Higgins v. Evans

87 S.W. 973, 188 Mo. 627, 1905 Mo. LEXIS 52

• Court: Supreme Court of Missouri
• Decided: May 24, 1905
• Status: Published

Opinion

YALLIANT, J.

-By a deed poll the plaintiff conveyed to the defendant certain real estate in St. Louis which was encumbered with a mortgage for $10,000.00, which deed contained the following clause: “he (the grantor) will warrant and defend except as to a certain deed of trust dated May 29th, 1893, recorded in book 1167, page 95, made to secure $10,000; said Daniel Evans assumes the payment of said $10,000 and interest thereon from February 8, 1897, and taxes for the year 1897. ’ ’ The plaintiff, the grantor in the deed, having, at the end of a lawsuit against him, been compelled to pay the balance remaining due on the mortgage debt after foreclosure sale, amounting to $4,610.85', brings this suit against his grantee in the deed poll, the defendant, based on the clause of assumption of the debt above quoted, for the amount last named and interest.

The facts are not disputed. On May 29, 1893, one Loveland, then owner, executed the deed of trust to secure his note of that date for $10,000, due three years after date, with interest notes, all payable to B. F. Hobart. Afterwards Loveland sold the property to Mrs. Hobart subject to the deed of trust, which she assumed to pay. Hobart sold the notes to the St. Louis Trust Company, and subsequently he and his wife sold the land to Mrs. Sweringen subject to the mortgage debt, which she assumed to pay. On April 1, 1896 (sixty days before maturity of the note), the St. Louis Trust Company agreed in writing with Mrs. Sweringen to extend the notes two years, and in consideration of the extension Mrs. Sweringen gave the trust company her individual notes for the interest that would accrue during the extended period, and wrote on the back of the principal note: “St. Louis, April 1st, 1896. In consideration of the extension of this note to mature May 29, fixed, 1898,1 hereby guarantee the payment of this note and all interest thereon, ’ ’ and signed it with her name. On the next day, April 2,1896, Mrs.. Sweringen sold the land to the plaintiff in this case, Higgins, with warranty of title except as to the $10,000 deed of trust, the deed reciting: “the said Thomas C. Higgins assumes the payment of said $10,000 and interest thereon from April 1,1896.” In addition to that recital in the deed to Higgins he executed a bond with personal security to Mrs. Sweringen for $10,000, conditioned that he would pay the mortgage debt. On February 8, 1897, Higgins conveyed the land to Evans, the defendant herein, by deed referring to the deed of trust, giving the book and page of its record, and reciting that ‘ ‘ said Daniel Evans assumes the payment of said $10,000, and the interest thereon from February 8, 1897, and taxes for the year 1897.” In January, 1898, Higgins conveyed the land by deed to one Green and in that deed the mortgage debt was referred to and there was a recital that Green assumed the payment of it.

This was the condition of the case when the mortgage note matured according to the extension, except that Hobart had in the meantime again, become the owner of the original note and of Mrs. Sweringen’s interest notes. Hobart brought suit against Mrs. Sweringen, Higgins, Evans and Green to foreclose the mortgage, and obtained a decree under which the property was sold for less than sufficient to pay the mortgage debt. Hobaut sued Mrs. Sweringen on her guarantee of the mortgage note, and recovered judgment for the amount due, which Mrs. Sweringen paid, less the amount the property brought at the foreclosure sale. Then Mrs. Sweringen sued Higgins and the surety on his bond and recovered judgment for the amount of the bond, $10,000, to be satisfied on payment of the amount of damages assessed which, with interest and costs, amounting to $4,610.85, Higgins, paid, and brings this suit to recover the same of his grantee Evans on his assumption. The plaintiff recovered judgment as prayed, and the, defendant appealed.

I. The point on which appellant chiefly relies is that the contract under which Mrs. Sweringen, in consideration of the extension, guaranteed the payment of the note, was such an alteration of the terms of the original debt as “to release the maker of the note and every privy of the maker — every one who stood in a relation of surety — from his obligation under it.” It is also said in appellant’s brief: “Mrs. Sweringen, for whom the alteration was made, assumed the new debt, and guaranteed its payment, and was alone obligated for it. For this new debt she could obligate her grantee only by special agreement with reference thereto which she did by requiring him to give bond binding himself to pay it. This was the only debt existing when appellant became respondent’s grantee, and no contract whatever was made between them with respect to it.”

The proposition is, the original mortgage debt was wiped out by the contract between Mrs. Sweringen and the trust company, and the latter contract was thereafter the only obligation in existence, and since the recital in the deed to Evans referred- expressly to the original mortgage debt and no other he was not thereby obligated to pay the new debt that Mrs. Sweringen had created by her contract with the trust company.

The principle of law first advanced by the learned counsel is that if the holder of a note for a sufficient consideration makes a contract with the principal debt- or, without the knowledge or consent of the surety, whereby the period for payment is extended beyond that expressed in the note, such contract releases the surety from his liability. That principle is well established. [Harburg v. Kumpf, 151 Mo. 16; Johnson v. Bank, 173 Mo. 171.]

It is also the law that when a grantee accepts a deed conveying land to him encumbered with a mortgage and the deed contains a clause reciting that the grantee assumes the payment of the mortgage debt, if it is a debt that the grantor was under obligation to pay, the grantee thereby becomes as to that debt the principal debtor and the grantor becomes the surety. And when that relation has been established, if the holder-of the mortgage note with notice that the grantee has assumed the debt makes a binding agreement with him without the knowledge and consent of the grantor, to extend the note, the rnle of law first above stated applies to the case and the grantor as surety is released. [Pratt v. Conway, 148 Mo. 291, and cases cited.] And it has been said by this court in such case that: “While the mortgagee may release the mortgagor without discharging the grantee, his release of the grantee, or his valid extension of time to the grantee, without the mortgagor’s consent, would operate to discharge the mortgagor.” [Nelson v. Brown, 140 Mo. 580, l. c. 589-90.]

The liability of the grantee who accepts a deed containing such a recital applies also to successive grantees. “The principles applied between the mortgagee and the grantee of the land assuming the mortgage apply equally after the land has passed to another grantee, or to a series of grantees. A holder of a mortgage may sue a subsequent grantee, or any number of subsequent grantees, provided he can show in each case the elements essential to sustain an action against the first grantee; as, that he has assumed the payment of the mortgage, that his immediate grantor was liable, where such liability is essential,” etc. [20 Am. and Eng. Ency Law (2 Ed.), 1000.] The same law-writer says also that if the grantor is not liable his grantee is not liable and cites in the note an array of authorities to sustain that proposition. [Id. p. 994.] But that question is not in this case because in all the successive grants.in this case each grantor had assumed the payment of the mortgage debt.

But whilst the law is that if the creditor, without the knowledge and consent of the surety, should release the principal debtor, or make a valid agreement'with him to extend the note, the surety would be thereby released, yet the creditor may release the surety, or make a valid agreement with him for further time, without affecting the liability of the principal. [Nelson v. Brown, supra; 27 Am. and Eng. Ency. Law (2 Ed.), 533.]

There is one other feature of the law on this subject to be noted in this connection, that is, that whilst the law implies an agreement on the part of the grantee to pay the mortgage debt from the fact that he accepts a deed reciting that he assumes to do so, yet that is not the only method by which he may become personally liable; he may so bind himself by a collateral agreement. [20 Am. and Eng. Ency. Law (2 Ed.), 990.]

There does not seem to be any difference between the learned counsel as to the legal principles above stated, the difference arises in the attempt to apply the law to the facts of this case.

In the deed from the mortgagor to Mrs. Hobart was the recital that Mrs. Hobart assumed the payment of the note; she thereby became the principal and the mortgagor the surety in the mortgage debt. In the deed from Mrs. Hobart to Mrs. Sweringen was a like recital and the result was that Mrs. Sweringen became the principal and Mrs. Hobart the surety. At the date of the contract of extension between Mrs. Sweringen and the trust company, Mrs. Sweringen was the principal debtor. Conceding that there was a sufficient consideration to support the contract of extension the effect of. it was to release Mrs. Hobart and the mortgagor, for they were then only sureties, but it did not alter Mrs. Sweringen’s attitude towards the mortgage note; she was still bound as principal to pay it, only she had an extension of time. After the contract of extension was made Mrs. Sweringen sold to the plaintiff and the plaintiff sold to the defendant; in each deed there was a recital of assumption of the debt and the only description given of the debt assumed was by reference to the mortgage on record; there was nothing on the face of either deed to show that the day of payment had been extended from May 29th, 1896, to May 29, 1898. So that when the defendant took his deed February 8th, 1897, he did not know but that the debt was then past due, and that he then had the right to pay it, clear np his title and stop the running of interest.

If the relation of the defendant to the debt had been that of surety for its payment the agreement for the extension would have released him. But that was not his relation to the debt, his obligation was that of principal debtor, while his predecessors become, as to him, sureties. The case then turns on this question— is the defendant, who for a valuable consideration contracted as principal to pay the mortgage debt as described in the deed of trust, discharged from his obligation by the fact that its day of maturity had without his knowledge been extended?

He was not bound to do anything more than he agreed to do, hut was he released from doing what he did agree to do because of this extension? He was not bound by the contract of extension. He had for a valuable consideration agreed to pay the note according to its tenor and effect. That was the contract between him and his grantor, and that contract, and that only, his grantor could enforce against him. And whatever right the holder of the mortgage note had as against the grantee was under that contract and that alone. Upon the acceptance of the deed containing the clause of assumption the defendant on the one hand became bound to pay the mortgage note according to its tenor and effect, and on the other, he acquired the right to pay it according to its tenor and effect and thus clear up his title and stop the running of interest. If at any time after he had taken his deed he had tendered to the holder of the note payment according to its face the interest thereon would have ceased to run.

In this suit the plaintiff, who was the grantor in the deed, sued on the contract which the defendant, the grantee, made, and asks judgment that the defendant be required to do what he agreed to do and nothing more. There is no demand here for payment of Mrs. Sweringen’s interest notes or the interest on those notes. If as suggested in appellant’s brief the estimate of the balance due on the mortgage note after deducting the amount realized at the foreclosure sale includes interest on those interest notes and is therefore to that extent in excess of what the defendant rightly owes, that is a matter that should have been brought to the attention of the trial court; it is too late to raise it now.

The point is advanced in the brief of the learned counsel that by the contract of extension the original mortgage debt was extinguished and a new contract in which Mrs. Sweringen was first principal was substituted. We do not think that that was the effect of Mrs. Sweringen’s contract. It was an agreement for extension of the original debt and not its extinguishment. We hold that the original mortgage debt was in full force when the defendant assumed to pay it, and that he is not released from his obligation by the agreement of extension.,

II. It is also contended that the alleged contract of defendant is not binding on him because it is within the purview of that clause of the Statute of Frauds which requires all undertakings not to he performed within one year to be in writing signed by the party sought to be charged.

That construction of the statute would overturn- all the law above discussed in reference to the effect of a clause in a deed reciting that the grantee assumed to pay the mortgage debt, or at least it would limit it to debts payable within a year. The obligation of the grantee in such case arises not from his direct promise to pay, but it arises by implication of law out of the fact that he accepted a deed with such a recital. What the law implies is not affected by the Statute of Frauds. [20 Am. and Eng. Ency. Law (2 Ed.), 992.]

We infer from the offer of proof by defendant, as shown in the record, that his real defense in the case failed because by tbe death of tbe agent through whom tbe exchange of lands was effected tbe defendant lost tbe only witness by whom be could prove tbe affirmative defense pleaded in bis answer, but we see no way of relieving against that misfortune.

We discover no error in the'record. Tbe judgment is affirmed.

All concur, except Marshall, J., not sitting.