Cook v. Parham & Blunt

BBICKELL, C. J. A mortgagee, taking a mortgage as security for a pre-existing debt, is not a bona fide purchaser for a valuable consideration, protected against prior equities of which he has no notice. — Boyd v. Beck, 29 Ala. 703. .But, if the mortgage is security for a debt presently contracted, the security enters into the consideration on which the credit is given, and the mortgagee will stand in the relation of a purchaser entitled to protection against equities of which he has no notice. In this case, a part of the consideration was a debt contracted presently, and a pre-existing debt, founded on a consideration of Confederate notes, which was reduced in amount to a sum agreed upon as their actual value, and the day of payment extended — in effect, the old debt was extinguished, and a new one created. The general rule, that priority in' point of time gives priority in point of right, prevails alike in courts of law and equity. The whole theory [461] upon which protection is afforded a purchaser, against prior equities of which he has no notice, is, that in reliance upon the legal title he has parted with a consideration of value, or divested himself of some legal right, or been induced to change his condition, so that a deprivation of the legal title would work him injustice. His equity, though younger in point of time, is equal in conscience to the older equity with which it may be intended to burden the legal estate. Courts of equity, therefore, refuse to interfere against him. The extinguishment of the pre-existing debt, not a mere change in its form; the creation of a new debt, founded on a new consideration, giving a new day of payment, brings the mortgagees in the relation of bona fide purchasers, who are entitled to protection against the resulting trust asserted by Mrs. Adams. — Schempert v. Dillard, 55 Miss. 361; 1 Jones on Mortgages, §§ 458-9. It is not necessary, therefore, to consider whether the evidence establishes the existence of the trust. The conveyance by the heirs or devisees of Scott, to Mrs. Adams, of the premises embraced in the mortgage to their ancestor, executed by Adams in 1849, would, in a court of equity, operate an assignment of the debt secured by the mortgage. — Welsh v. Phillips, 54 Ala. 309. Independent of that conveyance, there was a separate assignment of the debt. True, the personal representative does not join in the assignment. He had died before it was made; and it is but a fair presumption, when distributees or legatees are found controlling choses in action which were assets, in the absence of an administration, after the lapse of several years from the death of the ancestor, that their possession is rightful, and that they are clothed with the legal title. That title they can acquire by a transfer from the personal representative, or by a distribution in the Court of Probate. But, whether they had the legal title or not, their assignment would pass an equity, which would prevail, unless there were creditors whose rights were affected. No creditors are shown to exist, and it is not for a stranger to question the validity and effect of the assignment. There is no room for a presumption of payment of this debt. Judgment was obtained upon it in less than twenty years after its maturity, and payments were made upon it, which repel such a. presumption, though more than twenty years had elapsed before the filing of the cross-bill to foreclose it. The judgment having been rendered before the mortgage to the appellees, they are bound by it as privies of the mortgagor. — McClelland v. Ridgway, 12 Ala. 482; Crow v. Hudson, 23 Ala. 393. It was conclusive of the rights of [462] the parties, and fully determined all .defenses, whether of prior payments or otherwise, which could have been urged against the debt. — Mervine v. Parker, 18 Ala. 241; Burt v. Hughes, 11 Ala. 571; DeSylva v. Henry, 3 Porter, 132. A concession that the judgment was, by mistake, rendered for a larger sum than was due, would not avail the appellees, unless the finality and conclusiveness of the judgment was impaired. The admission of the mistake, and a consent to its correction, made and given by the attorneys of record, subsequent to the death of the plaintiff, was not within the line of their authority. The chancellor was, therefore, in error in not allowing the amount of the judgment as the mortgage debt. The liability of a mortgagee in possession for rents and profits, and his duty to apply them in reduction of the mortgage debt, may be admitted. But there is no room for considering Mrs. Adams as. a mortgagee in possession. Her possession was a mere continuation of that of her husband, and she was entitled to remain in possession, taking the rents and profits, until her dower was assigned, or there was a foreclosure of the mortgage. — Boynton v. Sawyer, 35 Ala. 497. There was error, therefore, in charging Mrs. Adams with rents. For the errors we have pointed out, the decree must be reversed, and the cause remanded. Stone, J., not sitting.