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April 18, the filing of the Missouri judgment did not create a lien in favor of the
creditor so as to make it a secured creditor for purposes of the Act.
Claims of Surety
Second Circuit
Arkansas
California
Home Indemnity Co. of New York v. O'Brien, 104 F.2d 413 (2nd Cir. 1939). A
New York compensation insurer filed a surety bond as a prerequisite to the
right to do business in Michigan. The company was later liquidated by the
New York courts. The surety then became indebted under the bond to all
those entitled to compensation benefits under Michigan's compensation
laws.
Forte v. Chamberlain, 93 Ark. 112, 124 S.W. 234 (1910). Where a mutual fire
insurance company placed in the hands of a receiver because of insolvency,
and the company had filed an indemnity bond with sureties (condition for the
payment of all claims under any policy issued on property in Arkansas if the
company shall not reserve 50% of its premium for the payment of losses), and
there had never been any improper use of the reserve fund, the liability of the
sureties is not an asset of the company which passed to the receiver, so that
the receiver is disallowed from maintaining an action to restrain policyholders
from suing on the bond.
Golden Eagle v. Millard Tong Construction Company, No. A095228, 2002 Cal.
App. Unpub. LEXIS 5947 (Ct. App. June 26, 2002). The California Court of Appeal
held that Cal. Ins. Code § 1028, which prevents courts from considering default
judgments in determining whether a claim may be recovered in a liquidation
proceeding, applies to defaults arising from surety bonds.
Kentucky Louisville Title Co. v. Crab Orchard Banking Co., 249 Ky. 736, 61 S.W.2d 615
(1933). An insolvent corporation, which engaged in real estate mortgage bond
business, guaranteed such bonds and held some of its own bonds, would not
be entitled to a share in the proceeds from the mortgaged property until all
other bondholders were fully paid.
Title Ins. & Trust Co. v. Louisville Presbyterian Theological Seminary, 270 Ky.
442, 109 S.W.2d 814 (1937). A title insurance company had sold thirteen bonds
and retained the remainder of twenty‐five bonds guaranteed by it and secured
by a real estate mortgage. The company went insolvent and the bondholders
sued to obtain priority in the distribution of the proceeds of the mortgaged
property and any payments made on the bonds by the makers. The court of
appeals affirmed that the purchasers of the thirteen bonds were entitled to
priority over the bonds retained by the company. The bondholders did not
forfeit their rights to the receiver by participating in the plan of reorganization.
The title company's plea that its twelve bonds were part of its statutorily
required guarantee fund was not supported by its allegations. Furthermore,
there was no common law pledge of the twelve bonds because the company
did not deliver the bonds to the insurance commissioner but retained control
over them.
Missouri
Allen v. Surety Life Ins. Co., 230 Mo. App. 402, 92 S.W.2d 956 (1936). A life
insurance company filed an appeal from a judgment against it on two life
insurance policies. The Missouri insurance commissioner then secured a
liquidation order against the insurer, and the insurer defaulted on the appeal.
The judgment creditors on the two life insurance policies tried to recover on
the appeal bonds posted. The court held the judgment against the insolvent
insurance was proper because it was the duty of the Missouri commissioner to
defend such actions upon appointment. The sureties on posted by the
insolvent insurer were thus liable.