Fidelity & Deposit Co. v. Union Trust Co.

• Decision Date: 21 July 1942
• Docket Number: No. 255.,255.
• Citation: 22 ALR 1228,129 F.2d 1006
• Parties: FIDELITY & DEPOSIT CO. OF MARYLAND v. UNION TRUST CO. OF ROCHESTER, N. Y.
• Court: U.S. Court of Appeals — Second Circuit

22 ALR 1228, 129 F.2d 1006 (1942)

FIDELITY & DEPOSIT CO. OF MARYLAND v. UNION TRUST CO. OF ROCHESTER, N. Y.

No. 255.

Circuit Court of Appeals, Second Circuit.

July 21, 1942.

Raines & Raines, of Rochester, N. Y. (William M. Marks, of Rochester, N. Y., of counsel), for plaintiff-appellee and appellant.

Harris, Beach, Folger, Keating & Wilcox, of Rochester, N. Y. (Kenneth B. Keating and Frederick T. Pierson, both of Rochester, N. Y., of counsel), for defendant-appellant and appellee.

Before AUGUSTUS N. HAND, CHASE, and CLARK, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge.

London Guarantee & Accident Company (which we shall call London) is a casualty company doing business in Rochester, New York. The offices were in charge of one O'Connell, whose duties consisted of investigation and settlement of claims resulting from accidents involving automobiles insured by the company. O'Connell entered into a conspiracy with a doctor named Kauffman and with others to defraud the company by making fraudulent claims to the home office of London for alleged accidents.

By false reports O'Connell obtained authorizations to settle what his company believed to be legitimate claims and pursuant thereto issued three drafts signed by him as agent for London drawn on the Chemical Bank of New York. Draft Exhibit 2 for $300 was made payable to the order of Donald Gilbert, whose real name was Frank Graves. Draft Exhibit 4 for $1200 was made payable to the order of Sally Johnson whose real name was Bernice Levin. Draft Exhibit 7 for $2500 was payable to the order of James Giambrone and Josephine Giambrone.

The claims settled by the drafts payable to Gilbert for $300 and to Johnson for $1200 were based on a prearranged automobile accident wherein, as had been agreed among Graves, Levin, Kauffman and one Geck, Geck ran into a car in which Graves and Levin were seated. The latter were uninjured by the impact, but were paid $25 and $50, respectively, for their part in the conspiracy. They endorsed the drafts for $300 and $1,200 made payable to them under the assumed names of Gilbert and Johnson and turned them over to Kauffman, who endorsed them personally and deposited them to the credit of his account with the defendant Union Trust Company of Rochester. The drafts were endorsed and collected by it from the Chemical Bank. Under the regular practice of the latter, London examined such drafts prior to payment by Chemical and then, as in the case at bar, drew checks in favor of Chemical for the amount of the drafts which it had examined and approved.

The endorsement of the draft for $2,500 payable to James Giambrone and Josephine Giambrone was not made by them. Their signatures were forged by Kauffman, who added his personal endorsement as he had done in the case of the other two drafts and then deposited the draft to the credit of his account with the Union Trust Company. The latter collected it in the same way as the others.

O'Connell had adjusted all three claims. It was proved that he was with Kauffman when the fraudulent accident was planned with Geck, Graves and Levin and that he was a prime factor in the conspiracy to defraud London.

The plaintiff had issued a Fidelity bond covering the malfeasance of London's employee O'Connell and had reimbursed London for the three fraudulent drafts that he had drawn. Thereafter it brought this action, under an asserted right of subrogation, to recover from the defendant the amount of the drafts and interest, upon the theory that the latter had charged London with the payments under forged endorsements.

Judge Burke, before whom the case was tried, granted judgment for the plaintiff upon the cause of action based on the Giambrones' draft on the ground that the signatures of the Giambrones were actually forged and that therefore the defendant had derived no title to the draft and had no right to collect it from London. He dismissed the cause of action based on the Gilbert and Johnson drafts on the ground that the latter were real persons, although using aliases to aid them in their fraudulent schemes, that London intended to authorize drafts to be issued to the persons calling themselves "Gilbert" and "Johnson," who had actually made the claims, and that title to the drafts, therefore, passed to the defendant, which was entitled to collect them.

The $2,500 draft payable to the Giambrones read as follows:

"No. L 103009 "London "Guarantee and Accident Company, Ltd. "Issued at Rochester, N. Y. July 23, 1931 "Upon Acceptance

"Pay to the order of James Giambrone & Josephine Giambrone ($2500.00) the sum of Twenty-five Hundred and no/100 .... Dollars.

"When properly endorsed on the back hereof, this draft becomes and constitutes a release in full for the payment of All Claims * * * against Giovanni Centola on account of accident on or about May 23, 1931.

"Assured: Giovanni Centola Claimant Josephine Giambrone "Policy No.:KD544573 H. O. Claim No AL270781 "Agency Claim No.:25511 "To "The Chemical Bank & Trust Co. of New York "Fifth Avenue Branch "5th Avenue at 29th Street "A 1-12 "London Guarantee and Accident Company, Ltd. "By John J. O'Connell "Claim Department

"This draft must be endorsed in ink and presented for collection within ten days."

The endorsement of the defendant-bank on this draft, which it caused to be presented...