The Hawaiian gazette. [volume] (Honolulu [Oahu, Hawaii]) 1865-1918, 1904-10-25

OF SURETY
Federal Court Decision
In Bankruptcy
Matter.
tFrom Saturdays Advertiser)

CFrom Saturdays Advertiser.)
Judge Dole yesterday rendered the
following decision in the matter Of X
KaJlta, n bankrupt, in the District
Court OF the United States. It has an
important bearing on the suretyship Of
bonds:
The trustee In this case having been
removed on account OF embezzlement
of trust funds, the Pacific Surety Com
pany of California, the surety on the
bond OF said trustee, Joins with the new
trustee OF the said estate. Mr.. Chas.
II. Hemenway, in a submission for q
decision of this court on the following
questions:
First-Is the said Surety Company
liable under its bond to reimburse the
above named estate for any sums in
addition to actual amounts of money
embezzled? And submits the follow
ing facts affecting this question::
The present trustee has been obliged
to pay out of the estate:
Attorneys fee allowed by the
court In the matter OF the re-
moval of the former trustee. 1875 90
Costs OF court In the same matter 800
Premium on bond of present trus-
Tee. ...'.'..'............. l2.60
Total. .......................$ so
The form of bond given by trustees
In bankruptcy contains the following
conditions
IF the said trustee as afore-
said shall obey such orders as said
court may make In relation to said
trust, and shall faithfully and truly ac-
count for all moneys, assets, and ef-
fects of the estate of said bankrupt
which shall come into his hands and
possession, and shall In all respects
faithfully perform all his official duties
as said trustee, then this obligation
to be void; otherwise, to remain In full
force and virtue"
The condition of the bond being not
only to account for all the moneys, as
sets and effects of the estate which
comes into the hands of the trustee
but also to, In all respects, faithfully
perform all his official duties as said
trustee, 1t appears to me that the par
ties to the bond are liable not only
for such moneys as have been embeg-
zled, but also for such expenditures
which have become necessary on ac-
count OF and as the direct result of the
failure of the trustee TO faithfully per-
form all his official duties.
The item OF $3.50 for premium on
the Official bond of the new trustee Is
probably too remote a result of the
misconduct of the trustee to be made a
charge against the surety. Such an ex.
pense would accrue on any occasion of
filling such vacancy, which might be
caused by the death or resignation Of
the trustee as well as by his removal.
The other expenditures became neces-
sary as the immediate result of the
failure of the trustee to perform his Of
fetal duties. In consequence thereof
the parties to the bond are liable for
the same, as well as the amount of
money embeZZled.
The second question IL as follows:
Upon payment by the Surety Com
pany of the ascertained loss to the es-
tate, should the bond first given in this
estate be cancelled of record?
The Bankruptcy Law (Section so
Div. mo-, provides that suits upon
trustees bonds shall not be brought
subsequent to two years after the es-
tate has been closed. The Implication
Of this provision is that suits may be
upon such bonds at any time
within two years after the estate has
been closed, unless, perhaps, the
AMOUNT of the bond should have been
Exhausted by previous suits. The pres
mt Liabilities of the parties to the bond
IN account of the misconduct of the :
rustee, consume but small part of
he amount of the bond. / can find no
aw directly on this question. / find,
iowever that the California Statute of
insolvency provides that 1.-The bond
hail not be void upon the first recov-
ny but may be sued upon from time
o time by any creditor aggrieved In his
'wn name until the whole penalty IL
Insolvency Act OF 1880,
Zee. 80. This refers to the bond to the
Isslgnee OF an insolvent estate under
hat statute. Although this statute has
10 authority with this court, yet IL
Gems TO suggest a reasonable rule OF
'ractice under the Bankrupt Act.
II appears 10 me, therefore, that the
'ond OF the first trustee may not be
aneelied OF record but must stand I'M
u two years have elapsed after the es-
ate has been closed.
SANFORD -. DOLE,
Judge, United States District Court.
October 2lst, 1904,