United States Fidelity & Guaranty Co. v. Whittaker

• Decision Date: 02 November 1925
• Docket Number: No. 4455.,4455.
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. WHITTAKER.
• Court: U.S. Court of Appeals — Ninth Circuit

8 F.2d 455 (1925)

UNITED STATES FIDELITY & GUARANTY CO. v. WHITTAKER.

No. 4455.

Circuit Court of Appeals, Ninth Circuit.

November 2, 1925.

Gunn, Rasch & Hall, of Helena, Mont., for plaintiff in error.

James L. Wallace and Chas. N. Madeen, both of Missoula, Mont., for defendant in error.

Before GILBERT, HUNT, and RUDKIN, Circuit Judges.

RUDKIN, Circuit Judge.

In January, 1912, one Agnes Comerford, as administratrix of the estate of Thomas Comerford, deceased, commenced an action in the district court of the Fourth judicial district of the state of Montana, in and for the county of Missoula, against the James Kennedy Construction Company and the city of Missoula, a municipal corporation, to recover damages in the sum of $36,420 for negligently causing the death of her husband. Upon the trial of the action, a verdict in the sum of $17,500 was returned in favor of the plaintiff and against the defendant James Kennedy Construction Company, and on March 1, 1913, a judgment was entered upon this verdict. Thereafter the construction company served and filed notice of intention to move for a new trial, and on April 15, 1913, the court entered an order allowing 10 days within which to file a bond in the sum of $17,800 to stay execution. It was further ordered that execution be stayed during the 10 days, and, upon the filing of the bond as required, that execution be further stayed until the motion for a new trial was disposed of or until the further order of the court, counsel being present and consenting thereto. Thereafter the construction company, with the United States Fidelity & Guaranty Company, as surety, executed a stay bond in the sum of $17,800, as required by the order, conditioned that, if the judgment and execution were stayed until the motion for a new trial was heard and decided, the construction company, if the motion was overruled, would take an appeal to the Supreme Court of the state of Montana from the judgment entered in the action, and from the order denying the motion for a new trial, and, if the motion for a new trial was overruled and the construction company failed to take an appeal to the Supreme Court of the state of Montana within the time allowed by law, the construction company would pay to the plaintiff, on demand, the amount of the judgment with costs, not exceeding in all the sum of $17,800. The motion for a new trial was thereafter denied; the construction company took an appeal to the Supreme Court of the state, and the judgment (50 Mont. 196, 145 P. 952) was there affirmed. Thereafter the plaintiff in the action commenced an action on the bond in a state court of Montana.

The complaint contained two causes of action: The first for a recovery on the bond as executed; the second, for a reformation of the bond by adding thereto the words, "and if not reversed or if affirmed on appeal," or equivalent words after the words contained in the bond, "that the defendant will, if said motion is overruled, take an appeal to the Supreme Court of the state of Montana from the judgment rendered in said action and from the order overruling defendant's motion for a new trial." Upon the trial of that action in the state court, the trial court found that the plaintiff was entitled to recover upon the bond as executed, and was also entitled to a reformation of the bond as prayed, and entered a decree accordingly. Upon appeal to the Supreme Court of the state this decree was reversed, the Supreme Court holding that there could be no recovery upon the bond as executed, and that the evidence did not warrant a reformation of the bond. Comerford v. United States Fidelity & Guaranty Co., 59 Mont. 243, 196 P. 984. After the record was remitted to the court below, the plaintiff took a voluntary nonsuit, and her successor in office commenced the present action in the United States District Court for the District of Montana. The complaints in the two actions were the same. Upon the trial in the court below, the cause of action for a reformation of the bond was dismissed by consent, and judgment was entered in favor of the plaintiff upon the first cause of action, which sought a recovery upon the bond as executed. The latter judgment is now before this court upon writ of error.

The motion to dismiss the writ of error on the ground that the record was not filed in this court within the time prescribed by law is not well taken, as it appears that the record was so filed within the time fixed and allowed by orders duly made and entered pursuant to the rules. Nor need we consider the motion to strike the bill of exceptions from the record, for the reason that it was not presented to the trial judge within the time prescribed by the rules, because the only questions we deem it necessary to discuss or consider are presented by the pleadings and judgment roll.

It is urged on the part of the plaintiff in error that the judgment of the Supreme Court of the state in the former action is a bar to the present action. On the other hand, it is claimed that the judgment is not a bar, because the case was simply remanded to the lower court for further proceedings, without the entry of a final judgment. In the view we take of the question thus presented, it is not material whether a final judgment was entered in the state court or not, because the construction placed upon a bond given in a judicial proceeding in a state court, pursuant to a law of the state, by the highest court of the state, is controlling upon every other court, and in every other jurisdiction. Thus Fidelity Co. v. Bucki Co., 189 U. S. 135, 23 S. Ct. 582, 47 L. Ed. 744, was an action on an attachment bond given in an action brought in a state court of Florida. Under the laws of Florida, as construed by the highest court of that state, counsel fees incurred in securing the dissolution of an attachment are recoverable in an action on the attachment bond, while a different rule obtains in the federal courts. In reference to such a bond, and the construction given thereto by the highest court of the state, Mr. Justice Brewer said:

"Liability for these counsel fees being, as declared by its highest court, a part of the obligation assumed by the obligor in an attachment bond given in the courts of Florida, should be enforced in every court in which an action on such a bond is brought. This action was commenced in a circuit court of the state, and, if it had proceeded there to judgment, unquestionably a liability for counsel fees would have been sustained, and it cannot be that by removing the case to the federal court such liability has been taken away. In Tullock v. Mulvane, 184 U. S. 497, 505 22 S. Ct. 372, 375 (46 L. Ed. 657), we held that, when a bond has been given in a case pending in the federal court and an action was thereafter brought in the state court on such bond, the rule of liability was that existing in the federal court in which the bond was given, and said: `It is clear that, if it be true that the bond given in a federal court of equity on the granting of an injunction is not to be construed with reference to the rules of law applicable to such bonds in such court, then there can be no certain general rule by which to determine the liability of the obligors upon the bond. Their responsibility would be one thing in a court of the United States and a different thing in the courts of the various states, which would imply that the parties did not contract with reference to any definite rule of liability.'"

The plain provision or condition of the bond was that the defendant in the action in the state court would take an appeal to the Supreme Court of the state from the final judgment and from the order denying the motion for a new trial, in the event that such an order was made, and that it would pay the judgment only in the event that no appeal was taken. It would seem manifest from this that the condition of the bond was fully performed and satisfied when the appeal to the Supreme Court was taken within the time allowed by law. But, in any event, such was the view of the Supreme Court of the state, and, for reasons already stated, the construction placed upon the bond by that court is controlling here. It may be urged that the defect in the complaint was cured by the findings of the court, but the rule is all but universal that, if a complaint wholly fails to state a cause of action, and more especially if it affirmatively shows that there is no cause of action, the defect is fatal, and the doctrine of aider by verdict or findings has no application. In 3 C. J. 785, the rule is thus stated:

"While it has been held in some jurisdictions that the objection that the complaint does not state facts sufficient to constitute a cause of action is waived by a failure to raise an objection below in some appropriate manner, it is well settled in most jurisdictions that an objection of this character may be urged for the first time on appeal. The reviewing court, however, does not look upon such an objection with favor, and the complaint will be construed liberally and supported by every legal intendment, and, if the defect was amendable, or the pleading is good after verdict or sufficient to bar another action for the same cause, it will be sufficient on appeal, in the absence of objection in the court below. It must be shown that there is a total absence of an averment of some fact essential to the existence of the cause of action, or the presence of some averment that absolutely destroys plaintiff's right to recover."

Here there was a total absence of an averment that no appeal to the Supreme Court of the state was taken, and this fact was essential to the existence of a cause of action. Furthermore, there was an affirmative averment that such an appeal was in fact taken, and this averment totally destroyed any possible right of recovery on the part of the plaintiff without a reformation of the bond. In Western Union Telegraph Co. v. Sklar, ...