Jefferson Bank & Trust Co. v. Central Sur. & Ins. Corp.

• Decision Date: 12 December 1966
• Docket Number: No. 51209,No. 2,51209,2
• Citation: 408 S.W.2d 825
• Parties: JEFFERSON BANK AND TRUST COMPANY, a Corporation, Plaintiff-Appellant, v. CENTRAL SURETY AND INSURANCE CORPORATION, a Corporation, Defendant-Respondent
• Court: Missouri Supreme Court

Page 825

408 S.W.2d 825

JEFFERSON BANK AND TRUST COMPANY, a Corporation, Plaintiff-Appellant, v. CENTRAL SURETY AND INSURANCE CORPORATION, a Corporation Defendant-Respondent.

No. 51209.

Supreme Court of Missouri, Division No. 2.

Dec. 12, 1966.

Buckley & Campbell, R. Forder Buckley, Robert Lee Campbell, St. Louis, for plaintiff-appellant.

Fred J. L. Schuler, St. Louis, for defendant-respondent.

FINCH, Judge.

This case comes to the writer on reassignment.

Plaintiff bank, herein sometimes referred to as 'Jefferson,' brought suit on its Bankers Blanket Bond for $20,621.06. Both plaintiff and defendant surety, sometimes referred to as 'Central,' filed motions for summary judgment. The trial court entered judgment for Central on its motion for summary judgment and Jefferson has appealed.

Jefferson seeks recovery of the amount it was required to pay Brede Decorating, Inc., as a result of the judgment of this court in the case of Brede Decorating, Inc. v. Jefferson Bank and Trust Co., Mo., 345 S.W.2d 156, plus costs and expenses incident to that suit. The bond covered losses of specified types and included the following provisions upon which Jefferson seeks recovery:

'ON PREMISES

'(B) Any loss of Property through robbery, burglary, common-law or statutory larceny, theft, false pretenses, hold-up, misplacement, mysterious unexplainable disappearance, damage thereto or destruction thereof, whether effected with or without violence or with or without negligence on the part of any of the Employees, * * *.'

'FORGERY OR ALTERATION

'(D) Any loss through FORGERY OR ALTERATION of, on or in any checks, drafts, acceptances, withdrawal orders or receipts for the withdrawal of funds or Property, certificates of deposit, letters of credit, warrants, money orders or orders upon public treasuries; or any loss (1) through transferring, paying or delivering any funds or Property or establishing any credit or giving any value on the faith of any written instructions or advices directed to the Insured and authorizing or acknowledging the transfer, payment, delivery or receipt of funds or Property, which instructions or advices purport to have been signed or endorsed by any customer of the Insured or by any banking institution but which instructions or advices either bear the forged signature or endorsement or have been altered without the knowledge and consent of such customer or banking institution, * * *. Mechanically reproduced facsimile signatures are treated the same as handwritten signatures.'

Losses covered were those 'sustained by the Insured at any time but discovered after noon of the 1st day of November, 1957, and prior to the termination or cancelation of this bond. * * *.'

Two basic disputes exist between the parties on this appeal. They are (1) do the bank's losses fall within coverage provided by the Bankers Blanket Bond (false pretenses on the premises or forgery), and (2) assuming that they do, were the losses discovered during the term of the bond?

Our opinion in the Brede case, supra, recited in considerable detail the transactions out of which the recovery by Brede from Jefferson arose. Except as necessary for clarity, we will not recite those facts again. Those interested may refer to 345 S.W.2d 156 for further details. Suffice it to say here that during the period from January 6, 1955, to October 16, 1955, sixteen checks payable to Brede Decorating, Inc., were deposited in Jefferson to the credit of Acme-Williams Decorating Co., a partnership consisting of Egan, the treasurer of Brede, and Siviur, a salesman for Brede. The name 'Brede Decorating, Inc.,' was stamped with a rubber stamp on the back of each of the sixteen checks. Below that was typed or written the words 'Acme-Williams Decorating Co.' None of the checks bore any individual signature or name. These endorsements were placed on the checks and the deposits were made by Egan or Siviur, but the evidence did not clearly establish which one performed the acts with respect to particular checks.

This court held in the Brede case that the resolution furnished to the bank by Brede did not authorize Egan to do what was done here; that Egan had no authority, express or implied, to endorse corporate checks for deposit to any other account; and that under the evidence Jefferson was put on inquiry to determine whether Brede had authorized the actions in question. We held that the trial court was justified in entering judgment for Brede on its after-trial motion, notwithstanding a jury verdict in favor of Jefferson.

Jefferson notified Central of the Brede suit when filed and called upon Central to defend and hold Jefferson harmless under its blanket bond. Central denied liability and declined to defend. Jefferson now seeks recovery of the judgment entered against it therein, plus attorneys' fees and expenses.

Both motions for summary judgment were submitted originally to Judge Reagan. He overruled both motions, reciting that there were issues of fact in dispute which would require a jury trial, these including a sharp dispute as to when the loss was discovered

Subsequently, a pre-trial conference was held before Judge McMillian and he filed a memorandum for the clerk reciting that the parties had stipulated that there was no issue of fact involved and that the issues were entirely ones of law which could be decided by the court. It was stipulated that the motions of both parties for summary judgment should be treated as refiled and the case submitted to the court thereon. The stipulation provided for consideration of the transcript in the prior Brede case and the Supreme Court's opinion therein, as well as the pleadings, interrogatories, depositions, requests for admissions, and affidavits in the case then pending before the court.

Thereafter, the trial court made findings of fact and conclusions of law and entered judgment for Central. Findings of fact included ones that Egan, by the endorsements and deposits, wrongfully converted the funds of Brede; that the circumstances surrounding the negotiations were so unusual as to put Jefferson on inquiry to determine whether the acts were authorized by Brede; that prior to November 1, 1957, officers of Brede made inquiry at the bank in connection with the sixteen checks and the handling thereof; and that the loss thereby was discovered prior to November 1, 1957. There were conclusions of law that there was no loss either by false pretenses or by forgery; that there was no evidence to show that the loss occurred on the premises; that the bank was guilty of conversion; and that the loss was discovered prior to November 1, 1957.

Considering first the question of coverage, we have concluded that the acts complained of do amount to false pretenses on the premises which fall within coverage B of the bond. It is true, as Central points out, that there was no evidence as to where the endorsements on the checks were made by Egan or Siviur, or that they occurred at the bank. However, when the checks, with the endorsement of Brede thereon, were presented at the bank for deposit to the account of Acme-Williams, that constituted a representation to Jefferson that the checks had been endorsed on behalf of Brede by an authorized person for the purpose of negotiating the checks. Such representation was false, and it was a false representation to the bank on its premises at the time the checks actually were presented for deposit. Federal Deposit Ins. Corp. v. Hartford Accident & Indemnity Co., D.C., 106 F.Supp. 602, 604(2); affirmed 8 Cir., 204 F.2d 933, 937(5).

Central asserts that the Brede opinion has determined, as a matter of law, that what occurred was a conversion and that the blanket bond does not cover loss by conversion. This contention overlooks the fact that the suit by Brede against Jefferson was for alleged conversion by the bank of Brede's funds as a result of the bank's handling of checks which belonged to Brede. When the opinion speaks of conversion or diversion of funds, it is characterizing what the bank did, not the nature of the acts of Egan or Siviur. The Brede opinion does not hold that the acts of Egan and Siviur were not false pretenses on the premises or, for that matter, that they were not forgeries.

In this action by Jefferson against Central we are concerned with the acts of Egan and Siviur. More specifically, we are concerned with whether they amount to false pretenses on the premises or forgeries which, in turn, induced Jefferson to convert or divert Brede's funds. We hold, as above indicated, that the acts of Egan and Siviur did constitute false pretenses on the premises. Under these circumstances, we need not extend this opinion by considering whether the acts also would fall within the coverage against loss by forgery under coverage D.

This brings us to a consideration of the second question which is whether the losses were discovered during the term of the bond written by Central for Jefferson. The trial court adopted the view of Central and held as a matter of law that the losses were discovered prior to November 1, 1957, and not covered by its bond.

Central, seeking to sustain the action of the trial court, asserts on appeal that the opinion of this court in the Brede case established that Jefferson was put on inquiry in 1955 when the checks were presented for deposit. This, says Central, constituted discovery of the loss prior to November 1, 1957, as a matter of law. We do not agree. We did hold in Brede that when the checks were presented with the endorsements heretofore described, the bank, for the purpose of determining its liability to Brede, was put...