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DEITRICK v. STANDARD SURETY & CASUALTY CO.

decided: March 28, 1938.

DEITRICK, RECEIVER, ET AL
v.
STANDARD SURETY & CASUALTY CO.



CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIRST CIRCUIT.

Hughes, McReynolds, Brandeis, Butler, Stone, Roberts, Black, Reed

Author: Mcreynolds

[ 303 U.S. Page 472]

 MR. JUSTICE McREYNOLDS delivered the opinion of the Court.

The Boston-Continental National Bank, established in December 1930 through consolidation of Boston National Bank and Continental National Bank, became insolvent. December 17, 1931, a receiver appointed by the Comptroller of the Currency took charge of its affairs. Petitioner is his successor. Among the bank's effects were four "Note-Guaranty" Bonds -- $40,000, $52,000, $20,000 and $20,000 -- alike in form, dated in August and December 1930 and June and July 1931, with certain "endorsements" showing extensions. Each purported to be executed by the maker of a described note as principal with Respondent as surety, and was conditioned to pay to the bank the amount of the note upon default, &c.

In June and September 1932 the Receiver brought separate actions at law upon three of these bonds. In each he alleged that the Company was indebted to him for the specified penalty with interest; and for this he asked judgment. The three declarations are alike in form and allegations. One, typical of all, is copied below.*fn1

[ 303 U.S. Page 473]

     There also is one of the Note-Guaranty Bonds, typical of all.*fn2 Each declaration exhibited a bond, alleged that thereby the Company bound itself to pay the bank a

[ 303 U.S. Page 474]

     specified sum in the event of default, which had occurred, &c., that damages had been sustained whereby the surety had become indebted "in the penal sum of said bond, with interest."

[ 303 U.S. Page 475]

     Answering, the Company denied liability and alleged that, as the bank well knew, the bond was executed without authority, had been fraudulently obtained, was invalid.

Before the three law actions were filed the Surety Company instituted four separate equitable proceedings in the Supreme Court, Suffolk County, Massachusetts, against the bank and makers of guaranteed notes. Each complaint alleged that the bank had fraudulently obtained the bond and asked that it be declared null and void. Later the Receiver became party in these causes and all were removed to the federal court. There, he filed separate answers, substantially alike, averring that the bond had been duly executed, that default had taken place and that damages amounting to the full amount of the specified penalty had been sustained. Each answer concluded -- "Wherefore these defendants pray: 1. That the court determine the amount due from the plaintiff to Boston-Continental Bank and John B. Cunningham, its receiver, and order the plaintiff to pay the same with interest. 2. For such further relief as the court finds meet and just."

Copies of one complaint*fn3 and answer*fn4 thereto, typical of all, ...


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