Citizens State Bank of Thedford v. United States Fidelity & Guaranty Company

• Decision Date: 17 March 1936
• Docket Number: 29595
• Citation: 266 N.W. 81,130 Neb. 603
• Parties: CITIZENS STATE BANK OF THEDFORD ET AL., APPELLANTS, v. UNITED STATES FIDELITY & GUARANTY COMPANY, APPELLEE
• Court: Nebraska Supreme Court

266 N.W. 81

130 Neb. 603

CITIZENS STATE BANK OF THEDFORD ET AL., APPELLANTS, v. UNITED STATES FIDELITY & GUARANTY COMPANY, APPELLEE

No. 29595

Supreme Court of Nebraska

March 17, 1936

APPEAL from the district court for Furnas county: CHARLES E. ELDRED JUDGE. Reversed.

REVERSED.

Syllabus by the Court.

1. A pledgee becomes liable for conversion on surrendering a pledged certificate of deposit, and taking in lieu thereof without pledgor's knowledge, a new certificate having a later maturity date.

2. Evidence examined, and held insufficient to sustain appellee's defense of ratification.

Appeal from District Court, Furnas County; Eldred, Judge.

Action by the Citizens State Bank of Thedford and another against the United States Fidelity & Guaranty Company of Baltimore. From a judgment for defendant, plaintiffs appeal.

Reversed and remanded.

Squires, Johnson & Johnson and Evans & Lee, for appellants.

Clarence A. Davis and L. L. Abbott, contra.

Heard before GOSS, C. J., ROSE, GOOD, EBERLY, DAY, PAINE and CARTER, JJ.

OPINION

EBERLY, J.

This is an action at law brought by the Citizens State Bank of Thedford, Nebraska, and J. H. Figard, against the United States Fidelity & Guaranty Company of Baltimore, Maryland, to recover the sum of $ 3,000 alleged to have been entrusted to the defendant company for the sole purpose of indemnifying it against loss because of the execution of an appeal bond in the case of the Nebraska State Bank of Valparaiso, Nebraska, v. Citizens State Bank of Thedford, Nebraska, J. H. Figard and Otto J. May. The appeal bond in the sum of $ 5,500 was actually executed by the defendant company; the appeal was perfected; the judgment appealed from was reversed in the appellate court (122 Neb. 522); and later, after remand, the action was dismissed in the trial court. These facts admittedly negative all liability on the part of the defendant company on the appeal bond, and entitle the plaintiffs in the instant case to the return of the property pledged as indemnity. The fundamental question is whether the duty to return this pledge, under the peculiar facts in this case, has been performed by the defendant company, or whether it has been guilty of the conversion of the same and thereby incurred a personal liability therefor.

After trial in the district court judgment was rendered for defendant, and plaintiffs appeal.

The facts disclosed by the record include the following: On March 17, 1930, in an action commenced in the district court for Furnas county by the Nebraska State Bank of Valparaiso (of Saunders county) against the Citizens State Bank of Thedford, Nebraska, and J. H. Figard, both of Thomas county, Nebraska, and another, a judgment for an amount definite was entered against the defendants. In this litigation, J. H. Figard was represented by Stevens & Stevens, a firm of attorneys composed of John Stevens and Wade Stevens, both of whom were residents of Furnas county, Nebraska. These attorneys did not represent the Thedford bank in the proceedings that resulted in the judgment; nor, except for what services they may have rendered in securing an appeal bond, did they in any manner appear for that institution in the appellate proceedings. Throughout the litigation the Citizens State Bank of Thedford was represented by Evans & Lee, a firm of attorneys of Broken Bow, and by Squires, Johnson & Johnson, a firm of attorneys of Broken Bow, Nebraska. It appears that the Citizens State Bank of Thedford, after the rendition of the judgment, and before the filing of the appeal bond, "closed its doors." On the 7th day of April, 1930, after a telephone conversation between a representative of the firm of Stevens & Stevens and Figard, the latter, in company with T. P. Hamilton, president of, and representing, the Citizens State Bank of Thedford, proceeded to Alliance, Nebraska, and on their own individual responsibility negotiated a loan of $ 3,000 from the Guardian State Bank. This was borrowed by Figard and Hamilton on a "fifty-fifty" basis for the purpose of depositing the same with the clerk of the district court as a "cash appeal bond" in the case heretofore mentioned, which they were both desirous of appealing. This money was immediately transmitted to the First State Bank of Beaver City by telegraph. This telegram to that institution contained the following: "Notify and pay to Stevens & Stevens, attorneys, $ 3,000 for J. H. Figard and Citizens State Bank, Thedford, Nebraska, we are remitting by mail."

In reply to this telegram the following letter, signed by "Stevens & Stevens, by Wade Stevens," was addressed to and received by Figard at Thedford:

"April 8, 1930. Mr. J. H. Figard, Thedford, Nebraska. Dear Mr. Figard: We had notice from the local bank last evening that they had received $ 3,000 from the bank at Alliance. We receipted for it today. We found no provision for the deposit of cash as a supersedeas bond and our clerk does not like to take the responsibility of holding the money, so we deposited the $ 3,000 on time deposit; which will draw 3% for six months or 4% for a year's deposit. We anticipate that it will be on deposit for a year. We then executed a bond and indorsed the certificates of deposit to the bonding company as security. The premium on this bond is $ 55 which we will ask that you and the bank send us. The interest on the deposit will be $ 120 if left a year, which will more than reimburse you for the premium. We would have had to lose the interest if we had induced the clerk to hold the money. We are inclosing an application for a bond which please fill out and return to us. You do not need to pay any attention to anything except the first page where you may fill in numbers 8 and 9 and then sign on the lines checked. Trusting this will meet with your approval we are, with best regards, Yours very truly."

With this letter there was inclosed the ordinary application for the execution of an appeal bond in the case of Nebraska State Bank of Valparaiso v. Citizens State Bank of Thedford et al., directed to the United States Fidelity & Guaranty Company. It provided for the payment of a premium of $ 55 per annum in advance during the continuance of the obligation.

The evidence is without dispute that the letter was never submitted to Hamilton and that he never was advised of the facts recited therein, and it does not appear that any other officer or agent of the Thedford bank was given any information as to its contents. It also appears without question that the United States Fidelity & Guaranty Company executed the appeal bond applied for, and the same was properly filed and approved on April 8, 1930, and that the applicants paid the first year's premium thereon in advance.

In connection with the bond transaction, John Stevens testifies that he is one of the members of the firm of Stevens & Stevens; that during the period of the events connected with this litigation his son, Wade Stevens, the other member of the firm, was in the bonding business, representing the United States Fidelity & Guaranty Company; that the firm of Stevens & Stevens, lawyers, had nothing to do with the bonding business; that it was a side business of his son Wade, and strictly his personal affair, and that the commission derived therefrom went to Wade. This witness also testified that he had nothing to do with the matters of business pertaining to the bonding business, and the furnishing of reports, "and such as that," between Wade Stevens and the United States Fidelity & Guaranty Company. This evidence is without express contradiction in the record.

It also appears from the "power of attorney," in writing, duly executed by the United States Fidelity & Guaranty Company, that Wade Stevens was the duly appointed attorney in fact for that company, and as such authorized and in charge of its business in Furnas county, Nebraska.

It further appears that, instead of a payment to Stevens & Stevens of the $ 3,000 in cash by the First State Bank of Beaver City, there was issued by that institution to Stevens & Stevens on April 8, 1930, a nonnegotiable certificate of deposit, bearing date of April 8, 1930, due six or twelve months after date, bearing interest. Thereupon this certificate of deposit was indorsed, "Pay to United States Fidelity & Guaranty Company as security on appeal bond executed by J. H. Figard and Citizens State Bank of Thedford, Stevens & Stevens," and transmitted to the United States Fidelity & Guaranty Company, and thereafter held by them until about the maturity thereof. At that time it was indorsed by this company in the words, "for renewal only, United States Fidelity & Guaranty Company, by J. Irving Cook," and returned to their Furnas county agent, Wade Stevens. Thereupon Wade Stevens indorsed the name of "Stevens & Stevens" thereon, and on April 11, 1931, surrendered this instrument to the maker, and in lieu thereof there was issued to him a second nonnegotiable certificate of deposit bearing date of April 8, 1931, for the sum of $ 3,120 payable to Stevens & Stevens, or assigns, due 6 or 12 months after date, with interest. This, he indorsed, "Pay to United States Fidelity & Guaranty Company for security on appeal bond of J. H. Figard and Citizens State Bank of Thedford," and transmitted this renewal to that company.

In the meantime, on October 22, 1930, at the request of T. P. Hamilton, president of the Citizens State Bank of Thedford, the Guardian State Bank of Alliance addressed a letter to Stevens & Stevens with reference to this transaction. One paragraph of this letter reads as follows:

"He (Hamilton) now has up a cash bond and he would like to know if he could place up liberty bonds instead. If it is desirable to use the liberty bonds, would a safe-keeping receipt...