Page images

if with full knowledge of his discharge, by reason of not having notice, he makes a new promise to pay the note, he may be charged; and hence, that in the case of a guarantor of a note, a new promise or unequivocal act of recognition of his continued liability, made by the guarantor with full knowledge of the laches of the holder of the note, will continue the guarantor's liability. Sigourney &c. v. Wetherell &c. 6 Metcalf 563.

10. Whether on guaranty action will lie for a person not a party to it.

There is, Chancellor Walworth observes, (26 Wend. 430,) a mercantile guaranty, recognized by the codes of commerce, both of France and Spain, called an aval, by which the payment of a bill of exchange may be guarantied. When the form of the aval is such that it can operate as a general endorsement, it will pass to any subsequent endorsee or holder of the bill, in the same manner as if it was an endorsement on the bill itself; but when it is restricted in its terms, as in case of an endorsement filled up without words of negotiability, it can only be sued by the person to whom it is given. Code of Com. of France, Rod. Transl., B. 1, art. 142; Code of Com. of Spain, in French, by Foucher, p. 165, tit. 1, § 6, art. 477, 478. But to make the guarantor liable in those cases the same protests and notices are necessary as in the case of a real endorser. Crivelli's Dict. Du Droit, tit. Aval. That species of negotiable mercantile guaranty, is not even co-extensive with those countries where the civil law prevails; for in the case of Cooley v. Lawrence, 4 Martins' Rep. 640, the supreme court of Louisiana held that a guaranty of that nature was not known to the laws of that state, but must be governed by the rules of other special contracts. See also, 3 Martin's Rep. N. S. 659; 10 Louis. R. 374. And Mr. Bell, the distinguished commentator on the commercial law of Scotland, where the civil law also prevails, distinctly expresses the opinion that the separate guaranty of a bill or note is not negotiable so as to authorize a subsequent holder to sue on it in his own name. 1 Bell's Comm. on Com. Law of Scotland 376.

Considering the question with reference to the law of England and the law of New York, Chancellor Walworth thinks that a guaranty upon a negotiable note, whereby the guarantor agrees with the holder of the note, that he will be answerable that the note shall be paid to him or to his order, or the bearer hereof, when it becomes due, is probably negotiable by

the transfer of the note upon which it is written; for he deems it in fact a special endorsement of the note, or more properly a negotiable note in itself. 26 Wend. 431. It may be questionable whether this is entirely consistent with Lamourieux v. Hewit, 5 Wend. 307, cited ante, p. 283, or with other authorities cited ante, p. 226.

However that may be, certain it is, that to make a guaranty negotiable as a part of the note to which it relates, it must be on the note itself or at least annexed to it. A separate guaranty is not negotiable so as to authorize the assignee to bring a suit thereon in his own name. McLaren v. Watson's er'ors, 26 Wend. 430. It must, says Cowen, J., end where it began, like a bond or other like chose in action. S. C. 19 Wend. 568.

If there be an agreement that a bill shall be honoured by the drawees, the party with whom that agreement is made may maintain an action thereon and recover the damages which he has sustained by the breach thereof. But the contract is not negotiable. And on it no one can sue in his own name but an original party to the contract, unless it be otherwise. provided by statute. Birckhead v. Brown, 5 Hill 646.



1. As to consideration for promise; and legality of act against which indemnity is given.

The particular promise sued on is sometimes regarded as not a collateral but an original one. Nevertheless there must be a consideration for it. Myers v. Morse, 15 Johns. 427. The consideration was sufficient in Frain v. Gold, 5 Pick. 384, and Chapman v. Ross, 12 Leigh 565.

If the act directed or agreed to be done is known at the time to be against law, an express promise to indemnify would be illegal and void. Martyn v. Blithman, Yelv. 197; Bull. N. P. 146; Merryweather v. Nixon, 8 T. R. 186; 1 Caines' Rep. 460; 14 Johns. 381; 17 Johns. 144; Ayer v. Hutchins c. 4 Mass. 373; Denny v. Lincoln, 5 Id. 385; Churchill v. Perkins &c. Id. 541; 3 Iredell 538. But if it was not known. at the time to be unlawful, the promise to indemnify is a good

and valid promise. Fletcher v. Hariot, Hutt. 55; Battersey's case, Winch. 48; 1 Vin. Abr. 299, pl. 27; Arundel v. Gardiner, Cro. Jac. 652; Allaire v. Ouland, 2 Johns. Cas. 54; Coventry v. Barton, 17 Johns. 142; Stone v. Hooker, 9 Cow. 154; Avery v. Halsey, 14 Pick. 174; Ives v. Jones, 3 Iredell 538; Davis v. Arlidge, 3 Hill 170.

The general rule, that between wrongdoers there is neither indemnity nor contribution, is spoken of by Lord Ellenborough in Farebrother v. Ansley, 1 Camp. 345, and Wilson v. Milner, 2 Id. 452. If the effect of the decision in the last case was, that wherever it turns out that the parties are wrong, there can be no indemnity, Lord Denman has said, he thinks the decision is not sustainable. Betts &c. v. Gibbins, 2 Adol. & El. 57, 29 Eng. Com. Law Rep. 38. To avoid the obligation of indemnity, the object and design of the parties must be to commit a trespass or to do some other unlawful act. Jameison v. Calhoun, 2 Spears 19.

A judgment creditor delivers a fi. fa. to a sheriff, and affirms to him that certain goods in the shop of one man are the goods of another and liable to the execution against the latter, and requires the sheriff to levy the execution thereon, and in consideration of his so doing, promises to enter into bond to save him harmless. The sheriff giving credence to this promise, entered the shop and took the goods; for which the owner of the shop sued him and recovered damages and costs. Whereupon an action was brought against the creditor for breach of his promise. Though it was objected that the promise on this consideration was against law, the action was maintained. Arundel v. Gardiner, Cro. Jac. 652.

Where under the defendant's express directions, the plaintiff has done an act which occasions an injury to third persons, yet if such act is not apparently illegal in itself, but is done honestly and bona fide in compliance with those directions, the defendant is bound to indemnify the plaintiff against the consequences thereof. Betts &c. v. Gibbins, 2 Adol. & El. 57; Toplis v. Grane, 5 Bingh. N. C. 636, 35 Eng. Com. Law Rep. 263.

2. How far material to give notice to indemnifier.

If a demand be made which the person indemnifying is bound to pay, and notice be given to him, and he refuse to defend the action, in consequence of which the person to be indemnified is obliged to pay the demand, that, says Buller, J., is equivalent to a judgment, and estops the other party from saying that the defendant in the first action was not

bound to pay the money. Duffield v. Scott, 3 T. R. 374. If there was no notice to the party called on for an indemnity, he may be let in to shew that the plaintiff has no claim in respect of the alleged loss or not to the amount alleged; that he made an improvident bargain; and that the defendant might have made better terms if the opportunity had been given him. That, however, will not be assumed, when it is not proved. Smith v. Compton &c. 3 Barn. & Adol. 407, 23 Eng. Com. Law Rep. 106.

3. Whether judgment against plaintiff authorizes him, before paying it, to sue indemnifier.

After what has been said in treating of the action on a covenant or obligation to indemnify, (ante, ch. 10, p. 116-122,) but little need be added here as to the effect of a judgment against the party to whom the indemnity is given.

Where a defendant requested the plaintiff to defend a certain suit and promised to indemnify him from all costs, liabilities and damages, and to pay all which he might incur, this promise was considered to be broken by a judgment against the plaintiff; and before paying the damages recovered of him he maintained an action therefor. Stroh v. Kimmel, 8 Watts 157; Carman v. Noble, 9 Barr 371.

An officer takes goods of a lessee in execution from off the leased premises, and on receiving an instrument of indemnity from the creditor, pays him the proceeds, without discharging the landlord's claim for rent. A judgment, afterwards obtained by the landlord against the officer, is sufficient proof of the officer's being damnified, whether he has paid it or not. The officer may commence his action against the creditor, without any demand on the creditor to indemnify him. Crawford &c. v. Jarrett's adm'r, 2 Leigh 633.

4. What expenses may be recovered from indemnifier.

A defendant promises to save the plaintiff harmless from loss in consequence of signing a bond or surety. If the surety is obliged to pay the bond, the principal is to repay him what he has been obliged to advance, together with all such reasonable expenses as he may have been obliged to incur and which may be considered as the necessary consequence of the neglect of the principal to discharge his own debt. But extraordinary expenses, which might have been avoided by payment of the money, or remote and unexpected consequences, are not con

sidered as coming within the contract. Hayden v. Cabot, 17 Mass. 402.

A man has no right, merely because he has an indemnity, to defend an action, and to put the person guaranteeing to useless expense. Gillett v. Rippon, 1 Mood. & Malk. 406, 22 Eng. Com. Law Rep. 410. His defence and the expense thereby incurred, may sometimes be justified by the nature of the defendant's agreement. Smith v. Compton &c. 3 Barn. & Adol. 407, 23 Eng. Com. Law Rep. 106. But as a general rule, a person should not inflame his own account against another by incurring additional expense in the unrighteous resistance to an action which he cannot defend. Short v. Kalloway, 11 Adol. & El. 28, 39 Eng. Com. Law Rep. 17.

5. Insurance of buildings against loss by fire is in effect a contract of indemnity.

An insurance of buildings against loss by fire, although in popular language it may be called an insurance of the estate, is in effect a contract of indemnity, with an owner, or other person having an interest in the preservation of the buildings, as mortgagee, tenant, or otherwise, to indemnify him against any loss which he may sustain in case they are destroyed or damaged by fire. If, therefore, the assured has wholly parted with his interest before they are burnt, and they are afterwards burnt, the underwriter incurs no obligation to pay anybody. The contract was to indemnify the assured; if he has sustained no damage, the contract is not broken. If, indeed, on a transfer of the estate, the vendor assigns his policy to the purchaser, and this is made known to the insurer, and is assented to by him, it constitutes a new and original promise to the assignee to indemnify him in like manner whilst he retains an interest in the estate; and the exemption of the insurer from further liability to the vendor, and the premium already paid for insurance for a term not yet expired, are a good consideration for such promise, and constitute a new and valid contract between the insurer and the assignee. But such undertaking will be binding, not because the policy is any way incident to the estate, or runs with the land, but in consequence of the new contract. Sadlers Co. v. Badcock &c. 2 Atk. 554; Lynch &c. v. Dalzell &c. 4 Brown's Par. Cas. (Tomlin's edi.) 431; Carroll &c. v. Boston Mar. Ins. Co. 8 Mass. 515; Etna Fire Ins. Co. v. Tyler, 16 Wend. 397; Wilson v. Hill, 3 Metcalf 68, 9; Columbia Ins. Co. v. Lawrence, 10 Peters 507; Carpenter v. Providence W. Ins. Co. 16 Id. 503;

« PreviousContinue »