Home v. Selling

BURNETT, J. 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. 1. According to the decisions in ithis state, where one accepts a deed which not only reqites 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 Pac. 168); Farmers’ National Bank v. Gates, 33 Or. 388 (54 Pac. 205, 72 Am. St. Rep. 724); Hoffman v. Habighorst, 49 Or. 379, 391 (89 Pac. 952, 91 Pac. 20). It is plain, therefore, that the acceptance of the deeds mentioned, containing the clauses alreajdy quoted, made May and the Investment Company p¿rsonally liable to pay the mortgage debt. — 433 — 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 ease cited by the defendants is Keller v. Ashford, 133 U. S. 610 (33 L. Ed. 667, 10 Sup. Ct. Rep. 494). In that instance one Thompson was the owner of certain realty in the City of Washington. He encumbered 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 encumbrances 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 sev — 434 — eral 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 courts prevails respecting remedies^ In later cases, notably Willard v. Wood, 135 U. S. 309 (34 L. Ed. 210, 10 Sup. Ct. Rep. 831), 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 ithe 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 Ins. Co. v. Hanford, 143 U. S. 187, 190 (36 L. Ed. 118, 12 Sup. Ct. Rep. 437), the court recognized the condition that in various stktes the law based upon the decisions of the local courts, was that an action could be maintained under such circumstances and that it was hot 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 principia! 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 enforce — 435 — able according to the remedy afforded by the lex fori. The effect of the law of the place on the remedy is discussed in Gibson v. Victor Talking Machine Co. (D. C.), 232 Fed. 225. Oregon precedents are numerous to the effect that on a contract properly made for the benefit of a third person, he can bring an action directly against the promisor. The early case of Baker v. Eglin, 11 Or. 333 (8 Pac. 280), recognized the liability of the promisor to the third person, so as to exonerate the former from being held as a garnishee in the action of other creditors of the promisee. The case does not make any ruling upon the remedy by which the third person might enforce his interest in that contract, but in the following cases the doctrine is recognized that an action at law would lie: Hughes v. Oregon Ry. & Nav. Co., 11 Or. 437 (5 Pac. 206); Schneider v. White, 12 Or. 503 (8 Pac. 652); Chrisman v. State Ins. Co., 16 Or. 283 (18 Pac. 466); Washburn v. Interstate Investment Co., 26 Or. 436 (36 Pac. 533, 38 Pac. 620); Feldman v. McGuire, 34 Or. 309 (55 Pac. 872); Miles v. Bowers, 49 Or. 429, 434 (90 Pac. 905); Hoffman v. Habighorst, 49 Or. 379 (89 Pac. 952); Oregon Mill & Grain Co. v. Kirkpatrick, 66 Or. 21 (133 Pac. 69); Baker City Mercantile Co. v. Idaho Cement Pipe Co., 67 Or. 372 (136 Pac. 23). It is said in 13 O. J. 705, Section 815: “In most of the states the English doctrine that where a person makes a promise to another for the benefit of a third person the latter cannot maintain an action on it is not recognized to the full extent, but it is held, subject to the qualifications hereafter stated, that the action may be maintained. This is now the prevailing doctrine in the United States”; citing a wealth of authorities. — 436 — But it is not every agreement to discharge an obligation to a third party that will support an action at law by the latter. The principle is thus stated by Mr. Chief Justice Bean in Washburn v. Interstate Investment Co., 26 Or. 436, 441 (38 Pac. 620, 621): “The prevailing doctrine in this country undoubtedly is that, where' one person, as a consideration or part consideration, for an executed cjontract, promises another, for a consideration moving from him to pay or discharge some legal obligation or debt due from such other to a third person, the latter, although a stranger to the consideration, and not an immediate party to the contract, may maintain an action thereon, if it was made directly and primarily for his benefit.” In Vrooman v. Turner, 69 N. Y. 280 (25 Am. Rep. 195), the following language was used, and approved in Kansas City Sewer Pipe Co. v. Thompson, 120 Mo. 218 (25 S. W. 522): “To give a third party who may .derive a benefit from the performance of the promise, an action, there must be, first, an intent by the promisee to secure some benefit to the third party, and second, some privity between the two, the promisee and the party to be benefited, and some obligation .or duty owing from the former to the latter which would give him a legal or equitable claim to the benefit of the; promise, or an equivalent from him personally.” ' 2. The present case comes within the doctrine thus announced, which, we think, is well settled by the authorities. The stipulation to pay the mortgage was for the benefit of the holder thereof, directly. There was a privity between the mortgagor, who is the promisee, and the holder of the mortgage, resulting from that instrument. There was an obligation from the original mortgagor to the mortgageb to pay; hence, when the mortgagor conveyed his property to May, who assumed the mortgage, at once an obligation — 437 — arose which, under our precedents, considering the lex fori, could be enforced by an action at law. The defendants cite Parker v. Jeffery, 26 Or. 186 (37 Pac. 712); Washburn v. Interstate Investment Co., 26 Or. 436 (36 Pac. 533, 38 Pac. 620), and Brower Lumber Co. v. Miller, 28 Or. 565 (43 Pac. 659, 52 Am. St. Rep. 807). Parker v. Jeffery was a case in which a contractor had given a bond to the city of Portland to pay for all labor and materials used in the construction of a sewer. This occurred before our present statute on that subject was enacted. No particular claim of any individual was required to be paid. In Washburn v. Interstate Investment Co. the defendant had agreed to advance to a certain concern money to pay the latter’s debts without specifying them, and not to exceed a certain amount. Similar circumstances were present in Brower Lumber Co. v. Miller. In each of these cases nothing passed to the promisor from the promisee in which the third party had any interest or to which he had any claim. This element, which otherwise would furnish a common bond or quasi privity among the three parties, was absent. This circumstance differentiates these cases from the present contention and those like it. The mortgaged property, passing from the mortgagor to his grantee, in which the third party has an interest by virtue of his mortgage, puts the instant ease in the class recognized by the quoted language of this court in the Washburn case. 3. One reason given by the courts which refuse to enforce such an obligation except in equity is that the immediate parties to the agreement could annul the same, but that matter is controlled by this doctrine, that such a contract cannot be rescinded by the parties thereto after it has been acted upon or accepted by the — 438 — third party: Davis v. Calloway, 30 Ind. 112 (95 Am. Dec. 671); Dodge v. Moss, 82 Ky. 441; Pecquet v. Pecquet, 17 La. Ann. 204; Mitchell v. Cooley, 5 Rob. (La.) 240; Gifford v. Corrigan, 117 N. Y. 257 (22 N. E. 756, 15 Am. St. Rep. 508, 6 L. R. A. 610); Putney v. Farnham, 27 Wis. 187 (9 Am. Rep. 459). 4. Bringing an action by the mortgagee on the contract for his benefit is an acceptance thereof by him: Taylor v. Ingersoll, 18 Colo. App. 272 (71 Pac. 398); McCoy v. McCoy, 32 Ind. App. 38 (69 N. E. 193, 102 Am. St. Rep. 223); Motley v. Manufacturers’ Ins. Co., 29 Me. 337 (50 Am. Dec. 591); Warren v. Batchelder, 16 N. H. 580; Zweitusch v. Becker, 153 Wis. 213 (140 N. W. 1056); Gilbert Pager Co. v. Whiting Paper Co., 123 Wis. 472 (102 N. W. 20). If the rescission of the contract by Jacobs had been mooted here it is foreclosed by the institution of this action which makes it impossible now to abrogate it without the consent of the plaintiff. : 5. We cannot sanction the defense ¡to the effect that no claim had been presented to Mays guardian or to his executors. We remember that he died after the commencement of the action. It is said in Section 38, L. O. L.: “No action shall abate by the death, marriage or other disability of a party, or by the transfer of any interest therein, if the cause of the Action survive or continue. In case of the death, marrjage or other disability of a party, the court may at any time within one year thereafter, on motion, allow the action to be continued by or against his personal representatives or successors in interest.” 6. The effect of sustaining this defense as pleaded would be to abate the action, which the statute just quoted says shall not happen on the death of a party. — 439 — It is not required that a claim shall be presented to a guardian. Strictly speaking, indeed, he is not a party to the action. It is properly brought directly against his ward, who must appear by guardian. 7, 8. The second defense to the effect that neither May nor the Investment Company ever entered into any contract or agreement with the plaintiff to pay it any sum of money whatever, is sham, in the legal sense because as the record discloses, the acceptance of the deed drawn in the form stated, amounts to a contract to pay the mortgage to the holder thereof. Again, the offer pleaded in the third separate answer to convey to the plaintiff the property in satisfaction of the deed, cannot be sustained as a defense, because that is not according to the terms of the contract. The agreement is for payment, which means the delivery of money to the payee in discharge of the debt. The plaintiff cannot be compelled to accept the land in satisfaction of its claim, any more than it could be required to accept municipal bonds or a band of cattle. The demurrer to these three separate defenses was properly sustained. The finding of the court was that the original mortgagor, by the terms of the mortgage, “covenanted and agreed to pay all sums of money, the principal and interest specified in said promissory note at the time therein designated.” We remember that in the deed from Jacobs to May the phrase was 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.” No allusion is made to the note or to any of its incidentals, The agreement is to pay the mortgage and — 440 — the action at law against the present defendant is really upon that stipulation. “If the mortgage contains a covenant to pay the debt secured, although there be no note, bond, or other separate evidence or acknowledgment of the debt, the mortgagor is personally liable, .andean action of debt will lie on the covenant”: 27 Cyc. 1081. 9, 10. In assuming the payment of the mortgage the covenant therein as distinguished from the separate personal note, was the measure of the grantee’s duty. The obligation assumed by him must be construed according to its terms and is not to be enlarged beyond them. The present grantees did not agree to respond directly to the conditions of the note, but only to the mortgage, which latter instrument does not directly bind them to pay more than the prir.cipal and interest of the note, hence the attorneys’ fee must be laid out of the case, although the note itself is quoted in the complaint. In that respect, strictly speaking, the judgment is not in conformity with the findings of fact, but, as stated in Miles v. Bowers, 49 Or. 429, 435 (90 Pac. 905, 907): “The conclusion of law found by the court not being deducible from its findings of facts, the judgment based thereon cannot stand; but, the facts found being sufficient to support a judgment in plaintiff’s favor, it is the better practice for this court t!o correct the conclusions of- law by directing what judgment shall be entered: Coulter v. Portland Trust Co., 20 Or. 469 (26 Pac. 565, 27 Pac. 266); Pacific Lumber Co. v. Prescott, 40 Or. 374 (67 Pac. 207, 416).” “Where an installment of interest on the note or bond secured by a mortgage falls due and remains unpaid, without precipitating a maturity of the entire debt, an action may be maintained to recover such installment, independently of the mortgage, unless such a course is forbidden by the statute”: 27 Cyc. 1277. — 441 — 11. On the authority of Hicks v. Hamilton, 144 Mo. 495 (46 S. W. 432, 66 Am. St. Rep. 431), the contention is made that the Investment Company is a remote grantee and as such is not liable here. In that case the mortgagor conveyed his land merely “subject to the mortgage” without requiring his grantee to assume or pay the encumbrance. The latter in turn deeded the tract to another by an indenture which required that grantee to “assume and pay the mortgage.” Thus the continuity of personal liability was interrupted so that its chain did not unite the original mortgagee with the ultimate grantee and for this reason it was held that the latter was not directly liable to the former. The case at bar is different because the clause assuming and agreeing to pay the mortgage is common to both successive conveyances, which constitutes an unbroken sequence of personal liability from the original mortgagors down to the last grantee. Of course there can be but one satisfaction of the demand, although both grantees are liable. The result is that the judgment is modified by allowing the plaintiff to recover from the defendants the sum of $3,000, without any attorneys’ fees. Modified. McBride, C. J., and Benson and Harris, JJ., concur.