Mutual Life Insurance v. J. H. C. Corp.

Schreiber, J. Where a mortgagee enters into an extension agreement with one who has assumed liability on the mortgage, without the consent of the original mortgagor, the latter is discharged. This is not so, however, if the extension agreement contains an express reservation of the mortgagee’s rights against the original mortgagor, for such reservation has the - effect of preserving the mortgagor’s right of subrogation in the event that the mortgagor pays the mortgage and seeks indemnification from the grantee who had assumed the mortgage (Calvo v. Davies, 73 N. Y. 211, 216-217; see, also, National Park Bank v. Koehler, 204 N. Y. 174; National Bank of Newburgh v. Bigler, 83 N. Y. 51, 66; Restatement, Security, § 129, p. 348). In such a case, the mortgagor may sue the grantee notwithstanding the fact that the term of the extension agree [417] ment has not yet expired. The only differences between the instant case and Calvo v. Davies (supra) are (1) that here the mortgagor is a quasi surety, having an equity similar to that of a surety, to the extent of the value of the land (Murray v. Marshall, 94 N. Y. 611), while in Calvo v. Davies (supra) the mortgagor was a surety for the entire amount of the mortgage indebtedness, and (2) that in the instant case there was an express reservation of rights which the court in Calvo v. Davies (supra) found to be lacking. A reservation which would be effectual to preserve the liability of a mortgagor who was surety for the full indebtedness should, a fortiori, be effective to save the liability of a mortgagor who is' a quasi surety to the extent of the value of the land. Motion granted. Settle order.