Mutual Life Insurance v. Davies

The conveyance *184of the land by the defendant Davies to Cudlip, and the agreement by the latter to assume and pay the mortgage, created the relation of principal and surety between them. The effect of this transaction was, in equity, to make the land the primary fund for the payment of the mortgage debt, and to place Davies in the attitude of surety only thereafter (Johnson v. Zink, 51 N. Y. 333 ; Jumel v. Jumel, 7 Paige, 594).

The subsequent conveyance from Cudlip to Adriance, although the latter also assumed the payment of the mortgage, did not affect Davies’ relation as surety. It gave him the additional advantage of the agreement of Adriance. This being the relation between Davies and the grantees of the premises, of which plaintiff had notice, although Davies still remained liable on the bond accompanying the mortgage, yet the plaintiff was bound in its dealings with the grantees and others, in regard to the mortgage debt, to do nothing to the injury of Davies as surety.

A surety has a right to request the creditor to proceed without delay in the collection of the debt, and if the creditor, notwithstanding such request, neglects to proceed, and the recovery of the debt thereafter has become by such delay impossible, the surety would be discharged, or should it appear that the creditor’s means of recovery have been, by delay after such request, only partially impaired, then his obligation against the surety is impaired to the extent of the los 3 only (Paine v. Packard, 13 Johns. 174 ; King v. Baldwin, 2 Johns. Ch. 554 ; S. C., 17 Johns. 384 ; Warren v. Beardsley, 8 Wend. 194; Herrick v. Borst, 4 Hill, 650 ; Colgrove v. Tallman, 67 N. Y. 95). The reason for this conclusion being that the creditor is under an “ equitable obligation” to obtain payment from the principal debtor, and the surety can by a “full and explicit request” compel the creditor to *185proceed to recover the debt, and his refusal to do so will exonerate the surety (King v. Baldwin, supra).

The learned judge before whom the trial was had was requested by the defendant’s counsel to find in substance as facts, that in November or December, 1874, the defendant Davies, at the plaintiff’s offices, informed William Gr. Davies (who was attached to the law department of the plaintiff’s business) that he was anxious about the value of the security, and desired to have the mortgage foreclosed, if any taxes or assessments upon the premises were unpaid; that thereupon William Gi. Davies made an examination of the books and papers of the company, and assured the defendant that there were no taxes or assessments unpaid, or interest in arrear ; that defendant informed William Gr. Davies that if any taxes or assessments should be unpaid and in arrear, he wished the mortgage forthwith foreclosed for his protection, which William Gr. Davies, thereupon, and at several times thereafter, assured him should be done.

The learned judge declined to find these facts, and the defendant excepted.

We have examined the case to ascertain whether the judge before whom the witnesses were examined was justified in refusing to find the facts he was requested.

From such examination, we cannot conclude that the judge was in error in declining to find any portion of what was requested of him which is material to the just disposition of the case. And the case in that respect may well rest upon his decision. William Gr. Davies, who is a nephew of the defendant, and who was frequently consulted by him, in the plaintiff’s offices, and elsewhere, in respect to Ms mortgages, has testified, that he could not have informed the defendant that there was nothing against the property, when interest was unpaid, the December interest being in *186arrear, and that the entries of payment of interest were promptly made in the books ; that the company’s books did not at that time show what taxes or assessments were against the property ; that he had not the information to give upon that subject; that he might have said that they knew of none; that he did not understand the defendant to direct or request that the, mortgage should be foreclosed ; that he very probably made a remark that he wanted it done if taxes and assessments accumulated.

Conceding that the plaintiff requested that the viortgage should be foreclosed, if taxes and assessments accumulated, and should be in arrear, does that amount to a “full and explicit” request to the plaintiff, to foreclose the mortgage ?

The request, it must be observed, was made of a person, who, under the evidence, had no duty in his relations to the plaintiff in that direction.

The president and finance committee of the plaintiff were the persons who had the control of such matters ; they directed the foreclosure of the company’s mortgages. The person of whom the request was made was neither president nor member of that committee. He had no authority to direct or order the foreclosure of a mortgage.

When a request of this nature is to be made of a corporation, to be effective, it should be formally made, and communicated to one charged with the subject.

This is the more important, as a disregard of the request is followed by a release of a security. In large corporations, there must needs be a systematic distribution of duties among numerous officers and agents. And persons seeking to charge a corporation with notice to, or with acts or omissions of its agents, must see to it that the notice is communicated to, or that the act or omission proceeds from a person charged with a duty in the premises. By way of illustration, *187a communication made to the discount clerk of a bank with respect to matters clearly not under his control, but within the specific duty of the notary, paying or receiving clerk, could not well be considered a good notice to the bank, by which it would be absolutely bound.

When a corporation is engaged in making investments of money, the duty of calling in loans is quite as important as that of making them. The decision in'each instance must rest in responsible hands. The plaintiffs intrusted this duty to its chief officer and principal committee, with whom the defendant, who was not a stranger to the plaintiff’s offices, should have formally communicated, and especially so, as his request to foreclose was conditional, accompanied with the added service, care and judgment, with respect to taxes and assessments.

But again: the defendant could not, through a notice to or request of William Gv Davies, cast upon the plaintiff the duty of watching taxes and assessments, so as to guard against their accumulation.

That was a matter about which the defendant might himself have inquired, as his interest prompted, at the proper municipal offices where reliable records are kept.

The evidence shows that the books of the company did not, at that time, disclose what taxes and assessments were returned against the property, and that the plaintiff had in fact no information to give upon that subject, and could only obtain it by an inquiry at offices equally open to the defendant.

The person in the plaintiff’s employment with whom the defendant communicated, according to his testimony, was not assigned to any duty of the nature of the one sought to be imposed by the defendant.

He was the assistant to the solicitor of the company in its law department. This department exam*188ined vouchers, the surrender of death claims, and had the supervision of all litigated business and general direction of it. He had no right, as assistant to the solicitor, to order the foreclosure of a mortgage for non-payment of taxes.

Had William G-. Davies, therefore, chosen to act in the direction requested, it must have been for the defendant, and in his interest, and for his omission, if any, the plaintiff is not liable.

But it is urged by the learned counsel for the defendant, that the plaintiff extended for a time the payment of the mortgage, at the request of Mr. Sage, the owner of a subsequent incumbrance. It appears that the plaintiff, in January, 1875, was about to foreclose the mortgage, and had placed the same in the hands of its attorneys for that purpose.

At this stage Mr. Sage came forward and paid the interest in arrear, and the expenses of the preliminary proceedings, and the mortgage was returned by the attorneys to the company. Mr. Sage, in August following, paid another installment of interest on the mortgage.

He testified that he was desirous of getting an opportunity to investigate the value of the property, and to that end made those payments. It is not shown that any agreement was made to extend the payment of the mortgage for a day.

The plaintiff simply forbore the collection of the debt which was due. However such forbearance of the creditor may prejudice the surety, it will not of itself have the effect to discharge him.

A naked promise to forbear, if one was made, would work no change in the antecedent relations of the parties.

The distinction between an agreement to give time, and time given irrespective of an agreement is important.

*189A creditor may refrain from taking proceedings, or abandon those he has commenced, provided he releases no lien, without discharging a surety (2 Am. Leading Cases [Hare & Wallace] notes to Pain v. Packard, and King v. Baldwin, pp. 390, 394).

There is nothing to show that the plaintiff was restrained by any agreement, for any length of time, from collecting the mortgage, and the defendant could, notwithstanding the payment of the interest in arrear by Sage, have at any moment paid the debt, and have been subrogated to the plaintiff’s rights and remedies under the mortgage (Calvo v. Davies, in the court of appeals, per Andrews, J.).

The manuscript opinion in that case has been handed up with the papers.

This opinion fully recognizes the position and rights of the defendant Davies as surety, upon the facts appearing as above stated.

The judgment for a deficiency in this case is doubtless owing, in a large degree, to the accumulated taxes and assessments upon the premises, which were, by the judgment of the special term, directed to be paid out of the moneys arising on the sale of the land.

Some of these assessments accrued as early as the year 1872, and a considerable portion of the whole was a matter of record in the proper city offices in December, 1874, when the defendant had the interview with the assistant solicitor in the office of the company.

However unfortunate the result may prove to the defendant, we cannot think that the case would justify this court in casting upon the plaintiff the burden of paying these liens.

If the plaintiff was at all at fault in allowing them to accumulate through its forbearance to foreclose when the assessments first appeared, the defendant is not wholly free from responsibility. If the existence of these liens depreciated the security of the mortgage, *190and furnished a reason for its foreclosure, the defendant, whose pecuniary interest in the matter was large, could have readily acquired a knowledge of them, and by a seasonable and explicit request to the plaintiff, could have secured himself against any loss whatever.

We fail to discover any error in the proceedings on the trial or in the judgment.

Judgment affirmed with costs.

Sedgwick and Speir, JJ., concurred.