Prosser Power Co. v. United States Fid. etc. Co., 73 Wash. 304, 132 Pac. 48 (1913).

           [No. 10899. Department Two. May 1, 1913.]
           FIDELITY & GUARANTY COMPANY, Appellant. 1

An indemnity company insuring the fidelity of an employee waives
the requirement that the principal sign the bond where its agent
delivered the bond without such signature.

SAME - DELIVERY. A fidelity bond is sufficiently delivered
where the agent of the surety company handed it to the employee
whose fidelity was guaranteed with intent to pass it to the
custody of the employer.

warranty that an employee's accounts had been examined September
1, 1909, and found correct, is shown by testimony of the
insured's president that he would not say that the books were
examined on the first of each month.

a fidelity bond of a monthly examination of the books of the
employee, and a "daily and monthly" accounting for funds handled,
is sufficiently complied with where it is shown that the accounts
were examined once a month and a daily examination made of the
receipts, ledger and banking account, and the employee was
required to submit a complete financial statement once each
month, and no discrepancies were found.

SAME - CONDITIONS - SETTLEMENT. A condition in a fidelity bond
that any settlement with the principal for any loss shall render
the bond null and void is not broken by the acceptance of money
applied in settlement of an embezzlement prior to the date of the

1 Reported in 132 Pac. 48.

 May 1913               Opinion Per MORRIS, J.

SAME. The acceptance of money applied in settlement of an
embezzlement prior to the date of an indemnity bond is not a
violation of the provision in the bond that if the obligee shall
hold concurrent security, the surety shall be liable for only a
proportion of the loss.

Appeal from a judgment of the superior court for Spokane
county, Kennan, J., entered June 17, 1912, upon findings in
favor of the plaintiff, after a trial on the merits before the
court without a jury, in an action on an indemnity bond.

Happy, Cullen, Lee & Hindman, for appellant.

Thomas A.E. Lally, for respondent.


MORRIS, J. - Action upon a fidelity bond, indemnifying
respondent against loss to the extent of $1,000 by reason of
dishonesty of H.E. Garfield, its bookkeeper and cashier.
The cause was tried by the court without a jury, and
judgment entered sustaining recovery, from which this appeal is

The appellant, having executed a bond, sent it to a Mr.
Pratt, its agent at Prosser, for delivery to respondent. Mr.
Pratt called up respondent and notified it of the arrival of
the bond, and Garfield, who had charge of respondent's
banking business, called at the bank where Mr. Pratt was
employed, and Pratt delivered the bond to him. Garfield never
signed the bond, and the first contention suggested is that
liability cannot be enforced against appellant because of the
failure of Garfield as principal to sign the bond. This
requirement can be waived, and when Pratt, as agent for
appellant, delivered the bond without the signature of the
principal, his act was in effect a waiver. It also appears that
Garfield executed to appellant an agreement whereby he bound
himself to reimburse it for any loss it might sustain under
the bond. So far, therefore, as enabling appellant to
proceed against Garfield in case of being called upon to stand
good for his default, his signature to the bond was not necessary,

                    Opinion Per MORRIS, J.           73 Wash.

as such liability could be enforced under the agreement
obtained from Garfield. These circumstances are ample to
overcome the failure of Garfield to sign the bond as principal.
People to Use of Bartlett Co. v. Carroll, 151 Mich. 233,
115 N.W. 42; United States Fidelity & Guaranty Co. v.
Haggart, 163 Fed. 801; General Railway Signal Co. v. Title
Guaranty & Surety Co., 205 N.Y. 407, 96 N.E. 734;
Proctor Coal Co. v. United States F. & Guaranty Co., 124 Fed.

The second contention is that the bond was never
delivered. When Pratt, the local agent, handed the bond to
Garfield, his purpose and intent was to deliver it to respondent,
and in accepting the delivery Garfield was acting for
respondent. There can be no doubt when Pratt parted with the
custody of the bond he intended to pass it to the custody of the
respondent for the purpose for which it had been written.
This would constitute delivery. 1 Cooley, Brief on
Insurance, 449.

The third contention is that there was a breach of
warranty sufficient to avoid the bond. The application for the
bond stated that Garfield's accounts had been examined
September 1, 1909, and found correct. The president of
respondent testified, in response to questions as to the date of
the monthly examinations of Garfield's books, that he could
not say the books were examined on the first of each month.
This does not prove the falsity of the statement that the
books were examined September 1st. The witness was not
referring to that particular date, but was referring to the
subsequent monthly examinations, when he said he could not
testify to such examinations being made on the first of each
month. The requirement was a "monthly" examination of
the books, and a "daily and monthly" accounting for the
funds and securities handled. It is shown, that the
respondent examined the accounts once a month and made daily
examination of the receipts, ledger, and banking account; that
Garfield was required to submit a complete statement of the

 May 1913               Opinion Per MORRIS, J.

financial situation once each month, and that no discrepancies
were ever found in any of these examinations. This was
a sufficient compliance with the examination requirement.
Southern Surety Co. v. Tyler & Simpson Co., 30 Okl. 116,
120 Pac. 936; American Bonding Co. v. Morrow, 80 Ark. 49,
96 S.W. 613, 117 Am. St. 72.

It is next suggested that no recovery can be had upon the
bond because of an alleged settlement between respondent and
Garfield. The bond contained a provision that:

"If the obligee makes any settlement with the principal for
any loss hereunder, this bond shall be null and void."

The total amount embezzled by Garfield was $2,468.44.
Of this amount $897.48 was embezzled prior to February 1,
1910, the date of the bond, and $1,571.01 subsequent to that
time. When respondent learned of this shortage in July,
1910, it demanded security from Garfield, and Garfield
executed an agreement, and as part thereof placed the deed to
certain lands in escrow. This deed the lower court finds was
to be delivered to respondent if Garfield should fail, after
three days' notice, to repay it any amount embezzled by him
prior to the execution of the bond and not covered by
is also found that Garfield represented the land embraced in
this deed to be subject to the lien of but one mortgage of
$925, when, as a matter of fact, there was a second
mortgage of $1,625, which with the first mortgage aggregated
an amount exceeding the value of the land. Upon learning
these facts, the respondent repudiated the agreement and
refused to accept the deed. Garfield also gave respondent a
note for $300, which was applied in settlement of the amount
embezzled prior to the date of the bond. These facts do not
sustain appellant's contention. We know of no legal
reason preventing respondent from accepting money from
Garfield and applying it in payment of the amount embezzled
by him prior to the time when the bond was executed. Such
a course did not disturb appellant's liability for sums

 308    EGBERS v. FISCHER.
                          Syllabus.                73 Wash.

embezzled subsequent to the execution of the bond. This contract
was one of indemnity against the dishonesty of Garfield after
February 1, 1910, and it had no concern with any settlement
between respondent and Garfield for defalcations prior to
that time, so long as such settlement was not accepted with
any intent to condone the dishonesty of Garfield subsequent
to the execution of the bond. Remington v. Fidelity &
Deposit Co.,
27 Wash. 429, 67 Pac. 989. Neither was the
taking of this note a violation of the further provision of the
bond that "if the obligee shall at any time hold concurrent
with this bond . . . any guaranty of security from or
on behalf of the principal, the obligee shall be entitled, in the
event of loss by default of the principal, to claim hereunder
only such proportion of the loss as the amount covered by
this bond bears to the full amount of the security carried
whether valid or not."

We find no reason for disturbing this judgment, and it is

CROW, C.J., ELLIS, FULLERTON, and MAIN, JJ., concur.