Keller v. . Parrish

Adams, J. By selling tbe mortgaged premises to Parrisb and Patterson, tbe mortgagors, E. M. Cain and bis wife, were not relieved of their personal liability on tbe notes which they bad executed to Hatcher and which Hatcher afterwards endorsed and transferred to tbe plaintiff. And because they accepted their deed subject to tbe mortgages tbe grantees were estopped to deny that tbe mortgages were valid. They became personally liable, not only to their grantor, but directly to tbe bolder of tbe notes and mortgages. Baber v. Hanie, 163 N. C., 588. It is therefore apparent that tbe question immediately confronting us is addressed to tbe relation existing between tbe several parties — -the mortgagors, tbe purchasers of tbe equity of redemption, and tbe plaintiff who bolds in due course tbe notes that were given to Hatcher. Is tbe relation to be determined by tbe application of legal or equitable principles? In Baber v. Hanie, supra, tbe Court said there are two grounds for tbe recovery by a mortgagee from a vendee of tbe mortgagor of a deficiency in tbe mortgage debt after foreclosure: equitable subrogation and tbe broad principle that a third person may maintain an action on a contract made for bis benefit. It was remarked that tbe case presented a good opportunity for tbe application of tbe latter principle, but that tbe decisions of tbe Court bad not gone so far. Tbe case was therefore decided by applying tbe doctrine of equitable subrogation. It was said that tbe right of tbe mortgagee to bold tbe purchaser of tbe equity of redemption upon bis agreement to assume tbe payment of tbe mortgage debt was not enforceable in an action at law upon tbe agreement between tbe mortgagor and tbe purchaser, but was enforceable as a collateral stipulation obtained by tbe mortgagor, which by *737 equitable subrogation inured to tbe benefit of tbe mortgagee. Tbe mortgagee’s privilege being tbat of subrogation to tbe rights of tbe mortgagor, tbe mortgagee could enforce tbe personal liability of tbe purchaser only to tbe extent of tbe deficiency upon a foreclosure of tbe mortgaged premises — and then only if tbe mortgagor was himself personally liable for tbe mortgage debt. As between themselves tbe purchaser occupied tbe position of principal debtor and tbe mortgagor tbat of surety. In tbe Baber case four successive grantees bad assumed tbe mortgagor’s debt; and it was held tbat tbe doctrine of subrogation extended to tbe whole number, tbe last and intervening purchasers of tbe equity of redemption being bound, not only to tbe first purchaser, but to bis vendor and to tbe mortgagee after tbe latter bad applied to bis debt tbe proceeds arising from a sale of tbe mortgaged premises. In Rector v. Lyda, 180 N. C., 577, Walker, J., resorted to tbe legal principle which be bad declined to apply in Baber v. Hanie. Tbe statement in Rector’s case is to this effect: Hudson Williams, after executing to L. I. Jennings bis note and mortgage to secure tbe payment of $2,000 conveyed tbe land described in tbe mortgage to Manly Lyda, who assumed tbe mortgage debt as part consideration for bis purchase. Having died, Jennings and Lyda were represented by their administrators. A verdict was returned in favor of tbe administrator of Jennings against tbe administrator of Lyda and judgment was rendered for tbe amount demanded with interest, but tbe trial court, conforming to tbe decision in Baber v. Sanie, directed tbat no execution should issue until tbe mortgage was foreclosed and tbe amount of tbe deficiency ascertained. On appeal this Court modified tbe judgment by striking out tbe clause requiring foreclosure of tbe mortgage and held tbat without foreclosure tbe action could be maintained. It was said in tbe opinion tbat tbe trial judge bad followed tbe former rule in equity, but tbat tbe action could be maintained on tbe broad principle tbat one for whose benefit a promise is made to another may maintain an action upon tbe promise though neither a party to tbe agreement nor a privy to tbe consideration. Tbe deduction was tbat a mortgagee may maintain a personal action against a purchaser of tbe equity of redemption who has agreed with bis grantor to pay off tbe incumbrance if tbe grantor was himself personally liable upon tbe mortgage debt — a deduction which is supported by tbe citations in tbe opinion and fortified by subsequent decisions. Parlier v. Miller, 186 N. C., 501; Glass Co. v. Fidelity Co., 193 N. C., 769. See Annotation, 21 A. L. R., 413, 454. Tbe party for whose benefit tbe contract is made, being tbe real party in interest,- sues in bis own right, not in tbat of another. Hence it was said in Voorhees v. Porter, 134 N. C., 591, 604, tbat it is immaterial whether tbe liability of tbe original debtor is continued or not. Upon this principle tbe *738 plaintiff’s release of the mortgagor would not of itself bar the plaintiff’s right of recovery. True, the answer to the sixth issue embraces the additional finding that the plaintiff agreed to this release, knowing that Parrish had reconveyed the premises to the mortgagor; but it was held in Rector v. Lyda, supra, that the mortgagee could proceed directly against the grantee or purchaser in an action at law without the concurrence of the mortgagor. By virtue of his promise Parrish became the principal debtor to the mortgagee; he knew that the plaintiff was the assignee of the Hatcher notes; he reconveyed to the mortgagor without consideration. However this transaction may have affected the relation between Parrish and the mortgagor, it did not (the plaintiff not consenting) change the relation existing between Parrish and the plaintiff who, having purchased the notes upon the mortgagee’s representation that Parrish was solvent, sought to enforce the right which accrued to him as the assignee of the mortgagee. Indeed, the action could have been maintained without a foreclosure of the mortgage (Rector v. Lyda, supra); a fortiori could it be maintained after foreclosure and the admitted insolvency of the mortgagor. After the mortgagee has accepted or acted on the faith of the contract the mortgagor and the grantee may not change or annul it in the absence of the mortgagee’s consent. 41 C. J., 749, sec. 815. It follows, then, that the answer to the sixth issue is not a bar to the plaintiff’s recovery. It is contended, in the next place, that the defendant, Parrish, was a necessary party to the suit for foreclosure, but we do not concur. We must not lose sight of the plaintiff’s remedy. He seeks to enforce his right against Parrish, not by a suit in equity, but by an action at law. The action could be maintained without the concurrence of the mortgagor upon the theory that Parrish’s promise to pay the debt constitutes a contract between him and the mortgagor for the benefit of the plaintiff. The action is in the nature of assumpsit. The case of Woodcock v. Bostic, 118 N. C., 822, is explained in Rector v. Lyda, supra. Foreclosure and a sale of the premises was not a condition precedent to the right of the plaintiff to proceed against Parrish. 41 C. J., 750, sec. 819; 753, sec. 822. “The mortgagee, under the rule allowing a third person to sue at law upon a contract made for his benefit may sue without regard to the personal liability of the mortgagor when the grantee has promised upon a sufficient consideration to pay the debt.” Ibid., 755, sec. 827; Voorhees v. Porter, supra. Besides, Parrish reconveyed the land to Cain on 2 January, 1921; the decree of foreclosure was made on 22 May, 1922, and at this time Parrish, while liable in assumpsit on the debt, had no interest in the land. If he had previously occupied the position of mortgagor he was not a necessary defendant in the foreclosure because he had parted with his interest and upon this ground denied that he was *739 liable to the plaintiff. Bernard v. Shemwell, 139 N. C., 446. As we have already pointed out, the reassumption of the debt by the mortgagor did not, in the absence of the plaintiff’s consent, release the defendant from liability to the plaintiff upon his original promise. It will he noted in reference to the eighth issue that the plaintiff did not acquire title to the land by purchasing at his own sale, but at a judicial sale at which he was authorized to bid by the decree of foreclosure, and fraud in conducting the sale was neither proved nor alleged. For the errors complained of there must be a New trial.