Episcopal City Mission v. Brown

In equity. Bill by Episcopal City Mission and George W. Meserve against Lucy T. Brown and John B. Brown to enforce payment of a deficiency arising on a foreclosure of a mortgage assumed by defendants. From a decree dismissing the bill, complainants appeal.

On March 1, 1877, George W. Messerve mortgaged to the Episcopal City Mission, a Massachusetts corporation, certain lots in the city of Boston, which were designated as 'Lots 3 and 4.' The mortgages were for the sum of $19,500 on each lot. On the same day Meserve conveyed these lots to Lucy T. Brown, the wife of John B. Brown. The consideration of the conveyance was $30,000, 'to me paid by said Lucy T. Brown, wife of John B. Brown.' After referring to the mortgages above mentioned, the deed contained these words: 'Which mortgages, with all interest thereon, the said Lucy T. Brown hereby assumes and agrees to pay, and to protect and save harmless said grantor therefrom.' On March 19, 1877, the following bond was executed by John B. Brown:

'Know all men by these presents that I, John B. Brown, am holden and stand firmly bound unto George W. Meserve in the sum of the thousand dollars, to the payment of which to the said Meserve or his executors, administrators, or assings I hereby bind myself, my heirs, executors, and administrators.

'The condition of the obligation is such, that whereas the said George W. Meserve did, by deeds dated March 1, 1877, convey unto Lucy T. Brown two separate estates on Purchase street, Boston, Mass., each estate being subject to a mortgage of $19,500, at six and one-half per cent. interest, to the Episcopal City Mission, of even date with said deeds, which said mortgage and interest thereon the said Lucy T. Brown assumed and agreed to pay and hold the said Meserve harmless therefrom:

'Now, therefore, if the said Lucy T. Brown shall perform the obligations of said deeds as therein expressed, and save the said Meserve harmless, then this obligation shall be void; otherwise it shall be and remain in full force and virtue, only to the extent, however, that the said Meserve suffers harm.'

On the 14th day of March, 1877, John B. Brown and Lucy T. Brown deeded to Meserve certain parcels of land situated in the city of Chicago. It was stated that the deed was executed for 'one dollar and for other good and valuable considerations,' the receipt whereof was acknowledged by the sellers. The property conveyed was described as incumbered by various mortgages, amounting in principal to $12,225.70, subject to a credit of $2,680, leaving a balance in principal of $9,545.70, which, with the interest due, made the amount of the assumption taken by Meserve exceed $10,000.

On March 1, 1884, the Boston property was sold to pay the mortgage debt, and was bought in by the Episcopal City Mission, which, after applying the price to the debt, stated that there was a deficiency on one lot of $10,074.71, and on the other of $10,574.71. In February, 1886, Meserve assigned to the mission 'all claims, demands, or rights of action, of whatever sort or kind in law or equity, which I may have against John B. Brown, formerly of Boston, and Lucy T. Brown, wife of the said John B. Brown.' On March 18, 1887, Meserve specially assigned to the same corporation all his right, title, and interest in and to the bond given to him by John B. Brown as above mentioned.

In July, 1890, to the Episcopal City Mission and George W. Meserve brought their bill against Lucy T. Brown and John B. Brown in the circuit court of the United States for the Northern district of Illinois. They set out the mortgages given by Meserve to the Episcopal City i ssion, the sale of the mortgaged property by Meserve to Mrs. Brown, the assumption by her of the mortgage debt, the bond given to Meserve by Brown, the foreclosure proceedings, and the amount of the indebtedness remaining after crediting the price as above stated. The bill averred that repeated demands had been made upon Brown and his wife to pay the balance of the mortgage debt; that they had refused to do so, and that the Browns pretended that Meserve was indebted to John B. Brown for a larger amount than that which he owed Meserve; that this fact entitled him to a set-off; and that, in fact, he owed Meserve nothing. The bill further charged the financial irresponsibility of Meserve, and his inability to pay the remainder of the debt. Complainants prayed that the corporation might be subrogated to the rights of Meserve against Brown and his wife, and that a decree might be passed condemning the latter to pay the debt. Mrs. Brown answered by denying any liability. She averred that she had been no party to the purchase of Meserve's Boston property, and had done nothing whatever in the way of acceptance or ratification in connection with the transaction; that some time after the purchase she was informed by her husband that her name had been used in Meserve's deed, for his benefit, and that she never at any time knew the contents of the deeds or of the assumptions therein purported to have been taken by her. She averred her belief that the deeds were made in her name in consequence of an agreement between her husband and Meserve, by which her husband undertook to convey to Meserve certain property in Chicago, and Meserve was to assume the incumbrances thereon to the discharge of her husband, while Meserve was to deed to him the property in Boston, and he was to assume all incumbrances resting upon it. She also averred that Meserve had failed to carry out his obligations by discharging the debt assumed by him, and that, in consequence of this, her husband had been compelled to pay the same, and had a claim against Meserve exceeding the amount of any demand which the latter might have upon him. She prayed that, if she should be held liable for the Boston transaction, she be allowed, be way of set-off, credit for the amount of the obligations under which Meserve rested in connection with the Chicago property. The answer of Brown also averred that the deed had been taken in the name of Mrs. Brown without her knowledge or consent, and without her being in any way a party to the contracts; that the sale of the Boston property was the result of an agreement between himself and Meserve, by which they bound themselves to exchange property in Chicago belonging to Brown for the property in Boston belonging to Meserve; that by the agreement between them the deed for the Boston property was made in the name of Mrs. Brown for Brown's convenience, and that it was done with the full assent of Meserve, it being understood between them that Brown's liability resulting from the sale of the Boston property should be $10,000, evidenced by the bond which was the equivalent of the obligation, to be assumed by Meserve, in favor of Brown in consequence of the transfer to be made to Meserve, of the Chicago property, the agreement being that each party should mutually assume the risk beyond these obligations. The answer further set out that in pursuance of their agreement Brown's bond was given for $10,000 to Meserve, and the sale of the Chicago property was made to Meserve, who assumed the incumbrances upon it; that Meserve had failed to carry out his assumption of the Chicago incumbrances, and that Brown had been compelled to expend in consequence more than $20,000, and asserted that Brown, therefore, was released from all claim on the bond.

After taking much testimony, the complainants filed an amended bill, which again stated the agreement between Meserve and Brown, and recited the sales of the Chicago and Boston property, the giving of the bond by Brown, the default in h e payment of the mortgage on the Boston property, and the sale thereof, and the deficiency in the amount realized. It also averred the defenses set up by Mrs. Brown, and her denial of responsibility under the assumptions in the Boston sales. It averred that Brown's conduct in making his wife a party to the deed was fraudulent, and denied his right to set off any indebtedness to him on the part of Meserve against the Episcopal City Mission. It prayed for a decree subrogating the mission to the rights of Meserve against Brown and wife. To this amended bill Mrs. Brown answered by practically reiterating her former defenses. Brown answered also, setting up substantially the same defense which he had advanced before, and further specially denying that any fraud had been practiced on Meserve in substituting the name of his wife for his own, and averring that, on the contrary, her name had been used as 'a straw grantee' with the full knowledge of Meserve, and that his bond of $10,000 had been given by him to evidence the extent of his obligation, and that this was a part of the contract between the parties.

The decree below rejected the claim of the complainants. City Mission v. Brown, 43 Fed. 834.

George Burry, for appellants.

Chas. M. Osborne and Saml. A. Lynde, for appellees.

Mr. Justice WHITE, after stating the case, delivered the opinion of the court.