Case Name: THE PEOPLE OF THE STATE OF NEW YORK, Respondents, v. THOMAS C. CHALMERS, Impleaded, etc., Appellant
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1874-07
Citations: 8 N.Y. Sup. Ct. 683
Docket Number: 
Parties: THE PEOPLE OF THE STATE OF NEW YORK, Respondents, v. THOMAS C. CHALMERS, Impleaded, etc., Appellant.
Judges: 
Reporter: Supreme Court Reports (Hun)
Volume: 8
Pages: 683–689

Head Matter:
THE PEOPLE OF THE STATE OF NEW YORK, Respondents, v. THOMAS C. CHALMERS, Impleaded, etc., Appellant.
Chapter 848, Laws 1860 — bond given by assignee under — sureties on — liability of.
The defendants are sureties upon a bond given by one De Camp, in pursuance of chapter 848, Laws 1860, for the faithful discharge of his duties as assignee, under an assignment made by insolvent debtors for the benefit of their creditors. Certain judgment-creditors of the assignors subsequently brought suits, in which judgments were recovered setting aside the assignment as to them on the ground of fraud, and directing the assignee to pay over to them certain sums in said judgments mentioned. The assignee having failed to comply with the terms of the judgments, this suit was brought. Held, that the defendants were not liable. The object of the bond required by the statute is to render general assignments by insolvent debtors more efficient, and to secure the full and faithful application of the debtors’ property to the discharge of the creditors’ demands, according to the directions contained in the assignment, and it is no part of the design of the statute to defeat the assignment, or to provide means, or secure the ends, by which that might be accomplished.
Appeal from a judgment in favor of the plaintiff, entered upon the verdict of a jury.
On October 81, 1865, Mary A. Halsey and Oscar P. Horthum, comprising the firm of Hals.ey & Horthum, of the city of Hew York, executed and delivered to A. L. De Camp, a general assignment for the benefit of their creditors. On Hovember 14th, 1865, the defendants in this action executed a bond to the people of the State of New York, in the penalty of $25,000, pursuant to section 3, chapter 348, Laws of 1860, conditioned for the faithful discharge of the duties of said Be Camp as such assignee, and for the due accounting for all money received by him as such assignee. Certain creditors of Halsey & Northum subsequently commenced suits, in which judgments were recovered, setting aside the assignment as fraudulent as to them, and directing that the property in the hands of the assignee should be applied toward the payment of such judgments. On the foot of these decrees, setting aside the assignment, an order of reference was made on the 4th of March, 1871, referring it to a referee to take the accounts of Be Camp, as assignee, and report the amount of property which came into his hands for which he was liable. The referee found that he was chargeable with $15,402.29, and Be Camp having failed to pay over this amount, as directed by the court, this action was brought against the sureties on the bond.
F. N. Bangs, for the appellant,
cited Douglass v. Howard (24 Wend., 35); Jackson v. Griswold (4 Hill, 522); McMicken v. Webb (6 How. [U. S.], 292); McClusky v. Cromwell (1 Kern., 598); Shellington v. Howland (53 N. Y., 374); Smith v. The U. S. (2 Wall., 236).
Nelson Smith and B. K. Pheljps, for the respondents,
cited Henriques v. Hone (2 Edw. Ch., 119); Mackie v. Cairns (5 Cow., 547); Rapelye v. Prince (4 Hill, 119); Bridgeport Ins. Co. v. Wilson (34 N. Y., 275); Methodist Churches v. Barker (18 id., 463); Leavitt v. Dabney ( 9 Abb. [N. S.], 373); Gelston v. Hoyt (13 Johns., 561); Dorr v. Birge (8 Bar., 351); Wood v. Young (5 Wend., 620).

Opinion:
Baetiels, J.:
This action is upon a bond, given by the defendants under chapter 348, of the Laws of 1860, for the faithful discharge, by the principal, of his duties as assignee, under an assignment made by insolvent debtors for the benefit of their creditors, and for the due accounting for all moneys received by such assignee. That is the form prescribed by the statute for the condition of the bond, and it strictly conformed to the requirement in that respect made. The assignee accepted, but never consummated or completed, the execution of the trusts created by the assignment; for creditors of the insolvent assignors, who were dissatisfied with the disposition which the assignment made of the debtor's property and its proceeds, assailed it as fraudulent, under judgments recovered by them, and that was finally held to be its character. And for that reason, it was held inoperative and void, as to their demands. This effectually subverted and annulled the entire assignment, and wholly defeated the objects proposed to be accomplished by it, because the amount due upon the judgments under which it was assailed, greatly exceeded all that the assignee received under it for the purposes of the trust, And that was diverted from the trusts mentioned in the assignment, and appropriated to the payment, as far as it might prove sufficient for that purpose, of the creditors' judgments against the assignors, and the costs of the proceedings taken by them. This necessarily ended all the rights, duties and functions of the assignee, under the assignment. His duties, afterward, wholly appertained to the application to be made of the property, in conformity to the judgments. From that time, they became his guide, and defined the duties he could be required to perform. They resulted in finding the debtor's property in his possession, applicable to the payment of the judgment creditors' demands, and his only obligation was to appropriate it as they required him to do that. In that he has failed, and, on account of that failure, the present action was brought against the assignee and his sureties upon the bond given for the faithful discharge of his duties, and the due accounting for the moneys received by him. And the first, as well as the most important question arising upon the present appeal, is, whether that failure was a violation of the condition of the bond. That was answered at the circuit in the affirmative, and the sureties of the assignee were accordingly held liable for his failure to comply with the terms of the creditors' judgments. In no other way could their liability be maintained, for it is only where the assignee fails, or refuses to perform the decree or order made against him, that an action can be brought upon the bond.
The bond was given pursuant to a statutory requirement, and the liability of the sureties in it, can, consequently, be no broader than the purposes designed to be promoted by the terms and spirit of the statute. To that extent, the sureties are clearly bound, but no farther than that. And for the purpose of determining the measure of their liability, an examination of the spirit, design and terms of the statute, will become necessary. Its main object and purpose appears to have been, to render general assignments by insolvent debtors, more efficient and certain, in the execution of the design for which the common law permitted them to be made, and to secure the full and faithful application of the debtor's property, to the discharge of the creditors' demands, according to the directions contained in the assignment. It was no part of the design of the statute to defeat the assignment, or to provide means, or secure the ends, by which that might be accomplished. Neither did it provide or interpose any obstacle, not previously existing, in the way of creditors, dissatisfied with its provisions, disposed to assail it and attempt its subversion. Their remedies remained precisely as the law had before provided them. They were in no respect accelerated, diminished or affected by this statute. Its general scope and object w.as to secure a faithful application of the debtor's assets, under the terms and provisions of the assignment, and in that way to protect both debtors and creditors against the waste, improvidence, negligence and infidelity of the assignee, in the execution of the trusts created by it. To promote that end, the statute begins by providing for certain formalities to be observed in the execution of the assignment, denominating the assignee's estate a trust, and requiring a schedule of the debtor's property to be made and filed under the solemnity of his oath. And then follows the requirement, that the assignee shall, with sufficient sureties to be approved by the county judge, enter into a bond, of the nature of that given in this instance, " before he shall have power or authority, to sell, dispose of, or convert to the purposes of the trust, any of the assigned property." And after the lapse of one year, upon the petition of any creditor of the assignors, the assignee may be required to show cause before the county judge, why an account of the trust fund, created by the assignment, should not be made. And that officer, on the hearing, is authorized to decree payment of such creditor's proportional part of such fund. This provision is an important one to be considered in this case, because it is for the default of the assignee to comply with what may be required from him by the order' or decree which may be made, that his sureties are rendered liable. And it is apparent that it is directed only to the proper application of the trust fund, according to the terms of the assignment. Ho judgment is rendered necessary, to warrant the proceedings of the creditor, as it is where the object is to assail the assignment as unlawful, and subvert and destroy its trusts. But all that is necessary is, that the creditor shall be entitled to a proportional part of the trust fund, provided by it for his benefit. And this necessarily assumes the validity of the assignment itself, for in no other way, consistently with the terms used, could the creditor be entitled to a proportional part of the fund mentioned. The remedy is clearly provided for, and confined to, those creditors claiming a benefit under the terms of the assignment itself. And that design is still further exhibited by the provisions made, concerning the action which may be brought upon the bond. For it is only when the assignee shall, omit, or refuse, to perform any decree or order made against him, for the payment of a debt out of the trust fund, by a judge or court having jurisdiction, that the bond can be ordered to be prosecuted. The default for which that can be done, is limited to the non-performance of the decree or order requiring payment to be made out of the trust fund, provided for, and contemplated by the assignment. And it clearly presupposes the continuance and execution of the trusts mentioned in it. This purpose is still further manifested by the disposition which the court or judge is required to make of the amount collected on the bond. For the only use which, according to the terms used in the act, can lawfully be made of that, is, that it shall be applied in satisfaction of the debts of the debtor, " in the same manner as the same ought to have been applied by" the assignee; and that is, as it was directed by the assignment. For, under all proceedings provided for by the statute, no obligations are considered beyond those arising out of that instrument. They are all prescribed for the apparent and only purpose of securing a faithful execution of the trusts declared by the assignment. It is for their sole protection that the bond was prescribed; and to render that entirely efficient, the proceedings mentioned were provided. The terms in which the condition of the bond is required to be expressed, sustain the same result; for they require the sureties to become bound only for the faithful discharge of the duties of the assignee, and the due accounting for all moneys received by him. The duties referred to,.are no other than those arising out of the assignment, and the moneys simply those received by him as assignee, in the ordinary course of the execution of such trusts.
The object and design of the statute in providing the bond, are reasonably clear and well defined; and it is the duty of the court to carry them into effect, as they are manifested by the law. It cannot, properly, be so far enlarged by construction, as to impose upon the sureties an obligation which it was not its purpose to require them to bear; particularly, as neither the law nor the terms of the bond, contain anything which requires that to be done. Sureties are favored by the general rules of construction, so far that their undertaking on behalf of their principal, is not to be extended beyond the fair and obvious import of the terms, under the circumstances, made use of for the purpose of expressing it. Their undertaking, by the bond in suit, was, that the assignee should faithfully discharge the duties devolving upon him in that capacity, and account for the moneys received by him in the same relation. They in no sense became liable for his duties and omissions in the new capacity, arising out of the complete subversion of the assignment and all the trusts it contemplated and provided for, by the action of creditors proceeding in hostility to it, and in defiance of its provisions. Consequently, the omission or refusal to perform the decree or order, for which alone an action may be maintained upon the bond, under the terms of the statute providing for it, was not shown upon the trial of this cause. The contingency, on which the liability has been rendered dependent, never has arisen, and no judgment against the sureties was warranted by what appeared in the case. For this reason, the other objections to the recovery will not require consideration. The judgment should be reversed, and a new trial ordered, with costs to abide the event.
Davis, P. J., and Bbadt, J., concurred.
Judgment reversed, and new trial ordered, costs to abide the event.
Laws of 1860, 596, § 5.
Laws of 1860, 596, § 4.
Id., p. 596.
Holmes v. Carley, 31 N. Y., 289, 290, and cases cited.
Martin v. Thomas, 24 How. (U. S.), 315, 317.