142 Misc. 233 | N.Y. Sup. Ct. | 1931
On the 3d of July, 1923, the plaintiff owned certain real estate which was subject to a mortgage held by the Rome Savings Bank for $18,500; on that day he conveyed the premises to John Augello and Rosaría Augello by deed in which the grantees agreed and assumed to pay said mortgage as a part of the purchase price. The grantees on the same day executed to the plaintiff a second purchase-money mortgage on said premises in the sum of $15,150. On July 1, 1925, the defendants Augello conveyed the premises to a corporation known as Family Theatre, Inc., by deed in which the grantees agreed and assumed to pay the two aforementioned mortgages. On the 30th day of June, 1927, the Family Theatre, Inc., deeded the premises to one Louis Goldberg and wife by deed in which said Louis Goldberg assumed and agreed to pay the first mortgage and also the second mortgage, then held by the plaintiff, upon which there was then due the sum of $12,541.64. '
When in a deed a grantee assumes and agrees to pay, as a part of the consideration of the grant, a mortgage upon the premises conveyed, the relationship of the mortgagor to the mortgagee is, as between himself and his grantee, altered; the mortgagor ceases to be the principal obligor and takes on' the relationship of a surety, while a grantee who has assumed and agreed to pay the mortgage becomes the principal debtor. So in this case, when the defendants Augello conveyed the property to the Family Theatre, Inc., the latter, having assumed in the grant to pay the mortgages, became
On or about the 18th of January, 1928, the plaintiff, Eugene White, executed a subordination agreement whereby he agreed to subordinate his second mortgage upon the property to a certain mortgage about to be executed by the Goldbergs to one Abraham W. Rizika. This subordination agreement was on the 18th of January, 1928, recorded in the Oneida coimty clerk’s office; and on the same day said Goldbergs executed and delivered to said Rizika a mortgage upon the premises covered by aforesaid mortgages, to secure the payment of the sum of $1,000, stated to be a collateral mortgage, dated January 18, 1928, and duly recorded. The mortgage states that it is given as collateral security on a promissory note or notes to an amount not to exceed $1,000, and the money to be advanced within three months at the discretion of the party of the second part. There was advanced $300 of the amount.
There came a time when the premises were damaged by fire, and the insurance company paid the damage by a check for the sum of $3,500, which was drawn payable to the Rome Savings Bank and to the plaintiff, Eugene White, indorsed by both and turned over by them to Louis Goldberg, the then owner of the property, who received the proceeds of the check.
The second mortgage contained a provision that it was payable at the the rate of $125 a month. The interest due was first to be deducted, and the balance of the payment was to be applied to reduce the principal of the debt.
While Mr. Goldberg was making improvements to the property, such arrangements were made between him and Mr. White that Mr. White agreed not to enforce the payment of more than the interest upon the mortgage until after the improvements were completed. The improvements were not completed, nor did all of the proceeds of the insurance moneys go into the improvement of the property. Subsequently the Rome Savings Bank foreclosed its mortgage and the property was sold for $10,000, and there was a deficiency of about $12,000, for which judgment was taken against Louis Goldberg.
This action is brought by the plaintiff to recover against the defendants Augello on account of their obligation on his mortgage debt, and against the defendant Family Theatre, Inc., on account of its assumption of and agreement to pay this mortgage debt>
The defendants contest the claim of the plaintiff on the ground that, so far as he was concerned, they stood in the relationship of sureties, and that his conduct and dealings with Goldberg in respect of the execution of the subordination agreement, of the insurance moneys, and of the postponement of the time of payment of the principal of the mortgage debt, operated, as to them, as a release of their obligation as sureties to the plaintiff.
The agreement between the plaintiff and Goldberg for the postponement of the payments of the installments of principal due according to the terms of the mortgage was supported by an adequate consideration, in that it was based upon the agreement of Goldberg to make certain improvements upon the property, the effect of which was to enhance the value of the mortgaged property. This agreement, the indorsement of the check for the insurance moneys by the plaintiff over to Goldberg and the execution of the subordination agreement were transactions carried on without knowledge on the part of the defendants or either of them, nor have they consented to or acquiesced therein.
The defendants have offered no evidence to show that the plaintiff White had any actual knowledge at the time of the transactions aforementioned of the agreements on the part of the Family Theatre, Inc., or on the part of Goldberg contained in the deeds, whereby said parties assumed and agreed to pay the plaintiff’s mortgage as a part of the consideration of the transfer of the title to the land, and the record is devoid of any evidence in this respect, apart from the fact that the deeds containing the agreements were recorded and the fact that Goldberg made payments of installments due upon the mortgage to the plaintiff. According to the record, and as between Goldberg and the defendants, the former became the principal obligor and the defendants became sureties.
It is a well-settled principle of the law of principal and surety that in case of any arrangement whereby the relationship between the creditor and the principal in respect of the debt is altered the effect of that alteration without the knowledge and consent of the surety works a discharge of the liability of the surety. (New York Life Ins. Co. v. Casey, 178 N. Y. 381; Calvo v. Davies, 73 id. 211, 216; Marshall v. Davies, 78 id. 414; Paine v. Jones, 76 id. 274, 278.) This rule, however, is not absolute, but it depends upon whether the creditor had knowledge of the alteration of the relationship or that the relationship of principal and surety had been created. If the defendants would be relieved from the burden of their obligation, it was incumbent upon them to show that the fact that as between
The foregoing statement in respect of the necessity of notice would apply to the extension of the time to pay the principal installments, and would also apply to the acts of the plaintiff in reference to the insurance moneys, so far as the surety relationship is concerned. But would it apply to the subordination agreement? To the extent at least of $300 the plaintiff by the subordination agreement had allowed a hen to be created ahead of his second mortgage.
The acts of the plaintiff in extending the time for payment of the mortgage, in turning over the insurance moneys to Goldberg and in executing the subordination agreement must be construed, so far as the Augellos are concerned, in the light of the plaintiff’s known relationship to them. So far as he was concerned, having no knowledge of the assumption agreements contained in the deeds to the Family Theatre, Inc., and to Goldberg, they stood in the relationship of primary obligors. He, however, knew of these transfers of the title, for the reason that the Family Theatre, Inc., and Goldberg made payments upon the mortgage, and he knew that the title to the property had been transferred out of the Augellos; and there did arise, by reason of these transfers, a quasi surety relationship to the extent that the land was the primary security, and the obligation of the Augellos as quasi-sureties was only to the extent that the value of the land failed to satisfy the mortgage. (Murray v. Marshall, 94 N. Y. 613.) The foregoing was a case where there was an extension of the time of the payment
I think the foregoing principles are applicable here in respect of the extensión of time, the dealings with the insurance moneys, and the subordination agreement, and that unless the record shows the value of the land at the time thereof the plaintiff must fail.
Some interesting facts bearing upon the conduct of the plaintiff appear in the record. The transfer from the Family Theatre, Inc., to Goldberg was June 30, 1927, and the balance then due upon the White mortgage was $12,541.64. There were no payments of principal down to January 1, 1928, and the balance due upon the mortgage on that day was $12,541.64, and there have been no payments since. White knew that the title was in Goldberg at about the time he acquired the title. The insurance moneys amounted to $3,500 or $3,600; these were tinned over by the plaintiff to Goldberg. Goldberg’s statement as to what he did with the proceeds of the insurance moneys is indefinite and somewhat nebulous. Some of the money he used for his own private purposes, unrelated to the property. He says he paid the' Rome Savings Bank $700, which must have been upon interest; that he paid if or masons’ supplies, some of which were purchased before the fire; that he paid labor bills incurred in remodeling the building before the fire, and that he quit work one month after the fire. The insurance moneys, pro tanto, took the place of the real estate and should have been
The premises were sold at foreclosure sale in October, 1928; they were bid in by the Rome Savings Bank for $10,000. This is the only evidence as to the value of the property at the time of the transactions by the plaintiff which are complained of. The plaintiff owed the duty to offer evidence on this subject and to show by more definite proof than was presented what became of the $3,500 or $3,600 of insurance moneys. The measure of the value of the property in January, 1928, was not the amount at which it was sold at the foreclosure sale in October, 1928.
At the close of the evidence in the case, both parties having made motions for the direction of a verdict, it was stipulated that the court may take these motions under advisement, examine the record and decide the matter with the same force and effect as if the jury were present. Under the authority of Murray v. Marshall (supra) I am constrained to grant the motions of the defendants for a dismissal of the complaint as against each of them; but, in view of the intricacies of the law' involved and of the fact that the action was not tried having in mind the law applicable, and that no attempt was made to prove facts essential in order to reach a just determination of the equities, this motion is granted without prejudice to the right of the plaintiff to bring a new action, upon the payment of the taxable costs and disbursements, including one-half of the costs of the stenographer’s minutes. Let the clerk enter in his minutes, as of the day of the motions, an order accordingly.