This is a bill in equity by the payee on a $25,000 promissory note against the accommodation maker, Lillian G. Homsey (Lillian), wife of the maker, Anton E. Homsey (Anton), to reach and apply her dower interest in certain real estate, formerly owned by Anton, but subsequently taken by the trustee in bankruptcy of Anton's estate.
The master made the following findings of fact. On various occasions from 1953 on, the plaintiff, a garment manufacturer, lent Anton, a stockbroker, substantial sums of money. The note in issue was executed on April 2, 1956, by Anton as maker and Lillian as accommodation maker. Lillian received no consideration for her signature, but merely signed the instrument to aid her husband in his business. She also signed, as collateral for the loan, a mortgage of realty in Falmouth owned by her husband. It is Lillian's dower interest in this property, as well as in certain other real estate, which the plaintiff is seeking to reach and apply. Anton delivered to the plaintiff the note and the mortgage and requested that the plaintiff not record the mortgage. The plaintiff acquiesced and, without Lillian's knowledge, did not record the mortgage. However, upon learning that Anton was in financial difficulty, the plaintiff attempted to record the mortgage on September 7, 1960, but the recording was defective. On December 2, 1960, Anton was adjudicated a bankrupt.
The court entered a final decree adjudging Lillian to be indebted to the plaintiff in the amount of $25,000 plus interest, and ordering her to pay him $34,200. The court further ordered that her interest in Anton's real estate be reached and applied in satisfaction of her debt, that the trustee in bankruptcy pay to the plaintiff all sums held by him belonging to Lillian, and that Lillian, her agents and attorneys pay to the plaintiff all sums held in escrow pending determination of this suit.
We are bound by the facts found in the confirmed report of the master except those which are mutually inconsistent or plainly wrong. Lukas v. Leventhal, 344 Mass. 762. No such error appears here. We proceed to determine whether the final decree is "such as the law requires upon the facts found by the master and proper inferences therefrom." Foot v. Bauman, 333 Mass. 214, 219, and cases cited. New England Overall Co. Inc. v. Woltmann, 343 Mass. 69, 75.
It is well established that when a payee on a note, without the consent of the surety, impairs the collateral given to him as security by the maker, the surety is discharged to the extent that the security is impaired. Durfee v. Kelly, 228 Mass. 571, 573. Atlas Fin. Corp. v. Trocchi, 302 Mass. 477, 482. This rule has been applied in a situation where a payee has impaired the collateral by failing to record a mortgage given to secure the debt. Providence, Fall River & Newport Steamboat Co. v. Massachusetts Bay S.S. Corp. 38 F.2d 674, 676 (D. Mass.).
Prior to the enactment of the N.I.L. an accommodation maker was held to be a surety. Guild v. Butler, 127 Mass. 386, 389. Union Trust Co. v. McGinty, 212 Mass. 205, 206. Even after the passage of the N.I.L. an accommodation maker was held to be a "surety," but only to the extent of preserving in the accommodation maker who pays a note the right of subrogation against the maker. Ricker v.
We recognize the confusion that exists with regard to an accommodation maker under the N.I.L. The drafters of the Uniform Commercial Code also were aware of this confusion and have endeavored to make it clear that "an accommodation party is always a surety"
Decree affirmed with costs.