American Surety Co. of New York v. Phillips

LEVY, J. (after stating the facts as above). The appellee, the indemnitee, brought suit on the contract of indemnity executed by the surety company to enforce performance of that contract by compelling the surety company to discharge that obligation. It was alleged that the surety company was liable because there was a breach of the express terms of the contract, in that the maker of the vendor’s lien note had failed at maturity to pay to the payee the last vendor’s lien note. In the petition the plaintiff further sought to recover as costs attorney’s fees incurred by her in the institution of the suit against the surety company to enforce performance of the term of the bond of indemnity. And the question for review on appeal is tha.t of whether or not the court erred in allowing recovery for the attorney’s fees incurred in prosecuting the suit on the bond. The terms and extent of the surety company’s obligation of indemnity, as expressed in the contract, is, in the event the vendor’s lien notes should not be paid on or before the dates when they are due, “to indemnify said Trannie H. Phillips against all loss which may be incurred by her in case said notes should not be paid at maturity.” The words “all loss which may be incurred by her” mean and refer to the transaction indemnified against. And if it had been alleged and proven that the indemnitee had been compelled to pay the vendor’s lien note, according to its face and tenor, in order to protect her land against sale under foreclosure, she may, in the action on the contract of indemnity, be entitled to recover the amount so paid on the note, according to its face and tenor, which included attorney’s fees. Or if it had been alleged and proven that as a result of a suit against her she had been compelled to pay attorney’s fees to prosecute such suit, she may be entitled, in the action on the contract of indemnity, to recover the legal costs and attorney’s fees so expended by her. Schmick v. Noel, 72 Tex. 1, 8 S. W. 83; Roberts v. Palmore, 41 Tex. 619. In each of these instances the “loss” would have resulted from the transaction indemnified against. But the attorney’s fees here sought to be recovered are not a part of the “loss” incurred by reason of and arising out of the vendor’s lien note transaction indemnified against, as above illustrated. The attorney’s fees here sought to be recovered were only incurred to enforce performance of the terms of the bond of indemnity. And the bond of indemnity does .not, according to its terms, provide for nor entitle the indemnitee to recover the attorney’s fees as here sued for. The contract *625 of indemnity which alpne created must determine the extent of the surety company’s liability both at law and equity; for there is no principle upon which a court of equity or law can enlarge the legal effect of the agreement. The bond is not governed, it is thought, by the articles of the statute referred to by appellee. The judgment, as far as it pertains to attorney’s fees, is reversed; and in that particular only judgment is here rendered in favor of the surety company. Footnotes [⅞] — other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes