Schram v. Coyne

• Decision Date: 15 April 1942
• Docket Number: No. 8968.,8968.
• Citation: 127 F.2d 205
• Parties: SCHRAM v. COYNE.
• Court: U.S. Court of Appeals — Sixth Circuit

127 F.2d 205 (1942)

SCHRAM v. COYNE.

No. 8968.

Circuit Court of Appeals, Sixth Circuit.

April 15, 1942.

Edward M. Brown, of Cincinnati, Ohio (Robert S. Marx, Frank E. Wood, and Edward M. Brown, all of Cincinnati, Ohio, Lawrence I. Levi and Frank Wiseman, both of Detroit, Mich., and Nichols, Wood, Marx & Ginter, of Cincinnati, Ohio, on the brief), for appellant.

Glenn D. Curtis, of Detroit, Mich. (Bulkley, Ledyard, Dickinson & Wright, of Detroit, Mich., on the brief), for appellee.

Before SIMONS, MARTIN, and McALLISTER, Circuit Judges.

McALLISTER, Circuit Judge.

In 1926, Adolph Deutsch and his wife executed a real estate mortgage on certain premises to a bank. Thereafter, they conveyed the property to appellee by warranty deed, which set forth that it was free and clear of all encumbrances except the above-mentioned mortgage, which appellee "assumes and agrees to pay according to its terms and stipulations." The last payment on the mortgage was made by appellee on July 25, 1932, and the mortgage and note were thereafter foreclosed in September, 1935, by appellant, as receiver of the bank. This action to recover a deficiency of $579.30 was commenced by appellant in 1940. The District Court held that, in accepting the deed, appellee assumed payment of the mortgage, but that his agreement was a simple contract and not a covenant, and, accordingly, entered judgment of no cause of action. The basis for the entry of the judgment, and the importance of the distinction between simple contract and covenant in this case, is because of the Michigan statute of limitations, which provides that all actions shall be commenced within six years after the cause of action shall accrue, and not afterward, except that action founded on covenants in deeds and mortgages of real estate may be brought within 10 years from the time that the cause of action accrued on such covenant. 3 Comp.Laws Mich. 1929, § 13976; Mich.Stat.Ann. § 27.605.

Whether acceptance by a grantee of a deed from a mortgagor, containing the grantee's assumption of the mortgage, renders the grantee liable to the mortgagee on the covenant or simple contract, is a question that has not been decided by the Michigan courts.

In a number of jurisdictions, such a grantee is held to be bound only on simple contract. Willard v. Wood, 164 U.S. 502, 17 S.Ct. 176, 41 L.Ed. 531; Nutter v. Mroczka, 303 Mass. 343, 21 N.E.2d 979; Taylor v. Forbes' Adm'r, 101 Va. 658, 44 S.E. 888; Bishop v. Douglass, 25 Wis. 696; Hollister v. Strahon, 23 S.D. 570, 122 N.W. 604, 21 Ann.Cas. 677; Clement v. Willett, 105 Minn. 267, 117 N.W. 491, 17 L.R.A., N.S., 1094, 127 Am.St.Rep. 562, 15 Ann.Cas. 1053; Foster v. Atwater, 42 Conn. 244; Maule v. Weaver, 7 Pa. 329; Hocking County Trustees v. Spencer, 7 Ohio 149, pt. 2; see Johnson v. Muzzy, 45 Vt. 419, 12 Am.Rep. 214; Baldwin v. Emery, 89 Me. 496, 36 A. 994.

In other states, such a grantee is liable on the covenant to assume and pay the mortgage. Atlantic Dock Co. v. Leavitt, 54 N.Y. 35, 13 Am.Rep. 556; Brice v. National Bondholders Corp., 187 Ga. 511, 1 S.E.2d 426; Fidelity Union Trust Co. v. Prudent Inv. Corp., 129 N.J.Eq. 255, 19 A. 2d 224; Parlier v. Miller, 186 N.C. 501, 119 S.E. 898; Turner v. Williams, 235 Ala. 502, 180 So. 95; Beeson v. Green, 103 Iowa 406, 72 N.W. 555. In some states, it is provided by statute that where instruments are in writing, they are within the statute of limitations; and in certain of these jurisdictions, a recital in a deed poll, that the grantee agrees to assume the mortgage, is held to be enforceable as a written instrument, within the meaning of such statutes. See Cleveland Trust Co. v. Elbrecht, 137 Ohio St. 358, 30 N.E.2d 433; Bracklein v. Realty Ins. Co., 95 Utah 490, 80 P.2d 471; First National Bank of Berwyn v. Raymer, 180 Okl. 529, 71 P.2d 485.

In discussing covenants and instruments under seal, one is speaking of concepts of a remote time, which have been shorn, throughout the centuries, of much of their former force and efficacy; and, more recently, in many jurisdictions, their former distinguishing marks have been completely effaced. Distinctions between sealed and unsealed instruments have been abolished in many states. In Michigan, by statute, in effect at the time this controversy arose, it was provided that instruments, then required to be under seal, should be deemed in all respects to be sealed instruments, provided that the word "seal" or the letters "L. S." were added in the place where the seal should be affixed; Comp.Laws Mich. 1929, § 13328; Mich.Stat.Ann. § 26.591; and it is now provided that deeds, mortgages, or other instruments affecting the title to real estate shall be construed to be sealed instruments, without affixing a seal, scroll, device, or the word "seal" or the letters "L. S." Act 63, Pub.Acts 1937, Mich. Stat.Ann. § 26.595, Supp.1940.

While the importance of seals is disappearing, the law, in some cases, still maintains the fiction of their force, notably in the application of statutes of limitations, as in this controversy; and, because we are here confronted with instruments under seal, a passing reference to their nature serves to define a fundamental attribute.

As remarked by Justice Holmes, originally, at common law, a charter was simply a writing; and since few could write, most people authenticated them by making a mark, and when seals belonged only to the great, apparently seals were only evidence of the authenticity of the charters. But when seals came into more general use, they acquired such importance that men were bound thereby, although their seals had been affixed without their consent. "A covenant or contract under seal was no longer a promise well proved; it was a promise of a distinct nature, for which a distinct form of action came to be provided. * * * The man who had set his hand to a charter, from being bound because he had consented to be, and because there was a writing to prove it, was now held by the force of the seal and by deed alone, as distinguished from all other writings." Holmes, The Common Law, pages 277 and 278. That the distinction between contract and covenant is still observed may be seen in a recent Michigan case, Guardian Depositors Corp. v. Savage, 287 Mich. 193, 283 N.W. 26, 27, 124 A.L.R. 635, where it is said: "Always a covenant obligation has been considered more solemn and binding than a mere promise in writing not under seal."

Appellant relies upon Crawford v. Edwards, 33 Mich. 354, as the Michigan authority most nearly approaching the view that an assuming grantee is bound on the covenant rather than on simple contract. In that case, the court said: "The acceptance of such a deed binds the grantee as effectually as though the deed had been inter partes, and had been executed by both grantor and grantee." But it cannot be concluded from the foregoing that such a grantee is bound as a covenantor. In Baldwin v. Emery, 89 Me. 496, 36 A. 994, where it was also said, in almost identical language, that acceptance of a deed poll by a grantee renders him liable to perform all the acts therein required of him, as effectually as if it were an indenture executed under his own hand and seal, it was held that the remedy was assumpsit or debt, and not covenant, for the reason that only a covenant could be sued on in an action of covenant; and in the late case of Nutter v. Mroczka, supra, the Supreme Court of Massachusetts, in holding that an assuming grantee became bound by a promise, implied by his acceptance of the deed, on simple contract, and not on contract under seal, observed 303 Mass. 343, 21 N.E.2d 981: "This distinction was marked, while the old forms of action were retained, by the fact that the grantee must be sued in assumpsit, and not in covenant."

In the case of Crawford v. Edwards, supra, previously mentioned, and upon which appellant strongly relies, the Supreme Court of Michigan further remarked: "It was said in Earl of Belvidere v. Rochfort, cited in Hoff's Appeal, 24 Pa. 200, 205, `The plain intent of the deed was to put the purchaser in the place of the vendor, and that he might not be longer liable to the mortgagee, a sufficient part of the purchase money was left in the purchaser's hands for satisfaction of the mortgage, the purchaser thereby taking upon himself the vendor's bond and covenant for payment of the mortgage as fully as if he himself had covenanted to pay it off. And either the vendor or mortgagee might, upon that contract, have compelled him to pay it off.'" A reference to Hoff's Appeal, supra, discloses that the court in that case held that an assuming grantee was liable in assumpsit, if not in covenant. The portion of the opinion quoted in Crawford v. Edwards, supra, was preceded by a statement by the Pennsylvania court that it was immaterial whether the assumption of mortgage by the acceptance of deed amounted to a covenant; and the only question decided was that such a grantee would, in any event, be liable in an action for money had and received. But where a similar question of covenant came squarely before the Supreme Court of Pennsylvania in Maule v. Weaver, supra, Chief Justice Gibson, writing for the court, held that an action of covenant could not be maintained against a grantee in a deed poll under any circumstances, and that while mutual covenants might be contained in the same instrument, each party must seal and deliver his own, exactly as if they were contained in several parts of it; and it was held that recitals in such a deed did not bind the grantee as a covenantor, unless he sealed it. From the foregoing, we are not...