Higman v. Humes

| Ala. | Nov 15, 1899

DOWDELL, J.

The appeal in this case is taken from the decree of the chancellor rendered on December 16th, 1898, overruling the demurrer of the respondent John Higman, Jr., to complainant’s bill and also tbe motion of said respondent to dismiss the bill for want of equity. The vital question raised by the demurrer and motion, and the one urged in argument by counsel, is one of priority between mortgagees. The facts, as stated in the bill are substantially as follows: On the 14th of January, 1888, the respondent Harris 0. Higman together with Newton B. Hall and George Smith executed a mortgage to the complainant Humes .and Eugene C. Gordon, Lionel W. Day, George E. Crane and Hiram G. Bond on the land involved for the balance of the purchase money due thereon. The complainant Humes subsequently became the sole owner of the mortgage debt, and filed a bill on the 17th of April, 1895, to foreclose said mortgage. The mortgagors and the co-mortgagees were made parties respondents to this bill. On September 10th, 1895, complainant Humes and respondent Harris C. Higman entered into a written agreement, by the terms of which the said Higman was to withdraw his defense to said suit and consent to the rendition of a decree of foreclosure for the amount of the debt due on said mortgage, to-wit, $2,468, with the understanding that the said Higman was to become the purchaser at the foreclosure sale and to execute new notes and a new mortgage to secure the payment of said notes, the 'said notes to cover the amount of the decree. On September 12, 1895, a decree of foreclosure was rendered, and October 28th, 1895, the land was sold by the register under said decree, at which said sale said Higman in pursuance of his said agreement became the purchaser, bidding the sum of $500. On February 19th, 1896, the •sale was confirmed by the court on the report of the register that the purchaser, the said Higman, had made •satisfactory arrangement with the complainant. On November the 28th, 1895, and before the delivery of the register’s deed of the same date, Higman executed the second mortgage to Humes on the same property, which was filed for record on February 4th, 1896, and on which •same day the register’s deed to Higman was filed for record. The mortgage in favor of John Higman, Jr., executed by said Harris O. Higman on the same lands, bears date of October 7th, 1889, and was recorded November 5th, 1889, long subsequent in time, both as to execution and record, to the mortgage by H. 0. Higman and others to Humes and others, and which was foreclosed under the agreement as above stated between Humes and Higman.

It is distinctly averred in the bill, that it ivas not the intention of the parties in the making of the agreement of September 10th, 1895, or by the foreclosure proceedings had in pursuance thereof to discharge and release the lien of the first mortgage. On the other hand, it is averred that the sole intent and purpose of making said agreement and having a sale in accordance .with its terms, -and the giving and taking of new notes'and new mortgage, were simply to extend or renew tiie debt. As between the immediate parties to the transaction, the effect of taking the new notes and mortgage depends entirely on the intention of the parties, and this is a matter dependent upon proof, and should not be eliminated from the case by a ruling upon the pleading. Even the giving of a receipt and release absolute on its face for the amount secured by the first mortgage, does not destory the lien of the original mortgage unless so intended by the parties. “Whether the taking of the second mortgage is a payment of the first depends upon the intention of the parties. When no receipt is given as for the amount secured by the first mortgage, and no release thereof is executed, the presumption is that the latter notes and mortgage were .not intended to discharge and pay the earlier. When such receipt is given or release executed, the contrary presumption obtains. But this is only a prima facie presumption. It may be met and overturned, whatever the form of the paper relied upon as evidencing payment and discharge, by proof of an intent of the parties that the receipt or release was not to operate according to its express terms, but was executed for other purpose than to show the satisfaction of-the mortgage debt and release of the mortgage lien.” N. E. M. S. Co. v. Hirsh Bros., 96 Ala. 234.

In the case at bar no receipt or release was given, but in addition to the taking of new notes and mortgage, the transaction between the parties included the f'ore-closure proceedings had in the chancery court. Where-the purpose or object of the parties is the renewal and extension of the old debt, it is unimportant what form the transaction may take in effectuating such purpose, the intention at last must control. Nor can it he any objection, in the absence of fraud, upon, or prejudice to, the rights of. third persons, that such purpose is sought to be effectuated by parties through the aid of the court’s judgments and decrees.

To hold that Humes is estopped by 'the decree of the chancery court in the foreclosure proceedings would be to ignore the agreement between Humes and H. C. Higman, -and to disregard one of the prime objects of these-proceedings as well as the intention of the parties to-this transaction. Whatever effect the decree of foreclosure may have had upon the mortgage debt under the doctrine'of merger of a lower into.a higher evidence-of debt, the lien under the mortgage was not thereby destroyed, but was preserved and .continued as a security for the payment of the decree. The sale had under this decree and the ■ purchase by the mortgagor Higman was in pursuance of his agreement with Humes and a link in the transaction by which a renewal and extension of the old debt was to be accomplished and secured. The collection of the debt evidenced by the decree was not in the contemplation of the parties in having the sale, and hence it cannot be said that the-lien or security was destroyed or exhausted by the sale. We are not to be understood as asserting that a sale under a decree of foreclosure does not as a general' proposition exhaust the lien under the decree, but what we have said is limited to the facts of this particular case.

Our conclusion is that Humes’ lien, originating under the first mortgage, was not lost by the transaction with his mortgagor Higman. Did he lose his priority over the lien of the junior mortgage to John Higman? As-we have seen, John Higman’s.inortgage was subsequent in execution to Humes’ first or original mortgage, but prior to the foreclosure proceedings, the agreement between Humes and H. C. Higman, and the execution of the new or second mortgage to Humes. It is . not pretended but that the lien under the mortgage of John Higman was subordinate to the lien under Humes’ first mortgage. John' Higman parted with nothing upon the faith of the foreclosure proceedings and' the sale made thereunder to H. C. Higman. He acquired no new right nor suffered any detriment by reason of the transaction between Humes and H. C. Higman, .which under the facts as alleged in the' bill was nothing more or less, in •effect, than a renewal and extension of the old debt. “The extension of time of payment of the mortgage debt does not impair the security as against subsequent encumbrances.” — 15 Am. & Eng. Encyc. Law, p. 872, note 1; 1 Jones on Mortgages, (5th ed.), §§ 927, 942.

It is urged by counsel for appellant that the legal title conveyed by the register’s deed to H. C. Higman passed eo instanti to John Higman by virtue of the words •“bargain, sell and convey” contained in his mortgage. While these words operate as a warranty of title, by virtue of the statute, and under them a subsequently acquired title by the grantor, as a rule, will enure to the benefit of the grantee, they cannot operate to displace or impair an outstanding lien or claim in a third person.

The decree, of the chancellor overruling the demurrer and motion to dismiss the bill for want of equity must be affirmed.

Affirmed.