This section is from the book "The Law Of Real Property and Other Interests In Land", by Herbert Thorn Dike Tiffany. Also available from Amazon: A Treatise on the Modern Law of Real Property and Other Interests in Land .
The transfer of the mortgaged land may be merely "subject to" the-mortgage, or it may be accompanied by an agreement on the part of the transferee to pay the mortgage debt, a contract of assumption, as it is frequently called, or it may be neither.
Except in the case of a transfer to one who takes free from the mortgage lien as being a bona fide purchaser for value,18 a transfer of mortgaged land is necessarily subject to the mortgage, in the sense that the transferee takes the land subject to the possibility that it may, at the instance of the holder of the mortgage, be applied to the satisfaction of the obligation secured by the mortgage, that is, the land is subject to the mortgage lien in his lands as it was so subject in the hands of his transferor. The statement in a particular case, however, that the transfer is "subject to" the mortgage, usually refers, not to the fact that rights of the mortgage creditor take precedence of the rights of the transferee, but to the relation between the parties to the transfer as regards the duty to satisfy the debt secured by the mortgage. By taking a transfer of the land subject to the mortgage, the transferee concedes that, as between him and the transferor, the debt is to be satisfied out of the land, and that the transferor is not, as being personally liable for the debt, under any obligation to pay it for the purpose of relieving the land in the transferee's hands.
Ordinarily, when it is intended that the transfer shall be subject to the mortgage in this sense, the in17. Villa v. Rodriguez, 12 Wall. (U. S.) 323, 20 L. Ed. 406; Trimble v. McCormick, 12 Ky. L. Rep. 857, 15 S. W. 358; Jones v. Blake, 33 Minn. 362, 23 N. W. 538; Tower v. Fetz, 26 Neb. 706, 18 Am. St.
Rep. 795, 42 N. W. 884. Contra, Wilson v. Parshall, 129 N. V. 223, 29 N. E. 297; Clark v. Haney, 62 Tex. 511.
18. Ante, Sec. 566 et seq.
It has been said that, in the absence of evidence to the contrary, it may be presumed that the amount of the mortgage was deducted in fixing the price, and that the transfer was, therefore, subject to the mortgage.20 This would appear to be a reasonable presumption. But the fact that there was such a deduction is not conclusive of an intention that the transfer was intended to be so subject.21
In case there is no purchase price, that is, in case the mortgaged property is transferred as a gift, and there is no language in the conveyance, or other evidence, indicative of the intention of the parties in this regard, it might, it would seem, be assumed that the expectation of the parties was that the donor should pay his debt himself rather than that his donee should pay it out of the property.22 But there is at least one case in which the court refused to recognize any right in the donee, in such a case, upon paying the mortgage debt, to assert a claim against the donor's estate for the amount of the payment.23 The former view accords in result with the common law rule that the devisee of land may call upon the executor to exonerate the land by paying the decedent's mortgage debt out of the personalty.24
19. Maher v. Lanfrom, 86 111. 513; Hazle v. Bondy, 173 111. 302, 50 N. E. 671 (semble); Puller v. Hunt, 48 Iowa, 163; Atherton v. Toney. 43 Ind. 211; Wadsworth v. Lyon, 93 N. Y. 201, 45 Am. Rep. 190; Howard v. Robbins, 170 N.
Y. 498, 63 N. E. 530; Sternberger v. Hanna, 42 Ohio St. 305; Carpenter v. Koons, 20 Pa. 222.
20. Atherton v. Toney, 43 Ind. 211; Guernsey v. Kendall, 55 Vt. 201; Howard v. Robbins, 170 N. Y. 498, 63 N. E. 530.
21. Bennett v. Bates, 94 N. Y.
In case the instrument of transfer contains a covenant of warranty or other covenant for title sufficient to cover the mortgage incumbrance, the obligation to pay the mortgage debt is, as against the transferee, upon the transferor, and the transfer is not subject to the mortgage.25 If, however, the instrument also contains a clause to the effect that the transfer is subject to the mortgage, this is to be construed as excluding the mortgage from the operation of the covenant.26 That, however, the mortgage was expressly excepted from the operation of a covenant against incumbrances in the instrument of transfer has been held not to show an intention that the transfer should be subject to the mortgage.27 But by one decision a different effect was, it seems, given to such an exception in a covenant of warranty.28 In case the transfer is not expressly subject to the mortgage, and there is nothing, such as a reduction in the amount of the purchase price, to show an intention to that effect, the transfer is not so subject, even though there are no covenants on the part of the transferor applicable to the mortgage.29
354; Maher v. Lanfrom, 86 111. 514.
22. See Re Darby (1907), 2 Ch. 465; compare post, Sec. 625, notes 50-52.
23. Fischer v. Union Trust Co., 138 Mich. 612, 68 L. R. A. 987, 110 Am. St. Rep. 329, 101 N. W. 852. In this case there was a promise by the donor to pay the mortgage debt, which was invalid for lack of consideration, but such promise might, it is submitted, have been regarded as showing an intention that the conveyance of the land was not subject to the mortgage, in the sense of making the land the primary fund for the payment of the debt.
24. Post, Sec. 640(b), notes 83-87.
25. Maher v. Lanfrom, 86 111. 513; Fuller v. Hunt, 48 Iowa, 63; Wadsworth v. Williams, 100 Mass. 126; Kelly v. Jenness, 50 Me. 455, 79 Am. Dec. 623; Hooper v. Henry, 31 Minn. 264, 17 N. W. 476; Mickles v. Townsend, 18 N. Y. 575; Barnes v. Mott, 64 N. Y. 397, 21 Am. Rep. 625.
26. Drury v. Holden, 121 111. 130, 13 N. E. 547; Freeman r.
In case the transferor is not personally liable for the debt, the transferee necessarily takes it subject to the mortgage, without any right to assert a primary personal liability upon the part of the transferor, except as the latter may have covenanted with him against such an incumbrance. The question may arise, however, whether the transferor's predecessor in title, who is personally liable, can assert that there is a primary liability on the part of the land in the hands of the transferee, and that his own liability is secondary only. It seems that this is dependent on whether the land was primarily liable in the hands of the transferor. That is, if A, who is personally liable, transfer the land to B, who assumes no personal liability, and B transfers the land to C, the question whether C takes the land subject to the mortgage as against A ordinarily depends on whether B so took it. If B took the land subject to a primary liability in favor of A, B cannot relieve it therefrom by making a transfer to C.30-31 If B did not take the land subject to such primary liability in favor of A, the fact that B's transfer to (' is in terms subject to the mortgage should not, it is conceived, be regarded as showing an intention to relieve A, not a party to the transaction, of the primary liability previously established against him.32