Miller v. Kennedy

Decision Date07 February 1900
Citation81 N.W. 906,12 S.D. 478
PartiesMILLER v. KENNEDY et al.
CourtSouth Dakota Supreme Court

Appeal from circuit court, Walworth county; A. W. Campbell, Judge.

Action by A. A. Miller against Edward G. Kennedy and others. Judgment for defendants, and plaintiff appeals. Affirmed.

W. F Mason, for appellant. H. H. Potter, for respondent Edward G Kennedy.

FULLER P. J.

From that portion of the decree in this action to foreclose a mortgage on real property which adjudges the defendant Edward G. Kennedy not liable for a deficiency remaining after the sale of the premises, and from an order overruling a motion for a new trial, plaintiff appeals.

For the purposes of the questions of law presented, the facts may be briefly stated thus: After the execution of the mortgage, and before its maturity, respondent sold and conveyed the premises to the defendant S. L. Overholser, who, as part consideration therefor, orally assumed and agreed to pay the debt secured by appellant's mortgage, which was mentioned in the deed as an incumbrance. Thereafter appellant, with actual knowledge of the sale and assumption of the mortgage debt, entered into a written contract, indorsed on the back of the note, by the terms of which he agreed with Overholser to extend the time of payment several years, although respondent protested against, and refused to consent to, any extension. In accordance with a familiar principle, where the owner of mortgaged property and a purchaser thereof agree that, as a part consideration, the grantee shall pay the mortgage indebtedness, the relation of principal and surety as between the parties, is thereby created, and the grantee becomes the principal debtor, while the grantor and mortgagor occupy the relation of a surety, responsible only as such to a mortgagee having notice of such contract. Of course, both are debtors of the mortgagee, but the land is the primary fund out of which the debt must be satisfied, in the first instance, if it be sufficient for that purpose; and, if not it is the duty of the purchaser to satisfy the obligation in accordance with his promise, and according to the rules of law relating to principal and surety. After being advised of such assumption, an agreement by a mortgagee with a purchaser, who, by assuming the mortgage, has become the principal debtor, extending the time of payment without the consent of the surety, discharges him from all liability. "The assumption," says Mr. Pomeroy, "produces its most important effect, by the operation of equitable principles, upon the relation subsisting between the mortgagor, 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. *** While the mortgagee may release the mortgagor without discharging the grantee, his release of the grantee, or his valid...

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