American Druggists Ins. Co., Inc. v. Bogart

• Decision Date: 20 June 1983
• Docket Number: No. 82-5352,82-5352
• Citation: 707 F.2d 1229
• Parties: AMERICAN DRUGGISTS INS. CO., INC., and John H. Brown, Plaintiffs-Appellants, v. Joseph I. BOGART, Clerk of the Court, Southern District of Florida, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1229

707 F.2d 1229

AMERICAN DRUGGISTS INS. CO., INC., and John H. Brown Plaintiffs-Appellants, v. Joseph I. BOGART, Clerk of the Court, Southern District of Florida, Defendant-Appellee.

No. 82-5352.

United States Court of Appeals Eleventh Circuit.

June 20, 1983.

Roy E. Black and Frank C. Furci, Miami, Fla., for plaintiffs-appellants.

Clark D. Mervis and Maria P. Sperando, Asst. U.S. Attys., Miami, Fla., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before HILL and HATCHETT, Circuit Judges, and HAYNSWORTH, ^* Senior Circuit Judge.

JAMES C. HILL, Circuit Judge:

The United States District Court for the Southern District of Florida has an unwritten policy that allegedly disqualifies sureties from writing bonds in the district if the surety fails to pay the amount of an estreated bond within twenty days from the date of estreature. A corporate surety, which does business within the district, challenges the practice as inconsistent with the federal statutory scheme regulating corporate sureties and as a violation of the due process clause of the fifth amendment. The district court entered a summary judgment against the surety, rejecting both arguments. Upon review, we vacate the entry of summary judgment, and remand the case for further consideration.

I.

American Druggist Insurance Company ("ADIC") is a licensed corporate surety. On November 6, 1980, John Brown, an agent of ADIC, entered into a bail bond contract for $50,000. The bond guaranteed the appearance of Ramon Raimundo Casado in a criminal proceeding before the district court. When Casado failed to appear, on February 12, 1981, the district judge estreated the bond in open court. By a letter dated February 17, 1981, the clerk of the court notified ADIC of the estreature, and advised that the surety would be disqualified from writing additional bonds if the estreated amount was not remitted to the court by March 2, 1981--twenty days from the estreature.

When twenty days elapsed, ADIC filed a motion for additional time to secure the defendant's presence. The district court granted the motion and extended the deadline for surrendering Casado, or paying the full amount of the bond, until March 17, 1981. ADIC, however, was unable to recapture Casado by the extended deadline. Hence, on March 17, 1981, ADIC filed a motion to stay the order of the clerk disqualifying ADIC from writing any further bonds within the district. This motion alleged that on March 16, 1981, an agent of ADIC was prohibited from writing a bond notwithstanding the court's deadline extension. The agent apparently was told that ADIC had been placed on a list of disqualified sureties and would not be permitted to write bonds unless the clerk received an order from the court. The motion to stay disqualification essentially sought declaratory relief on grounds that the court's disqualification policy violated due process requirements. Accompanying this motion also was a motion to set aside the bond forfeiture and a motion for an evidentiary hearing.

On March 20, 1981, the district court heard counsels' argument on the various motions. At that time, the district judge indicated that he had done some research into the disqualification policy, but discovered nothing more than "[t]hat is just the way we have always done it." Nevertheless, the court stated further that the surety's due process challenge was not appropriately presented in the bond forfeiture proceeding, but instead should form the basis of a separate complaint. This position was restated in an order dated March 25, 1981, in which ADIC's motions to set aside bond forfeiture and for an evidentiary hearing were denied. The order expressly refused to address the constitutionality of the court's disqualification process, suggesting that such a decision must await another day. Taking its cue, ADIC filed its present complaint against the clerk of the court for the Southern District. ¹

II.

The major obstacle to evaluating the surety's claims is determining the practical significance of the disqualification policy. Because the procedure has not been formalized in any written rule, order, or memorandum, the origin of the court's practice is unclear. Officials in the clerk's office maintain that the practice has been in effect for more than twenty years and simply is an ongoing function of the court's administrative process.

Part of the procedure, however, has been formalized. After a determination of estreature, the clerk of the court mails a form letter to the surety. This letter notifies the surety of the forfeiture and explains that "[i]n accordance with the policy of this Court," the surety has twenty days in which to pay the full amount of the bond or else "be disqualified and precluded from writing any further bonds until said amount has been satisfied." ² If the surety fails to comply within the requisite time, the clerk places the name of the surety on a list with similarly disqualified sureties. ADIC maintains that a surety's relegation to this list automatically disqualifies the surety from writing further bonds until payment is made. Indeed, the language of the form letter indicates that such disqualification reflects official court policy. Notwithstanding the existence of the list and the language of the form letter, appellee maintains that ultimate approval of a criminal bond remains with the appropriate district judge or magistrate. Thus, the clerk's office may not refuse to accept a judicially approved criminal bond, even if the surety's name appears on the disqualification list.

That the surety may theoretically by-pass the clerk's office and obtain judicial approval for each of the criminal bonds, however, does not negate the impact of the disqualification list. Initially, by the time judicial approval is secured, the defendant, in a hurry to raise bail funds, will likely have turned to another corporate surety not on the list. But even if the surety reaches a judicial officer in time, the list still plays a role in the approval process. Both district judges and magistrates have access to the information; either a copy of the form letter is delivered to the officer handling the forfeiture or the judge or magistrate simply telephones the clerk's office for the information. Thus, although use of the information conveyed by the disqualification list may be appropriate in the bond approval process, it would be naive to suggest that placement on the list does not significantly impede the surety's ability to do business within the district. Bearing this in mind, we turn to the specific arguments against the policy, as advanced by the surety.

A.

ADIC first challenges the practice of the Southern District as inconsistent with the procedures established by federal statutes governing corporate sureties. The starting point of this analysis is rule 46(d) of the Federal Rules of Criminal Procedure which provides:

JUSTIFICATION OF SURETIES. Every surety, except a corporate surety which is approved as provided by law, shall justify by affidavit and may be required to describe in the affidavit the property by which he proposes to justify and the encumbrances thereon, the number and amount of other bonds and undertakings for bail entered into by him and remaining undischarged and all his other liabilities. No bond shall be approved unless the surety thereon appears to be qualified.

(emphasis supplied). The advisory committee note to this rule indicates that "[c]orporate sureties are regulated by 6 U.S.C. Sec. 6-14." ³

Until recently, title 6 of the United States Code provided for the comprehensive regulation of corporate sureties. As of September 3, 1982, however, the title 6 provisions regulating corporate sureties have been recodified without substantive change under title 31. Act of September 13, 1982, Pub.L. No. 97-258, 96 Stat. 1085. Pursuant to the statutory regulations, the surety corporation must file a copy of its articles of incorporation and a statement of assets and liabilities with the Secretary of the Treasury. 31 U.S.C.S. Sec. 9305(a) (Advance, November, 1982) (formerly, 6 U.S.C. Sec. 8). If the Secretary is satisfied that the surety has the proper charter authority, paid-up capital of at least $250,000, and the ability to carry out its contracts, then the surety is granted written authorization to provide surety bonds under title 31. Id. Sec. 9305(b).

Once authorized, the surety may write bonds pursuant to section 9304 of title 31; however, it also must file quarterly financial statements with the Secretary for the purpose of continuous evaluation. Id. Sec. 9305(c). In addition, section 9305(d) provides:

The Secretary--

(1) shall revoke the authority of a surety corporation to do new business if the Secretary decides the corporation is insolvent or is in violation of this section or section 9304 or 9306 of this title;

(2) may investigate the solvency of a surety corporation at any time; and

(3) may require additional security from the person required to provide a surety bond if the Secretary decides that a surety corporation no longer is sufficient security.

Id. Sec. 9305(d) (formerly, 6 U.S.C. Sec. 9). Finally, section 9305(e) states:

A surety corporation providing a surety bond under section 9304 of this title may not provide any additional bond under that section if--

(1) the corporation does not pay a final judgment or order against it on the bond; and

(2) no appeal or stay of the judgment or order is pending 30 days after the judgment or order is entered.

Id. Sec. 9305(e) (formerly, 6 U.S.C. Sec. 11). Each of these responsibilities is detailed further in the regulations promulgated by the Secretary. See generally 31 C.F.R. Sec. 223 (1982).

The extensiveness of the statutory scheme governing the continuous authorization of corporate sureties, and the explicit provisions for revocation of the right to do business, reflect Congr...