Also known as: Restatement (Third) · Restatement Third · ALI Third Restatement · Third Restatement of Torts
Written by attorneys — see sources 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.
Around 2:30 a.m. on June 20, 2007, neighbors reported a fire that had erupted at the home of the Tinchers in Downingtown, Pennsylvania. Investigators concluded that a lightning strike near the Tinchers’ home caused a small puncture in the corrugated stainless steel tubing transporting natural gas to a fireplace. The CSST was part of the TracPipe System manufactured and sold by Omega Flex. The resulting fire burned for over an hour and caused significant damage to the home and belongings. Following the fire, the Tinchers reported the incident to their insurer, United Services Automobile Association. USAA compensated the Tinchers for their loss up to the limit of their policy and received an assignment of liability claims. The Tinchers suffered an additional out-of-pocket loss because a portion of their claimed loss exceeded the limits of the USAA policy. In January 2008, the Tinchers filed a complaint against Omega Flex in the Chester County Court of Common Pleas. They asserted claims premised upon theories of strict liability, negligence, and breach of warranty, with the strict liability claim based on Section 402A of the Second Restatement. The case proceeded to a jury trial in October 2010 before Judge Ronald C. Nagle. The Tinchers offered expert testimony that the CSST walls were only one-hundredth of an inch thick and therefore inherently defective because lightning-generated currents were highly likely to perforate them. Omega Flex presented its own experts who testified that the TracPipe System met all applicable industry standards. They also stated that the lightning strike lacked sufficient energy to cause the puncture and that an attempted bonding clamp found disconnected after the fire may have prevented the incident if properly installed. After the close of evidence, the trial court denied Omega Flex’s motions for nonsuit and directed verdict. On October 20, 2010, the jury returned a verdict in favor of the Tinchers on the strict liability claim. The jury awarded compensatory damages totaling $958,895.85 plus delay damages. The jury found for Omega Flex on the negligence claim. Omega Flex filed post-trial motions that the trial court denied, leading to entry of judgment. The Superior Court affirmed the judgment in September 2012. The Supreme Court granted Omega Flex’s petition for allowance of appeal limited to the question of whether to replace the strict liability analysis of the Second Restatement with that of the Third Restatement.
View caseTimothy 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.
Nancy Denny was severely injured when the Ford Bronco II that she was driving rolled over on June 9, 1986. The rollover occurred after Denny slammed on her brakes to avoid a deer that had walked directly into the vehicle's path. The Bronco II was a downsized small utility vehicle designed for off-road use on unpaved and rugged terrain. Ford marketed the vehicle as suitable for commuting, suburban and city driving, and family use in snow and ice. Denny and her spouse sued Ford Motor Co. asserting claims for negligence, strict products liability and breach of implied warranty of merchantability under UCC 2-314(2)(c) and 2-318. The case went to trial in the District Court for the Northern District of New York in October of 1992. Plaintiffs introduced evidence that the Bronco II had a high center of gravity, narrow track width and short wheel base that made it prone to rollover on paved roads. Ford introduced evidence that those design features were necessary to the vehicle's off-road capabilities and that it had not been designed primarily as a passenger car. The jury found that the Bronco II was not defective under the strict products liability claim but that Ford had breached the implied warranty of merchantability and that the breach proximately caused Nancy Denny's injuries. Following apportionment the plaintiff was awarded judgment in the amount of $1.2 million. Ford moved for a new trial under Federal Rule of Civil Procedure 59(a) arguing that the verdicts were irreconcilable. The trial court rejected the motion. On appeal the Second Circuit certified three questions of New York law to this Court.
View caseTimothy 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 University of Texas Southwestern Medical Center, a teaching hospital affiliated with the University of Texas, hired Naiel Nassar, a physician of Middle Eastern descent, first as a medical resident in 2001 and later as an assistant professor in the Department of Internal Medicine in 2006. Nassar's direct supervisor was Dr. Michael Levine, the Chief of Infectious Disease Medicine, and he also worked with Dr. Brian Becherer, the Medical Director of the hospital's employee health clinic. In 2007 and 2008, Nassar complained to his supervisors that he was being subjected to discrimination and harassment by Levine on the basis of his religion and ethnic heritage. In July 2008, Nassar was offered and accepted a position as a full-time faculty member in the Department of Internal Medicine. In August 2008, Nassar resigned from his faculty position in a letter stating that the primary reason for his departure was the hostile work environment created by Levine's harassment. After Nassar resigned, Becherer sent a letter to the state medical board reporting that Nassar had resigned while under investigation for professional misconduct involving alleged improper billing practices. Nassar filed suit in the United States District Court for the Northern District of Texas alleging two claims under Title VII: status-based discrimination on the basis of his race, religion, and national origin, and retaliation for complaining about Levine's conduct. The case proceeded to trial before a jury. The District Court instructed the jury that Nassar could prevail on his retaliation claim if he showed that retaliation was a motivating factor in the hospital's decision to send the letter to the medical board. The jury found for Nassar on both claims and awarded him $3,000 in backpay and $400,000 in compensatory damages, which the District Court reduced to $300,000 pursuant to the statutory cap. The hospital appealed to the Fifth Circuit, which affirmed the retaliation verdict on the theory that the motivating-factor standard applied. The Supreme Court granted certiorari.
View caseThe 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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