Page:Federal Reporter, 1st Series, Volume 2.djvu/544

 flBCOX V. CITIZENS' INS, CO. 01" ST. LOTJIS.- 537 �doing he was carrying out the understanding between him- eelf and the insurance company. �It further alleged that complamantsdid not, until af ter the recovery of the Judgment at law, become cognizant of the agreement and understanding between Pottle and the insur- ance company, nor of the mode in which business was trans- acted between them, but were advised by Pottle of the facta after the recovery of the judgment, and when execution was in the hands of the defendant marshal, and that they exe- cuted the bond in ignorance of the fact that Pottle was, at the time, a defaulter to the company. �The answer of the defendant company denies the material allegations of the bill, and it is unnecessary, for disposition of the case, to state in detail the deniais and affirmative alle- gations contained in the answer. �The contention on the part of eomplainants is that for a long time previous to the execution of the bond Pottle had been in the habit of depositing moneys, which he reeeived as agent of the insurance company, in bank in his own name, and to the credit of his individual account, thereby convert- ing the same to his own use ; that remittances to the com- pany were made by his individual checks upon such account, and that while pursuing this course of dealing he became a defaulter ; that being required to give the bond in question he was allowed by the company, thereafter, in pursuance of previous methods of business, to couvert the moneys which he thereafter reeeived to his own use, and then to apply those moneys in satisfaction of indebtedness which accrued before and existed at the time of the execution of the bond; that ail this was permitted under an implied if not express under- standing between the insurance company and Pottle; that the application of moneys reeeived by him upon current bus- iness, transaeted after the execution of the bond, to his pre- vious defalcations, operated constructively, if not actually, as a fraud upon the sureties; that therefore they have an equi- table right to satisfaction of the bond to the extent of the moneys remitted on account of the current business accruing after the execution of the bond. In other words, that, as ����