KINYON INV. CO. v. BELMONT STATE BANK et al. (No. 5327.) (Supreme Court of Montana. Dec. 17, 1923.) 1. Mortgages 292(1) Purchaser assuming mortgage is liable to mortgagee. A purchaser of mortgaged property' who assumes the mortgage becomes liable therefor, which liability may be enforced by the mortgagee by appropriate action. 2. Mortgages 292 (1) - Theory of mortgagee's right to foreclose against purchaser from mortgagor stated. Under Rev. Codes 1921, § 9467, providing a foreclosure suit is the only form of action maintainable to enforce payment of a debt secured by a mortgage, and section 8209, declaring a creditor entitled to the benefit of everything which a surety has received from the debtor by way of security, the right of a mortgagee to foreclose against a purchaser from the mortgagor who has assumed the mortgage is predicated on the theory that the purchaser becomes the principal debtor and the mortgagor the surety, and that the mortgagee is entitled to an equitable subrogation to all security held by the surety against the principal debtor. 3. Mortgages 282(1) -Bank assuming mortgage liable for deficiency judgment. Under Rev. Codes 1921, § 8253, relieving a mortgagor from personal liability, where a note is made a part of a mortgage securing it wherein the mortgagors expressly covenanted to pay the mortgage debt, a bank, as purchaser of the mortgaged property, which assumes and agrees to pay the mortgage, is liable for a deficiency judgment though there is no express assumption of personal liability, particularly in view of section 9467, authorizing a deficiency judgment and creating a contingent liability. 4. Mortgages 280 (4)-Liability of bank as suming mortgage measured by terms thereof. The liability of a bank which has assumed a mortgage is measured by the terms thereof. 5. Mortgages 283 (2)—Right against mortgagor not lost by first proceeding against his grantee. Rights against a mortgagor are not lost by first proceeding against the purchaser of the mortgaged premises who has assumed the mortgage. Appeal from District Court, Golden Valley County; Geo. A. Horkan, Judge. Action by the Kinyon Investment Company against the Belmont State Bank and another. Judgment for plaintiff, and named defendant appeals. Affirmed and remanded for amendment. ered to the Bankers' Farm Mortgage Company their promissory note for $2,500, due December 1, 1924, with interest at 6 per cent. per annum. The interest payments were represented by coupons attached to the note, and these coupons became due, respectively, December 1, 1919, December 1, 1920, December 1, 1921, December 1, 1922, December 1, 1923, and December 1, 1924. To secure the payment of the principal debt and interest, Wilson and wife executed and delivered to the mortgage company a mortgage upon 320 acres of land in Musselshell (now Golden Valley) county. The note and mortgage each contained a provision that upon default in the payment of interest the holder might declare the principal and unpaid interest due immediately. The mortgage also contained a provision that the mortgagors should pay all taxes levied against the property, and upon their failure to do so the holder of the note and mortgage might pay the same, and the amount so paid should be added to the principal debt and become a lien upon the property. It also contained a provision for an attorney's fee of 10 per cent, in case of foreclosure. This suit to foreclose was instituted in January, 1923. The complaint is in the usual form. It alleges that default had been made in the payment of interest due December 1, 1921, and December 1, 1922, and by reason thereof plaintiff elected to and did declare the whole amount due immediately. It is alleged further that plaintiff was compelled to pay and did pay $224.92 taxes levied upon the property which the mortgagors had not paid. It is alleged further that the Van Duzen Oil Company has or claims to have some interest in the property. In April, 1919, the mortgage company sold, assigned, and transferred the note and mortgage to this plaintiff. In July, 1922, Wilson and wife conveyed the land by warranty deed to the Belmont State Bank, subject to the mortgage debt which the bank assumed and agreed to pay. Personal service of summons was made upon each of the defendants, but neither appeared, and the default of each was regThereafter evidence was ularly entered. heard and a decree of foreclosure rendered. The court found that the amount due was $2,954.38, and directed a sale of the property to satisfy that amount, and the following amounts: $224.92, for taxes paid, with $3.40 interest thereon; $200 attorney's fee; $17 abstract fee; and $19.20 costs. The decree W. A. Pennington, of Roundup, for ap- provided that if the money received from pellant. the sale was insufficient to pay the several boarman & Boarman, of Roundup, for re- amounts above and the sheriff's costs of sale, spondent. HOLLOWAY, J. In February, 1919, Perry B. Wilson and wife executed and deliv a deficiency judgment should be entered against the Belmont State Bank for such balance. Under an order of sale the property was duly sold on April 7, 1923, for For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes (221 P.) $2,500, and, upon the sheriff's return being | 613. made, a deficiency judgment for $952.94 was entered against the bank, which thereafter appealed.. Two questions are presented: (1) May plaintiff maintain this action against the bank? and (2) if it may do so, what is the measure of the bank's liability? [1, 2] 1. It is the general rule in this country that where one purchases mortgaged premises from the mortgagor and assumes and agrees to pay the mortgage he becomes liable therefor, which liability inures to the benefit of the mortgagee who may enforce it in an appropriate action. The decided cases supporting the rule are too numerous to be cited here. They will be found lected in the notes in 21 A. L. R. 440. Upon the question: What is the appropriate form of action? the authorities are not agreed, and the disagreement arises largely from a difference of opinion as to the theory of liability and from special statutes which reflect upon the subject. See, also, 19 R. C. L. p. 375; 3 Pomeroy's Eq. Jur. §§ 1206, 1207; 2 Jones on Mortgages, 88 741, 752; Winters v. Hub. Min. Co. (C. C.) 57 Fed. 287. In Crowell v. Hospital of St. Barnabas, above, the court said: * "The right of a mortgagee to enforce payment of the mortgage debt, either in whole or in not rest upon any contract of the grantee with part, against the grantee of the mortgagor, does him, or with the mortgagor for his benefit. *. mortgage, who assumes and agrees to pay the * The purchaser of lands subject to mortgage debt, becomes, as between himself and his vendor, the principal debtor, and the liability of the vendor, as between the parties, is col-itor may have the benefit of all collateral oblithat of a surety. * * * In equity, a credgations, for the payment of the debt, which a person standing in the situation of a surety for others holds for his indemnity. * * It is in the application of this principle that decrees for deficiency in foreclosure suits have been made against subsequent purchasers, who have assumed the payment of the mortgage between themselves and their grantors. * debt, and thereby become principal debtors as Recovery of the deficiency after sale of the mortgaged premises, against a subsequent purchaser, is adjudged in a court of equity to the mortgagee not in virtue of any original equity residing in him. He is allowed, by a mere rule of procedure, to go directly as a creditor to avoid circuity of action, and save the mortagainst the person ultimately liable, in order gagor, as the intermediate party, from being harassed for the payment of the debt, and then driven to seek relief over against the person who has indemnified him, and upon whom the liability will ultimately fall. The equity on which his relief depends is the right of the mortgagor against his vendee, to which he is the place of the mortgagor." permitted to succeed by substituting himself in In many jurisdictions the liability is enforced, in an action at law, upon the theory that the grantee's promise to pay the debt secured by the mortgage, constitutes a contract between him and the mortgagor for the special benefit of the mortgagee, which the mortgagee may enforce in a direct action against the grantee. The cases supporting this view will be found cited in 21 A. L. R. 454. In other jurisdictions, among them Arkansas, California, Michigan, New Jersey, Vermont, and Virginia, the liability is predicated upon the theory that since, as between the parties to the deed, the grantee by his contract of assumption becomes the principal debtor and the mortgagor the surety, the mortgagee is entitled to the benefit of the contract under the familiar doctrine that a creditor is entitled by equitable subrogation to all securities held by a surety of the principal debtor. Felker v. Rice, 110 Ark. 70, 161 S. W. 162; Biddel v. Brizzolara, 64 Cal. 354, 30 Pac. 609; Williams v. Naftzger, 103 Cal. 438, 37 Pac. 411; Crawford v. Edwards, 33 Mich. 354; Kollen v. Sooy, 172 Mich. 214, 137 N. W. 808; Crowell v. Hospital of St. Barnabas, 27 N. J. Eq. 650; Green v. Stone, 54 N. J. Eq. 387, 34 Atl. 1099, 55 Am. St. Rep. 577; Biddle v. Pugh, 59 N. J. Eq. 480, 45 Atl. 626; Lamoille County S. B. & T. Co. v. Belden, 90 Vt. 535, 98 Atl. 1002; McIlvane v. Big Stony L. Co., 105 Va. 613, 54 S. E. 475; Thacker v. Hubard, 122 Va. 379, 94 S. E. 929, 21 A. L. R. 414. This theory has been approved by the Supreme Court of the United States in Keller v. Ashford, 133 U. S. 610, 10 Sup. Ct. 494, 33 L. Ed. 667; Union Mut. Life Ins. Co. v. Hanford, 143 U. S. 187, 12 Sup. Ct. 437, 36 L. Ed. 118; and in Johns v. Wilson, 180 U. S. 440, 21 Sup. Ct. 445, 45 L. Ed. by the Supreme Court of the United States That language is quoted with approval in Keller v. Ashford, above. the covenant or mortgagee has the option to proceed directly ability may be enforced in an action at law "A creditor is entitled to the benefit of every- and costs. In other words, although the thing which a surety has received from the mortgagor does not assume a primary perdebtor by way of security for the performance sonal liability, he is held to a contingent of the obligation, and may, upon the maturity liability; the contingency being the failure of the obligation, compel the application of such of the mortgaged property to sell for a sum security to its satisfaction." sufficient to discharge the debt and costs. Fast v. Steele, 127 Cal. 202, 59 Pac. 585; Biddel v. Brizzolara, above. For the same reason the grantee of the mortgagors in this instance assumed a personal liability for the amount of the deficiency judgment. California has the same statutory provision, and concerning this rule in equity the Supreme Court of that state said: Since the bank's liability is measured by the terms of the mortgage, and the mortgage provided for an attorney's fee in case of foreclosure, and for the payment of tax "This rule in equity does not depend upon the character of the liability of the principal debtor to the creditor, or upon the existence of any relation between the creditor and the surety for the principal debtor, but is founded wholly upon the right of the creditor to avail himself of whatever rights the surety has as against the principal debtor. It has been formulated in es by the mortgagors, the allowance of these section 2854 of the Civil Code as follows: items was properly made. In 27 Cyc. 1355, the rule is stated as follows: * It is under the application of this prin- | ciple that in the foreclosure of a mortgage a judgment for a deficiency may be rendered against a grantee of the mortgagor who has assumed the payment of the mortgage debt." Hopkins v. Warner, 109 Cal. 133, 41 Pac. 868. Under these authorities we hold that the rule of equitable subrogation is in force in this state, and that in virtue of that rule plaintiff may maintain this action against the bank. [3, 4] 2. The extent of the bank's obligation is measured by the terms of the mortgage. The Home v. Selling, 91 Or. 428, 179 Pac. 261, 21 A. L. R. 403; Thacker v. Hubard, above. "But if he [grantee] assumes the mortgage in general terms, or without restrictions, he becomes liable for all that may be actually due upon it, which may include overdue as well as accruing interest, according to the terms of the contract, and taxes on the premises which it was the duty of the mortgagor to pay, and also attorney's fees and costs of suit." [5] The assumption of the mortgage debt by the grantee, however, does not deprive the mortgagee of any remedies he may have against the mortgagor; he may enforce his right against the mortgagor, or the grantee, or against both of them. Thompson v. Cheesman, 15 Utah, 43, 48 Pac. 477; Crawford v. But counsel for the bank insists that the Edwards, 33 Mich. 354; 27 Cyc. 1351, 1352. mortgagors did not assume any personal liIt is conceded by counsel for plaintiff, and ability under the mortgage; hence the bank properly so, that error was committed in cannot be held for a deficiency judgment. computing the amount due upon the note, Section 8253, Revised Codes 1921, provides: and that the amount found to be due is $113 in excess of the amount actually due. It is "A mortgage does not bind the mortgagor personally to perform the act for the perform-conceded also, that the charge of $17 for ance of which it is a security, unless there is abstract fee, and the item of $3.40, interest an express covenant therein to that effect." on taxes paid, were improperly included in the judgment. The cause is remanded to the district court, with directions to amend the decree by deducting from the amount thereof the sum of $133.40, and as thus amended it will stand affirmed, each party to pay his own costs of appeal. In the instant case the note is made a part of the mortgage, and thereby the mortgagors did expressly covenant to pay the mortgage debt. But, aside from this consideration, section 8253 must be read in connection with section 9467, which expressly authorizes a deficiency judgment in the event the proceeds from the sale of the mortgaged CALLAWAY, C. J., and COOPER, GALEN, property are insufficient to pay the debt and STARK, JJ., concur. (221 P.) Dec. 31, 1. Bail 80-Surrender may be while person The only purpose of bail under Rem. Comp, St. §§ 1919, 776, on appeal from conviction in police court, being to permit the discharge from custody of the convicted person pending determination of appeal, there being no requirement that he as a prerequisite to appeal give bond to pay the fine imposed as for the judgment, there is no lien on the bail, whether in form of recognizance or money deposit, so it cannot be held to satisfaction of the judgment after surrender of accused pending the appeal. Department 2. offense, and was sentenced to pay a fine of $250, with the cost of the prosecution. He again appealed to the superior court from the judgment of conviction, and bail was fixed at $300. Money was also deposited in lieu of bail by recognizance on this appeal by the attorney of Williams, and Williams given his liberty pending the appeal. A transcript of the record of this proceeding was also forwarded to the clerk of the superior court to which the appeal was taken, together with the bail money, by the police judge. Later on, and while the foregoing appeals were pending in the superior court, Williams was arrested on a warrant issued on an information filed in that court charging him with conducting and maintaining a place for the sale of intoxicating liquor, and was confined in the county jail to await his trial on the charge. While so confined he surrendered himself to the sheriff of county of Franklin on his first conviction, and assigned the sum he had deposited as bail to se cure his appearance in the superior court to the attorney who had become his bail on the second conviction. At or about the same time the attorney also tendered his surrender on the second conviction. The attorney thereupon moved in each separate appealed cause Appeal from Superior Court, Franklin for an order exonerating the bail, and for County; Hill, Judge. From orders in two cases against Harry Williams, exonerating his bail and directing payment of the bail money to him or his attorney, Edward A. Davis, the State appeals. Affirmed. leave to withdraw from the clerk of the' On court the money deposited as bail. April 26, 1923, the court granted the motions, entering orders exonerating the bail, and directing the clerk to turn over and pay the bail money to the defendant or his attorney. Afterwards, and on April 28, 1923, Chas. W. Johnson, of Seattle, for the Williams was tried on the jointist charge, State. and was found guilty by the verdict of a Edwards A. Davis, of Pasco, for respond-jury. Later on he was sentenced to a term ents. FULLERTON, J. On October 23, 1922, the defendant, Harry Williams, was convicted in the police court of the city of Pasco of having intoxicating liquor in his possession, contrary to the ordinances of the city, and was sentenced to pay a fine of $200, together with the costs of the prosecution, and be confined in the city jail until the fine and costs were paid. Williams appealed to the superior court of Franklin county from the judgment, and the police judge fixed his bail pending the appeal at the sum of $250. Williams, instead of entering into a recognizance with sureties, deposited with the police judge the amount of the bail in money, and was thereupon discharged from custody. In due time the police judge forwarded to the clerk of the court to which the appeal was taken a transcript of the proceedings of his court, together with the money deposited with him as bail. On February 26, 1923, Williams was convicted in the same police court of a similar in the penitentiary, leaving the appeals from the convictions in the police court undetermined. The from the orders of the court directing a reThe proceedings before us are appeals turn of the money deposited as bail. objections to the orders of the court are stated by the prosecuting attorney in the following language: "There are at least two reasons why the court erred in releasing the cash bail: First, the arrest by the state of Washington in another charge and a subsequent conviction does not amount to a surrender while the defendant is being held to answer the state charge; second, cash bail deposited is liable for the payment of the fines in case the police court is affirmed on appeal from a conviction in the summary proceedings for violating a city or dinance." [1] The first of the propositions here enunciated is possibly sound, but we cannot think that, as it is stated, it correctly represents the situation presented. In this state a per For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indoxes 221 P.-19 [2] What we have said in answer to the first objection in the main answers the second. The statutes cited make it clear that the only purpose of bail on an appeal from a judgment of conviction is to permit the discharge from custody of the convicted person pending the appeal. There is no requirement that the convicted person as a prerequisite to an appeal shall give bond to pay the fine that may have been imposed upon him as a part of the judgment of conviction. He may appeal without furnishing bail of any sort. If he does so, he must stay in custody until his appeal is de liberty pending that event, or pending such time as his bail is willing to stand sponsor for him. Money deposited in the form of bail is only a substitute for bail by recognizance or bond, and sureties giving that form of bail have the same rights as do sureties giving the other, and may surrender the person bailed on the same terms as may the others. Since there is no requirement that the appellant shall give surety for the satisfaction of the judgment on taking an ap peal, there is no lien upon the bail furnished, whether it be in the form of a recognizance, or whether it be a money deposit, and hence the prosecuting authority may not hold the bail to a satisfaction of the judgment after the surrender of the accused by the bail to the proper officer. son who is convicted in a police or justice's [ ditional to the one on which he was then court, and fined, must, if he does not other- held. It is therefore our opinion that the wise pay the fine, he confined in jail until surrender was within the province of the the fine and costs are worked out at a stated bail, and was properly made. sum per day. If he appeals from the judgment of conviction, he must be held in custody pending the appeal, unless he enter into a recognizance with sureties in such reasonable sum as the judge or justice of the court from which the appeal is taken may require, conditioned to appear at the court appealed to, and there prosecute his appeal and abide the sentence of the court thereon (Rem. Comp. Stat. § 1919), or in lieu of such recognizance he deposit with the proper officer of the court the amount of money for which he is required to enter into recognizance (Id. § 776). Elsewhere the statute provides for the exoneration of the sureties fur-termined. By furnishing bail he secures his nishing the bail. It provides that, at any time before the breach of the obligation, the sureties may surrender the person bailed to the sheriff of the county and thereby relieve themselves from further liability on their obligation, and further provides that the person bailed may himself surrender to the sheriff in exoneration of his bail. (See the various sections of the Code cited under the title "Arrest and Bail.") In the cases before us, as we have said, the surety in the one instance surrendered the defendant to the sheriff, and in the other the defendant himself made the surrender. It is on these acts, and not on the fact that the defendant was convicted of another and independent crime, that the bail claim an exoneration of their liability on their obligation and claim a right to a return of the money deposited. The validity of the orders of the court, therefore, must depend on the question whether the acts performed in the attempted surrender amounted in law to a surrender within the purport of the statute. It differs from the ordinary case only in the fact that the person bailed was in custody, and not at large, when the surrender was made. But we cannot think this difference in any way affects the right of surrender. Certain-court might direct. It being within the powly, if the bail may surrender the custody of the person bailed to the sheriff at any time while he is at large, they may do so after his arrest on another charge, provided, of course, that the officer to whom they make the surrender may take him into custody. This might not be the fact if the officer to whom the surrender could be made is not the officer having him in custody on the other charge, but there was no difficulty on this score in the present instance. The officer then having the defendant in custody was the officer entitled to his custody on the surrender of the bail, and after the surrender he but held him in custody on charges ad-TON, and BRIDGES, JJ., concur. The cases of State v. Stommel, 89 Iowa, 67, 56 N. W. 263, and State v. Meier, 96 Iowa, 375, 65 N. W. 316, cited by the prosecuting attorney to sustain his position, are not in point. The statutes under consideration in those cases provided that upon an appeal from a judgment imposing a fine the appellant as a prerequisite thereto must enter into an undertaking "to pay the fine" imposed, or so much thereof as the appellate er of the Legislature to impose such a condition as a prerequisite to the right of ap peal, it is, of course, manifest that a surrender of the accused would not exonerate the bail. But, as we have shown, our statute contains no such requirement, and the applicable rule in the one instance cannot be the applicable rule in the other. As bearing upon the questions discussed, see McAlmond v. Bevington, 23 Wash. 315, 63 Pac. 251, 53 L. R. A. 597. The orders appealed from are affirmed. MAIN, C. J., and MITCHELL, PEMBER |