Bunnell v. Carter

14 Utah 100 | Utah | 1896

Miner, J.:

In February, 1890, appellant was tbe owner of property in Salt Lake City, and sold it to respondent; Thomas Carter, and took from him, as part payment, two. promissory notes made by Carter, ¡of $1,500 each, payable on or before February 5, 1891, and February 5, 1892, respectively, with annual interest. These notes were secured by a mortgage on the property, which was duly recorded. This action was brought to foreclose the mortgage, and for a deficiency judgment against Carter, the respondent. Cn April 2, 1890, Carter conveyed the premises to John E. Dooly, by general warranty deed, subject to the incum-brance ¡of the $3,000 mortgage. On October 3, 1893, Dooly conveyed the premises to A. G. Campbell, by general waranty deed, subject to the same mortgage. Neither Dooly nor Campbell assumed or agreed to pay the mortgage. Carter, the respondent, paid no interest on the notes after conveyance to Dooly, nor'was he at any time called upon or requested to pay any interest on either note. The interest was paid by Dooly or Campbell. On October 12, 1891, payment of the notes, by agreement between the plaintiff and the owner of the property, was extended to October 12, 1892, and afterwards likewise extended until February 5, 1894. These extensions were without the knowledge or consent of the respondent, Carter, the maker of the notes. The property covered by the mortgage was worth the full amount of the mortgage debt at all times between October 11, 1891, and the maturity of the last note, February 6,1892; but since said time said property has depreciated in value, and is not now worth the mortgage debt. Upon a foreclosure and sale of the property, the sheriff returned a deficiency of $1,357.30. The court denied the appellant’s motion for a deficiency judgment against Carter, the maker of the notes, for tbis sum, and rendered its decree accordingly. From tbis decree and judgment, tbis appeal is taken.

WbiHe it is true that a purchaser wbo assumes the mortgage becomes as to the mortgagor the principal debtor, and the mortgagor a surety, yet, under such circumstances, the mortgagee, unless be assented to such an agreement, may treat both as principal debtors, and may have a personal decree against both. So where the purchaser, having assumed the payment of an existing mortgage, he thereby becomes the principal debtor, and the mortgagor a surety of the debt merely, 'and an extension of the time of payment of the mortgage, by an agreement between, the holder of it and the purchaser, without the consent of the mortgagor, discharges the mortgagor from liability upon it. 1 Jones, Mort. §§ 741, 742; Calvo v. Davies, 73 N. Y. 211.

But the facts in this case are different from those stated. The question here presented is whether the mortgagor is discharged from liability on account of the depreciation of the mortgage security below the debt during the period covered by the extension of payment after maturity, where the payment of the debt was extended by the mortgagee and grantee of the mortgagor, without the consent of the mortgagor, and when liability was not assumed by the grantee. In this case, at the maturity of the second note, the premises were ample to discharge the debt, but the notes were extended for two and three years by the mortgagee and grantee, and during this period of extension the property depreciated, and was not worth the mortgage debt at the expiration of the time to which it was extended. While no strict and technical relation of principal and surety arose between Carter, the mortgagee, and his grantee, Dooly or Campbell, from the conveyance of the land subject to the mortgage, still an equity did arise, which could not be taken from the mortgagor without his consent, and which bears a close resemblance to the equitable right of a surety,"' the terms of whose contract have been modified. Dooly or Campbell, as grantees of Carter,- could not properly be denominated “principal debtors,” because they owed no debt; and yet the land which they owned was the .primary fund for the payment of the mortgage, and the mortgaged property stands liable to the extent of its value, for the payment of the mortgage. So, as grantee with respect to the land, and to the extent of its value only, they stand in the relation of principal debtors, and to this extent only the mortgagor has the equities of a surety. r This result follows from the right of subrogation which inheres to the original conveyance from Carter to Dooly, made subject to the mortgage which Carter executed. As against Dooley, Carter had the right to require that the land should be first exhausted in payment of his mortgage. The amount of the mortgage was deducted from the purchase price, the tacit understanding, at least, being that the land should pay the debt as far as it would go. Through this right of subrogation, the mortgagor, after • conveyance, and after maturity of the mortgage, may pay the debt, and secure his safety upon the land. This was a right that Carter had which could not' be invaded with impunity.. But it was invaded when the mortgagee and the grantee extended the time of payment without the knowledge or consent of Carter. They, for the time at least, took away Carter’s right of subrogation, and imposed upon him a new risk, not anticipated and never consented to. The value of the land at the maturity of the notes was more than sufficient to pay the mortgage. By the extension, increased accumulations of interest were to be expected. The mortgagee had no right to modify or destroy Carter’s original right of sub-rogation. In making the extension, he acted at his peril.-

The grantees, Dooly and Campbell, stood in quasi relation of prin.cipal debtors, only in respect to the value of the land as the primary fund, and to the extent of its value. That value being less than the mortgage debt, they owed no debt or obligation whatever beyond it; but the mortgagor stood to the end, as he was in the beginning, the sole principal debtor, but, on account of the depreciation in the value of the mortgaged security, liable only to the extent of the value of the land, which is shown to have depreciated during the time of the extenson of the notes, and to be less in value than the face of the mortgage. The measure of his injury was his right of- subro-gation, and that was necessarily measured by the value of the land. The extension of time took away his right of subrogation, and discharged him to the extent of the value of the land. Being once discharged, he could not again be made liable. From the time of the extension of payment by the mortgagee, the risk of future depredation fell upon the creditor, who, by the extension, practically took -the land as his sole security to the extent^ of its then value, and assumed the risk of obtaining that value out of it in the future.

In Murray v. Marshall, 94 N. Y. 611, the court say: “For conceding the general rule to be that the surety is discharged utterly by a valid extension of the time of the payment, and that the mortgagor stands in the position, and has the rights of a surety, it must be steadily remembered that he can only be discharged so- far as he is surety; that he holds that position only up to the value of the land, and beyond that is still principal debtor, without any remaining equities.” The mortgagor has a right to complain in this case only to the extent of the depreciation of the value of the mortgage security, which decreased during the period of time covered by the extension of the time of payment, 'and which deprived him of bis right of subrogation, and so impaired bis equitable rights as mortgagor as to discharge him from liability'to the extent of the value of the land, which is shown to be less than the face of the mortgage, and to the extent of an3r deficiency judgment. Murray v. Marshall, 94 N. Y. 611; Clark v. Mackin, 95 N. Y. 346; Jones, Mortg. §§ 740-742; Metz v. Todd, 36 Mich. 473.

We are of the opinion that the plaintiff, by treating with the grantee in the manner stated, and extending the time of payment beyond maturity, to a period when the land depreciated in value below the face of the mortgage, and in dealing with the land, which constituted the primary fund for the payment of the mortgage in a manner to deprive the mortgagor of his right to resort to it for indemnity, the defendant, Carter, was released from liability for the deficiency reported due upon the mortgage. We find no reversible error in the record. The order and judgment appealed from are affirmed, with costs.

• Zane, C. J., and Bartch, J., concur.