text:
    Drown v. The Northern Ohio Traction Company.

      Negligence of both plaintiff and defendant — Plaintiff cannot recover, when — Doctrine of “last chance” applies, when — Plaintiff can recover only upon allegations of his petition — Instructions to fury.

    1. Where both the plaintiff and the defendant were negligent, and the negligence of both directly contributed to produce the injury, the plaintiff has no right to recover; and in such case, . when the defendant asks the court to so instruct the jury, in unambiguous terms, a refusal to so instruct is error. Pittsburg, Ft. W. & C. Ry. Co. v. Krichbaum’s Admr., 24 Ohio St., 119, and Timmons v. Central Ohio Railroad Co., 6 Ohio St., 103, approved and followed.
    2. The doctrine of “last chance,” as formulated in Railroad Co. v. Kassen, 49 Ohio St., 230, paragraph one of syllabus, does not apply where the plaintiff has been negligent, and his negligence continues, and, concurrently with the negligence of defendant, directly contributes to produce the injury; it applies only where there is negligence of the defendant subsequent to, and not contemporaneous with, negligence by the plaintiff so that the negligence of defendant is clearly the proximate cause of the injury and that of the plaintiff the remote cause.
    3. Since the plaintiff car recover only upon the allegations of his petition, he cannot recover upon negligence which warrants the application of the rule of “last chance” without alleging it in his petition.
    (No. 9897
    Decided May 7, 1907.)
    Error to the Circuit Court of Summit County.
    This case came into the .court of common pleas of Summit county by appeal from a justice of the peace. It was an action to recover damages for an injury, by an electric car belonging to the defendant, to a buggy and a- pair of horses hitched thereto. The petition alleged no other specific act of negligence by the defendant than that the car of the defendant was running at a high and dangerous rate of speed without sounding a signal and without warning of any kind, in violation of an ordinance of the city of Akron, and without keeping any lookout for persons driving on the street. The defendant denied all the allegations of negligence, and further answering, alleged that if the property of plaintiff .was injured or damaged in any way it was the direct result of the carelessness and negligence of the plaintiff and of the person driving the team of horses owned by the plaintiff; that the person driving said team .carelessly and negligently drove upon the track of the defendant in front of an approaching car, without looking for an approaching car or taking any precaution for his safety or the safety of the team; that the approach of the car could have been seen and heard by the person driving the team, had he used ordinary care or looked for an approaching car; that the person driving the team drove upon the tracks of the defendant in front of an approaching car,7 which was so close to the team at the time it was driven upon said track that it was impossible to stop the car; and the defendant also further avers that any injury or damages sustained by the plaintiff were the result of the negligence of the plaintiff and the person driving the team directly contributing thereto. The reply denied each and every allegation contained in the answer, except so far as they are admissions of the plaintiff’s petition. The circumstances of the case, as developed in the evidence, are as follows: A span of horses, harnessed to a top-buggy belonging to the plaintiff in error and driven by one Hardy, was going south on Main street, in the city of Akron, having come on to Main street from Coburn street. There was a loaded wagon standing on the west side of Main street, with a span of horses attached to it, hitched to a post. The point at which the plaintiff in error’s team came upon Main street was about two hundred or two hundred and fifty feet north from the point where the accident occurred. When the driver reached Main street, he looked to the north for an approaching car, but saw none. He did not look back of him after he started southward upon Main street. There was a double track on Main street. The team was driven at the rate of seven or eight miles an hour south upon the street, and seeing a wagon extending to within a few feet of the street car track on the west side of the street, Hardy drove astride of the west rail of the west track, in order to avoid it. A short distance beyond the wagon, which was hitched in the street, the buggy and horses were struck by the car. The driver, Hardy, testifies that the accident occurred as he was leaving the track upon which he had driven to go around the wagon. The motorman and one other witness called by the plaintiff testify that the accident occurred as the Team was driven upon the west track. The motorman and two other employes of the defendant company testify that on the trial before the justice of the peace Hardy testified that the accident occurred as he drove upon the track to pass around the team which was hitched in the street. Hardy denies this. The court was asked to instruct the jury in several propositions, only two of which it is necessary to quote. They are as follows: “3. If the jury find from the evidence that the plaintiff through his agent Hardy and the defendant were both negligent and that the negligence of both directly contributed to cause the injury complained of in plaintiff’s petition, then your verdict should be for the defendant.” “4. If the jury find that the negligence of both plaintiff’s agent and the defendant combined so as to directly cause the injury complained of by plaintiff, then yotir verdict should be for the defendant.” These requests to charge were refused by the court, but the court did charge the jury as follows: “I say to you, gentlemen of the jury, that if you find from all the evidence that the motorman, who had charge of the car which struck Hardy’s team, could by the exercise of ordinary care have seen the plaintiff and stopped the car, and that by reason of the failure to stop the car Hardy’s team was knocked down and injured, it would be such negligence on the part of the defendant as would enable the plaintiff to recover, provided Hardy was free from contributory negligence on his part; or if the motorman saw Hardy’s team on the track, or by the exercise of ordinary care could have seen it in time to stop the car, but did not, and purposely, willfully and wantonly ran into it, then defendant would be guilty of negligence, and the plaintiff would be entitled to recover under such circumstances, even if plaintiff’s agent was guilty of contributory negligence in.being on the track in front of the car at the time of the injury. * * * The court instructs the jury that one who is injured by the mere negligence of another cannot recover any compensation for his injury if, by his own negligence, he contributed to produce the injury of which he complains, so that but for his, or his agent’s concurring or co-operating fault, the injury would not have happened to him, except when the direct cause of the injury is the omission of the other party after becoming aware of the injured party’s, or his agent’s, negligence, or by the exercise of ordinary care could have become aware of such negligence, failed to use a proper degree of care to avoid the consequences of such negligence. The court instructs the jury that notwithstanding the jury may find that the plaintiff or his agent was guilty of negligence, and that such negligence contributed to the injury of which he complains; yet still if the agents of the' defendant were aware of such negligence in time, by the use of ordinary care and prudence, to have avoided the effect of such negligence on Hardy’s part, but did not do so, then such negligence on his part is not such contributory negligence as to "constitute a defense to this action. What I mean by that, gentlemen, so as to make no mistake, is, that if Hardy was on this track driving south, and you find that he was negligent in being on it as he was, his failure to look, or failure to watch, to avoid injury, if he was negligent, that that would not prevent him from recovering in this suit, if the motorman of the car, after discovering him in that position, could have, by the use of reasonable and ordinary- care on. his part, avoided the injury by stopping the car. Now, gentlemen, that is a question of fact for you to-determine from all the facts and circumstances in the case, and I leave that question wholly for you to determine impartially and justly, according to the testimony.” The defendant excepted to the charge generally, and to each and every part thereof, and to the refusal to charge as requested. The jury returned a verdict in favor of the plaintiff, motion for new trial was overruled, and judgment rendered upon the verdict. On petition in error, the circuit court reversed the judgment of the court of common pleas and remanded the cause to the said court to be proceeded in according to law and the rights of the parties. The plaintiff in error seeks to have the judgment of 'the circuit court reversed and the judgment of the court of common pleas affirmed.

      Mr. G. M. Anderson and Mr. A. J. Wilhelm, for plaintiff in error,
    cited and commented upon the following .authorities:

      Railway Co. v. Schade, Admr., 15 C. C., 424; 57 Ohio St., 650; Railway Co. v. Ehlert, Admr., 19 C. C., 177; 63 Ohio St., 320; Railroad Co. et al
      v. McCormick, Admx., 69 Ohio St., 45; Elliott on Roads and Streets, 2d Ed., Secs. 765 and 767; Wilkins v. Railway & Bridge Co., 96 Ia., 668; Booth on Street Railways, Sec. 316; Hull v. Railway Co., 13 Utah, 243; Mahoney v. Railway Co., 110 Cal., 471; Railway Co. v. Albright, 14 Ind. App., 433.

      Messrs. Rogers, Rowley & Rockwell; for defendant in error.
    Where the testimony of the plaintiff raises a .clear presumption of negligence on his part, which directly contributed to the injuries complained of, and no testimony is offered by him tending to rebut that presumption, the duty of trial court is to direct a verdict for defendant.
    In the case at bar, adopting the theory of plaintiff in error, the testimony of. Hardy, the driver of the vehicle, at the time of the accident, clearly showed him to be guilty of negligence, which was concurrent and contemporaneous with the alleged negligence of the defendant, and which was wholly unrebutted, and it was the duty of the court under the circumstances to have directed a verdict for the defendant as requested by the defendant at the conclusion of plaintiffs testimony.
    That plaintiff was guilty of such contributory negligence as to defeat a recovery either upon his claim that he drove upon the track for a distance of two hundred and fifty or three hundred feet with his back toward an approaching car without looking, or upon the theory of the defendant that he suddenly drove upon the track directly in front of an approaching car is sustained by a uniform line of authorities.

      a. Under plaintiff’s testimony.
    It is the duty of a driver of a vehicle when driving upon a street car track to look behind for cars approaching from the rear, and to drive for a distance of two hundred and fifty to three hundred feet without doing so is negligence. Booth on Street Railways, Sec. 316; McGauley v. Transit Co., 79 S. W. Rep., 461; Belford v. Railroad Co., 83 N. Y. Supp., 836; Baking Co. v. Railway Co., 94 N. W. Rep., 533; Clark on Accident Law, See. 106.
    b. Under defendant’s testimony.
    For the driver of a vehicle to suddenly turn upon a street car track directly in front of an approaching car is negligence, and such negligence as would bar a recovery. Harpham v. Traction Co., 4 C. C., N. S., 257; Railway Co. v. Wadsworth, 1 C. C., N. S., 483; 70 Ohio St., 432; Sullivan v. Railway Co., 71 N. E. Rep., 90; Railway Co. v. Marschke, 70 N. E. Rep., 494; Traction Co. v. Browdie, 2d St. Ry. Rep., 138; Railway Co. v. Jenkins, 11 Cir. Dec., 130; Rider, Admx., v. Rapid Transit Co., 171 N. Y., 139; Williams v. Railway Co., 97 N. Y. Supp., 393; Walsh v. Railroad Co., 99 N. Y. Supp., 773.
    c. Upon the proposition of its being the duty of the court to direct a verdict we cite the following authorities: Railroad Co. v. McClellan, 69 Ohio St., 142; McCarty v. Railroad Co., 20 C. C., 536; Stafford v. Railway Co., 85 N. W. Rep., 1036; Mathes v. Railway Co., 59 N. E. Rep., 77; Russell v. Railway Co., 86 N. W. Rep., 346; Creamer v. Railway Co., 156 Mass., 320; Benjamin v. Railway Co., 160 Mass., 3; Robbins v. Railway Co.,
      165 Mass., 30; Kelly v. Railway Co., 175 Mass., 333.
    The trial court in its charge instructed the jury that the defendant was liable for the omission of duty not only after becoming aware of plaintiff’s negligence but for a failure to use a proper degree of care after it could by the exercise of ordinary care have seen plaintiff in time to avoid the injury.
    This we take it is not the law in Ohio. The circuit court in passing- upon the case at bar, reviewed the cases of Railway Co. v. Shade, Admr., 37 Ohio St., 650; Railway Co. v. Ehlert, Admr., 63 Ohio St., 320; Railroad Co. v. McCormick, Admx., 69 Ohio St., 45, and upon the authority of the two later cases held the rule of law as charged by the trial court to be erroneous.
    In the case of Railroad Co. v. Kassen, 49 Ohio St., 230, the railroad company were held liable, when the railroad company, after it became'aware or ought to have become aware of the plaintiff’s danger, failed to use ordinary care to avoid injuring him.
    In the McCormick case, 69 Ohio St., 45, however, the engineer had no, knowledge of McCormick’s presence upon the bridge until too late to take any steps to save him, and it will be borne in mind that McCormick was neither a licensee nor a trespasser. This (supreme) court in passing upon the McCormick case referred to the Kassen case and differentiated between them. Siek v. Railway Co., 16 C. C., 393; Traction Co. v. Simon, Admr., 8 C. C., N. S., 515.
    The rule in, Ohio therefore seems to be well settled that mere negligence in not discovering a person in peril not amounting to a willful or reckless disregard of the rights of others will not give a party guilty of contributory negligence proximately causing his injury a right to recover. The plaintiff in this case, however, seeks to have a different principle applied to this defendant. The most that can be claimed for the' rights of both plaintiff and defendant in the streets is that they are equal and their duties and obligations are mutual.
    In an action for injuries from being struck by a street car, it was error to authorize a recovery by the plaintiff, notwithstanding contributory negligence, where the evidence showed conclusively that the motorman did not see the person injured until after the accident. Bennichsen v. Railway Co., 84 Pac. Rep., 420; Beaty v. Railway Co., 91 S. W. Rep., 365.
    Instructions to the jury should be limited to the facts of the case on trial, and to the rules of law which apply to those facts, and govern the actual issues which they present. Frizzell v. Railway Co., 124 Fed. Rep., 176.
    The proposition of law that “If the defendant by the exercise of reasonable care could have avoided the injury after he saw or might have seen by the exerpise of due care plaintiff in his position of peril” involves the question of remote and not proximate contributory negligence.
    It is urged by plaintiff in error that the rule exempting the defendant from liability in .the event of the concurrent proximate contributory negligence of the plaintiff only applies to trespassers or mere licensees. This is not the law. Contributory negligence is not the ground upon which trespassers are denied the right to recover. They are denied this right upon the ground that the defendant owes no duty to avoid injuring them until after actually discovering their peril without regard to the question as to whether or not they were guilty of contributory negligence. We maintain that the rule is no different where the negligence of both parties is concurrent and contemporaneous, whether the party be a trespasser, licensee or a party lawfully using the street.
    The principle that where both parties are in fault and the fault or negligence of each contributes directly to the injury received, neither party can be made to respond to the other, is so well established as to require no elucidation to the court, and we shall simply cite a few of the numerous authorities: 1 Thompson on Negligence, Sec. 237; O’Brien v. McClinchy, 68 Me., 552; Holmes v. Railroad Co., 31 Pac. Rep., 834; Beach on Contributory. Negligence, 3d Ed., 32, note 44; Railroad Co. v. Transportation Co., 32 Ohio St., 116; Railway Co. v. Elliott, 28 Ohio St., 340; Timmons v. Railway Co., 6 Ohio St., 105; Kerwhacker v. Railway Co., 3 Ohio St., 172; Coal Co. v. Estievenard, 33 Ohio St., 43; Railway Co. v. Callahan, 2 C. C., N. S., 326; Railway Co. v. Gahan, 1 C. C., N. S., 205; Murphy v. City of Dayton, 7 N. P., 227; Lucas, Admr., v. Railroad Co., 72 Mass., 64; Murphy et al. v. Dean et al., 101 Mass., 466; Robinson v. Cone, 22 Vt., 213; Trow v. Railroad Co., 24 Vt., 487; Birge v. Gardiner, 19 Conn., 507; Adams v. Ferry Co., 72 Am. Dec., 247; Jerolman v. Railway Co., 108 Ia., 177; Railway Co. v. State, ex rel., 29 Md., 420; Gilbert v. Railway Co., 13 O. F. D., 475.

      Under the facts as the defendant claimed them, it was clearly the duty of the court to submit the requests in question. The court had no right to invade the province of the jury and find that the evidence did not sustain defendant’s contention, and it had no right to only submit to the jury the phase of the case contended for by plaintiff. Railway Co. v. Krichbaum’s Admr., 24 Ohio St., 121; Railway Co. v. Wynant, 17 N. E. Rep., 118; 5 Am. St. Rep., 644.
   Davis, J.

Under the issues in this case, evidence was introduced tending to prove that the plaintiff’s agent was guilty of negligence directly contributing to the injury to plaintiff’s property. If the driver of the plaintiff’s team, immediately upon entering Main street, and without afterwards looking to the north as he admits, drove southward upon the track until the car coming from the north overtook and collided with the buggy, he was negligent; because the street was open and unobstructed for from two hundred to two hundred and fifty feet from the point at which he entered upon it, and it was not necessary for him to go upon the street railway track, and because, the night being dark he unnecessarily put himself in a place of obvious danger and continued therein until the moment of the accident, without looking out for an approaching car or doing anything whatever to avoid injury, apparently risking his life and the property of his principal upon the presumption that the defendant’s employes would make no mistakes nor be guilty of any negligence. If, on the other hand, he drove along the street until he came to the obstruction and then turned out upon the track to go around it without again looking, as his own testimony shows that he did not, and was then almost in the same instant struck by the car, he was negligent. Upon either hypothesis, assuming that the defendant was negligent in not keeping a proper lookout, or was otherwise not exercising ordinary care to prevent collision with persons lawfully on its. track, the plaintiff could not recover, if it should appear in the case that the negligence of both is contemporaneous and continuing until after the moment of the accident, because, in such case the negligence of each is a direct cause of the injury without which it would not have occurred, rendering it impracticable in all such instances, if not impossible, to apportion the responsibility and the damages. Suppose, for example, that not only the buggy and horses had been injured,, but the defendant’s car also, by what standard could the extent of liability of either party be determined? Timmons v. The Central Ohio Railroad Co., 6 Ohio St., 105; Village of Conneaut v. Naef, 54 Ohio St., 529, 531. In short, there can be no recovery in such a case unless the whole doctrine of contributory negligence, a doctrine founded in reason and justice, should be abolished:

Under these circumstances, therefore, it was not sufficient to say to the jury that if they should find. that the motorman who had charge of the car which struck the team, could by the exercise of ordinary care have seen the team and could have stopped the car and that by reason of the failure to do so the team was injured, it would be such negligence by the defendant as would entitle the plaintiff to recover, provided that the plaintiff’s-driver was “free from contributory negligence.” The defendant had the right to have the jury specifically instructed, as it requested, that if the jury should find from the evidence that both’ the plaintiff and the defendant, through their agents, were negligent, and that the negligence of both combined so as to directly cause the injury complained of, then the verdict should be for the defendant. The court refused to so instruct the jury, and the circuit court correctly held that the refusal to so charge was erroneous.

The error' in refusing the defendant’s request to charge, was extended and made much more prejudicial when the court, after, giving instructions as to contributory negligence by the plaintiff in very general terms, proceeded to impress upon the jury, by repetition and with some emphasis, the doctrine known.as “the last chance.” This doctrine is logically irreconcilable with the doctrine of contributory negligence, and accordingly it has been vigorously criticised and warmly defended. Probably, as in many * such controversies, the truth lies in middle ground; but it is certain that the rule is applicable only in exceptional cases, and the prevalent habit of incorporating it in almost every charge to the jury in negligence cases, in connection with, and often as a part of, instructions, upon the subject of contributor)'- negligence, is misleading and dangerous.

This confusion seems to arise either from misapprehension of the law or a want of definite thinking. The doctrine of the “last chance” has been clearly defined by a well-known text-writer as follows: ' “Although a person comes upon the track negligently, yet if the servants of the railway company, after they see his danger, can avoid injuring him, they are bound to do so. And, according to the better view with reference to injuries to travelers at highway crossings — as distinguished from injuries to trespassers and bare licensees upon railway tracks at places where they have no legal right to be — the servants of the railway company are bound to keep a vigilant lookout in front of advancing engines or trains, to the end of discovering persons exposed to danger on highway crossings; and the railway company will be liable for running over them if, by maintaining such a lookout and by using reasonable care and exertion to check or stop its train, it could avoid injury to them.” 2 Thompson,. Negligence, Sec. 1629. The italics are the author’s. Now, it must be apparent upon even a slight analysis of this rule that it can be applied only in cases where the negligence of the defendant is proximate and that of the plaintiff remote; for if the plaintiff and the defendant both be negligent and the negligence of both be concurrent and directly contributing to produce the accident, then the case is one of contributory negligence pure and simple. But if the plaintiff’s negligence merely put him in the place of danger and stopped there, not actively continuing until the moment of the accident, and the defendant either knew of his danger, or by' the exercise of sxich diligence as the law imposes on him would have known it, then, if the plaintiff’s negligence did not concurrently combine with defendant’s negligence to produce the injury, the defendant’s negligence is the proximate cause of the injury and that of the plaintiff is a remote cause. This is all there is of the so-called doctrine of “the last clear chance.” A good illustration is found in the case of Railroad Co. v. Kassen, 49 Ohio St., 230. Kassen walked through the rear car of the train on which he was a passenger to the rear platform from which he either stepped off or fell off upon the track, where he lay for about two hours when he was run over by another train. It was held that, although Kassen may have been negligent in going upon the rear platform and stepping or falling off, yet since the railroad company knew of his peril and had ample time to remove him or to notify the trainmen on the later train, its negligence in not doing so was the proximate cause of Kassen’s death and the negligence of Kassen was remote. In that case the proximate cause and the remote cause were so clearly distinguishable; and it is so very evident from the opinion and the syllabus that this distinction was the real ground of the judgment of the court, that it is somewhat surprising that the doctrine of last chance as stated in that case should have been so often misinterpreted as' a qualification of the doctrine of contributory negligence.

It is clear, then, that' the last chance rule should not be given as a hit or miss rule in every case involving negligence. It should be given with discrimination. Since the plaintiff can recover only upon the allegations of his petition, if there is no charge in the petition that the defendant after having notice of the plaintiff’s peril could have avoided'the injury to plaintiff and there is no testimony to support such charge, the giving of such a charge would be erroneous. There is no such allegation in the petition in this case. But further, there is testimony tending to prove that the plaintiff’s team was driven upon the street railway track in the night time, ahead of the car, and that it continued on the track for a distance of two hundred and fifty feet until struck by the car, without taking any precaution to avoid accident. Assuming that the defendant was negligent in not seeing the buggy on the track and in not avoiding the accident, yet the plaintiff’s negligence was continuous and was concurrent at the very moment of the collision. It proximately contributed to the’ collision, for without it the collision would not have occurred. There was no new act of negligence by the defendant, which was independent of the concurrent negligence and which made the latter remote. Therefore there was no place in the case for the doctrine of “the last clear chance.”

There is a case, which was decided in the sixth circuit, which will illustrate our views, and a reference to it may save some further discussion. It is the. case of The Lake Shore & Michigan Southern Railway Co. v. Callahan, 2 O. C. C., N. S., 326; s. c. 15 O. C. D., 115. A railroad section man, in obedience to an order by his foreman, started to walk along the track with his back to a locomotive two or three hundred feet away, but without observing whether the engine was standing still or running backward, and he walked along the track for seventy-five feet without paying any further attention to the engine, which was in fact backing toward him, and was struck by it and injured. The court held that it was. a case of concurrent negligence, continuing to the moment of the injury, that the doctrine of “the last chance” did not apply, and that plaintiff was guilty of contributory negligence.

Similar views were expressed by the New York court of appeals in Rider v. Syracuse R. T. Co., 171 N. Y., 139, 148, per O’Brien, J., as follows: “The contributory negligence of the injured party can not be taken from the jury except in cases where it is clear that there was some new act of negligence on the part of a defendant that was the proximate cause of the injury. The negligence of the deceased, if any, was substantially concurrent with that of the defendant, if any. It is -im-< possible to separate that part of the transaction which took place after the first contact of the car with the vehicle from what took place before. It was all one transaction, and to attempt to divide it into fragments and impute one part of it to the negligence of both parties and another part to the defendant’s negligence alone would, as it seems to us, entirely subvert the law of contributory negligence as applied to accidents of this character. If the theory upon which this case was tried and submitted is-to.be sanctioned, it must, we think, follow that in every case based upon such an accident, the result must turn' not upon the general rule as stated, but upon the exception; or, in other words, the inquiry must be not whether the injured party’ was negligent, but whether. it was reasonably possible for the defendant to have avoided the accident.”-

We do not feel willing to close this opinion without reference to P. Ft. W. & C. Ry. Co. v. Krichbaum’s Admr., 24 Ohio St., 121. While the whole of the court’s opinion, .delivered bv Mcllvaine, J., is pertinent, we quote only the following: “Neither of these instructions, however, indicated the rule by which the jury should be governed, in case they found the injury to have resulted from combined causes, to-wit, the co-operation of negligent conduct on the part of both the defendant and the deceased. With regard to the rule in such case, the court gave to the jury two propositions, as follows: Tt matters not how careless the servants of the defendant may have been, the plaintiff ought not to recover, if the deceased or his father could have avoided •the collision by the exercise of care, diligence, and prudence. On the other hand, it matters not how careless the deceased and his father may have been, if the persons running the train could, by the exercise of ordinary care, -prudence, and diligence, have avoided the collision, and did not, then the plaintiff ought to recover.’ The first proposition was quite as favorable to the defendant as it should have been, but the latter was to its prejudice and is wholly indefensible.”

The judgment of the circuit court is

Affirmed.

Si-iauck, C. J., Price, Crew and Summers, JJ., concur.


source: Caselaw Access Project

author: Spear, J.

license: Public Domain

text:
    Livingston and Taft, Trustees v. The Fidelity & Deposit Company, of Maryland.

      Corporation applying to surety company for bond — Guaranteeing honesty of employe — Statements as to past conduct of such employe — Become part of contract for such bond — Bondsmen not liable for acts of said employe — Except within direct scope of his specified duties.

    1. Written statements made by a corporation accompanying an application to a bonding company for a bond guaranteeing the honesty of employes, which statements relate to the past conduct of such employes in their service as such, and are intended to and do enter into the contract and become the inducement in part for the issuing of the bond, are in the nature of warranties, and their falsity in any material particular will defeat recovery on the bond for the delinquency of such employes.
    2. Where, in a suit upon a bond executed to a loan company guaranteeing the honesty of an employe, it appears that it was stipulated in the application for such bond that the duties of such employe are to receive and deposit all moneys received by the company, to indorse checks for deposit only, and not authorized to sign checks or accept drafts, or pay out on account, with no authority to withdraw money, and the obligation of the bond is to make good any loss occasioned by the fraud or dishonesty of such employe in connection with his duties as specified, and the bondsman not to be liable for other than the personal acts of such employe within the direct scope of his specified duties, the bondsman will not be held for the dishonesty of such employe in inducing the loan company to accept a loan to a fictitious person, on fictitious security, and procuring the money from the bank where moneys of the company are on deposit, on a check issued by the company in the name of such fictitious borrower, by forging his name upon the check.
    (No. 10260
    Decided May 7, 1907.)
    Error to the Circuit Court of Cuyahoga county.
    J. B. Livingston and Frederick L. Taft, as trustees of The Guarantee Savings & Loan Company, were the plaintiffs in the action below out of which this error proceeding arises, and are plaintiffs in error here, and The Fidelity & Deposit Company, of Maryland,, was the defendant in the action and is the defendant in error here.
    It ■ appears from the record that The Guarantee Savings & Loan Company was a corporation, organized long prior to October 8, 1901, under the laws of Ohio, having its principal place of business in the city of Cleveland, and that by quo warranto proceedings in this court the Company was, on the above date, ousted from its right to be a corporation, and the plaintiffs in error were appointed trustees to wind up its business concerns. The Fidelity & Deposit Company is a Maryland corporation authorized to do business in Ohio, having an office at Cleveland, for the purpose of executing bonds guaranteeing the fidelity of employes.
    The action of the trustees was based upon one of these guarantee bonds executed by the defendant to the Loan Company June 1, ' 1896, for a consideration in money then paid,' undertaking to guarantee the fidelity of certain employes of the Loan Company. The bond was continued in force from year to year based upon written applications which had attached certificates and schedules enumerating the officers whose honesty was to be guaranteed and indicating their duties, the purpose of each of which was to obtain a continuance of the obligation of the bond. Recovery was sought for alleged embezzlement and larceny by one Jacob A. Blodt, secretary of the Loan Company, in the sum of ten thousand dollars. Issue was taken by the defendant by answer, a number of separate defenses being pleaded, and liability being denied. By reply plaintiffs took issue as to the new matter. Further facts are stated in the opinion. At the trial of the cause at January term, 1906, of the common pleas of Cuyahoga, upon conclusion of the testimony offered' by plaintiffs,' a motion was interposed by defendant to the court to direct a verdict, for defendant, and the court being of opinion that the evidence adduced by the plaintiffs had, under the law applicable to the facts shown, entirely failed to make a case against defendant, sustained the motion. A verdict was rendered accordingly, and judgment for defendant entered thereon, which on error to the circuit court was affirmed.

      Mr. Smith W. Bennett and Messrs. Smith, Taft & Arter, for plaintiffs in error,
    cited and commented upon the following authorities:
    Thompson on Building Associations, Sec. 70; Edgerly v. Emerson, 3 Foster (N. H.), 555; Cook on Corporations, Vol. 2, Sec. 715; Frost on Law of Guaranty Insurance, bottom paging, 213, 214 and 215; Livingston et al., Trustees, v. Fidelity & Deposit Co., 7 C. C., N. S., 66; People v. Royce, 106 Cal., 173; Mfg. & Cold Storage Co. v. Bonding & Trust Co., 75 S. W. Rep., 197; Moore v. United States, 160 U. S., 268; Warren’s Criminal Law, 475 and 476; Commonwealth v. King et al., 9 Cush., 284; Calkins v. State, 18 Ohio St., 366; Ex parte Hedley, 31 Cal., 109; Rex v. Beechey, Russ. & Ry., 319; Bishop’s Criminal Law, Sec. 361; People v. Dalton, 15 Wend., 581; Coal Co.
      v. Fidelty & Guaranty Co., 126 Fed. Rep., 89; Rice et al. v. Fidelity & Deposit Co., 103 Fed. Rep., 427; Insurance Co. v. Fidelity & Casualty Co., 130 N. C., 129; Young v. Surety Co., 137 Cal., 596; Guaranty Co. v. Savings Bank & Trust Co., 183 U. S., 402; Orme & Okey, Recrs., v. Baker, 74 Ohio St., 337; Lamson et al. v. Beard, 94 Fed. Rep., 30; Huston v. Insurance Co., 66 Ohio St., 246; Insurance Co. v. Schild, 69 Ohio St., 136; Fidelity & Deposit Co. v. Courtney, 186 U. S., 342; Coal Co. v. Fidelity & Casualty Co., 99 Fed. Rep., 242; Carstairs et al. v. Bonding & Trust Co., 116 Fed. Rep., 449; Insurance Co. v. Sale, 121 Fed. Rep., 664; Sections 3171h, 3250, 3252, 3836-1, and 3836-3, 6842 and 6843, Revised Statutes.

      Mr. ILorace Andrews; Mr. H. H. McKeehan and Messrs. Hoyt, Dustin & Kelley, for defendant in error,
    cited and commented upon the following authorities:

      Guaranty Co. v. Savings Bank & Trust Co., 183 U. S., 402; Huston v. Insurance Co., 66 Ohio St., 246; Insurance Co. v. Schild, 69 Ohio St., 136; Coal Co. v. Fidelity & Guaranty Co., 126 Fed. Rep., 89; Fidelity & Deposit Co. v. Courtney, 186 U. S., 342; Hunt v. Fidelity & Casualty Co., 99 Fed. Rep., 242; Carstairs et al. v. Bonding & Trust Co., 116 Fed. Rep., 449; Insurance Co. v. Sale, 121 Fed. Rep., 664; Hatch et al. v. Ferguson et al., 68 Fed. Rep., 46; May on Insurance, Secs. 156, 157 and 158; Frost on Law of Guaranty Insurance, Secs. 59, 83 and 84; Joyce on Insurance, Secs. 1889, 1892, 1897, 1924 and 1925;
      Byers v. Insurance Co., 35 Ohio St., 606; Remington v. Fidelity & Deposit Co., 27 Wash., 429; Orme & Okey, Recrs., v. Baker, 74 Ohio St., 337; 19 Cyc., 520, 521; Rice et al. v. Fidelity & Deposit Co., 103 Fed. Rep., 427; Insurance Co. v. Fidelity & Guaranty Co., 130 N. C., 129; Young v. Surety Co., 137 Cal., 596; State, ex rel. v. Griffith et al., 74 Ohio St., 80; Livingston et al., Trustees, v. Fidelity & Deposit Co., 7 C. C., N. S., 66; State v. Meyers, 56 Ohio St., 340; Kellogg v. State, 26 Ohio St., 15; Reed et al. v. Fidelity & Casualty Co., 189 Pa. St., 596; Theater Co. v. Fidelity & Casualty Co., 92 Wis., 412; Bonding & Trust Co., v. Harvester Co., 91 Md., 733; Section 1189, Revised Statutes of Kentucky; Section 3836-4, Revised Statutes.
   Spear, J.

The length of the bond of June 1, 1896, and of the several applications and continuation certificates then and thereafter given, introduced as exhibits, render it impracticable to reproduce them here in haec verba, but their salient features will be referred to. By the terms of the bond certain answers and representations and promises, and any subsequent representations and promises of the Loan Company, were made the basis of the contract denominated the bond, the language being that it is “understood and agreed that those representations and such promises, and any subsequent representations or promises of the employer, hereafter required by or lodged with the Company, shall constitute- part of the basis and consideration of the contract hereinafter expressed.”

The loss insured against was such as might be sustained by reason of the ,fraud or dishonesty of • the employe “in connection with his duties as specified on said schedule ¿mounting to embezzlement or larceny,” and the time limit as to liability for such dishonesty was twelve months next before the discovery.

Respecting the promises referred to, the bond provided this: “This bond is entere^ into on the condition that the business of' the employer shall be continued to be conducted. and the duties and remuneration of the employes shall remain in accordance with the statements hereinbefore referred to.”

As qualifying the above it was also provided in the bond that the Loan Company should have the right, on giving written notice, to make interchanges or substitutions as to employes upon terms mentioned An the bond. Respecting this feature the further provision is,: “And the ’Company shall not be liable for other than the personal acts of the employe' within the direct scope of his duties named in said schedule or in said notices.”

Desiring to substitute another person as secretary, the Loan Company made written application January 25, 1897, and in that paper defined the duties of that officer thus: “Receive and deposit all moneys received by the Company and acting as secretary in general, having custody of cash, likely not more than $1,500, and of that only about twenty-four hours. .Not authorized to pay out cash op account, but required to make deposit in the authorized depository, The National •Park bank. Allowed, in conjunction with the 'president and treasurer, to indorse checks, but for deposit only,'and not authorized to sign checks ñor accept drafts.” The representations respecting the powers and duties of the secretary were not subsequently changed. This application con-, tained the agreement that the answers were to be taken as conditions precedent, and as the basis of the bond.

At the expiration of the year, viz.: June 1, 1897, application in writing was made by the Loan' Company for a renewal and the - Company certified-that each of its employes named in the accompanying list had faithfully and satisfactorily performed his duties and promptly and correctly rendered his accounts during the preceding year, In this application Blodt, the defaulting employe, is classed as general manager and the obligation as to him is five thousand dollars.

Again, at the expiration of the year, application was made for a renewal and in that application Blodt was named as secretary with the same amount as guarantee. The same certificate as to faithful performance of duties as in the one preceding accompanied this application. ■

Like application, with like certificate as to performance of duties, was made in each of the three years following, Blodt being continued as secretary. He resigned August 8, 1901, and then the crash came.

The obligatory portion of the last continuation certificate was in form following:

“In consideration of the sum of one hundred and fifteen and 00-100 dollars, the Fidelity and Deposit Company of Maryland hereby continues in force schedule bond No. 175, in favor of The Guarantee Savings and Loan Company, Cleveland, Ohio, on behalf of the persons named in the annexed schedule, in the positions and for the sums therein specified, for the period beginning the first day of June, 1901, and ending the 'first day of June, 1902, subject to all the covenants and conditions set forth and expressed in said schedule bond, heretofore issued on the first day of June, 1896.
“Provided the aggregate liability of the Fidelity and Deposit Company of Maryland, from the date of the issuance of said original schedule bond, to the date of the expiration of this certificate, for or on account of any act or acts of any one of said persons, shall not exceed the sum written opposite that person’s name upon the attached schedule.
“Witness the signatures of the president and secretary this fifth day of June, 1901.”

In the schedule attached to the application for this certificate Blodt was again named as secretary, and the sum written opposite his name was ten thousand dollars.

Blodt’s scheme of fraud was substantially this: Pie would purchase a cheap vacant lot taking title in the name of a fictitious person, and then cause an application to the Loan Company for a loan to be made on one of its blanks in the name of the fictitious person, accompanied by a deed and abstract of title.- The loan was to be used for the apparent purpose of erecting a building on the lot payable as the structure progressed. The borrower was described as a German, unacquainted with the English language, and for that reason wished Blodt to act for him. From time to time checks were thus secured in the name of the borrower, which Blodt would use in procuring the money, acting on his pretended authority to represent the borrower, and forging the name of the fictitious payee, at the same time lodging with the Company a fraudulent insurance policy, he being an insurance agent. This simple scheme was made possible of accomplishment by the neglect of the other officers of the Company. No board of directors, nor any committee, acted upon these loans or the checks. Nor did any appraisal or other committee inspect these imaginary buildings, or the lots on which it was represented they were to be constructed. In no instance had any such building a real existence. Checks drawn by officers who were authorized to sign checks were signed up in blank and left in the custody of Blodt, the signers being absent, one of them continuously absent from the state. The money of the Company instead of being deposited wholly in the authorized depository, the Park bank, as the agreement required, was distributed around in several banking institutions, and the manipulation of the funds by Blodt thus made easier. Blodt’s fraudulent scheme commenced by an application presented October 12, 1896, by which he secured $800, and continued through all the years until August 7, 1901, the number of such fictitious applications reaching 129, the amounts ranging from' $150 to $1,620, and amounting in the aggregate to $209,100.

Nor were examinations made of Blodt’s accounts within the spirit of the contract June 1, 1900, nor in the year 1901. It appears that one Diehm made some examination prior to June 1, 1900, and that an alleged expert examiner, employed by the Company but directed by Blodt, made an examination shortly prior to December, 1900, and reported the accounts correct. No accounts were in fact rendered, nor examinations had June 1, 1900, as stated in the Loan Company’s last certificate. And it is entirely apparent that the examinations which were made, although probably conducted in good faith, were really surface and perfunctory examinations, and entirely untrustworthy. It is equally apparent that had the Company exercised ordinary diligence, or a real effort to comply with its contract with the Fidelity Company, the criminally loose methods of Blodt and the grossly negligent methods of the other officers having duties in the management to perform,- and which the spirit of the-contract with the defendant Company required that they should perform, would have been exposed years before the final catastrophe, and before the certificate on which liability is claimed by plaintiffs was issued. In fact, the active management appears to have been turned over to Blodt, who conducted affairs as he pleased without control, check, or efficient supervision by anyone. Much of the time the vice-president was out of the state, he and the treasurer. having signed and left with Blodt blank checks, and all of the amounts he converted were obtained by using* these checks. The other officers seem to have been equally negligent. The vigilant supervision which the Company, as well by its by-laws, the statutes of the state, and its contract with defendant, was required to exercise, was wholly wanting.

The certificate for continuation accompanying the last application is in the terms following:

“Certificate. — I, Arthur L. Mix, Prest. Guarantee Savings and Loan Co., hereby certify that each of the employes named in the accompanying list has faithfully and satisfactorily performed his duties and promptly and correctly rendered his accounts during the year ending June 1st, 1901; and that to the best of my knowledge and belief, neither of them has been, nor is now, in arrears or default; that at the-date of the last examination of their respective accounts the same wfere found, in each case, correct, and I know of no reason why the guarantee on behalf of each should not be continued.'
“Dated at Cleveland, O., June 1st, 1901.
■“(Signed) Arthur L. Mix, Prest,
“The Guarantee Savings and Loan Co.”

Two questions only seem to need attention. What is the* nature, and the effect in law, of the representations and promises made by the Loan. Company to the Fidelity Company to induce the. bonding contract, and were the defaults of Blodt “within the direct scope of his duties named in said schedule,” that is, his duties as secretary?

1. As to the first question. It is assumed that the bonding contract, with the continuation certificates, are in the nature of insurance contracts rather than surety contracts, and it is contended that the effect of the statements denominated representations and promises are not to be treated as warranties, but are merely representations, and to be determined by the rules applicable to insurance contracts. That is, unless the statements are known to be untrue when made, their actual falsity does not prejudice the rights of the insured. An extensive array of authorities is produced to show that the language of such contracts should be construed most strongly against the insurer, since the terms are specified by the company and not by the policy-holder. It is perhaps not necessary to look beyond our own state to ascertain the correct rule. Being contracts of indemnity against loss such contracts should be liberally construed in favor of the object sought to be attained, and where a clause is susceptible of two interpretations which seem equally fair, that should be preferred which affords the greater indemnity, but, like other contracts, they should receive a reasonable construction in order to carry out the "presumed intention of the parties as expressed by the language used. West et al. v. Ins. Co., 27 Ohio St., 1; Travelers’ Ins. Co. v. Myers & Co., 62 Ohio St., 529; Germania Fire Ins Co. v. Schild, 69 Ohio St., 136. The question of what name shall be given to the representations and promises of the Loan Company seems to us unimportant. The certificate of Mix, the president, attested positively that each of the employes, which included Blodt, had “faithfully and satisfactorily performed his duties and correctly rendered his' accounts during the year ending June 1, 1901,” and at the date of the last examination of the respective accounts the same were found in each case correct, both of which statements also included the treasurer, Wunderlich. These statements, relating as they did to past transactions and existing conditions, and the promises as to future conduct of employes, entered into the contract and were at least in part the inducement which led to it, and constituted the basis of liability on the part of the Fidelity Company, and, although the term warranty is not used, yet they in law had the full effect of warranties. So that their falsity in any material particular is fatal to any action on the bond. That the statements were both false and material admits of no rational dispute. That Mix, the president, had no personal knowledge of their falsity is immaterial. They were the representations of the Company, and that they were grossly false was well known to those who were in active management of the Company’s affairs. This- condition brings the case within the ruling in Orme & Okey, Recrs., v. Baker, 74 Ohio St., 337, where the knowledge of those actively participating in the management of a bank is held to be in law the knowledge of. the bank itself. But proof of such knowledge is not essential to the responsibility of the Company for the truth of the statements made. The statements were conditional to the taking effect of the stipulation for liability on the part of the Fidelity Company; were statements that certain facts were true, and that certain acts respecting the performance of duties should thereafter be done by officers of the Loan Company. These statements, however expressed, are of the very essence, of warranties. The promises were to be observed in good faith; the representations as to the conduct of the employes and.the condition of their accounts and transactions with the Company could not be' truthfully made unless they were the result of a reasonably vigilant examination and supervision of the conduct of such employes and their dealings which affected the .business of the Company. As before stated, no real effort to control or supervise Blodt was attempted, and he was allowed practically to manage the whole affair to suit himself. ..The duties' of other officers were defined in the- Company’s statements accompanying their several applications, and it was part of the contract • that these, duties should not be changed without notice to the Fidelity Company. No such notice was given. On the contrary, the last statement of the president implies that the concerns are being ■managed by the several officers in accordance with the previous stipulation. It does more than this. We emphasize the fact that it contains a positive statement that each of the employes named has faithfully and satisfactorily performed his duties. In fact, some had utterly abandoned their duties. It stated' positively that they had promptly and correctly rendered accounts during the year ending june 1, 1901. Some' of them had rendered no accounts whatever during that year. The examination of the alleged expert was made, the ■December before. The foregoing are positive statements. The -certificate does say that to the best of the president’s knowledge and belief neither of. the employes had beén or was ■ in arrears or default. At the trial, Mix, the president, was absent from the state and could not be produced In person. He seems to have been generally absent so far as the performance of duties was concerned. It was stipulated by counsel that if present he would testify that he executed the certificates signed by him and had no knowledge of the untruthfulness of any matter therein contained. Very likely. But his certificate was the certificate •'of the Company as regards the rights and obligations of the Fidelity Company, and his personal belief, entertained in a distant state, and with no previous intelligent effort on his part to ascertain the truthfulness of the statements, when taken with the real facts as they existed, shows not only a failure on the part of the Company to perform its part of the contract, but a blind, reckless disregard of contract obligations. Can any intelligent person suppose that if the method of management had been disclosed as fully as it was concealed, that the 'bond would ever have been renewed by the defendant Company? We think not. It appears to us clear that the representations and promises were in law warranties, and the falsity of the former and the disregard by the Loan Company of the latter constitute a complete defense.

■ Lest the foregoing comment respecting the negligence-of the Loan Company be misconstrued as indicating that negligence is the basis of our judgment, we add that negligence is but an incident. It is not intended to hold that mere negligence on the part of the guarantee may afford a defense but to hold that a warranty binds the warrantor, and that. tfye breach on his part constitutes a defense to an action on the bond.

2. But were the defaults of Blodt, ■ whether to be regarded as embezzlements or larcenies or by whatever name denominated, within the line of his duties as secretary? Those duties, so far as the money of the Company is concerned, are specifically defined. The secretary is authorized to receive money and it is his duty to deposit it. This specification as to deposit of funds by the secretary is in conflict with sections four and five of the by-laws, which provide that the secretary “shall receive all moneys paid to the company and enter the same in the proper books,” and that “the treasurer shall receive and have custody of all the moneys of the Company and promptly depo’sit the same in such bank or banks as the board of directors may designate,” thus implying that the secretary should pay moneys received to the treasurer. But whichever shall be taken as the controlling provision regarding deposits of money it is entirely clear that nowhere is authority given the secretary to withdraw the funds, and that so far as the money was concerned his duty had been exhausted when he properly deposited it. It is provided by section 3836-4, Revised Statutes, that the treasurer shall deposit all funds in the bank designated by the board of directors, and they can be withdrawn only by check signed by the president and financial secretary, or such other, officers as the board of directors may designate. In making deposits of funds received by him Blodt was acting as secretary, but the fact that t|ie signature of the secretary to checks is contemplated by the above cited statute does not suggest that he has authority to use the checks; the contrary inference is apparent. Nor had he any duty as secretary to pass upon applications for loans, nor perform the duties of an appraisal committee in the examination of the securities offered, nor the duty of - the board of directors in authorizing expenditures. All-these acts, while necessary in the working out of Blodt’s fraudulent scheme, were not only not within the direct scope of his duties but were wholly without any of the 'specified duties. The frauds upon the Company to which these transactions were incidents, were not, therefore, the frauds of Blodt as secretary, but were acts which, by the gross negligence of the Company, he was permitted to do foreign to the duties enjoined upon him by the schedule as well as the statute and the by-laws of the Company. Let us recur again to the provision of the bond. The Fidelity Company is to make good to the Loan Company any loss sustained by reason of the fraud or dishonesty of the employe “in connection with his duties as specified on said schedule,” and “the Company shall not be liable for other than the personal acts of the employes within the direct scope of their duties named in said schedule.” These-are controlling provisions. If we are right in these deductions from them and from the facts of the record, and they seem inevitable, then it follows that Blodt’s frauds do not come within the direct scope of his duties as secretary, and that, therefore, they are without the obligation of the bond and the Fidelity Company can not be held for them.

We find no error in the judgment of the circuit court or in that of the common pleas, and they will be

Affirmed.

Shauck, C. J., Price, Crew and Summers, jj., concur. .