Stollenwerck v. Marks

65 So. 1024 | Ala. | 1914

ANDERSON, C. J.

A determination of this case is dependent largely, if not entirely, upon a construction of the contract marked Exhibit B to the bill of complaint as modified by a subsequent agreement marked Exhibit 0 to the said bill of complint, and which will be set out by the reporter. As we construe Exhibit B, it created no debt from Marks & Gayle to Stollenwerck; there is nothing in it that obligates Marks & Gayle to pay Stollenwerck the sum paid out by him as the purchase price the property or to render them legally bound to him to pay the same or any part thereof. It seems that Marks & Gayle were unable to consummate the contract of purchase with Abraham Bros., except with the assistance of Stollenwerck, who financed the deal. The money was not borrowed from Stollenwerck, and there is nothing in the entire'transaction which obligated Marks & Gayle as a partnership, or individually, to repay Stollenwerck the sum of $41,000, the consideration paid-by him for the proeprty. The agreement simply authorized Stollenwerck to buy the property instead of Marks. & Gayle, and to pay for same without being-reimbursed or repaid by said Marks & Gayle, with the understanding that if Stollenwerck sold the property within three years for a profit the said profit was to be divided with said Marks & Gayle. It is true that Marks & Gayle obligated themselves to repay Stollenwerck the difference between $41,000 and any less sum for which he should sell the property within three years at their request, but this was ho unconditional promise on their part to guarantee the reimbursement of the said Stollenwerck, as he could not sell the property for less, except with their consent and approval, and if Stollenwerck did not sell the property within three years, which was entirely optional with him, the property was his, subject to the right of Marks & Gayle to repurchase same. Therefore there is nothing about the transaction which obligated Marks & Gayle to repay Stollenwerck the said $41,000, or to convert the conveyance into a mortgage as a mere security for a debt owing from Marks & Gayle to Stollenwerck.

Piad Stollenwerck sold the property during the three years for less than $41,000 without the consent of Marks & Gayle, and which he had the right to do, they were not liable to him for the difference. Indeed they were not liable to him for any of said $41,000, except in the one event that he sold the property during the said three years for less than said amount upon the written request of said Marks & Gayle. It may be true that Marks & Gayle obligated themselves to account for the difference between the net rent and the interest, taxes, paving, etc., during the said three years within which the property might be sold for the joint benefit of all the parties, but this was a mere condition to keeping the agreement alive, and was in no sense a debt to be secured by the agreements or for which the property was to be held as a security, as there was no provision for the unconditional payment or collection of same, the penalty for nonpayment being only a forfeiture of the right under the contract to share in the profits of a sale should same be made within said 3 years, or to re-purchase within 30 days after the expiration of said period in case np sale was made. Nor did the modification, Exhibit G, make the transaction a security or constitute the conveyance a mortgage; it merely added $3,000 due by Gayle, as trustee, to the $41,000 as the purchase price and which was to be included in the amount to be first deducted in case of a sale of the property before a division of the profits. There was nothing about the transaction to indicate that the said Stollenwerek would have any recourse on Marks & Gayle for the $41,000 or the $44,000, or that the conveyance should stand as a security for same. It was but a purchase by Stollenwerck of the property with the understanding that, if Marks & Gayle paid interest, taxes, pavement, etc., during the three years in excess of the net rents, Stóllenwerck would divide the net profits with them in case of sale or let them repurchase the property for a certain price within 30 days if no sale was made, and, as a part of the consideration for the modified agreement and the exchange of' the property and the increased amount for the repurchase, it was agreed that the $3,000 due from Gayle, as. trustee, should be added to the original consideration of $41,000, subject to the terms and considerations of the original agreement. Marks & Gayle did not undertake to pay this $3,000, nor did they owe Stollenwerek- the original $41,-000; he simply paid that sum to become the purchaser instead of Marks & Gayle upon the condition that if they kept the interest, taxes, etc., within the rent during the three years he would divide the profits with them in case of a sale by him or that they might repurchase if no sale was made. The only condition whatever upon which Marks & Gayle should become liable for any part of the $44,000 was in the event that Stollenwerek would at their request sell the property for less than said amount. They did not thereby become indebted to Stollenwerek so as to become personally liable to him for any residuum of tbe $44,000, if upon a foreclosure the property did not yield a sum sufficient to pay the sum in full. The only possible theory upon which they could have become indebted was in the case Stollenwerck made a sale of the property at their request during the three years, but which was, even in that event, optional with Stollenwerck, and,- this event never having happened, the said Marks & G-ayle are not, and have never been, indebted to Stollenwerck for said sum so as to create the relation of debtor and creditor and which is essential to fix the status of mortgagor and mortgagee.

“One of the distinguishing tests by which to determine whether an instrument is a mortgage, or a sale with the privilege of repurchasing, is the existence or nonexistence of a debt to be secured. If there be no debt due from the grantor to the grantee, there can be no mortgage. The idea of a mortgage without a debt to be secured by it is a legal myth in our system of jurisprudence.”—Nelson v. Wadsworth, 171 Ala. 603, 55 South. 120; Vincent v. Walker, 86 Ala. 336, 5 South. 465; Donglass v. Moody, 80 Ala. 61.

“A mortgage is, in equity, a hypothecation or pledge of property for the security of a debt. There must be a debt, or there can be no security for its payment. Hence it is said, if there is no debt, there can be no mortgage. Debt, in this connection, means a duty or obligation to pay, for the enforcement of which an action will lié.”—McKinstry v. Conly, 12 Ala. 678; Haynie v. Robertson, 58 Ala. 37.

“It is a necessary ingredient in a mortgage that the mortgagee should have a remedy for his debt against the debtor. * * * The effect of a mortgage * * * is to leave on the mortgagor a personal liability for the residuum of the debt, if, on foreclosure, the property mortgaged fails to yield a sum sufficient to pay it in full.”—Peeples v. Stolla, 57 Ala. 58.

Applying this well-established rule to the case at bar, we hold that the city court erred in holding that the relationship of mortgagor and mortgagee existed between Stollenwerck and Marks & Gayle. Our conclusion can well be rested upon a proper construction of the written agreement above mentioned, but, should we have to look to the extraneous proof, the weight of same strengthens the theory that Stollenwerck was a conditional vendee, and not a mortgagee.

The decree of the city court is reversed, and one is here rendered holding that the conveyance in question was not intended as a mortgage, and denying the complainants the right to redeem the property, and, as the complainants were denied relief under the other theory of their bill and from which they took no appeal, the bill of complaint is dismissed.

Reversed and rendered.

Mayfield, Somerville, and de Graffenried, JJ., concur.