National Surety Co. v. Salt Lake County

• Decision Date: 27 March 1925
• Docket Number: No. 6819,6820.,6819
• Citation: 5 F.2d 34
• Parties: NATIONAL SURETY CO. v. SALT LAKE COUNTY et al. AMERICAN INDEMNITY CO. v. SAME.
• Court: U.S. Court of Appeals — Eighth Circuit

5 F.2d 34 (1925)

NATIONAL SURETY CO. v. SALT LAKE COUNTY et al.^*

AMERICAN INDEMNITY CO. v. SAME.

Nos. 6819, 6820.

Circuit Court of Appeals, Eighth Circuit.

March 27, 1925.

Arthur E. Moreton, of Salt Lake City, Utah, for appellants.

John Jensen, of Salt Lake City, Utah (A. M. Cheney, of Salt Lake City, Utah, Frank E. Holman, of Seattle, Wash., and L. R. Martineau, Jr., and Harold M. Stephens, both of Salt Lake City, Utah, on the brief), for appellees.

Before LEWIS, Circuit Judge, and VAN VALKENBURGH and FARIS, District Judges.

FARIS, District Judge.

These cases involve the question of appellants' right to share, by way of subrogation, in certain dividends in the hands of one Jenkins, and accruing from assets, which came into the hands of Jenkins, as receiver of the National City Bank of Salt Lake City, Utah, which failed on the 17th day of January, 1922; as also the right of appellants to participate in the proceeds of certain securities in the hands of one Groesbeck. The situation and status of the parties, so far as the pleadings and the manner in which, severally, these parties got into court are concerned, are not important; but some of the facts are necessary to an understanding of the case and to its decision.

Groesbeck was the county treasurer of Salt Lake county, Utah, and as such executed and delivered to Salt Lake county, on the 3d day of January, 1921, an official fidelity bond in the sum of $200,000, with the American Surety Company as surety therein. In this bond, as forecast above, Salt Lake county, Utah, was the obligee.

Under the permissive provisions of section 4500, Comp. Laws of Utah 1917, Groesbeck deposited the money of Salt Lake county, which came to his hands as county treasurer, in the National City Bank, and of such funds, so held by him, there was on deposit, when the bank failed, the sum of $643,094.29. The statute mentioned may be important to an understanding and disposition of the contentions urged pro and con by the parties. It reads thus:

"Any public officer having public funds in his custody may deposit the same, or any part thereof, with any bank incorporated under the national banking act and doing business in this state, or with any bank or trust company incorporated under the laws of and engaged in business in this state; provided, that he requires such depository to pay interest on all funds so deposited at a rate of not less than 2 per cent. per annum and that he take from such depository collateral security or a good and sufficient surety company bond or a personal bond approved by him and sufficient in amount to fully protect such funds; provided, that the cost of any official bonds required to be furnished by any public treasurer shall be paid out of funds in the respective treasuries; provided, that the interest received under the provisions of this title by the state treasurer shall be placed in the general fund." Section 4500, Comp. Stats. 1917.

Pursuant to the provisions and conditions of the above section, Groesbeck took from the National City Bank a surety bond, with the bank as principal and the appellant National Surety Company as surety, in the sum of $125,000, and a like bond from the Fidelity & Deposit Company in the sum of $75,000, as also a similar bond of the Massachusetts Bonding & Insurance Company in the sum of $25,000; in each of which bonds, "Groesbeck, treasurer of Salt Lake county, Utah," was the obligee. The bank also put up with Groesbeck, as collateral security to further secure the payment by the bank of the money deposited therein by him as such treasurer, $360,000, par value, of the bonds of the Crystal Lake Farms Company.

The bond of the Fidelity & Deposit Company contained an express provision that on the payment by it of the sum of $75,000, the amount for which it became liable as a surety, it should receive dividends, pro rata with other creditors, out of the assets of the bank. Such dividends it has gotten and is now getting, pursuant to an assignment to it by Groesbeck, and it is not complaining here. The bond executed by appellant National Surety Company had no express provision as to subrogation. The Massachusetts Bonding & Insurance Company for some reason, not necessary to state, even if it were known, does not complain here.

Salt Lake county, has been paid in full thus: By National Surety Company, appellant, $125,000; by Massachusetts Bonding & Insurance Company, $25,000; by Fidelity & Deposit Company, $75,000 (all paid to Groesbeck for the benefit of Salt Lake county); by the American Surety Company, $200,000 (paid to Salt Lake county, obligee therein, on the fidelity bond of Groesbeck); by the sum of $170,428.28, being a 30 per cent. dividend, paid to the county by the bank's receiver; and by the sum of $47,666.01, out of a further dividend of $56,809.42, in the hands of the receiver, and now apportionable. The county's right to this sum of $47,666.01, out of the dividend now apportionable, is, it is said in the brief of appellant National Surety Company, conceded. So there are left in dispute here only the balance of this dividend, to wit, $9,143.41, plus participation in future dividends, if any, and whatever sum may be derived from the sale of the Crystal Lake Farms bonds, the par value of which is $360,000; actual value, neither clear nor important. These bonds were assigned by Groesbeck to the American Surety Company, between whom and appellant National Surety Company the contest here is waged. The right of American Indemnity Company, appellant in case No. 6820, is a derivative one, dependent wholly upon recovery by the National Surety Company; so, no further reference need be made as to it, or as to its appeal till the end of the discussion.

The single question is whether, upon the facts stated, the law and the equities give these remaining dividends and the proceeds of the Crystal Lake Farms bonds, after the county has been paid in full, to the appellant National Surety Company or to the appellee, American Surety Company. The learned trial court held that the American Surety Company is entitled to all funds derived and to be derived from such dividends and bonds, till it shall have been paid the sum of $223,362.15, the total sum paid by it on its fidelity bond, including interest, and with interest on the basic sum, at the rate of 8 per cent., from February 29, 1924, and that the appellant National Surety Company shall be postponed in participation in such funds till the appellee American Surety Company, shall have been paid in full.

The correctness of this decree is assailed by appellant, and such correctness of it is in various allegations assigned as error, for that it is contrary to law and equity.

It is conceded by counsel for appellee that the money which Groesbeck deposited in the bank was...