Prudence Co., Inc. v. Fidelity & Deposit Co., 297 U.S. 198 (1936)
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Prudence Co., Inc. v. Fidelity & Deposit Company of Maryland
No. 270
Argued January 8, 9, 1936
Decided February 3, 1936
297 U.S. 198
CERTIORARI TO THE CIRCUIT COURT OF APPEALS
FOR THE SECOND CIRCUIT
Syllabus
1. In an action by the maker of a building loan, secured by a mortgage on the building, to recover on a bond indemnifying him from loss due to the failure of the borrower to complete the building in time and manner as specified in the loan contract, the measure of damages should be such as will place the lender in the same position as if the building had been completed as stipulated. P. 205.
2. Where the lender, in such a case, was obliged by the borrower’s defaults in construction of an apartment building to foreclose his mortgage, buy in the unfinished structure for less than the loan, and take a deficiency judgment, it was error to limit recovery on the indemnity bond to the cost of completing the building in accordance with the contract; in the estimation of damages, there should be considered also the rents that might have been impounded in the foreclosure proceedings had the building been ready for use, and the reduced value of the building at the foreclosure sale because of its unfinished state. P. 206.
3. The difference between the value of the unfinished building at the foreclosure sale and the value it would have had if completed as per contract may be considered as made up of two elements, the cost of completion and the carrying charges meanwhile. These may be proved by expert testimony; or where, as in this case, the building was completed by the lender, the actual cost of that may be shown, and the other element may be established by expert proof of the rental value of such a building (finished) at the date of default and later. P. 206.
4. In this case, in proof of damages due to delay in completing the building, evidence was received, without objection, of payments for taxes and insurance and of loss of interest on investment during the time required for its completion. Held that an objection that such carrying charges may have exceeded the rents that might have been received if the building had been finished as agreed came too late, it not having been made at the trial. P. 207.
5. In an action for damages caused by impairment of a mortgage security, through the borrower’s failure to complete the mortgaged building as agreed, loss of rents is to be classed not as special, but as general, damage, and may be proved without having been specifically alleged. P. 207.
77 F.2d 834 modified and affirmed.
Certiorari, 296 U.S. 566, to review a judgment reversing one recovered in the District Court, 7 F.Supp. 392, in an action on an indemnity bond.