Case ID: ohio-st_117/html/0362-01.html
Source: Caselaw Access Project
Author: {"author": "Jones, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Grant v. Kinney et al.
    
      Statute of frauds—Agreements required to be in writing— Grantee’s verbal promise to pay mortgage note if foreclosure dismissed—An original promise to mortgagee, upon sufficient consideration and not within statute, when.
    
    A holder of a second mortgage instituted proceedings for its foreclosure. Thereafter and while such foreclosure suit was pending, Grant, a purchaser acquiring the mortgaged premises, verbally agreed with the second mortgagee that, if the latter would dismiss his pending suit, pay the costs thereof and credit his second mortgage notes with interest then accrued thereon, he, Grant, would pay the mortgagee the principal of an over-due mortgage note amounting to $500.00 and would assume the balance of the mortgage indebtedness with interest from the date of the verbal agreement; Held: That such verbal promise made to the mortgagee was an original and not a collateral promise; it was made upon a sufficient consideration subserving a pecuniary purpose involving a benefit to the promisor and was not within the statute of frauds.
    (No. 20519
    Decided November 30, 1927.)
    Certified by the Court of Appeals of Seneca county.
    The Seneca County Court of Appeals certified this cause to this court upon finding that its judgment of reversal was in conflict with the judgment presented upon the same question by the Cuyahoga County Court of Appeals in the case of Leichtman v. Stein, decided January 26, 1914, and reported in 3 Ohio App., 15.
    The present suit was a foreclosure suit filed by the defendants in error on April 7, 1923, wherein a personal judgment was sought against George E. Grant, the plaintiff in error. On March 4, 1920, one Hinesman and wife, who then owned the premises in question, executed a second mortgage to Ervin L. Kinney and wife, securing a series of six promissory notes. The Hoytville Bank Company held a first mortgage, which was a prior lien upon the premises. On October 25, 1921, Hinesman and wife conveyed the premises to Estella S. Pierce by deed of general warranty, and as part of the consideration therefor said Pierce assumed the payment of a series of notes secured by said second mortgage. These notes becoming due and unpaid, the Kinneys brought an action in foreclosure, in which action they sought a personal judgment against the plaintiff in error, George E. Grant. In their petition in this cause, the Kinneys allege that prior to June 29, 1922, they had brought an action in foreclosure upon the said second mortgage, and that one of the notes for $500 was past due, and that at that time the total amount of accrued interest on the unpaid mortgage notes was $124.36.
    On June 26, 1922, Estella S. Pierce and her husband conveyed the premises to Grant, the plaintiff in error, in which conveyance there was a provision providing that “the grantee herein does not assume any personal liability of payment thereof, the mortgagee only having right of foreclosure. ’ ’ Said deed from Pierce to Grant was not received for record until the 29th day of June, 1922, at 1 p. m. This was the day on which the record discloses that Grant verbally represented to the Kinneys that if they would dismiss the pending suit, remit the interest then accrued upon all of said mortgage notes, cancel and surrender said note for $500 then due, and pay the costs of and dismiss the suit, he, Grant, would, in consideration of the remission of all accrued interest on the various mortgage notes and the cancellation of said note and the dismissal of said suit and payment of costs by the Kinneys, purchase said real estate from Estella S. Pierce and would pay the Kinneys the sum of $500, that being the principal of one of said mortgage notes then due, and would assume the balance of the mortgage indebtedness as it became due, together with the interest thereafter accruing.
    It is alleged in the petition that the Kinneys in consideration of said agreement of assumption did dismiss the suit, pay the costs thereof, and credit all of said remaining notes with payment of interest up to June 29, 1922.
    In this action Grant answered, denying that he at any time, either orally or in writing assumed or promised to pay the balance of the mortgage indebtedness as set forth in the petition. He alleged that he had no knowledge of the pending foreclosure proceedings brought by the Kinneys against Pierce until after he had received a warranty deed for the premises from Estella S. Pierce; that when he received this information concerning the foreclosure suit he refused to consummate the purchase until he was assured by the Kinneys that*if he would proceed with the purchase and pay them $500 they would dismiss the foreclosure suit and pay the costs and remit all past-due interest on the mortgage indebtedness up to the 29th of June, 1922. He alleged that it was expressly understood and agreed by the Kinneys and himself that he, Grant, was not to assume or incur any personal liability whatever in connection with the mortgages covering said real estate; and that his deed from Pierce contained an express stipulation to that effect.
    In their reply the Kinneys denied all these allegations contained in Grant’s answer.
    This cause was submitted to a court and jury upon the evidence, and at the conclusion of the plaintiffs’ testimony, upon motion of the defendant, Grant, the court ordered the jury to return a verdict in favor of the defendant. This the jury did and judgment was accordingly rendered. This judgment was reversed by the Court of Appeal's, for the reason, as stated in its journal entry, “that this case does not come within the statute of frauds.” The Court of Appeals remanded the cause to the common pleas court of Seneca county for further proceedings according to law.
    In the course of the trial the plaintiffs called Grant for cross-examination. He admitted that he-had a conference with the Kinneys on June 29,1922, in the office of one of the attorneys. He explicitly denied having made any agreement whatever concerning the assumption of the mortgage indebtedness. He testified that at the time of the conference on the 29th of June he had the deed of Pierce, executed on June 26th, in his pocket; and that this deed contained a provision whereby he was to as-' sume no personal liability upon the mortgage notes.
    One of the plaintiffs below, Ervin L. Kinney, was thereupon called as a witness and testified that Grant was in conference with him at the attorney’s office on June 29, 1922, and that there were present at that time his wife, the attorney, Grant himself, and the husband of Estella S. Pierce. He was then asked:
    “Q. You may tell the jury what was then done and said with reference to these notes with Mr. Grant at that time. A. We went up there and Mr. Grant said: ‘If you throw off the interest,
    I will pay this $500 note and assume the rest of them.’ If we would dismiss the case that was pending against him, he would take care of the rest of them. He said he was worth it and he would pay them.”
    Mrs. Kinney testified to the same effect. Kinney testified that Grant paid one $500 note, and that he credited all the interest due on the remainder of the notes as having been paid up to June 29, 1922, and that the amount so credited was about $120. He also testified that he dismissed the pending foreclosure suit and paid the costs.
    The attorney, Wade, who was present at the conference, was also called as a witness. He testified that the two Kinneys, Grant, and Pierce were at his office on June 29, 1922; that Mr. Grant said that he was trying to effect a deal for the premises which the Pierces owned, and that he would be willing to buy the farm provided “he got set right with Mr. Kinney and his wife;” that they talked over the amount then due and Mr. Grant agreed “that, if Kinney would throw off the interest and dismiss the suit that was pending in Tiffin and pay the costs, he would assume and pay the $500 note that was then due; that is, he would pay the one in cash and the others as they became due later on; ” and that Kinney and his wife accepted the proposition to throw off the interest. The pending foreclosure suit was dismissed by tbe Kinneys, and the costs amounting to $14 or $15 were paid by them. Wade testified that Grant also stated that he would not deal with Pierce for the purchase of the premises until he had first settled with Kinney and knew what he had to pay.
    The testimony of the Kinneys and Wade was objected to by counsel for Grant. These objections were overruled at the time, but evidently the trial court, since he later directed a verdict in favor of Grant, must have held against its competency.
    The property was sold under foreclosure proceedings, but the proceeds were insufficient to satisfy both mortgages thereon. ,
    
      Mr. N. R. Harrington, and Mr. George E. Schroth, for plaintiff in error.
    
      Mr. Ora R. Wade, and Mr. Warren P. Dillon, for defendants in error.
   Jones, J.

Section 8621, General Code, commonly known as the statute of frauds, provides:

“No action shall be brought whereby to charge the defendant, upon a special promise, to answer for the debt, default or miscarriage, of another person; * * * unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged therewith, or some other person thereunto by him or her lawfully authorized.”

The question determinative of this case, as stated by counsel for plaintiff in error, is whether the “verbal agreement alleged by the plaintiffs, upon which plaintiffs ’ claim against the defendant, Grant, was based, was within the statute of frauds.”

Although denied by the defendant, the verbal agreement as alleged in the petition was sustained by the evidence of the Kinneys and the attorney, Wade. If that evidence was competent on the issue made regarding the verbal agreement, the cause should have been submitted to the jury; otherwise-, the court was justified in directing a verdict. The .situation of the parties at the time of the so-called verbal agreement was as follows: The Kinneys had a second mortgage upon the premises which •they were entitled to foreclose, and a petition therefor was pending when the alleged verbal agreement 'was made on June 29, 1922. Grant was desirous of purchasing the property, and three daj^s prior to this date he had received a deed from Pierce, the owner, which contained a provision against the assumption by Grant of personal liability upon the mortgage notes. This deed transaction was between Grant and Pierce, the Kinneys having no knowledge thereof. Whether there was any final delivery of this deed from Pierce to Grant on June 26, 1922, does not appear, but the inference from the testimony of Mr. Wade is that the acquirement of title by Grant from Pierce should be in abeyance until Grant had effected some adjustment of the pending foreclosure suit and had procured a reduction of interest upon the indebtedness secured by the second mortgage upon the premises which Grant purchased.

The defendants in error, who were plaintiffs-below, sought a personal judgment against Grant by reason of an alleged verbal promise made to them by him on June 29, 1922. The plaintiffs alleged, and offered evidence in support of the allegations, that they had a pending suit for foreclosure of a second mortgage upon the premises prior to June 29, 1922; that on this date Grant appeared at the office of an attorney and stated that he proposed to purchase the premises. At that time Grant admitted, on cross-examination, that he had a deed for the premises from Pierce bearing title June 26, 1922. This deed contained a clause relieving the grantee from personal liability on account of the mortgage indebtedness. However, Kinney testified that they knew nothing about this deed, and there is no testimony tending to show that they knew its contents or knew that it contained a provision whereby the grantee was not to assume any personal liability upon the second mortgage.

The testimony of the Kinneys, plaintiffs below, was to the effect that on June 29, 1922, Grant verbally agreed with them that if they would dismiss the foreclosure proceeding and pay the costs thereof, and would throw off all interest then accrued on the mortgage notes, he would pay the $500 note then due and assume the notes and interest thereafter payable. It was in testimony that thereafter the Kinneys dismissed their foreclosure proceedings, paid the costs, amounting to $14 or $15, credited the interest accrued up to that time on the several mortgage notes, and received from Grant the sum of $500 upon the note then due. The amount of interest remitted and credited was about $120, to which extent Grant’s purchase would be relieved from the lien.

It is conceded by the parties that Grant thereafter took possession of the premises. Was the agreement so testified to an original or collateral one upon the part of Grant? If it was collateral, and was one whereby he only became the surety or guarantor of the mortgage debt, then the special promise testified to on the trial would be within the statute of frauds, and under its terms no action could be brought to charge the plaintiff in error therewith. On the other hand, if it was an independent contract, made upon sufficient consideration, where the purpose of Grant was to achieve benefit for himself, the verbal promise so made would be an original and not a collateral promise, and would be enforceable.

Under the circumstances testified to on the trial, we are of the opinion that the rule announced in Crawford v. Edison, 45 Ohio St., 239, 13 N. E., 80, applies. The first proposition of the syllabus in that case is:

“When the leading object of the promisor is, not to answer for another, but to subserve some pecuniary or business purpose of his own, involving a benefit to himself, or damage to the other contracting party, his promise is not within the statute of frauds, although it may be in form a promise to pay the debt of another and its performance may incidentally have the effect of extinguishing that liability.”

That proposition is simply an adoption of the language employed by Mr. Justice Clifford in Emerson v. Slater, 63 U. S., (22 How.), 28, 43, 16 L. Ed., 360, and is supported by a wealth of authority, as shown in the various cases cited under the text found in 25 Ruling Case Law, 494, Section 78. Among other cases, see Frohardt Bros. v. Duff, 156 Iowa, 144, 135 N. W., 609, 40 L. R. A. (N. S.), 242, Ann. Cas., 1915B, 254; Manning v. Anthony, 208 Mass., 399, 94 N. E., 466, 32 L. R. A., (N. S.), 1179; Winn v. Hillyer, 43 Mo. App., 139; Johnson v. Huffaker, 99 Kan., 466, 162 P., 1150, L. R. A., 1917D, 872. The Huffaher case is peculiarly similar to the instant case. The syllabus therein is as follows:

“A promise to pay an existing note and mortgage executed by another, made to subserve the purpose and protect the interest of the promisor who had become the owner of the mortgaged land, the consideration for the promise being the forbearance of the creditor to whom the promise was made in bringing a foreclosure proceeding, constitutes an original undertaking of the promisor and is valid though not in writing.”

Grant had the title or proposed to acquire the title to the premises covered by the second mortgagé; he sought to derive benefit for himself, as such purchaser, by the dismissal of the pending action, at the cost of the Kinneys, and by reduction of the mortgage debt upon the premises the title to which he was acquiring. On the other hand, the Kinneys, under the agreement and its acceptance by them, were placed at a disadvantage if the agreement were not enforced. The forbearance to prosecute the pending suit, their payment of the costs of dismissal, and the remission of all interest up to June 29, 1922, undoubtedly were sufficient consideration for the promises made. If the verbal promises made to Grant at the time were not that the debt should be reduced by the sum of $120 of interest credited, but reduced by a sum equal to one-half of the amount of the debt secured by the second mortgage, who would question the sufficiency of consideration or the exception of such verbal agreement from the statute of frauds ? The underlying legal principle is the same, whether Grant obtained a reduction of the mortgage debt in an amount equal to $120, or obtained a reduction equal to ten times that amount. The benefit or detriment accruing to the respective parties would be simply one of degree.

Counsel for plaintiff in error advance the belated argument to this effect: That before this verbal testimony could be admitted upon the trial below, it would be incumbent upon the Kinneys to seek a reformation of the deed made by Pierce to Grant, wherein was contained the provision that Grant was not to assume personal liability for the payment of the second mortgage debt. Obviously, this argument is not tenable and cannot be sustained. In the first place, it was not necessary for the Kinneys to obtain the reformation of an instrument to which they were not a party, and the provisions of which were to them unknown; and in the second place, the agreement having subsequently been made, upon a new distinct, and sufficient consideration, after the time when said deed from Pierce to Grant was made, the testimony would have been relevant and competent in that aspect of the case.

The trial court directed a verdict for the defendant, evidently upon the theory that the evidence relating to an agreement not in writing was incompetent and came within the statute of frauds. The Court of Appeals reversed the judgment and remanded the cause to the common pleas court for further proceedings according to law. The pleadings of the parties made a direct issue as to whether such verbal agreement was made; and, since that issue has not been disposed of in the trial court, the judgment of the Court of Appeals will be affirmed and the cause remanded to the common pleas court, in conformance with the judgment of the Court of Appeals.

Judgment affirmed.

Marshall, C. J., Day, Allen, Kinkade and Matthias, JJ., concur.