Ball v. Chancellor

The opinion of the court was delivered by Beasley, Chief Justice. This is a suit against a surety on the bond of a receiver appointed by the Chancellor, on proceedings in his court winding up the affairs of an insolvent bank. Such receiver was appointed by force of the seventy-second section of the act concerning corporations, whereby it is made the duty of such officer, among other things, in the .statutory language, “ to pay into the Court of Chancery all the moneys and. securities for money arising from such sales, or which the said receiver or receivers, &c., shall collect or receive by virtue of the authority vested in them, to be disposed of by the said receiver, &c., from time to time, under the order of the said court, among the creditors of the said company, first making to the receiver, &c., such reasonable compensation as the Chancellor may deem just and proper, and also deducting the costs of the proceeding in the said court.” Rev., p. 189. By the following section of this same law the receiver is required, besides taking a prescribed oath of office, to “ comply with such terms as the Chancellor in his order appointing him may prescribe,” and in the present instance, which was in accordance with the usual practice, this officer was directed to execute a bond, with which mandate he complied, giving the obligation now in suit, the condition of such instrument being that the receiver “ shall faithfully perform the duties of his office as such receiver.” From the developments at the trial at the Circuit Court it appeared that, upon the petition of creditors, the receiver had [134] been ordered by the Chancellor to render an account, and that it had been, in the ordinary course, referred to a special master1 to take such account and to report thereupon. Due notice of the taking of this account before the master was given by the-solicitor of the petitioning creditors to the appellant and the-other bondsmen of the receiver, in which it was stated that they might attend such examination if they saw fit so to do. Upon the coming in of the master’s report an order nisi to confirm the same was taken, and a copy served on the appellant. Some of the co-sureties with the appellant filed exceptions.. The receiver appealed from the decree of the Chancellor to-the Court of Appeals, aird on the remittitur from that court a final decree was entered finding the receiver in arrears in a. sum much larger than that for which the appellant stood bound. At the trial the counsel of the appellant insisted that the decree ascertaining the amount of money for which the receiver was in default was not competent evidence against the appellant, and, in the next place, t-liat if it was competent it was not conclusive, and that the accounts of the receiver could be restated by the jury. The judge trying the case charged, the reverse of both these propositions, and the correctness of' charge is the subject to be1 passed upon on this writ of error.. The general principles that regulate the subject thus introduced have not been, in all cases, very clearly defined by the decisions, for the judicial views in this field are not to be reconciled. And yet, however much this may be the state of affairs with respect to some of the particulars embraced within the-scope of the topic, the rule applicable to the present facts may be considered to be settled by a weight of authority and reason that may be said to have laid it at rest. That rule is, that when it is the duty of the principal to account in the business, undertaken by him, such accounting is a part of the res gestee,. and such settlement, legally and fairly made, will be obligatory on the surety in all cases to the extent, at least, of being-evidence against him in a suit on his contract of suretyship. This principle is illustrated and declared in the case of Town. [135] of Union v. Bermes, 15 Vroom 269. And I also think that when such accounting, as a part of such res gestae, is to take place before a court of judicature, that the judgment of such tribunal will be as conclusive upon such surety as it is upon the principal. Hor does it make any difference, in these respects, whether the duty of the principal to make such accounting be expressly stipulated for in the instrument composing the suretyship, or such obligation is merely to be necessarily inferred from the nature of the business in question. It should be noted that the rule thus delineated would not embrace ordinary judgments obtained against the principal for breaches of duty in the course of the guaranteed business, so as to make them, per se, evidence in a suit against the party, for such judgments are no part of the res gestae; and, in order to render such recoveries efficacious for the latter purpose, an opportunity must have been afforded the surety, by notice or otherwise, of taking part in the defence of the primary action. Kip v. Brigham, 6 Johns. 158; Thomas v. Hubbell, 15 N. Y. 408. It would seem to me to be difficult to assign any reason why the legal rule above stated, to the effect that a judgment on an accounting made by a principal should not be admissible in evidence in a suit against the surety by reason of the withholding of the amount so settled, when the rendering of such account in the mode adopted was a part of the conduct of the principal embraced in the terms of the suretyship. It is then clearly part of the res gestee, i. e., of the business the faithful performance of which forms the staple of the guaranty. If it is not admissible in evidence against the surety, then it must follow that none of the doings of the principal in the business are so admissible. In the case in hand it was the plain duty of the receiver to account in the Court of Chancery, and to pay over the amount found due from him in that proceeding; and when the appellant stipulated for his good conduct in office, he just as clearly covenanted that the principal would do those particular acts as if such duties had been specifically designated in the obli [136] gation signed by him. Therefore, if the case were presented I should be inclined to hold that the decree in question would have conclusively bound this surety even in the absence of a notice to him of the pendency of such proceeding . But, on the present occasion, all that this court is called upon to decide — and which is, consequently, all that is passed upon — is whether this decree, which ascertained in his accounting the amount due from this receiver, is competent and conclusive evidence against the appellant, he-having had an opportunity to intervene and co-operate in such settlement. It clearly appears that he was notified of the hearing before the master, and of the coming in of the report of that officer, and therefore, according to the well-settled practice of the Court of Chancery, it was within his power to put in question any pertinent matter he deemed contestable. In point of fact, some of the other sureties on this bond took that course. This appellant, consequently, was as much a party, for every substantial purpose of the judicial procedure referred to, as though the proceeding had been a formal suit against him and his principal. Under such conditions, I do not find that it has ever been held that a decree of this nature was not both admissible and conclusive upon all the persons thus directly involved in it. Such was the opinion of the court in the case of Methodist Episcopal Church v. Barker et al., 18 N. Y. 463. An opposite view would be attended by enormous embarrassments. If the entire account can be overhauled at the instance of the surety, it is obvious that no reasonable investigation of such multiform matters could be made by a jury. In the present instance, an ascertainment of the sum due from this receiver would be impossible in the legal forum, as the statute requires the Chancellor to fix the amount of his commissions. The Circuit judge was plainly l’ight in admitting the evidence in question and in his ruling that it was conclusive on the surety. Let the judgment be affirmed. For affirmance — The Chancellor, Chief Justice, [137] Knapp, Magie, Parker, Reed, Scudder, Yan Syokel, Brown, Clement, Cole, Paterson. 12. For reversal — None.