Gregory v. Arms

Citation96 N.E. 196,48 Ind.App. 562
Decision Date01 November 1911
Docket Number7,932
CourtCourt of Appeals of Indiana

96 N.E. 196

48 Ind.App. 562



No. 7,932

Court of Appeals of Indiana

November 1, 1911

[96 N.E. 197]

From Warren Circuit Court; James T. Saunderson, Judge.

Suit by Lila F. Gregory, as administratrix of the estate of John Gregory, deceased, against Azro A. Arms. From a judgment for defendant, plaintiff appeals.


Victor H. Ringer and Edwin F. McCabe, for appellant.

William B. Durborrow, for appellee.

OPINION [96 N.E. 198]

[48 Ind.App. 566] FELT, P. J.

Suit by appellant against appellee, for subrogation to the rights of the State of Indiana under a school-fund mortgage executed by appellant's decedent, John Gregory, and to enforce the lien thereof against the real estate described therein and owned by appellee.

Omitting the formal parts of the complaint, it, in substance, alleges that on April 12, 1884, John, Hannah E. and Benjamin R. Gregory were the owners in fee simple, as tenants in common, of eighty acres of real estate in Warren county, Indiana; that on November 29, 1884, said John Gregory executed to the State of Indiana his note for $ 500, due on or before December 1, 1889; that, to secure said note, all the aforesaid owners of said real estate duly executed a mortgage thereon to the State of Indiana; that it was duly recorded within the time required by the law; that on November 25, 1889, said John Gregory, his wife Lila joining him, and Hannah Gregory, by deed of general warranty, duly executed, conveyed to said Benjamin R. Gregory "for the sum of $ 1," the undivided two-thirds part of 200 acres of real estate in said county, including the 80 acres so mortgaged as aforesaid; that said conveyance was made subject to all liens and charges now existing thereon, and especially subject to a mortgage for $ 3,500, due to William C. Smith, which mortgage said Benjamin R. Gregory agreed to pay; that said deed was duly accepted by the grantee, and duly recorded on November 26, 1889, in the recorder's office of said Warren county; that on November 26, 1889, said Benjamin R. Gregory and wife, by warranty deed, duly executed, conveyed said real estate, including the 80 acres aforesaid, to appellee, for a consideration of $ 5,000, and the deed was duly recorded within the time allowed by law; that on Dece,ber 2, 1896, said Benjamin R. Gregory died, and his estate has not been administered on; that on November 7, 1908, John Gregory, appellant's decedent, died; that the auditor of said county, on July 21, 1909, filed a verified claim against the estate of said John Gregory, deceased, for [48 Ind.App. 567] the collection of said note for $ 500, which claim was disallowed by the administratrix; that upon a trial on March 17, 1910, said claim was allowed by the court in the sum of $ 682.50, which amount appellant paid, and thereafter instituted this suit.

Appellee answered by a general denial, and by several paragraphs of affirmative answer, to the sixth, seventh, eighth and ninth of which demurrers were overruled, and the rulings thereon are here assigned as errors; also the overruling of appellant's motion for a new trial.

The first question arising under the assignment of errors relates to the legal effect of the language employed in the deed from John Gregory and others to Benjamin R. Gregory.

The mortgage for $ 3,500, especially mentioned, seems to have covered all the 200 acres conveyed by the deed, but was junior to the mortgage for $ 500, to the State of Indiana, on the 80 acres included in the conveyance; but the latter mortgage was not mentioned in the deed, except as it was covered by the general clause, "subject to all liens," etc.

The position of appellee is that since the note for $ 500, was the individual obligation of John Gregory, the conveyance by him to Benjamin R. Gregory, subject to existing [96 N.E. 199] liens, did not change the character of his obligation, but he was, after as well as before the execution of the deed, primarily liable for the debt as principal.

The contention of appellant is that such conveyance, ipso facto, made the real estate the primary source of funds for the payment of the mortgage debt, and that John Gregory therefter occupied the position of surety, instead of principal, as originally, and up to the time of the conveyance, and that appellee, as grantee of Benjamin R. Gregory, took the real estate charged with such primary liability for the payment of the mortgage.

Where a person takes a deed to real estate subject to encumbrances thereon, he does not thereby become personally liable to discharge the preexisting liens, but, in the absence [48 Ind.App. 568] of any showing to the contrary, the purchaser is deemed to have deducted the amount of the prior encumbrances from the purchase price, and the land in his hands becomes the primary source of funds out of which the encumbrances are to be paid. State, ex rel., v. Davis (1884), 96 Ind. 539; Bunch v. Grave (1887), 111 Ind. 351, 355, 12 N.E. 514; Atherton v. Toney (1873), 43 Ind. 211, 213; Hancock v. Wiggins (1902), 28 Ind.App. 449, 63 N.E. 242; Burns v. Gavin (1889), 118 Ind. 320, 322, 20 N.E. 799; Myers v. O'Neal (1892), 130 Ind. 370, 373, 30 N.E. 510; Green v. McCord (1903), 30 Ind.App. 470, 66 N.E. 494; Kostenbader v. Spotts (1876), 80 Pa. 430, 433; Gerdine v. Menage (1889), 41 Minn. 417, 420, 43 N.W. 91; Drury v. Holden (1887), 121 Ill. 130, 137, 13 N.E. 547; Manwaring v. Powell (1879), 40 Mich. 371, 374.

While one who accepts a deed conveying to him real estate subject to a mortgage does not thereby render himself personally liable for the payment of the debt, yet if the purchaser assumes the payment of the mortgage debt he thereby makes himself personally liable. In both instances, however, the purchaser takes the land charged with the payment of the debt, and it remains the primary source of funds for the payment of the mortgage as between the purchaser and the mortgagee.

If the purchaser assumes the mortgage, he becomes, as to the mortgagor, the principal debtor, and the mortgagor becomes the surety; but the mortgagee, unless he has assented to such an arrangement may treat both as principal debtors, and may take a personal judgment against each of them in addition to his decree of foreclosure. If, however, the conveyance is made subject to the mortgage, upon foreclosure the purchaser of the land, while not liable personally, cannot prevent the real estate from being first exhausted to pay the mortgage debt, and the mortgagor will only be liable on the personal judgment against him for the amount, if any, remaining due on the judgment after the real estate has been exhausted. Hancock v. Fleming (1885), 103 Ind. 533, 3 N.E. 254; Adams v. Wheeler [48 Ind.App. 569] (1890), 122 Ind. 251, 253; Stuckman v. Roose (1897), 147 Ind. 402, 407, 46 N.E. 680; Baltes Land, etc., Co. v. Sutton (1900), 25 Ind.App. 695, 57 N.E. 974; Oglebay v. Todd (1906), 166 Ind. 250, 76 N.E. 238; State, ex rel., v. Davis (1884), 96 Ind. 539; Sheldon, Subrogation (2d ed.) §§ 11, 26, 85; 1 Jones, Mortgages (6th ed.) §§ 736, 738, 741; Cherry v. Monro (1848), 2 Barb. Ch. 618; Hopkins v. Wolley (1880), 81 N.Y. 77; Wilbur v. Warren's Estate (1887), 104 N.Y. 192, 197, 10 N.E. 263; Calvo v. Davies (1878), 73 N.Y. 211, 29 Am. Rep. 130; Johnson v. Thompson (1880), 129 Mass. 398; Hermanns v. Fanning (1890), 151 Mass. 1, 23 N.E. 493; Moore's Appeal (1879), 88 Pa. 450, 452, 32 Am. Rep. 469.

The deed to appellee contained no provision referring to encumbrances, except as to the mortgage for $ 3,500; but a purchaser is bound by the recitals in the prior deeds, which constitute his chain of title, and he is presumed to have examined the records of deeds, necessary to make out such a chain of title. Oglebay v. Todd, supra; Lowry v. Smith (1884), 97 Ind. 466; Brannon v. May (1873), 42 Ind. 92; 1 Jones, Mortgages (6th ed.) § 740.

On the foregoing authority, it is clear that appellee is bound by the clause in the deed from John Gregory and others to Benjamin R. Gregory, his immediate grantor, relative to existing liens, though the deed to appellee was not made subject to any lien or encumbrance, except the mortgage for $ 3,500.

If appellant, as the legal representative of John Gregory, deceased, in paying the debt evidenced by the note and mortgage in controversy, discharged an obligation for which decedent was primarily liable, there can be no subrogation. If, however, decedent was only secondarily liable as surety, and appellant paid the debt after due allowance and adjudication by the court, the payment was not voluntary, and appellant's right of subrogation was made out, and the enforcement of the lien of the school-fund [48 Ind.App. 570] mortgage against appellee's real estate would be fully warranted. Warford v. Hankins (1898), 150 Ind. 489, 50 N.E. 468; Begein v. Brehm (1890), 123 Ind. 160, 166, 23 N.E. 496; Josselyn v. Edwards (1877), 57 Ind. 212; Rardin v. Walpole (1871), 38 Ind. 146; Sheldon, Subrogation (2d ed.) §§ 11, 26; 1 Jones, Mortgages (6th ed.) §§ 740, 741.

The foregoing propositions enter largely into the consideration of the questions arising on the demurrers to the several paragraphs of special answer. In determining the sufficiency of the answers, it is necessary to keep in view the peculiar provisions of the deed from John Gregory and others to Benjamin R. Gregory, and the facts disclosed by the complaint.

The note for $ 500 was executed by John Gregory alone, but the mortgage securing it was executed on eighty acres of real estate owned jointly by the maker of the note, Benjamin [96 N.E. 200] R. Gregory and Hannah E. Gregory. The note, by its terms, was due December 1, 1889, and on November 25, 1889, John Gregory and wife and Hannah E. Gregory conveyed to Benjamin R. Gregory their undivided two-thirds interest in 200 acres of real estate, including the aforesaid 80 acres, for a named consideration of $ 1, "subject to all liens...

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2 cases
  • Gregory v. Arms
    • United States
    • Court of Appeals of Indiana
    • November 1, 1911
  • Shuee v. Gedert, 1-179A29
    • United States
    • Court of Appeals of Indiana
    • October 17, 1979
    ...the land would be the primary security for the debt. This impression comports with Indiana law. See, e. g., Gregory, Administratrix, v. Arms, (1911) 48 Ind.App. 562, 96 N.E. 196. The bank, however, demanded what appears to be the right to proceed directly against the Gederts without foreclo......

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