Court Opinion

ID: 7968522
Source: CourtListenerOpinion
Date Created: 2022-09-09 00:52:56.1345+00
Date Added: 2024-06-11T16:34:42.745629
License: Public Domain

Mitchell, J.
This case comes up on appeal from the judgment without either a bill of exceptions or case; and the only question is whether the judgment is justified by the findings of fact. The material facts found are that plaintiff’s assignor made a loan of $3,500, for five years, to one Helbostad, secured by mortgage on certain real estate, upon which the mortgagor was then constructing a building; that, as part of the same transaction, Helbostad, as principal, and the defendant, as surety, executed to plaintiff’s assignor a bond conditioned to pay all claims for work performed or material furnished, in the erection and completion of the building •on the mortgaged premises, and to keep them free and clear of all liens for such labor or material.
The condition of the bond was broken, and liens to the amount of $874.14, paramount to the lien of the mortgage, accrued for labor and material for the building, which were enforced by judgment, upon which the premises were sold to a third party, for the amount of the liens, interest, and costs. The time of redemption expired, and plaintiff’s mortgage security was entirely lost. The premises were worth $3,500. The debt secured by the mortgage is not yet due. Helbostad is wholly insolvent, and has removed from the state.
In an action on the bond, the court awarded to plaintiff only nominal damages, apparently upon the theory that, as the debt secured by the mortgage was not yet due, the plaintiff had sustained no substantial damages. This, we think, was error, for the gist of the action was the loss, not of the debt, but of the security.
In view of the general purpose of the bond, as indicated by its subject-matter and the relation of the parties to the property, it must be construed as a contract of indemnity to protect the mortgaged premises against paramount liens which would impair or destroy the security. American B. & L. Ass’n v. Waleen, 52 Minn. 23, (53 N. W. 867.) Hence damage must be shown before the party indemnified can recover, and compensation can only be given for loss actually sustained. But the contract of the bond was not to pay the mortgage debt, but to protect the mortgage security. The plaintiff *350had a right to the benefit both of the personal obligation of the mortgagor and of the security of the mortgage. By reason of the breach of the condition of the bond, plaintiff has lost the latter, and has remaining only the former. The court finds that the mortgagor is insolvent, but we do not consider that fact material. That the plaintiff has sustained and is entitled to recover substantial damages is, we think, self-evident. See Barron v. Mullin, 21 Minn. 374. Whatever damages it recovers will amount to payment pro tanto of the mortgage debt.
While the mortgage security has been entirely lost, yet it has been lost on removable liens (that is, liens which plaintiff might have removed by paying them) for $874.14, while the property was worth $3,500. The question is whether, under the circumstances, the measure of damages is the value of the property or the amount of the liens. While plaintiff’s attorneys have assumed that the former would be the rule, yet neither side has discussed nor referred to the point, but they have devoted themselves entirely to the general question whether the plaintiff' was entitled to substantial or only nominal damages. However strong our impressions on the subject may be, we do not feel called upon to pass upon a question which counsel have not discussed, and upon which they have given us no aid in their briefs. We shall therefore merely reverse the judgment. We may suggest, however, that, as a covenant against incumbrances has been converted in this country into merely one of indemnity, doubtless decisions in actions for a breach of that covenant will be of aid in solving the question of the proper measure of damages in this case.
Judgment reversed.
Buck, J., absent, sick, took no part,
(Opinion published 59 N. W. 1054.1