Opinion
Decided December 12th, 1940.
1. Certain defendants, grantees of the property in question, who bought it subject to a mortgage which they assumed and agreed to pay, object to the confirmation of the foreclosure sale unless complainant will give credit for the value of the property. Complainant consents to such an order, but insists that it embody a reservation that the consent shall not operate as a credit in favor of the defendant-mortgagor on account of the sum adjudged to be due by the foreclosure decree. Held, equity will not deprive the impoverished assuming grantees of their equitable right to a credit for the fair value of the property because a possibly well-to-do mortgagor may incidentally benefit. The reservation of the right to recover the full amount of the bond from the mortgagor would nullify the requirement that credit for fair value be given. The order will be entered without the reservation requested by complainant.
2. A purchaser of land who assumes and agrees to pay the mortgage debt becomes, as between himself and the vendor, the principal debtor and the vendor becomes his surety. If complainant consents to give credit for the fair value of the property against the impoverished assuming grantees, who are his principal debtors, the rules of suretyship require a like credit to be given to the surety-mortgagor.
On appeal from an order of the Court of Chancery advised by Vice-Chancellor Bigelow, who filed the following opinion:
"Certain defendants object to confirmation of the foreclosure sale unless complainant will give credit for the value of the property. We have the familiar situation of foreclosure decree followed by complainant-mortgagee bidding in the property at a nominal price. The only novel feature arises from the mortgagor's sale of the property, subject to the mortgage which his grantees assumed and agreed to pay. No proofs have been presented concerning the financial situation of the mortgagor, and so he is presumed to be able to satisfy the mortgage. The assuming grantees are without such means. They are the ones who object to confirmation. The mortgagor, while a party to the foreclosure suit, has not been brought in on this out-crop of the case.
"Complainant consents to an order that, unless it credits the fair value of the mortgaged land, an alias writ shall issue for a resale of the premises, but it insists that the order embody the following provision:
"`That any consent filed by the complainant pursuant to this order shall not operate as a credit in favor of the defendant, Percy C. Stevens (the mortgagor), on account of the moneys adjudged to be due by the final decree entered herein; the complainant shall have the right to recover from said Percy C. Stevens the full amount of the deficiency resulting from the aforesaid sheriff's sale without crediting on account thereof the aforesaid sum of $7,739.98 as and for the net fair value of the mortgaged premises.'
"Let us consider what results would follow an order drawn in accordance with the contention of complainant. Assume that the sale is confirmed and that complainant then compels the mortgagor to pay the bond without crediting the value of the mortgaged premises. The mortgagor would then have an action at law against his grantees on their covenant and so they would be deprived of the protection which Young v. Weber, 117 N.J. Eq. 242, and similar cases were designed to afford. Complainant suggested that the mortgagor on paying the debt — if indeed he is actually able to pay in full — will receive title to the property and may be required to credit the assuming grantees with its value. I doubt it. We do not compel the mortgagee to give such credit; we only make the credit a condition to confirmation of the sale. Again the mortgagor may be unable to pay the full sum which entitles him to redeem the land; and in such case, he will assuredly be able to look to the grantees to make him whole. So much of the proposed order as purports to require credit for fair value would be a mockery, nullified by the reservation of the right to recover from the mortgagor the full amount of the bond.
"Again: `The law is well settled that a purchaser of land who assumes and agrees to pay the mortgage debt, becomes as between himself and vendor, the principal debtor and the vendor becomes his surety.' Reinfeld v. Fidelity Union Trust Co., 123 N.J. Eq. 428; 125 N.J. Eq. 347. If complainant elects, in the present instance, to give credit for fair value upon his cause of action against the impoverished assuming grantees, who are his principal debtors, the rules of suretyship require a like credit to the surety-mortgagor. Sholes v. Eisner, 90 N.J. Law 151, 157; Burack v. Mayers, 121 N.J. Eq. 135; 122 N.J. Eq. 5; Slatoff v. Theurich, 123 N.J. Eq. 593. The clause which complainant desires to have inserted in the order would seem erroneous since it attempts to nullify this rule.
"It is true that the rule on which the grantees rely may be invoked only by the distressed debtor. The affluent debtor may not take advantage of it to avoid payment of his debt. But the grantees should not be deprived of their equitable right because a possibly well-to-do mortgagor may incidentally benefit.
"Let the order be entered without the clause which I have quoted."
Messrs. Hood, Lafferty Campbell, for the appellant.
Messrs. Seymour Seymour, for the respondents.
The order appealed from will be affirmed, for the reasons stated in the opinion filed in the Court of Chancery by Vice-Chancellor Bigelow.
For affirmance — THE CHIEF-JUSTICE, BODINE, DONGES, HEHER, PERSKIE, PORTER, DEAR, WELLS, WOLFSKEIL, RAFFERTY, HAGUE, JJ. 11.
For reversal — PARKER, CASE, JJ. 2.