Case ID: ad_153/html/0032-01.html
Source: Caselaw Access Project
Author: {"author": "Miller, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

E. R. Thomas Motor Branch Company, Appellant, v. United States Fidelity and Guaranty Company, Respondent.
    First Department,
    November 8, 1912.
    Principal and surety—bond securing payment of judgment which may be recovered after opening of judgment by default — withdrawal of answer and counterclaim" by. principal—judgment by consent, when surety liable —when no extension of time which discharges surety — subrogation.
    Where as a condition for opening a defendant’s default taken upon a failure to answer, a surety company agrees to pay any judgment which the plaintiff may recover, a judgment is “recovered” within the meaning of the undertaking although it be taken by consent, or by subsequent default.
    Hence, where after the giving" "of such undertaking the principal of the surety conpany interposed an answer containing a counterclaim which it was not bound to set up, and thereafter pursuant to .written stipulation withdrew its answer and counterclaim and allowed the plaintiff to take judgment, upon .condition that it should furnish an undertaking to secure the payment of any judgment which the principal might obtain in a subsequent action upon its counterclaim, the surety company is liable upon its bond, in the absence of fraud or collusion, there being nothing to show that the plaintiff was not justly entitled to the judgment recovered against the principal.
    Although in consideration of the withdrawal of the principal’s answer and counterclaim the plaintiff in substance agreed that it was to acquire no rights under the judgment by consent until it secured the payment of any judgment that might be recovered on the principal’s counter-, claim, and although the principal only agreed to pay the plaintiff’s judgment within five days after the undertaking was given, there was no such extension of time as discharged the surety company. This because the plaintiff was not prevented from giving its undertaking and proceeding to enforce the judgment entered by consent, the delay in procuring the undertaking being a mere incident to the agreement. Qucere, as to whether the surety company which secured the payment of the plaintiff’s judgment was subrogated to the rights of its principal on the counterclaim and to its interest in the security furnished by the plaintiff.
    Appeal by the plaintiff, the E. R. Thomas Motor Branch Company, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 5th day of March* 1912, upon the verdict • of a- jury, rendered by direction of the court, and also from an order entered in said clerk’s office on the 15th day of March, 1912, denying the plaintiff’s motion for a new trial made upon the minutes.
    
      George A. McLaughlin, for the appellant.
    
      Lewis Johnston, for the respondent.
   Miller, J.:

This plaintiff brought an action against the S. & V. Motor Company and on the 19th of April, 1911, entered a judgment by default for the sum of $3,264.17. Thereafter a motion was made to open, the default, which was consented to on condition that the defendant therein file a bond conditioned to pay any judgment the plaintiff might recover, and on that consent an order was entered on the 22d day of May, 1911, opening the default, the defendant having executed and filed an undertaking “ that if the plaintiff above named [the plaintiff in this action] shall finally recover any judgment herein against the defendant above named [the said S. & V. Motor Company] that the defendant will pay the sum recovered or directed to be paid by the judgment not exceeding the sum of ” $3,500. It is plainly to be inferred that the default was taken for failure to answer. Uo reference is made in the order opening the default or in the said consent or in the undertaking to a proposed answer, but an answer was served, presumably after the default was opened, which, among other things, set up a counterclaim for the sum of $8,000. Thereafter, and on the 27th of June, 1911, the parties to that action entered into a stipulation whereby the defendant withdrew its counterclaim and answer and consented that the plaintiff might take judgment for the full amount of its claim on certain specified conditions, viz., that within thirty days, the defendant should bring an action against the plaintiff on the matters set up in its counterclaim;. (2) that the plaintiff should give the defendant an undertaking either before, or not later than twenty days after the commencement of such an action, conditioned tq pay any judgment recovered therein; (3) that the plaintiff should take no steps for the enforcement and collection of its judgment before making and giving said undertaking; (4) that in case of the plaintiff’s failure to give the undertaking within the time provided for, the defendant might within ten days from the expiration of said time move to open and set aside the judgment in which case it was to he set aside and the cause restored to the short cause Calendar, but unless such a motion was made within ten days, the judgment was to stand, and the plaintiff was to be at liberty to proceed to collect it; and (5) the defendant agreed within five days after the delivery of said bond, unless it was a_surety 'company’s bond, to pay the judgment thus consented to, and in the event of its failure to do so, the bond, given pursuant, to the consent, was to be null and void, the plaintiff was to be at liberty to enforce the collection of said judgment and without opposition thereto by the defendant to move for an order canceling said bond as of record. On June 28, 1911, on the call of the calendar, an order was entered on consent in open court that the plaintiff have judgment against the defendant for the sum of $3,282.09. ' On July 15, 1911, the plaintiff filed an undertaking of the National Surety Company,' pursuant to said stipulation, and on July twenty-first entered judgment against the said defendant, the S. & V. Motor Company, in the sum of $3, 329.87. This action is brought against the defendant on its undertaking, and two questions are involved, viz.: (1) Is the judgment of the plaintiff against the S.. & V. Motor Company within the terms of the undertaking ? and (2) was the defendant discharged by an extension of time granted to its. principal ? Counsel on behalf of the defendant stated during the trial that it made “no charge of fraud or collusion.”

The defendant’s agreement was that, if the plaintiff should finally recover any judgment against the S. & V. Motor Company, it would pay the sum directed to be paid. A judgment is none the less recovered in an action though it be by consent or on default. If the defendant had served an answer without setting up a counterclaim and then had failed to appear at the trial, the judgment recovered at the trial would still have been “ recovered ” within the meaning of the undertaking. We fail to perceive any distinction between a tacit consent as upon failure to appear, and an express consent by written stipulation. The defendant in that action interposed a counterclaim, but it was not bound to do so, and there is nothing in the order opening the default, in the consent upon which it was entered, or in the undertaking itself to indicate that the latter was given with the understanding or on the assumption that the answer should set up a counterclaim. The defendant in this action cannot, in the absence of fraud or collusion, complain of the withdrawal by the defendant in that action of a counterclaim which it was not bound to plead in the first instance. There is nothing in this record tending to show that the plaintiff was not justly entitled to the judgment recovered by it against the defendant’s principal, and a judgment recovered by consent is within the terms of such an undertaking as the one in suit and, in the absence of fraud or collusion, is presmnptive evi- ' dence against the obligor. (Conner v. Reeves, 103 N. Y. 527.) The respondent relies chiefly upon Foo Long v. American Surety Co. (146 Y. Y. 251) in which a distinction was made between the limited undertaking involved in that case and a comprehensive one like that involved in the case at bar and in Conner v. Reeves.

We do not consider the stipulation pursuant to which the judgment against the defendant’s principal was entered as an agreement to extend the’time of entering the judgment or to forego the issuance of an execution thereon. As a condition of getting it's judgment, the plaintiff was to give an undertaking and was to acquire no rights until it did so. It could have given its undertaking, entered its judgment and proceeded to enforce it forthwith. The agreement of the defendant to pay the judgment within five days after the undertaking was given did not involve an agreement on the plaintiff’s part to forego proceedings to enforce the collection of the judgment during that time. As the plaintiff was not precluded by its stipulation from entering judgment and proceeding to collect it forthwith, the slight delay in procuring the undertaking and in entering the judgment was a mere incident, and it has been decided that The mere postponement of one of the ordinary proceedings in a case in which such an undertaking has been given does not release the sureties.” (Steinbock v. Evans, 122 N. Y. 551.) This case is not at all like Montrose v. Levenson (N. Y. L. J., Nov. 28, 1908; affd. by this court, without opinion, 132 App. Div. 928), in which there was a stipulation that judgment should not be entered until four months later.

The defendant may be entitled to be subrogated to. the right of its principal to proceed on its counterclaim and to, its inter-. est in the security furnished by this plaintiff. But that is a matter not now before us.

The judgment and order should be reversed and judgment directed for the plaintiff, with costs in this court and in the court below.

Ingraham, P. J., Laughlin, Scott and Dowling, JJ., concurred.

Judgment and order reversed and judgment directed for plaintiff, with costs in this court and in the court below. Order to be settled on notice.