Sledge, McKay & Co. v. Obenchain

Cooper, J., delivered the opinion of the court. On the twenty-fifth day of Juue, 1877, A. S. Brown was the owner of certain lands in Grenada County, and on that day executed a mortgage thereon to Sledge, McKay & Co., to secure a debt of $4,500 due to them. On the sixth day of November, 1877, Brown conveyed these, with other lands, and eight mules, to his wife, Jeannette Brown, and the conveyance was duly recorded, the consideration being a credit of $5,000 given by her on a note for $11,000 executed by her husband on the preceding day to-her, which note was executed in consideration of certain property of his wife’s received by him many years before from the estate of Mrs. Brown’s father. The deed recites the fact that Mrs. Brown accepted the conveyance of the land subject to the mortgage to Sledge, McKay & Co., and to other mortgages to other parties. On the seventeenth day of February, 1878, Mr. and Mrs.. Brown sold to their children, Frank S. Brown and Mrs. Obenchain, the mules named in the conveyance to Mrs. Brown,, and certain other personal property not necessary to be named,, and all the rents, issues, and profits of the lands mortgaged to-Sledge, McKay & Co., for the sum of $900, which sum the-purchasers were to pay to Sledge, McKay & Co. for account, of A. S. Brown. On the same day they executed a voluntary conveyance of the land to Mrs. Obenchain and Frank S. Brown; but the deed was not delivered, if at all, until October, 1878. On the eleventh day of June, 1878, there remained due and unpaid to Sledge, McKay & Co. the sum of $1,091.33 of the-mortgage debt, and A. S. Brown was then indebted to them, in the further sum of $2,144.16, which amount was unsecured. It was agreed between A. S. Brown and Sledge, McKay &, Co. that he should execute a note for both sums, to be due674 January 1, 1879, which was done. To secure this note, A. S. Brown and wife executed on that day (June 11,1878) a mortgage on the lands formerly mortgaged, and on the eight mules which she had received from her husband and had sold to her children, and all the crops to be raised on the lands mortgaged, during the year 1878, which she had also sold to her children. Sledge, McKay & Co., having no actual notice of these transfers of property by A. S. Brown, cancelled the mortgage executed on the 25th of June, 1877. A. S. Brown and his wife, Jeannette, died in the fall of 1878. After their death, Frank S. Brown paid, or caused to be paid, to Sledge, McKay & Co., from the proceeds of the crop raised on the mortgaged lands, the sum of $892.59 ; and before answer filed in this cause, Mrs. Obenchain tendered to them the sum of $7.41 in discharge and payment of the $900 which she and her brother had agreed to pay to them for account of A. S. Brown. Sledge, McKay & Co., by their bill, set up the facts connected with their dealings with A. S. Brown, and charge that they had no actual notice of the conveyance from him to his wife ; that said conveyance was made to hinder, delay, and defraud them; that Brown owed his wife nothing; and that the conveyance from Mr. and Mrs. Brown to Frank S. Brown and Mrs. Obenchain was both voluntary and fraudulent. They allege that administration on the estate of A. S. Brown has been granted in the State of Tennessee, and that the estate is insolvent; and pray that the deeds from A. S. Brown to Jeannette Brown, and from Mr. and Mrs. Brown to Frank S. Brown and Mrs. Obenchain, may be declared fraudulent and cancelled ; that the lands be subjected to the payment of this debt, or if this cannot be done, then that the mortgage executed June 25, 1877, may be reinstated and foreclosed for the amount due and unpaid on the debt thereby secured ; and also pray for general relief. On final hearing the chancellor dismissed, the bill, basing his ■decision, as is shown by the decree, upon the facts found by '.him, that complainants accepted the second mortgage with [675] notice of the conveyance from A. S. Brown to his wife, and that the first mortgage was thereby extinguished. We do not concur in the finding of the chancellor that the -security afforded by the first mortgage was extinguished by the dealings between complainants and Mr. and Mrs. Brown. It is a well-established principle that courts of equity, where there has been a mere change in the form of the indebtedness or security, and where the lights of innocent third persons are not affected, will keep alive the original security to enforce the very right and justice of the case. Thomson v. Hester, 55 Miss. 656 ; Cansler v. Sallis, 54 Miss. 446. The evident intention of complainants was to retain a security upon the identical property named in the first mortgage, to secure the identical debt thereby secured ; and the mere fact that a new mortgage was executed to secure that debt and another, and the old security surrendered, does not preclude them from insisting upon the security afforded by the original mortgage. But upon another equally well settled principle complainants were entitled to subject the laud for the payment of the balance due on the first mortgage debt. The conveyance from A. S. Brown to his wife, Jeannette, ■expressly conveys the land subject to the mortgage of complainants. It is true that because of Mrs. Brown’s coverture she could not incur any personal liability to the mortgagees, nor, perhaps, are the words of the conveyance sufficient to impose such personal liability; but, as between A. S. Brown and his wife, after the conveyance the land in equity is considered the primary debtor, and the obligation of Brown is in the nature of a security. As to the land, Brown occupied the relation of a surety, and if he had been compelled to pay the ■mortgage debt, he would have been considered as an assignee thereof and entitled to foreclosure. Cleveland v. Southard et al., 25 Wis. 479; 7 Paige, 248, 591 ; 2 Johns. Ch. 125; Waters v. Bossel, 58 Miss. 602. Mrs. Brown, being a married woman, was unable to bind, by mortgage or otherwise, the corpus of her estate to secure the [676] debt of her husband, but she had power to secure so much of the debt as was, before the execution of the mortgage, a lien on her estate. Nelson v. Miller, 52 Miss. 410. Complainants cannot in this proceeding subject the land to the payment of the $2,144.16, which was not secured by the first mortgage.. If the conveyance from Brown to his wife is valid, then the-death of Mrs. Brown operated to discharge her land from thepaymeut of this amount, which was and is the debt of her husband. Reed v. Coleman et al., 51 Miss. 835. If the conveyance was made to hinder, delay, or defraud the creditors of A. S. Brown, yet complainants are not in a condition to assail it; for, as to such conveyance, they are both subsequent encumbrancers and subsequent creditors with notice. The amount ($892.59) paid complainants by Frank S. Brown ought to be appropriated to the payment of that portion of the debt which bound the lands convejmd to Mrs. Jeannette Brown, and which were by her conveyed to defendants. Mrs. Brown, when she accepted the conveyance from her husband, took the land encumbered only with the debt then owing complainants, all of which, except the sum of $1,091.33, was paid by her husband before the eleventh day of June, 1878, when she executed the mortgage. On the 12th of February, 1878, she sold the mules and personal property to her son and daughter, in consideration of the payment by them to Sledge, McKay & Co. of the sum of $900 for account of A. S. Brown. At this time A. S. Brown owed no debt to-Sledge, McKay & Co. except the $4,500 moi’tgage debt, or so-much of it'as was then due and unpaid. It is therefoi’e evident that Mrs. Brown intended this payment to be applied to-the discharge of the debt for which her property was bound. But there is another and conclusive reason for requiring the appropriation of this payment to the balance due on the first mortgage debt, which is, that at the time (December 11,. 1878) when it was made there was no other demand which Frank S. Brown and Mrs. Obenchain could be called upon to-pay ; but this bound the land conveyed to them, and in addi [677] tion to that, they had personally assumed payment to the ■extent of $900. In this view of the rights of the parties, it is evident the tender made by Mrs. Obenchain was not of the amount for which complainants could subject the land. She tendered the ■difference between the amount paid by Frank S. Brown and $900, which he and she had agreed to pay in consideration of the sale to them of the personal property. Complainants •ought to be paid the difference between the sum paid by Frank S. Brown and the amount due on the debt secured by the first mortgage, and interest. The decree is reversed and cause remanded, for a decree in :accordance with this opinion.