Alabama-florida Co. v. Mays

• Decision Date: 15 June 1933
• Citation: 149 So. 61,111 Fla. 100
• Parties: ALABAMA-FLORIDA CO. v. MAYS et al.
• Court: Florida Supreme Court

149 So. 61

111 Fla. 100

ALABAMA-FLORIDA CO. v. MAYS et al.

Florida Supreme Court

June 15, 1933

En Banc.

Suit by the Alabama-Florida Company against H. Mays and others. From an order dismissing the bill, complainant appeals.

Affirmed. Appeal from Circuit Court, Highlands County; W J. Barker, judge.

COUNSEL

J O'Dell Gregory, of Elkins, W. Va., and P. A. Naylor and A. M. Baker, both of Sebring, for appellant.

Raney Raney & Wannamaker and Hampton, Bull & Crom, all of Tampa, and W. H. Nollman, of Sebring, for appellees.

OPINION

GEORGE W. TEDDER, Circuit Judge.

The complainant below, appellant here, brought a suit in equity against the defendants to have declared and enforced an alleged lien on an undivided one-half interest in certain lots in Sebring. From an order sustaining the demurrer to the bill of complaint, and from an order sustaining the demurrer to the amended bill of complaint and dismissing the bill as to one of the defendants, complainant appeals.

The amended bill of complaint alleges, in substance, that on March 1, 1925, Basil Bowden and B. O Bowden executed five notes aggregating $9,000, and to secure the payment thereof also executed a mortgage, which was duly recorded, on sixteen lots in Sebring to Sebring Real Estate Company, a corporation. The first three notes were paid before the institution of this suit. Part was paid on the fourth and fifth notes, which together with the mortgage by separate several assignments came into possession of complainant. On October 27, 1925, B. O. Bowden, joined by his wife, conveyed by warranty deed to Bryant Bowden an undivided one-half interest in the above-mentioned sixteen lots and also by the same deed conveyed an undivided one-half interest in twenty-seven other lots in Sebring, which deed was duly recorded. The deed contained the following clause: 'It is distinctly understood and agreed that the purchaser herein assumes & agrees to pay off note and mtg. to Minnie A. Sumner & husband and note and mtg. to Sebring Real Estate Company, a corp. executed by first parties hereto & as now of record.' It is alleged that the note to the Sumners has been paid.

It is further alleged in the bill that on November 13, 1926, Bryant Bowden conveyed sixteen of the last-mentioned twenty-seven lots by quitclaim deed to J. C. Sumner and Minnie Sumner, his wife, who, by warranty deed conveyed the same sixteen lots to H. Mays, on May 3, 1927. Mays and wife executed a mortgage on these lots to John G. Mackey, who, on November 1, 1930, assigned said mortgage to Hunter Henderson, as liquidator of the Bank of Ybor City, as additional security on a prior indebtedness. The sixteen lots mentioned in this paragraph are the lots involved in this proceeding, but were not included in the mortgage to Sebring Real Estate Company. It is also to be noted that none of the grantees in the deeds conveying title to these lots subsequent to Bryant Bowden are alleged to have assumed the payment of said mortgage. However, it is alleged that each of said grantees had full knowledge of the assumption by Bryant Bowden of the said mortgage debt.

On February 17, 1931, complainant, the assignee of the mortgage and the last two notes executed by the Bowdens to Sebring Real Estate Company, filed suit, claiming a lien was created upon the undivided one-half interest in the last-mentioned sixteen lots by reason of the contract of Bryant Bowden by which he assumed and agreed to pay the mortgage debt as a part of the purchase price of the undivided one-half interest in all of the lots conveyed. Defendant Henderson demurred to the bill, and the demurrer was sustained. An amendment to the bill was filed, and the defendant demurred to the bill as amended. This demurrer was also sustained and the bill dismissed as to said defendant.

The claim of the complainant as disclosed by the pleadings is apparently grounded upon two theories:

(1) That a vendor's lien exists on all the lots conveyed for the amount unpaid on the purchase price; that this lien inured to the benefit of the mortgagee as a result of the contract of assumption by the vendee of the mortgage debt; that the mortgagee may enforce a vendor's lien on lots not included in the mortgage against a subsequent purchaser, who did not assume the mortgage debt, with notice of such lien; and that the assignee succeeds to all the rights which were available to the mortgagee.

(2) That the lien created by the contract of assumption of the mortgage debt by the first vendee, said mortgage debt being the amount unpaid on the purchase price of all the property conveyed, is a security in the nature of a mortgage, and is in effect an equitable mortgage which may be enforced by the assignee of the original mortgage against lots not included in said mortgage, which lots are now owned by a subsequent grantee who did not assume the mortgage debt.

The case was apparently heard in the lower court upon the first theory only, but the latter is most earnestly contended for by appellant.

It may be said at the outset that a mere contract of assumption of a mortgage debt does not have the effect of spreading, enlarging, or expanding the mortgage lien to other property of the new debtor. Mississippi Valley Trust Co. v. Southern Trust Co. (C. C. A.) 261 F. 765; Abell v. Coons, 7 Cal. 105, 68 Am. Dec. 229; Jones on Mortgages (8th Ed.) vol. 2, p. 299; 41 C.J. 731. Therefore, if complainant can succeed in this proceeding, the lien must arise from the effect of the assumption agreement upon the vendor's lien on all the lots conveyed for that part of the unpaid purchase price represented by the mortgage debt assumed; or, as contended by complainant, the contract of assumption created a lien in the nature of an equitable mortgage, which lien attached not only to the lots incumbered by the mortgage, but to lots not so included.

Upon the question of the right of the assignee of a mortgage to proceed against the vendee, who assumed and agreed to pay the mortgage debt, and subsequent grantees with notice, there is a great diversity of opinion among the courts. As was said by Mr. Justice Gray in the case of Union Mutual Life Insurance Company v. Hanford, 143 U.S. 187, 12 S.Ct. 437, 438, 36 L.Ed. 118: 'Few things have been the subject of more difference of opinion and conflict of decision than the nature and extent of the right of a mortgagee of real estate against a subsequent grantee, who by the terms of the conveyance to him agrees to assume and pay the mortgage.'

It is well settled in this state that, where a mortgagor conveys the mortgaged premises to one who assumes the mortgage, as between the vendor and vendee, the purchaser is the principal debtor, and the mortgagor or grantor is in the position of a surety, and, where successive grantees of the mortgaged premises have assumed the mortgage debt thereon, each becomes liable to the mortgagor and also to the mortgagee. This liability of the grantee arises from his acceptance of a deed poll with knowledge of a recital therein that he assumes an indebtedness against the property, and he is as effectually bound as if it were a contract executed under his own hand and seal. Brownson v. Hannah, 93 Fla. 223, 111 So. 731, 51 A. L. R. 976; Ackley v. Noggle, 97 Fla. 640, 121 So. 882; 2 Jones on Mortgages (8th Ed.) § 920; Berns v. Harrison, 100 Fla. 1105, 131 So. 654; Proctor v. Hearne, 100 Fla. 1180, 131 So. 173.

But the relation thus created does not in itself involve the mortgagee in its legal effects. He may treat both the mortgagor and each successive grantee who assumes the payment of the mortgage debt as principal debtors, or he may proceed against one or more of them, and to the exclusion of the others, either in an action at law or by a proceeding in equity, and may have a personal decree against either or all of the defendants. Slottow v. Hall Investment Co., 100 Fla. 244, 129 So. 577; Proctor v. Hearne, supra; Whitfield v. Webb, 100 Fla. 1619, 131 So. 786; Bailey v. Inman (Fla.) 140 So. 783; Hardee v. Bennett (Fla.) 140 So. 906.

'In this jurisdictiion, the rule * * * does not rest upon the equitable doctrine of subrogation, as is the case in some jurisdictions. See Keller v. Ashford, 133 U.S. 610, 10 S.Ct. 494, 33 L.Ed. 667. The ground of the grantee's liability adopted by this court is that of contract, an application of the now prevailing American doctrine that the grantee's assumption of the mortgage debt is a contract made and intended by the formal parties thereto, not alone for their own benefit, but also for the direct benefit of a third party, the mortgagee, who may sue upon it at law as the real party in interest (see section 4201, C. G. L. 1927), even though the agreement to assume is contained in an instrument under seal.' Whitfield v. Webb, supra, 100 Fla. text 1623, 131 So. 786, 787, and cases there cited.

In some jurisdictions where the equitable doctrine of subrogation prevails it has been held that the equity on which the relief of the mortgagee depends is the right of the mortgagor against his vendee, to which he is permitted to succeed by substituting himself in the place of the mortgagor. Crowell v. Hospital of St. Barnabas, 27 N. J. Eq. 650; Federal Land Bank v. Davis, 88 Mont. 463, 295 P. 253; Keller v. Ashford , 133 U.S. 610, 10 S.Ct. 494, 33 L.Ed. 667; Binns v. Baumgartner, 105 N. J. Eq. 58, 146 A. 879. But in the case of Slottow v. Hull Inv. Co., supra, we held that the right of the mortgagee to proceed against the vendee who had assumed and agreed to pay the mortgage debt is cumulative, rather than substitutional.

It is not necessary that the assumption agreement be incorporated in the deed of conveyance where the debt assumed represents a part of the consideration of purchase of the...