17 F.2d 942 (S.D.Ohio), 331, American Surety Co. of New York v. National Bank of Barnesville, Ohio

Docket Nº:331.
Citation:17 F.2d 942
Party Name:AMERICAN SURETY CO. OF NEW YORK v. NATIONAL BANK OF BARNESVILLE, OHIO, et al.
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 942

17 F.2d 942 (S.D.Ohio)

AMERICAN SURETY CO. OF NEW YORK

v.

NATIONAL BANK OF BARNESVILLE, OHIO, et al.

No. 331.

United States District Court, S.D. Ohio, Eastern Division.

Page 943

Booth, Keating, Pomerene & Boulger, of Columbus, Ohio, for plaintiff.

W. O. Chappell, of Barnesville, Ohio, for defendant receiver.

Herbert Mitchell, of St. Clairsville, Ohio, and J. H. Chaney, of Barnesville, Ohio, for defendant board of education.

HOUGH, District Judge.

This case was submitted to the court upon the pleadings, consisting of the bill and separate answers of the receiver and the board of education, and agreed statement of facts, oral arguments, and briefs.

The Barnesville National Bank is in receivership. Prior to its failure it became the depository for the school funds of the defendant board of education. At the time the bank became the depository for the school funds, and in order to effect the same, it executed a bond, with the complainant, American Surety Company of New York, as surety, to the board of education, in the sum of $6,000, conditioned as follows:

'That if said National Bank of Barnesville shall safely keep the moneys constituting the funds of said board of education of Kirkwood township, Belmont county, Ohio, so to be deposited with it, and shall promptly pay all checks and drafts drawn in accordance with law by the clerk of said board of education of Kirkwood township against said funds, including all interest to accrue thereon, at the agreed rate per centum on all daily balances, then this obligation shall be void; otherwise, to remain in full force and virtue in law.'

Prior to the execution of this bond, the president and cashier of said bank signed a written application for said bond, in which application appears the following language, to wit:

'3. That the depository shall indemnify and keep indemnified the surety company from any liability of loss, costs, charges, suits, damages, counsel fees and expenses of whatever nature, which the surety shall or may for any cause, any time, sustain or be put to, in consequence of the surety having executed said bond.'

This application was accepted by the surety company by the issuance of said bond. The bank failed, and the defendant receiver was appointed.

At the time of the failure, the bank's indebtedness to the board of education on said deposit was $28,251.06. The receiver allowed a set-off, amounting to $12,000 in bonds, leaving a net indebtedness to the board of education of $16,030.47.

Upon notice by the board of education to the surety company of liability upon the surety bond, the surety company paid the full amount thereof, to wit, $6,000, to the board of education. The receiver has paid dividends to the bank's creditors of 45 per cent. of their claims. The board of education has received this percentage, based upon the full net amount; that is, less the amount of the set-off, and including the $6,000 received from the surety company.

The surety company, after paying its liability under the bond, filed a claim for allowance with the receiver for the full amount so paid. The receiver refused allowance of the claim. A bill in equity was filed, to compel the receiver to accept and allow the surety company's claim, and to pay it dividends at the same rate as other general creditors of the bank, and that the board of education be required to return all dividends received by it upon the $6,000 amount.

The complainant contends that it has responded to its full liability under its bond, and is therefore subrogated to the rights of the board of education to the extent of the amount paid to it, $6,000.

The defendants claim that the doctrine of subrogation does not apply, for the reason that the payment of the full amount of the bond does not extinguish, and only partially extinguishes the debt owing to it by the bank.

The complainant contends that it...

To continue reading

FREE SIGN UP
1 practice notes
1 cases