Court Opinion

ID: 3624554
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:05:29.278928+00
Date Added: 2024-06-11T11:51:21.337981
License: Public Domain

The plaintiff filed notices of liens under contracts for public improvements. The liens attached to moneys of the State or county applicable to the construction of such improvements. (Lien Law [Cons. Laws, ch. 33], § 5.) The statute which created the liens defined their limits and provided the manner in which they might be enforced. By the filing of a notice, the lienor obtained the rights accorded by the statute — no more and no less. Any rights acquired by the filing of a notice of lien upon the moneys which, by the statute, were made subject to the lien, might, from their inception, be discharged or defeated by the filing of an undertaking "conditioned for the payment of any judgment * * * which may be recovered in any action" to foreclose the lien. (§ 37.) Then, by operation of law, even without the consent of the lienor, the obligation of the bond was substituted for the fund which was subject to the lien. The relation and rights of the parties remained otherwise unchanged (Harley v. Plant,210 N.Y. 405), but the undertaking brought in a new party, and thus created a new relation involving new rights and obligations. The obligations of the surety, though voluntarily assumed for a valuable consideration, are defined and measured by the statute and the language of the bond. The rights of the lienor are defined and measured in the same manner. A lienor has no choice of whether to enforce a lien upon a fund or to avail himself of the obligations of the undertaking. He may be relegated, even against his will, to an action to enforce the obligation of the undertaking; but if he seeks to avail himself of the benefit of the statutory undertaking, he subjects himself to any limitation upon his rights, express or implicit, in the terms of the undertaking. Thus both the rights of the lienor and the correlative obligation of the surety are in all cases determined by the statutory undertaking. *Page 179 
The obligation of the surety company is one of suretyship. Correlative rights and obligations arise from that relationship. They may not be cast aside because the surety receives compensation or because the relationship has been thrust by statute upon the lienor. It is often said that a creditor discharges a surety by any dealing or arrangement with the principal debtor without the surety's assent, which at all varies the situation or rights of the parties. (1 Brandt on The Law of Suretyship and Guaranty, § 255.) Accordingly the rule is well established that "when the obligation of the surety is for the debt of the principal, if the time of payment is without the consent of the surety, by a binding agreement between the creditor and the principal, extended for a definite time, the surety is discharged. The reason is that the surety is bound only by the terms of his written contract, and if those are varied without his consent it is no longer his contract and he is not bound by it." (Id. § 376.) These tests must be applied here, but even so, I reach the same conclusion as Judge FINCH that the surety is left without a valid defense.
The time at which a debt is payable constitutes one of the terms of the debt itself. A binding agreement with the debtor extending the time for payment alters the risk assumed by a surety for the payment of that debt. Except for such extension, the surety might at any time pay the debt and compel reimbursement from the principal. The obligation of the surety cannot be altered without the surety's consent to cover a risk without such safeguard. Here the surety did not guarantee payment of the debt of the principal. Its obligation was confined to the payment of a judgment recovered in an action to foreclose a lien. No such judgment could be recovered if the lien was defective, yet the debt might still remain in existence and be collectible by action at law. The defendant thus agreed to pay not an existing debt, payable then or at some time in the future, but to pay a judgment which might never come into existence. How or when or in what amount such a judgment would be *Page 180 
obtained was then undetermined, and the surety had no right to object to any fair and honest agreement between the parties intended to govern such matters.
The surety is not a necessary party to an action to foreclose the lien, yet a "judgment therein establishing that the lien when discharged by the undertaking was valid and enforceable in a fixed amount is conclusive as an adjudication in an action upon the undertaking against the sureties, although they were not parties to the former action." (Harley v. Plant, supra, p. 410.) The giving of the undertaking in no way altered the right and power of the lienor to control the action to foreclose the lien. That remained as before, and when the lienor chose, for its own benefit but without bad faith, to enter into an agreement with its debtor to adjourn the trial for a definite time pending consummation of a settlement, it merely exercised rights which belonged to it and which it never abandoned. The surety's risk and its liability are not increased by exercise of a right by a creditor which the parties must have understood the creditor retained. Concededly, a judgment has been recovered in an action brought to foreclose a lien, as stipulated in the bond. There was no stipulation in the bond which expressly or by implication restricted the plaintiff in its control of the foreclosure action. The plaintiff has proceeded in manner permitted by law.
Judgment should be reversed.
CRANE, Ch. J., O'BRIEN, CROUCH and LOUGHRAN, JJ., concur with FINCH, J.; LEHMAN, J., concurs in separate opinion, in which all concur; HUBBS, J., not sitting.
Judgment accordingly. *Page 181