BEFORE WALKER, HAWKINS AND DAN LEE
HAWKINS, JUSTICE, FOR THE COURT:
John E. Hughes Jr., appeals from an order of the Leflore County Circuit Court dismissing Maurice F. Tyler from his obligation as surety on a promissory note held by Hughes.
The issues presented by this appeal are (1) whether Tyler, who was the original maker of the note is entitled to the protections of 75-3-606 Miss. Code Ann.; and (2) whether Hughes by executing a partial release and subordination agreement unreasonably impaired the collateral and thereby released Tyler from his obligation on the note.
We affirm on both issues.
On March 15, 1977, Tyler bought 1,256 acres of land in Leflore County, from Hughes. The Travelers Indemnity
Company made Tyler a loan on the land for $1,000,000, which was secured by a first deed of trust. To secure part of the purchase price, Tyler gave Hughes a promissory note for $100,000 due on or before March 15, 1982. On September 1, 1978, Tyler conveyed the land to Whisenhunt and others thereinafter Whisenhunt), and by the mutual agreement of all parties, Whisenhunt was allowed to assume the Travelers and Hughes loans.
Although the record is not clear on the circumstances surrounding the financial arrangements Whisenhunt made to purchase the property, apparently Whisenhunt assumed the $980,000 mortgage that was outstanding with Travelers, paid off $500,000 of that loan, reducing it to a total of $480,000 and Travelers in turn released 776 acres as security for the loan. Whisenhunt obtained a new loan from Travelers Insurance Company in the amount of $790,000 which consisted of the $500,000 used to pay down on the original loan and an increase of $290,000. As security for this loan, Whisenhunt put up the 776 acres released by Travelers on the original loan plus an additional 15 acres it had acquired.
On September 5, 1978, Hughes executed and delivered a subordination instrument in favor of Travelers which further subordinated his $100,000 promissory note to the two deeds of trust which Travelers held against Whisenhunt.
Hughes agreed to the assumption of the Tyler note by Whisenhunt and from that point on Hughes accepted Whisenhunt as his debtor under the Tyler note. Hughes accepted principal and interest payments from Whisenhunt.
On February 4, 1980, Whisenhunt prepaid the sum of $50,000 on the principal balance of the Tyler note, leaving a principal balance of $50,000 on the note. In exchange of the prepayment of the $50,000 principal, Hughes executed another subordination agreement in favor of the Travelers Insurance Company. This subordination agreement permitted Travelers to cancel the $480,000 loan and make a new loan for $600,000
As further consideration of the prepayment of the $50,000 principal, Hughes executed a partial release to Whisenhunt. In the partial release, Hughes released 776 acres of land from his second mortgage. *fn1
The property that remained after the subordination agreement and partial release to secure the remaining $50,000 principal left on the Hughes note was a second
mortgage to 480 acres of the original Hughes property behind a first mortgage of $600,000 at an interest rate of 11%.
Tyler was not aware of the last subordination agreement and partial release executed by Hughes in favor of Whisenhunt prior to its execution and Tyler did not consent to it.
The only testimony in the record as to the fair market value of the property is the testimony of Hughes that in February, 1980, the land surrounding the property in question was selling for between $1,400 and $1,600 per acre. The parties in their stipulation agreements stipulated that on February 4, 1980, the fair market value of the property was in excess of $1,000 per acre.
The balance of the promissory note became due and payable on March 15, 1981, and is now past due, no amount having been paid to Hughes. Hughes made a demand upon Tyler for payment of the promissory note, but Tyler failed or refused to pay the note.
Whisenhunt defaulted on the payments to Travelers and on April 17, 1982, Travelers foreclosed its deed of trust on the property. No party other than Travelers bid any amount at the foreclosure sale, and Travelers bid in the property for the principal, interest and cost of the sale that was due on its loans. Hughes received no funds from the sale to apply to his note as a second lien holder. Appendix A is an explanation of the transactions which took place in this case and is designed to show the effect Hughes's subordination agreement and partial release of February 4, 1980, had on Tyler's security as a surety for Whisenhunt.
The trial court found that Hughes released Tyler from his obligation to pay the promissory note when he executed the partial release and subordination agreement ...