Brown v. Turner, 202 N.C. 227 (1932)

Feb. 17, 1932 · Supreme Court of North Carolina

202 N.C. 227

LELIA M. BROWN v. MARGARET TURNER, Administratrix of FRANK TURNER, Deceased.

(Filed 17 February, 1932.)

1. Mortgages F a — Mortgagor’s liability to mortgagee is not changed by mortgagee’s agreement with subsequent purchaser to release part of land.

Where land subject to a mortgage is sold successively by deeds in which the grantees assume the mortgage indebtedness, and thereafter the mortgagee releases a part of the land from the mortgage lien by agree: ment with a subsequent purchaser without the Knowledge or consent of the mortgagor: Held, the primary liability of the mortgagor to the mortgagee is not affected by the release, and the mortgagee may recover against the mortgagor on a. note executed by him and secured by the mortgage.

2. Mortgages O a/ — Personal liability on note secured by a mortgage is not merged therein.

The execution of a mortgage does not merge the personal liability of the mortgagor on his note secured thereby, and the mortgagee, upon default, may sue either m personam on the note or in rem by foreclosure, or may unite both remedies in one action.

3. Mortgages O d — As between the pai’ties a release of part of land from mortgage does not affect mortgagee’s lien on the remainder.

As between the original parties a release of part of the land mortgaged from the mortgage lien does not affect the mortgagee’s lien on the remainder, which is security for the whole debt.

Appeal by defendant from Stack, J., at September Term, 1931, of BuNcombe.

Affirmed.

This is an action on a promissory note for $375 executed and delivered to tbe plaintiff by Frank Turner, tbe defendant’s intestate. Trial by jury was waived, tbe material facts being as follows:

On 13 May, 1926, Frank Turner bought from tbe plaintiff and her sister, Ida M. Catbey, two bouses and lots described as lots 8 and 9 at tbe price of $3,000. He paid $750 and executed six notes for $375 eacb, aggregating $2,250. To secure payment be executed a deed of trust on both lots to tbe Central Bank and Trust Company. Prior to 8 May, 1928, tbe debt bad been reduced to $1,500, and prior to this date W. B. Catbey through mesne conveyances bad acquired Frank Turner’s title to tbe lots. Catbey made improvements in tbe bouse on lot 9, thereby increasing its value $500. Tbe value of lot 9 was then $2,000 and tbe value of lot 8 was $1,500. On 8 May, 1928, tbe plaintiff and ber sister, Ida M. Catbey, made an agreement with ~W. B. Catbey that tbe trustee should release lot 9 from tbe operation of tbe deed of trust, so that said Catbey might obtain a first mortgage loan on tbe property. By consent of these parties tbe Central Bank and Trust Company released lot 9 on 8 May, 1928, without notice to Frank Turner. Catbey then executed a mortgage or deed in trust on this lot to secure $1,200 which be borrowed from tbe Blue Ridge Building and Loan Association. At this time Catbey paid $750 of tbe remainder due on tbe notes ($1,500) secured by tbe deed of trust to tbe Central Bank and Trust Company and paid tbe interest on tbe remaining $750 to 13 November, 1928, leaving unpaid two notes for $375 eacb, tbe one in suit held by tbe plaintiff and tbe other by Ida M. Catbey. Tbe trustee held lot 8 as security for these notes. Lot 9 was sold under tbe mortgage given by Catbey.

Tbe defendant contends upon these facts that Catbey became tbe principal debtor and Frank Turner a surety, who was discharged from liability to tbe mortgagee by tbe trustee’s release of one of tbe lots.

Tbe other question is whether tbe action is barred by tbe provisions of section 100 of tbe Consolidated Statutes.

John jE. Cathey and 'James E. Rector for plaintiff.

J. E. Baumberger and F. W. Thomas for defendant.

Adams, J.

An agreement by tbe purchaser of an equity of redemption with bis vendor that be will assume and pay tbe mortgage debt will render him personally liable, not only to bis grantor but also to tbe bolder of tbe mortgage. As between themselves tbe purchaser is regarded as tbe principal debtor and tbe grantor as surety, and tbe mortgagee’s right to' maintain an action upon this agreement rests upon tbe ground that tbe contract of tbe purchaser is a collateral stipulation obtained by tbe mortgagor, which by equitable subrogation inures to tbe benefit of tbe mortgagee. Tbe mortgagee is entitled to appropriate for bis debt any security held by bis debtor for its payment, but be has no rights against tbe purchaser which could not under tbe contract of purchase have been claimed by tbe original debtor; and in tbe application of this equitable doctrine tbe mortgagee has been allowed to enforce tbe personal liability of tbe purchaser only to tbe extent of a deficiency upon a foreclosure sale of tbe mortgaged premises and only if tbe party to whom tbe purchaser’s agreement was given was himself personally liable for tbe payment of tbe mortgage debt. Tbe mortgagor of course remains liable to tbe mortgagee as tbe debtor to whom tbe credit was directly extended. This is tbe principle set forth in Baber v. Hanie, 163 N. C., 588. On tbe principle that one for whose benefit a promise is made may maintain an action upon tbe promise, it is held in a later ease that tbe mortgagee may sue tbe mortgagor’s grantee who has assumed tbe payment of tbe debt without foreclosing tbe mortgage or joining tbe mortgagor in tbe action. Rector v. Lyda, 180 N. C., 577. See Keller v. Parrish, 196 N. C., 733, and Parlier v. Miller, 186 N. C., 500.

We have restated these principles for tbe reason that tbe defendant cites Baber v. Hanie and Parlier v. Miller as authority for tbe position that tbe mortgagor and tbe person assuming tbe payment of tbe mortgage debt sustained tbe relation of surety and principal not only as between themselves, but as between themselves and tbe mortgagee. We do not concur in this statement. Tbe only parties to tbe present action are tbe bolder of one of tbe notes and tbe administratrix of Frank Turner, tbe mortgagor. Neither of tbe vendees who assumed tbe debt is a party.’ Tbe object of tbe action is to procure'a judgment on tbe mortgagor’s note, not to foreclose tbe mortgage or to adjudicate tbe rights of all persons who were connected with tbe several transactions. Tbe only asserted counterclaim set up in tbe answer consists simply of averments upon, which it is sought to dismiss tbe suit and to bar tbe plaintiff’s recovery of a judgment. Tbe only point in issue is whether tbe defendant is indebted to tbe plaintiff on tbe note.

Tbe doctrine that tbe purchaser of an equity of redemption assuming tbe payment of tbe mortgage debt is tbe principal and bis grantor tbe surety, obtains as between themselves and does not preclude tbe mortgagee from proceeding against tbe mortgagor as bis principal debtor, at least wben be does not assent to tbe agreement. So far as tbe mortgagee is. interested tbe mortgagor is not a mere surety. Tbe mortgagee is not required' first to foreclose bis mortgage; be may bring suit only on tbe note. Tbe fact tbat tbe mortgagor bas sold tbe equity of redemption to a purchaser who assumes tbe mortgage debt does not change tbe right of tbe bolder of tbe note to pursue tbe personal remedy. He may bring an action in personam or an action in rem, or be may pursue both remedies in one action. Tbe debt is tbe primary obligation between tbe parties and tbe note is tbe primary evidence of tbe debt. Tbe execution of tbe mortgage does not merge tbe mortgagor’s personal liability. 2 Jones on Mortgages (7th ed.), sec. 1220; 41 C. J., 733, sec. 783; Ellis v. Hussey, 66 N. C., 501; Silvey v. Axley, 118 N. C., 959; McCaskill v. Graham, 121 N. C., 190. His Honor was therefore correct in bolding tbat tbe release of tbe lien on one of tbe lots did not discharge tbe primary liability of tbe mortgagor. As between tbe original parties tbe release of a part of tbe mortgaged xoremises does not affect tbe mortgagee’s lien upon tbe residue; this is bound for tbe whole debt. 2 Jones, supra, secs. 722, 981.

Upon tbe facts found by tbe trial court tbe action is not barred by section 100 of tbe Consolidated Statutes. Judgment

Affirmed.