Franklin Mortgage Co v. Mcduffie

• Decision Date: 20 July 1931
• Docket Number: Nos. 21032, 21033.,s. 21032, 21033.
• Citation: 43 Ga.App. 604,159 S.E. 599
• Parties: FRANKLIN MORTGAGE CO. v. McDUFFIE. McDUFFIE. v. FRANKLIN MORTGAGE CO.
• Court: Georgia Court of Appeals

43 Ga.App. 604

159 S.E. 599

FRANKLIN MORTGAGE CO.

v.McDUFFIE.

McDUFFIE.

v.FRANKLIN MORTGAGE CO.

Nos. 21032, 21033.

Court of Appeals of Georgia, Division No. 2.

July 20, 1931.

Syllabus by the Court.

"If two estates in the same property unite in the same person in his individual capacity, the less estate is merged in the greater." Civil Code (1910), § 3682. Thus, where the holder of the legal title under a security deed purchases the equity of redemption, the whole estate is vested"in him; and both the lien and the debt upon which it is founded are extin-guished, unless the actual value of the property be ascertained, by foreclosure and sale under the lien, or by express stipulation between the parties. Jackson v. Tift, 15 Ga. 557; 41 C. J. 775, § 869. A fortiori, as in the instant case, if the owner of the equitable or beneficial interest in land acquires the outstanding legal title, conveyed by his predecessor in title to a third person to secure a debt, the equitable interest and the legal title become merged, and the debt for which the legal title was held as security is extinguished, unless there is an agreement to the contrary, or it is the manifest intention of the party in whom such equitable and legal estate unite that there should be no merger. "The owner of property, subject to a lien created or imposed against the property by another, may protect himself by purchasing the lien for levy on other property, or to hold it as a claim against the person liable to pay the same." Civil Code (1910), § 3683. The burden is upon the party asserting that no merger took place to allege and prove facts negativing the existence of such a merger. Muscogee Mfg. Co. v. Eagle & Phenix Mills, 126 Ga. 210(7), 54 S. E. 1028, 7 L. R. A. (N. S.) 1139; Pitts Banking Co. v. Penn, 160 Ga. 854 (1), 129 S. E. 105; McDuffie v. Merchants' Bank, 168 Ga. 232, 233, 147 S. E. 111.

Syllabus by the Court.

The question of intention on the part of a person acquiring both the equitable interest in land and the legal title thereto is one of fact, and where the owner of the equitable interest acquires the legal title from the holder of a security deed, together with the debt secured by such a deed, his prosecution of a suit upon the note, and his exercise of the power of sale contained in the security deed, in the absence of better proof to the contrary, may imply such an intention as will be sufficient to prevent a merger. Knowles v. Lawton, 18 Ga. 476(2), 63 Am. Dec. 290. Still, however, if the consideration of his purchase of the property, as incumbered by the previous lien securing the outstanding debt, is represented in whole or in part by such debt, the result would be otherwise, since "as a general rule a party can not hold a lien on his own property" (Civil Code of 1910, § 3683), and since, where the debt secured by th.e lien represents the consideration of his purchase, there would be no consideration should he be permitted to keep the lien alive for the purpose of making the original promisor pay it. He does not need the protection which would be afforded by the enforcement of the outstanding claim, when the claim has already afforded the consideration of his purchase. Accordingly, in the instant case, the defendant having alleged that the plaintiff in accepting a deed from Mrs. Woolf did so "in satisfaction of all debts secured by said property, " it follows that it would not be entitled to receive again the benefit of the amount represented by the outstanding indebtedness, by recovering it from the original promisor. The court, therefore, erred in striking the defendant's plea as failing to set forth a defense.

Syllabus by the Court.

In a suit upon promissory notes secured by a deed to land, the notes and deed providing in substance for the payment of all taxes and assessments against the property by the maker of the notes and grantor in the deed, the plaintiff cannot recover taxes and assessment paid by himself after a sale of the property under the power of sale contained in the deed, and its purchase by himself at such sale, since the defendant would be entitled to credit in the amount of the proceeds of such sale, which must necessarily have been diminished on account of the outstandingincumbrances represented by unpaid taxes and street improvement assessments, since the purchaser at such sale bought subject to the unpaid and outstanding taxes and assessments. Civil Code 1910, §§ 6054, 1141; Wilson v. Boyd, 84 Ga. 34, 10 S. E. 499. Therefore the court did not err in refusing to allow the plaintiff's amendment seeking to recover taxes and street assessments paid by it after it had become the purchaser of the property at the sale under the power.

(a) The clause in the bond to reconvey, executed to the defendant by the original holder of the note and the security deed, providing for the payment of all reasonable attorney's fees incurred by the holder of the deed "by reason of having been made party to any suit on account of being the holder of said security deed, or in any suit in which it may be necessary to interplead to protect the lien thereof, or its priority, " reasonably construed, referred to attorney's fees incurred by the holder of the deed in protecting his security, and would not entitle him to recover on account of attorney's fees incurred in defending a suit brought by the maker of the note to restrain a suit at law instituted upon the note. Consequently, the court did not err in rejecting the plaintiff's amendment seeking recovery on account of such alleged expense.

(b) In such a suit the plaintiff, if entitled to prevail, was entitled to recover attorney's fees upon the principal and interest actually due on the note on the return day of the court to which the suit was filed, and subsequent interest, if any, and the court erred in holding that, in determining the amount of attorney's fees recoverable, the sum realized from the sale of the property under the power of sale contained in the security deed after the filing of the suit should be excluded from the calculation.

Syllabus by the Court.

Under the foregoing rulings, the court properly disallowed the amendments to the petition, but erred in holding that the plaintiff could recover only attorney's fees upon the unpaid balance of the note, and in striking the answer of the defendant as setting forth no defense. Accordingly, the judgment in case No. 21032 is affirmed in part and reversed In part, and the judgment in case No. 21033 is reversed.

Error from City Court of Atlanta; Hugh M. Dorsey, Judge.

Suit by the Franklin Mortgage Company against P. C. MeDuffie. From the judgment, both parties bring error.

Affirmed in part and reversed in part in one case, and reversed in other case.

MeDuffie owned a piece of real estate on which he had borrowed from John Hancock Life Insurance Company $7,500, giving to the lender a security deed, which was duly recorded, to secure the loan note. Subsequently MeDuffie sold the property to Mrs. Woolf, the grantee expressly assuming such debt as a part of the purchase price. Mrs. Woolf thereafter conveyed the property to the Franklin Mortgage Company, without any reference to the incumbrance, nor did the mortgage company expressly agree to pay off and discharge the same as a part of the purchase price. The mortgage company, in order to perfect its title, took a transfer of McDuffie's note to the insurance company, together with a purchase of the legal title represented by the security deed, and proceeded to sue MeDuffie on the note, and the suit constitutes the subject-matter of this litigation. In the plea filed to this suit MeDuffie alleged that the plaintiff mortgage company took the property from Mrs. Woolf "in satisfaction of all debts secured by said property." It appears that pending the suit the mortgage company sold the property under the power of sale embodied in the security deed acquired by it, and, after buying in the property for an amount less than that represented by the note, it now seeks to recover the balance on the note, together with attorney's fees on the entire amount of the note. By amendment it seeks also to recover taxes and street improvement assessments paid by it after it had bought the property in at the sale under the power, and attorney's fees incurred by it in defending a suit brought by MeDuffie to enjoin the instant action, the nature of which proceeding is not disclosed, the pleadings not being set forth. The questions of law presented are whether the mortgage company is entitled to recover such balance on the insurance company's note transferred to it,...