McCurdy v. Van Os

I do not agree that "it is elementary that if the bank by its dealings with Wiersum released him, such release terminated the liability of prior assignees who had agreed to perform the terms of this contract. Barnard v. Huff, 252 Mich. 258 (77 A.L.R. 259); Gorman v. Butzel, 272 Mich. 525." Nor do I think the cases cited so hold.

1. There is a wide difference between a land contract and a mortgage. Hooper v. Van Husan, 105 Mich. 592; Jones v. Bowling,117 Mich. 288; Curry v. Curry, 213 Mich. 309; Cady v. Taggart, 223 Mich. 191; Jackson v. West, 224 Mich. 578;Craig v. Black, 249 Mich. 485; Genyk v. Nagrich, 255 Mich. 189; Lutz v. Dutmer, 286 Mich. 467.

"The rights of mortgagor and mortgagee differ from those of vendor and vendee. The mortgagor holds the fee; the mortgagee has a lien. The vendor holds the fee; the vendee had an equitable interest." Cady v. Taggart, supra.

"The vendee gets the equitable title, but the legal title still remains in the vendor, and is held as security for the payment of the purchase price. Hooper v. Van Husan, 105 Mich. 592 ." Lutz v. Dutmer, supra.

"The foreclosure of mortgages is one of the ancient equitable remedies. Its object is simply to enforce a lien upon lands by making it absolute unless redeemed." Michigan Ins. Co. v.Brown, 11 Mich. 265.

"Under the original equitable jurisdiction there never was any power to make a personal decree against even the mortgagor himself." Johnson v. Shepard, 35 Mich. 115.

"The power to render a deficiency decree in mortgage foreclosure cases is purely statutory. It is a substitution for a legal action and must be governed by the rules which would apply at law. Michigan Ins. Co. v. Brown, 11 Mich. 265;McCrickett v. Wilson, 50 Mich. 513; Vaughan v. Black, 63 Mich. 215; Winsor v.Ludington, 77 Mich. 215; Kelly v. Gaukler, 164 Mich. 519;Kollen v. Sooy, 172 Mich. 214; Union Trust Co. v.Detroit Trust Co., 243 Mich. 451; Janower v. F. M. SibleyLumber Co., 245 Mich. 571; Bleakley v. Oakwayne Farms Co.,265 Mich. 268; Wurzer v. Geraldine, 268 Mich. 286."Lutz v. Dutmer, supra.

2. "A suit on a mortgage in England is not a suit to collect money, but one to get land, whereas a bill by a vendor is always to get his money, and the lien on the land is only a means of collecting it in whole or in part." Fitzhugh v.Maxwell, 34 Mich. 138,141.

"The claim of the vendor is but an ordinary money debt, secured by the contract." Walker v. Casgrain 101 Mich. 604,608.

"A vendor, as well as a vendee, is entitled to specific performance. If the defendant had made large payments, the complainant would be entitled, upon failure to make further payments when due, to file his bill for specific performance, and in the nature of a foreclosure bill, and in such case would be entitled to a sale of the land and decree for deficiency."Loveridge v. Shurtz, 111 Mich. 618.

"A bill filed strictly for specific performance usually asks a decree for the whole consideration, and the vendor, complainant, if he would have the entire consideration awarded to him by the decree, must be able to perform the contract. Where the consideration sought is the payment of money only, this proceeding amounts substantially to a foreclosure, as it gives the vendor a decree for money due by the terms of the contract, and, by sale of the equitable title of the vendee, subjects the premises to the payment of the same. This proceeding is favored, as it enforces no forfeiture."Gray v. Hill, 105 Mich. 189.

"It is well settled that specific performance is granted in favor of the vendor of land as freely as in favor of the vendee, though the relief actually obtained by him is the recovery of money, the purchase price." Pearson v. Gardner,202 Mich. 360 (L.R.A. 1918 F, 384).

In 25 Halsbury's Laws of England, p. 408, it is said:

"Specific performance of a contract is ordered at the discretion of the court in cases where damages do not afford a complete remedy; and although, since a vendor's claim is,strictly speaking, merely a pecuniary demand, and damages would sufficiently compensate him, yet the court acts on the principle that the remedy must be mutual, and, therefore, specifically enforces the contract at the suit of the vendor in every case where a similar remedy is open to the purchaser."

In support of this statement, Cox v. Middleton, 2 Drew. 209 (23 L. J. Ch. 618, 61 Eng. Rep. 699); Haywood v. Cope, 25 Beav. 140 (27 L. J. Ch. 468, 4 Jur. [N. S.] 227, 53 Eng. Rep. 589);Scott v. Alvarez, L. R. 59 Ch. Div. 603; Adderley v. Dixon, 1 Sim. St. 607 (57 Eng. Rep. 239); Regent's CanalCo. v. Ware, 23 Beav. 575 (53 Eng. Rep. 226); and Cogent v.Gibson, 33 Beav. 557 (55 Eng. Rep. 485), are cited.

Barnard v. Huff, supra, and Gorman v. Butzel, supra, were based upon the theory of novation — the making of a new and substituted contract in the place and stead of the original contract.

In Gorman v. Butzel, supra, it was said:

"The equitable situation is that the assignee becomes primarily liable for the purchase price and the vendee is his surety," citing Barnard v. Huff.

In Barnard v. Huff, supra, it was said:

"As between the assignor and the assignee, the latter becomes the principal debtor and the former a surety * * * and the principles of subrogation apply."

The language of these two cases is a misapplication of elementary principles. These statements are gratuitousdicta.

In Crawford v. Edwards, 33 Mich. 354, it was held that the acceptance of a deed by a grantee from a grantor, in which the grantee assumes and agrees to pay, binds the grantee as effectually as though the deed had been executed by the grantee. If the grantee merely accepted a deed of the premises, subject to the mortgage, "in such a case the property would be made primarily liable for the debt, but the grantee would not have assumed, and would not be personally liable for its payment." It was said:

"Of course the vendor would not be discharged upon his grantee's making such a promise, except at the option of the mortgagee. The mortgagee may treat both the vendor and his grantee as principal debtors to him, and have a personal decree against either or both. * * *

"The principle upon which this rests is, that the creditor is entitled to the benefit of all collateral obligations for the payment of the debt, which a person standing in the name of a surety for others has received for his indemnity, and to relieve him or his property from liability for such payment."

This case establishes that the land mortgaged is originally and primarily liable.

On foreclosure of a mortgage, the suit is not one primarily to collect money, but one to get land. Fitzhugh v. Maxwell,supra; Lutz v. Dutmer, supra.

When the mortgagor becomes a grantor to a grantee who assumes and agrees to pay the mortgage, the grantor parts with his title to the land which passes to the grantee and as the grantee who has assumed and agreed to pay in consideration of acquiring the land the grantee then becomes primarily liable. But the mortgagor and grantor is still liable upon the theory that he is a surety. As between the grantor and his grantee who assumes and agrees to pay the mortgage, the mortgage is in fact paid. Miller v. Thompson, 34 Mich. 10. But that does not affect the rights of the mortgagee who may still have recourse on equitable foreclosure to the liability of both the mortgagor and his grantee. In Miller v. Thompson, supra, Macklin mortgaged the premises to Miller. He then deeded to Thompson who assumed and agreed to pay. It was said:

"It was not essenial there should be a novation; it was sufficient that Thompson, as between himself and Macklin, had agreed to pay the mortgage. That agreement brings the case within the equity of the statute which provides that 'if the mortgage debt be secured by the obligation or other evidence of debt of any other person besides the mortgagor, the complainant may make such person a party to the bill, and the court may decree payment of the balance of such debt remaining unsatisfied, after a sale of the mortgaged premises, as well against such other persons as the mortgagor, and may enforce such decree as in other cases.' "

In Higman v. Stewart, 38 Mich. 513, the liability of the grantee of lands, who assumed and agreed to pay the mortgage, was extensively discussed. It was said:

"The doctrine has been maintained in two forms. Thefirst, where a special agreement has been made between theseller of the equity of redemption and the purchaser that the mortgage debt shall be considered purchase money, but be left in the hands of the purchaser for the use of the mortgagees: and this, it has been said, affords a valid basis for a direct claim by the mortgagee against the purchaser thus holding the mortgage debt for his use. * * *

"The second form accorded to the doctrine is that the grantee upon consideration agrees with the grantor to pay his debt, whereby as between them the grantee becomes principal debtor and the grantor his surety; and in accordance with the principle which in equity entitles the chief creditor to receive the benefit of a security held by a surety, the mortgagee creditor is entitled to the benefit of the agreement made by the purchaser of the equity of redemption. * * * In this aspect the doctrine does not contemplate an obligation from the grantee to the mortgagee, but a promise from the former to the mortgagor which may be caused to inure by an equitable subrogation to the mortgagee's benefit."

This case holds that originally the mortgagor is primarily liable because he is the owner of the land subject to the mortgage. When he sells the land to a grantee who assumes and agrees to pay the mortgage, the grantee becomes the owner of the land, the grantor parts with his title thereto, the mortgage is primarily a lien upon the land, the liability follows the land, the grantee becomes primarily liable and, if he does not perform the contract with his grantor in writing to pay the debt of the grantor which he has assumed and agreed to pay, the grantor still remains liable and there can be no discharge of liability without an express agreement to that effect to which the mortgagee is a party.

In Hicks v. McGarry, 38 Mich. 667, it was said:

"We have held that in a foreclosure proceeding in equity, the mortgagee might, where as in this case the mortgage was included in the purchase money, be so far subrogated to the mortgagor as to have the benefit of such an obligation. The reasons for this are peculiar to equity. * * *

"But we have held in Pipp v. Reynolds, 20 Mich. 88, andTurner v. McCarty, 22 Mich. 265, that no action at law will lie by a third person against a promisor who has promised to pay an obligation from a debtor of such person, but who has had no dealings with the creditor."

This principle has been repeatedly restated. Tapert v.Schultz, 252 Mich. 39; Fender v. Feighner, 265 Mich. 536; Lutz v. Dutmer, supra.

In Corning v. Burton, 102 Mich. 86, Burton and Ellsworth owned the property. They mortgaged it to Corning. Burton then deeded to Dickerson who assumed and agreed to pay one-half of the mortgage. Ellsworth then deeded to Dickerson who assumed and agreed to pay one-half of the mortgage. Dickerson then deeded to McQueen who assumed and agreed to pay the mortgage. The executors of Corning then foreclosed the mortgage, making Burton, Ellsworth, Dickerson and McQueen defendants. The court held that a personal decree might be rendered in a foreclosure case against a grantee of the mortgagor who has accepted a deed stating that it is subject to the mortgage which the grantee assumes and agrees to pay. It was said:

"Doubtless equity would say that McQueen was primarily liable, Dickerson next, and the mortgagors last; but all are liable. To hold otherwise would be to say that Dickerson could escape his personal liability, and compel the mortgaors to pay, by deeding to an impecunious person who should assume the debt."

McQueen was primarily liable because he was the owner of the land and had assumed and agreed to pay the mortgage debt. Dickerson was liable next because he owned an entire interest in the premises and had assumed and agreed to pay the mortgage debt. The mortgagors were finally liable because it was their debt which had not been paid.

There is nothing in these cases which holds that the owner of a mortgage is compelled to join all of the persons who have assumed and agreed to pay the mortgage. He may foreclose his mortgage as against the mortgagor. He may choose not to proceed to enforce liability against one who has assumed and agreed to pay the mortgage. He may do so or he may not do so. His proceeding on foreclosure of a mortgage is a proceeding againstthe land. The personal liability of the mortgagor and of subsequent grantees of the mortgagor who assumed and agreed to pay are secondary. But in a land contract, the proceeding isbrought for the enforcement of a personal liability. The proceeding is not one to foreclose a lien. The vendor has legal title and the discharge of the equitable title by sale of the premises is only incidental to specific performance. In the case of the foreclosure of a mortgage, the proceeding is to enforce a lien, to convert the mortgage lien into an absolute title, to acquire by foreclosure against the specific property title to the land. In case of a mortgage foreclosure, the owner of the land who has assumed and agreed to pay is primarily liable because the land is primarily liable and, as a grantee who has assumed and agreed to pay, he is in possession of the land. But in case of a land contract, the assignee of the vendee is not primarily liable. The person who is primarily liable is the vendee. He is the person who has contracted the debt. The claim of the vendor is but an ordinary money debt secured by the contract (Walker v. Casgrain, 101 Mich. 604;Fitzhugh v. Maxwell, supra; Lutz v. Dutmer, supra), and the release from liability of a person who has acquired the land is no release of the vendee from his money debt without an express novation to which the vendor or his grantee is a party. In the foreclosure of a mortgage, a release from liability of the last assignee of the mortgagee who assumes and agrees to pay it is a release of the lien upon the land, which land is primarily liable and, therefore, amounts to release of liability of prior assignees. But in the foreclosure of a land contract, the vendor or his grantees have the title to the land, the amount due on the land contract is a personal liability, and the release of liability of the last assignee of the vendee who has assumed and agreed to pay the debt in no way affects the liability of the original vendee or prior assignees of the contract and in no way affects the title to the land which still remains in the vendor or his grantees.

In this case, however, if the bank, after it accepted the assignment from Wiersum, took possession of the property, proceeded on the assumption that it owned it and dealt with it as the owner thereof in total disregard of the contract for a period of two years with the acquiescence of the vendee and his subsequent assignees, there was in effect a payment and discharge of the contract obligation by an acceptance of the consideration therefor and personal liability on the contract upon the part of the original vendee and his subsequent assignees is at an end. On this ground, I concur with the result reached by Mr. Justice NORTH.

CHANDLER, J., concurred with POTTER, J. McALLISTER, J., did not sit.