Schmitt v. Merriman

Mr. Justice Waterman delivered the opinion of the court. It is a familiar rule that where one person for a valuable consideration makes a- promise to another for the benefit of a third person, such third person may maintain an action lipón it. It is not necessary that any consideration should move from the third person. Thus in conveyance of land, if a part of the consideration is the assumption by the grantee of a mortgage upon the premises, the grantee becomes bound to discharge such incumbrances; and this obligation may be enforced by the mortgagee; and if the deed recite that the grantee assumes and agrees to pay the mortgage, the grantee, by accepting the same, covenants to pay; and such covenant the mortgagee may enforce in an action at law. Dean, use, etc., v. Walker, 107 Ill. 540; Bay v. Williams, 112 Ill. 91; Jones on Mortgages, Sec. 741; Pomeroy’s Eq. Juris., Sec. 1207; Burr v. Beers, 24 N. Y. 178. The mortgagee’s relief depends upon no original equity residing in himself, but upon the right of the mortgagor against his grantee, to which the mortgagee succeeds. Jones on Mortgages, Sec. 756; Crowell v. Hospital of St. Barnabas, 27 N. J. Eq. 650. It is quite true that the parties have a right to rely upon the record of properly recorded instruments; and if appellee had purchased her mortgage after the recording of any of the deeds to appellant, relying upon the assumption clause therein, there perhaps might thus have been created an estoppel which would have prevented the showing by appellant of the truth as to the circumstances of the insertion of such clause and the lack of an obligation upon his part at any time to pay anything to or for or upon the order of his grantor. The mortgage to Elizabeth Lidster was made prior to any conveyance to appellant and she neither gave nor suffered anything upon the strength of any assumption by appellant. We are thus brought face to face with the question whether the rule that a recital in a deed, that the grantee assumes and agrees to pay a mortgage, is and remains in force for the benefit of a mortgagee who has done nothing upon the strength thereof, notwithstanding the grantee may have been induced to accept the deed by fraud or mistake and his grantor has against him, thereunder, no right whatever. The ground upon which is based a grantee’s liability to pay a mortgage he has assumed, or the amount of which has been deducted from the amount of the consideration of the deed to him, in many of the American states is that of contract, a promise to pay the mortgagee, upon a consideration given by the grantor. In this and other states the grantee, as a party beneficially interested, may maintain an action at law upon such promise. In some of the states of the Union thó courts proceed upon the theory that the liability of the grantee to the mortgagee does not arise from contract but results from an application of the equitable doctrine of subrogation. That is, that since by the assumption the mortgagor becomes a surety, the creditor (mortgagee) is entitled to all the securities he holds from the principal debtor (the assuming grantee) and is entitled in equity to enforce the promise made by such grantee. Pomeroy’s Equity Juris., Sec. 1207. Upon whichever theory the right of the mortgagee is placed it is based upon a valid promise made»upon a good consideration. If the promise fail, be shown to have been obtained by fraud, or mistakenly made, the mortgagee who has given nothing, suffered nothing, can not enforce the undertaking. Benedict v. Hunt, 32 la. 27-30; Huebsch v. Scheel, 81 Ill. 281-284; Crowell v. Hospital of Saint Barnabas, 27 N. J. Eq. 651, 653, 655, 656; Arnaud v. Grigg, 28 N. Y. Eq. 482-485; Bull v. Titsworth, 29 N. J. Eq. 73; Bogart v. Phillips, 112 Mich. 697; Webber v. Lawrence, 118 Mich. 630; Southern Home Building & Loan Association v. Winans, 60 Sou.Western Rep. 825; Shields v. McClure, 75 Mo. App. 631; Blass v. Terry, 156 N. Y. 122; Logan v. Miller, 106 la. 511. If, as appellant claimed and offered to show, he never purchased the premises in question and the deed to him was in fact but a mortgage, and instead of his being, when either of the conveyances to him were made, indebted to or under any obligation to pay anything to or for his grantor the reverse was the case, the appellant received nothing for assuming the incumbrance of $9,000, and there was no consideration for a promise to pay the same. Garnsey v. Rogers, 47 N. Y. 233, 239, 240; Gaffney v. Hicks, 131 Mass. 124; Bassett v. Bradley, 48 Conn. 238. The entire doctrine of assumption by purchasers is founded upon the obligation of grantees to pay their indebtedness to their grantors. Thompson v. Dearborn et al., 107 Ill. 87. In the case at bar, Mr. Merriman, the grantor to appellant, testified that he was indebted t-o the appellant in the sum of $3,000, and that he gave the deed to him as security therefor; that there was never any conversation about nor any agreement with Mr. Schmitt in regard to the payment of the mortgage indebtedness; that he never delivered the deed to appellant; that he left it with Mr. Dow, the notary, wrho drew it, to be sent for record; that appellant never offered to purchase the land; that the deed to the Beloit Land Company was made after he had paid his indebtedness to appellant and in pursuance of his, Marriman’s agreement existing with said company when he conveyed to appellant; that when he conveyed to Mr. Schmitt, he, Schmitt, agreed to deed over to the company on payment of the $3,000, and at his, Merriman’s, request he did so convey. The chancellor refused to allow appellant to testify what the real consideration of either of the deeds to him was; whether either of the deeds was ever delivered to him or in his possession; when he first knew that either of the deeds contained a clause by which the grantee agreed to pay the Lidster mortgage or whether he ever purchased the conveyed lands; and held the recital of the existence of such a mortgage, made in the deed to the Beloit Land and Investment Company conclusive evidence against him that he knew of its [existence, that he had accepted the same, and agreed to its terms. . The question in this case is not whether the conveyance. by appellant to the Beloit Land Company is not evidence of his acceptance of the deed to him and knowledge of the-recitals therein, or whether one thereafter dealing with the title may not hold him estopped to deny acceptance and knowledge, but whether such conveyance is conclusive evidence, and whether one who has not hereafter dealt with either title or indebtedness can hold him estopped from showing the truth. A contract to assume an incumbrance is not one of the essential parts of a deed; on the contrary it is extraneous and collateral to the conveyance. Such recital in a deed is not in and of itself sufficient to fix a liability to pay. Something more than this must be shown; the grantee is not estopped by the mere recitals of a deed he did not execute. Thompson v. Dearborn et al., 107 Ill. 91-93; Blass v. Terry, 156 N. Y. 122; Carpenter v. Buller, 8 Meeson & Welsby, 209; South Eastern Railway v. Warton, 6 Hurls. & Hor.526. An estoppel by conduct does not lie in favor of one who has not acted upon the faith of the representation or con-. cealment under which he claims. Notwithstanding the length of time during which that known as the American doctrine of assumption by purchasers, has existed, the ordinary layman does not know that by the language of a recital in a deed to him, he may, at least in favor of third parties, be placed under a burdensome and neither assented nor understood obligation. Usual as is, out of pure good nature, the making of quitclaim deeds by laymen, to property they are aware they do not own, without a careful examination of the manner in which an apparent title has been cast upon them, a rule that by such conveyance they are conclusively presumed to have accepted deeds to them, to have knowledge of and be bound by recitals therein, wrould be most productive of fraud and injustice. The decree of the Circuit Court is reversed and the cause remanded for further proceedings not inconsistent with this opinion. Reversed and remanded.