[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 124 The question here is whether or not the relation of the defendant Link to the obligation to pay the mortgage debt or any deficiency which would remain after application to it of the proceeds of sale, was such as to support the charge of liability made and relief sought against him in this action. The conveyance of the premises by the Sullys to Kellogg was accompanied by no undertaking on his part to pay the mortgage made by them to the plaintiff. Afterwards and while he held the title, his liability was created by his bond given to the plaintiff, and by its terms the land was made the primary fund, and his personal liability *Page 125 was dependent upon and for such deficiency. It is for that reason urged that Kellogg never undertook to pay the mortgage debt, and as the consequence no such obligation was assumed by the defendant. So far as the obligation in such case is dependent upon the doctrine of equitable subrogation, the liability of the grantor is essential to the creation of that of the grantee by the terms of the assumption on his part in the granting instrument. (Trotter v. Hughes, 12 N.Y. 74; Vrooman v.Turner, 69 id. 280.) And it is also essential that the deed be effectual to convey the title to the grantee else it may be said that the relation of principal and surety between the parties to the deed does not arise, because the grantee takes nothing from his grantor in support of the assumption for that purpose or which as between them places such parties in that relation to the debt. (Garnsey v. Rogers, 47 N.Y. 233; Pardee v. Treat, 82 id. 385; Root v. Wright, 84 id. 72; Dunning v.Leavitt, 85 id. 30.)
The deed from Kellogg to the defendant conveyed the title, and the latter by its terms, ample for the purpose, assumed the payment of the mortgage. This may be treated as indemnity to his grantor against any liability he had before then incurred in that respect. And it is not important for this purpose that the obligation of Kellogg arose out of an assumption subsequent to, instead of at the time he took the title which he conveyed to the defendant. His liability was to pay so much of the mortgage debt as should constitute the deficiency. And for the purpose of charging him to that extent, he may properly have been made a party defendant in the foreclosure action. (Luce v. Hinds, Clarke, 453; Curtis v. Tyler, 9 Paige, 432.)
Although this may be so as against Kellogg, it is urged that the undertaking of the defendant is not available to the plaintiff because (1) The grantor of the defendant was not the principal debtor, and (2) It does not appear that the defendant's undertaking in the deed was made or intended for the benefit of the plaintiff. The latter proposition, which will have further consideration, has no necessary application *Page 126 to the subject of equitable subrogation, through which the creditor takes the benefit of securities received by the person having, in respect to the debt, the relation of surety to him from whom they are taken. Then, for the purposes of the remedy, they are treated as trusts for the further security of the debt, and the relief as to them in equity is by way of the execution of such trusts in behalf of the creditor. (Vail v. Foster,4 N.Y. 312.) The defendant's grantor, holding the title to the property which was charged with the lien of the mortgage, added to it his personal liability for the deficiency. This was furnished by his bond to the plaintiff, and so far as appears by the findings of the referee and indicated by his refusal to find to the contrary, the bond was given pursuant to an understanding exclusively between him and the plaintiff and for the benefit of the latter and without any undertaking to or request of the Sullys to do so. It was in practical effect an obligation of Kellogg that the entire mortgage debt should be paid, treating the premises so held by him and covered by the mortgage as the primary fund for the purpose.
When the defendant took from Kellogg the conveyance of the property and assumed the payment of the mortgage debt, for which he reserved an equivalent portion of the consideration, his obligation as between him and his grantor was primary so far as the latter was personally liable for it. This as it was may be regarded as indemnity to him for the obligation he had voluntarily assumed in respect to the debt, and to that extent as between them they had the relation of principal and surety, and for the purpose of relief founded upon the doctrine of equitable subrogation they may be so treated by the plaintiff. (Halsey v.Reed, 9 Paige, 446.) And within that principle the defendant was chargeable with the deficiency and for such purpose was properly made a party defendant in this action.
The action as against the defendant may, we think, be maintained on the broader ground that his promise was made to Kellogg for the benefit of the plaintiff, and had the requisite consideration for its support. There was no qualification of *Page 127 the liability assumed by him, making it dependent upon any condition. His grantor placed in his hands a fund treated equal to the amount of the mortgage debt, and upon that consideration the assumption appearing by the terms of the deed was made, and by it the defendant agreed to pay the mortgage "held and owned" by the plaintiff. This appears to have been, and it was a promise made by the defendant to Kellogg for the benefit of the plaintiff. It was made upon a consideration by which he was equipped with a fund for the purpose, and its performance would discharge his grantor from a personal obligation assumed by him to the plaintiff. This would seem to bring the defendant's undertaking or promise thus made within the principle requisite to the support of the liability of the defendant to the plaintiff. (Lawrence v. Fox, 20 N.Y. 268; Burr v. Beers, 24 id. 178; Thorp v. Keokuk Coal Co., 48 id. 253; Schley v.Fryer, 100 id. 71.)
It would have been otherwise if the title to the land had not passed to the defendant. But as it did the obligation of the grantor in respect to the mortgage debt as between them became that of the defendant, his grantee. (Pardee v. Treat, 82 N.Y. 385. )
The suggestion that the defendant did not intend that his covenant should inure to the benefit of the plaintiff, because when made he was not advised of the bond of Kellogg to the plaintiff, may be met by the fact that his undertaking was to pay the mortgage of which the plaintiff was represented as the holder and owner, and it was broad enough to embrace the entire amount, in the event the liability of his grantor had been such as to make the covenant essentially necessary for that purpose.
The conclusion is that defendant was chargeable in the action for any deficiency that might arise from the foreclosure and sale.
The appeal to this court so far as it was from the judgment entered on the decision of the General Term was properly taken. In foreclosure actions the payment of a deficiency that may arise is awarded by the judgment entered prior to the *Page 128 sale and by which it is directed. The judgment entered upon the report of the referee in the present case was not an interlocutory but a final adjudication for the purposes of the question raised here in that respect. (Code, §§ 1626, 1627;Morris v. Morange, 38 N.Y. 172.) And the question of liability for deficiency must be determined by the judgment of foreclosure and sale. The objection raised to the appeal is, therefore, not well taken. The judgment in favor of the defendant Link against the plaintiff should be reversed and a new trial granted of the issue raised by his answer, costs to abide the event.
All concur, except LANDON, J., not sitting.
Judgment reversed.