Farmers' Loan & Trust Co. v. Central Park, N. & E. R. R.

HOUGH, District Judge. It is admitted that the opinion of Judge Lacombe, C. J., in the court below correctly states the material facts of this litigation. It is therefore unnecessary to consider at length the evidence and exhibits. ' The propositions on which the Central Park Company, rests its appeal are reducible to three, viz.: (1) Since the lease of 1892 provides that “this lease is made subject to all debts and liabilities of the [Central Park Company] which are hereby assumed and are to be paid by the [Metropolitan Company] as a part of the consideration hereof,” it follows that the Metropolitan Company became primarily responsible for the mortgage debt of 1872; the Central Park Company but a surety, and its, property .also but secondarily liable. (2) This being the legal relation of the parties, the acquisition of the bonds on their maturity by the Morton Trust Company, under the circumstances, and in the manner detailed in the opinion below, constituted a payment of the mortgage debt. (3) But, if the bonds were not extinguished by payment eo instanti,. the Morton Trust Company acquired possession of them, then the time for their payment was extended in favor of Metropolitan Company by the terms of the mortgage of 1902, and such delay discharged the Central Park Company as surety, and its property as well. This case does not require decision of the question whether the lease of 1892 imposed upon the Metropolitan Company the obligation of ultimately paying, not only the current indebtedness, but the already existing funded debt of the Central Park Company. [1] It is enough that the document itself is sufficient evidence that the parties intended the indebtedness secured by the mortgage of 1872 to be continued, and the property of the Central Park Company to be pledged to secure the same, for an indefinite period. This is fully shown by the following language from the lease: “Whenever any of the funded debt of the party of the first part [Central Park Company] shall become due and payable, the party of the first part shall, upon the request of the party of the second part provide for the re [965] newal thereof bj' the issue or the renewal of bonds in the customary form and upon tike request shall secure the sanie by mortgage or mortgages upon all its property and franchises, and this shall be done at the lowest rate of interest at which such bonds can be marketed. “Provided, however, and it is hereby expressly agreed, that any mortgage so made shall lie made subject to the existing first mortgage of one million two hundred thousand dollars ($1,200,000) now upon the property of the company, and also to the rents provided to lie paid by tills lease, which mortgage and rents shall be a charge upon all of the property and rights of the company prior to any other mortgage which may hereafter be placed thereon; it being understood that said first mortgage may be refunded at lower interest and still retain its place as first mortgage.” It follows from this that there was no ¡duty upon the Metropolitan Company to pay and extinguish the Central Park Company’s bonds in 1902^, nor at any time down to the present. This being true, it would require a most technical view of the actual occurrences to produce the holding that what the lessee company was not presently bound to do, what no one intended to do, and what the lessor never asked to be done, was nevertheless inadvertently accomplished. We agree with appellee's contention that what was done amounted to an extension of the bonds (or of the indebtedness evidenced by the same), without interest, and are of opinion that such extension is fairly within the provision of the lease for “renewal of bonds.” See Words and Phrases, tit. “Renewal,” for cases holding extensions frequently synonymous with renewals. [2] .But even assuming with appellant that the lease of 1892 does contain an assumption of the Central Park Company’s funded debt, and assuming, further, this case is governed wholly by the law of New York as declared by its highest court, there is nothing in the evidence to show that the Metropolitan Company ever assumed any higher obligation than one to hold the Central Park Company harmless from the consequence of foreclosure, the pledged property remaining as always the primary fund for the payment of the mortgage. “The giving of a covenant by the grantee does not work a novation of the mortgage debt. It does not make the debt his own, except in respect to the estate.” Matter of Wilbur v. Warren, 104 N. Y. 198, 10 N. E. 265, citing Butler v. Butler, 5 Ves. 534. This is exactly where appellant’s argument leads, viz.: The asserted assumption of payment is held to have worked a novation, so that an action would have, lain by the Central Park Company against the Metropolitan Company in 1902 to compel the surrender and cancellation of the bonds in question, even though (had that been done) the same property might have been at once subjected to another mortgage of the same amount to run for any length of time. This position seems to us answered by its statement. It follows, from the admission made (for argument’s sake only) of an assumption of the debt secured by the mortgage of 1872, that the pledged property remained the primary fund for repayment, and that whatever extension of time for payment resulted from the terms of the mortgage of 1902 was granted not to the principal, but to [966] the surety (Metropolitan Company), and has not, therefore, worked any release of the principal fund now being proceeded against. The decree is affirmed, with costs.