Rea v. Underwood

• Decision Date: 22 January 1934
• Docket Number: 30998
• Court: Mississippi Supreme Court
• Parties: REA v. UNDERWOOD

152 So. 272

168 Miss. 799

REA v. UNDERWOOD

No. 30998

Supreme Court of Mississippi

January 22, 1934

Division B

1. NOVATION. Finding that transaction whereby building and loan association accepted new deed of trust from grantee of incumbranced premises constituted novation, whereby new debtor was substituted and other property of original debtor released, held justified under evidence.

The evidence disclosed that original debtor gave building and loan association two deeds of trust on different property each of which provided that it should be continuing security for further advances or other indebtedness. Thereafter, the property covered by the second deed of trust was conveyed to another, who gave the association a new deed of trust thereon containing no recital as to the first deed of trust given by her grantor. The evidence was conflicting as to whether it was understood that the new deed of trust would extinguish note and second deed of trust which grantee of premises assumed.

2 EVIDENCE.

Attorney's letter approving abstract sent to loan company Held not binding on deed of trust debtors not shown to have seen letter when it was transmitted.

HON. M. B. MONTGOMERY, Chancellor.

APPEAL from chancery court of Yazoo county, HON. M. B. MONTGOMERY, Chancellor.

Suit by Mrs. Bettie W. Underwood against W. O. Rea, receiver. Judgment for plaintiff, and defendant appeals. Affirmed.

Affirmed.

Barbour & Henry, of Yazoo City, and Fulton Thompson, of Jackson, for appellant.

The court below erred in overruling defendant's demurrer.

The terms of the deed of trust securing appellee's indebtedness "however evidenced," is sufficient to hold the appellee as surety as well as principal and the taking of the second deed of trust on a portion of Lot 4 Pugh's Square from Mrs. Ethel U. Moore did not, as a matter of law, release appellee on her former deed of trust on said lands.

5 Thompson on Real Property, p. 4711.

Where the mortgagee gives up the notes secured to a purchaser of the mortgage premises, and takes from such purchaser his own notes, evidencing the same continuing debt, this does not release or extinguish the mortgage.

Bond v. Liverpool & London & Globe Insurance Company, 106 Ill. 654; Jones on. Mortgages, 924 et seq.; Foster v. Payne, 64 Iowa 85, 18 N.W. 699; Hynes v. Rogers, Littell Select Cases, 5 Ky. 229; Hadlock v. Bulfinch, 31 Me. 246; 5 Thompson on Real Property, p. 895, par. 4711; McConike v. McClurg, 18 Wis. 667; Mersman v. Werges, 112 U.S. 139, 28 L.Ed. 641.

The taking up of the mortgage note and the substitution of another is not a discharge of the original debt as between the parties or as to a subsequent purchaser. This is upon the ground that it is the debt and not the mere evidence of it which is secured, and so long as the debt exists in any form, the mortgage will remain unsatisfied.

Par. 4711, Thompson on Real Property; White v. Stevenson, 144 Cal. 104, 77 P. 828; Walton Plough Company v. Campbell, 35 Neb. 173, 16 L. R. A. 468.

A purchaser who assumes a mortgage becomes as to the mortgagor the principal debtor, and the mortgagor as surety, but the mortgagee unless he assented to such an arrangement, may treat both as principal debtors, and may have a personal decree against both.

2 Jones on Mortgages, par. 741; Union Mutual Life Ins. Co. v. Hanford, 143 U.S. 187, 36 L.Ed. 118; Shepherd v. May, 115 U.S. 505, 29 L.Ed. 456; Scholten v. Barbour, 217 Ill. 148, 75 N.E. 460; Conn. Mutual Life Ins. Co. v. Mayer, 8 Mo.App. 18; Walters v. Hubbard, 44 Conn. 340; Fish v. Glover, 154 Ill. 86; Corbett v. Waterman, 11 Iowa 86; Mulvane v. Sledgley, 63 Kan. 105, 55 L. R. A. 552.

Although the mortgagee is not a party to the contract of assumption, he may enforce it for his advantage.

Blood v. Crew Levick Co., 55 Am. St. 742; Beardman v. Larrabee, 51 Conn. 39; James v. Day, 37 Iowa 164.

There must be a substitution of a new obligation for the old one, and the new obligation must be a valid one. The acceptance by the mortgagee of a second mortgage upon the property from the purchaser would not release the first mortgagor.

Conn. Mutual Life Ins. Co. v. Tyler (U. S.), 8 Biss. 369; Winslow v. Stoothoff, 104 A.D. 28, 93 N.Y.S. 335; 2 Jones on Mortgages, par. 742A; Walters v. Hubbard, 44 Conn. 340; Fish v. Glover, 154 Ill. 86; 1 Jones on Mortgages, par. 355.

There was no consideration for the alleged release of appellee under her deed of trust of April 3, 1928.

Wise & Bridgforth, of Yazoo City, and L. Barrett Jones, of Jackson, for appellee.

It cannot be denied that the assumption of the original debt created Ethel U. Moore principal, and Mrs. Underwood surety. The principal is released because the association (appellant herein) with due notice thereof, accepted the primary debtor (Ethel U. Moore). Intention is a question of fact, and appellant's prior and subsequent actions and dealings with said Mrs. Ethel U. Moore shows and determines the intention of the appellant as to the parties and the subject matter. The novation was created, and thereby released the surety.

Gilliam v. McLemore, 141. Miss. 253, 106 So. 99; 16 L. R. A. 85; 41 A. L. R. 277; 21 A. L. R. 440; Williams v. Butts, 87 So. 147; Hembree v. Johnson, 119 Miss. 204, 80 So. 554; 81 A. L. R. 1017; Bailey v. Inmon, 140 So. 783; Lee v. Newman, 55 Miss. 365; Dodge v. Cutrer, 100 Miss. 647, 56 So. 455; Barnes v. Jones, 111 Miss. 337, 71 So. 573; 2 Devlin on Deeds (3 Ed.), sec. 1056. et seq.

Where the creditor accepts the new debtor for the debt of the old debtor, and deals with the new debtor as though primarily liable, novation may be implied from the circumstances--though a substitution of the new for the old debtor was not expressly understood between the parties.

American Blakeslee Mfg. Co. v. Martin & Son, 81 So. 6; DeWitt v. Monjo, 61. N.Y.S. 1046, 46 A.D. 533.

Novation is proven where it is irresistibly inferred from surrounding circumstances.

Amoss v. Burleson, 8 La. App. 359.

Novation is the substitution of a new obligation for a then existing debt.

5 Words & Phrases, p. 4848; Henry v. Nubert, 35 S.W. 444, 448; Workingmans Bldg. & Savings Assn. v. Williams, 37 S.W. 1019; Gurchard v. Brande, 15 N.W. 764; 16 Am. & Eng. Ency. Law, p. 862; Hopkins v. Jordan, 77 So. 710; Morgan Paving Co. v. Carroll, 88 So. 640.

Where a third person (Mrs. Moore) contracts in writing to pay the debt of another (L. A. Underwood and Mrs. Bettie W. Underwood), and the creditor (appellant), with his consent, and relying on the contract credits the debtor, and charges such person with the debt, he, by novation, becomes directly liable to the creditor.

Pugh v. Baines, 19 So. 370; Tysen v. Somerville, 17 So. 567; Bowen v. Ratcliff, 140 Ind. 293, 49 Am. St. Rep. 203, and note on page 204; Campbell v. Bigham, 149 Miss. 214, 115 So. 395.

We would like to call the court's attention to the authorities herein cited, which were selected by us as the leading cases from the majority rule, that subsequent dealings between the mortgagee and grantee of the mortgaged property, entered into without the consent of the mortgagor, and accepting the new debtor for the old, discharges the latter from personal liability.

Gilliam v. McLemore, 141 Miss. 253, 106 So. 99; Union Mutual Ins. Co. v. Hanford, 143 U.S. 187, 36 L.Ed. 118, 12 S.Ct. 437; Woodman v. Brown, 119 Col. 283, 63 Am. St. Rep. 108.

Where a mortgage secures payment of a specific debt, the debtor is entitled to a cancellation thereof, or payment by him of the debt secured, although he may owe the mortgagee other unsecured debts contracted since the execution of the mortgage.

Williams v. Butts, 124 Miss. 661, 87 So. 145.

The personal liability of the mortgagor may be released without extinguishing the mortgage, if this is done without any intention of discharging the debt.

Donnelly v. Simonton, 13 Minn. 301; Hayden v. Smith, 12 Met. 511; Colby v. Place, 11 Nebr. 348; Mason v. Beach, 55 Wise. 697, 13 N.W. 884; Walls v. Baird, 91 Ind. 429; Ellis v. Johnson, 96 Ind. 377.

This release is personal merely and does not discharge the debt or the mortgage.

1 Jones on Mortgages (6 Ed.), p. 1053, sec. 983; 2 Jones on Mortgages, pars. 741 and 742.

Argued orally by L. J. Wise, for appellee.

OPINION

Ethridge, P. J.

On April 3, 1928, L. A. Underwood and wife, Mrs. Bettie W. Underwood, executed a deed of trust to the Building & Loan Association of Jackson, Mississippi, to secure the payment of one thousand nine hundred dollars, borrowed from said association; said loan to be payable in monthly installments, and to bear interest at the rate of eight per cent. per annum. One of the clauses of this deed of trust provides: "And it is distinctly understood that this deed of trust shall be a continuing security for said indebtedness and any renewal or extension thereof or further advances or other indebtedness, however evidenced, that the buildings on said land shall be kept insured," etc. Another clause provides that: "The giving or taking hereafter of any other or additional security to secure any indebtedness herein referred to or hereafter contracted by us with said Building & Loan Association during the life of this deed of trust shall not be construed as a waiver of the lien of this deed of trust."

On the 22d day of August, 1929, L. A. Underwood and wife, Bettie W Underwood, executed another deed of trust to the Jackson Building & Loan Association to secure a note for one thousand five hundred dollars upon a different piece of property from that embraced in the first deed of trust; providing for monthly payments of twenty-two dollars, and containing the same clauses as are quoted from the first deed of trust. Subsequent to the execution of this deed of trust, L. A. Underwood died...