Case Name: MacArthur Brothers Company, Appellant, v. Edward W. Kerr, as Executor, etc., of Mary Crage, Deceased, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1913-03-05
Citations: 155 A.D. 690
Docket Number: 
Parties: MacArthur Brothers Company, Appellant, v. Edward W. Kerr, as Executor, etc., of Mary Crage, Deceased, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 155
Pages: 690–693

Head Matter:
MacArthur Brothers Company, Appellant, v. Edward W. Kerr, as Executor, etc., of Mary Crage, Deceased, Respondent.
Fourth Department,
March 5, 1913.
Guaranty and suretyship — contract indemnifying surety company against loss construed—no recovery on said contract where surety has not suffered loss.
Where a contract securing the surety of a contractor against loss is purely one of indemnity there can be no recovery thereon until such time as the surety company has suffered loss.
A contract whereby a person agreed to indemnify the surety of a contractor against all loss which it might sustain by reason of having executed its undertaking, and to pay to the company all damages for which it shall become responsible upon said undertaking, “before said company or its representatives shall be compelled to pay the same, any sum so paid, however, to be applied to the payment of such damages,” is purely one of indemnity.
Hence, where a judgment was recovered against .the surety which assigned its right under said contract to the judgment creditor, the consideration being solely the satisfaction of the judgment, the assignee cannot recover on the contract, as the surety company has suffered no loss.
Kruse, J., and McLerrar, P. J., dissented, with opinion.
Appeal by the plaintiff, MacArthur Brothers Company, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Erie on the 15th day of May, 1911, upon the dismissal of the complaint by direction of the court after a trial at the Erie Trial Term.
Thomas E. Lawrence [Charles J. Staples with him on the brief], for the appellant.
Frank A. Abbott, for the respondent.

Opinion:
Lambert, J.:
The action grows out of the following facts: MacArthur Brothers Company was a general contractor for the building of a portion of a line of railroad. That concern sublet a portion of their contract to La Morte & McCabe and required of the sub-contractors a surety bond for the faithful performance of their contract. Such bond was written by the Fidelity and Deposit Company of Maryland in July, 1903.
The surety company required of the sub-contractors an agreement for its protection against loss upon the bond, and received July 6, 1903, the contract, executed by Mary Crage, respondent's testatrix, which forms the basis of the action. La Morte & McCabe apparently abandoned their contract prior to its completion, and MacArthur Brothers Company brought action upon the surety bond in the Court of Common Pleas of Clearfield county, Penn.
Notice of the commencement of this action was timely served upon Mary Crage, with the demand that she defend the same. So far as appears, she took no part in the action, and on the 13th day of September, 1906, judgment was rendered in that action against the surety company and in favor of MacArthur Brothers Company for the sum of $2,000. On the same day the surety company assigned to MacArthur Brothers Company the agreement with it of Mary Crage and all its rights thereunder. The assignment recites the consideration therefor as being the satisfaction of the judgment aforesaid, and three days later that judgment was satisfied of record. There is no claim that other consideration was paid for the satisfaction of the judgment than the assignment of the Crage agreement.
Appellant's contention is that the Crage agreement goes further than mere indemnity and creates an absolute liability, complete in every particular, upon the rendition of the Pennsylvania judgment. A single clause of such agreement is advanced to support that contention. It reads as follows :
" Second. That said Mary Crage shall and will at all times indemnify and keep indemnified and save harmless the said company from and against all loss, damages, cost, charges, counsel fees and expense whatsoever which said- company shall or may for any cause, at any time, sustain or incur by reason or in consequence of said company having executed or agreed to execute said instrument; and do further covenant and agree to pay to said company or its representatives all damages for which said company or its representatives shall become responsible upon the. said bond or undertaking before said company or its representatives shall be compelled to pay the same, any sum so paid, however, to be applied to the payment of such damages
If this agreement is simply one of indemnity, then the non-suit was right, as there is no -proof in the record that the surety company has suffered any loss whatever and it affirmatively. appears that there now remains no further liability against it upon this judgment.
If, on the other hand, the agreement goes further and is an absolute promise to pay, dependent only upon the arising of the liability against the surety company by the rendition of the judgment, such an agreement is valid and enforcible. (See Maloney v. Nelson, 144 N. Y. 182.)
The determination of the question depends upon the meaning given to the wording of the last phrase of the above question. It is to be noted that the obligation to pay is, by the express wording, limited to payment preceding the time when the surety company is compelled to pay. Up to this time the surety company has not been compelled to pay anything and so far as appears from the record has not paid a dollar. It is further to be noted that all that is paid to the surety company is to be devoted to the payment of the damages which the surety company was obligated to pay. This further evidences to me that the real purpose of the clause was to compel the indemitor, Mary Crage, to furnish to the surety company, in advance, the necessary funds with which to liquidate such damages as it might be compelled to pay under its bond. If I am right in this construction, then the contract was purely one of indemnity, and until such time as loss occurred to the surety company, there were no damages arising under the Crage agreement.
These views lead to the affirmance of the judgment, with - costs.
All concurred, except McLennan, P. J., and Kbuse, J., who dissented in a memorandum by Kbuse, J.