Grow v. . Garlock

| NY | Oct 7, 1884

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] This action was brought to foreclose a mortgage dated May 20, 1874, given by the defendant Horace Garlock to the plaintiff. It is alleged in the complaint that on the 16th day of February, 1875, the defendant Jason Garlock, by his writing indorsed upon the bond which the mortgage was given to secure, for value received, duly guaranteed the payment of the bond and mortgage, and a deficiency judgment is prayed against both Horace and Jason. All the defendants but Horace Garlock and Adam J. Snell suffered default. Snell alleged in his answer that he granted the mortgaged premises to Horace Garlock, and that he had a vendor's lien upon the premises for unpaid purchase-money which was known to the plaintiff at the time he took his mortgage, and which was therefore prior and superior to the lien of his mortgage; and he also alleged, as did Horace in his answer, that the mortgage was executed by Horace with the knowledge of the plaintiff, for the accommodation of Jason Garlock, who was the principal debtor, and that the plaintiff had so dealt with Jason and his property as to release Horace from any liability upon his bond and mortgage.

The cause being at issue upon the answers of Snell and of Horace Garlock was referred to a referee who found that, at the time the plaintiff advanced his money and took his mortgage, he relied upon the records which showed a clear title to the premises in Horace Garlock, and that he had no knowledge that any of the purchase-money for the premises remained unpaid to Snell. He found as matter of law, among other things, "that as to the plaintiff the said Horace Garlock was the principal debtor as to the debt represented by the said bond and mortgage executed by said Horace Garlock to the plaintiff, and was not a surety for the said Jason Garlock as regards said debt, so that the release of any securities which the said plaintiff may have received from the said defendant Jason Garlock would not in any way affect the lien of the said Horace Garlock to the plaintiff for the payment of said debt," and he ordered the usual judgment of foreclosure in favor of the plaintiff, which was upon appeal affirmed at the General Term, and then Snell and Horace Garlock appealed to this court.

The following facts are undisputed: Sometime prior to the date of the mortgage, Jason Garlock borrowed of the Watertown Bank for his own use the sum of $2,000 and gave a note therefor made by himself and indorsed for his accommodation by his father Horace. The note was about falling due and the bank insisted upon payment, and Jason was unable to pay it. He and his father then applied to the plaintiff for a loan of money to take up the note, and they at first proposed to him to give him their joint note. This he refused to take, but said he would take a mortgage upon the father's farm; and so it was finally arranged that Horace should give the mortgage upon his farm to secure the loan. The bond and mortgage were then drawn and executed by Horace and delivered to Jason, who went with the plaintiff to the bank. There the plaintiff produced the $2,000 and took up the note and delivered it to Jason, and he then delivered the bond and mortgage to the plaintiff. Afterward, in February, 1875, at the request of the plaintiff, Jason guaranteed the payment of the bond and mortgage. The plaintiff had full knowledge of the nature of the bank debt, and the relations between Jason and Horace. He knew that the money was borrowed of him to pay the debt of Jason for which Horace was liable as surety. As between Jason and Horace, the debt to the plaintiff was really the debt of Jason for which Horace had bound himself and his property as surety. Jason was bound to indemnify Horace against any loss by reason of the bond and mortgage, and he at once became debtor to Horace for any money he paid upon the debt. As between them, upon the undisputed facts, Jason was the principal debtor and Horace a mere surety. These relations were known to the plaintiff, and hence he was bound to respect them. It may be that as to the plaintiff, Horace technically remained the principal debtor. But that is not a controlling circumstance. If, as between Jason and Horace, there was the relation, as to the debt, of principal and surety, no matter how or when it arose, and no matter whether the plaintiff consented to it or not, whenever that relation came to his knowledge, he was bound to respect it; and so it has been abundantly held by authorities which control us. (Colgrove v. Tallman, 67 N.Y. 95" court="NY" date_filed="1876-10-03" href="https://app.midpage.ai/document/colgrove-v--tallman-3603995?utm_source=webapp" opinion_id="3603995">67 N.Y. 95; Calvo v. Davies, 73 id. 211; Palmer v. Purdy, 83 id. 144.) If Jason, recognizing his liability as principal debtor, placed any property in the plaintiff's hands, or gave him a lien upon any property to secure the debt, he was bound to keep and hold the property for that purpose, for the protection and benefit of Horace, the surety, and if he voluntarily gave up or surrendered the property or the lien to Jason, or wasted the property, or allowed Jason to waste it, then Horace, as surety, had just ground of complaint, and to the extent of his loss was entitled to a reduction of his liability for the debt.

There was evidence tending to show that the plaintiff had, in his dealings with Jason and his property, disregarded and violated the rights of Horace as surety; and, therefore, without examining other alleged grounds of error brought to our attention in the briefs, for the error in the finding of law by the referee, in substance, that the plaintiff was not bound to respect the relation of principal and surety existing between Jason and Horace, the judgment should be reversed and a new trial granted, costs to abide event.

All concur, except DANFORTH, J., absent.

Judgment reversed.