Ocean Accident & Guarantee Corporation v. Old Nat. Bank
Decision Date | 10 April 1925 |
Docket Number | No. 4131.,4131. |
Parties | OCEAN ACCIDENT & GUARANTEE CORPORATION, Limited, v. OLD NAT. BANK. |
Court | U.S. Court of Appeals — Sixth Circuit |
Stuart E. Knappen, of Grand Rapids, Mich. (Knappen, Uhl & Bryant, of Grand Rapids, Mich., on the brief), for plaintiff in error.
Edgar H. Johnson, of Grand Rapids, Mich. (Travis, Merrick, Warner & Johnson, of Grand Rapids, Mich., on the brief), for defendant in error.
Before DENISON, DONAHUE, and MOORMAN, Circuit Judges.
The Old National Bank of Grand Rapids, Mich., defendant in error, brought this suit against the Ocean Accident & Guarantee Corporation, of London, England, plaintiff in error, to recover under an indemnity bond issued December 31, 1920, and renewed December 31, 1921, with amendment in form of rider, the value of 64 bills of lading which the bank had received, with attached drafts for collection, and which it had lost through the acts of W. L. Wellman Company. The case was tried before the court, and judgment rendered for the bank in the sum of $72,596.86, with interest at 5 per cent. per annum from March 9, 1922. $10,975.34 of this loss occurred in December, 1921.
The facts in the case are simple. E. L. Wellman Company was engaged in the grain business in Grand Rapids, and the Old National Bank for some time prior to the matters complained of had received daily an average of 8 or 10 drafts, with attached bills of lading, on the Wellman Company. Some of them were paid on presentation; others were not. From the beginning of the period in which this loss occurred there was an accumulation of drafts that had been presented and not paid. When the drafts were received by the bank, its custom was to fold the bill of lading with the face inside, and pin it to the draft. The accumulated drafts were kept in a package between cardboards. The new drafts, as they came in, were placed on the outside of the cardboards, with a rubber band around all of them.
Carlton Blomley, the collector for the bank, daily took this package to the Wellman Company to present the drafts for payment. They were presented to Arthur Drueke, the bookkeeper and cashier of the company, in the front office of the suite of rooms occupied by that company. In this room there were two high desks and the telephone switchboard. The bookkeeper was usually behind his desk, and, upon presentation by the collector, would sometimes say, "Let me look at them," and take the package, go over the drafts and bills of lading, and, for the ostensible purpose of checking the bills with invoices in another room, would take some of the drafts and bills out of the room. He would then bring them back, and, if he did not want to pay any of the drafts, would say, "I don't want any to-day," or "Hold them," handing the package to the collector; if he wanted to pay any of them, he would do it, keep the corresponding bills of lading, and hand the others to the collector, to be returned to the bank.
Blomley did not know just how many of the drafts and bills, or whether all of them, were taken out of the room on any particular occasion. He usually sat in a chair below the desk near the switchboard, and was not in position to see what Drueke did. Either while Drueke had the drafts and bills in the next room, or after he had returned to his desk, he detached the bills he wanted, and in their stead attached to the drafts regular forms of the same color, folded face inside, partially or completely filled out as the true bills. All unaccepted drafts having been returned to the collector, and the forms attached to them being exteriorly identical in appearance with the true bills, he, as well as the collecting teller of the bank, assumed that the fictitious bills were genuine.
To avoid detection the Wellman Company paid the drafts with the fictitious bills of lading attached when tracers for those drafts were received by the bank. Funds to make these payments were procured by abstracting other bills, effecting delivery of the cars, reselling them, and depositing the proceeds of those sales to the company's account. In this way the fraudulent practice was concealed for more than a year. Hence, the accumulation of fictitious bills in December of 1921. After discovery of these frauds, the Old National Bank paid to the owners of the original bills of lading the value thereof, without adjudication of liability.
This action is to recover the amounts so paid, with interest. It is the contention of the bank that the loss is covered by the following language in the policy:
Liability under this provision is denied by...
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