In re People, 150 N.Y.S. 260

In re People

150 N.Y.S. 260 | N.Y. Sup. Ct. | 1914

Greenbaum, J.

On December 16, 1912, the superintendent of insurance was directed by order of this' court to take possession of the property and liquidate the business of the Empire State Surety Company, pursuant to the provisions of section 63 of the Insurance Law. It appears that" 101 claims have been filed in this proceeding by subcontractors, materialmen and laborers, arising under certain bonds executed for their benefit by the Empire State Surety Company as surety, pursuant to an act of congress approved February 24, 1905, under contracts awarded by the United States government for the construction of public work. The state superintendent, as liquidator, has rejected and disallowed all of these claims upon the alleged ground that at the date when the order of liquidation was entered they had not been reduced to judgment under the provisions of the federal statute, and hence were contingent and not provable. For the purposes of this motion the claims may be divided into, two general classes, those arising out of contracts which had not been completed prior to December 16, 1912, and those arising out of contracts which, prior

*73to such date, had been completed and final settlement authorized by the government authorities, but upon which no judgments had then been entered. This latter class may be subdivided into claims upon which suits had been brought prior to December 16, 1912, some of which are still pending, the others having matured into judgments; those upon which actions have since been brought and those in which no suit has yet been commenced. The determination of this motion turns upon the meaning and effect of the decision of the Court of Appeals in Matter of Smith Co. v. Yawger, 211 N. Y. 107, reached by a divided court. The learned counsel for the state liquidator contends that it is authority for the broad proposition that under no circumstances is a claim provable against an insolvent surety company arising upon a bond like that here involved, given pursuant to the act of congress, unless prior to the liquidation proceedings it has been reduced to judgment. It is generally conceded by the various counsel appearing upon the motion that the rule recognized in this state is that claims against insolvent insurance companies must be determined as of the date of the commencement of the insolvency proceedings, and that claims which at that date are contingent in their nature are not provable because of the uncertainty involved in estimating their value and of the delay and confusion that might arise in the administration and the settlement of the insolvent estate. People v. Metropolitan Surety Co., 205 N. Y. 135. The question thus arises, are the claims under review to be treated as contingent because they had not ripened into judgment when the order of insolvency in this proceeding was entered? By its bonds executed to the United States government the surety company obligated itself to the prompt ‘ payment to all per*74sons supplying” the bonded contractor “with labor and materials in the prosecution of the work ’ ’ referred to in the government contract. A study of the two opinions in the Yawger case reveals that the decided difference between the judges of the Court of Appeals arose upon the question of the necessity of strict compliance with the federal statute requiring the claimant to procure a judgment as a condition precedent to the establishment of his claim in the insolvency proceedings affecting the surety company. The majority opinion held that the federal statute afforded an exclusive remedy to the claimant,' which may not be departed from under any circumstances. The minority opinion, on the other hand, argued that this court having acquired jurisdiction of the funds of the insolvent surety company had jurisdiction to determine the validity of all claims thereto, and that it would serve no useful purpose to compel the claimant first to resort to the remedy provided by the federal statute. As I read the prevailing opinion in the Yawger case, supra, it held that the liability of the surety company was “ qualified and conditional,” but it nowhere appears therein that the court held that the claim was “ contingent.” Phrases in the opinion isolated from the context may give color to the contention of the learned counsel for the state superintendent, but it seems to me this court should limit the opinion strictly to the law declared upon the state of facts upon which it was required to pass, namely, that the procurement of a judgment , in the federal court was a condition precedent to the provability of such claims as áre here being considered. There is a marked difference between a ‘ ‘ contingent ’ ’ claim and one that is “ conditional.” In the absence, therefore, of an express holding by the Court of Appeals that claims of the nature of those under consideration are *75to be regarded as contingent because they had not been reduced to judgment prior to the commencement of insolvency proceedings, it is not to be presumed that the court intended to exclude such claims from sharing in the distribution of the insolvent estate when the conditions precedent of procuring judgments upon the claims have been met. It thus follows that all the claims which have been reduced to judgment will be treated as valid and provable, and the rejection of such claims is set aside and overruled. The rejection of claims that have not matured in judgments is sustained. It also follows that the motions made in behalf of claimants whose claims have not been reduced to judgment for permission to prosecute them to judgment are granted. Settle orders on notice.

Motions granted.