Fouts v. Maryland Casualty Co.

• Decision Date: 14 January 1929
• Docket Number: No. 2775.,2775.
• Citation: 30 F.2d 357
• Parties: FOUTS v. MARYLAND CASUALTY CO.
• Court: U.S. Court of Appeals — Fourth Circuit

30 F.2d 357 (1929)

FOUTS v. MARYLAND CASUALTY CO.

No. 2775.

Circuit Court of Appeals, Fourth Circuit.

January 14, 1929.

John L. Rendleman and Hayden Clement, both of Salisbury, N. C., for appellant.

James S. Manning, of Raleigh, N. C., and Walter L. Clark, of Baltimore, Md. (Roszel C. Thomsen, of Baltimore, Md., on the brief), for appellee.

F. G. Awalt and George P. Barse, both of Washington, D. C., for Comptroller of the Currency, amici curiæ.

Before WADDILL and NORTHCOTT, Circuit Judges, and COLEMAN, District Judge.

NORTHCOTT, Circuit Judge.

The appellant, Fouts, was appointed receiver of People's National Bank of Salisbury, N. C. The appellee brought this action against the receiver, to compel the allowance and payment of dividends on its claim upon an indemnity agreement, executed by the bank. The agreement was contained in the bank's application for a bond, by which the bank, as principal, and the appellee, as surety, undertook that the official deposits of the state treasurer of the state of North Carolina, up to a named sum, would be repaid on demand. The bond was applied for on January 26, 1923, and was given for $50,000. The bank became insolvent, and was closed on June 8, 1923, at which time the deposit of the state treasurer was $89,579.14.

Shortly after the closing of the bank, the casualty company paid the state treasurer the amount of the bond, and brought a suit against the receiver, asking that it be subrogated to the rights of the state treasurer, and that it be permitted to prove its claim for $50,000 on its indemnity contract. At the time of the bringing of this suit it was not known what the loss of the treasurer would be. The District Court refused the relief prayed for, and an appeal was taken to this court. The decree of the District Court was affirmed. See Maryland Casualty Co. v. Fouts (C. C. A.) 11 F.(2d) 71, 46 A. L. R. 852.

Since this decision the receiver has paid dividends to the creditors of the bank in an amount that would, when added to the $50,000 paid him by the casualty company, pay the state treasurer his entire deposit and $1,706.53 in addition. This latter amount is being retained by the receiver.

The appellee then brought this suit, praying that the receiver be directed to pay it dividends to an amount equal in per cent. to the amount paid the general creditors; that it be given the $1,706.53 in the hands of the receiver, due as a dividend, to the state treasurer; and that it be allowed to participate with other creditors of the bank on the claim of the treasurer.

The judge below found for the casualty company, and entered a decree directing the receiver to pay appellee the retained $1,706.53 and dividends on the remainder of its claim equal in per cent. to the dividends already paid the other creditors. From this action of the court below this appeal was taken.

Two main points are relied on by appellant: (1) That the matters in controversy were res adjudicata; and (2) that the allowance of appellee's claim and the payment of back dividends would be in contravention of the vested rights of the general creditors, and unjust to them. We will first consider the second point.

It is evident that while the bank had assumed two liabilities, one to the state treasurer on account of the deposit, one to the casualty company by reason of its contract of indemnity, there was only one debt, the deposit of the state treasurer, the payment of which debt discharged both obligations. The liability to the casualty company only became alive in the event that the bank failed to meet the first or primary liability on the deposit. If the casualty company is to be paid dividends equal to the other creditors, while at the same time the state treasurer is also paid equal dividends on his claim, then it is clear that dividends will have been paid on $139,579.14, when the original debt was only $89,579.14. That this would be to the prejudice of the rights of the other creditors cannot be denied.

The casualty company only guaranteed the deposit of the state treasurer to the extent of the loss up to the sum of $50,000. It has become evident that the loss will not amount to $50,000. How can a claim be allowed and dividends paid on it when the amount is not possible of ascertainment?

Undoubtedly the decree of the lower court permits a double filing of claims on the one debt. The law requires the pro rata distribution of dividends upon such debts only as existed at the time of the suspension of the bank. In re United Grocery Co. (D. C.) 253 F. 267; American Surety Co. v. De Carle (C. C. A.) 25 F.(2d) 18; White v. Knox, 111 U. S. 785, 4 S. Ct. 686, 28 L. Ed. 603.

Let us suppose that the casualty company...