Under the bond the company is bound as principal upon breach. This is the crux of the whole case. Plaintiff claims there has been no breach. Defendant claims that when the Franklin Trust Company failed and was insolvent the breach was complete. The court feels that the breach was complete under the terms of the agreement when the trust company closed its doors, unable to pay its depositors in full. The breach having occurred, it thereupon became the duty of the state officials to protect the interests of the state to the best of their ability. Public policy naturally entered largely into the question in making up their decision as to the course to follow. The fact that the state officials, knowing the acute condition of public affairs, deemed it wise public policy to pursue the course they did, does not, in the absence of an actual violation of constitutional or legal rights, furnish a ground for the intervention of a court in equity.
Findings of Fact and Conclusions of Law.
Findings of Fact.
1. Defendant National Surety Company is principal on four bonds, dated respectively June 14, 1921, December 2, 1922, January 5, 1923, and March 14, 1928, aggregating $400,000, and given to the Commonwealth of Pennsylvania to secure its deposits in Franklin Trust Company, Philadelphia, among the provisions of all of which bonds is included the following: "And in case of a breach of any of the conditions of the foregoing bond, the said surety holds itself bound as principal for any debts arising thereunder, in the amount aforesaid, and agrees to answer for the same without regard to and independently of any action taken against the said Franklin Trust Company of Philadelphia and whether the said Franklin Trust Company be first pursued or not."
2.Franklin Trust Company closed its doors and was taken into possession by the secretary of banking of the commonwealth of Pennsylvania on October 5, 1931.
3. There was on deposit in Franklin Trust Company on October 5, 1931, commonwealth of Pennsylvania funds aggregating $450,000, together with accrued interest due thereon.
4. On or about October 21, 1931, the state treasurer made formal demand on National Surety Company for the prompt payment of its share of the liability to the commonwealth of Pennsylvania for the said deposit of $450,000, with interest.
5. On or about January 21, 1932, the state treasurer of Pennsylvania filed with the secretary of banking a claim for said $450,000, deposit, with interest, and asked that said claim be given a preference.
6. The other company, acting as surety for the commonwealth's deposits under the provisions of a bond or bonds similar in terms and purport to those of National Surety Company, has made payment as principal to the commonwealth of the sum of $50,000, with interest due thereon.
7. National Surety Company, through its duly constituted officers acting with authority, has admitted its liability to the commonwealth for the payment before October 1, 1932, of the sum of $400,000, being the balance of the commonwealth's deposit in Franklin Trust Company, together with interest due thereon.
8. National Surety Company has at all times agreed to pay the commonwealth of Pennsylvania the full amount for which it is admittedly liable under its four bonds aggregating $400,000, and has not at any time refused to pay said amount or any part thereof or made any direct effort to avoid and escape liability to the commonwealth therefor.
9. The four depository bonds given by National Surety Company to secure deposits of the commonwealth of Pennsylvania are valid and subsisting contracts legally entered into, and National Surety Company has at all times admitted its legal liability thereunder.
10. National Surety Company gave to the commonwealth of Pennsylvania depository bonds, of character similar to those respecting Franklin Trust Company, to secure commonwealth deposits in Federal Title & Trust Company of Beaver Falls, Lancaster Trust Company, Agricultural Trust & Savings Company, Mid-Valley Trust Company, successor to Throop State Bank, and Mid-Valley Trust Company, successor to Olyphant Bank, all banking institutions of the commonwealth of Pennsylvania.
11. The commonwealth of Pennsylvania entered judgments against National Surety Company on its several bonds securing deposits in said institutions in the court of common pleas of Dauphin county, Pa., on October 5, 1932, prior to the filing of the supplemental bill of complaint in this proceeding.
12. The said judgments were entered by the commonwealth of Pennsylvania in accordance with the provisions in the bonds which are identical with those in the bonds of National Surety Company given to secure deposits of the commonwealth in Franklin Trust Company.
13. Neither William D. Gordon, Edward Martin, nor William A. Schnader has violated or is violating or threatens to violate any law or any provision of the Constitution of the commonwealth of Pennsylvania.
14. The commonwealth of Pennsylvania has at no time released National Surety Company from any liability under any of the bonds given by it to secure commonwealth deposits in the banking institutions named and has at all times looked to the National Surety Company for payment of the full amount of said deposits with interest due thereon, secured by said bonds.
15. Depositories of funds of the commonwealth of Pennsylvania must be approved by the board of finance and revenue.
16.The state treasurer of Pennsylvania is the sole officer with authority to deposit funds of the commonwealth of Pennsylvania in institutions approved by the board of finance and revenue, and to make withdrawals therefrom.
17. The board of finance and revenue of the commonwealth of Pennsylvania has no authority to require the state treasurer to collect claims of the commonwealth, nor to direct him from whom to collect them.
Conclusions of Law.
1. Complainant has not stated facts sufficient to constitute a cause of action in his favor.
2. Complainant has no valid cause of action.
3. The contracts of the commonwealth of Pennsylvania with the National Surety Company were entered into legally and without fraud and are binding upon the parties thereto.
4. The bill of complaint and the supplemental bill show on their face that they are wholly without equity.
5. The granting of the relief sought by the complainant would adversely affect the rights of the commonwealth of Pennsylvania.
Let a decree be submitted dismissing the bill, with costs.
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