Welsh v. Phillips

BRICKELL, C. J. The question most fully discussed by counsel, and which, we suppose, controlled the judgment of the circuit court, the effect and operation of a conveyance absolute in form and terms, by a mortgagee in possession of the mortgaged premises, without an assignment or transfer of the mortgage debt, has not been the subject of express adjudication in this court. In Duval v. McLoskey, 1 Ala. 737, the court, citing the decisions in New York which hold a transfer of an interest in the mortgaged premises without an assignment of the debt, is a nullity — the mortgage being a mere incident to the debt, and adopting them as correct expositions of the law, say nevertheless: “In concluding that a mortgagee can not assign the right to the mortgaged property without also assigning the debt to which it is an incident, we do not desire to be understood as intimating that it is incompetent for the mortgagee to relinquish, by contract, the possession to a third person, at any time, until the debt is paid.” Whether a mortgagee may by an assignment to a stranger of the mortgage, or by a conveyance of the premises, unattended by a transfer of the mortgage debt, pass the legal estate, is a question on which the authorities in this country [314] are in irreconcilable conflict. In'New York, New Hampshire and some other Slates which have followed their decisions, such a conveyance or assignment would be void, and one entering under it would be a trespasser as against the mortgagor. In other States, the assignment or conveyance, if in proper form to pass an interest in real estate, is treated as a conveyance of the legal estate, passing to the assignee or grantee, the right of the mortgagee to enter. — 2 Wash. Real Prop. § 4, ch. 16. The correctness of the one decision or the other, depends on the theory of a mortgage which may prevail. If it is regarded as a mere security for a debt, a chattel interest, until foreclosure, the mortgagor continuing the real owner of the fee, an assignment of the mortgage or a conveyance by the mortgagee of the premises, not intended, and incapable of operation as a transfer of the debt, may be treated as void, not passing any estate or interest in land. That, however, notwithstanding what is said in Duval v. McLoskey, supra, is not the theory of a mortgage which the current of our decisions has recognized, and by which they have been controlled. A mortgage is more than a mere security for a debt- — it creates a direct, immediate estate in land- — -a fee simple, unless otherwise expressly limited. The estate is conditional — annexed to the fee is a condition which may defeat it. The mortgagee, if in the conveyance there is not a reservation of the possession to the mortgagor, until default in the performance of the condition, has the immediate right of entry, and may eject the mortgagor or his tenants. — Duval v. McLoskey, supra. If the mortgagor is permitted to remain in possession, he is the mere tenant at will of the mortgagee. After the.law day, and default in the performance of the condition, at law the estate is absolutely vested in the mortgagee — the fee is freed from the condition annexed to it. Nothing remains in the mortgagor but the equity of redemption, of which courts of law take no notice. Paulling v. Barron, 32 Ala. 11; Barker v. Bell, 37 Ala. 358. Before default, all that remains in him, is the right to perform the condition and thereby restore his original estate. An assignment of the mortgage debt, without an assignment of the mortgage, will not pass the legal estate, that remains in the mortgagee in trust, an equitable security for the payment of the debt. In Center v. P. & M. Bank, 22 Ala. 751, it is said the mortgage is but an incident and passes in equity to the assignee of the debt.' But, the legal estate resides in the mortgagee until the mortgage is assigned. In Graham v. Newman, 21 Ala. 498, it is said, the assignment of a mortgage debt operates in equity an assignment of the mortgage, entitling the assignee to use the name of the mortgagee to enforce [315] the mortgage at law. If not only the debt, but the mortgage also is assigned, the legal title passes to the assignee, and. he may at law proceed in his own name. If the mortgage is of land, to pass the legal estate there must be a deed from the mortgagee to the assignee, “either on a separate paper or endorsed on the mortgage deed, with suitable words to convey the thing itself.” On a bill to foreclose, the mortgagee in possession having died, the heir to whom the legal title has descended, is an indispensable party, that the legal title may be bound by the decree.—Huggins v. Hall, 10 Ala. 283. In a court of law nothing less than payment, or something equivalent to payment of the mortgage debt, a release in writing of the mortgage, or a reconveyance, operates a divestiture of the legal estate of the mortgagee.—Barker v. Bell, supra; Powell v. Williams, 14 Ala. 476. It is not settled in this State that payment of the debt after the law day, without reconveyance from the mortgagee, will restore the fee to the mortgagor; and in Collins v. Robbinson, 33 Ala. 91, the court refrained from determining whether, after payment, the mortgagee not having reconveyed, could maintain ejectment. It is manifest that our decisions have regarded mortgages as of a dual character — a conveyance of an estate in lands — and a security for a debt; bearing one character in a court of law and another in a court of equity. At law it is a conveyance of an estate in lands, with a condition annexed which may defeat it. It comprehends the entire fee, leaving the mortgagor the right, on the performance of the condition, to restore himself to his original estate. This right, as between mortgagor and mortgagee, is not property, but matter of jurisdiction, and if it is not exercised to the day it is lost. In equity it is a'security for a debt, passing as an incident with the assignment of the debt, as any security for its payment would pass. The mortgagor has an equity of redemption, a right to perform the condition, on making compensation to the mortgagee, which is regarded as an estate in lands, separate from the legal estate, alienable or transmissible by descent or devise. It would not comport with this theory, now too firmly engrafted in our law to be controverted, to assert that a conveyance by the mortgagee, though not operating an assignment of the mortgage debt, does not pass the legal estate. However this may be, it can not be doubted that a mortgagee in actual possession, as was John S. Welsh when he conveyed to Nicholas Welsh, may convey to a stranger,' and his conveyance, if expressed in proper terms, will pass the possession, enabling the grantee to hold and defend against all who can not show a superior title.—Smith v. Smith, 15 N. [316] H. 55; Wallace v. Goodall, 18 N. H. 439; Hinds v. Ballou, 44 N. H. 619; Givan v. Doe, 7 Blackf. 210. The conveyance employs the statutory words, “grant, bargain, sell,” declared when it was made to import an express covenant that the grantor was seized of an indefeasible estate in fee simple, freed from incumbrances done or suffered from the grantor, and for quiet enjoyment against the grantor, his heirs or assigns.—Clay’s Dig. 156, § 31. The operation of this conveyance was to pass not only the present interest of John S. Welsh, the mortgagee, which was an estate in fee simple debased by the quality annexed in its creation, but the pure fee simple accruing from the failure of the mortgagor to perform the conditions on the day appointed. Such a conveyance by a mortgagee operates not only a conveyance of the land, but an equitable assignment of the debt, to which the interest of the grantor in the lands may be said to be incidental.—Ruggles v. Barton, 13 Gray, 506; Hunt v. Hunt, 14 Pick. 382; Connor v. Whitmore, 52 Me. 186. If the fee of John S. became perfect at law, freed from the conditions annexed by the failure of the mortgagor to pay the debt, it would have enured to his grantee, and he would have been estopped from setting it up against him. A breach of the covenants of the conveyance can be avoided only by treating it, as it imports to be, a-transfer of the grantor’s interest in the lands, and of all he had necessary to render the conveyance operative and effectual. In the conveyance both mortgagor and mortgagee join, and the conveyance is direct to the mortgagor in trust for the separate use of his wife during her life, remainder over to her children, and the mortgagor covenants .that he will accept the trusts and carry them into effect. The general rule of law is, that when a greater and less, or a legal and equitable estate, meet and coincide in the same person, they are merged, the one drowned in the other.—2 Wash. Real Prop. 180; 4 Kent, 108. After this conveyance, the estate of mortgagor and mortgagee was an impossibility — the union of the two estates in Nicholas Welsh rendered it incompatible for him to sustain such different relations. At law, this rule is inflexible, but in equity it depends on the intention of the parties. The merger takes place though the two estates may be held in different rights — the one in his own right and the other en autre droit.—4 Kent, 110; Clift v. White, 15 Barbour, 71; Forbes v. Maffutt, 18 Vesey, 384, (note). The operation of this conveyance was to unite in Nicholas Welsh as trustee the entire estate of mortgagor and mortgagee, and on the death of Mrs. Welsh all active duties of the truátee terminated and the objects of the trust were fully accomp [317] lished. The estate then devolved on the appellants, in whom the legal and equitable estate, united. The • court erred in the charge given, and the judgment must be reversed and the cause remanded.