Appeal from the District Court of the United States, for the Eastern District of Pennsylvania; William H. Kirkpatrick, Judge.
Before BIGGS, MARIS, and CLARK, Circuit Judges.
The plaintiff has appealed from a judgment of the District Court for the Eastern District of Pennsylvania in a suit on a fidelity bond. The case was tried without a jury. The following is a summary of the stipulated facts:
From September 2, 1929, to September 10, 1936, John N. Trezise was employed by the appellant bank as its cashier. Up to May 18, 1935, his fidelity and that of other employees was insured under a fidelity schedule bond executed by the appellee. The appellant's board of directors resolved that it should purchase a banker's blanket bound and authorized Trezise to sign the application therefor. The application dated May 27, 1935, was signed by Trezise, the appellant being named as the applicant. The banker's blanket bond was issued by the appellee and the schedule bond was cancelled as of May 18, 1935.
The appellee contended that it was induced to grant the coverage by reason of representations in the application which were in fact false and that the contract of coverage was therefore vitiated. The application read:
"The following information is given to the Company by the Applicant for the purpose of enabling the Company to decide with full knowledge of the facts whether or not to furnish the desired coverage.
"1. Name of Applicant. First National Bank.
"8. (a) What losses are known to have been sustained during the past five years from any of the causes against which indemnity is to be given by the bond for which application is hereby made?
"(b) What means have you adopted to prevent a recurrence of such losses?
"The present officers and employees of the Applicant, of whom a complete list at this time, with positions held, is attached, have all, to the best of the Applicant's knowledge and belief, while in the service of the Applicant, always performed their respective duties faithfully. There has never come to the notice or knowledge of the Applicant any act, fact or information indicating or tending to indicate that any of the said officers or other employees are unreliable, deceitful, dishonest or unworthy of confidence. The habits of all the said officers and other employees of the Applicant, to the best of the Applicant's knowledge and belief, are good."
Within the five year period preceding the issuance of the banker's blanket bond the appellant sustained a direct loss of $56,511 due to the fraud and dishonesty of Trezise. None of the losses sustained by the appellant was discovered by it until September 10, 1936. Notice and proof of loss were given to the appellee, which refused payment on the bond. No part of the premium paid the appellee by the ...