Court Opinion

ID: 7202958
Source: CourtListenerOpinion
Date Created: 2022-07-24 17:10:22.155581+00
Date Added: 2024-06-11T16:16:34.854019
License: Public Domain

JANVIER, J.
(dissenting). In addition to the reasons given in my dissenting opinion in U. S. Fidelity & Guaranty Co. v. Crais, 127 So. 414, I now desire to present what I consider further sound objections to a decree iii favor of defendant.
The surety company executed in favor of the bank an indemnity agreement under which it undertook to make good any loss sustained by the bank as a result of two different main classes of criminal acts: First, defalcations of employees; second, robberies, holdups, etc., by third persons. The bond thus partook of two characters. So far as it guaranteed against loss caused by criminal acts of employees, its purpose was to insure the bank against loss caused by persons known to, and connected with, the bank. Thus, so far as those persons, the employees, were concerned, it was an agreement that the surety would stand behind and be responsible for the acts of certain particular persons contemplated by the contracting parties. In the majority opinion it is held that the contract was one of insurance and that the subrogation in favor of the insurer and against Johnson, the defaulting employee, did not take place as a matter of right. It is my belief that my associates have fallen into error by *123their conclusion, that, because the text-writers and the authorities hold that such a contract is in its main features one of insurance, none of the rights which a surety usually has flow out of that contract. I readily concede that it is an insurance policy in the sense that it created a direct obligation which the insured was bound to discharge, regardless of any attempt by the bank to first collect from Johnson. In my opinion all of the cases cited in the brief of the defendant and in the majority opinion simply hold that the insured, in this case the bank, may proceed directly against the insurer, in this case the plaintiff, United States Fidelity & Guaranty Company, but none of them holds that there does not result from the payment by the surety a subrogation in its favor against the person who caused the loss. For instance, in the supplemental brief filed by. the defendant, we find cited the case of First National Bank v. U. S. Fidelity & Guaranty Co., 150 Wis. 601, 137 N. W. 742, in which the court held: A fidelity .bond indemnifying against dishonesty is essentially an insurance contract guaranteeing payment, and is not a mere guaranty of collection upon which the insured can recover only after exhausting his remedies against those primarily liable.
And in Southern Surety Co. v. Citizens’ State Bank of Hempstead (Tex. Civ. App.) 212 S. W. 556, 557, which is relied on in the majority opinion, the court said:
“The plain purpose and intent was to create a direct and primary obligation from the surety company to the bank.”
It is manifest that the question of the right to subrogation was in no way involved, but only the question of whether or not the insured must first attempt to collect his loss from the employee. The majority opinion relies on the text-writers and contains quotations from Joyce to the effect that a fidelity bond is an insurance contract. As I have already said, I find no fault with that statement, but I call attention also to the statement in Joyce on the Law of Insurance, vol. Y, p. 5927, that:
“In fidelity and guaranty insurance the obligation of the insurer to indemnify the insured employer is co-extensive with said insurer’s right to indemnity from the employee for payments made to insured by reason of the employee’s fraud or dishonesty.”
To the same effect we find, in Cooley’s Briefs on Insurance (2d Ed.) vol. VII, p. 6700:
“Although a surety issues a bond for the protection of an employer against the defalcation, etc., of an employee, and the signature of the employee does not appear thereon, the company is subrogated to all the rights of action against such employee which the employer would have, and any action against the defaulter would be as well founded as though brought on his express agreement to repay.”
To the same effect, see Corpus Juris, vol. 33, p. 43, sec. 714:
“Where, however, the contract is to be regarded as one of indemnity, the company, on payment of the loss, is subrogated to all of the rignts of insured against the person whose fault or negligence caused the loss.”
But whatever may be the jurisprudence in the other states, it seems very plain to me that the rights as between the surety and Johnson are governed by the Civil Code of Louisiana, which, in article 2161, grants the subrogation as a matter of right, as I shall hereafter show.
Therefore, whether he knew it or not— and from the nature of his employment (he being the manager of a branch department) I am convinced that he did know it —Johnson was in effect one of the principals in the blanket bond and the United *124States Fidelity & Guaranty Company was the surety.
Even if it be conceded that Johnson did not know that there was a surety who was responsible for his peculations, the United States Fidelity & Guaranty Company was none the less his surety, because Civ. Code, art. 3038, provides:
“A man may be surety without the order or even the knowledge of the person for whom he becomes surety.”
The surety company was, therefore, surety for Johnson.
There is no dispute over the fact that Johnson was guilty of criminally defrauding his employer, the bank, and that thus the surety company became liable to the bank for Johnson’s shortages. Therefore, when the surety paid the bank it had its recourse against Johnson because, under Civ. Code, art. 3052, “the surety who has paid the debt, has his remedy against the principal debtor, whether the surety has been given with or without the knowledge of the debtor.’’
See, also, C. C. art. 3053, “with regard to that remedy (3052), the surety has the same right of action and the same privilege of subrogation, which the law grants to co-debtors in solido.’’
Even if it be conceded that there was no conventional subrogation, since the evidence does not show a written subrogation by the bank to the surety company of the rights of the bank against Johnson, the surety was none the less fully subrogated to those rights against Johnson, because, by again referring, to that foundation stone of Louisiana law, the Civil Code, we find that in article 2161 it is provided:
“Subrogation takes place of right: * * *
“3. For the benefit of him, who, being-bound with others, or for others, for the payment of the debt, had an interest in discharging it.”
The surety (United States Fidelity & Guaranty Company) was bound with another (Johnson) for the payment of the debt created by Johnson when he stole the money. Thus, when the surety paid the debt it was subrogated as a matter of right to the claim of the bank against Johnson. I:! the surety thus obtained a claim against Johnson and the right to sue him civilly for the enforcement of that claim, its forbearance in the exercise of its said rights was full and complete consideration ?or the contract which is herein sued on, because our Supreme Court has said, in Commercial National Bank v. Richardson, 163 La. 933, 113 So. 152, 154:
“Moreover, under our law, ‘a debt due by another is a sufficient consideration to sup'port the promise of a third person to pay it.’ ”
Also, in Flood v. Thomas, 5 Mart. (N. S.) 560, we find:
“The debt of another is a sufficient consideration to support a contract of surety, or a promise to pay it.”
Again, in New Orleans & Carrollton R. R. v. Chapman, 8 La. Ann. 97, the Supreme Court said:
“To make a contract of this nature, a promise to pay the debt of another, valid, it is only requisite to show the pre-existence of the debt which pne has promised to pay to him who is the creditor. This is the pact constitutae pecuniae and requires no further consideration or foundation than the original debt. Pothier, Traite des Obligations, 1st vol., p. 367, ‘Du Pact Constitutae Pecuniae.’ ”
Thus one of the considerations which the defendant, along with the other signers of the contract, received, was the temporary forbearance of the surety company. The debt of Johnson was sufficient considera*125tion to support the agreement of his friends to pay that debt in the future on condition that for the present no civil action would be resorted to.
An attack on this reasoning is based on the contention which I have already discussed, that the surety company was not a surety at all, but was in fact an insurer, and that, thus, subrogation di4 not take place as a matter of right, but could result only from a conventional assignment and that, since the record does not show a conventional assignment, no right in the surety against Johnson appears.
My answer to this is that where one person having in view a particular person or a particular group of persons agrees to stand responsible for their actions, that first person is a surety or guarantor of the actions of that other, or those other persons.
But I am of opinion that defendant here cannot raise the question as to whether or not Johnson became indebted to the surety when the surety paid the bank. Having agreed by his solemn obligation, together with the others, that, if the surety would pay the bank, they would pay the surety, can he now raise the question that no subrogation took place under which the surety could have sued Johnson? By the very terms of the agreement it appears that the surety could have sued Johnson and it was in order to avoid that result that they entered into the agreement. ■ It would be monstrous to allow them, having agreed that the surety could sue Johnson, to now contend that that is not a fact. When that agreement was entered into no question was raised as to the fact of the payment by the surety company to the bank. The whole tenor of the agreement shows that it was understood that, as soon as the payment was made by the surety to the bank, the surety had the right to sue Johnson. I cannot countenance an attempt by them now to dispute the right of the surety against Johnson and, as I have already said, the existence of that right against Johnson was full consideration for the agreement by Johnson’s friends to pay his debt and discharge his obligation.
I feel that where parties, by their solemn contracts, undertake obligations, the law does not and should not favor the abrogation of those contracts on purely technical grounds, and that those contracts should be enforced, unless to do so would do violence to real justice or to legal principles. Here no such result would follow a decree requiring that defendant do what he deliberately and solemnly agreed to do.
I respectfully dissent.