McNeil Construction Company, a Corporation v. The Livingston State Bank, a Montana State Bank

It seems to be agreed that in September, 1956, a former employee of McNeil, using stolen blank payroll checks of McNeil, made out to himself some 29 of them, forged the signature of someone authorized to sign the checks, and cashed them. The total was $4,148.16. The checks were all drawn on McNeil’s account at the Livingston State Bank. In the regular course of business, the bank cashed the checks and charged them to the account of McNeil, a California corporation.

Seaboard Surety Company, a New York corporation, bonding company for McNeil on the latter’s employees’ fidelity bond, after claim was filed by McNeil, promptly remitted the amount of the loss, taking from McNeil a loan receipt.

Apparently the bank denied liability for the total sum of $4,148.16 it had charged McNeil. On May 1, 1957, McNeil 1 sued the bank for the amount of the forgeries, asserting a claim in excess of $3,000, the then required amount for diversity jurisdiction. Its first complaint was dismissed (McNeil Construction Co. v. Livingston State Bank, D.C., 155 F.Supp. 658 ) with leave to amend. A second complaint was filed in which it was stated alternatively that McNeil was the trustee of an express trust.…

(concurring).

I concur in the above opinion. However, I feel that it is necessary to briefly underscore what seems to me to be the essential basis of the decision in this case. The key to who is the real party in interest in a case similar to this one depends on the effect given to the loan receipt transaction between the insurer and the insured by the applicable state law.

Insurers who become subrogees of the rights of their insureds by the payment of claims are real parties in interest who must, in accordance with Rule 17 (a) of the Federal Rules of Civil Procedure, prosecute actions to recover the amount of such claims in their own names. See, e. g., United States v. Aetna Cas. & Sur. Co., 338 U.S. 366 , 70 S.Ct. 207 , 94 L.Ed. 171 (1949). To become a subrogee the insurer must have paid the claim of his insured. Whether the claim has been paid by the issuance of a loan receipt whereby the insured is obligated to repay the “loan” only if the claim is recovered from a third party is a question of state law. E. g., Tyler v. Dowell, Inc., 274 F.2d 890 (10th Cir. 1960). If under the state law a loan receipt is evidence of a true loan then the insurer has not “paid” the insured’s…

300 F.2d 88 McNEIL CONSTRUCTION COMPANY, a Corporation, Appellant, v. The LIVINGSTON STATE BANK, a Montana State Bank, Appellee. No. 17102. United States Court of Appeals Ninth Circuit. February 5, 1962. Rehearing Denied May 10, 1962. Anderson, Symmes, Forbes, Peete & Brown, by Weymouth D. Symmes, Billings, Mont., for appellant. Luxan & Scribner, Helena, Mont., A. W. Scribner, Helena, Mont., of counsel, for appellee. Before CHAMBERS and HAMLIN, Circuit Judges, and FOLEY, District Judge. CHAMBERS, Circuit Judge. 1 It seems to be agreed that in September, 1956, a former employee of McNeil, using stolen blank payroll checks of McNeil, made out to himself some 29 of them, forged the signature of someone authorized to sign the checks, and cashed them. The total was $4,148.16. The checks were all drawn on McNeil's account at the Livingston State Bank. In the regular course of business, the bank cashed the checks and charged them to the account of McNeil, a California corporation. 2 Seaboard Surety Company, a New York corporation, bonding company for McNeil on the latter's employees' fidelity bond, after claim was filed by McNeil, promptly remitted the amount of the loss, taking…