Interstate Land & Investment Co. v. Logan

• Decision Date: 01 June 1916
• Docket Number: 4 Div. 616
• Citation: 196 Ala. 196,72 So. 36
• Court: Alabama Supreme Court
• Parties: INTERSTATE LAND & INVESTMENT CO. v. LOGAN et al.

72 So. 36

196 Ala. 196

INTERSTATE LAND & INVESTMENT CO. v. LOGAN et al.

4 Div. 616

Supreme Court of Alabama

June 1, 1916

Appeal from Chancery Court, Geneva County; W.R. Chapman, Chancellor.

Bill by the Interstate land & Investment company against Sallie H Logan, and by amendment bringing in Mrs. G.H. Holloway, to enjoin the foreclosure of a mortgage. Judgment for respondents, and complainant appeals. Affirmed.

C.D Carmichael, of Geneva, and Ball & Samford, of Montgomery, for appellant.

W.O Mulkey, of Geneva, and B.G. Farmer, of Dothan, for appellees.

THOMAS J.

It is averred that Mrs. G.H. Holloway was the owner of about 2,000 acres of land described in her mortgage to Sallie H. Logan, of date October, 1909; that in 1911, for a valuable consideration and with covenants of warranty, she sold to the Montgomery Bank & Trust Company 1,323.50 acres of said lands. It is further averred that on the 2d day of January and on the 24th day of June, 1912, said mortgagee, Logan, executed a purported release from said mortgage to about 880 acres of said lands, in favor of J.C. McEachern. E.A. Majors, and D.H. Harris. It is further averred that said mortgagee had notice of the fact that the mortgagor, G.H. Holloway, had sold and conveyed, for a valuable consideration, said portion of the mortgaged lands to the Montgomery Bank & Trust Company, and that with this knowledge she executed these releases without receiving therefor and applying as a credit on said debt a pro tanto amount of the burden resting on the lands included in said mortgage, or without giving credit on said mortgage for any amount by reason thereof, and that said mortgagee was undertaking to enforce the entire mortgage debt against the 1,323.50 acres sold by her said mortgagor, Holloway, to complainant. It is further averred that the value of the lands so released by the respondent Logan was equal to, or greater than, the amount of her mortgage debt.

The right of exoneration arises out of a joint and several liability on the same obligation, and is strikingly illustrated in the maxim, "Equality is equity." So where there is a single claim against several debtors, if equity had jurisdiction it will apportion the burden ratably among them; or, if one is compelled to pay more than his share, will give him the remedy of contribution against the others. Pom.Eq.Jur. §§ 406, 407, 410, 411, and 99, as to contribution.

This doctrine of the courts, as applies to a release by a mortgagee of one or more parcels of the mortgaged tracts of land, is clearly stated by the text-writers. Its best expression is:

"Although the equities between the subsequent owners of various parcels of the mortgaged premises, whether equal or unequal, do not prevent the mortgagee from enforcing the mortgage security, if necessary, against all these parcels, yet, after the mortgagee has received notice of the subsequent conveyances, the equities affect him to such an extent that he cannot deal with he whole premises, or with any parcel thereof, or with the owner of any parcel, by release or agreement, so as to disturb the equities subsisting among the various owners, or to destroy their rights of precedence in the order of liability, or to defeat their rights of ratable contribution, or of complete or partial exoneration. No such obligation, however, rests upon the mortgagee, nor is he prevented from dealing with the mortgaged premises in any manner consistent with his general rights as a mortgagee, unless he has received notice of the conveyances to the subsequent owners whose interests could be affected by his dealings; but notice of their conveyances would be a notice of all the equities which arise therefrom. Since his mortgage is a prior lien, and creates an incumbrance alike upon all parts of the land subject to it, no subsequent change in the ownership of the mortgaged premises, of which be is ignorant, can in any degree control or limit his original rights and power conferred by the security. It is settled, therefore, that notice must be given to the mortgagee of any subsequent conveyance of a parcel or the mortgaged premises, so as to prevent him from affecting the equities of the grantee therein by his dealings with other portions of the same premises. *** The effect of a partial release by the mortgagee who is charged with notice differs in two cases where the equities of the various owners are equal and where they are unequal. In the first case, where the mortgaged premises have been conveyed to or are held by various owners, in such manner that their equities are equal, and all their parcels or shares are liable to a ratable contribution, if the mortgagee, having notice of such condition, releases one of the parcels or shares, he thereby discharges a part of the mortgage debt, equal to the ratable portion thereof chargeable upon the lot released, while the balance of the debt alone remains a burden upon the other parcels or shares of the premises. The release of one parcel or share would release all the other parcels from the same proportionate amount of their respective original liabilities which the value of the part released bears to the total value of the mortgaged premises; one owner being released, all the others are entitled to a pro rata abatement. When the equities of the various owners are unequal, so that their respective parcels are liable in the inverse order of alienation, if the mortgagee, having notice of this situation, releases a parcel which is primarily liable, he thereby discharges or releases all those parcels which are subsequently liable, in the order of their several liabilities, from an amount of the mortgage debt equal to the value of the parcel released. If the value of the parcel released equals the mortgage debt, then all the subsequent parcels are wholly relieved from liability; if the value is less than the mortgage debt, the subsequent parcels can, at most, be liable, in their order, only for the excess of the debt over such value." 3 Pom.Eq.Jur. (3d Ed.) § 1226.

In Winston v. Yeargin, 50 Ala. 340, Justice Saffold declared, of the duty of the principal debtor to the sureties, that each case should be decided on its merits according to the justice and equity of the attending circumstances, and that it is the doctrine of the courts that the creditor is a trustee of his execution for the benefit of the surety, and, though not bound to active diligence, yet, if he voluntarily interferes and by his own act releases the lien, the surety is discharged. In Hudson Trust Co. v. Elliott, as Ex'x, 69 So. 631, where the right of the surety against whom judgment had been obtained was under consideration, this court held that where the creditor has liens on the properties of the party primarily liable, and on those of the surety, for the same debt, the surety has an equity, on foreclosure, to require the property of the principal to be first applied to the payment of the debt. Pac. G. Co. v. Anglin, 82 Ala. 492, 1 So. 852; Bramlett et al. v. Kyle et al., 168 Ala. 325, 329, 52 So. 926. The fact that the liens were created by mortgage, rather than by judgment, can make no difference in the application of the principle involved. It grows out of the duty of the principal debtor to pay the debt and extinguish the alternative liability of the surety. It is the duty of the creditor to recognize this right when it can be done without injury to himself.

In a bill to restrain foreclosure of a mortgage under its power ( Bramlett v. Kyle, 168 Ala. 325, 52 So. 926), this court has recently held that the doctrine of exoneration is the weapon of the surety, whether that relation be affirmed by the contract itself, or be the product of equity's motive to attain natural justice on the theory that the real beneficiary of the obligation assumed by the parties should discharge the burden.

It is important, then, to know who is the principal debtor to the mortgagee when that relation changes to that of purchaser from the mortgagor. As a general rule, a purchaser of mortgaged lands is not liable for the mortgage debt, unless he expressly or impliedly agrees to pay the same. Fiske v. Tolman, 124 Mass. 254, 26 Am.Rep. 659; Patton v Adkins, 42 Ark. 197; Scholten v. Barber, 217 Ill. 148, 75 N.E. 460; Bristol Sav. Bank v. Stiger, 86 Iowa, 344, 53 N.W. 265; Crane v. Hughes, 5 Kan.App. 100, 48 P. 865; Canfield v. Shear, 49 Mich. 313, 13 N.W. 605; Van Eman v. Mosing, 36 Okl. 555, 129 P. 2. When the mortgage debt forms a part of the consideration of purchase, the purchaser becomes the principal debtor, to the extent of the property, to indemnify his grantor, and the promise to discharge the obligation to that extent is implied from the nature of the transaction. Foy v. Armstrong, 113 Iowa, 629, 85 N.W. 753; N.W. Bk. v. Stone, 97 Iowa, 183, 66 N.W. 91; Schlatre v. Greaud, 19 La.Ann. 125; Cummings v. Jackson, 55 N.J.Eq. 805, 38 A. 763; Flagg v. Thurber, 14 Barb. (N.Y.) 196; Thompson v. Thompson, 4 Ohio St. 333; Moore's App., 88 Pa. 450, 32 Am.Rep. 469; L.U. In. Co. v. Dunn, 167 Ill.App. 22. But the purchaser is under no personal liability to his grantor (the original mortgagor), or to the owner of the mortgage, for the mortgage debt. Hubbard v. Ensign, 46 Conn. 576; Lawrence v. Towle, 59 N.H. 28; Equitable L.A. Soc. v. Bostwick, 100 N.Y. 628, 3 N.E. 296; Belmont v. Coman, 22 N.Y. 438; 78 Am.Dec. 213. Where, however, the vendee of the mortgagor assumes the payment of the mortgage but does not expressly assume any personal liability, he is not personally liable to the mortgagee, but is so liable to the mortgagor, and as between him and his grantor (the mortgagor) he becomes the principal debtor, and the vendor (his mortgagor) a surety. Green v. Hall, 45 Neb. 89, 63 N.W. 119; Bennett v. Bates, 94 N.Y....