This section is from the book "The Law Of Real Property and Other Interests In Land", by Herbert Thorn Dike Tiffany. Also available from Amazon: A Treatise on the Modern Law of Real Property and Other Interests in Land .
Upon the assumption of the mortgage debt by the transferee, he becomes, according to the current of authority, as regards the transferor, the principal debtor, while the transferor becomes a surety merely for its payment.16
4 N. J. Eq. 454; Taintor v. Hem-mingway, 18 Hun (N. Y.) 418; Kearney v. Tanner, 17 Serg. & R. (Pa.) 94, 17 Am. Dec. 648; Latimer v. Latimer, 38 S. C. 379, 16 S. E. 995.
13. Post, Sec. 646.
14. Holland Reformed School Society v. De Lazier, 85 N. J. Eq. 497, 97 Atl. 253.
15. Wilcox v. Campbell, 106 N. Y. 325, 12 N. E. 823; Haas v. Dudley, 30 Ore. 355, 48 Pac. 168.
16. Felker v. Rice, Ark.
, 151 S. W. 162; Boardman v.
Larrabee, 51 Conn. 39; Flagg v. Geltmacher, 98 111. 293; Ellis v. Johnson, 96 Ind. 377; Boice v. Coffeen, 158 Iowa, 705, 138 N. W. 857; George v. Andrews, 60 Md.
26, 45 Am. Rep. 706; Regan v. Williams, 185 Mo. 620, 105 Am. St. Rep. 600, 84 S. W. 959; Mer-riam v. Miles, 54 Neb. 566, 69 Am. St. Rep. 731, 74 N. W. 861; Newark v. Firemen's Ins. Co. v. Wilkinson, 35 N. J. Eq. 160; Calvo v. Davies, 73 N. Y. 211, 29 Am. Rep. 130; Cook v. Berry, 193 Pa. St. 377, 44 Atl. 771; Moore v. Triplets, 96 Va. 603, 70 Am. St. Rep. 882, 32 S. E. 50.
And so a subsequent grantee assuming the debt becomes primarily liable as against his grantor, the grantee of the mortgagor, Ogle-bay v. Todd, 166 Ind. 250, 76 N. E. 238, and as against the mortgagor, Risk v. Hoffman. 69 Ind. 137; Holland Reformed School Society benefit of the mortgage security is lost.22 In a few jurisdictions, on the other hand, the mortgage creditor must have in some way indicated his assent to this relation of principal and surety in order that he may be bound to recognize it in his dealings with the transferee.23 It has been suggested24 that this latter view is proper when the liability of the transferee of the land directly to the mortgage creditor is based on the theory of subrogation, since on that theory there is no legal liability on his part to such creditor, such as is necessary to make him a principal debtor, while if a direct legal liability on the part of the transferee of the land to the mortgagee exists, the former view, that the creditor must recognize the relation of principal and surety, is justified.
The mortgage creditor's riglit of action to enforce the personal liability of the transferor is not affected by the fact that, as between the parties to the transfer, the mortgagor is surety only.17 But he is, according to a number of decisions, bound to recognize this new relation of principal and surety in his dealings with the principal, that is, the transferee, and consequently the transferor is discharged from his personal liability if the mortgage creditor, after knowledge of the transfer and the terms thereof, enters into a contract with the transferee extending the time of payment,18 releasing him from the obligation,19 or otherwise altering the terms thereof.20 And if, in the particular jurisdiction, a creditor is bound to sue the principal at the request of the surety, the transferor may be discharged in so far as the creditor's failure to comply with such a request has resulted in diminishing the security.21 And so, it seems, as regards any act of negligence on the part of the creditor whereby the v. De Lazier, 85 N. J. Eq. 497, 97 Atl. 253.
17. Flagg v. Geitmacher, 98 111. 293; Hazle v. Bondy, 173 111. 302, 50 N. E. 671; Nelson v. Brown, 140 Mo. 580, 62 Am. St. Rep. 755, 41 S. W. 960; Merriam v. Miles, 54 Neb. 566, 69 Am. St. Rep. 731, 74 N. W. 861; Stephany v More, 82 N. J. L. 186, 82 Atl. 731; Poe v. Dixon, 60 Ohio St. 124, 71 Am. St. Rep. 713, 54 N. E. 86; Hull v. Hayward, 13 S. D. 261, 79 Am. St. Rep. 890, 83 N. W. 270.
18. Union Mut. Life Ins. Co. v. Hanford, 143 U. S. 187, 36 L. Ed. 118; Herd v. Tuohy, 133 Cal. 55, 65 Pac. 139; Brosseau v. Lowy, 209 111. 405, 70 N. E. 901; Union Stove & Machine Works v. Caswell, 48 Kan. 689, 16 L. R. A. 85,
29 Pac. 1072; George v. Andrews, 60 Md. 26, 45 Am. Rep. 706; Franklin Sav. Bank v. Cochrane, 182 Mass. 586, 61 L. R. A. 760, 66 N. E. 200; Nelson v. Brown. 140 Mo. 580, 62 Am. St. Rep. 755, 41 S. W. 960; Merriam v. Miles, 54 Neb. 566, 69 Am. St. Rep. 731, 74 N. W. 861; Calvo v. Davis, 73 N. Y. 211, 29 Am. Rep. 130; Paine v. Jones, 76 N. Y. 274; Miller v. Kennedy, 12 S. D. 478, 81 N. W. 906; Bunnell v. Carter, 14 Utah, 100, 46 Pac. 755.
19. Heidahl v. Geiser Mfg. Co., 112 Minn. 319, 140 Am. St. Rep. 493, 127 N. W. 1050.
20. Paine v. Jones, 76 N. Y. 274.
21. Russell v. Weinberg, 4 Abb. N. Cas. 139. Contra, Fish v. Glover, 154 111. 86, 39 N. E. 1081.
In case the transfer of the land is merely subject to the mortgage, without any assumption of the debt, the land in the hands of the transferee is, as regards the mortgagor, the principal debtor, and the mortgagor a surety, merely, and, applying the rule which has moro usually been applied when the transferee assumes the debt,25 the mortgagor's personal liability may properly be regarded as extinguished by reason of an extension of time granted to the transferee, or other change in the obligation,26 or even a failure to foreclose on request.27 But the relation of suretyship in such case extends only to the value of the land at the time, and no dealings between the mortgagee and the transferee can discharge the mortgagor to any greater extent.28
22. Hampe v. Manke, 28 S. D 501, 134 N. W. 60.
23. Shepherd v. May, 115 U. S. 505, 29 L. Ed. 456; Boardman v. Larrabee, 51 Conn. 39; Corbett v. Waterman, 11 Iowa, 87; Iowa, Loan & Trust Co. v. Haller, 119 Iowa, 645, 93 N. W. 636; Brad-street v. Gill, 22 N. M. 202, 160 Pac. 354; Denison University v. Manning, 65 Ohio St. 138, 61 N. E. 706.
24. Editorial note, 13 Columbia Law Rev. 239.
25. Ante, this section, note 18.
26. Travers v. Dorr, 60 Minn. 173, 62 N. W. 269; Bunnell v. Carter, 14 Utah, 100, 46 Pac. 755; Murray v. Marshall, 94 N. Y. 611; Metzger v. Nova Realty Co., 214 N. Y. 26, 107 N. E. 1027. Contra. Chilton v. Brooks, 72 Md. 554, 20 Atl. 125.
27. Osborne v. Heyward, 40 N. Y. App. Div. 78, 57 N. Y. Supp. 542; Gottschalk v. Jungmann, 78 N. Y. App. Div. 171, 79 N. Y. Supp. 551.
Apart from the apparent equity of the rule, as adopted in the majority of the courts which have considered the matter, that the mortgagee, having knowledge of the facts, must act with due regard to the right of the mortgagor to have the debt satisfied out of the property itself, it may be observed that this is the view which best harmonizes with the decisions, elsewhere referred to,29 that if part of the land is subject to a primary liability as regards another part, the mortgage creditor, knowing this, cannot release the part primarily liable without to that extent extinguishing his rights against the other part. If he is bound to recognize the existence of primary and secondary liability as regards different parts of the land, he should be bound to recognize it as regards different persons, or as regards a person and the land. Indeed the primary liability of a part of the land quite usually grows out of the primary liability of a particular person as regards the land transferred,30 and to apply different rules in this regard in the two cases is calculated to cause a very considerable degree of confusion.
When the transfer is not subject to the mortgage, and there is no assumption by the transferee, the mortgagor is primarily liable, and the land secondarily so,31 and this, it seems, must be recognized by the mortgage creditor in his dealings with the mortgagor, at the risk of discharging the land from the the lien.32
28. North End Savings Bank v. Snow, 197 Mass. 339, 83 N. E. 1099; Travers v. Dorr, 60 Minn. 173, 62 N. W. 629; Sime v. Lewis, 112 Minn. 403, 128 N. W. 468; Antisdel v. Williamson, 165 N. Y. 372, 59 N. E. 207.
29. Post, Sec. 625, notes 67, 68, Sec. 644.
30. See Editorial note, 3 Columbia Law Rev. 199.
31. Ante, Sec. 622.
32. See Barnes v. Mott, 64 N. Y. 397, 21 Am. Rep. 625.