Opinion
Nos. 23757 and 23758
Decided March 29, 1933.
Real property — True deed date may be established by parol, when — Mortgages — Recorded extension agreements not binding on grantee, without notice — Grantee, assuming mortgage, personally liable therefor — Personal judgment lies before or after foreclosure — Subsequent grantee, assuming mortgage, liable notwithstanding break in chain of assumption — Grantee becomes principal debtor and the grantor his surety.
1. A deed is presumed to have been executed and delivered as of the date it bears, but this presumption is rebuttable, and it is well settled that the true date may be established by parol testimony.
2. Extension agreements between a grantor and mortgagee do not bind a grantee who did not have actual notice thereof. Recording of such instruments, with the county recorder of the county in which the mortgaged land is located, does not have the effect of charging such grantee with notice, as such instruments are not of such a character as the law requires to be recorded in order to impart notice.
3. When a grantee expressly assumes and agrees to pay mortgages and interest, as a part of the consideration for the land, he becomes personally liable therefor, and it can make no difference to him whether a personal judgment is awarded against him for a deficiency, before or after the sale of the mortgaged premises on foreclosure.
4. A break in the chain of assumption between an original grantor and mortgagor and a subsequent grantee, does not destroy the privity between the holder of the note and mortgage and a subsequent grantee who assumes and agrees to pay the mortgage and interest, as a part consideration for the land in question; and the mortgagee may maintain an action against such grantee.
5. Where the grantee of real estate, as a part of the purchase price thereof, assumes to pay a debt secured thereon by mortgage, the grantor being also personally bound for the payment, such assumption as between the grantor and grantee constitutes the grantee the principal debtor and the grantor his surety. ( Poe v. Dixon, 60 Ohio St. 124, first proposition of syllabus, approved and followed.)
ERROR to the Court of Appeals of Wyandot county.
On and prior to September 28, 1922, Jerome A. Kline was the owner of a rectangular piece of land containing 200 acres, situated in Wyandot county, Ohio. For some purpose of his own, he divided the land into three tracts of sixty-six and two-thirds acres each. These tracts are treated in these proceedings as the east, middle and west tracts.
On September 28, 1922, Kline executed and delivered to the Provident Life Trust Company of Philadelphia, Pennsylvania, a mortgage for $8,300 on the east and middle tracts, and a mortgage on the west tract for $3,500. By transfers these mortgages came into the hands of the present holder, the Farmers Trust Company of Indianapolis, Indiana. Subsequent to the execution of these mortgages, exact dates not being material, Kline conveyed the west and middle tracts to Mary Johnson, free and clear of incumbrances except a mortgage of $8,300. This deed contained a provision to the effect that Mary Johnson did not assume and agree to pay this mortgage. It will be borne in mind that there was no mortgage for $8,300 on the west and middle tracts, such mortgage being on the east and middle tracts.
Mary Johnson conveyed the west and middle tracts to Beatrice F. Seiller. This deed refers to the $8,300 mortgage and contains the provision that the grantee agrees and assumes to pay this mortgage.
Jerome A. Kline conveyed the east tract to R.M. and Ida M. Carson. This deed provided for the assumption by grantees of a mortgage of $3,500. There was no mortgage for $3,500 on the east tract, such mortgage being on the west tract.
R.M. and Ida Carson conveyed the east tract to Beatrice F. Seiller. This deed contained a provision that grantee assumed the $8,300 and $3,500 mortgages as a part of the consideration for the land.
By these conveyances Beatrice F. Seiller became the owner of all three tracts of land, and she assumed and agreed to pay both mortgages as a part of the consideration for the land.
Charles R. Kellogg was at this time the owner and holder of the mortgages executed by Kline. An extension agreement as to each mortgage was entered into by and between Kellogg, Kline, Beatrice F. Seiller and her husband, Leonard M. Seiller, by means of which the time and amounts of payments were fixed. These extension agreements were entered on the mortgage records of Wyandot county, Ohio.
Beatrice F. Seiller and her husband thereupon conveyed all the real estate in question to the L. B. Holding Company. This deed refers to a mortgage of $8,300 and a mortgage of $3,500, held by the Farmers Trust Company, and contains the further provision: "All of which mortgages, interest, taxes and assessments, the grantee herein assumes and agrees to pay as part of the consideration herein."
Dates now become important.
On October 16, 1928, J. William McCarty, through Baldwin Co., real estate brokers, made in writing a proposal of exchange of properties, by the terms of which he proposed to exchange his equity in property known as No. 55-57 Rich street, Columbus, Ohio, for the J. Kline farm of about 200 acres, located in Wyandot county, Ohio, subject to two first mortgages, one of $7,600 and one of $3,100, held by the Indianapolis Bank Loan Company, bearing six per cent. interest, payable semiannually, plus $200 on the $7,600 mortgage and $100 on the $3,100 mortgage, this to apply on principal.
On October 17, 1928, the L. B. Holding Company accepted this proposition.
The L. B. Holding Company was authorized to transact business, in other words was incorporated, on October 26, 1928.
On October 24, 1928, the L. B. Holding Company signed and acknowledged a deed for the real estate in question to J. William McCarty. This deed was delivered to J. William McCarty on November 1, 1928. This deed contains, as an exception to the covenant against incumbrance, the following provision: "Except a certain mortgage, with a total balance of exactly $7500.00 as of November first, 1928, also a certain mortgage with a total balance of exactly $3000.00 as of Nov. 1, 1928. Both mortgages held by Farmers Trust Company, Indianapolis, Ind. Also except all taxes and assessments due June, 1929, and thereafter. All of which mortgages, interest, taxes and assessments the grantee herein assumes and agrees to pay as part of the consideration herein." McCarty accepted this deed, delivered it to the county recorder of Wyandot county, Ohio, at 4:26 p. m. of November 1, 1928, and on November 2, 1928, it was duly recorded in the Wyandot county record of deeds.
J. William McCarty died on December 29, 1928, and E.P. Walser was appointed and qualified as administrator of his estate. Thereupon, the Farmers Trust Company presented its notes to the administrator and asked that they be allowed as claims against the estate of J. William McCarty, deceased. The claims were rejected by the administrator, and suit was brought on said notes, and foreclosure of the mortgages prayed for therein, in Wyandot county, Ohio.
The administrator of the estate, the heirs of J. William McCarty, deceased, Jerome A. Kline, and all subsequent grantees, and, so far as the record shows, all persons having an interest in any wise in the real estate in question, were made parties defendant. The parties answered generally, but the issue herein is made by the answer of the administrator and heirs at law of J. William McCarty, deceased, and the reply of plaintiff thereto.
For their first defense, defendants admit the representative capacity of E.P. Walser, that plaintiff presented its claim to him as administrator and that he rejected the claim on December 30, 1929. They deny that the L. B. Holding Company is a corporation.
As a second defense they plead the chain of title from Kline to McCarty and allege that in event it be shown that J. William McCarty accepted the deed in question, he was a subsequent grantee in the chain of title to Mary Johnson, Ida M. Carson and Ray Carson, "and whatever assumption of indebtedness was made in the conveyance to said J. William McCarty was without any consideration therefor and was wholly void." They recite the break in the assumption of the mortgages in the conveyance from Kline to Mary Johnson and an alleged break in the conveyance from Kline to R.M. and Ida Carson, wherein they assume a mortgage that was not on the land purchased by them. They further claim that the extension agreements were without consideration and void; that J. William McCarty had no knowledge of these agreements and did not consent thereto.
Plaintiffs by reply claim that the extension agreements were duly recorded in the mortgage records of Wyandot county, Ohio, at 10:19 o'clock, a. m., January 31, 1928, and plaintiffs deny all other claims of defendants, except such as are admissions of alleged facts.
The real estate in question has been sold. Sales were confirmed and the proceeds have been distributed.
Trial was had in the court of common pleas of Wyandot county, Ohio, and deficiency findings were made and judgments rendered against the estate of J. William McCarty, deceased.
Error was prosecuted to the Court of Appeals of Wyandot county, which court affirmed the judgment of the trial court. Error is prosecuted here to reverse the judgment of the Court of Appeals in affirming the judgment of the court of common pleas.
Mr. E.P. Walser and Messrs. White, Smith Dempsey, for plaintiffs in error.
Mr. A.K. Hall, Messrs. Butler Summer, Mr. Emerson L. Taylor and Mr. Floyd A. Johnston, for defendants in error.
Identical questions being involved in both of these cases, they were by consent submitted together, were so considered, and will be passed upon in one opinion.
Plaintiffs in error raise the following questions:
(a) Could the L. B. Holding Company, the corporation from whom J. William McCarty received title, execute a valid deed before the corporation was legally in existence, and could any such deed be modified by parol evidence or reformed without an action specially for that purpose?
(b) Where a grantee assumes a mortgage which is foreclosed, can a personal judgment be awarded against said grantee before the sale of the mortgaged premises and the ascertainment of the actual deficiency?
(c) Can a grantee who, in the deed to him, has assumed a portion of a mortgage indebtedness, be held for a deficiency judgment on foreclosure of the mortgage on the premises where the chain of assumption of said mortgage indebtedness has been broken in a deed to prior grantees in the chain of title?
(d) Can a grantee who has assumed in his deed a certain mortgage, the chain of assumption of which has been previously broken in a prior deed, be held to such assumption by reason of the covenants of an extension agreement between the original mortgagor, a prior grantee, and the mortgagee, executed subsequently to said break, but to which the assuming grantee was not a party, and which contained covenants other and different from those expressly stated in the deed to said assuming grantee?
These propositions will be considered seriatim.
It is fundamental that a corporation cannot execute a deed as a corporation until it has a corporate existence. This was a question of fact. Testimony was introduced in the trial court as to the time of the execution and delivery of the deed. On this proposition the court found against plaintiffs in error. There was some evidence to support this finding and this court cannot disturb it. It is contended that the court erred in admitting parol testimony to establish the date of execution and delivery of the deed. A deed is presumed to have been executed and delivered as of the date it bears, but this is a rebuttable presumption, and it is well settled that the true date may be established by parol testimony. The most that McCarty or his heirs could have done would have been to demand a curative deed, and, in the event it was refused, sue for a proper deed. Inasmuch as McCarty accepted the deed and took possession under it, we do not regard this question as of serious moment.
"Can a personal judgment be taken against an assuming grantee before the sale of the mortgaged premises and ascertainment of the exact deficiency?"
The property has been sold in this case, the proceeds of sale applied to the extinguishment of the debt, and the deficiency ascertained. If the McCarty estate is liable, is not this question moot at this time?
As we view it, there are just two questions of law for this court to determine in this case:
First, under all the facts and circumstances of the case, is the estate of J. William McCarty, deceased, liable to the mortgagee herein?
Second, if the estate is liable to the mortgagee, what is the extent of liability?
The facts that control these propositions are documentary and are not disputed.
In approaching this question we are brushing aside the extension agreement between Kellogg and the Seillers. McCarty was not a party to it and was not bound by it.
The fact that the agreements were entered of record adds nothing. These instruments were not of such a character as the law requires to be recorded in order to impart notice. We are content with the theory that McCarty knew nothing of these extension agreements; consequently, the further fact that there was no consideration moving to the Seillers for these extension agreements could make no difference to McCarty.
As we see it, the fact that the cord of privity was broken between the original mortgagee and the Seillers does not affect the result that must be reached in this case. All the real estate in question reached the Seillers. As a part of its purchase price, they agreed to pay both mortgages in question here. The Seillers by conveyance passed it on to the L. B. Holding Company. This deed refers to the same mortgages specificially, and the company agrees to pay them as a part of the consideration.
Thereupon, McCarty made his proffer of exchange of properties to the L. B. Holding Company, in which he refers to the specific land and the specific mortgages, in which he agrees to take the land subject to the mortgages plus $200 on one mortgage and $100 on the other "this to apply on principal."
This proposition was accepted by the company, and deeds were exchanged. In the deed from the company to McCarty these specific mortgages were excepted from the covenant against incumbrances, and McCarty assumed and agreed to pay them as a part of his consideration.
Upon what ground can one who assumes and agrees to pay "mortgage and interest" object to a deficiency judgment being taken against him? The expression "mortgage and interest" comprehends the entire debt. Interest clauses in mortgages in general, and in the mortgages involved herein, in particular, mention interest only in the condition of defeasance, in substance as follows: "Provided, nevertheless, if the (mortgagor) shall pay or cause to be paid his certain promissory note of even date herewith in the sum of $__________ with interest at __________% from date when the same shall become due, then these presents shall become void; otherwise to remain in full force and effect."
One cannot plead ignorance of the contents of a mortgage which he assumes and agrees to pay with "interest."
We are not unmindful of the subtle niceties drawn where land is taken by subsequent grantees "subject to a mortgage." In such a case the grantee assumes no personal responsibility, according to the great weight of authority. But such grantee must not assume and agree to pay the mortgage, for by so doing he injects his personality into the matter and becomes personally liable.
McCarty took this land under an agreement to pay, and to the extent of his agreement he became personally liable; and it could make no difference to him when a personal judgment was awarded against him, whether before or after the sale of the mortgaged premises on foreclosure.
McCarty's contract was not a contract to indemnify prior grantors. It was a contract to pay the debt, and this liability could be enforced in a suit to foreclose the mortgage. Green v. Stone, 54 N.J. Eq. 387, 34 A. 1099, 55 Am. St. Rep., 577; also see notes, 78 Am. Dec., 72, 71 Am. St. Rep., 201, and 8 L.R.A., 315.
It is claimed that because there was a break in the assumptions of the mortgages there was no privity between the holder of the note and mortgage and McCarty.
Though there is authority supporting this view, the decisions hold almost unanimously that a grantee of premises, in assuming a mortgage thereon, renders himself liable for the discharge of the mortgage debt; not only to the mortgagor, but also to the mortgagee. 19 Ruling Case Law, Section 145, pages 374 and 375.
This court has heretofore held that "where the grantee of a parcel of real estate, as part of the purchase price thereof, assumes to pay a debt secured thereon by a mortgage — the grantor being also personally bound for the payment — such assumption, as between the grantor and grantee, constitutes the grantee the principal debtor, and the grantor his surety." Poe v. Dixon, 60 Ohio St. 124, 54 N.E. 86, 71 Am. St. Rep., 713, first paragraph of syllabus.
We find no prejudicial error in the record herein, and the judgment of the Court of Appeals is hereby affirmed.
Judgment affirmed.
WEYGANDT, C.J., DAY, ALLEN and MATTHIAS, JJ., concur.
KINKADE and JONES, JJ., not participating.