Earle v. Earle — 49 N.Y. Super. Ct. 57

Majority

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CORNELIA D. EARLE, Appellant, v. WILLIAM P. EARLE, Respondent.

Headnote

Guaranty companies—justification as sureties.

The corporations which, under chapter 486 of the Laws of 1871, are vested with authority to guarantee bonds and undertakings in judicial proceedings, need not possess the qualifications required of sureties by the Code, though the manner of justification is the same; but it is the duty of the judge to whom the undertaking or bond is presented for approval, to exercise his discretion in each particular case as to whether the actual statement of the company’s business justifies an approval.

Before Sedgwick, Ch. J., Truax and O’Gorman, JJ.

Decided February 5, 1883.

Appeal by plaintiff from order approving an undertaking given by the defendant on an appeal from the general term to the court of appeals.

The undertaking was signed by the defendant. No sureties were given, but the performance of the. undertaking was guaranteed by a corporation called the Fidelity and Casualty Company. This guarantee was claimed to be valid for the purpose, under the provisions of an act to facilitate the giving of bonds required by law (Laws 1871, chap, 486), which enacted: “Section 1. Whenever any person who now or hereafter may be required or permitted by law to make, execute, and give a bond or undertaking with security conditioned for the faithful performance of any duty, or for the doing or not doing of any thing in said bond or undertaking specified, any head of department, surrogate, judge, sheriff, district attorney or any other officer who is now or shall hereafter be re

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quired to approve the sufficiency of any such bond or undertaking, may, in the discretion of such officer, accept such bond or undertaking and approve the same whenever the conditions of such bond or undertaking are guaranteed by a company duly organized or authorized tc do business under the laws of this State, and authorized to guarantee the fidelity of persons holding positions of public or private trust; and all such corporations are hereby vested with full power and authority to guarantee such bonds and undertakings ; but this act shall not prevent a justification on the part of such company through its officers as required by law of other sureties.

“ § 2. It is further provided that the guarantee of any such company shall not be accepted by heads of departments, or others, as provided in section one of this act, whenever its liabilities shall exceed its assets, as ascertained in the manner provided in section three of this act.

“§ 3. Whenever the liabilities of any such company shall exceed its assets, the superintendent of the insurance department shall require the deficiency to be paid up within sixty days, and if it is not so paid up, then he shall issue a certificate showing the extent of such deficiency, and he shall publish the same once a week for three weeks in the State paper, and thenceforth and until such deficiency is paid up, such company shall not do business under the provisions of this act. And in estimating the condition of any such company under the provisions of this act, the superintendent shall allow as assets only such as are authorized under existing laws at the time, and shall charge as liabilities in addition to eighty per cent, of the capital stock, all outstanding indebtedness of the company, and a premium reserve equal to fifty per' centum of the premiums charged by said company on all risks then in force, nothing herein contained shall apply to bonds given in criminal cases.

“ § 4. This act shall take effect immediately.”

It was admitted by the parties, that if the rule of the Code applicable to the justification of sureties, to wit: that

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the surety must be worth double the amount of the bond over and above all existing and contingent liabilities, be applied in this ease, the undertaking was insufficient.

> The court approved the undertaking by an order, from which plaintiff appealed.

Carlisle Norwood, Jr., for appellant.

John M. Martin, for respondent.

Moore, Low & Sanford, for The Fidelity and Casualty Co.

—My construction of the act is as follows : If a bond or undertaking is proposed which is to be secured by the guarantee of the company, the party opposed may require “ a justification on the part of such company through its officers as required by law of other sureties.” If it should appear on such justification that “ its liabilities exceed its assets, as ascertained in the manner provided in section three of this act,” the act forbids the acceptance of the guarantee. The alternative is is not that the court shall approve absolutely and under all circumstances. As stated in the first section, the court must exercise its judicial discretion to determine whether the financial condition of the company would justify an approval. I do not think that the act implies that the company must possess the qualifications required of sureties, although the manner of justification is to be same as when sureties justify. The nature of the business makes it clear that the Legislature knew that such qualifications could not exist. If the Legislature intended that the company should show such qualifications, it was not necessary to provide anything further on the subject, and especially to prohibit the approval of the undertaking if the company’s condition did not reach the standard specified by the third section. But although the company may be in the condition described by section three, it is the duty of the judge to exercise his discretion in each particular case,

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as to whether the actual state of the company’s business justifies ari approval of the undertaking.

It may be, that in the present case the court did not exercise the discretion referred to. If it did not, the general term should make the order, that would be called for by the particular circumstances. In my opinion, the circumstances called for an approval of the undertaking, which was actually approved below. There should be no costs on the appeal to either party.

Order affirmed, without costs.

Truax and O’Gorman, JJ., concurred.