Before EVANS, SPARKS, and KERNER, Circuit Judges.
The judgment from which this appeal was taken was entered in an action brought to determine which one of two insurance companies should bear the loss which plaintiff admittedly sustained, growing out of transactions where seven checks were issued by plaintiff and cashed in payment of merchandise supposedly delivered to it, but which had never been received.
One defendant, the New Amsterdam Casualty Company, admitted its liability for the whole claim. It, however, sought to hold the other defendant, the Employers' Liability Assurance Corporation, Limited, because of that Company's primary liability on a policy by it issued, which covered forgery (specifically defined by the policy) by one acting as agent of the insured.
The facts are largely covered by stipulation of the parties. Appellant issued what is called a forgery policy. The New Amsterdam Company issued what is known as a fidelity policy. The latter policy covered plaintiff's loss. Its right to recover against appellant, however, depends upon its showing that appellant's so-called forgery policy covered plaintiff's loss.
The precise question arises out of the language of appellant's policy which is as follows:
"The Employers' * * * Corporation * * * hereby agrees to indemnify the Assured * * * against losses sustained * * * by reason of
"Forgery or alteration of, on, or in any check, draft, promissory note, bill of exchange, or similar written promise, order or direction to pay a sum certain in money, made or drawn by, or drawn upon or as a direction to the Assured, or made or drawn by one acting as agent of the Assured, or purporting to have been made or drawn as hereinbefore set forth, including
"(a) Any check or draft made or drawn in the name of the Assured payable to a fictitious payee and endorsed in the name of such fictitious payee whether or not such endorsement be a forgery within the law of the place controlling the construction thereof; and
"(b) Any check or draft procured in a face to face transaction with the Assured or with one acting as agent of the Assured by anyone impersonating another and made or drawn payable to the one so impersonated and endorsed by anyone other than the one impersonated, whether or not such endorsement be a forgery within the law of the place controlling the construction thereof."
The essential story may be told briefly as follows:
Plaintiff had an employee named Thomas J. Lane, who married another employee named Beatrice Agolia. After this marriage, the wife ceased to work as an employee. She and her husband conceived a scheme to defraud the plaintiff, which plan they executed. They operated under the name of Tolabeag Engineers. The first word was made up of the first two letters of each of the names of these two getrich quick swindlers. The wife went to Cleveland and there rented an office. She made out false inventories of goods and sent them to the plaintiff. The husband, who remained as an employee of the plaintiff, fraudulently caused a receipt for these goods to be issued. The wife then sent a bill in the name of Tolabeag Engineers to plaintiff, and received a check in payment thereof. The check was made out to Tolabeag Engineers and was indorsed by the wife and cashed. This operation was repeated and plaintiff was defrauded out of a total of $12,477.35, before it caught up with Mr. and Mrs. Lane.
No business was transacted by Tolabeag Engineers and nothing was done at the Cleveland office, save as related. The wife made out false invoices, and presented the bills therefor, cashed the checks which plaintiff sent pursuant to the invoices and fraudulently obtained receipts. In fact, Tolabeag Engineers transacted no other business. The wife visited the Cleveland office, but rarely - two or three times in four months, and then only for a few minutes at a time. The space she rented was known as desk space in a community office. She had her mail sent to her in Chicago in envelopes furnished by her. She also ...