Court Opinion

ID: 2735276
Source: CourtListenerOpinion
Date Created: 2014-09-20 01:11:19.371998+00
Date Added: 2024-06-11T09:28:50.222577
License: Public Domain

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SJC-11424

    A.J. PROPERTIES, LLC    vs.     STANLEY BLACK AND DECKER, INC.

            Suffolk.    May 5, 2014. - September 5, 2014.

Present:    Ireland, C.J., Spina, Cordy, Botsford, Gants, Duffly, &
                              Lenk, JJ.1

Assignment. Debt. Mortgage, Assignment. Contract, Assignment,
     Surety. Surety. Bond, Private building project, Construction
     and contract bond. Environment, Environmental cleanup costs.

     Certification of a question of law to the Supreme Judicial Court
by the United States District Court for the District of Massachusetts
on April 8, 2013.

     Gerard A. Butler, Jr. (Andrew D. Black with him) for the
defendant.
     John A. Mavricos for the plaintiff.

     DUFFLY, J.   At issue in this case is the right to payment under

a performance bond issued to secure the obligation of an environmental

consulting company to perform environmental remediation of a

contaminated site that included land that had been owned by Stanley

Black and Decker, Inc. (Stanley).    In 2011, A.J. Properties, LLC (A.J.

     1
       Chief Justice Ireland participated in the deliberation on this
case prior to his retirement.
                                                                     2

Properties), commenced the underlying action in the Superior Court,

contending that it had acquired the rights to payment under the bond,

and that Stanley had wrongfully collected payment.    A.J. Properties

argued that Stanley had assigned the rights to payment when it assigned

a mortgage on the property to the Wyman–Gordon Company (Wyman-Gordon),

which later assigned the mortgage to A.J. Properties.

     After Stanley removed the case to the United States District

Court for the District of Massachusetts, a judge of that court

certified the following question to this court pursuant to S.J.C.

rule 1:03, as appearing in 382 Mass. 700 (1981):

     "Does the rule of Quaranto v. Silverman, 345 Mass. 423, 426–[427]
     (1963) [(Quaranto)], that 'the assignment of a debt carries with
     it every remedy or security that is incidental to the subject
     matter of the assignment and could have been used or made
     available to the assignor,' extend to a situation where a
     mortgage and a surety agreement secured an obligation, and both
     the mortgagor and the surety breached that obligation prior to
     a written assignment of the mortgage, does the assignee, by
     operation of law, acquire the right against the surety's receiver
     for the surety's breach of its obligation?"

     We answer that whether the right against the surety's receiver

is deemed assigned by operation of the rule of Quaranto, supra, depends

on whether the right is an incident to the subject matter of the

assignment.   If it is, and the parties do not manifest an intent not

to assign the right, the right may be assigned by operation of the

rule stated in Quaranto, supra.   The nature of the obligation and the

breach, however, could be such that the right against the surety's
                                                                   3

receiver would not be an incident to the subject matter of the

assignment, but, rather, a collateral cause of action.    If so, the

right against the receiver would be assigned only if the parties

manifested an intent to make such an assignment.   In the particular

circumstances of this case, the answer to the question depends on

interpretation of the agreement to assign the mortgage and the

obligations it secured, as well as the nature of the breach which

occurred.

     Background.   We summarize the undisputed facts in the summary

judgment record.   In 1995, Stanley became aware of soil and

groundwater contamination on its property located at 149 Washington

Street in Worcester (149 Washington Street property); the

contamination extended to an adjacent parcel at 105 Madison Street,

owned by Wyman-Gordon, on which Wyman-Gordon operated an industrial

facility.   Stanley faced liability for the contamination pursuant to

G. L. c. 21E,2 and entered into an agreement with Vargo & Associates

Environmental Consulting Corporation (Vargo) to remediate both the

149 Washington Street and Wyman–Gordon properties.    Stanley agreed

to pay Vargo $400,000 to perform the remediation, and to sell the 149

Washington Street property to Vargo for one dollar.    In December,

1997, Stanley and Vargo entered into a purchase and sale agreement

     2
       As a former owner of the property, Stanley Black and Decker,
Inc. (Stanley), faced continuing liability under G. L. c. 21E,
§ 5 (a).
                                                                     4

for the 149 Washington Street property that included the following

conditions for the closing of the sale.    Vargo was to obtain and

deliver a performance bond in the amount of $800,000; to deliver an

indemnity agreement executed by it and its principal, Patrick Vargo,3

promising to complete the remediation and to hold Stanley harmless

from all liabilities arising from any breach by Vargo; and to grant

Stanley a mortgage on the 149 Washington Street property (1997

mortgage).   The mortgage was to "secure all obligations" of Vargo and

its principal to Stanley under the indemnity agreement, mortgage, and

"all other agreements between" Stanley and Vargo, including any

"indebtedness, obligations and liabilities" under "instruments . . .

executed or delivered in conjunction [with the purchase and sale

agreement or the indemnity agreement]."4    All documents were

     3
       For simplicity, we refer to Vargo & Associates Environmental
Consulting Corporation as Vargo, and to its principal, Patrick Vargo,
by his full name.
     4
       Specifically, the mortgage Vargo granted Stanley on the 149
Washington Street property (1997 mortgage), titled "mortgage and
security agreement," states that Vargo grants the mortgage as security
for

     "(1) Performance of each agreement of [Vargo] incorporated by
     reference or contained herein; (2) payment of the Obligations
     (as defined in the Mortgage Rider); (3) payment of such
     additional sums as may hereafter be advanced for the account of
     [Vargo] or assigns by [Stanley], with interest thereon; and (4)
     payment and performance by [Vargo] of each obligation contained
     in any document, contract and agreement delivered to [Stanley]
     in conjunction with the sale of the Property to [Vargo],
     including without limitation (i) the Agreement of Purchase and
                                                                    5

executed, Vargo obtained a $800,000 performance bond, and the closing

took place.

     In 2001, before remediation was complete, Vargo suspended

remediation operations and abandoned the site.   Stanley attempted to

obtain performance from Vargo pursuant to their agreements; in January

2002, Stanley was advised by counsel for Vargo that Patrick Vargo had

filed for personal bankruptcy.   In February, 2002, Stanley contacted

United Capitol Insurance Company (United Capitol), the surety on the

performance bond, to request performance as surety under the bond,

and learned that United Capitol had become insolvent and ceased

operation earlier that month and liquidation proceedings had

commenced.    In October, 2002, Stanley filed a proof of claim under

the bond with the receiver for United Capitol in the amount of

$800,000, the full amount of the bond.5

     In December, 2002, Stanley entered into a settlement agreement

with Wyman–Gordon, which provided that Wyman–Gordon would retain a

different contractor to remediate the contaminated portions of the

     Sale of Real Property and Joint Escrow Instructions, and (ii)
     the Environmental Compliance and Indemnity Agreement . . . ."

     The rider to the mortgage defined "Obligations" as including
Vargo's "indebtedness, obligations and liabilities" under
"instruments . . . executed or delivered in conjunction [with the
purchase and sale agreement or the indemnity agreement]."
     5
       In 2010, Stanley received payment from United Capitol's
receiver in the amount of $659,000 as settlement of the claim.
                                                                     6

149 Washington Street and Wyman–Gordon properties, and that Stanley

would contribute $599,000 to the total cost of the remediation, which

was fixed at $855,000.   Stanley also agreed to assign to Wyman–Gordon

at a future date the 1997 mortgage on the 149 Washington Street

property and the obligations secured by the mortgage.

     In February, 2003, creditors of Vargo foreclosed on a second

mortgage on the 149 Washington Street property; A.J. Properties

purchased the right to acquire the property at the foreclosure sale.6

In March, 2003, after Wyman–Gordon had signed the settlement agreement

with Stanley, but before it had been assigned the 1997 mortgage, Wyman–

Gordon entered into an agreement with A.J. Properties.      That

agreement provided that A.J. Properties would assign to Wyman-Gordon

the right to purchase its interest in the 149 Washington Street

property, and that, at the option of A.J. Properties, Wyman-Gordon

would assign to A.J. Properties the 1997 mortgage on a portion of the

149 Washington Street property,7 as well as "all rights that

Wyman-Gordon has to the obligations and debts which the [1997

     6
       Stanley notes in its brief (and it does not appear to be
disputed) that in 1998, Vargo obtained a loan from a bank in exchange
for a promissory note, secured by a mortgage on certain parcels
comprising a part of the 149 Washington Street property.
     7
       The assignment agreement specified that the 1997 mortgage
would encumber only parcels 13-18 and parcels 20-21, a portion of the
149 Washington Street property that is now leased by a fast food
restaurant chain. Wyman-Gordon had the option to discharge the
mortgage with respect to the remainder of the 149 Washington Street
property.
                                                                     7

Mortgage] secures."

     Stanley assigned the 1997 mortgage to Wyman–Gordon in May, 2003,

pursuant to the settlement agreement between Stanley and

Wyman-Gordon.   In 2007, A.J. Properties exercised its option to

acquire the 1997 mortgage from Wyman-Gordon; Wyman-Gordon executed

an assignment granting to A.J. Properties the 1997 mortgage "and the

claims secured thereby."8

     Prior proceedings.     In 2011, A.J. Properties commenced the

underlying action against Stanley in the Superior Court.     A.J.

Properties alleged that it had been assigned the right to recover all

funds paid to Stanley by the receiver for United Capitol in settlement

of the claim under the performance bond.    Stanley removed the case

to the United States District Court for the District of Massachusetts.

A.J. Properties then moved for partial summary judgment and Stanley

filed a motion for summary judgment.   A Federal District Court judge

determined that A.J. Properties was entitled to the amounts paid by

United Capitol's receiver to Stanley, and allowed, in part, A.J.

Properties's motion for summary judgment.

     In allowing A.J. Properties's partial motion for summary

judgment, the District Court judge determined, based on a number of

     8
       Soon after it obtained assignment of the 1997 mortgage, A.J.
Properties brought a claim in the Superior Court against Vargo under
the 1997 Environmental Compliance and Indemnity Agreement and the 1997
mortgage. After Vargo defaulted, a Superior Court judge entered a
judgment of approximately $1.2 million in favor of A.J. Properties.
                                                                     8

written instruments executed by the parties,9 "that the performance

bond was indeed among the obligations that were secured by the

mortgage."   The judge determined further that the "subsequent

assignments of the [1997] mortgage, which included the obligations

secured by [the mortgage], also included the right to recover against

the surety [United Capitol] for the performance bond."      The judge

noted that he reached this determination by applying the rule set forth

in Quaranto, supra, that "the assignment of a debt carries with it

every remedy or security that is incidental to the subject matter of

the assignment and could have been used or made available to the

assignor," and that, pursuant to that rule, United Capitol's

"liability under the bond is a remedy incidental to the duty of [Vargo]

to pay what was available to Stanley before it assigned that

obligation; thus, the assignment of the duty of [Vargo] carried with

it that of its surety."   Stanley sought interlocutory review in the

United States Court of Appeals for the First Circuit, pursuant to 28

U.S.C. 1292(b), contending that the District Court judge misapplied

the rule of Quaranto.   The Court of Appeals recommended certification

of the question to this court.

     Discussion.   a.   Common-law background.   In order to

     9
       These included the 1997 mortgage, the 2002 settlement
agreement, the 2003 assignment from Stanley to Wyman-Gordon, the 2003
option agreement, and the 2007 assignment from Wyman-Gordon to A.J.
Properties.
                                                                     9

effectuate an assignment of an interest, an assignor must make

manifest an intention to transfer that interest to an assignee.    See

Restatement (Second) of Contracts § 317 (1) (1981) ("An assignment

of a right is a manifestation of the assignor's intention to transfer

it by virtue of which the assignor's right to performance by the

obligor is extinguished in whole or in part and the assignee acquires

a right to such performance").     In Quaranto, supra at 426–427, we

noted in dicta the default rule that, where an assignor assigns a debt,

the assignor thereby also assigns any security he or she holds for

the debt.   Id. ("Generally, the assignment of a debt carries with it

every remedy or security that is incidental to the subject matter of

the assignment").   We noted two cases in which we had applied this

general rule, Brazill v. Green, 236 Mass. 93, 98 (1920), and Rogers

v. Abbot, 206 Mass. 270, 272 (1910) (upon assignment of debt, security

for debt "passed to [assignee] as an incident to the [debt]"), and

also cited additional authority.    See Morris v. Bacon, 123 Mass. 58,

59 (1877) ("the debt is the principal and the mortgage an incident");

Restatement of Contracts, § 171(2) (1932); 4 Corbin, Contracts § 907

(1950); W.H.E. Jaeger, Williston on Contracts § 432A (3d ed. 1960)

(Williston on Contracts [3d ed.]).10    Parties who intend to assign

     10
       The treatises cited in Quaranto v. Silverman, 345 Mass. 423,
427 (1963) (Quaranto), have since been updated; the principle as
stated remains unchanged. See 1 R.A. Lord, Williston on Contracts
§ 74:51 (4th ed. 2003); 9 J.E. Murray, Corbin on Contracts §§ 47.7,
                                                                      10

only the debt and not the security for the debt may do so by making

this intent clear in their assignment agreement.      See 4 Corbin,

Contracts, § 907; Williston on Contracts (3d ed.) § 432A; Restatement

(Second) of Contracts § 340 comment c, at 88-89 (1981).

     The theory underlying the default rule in Quaranto, supra, is

that when parties assign a debt, it generally may be assumed that they

also intend to assign the security for that debt, because an interest

in retaining the security to enforce the debt generally dissipates

once the debt has been assigned.      See 4 Corbin, Contracts, § 907

("[t]his is the general rule . . . because such is usually the

intention of the assignor and assignee and there is ordinarily no

reason for letting the assignor keep the security or for giving it

back to the obligor").     Applying this principle to the assignment of

a note secured by a mortgage, we have said that, upon such assignment,

the assignee receives an equitable right to the mortgage even if the

mortgage is not mentioned in the assignment, because the mortgage is

an incident to the note.    See Barnes v. Boardman, 149 Mass. 106, 114

(1889).

     The rule that the assignment of a debt generally carries with

it the assignment of security for the debt is an example of the broader

principle that, in general, an assignment carries with it all the

51.1 (Rev. ed. 2007); Restatement (Second) of Contracts § 340(2)
(1981).
                                                                      11

rights that are "incidental to" the subject matter of the assignment.

See Brazill v. Green, supra (when assignor assigns judgment, that

which is incident to judgment passes to assignee without formal

transfer); 1 R.A. Lord, Williston on Contracts § 74:51 (4th ed. 2003)

(Williston on Contracts [4th ed.])    (collecting cases).   This

general rule, however, has an important limiting principle:      an

interest that is merely related to the subject matter of the

assignment, but not incidental to it, is not assigned by implication.

"In order for a right to pass as an incident under an assignment of

[an interest] it must, in a legal sense, constitute a security for

the debt.   It must be more than a mere collateral right of action."

Williston on Contracts (4th ed.) § 74:51 at 564.     See Robinson v.

Towns, 30 Ga. 818, 822 (1860) (assignment of judgment carried with

it interest in further enforcement of judgment, but not interest in

money that sheriff had collected on judgment prior to assignment);

Commonwealth v. Wampler, 51 S.E. 737, 738 (Va. 1905) ("assignment of

a chose in action [generally does not] invest in the assignee, as an

incident, a litigious right against a third party to recover damages

for an injury which accrued prior to the assignment").

     Additionally, just as an assignment of a claim does not carry

with it a collateral cause of action, "the assignment of rights under

a continuing contract does not imply an assignment of rights of action

for previous breaches of the contract."   Williston on Contracts (3d
                                                                   12

ed.) § 431.   See National Reserve Co. of Am. v. Metropolitan Trust

Co. of Cal., 17 Cal. 2d 827, 833 (1941) ("Unless an assignment

specifically or impliedly designates them, accrued causes of action

arising out of an assigned contract . . . do not pass under the

assignment as incidental to the contract if they can be asserted by

the assignor independently of his continued ownership of the contract

and are not essential to a continued enforcement of the contract").

See, e.g., Anheuser-Busch, Inc. v. Miller, 99 B.R. 137, 139-140 (D.

Mass. 1989); Steele v. Brazier, 123 S.W. 477, 482 (1909); Love v. Van

Every, 18 Mo. App. 196, 203-205 (1885) (collecting cases); Restatement

(Second) of Contracts § 328 (1981); 4 Corbin, Contracts § 876.    See

also Ginsberg v. Austin, 968 F.2d 1198, 1201 (Fed. Cir. 1992)

(assignment of reversion does not carry with it right to recover all

rents accrued prior to assignment).

     In some circumstances, it may be difficult to distinguish between

a collateral cause of action that is not assigned by implication, and

a security for a debt that is assigned by implication.     See

Commonwealth v. Wampler, 51 S.E. 737, 738 (Va. 1905) ("The distinction

as to what does and what does not pass by incidental assignment is

in some instances nice and difficult to draw"); Heyer v. Kaufenberg,

40 Wyo. 367, 371-373 (1929) (collecting cases).11

     11
       The analysis of the Supreme Court of Wyoming in Heyer v.
Kaufenberg, 40 Wyo. 367 (1929) is instructive. In that case, the
                                                                    13

     Making such a determination turns on whether the interest in

question is "incident to" that which is assigned, that is, whether

the interest in question "usually or naturally and inseparably depends

upon, appertains to, or follows" that which is assigned.

Commonwealth v. Wampler, supra, quoting 1 Bouvier Law Dictionary 1006

(Rawle's Rev. 1897).

     b.   Application to reported question.    Where a mortgage and a

surety agreement secured an obligation,12 and both the mortgagor and

the surety committed a breach of that obligation prior to a written

assignor obtained money judgments in his favor and subsequently
assigned them. Id. at 369. Before the assignment, the assignor
executed the judgments, and levies were made under those executions
upon property that was in the possession of a receiver. Id. Prior
to the foreclosure sale, the property owner filed an injunction bond
in the sum of $500 that was backed by a surety, and the court issued
an order restraining the foreclosure sale. Id. The assignor
successfully moved to dissolve the restraining order, and after the
order had been dissolved, he assigned all his rights in the judgments.
Id. at 370. The assignor then filed suit against the surety for
attorney's fees and costs incurred in dissolving the restraining
order, and the surety objected that the assignor could not maintain
any action upon the bond because he had assigned his interest in the
bond when he assigned the underlying judgments. Id. In holding that
the assignment of the underlying judgments did not carry with it the
right to damages under the bond, the court reasoned that the assignor's
rights under the bond were in no sense "'naturally and inseparably'
dependent upon the judgments and hence were not incident to them.
Neither were such rights in any way a security held by the assignor,
for the payment of the judgments, nor did they furnish any remedy to
accomplish their collection." Id. at 377, quoting Commonwealth v.
Wampler, 51 S.E. 737, 738 (Va. 1905).
     12
       We assume the facts as stated by the Federal District Court
judge, relying on his determinations as to what was secured by the
mortgage.
                                                                    14

assignment of the mortgage, the certified question requires a

determination whether the right against the surety's receiver for the

surety's breach of its obligation is a collateral cause of action that

remains with the assignor unless expressly assigned, or whether it

is an "incident to" the subject matter of the assignment such that

it is deemed to be acquired by the assignee by implication of law.

     The answer to this question depends on the nature of the

obligation and the breach.   The obligation at issue in this case is

the performance bond Vargo was required to obtain under the terms of

the purchase and sale agreement prior to issuance of the 1997 mortgage.

The bond provided that Vargo as principal, and United Capitol as

surety, were bound to Stanley in the amount of $800,000; that the

obligation would be void upon Vargo's performance of remediation under

the compliance and indemnity agreement; and that if Vargo defaulted

on its promise to remediate, United Capitol was obligated promptly

to remedy the default, complete the remediation, or arrange for the

lowest responsible bidder to complete the remediation and pay for the

costs of completion up to $800,000.13

     Under the terms of the assignment agreement, A.J. Properties was

     13
       The bond was a performance bond, not a payment bond. See
National Fire Ins. Co. of Hartford v. Fortune Constr. Co., 320 F.3d
1260, 1271, 1278 (11th Cir.), cert. denied, 540 U.S. 873 (2003)
(distinguishing between performance bond and payment bond: purpose
of performance bond is to assure obligee that underlying obligation
will be completed and that obligee will not be liable for costs in
excess of contract price if primary obligor defaults).
                                                                   15

assigned the 1997 mortgage and the claims and obligations secured

thereby.   It is unclear whether, in interpreting the "performance

bond [as] indeed among the obligations that were secured by the [1997]

mortgage," the Federal District Court judge determined that only

Vargo's obligation to obtain the performance bond was secured by the

mortgage, or that Vargo's obligation to render performance on the bond

(that is, to complete remediation, or, upon failure to do so, to pay

Stanley $800,000) was secured by the mortgage.14    We consider each

possibility in turn.

     If the obligation secured by the mortgage was to obtain a

performance bond, but not the obligation to perform on the bond, then

the rule of Quaranto would not apply, and the right to recover against

the surety would not be deemed to have been assigned by implication.15

     14
        The parties dispute what was included in the subject matter
of the assignment by the express terms of the assignment agreement.
A.J. Properties maintains that the assignment, by its terms, included
the 1997 mortgage and all "claims secured thereby," which it alleges
encompassed the right to recover against Vargo for defaulting on its
obligations in the performance bond and the right to recover against
United Capitol for defaulting on its obligations in the performance
bond. If A.J. Properties is correct that the express terms of the
assignment included the right to recover against United Capitol, then
there would be no need to apply the rule stated in Quaranto, and the
answer to the reported question would be irrelevant to the resolution
of the dispute.
     15
        The certification order states that the 1997 mortgage was
executed on December 31, 2007, and that Vargo subsequently obtained
the performance bond on January 22, 1998. According to the purchase
and sale agreement, obtaining the performance bond was a condition
precedent to the closing, but not a condition precedent to the
                                                                     16

The reason for this is that if the obligation to obtain the bond was

part of the debt that was secured by the mortgage, and the mortgagor

would have been permitted to foreclose on the mortgage if the mortgagee

failed to obtain the bond, then obtaining the bond was analogous to

making payments under an instalment note secured by the mortgage.   The

procurement of the bond was part of the debt or obligation itself,

and delivery of the bond fulfilled that part of the obligation.     The

assignment of a security does not carry with it a debt that already

has been satisfied.

     If, on the other hand, the obligation secured by the mortgage

was an obligation to perform, and that obligation was separately

secured by a bond, the obtaining of which also was secured by the

mortgage, the Quaranto rule may apply.    The rule might have applied

if, for example, at the time of the assignment to Wyman-Gordon, Vargo

had defaulted on its obligation to perform remediation but United

Capitol had not committed a breach of its obligation as surety to

perform remediation or otherwise remedy the default by Vargo.    Under

such circumstances, an assignment of the right to recover against

Vargo for its obligation to perform on the bond might have carried

with it an assignment of the right to recover against United Capitol

for its obligation to perform on the bond, including the right to

recover the full amount of the bond in the event of a subsequent

execution of the 1997 mortgage.
                                                                    17

material breach by United Capitol of its obligation to perform.    See

Brainerd, Shaler & Hall Quarry Co. v. Brice, 250 U.S. 229, 233 (1919)

(assignment of obligation against primary obligor that is secured by

surety generally carries with it assignment of obligation against

surety); Restatement (Third) of Suretyship & Guaranty § 13 (1996).

     The Quaranto rule might not apply, however, when both the

obligation to perform and separate security for that performance are

secured by a mortgage, and where, prior to the assignment of that

mortgage, there has been a breach of the obligation to perform and

of the surety's obligation to secure performance.     Whether the rule

of Quaranto, supra, applies in such circumstances depends on the

nature of the breach at issue.   The rule does not apply, for instance,

where the surety was liquidated prior to the time of assignment.

     If the mortgagor has committed a breach of its agreement to

perform, and the entity acting as a paid surety on a performance bond

has been liquidated prior to the time of assignment, then the surety

is no longer able to perform the underlying obligation.   In that case,

what remains prior to the assignment is not a claim against the

surety's receiver for performance or payment on the bond, but rather

a claim against the surety's receiver in the nature of damages for

a breach of contract.   See Commissioner of Ins. v. Massachusetts Acc.

Co., 314 Mass. 558, 565 (1943), quoting Carr v. Hamilton, 129 U.S.

252, 256 (1889) (upon liquidation, company's business "is brought to
                                                                    18

an absolute end, and the policy holders become creditors to an amount

equal to the equitable value of their respective polices, and entitled

to participate pro rata in its assets"); In re Liquidation of Integrity

Ins. Co., 147 N.J. 128, 135 (1996), quoting 19A J. A. Appleman & J.

Appleman, Insurance Law & Practice § 10721, at 196 (1982) ("The

common-law rule is that '[w]here an insurance company is adjudged

insolvent, the claims existing on behalf of its policyholders have

been held to be in the nature of damages for a breach of contract'");

1 Couch on Insurance, § 6:1 (3d rev. ed. 2009); 11 Couch on Insurance,

§ 163:17 (3d ed. 2005) (bonds issued by paid surety companies to

protect property owners from loss due to failure of contractors to

perform conditions of building or other similar contracts are

considered as essentially contracts of insurance for some purposes).

     A claim against the surety's receiver in the nature of damages

for a breach of contract is neither security for an obligation nor

in any other way an incident to the obligation secured by the mortgage;

rather, it is a collateral cause of action.    The value of this cause

of action does not "depend[] upon, appertain[] to, or follow[]" an

underlying obligation.   See Heyer v. Kaufenberg, 40 Wyo. 367, 373

(1929), quoting Commonwealth v. Wampler, 51 S.E. 737, 738 (Va. 1905).

To the contrary, such a cause of action has free-standing value that

is determinable upon the date of the surety's liquidation; on that

date, it is not dependent on the mortgagor's obligation to perform,
                                                                    19

which already has been defaulted on.   If parties wish to assign such

a cause of action, they may do so by manifesting their intent to do

so, but, absent an express indication, assignment of such a cause of

action will not be implied by an assignment of the mortgage and the

obligations it secures.

     Conclusion.   For the reasons stated, we answer the reported

question as follows:   "Where a mortgage and a surety agreement secured

an obligation, and both the mortgagor and the surety committed a breach

of that obligation prior to a written assignment of the mortgage, the

assignee does not necessarily acquire the right against the surety's

receiver for the surety's breach of its obligation."

     The Reporter of Decisions is directed to furnish attested copies

of this opinion to the clerk of this court.    The clerk in turn will

transmit one copy, under the seal of the court, to the clerk of the

United States District Court for the District of Massachusetts, as

the answer to the question certified, and will also transmit a copy

to each party.