Opinion
No. 28182
Decided December 4, 1940.
Mortgages — Mortgagee or assignee may maintain action against grantee assuming mortgage — Consideration passing from grantee to grantor sufficient to support assumption — Deed poll binds grantee, when — Recital in conveyance obligating grantee to pay mortgage, a contract — Creditor-beneficiary may institute action within fifteen years — Section 11221, General Code.
1. A mortgagee or his assignee may maintain an action for the amount due on a mortgage indebtedness against a grantee who by the terms of a deed of conveyance from the mortgagor assumes and agrees to pay the mortgage.
2. The consideration passing from the grantee to the grantor is sufficient to support the agreement of assumption.
3. A deed poll delivered to and accepted by the grantee binds him as effectually as a deed inter partes.
4. A recital in an instrument of conveyance by which the grantee obligates himself to pay a mortgage debt on the premises conveyed is a contract in writing within the meaning of Section 11221, General Code, and suit may be brought thereon by the creditor-beneficiary within fifteen years after the accrual of the cause of action.
APPEAL from the Court of Appeals of Cuyahoga county.
This controversy arises out of a petition filed in the Court of Common Pleas of Cuyahoga county, Ohio, by the defendant, John B. Lindner, to set aside two personal judgments rendered against him at a previous term of court. That petition was filed in the original action, in which judgment was taken, and bore the same title and number. The petition was later amended, and the issue as to regularity and validity of the judgments was tried on the second amended petition of the defendant Lindner.
The original action in which the judgments were rendered was brought by The Cleveland Trust Company against various defendants including John B. Lindner, Joseph Nagy and Barbara Nagy, and sought personal judgment, foreclosure of mortgage and equitable relief against the defendant Lindner.
The defendants Joseph Nagy and Barbara Nagy filed a cross-petition therein in which they likewise sought judgment and foreclosure of a second mortgage lien.
After the mortgages, of which foreclosure was asked, were executed and delivered to The Cleveland Trust Company and defendants Nagy, the mortgagor, The Wiemol Realty Company, executed and delivered to John B. Lindner a deed conveying to him the mortgaged premises. The grantee did not sign the deed but did accept the conveyance. The deed contained a warranty that the premises "are free from all encumbrances whatsoever except a mortgage to The Pearl St. Savings and Trust Co. in the sum of $10,000 and a mortgage to Joseph and Barbara Nagy in the sum of $10,000, and taxes and assessments payable with the taxes for the last half of 1925, and thereafter, which the grantee assumes and agrees to pay * * *."
The judgments sought to be set aside were rendered against the defendant Lindner for the amounts due to plaintiff and to defendants Nagy, on their respective notes and mortgages.
These mortgages were originally given by The Wiemol Realty Company, one to The Pearl Street Savings Trust Company, thereafter assigned to the plaintiff, The Cleveland Trust Company, and the other direct to Joseph Nagy and Barbara Nagy.
On trial on the second amended petition of the defendant Lindner to set aside these judgments, the petitioner maintained that the proceedings were irregular; that he had a valid defense based upon the fact that more than six years had elapsed since the accrual of the causes of action; that the contract of assumption was implied as to the owners of the mortgage indebtedness; and that the actions by the plaintiff and cross-petitioners Nagy were barred by the six-year statute of limitation.
The court found "that there was irregularity in obtaining the said judgments, but that the defendant, John B. Lindner, presented no valid defense to the petition of plaintiff, The Cleveland Trust Company, or to the cross-petition of the defendants, Joseph Nagy and Barbara Nagy, and that said second amended petition should therefore be denied."
Thereupon the court entered judgment against the defendant, John B. Lindner.
On appeal, the Court of Appeals affirmed the judgment and thereafter this court allowed a motion to certify the record.
Messrs. Todd Todd, for appellee, The Cleveland Trust Company.
Mr. W.P. Newton, for appellant.
The sole inquiry is whether the contract of assumption on which the personal judgments against the defendant, John B. Lindner, were founded was an agreement or promise in writing to which the fifteen-year limitation provided for in Section 11221, General Code, applies, or an implied contract within the meaning of Section 11222, General Code, which provides that an action on a contract not in writing express or implied shall be brought within six years after the cause of action accrued.
It is not questioned that as between the grantor-mortgagor and the grantee the contract of assumption is in writing and applies to the mortgages as well as taxes and assessments; but the controversy is as to the relation between the mortgage creditors and the grantee. The plaintiff which, by virtue of assignment, stands in the shoes of the mortgagee, maintains that its right to a personal judgment as well as the right of the other mortgage creditors (the defendants Nagy) is based on the written provision in the deed by which the grantee, John B. Lindner, assumed and agreed to pay the mortgages, that is, on an agreement or promise in writing. The defendant, John B. Lindner, maintains that the contract of assumption is as to plaintiff and the other mortgage creditors merely an implied contract. The defendants Nagy have filed no brief and appear in the appeal only as appellees.
To determine whether the rights of action of the mortgage creditors are founded upon the written contract contained in the deed or upon an implied contract requires a careful consideration of the nature of a third party beneficiary contract arising from a conveyance containing such a contract of assumption.
In most American jurisdictions a contract made for the benefit of a third person has been recognized as creating a valid obligation on which the third party beneficiary may maintain an action at law against the promisor for money agreed to be paid or indebtedness assumed. Carson Pirie Scott Co. v. Parrett et al., Exrs., 346 Ill. 252, 178 N.E. 498, 81 A.L.R., 1262, annotation at 1279; 2 Williston on Contracts (Rev. Ed.), 1103, Section 381. The application of the principle has received especial recognition where the purchaser of premises assumes and agrees to pay a mortgage thereon. McCown v. Nicks, 171 Ark. 260, 284 S.W. 739, 47 A. L. R., 332, annotation at 340; 2 Williston on Contracts (Rev. Ed.), 1111, Section 383; 1 Restatement of Law of Contracts, 161, Section 136, Subsection 1, Illustration 2.
This court long ago recognized the rule that a mortgagee could recover judgment against the grantee of mortgaged premises upon an agreement by which the grantee assumed the mortgage indebtedness as part consideration for the conveyance, whether the agreement was in or dehors the deed. Society of Friends v. Haines, 47 Ohio St. 423, 25 N.E. 119; Poe v. Dixon, 60 Ohio St. 124, 54 N.E. 86, 71 Am. St. Rep., 713; Walser, Admr., v. Farmers Trust Co., 126 Ohio St. 367, 185 N.E. 535.
The consideration supporting the deed by which the transfer is effectuated is a sufficient quid pro quo to support the assumption agreement in favor of the creditor-beneficiary. It is, moreover, inconsequential that the agreement is evidenced by a deed poll, as in the instant case, for the acceptance of the deed binds the grantee as effectually as if the deed were an indenture or contract inter partes. Hickey v. Lake Shore M. S. Ry. Co., 51 Ohio St. 40, 47, 36 N.E. 672, 46 Am. St. Rep., 545, 23 L.R.A., 396; New York Central Rd. Co. v. City of Bucyrus, 126 Ohio St. 558, 570, 186 N.E. 450. Then too, such a contractual obligation is not within the Statute of Frauds for the promise to pay the mortgage does not concern an interest in land nor constitute an agreement to answer for the debt, default or miscarriage of another. The promise relates only to existing indebtedness and is the direct primary obligation of the grantee.
In some jurisdictions an obstacle to recovery has been found in instances in which the promise of assumption is embodied in a written instrument under seal. 2 Williston on Contracts (Rev. Ed.), 1152, Section 401. This difficulty is obviated in Ohio because private seals are abolished and, if such a seal be employed, it does not give added force to the instrument or change its construction. Section 32, General Code.
The only conclusion warranted by the authorities is that the action by the creditor-beneficiary is founded on the contract between the grantor and grantee. In the case at bar the only contract there is to support the judgments is that written in the deed. The contention of the defendant Lindner that the actions of plaintiff and the cross-petitioners Nagy rest not upon a contract in writing but upon an implied contract, can not be sustained. The actions were predicated upon an agreement or promise in writing and would not be barred until fifteen years after the accrual of the causes of action. Section 11221, General Code.
The courts below did not err and the judgment of the Court of Appeals is affirmed.
Judgment affirmed.
WEYGANDT, C.J., DAY, ZIMMERMAN, TURNER, MATTHIAS and HART, JJ., concur.