Rader v. Manufacturers Cas. Ins. Co. of Philadelphia

• Decision Date: 05 March 1957
• Docket Number: Docket 24242.,No. 122,122
• Citation: 242 F.2d 419
• Parties: Frieda RADER and Paul Rader, Plaintiffs-Appellants, v. MANUFACTURERS CASUALTY INSURANCE COMPANY OF PHILADELPHIA, PA., Fred Flatow, Abraham Newman and Herman Cowen, individually and as co-partners doing business under the firm name and style of Newman & Cowen, and Samuel Salerno, Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

242 F.2d 419 (1957)

Frieda RADER and Paul Rader, Plaintiffs-Appellants, v. MANUFACTURERS CASUALTY INSURANCE COMPANY OF PHILADELPHIA, PA., Fred Flatow, Abraham Newman and Herman Cowen, individually and as co-partners doing business under the firm name and style of Newman & Cowen, and Samuel Salerno, Defendants-Appellees.

No. 122, Docket 24242.

United States Court of Appeals Second Circuit.

Argued January 14, 1957.

Decided March 5, 1957.

Abraham H. Simon, Simon & Brand, Brooklyn, N. Y. (Richard S. Lane, New York City, of counsel), for plaintiffs-appellants.

Edward H. Levine and Hyman Herman, New York City (Vernon C. Rossner, New York City, of counsel), for defendants-appellees.

Before MEDINA and HINCKS, Circuit Judges, and LEIBELL, District Judge.

LEIBELL, District Judge.

This is an appeal by plaintiffs from an order of the District Court, dated April 16, 1956, which denied plaintiffs' motion for a preliminary injunction, and granted defendants' motion to dismiss the complaint on the ground of res judicata.

On March 23, 1956, plaintiffs filed their complaint in this Court. Therein they allege that they are seeking relief in equity and in law against exactions being made against them in demands for payment of $50,000, arising out of the forfeiture of two bail bonds of the defendant, Manufacturers Casualty Insurance Company of Philadelphia, Penna., hereinafter referred to as the Surety Company, in this Court. Other defendants named in this action are Fred Flatow; Abraham Newman and Herman Cowen, individually and as co-partners doing business under the name of Newman & Cowen; and Samuel Salerno.

Plaintiffs allege that a first bail bond of $50,000 was given by the Surety Company on December 1, 1949, to obtain the release of George Faucella, who was held in confinement under an indictment of this Court, dated November 18, 1949; that thereafter, a second bail bond of $50,000 was given by the Surety Company which, by leave of the Court, rewrote the first bail bond to cover a second indictment involving George Faucella, dated December 16, 1949. The prisoner was thereupon released on bail.

It is further alleged that on February 6, 1950, the criminal George Faucella failed to appear for trial, whereupon both bail bonds were forfeited. Faucella has not since been located.

Plaintiffs contend that in order that the relief sought may be effective, a proceeding comparable to the former writ of Scire Facias be permitted under an order to show cause containing stays of exactions during the pendency of this action.

Plaintiffs allege that they permitted themselves to become indemnitors to the Surety Company for the first bail bond of December 1, 1949, by signing a bail bond application, an indemnity agreement, and a confession of judgment in the amount of $50,000, on a condition precedent that Peter Faucella, a brother of the prisoner there present, and a cousin also, become indemnitors, a condition which was not fulfilled. It is alleged that such condition was imposed in the presence and hearing of the individual named defendants, all of whom are under agreement with the Surety Company as indemnitors to pay individually the loss, if any, sustained by forfeiture of the bail bond then applied for and given. Neither the brother nor the cousin became indemnitors.

Plaintiffs allege that after the forfeiture of the bail, proceedings were had in this Court at the instance of the defendant Surety Company, to avoid the forfeiture, claiming that the prisoner was being forceably detained against his will or had been murdered. It was further urged that the sum of $50,000 be retained by the Clerk of this Court, pending the outcome of the above contentions made by the Surety Company.

It is alleged that plaintiffs were not parties to these proceedings and furthermore, that the rewriting of the December 1, 1949 bail bond so as to cover the second indictment was not authorized; and that Paragraph "Sixth" of the indemnity agreement did not warrant such action.

Paragraph Sixth of the Indemnity Agreement of November 30, 1949, provided:

"That no act or omission of the Company in modifying, amending, limiting, or extending the instrument so executed by the Company shall in any wise affect our liability hereunder, nor shall we or any of us be released from this obligation by reason thereof; and we agree that the Company may alter, change or modify, amend, limit or extend said bond or undertaking and may execute renewals thereof, or other and new obligations in its place or in lieu thereof, and without notice to us, notice being expressly waived, and in any such case, we and each of us shall be liable to the Company as fully and to the same extent on account of any such altered, changed, modified, amended, limited or extended instrument, or such renewal thereof, or other or new obligations in its place or in lieu thereof, whenever and as often as made, as fully as if such instrument were described at length herein."

Plaintiffs next allege evidentiary matter tending to show or indicate, that the rewriting of the first bail bond to cover both indictments on the part of the defendant "was reckless, improvident and a failure to use ordinary prudence and reasonable care," and that the resultant loss should be chargeable to the defendants.

It is further alleged that on December 5, 1949, before any default had taken place, the defendant, Fred Flatow, as attorney in fact of the Surety Company, entered judgment against the plaintiffs for $50,000, which was based upon their "confession of judgment" dated December 1, 1949. Plaintiffs allege that said judgment for $50,000 was rendered unenforceable on December 16, 1949 when the criminal appeared before this Court and pleaded to the second indictment, and by the rewriting of the bail bond to cover both indictments without the knowledge and consent of plaintiffs; and that therefore the judgment should be vacated.

It is next alleged that the defendants are unjustly retaining plaintiffs' securities and unjustly exercising control over said properties. The securities consist of deeds to plaintiffs' real estate located at 312 East 51st Street and 144-6 East 83rd Street, and two life insurance policies of $5,000 each on the lives of plaintiffs, assignments of which are also withheld.

The complaint also alleges that after this Court had ordered the forfeiture of the two bail bonds the defendants entered into a conspiracy and scheme to fasten the loss on plaintiffs and in consummation of such conspiracy did commit certain acts and did offer false testimony to the Courts and did submit false documents in their planned defense against plaintiffs.

In support of this charge plaintiffs allege that in prior state court actions, the defendants, particularly Fred Flatow, gave false and misleading testimony; to wit, urging before the State Courts that plaintiffs' rights and remedies had been determined in the forfeiture proceedings in this Court; that the defendant Surety Company had paid the loss, it now appearing that the defendants, Newman and Cowen, paid the loss; that defendant Flatow falsely swore that the bail bond application and the indemnity agreement were signed and acknowledged by plaintiffs on November 30, 1949, when in truth and in fact such instruments were signed on December 1, 1949, at the same time the confession of judgment and the deeds to plaintiffs' real estate were signed by plaintiffs, and at the same time the other indemnitor, Dorothy Merritt, then present, also signed as co-indemnitor.

The complaint herein also alleges that in further consummation of the conspiracy, the defendant Flatow in his capacity of attorney at law and as attorney in fact of the Surety Company prepared an agreement dated June 12, 1952, wherein the Surety Company is named as the creditor and possessor of the above judgment, well knowing that the Surety Company was not then rightfully a claimant against plaintiffs. Plaintiffs allege that they signed such instrument under duress and in ignorance of the fact that under the agreements existing between the individual defendants and the Surety Company, each was bound to pay the loss and each was required to contribute towards the payment of the same.¹

It is alleged that in further consummation of the conspiracy the defendant Flatow caused an assignment of said judgment to be executed by the defendant Surety Company to the defendants, Newman and Cowen, purportedly dated June 16, 1952, "for the purpose of giving verity to the assertion in the aforesaid agreement of June 12, 1952."

Plaintiffs' prayer for relief is that it be decreed that no contract of indemnity exists at all; that if any agreement exists it should be confined to the first indictment and none other; that the inclusion of paragraph "Sixth" in the indemnity agreement did not in fact constitute a part of the contract; that the indemnity agreement did not grant power to defendants to rewrite the bail bond of December 1, 1949 to cover also the indictment of December 16, 1949; that the judgment entered on December 5, 1949, in the amount of $50,000 be held unenforceable; that the agreement of June 12, 1952, be set aside for being procured by duress; that the plaintiffs be entitled to the return of their deeds and their policies of insurance; that any instruments of transfer in the hands of the defendants be declared void; and finally that defendants be enjoined and restrained from in any manner interfering with and disposing of the assets or property of the plaintiffs, and from enforcing collection from plaintiffs under the judgment dated December 5, 1949, except in this Court.

Annexed to the complaint are a bail bond application signed by the plaintiffs, dated December 1, 1949, containing plaintiffs' financial statement; the indemnity agreement signed by plaintiffs on November 30, 1949; a confession of judgment signed by plaintiffs on December 1, 1949, authorizing entry of judgment for the amount of...