Thompson v. Hudgens

• Decision Date: 28 May 1931
• Docket Number: 13159.
• Citation: 159 S.E. 807,161 S.C. 450
• Parties: THOMPSON v. HUDGENS et al.
• Court: South Carolina Supreme Court

159 S.E. 807

161 S.C. 450

THOMPSON v. HUDGENS et al.

No. 13159.

Supreme Court of South Carolina

May 28, 1931

Appeal from Common Pleas Circuit Court of Anderson County; M. L Bonham, Judge.

Action by W. E. Thompson, administrator of the estate of W. K. Hudgens, deceased, against Annie J. Hudgens and others, including James E. Peurifoy, receiver. From the judgment, the last-named defendant appeals.

Affirmed.

The decree of Circuit Judge Bonham, directed to be reported, was as follows:

At summer term, 1930, of the court of common pleas for Anderson county, by agreement of counsel, this case was marked "Heard," and taken up subsequently at chambers. It was heard, partly on an agreed statement of facts and partly on oral testimony taken before me, and on documents then introduced in evidence, or included in the agreed statement.

The action is brought by the administrator of the estate of W. K Hudgens, deceased, for the purpose of calling in creditors marshaling assets and settling the estate. Creditors were restrained by order of the court from bringing their several and separate actions, and their rights are to be adjudicated in this action. The real contests are between James E Peurifoy, as receiver of American Bank & Trust Company on the one hand, the widow and children of W. K. Hudgens, deceased, and the creditors of the decedent on the other hand. The pertinent issues grow out of the following narrated facts, as they appear from the pleadings, the agreed statement, and the testimony taken:

W. K. Hudgens conducted a considerable mercantile business at Piedmont and other places; he died intestate on the 7th day of July, 1928, and the plaintiff is the duly appointed and qualified administrator of his estate; he left him surviving, as his sole heirs at law, his widow, Mrs. Annie J. Hudgens, and his children, Mrs. Virginia Conner, James R. Hudgens, John W. Hudgens, and Archie Hudgens, of whom the last named is a minor, and appears in this action by his duly appointed guardian ad litem. The estate of said intestate is hopelessly insolvent.

On November 19, 1920, W. H. Poole conveyed to J. W. Washington a storeroom and dwelling house in the town of Piedmont, the stated consideration being "$10.00 and other consideration." The deed was recorded the same day. On that day, J. W. Washington executed and delivered to W. H. Poole a mortgage on the same premises to secure a note for $4,000; this mortgage was recorded November 26, 1920. It stands today unsatisfied of record. On November 20, 1920, J. W. Washington executed a mortgage of the same premises to W. K. Hudgens to secure a note for $2,500; this mortgage was recorded December 9, 1920. It is unsatisfied of record. November 1, 1921, W. H. Poole assigned the note and mortgage given to him by J. W. Washington to W. K. Hudgens. The assignment is written on the back of the mortgage, but is not recorded. December 5, 1923, J. W. Washington conveyed to W. K. Hudgens the premises covered by the mortgage to W. H. Poole, which had before that date been assigned to W. K. Hudgens, who was also owner and holder of the mortgage for $2,500, which was made to him direct. The stated consideration of the deed is "Ten Dollars and other valuable consideration." This deed bears the requisite federal and state revenue stamps, and was recorded December 6, 1923. On April 12, 1926, W. K. Hudgens borrowed of American Bank & Trust Company the sum of $9,464.74 for which he gave his note and to secure it, at the time of its execution and delivery, he pledged to the bank sundry notes and mortgages including the note and mortgage of $4,000 which J. W. Washington had executed to W. H. Poole on November 19, 1920, covering the house, storehouse, and lot in Piedmont, and which W. H. Poole transferred and assigned to W. K. Hudgens on November 1, 1921. June 30, 1930, there was due on the note to the American Bank & Trust Company the sum of $6,228.84, including interest and attorney's fees. The collateral which the bank holds has been practically exhausted, except the Poole mortgage. At the time of the conveyance to W. K. Hudgens by J. W. Washington, namely, December 5, 1923, there were no liens by way of mortgage, judgments, or otherwise on the premises so conveyed, other than the two mortgages hereinabove spoken of. The name "Hudgens & Company," as it appears upon certain of the documents involved herein, was a trade-name employed by W. K. Hudgens, and no other person than he had any interest in the business conducted by him under that name, or in its assets. W. K. Hudgens was possessed of other real estate which was pledged to other several of his creditors, but these matters are not involved here. The officers of the American Bank & Trust Company had no actual notice of the deed from J. W. Washington to W. K. Hudgens, but the same was duly recorded in the office of register of mesne conveyances for Greenville county in Deed Book 88, at page 581.

The plaintiff, the administrator of the estate of W. K. Hudgens, deceased, as representative of the creditors of the insolvent estate, makes the claim that when W. K. Hudgens received from J. W. Washington a deed conveying to him the title in fee to the premises which Washington had bought from Poole and upon which he had given Poole a mortgage and upon which he had given to Hudgens a mortgage junior to that to Poole, the lesser title of mortgage was merged in the greater title of the fee, and the mortgages were extinguished. The defendant American Bank & Trust Company contends that there was no merger because the parties did not intend that there should be; that if there was a merger, W. K. Hudgens was estopped to claim it, and that his personal representative and his heirs at law, being in privity with him, are likewise estopped. That in any event the bank has an equitable mortgage which gives it priority over all other claimants, and that it has a preferred lien on the funds of the estate which arose from the collection by Hudgens of some of the collateral pledged by him to the bank, all of which had not been remitted. These positions are controverted by the administrator and by the widow and children of the decedent. The widow claims dower in the premises, and the widow and children claim homestead.

These are the issues which stand for adjudication.

Was there a merger? When does a merger occur? When the holder of a mortgage acquires the equity of redemption or the legal title to the land merger will take place, unless the parties intend otherwise.

This doctrine is sustained fully by the decisions of our own court. McCreary v. Coggeshall, 74 S.C. 42, 53 S.E. 978, 7 L. R. A. (N. S.) 433, 7 Ann. Cas. 693; Gainey v. Anderson, 87 S.C. 47, 68 S.E. 888, 31 L. R. A. (N. S.) 323; Willoughby v. Ray, 131 S.C. 317, 127 S.E. 441.

"Where a greater and a less legal estate held in the same right, meet in the same person, without any intermediate estate, a merger necessarily takes place. The lesser estate ceases to exist, being merged in the greater, which alone remains." Pomeroy's Equity Jurisprudence (3d Ed.) § 787.

"Where the legal estate--for example the fee--and an equal co-extensive equitable estate unite in the same person, the merger takes place in equity in the absence of acts showing an intention to prevent it, as certainly and as directly at law. Under these circumstances merger is prima facie the equitable as well as the legal rule." Same authority, § 788.

"Where the owner of the fee becomes absolutely entitled in his own right to a charge or encumbrance upon the same land, with no intervening interest or lien, the charge will at law merge in the ownership and cease to exist. Under like circumstances a merger will take place in equity, where no intention to prevent it has been expressed and none is implied from the circumstances and interest of the party; and a presumption in such case arises in favor of the merger. Generally the same result follows whether a mortgagee assigns a mortgage, or the mortgagor conveys the land to the mortgagee." Same authority, § 790.

The burden of overcoming the presumption in favor of merger rests upon him who denies that there was a merger; he must show by the preponderance of the evidence that it was the intention of the parties that there should be no merger. The rule is nowhere more clearly and succinctly expressed than in the case of Gainey v. Anderson, 87 S.C. 47, 68 S.E. 888, 890, 31 L. R. A. (N. S.) 323, in this language: "When the circumstances under which merger ordinarily takes place are shown, the burden rests upon him who alleges that there was no merger to prove a contrary intention, or to prove facts and circumstances from which such an intention will be presumed."

To the same effect is the case of McCreary v. Coggeshall, 74 S.C. 53, 53 S.E. 978, 7 L. R. A. (N. S.) 433, 7 Ann. Cas. 693.

At what time does the intention become the controlling factor? It is at the time the two estates come together.

"While the intention controls it must be understood as the intention existing at the time the two interests came together. If there was then no intention to keep the encumbrance alive, a merger cannot be defeated by an intention afterwards formed and expressed, or from a subsequent change of circumstances from which an intention might be inferred." Pomeroy's Equity Jurisprudence, § 792.

In the present case, the American Bank & Trust Company (which will be called the bank) seeks to fulfill the requirement of its obligation to overcome the presumption in favor of the merger by these circumstances:

First The pencil calculations on the back of the mortgage which it is claimed show that the interest was calculated to March 1, 1926, whereas the deed from Washington to Hudgens was dated December 5, 1923, and...