## Facts

- Warner borrowed money from Hopkins, executing a promissory note secured by a mortgage on Warner’s land.
- Warner later conveyed the mortgaged property to purchasers who, in the conveyance, assumed and agreed to pay the mortgage debt.
- The mortgage debt went into default.
- Hopkins filed a foreclosure action against Warner and the assuming purchasers, seeking foreclosure and a deficiency judgment against the purchasers if the sale proceeds were insufficient.
- The trial court ordered foreclosure and authorized a deficiency judgment directly against the assuming purchasers.
- The assuming purchasers appealed the portion of the decree imposing personal deficiency liability on them.

## Issues

1. Whether a mortgagee may obtain a deficiency judgment in foreclosure directly against purchasers who assumed the mortgage debt in their conveyance from the mortgagor, despite the mortgagee not being a party to the assumption agreement.
2. Whether, upon an assumption, equity treats the assuming grantee as the principal debtor and the original mortgagor as a surety, permitting the creditor to enforce the grantee’s promise to avoid circuity of actions.

## Decision

- The judgment was affirmed.
- An assuming grantee is treated in equity as the principal obligor on the mortgage debt, and the original mortgagor is treated as a surety as between themselves.
- The mortgagee may enforce the assumption obligation directly in the foreclosure action and may recover any deficiency from the assuming grantee.

## Legal Principles

- When a grantee takes mortgaged property and assumes and agrees to pay the mortgage, the grantee becomes the principal debtor and the mortgagor becomes a surety in equity as between those parties.
- Equity permits the mortgagee to assert the surety’s rights against the principal obligor to prevent circuity of actions, including enforcing the grantee’s assumption promise.
- The lack of direct contractual privity between mortgagee and assuming grantee does not bar equitable enforcement where the assumption was made for the purpose of paying the mortgage debt.
- In a foreclosure proceeding where all interested parties are before the court, it is procedurally proper to adjudicate the assuming grantee’s personal liability and enter a deficiency judgment if the security is insufficient.

## Conclusion

A purchaser who assumes a mortgage becomes the primary debtor in equity, and the mortgagee may obtain a deficiency judgment directly against that purchaser in the foreclosure action even though the assumption agreement was made with the mortgagor rather than the mortgagee.


Hopkins v. Warner, 109 Cal. 133, 41 P. 868 (1895)