United States v. National Surety Corporation

• Decision Date: 10 May 1939
• Docket Number: No. 11347.,11347.
• Citation: 103 F.2d 450
• Parties: UNITED STATES for Use and Benefit of MIDLAND LOAN FINANCE CO. v. NATIONAL SURETY CORPORATION et al.
• Court: U.S. Court of Appeals — Eighth Circuit

103 F.2d 450 (1939)

UNITED STATES for Use and Benefit of MIDLAND LOAN FINANCE CO. v. NATIONAL SURETY CORPORATION et al.

No. 11347.

Circuit Court of Appeals, Eighth Circuit.

April 21, 1939.

Rehearing Denied May 10, 1939.

Benedict Deinard, of Minneapolis, Minn. (George B. Leonard, of Minneapolis, Minn., on the brief), for appellant.

Pierce Butler, Jr., of St. Paul, Minn. (Michael J. Doherty and Robert O. Sullivan, both of St. Paul, Minn., on the brief), for appellee National Surety Corporation.

George T. Havel, of Le Center, Minn., for appellee Patrick J. Malone.

Before SANBORN, THOMAS, and VAN VALKENBURGH, Circuit Judges.

THOMAS, Circuit Judge.

On this appeal a single question of law is presented. It is: May a private sender of mail through the United States mails maintain an action, without the consent of the government, upon the official bond of an acting postmaster to recover consequential damages resulting from the delivery of mail to one other than the addressee without the written consent of the sender?

The lower court in an able and exhaustive opinion held that such an action can not be maintained. The motion of the surety to dismiss the complaint was sustained on the grounds that the United States is the sole party in interest entitled to sue or to recover on the bond and that the plaintiff, not having obtained the government's consent so to do, can not maintain an action in the name of the United States. See United States, for Use and Benefit of Midland Finance Co. v. National Surety Corporation et al., D.C., 23 F.Supp. 411. The court also dismissed the action against Malone, the principal on the bond, for lack, in the absence of the surety as a party, of the requisite diversity of citizenship to confer jurisdiction. The plaintiff assigns error directed to both rulings, but the argument in this court is addressed exclusively to the alleged errors relating to the sustaining of the surety's motion.

The material facts are not in dispute. The appellant, Midland Loan Finance Company, brought the action for its use and benefit in the name of the United States against the principal and surety to recover the penalty of the bond in the sum of $16,000. The total alleged loss was $34,997.03. The consent of the United States to bring the suit was not obtained. The question presented was properly saved in the lower court.

The appellant is a corporation engaged in the automobile finance business at Minneapolis, Minnesota. It purchases contracts of sale from automobile dealers. Thomas Hunting was such a dealer at Montgomery, Minnesota, where the defendant Malone was acting postmaster. Hunting sold to the appellant conditional sales contracts including the installment notes of the purchasers. In submitting contracts and notes to appellant, Hunting gave credit references. Appellant addressed letters to the makers of the contracts and to the credit references at Montgomery. At the request of Hunting the postmaster delivered to him substantially all of the letters received at Montgomery in appellant's envelopes. Hunting then sold to appellant spurious contracts made in the name of fictitious persons with fictitious credit references. Since he received the mail addressed to such fictitious names he was enabled to defraud the appellant of the moneys for which damage is sought in this action. It is not claimed that any of the lost funds came into the possession of the acting postmaster or that he had any knowledge of the fraud that was being perpetrated by Hunting. The appellant not only did not consent to the delivery of its letters to Hunting, but it was ignorant of the fact that they were not delivered to the persons addressed.

The bond, given by the defendants as principal and surety, bound them "to pay to the United States of America the sum of Sixteen Thousand dollars" on condition that if Malone "shall faithfully discharge all duties and trusts imposed on him as acting postmaster either by law or by the regulations of the Post Office Department, and shall perform all duties as fiscal agent of the Government imposed on him by law or by regulation of the Treasury Department made in conformity with law * * then this obligation shall be void; otherwise, of force."

The bond was made and delivered pursuant to section 34, Title 39 U.S.C.A., which provides: "Every postmaster, before entering upon the duties of his office, shall give bond, with good and approved security, and in such penalty as the Postmaster General shall deem sufficient, conditioned for the faithful discharge of all duties and trusts imposed on him either by law or the rules and regulations of the department."

Other pertinent statutes provide:

"All bonds taken and contracts entered into by the Post Office Department shall be made to and with the United States of America." 5 U.S.C.A. § 377.

"All suits * * * arising under the postal laws, shall be brought in the name of the United States." 28 U.S.C.A. § 732.

The Postal Laws and Regulations, Edition of 1932, provide:

"Section 777. 1. Mail matter should be delivered to the person addressed or in accordance with his written order.

"2. When a person requests delivery to him of the mail of another, claiming that that addressee has verbally given him authority to receive it, the postmaster, if he doubts the authority, may require it to be in writing, signed and filed in his office."

Section 816 provides for recovery of loss due to wrongful delivery from the postal employee responsible therefor by the Chief Inspector by proceedings in the department, and that "7. All amounts recovered under the provisions of this section shall be paid to the United States and to the senders or owners of the mail as their interests shall appear."

It will be observed that this is not an action against the postmaster sounding in tort nor one against the United States on the theory of respondent superior. It is an action on a bond by a stranger to the contract brought without the consent of the obligee. If it be assumed that the postmaster breached the bond by failing to require Hunting to file with him the written order of the addressees before delivering the letters in accordance with the provisions of section 777 of the Postal Regulations, it does not follow that appellant is entitled to maintain the action. No federal statute authorizes such procedure; and it is the general rule that "a third person cannot sue for the breach of a contract to which he is a stranger unless he is in privity with the parties and is therein given a direct interest." German Alliance Insurance Co. v. Home Water Co., 226 U.S. 220, 234, 33 S.Ct. 32, 57 L.Ed. 195, 42 L. R.A.,N.S., 1000. This...