Lathrop v. Atwood

Church, Ch. J. The agreement upon which this action is founded, so far as it is necessary for us to consider it, is one whereby the defendants contracted with the plaintiff to pay all the debts due from the late firm of Atwood & Lathrop, which consists of the plaintiff and one of the defendants, and also to save the said Lathrop harmless from any cost, trouble or liability, on account of said debts. These debts were all then due to the respective creditors of Atwood & Lathrop, and the defendants proceeded to pay the same; but on the 24th day of October, when this suit was brought, there remained due and unpaid the sum of 635 dollars. This was four months after the defendants had assumed the payment; but the plaintiff had not been compelled to pay, nor had he paid, any of these claims, nor had he been subjected to any cost on account of them, at that time. And the questions now put to us, are, whether the defendants are liable, in this action, for the non-payment of the balance of the debts unpaid? The cases in which this question is discussed, are not free from some confusion; and yet the principles deducible from them, or explicitly decided by them, are clear enough. The confusion seems to have arisen from the want of a clear discrimination between mere contracts of indemnity, and contracts for the performance of some act in which the plaintiff has an interest, from which indemnity, either expressly or by implication, is to result. We think an examination of the cases will show these reasonable doctrines; that, if a condition, covenant or promise be only to indemnify and save harmless a party from — 124 — some consequence, no action can be sustained for the liability or exposure to loss, nor until actual damage, capable of appreciation and estimate, has been sustained, by the plaintiff. But if the covenant or promise be, to perform some act for the plaintiff’s benefit, as well as to indemnify and save him harmless from the consequences of non-performance, the neglect to perform the act, being a breach of contract, will give an immediate right of action. In this case, it will be remembered, that the plaintiff was one of the copartners of the former firm of Atwood & Lathrop, and had an immediate interest in the payment of the debts due from them; and that the defendants, for a valuable consideration, expressly promised to pay them, and also to save harmless and indemnify the plaintiff against them. In the case of Cutler v. Southern, 1 Sound. 116. it was decided, that, when a condition was to discharge or acquit the plaintiff from a bond or other particular thing, non damnificatus was not a good plea, but the defendant should set forth affirmatively the special matter of performance; but if the condition be to acquit from damage merely, such plea is good. The doctrine is sustained, more or less clearly, in the following cases. Toussaint v. Martinant, 2 Term R. 100. Martin v. Court, Id. 640. Farquar v. Morris, 7 Term R. 124. Hodgson v. Bell, 7 Term R. 97. Holmes v. Rhodes, 1 Bos. & Pull. 638. Norwich v. Bradshaw, Cro. Eliz. 53. Abbots v. Johnson, 3 Bulst. 233. The case of Port v. Jackson, 17 Johns. R. 239. 479. is very similar to the present, and the principle involved, well considered. It is there said: “The covenant is not, that the defendant shall indemnify the plaintiff against his own covenant, or against any damage he may sustain; but it is express and positive, that the defendant will pay the rent for which the plaintiff continued to be liable. The sum to be paid is certain and liquidated, and the breach of the covenant consists in not paying it. A plea of non damnificatus would be no answer to the declaration. And the very reason for inserting this covenant, was, to guard against the necessity of the plaintiff’s paying the rent.” In that case, there was no express covenant to indemnify and save harmless, as here; but the obligation to save harmless was necessarily implied. — 125 — Ex parte Negus, 7 Wend. 499. furnishes another clear exposition of the doctrine we advance. In that case, the court says: “Whether an action lies or not, depends upon the true intent and meaning of the covenant; if it is simply to indemnify, and nothing more, then damage must be shewn before the plaintiff can recover; but if there is an affirmative covenant to do a certain act, or pay certain sums of money, then it is no defence, in such an action, to say, that the plaintiff has not been damnified. Here, Negus assumes the debts of the copartnership; he makes them his own individual debts; he is the person to pay, &c. Where indemnity alone is expressed, it has always been held, that damage must be sustained before a recovery can be had; but where there is a positive agreement to do the act which is to prevent damage to the plaintiff; then action lies, if the defendant neglects or refuses to do such act.” Chace v. Hinman, 8 Wend. 452. On the same principle it is, that a sheriff may recover on a bond for the jail limits, in which the condition is, that the party imprisoned shall remain a true and lawful prisoner, as well as to indemnify the sheriff for a breach of this condition. And in conformity with it, recoveries are had every day, in our courts, by officers against receipts-men, who promise to redeliver property levied on and to save harmless, &c. Blaisdale v. Babcock, 1 Johns. R. 518. Kipp v. Brigham, 6 Id. 158. Hamilton v. Cutts & al. exrs., 4 Mass. R. 349. Booth v. Starr & al. 1 Conn. R. 244. Bender v. Fromberger, 4 Dall. 436. In the case of Thomas v. Allen, 1 Hill, 145. the court remarks: “The case then comes to this; the defendant agrees, that he will pay a sum of money when it becomes due, for which the plaintiff is bound to some third person, and that he will save the plaintiff harmless. This is more than a bond of indemnity, and the breach is well assigned, by showing that the debt to Johnson was not paid at the day.” Aberdeen v. Blackman, 5 Hill, 324. is a case of indemnity merely, and in which the defendant made no other promise, and the plaintiff had paid nothing, nor been put to expense; and the court, recognizing the principles of the case cited, held, that the action could not be sustained. It was like a — 126 — promise to indemnify a surety, indorser, &c. Griffith v. Hanison, 1 Salk. 197. The doctrine of the case of Booth v. Starr, in this court, 1 Conn. R. 244. fully sustains our views, and would be sufficient authority alone for our present decision. Other cases also sustain us. Gilbert v. Wiman, 1 Comstock, 550. Barry v. Mandell, 10 Johns. R. 563. Kipp v. Brigham, Id. 563. Churchill v. Hart, 3 Denio, 321. Crofut v. Moore, 4 Verm. R 204. - v. Richardson, 10 Mees. v. Wels. 284. Ward v. Henry, 5 Conn. R. 595. Hotchkiss v. Downs, 2 Conn. R. 136. 1 Sw. Dig. 411. Crippen v. Thompson, 6 Barb. 282. But, by the contract now in question, no time was definitely fixed, within which, the defendants should pay these debts. We think the duty of the defendants was, to pay them according to their tenor; and as they were all then due, they should have been paid immediately. The plaintiff was every moment subject to suits, and the defendants to insolvency, and they assumed the risk, and substituted themselves as the debtors; and we do not see how they can say to the plaintiff, any more than to the creditors themselves, “we must have further time for payment.” At any rate, a reasonable time was all they could ask, and all the law could give. The creditors of Atwood & Lathrop resided within the reach of one or two days. The amount of their respective claims was known to the defendants, from the beginning, and they had actually paid upon them about 75 per cent. Surely, four months was a very liberal and extended time for the payment of these debts. A reasonable time had elapsed, before the institution of this suit. Notwithstanding all, the defendants insist, that although they have violated their engagement, and have thus given to the plaintiff a right of action against them, they are liable only for nominal damages, because the plaintiff has neither paid any of these debts before suit, nor been subjected to actual loss or damage, by reason of the defendants’ neglect; and the defendants, or Lathrop, one of them, remains still liable, and may be subjected at the suit of the creditors to the payment of the claims, and thus subjected twice. All this may be; but by whose fault? Not the plaintiff’s. The very reason why the plaintiff required, and the defendants — 127 — agreed to pay these debts, was, to exonerate and relieve the plaintiff from any preparation or pains-taking for the payment of them. The defendants received, and have put into their pockets, the means of paying; and holding on to these, they now say, we will neither pay to the creditors, nor to the plaintiff! A judgment for nominal damages would give the sanction of the law to this unjustifiable claim. The cases we have referred to, as sustaining this action, all, impliedly at least, oppose this claim of the defendants, and several of them very explicitly. Port v. Jackson, 11 Johns. R. 239. Ex parte Negus, 7 Wend. 499. Crofut v. Moore, 4 Verm. R. 204. Atkinson’s ex’rs. v. Coatsworth, 8 Mod. 33. Upon the facts agreed and submitted to us, in this case, we shall advise the superior court, that the plaintiff is entitled to a judgment for the amount of the balance of the debts due from the firm of Lathrop & Atwood, when this suit was commenced, and the interest thereon. Waite, J. This action is founded upon a contract made by the defendants, by which they, among other matters, agreed to pay all the debts of the firm of Atwood & Lathrop, and save the plaintiff harmless from all liability on account of the same. That firm was composed of the plaintiff and Atwood, one of the defendants, but Crouch, the other defendant, was not a member. It is admitted, that for other reasons, there has been a breach of the contract; and the only question submitted to us, is, to what extent the defendants are liable in the present suit, by reason of their omission to pay the debts according to their contract. At the time the action was commenced, the defendants had paid the greater part of them, but the plaintiff had neither paid, nor been called upon to pay, any portion. Since that time, he has paid about two hundred dollars, and there remains about four hundred dollars of those debts still unpaid. The court is of opinion, that the plaintiff is entitled to recover, not only the amount which he has paid, but also the balance still remaining unpaid. In this opinion, I should, without hesitation, concur, had the contract been made by Crouch alone, who is no otherwise liable for these debts, than by virtue of his contract. Having bound himself to — 128 — pay the debts, it would be immaterial to him, whether he paid them to the plaintiff, or the creditors. Carr, admr. v. Roberts, 5 Bar. & Adol. 78. (27 E. C. L. 39.) Not so with Atwood, the other defendant. He is one of the original debtors; and the creditors have a right to look to him, as well as the plaintiff, for the payment of their debts; and their rights remain unaffected, by any arrangement between them, or any payment made to the plaintiff. Suppose the contract had been made with Atwood alone, by which he agreed to pay their joint debts, and save the plaintiff harmless. Such an agreement would have no effect upon their joint liability to their creditors; but, as between themselves, would change their relation from that of joint debtors to that of principal and surety. Now, a surety, on account of his mere liability as such, can never recover of his principal, damages beyond the amount sustained by him. It was indeed once holden otherwise, by the supreme court of errors in this state. Filley v. Brace, 1 Root, 507. But that decision was afterwards, upon mature deliberation, overruled. Booth v. Starr, 1 Conn. R. 244. 1 Sw. Dig. 413. In the latter case, the court said, “it would seem to be a clear dictate of reason, that the mere liability to pay money for another, he continuing liable to pay the money himself, can never be a cause of action on the contract of indemnity; for it is uncertain, whether the surety will ever be compelled to pay, and the principal may pay himself. Such uncertainty can be no ground of action.” The same principle was again recognised in a subsequent case, in which the court say, “the mere liability to pay money, is no ground of action.” Hotchkiss v. Downs, 2 Conn. R. 138. And the rule, which is founded upon the plainest principles of justice, may now be considered as fully established. Colleridge v. Heywood, 9 Adol. & Ellis, 633. (26 E. C. L. 233.) Reynolds v. Doyle, 1 Man. & Gran. 753. (39 E. C. L. 640.) Ingalls v. Dennet, 6 Greenl. R. 79. I am aware, that in the contract under consideration, the defendants promised, not only to indemnify the plaintiff, but also to pay the very debts for which he is liable. And it is upon the latter ground only, that Crouch could be made liable for the full amount of the debts. For a mere promise — 129 — to indemnify would not have that effect, unless the plaintiff had been subjected to the payment. But as he is sued jointly with Atwood, no recovery can be had, in the present suit, beyond the amount which the plaintiff is entitled to recover of Atwood. And, as already remarked, the effect of the contract, as between Atwood and the plaintiff, was, to place them in the position of principal and surety, in relation to the joint debts which they then owed. Atwood indeed agreed to pay the debts; but he never agreed to pay them twice; once to the plaintiff, and then afterwards to the creditors; a result which may happen, if he is compelled to pay the full amount of the debts to the plaintiff in the present suit. For, as already stated, a judgment in the present suit, and even payment to the plaintiff, can have no effect upon the claims of the unpaid creditors against him, or in the least, exonerate him from his liability to them. All the arguments against the claim of a surety to recover the amount of a joint debt, due from him and his principal, so long as the principal continues liable to the creditor, apply, with equal force, to the present case, so far as Atwood is concerned. For these reasons, I find myself unable to concur in the opinion that the plaintiff is entitled to recover the amount of outstanding and unpaid debts due from him and the defendant Atwood. Judgment for plaintiff.