Court Opinion

ID: 5513834
Source: CourtListenerOpinion
Date Created: 2022-01-10 04:26:46.101236+00
Date Added: 2024-06-11T08:34:14.175100
License: Public Domain

By the Court, Sutherland, J.
It is contended by the defendant that this is a bond of indemity merely, and that neither the plaintiff nor his intestate have been injured or damnified by the reversal of the judgment in the court of errors; or that the damage, if any, is merely nominal, as nothing has been paid or probably ever will be paid upon the judgment recovered against him by Scott.
The inquiry naturally suggests itself, what was the motive of the defendant Hinman in entering into this arrangement with ■ Stranahan 1 We find the answer in the testimony of Henry Green.' He states that he was, at the time of the giving of the bond in question, secretary of the Utica Insurance Company; that he drew the bond and witnessed its execution ; and that the defendant Hinman was at that time one of the directors of the company, and a stockholder to a considerable amount. He also appears to have taken an active part in the prosecution of the writ of error. There can be little question that he was the managing agent of the company in all these transactions, and that although he signed the bond *456individually, he was understood by Stranahan, and was in fac(- act¡ng on behalf of the company and with their approbation, though probably without any legal authority to bind them. It is obvious, from all the facts in the case, than Stranahan had no objection to the judgment being reversed ; that only a formal resistance was to be made to it, for the purpose of saving appearances. The letter of Hinman to Stranahan of the 22d of December, 1825, shows that Hinman was to pay all the expenses of defending the writ of error. The truth undoubtedly is, that it was perfectly understood between Hinman and Stranahan, that neither Stranahan nor Scott were to be affected by the reversal of the judgment; and I think such is the conclusion to be drawn from the face of the bond itself, without any extraneous evidence. Stranahan was the first endorser, and was liable over to Scott upon the note, in the event of his being compelled to pay it. The indemnification of Stranahan as endorser upon the note, manifests therefore by the strongest implication, the understanding of the parties that if the judgment was reversed, the note was not to "be collected from Scott, the subsequent endorser, who would in that event have a right immediately to collect it from Stranahan, and produce the very state of things against which it was the object of the bond to indemnify him. This view of the case is intended to shew that there is no injustice in giving to Scott (for whose benefit this suit appears to be prosecuted) the indemnity provided by this bond, if it can be done consistently with the rules of law.
There is no doubt as to the general proposition, that in order to recover upon a mere bond of indemnity, actual damage must be shewn. If the indemnity be against the payment of money, the plaintiff must in general prove actual payment, or that which the law considers equivalent to actual payment. A mere legal liability to pay is not in such case sufficient; but if the indemnity be not only against actual damage or expense, but also against any liability for damages or expenses, then the party need not wait until he has actually paid such damages, but his right of action is complete when he becomes legally liable for them. Chancellor Jones, in the case of Rockefeller v. Donnelly, 8 Cowen, 639, lays it down as a general prop*457osition, that even when the obligation is simply to indemnify against damage or expense, and the obligee has become absolutely bound and liable to pay the expense or damage, and the amount is liquidated so that his demand against his obligor upon the bond of indemnity, by reason of the charge against himself is reduced to a certainty, he may enforce his demand against his obligor in the first instance, before he satisfies the charge against himself; and he observes that it is an operation which avoids circuity, and essentially subserves the purposes of justice and equity, by enabling him who is entitled to the indemnity, to obtain the means to satisfy the charge he has incurred from the party who ought to bear it, and thereby save himself the necessity of an advance and payment out of his own funds and estate, which might be inconvenient, and perhaps involve him in serious embarrassment. I must confess that this general proposition of the learned chancellor seems to me to carry the doctrine farther than I had supposed warranted by the authorities, 7 Johns. R. 358 ; 4 Mass. R. 627; 14 Johns. R. 177; but it is unquestionably sound, where the indemnity is not only against actual damages and expenses, but also against the liability for them; and such, I apprehend, will be found to be the fact in this case, upon a critical examination of the defendant’s bond. The condition is, 1. That the defendant shall save harmless and indemnify Stranahan against all damages, costs and charges to which he may in any way be subjected or become liable for by reason of the reversal of said judgment; 2, Against all charges and expenses which he may incur or become liable for in defending said writ of error; and 3. Against said note, or any judgment or proceeding which may be had against him as endorser thereon. A distinction is here obviously taken between damages actu~ ally sustained or incurred and & fixed legal liability for such damages, and the indemnity is against both. In the case of Rockfeller v. Donnelly, already referred to, 8 Cowen, 628, the condition of the bond was to save, defend and keep harmless the overseers of the poor, &c. from and against all charges, damages and expenses, taxes, rates and assessments, &c. for or by reason of the birth, &c. of a bastard child, &c. Chancellor *458Jones remarks upon the subject, that the indemnity consists in securing the town against charges and expenses, taxes» rates, Síc. and that this could only be effectually done by keeping the infant when born from becoming chargeable, or by providing the means to defray the charges in which its birth and maintenance should involve the town. If the child upon its birth is permitted by the father to become a charge to the town, expenses inevitably follow, for which the overseers are answerable. Mr. Senator Spencer, p. 653, says the defendants are to indemnify against all charges, expenses, Sic. by reason of the birth or maintenance of the child. Technically this condition was broken the moment the child was born; for then it became a charge on the town, and that was the thing against which the defendants covenanted; and the birth being admitted by the pleadings, it is a legal consequence that the child became a charge to the town, and thus the breach is admitted. The chancellor and Mr. Spencer both treat: it as a common bond of indemnity between individuals, and in the observations which I have quoted, are settling its construction without any reference to the circumstance that the bond was given to public officers. If then a bond of indemnity against charges, damages, expenses, taxes, &c. is broken by the happening of an event which must inevitably lead to charges, expenses or taxes, much more must it be so when the indemnity is in terms against a liability for damages and expenses.
That the judgment recovered by Scott against Stranahan’s administrator, which fixed his liability for damages and ascertained the amount, was a consequence of, ór happened, in the language of the bond, by reason of the reversal in the court of errors of the judgment of Scott v. The Utica Insurance Company, there can be no doubt; and a breach assigned upon that part of the bond, would be supported by this evidence. I make this observation because the pleadings are not attached to the case, and it does not appear what the particular breaches assigned are,'nor the manner of the assignment.
It was not competent for Hinman, under the circumstances of this case, to show that Scott had a good defence against the suit of the Utica Insurance Company, or that Stranahan’s administrator might have successfully defended the suit *459brought by Scott against him upon the note in question; nor was he entitled to notice of the pendency of that suit from the plaintiff. It is evident that the defence of the writ of error was amicably and jointly conducted by Stranahan and Hinman, at the exclusive expense of the latter, or of the insurance company, whose agent Hinman undoubtedly was, and that it was the understanding and the wish of both of them that the judgment should be reversed. Hinman treated Stranahan throughout as the party in interest in the writ of error. Stranahan so considered himself, and well he might, for he was not only the first endorser, and liable over to Scott in that character, but he had' also, as early as 1819, bound himself in a penal bond to Scott to pay him whatever sum the insurance company might recover against him as second endorser upon the note, with costs, &c. Admitting Stranahan to have been solvent at that time, he was in truth the only party in interest, Scott was a mere nominal party, and to say the least of it, it would have been a violation of good faith on the part of Stranahan or his administrators, to have interposed a defence to the suit of Scott, on the ground of the illegality or usurious character of the original transaction; and if Hinman is to be considered the agent of the insurance company, the complaint that such defence was not interposed, does not come with a very good grace from him. His attempt to shew that Stranahan had been indemnified by the maker of the note, entirely failed.
The plaintiff is entitled to judgment.