Hamlin v. Klein

Headnote

PPINCIPAL AMD SUEETY—DISCHARGE OT SURETY.

Sureties on a bond secured by mortgage are not discharged by a release of the mortgage - which release is afterwards rei aside on the ground that it was secured by fraudulent representations.

Appeal from special term, Monroe county.

Action by Frank II. Hand in and another, as trustees, against Frederick Klein and others, to set aside a release of certain lands from the lien of a mortgage held by plaintiff as assignees. There was a judgment in favor of plaintiffs, and defendants Frederick Klein and Simon S. Yorreuter appeal.

This action was brought by the plaintiffs, who are the holders, by assignment, of a certain mortgage described in the complaint, to vacate a release of lands from the lien of their mortgage, and to' restore such lien as to the lands described upon the ground that the plaintiffs were induced to execute such release by reason of the fraudulent representations of the mortgagor. The mortgage in question was made by the Jennings Park Homestead Association to the defendant Frederick Klein, and was intended originally as security for the payment of the sum of $11,500 and interest. The .mortgage covered a tract of land in the eastern part of the city of Rochester, which had been plotted for city lots, and it contained, among other provisions,-the following: “The party of the first part may pay thereon at any time any sum not less than $200, to be applied on the principal thereof,” and “the party of the second part agrees to release from the lien of the mortgage * * each and every lot of said tract, according to a map thereof, on payment of the assessed valuation of the said lots and all taxes and interest and insurance on said lots as fixed by said association.” The premises covered by the mortgage were subdivided into forty-six city lots and a map thereof was filed in the Monroe county clerk’s office, but the same did not show the valuation of each of the lots, as assessed by the association. The mortgage, together with the bond accompanying the same, ultimately came into the hands of these plaintiffs by mesne assignments, the defendant Vorreuter being one of the parties through whom the same were assigned and transferred. At the time the defendant Klein assigned such bond and mortgage, he accompanied the same with a personal guaranty of their payment, which guaranty passed by assignment with the bond and mortgage to these plaintiffs, and both the defendants Klein and Vorreuter executed a mortgage upon certain other property belonging •to them individually, as collateral security for the amount unpaid upon the mortgage in suit, which mortgages, together with the individual bonds of the mortgagors, also came into the hands of the plaintiffs, and are now held by them. At the time the plaintiffs became the owners of the original bond and mortgage there was unpaid thereon $7,825 of principal and some accrued interest, ¡and no part of the mortgage premises had then been released. On the 11th day of February following, $1,050 of principal was paid upon the mortgage, and six of the lots covered thereby were released from the lien thereof. On the 18th of April, 1893, the treasurer of the Jennings Park Homestead Association paid to the ‘'plaintiffs the further sum of $3,075 of principal and $275 interest, and at the time of making such payments asked for

and received from the plaintiffs a release of 30 additional lots. At the time of making such payments it is alleged that the treasurer stated to the plaintiffs that the amount paid entitled the mortgagors to a release of that number of lots, aiid that all taxes and interest due on the same, as well as-the assessed valuation thereof, had been paid to the associaation, and by the association to the plaintiffs; that, relying upon the truth of such statement, and believing that the sum required to be paid as a condition of such release had been fully paid, the plaintiffs executed and delivered their release to the mortgagor; but that, as a matter of fact, five of ■ the lots embraced in the release were not entitled, under the terms of the mortgage, to be discharged from the lien thereof, by reason of the fact that their assessed valuation,, amounting to $1,295, had not been paid to the association by the owners, nor by the association to the plaintiffs. At the time of the execution and delivery of the release the plaintiffs had no knowledge of the assessed valuation of the particular lots, nor of the amount which had been actually paid upon the different lots to the association as the same did not appear in the mortgage nor upon the map held by them. Upon learning, as they subsequently did, that the five lots in question had been improperly released from the lien of their mortgage, the plaintiffs brought this action to vacate such release, so far as it related to these particular lots, and to have the lien of their mortgage restored to the same.