241 A.D. 204 | N.Y. App. Div. | 1934
The appealing defendant, Fermac Corporation, was the original mortgagor. After giving to the plaintiff the mortgage which is here being foreclosed, this defendant conveyed the premises subject to such mortgage but without any assumption of the same by the grantee. This new owner gave to this same plaintiff a second mortgage on the premises. Then the property was conveyed through a series of owners subject to the two mortgages, which were assumed by all of the subsequent owners except the last. Both mortgages came due on April 5, 1931, at which time there was unpaid on the first mortgage principal of $16,400 and on the second mortgage the full amount of principal of $3,300. With these amounts still due and unpaid, the defendant Fermac Corporation in November, 1931, offered to pay to the plaintiff the full amount unpaid on the first mortgage and asked for an assignment of the same. The plaintiff refused to give this assignment, stating that it could not do so because it desired to protect its second mortgage. Fermac Corporation then demanded that the plaintiff immediately foreclose the first mortgage because the premises were then worth more than the amount unpaid on this mortgage.
After a delay of thirteen months, foreclosure proceedings were instituted, and at the time of the trial twenty months had expired since the date of the demand. The referee held that one month after demand was an excusable delay and that the delay for the following twelve months was inexcusable. He found the value of the premises at the time of the demand to be $17,000 and at the time of the trial $10,000 and apportioned the depreciation between the period from the date of demand to the commencement of the action and the period from the commencement of the action to the time of trial. He concluded that the plaintiff was entitled to the usual judgment of foreclosure and sale with judgment for deficiency, if any, against the Fermac Corporation only if said deficiency should tie in excess of $4,200 and then only to the extent of said excess.
The defendant Fermac Corporation contends that the failure of the plaintiff to accept from it payment of the full amount then unpaid on the first mortgage and to give it an assignment of said mortgage constituted a complete release from its liability for deficiency. It was long since settled in this State that when a mortgagor conveys the mortgaged premises to one who acquires them subject to the mortgage without assuming the payment of the same, the mortgagor remains the principal debtor, but occupies a position akin to that of a surety for the amount of the mortgage, that is, to the extent of the value of the land, and the land becomes primarily hable for the debt in exoneration of the surety instead
relation of principal and surety arose between the mortgagor and his grantee from the conveyance subject to the mortgage, an equity did arise which could not be taken from the mortgagor without his consent, and which bears a very close resemblance to the equitable right of a surety, the terms of whose contract have been modified. We cannot accurately denominate the grantee a principal debtor, since he owes no debt, and is not personally a debtor at all, and yet, since the land is the primary fund for the payment of the debt, and so his property stands specifically liable to the extent of its value in exoneration of the bond, it is not inaccurate to say that as grantee, and in respect to the land, and to the extent of its value, he stands in the relation of a principal debtor, and to the same extent the grantor has the equities of a surety.” (Murray v. Marshall, 94 N. Y. 611, 615.)
The original mortgagor, as surety, on payment of the debt, is entitled to an assignment and effectual transfer of the debt and all security held by the mortgagee and is entitled to have both the bond and mortgage assigned to him. (Ellsworth v. Lockwood, 42 N. Y. 98; Murray v. Marshall, supra.) In other words, he is entitled to be completely subrogated to the rights of the creditor. In the instant case the mortgagor was deprived of this right. His offer to pay the full amount then unpaid on the mortgage was declined and the mortgagee refused to assign the bond or mortgage to him. At the time of the offer the mortgaged premises were of sufficient value to satisfy this mortgage in full. There would have been no loss to the holder of the first mortgage. It was, therefore, being deprived of a most substantial right by the refusal of the mortgagee to accept such payment and make such assignment and was released from further liability for the debt. This alone is sufficient ground for reversing that portion which adjudges that this defendant pay a deficiency.
It is true that in this case the mortgagee also held a second mortgage on the premises which was given to it by a subsequent grantee and it desired to protect this second mortgage. This situation created no equities in the plaintiff’s favor. The original mortgagor was not a party to the transaction of the giving of the second mortgage and can in no way be bound by, or deprived of any of its rights by reason of, that transaction. It must be assumed that the mortgagee was not in ignorance of the first mortgagor’s right of subrogation when it entered into the second transaction, and if, under those circumstances, it saw fit to place itself in this position, it must abide by the effect thereof.
The judgment below must be modified by striking therefrom the provision that the plaintiff recover from the defendant Fermac Corporation the deficiency in excess of $4,200, and then only to the extent of said excess, and inserting therein a provision dismissing the complaint as to the defendant Fermac Corporation upon the merits, and as so modified affirmed, with costs to the appellant in this court and in the court below. The conclusion of law that the plaintiff is entitled to a judgment for deficiency against the defendant Fermac Corporation falls because the facts as found do not sustain it.
Hill, P. J., Rhodes, McNamee and Heffernan, JJ., concur.
Judgment modified by striking therefrom the provision that the plaintiff recover a deficiency judgment against the Fermac Corporation, and by inserting therein a provision dismissing the complaint as to the defendant Fermac Corporation upon the merits, and as so modified, affirmed, with costs to the appellant in this court and in the court below.
The conclusion of law that the plaintiff is entitled to a judgment for a deficiency against the defendant Fermac Corporation falls because the facts as found do not sustain it.