Johns v. Wilson

Background

A mortgage lender named Wilson sought to foreclose a mortgage after the mortgaged property was sold by the record owner, Armstrong, to Robert E. Daggs. Daggs entered possession through his tenant, William A. Daggs. Daggs later conveyed the property to Alvin L. Johns, but that deed was kept off the public record until after Wilson filed his foreclosure case and a notice of the suit had been recorded. After the sheriff’s sale and deed, William A. Daggs refused to give up possession, claiming tenancy under Johns. The state Supreme Court found that Robert E. Daggs and A. Jackson Daggs conspired to hide the sale and that the deed to Johns was withheld to hinder Wilson, and it held that deed fraudulent and void as to Wilson.

Reasoning

The core question was whether the mortgagee could get a personal money judgment against Daggs based on a promise in Daggs’s deed to pay the mortgage, even though the mortgagee had no direct contract with Daggs. The Court reviewed prior decisions and concluded that, under equitable principles and the local law that makes no strict law-versus-equity distinction, the mortgagee may enforce the purchaser’s agreement to assume the debt. The Court emphasized that the mortgaged property must first be applied toward the debt, which was done here, and that the buyer who agreed to pay became primarily liable once the mortgagee knew of the arrangement. The Court also approved a second foreclosure where the true purchaser’s deed was fraudulently concealed.

Real world impact

This decision lets a mortgage lender pursue a buyer who agreed to assume a mortgage and allows a new foreclosure when owners hide conveyances to mislead the lender. The judgment against Daggs was affirmed, and the secretly withheld deed was treated as fraudulent as to the mortgagee.