Opinion
No. 30621.
May 29, 1933. Suggestion of Error Sustained in Part and Overruled in Part, June 12, 1933.
1. REFORMATION OF INSTRUMENTS.
Grantee may show that debt assumption clause was inserted through fraud or mistake and that he did not in fact assume debt.
2. APPEAL AND ERROR.
Chancellor's decree is final in respect to holding supported by evidence and not appealed from.
3. REFORMATION OF INSTRUMENTS.
Bank assuming mortgage indebtedness by virtue of clause inserted in deed to it held not estopped to deny liability thereunder on ground assumption clause was inserted by mistake where it was not shown parties enforcing mortgage changed their position to their injury or that assumption clause affected their interest.
4. REFORMATION OF INSTRUMENTS.
Plaintiffs held not entitled to enforce mortgage against grantee in deed assuming mortgage, where assumption clause was inserted by mutual mistake, and deed was intended as security for debt.
APPEAL from Chancery Court of Hinds County.
Butler Snow, of Jackson, for appellant.
The mortgagee's rights are derivative, that is, that such a mortgage has no rights than the grantor in the deed.
So far as we have been able to find, the courts of this state have not had occasion to pass upon the questions presented by this appeal. The cases dealing with the assumption of mortgage or unsecured debts in deeds and bills of sale and of the rights of the grantor and the creditor whose debt is assumed, are dealt with in the following cases, viz.:
Vignau v. Ruffins, 1 Walker, 311; Hairston v. Jaudon, 42 Miss. 380; Marquez v. Caldwell, 48 Miss. 23; Sweatman v. Parker, 49 Miss. 19; Lee v. Newman, 55 Miss. 365; Ware v. Allen, 64 Miss. 547; Washington v. Soria, 73 Miss. 665; Wear v. Boogher Dry Goods Company, 84 Miss. 236; Dodge v. Cutrer, 100 Miss. 647; Dodge v. Cutrer, 101 Miss. 845; Barnes v. Jones, 111 Miss. 337; Gilliam v. McLemore, 141 Miss. 253; Palmer v. Bridges, 151 Miss. 12; Arnold v. Lyman, 17 Miss. 400; Washington v. Soria, 73 Miss. 673; Atkinson v. Whitney, 67 Miss. 665.
So far as we know, the cases reviewed are those most directly bearing upon the general propositions now before the court. In none of these cases was the derivative right of the mortgagee discussed. None of them involved the question of accident or mistake. They were all cases where the promise to pay the third person was a part of the consideration agreed to be paid for the property. In none of them did there arise the effect of an assumption clause in a mortgage, or deed poll given as a mortgage, so that, we are compelled to resort to general principles and the authorities of other states for a correct solution of the questions presented by this appeal.
This general question is dealt with in Jones on Mortgages (8 Ed.), sec. 916, et seq.; Wiltsie on Mortgage Foreclosure, sec. 233, et seq., and Devlin on Deeds, sec. 1047, et seq., and notes 78 Am. Dec. 77; L.R.A. 1919A, 999; 21 A.L.R. 433 and 504 and 47 A.L.R. 339.
All the authorities seem to agree that in cases of this kind the right of the mortgagee, or a credit whose debt is assumed, is a derivative right of the mortgagee, and can arise no higher than the rights of the grantor in the deed, save in exceptional circumstances, which do not exist in this case.
Throughout the work of Jones on Mortgages, it is distinctly recognized that the grantee when sued by the mortgagee, whose debt is claimed to have been assumed, may show in defense anything which he might show as a defense had the suit been brought by the mortgagor. For instance, the agreement must be supported by a good consideration. (Section 938.)
The promise may be avoided where the purchaser has been evicted and there has been a total failure of consideration. (Section 942.)
That the assumption was induced by false and fraudulent representations. (Section 942.)
That the clause is inserted through fraud or mistake, that is, that the grantee did not in fact assume the debt. (Section 943.)
Where the grantee reserves the right to annul the deed upon paying a debt. (Section 947.)
The right of a mortgagee who is a gratuitous beneficiary, to enforce an agreement to assume and pay a mortgage debt, is subject to the equities between the parties to the contract.
Flagg v. Munger, 9 N.Y. 483; Dunning v. Levett, 85 N.Y. 30; Lloyd v. Lowe, 63 Colo. 288, L.R.A. 1918A, 999; Clarinda National Bank v. Kirby, 191 Iowa, 786; Becker v. Nelson, 164 Minn. 367; Guarantee Mortgage, etc. Co. v. Cox, 206 N.W. 278; Parker v. Interstate Trust Banking Co., 56 Fed. 792; Epps v. Thompson, 202 Ala. 145, 79 So. 611; Drury v. Hayden, 111 U.S. 223.
That the right of the mortgage creditor is derivative seems to be expressly adjudged, or at least recognized, in this state in the case of Catlett v. Bacon, 33 Miss. 270.
Where the assumption clause is inserted through error and mistake, the grantee is not liable.
Wiltsie on Mortgage Foreclosure, sec. 240; Jones on Mortgages, sec. 943; Crow v. Lewin, 95 N.Y. 433; Dunning v. Levett, 85 N.Y. 30; Flagg v. Munger, 9 N.Y. 483; Lloyd v. Lowe, 63 Colo. 288; L.R.A. 1918A, 999; Becker v. Nelson, 164 Minn. 367; Peters v. Goodrich, 192 Iowa, 790; Real Estate Trust Co. v. Balch, 45 N.Y. Sup. Ct. 528; Guarantee Mortgage Loan Co. v. Cox, 206 N.W. 278; Llewelyn v. Butler, 172 S.W. 413; Epps v. Thompson, 202 Ala. 145; Elliot v. Sackett, 108 U.S. 133; Drury v. Hayden, 111 U.S. 223; Adams v. Wheeler, 122 Ind. 251; Bogart v. Phillips, 112 Mich. 697; Benedict v. Hunt, 32 Iowa, 27; Citizens Bank v. Thomas, 264 S.W. 86; Parker v. Jenks, 36 N.J. Eq. 398; O'Neal v. Clark, 33 N.J. Eq. 444; Raiford v. Clark, 87 Conn. 567; Cushman v. Newburn, 75 Okla. 258; Bradshaw v. Providence Trust Co., 81 Or. 55; Boyd v. Winde, 65 Okla. 141; Parker v. Interstate Trust Banking Co., 56 Fed. 792; Luria v. Bank of Coral Gables, 142 So. 901; Warren v. Snowden, 82 N.Y. 604; Bull v. Tittsworth, 29 N.J. Eq. 73; Brookhart v. Hunter, 163 Wisc. 381; Wisc. S. L. Ass'n v. Boehme, 171 Wisc. 1.
A stipulation in a mortgage, or deed given as a mortgage, whereby the mortgagee assumes and agrees to pay a prior mortgage, does not impose upon the subsequent mortgagee personal liability for the prior mortgage debt. Moreover, in such a case, there is no consideration to support the agreement for an assumption.
Sections 946, 952, Jones on Mortgages, note 78 Am. Dec. 77; Garnsey v. Rogers, 47 N.Y. 233, 7 Am. Rep. 440; Arnaud v. Greeg, 29 N.J. Eq. 482; Root v. Wright, 84 N.Y. 73; Boyd v. Winde, 65 Okla. 141; Flagg v. Munger, 9 N.Y. 482; Llewelyn v. Butler, 172 S.W. 413; Guarantee Mortgage Loan Co. v. Cox, 206 N.W. 278; Gayner v. Hicks, 131 Mass. 124; Parker v. International Bank Trust Co., 56 Fed. 729; Broadbent v. Hudder, 83 Wisc. 380; Merriam v. Schmidt, 211 Ill. 363; Wisc. S. L. Assn. v. Boehme, 171 Wisc. 1.
It seems that all the authorities hold that there must be a sufficient consideration for the assumption of the debt.
Allen v. Smith Brand, 160 Miss. 303.
Horton Sanders, of Jackson, for appellees.
After a careful examination of appellant's brief, it will be seen that the appellant treats the deed in question as a mortgage, without discussion or argument, and takes the position that the court held as a matter of fact, that the deed was intended as a mortgage, but that is not true as reflected by the record or is there any evidence to support such a finding as between the appellant and appellees.
Notwithstanding the decree pro confesso, the final decree, and the failure of appellant to appear in the court below, if, on the whole case as presented here, it appears that the appellee was not entitled to relief, the decree must be set aside.
Minor v. Steward, 2 How. 912; Kelly v. Brooks, 57 Miss. 225; Hargrove v. Martin, 6 S. M. 61; Simpson v. Smith Sons Co., 75 Miss. 505, 22 So. 805; Soria v. Stowe, 66 Miss. 615, 6 So. 317.
There was not sufficient or competent evidence upon which the court could decree the deed to be intended as mortgage.
From a careful examination of the records, and we believe appellant will concede it to be true, that there were no charges of fraud in the pleadings or was there any fraud attempted to be proven at the trial, so the question of fraud does not concern us here.
Where one desires to offer parole proof that a deed absolute in form is a mortgage in fact, it must first be shown that the grantor remained in possession of the land.
Jordan v. Jordan, 111 So. 102.
What imposes a liability upon the grantee in a deed wherein a debt is assumed? We think that it is by virtue of the assumption in the deed accepted by them.
Gilliam v. McLemore, 106 So. 99.
When the deed executed by the grantor contains a clause sufficiently showing such an intent, the acceptance thereof by the grantee consummates the assumption, and creates a personal liability on his part, which inures to the benefit of the mortgagee as though he had executed the deed.
Gilliam v. McLemore, 106 So. 99.
In the case at bar there can be no question about the deed containing a sufficient assumption clause.
The appellant became the principal debtor, the grantor in the deed (Bradshaw) became a surety and according to the rule of the McLemore case, supra, it would not have been necessary to have made Bradshaw a party to this suit for the appellees could have looked entirely to the bank for its money.
There is not one scintilla of evidence of record showing a mutual mistake, error or oversight, but on the other hand and by the testimony of this case, it is shown that both parties were guilty of gross negligence. It is our understanding of the law, and we take the question so well settled that we will not cite any authorities to sustain the proposition, that a party cannot complain of his own negligence. In other words, "Equity aids the diligent and not those who sleep on their rights."
A person cannot avoid a written contract, which he has entered into on the grounds that he did not read it or have it read to him and that he supposed its terms were different, unless he was induced not to read it or have it read to him by fraudulent representations made to him by the other party on which he was entitled to rely.
Continental Jewelry Company v. Joseph, 105 So. 639.
In our own state it is well settled that the subsequent grantees become primarily liable, by virtue of the assumption of the deed accepted by them, to the original mortgagee.
Sweatman v. Parker, 49 Miss. 19; Lee v. Newman, 55 Miss. 365; Dodge v. Cutrer, 100 Miss. 647, 56 So. 455; Barnes v. Jones, 111 Miss. 337, 71 So. 573.
Argued orally by George Butler, for appellant, and by W.T. Horton, for appellee.
This case arose by bill in equity filed by Hammer and Eyrich against the Merchants' Manufacturers' Bank of Ellisville, Mississippi, and others, in which Hammer and Eyrich sought to recover from the bank an indebtedness due by Bradshaw, alleged to have been assumed by the bank by virtue of a clause in a deed dated February 9, 1930, executed to the bank, reciting as a part of the consideration as follows: "The assumption by the grantee of the liability for the indebtedness secured by the deed of trust hereinafter mentioned." This deed of trust is described in the deed from Bradshaw to the bank.
The bank made its answer a cross-bill against all the other parties, and alleged that the above language was inserted in the deed made to it by Bradshaw by mutual mistake of the parties thereto, and that, in truth and in fact, the deed was intended to be a mortgage.
Bradshaw answered admitting the material allegations of the bank's cross-bill. Hammer and Eyrich denied these allegations.
The court below held that the bank, by virtue of said clause, was liable to Hammer and Eyrich, and allowed them a recovery from the bank on its assumption in the deed of the amount adjudged to be due by Bradshaw; that the deed should be corrected by striking out the above clause; and that as to all the parties, except Hammer and Eyrich, the instrument was a mortgage.
The evidence is ample to support the chancellor's finding that Bradshaw, the grantor, remained in possession, and the evidence is uncontradicted that there was no agreement between the parties that the bank was to assume any indebtedness on the lands granted to it by him. The finding of the chancellor that this language was inserted by mutual mistake is fully sustained, as is his finding that the deed was intended only as security for the debt.
We are unable to perceive upon what theory the court below held that by virtue of said deed, Hammer and Eyrich acquired a greater right by virtue of Bradshaw's deed to the bank than was vested in Bradshaw. There is no appeal from that part of the decree holding that the deed was, in fact, a mortgage, and that the clause assuming liability should be eliminated from the deed as a mutual mistake. We can perceive no difference, in the application of the facts of this case, to the position of Hammer and Eyrich than if Bradshaw had procured assumption of liability by fraud, or if, in fact and in truth, the deed had been a forgery.
The rights under the deed in question accruing to Hammer and Eyrich are derivative from the grantor in the deed, Bradshaw, and the decree correcting the deed, and the equities in the bill, must control the rights of the gratuitous beneficiaries, Hammer and Eyrich, in this case, there being no other agreement except that contained in the warranty deed.
The grantee may show that the assumption clause was inserted through fraud or mistake, and that he did not, in fact, assume the debt. See Jones on Mortgages (2 Ed.), section 942, and Wiltsie on Mortgage Foreclosures, section 240.
Counsel for appellees, Hammer and Eyrich, undertake to argue that there was error in the decree of the chancellor in holding that the clause was inserted by mistake. There was no appeal here as to that, and the decree is final in that respect, and is supported by the evidence in the case. The appellees also assert an estoppel, which is not made clear by this record, and which does not disclose that Hammer and Eyrich had changed their position in any particular to their injury, or that the assumption clause in this deed had, in any way, affected their interest, or that they had been led to do, or not to do, anything by reason thereof. Hart v. Foundry Co., 72 Miss. 809; syllabus 5, 17 So. 769.
It follows that we are of the opinion that Hammer and Eyrich's rights are derived from their mortgagor, Bradshaw. The decree of the court below is that he has no rights, that the assumption clause is void as to him, and it therefore necessarily follows that Hammer and Eyrich could not maintain their bill against the Merchants' Manufacturers' Bank.
The original bill is therefore finally dismissed, and decree is entered here for the appellant.
Reversed and decree for appellant.
ON SUGGESTION OF ERROR.
On a former day of this term a decree was entered reversing the decree of the court below and finally dismissing the original bill, which sought relief against parties other than the only appellant herein. The decree entered in this court should have reversed the decree of the court below and finally dismissed the bill of complaint as to the Merchants' Manufacturers' Bank only. The decree previously entered will, therefore, be set aside and a proper one entered. In all other respects the suggestion of error filed by the appellees will be overruled.
Sustained in part, and overruled in part.