Mechanics Trust Co. v. Fidelity & Casualty Co.
| Decision Date | 27 June 1931 |
| Docket Number | 6 |
| Citation | 304 Pa. 526,156 A. 146 |
| Parties | Mechanics Trust Co. v. Fidelity & Casualty Co., Appellant |
| Court | Pennsylvania Supreme Court |
Argued March 26, 1931
Appeal, No. 6, May T., 1931, bye defendant, from judgment of C.P. Dauphin Co., June T., 1929, No. 1295, on verdict for plaintiff, in case of Mechanics Trust Company v. Fidelity & Casualty Company of New York. Affirmed.
Assumpsit on bond of suretyship. Before WICKERSHAM, J.
The opinion of the Supreme Court states the facts.
Verdict and judgment for plaintiff for $10,722.88. Defendant appealed.
Error assigned, inter alia, was refusal of judgment for defendant n.o.v., quoting record.
The judgment is affirmed.
Robert P. F. Maxwell, with him George F. Blewett, William F. Bailey and Metzger & Wickersham, for appellant. -- The measure of damages is based on the difference of the value of the property as security: Province Security Corp. v. Casualty Co., 168 N.E. 252; Longfellow v. McGregor, 63 N.W. 1032; Weightman v. Trust Co., 208 Pa. 449; Penna. Co. v. Central Trust Co., 255 Pa. 322; Wheeler v. Equitable Trust Co., 206 Pa. 428; Equitable Trust Co. v. National Surety Co., 214 Pa 159.
Paul G. Smith, for appellee. -- The appellee at all times has contended that the purpose of the bond was to give to it the security of four completed dwellings on the real estate and that the measure of damages on the breach was the reasonable cost of completion so that appellee obtained such security.
The contract was a completion bond: Reigart v. White, 52 Pa. 438; Equitable Trust Co. v. Nat. Surety Co., 214 Pa. 159; Union Trust Co. v. Citizens Trust Co., 185 Pa. 217; James v. Scott et al., 59 Pa. 178.
The proper measure of damages was the reasonable cost of completion: Weightman v. Union Trust Co., 208 Pa. 449; Wheeler v. Equitable Trust Co., 206 Pa. 428; German-American Title & Trust Co. v. Trust and Surety Co., 190 Pa. 247; Penna. Co. v. Trust & Savings Co., 255 Pa. 322; Central Trust & Savings Co. v. Furniture Co., 65 Pa.Super. 339; Wheeler v. Trust Co., 206 Pa. 428.
The apparent profit on the sale of the dwellings does not inure to the benefit of the surety: Wheeler v. Trust Co., 206 Pa. 428; Edgar v. Boies, 11 S. & R. 445.
Before FRAZER, C.J., WALLING, SIMPSON, KEPHART, SCHAFFER and MAXEY, JJ.
This action in assumpsit is by the obligee on a personal surety bond against the surety after breach by the principal. In February, 1928, William H. Turby planned to erect two double houses on a tract of land owned by him at 19th and Spencer Streets in the City of Harrisburg. At that time, the land in question was encumbered by a mortgage of $3,355.59 and a judgment lien amounting to $1,500. To finance his improvement, Turby applied to plaintiff trust company for a loan of $15,000, to be secured by a first mortgage on the tract of land and buildings to be erected. The court found that $5,000 of the loan was advanced upon credit of the ground or unimproved land and to clear off the above mentioned earlier liens so that plaintiff's $15,000 mortgage would be a first lien; the remaining $10,000 of the loan to be advanced to Turby for construction of the proposed buildings. The bond and mortgage on the premises, to cover the $15,000 loan, were duly executed by Turby in favor of the Mechanics Trust Company under date of February 7, 1928. However, since the mortgage, to the extent of $10,000 of the loan, was on the proposed buildings, not yet constructed, plaintiff further required that Turby furnish a personal bond in the amount of $10,000 guaranteeing completion of the proposed two double houses. Turby met this requirement, and it is this personal surety bond which forms the subject-matter of the present suit.
The surety bond was executed in favor of plaintiff trust company on February 21, 1928, signed by Turby as principal and the Fidelity & Casualty Company of New York, the present defendant, as surety. Following the usual bonding paragraph, the bond provided,
Although the bank appears to have made Turby a minor advance on February 20, 1928, it was not until the above quoted bond was in plaintiff's possession that, on February 23, 1928, the bank advanced Turby the money to pay off the old mortgage and the judgment lien standing against the land. At this time he was given a check for $300 with which he paid the premium on the surety bond procured from defendant and also a personal check for $200. The balance of $9,000 of the loan was paid to Turby in installments of $500 and $1,000 each on eighteen separate dates from March 8, 1928, to May 24 of the same year.
Turby proceeded with the erection of the houses until they were from one-third to one-half completed. In September, 1928, plaintiff, learning that Turby had discontinued work on the buildings, immediately advised defendant surety company in writing of this fact and requested that immediate attention be given the matter. The court found that, following this notification, defendant did nothing. Turby became bankrupt on October 12, 1928, and the land and four uncompleted houses which were in course of erection thereon were sold for the sum of $7,800 at public sale by the trustee in bankruptcy, free and clear of all encumbrances, to David Wallace, who acted for plaintiff bank.
The condition of the houses when Wallace took possession was the same as when Turby ceased work. Wallace had the buildings completed at a cost of $9,851.34, following, aside from one minor change, Turby's original plans. Wallace sold the houses on installment contracts for a total price of $22,400. The evidence showed the price received, after payment of all expenses, and assuming that the installment contracts will be carried out, represented a net profit, due to Wallace's operation, of $3,350.58. Of this sum, $1,675.29 is to go to plaintiff under an oral agreement testified to by Wallace, which testimony was admitted by the trial court with the understanding that the jury were to be told to disregard it. The evidence further developed that the principal and interest due on the $15,000 mortgage to August 7, 1929, was $16,238.20, and that the net amount received at that time by plaintiff from the trustee in bankruptcy on its claim filed in the Turby bankruptcy proceeding was $6,514.64, leaving a loss to plaintiff under the mortgage of $9,723.56, without considering interest accrued since that date.
The trial judge instructed the jury that the bond in question was a completion bond which was breached September 24, 1928, and that the damage for which defendant is liable was "such an amount not in excess of $10,000 as it cost the Mechanics Trust Company to complete those buildings"; he also instructed the jury to disregard Wallace's testimony as to the profit realized on his agreement with plaintiff to complete the buildings. The court refused defendant's points setting forth its theory that the bond was not to insure completion but to indemnify plaintiff on its mortgage, and also to the effect that the measure of damage was the difference between the amount advanced by plaintiff for the construction of the dwellings and the fair market value of the buildings at the time of the breach considered separate and apart from the land; defendant's offers of evidence upon these points had already been excluded and exceptions noted. The jury found for plaintiff, and a verdict was entered in favor of the bank for $9,837.51, with interest from the date of defalcation, $885.37, making a total of $10,722.88. Defendant's motions for judgment n.o.v. and for a new trial were overruled and this appeal followed.
Without treating separately appellant's thirty assignments of error, we may dispose of the legal matters in the controversy by a discussion of three principal questions which are involved: (a) Is the bond in issue a completion bond or must it be construed only to indemnify plaintiff for loss on its mortgage loan? (b) Assuming the default by Turby on September 24, 1928, what was the measure of damage governing defendant's liability to plaintiff? (c) Did the court err in excluding defendant's above mentioned offers of testimony and in instructing the jury to disregard the testimony of Wallace as to the profits realized on his agreement with plaintiff to complete the buildings?
Turning to the first of the above questions, it is to be noted that the bond on which defendant became surety states that "if the said William H. Turby shall well and faithfully perform his part of the agreement and erect said dwellings then his obligation shall be void, otherwise to be and remain in full force and effect." The only logical interpretation to be placed upon the last clause, beginning with the word "otherwise," is that in case Turby failed to erect the buildings, the obligation under the bond would...
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