Case Name: William T. Emmet, Superintendent of Insurance of the State of New York, Appellant, v. The Sanitary Water Still Company, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1914-03-06
Citations: 161 A.D. 288
Docket Number: 
Parties: William T. Emmet, Superintendent of Insurance of the State of New York, Appellant, v. The Sanitary Water Still Company, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 161
Pages: 288–291

Head Matter:
William T. Emmet, Superintendent of Insurance of the State of New York, Appellant, v. The Sanitary Water Still Company, Respondent.
First Department,
March 6, 1914
Guaranty and surety — contract of suretyship construed — right of principal on default of contractor to set off damages against amount due surety.
In an action by the receiver of a surety company on an agreement by which the company became surety for the defendant’s performance of a contract with the United States government, and under which the defendant agreed “to save harmless and indemnify” the surety company from “any and all * * * liabilities, losses * * * of whatsoever kind, name, nature or description,” which the surety company “ shall or may, for any cause, at any time sustain or incur, by reason of” any bond or undertaking given in defendant’s behalf, it appeared that the defendant, having failed to perform its contract, the government refused to pay and deducted from moneys due by it to the surety company on account of other transactions the amount of damages caused by the defendant’s default.
Held, that the act of the government in appropriating the moneys due the surety company constituted a “liability” within the meaning of the agreement, and that an order denying plaintiff's motion for judgment on the pleadings should be reversed.
Lau&hlin and Clarke, JJ., dissented, with opinion.
Appeal by the plaintiff, William. T. Emmet, as superintendent of insurance, etc., from an order of the Supreme Court, made at the Hew York Special Term and entered in the office of the clerk of the county of Hew York on the 18 th day of Hovember, 1913, denying plaintiff’s motion on the pleadings for judgment overruling the demurrer to the complaint.
Albert Reese, for the appellant.
E. Ormonde Power, for the respondent.

Opinion:
Hotchkiss, J.:
By the instrument on which this action is brought the defendant agreed " to save harmless and indemnify " the surety company, of which plaintiff is the receiver, from "any and all liabilities, losses of whatsoever kind, name, nature or description" which the surety company "shall or may, for any cause, at any time sustain or incur, by reason of " any bond or undertaking given by the surety company in defendant's behalf; also, that the defendant would at its own expense defend the surety company from any action brought bn any such bond or undertaking and would pay " upon demand, any and all damages, charges and expenses " for which the surety company " shall become responsible."
Under a claim that the defendant had failed to perform its contract with the United States government in the manner agreed, to the damage of the government in the sum of $1,600, being the amount for which the surety company had executed its bond to the government for the faithful performance by defendant of the contract in question, the government authorities refused to pay and deducted said sum from moneys due by it to the surety company on account of other transactions. This act of the government in thus appropriating the money of the surety company under a claim of right constituted a liability if not a loss within the meaning of the agreement. Hot only was it a liability but it was one which had been actually enforced. Whether such appropriation was or was not justifiable is of no importance. If the government had paid over the money without prejudice and had then brought an action against the surety company on its bond, that company would certainly have been compelled to defend the action at its own cost and to pay the amount of any recovery. The situation cannot be different where the government has assumed to be its own paymaster and without bringing suit has exercised the right possessed by any creditor to determine for himself and at his own risk whether or not one is indebted to him and whether in payment of such indebtedness he shall appropriate moneys of the debtor in his hands and leave the debtor to sue.
The order appealed from should be reversed, with ten dollars costs and disbursements, and the motion granted, with «ten dollars costs, with leave to defendant to withdraw the demurrer and to answer on payment of said costs.
Ingraham, P. J., and Scott, J., concurred; Laughlin and Clarke, JJ., dissented.