Collier v. Union Indem. Co.

• Citation: 31 P.2d 697,38 N.M. 271
• Decision Date: 03 April 1934
• Docket Number: No. 3846.,3846.
• Parties: COLLIERv.UNION INDEMNITY CO.
• Court: Supreme Court of New Mexico

38 N.M. 271

31 P.2d 697

COLLIER

v.UNION INDEMNITY CO.

No. 3846.

Supreme Court of New Mexico.

April 3, 1934.

Appeal from District Court, Santa Fé County; M. A. Otero, Jr., Judge.

Action by James Collier against the Union Indemnity Company. The action was dismissed, and plaintiff appeals.

Reversed and remanded, with direction.

Condition of indemnity policy relieving insurer from liability for injuries caused by contract convict or illegally employed minor held proviso, not exception, respecting necessity for negativing thereof by insured.

Francis C. Wilson and George E. Kessler, both of Santa Fé, for appellant.

Gilbert & Hamilton, of Santa Fé, for appellee.

ZINN, Justice.

From a judgment sustaining a demurrer to appellant's amended complaint and dismissing the action, this appeal is prosecuted.

We treat the parties here as they were below; that is, plaintiff and defendant.

The defendant is a corporation organized to transact a general insurance and surety business. On or about November 4, 1926, the defendant entered into a contract of insurance with the plaintiff. The defendant agreed to indemnify the plaintiff against loss from liability imposed by law for damages on account of bodily injuries accidentally suffered by any person not employed by the insured during the construction of certain sewers for the city of Santa Fé. The plaintiff was a contractor doing business under the name and style of the Collier Construction Company. He was engaged in the construction of a sewer under a contract with the city of Santa Fé. He had agreed to save the city harmless from any liability which might result from the construction of the sewers covered by his contract. The sewers were to be constructed in the streets of the city.

On February 6, 1927, one Margaret Johnson was injured by reason of failing into a sewer trench under construction by the plaintiff. She made claim against the plaintiff for damages suffered. The plaintiff notified the defendant of the claim and of the accident and injury, and the defendant employed the firm of Gilbert & Hamilton, attorneys at law of Santa Fé, to represent it in the matter. Some negotiations as to settlement were entered into, but resulted in no agreement. On February 25, 1927, Margaret Johnson brought suit against the city of Santa Fé and the Collier Construction Company for damages. The plaintiff called upon the defendant to represent and defend him in the proceeding. The defendant responded and employed Attorney Carl H. Gilbert of the firm of Gilbert & Hamilton of Santa Fé. He filed a plea in abatement for the reason that there was no such legal entity as the Collier Construction Company; the true name of the contractor was James Collier, the plaintiff here. The court sustained the plea and quashed the writ of summons.

Thereafter in the same cause Margaret Johnson amended her complaint and made the plaintiff a party defendant, but no service was obtained upon him. The defendant made no further effort to represent or to assist Collier in the case. The case proceeded to judgment against the city of Santa Fé in the sum of $10,000, which judgment was affirmed by this court. 35 N. M. 77, 290 P. 793. The city of Santa Fé then filed suit in the United States District Court for the District of New Mexico against plaintiff and the American Surety Company of New York, setting up a cause of action based upon the Johnson judgment seeking recovery in the sum of $10,000, together with interest, costs, and attorneys' fees, aggregating $13,225. Collier notified the defendant of the institution of this cause with the request to defend him pursuant to the contract of insurance. The defendant failed and refused to appear and defend the plaintiff. The plaintiff then compromised and settled this suit with the city for the sum of $12,182.49, which amount has been paid, satisfied, and discharged, and the suit of the city against the plaintiff, in the United States District Court, has been compromised, paid, satisfied, and discharged.

The complaint also alleges that Margaret Johnson did not fall within any exception named in the policy and was such a person for whose accidental injuries the defendant obligated itself to indemnify.

There is contained in the complaint the allegation that the defendant has failed and refused to pay the plaintiff the loss incurred by him, and that the plaintiff has complied with all the terms and conditions of the contract that are obligatory upon him to do and perform as conditions precedent.

The plaintiff prays judgment in the sum of $5,000, the penalty of the bond, and the further sum of $2,750 for attorneys' fees, costs, incurred in the case in the United States District Court and interest, and for the additional sum of $1,000 for attorneys' fees in this case.

Attached to the complaint, as exhibits, we find the insurance contract, the judgment in favor of Johnson, and the findings of fact and conclusions of law made by the district court in support of the Johnson judgment. From the findings of fact it appears that Margaret Johnson, while proceeding along the street in a cautious and careful manner, in attempting to pass by a trench digging machine which Collier, or his agents and servants, had left in the public street, the ground along the pathway gave way under her foot. This pathway had been generally used by pedestrians in passing along the street, after the partial excavation of a trench had been effected. She fell into the trench and on a boom, upon which boom there were pieces of sharp and jagged edged iron being part of the mechanism for digging the trench. As a result of being so precipitated into the trench and upon the boom, she was injured.

The court found that Collier and his agents and servants failed to exercise usual and proper care to safeguard the public in the prosecution of the work of excavating for the sewer line. The negligent acts on the part of Collier, or his agents and servants, are specifically described in the court's findings.

It is manifest from the court's findings of fact in the state case, which the demurrer admits to be true, that the negligent acts of Collier, his agents or servants, in failing to exercise usual and proper care to safeguard persons traveling along the pathway, was the proximate cause of Miss Johnson's injuries.

The defendant demurred to the complaint for the following reasons:

First. That the complaint fails to show that jurisdiction was ever obtained over the plaintiff in the action brought by Margaret Johnson. That the complaint fails to allege facts sufficient to show that the plaintiff performed any of the acts either in the Johnson suit or the suit of the city of Santa Fé in the federal court which, by the provisions of the policy, are made conditions precedent to the creation of an obligation on the part of the defendant to defend either of said actions. That it affirmatively appears from the complaint that the action brought by the city of Santa Fé against the plaintiff included claims for attorney's fees and other items of damage constituting liabilities not insured against by the policy of insurance. That the complaint fails to allege sufficient facts to show that the action brought by the city of Santa Fé was brought to enforce a liability imposed by law upon the plaintiff for damages on account of bodily injuries accidentally received, or that said action was of a nature which the defendant was obligated to defend under the provisions of the policy of insurance;

Second. That it affirmatively appears from the complaint that no final judgment has been rendered against the plaintiff on any cause of action for liability insured against by the policy of insurance, because the complaint fails to allege facts to show that the damages sued for constitute a loss which was either (a) sustained by the plaintiff or (b) paid for in money by the plaintiff or (c) paid in satisfaction of any judgment against the plaintiff after actual trial of the issue. That no facts are alleged to show that the defendant gave its written consent to the settlement of the action brought by the city of Santa Fé against the plaintiff and the American Surety Company. That no facts are alleged to show the existence of any liability of the plaintiff to pay any portion of the judgment recovered by Margaret Johnson against the city of Santa Fé.

Plaintiff maintains the sufficiency of his complaint most strongly on the theory that it discloses a breach of defendant's contract obligation to defend him in the Johnson case; which breach, it is claimed, operated to waive or release various of the contract restrictions or limitations upon his right to indemnity.

Considering the findings in the Johnson Case, as exhibited in this complaint, it clearly appears that the negligence for which Johnson recovered was that of the plaintiff. Defendant does not deny that Collier was answerable over to the city, as for exoneration, on principles laid down in Chicago v. Robbins, 67 U. S. (2 Black) 418, 422, 17 L. Ed. 298; Robbins v. Chicago, 71 U. S. (4 Wall.) 657, 670, 18 L. Ed. 427; Washington Gas-light Co. v. Dist. of Columbia, 161 U. S. 316, 16 S. Ct. 564, 40 L. Ed. 712; and in many other decisions. Defendant contends that the judgment itself did not conclude plaintiff, either as to his negligence or as to the damages, and that plaintiff did not really become involved until the city sued him.

This, defendant urges, results from the fact that the city did not give plaintiff notice to defend the Johnson suit.

Plaintiff's position is that “notice *** and an opportunity to appear and defend” are enough to estop the person answerable over, “to contest the justice of the claim in the suit against himself, after having neglected or failed to show its injustice, in the suit against the person to whom he is responsible over.” 34 C. J. “Judgments,” § 1463. The general principle is usually stated thus.

But it will be found that the authorities...