Aetna Cas. & Sur. Co. v. Phoenix Nat. Bank & Trust Co., 285 U.S. 209 (1932)

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Aetna Casualty & Surety Co. v. Phoenix National Bank & Trust Co.

No. 413

Argued January 25, 1932
Decided March 14, 1932
285 U.S. 209

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Syllabus

1. A surety company’s undertaking to indemnify and hold harmless a bank from any loss through payment of falsely raised checks or forged endorsements implies a right of subrogation to claims which the bank might assert against depositors upon whose accounts such checks are drawn, based on their alleged negligence in drawing them or in not notifying the bank of the forgeries. P. 214.

2. Under such a contract, the liability of the surety which accrues when a forged check is paid is discharged when the bank relinquishes its right against the depositor. Id.

3. In a suit for indemnity in which the defense is relinquishment of a claim of right to which the indemnitor should have been subrogated, the burden rests upon the indemnitee to show that the claim was unsubstantial. P. 216.

4. Under a contract to indemnify a bank from loss through payment of forged checks, the indemnitor, is liable and may be sued when such check has been paid. The bank is not called upon first to defend against claims of the depositor or prosecute its own claims against endorsers. Id.

44 F.2d 511 reversed.

Certiorari, 284 U.S. 608, to review the reversal of a judgment in favor of the above-named petitioner in an action by the bank on a contract of indemnity.