Bank One, West Virginia, St. Albans, NA v. USF & G

• Decision Date: 22 November 1994
• Docket Number: Civ. A. No. 2:94-0714.
• Citation: 869 F. Supp. 426
• Court: U.S. District Court — Southern District of West Virginia
• Parties: BANK ONE, WEST VIRGINIA, ST. ALBANS, N.A., Plaintiff, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant.

869 F. Supp. 426

BANK ONE, WEST VIRGINIA, ST. ALBANS, N.A., Plaintiff, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant.

Civ. A. No. 2:94-0714.

United States District Court, S.D. West Virginia, Charleston Division.

November 22, 1994.

William W. Booker and Jonathan Nichol, Kay, Casto, Chaney, Love & Wise, Charleston, WV, for plaintiff.

John T. Miesner, Hoyer, Hoyer & Smith, Charleston, WV, Edward G. Gallagher, Wickwire Gavin, P.C., Vienna, VA, for defendant.

MEMORANDUM OPINION AND ORDER

HADEN, Chief Judge.

Pending is the Defendant's Motion to Dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The parties have submitted memoranda in support of their respective positions and the matter is mature for the Court's consideration.

As an initial matter, the Court notes the standard of review of a motion to dismiss filed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. As stated by our Court of Appeals,

"In general, a motion to dismiss for failure to state a claim should not be granted unless it appears certain that the plaintiff can prove no set of facts which would support its claim and would entitle it to relief. In considering a motion to dismiss, the court should accept as true all well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff. See, e.g., De Sole v. United States, 947 F.2d 1169, 1171 (4th Cir.1991)."

Mylan Laboratories, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.1993), cert. denied, sub nom, American Home Products Corp. v. Mylan Laboratories, Inc., ___ U.S. ___, 114 S.Ct. 1307, 127 L.Ed.2d 658 (1994); see Ridgeway Coal Co. v. FMC Corp., 616 F.Supp. 404, 406-07 (S.D.W.Va.1985) (Haden, C.J.) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)).

On May 29, 1991, Plaintiff's predecessor, Citizen's National Bank of St. Albans (hereinafter "Citizens") purchased from the Defendant United States Fidelity and Guaranty Company (hereinafter "USF & G") a Financial Institution Bond. In this Bond, USF & G agreed to insure Citizens against loss resulting from the dishonest or fraudulent acts committed by Citizens' employees against it.

The Bond's Insuring Agreement provides the Bond does not cover "potential income, including but not limited to interest and dividends, not realized by the Insured." (Insuring Agreement, "Conditions and Limitations" section two, "Exclusions" at subparagraph (s)). In addition, subparagraph (v) excludes "indirect or consequential loss of any nature."

Citizens suffered a loss of $511,146.16 through embezzlement by Larry Stewart, a former bank officer. By letter dated December 11, 1991, Citizens notified the Defendant about the Stewart embezzlement loss. On March 20, 1992, Citizens filed a Proof of Loss with the Defendant. On December 7, 1992, Citizens delivered to the Defendant a detailed analysis of the Stewart loss, including a written narrative describing each one of Stewart's one hundred and fifty-seven separate embezzlement transactions supported by bank statements and journal entries.

Seventeen months later on May 23, 1994, the Defendant paid $409,560.00, which represented the amount of money Stewart had embezzled less the Bond's deductible of $100,000.00 and less $1,586.16 restitution Stewart paid to Plaintiff. In consideration for this payment, the Plaintiff executed a "Partial Release" whereby it agreed to "release, acquit, exonerate and discharge The USF & G Companies from any and all actions, suits, claims, damages and liabilities whatsoever on account of any loss sustained." The Partial Release also contained a reservation of rights clause which stated, "excepted from this release is the bank's claim in the amount of Eighty two thousand five hundred sixty three and 96/100 ($82,563.96) for interest on the principal amount of Four Hundred Nine Thousand Five Hundred Sixty and 00/100 dollars ($409,560.00). USF & G did not sign this release nor did it contain any representations or agreements made by USF & G.

Plaintiff acknowledges payment of the amount owed under the Bond, but here seeks interest on the amount paid for the period of time from the notice of loss to the receipt of payment as damages for Defendant's delay in making payment on the claim.

Because the Court is exercising diversity jurisdiction, the law of West Virginia controls. The Supreme Court of Appeals of West Virginia has already decided the instant issue. Bennett v. Federal Coal & Coke Co., 70 W.Va. 456, 74 S.E. 418 (1912). In Bennett, a similar dispute ensued over the payment of interest on the principal debt. Id. A settlement was reached on the principal, but the plaintiff argued there was an agreement to resolve the interest question later. Id. The court found the reservation of rights made no difference. Id. 74 S.E. at 422. The court held that if interest is sought as damages for delay in payment, the cause of action cannot stand alone and does not survive payment of the principal debt. Id. In Syllabus Point 4, the court stated:

"where the contract does not so specifically provide for payment of interest, but the right thereto is by an implication, interest is considered as damages, and not as forming the basis of the action, and is recoverable only along with the principal sum and as an incident thereto, and if the principal sum is accepted in settlement the right to the damages is lost and no separate subsequent action can be maintained therefor."

Id. Benne...