Atlanta Trust Co. v. Federal Land Bank of Columbia
| Decision Date | 10 November 1942 |
| Docket Number | 14340. |
| Citation | 23 S.E.2d 430,195 Ga. 142 |
| Parties | ATLANTA TRUST CO. v. FEDERAL LAND BANK OF COLUMBIA et al. |
| Court | Georgia Supreme Court |
Rehearing Denied Dec. 3, 1942.
Syllabus by the Court.
A creditor who on the same day receives from a debtor two security deeds conveying the same property, one to secure an indebtedness of forty thousand dollars, and the other five hundred dollars, the latter deed containing a general covenant of warranty excepting only the deed first referred to, and also containing a statement that it is made subject to the other deed, and that it is agreed that the title thereby conveyed shall not be merged with the title conveyed by the other deed, and the creditor thereafter delivers to another party its deed whereby it conveys to the latter all its rights, title, interest in and to the deed first mentioned, the indebtedness thereby secured, and all its right, title, and interest in and to the real estate therein described, and the grantee in the last mentioned conveyance by exercising the power of sale contained in the first deed sells the property and purchases the same, and then, agreeing that the original debtor might repurchase the same, makes him a deed to the property, he is turn giving a security deed to the same, and in default of some of the covenants therein sells the property under a power contained therein and purchases the same; Held, that neither under the rule of the merger of estates contained in the Code, § 85-710, nor under the doctrine of after-acquired title embraced in § 29-111, nor under any other principle of law or equity is the creditor first named entitled to share in the proceeds of the sale under the deed last referred to.
Alex M. Hitz, of Atlanta, for plaintiff in error.
Harry D. Reed and G. Stokes Walton, both of Columbia, S. C., for defendants in error.
On the same day, McArthur made two security deeds to Atlanta Trust Company, each containing a power of sale, conveying the same land, one to secure a debt of forty thousand dollars and the other a debt of five hundred dollars. Both were recorded on the following day. The instrument last referred to contained a general covenant of warranty, excepting only the other deed between the same parties, a statement that it was made subject to the other deed, and that it was agreed that the title thereby conveyed shall not merge with the title conveyed by the other deed. Thereafter Atlanta Trust Company delivered to Metropolitan Life Insurance Company its deed whereby it conveyed to the latter all its rights, title, and interest in and to the deed first mentioned, to wit, the one securing the forty thousand-dollar loan, also the indebtedness thereby secured, and all its right, title interest, property and possession, claim or demand, at law or in equity, of, in, and to the real estate described therein. At a later date the Metropolitan Life Insurance Company foreclosed the forty thousand-dollar security deed by exercising the power of sale contained in the deed, and at the sale purchased the property. Subsequently the Metropolitan agreed to sell a portion of the land to McArthur, who thereupon made application to the Federal Land Bank of Columbia and to the land bank commissioner for a loan or loans of $21,000, the proceeds of which, after payment of the expenses of obtaining the loans, were to be used to pay Metropolitan for the purchase-price. The loans were made, one for $11,900, the other for $5,000. Drafts for $14,482.19 were delivered to and accepted by Metropolitan as the purchase-price, and it made to McArthur a deed to the land so purchased. $18.75 of the $5,000 loan was used to pay title insurance. Of the $11,900 loan, $2,399.06 were used as follows: $595 to pay for stock in National Farm Loan Association, $1,500 to build a tenant-house and barn and for repairs to buildings, $48.06 for title insurance, and $256 for loan expenses. McArthur, as a part of the entire transaction, executed and delivered to Federal Land Bank notes for $11,900, and to the land bank commissioner notes for $5,000, and also his deeds as security for these loans. Because of various defaults under the terms of the loan contracts, the land bank, owner of the $11,900 loan papers, and the Federal Farm Mortgage Corporation, which had in the meantime acquired the interest of the commissioner in the $5,000 loan papers, foreclosed, the sale being made by the land bank as attorney in fact for McArthur, the mortgage corporation being the purchaser for $14,000. The land bank, after paying from the $14,000 the cost of advertising, $16, and taxes, $124.50, applied $9,859.50 toward the payment of the purchase-money portion of the $11,900 loan, plus interest on the same, together with advances for taxes and insurance premiums and interest, and permitted the mortgage corporation to retain $4,000 of its $14,000 bid, without actual transfer and payment of the money. McArthur's personal liability on his note to secure which the $500 security deed was given is not legally enforceable because he has obtained a discharge in bankruptcy.
Under this state of facts the Atlanta Trust Company insists that while it is in the position of being subordinated to the actual purchase-money advanced by the Federal Land Bank, it has a superior claim to the non-purchase money advanced for the other purposes set forth above. This insistence embodies the contention that when the Federal Farm Mortgage Corporation became the successful bidder at the foreclosure sale, it thus acquired the fee-simple title, subject only to the Atlanta Trust Company's lien, and that at that instant the title it held under its security deed became merged into the greater title, to wit, the fee-simple title it acquired at the sale, subject only to the claim of the Atlanta Trust Company under the latter's $500 security deed, and that as a result the title held by the mortgage corporation under its security deed became extinguished.
The position of the Atlanta Trust Company can not be sustained. There is no attack on the validity of the sale exercised under the power...
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