Gregory v. Arms
| Decision Date | 01 November 1911 |
| Docket Number | No. 7,932.,7,932. |
| Citation | 96 N.E. 196,48 Ind.App. 562 |
| Parties | GREGORY v. ARMS. |
| Court | Indiana Appellate Court |
OPINION TEXT STARTS HERE
Appeal from Circuit Court, Warren County; Jas. T. Sanderson, Judge.
Suit by Lila F. Gregory, administratrix of John Gregory, deceased, against Azro A. Arms. Judgment for defendant, and plaintiff appeals. Reversed, with directions.Victor H. Ringer and Edwin McCabe, for appellant. William B. Durborow, for appellee.
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 the appellee.
Omitting the formal parts of the complaint, it, in substance, charges: That on April 12, 1884, John, Hannah E., and Benjamin R. Gregory were the owners in fee simple, as tenants in common, of 80 acres of real estate in Warren county, Ind.; 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 80 acres of real estate duly executed their mortgage thereon to the state of Indiana. That the same was duly recorded within the time required by the law. That on the 25th day of November, 1889, said John, 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 one dollar” 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 on the same, and especially subject to a mortgage for $3,500 due William C. Smith, which mortgage the said Benjamin R. Gregory agrees 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 the 25th day of November, 1889, the said Benjamin R. Gregory and wife by warranty deed duly executed conveyed all said real estate, including the 80 acres aforesaid, to the appellee for a consideration of $5,000 as named in the deed, which deed was duly recorded within the time allowed by law. That on December 2, 1896, the said Benjamin R. Gregory died in said county, and his estate has not been administered upon. That on November 7, 1908, John Gregory, appellant's decedent, died in said county. That the auditor of said county on July 21, 1909, filed a verified claim against the estate of said John Gregory, deceased, for the collection of said note for $500, which claim was disallowed by the administratrix, and thereafter upon trial duly had was on March 17, 1910, allowed by the court in the sum of $682.50, which amount appellant paid and thereafter instituted this suit. The appellee answered by 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 error relates to the legal effect of the language employed in the deed from John Gregory et al. to Benjamin R. Gregory. The $3,500 mortgage, especially mentioned, seems to have covered all of the 200 acres conveyed by the deed, but was junior to the mortgage for $500 to the state of Indiana, upon 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 the appellee is that, the note for $500 being the individual obligation of John Gregory, the conveyance by him to Benjamin R. Gregory subject to existing 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 thereafter occupied the position of surety, instead of principal, as originally and up to the time of the conveyance, and that the appellee as grantee of Benjamin R. Gregory took the real estate charged with such primary liability for the payment of the mortgage.
[1] Where a person takes a deed to real estate subject to incumbrances thereon, he does not thereby become personally liable to discharge the pre-existing liens, but, in the absence of any showing to the contrary, the purchaser is deemed to have deducted the amount of the prior incumbrances from the purchase price, and the land in his hands becomes the primary source of funds out of which the incumbrances are to be paid. State ex rel. Lowry v. Davis et al., 96 Ind. 539;Bunch v. Grave et al., 111 Ind. 351-355, 12 N. E. 514;Atherton v. Toney et al., 43 Ind. 211-213;Hancock v. Wiggins et al., 28 Ind. App. 449-456, 457, 63 N. E. 242;Burns et al. v. Gavin, 118 Ind. 320-322, 20 N. E. 799;Myers et al. v. O'Neal et al., 130 Ind. 370-373, 30 N. E. 510;Green et al. v. McCord, Trustee, 30 Ind. App. 470-473, 66 N. E. 494;Kostenbader v. Spotts, 80 Pa. 430-433;Gerdine v. Menage, 41 Minn. 417-420, 43 N. W. 91;Drury v. Holden, 121 Ill. 130-137, 13 N. E. 547;Manwaring v. Powell et al., 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.
[2] If the purchaser assumes the mortgage, he becomes as to the mortgagor the principal debtor, and the mortgagor 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 the foreclosure, the purchaser of the land, while not liable personally, cannot prevent the real estate being first exhausted for the payment of 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 et al., 103 Ind. 533, 3 N. E. 254;Adams v. Wheeler et al., 122 Ind. 251, 253, 23 N. E. 760;Stuckman v. Roose et al., 147 Ind. 402-407, 46 N. E. 680;Baltes Land, etc., Co. v. Sutton, 25 Ind. App. 695-697, 57 N. E. 974;Oglebay et al. v. Todd et al., 166 Ind. 250-253, 76 N. E. 238;State ex rel. Lowry v. Davis et al., 96 Ind. 539; Sheldon on Subrogation (2d Ed.) §§ 11, 26, 85; 1 Jones on Mortgages (6th Ed.) §§ 736, 738, 741; Cherry v. Monro et al., 2 Barb. Ch. (N. Y.) 618;Hopkins, Adm'r, v. Wolley et al., 81 N. Y. 77;In re claim Wilbur v. Estate of Warren, 104 N. Y. 192-197, 10 N. E. 263;Calvo v. Davies, 73 N. Y. 211, 29 Am. Rep. 130;Johnson v. Thompson et al., 129 Mass. 398;Hermanns v. Fanning, 151 Mass. 1, 23 N. E. 493;Moore's Appeal, 88 Pa. 450-452, 32 Am. Rep. 469.
[3] The deed to appellee contained no provision referring to incumbrances 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 chain of title. Oglebay et al. v. Todd et al., supra, at page 255 of 166 Ind., at page 238 of 76 N. E.;Lowry v. Smith, 97 Ind. 466;Brannon et al. v. May, 42 Ind. 92; 1 Jones on Mortgages (6th Ed.) § 740. On the foregoing authority, it is clear that appellee is bound by the clause in the deed from John Gregory et al. to Benjamin R. Gregory, his immediate grantor, relative to existing liens, though the deed to appellee was not made subject to any lien or incumbrance except the mortgage for $3,500.
[4] If the 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 the decedent was primarily liable, there can be no subrogation. If, however, the 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 mortgage against appellee's real estate would be fully warranted. Warford et al. v. Hankins, 150 Ind. 489, 50 N. E. 468;Begein et al. v. Brehm et al., 123 Ind. 160-166, 23 N. E. 496;Josselyn et al. v. Edwards, 57 Ind. 212;Rardin v. Walpole, 38 Ind. 146; Sheldon on Subrogation (2d Ed.) §§ 11, 26; 1 Jones on Mortgages (6th Ed.) §§ 740, 741. The foregoing propositions enter largely into the consideration of the questions arising upon the demurrer 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 et al. to Benjamin R. Gregory and the facts disclosed by the complaint.
The $500 note was executed alone by John Gregory, but the mortgage securing it was executed upon 80 acres of real estate owned jointly by the maker of the note and BenjaminR. and Hannah E. Gregory. The note by its terms was due December 1, 1889, and on November 25, 1889, John Gregory and wife and the said 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 and charges” existing...
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