U.S. v. Martinez

• Decision Date: 14 January 1980
• Docket Number: 79-2696,Nos. 79-1189,s. 79-1189
• Parties: UNITED STATES of America v. Humberto MARTINEZ, Surety Insurance Company and Cal Rynerson, Appellants in79-1189. Appeal of ALLEGHENY MUTUAL CASUALTY CO., in 79-2696.
• Court: U.S. Court of Appeals — Third Circuit

Page 473

613 F.2d 473

UNITED STATES of America v. Humberto MARTINEZ, Surety Insurance Company and Cal

Rynerson, Appellants in79-1189.

Appeal of ALLEGHENY MUTUAL CASUALTY CO., in 79-2696.

Nos. 79-1189, 79-2696.

United States Court of Appeals, Third Circuit.

Argued Oct. 10, 1979.

Decided Jan. 14, 1980.

Alvin S. Michaelson (argued), Beverly Hills, Robert J. Del Tufo, U. S. Atty., Newark, N. J., for appellants; Samuel A. Alito, Jr. (argued), Asst. U. S. Atty., Newark, N. J., on brief.

Before ADAMS, ROSENN, and WEIS, Circuit Judges.

OPINION OF THE COURT

ADAMS, Circuit Judge.

We must decide in this appeal when a surety's obligation on a bail bond terminates, as well as how and by whom a surety's obligation may be discharged. The original defendant in this case failed to surrender to serve his sentence after his criminal conviction was affirmed by this Court. ¹ From a default judgment, entered by consent, ordering forfeiture of the appearance bond, Allegheny Mutual Casualty Company (Allegheny Mutual) appeals ² on the grounds that (1) the bond by its terms was not valid through appeal, (2) if it were, the surety's obligation was released by the action of the clerk of the district court purporting to cancel the bond, and (3) even assuming that the release was a mistake, the bond could not be reinstated under the court's power to correct clerical errors. We hold that the bail bond continued in effect while the conviction was on direct appeal and, inasmuch as the clerk's cancellation of the bond was mistaken and there is no evidence of reliance on the clerk's cancellation, the bond could be reinstated by the district court and must now be forfeited because of Martinez's failure to appear for incarceration pursuant to his sentence.

I.

The genesis of this dispute may be traced to the arrest of Humberto Martinez for selling heroin. The magistrate before whom Martinez appeared originally set bail at $25,000. After several days in detention, Martinez obtained a surety for his bail bond, which was signed by Martinez, by an attorney-in-fact for Allegheny Mutual, and by a magistrate on behalf of the government. As security for the bond, the surety was given a deed for property in California owned by Martinez's wife. The interest of Allegheny Mutual in the bond was later purchased by Cal Rynerson, as agent for Surety Insurance Company.

Martinez appeared in the district court at all times required of him up to and including sentencing. The penalty imposed consisted of two concurrent terms of fifteen years, followed by a special parole term of ten years. At the request of Martinez's lawyer, who now represents the surety, the trial judge continued bail on appeal in the same amount. This decision by the trial judge was based on Martinez's perfect record in appearances at trial, on the fact that security worth $25,000 had been posted, and on counsel's assurance that the bond was "good through appeal." ³

While the criminal conviction was on appeal in this Court and Martinez was out on bail, a secretary in the United States Attorney's office mistakenly sent a form letter to the clerk of the district court instructing the clerk to cancel the bond. The letter was not signed by the United States Attorney but, apparently following standard procedure, the clerk stamped "cancelled of record" on the face of the bond and sent a certificate of discharge to Rynerson.

After a panel of this Court affirmed the conviction of Martinez and the Supreme Court denied certiorari, ⁴ the district judge issued an order for the defendant to surrender. Martinez failed to appear, and a bench warrant for his arrest has so far not brought about his apprehension.

Well over a year after the purported cancellation of the bond, the United States Attorney discovered the error and moved, albeit without notice to the defendant's attorney or to the surety, for reinstatement of the bond. In granting the motion, the district court declared that the bond had been "erroneously cancelled at the request of . . . the United States Attorney without the approval or Order of this Court."

Shortly thereafter, counsel for Martinez filed a motion on behalf of the surety to vacate the order of the district court reinstating the bond. Following a hearing at which Cal Rynerson was the sole witness, the motion to vacate was denied. Rynerson testified that he retained the deed for the California property serving as security for the bond and that this property was probably worth more than the face amount of the bond, so that he was fully indemnified against forfeiture of the bond. Finding that "there is no prejudice to the Surety with respect to the reinstatement of the bond since the Surety still has ample security to cover its obligations," and that the security was the property "of the absconding defendant," the district court denied the motion to vacate the reinstatement of the bond. The judge stated that the cancellation was a clerical error which the court could correct under Fed.R.Crim.P. 36, that the clerk lacked the authority to release the surety, and that the surety must have realized that the clerk's action was mistaken and improper.

II.

A.

A bail bond is essentially a contract between the government on the one hand, and a principal and his surety on the other. ⁵ The extent of each party's undertaking therefore depends on the wording of the agreement and the intention of the parties as interpreted within the general framework of suretyship and contract law. ⁶ Generally, the terms of a bail contract are to be strictly construed in the surety's favor, and the surety may not be held liable for any greater undertaking than he has agreed to. ⁷ As with any other contract, the controlling consideration in interpretation is "the reasonable intentions of the parties." ⁸

B.

Courts of appeals have disagreed on the question whether federal or state law governs the interpretation of bail bonds filed with federal courts. Those holding that state law applies simply assert in conclusory fashion that a contract should be interpreted according to the law of the state in which it was made. ⁹ The Court of Appeals for the Second Circuit, however, has held that federal common law should be applied because "(f)ederal regulation of bail procedures in the federal courts is pervasive, . . . federal bail bonds may have distinctive features not found in state bonds," and "federal fiscal interests are affected." Moreover, although the need for national uniformity and certainty is not entirely compelling, since bail practices may differ from district to district, "there is nothing 'peculiarly local' about bail bond law, nor would any important state policies be affected by a decision to apply federal law to bail bonds in federal court." United States v. Catino, 562 F.2d 1, 2 (2d Cir. 1977); Accord, United States v. Miller, 539 F.2d 445, 448-49 (5th Cir. 1976) (per curiam).

The question which law to apply may be academic on this appeal, for there is no New Jersey case law that addresses the issue presented. ¹⁰ In State v. Rice, 137 N.J.Super. 593, 350 A.2d 95 (Essex County Ct. 1975), Aff'd mem., 148 N.J.Super. 145, 372 A.2d 349 (App.Div.1977), a New Jersey court merely held that a surety would not be released by any trial court action short of acquittal or conviction. It specifically did not consider the question whether "after conviction, imposition of a suspended sentence, suspension of execution of a sentence or a term of probation would operate to discharge a surety" or "whether a new recognizance is required pending appeal of a final judgment of conviction and sentence." Id. 137 N.J.Super. at 603, 350 A.2d at 101.

It is therefore unnecessary to decide whether federal or state law controls. Moreover, it is not a disagreement over the principles of contract law governing the interpretation of bail bonds, but one over the application of these principles to the facts, that has divided the federal courts on the question whether bail bonds continue through appeal. The applicable principles are indeed noncontroversial: the plain meaning of the agreement supplemented, if necessary, by any intention of the parties that may be gleaned from the circumstances. ¹¹ We look first, then, to the terms of the bond.

C.

The bond in this proceeding, which is of standard form, contains three paragraphs. The first recites as a condition of the undertaking that the defendant appear before the United States District Court for New Jersey or any other district to which the case is removed. It then provides that "the defendant is to abide any judgment entered in such matter by surrendering himself to serve any sentence imposed and obeying any order or direction in connection with such judgment as the court imposing it may prescribe." The important language of the second paragraph is that "(i)f the defendant appears as ordered and otherwise obeys and performs the foregoing conditions of this bond, then this bond is to be void, but if the defendant fails to obey or perform any of these conditions, payment of the amount of this bond shall be due forthwith." The third paragraph states: "It is agreed and understood that this is a continuing bond which shall continue in full force and effect until such time as the undersigned are duly exonerated."

Difficulty arises because two courts of appeals, both following the same precedent and claiming to have ascertained the plain meaning of the bond, have disagreed on the very issue we must decide. ¹² In United States v. Miller, 539 F.2d 445, 449 (5th Cir. 1976) (per curiam), the Fifth Circuit held that by the language of the bond, the surety's liability "may be extended to cover reasonably brief postponements of the execution of sentence." It noted the surety's argument that "once a sentence of incarceration has been pronounced all hope of parole vanishes and the risk of flight is materially increased. (The surety contended) that this increased risk which it says is not...