Preston & Co. v. Ellington

BKICKELL, O. J.' — The main question in these cases, which grow out of the same transactions, and in which the same parties are interested, may be thus stated : First, whether the lien of a vendor of lands, for the payment of the purchase-money, is extinguished if he transfers the notes given for the purchase-money, the nature and character of the transfer excluding his liability for the ultimate payment of the notes? If, after such transfer, without the intervention of a new consideration, the assignor, to enable the assignee to enforce the lien on the lands, indorses the notes in terms which ■ impose upon him a liability for their ultimate payment, in the event the holder exercises due diligence to recover of the maker, and fails, can the assignee enforce the lien ? Can the legal effect of the indorsement be varied by parol evidence of an agreement, contemporaneously made, that the vendor should not be made personally or pecuniarily liable for the payment of the notes ? [138] Prior to the statute approved February 13th, 1879 (Pam. Acts 1878-9, p. 171), which was subsequent to the present transaction, promissory notes, or other evidences of debt, given for the purchase-money of lands, when assigned, did not pass to the assignee the right to enforce the equitable lien of the vendor, if the assignment were of such nature aud character that he had no interest in the recovery of the debt, and would not sustain loss if it-was unpaid. — Bankhead v. Owen, 60 Ala. 457. The principle underlying the decisions asserting this, doctrine was, that the equitaiole lien of a vendor who had made a conveyance of lands, the purchase-money not being paid, and an independent security for its payment not having been taken, was a trust chargeable upon the lands for the security and indemnity of the vendor, raised and enforced by a court of equity, because one man ought not in good conscience to get and keep the lands of another without paying the consideration money. The trust was raised only for the security and indemnity of the vendor ; and it was upon a principle of subrogation that an assignee, claiming through him, was entitled to enforce it. The trust arising by construction or operation of law, for the personal indemnity of the vendor, a transferree, or assignee, was not subrogated to it, when subrogation was not necessary for the protection of the vendor. — Bankhead v. Owen, supra; Hall v. Click, 5 Ala. 363; Grigsby v. Hair, 25 Ala. 327. The trust or lien, however, was not • discharged or extinguished by the assignment. The assignee had not an equity to enforce it, but it remained, as it was in its original creation, a trust or security for the payment of the purchase-money to the vendor; and if he subsequently acquired the notes, it was as capable of enforcement as if he had never parted with them.- — Bankhead v. Owen, supra; Green v. Demoss, 10 Humph. 371; Page v. Green, 6 Conn. 338; Lindsey v. Bates, 42 Miss. 397; Cotten v. McGehee, 54 Miss. 570. "We do not, therefore, assent to the proposition, which seems to be the basis of the chancellor’s decree, that the original transfer of the notes by the vendor by delivery only, not imposing upon him liability for their payment, discharged or extinguished the lien upon the lands. The lien was merely suspended, while the notes remained in the hands of the assignee or transferree,. who had not capacity to enforce it. .The subsequent indorsement of the notes by the vendor in writing is, in terms, a transfer of the legal title, and is a contract of specific legal, import — a contract by which the vendor binds himself to pay the notes, in the event the transferree, after .the exercise of the diligence the law prescribes, was unable to obtain payment from the makers. A transfer of this character, it can not be questioned, clothes the transferree [139] with full capacity to enforce the lien upon the lands for the payment of the notes. The original transfer may not have involved the vendor in liability for the payment of the notes, and no new consideration may have intervened for the subsequent indorsement. Whether the want of a consideration for the indorsement can be made the subject of inquiry, when the transferree is seeking only the enforcement ■ of the lien upon the lands, and not the fixing upon the vendor a personal liability, it is not necessary now to consider. The subsequent indorsement was intended by the parties as an alteration or modification of the original, rather than as the making of a new contract. Before or after the consummation of a contract, the parties may alter, rescind or modify it; and to support the alteration, modification or rescission, it is not necessary that a new consideration should intervene. The mutual agreement of the parties supports it. — 1 Brick. Dig. 394, § 233. If the consideration of the indorsement were now a matter upon which the rights of the parties were dependent, there is no reason for doubting that it is adequate. The indorsement, as we have said, is, of itself, a contract of specific legal import; and there is no principle upon which it can be varied or altered by evidence of contemporaneous verbal agreements or stipulations which the parties did not incorporate into it. It may be conceded the evidence shows that the purpose of the indorsement was merely to enable the transferrees to enforce the lien upon the lands, and that it was verbally agreed the vendor was not to be bound personally for the payment of the notes. It has long been settled by the decisions of this court, that the indorsement of a promissory note by the payee, whether in full or in blank, is a contract having a defined legal operation and effect, which can not be varied by parol evidence.' — 1 Brick. Digest, 301, § 699; Day v. Thompson, 65 Ala. 269. The indorsement of the notes operating as an assignment, pro tanto, of the lien upon the lands, entitled the assignee to payment in priority of the note retained by the vendor, though it was in point of time first due and payable. This has been settled by repeated decisions of this court, and is the general doctrine applicable to mortgages and collateral securities for the payment of debts. The assignment of the debt, when absolute and unconditional, is an assignment pro tanto of the mortgage or other security; and if the fund arising from the mortgage or other security is not sufficient to pay the entire debt, the assignee has a preference over the assignor.— Cullum v. Erwin, 4 Ala. 252; Nelson v. Dunn, 15 Ala. 501; Grigsby v. Hair, 25 Ala. 327. The vendor, Daniel, after the indorsement of three of the notes, retaining one of them, was in the [140] relation of a subsequent incmnbrancer. The only right he could assert was to be let in to redeem, upon payment of the notes indorsed, or to take the surplus of the proceeds of the sale of the lands remaining after satisfying the notes. A redemption is not claimed; nor is the fairness or regularity of the sale made under the decree of ,the court, in the suit by the appellants for the enforcement of the lien, assailed; nor is the price bid for the lands alleged to be inadequate. The only right which Daniel could assert was a right to the surplus of the proceeds of. the sale remaining after satisfying the decree in favor of the appellants'. A petition filed in that cause, while the fund was under the control of the court, was the proper mode of asserting the right. The right of Daniel to the surplus is, of course, superior to any claim Steiner, MeG-ehee & Co., as assignee of the Ellingtons, can claim. There is no event in which they would be entitled, unless there was a surplus of the proceeds of sale remaining after satisfying the whole purchase-money and the costs of suit. We perceive no reason for setting aside the sale of the lands, or for withholding confirmation of it, and ordering a conveyance to be made to the purchaser. The result is, the decrees of the chancellor must be reversed, and decrees here rendered in conformity to this opinion.