Citation. 69 N.Y. 280 (Court of Appeals New York, 1877)
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A piece of mortgaged property was conveyed to many people. Most of whom did not assume the obligations of the mortgage. In the last conveyance, the grantee assumed the obligations under the mortgage.
Synopsis of Rule of Law.
"A grantee of mortgaged premises whose conveyance recites that the land is conveyed subject to the mortgage, and that the grantee assumes and agrees to pay the same as part of the consideration, is not liable for a deficiency arising upon a foreclosure and sale, in case the grantor was not personally liable, legally or equitably, for the payment of the mortgage. A mere stranger cannot claim the benefit of a contract between other parties; to entitle a third person to such a benefit there must be either a new consideration or some prior right or claim against one of the contracting parties, by which he has a legal interest in the performance of the agreement."
Facts.
This case concerned an action to foreclose a mortgage. Defendant 1, Evans ("Defendant 1"), executed the mortgage in August 1873. Defendant 2 conveyed the premises covered by the mortgage to Mitchell and title eventually came to rest with Sanborn. None of the grantees assumed to pay the mortgage. Sanborn conveyed the mortgage to Defendant 2, Turner ("Defendant 2"). This conveyance was subject to the mortgage, meaning Turner agreed to pay off and discharge the mortgage. The Plaintiff, Vrooman (the "Plaintiff"), sued the Defendant to foreclose on the property.
Issue.
If a grantor is not liable for a mortgage, is a grantee that assumed the mortgage from the grantor liable?
Held.
No. Neither Defendant 1 nor Defendant 2 are bound at law or equity to pay the mortgage. The only way the third party, the Plaintiff in this matter, can derive a benefit from the promise's performance is 1) the promissee, Sanborn had an intent to procure a benefit for the third party; 2) there is privity between the promissee and the third party and 3) the promissee owes a duty or obligation to the third party. The Promisor, the Defendant in this case, did not need to be in privity with the third party. However, there needed to be a legal obligation between the promisor and the third party.
• Based on the facts of the case, the Plaintiff cannot recover. Since Sanborn was not subject to the mort¬gage, the Defendant cannot be subject to the mortgage.
Discussion.
The courts discussion and application of [Lawrence v. Fox] is very interesting.
