155 N.W. 863 | N.D. | 1915
Lead Opinion
(after stating the facts as above). There is a decided conflict in the authorities upon the question which is before us, and some courts hold to the rule that the grantee of mortgaged premises who purchases subject to a mortgage which he assumes and agrees to pay will not be liable for a deficiency arising on a foreclosure and sale, unless his grantor is also liable, legally and equitably, for the payment of the mortgage, and that if there is a break anywhere in the chain of liability, all of the subsequent purchasers are without obligation in so far ás the mortgagee is concerned, and that the promise of the last grantee only operates as an indemnity to his immediate grantor. See dissenting
If we adopt this rule, it is perfectly clear that the trial court erred in rendering judgment for the plaintiff and respondent, and that such judgment should be reversed, for, although it is perfectly clear from the record that in the deed from the Langleys to Finseth, Einseth assumed and agreed to pay the mortgage, and that in the deed from Engel to the Langleys, the Langleys also agreed to pay the mortgage, it is not clear that in the deed from the Woodburys to Engel, made any such agreement or assumption; that the chain was therefore broken, and according to the authorities cited there would be no privity of contract between the mortgagee, McDonald, and the defendant M. B. Finseth. We believe, however, that the cases mentioned are unsound in principle, and prefer to follow the other line of authorities, which appear to us to express the better rule. The cases cited by counsel for appellant, indeed, seem to totally ignore, in their conclusions at any rate, even if not in their reasoning, the well-established rule of law that when one makes a promise to another for the benefit of a third person, such third person can maintain an action upon the promise, even though the consideration does not run directly from him, and even though at the time he knew nothing of the promise to pay him. Hare v. Murphy, 45 Neb. 809, 29 L.R.A. 851, 64 N. W. 211; McKay v. Ward, 20 Utah,
This is certainly the rule which has been announced by this court in construing § 3840, Eev. Codes 1895, which provides that “a contract made expressly for the benefit of a third person may be enforced by him at any time before the- parties thereto rescind it.” In the case of McArthur v. Dryden, 6 N. D. 438, 71 N. W. 125, we said: “Section 3840, above quoted, contemplates a contract resting upon a present consideration passing between the two contracting parties, and with which the third party has no connection. One of the most common instances of such a contract -arises when a mortgagor of real property sells the same, and the grantee, as a part of the consideration, promises and agrees with the mortgagor.that he will pay the mortgage debt. Here the conveyance of the property furnishes the consideration for the grantee’s promise, and the mortgagee may maintain an action against him. He becomes the principal debtor, and, while the mortgagor is not released, yet, as to the grantee, he stands in the position of a surety. Moore v. Booker, 4 N. D. 543, 62 N. W. 607.”
And we are not unaware of the holding in Parlin v. Hall, 2 N. D. 473, 52 N. W. 405, and come to our conclusion in spite of that decision. In our minds, indeed, that case is in no way parallel with the one at bar, as in it the defendant did not agree to pay any debt, or to pay anyone, or to be directly responsible to any third party, but merely “to pay to said first party all the sums which he pays on said guaranty, or advances in pursuance of this agreement.” This is clearly not a promise to pay any third party. In the case at bar the defendant Finseth expressly agreed in his deed from the Langleys to pay a mortgage of $2,000, and we must assume that this amount was deducted from the purchase price of the land. 3 Pom. Eq. Jur. 3d ed. § 1205; Maher v. Lanfrom, 86 Ill. 513; Freeman v. Auld, 44 N. Y. 50; Hardin v. Hyde, 40 Barb. 435; Fuller v. Hunt, 48 Iowa, 163; Green v. Turner, 38 Iowa, 112; Greither v. Alexander, 15 Iowa, 470; Gage v. Cameron, 212 Ill. 146, 72 N. E. 204; Jehle v. Brooks, 112 Mich. 131, 70 N. W. 440; Strong v. Converse, 8 Allen, 557, 85 Am. Dec. 732; Drury v. Tremont Improv. Co. 13 Allen, 168; Weed Sewing Mach. Co. v. Emerson, 115 Mass. 554; Schley v. Fryer, 100 N. Y. 71, 2 N. E. 280;
So, too, it is immaterial whether the original mortgagor in fact received from the plaintiff the full sum of $2,000 or not, or whether, as claimed by the defendant, $600 of the $2,000 has never been paid to the original mortgagor. The evidence shows that this $600 was not paid, but was kept back for a short time, with the consent of both parties, on account of the immediate lack of funds of the mortgagee, and that in the interim the original mortgagors, the Woodburys, deeded the property to Ernest Engel, such deed containing the provision that the premises were “free from all encumbrances except a mortgage of $2,000 to Walter A. McDonald.” It is true that under the holding of this court in the cases of Smith v. Gaub, 19 N. D. 337, 123 N. W. 827, and Sommers v. Wagner, 21 N. D. 531, 131 N. W. 797, Ernest Engel, the grantee of the Woodburys, was not himself bound to pay the mortgage
The fact remains, however, that the last grantee, the defendant Einseth, specifically agreed to pay the $2,000 mortgage, and the question before us is merely whether the plaintiff, McDonald, can, in a court of equity, take advantage of the promise and assert his claim. It is perfectly clear that he could have asserted it against the original mortgagors, the Woodburys; for the testimony shows that McDonald had agreed with these parties to collect the full amount of the mortgage note, and had given back to them an obligation by which he had agreed to pay them this amount of money when so collected. His testimony is as follows: “I do not believe I ever met the defendant Finseth, — may have seen him. The full amount, $2,000, was not paid by me, only $1,400, plus interest and an acknowledgment for $600. Instead of giving these people $600 in cash, to save making up a new set of papers, I gave them an acknowledgment that when the note would be paid I would give them $600, and that acknowledgment has never been taken up. I was not to pay it until this note of $2,000 was paid. That was
Even though the deed from the Woodhurys to Engel would preclude the idea that Engel agreed to assume and pay the mortgage debt, still the fact remains that the sum would be a lien upon the premises, ■and the title of the grantee would be subject thereto, and the presumption would be, even without proof, that that amount of money was deducted from the purchase price. Although, indeed, to quote the language in the opinion of Smith v. Gaub, supra, and in relation to the modification of the covenant of warranty by the statement that the premises were free from all encumbrances except the mortgage specified, “if plaintiff had wished or intended to except the mortgage from the covenant of warranty, he could easily have done so by making the restriction upon the covenant against encumbrances apply to all the covenants of the deed. In view of the ease with which it may be accomplished, it is inconceivable that a careful conveyancer in a document so formal and important as a deed should fail to malte the exception in some such manner.” This court must, nevertheless, take judicial notice of the well-established customs of business and trade, and it will not be presumed, in the absence of proof, that any person would take a deed to land which was subject to a mortgage without deducting such amount from the purchase price, nor that he would rely entirely on the covenants ■of warranty of his grantor to protect his purchase. The fact, indeed, that the interest on the full $2,000 was paid up to the 31st day of January, 1913, and partly by the defendant himself, adds emphasis to this presumption. Whether or not the plaintiff had paid to his original mortgagor the full amount of the mortgage note, indeed, is a matter
They had, in short, agreed to pay this debt to the grantors in a certain manner, and this included the paying of $2,000 and interest to the owner of the mortgage; and we can see no reason why these contracts were not valid and could not be enforced.
Nor is there any merit in the contention that the deed was not delivered to the defendant Finseth, but to his cotenant, H. A. Hallum, and that said cotenant had no authority to obligate the defendant Finseth to pay such mortgage, or to accept a deed containing such clause. This point was mentioned in the oral argument, but is not suggested in the brief. If it had been, the answer to it is that the defendant Finseth himself testified that he knew the property had been deeded to himself, and his cotenant; that'he knew there was a mortgage on the property, and paid interest on it; that his cotenant told him that he had received the deed; that he knew that he had placed it of record; that he told him he had; that the property now stands in his name-; that he paid half of the interest for two years on the full $2,000, and that Mr. Hallum paid the other half, and that he understood it was to be sent up to Mr. McDonald. The deed was recorded on the Ith day of August, 1911. This action was not begun until June, 1914. It would hardly seem that the grantee of a recorded deed can sit quietly for three years, remain in possession of the premises, and pay the interest on a mortgage which is assumed thereon, and then claim that he did not know of or consent to the terms of the instrument.
The judgment of the District Court is affirmed.
Concurrence Opinion
I concur in the affirmance, but express no opinion upon paragraphs three and four of the opinion.