Appeal from a judgment of the Superior Court of Fresno County and from an order refusing a new trial. J. R. Webb, Judge.
The findings are insufficient. (Harlan v. Ely , 55 Cal. 340; Bank of Woodland v. Treadwell , 55 Cal. 380.) The agreement in question did not create any right in favor of the mortgagee against the appellants. (Sheldon on Subrogation, sec. 24; Biddel v. Brizzolara , 64 Cal. 361; Turk v. Ridge , 41 N.Y. 201; Wiltsie on Mortgage Foreclosure, sec. 417; Flagg v. Munger , 9 N.Y. 483; Dunning v. Leavitt , 85 N.Y. 30; 39 Am. Rep. 617; Civ. Code, sec. 1559.)
Fox, Kellogg & Gray, for Appellants.
Frank H. Short, for Respondents.
JUDGES: Harrison, J. Van Fleet, J., and Garoutte, J., concurred.
The defendant, Warner, executed to the plaintiffs a mortgage upon certain lands in the county of Fresno to secure his promissory note for the sum of four thousand five hundred dollars, and subsequently conveyed the mortgaged lands to the appellants. In their complaint for the foreclosure of this mortgage the plaintiffs allege that the appellants, in consideration of the conveyance to them, assumed and agreed to pay the mortgage debt, and ask for judgment against them, as well as Warner, for any deficiency in the proceeds of sale. Judgment was rendered in their favor in accordance with the prayer of their complaint, and the grantees of Warner have appealed. At the trial the following instrument, executed by the appellants to Warner, was introduced in evidence: "In consideration of the transfer this day made to us by H. C. Warner of Fresno, California, of certain real estate,. .. . we agree to hold the said Warner harmless as against any and all the mortgages existing upon the real estate this day transferred to us, which mortgages are four in number, one of four thousand five hundred dollars to Hopkins;. .. . and the mortgages are to be settled at such time and in such manner as the undersigned or their survivors, or survivor, may determine; provided, that the said Warner shall at all times be held harmless as to the same." It was admitted that the mortgage under foreclosure is the one specified above in the instrument.
The plaintiffs are not seeking by an action at law, or under the provisions of section 1559 of the Civil Code, to recover judgment against the appellants upon the promise made by them to Warner; and the cases cited by the appellants, to the effect that an action at law cannot be maintained by a third party upon a promise made by one person to another from which such third person may derive a benefit, are inapplicable. The right of the plaintiffs to maintain this action against the appellants springs from the well-known rule in equity that a creditor is entitled to the benefit of any obligations or securities given by his debtor to one who has become a surety of such debtor for the payment of the debt. (Sheldon on Subrogation, sec. 85; Jones on Mortgages, sec. 755; Pomeroy's Equity Jurisprudence, sec. 1206; Keller v. Ashford , 133 U.S. 622; Crowell v. Currier , 27 N. J. Eq. 154; Williams v. Naftzger , 103 Cal. 438.) This rule in equity does not depend upon the character of the liability of the principal debtor to the creditor, or upon the existence of any relation between the creditor and the surety for the principal debtor, but is founded wholly upon the right of the creditor to avail himself of whatever rights the surety has as against the principal debtor. It has been formulated in section 2854 of the Civil Code as follows: "A creditor is entitled to the benefit of everything which a surety has received from the debtor by way of security for the performance of the obligation, and may, upon the maturity of the obligation, compel the application of such security to its satisfaction." It is under the application of this principle that in the foreclosure of a mortgage a judgment for a deficiency may be rendered against a grantee of the mortgagor who has assumed the payment of the mortgage debt. (Williams v. Naftzger, supra .) By the purchase of the mortgaged premises, and the agreement on the part of the purchaser to discharge the mortgage debt, there results, as between the mortgagor and his grantee, a substitution of the liability to the mortgagee, by which the grantee becomes the principal debtor to the mortgagee, and the liability of the mortgagor merely that of a surety for his grantee. This agreement of the grantee to discharge the mortgage debt is an obligation in the hands of the mortgagor, which the mortgagee may enforce for his own benefit when he seeks to obtain satisfaction of the mortgage debt, to the same extent that it could be enforced by the mortgagor. The mortgagee, in his action to foreclose the mortgage, may proceed against the mortgagor alone for any deficiency in the proceeds of sale, or he may avail himself of his right to proceed against the mortgagor and his grantee in the same action. If he proceeds against the mortgagor alone, and the judgment is docketed against him for any deficiency, the latter has [41 P. 869] a right of action over against his grantee upon his agreement to assume the mortgage debt. Under the rule for the foreclosure of mortgages in this state there can be no personal liability upon the mortgage debt, except for a deficiency therein after the sale of the mortgaged premises, and prior to such sale the mortgagor will have no right of action upon this agreement of his grantee; but, to avoid circuity of action, and to protect the mortgagor, as the intermediate party, from being compelled to pay the debt, and then to seek redress from his grantee, who has assumed the mortgage debt, equity permits the mortgagee to bring all the parties who are liable for the debt, whether principally or ultimately, before the court, and have their rights adjusted in a single suit. In such an action the mortgagee represents the mortgagor for the purpose of enforcing this obligation of the purchaser to him, and his right to enforce this obligation has the same extent and is subject to the same limitations as would be that of the mortgagor in a separate action against his grantee. It is not necessary that there should be a formal promise, on the part of the grantee, to pay the mortgage debt, in order to render him liable therefor, if his intention to assume the debt appears from a consideration of the entire instrument. The obligation may be made orally or in a separate instrument; it may be implied from the transaction of the parties, or it may be shown by the circumstances under which the purchase was made, as well as by the language used in the agreement. (Jones on Mortgages, sec. 748; Canfield v. Shear , 49 Mich. 313; Heid v. Vreeland , 30 N. J. Eq. 591.)
The terms used by the parties to the agreement in the present case indicate clearly an intention on the part of the appellants to assume the mortgage debt to the plaintiffs. The provision in the agreement that "the mortgages are to be settled at such time and in such manner" as the appellants might determine is to be read in connection with the subsequent proviso, and cannot be construed as giving to the appellants the right to determine the manner and select the time at which they will settle the plaintiffs' mortgage, irrespective of their agreement that "the said Warner shall at all times be held harmless as to the same." The word "settled," as used in this instrument, is equivalent to "paid" (Pinkerton v. Bailey, 8 Wend. 600; Stilwell v. Coope , 4 Denio, 225; Moore v. Hyman, 13 Ired. 272); and, while the appellants might not be required to pay the mortgage debt until it should be demanded by the plaintiffs, yet by delaying to settle the debt until after the commencement of the action to foreclose the mortgage they lost the right to select the time and manner of its settlement, which they had reserved in their agreement with Warner, and their liability to pay the debt became equal to that of Warner. The commencement of the action to foreclose the mortgage rendered their agreement to save him harmless a binding obligation, which the plaintiffs, as his representative, and for their own benefit, are entitled to enforce. It must be borne in mind that, unless there shall be a deficiency in the proceeds of sale, there will be no liability on the part of Warner, and, consequently, none on the part of the appellants, and that this cannot be known until after a sale under the judgment. If there shall be a deficiency, it will then be docketed against the appellants as well as against Warner, and the appellants will not hold him harmless against it, unless they can at that time be compelled to release him from its effect. The docketing of a judgment for this deficiency against them at that time is the protection which is given to Warner by the above rule in equity, and affords an opportunity to the appellants to discharge their obligation to Warner without increasing its burden upon them.
The appellants object to the sufficiency of the findings to support the judgment upon the ground that, after making findings upon all the issues in the case, the court has also found "that each and all the allegations and averments in plaintiffs' complaint contained are true and correct, except as hereinbefore otherwise found, and that all the denials of the answer of the defendants who have appeared herein are untrue, except as hereinbefore otherwise found." The appellants have not, however, pointed out any issue upon which the court has failed to make a finding, nor do they contend that the findings do not cover all the issues in the case. This additional finding does not render the other findings defective, but is to be regarded merely as surplusage.
The judgment is not rendered ineffective by reason of being contained in the same document with the findings. There is no rule which requires the findings and the judgment to be incorporated in separate documents.
The judgment and order are affirmed.