Wachovia Bank & Trust Co. v. Independence Indemnity Co.

• Decision Date: 14 January 1930
• Docket Number: No. 2897.,2897.
• Parties: WACHOVIA BANK & TRUST CO. v. INDEPENDENCE INDEMNITY CO.
• Court: U.S. Court of Appeals — Fourth Circuit

37 F.2d 550 (1930)

WACHOVIA BANK & TRUST CO. v. INDEPENDENCE INDEMNITY CO.

No. 2897.

Circuit Court of Appeals, Fourth Circuit.

January 14, 1930.

W. M. Hendren, of Winston-Salem, N. C., for appellant.

F. P. Hobgood, Jr., of Greensboro, N. C., for appellee.

Before WADDILL, PARKER, and NORTHCOTT, Circuit Judges.

WADDILL, Circuit Judge.

This is an appeal from a judgment of the District Court of the United States for the Middle District of North Carolina, at Winston-Salem, rendered in an action by the receiver of a defunct bank, appellant here, to recover on a bond insuring the fidelity of its president, which action was dismissed upon a directed verdict. The facts are as follows:

On April 26, 1926, the Merchants' Bank & Trust Company was closed by the banking department of the Corporation Commission of North Carolina, and on June 16, 1926, the Wachovia Bank & Trust Company was named as permanent receiver. Pursuant to an order of court, in October, 1926, the receiver arranged for an audit of the Merchants' Bank & Trust Company, and in the month of December, 1926, received information from the auditors indicating misappropriation, misapplications, and embezzlement of sums of money by Thomas Maslin, the president of the bank. Receivership affairs were under the general supervision of R. G. Stockton, one of the trust officers of the Wachovia Bank & Trust Company, the details being looked after by Thomas H. Haskins, one of its auditors.

Concurrent with the appointment of the receiver, the banking department of the Corporation Commission of the state delivered to the receiver all of the books, records, and papers of the bank, which had come into its possession, and included among such records was a package of fidelity bonds, some written with the National Surety Company, and some with the appellee indemnity company. Among these fidelity bonds so coming into the possession of the receiver were two on Thomas Maslin, one dated November 16, 1921, and one dated November 24, 1925, both in the National Surety Company. The bonds with the appellee company covered two employees of the bank, Bertha Long and C. R. Masten.

J. S. Dunn was the Winston-Salem agent of the National Surety Company, save for the period from November, 1924, to November, 1925, when he gave up that agency and accepted the agency of the appellee company, which agency was in turn surrendered in the fall of 1925, when he resumed the agency of the National Surety Company. Within a day or two after the receiver took charge of the bank, Thomas Haskins took all of the fidelity bonds of which he had any knowledge to J. S. Dunn, with the request that he check them and advise Haskins those that were in force and those that had been superseded. Dunn did this, returning the bonds, indicating one of the National Surety Company's bonds as being in force, and one as superseded. At the trial the witness Haskins testified that he said nothing to Mr. Dunn at this time about a bond on Maslin in the appellee company, as at that time he did not know anything about Mr. Dunn's connection with the appellee company, and Mr. Dunn did not mention it.

After the receiver was advised of the misappropriations of Maslin, acting upon the assumption that the National Surety Company was the only company with which the bank had any fidelity bonds on Maslin, it filed a claim, in December, 1926, with the National Surety Company for reimbursement in the full amount of the misappropriations, etc., as shown by the audit. Pursuant to an understanding with Mr. Pond, representative of the National Surety Company, instead of undertaking to set out the various items in the claim filed, there was delivered to him, in support of the claim, a copy of the audit. On September 19, 1927, the National Surety Company wrote a letter to counsel for the receiver, advising that it had discovered that during the period of November 16, 1924, to November 16, 1925, it was not surety on Maslin's fidelity bond. This was the first knowledge receiver had of the existence of the bond in suit. Mr. Haskins went to see Mr. Dunn for verification, and was then advised that for the period of November, 1924, to November, 1925, the appellee company was on Maslin's bond. Thereupon the receiver, on September 29, 1927, nine months after the discovery of the defalcations, gave notice to the appellee company of the loss and its claim. No trace of the bond in suit was ever found among the books and papers of the bank.

The bond sued on contained the following provision, among others:

"Provided, however, and upon the following express conditions:

"First — That the employer shall within a reasonable time and at all events not later than thirty days after discovery of loss hereunder, notify the surety thereof at its home office."

The appellee, Independence Indemnity Company, defendant below, denied liability on the bond sued on because of failure to notify in accordance with the provision of the bond, whereupon the receiver, appellant here, brought suit. At the conclusion of all the evidence, the trial court, upon motion of the defendant surety company, directed a verdict in favor of defendant, and entered judgment thereon, from which this appeal is taken. Error is assigned to the action of the trial court in sustaining...