Great Southern Land Co. v. Valley Securities Co.

• Decision Date: 09 November 1931
• Docket Number: 29537
• Court: Mississippi Supreme Court
• Parties: GREAT SOUTHERN LAND CO. et al. v. VALLEY SECURITIES CO

137 So. 510

162 Miss. 120

GREAT SOUTHERN LAND CO. et al. v. VALLEY SECURITIES CO

No. 29537

Supreme Court of Mississippi

November 9, 1931

Division B

1 MORTGAGES. Senior mortgagee holding installment notes providing for attorney's fees held not entitled on foreclosure, as against holder of junior mortgage purchasing at foreclosure sale, to receive attorney's fee on any part of principal indebtedness where mortgage contained no provision for attorney's fees or reference to such provision.

The evidence disclosed that neither the conveyance from the first mortgagee nor the purchase-money mortgage securing the notes referred to provision in notes for payment of attorney's fee, and the same was true of subsequent conveyances of the mortgaged property, and the second mortgagee had no actual notice of such provision prior to notice of foreclosure sale. On default in one of the installment notes, the trustee under the first mortgage advertised property for foreclosure claiming the fifteen per cent attorney's fees, and thereupon the second mortgagee made tender of indebtedness and costs with attorney's fees on the overdue installment note, which was declined. The second mortgagee then purchased the property at the foreclosure sale, and demanded a refund of difference between amount it paid for the property and the amount due on the first mortgagee's notes, with interest and costs.

2. MORTGAGES.

Provision in first mortgage requiring mortgagor to keep property free of anything which might affect mortgagee's equity held insufficient to give junior mortgagee constructive notice of stipulation for attorney's fees in first mortgage notes.

3. MORTGAGES.

Difference remaining after satisfying senior mortgage should be applied on junior mortgage, though junior mortgagee is purchaser at foreclosure.

4. MORTGAGES.

Junior mortgagee's interest is not merged in title by purchase at foreclosure sale of senior mortgage, if junior mortgagee did not intend merger or merger is against his manifest interest.

5. MORTGAGES.

Merger of junior mortgagee's interest held not affected by its purchase at foreclosure sale of first mortgage, where junior mortgagee had made tender in effort to stop foreclosure and had demanded payment over of surplus.

6. USURY.

Second mortgagee's contract, if usurious because providing for interest over eight per cent but under twenty per cent, nevertheless remained valid charge against property to extent of principal indebtedness (Code 1930, section 1946).

Suggestion of Error Overruled January 4, 1932.

APPEAL from chancery court of Harrison county HON. D. M. RUSSELL, Chancellor.

Suit by the Valley Securities Company against the Great Southern Land Company and others. From a decree awarding recovery for part of the amount claimed, defendants appeal, and plaintiff cross-appeals. Affirmed on the direct appeal, reversed on the cross-appeal, and judgment rendered.

STATEMENT OF FACTS BY THE COURT.

The bill in this case was filed in the chancery court of Harrison county by appellee and cross-appellant, the Valley Securities Company, the holder of a junior mortgage upon certain property located in the city of Hattiesburg, known as the Hattiesburg Hotel property, against the appellants, the Great Southern Land Company, the beneficiary in a prior mortgage on the property, and J. H. Beeman, trustee therein, to recover the excess over and above the amount due on the first mortgage realized by appellants from a foreclosure of their mortgage. There was a trial on bill, answer, and proofs, resulting in a decree in favor of the appellee and cross-appellant, in the sum of twenty thousand eight hundred sixty-three dollars and seventy cents, together with the interest thereon at the rate of six per cent per annum from February 18, 1929, making a total recovery of twenty-three thousand eighty-seven dollars and fifty-eight cents. The appellee and cross-appellant sought a decree for a larger amount. Appellants prosecute this appeal from that decree, and appellee and cross-appellant prosecutes a cross-appeal.

For convenience and clarity appellants will be referred to as the Land Company, and appellee and cross-appellant as the Securities Company.

The subject-matter involved in the litigation is an attorney's fee of fifteen per cent on the entire principal amount due under the Land Company's first mortgage, as well as accrued interest thereon.

The Land Company claimed that out of the proceeds of the foreclosure of its first mortgage it was entitled to receive from the trustee the unpaid principal of the indebtedness secured by the mortgage, including accrued interest; and, in addition thereto, fifteen per cent thereon provided for in the notes evidencing the indebtedness; while the Securities Company contended that the Land Company was only entitled to receive out of the proceeds of the foreclosure sale the unpaid principal of the mortgage indebtedness, and accrued interest thereon, and costs of sale, and no attorney's fees whatever.

There is no substantial conflict in the evidence as to the material facts, except as to the value of the property covered by the two mortgages. The facts are as follows:

On the 2d day of January, 1926, the Land Company was the owner of the Hotel Hattiesburg. On that date it conveyed the property to J. I. and J. T. Harrison and R. S. Love, in consideration of the sum of two hundred fifty thousand dollars, of which sum fifty thousand dollars was paid in cash, and the balance of two hundred thousand dollars was arranged in deferred payments, as follows: It was evidenced by ten promissory notes, of twenty thousand dollars each, secured by a mortgage on the property. The notes were due and payable, one each year, for ten years from their date, and bore interest at six per cent per annum, payable annually. The notes were so described in the mortgage; and, in addition, the mortgage contained the following: "Payable on or before the first day of January of each succeeding year, bearing interest at the rate of six per cent per annum beginning January 1, 1926, and the interest on the full amount of said notes which are unpaid, to be paid, payable annually."

By successive conveyances not necessary to set out, the title to the property of the Harrisons and Love became vested in C. J. Thomas. The conveyance to Thomas was made on March 29, 1928, and recites a consideration of ten dollars cash, and the assumption of one hundred sixty thousand dollars, with accrued interest from January 1, 1928, due to the Land Company under their senior mortgage.

At the time of the conveyance to Thomas, there had been paid on the principal of the Land Company's mortgage two notes of twenty thousand dollars each. On the same date the property was conveyed to Thomas, he borrowed eighty thousand dollars from the Securities Company, evidenced by several deferred payment promissory notes, to secure which he gave a mortgage on the property, reciting, among other things, that the property was free from all incumbrances, except the mortgage of the Harrisons and Love to the Land Company. On January 1, 1929, Thomas conveyed the property to Mrs. Nix.

The twenty thousand dollars due the Land Company on January 1, 1927, together with the interest on the entire indebtedness, was duly paid, as was the twenty thousand dollar note due January 1, 1928, and the accrued interest on the entire indebtedness; thus reducing the principal of the indebtedness to the Land Company to one hundred sixty thousand dollars. The last purchaser, Mrs. Nix, defaulted in the payment of the twenty thousand dollar note due January 1, 1929, as well as the interest on the balance of the indebtedness of one hundred sixty thousand dollars. Thereupon Beeman, the trustee in the Land Company's mortgage, advertised the property for foreclosure sale under the mortgage, for the benefit of the Land Company.

The evidence is somewhat uncertain as to whether or not the notes evidencing the indebtedness to the Land Company provided for an attorney's fees. The originals were not introduced in evidence. The Land Company claimed that the notes provided for such a fee. For the purposes of this decision, the contention of the Land Company will be treated as a fact.

At the time the Securities Company lent the eighty thousand dollars to Thomas, and took a second mortgage on the properly, it had no actual notice that the Land Company's notes contained such a provision. One of the questions in the case is whether it had constructive notice.

The conveyance from the Land Company to the Harrisons and Love described the purchase-money notes in detail, giving their amounts, maturity, rate of interest, and how payable; but in nowise referred to the fact that the notes provided for the payment of an attorney's fee; and the mortgage from the Harrisons and Love to the Land Company to secure the purchase-money notes likewise made no reference to the fact that the notes provided for an attorney's fee. And the same is true of all subsequent conveyances of the property, down to and including Mrs. Nix, the last vendee before the foreclosure sale.

Neither in the Land Company's notes nor in the mortgage securing them was there any acceleration provision -- that is, there was no provision that on failure to pay any one of the notes all could be matured.

Default was made in the payment of the twenty thousand dollar note due the Land Company on January 1, 1929, and interest thereon, as well as the interest on the balance of the principal. Thereupon the trustee in the mortgage, at the request of the Land Company, proceeded to advertise the property for foreclosure sale, under the terms of the mortgage. The advertisement recited that the Land Company elected and declared the...