Fidelity & Deposit Co. of Maryland v. Krout

• Citation: 146 F.2d 531
• Decision Date: 05 January 1945
• Docket Number: No. 84.,84.
• Parties: FIDELITY & DEPOSIT CO. OF MARYLAND v. KROUT et al.
• Court: U.S. Court of Appeals — Second Circuit

146 F.2d 531 (1945)

FIDELITY & DEPOSIT CO. OF MARYLAND v. KROUT et al.

No. 84.

Circuit Court of Appeals, Second Circuit.

January 5, 1945.

Rubinton & Coleman, of Brooklyn, N. Y. (Leonard Acker, of Brooklyn, N. Y., of counsel), for appellant.

Stewart Maurice, of New York City, for Fidelity & Deposit Co. of Maryland.

Harold S. Fleischer, of New York City, for respondent.

Before L. HAND, CHASE, and CLARK, Circuit Judges.

CHASE, Circuit Judge.

This action was brought in the District Court for the Eastern District of New York by the plaintiff, a Maryland corporation, against defendants Krout and Leiter, both of them residents of the Eastern District, and against Meadowbrook Farms, Inc., a New Jersey corporation. As the latter was not served with process and did not appear, the suit was discontinued as to it.

The plaintiff sought to recover $3,500 which it had paid to the First National Bank of Blairstown, N. J., in discharge of liability which it admitted on a bond it had issued to the bank, which was called a banker's blanket bond and covered loss to the bank resulting from its payment of forged checks. After filing findings of fact and conclusions of law, the court entered judgment for the amount claimed against defendant Krout and dismissed the complaint on the merits as to defendant Leiter. The plaintiff and Krout have both appealed.

The action arose out of the following circumstances: Krout and Leiter were stockholders in Meadowbrook Farms, Inc., and were respectively its president and secretary. Meadowbrook Farms, Inc., had a checking account in the First National Bank of Blairstown, on which the bank was authorized to honor checks of the corporation signed by Krout as well as by other officers named in a resolution of the corporation, a certified copy of which was on file in the bank. On April 21, 1941, Krout purchased Leiter's stock and the latter ceased to be an officer of the corporation. On that day Leiter presented to the bank for payment a check of Meadowbrook Farms, Inc., for $3,500 signed by himself and purportedly by Krout as officers, and payable to and endorsed by himself. The bank paid Leiter in cash the amount of the check and charged it against the balance then standing to the credit of Meadowbrook Farms, Inc. The remaining balance was insufficient to pay other checks which were presented for payment the next day and the bank so notified Meadowbrook Farms, Inc. Later that day Krout appeared at the bank and, insisting that his signature was forged on the check Leiter had cashed, demanded that the amount paid on that check be restored to the account of Meadowbrook Farms, Inc. Still later on the same day he signed and swore to an affidavit to the effect that the check was forged, and delivered the affidavit to the bank. The next day the bank notified the plaintiff, its insurer, of the claim of forgery which Krout had made. The plaintiff thereupon sent a representative to interview Krout, who persisted in his assertion that he had not signed the check. On April 28, Krout executed and delivered to the bank another affidavit in which he swore that he neither signed the check nor authorized anyone else to sign it on his behalf, that his signature was forged, and that he made the affidavit for the purpose of inducing the bank to reimburse Meadowbrook Farms, Inc., in the sum of $3,500. The bank then restored that amount to the account of Meadowbrook Farms, Inc., and the plaintiff paid the bank the same amount as for a loss for which it was liable under its policy.

In its complaint in this suit the plaintiff set forth the facts substantially as stated above and alleged in addition that it had ...