Patti v. United Surety Co.

“One who does not belong to the class that might be injured by a statute cannot raise the question of its validity. Albany County Supervisors v. Stanley, 105 U. S. 305 , 26 L. Ed. 1044 ; Clark v. Kansas City, 176 U. S. 114 -118, 20 Sup. Ct. 2S4, 44 L. Ed. 392 ; Lampases v. Bell, 180 U. S. 276 -283, 21 Sup. Ct. 368 , 45 L. Ed. 527 .”

And' in Cooley’s Constitutional Limitations, p. 232, the subject is treated in the following language:

“Nor will a court listen to an objection made to the constitutionality of an act by a party whose rights it does not affect and who has therefore no interest in defeating it. * * * The statute is assumed to be valid until some one complains whose right it invades. Respect for the Legislature,' therefore, concurs with well-established principles of law in the conclusion that such an act is not void, but voidable only, and it follows as a necessary

legal inference over this position that this ground of avoidance can be taken advantage of by those only who have a right to question the validity of the act and not by strangers. To this extent only is it necessary to go in order to secure and protect the rights of all persons against the unwarranted exercise of legislative power, and to this extent only, therefore, are courts of justice called upon to interpose.”

A statute is assumed to be valid until some one complains whose rights it invades. Cooley on Const. Lim. 163, cited 89 N. Y. 93 . “It is the duty of the court to determine a constitutional question only when it is directly and necessarily involved in the issue to be determined. It is only when some person attempts to resist the operation of an act claimed by him to be unconstitutional, and calls in the aid of the judicial power to pronounce it void as to him his property or his rights, that the objection of unconstitutionality can be presented and sustained.” People, etc., v. Brooklyn, F. & C. I. R. R. Co., 89 N. Y. 76 -93.

This now brings up the question, the important question, whether or not the defendant company is a person discriminated against, and whether it has the right to set up as a shield or defense to its solemn contract under seal the unconstitutionality of the statute under the provisions of which the defendant’s principal was the one against whom the discrimination was directed. Section 2 of the act in question provided that:

“Said bond shall be executed by said corporation, firm or persons as principal, with at least two good and sufficient sureties, who shall be responsible and owners of real estate within the state of New York. The bond shall not be accepted unless approved by the Comptroller, and upon such approval it shall be filed in his office. The bond of a surety company may be received, if approved as aforesaid, or cash may be accepted in lieu of surety.”

It will be observed that the principal had three ways in which to comply with the statute. He could furnish the security (1) by giving as sureties owners of real estate; or (2) he could deposit cash; or (3) he could give the bond of a surety company. There is nothing mandatory about the character of the surety, except that it should be sufficient and approved. A surety company was not named in the statute as a class whose bond alone would be accepted, and the surety company was under no legal or moral obligation to accept the risk except of its own free will, and it had the absolute right to refuse to execute the bond if it did not wish to do so; so that it is clear that, as to this particular defendant, its act was entirely voluntary, and not required by the statute, the language of which was that “the bond of a surety company may be received, if approved,” and that provision was for the benefit of the defendant if it sought to avail itself of the opportunity presented for earning the premium on such a bond. The reasons for the enactment of the statute in question are manifest to those familiar with conditions existing in the large cities of our state; and were a statute enacted with the sixth provision of the act in question eliminated, thus avoiding the discrimination complained of, it would prove an exceedingly salutary enactment and of beneficent and immeasurable good. Thousands of poor immigrants whose all lie in the savings they desire to transmit by the companies

Another question presents itself as to whether the defendant has not waived its right, assuming it has a right, to question the constitutionality of the statute. As counsel for the plaintiff aptly puts it:

“Conceding for the sake of argument that the defendant, United Surety Company, would have the right ordinarily to question the unconstitutionality of the act, it will be deemed to have waived any such right by voluntarily coming under its provisions and submitting to it by doing the very thing which the act directs to be done. The United Surety Company has executed a bond under the provisions of the act which it is now seeking to have declared unconstitutional. It has accepted the benefits, inasmuch as it has obtained remuneration for the giving of the bond on behalf of one of the persons directed by the act to procure the bond. It has entered into a contract by giving a bond. To allow the United Surety Company to escape from its contract (bond) would be to deny the very principles of contractual relationship. Can it be said that they may perceive an act unconstitutional, enter into the benefits of its provisions, and then when sued under their obligation be heard to say the Legislature had no power to pass the statute and it is unconstitutional?”

. It is well settled that a person may by his acts or omission to act waive a right which he might otherwise have under the provisions of the Constitution. Pierce v. Somersett R. R. Co., 171 U. S. 641 , 19 Sup. Ct. 64 , 43 L. Ed. 316 ; Vose v. Cockcroft, 44 N. Y. 415 . It has been held that a waiver of a constitutional provision precludes the party waiving it from afterwards claiming protection under it, even though it was adopted solely for his benefit, and such a waiver is binding as to both the past and future transactions. Lee v. Tillotson, 24 Wend. 337 , 35 Am. Dec. 624 ; Baker v. Braman, 6 Hill, 47 , 40 Am. Dec. 387 ; New York v. Manhattan R. Co., 143 N. Y. 1 , 37 N. E. 494 . And in the case of People v. Murray, 5 Hill, 468 , the court held that where parties were authorized by statute to erect a dam across a river provided they should first execute a bond to the people, conditioned to pay such damages as each and every person might sustain in consequence of the erection of the dam, the damages to be assessed by a justice of the peace, and where the dam was erected and damages assessed as provided by the statute, it was held in an action on the bond to recover those damages that the party erecting the same and who had received the benefit of the statute was precluded by his action from contesting its validity and could not insist upon his right to a common-law

“The question is whether by virtue of these various actions of defendant and its predecessors, together with, the acceptance of subsequent legislation on the subject, based upon the assumed validity of the act of 1868, there has not been a waiver of the defense that the act was unconstitutional. Persons or corporations even may waive in some matters, and upon some occasions, a constitutional or statutory provision in their favor. Embury v. Connor, 3 N. Y. 511 , 53 Am. Dec. 325 ; Matter of Cooper, 93 N. Y. 507 -512; Matter of New York, L. & W. R. R. Co., 98 N. Y. 447 -453; Sentems v. Ladew, 140 N. Y. 463 -466, 35 N. E. 650 , 37 Am. St. Rep. 569 . In the last cited case it is said: ‘A party may waive a rule of law, or a statute, or even a constitutional provision enacted for his benefit or protection, where it is exclusively a matter of private right and no considerations of public policy or morals are involved, and, having once done so, he cannot subsequently invoke its protection.’ Although the provision as to a local act’ containing but one subject, which shall be expressed in its title, is of a public nature, and was placed in the Constitution for the purpose of preventing surprises as to the object and purpose of any proposed legislation, yet when an act has been so passed, and its enactments bear upon the private rights of an individual, the constitutional provision then becomes as to him, one which is, within the meaning of the expression, enacted for his benefit, and it is then a matter which such individual may, as to his private rights, waive the benefit of, and consent to perform or submit to the requirements of the act, the same as if the constitutional provision had not been violated. And, when once such waiver has been made and such consent been given, the party so waiving and consenting is forever concluded thereby. Especially should this be so where the party takes benefits granted by the act.” New York v. Manhattan R. Co., 143 N. Y. 26 , 37 N. E. 494 .

Where parties have accepted and received the benefits of acts unconstitutional or alleged to have been unconstitutional, the courts have held them estopped to claim or set up the unconstitutionality of the act in question. The case of Mayor v. Gorman, 26 App. Div. 191 , 49 N. Y. Supp. 1026 , was an action brought against the defendant as the legal representative of a former sheriff of the county of New York to recover certain moneys alleged to be due the city of New York from the sheriff while he was acting in that capacity, and the defense interposed was that the statute under which he received the fees was unconstitutional. The court said:

“And now his executrix makes the extraordinary claim that the act under which her decedent administered his office, received his statutory salary, paid over the fees to the Comptroller, and received back one-half of them was unconstitutional, and that, as a legal consequence, she not only can retain the fees which were npt turned into the city treasury, but can actually recover back from the city all those, that were. Even if the act were invalid, neither the officer, nor his sureties, nor his or their representatives would under such circumstances be permitted to plead its invalidity. Having received the moneys in question under the act, the officer would be estopped from claiming its unconstitutionality in order that he might retain them. He certainly could not enjoy the benefits of the act and plead invalidity as to the duties. There is no case directly in point, doubtless because no public officer has ever ventured to make such a claim. But the rule laid down in Supervisor v. Allen, 99 N. Y. 532 , 2 N. E. 459 , points with sufficient emphasis to the governing principle. There it was said that a defendant who had received funds by virtue of an act which directed that they should be allowed to him for the benefit of his county could not set up the invalidity of the act under

which he received the money, and on that ground claim to retain it for him.self as against the party for whose benefit he recovered it. This, as Judge Rapallo said, is ‘fundamental.’ ” Mayor v. Gorman, 26 App. Div. 194 , 49 N. Y. Supp. 1026 .

As a supposititious case in point, suppose Ferrari, the defendant’s principal for whom the defendant gave the bond, received the money from the plaintiff for transmission and failed to execute his contract, will any one contend for a single moment that he could in an action for money had and received brought by the plaintiff against him set up the unconstitutionality of the act as a defense? I think not, even though he were the party discriminated against by the unconstitutional act. And the reason is obvious that he received the money and benefits, and would be deemed to have waived the invalidity of the statute and would be estopped from setting it up as a defense. I have examined the cases submitted by defendant’s counsel (Henry v. Daley, 17 Hun, 212 ; Gillespie v. Torrance, 25 N. Y. 306 , 82 Am. Dec. 355 ; Putnam v. Schuyler, 4 Hun, 166 ; Lasher v. Williamson, 55 N. Y. 619 ), but I fail to see that they apply to the question at bar. They hold substantially that a surety cannot avail himself of an independent cause of action existing in favor of his principal against the plaintiff as a defense or counterclaim, and that it is for the principal to determine what use he will make thereof, and that the surety has no control over him in this respect, and they have no application to the case before me. Reverting to the case of Vose v. Cockcroft, supra, and relying upon which authority the learned justice of the Supreme Court decided the case before him, I have examined that case fully. That case held that the provisions of the Revised Statutes for a special proceeding in rem against ships by attachment to enforce a lien for supplies furnished for the use thereof are unconstitutional and void as conflicting with the exclusive admiralty jurisdiction of the federal court. In that case it was further held that:

“In civil procedure the protection of any statutory or constitutional provision may be waived, and a party may be estopped by his acts from denying the constitutionality of the law or proceeding. In an action upon a bond given to obtain the release of a vessel from attachment under the above provisions of the Revised ‘Statutes, the defendant, having entered into stipulations which by fair inference recognized the validity of the statute, and having failed to allege its unconstitutionality by answer on the trial, must be deemed to have waived that defense. And the bond being given under the provisions of the statute to procure release of the vessel is given in invitum (that is to say, compulsory), and, the attachment being unconstitutional, the bond is also void.”

The judgment for plaintiff in that case was affirmed by the Court of Appeals, upon the ground, however, that the answer did not set forth or allege the unconstitutionality of the act in question. . In the case at bar it is true that the defense of unconstitutionality is fully set forth, but the distinguishing feature of the Vose Case, supra, and the one before me, is that in- the Vose Case the bond was given by the defendant, a party interested and compelled by the law. or act to do so, in order to procure the release of the vessel, while in this case the bond was given voluntarily by a surety company, who was not in any way interested in the statute either by its terms or provisions. I am of the opinion, therefore, that the defendant company, not being a person

Therefore, after a careful examination of the law applicable to this case, I have arrived at the conclusion that the defenses set up in the answer are insufficient in law. I am of the opinion that the complaint herein sets forth a good cause of action against the defendant, and I therefore decide that the demurrer to the second paragraph of the answer and to the separate defenses therein should be, and is, sustained, with costs to abide the event and with leave to defendant to plead anew if it be so advised within six days after the entry of a decision and an interlocutory judgment hereon.

Ordered accordingly.