Levin v. Friedman

Smith, J., delivered the opinion of the Court. We shall here affirm the determination by a trial judge (Shure, C.J.) that appellants, Lawrence L. Levin et al, sued too late. Levin and his associates (Levin) were involved with land in Prince George’s County. In connection with development of that land a performance bond was executed to that county guaranteeing completion in their subdivision of grading and paving, and the construction of concrete curbs, gutters, sidewalks, etc. Continental Casualty Company was the surety.

Levin had personal liability. Levin sold the land to Basilisk, Inc. (Basilisk). The original contract of sale contemplated that any bonds existing relative to this land ⁴⁴⁰ should “be transferred and assumed by Purchaser” and that the “Purchaser [should] hold Sellers harmless with respect to any liability on account of same.” About two months later a letter was addressed to the seller stating: “In view of the fact that a reference in the land sales contract dated May 3, 1965 and addendum thereto, paragraph 5, re certain lots in Schrom Hills Subdivision, Prince George’s County, Maryland contains a stipulation that all street bonds on construction loans in connection thereto be transferred to the Purchaser and the Purchasers in turn to save the Sellers harmless with respect to any liability on account of same is found to be inoperable as to the transfer of said Bonds, because the Surety is reluctant to transfer said bond (s) as such, inasmuch as they now hold the Sellers liable for performance thereunder. “It is therefore, for good and valuable consideration, agreed that the Sellers will continue said Bond (s); that the Purchasers herein (Basilisk Inc.) and individually by Gerald Friedman, Martin Goldberg, their respective wives; successors and assigns will and shall hold the Sellers harmless against any liability on account of same, and shall do all things to perform and complete the obligations as insured under the bond, as though Basilisk, Inc., and individually by Gerald Friedman, Martin Goldberg, their respective wives, successors and assigns executed said Bond (s). The liability hereunder shall continue until the expiration date of said bond (s) and the Purchasers shall notify the Seller immediately upon the completion of work in order to notify the Insurance Carrier and/or Surety to cancel same and thereby be relieved of further liability thereunder.

Sellers shall keep said bond (s) in full force and effect until completion of the work and Purchasers agree to promptly complete said work as required by appropriate authorities.” (Emphasis added.) ⁴⁴¹ The letter was signed on behalf of Basilisk and also by Mr. and Mrs. Friedman and Mr. and Mrs. Goldberg (collectively, the purchasers). It was accepted by Levin. The Friedmans and Basilisk are appellees here. By October 6, 1967, Levin was aware of problems insofar as the completion of this work was concerned because on that date counsel for Levin addressed a letter to the purchasers.

He advised that he represented Levin, enclosed a copy of the agreement of July 1,1965, and further stated: “We are advised that the work on the lots has now been abandoned and that the first trust holder is foreclosing on the lots. You are advised that we will hold you legally liable under your warranty agreement for all costs and expenses in connection with the performance of work under the bond to the Public Works Department of Prince George’s County.” This was followed by a letter from counsel for the bonding company to Levin dated May 3,1968, advising: “You gentlemen, as individual indemnitors and the persons primarily responsible for the performance of the permit work, are therefore requested to take the necessary steps to complete such work without further delay and at no cost or expense to Continental. You are also requested to advise Continental how and when such work will be performed.” On June 27, 1968, Prince George’s County submitted to Levin an itemization of the defects in the work. Apparently, years then passed with Levin’s doing nothing as a result of this correspondence other than perhaps to offer a fervent prayer that nothing more would be heard about the matter.

Then, on December 10, 1971, the bonding company sued Levin on his agreement to indemnify that company against any liability or loss as a result of its having written the bond to the county. ⁴⁴² Levin took action on January 18, 1972, by filing a third-party claim against Gerald Friedman and Sandra Friedman, his wife; Martin Goldberg and Adele Goldberg, his wife; and Basilisk, based upon the July 1, 1965, letter agreement. On March 6, 1973, a settlement was reached between Levin and the bonding company by which Levin agreed to pay $15,000 to the bonding company for its damages. A settlement had previously been effected between Levin and Mr. and Mrs. Goldberg. The case proceeded to trial against Mr. and Mrs. Friedman and Basilisk.

The trial judge found the case to be governed by the provisions of Maryland Code (1957) Art. 57, § 1 requiring suit to be filed “within three years from the time the cause of action accrued.” In a comprehensive and well reasoned opinion he stated, in part: “Clearly, then, by October 6, 1967, all parties were notified that work on the lots had been abandoned, and on May 3, 1968, Continental Casualty Company made demand on the indemnitors to take the necessary steps to complete the work ‘without further delay.’ The Third-Party Claim against the Friedmans, not having been filed until January 18, 1972, comes too late, liability having been established more than three and one-half (3V2) years prior thereto.” Two arguments are presented by Levin as to why the trial judge erred in dismissing this cause of action as barred by the statute of limitations: (1) that “[appellants’ cause of action did not accrue, and the statute of limitations begin to run, until their liability became fixed and established by the settlement of the action brought against them as a result of the appellees’ default in performance”; and (2) that “[t]he trial court applied the wrong period of limitations to appellants’ cause of action against appellee Basilisk.” The reasoning on the latter point is based upon a contention that the contract was executed under seal by Basilisk, is thus a specialty, and is controlled by the 12 year period of limitations contained in Code (1957) Art. 57, § 3. We shall consider these contentions in inverse order. ⁴⁴³ The letter of July 1, 1965, setting forth the agreement upon which suit was brought, is not under seal. In response to a question at oral argument as to the instrument under seal to which reference was made in this contention of Levin, counsel pointed to the sales agreement between Levin and Basilisk et al. No corporate seal was there affixed nor was any reference made to a corporate seal. After “Basilisk, Inc.,” there is printed “(SEAL).” If we were to assume, arguendo, that Levin could claim against Basilisk in this proceeding upon the strength of the contract of sale, notwithstanding his reference in his declaration to the letter of July 1, 1965, and his failure to refer in that declaration to the earlier contract of sale, his contention that the contract constituted a speciality would fall upon the basis of the holding in Smith v. Woman’s Medical College, 110 Md. 441, 445-46 , 72 A. 1107 (1909), since there was no reference made in the body of that contract to the corporate seal and there was nothing on the face of the paper to indicate that it was intended to be issued as a specialty.

For the most recent discussion of this subject see Gildenhorn v. Columbia Real Estate Title Insurance Company, 271 Md. 387 , 317 A. 2d 836 (1974). Levin argues “that a cause of action founded upon a right of indemnity does not accrue, and the statute of limitations [does not] begin to run, until the indemnitor either suffers or pays a judgment ... or settles an action brought against him as a result of the indemnitor’s default.” He undoubtedly has in mind two types of indemnity, an indemnity against liability and an indemnity against loss or damage. “Strict indemnity” has been called “indemnity against loss or damage.” 41 Am. Jur. 2d Indemnity § 28 (1968), and 42 C.J.S. Indemnity § 14c (1944). Where a contract is strictly one of indemnity, that is, one against loss or damage, the indemnitee cannot recover until he has made payment or