Also known as: Restatement (Third) · Restatement Third · ALI Third Restatement · Third Restatement of Torts
Written by attorneys · grounded in primary & secondary sources — see below
A compilation of common-law principles governing transfers of mortgaged real estate. The compilation treats the original mortgagor as a secondary obligor after a transfer with assumption and supplies rules for exoneration, subrogation, and discharge of the transferor by express release or suretyship defenses.
Timothy Tang sold his mortgaged factory to TechVista Solutions. The deed recited that the buyer took subject to the mortgage but the mortgagee later sent Tang a signed letter releasing him from all personal liability on the note. When the buyer later defaulted, the mortgagee sued only the buyer. The release satisfied the requirement for discharge of the original transferor.
Timothy Tang sold his mortgaged factory to TechVista Solutions with assumption of the debt. After the buyer defaulted, Tang paid the mortgagee and sought exoneration. The court ordered the buyer to pay the mortgagee directly, treating Tang as secondary obligor under the Restatement rules on assumption transfers.
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Timothy Tang sold his mortgaged factory to TechVista Solutions with assumption of the debt. The mortgagee later modified the note without Tang's consent. Tang invoked suretyship defenses to obtain discharge from personal liability under the Restatement provisions on transferor protection.
Timothy Tang sold his mortgaged factory to TechVista Solutions with assumption of the debt. When the buyer threatened waste that impaired the security, Tang obtained an order compelling performance to protect his secondary-obligor position under the Restatement exoneration rules.
The transferor is discharged by an express release from the mortgagee or by operation of suretyship defenses when the mortgagee materially modifies the obligation without consent. The release must be express. Mere transfer or assumption by the buyer does not automatically release the original obligor.
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Yes. The mortgage continues to encumber the real estate in the hands of the transferee regardless of whether the transferee assumed personal liability. The mortgagee may foreclose the lien even if the original borrower received no release.
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The transferor may compel the transferee to perform the assumed obligation through a direct action for exoneration. The court may order the transferee to pay the mortgagee directly or enter a money judgment that the transferor must pass through to the mortgagee.
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The transferor becomes a secondary obligor and the transferee the principal obligor under suretyship principles. This status gives the transferor rights to exoneration, reimbursement, and subrogation if the transferee defaults or impairs the security.
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…2010, in anticipation of trial, Omega Flex filed a motion in limine requesting the application of Sections 1 and 2 of the Third Restatement of Torts to the Tinchers’ strict liability claim. Omega Flex also proposed jury instructions and findings of fact consistent with the provisions of the Third Restatement. The Tinchers opposed Omega…