Aaron B. Mead et al. v. Francis B. Peabody et al.

1. Construction of Contracts—Assumption of 3Iortgage Debt by Grantee of the Fee.—When the mortgage debt is specified in the clause by which the grantee of the fee assumes and agrees to pay, then the grantee undertakes to pay the entire amount of the debt, although the *298mortgage covers other lands as well, and his liability in snob case is not limited to such part thereof only as is equitably chargeable upon the lands purchased.

Bill to Foreclose a Trust Deed. —Cross-bill, etc. Appeal from the Circuit Court of Cook County; the Hon. Murray F. Tuley, Judge, presiding.

Heaixl in this court at the October term, 1898.

Affirmed.

Opinion filed June 12, 1899.

Statement of the Case.—This cause originated in a bill to foreclose a trust deed, filed by Peabody and Houghteling, to which Edward H. Olson, appellee, and Aaron B. Head, appellant, with others, were parties defendant.

The controversy in the case arises upon the question as to whether Olson or Head shall be decreed to be, as between themselves, primarily liable to pay the debt involved in the foreclosure. Olson was the maker of all the notes in question, and together with his wife, conveyed as surety the property subject to the foreclosure. Afterward Olson and wife conveyed part of the premises by special warranty deed to the wife of Head. As the only consideration for such transfer to his wife, appellant* Head entered into the following agreement in writing:

“I, A. B. Head, in consideration of conveyance by Edward H. Olson, by special warranty deed t.o Hary E. Head, dated the 10th day of July, 1890, of certain real estate, hereby agree to pay, protect and save harmless the said Edward M. Olson from all loss, damage or expense on account of any and all notes executed by said Olson, which may be secured by trust deed on lot 3 and H. \ of lot 4; lots 6, 7, 8, 25, 26, 27 and 28, all in block three (3) in Mils F. Olson’s subdivision of all the part of the northwest quarter of the southwest quarter of section thirty-six, township forty north, range thirteen east of the third principal meridian, lying west of Clarkson Ave., in the city of Chicago, county of Cook and State of Illinois. I also agree to pay a bill of $30 for plumbing done in Ho. 45 Clarkson Ave., to H. Hogan, also a bill of $50 to Speigle & Co., for mantels put in Ho. 45 and 53 Clarkson Ave.

Signed, A. B. Head.”

Olson filed his cross-bill, setting up that by force of this agreement Head had assumed and undertaken to pay all of *299the notes which secured the debt upon which the original bill to foreclose was brought.

Mead answered, admitting the execution of the agreement in writing, but averring, in substance, that the undertaking was in respect to another trust deed and the notes thereby secured, and had no relation to the notes of Peabody and Houghteling, and that Mead at the time of making the agreement had no knowledge of the existence of the latter notes.

There was practically no contest upon the original bill. Upon the cross-bill of Olson and answer of Mead and replication thereto, there -was a hearing before a master in chancery. It was, in effect, contended by appellant Mead that he had, by the written agreement, assumed and agreed to pay certain notes aggregating $7,900, secured by trust deeds, which were a first lien upon the property, and so much only of the second mortgage debt of $7,000 as should be equitably charged against the lots conveyed to Mrs.- Mead. On the other hand, appellee Olson contended that by the writing Mead had assumed and agreed to pay not . only the $7,900, but as well the entire note of Olson held by Peabody and Houghteling for $7,000, secured by a junior trust deed, being the note which is the basis of the original bill to foreclose.

■ It appeared that after the contract by Mead to pay Olson’s notes was entered into, Olson had paid sums amounting, with interest, to $2,289.30 upon the Peabody and Houghteling note.

The master’s report found that by the agreement Mead assumed only the $7,900 note, admitted, and so much of the $7,000 note as was equitably chargeable upon the lots named in the agreement. There were other lots of land than those named in the agreement as conveyed to Mrs. Mead by Olson, which were subject to the trust deed securing the $7,000 note.

The chancellor sustained exceptions of Olson, cross-complainant, to the master’s report, and found that Mead not only assumed and by his agreement in writing undertook to *300pay the part of the $7,000 equitably chargeable to the lots conveyed by Olson to Mrs. Mead, but that Mead had thereby assumed and agreed to pay the entire amount of the $7,000 note.' The decree finds that Mead is primarily liable, as between himself and Olson, for the entire amount of the Peabody and Houghteling note, which is the subject of the original bill to foreclose; oand orders that Olson have execution against Mead for the amounts paid by Olson upon the Peabody and Houghteling note after the contract by Mead was entered into. It orders the premises conveyed by Olson to Mrs. Mead to be sold first, and orders that if after the coming in of the master’s report of sale it should appear that a sale of the other mortgaged premises was necessary, then Olson should have execution against Mrs. Mead “ for the amount realized from the sale of such other premises.”

Charles H. Hamill, attorney for appellants.

Chytraus & Deneen, attorneys for Edward M. Olson, appellee.

Opinion peer Curiam.

The only question presented by this appeal is the construction of the agreement in writing entered into between appellant A. B. Mead and appellee Olson.

The various lots of land mentioned' in the agreement were, at the time the agreement was made, subject severally to incumbrances which constituted a first lien and aggregated in amount $7,900. They were also, except lot 26, subject to a second mortgage of $7,000, which covered also certain other lots than the ones included in the written agreement. The question presented is whether the undertaking of Mead was to pay the second mortgage notes, and if so, whether to pay them in full, or only so much of them as should be equitable—treated as a charge upon the lots mentioned in the agreement. While by answer to cross-bill, appellant presented the theory of accident or mistake in the making of the contract, which by its terms includes all notes of Olson secured upon the lots in question, yet upon the hear*301ing no such defense was presented. Mr. Mead very frankly states in his testimony, that he was aware of the existence and lien of the Peabody and Houghteling note, i. e., the $7,000 junior incumbrance, before he made the written agreement, and had negotiated with Peabody and Houghteling for release of the lots conveyed to Mrs. Mead upon payment of a stated amount".

We can not assent to the contention of counsel for appellant, that there is any ambiguity as to the subject-matter of the contract, i. e., the notes which required extrinsic evidence, or made such evidence admissible to indicate that notes were contemplated by the parties to the agreement. We are of opinion"that the notes which appellant contracted to pay are all the notes of Olson which were then secured upon the lots described, or upon any of those lots. But if there is ambiguity, and if the evidence admitted upon the hearing is proper for the purpose of determining what notes are the subject-matter of the contract, then the result is the same, for the evidence fully warrants the conclusion reached by the chancellor that all the notes of Olson here in question, including the $7,000 note, were subject-matter of the contract.

Counsel for appellant does not seriously contend for a construction of the contract which would altogether exclude from its operation the $7,000 note in question. -He concludes his brief by asking that the decree be reversed and a decree directed “by -which Mrs. Mead’s lots should bear only their just proportion of complainant’s incumbrances, and Mr. Mead shall be charged with personal liability as to that proportion only of the debt that the value-of the lots conveyed to Mrs. Mead bore at the time of conveyance to the value of all the lands subject to the incumbrance.”

It is then to be determined whether the written agreement should be construed to be an undertaking to pay all of the $7,000 incumbrance, or only such part thereof as is equitably chargeable to the lots purchased by Mrs. Mead. The contract in writing was made as a substitute for a *302clause in the special warranty deed from Olson to Mrs. Mead by which Mrs. Mead, the grantee, should assume and agree to pay all mortgage liens on the lots. There is no dispute as to this fact. But the substitute, i. e., the contract by Mrs. Mead, does not undertake to do more than merely assume and pay all liens or incumbrances upon these lots, in that it specifically undertakes "to pay “ all notes executed by Olson which may be secured by trust deed ” on these lots.

The authorities are in harmony to the effect that when the mortgage debt is specified in the clause by which the grantee of the fee assumes and agrees to pay, then the grantee undertakes to pay the entire amount of the debt, although the mortgage covers other lands as well, and his liability in such case is not limited to such part thereof only as equitably chargeable upon the lands purchased. 1 Jones on Mortg., Sec. 743; Welch v. Beers, 8 Allen, 151; Wiling v. Campbell, 106 N. Y. 325.

Counsel for appellant, in support of his contention that the liability should be construed as limited to the proportion of the mortgage debt only with which the lots in question are equitably chargeable, cites Hoy v. Bramhall, 4 C. E. Green (N. J.), 74.

But in that case the subject-matter of the undertaking was “ the payment of all liens now on said premises.” If the language here to be construed was like to that, and if all that Mead had undertaken by this contract had been to pay “ all liens ” upon the lots in question, then a like conclusion might here obtain. But here the appellant agreed to pay, not the debt to the extent that it was a lien upon these lots, but “ the notes.”

We are inclined to view the construction put upon the contract by the learned chancellor as correct.

This is, however, one respect in which the decree is erroneous. It provides that after the sale of the lots conveyed to Mrs. Mead, if the mortgage debt is not thereby satisfied then the other lots covered by the mortgage shall be sold, and that Olson shall have execution against Mead for the *303amount realized from such sale of the latter premises. This is erroneous. The premises last mentioned might sell for much more than the total of the obligation assumed by Mead. • The decree should have awarded execution to Olson in this behalf only for an amount equal to such part of the mortgage debt as was not satisfied by the sale of the lots conveyed to Mrs. Mead.

We do not regard the order that the lots conveyed to Mrs. Mead be first sold, as erroneous. If she were a purchaser for value, the question would be different. But it appears, and the decree so finds, that the only consideration for the conveyance by Olson to her was the undertaking of Mr. Mead in the written contract. It ivas one transaction. Her interest in and rights to the lots conveyed can not be held to be any better in this behalf than would theinterestand right of Mr. Mead if the conveyance had been made to him.

With the modification above suggested, the decree is affirmed.