Maryland Casualty Co. v. Klaber's Estate

Opinion by Mr. Chief Justice McBride. 1. If according to plaintiff’s contention, this application is to be treated as a proceeding at law, the findings of the court are conclusive here as to the facts. There remains but one question: Can the surety upon a bond of this character be relieved of further liability thereon upon his arbitrary demand to be so released and without showing any fault, dereliction or misconduct on the part of his principal? The decision of this matter hinges upon the construction of Section 685, L. O. L., which reads as follows: “The surety, or representative of any surety, upon the bond, undertaking, or other obligation of any guardian, assignee, receiver, executor, administrator or other fiduciary, may apply by petition to the court wherein said bond is directed to be filed, or which may have jurisdiction of such guardian, assignee, receiver, executor, administrator, or other fiduciary, praying to — 120 — be relieved from further liability as such surety for the acts or omissions of the guardian, assignee, receiver, executor, administrator, or other fiduciary which may occur after the date of the order relieving such surety, to be granted as herein provided for; and for an order requiring such guardian, assignee, receiver, executor, administrator, or other fiduciary to show cause why he should not account and be relieved from any further liability as aforesaid, and that said principal be required to give a new bond. Thereupon, said court shall issue such order, returnable at such time and place and to be served in such manner as said court shall direct, and may in the meantime restrain such guardian, assignee, receiver, executor, administrator, or other fiduciary from acting, except in such manner as said court may direct, for the preservation of the trust estate. If the principal in such bond, undertaking, or other obligation account in due form of law and file a new bond, undertaking, or other obligation, duly approved within the time limited in such order, then said court must make an order releasing said surety filing petition as aforesaid from liability upon the bond for any subsequent act or default of the principal; and in default of said principal thus accounting and filing such new bond within the time limited in such order, said court shall at once make an order directing such guardian, assignee, receiver, executor, administrator, or other fiduciary to account in due form of law within ten days — and if the trust fund or estate shall be found or made good and paid over, or properly secured, such surety shall be discharged from any and all further liability as such for the subsequent acts or omissions of the guardian, assignee, receiver, executor, administrator, or other fiduciary after the date of such surety being relieved or discharged — and further discharging such guardian, assignee, receiver, executor, administrator, or other fiduciary from his position.” The above section was enacted in 1899, and is substantially taken from Section 812, N. Y. Code of Civ. Procedure, as amended by Chapter 568, Laws N. Y., — 121 — passed May 13,1892. For the purposes of comparison we give the corresponding section in said compilation: “The surety or sureties or the representatives of any surety or sureties upon the bond of any trustee, committee, guardian, assignee, receiver or executor may present a petition to the court or judge that appointed him, or that approved or accepted such bond, praying to be relieved from further liability as surety or sureties for the acts or omissions of the trustee, committee, guardian, assignee, receiver, or executor occurring after the date of the order relieving surety or sureties, and that the principal on the bond be required to show cause why he should not give new sureties. Thereupon the court or judge must issue the order to show cause accordingly and may restrain such trustee, committee, guardian, assignee, receiver, or executor from acting, except to preserve the trust estate until further order. Upon the return of the order so issued, if the principal in the bond file a bond in the usual form, with new sureties to the satisfaction of the court or judge then, within such reasonable time, not exceeding five days, as the court or judge fixes, the court or judge must make a decree or order releasing the surety or sureties petitioning from liability upon the bond for any subsequent act or default of the principal; otherwise a decree must be made that such trustee, committee, guardian, assignee, receiver, or executor account before the court or judge, or a referee appointed, and that upon the trust fund or estate being found or made good and paid over or properly secured, the surety or sureties shall be discharged from any and all further liability as such of the subsequent acts or omissions of the trustee, committee, guardian, assignee, receiver or executor occurring after the date of his or their being so relieved or discharged, and discharging such trustee, committee, guardian, assignee, receiver, or executor. ’ ’ 2. Previous to its adoption here this section had been construed by the court of appeals of the state of its origin, and according to the commonly accepted rules — 122 — of construction it must usually be deemed to have passed here subject to the same interpretation given it by the courts of the state where it originated: Putnam v. Douglas County, 6 Or. 328 (25 Am. Rep. 527); State v. Finch, 54 Or. 482 (103 Pac. 505); Jamieson v. Potts, 55 Or. 292 (105 Pac. 93, 25 L. R. A. (N. S.) 24); Abraham v. Roseburg, 55 Or. 359 (105 Pac. 401, Ann. Cas. 1912A, 597); and many other cases. The statute last above quoted came up for construction in American Surety Co. v. Thurber, 162 N. Y. 244 (56 N. E. 631), and the same contention was made in that case as is made by the plaintiff here, in answer to which the court said: “The appellant claims that the provisions of the section are mandatory, as the word ‘must’ ordinarily excludes discretion. That word, however, is occasionally used in the code without the imperative meaning which it usually has. (Spears v. Mayor etc., 72 N. Y. 442; Wallace v. Feely, 61 How. Pr. 225, affirmed 88 N. Y. 646.) The provision requiring the court to ‘issue an order to show cause,’ implies that cause may be shown. It is more than a substitute for a notice of motion, for it is a specific requirement in a statute creating a special remedy, of which it is a part. There is no reason why the principal should be required to show cause, if no cause can be shown under any circumstances. When all the provisions of the section are read together, we think the court has a discretion to exercise depending on the facts of the case, and is not commanded to make a decree regardless of those facts. In other words, we construe the expression ‘a decree must be made’ under the circumstances to mean ‘a decree may be made.’ ” This construction is emphasized by the fact that in 1895 the legislature of New York again amended Section 812 by providing in effect that upon notice and accounting, etc., “the surety * * shall be entitled as — 123 — a matter of right to be and shall be discharged from liability.” Subsequent to tbe latter amendment tbe same court in the case of In re United States Fidelity & Guaranty Company, 50 Misc. Rep. 147 (98 N. Y. Supp. 217), held that under its provisions the surety had an absolute right to be released. 3. No such change has been made in our statute, and until such amendment is made we are disposed to follow the rule laid down in American Surety Co. v. Thurber, 162 N. Y. 244 (56 N. E. 631), which seems to us to be only fair in requiring a surety who enters into a contract for an agreed consideration to abide by it so long as the other party to the agreement faithfully performs the conditions of his trust. Counsel for appellant cite a number of cases holding under statutes varying in their terms somewhat that sureties have a peremptory right upon petition for that purpose to be relieved from further liability for the acts or omissions of their principals, but in none of these is there a provision requiring the principal to show cause why the surety shall not be relieved, except in the case of In re United States Fidelity & Guaranty Company, 50 Misc. Rep. 147 (98 N. Y. Supp. 217), which, as before shown, depends upon a provision of the. statute expressly providing that they shall be discharged “as a matter of right.” The other cases are: Kempner v. Galveston Co., 73 Tex. 216 (11 S. W. 188); Sifford v. Morrison, 63 Md. 14; March v. Fidelity & Deposit Co. of Maryland, 79 Md. 309 (29 Atl. 521); Cochies Co. v. Ritter, 3 Ariz. 208 (73 Pac. 448); United States Fidelity & Guaranty Co. v. Peebles, 100 Va. 585 (42 S. E. 310). As before remarked there is no provision in any of the statutes of these states permitting or requiring the principal to show cause why the surety should not be discharged, and this differentiates them — 124 — from the case at bar. It would certainly be an anomaly if a party should be required by law to appear and show cause why the court should not make an order which it was imperatively commanded to enter no matter what showing the party cited might be able to make. The views here announced render unnecessary a consideration of the other questions discussed on the hearing. The judgment is affirmed. Affirmed. Mr. Justice Moore, Mr. Justice Benson and Mr. Justice Bean concur; Mr. Justice McCamant not sitting.