11 A.2d 240 | N.J. | 1940
The precise question in this case is whether a law court has jurisdiction to entertain a suit by a plaintiff-mortgagee against an assuming grantee of plaintiff's mortgagor for a deficiency after foreclosure sale. It will be helpful to state the pertinent facts briefly as taken from the pleadings.
The complaint alleges that on June 8th, 1926, Kelly, one of the defendants (the mortgagor), gave the usual bond and a mortgage to secure the payment of $8,000 on June 8th, 1927, with interest payable semi-annually. Kelly conveyed the mortgaged premises to Emily Corby, the other defendant (appellant here), who assumed the mortgage and promised to pay it. The mortgage was foreclosed and, after final decree fixing the amount of the debt, the lands and premises were sold. The sum realized from the sale was insufficient to clear the debt. The sale was confirmed. The deficiency amounted to $2,965.84.
The agreement between Kelly, the grantor, and Corby, the assuming grantee, is pleaded in detail. The allegation is that therein it was provided that Emily Corby took "the property subject to and assuming a first mortgage," in the amount of $8,000 and that subsequently Kelly conveyed the premises to Mrs. Corby and that in making payment to Kelly the said Emily Corby "deducted from the purchase price the sum of $8,000" being the amount of the mortgage and "as a matter of law assumed payment thereof and is under a legal duty to pay the same as part of the consideration in said deed expressed."
On motion, the answer filed for Mrs. Corby was challenged. The learned trial judge struck out the answer and judgment for the amount of the deficiency was entered against her. The plaintiff's affidavits in support of the motion to strike out the answer had annexed to them the contract of sale. No answering affidavit was presented by the defendant. *251
The question that is here argued is concerned with the jurisdiction of the law court to entertain the suit. The appellant claims a want of jurisdiction. That question was not raised in the court below. It may be raised here. Jurisdiction goes to the source of the court's authority and if there was none the judgment is a nullity.
There are two schools of thought on the question before us. One holds that where an assuming grantee makes a promise direct to his grantor (the mortgagor) that he will pay the debt, the mortgagee is a party beneficially interested and is entitled to sue the promising grantee at law in his own name as though the grantee made the promise to him direct. This is upon the theory that the liability arises directly out of contract and not on the equitable doctrine of subrogation. In equity the covenant of the assuming grantee is treated as one for the indemnification of the mortgagor.
The other view arises out of an exclusively equitable conception of the relationship of the parties and the reasoning proceeds upon the theory that the assuming grantee's liability to the mortgagee arises by the mechanics of subrogation which entitled the mortgagee (since the mortgagor becomes surety under these circumstances) to all the security which the mortgagor has out of the assumption of the debt by the grantee, and thus equity entitles the mortgagee to recover on the agreement between the mortgagor and the grantee.
The first view adheres to what Professor Pomeroy calls an American doctrine. Our state has been classed by the textwriters as an adherent to the second school of thought. (See Pom. Eq.Jur. (4th ed.) §§ 1206, 1207, and notes under each section.)
We have found no case, and counsel for the parties here have pointed to none, where our court of last resort has passed on this precise question. True, there are statements in some of the cases to which attention will be called which indicate that the suit for deficiency, after foreclosure sale, by a mortgagee against an assuming grantee does not lie: or perhaps it is more accurate to say that the cases indicate that the mortgagee's remedy for deficiency against an assuming grantee is equitable in its nature and that equity is the exclusive *252 forum if the mortgagee would be made whole. We do not, however, consider these cases controlling of the issue before us since the statements are, in the main, dicta; and indeed not a few of the authorities on which appellant relies seems to be in accord with the view which we entertain, that is, that jurisdiction exists at law.
The continued adherence in this state to what we have referred to as the second school of thought results, we believe, from two scholarly opinions in the same case, one by Vice-Chancellor Van Fleet in Crowell v. Currier,
The Crowell case was decided in 1876, so we see that at the time a third party beneficiary might sue on a simple contract though the consideration did not move from such third party. But the rule was otherwise with regard to sealed contracts.
The change in our statute designated under the revision —R.S. 2:26-3.6 — was first made in 1898 to include sealed as well as simple contracts. (Chapter 207, Pamph. L. 1898, ch. 247; chapter 251, Pamph. L. 1902, ch. 247; paragraph 28,Pamph. L. 1903; Comp. Stat., p. 4059, § 28.) Thus it will be perceived that since 1898 the statute permitted a person for whose benefit a contract was made, either simple or sealed, tosue thereon in any court; it seems apparent that the common law rule was extended to include sealed as well as simple contracts. The 1898 statute was entitled "An act to regulate the practice of courts of law" and there is much significance in the title. Our Practice act of 1903 (page 541, section 28) is, in substance, identical with the present statute (2:26-3.6).
In Styles v. Long,
It serves no good purpose to pursue this inquiry further. Certainly a grantee who assumes a mortgage debt and promises to pay it makes a contract with the grantor for the benefit of the mortgagee. We cannot, at the moment, imagine a contract, made more for the benefit of a third party. Parenthetically, we observe, although the point is not raised, that this suit is based upon the terms of the contract of sale, not *255
on the deed of conveyance. It is clear that the contract merges into the deed but only in so far as the execution of the deed satisfies and gives effect to the terms of the contract. Collateral agreements therein do not merge and may be treated as separate covenants upon which suit may be brought. So here the assumption agreement is such. See Dieckman v. Walser,
Our conclusion is that the cases upon which appellant relies for a reversal of this judgment were grounded on the state of the law prior to the 1898 amendment, supra, but that since the passage of that statute a court of law has jurisdiction to entertain a claim such as the plaintiff here presents.
The judgment will therefore be affirmed.