Title Guaranty & Surety Co. v. Roehm

Fellows, J. (after stating the facts). It is the claim of the defendant that he is only bound by “the letter of the bond;” that as to the first undertaking he obligated himself with reference to only one bond, a bond running to the township of Portage and the people of the State of Michigan in the sum of .$22,000, and that no such bond was signed by plaintiff, but that two bonds each in the sum of $11,000, one running to the township and one to the people, were signed by plaintiff; that as to the second undertaking the language is indefinite, provided for only one bond, not two, that the description of the highway was different in the undertaking from that found in the bonds signed by the plaintiff, and that if he is in any way bound by the second undertaking it is only with reference to the bond running to the township and not the one running to the people; that as he saw none of the bonds signed by the plaintiff he had no knowledge of their terms; and that he is not liable in this action. In short it is his claim that he is a surety, and a gratuitous one, and is entitled to invoke the rule of strictissimi juris. Defendant did not sign as surety with Mr. Drapeau. Both of the undertakings signed by him were contracts of indemnity and he was an indemnitor and not a surety. These contracts of indemnity must be construed and liability determined by the rules applicable to such contracts and not by rules applicable to contracts of suretyship. The rule of strictissimi juris may not be applied to such contracts. “In the interpretation of indemnity contracts, the *592 cardinal rule is that which applies to contracts generally, i. e., to ascertain the intention of the parties and to give effect to that intention if it can be done consistently with legal principles. Contracts of indemnity, therefore, must receive a reasonable construction so as to carry out, rather than defeat, the purpose for which they were executed. To this end they should neither, on the one hand, be so narrowly or technically interpreted as to frustrate their obvious design; nor, on the other hand, so loosely or inartificially as to relieve the obligor from a liability within the scope or spirit of their terms. Where the general import of a contract is one of indemnity, it is the rule that all of the words used therein should be construed to be in harmony with, and subservient to, the general purpose of the bond.” 14 R. C. L. p. 46. “In construing contracts of indemnity the ordinary rules of construction employed in the interpretation of contracts generally are applicable. Indemnity contracts like other contracts are to be so expounded as to effectuate the intention of the parties. Thus in ascertaining the intention of the parties, the court must take into consideration not only the language of the contract but the situation of the parties and the circumstances surrounding them at the time the contract was made.” 22 Cyc. p. 84. “A contract of indemnity should be construed so as to cover all losses, damages, or liabilities to which it reasonably appears to have been the intention of the parties that it should apply, but not to extend to losses, damages, or liabilities which are neither expressly within its terms nor of such character that it can reasonably be inferred that they were intended to be within the contract.” 16 Am. & Eng. Enc. Law (2d Ed.), p. 173. In Fidelity & Deposit Co. v. Hibbler, 177 Mich. 490, we quoted the above language from the American & English Encyclopaedia of Law and then said, speaking through Mr. Justice Kuhn: “Applying this rule of construction to this agreement, it seems tqhave been the intention of the parties *593 to make an agreement which was to be an absolute undertaking by the defendants, the indemnitors, to reimburse the plaintiff, the indemnitee, for any loss sustained by it in connection with William H. Hibbler. There is no question but that the plaintiff acted in good faith. When its liability was established it paid its loss, and, under the agreement which the defendants made with it, it should now be reimbursed.” What were the circumstances surrounding the parties when these undertakings were entered into? Mr. Drapeau had a contract for a public improvement. He was required to give the statutory bond and a bond to the township. All parties knew this, or were presumed to know it. The aggregate was $22,000. From the fact that Mr. Drapeau did not leave an estate sufficient to pay his indebtedness we may infer that he was not forehanded. Plaintiff if it signed his bond or bonds would obligate itself for a large amount. Defendant agreed to indemnify it. To hold that he did not become liable and did not indemnify it because two bonds were given instead of one, because the two obligees were named in separate bonds instead of being joined in one bond, because the description of the work was not as definite as it might have been when everyone knew what highway was referred to and what highway they were contracting with reference to, would not only “be a narrow and strained construction of the contract but would absolutely frustrate the intention of the parties. We need not consider whether the second bond to the people of the State of Michigan was full enough in its terms to justify recovery upon it by material-men. Defendant had notice of the suits brought by them upon this bond and had an opportunity to then make such defense. He did not chose to embrace such opportunity and cannot now be heard to complain. Knickerbocker v. Wilcox, 83 Mich. 200, 210; 22 Cyc. *594 p. 106, and the authorities there cited. This is likewise true of the question of recovery on the two bonds jointly without separating the amount of the recovery as to each. Upon the latter question, however, see Sullivan v. Casualty Co., 208 Mich. 68, 210 Mich. 625. The judgment is affirmed. Steere, C. J., and Moore, Wiest, Stone, Clark, Bird, and Sharpe, JJ., concurred.