the City of Centralia, Illinois, and vicinity, including the
collection of premiums or charges therefor.
During the period of approximately eight months prior to
December 20, 1954, R.F. Niblo, Inc., was unable to satisfy its
financial obligations, including delinquent premium balances due
and owing Travelers in the amount of $3,763.78; a promissory note
of R.F. Niblo, Inc., R.F. Niblo and Aaron Karchmer payable to the
order of The Old National Bank of Centralia in the principal sum
of $8,500.00; a promissory note of R.F. Niblo, Inc., R.F. Niblo
and Herman Morton payable in the principal sum of $3,000.00; and
a promissory note of R.F. Niblo, Inc., R.F. Niblo, Herman Morton
and Charles Gross likewise payable in the principal sum of
$2,500.00; which promissory notes had been executed by the
respective defendants Herman Morton, Aaron Karchmer and Charles
Gross wholly as accommodation co-makers and at the request of the
third-party defendant R.F. Niblo.
Travelers were proposing cancelation of their agency contracts
with R.F. Niblo, Inc., for the reason of the failure to remit the
delinquent premium balances and the failure to regularly account
for and remit premium balances within the prescribed period of
forty-five days from the month of issuance of the respective
bonds and policies of insurance.
The proposed cancelations of the agency contracts were deferred
from time to time at the request of third-party defendants R.F.
Niblo and R.F. Niblo, Inc., and defendants Herman Morton, Aaron
Karchmer and Charles Gross in cooperation with their efforts to
obtain a satisfactory sale, refinancing or reorganization of the
R.F. Niblo, Inc., business.
During the month of November, 1954, Travelers offered to
withhold termination of the agency contracts and continue R.F.
Niblo, Inc., as their duly authorized agent, provided R.F. Niblo,
Inc., pay the $3,763.78 delinquent premium balances and further
provided that defendants Herman Morton, Aaron Karchmer and
Charles Gross, jointly and severally, guarantee the payment of
any and all sums then or thereafter owing Travelers on account of
insurance or bonds issued by or through R.F. Niblo or R.F. Niblo,
Inc., and further provided that said defendants would become and
serve as members of a five man board of directors for the future
control and operation of R.F. Niblo, Inc., and its business.
On or about December 10, 1954, R.F. Niblo, Inc., made payment
of $3,763.78 delinquent premium balance and in addition all other
premium account balances payable to The Travelers Companies as of
November 1, 1954.
On December 20, 1954, the board of directors of R.F. Niblo,
Inc., was increased from three to five in number and thereafter
at all times herein pertinent the directors and respective
officers of the corporation were as follows:
R.F. Niblo, Director and President
Aaron Karchmer, Director and Vice President
Herman Morton, Director and Secretary
N.W. Niblo, Director and Assistant Secretary
Charles H. Gross, Director and Treasurer.
The Old National Bank of Centralia, Centralia, Illinois, was
designated the sole depository for funds of R.F. Niblo, Inc., and
by action of the board of directors on December 20, 1954, it was
provided that all checks, drafts, or other orders for the payment
of money, notes, or other evidences of indebtedness, issued in
the name of the corporation, should be signed by the treasurer or
the president and counter-signed by the secretary or vice
On the same day defendants Herman Morton, Aaron Karchmer and
Charles Gross made, executed and delivered to Travelers the
following instrument in writing:
"For valuable consideration, the receipt and
sufficiency thereof being
hereby acknowledged, we, the undersigned, do hereby
jointly and severally guarantee due payment of any
and all sums now or hereafter owing The Travelers
Insurance Company, The Travelers Indemnity Company
and/or The Travelers Fire Insurance Company on
account of Bonds or Indemnity and/or insurance of
every kind, character and description, heretofore or
hereafter sold or issued by or through R.F. Niblo or
the R.F. Niblo, Inc. Agency, both of Centralia,
"It is understood that all premium balances are to
be remitted not later than 45 days from the month of
issuance of said respective bonds and policies of
"This guarantee shall continue in full force and
effect for the period of one year from the date
hereof and thereafter until terminated by notice, in
writing, not less than sixty days prior to the
effective date thereof."
Thereupon Travelers withheld termination of the agency contracts
and continued R.F. Niblo, Inc., as their duly authorized agent.