Federal Insurance Co. v. Fifth Third Bank

Federal Insurance Company (Federal) brought this diversity action against the Fifth Third Bank (Bank) seeking a judgment in the amount of $766,815.45. Federal, as surety on a bond for Becker Electric Company (Becker), alleged that the Bank wrongfully offset two Becker deposits which were the proceeds of progress payments made to Becker involving a contract with the State of Ohio on which Federal was the surety. The district court held that Federal had not shown the existence of any type of trust, assignment, or subrogation which would have legally or equitably prohibited the Bank from offsetting these deposits against sums owed to the Bank by Becker in connection with prior loans. Federal subsequently filed this appeal, asserting that the district court erred in not finding either that there was a trust created or that Federal had equitable rights in the deposits superior to the Banks offset rights.