
    Sophie Marchais Lagrave, Appellant, v. Leopold Hellinger, Respondent.
    First Department,
    May 5, 1911.
    Mortgage — conveyance by' mortgagor — assignment by mortgagee of portion of debt — judgment — res adjudicata — when foreclosure bars subsequent action to recover portion of debt assigned.
    Defendant mortgaged lands covenanting to pay $10,000 of the loan within two years and. thereafter conveyed the premises to B. subject to the mortgage, the amount of which was deducted from the purchase price As the defendant failed to pay the $10,000 when due his grantee paid it to the mortgagee which entered into an agreement with the grantee’s . sister assigning to her a $10,000 interest in the mortgage subject to the first lien in favor of the mortgagee, and further agreeing that when the balance of the debt was paid it would assign the bond and mortgage to the grantee’s sister. Thereafter the grantee in his turn conveyed subject to the whole mortgage debt, and later assigned to the plaintiff the sister’s interest in the mortgage which she had assigned to him. As the balance due to the original mortgagee was not paid, it brought a suit of foreclosure making the parties to the present action defendants, neither of whom defended. On a sale in that suit the present defendant — the original mortgagor —with another, bought in the property and a deficiency judgment was taken against him which he thereafter paid. The original mortgagee pursuant to the agreement made with the present defendant’s sister assigned the original mortgage to the present plaintiff who thereupon brought the present action on .the bond to recover the $10,000.' The defendant alleged payment and set out the judgment in the foreclosure as a bar.
    
      Held, that as the conveyance of the mortgagor was made expressly subject to -the mortgage the debt was included therein and formed part of the consideration, so that the land became primarily hable, and as the grantee paid $10,000 of the mortgage debt it was to that extent extinguished so that there could be no recovery for that amount against -the defendant mortgagor.
    
      Held further, that the judgment in the suit of foreclosure was res adjudi-. cata, and a bar to the present action, because the plaintiff having been made a party should have asserted her claims therein.
    The grantee of the mortgagor having himself paid the $10,000, the assignment by the mortgagee to the grantee’s sister was in legal effect an assignment to him.
    Although the bond was not mentioned in the assignment to the grantee’s sister there was in-effect an assignment of $10,000 of the mortgage debt, for a portion of a mortgage cannot be assigned without a corresponding portion of the debt.
    Where a mortgagor conveys with warranty and receives the whole purchase price he remains primarily liable for the debt. But if in the conveyance the amount of the debt be deducted from the purchase price it shows an intention to subject the property to its payment.
    Appeal by the plaintiff, Sophie Marcháis Lagrave, from a ¡judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Bew York on the 7th day of July, 1910, upon the decision of the court rendered after a trial at the Bew York Trial Term, a jury having been waived.
    
      Frederick L. Taylor, for the appellant.
    
      Harold Nathan, for the respondent.
   McLaughlin, J.:'

On .the 25th of August, 1898, the defendant, who was then the owner of certain real estate in the city of Bew York, mortgaged the same to the United States Life Insurance Company to secure the payment of a bond given at the same time in the sum of $90,000, payable in five years. The bond and mortgage contained covenants that the principal sum should be reduced by the payment of $10,000 within two years from their date and that in default thereof the whole amount should become due. A few days later the defendant conveyed the- real estate in question to one Brown, subject to the mortgage,, the amount of which was deducted from the purchase price. When the installment of $10,000 became due it was not paid and the insurance company, by resolution of its board of directors, directed its counsel to commence an action for the collection of the whole mortgage debt. Brown thereupon paid the $10,000, and had the insurance company enter into an agreement with his sister, Mrs. Kingsbury, by which it “ sold, assigned and transferred * * * unto the said party of the second part [Mrs. Kingsbury] * * * an interest in said mortgage to the extent of Ten thousand dollars, which interest shall be second and subject to the first lien of said party of the first part, which interest said party of the first part retains in said mortgage to the extent of said sum of Eighty thousand dollars, it being the intent and agreement of the parties hereto that hereafter, as between the parties hereto the said mortgage for Ninety thousand dollars shall be regarded as if it had been originally made as a mortgage for Eighty thousand dollars to the party of the first part, and thereafter as a mortgage of Ten thousand dollars to the party of the second part, and the sums of money secured by the interest in said mortgage hereby ■ assigned to the said party of the second part, shall at all times be regarded as between the parties hereto, as if the same were a second mortgage.” The agreement further provided that when the insurance company had been fully paid it would “ assign the said bond, together with said mortgage, to the said party of the second part, to the end that the same may be enforced by her, * * * if so desired, * * * and for the balance of such original mortgage indebtedness, to wit, the said sum of Ten thousand dollars, with interest.”

The $10,000 was paid by Brown with his own money, and the agreement of the insurance company, while in form with Mrs. Kingsbury, was in fact with him and for his benefit, and she, the day after it was made, assigned the same to him. Shortly after the agreement was made Brown conveyed the real estate to a third party, subject to the $90,000 'mortgage. He held the assignment from Mrs. Kingsbury until October, 1903, when he assigned it to this plaintiff. A few days after the assignment to the plaintiff the insurance company — the $80,000 not having been paid to it — commenced an action to foreclose, and both of the parties to this action, with others, were made parties defendant. The defendant in this action appeared and demurred to the complaint. This plaintiff did not appear, and after. her time to answer had expired the defendant withdrew his demurrer. The action' was prosecuted to judgment, and resulted in a sale at which this defendant — the maker of the bond and mortgage — and another became the purchasers for an amount slightly less than the amount found due the insurance company. A judgment for deficiency for this amount was taken against this defendant, which he thereafter paid. The insurance company then assigned to this plain-. tiff the original bond, in accordance with the agreement made by it with Mrs. Kingsbury when the ' $10,000 was paid by Brown, and thereupon, this action was. brought upon the bond to recover that amount. The answer, among other defenses, alleged affirmatively payment and the judgment in the. foreclosure action as a bar. At' the conclusion of the trial the complaint was dismissed upon the merits 'and plaintiff appeals.

The assignment to Mrs. Kingsbury was, in legal effect, an assignment to Brown. ■ He testified that he paid the $10,000 — that it was his money — and the court so found. Notwithstanding the fact that the bond, was not mentioned in the assignment by the insurance company to Mrs. Kingsbury, it was, in effect, an assignment of so much of the mortgage debt, and. for the obvious reason that a portion of ■ the mortgage could not be assigned without a corresponding portion of the debt itself. (Merritt v. Bartholick, 36 N. Y. 44; Munoz v. Wilson, 111 id. 295.) When the mortgage was given the mortgagor was the principal debtor and the land merely security, but this relation was modified, when the mortgagor conveyed to Brown. • The land then became the primary source from which the mortgage had to be satisfied. (Tice v. Annin, 2 Johns. Ch. 125; McKinstry v. Curtis, 10 Paige, 503; Howard v. Robbins, 170 N. Y. 498.)

The general rule is that where land is conveyed by the mortgagor the question as to where the primary liability rests depends upon the agreement of the parties to the conveyance. If the mortgagor conveys with warranty and receives the whole purchase price, then he remains primarily liable for the debt (Wadsworth v. Lyon, 93 N. Y. 201); but, on the other hand, if in the conveyance the amount due on the mortgage is déducted from the purchase price, that evidences an intent to subject' the property conveyed to its payment. (Bennett v. Bates, 94 N. Y. 354; Antisdel v. Williamson, 165. id. 372.) The conveyance from the defendant to Brown was made expressly subject to the insurance company’s mortgage. The mortgage debt was included in it and formed a part of the consideration of the conveyance. It was expected Brown would pay that debt because in effect he retained from the purchase price the amount of the incumbrance. If, while holding the title, he paid the mortgage debt, or any part of it, he was doing only what it was expected he vtould do when the conveyance was made and to the extent of the payment the debt was extinguished; in other words, as between Brown and the mortgagor, there could be no liability on the bond while Brown owned the land that was primarily liable.

In Tice v. Annin (supra), the chancellor, in speaking of a mortgagor’s right to subrogation as against the land which he sold subject to a mortgage, said: “If the mortgagee himself * * * sells the equity of redemption by execution at law to satisfy the very debt for which the mortgage was taken, and he then proceeds at law against the mortgagor’s person or other property for the residue of the debt unsatisfied by the sale of the equity, or if the whole debt was satisfied by the sale of the equity, the same consequence must follow. He must, at all events, on being paid, assign over to the mortgagor the bonds and Mortgage to enable him to compel the purchaser of the equity to refund him the debt out of the land charged. If, however, the mortgagee ■ * * * has put it out of his power to assign, by placing the whole debt and security in the hands of the purchaser, a new and greater difficulty arises. To allow the purchaser to go on and compel the mortgagor to pay the mortgage debt to him and then to compel him to assign over the mortgage to the mortgagor so as to enable him to recover the money back again, would be an idle and absurd proceeding. There seems to be no other alternative but to consider the debt as extinguished in the hands of the purchaser. He purchased only the equity of redemption, and of course subject to the mortgage debt, and Ms purchase of that debt was notMng more than an extinguishment of the incumbrance upon his land.” (See, also, Dollar Savings Bank v. Burns, 87 Penn. St. 491; Atherton v. Torrey, 43 Ind. 211; Drury v. Holden, 121 111. 130; Fuller & Co. v. Hunt, 48 Iowa, 163.)

There is also another reason why the complaint was properly dismissed, and that is the judgment in the foreclosure action, which, in my opinion, is a complete bar to the maintenance of this action. Whatever right, if any, this plaintiff had, came, originally, through the assignment of the insurance company. When, therefore, she and the mortgagor were made parties defendant in the foreclosure action she had to there assert whatever claim she had. (Code Civ. Proc. § 1627.) The judgment in that action determined the amount of the mortgage debt and when that judgment was paid and satisfied, it became res adjudicata upon that subject. If the $10,000- now sought to be recovered were not considered in determining how much .was due in the foreclosure action, it was the fault of the present plaintiff and no one else. That judgment is binding upon her. But it is. suggested there was no occasion to litigate, in the foreclosure action, the defendant’s liability for the amount here sought'to be recovered, because that was a debt separate from his liability for the remaining $80,000. I am unable to see any force in the suggestion! If it be true that there was $90,000 due from this defendant at the time the foreclosure action- was commenced, that constituted a single indebtedness-so far as he was concerned, and for which but a single cause of action could be maintained. If no assignment had been made of the $10,000 the msurance company could not have split up its cause of action and maintained an action first to recover $80,000 and then another to recover $10,000. It could not confer upon others what it did not itself have the right to do. (Dickinson v. Tysen, 125 App. Div. 735.)

It follows that the judgment. appealed from is right and should be affirmed, with costs.

Ingraham, P. J., Scott, Miller and Dowling, JJ., concurred.

Judgment affirmed, with costs. _  