Case Name: The West Side Building & Loan Company v. Isaac Kaplan et al.
Court: Montgomery County Court of Common Pleas
Jurisdiction: Ohio
Decision Date: 1932-05-04
Citations: 29 Ohio N.P. (n.s.) 569
Docket Number: 
Parties: The West Side Building & Loan Company v. Isaac Kaplan et al.
Judges: 
Reporter: Ohio nisi prius and general term reports (new series)
Volume: 29
Pages: 569–574

Head Matter:
Common Pleas Court of Montgomery County.
The West Side Building & Loan Company v. Isaac Kaplan et al.
Decided May 4, 1932.
I. C. Dels camp, against the demurrer.
M. J. Gilbert, for the demurrer.

Opinion:
SNEDIKER, J.
This case was begun by a filing of a petition by the West Side Building & Loan Company against Isaac Kaplan and others for the foreclosure of a mortgage for $25,000.00. During the progress of the case William E. Watson was made a party defendant. Howard R. DeBoard was also a defendant. In an answer and cross-petition Howard R. DeBoard set up a $2,000.00 note with interest and a mortgage upon the same property covered by the mortgage of the West Side Building & Loan Company, which note was originally made by Isaac Kaplan and Rose Kaplan, codefendants, to Andrew J. DeBoard and endorsed to him. In the cross-pet'ition he set up several conveyances: first, of Kaplan and his wife to Anna H. Hittle et al, in which the $2,000.00 note and mortgage were assumed by the grantees and they agreed to pay the note as part consideration for the conveyance; second, from Anna M. Hittle and her co-grantees in the former deed to Anna K. Osness, in which there was an exception from the warranty of the $2,000.00 note and mortgage to Andrew J. DeBoard, but not an assumption and agreement to pay by the grantee, Anna K. Osness; third, a conveyance from Anna K. Osness of this same property to William E. Watson, in which there was an exception from the warranty of the $2,000.00 note and mortgage which Watson did assume and agree to pay, in the following language: "and a two-thousand-dollar second mortgage held by Mr. DeBoard, all of which the said grantee hereby assumes and agrees to pay."
Watson has filed a general demurrer to the cross-petition on the ground that it does not state facts sufficient to constitute a cause of action against him. The theory of his counsel is that because Watson's grantor, Anna K. Osness, did not assume and agree to pay the $2,000.00 mortgage to DeBoard he is relieved from any liability to the cross-petitioner, Howard R. DeBoard, he having subsequently conveyed the property to William Ernest by a deed which showed an exception from the warranty of the two thousand dollars, "payable to A. J. DeBoard which was by him assigned to Howard DeBoard."
There are two lines of authorities bearing on the point raised by counsel in favor of the demurrer. One is Ryan v. Buckeye State Bldg. & Loan Co., 29 Ohio App., 476; 163 N. E., 719, the second syllabus of which reads:
"In an action to foreclose a mortgage against a defendant, remote grantee of the original mortgagor, a contract made for the benefit of the defendant's immediate grantor by the defendant whereby the mortgage payable to the plaintiff was assumed cannot inure to the benefit of the mortgagee where there was no proof that the defendant's immediate grantor assumed the mortgage."
Another case which holds that a break in the chain of liability for the debt relieves subsequent holders (and this was with respect to a deficiency judgment) is that of Keehl v. Roberts et al, 29 O. L. R. 377; 32 Ohio App., 237.
On the contrary, the Court of Appeals of Summit county, in the case of Greene etc. v. Shepherd et al, held that,
"A grantee who assumed and agreed to pay a note and mortgage is personally liable on a deficiency judgment notwithstanding his grantor did not assume and agree to pay."
And in the case of Mullin v. Clermont County Realty Company, 34 O. L. R. 335, 39 Ohio App., 103, the Hamilton county Circuit Court cites the 143 T'enn., page 681, in which the court said:
"In these cases it is held that the price of the land is a sufficient consideration for the agreement to pay the mortgage debt and the vendor may rightfully direct how, when, and to whom the purchase price of the land may be paid; and where a party purchaser of land agrees as a part of the contract of purchase to assume and pay a mortgage debt existing against the land, the promise so to do is for the benefit of the owner and holder of the debt and may be enforced by such party."
And, again, quoting the 100 Wash, at page 625, the Hamilton county. circuit court say:
"Remote grantees of a mortgagor who covenanted and agreed with their immediate grantors to assume and pay the mortgage are liable to a deficiency judgment although the grantors were not personally liable on the mortgage."
And then the court states:
"The authorities hereinbefore noted indicate the wide divergence of reasoning upon this question. Our own view is that reason and justice require that the definite contract of the grantee to pay the mortgage be enforced even to the extent of a personal judgment, in view of the fact that there was consideration for her promise so to do."
In the 100 Wash., 625-629, the decision contains this language:
"There is a line of decisions holding that the grantee of mortgaged premises, who purchases subject to a mortgage which he assumes and agrees to pay, is not liable for a deficiency arising on foreclosure unless his immediate grantor is also liable; the basis for which ruling is the principle that, where the grantor is liable for the mortgage indebtedness and the deed under which he conveys contains an assumption clause, the grantee becomes the principal debtor by virtue of the agreement, and the grantor occupies the situation of a mere surety for him as to the payment of the mortgage indebtedness, and since the grantor was not himself liable, the relation of principal debtor and surety between the grantor and grantee would not exist and no deficiency judgment could be had. That view is sustained by the following principal cases:
In Hicks v. Hamilton, 144 M. 495, 46 S. W. 432, 66 Am. St. 431, that principle was also followed; But later, in Crone v. Stinde, 156 Mo. 262, 55 S. W. 863, 56 S. W. 907, the Hicks case was expressly overruled. In the Crone case, the opinion declared that the view therein expressed was in line with the great weight of authority and supported by the better reasoning. Some of the cases cited are put upon the ground that a third party cannot sue upon the agreement made between two other persons for his benefit. But we have taken a different view as to that matter, and in Gilmore v. Skookum Box Factory, 20 Wash. 703, 56 Pac. 934, adopted the principle that the beneficiary of a new promise made between two other parties for his benefit, creating a liability on the part of the promisor to pay the beneficiary of the promise in any event and irrespective of any debt due from the promisor to such beneficiary, can maintain such action and recover.
In Dean v. Walker, 107 Ill. 540, 47 Am. Rep. 467, the Supreme Court of Illinois said that the New York cases heretofore mentioned, and others following them, were predicated upon the principle that, where the grantor is liable for the mortgage indebtedness and the deed under which he conveys contains an assumption clause, the grantee becomes the principal debtor by virtue of the agreement, and the grantor occupies the situation of a mere surety for him as to the payment of the'mortgage indebtedness. The Supreme Court of Illinois, however, did not approve of the application of the principle adopted by the New York and other' courts, but adhered to the principle that, where one person makes a promise to another based upon but one consideration for the benefit of a third person, such third person may maintain an action upon it. The Colorado Supreme Court has adhered to the same doctrine, and in Cobb v. Rishel, 15 Colo. App. 384, 62 Pac. 625, held that there was no difference whether the grantor is himself obligated or not, as both promises are based upon a consideration, in the one case there being a manifest consideration, and in the other it being a mere matter of deduction and proof, the legal presumption being that the amount assumed is but a portion of the purchase price of the property.
The identical question was passed upon, and a most instructive opinion written, in McDonald v. Finseth, 32 N. D. 400, 155 N. W. 863. In that case the court held that the grantee of the mortgaged premises, who purchases subject to a mortgage which he assumes and agrees to pay for a deficiency arising on a foreclosure and sale, will be held liable even though his grantor is not personally liable for the payment of the mortgage. The authorities for and against this proposition were there collated and reviewed, and we think the better reasoning sustains the principle there adopted. We have ourselves held, in Harbican v. Chamberlin, 82 Wash. 556, 144 Pac. 717, that the deed, in which it is affirmatively found that the grantee expressly assumed the mortgage, imports a consideration, affirming the decision of the lower court granting a deficiency judgment. As was said in McDonald v. Finseth, supra, we must assume that the amount assumed by the remote grantee was deducted from the purchase price of the land.
We feel that reason and principle sustain the proposition that a remote grantee should be held liable under an assumption of another's debt and mortgage upon the conveyance of premises
When a grantee takes title to property which is subject to a mortgage and assumes and agrees to pay that incumbrance, that assumption is one of the reasons why the conveyance is made to him, and it is a contract with his grantor not only for the benefit of the grantor but for the benefit of the mortgagee who, as a third party for whose bfenefit the mortgage was made, may insist upon the grantee carrying out his promise to satisfy the note and mortgage. We agree with the authorities which so hold.
The demurrer is overruled.