People v. Metropolitan Surety Co. (175 A.D. 43, 1916)

Cochrane, J.:

We agree with the learned referee that the two companies stand in the relation to each other of cosureties and that, as between themselves, each was liable for payment of one-half of the liability of McGowan to the United States, which Hability was covered by their respective bonds. Such was their relation to each other unless there was an agreement expressed or implied between themselves to the contrary. The appellant contends that by the execution of the last bond the appellant became a subsurety for the Metropolitan Surety Company and that as between the two companies the Metropolitan Surety Company was primarily liable. There is no evidence, however, of any such understanding between the two companies. JSTo communication whatever passed between them on the subject. It does not appear that the appellant company knew of the application which McGowan made to the Metropolitan Surety Company through Vance or of the indorsement by the latter on said application or that the appellant even knew of the existence of the subsequent bond. All it knew was that its annual premiums had stopped, but whether that was because McGowan had died or left the government service or for some other reason the appellant did not know so far as the evidence discloses. Nor is there any equitable reason why the appellant should stand in the relation of subsurety to the other company. The execution of the bond by the latter company in no way prejudiced the appellant but on the contrary relieved it of one-half of its liability because of the acts of McGowan. In the absence of any evidence the legal presumption is that the two companies were cosureties and the burden rests on the appellant to overcome this presumption which it has failed to do. The appellant, therefore, has a claim against the receiver herein for $4,091.30, as found by the referee.

We do not, however, agree with the referee in his conclusion that the claim was a contingent liability at the time of the appointment of the receiver and must, therefore, be postponed to the payment of other claims. It is said that the conclusion of the referee in this respect is sustained by the case of Matter of Fleet v. Yawger (205 N. Y. 135). The claim, however, is rather within the principle of Matter of Empire State Surety Company (214 N. Y. 553); Matter of Empire State Surety Company (216 id. 273), and Matter of Museum of Fine Arts v. Metropolitan Surety Company (171 App. Div. 15). Liability on these bonds because of the misdeeds or shortcomings of McGowan was complete before the appointment of the receiver. Liability depended on no contingent event thereafter to arise. A complete cause of action -then existed against the Metropolitan Surety Company in favor of the United States. The Federal government did not have to wait for the happening of any event or contingency in order to enforce its claim. All that was done after the appointment of the receiver was by way of liquidation or enforcement of the claim, but liability existed complete and final when the receiver was appointed.

It is true, of course, that the appellant had no claim against its cosurety until it had paid the debt, but that is not the point here. The appéllant has paid the debt, and in doing so it has become subrogated to all the rights and remedies which the United States had against the receiver at the time of his appointment. The rule which requires the postponement of contingent claims is a harsh and arbitrary rule which exists ex necessitate. The reason for the rule is well stated by the referee in his opinion as follows: “ If claims which were contingent at the time of the commencement of the dissolution proceedings were allowed, then since the contingencies might never be resolved, or might take years before they were resolved, distribution of the assets among the rest of the creditors would become practically impossible.” The reason for the rule and, therefore, the necessity for its application does not exist in this case. Here the receiver on the day of his appointment could have satisfied the claim of the United States. There was a definite existing liability on that day depending on no contingency m the future which might theoretically have been liquidated by the receiver. He knew then that it would have to be paid, and distribution of the assets of his estate and termination of th