Northwestern Land Ass'n v. Harris

HARALSON, J. — There is no dispute as to what the North Alabama Improvement Company, the mortgagor grantor of Mrs. Julia C. Harris of a part of the mortgaged lands, owed Mrs. Robinson, as a balance on its mortgage debt to her, nor as to the amount Mrs. Harris and her husband, C. C.Harris, owed on their joint notes as a balance on the part of the land she bought from the Improvement Company, after the execution of its mortgage to Mrs. Robinson. The company owed, as ascertained by the register, $11,336.54, and Mrs. Harris, $5,750.78. The prayer of the bill is, that in foreclosing the mortgage the court should order the register “to sell, first, that part of the land embraced in said mortgage, which was not conveyed by the.said Improvement Company, and if this be insufficient to pay the balance, due on complainants’ debt, then sell the land conveyed to Julia C. Harris.” The original bill was amended, setting up that the Improvement Company, before the filing of the bill, sold and conveyed to the Northwestern Land Association, whatever right, title or interest it had in the mortgaged lands, except that part sold to Mrs, Harris, and the prayer was amended, asking that the lands sold to the Association be first condemned to sale for the satisfaction of the mortgage indebtedness. The Improvement Company, making its answer a cross-bill, prayed in substance, that the lands sold to Mrs. Harris be first sold, and the proceeds applied towards the payment of Mrs, Robinson’s mortgage debt, [474] before resorting to the remainder of the lands in the ownership of the Improvement Company, not conveyed to Mrs. Harris ; and that judgment be rendered against Mrs. Hams and her husband, C. C. Harris, for any deficit remaining unpaid on their debt,"after the sale of the portion of the land sold to Mrs. Harris, &c. The chanceiy court dismissed the cross-bill on demurrer, and decreed foreclosure and sale in conformity with the prayer of the bill, adopting the theory in such cases, that the land should be sold in the inverse order of alienation. We cannot do better, than to state the principles governing the case, as they have been stated by Mr. Pomeroy, supported apparently by the decisions of the courts of all the States, including our own, except, perhaps, the courts of Kentucky and Iowa, viz. : “Whenever the mortgagor has conveyed separate parcels of the mortgaged premises by warranty deeds to successive grantees, and there are no special provisions in any of the deeds, and no other dealings between themselves, or with the mortgagor,, which disturb the equities otherwise existing, a priority results, depending upon the order of conveyance. As between the mortgagor and all the grantees, the parcel in his hands, if any, is primarily liable for the whole mortgage debt, and should be exhausted before having recourse to any of theirs; as between the grantees, their parcels are liable in the inverse order of their alienation, any parcel chargeable first in order must be exhausted before recourse is had to the second.” — 3 Pom. Eq. Jur., § 1224; 2 Jones on Mortgages, § 1620; P. & M. Bank v. Dundas, 10 Ala. 661; Mobile &c. Ins. Co. v. Huder, 35 Ala. 713 ; Relfe v. Bibb, 43 Ala. 519 ; Wallace v. Nichols, 56 Ala. 321; Dacus v. Streety, 59 Ala. 183 ; Prickett v. Sibert, 75 Ala. 319; Aderholt v. Henry, 87 Ala. 418. In the same section referred to, Mr. Pomex’oy states the reason of the rule to be, that “the form of the deed shows that the grantee not only assumed payment of no portion of the, mortgage debt, but did not buy his parcel even subject to the mortgage ; and the entire burden was, therefore, left upon the portion of land remaining in the ownership of the mortgagor. Whatever, be the rights of the mortgagee to resort to either or both of the parcels, it is plainly the equitable duty of the mortgagor to assume [475] the whole debt, and thus to free the grantee’s parcel from the lien.” But, there are circumstances which disturb these equities and defeat this rule.. The same learned author upon this subject observes, that the doctrine just stated “is one of purely equitable origin, and is not an absolute rule of law, and if the purely equitable reasons on which it rests are wanting, it ceases to operate.” In the case from this court last cited, — 87 Ala.-, it is said: “Generally, the rule may be invoked whenever the alienee has a right, as against the common vendor, to have the parcel bought and paid for by him, free from the incumbrance.” If the alienee has no such right, the rule would, of course, not apply. . In the mortgage of the Improvement Company to Mrs. Robinson, appears the following, as one of its conditions : “And upon the further condition, that in the event the North Alabama Improvement Company shall sell any portion of the above described lands, the party of the second part, Joanna S. Robinson, upon the payment to her of the purchase money for such portion so sold, will release such portion from the mortgage, and credit the above described notes with the amount so paid.” This mortgage was duly recorded, and Mrs. Harris had notice of its provisions. It is averred in the answer and cross-bill of the company, and not denied, that the one-third cash payment for the lands sold to Mrs. Harris, — amounting to $4,333.33, — was paid to Mrs. Robinson, and the two notes given to the Improvement Company, for the balance, by her and her husband, C. C. Harris, each for $4,383.33, and dated on the date of the sale to her, one payable' twelve months, and the other two years after date, and each containing the statement of its consideration to be, “for deferred payment on the property purchased, as per deed executed this day, ’ ’ were indorsed to Mrs. Robinson and her husband, by the Improvement Company. On these notes, Mrs. Harris made several payments at different times, sufficient to reduce her and her husband’s debt at the date of the register’s report, to $5,750.78. The evident intention of the condition in the mortgage was, that, in case of sale of a part of the land mortgaged, the mortgagor might get the benefit of the proceeds arising from such sale when paid, to be applied [476] in extinguishment of its own indebtedness to Mrs. Robinson, and to that extent, in ease or exoneration of the mortgage incumbrance on the part of the lands remaining in its ownership. The payments made by Mrs. Harris to Mrs. Robinson, and the transfer to her of the two notes of Mrs. Harris and her said husband, for the balance due by her on the purchase, and the subsequent payments made on these notes, all of which went as payments on the mortgage debt, evidence such an intention as understood by all the parties. The deed of the Improvement Company to Mrs. Harris is not shown to have contained a warranty of title, and even if it did, the equities between her and her vendor would be preserved according to their dealings. Not having paid the whole, but the larger part of the purchase money, the obvious equity of the transaction between her and her vendor is, to take the case from under the operation of the rule in respect to a sale first of the land remaining in ownership of the mortgagor, and afterwards a sale, if necessary, of that of the vendee of the mortgagor, and require the sale first of the lands sold to the vendee, Mrs. Harris, and afterwards a sale of the balance for anything that may remain owing on the mortgage to Mrs. Robinson. Mi’s. Harris still owes the debt, and ought to be required to do all she undertook in the beginning for the purposes intended. Her rights will thus be preserved as fully as she undertook to contract for them, and the land remaining in the ownership of the Improvement Company allowed to stand subject to sale under the mortgage, unless the balance due thereon is paid by the company, which, in its cross-bill, it offers to do. A decree to this effect, will accomplish just what the parties started out to do, and what would have been done, if each had carried out his undertaking. When the lands of Mrs. Harris have been sold, the proceeds of the sale applied to the mortgage debt will extinguish her debt, pro tanto. If the land should not sell for a sum sufficient to pay the balance she and her husband owes, as it has been ascertained, they, of course, would be liable on their notes for such balance remaining unpaid, to whoever may be the owner of the notes. They are now held, as shown, by Mrs. Robinson, merely as collateral security to her debt from the Improvement Company. [477] The court erred in sustaining the demurrers to the cross-bill and in the decree rendered for the sale of the lands. The appellant, the Northwestern Land Association, succeeds, as is shown, to the rights and equities of its vendor, the North Alabama Improvement Company, in the lands conveyed by said company to it. Reversed and remanded.