Bayham v. Maryland Nat. Ins. Co.

• Decision Date: 08 June 1966
• Docket Number: CA-CIV,No. 1,1
• Parties: Alan Philip BAYHAM, Appellant, v. MARYLAND NATIONAL INSURANCE COMPANY, a Maryland Corporation, Appellee. 247.
• Court: Arizona Court of Appeals

Page 120

415 P.2d 120

3 Ariz.App. 405

Alan Philip BAYHAM, Appellant, v. MARYLAND NATIONAL INSURANCE COMPANY, a Maryland Corporation, Appellee.

No. 1 CA-CIV 247.

Court of Appeals of Arizona.

June 8, 1966.

Rehearing Denied July 1, 1966.

Raymond Huffsteter, Phoenix, for appellant.

Harold Goldman, Phoenix, for appellee Maryland Nat. Ins. Co.

DONOFRIO, Judge.

This is an appeal from an order and judgment granting a motion to set aside the default judgment against a surety on a replevin (redelivery) bond.

Appellant, plaintiff below, a member of the Arizona Bar, on August 14, 1964, filed an action for attorney's fees in the amount of $3,501.19 against R. O. Kelly and Romeria Kelly, Kelly Development Co. Inc., Kelly Enterprises Inc., and Marks Inc. At the same time he filed an affidavit and a bond on attachment in the amount of the suit and a writ of attachment was issued. Upon serving the writ the sheriff attached a 1964 Cadillac automobile, the title to which was in Kelly Development Co. subject to a $7,204.15 lien in favor of Coulter Cadillac, Inc.

The next day, August 15, Kelly Development Co. obtained from appellee Maryland National, also referred to as the surety, a redelivery bond in the sum of $7,000, had it approved by the sheriff and retook possession of the Cadillac automobile.

On September 9, 1964, appellant filed an amended complaint retaining the original cause of action and adding two additional causes of action. One of the new causes of action was based on debt in the sum of $2,700 for monies loaned to defendants, the other was based on conversion of a 1963 Oldsmobile automobile. The defendants accepted service of the alias summons and amended complaint on September 16, 1964.

On November 16, 1964, the defendants not having answered, the plaintiff entered a default against them. No notice of application for taking default judgment was ever served on the defendants or the surety. On December 22, 1964, judgment was taken against the defendants and Maryland National as surety on defendants' replevin (redelivery) bond for the sum prayed for in the three causes of action namely, $6,885.23 and costs. The reasonable value of the Cadillac was fixed by the court at $6,885.23. Defendants at no time sought to set aside the default judgment. On June 21, 1965 appellee moved to set aside the default judgment against it as surety. The motion was granted and this appeal followed.

Three crucial questions are presented which are determinative of the appeal. The first of these deals with the giving of notice and can be divided into two parts. The first being whether a three day notice prior to hearing an application for judgment by default under Rule 55(b), Rules of Civil Procedure, 16 A.R.S. is required to be given to the surety and is the failure to give such notice violative of the due process clause of the Federal Constitution, and the second being whether this three day notice should be given to the defendants and if so required what effect does the failure to give such notice have on the judgment against the surety.

The pertinent portion of Rule 55(b) supra reads:

'1. In all cases the party entitled to a judgment by default shall apply to the court therefor, * * *. If the party against whom judgment by default is sought Has appeared in the action, he or, if appearing by representative, his representative, Shall be served with written notice of the application for judgment at least three days prior to the hearing on such application.' (Emphasis supplied)

With reference to the first part of the question appellee contends that by posting the replevin bond it appeared in the action and was therefore entitled to receive the three day notice. As to the second part, it urges that since the defendants who obtained the bond and thereby appeared in the action were not served with the notice the default judgment was void and therefore the judgment against the surety based thereon is invalid. We now pass upon these questions.

Our court recently in General Ins. Co. of America v. Deen, 3 Ariz.App. 187, 412 P.2d 869 (1966), held constitutional as not violative of due process the procedure in the replevin statute A.R.S. § 12--1308. This statute is the counterpart of A.R.S. § 12--1536 in relation to the way the property is treated, each in its way making its own provisions for the return of the property or its value, or the satisfaction of the judgment. We believe the reasoning of this court in Deen with reference to A.R.S. § 12--1308 is equally applicable to A.R.S. § 12--1536. The constitutional issue as to whether it satisfies the ordinary due process requirements of notice and opportunity to be heard is also the same. In Deen our court quoted with approval from a Florida case, towit:

'In Evans v. Kloppel, 72 Fla. 267, 73 So. 180 (1916), a statute similar to A.R.S. § 12--1308 was attacked as unconstitutionally violative of due process. The court said:

'The great weight of authority is to the effect that the surety by signing the undertaking becomes a quasi party to the suit and is held to have notice of all the proceedings thereafter in the suit that may affect his liability on the undertaking. 'The statute was designed to give a speedy remedy against those who, by becoming surety on such undertakings, have assisted another in depriving a party of his property.' Richardson v. People's Nat. Bank, supra. (57 Ohio State 299, 48 N.E. 1100.) The statutes do not do violence to the due process clause of the fourteenth amendment, because the surety by signing the undertaking, the condition and consequences of which are affixed by statute, enters the court for the purpose of contesting or aiding his principal in contesting a question in an action pending in the court and is thus deemed to have submitted himself to the jurisdiction of the court for all purposes of the action. York v. (State of) Texas, 137 U.S. 15, 11 Sup.Ct. 9, 34 L.Ed. 604; Western (Life) Indemnity Company of Illinois v. Rupp, 235 U.S. 261, 35 Sup.Ct. 37, 59 L.Ed. 220.' (Emphasis added) 73 So. at 187.' Deen, 412 P.2d 873.

Counsel have cited House v. Smith's Cashway Inc., 38 Ariz. 399, 300 P. 951 (1931) wherein our Supreme Court held that the filing of a replevin bond was an appearance by the defendant therein. The Court had before it the question of the validity of service against a defendant company erroneously named and reasoned that if the defendant secured a dissolution of an attachment lien by substituting a surety bond such action amounted to a general appearance giving the court jurisdiction and that defendant could not thereafter question the service by a special appearance. We are not called upon to apply the rule in House to the case at bar. The failure to give the notice does not render the judgment void but merely voidable. Rogers v. Tapo, 72 Ariz. 53, 230 P.2d 522 (1951); Nesbitt v. Nesbitt, 1 Ariz.App. 293, 402 P.2d 228 (1965).

The bond was posted pursuant to § 12--1536 A.R.S. which reads as follows:

'At any time before judgment, if the property is not previously claimed or sold, defendant may replevy the property or any part thereof By giving bond to be approved by the officer who levied the writ, payable to plaintiff in double the amount of plaintiff's debt, or, at defendant's option, for the value of the property replevied as estimated by such officer, conditioned that defendant will satisfy the judgment which may be rendered in the action, or will pay the estimated value of the property with lawful interest thereon from the date of the bond.' (Emphasis supplied)

A reading of the statute indicates that the bond is posted to satisfy any judgment which may be rendered in the action, or to pay the estimated value of the property. It is in effect a substituted security for the property which is released at the time the bond is posted. Smith's Cashway, (supra).

A review of our statutes covering the subject of replevin and the few cases we have been able to find indicates that the surety on the replevin bond is not such a party to the action wherein the default judgment was taken to require the service upon it of the three day notice. In Servall Automotive Service v. McDuffie, 44 Ariz. 498, 38 P.2d 655 (1934) our Supreme Court held that the replevin bond given to release property in attachment proceedings is a substitute for the attachment lien with the attaching creditor looking to the bond for security to satisfy his judgment. The relation of suretyship grows out of the assumption of liability at the request of the defendant who may be liable for the payment of the judgment for which the surety binds itself to pay. The surety acts in an accessory or collateral capacity and generally is not involved in the issues between the parties. It leaves the conduct of the case to the defendant and is not permitted to contest the liability between the parties. Lindsey v. Williams, Tex.Civ.App. (1950), 228 S.W.2d 243; Lawyers Lloyds of Texas v. Webb, Tex.Civ.App. (1941), 154 S.W.2d 867. The judgment entered against the surety was not a judgment by default but was a judgment by summary action based upon a default judgment entered against the principal.

There are, however, special instances where the surety may be considered a party, and in the absence of these special defenses arising out of particular circumstances whatever concludes the principal concludes the surety. In Deen this court quoted the following from 77 C.J.S. Replevin § 324 p. 232:

'Statutes providing for proceedings by rule or motion for judgment and award of execution on the replevin or redelivery bond, after breach thereof, have been construed and applied; and where a judgment is rendered against plai...