Lewis v. Hunt

HENDERSON, J.,

pro

tem.

The defendant, William M. Hunt, appeals from a judgment in favor of the plaintiffs Lewis, husband and wife, for breach of contract. The facts, which we deem material for our decision are summarized as follows: The defendant entered into a contract on October 1, 1926, for the purchase from plaintiffs of a certain house and lot, which Mrs. Lewis claimed as her separate property, at a price of $15,000. As part of the purchase price the defendant “assumed and agreed to pay” when it became due on February 1, 1927, a certain note in the sum of $3,500

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secured by a mortgage on the property held by the Bank of Italy. After the transfer of the premises, in further payment of the purchase price the defendant delivered to the plaintiffs his promissory note secured by a deed of trust constituting a second lien on the property. The defendant defaulted in the payment of this note when due, which default was followed by the purchase of the property subject to the mortgage at the foreclosure sale by Mrs. Lewis, who went into possession under the trustee’s deed on February 15, 1930. The defendant, having defaulted in the payment of the note secured by the mortgage, the plaintiffs voluntarily paid the same to the mortgagee bank at its suggestion in order to protect the property from foreclosure and received from the bank what was termed a “release” on the twenty-second day of March, 1930. The plaintiffs sued, and the court rendered judgment, upon the contract of assumption alone. Irrespective of the many objections raised by defendant they may be reduced for our consideration to his single claim that he cannot be legally bound upon a judgment for payment of money until plaintiffs have first foreclosed the mortgage, exhausted their security, and reduced the obligation to a fixed amount on a deficiency judgment, if any.

It is the position of the respondent, which receives the support of the great weight of authority, that the assumption of the mortgage debt by the grantee of the land subject thereto as part of the purchase price is a contract to pay rather than one of indemnity, and a cause of action accrues in favor of the original grantor for the entire sum secured thereby immediately upon the failure of the purchaser to pay the mortgage debt at maturity. (41 C. J., p. 741, sec. 802.) The authorities announcing the majority view ordinarily declare that a recital in a deed stating, “ ‘which mortgage the grantee assumes, or assumes and agrees to pay’ or the conveyance is made ‘subject to the payment of an outstanding mortgage’ ” makes the sum of money represented thereby a part of the purchase price and imposes a personal obligation upon the grantee, which ■ in case of default may be enforced by the mortgagee pursuant to the terms of the contract.