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State v. Birkins

Court of Chancery of Delaware, New Castle County

March 1, 1951

STATE, to the Use of MILLS et al.
v.
BIRKINS et al.

Action by the State of Delaware, to the use of Vivian Willcox Mills and another, as sole heirs-at-law of Charles J. Willcox and another, both deceased, against Marshall E. Birkins and another, co-partners, doing business as Stellman and Birkins, as principal, and Great American Indemnity Company, a corporation of the State of New York, as surety, seeking to recover under a lost instrument bond. The Court of Chancery, Seitz, Vice Chancellor, held that attorney's fees were included within the surety's obligation, under the terms of the bond, to indemnify for costs and expenses.

Order in accordance with opinion.

[32 Del.Ch. 40] John S. Walker and Frank J. Miller, Wilmington, for plaintiffs.

Stewart Lynch and Florence E. Freeman, Wilmington, for defendant bonding company.

SEITZ, Vice Chancellor.

The sole question presented is the right of successful plaintiffs to recover reasonable attorneys' fees under the terms of a lost securities bond.

The case arises in this way. Money due some 28 stockholders, inter alia, in a receivership liquidation was deposited to their credit in the Farmers Bank. Subsequently an alleged assignee of those 28 stockholders applied to the Court for payment of the money. The assignee was required to file a Lost Instrument Bond because the stock certificates were allegedly lost. The penalty clause in the bond equals the aggregate of those separate amounts. Later two of the original stockholders-the plaintiffs here-sought to recover the money due them on the ground that they had not assigned their interests. Plaintiffs brought suit to recover under the Bond. The bonding company [32 Del.Ch. 41] concedes

Page 869

their right to recover the principal amount due. It denies that its liability includes attorneys' fees. Its arguments may be summarized as follows:

(1) Since the payment of attorneys' fees would result in payments in excess of the penalty in the bond, they are not recoverable.

(2) Absent statutory language or specific language in the bond, the surety is not obligated to pay attorneys' fees.

(3) Under Revised Code of Delaware 1935 Paragraph 4682, plaintiffs cannot recover attorneys' fees because express provision therefor is not made in the bond.

Plaintiffs naturally take issue with all three of defendant's contentions.

Before analyzing the import of the quoted language of the bond, it is important to consider one other matter. One fact stands out very strongly in my mind. The bond in question was given in an amount which covers only the aggregate of the principal amount due the 28 stockholders whose money was paid out on the application of the alleged assignee. Plaintiffs argue in effect that we are not here concerned with a case where recovery will be in an amount in excess of the penalty clause in the bond since, they point out, the total of their claims including the amount of attorneys' fees requested does not exceed the amount in the penalty clause. Such a contention, if accepted, would mean that the bond was not in fact given for the portection of the principal amounts due all 28 stockholders unless it also he assumed that the bonding company is liable beyond the amount of the penalty clause. There is no equitable basis for a ‘ first come, first served’ approach to this construction problem.

I therefore conclude that plaintiffs are not entitled to recover for attorneys' fees unless the bonding company is liable beyond the amount provided in the penalty clause.

My conclusion naturally leads me to the next important [32 Del.Ch. 42] question: Under the terms of this bond, can successful plaintiffs recover attorneys' fees when such a recovery ...


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