Dugas v. American Surety Co of New York

• Decision Date: 29 March 1937
• Docket Number: No. 340,340
• Parties: DUGAS v. AMERICAN SURETY CO. OF NEW YORK. *
• Court: U.S. Supreme Court

300 U.S. 414

57 S.Ct. 515

81 L.Ed. 720

DUGAS

v AMERICAN SURETY CO. OF NEW YORK.^*

No. 340.

Argued Jan. 13, 14, 1937.

Decided March 29, 1937.

Mr. Justice VAN DEVANTER, after making the foregoing statement, delivered the opinion of the Court.

This case presents a controversy over the scope and effect of the decrees of a federal District Court in a suit brought by a surety company under the Interpleader Act of May 8, 1926,¹ and over the propriety of subsequent proceedings in the same court upon a supplemental bill brought in aid of and to effectuate that decree.

It will be helpful to state the facts with some detail.

February 12, 1930, the Lumbermen's Reciprocal Association, a Texas insurance corporation, by way of qualifying itself to engage in writing workmen's compensation and other insurance in Louisiana, executed a bond, in the sum of $20,000, conditioned for the payment of claims lawfully arising against it by reason of insurance so written. The bond was given conformably to a Louisiana statute,² and was executed by the American Surety Company, a New York corporation, as surety. Later in 1930, and after writing a substantial volume of insurance in Louisiana, the Lumbermen's Reciprocal Association became embarrassed and was placed in the hands of a receiver by a court in Texas.

April 14, 1931, in a suit brought in a Louisiana court, Etienne Dugas, who had a claim against the Lumbermen's Reciprocal Association arising out of workmen's compensation insurance written by it in Louisiana, recovered against the American Surety Company, as surety on the qualifying bond, a judgment for the payment of $20 per week for not more than 300 weeks commencing May 15, 1930, subject to modification as to future payments if his disability was relieved or reduced, and for $250 for medical bills, together with costs.

The American Surety Company appealed to the Court of Appeal from that judgment, and, for the purpose of suspending execution pending the appeal, it executed a bond conditioned that it should diligently prosecute its appeal and satisfy whatever judgment might be rendered against it if cast in the appeal. The appeal bond was given conformably to a law of the state,³ was in the sum of $10,000, and was executed by the New York Casualty Company as surety. The appeal was perfected and the record duly filed in the Court of Appeal, but nothing further was done therein for reasons which soon will appear.

Many other claims arising out of insurance written in Louisiana by the Lumbermen's Reciprocal Association were asserted under the qualifying bond. In the aggregate, these claims were far in excess of the amount of the bond.

June 6, 1931, desiring to avail itself of the provisions of the Interpleader Act of May 8, 1926, the American Surety Company, with the court's leave, paid into the registry of the federal District Court at New Orleans, La., the sum of $20,000, being the full amount of the qualifying bond, and thereupon filed in that court a duly verified bill of interpleader in which it set forth the several matters here recited, including the proceedings, judgment, and appeal in Dugas' suit on the qualifying bond; stated the names and places of residence of the several claimants under that bond, so far as they were known to it; and further alleged—

'This Court has jurisdiction because this is a bill of interpleader in equity brought by a surety company against bona fide adverse claimants against its bond of February 12, 1930, two or more of whom are citizens of different states, and one or more of said adverse claimants resides or reside within the territorial jurisdiction of this Court.'

'Plaintiff disclaims any interest in the amount of its said bond except to pay same to the persons lawfully entitled thereto.'

'By reason of the conflicting claims against the said bond, and the fact that claims already known to plaintiff greatly exceed the amount of the said bond, plaintiff is in grave danger of being greatly harassed and damaged, and cannot safely make payments to any claimant without the aid of this Court.'

'Plaintiff, with the permission of this Court first obtained, has paid into the Registry of this Court the said sum of $20,000.00, the amount of said bond, to abide the judgment of this Court.'

The bill prayed that Dugas and the other claimants be cited to interplead and settle among themselves their claims to the amount of the bond deposited in the court's registry; that each of them be temporarily and permanently enjoined from instituting or prosecuting in any state court or in any other federal court any suit on account of any right or claim growing out of the qualifying bond; that the plaintiff be released from all further liability on the qualifying bond; and that any other or further relief deemed proper in the premises be granted.

All claimants under the qualifying bond, including Dugas, were called into the suit as defendants.

June 24, 1931, the court after a hearing granted an interlocutory injunction conforming to the prayer in the bill.

Dugas risisted the bill by an exception of no cause of action, a plea of estoppel, and an answer. In the plea and answer he specifically relied on the judgment of April 14, 1931, in the state court and the appeal therefrom together with the appeal bond, as showing that he should not be brought into the interpleader suit.

September 19, 1932, after a full hearing, the court rendered a decree as follows:

1. Declaring the American Surety Company had complied with all of its obligations under the qualifying bond by depositing the full amount of the bond in the court's registry at the time of bringing the suit; and further declaring that company, by reason of such compliance, to be released and discharged from any and all further liability on account of such bond;

2. Enjoining each of the defendants from instituting or prosecuting in any state court, or in any other federal court, any suit against the American Surety Company on account of any right or claim growing out of such bond; and

3. Appointing a special master and charging him with the duty of hearing the claimants and reporting upon the manner in which the fund deposited in the registry, less specified fees and costs, should be distributed among the claimants.

No appeal was taken then or thereafter from that decree; and it remained in full force and effect.

In due course hearings were had and evidence was produced before the special master, after which he submitted a report containing his findings of fact, conclusions of law, and recommendations for a distribution of the fund, less fees and costs, among the several claimants upon a pro rata basis. The report also contained a statement showing what he found to be the true and full amount of each claim, the total being in excess of $60,000, and a further statement showing the amount which, on a pro rata distribution would be payable on each claim. As to Dugas' claim, the master reported the true and full amount as $4,160.68⁴ and the pro rata share of the fund payable on the claim as $1,141.29.

Shortly after the special master's report was submitted, the several claimants, including Dugas, entered into and filed in the suit a written stipulation declaring that they acquiesced in the report, waived the time allowed for filing exceptions, and requested the court to confirm the report and make it the court's decree.

April 20, 1933, the court, with the special master's report and the stipulation before it, rendered a decree confirming the report and directing that the balance of the fund in the registry be distributed among the several claimants in accordance with the master's recommendations. No appeal was taken from this decree.

The fund was distributed and paid out accordingly and was thereby exhausted. Dugas accepted the pro rata share accorded to him in the master's report and the confirming decree.

March 7, 1934, Dugas brought a suit in the Louisiana court before mentioned against the New York Casualty Company, the surety on the appeal bond given in his earlier suit on the qualifying bond. In this new suit he asserted that the American Surety Company, defendant in the earlier suit and principal in the appeal bond, had not diligently prosecuted its appeal, but, on the contrary, had brought the interpleader suit in the federal court and had obtained therein an injunction which in effect prohibited him from securing a determination of the appeal; and that it had thereby abandoned the appeal and violated the condition of the appeal bond. While the new suit was based on an asserted breach of the appeal bond by the principal, it was brought against the surety alone. The relief prayed was a judgment in Dugas' favor for $3,019.39, being the difference between the amount of his workmen's compensation claim as ascertained in the interpleader suit and the sum allowed and paid to him in that suit as his pro rata share of the fund arising from the deposit in court of the full amount of the qualifying bond. By an amended petition the amount for which judgment was prayed was reduced to $2,999 to forestall a removal to the federal court.

To the new suit the New York Casualty Company interposed the exception of prematurity, among others. The court sustained that exception, without ruling on the others, and dismissed the suit. Dugas appealed to the Supreme Court of the state, which, on January 7, 1935, reversed the judgment of dismissal and remanded the suit for further proceedings.⁵

January 29, 1935, the American Surety Company, with the leave of the federal court, filed in the interpleader suit a supplemental bill in which it set forth the matters and proceedings occurring after the decree of September 19, 1932, in that suit; alleged that the judgment of April 14, 1931, against the American Surety Company and in favor of Dugas in his earlier suit in the state court was based entirely on the qualifying bond of February 12, 1930, given by the ...