Case ID: abbn-cas_5/html/0263-01.html
Source: Caselaw Access Project
Author: {"author": "Gilbert, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

LOOMIS v. BALHEIMER.
    N. Y. Supreme Court, Second Department, Second District;
    
    
      Special Term, July, 1878.
    Foreclosure. — Neglect to Proceed. — Exoneration of Collateral Debtor.
    The rule in Russell Weinberg (4 Abb. New Cas. 139) — that where a mortgagor, having sold the mortgaged premises to one who has assumed payment of the mortgage, requests the mortgagee, after the mortgage becomes due, to foreclose immediately lest the premises become insufficient, the latter must do so or the former will be discharged from liability on the bond if the property afterwards becomes insufficient — applies where the mortgage is not due by its terms, but the holder of the mortgage has an option to declare the whole due by reason of a default in the payment of interest, taxes or installment.
    
    In such case the person collaterally liable is entitled to call on the holder of the mortgage to exercise his option and foreclose for the whole amount; and if he refuses to do so he cannot recover a deficiency against the one who made the request.
    Trial by the court.
    This action was brought by Harmon Loomis against George L. Balheimer and others, to foreclose a mortgage on real property. Balheimer had conveyed the mortgaged land to Lucas Koenig, the deed containing a covenant, on the part of Koenig, to assume and pay the mortgage and bond held by the plaintiff, which were the subject of the present action. The bond and mortgage gave to the mortgage creditor the option, in case of a default in the payment of interest or taxes, or any part of the principal, to have the whole amount of principal and interest, which was secured by the mortgage, become due and payable forthwith. A default occurred in November, 1876, which entitled the plaintiff to exercise this option. The action was not, however, commenced until April, 1878.
    The plaintiff demanded a judgment for deficiency against the mortgagors ; which they resisted, claiming that the plaintiff, by refusing to exercise his option when requested by the mortgagors to foreclose for the entire amount, and by receiving small payments on account during a year and a half delay, had exonerated them from liability.
    The evidence was somewhat conflicting, but the plaintiff adduced and relied on affidavits tending to show that plaintiff had notice of the mortgagor’s conveyance to Koenig, that he was requested on behalf of Balheimer to foreclose at about the time that the default occurred, and again subsequently; and that, meanwhile, the property had depreciated.
    
      Henry Hagner, for plaintiff.
    
      Simon Sultan, for defendants.
    I. The defendant, Balheimer, having conveyed the mortgaged property to Lucas Koenig, with a covenant on the part of the latter to assume and pay the mortgage and bond held by the plaintiff, the relation of principal and surety was established between the parties to this conveyance, of which the plaintiff was bound to take notice (Calvo v. Davies, 8 Hun, 222; Comstock v. Drohan, Id. 373; Burr v. Beers, 24 N. Y. 178; Garnsey v. Rogers, 47 Id. 233; 1 Hilliard on Mortgages [4th Ed.] 357-359; Colgrove v. Tallman, 67 N. Y. 95).
    II. The covenant giving the mortgagee the option in default of payment of the interest or taxes, or the accruing part of the principal to have the whole amount of principal and interest secured by the mortgage and bond become and be due forthwith was a covenant, the plaintiff was in duty bound to assert when requested to do so by the defendant (Hunt v. Roberts, 45 N. Y. 691, 696).
    
      III. The neglect of the plaintiff to foreclose the mortgage when he was requested to do so, and default had been made which entitled him to do so, connected with the proof that by reason of such neglect and the unauthorized indulgence shown by the plaintiff to the owner of the equity of redemption, the property which was the primary fund for the payment of the mortgage debt, has depreciated in value, and the responsibility of Lucas Koenig, the party primarily liable, has become impaired, discharges the defendant from liability for any deficiency of the mortgage debt, which might have been prevented by diligent action on the part of the mortgagee (Russell v. Weinberg, 2 Abb. New Cas. 422; Black River Bank v. Page, 44 N. Y. 453; Colgrove v. Tallman, 67 Id. 95; Northern Ins. Co. of N. Y. v. Wright, 6 N. Y. Weekly Dig. 78).
    
      
       See also Northern Ins. Co. v. Wright, 13 Hun, 166.
    
   Gilbert, J.

Judgment for plaintiff with costs, except that the mortgagors are relieved from any deficiency and from costs. No costs to mortgagor.