King Edward Employees FCU v. Travelers Indem. Co.

• Citation: 206 F.2d 726
• Decision Date: 23 October 1953
• Docket Number: No. 14324.,14324.
• Parties: KING EDWARD EMPLOYEES FEDERAL CREDIT UNION v. TRAVELERS INDEMNITY CO.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

206 F.2d 726 (1953)

KING EDWARD EMPLOYEES FEDERAL CREDIT UNION v. TRAVELERS INDEMNITY CO.

No. 14324.

United States Court of Appeals Fifth Circuit.

August 31, 1953.

Rehearing Denied October 23, 1953.

Taylor Jones and Rogers, Towers & Bailey, Jacksonville, Fla., for appellant.

Francis P. Conroy and Marks, Gray, Yates & Conroy, Jacksonville, Fla., for appellee.

Before BORAH, RUSSELL and STRUM, Circuit Judges.

BORAH, Circuit Judge.

This is an appeal from an order and judgment of the district court dismissing plaintiff's suit for failure to state a claim upon which relief can be granted.

The well-pleaded material allegations of the complaint which we must treat as admitted are these: Plaintiff is a federal credit union, a cooperative association organized under the provisions of Chap. 14, Title 12, U.S.C.A., as defined in Section 1752 of said Title, with its principal office and place of business in Jacksonville, Florida. During the period beginning and existing through and beyond May 15, 1951, plaintiff was protected by a credit union blanket indemnity bond issued by the defendant, The Travelers Indemnity Company. By the terms of said bond and the riders attached thereto, defendant agreed to indemnify and hold harmless the plaintiff, to an amount not exceeding $20,000.00 from and against the direct loss of any property:

"(a). Through any dishonest act, wherever committed, of any of the Employees, whether acting alone or in collusion with others or, in case faithful performance of duty coverage on the Employees or any of them is required by law under which the insured is incorporated, or by the rules and regulations of any officer, board or commission having supervision over Credit Unions, then through the failure of such Employee or Employees to perform faithfully their duties."

The complaint alleges that faithful performance of duties coverage on the treasurer of the credit union was required by the law¹ under which it was incorporated; that J. F. Lucas was treasurer of the credit union and was entrusted with the custody of all of its funds and assets and it therefore became his duty to diligently care for, protect, safeguard, preserve and account for all the funds and assets of plaintiff. However, during the period February 1, 1950, through May 15, 1951, Lucas failed to faithfully perform his duties by carelessly and negligently using or permitting the use of the funds of plaintiff in honoring and cashing 46 drafts issued by John H. Swisher & Son, Inc., payable to the order of Machine Engineers bearing the forged or unauthorized indorsements of the payee and without even requiring the person presenting 38 of said drafts to indorse them; and by then indorsing or permitting the indorsement of such drafts in the name of the plaintiff in blank thereby guaranteeing the validity and genuineness of all prior indorsements and warranting that plaintiff had good title to the drafts. These drafts were then deposited by plaintiff to its account in the Springfield Atlantic Bank, Jacksonville, Florida, which bank credited plaintiff's account with the amount of each draft and then forwarded the drafts to the Atlantic National Bank, Jacksonville, Florida, which in turn, presented said drafts to John H. Swisher & Son, Inc., which paid them. Upon discovery of the fact that the indorsements of the payee, Machine Engineers, were forged and unauthorized, the Springfield Atlantic Bank demanded payment of plaintiff of the total amount of the drafts and blocked the account of plaintiff in the bank on September 25, 1951, to the extent of $19,782.75, the total amount of the drafts. Plaintiff, having indorsed the drafts and having received payment by the bank was allegedly under a legal obligation to refund the amount of the drafts which the bank had paid and in recognition of such legal obligation and in order to unblock its account, paid the bank the sum of $19,782.75. Notice of loss was duly given by plaintiff to defendant, proof of loss was furnished, and plaintiff performed all conditions of the contract required of it but defendant failed and refused to pay the amount of the loss as contracted.

In a second count, plaintiff realleged all of the foregoing facts except that instead of referring only to J. F. Lucas, treasurer, the allegations refer to J. F. Lucas, treasurer, and Audrey DuBard, assistant treasurer, as having done or permitted the doing of the negligent and careless acts, and with this further exception that plaintiff alleged that faithful performance of duty coverage on the treasurer and assistant treasurer of plaintiff was required by the rules and regulations of the officers, boards and commissions having supervision of it.

The prayer of the complaint was for a judgment in the sum of $25,000.00 together with interest and costs and attorneys' fees reasonably expended or incurred in and about the prosecution of the suit.

Cases are generally to be tried on their proofs rather than the pleadings and there was no justification for granting the motion to dismiss the complaint for failure to state a claim unless the averments in the pleading attacked disclosed with certainty that the plaintiff would not be entitled to relief under any state of facts which could be proved in support of the claim. Leimer v. State Mutual Benefit Assur. Co., 8 Cir., 108 F.2d 302; Carroll v. Morrison Hotel Corp., 7 Cir., 149 F.2d 404; Ware v. Travelers Ins. Co., 9 Cir., 150 F.2d 463; Dollar v. Land, 81 U.S.App.D.C. 28, 154 F. 2d 307; Frederick Hart & Co., Inc., v. Recordograph Corp., 3 Cir., 169 F.2d 580. The test is whether the complaint, construed in the light most...