with, the surety is discharged. 2 Brandt, Sur. § 403; Jones v. Keer, 30 Ga. 93, 95; Cunningham v. Wrenn, 23 Ill. 64, 65; Lynch v. Colegate, 2 Har. & J. 34, 37; Holl v. Hadley, 4 Nev. & M. 515, 520; Bonser v. Cox, 4 Beav. 379, 384; U. S. v. Hillegas, 3 Wash. C. C. 70, 76, Fed. Cas. No. 15,366; Whitcher v. Hall, 5 Barn. & C. 269; Combe v. Woolf, 8 Bing. 156, 161.

Again, the contract of these parties consisted of mutual covenants, -a covenant by the plaintiff that its cashier, Kelly, should invariably indorse its checks with the words "For Deposit," and a covenant by the defendant that it would pay the losses resulting from the fraudulent and dishonest acts of Kelly if he failed to do so. The plaintiff failed to fulfill any part of its covenant. It failed in toto. Kelly received and used many of his employer's checks, but he never indorsed one of them with the words "For Deposit" during the entire term of the bond. As the plaintiff has committed a complete breach. of its covenant, it cannot enforce the fulfillment of the covenant of the defendant. He who commits the first substantial breach of a covenant cannot maintain an action against the other contracting party for a subsequent failure to perform it. Rice v. Deposit Co., 103 Fed. 427, 432, 433, 43 C. C. A. 270, 276; Imperial Fire Ins. Co. v. Coos Co., 151 U. S. 463, 467, 14 Sup. Ct. 379, 38 L. Ed. 231; Guarantee Co. of North America v. Mechanics' Sav. Bank & Trust Co. (decidec by the supreme court Jan. 6, 1902) 22 Sup. Ct. 124, 46 L. Ed. 253; Hubbard v. Association, 100 Fed. 719, 40 C. C. A. 665; Seal v. Insurance Co., 59 Neb. 253, 80 N. W. 807; Brady v. Association, 60 Fed. 727, 9 C. C. A. 252. The case of Rice v. Fidelity Deposit Co., 103 Fed. 427, 432, 433, 43 C. C. A. 270, 276, which was decided by this court on July 16, 1900, was, in my opinion, identical in every essential particular with the case in hand, and the law applicable to the facts of these cases has not changed since that case was decided. In that case the covenant contained in the answer of the employer in the application for the bond was that the checks should be countersigned by the bookkeeper, and the bookkeeper did not countersign. them. We held that the employer could not recover, and, among other things, we said:

"The legal effect of these contracts was to create the relation of principal and surety between Perry and the fidelity company. The plaintiffs were necessarily aware of this relation. They agreed. in so many words, by the instrument of August 30, 1895, that the countersignature of their bookkeeper on the checks of Perry against their account should be a condition of the liability of this surety; and the general rule is that if a condition, known to the obligee, upon which a surety agrees to be bound. is not complied with, the surety is discharged. 2 Brandt, Sur. § 403; Jones v. Keer, 30 Ga. 93, 95; Cunningham v. Wrenn, 23 Ill. 64, 65; Lynch v. Colegate, 2 Har. & J. 34, 37; Holl v. Hadley, 4 Nev. & M. 515, 520; Bonser v. Cox, 4 Beav. 379, 384; U. S. v. Hillegas, 3 Wash. C. C. 70, 76, Fed. Cas. No. 15,366; Whitcher v. Hall, 5 Barn. & C. 269; Combe v. Woolf, 8 Bing. 156, 161. Again, the bond and the instrument of August 30, 1895, must be read, construed, and enforced together. The contract of these parties consists of all the stipulations and agreements in both instruments. Both instruments are parts of a single contract. When they are so read, the agreement of these parties is found to contain mutual covenants.--a covenant of the employers that they will invariably require the countersignature of their bookkeeper, Gribble, on all checks of Perry against their account, and a covenant of the

fidelity company that it will pay the losses resulting from the dishonest and fraudulent acts of Perry. Now, the plaintiffs have entirely failed to keep their covenant. Consequently they cannot enforce the fulfillment of the covenant of the fidelity company. He who commits the first substantial breach of a contract cannot maintain an action against the other contracting party for a subsequent failure to perform. Cattle Co. v. Martindale, 63 Fed. 84, 89, 11 C. C. A. 33, 38, 27 U. S. App. 277, 284, 285; Norrington v. Wright, 115 U. S. 188, 204, 205, 6 Sup. Ct. 12, 29 L. Ed. 366; Filley v. Pope, 115 U. S. 213, 6 Sup. Ct. 19. 29 L. Ed. 372; Rolling Mill Co. v. Rhodes, 121 U. S. 255, 261, 264, 7 Sup. Ct. 882, 30 L. Ed. 920; Beck & Pauli Lithographing Co. v. Colorado Milling & Elevator Co., 3 C. C. A. 248, 52 Fed. 700, 10 U. S. App. 465, 470; King Philip Mills v. Slater, 12 R. I. 82, 34 Am. Rep. 603; Smith v. Lewis, 40 Ind. 98; Hoare v. Rennie, 5 Hurl. & N. 19; Pope v. Porter, 102 N. Y. 366, 371, 7 N. E. 304; Dwinel v. Howard, 30 Me. 258; Robson v. Bohn, 27 Minn. 333, 344, 7 N. W. 357; Reybold v. Voorhees, 30 Pa. 116, 121; Stephenson v. Cady, 117 Mass. 6, 9; Branch v. Palmer, 65 Ga. 210; Fletcher v. Cole, 23 Vt. 114, 119."

These remarks are applicable to, and should control the decision of, this case.

It is further submitted that, if these views are erroneous, and if the mere adoption of a rule that one shall do an act, and ignorance whether it is complied with or not, constitute either the fulfillment, or a legal excuse for the failure to fulfill, a guaranty that he will perform it, then, by the same mark, the adoption of a rule by the defendant that the plaintiff's loss from the fraudulent or dishonest acts of the cashier shall be paid without the payment of it must constitute either a payment of that loss or a legal excuse for a failure to pay it, and the judgment ought not to require the defendant to do more than to adopt such a rule. It ought not to require it to pay the loss. The defendant should have the benefit of the rule applied to the plaintiff.

(115 Fed. 970.)

KNIGHT V. WEEKS et al.

(Circuit Court of Appeals, Fifth Circuit. May 20, 1902.) SURETIES-CONTRIBUTION-ENFORCEMENT OF EXECUTION AGAINST CO-SURETY. Under Rev. St. Fla. § 983, which provides that co-sureties shall be bound to each other for a proportional contribution, and section 1177, which provides that any one who has paid money as a surety shall have the right to control the judgment, a surety who has paid a judgment at law after execution issued has the right to cause such execution to be levied on property of a co-surety, who is also a judgment defendant. and to enforce payment of his proportional share; and the court cannot arrest the execution on a petition of such co-surety setting up prior equities between the parties, which it is the sole provision of a court of equity to determine.

In Error to the Circuit Court of the United States for the Southern District of Florida.

H. L. Anderson, for plaintiff in error.

G. C. Martin, for defendants in error.

Before PARDEE, McCORMICK, and SHELBY, Circuit Judges.

PER CURIAM. The transcript in this case embraces the opinion of the judge of the circuit court, as announced on the hearing of the motion to stay execution, as follows:

"On the 9th day of April. 1900, the Gulf Transportation Company, a corporation under the laws of the state of Florida, made two certain promissory notes in the sum of fifteen hundred ($1,500.00) dollars each, and delivered the same to the Brunswick & Hawkinsville Transportation Company, a corporation under the laws of the State of Georgia, but before the delivery of the same R. J. Knight, E. P. Rose, J. S. Weeks, Sr., and J. S. Weeks. Jr., and L. P. Weeks, doing business as J. S. Weeks & Sons, and G. W. Varn, indorsed the said promissory notes. Afterwards judgment was entered against the above-named persons in the circuit court of the United States for the Southern district of the state of Florida, and execution thereon issued in the sum of three thousand five hundred and thirty and 50/100 ($3.530.50) dollars, and the said execution was levied upon certain lands and property in said district belonging to the defendants Weeks and Varn, and the same was advertised by the marshal of the said district for sale. Before the day of the said sale so advertised, certain of the defendants,-E. P. Rose, J. S. Weeks & Sons, and G. W. Varn,-paid to the Brunswick & Hawkinsville Transportation Company and its attorneys the full amount of the principal and interest of the said execution, and, instead of having the said execution satisfied of record, and returned into the office of the clerk of this court, procured from the Brunswick & Hawkinsville Transportation Company an alleged assignment of said execution to one Lazarus B. Varn. After having procured the alleged assignment of said execution, the defendants Rose, Weeks & Sons, and G. W. Varn procured the marshal of the said district to make a levy upon the property belonging to Robert J. Knight and J. B. Martin as copartners under the firm name of J. B. Martin & Co. It is admitted that the payment and assignment was made for the purpose of holding the judgment in force in order to recover from R. J. Knight, the fourth surety, one-quarter part of the judgment recovered, under sections 1177 and 983 of the Revised Statutes of Florida. The petitioner herein does not deny that he is a codefendant and co-surety, and owes his share of the judgment, but claims that, as the co-debtors have advanced the money and paid the same in full, it should be satisfied of record, and he not held to pay his share in this proceeding.

"Section 983 of the Revised Statutes of Florida provides that co-sureties shall be bound to each other for a proportional contribution, and, if one is compelled to pay the debt, he shall have his remedy against his co-surety; and section 1177, Id., provides that any one who has paid money as a surety shall have a right to control the said judgment. These principles seem to determine the questions presented, and the court cannot consider in this motion for a stay of execution the matters set up in the petition, which are irrelevant and immaterial to that issue, although they might be urged in a chancery suit. This court, as a common-law court, has no power to go back of the judgment and make inquiry as to the relations and equities existing between the parties prior thereto. This is especially the privilege of a court of equity. It will therefore be ordered that upon payment of the petitioner's contributory portion of the judgment further enforcement of the execution be stayed, otherwise to be enforced to the extent of that amount."

On a careful examination of the record and on consideration of the briefs submitted in this court, we find no reason to dissent from the views expressed by the trial judge as above given. The judgment of the circuit court is therefore affirmed.

(115 Fed. 793.)

ESPENSCHIED et al. v. BAUM et al.

(Circuit Court of Appeals, Seventh Circuit. May 6, 1902.)

No. 839.

APPEAL-REVIEW-QUESTIONS OF FACT.

Where an equity cause was heard by the chancellor on testimony taken in open court, very clear and palpable error must appear, to justify a reversal on the facts by the appellate court.

Appeal from the Circuit Court of the United States for the Southern District of Illinois.

John M. Holmes and G. A. Koerner, for appellants.

D. M. Browning, for appellees.

Before JENKINS, GROSSCUP, and BAKER, Circuit Judges.

PER CURIAM. Appellants, in their bill of complaint, charge appellees with abuse of fiduciary relations, and with misconduct in the management of a corporation in which appellants were stockholders. After a full hearing on the merits, at which the principal evidence was heard orally by the chancellor in open court, the bill was dismissed for want of equity. The assignment of errors presents the sole question whether the decree should be reversed on the evidence. A careful consideration of the evidence in the record convinces us that the decree was right. But if the conflicts in the evidence were graver than we find them, a reversal would not be justified, since the court at the trial had the opportunity (which we have not) of judging of the credibility of the witnesses by their appearance and demeanor on the stand. Under such circumstances, a very clear and palpable error in the facts must be shown on appeal.

The decree is affirmed.

(115 Fed. 799.)

PARKER et al. v. MOORE.

(Circuit Court of Appeals, Fourth Circuit. May 8, 1902.)

No. 435.

1. CONTRACTS-ACTION FOR BREACH-WHAT LAW GOVERNS.

A contract, although recognized as valid by the laws of the state where made, will in general not be enforced by the courts of another state, where it is contrary to morals or to the public policy or statutes of such state.

2. FEDERAL COURTS-FOLLOWING STATE DECISIONS.

A court of the United States will follow the rule laid down by the highest court of the state in determining whether a contract is governed by the laws of the place where it was made and to be performed or by the law of the forum, and also upon the question whether a contract is contrary to the public policy or statutes of the state.

3. TRIAL-DIRECTION OF NONSUIT-QUESTIONS FOR JURY.

In an action to recover margins advanced by plaintiffs as brokers for defendant on purchases of cotton for future delivery made on defendant's order on the New York Cotton Exchange, where plaintiffs introduced evidence showing that in each case they advised defendant that the purchase was made with the distinct understanding that actual delivery was contemplated, to which he expressed no dissent, it was error to direct a nonsuit, suo motu, based upon the statute of South Carolina, declaring such contracts void unless it was the bona fide intention of both parties at the time the contract was made that the cotton should be actually delivered and received in kind, merely on the self-serving testimony of defendant that it was not his intention to receive the cotton; the question of defendant's actual intention at the time, under such state of evidence, being one for the jury.

4. CONTRACTS-GAMBLING TRANSACTIONS-RIGHT OF BROKER TO RECOVER AD

VANCES.

The statute of South Carolina (Rev. St. § 1859 et seq.), which declares void contracts for the sale and purchase of certain articles, including cotton, for future delivery, unless it is the bona fide intention of both parties at the time that the article shall actually be delivered and received in kind at the time specified, as construed by the supreme court of the state, does not preclude the recovery by a broker of margins advanced for his principal on purchases of cotton for future delivery, on a cotton exchange, although the principal in fact intended not to receive the cotton, but to speculate on the fluctuation in price, where he kept such intention secret, and it was not known to the broker, who made the purchases in good faith, and in the belief that an actual purchase was intended.

5. SAME.

There is no principle of general law upon which a principal can avoid liability to his agent for advances made in good faith on his request, because the contract on which they were made was rendered illegal by the secret intention of the principal not to perform the same in accordance with its terms.

6. APPEAL QUESTIONS PRESENTED BY RECORD.

An assignment of error on the ground that defendant was estopped by his previous conduct from setting up a certain defense in support of which he introduced testimony in the court below cannot be considered by the appellate court, unless based on some objection and exception to the evidence taken in the trial court, and shown by the record. In Error to the Circuit Court of the United States for the District of South Carolina, at Greenville.

For opinion below, see III Fed. 470.

1. See Contracts, vol. 11, Cent. Dig. §§ 455-458.

53 C.C.A.-24