American Surety Co. of New York v. Egan

• Decision Date: 14 December 1932
• Docket Number: No. 6051.,6051.
• Citation: 62 F.2d 223
• Parties: AMERICAN SURETY CO. OF NEW YORK v. EGAN et al.
• Court: U.S. Court of Appeals — Sixth Circuit

62 F.2d 223 (1932)

AMERICAN SURETY CO. OF NEW YORK v. EGAN et al.

No. 6051.

Circuit Court of Appeals, Sixth Circuit.

December 14, 1932.

E. S. Reid, Jr., and L. H. Paddock, both of Detroit, Mich. (Miller, Canfield, Paddock & Stone, of Detroit, Mich., on the brief), for appellant.

J. H. Amberg, of Grand Rapids, Mich., and C. N. Sessions, of Muskegon, Mich. (Butterfield, Keeney & Amberg, Morton Keeney, and Harry Shulsky, all of Grand Rapids, Mich., and Cross, Foote & Sessions and Clarence N. Sessions, all of Muskegon, Mich., on the brief), for appellees.

Before MOORMAN, HICKS, and SIMONS, Circuit Judges.

MOORMAN, Circuit Judge.

The American Surety Company brought this suit against the Palmer Construction Company and six individual defendants to recover the amounts it was required to pay as surety on a contract which the construction company made with the University of Michigan for the construction of an athletic building. The action was founded on an indemnity agreement executed by the defendants on June 18, 1923. The bond for the contract was executed upon the request of the construction company August 1, 1927. The construction company made no defense to the action, and judgment was taken against it, but the other defendants filed answers asserting, upon grounds alleged, that the indemnity agreement was not a valid and subsisting agreement upon which the surety company did or could rely in executing the bond. The case was submitted to the jury upon the issues tendered in the answers, and a verdict was returned in favor of the contesting defendants. From a judgment rendered thereon, the surety company appeals.

It appears in the proofs that the construction company was organized in 1923 for the purpose of engaging in construction work; that shortly thereafter it sought a contract to construct the Butterworth Hospital in Grand Rapids, and, being required to submit with its bid an offer by a responsible surety to guarantee performance of the contract, it applied to appellant; that appellant agreed to guarantee the contract; and that, pursuant to an arrangement then made, the agreement here in question was executed and delivered. The agreement provides that: "Whereas, the undersigned (hereinafter called the indemnitor) has heretofore required, and may hereafter require suretyship upon certain obligations of suretyship on behalf of the undersigned, or of some other person or corporation, and has applied, and may hereafter apply to the American Surety Company of New York (hereinafter called the Surety) to execute such instruments, as Surety: Therefore, the undersigned does hereby undertake and agree," etc.

Counsel agree that the words "undersigned" and "indemnitor," as used in the agreement, include all the parties signing it, the construction company and each of the individual signers. Upon that hypothesis it is argued that appellees were not bound to indemnify the surety company as to any bonds except those which they personally requested, and, as the proofs show that none of them requested the bond for the athletic building, there should have been a directed verdict in their behalf. We cannot accept this construction. It seems plain to us that it was the purpose of the agreement to deal with the immediate and perhaps prospective needs of the only party whose business was expected to require bonds. It was known at that time that the construction company contemplated engaging in construction work, indeed its application for a guaranty of its bid on the Butterworth Hospital was the immediate cause of the execution of the agreement. No one thought any of the other signers would ever require a bond. Certainly there is nothing in the agreement to indicate that they were not to be bound except upon their separate requests, and, inasmuch as the agreement was executed for the benefit of the construction company, we think it is to be held that the making of an application by that company was sufficient to bind all the signers within the limits contemplated by the undertaking.

The construction company did not obtain the contract for the Butterworth Hospital. The appellees claimed in their pleadings, and introduced evidence to show, that the agreement was executed and delivered with the understanding that it should be effective only as to that contract. They further contended, as stated, that, even if it was not delivered with that understanding, there was no liability for the losses sued for, because only such signers of the agreement as requested the bond were liable for losses sustained by its execution. If this last-mentioned contention is sound, the appellees were entitled to directed verdicts, for there was no evidence showing that any of them requested the execution of the bond. Though overruling motions for directed verdicts made upon that ground, the court nevertheless charged the jury that the request of the construction company was not to be regarded as the equivalent of a request from the appellees. This, in our opinion, was tantamount to saying that it was a necessary condition to liability on the part of the individual indemnitors that they separately request the execution of...