Prudential Finance Co. v. National Surety Corp. , 192 Ga. 140 ( 1941 )

1. The surety corporation sought to recover of the finance company as indemnitor the amount of certain losses alleged to have been sustained by the plaintiff by reason of having become surety for a third company upon two bonds made by the latter company in a judicial proceeding. Attached to the petition were copies of two indemnity contracts alleged to have been executed by the defendant as indemnitor, one for each bond. Copies of the bonds themselves were not attached to the petition, but the petition purported to state the conditions of each in substance, together with the names of the parties thereto, and to show a breach thereof by the principal, with resulting loss to the plaintiff. The allegations, in connection with recitals contained in the first indemnity agreement, showed that the first bond was executed and filed with the circuit court of the 13th Judicial Circuit of the State of Florida, in behalf of a named principal and in favor of a named obligee, in a matter described in the indemnity agreement as "$1545 restraining-order bond in case of the Bentley-Gray Dry Goods Company, a corporation, et al." It further appeared that the bond was executed at the request of the defendant in the case stated. Held, that the petition was not subject to general demurrer, so far as it sought recovery for loss on the first bond.

(a) The court passed an order sustaining certain grounds of special demurrer to the extent of requiring "the setting up of a copy of the bond referred to or substantially the provisions thereof." The effect of this order was to sustain such demurrers in so far as they may have contained merit; and it was not erroneous as against the defendant.

(b) Under the allegations of the petition and the recitals contained in the first indemnity contract as signed by the defendant, the petition was not subject to special demurrer as failing to "set forth the nature of the judicial proceeding" or the conditions of the bond as prescribed by judicial order.

(c) The rulings made above refer only to that part of the petition which sought recovery in relation to the first bond.

2. The second indemnity contract which the plaintiff sought to apply to the second bond referred only to such bond or bonds as the surety corporation might execute on application of the defendant or of any person whose name might be furnished by the defendant to the plaintiff for that purpose, and did not otherwise describe or identify any bond as to which the defendant would be liable. The petition having failed to allege that the plaintiff executed such bond on the request or application of the defendant or of any person whose name was so furnished to the plaintiff for that purpose, the allegations of paragraph 10 of the petition, relating to the second bond and the second indemnity agreement, should have been stricken on demurrer for insufficiency.

No. 13612. MAY 15, 1941. National Surety Corporation filed a suit against Prudential Finance Company and others, praying for a money judgment against the finance Company, and for injunction to restrain all of the defendants from transferring, alienating, or changing in any manner the assets of the finance company. Later the action was voluntarily dismissed as to all parties defendant except the finance company. As to that company, the petition alleged that the plaintiff had sustained losses by reason of having become surety for a third company upon two bonds made by the latter company in a judicial proceeding, and that the finance company was liable to the plaintiff for the amount of such losses under certain indemnity contracts. The finance company filed a demurrer containing both general and special grounds. On November 7, 1940, the court overruled the general demurrer upon each and every ground, and reserved the special demurrers for "a later decision." On the following day, some of the special demurrers were sustained in part, while some were sustained altogether, and still others were overruled. In this order on the special demurrers the plaintiff was allowed fifteen days to amend. Nothing was said as to what would happen if the plaintiff did not amend. It appears from the record that no amendment was offered. After lapse of the fifteen-day period, the defendant presented a bill of exceptions, assigning error on the overruling of the general demurrer, and on the order on the special demurrers in so far as it overruled any of them.

The petition contained the following allegations:

"7. On April 26, 1938, your petitioner executed as surety a bond payable to the City of Tampa, in the amount of ($1545), being a bond executed and filed with the circuit court of the 13th Judicial Circuit of the State of Florida, and the condition of the bond was that if Banks Company should pay to the City of Tampa city license-taxes found to be legally due the City of Tampa for the year 1938, then the bond would be void; otherwise to be of full force and effect, and National Surety Corporation obligated itself to pay the City of Tampa the city license-taxes for the year 1938 for Banks Company in the event Banks Company failed to pay said license taxes.

"8. Prior to the execution of said bond the defendants herein furnished your petitioner with a financial statement, a copy of which is attached hereto, marked Exhibit ``A,' and made a part hereof.

"9. Prior to the execution of said bond the defendants, Prudential Finance Company, executed an indemnity agreement to National Surety Corporation, a copy of which is attached hereto, marked Exhibit ``B,' and made a part hereof.

"10. On or about January 10, 1939, petitioner executed as surety a bond, the condition of which was substantially the same as that described in the preceding paragraphs of this petition, except that the bond covered city license taxes due the City of Tampa by Banks Company for the year 1939, and the amount of said bond was ($1515), and on January 9, 1939, Prudential Finance Company executed a general indemnity agreement to National Surety Corporation, a copy of said agreement being attached hereto, marked Exhibit ``C,' and made a part hereof.

"11. Your petitioner shows that the City of Tampa, through its proper officers, made demand upon petitioner for payment under the two bonds herein above described, and threatened to file suit on said bonds unless payment was made; and petitioner shows that on the 21st day of November, 1939, petitioner paid to the City of Tampa the sum of ($930) in payment of its liability and the liability of Banks Company under the bond executed on April 26, 1938, and as herein above described, and a copy of the receipt and release from the City of Tampa to National Surety Corporation is attached hereto, marked Exhibit ``D,' and made a part hereof.

"12. Your petitioner shows that the City of Tampa, through its proper officers, made demand upon petitioner for payment under the bond executed on January 10, 1939, as herein above described, and threatened to file suit on said bond unless payment was made; and petitioner shows that on the 21st day of November, 1939, petitioner paid to the City of Tampa the sum of ($840) in payment of its liability and the liability of Banks Company under the bond executed on January 10, 1939, and as herein above described, and a copy of the receipt and release from the City of Tampa to National Surety Corporation is attached hereto marked Exhibit ``E,' and made a part hereof.

"13. Petitioner shows that the defendant, Prudential Finance Company, is indebted to your petitioner in the sum of ($1770) upon the indemnity agreements herein described and which are attached hereto as exhibits and made parts of this petition.

"14. Petitioner shows that it has made demand upon Prudential Finance Company for payment and same has been refused."

Paragraphs 15 to 19, inclusive, were altogether stricken on demurrer, and need not be stated. By amendment it was alleged that the defendant finance company is insolvent.

The contents of Exhibit "A" need not be stated. Copies of the bonds on which the plaintiff became surety were not attached. Exhibit "B" is a copy of an indemnity contract signed by Prudential Finance Company on April 26, 1938. This contract began by reciting that "The undersigned, hereinafter called indemnitors, have a material interest in procuring a bond or bonds in behalf of Banks Company, hereinafter called principal, and in favor of City of Tampa, Florida, a municipal corporation, and its successors — $1545 restraining-order bond in case of Bentley-Gray Dry Goods Company, a corporation, et al., and, at the request of the indemnitors and upon condition that this instrument be executed, the National Surety Corporation, hereinafter called surety, has executed or procured the execution of or is about to execute or procure the execution of such bond or bonds." The agreement contained, among others, the following provisions: that the finance company "will indemnify the surety, its successors and assigns, against any and all liability, loss, costs, damages, fees of attorneys, and other expenses which the surety may sustain or incur in consequence of having executed, or procured the execution of, any such bonds;" that "the voucher or vouchers for such payments shall be prima facie evidence of the liability of the indemnitors to reimburse the surety for such payments, with interest," and that the surety company is authorized "to adjust, settle, or compromise any claim or suit arising under such bond; and, . . with respect to any of the foregoing matters, to take any action it may deem appropriate and refrain from taking any action it may deem inappropriate;" also that the indemnitor waives "notice of the execution of any such bond and notice of any breach thereof or of any act or default that may give rise to claim thereunder or hereunder." Exhibit "C" is a copy of an alleged second indemnity contract, purporting to have been executed by the defendant finance company on January 9, 1939. It is entitled "General Indemnity Agreement," and refers to no particular bond. It provided, however, that it would cover any and all such bonds executed by the surety company "as have been and such as may hereafter be applied for" by the finance company as indemnitor, or by any person, firm, corporation, or association whose name shall for that purpose have been furnished to the surety company by it, whether or not "this instrument is referred to or mentioned in connection therewith." In other respects, that is, as to terms and conditions, this agreement was the same as the previous one. Exhibit "D" purports to be a receipt signed by the tax collector of the City of Tampa, Florida, on November 21, 1939, acknowledging payment by the surety company of the sum of $930, and discharging it from all liability "as surety on the bond executed in the case of Bentley-Gray Dry Goods Company v. City of Tampa, and wherein Banks Company Incorporated executed said bond as principal and National Surety Corporation executed said bond as surety." The receipt further declares that the surety company is subrogated to any and all rights of the City of Tampa against Banks Company. Exhibit "E" is a copy of a receipt substantially the same as the foregoing, except that the amount is $840, and it refers to "the bond executed in the case of J. P. McCraw v. City of Tampa and wherein Banks Company Incorporated executed said bond as surety."

The grounds of special demurrer (1, 3 and 4), which the court sustained in part, were as follows: (1) To paragraph 7 of the petition, upon the grounds that no copy of the surety bond is attached; and that the petition does not "set forth the nature of said judicial proceedings, nor the terms and conditions of said bond, nor the liability, if any, judicially determined thereon in so far as plaintiff is thereby affected as surety." (3) To the allegations in paragraph 9 of the petition, on the following grounds: (a) "That said alleged indemnity agreement does not disclose upon its face nor by virtue of concurrent writing or writings the terms and conditions of the said bond and the liability of the said Banks Company, Tampa, Florida, or plaintiff as surety or guarantor thereon, so as fully to disclose the terms and conditions of said alleged indemnity agreement." (b) "That said allegations as to the condition of said bond constitute a conclusion of the pleader, and are not predicated upon any facts to substantiate the same, and more especially because it does not appear from the copy of said indemnity agreement attached to said suit nor from a copy of said alleged restraining order bond what were the terms and conditions of said bond." (c) "That the said alleged indemnity agreement, as therein set out, is too vague, indefinite, and uncertain in its terms and conditions to constitute the basis of an action for damages, and should accordingly be stricken." (4) To the allegations in paragraph 10 of the petition, upon the following grounds: (a) No copy of the bond is attached to the petition. (b) The allegation that "the condition of which (said bond) was substantially the same as that described in the preceding paragraphs of this petition" is too vague, undefinite, and uncertain to put the defendant on notice. (c) "Neither the said allegations nor the copy of said alleged indemnity agreement disclose any actionable indemnity agreement or breach thereof, and accordingly should be stricken;" and upon still other grounds substantially the same as that contained in this last quotation. These special grounds numbered 1, 3, and 4 were sustained by the court, "only to require the setting up of a copy of the bond referred to or substantially the provisions thereof." The grounds of special demurrer which the court unqualifiedly overruled were: (2) Assailing the allegations of paragraph 8 of the petition as being "immaterial, irrelevant, and incompetent to bind this defendant." (5) Attacking the allegations of paragraph 11 of the petition as irrelevant and immaterial, and contending that the payment alleged to have been made by the plaintiff appeared to have been voluntary and not under legal compulsion. (6) Aimed at the allegations in paragraph 13 of the petition, as constituting a mere conclusion of the pleader, and as a matter of fact showing no liability on the part of the defendant. (7) To the allegations in paragraph 14 of the petition, as "irrelevant and incompetent." The special grounds of demurrer which the court unqualifiedly sustained and about which there is here no controversy were those relating to the allegations contained in the plaintiff's paragraphs 15 to 19, inclusive. 1. In this division of the opinion, we shall deal with the case only as it relates to the first of the two bonds which the plaintiff claims to have executed as surety. As shown in the preceding statement, the plaintiff did not attach to the petition a copy of either bond, but the petition alleged that the condition of the first bond was that "if Banks Company should pay to the City of Tampa city license-taxes found to be legally due the City of Tampa for the year 1938, then the bond would be void; otherwise to be of full force and effect," and alleged further that the National Surety Corporation "obligated itself to pay the City of Tampa the city license taxes for the year 1938 for Banks Company in the event Banks Company failed to pay said license taxes." Other allegations were to the effect that the City of Tampa, through its proper officers, demanded payment of the sum of $930 as the liability of the plaintiff and of Banks Company under this bond, and that on November 21, 1939, the plaintiff paid this sum, taking a receipt and release from the city tax-collector, a copy of which is attached to the petition. The petition describes the bond as one "executed and filed with the circuit court of the 13th Judicial Circuit of the State of Florida," and shows that it was executed for Banks Company as principal. The petition itself gives no information as to the nature of the judicial proceeding, but the indemnity contract signed by the defendant, a copy of which was attached as an exhibit, contains the figures and words, "$1545 restraining-order bond in case of the Bentley-Gray Dry Goods Company, a corporation, et al." The indemnity contract also provided that a voucher or vouchers for payment "shall be prima facie evidence of the liability of the indemnitors to reimburse the surety for such payments, with interest." In view of the foregoing allegations, the petition was not subject to general demurrer so far as it sought a recovery on the first transaction. Dotson v. SavannahPure Food Canning Co., 140 Ga. 161 (78 S.E. 801); PiedmontHotel Co. v. Henderson, 9 Ga. App. 672 (2) (72 S.E. 51). The court did sustain grounds 1, 3, and 4 of the special demurrer, so far as "to require the setting up of a copy of the bond referred to or substantially the provisions thereof." Since special ground 4 did not relate to the first bond, we will at this point consider only grounds 1 and 3 and the order passed thereon. The judge did not require absolutely that a copy of the bond be attached, his order being in the alternative. He did require, however, that at least the substantial provisions of the bond be stated; and the proper construction of his order would seem to be that he considered that such provisions had not already been alleged. Certainly the order adjudicated something adversely to the plaintiff, and required amendment. If the defendant had moved for some further order after the plaintiff failed to amend within the time allowed, it may be that an entirely different situation would have been created; but as to that of course no decision is here made. Compare White v. Little, 139 Ga. 522 (3) (77 S.E. 646); Jones v. Butler, 191 Ga. 126 (12 S.E.2d 326);Headley v. Maxwell Motor Sales Co., 25 Ga. App. 26 (2) (102 S.E. 374).

To say the least, the order as passed substantially sustained every contention made in grounds 1 and 3 of the special demurrer, unless it be otherwise as to that part of ground 1 which objected that the petition did not, either in paragraph 7 or elsewhere, set forth "the nature of said judicial proceeding," or the liability on the bond, "if any, judicially determined," — the latter phrase meaning, we suppose, the conditions of the bond as prescribed by judicial order. The court did not err in overruling this part of the demurrer. The petition showed that the bond was executed and filed with the circuit court of the 13th Judicial Circuit of the State of Florida. In the indemnity contract it was further described as a bond made in behalf of Banks Company and in favor of the City of Tampa, Florida, "$1545 restraining-order bond in case of the Bentley-Gray Dry Goods Company, a corporation, et al." A copy of the indemnity contract was made a part of the petition, and according to the copy it was signed by the defendant. The defendant thus contracted with reference to the judicial proceeding, and actually stated the case and its nature in a general way. It further appears in this contract that the bond was given in pursuance of some restraining order, and that it was made on request of the defendant in the very case stated. In these circumstances, the defendant presumably knew all about the case and the orders rendered therein, and did not need further information in order to prepare its defense. Since the petition alleged enough to show to the court a right of action in the plaintiff, and the defendant did not need additional information, the demurrer was without merit in so far as it may have demanded further specification. Apparently, the decision inRed Line Products Co. v. J. M. High Co., 53 Ga. App. 531 (186 S.E. 698), cited for the defendant, would be applicable, if the plaintiff here had not set forth a copy of the indemnity agreement signed by the defendant; but as it is, the ruling there made is not pertinent in the instant case. Nor is the conclusion here reached contrary to the decision in Southern Grocery Stores Inc. v. Childs, 174 Ga. 888 (164 S.E. 766), or to other decisions relied on by the plaintiff in error. We conclude that the judge did not err in overruling special grounds 1 and 3, in so far as he may in fact have overruled them. Nor was it error to overrule other grounds of demurrer, either general or special, as to any part of the petition relating to the first bond.

2. In so far as the plaintiff sought a recovery in relation to the second bond, the petition was fatally defective, for the reason that it did not disclose any actionable indemnity agreement or a breach thereof by the defendant as referable to such bond. Recovery here was sought on basis of the general indemnity agreement, a copy of which was set forth as exhibit "C." As shown in the preceding statement, this agreement purported to cover any and all bonds which the surety company might execute on application of the defendant, or by any person, firm, corporation, or association whose name shall for that purpose have been furnished to the surety company by the defendant indemnitor. The agreement does not otherwise identify any bond as to which the defendant would be liable, and the petition nowhere alleged that the second bond was made on request or application of any of such parties, or of any party, for that matter. For this reason, it did not state a cause of action for reimbursement in so far as the second bond is concerned, and the court erred in overruling that part of ground 4 of the special demurrer attacking the allegations of paragraph 10 because "neither the said allegations nor the copy of said alleged indemnity agreement disclose any actionable indemnity agreement or breach thereof, and should accordingly be stricken." While the petition as a whole was not demurred to on this ground, yet with the allegations of paragraph 10 stricken, as they should have been, nothing would have remained as basis for recovery upon the second indemnity agreement. This being true, other grounds of demurrer pertaining to this phase of the case need not be considered.

Judgment affirmed in part and reversed in part. All theJustices concur.