State ex rel. Stone v. United States Fidelity & Guaranty Co.

• Decision Date: 03 May 1948
• Docket Number: 17696.
• Citation: 78 N.E.2d 881,119 Ind.App. 63
• Court: Indiana Appellate Court
• Parties: STATE ex rel. STONE v. UNITED STATES FIDELITY & GUARANTY CO.

78 N.E.2d 881

119 Ind.App. 63

STATE ex rel. STONE v. UNITED STATES FIDELITY & GUARANTY CO.

No. 17696.

Appellate Court of Indiana, in Banc.

May 3, 1948

Rehearing Denied June 9, 1948.

On Petition for Rehearing.

Bachelder, Bachelder & Fife and H. K Bachelder, all of Indianapolis, and Otis E. Gulley, of Danville, for appellant.

R. F. Davidson, A. J. Stevenson, and Stevenson & Kendall, all of Danville, for appellee.

DRAPER Chief Judge.

This is an appeal from a judgment of the Hendricks Circuit Court denying recovery from the surety on a bond given by one George N. Montgomery, as principal, and United States Fidelity and Guaranty Company, as surety, in a certain receivership proceeding.

The evidence consists of a paragraphed stipulation filed by each party, each party reserving to himself, however, the right to object to any portion of the stipulation filed by his opponent, on the sole ground that the same is not pertinent to the issues.

By the stipulations it appears that, prior to April 1926, the National Automobile Insurance Association was an association of individuals and companies exchanging reciprocal or interinsurance contracts in the state of Indiana under the provisions of § 39-2801 et seq., Burns' 1933.

In April 1926 a suit was filed in the Superior Court of Marion County seeking a money judgment and the appointment of a receiver for said association. A receiver was appointed, but he was shortly discharged and was succeeded on June 24, 1926 by George N. Montgomery. On the same day the bond above referred to was executed, filed and approved pursuant to the provisions of § 3-2605, Burns' 1933. Omiting caption, signatures and approval, it reads as follows:

'Know All Men by These Presents, that we George N. Montgomery as principal, and United States Fidelity & Guaranty Company, as sureties, are held and bound to the Clerk of Marion Circuit Court in the penal sum of Fifty Thousand & no/100 ($50,000.00) Dollars, for the payment of which well and truly to be made, without relief from valuation laws, we bind ourselves, our heirs, executors, and administrators jointly and severally firmly by these presents.

'Sealed and dated, this 24th day of June, 1926.

'The Condition of This Obligation is Such, that whereas the above named and bounden George N. Montgomery has been duly appointed by the Judge of Marion Superior Court Room 4 in the State of Indiana, Receiver in a cause pending in said Court wherein Thomas E. Clifford plaintiff, and National Auto Insurance Association defendant, being Cause numbered 35457 on the Docket of said Court.

'Now if the said George N. Montgomery shall faithfully discharge his duties as such Receiver in said Action and obey the orders of said Court and the Judge thereof, then said obligation shall be void, otherwise to remain in full force and effect.'

While acting as such receiver, Montgomery received assets of the subscribers at said association valued at about $30,000, all of which were appropriated to the use of such receivership, and none of which were appropriated to his own use.

On February 16, 1927, this court held in Turner v. Henshaw, 86 Ind.App. 565, 155 N.E. 222, that the appointment of a receiver for such as the National Automobile Insurance Association was wholly void, since such a so-called association of individuals and companies was not a corporation or legal entity of any kind, but was merely the name of a place where subscribers exchanged contracts of indemnity through their attorney-in-fact.

Closely following that decision, and on April 4, 1927, one Fae Patrick (appellant's predecessor, now dead) was appointed and qualified as receiver of the assets, property and funds of the subscribers of National Automobile Insurance Association by the Vanderburgh Superior Court. ^[*] He unsuccessfully demanded from Montgomery the money and property of said subscribers in the latter's hands, and later, on June 2, 1927, filed suit therefor in the Marion Circuit Court, making Montgomery a party defendant in his individual capacity and as 'purported receiver' for said association. During the pendency of that suit Montgomery died and his administrator was substituted as party defendant. That suit was venued to and tried in the Shelby Circuit Court and on March 4, 1931, resulted in a judgment against the administrator for $35,206.03. That judgment was affirmed by this court in Givan v. Patrick, 1933, 96 Ind.App. App. 189, 184 N.E. 823.

The surety executed the bond in question for hire. It became aware of the pendency of the suit which resulted in the judgment in the Shelby Circuit Court, but was not a party thereto and made no defense thereof. None of the money in question found its way into Montgomery's estate. The estate was insolvent and the judgment against Montgomery's administrator remains wholly unpaid. That judgment, with interest, is the basis of this action.

The foregoing appears by stipulations to which no objection was made by either party. We now condense appellee's fifth paragraph of stipulation with some particularity because its admissibility was objected to by the appellant on the ground that the evidentiary matters disclosed therein had been merged in the judgment rendered in the Shelby Circuit Court; were not properly before the court for determination in this case; and thus, had no bearing upon the issues presented below.

In said fifth paragraph the following facts are made to appear. Subsequent to the filing of said bond Montgomery received from his predecessor approximately $24,500 together with furniture and equipment constituting the property of the subscribers at said association. During the administration of said trust he received, as such receiver, certain interest on investments and collected from the subscribers at said association premium assessments totalling about $3500, which amount was voluntarily paid by said subscribers to said Montgomery as receiver. The Underwriters Exchange Incorporated, as attorney-in-fact for the subscribers at said association, was present in court when Montgomery's predecessor was appointed as receiver, and made no objection to said appointment, and after said appointment the said attorney-in-fact voluntarily turned over to Montgomery's predecessor all the assets and property in its possession belonging to said subscribers. On September 27, 1927, Montgomery filed his final report as receiver which showed receipts of $28,688.73 and expenditures of $21,296.47, all of which sums were expended under and pursuant to the order of court in which such proceedings were pending. This report was accompanied by Montgomery's resignation. The court thereupon made a final allowance of fees to Montgomery and his attorney, and directed that the balance in his hands be paid to the clerk of the court, and gave ten days within which exceptions might be filed. Eleven days later, and on October 8, 1927, the attorney-in-fact filed exceptions to Montgomery's report in which it alleged that his appointment was null and void, and asked that the assets received by him totalling $28,688.73 be ordered restored to the attorney-in-fact. On motion of Montgomery and on its own motion the court struck out said exceptions and entered a judgment approving said report, and discharging Montgomery from further duties and from his bond and trust. This ruling was appealed to this court and the appeal was dismissed with opinion by this court in Underwriters Exchange, Inc., v. Montgomery, Rec., 1930, 91 Ind.App. 24, 169 N.E. 54.

None of the facts heretofore stated, including those contained in appellee's fifth paragraph of stipulation are contradicted. Those stipulated in appellee's fifth paragraph were substantially those alleged in appellee's third, fourth and fifth paragraphs of answer to appellant's complaint, to which paragraphs of answer the appellant addressed a demurrer which was overruled. The correctness of that ruling is the first question presented by appellant's assignment of error. Appellant also assigns error in the overruling of his motion for new trial, which asserts the insufficiency of the evidence and the illegality of the decision and further asserts error in the admission of the evidence contained in appellee's fifth paragraph of stipulation.

We think the ruling on demurrer has become immaterial. Any error in overruling the demurrer would be harmless, since all of the facts were stipulated, and a correct declaration or statement of the law as applied to the relevant facts stipulated can be made without regard to the sufficiency of the pleadings. The situation is much like that obtaining where the facts have been specially found, and the same rule applies. Lind v. Douglass, 1925, 83 Ind.App. 380, 148 N.E. 497.

Of the facts stipulated in appellee's fifth paragraph of stipulation, the appellee here seems to urge, in defense of the judgment below, only those which show that the court of Montgomery's appointment approved his acts and conduct as receiver, and discharged him from his bond and trust, it being appellee's contention that by reason thereof the appellee was completely released from any and all liability on the bond. The appellant, on the other hand, asserts the inadmissibility of that evidence and further asserts that such defense is not now available to the surety, since the latter is, in the absence of fraud, bound by all matters which were or could have been adjudicated in the prior action against the principal, of which action the surety had knowledge but which action it did not choose to defend.

Assuming the admissibility of that evidence for the purpose of quickly reaching the substantial question involved, we are of the opinion that the order referred to did not constitute a defense. Both parties...