Court Opinion

ID: 5231901
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:58:20.682466+00
Date Added: 2024-06-11T08:27:40.678190
License: Public Domain

Laughlin, J. (dissenting):
The surety company, of which the plaintiff is the receiver, agreed to become surety for defendant on proposals and contracts, and became surety for its performance of a contract with the government of the United States. In addition to paying the premium for the insurance the defendant agreed in writing “to save harmless and indemnify” the surety company from “any and all * * * liabilities, losses * * * of whatsoever kind, name, nature or description,” which it should “for any cause, at any time sustain or incur, by reason of ” any bond or undertaking given by it in behalf of defendant, and that the defendant would at its own expense defend the surety company against any action brought on any such bond or undertaking and pay “upon demand, any and all damages, charges and expenses ” for which the surety company “shall become responsible.” The government claimed that the defendant failed to perform the contract for the performance of which the insolvent company represented by the plaintiff became surety. It appears that at that time the government was, or thereafter became, indebted to the surety company on account of transactions in no manner connected with its contract with the defendant, and the government appropriated from the moneys due from it to the surety company the sum of $1,600, under the claim that it was entitled to do so on account of the defendant’s failure to perform its contract for which the surety company was surety.
The receiver of the surety company brings this action alleging merely these facts, and the question presented by the motion for' judgment on the pleadings was whether the *291amended complaint, to which a demurrer on the ground of insufficiency of facts was interposed, states a cause of action. I am of opinion that it does not. The liability of the defendant cannot be affected by the fact that the government happened to owe the surety company and asserted a right to withhold part of the moneys thus owing on account of its claim that the defendant failed to perform the contract. There is no allegation in the complaint to the effect that the defendant failed to perform its contract with the government; nor is there any allegation from which such failure may legitimately be inferred. The contract between the surety company and the defendant was not made in the light of a situation by which the government might have it in its power to withhold funds due from it to the surety company. It was merely contemplated that the surety company might be called upon to respond in damages for a breach of contract on the part of its principal, and that it should be reimbursed by the defendant for any liability established against it in an action, suit or other proceeding, including “counsel fees and eipenses of whatsoever kind, name, nature or description,” and for any valid claim of liability asserted against it as surety for the defendant which it settled without litigation. The decision about to be made by this court proceeds upon the theory that the surety company was at liberty to settle any claim asserted against it, whether valid or not, and to recover of the defendant the amount thus paid. To that doctrine I cannot subscribe. The amended complaint, in my opinion, is fatally defective in that it fails to allege any facts tending to show that the United States government had a just or valid claim against the surety company as surety for the defendant.
I, therefore, vote for affirmance.
Clarke, J., concurred.
Order reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs, with leave to defendant to withdraw demurrer and to answer on payment of costs in this court and in the court below.