First Nat. Bank & Trust Co. v. Strong

• Decision Date: 12 December 1930
• Parties: FIRST NAT. BANK & TRUST CO v. STRONG.
• Court: Connecticut Supreme Court

152 A. 575

112 Conn. 412

FIRST NAT. BANK & TRUST CO v. STRONG.

Supreme Court of Errors of Connecticut.

December 12, 1930

Appeal from Superior Court, New Haven County; Alfred E. Baldwin Judge.

Action by the First National Bank & Trust Company against William S Strong on a promissory note. The case was tried to the court. Judgment for the plaintiff, and the defendant appeals.

No error.

On August 1, 1925, the defendant gave to Nettle G. Howshield his note for $10,000, secured by a third mortgage upon property owned by him, which note and mortgage she assigned on August 3, 1925, to the plaintiff. There was a first mortgage of $60,000 upon the property, and a second mortgage of $20,000 held by Louis A. Soldan. On August 1 1929, the plaintiff was informed by Soldan that the first mortgagee was threatening foreclosure of its mortgage. The defendant had transferred the equity of redemption in the property, subject to the mortgages upon it, to Telef Jensen and he in turn had conveyed it subject to the mortgages to Bertha Soldan the wife of the second mortgagee, in whose name it stood on that day, but it does not appear that either of these grantees assumed and agreed to pay the mortgages. The plaintiff had the property appraised by three real estate men who valued it at between $72,212 and $77,000. There was interest due on the first and second mortgages of $2,200 or more, and past-due taxes of $1,800 to $2,000. The plaintiff's mortgage was without value, and on August 31, 1929, it quitclaimed its interest in the property to Bertha Soldan, the owner of the equity of redemption, without notice to, or the knowledge or consent of, the defendant, at the same time taking from Louis A. Soldan, the holder of the second mortgage, the writing which appears in the footnote.^[1]

This action was brought to recover the balance due upon the $10,000 note, and the defendant filed a special defense alleging the release of the third mortgage without his knowledge or consent, and that the plaintiff thereby released and discharged him from liability upon the note.

Andrew D. Dawson, of Waterbury, for appellant.

Arthur W. Chambers, of New Haven, for appellee.

Argued before MALTBIE, HAINES, HINMAN, BANKS, and AVERY, JJ.

BANKS J. (after stating the facts as above).

A mortgagor who has conveyed his equity of redemption has a right to have the mortgaged property applied to the payment of the mortgage debt so far as necessary for his protection against personal liability for the debt secured. 2 Jones on Mortgages (8th Ed.) § 839. The mortgagee is not, however, obliged to tender an assignment of the mortgage security as a condition of recovery upon the note. Barnes v. Upham, 93 Conn. 491, 495, 107 A. 300, 6 A.L.R. 494. The mortgagor may justly complain if his personal liability upon the note is allowed to remain, while the means which he has provided for meeting it has been disposed of. But all that he would be entitled to, if the mortgage had not been released, would be the right to have it assigned to him, upon his payment of the debt, so that he may avail himself of such security as the mortgage affords in obtaining reimbursement. He has no right to insist that his liability is wholly discharged because the mortgagee releases the mortgage which is the security for the debt, unless the security was sufficient to have fully paid the debt. He is discharged only to the extent that he has been injured. Worcester Savings Bank v. Thayer, 136 Mass. 459; Norton v. Henry, 67 Vt. 308, 31 A. 787; 2 Jones on Mortgages (8th Ed.) § 839. It follows that the release of the mortgage by the mortgagee is not a bar to his action to recover upon the note from the mortgagor, but that the latter may, in such action, set off against the amount due on the note whatever damage he has suffered by reason of the loss of the security.

That was the extent of the defendant's rights in this action. He was not harmed by the failure to receive notice of the plaintiff's intention to release the third mortgage. He was entitled in this action to set off against the amount due on his note the value of the security which was lost by the plaintiff's quit-claim deed of its...