William Shipman, as Sole Surviving Trustee under the Last Will and Testament of Caleb H. Shipman, Deceased, Respondent, v. Nathaniel Niles, Appellant

William Shipman, as Sole Surviving Trustee under the Last Will and Testament of Caleb H. Shipman, Deceased, Respondent, v. Nathaniel Niles, Appellant. Mortgage—remedies of the mortgagee where a mortgage lorn is gua/ranteed by a third person—action for the deficiency, where the mortgagor was not a party to the foreclosure action in which the mortgaged premises were sold. Where, as additional security for the payment of a loan secured by a bond and mortgage, a third party guarantees, by a separate instrument, the payment of such bond and mortgage, the mortgagees have three remedies: First, they may proceed upon the bond and guaranty alone against the guarantor or the bondsmen and guarantor, and, if the judgment obtained in that action be unsatisfied, foreclose the mortgage for the purpose of having the real estate sold and applied to the satisfaction of the deficiency; second, they may bring an action of foreclosure making both the mortgagor and the guarantor parties, and by asking such relief in the complaint obtain a judgment for any deficiency remaining after the foreclosure sale; or, third, they may foreclose the mortgage as against those in possession of the property and then, with leave of the court, obtained pursuant to section 1628 of the Code of Civil Procedure, bring an action upon the guaranty to recover any deficiency resulting from the foreclosure sale. In the • present case the mortgagor conveyed the property to the guarantor. After such conveyance the mortgagees brought an action to foreclose the mortgage, making both the mortgagor and the guarantor parties. Being unable to make service upon the mortgagor, the latter was, on motion of the mortgagees, stricken out as a party defendant and the suit proceeded to a judgment of foreclosure and sale, no deficiency judgment being asked for. The • sale not realizing enough, to pay the amount of the bond, the mortgagees, after obtaining leave of the court, brought an action against the guarantor upon the guaranty to recover the balance. Held, that the mortgagees were entitled to maintain the action; That the prosecution of the foreclosure action to judgment in the absence of the mortgagor did not operate to release the mortgagor from liability for the . deficiency, ■ and, as a consequence, release the guarantor from liability therefor. Appeal by the defendant, Nathaniel Niles,'from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 10th day.of April, 1902, upon the decision of the court rendered upon the" pleadings after a trial at the New York Trial Term, a jury having been waived. Marston Wiles, for the appellant.. Qha/rles B. Samuels, for the respondent. [MAJORITY — O’Brien, J.:] O’Brien, J.: There having been a judgment ordered for the plaintiff upon the pleadings, the questions presented arise exactly ás they would had the plaintiff interposed a demurrer to the defendant’s answer; and it remains, therefore, to determine whether any defense was pleaded. The action is brought to recover upon an agreement of guaranty executed by the defendant on August 16, 1892, in favor of the plaintiff herein and Henry Shipman, since deceased, trustees under the will of Caleb H. Shipman. It appears that George Moore, for the purpose of procuring a loan, had made and executed on August' 15, 1892, his bond for the sum of $20,000, secured by a mortgage of real estate of which he was the owner, and the defendant, for additional security, gave on the following day his guaranty in terms as follows: “ In consideration of the sum of One dollar to me in hand paid, and other good and valuable consideration to me moving, I do hereby guarantee the payment to the obligees therein named of the within bond and the mortgage therein referred to, according to terms thereof.” Thereafter Moore conveyed to Niles the property in question, subject to the mortgage. Default having been made by Moore, the plaintiffs instituted proceedings to foreclose the mortgage, having first made Moore and Niles parties. Failing, however, to obtain service upon Moore of the summons and complaint, he was, on their motion, stricken out as a party defendant, and the suit proceeded to foreclosure and sale in the absence of Moore, and no deficiency judgment was asked for against him. Upon the sale the property did not realize enough to pay the amount of the bond, and it is for the difference, or the deficiency arising upon such sale, that this suit is brought against the defendant Niles as guarantor. His contention now is that the plaintiffs’ failure to retain Moore as a party defendant and to demand and obtain as against him a deficiency judgment, and their neglect in that action to charge the defendant Niles as guarantor was, in effect, an election to resort alone to. the collateral real estate for the payment of the debt; and that the legal result was that Moore, the principal debtor, was released, and as a consequence the remedy against the defendant as guarantor was lost. Stripped of verbiage, the principle which the defendant invokes and which lies at the basis of the defenses variously pleaded, is that by reason of the facts stated, Moore, who was the principal on the bond and, therefore, the principal debtor, having been released from his obligation, the defendant, who was the mere guarantor or surety, was equally released. If, therefore, it should appear that the plaintiffs did not release Moore, but that he was liable for the deficiency resulting after the sale of the mortgaged premises, then the whole structure which has been built upon this foundation falls. As we take it, apart from foreclosure by advertisement, which is not here involved, the plaintiffs, under the ordinary proceedings to enforce the obligations and conditions contained in the bond and mortgage and guaranty, had three remedies: First, they might have proceeded upon the bond and guaranty alone against the guarantor, or the bondsman and guarantor, and after judgment, if unsatisfied, have foreclosed upon the real estate for the purpose of having it sold and applied to the satisfaction of the debt; second, following the usual course in foreclosure, they might have made Moore a party in a foreclosure action, and after service and judgment and sale of the property, upon asking for such relief in their complaint, could have obtained a deficiency judgment; or, third, they could, as was done in this cáse, have a foreclosure as against those in possession of the property and owning the' equity of redemption for the purpose of having it applied to the payment of the debt, thus leaving the obligation upon the bond upon which a recovery may he had except to the extent of the amount realized on the foreclosure sale in an action commenced by leave of court. . Authority for this latter procedure is to be found in Equitable Life Ins. Society v. Stevens (63 N. Y. 341), wherein it was held that “ Under the provisions of the Revised Statutes (2 R. S. 199, § 153) prohibiting an action at law, unless authorized by the court, to recover a debt secured by a mortgage during the pendency of an action to foreclose the mortgage, or ‘ after a decree rendered thereon,’ the court is not absolutely bound to grant an application for leave to commence an action to recover a deficiency arising upon a sale under a judgment in a foreclosure suit wherein no provision was made for a deficiency, but may, in the exercise of a sound dis^ cretion, grant or refuse it in accordance with the equities of the case. * * * The mere omission to demand judgment for a deficiency does not convert it into a strict foreclosure.” And in McKernan v. Robinson (84 N. Y. 105) it was held that where such an action (upon a guaranty of a mortgage after bill filed to foreclose) has .been commenced without previous authority, the court may by subsequent order mad§nu/nc pro tunc grant permission, and so remove the impediment to the maintenance of the action founded upon the statute. (2 R. S. 191, §§ 153, 154.) So in the more recent case of United States Life Ins. Co. v. Poillon (7 N. Y. Supp. 834) it was held that “ on application for leave to sue for part of a mortgage debt after judgment of foreclosure as required by Code Civil Proc. N. Y. § 1628, the court will, in the exercise of its discretion, consider the equitable rights of defendant which cannot be pleaded by him in the action at law.” Thus it appears that the plaintiff, after the sale in foreclosure, was not entirely without recourse to his bondsman, under section 1628, foi’ the deficiency, although he had not asked for a deficiency judgment. Nor was he, under the procedure followed in such a foreclosure, obliged to give personal notice of the sale to Moore. He had joined in that action the defendant Niles, who at that time was not only the guarantor but also the owner of the property subject to the mortgage, and thus held the equity of redemption. The foreclosure suit, therefore, was properly brought and maintained, and the bondsman was not thereby released from- the claims of the obligee; and it follows that the guarantor also was not released. And as leave was duly obtained by the plaintiff to bring this action against the guarantor, there appears to be no reason why plaintiff may not proceed in this action to recover the amount of the deficiency as against the guarantor Niles. The judgment accordingly is affirmed, with costs. Van Brunt, P. J., Patterson, McLaughlin and Laughlin, JJ., concurred. Judgment affirmed, with costs. 3R. S. 191, § 158.—[Rep.