Gaston, J. Upon the question, when did the plaintiff’s cause of action arise, our opinion differs from that which was held in the Court below. We are of opinion that his cause of action did not arise, until the payment in fact of the judgment against him. The undertaking of the testator of the defendants was, to save the plaintiff from harm because of his having become the bail of Samuel Magness, and the duty arising from this undertaking was broken, when the plaintiff sustained damage by reason of his liability as bail. A contract may be so expressed, as not only-to indemnify against actual loss, but to protect against any claim, suit or *30 demand, and, upon such a contract, the recovery of ajudgment, or even the institution of a suit against the person thus protected, may entitle him to an action against his guarantor. ®ut &enera^ ru^e certainly is, that, in order to recover upon an indemnity, whether it be expressed or implied, it must be shown that a damage has been sustained.
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REYNOLDSv. MAGNESS,24 N.C. 26(1841)
JOHN REYNOLDS v. BENJAMIN MAGNESS' EXECUTORS.
Supreme Court of North Carolina
1. In the case of an indemnity for becoming bail, the cause of action does not accrue until the bail is compelled to pay the money, and does actually pay it.
2. The entry of satisfaction of a judgment on the record is evidence to a jury from which they may infer that the judgment has been paid; but,per se, it only imports a release of the judgment, and it may be shown by extrinsic evidence that the judgment was not in fact paid.
3. The rule that where parties have reduced their contract to writing, parol evidence, shall not be introduced to alter or contradict the written instrument, applies only to controversies between the parties themselves and those claiming under them. Between one of the parties and a stranger the rule does not apply.
4. Before a suit is brought on a contract of indemnity, notice of the loss should be given to the party indemnifying.
5. Where the judge below has misdirected the jury, yet the verdict has been such as it ought to have been had there been no misdirection, this Court will not grant a new trial. It will only do so where the misdirection has misled the jury into a wrong verdict.
APPEAL fromBattle, J., at Spring Term, 1841 , of RUTHERFORD.
The following case was reported by the judge below: This was an action on the case brought by the plaintiff to recover of the defendants the amount which he had paid as the bail of one Samuel Magness, under a promise of the defendant's testator that if the plaintiff would become such bail he would save him harmless. Pleas, the general issue and the statute of limitations. The plaintiff, after producing a writ against Samuel Magness in favor of the administrator of one William Magness, issued in April, 1826, and a bail bond given thereupon by the said Samuel, with the plaintiff and two others as his sureties, introduced a witness who proved that at the time when the suit was (27) brought against Samuel Magness he resided in South Carolina, but was then on a visit to Rutherford County; that, upon being taken by the sheriff, the defendant's testator, who was one of the administrators of William Magness, and a brother of Samuel, requested the present plaintiff to become his bail, saying to him that if the would do so, "he would be his back bail, and he should not suffer." The plaintiff then showed a judgment obtained in the suit at July Term, 1828, of the county court, aca. sa. against the said Samuel Magness, returned "Not to be found." andsci. fa. against the bail, upon which judgment was obtained at January Term, 1831, and execution issued thereon returnable to the term next ensuing. The plaintiff then proved that one of his cobail had left the State in 1827, and the other was insolvent; and, for the purpose of showing that he had paid the moneys, he produced a bill of sale for certain negroes, and a deed for a tract of land, executed to the surviving administrator of William Magness on 7 March, 1831.Page 24which the parties said was to pay up an execution for which the present plaintiff was bound as bail for Samuel Magness, and the plaintiff said it was to enable him to recover the amount back from his principal, Samuel Magness. The writ, in the present suit, was issued in 1835; and for the purpose of avoiding the effect of the statute of limitations, the plaintiff offered to prove that the said bill of sale and deed, though absolute in terms, were intended by the parties only as a mortgage or security for the debt, and that in truth the execution against the bail of Samuel Magness was not paid off until 1833 and 1834, when two of the negroes mentioned in the said bill of sale were taken into possession by the plaintiff in that suit, the property, purporting to have been conveyed both by the bill of sale and deed, having remained in the possession of the grantor until that time. This evidence was objected to by the defendants upon the ground that the plaintiff was estopped from showing that his conveyances were not absolute, as they purported to be. But the court received the testimony, reserving the question of its admissibility. A witness then proved that he took the said bill of sale and deed from the present plaintiff for the plaintiff in the suit against (28) Samuel Magness, being the agent of the said last mentioned plaintiff; that he intended that the conveyance should be absolute, so as to convey a firm and indefeasible title to the property therein mentioned, but that he only intended to hold it as a lien on the property, and agreed at the time that the present plaintiff should retain the possession of the said property until he could send out and try to recovery the money from his principal, and, if he succeeded in getting the money, he was to keep the property altogether. This witness also proved that the property conveyed was worth much more than the debt intended to be secured, that no money was paid him by the present plaintiff at that time, but that, at his request, he indorsed satisfaction on the execution. An execution returnable in 1831 was then produced, with a return of satisfaction by the plaintiff's receipt. Another witness, a son of the plaintiff in the suit against Samuel Magness, then proved that his father, not receiving the money from the present plaintiff, took possession of one of the negroes mentioned in the bill of sale, in the fall of 1833, and of another in 1834, claiming them under the bill of sale aforesaid; that his father took the said slaves as his own property, having some time before that settled up the estate of his intestate, and he set up no claim to another slave mentioned in the bill of sale, or to the land conveyed by the deed, though he had not reconveyed them to the plaintiff. The defendant's counsel objected, first, that there was a satisfaction of the execution against the present plaintiff, as bail, in 1831, and that his right of action then accrued and was barred by the operation of the statute of limitations; second, that notice of the payment of the money as bail byPage 25the present plaintiff was necessary to be shown to the defendants, or their intestate, before the action could be sustained. The plaintiff's counsel contended that no notice was necessary, but that, if it was, the jury might infer from the general notoriety of the transaction that the defendants, or their intestate, had notice; and that, with regard to the statute of limitations, it did not bar the action, because the debt for which the plaintiff was bound as bail was not, in fact, paid by him until he parted with his negroes, in 1833 or 1834. His Honor (29) instructed the jury that as the present plaintiff executed the bill of sale and deed in 1831, and directed satisfaction of the execution to be entered of record, in order to enable him to maintain an action for money paid, against his principal, he could not now be permitted to allege that the money was not paid in 1831; and that the statute of limitations barred the present action; and, secondly, that notice was necessary to be shown before the bringing of the present suit, and that there was no evidence before the jury of such notice. The jury found a verdict in favor of the plaintiff upon the general issue, but against him upon the plea of the statute of limitations. Judgment having been rendered, in pursuance of this verdict, in favor of the defendant, the plaintiff appealed.
No counsel appeared for the plaintiff in this Court.J. G. Bynum for defendants.
GASTON, J.
Upon the question, when did the plaintiff's cause of action arise? our opinion differs from that which was held in the court below. We are of opinion that his cause of action did not arise until the paymentin factof the judgment against him. The undertaking of the testator of the defendants was to save the plaintiff from harm because of his having become the bail of Samuel Magness, and the duty arising from this undertaking was broken when the plaintiff sustained damage by reason of his liability as bail. A contract may be so expressed as not only to indemnify against actual loss, but to protect against any claim, suit, or demand, and upon such a contract the recovery of a judgment, or even the institution of a suit against the person thus (30) protected, may entitle him to an action against his guarantor. But the general rule certainly is that in order to recover upon an indemnity, whether it be expressed or implied, it must be shown that a damage has been sustained. The damage alleged in the plaintiff's declaration is the payment of the money recovered against him. A judgment had been obtained therefor, and satisfaction of the judgment was acknowledged of record. This entry was evidence from which might be inferred a payment of the sum recovered, butper seit was but a release of the judgment, an extinguishment of that security. It was unquestionablyPage 26competent for the defendants to show, notwithstanding such release, that the plaintiff had paid nothing(Brisendine v. Martin,23 N.C. 286), and if they were not thereby estopped from showing this fact, neither was the plaintiff estopped, for all estoppels must be mutual. The entry of satisfaction was made upon the plaintiff's executing conveyances of land and negroes to the creditor. If the property so conveyed was at the time received in discharge of the debt, the transaction would have constituted a payment. But the testimony, if believed, showed that these conveyances, though absolute in terms, were intended by the parties to be used, and in fact were used, only as a security for the payment of the sum recovered. There was, therefore, but a substitution of one security for another. It is true that if a controversy had arisen between the parties to these conveyances and the bargainee had denied the parol agreement, the plaintiff would have found serious, perhaps insuperable, difficulty in establishing it. But the grantee has never set them up as absolute conveyances. He took them as a security only, and afterwards received a part only of the property thus pledged in payment of the debt. The rule of evidence that where the parties to a contract have reduced their agreement to writing, parol evidence shall not be received to alter or contradict the written instrument, applies to controversies between the parties and those claiming under them. The parties have constituted the written instrument the authentic memorial of their contract; and, (31) because of this compact, the instrument must be taken, as between them, to speak the truth and the whole truth in relation to its subject-matter. But strangers have not assented to this compact, and, therefore, are not bound by it. When their rights are concerned, they are at liberty to show that the written instrument does not disclose the full or true character of the transaction. And if they be thus at liberty when contending with a party to the transaction, he must be equally free when contending with them. Both must be bound by this conventional law or neither.
On the other question presented in the case we are of opinion that, upon an undertaking like that before us, the plaintiff, before bringing suit, is bound to give notice of his loss to his guarantor.Grice v. Ricks,14 N.C. 62;Sherrod v. Woodard,15 N.C. 360. If, indeed, the testator of the defendants in this case were alive when the loss complained of was sustained, formal notice might be dispensed with, because he was a party to the act causing the damage. From the case stated we infer, for the fact is not precisely set forth, that he was not then alive; but it is not necessary for us to examine how this matter may be, because the jury have found for the plaintiff on the general issue, and their verdict is against him only on the plea of the statute of limitations. If the reversal of a judgment be prayed for because of misdirection of the judge.Page 27in his instructions to the jury, and it appears that such misdirection did not and could not mislead the jury, because their finding has been such as it certainly ought to have been had the mistake not been committed, this Court has held that it will not interfere to enable the appellant to have a new trial of the issue. But where the misdirection has misled the jury into a wrong verdict, and upon that verdict the judgment complained of was rendered, it is a matter of right to have judgment reversed and avenire de novoawarded. We cannot set the verdict right, nor can we establish, a compensation of errors, by setting off against the error of law complained of an error of fact in the jury, to the injury of the opposite party, upon another issue. In such case all the issues, ought to be submitted to another jury, with the proper instructions. (32)
PER CURIAM. New trial.Cited: Costin v. Baxter,29 N.C. 114;Pollock v. Wilcox,68 N.C. 49;Overby v. B. and L. Assn.,81 N.C. 62;Mulholland v. York,82 N.C. 512;Thomas v. Lines,83 N.C. 197;S. v. Grady, ib., 648;Cowles v. Hall,90 N.C. 333;Moore v. Parker,91 N.C. 281;Leak v. Covington,99 N.C. 566;Puffer v. Baker,104 N.C. 153;Carden v. McConnell,116 N.C. 876;Ledford v. Emerson,138 N.C. 503;Wood v. Kincaid,144 N.C. 395.