Etna Indem. Co. v. Baltimore

• Decision Date: 11 January 1910
• Citation: 76 A. 251,112 Md. 389
• Parties: ETNA INDEMNITY CO. v. BALTIMORE, S. P. & C. RY. CO.
• Court: Maryland Court of Appeals

76 A. 251

112 Md. 389

ETNA INDEMNITY CO.

v. BALTIMORE,S. P. & C. RY. CO.

Court of Appeals of Maryland.

Jan. 11, 1910.

Appeal from Circuit Court of Baltimore City; Charles W. Henisler, Judge.

Bill by the Baltimore, Sparrows Point & Chesapeake Railway Company against the Etna Indemnity Company. From the decree, defendant appeals. Reversed and remanded.

Argued before BOYD, C. J., and PEARCE, SCHMUCKER, BURKE, THOMAS, and PATTISON, JJ.

John B. Deming, for appellant.

Geo. Dobbin Penniman, for appellee.

BOYD, C. J. This is an appeal from a decree directing the Constructing Engineers Company and its president and secretary to execute, reform, and complete a bond to the Baltimore, Sparrows Point & Chesapeake Railway Company from the Constructing Company, as principal, and the Ætna Indemnity Company, as surety. The bill alleges that the Constructing Company had a contract with the railway company to build an electric railway, by which the Constructing Company was required to furnish a bond in the penalty of $10,000; that it delivered to the plaintiff, the railway company, a bond with the Etna Company as surety, which was accepted, but the Constructing Company did not execute it; that the Constructing Company undertook the work, but the railway company, finding it could not complete it according to the terms of the contract, entered into a supplementary agreement with it, whereby the railway company was authorized to co-operate with it in the completion of the work; that the plaintiff caused the Constructing Company to procure on the same day a writing from the Ætna Company, consenting to the execution of the agreement by the railway company and the Constructing Company, the Ætna Company stipulating that its liability should in no event exceed $10,000, as stated in the bond; that a receiver was afterwards appointed for the Constructing Company, but he was not authorized to proceed with the work, and the railway company was compelled to enter into an agreement with other contractors for its completion. It also charges that, by reason of having the work completed during winter months, it was much more expensive than it would otherwise have been; that it cost $18,000 more than the Constructing Company was to receive for it; that a suit at law was brought on the bond; and that within two weeks prior to filing the bill in equity it was discovered that the bond was not executed by the Constructing Company; It being claimed that when the Constructing Company delivered it to the railway company it was not noticed that it had not been executed by it, and it was placed with the records of the railway company for safe-keeping. The bill was filed to require the Constructing Company to complete the execution of the bond, as it was intended and supposed to be. The bond is dated July 17, 1905, and the bill was filed March 20, 1900, against the Constructing Company, its president and secretary, and the receiver. On April 14, 1909, the Ætna Company fiied a petition in the equity case, asking to be made a party defendant, and to be given an opportunity to appear and answer, which was granted. The receiver answered, stating that he was informed and believed that it was the intention of the Constructing Company to deliver a good and sufficient bond, and the Constructing Company, and its president and secretary, also admitted that such was the intention, and that they thought it had been properly executed before it was delivered. The Ætna Company filed a separate answer, in whicn it denied many of the allegations of the bill, and neither admitted or denied others. It alleges that the execution of the bond by the Constructing Company was a condition precedent to liability on its part, and a condition upon which it was delivered to that company. It alleges laches, and that the bond is void and of no effect as to it. It explains the supplemental agreement by saying that it entered into it in the mistaken belief that the bond had been duly executed and delivered, that the plaintiff as custodian of the bond knew, or ought to have known, that it had not been executed, but failed to disclose the fact until long after the alleged liability had arisen, and after suit thereon at law had been brought. The case was submitted to the court on bill and answer, resulting in the decree as above stated, and the Ætna Company took this appeal.

We can have no special difficulty about the right of an obligee to have a bond corrected in equity, even against a surety, when the principal has by mere oversight not executed it, after it is given to the principal by the surety to be executed and delivered to the obligee; provided, of course, the circumstances are such as would justify a court of equity in reforming an instrument of writing. If a surety executes such a bond, and gives it to the principal to be executed by him. and then to deliver it to the obligee, and the principal does so deliver it, having simply overlooked the fact that he had not executed it, and the obligee, believing it was properly executed, and not observing that it had not been by the principal, placed it away for safe-keeping with its papers, all three parties believing it had been regularly executed and intending that it should be, it would be a confession of a very limited power to do justice, if a court of equity would have to admit that it could not require the bond to be put in the shape it was intended and believed to be by all the parties, merely because one of them was a surety. But we do not understand the powers of a court of equity to be so restricted. In Newcomer v. Kline, 11 Gill & J. 457, 37 Am. Dec. 74, the word "dollars" was omitted from a single bill, on which there was a surety, by mistake and accident as alleged in the bill, and our predecessors said: "No doubt can be entertained as to the jurisdiction of a court of equity to correct a mistake in this case, and that such relief will be granted even in the case of a surety. See [Wiser v. Blakely] 1 John. C. Rep. 609." The court passed a decree in the equity case requiring the money to be paid, and it also cited Montville v. Haughton, 7 Conn. 549, which seems to be one of the leading cases on the subject, and said: "In that case a bond was intended to be executed, but the seal was omitted by accident. Relief was granted in equity, although it was contended that the party had his remedy at law; the judge in delivering his opinion observing that the plaintiffs were entitled to a bond, the consideration of which could not be inquired into at law. The remedy might not be adequate." In 24 Am. & Eng. Eucy. of Law, 650, it is said: "Equity may reform instruments against...