Cansler v. Sallis

Chalmers, J., delivered the opinion of the court. That a mere change in the form of indebtedness will not discharge a lien, unless it is apparent that the parties intended to extinguish it, is well settled. The principle was stated and fully recognized in Lewis v. Starke, 10 S. & M. 120, 128, and in the recent case of Howell v. Bush, ante, 437; but in those cases the facts negatived any intention of retaining the lien, and demonstrated an opposite intention. In this case, on the contrary, the allegations of the bill, which are admitted by the demurrer, are that “ when the new note and trust-deed were taken, it was not intended to destroy the lien of the first trust, but only to change the form for the convenience of parties.” This change of form grew out of the fact that the note had been assigned, and the assignee desired a new note and trust-deed in his own name. The new note was for the exact amount of the old one, with the accumulated interest; and the consideration of both was the unpaid purchase-money of the land mortgaged. The original trust-deed was marked “ satisfied by settlement,” — language which seems of itself to import that there had been no actual payment if the settlement should fail. There - can be no doubt that, under the allegations of the bill, the intention between the parties was to substitute the second note and trust-deed for the first as a mere change in the form of indebtedness for some fancied convenience to the parties. Whenever this is the case, a court of equity will look through the form to the substance, and keep alive the original security, if justice requires it. Dillon v. Byrne, 5 Cal. 455; Swift v. Kraemer, 13 Cal. 526 ; Flower v. Elwood, 66 Ill. 438 ; Nichols v. Overacker, 16 Kansas, 54. Can Mann, who had taken a trust-deed junior to the original one, complain that it is kept alive? How is he prejudiced? He has still all that he bargained for. He was induced to take no new step, by reason of the change in the form of the [450] original security. He has not been misled by it; he has advanced no new consideration in consequence of it. Shall he be allowed to gain an accidental advantage by a transaction with which he had no concern ? If it was the intention of the parties to the original security to keep it alive, as the bill charges, the carrying out of that intention in no manner harms him. His rights remain wholly unaffected, and this is all that he can ask. Decree reversed and demurrer overruled.