Sooysmith & Co. v. American Surety Co. (28 A.D. 346, 1898)

Barrett, J.:

The question in dispute here is whether interest on the sum of $5,000 is to run from the date of the defendant’s undertaking or from the date of the recovery of the judgment. That is the precise question submitted to us. We see no basis, either in the instrument itself or in the Code of Civil Procedure (§ 688), for the contention that it runs from the date of the undertaking. The undertaking is not an agreement to pay a specified sum of money absolutely, upon demand, with interest. It refers to a future and contingent event. The company agrees to pay the specified sum only upon the happening of that event. How, then, can interest run against the specified sum until tlie event occurs which makes the specified sum payable ? It seems clear that it cannot so run, unless, at least, the language of the instrument on that, head is so clear and explicit as to admit of no, other meaning, and unless the phraseology- of the statute is so clear and explicit as to admit of no other construction. Eor it will be observed that there is nothing special or peculiar about the undertaking in question. In fact, it literally follows the exact phrase- . ology of the statute. ’ The plaintiff takes this same view of both the , undertaking and the statute, but it insists that the language of each is sufficiently clear and explicit to justify its present claim. Thus it construes the instrument to mean that the company, Upon the 1 happening of the particular event, agrees to' pay not only the specified sum, but also interest thereon for tlie period anterior thereto, devoted to ascertaining whether the specified sum shall be pay able at all. We repeat that the language should be clear and explicit to ■ warrant such. an extreme and peculiar construction. There is certainly no such literal language, either in the section itself or in this present corresponding instrument. What then is meant by the words “ with interest,” as used in the section and—: following the section — in the undertaking ? With interest on what ? And from when ? Logically, it must be either upon the plaintiff’s claim, as it runs, or upon the judgment. . It cannot consistently be upon the . undertaking until the liability thereunder has matured.

In other words, the security is either for the interest upon-the judgment or for the running interest upon the plaintiff’s -claim. That it is not the latter the plaintiff impliedly concedes,' It makes no such claim and rests solely upon the contention that the undertaking is for $5,000 with interest from its date. This contention, if correct, makes the undertaking a most incongruous instrument. It is conceivable that a plaintiff should have full-security for his claim and interest. It is also conceivable that he should have security for his judgment and- interest. Any instrument- clearly providing for . either one of these things would, whether within the statute or not, be at least consistent and sensible.

But an undertaking by which a surety agrees to pay a possible ' judgment against his principal upon an unliquidated claim, not ' exceeding a specified sum, with interest, on that specified sum from the date of the undertaking, has- no necessary relation to any precise or definite indemnity with regard to the interest running against the principal. The only way any effect can be given to such a provision is to say that it measures the principal sum of the surety’s liability. But if so it measures it without regard to the corresponding obligation of the principal. This surely could never have been the intention of the law nor of the parties here, who, in literal terms, followed the law.

The purpose of the lawmakers is quite clear. Under the former Code of Procedure (§§ 240, 241) an attachment could be discharged upon the defendant’s giving an undertaking either im, double the amount of the plaintiff’s claim or — where the property attached was less in amount — in double its value. In this particular a different system was inaugurated under the Code of Civil Procedure. But the intention of both systems, was simply to secure to the' plaintiff the value of the property attached. The Legislature always regarded proceedings against non-residents by attachment as guasi in rem. It has not treated such proceedings as in personam in the ordinary sense; that is, in the sense of an action commenced by the service of a summons upon the defendant within the State. Occasionally, it is true, an attachment is followed by a general appearance or by personal service of the summons within the State. But the provisions of the Code with*regard to attachments are, in the main, aimed at the jurisdiction acquired by the seizure of property under the writ. The judgment which follows publication thereafter is in form a judgment against the defendant i/npersonam for the amount of the plaintiff’s claim. It is, however, in substance, a judgment authorizing the application of the, property attached, or its proceeds, to the payment of the judgment.. The nature of the undertaking required to be given ’ to discharge an attachment thus becomes apparent. ■ The defendant is certainly not required directly to secure the plaintiff’s claim, with interest and costs, as though the court had jurisdiction over his person. He is simply required, if he wants an immediate restoration of his- attached property, to substitute an undertaking therefor; that is, to guarantee to the plaintiff " the application to any judgment he may subsequently recover of the actual value of the property thus restored. The attachment is, not" thus vacated. It is simply discharged as to the property attached. (§ 687.) To accomplish this purpose, and this only, the machinery which follows in section 688 is provided. The defendant applying for the discharge is required to give an undertaking, commensurate, not with the plaintiff’s claim,, including interest and costs,, hut with the property attached, or with that part of it which he desires to have freed from the writ. Whether he desires to have all the attached property, or but a part of it, freed from the writ,die can effect his-purpose in but one way as to form, while he has two alternative options as to substance. In form he must always give an undertaking, to pay on demand the amount of any judgment which, may be recovered in the action against him, not exceeding a sum specified in the undertaking, with interest; then follow the alternative options relating to the substantial obligation and varying witlithe value of the property sought to be released. The “sum specified” must be at least equal to the amount of the plaintiff’s claim, as specified in his .affidavit, or, at the defendant’s option, equal to the appraised value of the property attached, according to the. inventory. Now,, if the prior words, “ with interest,” have reference to interest upon the sum specified as at least equal to the amount of the plaintiff’s demand as specified in his affidavit, it must also have reference to interest upon the sum specified, as equal to the appraised value of the property attached. If it has no relation to interest in the latter case, it can have none in the former. Were this otherwise, why should not provision have been made,-in the same connection, for the costs- of the action ? If the intention was to specify a sum which would fully and directly guarantee to the plaintiff, not merely the value of the property attached, but his entire claim,, then the sum specified in the undertaking should have been simply equal to the amount of that entire claim, namely, principal, interest and - costs. It will be observed that the form of the undertaking is the same in each of the -contingencies contemplated by the section. Even when the defendant desires to free but a part of the attached- property, the undertaking must still be in form to pay, on demand, the amount of any judgment which may be recovered in the action against him, not exceeding. a sum specified in the undertaking, with interest. But that specified sum is then the precise value of' theqxort of the property released—-neither more or less.

Upon this construction the plaintiff is never, in any contingency, deprived of interest for the simple reason that he is never entitled to it. If the property ■ remains unreleased pendente lite it may appreciate or depreciate in value, but it earns no interest. It is there upon the recovery of judgment to be applied to the satisfaction of the judgment. If, however, it has been released on an undertaking, the undertaking to pay its appraised value is there to be similarly utilized. There is not the least difficulty under this construction in guaranteeing to the plaintiff the full amount of his claim, with' interest and costs, when he has attached property enough to cover the totality. The defendant in that case cannot discharge the attachment upon giving an undertaking to pay the plaintiff’s judgment, not exceeding a specified sum equal to the amount of the plaintiff’s demand. The language of the section is that the specified sum must be at least equal thereto. The court has ample power in a proper case to require an undertaking which shall specify a larger sum. If the sum specified must, at least, equal that claimed, the court may certainly, in a proper case, require that it be greater.

No attachment under these sections can be discharged ex parte. The plaintiff is given ample opportunity to object to the undertaking (§§ 689-696), and he can see to it, where the property attached is amply sufficient to cover his entire claim, with interest and costs, that the undertaking covers its full value or, at least, his full claim. This has been the common practice" of the court at Special Term, and we find but one instance in which the power seems to have been questioned. There, however, a formal opinion asserting the power was filed. (Morewood v. Curtis, 13 Civ. Proc. Rep. 218.)

The suggestion lias been made that this view of section 688 deprived the words “ with interest ” of any force or significance. The suggestion overlooks the previous words “ on demand.” The undertaking is to pay on demand the amount of the judgment, not exceeding the sum specified, with interest. The sum specified thus becomes due upon the recovery of the judgment, but a demand is" made a prerequisite to the right of action therefor.. The intention here is plain. The right of action accrues only ujion the demand, but the recovery runs from the entry of the judgment. The “ sum specified ” is due upon the recovery of the judgment, and upon demand, it becomes paycible with interest from that date.

Our judgment should, therefore, be for the plaintiff, that it recover judgment against the defendant for the sum of $5,000, with interest thereon from November 21, 1894, to- date of payment, less the amount of the defendant’s costs.

Rumset, Patterson and O’Brien, JJ., concurred; Van Brunt, R. J., dissented.

Van-Brunt, P. J. (dissenting):

On or about the 28th of February, 1889, the plaintiff in this action, a foreign corporation created under the laws of the State, of New Jersey, and having an office and place of business in the city of New-York, sued out an attachment against the property of one Clarence H. Tenner, in an action commenced by the plaintiff against said Tenner to recover $5,000 with interest. This attachment was delivered to the sheriff of the city and county of New York, and he levied upon certain property of said Venner. Afterwards, and on the-2d day of March, 1889, Venner appeared in the action and procured the execution of an undertaking by ■ the defendant, the American Surety Company, whereby the company, pursuant to the statute in such case made and provided, undertook that the defendant Tenner would, on demand, pay to the plaintiff the-amount of any judgment which might be recovered .in said action against him, not exceeding. $5,000, with, interest. This undertaking was accepted upon the part of the plaintiff, and the attachment was thereupon discharged by order of the court. Afterwards, and on or about the 21st of November, 1894, the plaintiff recovered a judgment against Tenner in the action in which the attachment was issued for the sum of $8,041.83,. damages and cogts. The judgment was duly docketed in the office of the clerk of 'the city and county of New York on the 21st of November, 1894. Thereupon a dispute arose between the plaintiff and the defendant, the surety company, as- to whether the company was liable' upon its undertaking for $5,000, with interest from March 2,-1889, the date of the execution of the undertaking,, or from the 21st of November, 1894, the date of the recovery of the judgment.

We think that, in view of the nature of the action ,and the claim under the attachment, which the undertaking was executed to release, it was the intention of the surety company to be bound for the $5,000, with interest from the time of the execution of the undertaking. • It is to .be observed that the attachment was issued for the sum of $5,000, with interest; that it was levied upon the property of the defendant, and that it was to discharge this -levy that the undertaking was executed. It was intended to secure the claim which was represented by this attachment, namely, $5,000 and interest, and, hence, the peculiar language of the undertaking, that the surety company undertakes that the defendant (Tenner) will, on demand, pay to the plaintiff the amount of any judgment which may be recovered in the action against the defendant, not exceeding .$5,000, with interest. This $5,000, with interest, is undoubtedly the amount referred to in the attachment. The words “with interest” have no connection with the word “judgment.” The surety company’s duty to pay sprang into existence the moment the judgment was entered and before any interest upon the judgment had accrued. The penalty in the undertaking was the amount claimed in the attachment, namely, $5,000 and interest.

While it is undoubtedly true that even if under the Code the. bond should be for the amount of the plaintiff’s demand with interest thereon from its date, the parties to the contract had the power to limit themselves to a smaller amount, yet, where the undertaking is manifestly given to comply with the requirements of the Code, such a limitation will not be imported into the contract unless its language requires it.

It may be true that the plaintiff might have claimed an undertaking in which the interest upon the $5,000 should run from a period anterior to the giving of the undertaking. But because it did not exact all that it was entitled to, is no reason for depriving it of what it has got.

We think from a consideration of the facts of the case, and of the language of the undertaking, that the interest is upon the $5,000, and that the plaintiff is entitled to recover the $5,000 with interest from the date of the execution of the undertaking.

Judgment should be ordered for the plaintiff, with costs.

Judgment ordered for plaintiff for the sum of $5,000, with inter-, est from November 21, 1894, to date of payment, less amount of defendant’s costs.