Summary
In Great Southern Land Co. v. Valley Securities Co., 162 Miss. 120, 137 So. 510, the Court used this language: "If there had been an acceleration clause in the Land Company's mortgage, under Section 2170, Code of 1930, the Securities Company had the right to stop the foreclosure sale by tendering to the Land Company the amount of the overdue note alone, without attorney's fees, with trustee's fees and costs incurred."
Summary of this case from Ranson v. SnyderOpinion
No. 29537.
November 9, 1931. Suggestion of Error Overruled January 4, 1932.
1. MORTGAGES. Senior mortgagee holding installment notes providing for attorney's fees held not entitled on foreclosure, as against holder of junior mortgage purchasing at foreclosure sale, to receive attorney's fee on any part of principal indebtedness, where mortgage contained no provision for attorney's fees or reference to such provision.
The evidence disclosed that neither the conveyance from the first mortgagee nor the purchase-money mortgage securing the notes referred to provision in notes for payment of attorney's fee, and the same was true of subsequent conveyances of the mortgaged property, and the second mortgagee had no actual notice of such provision prior to notice of foreclosure sale. On default in one of the installment notes, the trustee under the first mortgage advertised property for foreclosure, claiming the fifteen per cent attorney's fees, and thereupon the second mortgagee made tender of indebtedness and costs with attorney's fees on the overdue installment note, which was declined. The second mortgagee then purchased the property at the foreclosure sale, and demanded a refund of difference between amount it paid for the property and the amount due on the first mortgagee's notes, with interest and costs.
2. MORTGAGES.
Provision in first mortgage requiring mortgagor to keep property free of anything which might affect mortgagee's equity held insufficient to give junior mortgagee constructive notice of stipulation for attorney's fees in first mortgage notes.
3. MORTGAGES.
Difference remaining after satisfying senior mortgage should be applied on junior mortgage, though junior mortgagee is purchaser at foreclosure.
4. MORTGAGES.
Junior mortgagee's interest is not merged in title by purchase at foreclosure sale of senior mortgage, if junior mortgagee did not intend merger or merger is against his manifest interest.
5. MORTGAGES.
Merger of junior mortgagee's interest held not affected by its purchase at foreclosure sale of first mortgage, where junior mortgagee had made tender in effort to stop foreclosure and had demanded payment over of surplus.
6. USURY.
Second mortgagee's contract, if usurious because providing for interest over eight per cent but under twenty per cent, nevertheless remained valid charge against property to extent of principal indebtedness (Code 1930, section 1946).
APPEAL from chancery court of Harrison county. HON. D.M. RUSSELL, Chancellor.
STATEMENT OF FACTS BY THE COURT.The bill in this case was filed in the chancery court of Harrison county by appellee and cross-appellant, the Valley Securities Company, the holder of a junior mortgage upon certain property located in the city of Hattiesburg, known as the Hattiesburg Hotel property, against the appellants, the Great Southern Land Company, the beneficiary in a prior mortgage on the property, and J.H. Beeman, trustee therein, to recover the excess over and above the amount due on the first mortgage realized by appellants from a foreclosure of their mortgage. There was a trial on bill, answer, and proofs, resulting in a decree in favor of the appellee and cross-appellant, in the sum of twenty thousand eight hundred sixty-three dollars and seventy cents, together with the interest thereon at the rate of six per cent per annum from February 18, 1929, making a total recovery of twenty-three thousand eighty-seven dollars and fifty-eight cents. The appellee and cross-appellant sought a decree for a larger amount. Appellants prosecute this appeal from that decree, and appellee and cross-appellant prosecutes a cross-appeal.
For convenience and clarity appellants will be referred to as the Land Company, and appellee and cross-appellant as the Securities Company.
The subject-matter involved in the litigation is an attorney's fee of fifteen per cent on the entire principal amount due under the Land Company's first mortgage, as well as accrued interest thereon.
The Land Company claimed that out of the proceeds of the foreclosure of its first mortgage it was entitled to receive from the trustee the unpaid principal of the indebtedness secured by the mortgage, including accrued interest; and, in addition thereto, fifteen per cent thereon provided for in the notes evidencing the indebtedness; while the Securities Company contended that the Land Company was only entitled to receive out of the proceeds of the foreclosure sale the unpaid principal of the mortgage indebtedness, and accrued interest thereon, and costs of sale, and no attorney's fees whatever.
There is no substantial conflict in the evidence as to the material facts, except as to the value of the property covered by the two mortgages. The facts are as follows:
On the 2d day of January, 1926, the Land Company was the owner of the Hotel Hattiesburg. On that date it conveyed the property to J.I. and J.T. Harrison and R.S. Love, in consideration of the sum of two hundred fifty thousand dollars, of which sum fifty thousand dollars was paid in cash, and the balance of two hundred thousand dollars was arranged in deferred payments, as follows: It was evidenced by ten promissory notes, of twenty thousand dollars each, secured by a mortgage on the property. The notes were due and payable, one each year, for ten years from their date, and bore interest at six per cent per annum, payable annually. The notes were so described in the mortgage; and, in addition, the mortgage contained the following: "Payable on or before the first day of January of each succeeding year, bearing interest at the rate of six per cent per annum beginning January 1, 1926, and the interest on the full amount of said notes which are unpaid, to be paid, payable annually."
By successive conveyances not necessary to set out, the title to the property of the Harrisons and Love became vested in C.J. Thomas. The conveyance to Thomas was made on March 29, 1928, and recites a consideration of ten dollars cash, and the assumption of one hundred sixty thousand dollars, with accrued interest from January 1, 1928, due to the Land Company under their senior mortgage.
At the time of the conveyance to Thomas, there had been paid on the principal of the Land Company's mortgage two notes of twenty thousand dollars each. On the same date the property was conveyed to Thomas, he borrowed eighty thousand dollars from the Securities Company, evidenced by several deferred payment promissory notes, to secure which he gave a mortgage on the property, reciting, among other things, that the property was free from all incumbrances, except the mortgage of the Harrisons and Love to the Land Company. On January 1, 1929, Thomas conveyed the property to Mrs. Nix.
The twenty thousand dollars due the Land Company on January 1, 1927, together with the interest on the entire indebtedness, was duly paid, as was the twenty thousand dollar note due January 1, 1928, and the accrued interest on the entire indebtedness; thus reducing the principal of the indebtedness to the Land Company to one hundred sixty thousand dollars. The last purchaser, Mrs. Nix, defaulted in the payment of the twenty thousand dollar note due January 1, 1929, as well as the interest on the balance of the indebtedness of one hundred sixty thousand dollars. Thereupon Beeman, the trustee in the Land Company's mortgage, advertised the property for foreclosure sale under the mortgage, for the benefit of the Land Company.
The evidence is somewhat uncertain as to whether or not the notes evidencing the indebtedness to the Land Company provided for an attorney's fees. The originals were not introduced in evidence. The Land Company claimed that the notes provided for such a fee. For the purposes of this decision, the contention of the Land Company will be treated as a fact.
At the time the Securities Company lent the eighty thousand dollars to Thomas, and took a second mortgage on the property, it had no actual notice that the Land Company's notes contained such a provision. One of the questions in the case is whether it had constructive notice.
The conveyance from the Land Company to the Harrisons and Love described the purchase-money notes in detail, giving their amounts, maturity, rate of interest, and how payable; but in nowise referred to the fact that the notes provided for the payment of an attorney's fee; and the mortgage from the Harrisons and Love to the Land Company to secure the purchase-money notes likewise made no reference to the fact that the notes provided for an attorney's fee. And the same is true of all subsequent conveyances of the property, down to and including Mrs. Nix, the last vendee before the foreclosure sale.
Neither in the Land Company's notes nor in the mortgage securing them was there any acceleration provision — that is, there was no provision that on failure to pay any one of the notes all could be matured.
Default was made in the payment of the twenty thousand dollar note due the Land Company on January 1, 1929, and interest thereon, as well as the interest on the balance of the principal. Thereupon the trustee in the mortgage, at the request of the Land Company, proceeded to advertise the property for foreclosure sale, under the terms of the mortgage. The advertisement recited that the Land Company elected and declared the entire indebtedness due. As stated, there was no provision in the mortgage authorizing that to be done. The sale notices stated further that the unpaid mortgage indebtedness provided for the payment of fifteen per cent attorney's fee. The evidence showed that this was the first notice the Securities Company had that the notes contained such a provision. Discovering that fact, the Securities Company, in an effort to protect its rights under its second mortgage, considering itself a party in interest in the property, before the foreclosure sale, tendered to the Land Company the sum of twenty thousand dollars to cover the principal of the note due January 1, 1929, together with interest thereon to the date of the tender; and also with fifteen per cent attorney's fees on this note of twenty thousand dollars; and, in addition, the interest due on the balance of the indebtedness (unmatured at that time), with the trustee's costs of advertising the sale, and a reasonable fee to the trustee for his services, and requested its acceptance, and a reinstatement of the Land Company's mortgage. This tender was declined, and the Land Company, in turn, demanded that, unless the total amount of its indebtedness, due and undue, with interest thereon, and in addition fifteen per cent of the whole, as attorney's fees, with all expenses, was paid by the Securities Company, the sale would be proceeded with. Thereupon the Securities Company tendered the full amount of said indebtedness, due and undue, with interest thereon, and cost and expenses of the foreclosure so far incurred, together with fifteen per cent attorney's fees on the twenty thousand dollars which was overdue; which the Land Company declined.
Thereupon the trustee proceeded to sell the property. At the sale the Securities Company was the purchaser for the sum of one hundred ninety-five thousand dollars, which was paid in cash to the trustee. When the payment was made, the Securities Company demanded of the trustee a refund to it of the difference between the amount it paid for the property at the foreclosure sale, one hundred ninety-five thousand dollars, and the aggregate of the Land Company's notes, due and undue, with interest thereon, and costs and expenses of the foreclosure sale. This demand was refused by the trustee at the request of the Land Company, and thereupon the trustee paid over to the Land Company the entire sum of one hundred ninety-five thousand dollars. The sale took place on February 18, 1929, and the purchase money was paid by the Securities Company to the trustee on that date.
The trustee operated the hotel property for a short time. Such operation showed a net profit of one thousand nine hundred thirty-nine dollars and twenty-six cents. This amount, added to the one hundred ninety-five thousand dollars bid and paid by the Securities Company, represented the funds in the hands of the trustee to be disposed of. The trustee made the following disposition of the funds; he paid the fee for advertising the foreclosure, sixty-three dollars; the trustee's fee of five hundred dollars; the unpaid principal of the Land Company's indebtedness of one hundred sixty thousand dollars, and accrued interest thereon of ten thousand eight hundred dollars, making one hundred seventy thousand eight hundred dollars; and attorney's fees of twenty-six thousand one hundred fifty-nine dollars and fifty cents, being fifteen per cent of the Land Company's entire indebtedness, including principal and interest, which left a deficit of one hundred thirty-six dollars and thirty cents, which the Land Company absorbed.
The court, in its decree, allowed the Securities Company a recovery from the Land Company of all the fifteen per cent attorney's fees, except fifteen per cent on the twenty thousand dollar note past due at the time of the foreclosure sale, and interest thereon, together with all accrued interest on the undue principal of the Land Company's indebtedness. The fifteen per cent attorney's fee on these sums amounted to four thousand six hundred thirty-two dollars.
The Securities Company, on its cross-appeal, contends that the court should have rendered a decree in its favor for this additional amount. This is the basis of the Securities Company's cross-appeal.
There was some conflicting testimony as to the value of the property; but, as we view the evidence, it greatly preponderates in favor of the contention of the Securities Company that at the time of the foreclosure it was wholly insufficient in value to discharge the two mortgages, with accrued interest and expenses. In fact, as we view the evidence, it tends strongly to show that the property was worth little, if any, more than the sum bid and paid for it by the Securities Company at the foreclosure sale.
The chancellor in his opinion, which was made part of the record, as we understand it took that view.
T.J. Wills, of Hattiesburg, for appellant.
There is a clause in the mortgage which reads, among other things, that parties of the first part agreed that the property shall be kept free of all unsettled judgments or anything that might affect the equity of the said party of the second part. In dealing with the property, the Great Southern Land Company was protected by this clause from considering any intervening rights that might have accrued, the clause having been stipulated into deed of trust so that all parties dealing with the property were charged with notice of inquiry as to what the equities of the grantor of the property, the beneficiary in the deed of trust might have therein.
The maker of the notes to appellee, was charged usurious interest. The contract was unenforceable in Mississippi. It provided for interest at the rate of eight per cent and five thousand dollars in cash was deducted from the eighty thousand dollars, giving to Thomas only seventy-five thousand dollars, for which he paid eleven thousand four hundred dollars, a usurious rate of interest.
When two estates unite it operates to extinguish the lesser of the estates to extinguish the deed of trust and the debt secured thereby. If the property is worth the amount of or in excess of the indebtedness secured by the senior and junior deed of trust, both are extinguished by sale under the senior deed of trust and the purchase thereof by the holder of the junior deed of trust if the value of the property is equal to both indebtedness. It is extinguished pro tanto if the value is less than both indebtedness.
Horr v. Herrington (Okla.), 20 L.R.A. (N.S.) 47; Miller v. Little, 37 N.D. 612, 164 N.W. 19.
Stevens Heidelberg, of Hattiesburg, for appellee.
Even if the deed of trust or the notes had contained an acceleration provision, any interested party, upon payment of the amount past due, with all accrued interest, costs, attorney's fees and trustee's fees on the amount actually past due by the terms of the notes "not of the amount accelerated" and all such taxes or insurance premiums due and not paid, with proper interest thereon, had the right to reinstate the contract according to its terms. The appellants would not have been entitled to collect any attorney's fees on those notes which, according to their maturity dates, had not matured.
Even if the notes were payable in the State of Mississippi and were governed by the law of the State of Mississippi, the contract would not be unenforcible. The only thing which would be forfeited would be the interest itself and appellee would still be entitled to collect the seventy-five thousand dollars actually paid by it.
Section 1946, Code of 1930.
Whatever may be the circumstances, or between whatever parties, equity will never allow a merger to be prevented and a mortgage or other security to be kept alive, when this result would aid in carrying a fraud or other unconscientious wrong into effect, under the color of legal forms. Equity only interposes to prevent a merger, in order thereby to work substantial justice.
2 Pomeroy's Equity Jurisprudence (2 Ed.), secs. 791, 793, 794.
Where it is said that the rule that the purchase of the land by the junior mortgagee merges his title is founded upon the reason that there could generally be no advantage to him in keeping on foot his own mortgage against his own estate.
Where a mortgage incumbrancer becomes the owner of the legal title, or of the equity of redemption a merger will not be held to take place if it be apparent that it was not the intention of the owner, or of, in the absence of any intention, the merger would be against his manifest interest.
1 Jones on Mortgages, sec. 869; Hartford Fire Insurance Company v. Buckwalter, 77 So. 798; Jones on Mortgages, sec. 848.
The purchase by a second mortgagee of the mortgage property under foreclosure of the first mortgage does not merge the liability on the note secured by such second mortgage so as to preclude him from enforcing the liability of the parties thereon.
Blackwood v. Sakwinski, 29 A.L.R. 1314.
The doctrine of merger is never regarded with favor in a court of equity, nor allowed therein, except for special reasons and to carry out the intention of the parties. Estates in equity are always kept distinct when the interest of either party or a creditor requires it.
Note 99 Am. St. Rep. 158; Knowles v. Lawton, 63 Am. Dec. 290; 36 L.R.A. (N.S.) 1427.
The surplus insofar as the junior mortgagee is concerned becomes real estate and the lien of the junior mortgage is immediately transferred from the land itself to the surplus in the hands of the trustee or senior mortgagee.
Frank v. Davis, 17 L.R.A. 306; McPherson v. Davis, 48 So. 625; Markey v. Langley, 23 L.Ed. 701.
A purchase by a junior encumbrancer of land at a sale under a senior incumbrance did not effect a merger, but that the junior incumbrancer's lien would be transferred to the surplus, and he would be entitled to enforce it as against this surplus.
Kilmer v. Hannifan, 85 N.W. 16.
Where default was made in the payment of the amount named in a trust deed and the trustee at the request of the beneficiary advertised the land for sale, but before the date fixed for the sale, a third party bought the land covered by the trust deed and tendered to the trustee the amount mentioned in the deed of trust interest thereon, and the accrued expenses for advertising and the trustee's fees, which the trustee at the instance of the holder of the indebtedness secured, refused to accept but demanded attorney's fees in addition. In such case, the attorney fees not being mentioned in the trust deed, though named in the note evidencing the debt, and the purchaser of the land having no notice of such fees being included in the debt secured, the trustee was wrong in refusing such tender and the purchaser of the land having enjoined the sale by the trustee, the beneficiary could not recover attorney's fees for defending such suit since their wrong caused the litigation and the attorney's fee, all of which was unnecessary.
Hardin v. Ross, 78 So. 2, 117 Miss. 186.
A purchaser or mortgagee is chargeable with notice of the conditions and recitals contained in all the recorded instruments forming his chain of title and the extent of the title conveyed or otherwise affected, but not that a grantee or mortgagee has any greater interest than that appearing in the recorded instrument.
23 R.C.L., page 216, section 79; Equitable Building Loan Association v. Corley, 110 Am. St. Rep. 615; Simmons v. Hutchinson, 81 Miss. 351, 33 So. 21; Sack v. Gilmer Dry Goods Company, 115 So. 339, 149 Miss. 296.
Record of a deed is only notice of what appears upon the face of the deed, or to that to which it naturally points.
Dikeman v. Parrish, 47 Am. Dec. 445; Gilchrist v. Gough, 64 Ind. 589; 39 Cyc. 1721.
In order to impute constructive notice to a purchaser by reason of recitals in instruments affecting his title, the recitals relied upon must be so clear and distinct as to put an ordinarily prudent person upon inquiry, and must be so far correct and intelligible that upon proper inquiry they would lead the purchaser to knowledge of the particular fact or incumbrance with notice of which it is sought to charge.
Spellman v. McKeen, 96 Miss. 693.
A mortgage given to secure a note is, between the original parties, a lien upon the premises according to the legal rate of interest secured by said note; but subsequent encumbrances on the same premises are bound by nothing more than is disclosed by the record, unless express notice can be proved.
Whittacre v. Fuller, 5 Minn. 508.
If there is a junior encumbrancer, any surplus which remains after the sale of the mortgaged property by a trustee, without judicial proceedings, will go to him, and the trustee will hold it in trust for such encumbrancer.
O'Reilly v. Hendricks, 2 S. M. 388.
And the rule is the same when the sale is by a trustee under a deed of trust.
Gage v. Iler, 5 S. M. 410, 43 Am. Dec. 321.
Prior mortgagee, with notice of a subsequent mortgage, holds the balance of the fund derived from a sale of the mortgaged premises, over and above his mortgage, in trust for the subsequent mortgagee.
White v. Dougherty, 17 Am. Dec. 802; 41 C.J., page 1015, section 1475.
As respects the rights of junior encumbrances entitled to the surplus it is generally held that the senior mortgagee, realizing more than the amount of his debt on a foreclosure sale is to be regarded as a trustee for their benefit.
41 C.J., page 1017, sec. 1478.
In the distribution of the proceeds of the foreclosure sale, was the Land Company entitled to be credited with any attorney's fee whatsoever? The mortgage, as stated, made no provision for the payment of attorney's fees. There is no reference whatever in the mortgage to the fact that the notes evidencing the debt secured by the mortgage had any provision for the payment of attorney's fees; and the evidence showed without conflict that the Securities Company had no actual notice that the notes provided for the payment of attorney's fees. The fact that they do so provide was not referred to in any of the conveyances from the Land Company down to and including that to Mrs. Nix, the last vendee before the foreclosure sale. We think the case of Hardin v. Ross, 117 Miss. 186, 78 So. 2, is decisive of this question against the contention of the Land Company, and in favor of the contention of the Securities Company.
The question in that case was whether or not the holder of a deed of trust was entitled to demand attorney's fees in addition to the debt and interest thereon from a purchaser of the property embraced in the deed of trust, who bought with knowledge that it was being sold subject to the deed of trust of record. The indebtedness secured by the deed of trust was a promissory note, which provided for the payment of attorney's fees, but there was no reference in the deed of trust to the stipulation as to attorney's fees — no statement that it included attorney's fees. Caldwell and wife executed a deed of trust on land in Calhoun county to secure an indebtedness to one Barton. Default was made in the payment of the indebtedness, and the trustee, at the request of the beneficiary, advertised the land for foreclosure sale. Before the day of sale, Hardin bought the land, and received a conveyance thereto from Caldwell and wife. Hardin thereupon tendered to the trustee the amount mentioned in the deed of trust, with interest thereon, and accrued expenses for the advertising, including the trustee's fee. The trustee, at the instance of the holders of the indebtedness, declined to accept the tender, whereupon the trustee resigned, and a substitute trustee was appointed by the holders of the indebtedness, and the land was again advertised for sale. Hardin then filed his bill of complaint, setting out those facts, and stating further that the land would be sold if the sale was not enjoined by the court, and that the trustee had refused to accept the amount tendered, described in the deed of trust, but had demanded in addition thereto one hundred sixty dollars by way of attorney's fees.
The court held that the attorney's fees not having been mentioned in the deed of trust, though named in the notes evidencing the debt, and the purchaser of the land having no notice of such fees being included in the debt secured, the trustee was not justified in refusing the tender by the purchaser of the land, and, the latter having enjoined the sale by the trustee, the beneficiary could not recover attorney's fees for defending such suit, "since their wrong caused the litigation and the attorney's fee, all of which was unnecessary."
The decision in that case is amply supported by authority. Our court held in Simmons v. Hutchinson, 81 Miss. 351, 33 So. 21, that constructive notice arising from the record of a muniment of title imputes only such knowledge as the instrument there recorded discloses, and not what diligent inquiry into its meaning might disclose; that it is only constructive notice of the contents of the paper there recorded, or intended to be recorded, and its particular contents only, and will have no operation or effect as to any existing facts not described or pointed out in the recorded instrument.
To the same effect is Sack v. Gilmer Dry Goods Co., 149 Miss. 296, 115 So. 339. See, further, 23 R.C.L., p. 216, section 79, and case notes.
The Land Company contends that the following provision in its mortgage was sufficient to give the Securities Company notice of the fact that the notes secured by the mortgage provided for attorney's fees: "The parties of the first part have agreed that the hereinafter described property shall be kept free of all unsettled liens of any kind or character for any work or improvements on the property, or all unsettled judgments, or anything that might affect the equity of the said party of the second part."
As we understand the argument of the Land Company, it is that the stipulation in its notes, providing for attorney's fees, was an equity; and, seeing this provision in the mortgage, the Securities Company ought to have made inquiry of the Land Company as to what it meant; and that, if it had done so, it would have ascertained that the notes secured by the mortgage provided for the payment of attorney's fees. We are unable to follow this argument. In the first place, the stipulation in the notes for attorney's fees is not an equity; the right thereby conferred on the Land Company was purely legal, not equitable. And in the second place, under the authorities referred to, there is nothing in this language of the mortgage that points even in a remote degree to the fact that the Land Company's notes provided for the payment of attorney's fees.
The Land Company contends that, where a junior mortgagee purchases at the foreclosure sale of a senior mortgage, all interest of the junior mortgagee is thereby merged into the title to the land, and his mortgage indebtedness is thereby discharged; and therefore he is not entitled to have applied to his mortgage indebtedness any surplus remaining after satisfying the senior mortgage; that this is especially true where the value of the land is sufficient to satisfy both mortgages, as the Land Company contends it was in this case.
The general rule is that, where a surplus remains after satisfying a senior mortgage, it should be applied on the junior mortgage. O'Reilly v. Hendricks, 2 Smedes M. 388; Cage v. Iler, 5 Smedes M. 410, 43 Am. Dec. 521; 41 C.J., pp. 1015 and 1017, sections 1475 and 1478. And this rule obtains where the junior mortgagee is the purchase at the foreclosure of the senior mortgage. A merger will not take place if it be apparent that the junior mortgagee, in purchasing, did not so intend, or that a merger is against his manifest interest. 2 Pom. Jurisprudence (2 Ed.), sections 791 and 793; Jones on Mortgages, section 848; Hartford Fire Ins. Co. v. J.R. Buckwalter Lumber Co., 116 Miss. 822, 77 So. 798. In this case our court cites with approval section 848 of Jones on Mortgages.
It is manifest, from the evidence in this case, that the Securities Company, by its purchase, had no intention to bring about a merger of its mortgage into its title to the land. On the contrary, the Securities Company used every available means at hand to prevent such a merger. In order to stop a foreclosure under the senior mortgage, the Securities Company tendered to the Land Company largely more than enough to discharge its indebtedness, with interest and expenses incident to the foreclosure advertisement. And immediately after the foreclosure sale, and the payment of the proceeds of the sale into the hands of the trustee in the senior mortgage, the Securities Company demanded of the trustee that he pay over to it, on its mortgage, the surplus remaining after the senior mortgage was discharged, which was done.
It is doubtful whether the Oklahoma and South Dakota cases relied on by the Land Company are authorities to the contrary; but, if they were, we would without hesitation hold that, where a merger of the two estate was not intended, and especially where the merger is against the interest of the junior mortgage purchaser, no merger takes place. As we view it, that is the sounder and better rule.
The Land Company contends that the Securities Company had no valid mortgage indebtedness against the land, because its indebtedness was usurious. The facts relied on by the Land Company to show that the Securities Company's debt was usurious are as follows: The Securities Company lent Thomas only seventy-five thousand dollars; they took his notes for eighty thousand dollars, with interest thereon from their date, at eight per cent per annum. Therefore, under section 1946, Code of 1930, the contract (if a Mississippi contract) was usurious. The statute provides that, when a greater rate of interest than eight per cent per annum is stipulated for, or received, all interest shall be forfeited; and, if a greater rate than twenty per cent per annum is stipulated for, or received, both principal and interest shall be forfeited.
The Securities Company's notes were executed in the state of Louisiana, and made payable in the city of New Orleans, in that state. The Land Company contends that for that reason the transaction is governed by the laws of Louisiana, where the contract is not usurious, and not by the laws of Mississippi. We do not decide that question, because it is not necessary.
For the purposes of this decision, we treat the contract of the Securities Company as usurious under the laws of this state; and still it remains a fact that at the time of the foreclosure sale there was due the Securities Company, on its mortgage, the sum of seventy-five thousand dollars, which represents the actual amount it lent to Thomas, without interest. The interest stipulated for in the contract amounted to less than twenty per cent of the seventy-five thousand dollars actually lent; and therefore, under the statute, the interest, and not the principal, is forfeited. The principal remained a valid charge against the property.
If there had been an acceleration clause in the Land Company's mortgage, under section 2170, Code of 1930, the Securities Company had the right to stop the foreclosure sale by tendering to the Land Company the amount of the overdue note alone, without attorney's fees, with trustee's fees and costs incurred.
The result is that the decree should be affirmed on direct appeal, and reversed on cross-appeal, and judgment rendered here in favor of the Securities Company in the additional sum of four thousand six hundred thirty-two dollars, with six per cent interest per annum thereon from the 18th day of February, 1929.
Affirmed on direct appeal, reversed on cross-appeal, and judgment here.