## Facts

- In 1963, Loell and Bonnie Good borrowed $13,600 from Pendleton Loan Association, executing a promissory note secured by a mortgage on real property.
- The mortgage included the Goods’ covenant to pay the debt.
- The Goods later conveyed the property to Sarah Vilcsek.
- In 1971, Vilcsek conveyed the property by warranty deed to William and Joyce Hartle.
- The deed recited that the conveyance was subject to the existing mortgage and that the Hartles “assumed and agreed to pay” the mortgage debt.
- The lender later executed a release of the mortgage lien, relinquishing its security interest in the property, while the underlying debt remained unpaid.
- The lender sued the Hartles for a personal money judgment based on the deed’s assumption clause, despite the Hartles not having signed the original note or mortgage.

## Issues

1. Whether grantees who accept a deed stating they “assume and agree to pay” an existing mortgage become personally liable to the mortgagee, even though they did not sign the original note.
2. Whether the mortgagee’s release of the mortgage lien extinguishes the personal liability of assuming grantees and bars an in personam action for the debt.
3. Whether summary judgment for the grantees was proper on the record.

## Decision

- The Indiana Court of Appeals reversed the trial court’s grant of summary judgment for the Hartles.
- The court held that the Hartles’ acceptance of a deed with an “assume and agree to pay” clause created personal liability for the mortgage debt enforceable by the lender.
- The court held that the lender’s release of the mortgage lien did not, by itself, discharge the Hartles’ personal obligation arising from the assumption.
- The case was remanded for further proceedings.

## Legal Principles

- A deed provision that the grantee “assumes and agrees to pay” an existing mortgage creates an independent personal promise by the grantee to pay the debt.
- The mortgagee may enforce the grantee’s assumption promise as an intended third-party beneficiary, without separate contractual privity.
- A mortgage lien and the underlying debt are distinct; releasing the lien removes the security interest but does not automatically discharge personal liability on the debt or an assumption agreement.
- Summary judgment is improper where the movant’s entitlement depends on an incorrect legal premise that an assuming grantee cannot be personally liable to the lender.

## Conclusion

An assuming grantee who accepts a deed agreeing to pay an existing mortgage may be held personally liable to the lender as a third-party beneficiary, and the lender’s release of the mortgage lien does not alone extinguish that personal liability.


First Indiana Fed. Sav. Bank v. Hartle, 567 N.E.2d 834 (Ind. Ct. App. 1991)