Edwards v. Mortgage Securities, Inc.

Action to quiet title. Defendant corporation had judgment and plaintiffs appeal.

The essential and undisputed facts are these: On February 1, 1928, appellants executed a promissory note and deed of trust in favor of respondent for $10,850. The principal of the note was payable three years after date with interest payable quarterly. Respondent was given the option to declare the whole sum of principal and interest immediately due and payable in the event of default in the payment of any instalment of interest. The interest was not paid on June 1, 1928, and on June 7, 1928, respondent recorded a notice of default and election to sell under the trust deed. On June 27, 1928, appellants conveyed the property described in the trust deed to a third party and thereafter it changed hands several times. None of appellants’ successors in interest assumed payment of the indebtedness. On August 13, 1929, respondent, who had taken no steps to effect a sale of the property, recorded a cancellation of its notice of default and election to sell. Appellants had no actual knowledge of any steps or transactions taken or had after they conveyed the property on June 27, 1928. On May 13, 1931, respondent notified appellants that the interest on the note was due; that they were personally liable for any deficiency that might arise in the event of sale, and demanded additional security. Belying upon this representation as to their personal liability, appellants conveyed certain other property to respondent. Subsequently, and after appellants had again defaulted in the payment of interest, said deed of trust was foreclosed by respondent who purchased the property and claimed a deficiency of $5,950.95. On January 4, 1932, appellants made a written demand for a reconveyance of the property given as additional security upon the ground that it had been obtained as the result of the misrepresentation of respondent and that there was no consideration for it. By

In addition to findings covering the foregoing facts, the court found that the representation of respondent that appellants were personally liable for a deficiency was true. Appellants moved to set aside the judgment and have judgment rendered in their favor, but this motion was denied by failure of the court to act upon it within the time required by law.

Appellants argue that the cancellation of the default without their consent, and after their conveyance of the property to a third party, amounted to an extension of time to a principal debtor and that they, as sureties, were thereby released from any liability for a deficiency; that in the absence of such liability there was no consideration for the conveyance of May 13, 1931. The record does not show all the circumstances surrounding the giving of this conveyance and presumably some extension of time was given appellants as the result of it. In any event, no point is made as to the absence of consideration except that mentioned above.

“ Where a conveyance is made of mortgaged property and the vendee does not assume payment of the mortgage debt, the relation of principal and surety springs up between the land and the mortgagor, he being the surety and the land being the principal debtor, and he becomes at once entitled to all the protection which the law gives to sureties. . . . Where there is an extension of time by the creditor to the principal, without the consent of the surety, the latter is released” from further liability. (Braun v. Crew, 183 Cal. 728 [ 192 Pac. 531 ], and cases there cited.)

It must be conceded that if the cancellation of the default by respondent under these circumstances actually amounted to an extension of time not contemplated by the original contract, the appellants would have been released and there would have been no consideration for the conveyance in question. But it does not appear that such an extension was given. By the express terms of the note it did not mature until February 1, 1931. The option given respondent to declare a default earlier because of nonpayment of interest was inserted solely for its benefit. Its election to exercise this right did not preclude it from waiving the

It appears that the cancellation of the default restored the original obligation so that it matured on February 1, 1931. Thereafter additional security was given and foreclosure was further postponed. But the delay occasioned by these voluntary acts of cancellation and postponement did not discharge the surety. It is well settled that mere forbearance, delay or discontinuance of proceedings by the credi

It follows from the foregoing conclusions that at the time respondent made its demand for additional security, appellants were still liable for a deficiency in the event of sale and therefore that the deed was not given without consideration on such account.

Judgment affirmed.

Thompson, J., and Pullen, P. J., concurred.