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Breslin v. National Surety Co.

September 15, 1930

BRESLIN
v.
NATIONAL SURETY CO.



Appeal from the District Court of the United States for the Eastern District of Pennsylvania; William H. Kirkpatrick, Judge.

Author: Johnson

Before BUFFINGTON and DAVIS, Circuit Judges and JOHNSON, District Judge.

JOHNSON, District Judge.

This is an action in assumpsit on a written indemnity agreement by the National Surety Company against John E. Zerbey and Andrew Breslin. The case was submitted to the jury and a verdict was rendered in favor of the plaintiff and against the defendant, Breslin, for $39,046.18. From the judgment entered on this verdict, an appeal has been taken to this court.

Zerbey was in the liquor business prior to National Prohibition. On the passage of the Volstead Act, 27 U.S.C.A. § 1 et seq., he desired to continue in the wholesale liquor business, but to do so he was required to give bond to secure his faithful performance in the use and distribution of alcohol which he was permitted to withdraw from the government warehouse.He first gave a bond in the sum of $5000; later a bond in the sum of $35,000; and when he increased his withdrawals, he finally gave a bond for $100,000 on or about March 13, 1920, but it was dated back to January 23, 1920, the date of Zerbey's original $5,000 bond.

The Surety Company, as a condition precedent to its consent to execute the $100,000 required an agreement indemnifying it against all losses and expenses which it might incur in consequence of executing the bond purporting to be signed by both Breslin and Zerbey. Thereafter the Government asserted a claim upon the bond against Zerbey and the plaintiff, the National Surety Company, based upon violations of the Prohibition Act committed by Zerbey while operating under permit. On March 1, 1923, the Government brought its suit in the United States District Court for the Middle District of Pennsylvania against Zerbey and the plaintiff upon the bond. The plaintiff undertook the defense, employed attorneys and incurred expenses in connection with the suit amounting to upward of $28,000. The District Court dismissed the action, and the Circuit Court of Appeals certified the question involved to the Supreme Court of the United States, which court decided that the bond in question was not a penalty bond forfeitable in its entire amount upon breach of condition, but a bond of indemnity securing the payment of internal revenue taxes, if any, accruing by reason of the breach. There being no tax due the result was that the plaintiff escaped all liability under the bond. United States v. Zerbey, 271 U.S. 332, 46 S. Ct. 532, 70 L. Ed. 973, decided May 24, 1926.

In March, 1927, the plaintiff brought suit against Breslin and Zerbey upon the indemnity agreement to recover $28,135.30 for expenses incurred by reason of the Government's suit upon the bond and $7,000 for unpaid premiums from January 23, 1920, to January 23, 1928. In his affidavit of defense Breslin denied that he executed the indemnity bond and alleged that the signature attached to the indemnity agreement was not his signature and that it was a forgery. At the trial he testified that his name had been written to the indemnity agreement without his knowledge by one Keating, a person connected with the office of the general agents of the National Surety Company in Scranton, Pennsylvania, and he denied all knowledge of the giving of the agreement at that time.

In August or September, 1920, Keating called Breslin over the telephone and informed him that he, Keating, had signed Breslin's name to the indemnity agreement but Breslin never at any time until just before the suit was brought against him in March, 1927, suggested to anyone that he had not signed the bond. Breslin with knowledge of the alleged forgery, went to Washington, when suit was brought upon the indemnity bond to take up with the Federal Prohibition Commissioner the matter of compromising the claim of the Government against John E. Zerbey. The Commissioner was in doubt as to Breslin's right to be heard in the matter and stated that the Government did not know Breslin in the transaction. Breslin's attorneys stated to the Commissioner that he was not a mere volunteer as he had signed the indemnity bond and had a right to be heard in the matter.

The court submitted two questions to the jury; first, whether Breslin had signed the indemnity agreement, and if not, secondly, whether Breslin ratified Keating's act of signing Breslin's name to the agreement.

The three principal assignments of error presented on this appeal are; first, that the Court erred in submitting to the jury the question whether Breslin had ratified Keating's act of signing the indemnity agreement; secondly, that the court submitted the case to the jury on an issue not raised by the pleadings, to wit: the ratification of the alleged forgery and, thirdly, that the court erred in giving further instructions to the jury in the absence of the parties and their counsel.

First, as to the assignment of error in submitting to the jury whether Breslin ratified the signing by Keating of his name to the indemnity agreement. Keating signed Breslin's name to the agreement witthout any knowledge or authority of Breslin. By the Act of Assembly of Pennsylvania of March 31, 1860, P.L. 382, 18 P.S. § 3631, it is provided: " § 3631. If any person shall fraudulently make, sign, alter, utter or publish, or be concerned in the fraudulently making, signing, altering, uttering or publishing any written instrument, other than notes, bills, checks, or drafts already mentioned, to the prejudice of another's right, with intent to defraud any person or body corporate, or shall fraudulently cause or procure the same to be done, he shall be guilty of a misdemeanor."

It is not a question of law for the court, but a question of fact for the jury whether Keating's signing of Breslin's name to the indemnity agreement was a forgery. In Commonwealth v. Wilson, 44 Pa. Super. 183, the defendant was convicted of forgery on the ground of an alteration in the destination written in a railroad ticket. On page 187 of this case, in 44 Pa. Super., Judge Orlady, delivering the opinion of the Court, said: "Text-writers and judges agree that as a general rule any writing in such form as to be the means of defrauding another may be the subject of forgery, or of alteration in the nature of forgery. The offense may be committed in respect to any writing; which, if genuine would operate as the foundation of another's liability. If it is calculated to deceive and intended to be used for a fraudulent purpose, - that is sufficient: 13 Am. & Eng. Ency. of Law (2d ed.) 1093. The offense of uttering a forged instrument consists in offering to another a false instrument which has capacity to injure, with a knowledge of its falsity, and with an intent to defraud: Whart. Crim. Law (11th ed.), sec. 703."

It is true, there must be added to the act of signing the intent to defraud, but the intention under all the circumstances in this case, is not a question of law for the court, but of fact for the jury. How can the court say, as a matter of law, that there was no intent to defraud when Keating signed Breslin's name to a $100,000 indemnity bond without Breslin's knowledge or authority. Breslin testified, after he knew of the alleged forgery, that Keating requested him not to expose the matter or cause any trouble. The question of forgery then was a question for the jury to determine in this case.

The question then arises whether there could be a ratification of the act of Keating if it were found to be a forgery. The court below held there could be such ratification and so instructed the jury, leaving the question of ratification, under the evidence in the case, to the jury. In the first place it is doubtful whether there is sufficient evidence to establish a ratification, but if there is sufficient evidence to submit to the jury on the question of ratification, the Supreme Court of Pennsylvania, where the contract was executed, has held consistently, beginning with McHugh v. ...


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