First Federal Savings and Loan Association of Gary v. Arena
Indiana Court of Appeals
406 N.E.2d 1279 (1980)
In 1965 and 1966, Michael and Grace Arena (plaintiffs) obtained two mortgages on an Indiana property from First Federal Savings and Loan Association of Gary (First Federal) (defendant). The mortgages permitted First Federal to modify the terms with subsequent borrowers. On March 10, 1969, the Arenas sold the property to Sanford G. Richardson, subject to the two mortgages with First Federal. On that day, without the Arenas’ knowledge or consent, Richardson and First Federal modified the mortgage agreements by extending the payment period and increasing the interest rate from 6 percent to 7.25 percent. In 1975, Richardson defaulted on the mortgages. First Federal sued in foreclosure against the Arenas, Richardson, and several lienholders. The Arenas moved for dismissal. The Arenas claimed that any personal liability the Arenas might have had as sureties for Richardson under the mortgage was discharged when First Federal and Richardson agreed to increase the interest rate without the Arenas’ consent. The trial court dismissed the action against the Arenas. First Federal appealed.
Rule of Law
Holding and Reasoning (Chipman, J.)
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