12. TRIAL-INSTRUCTIONS-SUFFICIENCY OF EVIDENCE.

There is no error in withdrawing from the consideration of the jury a particular defense, where there is no competent evidence in support of it, on which a verdict could be based.

In Error to the Circuit Court of the United States for the Eastern District of Tennessee.

This was an action by the Supreme Council Catholic Knights of America against the Fidelity & Casualty Company of New York on a bond. At the trial the jury found for plaintiff. Judgment for plaintiff was entered on the verdict. Both parties brought error.

Xenophon Wheeler and Thomas McDermott, for plaintiff.

Creed F. Bates, Charles C. Hadal, Edwin R. Thurman, and J. Washington Moore, for defendant.

Before TAFT and LURTON, Circuit Judges, and BARR, District Judge.

LURTON, Circuit Judge. The appellant here and plaintiff below is the Supreme Council Catholic Knights of America, a corporation under the laws of Kentucky. In general terms it may be described as a fraternal and beneficiary association of the members of the Catholic Church. Its chief purpose seems to have been the establishment and maintenance of a life insurance feature, by means of which a sum not exceeding $5,000 was to be paid to the family of each member out of funds raised by death assessments and paid into the common treasury, and then, under the laws of the order, paid to the beneficiary entitled. The defendant corporation, the Fidelity & Casualty Company of New York, is a corporation of the state of New York, and is engaged in the business of guarantying the fidelity and honesty of officers, agents, and employés.

This suit was an action on a bond for $50,000, executed by the defendant company to the plaintiff corporation, insuring the fidelity and honesty of Michael J. O'Brien as supreme treasurer of the Supreme Council Catholic Knights of America. So much of said bond as is involved in the questions presented by the assignment of errors is as follows:

"This bond, made the first day of July, in the year of our Lord one thousand eight hundred and ninety-one, between the Fidelity and Casualty Company of New York, hereinafter called 'the company,' of the first part, and Michael J. O'Brien, of Chattanooga, Tenn., hereinafter called the 'employed,' of the second part, and Supreme Council Catholic Knights of America, hereinafter called 'the employer,' of the third part. Whereas, the employed has been appointed supreme treasurer at Chattanooga, Tenn., in the service of the employer, and has applied to the company for the grant by them of this bond, and whereas, the employed has heretofore delivered to the company certain statements and a declaration relative to the duties and accounts of the employed, and other matters, it is hereby understood and agreed that those statements and such declaration, and any subsequent statements or declaration hereinafter required by or lodged with the company, shall constitute an essential part and form the basis of the contract hereinafter expressed: Now, in consideration of the sum of three hundred and seventyfive dollars, as a premium for the term ending on the first day of July, eighteen hundred and ninety-two, at 12 o'clock noon, it is hereby declared and agreed that during such term, or any subsequent renewal of such term, and

subject to the conditions and provisions herein contained, the company shall, at the expiration of three months next after proof satisfactory to its officers of a loss as hereinafter mentioned, make good and reimburse to the employer, to the extent of the sum of fifty thousand dollars, and no further, such pecuniary loss, if any, as may be sustained by the employer by reason of fraud or dishonesty of the employed in connection with the duties referred to, amounting to embezzlement or larceny, which was committed and discovered during the continuance of said term or any renewal thereof, and within three months from the death, dismissal, or retirement of the employed: provided, that on the discovery of any such fraud or dishonesty as aforesaid the employer shall immediately give notice thereof to the company, and that full particulars of any claim made under this bond shall be given in writing, addressed to the company's secretary, at its office in the city of New York, within three months after such discovery as aforesaid, and within three months after the expiration of this bond, and the company shall be entitled to call for, at the employer's expense, such reasonable particulars and proofs of the correctness of such claim, and of the correctness of the statements made at the time of effecting this bond, or made at any time of the payment of any renewal premium, as may be required by the officers of the company, and to have the same particulars, or any of them, verified by statutory declaration; and any claim made under this bond, or any renewal thereof, shall embrace and cover only acts and defaults committed during its currency, and within twelve months next before the date of the discovery of the act or default upon which such claim is based, and upon the making of any claim this bond shall wholly cease and determine, and shall be surrendered to the company on the payment of such claim. And this bond is entered into on the condition that the business of the employer shall be continued to be conducted, and the duties and remuneration of the employed shall remain in accordance with the statements hereinbefore referred to; and if, during the continuance of this bond, any circumstance shall occur or change be made which shall have the effect of making the actual facts differ from such statements, or any of them, without notice thereof being given to the company at its office in New York, and the consent and approval in writing of the company being obtained, or if any willful suppression or misstatement be made in any claim under this bond, or any fact affecting the risk of the company at any time, or if the employer shall fail to notify the company of the occurrence of any act of dishonesty on the part of the employed as soon as it shall have come to the knowledge of the employer, or shall continue to intrust the employed with valuable property after such discovery, this bond shall be void from the beginning."

O'Brien succeeded himself as treasurer, having held the same office for two preceding terms of two years each. The defendant company was surety only from July 1, 1891, the date when his third and last term began. O'Brien acted under defendant's bond only from July 1, 1891, to September 10, 1891, when he abandoned his trust and fled the country. There was a jury and verdict against the defendant, as surety, for $15,722. From the judgment on this verdict both the plaintiff and defendant have sued out writs of error. The principal question arising upon the plaintiff's assignment of error is as to the liability of the surety for certain items of receipt, aggregating $21,000, and with which O'Brien charged himself as of various dates between July 1 and 10, 1891. The contention of the defendant was and is that the charges so made by O'Brien against himself were misdated; that the moneys so charged were in fact received and paid out before July 1st, and were not, therefore, embezzled by O'Brien during the currency of its bond. The contention of the plaintiff was and is that the charges so made by O'Brien against himself were made during the life of the bond, and in the

ordinary course of his duty as treasurer, and are therefore conclusive upon him and upon his surety.

Evidence tending to show that these items had been received dur ing the latter part of June, and paid out before July 1st, was admitted over objection. There was also evidence tending to show that O'Brien had a habit of dating his entries, letters of advice, and receipts about 10 days after the date of actual receipt. The court, in substance, instructed the jury that while admissions, entries, receipts, and reports made to other officials of the order during the life of the bond, and in the usual and ordinary course of his duty as treasurer, would be evidence affecting O'Brien's surety, yet such admissions or reports would not be conclusive, and might be contradicted and explained, and that it was for the jury to say, upon the whole evidence submitted to them, whether the items in controversy had been received before or after the execution of the bond in suit, and before or after the beginning of his third term; that, on the evidence, it was for them to say whether the sums so received were paid out before the currency of defendant's bond. The court also charged that the defendant surety would not be liable for any moneys received by O'Brien before July 1st, which were not in his hands when the defendant became bound as his surety; that for any defalcation before July 1, 1891, the defendant surety could not be made liable under the bond exhibited.

There has been a wide difference of opinion entertained by American courts as to the conclusiveness of official reports, or entries made by public officials in the ordinary course of official duty. There is a respectable line of authority, beginning with the case of Baker v. Preston, 1 Gilmer, 235, holding that such entries and reports are conclusive both upon the official making them and the sureties upon his official bond. That case involved the liability of the sureties upon the bond of a state treasurer who at the beginning of a second term had on hand, according to his own books, a large balance brought forward from a preceding term. The sureties were held concluded by the book balance thus brought forward, and not suffered to show that in fact the balance on hand was much less, by reason of a defalcation committed during the former term, and not appearing upon the books. The decision was by a divided court. Judge White dissented in a very able opinion, based upon the total want of authority to support the conclusion of the court. The de cision has been much criticised in subsequent opinions of the Virginia supreme court. Munford v. Overseers, 2 Rand. 314; Craddock v. Turner's Adm'r, 6 Leigh, 116. It has been followed in State v. Grammer, 29 Ind. 530; Morley v. Town of Metamora, 78 Ill. 394; City of Chicago v. Gage, 95 Ill. 593; Boone Co. v. Jones, 54 Iowa, 699, 2 N. W. 987, and 7 N. W. 155,-and perhaps others. The doctrine has been repudiated, and such reports and entries held to be only prima facie evidence, and open to contradiction, by a decided weight of judicial opinion. U. S. v. Eckford, 1 How. 250; U. S. v. Boyd, 15 Pet. 187; U. S. v. Boyd, 5 How. 29; Arkansas v. Newton, 33 Ark. 277; Bissell v. Saxton, 66 N. Y. 55; Mann v. Yazoo City, 31 Miss. 574; Hatch v. Attleborough, 97 Mass. 537; Nolley v. Calla

way Co., 11 Mo. 447; Nevada v. Rhoades, 6 Nev. 352; Townsend v. Everett, 4 Ala. 607; Vivian v. Otis, 24 Wis. 518.

Undoubtedly, there may occur cases in which the official should be estopped by his entries and reports, in consequence of special circumstances appearing constituting an estoppel in pais. In such cases the surety would be bound by the evidence which concluded his principal. But such estoppel could only arise under bonds conditioned for the faithful discharge of the duties of the office. Some of the cases cited above as following Baker v. Preston were in part based upon facts constituting estoppel in pais. So, under bonds. obligating the surety for the faithful discharge of official duty by his principal, the evidence offered to show fabricated entries or false reports may show such official dereliction or fraud as in itself would constitute a breach of the obligation of the bond. Such was the case of U. S. v. Girault, 11 How. 22,-a case which counsel for plaintiff have urged was in conflict with U. S. v. Boyd, 5 How. 29. The opinion in each case was by Mr. Justice Nelson, and, when rightly understood, is in harmony and in accord with the earlier case of U. S. v. Eckford, 1 How. 250. In the case last cited the suit was upon the bond of a collector who had succeeded himself, and stood charged, when the bond in suit was given, with large balances, which were carried forward in subsequent reports as cash on hand, As to the effect of such charges, the court said:

"The amount charged to the collector at the commencement of the term is only prima facie evidence against the sureties. If they can show by circumstances or otherwise that the balance charged, in whole or in part, has been misapplied by the collector prior to the new appointment, they are not liable for the sum so misapplied."

In the Boyd Case, which was an action on, the bond of a receiver of public moneys arising from sale of the public lands, it appeared that during the term of the bond he reported in his official reports the receipt of large sums as from the sale of public lands. Upon default his sureties were sued for the sums so reported. Their defense was that Boyd had never received the money so reported; that the charges so made were for lands which Boyd had entered in his own name, or in the name of others for his benefit, after his term of office began, but before the execution of his bond; that the lands so sold had never been paid for, Boyd simply charging himself as receiver in his accounts, as if the money had been paid, and carrying forward these charges in his subsequent reports. It was contended in that case, as in this, that any evidence contradicting the entries against himself and his official reports should be excluded as incompetent. Upon that point the court said:

"It has been contended that the returns of the receiver to the treasury department, after the execution of the bond, which admit the money to be then in his hands to the amount claimed, should be conclusive upon the sureties. We do not think so. The accounts rendered to the department, of money received, properly authenticated, are evidence, in the first instance, of the indebtedness of the officer against the sureties, but subject to explanation and contradiction. They are responsible for all the public moneys which were in his hands at the date of the bond, or that may have come into his hands afterwards, and not properly accounted for, but not for moneys which the officer

may choose falsely to admit in his hands, in his accounts with the government. The sureties cannot be concluded by a fabricated account of their principal with his creditors. They may also inquire into the reality and truth The principle has been asserted

of the transactions existing between them. and applied by this court in several cases."

It will be observed that in the Boyd Case the fraud by which lands had been entered without the actual payment of the entry money-a thing absolutely prohibited by law-had been committed before the obligation of his sureties began. They were therefore not liable for a violation of law committed before his bond was given.

In Girault's Case, who was also a receiver, the facts were the same as in the Boyd Case, with this important distinction: Girault's fraud in entering lands without actual payment was committed during the currency of his bond. The bond was conditioned that he should faithfully discharge the duties of his office. While the sureties were not estopped to show that in fact he had received no money, and that his reports to the contrary were false and untrue, yet the proof which established this fact established a fraud for which his sureties were liable. In Girault's Case the question arose upon the sufficiency of a plea which set out the manner in which Girault had defrauded the government, and the circumstances under which he had charged himself for money which in fact he had never received. The plea was held bad because, as the court said:

"The condition of the bond is that Girault shall faithfully execute and discharge the duties of his office as a receiver of the public moneys. The defendants have bound themselves for the fulfillment of those duties, and are, of course, responsible for the very fraud committed by that officer, which is sought to be set up here in bar of the action on the bond."

Proceeding, the court distinguishes the case from Boyd's by saying:

"There the receipts which had been returned to the treasury department, upon which the indebtedness was founded, and which had been given on entries of the public lands without exacting the money, in fraud of the government, were all given before the execution of the official bond upon which the suit was brought. Their sureties were therefore not responsible for the fraud, and it was those transactions on the part of the receiver which had transpired anterior to the time when the sureties became answerable for the faithful execution of his duties, in respect to which it was held that they could not be estopped by his returns to the government." 11 How. 30.

The bond now in suit is not the bond of a sworn public official. In a more important particular still is it distinguishable from the bonds involved in all the cases cited above. It is this: All those bonds bound the sureties for the faithful discharge of the duties of the office occupied by their principal. The bond in suit is remarkable in that the only obligation of the surety is that it will make good and reimburse "such pecuniary loss, if any, as may be sustained by the employer by reason of fraud or dishonesty of the employed in connection with the duties referred to, amounting to embezzlement or larceny, which may be committed and discov ered during the continuance of said term or any renewal thereof, and within three months from the death, dismissal, or retirement