American Surety Co. of New York v. Shaw

• Decision Date: 09 January 1932
• Docket Number: No. 6278.,6278.
• Citation: 54 F.2d 550
• Parties: AMERICAN SURETY CO. OF NEW YORK v. SHAW, Banking Com'r.
• Court: U.S. Court of Appeals — Fifth Circuit

54 F.2d 550 (1931)

AMERICAN SURETY CO. OF NEW YORK v. SHAW, Banking Com'r.

No. 6278.

Circuit Court of Appeals, Fifth Circuit.

December 15, 1931.

Rehearing Denied January 9, 1932.

Geo. E. Shelley, of Austin, Tex., for appellant.

W. J. Rogers, of San Antonio, Tex., for appellee.

Before BRYAN, FOSTER, and HUTCHESON, Circuit Judges.

HUTCHESON, Circuit Judge.

The First State Bank of Idalou, Tex., having become insolvent, was taken over for liquidation by the banking commissioner. He brought this suit against appellant as surety on two fidelity bonds issued to the bank, one guaranteeing the fidelity of T. B. Walker, cashier, the other, the fidelity of H. B. Stewart, assistant cashier, each for the sum of $10,000.

It was alleged that beginning in April, 1928, and continuing to January 30, 1929, when the bank was taken over for the purpose of liquidation, the bank had sustained a pecuniary loss of more than the full amount of the bonds in moneys and securities embezzled and wrongfully abstracted or willfully misapplied by the action of said officers in conspiring with and in assisting and aiding one J. L. Brabham, a former officer of said bank, to in effect loot it.

The petition, alleging that during that period the bank had suffered losses through this cause in the sum of more than $35,000, set out and itemized the particular losses which made up the sum, and charged Walker and Stewart with responsibility therefor because of their active complicity therein. It alleged that Walker and Stewart, brothers-in-law of Brabham, a former officer and a large stockholder of the bank, though they well knew that he was an embezzler, that he had misapplied funds of the bank, and would do so again if given an opportunity, they then being in active charge and responsible for the conduct of the bank, wrongfully permitted Brabham to have full access to the funds, books, and records of the bank, and to misappropriate and mishandle them at will, they well knowing that he was misapplying the funds of the bank and aiding and assisting him in doing so.

Appellant denied generally and defended specially on the ground that if Walker, Stewart, and Brabham were during the times alleged in the petition in a kind of common understanding, agreement, and system to embezzle, misapply, and wrongfully abstract the funds of the bank, this agreement and system existed long prior to the date when, at the special instance and request of the bank, the defendant issued its last continuation certificates and the fact of its existence was well known to the officers and directors of the bank. That the act of the bank in concealing these facts from appellant and in inducing it to renew the bonds without acquainting it with this condition was such a fraud upon appellant as to relieve it from liability thereon.

Plaintiff joining issue, the case went to trial. At the conclusion of the evidence the defendant requested a directed verdict on the whole case and also a directed verdict on each of the items sued on. These requests were refused and the case went to the jury on special issues, resulting in a verdict upon which judgment was rendered for $20,000, the full amount of the bonds. Every issue necessary to support the judgment, including a specific finding that Walker and Stewart were in agreement with Brabham to willfully misapply and wrongfully abstract the funds of the bank, and that each of them affirmatively assisted in such misapplication to the extent of $36,552.61, was found by the jury in favor of plaintiff.

Appellant urges here that the jury should have been instructed for it, (1) because of the fraud of the bank in inducing a renewal of the bonds with full knowledge that...