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Defendants-appellants Wallace B. Woodhead and Lorene M. Woodhead appeal from a summary judgment entered November 15, 1989, in the United States District Court for the Southern District of New York (Stanton, J.). The district court awarded plaintiff-appellee National Union Fire Insurance Company ("National Union") reimbursement pursuant to the terms of an indemnity agreement and as subrogee of the holder of a promissory note for money paid on the note plus interest and attorneys' fees. See National Union Fire Ins. Co. v. Woodhead, Fed.Sec.L.Rep. (CCH) ¶ 94,455 (S.D.N.Y. May 15, 1989), (1989 WL 53004). The judgment was certified by the district court as a final judgment pursuant to Federal Rule of Civil Procedure 54(b). A stay of execution on the judgment pending appeal was ordered by this court and was extended at oral argument until disposition of this appeal.

The Woodheads became makers of the promissory note and entered into the indemnity agreement as part of an investment in third-party defendant Seacom Information Associates Limited Partnership ("Seacom"). The note subsequently was negotiated and endorsed to third-party defendant Manufacturers and Traders Trust Company ("M & T"). National Union became subrogated to the rights of M & T when the Woodheads defaulted on the note and, pursuant to the terms of a financial guarantee bond, National Union made the requisite payments in their stead.

On appeal, the Woodheads contend that National Union is not entitled to recover on the note as M & T's subrogee, because it took the note with knowledge that their investment in Seacom had been induced by fraud. The Woodheads also contend that the indemnity agreement was an integral part of the contract to invest in Seacom and that fraud in the inducement of the contract to invest excuses their performance on the related indemnity agreement. For the reasons that follow, we affirm the judgment to the extent it awarded National Union reimbursement on the note as M & T's subrogee, and we vacate the stay of execution on the judgment.


917 F.2d 752 (1990)



Wallace B. WOODHEAD and Lorene M. Woodhead, Defendants-Appellants, v. ROTHSCHILD REGISTRY INTERNATIONAL, INC., Seacom Information Associates, Robert B. Ehrlich, Ray Blitstein, Laverne Poppe, and Manufacturers and Traders Trust Company, Third-Party Defendants.

No. 1454, Docket 89-9155.

United States Court of Appeals, Second Circuit.

Argued August 13, 1990.

Decided October 30, 1990.

New York Law School location: File #1018, Box #126