Ætna Casualty & Surety Co. v. United States Fidelity & Guaranty Co. , 11 F.2d 102 ( 1926 )

BRYAN, Circuit Judge.

Appellants joined in a single bill of complaint to cancel two bonds; one for $20,000 upon which the HDtna was surety, and the other for $30,000 upon which the Standard was surety. Each, of the bonds recites that the principal, the Florida Bank & Trust Company, of Gainesville, Fla., on August 7, 1923, had been designated by the board of bond trustees of a special road and bridge district as depository of the funds of that district, and is conditioned that the bank should safely keep, account for, and pay over to the board upon demand “all money that may come into its hands by virtue of its acting as said depository,” ete.

Cancellation of the bonds was sought on the ground that they were procured as a result of fraud committed by the United States Fidelity & Guaranty Company in an effort to relieve itself of liability as surety upon a similar bond for $85,000.

The parties defendant to the bill were the United Stales Fidelity & Guaranty Company, the receivers of the bank, and the board of trustees of the special road and bridge district. Diversity of citizenship was averred to exist between appellants on the one hand and the Fidelity & Guaranty Company on the other; but none of them was a citizen of Florida where the suit was brought, and, because of this, the Fidelity & Guaranty Company claimed its privilege under section 51 of the -Judicial Code (Comp. St. § 1033) to he sued in the district of the residence of either itself or the plaintiffs, and its motion to be dismissed from the suit was granted. Subsequently the motion of the board of trustees to dismiss the bill of complaint was also granted.

The averments of the bill relied on to sustain the charge of fraud are, in substance, as follows: On September 4,1923, the board of trustees had on deposit in the bank the sum of $161,545.10, which was protected by bonds aggregating $160,500. The fidelity & Guaranty Company was surety on one of these bonds for $85,00"0, which did not expire until December of 1923, but on September .17th it ascertained upon an examination of assets and liabilities that the bank was insolvent. It thereupon demanded of the bank that the latter secure a release of its bond, and procure bonds from other surety companies that did not have any knowledge of the bank’s financial condition. In compliance with this demand the bank applied to appellants, and procured from them the bond's sought to be canceled, which the board of trustees, on October 2d, accepted and approved, and by resolution released the Fidelity & Guaranty Company from future liability on its $85,000 bond, but held that bond as security for any liability which already had accrued, and accepted from the bank and the Fidelity & Guaranty Company new bonds aggregating $35,000. In short, the charge of fraud is that the Fidelity & Guaranty Company secured a release of liability to the extent of $50,000 at the expense of appellants. The bill further avers that the bank failed on October 8th, and that its indebtedness to the board of trustees at the time of its failure amounted to $146,000, but that the board of trustees had deposited only $41.50 after the acceptance of the bonds upon which appellants were sureties.

It is first insisted that it was error to grant the motion of the Fidelity & Guaranty Company to dismiss, on the ground that the purpose of the suit was to enforce a claim to personal property, that is to say, to the $85,000 bond, and was maintainable as a local action under section 57 of the Judicial Code (Comp. St. § 1039). But we are of opinion that the motion to dismiss should have been granted. Appellants have no claim to the bond, which is but evidence of a liability assumed in favor of the board of trustees. So far as appears, no misrepresentations were made to appellants, but they were left free to make their own investigation and determine 'for themselves whether they would assume the risk involved in becoming sureties for the bank. It is not charged that the board of trustees was guilty of any fraud, nor that its resolution undertaking to release the Fidelity & Guaranty Company from future liability has resulted in any substantial injury to appellants. The limit of liability of both appellants, according to the averments of the bill, is only $41.56, a sum much too small to give a federal district court jurisdiction of the subject-matter of the suit. It further affirmatively appears from the bill that appellants do not need the aid of a court of equity, and that they have a complete defense to any suit the board of trustees might bring against them on account of deposits in the bank made prior to the approval and acceptance of the bonds upon which they are sureties.

The decree is affirmed.