Thomson v. . Sanders

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] It is contended on the part of the defendant that the purpose of the bond made by him to the plaintiff, was merely to indemnify the latter against any claim which might be made by Wagner, and the costs and damages resulting to him from the assertion or prosecution of any claim made by Wagner upon the South Carolina judgment, and that it is entitled to such construction, and therefore the bond cannot support an action to recover the costs or expenses incurred by the plaintiff in the defense of the action brought against him by the defendant. The terms of that instrument do not seem to so limit its operation and effect. In the condition of the bond is first described the claim against which the plaintiff is indemnified, it then proceeds to indemnify him against all costs and damages which he should be compelled to pay by reason of the Wagner action or claims on which it was based. The claim in view and mentioned was the South Carolina judgment. The indemnity seems to have embraced such costs and damages as the plaintiff should be subjected to, not only in that action but by reason of any claim made against him founded upon such judgment. The relation of the defendant assumed to it was such as to enable him to control the judgment, and he undertook to relieve the plaintiff from its effect as a cause or claim against him for prosecution and its consequences. This would seem to include within its purpose, as represented by its terms, the protection of the plaintiff against the costs and damages resulting to him from the prosecution by any person having the apparent title to it, of any claim founded upon the judgment. Such has been the effect given to it by adjudication which is controlling here upon that question. It appears that after the discontinuance of the Wagner action against the plaintiff in the Supreme Court of this state, the then plaintiff in that action assigned the judgment to one Beecher, who brought an action upon it against the defendant which the latter defended. The discontinuance of that action was procured by the defendant, and thereupon the plaintiff brought against him an action on this bond of indemnity in the City Court of New York, to recover the costs or expenses of defending the Beecher action and recovered. That judgment remains effectual, and must here be deemed to have conclusively established, as between these parties, that the liability of the defendant upon the bond was not limited to such costs and damages as the plaintiff should incur in the prosecution of the claim of Wagner, but includedsuch as should arise from the prosecution of it by any other party having the apparent title to it. (Doty v.Brown, 4 N.Y. 71; Castle v. Noyes, 14 N.Y. 329; Pray v.Hegeman, 98 N.Y. 351.) The conclusion would seem to follow that the operation of the bond extended to the action prosecuted upon the judgment by the defendant against the plaintiff, so as to afford to the latter the indemnity for such costs and damages, if any, which he reasonably incurred in excess of the costs recovered in such action.

It is alleged in the answer that the action so brought by the defendant against the plaintiff came on to trial, and that the complaint was dismissed on the ground that the $500, paid to and taken by defendant upon the compromise pursuant to which the bond was made, had not been paid or tendered back to the plaintiff. That was the necessary result of an action brought upon the judgment, because its support by the defendant was dependent upon the rescission of the agreement constituting the compromise, which could be done for the purpose of an action of law, only by tender of restoration by the defendant of that which he had received from the plaintiff. The record of that action is not here, but by the pleadings and evidence in the present case, it appears to have been an action upon the judgment, and that the allegations of fraud on the part of the plaintiff in obtaining the settlement and bond, were intended to furnish a reason for its support.

The alleged cause of action there was different from that set forth in the defendant's answer in this action by way of counter-claim. And for that reason the recovery there would have been no bar to the latter if the dismissal had been on the merits. (Stowell v. Chamberlain, 60 N.Y. 272.) But it does not so appear. (Code, § 1209.)

The evidence offered by the defendant with a view to prove the alleged fraud was excluded and exception taken. The question therefore arises whether the matter alleged constituted a counter-claim within the statute, which provides that it must be a cause of action against the plaintiff tending to diminish or defeat his recovery, arising out of the contract or transaction set forth in the complaint as the foundation of the plaintiff's claim or connected with the subject of the action. (Id. § 501.)

It is alleged in the answer, that the defendant was induced to make the compromise and give the bond of indemnity by the false and fraudulent representations of the plaintiff, made, in the manner stated, with the intent to deceive him, and that as the consequence of such fraud on the part of the plaintiff the defendant sustained damages for which he demanded judgment. This alleged cause of action of the defendant arose out of the transaction or contract, of which the bond set forth in the complaint as the foundation of the plaintiff's claim was the product, and the making of it constituted a part, and such cause of action alleged by the defendant comes within the meaning of a counter-claim as defined by the statute. (Litchult v.Treadwell, 7 Wkly. Dig. 83; affirmed, 74 N.Y. 603; Carpenter v. Manhattan Life Ins. Co., 93 N.Y. 552.) The view of the General Term was, that as the situation remained the same as it was when the complaint in the action of the defendant against the plaintiff was dismissed, the alleged counter-claim was not available for the reason then existing for the disposition made of that action. It seems to have been assumed that the restoration of the amount paid by the plaintiff to the defendant was essential to the right of the latter to assert such counter-claim. That would have been so if it had been an alleged cause of action upon the South Carolina judgment, as its support would have been dependent upon rescission of the agreement which produced the bond, but the asserted counter-claim is a cause of action founded solely upon alleged fraud, for which the defendant seeks to have allowed to him the damages he sustained by it.

In making this claim the defendant does not proceed in dis-affirmance of the agreement of compromise, that, and the bond of indemnity remain effectual, subject only to his claim for such damages as he may legitimately have sustained by reason of the fraud with which he charges the plaintiff. For the purpose of such relief no restoration was essential. What the defendant received as the result of the agreement may be retained by him, and taken into consideration upon the question of damages in the event the claim for them is supported at the trial. (Gould v.Cayuga Co. Nat. Bank, 99 N.Y. 333.)

These views lead to the conclusion that the judgment should be reversed and a new trial granted, costs to abide the event.

All concur.

Judgment reversed.