TRIEBER, District Judge
(after stating the facts as above),
The court agrees with counsel for defendant that this cause must be determined by the provisions of the bond as originally executed, this renewals being merely extensions thereof, and the answers of the bank to the questions in the application for the bond so far as they are warranties, if untrue, will relieve the insurer of liability on the bond. That part of the first condition, that “all written statements made in connection with this bond or any renewal thereof [there were no statements made by the bank on the renewals] are warranted to be true,” must clearly be limited to the time the questions in the application were answered. In Willoughby v. Fidelity & Deposit Co., 16 Okl. 546, 85 Pac. 715, 7 L. R. A. (N. S.) 548, 8 Ann. Cas. 603, affirmed per curiam in 205 U. S. 537, 27 Sup. Ct. 790, 51 L. Ed. 920, relied! on by defendant, the false statements in the application were to existing, facts, and not promissory for the future. Therefore it is not applicable to the instant case.
It is true there may be promissory warranties, a breach of which will avoid the bond, as when the applicant obligates himself to do certain things considered to be material to the risk; but such promises are conditions subsequent, and the burden of proof to establish a breach of such promises is on the defendant. Title Guaranty & Surety Co. v. Nichols, 224 U. S. 346, 348, 349, 32 Sup. Ct. 475, 476 (56 L. Ed. 795). In this case the defense was, as in the instant case, that:
“Tbe loss was due to tbe neglect of tbe employer to supervise tbe conduct of tbe employee by making sucb monthly examinations of bis accounts as it agreed to make or bave made.”
It was held:
“Tbe plaintiff was plainly entitled to recover upon proving tbe bond, an embezzlement, and a breach, by a refusal to indemnify. It was not obliged to aver that it bad made tbe examinations which it agreed should be made. If it bad failed in that duty, it was for tbe surety company to so plead and prove.”
That a failure of an absolute promissory warranty to make monthly examinations of the applicant’s accounts will avoid the policy under the provision of a bond or -policy like the one in this case may be conceded, .but was there such a warranty? Question 11 contains three questions, subdivision (a) two, and subdivision (b) one. The questions in (a) read:
“In case of applicant handling cash or securities, bow often wili the samé be examined and compared with tbe books, accounts, and vouchers; (2) and by whom?”
The first part of the question is answered, “Monthly.” The second is unanswered. Acceptance of the application and execution of the bond, without an answer to (a) question is a waiver. Phœnix Ins. Co. v. Raddin, 120 U. S. 183, 7 Sup. Ct. 500, 30 L. Ed. 644.
[789]*789If there were no other answer to that question in paragraph 11, failure to make such examinations monthly by some one would unquestionably be fatal to a recovery on the bond. But (b) of question 11, which reads: “Will any examination of the applicant’s accounts be made outside of the audit of the state or national bank examiners?” was answered, “No.” The defendant had therefore been advised that the only examination of the applicant’s books, vouchers, and accounts would be made by the state bank examiner, and by none other.
The law of Arkansas in force at the time the bond and the renewals were executed and still in force made it the duty of the state bank examiner “to make an examination of every bank * * * at least once a year.” Section 705, Crawford & Moses’ Digest of Arkansas Statutes 1921. The defendant was bound to know that the state bank examiner was not required by the laws of the state, nor could he be required by the bank, to make monthly examinations of the bank’s books and accounts, nor could it presume that the state bank examiner would make monthly examinations of the bank. Executing its bond with such knowledge was, in the opinion of the court, a waiver of monthly examinations by the state bank examiner, the only person the bank states who was to make the examinations. It did not state that examinations would be made by its officers or by some independent examiners outside of the bank, as contended by counsel. If counsel’s contention is to be sustained, a failure of examinations by the officers of the bank, or independent auditors outside of the bank, would be just as fatal to a recovery. A strict construction of these answers, as insisted on, would require monthly examinations by the state bank examiner, and by none other, and his failure to make them monthly would be a fatal breach.
Counsel for defendant rely on Rice v. Fidelity etc., Co., 103 Fed. 427, 43 C. C. A. 270, and National Surety Co. v. Long, 125 Fed. 887, 60 C. C. A. 623, decided by the Circuit Court of Appeals for this circuit. A careful examination of the facts convinces their inapplicability to the instant case. In the Rice Case the question was whether the applicant was the bookkeeper of the assured and authorized to sign checks on behalf of the firm. The questions and answers in that case were:
“10. (a) Will he be authorized to sign cheeks on your behalf? Ans. Yes.”
“(b) Will the countersignature of any other person be invariably required? * * * Ans. “Yes. John W. Gribble, bookkeeper.”
The bond contained this recital:
“And whereas, the employer has delivered to the Fidelity & Deposit Company of Maryland, a corporation of the state of Maryland, hereinafter called the ‘company,’ a statement in writing relative to the duties, responsibilities, and the check to be used upon the employee, in said position, and other matters: Now, therefore, in consideration of the sum of one hundred dollars paid as a premium for the period from July 25, 1895, to July 25, 1896. at twelve o’clock noon, and upon the faith of the said statement as aforesaid by the employer, it is hereby agreed and declared that the company will indemnify the obligees on certain conditions named in the bond.”
It was held that the statement that the countersignature by Gribble to all checks drawn and signed by the bookkeeper was a part of the [790]*790contract, because “the bond recites that it rests upon the faith of this statement.” The bond in this case does not state anything about “a check to be used upon the employee,” as it did in that case. Counsel are therefore mistaken, when in their brief they state that the plaintiff bank obligated itself that “it would make monthly examinations of the books.”
In the Long Case the bond contained the provision:
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TRIEBER, District Judge
(after stating the facts as above),
The court agrees with counsel for defendant that this cause must be determined by the provisions of the bond as originally executed, this renewals being merely extensions thereof, and the answers of the bank to the questions in the application for the bond so far as they are warranties, if untrue, will relieve the insurer of liability on the bond. That part of the first condition, that “all written statements made in connection with this bond or any renewal thereof [there were no statements made by the bank on the renewals] are warranted to be true,” must clearly be limited to the time the questions in the application were answered. In Willoughby v. Fidelity & Deposit Co., 16 Okl. 546, 85 Pac. 715, 7 L. R. A. (N. S.) 548, 8 Ann. Cas. 603, affirmed per curiam in 205 U. S. 537, 27 Sup. Ct. 790, 51 L. Ed. 920, relied! on by defendant, the false statements in the application were to existing, facts, and not promissory for the future. Therefore it is not applicable to the instant case.
It is true there may be promissory warranties, a breach of which will avoid the bond, as when the applicant obligates himself to do certain things considered to be material to the risk; but such promises are conditions subsequent, and the burden of proof to establish a breach of such promises is on the defendant. Title Guaranty & Surety Co. v. Nichols, 224 U. S. 346, 348, 349, 32 Sup. Ct. 475, 476 (56 L. Ed. 795). In this case the defense was, as in the instant case, that:
“Tbe loss was due to tbe neglect of tbe employer to supervise tbe conduct of tbe employee by making sucb monthly examinations of bis accounts as it agreed to make or bave made.”
It was held:
“Tbe plaintiff was plainly entitled to recover upon proving tbe bond, an embezzlement, and a breach, by a refusal to indemnify. It was not obliged to aver that it bad made tbe examinations which it agreed should be made. If it bad failed in that duty, it was for tbe surety company to so plead and prove.”
That a failure of an absolute promissory warranty to make monthly examinations of the applicant’s accounts will avoid the policy under the provision of a bond or -policy like the one in this case may be conceded, .but was there such a warranty? Question 11 contains three questions, subdivision (a) two, and subdivision (b) one. The questions in (a) read:
“In case of applicant handling cash or securities, bow often wili the samé be examined and compared with tbe books, accounts, and vouchers; (2) and by whom?”
The first part of the question is answered, “Monthly.” The second is unanswered. Acceptance of the application and execution of the bond, without an answer to (a) question is a waiver. Phœnix Ins. Co. v. Raddin, 120 U. S. 183, 7 Sup. Ct. 500, 30 L. Ed. 644.
[789]*789If there were no other answer to that question in paragraph 11, failure to make such examinations monthly by some one would unquestionably be fatal to a recovery on the bond. But (b) of question 11, which reads: “Will any examination of the applicant’s accounts be made outside of the audit of the state or national bank examiners?” was answered, “No.” The defendant had therefore been advised that the only examination of the applicant’s books, vouchers, and accounts would be made by the state bank examiner, and by none other.
The law of Arkansas in force at the time the bond and the renewals were executed and still in force made it the duty of the state bank examiner “to make an examination of every bank * * * at least once a year.” Section 705, Crawford & Moses’ Digest of Arkansas Statutes 1921. The defendant was bound to know that the state bank examiner was not required by the laws of the state, nor could he be required by the bank, to make monthly examinations of the bank’s books and accounts, nor could it presume that the state bank examiner would make monthly examinations of the bank. Executing its bond with such knowledge was, in the opinion of the court, a waiver of monthly examinations by the state bank examiner, the only person the bank states who was to make the examinations. It did not state that examinations would be made by its officers or by some independent examiners outside of the bank, as contended by counsel. If counsel’s contention is to be sustained, a failure of examinations by the officers of the bank, or independent auditors outside of the bank, would be just as fatal to a recovery. A strict construction of these answers, as insisted on, would require monthly examinations by the state bank examiner, and by none other, and his failure to make them monthly would be a fatal breach.
Counsel for defendant rely on Rice v. Fidelity etc., Co., 103 Fed. 427, 43 C. C. A. 270, and National Surety Co. v. Long, 125 Fed. 887, 60 C. C. A. 623, decided by the Circuit Court of Appeals for this circuit. A careful examination of the facts convinces their inapplicability to the instant case. In the Rice Case the question was whether the applicant was the bookkeeper of the assured and authorized to sign checks on behalf of the firm. The questions and answers in that case were:
“10. (a) Will he be authorized to sign cheeks on your behalf? Ans. Yes.”
“(b) Will the countersignature of any other person be invariably required? * * * Ans. “Yes. John W. Gribble, bookkeeper.”
The bond contained this recital:
“And whereas, the employer has delivered to the Fidelity & Deposit Company of Maryland, a corporation of the state of Maryland, hereinafter called the ‘company,’ a statement in writing relative to the duties, responsibilities, and the check to be used upon the employee, in said position, and other matters: Now, therefore, in consideration of the sum of one hundred dollars paid as a premium for the period from July 25, 1895, to July 25, 1896. at twelve o’clock noon, and upon the faith of the said statement as aforesaid by the employer, it is hereby agreed and declared that the company will indemnify the obligees on certain conditions named in the bond.”
It was held that the statement that the countersignature by Gribble to all checks drawn and signed by the bookkeeper was a part of the [790]*790contract, because “the bond recites that it rests upon the faith of this statement.” The bond in this case does not state anything about “a check to be used upon the employee,” as it did in that case. Counsel are therefore mistaken, when in their brief they state that the plaintiff bank obligated itself that “it would make monthly examinations of the books.”
In the Long Case the bond contained the provision:
“If, at any time, it appears that the above-named principal has abandoned the work, or will not be able, or does not intend, to carry out or perform the contract, the obligee shall immediately so notify the company in writing, by registered letter, prepaid, addressed to the company, at its principal offices in the city of New York, and the company shall have the right, at its option, to assume such contract and to sublet or complete the same, and, if it so elect, all moneys due or to become due thereafter, under said contract, including percentages agreed to be withheld until completion, shall, as the same shall become due and payable under the terms of said contract, be paid to the company, regardless of any assignment or transfer thereof by the principal."
And it was held that a failure to notify-the surety company immediately of the contractor’s abandonment of the work released the company of liability on the bond.
Nor is U. S. Fidelity & Guaranty Co. v. Maxwell, 152 Ark. 64, 237 S. W. 708, in point. In that case the bank in the application stated that:
“Examinations of the applicant’s accounts would be made twice a year by some reputable auditing firm outside of the audit of the state and national bank examiners.”
No examinations by an auditing firm were ever made, nor by any other than the state bank examiner, and this was held to release the surety company. In that case it was also held that:
“A mere reference in a policy to the application does not constitute a warranty, even though the application itself contains a statement that the truth of the statements shall constitute a warranty."
Other authorities cited by counsel have been examined, and received careful consideration, but found to be inapplicable on the facts.
Is the fact that, although in the application the bank stated in reply to question 7 that the title of the applicant’s position is bookkeeper, and her duties to “keep the books and assist the teller,” and later she was made assistant cashier, and that her salary was raised three times, without the written approval of the surety company, fatal to a recovery on the bond ?
It is not necessary to cite numerous authorities that the ordinary rule of strictissimi juris, applied to guaranties by individuals as a personal favor and without remuneration, does not apply to surety companies executing such bonds for a stipulated compensation and as a strictly business enterprise. A leading case is Guaranty Co. v. Pressed Brick Co., 191 U. S. 416, 424, 24 Sup. Ct. 142, 48 L. Ed. 242, followed in Atlantic Trust & Deposit Co. v. Town of Laurinburg, 163 Fed. 691, 90 C. C. A. 274 (8th Ct.), Pittsburgh-Buffalo Co. v. American Fidelity Co., 219 Fed. 826, 135 C. C. A. 488 (3d Ct.), and many others. Nor are such companies relieved by a change in the contract, unless the change has done them harm. American Bonding Co. v. United States, 233 Fed. 364, 369, 117 C. C. A. 300 (3d Ct.); Alabama [791]*791Fidelity, etc., Co. v. Alabama Penny Savings Bank, 200 Ala. 337, 76 South. 103.
As to the increase in the applicant’s salary, how did it harm the defendant? That she was also made assistant cashier, when the only other duty imposed or required of her was to sign drafts and cashier’s checks, certainly did not harm defendant, as the undisputed evidence is, and the court so found, that the embezzlements were all made in the discharge of her duties as bookkeeper and assistant teller, and none as assistant cashier ? If the peculations had’ been in her capacity as, assistant cashier, the result would be different, and the defendant' relieved of its liability on the bond.
This disposes o E all contested issues, and the conclusion of the court is that plaintiff is entitled to a judgment, with interest from the institution of this action.