Case Name: Frank Hasbrouck, as Superintendent of Insurance of the State of New York, Plaintiff, v. Frank Labriola et al., Defendants
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1915-01
Citations: 88 Misc. 709
Docket Number: 
Parties: Frank Hasbrouck, as Superintendent of Insurance of the State of New York, Plaintiff, v. Frank Labriola et al., Defendants.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 88
Pages: 709–714

Head Matter:
Frank Hasbrouck, as Superintendent of Insurance of the State of New York, Plaintiff, v. Frank Labriola et al., Defendants.
(Supreme Court, New York Special Term,
January, 1915.)
Surety corporations — bonds of — insolvency of — possession of property for purpose of liquidating by state superintendent of insurance.
After defendant L had given a surety company bond to enable him to keep and use explosives needed in his business of contracting and excavating, one of his employees, defendant M, was severely injured by an explosion which occurred in the course of certain excavating work, and in an action against said defendant for damages M recovered judgment. Thereafter L was adjudicated a bankrupt and received his discharge, said judgment appearing in his schedules as a debt. An action afterward brought by M on the bond was defended by the surety company and the complaint dismissed, and a second action by M against the surety company, which it defended, resulted in a dismissal of the complaint and the judgment entered thereon was affirmed on appeal. Thereafter the surety company became insolvent, the superintendent of insurance took possession of its property for the purpose of liquidating its affairs and M filed his claim with the liquidator. Held, that the court on the equity side had no jurisdiction where the relief demanded was that it be determined whether M’s claim against plaintiff was valid and, if so, that the amount thereof be adjudged and determined in this action, that defendant L be directed to pay to defendant M the amount adjudged to be due him and that he be required to accept such payment in satisfaction of his claim and that plaintiff recover the cost and expense of bringing the present action and expenses incurred in defending the actions brought by M against the surety company.
Whether a surety may or may not recover counsel fees and other expenses from his principal depends on the facts of each particular case, but they will not be allowed where it appears that they were ineurved in "defending against a meritorious claim, and under this rule plaintiff was not in a position to ask reimbursement for expenses incurred by the surety company in defending against the claim made upon it by M.
The nature of this action and the material facts are stated in the opinion.
Frederic Gr. Dunham (M. J. Wright, of counsel), for plaintiff.
James E. Wilkinson, for defendant Labriola.
Louis Diamant, for defendant Miaño.

Opinion:
Gtiegerich, J.
The action is brought by the superintendent of insurance as liquidator, of the Empire State Surety Company, an insolvent corporation. It is brought on the equity side of the court, and the character of the relief sought is such that it can be granted, if at all, only by a court of equity. The nature of the relief prayed for will be more readily understood if the facts of the case are first shortly stated. In the year 1904 the defendant Frank Labriola, being engaged in the business of contracting and excavating, applied to the surety company to become surety upon a bond required by an ordinance of 'the city of New York and the regulations of the municipal ordinance commission to enable him to keep and use the explosives needed in the conduct of his business. Such a bond was thereafter duly executed by Labriola as principal and by the surety company as surety and was delivered to the fire commissioner, as required by the ordinance. Thereafter, and in January, 1905, an explosion occurred in the course of certain excavating work, and the defendant Miaño, a workman employed by Labriola, was severely injured. Miaño thereupon brought'an action against Labriola to recover damages for his injuries, and in June, 190-5, recovered a judgment against him for $1,261.31. This judgment has never been satisfied, and Labriola has since gone into bankruptcy and has received his discharge, this judgment being scheduled among his debts. After the recovery of the judgment against Labriola, Miano brought an action against the surety company to recover against it upon its bond. This action was defended by the surety company and the complaint was dismissed. Subsequently a second action was commenced by Miano against the surety company, which was also defended and resulted in a dismissal of the complaint, which was affirmed on appeal. 153 App. Div. 423. Thereafter the surety company became insolvent, and the superintendent of insurance took possession of its property and is now engaged in liquidating its affairs. Miano has filed his claim with the liquidator, and the complaint "admits that the claim is well founded both in law and in fact, the only question being as to the amount of the damages properly recoverable; but it is alleged that it would be onerous and burdensome on the plaintiff to require this question to be litigated in an action at law by Miaño against the plaintiff, " and subsequently to raise money to pay such a judgment as might be obtained by the said'Gfuiseppe Miaño." It is further claimed by the plaintiff that the defendant Frank Labriola was not the real owner of the contracting business, but that it was, in fact, owned by his wife, the defendant Antonetta Labriola, and that Frank Labriola was merely the agent and servant of his wife in the conduct of the business. The relief demanded (excepting such demands as were withdrawn upon the trial) is that it be determined whether Miaño's claim against the plaintiff is valid, and, if so, that the amount thereof be adjudged and determined in this action; that the defendants Frank Labriola and Antonetta Labriola be directed to pay to the defendant Miaño the amount adjudged to be due him, and that Miaño be required to accept such payment in satisfaction of his claim, and that the plaintiff: recover from the defendants Labriola the costs and expenses of bringing this suit and the expenses incurred in defending the actions brought by Miaño against the surety company. The answer of Miaño admits all the allegations of the complaint and joins in the prayer of the plaintiff for the relief therein demanded, except that he does not join in the prayer that he be required to accept the sum awarded in full payment of his claims. But the answers of the defendant Labriola put in issue all the facts upon which Miaño's right to recover for his injuries depends, and they also set up various defenses. No claim has ever been made by Miaño against the defendant Antonetta Labriola, except the ' claim asserted by his demanding relief against her in this action. In this case, therefore, the-court, sitting as a court of equity, is asked to try an accident case, to determine whether the person injured is entitled to recover, and, if so, the extent of his injuries and the amount to be awarded as damages, and, finally, to direct payment of such damages by one defendant to another. Furthermore, this relief is sought by the liquidator of an insolvent surety company which is concededly liable to the injured man, but which has paid nothing on the claim and can only -hereafter be injured to the extent of such partial payment as it may ultimately make by way of a dividend on the claim. Nevertheless, it claims the right to require payment in full by the third person, whom the person injured has not attempted to hold liable and in whose favor the Statute of Limitations is now a complete protection against any claim by him.. I do not think that the jurisdiction of a court of equity has yet been so far extended as to include a case of this character; nor do I think that the plaintiff would be entitled to. such relief even if the jurisdiction existed. Furthermore, I do not find that the business was conducted by or on behalf of Antonetta Labriola, or that she was at any time liable for the injury. As to the defendant Frank Labriola, a judgment has already been recovered against him by the injured person. If his liability, evidenced by this judgment, has been discharged in bankruptcy, the plaintiff can hardly maintain an action to compel him to pay the very creditor from whose claim he was thus discharged. If that judgment was not discharged, it is still enforcible, and another judgment against him and in favor of the injured person for the same wrong cannot properly be asked. Nor is the plaintiff in any position to ask reimbursement for expenses incurred by the surety company in defending against the claim made upon if by the injured person. The proposition that the claim was a meritorious one is at the foundation of the present action. Whether a surety may or may not recover counsel fees and other expenses from his principal depends on the facts of the case (City Trust S. D. & S. Co. v. Am. Brewing Co., 182 N. Y. 285, 291), but they are not to be allowed where it appears that they were incurred in defending against a meritorious claim. Thomson v. Taylor, 72 N. Y. 32, 34. If the surety company had settled this concededly meritorious claim when it was presented, as it ought to have done, it would not now be under the necessity of invoking the extraordinary remedies which are sought in this action, and the injured workman would not be in his present predicament. Judgment for defendants Labriola. Submit, with proof of service, requests for findings within five days after the publication of this memorandum. The question of costs is reserved until the requests for findings of the respective parties are passed upon. Briefs relative to costs and to the requests to find may be left with the clerk within two days after the service of such requests, at the expiration of which time all papers are to be submitted by the clerk to me.
Ordered accordingly.