Southern Surety Co. v. MacMillan Co.
United States Court of Appeals for the Tenth Circuit
58 F.2d 541 (1932)
- Written by Rich Walter, JD
Facts
In 1924, Southern Surety Company (Southern) (defendant) issued a $20,000 bond to ensure that a bookseller would execute its contract with the MacMillan Company (MacMillan) (plaintiff), a publisher. The bond contained a clause obligating MacMillan to notify Southern if the bookseller ever defaulted on the contract. Beginning in 1926, the bookseller defaulted on the contract by falling behind in its quarterly remittances and building up a large debt to MacMillan. MacMillan, which treated these shortfalls as a minor and temporary problem, failed to inform Southern of the default. In 1929, MacMillan discovered that, owing to embezzlement by one of the bookseller’s employees, the bookseller would never be able to make up the shortfalls. At this point, MacMillan informed Southern that the bookseller was in default. Southern refused to indemnify MacMillan for its losses, claiming that MacMillan’s failure to report the earlier defaults voided the bond. MacMillan sued, and the trial judge ordered Southern to honor its bond. Southern appealed to the federal circuit court.
Rule of Law
Issue
Holding and Reasoning (McDermott, J.)
Dissent (Phillips, J.)
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