Walkup v. Cushing

PER CURIAM

In this professional negligence case, plaintiffs claim that defendant was negligent in failing to raise a defense on their behalf when he represented them in an earlier action. We reverse.

The legal issue is whether, when a mortgagee1 transfers the debt and the mortgage to the grantee of the mortgagor, the debt merges with the security. If it does, defendant was not entitled to summary judgment on plaintiffs’ claim that he was negligent in failing to raise merger as a defense when plaintiffs, who signed separate guarantees, were sued as guarantors of the note. Defendant asserts that the grantee’s intent controls whether there was a merger. Plaintiffs argue that, under the circumstances of this case, merger occurred, regardless of the grantee’s subjective intent.

Plaintiffs are correct. The situation presented in this case is precisely like that in Baxter v. Redevco, Inc., 279 Or 117, 566 P2d 501 (1977), where the Court held that the grantee’s intention is not relevant, and there was a merger of the debt with the security. 279 Or at 123. The same result obtains here.

Because the debt merged with the security, plaintiffs had a defense to the action on their guarantee. Defendant was not entitled to summary judgment.

Reversed and remanded.

The security device in this case was a trust deed. Because it does not affect the analysis, and for ease of reference, we will refer to the parties as though there were a mortgage.