Anderson v. General American Life Ins. Co.

• Citation: 141 F.2d 898
• Decision Date: 07 April 1944
• Docket Number: 9546.,No. 9547,9547
• Parties: ANDERSON v. GENERAL AMERICAN LIFE INS. CO. GENERAL AMERICAN LIFE INS. CO. v. ANDERSON.
• Court: U.S. Court of Appeals — Sixth Circuit

141 F.2d 898 (1944)

ANDERSON v. GENERAL AMERICAN LIFE INS. CO.

GENERAL AMERICAN LIFE INS. CO. v. ANDERSON.

Nos. 9547, 9546.

Circuit Court of Appeals, Sixth Circuit.

April 7, 1944.

Wm. Marshall Bullitt, of Louisville, Ky. (Wm. Marshall Bullitt, Francis T. Goheen, and Thomas W. Bullitt, all of Louisville, Ky., Powell B. McHaney, of St. Louis, Mo., and Bullitt & Middleton, of Louisville, Ky., on the brief), for General American Life Ins. Co.

Robert S. Marx, of Cincinnati, Ohio (Robert S. Marx, Frank E. Wood, Harry Kasfir, and Nichols, Wood, Marx & Ginter, all of Cincinnati, Ohio, on the brief), for Anderson, receiver.

Before HICKS, SIMONS, and MARTIN, Circuit Judges.

MARTIN, Circuit Judge.

This is the second appeal by the Receiver of the National Bank of Kentucky (in liquidation under the National Banking Act, 12 U.S.C.A. § 21 et seq.) from adverse judgment in the district court, upon a cause of action brought by an insurance company to enforce payment to it, as holder of two certificates of deposit issued by the bank for $250,000 each, of the same pro rata dividends which have been distributed to other creditors of the bank. There is also to be considered the cross-appeal of the General American Life Insurance Company from the disallowance of interest — a quite important issue, on account of the amount involved.

Upon the former hearing of the case, it appeared that, following the opening statement of defenses made by the attorney for the Receiver into which he incorporated the averments of the answer, and without receiving any evidence whatever, the district judge awarded the plaintiff insurance company judgment for the full amount of its claim, with interest, and ordered payment of the pro rata dividends on the claim. The reasons for his action were detailed by District Judge Cochran on petition for rehearing. Missouri State Life Ins. Co. v. Keyes, D.C.W.D.Ky., 46 F.Supp. 181. This court reversed the judgment of the district court and directed that evidence should be received and that findings of fact and conclusions of law should be filed by the district court. The assumed facts and the rationale upon which reversal was based are reported in Anderson v. Missouri State Life Ins. Co., 6 Cir., 69 F.2d 794.

By purchase of the assets of the Missouri State Life Insurance Company, in state insolvency proceedings, the present appellee, General American Life Insurance Company, became vested with title to the original plaintiff's claim against the Receiver and, by order of the district court, has become substituted plaintiff herein.

The opinion of District Judge Swinford, who tried the case upon its remand, is reported in General American Life Ins. Co. v. Anderson, D.C., 46 F.Supp. 189-198.

On the former hearing of the case, no error was found in the conclusion of District Judge Cochran that the knowledge of Rogers Caldwell of the infirmity which attached to the original certificates of deposit issued to Caldwell & Company was not attributable to the Missouri State Life Insurance Company, inasmuch as Caldwell had acquired such knowledge while acting for himself, or for Caldwell & Company, and not for the insurance company; wherefore, it was to his interest to conceal such knowledge, rather than to reveal it to the insurance company, which subsequently purchased the certificates and caused them to be reissued directly in its own corporate name. This conclusion was considered to be supported under the familiar rule of agency that it would be presumed that, in such circumstances, an agent would not communicate his knowledge to his principal; and that, therefore, the Missouri State Life Insurance Company was not chargeable with knowledge of the written agreement between the bank and the Associated Life Companies, Inc. American National Bank v. Miller, 229 U.S. 517, 33 S.Ct. 883, 57 L.Ed. 1310; Ohio Millers' Mutual Insurance Co. v. Artesia State Bank, 5 Cir., 39 F.2d 400.

The infirmity in the original certificates of deposit for $250,000 each, issued by the bank to Caldwell & Company, stemmed from certain undeniably established interlocking transactions. Associated Life Companies, Inc., an insurance stockholding company, was completely controlled by Rogers Caldwell, its books being kept in the offices of Caldwell & Company, the employees of which without additional compensation did the routine work of the insurance stockholding company. Pursuant to negotiations on the previous night between Rogers Caldwell and James B. Brown, president of the National Bank of Kentucky, at Brown's home, Caldwell, on August 21, 1930, delivered to the bank a promissory note for $500,000, executed by Associated Life Companies, Inc., and secured by $550,000 of bonds, as collateral.

The following letter was written on the bank's stationary and delivered:

"August 21, 1930. "National Bank of Kentucky "Louisville, Ky.

"Dear Sirs:

"You have today granted loan of $500,000.00 to this Company from which proceeds we have purchased two $250,000.00 Certificates of Deposit from your Bank in the name of `Caldwell & Company.'

"We hereby agree and guarantee that these Certificates of Deposit will not be cashed only in reduction of the above mentioned loan.

"Yours very truly "Associated Life Companies, Inc. "By: Thos. W. Goodloe "Secretary."

Simultaneously with the receipt of these documents, the National Bank of Kentucky issued and delivered to Caldwell & Company two negotiable certificates of deposit for $250,000 each.

In remanding the cause for retrial, this court pointed out that, in order to sustain a final judgment rendered upon mere statements of the case, admissions of attorneys "must clearly preclude recovery or defense, and broad and liberal interpretation must be made without too precise limitation of the meaning of specific words and phrases." Upon this broad basis of interpretation crediting the fair intendment of all averments and statements of the appellant and its attorney, the court considered that an offer of proof had been tendered "that Rogers Caldwell through the instrumentality of the various corporations dominated and controlled by him was engaged in perpetrating a fraud upon the bank, and that the Missouri State Life was a willing instrument in its perpetration."

The former opinion detailed items of proffered proof, and concluded that if "unchallenged or surviving destruction by adverse proofs," the evidence offered fully demonstrated that "the corporate will of Missouri State Life was exercised only by Caldwell, or at his bidding." It was asserted that if directors or committees of a corporation abdicate, surrender their powers and subordinate their judgments and their wills to one dominating individual, hermetically seal their minds to the obvious, permit their corporation to be used as an instrumentality of deception, unlawfulness and fraud pursued continuously over a period of years, the corporation may not escape liability for failure of proof of its specific knowledge of one irregular transaction.

The former opinion stated, moreover, that no escape was visible from the "sole actor" doctrine, "even in the limited application that was made of it by this court in the third phase of Kean v. National City Bank 6 Cir. 294 F. 214, and by the Supreme Court in Curtis, Collins & Holbrook Co. v. United States, 262 U.S. 215, 43 S.Ct. 570, 67 L.Ed. 956." Upon the assumed facts, no distinction was found in the applicability of the sole actor doctrine to the instant case from that made of it by this court in National City Bank v. Carter, 6 Cir., 14 F.2d 940, and National City Bank v. Carter, 6 Cir., 31 F.2d 25.

The court was careful to observe, however, that "the question of exclusive control is one of fact upon all the evidence, and the amount of stock owned by Caldwell is, on that issue, not at all conclusive." It was further asserted that the question of Caldwell's authority to bind the Missouri State Life Insurance Company by the agreement of the bank, concerning the use and application of the proceeds of the certificates, was an issue of fact to be decided by the district judge.

From the entire context of the former opinion, it should be obvious that what was there said was based upon the assumption of proof of all allegations of appellant's answer and the statement of defenses by its trial attorney, with every favorable inference to be reasonably drawn therefrom by liberal interpretation of the intendments of both pleader and advocate. The opinion discussed somewhat fully the assumed facts, as if proven; rationalized thereon; and sought to supply, as far as practicable in the state of the record, guidance upon the apparently applicable law of this complicated case. Nothing said was intended to foreclose the binding effect here of the findings of fact, which were directed to be made by the district court upon the evidence received at the trial, unless such findings should be deemed clearly erroneous.

Although counsel have briefed and argued the case upon the facts largely by comparing factual statements in the former opinion with testimony received at the trial as either supporting or disproving each assumed fact, the method of counsel will not be followed in this opinion; but the controlling facts, as found by the district judge, will be narrated directly without reference to statements concerning corresponding subject matter in our former opinion.

After careful examination of the record, consisting of four printed volumes, aggregating 1747 pages of which 330 pages are exhibits, the district court's determinative findings of fact, supported by substantial evidence and not deemed clearly erroneous, will be narrated in indirect-discourse form.

On August 27, 1930, six days after the National Bank of Kentucky issued the two $250,000 certificates of deposit to Caldwell & Company, the latter endorsed and sold one of the certificates to the Missouri State Life Insurance Company for $250,000. This consideration...