Knights Of The Ku Klux Klan Inc v. Fid. &. Deposit Co. Of Md.

• Decision Date: 03 May 1933
• Docket Number: No. 22653.,22653.
• Citation: 169 S.E. 514,47 Ga.App. 12
• Parties: KNIGHTS OF THE KU KLUX KLAN, Inc. v. FIDELITY &. DEPOSIT CO. OF MARYLAND.
• Court: Georgia Court of Appeals

47 Ga.App. 12

169 S.E. 514

KNIGHTS OF THE KU KLUX KLAN, Inc.

v.FIDELITY &. DEPOSIT CO. OF MARYLAND.

No. 22653.

Court of Appeals of Georgia, Division No. 2.

May 3, 1933.

Rehearing Denied May 27, 1933.

Syllabus by the Court.

1. Where a surety on a fidelity bond, by its acts in negotiating for a settlement of a loss under the bond, has led the obligee therein to believe that it will be paid without suit, the surety cannot take advantage of a provi sion in the bond which requires an action to recover for a loss under the bond to be brought within a certain time.

2. Where the petition specifically charges that the principal in the fidelity bond, while acting as an officer and employee of the plaintiff, "did fraudulently misappropriate, willfully misapply, and embezzle three thousand dollars" belonging to the plaintiff, the obligee in the bond, it does not show that the shortage sued for by the obligee was a civil liability only, although the plaintiff attached to Its petition, along with other exhibits, for the purpose of showing negotiations with the surety on the bond looking to a settlement of the loss, a letter from the principal on the bond to the surety to the effect that he did not owe the plaintiff, that the plaintiff owed him, and that he took the money to reimburse himself.

3. Where the surety did not deny liability for the loss until July 3, 1930, and suit was brought to recover on the bond on October 3, 1930, the suit was brought within a reasonable time after the surety denied liability, regardless of whether the conduct of the surety in negotiating for a settlement definitely waived the stipulation in the bond that an action thereunder should be brought within a certain time, or merely suspended the operation of such stipulation, and upon the denial of liability by the surety it became revived.

4. A provision in a fidelity bond requiring proofs of loss to be submitted within a certain time may be waived by the surety on the bond, and such waiver may be implied from conduct inconsistent with an intention on the part of the surety to insist upon compliance with the requirements of the bond in this respect; and failure to demand the proof of loss within the time prescribed, when coupled with other acts calculated to lead the insured to believe that the proof need not be furnished within the prescribed time, is sufficient to show an implied waiver.

Error from Superior Court, Fulton County; John D. Humphries, Judge.

Suit by the Knights of the Ku Klux Klan, Incorporated, against the Fidelity & Deposit Company of Maryland. Demurrer to petition was sustained, petition was dismissed, and plaintiff brings error.

Reversed.

On October 3, 1930, the Knights of the Ku Klux Klan, Inc., filed suit against the Fidelity & Deposit Company of Maryland, making substantially this case: The Knights of the Ku Klux Klan, Inc., had various officers and employees in the different states of the United States. In consideration of a certain pre-mium paid by the Klan, the Fidelity & Deposit Company of Maryland executed to it a certain bond wherein it agreed to indemnify the Klan against any loss, in respect of moneys of the Klan, caused by any of certain officers and employees of the Klan, through any act of fraud, embezzlement, misappropriation, willful abstraction, or willful misapplication committed by any of such persons. The bond provided that "any suit or action to recover against the surety on account of loss hereunder shall be brought before the expiration of twelve months from the discovery of the loss." One McCord Harrison was an officer and employee of the Klan, rightfully falling within the persons designated as coming under the above bond. While acting in his capacity as such officer Harrison fraudulently misappropriated, willfully misapplied, and embezzled from the Klan certain moneys, the same occurring on various dates, all within the life of the above bond. The loss was not discovered by the Klan until August 28, 1920, when it immediately notified the surety thereof. On January 22, 1927, the Klan furnished the surety with proof of loss, supported by itemized and verified statements and audits showing the particulars of claim and loss. Upon receipt of the papers the surety wrote to the Klan acknowledging receipt thereof and asking for the present address of Harrison and for information as to the location of the record, so that it could have its auditor make an inspectioa thereof. On February 9, 1927, the Klan wrote the surety that the last address of Harrison was a certain post office box in Phoenix, Ariz., but that it would try to get his present address and notify the surety, and that the records were in the hands of a named person at Douglas, Ariz., and in the hands of the local secretaries of the various "Klans in the Realm of Arizona, that is in practically every town of any size in that State." On March 1, 1927, the Klan further wrote to the surety that Harrison was then employed by the city of Phoenix as a night patrolman, and lived at a named street address in that city. On July 25, 1927, the Klan again wrote to the surety, in regard to obtaining a settlement of the claim, to the effect that it was placed in somewhat of an embarrassing position, due to the nonsettlement of the claim, in that Mrs. Harrison, who had been employed by the Klanswomen, had also been short in her accounts and the surety on her bond had settled promptly, and that the men of the Klan were getting impatient. It further wrote that it had furnished the surety with an audit of Harrison's accounts, which was made at quite an expense, and that the audit showed his shortage in detail, and a check would be appreciated in settlement. On August 4, 1927, the surety wrote to the Klan, inclosing a letter dated August 2, 1927, from its claim department, to the effect that if the Klan desired prompt payment it would have to localize its records, so that a personal investigation of the case could be made by the claim department; that it could not recognize the audit submitted as proper proof of the claim; that it could not journey to every county in the state to inspect the records; that if the Klan did not wish to localize its records, it could submit conclusive proof of the shortage and payment would be made; that if the Klan could do neither, the only course left open for the surety would be to endeavor to adjust the matter by the advices of Harrison; and that it could do nothing until the Klan complied with its requests. On August 9, 1927, the Klan wrote to the surety that it had received the letter of August 4, with attached correspondence; that it was willing to wait fifteen days for a settlement; that it could see no reason why the audit furnished by it was not sufficient proof of loss; that the audit was made at great expense and was prepared by a competent auditor; and that it could not understand what further proof the surety could want. On August 30, 1927, the surety wrote to the Klan that it was inclosing a letter from its claim department and that it would take the matter up with Harrison in order to get further light on the question. The letter of the claim department was to the effect that it could not accept the audit as given it by the Klan as conclusive proof; that under the terms of the surety contract, the surety had the right to make a personal investigation of the records of the Klan; that it was being deprived of this right if the Klan refused to localize its records for an inspection; and that it seemed that the only course left open in endeavoring to adjust the matter was through the advice of Harrison, the principal.

On October 28, 1927, the surety wrote to the Klan that the claim department was still on the trail of the principal, but without results so far as obtaining any worthwhile information was concerned, that the claim department was still working on the case, and that the Klan would be advised further at an early date. On December 17, 1927, the surety wrote to the Klan that it had been unable to get the principal either to admit or to deny the shortage, in whole or in part, that it was making an effort to obtain an itemized statement of the shortage, and that as the situation then stood it was unable to do anything further in connection with the claim in respect to settlement, other than through the advice of the principal. On December 19, 1927, the Klan wrote to the surety that the detailed statement covering the shortage which it forwarded at the time the claim was filed covered the matter thoroughly and was made up by a very capable man; that if it was not satisfied that this statement was correct, the Klan would be glad to furnish it with the names and ad-dresses of the secretaries of the local Klans affected by this shortage, which were only about fifteen or twenty; that it could sendits representative to these places and make a thorough investigation; and that if it did not care to do this, a check covering the claim would be appreciated. On January 6, 1928, the surety wrote the Klan to furnish it with the addresses of these secretaries, and that its early advice in this connection would help expedite the settlement. In January, 1928, the Klan sent its representative to about twenty towns and cities in Arizona, where its records affected by this loss were kept, and, in accordance with the demands of the surety, it assembled and localized its records and carried them to Phoenix, all of which was done at considerable expense to it. The Klan then wrote the surety on January 30, 1928, that the records were at its office in Phoenix, and that if the representative of the surety would call on the Klan official in that city, he would gladly co-operate with him in reviewing these records. On June 19, 1928, the Klan wrote to the surety to let it know the present status of the matter, and that sufficient time had elapsed for it to have completed the investigation. On June 22, 1928, the surety wrote to the Klan that it...