McKay v. Ward

46 L.R.A. 623, 57 P. 1024, 20 Utah 149, 1899 Utah LEXIS 40

• Court: Utah Supreme Court
• Decided: June 30, 1899
• Status: Published

Opinions

MINER, J.

This was an action to foreclose a mortgage given by defendant Ward and wife, and for a deficiency judgment against Belnap, who took a conveyance of the property, subject to the mortgage, and assumed and agreed to pay it. A deficiency judgment was given against Belnap from which judgment he appeals.

The court found, among other things, that Ward and wife, while owning the premises on the 13th day of August, 1890, gave the notes in question to the plaintiff, which notes were secured by a mortgage on the property in question, due one year after date; that on November 11, 1893, Ward sold and conveyed the mortgaged property by warranty deed to one McDonald, subject to said mortgage; that on November 12, 1891, plaintiff extended the payment of the notes to November 13, 1893, at the request of McDonald, but as the agent for, and upon consideration paid by defendant Ward; that McDonald was also interested in obtaining said extension. The record also shows that McDonald applied to the plaintiff for the extension on behalf of Ward; that McDonald borrowed the money from plaintiff for Ward (and that plaintiff understood that McDonald was the agent all the way through for Ward and Belnap); that said extension was in writing and recorded in the office of the recorder November 12, 1891; that on April 12, 1892, defendant Belnap purchased the property from McDonald and obtained a warranty deed therefor subject to said mortgage, and by written promise contained in the deed, agreed as follows:

“This conveys the premises on which Joseph Belnap now lives, and is given subject to a certain mortgage given to secure two promissory notes, one for one hundred dollars, and one for six hundred dollars, both drawing 12 per cent, interest per annum, made and executed by the aforesaid William H. Ward, and payable to Isaac McKay of Huntsville, which notes or incumbrance, the aforesaid Joseph Belnap by accepting this deed, assumes and agrees to pay.”

The deed was accepted and recorded by Belnap. In April, 1894, Belnap had actual notice of said extension of time for payment and thereafter made payment on said mortgage, and paid both principal and interest on a note for $100, assumed at the same time and in the same deed, and secured by said mortgage; that on November 1, 1896, Belnap acknowledged said mortgage in writing and arranged to pay the same. The testimony was conflicting, but there was evidence tending to sustain the facts found by the court as above stated:

Upon this subject the transcript shows that Isaac McKay testified that his son, at his request, wrote to defendant Belnap in August, 1896, that he desired the mortgage paid; that soon thereafter he received a letter from Mr. Belnap, written on the back of the letter sent him, and signed by Belnap, wherein he wrote “that he would be back the first of November and that he would pay me.” The original letter was burned by his wife, with some other papers, sometime before, through mistake.

Mrs. McKay testified that she saw the letter when it was written, and saw the reply written on the back of the letter and that Belnap wrote and signed the reply; that in the letter he said he would be in about the first of November, and see Mr. McKay and pay him.

Isaac W. McKay, son of the plaintiff, testified to the writing of the letter about October 1896, to Belnap for his father, asking payment of the moi’tgage; that Belnap wrote on the back of the letter and returned it saying that he would be in some time in November and settle with my father.

Joseph Belnap admitted writing a letter, but said he wrote that he would be in about the first of November and see Mr. McKay about the Ward note, and denied writing that he would pay it. Belnap further testified that he was not indebted to McKay on any other account than these two notes — the $100 note and the $600 note, and that he owed McKay no other than that secured to be paid by the mortgage; that he paid the' $100 note and the interest on the $600 note. Belnap also relied upon a letter written to him by McKay wherein his statement is claimed to be corroborated.

The important question is as to the liability of Belnap, McDonald’s grantee, for the deficiency judgment.

Appellant claims that as Ward gave the notes and mortgage to the plaintiff, and afterwards conveyed the mortgaged premises to McDonald, subject to the mortgage, but without assuming it in writing, and the fact that Belnap purchased the mortgaged premises from McDonald, and assumed and agreed to pay the mortgage, would not make him liable to pay the mortgage or upon any deficiency judgment obtained thereon, because McDonald was not personally liable to pay it, and no privity existed between the parties. The case therefore presents the question whether the obligation assumed by one who purchases the mortgaged premises, and agrees for a consideration to pay the mortgage debt, shall be held to be available to the mortgagee or his assignee in all cases, or only in cases where the purchaser’s immediate grantor was personally liable for the payment of the debt.

There is much conflict in the authorities upon the subject. New York, New Jersey, and several other states hold that a grantee who has assumed to pay the mortgage as a part consideration of his purchase is not liable for a deficiency arising upon a foreclosure and sale in case his grantor was not personally liable for the payment of it; while Pennsylvania, Illinois, Nebraska, Wisconsin, Iowa, Ohio, Missouri and Utah, and possibly some other states, hold that a purchaser is liable on his assumption and agreement to pay the mortgage, although the agreement to assume and pay it.be in a deed from a grantor who was under no personal liability to pay the mortgage. In these states it is held that the price of the land is a sufficient consideration for the agreement to pay the mortgage debt, and that where the amount of the mortgage is withheld for the purpose of satisfying the obligation, a vendor may right-fully direct how, when, and to whom the purchase price of property he sells may be paid; that he may rightfully receive it to himself, donate it to public charity, or make such other disposition of it as may best meet his views; that where a promise or contract has been made between two parties for the benefit of a third, action will lie tbereon at the instance of the third party to be benefited, although the promise or contract was made without the knowledge of the third party, and without any consideration moving direct from him; that if the vendee agrees to "pay in accordance with such directions of the vendor, he cannot set up as a defense that his vendor was under no duty to apply and pay the fund in the manner agreed. The following cases support the latter contention: Merriman v. Moore, 90 Pa. St. 78; Dean v. Walker, 107 Ill. 541; 47 Am. Rep. 467; 1 Jones on Mortgages, (5th ed.) 760; Hare v. Murphy, 64 N. W. R. 211; 45 Neb. 809; Marble Sav. Bank v. Messarvey, 101 Ia. 286; Bay v. Williams, 1 N. E. 340; Enos v. Sanger, 96 Wis. 150; Brewer v. Maurer, 38 Ohio St. 543; 43 Am. Rep. 436; Marble Sav. Bank v. Mesarvey, 70 N. W. R. (Ia.) 198; Benson v. Green, 72 N. W. R. 555; Bay v. Williams, 112 Ill. 91; 3 Pom. Eq. Jur. sec. 1207; 1 Beach Mod. Law of Cont. 196 and note; Ross v. Kennison, 38 Ia. 396; Pomeroy on Code Rem. sec. 139; Enos v. Sanger, 70 N. W. R. (Wis.) 1069; Bassett v. Hughes, 43 Wis. 319; Montgomery v. Rief, 15 Utah, 499; Brown v. Markland, 16 Utah, 360; Clark v. Fisk, 9 Utah, 94; Hoff’s Appeal, 12 Harris, 200; Justice v. Tallman, 5 Norris, 147; Heim v. Vogel, 69 Mo. 529.

It sufficiently appears from the whole record that Bel-nap agreed to pay McDonald $1,170 for the land in question, and over and above the amount paid down he assumed and agreed to pay the two notes secured by the mortgage made by Ward to McKay, amounting to $700, and interest, as consideration for the land. When he paid these notes, and not until then had he paid the consideration he had agreed to pay for the property. This agreement was binding upon him and was made for a good and valid consideration. The amount of the mortgage was deducted from the consideration which he had assumed and agreed to pay for the land. That sum he retained in his hands for the express purpose of paying off the incumbrance. He was then living on the land, and his title was good when he made the payments. He actually paid $100 upon the principal and interest of the mortgage he assumed. He accepted the deed with the assumption named therein and knew its provisions. There was no deception practiced upon him.

The doctrine of the liability of a grantee in a deed who assumed and agreed to pay a prior mortgage as part consideration for the purchase price of land sold, although his grantee was not liable to pay said mortgage, rests in several states upon the doctrine that where one person, for a valuable consideration, engages with another to do some act for the benefit of a third person, the latter may maintain an action against the promisor for a breach of the agreement. Enos v. Sanger, 96 Wis. 150; Marble Sav. Bank v. Mesarvey, 101 Ia. 285; Dean v. Walker, 107 Ill. 540.

In the case of Montgomery v. Rief, 15 Utah, 495, the court, speaking through Mr. Justice Bartch, said: “This question has been the subject of much controversy in the courts, and as a result the prevailing doctrine in this country, as shown by the weight of authority, doubtless is that, where a promise or contract has been made between two parties for the benefit of a third, an action will lie thereon at the instance, and in the name of the party to be benefited, although the promise or contract was made without his knowledge and without any consideration moving from him.” Thompson v. Cheesman, 15 Utah, 49; Brown v. Markland, 16 Utah, 360.

While the above cases do not deal directly with a question like the one under consideration, the principle laid down therein is the basis of the doctrine here contended for.

The case of Clark v. Fisk, 9 Utah, 94, was where Stowell sold land to Swan, who executed back a purchase money mortgage thereon. Swan thereafter sold part of the land to Barry, who gave back to Swan a purchase money mortgage thereon, but who did not assume any mortgages made by Swan, or otherwise so far as appears from the record. Barry thereafter sold the property to Fisk, with a clause in the deed that the grantee assumed and agreed to pay the mortgaged indebtedness. Suit was thereafter brought to foreclose the first Swan mortgage to Stowell, which was then held by Clark, and for a deficiency judgment against Fisk thereon, and the court held that Fisk was liable on his assumption in the mortgage, and rendered a deficiency judgment against him. The court, speaking through Mr. Justice Bartch, said in substance (as shown by the head note) that where a vendee has given a mortgage to secure some part of the purchase price, and then the vendee sells the land by a deed wherein the grantee therein assumes and agrees to pay the mortgage, the vendee and mortgagor cannot release his grantee in the deed, so as to affect the rights of the mortgagee, without the mortgagee’s consent. Where a grantee in a deed assumes and agrees to pay a mortgage, his agreement inures to the benefit of the mortgagee and his assigns, and they obtain all the rights of the grantor in the deed as against the grantee.

In this case we do not look elsewhere than to the opinion for the facts upon which the opinion is *based. The court is presumed to have embodied all the material facts as it finds them in the opinion of the court, and on these facts the court renders its decision. It is not to be expected that resort will be had to the files of the trial court for facts or conclusions that should be embraced in the opinion. It will be seen from the statement in the above case, that the principle decided corresponds with the case now under consideration. In that case Swan gave the notes and mortgage sought to be foreclosed, and Barry, Fisk’s grantor, did not assume the prior Swan mortgage, and was not liable thereon, yet the court holds that Fisk, Barry’s grantee, was liable for a deficiency judgment, although Fisk claimed that his promise to pay the mortgage was inserted in the deed without his knowledge, and although Barry had actually released him from the obligation assumed in the deed.

In Marble Sav. Bank v. Mesarvey, 70 N. W. R. (Ia.) 1069, it is held that a covenant by a purchaser of mortgaged premises to pay the mortgage debt, may be enforced by the mortgagee, whether such purchaser’s immediate grantor was personally liable for the debt or not.

In Dean v Walker, 107 Ill. 540, it is held that where a deed for land imposes the obligation upon the grantee to pay and discharge the existing incumbrance upon the land, the grantee’s liability to the holder of the incum-brance rests upon the doctrine that when one person makes an agreement to another for the benefit of a third person, the latter may maintain an action upon it. In such case it is not necessary that there should be any consideration passing from the third person, and it was immaterial whether the granted was personally liable for the debt or not.

In Beeson v. Green, 72 N. W. R. (Ia.) 555, it is held that a grantee of a deed with a clause therein that he assumed the incumbrance, obligated him to pay the mortgage the same as if he signed the deed containing the promise, and parole evidence was inadmissible, in the absence of fraud, to show that the deed was not executed in accordance with the contract.

In Merriman v. Moore, 90 Pa. St. 78, it is held that a grantee in a deed may so contract therein with his grantor as to make himself personally liable to a mortgagee for the amount of the mortgage therein even though the grantor was not liable to pay the mortgage; that the grantee in a deed may so contract therein with his grantor as to make himself personally liable to a mortgagee for the amount of the mortgage thereon, even though the mortgagor was not liable to pay the mortgage; that the grantor had the right to contract with his purchaser as to whom, when, and how the consideration for the land should be paid, and the grantee would be liable on such promise. Bay v. Williams, 112 Ill. 91.

In Enos v. Sanger, 70 N. W. R. (Wis.) 1069, it was held that where a subsequent grantee of mortgaged premises, in the conveyance to him, assumes the mortgage as part of the consideration, his liability rests solely on such consideration and promise, and no other consideration need pass from the mortgagee to the grantee, though his immediate grant^ was not personally liable to the mortgagee.

In Brewer v. Dyer, 7 Cush. 337, the court said: “Upon the principal of law long recognized and clearly established, where one person for a valuable consideration, engages with another to do some act for the benefit of a third, the latter who would enjoy the benefit of the act, may maintain an action for the breach of such agreement. It does not rest upon the ground of any actual or supposed relationship between the parties, as some of the earlier cases seem to indicate, but upon a broad and more satisfactory basis that the law, operating upon the acts of the parties, establishes the privity, and implies the promise on which the action is found.”

In Enos v. Sanger, 70 N. W. R. (Wis.) at page 1070, in speaking-of the above doctrine, the court say: “In most, if not all, jurisdictions where the liability of a grantee to pay a debt secured upon the property conveyed to him, because of his promise in the conveyance, is sustained on the ground stated, the fact of whether the grantor was liable for the debt or not is held immaterial.”

In Brewer v. Maurer, 38 Ohio St. 543, 43 Am. Rep. 436, in discussing this same question the court said: “This question arose in Merriman v. Moore, 90 Pa. St. 78. That was an action, like the present, to recover for a deficiency against a grantee, who held under a deed, subject to a mortgage which the grantee had verbally assumed to pay as part of the purchase money. There, as here, it was insisted that, as the grantor was under no personal obligation to pay the debt, his grantee’s promise to pay the same was not binding, for want of a consideration. The court say, the consideration was the price of the land. It was nothing to the grantee what the grantor did with the purchase money. He might direct how it should be paid. If the vendee agrees to pay it as the vendor directs, the former cannot set up as a defense that his vendor was under no duty to apply it in that way. If this principle be sound, and I see no reason to question it in a case like the. present, then it follows that the plaintiffs in error are liable on their covenant to pay, even though Mary Braundel was not. French, when he sold the land to them, made his conveyance subject to the mortgage, which they agreed to pay, as part of the purchase money. He, for reasons that are obvious, having assumed this debt, and having warranted the title, devoted a portion of the purchase money, equal to the debt, to its discharge. At that time the debt was not all due. The promise was to pay - the purchase money in the way specified in said mortgage. It was a promise for the benefit of all prior grantors, including the mortgagor. No reason can be perceived why, in the furtherance of justice, the plaintiffs in error should not pay the purchase money in the manner they had contracted to pay and thereby relieved the mortgagor, through whom they claim, from his liability. The promise of French to her was therefore a valid contract. The consideration for it was purchase money which she has the right to stipulate for and direct how it should be paid, and which he agreed to pay in the manner stated. Upon her executing the conveyance to him, his promise to her was as binding as if she had been a feme sole. This being so, he was personally bound, and in like manner his grantees became bound to him. ”

In this case it does not appear that the grantor was liable to pay the debt. While the case was decided on another point, the opinion shows that Ohio stands with other states on this question.

In Heim v. Vogel, 69 Mo. 529, where a grantor conveyed to a grantee, a lot covered by a previous mortgage, which the grantor was not liable upon, and the grantee agreed and assumed to pay the mortgage, it was held that his agreement to pay embraced in the deed, rendered him liable to pay the mortgage. The case of Hicks v. Hamilton, 144 Mo. 495, is not in point. In that case there was no consideration for the,promise of the grantee.

There is still- another reason why defendant Belnap is liable for a deficiency judgment, independent of the principle laid down. Mr. Belknap assumed and agreed to pay that mortgage debt in the deed to him, and retained $700 of the purchase price of the land in his hands with which to pay such incumbrance. Showing that was his understanding, he therafter actually paid the $100 note and interest secured by the agreement named in the deed, and thereafter when asked by the holder to pay the mortgage, he wrote to plaintiff agreeing to pay it. Belnap also testified when upon the witness stand that he was indebted to McKay on no other account than those notes, the $100 and the $600 note.

Under such circumstances the appellant should be held liable to pay the debt he had assumed and agreed to pay, irrespective of his liability because of the assumption contained in the deed.

After an examination of all the conflicting authorities, we are of the opinion, as based upon the better reason, that where a grantee, in a conveyance to him, assumes and agrees to pay the debt of a third person as part of the consideration for his purchase, there is no necessity for any consideration to pass from such third person or his debtor to such grantee to support such agreement. A portion of the consideration for the purchase being left in such grantee’s hands, and appropriated by the grantor to the payment of such debt, which debt such grantee agreed to pay in consideration of the conveyance and of such appropriation of the purchase money, he cannot be heard to object to the performance of his contract because his grantor was not liable to such third person; and when Belnap received the deed of the premises in question and therein agreed and promised to assume and pay the mortgage specified in the deed, and retained $700 of the purchase price of the land to pay the mortgage, he became personally liable to pay the same, notwithstanding his grantor was under no obligation and could not be held liable to pay said mortgage. The liability rests upon the consideration and the promise to pay the mortgage.

Under the facts as disclosed the plaintiff was entitled to a deficiency judgment.

Mortgaged Premises — Conveyance of — Assumption Clause in Deed— Grantor not Personally Liable — When Grantee May be Personally Liable to Owner of Mortgage. The grantee of mortgaged premises, who in his deed of conveyance, has merely assumed and agreed to pay the mortgage, and whose immediate grantor is not personally liable for the mortgage debt, cannot, according to the great weight of authority, be held personally liable to the mortgagee or owner of the mortgage, unless it is clearly shown that the grantor intended to confer a benefit upon him; or unless the grantee accepted the deed with full knowledge of an assumption clause therein containing apt words showing that the grantor intended to bestow a benefit upon the mortgagee.

We are also of the opinion that the court committed no error in admitting in evidence the contract between the mortgagee and the grantee’s immediate grantor by which the time for the payment of the mortgage indebtedness was extended. The evidence shows that the extension was for a definite period, and granted at the instance of the grantor, who had purchased the property subject to the mortgage. The parties were bound by the extension.

We are also of the opinion that the action was not barred by the statute of limitations taking into consideration the time covered by the extension.

We find no reversible error in the record. The judgment of the district court is affirmed, with costs.

Baskin, J., concurs. Bartch, C. J., dissenting.