Keeler v. Hollweg

Gaynor J.: These answering defendants stood in the relation of sureties to the plaintiff’s husband for the payment of the note, and he held the chattel mortgage as security for its payment, not only in his own interest, but also as trustee for them. TTis duty under such trust was toi preserve the said security, and, I suppose, to do whatever was necessary to keep.it in life, and a prior lien, (to file it, for instance), and to turn it over to the defendants 'intact upon their paying the note. . It must also be that it was permissible to him under the trust to do anything to strengthen the security, or make it better, such, for instance, as extending it to new or sub"stituted chattels, for those worn out or destroyed, or exchanging it for an adequate mortgage on real property, or for a pledge of government bonds. I do not see how we may avoid this conclusion, having allowed that the relation is one of trust. His own interest required this, and it was equally for the interest of the sureties. He was not permitted to release the- security, ;or ‘diminish it, and to do so would discharge the sureties pro tmto. Such a total release in this case would discharge the sureties entirely, for the security was equal to the debt (Hayes v. Ward, 4 Johns. Ch. 123; Vose v. Railroad Co., 50 N. Y. 369; Murray v. Marshall, 94 N. Y. 611). When the said note and mortgage were transferred to the plaintiff by her said husband, whether for value or not, she succeeded to his position in relation to these defendants. She released the said mortgage, but simultaneously took a new one of the same parties, on the same chattels, and of the very same words and tenor, but payable tó herself. The security was therefore in no wise diminished or affected, unless some priority slipped In by the change. I doubt .if the burden is on the plaintiff to prove that such was not the case. It is not to be presumed that her act was-in breach of her trust, or negligent, .and detrimental to the sureties; but to the contrary, as is the general rule with trustees. She acted for her own interest, -and for that of the sureties, and from the facts proved the security is the very same. It is not to be presumed that there [417] were other mortgagees or creditors with liens, and that they got priority. This case does not fall within the principle that where the contract which fixes the surety’s liability is changed, he is ipso facto discharged, as is the case when the contract time for the principal to pay is extended. There the surety is discharged, because the contract holding him no longer exists and cannot be sued upon, and the new contract is not his contract (Merrill v. Reiners, 14 Misc. Rep. 583). The question here involved depends upon equitable principles. If, as custodian of the security for herself and the sureties, she had violated her trust duty to the sureties, not to release or impair the security, equity would deprive her of her recourse against the sureties, pro tanto. It may not be easy to cite authority to that precise effect, but it seems to me that this principle of trust is the one which governs, and upon which the authorities may be harmonized and placed (Brandt on Suretyship, ch. 17; Underhill v. Palmer, 10 Daly, 478), Judgment for the plaintiff.