Ham v. Hill

• Decision Date: 31 January 1860
• Citation: 29 Mo. 275
• Parties: HAM, Plaintiff in Error, v. HILL, et al., Defendants in Error.
• Court: Missouri Supreme Court

29 Mo. 275

HAM, Plaintiff in Error,

v.HILL, et al., Defendants in Error.

Supreme Court of Missouri.

January Term, 1860.

1. A. and B. were partners. A., transferring his interest to B. and retiring from the firm, took from the latter a bond of which the following is the condition: “Whereas the said B. having purchased the interest of the said A. in the firm of ‘A. & B.’ in the carriage business in the city of B., Mo., and has agreed with the said A. to assume all partnership liabilities of said firm incurred between April 1, 1858, and July 1, 1858, and to pay the same whenever payment is demanded legally by the creditors of said firm; now if the said B. shall observe and keep said agreement and pay said debts in manner and form above prescribed, then this bond to be void, otherwise to remain in full force and virtue.” Held, that this was not merely a bond of indemnity to A.; that the obligation thereby created was not contingent upon A.'s being compelled to pay, or his actually paying, to the creditors of the firm the debts embraced within the bond; that a right of action on the bond accrued to A. so soon as B. failed to pay those debts on demand of the creditors.

2. The measure of damages in such case, it seems, would be the amount of the debts provided for in the bond; upon a proper showing, however, the court might give judgment in such form as would make the defendant safe in paying the judgment.

Error to Cooper Circuit Court.

The following is the entire bond sued upon: “Know all men by these presents, that we, John H. Hill, as principal, and William B. Short and George Stucker, as securities, are held and firmly bound unto James R. Ham in the just and full sum of fifteen hundred dollars, for the just and full payment whereof we bind ourselves, our heirs, administrators and assigns firmly by these presents. Upon condition, however, that, whereas, said John H. Hill having purchased the interest of the said James R. Ham, in the firm of Ham & Hill, in the carriage business, in the city of Boonville, Missouri, and has agreed with the said Ham to assume all partnership liabilities of the said firm incurred between the first day of April, 1858, and the first day of July, 1858, and to pay the same whenever payment is demanded legally by the creditors of said firm; now if the said Hill shall observe said agreement and pay said debts in manner and form above prescribed, then this bond to be void, otherwise to remain in full force and virtue. Witness our hands and seals this 5th day of July, 1858. [Signed] John H. Hill (seal), Wm. B. Short (seal), George Stucker (seal.)”

The debts with respect to which defendant was alleged to be in default amounted, as set forth in the petition, to $495.67 and interest. Plaintiff claims damages to the amount of six hundred dollars.

Stephens & Vest, for plaintiff in error.

I. The bond sued on is not a bond of indemnity. It is a bond to do a specific thing, that is, to pay certain debts of the firm of Ham & Hill. The failure of defendant to pay these debts, when payment thereof was legally demanded, was a breach of the bond, and entitled plaintiff to his action. (See 5 Johns. 42; 20 Johns. 161; 3 Cow. 332; 16 Pick. 241; 26 Verm. 61.)

II. The plaintiff can recover not only nominal damages but the full amount of the debts which defendant failed to pay. (See Sedgwick on Dam. 321; Post v. Jackson, 17 Johns. 238; Thomas v. Allen, 1 Hill, 145; 17 Johns. 479; 7 Wend. 499; 7 B. Monroe, 307; 3 Bibb, 197; 7 Dana, 170; 15 Wend. 503; 9 Mees. & W. 656; 8 Mod. 33; 7 T. R. 97.)

Douglass & Hayden, for defendants in error.

I. The bond sued on was a bond of indemnity. It was given to protect the obligee against the payment of the partnership debts. It was for the benefit and protection of the plaintiff alone. It did not affect the liability of either partner to the creditors of the firm. It did not release plaintiff from existing liabilities, nor, so far as creditors are concerned, did it add to the obligation of Hill to pay them. The true sense and meaning of the bond was to save plaintiff harmless. (See Hardcastle v. Hickman, 26 Mo. 475.) The petition states that Hill has refused to pay. Why has he refused? It may be that the notes were fraudulently obtained or there was a failure of consideration, or that he had a set-off. If he has such a defence, shall he not have an opportunity to establish it? If plaintiff recovers he may appropriate the money to his own purposes, and leave the partnership debts unpaid. If he be insolvent, the creditors can not coerce the money from him. Defendant may be compelled to pay the debts twice. A recovery by plaintiff would impair defendant's ability to pay the creditors.

II. The bond is a penal bond, but the penalty is not the measure of damages. The obligee can recover only such damages as he has actually sustained--actual compensation for positive loss. (Sedgw. on Dam.--.) The only way in which plaintiff can show that he has sustained loss is by showing that he has been compelled to pay the debts provided for in the bond, or a portion of them. The measure of damages will be the amount so paid. There is no cause of action. There is no averment of payment, and he must pay to recover. The demurrer was properly sustained. (10 Mo. 19; 17 Mo. 41; 15 Mo. 421.)

EWING, Judge, delivered the opinion of the court.

This was an action on a bond executed by the defendant Hill to the plaintiff-- who had been copartners in the carriage business--containing the following condition: “That whereas the said John H. Hill having purchased the interest of the said James R. Ham, in the firm of Ham & Hill, in the carriage business, in the city of Boonville, Missouri, and has agreed with the said Ham to assume all partnership liabilities of the said firm incurred between the 1st day of April, 1858, and the 1st day of July, 1858, and to pay the same whenever payment is demanded legally by the creditors of said firm: Now if the said Hill shall observe and keep said agreement and pay said debts in manner and form above prescribed, then this bond to be void, otherwise to remain in full force.” The petition alleges, as breaches of said bond, the failure of the defendant to pay certain debts of the firm, which are particularly specified in the petition, accruing within the period mentioned in the bond, payment of which had been legally demanded; and that suit had been brought against the plaintiff by the creditors of the firm to recover said debts. There was a demurrer to the petition, which being sustained, the cause is brought to this court by writ of error.

The question for our consideration is whether a right of action accrued on the bond upon the failure of the defendant to pay the debts it provides for according to its stipulation; or is it a bond of indemnity merely? We think it is clearly to be collected from the terms of the instrument in suit that it was not the intention merely to secure the plaintiff against actual loss or damage, or that it created an obligation which was contingent upon the payment by the plaintiff of the debts it provides for. It is a bond with an affirmative covenant to do a certain thing; the...