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Continental Casualty Co. v. United States

January 29, 1934


Appeal from the District Court of the United States for the Southern District of Illinois, Southern Division; John P. Barnes, Judge.

Author: Alschuler

Before ALSCHULER, EVANS, and SPARKS, Circuit Judges.

ALSCHULER, Circuit Judge.

The decree for appellees, from which this appeal is taken, was rendered in an equity suit against appellant as surety upon a bond in the penal sum of $100,000 given to secure deposits of bankruptcy funds in the Ridgely-Farmers State Bank, of Springfield, Ill., the principal of the bond, against loss on account of such deposits. The bond, with indorsement of approval thereon by the United States District Judge, is set forth in the margin.*fn1

The bank failed and was closed December 29, 1932, since which time a receiver has been in charge; and up to the time of the hearing no dividend had been paid. At the time of failure bankruptcy receivers and trustees had on deposit in the bank bankruptcy funds aggregating $115,399.40, all of which remained unpaid. The suit was brought by the United States for the use of the several trustees and receivers in bankruptcy (199 in number) who had such deposits in the bank. The decree was for the full penalty of the bond.

Appellant contends that the cause of action, brought in equity to avoid multiplicity of suits, was cognizable at law and that equity does not have jurisdiction. It is maintained that the United States might have brought a single suit at law, and in case judgment was recovered each person entitled thereto could then have assessment of his damages made. In view of what we determined in Illinois Surety Co. v. United States, 226 F. 665, where just such a situation was presented, we deem it unnecessary to discuss the proposition. We there held that where a bond, in like form as here, had been given by a depository to secure the various deposits of bankruptcy funds, the action thereon should be brought in equity.

It is urged that the District Court erred in hearing the case at the time it was heard, in that under Equity Rule 47 (28 USCA § 723) it was improper to set the case for trial before the expiration of 110 days after the cause was at issue.

The applicable facts thereon are: The bill was filed March 14, 1933, to which appellant filed a motion to dismiss. Both judges of that district being disqualified to act, District Judge Barnes of the Northern District of Illinois was designated. He sat at Springfield April 21, at which time the motion to dismiss was denied, the time to file answer extended to May 1, and the cause set for hearing May 19. Answer was filed April 29. On May 16 appellant served notice that it desired to take depositions, and that on the 19th it would move for a continuance before Judge Barnes in order to take depositions of named witnesses living more than one hundred miles away, and on May 19 appellant moved for continuance of the hearing accordingly. None of the moving papers indicated what was sought to be shown by such witnesses. On inquiry by the court, appellant's counsel said that one of the proposed witnesses was, at the time the bond was executed, in appellant's office at Chicago, and that he had conversations relative to execution of the bond; and that the other had knowledge of telephone conversations with one of the officers of the bank. Counsel said:

"We expect to show not only the computation of the return premium, but also the preparation of notices, and matters in the Chicago office, and conversations relative to the cancellation of this bond. * * * By this young man. I am not sure, but it is my understanding that he did have a conversation, or someone had."

Nothing which was so disclosed could have tended to invoke the court's discretion to grant a continuance, nor to indicate an abuse of discretion in denying it. But it is contended that under the equity rule the case could not properly be set until the aggregate of time therein mentioned within which depositions might be taken had expired, which aggregate is 110 days.

In our judgment the rule (see margin*fn2) does not contemplate that the time fixed therein is an inhibition upon the setting of the case within such time. We regard it rather as an inhibition upon the parties against postponement of the setting and the hearing of the cause beyond the times as fixed in the rule, unless indeed the statute otherwise provides. Deutsch v. Southern Corp. (D.C.) 53 F.2d 96; Reflectolyte Co. v. Edwin F. Guth Co. (D.C.) 31 F.2d 777; Kentucky-Tennessee Light & P. Co. v. City of Paris, Tenn., 48 F.2d 795 (C.C.A. 6).

But even if appellant is correct in its construction of the rule, the record does not show that at the time the setting was made there was any objection thereto by appellant. Any right of insistence that the setting be not within the time fixed by the rule was thus waived. This left the disposition of the motion for continuance within the court's discretion, which we do not find to have been abused in denying the continuance.

Appellant contends that under section 61 of the Bankruptcy Act (11 USCA § 101) providing that "Courts of bankruptcy shall designate, by order, banking institutions as depositories for the money of bankrupt estates, * * * and shall require bonds to the United States, subject to their approval," it is necessary that in the record of a suit on such a bond there must appear in evidence an order made by the court designating the bank as a depository and approving the bond, and that no such orders are shown by this record.

The pleadings do not specifically raise any such issues, and they cannot be first raised in the assignments of error and the briefs. But appellant is in no position to raise such questions. It executed and delivered the bond upon the assumption that the bank had been duly designated a depository, and during the intervening years appellant proceeded upon the assumption that the bank had been duly designated as depository, and that the bond had been duly approved by the court. It well knew that the bank itself, and the receivers and trustees in bankruptcy, were relying upon the same assumption. The approval of the district judge was indorsed on the bond itself. Every act of appellant, including its letter of withdrawal from the bond, written nearly six years after the bond was executed, points unerringly to its assumption that it was, up to that time, a lawful surety upon a lawful and effective bond. Under these circumstances we are of opinion that ...

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