of the quantity and value of the material delivered, having regard to its character, whether granite, marble, or carved marble, as to which there was a considerable difference, but the relative value of it to the total quantity which had been contracted for. And when it is considered that, out of a total contract price of $110,000, representing 82,000 weighed feet to be delivered, bills for some $105,000 were approved and paid, when but 60,000 weighed feet, having a relative value of but $73,000, had been furnished-an overpayment of $32,000it is altogether too much to ask that the mere looking over of the invoices in the way described shall be accepted as in any sense constituting an estimate such as was contemplated. The prejudice of this to the surety is manifest, the overpayment made being substantially the amount above the contract price, which is now demanded, which, had it been kept back by the contractor as provided in the agreement, he would have had in hand enough to cover the material unfurnished, without callingOpon the surety.

No doubt the contractor was not chargeable with the inefficiency or mistakes of the architect, provided an attempt at an estimate was really made; and, in the absence of notice to the contrary, an approval of the invoices may have been sufficient for him to act upon without a formal certificate, nothing being said about that in the agreement. But not only were the deficiencies in the deliveries so gross as to put him upon inquiry, but the only basis for the architect's approval, to his certain knowledge, being the invoices on which the material was shipped, and the representations made at the time by himself and his son, one or both, with regard to them, he was fully advised as to how the approvals were obtained, and just what they amounted to, and they are only available to him here, in consequence, for what they stand. That Mr. Van Houten was also aware, at least in a general way, from the outstart, of the discrepancy in deliveries, is shown by his letters-one of January 5, 1898, complaining that not a hundredth part of the material had been furnished, which would only have entitled the marble company to about $1,000, after deducting the percentage, although bills to the extent of $4,450 had been already approved and paid; and another of August 4th, declaring that not quite a quarter was on the ground, at which time $30,311 had been paid, as against $24,750 due, an advancement of some $5,000. It is not necessary to consider whether, even though no estimates were made, Mr. Van Houten would have been within the terms of the agreement and the surety have no cause to complain, if the payments for material delivered did not in fact exceed 90 per cent. of its relative value. The jury were so instructed, it is true, but the evidence was so overwhelmingly the other way, that, if the case turned upon that, a verdict for the defendant was inevitable, and should have been directed. But, passing that by, it could not be successfully contended, in view of what has been referred to, either that estimates were really made or that the contractor was without knowledge, and, relying upon the apparent action of the architect in approving invoices, was therefore protected. One or the other, however, was vital to be shown, and in the absence of it the surety was released by the overpayments made in disregard of

the agreement, and the verdict to the contrary cannot be sustained. This disposes of the case; but it is further contended that, entirely aside from whether estimates were made, the delivery of material was anticipated by advances of money, equally in contravention of and prejudicial to the rights of the surety, which also operated to release it. The facts upon which this is based are as follows: In the spring of 1898, when comparatively little material had been delivered, the marble company being short of funds, Mr. Hepburn, the manager, went to Mr. Van Houten to see whether he could not get some money for the company, asking for a lump sum, to be paid back by the shipment of material. Mr. Van Houten was willing to accommodate him, but, not having the money himself, it was suggested that they should see whether it could not be obtained elsewhere. He and Mr. Hepburn and Mr. Shaw accordingly went to the Paterson National Bank, where Mr. Van Houton did business, and, after discussing the matter there with the cashier, it was arranged that the marble company should give its note, which Mr. Van Houten would indorse and the bank discount for him, the marble company receiving the proceeds. This was carried out, a two months' note for $10,000, bearing date May 10, 1898, being made and discounted, the proceeds being credited to Mr. Van Houten, who turned the money over to the marble company. This note was subsequently paid off, as arranged, with two months' shipments; no payments being made to the marble company on these deliveries, but the value of the material being turned into the bank by Mr. Van Houten and there credited. This first note came due in July, when another note of like amount at three months' time was given and discounted; the money on this occasion being turned over to the marble company direct, against which it made payment by deliveries of material as before, through August and September, the whole being taken care of in that way. Before the second note came due, however, still another was given and discounted, September 16th, for three months, also for $10,000, overlapping the other. This one came due December 16th, and certain payments were made on it by material as before, but not enough to fully meet it, by some $6,410, which being still unpaid at its maturity was renewed by a further note for that amount at three months' time, not however by the Avondale Marble Company, whose quarry had been sold out meantime by the sheriff, but by certain individual members, who succeeded that company and organized another-the Pennsylvania Marble & Granite Companywhich took over the quarry and continued the delivery of material under the existing agreement. The last-named note came due in March, 1899, and was extended by another due in May, which was itself succeeded by still another for the increased sum of $10,000, on which $3,000 was paid July 14th; a renewal for the balance, made in August, being finally paid when it came due.

The learned trial judge was of the opinion that these note transactions were merely accommodation loans having no other significance; Mr. Van Houten simply lending the security of his name by indorsing the notes of the marble company and the parties who succeeded it, which with the several renewals and extensions the bank discounted for

them. But the case is not so simple; nor is the transaction able to be separated from the existing agreement between the parties with regard to the delivery of material. As already observed, the money obtained was obtained in direct response to an application by the marble company for an advance on account of the agreement and the delivery of material to be made under it, and by the arrangement which was made for its repayment it was expressly tied up to this. No doubt, as to the bank. it was a loan; but as to the others it was essentially an advance of money upon the agreement, to be repaid by a delivery of the material there contracted for. This also was the course pursued; the value of the material subsequently delivered being turned over to the bank by Mr. Van Houten, and the marble company credited accordingly, no payments on account of material being otherwise made so long as there were these outstanding notes. It is true that the 10 per cent. was still withheld from the amounts credited, but that does not help the matter. The point is that, instead of being paid as marble and granite were delivered, as provided in the agreement, the marble company had put in its hands by the transaction a large sum of money in advance and anticipation of this. Thereafter it was not a question of payment according to deliveries, where the agreement puts it, but a repayment by deliveries outside of it. This deprived the surety of the protection and the incentive of restricted payments, and was just as prejudicial as if the advance were less disguised. The money so obtained not only helped to swell the grand total of overpayments made, but until material to correspond had been delivered, if this, indeed, was ever entirely the case, it carried these payments meanwhile by just so much more beyond bounds; the surety in either case being released by the plain departure from the terms of the agreement.

There are other questions which might require discussion, if the case were going back for a retrial, such as the deduction of freight bills before the calculation of the percentages to be withheld, instead of afterwards, and whether, upon a default by the marble company, the surety was liable to the extent contended for at the trial. But the case is to stop here, and it is not material. The point now made for the first time that the contract in the bond was something more than one of mere surety, the final clause of the condition being to indemnify and save harmless from all damages in the premises, is not only open to the objection that it was not raised in the court below and so its influence upon the disposition of the case cannot be determined; but there is no force to it, in our judgment, if it had been. It may have imposed on the surety, as argued, something more than the mere obligation to see to the fulfilment of the agreement so far as the delivery of material was concerned, but it none the less made the obligation one of suretyship, imposing the reciprocal duty on the opposite party of not departing from it to the detriment of the surety in respect of what is involved in this issue, as was clearly done.

The judgment is reversed.

NEW AMSTERDAM CASUALTY CO. v. CUMBERLAND TELEPHONE & TELEGRAPH CO.

(Circuit Court of Appeals, Sixth Circuit.

No. 1,593.

March 21, 1907.)

INSURANCE-EXTENT OF LIABILITY OF INSURER-INDEMNITY INSURANCE. A policy, issued by a casualty company, insured against loss from liability for damages on account of bodily injuries accidentally suffered by any person caused by the negligence of the assured, "and against the expense of defending any suit for such damages." It limited the company's liability arising from the injury or death of one person to $5,000, and provided for notice to the company of any injury and any claim or suit for damages therefor, that the company should defend or settle any such suit, and prohibited the assured from making any settlement or incurring any expense or interfering in any negotiations for settlement or in any legal proceeding without the company's consent. Held, that the limitation did not include the costs and expenses of a suit on a claim for damages for the death of a person which was defended by the company pursuant to the terms of the policy, and that on recovery of a larger sum by the plaintiff therein the assured was entitled under the policy to be reimbursed for the costs and expenses which it was compelled to pay in addition to the $5,000 indemnity against the damages recovered.

In Error to the Circuit Court of the United States for the Middle District of Tennessee.

Clarence T. Boyd, for plaintiff in error.

Wm. L. Cranbery, for defendant in error.

Before SEVERENS and RICHARDS, Circuit Judges, and COCHRAN, District Judge.

SEVERENS, Circuit Judge. This is an action brought by the defendant in error, hereinafter called the "Telephone Company" against the plaintiff in error, hereinafter called the "Casualty Company," upon a policy of insurance—

"against loss from common law or statutory liability for damages on account of bodily injuries fatal or nonfatal, accidentally suffered by any person or persons not employed by the assured at or about any of the work of the assured described in the schedule indorsed hereon, caused by the negligence of the assured, and resulting from the work described in said schedule, and against the expense of defending any suit for such damages."

While the policy was in force, and on or about February 8, 1901, Thomas Ware, an employé of the Telephone Company was killed at the city of Owensboro, Ky., by coming in contact with a telephone wire resting upon the wire of the Electric Light Company in said city, heavily charged with electricity, and the provisions of the policy became operative, as follows:

"(1) The assured, upon the occurrence of an accident, shall give immediate notice thereof in writing, with full particulars to the home office of the company at New York City, or its duly authorized agent. He shall give like notice, with full particulars, of any claim which may be made on account of such accident.

(2) If thereafter any suit is brought against the assured to enforce a claim for damages on account of an accident covered by this policy, immediate no152 F.-61

tice thereof shall be given to the company, and the company shall defend such suit in the name and on behalf of the assured, or settle the same.

"(3) The assured shall not settle any claim, except at his own cost, nor incur any expense, nor interfere with any negotiation for settlement or in any legal proceeding without the consent of the company previously given in writing, but he may provide at the time of the accident such immediate surgical relief as is imperative. The assured, when requested by the company, shall aid in securing information and evidence and in effecting settlements, and in case the company calls for the attendance of any employé or employés as witnesses at inquests and in suits, the assured will secure his or their attendance, making no charge for his or their loss of time."

Notice of the accident was given by the Telephone Company to the Casualty Company. Suit was brought by the administrator of Ware against the Telephone Company for damages arising from his death under a statute of Kentucky, and notice of that was also given to the Casualty Company, and that company thereupon employed counsel to defend said suit in the name and on behalf of the Telephone Company, and upon the trial judgment was rendered against the latter company for $12,500 and costs. An appeal from said judgment was prosecuted to the Court of Appeals of the state of Kentucky, and final judgment was rendered against the Telephone Company by said Court of Appeals of Kentucky for the sum of $12,500 with interest at 6 per cent. per annum and 10 per cent. damages additional. The total judgment of the Court of Appeals of Kentucky, including interest, damages, and costs, amounted to $15,447.26, which was paid by the Telephone Company on November 25, 1903. .

Of the expenses of the suit on the trial and the appeal the Casualty Company paid $989.45. The Telephone Company paid the costs of the plaintiff in that suit and other costs and expenses to an amount in all, which, upon the proportion of $5,000 to the entire judgment appealed from, as directed by the court below, resulted in a balance in favor of the Telephone Company of $1,167.98. The judgment was for $5,000 plus this balance of $1,167.98 wit the interest thereon from the date of the judgment of the trial court in the Ware Case. Upon the trial, which was before the court without a jury and upon an agreed statement of facts, the Casualty Company contended that its liability under a limitation in the policy did not extend beyond the sum of $5,000, and that the judgment should be limited accordingly, without enlargement from the costs and expenses which the Telephone Company had incurred by reason of the suit. And it further contended that the $5,000 should be reduced by the $989.45, which it had paid of the expenses of the suit, as above stated. Both of these contentions were overruled by the court below, and the plaintiff in error.renews them here.

The policy contained the following provision:

"(A) The company's liability as aforesaid arising from an accident resulting in injuries to or in the death of one person is limited to five thousand dollars ($5.000.00), and subject to the same limit for each person the total liability arising from any one accident resulting in injuries to or in the death of any number of persons is limited to ten thousand dollars ($10,000.00).”

And the Casualty Company contends that this limitation includes all the consequences of the accident, such as the expenses of a law