Opinion
1 Div. 902.
January 23, 1936. Rehearing Denied March 19, 1936.
Appeal from Circuit Court, Baldwin County; F. W. Hare, Judge.
Harry T. Smith Caffey, of Mobile, for appellant.
Every mortgagor has an equity to restrain the mortgagee from selling the mortgaged property en masse if for any reason it appears that the bidding would be stimulated by offering the various portions for sale in small tracts. Mahone v. Williams, 39 Ala. 202; Dozier v. Farrior, 187 Ala. 181, 65 So. 364; Kelly v. Carmichael, 217 Ala. 534, 117 So. 67. Appellant shows a right to require the mortgagee to subject the property sold by him to the Bay Minette Land Company, which assumed payment of the mortgage debt, before proceeding against property retained by appellant. Pomeroy's Eq. § 797; Interstate L. I. Co. v. Logan, 196 Ala. 196, 72 So. 36; Maulitz v. Jones, 222 Ala. 609, 133 So. 701; Farmers' S. B. L. Ass'n v. Kent, 117 Ala. 624, 23 So. 757; Wiltsie, Mortg. Foreclosures (4th Ed.) § 864; Whittle v. Clark, 219 Ala. 161, 121 So. 530; Rogers v. Piland, 178 N.C. 70, 100 S.E. 181; Dedrick v. Den Bleyker, 85 Mich. 475, 48 N.W. 633. The bill further shows an equity to have the lands subjected in the inverse order of the various sales by appellant and the land company. Code 1923, § 7831; Interstate L. I. Co. v. Logan, supra; Tenn. Valley Bank v. Sewell, 214 Ala. 362, 107 So. 834; 3 Pomeroy's Eq. § 1206; Scheuer v. Kelly, 121 Ala. 323, 26 So. 4.
Smith Johnston, of Mobile, for appellees.
Power of foreclosure in a mortgage will not be enjoined except when, because of fraud, want or illegality of consideration, or for other sufficient reasons, the enforcement of the collection is against good conscience and would work great and irreparable injury, or when the mortgagee is about to proceed in an improper and oppressive manner in abuse of the power granted. Caldwell v. Caldwell, 166 Ala. 406, 52 So. 323, 139 Am.St.Rep. 48; Security Loan Ass'n v. Lake, 69 Ala. 456; Glover v. Hembree, 82 Ala. 324, 8 So. 251; Vaughan v. Marable, 64 Ala. 60; Ballenger v. Price, 219 Ala. 412, 122 So. 628; Wittmeier v. Tidwell, 147 Ala. 354, 40 So. 963; McCalley v. Otey, 90 Ala. 302, 8 So. 157; Ross v. N.E. M. S. Co., 101 Ala. 362, 13 So. 564; 2 Jones, Mortgages, § 1805. The equity of marshaling assets or selling in inverse order of alienation cannot be invoked by the debtor as against the creditor, but must be invoked by one of the creditors, and must be claimed to be enjoyed. 5 Pomeroy's Eq. 5083, § 2291; Vines v. Wilcutt, 212 Ala. 150, 102 So. 29, 35 A.L.R. 1301; Threefoot v. Hillman, 130 Ala. 244, 30 So. 513, 89 Am.St.Rep. 39; Sowell v. Federal Res. Bank, 268 U.S. 449, 45 S.Ct. 528, 69 L.Ed. 1041; Searle v. Chapman, 121 Mass. 19. The mortgagor, by sale of the property, does not become surety and his grantee principal debtor as to the mortgagee unless the mortgagee accepts or consents to the grantee as principal debtor. Manlitz v. Jones, 222 Ala. 609, 133 So. 701; Slottow v. Hull Inv. Co., 100 Fla. 244, 129 So. 577. If one party has a lien or interest in two estates and ther party in only one, the former cannot be compelled to resort to only one of them, unless it is shown to be sufficient to satisfy his interest or debt. Coker v. Shropshire, 59 Ala. 542.
This is a bill, filed by the mortgagor against the mortgagee, to enjoin the foreclosure of the mortgage under the power of sale. Subsequent grantees of the mortgagor, and the grantees of one of the subsequent grantees are made parties defendant, but no specific relief against such defendants is prayed.
The bill, to state the substance of its averments, alleges that on March 1, 1926, the complainant and his wife executed a mortgage to the First Joint Stock Land Bank of Montgomery, Montgomery, Ala., "to secure a large sum of money, payable in semi-annual installments, several of which said installments" were at the filing of the bill, past due; that the said mortgage contained a power of sale in case of default, and that said mortgagee has given notice of the foreclosure of the mortgage, in which the property is described as described in the mortgage, in nine separate and distinct parcels, aggregating 1077.82 acres, said notice stating: "This sale will be made for the purpose of realizing the mortgage debt, together with all expenses of the sale and a reasonable attorney's fee;" that subsequent to the execution of said mortgage, on December 21, 1929, complainant sold and conveyed by warranty deed to the defendant, Larkin T. Rhodes, a parcel of said lands, specifically described, warranting that said parcel was free from all encumbrances, except the mortgage to the defendant Land Bank, and covenanting with his said grantees to have the land sold and conveyed to said Rhodes released from the operation of said mortgage; that since the execution of the mortgage, the mortgagor, by statutory warranty deed, conveyed to the Bay Minette Land Company all the lands covered by said mortgage, except blocks 190 and 198 of the "Hand Land Addition to Bay Minette as shown on plat recorded in the office of the Probate Judge of Baldwin County," comprising 23 acres, and with the further exception of section 31, township 2 north, range 4 east, Baldwin county, and the parcel theretofore sold to said Rhodes; that the conveyance to the Bay Minette Land Company was based upon a consideration of many thousand dollars, and the assumption by said land company of the debt secured by the mortgage; that thereafter, the complainant leased to one Sims the pine timber on said section 31, township 2 north, range 4 east, for turpentine purposes, for a term expiring January 1, 1937, and leased to Hampton Bush said block 198 in the Hand Land addition, and put him in possession of same; that subsequent to the conveyance by the complainant to the land company that company had executed and delivered a number of warranty deeds to the Consumers Oil Company and Jos. S. Mayo to separate and distinct, specifically described tracts or parcels of said mortgaged lands; that said grantees went into possession and have made valuable improvements; that the property described as parcel 9 consists of timber lands which have never been cleared for cultivation, while other large acreage consists of farm lands from which the timber has been removed, "and if the sale of said lands was marshalled, and they were sold in parcels, they would probably sell for materially more than if said property were sold in lump, first, because of the scarcity of persons who would be either willing or able to buy the property; * * * that the reasonable market value of the property covered by said mortgage at this time is materially in excess of the mortgage indebtedness;" that the First Joint Stock Land Bank of Montgomery is, and has been for years, well aware of the conveyances by complainant to the land company, and that that company had assumed the said indebtedness, and since the date of said deed said land company has paid to the Land Bank the interest on said mortgage and the taxes on said property, so far as the interest and taxes have been paid. (Italics supplied.)
The bill also avers that the Land Bank had no authority in law to take a mortgage on said timber lands to secure a loan.
The defendant First Joint Stock Land Bank demurred to the bill on the ground, among others, that the bill was without equity. The court sustained the demurrer, and from that decree this appeal is prosecuted.
The appellant insists that the facts alleged sustain the equity of the bill, as one to prevent an unwarranted abuse of the power of sale in violation of the trust arising therefrom, by sacrificing the mortgaged property at a mass sale, instead of selling in separate parcels. A sufficient answer to this contention is, that the bill does not aver that the mortgagee is threatening or intends to sell the property en masse, or that the mortgagee has been requested to sell the property in separate parcels or tracts and has refused such request. It is not averred that by a sale of the property in separate parcels it will bring a better price than if sold en masse. We have not overlooked the averment in the bill as last amended, "that if the sale of said lands was marshalled, and they were sold in parcels, they would probably sell for materially more than if said property was sold in lump, first, because of the scarcity of persons who would be either willing or able to buy the property." This averment, assuming it is sufficiently positive that a sale in parcels would be beneficial to the mortgagor, is coupled with another ill-grounded theory of the bill's equity — the marshaling of assets of the debtor at his instance.
To warrant interference by a court of equity with the right of foreclosure, facts must be alleged showing that the mortgagee is perverting the power from its legitimate purpose. Caldwell v. Caldwell, 166 Ala. 406, 52 So. 323, 139 Am.St. Rep. 48; Ballenger et al. v. Price, 219 Ala. 412, 122 So. 628; Glover v. Hembree, 82 Ala. 324, 8 So. 251.
Taking, as true, the statement in the advertisement of the sale — "This sale will be made for the purpose of realizing the mortgage debt, together with all expenses of the sale and a reasonable attorney's fee" — it will be assumed, in the absence of positive averments to the contrary, that the mortgagee intends to offer the property for sale in such sort as that it will not be unwarrantedly sacrificed. Moreover, assuming that the several parcels or tracts of land covered by the mortgage are so situated that they can be conveniently sold and conveyed separately, or that the land has been laid off in parcels for separate and distinct enjoyment, if the mortgagee abuses the power of sale and sacrifices the property by a sale en masse, the mortgagor has his remedy in equity. Dozier v. Farrior et al., 187 Ala. 181, 65 So. 364; Mahone v. Williams, 39 Ala. 202; Kelly v. Carmichael, 217 Ala. 534, 117 So. 67.
Appellant's second contention is, that the mortgagor, by conveying a part of the mortgaged property to the Bay Minette Land Company in consideration, in part, of the assumption of the mortgage debt to the bank, the land company became the principal debtor and the mortgagor the surety and as such he had the right, in equity, to compel the mortgagee, in foreclosing its mortgage, to first exhaust the property conveyed to the land company before selling the property retained or previously conveyed by the mortgagor. That the authorities cited by the appellant (and noted hereunder) to sustain this contention establish the principle, that in such circumstances the relation of principal and surety is created as between the mortgagor and his grantee, and that the mortgagor is the surety, is without question. 2 Pomeroy Eq.Jurisdiction, 797, dealing with the doctrine of merger.
Interstate Land Investment Co. v. Logan, 196 Ala. 196, 72 So. 36, a bill by a grantee of the mortgagor to enforce the right of exoneration to the extent that the mortgagee had released the mortgaged property without consideration from the operation of the mortgage, and was seeking to enforce the entire debt against the complainant's property.
Maulitz v. Jones, 222 Ala. 609, 133 So. 701, a bill by the mortgagee and those interested with him to foreclose the mortgage. In this case it was held, in the circumstances above stated, that as between the mortgagor and his grantee the relation of principal and surety was created, and when the mortgagee accepts "the relationship" he cannot extend the time of payment without the mortgagor's consent, without releasing the mortgagor from liability for the debt.
The Farmers' Savings Building Loan Association v. Kent Sabotka, 117 Ala. 624, 23 So. 757, was a bill filed by a grantee of the mortgagor, as to part of the property; no mention of the mortgage being made in the conveyance which was with warranties, and the bill averred that the mortgagor claimed payment of the mortgage debt. The bill sought an accounting and to compel the sale of the lands in the inverse order of their alienation by the mortgagor, and to first exhaust that retained by the mortgagor.
Whittle v. Clark et al., 219 Ala. 161, 162, 121 So. 530, 531, was a bill filed by the mortgagors who had conveyed the mortgaged property to one who had assumed the payment of the mortgage debt against one who had acquired the property at the foreclosure of a second mortgage and thereafter procured a transfer of the mortgage, and demanded its payment by complainants. The principle of law now asserted was applied as follows in that case:
"Whether the defendant purchased the property, assuming the payment of the first mortgage, and thereafter sold the property to Thornton and wife, is not averred in the bill, though this is stated by appellees in their brief and argument.
"If these are the true facts of the case, the defendant by such assumption of the first mortgage debt became primarily liable therefor, and the complainants were liable merely as sureties. Robson v. O'Toole et al., 45 Cal.App. 63, 187 P. 110; People's Sav. Bank of Tallassee v. Jordan, 200 Ala. 500, 76 So. 442; Eppes v. Thompson, 202 Ala. 145, 79 So. 611; Mitchell v. Hickman, 208 Ala. [344] 345, 94 So. 284; White v. Schader et al., 185 Cal. 606, 198 P. 19, 21 A.L.R. 499, and note 504.
"And in an action at law by the defendant, on the notes representing the mortgage debt, complainants could plead this assumption of the debt by the defendant in bar of the action. People's Sav. Bank v. Jordan, supra; Mitchell v. Hickman, supra.
"Yet in the absence of suit to enforce the collection of the notes, and in the face of a demand by the defendant for the payment accompanied by threats to sue thereon, the complainants may invoke the aid of a court of equity, by bill in the nature of a bill quia timet, to have the notes and mortgage canceled and surrendered, and remove the burden and cloud hanging over them as sureties. Segall et al. v. Loeb et al. [ 218 Ala. 433] 118 So. 633; Tillis v. Folmar, 145 Ala. 176, 39 So. 913, 117 Am.St.Rep. 31, 8 Ann.Cas. 78.
"If, however, the defendant did not assume the payment of the debt secured by the first mortgage, though it was assumed by his predecessors in title, the complainants would still be liable on their obligation; and, upon payment of the debt, the complainants, as sureties of those who had assumed its payment, would be entitled to be subrogated to the security afforded by the mortgage and have it enforced against the property (Cullum v. Emanuel Gaines et al., 1 Ala. 23, 34 Am.Dec. 757; 21 R. C.L. 1106, § 144), but cannot compel the creditor, in the absence of statute, to proceed against the principal or the property and relieve them from liability (Dampskibsaktieselskabet Habil et al. v. United States Fidelity Guaranty Co., 142 Ala. 363, 39 So. 54; Skinner v. Barney, 19 Ala. 698; Bank of State of Alabama v. Godden Lowry, 15 Ala. 616) ."
In Rogers et ux. v. Piland, 178 N.C. 70, 100 S.E. 181, the mortgagee had refused the offer of the mortgagor to pay the interest, and demanded payment of the entire debt not due, and sought to foreclose.
In Dedrick et al. v. Den Bleyker, 85 Mich. 475, 48 N.W. 633, the mortgagee at the instance of the mortgagors' grantee who had assumed the debt, extended the time of payment without the mortgagors' consent, for twenty years. In such circumstances the court held that the mortgagors were released from liability.
2 Wiltsie on Mortgage Foreclosure, Fourth Edition, § 864, merely states the general principle that "Where it is inequitable and wrongful that a mortgagee should sell the property under a power of sale contained in the instrument, an injunction restraining such sale may be granted on the application of the mortgagor or of any other person interested in preventing the sale." (Italics supplied.)
These authorities fall far short of justifying the application of that principle to the facts alleged in the bill. To state the proposition in other words, the averments of the bill fall far short of showing that the mortgagee is proceeding "inequitably and wrongfully."
In the circumstances alleged in the bill, either the mortgagor or his grantee, the land company, who had assumed the debt, had the right to pay the interest on the loan, and the mortgagee could not refuse to accept such payment. But the fact that the mortgagee had knowledge of the relation and accepted payment of interest from the land company did not destroy the right of the mortgagee to assert that both the principal and surety were primarily liable, and proceed against them jointly or severally at its election. Code 1923, § 9543; Tennessee Valley Bank et al. v. Sewell, 214 Ala. 362, 107 So. 834; Whittle v. Clark et al., 219 Ala. 161, 121 So. 530, 531.
In the case last cited (Whittle v. Clark et al.), it was held that the mortgagors could not "compel the creditor, in the absence of statute, to proceed against the principal or the property and relieve them [the mortgagors] from liability."
The appellant's third and last contention is, that the facts stated give the bill equity as one to compel a marshaling of the property, and compel the mortgagee to sell it in the inverse order of its alienation by the mortgagor.
The doctrine of marshaling assets is "the creature of equity — called into exercise by, and for the benefit of the creditor who is to be profited by it." Turner v. Flinn et al., 67 Ala. 529, 532; Central Lumber Co. v. Jacks et al., 222 Ala. 475, 132 So. 721; 5 Pom.Eq.Juris. page 5083, § 2291. Neither this doctrine nor the statute, section 7831, Code 1923, dealing with Executions and Judgments, which provides, "When property is subject to a lien and part of it is sold by the debtor, the part remaining in him should be first applied to the payment of the lien. If the property subject to such lien is sold in several parcels at different times, the parcels should be charged in the inverse order of their alienation," can be brought to the aid of the mortgagor, the original debtor, and primarily liable for the debt as surety. The statute merely applies the equitable doctrine of marshaling assets to sales under execution to the benefit of purchasers, not debtors.
Our conclusion, therefore, is, taking the averments of the bill as true, it is without equity, and the demurrer for want of equity, was well sustained.
Affirmed.
GARDNER, BOULDIN, and FOSTER, JJ., concur.