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one of its conditions that "upon the discovery by the employer that a loss has been sustained, or of facts indicating that a loss has probably been sustained, the employer shall immediately so notify the company in writing, at its principal offices in the city of New York, and failure to give such immediate notice shall relieve the company from all liability hereunder on account of the employé causing such loss," and by which all of its conditions and provisions were expressly made conditions precedent to the right of the insured to recover upon it. By the express terms of this policy the Surety Company was therefore liable to the defendant in error, not only for fraud on the part of Brown, but also for his "culpable negligence," and in the case of either fraud or culpable negligence by him was entitled to the prescribed notice.

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Counsel for the defendant in error insists that the Railway Company was not obliged to give the Surety Company any notice until the former was justified in "preferring charges" against Brown; and the court below, in one of its instructions to the jury, duly excepted to and assigned as error, told them that the Railway Company had "a right to delay giving notice until it discovered facts that would have justified a careful and prudent man in charging another with fraud or culpable negligence." Much reliance is placed by counsel for the defendant in error, in support of their contention, upon the case of American Surety Company v. Pauly, 170 U. S. 133, 18 Sup. Ct. 552, 42 L. Ed. 977, which they say "involved an indemnity bond whose language was the same in substance as that of the bond here." But counsel are entirely mistaken in saying that the provision in respect to notice in the bond involved in that case was substantially the same as in the bond here in suit; on the contrary, the two provisions are very substantially unlike. By the bond in the Pauly Case the Surety Company agreed to "make good and reimburse to the employer all and any pecuniary loss, sustained by the employer, of moneys, securities, or other personal property in the possession of the employé * * by any act of fraud or dishonesty on the part of the employé. And the provision in respect to notice was "that the company shall be notified in writing, at its office in the city of New York, of any act on the part of the employé which may involve a loss for which the company is responsible hereunder, as soon as practicable after the occurrence of such act shall have come to the knowledge of the employer." Clearly, under that bond the surety was liable only for the fraud or dishonesty of the employé, and the notice required. was of acts for which it was liable; that is to say, fraudulent or dishonest acts of the employé-notice of which fraudulent or dishonest acts was required to be given "as soon as practicable" after their occurrence had come to the knowledge of the employer. It was in respect to such provisions that the Supreme Court held that the Surety Company "did not intend to require written notice of any act upon the part of the cashier that might involve loss, unless the bank had knowledge, not simply suspicion, of the existence of such facts as would justify a careful and prudent man in charging another with fraud or dishonesty. If the company intended that the bank should inform it

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of mere rumors or suspicions affecting the integrity of O'Brien, such intention ought to have been clearly expressed in the bond." 170 U. S. 147, 18 Sup. Ct. 558, 42 L. Ed. 977.

Similar to the Pauly Case are those of Etna Indemnity Co. v. Crowe Mining Co., 154 Fed. 545, 83 C. C. A. 431, and Ætna Indemnity Co. v. Farmers' National Bank, 169 Fed. 737, 95 C. C. A. 169, also relied upon by the defendant in error. In each of those cases it will be seen that the covenant in respect to notice was qualified, and that the obligation to give notice did not arise until the delinquency of the employé was absolutely discovered; for it is obvious that, until the assured is in possession of facts upon which he can predicate notice, the obligation to give it does not and cannot arise. How different are the provisions of the policy in suit, where, as has been shown, the Surety Company made itself liable, not only for the "fraud," but for the "culpable negligence," on the part of Brown, "immediate" notice of which to the Surety Company was expressly required and made a condition precedent to recovery upon the bond.

The court below instructed the jury, among other things, as follows:

"In this case, as above stated, Brown is alleged to have been guilty of personal dishonesty or culpable negligence in making the deposits in question when he knew the bank was insolvent, and you will observe, therefore, that the fraud on the part of Brown is an essential element. Accordingly the plaintiff was not required to give notice to the Surety Company until it had discovered such fraud, or facts indicating the probability of such fraud, and that the plaintiff had suffered loss by reason thereof. The closing of the bank's doors, and the discovery by the plaintiff therefrom that a loss had been suffered by it, is not necessarily conclusive that the plaintiff should have at once given notice to the defendant Surety Company. You have the right to and should take into consideration all the circumstances and conditions then existing and making up the whole situation as known to the plaintiff, and from them determine as to the time when the plaintiff discovered or had information of facts indicating that Brown had probably been guilty of fraud or culpable negligence resulting in loss to the plaintiff.”

And also:

"The plaintiff was not required to give the Surety Company notice upon the discovery of facts that would merely raise a suspicion of fraud or culpable negligence on the part of Brown. It had the right to wait before giving notice to the Surety Company until it discovered facts that would reasonably do more than raise a mere suspicion. It had a right to delay giving notice until it discovered facts that would have justified a careful and prudent man in charging another with fraud or culpable negligence. Nor was it incumbent upon the plaintiff upon discovery of Brown's fraud, or of facts indicating that Brown had probably been guilty of fraud upon the plaintiff, to instantly notify the Surety Company. The words 'immediate notice,' as employed in the bond, are to be given a reasonable and practical construction, and are to be taken as requiring the plaintiff only to give notice as soon as was under all the circumstances of the case reasonably practicable."

To both of which instructions the defendant to the action excepted, and which it here assigns as error. And the court refused this, among other instructions requested by the defendant to the action, the plaintiff in error here:

"If you find that on or before the 1st day of November, 1907, the plaintiff had discovered or knew that the California Safe Deposit & Trust Company

had suspended payment, and had discovered or knew that J. Dalzell Brown, as treasurer of the plaintiff, had dishonestly or with culpable negligence delayed the siguing of checks of the plaintiff against its deposit in the bank, and had discovered or knew that by reason of these facts such checks had not been presented to and paid by the bank before its suspension, and had discovered or knew that Brown had deposited to the credit of the plaintiff on the 24th and 26th days of October, 1907, funds aggregating $250,000, and had discovered or knew that it had to its credit in the bank at the time of its suspension approximately $250,000, and had discovered or knew facts indicating that the assets of the bank would probably not equal in value its liabilities, I instruct you that the plaintiff had then discovered facts indicating that a loss within the bond had probably been sustained, and it became its duty to give immediate notice to the defendant. If you find these facts, and further find that such immediate notice was not given by the plaintiff to the defendant, your verdict must be for the defendant."

To which action of the court the defendant to the action reserved an exception, and assigns it as error.

In the case of Guarantee Company v. Mechanics', etc., Co., 183 U. S. 402, 22 Sup. Ct. 124, 46 L. Ed. 253, the bond sued on insured a bank against such pecuniary loss as it might sustain by reason of the fraudulent acts of its teller, and contained a provision that it would notify the insuring company on "becoming aware" of the teller "being engaged in speculation or gambling." The trial judge, in deciding the case, said in his opinion:

"The language of the bond is that the employer shall report 'on his becoming aware of the employé being engaged in speculation.' Without now stopping to consider at length the meaning of the terms here used, I am of opinion that, in the absence of fraud or bad faith, the failure to disclose the result of the inquiry made in this instance did not invalidate the bond as to the surety. Certainly speculation in a reasonable and substantial sense is meant, such in length of time or magnitude as would make it serious. This, when brought to the attention of the bank officials, was a past event, and apparently in itself unimportant. The bank was under no duty by the contract or independently of it to actively institute or prosecute inquiries about Schardt, or to run down loose rumors or anonymous letters."

The Circuit Court of Appeals, to which the case was first taken, said:

"There is not the least evidence of any bad faith on the part of any of these officers of the bank, including Sykes, the old cashier, in not making a disclosure of what was known, but only of bad judgment in not being more considerably affected by their information."

The Supreme Court, in considering these expressions of opinion, said (183 U. S. 421, 22 Sup. Ct. 132, 46 L. Ed. 253):

"The quotations show that the Circuit Court of Appeals and the Circuit Court concurred in the opinion that if the president and directors had such confidence in Schardt that they did not feel called upon to make any investigation in view of the information that they had received, or to notify the company of that information, and were not guilty of intentional bad faith, then the bank could not be held to have violated the stipulations of the bond on its part. As will have been seen, we are unable to accept this conclusion. The company's defense did not rest on the duty of diligence growing out of the relation of the parties, but on the breach of one of the stipulations entered into between them. The question was not merely whether the conduct of the bank was contrary to the nature of the contract, but whether it was not contrary to its terms. Engagement in speculation or gambling was what the company sought to guard against, because experience had ad

monished it of the probability that speculation or gambling would lead to acts involving loss for which it would be responsible. Bad faith in the view of the courts below would not exist if the bank had such confidence in Schardt's integrity that it accepted his bare statement that he was not speculating as overcoming the weight of his admission that he had been. How anything but such a denial could be expected it is not easy to see, nor how careful and prudent men could have been justified in omitting independent inquiry. * * We think it was the duty of this bank to have made prompt investigation, or at all events to have notified the company at once of the information that it had, and we decline to hold that the bank's misplaced confidence in Schardt affords sufficient ground for enforcing the liability of the Surety Company on the theory of good faith. Our conclusion is that the failure of the bank in the particulars adverted to defeats a recovery on the teller's bond for defalcation after information of Schardt being engaged in speculation was received."

The gist of the decision of the Supreme Court in that case is that by the bond there in suit the bank was required to give the Surety Company notice on becoming aware that the teller was engaged in speculation or gambling, because such was the contract of the parties. The bond here in suit expressly made the required notice a condition precedent to any recovery upon it, and expressly required that upon the discovery of any fraud or culpable negligence on Brown's part, and that a loss had thereby been sustained, or of facts indicating that a loss would probably thereby be sustained, the employer should immediately give the insurer notice, and that failure to give such immediate notice should relieve the Surety Company of all liability under the policy on account of the employé.

As has been already pointed out, there was and is in this case no conflict in the evidence concerning the facts showing that the Railway Company knew at least as early as November 1st that Brown, if not guilty of fraud, was at least guilty of "culpable negligence" in the handling of its funds; for no other conclusion could be drawn by any reasonable man from the facts stated by the officers of the Railway Company having charge of the matters in question. The law undoubtedly is that the requirement of "immediate" notice in policies of insurance means a reasonable notice in view of all of the circumstances of the case, and that where the facts relied upon to excuse a failure sooner to give a notice of loss are disputed, or the inference to be drawn therefrom is uncertain, the question as to whether the notice. is "immediate" under the circumstances of the case, is for the jury. But when it is borne in mind that the obvious purpose of the notice in question was to enable the Surety Company to take steps for its protection, and that the Railway Company delayed from at least November 1st to November 20th before giving the insuring company any notice whatever of Brown's acts, or of any fact indicating any loss or probable loss by reason of them, while it was, during all of the intervening time, as shown by the telegrams referred to and by the uncontradicted testimony concerning the sending of one of the attorneys from Mr. Cutcheon's office to San Francisco, preparing for litigation. against the Trust Company, its officers and stockholders, based upon fraud in connection with the deposit by Brown of $100,000 of its money on October 26th in that bank-when, I say, all of these facts.

are considered, it must, in my opinion, be held as a matter of law. that the notice given by the Railway Company to this Surety Company was not the "immediate" notice required by the contract of the parties. And I think the following authorities, and the numerous cases there referred to, sustain this conclusion: National Surety Co. v. Long, 125 Fed. 887, 60 C. C. A. 623; Gamble-Robinson Co. v. Mass. Bonding & Ins. Co., 113 Minn. 38, 129 N. W. 131; Parker v. Insurance Co., 179 Mass. 528, 61 N. E. 215; Travelers' Insurance Co. v. Myers, 62 Ohio St. 529, 57 N. E. 458, 49 L. R. A. 760; Foster v. Fidelity & Casualty Co. of N. Y., 99 Wis. 447, 75 N. W. 69, 40 L. R. A. 833.

It is a sufficient answer to the suggestion that the Surety Company waived the objection that the notice was not given in time, by failing to object to it when given, to say, first, that a waiver, to be effective, must be made with full knowledge of the facts; and, second, that the complaint contains no allegation of waiver.

In my opinion, the judgment should be reversed, and the cause remanded for a new trial.

ROONEY et al. v. BARNETTE et al.

(Circuit Court of Appeals, Ninth Circuit. October 7, 1912.)

No. 2,005.

1. JURY (§ 47*)—QUALIFICATION OF JURORS-RESIDENCE.

A juror, in Alaska, who testified that he had been a resident of the territory for five years, and was employed at an annual salary as purser on boats which navigated the Yukon river during the summer season, was not subject to challenge for cause merely because it was customary for him to leave the territory during the winters.

[Ed. Note. For other cases, see Jury, Cent. Dig. § 254; Dec. Dig. § 47.*]

2. MINES AND MINERALS (§ 23*)-ASSOCIATION CLAIMS-ASSESSMENT WORK. The law does not require assessment work to be done on each 20 acres of an association placer mining claim.

[Ed. Note. For other cases, see Mines and Minerals, Cent. Dig. §§ 51-59, 114; Dec. Dig. § 23.*]

3. MINES AND MINERALS (§ 26*)—MINING CLAIMS-LOCATION ON SUBSISTING CLAIM.

An entry upon a mining claim before a prior locator is in default cannot be made for the purpose of making a provisional location, to be valid in case the prior locator fails to do the annual work.

[Ed. Note. For other cases, see Mines and Minerals, Cent. Dig. §§ 61-63; Dec. Dig. § 26.*]

4. JUDGMENT (§ 707*)-RES JUDICATA-SUIT BETWEEN DIFFERENT PARTIES. A decree in a suit to quiet title to an association mining claim, finding that the location was invalid, based on evidence tending to show an agreement prior to the location that one person should own an interest in excess of 20 acres, is not conclusive as an adjudication in a subsequent action of ejectment brought by a stranger to such suit against the complainants therein and others; but the question of the validity of the *For other cases see same topic & § NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes