Parke & Lacy Co. v. White River Lumber Co.

California Supreme Court Jan 10, 1896 No. No. 18280Published

Before: Vanclief

AI Brief

AI-generated · verify before citing

Holding. The court held that a surety's mortgaged property is exonerated from liability for a debt if the underlying contract is materially altered without the surety's consent, but the surety remains liable for distinct, unaltered obligations secured by the same mortgage.

Issues

Whether a material alteration of a contract by the principal parties without the surety's consent discharges the surety's liability.
Whether a surety is estopped by mortgage recitals from asserting that the underlying contract was altered.
Whether a surety is discharged from all obligations when a mortgage secures both an altered contract and a separate, unaltered promissory note.

Disposition. remanded

Quotations verified verbatim against the opinion

“If, therefore, the contract was altered by the parties thereto in any material particular after the execution of Hilton’s mortgage, without his consent, the mortgaged property was thereby exonerated from all liability as security.”

“Where a surety is bound by one bond for the performance by the principal of two distinct things, and the contract is varied as to one of the things to be performed, the surety is discharged as to the matter concerning which the contract has been changed”

Synopsis

Mortgage for Debt of Another—Suretyship—Discharge of Lien— Change of Principal Contract.—When property of any kind is mortgaged or pledged by the owner to answer for the default or miscarriage of another person, such property occupies the position of a surety or guarantor, and anything which will discharge an individual surety or guarantor who is personally liable will, under similar circumstances, ■discharge such property; and the mortgaged property is exonerated from all liability as surety if, after the execution of the mortgage, the principal contract between the debtor and creditor is altered in any material particular without the consent of the mortgagor.

Id.—Recitals in Mortgage—Estoppel—Reference to Lease—Conditional Sale—Alteration of Terms.—A recital in a mortgage executed by a third person to secure payments under a lease which operates in law as a conditional sale, that the principal debtor is justly indebted to the creditor for the full sum agreed to be paid as rent for certain machinery in accordance with the terms of the lease, does not estop the mortgagor from showing that the terms of the lease were afterward altered by the parties, and that no indebtedness ever accrued in accordance with its original terms.

Id.—Note Secured by Mortgage—Foreclosure.—Where the mortgage, in addition to being given as security for the lease, is also given to secure the payment of a promissory note which is distinct from the lease or conditional sale, and which has not been altered in any respect, the mortgage should be foreclosed therefor, though discharged as to the lease by the change of its terms.

Id.—Discharge of Surety in Part.—Where a surety is bound by one bond for the performance by the principal of two distinct things, and the contract is varied as to one of the things to be performed, the surety is discharged as to the matter concerning which the contract has been changed, but is not discharged from that as to which it has not been changed.

Vanclief, C. On June 12, 1889, the respondent, Hilton, executed to appellant a mortgage on real estate to secure payment of a promissory note of the same date made jointly by the White River Lumber Company and W. D. Parsons, for $650 and interest, payable to the order of plaintiff nine months after date; and also to secure the further sum of $3,064, payable to plaintiff according to the terms of a written agreement of same dater attached to and made a part of the mortgage, of which the following is a copy:

“ The Parke & Lacy Company of San Francisco, Cal., lessors, hereby lease unto the White River Lumber Company and Warren D. Parson of Tulare county, Cal., lessees, the following property for the period of nine (9) months, from the 15th day of June, 1889, to wit:

“ One (1) 54 inch x 16 feet horizontal stationary tubular boiler, No. 3,155, with fittings (T. M.- Nagle’s make).

“ One (1) 16 inch x 20 inch Phoenix engine, No. 674, with a Gardner governor.

“ One (1) 11 foot x 16£ inch pulley, made in halves of suitable weight.

[662]“ One (1) No. 3 Valley bucket pump, $nd merchandise described in the list attached hereto.

“ Said property is to be used only at Arbor Vitae, Tulare county, State of California, and said lessees are to pay to said lessors, at San Francisco, for the use of said property the sum of three thousand and sixty-four. ($3,064) dollars, payable us follows: All on the 15th day of March, A. D. 1890.

“Said lessees agree that they will pay the rent at the times and in the manner aforesaid; that they will not, permit said property, nor any part thereof, to be affixed to real estate, nor removal from where it is to be used aforesaid, nor deliver the same to any one, nor suffer it to be taken away by any one, except lessors, nor in any manner transfer, or attempt to transfer, this lease, or any interest therein or in said property, without the-written consent of lessors; that they will keep said property in good condition and repair, and pay all expenses relating to said property hereafter incurred, including transportation and insurance thereof, in the name of lessors, and all damages to said property suffered by lessors. It is further agreed that time is of the essence of this agreement, and that upon the failure of the lessee strictly to keep and perform any of the covenants or provisions hereof by them agreed to be performed, then and thereupon without any notice this, instrument shall be deemed to be canceled and of no. further effect as against lessors, and all right and interest of lessee in or to said property shall cease, and all rent by lessee theretofore paid shall belong to lessors as full payment for the prior use of said property, and lessors shall be entitled to take into their possession all said property.

Parke & Lacy Co. v. White River Lumber Co.

AI Brief

Synopsis

More from California Supreme Court

Related research

AI Brief