Ost v. Mindlin

Scott, J.:

The facts upon which this appeal turns have been so fully stated by Mr. Justice Laughlin that it is unnecessary to repeat them at length. The appellants are sued as guarantors for the payment of a bond secured by a mortgage, and the question involved has been accurately stated by him to be “ whether the election of the holders of the mortgage at the time of the foreclosure to declare the whole amount due was irrevocable and inured to the benefit of the appellants and could not be waived without their consent.”

The situation of the parties when Stecher and Paley, the then owners of the mortgage, elected to declare the whole amount due, for non-payment of an installment, was that these appellants were guarantors that the sum secured by the mortgage would be paid in strict conformity to the terms of that instrument and the accompanying bond. This included the obligation to pay the whole amount when it should become due, if those primarily obligated should fail to do so. Hence when the whole amount became due by the election of the holders to so consider it, the appellants became instantly liable, as guarantors, to pay the whole amount, but coupled with this obligation was the right to be subrogated to any security which the creditor might hold. It was also their right to insist that the date of the payment should not be postponed without their consent, under penalty of the cancellation of their liability. These rules are fundamental and elementary.

Nothing is better settled in this State than that the holder of a bond and mortgage who has elected to declare the whole debt presently due for a default in paying interest or an installment of principal, cannot of his own accord, and to the detriment of any person obligated to pay the amount, revoke and recall his election. Such an election once made is final and irrevocable after any person liable to pay the debt, whether as principal or surety, has changed his position and assumed an obligation which is the result of such election. The authorities to this effect are so numerous that it will be necessary to cite but a few of them. (Kilpatrick v. Germania Life Ins. Co., 183 N. Y. 163; Pizer v. Herzig, 120 App. Div. 102; Brown v. Mason, 55 id. 395; affd., 170 N. Y. 584.)

It is quite clear that by electing to declare the whole sum due the then holders of the mortgage effected a material change in the position of appellants. The debt which they had guaranteed became changed from one payable in the future and in installments, to one immediately payable. Having thus become presently payable any attempt to extend the time of payment, such as would result from a revocation of the election, was in violation of their rights and detrimental to them as presumption of law. As was said in Calvo v. Davies (73 N. Y. 211): “That an agreement by the creditor with the principal debtor, extending the time for the payment of the debt, without the consent of the surety, discharges the latter, is established by numerous authorities, and the court will not enter into the question what injury the surety has sustained. ”

The contention that appellants consented- to the revocation of the election merits little consideration. What they did was merely to consent to a discontinuance of the foreclosure action. This of itself is certainly not a consent to an extension of the time for the payment of the debt, and more especially in view of the fact that the consent was signed upon the assurance that arrangements had been made by which the mortgage debt would be paid without recourse to appellants. Reduced to its ultimate terms we have then the case of a debt presently due for which the appellants were sureties or guarantors, and of an extension of the time for the payment of that debt by an agreement valid between the principal debtor and creditor, but without the consent of the sureties or guarantors. Upon well-settled principles the appellants were thereby released, and it is immaterial whether or not the extension of time for payment actually worked to their detriment. It was clearly error to have directed a verdict for the plaintiff. Indeed, upon the case as made, the court should have dismissed the complaint if a motion for that relief had been made, but as no such motion was made we are powerless to so dispose of the case on this appeal.

The judgment and order appealed from must be reversed and a new trial granted, with costs to appellants to abide the event.

Ingraham, P. J., and Clarke, J., concurred; Laughlin and McLaughlin, JJ., dissented.