Union Mutual Life Ins. Co. v. Hanford - 143 U.S. 187 (1892)
U.S. Supreme Court
Union Mutual Life Ins. Co. v. Hanford, 143 U.S. 187 (1892)
Union Mutual Life Insurance Company v. Hanford
Argued and submitted March 26, 1891
Decided February 29, 1892
143 U.S. 187
Under the law of Illinois, a grantee who by the terms of an absolute conveyance from the mortgagor assumes the payment of the mortgage debt, is liable to an action at law by the mortgagee; the relation of the grantee and the grantor toward the mortgagee is that of principal and surety, and therefore a subsequent agreement of the mortgagee with the grantee, without the assent of the grantor, extending the time of payment of the mortgage debt, discharges the grantor from all personal liability for that debt.
This was a bill in equity, filed March 30, 1878, by the union Mutual Life Insurance Company, a corporation of Maine, against Philander C. Hanford, Orring P. Chase, Frederick L. Fake, and Lucy D. Fake, his wife, citizens of Illinois, to foreclose by sale a mortgage of land in Chicago, and to obtain a decree for any balance due the plaintiff above the proceeds of the sale. Fake and wife were defaulted, and Hanford and Chase answered. The case was heard upon a master's report, and the evidence taken before him, by which (so far as is material to be stated) it appeared to be as follows:
On September 9, 1870, Hanford and Chase mortgaged the land to one Schureman to secure the payment of three promissory notes of that date, signed by them, and payable to his order, one for $5,000, in one year, and the second for $5,000, in two years, each with interest at the rate of eight percent annually, and the third for $6,000, in three years, with interest at the rate of ten percent annually.
On January 30, 1871 (the first note having been paid), the plaintiff, through one Boone, its financial agent, bought the mortgage, and Schureman endorsed the remaining notes, and assigned the mortgage to the plaintiff.
On September 9, 1872, Hanford and Chase conveyed the land to Mrs. Fake by deed of warranty, "with the exception of and subject to" the mortgage, (describing it), "which said mortgage or trust deed, and the notes for which the same is collateral security" (describing them)
"it is hereby expressly agreed shall be assumed, and paid by the party of the second part, and, when paid, are to be delivered, fully cancelled, to said Chase and Hanford."
At or about the date of this conveyance, Chase called with Fake at Boone's office and told him that Hanford and Chase had sold the property to Mrs. Fake, and that she was to pay the mortgage, and Boone, as Chase testified, "said 'All right' or something of that sort." At the same interview, Boone, as the plaintiff's agent, in consideration of $150 paid him by Chase, extended the $5,000 note until September 9, 1874.
Fake, as his wife's agent, afterwards paid interest on the notes to Boone as the plaintiff's agent, and on January 9, 1875, for the sum of $340, obtained from him, without the knowledge of Hanford or Chase, an extension of the notes until September 9, 1875.
The value of the mortgaged premises in September, 1874, was $18,000 to $19,000, and at the date of the master's report, in April, 1879, was $10,000 to $15,000 only.
The principal defense relied on by Hanford and Chase was that they were discharged from personal liability on the notes by this extension of the time of payment without their consent.
The land was sold by the master, under order of the court, for $12,000, which was insufficient to satisfy the sums due on the mortgage, and the plaintiff, after notice to Hanford and Chase, moved for a deficiency decree for a sum amounting, with interest, to more than $5,000. The circuit court overruled the motion. 27 F. 588. The plaintiff appealed to this Court.