Standard Surety & Casualty Co. v. Baker

• Decision Date: 30 August 1939
• Docket Number: No. 11457.,11457.
• Citation: 105 F.2d 578
• Parties: STANDARD SURETY & CASUALTY CO. OF NEW YORK v. BAKER et al.
• Court: U.S. Court of Appeals — Eighth Circuit

105 F.2d 578 (1939)

STANDARD SURETY & CASUALTY CO. OF NEW YORK v. BAKER et al.

No. 11457.

Circuit Court of Appeals, Eighth Circuit.

July 19, 1939.

Rehearing Denied August 30, 1939.

Charles C. Byers, of Kansas City, Mo. (E. R. Morrison, Richard C. Jensen, and Morrison, Nugent, Berger, Byers & Johns, all of Kansas City, Mo., on the brief), for appellant.

O. W. Watkins, of St. Joseph, Mo., and Richard S. Righter and Horace F. Blackwell, Jr., both of Kansas City, Mo., for appellee Noble I. Ayers.

Before GARDNER and THOMAS, Circuit Judges, and WYMAN, District Judge.

GARDNER, Circuit Judge.

This is an appeal from an interlocutory order denying an injunction enjoining and restraining appellees from instituting or prosecuting any action or suit involving the subject matter of this suit until entry of final judgment. The proceedings were instituted by the filing of a bill in the nature of a bill of interpleader by appellant. It will be convenient to refer to the parties as they appeared below.

The motion for temporary injunction was denied, on the ground that the bill was insufficient as a bill in the nature of a bill of interpleader. It is therefore essential to examine the allegations of the bill.

The defendants were citizens of various states, and none of them was a citizen of New York, of which the plaintiff was a citizen. In 1936 and 1937, and during part of 1938, A. B. Collins and Company, Inc., a Missouri corporation, was a dealer in the sale, transfer and exchange of securities within the State of Missouri. Under the provisions of the Missouri statute, the Collins Company, in applying to the Commissioner or Supervisor of Corporation Registration of Missouri, for registration as a dealer in securities, was required to file a bond in the sum of $5,000, running to the people of the State of Missouri, conditioned upon faithful compliance by the dealer and its salesmen with the provisions of the Missouri statute. On December 31, 1936, such a bond was executed by the Collins Company as principal and plaintiff as surety. This bond, effective during 1936, was maintained during 1937 by a continuation certificate. On January 1, 1938, the Collins Company executed a new bond in the sum of $5,000, with plaintiff as surety.

In 1938, the Collins Company was adjudged a bankrupt in proceedings still pending in the Western District of Missouri. Following the institution of the bankruptcy proceedings, numerous actions at law were filed against the plaintiff, the bankrupt, the trustee, and others, to recover damages for alleged breach of the bond. Certain of the defendants claimed to have sustained losses through transactions with the Collins Company, some involving alleged conversions, and others involving non-registration of securities. The aggregate amount sued for was in excess of $20,000. Six of these actions were commenced in the Circuit Court of Jackson County, Missouri, and one has been commenced in the District Court of the United States for the Western District of Missouri. Seventy of the defendants have filed claims against the Collins Company in the bankruptcy proceedings.

Plaintiff alleged that its liability on the bond was limited to $5,000, and that by reason of the conflicting claims of defendants, it was in great doubt as to which defendant or defendants, if any, were entitled to be paid under the bond and in what proportion; that as a result and in consequence it was exposed to double or multiple liability, and hence was entitled to maintain its bill of interpleader under the provisions of Subdivision 26 of Section 41, Title 28 U.S. C.A., as amended, and Rule 22 of the Federal Rules of Civil Procedure, 28 U.S. C.A. following section 723c; that as to claims against it based on claimed conversion, wrongful failure to account, or wrongful appropriation, it was not liable to any defendant and it denied liability; that unless the relief prayed were granted, it would suffer irreparable damage by being required to defend a multiplicity of suits, and would be exposed to the danger of multiple liability. It asked for injunctive relief and obtained a preliminary injunction restraining and enjoining defendants from instituting or prosecuting any action or suit upon the bonds described in the bill. It deposited a bond payable to the clerk of the court, in the sum of $5,000, conditioned upon compliance by the plaintiff with the further order or decree of the court with respect to the subject matter of the controversy. It prayed judgment that it was not indebted to any defendant; that its aggregate liability was $5,000; that it was not liable for failure of its principal to account for the conversion or misappropriation of funds; that if there was a liability, the defendants be required to interplead, and the plaintiff be discharged from liability to all persons except those whom the court should adjudge entitled thereto; that defendants be restrained from instituting any action against plaintiff for the recovery of the amount of the bond and from proceeding further in proceedings already instituted.

In dissolving the preliminary injunction, the lower court expressed the view that it was essential "that there shall be conflicting claimants to the same fund or subject matter held by the plaintiff, and a second essential, that the plaintiff shall have some right to equitable relief as against the defendants, or some of them, with respect to the same fund or subject matter."

On this appeal plaintiff contends that its bill was sufficient as a bill in the nature of a bill of interpleader. Interpleader has long been recognized as an equitable remedy available in federal courts. It is not primarily dependent upon statute, but was maintainable under the general equity jurisdiction. The nature of this remedy and its enlargement by federal statute has so recently been considered by this court in an exhaustive opinion by Judge Sanborn in Klaber v. Maryland Casualty Company, 8 Cir., 69 F.2d 934, that any attempt here to consider the history and development of the remedy would seem to be an act of supererogation. Since that opinion was handed down, however Congress has passed the Act of January 20, 1936, 28 U.S.C.A. § 41, subd. (26), further enlarging the scope and availability of the remedy by interpleader or by bill in the nature of interpleader.

In a bill in the nature of interpleader, plaintiff may have some personal interest in the subject matter. Here, plaintiff denies the validity of the claims against it and so the pleading filed must be construed to be a bill in the nature of a bill of interpleader. Even before the adoption of the federal statutes on the subject, a federal court of equity had jurisdiction to entertain a bill in the nature of interpleader otherwise good even though plaintiff disclosed a personal interest in the subject matter, although under such circumstances he was not entitled to costs or counsel fees. Groves v. Sentell, 153 U.S. 465, 14 S.Ct. 898, 38 L.Ed. 785; Sherman Nat. Bank v. Shubert Theatrical Co., 2 Cir., 247 F. 256; Fleming v. Phœnix Assur. Co., 5 Cir., 40 F.2d 38. It is, however, contended that even though such a bill might be maintained notwithstanding plaintiff's interest, yet it will not lie unless there is some special ground, for equitable relief besides double vexation. Here, it appears that there are some seventy claimants, so that there is not only risk of double or multiple liability, but there is an unnecessary vexation to the plaintiff, who is threatened with repetition of demands and claims. Plaintiff's need for equitable relief is not diminished by the fact that it claims some interest in the subject matter.

Rule 22 of the new Federal Rules of Civil Procedure provides that, "Persons having claims against the plaintiff may be joined as defendants and required to interplead when their claims are such that the plaintiff is or may be exposed to double or multiple liability. It is not ground for objection to the joinder that the claims of the several claimants or the titles on which their claims depend do not have a common origin or are not identical but are adverse to and independent of one another, or that the plaintiff avers that he is not liable in whole or in part to any or all of the claimants. * * * The remedy herein provided is in addition to and in no way supersedes or limits the remedy provided by Section 24(26) of the Judicial Code, as amended, U.S.C., Title 28, § 41(26). ...