People v. Standard Accident Insurance

Steuer, J. Defendants are principal and surety on a bond given to the State of New York pursuant to chapter 478 of the Laws of 1934. The said bond, in the penal sum of $1,000, was conditioned upon the principal not suffering any violation under a permit issued to it for a liquor license. Special Term granted summary judgment against both defendants. We are in accord that as regards the principal summary judgment should have been denied and that defendant’s motion for summary judgment on the ground that the action is barred by limitation of time should have been granted. The bond contained a provision that any action for the penal sum shall be commenced within 16 months after the expiration of the license period. It is conceded that this action was begun considerably more than 16 months after the expiration of the license. This defendant properly raised the issue in its answer. The People seek to avoid the effect of the defense on the basis of the following facts: The license expired February 28, 1959. On October 26, 1959, the license was cancelled as a result of a determination that an offense had been committed in January, 1958. This action was begun on October 5, 1960. It is plaintiff’s contention that the period of limitations begins to run not from the date of expiration of the license but from the date of adjudication that an offense was committed. This argument rests on the contention that a proceeding to cancel a license is not barred by the fact that the license has already expired. There is no authority to support this contention. It is true that the expiration of the license period will not bar a proceeding begun during that license period (Matter of Farley [Spier Certificate], 161 App. Div. 205; Matter of D’Amato v. Krulewitch, 23 Misc 2d 473). Whether such a proceeding may be entertained if initiated after the license has by [3] its terms expired need not be determined in this case, and consequently we do not reach it. This is because the plain language of the bond fixes the starting point for the limitation of the bond as the date of expiration of the license. To hold otherwise would be to fix a period of limitations utterly at variance with the bond—namely, 16 months after whatever date the authority decided to adjudicate a complaint on an alleged offense. Such an extension, practically without limit, would make the provision for limitation virtually nugatory. The contention that the license period extended to the date of adjudication is untenable. As regards the surety, the situation is different. This defendant advisedly refused to plead limitations and does not now seek immunity from this source. It does advance several reasons why it claims the judgment to be improper, none of which reasons do we find to be valid. While not argued by the parties, we are confronted with the proposition that a surety cannot be held responsible when its principal is exonerated. This is ordinarily true but does not apply where the grounds upon which the principal is released are personal to it and do not affect its inchoate liability on the bond (see Putnam v. Schuyler, 4 Hun 166; McLaughlin v. McGovern, 34 Barb. 208; Simpson, Suretyship, p. 273 et seq.; Restatement, Security, § 125 [1941]). While the defense here is not, strictly speaking, personal, the situation is very closely analogous and the same rule would apply. Moreover, this defendant has also failed to raise the question whether the action to cancel the license was maintainable after expiration. So in this connection also the question is not before us. The ground advanced is that the offense for which the penalty was imposed did not take place on the bonded premises. Here the license was granted to the principal, a corporation, and its address is stated to be 1015 Nostrand Avenue, Brooklyn. The offense was that Louis Cohen, an officer of the licensee, obtained another license for premises on Tompkins Avenue, which license he did not intend to use personally but intended to give to someone else to act under. Defendant does not dispute that this was an offense and that the license issued to the corporate defendant was properly revokable on account of it. Its sole contention is that this was not an offense committed at Nostrand Avenue and that its liability is solely for acts committed at this address. The bond itself says nothing about any address except that it gives Nostrand Avenue as the address of the corporation. It refers to any act of the principal without limitation as to the place committed. In that respect the bond differs from that involved in a case relied on (Clement v. Smith, 128 App. Div. [4] 859, affd. 197 N. Y. 531) which bond referred to violations on the licensed premises. Nor can this appellant derive any consolation from the general tenor of the bond. The bond states that it is given in accord with the Alcoholic Beverage Control Law and it would therefore be expected that the close regulatory provisions as to the persons to whom licenses would be issued and the careful regard to questions of ownership and operation would be subjects of its coverage. The order of June 27, 1961, granting summary judgment against defendant Standard Accident Insurance Co. should be affirmed with costs, and the order of June 29, 1961, granting summary judgment against defendant Blaine & Heyward Bar and Restaurant, Inc. should be reversed on the law and the facts, and the cross motion of said defendant granted, with costs.