Wolthausen v. Trimpert

• Decision Date: 19 February 1919
• Court: Connecticut Supreme Court
• Parties: WOLTHAUSEN v. TRIMPERT.

105 A. 687

93 Conn. 260

WOLTHAUSEN v. TRIMPERT.

Supreme Court of Errors of Connecticut.

February 19, 1919

Appeal from Court of Common Pleas, Fairfield County; John R. Booth Judge.

Action by John H. Wolthausen against William F. Trimpert. Judgment for plaintiff, and defendant appeals. No error.

On May 4, 1914, the plaintiff sold to the Wolthausen Rough Hat Company all his stock in that company for $18,000. He was to receive cash. The defendant was one of the principal stockholders of the Rough Hat Company, and at the request of the defendant's attorney the plaintiff consented to take in part payment an assignment from the Rough Hat Company of an account it had against the M. Oppenheim Hat Company, so that the plaintiff received in payment for his stock the assigned account, amounting to $10,005.34, and the balance of $7,994.66 in cash. The acceptance of this Oppenheim account in lieu of cash, at the request of the defendant's attorney, was of material benefit to the defendant, who was one of the principal stockholders of the Rough Hat Company and, in consideration of the acceptance of the assignment by the plaintiff, the plaintiff and defendant, on May 4, 1914 entered into a written contract, upon which this action is brought. The contract was as follows, omitting the immaterial parts:

" Whereas, the said Wolthausen has this day assumed the liability of the Wolthausen Rough Hat Company, a Connecticut corporation, under and by virtue of a certain agreement dated February 7, 1914, by and between said corporation and M. Oppenheim Hat Company, a New York corporation, and has received an assignment of a certain account held by the Wolthausen Rough Hat Company against said M. Oppenheim Hat Company; and whereas, the said Trimpert is one of the principal stockholders of the Wolthausen Rough Hat Company: Therefore be it agreed as follows: That said parties shall bear an equal share of any loss that may be incurred by the said Wolthausen on the balance of $5,000, which, under the terms of said agreement of February 7, 1914, it is provided may remain to the credit of the said M. Oppenheim Hat Company for a period of 90 days after the indebtedness of the said M. Oppenheim Hat Company has been reduced to said sum of $5,000, provided the said Wolthausen does not extend said credit beyond said period of ninety days."

This contract was signed by both parties. The contract of February 7, 1914, referred, among other things, to the sale of rough hat bodies by the Rough Hat Company to the Oppenheim Company, and to the credit to be given when the account of said Oppenheim Company should be reduced to $5,000. On May 21, 1914, the account had been reduced to $4,347.40; whereupon, by the contract of Feburary 7, 1914, the Oppenheim Company became entitled to the 90-day credit expiring August 21, 1914. Pursuant to an agreement in the contract of February 7, 1914, the defendant became a stockholder and director in the Oppenheim Company, and remained such until he resigned some time in the summer of 1914, and he had or was chargeable with knowledge of the financial affairs of the Oppenheim Company, and that the balance of $4,347.40 had not been paid at the time of his resignation; also, pursuant to the contract of February 7th, the bookkeeper of the Rough Hat Company became a director and the treasurer of the Oppenheim Company until his resignation, August 27, 1914. He knew at that time that the balance of the account had not been paid, but did not call defendant's attention to this fact, or suggest payment of the account by the Oppenheim Company. At some time prior to September 1, 1914, the plaintiff, with his attorneys, took up the claim with the Oppenheim Company and pressed for payment. About September 1st the Oppenheim Company offered to assign certain accounts in satisfaction of the plaintiff's claim against it, but afterwards declined to do so. On October 14, 1914, as a result of further demands by the plaintiff, the Oppenheim Company paid $1,000 on account. No further payments were afterwards made by the Oppenheim Company. The Oppenheim Company was fairly prosperous to August 1, 1914, but thereafter it lost credit, its business fell off, and it became in fact insolvent soon after October 1, 1914, and this insolvency was disclosed to the plaintiff at some time prior to December 1, 1914. The plaintiff, after August 21st and prior to his knowledge of the insolvency, made repeated demands for payment and threatened suit. The Oppenheim Company ceased to do business in December, 1914. The plaintiff brought suit against the Oppenheim Company in January, 1915, and realized nothing. The Oppenheim Company was adjudged bankrupt April 27, 1915, and ultimately paid 10 per cent., the final dividend having been received by the plaintiff December 12, 1916. Soon after August 21, 1914, the defendant was informed by an officer of the Oppenheim Company, and in good faith believed, that the plaintiff's claim had been satisfactorily adjusted, and had no knowledge of the contrary until the plaintiff brought suit against the Oppenheim Company in January, 1915. The plaintiff did not give notice to the defendant of the failure of the Oppenheim Company to pay the balance due on the assigned account until after he received the final dividend from the trustee in bankruptcy December 12, 1916. This action was brought January 24, 1917. The court found due and unpaid on the plaintiff's claim against the Oppenheim Company $3,012.66 and accrued interest from December 12, 1916, which was the plaintiff's loss on said claim, and rendered judgment for the plaintiff to recover one-half, to wit, $1,613.02, from the defendant.

Where indemnitor agreed to share equally indemnitee's losses on an account held by indemnitee against third party, indemnitee's failure to bring suit against third party, which finally became bankrupt, was not negligence or laches, where indemnitee continually pressed third party for payment, and threatened to bring suit, and where suit, if in fact brought, might have forced third party into bankruptcy.

J. Moss Ives and Thomas A. Keating, both of Danbury, for appellant.

William H. Cable, of Danbury, for appellee.

GAGER J.

The principal question upon the foregoing statement of facts relates to the construction to be given to the contract between the plaintiff and the defendant. The operative part of the contract reads as follows:

" That said parties shall bear an equal share of any loss that may be incurred by the said Wolthausen on the balance of $5,000 which, under the terms of said agreement of February 7, 1914, it is provided may remain to the credit of the said M. Oppenheim Hat Company for a period of 90 days after the indebtedness of the said Oppenheim Hat Company has been reduced to said sum of $5,000, provided the said Wolthausen does not extend said credit beyond said period of 90 days."

The plaintiff contends that this was a contract of indemnity, or an absolute guaranty. The defendant contends that the contract was one of conditional guaranty. Very many of the cases in which the distinction between contracts of guaranty and contracts of indemnity is drawn arise with reference to the applicability of the statute of frauds. No such question arises here, for the defendant signed contract in question. The distinction, however, remains the same.

A contract of guaranty is a collateral undertaking, and presupposes some contract or transaction to which it is collateral. The definition adopted in Ball Electric Light Co. v. Child, 68 Conn. 525, 37 A. 391, is:

" A guaranty is a collateral undertaking to pay a debt or perform a duty, in case of the failure of another person, who is in the first instance liable to such payment or performance."

Indemnity contracts are of great variety, but, so far as a situation like that now before us is concerned, it may be said that the contract to indemnify is an original undertaking to save the indemnitee harmless against loss or damage of a specified character which may happen in the future. Bouvier Law Dictionary, art. " Indemnify." If the contract before us is a contract to indemnify, then the distinction between absolute and conditional guaranties and the characteristics of each become of no importance in the decision of this action.

Our own cases are sufficiently clear in point to control the construction of the contract between the plaintiff and defendant. The trial court correctly decided the character of this contract upon the authority of Reed v. Holcomb, 31 Conn. 360. In this case, in which the primary question was whether the undertaking was within the statute of frauds, the court, after citing from New York and Massachusetts cases, said:

" If the promise is on a sufficient consideration moving between the immediate parties to it, and from which the

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