Willis v. Fidelity & Deposit Co. of Md.
| Decision Date | 21 January 1952 |
| Docket Number | Gen. No. 45391 |
| Citation | 345 Ill.App. 373,103 N.E.2d 513 |
| Parties | WILLIS v. FIDELITY & DEPOSIT CO. OF MARYLAND et al. FIDELITY & DEPOSIT CO. OF MARYLAND v. WILLIS. |
| Court | United States Appellate Court of Illinois |
Dent, Hampton & Doten, Chicago, for appellant.
Hirsch E. Soble, Thomas H. Fitzgerald, Chicago, for appellee.
Broadway-Clark Currency Exchange, Inc., was licensed by the Auditor of Public Accounts on February 6, 1945, to operate a community currency exchange at 2805 North Clark Street, Chicago. The exchange was operated until September 2, 1949, when it was closed by the Auditor. On September 12, 1949 the Auditor determined that the exchange was insolvent and that its business should be liquidated, appointed Robert E. Willis, as Receiver, and directed the Attorney General to file a complaint in the Circuit Court of Cook County for its liquidation and dissolution and for an injunction restraining it from continuing operations. The Attorney General filed the complaint. On March 4, 1950, the Receiver filed a complaint in the Circuit Court of Cook County against Fidelity and Deposit Company of Maryland, alleging that it issued to the currency exchange its blanket bond, insuring the exchange against loss by burglary, larceny or embezzlement up to $10,000 and that the exchange sustained losses totaling $5,455.48 by larceny or embezzlement for which the surety is liable, together with reasonable attorneys' fees, interest and costs. Defendant's answer required plaintiff to prove that the exchange sustained the losses alleged and that such losses were of the type covered by the bond. Defendant, by an amended counterclaim, sought to set off its claim for $6,236.86 against the exchange, predicated upon three grounds for recovery. On motion of plaintiff the court struck the amended counterclaim. Defendant elected to stand on its amended counterclaim and it was dismissed. Defendant, appealing, asks that the order striking and dismissing its amended counterclaim be reversed and that the cause be remanded for further proceedings.
Count 1 of the amended counterclaim alleges that on December 5, 1947, the exchange executed and delivered to the surety a written application, requesting it to act as surety on the $7,000 annual license bond required of the exchange for the year 1948 by § 5 of an Act in relation to the regulation of community currency exchanges, (Par. 35, Ch. 16 1/2, Ill.Rev.Stat. 1951), which application contained agreements on the part of the exchange to indemnify the surety against 'all loss, liability, costs, damages, attorney fees and expenses whatsoever, which the Company (surety) may sustain or incur by reason of executing said bond, in making any investigation thereof, in prosecuting or defending any action which may be brought in connection therewith, in obtaining a release therefrom, and in enforcing any of the agreements therein contained, * * * that nothing herein contained shall be construed to waive or abridge any right or remedy which the Company might have if this instrument were not executed * * *, that the above agreements shall bind the undersigned and the heirs, executors, administrators, successors and assigns of the undersigned.' The amended counterclaim further alleges that on December 5, 1947, the surety, in consideration of such promises and agreements, executed and delivered, as surety for the currency exchange, and the latter, as principal, executed and delivered to the Auditor of Public Accounts as obligee, a $7,000 currency exchange bond dated January 1, 1948, conditioned, among other things, upon the payment by the exchange of all liability incurred upon any money orders issued by it, of all liability for any sum due to the payee of any check, draft or money order left with it for collection, and of all liability incurred by it in connection with the acceptance of funds for the payment of local utility bills.
The counterclaim further averred that on November 29, 1948, the exchange executed and delivered to the surety another written application requesting the surety to act on its annual license bond for the year 1949, which application contained identical agreements on the part of the exchange as were contained in the application for 1948; that on December 1, 1948, the surety, in consideration of such promises, executed as surety, and the currency exchange executed as principal and delivered to the State Auditor as obligee, a new $7,000 currency exchange license bond, effective for the year 1949, containing the same conditions as the 1948 license bond. Copies of the exchange's applications for the annual license bonds are attached as exhibits. The counterclaim further stated that on or prior to September 1, 1949, the exchange became and was at all times thereafter insolvent; that it breached and failed to keep and perform the conditions of its annual license bonds for each of the years 1948 and 1949 in that the exchange failed and was unable to pay divers money orders purchased from and issued by it and the amount of its liability on divers checks, drafts and money orders left with it for collection aggregating $5,399.14, listed on an exhibit; that the exchange failed and was unable to pay its liability totaling $87.72, as shown on another exhibit, in connection with its acceptance of funds for the payment of public utility bills; that on December 29, 1949, an order was entered in the receivership proceeding, allowing as claims against the exchange 'and the receivership thereof' all of the claims listed on the exhibits attached to the counterclaim; that the surety became and was liable, on and prior to September 1, 1949, under the two currency exchange license bonds it executed as surety for the exchange to the Auditor for the sum of $5,399.14 and $87.72, respectively, and the exchange under and by virtue of the agreements in the applications became and was obligated to indemnify the surety on and prior to September 1, 1949, against all loss, liability, costs, damages, attorney's fees and expenses whatsoever which the surety sustained or incurred by reason of executing and delivering the currency exchange license bonds; that on January 17, 1950, the surety employed a law firm to investigate, determine and pay its liability, if any, under the currency exchange license bonds; that the reasonable value of the services so performed exceeds the sum of $750, which the surety has incurred and will be obligated to pay; and that on January 23, 1950, the surety paid $5,399.14 and on March 3, 1950, paid the further sum of $87.72 to the Auditor for the use and benefit of the creditors of the exchange whose claims were allowed in the receivership proceeding and are listed on the exhibits attached to the counterclaim, in payment of the surety's liability under both currency exchange license bonds. Count 2 relies on the allegations of Count 1 and states further that by reason of the payments by the surety and by reason of the suretyship relation between the exchange and the surety the exchange became and was obligated to indemnify the surety on and prior to September 1, 1949, against all loss, liability, costs, damages, attorneys' fees and expenses whatsoever, which the surety sustained or incurred by reason of having signed and delivered the currency exchange license bonds; that the surety, upon making payments to the State Auditor, became subrogated to and is now the actual bona fide subrogee of the allowed claims against the exchange and its Receiver, listed on the exhibits attached to the counterclaim; that on both counts counterclaimant prays judgment against the Receiver for $6,236.96, together with interest and costs of suit; that there be set off the respective claims of the Receiver alleged in his complaint and that of the surety alleged in the amended counterclaim; and that the surety have judgment in its favor and costs of suit.
The Community Currency Exchange Act was approved June 30, 1943, and amended in 1947, 1949 and 1951. Section 5 states that before any license shall be issued to a community currency exchange the applicant shall file annually with and have approved by the Auditor a surety bond in the sum of $3,000, or a larger sum, depending on the average amount of liability during the previous year, such bond to run to the State of Illinois, for the benefit of any creditors of the exchange for any liability incurred on any money orders issued by the exchange and any liability for any sums due to any payee of any check, draft or money order left with the exchange for collection, and for any penalties that may be imposed or for any liability incurred by the exchange in connection with its acceptance for payment of local utility bills. Section 6 requires every applicant, after his application for a license has been approved, to submit a policy or policies of insurance to be approved by the Auditor, insuring the applicant against loss by burglary, larceny, forgery or embezzlement in a sum not exceeding certain amounts determined by the average amount of cash and liquid funds kept on hand at the office of the exchange. Section 7 requires the exchange to have at all times a minimum sum of $2,000 of its own funds available for the use and purpose of its business, exclusive of and in addition to funds received in exchange or transfer; and in addition shall at all times have on hand an amount of liquid funds sufficient to pay on demand all outstanding money orders issued by it. Section 15.1 contains provisions for the closing and liquidation of an exchange and the payment of ratable dividends, and states that all expenses of the receivership, including reasonable receiver's, solicitor's and attorney's fees approved by the Auditor, shall be paid out of the assets of the exchange. This section was amended in 1951 to provide that in the event a suit is instituted or maintained by the receiver...
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