National Surety Co. v. Breuchaud — 173 A.D. 795

Majority

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National Surety Company, Respondent, v. Jules Breuchaud, Appellant. (Action No. 2.)

First Department,

July 10, 1916.

Headnote

Guaranty and suretyship — action by assignee of surety company on bond executed by assignor to recover second installment of premium —judgment in action for first installment res adjudicata—counsel fees in first action not an expense of suretyship.

Where in an action by the assignee of a surety company to recover a second installment of the premium on a bond it appeared that the indemnitor agreed to “ at all times indemnify and save the surety harmless from and against every claim, demand, liability, cost, charge, expense, suit, order, judgment and adjudication whatsoever, and will place the surety in funds to meet every claim, demand, liability, cost, charge, expense, suit, order, judgment or adjudication against it by reason of such suretyship,” and that, while defendant’s contract for which the bonds were furnished was still uncompleted, the assignor became insolvent, reinsured its risks in the plaintiff and assigned its contract with the defendant, a prior judgment in favor of the plaintiff awarding a recovery of an installment of the premium on the same bond is res adjudicata upon the question of defendant’s liability.

Counsel fees in the action for the prior installment of the premium cannot be said to be an expense arising out of the suretyship, within the meaning of the agreement with the defendant.

Appeal by the defendant, Jules Breuchaud, from a judg. ment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 19th day of May, 1915, upon the verdict of a jury for $2,177.39, .rendered by direction of the court.

Vance Hewitt, for the appellant.

William B. Page, for the respondent.

The plaintiff’s assignor, The Empire State Surety Company, entered into an agreement with the defendant to become his bondsman upon certain contracts with the city of New York. It was provided in the said agreement that the indemnitor “ will at all times indemnify and save the surety harmless from and against every claim, demand, liability, cost, charge,

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expense, suit, order, judgment and adjudication whatsoever, and will place the surety in funds to meet every claim, demand, liability, cost, charge, expense, suit, order, judgment or adjudication against it by reason of such suretyship.”

Various bonds were furnished by the Empire State Surety Company pursuant to this agreement. While the defendant’s contract with the city, for which these bonds were furnished, was still uncompleted, the Empire State Surety Company became insolvent, reinsured its risks in the plaintiff company and assigned its contract with the defendant and all its rights thereunder to the plaintiff. Thereafter the defendant refused to pay the premium on the bonds to the plaintiff on demand. An action was brought for the recovery thereof, which resulted in a judgment for the plaintiff, which was affirmed by this court. (National Surety Co. v. Breuchaud, 165 App. Div. 395 .) The present action is brought to recover a second installment of the premium of the same bond, and upon the. question of defendant’s liability therefor the former judgment is res adjudicata.

The plaintiff has included in its cause of action, however, the sum of $650 paid by it as counsel fees in the action for the prior installment of the premium, and the judgment herein includes that item. The respondent attempts to justify this item under the provision of the indemnity agreement quoted above, claiming that it is an expense arising “by reason of such suretyship,” within the meaning of the contract. I am of the opinion that this item cannot be said to be an expense arising out of the suretyship and was erroneously allowed. The cause of action in which the said expense was incurred arose, not out of the suretyship, but out of a breach of the indemnity agreement by the defendant failing to pay the premium in accordance therewith. It is true that, had no suretyship been assumed, no such controversy could have arisen, but the controversy was entirely collateral to the suretyship itself.

At the close of the case the plaintiff’s attorney moved for the direction of a “verdict in favor of the plaintiff for the premium of $1,364.45, with interest amounting to $128.46, and also for the counsel fee of $650, with interest from the

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date of the commencement of this action, which amounts to $34.45, making a total .of $2,177.39.” The learned trial justice granted the motions in full. He should have granted the first motion and denied the second.

The judgment should be reduced by $684.45, and as so modified affirmed, with costs to the appellant.

Clarke, P. J., McLaughlin, Scott and Smith, JJ., concurred.

Judgment reduced by $684.45, and as so modified affirmed, with costs to the appellant.