Tennessee Valley Bank v. Sewell

• Decision Date: 01 April 1926
• Docket Number: 8 Div. 806
• Citation: 214 Ala. 362,107 So. 834
• Parties: TENNESSEE VALLEY BANK et al. v. SEWELL.
• Court: Alabama Supreme Court

107 So. 834

214 Ala. 362

TENNESSEE VALLEY BANK et al. v. SEWELL.

8 Div. 806

Supreme Court of Alabama

April 1, 1926

Appeal from Circuit Court, Morgan County; J.E. Horton, Judge.

Bill in equity by J.Q. Sewell against the North Alabama Building &amp Loan Association, the Tennessee Valley Bank, L.W. Norton, and S.G. McDuff. From a decree for complainant, respondents North Alabama Building & Loan Association and Tennessee Valley Bank appeal. Affirmed.

S.A Lynne, of Decatur, for appellants.

A.J Harris, of Decatur, for appellee.

ANDERSON C.J.

When a mortgagor conveys the mortgaged property, and his grantee assumes the payment of the mortgage as between the mortgagor and his grantee, the grantee becomes the principal debtor primarily liable for the debt, and the mortgagor becomes a surety with all the consequences flowing from the relationship. As between these two and the mortgagee, although he may treat them both as debtors, and may enforce the liability against either, still, after notice of the assumption, he is bound to recognize the condition of suretyship and to respect the rights of the surety in all of his subsequent dealings with them. When the mortgagor, having become a surety, pays off the mortgage, he is entitled to hold it by equitable assignment or subrogation for the purpose of reimbursement from the grantee. 3 Pomeroy, § 1206, and note on page 1409. This rule as enunciated by Mr. Pomeroy is not only supported by many authorities cited in his notes, but finds support in our own case of Hamilton v. Robinson, 67 So. 434, 190 Ala. 549, as well as previous decisions of this court. Therefore, when Sewell, the appellee, mortgaged the lot to the loan company, and subsequently sold it to Norton, who assumed the payment of the mortgage as part of the purchase money, but failed to pay same, and Sewell paid it, he became the equitable assignee, and was by the operation of equitable principles subrogated to the rights of the loan company.

The fact that section 3602 of the Code of 1907 forbade the loan company from assigning its securities could at most apply to a contractual or conventional subrogation, and not to one that arose by the operation of law. Moreover, section 3602 must be considered in pari materia with section 5394 of the Code of 1907, and which provides:

"A surety who has paid the debt of his principal is subrogated, both at law and in equity, to all the rights of the creditor, and

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