On appeal from the Essex County Circuit Court.
For the plaintiff-appellee, Howe & Davis (Edward L. Davis, of counsel).
For the defendant-appellant, Alfred J. Grosso.
Before Brogan, Chief Justice, and Justices Donges and Porter.
BROGAN, CHIEF JUSTICE. The precise question in this case is whether a law court has jurisdiction to entertain a suit by a plaintiff-mortgagee against an assuming grantee of plaintiff's mortgagor for a deficiency after foreclosure sale. It will be helpful to state the pertinent facts briefly as taken from the pleadings.
The complaint alleges that on June 8th, 1926, Kelly, one of the defendants (the mortgagor), gave the usual bond and a mortgage to secure the payment of $8,000 on June 8th, 1927, with interest payable semi-annually. Kelly conveyed the mortgaged premises to Emily Corby, the other defendant (appellant here), who assumed the mortgage and promised to pay it. The mortgage was foreclosed and, after final decree fixing the amount of the debt, the lands and premises were sold. The sum realized from the sale was insufficient to clear the debt. The sale was confirmed. The deficiency amounted to $2,965.84.
The agreement between Kelly, the grantor, and Corby, the assuming grantee, is pleaded in detail. The allegation is that therein it was provided that Emily Corby took "the property subject to and assuming a first mortgage," in the amount of $8,000 and that subsequently Kelly conveyed the premises to Mrs. Corby and that in making payment to Kelly the said Emily Corby "deducted from the purchase price the sum of $8,000" being the amount of the mortgage and "as a matter of law assumed payment thereof and is under a legal duty to pay the same as part of the consideration in said deed expressed."
On motion, the answer filed for Mrs. Corby was challenged. The learned trial judge struck out the answer and judgment for the amount of the deficiency was entered against her. The plaintiff's affidavits in support of the motion to strike out the answer had annexed to them the contract of sale. No answering affidavit was presented by the defendant.
The question that is here argued is concerned with the jurisdiction of the law court to entertain the suit. The appellant claims a want of jurisdiction. That question was not raised in the court below. It may be raised here. Jurisdiction goes to the source of the court's authority and if there was none the judgment is a nullity.
There are two schools of thought on the question before us. One holds that where an assuming grantee makes a promise direct to his grantor (the mortgagor) that he will pay the debt, the mortgagee is a party beneficially interested and is entitled to sue the promising grantee at law in his own name as though the grantee made the promise to him direct. This is upon the theory that the liability arises directly out of contract and not on the equitable doctrine of subrogation. In equity the covenant of the assuming grantee is treated as one for the indemnification of the mortgagor.
The other view arises out of an exclusively equitable conception of the relationship of the parties and the reasoning proceeds upon the theory that the assuming grantee's liability to the mortgagee arises by the mechanics of subrogation which entitles the mortgagee (since the mortgagor becomes surety under these circumstances) to all the security which the mortgagor has out of the assumption of the debt by the grantee, and thus equity entitles the mortgagee to recover on the agreement between the mortgagor and the grantee.
The first view adheres to what Professor Pomeroy calls an American doctrine. Our state has been classed by the textwriters as an adherent to the second school of thought. (See Pom. Eq. Jur. (4 th ...