Reid v. Whisenant

Hines, J.

(After stating the foregoing facts.)

As a general rule, an action on a contract must be brought in the name of the party in whom the legal interest in such contract is vested. Civil Code, § 5516. To this general rule there are exceptions. Where the purchaser of the assets of a firm agreed to pay their debts, this court held that a creditor of the firm could by bill, to which the partners and purchaser were parties, enforce this agreement for his benefit. Bell v. McGrady, 32 Ga. 257. So where a married woman, having separate property, and being indebted to another by note, conveyed her separate estate absolutely to others in consideration of .their agreement to pay her an annuity for life and all debts against her separate property, this court ruled that this agreement could in equity be enforced by her creditors; and where she was dead and had no representative and no estate, the bill by her creditors to enforcé the agreement was not defective because she or her representative was not a party to the proceeding. Dallas v. Heard, 32 Ga. 604. So where a vendee in a bond for title for a valuable consideration transferred the bond, together with his interest in the land, to a third person who assumed and agreed to pay the balance of the purchase-money, the vendor, not being a party to the contract, can not in an action at law enforce the contract of such third person; but the vendor may maintain an equitable action against the vendee and his transferee to recover a judgment for the balance of the purchase-money, with a special lien upon the land. Morgan v. Argard, 148 Ga. 123 (95 S. E. 986); Dunson v. Lewis, 156 Ga. 692, 702 (119 S. E. 846).

It is now well settled in this State that a purchaser of lands, who assumes the payment of an encumbrance thereon as a part of the consideration of his purchase, is liable in equity to the holder of such encumbrance under such agreement, or to his vendor in case the latter has to pay ofi the encumbrance. The assignee of a mortgage or security deed, when the debt thereby secured has been assigned by the purchaser, can enforce the present liability of the purchaser just as the mortgagee might have done had there been no assignment. Clark v. Fisk, 9 Utah, 94 (33 Pac. 248); 2 Jones on Mortgages (7th ed.), § 741. Where a grantee in the deed to him assumes payment of a mortgage or other encumbrance on land, the successor in title of the grantor under the latter’s warranty deed succeeds to the benefit of such agreement. Jager v. Vollinger, 174 Mass. 521 (55 N. E. 458). Such assumption of the payment of the encumbrance is not alone for the'protection of his vendor, but it also inures to the benefit of any subsequent purchaser. Litchfield v. Preston, 98 Va. 530 (37 S. E. 6). In Wilcox v. Campbell, 106 N. Y. 325 (12 N. E. 823); it was held that “Where A, who is the owner of a tract of land which is subject to mortgage, sells a part to B) who assumes and agrees to pay as part of the purchase-price the amount of the mortgage, and thereafter A sells the remainder of the tract to C, C or his assignee may, on the foreclosure of the mortgage through the failure of B to pay the same, and the sale of his lands therefor, maintain an action against B to recover damages.” In Cooley v. Murray, 11 Colo. App. 241 (52 Pac. 1108), the Court of Appeals of Colorado held “The agreement of the grantee of one of two lots owned by the grantor, subject to a mortgage, to assume and pay it as a part of the purchase-price, inures to the benefit of the subsequent grantee of the other lot, in case the mortgage is not paid and the second lot is sold to satisfy it.” In Haas v. Dudley, 30 Or. 355 (48 Pac. 168), the Supreme Court of Oregon held that on the foreclosure of a mortgage which the vendees of a part of the mortgaged premises had agreed to pay, the vendor could recover from such vendees to the value of the part retained by him, which was sold with the rest to satisfy the mortgage debt. In Bollinger v. Baylor, (Tex. Civ. App.) 185 S. W. 1021, the Court of Civil Appeals of Texas held that the first grantee of land, who conveyed it to a second grantee, who in turn conveyed it to a third grantee, both assuming the vendor’s lien note as a part of the purchase-price, had a cause of action against such grantee, whose failure to pay the note occasioned the loss to the third grantee of a part of the land covered by the vendor’s lien note, and not sold by him.

There are two theories upon which a mortgagee can base his right to hold a purchaser, who has assumed the payment of his mortgage, personally liable for the mortgage debt. The first is the theory of equitable subrogation, by which a creditor is entitled to all the collateral securities which his debtor has obtained to reinforce the primary obligation. The second theory is that, if one person makes a promise to another for the benefit of a third person, that third person may maintain in equity an action on the promise. Wiltsie on Mortgage Foreclosure, § 226; Closner v. Chapin, 168 S. W. 371. It is on the last-mentioned theory that a purchaser of a portion of a tract of land, subject to a mortgage or other encumbrance, which he assumes and agrees to pay, is liable to his vendor, or to an assignee of the latter, when he fails to discharge such mortgage or encumbrance, in default of which the remaining portion of the land is sold and becomes a loss to the vendor or to an assignee of the latter.

So in this case, when Dodd and wife sold and by their warranty deed conveyed to Whisenant 6,550 acres of the 10,555-acre tract involved in this litigation, and by the terms of said deed Whisenant agreed to assume and pay an outstanding encumbrance on the entire tract of $11,000 principal, with interest, and where Dodd and wife sold and by deed conveyed the remainder of the tract to Reid, reciting in their conveyance the agreement oí Whisenant to pay this incumbrance, and where Whisenant defaulted in the payment of the encumbrance, in consequence of which it was foreclosed and the entire tract was sold under the decree of foreclosure, Whisenant became liable to Reid for the value of his portion of said land so lost in consequence of the default of Whisenant in paying ofE this encumbrance.

What is the measure of damages in this case ? If Reid had paid oil the encumbrance on this property, as he had the right to do, then the measure of his damages would have been the amount necessary to pay the principal and interest of the encumbrance, with any costs which had accrued by reason of the foreclosure. But Reid did not discharge the encumbrance. In consequence of the default of Whisenant to pay it off, the entire tract of land was sold under a decree foreclosing the encumbrance, and in consequence Reid lost his portion of these lands. Hnder these circumstances the measure of damages which he would be entitled to recover from Whisenant was the value of his tract at the time he lost the same by the foreclosure sale. Wilcox v. Campbell, Bollinger v. Baylor, Haas v. Dudley, supra. But it is insisted by counsel for Whisenant that Reid was bound to lessen these damages by paying off the encumbrance on this land, in which event Whisenant would only be liable for the amount necessarily expended for that purpose. It is undoubtedly true that where by a breach of contract one is injured, he is bound to lessen the damages so far as is practicable, by the use of ordinary care and diligence. Civil Code. § 4398. This rule is applicable only where the damages can be lessened by reasonable efforts and .expense. Miller v. Mariners Church, 7 Me. 51 (20 Am. D. 341). The rule requiring the plaintiff to protect himself from loss arising from breach of a contract is not applicable where there is an absolute promise to pay, and not one of indemnity merely. Wicker v. Hoppock, 6 Wallace, 94. Whisenant became the principal debtor, as between him and Dodd, when he assumed the payment of this encumbrance, and Dodd remained simply a surety. When Reid bought from the Dodds he became simply the surety of Whisenant for the payment of this money. The portion of the land bought by Whisenant was primarily liable for the payment of the encumbrance against the entire tract, and the portion retained .by Dodd and purchased by Reid liable for «the deficiency only. Under these circumstances it was not incumbent upon Reid, nor was the duty enjoined upon him, to raise money sufficient to discharge this encumbrance as between him and Whisenant, nor was he under any obligation to take any steps in the foreclosure proceedings. "It was by the default of Whisenant that he was deprived of his property, and the value thereof is the rightful measure of his demand against them. Wilcox v. Campbell, supra; Haas v. Dudley, supra. When Whisenant by his default permitted this ..encumbrance to be foreclosed and the entire tract sold under the decree of foreclosure, whereby Reid lost his portion of the tract, Whisenant became liable to Reid for the value'of the land so lost by the latter.

Applying the above principles, the court erred in sustaining the demurrer to the petition.

Judgment reversed.

All the Justices concur, except