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03/25/76 MICHIGAN WINERIES v. JOHNSON

March 25, 1976

MICHIGAN WINERIES, INC.
v.
JOHNSON



Appeal from Wayne, Theodore R. Bohn, J.

Bronson, P. J., and R. B. Burns and D. E. Holbrook, Jr., JJ.

SYLLABUS BY THE COURT

1. Mortgages -- Real Property -- Assumption of Mortgage -- Defenses of Grantee -- Lack of Capacity -- Mutual Mistake -- Lack of Consideration -- Usury.

A grantee of property who has assumed an existing mortgage on the property may not, as a general rule, avail himself of any defenses that the mortgagor may have, including lack of capacity to enter into a binding contract, mutual mistake, lack of consideration and usury.

2. Mortgages -- Real Property -- Assumption of Mortgage -- Defenses of Grantee -- Illegality.

A grantee of property who has assumed an existing mortgage on the property may not assert the illegality of the mortgage agreement as a defense in a suit by the mortgagee for the unpaid debt.

The opinion of the court was delivered by: Per Curiam

Complaint by Michigan Wineries, Inc., against Loretta O. Johnson and Detroit Beverage Corporation to recover an unpaid debt secured by a mortgage. Summary judgment for Michigan Wineries against Detroit Beverage. Detroit Beverage appeals.

We are called upon to decide a single question on appeal:

Should a buyer who assumes a mortgage be allowed to assert the illegality of the original mortgage agreement?

We answer that question in the negative, and affirm the trial court.

Plaintiff brought suit against defendant Loretta Johnson and defendant-appellant Detroit Beverage Corporation, alleging that both parties had defaulted on a mortgage obligation owed to plaintiff. The trial Judge granted plaintiff's motion for summary judgment against Detroit Beverage pursuant to GCR 1963, 117.2(2), for failure to state a valid defense, and that defendant appeals here.

On March 5, 1963, Loretta Johnson made and delivered to plaintiff a mortgage on certain property in the City of Detroit as security for repayment of a debt owed to plaintiff. By the terms of the mortgage agreement, sale of the mortgaged property would not affect Loretta Johnson's liability pursuant to the mortgage or the underlying debt. On May 31, 1967, the property was sold to defendant Detroit Beverage. As part of the transaction, Detroit Beverage expressly agreed to assume and pay the mortgage. Defendant-appellant did in fact pay on the mortgage until February 5, 1973, but made no payments subsequent to that date.

Plaintiff brought suit for the entire unpaid indebtedness, claiming that it could invoke an acceleration clause in the mortgage agreement upon default of the defendants. Detroit Beverage admitted that it had assumed the mortgage, but asserted as an affirmative defense the illegality of the original mortgage. Defendant-appellant alleged that the debt and mortgage were void and unenforceable because the underlying consideration given by plaintiff consisted of the granting of credit in the sale of alcoholic beverages, contrary to MCLA 436.16; MSA 18.987. *fn1 The trial Judge did not decide if the transaction was in fact illegal under that statute. ...


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