United States Credit Bureau Inc. v. Claus

MARKS, J. This is an appeal from a judgment in the sum of $2,566.65 obtained under a contract of indemnity between defendant and Indemnity Insurance Company of North America, the plaintiff’s assignor.

In August, 1939, B. I. and Alice Anderson as owners entered into a contract for the construction of a dwelling, garage and water system by defendant as contractor. The Indemnity Insurance Company of North America became surety on the contractor’s bond in the sum of $8,000. An indemnity agreement between the surety and the contractor gave the surety the right of immediate action against the contractor for any “loss or liability when . . . paid, adjusted, incurred or assumed . . . whether the same shall have been actually paid or not.”

Defendant defaulted on his contract in January, 1940, and the surety then proceeded under its liability on its bond and paid for the completion of the contract. Judgment was given against defendant for two payments made by the surety in completing the building contract. These payments were made on June 26, 1940, and July 30, 1940. Not included in the judgment were two payments made by the surety on March 13, 1940, and a third on August 27, 1940, totaling $265.85. The complaint in this action was filed on April 14, 1944.

The only questions argued here are (1) that the cause of action is barred by subdivision 1 of section 337 of the Code of Civil Procedure, and (2) that the debt was discharged under [87]an adjudication of bankruptcy made on August 14, 1942, and a discharge of the bankrupt on October 22, 1942.

Defendant’s argument on the bar of the statute of-limitations proceeds as follows: That the indemnity was against liability as well as against loss; that liability attached when defendant abandoned his contract in January, 1940, when the action could have been commenced, which was more than four years prior to the time suit was started.

The same arguments were made in the cases of Oaks v. Scheifferly, 74 Cal. 478 [16 P.252], and Globe Indemnity Co. v. Larkin, 62 Cal.App.2d 891 [145 P.2d 633], where indemnity contracts similar to the one before us were involved. In the Globe Indemnity case it was said:

“But Oaks v. Scheifferly, 74 Cal. 478 [16 P. 252], is the only case in point on the precise question before us and that case fully sustains the contentions of plaintiff. There as here the agreement had a dual aspect in that it purported to indemnify against liability as well as against actual damages suffered through payment of the liability; the action was brought more than four years after the liability had accrued but within four years after payment had been actually made to satisfy the liability; and the action was based upon the covenant to indemnify against such damages rather than upon the covenant to indemnify against liability. Contrary to the claim of defendant here, the court there recognized the dual aspect of the agreement and recognized that an action to recover upon the covenant to indemnify against liability could have been brought at any time after the liability had accrued and even prior to the actual payment of any loss. But the court treated the action, based upon the covenant to indemnify against damages, in the same manner as though such covenant had been contained in an agreement separate and apart from the covenant to indemnify against liability and held that the action to recover upon the covenant to indemnify against damages was not barred. ’ ’