Wood v. Smith

Eothrock, J.

i subrogation. — I. It will be observed that by the agreed statement of facts it is stipulated that Susan Smith, by the terms of the deed from Wood to herself, assumed ^ payment 0f the mortgage. A copy of the deed is exhibited with and made a part of the agreed statement of facts. Upon an examination of the deed it appears that it was a conveyance subject to the French mortgage, but there was no undertaking in the deed, upon the part of Susan Smith, that she would pay the mortgage. This apparent contradiction in the agreed facts has been the subject of some controversy between counsel for the respective parties. We think, as the deed was made part of the agreed statement, its provisions must control the rights of the parties so far as they may be affected thereby. But, in the view we take of the questions involved in the case, this difference is not material. When Susan Smith took this conveyance she contracted to pay for the premises she purchased the sum of three thousand two hundred and fifty dollars. Of this sum one thousand two hundred and thirty-one dollars and thirty-five cents, with interest from April 1,1872, was to be paid by her to the holder of the French mortgage. The remainder of the purchase money was to be paid t'o the plaintiff. It is *162 true, the deed having been merely made subject to the mortgage, there was no such obligation as that by its terms.

French, the mortgagee, could have maintained an action against Susan Smith for the debt secured by the mortgage. But it is well settled that where a mortgage debt forms a part of the consideration of the purchase, although the purchaser has not entered into any contract or agreement, by deed or other writing, to pay it, he is bound to that extent to indemnify the grantor. The law implies a promise to that effect from the nature of the transaction. 1 Jones on Mortgages, § 751, and cases cited.

“Where one buys absolutely for a stipulated price, and instead of paying the whole of it to his grantor he is allowed to retain a part, which he agrees to pay to a creditor of a grantor having a lien upon the land, the amount which he thus agrees to pay is his own debt, which, by arrangement with his grantor, he has agreed to pay to the creditor of the latter; and although this arrangement, not being assented to by the creditor, does not discharge the grantor from liability, yet, as between him and the party who has assumed it, the grantor is a mere surety.” Gramsey v. Rogers, 47 N. Y., 233 .

If, then, the rights and obligations of the parties were such that the plaintiff was the mere surety for Susan Smith for the payment of the mortgage debt, it is a familiar and well-established principle that if the plaintiff had paid off the debt while that relation subsisted he would have had the right to be subrogated tu all the rights of the mortgagee, and thus to subject the property to the payment of the mortgage; and if he had paid part of the mortgage debt he would have been entitled to subrogation for the part paid by him.

■a. ——: re. contract. II. We will next consider how the rights of the parties were affected by the contract of rescission. It was to all intents and purposes a contract of rescission. By its terms the parties were to be placed in precisely the same situation they were before the original purchase was made by Susan Smith. Time was not of the essence of the con *163 tract of rescission. Both parties, failed to perform or offer to perform that contract. Susan Smith was the first to attempt its rescission. This she did by procuring her deed from Foss, with whom it had been deposited as an escrow When she did this, and afterward recovered of the plaintiff for the use and occupation of the premises in the action before the justice of the peace, if she had not conveyed the property to the defendant Benham the plainest principles of equity would require that she should place the plaintiff in statu quo by repaying to him the amount he paid on the French mortgage. As she was reinstating herself in her rights under her original purchase from the plaintiff, it would be a strange perversion of justice to hold that she could take the benefits of her purchase without also carrying its burdens. And here we may say that the proceeding before the justice of the peace was not an adjudicication of the claim of the plaintiff to be reimbursed for what he had paid on the mortgage debt, because the plaintiff did not, in the action, set up such claim, and he could not have maintained it if he had. There was no jurisdiction in that court to grant the equitable relief necessary to reimburse the plaintiff, and Benham, who then held the legal title to the property, was not a party. We think it is clear that if the title were now in Susan Smith the plaintiff would, in equity, be entitled to be subrogated to all the rights of French, the mortgagee, to the extent of the amount paid by the plaintiff.

3. — ¡saleto notice! paity‘ III. It remains to be determined whether the plaintiff is entitled to any relief as against the defendant Benham. That Benham assumed the payment of the mortgage by the terms of the deed from Susan Smith to him is not disputed. The deed, so far as it refers to the mortgage, is as follows:

“This deed is made subject to a certain mortgage on said premises held by George French, and assigned to him by John P. Cook, for the sum of one thousand two hundred and thirty dollars and thirty-five cents, due April 1, 1874.

*164 ' “And I covenant with the said Lucius Benham that I hold' said premises by good and perfect title, excepting as above set forth; that I have good right and lawful authority to sell the same; that they are free and clear from all liens and incumbrances whatever.

“And I covenant to warrant and defend the title to the said premises against the lawful claims of all persons whomsoever, except the claim of said Cook mortgage, which is assumed by the said Lucius Benham. ”

Counsel for appellant insists that the defendant Benham is not liable to pay the five hundred and forty-six dollars and eighty-seven cents paid by plaintiff upon the mortgage debt, because there can be no liability to pay more, under the contract to assume the mortgage, than what appeared to be due thereon by the record at the time of his purchase. The ground of counsel’s argument in his own language is this : “When one assumes the payment of a mortgage debt of record he cannot, without proof of actual knowledge, be made liable for more than appears by the record to be due thereon.”

An elaborate argument is presented by the learned counsel upon the law of notice, in which it is contended that the possession of the plaintiff by his tenant, at the time Benham purchased the property, was not constructive notice to Ben-ham of the plaintiff’s claim. It was also urged, as there was no assumption of the payment of the mortgage in the deed from the plaintiff to Susan Smith, there can be no liability from Benham to the plaintiff. A number of authorities are cited to sustain these propositions, which we need not refer to, in the view we take of the case. It is perhaps sufficient to say that in the cases cited by counsel, as sustaining the last above proposition, it does not appear that the first grantees from the mortgagors assumed the payment of the mortgage debts in any way, either by the terms of the deeds or otherwise. In the case at bar Susan Smith did assume the payment of the mortgage debt by retaining so much of *165 the purchase money for that very purpose. But we think that the defendant Benham’s liability to pay the whole amount of this mortgage is fixed by the very terms of the deed. He. assumed to pay the claim of the Cook mortgage. . The ■mortgage described in-the deed as being held by French, and assigned to him by John P. Cook, is in the deed said to be for the sum of one thousand two hundred and thirty dollars and thirty-five cents, due April 1, 1874.

It is said by counsel that the amount named in the deed is only descriptive of the mortgage. 'In this position we cannot concur. We must interpret the contract according to its terms, and in doing so it is always proper to take into consideration the circumstances surrounding the contracting parties. :

■Susan Smith was bound, by every consideration of equity and good conscience, to pay the five hundred and forty-six dollars and eighty-seven cents which the plaintiff had paid on the mortgage. If she had intended only to describe the mortgage, when she inserted the amount thereof in the deed, she did not describe it correctly, for it was not then for the sum of one thousand two hundred and thirty dollars and thirty-five cents. The plaintiff had paid the sum of five hundred and forty-six dollars and eighty-seven cents before that to French, but it was no payment as between the plaintiff and Susan Smith. It does not appear that there was any other mortgage upon the premises, and naming the amount was entirely superfluous, if it was only intended as descriptive.

The, whole instrument, with the attending circumstances, leads to the conclusion that the amount named was part of the amount' which went to make up the purchase money for the property. If the position of the appellant be correct,1 and plaintiff had been compelled before that to pay all of the mortgage debt, then, the amount named being merely descriptive, the mortgage would have been paid, and Benham would have assumed no liability whatever. But this position would *166 he manifestly unsound. We are satisfied that a fair construction of the deed requires the payment of the amount therein named. The length of this opinion precludes a further elaboration of the questions involved.

Affirmed.