U.S. FOR USE AND BEN. OF MIDLAND LOAN FINANCE CO. v. NATIONAL(1940)
[309 U.S. 165, 166] Mr. Benedict Deinard, of Minneapolis, Minn., for petitioner.
[309 U.S. 165, 167] Mr. George T. Havel, of Le Center, Minn., for respondent Malone.
Mr. Pierce Butler, Jr., of St. Paul, Minn., for respondent National Surety Corporation.
Mr. Justice REED delivered the opinion of the Court.
The question presented is whether petitioner, a private user of the mails, may without the consent of any officer of the United States bring suit on the bond of an acting postmaster for consequential damages resulting from misdelivery of mail. The Circuit Court of Appeals for the Eighth Circuit affirmed a judgment of the District Court for the District of Minnesota dismissing petitioner's complaint. 1 We granted certiorari2 because of an alleged conflict with a decision of this Court3 and because an important question in the administration of the postal laws was involved.
The complaint alleged that petitioner was engaged in the business of automobile financing in Minneapolis, in the course of which it purchased from automobile dealers the installment notes of buyers secured by their sales contracts. A dealer living at Montgomery, Minnesota, [309 U.S. 165, 168] where the respondent Malone was acting postmaster, is alleged to have put into operation a scheme to defraud petitioner by selling it forged notes and contracts, which he sent petitioner along with a fictitious list of credit references. Petitioner, before purchasing, followed its usual practice of mailing letters of inquiry to the references, and after purchasing mailed payment books, insurance certificates, and receipts to the purported makers of the notes. The dealer persuaded the acting postmaster Malone, allegedly in violation of the Postal Regulations,4 to turn over to him all letters that arrived in Montgomery in petitioner's envelopes. Then he sent forged replies to petitioner's letters and made installment payments out of the money which petitioner had paid him in buying the notes. The dealer thus defrauded the Finance Company of some $ 34,000. The respondent Malone, on taking office as acting postmaster, had executed a bond for $16,000 to the United States as sole obligee with the respondent Surety Corporation as surety. The condition of the bond was:
In its complaint, without alleging specific authorization from the United States to sue, petitioner asked judgment on the bond for the defaults of Malone as postmaster. At the close of the testimony at the trial motions to dismiss the complaint were made by respondents and the district judge reserved judgment. After a jury verdict for petitioner the motions were granted. The Court of Appeals affirmed on the ground that a private user of the mails cannot maintain such an action as is here alleged without the consent of the United States, the obligee in the bond, and that no consent was given either by the statutes, expressly or by implication, or by any appropriate officer of the United States.
The respondent gave a statutory bond in compliance with an enactment of the Congress for the purposes specified in the statute. 5 As the bond is part of an integrated system of postal regulations, the determination of the parties authorized to sue upon it is a federal question governed by federal law. 6
We agree with the Court of Appeals that there was no consent and that such consent is necessary. Consequently there is no occasion to determine whether the bond was intended to protect private users of the mail from all loss or damage, however consequential, occasioned by the postmaster.
The record shows the only effort made to secure consent of an officer was a request to the Attorney General for [309 U.S. 165, 170] authority to sue. This was refused. Whether as a matter of right a third party may sue on the instrument for loss covered by an official bond running only to the statutory obligee depends upon the intention of the legislative body which required the bond. This intention may be evidenced by express statutory language or by implication. This was the rule announced in Washington, use of M'Cue v. Young. 7 There a bond had been given to the Corporation of Washington, a municipality by the manager of a lottery 'truly and impartially to execute' his duties. Without the city's consent, the holder of a winning ticket sued on the bond. This Court said:
In Howard v. United States8 this comment was made upon the Young decision:
Such official bonds are often part of a general statutory plan for the operation of governmental activities. While all the activities of a government of course confer benefits on its citizens, frequently the benefits are incidental [309 U.S. 165, 171] and unenforceable. 10 In the case of an official bond, even if its benefits are not incidental, it may well be that the legislative body is of the opinion that actions on the bond should be limited to the government in order to secure unified administration of claims.
We have recognized a similar need for a single control in regard to a sale bond required by a district court in an equity receivership. This Court in Munroe v. Raphael11 had before it an injunction granted by a federal district court upon the motion of its receiver to rescind a consent to sue and forbid further proceedings in a suit in a state court in the name of the United States upon a sale bond of the estate in receivership. The sale bond had been given for assets purchased from the receiver. It ran to the United States only and guaranteed the payment of a certain percentage of indebtedness to all creditors of the estate. The suit had been instituted in the state court by one creditor, with permission of the district court obtained prior to the receiver's motion for injunction. This Court upheld the injunction on the theory that the bond, a part of the estate, remained within the control of the court and that to ensure ratable payments to all creditors one should not be permitted to carry on the litigation. In the opinion, it was declared: 'Certainly no creditor could bring a suit in his own name on the bond, for his share of the purchase money. Nor could he institute such an action without leave of the District Court.' 12
Petitioner's attack is pointed at the application of the consent rule rather than at the rule itself. While with [309 U.S. 165, 172] some other official bonds consent if given by express provision,13 none is given in the postmaster bond statute. Petitioner urges that consent by implication is given. Attention is called to the words 'legal intendment' in the quotation from Washington, use of M'Cue v. Young and to a comment upon the Young case in the Howard case that these words show that 'consent may, under some circumstances, be assumed to have been given ....'14 These expressions are used to base an argument that the statutes and regulations of the postal service establish consent by intendment. The precedent chiefly relied upon for this position is the Howard case. This was a suit, without express consent of the United States, on a bond of a clerk of the district court, alleging breach by failure to pay over money deposited with the clerk in settlement of prior litigation. The bond was a statutory bond naming the United States as sole obligee and assuring that the clerk would faithfully discharge the duties of his office. This Court analyzed the statutory requirements and the 'peculiar relation' of the clerk to the court to determine the intendment of the Congress as to the standing of the private litigant to sue on clerks' bonds. Consideration was given to the fact that 'the great mass of litigation ... has always been between individuals,'15 that 'the practice of a century' required a ruling that the bond covered them and that it could [309 U.S. 165, 173] not be said of the clerk's bond, as it was said of the lottery bond, that it was given primarily for the governmental authority. This Court concluded that even though 'generally speaking ... in the absence of a statute' the obligation cannot be put in suit in the name of the obligee without his consent, the factors of custom, similarity of governmental and private use of the courts and the surrounding circumstances, in the absence of words declaratory of intention, evidenced an intendment to permit suit without consent on the clerk's bond. 'In our opinion, Congress intended that the required bond should protect private suitors as well as the United States, and therefore, no statute forbidding it, a private suitor may bring an action thereon for his benefit in the name of the obligee, the United States. Such must be held to be the legal intendment of existing statutory provisions.' 16
We conclude in the present instance, however, that circumstances, practice, statutes and regulations combine to forbid reading into this situation a 'legal intendment' to permit suit without the consent of the United States. Assuming the bond declared upon here is intended to cover the users of mail service, its beneficiaries are legion in comparison with the users of a court's depository. Moreover, the United States has a very substantial interest in a postmaster's bond. The statutory duties of a postmaster require him to act as a fiscal officer for the government at his office. He is responsible for postal savings deposits, money orders, stamps, and salary disbursements as well as for the property of the service, buildings, mail bags and other equipment. 17 Such circumstances weigh against a holding that the Congress intended to let a private user of the mails, wronged by the [309 U.S. 165, 174] principal of a postmaster's bond, sue wherever he might find defendants and gain for himself such priority on the bond as vigilance could obtain. 18
Apparently it is not customary for the United States to consent to suit by mail users upon postmasters' bonds. No case has been called to our attention where such permission has been granted though the requirement for a bond has been in existence since 1825.19 Rarely has a private individual sought recovery. 20 The contention of petitioner cannot be said to be supported by any continued administrative practice. On the other hand, the United States has undertaken repeatedly and successfully to recover on the bonds for the losses of mail users. Recovery has been allowed on the theory of a suit by a bailee for loss of property in his possession. 21 [309 U.S. 165, 175] There are over 44,000 post offices under the Post Office Department22 and it is common knowledge that millions of items of mail go through them each year. It is rather obvious that numerous claims, many of them for small amounts, are likely to arise in the course of many transactions. 23 Under the Department's Regulations there is a fairly complete administrative formula for handling these claims from discovery to satisfaction. 24 These facts, along with the substantial interest of the government in the bonds, convince us that the Congress intended that claims on the bonds would be handled through the government rather than through various suits by individuals.
[ Footnote 1 ] 103 F.2d 450, affirming, 23 F.Supp. 411.
[ Footnote 2 ] 308 U.S. 534 , 60 S.Ct. 102, 84 L.Ed. --.
[ Footnote 3 ] Howard v. United States, 184 U.S. 676 , 22 S.Ct. 543.
[ Footnote 4 ] Postal Laws and Regulations (1932), 777. 'Mail matter should be delivered to the person addressed or in accordance with his written order ....'
[ Footnote 5 ] 39 U.S.C. 34, 39 U.S.C.A. 34, Postal Laws and Regulations 410:
[ Footnote 6 ] James Stewart & Co. v. Sadrakula, 309 U.S. 94 , 60 S.Ct. 431, 84 L. Ed. --, decided January 29, 1940.
[ Footnote 7 ] 10 Wheat. 406, 409.
[ Footnote 8 ] 184 U.S. 676, 691 , 22 S.Ct. 543, 550.
[ Footnote 9 ] Cf. United States v. United States Lines Co., D.C., 24 F.Supp. 427; Moody v. Megee, D.C., 31 F.2d 117; United States ex rel. Brimberg Bros. v. Globe Indemnity Co., 2 Cir., 26 F.2d 191, 193; Idaho Gold Reduction Co. v. Croghan, 6 Idaho 471, 473, 56 P. 164; United States v. Griswold, 8 Ariz. 453, 456, 76 P. 596.
[ Footnote 10 ] German Alliance Ins. Co. v. Home Water Supply Co., 226 U.S. 220, 231 , 33 S.Ct. 32, 35, 42 L.R.A.,N.S., 1000.
[ Footnote 11 ] 288 U.S. 485 , 53 S.Ct. 424.
[ Footnote 12 ] Id., 288 U.S. at page 488, 53 S.Ct. at page 425; see District of Columbia, to Use of Langellotti, v. Fidelity & Deposit Co., 50 App.D.C. 309, 271 F. 383.
[ Footnote 13 ] 40 U.S.C. 270a to 270d, 40 U.S.C.A. 270a to 270d (laborers and materialmen may sue on bond of contractor for government building); 22 U.S.C. 103, 22 U.S.C.A. 103 ('any injured person' may sue on bond of consul); 22 U.S.C. 78, 22 U.S.C.A. 78 (same as to bonds of consular officers acting as administrators in foreign countries); 22 U.S.C. 170, 171, 22 U.S.C.A. 170, 171 (same as to bonds of marshals of consular courts); 28 U.S.C. 496, 500, 28 U.S.C.A. 496, 500 (same as to bonds of U.S. marshals); 11 U.S.C. 78, sub. h, 11 U.S.C.A. 78, sub. h (same as to bonds of referees, trustees and designated depositories in bankruptcy); 7 U.S.C. 247, 249, 7 U.S.C.A. 247, 249 (same as to bonds of warehousemen under the Warehouse Act).
[ Footnote 14 ] 184 U.S. 676, 691 , 22 S.Ct. 543, 549, 550.
[ Footnote 15 ] Id., 184 U.S. page 687, 22 S.Ct. page 548.
[ Footnote 16 ] Id., 184 U.S. page 692, 22 S.Ct. page 550.
[ Footnote 17 ] Postal Laws and Regulations 105-106, 443, 1626, 1408, 1426, 1430(21), 137, 235, 1866-70.
[ Footnote 18 ] In the absence of express legislation the government is not entitled to priority. See United States v. State Bank of North Carolina, 6 Pet. 29, 35; Mellon v. Michigan Trust Co., 271 U.S. 236, 239 , 46 S.Ct. 511, 512; United States v. Knott, 298 U.S. 544, 547 , 56 S.Ct. 902, 904, 104 A.L.R. 741.
The first statute permitting private suits on public contractors' bonds to the United States made no provision for government priority. 28 Stat. 278. By a later amendment private suits were forbidden until six months after completion of the contract and settlement of the contractors' accounts and the government was given priority. 33 Stat. 811, 40 U.S.C.A. 270; see Illinois Surety Co. v. United States to use of Peeler, 240 U.S. 214, 217 , 36 S.Ct. 321, 322. The present statute requires two bonds, one for the government and a second for laborers and materialmen. 40 U.S.C. 270a to 270d, 40 U.S.C.A. 270a to 270d.
[ Footnote 19 ] Act of March 3, 1825, 4 Stat. 103.
[ Footnote 20 ] Cf. Wile v. United States Fidelity & Guaranty Co., 6 Alaska 48; Idaho Gold Reduction Co. v. Croghan, 6 Idaho 471, 56 P. 164.
[ Footnote 21 ] National Surety Company v. United States, 8 Cir., 129 F. 70; American Surety Company v. United States, 5 Cir., 133 F. 1019; United States v. American Surety Company, 4 Cir., 163 F. 228; United States v. American Surety Company, 155 F. 941, C.C.N.D.Ill.; Gibson v. United States, 1 Cir., 208 F. 534; United States Fidelity & Guaranty Co. v. United States, 8 Cir., 229 F. 397; United States Fidelity & Guaranty Company v. United States, 9 Cir., 246 F. 433; United States v. United States Fidelity & Guaranty Company, 6 Cir., 247 F. 16; United States v. Griswold, 8 Ariz. 453, 76 P. 596.
[ Footnote 22 ] Report of the Postmaster General, 1939, p. 126.
[ Footnote 23 ] Compare the Department's experience with claims on domestic insured mail during the fiscal year ending June 30, 1939. Payments were made in connection with 113,846 claims, and the average payment amounted to only $3.87. Report of the Postmaster General, 1939, p. 120.
[ Footnote 24 ] Postal Laws and Regulations, 816: