Douglass v. Wells , 25 N.Y. Sup. Ct. 88 ( 1879 )

Bocees, J. :

This proposition is not disputed: that Frank E. Wells, on accepting the conveyance of the mortgage premises from George H. Wells and wife, wherein the former expressly assumed the payment of the bond and mortgage in suit, became, as between himself and George, primarily liable for the mortgage debt; and, further, that the holder of the claim (the mortgagee) might enforce such liability by personal judgment against him. But it is insisted that it was competent for George to discharge such personal liability against Frank, without the assent of the mortgagee, at any time before the latter had taken any step in his own behalf for its enforcement. The court so held at Special Term, and gave judgment for the defendant on the demurrer to the answer, wherein a release by George to Frank was set up as a defence to the claim by the mortgagee of personal liability against the latter. The ruling at Special Term is supported by the decision in Stephens v. Casbacker (15 N. Y. Sup. Ct. [8 Hun], 116). In that case, as in the case in hand, the grantee had reconveyed to his grantor, and the latter had released the former from his agreement to pay the mortgage debt, and bad gone into possession under the deed of reconveyance, before the mortgagee commenced his action, in which he sought to charge the party personally on his agreement. The court held that the release was effectual as a discharge against the claim of the mortgagee. The learned judge says : “ While the defendant remained in possession of the premises, and the covenant remained as between the parties in full force, unrevoked or unrescinded, the plaintiff might doubtless have maintained an action upon it, or held the defendant responsible for any deficiency upon a foreclosure of the mortgage;” and he adds, “but I can see no ground or reason in principle why, during such period, the grantor might not release the defendant (his grantee) from a personal obligation involved in such covenant, leaving the land simply subject to the mortgage, as ho might originally have conveyed the same.” This case, however, stands, as it is believed, alone in support of the doctrine advanced in it, among the reported decisions in this State. There is a class of cases which, as is urged by the respondent’s counsel, gives countenance and support to Stephens v. Oasbaclcer; as for instance Kelly v. Roberts (40 N. Y., 432); Whiting v. Gearty (7 W. Nig., 97); Moore v. Ryder (65 N. Y., 438, 442); Dunham v. Bischoff (47 Ind., 211); Day v. Patterson (18 Ind., 117); Mansur v. Bartholomew (19 Alb. L. J. [Ind. case], 52); Ætna Nat. Bank v. Fourth Nat. Bk. (46 N. Y., 82, 92); Simson v. Brown (68 id. 355, 361); Vrooman v. Turner (69 id., 280); Trotter v. Hughes (12 id., 74); King v. Whitley, 10 Paige, 465). But the decisions in those cases were mostly placed upon the ground of a want of privity between the promissor and the third party, for whose benefit the promise is made, although privity of contract between the latter and the promisor is not as it seems always necessary to the right of action on the undertaking; so be it, that a legal obligation or duty rests upon the promisee to the party to be benefited by it. (Remarks of Allen, J., in Vrooman v. Turner, 69 N. Y., on page 284.) But to return to the case of Stephens v. Casbacker. It is believed that the decision in this case is hostile to many others in this State, and cannot be upheld as sound. But, before calling attention to those cases, it may be well to give a passing notice to a remark contained in Whiting v. Gearty (7 Wk. Dig., 97), above cited. It was said in the very brief report of that case now before us, and upon the strength of the decision in Kelly v. Roberts (40 N. Y., 432), that, “ in the absence of notice to the mortgagee, of the assumption of the mortgage by a grantee, or in the absence of an acceptance by the mortgagee of such assumption, it has been held that the grantee may be released by the mortgagor.” But on recurring to Kelly v. Roberts, it will be seen that this question was not before the court in that case. Nor does it indeed give support to the remark in Whiting v. Gearty. Kelly v. Roberts was decided upon an entirely different principle, to wit : On the grounds that there was no privity of contract between the promisor and the third party, nor any privity to the consideration; that the plaintiff was an utter stranger to .the contract, having no right or interest in the subject-matter of it. The remark above cited in Whiting v. Gearty is unsupported by the decision in Kelly v. Roberts, besides, the remark was obiter; for all that was necessary to the decision in Whiting v. Gearty ivas the proposition that after notice to. the mortgagee, and acceptance by him of the assumption by the grantee, a valid release could only come from the former, upon the principle that a release, to be effectual, must come from the person vested with the right. All else that was said or that was attempted to be decided in that case was entirely obiter, as that case was presented on the facts. We may then, in the further examination of this case, commence with Lawrence v. Fox (20 N. Y., 268), where it was held, in general terms, that an action would lie on a promise made by the defendant, upon valid considerations, to a third person, for the benefit of a plaintiff, although the plaintiff was not privy to the consideration. The question whether the original promisee could have released the promissor from the obligation was not in the case except'argumentatively But Judge Gray, in whoso opinion five of his associates concurred, said in substance that he thought it would be difficult to maintain the right of the original promisee to discharge the obligation of the promissor to the third party for whose benefit it was made, and who, in accordance with legal presumption, would be deemed to have accepted it until his dissent was shown. Next in order in the Court of Appeals is Hartley v. Harrison (24 N. Y., 170), where it was held that when land is conveyed subject to a usurious mortgage, which the grantee assumes to pay, the mortgagee acquires a right to an appropriation of the land for that purpose, which cannot be divested without his assent. Here then was a release of the covenants and agreement contained in the deed by the grantor to the grantee, executed, however, after the mortgage foreclosure suit was commenced. The release was held imperative to open the defence of usury to the grantee. But the question, whether the personal liability assumed by the grantee was or was not discharged by the release of his grantor, was not passed upon by the court. Judge MasoN, in his opinion, however, spoke very emphatically on this subject. He said the grantee’s liability to the mortgagee was fixed the moment he received the conveyance, and it was not in the power of the grantor to release him from it; that the liability when once created was irrevocable. The case of Burr v. Beers (24 N. Y., 178) was decided upon the principle settled in Lawrence v. Fox; and nothing was there said upon the subject here under examination. The same may also be said of Ricard v. Sanderson (41 N. Y., 179). We are now brought to the case of Garnsey v. Rogers (47 N. Y., 233), where this entire subject was elaborately discussed. It was there said by Judge Batallo (although this point was not decided), and with the apparent concurrence of every member of the court, and as a notable proposition in the consideration of the caso, that, “ it must further he considered, that, where such an assumption (the same as in the case in hand) is made on an absolute conveyance of land ” (which is this case), “it is unconditional and irrevocable. The grantor cannot retract his conveyance or the grantee his promise or undertaking” (page 242). The case of Thorp v. Keokuk Coal Co. (48 N. Y., 253) simply recognized and applied the decision in Lawrence v. Fox and in Burr v. Beers; although Judge Earl incidentally remarks, that 1 ‘ when the third person adopts the act of the promisee in obtaining the promise for his benefit, he is brought into privity with the promissor, and he may enforce the promise, as if it was made directly to him.” The case of Vrooman v. Turner (69 N. Y., 280) was distinguished from Lawrence v. Fox; and the denial of the right in that case to enforce the agreement by the mortgagee against the grantee was put upon the ground that the former had no legal interest in the performance of the agreement. Nor has Comstock v. Drohan (71 N. Y., 9) any direct bearing upon the question under examination. The reasoning of Judge Church, in Campbell v. Smith (71 N. Y., 26) is, however, significant. The learned judge adopts substantially the remarks of Judge Rapadlo, above cited and quoted. He says “the former” (the grantor) conveyed absolutely all her interest in the premises,” and the grantee having accepted the conveyance 11 occupied the position of purchaser. As between them the relation of grantor and grantee existed, with all the rights and obligations incident to that position. The covenant to pay the mortgage was absolute, and the mortgagee had the right to enforce it.” We are also cited to Pike v. Seiter (22 N. Y. Sup. Ct.; 15 Hun, 402); Calvo v. Davies (15 N. Y. Sup. Ct.; 8 Hun, 222), affirmed in the Court of Appeals April 2, 1878, and Thayer v. Marsh (11 Hun, 501, affirmed in Court of Appeals December 8, 1878). But these cases have no direct bearing on the question as to the effect of a release by the grantor to the grantee. The cases seem to settle down upon this : That where the conveyance is absolute to the grantee his assumption therein of the payment of the mortgage debt, resting as a lien on the promises convoyed to him, creates against him an absolute obligation for its payment. The mortgagee is at once vested with a right to hold him upon his assumption of the debt. Now, no principle is clearer or better settled than this, that a release, to be effectual, must come from the party vested with the right. But it is urged that the right is not vested until there is an acceptance of the obligation. But in such case an acceptance is a legal presumption, in the absence of proof of actual dissent. (Lawrence v. Fox, per Gray, J., 20 N. Y., 274; Berly v. Taylor, 5 Hill, 584-585.) It seems to follow, giving due application of the decisions to the case in hand, that the plaintiff, so soon as Prank E. Wells accepted the deed of the mortgaged premises and assumed the payment of the mortgage debt, had an absolute vested right to the enforcement of such obligation. I am not unmindful of the decision in Crowell v. Hospital of St. Barnabas (27 N. J. Eq., 650) adverse to this conclusion; but that decision is in hostility to those of our own State above cited. It does not recognize the principle settled in Lawrence v. Fox, Burr v. Beers, and in the many cases following them, that the mortgagee may enforce the agreement made between the grantor and the grantee, whereby the latter assumed the payment of the mortgage debt. It is there maintained that the contract is with the grantor simply for his indemnity ; not a contract with the mortgagee for his security ; that the latter is not in privity wdth the grantee, either in respect to the contract or to the estate granted. So it was there determined, contrary to the rule in our own State, that the agreement, although operative between the parties to it, does not make the mortgage debt a personal debt of the grantee to the mortgagee. Under this ruling it would follow, of course, that the grantor could release and discharge the grantee from personal liability, and that too as well after as before suit for foreclosure was commenced, which result is expressly repudiated in Whiting v. Gearty by the Court of Appeals. The decision in Crowell v. Hospital of St. Barnabas is not in consonance with those of our own State since Lawrence v. Fox and Burr v. Beers were considered and determined. It is somewhat perplexing to determine precisely the ground on which the rule now established in our own State is made to rest, whether on the ground that the assuming of the mortgage debt by the grantee creates a ¡M’ivity of contract between him and the mortgagee, or makes the latter privy to the consideration of the promise, or that the right of action in the mortgagee springs simply from the promise of the grantee made to the grantor for the mortgagee’s benefit. Whatever may be the ground of the ruling it is now firmly and definitely settled in the courts of this State, that the promise of the grantee, in a case like this under consideration, may be adopted and enforced by the mortgagee as a personal obligation of the former to the latter. In this case, according to the decisions, the liability of Uranic E. Wells to the plaintiff was absolute on his acceptance of the deed from his grantor, George II. Wells, wherein he assumed the payment of the mortgage debt. The plaintiff then acquired a vested right to the enforcement of this liability. This right could not be. taken from him without his assent. He alone might discharge it. So Judge Rapadlo gave utterance to the law when he said, as above quoted, that the obligation was “ unconditional and ii-revocable ; that the grantor could not retract his conveyance, nor the grantee his promise or undertaking.” Of course, this ruling is limited to those cases (like this in hand) where the grant is absolute and the promise unconditional. It follows that the decision at Special Term was erroneous. Judgment on the demurrer granted at Special Term reversed, and judgment thereon ordered for the plaintiff, with costs.