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Seaboard Surety Co. v. Harbison

June 6, 1962

SEABOARD SURETY COMPANY, PLAINTIFF-APPELLEE,
v.
LEON G. HARBISON, GENERAL ASBESTOS & SUPPLY COMPANY, INC., ROBERT A. VOIGT, ALSO KNOWN AS R. A. VOIGT, DEFENDANTS-APPELLANTS.



Author: Hastings

Before HASTINGS, Chief Judge, and DUFFY and CASTLE, Circuit Judges.

HASTINGS, Chief Judge.

Plaintiff Seaboard Surety Company (appellee), a New York corporation, brought this diversity action in the United States District Court for the Southern District of Indiana. It sued defendants Leon G. Harbison, General Asbestos & Supply Company, Inc., Robert A. Voigt, also known as R. A. Voigt (appellants), all residents of Indiana.

It appears from the complaint that plaintiff executed performance and payment bonds on behalf of Construction Management, Inc. in favor of United States of America covering a contract for the replacement of boilers and conversion of a boiler at a Veterans Administration Hospital in Indianapolis, Indiana. Subsequently, Construction Management, Inc. commenced an arrangement in bankruptcy.

As a result of issuing such bonds and the ensuing bankruptcy, plaintiff was required to pay $11,899.50 in satisfaction of claims against the bankrupt.

Prior to the execution of such bonds, each defendant executed a separate indemnity agreement in favor of plaintiff promising in substance to indemnify plaintiff against any loss it might sustain by reason of the execution of such bonds. Copies of the three indemnity agreements which are identical in form were made exhibits to and a part of the complaint.

The complaint alleged that plaintiff executed such bonds and made such payments in satisfaction of claims against bankrupt in reliance upon such indemnity agreements and that demand for reimbursement was made and defendants refused to pay.

Plaintiff sought recovery of the sum of $11,899.50, with interest and attorneys' fees.

Defendants moved to dismiss the complaint on the ground that it failed to state a claim against them on which relief could be granted. From the briefs filed by both parties addressed to this motion, it appears that paragraph 3 of the indemnity agreements contains a cognovit provision. Defendant urged that such a provision is unlawful under the law of Indiana*fn1 and as a result the agreements were illegal and void. The district court overruled the motion to dismiss the complaint.

Thereafter, each defendant filed a separate answer to the complaint setting out similar multiple defenses. Plaintiff moved to strike four separate affirmative defenses from each answer. The defenses sought to be stricken may be summarized as (1) failure to state a claim on which relief could be granted, (2) illegality of the indemnity agreements, (3) failure of consideration and (4) release by cancellation.

From the briefs filed concerning the motions to strike, it appears that the first two of such defenses were based on the Indiana cognovit provision statute, supra, raised by defendants in their motion to dismiss the complaint.

The trial court, Honorable William E. Steckler presiding, granted the motion to strike these separate defenses, and they were stricken from the answers.

Thereafter, the case was assigned to Honorable S. Hugh Dillin, who conducted a pre-trial conference. In a pre-trial order entered after the conference it appears that defendants admitted the execution of the respective indemnity agreements in the form shown in the complaint. They further admitted the execution of performance and payment bonds by plaintiff but "denied that said Performance Bond was issued in reliance upon the Indemnity Agreements referred to therein." Plaintiff was ordered to furnish proof of the claims and expenses paid as alleged in the complaint.

By their general answers, defendants admitted all other allegations in the complaint, except the charge that such payments were made in reliance on the indemnity agreements and denied that plaintiff was entitled to ...


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