Case Name: The American Surety Co. v. Boyle et al.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1902-02-04
Citations: 65 Ohio St. 486
Docket Number: 
Parties: The American Surety Co. v. Boyle et al.
Judges: M’inshald, C. J., Bukket and Davis, JJ., concur.
Reporter: Ohio State Reports, New Service
Volume: 65
Pages: 486–495

Head Matter:
The American Surety Co. v. Boyle et al.
Surety upon bond — To indemnify one of several sureties upon replevin bond — Not held'to indemnify cosureties»of indemnified surety — Query as to participation of co-sureties in premium paid by principal.
1. A surety upon a bond given to indemnify one of several sureties upon a replevin bond, being a stranger to the action of replevin, is bound no further than he agrees to be bottnd, and he will not, by construction and against the terms of his obligation, be held to indemnify co-sureties of the indemnified surety.
2. When such indemnifying surety, being a surety company, executes its bond in consideration of a premium paid to it by the principal obligor in the replevin bond, the right of co-sureties to recover, whether against the company or the indemnified surety, cannot exceed the amount of the premium paid, that being the extent .of the impairment of the ability of the principal to discharge his primary obligation. Whether there may be a recovery to that extent we do not determine.
(Decided February 4, 1902.)
Error to the Circuit Court of Mahoning county.
Boyle brought suit in the court of common pleas against the surety company, McCurdy and others being cosureties with Boyle upon the replevin bond mentioned in the statement of the case. He sought and obtained a recovery against the insurance company and against McCurdy upon the following state of facts which appear from the pleadings and the special finding made in the court of common pleas: On the 22nd day of November, 1886, the firm of Mc-Gillin & Company commenced an action of replevin in the court of common pleas against the sheriff of Mahoning county and others' to recover possession of chattels which were in the hands of the sheriff. In that action the plaintiffs gave a bond in the sum of $33,964.32, with McCurdy, Boyle and others as sureties for them, the bond being conditioned that McGillin & Company should duly prosecute said action and pay all costs and damages which might be awarded ¿gainst them. Upon the approval of the bond the chattels which were the subject of the action were delivered to the firm of McGillin & Company. Pursuant to a demand made by McCurdy before signing the replevin bond as surety, the members of the firm of McGillin & Company as principals and the surety company as surety, executed to McCurdy an indemnifying bond in the same penal sum as that named in the replevin bond, the same being payable to Mc-Curdy, his heirs, executors, administrators and assigns. The condition of the indemnifying bond is:
“Whereas in an action now pending in the court of common pleas in the county of Mahoning, and state of Ohio, wherein Edward M. McGillin & Company are plaintiffs, and Eli B. Walker et al. are defendants, the said Robert McCurdy, with others, became the sureties on the bond of the said Edward M. Mc-Gillin & Company, for the penal sum of $33,964.32, in an action in replevin instituted in said court, and which bond is conditioned in substance that the said plaintiffs, Edward M. McGillin & Company, shall duly prosecute the said action, pay all costs and damages which may be awarded against them, a copy ofl which bond and the appraisal thereto attached isi hereto annexed and made a part of this instrument, and,
“Whereas, the said Robert McCurdy is desirous of being indemnified and saved harmless from loss or damage-arising out his suretyship upon the bond of said Edward M. McGillin & Company, and,
“Whereas, the said Edward M. McGillin & Company have applied to the said American Surety Company for such bond of indemnity,
“Now, therefore, ‘the condition of this obligation is such that, if the said Edward M. McGillin & Company shall duly prosecute the said action and pay all costs, and damages which may be awarded against them, and shall and-will truly keep and save harmless the» said Robert McCurdy from loss or damage arising out. of his having entered into and executed-said bond of replevin, as one of the sureties thereon, then this obligation to be void; otherwise to remain in full force- and effect-.”
The petition in the present case alleges that the» consideration for said indemnifying bond was paid to the surety company by McGillin & Company, it. being the sum of $250. The court finds that the premium Avas paid by McGillin & Company, and that it amounted to the sum of $420. This bond was executed without the knowledge of any of McCurdy’s co-sureties.
In the action of replevin judgment was rendered against McGillin & Company and in favor of the-sheriff, and thereafter those for whose benefit the sheriff had held the property recovered judgments on the replevin bond for sums which in the aggregate exceeded $25,000. One-fiftlx of the amount of said judgments was paid by Boyle,' and one-fifth by the surety company directly to the persons in whose favor said judgments werg recovered, but on account of McCurdy’s liability as surety in the replevin bond. Other facts were found upon the cross-petitions of other sureties respecting their rights as against Mc-Curdy and the company, but the statement of those facts may be omitted in the present case. Upon the facts so found the court rendered judgment in favor of Boyle against the insurance company for $5,985.68 and costs and against McCurdy for $1,113.62, that being one-fifth of the sum which the surety company had paid for McCurdy’s benefit; the judgment against McCurdy to be satisfied by the full payment of that rendered in favor of Boyle against the surety company. Further finding and judgment was entered against the surety company on account of the liability of other sureties upon the replevin Rond, but it is not material to any questions now considered. On petitions in error filed in''the circuit court.by the surety company and McCurdy the judgments of the common pleas court were affirmed. The same parties now present petitiofis in .error here for the reversal of the judgments of the circuit court and the common pleas court.
Myron A. Norris; B. F. Wirt and 8. D. L. Jackson, for plaintiffs in error, cited the following authorities:
Hall v. Cushman, 16 N. H., 462; Bank v. Carroll, 5 Ohio, 208; State v. Medary, 17 Ohio, 554; McGovney v. State, 20 Ohio, 93; State v. Cutting, 2 Ohio St., 1; Hall v. Williamson, 9 Ohio St., 17; Adams v. Flanagan, 36 Vt., 400 Robertson v. Deathridgem, 82 Ill., 511; Oldham v. Broom, 28 Ohio St. 41; Keith v. Goodwin, 31 Vt., 268; Harris v. Warner, 13 Wend., 400; Deering v. Earl of Einchelsea, 2 B. & P., 270; Leggett v. McClelland, 39 Ohio St., 624; Moore v. Moore, 15 Am. Dec., 523; Hampton v. Phipps, 108 U. S., 260; Monson v. Drakely, 40 Conn., 552; Robinson v. Boyd, 60 Ohio St., 57; Camp v. Bostwick, 20 Ohio St., 337; Barbour v. Bank, 45 Ohio St., 133; Horst v. Dague, 34 Ohio St., 371.
G. F. Arrell,• T. McNamara; R. B. Murray; W. S. Anderson; M. C. McNab Nand King, McYey & Robinson, for defendants in error, cited the following-authorities :
Niece v. Rogers, 7 Circ. Dec., 671; 14 R., 646; Oldham v. Broom, 28 Ohio St., 41; Cannon v. Connoway, 5 Del. Ch., 559; Berridge v. Berridge, 44 Ch. Div., 168; Bank v. Teeters, 31 Ohio St., 36; Emmitt v. Brophy, 42 Ohio St., 82; Hale v. Wetmore, 4 Ohio St., 600; Barber v. Bank, 45 Ohio St., 133; Stump v. Rogers, 1 Ohio, 533; McConnell v. Scott, 15 Ohio, 401; Voss v. Murray, 50 Ohio St., 193; Parsons on Contracts, 186; Gilbert v. Wymen, 1 Comst., 550; Rodmen v. Hedden, 10 Wend., 498; Lathrop v. Atwood, 21 Conn., 117; 2 Story’s Equity, section 850; Kramer v. Bank, 15 Ohio, 253; Pratt v. Walworth, 8 Circ. Dec., 472; 15 O. C. C., 412.

Opinion:
Shatjck, J.
The indemnifying bond executed to McCurdy by McGillin & Company with the American Surety Company as surety was in no sense substituted for the bond given in the action of replevin. By executing it the firm of McGillin & Company incurred no obligation additional to that already incurred as plaintiffs in that action and principal obli gors in the replevin bond. The indemnifying bond did not contemplate the payment of the damages that might result from the taking of the property, except as the discharge of. that primary obligation of McGillin & Company was suggested as the natural mode by which McCurdy should be saved from his contingent liability as surety. It was, in legal effect, wholly independent of the action of replevin, the bond given in that action being referred to for the sole purpose of identifying the liability against which McCurdy was to be indemnified. Although the amount of the indemnifying bond equals that of the replevin bond it does not exceed the conditional liability of McCurdy. The indemnifying bond is in a sum payable to him without terms indicative of an intention to benefit either the obligees or the other sureties in the replevin bond. The motive for its execution is expressly statd to be McCurdy's desire that he should be indemnified. The surety company, being a stranger to the action in replevin by which 'McGillin & Company wrongfully took the property which was the subject of the action, is bound no further than it has agreed to be bound, and the obligation defined by the terms of its contract is fully discharged by the indemnification of McCurdy. There is, therefore, no foundation for the judgment against the surety company
It is not less evident that the terms of the indemnifying bond afford no foundation for the judgment against McCurdy. While the bond was for his indemnity only, it was for his full indemnity, and his right thereto is denied by the judgment against him, or a liability must be asserted against the surety company beyond the stipulations of its contract. If, as is the case of the surety company, McCurdy's relations to the transaction were those only which are defined by the indemnity bond this would be an end to the inquiry.' But he is one of five sureties on the replevin bond, and it is insisted that out of that relation there arose an obligation to his co-sureties which, upon the facts found, is a full justification for the judgment against him. The doctrine invoked is tha't one of several sureties -who receives an indemnity froin the property of the principal is deemed to hold it for the equal benefit of all the sureties. It is true that this doctrine does not depend upon express contract. It is the creature of equity to be applied Avhen, and only Avhen, its application is justified by the equitable considerations Avhich gave rise to it. It is said to be applicable in this case because, although the indemnity came from the surety company, a stranger to the replevin bond, and in the discharge of the obligation which Avas imposed upon it by the indemnity bond, the premium Avas paid by the principal in the replevin bond. Assuming that McCurdy is amenable to the rule invoked notwithstanding his refusal to execute the replevin bond until indemnified, the field of necessary inquiry is bounded by tAvo familiar rules. On the one hand, a surety deriving indemnity from, the property of the principal obligor is charged with respect to it as trustee for his co-sureties; and, upon the other, a surety may obtain indemnity from a stranger to the obligation and retain it for his sole protection. In vieAv of its peculiar facts it cannot be said that this ease is clearly comprehended Avithin either of those familiar rules; and in the absence of definite authority Asm are obliged to resort to a consideration of the reasons upon which those equitable rules are founded. The case does not permit us to présume either that McCurdy demanded this indemnity for the benefit of the obligees or of his co-sureties in the replevin bond, or that liis co-sureties consented to Ms obtaining indemnity for bis sole benefit. Tbe surety Avho receives indefimity ffom tbe property of tbe principál is treated as a trustee for bis co-sureties either because of tbe presumption that be obtained it for tbe equal benefit of all, or because tbe diminution of tbe property of the principal, and tbe consequent diminution of bis ability to discharge bis primary obligation, Avould operate as a fraud upon the co-sureties if tbe special indemnity is obtained without their consent. On tbe other band tbe surety who obtains special indemnity from a stranger to the obligation is not charged as a trustee for bis co-sureties because no injui*y is done them, tbe ability of tbe principal to discharge bis primary obligation not being diminished. Tbe right of a surety to procure indemnity for bis sole benefit is, therefore, restricted only by tbe requirement that it must not be obtained to tbe prejudice of bis co-sureties. Counsel for tbe defendants in error quote numerous comprehensive statements of tbe doctrine Avhich bolds an indemnified surety to be a trustee for bis co-sureties, but if limited to tbe facts considered they are all consistent Avith this vícav. Tbe character of tbe transaction is determined by its substance and not by a mere incident. Leggett v. McClelland, 39 Ohio St., 624. There is nothing of substance in the transaction here considered except that in consideration of the premium y>aid to it and by a contract AAdiose force is Avholly expended in defining the liability of one and tbe commensurate rights of tbe other, tbe surety company assumed tbe place of McCurdy with respect to bis liability as surety upon the replevin bond, •the liability of tbe co-sureties being in no way affected except as the ability of McGillin & Company to discharge their primary liability was diminished by the payment of the premium. What appears, therefore, to be the controlling question suggests an inevitable answer.' What possible injury resulted to the co-sureties of McCurdy beyond the amount of the premium paid?
Furthermore, the judgment against McCurdy implies that the surety company is liable to those with whom it entered into no engagement. Remembering that the indemnifying bond is for the full indemnity of McCurdy, it is evident that if he should be required to pay the amount of the judgment against him he would, by the terms of his bond, have a valid demand against the surety company on account of that payment, with the obvious result that by indirection the company would be held bound to indemnify those for whose liability it has neither received a premium nor assumed an obligation.
We have examined Gibson v. Sheehan, 28 L. R. A., 400, which is said to have influenced the opinions of a majority of the judges of the circuit court in the present case. Analysis shows that it applies a general rule to a case which is not comprehended by it because not within its reason. It was evidently supposed to be supported by Hampton v. Phipps, 108 U. S., 260, which is inconsistent with it, holding, as it does, that the general doctrines under consideration are to be applied or rejected according to the dictates of the reasons upon which they rest, and applying those doctrines in that case to the denial of the right of participation. Whether the co-sureties of Mc-Curdy are entitled to maintain an action for their proportion of the premium paid we do not determine. That question is not properly presented, the allega tions of the petition and' the findings of the court in that regard being inconsistent, and counsel omitting the question from the larger view of the case which they have presented.
Judgments of the common pleas and circuit courts reversed and judgments for the surety company and McGurdy.
M'inshald, C. J., Bukket and Davis, JJ., concur.