Summary
In Paine v. Jones (76 N.Y. 274) the mortgage provided for a release of any part of the mortgaged premises at the election of the mortgagor upon payment of a stipulated sum per acre. His grantee, who had assumed the mortgage debt, caused the privilege to be stricken from the mortgage by agreement with the holders thereof, and it was held to be a change in the contract discharging the surety.
Summary of this case from Clinton v. Buffalo Land Security Co.Opinion
Argued January 31, 1879
Decided February 18, 1879
Rastus S. Ransom, for appellant. Dwight Arven Jones, for respondent.
There is no dispute about the facts in this case. They have been found by the court at Special Term, and the appellant concedes that they are supported by the evidence. So far as they concern the question involved in this appeal, they are as follows: On the 1st day of December, 1868, the defendant, Jones, executed to one Baker his bond and mortgage for $50,000, payable November 1, 1873, to secure the payment of so much of the purchase-money of certain premises described in the mortgage. Through various mesne assignments the bond and mortgage became the property of one Wright, and he, on the 9th of April, 1870, assigned them as collateral security to the Atlantic Savings Bank. On the 30th day of April, 1870, Jones and wife conveyed, by deed, the premises to Guthrie, and in and by the covenant therein Guthrie assumed the mortgage and agreed to pay it. The mortgage declared that "the mortgagor, his heirs and assigns, shall have the privilege of requiring from the party of the second part, his heirs or assigns, at any time before its payment, and as often as the same shall, from time to time, be desired, a release of any portion or portions of the mortgaged premises, upon the payment of an amount equal to the sum of $300 per acre, and at that rate for any part of an acre embraced in the portion or portions for which a release is so signed, or at the option of the party of the first part, in lieu of the payment of such sum, upon the execution by him or his assigns of a first mortgage to the party of the second part, for the same amount upon the property, or portion of which a release is so required." On the 14th day of June, 1870, an agreement in writing was entered into between Wright, Guthrie and the Atlantic Savings Bank, by which the clause in regard to releases, above referred to, was abrogated, without the knowledge or consent of Jones. On the 9th of December, 1872, the Atlantic Bank, by purchase from Wright, became the sole owner of the bond and mortgage. June 7, 1873, the name of the Atlantic Savings Bank was changed to "The Bond Street Savings Bank," and default having been made in payment of the moneys secured by the bond and mortgage, this action was commenced by the bank, and afterwards the present plaintiff was appointed its receiver, and continued the action. A judgment against Jones was asked for any deficiency which might arise on a sale of the mortgaged premises. He defended and relied upon the release above set out as such an alteration of the mortgage as relieved him from liability. The court at Special Term gave judgment in his favor, which the General Term affirmed.
We think no error was committed in thus deciding.
The bond and mortgage were given at the same time — were between the same parties and intended to secure the payment of the same sum of money. Together they constitute one contract, and thus express the measure, and define the terms, of the liability of Jones and the conditions on which it might be discharged. ( Marsh v. Dodge and others, 66 N.Y., 533; Rogers v. Smith, 47 id., 324.) It is equally well settled that by the acceptance of a deed conveying premises subject to a mortgage which the grantee assumes and agrees to pay he becomes, as between himself and the grantor, the principal debtor and the grantor the surety. ( Cornell v. Prescott, 2 Barb. [Sup. Ct. Rep.], 16; Comstock v. Drohan, 71 N.Y., 12.)
The holder of the security had notice of the deed and its covenants, and was bound by this relation and under an equitable obligation to do nothing to affect or alter rights of the surety. In Calvo v. Davies (8 Hun, 222), the court say: "The rule is absolute that there shall be no transaction with the principal debtor without acquainting the person who has a part interest in it." Upon appeal to this court the judgment in that case was affirmed (see 73 N.Y., 211), and is decisive upon the case before us. The facts were similar, and the relation of the parties the same. In view of that decision, a further discussion upon this point is unnecessary.
The respondent's counsel, however, contends with much earnestness that the alteration made by the creditor and principal debtor is not material, and therefore does not injuriously affect the surety. That it changes the contract is very plain, and it does not seem necessary to inquire what mischief the alteration might produce or how it might be prejudicial to the surety. The law requires that if there is any agreement between the principals with reference to a contract to the performance of which another is bound as surety, he ought to be consulted in regard to any proposed alteration, and if he is not or does not consent to the alteration he will be no longer bound, and the court will not inquire whether it is or not to his injury. ( Grant v. Smith, 46 N.Y., 93; Bangs v. Strong, 7 Hill, 250; Calvo v. Davies, 8 Hun, 222; affd. in Ct. of App., 73 N.Y., p. 211.)
The bond and mortgage prescribed the specific terms, on the observance of which his liability was to depend. In such a case every change or alteration is material ( Ludlow v. Simond, 2 Cai. Ca. in Error, 57; Rees v. Berrington, 2 Vesey, 540), and as it is a fact in this case that the surety never consented to the alteration in the mortgage, and did not know of the same, the decision of the court below was correct and its judgment should be affirmed, with costs.
All concur.
Judgment affirmed.