Court Opinion

ID: 3846924
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:21:43.57101+00
Date Added: 2024-06-11T14:12:55.368348
License: Public Domain

I concur in the decisions in these cases, and I base my concurrence on the following propositions:
(1) That the Act of May 14, 1874, P. L. 157, on which appellants rely, does not give "sureties in any instrument in writing for the forbearance or payment of money at any future time" the absolute right to be discharged from their liability by serving written notice on the creditor to collect the amount thereof, but merely provides in effect that in those cases where, by contract or by positive law, the sureties have a right to be relieved by giving notice, that notice must bein writing and signed by the party giving such notice. The act still leaves open the question when and under what circumstances a surety's liability may be terminated by such notice.
(2) That the bond furnished by the surety companies to secure payment of deposits and interest to the Commonwealth, pursuant to section 5 of the Act of February 17, 1906, P. L. 45, is in all its essential aspects a contract of insurance, and is subject to the same rules of interpretation and construction as a contract of insurance. In Young v. American Bonding Co.,228 Pa. 373, 77 A. 623, Mr. Justice STEWART of this court quoted (at page 380) with approval the following from 32 Cyc., page 306: "The doctrine that a surety is a favorite of the law, and that a claim against him is strictissimi juris does not apply where the bond or undertaking is executed upon a consideration by a corporation organized to make *Page 118 
such bonds or undertakings for profit. While such corporations may call themselves 'surety companies' their business is in all essential particulars that of insurance. Their contracts are usually in the terms prescribed by themselves, and should be construed most strictly in favor of the obligee."
(3) Since the bond is in its essential aspects a contract of insurance and since it does not provide for its cancellation by the surety company at the latter's own pleasure, it follows that the beneficiary of that contract, to wit, the Commonwealth, must be consulted and its leave obtained before the contract can be cancelled. The Commonwealth has a vested interest in the contract of suretyship from the date of its execution which interest is analogous to an interest a beneficiary has in a life insurance policy from the date of its execution. "The beneficiary designated in an ordinary life insurance policy has a vested interest from the time the contract of insurance takes effect, in the absence of any stipulation in the policy reserving to insured the right to change the beneficiary, assign the policy, or otherwise divert the proceeds, or in the absence of any language in the policy inconsistent with a vested interest:" 37 C. J. 577, section 343.
(4) Every sound consideration of public policy demands that in the absence of an express reservation of right in a contract of suretyship (and there is no such reservation in the contract before us) the surety company cannot be released from its liability without the consent of the Commonwealth.
Surety companies must accept the burdens as well as the benefits of their business. For many years they have been "insuring" state deposits in the banks of the Commonwealth with only negligible risk and with considerable profit to themselves. Now when the funds of the Commonwealth deposited in the banks most need the protection which the surety companies have been paid to supply, these companies propose to withdraw that *Page 119 
protection. If life insurance companies should seek to cancel their policies whenever an epidemic sweeps across the country, that situation would be analogous to what the surety companies are trying to do in the circumstances revealed to us in the instant cases.
The economic and financial disaster that would befall this Commonwealth if all the surety companies which have insured the deposits of state funds in banks possessed the power of cancellation they now claim and should imperatively demand the State's immediate withdrawal of such deposits upon pain of having the surety bonds cancelled, would be comparable to what befell the nation when the federal deposits were removed from the Bank of the United States and its twenty-five branches in 1833. It would be an anomalous situation if the courts which in matters officially before them are vested with the power to express the will of the sovereign would give such expression to that sovereign will as would inevitably bring ruin to the Commonwealth.
There is no inherent freedom in contracting parties to withdraw from a contract; for example, a contract of marriage cannot be dissolved even by the mutual consent of the two immediate parties to it. The Commonwealth's consent must be obtained if the contract is to be terminated. "Two contracting parties have the power to create rights in a third party:" Professor Arthur L. Corbin on "Third Parties as Beneficiaries of Contractors' Surety Bonds," page 668 of "Selected Readings on the Law of Contracts." In the law of nations the right of a state to withdraw from a union of states, unless the right so to withdraw is reserved in the original compact, is denied. The general power of the government to preserve and protect the public welfare is everywhere recognized: 18 Am.  Eng. Enc. L., page 740. The maxim "salus populi suprema lex" has been accorded recognition in the highest courts of this and other states and of the nation: Powell v. Com., 114 Pa. 265, 294,7 A. 913; P. R. R. Co. v. Braddock Electric Ry. Co., 152 Pa. 116, *Page 120 
127, 25 A. 780; Com. v. Alger, 61 Mass. 53; Beer Co. v. Massachusetts, 97 U.S. 25.
The Commonwealth is within its rights in refusing to consent to the termination of the surety companies' liabilities on the bonds in question.