Indemnity Agreement.

66

The Indemnity Agreement to be signed in "long term trusts" is substantially the same as that used in short term trusts," to which the reader should refer (see page 213), but as the "long term" risks are only written with joint control, the Indemnity Agreement contains a clause providing for such supervision over the funds of the estate by the surety.*

3-BONDS FILED IN COURT PROCEEDINGS.**

Bonds of this class are the most hazardous of all coming under the judicial classification, as they are absolute promises for the payment of money under certain definite contingencies. The universal practice of all surety companies is to secure collateral for an amount at least 10% greater than the amount of the bond-the 10% excess being given to cover the court costs in the case.

A general misunderstanding seems to exist in connection with this branch of the surety business as to the practice of surety companies in not accepting personal indemnity as sufficient collateral for their protection under these bonds, while they will take such indemnity under many of the obligations of other classes. But it must be considered that the obligation of a Judicial Bond is of a distinctive nature, and the security mentioned above is not acceptable and cannot be depended upon in Judicial Bonds, inasmuch as such obligations guarantee the full and prompt payment of money. Experience proves that the collection of money from personal indemnitors is both difficult and expensive.

The few exceptions where deviation is made from the above rule are in the case of bonds for small amounts given on behalf of railroads, railways and other large corporations. As full collateral is secured on these propositions, the informa

*See Appendix, page 215.

**As Attachment, Replevin, Injunction, Appeal, etc.

tion required in the application is simply that which is necessary for the proper preparation of the bond. A financial statement of the principal and a complete filling in and signing of the Indemnity Agreement is all that is required. Care should be taken to see that the signature of the principal is legally attested and, in the case of a corporation, that the corporate seal is affixed.*

4-BAIL BONDS.

It is the custom of many companies not to write Criminal Bail Bonds, and no company will write them unless it receives collateral in the full amount of the bond.

Recognizance Bonds in civil actions are less hazardous by far than Criminal Bail Bonds, and are executed by most companies, but only upon the same collateral requirements.

5-LIBEL BONDS.

Bonds of this character are given in admiralty proceedings. They are similar to attachment bonds. The purpose of a Libel Bond is to cover any damage which may be sustained by the owner of a vessel on account of the wrongful seizure of the ship for debt or any other claim.**

JUDICIAL BOND FORMS.

Bonds to be filed in court are statutory in form and copies of the same may usually be obtained from the clerks of the various courts. They differ somewhat in form, but the liability is practically the same in each state.

CANCELLATION OR RELEASE OF JUDICIAL BONDS.

The subject of securing the necessary release of bonds treated in this chapter is one that causes the agent and solicitor much annoyance. This can be saved if a proper understanding is had with the principal at the time of the

* See Appendix, page 217.

**Libel Bonds are also given for the release of a vessel from seizure under a libel.

signing of the Indemnity Agreement. Liability under Fiduciary Bonds can only be terminated by certain legal actions, and the trouble above referred to is caused by the difficulty the surety companies have in obtaining certified copies of the necessary papers showing a legal release of the obligation. The mere statement of the attorney or principal under a bond of the foregoing classes is not sufficient evidence to warrant the surety to legally cancel the liability.

1-MANNER OF OBTAINING A RELEASE OF LIABILITY FOR BONDS 66 OF SHORT AND LONG TERM TRUSTS."

a-Completion of Trust.-When the fiduciary has completed his trust, it is proper for him to secure (both for the protection of himself and his surety) an order of court discharging him from any further duties as a trustee, etc. Such an order can be obtained from the court upon proper petition, and its issuance terminates the future liability of the surety. A certified copy of this order should be furnished the surety. Before granting an order of this nature to a fiduciary, it is necessary for him to file a final account showing all transactions had up to the time such account is stated. The same should be approved, ratified and passed by the court, so that the trustee may proceed to complete the trust and receive his discharge. In some cases a certified copy of this final account will be acceptable to the surety, although a duly authenticated order of dismissal is always more to be desired.

b-Improper Administration of Trust.-When the surety has reason to believe that the estate is being mismanaged, it should terminate its liability under bond by petitioning the court for a release. The statutes in nearly every state make provision for such a contingency. In some states a reason must be given in the petition, and in others none is required. When the discharge is granted, the Court requires the fiduciary to file a new bond. The future liability under the first bond terminates upon the filing of the new obligation,

and a copy of such release, with satisfactory evidence of the filing of the second bond, should be furnished the surety. In some states, however, the surety is released only by the fiduciary's completing his trust. In all cases, where a petition of this nature is granted, the surety is responsible for liability antedating its release.

2-CONCERNING RELEASE OF BONDS FILED IN COURT PROCEEDINGS.

The statutes of no state provide for the release of the liability of a surety on bonds filed in court proceedings before the judgment is satisfied, damages paid, etc. When the liability which requires a bond to be filed in court proceedings has been terminated, the surety should be furnished with copy of satisfaction, or a certificate of the clerk of the court to that effect, or else with a verified copy of the docket entries showing that the liability is at an end.

3-RELEASE OF BAIL AND LIBEL BONDS.

The same conditions apply in the case of bail and libel bonds, as are noted under (2) above.

RENEWALS ON SECOND AND SUBSEQUENT YEARS' PREMIUMS.

The term 66 99 renewal is in some ways a misnomer, but is used for want of a better expression. Judicial Bonds are not renewed: they are continuous and remain in force until the completion of the trust, or removal of the fiduciary. It is a practice, therefore, for surety companies to bill to their agents at the beginning of each annual period the premium for the coming year. Solicitors and agents frequently find these premiums difficult to collect. This is caused by their not having emphatically impressed upon the principal, when application for the bond was made, that he agreed to pay the surety an annual premium until he, the principal, furnishes the company with a legal release from liability under his bond.

CHAPTER VIII.

MISCELLANEOUS INDEMNITY BONDS.

There are many necessary kinds of Miscellaneous Indemnity Bonds, the liability thereunder having a wide range. The opinion as to the advisabiliy of the acceptance of bonds of this class differs greatly among surety companies, so that all agents and solicitors should inform themselves as to the policy of the company with which they are associated. The underwriter on a proposition requiring a bond of this class should be furnished with full and detailed information as to the risk, the financial responsibility of the applicant, together with a statement of the protection that will be offered the surety in the way of collateral and security. The most usual bonds of this class, that are generally brought to the attention of the agent, are, as follows:

VARIOUS KINDS OF MISCELLANEOUS INDEMNITY

BONDS.

1-BONDS OF INDEMNITY COVERING LOST INSTRUMENTS. Bonds of this group, when the applicant's reputation is unquestionable and after certain preliminary requirements have been fulfilled, and a proper rate is obtained, may be stated to be acceptable propositions. When satisfactory they are written for a term which largely depends upon the statute of limitations in effect in the particular state in which the risk is located. This period may vary from two to twenty years, and in some rare instances is unlimited. It may also depend upon the character of the lost instrument, the place of execution and performance of the contract (if it be a contract), and the laws of the state which may govern the validity, interpretation or performance of such contract.