American Surety Co. v. City of Akron
| Decision Date | 03 May 1938 |
| Docket Number | No. 7270.,7270. |
| Citation | 95 F.2d 966 |
| Parties | AMERICAN SURETY CO. OF NEW YORK et al. v. CITY OF AKRON et al. |
| Court | U.S. Court of Appeals — Sixth Circuit |
P. C. Weick, of Akron, Ohio, and C. M. Vrooman, of Cleveland, Ohio (Weick, Powers & Mason, of Akron, Ohio, and Garfield, Cross, Daoust, Baldwin & Vrooman and McKeehan, Merrick, Arter & Stewart, all of Cleveland, Ohio, on the brief), for appellants.
Gillum H. Doolittle and H. L. Mull, both of Akron, Ohio (John W. Bricker, of Columbus, Ohio, and Wade DeWoody and Byron H. Larabee, both of Akron, Ohio, on the brief), for appellees.
Before HICKS, SIMONS, and ALLEN, Circuit Judges.
The city of Akron, Ohio, and the trustees of its sinking fund filed suit against six surety companies for recovery of $39,743.23, with interest, which represented the city's balance on deposit in the First-Central Trust Company at the time of its insolvency. The superintendent of banks of Ohio was later made a party defendant. The action was tried in the District Court upon written waiver of jury trial.
The trustees of the sinking fund, on June 2, 1930, pursuant to the provisions of Sections 4515 and 4516 of the General Code of Ohio, entered into two depository contracts, one with the Central Depositors Bank & Trust Company for $400,000, and the other with the First-City Trust & Savings Bank for $400,000, and additional moneys. Both banks were required to furnish bond to secure the city's deposits. Accordingly the following companies, on June 2, 1930, executed and delivered to the trustees surety bonds for the Central Depositors Bank & Trust Company as principal, in the following amounts respectively:
United States Fidelity & Guaranty
Company, $120,000
Fidelity and Deposit Company of
Maryland, $ 75,000
American Surety Company of
New York, $100,000
Alliance Casualty Company, $ 65,000
Surety bonds were similarly given for the First-City Trust & Savings Bank on the same date by the following companies, in the following amounts respectively:
Globe Indemnity Company, $100,000
Independence Indemnity Company, $100,000
American Surety Company of
New York, $300,000
The last named bond was released by resolution of the trustees on May 24, 1932, and is not involved in this action.
On October 18, 1931, the First-City Trust & Savings Bank entered into an agreement with the Central Depositors Bank & Trust Company (hereinafter called the Central Bank), under which all the assets of the latter bank were purchased and all its liabilities were assumed by the former bank as of October 18, 1931. Pursuant to the terms of the consent of the superintendent of banks, as provided in Section 710-86, General Code of Ohio, the transfer became effective as of November 3, 1931. The purchasing bank, on December 1, 1931, changed its corporate name to the First-Central Trust Company (hereinafter referred to as the Trust Company), and on the same day, as principal, gave its bond to the trustees of the sinking fund in the amount of $100,000, with the Indemnity Insurance Company of North America as surety.
The sureties on the bonds given by the Central Bank, with the exception of the United States Fidelity & Guaranty Company, knew of the merger agreement between the two banks, and accepted from the Trust Company renewal premiums on their respective surety contracts.
The Trust Company was taken over for liquidation by the superintendent of banks on June 21, 1933, at which time the trustees had city funds on deposit in the bank, in the amount in suit. Prior to insolvency the Trust Company had acquired bonds of the city of Akron of the face value of $229,600, which it pledged on March 17, 1933, to the Federal Reserve Bank of Cleveland as collateral security for an existing indebtedness.
The court of common pleas of Summit county, Ohio, on December 3, 1933, approved a plan for the resumption of business by the Trust Company and in conformity thereto, the superintendent of banks applied for and received a loan of $25,000,000 from the Reconstruction Finance Corporation (hereinafter referred to as the RFC). The application provided that a list of the Trust Company's assets to be pledged as security for the loan should be furnished to the RFC, and should give information as to existing or claimed set-offs against such assets. The municipal bonds were listed among the assets with no notations as to set-offs. The Trust Company's debt to the Federal Reserve Bank was paid on January 15, 1934, out of the proceeds of the RFC loan, but the municipal bonds were still held by the Federal Reserve Bank as custodian for the RFC.1 The journal entry of the state court approving the plan for resumption of business provided that "Upon payment by the Superintendent of Banks of the existing loans and while the assets of the Bank are temporarily in his hands, all rights of set-off shall attach and be allowed in due course." Certain of the municipal bonds, amounting to $33,600, matured on October 1, 1934, were presented by the RFC for payment, and were paid by the trustees. The RFC retained the proceeds, and credited the payment on the obligation of the superintendent.
The District Court rendered judgment in favor of the United States Fidelity & Guaranty Company, but held the American Surety Company of New York, Fidelity and Deposit Company of Maryland, Alliance Casualty Company, Indemnity Insurance Company of North America, and the Globe Indemnity Company, jointly and severally liable.
The principal questions are (1) whether by accepting premium payments on their surety bonds from the successor bank after the merger, certain sureties were estopped to deny their liability; (2) whether the fact that the city of Akron paid certain municipal bonds upon presentation discharged the sureties; (3) whether the sureties were entitled to have the municipal bonds held by the Trust Company set off against their obligations under their surety contracts.
Upon the first question, the District Court held that the acceptance of renewal premiums by the sureties of the Central Bank from the successor bank constituted recognition of the successor bank as principal, and estopped such sureties from denying liability under their bonds. Judgment was rendered for the United States Fidelity & Guaranty Company upon the ground that the company had accepted no premium after the consolidation of the two banks.
We think this ruling is correct. With full knowledge of the merger contract, and some eight months after its completion, the appellant sureties of the Central Bank accepted premiums from the successor bank. From that time until the Trust Company was taken over for liquidation (some eleven months later), the sureties indicated no intention not to recognize the Trust Company as their principal. They had ample opportunity to determine their liability under the bonds, and to determine the facts as to withdrawals made both before and after the merger was completed. Receipt by the sureties of premiums from the bank which was not their original principal as payment under their original surety contracts, with knowledge of the consolidation, constituted recognition of the successor bank as principal. By this conduct the sureties misled both the Trust Company and the city, and lulled them into a feeling of security. If the sureties had refused the premiums and had given notice that they would not recognize the successor bank, there was ample time for both the city and the Trust Company to secure other depository bonds and to protect the funds. The sureties slept upon their rights, and the city was induced to refrain from securing further protection. These particular sureties are now estopped...
To continue reading
Request your trial
-
Hartford Fire Ins. Co. v. United States
...after having behaved as if the bonds are enforceable by billing and accepting premium. See, e.g., Am. Sur. Co. of N.Y. v. City of Akron, 95 F.2d 966, 969 (6th Cir. 1938) ("[T]he acceptance of renewal premiums by the sureties of the Central Bank from the successor bank constituted recognitio......
-
United States v. Merchants Mutual Bonding Company
...Bell v. Kirkland, 102 Minn. 213, 113 N.W. 271; Fidelity & Deposit Co. v. Madson, 202 Wis. 271, 232 N.W. 525; American Surety Co. of N. Y. v. City of Akron, 6 Cir., 95 F.2d 966; Hartford Acc. & Indemnity Co. v. United States, All the elements of estoppel are present in this case. The parties......
-
Davis Erection Co., Inc. v. Jorgensen
...of the action. See, Crocker-Citizens Nat. Bank v. Control Metals Corp., 566 F.2d 631 (9th Cir.1977); American Surety Co. v. City of Akron, 95 F.2d 966 (6th Cir.1938); Termini v. Arthur Exhibitions, 9 Misc.2d 557, 169 N.Y.S.2d 584 (1957), aff'd 5 App.Div.2d 973, 173 N.Y.S.2d 243 (1958); Matt......
-
United States v. Tyler
...102 Minn. 213, 113 N.W. 271, 13 L.R.A.,N.S., 793; Fidelity and Deposit v. Madson, 202 Wis. 271, 232 N.W. 525; American Surety Co. v. City of Akron, 6 Cir., 95 F.2d 966; Hartford Acc. & Indemnity v. United States, 127 F.Supp. 565, 130 Ct.Cl. This question was raised on a motion to dismiss an......