American Surety Co. v. Singer Sewing Mach. Co.

• Decision Date: 05 February 1937
• Citation: 18 F. Supp. 750
• Parties: AMERICAN SURETY CO. OF NEW YORK v. SINGER SEWING MACH. CO.
• Court: U.S. District Court — Southern District of New York

18 F. Supp. 750

AMERICAN SURETY CO. OF NEW YORK v. SINGER SEWING MACH. CO.

District Court, S. D. New York.

February 5, 1937.

George L. Naught, of New York City (Allan C. Rowe, of New York City, of counsel), for plaintiff.

Burlingame, Nourse & Pettit, of New York City (Arthur E. Pettit, of New York City, of counsel), for defendant.

PATTERSON, District Judge.

The action is one at law on an indemnity agreement. It was commenced in the state court and removed here for diversity of citizenship. At the trial the parties stipulated for trial by a jury of one.

Vivian F. Baldwin and E. R. Baldwin brought suit in the District Court of the state of Idaho against Singer Sewing Machine Company and one Anderson. The suit was for personal injuries arising out of the alleged negligent operation of an automobile by Anderson, an employee of the Singer Company. The Singer Company was insured against loss on liabilities of this character, up to a limit of $10,000, and the defense of the suit was turned over to the insurance company pursuant to the provisions of the policy. A firm of attorneys retained and paid by the insurance company, Martin & Martin, appeared for the Singer Company in the suit. Anderson defended by an attorney of his own. The trial resulted in a judgment of $19,500 against the Singer Company and Anderson, and from this judgment both defendants appealed to the Idaho Supreme Court.

In connection with the appeal, the insurance company and the Singer Company made separate applications to American Surety Company for a supersedeas bond to stay execution on the judgment, the insurance company to indemnify to the extent of its policy limit, $10,000, the Singer Company to the extent of $9,500. The application of the Singer Company was for an "appeal bond to be executed on behalf of the Singer Sewing Machine Co. ads. Vivian F. Baldwin and E. R. Baldwin, covering judgment of $19,500, the Singer Sewing Machine Co. to be responsible to the extent of $9,500 and interest on that amount." In the indemnity agreement which was part of its application and on which the present action is based, the Singer Company agreed to indemnify and save harmless the Surety Company from all claims, demands, liabilities, expenses, etc. The pertinent portions of the indemnity agreement are these:

"Should the American Surety Company of New York, hereinafter called the Surety, execute or procure the execution of the suretyship hereinbefore applied for, or other suretyship in lieu thereof, the undersigned, hereinafter called the Indemnitor, do in consideration thereof, jointly and severally undertake and agree: * * *

"III. That the Indemnitor will perform all the conditions of said bond, and any and all modifications, renewals and extensions thereof, and will at all times indemnify and save the Surety harmless from and against every claim, demand, liability, cost, charge, counsel fee (including fees of special counsel whenever by the surety deemed necessary), expense, suit, order, judgment and adjudication whatsoever, and will place the Surety in funds to meet the same before it shall be required to make payment. * * *"

The Surety Company accordingly made a bond for costs in the sum of $300, as to which no rights are now asserted, and a supersedeas bond to stay execution in the sum of $25,000. The supersedeas bond was signed by the Surety Company alone, was delivered to the attorneys of record for the Singer Company, and was by them duly filed in the proper court. The bond, after a recital that the Singer Company had appealed from the judgment against it in favor of the Baldwins and desired to stay execution of the judgment, contained an undertaking of the Surety Company that "if the said judgment appealed from, or any part thereof, be affirmed, or the appeal dismissed, the appellant will pay * * * the amount directed to be paid as to which said judgment shall be affirmed, if affirmed only in part, and all damages and costs which may be awarded against the appellant upon the appeal, and that if the said appellant does not make payment within thirty days from the filing of the remittitur from the Supreme Court in the court from which the appeal is taken, judgment may be entered on motion of the respondents in their favor and against the undersigned surety for the said sum of $19,573.70, together with the interest that may be due thereon and the damages and costs which may be awarded against the said appellant, Singer Sewing Machine Company, upon the appeal."

As the result of the appeal the judgment was affirmed as to Anderson and reversed as to the Singer Company, and a dismissal of the action was directed as to the Singer Company. Baldwin v. Singer Sewing Machine Co. and Anderson, 49 Idaho, 231, 287 P. 944. The remittitur from the Idaho Supreme Court was duly filed in the District Court, and on May 24, 1930, final judgment dismissing the action as against the Singer Company was entered in the District Court.

On June 23, 1930, thirty days after filing of the remittitur, the Baldwins made application to the Idaho District Court for judgment against the Surety Company on the bond, without notice to any one, and judgment against the Surety Company for $22,357.21 was entered on the same day. The basis of the judgment, as shown by its recitals, was a finding that the bond covered Anderson as well as the Singer Company and that the bond was in effect a consent by the Surety Company to entry of judgment against it in case there should be an affirmance as to Anderson. Execution was issued and levy made on property of the Surety Company.

Then began a series of strenuous but unsuccessful efforts by the Surety Company to get rid of the judgment of June 23, 1930. First, it made a motion to vacate the judgment. The District Court granted the motion, taking the view this time that the bond was merely one in behalf of the Singer Company. But the Baldwins appealed from the order vacating the judgment and won a reversal in the Idaho Supreme Court. The Idaho Supreme Court held that the District Court had jurisdiction to enter the judgment of June 23, 1930, that the only question was whether that judgment was erroneous, and that the only method of testing whether the judgment was erroneous was by appeal. It accordingly held that the lower court had no power to vacate the judgment. Baldwin v. Anderson (American Surety Co.), 50 Idaho, 606, 609, 299 P. 341. The Surety Company then took other measures — certiorari to the United States Supreme Court, an appeal to the Idaho Supreme Court from the judgment of June 23, 1930, which appeal was dismissed as taken too late, a motion to amend the judgment which was denied, and a suit in the United States courts to enjoin enforcement of the judgment. It was held by the United States Supreme Court, American Surety Co. v. Baldwin, 287 U.S. 156, 53 S.Ct. 98, 77 L.Ed. 231, 86 A.L.R. 298, that the writ of certiorari to the Idaho Supreme Court should be dismissed because the Surety Company had not made any federal claims seasonably, and that the suit in the United States courts to enjoin enforcement of the judgment had been properly dismissed because the Surety Company prior to seeking relief in the United States courts had pursued its remedy in the state courts and was bound by the resulting adjudication against it there. The argument was made by the Surety Company that even if the Idaho trial court had jurisdiction to enter the judgment of June 23, 1930, that judgment was void for lack of due process because entered without opportunity to be heard on the merits. The Supreme Court took the view, however, that the Idaho practice gave the Surety Company adequate opportunity to be heard on the merits by way of appeal after entry of judgment, an opportunity lost because the Surety Company took the wrong procedure until too late to appeal effectively. After this double defeat the Surety Company brought suit in the Idaho courts to stay execution of the judgment on equitable grounds, but the Baldwins obtained an injunction against maintenance of the suit. All measures failing, the Surety Company on March 14, 1933, paid the Baldwins the sum of $26,894.81, in satisfaction of the judgment of June 23, 1930, interest and costs.

The Surety Company had advised the Singer Company promptly of the judgment entered against it on June 23, 1930, and of the proceedings being taken to get rid of the judgment. It invited the co-operation of the Singer Company and made clear its intention of holding the Singer Company responsible for loss and expenses. The Singer Company's response was a disclaimer of responsibility. The Surety Company had given like notice to the insurance company, with the result that the insurance company sent word to Martin & Martin, the firm of attorneys whom it had retained to defend the original suit against the Singer Company, to co-operate with the attorneys for the ...