National Sur. Co. v. Columbia Nat. Bank of Kansas City

• Citation: 153 S.W.2d 364,348 Mo. 226
• Decision Date: 21 July 1941
• Docket Number: 37431
• Parties: National Surety Company, in liquidation, by Louis H. Pink, Superintendent of Insurance of the State of New York, and Statutory Liquidator, Appellant, v. Columbia National Bank of Kansas City, a Corporation
• Court: United States State Supreme Court of Missouri

153 S.W.2d 364

348 Mo. 226

National Surety Company, in liquidation, by Louis H. Pink, Superintendent of Insurance of the State of New York, and Statutory Liquidator, Appellant, v. Columbia National Bank of Kansas City, a Corporation

No. 37431

Supreme Court of Missouri

July 21, 1941

Appeal from Jackson Circuit Court; Hon. Emory H. Wright Judge.

Affirmed.

Henry L. Jost and Henry L. Jost, Jr., for National Surety Company.

(1) Defendant Columbia National Bank, by its endorsements guaranteed the checks were genuine, and that all prior endorsements to its own were genuine and valid, and that it had good right and title thereto, and agreed and became liable and obligated to repay and restore the money it obtained thereby and therefor, if it developed, as it did that its said guarantees and representations were not true. R. S. 1929, secs. 2693, 2694; R. S. 1939, secs. 3080, 3081; First Natl. Bank v. Produce Exchange Bank, 338 Mo. 91, 89 S.W.2d 33; Borserine v. Maryland Cas. Co., 112 F.2d 409; Scott v. First Natl. Bank, 343 Mo. 77, 119 S.W.2d 929; Am. Sash & Door Co. v. Commerce Trust Co., 332 Mo. 98, 56 S.W.2d 1034; Central Natl. Bank v. Drosten Jewelry Co., 203 Mo.App. 646, 220 S.W. 511. (2) All persons receiving said checks from the defendant bank, including Doherty's Bank, the Fidelity, and Doherty himself, were entitled to rely on defendant's endorsements and the guarantees inhering therein. Borserine v. Maryland Cas. Co., 112 F.2d 409; First Natl. Bank v. Produce Exchange Bank, 338 Mo. 91, 89 S.W.2d 33; Scott v. First Natl. Bank, 343 Mo. 77, 119 S.W.2d 929. (3) Payment of the checks on defendant bank's endorsements by Doherty's depository and paying bank, the Fidelity, whereon they were drawn, did not discharge defendant bank on its endorsements. Borserine v. Maryland Cas. Co., 112 F.2d 409; First Natl. Bank v. Produce Exchange Bank, 338 Mo. 91, 89 S.W.2d 33; Central Natl. Bank v. Drosten Jewelry Co., 203 Mo.App. 646, 220 S.W.2d 511; R. S. 1929, sec. 2652; R. S. 1939, sec. 3039; Jones Brothers v. Citizens Natl. Bank of Okmulgee, 233 P. 472; State ex rel. Ark. Penitentiary v. Bank of Commerce, 202 S.W. 834; First Natl. Bank v. Whitman, 94 U.S. 243, 24 L.Ed. 230; Home Ins. Co. v. Mercantile Trust Co., 284 S.W. 834, 219 Mo.App. 645; 7 Amer. Jur., p. 402, sec. 555. (4) National Surety Company, as indemnitor, under its bond to Henry L. Doherty and Co., on payment to its indemnitee, Doherty, of the amounts of said checks, became subrogated to all rights of action which he then had against the defendant, Columbia National Bank, on its written endorsements of said checks. R. S. 1929, sec. 2694; R. S. 1939, sec. 3081; Borserine v. Maryland Cas. Co., 112 F.2d 409; 27 Am. & Eng. Ency. of Law (2 Ed.), pp. 203, 229, 232, 262; Labeaume v. Sweeney, 17 Mo. 153; Benne v. Schnecko, 100 Mo. 250; Royal Indemnity Co. v. Poplar Bluff Trust Co., 223 Mo.App. 908, 20 S.W.2d 971; Heim Brewing Co. v. Jordan, 110 Mo.App. 286; Phelps v. Scott, 30 S.W.2d 71, 325 Mo. 711; Schuchman v. Roberts, 133 S.W.2d 1030; Grubnau v. Centennial Natl. Bank, 279 Pa. 501, 124 A. 142; Commercial Cas. Ins. Co. v. Capitol City Surety Co., 231 N.Y.S. 169; Natl. Bank in Detroit v. Fidelity & Deposit Co. of Md., 288 N.W. 325; Tarrant Am. Sav. Bank v. Smokeless Fuel Co., 172 So. 603; Maryland Cas. Co. v. Chase Natl. Bank, 275 N.Y.S. 311; Fallick v. Amalgamated Bank of New York, 249 N.Y.S. 238; Am. Exchange Natl. Bank v. Yorkville Bank, 204 N.Y.S. 621; 14 R. C. L., p. 1404, sec. 568. Plaintiff's right of subrogation arose by operation of law, independent of agreement between National and Doherty. 27 Am. & Eng. Ency. of Law (2 Ed.), 207; Iowa State Ins. Co. v. Mo. Southern Ry. Co., 9 S.W.2d 255. The written assignment from Doherty to National, under the terms of National's indemnity bonds, was confirmatory of plaintiff's right of subrogation, and provided and called for by the terms of National's indemnity agreement, and made National's right of subrogation to Doherty's existing rights of action against defendant endorser of said checks absolutely definite and certain. (Article in Am. Bar Assn. Journal, November, 1939, p. 933, entitled "Assignments for the Purpose of Avoiding Technical Rules of Subrogation," by Stevens T. Mason of the Detroit Bar. A case directly in point on this proposition is Grubnau v. Centennial Natl. Bank, 279 Pa. 501, 124 A. 142, l. c. 144, par. 6 of opinion.) (5) National's payment to its indemnitee, Doherty, under its bonds, wherefore it took over at said time the said checks with defendant's endorsements, and an assignment, did not discharge defendant bank from liability on its endorsements to Doherty, and to National, his subrogee and assignee. Grubnau v. Centennial Natl. Bank, 279 Pa. 501, 124 A. 142; Borserine v. Maryland Cas. Co., 112 F.2d 409; Labeaume v. Sweeney, 17 Mo. 153; Benne v. Schnecko, 100 Mo. 250; Heim Brewing Co. v. Jordan, 110 Mo.App. 286; Royal Indemnity Co. v. Poplar Bluff Trust Co., 223 Mo.App. 928, 20 S.W.2d 971; Phelps v. Scott, 325 Mo. 711, 30 S.W.2d 71; Schuchman v. Roberts, 133 S.W.2d 1030. (6) The criminal acts of Doherty's employee in the issuance of the checks at the place of his employment, and his procurement to said checks of the necessary counter-signatures, was not imputable to Doherty. Am. Sash & Door Co. v. Commerce Trust Co., 332 Mo. 98, 56 S.W.2d 1034; Scott v. First Natl. Bank, 343 Mo. 77, 119 S.W.2d 929; Burke Grain Co. v. St. Paul Mercury Indemnity Co., 94 F.2d 458. (7) The proximate cause of the loss to Doherty, and to National Surety Company, his indemnitor, subrogee and assignee, was the endorsement and cashing of said checks by defendant bank, and not the issuance of said checks in Doherty's place of business. Am. Sash & Door Co. v. Commerce Trust Co., 332 Mo. 98, 56 S.W.2d 1034; Scott v. First Natl. Bank, 343 Mo. 77; Borserine v. Maryland Cas. Co., 112 F.2d 409. (8) Doherty was not negligent in respect to his discovery of Beedle's dishonest acts and thefts. Scott v. First Natl. Bank, 343 Mo. 77, 119 S.W.2d 929; Am. Sash & Door Co. v. Commerce Trust Co., 56 S.W.2d 1040; First Natl. Bank v. Produce Exchange Bank, 338 Mo. 91, 89 S.W.2d 33. (9) Defendant bank was negligent in respect to accepting said checks from its crooked customer and depositor without any investigation or inquiry of or concerning him, and immediately obtaining money on said checks by its own endorsements and giving to Beedle, alias Jefferies, immediate and unrestricted credit therefor, and immediate withdrawal privileges thereof. (10) The equities between Doherty and defendant bank, were not equal, but preponderantly in favor of Doherty and against defendant bank. Grubnau v. Centennial Natl. Bank, 279 Pa. 501, 124 A. 142; Central Natl. Bank v. Drosten Jewelry Co., 203 Mo.App. 646, 220 S.W.2d 511; Scott v. First Natl. Bank, 343 Mo. 77, 119 S.W.2d 929. Equity will not aid defendant bank to escape the consequences of its own negligence. I Pomeroy's Eq. Jur. (4 Ed.), sec. 452; Bispham's Prin. of Eq. (9 Ed.), sec. 191; Picot v. Page, 26 Mo. 398. Equity will not aid defendant bank to escape liability from the obligations which it itself has assumed under and by virtue of its endorsements under the statutes of the State. R. S. 1929, secs. 2693, 2694; R. S. 1939, secs. 3080, 3081; Aetna Ins. Co. v. O'Malley, 342 Mo. 800; Borserine v. Maryland Cas. Co., 112 F.2d 409; First Natl. Bank v. Produce Exchange Bank, 338 Mo. 91, 89 S.W.2d 33; 11 Am. & Eng. Ency. of Law (2 Ed.), pp. 157, 186; Bates v. Dana, 133 S.W.2d 326, 345 Mo. 311; St. Louis, I. M. & S. Railroad Co. v. Stone Co., 90 Mo.App. 171. (11) There is no basis in this case and on this record for the application of election of remedies to Henry L. Doherty and Co., indemnities under the indemnity bonds of National Surety Company, Grubnau v. Centennial Natl. Bank, 279 Pa. 501, 124 A. 142; Borserine v. Maryland Cas. Co., 112 F.2d 409; Reynolds v. Union Station Bank, 198 Mo.App. 323; Mann v. Bank, 20 S.W.2d 502; Byrd v. Knighton, 7 Mo. 443; Brown v. Essig, 1 S.W.2d 855. (12) This suit and action being upon the written endorsements of defendant bank on the checks in question, and its written promise to pay money, under the Missouri Statutes (R. S. 1929, sec. 2694, R. S. 1939, sec. 3081), is therefore not barred for ten years, following the accrual of such liability of the defendant bank on its endorsements, and accordingly this action was timely brought. Home Ins. Co. v. Mercantile Trust Co., 284 S.W. 834, 219 Mo.App. 645; Borserine v. Maryland Cas. Co., 112 F.2d 409; Herweck v. Rhodes, 34 S.W.2d 32, 327 Mo. 29; R. S. 1929, sec. 861; R. S. 1939, sec. 1013.

Paul R. Stinson and Dick H. Woods for respondent;

Ryland, Stinson, Mag & Thomson of counsel.

(1) This case is governed by equitable principles, and the assignment to plaintiff neither added to nor took from plaintiff's rights. When it paid Doherty & Company, if any right arose in its favor, it was by virtue of the application of the equitable doctrine of subrogation. Lowenstein v. Ins. Co., 227 Mo. 100, 127 S.W. 72; Memphis, etc., Railroad Co. v. Dow, 120 U.S. 287, 30 L.Ed. 595. (2) Plaintiff's subrogation claims must fail since it does not appear that (a) its equities are superior to those of the bank; or (b) that the bank in good conscience should ultimately bear the loss and exonerate plaintiff. Plate Glass Underwriter's Mut. Ins. Co. v. Realty Co., 219 Mo.App. 186, 269 S.W. 659; New York Title & Mtg. Co. v. First Natl. Bank of K. C., 51 F.2d 485; Washington Mechanics' Sav. Bank v. District T. Ins Co., 65 F.2d 827; Meyers v. Bank of America Natl. T. & Sav. Assn., 77 P.2d 1084; American Bonding Co. v. Bank, 133 P. 367, 46 L. R. A. (N. S.) 557; Baker v. American Surety Co. of N. Y., 159 N.W. 1044; Sheldon on Subrogation (2 Ed.), p. 15; 2 Story's Equity Juris. (14 Ed.), sec....