Merrill v. Shaw

Tenney, J. — On April 24, 1840, the plaintiff’s testator transferred to the defendant Shaw, eight shares in the capital stock of the Frankfort Bank, and two others transferred to him five shares each, in the same. In consideration of these transfers, Shaw paid the sum of fifty dollars for each share, and he and the other defendant by their obligation covenanted with the testator and others named, “to indemnify and save harmless all of them, or either of them, from any and all liabilities they may have incurred in their capacity as stockholders aforesaid, or from any loss or damage they may sustain from or on account of the said capacity, except the depreciation of the stock aforesaid.” On Nov. 5, 1889, the Suffolk Bank presented at the banking-house of the Frankfort Bank an amount of bills of the latter, and duly demanded payment thereof, which was refused. The charter of the Frankfort Bank was annulled by an Act of the Legislature, passed on March 29,1841, and the plaintiff’s testator and another were appointed receivers with the power to close up the affairs of the bank. On June 3, 1841, the Suffolk Bank instituted its suit against the Frankfort Bank for the recovery of the amount of bills, which had been presented, and the property of the plaintiff, of the defendants and others was attached in that process. The plaintiff’s testator, as one of the receivers, — 272 — employed counsel in defence of that suit, and while it was pending gave directions to his counsel to enter into an agreement in behalf of the Frankfort Bank with the Suffolk Bank, that the former should be defaulted, and the latter should take judgment for the amount of the bills before demanded, and interest thereon at the rate of six per cent. This agreement was made, and upon the default, judgment was rendered accordingly at the Dec. term, 1842, in the county of Waldo. Execution was seasonably issued upon that judgment, which was extended upon the real estate of the testator, in part satisfaction thereof. At the Circuit Court of the United States, holden at Portland in October, 1848, judgment for the possession of this real estate was obtained in a suit in favor of the Suffolk Bank against the testator. The present action was instituted September 4, 1848, and was continued till December term, 1850, in the county of Waldo, when it came on for trial. At the December term, 1849, in that county, the judgment in favor of the Suffolk Bank v. the Frankfort Bank, was reversed on a writ of error brought by the testator in his own name, on the ground, that the corporation against which it was rendered, had ceased to exist before the judgment was entered, and also before the action was brought. After the report of this case was made up, upon a review of the action of the Suffolk Bank against the testator, in the Circuit Court, the judgment obtained therein was reversed at a term of that Court holden in September, 1851, and judgment rendered for a restoration of the real estate levied upon of the testator, and for the costs recovered by the Suffolk Bank, and the marshal’s fees on the writ of possession, which had been paid by him, and interest on the whole, together with his costs, all of which have been paid by the Suffolk Bank. In the report of the present case, “ it is agreed by the original parties thereto, that this action shall stand continued a sufficient time for the plaintiff to make an effort to — 273 — procure a reversal of the judgment against him, in the Circuit Court, and the costs, expenses and trouble incurred by him in procuring such a reversal or a release of such judgment, may be claimed by him in this action in the same manner as if they had occurred before the bringing of this •action, and had been declared on in the same.” The indemnity provided by the obligation of April 24, 1840, was 1st, from the liability of the testator, which had become fixed; and 2d, from that to which the plaintiff’s testator was exposed, and both on account of his having-held the stock, which he transferred to Shaw. Was this indemnity limited to the injury, which might be the legitimate result of the actual and legal liability, whether incurred at the date of the obligation or afterwards, or did it extend so as to embrace the expenses and the value of his time, in resisting claims arising from a supposed liability, when none of those claims had any legal foundation ? Some legal rules exist touching the construction to be put upon covenants and bonds with conditions, where the real intention of the parties thereto, may not be perfectly obvious; some of which will be noticed. “If a condition be, that the lessee shall enjoy, this shall not be extended to tortious acts; and therefore, if he be disturbed without title, it is not a breach of the condition.” “So in covenant.” Comyn’s Digest, Condition, (E.) “ If a condition be to save harmless from all things contained in an indenture, he is not bound to indemnify from a collateral thing.” “Nor from actions, in which he has a lawful defence, without the obligor.” “If a covenant be to save harmless against a seizure, made by A, it extends to it, whether the seizure be tortious or not, but if a general covenant to save harmless, it extends not to tortious acts. Ibid, Covenant to indemnify, (I.) “ A covenant of warranty cannot be broken, but by an eviction or ouster of some title paramount to the grantor’s.” Twombly v. Hewley, 4 Mass. 441. “ And to entitle a plaintiff to recover on a covenant of warranty, he must show an — 274 — actual eviction or ouster, by a paramount title.” Bearce v. Jackson, Adm’r, 4 Mass. 408; Prescott v. Trueman, 4 Mass. 627. “If one consents to an unlawful ouster, he cannot afterwards be entitled to a remedy for such an ouster. But an ouster may be lawful; and there is no necessity for him to involve himself in a lawsuit, to defend himself against a title, which he is satisfied must ultimately prevail. But he consents at his own peril. If the title to which he has yielded be not good, he must abide the loss.” Hamilton v. Cutts, 4 Mass. 349. It was competent for the parties to the contract to covenant for an indemnity against all the expenses which the testator might incur, in any measures taken by him, to avoid damages and costs, whether the claims should be legally valid or otherwise. This is often done, in the bonds which sheriffs take of their deputies. And if the parties to this contract designed to make it thus broad, their intention must prevail in the construction. But this intention is not manifest from the contract itself. We are to presume, that they took into consideration the •exposure, under the laws of the State then in force, of stockholders in banks to pay from their private property, a sum equal to the amount of their shares, such as they had acquired in the bank, the affairs of which had become so deranged, that the plaintiff and others were willing to relinquish their stock on the receipt of fifty per cent, of the sum actually paid in; when large amounts of bills had been presented and payment thereof refused; and other similar demands and refusals to an uncertain extent were to be .apprehended, if not highly probable. Such was the exposure of the plaintiff’s testator, as the holder of his shares, at the time of the contract, and before its execution. He was by that contract to be saved harmless from the liability, which had become fixed, and from loss and damage, which might arise thereafter from or on account of his having been the holder of the shares, which he then transferred. It could not have been understood, that the contract amounted — 275 — to an insurance against the loss and damage which might arise in fruitless attempts in groundless proceedings against him, when his former capacity of a stockholder made him in no wise answerable for such claims. And the language employed will not admit of such a construction; it favors it to no greater degree, than the terms employed in the cases cited, where it was held, that no liability to pay such expenses existed. The manifest intention of the parties to the contract was, to secure the testator against those legal liabilities, which he had incurred, or the loss and damage which he might sustain, growing legitimately out of his capacity as a stockholder. At the time of the institution of the suit in favor of the Suffolk Bank, the liability of the plaintiff’s testator in that suit had ceased, as effectually as 'it would have done, under a valid written discharge of the officers of the bank itself; and at that time no loss had occurred, which could be the basis for a suit against 'the defendants. No other suit has been commenced against him, excepting that in the Circuit Court, which was brought and prosecuted, in order to make the levy upon his real estate available. The claims, which are presented in argument by the plaintiff, are the sums paid to counsel for services in defending the suit in the Circuit Court; in the writ of error to reverse the judgment rendered on default in this Court; and the counsel fees in this suit, together with such sum, as the Court may deem reasonable for the personal care and trouble of the testator, in the same suits. •The action of the Suffolk Bank having had no foundation from its commencement, could have been successfully defended. The defendant Shaw, could not have legally appeared in defence, though he may have had full notice of the pendency of the suit. The plaintiff’s testator was a stockholder also, but he had of course no greater right to appear as such, Whitman v. Cox, 26 Maine, 335, and it necessarily follows, that Shaw could not defend as his vouchee. And it would be unjust to the testator to suppose, that as a receiv — 276 — er, he -would allow the defendants to take the defence of the-suit, on account of the private contract between them and’ himself, as a former holder of the shares transferred to-.Shaw, regardless of the higher duty to the creditors, debtors and stockholders of the bank. The defence could have been made by the receivers alone, when their counsel by the authority of one, who instituted the present suit, agreed to a default and submitted to a judgment. A judgment so obtained and afterwards reversed, cannot now be treated as establishing the liability of the plaintiff’s testator, when the judgment in the Circuit Court has also been reversed for want of a legal foundation, and the fruits of both have been restored. The expenses incurred in the processes adopted to cause the reversals of these judgments, as well as the defence of the suit in the Circuit Court in favor of the Suffolk Bank, not being on account of any liability of the testator, constitute no breach of the defendants’ covenant. And the cause of action having failed on this account, the counsel fees in the same action cannot be obtained. Whatever may have been the liability of the testator on account of the claim of the Suffolk Bank, if it had been presented to this Court on its chancery side, is not now before us, as no loss or damage can have accrued, on account of a liability, which has not been determined in such a suit, and which has not been yielded to without a suit. Neither can the plaintiff now substitute the loss, which his testator might have sustained in actions against him, and in which he might have been held liable, for the expense incurred in avoiding a judgment, in a suit, which was commenced and prosecuted, and ultimately failed. Other questions were involved in the case, but their consideration has become unnecessary, for a final disposition of the-action. Plaintiff nonsuit. Shepley, C. J., and Howard, Appleton and Hathaway, J. J., concurred.