Court Opinion

ID: 9602950
Source: CourtListenerOpinion
Date Created: 2023-08-22 02:01:50.888438+00
Date Added: 2024-06-11T18:02:07.402702
License: Public Domain

Gregory, Justice:
On appeal to the circuit court the trial judge overruled all exceptions and affirmed the Report of the Master In Equity which concluded that the respondent (plaintiff below) should be held and declared liable as a surety under the subject bond in a sum not to exceed $10,000 (plus interest from and *163after September 19, 1969) with respect to the entire effective period during which the bond, including renewal or continuation periods, was in force.
In our view the order of the trial judge sets forth and correctly disposes of all issues submitted to this Court. We affirm and adopt that order, with minor deletions, as the directive of this Court.
ORDER OF JUDGE MOSS
This declaratory judgment action was instituted by plaintiff, National Grange Mutual Insurance Company, against the defendant, the Receiver for Consolidated Securities, Inc., seeking a construction of the plaintiff’s bond wherein Consolidated Securities, Inc. is the principal and National Grange is the surety. This bond was issued on May 18, 1962, pursuant to Section 62-111 of the South Carolina Code of Laws. Section 62-111 of the South Carolina Code provides as follows:
§ 62-111. Bonds or deposits of broker-dealers, agents and investment advisers. — Registered broker-dealers, agents and investment advisers shall post surety bonds in amounts of ten thousand dollars for broker-dealers and investment advisers and one thousand dollars for agents, conditioned that the registrant will comply with the provisions of this chapter and such orders and regulations as the Commissioner may from time to time prescribe. Such bond may be so drawn as to cover the original registration and any renewal thereof. Any appropriate deposit of cash or securities shall be accepted in lieu of any such bond. Every bond shall provide that no suit may be maintained to enforce any liability thereon unless brought within two years after.the sale or other act upon which such suit is based and shall also provide that the liability of the surety on each such bond to all persons aggrieved shall in no event exceed in the aggregate the penal sum thereof. (1961 [52] 185.)
The plaintiff’s obligation under its bond was conditioned upon the principal’s compliance with the South Carolina *164Uniform Securities Act, Section 62-1, et seq. of the 1962 Code and provided, in pertinent parts as follows:
The Liability of the surety hereon to all persons aggrieved shall in no event exceed in the aggregate Ten Thousand ($10,000.00) Dollars in any registration period or in any renewal thereof.
This Bond is a continuous obligation and shall cover the full period or periods of registration of the principal, including initial and renewal registration.
It is undisputed that the principal, Consolidated Securities, Inc., was required under the above act to register for a period of one year and thereafter to renew its registration each year. Further, it was stipulated by the parties to this action that the “bond was renewed or continued in effect each year for several years”, in that, for the purposes of this action only, “during each of two years while the bond was in effect, a loss of $10,000 a year, that is $20,000' for the two years was sustained.” The plaintiff conceded its liability under the bond for losses of $10,000 occurring in one year during the life of the bond, prior to September 19, 1969, but it denied any liability in excess of $10,000, even though additional or other losses occurred in another registration period for which the bond continued in effect. It is the defendant’s position that the plaintiff, under the bond, would be responsible for $10,000 during each registration period if losses in that amount occurred in each of such registration periods.
As noted above, the bond provides that it is a continuous obligation covering the full period or periods of registration of the principal including initial and renewal registrations. The bond does not terminate at the end of any registration period, but may only be cancelled by either the principal or the surety by giving thirty (30) days written notice of such cancellation. Such provision is not contrary to Section 62-111 of the South Carolina Code. That section provides, as an alternative to posting a surety bond, for the deposit of a *165cash bond by the registrant. The statute also states that the bond shall provide that no suit may be maintained to enforce any liability thereon unless brought within two years after the wrongful act. The posting of a cash bond, as an alternative to a surety bond, would also be a continuing obligation. If a registrant should adopt the alternative procedure of posting a cash bond, the maximum that could be recovered under the circumstances in this case would be the sum posted, regardless of the number of years and the amounts involved in defaults under the cash bond. The bond states that it is a continuous obligation and it should be noted that nothing is required of either the surety or the principal to renew the bond at the end of each registration period. Affirmative action is required in the form of thirty (30) days notice by either the surety or the principal to effect a termination of the bond. I do not think that the bond or the statute meant for the surety to be obliged to pay the maximum amount of the bond if losses in that amount occurred in each of successive registrations.
The defendant relies heavily upon the case of Giese, et al. v. Engelhardt, et al., 175 N. W. (2d) 578 (N. D. 1970) to substantiate its position. However, I do not find that the South Carolina Securities Act, including the section requiring the bond, is as broad in purpose as the North Dakota Act, and, therefore, do not find that case controlling under the circumstances present here. In this connection, it should be noted that the legislature provided for a bond in a set amount which was contrary to the North Dakota Statute, and, further limited the time within which a suit could be maintained on the bond to two years. Further, Section 62-111 provides:
“Such bond may be so drawn as to cover the original registration and any renewal thereof.”
It is my view that the legislature in South Carolina envisioned a continual obligation covering the original regis*166tration, and the renewals thereof, without intent that the liability of the surety be cumulative after each registration.
Littlejohn and Ness, JJ., concur.
Lewis, C. J., and Rhodes, J., dissent.