First Trust Co. of Lincoln v. Airedale Ranch & Cattle Co.

• Decision Date: 03 July 1939
• Docket Number: 30555.
• Citation: 286 N.W. 766,136 Neb. 521
• Parties: FIRST TRUST CO. OF LINCOLN v. AIREDALE RANCH & CATTLE CO. ET AL.
• Court: Nebraska Supreme Court

286 N.W. 766

136 Neb. 521

FIRST TRUST CO. OF LINCOLN v. AIREDALE RANCH & CATTLE CO. ET AL.

No. 30555.

Supreme Court of Nebraska.

July 3, 1939

[Copyrighted Material Omitted]

Syllabus by the Court.

1. The mortgage bonds, a real estate mortgage securing them, and an " agreement against ultimate loss," relating thereto, being executed substantially contemporaneously as one transaction, are to be construed together .

2. In this case, under the facts disclosed by the record, the assignment of the first mortgage real estate bonds evidencing the debt secured, by necessary implication carried with it to the assignee thereof the mortgage by which such bonds were secured, and also the " agreement against ultimate loss" insuring the payment in full of the indebtedness evidenced thereby.

3. Under the proceedings had in this case, when the legal capacity of the Lincoln Trust Company to discharge the duties imposed by this trust had terminated through its bankruptcy and proceedings incidental thereto, the First Trust Company of Lincoln legally succeeded to and possessed all and identical powers originally vested in and possessed by the Lincoln Trust Company, and thus was a proper plaintiff to maintain this action.

4. In view of the facts in this case, the contemporaneous contracts between the parties pertaining to the same subject-matter the nature of the transactions between them, and the attendant circumstances, including the result sought to be attained, by necessary implication evidencing what the parties intended the language of the " agreement against ultimate loss" should provide for, may be properly taken into consideration in interpreting that document.

5. The " agreement against ultimate loss" construed, and interpreted as being strictly one of indemnity.

6. " The general rules which govern the construction and interpretation of other contracts apply in construing a contract of indemnity and in determining the rights and liabilities of the parties thereunder. In accordance with such rules the important question for determination is the intention of the parties, and the contract should be so construed, if it can be done consistently with legal principles, as to ascertain and give effect to such intention; and in making such construction the terms used and the language employed in the contract must be given a fair and reasonable interpretation, the contract must be read in its entirety, and consideration must be given not only to the language of the contract but also to the situation of the parties and the circumstances surrounding them at the time the contract was made." 31 C.J. 426.

7. Ordinarily, a covenant of indemnity cannot, when clear in its terms, be restricted by a recital. " If the recitals are clear and the operative part is ambiguous, the recitals govern the construction. If the recitals are ambiguous, and the operative part is clear, the operative part must prevail. If both the recitals and the operative part are clear, but they are inconsistent with each other, the operative part is to be preferred." Ex parte Dawes, 17 L.R.Q.B.D., Eng., 275, 286, quoted with approval in Williams v. Barkley, 165 N.Y. 48, 58 N.E. 765.

8. " Courts incline strongly to construe bonds as contracts of indemnity only, and will attach more importance to the general purpose of a bond, as shown by its provisions as a whole and the interests of the parties in the subject-matter, than to the precise form of words employed." Northern Assurance Co. v. Borgelt, 67 Neb. 282, 93 N.W. 226.

9. " The promise in an indemnity contract is an original and not a collateral undertaking, and in this particular differs from a contract of guaranty. If the contract of indemnity refers to, and is founded upon, another contract, either existing or anticipated, it covenants to protect the promisee from some accrued or anticipated liability, arising upon such other contract; it is not a contract to answer for the contractual debt, default, or miscarriage of another than the promisee, but a contract to indemnify the promisee from loss owing to his contractual liability." 31 C.J. 419.

10. " If an instrument is changed in respect of the consideration, which appears only as a recital to show the basis of the instrument, it would seem to be immaterial. Where words are added which are merely descriptive of the consideration and so fail to alter the legal effect of the instrument, they are, of course, immaterial." 3 C.J.S. 947, sec. 32.

11. " An alteration of a written instrument after its execution by one party thereto, without the knowledge or consent of the other, which neither varies its meaning nor changes its legal effect, is an immaterial alteration, and will not invalidate the instrument." Fisherdick v. Hutton, 44 Neb. 122, 62 N.W. 488.

12. Appeals in equity are for trial de novo in this court, and it is the duty of this court to reach an independent conclusion without reference to the findings of the district court. But, when the evidence on material issues so conflicts that it cannot be reconciled, the court considers the fact that the trial court observed the witnesses and their testimony, and must have accepted one version of the facts rather than the opposite.

13. Under the facts in this case, the makers of the contract against ultimate loss are not released from the obligation evidenced thereby because of the extension of the time of payment of the indebtedness to which it relates.

14. " Differing from the rule in actions on the law side of the court, which limits the judgment to the facts as they existed at the commencement of the action, when the action is in equity, relief will be administered as the nature of the case and the facts, as they exist at the close of the litigation, demand." Russell, Hardware & Implement Mfg. Co. v. Utica, Drop Forge & Tool Co., 195 N.Y. 54, 87 N.E. 788.

Appeal from District Court, Scotts Bluff County; Irwin, Judge.

Suit in equity by the First Trust Company of Lincoln against the Airedale Ranch & Cattle Company, Robert L. Ferguson, and others, for the collection of certain bonds, the foreclosure of a real estate mortgage securing the bonds, and the enforcement of a certain agreement against ultimate loss pertaining to the indebtedness. From a decree adjudging Robert L. Ferguson and others liable under the terms of the agreement against ultimate loss and overruling their motions for a new trial, they appeal.

Affirmed.

Fred A. Wright, of Omaha, for appellant C. N. Wright.

Neighbors & Coulter, of Bridgeport, for appellant Thomas L. Green.

Woods, Aitken & Aitken, of Lincoln, for appellant Ferguson.

Neighbors & Coulter, of Bridgeport, for defendant Airedale Ranch.

Harry R. Ankeny and C. J. Campbell, both of Lincoln, for appellee.

Heard before SIMMONS, C. J., and ROSE, EBERLY, PAINE, MESSMORE, and JOHNSEN, JJ.

EBERLY, Justice.

This is an appeal from a judgment entered in behalf of plaintiff in a suit in equity for the collection of certain bonds, the foreclosure of the real estate mortgage securing the same, and the enforcement of a certain " agreement against ultimate loss" pertaining to the indebtedness evidenced thereby. From the adverse action of the trial court in adjudging them liable under the " terms" of the guaranty against ultimate loss, and overruling their respective motions for new trial, defendants appeal.

This is a continuation of First Trust Co. v. Airdale Ranch & Cattle Co., 131 Neb. 475, 268 N.W. 362.It was therein stipulated by the parties, and ordered by the trial court, that the issues now for consideration be continued until after sale of the property was made and confirmation thereof had. These facts having occurred, the cause was tried with results as above indicated.

The original " agreement against ultimate loss" has been lost. There is no question as to the fact that such an instrument was originally executed and delivered by the defendants Robert L. Ferguson, W. H. Ferguson, T. L. Green, and C. N. Wright to the Lincoln Trust Company of Lincoln, Nebraska, in December, 1924. All parties agree that the following is a correct copy of the contractual parts of that agreement, land description, signatures, and one word only omitted, viz.:

" Agreement against ultimate loss. Know all men by these presents: That, whereas, the Airedale Ranch and Cattle Company has made application to the Lincoln Trust Company of Lincoln, Nebraska, for a loan of Seventy-five Thousand Dollars for five (5) years at six (6) per cent. per annum interest, payable semi-annually, from * * * 1st, 1925, to be secured by a mortgage on Nine Thousand Two Hundred Eighty (9280) acres of land situated in Scotts Bluff County and Banner county, Nebraska, more particularly described as follows: * * * And whereas, the Lincoln Trust Company has agreed to make said loan, provided title is found satisfactory.

Now, Therefore, it is understood and agreed that, in consideration of the Lincoln Trust Company making said loan, the undersigned, C. N. Wright, T. L. Green, Robert L. Ferguson and W. H. Ferguson agree with the said trust company that in case it becomes necessary to foreclose said mortgage that the undersigned will pay all court costs and reasonable attorneys' fees incident to said foreclosure, and when the property secured by said mortgage is sold and a sheriff's deed issues, if it does not sell for a sufficient amount to pay said loan in full together with all interest according to the terms of the note and mortgage, then and in that case the undersigned will make up such deficiency, the intention being that the Lincoln Trust Company, its successors or assigns is to be held safe and harmless in the principal sum of Seventy-five Thousand Dollars ($75,000) with interest according to the terms of

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