Massachusetts Bonding & Insurance Co. v. Feutz

• Citation: 182 F.2d 752
• Decision Date: 27 June 1950
• Docket Number: No. 14070.,14070.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)
• Parties: MASSACHUSETTS BONDING & INSURANCE CO. v. FEUTZ et al.

182 F.2d 752 (1950)

MASSACHUSETTS BONDING & INSURANCE CO. v. FEUTZ et al.

No. 14070.

United States Court of Appeals Eighth Circuit.

June 27, 1950.

John Murphy, Kansas City, Mo. (Herbert E. Barnard, St. Louis, Mo., Tucker, Murphy, Wilson & Siddens, Kansas City, Mo., and Walther, Hecker, Walther & Barnard, St. Louis, Mo., on the brief), for appellant.

Wilbur B. Jones and Arthur J. Freund, St. Louis, Mo. (Salkey & Jones, St. Louis, Mo., on the brief), for appellees W. F. Feutz, W. R. Courtney and J. C. Mundy.

G. W. Marsalek, St. Louis, Mo. (Moser, Marsalek, Carpenter, Cleary & Carter, St. Louis, Mo., Paul G. Koontz, and Kemp, Koontz, Claggett & Norquist, Kansas City, Mo., on the brief), for appellee Maryland Casualty Co.

Before GARDNER, Chief Judge, and THOMAS and COLLET, Circuit Judges.

GARDNER, Chief Judge.

This is an appeal from a judgment in favor of W. F. Feutz, W. R. Courtney and J. C. Mundy and against Massachusetts Bonding and Insurance Company, entered on verdict of a jury. We shall refer to the parties as they were designated in the trial court.

The action is for the recovery of damages for the alleged breach of a surety bond executed by defendant, appellant herein. It is alleged in the complaint that plaintiff W. F. Feutz entered into an agreement with one Harry J. Murphy, whereby said plaintiff agreed that he, together with persons to be associated with him as his assigns, would furnish Murphy the sum of $40,000.00 in cash for the purpose of enabling him to purchase certain farm machinery designated as twenty-one self-propelled combines which Murphy represented would be forthwith resold by him at a profit of $25,000.00; that Murphy represented to said plaintiff that he was able to procure said farm machinery and that it could readily be sold by him and that he would so purchase and sell such machinery; that the return of the sum of $40,000.00, together with profits to accrue to said plaintiff and his assigns, was the consideration for said agreement; that Murphy agreed not to use any part of said funds for any purpose other than for the purchase of the specific farm machinery and that he would furnish plaintiffs a surety bond to be issued by a reputable compensated insurance company, to protect plaintiff and his assigns from any losses arising out of said agreement; that plaintiff Feutz paid Murphy the sum of $15,000.00 on March 18, 1947, and thereafter plaintiffs furnished Murphy additional sums aggregating $25,000.00, so that on or before March 31, 1947, plaintiffs had furnished Murphy, for the purposes of the agreement, the aggregate sum of $40,000.00; that on or about March 31, 1947, plaintiff Feutz assigned to plaintiff W. R. Courtney a three-eighths interest in said agreement and to plaintiff J. C. Mundy a one-fourth interest therein; that the agreement between Murphy and plaintiff Feutz was reduced to writing March 24, 1947; that contemporaneously with the payment of the $15,000.00 by Feutz to Murphy, Murphy, pursuant to the terms of an agreement with Feutz, furnished and delivered to Feutz a surety bond of the Maryland Casualty Company in the sum of $65,000.00, whereby Murphy and the Casualty Company bound themselves to the plaintiff Feutz and to others to whom said plaintiff might be responsible, to reimburse them for any loss which might be sustained by act of fraud or dishonesty of the said Murphy in the performance of said contract, and that each of the plaintiffs advanced and paid over to Murphy the funds referred to with knowledge of and in reliance upon said contract of suretyship; that contemporaneously with the payments of the money to Murphy by plaintiffs Courtney and Mundy, plaintiffs entered into an agreement between themselves whereby Feutz agreed to be responsible to Courtney and Mundy for the sums advanced by them to Murphy for any loss arising out of the venture together with profits to be realized by plaintiffs; that this agreement was reduced to writing and by reference was made a part of the complaint; that thereafter and during the month of April, 1947, Murphy requested plaintiffs to deliver to him the surety bond of Maryland Casualty Company and agreed in exchange to deliver to them a surety bond executed by the defendant Massachusetts Bonding and Insurance Company; that plaintiffs thereupon delivered up the Maryland Casualty bond and received in exchange the bond of the defendant Massachusetts Bonding and Insurance Company, a copy of said bond being attached to the complaint and by reference made a part thereof; that the surety bond of the defendant executed by Murphy as principal and the defendant as surety, obligated defendant to pay plaintiffs not exceeding the sum of $65,000.00 for loss sustained by reason of any acts of fraud or dishonesty on the part of Murphy while in the performance of the agreement referred to; that defendant agreed by said bond that the $40,000.00 furnished by plaintiffs to Murphy for the purchase of the combines described in the agreement would not be used for any other purpose. It is then alleged that Murphy, in violation of the terms and conditions of the bond, through acts of fraud and dishonesty in the performance of said agreement failed to purchase the twenty-one combines and failed to use the funds advanced to him by plaintiffs for the purchase of said machinery; that by reason of his acts of fraud and dishonesty all the funds furnished by plaintiffs to Murphy and the profits to accrue therefrom had been lost to plaintiffs' damage in the sum of $65,000.00.

Defendant answered denying generally and specifically all the allegations of the complaint except as specifically admitted. It admitted the execution of the bond but alleged that the bond ran to W. F. Feutz, one of plaintiffs, as the sole obligee and that the bond was not executed for the benefit of plaintiffs Courtney and Mundy but for the benefit of Feutz only. It admitted the execution of the contract between plaintiff Feutz and Murphy as attached to plaintiffs' complaint; that plaintiff Feutz advanced only the sum of $15,000.00 and was not damaged in any amount exceeding $15,000.00; that the loss, if any, suffered by Feutz had occurred prior to the execution of the bond by defendant and during the time that the Maryland Casualty Company bond was in effect, and that the loss sustained by the other plaintiffs, if any, were also sustained prior to the date of the execution of the defendant's bond; that if there had been any assignment by the plaintiff Feutz to plaintiffs Courtney and Mundy of an interest in the contract of March 24, 1947 between plaintiff Feutz and Murphy, the assignment was without the knowledge or consent of the defendant. The answer contains other averments which we think immaterial to the issues as presented on this appeal. On motion of the defendant, Maryland Casualty Company was made party defendant.

At the close of all the testimony defendant moved for a directed verdict in its favor which was denied and the case was submitted to the jury on instructions to which defendant saved certain exceptions. The basic facts alleged in the complaint as distinguished from the conclusions alleged may be said, in view of the verdict of the jury, to have been either admitted or proved. In the first instance plaintiff Feutz alone had the negotiations which culminated in the written contract with Murphy, dated March 24, 1947, but he later assigned interests in the contract to the other plaintiffs, they having furnished a portion of the funds required by the terms of the contract. The contract, omitting preliminary recitals, so far as here material reads as follows:

"Whereas, in order to procure additional funds with which to purchase said combines (first party) has induced the Party of the Second Part to join him in the purchase of said farm machinery and furnish a portion of the funds necessary to purchase same, and

"Whereas the Party of the Second Part has agreed to furnish Forty Thousand Dollars ($40,000.00) of the Eighty-four Thousand ($84,000.00) necessary to complete the purchase of the 21 above mentioned combines,

"Now Therefore, Know All Men By These Presents, that in consideration of the promises and of the sum of One Dollar paid by the Second Party to said First Party and of the sum of One Dollar paid by the Second Party to said First Party, the receipts of which are both hereby acknowledged, the said First Party hereby agrees to purchase the farm machinery above described from certain sources known to him and to resell same in order that a profit may be realized.

"The Party of the First Part further agrees that he will not use any or any portion of the funds supplied by the Second Party for any purpose other than the purchase of the aforesaid farm machinery. Said purchases to be handled only on sight drafts being drawn by the sellers thereof with bills of lading attached, and the sales to be made only to solvent purchasers and shipment to be made by drawing of drafts with bill-of-lading attached.

"As further protection to the Party of the Second Part the Party of the First Part hereby agrees to allow the surety bond issued by the Maryland Casualty Company of Baltimore in the sum of Sixty-five Thousand ($65,000.00) to be used by said Second Party, or his assigns if any part of his interest in this agreement is assigned to someone else, to cover any losses as specified therein, said bond being dated March 18, 1947.

* * * * * *

"The Parties hereto agree that all profits or losses arising from this transaction shall be borne equally, one-half to the First Party and one-half to said Second Party, or his assigns.

"In Witness Whereof, the parties hereto have set their hands and affixed their seals this March 24th, 1947, binding themselves, their heirs or assigns, each copy of the triplicate agreement shall for all purposes be considered an original."

This agreement was signed by Harry J. Murphy as party of the first part and by W. F. Feutz as party...