American Bonding Co. v. Progressive Permanent Building Loan & Savings Ass'n

Boyd, J., delivered the opinion of the Court. This is a suit on a bond given by Wm. A. Wade and the apr pellant to the appellee in the penalty of $ 3,5 00. It recites in the preamble that Wade, by an assignment of a mortgage of even date, had granted and conveyed unto the appellee all those nineteen pieces or parcels of ground described in said assignment, and that it was a condition precedent to said assignment that the appellee should be saved and protected against loss in the premises by the execution of that bond of indemnity.

The part of the condition of the bond with which we are concerned-is “that if the said William A. Wade, assignor of said mortgage, shall fully complete and finish the buildings and improvements now in course of erection on said respective lots of ground, fence in said lots, lay the pavements and put the ground and premises in complete order for occupancy by tenants on or before the first day of July next.’-’ It then proceeds to state the manner in which they are to be completed ³³³ by referring to houses on certain streets in Baltimore. The condition of the bond also provides that the appellant should indemnify the appellee against mechanics’ liens, but that is not involved in this case, and no breach is alleged in the declaration as to it. A number of pleas and replications were filed, many of which were demurred to, but as the demurrers were for the most part decided against the appellee, it will not be necessary to consider them separately, especially as the important questions will be passed on in the consideration of the prayers. The Court granted the second, third, fourth and fifth prayers of the plaintiff and rejected all of the five prayers offered by the defendant.

The defendant excepted to the rulings of the Court as to these prayers and to the overruling of its special exceptions to the second, third and fourth prayers of the plaintiff. A verdict was rendered in favor of the plaintiff for $950.66, and this appeal was taken from the judgment on that verdict. The assignment of the mortgage by Wade to the appellee was to secure $3,500 loaned to him by it, and seems to contain the usual covenants in a building association mortgage, but it is not set out in full in the record. The mortgage assigned was from one Carter to Wade to secure a loan of $7,300, payable in one year, and conveyed the nineteen lots.

It does not provide for partial payments, but Wade and the appellee agreed that upon payment of one-nineteenth of the debt due it, the appellee would release a lot. It accordingly released one lot on payment of $170.10 and eight on each of which was paid $.168.10, all of which amounts were credited on the debt due the appellee. The releases were not made until áfter July 1st, 1899, the time the appellee contends there was default on the bond sued on. The appellant was not notified that the releases were to be made, and contends that it has suffered by reason thereof to the full amount of the penalty of the bond.

The mortgage was foreclosed as to the remaining ten lots which only realized $110 each, amounting in all to $1,100, and the auditor’s account showed the balance due the appellee to be $950.66. The loan was granted Wade that upon the condition that this bond should be given. ³³⁴ It is contended by the appellant that the bond sued on is a guaranty of the mortgage debt. The language of the undertaking quoted above would seem to show clearly that that contention is not correct. If the buildings and improvements, had been completed on or before July ist, then manifestly the bond would not have been liable, if there had been default on the mortgage, and the property had realized less than the amount due the appellee by Wade.

Presumably the. appellee felt satisfied to loan Wade $3,500 on the security of the assignment of the mortgage, provided the buildings and improvements were completed by the first day of July and were clear of liens, but however that may be, if, for example, the improvements had been completed by July ist, and had been destroyed by fire, certain it is that the appellant could not have been held responsible for any loss, if the insurance had not been kept up, or the amount of the policy could not be collected by reason of the failure of the insurance company, or other cause not occasioned by the appellant. The learned counsel for the appellant argued that the measure of damages on the bond was not what it would cost to complete the buildings, but the loss on the mortgage debt. It is true that if there had been no loss on the mortgage debt, there could be no recovery on the bond for the very simple reason that the appellee would have lost nothing, and therefore would not have been entitled to recover anything, and unless it did lose some portion of the debt by reason of its debtor failing to do that which the Bonding Company had agreed to hold itself liable for, then manifestly there can be no recovery against the appellant. What it did hold itself liable for, in our opinion, is stated above.

But that question is conclusively settled by the case of Schaeffer v. Bond, 72 Md. 501 . Mrs. Schaeffer loaned one John Carson $4,500, who gave her a mortgage on eleven parcels of land in Baltimore City. On the same day the mortgage was given, Carson executed a bond with securities, which recited that it was a condition precedent to making the loan that the bond was to be given. The condition of that bond was in the same language used in the one now be ³³⁵ fore us, as to the completion of improvements and the liens, and also included indemnity against ground rent.

This Court said “It is universally accepted law that sureties are only to be held to the letter of their contract; and their liability is not to be enlarged beyond their strict engagement. Brandt on Suretyship, sec. 79. Looking to the bond of John Carson and his securities, to Mrs. Schaeffer, it very clearly appears that the securities never undertook to be sureties for the mortgage debt, nor aay part of it. No default in respect to it, or anything which affected the mortgage debt, brought any liability on them for it.

Their undertaking was purely collateral to it. They became security that the buildings mortgaged should be completed by a specified time; for the fencing and paving of the premises; for the payment of the ground rent; and that Mrs. Schaeffer should suffer no loss by reason of mechanic’s liens on the property. None of these are mentioned in the mortgage except the rent. The mortgage gives no hint that the buildings mentioned in it are uncompleted structures.” We do not see any distinction between that case and the one now before us that can in any way affect the question.

The fact that the title to the property was in Carter can make no difference. Wade furnished the money for the building of the houses, took the mortgage from Carter which was assigned to the appellee, and was virtually the owner of the property. The evidence shows that the appellee entered into the agreement with Wade, as a condition precedent to the loaning of the money, and before the execution of the assignment of the mortgage, to release each lot upon the payment of one-nineteenth of the debt. Nine of them were accordinly released as stated above, and the sums received were credited on the mortgage.

That agreement was not embodied in the assignment of the mortgage and was not communicated to the appellant. All of the payments were made and the releases were executed after July 1st, 1899—the first being nearly four months thereafter. It is not denied, but practically conceded, that, none of the houses were completed by that date, and, as we have said the undertaking by the appellant was that they ³³⁶ should be completed by that time', it follows that the appellee was entitled to recover, if he did sustain any loss by reason of the .improvements not being so completed’. Each of the prayers granted by the Court required the jury to .find the latter fact before finding for the plaintiff.

The fifth was- the only one that instructed the jury as to the amount of recovery, which told them “that if they find for the plaintiff, they shall award the plaintiff such sum as they may find from the evidence the plaintiff lost under the said assignment of mortgage by reason of the non-completion of said houses, according to the terms of the bond proven in this case.” Wade, and not the appellee, was the one who procured the appellant to go on the bond. Mr. Carrington, atttorney for the appellee, testified that some one representing the appellant telephoned to his office that Mr. Wade had applied for the bond for the completion of the buildings, and if he would prepare it in such form as he desired and send it to the company, it would execute the bond for Mr. Wade. A few days afterwards Mr. Wade obtained the blank bond, took it to the appellant, and on the day of the final consummation of the loan, and the payment of the money, it was returned to Mr. Carrington’s office by Mr. Wade. It is not proven in the case that Mr. Carrington knew that there was an agreement to accept partial payments and execute releases when he drew the bond, but, if that be assumed, the appellant did not occupy such relation to the mortgage as to enable it to escape its liability f because the appellee executed the releases on payment of the amounts agreed upon, in accordance with its promise so to do.

In Schaeffer v. Bond, supra, three of the houses included in the mortgage were destroyed by fire shortly after default in the bond. They were insured as required by the mortgage “with provision in the policy for the payment of the insurance money, in the event of fire, to the mortgagee” and $2,469.1$ was paid by the insurance company.' The bill in that case alleged that that sum was properly applicable to the discharge of the obligation of the mortgagor to the mortgagee, but without the assent or concurrence of the appellees, who were sure ³³⁷ ties on the bond, Mrs. Schaeffer made an agreement with the mortgagor and others by which the insurance money was applied to the