Continental Casualty Co. v. Powell

• Decision Date: 06 April 1936
• Docket Number: No. 3984.,3984.
• Citation: 83 F.2d 652
• Parties: CONTINENTAL CASUALTY CO. v. POWELL et al.
• Court: U.S. Court of Appeals — Fourth Circuit

83 F.2d 652 (1936)

CONTINENTAL CASUALTY CO. v. POWELL et al.

No. 3984.

Circuit Court of Appeals, Fourth Circuit.

April 6, 1936.

Willcox, Cooke & Willcox and T. H. Willcox, all of Norfolk, Va., for appellant.

W. R. C. Cocke, of Norfolk, Va., Harold J. Gallagher, of New York City, Edward Duffy, of Baltimore, Md., Gordon M. Buck and Thomas O'G. FitzGibbon, both of New York City, Carlyle Barton, of Baltimore, Md., Theodore S. Garnett, of Norfolk, Va., Humes, Buck, Smith & Stowell, of New York City, Baird, White & Lanning, of Norfolk, Va., Davis, Polk, Wardwell, Gardiner & Reed, of New York City, and Hughes, Little & Seawell, of Norfolk, Va., for appellees.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

NORTHCOTT, Circuit Judge.

This is a claim filed by the appellant, herein referred to as the claimant, in a suit in equity pending in the District Court of the United States for the Eastern District of Virginia, at Norfolk, in which suit receivers were appointed for the Seaboard Air Line Railway Company. A reference was had to a special master, who reported against the contention of the claimant, and upon exceptions the judge below, after a hearing, confirmed the special master's report in July, 1934. After a rehearing the judge filed an opinion in September, 1935 (Guaranty Trust Co. v. Seaboard Air Line Ry. Co., 14 F.Supp. 555), reaffirming his former conclusion and adopting the findings and conclusions of the special master as the findings and conclusions of the court. From this action this appeal was brought.

Under a written contract which was entered into in 1913 between the claimant and the predecessor of the Seaboard Air Line Railway Company, the claimant wrote policies of health and accident insurance for employees of the railway company, the premiums for which policies were obtained by periodical deductions by the railway company from the pay of its insured employees pursuant to orders from the latter authorizing such deductions. The railway company in turn paid the sum so deducted from the pay of the employees to the insurance company less 5 per cent. as its compensation for the services performed. The fourth section of the agreement between the claimant and the railway company provided that the railway company "does not guarantee such collections and assumes no liability therefor," and the fifth section provided that the insurance company "agrees to waive all claims against said first party by reason of the failure for any cause to make any payment as herein provided, and to release said first party from any liability therefor."

Under the arrangement with the claimant the railway company deducted the sum of $7,324.04, from the wages which were due its employees accrued prior to June 24, 1930. This sum the claimant has never received. In addition to these deductions, the railway company made other deductions from the wages of its employees accruing subsequent to June 24, 1930. Receivers were appointed for the railway company on December 23, 1930, at which time the railway company was, as shown by its books, indebted to the claimant for these sums, and between December 20 and December 22, 1930, drafts covering the entire indebtedness were mailed to the claimant. After the appointment of the receivers these drafts were not paid by the banks upon which they were drawn. The amount of these deductions after June 24, 1930, was made the basis of a claim by the claimant and was allowed priority and has been paid.

Two questions are involved: First, was the amount due the claimant from the railway company entitled to a preference as being a trust imposed upon the funds in the hands of the receivers; and, second, was the claim one entitled to priority as having peculiar equities that called for an extension of the six months rule as applied to debts due from a railway company?...