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MADISON COUNTY FARMERS ASS'N v. AMERICAN EMP. INS. CO.

May 28, 1953

MADISON COUNTY FARMERS ASS'N
v.
AMERICAN EMPLOYERS' INS. CO.



The opinion of the court was delivered by: John E. Miller, District Judge.

The defendant has filed a motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A. The motion is based upon:

(1) The complaint,

(2) The answer,

(3) The amendment to the answer,

(4) Affidavit of J.S. Daily attached to the motion and exhibits thereto,

(5) The certificate of the Clerk of the Circuit Court of Madison County, Arkansas, and

(6) The certificate of the Clerk of the Chancery Court of Madison County, Arkansas.

The facts on which the motion is based are not in dispute and the question before the court is one of law.

The facts as shown by the record are as follows:

The plaintiff is a corporation organized under the laws of Arkansas with its principal place of business in Madison County. The defendant is a corporation organized and existing under the laws of the Commonwealth of Massachusetts with its principal place of business in the City of Boston and is licensed to transact business in the State of Arkansas.

The plaintiff, between August 17, 1951, and June 28, 1952, was engaged in the business of selling feed, seed, fertilizer and other farm supplies in Madison County, Arkansas, and in the course of such business employed Kelley Ottis Hill as its manager, whose duty it was to collect on plaintiff's account and to safely hold for plaintiff moneys due from the sales made in the due course of plaintiff's business.

On August 17, 1951, the defendant, for the consideration of $25 paid by plaintiff, executed and delivered to plaintiff a bond, a copy of which is attached to plaintiff's complaint as Exhibit "A".

The bond provides:

    "The American Employers' Insurance Company
  (hereinafter called Surety), in consideration of an
  agreed premium, binds itself to pay to Madison County
  Farm Association, Huntsville, Arkansas, (hereinafter
  called Employer), the amount of any pecuniary loss
  which any Employee named in the schedule hereto
  attached or added thereto as hereinafter provided,
  may, while in any position and at any location in the
  service of the Employer, alone or in collusion with
  others, cause to the Employer, not exceeding,
  however, the amount set opposite the name

  of such Employee, through any act of fraud,
  dishonesty, forgery, theft, larceny, embezzlement,
  misappropriation, wrongful abstraction or wilful
  misapplication committed during the one year term
  commencing on the 17th day of August, 1951, at noon,
  * *."

The bond further provides that the total liability shall not exceed the largest single amount effective as to any position held by such employee.

Other provisions in the bond prescribe the procedure to be followed by the obligee in the event of a loss on account of the acts of the employees. The bond specifically applies to Kelley Ottis Hill, Manager, in the amount of $5,000, and the consideration paid by the obligee to the defendant was $25.

The complaint further alleges that the said Kelley Ottis Hill had in his custody and under his control as Manager for plaintiff money in excess of $5,000 which he had received as such Manager for the use and benefit of the plaintiff and that he, the said Hill, wrongfully converted the same to his own use and has not accounted to the plaintiff for such amount.

The plaintiff prays judgment against the defendant for the face amount of the bond of $5,000 because of the alleged dishonesty of the said Kelley Ottis Hill.

In due time the cause was removed to this court on the ground of diversity of citizenship of the parties.

After removal, the defendant filed its answer in which it admitted all of the allegations of the complaint except that it denied that Kelley Ottis Hill was guilty of dishonesty as Manager for plaintiff and denied that it was indebted to the plaintiff in the sum of $5,000 or any other sum.

On May 12, 1953, the defendant was granted permission to file an amendment to its answer in which it realleged the allegations in its original answer and alleged:

    "Further answering the defendant states that on
  April 11, 1953, it served on the plaintiff a notice
  in writing demanding the plaintiff to forthwith
  commence suit against Kelley Ottis Hill, the
  principal debtor and other party liable to the
  plaintiff under bond F-101623 of this defendant, for
  any defalcation which plaintiff alleges to have
  occurred under said bond in its complaint filed
  against the defendant, and pursuant to Ark.Stats.
  1947, Section 34-333. That plaintiff is a corporation
  organized under the laws of the State of Arkansas
  with its principal place of business located in
  Madison County, Arkansas. That the said Kelley Ottis
  Hill is a citizen and resident of Madison County,
  Arkansas, and has continuously resided in Madison
  County, Arkansas, from the date of the filing of this
  action to the present. The plaintiff has failed and
  refused for more than 30 days following the service
  of said notice in writing to commence suit against
 ...

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