The Home v. Selling

• Decision Date: 11 March 1919
• Citation: 179 P. 261,91 Or. 428
• Parties: THE HOME v. SELLING ET AL.
• Court: Oregon Supreme Court

179 P. 261

91 Or. 428

THE HOME v. SELLING ET AL.

Supreme Court of Oregon

March 11, 1919

Department 1.

Appeal from Circuit Court, Multnomah County; R. G. Morrow, Judge.

Action by The Home, a corporation, against Ben Selling and another executors, and others. Judgment for plaintiff, and defendants appeal. Modified.

The plaintiff and the defendant Emanuel May Investment Company are corporations. Emanuel May, the individual, died during the progress of this litigation, and his personal representatives were substituted.

On November 21, 1910, George E. Jacobs and his wife gave their note to the plaintiff for $40,000, due ten years after date with "interest thereon quarter yearly at the rate of six per cent. per annum from date until paid." They stipulated therein that, "in case suit is instituted to collect this note or any part thereof," they would pay a reasonable attorney's fee to be determined in the suit. At the same time they gave their mortgage to the plaintiff on certain real property in Portland, Or., and "covenanted and agreed to pay all sums of money, the principal and interest, specified in said promissory note at the time therein designated." On February 25, 1913, they conveyed the premises to Emanuel May by deed duly executed, containing a statement to the effect that the property was subject to the mortgage mentioned, and that "the grantee herein in part consideration for this conveyance assumes payment of the $40,000 unpaid balance of the first of said mortgages and the interest accrued and to accrue thereon." Afterwards May conveyed to the investment company by deed which referred to the premises and the mortgage and contained the following words:

"And Emanuel May, the grantor above named, does covenant to and with Emanuel May Investment Company, the above-named grantee its successors and assigns that he is lawfully seized in fee simple of the above-granted premises, that the above granted premises are free from all incumbrances except the following mortgages, which are as a part of the purchase price, assumed by Emanuel May Investment Company. * * * Mortgage of $40,000.00 in favor of The Home, a corporation, on the north half of lot 6 and the south half of lot 7, block 2, city of Portland."

This action was brought against Emanuel May, the grantee of Jacobs and his wife and against the investment company, May's grantee, to recover the interest on the note from November 21, 1915, to February 21, 1917, amounting to $3,000, and the plaintiff claims $300 as a reasonable attorney's fee.

A demurrer to the complaint on the grounds that Jacobs and his wife are necessary parties, that the action has been brought before the note is due and that the complaint does not state facts sufficient to constitute a cause of action, was overruled. After denying that the grantees mentioned assumed the payment of the mortgage, and challenging the attorney's fee and the conclusion that $3,000 is due from the defendants, they interposed three separate defenses. The first of these was to the effect that after the purchase of the land by Emanuel May he became incompetent to transact his own business or care for his property; that a guardian was appointed for him; that afterwards he died and other individuals were appointed as his executors, but that no claims had ever been presented either to the guardian or to the executors covering the demand sued upon. A second defense is negative in its character, to the effect that neither Emanuel May in his lifetime nor the investment company ever entered into any contract with the plaintiff by which either of them undertook to pay the latter any sum of money whatever on account of the matters alleged in the complaint, wherefore the plaintiff has no cause of action against either of the defendants. The third is to the effect that the note in question was given for part of the purchase price of the premises, on account of which the mortgagee is not entitled to any deficiency judgment, and that Emanuel May, prior to the time he was declared incompetent, and thereafter his guardian, and still later his executors after his death, had tendered to the plaintiff conveyance of the mortgaged premises to be accepted by the plaintiff in lieu of any claim or demand against May or his estate or the investment company. The court sustained a demurrer to each of these further and separate defenses.

The action was then tried, resulting in findings of fact substantially as stated, with the addition that the court found that $200 is a reasonable sum to be allowed as attorney's fee in the circuit court for the collection of the interest, and the sum of $75 to be a reasonable amount to be allowed as attorney's fee in the Supreme Court, and rendered judgment against the defendants, the investment company directly, and the others in their respective capacities, for $3,000 and for the attorney's fees as indicated above. The defendants appeal.

Joseph Simon, of Portland (Dolph, Mallory, Simon & Gearin, and Platt & Platt, and Palmer L. Fales, all of Portland, on the brief) for appellants.

William L. Brewster and R. W. Montague, both of Portland (William L Brewster and Brewster & Mahaffie, all of Portland, on the brief), for respondent.

BURNETT, J. (after stating the facts as above).

One of the principal questions to be determined is whether or not the defendants contracted to pay the mortgage, and whether the mortgagee can maintain an action directly against them.

According to the decisions in this state, where one accepts a deed which not only recites the mortgage, but adds that the grantee assumes it, he becomes personally liable to pay the mortgage. Miles v. Miles, 6 Or. 266, 269, 25 Am. Rep. 522; Walker v. Goldsmith, 7 Or. 161, 181; Haas v. Dudley, 30 Or. 355, 48 P. 168; Farmers' National Bank v. Gates, 33 Or. 388, 54 P. 205, 72 Am. St. Rep. 724; Hoffman v. Habighorst, 49 Or. 379, 391, 89 P. 952, 91 P. 20. It is plain, therefore, that the acceptance of the deeds mentioned, containing the clauses already quoted, made May and the investment company personally liable to pay the mortgage debt.

The original general rule was that one who is not a party to a contract cannot bring an action on it in a court of law. although he might be benefited by its fulfillment. The leading case cited by the defendants is Keller v. Ashford, 133 U.S. 610, 10 S.Ct. 494, 33 L.Ed. 667. In that instance one Thompson was the owner of certain realty in the city of Washington. He incumbered it by trust deeds in the nature of mortgages, and at the instance of a junior mortgagee conveyed it to Ashford, with a clause in the deed as follows:

"Subject, however, to certain incumbrances now resting thereon, payment of which is assumed by said party of the second part."

After foreclosing the mortgage and exhausting the personal assets of the mortgagor, the holder of the note secured by the junior mortgage brought her bill in equity to compel the grantee of the mortgagor to pay the deficiency. The trial court dismissed the bill, holding that Ashford had never accepted the deed to him, and that the plaintiff's remedy, if any, was at law. After disposing of the question about the acceptance of the deed by Ashford, adversely to him, the court said:

"The case therefore stands just as if Ashford had himself received a deed by which he in terms agreed to pay a mortgage made by the grantor. In such a case, according to the general, not to say uniform, current of American authority, as shown by the cases collected in the briefs of counsel, the mortgagee is entitled in some form to enforce the agreement against the grantee, and much of the argument at the bar was devoted to the question whether his remedy should be at law or in equity. Upon the question whether the mortgagee could sue at law, there is no occasion to examine the conflicting decisions in the courts of the several states, because it is clearly settled in this court that he could not."

The court there worked out the conclusion that the plaintiff was entitled to relief, requiring the grantee to pay the deficiency. We must remember that this was a case brought in the nisi prius courts of the District of Columbia, where the rule of the United States court prevails respecting remedies.

In later cases, notably Willard v. Wood, 135 U.S. 309 10 S.Ct. 831, 34 L.Ed. 210, the principle was applied that the law of the forum governed the remedy, and that as the litigation in that suit was commenced in the District of Columbia the remedy would be in equity, although in New York, where the contract was made, an action at law would lie by the mortgagee against the grantee in such instances. Afterwards, in Union Life Insurance Co. v. Hanford, 143 U.S. 187, 190, 12 S.Ct. 437, 36 L.Ed. 118, the court recognized the condition that in various states the law, based upon the decisions of the local courts, was that an action could be maintained under such circumstances, and that it was not necessary to resort to equity to enforce the right mentioned. It was applied to the contention there in the following manner: Under the law of Illinois, a mortgagee could sue the grantee directly at law. The corollary to this proposition was that the grantee became the principal debtor and the mortgagor from whom he had received the title was the surety, so that when the mortgagee extended the time in which the grantee might pay the debt, it released the mortgagor, who stood as a surety only. We draw from these decisions, cited by the defendants here, this doctrine, that when the grantee of a mortgagor agrees to pay the mortgage, a right at once arises in favor of the mortgagee, and that it is enforceable according to the remedy afforded by the lex fori. The effect of the law of the place on the remedy is...