A.J. Properties, LLC v. Stanley Black and Decker, Inc. ( 2014 )

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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.