Court Opinion

ID: 5236657
Source: CourtListenerOpinion
Date Created: 2022-01-06 17:10:50.348104+00
Date Added: 2024-06-11T08:27:44.420439
License: Public Domain

Ingraham, P. J. (dissenting in part):
I concur with my brother Scott as to claims presented, where no action had been brought against the surety prior to December 16, 1912, but I dissent as to those claims that are based upon judgments recovered in actions commenced prior to that date. The case of People v. Metropolitan Surety Co. (211 N. Y. 107), which the prevailing opinion states is controlling in this case, does not, I think, apply to a case in which the action has been commenced against the surety prior to the date of the forced liquidation. In that case the contract between the United States and the construction company was completed and finally settled September 28, 1908. Six months after that date, March 27, 1909, the United States had not instituted any action upon the bond, and during that period there was no cause of action against the surety company by the creditors of the principal, because the creditors’ right of action was by the statute postponed during that six months, within which period the United States could sue. At the end of that period the creditors could sue, but, under the statute, it was a representative action on behalf of all the creditors upon the bond. It was said, in the opinion: “The liability of the surety company * * * remained qualified and conditional. Its certainty or absoluteness depended upon the possibility that, by means of the only method provided or permitted by the statute and not then instituted, the validity and enforceability of the claim be adjudicated. * * * It is unnecessary to consider whether or not the presentation of the claim to the receiver and the subsequent proceeding is a suit or action brought by the claimant. We are not required to pass beyond the fact that the claimant has no right of action and the surety company no liability cognizable in this action or proceeding. Whatever right of action was in the claimant or liability on the part of the surety was conditioned upon the use of the statutory remedy. Divorced *348from that remedy the right and the liability are non-existent. The claimant should have conformed with the provisions of the statute and obtained in the statutory action and presented to the receiver a judgment establishing the validity and amount of his claim. His claim as presented was conditional and not absolute, and its allowance was error.” Now, in that case the contract for the work was completed and finally settled September 28, 1908. The action then under consideration was commenced January 6,1909, and on January 30, 1909, the surety company was dissolved and a receiver appointed. No suit on the bond had been instituted by the United States or by any creditor of the principal debtor in the Federal courts as provided for in the Federal statute under which the bond was given, and the decision in that case related to the facts then before the court. Where, however, the action had actually been commenced in the Federal courts under the Federal statute to enforce the liability of the surety prior to the dissolution of the surety company, and the appointment of the receiver, it seems to me that the liability no longer remained conditional; that the essential facts upon which the liability of the principal and his surety are based had accrued, and the action as provided for by the Federal statute had been commenced to enforce that liability. The Federal statute, as I read it, recognizes the fact that after the six months’ period in which the United States could sue had expired then the liability to the creditors became fixed, and the proper proceeding by the commencement of the action in the Federal courts had been taken to enforce it. The liability did not depend upon the judgment in that action, but upon the facts as they then existed, and the judgment of the Federal court in that action was a mere ascertainment of the amount due the creditors as against the principal and his surety. And this, I think, was recognized in the opinion of the majority of the court in the Metropolitan Surety Company case, when it was said: “We are not required to pass beyond the fact that the claimant has no right of action and the surety company no liability cognizable in this action or proceeding." Whatever right of action was in the claimant or liability on the part of the surety was conditioned upon the use of the statutory *349remedy.” That remedy had been invoked by the petitioner and he was pursuing it when the insolvency of the surety required liquidation of its affairs, and when judgment was finally entered in the Federal action commenced prior to the entry of the order for the liquidation of the affairs of the surety, that judgment it seems to me, determined the amount of the obligation of the surety which existed at the time of its liquidation.
I think, therefore, that the order appealed from should be modified in accordance with these views.
Order reversed, with ten dollars costs and disbursements, and motion of Superintendent of Insurance granted. Order to be settled on notice.