Maryland Casualty Co. v. Fouts

• Decision Date: 12 January 1926
• Docket Number: No. 2404.,2404.
• Parties: MARYLAND CASUALTY CO. v. FOUTS (LACY, State Treasurer of North Carolina, Intervener).
• Court: U.S. Court of Appeals — Fourth Circuit

11 F.2d 71 (1926)

MARYLAND CASUALTY CO. v. FOUTS (LACY, State Treasurer of North Carolina, Intervener).

No. 2404.

Circuit Court of Appeals, Fourth Circuit.

January 12, 1926.

Kerr Craige, of Salisbury, N. C., and Sidney S. Alderman, of Greensboro, N. C. (George W. Dexter, of Baltimore, Md., Burton Craige, of Winston-Salem, N. C., and Wm. P. Bynum and F. P. Hobgood, Jr., both of Greensboro, N. C., on the brief), for appellant.

James S. Manning, of Raleigh, N. C., Dennis G. Brummitt, of Oxford, N. C., and Hayden Clement and John L. Rendleman, both of Salisbury, N. C. (Frank Nash and John H. Manning, both of Raleigh, N. C., on the brief), for appellees.

Before WADDILL and ROSE, Circuit Judges, and WATKINS, District Judge.

WADDILL, Circuit Judge.

This is an appeal from a decree of the United States District Court for the Western District of North Carolina, in a case in equity pending therein, in which the appellant was plaintiff and the appellees defendants. The suit was originally brought by the appellant, the Maryland Casualty Company, against the receiver of the People's National Bank of Salisbury, and subsequent to its institution the treasurer of the state of North Carolina was, upon his petition, permitted to intervene as a defendant, and he did appear and file his answer to the plaintiff's bill.

The appellant, the Maryland Casualty Company, executed, as surety for the People's National Bank of Salisbury aforesaid, a depository bond to B. R. Lacy, treasurer of the state of North Carolina, in the sum of $50,000. The bond was dated the 10th of January, 1922, and was for one year, and it was renewed and extended from the 10th of January, 1923, to the 10th of January, 1924. On the 8th of June, 1923, the People's National Bank of Salisbury was closed by the Comptroller of the Currency, and J. E. Fouts appointed its receiver. At the time of the failure of the bank, it was indebted to B. R. Lacy, the state treasurer, in the sum of $89,579.14. The bond executed by the defaulting bank as principal, with the Maryland Casualty Company as surety, contained these provisions:

"Whereas, in the month of _____ the above bound People's National Bank, Salisbury, N. C., was designated by the treasurer of the state of North Carolina one of the depositories of the funds belonging to the state of North Carolina:

"Now, the condition of the above obligation is such that if the above bound People's National Bank, Salisbury, N. C., shall well and faithfully pay over and upon demand of said Benjamin R. Lacy, or his legal representative, all moneys belonging to said Benjamin R. Lacy, personally or as treasurer, or to those to whom he may from time to time, personally or as treasurer, by check or draft or bill of exchange, direct payment to be made, all moneys which said Benjamin R. Lacy, may, either personally or as treasurer of the state of North Carolina, deposit with said People's National Bank, Salisbury, N. C., which may in any manner come into its custody or possession while acting as said state depository, or which may be received by it by virtue of its being said state depository, then this obligation to be void; otherwise, to remain in full force and effect."

The treasurer of the state of North Carolina duly notified the appellant surety company of the failure of the People's National Bank of Salisbury, and called upon that company to make good its liability under the depository bond aforesaid to the state. On the 9th of May, 1924, approximately 12 months after the failure of the bank, the surety company did pay the treasurer of the state of North Carolina the sum of $50,000, the penal amount of its bond. The said amount was paid by appellant without waiving any of its rights under the bond, and expressly reserving its right to hold the People's National Bank of Salisbury under an agreement between the bank and it for the reimbursement of any loss sustained by the surety company under the bond. It appeared that, at the time the Maryland Casualty Company executed the bond of $50,000 to B. R. Lacy, state treasurer, the People's National Bank of Salisbury entered into an agreement with the casualty company in connection with the application for, and execution of, said depository bond, the second provision of which agreement is as follows:

"Second. That said applicant shall and will at all times indemnify, and keep indemnified, and save harmless the said company from and against any and all liability asserted against said company, and from and against all loss, liability, costs, damages, charges, counsel fees, and expenses whatsoever which said company shall or may for any cause, at any time, sustain, incur, or be put to, for, or by reason or in consequence of said company's having executed said bond, and said applicant further covenants and agrees to pay to said company or its representatives all damages which said company or its representatives shall become liable for, by reason of said bond, before said company or its representatives shall be compelled to pay the same, any sum so paid, however, to be applied to the payment of such damages. * * *"

The appellant, plaintiff below, alleged: (1) That when it paid to the state treasurer of North Carolina $50,000 it was entitled to prove its claim for that sum. (2) That it was subrogated by reason of the payment of $50,000 to the claim of the state treasurer of North Carolina to that amount against the bank and its assets. (3) That it was entitled to dividends as any other creditor of the bank upon the $50,000. (4) That the excess of the claim of the state treasurer over $50,000, to wit, $39,579.14, and interest upon it, constituted a preferred claim upon the assets of the bank, and that the state treasurer was entitled to the payment of said amount as a preferred claim, because it constituted a trust fund due to the state, and that appellant was entitled to all dividends declared on the $50,000 paid by it to the state treasurer. On the propositions thus submitted the judge of the District Court decreed as follows:

"That the plaintiff, Maryland Casualty Company, is not entitled to receive any dividends from the defendant, J. E. Fouts, receiver of the People's National Bank of Salisbury, until intervener, B. R. Lacy, treasurer of the state of North Carolina, has received his entire deposit, and that the said plaintiff, Maryland Casualty Company, after payment has been made to the said B. R. Lacy, treasurer of the state of North Carolina, of the full amount of his deposit, with interest, is entitled to be subrogated to the rights of said state treasurer to, and to receive from the said J. E. Fouts, receiver, such additional dividends as may be declared by him upon the sum of $50,000, penalty of the bond executed by the Maryland Casualty Company and the amount paid by it thereon to the state treasurer. * * *"

"* * * That the plaintiff is not entitled to recover of the defendant, J. E. Fouts, receiver of the People's National Bank of Salisbury, on its indemnity agreement with the said bank, and that the said Maryland Casualty Company is only entitled to subrogation to the rights of B. R. Lacy, treasurer of the state of North Carolina, as hereinbefore set forth."

"* * * That the receiver of said bank, to wit, J. E. Fouts, pay to the said intervener, B. R. Lacy, treasurer of the state of North Carolina, the full sum of 20 per cent. dividends now declared by him as such receiver upon the sum of $89,579.14."

The court thereupon vacated a temporary restraining order enjoining the payment to the treasurer of the state of the amount of said 20 per cent. dividend, and ordered the same to be paid. From this decree the appeal in this case is taken.

While the assignments of error are quite numerous, they relate almost entirely to the questions (1) whether the appellant, the Maryland Casualty Company, should be paid dividends upon the sum of $50,000 paid by it under its bond of indemnity for said amount given in behalf of the state until the entire sum due the state, to wit, $39,579.14, in excess of the penalty of such bond, is fully paid; (2) whether, having paid the penal amount of the bond to the state treasurer, the appellant should not be subrogated to the rights of the state, and paid its dividends upon the amount thus paid by it in the distribution of the assets of the insolvent bank, notwithstanding the fact that the...