Case Name: Maryland Casualty Company, Appellant, vs. Hjorth and others, imp., Respondents
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1925-06-22
Citations: 187 Wis. 270
Docket Number: 
Parties: Maryland Casualty Company, Appellant, vs. Hjorth and others, imp., Respondents.
Judges: 
Reporter: Wisconsin Reports
Volume: 187
Pages: 270–276

Head Matter:
Maryland Casualty Company, Appellant, vs. Hjorth and others, imp., Respondents.
February 12
June 22, 1925.
For the appellant there was a brief by Simmons, Walker & Wratten of Racine, and oral argument by Charles F. Wratten and M. E. Walker.
For the respondent Smader there was a brief by Foley & Brack, and the cause was argued orally by /. /. Foley and /. Allan Simpson, all of Racine.

Opinion:
The following opinion was filed March 10, 1925:
Owen, J.
The court was right in denying the motion to change the answer to the question by which the jury found that the plaintiff did not refrain from canceling its bond in consideration of the execution and delivery of the note. There was a square conflict in the evidence on this question between Hjorth and Coleman, the agent of the plaintiff, who conducted the negotiations leading up to the execution of the note, and, besides, it appears without dispute that the contract between Hjorth and the Jennison Mills Company was terminated prior to the execution of the note, and no reason appears for a desire on the part of Hjorth for a continuation of the bond. The answer of the jury to this question cannot be disturbed.
Upon a consideration of the record pertaining to the further motion of the plaintiff for judgment notwithstanding the verdict, we come to a different conclusion. While it is .universally held that tl^e contract of an indemnity company guaranteeing to an employer the fidelity .of employees is a contract of insurance (First Nat. Bank v. United States F. & G. Co. 150 Wis. 601, 137 N. W. 742; Whinfield v. Massachusetts B. & Ins. Co. 162 Wis. 1, 154 N. W. 632; 25 Corp. Jur. 1089, and cases there cited), such holdings have generally been in cases involving the rights of the insured against the indemnity company and have related to a con struction of the contract of insurance. In such cases it is held that when the indemnity company pays the amount of the shortage it is subrogated to the rights of the employer against the employee. Manifestly the indemnity company acquires no right of indemnity or security against the employee until it has paid the claim of the employer against the employee and been subrogated to the rights of the employer against the employee, in cases where the contract of insurance or indemnity w,as not written at the request of the employee. In such cases, there being no contractual relations between the employee and the indemnity company, the indemnity company acquires no rights against the employee until subrogation takes place. But is that true where the contract of indemnity is entered into at the request of the employee? Although there is a dearth of authority upon this question, it would seem that where an employee makes application to an indemnity company to guarantee his fidelity to his employer, the relation of principal and surety, or of principal and guarantor, is created just as much as though the application had been made to a private individual and such private individual had executed a bond to the employer. We so hold.
It is well established that the law implies a promise on the part of the principal to indemnify his surety for losses actually sustained. 21 Ruling Case Law, 1097. Undoubtedly the principal is a debtor of the surety from the time the surety makes payment. 21 Ruling Case Law, 1120. The authorities are not in1 agreement as to the exact relation existing between the principal and surety after the execution of the contract and before payment by the surety. Some cases hold that the relation of debtor and creditor exists from the date of the contract of suretyship, while others hold that this relation does not arise until the time of payment. 21 Ruling Case Law, 1120. But whatever the exact relation, it is well supported by authority that, after the contract of suretyship has been entered into and before a breach, the liability of the surety to pay the principal's debts constitutes a sufficient consideration for security turned over to the surety by the principal. 32 Cyc. 240, and cases there cited.
In Momsen v. Noyes, 105 Wis. 565, 81 N. W. 860, this court said:
"The principle is well settled that the implied contract of the principal to indemnify the surety against loss takes effect from the time when the surety signs the bond or obligation, and not from the time when the surety actually pays the principal's debt. The actual payment simply fixes the amount."
In the instant case the liability of the surety had actually arisen. The default of the principal had actually occurred. It was known that the principal could not pay and that the surety would have to. We have no hesitancy in holding that the situation furnished an ample consideration for security given by the principal to the surety to indemnify it from loss. Longfellow v. Barnard, 58 Neb. 612, 79 N. W. 255; Harlan Co. v. Whitney, 65 Neb. 105, 90 N. W. 993; Bibb v. Hitchcock, 49 Ala. 468, 20 Am. Rep. 288; Swift v. Crocker, 21 Pick. 241.
It cannot be doubted that if Hjorth had deposited with the bonding company the notes of third parties as collateral security or had executed to it a mortgage upon, property, the circumstances then existing afforded a sufficient consideration for the giving of such additional security. Perhaps the consideration supporting this note is not quite so apparent, but we think it clear nevertheless. It is true that the giving of the note did not wipe out the original indebtedness (Griffin v. Long, 96 Ark. 268, 131 S. W. 672, 35 L. R. A. n. s. 855), but it did extend the time of payment, and this constituted a sufficient consideration as to all other defendants for the giving of the note. Johnston H. Co. v. McLean, 57 Wis. 258, 15 N. W. 177; Goll v. Fehr, 131 Wis. 141, 111 N. W. 235; Holmes v. Webb, 166 Wis. 280, 164 N. W. 1007. The motion of the plaintiff for judgment notwithstanding the verdict should have been granted.
By the Court. — Judgment reversed, and cause remanded with directions to enter judgment in favor of the plaintiff.
A motion for a rehearing was denied, with $25 costs, on June 22, .1925.