Van Meter v. Poole, 110 S.W. 5

JOHNSON, J.

In 1895, G. W. Grigsby borrowed $625 of school money belonging to Barton county, executed a bond therefor due in one year,, and secured the payment of the bond by a mortgage on his residence property in Lamar. Plaintiff signed the bond as surety. In 1902, the county obtained a judgment foreclosing the mortgage lien, caused the property to be sold thereunder and plaintiff became the purchaser under a bid of $500. The proceeds .of the sale were insufficient to discharge in full the amount of the principal and accrued interest and plaintiff, as surety, was compelled to pay tbe difference, together with the costs of the foreclosure suit. In 1896, and before the bond matured, G-rigsby sold the property to defendant for $140 and, so he says, the oral agreement of defendant to assume the payment of the school fund bond. He executed and delivered to defendant a warranty deed which expressed a consideration of $1,500, and which contained the recital: “This deed is made subject to trust deed of $625.” In the present action, plaintiff, relying on the oral agreement between Grigsby and defendant by which the latter undertook to pay the mortgage bond, seeks to recover at law from defendant the amount of the liability he incurred and discharged as surety on that bond. Defendant, a married woman, denies she made such agreement and asserts she paid $140 for Grigsby’s equity in the land with the distinct understanding that she would not assume the payment of the school fund debt, but would take the title to the property subject thereto. The issue of fact thus raised was resolved by the court sitting as a trier of fact in favor of the contention of plaintiff and, as this conclusion is supported by substantial evidence, we have no occasion to interfere but must accept as established the fact that defendant, at the time she purchased the property and received the deed, orally agreed to assume the payment of the mortgage debt. The judgment was for plaintiff and defendant appealed.

Plaintiff, by paying the debt .of his principal, became subrogated to the rights of the latter acquired by virtue of that agreement and is entitled to the enforcement of such rights. He is not estopped by the recitals of the deed from showing the real nature of the consideration paid or to be paid by defendant; the oral agreement does not fall within the Statute of Frauds; is not to be considered as an agreement to answer for the debt of another; nor is it at variance with the recital in tbe deed that tbe conveyance was merely subject to tbe mortgage lien. That recital .of itself imposed no obligation on tbe grantee to assume tbe debt but, being consistent with tbe existence of a cotemporaneous agreement of that nature, cannot serve to devitalize such agreement. In 1 Jones on Mortgages. (6 Ed.), section. 750, it is said: “Tbe contract of assumption is independent of tbe deed. Tbe verbal agreement is additional thereto and in no respect contradictory if the' conveyance was in terms subject to tbe mortgage. It; does not vary tbe terms of tbe contract and is not merged therein.”

That the promise of tbe vendee of land to pay off an incumbrance to be valid needs not be incorporated in the deed of conveyance nor evidenced by a written instrument, but may be orally made, was conclusively decided by the Supreme Court in Nelson v. Brown, 140 Mo. 1. c. 588: “Tbe execution of tbe deed from Brown was sufficient to take tbe contract out of tbe statute of frauds. Where tbe contract of sale of real estate is fully executed by tbe vendor by executing and delivering a deed therefor, an agreement to pay an existing debt against tbe land, in part or full payment of tbe pur-' chase money for the land, is not within the statute of frauds and is not required to be in writing, nor is it an agreement to pay tbe debt of another and therefore void if resting in parol, but is an original undertaking, and constitutes a part or all of tbe purchase money as tbe case may be.”

Defendant interposes tbe Statute of Limitations as a bar to tbe action, contending that “tbe mortgage debt alleged to have been assumed by defendant matured and was due November 6, 1896, and tbe statute started to run from that date and was barred when this suit was filed, March 26, 1904 — nearly eight years.” An important and permanent effect of the agreement of defendant to assume tbe mortgage burden was to establish tbe relation between her and her grantor Grigsby of principal obligor and surety with defendant in the former role. In Nelson v. Brown, supra, it was held: “When a grantee thus assumes payment of the mortgage debt as a part of the purchase price, the land in his hands is not only made the primary fund for the payment of the debt, but he himself becomes personally liable therefor to the mortgagee or other holder of the mortgage. ,The assumption produces its most important effect, by the operation of equitable principles, upon the relations subsisting between the mortgager, the grantee, and the mortgagee. As between the mortgagor and the grantee, the grantee becomes the principal debtor primarily liable 'for the debt, and the- mortgagor becomes a surety, with all the consequences flowing from the relation of suretyship. As between these two and the mortgagee, although he may treat them both as debtors and may enforce the liability against either, still, after receiving notice of the assumption, he is bound to recognize the condition of suretyship, and to respect the rights of the surety in all of his subsequent dealings with them. Payment, therefore, by a grantee who has assumed the entire mortgage debt completely extinguishes the mortgage ; he cannot be subrogated to the rights of the mortgagee, and keep the mortgage alive for any purpose. While the mortgagee may release the mortgagor without discharging the grantee, his release of the grantee, or his valid extension of the time of payment to the grantee, without the mortgagor’s consent, would operate to discharge the mortgagor. In short, the doctrines concerning suretyship' must control the dealings between these three parties.” To the same effect is the decision of the St. Louis Court of Appeals in Laumeier v. Hallock, 103 Mo. App. 116.

The application of these rules' to the facts of the present case requires us to hold that, with the status of principal obligor and surety once established between Grigsby and defendant Poole, that status necessarily continued during the life of the mortgage bond. Had Grigsby himself paid the amount of the deficiency remaining after the application of the proceeds of the sale, he could have compelled defendant to reimburse him on the ground that he had paid the debt as defendant’s surety, and the statute of limitations would not have begun to run against his action until, in response to his obligation as surety, he had actually paid the debt. As plaintiff, by discharging the bond became subrogated to the rights of Grigsby, it follows that limitations did not begin to run against his action until he paid the debt. This was in 1902, and as suit was brought in 1904, the action was not barred.

Point is made that plaintiff failed to show by evidence that defendant’s husband who conducted the transaction with Grigsby was the authorized agent of defendant, but we find the evidence abundantly sustains the finding of the learned trial judge that such agency existed.

The judgment is affirmed.

All concur.

Case Details

Case Name: Van Meter v. Poole

Court Name: Missouri Court of Appeals

Date Published: May 4, 1908

Citations: 110 S.W. 5; 130 Mo. App. 433; 1908 Mo. App. LEXIS 252

Court Abbreviation: Mo. Ct. App.