National Mut. Ins. Co. of Washington, D. C. v. Maryland Cas. Co., 19370

• Decision Date: 07 February 1963
• Docket Number: No. 2,No. 19370,19370,2
• Citation: 187 N.E.2d 575,136 Ind.App. 35
• Parties: NATIONAL MUTUAL INSURANCE COMPANY OF WASHINGTON, D. C., Appellant, v. MARYLAND CASUALTY COMPANY, Appellee
• Court: Indiana Appellate Court

Page 575

187 N.E.2d 575

136 Ind.App. 35

NATIONAL MUTUAL INSURANCE COMPANY OF WASHINGTON, D. C., Appellant, v. MARYLAND CASUALTY COMPANY, Appellee.

No. 19370.

Appellate Court of Indiana, Division No. 2.

Feb. 7, 1963.

Rehearing Denied April 2, 1963.

Straley Thorpe, Hammond, for appellant.

Spangler, Jennings, Spangler & Dougherty, by William S. Spangler, Gary, for appellee.

MOTE, Presiding Justice.

This appeal involves an action commenced in the Lake Circuit Court by Maryland Casualty Company, appellee, against American Fidelity and Casualty Company Inc., and National Mutual Insurance Company of Washington, D. C., appellant, to recover payment made by the appellee by reason of what has been styled variously as an original re-delivery bond, attachment bond and surety bond, executed by appellee in behalf of one Saunders, ancillary to a proceeding commenced in the Lake Superior Court and venued to the Porter Circuit Court, for property damages allegedly caused by Saunders' agent and driver in the operation of a tractor-trailer combination. The appellant had issued to said Saunders a policy of insurance covering said tractor-trailer for property damage in the sum of Five Thousand ($5,000.00) Dollars, which was in effect at the time of the collision.

A pertinent part of the policy or insuring agreement as disclosed by the record makes the following provisions:

'* * * To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of the use thereof caused by accident and arising out of the ownership, maintenance or the use of the automobile * * *

* * *

* * *

'6. Action against Company--coverages A and B:

'* * * Any person or organization or the legal representative thereof who has secured judgment or written agreement shall thereafter be entitled to recover under this policy to the extent of the insurance afforded by the policy * * *'

It appears that David Johnson Company, Inc., the obligee named in said bond, recovered a final judgment in the sum of Ten Thousand ($10,000.00) Dollars in its action for property damages against the said Saunders and Reed Trucking Company, Inc., lessee of the tractor-trailer combination at the time of the accident.

The record shows that the judgment of Ten Thousand ($10,000.00) Dollars rendered in favor of plaintiff, David Johnson Company, Inc., for property damages to its building against Saunders, et al., was satisfied and released upon the payment by appellee, after demand, of Five Thousand ($5,000.00) Dollars to the judgment creditor and the further payment of Five Thousand ($5,000.00) Dollars by said American Fidelity and Casualty Company, Inc.

Appellee filed a complaint in two paragraphs seeking to recover from appellant and American Fidelity and Casualty Company, Inc., the sum of Five Thousand ($5,000.00) Dollars so paid by it, and the issues were closed by an answer in three paragraphs; however, it is admitted in its brief that the second (2nd) and third (3rd) paragraphs raised no issues which concern this appeal.

The cause was submitted to the court, without jury, on January 21, 1959, on a stipulation of facts, the pertinent details of which are contained in this opinion. The aforementioned bond, omitting formal parts and signatures, is as follows:

'We, Paul B. Saunders and the Maryland Casualty Company acknowledge ourselves bound to David Johnson Company, Inc., in the penal sum of Five Thousand ($5,000.00) Dollars.

'The condition of the above obligation is that: Whereas, the said plaintiff has filed his complaint herein against this defendant and has by his written undertaking attached certain personal property belonging to this defendant, to-wit:

'One Brockway Motor Vehicle Tractor, Delaware License 'C25968, Serial #39199, Motor #46 B 2698'.

'Now in consideration of the plaintiff and the Sheriff of Lake County, Indiana, releasing unto the defendant the said described property, this defendant and his surety herein hereby stipulate and agree to substitute for said property their joint and several bond herein and undertake to pay all costs and damages adjudged against this defendant in the principle action herein to the extent as herein provided.'

The court found against appellant and in favor of appellee in the sum of Five Thousand ($5,000.00) Dollars and held the American Fidelity and Casualty Company not liable, and rendered judgment accordingly.

Appellant filed its motion for a new trial on the grounds, (1) that the decision of the court is not sustained by sufficient evidence and, (2) that the decision was contrary to law. The motion was overruled, and this appeal followed.

The only error relied upon for reversal was that the trial court erred in overruling the said motion for new trial. The sole proposition urged by appellant for reversal is that the decision is contrary to law because the trial court erroneously extended the law of subrogation under the facts of the case.

Basically, appellant bottoms its position on the theory that appellee was a mere volunteer in assuming the obligations defined in the bond issued by it. This position is untenable. A party, without compulsion, making a voluntary payment of the debt of another is not entitled to subrogation. Fast, et al. v. State of Indiana ex rel. Board of Commissioners of the County of Allen (1915), 182 Ind. 606, 107 N.E. 465; Indiana Trust Co. v. Beagley, Treasurer et al. (1938), 105 Ind.App. 502, 15 N.E.2d 758. However, it is held that a right of subrogation does exist in favor of one, who, bound as a surety, pays the debt or obligation of the principal under the compulsion of his suretyship obligation. Fidelity and Deposit Co. of Maryland v. Sluss (1938), 214 Ind. 258, 15 N.E.2d 372, 117 A.L.R. 575; Hubbard v. Security Trust Co., Receiver (1906), 38 Ind.App. 156, 78 N.E. 79; Fast et al. v. State of Indiana ex rel. Board of Commissioners of the County of Allen, supra. Indeed, Indiana, by statute, contemplates subrogation when a surety pays a judgment rendered against his principal.

'When * * * any person being surety in any undertaking whatever, has been or shall be compelled to pay any judgment or any part thereof, or shall make any payment which is applied upon such judgment by reason of such suretyship * * * the judgment shall not be discharged by such payment, but shall remain in force for the use of the * * * person making such payment * * *.' [Acts 1881 (Spec.Sess.), ch. 38, § 740, p. 240]; § 3-2505, Burns' 1946 Replacement.

In the case of Burbank et al. v. Slinkard et al. (1876), 53 Ind. 493, the court, having come to the conclusion that one Slinkard was liable to one Armstrong for the amount of the unpaid portion of a judgment, in response to the argument that Slinkard was a volunteer and not entitled to subrogation, stated:

'He was compelled by the law, and under threat of legal proceedings to pay it. We do not decide that the threat of the suit added anything to the compulsory character of the payment. It seems to us that it was sufficient that Slinkard was by law liable to Armstrong for the money, and that the latter claimed it of him. There was a legal compulsion on Slinkard to pay it, upon Armstrong's demand.

'It is maxim of law, that what one may be compelled to do by suit, he may do without suit.'

The existence of the right of subrogation is well defined in Peirce v. Higgins, et al. (1884), 101 Ind. 178, wherein the court said:

'The surety's right to subrogation comes into existence with his contract; his rights flow from that contract and accrue when it is executed * * *. These rights continue in undiminished vigor from their inception until the termination of his liability. It needs no particular form of contract to create them, for they are created by law and are legal incidents of the undertaking.'

Appellant has failed to distinguish between one voluntarily paying the debt of another and one voluntarily entering into a suretyship contract.

The appellant does not deny that appellee was bound by the bond, which, by its terms, was a substitution of the security of the bond for the property. Therefore, it was a bond for discharge of attachment or a restitution bond. § 3-519, Burns' 1946 Replacement; Elder-Stearns Law of Suretyship § 10.24 (5th ed. 1951). The execution of the bond discharges the attachment and when judgment is obtained resort may be had to the bond instead of the property. Bick et al. v. Lang et al. (1896), 15 Ind.App. 503, 44 N.E. 555. Therefore, when appellee, on demand, paid the...