Opinion
April 10, 1952 —
May 6, 1952.
APPEAL from an order of the circuit court for Milwaukee county: WM. F. SHAUGHNESSY, Circuit Judge. Affirmed.
For the appellants there were briefs by Whyte, Hirschboeck Minahan, attorneys, and Victor M. Harding and John G. Vergeront of counsel, all of Milwaukee, and oral argument by Mr. Vergeront.
For the respondent there was a brief by Charles C. Hiken and Gold McCann, and oral argument by Richard A. McDermott, all of Milwaukee.
Action by Milton M. Chernin upon a contract of indemnity dated May 8, 1948. The contract names the plaintiff and his wife, Diane Chernin, as indemnitees. She is plaintiff in a similar action brought upon the same contract and against the same defendants.
By the terms of the contract the defendants agreed —
". . . to indemnify and save harmless [plaintiffs] . . . against any and all actions, claims, or demands whatsoever [arising by reason of plaintiffs having been associated with defendants in any of the undersigned corporations or in any partnership], . . . including without special limitation thereto any and all liability for taxes, both state and federal, if any, of any kind or nature, any tax deficiency, if any, state or federal assessments, liens, or claims, together with any and all claims of any kind or nature whatsoever, . . . and the undersigned [defendants] agree in the event any claims may be asserted against [plaintiffs] . . . they will, whether said claims are groundless or not, defend the same in the name of [plaintiffs] . . . [and] will pay all costs of said defense, including attorneys' fees, and disbursements of any kind or nature incidental to or incurred in said defense, and will likewise pay all sums required to be paid by reason of said claims, or any of them, in the event it is determined that there is any liability on the part of [plaintiffs]. It is the intent of the parties that by this instrument [plaintiffs] are to be held entirely harmless from any and all liability of whatsoever kind or nature which may be imposed upon them, or either of them, by reason of them, or either of them, having been any officer, director, stockholder, or employee of any of the undersigned corporations, or any partner or employee of any partnership."
It is alleged in the complaint that, by reason of the membership of the plaintiff in the partnership referred to in the agreement, there has been assessed by the United States against him an additional tax. Recovery of the amount of the assessment is sought. A general demurrer to the complaint was overruled on November 8, 1951. Defendants appeal.
This court has long recognized the distinction between an indemnity against damage on a liability and one against the liability itself. Smith v. Chicago N.W. R. Co. 18 Wis. *17.
"If it [the paper] contains an indemnity against liability to pay . . . there is a breach of the covenant of indemnity as soon as the liability of the [indemnitee] to pay the same is fixed, and an averment that he has paid it is not essential to the cause of action. But if it is only an indemnity against loss or damage by reason of such liability there is no breach until payment, or until the plaintiff has suffered some loss or damage. . . ." Taylor v. Coon, 79 Wis. 76, 84, 48 N.W. 123.
The obligation of the defendants is to indemnify against liability. That appears clearly from the language of the contract by which defendants agreed to indemnify and save harmless the plaintiff against actions, claims, or demands whatsoever, by reason of any act or omission, including any and all liability for taxes, state and federal, and by reason of any liability for any tax deficiency. If there were any doubt about the nature of the obligation with respect to taxes such doubt is removed by the specific provision for indemnity arising by reason of any and all liability for any state or federal assessments. A "federal assessment" is alleged.
Defendants contend that the complaint is defective in that it fails to allege that plaintiff has sustained a loss. To establish liability under this agreement it is not necessary to allege or prove a loss. Lyle v. McCormick Harvesting Machine Co. 108 Wis. 81, 84 N.W. 18, nor is it required to establish that plaintiff has been called upon to pay. Ducommun v. Inter-State Exchange, 193 Wis. 179, 212 N.W. 289, 214 N.W. 616; Taylor v. Coon, supra.
They urge also that the assessment of the tax does not establish a legal liability; that the provisions of the Internal Revenue Code provide plaintiff with a remedy for review. That contention is answered by the fact that the contract in express terms calls for indemnity in the case of liability for "any state or federal assessments." The defendants agreed to protect the plaintiff against an assessment and is entitled to this action, 27 Am. Jur., Indemnity, p. 471, sec. 23; Stout v. Folger, 34 Iowa, 71.
The fact that it is not alleged in the complaint that plaintiff has tendered his defense against the assessment is immaterial. The determination of defendants' liability depends upon the terms of the contract and may not be limited or extended by construction or implication. It contains no provision requiring the tender of any defense which plaintiff might have against a claim, demand, or assessment made against him.
By the Court. — Order affirmed.