Yasuna v. Miller, 11699.

Decision Date01 March 1979
Docket NumberNo. 11699.,11699.
Citation399 A.2d 68
PartiesMuriel Mehlman YASUNA, Appellant, v. Howard F. MILLER, Appellee.
CourtD.C. Court of Appeals

Martin D. Teckler, Washington, D. C., for appellant.

William A. Mann, Washington, D. C., for appellee.

Before NEWMAN, Chief Judge, and GALLAGHER and HARRIS, Associate Judges.

GALLAGHER, Associate Judge:

This is an appeal from the trial court's grant of summary judgment in favor of the plaintiff. The judgment for appellee Miller was for the principal balance still due on a promissory note executed May 24, 1962, prior to adoption of the Uniform Commercial Code in this jurisdiction, and for interest thereon. We affirm.

On May 24, 1962, appellant Muriel Mehlman Yasuna purchased from William H. Roff (now deceased) certain real property (with a dwelling situated thereon) known as 1730 P Street, N.W., Washington, D.C., for a total price of $32,000. On that date appellant executed a promissory note — secured by a deed of trust on the P Street property — for the full purchase price, payable to Roff. Appellee Howard F. Miller purchased the note from Roff on November 17, 1963.1

Appellant sold the real property to Robert J. Toomey and Edwin T. Holloway on January 3, 1964. There were several subsequent transfers of the same real property and eventually payments on the note ceased after the balance due had been reduced to $13,242.75 as of January 24, 1975.2 This suit on the note followed on November 26, 1975.

Since this appeal is from the granting of summary judgment, we must first determine whether any genuine issue of material fact exists. Bennett v. Kiggins, D.C.App., 377 A.2d 57, 59 (1977); Hill v. District of Columbia, D.C.App., 345 A.2d 867 (1975). See Super.Ct.Civ.R. 56(c). As this court stated in International Underwriters, Inc. v. Boyle, D.C.App., 365 A.2d 779, 782-83 (1976):

In order to survive the summary judgment motion, the opposing party need only show that there is sufficient evidence supporting the claimed factual dispute to require a jury or judge to resolve the parties' differing versions of truth at trial. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-89, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968). Summary judgment is appropriate' only where "it is quite clear what the truth is. . . ." Sartor v. Arkansas Natural Gas Corp., 321 U.S. 620, 627, 64 S.Ct. 724, 88 L.Ed. 967 (1944). A doubt as to whether or not an issue of fact has been raised is enough to preclude a grant of summary judgment. Washington Post Co. v. Keogh, 125 U.S.App.D.C. 32, 34, 365 F.2d 965, 967 (1966).

In examining this case to determine whether appellant raised a genuine issue of material fact, we must view the record in the light most favorable to the party opposing the motion. Bennett v. Kiggins, supra at 59. Adickes v. S. H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970).

Appellant's defense is that the note she executed was assumed by Toomey and Holloway, the persons to whom she sold the P Street property. Because they assumed the note, says appellant, they became the principal obligors, "thereby making her a surety on that obligation and consequently having available to her certain defenses to this action in that status of a surety only." The trial court ruled that appellant had to satisfy two legal requirements in order to become a surety on the note. First, appellant, as maker of the note, had to show that all three parties to the note — the mortgagor-maker, the mortgagee-holder, and the grantee — agreed that the grantee would assume sole responsibility on the note.3 Thus, appellant was required to show that she, Toomey and Holloway, and Miller4 all agreed to an assumption of the note by Toomey and Holloway, in order for appellant to assume the status as a surety. Second, the trial court stated the requirement that "there must be words in the deed of conveyance from which, by fair import, an agreement to pay the debt can be inferred." Shepherd v. May, 115 U.S. 505, 510, 6 S.Ct. 119, 121, 29 L.Ed. 456 (1885). Consequently, said the trial court, appellant was required to show that there was some language in the deed of conveyance which would imply an agreement by Toomey and Holloway to assume the obligation. The court concluded that appellant had not shown the parties' compliance with either requirement and therefore granted appellee's motion for summary judgment.

Since there is little local law relating to these issues, we will first discuss the general principles underlying our analysis. The initial transaction between the parties involved a loan of money to purchase realty, evidenced by a promissory note and secured by a deed of trust. Deeds of trust are viewed as generally equivalent to common law mortgages,5 a mortgage being by definition an interest in property given as security for the payment of a debt. See, Axelrod, Berger & Johnstone, Land Transfer and Finance 137 (1971). Under the law of mortgages, a notion of fundamental importance is "that the security is inseparable from the obligation" for the mortgage's "sole function is to serve as security for the performance of the obligation. The obligation is correctly regarded as the principal thing with the interest in the land attached to it in an extremely important but subsidiary capacity." Osborne, Mortgages § 223 at 441 (2d ed. 1970).

Where there is a separately executed note, accompanying the mortgage, the cases uniformly hold that the mortgage secures the debt (not the instrument itself) with the note viewed as evidence of the mortgagor's primary personal obligation. Mortgages, supra, § 105 at 166; 3 R. Powell, The Law of Real Property ¶ 442 at 559 (1974). Thus, although the transaction may involve both a negotiable instrument (promissory note) and a trust deed, liability of the maker-mortgagor rests on the underlying debt. Indeed the note and the trust deed can be considered merely different parts of a single contract. See, e. g., Cafritz Construction Co. v. Mudrick, 61 App.D.C. 189, 190-91, 59 F.2d 864, 865-66 (1932). The remedy of the holder-mortgagee, of course, may depend on which route he pursues to collect his debt. This case for example, involves a suit on a promissory note6 rather than a mortgage foreclosure and deficiency judgment. In either case, however, the creditor sues on the underlying monetary obligation.

By executing a promissory note, appellant bound herself unconditionally to pay the instrument according to its terms, unless discharged.7 Because a discharge from liability on a promissory note is effected by any act or agreement which would discharge a simple contract for the payment of money, our discussion must necessarily draw on general principles of contract law. See, e. g., Carter v. Purcellville National Bank, D.C.Mun.App., 158 A.2d 325 (1960); Jones. v. Keiflin, D.C.Mun.App., 154 A.2d 360 (1959). As a mortgagor, appellant remained subject to her duty of performance unless it was discharged according to the rules of contract governing the particular obligation by which she was bound. Mortgages, supra § 247 at 502-03.

Appellant's contract defense, that a subsequent purchaser of the property assumed the note, relegating appellant to surety status and making available the surety defenses, must be evaluated in light of District of Columbia case law governing the creation of a principal-surety relation in a mortgage context. The availability of the suretyship defenses asserted by appellant (e. g., discharge of the surety by modification of the principal obligation) must be resolved according to the common law because the execution and alleged assumption of the note occurred before the effective date of the Uniform Commercial Code in the District of Columbia.8

Initially, the suretyship problem arises where the original mortgagor, bound to a primary liability, becomes a surety through the assumption of this liability by another, in connection with the sale of mortgaged land. According to the Restatement of Security § 83 at 239 (1941):

The suretyship relation is created where the surety . . . (c) having been a principal obligor, his obligation, without a novation,9 has been assumed by another or his property has been transferred under such circumstances as to place the property under the primary burden of the obligation.

In mortgage law, "assumption" is a term of art, defined by reference to the transaction between buyer and seller. Where a mortgagor transfers mortgaged land, the land always remains "subject to" the mortgage, that is, bears the principal burden of the mortgage, but the grantee is not personally obligated to pay off the debt which is secured by the property. The grantee may, however, not only acquire the property subject to the encumbrance, but specifically agree with the seller to assume personal and primary responsibility for payment of the debt secured by the mortgage. Where the buyer "assumes" the debt he becomes primarily liable on the note, and the original maker is relegated to the status of surety. See generally Restatement of Security, supra, § 83, Comment on clause (c) at 243; Mortgages, supra, § 248; Land Transfer and Finance, supra at 161-70.

Whether an assumption by the grantee occurs depends, in the District of Columbia, on the existence of an agreement between the grantor and grantee. Preferably, the agreement will be express, as where there "are words in the deed of conveyance from which, by fair import, an agreement to pay the debt can be inferred." Shepherd v. May, supra, 115 U.S. at 510, 6 S.Ct. at 119.10 However, the agreement to assume payment, as between the grantor and his grantee, can be implied as well as express,11 and in some cases may be separate from the deed conveying the property. See, e. g., Brice v. Griffin, 269 Md. 558, 307 A.2d 660, 662 (Md. 1973).

Where a grantee assumes the debt of the mortgagor, the surety-principal relationship only...

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