Gilpatric v. National Sur. Co.

• Decision Date: 10 June 1920
• Citation: 95 Conn. 10,110 A. 545
• Court: Connecticut Supreme Court
• Parties: GILPATRIC, State Treasurer, v. NATIONAL SURETY CO. et al.

110 A. 545

95 Conn. 10

GILPATRIC, State Treasurer, v. NATIONAL SURETY CO. et al.

Supreme Court of Errors of Connecticut.

June 10, 1920

Appeal from Superior Court, New Haven County; Donald T. Warner Judge.

Action by G. Harold Gilpatric, Treasurer of the State of Connecticut, against the National Surety Company and others. Judgment for plaintiff, and named defendant appeals. No error.

The plaintiff is the immediate successor as state treasurer of the original plaintiff, who brought the action while holding that office. The defendant Del Grego was for 28 years before March 6, 1918, engaged in business as a private banker in New Haven. On September 21, 1907, he, as principal and the defendant surety company, as surety, executed a bond for $10,000 to the state of Connecticut conditioned that, as Del Grego " has applied to the treasurer of the state of Connecticut for a certificate to conduct a private bank, now if the said Eugene S. Del Grego shall so conduct such private bank as to fully protect from any loss or injury all the customers of such private bank in accordance with chapter 86 of the Public Acts of 1907, then this obligation shall be null and void; otherwise of full force and effect." This was deposited with the state treasurer, who thereupon issued to Del Grego a license which has never been repealed or canceled. From that time up to and inclusive of September 23 1916, Del Grego paid each ensuing annual premium in advance, and the surety company accepted every such payment " without in any way circumscribing, limiting or restricting its liability under the bond." The surety company during all this period recognized and treated the bond as an existing one, and one upon which its suretyship was conditioned for Del Grego's compliance with the laws of this state relative to private bankers. In 1914 it attempted to raise the annual premium from $50 to $100, but was unsuccessful and abandoned the attempt. On September 7, 1917, the surety company notified Del Grego and the state treasurer's office in writing that it canceled the bond, its action to become effective September 21st following, the date upon which the last annual advance payment of premium had been made in 1916. This was the first action ever taken by the company declaring the bond canceled, or giving notice to that effect. The surety company had never made any effort to remove the bond from the state treasurer's office or to have Del Grego's license revoked, nor had it ever made any effort after the execution of the bond to ascertain Del Grego's financial condition. Del Grego was adjudicated a bankrupt on March 6, 1918, and was at that time indebted to his customers to an amount of more than $22,000 in excess of his total assets. This indebtedness had existed since August, 1917. The adjudication was at once referred by the United States District Court to a referee in bankruptcy having jurisdiction, for full and appropriate proceedings, and orders in pursuance thereof were duly issued. At that time there were 145 depositors in Del Grego's bank, all of whom were depositors on September 1, 1917, to whom he was indebted on their deposits in the sum of $37,854.09, and claims for that amount have been proved and allowed. They have received a dividend of 30 per cent. on their claims, and there is now in the hands of Del Grego's trustee the sum of $3,968.99 in cash remaining after the payment of this dividend and the expenses of settlement of the estate. These depositors and customers have lost and are damaged by the failure, bankruptcy, and negligence of Del Grego, and, upon the application of his trustee, an order was issued by the referee in bankruptcy having jurisdiction directing the then treasurer of the state-the plaintiff's immediate predecessor in that office-to bring suit upon the bond. The suit was so brought to recover the amount of the bond for the benefit of Del Grego's customers and depositors, as the surety has refused and neglected to pay it, although due demand has been made of the surety to that effect. Of the whole amount of deposits already referred to, the sum of $10,462.91 is that of deposits of depositors made before August 22, 1911, with interest thereon. Chapter 86 of the Public Acts of 1907 was repealed August 22, 1911 (Pub. Acts 1911, c. 197), and the treasurer did not thereupon require a new bond of Del Grego, or take any action concerning the bond as already furnished, but permitted him to continue his business under the original license. The surety company did not, upon the repeal of the act of 1907, give to the treasurer or to any one else any extension certificate or other evidence that the original bond had been extended or continued in force, but did, as already found, continue to receive annual advance payments of the premium thereon.

All the material facts so found, except that Del Grego's insolvency had existed since August, 1917, were embodied in the complaint, which also alleged specifically that " the full amount of said bond is necessary to protect the customers and depositors of said Eugene S. Del Grego, whose estate is in process of settlement." The defendant company demurred for substantially these reasons, because: (1) The plaintiff was without authority to bring the suit; (2) the referee was without authority to direct it; (3) the trustee had no interest in the relief sought; (4) the proceeds of the bond are not assets of the bankrupt estate; (5) all the interested persons are not parties; (6) the state has suffered no damage; (7) the state is not acting on behalf of the parties having liquidated claims, or on the relation of injured customers; (8) no definite loss to depositors has been ascertained; (9) the legislation of 1915 authorizing a suit by the state treasurer does not apply to the bond given under the act of 1907; and (10) the repeal of the last-named act terminated the bond and released the surety company from liability under it.

The demurrer was overruled (Curtis, J.), and four defenses were then interposed: (1) Setting up the written agreement of Del Grego, upon which the surety company executed the bond, and denying the essential allegations of the complaint; (2) alleging notice by the company in January, 1911, to Del Grego that it would not longer continue on his bond, and a request to him to terminate its liability by substituting other surety, and the subsequent termination of its liability by the repeal of the act of 1907; (3) alleging failure of the state bank commissioners to make the examination of Del Grego's bank as required by law; (4) alleging the failure of the state treasurer to cancel Del Grego's license upon the repeal of the act of 1907, and the release of the surety by reason of that claimed default.

A demurrer to the second, third, and fourth defenses was sustained (Keeler, J.). A reply to certain parts of the first defense averred that Del Grego's insolvency and inability to pay his depositors existed through September, 1917. This was demurred to on the ground that the default of the bankrupt had been legally determined as of March 6, 1918. Action on this demurrer was withheld until the final determination of the case on its merits, when it was overruled.

Certain interlocutory rulings on motions to expunge and to make more specific call for no independent statement or consideration.

The court rendered judgment for the plaintiff to recover the full amount of the penalty named in the bond, $10,000, with interest thereon from August 20, 1918, the date of the bringing of the action.

The appeal assigns error: (1) In the make-up of the finding and in the exclusion from it of certain claimed facts; (2) in overruling the defendant's demurrers, and in sustaining the demurrer of the plaintiff; (3) in rulings on evidence; and because (4) liability on the bond was terminated by the repeal of the act of 1907 as to deposits made after that date; (5) the surety company was not liable for interest in excess of the full penalty named in the bond; (6) the taking of premiums by the company after the repeal of the act neither extended the bond beyond that date, nor made the company liable to depositors of a date subsequent to it; (7) the defendant company had neither by act nor omission kept the bond in force for the benefit of such subsequent depositors; (8) the condition of the bond " limited it to" the act of 1907, " and that to extend it beyond this statute would be in violation of the Constitution of the United States" ; and (9) no subsequent legislation could extend or continue the bond without the surety company's consent.

The evidence has been certified upon the appeal for a correction of the finding.

Albert H. Barclay, of New Haven, for appellant.

Charles J. Martin, Louis M. Rosenbluth, and Joseph T. Anquillare, all of New Haven, for appellee.

CASE J.

None of the grounds of attack upon the finding is well based. If we assume the correctness of the claim that certain paragraphs embody conclusions of law rather than statements of fact, these are nevertheless fully sustained by other and unchallenged parts of the finding and by the evidence. If there are technical defects of the kind complained of, they are not harmful to the defendant. It is also urged that conclusions of fact are found " without stating the facts upon which these conclusions are based." There is nothing necessarily irregular in this. So far as appears, the finding was made to conform to the rule, occasionally overlooked, which requires it to " avoid the recital of evidence and all evidential matters, and be confined to a statement of those operative or ultimate facts" essential to present the legal questions involved. Practice Book Rules, § 103, p. 232. The claim that the court found, without evidence,...