Massachusetts Bonding & Ins. Co. v. Darby

• Decision Date: 14 February 1945
• Docket Number: No. 1872.,1872.
• Citation: 59 F. Supp. 175
• Court: U.S. District Court — Western District of Missouri
• Parties: MASSACHUSETTS BONDING & INS. CO. v. DARBY.

59 F. Supp. 175

MASSACHUSETTS BONDING & INS. CO. v. DARBY.

No. 1872.

District Court, W. D. Missouri, W. D.

February 14, 1945.

McClintock & Quant, of Kansas City, Mo., for plaintiff.

James P. Aylward and Roy W. Rucker, both of Kansas City, Mo., for defendant.

COLLET, District Judge.

Plaintiff signed the defendant's bond given to the City of Kansas City, Missouri, guaranteeing the faithful performance of defendant's duties as Director of Finance for the City. The City made claim against plaintiff as surety on the bond which was compromised and settled for $44,444.44, which sum plaintiff paid the City on November 7, 1940. By this action, instituted July 8, 1944, plaintiff seeks to recover back from the defendant the amount it paid. The basis for the present action is an agreement in the nature of an indemnity contained in defendant's application to plaintiff for the bond. The application was attached to the petition. That part of it now under consideration is as follows:

"I certify that the answers given to the foregoing interrogatories are true and in consideration of the Massachusetts Bonding and Insurance Company executing the bond herein applied for, I do hereby covenant, promise, and agree to pay the premium of $— per annum in advance during the continuance of the bond, and to indemnify and keep indemnified, the said Company from, and against any and all loss, costs, charges, suits, damages, counsel fees, and expenses of whatever kind or nature (including such costs and expenses, if any, which may be incurred by said Company in case it shall institute legal proceedings to be relieved from further liability on said bond) which said Company shall or may, for any cause, at any time, sustain, or incur, or be put to, for or by reason or in consequence of said Company having entered into or executed said bond."

The cause is now pending on motion to dismiss for want of sufficient allegation to justify a judgment against defendant. The petition must therefore be analyzed.

It alleges the organization of Kansas City, Missouri, under a Charter and states that the Charter provides for the appointment of a City Manager by the City Council who shall be the chief administrative officer of the City, that the City Manager is authorized to appoint a Director of Finance —"who shall have charge of the Department of Finance and the administration of the financial affairs of the City, including the installation, keeping and supervising of all accounts and financial records of the City; the supervision of the collection, custody and disbursement of all city moneys, except collections by the Water Department, and further provides that such Director of Finance shall have control over the expenditures of the City". (Quoted from the petition.)

It is alleged that H. F. McElroy was duly appointed City Manager on April 10, 1926, and served as such until his resignation on April 12, 1939. That Mr. McElroy duly appointed defendant Director of Finance on July 16, 1930, in which capacity he served until his resignation on April 17, 1940, during which period he—"was in charge of such Department of Finance and of the administration of the financial affairs of the City as in such Charter provided."

The petition then alleges that the Charter required the giving of a surety bond by defendant —"for the faithful performance of his duties as such officer * * *", that defendant gave such bond in the amount of $150,000 with plaintiff as surety to the extent of $75,000.00, that by the terms of the bond it was to be void on the condition— "that defendant should faithfully discharge and perform all his duties as such Director of Finance from and after February 1, 1933, but that otherwise it should remain in full force and effect". A copy of the bond was attached to the petition.

It is further alleged that in order to procure plaintiff to execute the bond defendant executed the written application heretofore referred to by which defendant agreed to indemnify plaintiff from any and all loss which plaintiff might suffer in consequence of its execution of the bond.

It is then alleged that defendant as Director of Finance, after November 7, 1937— "failed to perform and discharge his duties as such Director of Finance, and breached the terms and conditions of his official bond in that, from time to time, as hereinafter set forth, he wrongfully, suffered, permitted and caused divers sums of moneys, as hereinafter set forth, of the public moneys, funds and property of the city, to be wrongfully withdrawn from the treasury of the city, and to be wrongfully paid to H. F. McElroy and by H. F. McElroy appropriated and converted to his own use and benefit, * * * all of which was done by and as the direct result of wrongful acts and official misconduct by and on the part of defendant as Director of Finance of the City, in that he wrongfully drew, executed and issued to and in favor of H. F. McElroy, under the name adopted by him McElroy and defendant of `City Manager's Emergency Fund' * * *", certain Treasury Warrants which were listed and which totaled $695,748.43. It is then alleged that the moneys withdrawn from the City Treasury on these warrants were not used for any of the purposes for which the funds were created, with the result that such money "became permanently lost to each of said funds" and that the City was not indebted to the City Manager's Emergency Fund, had no such account, and no such account was authorized by Charter or Ordinance.

It is further alleged that after the funds were placed in the City Manager's Emergency Fund—"such funds were with the knowledge, consent, and assistance of defendant converted and appropriated by H. F. McElroy to his own use and benefit * * *".

The petition charges that the naming of the City Manager's Emergency Fund as the payee in the warrants—"was a means, scheme, device and subterfuge adopted, used, and employed by H. F. McElroy, with the knowledge, consent and assistance of defendant, for the express purpose of wrongfully withdrawing and paying over to H. F. McElroy said public money * * * and thereby converting same to his own use and benefit."

The allegation relating to plaintiff's loss on the bond is:

"That as the direct result of the foregoing failure of Defendant to faithfully perform and discharge his duties as such Director of Finance, the City lost money and was damaged in a sum largely in excess of $200,000.00 and the City presented claim thereon against Plaintiff, as surety upon such official bond of Defendant, which loss and damage as against this Plaintiff was by Plaintiff and the City compromised and settled for $44,444.44, which amount Plaintiff was required to and did pay to the City November 7, 1940, as surety on such bond. April 13, 1943, Plaintiff demanded payment of such sum from Defendant and Defendant refused and still refuses to pay the same."

In addition to the general assignment that the petition fails to state a claim upon which relief can be granted, the motion to dismiss is based upon the contentions...