Willingham & Cone v. Huguenin

Evans, P. J. (After stating the facts.) ' 1. When the statutory remedy of foreclosing a mortgage on realty is inadequate, the mortgage may be foreclosed in equity. May v. Rawson, 21 Ga. 461. The petition presents at least two . features calling for an equitable foreclosure. The first concerns matters between the mortgagor and mortgagee. The mortgagor840 is a non-resident and insolvent; the taxes on the property have not been paid; the mortgagee has defaulted in the payment of the interest on the incumbrance which he contracted to pay; the mortgagor refuses to repair the roof, and has permitted the building to fall into disrepair; and the mortgaged property is insufficient to pay the mortgaged debt. Under such circumstances, at the instance of the mortgagee, equity will preserve the Security and collect the rents and issues pending the foreclosure. The statutory remedy is inadequate to afford this relief. The other aspect of the case relates to the completeness of the relief by joining Willingham & Cone with the mortgagor as defendants. The mortgagor divided the debt secured by the mortgage into three notes, one of which was transferred by the mortgagee to Willingham & Cone. The holder of one of several notes secured by the same mortgage may proceed in the first instance to foreclose by suit in equity, but all the holders of notes secured by it must be brought before the court as defendants before a decree is made. 2 Jones on Mort. ■§1378. As said by Lord Talbot, “a court of equity in all cases delights to do complete justice, and not by halves.” It is best both for the holders of the notes and tlie mortgagor that the foreclosure sale shall remove the whole lien from the property, so that contemplating purchasers may bid with the assurance that the lien of thq mortgage will be entirely divested from the land. See Smith v. Bowne, 60 Ga. 484. 2. The petition was not rendered multifarious by the joinder of the holders of a transferred note with the mortgagor, because it set forth one connected interest among them all, centering in the point in issue in the cause. Conley v. Buck, 100 Ga. 187. In this connection it is immaterial whether the note of Willing-ham & Cone be preferred or postponed in payment to those held by 4he mortgagee. “The transfer of notes secured by a mortgage or -otherwise conveys to the transferee the benefit of the security. If more than one note is secured and the mortgagee transfers some and retains others, the holder of the transferred notes has a preference over the mortgagee if the security is insufficient to pay both.” Civil Code, §3684. In the absence of any special contract to the contrary, the indorsement of one of the notes by Iiuguenin to Willingham & Cone would give the latter a preference of payment, but would not forfeit the right of the other notes to be paid [841] out of the balance of the proceeds of the mortgaged property. But it is alleged that the note was transferred under a special agreement that the rule of preference prescribed by section 3684 should be reversed, and that Huguenin’s notes were to be first paid from the proceeds of the mortgaged property. The note which Huguenin indorsed to Willingham & Cone was payable to Huguenin’s order, and the indorsement was in blank. At common law the legal effect of such an indorsement could not be modified by a contemporaneous parol agreement, but our statute has changed the common-law rule. The Civil Code, §5209, provides that “Blank indorsements of negotiable paper may always be explained between the parties themselves, or those taking with notice of dishonor or of the actual facts of such indorsements.” Even if Willingham & Cone should be postponed in priority to Huguenin’s notes by special agreement, still they may look to the mortgage for payment of their note according to its priority. Hnder either view all the notes are secured by the mortgage, and their priority of payment depends on the special agreement as to the transfer of the ■note. In either event the holder! of all the notes are proper parties to the foreclosure proceeding. 3. There was no real conflict in the evidence. Huguenin owned a warehouse. Willingham & Cone were real estate agents. Huguenin consigned the sale of the warehouse to Willinghám & Cone, upon terms that he was to receive $7,000 net for the property. Huguenin was not to pay them any commission, but their compensation was to be the difference between $7,000 and the price the purchaser was to give for the property. The real estate agents found a prospective purchaser in one Elliott, of Calais, Maine. Elliott was unable to pay the cash, but offered to give $8,000 for the property as follows: pay $1,000 in cash, assume an existing incumbrance of $3,500, and give his notes for the balance, one for $1,000, due in sixteen months, one for $1,000 and one for $1,500, each due at two years and four months. Huguenin was to make Elliott, a deed to the property, and Elliott was to secure the deferred payments- by a mortgage on the property. Willingham & Cone submitted this proposition to I-Iuguenin, who agreed to accept the same on condition that he was to have the cash payment, and Willingham & Cone were to receive their compensation out of the last payment. The necessary papers to effectuate the trade [842] Avere prepared at the instance oJE Willingham & Cone, and carried by them to the home of Huguenin. Huguenin signed the deed. Willingham & Cone handed him a check for $1,000. Huguenin then gathered the mortgage, the check, and all the notes together and Avas about to place them in his pocket; whereupon Willingham reminded him that the $1,000 note belonged to him, and Huguenin handed it to him. Willingham then requested that Huguenin indorse it, which he did. Nothing more was said at the time. The litigants do not differ at all upon these facts. There are some variances as to the construction which each party placed upon them, but such are merely conclusions, and are of no probative value. The pivotal fact stands out in bold relief that Huguenin did not promise to pay any commissions for the sale of the property, and the real estate agents Avere to receive their compensation only after Huguenin realized $7,000. This feature of the trade runs through the whole transaction, and the circumstances of the indorsement of the note unmistakably indicate that, as it was payable to the order of Huguenin, his indorsement was not for the purpose of making himself liable, but to transfer the legal title to Willing-ham & Cone, to whom the note belonged under the contract, and. that Huguenin Avas first to receive from the mortgaged property the sum of $7,000. The mortgagor did not defend; and there Avas no error in directing a verdict foreclosing the mortgage, and providing that from the proceeds of the sale the mortgagee was to-be first paid, and that the transferee of the note be paid out of the surplus, if any. Judgment affirmed. All the Justices concur, except Holden, J., who did not preside.