Opinion
7 Div. 785.
May 17, 1928. Rehearing Denied June 7, 1928.
Appeal from Circuit Court, Calhoun County; W. B. Merrill, Judge.
Rutherford Lapsley, of Anniston, and Dorsey, Howell Heyman, of Atlanta, Ga., for appellant.
Appellant having expressly agreed to payment and cancellation of its mortgage, appellant's intervening lien of mortgage, of which appellee had notice, became first lien on the property. Wiley v. Boyd, 38 Ala. 625; Barnett Jackson v. McMillan, 176 Ala. 430, 58 So. 400; Hopkins v. Jordan, 201 Ala. 184, 77 So. 710. This record shows an express novation of the original contract between appellee and mortgagor. Hopkins v. Jordan, supra. Conveyance of the premises by the mortgagor to the mortgagee effects a merger of the two estates, vests the mortgagee with complete title, and puts an end to the mortgagee's rights under the mortgage. To prevent merger, it must appear that such was the intention of the conveyance. 27 Cyc. 1378-1382. In taking the deed, appellee was bound by the notice afforded by the record of appellant's mortgage. Alexander v. Welch, 10 Ill. App. 186.
Chas. D. Kline, of Anniston, for appellee.
The lien of the appellee's mortgage was not merged in the fee-simple title. 19 R. C. L. 484. Appellant has now, as it had before, the right to redeem. Grace v. Montgomery, 209 Ala. 386, 96 So. 430; McAllister v. Catchings, 210 Ala. 392, 98 So. 303; Cunningham v. House, 212 Ala. 557, 103 So. 578.
The general essentials of a novation have been recently declared by this court. It involves three or more parties, and consists of four requisites, viz.: (1) A previous valid obligation; (2) the agreement of the parties to the new contract; (3) the extinguishment of the old contract; and (4) the validity of the new contract. Hopkins v. Jordan, 201 Ala. 184, 77 So. 710; J. F. Morgan Paving Co. v. Carroll, 211 Ala. 121, 99 So. 640.
In the recent case of Woodruff v. Satterfield, 199 Ala. 477, 74 So. 948, it was declared that one who advances money for the discharge of a prior lien will be substituted in such superior rights by way of the rule of subrogation. The superior claim will prevail to the extent of its seniority.
A mortgagee or his assignee, in taking a deed from the mortgagor in lieu of foreclosure of the equity of redemption, is subordinated to the record notice that the junior mortgagee had the right of redemption within the two-year period. McAllister v. Catchings, 210 Ala. 392, 98 So. 303; Cunningham v. House, 212 Ala. 557, 103 So. 578; Grace v. Montgomery, 209 Ala. 386, 96 So. 430.
The foregoing are in harmony with the rule that one, having a mortgage on real estate, becoming the owner of the fee, ordinarily the result is a merger; yet it is a qualification thereof (1) if the intention of the parties was to keep alive the mortgage, or (2) if it is to the interest of the mortgagee to do this, or (3) necessary to his protection, and (4) this can be done without prejudice to the rights of the mortgagor or third parties as between such original parties the doctrine of merger will not apply. Cullum v. Emanuel, 1 Ala. 23, 34 Am. Dec. 757; Hamilton v. Robinson, 190 Ala. 549, 67 So. 434; 19 R. C. L. p. 484, § 276, and authorities.
That is to say, in a court of equity, a merger will not be allowed where it would work injustice, and thereby violate well-established principles of equity and the intention of the parties. 41 C. J. p. 776, §§ 870-872; Cullum v. Emanuel, 1 Ala. 23, 34 Am. Dec. 757; Woodward v. Clegge, 8 Ala. 317; Fawcetts v. Kimmey, 33 Ala. 261; Knighton v. Curry, 62 Ala. 404; White's Adm'r v. Life Association of America, 63 Ala. 419, 35 Am. Rep. 45; Gresham v. Ware, 79 Ala. 192; Hamilton v. Robinson, supra. This is rested upon the presumption that, in the absence of proof to the contrary, one intends what will best accord with his rightful interest, and what is necessary to protect that interest without violating the superior rights of other parties. Boatright v. Fennell, 213 Ala. 10, 104 So. 1; Gresham v. Ware, 79 Ala. 192, 196, 197; Stover v. Herrington, 7 Ala. 142, 41 Am. Dec. 86.
In Boatright v. Fennell, 213 Ala. 10, 104 So. 1, it is declared that intervening right or interest of the mortgagee to keep title distinct will prevent a merger of the legal and equitable title; that equity will not destroy the prior lien acquired by the subsequent holder of the legal title, if there is any lawful reason for keeping the prior equity or lien alive and not merged. Barnett Jackson v. McMillan, 176 Ala. 430, 58 So. 400; 2 Pom. Eq. Jur. (3d Ed.) § 791, p. 1401, § 793, p. 1405; 1 Jones on Mortg. (6th Ed.) p. 893, § 848; 41 C. J. p. 779, § 874; 19 R. C. L. p. 484, § 276 et seq.
Mr. Justice Somerville declared that, on principles of public policy, an agreement between mortgagor and mortgagee for the sale or release of the equity of redemption, entered into contemporaneously with the execution of the mortgage, will be set aside by a court of equity; that subsequent contract to that effect will be sustained, if not tainted by fraud, and found on consideration not grossly inadequate; and, where no time is stated in the agreement for redemption, two years will, by analogy, be held a reasonable time. Stoutz v. Rouse, 84 Ala. 309, 4 So. 170; Coleman v. Coleman, 173 Ala. 282, 55 So. 827; Savage v. Bradley, 149 Ala. 169, 43 So. 20, 123 Am. St. Rep. 30; Dinkins v. Latham, 202 Ala. 101, 79 So. 493.
With this understanding of the general rules of law having application, or incidentally for consideration in this decision, it should be said that the purpose of the original bill was for enforcing, on the land embraced in several conveyances, an alleged prior lien in favor of complainant, a second or intervening lienholder. It is alleged in the bill that defendant (appellee) had sold the lands in 1924, retaining a purchase-money lien, and thereafter, the following year, complainant took a mortgage from such purchasers and owners, and duly recorded the same, and the defendants took a deed from mortgagor to the property (in 1927) reciting as the true consideration:
"The cancellation of the mortgage debt that the said Edna J. Goodlett is due the party of the second part, in her purchase of the hereinafter described property from the party of the second part."
The right of the complainant's intervening mortgage is not superior to the title claimed by the Anniston Land Company, and the A. M. Robinson Company, corporation, is not entitled to enforce the same as a superior lien, interest, or title in and to said lands for the balance due upon its subsequent or third mortgage under the prayer of the bill to that end. It is noted that no question of redemption is incorporated in the pleading, and that the accounting sought was for payment on complainant's alleged superior title or claim in the land. The decree sustaining demurrers to the bill is in accord with the law on the subject obtaining in this jurisdiction.
The decree of the circuit court in equity is affirmed.
Affirmed.
ANDERSON, C. J., and SOMERVILLE and BROWN, JJ., concur.