In re H. L. Herbert & Co.

262 F. 682, 1919 U.S. App. LEXIS 1964

• Court: Court of Appeals for the Second Circuit
• Decided: December 10, 1919
• Docket: No. 54
• Status: Published

Opinion

HOUGH, Circuit Judge

(after stating the facts as above). [1] There can be no difference between the assumption of a mortgage, when the party assuming receives grant of the mortgaged lands, and the assumption of business debts, when such a party receives or takes over the business. The law of New York on this subject is summarized in Willard v. Wood, 135 U. S. 309, 10 Sup. Ct. 831, 34 L. Ed. 210. See, also, Schley v. Fryer, 100 N. Y. 71, 2 N. E. 280, and Goodyear, etc., Co. v. Dancel, 119 Fed. 692, 56 C. C. A. 300.

This bankrupt, therefore, became personally liable to Thedford in 1907, and the relation of the Herbert Company and Herbert the man to Thedford became that of principal and surety (Union Co. v. Hanford, 143 U. S. 187, 12 Sup. Ct. 437, 36 L. Ed. 118) as soon as Thed-ford knew of the agreement. As he never called on the corporation to pay, so far as this record shows never learned of the assumption, and has received payment in full, no effort can be made by appellant to claim through Thedford. It follows that, to recover at all, appellant must stand in Herbert’s shoes, for there was never any contract directly between surety company and bankrupt.

Therefore the crucial inquiry is to classify or define the nature of the contract between Herbert and the Herbert Company, embodied in the resolution above recited. It is either an agreement to pay, or an agreement to indemnify; i. e. to save Herbert harmless. See Mills v. Dow, 133 U. S. 423, 10 Sup. Ct 413, 33 L. Ed. 717, where the contract was both, and the difference is emphasized.

In contracts of indemnity the obligee cannot recover until he has been actually damnified, and then only to the extent of injury at the time suit brought; but, where the agreement is to pay, a recovery may be had as soon as breach of contract exists, and the measure of damages is the full amount agreed to be paid. Wicker v. Hoppock, 6 Wall. 99, 18 L. Ed. 752. In our opinion, the contract at bar was plainly to pay; it says so, and does not by words or inference promise to save Herhert harmless, which is the substance of an indemnity agreement.

[2, 3] But, when one promises to pay, the right of action on that promise is complete and perfect the moment the debt to which the promise relates becomes due and remained unpaid. Hume v. Hendrickson, 79 N. Y. at page 127. Applying that doctrine here, Thedford could have sued the bankrupt on this contract for his benefit as soon as it was made, or Herbert could have sued, assigning for breach that the corporation had not paid Thedford, whose debt was long before “due and payable.” ' That he had not -paid Thedford would be no defense, if as matter of fact he owed the money. Rector, etc., v. Higgins, 48 N. Y. 532, as expained in Maloney v. Nelson, 144 N. Y. 182, 39 N. E. 82.

[4] The amount or kind of damages recoverable on breach is immaterial; it is the existence of a right of action that “starts the statute” of limitations. Aachen, etc., Co. v. Morton, 156 Fed. 657, 84 C. C. A. 366, 15 L. R. A. (N. S.) 156, 13 Ann. Cas. 692; Goelet v. Ward Co., 242 Fed. 65, 155 C. C. A. 9. Indeed, an agreement to pay a debt due at date- of promise may be said to be broken the moment it is made. It follows that die statute of limitations barred any suit of Herbert’s against the bankrupt in six years — i. e., in 1913 — and the court below was right in expunging the surety company’s claim on that ground.

That Herbert chose to prolong litigation with Thedford confuses the issue, but is immaterial; the only result of suit was to prove that Herbert had owed the money since 1903, which is now admitted.

Order affirmed, with costs.