St. Paul Mercury Indem. Co. v. Nyce
Citation | 41 N.W.2d 682,241 Iowa 550 |
Decision Date | 07 March 1950 |
Docket Number | No. 47569,47569 |
Parties | ST. PAUL MERCURY INDEMNITY CO. et al. v. NYCE et al. |
Court | Iowa Supreme Court |
Boardman, Cartwright & Druker, of Marshalltown, and Oral S. Swift, of Des Moines, for appellants.
Haupert & Robertson, of Marshalltown, for appellees.
For several years prior to September 10, 1946, Earl H. Nyce was cashier, director and teller of the Fidelity Savings Bank, a state bank, of Marshalltown, Iowa. Shortly before the opening of the bank in the forenoon of that day, just after he had come from the post office with the mail, and while attending to his bank duties at his cage, he collapsed and died. One of his duties was to have charge of, and the responsibility for, the cash vault of the bank. This vault was a separate compartment of the built-in vault, shut off from the other compartments by bars and a locked door. The cash was kept in three safes each with a separate time-lock in this separate compartment. Nyce carried the keys to the cash vault and wound and set the time-locks. He had charge of distributing the cash to the cages, and attending to the placing of the cash in the vault at the close of each day's business. Two of the cash safes were opened every day, but the Mosler safe was set for three days, since it was used entirely as reserve.
An examining committee from the board of directors counted the cash in the vault four times a year. The last count before the death of Nyce was in June, 1946. Examiners of the State Banking Department counted the cash annually. The last time was in August, 1945. At no count was a shortage found.
After the death of Nyce and on the same day, all the cash was counted except that in the Mosler safe, on which the time-lock was set for September 12, 1946, on which day the cash in it was counted. The shortage was found to be $78,504.27. To this was added an item of $250, being a check which Nyce as treasurer of the Marshalltown Recreation Club had drawn payable to C. E. Wicklund. Without the latter's endorsement the check had been cashed, but not by Wicklund, and he stated he had received no money on the check. Adding this item to the cash shortage made the total defalcation, the sum of $78,754.27.
The plaintiffs are both corporate surety companies, engaged in the business of indemnifying banks against loss through any dishonest, fraudulent, or criminal acts of their officers and employees. The Mercury Indemnity Company, by its policy issued to the Fidelity Savings Bank, insured it against such losses up to $50,000. The National Surety Corporation, by its policy for $100,000, insured against such losses, but only in such amount as exceeded $50,000. In other words the first named company had the primary coverage of $50,000, and the second carried only the coverage in excess of $50,000. Having paid the loss to the insured bank as provided in their respective policies, the plaintiffs make their claims against the estate of the alleged defaulter, under the principle of subrogation, and as subrogees of the bank, with respect to any and all rights it may have held against the deceased and his estate, because of the defalcation.
Under neither policy did the bank have what is known as 'misplacement, mysterious, unexplainable, disappearance coverage.' It had coverage against loss because of dishonesty of employees--things directly chargeable to employees of the bank. Misplacement, mysterious, unexplainable, disappearance coverage is a type which a bank can buy in connection with that bond which insures against loss that is not traceable to dishonesty of the employees or larceny from the outside or burglary. The absence of this particular coverage is strongly urged by plaintiffs as a cause for their delay in filing their claims against the Nyce estate. We will refer to it later.
On September 20, 1946, the bank notified each surety company by registered mail of the loss. Each promptly sent a lawyer to Marshalltown to investigate. Mr. Meagher, of St. Paul, came for the Mercury Co., and Mr. Schmidt, from Chicago, for the National Co. The first named, since he represented the company carrying the primary liability, assumed the lead and the burden in the investigation. The bank gave them access to all of their books, records, facilities, and information. They were there three or four days on the first trip. They questioned the officers of the bank and the nineteen employees, they talked to Mrs. Nyce, they examined the estate records of Nyce's parents. They later made several trips to Marshalltown. They called in the aid of the sheriff, and the aid of State Bureau of Criminal Investigation. Trips were made to Des Moines to counsel with the chief of the Bureau, and the services of some of its investigators were procured. They sought the aid of the Federal Bureau of Investigation. Dr. Keeler, of Chicago, of lie-detector fame, came to Marshalltown with his mechanical apparatus, and all of the bank employees submitted to the test therewith. One of them admitted that he had embezzled some of the bank's money and that he was the 'pay off' man in some black market corn operation. This set the bonding company investigators off on a new trail on which much time was spent, but the record does not disclose what, if any, information or facts were discovered. In fact the record does not reveal what became of the missing cash or who took or received any of it. The investigation went on for months. Dr. Keeler made a report to the lawyer-investigators of his examinations of all the officers and employees of the bank. The officers of the bank took no active part in the investigation, but gave such aid and information as they could when called upon.
The investigators spent much time in trying to ascertain whether the money 'mysteriously and unexplainably disappeared', in which event their companies would not be liable, or whether it was stolen by some one connected with the bank. In an amendment of April 29, 1949, to the application to set aside the order closing the estate, the surety companies state their problem, thus:
On or about December 9, 1946, the bank sent written proof and statements of its claim to each surety company, which stated that E. H. Nyce was in control of the cash vault and safes therein. A vice-president of the bank testified: * * *.
Mr. Meagher, as a witness for the Mercury Indemnity Co., testified at length of his investigations. Everytime he came to Marshalltown he went by way of Des Moines and talked with Mr. Nebergall and Dell Murray of the Bureau of Criminal Investigation. The investigation was still going on the last time he was there and talked with them on May 6, 1947. He testified:
'
* * *. (Italics ours.)
This witness testified on April 28, 1949, and so far as the record shows 'they hadn't found anything' up to that date.
The National Surety Corporation...
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