St. Paul Title & Trust Co. v. Sabin

Winslow, J. The bond in suit was given by Sabm as principal and the United States Fidelity & Guaranty Company as surety to secure the reimbursement of the plaintiff for all necessary expenses and liabilities incurred by it in performing the conditions of paragraph 4 of the reorganization agreement which were to be performed by Sabin, and which he had not performed at the time the bond was given. The plaintiff contends that by the terms of said?paragraph 4 the defendant Sabin was required to procure releases of the claims of Kelson, Baldwin, McKay, and the Spring Yal-ley Land Company for lands taken for right of way purposes by the old company, and that, Sabin having failed to secure such releases, the amounts necessarily expended by the plaintiff in securing the same may be recovered in an action on the bond. On the other hand, the defendants contend that paragraph 4 only required Sabm to secure good title to said lands, and to secure releases of all valid claims against the property of the new company, and that under the principles laid down in the case of Kuhl v. C. & N. W. R. Co. 101 Wis. 42, not only was the title to the lands formerly owned by the parties named perfect in the new company, but said parties had no valid claim of any kind against the new company; and hence that the sums paid by the plaintiff in settlement of such claims were not within the terms of the bond. Thus it is readily seen that the vital questions in the case are simply as to the proper construction of the two instruments. Taking up the reorganization agreement first, we do not see how there can be any doubt but that it referred to the claims of Kelson, McKay, Baldwin, and the Spring Valley — 112 — Land Company by its very terms. It expressly names the claim of title asserted by the Spring Valley Land Company to a portion of the right of way as one of the claims of which Mr. Sabin is to secure a satisfactory release, and it also includes generally “all other claims of title, by whomsoever made or held, that may exist or Ije held to any portion or portions of said right of way.” It appears that the above-named claims were substantially the only claims made to the right of way, and this fact seems conclusive that they were the claims referred to in the agreement. Eut, if there were any doubt of the meaning upon the face of the agreement itself, it would be removed by the acts of the parties under it by which it was given a practical construction. The evidence shows without dispute that Mr. Sabin became a director and a member of the executive committee of the new railroad company; that a meeting of the executive committee was held May 22, 1897, at which h'e was present and presided, and that a resolution was then passed, without dissent, empowering the president and counsel of the road to “ take such action in relation to the unsettled right of way matters by compromise, condemnation proceedings, or otherwise, as they may think best.” This makes it clear that Mr. Sabin knew that condemnation proceedings were contemplated. It further appears without dispute that in the latter part of the year 1897 Mr. H. 0. Baker, of the St. Croix county bar, was employed to commence and prosecute the condemnation proceedings; that he prepared the necessary petition, and filed it in March, 1898; that both before and after the filing of the petition he had numerous interviews and conducted an extensive correspondence with Mr. Sabin, in the course of which Mr. Sabin was kept fully advised of the steps being taken, and approved of them. In these letters the position assumed by Mr. Sabin is unmistakably that of the responsible party to the litigation, who is advising and directing his attorney. The let — 113 — ters run from January, 1898, to December, 1899, and are too numerous and lengthy to quote, and this statement of their import must be sufficient. It also appears that on July 9, 1899, Mr. Sabin, by letter to Mr. G. D. Braman, stated that he would pay $2,916 to clear up the Spring Yal-ley right of way; that in November, 1899,he authorized the plaintiff, by letter, to settle the Baldwin claim for $400, and the McKay claim at an amount not exceeding $2,000; and that in pursuance of the authorization so given the various settlements were made. The final letter to Mr. Baker, written December 6, 1899, after the settlements were all made, is very significant as to the view Mr. Sabin then took of his relation to the condemnation proceedings. He says: “ I would like personally to have carried on this fight, but from your recent conversation, and after looking over the whole situation, 1 made up my mind that in the end it would cost as much to make the fight as it would to settle. . . . I have concluded it was better to make the best of a bad bargain, and try and get out of it as cheaply as possible. The next thing, of course, will be settlement with the trust company, which is bad enough.” It will be noticed that these condemnation proceedings were in progress when the amicable action to foreclose the lien upon Sabin's bonds was brought by the trust company, and that judgment in that action was rendered July 295 1898, some twenty days after Sabin had authorized the settlement of the Spring Valley claim; and that the bond in suit was given in October following that settlement, and just prior to the settlements with Baldwin and McKay. That Mr. Sabin has practically construed the reorganization agreement to mean just what the plaintiff now claims to be its meaning is not open to doubt upon these facts. That the settlements were favorable settlements, and the amounts paid were only such as were reasonably necessary, does not seem to be controverted, except in the case of the Nelson claim, to which reference will be made later. — 114 — "While these considerations seem conclusive as to the construction of the reorganization agreement as between Sabin and the plaintiff, it is contended that they are not conclusive as to the construction of the bond upon which the action is brought, especially as to the liability of the appellant the Fidelity & Guaranty Company, which is simply a surety on the bond, and whose obligation is sbriotissimi juris. The bond was given more than two years after the reorganization agreement was signed. The conditions of paragraph 4 of the agreement were imported bodily into the bond by its very terms. Certainly the surety should have investigated and ascertained for himself what those conditions were, and must be held to be bound by them. He cannot now be heard to say that he was not informed as to their character. He has agreed that they shall be performed, whatever they are. It is true that a surety is a favorite in the law, and that his liability will not be extended by construction; but when it becomes necessary to construe a contract which he has made the same test is to be applied as in construing any other contract, namely, "What was the intention of the parties as disclosed by the instrument read in the light of the surrounding circumstances ? Brandt, Suretyship & G. § 94. If we are right in our conclusion that paragraph 4 of the reorganization agreement requires no construction, but on its face definitely refers to the claims under consideration,— in other words, if the clause is clear and unambiguous,— the surety must, of course, be bound equally with the principal by its clear meaning. If, on the other hand, it is at all doubtful and open to construction, then the surrounding facts may be resorted to in ascertaining the proper construction as well against the surety as against the principal. Those facts leave no doubt as to the proper construction of the bond. Upon its face it informs the surety that some of the conditions of paragraph 4 were yet unperformed, and that the plaintiff was expected to incur expense in performing them. At this — 115 — •very time there had been pending for some months condemnation proceedings for the purpose of wiping out the claims of title in question. Sabin was recognizing these claims as claims which he must remove under his agreement; had authorized settlement of some, and was actively negotiating for settlement of others. There is no suggestion that there was any concealment of the situation at that time, or any collusion between Sabin and the plaintiff. They were proceeding to carry out the terms of paragraph 4 of the agreement as they understood them, and in a manner.clearly within their reasonable meaning. Hot only were such acts, which took place prior to or contemporaneous with the execution of the bond, admissible to show the situation of the parties at the time of the transaction, but the subsequent acts of Sabin in authorizing settlements of claims were admissible also as a part of the res gestee. Acts and declarations of the principal which take place in the course of the transaction of the business for which the surety is bound become a part of the res gestee, and are evidence against the surety. Brandt, Suretyship & G. § 627. It is strenuously argued, especially on behalf of the surety, that none of the parties named had any valid claim against the new railway company; that under the principles laid down in the Hooe Case, 98 Wis. 302, and the Kuhl Case, 101 Wis. 42, they had no title to any part of the right of way, nor any claim against the new railway company; that they could neither maintain condemnation proceedings nor actions for money judgments. It is further argued that the word “ claims,” as used in paragraph 4 of the reorganization agreement, should be construed as meaning valid claims against the new railway or its property, and not trumped-up claims without legal foundation of any kind, which the claims in question are said to have been. The argument is specious, but not tenable. It should be remembered that the reorganization agreement was made in August; 1896, — 116 — long before the decision in the Hooe Case was made. It is very evident that all the parties at that time regarded the claims in question as quite real and troublesome claims, which would have to be settled with in some way before a clear title to the right of way was obtained. And, indeed, we do not know that it has yet been decided that the claimants were absolutely without remedy of some kind. Neither the Kuhl Case nor the Hooe Case so decides. It is probably true that as a result of the doctrine of those cases the claimants could not maintain condemnation proceedings nor obtain personal judgments against the new railway company, although it is not necessary to so'decide in this cáse; but it does not necessarily follow that the new company could appropriate the lands and permanently use them without let or hindrance from the original owners. The powers of a court of equity to prevent manifest injustice are quite extensive, as is evidenced in the case of Stolze v. M. & L. W. R. Co. 104 Wis. 47, where an injunction was allowed to prevent an injustice of a similar nature. But whether there was in fact any legal remedy open to the property owners or not is not a question of great moment. Certain it is that the property owners were making vigorous and bona fide claims; that both the plaintiff in this action and Mr. Sabin regarded them as serious claims, and that they chose to enter into an agreement that these very claims should be satisfied and released by Mr. Sabin before he received his bonds; and that the surety in this action signed a bond to secure the faithful performance of the condition. The view we have taken of the case renders unnecessary any detailed review of rulings on evidence or of the charge of the court. As we view the case, the evidence left no question but that the bond covered the very claims in question, and the only question for submission to the jury was as to the amount of the damages. Upon this question the court instructed the jury, in substance, that whatever sums — 117 — Sabin authorized the plaintiff to pay in settlement of any of the claims aforesaid were to be ’ allowed, and, as to the claims not authorized by Sabin to be paid, such sums were to be allowed as the evidence showed to be just, necessary, and proper in order to secure settlement; that, if Sabin knew of the commencement of the condemnation proceedings, and was informed of their progress, and acquiesced therein, then the necessary disbursements and reasonable value of the attorney’s services in such proceedings might also be recovered; that, if he did not know of them, and the proceedings were unnecessary, there should be no recovery for the disbursements and attorney’s fees therein, but, if they were proper proceedings for the plaintiff to institute in order to adjust these claims, then the disbursements and attorney’s fees should be allowed. Under the principles of law already laid down in this opinion, it is very evident that, there being no claim of fraud or collusion between Sabin and the plaintiff, these instructions were fully as favorable to the defendant surety as it was entitled to demand, and certainly there can be no claim that they were erroneous as to the defendant Sabin. As to the claim of §100 paid to Nelson, we have been unable to find any evidence in the record from any source that the amount paid him was a reasonable and proper amount in settlement, or that Mr. Sabin ever authorized the payment of that sum, or any sum, in settlement of the claim; and we think, therefore, that this sum was improperly allowed. As this is a sum certain, the judgment maybe modified in this court by striking out the improper item, with interest, and affirmed as modified. By the Court.— Judgment modified by deducting therefrom the sum of §110.85, and, as so modified, affirmed. Uo costs are to be allowed except clerk’s fees, attorney’s fees, and $25 for printing, to be taxed in favor of appellant.