Case Name: Lewis Samuels, Resp't, v. Fidelity and Casualty Company, of New York, App'lt
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1888-06-19
Citations: 16 N.Y. St. Rep. 917
Docket Number: 
Parties: Lewis Samuels, Resp’t, v. Fidelity and Casualty Company, of New York, App’lt.
Judges: 
Reporter: New York State Reporter
Volume: 16
Pages: 917–920

Head Matter:
Lewis Samuels, Resp’t, v. Fidelity and Casualty Company, of New York, App’lt.
(Supreme Court, General Term, First Department,
Filed June 19, 1888.)
Contracts—Breach of—Agreement of surety company to become SURETY ON A BOND—WITHDRAWAL—LIABILITY FOR DAMAGES.
The plaintiff entered into a contract with the government, and in pursuance of the rules of the department requiring a bond, the plaintiff' secured the defendant as one of his sureties. The defendant, with the plaintiff and one Ripley, executed the requisite bond. The bond was submitted to the post master of New York, who certified as to the sufficiency of the sureties, and it was sent on to Washington. Thereupon the plaintiff'took the necessary steps toward carrying out the contract. Before the post-master had passed upon the sureties the defendant notified the plaintiff that he desired to witlidi aw from the bond, and so informed the department at Washington. Held, that the attempted withdrawal of the defendant from its contract was a breach thereof, and that the plaintiff was entitled to recover as damages the expenses to which he was put in supplying the new bond.
Appeal from judgment entered upon the verdict of a jury and from order denying motion for new trial.
T. S. Moore, for app’lt; D. P. Hays and S. Greenbaum, for resp’t.

Opinion:
Van Brunt, P. J.
This action was brought to recover damages arising out of the breach of a contract entered into between the plaintiff and the defendant in which the defendant, in consideration of the payment of $200, on or about the 14th of May, 1885, agreed to become surety for the plaintiff, in conjunction with one Horace Ripley, in the sum of $20,000, on a government contract which the plaintiff had for the furnishing of jute canvas mail bags for the use of the post-office department for and during the term of four years.
The plaintiff entered into the contract with the government, and by the rules of the department, a person entering into such contract must furnish a bond within a certain period of time after the receipt of the contract for execution. Pursuant to this requirement, the plaintiff applied to the defendant to become one of his sureties, and entered into an agreement with the defendant for the payment of the sum of $200 yearly to the defendant as a premium or charge for going upon said bond, and paid the defendant the first premium of $200, and the defendant executed, in conjunction with Horace Ripley and the plaintiff, the requisite bond. This bond had been submitted to Mr. Pearson, the postmaster of New York, who certified the sureties to be good and sufficient, and it was then sent to Washington. Before the postmaster-general had passed upon the sufficiency of the bond, the defendant addressed a letter to the plaintiff, informing him that it had decided to withdraw from the bond, not from anything personal to himself, but because it was its rule never to issue a bond of this kind unless it had security which could be converted into cash at any time in case of default, and as the security given was not of that class, they had written to the department at Washington to relieve them from the guarantee.
To this letter the plaintiff sent a reply that the contract was complete, and the money had been paid, and that he did not admit their right to withdraw from the contract. Upon the department receiving the letter from the defendant desiring to be relieved from the bond, the bond was returned, and the question as to the sufficiency of the bond was not passed upon or determined. The plaintiff thereupon proceeded to procure new sureties upon his bond, and he finally succeeded in obtaining new sureties, upon the payment of some $3,000, together with certain expenses he had incurred.
This action was brought to recover the amount of these damages, and they were assessed by the jury at the sum of $2,227.54, and interest, the jury having been instructed that if, under the circumstances, the sum which the plaintiff was required to pay in order to get new sureties was a fair and reasonable charge, that he was entitled to recover therefor.
Amongst other points which the defendant made upon the trial of this case was that the payment of money to sureties upon a bond given to secure the performance of a contract with the United States government is against public policy and the plaintiff cannot recover for money so paid.
This séems to be a remarkable proposition in view of the business which the defendant claims to be carrying on. It charges a premium for becoming a surety and when it is sought to be charged where it has entered into such a contract of suretyship, it claims that the payment of money to it was a breach of public policy and the party cannot recover damages by reason of the breach of its contract. It may be that the proposition is not couched in these exact words but the legal result is necessarily the same. The very business of the defendant itself is embraced within the proposition which it is sought to have the court pronounce to be illegal.
We have before us upon the conceded facts that a breach of a contract and the ground upon which this breach was justified in the correspondence is the existence of a fact which the defendant well knew when.it entered into the contract, viz., that it was violating its own rules, and because of that fact the claim seems to be advanced that it is not liable for damages and had a right to withdraw from this contract. Certainly no such defense could avail an individual who had entered into a contract of this character and it is difficult to see how this corporation can escape.
The claim which is sought to infuse into the case at the trial is that they were fearful that the department would reject the bond and that they did not like to have the odium cast upon their corporation of having one of their bonds rejected by the government. It may be that this was the true reason, but it was certainly not the one which was stated to the plaintiff at the time at which they proposed to violate their contract, or on the other hand they stated the true reason to the plaintiff, and endeavored to deceive the court upon the trial.
It is apparent from the interrogatories which were propounded to the government officials examined as witnesses for the defendant that the reason of the withdrawal was the fear of rejection, and not that they had deliberately violated their own rules in entering into the contract with the plaintiff as stated in the letter to him. Whether the government would accept or not is immaterial. That condition of affairs had been anticipated by the contract. If their bond was rejected that ended the contract, but until it was rejected they had no power of withdrawal because the contract having been entered into and partially performed could not be determined except upon completion.
The attempted withdrawal of the defendant from its contract was a breach thereof and the plaintiff was entitled to recover as damages the expenses to which he was put in supplying the new bond.
The fact that the defendant was but one of the sureties-does not alter the rule of damages. It became necessary in consequence of its withdrawal that a wholly new bond should be procured and the direct result of the breach was the expense which the plaintiff was put to in procuring the new bond.
It seems to us therefore, that the learned court was correct in holding the defendant liable for the damages sustained by the deliberate breach of its obligation and the jury having found the disbursements made by the plaintiff to be fair and reasonable, the defendant cannot complain of being called upon to repair the damage which it deliberately did.
The judgment and order should therefore be affirmed,, with costs.
Brady and Daniels, JJ., concur.