# Brief in Opposition to Petition for A Writ of Certiorari — Prudence Co. v. Fidelity & Deposit Co. of Md. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_0298%3A07 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief in Opposition to Petition for A Writ of Certiorari - **Published:** January 1, 1936 - **Citation:** 297 U.S. 198 ## Text _FILE COPY _ _—" Supreme Court of the United States October Term, 1935 : No. 270 THE PRUDENCE Company, INc., Petitioner, against FEO EM Re TRB RRR cae rates tt act eg one SR See ee ee Ee NT | ; | Fmeuity & Deposrr Company oF Mary- LAND and AMERICAN BonpING COMPANY oF BALTIMORE, Respondents. RESPONDENTS’ BRIEF IN OPPOSITION TO THE t PETITION F OR A W OF CERTIORARI. ' / Joun W. Davis, } JosepH F. Murray, E Txomas KE. Waite, § Counsel for Respondents. : 4 ‘ Gg, SUBJECT INDEX Statement of Facts Bi ios teccageadanpinl As to the Alleged Reasons for Granting a Writ —...... ies ot Aree " Argument “ , bie. ‘% Answering Point 4. A. The decisions of Trainor v. Aetna Cas. Co., 290 U. S. 47, and Kidd. v. McCormick, 83 N. Y. 391, do not warrant the allowance of in- terest on a mortgage, taxes and insurance pre- | ‘“miums as damages caused by the failure to complete a building: - B. Interest on the mortgage loan and taxes and insurance premiums are not recoverable as damages from the respondents, because the only default claimed against the respondents, failure ‘ to complete the building, was not a cause, either direct, natural, proximate, concurring or other- wise, of the loss by petitioner, but the sole, direct, : natural and proximate cause of such.loss was the default of the principal debtor on. the mortgage is C. Interest on the mortgage loan as dam- ages is not recoverable from the respondents because they assumed no obligation as to the principal of the loan, and interest as damages cannot be recovered apart from the principal... II. Answering Point II. The respondents were not - liable by contract for interest on the mortgage, taxes and premiums, because their bond did not guarantee the payment of such items. The ITI. IV. _ respondents’ sole obligation was to make good any default of their principal in constructing, paying for and completing the building _.___ Answering Point III. Whether the respondents were liable for interest on mortgage, taxes and insurance premiums was ‘a question of law de- terminable from a construction of -the respon- dent’s bond, and the Trial Court made no finding of fact in respect thereof. Answering Point IV. The Circuit Court of Ap- peals was not confused in its holding that the provision in the bond for written waiver of strict performance of the building loan ‘agreement -could be waived by the parol consent of the president of the petitioner to omissions and substitutions - Answering Point V. A provision in an instru. PAGE 15 20 22 . 29 27 V. ment requiring a written waiver may be waived by parol, and the excluded evidence tended to show such waiver VI. The Circuit Court of Appeals was correct in ordering a new trial. Conclusion Barnes v. Brown, 130 N. Y. 372, 381 Cases Cited. Beatty v. Guggenheim Exploration Co., 225 N. Y. 380, . 387 Bere v. Erie R. R. Co., 225 N. Y. 543, 546 Brady. v. Mayor, 14 App. Div. 152___..-. ae Brewster v. Wakefield, 22 How. 118 28 13 25 20 14 14 ill ~ ~ PAGE - Cohens v. Virginia, 6 Wheat.'264, 399.____ 10 Comey v. United Surety; 217 N: Y. %6____________.... — Cutter v. Mayor, 92 N. Y. 166, 170. 13 Dillon v. Barnard, 21 Wall. 430, 437 21 Finck v. Menke, 31 Mise. 748 13 General Electric Co. v. National Contracting Co., 178 - N.Y. 369, 375 - 26 Hamilton v. siemail. ete. Ins. Co., 136 U. 8. 242. 21 Hamilton v. Van Rensselaer, 43 N. Y, 244 : 14 Holden v. Trust Co., 100 U. S. 72. 14 Insurance Co. v. Norton, 96 U. S. 234, 240. 26 Kidd v. McCormick, 83 N. Y. 391.-.....-----------.--.---- 4, 5, 6, 8,9 Laidlaw v. Sage, 158 N. Y. 73, 98-102._.___-_-_--------.-------- 12 Langley v. Rouss, 185 N. Y. 201 _......-------- P 26. Longfellow v. McGregor, 61 Be Hi cichecsinens ssiolasacnsvemahe 10 Matter of Hermance, 71 N. Y. 481, 487_......-..------------— 20 Matter of Trustees, 137 N. Y. 95, 98. 13 &§ McCauslan v. Zoar Holding Co.,.13] Misc. 148, 150.12, 18 § Melick v. Knox, 44 N. Y. 676 _2...........------ 14 Milwaukee, etc., Ry. Co. v. Kellogg, 94 U. S..469, 475... 12 Northern Assurance Co. v. Grand View ete. Assn., 183 U. S. 808, 352, 361. , 26 O’Brien v. Young, 95 N. Y. 428 me ea ee 14 Pacific Co. v. Peterson, 278 U. S. 130, 136... 10 People v. Tax’ Commissioners, 174 N. Y. 417, 447_-- 10 Phillipe v. Curran, 218 Ill. App. 517- : 10 Province Securities Corp. v. Maryland Cas. Co., 269 ' Mass. 75, 94 , 10, 15, 18 Smith v. Molleson, 148 N. Y. 241, 246-: 18 Southern Cent. R. R. Co: v. Moravia, 61: Barb. 180,188. 14 Steen v. Niagara Fire Ins. Co., 89 N. Y. 316, 327. 26 Swift v. iii Valley R. Co., 243 U.S. 281, 239 21 Teer v. George A. Fuller Co., 30 F. (2d) 30, 32... ro 26 Trainor Co. v. Aetna Casualty Co., 290 U.S. 47_..4, 5, 6,8, 9, 10, 18 ‘United Real Estate Co: v. McDonald, 140 Mo. 605.10, 15, 18 Wakeman v. Wheeler, 101 N. Y. 205, 209... dD Authorities = et ee ee 13 Sutherland on Damages (4th Ed.), Secs. 300, 372... 13 Sutherland on Damages (4th Ed.), See. 725. i Supreme Court of the United States October Term, 1935 — sa No. 270 “9 Tur PrupeNcE Company, Inc., Petitioner, against Froetity & Derostr Company or Mary- LAND and AMERICAN Bonpina CoMPANY or BALTIMORE, ( Respondents. RESPONDENTS’ BRIEF IN OPPOSITION TO THE PETITION FOR A WRIT OF CERTIORARI. Statement of Facts. The statement of facts contained in the petition does not contain certain material facts which are necessary to a determination of the questions presented. For that reason, we supplement the statement contained in the petition with the following facts. * The building loan agreement provided for the delivery to petitioner of a bond and mortgage in the sum of $6,650,000, which was to mature on Decémber 16, 1930, on the same date fixed for the completion of the building, . and this bond and mortgage was executed and delivered (R. pp. 569, 592, 678). 2 Nowhere in respondents’ bond is there any provision guaranteeing the performance of the provisions of the bond and mortgage. Respondents’ bond guaranteed only the performance of the provisions of the building loan agree- ment (R. p. 596). At the same time that respondents’ bond for the com- pletion of the building was furnished, the petitioner re- ceived from a third party, Lefcourt, pursuant to the provisions of the building loan agreement, a guaranty of performance of all the terms, conditions and covenants of the bond and mortgage, including the payment of the prin- cipal sum and interest (R. pp. 571, 679, 680). On the date fixed for the completion of the building and the satisfaction of the mortgage, there was a default on the bond and mortgage (R. pp. 19, 722). Because of such de- fault, a foreclosure action was started by petitioner two days later, on December 18, 1930 (R. p. 19). On or about January 6, 1931, the borrower signed an agreement giving - the petitioner possession of the premises (R. p. 725). Judg-: ment of foreclosure and sale was made and entered on | January 19, 1931 (R. p. 19). The property was sold for | $6,000,000 on March 17, 1931 (R. pp. 19, 20). A deficiency . judgment was entered on April 3, 1934 (R. p. 20). _ The petitioner claimed the building was actually com- pleted on October 1, 1931. No evidence was adduced by the petitioner to establish what would have béen a reasonable time within which to complete the building after the default. The respondents, however, adduced uncontradicted testi- mony that the work done to complete the building after the | default cottd have been done in a period of from four to eight weeks (R. p, 436). The petitioner claimed interest, | taxes and insurance premiums for the whole period from the date of the default up to the date it claimed the mneeng was actually completed (R. pp. 18, + : * rat a 3 The only defaults claimed in the complaint were defaults in constructing, paying for and completing the building (R. pp. 13-16, Paragraphs XXI-XXVII, XXXI#). Nowhere in’the complaint was it alleged that there was any express obligation to pay interest on mortgage, taxes or insurance premiums, and in claiming for such items the theory was - that they were damages flowing from the defaults in the completion of the building, and not from any express obli- gation to pay them. Paragraph XXXVII of the complaint alleged that by reason of the defaults previously mentioned, which were defaults in completion, the plaintiff had been deprived of interest on the principal of the loan, not that plaintiff had been deprived of the interest because of the failure of the respondents to comply with an obligation to pay (R. pp: 17, 18). | The Cireuit Court of Appeals held that the measure of damages was the difference between the value of the building on the date of the default and the value the building would have had on that date if completed strictly in accor- dance with the plans and specifications (R. p. 885). No evidence was introduced by the petitioner to show the value of the building on the date of the default, or what the value would have been if the building had been completed on that date in accordance with the plans and specifications. The Circuit Court of. Appeals held that the items of omissions and substitutions claimed by the petitioner might detract from the value of the building (R. p. 882), and that such loss might be recovered (R. p. 884). The peti- tioner, however, introduced no evidence to show to what extent, if any, the value of the building: had been. diminished by such omissions and substitutions. On the other hand, — the respondents adduced uncontradicted testimony that the value of the building was not lessened by the items of omis- _ sion and substitution (R. pp. 359, 376, 377, 404). i 4 In the petition (pp. 9 and 10), the ‘petitioner speaks of interest lost by petitioner between December 16, 1930 and October 1, 1931 on $6,575,000. As a matter of fact, peti- tioner did not lose interest on $6,000,000 between March 17, 1931 and October 1, 1931, because it- sold the very same premises for $6,000,000 on March 17, 1931. As to the Alleged Reasons for Granting a Writ. The first reason has no substance, because the decision of the Cireuit Court of Appeals was in exact conformity with the decision of this Court in Trainor v. Aetna Casualty Co., 290 U. 8. 47. The only holding of this Court in the case mentioned is that damages were ‘‘the amount of the difference between the value of the unfinished buildings and their Value as it would - have been if completed in accordance with the agree- , ment—see Kidd v. McCormick, supra, p. 398—but exceeding neither the amount due on its debt nor the amount of the bond.’’ In this case the Circuit Court of Appeals’ held: . **We think, therefore, that the measure of dam- ages was the difference between the value of the building on December, 16, 1930, as the work had progreésed, and the value it would have had an that , day if completed strictly in accordance with the plans y and specifications’’ (R. p. 882). The second reason’has no substance, ‘because the aed _ sion of the Circuit Court of Appeals was in exact conformity with the law laid down in Kidd v. McCormick, 83 N. Y. 391. In that case the Court. stated in three different places -that the measure of damage was ‘the difference in value 5 ’ between the buildings unfinished and the buildings as they would have been if completed according to the contract. This is the same measure of damage followed in the-Trainor case, supra, and the same measure of damage applied in the instant case by the Cireujt Court of Appeals. The third reason has no substance, because the cases cited in the petition clearly state that any damayes recover- able must not be remote or speculative, but direct and im- mediate and resulting from the breach alleged. The breach here was the failure to complete a building. The damages claimed, to wit: interest on loan, etc., were lost because of the breach of the borrower in failing to satisfy a mortgage. The fourth reason has no substance} because, as above pointed out, the Cireuit Court of Appeals has followed the decisions in Trainor v. Aetna Casualty :Co. and Kidd vy. McCormick. ’ ~ The fifth reason has no subsfance, because there was no finding of fact that interest, taxes and insurahce were proper items of damage, but these items were allowed by — the Trial Court as-a matter of law, based upon‘a mistaken understanding of the decisions in Trainor v, Aetna Casualty Co. and Kidd v. McCormick. The sixth reason Has no substance, because the question is one dependent upon the interpretation of particular in- struments and does not involve a.question of law of general importance, af The seventh and eighth reasons have no substance, be- - cause they present a question which has been passed upon times without number, and that is whether a provision in a written instrument providing for a written waiver may be itself waived by parol. The ninth reason has no substance, because the amount involved and the length’ of .the trial are not among the reasons laid down for granting a writ of certiorari. Summary of Argument. 1. | ANSWERING Pornt I. A. The decisions of Trainor v. Aetna Cas. Co., 290 U.S. 47, and. Kidd v. McCormick, 83 N. Y. 391, donot ' warrant the atlowance of interest on a mortgage, taxes and insurance premiums as damages caused by the failure to complete a building. B. Interest on the mortgage loan and taxes and in- ‘ surance premiums are not recoverable as damages from the respondents, because the only default claimed against the respondents, failure to com- plete the building, was not a cause, either direct, natural, proximate, concurring or otherwise, of the loss by. petitioner, but the sole, direct, natural and proximate cause of such loss was the default of the principal debtor on the mortgage. C. Interest on the mortgage loan as damages is not recoverable from the respondents because—they } assumed no obligation as to the principal of the loan, and interest as damages can not be recovered apart from the principal. II. ANSWERING Pornt II. The respondents were not liable by contract for interest on the mortgage, taxes and premiums, a 7 because their bond did not guarantee the payment of such items. The respondents’ sole obligation was to make good any default of their principal in con- . structing, paying for and completing the building. ITI. ANSWERING Point ITT. Whether the respondents were liable for interest on mortgage, taxes and insurance premiums was a question of law determinable from a construction of the respondents’ bond,.and the Trial Court made no finding of fact in respect thereof. BV. ANSWERING Pornt IV. The Circuit Court of Appeals was not confused in its holding that the provision in the bond for written waiver of strict performance of the building loan agreement could be waived by the parol consent of the president of the petitioner to omissions and substitutions. ¥. . ANSWERING Pornt V. A provision in an-instrument requiring a written waiver may be waived by parol, and the excluded . evidence tended to show such waiver. VI. The Circuit Court of Appeals was correct in ordering a new trial. ARGUMENT. I. Answering Point I. oe ~ -™ The decisions. of Trainor v. Aetna Cas. Co.; 290 U. S. 47, and Kidd v. McCormick, 83 N. Y. 391, do not warrant the allowance of interest on a mortgage, taxes and insurance premiums as damages caused by the -failure to complete a building. The opposition by the respondents in the Trial Court to the allowance of interest on the mertgage loan, taxes and insurance premiums were summarily dismissed by the Court in these words: ‘‘The defendants’ contention would seem ade- quately to be disposed of under the authorities cited.’’ (Citing the above mentioned cases) (R. p. 907). | No authority was cited to or by the Court in which such items had ever been allowed. The Court depended entirely upon words used in the opinions in those two cases which were not necessary to their decision and were inserted only to show why the measure’of darfages laid down in those eases and which had always been previously applied was the correct and only measure of damages in such tases. _ Difference in value was applied in Trainor v. Aetna, as - the proper measure of damage, this Court saying: . ‘*Petitioner is entitled to be put in as good posi- tion in respect of its debt as it would have occupied if the buildings had been completed in accordance with 9 the terms of the undertaking; and this can be done . here only by giving it the amount of the difference between the value of the unfinished buildings and their value as it would have been if completed in accordance with the agreement—see Kidd v. Mc- Cormick, supra, p. 398—but exceeding’ neither the amount due on its debt nor the amount of the bond.’’ In that case the plaintiff was a third mortgagee with no ‘such rights as the plaintiff here, who was a first mortgagee. Defendant had claimed that the value of the property on the date of default was in excess of the debt to plaintiff and all prior liens and that, therefore, plaintiff could have suf- fered no damage. To show why that contention was not. sound, the Court said: ‘‘Petitioner was then- (at the default) without remedy against the property because its mortgage was not in default. It was, therefore, obliged to sit by and await the action of others over which it had no control. In the meantime, the. uncompleted buildings necessarily lay unrented, ‘subject to ex- | pense in the way of taxes, insurance, accumulating interest, ete., deteriorating in quality and steadily declining in value.”’ Because of those circumstances the Court held that the plaintiff would be compensated by giving it the difference in value. Clearly, that language is no authority for the ' proposition contefided for by petitioner here. At best, it is a reason why the difference in value is the true measure of damage. , In the Kidd case the Court stated the rule to be the same as was followed in the Trainor case. ; The reasoning used by that Court to show why that was -the- proper rule of damage was the same reasoning given by this Court in the’Frainor case. 10 Since the Trainor and Kidd cases did not even assume to decide that interest on mortgage, taxes and premiums are proper items of damage in such a case, what-the Court might have said arguendo is entitled to no weight. Cohens v. Virginia, 6 Wheat. 264, 399; Pacific Co. v. Peterson, 278 U. S. 130, 136; People v. Tax Commissioners, 174 N. Y. 417, 447. All the cases relied on in the Kidd case, all the cases relied on in the Trainor case, and all other decided cases. on the point are unanimous that the proper measure of damages is difference in value at the date of the default, and that may be shown by proving the actual cost of ~ completion. The Trawmor case cited with approval Umited Real Estate Co. v. McDonald, 140 Mo. 605, 612, in which it was clearly stated.that the damages were to be assessed as of the ~ date of the breach of the bond and that the measure of such damage was the difference between the value of the realty without the building required and the value of the property with-such building. © : To the same effect are: Longfellow v. McGregor, 61 Minn. 494; Province Securities Corp. v. Maryland Cas. Co., 269 Mass. 75, 94. Other cases substantially to the same effect are Phillipe v. Curran, 218 Ill. App. 517; Comey v. United Surety, 217 N. Y. 268. The plaintiff offered no evidence of difference in value. The petitioner has injected into its argument under Point I a theory which heretofore has not entered into the ay 11 ease. It is that items of interest, taxes and insurance entered into the determination of difference in values be- tween the building contracted for and the building at the time it should have been completed. No claim was made either in the pleadings or on the | trial that these claimed items ef damage entered into the determination of difference in values. The complaint sought interest as damages because the petitioner claimed it had been deprived of interest. Taxes and insurance were claimed and allowed as items of incompletion. Throughout the trial the respondents eins that dif- ference in value was the true measure of. damage. Peti- tioner offered no evidence from ‘which the Court could or did find what that difference, if any, was. For the petitioner now, after its refusal throughout the | case to be bound by the difference in value as the measure | of damage, to attempt to bring the items claimed within _the doctrine of difference in value is to present for the first time a new theory. Neither of the Courts below had pre- sented to it or decided any such question. ! Furthermore, as above pointed out, the measure of damage is fixed as of the date of the default. In fixing the damages as of that date, how can interest, taxes and insurance premiums enter into the determination when concededly the petitioner might have. let the building lie forever uncompleted? It would be impossible then to determine what the claimed loss of interest, taxes and pre- miums might be. Furthermore, petitioner is s contending for the right to recover for the cost of incomplete items, the cost of omis- sions and substitutions, interest, taxes and insurance pre- miums although the premises as they stood on the date of ‘the default: might have been of a value in excess of the amount of its mortgage. ° 12 Interest on the mortgage loan and taxes and insur- ance premiums are not recoverable as damages from the: respondents, because the only default- claimed against the respondents, failure to complete the build- | ing, was not a cause, either direct, natural, proximate, concurring or otherwise, of the loss by petitioner, but the sole, direct, natural and proximate cause of such loss was the default of the principal debtor on the mortgage. The prjncipal assumed two separate and independent obligations—the repayment of a*loan evidenced by a bond and mortgage, and the completion of a building. A default on the first obligation was bound naturally and directly to result in loss of interest on the loan, taxes and insurance premiums. That default would be the sole sufficient, effi- cient cause of the loss. If there were no default in repay- - ment, a default in completion in no event could result in the losses claimed. And again, the performance of the obliga- tion to complete would not prevent thé losses claimed if the obligation to repay were not performed. It is obvious, therefore, that there could be no connection of any kind between the failure to complete the building and the losses claimed. The failure to complete the byilding under one obliga- tion could not be the proximate cause of a loss from the failure to repay a loan under anothér obligation. Milwaukee, etc. Ry. Co. v. manee, 94 U. S. 469, 475; Lotito V. Sage, 158 N. Y. 73, 98-102; Wakeman v. Wheeler, 101 N. Y. 205, 209; McCauslan v. Zoar, 131 Misc. 148, 150. 13 It is fundamental that a plaintiff cannot derive a greater advantage from a breach than from a performance. Finck v. Menke, 31 Mise. 748; Barnes. v. Brown, 130 N. Y. 372, 381. ; The petitioner seeks interest on a mortgage, because of | respondents’ failure to complete -the building, which it would not have received if the respondents had completed the building. - | C. ° | Interest on the mortgage loan as damages is not recoverable from the respondents because they as- sumed no obligation as to the principal of the loan, and interest as damages can not be recovered apart from the principal. — ; Under Point II we show: in answer to petitioner’s: Point II that there was no contract obligation upon the respondents to pay interest on the mortgage loan. Here ‘we shall consider the interest as damages and establish that there is no liability in respondents to pay the interest as - such. | We quote from Matter of Trustees, 137 N., Y. 95, 98: ‘‘Before interest can be allowed in any case it must be by virtue of some contract express or im-, plied, or by virtue of some statute, or on account of the defdult of the party liable to pay, and then it is allowed as damages for the default.’’ Sutherland on Damages (4th Ed.), Sees. 300, 372; 17 C. J. 814; Cutter v. Mayor, 92 N. Y. 166, 170; i = 14 Southern Cent. R. R. Co. v. Moravia, 61 Barb, 180, 188. All cases and authorities recognize the distinction between interest payable by virtue of contract and that payable as damages for breach of contract. Brewster v. Wakefield, 22 How. 118; Holden v. Trust Co., 100 U.S. 72; © O’Brien v. Young, 95 N. Y. 428; Brady v. Mayor, 14 App. Div. 152; Hamilton v. Van Rensselaer, 43 N. Y. 244; Melick v. Knox, 44 N. Y. 676. All of the above authorities and others too numerous “to cite hold that in the absence of an express contract to pay interest, interest as damages cannot be recovered apart | from the principal of the debt. The interest, being only incidental and accessory, cannot exist without the debt, cannot be separated from the debt and sued for alone. The case which approaches nearest to the instant case is the Hamilton case (supra). There the creditor sought to recover interest accruing after the maturity of the principal debt from the third party who guaranteed the interest. Here also the petitioner seeks to recover such interest but from ones who did not guarantee interest. In the Hamilton — case the creditor sought to recover because of the contract guaranteeing the interest. If in that case interest after maturity had been sought as damages, it would be more akin to our case. In that case it was held that in no event would the guar- antor be liable for interest as damages because ‘‘he neither agreed to pay the principal, nor to be liable for the conse- quences of its non-payment’’. —_— 15 United Real Estate Co. v. McDonald, 140 Mo. 605; Province Securities Corp. v. Maryland Cas. Co., \ 269 Mass. 75, 94. II.. Answering Point II. The respondents .were not liable by contract for - interest on the mortgage, taxes and premiums, because their’ bond did not guarantee the payment of | such items. The respondents’ sole obligation was to make © " good any default of their principal in constructing, paying for and completing the building. This claim of .the petitioner that the jae of the respondents’ bond obligated the respondents to pay interest on mortgage, taxes and insurance premiums would seem to- be controverted by petitioner’s own prior, practical inter- pretation of the instruments. The default in the completion ‘of the building occurred on December 16, 1930. The action herein was instituted on or about February 18, 1932. Be- tween these two dates there weré numerous nae tions between the petitioner and the respondents. Detailed lists of damages claimed were delivered to the respondents by the petitioner. (Plaintiff’s Exhibits 60, 62, 66, 70, 71, 72, R. pp. 730, 732, 739, 744, 745, 752.) In none of these communications was any claim made for interest on mort: gage, taxes or insurance premiums, nor was any claim made in the complaint that the respondents were obligated by contract to pay interest, taxes or premiums. The long, detailed complaint alleged the only defaults were defaults | in constructing, paying for and completing the building. When the concluding paragraph of the complaint claimed 16 interest, taxes and insurance, it claimed them only because they were’damages flowing from the failure to complete the building, not flowing from the failure to comply with an - obligation to pay such items (R. pp. 13-18). Under the circumstances, it is hardly open to the peti- tioner to claim that there was any written obligation on the part of the respondents to pay such items. But apart from the practical construction placed upon the respondents’ bond by the petitioner, the only reasonable construction of the instruments in suit is that respondents were not liable by contract for the payment of interest, taxes and premiums. . All the instruments in suit which evidenced the relations between plaintiff and Central Park Properties, Inc.; show clearly that the latter assumed two separate obligations; first, the repayment of the principal of a loan in the sum of $6,650,000, with interest; second, the construction and completion of a building in accordance with the terms of the building loan agreement and plans and specifications. ~ That the petitioner fully understood that there were two separate obligations is showri by the fact that it sought _and obtained a guaranty of performance of the bond and mortgage from one Lefcourt (R. pp. 571, 578, 679). Lefcourt’s guaranty covered both of the obligations mentioned,—payment of principal and interest and com- pletion of the building,—while the surety bond executed by these respondents covered only the latter obligation, the _.completion of the building. Lefcourt’s collateral bond (Plaintiff’s Exhibit 10) in express terms guazanteed the performance of the provi- sions of the bond and mortgage, —_— payment of principal and interest. 17 - When we now turn to the respondents’ bond (Plain- tiff’s Exhibit 2) we notice the absence of any language like the language used ‘in the Lefcourt guaranty for the pay- ment of principal and interest and for the performance of the bond and mortgage. 7e The condition of the bond was that it will be void: if the principal shall proceed with the construction and com- pletion of the building so that it shall be constructed and completed in accordance with the building loan agreement and the plans and specifications, and ready for occupancy not later than December 16, 1930, free end clear of liens (among which is not plaintiff’s mortgage) (R. pp. 595, 596) ; if the principal shall pay the cost of the erection, con- struction and completion (R. p. 596) ; if the surety shall indemnify the obligee from,loss or damage caused by the : failure to construct, pay for and complete the building _ (R. p. 596); if the surety shall make good any default 1 constructing, paying for and completing the building and shall make good every other default by the principal in per- forming any of the other terms set forth in the building oan agreement to.be kept and performed by the principal up to and including the completion of and payment for the building in accordance with the building loan agreement and plans and specifications, and shall indemnify-the obligee against loss and damage suffered by the obligee in making good any default of the principal (R. pp. 596, 597). ' There is no condition express or implied respecting pay- ment of the principal of or the interest on the loan, taxes or premiums. The building loan agreement specifically pro- vided that the bond was to guarantee the completion of the building, not the payment of principal or interest of the loan, taxes or premiums. The recital in the bond itself . 18 is-that it was to guaramee the completion of the building, . not the performance of the bond and mortgage. As said in United Real Estate Co. v. McDonald, 140 Mo. 605, cited with approval in Trainor v. Aetna Casualty, 290 U.S. 47: ‘‘The condition of the bond is not that MeDonald’s notes should:be paid but that the house should be built.’’ 4 Province Securities Corp. v. Maryland Cas. Co., ‘ 269 Mass. 75, 94; : McCauslan v. Zoar Holding Co., 131 Mise, 148, 150. It is well settled that the obligation of the surety is not to be extended:to any other subject, person or period of time or liability than is expressed or necessarily included ‘in it. | Smith v. Molleson, 148 N. Y. 241, 246; _ Sutherland on Damages (4th Ed.), See. 725. Reading the building loan agreement and the bond to- gether, only one reasonable conclusion is possible: and that is that the respondents’ bond was a guaranty only of the completion of the building. That is exactly what both the - building loan agreement and the bond said. - Petitioner has apparently now discarded the argument - made by the Trial Court for the inclusion of interest, taxes 3 and insurance premiums in. the damages, and argues that 6 4- these items were payable because of provisions other than those relied upon by the Trial Court. Its first argument is, in brief, that since the respon- -dents’ bond agreed to make good any default by the prin- cipal in performing any of the terms, covenants or condi- tions of the building loan-agreement, and the principal in the - building loan agreement agreed to perform the cove- Point I]—-Under the decisions in Kidd v. McCor- mick and Trainor v. Aetna Casualty. Co, peti- ‘ tioner is not entitled to recover loss of interest on ‘the mortgage loan, taxes or insuratice pre- miums a ort III—Neither under the terms of the respon- dents’ bond nor under the law of damages are the respondents liable to the petitioner for inter- est on the mortgage loan, taxes or insurance premiums a A—Respondeits’ bond did not guarantee’ f pay- ment of interest, taxes and insurance pre- miums, but only guaranteed the completion , “19 of a building % : B—Interest on the mortgage: loan as damages is _ not recoverable from the respondents because they assumed no obligation as to the principal 15 17 19, of the loan, and interest as damages can net. * be recovered apart from the principal... ii , net . PAGE C—No evidence was offered by petitioner to -show that it suffered any loss of interest o: mortgage. joan, or taxes on insurance pre- miums; by reasofi of failure to complete the building —» ' 28 Point IV—Since petitioner concedes that it is en-. ' titled to recover damages suffered by. it only as mortgagee and not as owner, it may not recover interest on mortgage, taxes or insurance pre- — miums, because the foreclosure of the mortgage and the sale of the property terminated its status ‘as mortgagee , 34 Point V—The difference i in value between a building with and without omissions and substitutions is the proper measure of damages for such omis- sions and substitutions and the petitioner offered no evidence that the value of the building was lessened by reason thereof. 35 Conclusion : 37 PAGE American Surety Co. v. Woods, 105 Fed: 741. . 87 _ Barnes v. Brown, 130 N. Y. 372, 381 : 29 Bers v. Erie RB. R. Co., 225 N. Y. 543, 546 26 Brady v. Mayor, 14 App. Div. 152... sa iba, Peaster it 22 ‘How. 118__ 27 Ciminelli v*Wenland, 236 App. Div. 154. - ss 37 Cohens v. Virginia, 6 Wheat 264, 399... eine ae Comey v. United Surety, 217 N. 'Y. 268_ 17 Cutter v. Mayor, 92 N. Y. 166, esa SRE. ae 27 ' Dillon v. Barnard, 21 Wall. 430, 437. oat eaetr ee - 32 Finck v. Menke, 31 Mise. 748. ‘ aii ae Hadley v. Baxendale, 9 Exch.:341__.. Bait — Hamilton v. Liverpool, etc. Ins. Co., 186 U.S. 242... =.32 Hamilton v. Van Rensselaer, 43 N. -Y. 244 27 pe ll OE, San eeemernenen 27 Howard v. Stillwell, 139°'U. S. 199... 29, 30 Hull v. Cronk, 55 App. Div. 83, appeal dismissed 166 . N. Y. 606. _. 34 Jacob and Youngs v. Kent, 230 N. Y. 939, 2 Be siciieidiincesen a Kanter v. New Amsterdam Cas. Co., 195 App. Div. 756 (aff’d 233 N. Y. 602) 17 Kidd v. McCormick, 83 N. Y. 391. 13, 14, 15, 16, 17, 18, 37 Laidlaw v. Sage, 158 N. Y. 73, 98-102 waicsae ae Longfellow v. McGregor, 61 Minn. 494 36 Maloney v. Nelson, 144 N. Y. 182 _.23, 33 Matter of Hermance, 71 N. Y. 481, 487. 26 Matter of Trustees, 137 N. Y. 94, 98. 27 McCauslan v. Zoar, 131 Mise. 148, 150 23, 29 Melick v. Knox, 44 N. Y. 676 ) 27 abtecsia i’ etc. Ry. Co. v. ea eat 94 U. 8. 469, 475____. 29 & : - Sw iv _ O’Brien v. Young, 95 N. Y. 428. a Olsen v. Henderson, 113 App. Div. 676. Pacific Cot v. Peterson, 278 U. S. 130, 136» ‘People v. Tax Commissionérs, 174 N. Y. 417, 447... Phillipe v. Curran, 218 Ill. App. 517__. Province Securities Corp. v. Maryland Cas. Co., 269 Mass. 75, 94 -z-—---16, 23,28, Re Diamond T. Truck Sales Agendy, 282 Fed. 873, 875. 34 Smith v. Molleson, 148 N. Y. 241, 246. 23 Southern Cent. R. R. Co. v. Moravia, 61 Barb. 180, 188. 27 Stewart v.Barnes, 153 U. S. 456 34 Swift v. Hocking Valley R. Co., 243 U. S. 281, 289. 32 Trainor v. Aetna Casualty & Surety Co., 290 U. S. | 47 -_ 13, 14, 15, 16, 17, 18, 23, 37 United Real Estate Co. v.. McDonald, 140 Mo. 605, 612. ; 16, 23, 28 Wakeman v. “Wheeler, 101 N. Y. 205, 209 29 Walter v. Hangen, 71 App. Div. 40. a 8 Authorities Cited. 17 0. J. 814 34°. J.752, 755 . 2 Sutherland on Damages (4th Ed.) Sec. 725: Sutherland on Damages (4th Ed.) Sec. 300. Sutherland on Damages (4th Ed.) See. 372. ee aaa Statute Cited. N. Y. Civil Practice Act, Sec, 1079 hn Court of the United States ‘ October Term, 1935. Tus PRUDENCE Compas, Inc. . ’ Petitioner, against ra . : No. 270. Fieuiry & Depostr Company or MaryLanpD and American’ Bonpina CoMPANY OF BaLTIMoRE, Respondents. BRIEF FOR RESPONDENTS. Scope of Review. This Court has granted certiorari to cite the mea- sure of damages to be applied in an action brought by a mortgagee (here the petitioner) against sureties (here the respondents) on the bond of the latter guaranteeing com- pletion of a building, for damages arising out of failure to complete the building, where the principal-mortgagor ° has also defaulted on the mortgage. Damages Claimed by Petitioner. The petitioner did not ask generally for damages, but _ asked specifically for three items of damage; First, ¢x- penditures alleged to have beén made by it in completing ' the building though the greater part of’ the alleged period used for completion was after petitioner had become owner a --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_0298%3A07. Public record. Not legal advice.