U.S. Supreme Court
Shepherd v. May, 115 U.S. 505 (1885)
Shepherd v. May
Argued November 11, 1885
Decided November 23, 1885
115 U.S. 505
A conveyance of real estate subject to a deed of trust executed by the vendor to secure the payment of a note does not, without words importing that the vendee assumes the payment of the note, subject the latter to any liability to pay it.
An express promise made to the vendor by the vendee of real estate conveyed to him subject to a deed of trust executed to secure a debt, that he will pay the debt does not, without the assent of the creditor, make the vendee the principal debtor and the vendor the surety. chanroblesvirtualawlibrary
Where a deed of trust, executed to secure the note of the grantor, provided that in default of payment the trustee should sell the property on these terms: "The amount of indebtedness secured by said deed of trust unpaid, with expenses of sale, in cash, and the balance at twelve and eighteen months," and the proceeds of the sale made by the trustee were less than the amount due on the note, the holder was not estopped to deny that his note was satisfied by the payment to him of such proceeds.
This was an action at law brought by John Frederick May, the defendant in error, against Alexander R. Shepherd, the plaintiff in error, to recover a balance due on a promissory note.
The facts disclosed by the bill of exceptions were in substance as follows:
On April 26, 1875, May lent Shepherd $10,000, whereupon Shepherd made and delivered to May a note of that date and amount, payable to his order two years after date, with interest at ten percent per annum, payable quarter-yearly until paid. To secure the payment of the note, Shepherd on the same day conveyed to two trustees, with power to sell in default of the payment of the note, a certain improved lot in the City of Washington of which he was the owner and which May at that time believed to be good security for the money lent. This deed of trust provided that if default was made in the payment of the note or the interest, the trustees should sell the property thereby conveyed at public sale on the following terms:
"The amount of indebtedness secured by said deed of trust unpaid, with the expenses of sale in cash, and the balance at twelve and eighteen months, for which the notes of the purchaser, bearing interest from the day of sale, . . . shall be taken."
Before the maturity of the note, Shepherd sold the lot to Gilbert C. Walker, and by deed dated August 1, 1876, for the consideration, as stated in the deed, of $30,000, the receipt of which was acknowledged, conveyed the same to him. The deed to Walker was made "subject to a certain deed of trust dated the twenty-sixth day of April, A.D. 1875, . . . for the sum of ten thousand dollars," being the same deed of trust executed by Shepherd to secure his note to May. The deed contained a covenant by Shepherd to defend the premises chanroblesvirtualawlibrary
conveyed against the claim of all persons claiming under the grantor "save and except the aforesaid deed of trust." Shepherd paid the interest on his note to May as it accrued up to the time of his sale to Walker, and after that time Walker paid the interest until the maturity of the note. When the note fell due, Walker came to May and told him that "he had the note to pay," and asked May to extend the time of payment for one year, and thereupon May extended the note for one year, Walker agreeing to pay interest thereon at the rate specified in the note. Walker paid the interest upon the note for the year, and at the end of that time asked a further extension for another year. May agreed to extend the time of payment for nine months at the same rate of interest which Walker agreed to pay, but he paid no interest for this period. There was no evidence that Shepherd consented to these extensions of time for the payment of his note.
At the end of the nine months allowed by May to Walker for the payment of the note, upon default made, the property covered by the deed of trust was advertised and sold by the trustees. It was purchased by May for the sum of $8,500, to whom it was conveyed by the trustees by deed dated May 19, 1879. After crediting the note with the net proceeds of sale, May brought suit against Shepherd to recover the balance which he claimed to be due thereon. The jury returned a verdict for May for $3,163,28, on which the court rendered judgment. Shepherd, by the present writ of error, challenges the correctness of that judgment. chanroblesvirtualawlibrary