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UNITED STATES v. TAYLOR

June 24, 1955

UNITED STATES of America, Plaintiff,
v.
William A. TAYLOR and Royal Indemnity Company, Defendants



The opinion of the court was delivered by: GALSTON

The immediate matter before the court is a consideration of cross-motions, both of which will be dealt with in this opinion.

The first motion is that of the defendant Royal Indemnity Company for an order directing that summary judgment be entered in favor of that defendant dismissing the complaint on the ground that by virtue of the provisions of Title 6 U.S.C.A. § 5, defendant, as surety on the bond of defendant Taylor, is not liable for the indebtedness set forth in the complaint.

 The second motion is a cross-motion made by the plaintiff seeking summary judgment against both defendants.

 The complaint filed at the instance of the Comptroller General of the United States, acting on behalf of the General Accounting Office, and at the direction of the Attorney General, Title 31, U.S.C.A. § 505, charges that the defendant Taylor, on May 16, 1930, was appointed Property and Disbursing Officer of the United States for the National Guard of the State of New York, with headquarters at Brooklyn, whose duties in part consisted of receiving and disbursing public money and property of the United States. It is alleged that on April 23, 1930, Taylor as principal, and the Royal Indemnity Company as surety, executed and delivered to the plaintiff an official bond under the provisions of Sec. 67 of the National Defense Act of June 3, 1916, as amended, 32 U.S.C.A. § 49, under the terms of which the defendants guaranteed that Taylor, in his aforesaid capacity, would lawfully account to the United States for all funds and property belonging to the United States which might come into possession of the National Guard, and that Taylor would carefully discharge the duties of his office and safely keep or properly disburse and faithfully account for all federal property and funds entrusted to his care, without fraud or delay, during the period of the operation of the bond. This bond was, on May 16, 1930, duly accepted by the plaintiff. Thereafter thirty stipulations and consent agreements were executed amending the bond. It is alleged that during the period of operation of the bond the United States turned over to Taylor, in his official capacity, property and public funds in the sum of $ 150,126.52, for which the defendant has unlawfully failed and refused to account to the plaintiff, and that the defendant Taylor is indebted to the United States for that sum as shown on a Settlement of Account, bearing date October 8, 1943. It is alleged that upon the discovery by the accounting officers of the aforesaid deficiency, they notified the Secretary of War, and the Chief of Finance of the War Department certified the deficiency and indebtedness to the Comptroller General of the United States. Payment was then duly demanded from the defendant Taylor, and notification sent to the Royal Indemnity Company pursuant to the provisions of the Act of August 8, 1888, Title 6 U.S.C.A. § 4. In this notice, by form of letter from the plaintiff to the Royal Indemnity Company, demand was made upon that defendant for payment to the plaintiff of the sum of $ 60,000, being the face amount of the bond of April 23, 1930. So the plaintiff seeks judgment against Taylor in the sum of $ 150,126.52, and against the Indemnity Company in the sum of $ 60,000.

 Separate answers were interposed by the defendants.

 The defendant Taylor, after denials based on lack of knowledge or information in respect to Paragraphs First and Ninth of the complaint, denies the allegations of Paragraph Fifth, except as to that part of the paragraph alleging the filing of a bond. He also denies the allegations in Paragraphs Sixth, Seventh, Eighth, Tenth and Eleventh, except that he admits that demand was made for the sum of $ 60,000, and no payment was made pursuant to that demand.

 For a separate defense Taylor alleges that he carefully discharged the duties of his office, and safely kept or properly disbursed funds entrusted to his care without fraud or delay, and that he is not liable to the plaintiff for any property or public funds which came into his possession, 'during the period of the operation of the said official bond'. He alleges that he should have had full notice of the alleged facts set forth in the complaint which plaintiff alleges violated the provisions of the official bond, and that that bond expired in 1934, and that this action was not commenced until March 25, 1946, and the plaintiff is therefore guilty of laches.

 The answer of the Royal Indemnity Company makes the same denials as are set forth in the Taylor answer.

 As a separate defense it is alleged that the General Accounting Office did examine and settle the accounts of the defendant Taylor for the period from May 16, 1930, to April 23, 1934, and that thereafter, and prior hereto, the Accounting Office issued statements and certificates of settlement wherein it was certified that there were balances due to the plaintiff from the defendant. The allegation is made that this suit was instituted on March 28, 1946, more than five years after the statements and certificates of settlement had been filed, and that by virtue of the provisions of Title 6 U.S.C.A. § 5, the Royal Indemnity Company, as surety on the bond, and the bond stipulations and agreements described in the complaint, ceased to be and is not liable for such indebtedness.

 A second separate defense alleges that the plaintiff should have filed notice of the facts alleged in the complaint, and that it is guilty of laches such as in equity should bar the plaintiff from maintaining this action.

 Coming now to the motion of the Indemnity Company for summary judgment: As has been noted, the contention is made that the action is barred by the statute of limitations, and that therefore the defendant is entitled to a summary judgment dismissing the complaint. It is argued that the rights of the plaintiff are restricted by the provisions of Title 6 U.S.C.A. § 5, which provides as follows:

 'If, upon the statement of the account of any official of the United States, or of any officer disbursing or chargeable with public money, by the accounting officers, it shall thereby appear that he is indebted to the United States, and suit therefor shall not be instituted within five years after such statement of said account, the sureties on his bond shall not be liable for such indebtedness. July 30, 1947, c. 390, § 1, 61 Stat. 646.'

 It is argued that the Taylor accounts were audited from year to year, and that in 1937 for the first time the claims embraced in this litigation were made against him through written notices of individual items of disallowance for the years 1930-1934. By notice dated November 22, 1939, written demand was made upon the Surety for the sum of.$ 167,915.11. This notice refers to the Certificate of Settlement of Account dated November 8, 1939.

 A further Certificate of Settlement, dated March 15, 1943, was issued by the plaintiff, claiming $ 172,311.87, but this was followed by a Certificate of Settlement dated October 8, 1943, for $ 163,506.44. The Statement of ...


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