United States ex rel. Midland Loan Finance Co. v. National Surety Corp.

23 F. Supp. 411, 1938 U.S. Dist. LEXIS 2195
CourtDistrict Court, D. Minnesota
DecidedMay 16, 1938
DocketNo. 3681
StatusPublished
Cited by2 cases

This text of 23 F. Supp. 411 (United States ex rel. Midland Loan Finance Co. v. National Surety Corp.) is published on Counsel Stack Legal Research, covering District Court, D. Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States ex rel. Midland Loan Finance Co. v. National Surety Corp., 23 F. Supp. 411, 1938 U.S. Dist. LEXIS 2195 (mnd 1938).

Opinion

NORDBYE, District Judge.

The action was brought by the plaintiff, Midland Loan Finance Company, in the name of the United States as indicated above, to recover damages against the principal and surety on a postmaster’s bond in the penal sum of $16,000.00, given in ' pursuance of 39 U.S.C.A. § 34. No consent • to this suit by the United States has been obtained. The complaint sought to recover the sum of $34,997.03 against the principal and $16,000.00 against the surety. Subsequently, the plaintiff limited its right of recovery against both defendants to the amount of the bond.

Plaintiff was in the automobile finance 'business in the city of Minneapolis. It purchased contracts of sale made by various automobile dealers in this community. One Thomas Hunting was engaged in the automobile business at Montgomery, Minnesota, where the defendant Malone was Acting Postmaster. During the period in question, Hunting solicited plaintiff to purchase conditional sales contracts, including the promissory notes evidencing the obligation of the purchasers to pay the deferred installments thereon. It appears that Hunting became engaged in the practice of making out false and forged conditional sales contracts and notes which were tendered for sale to the plaintiff. In carrying on its business with Hunting, plaintiff had a certain established practice with reference to the investigation of the purchasers' named in the contracts tendered to it. Letters were mailed out by it to the credit references furnished. As soon as the contracts had been purchased, it was the custom to mail out payment books to the supposed purchasers in which were to be recorded by the plaintiff the monthly payments. Insurance certificates, receipts, etc., were also mailed out at this time to the purported purchasers. It ap-, pears that the various credit inquiries, which were generally addressed to banks, business concerns, and individuals in the vicinity of Montgomery, were sent through the United States mails and received at the Montgomery postoffice, but were seldom delivered to the persons to whom they were addressed. The evidence established that, at the request of Hunting, Malone, the postmaster, turned over to him substantially all of the mail which arrived at Montgomery in the envelopes of the plaintiff. When such mail was received by Hunting, he at times would answer the credit inquiries himself, some letters were destroyed, and the inquiries which concerned actual persons, but who were not purchasers of cars, were occasionally delivered to the addressed credit references, and such references would generally respond to the plaintiff. The insurance certificates, payment books, etc., which were mailed to the supposed purchasers were delivered to Hunting and retained by him. Not all of Hunting’s contracts were made out to fictitious persons. Some were made out in the names of bona fide people, but the purported purchasers had not bought any cars from Hunting. It appears also that many of the cars listed in the contracts described automobiles with serial and motor numbers that were actually in existence, but the purchasers of said cars as listed in the conditional sales contracts were either fictitious persons, or actual persons who had not in fáct purchased the cars, nor had they signed the conditional sales contracts. In the conduct of its business with the purchasers named in the various conditional sales contracts purchased from Hunting, the plaintiff used the United States mails, but, by reason of the arrangement between Hunting and the defendant Malone, the correspondence, inquiries, etc., did not reach the persons to whom the letters were addressed, but were received by Hunting instead, and in this manner he was able to dupe the plaintiff for a long period of time. In order to cover up his fraud, Hunting personally made payments to the plaintiff from time to time on the various fictitious contracts that he had sold. The evidence fairly es[413]*413tablished that plaintiff honestly believed that the contracts were bona fide, and also believed that the replies that it received from various credit references were genuine. It believed and relied up'on the integrity of the United States mails and honestly assumed that the various mail matter addressed in connection with the contracts that it had purchased was being delivered to the persons to whom such mail matter was addressed. The testimony indicated that Malone knew of Hunting’s business relations with the plaintiff, but it did not directly establish that Malone was knowingly a party to the fraud. Apparently, Hunting was one of the leading citizens in Montgomery, a man of rather dominant personality, and he was able to convince Malone that it was perfectly proper for the “Midland mail” to be delivered to him. However, by reason of the diversion of the mail in the manner hereinbefore described, contrary to the Postal Laws and Regulations, Hunting was able to dispose of many thousands of dollars worth of spurious contracts to the plaintiff. The jury found that Malone’s wrongdoing was the direct cause of plaintiff’s loss; that Malone violated his duties as postmaster; and that, as the proximate result of such violation, the plaintiff sustained a money loss at least to the extent of the penal sum of the bond, which was the amount of the verdict.

At the close of all the testimony, the defendant surety company made a motion for an order dismissing plaintiff’s case on the following grounds:

“1. That plaintiff has no right to bring this action; that this defendant is and was under no liability or obligation to plaintiff either under the official bond of the defendant Malone as Acting Postmaster at Montgomery, Minnesota, or otherwise; that the sole party in interest who may sue on or recover under said official bond is the United States of America.

“2. That plaintiff has failed to show any authority, permission or consent from the United States of America to institute or maintain this action on said official bond.

“3. That no authority, permission or consent was obtained by plaintiff from the United States of America to institute or maintain any action on said official bond.

“4. That the United States of America declined to give plaintiff authority, permission or consent to institute or maintain this action on said official bond.

“5. That the court is without jurisdiction to entertain this suit, which is one between plaintiff, a citizen and resident of the State of Minnesota, against defendant Malone, a citizen and resident of the State of Minnesota, and this defendant, a citizen and resident of the State of New York, wherein no separable controversy exists between the said defendants and plaintiff.

“6. That the court is without jurisdiction to entertain this suit in that it is not one arising under the Postal Laws of the United States of America.

“7. That the Postal Regulations of the United States of America, edition of 1932, particularly section 816 thereof, provides the sole, exclusive, and only method of recovery on the bond here involved, and that none of the matters and things required by said Regulations to be done and performed as a prerequisite to an action on said bond has been done or performed, either by plaintiff or otherwise.”

It was the ruling on this motion which was deferred. The first four grounds urged by the defendant surety company in support of its motion for dismissal are the only ones that require any lengthy discussion. If plaintiff had no right to proceed against the official bond of the postmaster to recover the damages sustained, without the approval or consent of the United States, obviously the motion should be granted.

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Cite This Page — Counsel Stack

Bluebook (online)
23 F. Supp. 411, 1938 U.S. Dist. LEXIS 2195, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-ex-rel-midland-loan-finance-co-v-national-surety-corp-mnd-1938.