Appeal from the United States District Court for the Central District of Illinois, Rock Island Division. No. 78-4051 -- J. Waldo Ackerman, Judge.
Posner, Circuit Judge, Coffey, Circuit Judge, and Campbell, Senior District Judge.*fn*
CAMPBELL, Senior District Judge.
This appeal challenges the district court's entry of summary judgment for the plaintiff-insured on a blanket bond issued by the defendant-insurance company. The appellant, Aetna Casualty and Surety Company (Aetna) claims that a material issue of fact exists as to whether the acts of William Kearney, a past president of the Rock Island Bank (Rock Island), were dishonest or fraudulent within the meaning of the bond. Kearney had issued letters of credit to Cortland J. Silver in amounts which greatly exceeded his loan authority without consulting the loan committee of the bank. Subsequently, Silver declared bankruptcy and one of the outstanding letters of credit resulted in a judgment against Rock Island for $371,181.71. Upon Rock Island's Motion for Summary Judgment, the district judge concluded that the losses incurred by Rock Island arising out of those letters of credit, i.e. the judgment and attorneys fees, were covered by the blanket bond. Based on that determination, the district court entered a judgment against Aetna for $532,914.21 and the defendant brought this appeal.
The decision in this case turns not on specific factual disputes as to the substance of the relevant transactions, but on the proper inferences to be drawn from those facts. The district court made extensive findings of fact with which we and the parties find no fault. Therefore, we will quote that portion of the Summary Judgment Order, subject to subsequent supplementation. (The District Judge's footnotes are included in brackets in the body of the quotation.)
1. During the period April 14, 1968 through April 9, 1970, The Rock Island Bank was insured under two Bankers' Blanket bonds issued by The Aetna Casualty and Surety Company. These bonds insured The Rock Island Bank, inter alia, against losses resulting from dishonest or fraudulent acts committed by any covered employee.
2. Throughout the aforesaid period, William J. Kearney was President of the Rock Island Bank and was an employee covered by the bonds.
3. During the period April 14, 1968 through April 9, 1970, Mr. Kearney issued seven letters committing The Rock Island Bank to assume loans made to, or to honor drafts drawn to the account of, Cortland J. Silver and/or one or more of his corporate enterprises, as follows:
Date Which Issued Amount Date
4/4/68 National Bank of $300,000 after 4/5/71
4/25/68 National Bank of $300,000 until 4/25/69
9/12/68 O'Hare International $350,000 1/2/73 through
4/17/69 National Bank of $300,000 until 4/19/70
6/5/69 Lorraine Realty $400,000 ...