National Mortg. Corp. v. Bullard

• Court: Georgia Supreme Court
• Writing for the Court: BELL, Justice.
• Citation: National Mortg. Corp. v. Bullard, 173 S.E. 401, 178 Ga. 451 (Ga. 1934)
• Decision Date: 16 February 1934
• Docket Number: 9725.
• Parties: NATIONAL MORTGAGE CORPORATION v. BULLARD.

173 S.E. 401

178 Ga. 451

NATIONAL MORTGAGE CORPORATION v. BULLARD.

No. 9725.

Supreme Court of Georgia

February 16, 1934

Rehearing Denied March 3, 1934.

Syllabus by the Court.

1. Where a debtor has conveyed his property to another and as a part of the transaction the purchaser has agreed to assume and pay the debts of the vendor, a creditor of the vendor may have a remedy in equity against the vendee, with proper pleadings and parties.

2. The right of the creditor to sue in equity upon such agreement of the vendee is not affected by a sale of the property under a power of sale contained in the original agreement, except that the vendee is to be credited with the net amount for which the property was sold; the vendee assumer remaining liable with respect to any deficiency.

3. The person assuming the debt is not a trustee of the creditor and the existence of such relation is not essential to a suit in equity by the creditor.

Error from Superior Court, Fulton County; Virlyn B. Moore, Judge.

Suit by the National Mortgage Corporation against M. M. Bullard and others. To review the judgment dismissing the petition as to defendant named, plaintiff brings error.

Reversed.

John P Stewart, of Atlanta (Howell, Heyman & Bolding, of Atlanta for parties at interest), for plaintiff in error.

Tye Thomson & Tye, R. A. Edmondson, Jr., and Edwin L. Sterne, all of Atlanta, for defendant in error.

BELL Justice.

National Mortgage Corporation brought a suit against Mrs. J. B. Wells, J. B. Wells, and M. M. Bullard, to recover on an alleged indebtedness claimed to be due as a balance on promissory notes. Bullard interposed a general demurrer, which the court sustained, dismissing the petition as to that defendant, and the plaintiff excepted. The suit at first appeared to be a mere action at law, but was amended so as to seek the aid of the court as a court of equity for the recovery of a judgment against M. M. Bullard as one who had assumed the debt upon the purchase of certain property from Mrs. Wells. The petition alleged substantially the following facts: On September 1, 1926, Mrs. Wells as maker and J. B. Wells as indorser executed notes for a stated sum to Mortgage Guarantee Company of America, and in connection therewith Mrs. Wells executed to the payee a deed in which she conveyed as security for the indebtedness a described tract of land. The payee later transferred to the plaintiff the notes together with all rights under the security deed. On July 1, 1930, Mrs. Wells sold and conveyed the property to M. M. Bullard, executing to him a warranty deed which contained the stipulation that "the purchaser agrees to assume and pay the loan, dated September 1, 1926, recorded in deed book 1027, page 21, signed by Mrs. J. B. Wells in favor of Mortgage Guarantee Company of America, maturing September 1, 1931, for $17,000." Upon a subsequent default in the payment of the indebtedness, National Mortgage Corporation elected to declare the entire amount due under an accelerative clause, and proceeded to exercise a power of sale contained in the security deed; the corporation being purchaser at the sale.

Bullard contends that his demurrer was rightly sustained, on the theory that under the law of this state he held the land as a trustee for the creditor, and that upon this theory alone is a suit in equity permitted in this jurisdiction against one in his position, insisting further that the creditor and security holder in causing the "trust property" to be sold under the power of sale has destroyed the res of the trust, rendering itself powerless to do equity in the cause, and has therefore lost or extinguished its equitable remedy against this defendant as trustee. There is no merit in this contention. As a general rule, the action on a contract, whether express or implied, or whether by parol or under seal, or of record, must be brought in the name of the party in whom the legal interest in such contract is vested. Civil Code 1910, § 5516. But where a debtor conveys his property to another, and as a part of the transaction the purchaser agrees to assume and pay the debts of the vendor, a creditor of the vendor may have a remedy against the vendee in an equitable proceeding. First National Bank v. Rountree, 173 Ga. 119, 159 S.E. 658. Under this well-recognized exception to the general rule as stated in the Code, where an owner of land conveys to a creditor a tract of land as security for the indebtedness, and the grantor thereafter sells and conveys the land to a third person by a deed containing the stipulation that the purchaser "agrees to assume and pay" the indebtedness, the grantee in the security deed or his transferee may enforce the assumption agreement of the purchaser by a suit in equity with proper pleadings and parties. Reid v. Whisenant, 161 Ga. 503, 508, 131 S.E. 904, 44 A.L.R. 599; Manget v. National City Bank, 168 Ga. 876, 149 S.E. 213; O'Leary v. Costello, 169 Ga. 754, 151 S.E. 487; Sheppard v. Bridges, 137 Ga. 615, 74 S.E. 245; Crawford v. Wilson, 139 Ga. 654, 78 S.E. 30, 44 L.R.A. (N. S.) 773. The fact that prior thereto the grantee or his transferee exercised a power of sale contained in the security deed would not destroy the right of either to bring suit against the grantor and his purchaser, who assumed the debt, to recover the amount due after crediting the proceeds of the sale; no question being involved as to the fair exercise of the power of sale. In Morgan v. Argard, 148 Ga. 123, 124, 95 S.E. 986, it is stated that "practically all the American courts permit a suit at law or in equity by the vendor against the maker of the purchase-money notes and his vendee, either (1) upon the broad ground that if one person makes a promise upon a valuable consideration to another for the benefit of a third person the third person may maintain an action on the promise, or (2) upon the theory of equitable subrogation, by which a creditor is entitled to all the collateral securities which his debtor has obtained to reinforce the primary obligation." See, also. Reid v. Whisenant, 161 Ga. 503, 508, 131 S.E. 904, 44 A.L.R. 599, supra. In this state the creditor is limited to a suit in equity. Sheppard v. Bridges, 137 Ga. 615, 629, 74 S.E. 245, and cit. In Codman v. Deland, 231 Mass. 344, 121 N.E. 14, 15, it was said: "When a grantee in a deed assumes and agrees to pay a mortgage on the property conveyed, he takes upon himself the burden of the debt or claim secured by the mortgage and as between himself and his grantor he becomes the principal and the latter merely a surety for the payment of the debt. The mortgagee is not bound by such an agreement unless he assents to it." This statement was approved by this court in the recent case of Stapler v. Anderson, 177 Ga. 434, 170 S.E. 498. The creditor by bringing suit against the assumer confirms and adopts the transaction between him and the original debtor.

The Supreme Court of the United States has sanctioned a proceeding in equity such as is...