Fish v. Glover

Magruder, J.: The position of the appellants in this case is, that, when the mortgagors and makers of the note secured by the mortgage, namely, Fish and Young, appellants herein, conveyed the mortgaged property to Thompson, and the latter, in the deed made to him, assumed the mortgage debt and agreed to pay it, the appellants were no longer principal debtors to appellee, but were mere sureties; and that, by the failure and refusal of appellee to foreclose the mortgage when the property was sufficient in value to pay the debt, and to bring any suit in accordance with the notice served upon him, the appellants were released and discharged from their obligation to pay the indebtedness. It has been held, that, as between the mortgagor and the grantee of the mortgaged property who assumes the mortgage debt, the latter becomes the principal debtor, and the former the surety for the payment of the debt. (Flagg v. Geltmacher, 98 Ill. 293; Dean v. Walker, 107 id. 540; Ellis v. Johnson, 96 Ind. 377; George v. Andrews, 60 Md. 26). But this is only true as between the grantee of the mortgagor assuming the mortgage debt, and the mortgagor himself. As between them, the mortgaged property becomes the primary fund. But the mortgagee may treat both as principal debtors, and may have a personal decree against both, unless he has consented to accept such grantee of the mortgagor as the principal debtor and to hold the mortgagor as surety merely. The mortgagee, in the absence of such assent, is not bound by the relation of suretyship existing between the mortgagor and the grantee who assumes the payment of the mortgage; the rights of the mortgagee remain unchanged, and his relation to the mortgagor is not affected, so that, as against him, the mortgagor is in no position to assert and take advantage of the rights of a surety. The doctrine is stated by Mr. Jones in his work on Mortgages (at sec. 741) in the following words : “The mere assignment by the mortgagor of his interest in the mortgaged premises to a third person who agrees to' pay off the mortgage, does not release the mortgagor. There is no novation unless there be something to show that the mortgagee has released the mortgagor, and has agreed to look solely to the purchaser for payment of the mortgage debt. There must be a substitution of a new obligation for the old one, and the new obligation must be a valid one.” (Shepherd v. May, 115 U. S. 505; Hayward v. Burke, 151 Ill. 121; Corbett v .Waterman, 11 Iowa, 86; James v. Day, 37 id. 164; Massie v. Mann, 17 id. 132; Thompson v. Bertram, 14 id. 476; Waters v. Hubbard, 44 Conn. 340; Marsh v. Pike, 1 Sandf. Ch. 210). The mortgagee is entitled to the obligation of the purchaser, but it is treated as a collateral obligation. It would be a singular doctrine, if the contract rights of the mortgagee could be changed by any arrangement between the mortgagor and his grantee, to which the mortgagee was not a party. (Jones on Mort. sec. 742 a). There is nothing in the evidence produced by appelants tending in any way to show, that appellee assented to any arrangement by which Thompson was to be regarded as the principal debtor, and Fish and Young were to be treated as mere sureties. A mortgage is but an incident to the debt, the payment of which it is given to secure ; the debt is the principal thing. (Lucas v. Harris, 20 Ill. 166; Wayman v. Cochrane, 35 id. 152). The lien of the debt secured by a mortgage attaches to the mortgaged property, and the lien can, as between the parties, only be destroyed by the payment or discharge of the debt, or by a release of the mortgage. (Flower v. Elwood, 66 Ill. 438). The fact, that the creditor has security by mortgage, does not prevent him from obtaining a judgment on the note, and subjecting other property of his debtor to its payment. (Karnes v. Lloyd, 52 Ill. 113; Vansant v. Allmon, 23 id. 26). The mortgagee may proceed personally against the debtor on the note and subject his general property to the judgment, or he may bring ejectment on condition broken, or file a bill in chancery for a foreclosure. These remedies are concurrent or successive, as may be deemed proper. (Carroll v. Ballance, 26 Ill. 9; Vansant v. Allmon, supra). If appellants had desired to foreclose the mortgage against their grantee, Thompson, or his grantee, Sweet, they should, as sureties of the grantee, have paid the debt to appellee, as holder of the note and mortgage, and then they would have been subrogated to appellee’s rights in the security. It is upon the payment of the debt by the surety, that he becomes entitled to be subrogated to the rights of the creditor. When a surety pays off the debt, equity transfers to him all the securities held by the creditor, but the creditor cannot be deprived of his security until the debt, for which it is pledged, is extinguished. (James v. Day, supra). The surety can pay the debt the moment it becomes due, which is doing no more than he agreed to do, and immediately resort to the principal for reimbursement. (Taylor v. Beck, 13 Ill. 376). It has been held, that, where the owner of land sells it subject to mortgage executed by himself, the land ih equity becomes the primary fund for the payment of the debt, and the vendor occupies the position of surety, and, upon payment of the mortgage debt, is entitled to be subrogated to the rights of the creditor the same as any other surety. (Brandt on Suretyship and Guaranty, sec. 37; Marsh v. Pike, supra; Eddy v. Traver, 6 Paige Ch. 521; Kane v. State, 78 Ind. 103; Ayers v. Dixon, 78 N. Y. 318). When appellants signed the note and mortgage, the relation of £>rincipal debtor and creditor was thereby created between them and appellee. That relation could only have been changed by a valid agreement, subsequently entered into between them, founded upon a valuable consideration. The evidence introduced showed no such agreement, and was therefore properly excluded. We do not think, that the statute relied upon by counsel" for appellants, and under which they claim to have served their notice, has any application to a case like the present. That Statute provides : “That when any person bound as surety for another for the "payment of money, or the performance of any other contract in writing, apprehends that his principal is likely to become insolvent or to remove from the State without discharging the contract, if a right of action has accrued on the contract he may, by writing, require the creditor forthwith to sue upon the same, and unless such creditor shall, within a reasonable time, and with due diligence, commence suit thereon, and prosecute the same to final judgment and execution, the surety shall be discharged; but no such discharge shall in any case affect the rights of the creditor against the principal debtor.” (Rev. Stat. chap. 132, sec. 1.) This section refers to contracts in writing binding sureties, and not to contracts of suretyship arising by implication. There was no contract in writing, making appellants sureties, to which appellee was a party. Appellants alone signed the noté secured by the mortgage. That note was not signed by Thompson, and, although Thompson was pérsonally liable to appellee in an action at law for the debt which he agreed to pay by the terms of the deed executed to him, (Dean v. Walker, supra), yet appellants, as mortgagors, and their grantee, were both liable to the holder of the note and mortgage as principals. (Jones on Mort. sec. 741; Taylor v. Beck, supra; Waters v. Hubbard, supra; Corbett v. Waterman, supra). The word, “other,” in the expression, “any other contract in writing,” clearly implies, that the previous obligation, by which any person was bound as surety for the payment of money, was intended to be an obligation in writing. It is said, that the bill of exceptions does not show the introduction of the note in evidence. A certified copy of the note is therein shown to have been introduced in evidence by consent, and testimony in relation to its contents was admitted without objection by appellants. The original had been withdrawn by leave when the judgment was entered, and a certified copy had been left in its place. In a proceeding such as this, where the judgement, which was entered in term time, was not vacated, but allowed to stand as security for the purpose of giving the defendants an opportunity to prove a defense if they had any, it will' be presumed, in the absence of any proof ■ showing to the contrary, that the judgment, as originally entered, was rendered upon proper and sufficient evidence. There was no claim that the note was not a just debt, if the circumstances hereinbefore set forth should not constitute a valid defense. We cannot see, that the judgment was entered for too large an amount. The warrant of attorney, accompanying the note, authorized a confession of judgment for a fee of §500.00, in addition to the principal and interest due upon the note. But the amount of the fee included in the note was only §250.00. No objection was made in the court below to the allowance of this sum. The judgment of the Appellate Court, and the order and judgment of the Circuit Court are affirmed. Judgment affirmed.