People v. Imran

Heller & Heller, New York City (Peter Toumbekis of counsel), for defendant. Charles J. Hynes, District Attorney, Brooklyn (Barry Aaron of counsel), for plaintiff.

OPINION OF THE COURT

WILLIAM E. GARNETT, J. Does the "double equity" requirement contained in CPL 500.10 (17) (b) apply to a court's review of an insurance company bail bond secured by real property? In this case, the defendant was charged with numerous counts of criminal sale of a firearm in the third degree, a class D felony. (Penal Law § 265.11 [1].) At his arraignment on October 11, 2002, a judge set bail at $500,000 cash or insurance company bond.^[*] The People requested, and were granted, a bail source hearing pursuant to CPL 520.30. On October 16, 2002, an insurance company posted a bail bond in the amount of $500,000 secured by three pieces of real property valued by the insurance company at $593,000. This valuation was calculated by subtracting mortgages from real estate appraisal values. A bail source hearing was scheduled for October 17, 2002. In the interim, the defense provided the appraisals and copies of the deeds to the District Attorney. At the hearing on October 17, the District Attorney did not contest the purported equity in the three properties. Moreover, the prosecution did not challenge the source of the security for the bond on any of the grounds specified in CPL 520.30 (1). The District Attorney did, however, argue that the insurance company bond, secured by real property, must be scrutinized under CPL 500.10 (17) (b) which requires that a "secured bail bond" be secured by real property having a value of, at least, twice the total amount of the undertaking. The defense contended that this section does not apply to an evaluation of real property accepted by an insurance company as collateral for a bail bond. At a sidebar, the defense all but acknowledged that if the formula contained in CPL 500.10 (17) (b) were applicable, the "double equity" requirement could not be met in this case.

Bail Structure

The Criminal Procedure Law permits an arraignment court to select from an array of bail options. (CPL 520.10 [1].) The court may delimit the options by specifying at least two forms of bail. (CPL 520.10 [2] [b].) If the court simply sets bail at a given amount, the defendant may choose from the full panoply of options listed in CPL 520.10 (1), but may post bail in the least onerous forms, i.e., unsecured surety bond or appearance bond. (CPL 520.10 [2] [a].) Among the options that a court may specify and a defendant may choose is the "insurance company licensed by the New York State Superintendent of Insurance in assessing the adequacy of the underlying security for a bond whether the collateral is cash or real property. (People v O'Boyle, supra; People v McIntyre, supra [inquiry properly limited]; People v Martinez, 166 Misc 2d 781 [Sup Ct, NY County 1995] [inquiry is more limited].) This deference is bottomed on an assumption that "th[e] company has favorably assessed the risk of the defendant's nonappearance." (People v Martinez, supra at 783.) In Matter of Barnes v Cohen (45 AD2d 837, 838 [1st Dept 1974]), the Appellate Division limited a court's inquiry pursuant to CPL 520.30 (1) to the obligor insurance company rather than the "underlying indemnification, except to the extent of public policy." In Matter of Johnson v Crane (supra ), the Appellate Division overruled Barnes to the extent that Barnes had been applied to foreclose inquiry into the source of the indemnification on the grounds specified in CPL 520.30 (1). Thus, it is patently clear that even where an insurance company bail bond is posted, the District Attorney may have inquiry into the source of the collateral on the grounds specified in CPL 520.30 but the value of the collateral is left to the business judgment of the insurance company. The insurance company's licensure by the State coupled with the presumption that the company will apply proper commercial risk assessment warrants the court's acceptance of the insurance company's decision on the value and sufficiency of the underlying collateral. The prosecution has cited People v Sherman (supra ) for the proposition that the "double equity" provision of CPL 500.10 (17) (b) applies to the evaluation of an insurance company bail bond secured by real property. However, first, this case is not binding authority and second, the facts of this case are distinguishable. In Sherman, the Appellate Division, on remand, had required a "fully secured surety company bond." The phrase "fully secured," at least arguably, brought this bail instrument within the strictures of CPL 500.10 (17), which requires that a secured bail bond is subject to the "double equity" provision of CPL 500.10 (17) (b) when the bond is secured by real property. This significant fact distinguishes the Sherman case from this case as the arraignment court here did not specify how the insurance company bond was to be secured.

Statutory History

The conclusion that a court may not inquire into the value of the underlying collateral for an insurance company bond and The "double equity" provision was required to standardize bail practices regarding real property and to address problems relating to heavily encumbered real property offered as security for bail. (See Amen mem, supra, and letter from NY County Lawyers' Assn, Comm on Crim Cts by [future mayor] Vincent R. Impellitteri, dated Mar. 16, 1942, which opposed the "double equity" provision.) In 1970, the Code of Criminal Procedure was replaced by the CPL which in section 500.10 (16) provided for "insurance company bail bonds," separate and distinct from "secured bail bonds," proffered by companies licensed by the Superintendent of Insurance. The "double equity" provision was retained only in the subdivision which defined a "secured bail bond." (CPL 500.10 [17] [b].) Thus, the new CPL created a new bail instrument independent of all others. (CPL 500.10 [16].)

Conclusion

While the amendments, including the "double equity" requirement in the Code of Criminal Procedure, had their genesis in the abuses of bail bondsmen, the continuation of the "double equity" provision in the CPL as part of the definition of a "secured bail bond" has more to do with the vagaries of the real estate market and less to do with providing a mechanism for controlling the abusive practices of bondsmen. (People ex rel. Hardy v Sielaff, supra at 620-621.) The CPL relegated the underfinanced and casual surety bondsman to virtual extinction by subjecting the professional bail bondsman to State regulation and control. Under the Code of Criminal Procedure, a bondsman was not required to show sufficient resources to cover the face amounts of the bail bonds that he had written. Upon a defendant's failure to appear, the State was left to foreclose on the real property. The approbation of the State through the licensing by the Superintendent of Insurance is predicated on the adequacy of an insurance company's financial resources to cover the face amounts of its bonds. (Insurance Law §§ 6801, 1102.) Thus, in the event of a forfeiture, the State recovers against the company rather than the owners of the real estate. By these regulations, the insurance company receives the imprimatur of the State and is concomitantly relieved of the onerous collateral requirements previously imposed on them by the Code of Criminal Procedure. The new statute qualifies bail companies while the old statute merely excluded unscrupulous bondsmen. A bona fide insurance company is permitted, subject to any limitation by the court as to the form of the bail, to only satisfy itself as to the value and sufficiency of the collateral. Therefore, when a court sets a bail amount with an insurance company bond alternative, the court is without authority to question the value of the collateral pledged by the indemnitor. Consequently, the "double equity" provision contained in CPL 500.10 (17) (b) is not applicable to an insurance company bail bond secured by real property. If a court concludes that a fully secured bond is necessary to ensure the defendant's future appearance, then its bail determination should reflect that conclusion. An arraignment court is not compelled to allow an insurance company bail bond as an acceptable form of bail. While the court and the District Attorney may not question the value accepted as collateral by the insurance company, CPL 520.30 permits an inquiry into the source of the collateral provided by the indemnitors. (CPL 520.30 [1] [c], [d].) The bond security may be contested on any of the bases listed in CPL 520.30 (1). In this case, the District Attorney has made no argument that the source of the collateral is in contravention of any of the provisions of CPL 520.30 (1). Otherwise, the bail bond on its face is in conformity with the law. In light of the foregoing analysis which demonstrates this court's circumscribed review of an insurance company bail bond, the bond in this case is approved. [*] The defendant was also required to surrender his passport and establish his United States citizenship as conditions of bail. These requirements were satisfied by the defendant.