Hartford Acc. & Indem. Co. v. Maus

• Citation: 266 Or. 203,511 P.2d 839
• Parties: HARTFORD ACCIDENT AND INDEMNITY COMPANY, a corporation, Appellant, v. Lorraine W. MAUS and David C. Maus, husband and wife, Defendants, George A. Pyle and Mary Pyle, husband and wife, Respondents.
• Decision Date: 06 July 1973
• Court: Oregon Supreme Court

Page 839

511 P.2d 839

266 Or. 203

HARTFORD ACCIDENT AND INDEMNITY COMPANY, a corporation, Appellant, v. Lorraine W. MAUS and David C. Maus, husband and wife, Defendants, George A. Pyle and Mary Pyle, husband and wife, Respondents.

Supreme Court of Oregon, In Banc.

Argued and Submitted April 4, 1973.

Decided July 6, 1973.

Randall E. Thwing, Eugene, argued the cause for appellant. With him on the briefs were Thwing, Atherly & Butler, Eugene.

A. J. Morris, Eugene, argued the cause for respondent. With him on the brief were Bailey, Hoffman, Morris & Van Rysselberghe, Eugene.

DENECKE, Justice.

The defendants Pyle prevailed in this action on an express indemnity agreement tried before the court without a jury. Plaintiff, Hartford, appeals.

Mrs. Maus was president of Eugene Escrow Service, Inc., a corporation. The company engaged in the escrow business. Statutes required companies engaging in such business to provide a bond. Mrs. Maus secured the defendant George Pyle, a realtor with whom she had done escrow business, and his wife, the defendant Mary Pyle, to sign as indemnitors on the application to Hartford for such bond. Pursuant to such application a bond of escrow agency was issued by Hartford.

Eugene Escrow Service, Inc., defaulted and the state was required to make payments to persons owed by the escrow company. The state obtained a judgment against Hartford, as surety, for such payments. In this action Hartford seeks indemnity for the amount paid to satisfy that judgment and for attorney fees according to the provisions of the indemnity agreement.

The application, prepared by Hartford's agent, states that the bond sought is one 'to cover Real Estate License.' The bond issued was 'Bond of Escrow Agency.' The indemnity portion of the application recites: 'In consideration of the HARTFORD ACCIDENT AND INDEMNITY COMPANY executing the bond or instrument herein applied for, the undersigned join * * * in the foregoing indemnity agreement * * *.'

The trial court held for the defendants upon the ground that the bond applied for was never issued.

The indemnity agreement also provides that the bond issued is 'made part of this agreement.' Provisions of the indemnity agreement are then contradictory inasmuch as the bond applied for is 'to cover Real Estate License,' which is part of the indemnity agreement, whereas the bond issued is a 'Bond of Escrow Agency.' Being internally inconsistent, the indemnity agreement is ambiguous and, therefore, extrinsic evidence may be introduced to explain the ambiguity. Erickson v. Grande Ronde Lbr. Co., 162 Or. 556, 580, 92 P.2d 170, 94 P.2d 139 (1939).

The evidence is uncontradicted that the intent of all the parties was that the application was to secure an escrow agent's bond for Mrs. Maus's company. There was no suggestion that the company was engaged in the real estate brokerage business and the strong implication is to the contrary. The statute requires no bond for a real estate broker. The use of the phrase 'Real Estate License' in the application was clearly a mistake.

If we examine the problem in light of the Pyle's subjective intention rather than their objective intention as expressed in the documents, we reach the same result. The Pyles did not read the application except for the indemnity paragraph which they signed. They also never saw the bond. Their intention was to sign the indemnity agreement so Mrs. Maus could get a bond to continue operating her escrow business.

Upon oral argument the questions were raised ...