National Surety Co. v. Jenkins

• Decision Date: 28 March 1927
• Docket Number: No. 7409.,7409.
• Citation: 18 F.2d 707
• Parties: NATIONAL SURETY CO. v. JENKINS et al.
• Court: U.S. Court of Appeals — Eighth Circuit

18 F.2d 707 (1927)

NATIONAL SURETY CO. v. JENKINS et al.^*

No. 7409.

Circuit Court of Appeals, Eighth Circuit.

March 28, 1927.

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

Paul H. Ray, of Salt Lake City, Utah (E. M. Bagley and Robert L. Judd, both of Salt Lake City, Utah, on the brief), for appellee Jenkins.

John Jensen, of Salt Lake City, Utah (A. M. Cheney, L. R. Martineau, Jr., and Harold M. Stephens, all of Salt Lake City, Utah, on the brief), for appellees American Surety Co. and Groesbeck.

Before BOOTH, Circuit Judge, and PHILLIPS and JOHN B. SANBORN, District Judges.

PHILLIPS, District Judge.

The National Surety Company brought this action against Edward E. Jenkins, as receiver of the National City Bank of Salt Lake City, Utah, to compel the allowance of its claim upon an indemnity agreement entered into between the bank and the National Company and the payment of dividends thereon. The receiver answered and prayed that the American Surety Company and E. J. Groesbeck be required to interplead in the action. The court entered an order directing that Groesbeck and the American Company appear in the action and set forth their claims, if any, to the assets out of which the National Company sought the payment of dividends. Thereupon Groesbeck and the American Company filed their answer. The answers of the receiver, the American Company and Groesbeck set up the decree in the case of National Surety Co. v. Salt Lake County (C. C. A. 8) 5 F.(2d) 34, and alleged that under the doctrine of res adjudicata the National Company was estopped from asserting its alleged claim upon the contract of indemnity and from receiving dividends thereon out of the assets of the insolvent bank. These answers also alleged that the National Company was not entitled to participate in such dividends until the American Company had been paid in full under its right of subrogation to the claim of Salt Lake county.

The facts material to the determination of the questions here involved are these:

Groesbeck was the county treasurer of Salt Lake county, Utah. On the 3d day of January, 1921, Groesbeck as principal, and the American Company as surety, executed and delivered to Salt Lake county an official fidelity bond in the sum of $200,000. Groesbeck deposited funds which came into his hands as county treasurer with the bank. To secure such deposit, the bank, as principal, executed and delivered to Groesbeck three surety bonds, one executed by the National Company as surety, in the sum of $125,000, one by the Fidelity & Deposit Company as surety, in the sum of $75,000, and one by the Massachusetts Bonding & Insurance Company, as surety, in the sum of $25,000. These bonds ran to Groesbeck, treasurer of Salt Lake county, Utah, as obligee. The bank also deposited with Groesbeck, as collateral security to further secure such deposit, Crystal Lake Farm Company bonds of the par value of $360,000. The bank, in its application to the National Company for the bond executed by it as surety, agreed to indemnify the National Company for all losses it might suffer by reason of its liability as surety under such bond. After the payment by the National Company of its liability under such bond, it assigned to the American Indemnity Company $5,000 of its claim upon such contract of indemnity.

The bank failed January 17, 1922. At that time, the treasurer's deposit with the bank amounted to $643,094.29. Salt Lake county was paid in full as follows: By the National Company $125,000, by the Massachusetts Company $25,000, by the Fidelity Company $75,000, by the American Company $200,000, and by two dividends paid by the receiver on the deposit of Groesbeck as treasurer. The first dividend amounted to $170,428.28. The second dividend amounted to $56,809.42. At the time the second dividend was paid, the balance due the county was $47,666.01, leaving an overplus of $9,143.41.

On March 10, 1924, Salt Lake county, Groesbeck as treasurer, and the American Company brought an action against the receiver, in which they sought a decree directing the receiver to pay out of the second dividend $47,666.01 to Salt Lake county, and the balance of $9,143.41 and all future dividends to accrue on the deposit of Groesbeck as treasurer, and the proceeds of the Crystal Lake bonds to the American Company. The plaintiffs in that suit asserted that the American Company was subrogated to the rights of Salt Lake county and Groesbeck as treasurer. The receiver answered, setting up that the National Company and Massachusetts Company had paid the sums of $125,000 and $25,000, respectively, on account of the depository bonds executed by them as sureties, and were claiming that they were subrogated to the rights of Groesbeck and the county, and were entitled to the excess of the second dividend and the future dividends to be paid on account of such deposit, and the proceeds of the Crystal Lake bonds, and prayed that they be required to interplead in the action. On March 28, 1924, the court entered its order directing the receiver to pay the sum of $56,809.42, the amount of the second dividend, into the registry of the court to abide the orders and direction of the court, and ordered the National Company and the Massachusetts Company to interplead in the action, and to show cause, if any they had, why the money and the funds claimed by the plaintiffs in such action should not forthwith be paid to such plaintiffs.

The National Company appeared and filed its answer. It set up its claim to subrogation, and also set up the indemnity agreement, and the fact that it had duly presented its claim thereon to the receiver. The National Company prayed that it be decreed to be entitled to subrogation to its pro rata share of said $9,143.41, and to its pro rata share of all dividends thereafter to be declared by the receiver by reason of the deposit of Groesbeck, as treasurer, and to its pro rata share of the Crystal Lake bonds. It also prayed that the claim of the National Company against the receiver in the sum of $125,000 arising out of such indemnity agreement be allowed and approved, and that the receiver be ordered to pay the National Company dividends thereon. The receiver filed no pleading in response to the answer of the National Company. The American Company filed an answer thereto, in which it denied the right of the National Company to subrogation, and also alleged that it had no knowledge or information sufficient to form a belief as to the truth of the allegations relative to the indemnity agreement, and therefore denied the same. The former cause duly came on for trial. At the commencement of the trial a stipulation was entered into between counsel, by which it was agreed that the balance due Salt Lake county should be paid out of the fund, and an order was entered directing that such payment be made. Counsel for the American Company and the county thereupon announced that the litigation as it then stood was wholly between the American Company on the one side, and the Massachusetts Company and the National Company on the other side, as to which was entitled to the prior right of subrogation to the balance of the second dividend, to the future dividends to be paid on the deposit of Groesbeck as treasurer, and to the Crystal Lake bonds. That was the sole issue tried by the court and determined and adjudicated by its decree. That was the sole issue considered by this court on the appeal of the case. See National Surety Co. v. Salt Lake County (C. C. A.) 5 F.(2d) 34, where District Judge Faris, speaking for the court, said:

"These cases involve the question of appellants' National Surety Company and American Indemnity Company 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 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."

While the indemnity agreement of the National Company was pleaded and introduced in evidence, it was upon the theory that it gave a superior equity to the National Company, and because thereof, a prior right to subrogation.

Counsel for the American Company, in a portion of their brief in the former case which was introduced in evidence in the instant case, said:

"As we understand them, the contentions of the National Surety Company are substantially as follows:

"I. That the indemnity agreement of the bank, embodied in the bank's application to the National Surety Company for depository bond, gives the National Surety Company a direct legal right, not to indemnity out of the general assets of the bank as such, but to indemnity out of the dividends declared and payable upon the claim of Mr. Groesbeck. * * *

"It is * * * clear...