Court Opinion

ID: 5740678
Source: CourtListenerOpinion
Date Created: 2022-01-12 16:41:11.573199+00
Date Added: 2024-06-11T08:41:03.673536
License: Public Domain

Valente, J. (dissenting in part).
I agree with the holding of the court that Blaine & Heyward Bar and Restaurant, Inc.— the principal on the bond—is entitled to summary judgment dismissing the complaint. But I cannot join in the anomalous conclusion that the surety on the bond may be held liable although the principal is discharged.
Clearly there was no compliance with the condition in the bond requiring that any action for the penal sum of the bond be commenced within 16 months after the expiration of the license period. The license expired February 28, 1959 and the action was commenced on October 5, 1960. The court exonerates the principal because of the failure to bring suit within the 16 months’ period, yet holds the surety liable because it did not plead the limitations as a defense and because the court regards the situation as an exception to the general rule that a surety may not be held responsible when the principal is exonerated.
In Matter of Cheesman (236 N. Y. 47, 51) it was said: “ It is the general rule that a surety is not liable if the original debt is barred by the Statute of Limitations ”.
On the question of whether the running of limitations in favor of the principal releases the surety, there is a conflict of authority in other jurisdictions. (50 Am. Jur., Suretyship, § 80, p. 961; Anno. 122 A. L. R. 204.)
Nevertheless, though the running of the limitations may not automatically discharge the surety, the fact that both surety and principal were sued in the same action makes the result reached by the majority run counter to another well-established doctrine in the law of suretyship.
In Stearns, Law of Suretyship (5th ed.; p. 177) it is stated: ‘ ‘ A judgment in favor of the principal in an action brought by *5the creditor against him is conclusive against the creditor in a subsequent action brought by him against the surety”. (See, also, ibid., § 7.20, p. 231 and 1 Freeman, Judgments [5th ed.], § 466.)
A judgment which would be res judicata in a subsequent suit against the surety should be no less binding because the surety happens to be a party in the same suit. The determination herein is thus so logically inconsistent, it should not stand. The judgment in favor of the principal should automatically preclude judgment against the surety.
What has been said hereinabove is predicated on the acceptance of the ruling of the court that the principal is being exonerated solely because of the failure to bring suit within the 16 months’ period. However, I believe that the other defenses to the action should have been sustained, and the surety held not liable on the bond.
In the first place, the revocation of the principal’s license was based upon acts of one of the licensee’s officers committed in connection with premises other than the one covered by the license. The bond (par. 6) provides that “ A breach of any condition of this bond shall be deemed to have been established by the revocation * # * of the aforesaid license ’ ’. The use of the word “ deemed ” connotes a presumption which is rebuttable. Once the license is revoked, it is no longer necessary to prove de novo the facts of the violation for which the bond was cancelled. But it is still essential to determine whether the violation comes within the terms of the bond. The surety did not in its bond — fairly construed—promise to answer for any violation at any other location than that covered by the license to the principal. (See Clement v. Smith, 128 App. Div. 859, affd. 197 N. Y. 531.) Hence, I would hold that the bond herein was given to secure observance of the law on the premises for which the license was issued.
Finally, the revocation of the license herein occurred as a result of a proceeding instituted in June, 1959. However, the license had expired on February 28, 1959. It appears that the licensee sold its business and neither sought nor secured a renewal of the license after February 28, 1959. The court now holds that the proceeding to cancel the license was not barred by the prior expiration of the license. However, in Matter of De John v. New York State Athletic Comm. (12 A D 2d 318) the court held otherwise. In a dissenting opinion in that case, I vainly urged the proposition which the court would accept without any reference to that decision. On the basis of Matter of De John v. New York Stale Athletic Comm. (supra) it would *6appear that the revocation proceeding herein was wholly unauthorized because there was no license extant at the time revocation proceedings were commenced. Consequently, the surety may successfully urge the unauthorized revocation as a defense to this action on the bond.
I, therefore, dissent. I would reverse the order granting summary judgment against the surety and would dismiss the complaint as against the surety as well as against the principal.
Botein, P. J., and Breitel, J., concur with Stetjer, J.; Valente, J., dissents in part, in opinion in which Bergan, J., concurs.
Order, entered on June 27,1961 and judgment entered thereon on June 29,1961 affirmed as to the defendant Standard Accident Insurance Company, with costs to respondent, and reversed, on the law, and the motion for summary judgment denied as to defendant Elaine & Heyward Bar and Restaurant, Inc., with costs to that appellant against respondent. Settle order on notice.