132 Va. 33 | Va. | 1922
after making the foregoing statement, delivered the following opinion of the court:
‘The equity on which this relief depends is the right of the mortgagor against his vendee, to which he is permitted to succeed by substituting himself in the place of the mortgagor.’ ” (Italics supplied.)
It is just here that the crucial question of law involved in the case before us arises, namely:
This is an open question in Virginia.
This question was not involved and was not decided in Osborne v. Cabell, supra (77 Va. 462), or in Crowell v. St. Barnabas Hospital, supra (27 N. J. Eq. 650), relied on for appellee. In neither of these cases was there any assent of the mortgagee, before the suit was instituted, to the changed relationship of the mortgagor and mortgagee brought about by the agreement between the mortgagor and his grantee by which the latter assumed the mortgage debt and became in equity the principal debtor, as between the mortgagor and grantee. All that is said and held in those
In Willard v. Worsham, supra (76 Va. 392), the question we have under consideration was considered, but left undecided. There was no action of the mortgagee in that case indicating assent to the changed relationship aforesaid before the suit in equity was instituted by the mortgagee against the grantee; but there was, prior to the institution of the suit, a release of the grantee by the mortgagor, which was held to be invalid as a release, because of the insolvency of the mortgagor at. the time of the giving of the release and of its being without consideration to' support it. However, what is said in the opinion of the court delivered by Judge Staples, touching the question we have under consideration, is pertinent, in view of the position urged in argument for appellee, Thacker, that the doctrine aforesaid prevailing in Virginia fixes the rights and remedies of the mortgagee as those possessed by the mortgagor at the time of the institution of the suit, and that conduct of the mortgagee and the grantee in dealing directly with each other, showing the assent of the former to the changed relationship aforesaid, cannot fix the rights of the mortgagee against the grantee prior to suit brought, so that the mortgagor’s subsequént bona fide release of the grantee supported by a valuable consideration can be held to be inoperative.
* * * * * * * * *
“It seems to me there is great force in the doctrine held by the New York courts” (above referred to, which is a different and more extreme doctrine than that referred to in the italicized portion of the- quotation just made), “because the grantee having assumed the payment of the mortgage debt, and retaining the absolute ownership and possession of the mortgaged estate, he, to that extent, diminishes the resources of the mortgage debtor and his means of payment, and he ought not to be permitted to evade a just responsibility by any acquittance or discharge obtained from the mortgage debtor. ‘ Whether he might do so, upon a rescission of the contract out and out and a reconveyance of the estate before the rights of the creditor have been
And when we examine the decisions in the States other than Virginia in which it is held that the action at law will not lie; that the remedy under consideration is in equity alone; and that the relief must be given in equity upon the application of the equitable doctrine aforesaid; we find nothing in them against, and, in some instances, especially in New Jersey, where the holding that the jurisdiction is in equity alone seems to have originated, much in favor of the view that the equitable rights of the mortgagee under that doctrine become fixed and irrevocable the moment the mortgagee assents to the new relationship aforesaid, or certainly when he both assents to it and the grantee has notice that he does so.
We find the following holdings in New Jersey on this subject: In Youngs v. Trustees, 31 N. J. Eq. 290, at pp. 299-300, this is said: “ * * Where the mortgagee has acquired no independent equity arising from the dealings between him and the subsequent grantee of the mortgaged premises, and stands exclusively on the engagement of the grantee with his grantor to assume and pay the mortgage debt, he cannot have the benefit of that contract if it has, before bill filed, been released and discharged in good faith by those who were the parties to it.” And further on, speaking of such a release, it is said that it “will operate as a complete extinguishment, unless, in the meantime, some equitable right in it has arisen in favor of third persons.” (Italics supplied.)
In Crowell v. St. Barnabas Hospital, supra (27 N. J. Eq. at p. 658), this is said: “There may be circumstances in the dealings of the subsequent purchaser with the mortgagee * * which will give the mortgagee an independent equity to have his mortgage paid by the grantee of the mortgaged premises. But where, as in this case, no such
In New Jersey, under its later procedure, there must be a separate suit to foreclose a mortgage, which must precede the suit for deficiency; decree for the deficiency cannot be entered in the foreclosure suit; and in Field v. Thistle, 58 N. J. Eq. 339, at p. 343, 43 Atl. 1072, at p. 1073, this is said: “* * * although the decree for deficiency cannot now be obtained in the foreclosure suit, yet the commencement of a suit for foreclosure, to which the defendants assuming the mortgage are properly made parties as ultimately liable for the deficiency, is, in my judgment, such an acceptance of their obligation and action thereon as the mortgagee is entitled to rely on as fixing his right to enforce the covenant and terminate the right to release by the voluntary act of the parties. * * * Bringing an action to foreclose and claim therein for deficiency is such an adoption of the covenant by the mortgagee as terminates the right to release.”
In Indiana, where the procedure is statutory, but where the remedy in the class of cases we have under consideration is allowed upon the ground of equitable subrogation aforesaid, it is held that where the mortgagee-has notice of the assumption of the debt by a grantee and accepts the grantee as debtor and the grantee has notice of that fact, the obligation of the grantee thereupon becomes irrevocable, so that after such acceptance the mortgagor has no longer any right to release the grantee from the obligation to the mortgagee. Talburt v. Berkshire Life Ins. Co., 80 Ind. 434; Berkshire Life Ins. Co. v. Hutchings, 100 Ind. 496; Carnahan v. Tousey, 93 Ind. 561.
As said in the case last cited, at p. 564: “The acceptance however, is a mental act, consisting simply of the determination of the party to avail himself of the contract made by
And when we consider the decisions in the States which hold that the action in the class of cases we are considering will lie at law—which is the rule generally prevailing—we find that the recovery is permitted on either of two grounds. As stated in 2 Jones on Mortgages (7th ed.), sec. 762, the mortgagee is “allowed to recover in a suit at law against the purchaser who has assumed the debt, upon the ground of equitable subrogation, or that the transaction amounts to a novation.” We see, therefore, that the recovery is al
Gifford v. Corrigan, 117 N. J. 257, 22 N. E. 756, 6 L. R. A. 610, 15 Am. St. Rep. 508, involves a release of the grantee from his liability on the clause in his deed assuming payment of a mortgage debt, the release being executed after the mortgagee knew of the clause in the deed and had assented to it and adopted it as a security for his own benefit; and the question was whether the obligation of the grantee in the deed was revocable thereafter. In the opinion of the.court this is said: “My judgment leads me to answer that question in the negative. Of course it is difficult, if not impossible, to reason about it without recurring to Lawrence v. Fox, 20 N. Y. 268” (which, contrary to earlier decisions in that State, held that the action in such case by the mortgagee against the grantee would lie at law), “and ascertaining the principles upon which its
In Gibson v. Hambleton, 52 Neb. 601, 72 N. W. 1033, this is held: “After notice of such covenant and assent thereto by the mortgagee, his right of action thereon cannot be diverted by a voluntary rescission thereof by the contracting parties.”
In Texas, where the action at law is allowed in the class of cases which we are considering, it is held that the obligation of the grantee to the mortgagee does not become irrevocable without the consent of the mortgagee until the mortgagee has in fact assented to or accepted the promise of the grantee. In Hoeldtke v. Horstman, 61 Tex. Civ. App. 148, 128 S. W. 642, there is an able and instructive opinion on the subject. After an exhaustive consideration of the desions, both in the States allowing the action at law and those on the subject. After an exhaustive consideration of the deci“So far as our investigation has been extended, all of the eases where this question has been involved concede that the promise of the grantee becomes irrevocable when the mortgagee has in some manner acted upon it, with the exception of two—one in California, and the other in New Jersey. Biddell v. Brizzolara, 64 Cal. 354, 30 Pac. 609; Laing’s Ex’rs v. Byrne, 34 N. J. Eq. 52. * * * In those cases where it is held if the mortgagee has in some manner acted upon the promise of the grantee that the liability of the latter becomes fixed, it is not claimed that this action must be such as would create an estoppel against the grantee. It seems to be sufficient if it is such as to evince an acceptance or an adoption of the promise by the mortgagee.” (Italics supplied.)
In Biddell v. Brizzolara, 64 Cal. 354, 30 Pac. 609, and La
It is true also that in 2 Jones on Mortgages, sec. 763, this is said: “Whether the grantor can deprive the mortgagee of the benefit of the covenant made by the grantee who has assumed the payment of the mortgage will in large measure depend upon the ground upon which the mortgagee is allowed to take advantage of such covenant. On the one hand, if this covenant be regarded as an agreement of indemnity against the mortgage debt, which the mortgagee may avail himself of by way of equitable subrogation, the grantor and his purchaser may at any time before the filing a bill to foreclose the mortgage extinguish the liability, as between themselves * * *, and as the contract of indemnity is thus put an end to by the act of the parties to it, there is then no right to which the mortgagee can be subrogated.” (Italics supplied.)
But this, as appears from the authorities cited in the footnote to sustain the text, is but a statement of the general doctrine embodied in the holding in Crowell v. St. Barnabas Hospital and like cases, and, as we have seen from the consideration of these cases above, such statement of the doctrine must be qualified by the further statement made, as aforesaid, in the Crowell v. St. Barnabas Hospital Case, which is, in substance, that the filing of the bill fixes the time when the obligation of the grantee becomes irrevocable only
The case must therefore be reversed, and final decree will be entered in favor of appellant for the deficiency of $1,371.00 principal, left unpaid of the mortgage debt after the foreclosure of the deed of trust, with interest thereon from July 21, 1915, and costs.
Reversed, and final decree.