Source: https://supreme.justia.com/cases/federal/us/300/414/
Timestamp: 2019-04-22 08:52:18+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 300 › Dugas v. American Surety Co.
In a proceeding brought in the District Court by a surety company under the Interpleader Act of May 8, 1926, to interplead the several claimants upon a qualifying bond, the amount of the bond was paid by the surety into the registry of the court, and two decrees were entered, the first discharging the surety from further liability on the bond and enjoining the several claimants from prosecuting any suit against the surety on account of any claim or right arising out of the bond, and a later determining the rights of the several claimants in the deposited fund and directing its distribution among them on a pro rata basis. No appeal was taken from either decree. In an earlier proceeding in a state court, one of the claimants had obtained a judgment against the surety under the qualifying bond, from which judgment an appeal by the surety was pending, an appeal bond suspending execution having been filed. He objected to being brought into the interpleader, but agreed to the second decree in it and took his share of the distribution.
1. The District Court in the interpleader suit had jurisdiction of both the subject matter and the parties. P. 300 U. S. 425.
2. The decrees in the interpleader suit completely terminated the liability of the surety on the qualifying bond and fixed the full measure of the claimant's right under that bond. P. 300 U. S. 425.
the exercise of the court's jurisdiction, were subject to challenge and reexamination only on appeal, and became conclusive on the claimant in the absence of an appeal. P. 300 U. S. 425.
4. Though the payment was into the court's registry, and not directly to the claimants, it nevertheless was a lawful and effective payment under the Interpleader Act. P. 300 U. S. 425.
5. As the judgment in the state court was based solely on the qualifying bond, the payment of the bond and discharge of the surety, as effected in the interpleader suit, operated, under recognized principles of law and equity, to extinguish the claimant's right under the judgment. P. 300 U. S. 425.
6. In subsequently bringing suit in the state court on the appeal bond and attempting to realize on the prior judgment, the claimant contravened the fair intendment of the decrees in the interpleader suit. P. 300 U. S. 426.
7. As the claimant's right under the state court judgment was extinguished, he was no more entitled to realize on the judgment by suing the surety on the appeal bond than by suing the principal. P. 300 U. S. 428.
8. And as the surety on the appeal bond would be entitled to reimbursement from the principal were judgment to go against the former, the principal may be heard to complain. P. 300 U. S. 428.
9. The District Court has jurisdiction to entertain a supplemental bill in aid of and to effectuate its prior decrees. P. 300 U. S. 428.
10. Such a bill is ancillary and dependent, and the jurisdiction follows that of the original suit, regardless of the citizenship of the parties to the bill or the amount in controversy. P. 300 U. S. 428.
11. The power of the District Court to enjoin the claimant from further prosecution of his suit in the state court on the appeal bond finds support in §§ 2 and 3 of the Interpleader Act, as well as in settled adjudications respecting the power of a federal court to protect its jurisdiction and decrees. P. 300 U. S. 428.
82 F. 2d 953, affirmed.
Act of May 8, 1926. [Footnote 1] and over the propriety of subsequent proceedings in the same court upon a supplemental bill brought in aid of and to effectuate that decree.
It will be helpful to state the facts with some detail.
February 12, 1930, the Lumbermen's Reciprocal Association, a Texas insurance corporation, by way of qualifying itself to engage in writing workmen's compensation and other insurance in Louisiana, executed a bond, in the sum of $20,000.00, conditioned for the payment of claims lawfully arising against it by reason of insurance so written. The bond was given conformably to a Louisiana statute, [Footnote 2] and was executed by the American Surety Company, a New York corporation, as surety. Later in 1930, and after writing a substantial volume of insurance in Louisiana, the Lumbermen's Reciprocal Association became embarrassed, and was placed in the hands of a receiver by a court in Texas.
April 14, 1931, in a suit brought in a Louisiana court, Etienne Dugas, who had a claim against the Lumbermen's Reciprocal Association arising out of workmen's compensation insurance written by it in Louisiana, recovered against the American Surety Company, as surety on the qualifying bond, a judgment for the payment of $20 per week for not more than 300 weeks commencing May 15, 1930, subject to modification as to future payments if his disability was relieved or reduced, and for $250 for medical bills, together with costs.
bond conditioned that it should diligently prosecute its appeal and satisfy whatever judgment might be rendered against it if cast in the appeal. The appeal bond was given conformably to a law of the state, [Footnote 3] was in the sum of $10,000, and was executed by the New York Casualty Company as surety. The appeal was perfected and the record duly filed in the Court of Appeal, but nothing further was done therein for reasons which soon will appear.
Many other claims arising out of insurance written in Louisiana by the Lumbermen's Reciprocal Association were asserted under the qualifying bond. In the aggregate, these claims were far in excess of the amount of the bond.
"This Court has jurisdiction because this is a bill of interpleader in equity brought by a surety company against bona fide adverse claimants against its bond of February 12, 1930, two or more of whom are citizens of different states, and one or more of said adverse claimants resides or reside within the territorial jurisdiction of this Court. . . ."
"Plaintiff disclaims any interest in the amount of its said bond except to pay same to the persons lawfully entitled thereto. . . . "
"By reason of the conflicting claims against the said bond, and the fact that claims already known to plaintiff greatly exceed the amount of the said bond, plaintiff is in grave danger of being greatly harassed and damaged, and cannot safely make payments to any claimant without the aid of this Court."
"Plaintiff, with the permission of this Court first obtained, has paid into the Registry of this Court the said sum of $20,000.00, the amount of said bond, to abide the judgment of this Court."
The bill prayed that Dugas and the other claimants be cited to interplead and settle among themselves their claims to the amount of the bond deposited in the court's registry; that each of them be temporarily and permanently enjoined from instituting or prosecuting in any state court or in any other federal court any suit on account of any right or claim growing out of the qualifying bond; that the plaintiff be released from all further liability on the qualifying bond, and that any other or further relief deemed proper in the premises be granted.
All claimants under the qualifying bond, including Dugas, were called into the suit as defendants.
June 24, 1931, the court after a hearing granted an interlocutory injunction conforming to the prayer in the bill.
Dugas resisted the bill by an exception of no cause of action, a plea of estoppel, and an answer. In the plea and answer, he specifically relied on the judgment of April 14, 1931, in the state court and the appeal therefrom, together with the appeal bond, as showing that he should not be brought into the interpleader suit.
3. Appointing a special master and charging him with the duty of hearing the claimants and reporting upon the manner in which the fund deposited in the registry, less specified fees and costs, should be distributed among the claimants.
No appeal was taken then or thereafter from that decree, and it remained in full force and effect.
In due course, hearings were had and evidence was produced before the special master, after which he submitted a report containing his findings of fact, conclusions of law, and recommendations for a distribution of the fund, less fees and costs, among the several claimants upon a pro rata basis. The report also contained a statement showing what he found to be the true and full amount of each claim, the total being in excess of $60,000, and a further statement showing the amount which, on a pro rata distribution, would be payable on each claim. As to Dugas' claim, the master reported the true and full amount as $4,160.68, [Footnote 4] and the pro rata share of the fund payable on the claim as $1,141.29.
filed in the suit a written stipulation declaring that they acquiesced in the report, waived the time allowed for filing exceptions, and requested the court to confirm the report and make it the court's decree.
April 20, 1933, the court, with the special master's report and the stipulation before it, rendered a decree confirming the report and directing that the balance of the fund in the registry be distributed among the several claimants in accordance with the master's recommendations. No appeal was taken from this decree.
The fund was distributed and paid out accordingly, and was thereby exhausted. Dugas accepted the pro rata share accorded to him in the master's report and the confirming decree.
the amount for which judgment was prayed was reduced to $2,999 to forestall a removal to the federal court.
of April 14, 1931, on the qualifying bond; that, if Dugas should collect any sum from the New York Casualty Company in his suit against it as surety on the appeal bond, the American Surety Company, as principal on that bond, would be bound to reimburse such surety, and that, in these circumstances, Dugas' suit against the New York Casualty Company was essentially an effort to enforce the judgment of April 14, 1931, which was based solely on the qualifying bond, and therefore was an attempt indirectly to subject the American Surety Company to further liability on account of that bond contrary to the decree of September 19, 1932. Accordingly, and in aid of the decrees in the interpleader suit, the supplemental bill contained prayers for an injunction restraining Dugas from further prosecuting his suit against the New York Casualty Company, and for general relief.
To the supplemental bill, Dugas filed pleas challenging the jurisdiction of the court, its power to enjoin proceedings in the state court, and the sufficiency of the case stated. The pleas were overruled, and Dugas answered. Upon the final hearing, the court found the facts to be as alleged in the supplemental bill, and held that Dugas' suit against the New York Casualty Company as surety on the appeal bond was essentially an effort to enforce against the American Surety Company the judgment which he had obtained against it as surety on the qualifying bond, and therefore was in contravention of the spirit, if not the letter, of the decrees in the interpleader suit, and, on that basis, the court gave a supplemental decree specifically enjoining Dugas from further prosecuting his suit in the state court against the New York Casualty Company. Dugas appealed, and the Circuit Court of Appeals affirmed the decree, one judge dissenting. 82 F.2d 953. The case is here on certiorari.
1. The amount or penalty of the qualifying bond was $20,000. The surety's obligation was not to Dugas alone, but to the other claimants as well, and this obligation was not to pay all claims regardless of their aggregate, but to pay $20,000, or so much thereof as should be needed, and no more. Because the claims exceeded $20,000, the surety paid that sum into the registry of the federal court, there to abide the court's decree, and at the same time brought in that court its interpleader suit against all claimants, including Dugas, to the end that its liability on the bond might be terminated, and that the rights of the several claimants in the amount of the bond so paid into court might be judicially determined and the fund distributed accordingly.
to issue its process for all such claimants and to issue an order of injunction against each of them, enjoining them from instituting or prosecuting any suit or proceeding in any State court or in any other Federal court . . . on such bond . . . until the further order of the court; which process and order of injunction shall be returnable at such time as the said court or a judge thereof shall determine, and shall be addressed to and served by the United States marshals for the respective districts wherein said claimants reside or may be found."
"SEC. 3. Said court shall hear and determine the cause and shall discharge the complainant from further liability, and shall make the injunction permanent and enter all such other orders and decrees as may be suitable and proper, and issue all such customary writs as may be necessary or convenient to carry out and enforce the same."
By plea and answer, Dugas objected to being brought into the interpleader suit and grounded the objection upon the judgment, appeal, and appeal bond in his earlier suit in the state court; but the objection was overruled, and the cause proceeded to the rendition of two related decrees.
In one decree, given September 19, 1932, the complainant surety, by reason of its payment of the amount of the qualifying bond into the court's registry, was discharged from any and all further liability on account of that bond, and the several claimants, including Dugas, were enjoined from instituting or prosecuting against the complainant surety, so discharged, any suit on account of any claim or right growing out of such bond. In the other decree, given April 20, 1933, the court determined the rights of the several claimants, including Dugas, in the fund paid into the registry, and directed its distribution among them on a pro rata basis -- this decree being in exact accord with a stipulated request by all claimants, including Dugas.
Taken together, the two decrees not only completely terminated the liability of the complainant surety on the qualifying bond, but also fixed the full measure of Dugas' right or claim under the bond, and in necessary effect determined that the judgment, appeal, and appeal bond in his earlier suit in the state court did not put his claim beyond the reach of the interpleader suit, or require that it be dealt with differently from other claims.
Plainly, the court had jurisdiction of both the subject matter and the parties. No appeal was taken from either decree. Therefore, Dugas was bound by both decrees. Had he exercised his right to appeal, he could have obtained a review of the rulings on his objection to being brought into the suit, on the bearing and effect of the prior judgment and proceedings in the state court and on the right of the complainant surety to be discharged from further liability in respect of his claim. But these rulings were all made in the exercise of the court's jurisdiction, were subject to challenge and reexamination only on appeal, and became conclusive on him in the absence of an appeal.
3. In the interpleader suit, there was an actual, complete, and judicially sanctioned payment of the qualifying bond by the surety, and it was on this basis that the surety was discharged from all further liability. While the payment was into the court's registry, and not directly to the claimants, it nevertheless was a lawful and effective payment under the Interpleader Act. In effect, the first decree converted the claims under the bond into claims against the fund paid into the registry, and the second decree, made after a hearing in which all claimants were heard, directed and brought about a distribution of the fund among them according to their ascertained rights.
operated, under recognized principles of law and equity, to extinguish his right under the judgment. He relied on the judgment in his several pleadings and the decrees fixed the measure of his claim conformably to the judgment. Even the costs awarded to him by the judgment were included in the computation. Thus, it is plain that the interpleader suit and the decrees therein dealt with his claim as it was embodied in and evidenced by the judgment.
4. Whether, in subsequently bringing suit in the state court on the appeal bond, Dugas contravened the fair intendment of the decrees in the interpleader suit is the principal question arising on the supplemental bill. Both courts below answered the question in the affirmative.
It already has been shown in this opinion that his right under the judgment was extinguished by the proceedings and decrees in the interpleader suit.
With this understanding of the operation and effect of the decrees in that suit, it becomes plain that Dugas' action in bringing suit on the appeal bond, and thereby attempting to realize on the prior judgment notwithstanding the extinguishment of his rights under it, was in contravention of those decrees.
His counsel contends otherwise, and seeks to support the contention by pointing out that the injunction did not directly forbid Dugas from suing on the appeal bond, but only from instituting or prosecuting any suit against the complainant surety on account of a right or claim growing out of the qualifying bond. But the injunction, being only one part of the decrees, is not the exclusive criterion of what was determined and effected by them. Its purpose was to forestall anticipated departures, not to limit other provisions or restrict their operation and effect.
By the other provisions, it was adjudged that the complainant surety had complied with all of its obligations under the bond by paying the amount of the bond into the court's registry; that, by reason of this compliance, it was discharged from any and all further liability on account of the bond, and that the several claimants under the bond, all of whom had been brought in and heard, were entitled to designated portions of the fund so paid into the registry. Under this last provision, each claimant was paid his portion, the fund being thereby exhausted. It also was adjudged that the fact that Dugas' claim was embodied in and evidenced by a judgment did not make it other than a claim under the bond or take it without the reach of the interpleader suit. He acquiesced in that and other rulings, and the amount of his claim and his proportionate share of the fund were fixed conformably to the judgment. He acquiesced also in this, and accepted the share so allotted to him. In this way, the other provisions in the decrees accomplished, as they were intended to do, the extinguishment of his right under the judgment, and they did this independently of the injunction.
that, in such as involved questions approximately like those presented to the District Court in the original suit, there were locally appropriate applications for the exercise of appellate authority before the rulings became conclusive, which was not the case here.
Some reliance is placed on the fact that the suit on the appeal bond was against the surety thereon alone. But this does not make for a different result. As Dugas' right under the judgment was extinguished, he was no more entitled to realize on the judgment by suing the surety on the appeal bond than by suing the principal. Besides, the surety, if cast in the suit and compelled to pay, would be entitled to reimbursement by the principal. The latter, therefore, may be heard to complain in the circumstances shown here.
THE CHIEF JUSTICE and MR. JUSTICE CARDOZO are of opinion that the decree should be reversed for the reasons stated by Sibley, J., in the court below.
* Opinion begins on p. 300 U. S. 423, infra.
Ch. 273, 44 Stat., Pt. 2, 416. Repealed and new act substituted January 20, 1936, c. 13, 49 Stat. 1096, but with saving clause respecting any act done or any right, accruing or accrued, in any suit or proceeding had or commenced under the earlier act prior to its repeal.
Act 172, La.Laws No. 172, 1908, p. 232.
Code Prac., arts. 575, 579.
The master found Dugas' disability was materially relieved at the time the hearing began (October 26, 1932) and recommended that his claim be allowed at $20 per week for the 127 weeks preceding the hearing at $8 per week for 173 weeks, discounted at 8 percent, and at $250 for medical bills and $97.40 for costs and expert testimony, making a total of $4,160.68.
Dugas v. New York Casualty Co., 181 La. 322, 159 So. 572.
Cage's Executors v. Cassidy, 23 How. 109, 64 U. S. 116; Carpenter v. Longan, 16 Wall. 271, 83 U. S. 275; Dodge v. Freedman's Savings & Trust Co., 93 U. S. 379, 93 U. S. 382; United States v. Chouteau, 102 U. S. 603, 102 U. S. 610-611. And see Illinois Surety Co. v. Peeler, 240 U. S. 214, 240 U. S. 225.
Story's Equity Pleading (9th Ed.) § 338; Root v. Woolworth, 150 U. S. 401, 150 U. S. 410-412; Local Loan Co. v. Hunt, 292 U. S. 234, 292 U. S. 239.
Root v. Woolworth, supra, p. 150 U. S. 413; Local Loan Co. v. Hunt, supra.
French v. Hay, 22 Wall. 238, 89 U. S. 250; Root v. Woolworth, supra, p. 150 U. S. 411; Julian v. Central Trust Co., 193 U. S. 93, 193 U. S. 112; Madisonville Traction Co. v. Saint Bernard Mining Co., 196 U. S. 239, 196 U. S. 245; Looney v. Eastern Texas R. Co., 247 U. S. 214, 247 U. S. 221; Wells Fargo & Co. v. Taylor, 254 U. S. 175, 254 U. S. 183.

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