Opinion
No. 32240.
May 4, 1936. Suggestion of Error Overruled June 1, 1936.
1. MORTGAGES.
Grantees of portion of mortgaged realty who did not contract or assume to pay mortgage debt were not personally liable therefor.
2. MORTGAGES.
Assignee of mortgagee could not proceed against portion of mortgaged realty conveyed to grantees who did not assume mortgage debt until assignee had exhausted her remedies against assignee of grantee of another portion of realty, and such grantee, both of whom had assumed mortgage debt, and mortgagor, in order named.
3. MORTGAGES.
Grantees of portion of mortgaged realty who took in subordination to deed of trust and with notice thereof could not assert defense of adverse possession against assignee of mortgagee foreclosing deed of trust.
4. MORTGAGES.
Grantees of portion of mortgaged realty could not assert defense of estoppel against assignee of mortgagee foreclosing deed of trust where neither assignee nor mortgagee had done anything upon which estoppel could be predicated.
5. MORTGAGES.
Grantees of portion of mortgaged realty could not assert defense of waiver against assignee of mortgagee foreclosing deed of trust where neither assignee nor mortgagee knew of conveyance of mortgaged realty to grantees until note was past due and was being got ready for foreclosure.
6. MORTGAGES.
Release of portion of mortgaged realty from operation of mortgage did not release another portion of realty conveyed to other grantees.
7. MORTGAGES.
In action to foreclose deed of trust on realty, mortgagor who had conveyed all of realty, and grantee of portion of realty who had assumed part of mortgage debt and had subsequently conveyed such portion of realty, should have been joined as defendants, as well as grantees in possession, notwithstanding alleged insolvency of mortgagor and such grantee.
APPEAL from chancery court of Covington county. HON. BEN STEVENS, Chancellor.
H.M. McIntosh and Tarver McIntosh, both of Collins, for appellant.
A.F. Riels, the original mortgagor, could not claim this land adversely to the mortgagee to whom he had given the mortgage, neither could the Gunters as grantees from A.F. Riels claim adversely to the mortgagee, appellant here.
The possession of a mortgagor, or his assignee, is not only entirely consistent with the rights and estate of the mortgagee, but, as a general rule, cannot be adverse thereto until he has denied the mortgagee's rights under the mortgage and set up an exclusive title in himself, so openly and notoriously that the mortgagee must have known of the adverse claim.
1 R.C.L. 748.
Neither the mortgagor nor his grantee holds adversely to the mortgagee until he has distinctly disclaimed holding under him, and asserted title in himself.
A mortgagor cannot be regarded as holding adversely to the mortgagee unless it is shown that there was a renunciation of the mortgagee's rights, of which he had knowledge.
Holmes v. Turners Falls Lbr. Co., 6 L.R.A. 283; Alsup v. Stewart, 88 Am. Dec. 169; New England Mortg. Sec. Co. v. Fry, 42 So. 57.
The possession of a mortgagor, or of his assignee, is not adverse to the mortgagee, except where the assignee has no notice of the mortgage.
Newman v. Chapman, 14 Am. Dec. 766.
The note herein sued on became due April 1, 1930; it would not have been barred by the statutes of limitations until April 1, 1936. This bill was filed March 16, 1935.
Section 2290, Code of 1930; Hill v. Nash, 19 So. 710; Houston v. National Mut. Building Loan, 31 So. 542.
W.U. Corley, of Collins, for appellees.
Where a person wronged is silent under a duty to speak, or by an act or declaration recognizes the wrong as an existing and valid transaction and in some degree at least gives it effect so as to benefit himself or so as to affect the rights or relations created by it between the wrongdoer and a third person, he acquiesces in, assents to it, and is equitably estopped from impeaching it.
Rothschilds v. Titled Guaranty Trust Co., 97 N.E. 879; Strauss Bro. v. Denton, 106 So. 257.
It is contended that the mortgage was a matter of record and notice to appellees. This may be true, but, registry laws cannot be invoked to shield fraud; hence the holder of recorded title may, by his conduct inconsistent or either by estoppel to assert it against one who has been misled by him to his prejudice.
Love v. Mason, 72 Miss. 424; Stolen v. Bryant, 55 Miss. 261; Murphy v. Jackson, 69 Miss. 403; Hurst v. Smith, 151 So. 825; Warren v. Tampa Mortgage Investors Co., 150 So. 738.
The rule of equity, that if one man knowingly, though he does it possibly by looking, suffers another to purchase and expend his money on land under an erroneous title without making his claim, he should not afterwards be permitted to exercise his legal right against that person. It would be an act of injustice and his conscience is bound by an equitable estoppel.
Nixon v. Carco, 28 Miss. 414; Dixon v. Greene, 24 Miss. 618; Johnson v. Outlaw, 56 Miss. 541; Thompson v. Strickland, 52 Miss. 574; 21 C.J. page 1160, sec. 163, and page 1202, sec. 205; White v. Jenkins, 33 So. 297.
We assert that under the doctrine of estoppel we have what is considered as a waiver.
19 Cyc. 805; Lucas v. American Freehold Land Mortgage Co., 72 Miss. 366; Higgins v. Haberstraw, 76 Miss. 627; Terrell v. Weymouth, 32 Fla. 255; A.G.S.R.R. v. S. N.A.R.R., 84 Ala. 570; Vicksburg Water Works Co. v. Guffy Petroleum Co., 86 Miss. 60; Harmon v. Leberman, 87 S.W. 203; National Building Loan Assn. v. Gilmer, 128 F. 293.
It will be noted that appellant, as complainant below, did not make A.F. Riels and his wife parties to this suit. The makers of the note sued on are not in court. The makers of the mortgage sued on are not in court. C.C. Thrash, one of the holders of part of the security, is not in court, but only W.C. Hicks, against whom a judgment was taken, and the appellee in this case. If the contention of appellant is correct, then we make bold to assert that his entire decree is void because the original bill prays for a personal judgment. A personal judgment was granted both for the amount sued for and for the lien. Certainly no lien could be established unless there was a money judgment on which to base it.
On March 8, 1920, A.F. Riels and wife, being the owners of certain lands in Covington and Jones counties, gave a deed of trust thereon to secure a note for one thousand eight hundred fifty dollars to Geo. M. Forman, due ten years after date, but with provisions for annual interest payments. The deed of trust was in due time recorded in both counties. On August 21, 1923, Riels and wife conveyed forty-eight acres of the mortgaged land to Cleve Hall, who, as a part of the purchase price, agreed to assume and pay one thousand six hundred dollars of the said mortgage indebtedness, together with the annual interest on said one thousand six hundred dollars. On October 17, 1925, Cleve Hall and wife conveyed said forty-eight acres to W.C. Hicks, and, as a part of the consideration, Hicks agreed to assume the payment of said one thousand six hundred dollars and interest. On March 24, 1924, Riels and wife conveyed to C.C. Thrash what appears to be about twenty-seven acres of the mortgaged land, and, as a part of the consideration, Thrash agreed to assume and pay two hundred fifty dollars of the said mortgage indebtedness, together with all the proportionate interest thereon. Thus there was assumed by these grantees, in the proportions stated, the entire one thousand eight hundred fifty dollars of the original mortgage indebtedness. All the aforementioned deeds were in due time recorded.
On November 12, 1924, Riels and wife conveyed to the Gunters, the appellees herein, the remainder of the lands, not theretofore conveyed to Hall and to Thrash, the conveyance to the Gunters being in consideration of two thousand fifty dollars cash paid. This latter deed carried the following recitals: "It is agreed and understood that George M. Forman and Company of Chicago, Illinois, holds a deed of trust on said lands together with other lands, but that the said loan has been assumed by the other parties to whom the grantor herein has sold a part of the land described in the deed of trust, and that the grantors herein bind and obligate themselves and their heirs that the grantees herein will be safe from payment of any part of said indebtedness due said George M. Forman Co. as aforesaid, said indebtedness being for the sum of $1850 and duly appearing of record in the office of the chancery clerk of Covington County at Collins, Miss."
It thus appears that at the time the Gunters accepted their deed, they had ample notice that the land was encumbered and of the amount thereof and of the respective assumptions of the indebtedness as aforesaid, and of the proportions of said assumptions. They did not request or secure any release from Forman nor any statement from him in writing or any statements of any kind to the effect that he would look solely to the parties who had assumed the debt of Riels. It is not shown by the evidence that Forman ever had, until recently, any knowledge or notice of the conveyance by Riels to the Gunters, but it is shown that Forman had knowledge of the assumptions above mentioned, and made no objections thereto, but, as already said, made no agreement to look solely to the new debtors. Thrash paid the amount which he assumed, and the Forman trustee released the Thrash lands from the deed of trust on June 20, 1929. But Hicks failed to pay the amount assumed by him, so that at the date of the decree herein there was a balance due of about one thousand five hundred dollars.
On January 4, 1935, Forman assigned the note and deed of trust to complainant, and on March 16, 1935, the assignee, jointly with the trustee in the original deed of trust, filed her bill to foreclose, making Hicks and wife and the Gunters parties defendants. Riels and wife and Hall were not joined as defendants. On the hearing there was a decree pro confesso against Hicks and wife for the balance of the debt and condemning the lands bought by them to be sold to pay the same, but denying all relief against the lands of the Gunters, and complainants appeal.
The Gunters are not liable for the debt, or any part thereof, so far as concerns any personal decree against them, because they had not contracted or assumed to pay the same. It follows that the rule in equity in favor of the Gunters is that Hicks is primarily liable both personally and as to the mortgaged property held by him, together with any other property of his subject to execution; that next after him Hall is liable, together with any property of his subject to execution; and, in the third place, Riels and wife are liable, together with any property of theirs subject to execution; and that it is not until recourse has been had in the order named that the lands of the Gunters may be touched, and then, of course, only for any deficiency after exhaustion of remedies against the parties liable in advance of them, and in the order stated.
The Gunters, after their purchase, made valuable improvements on the land conveyed to them. They did so without any notice or intimation from Forman other than the notice in the record of deeds and the deed accepted by the Gunters that any balance remained due on his debt or that he was looking to the Gunter land for any part of the debt. Their case arouses sympathy, but they cannot be relieved on any of the grounds contended for by them, to-wit: (1) Adverse possession; (2) estoppel; (3) waiver; and (4) a release, as the effect of the release of Thrash. Adverse possession cannot be asserted because the Gunters took in subordination to the deed of trust and with notice thereof. Complainants are not estopped, because they did nothing upon which an estoppel could be soundly predicated; and there was no waiver, because, as already mentioned, it is not shown by the evidence that complainant or her assignor ever knew of the conveyance to the Gunters until the note was past due and was being got ready for foreclosure. And no release of the other lands was worked by the release of Thrash, and his land, because the Gunters had record notice at the time of their purchase as to the amount assumed by Thrash and that he would as a probability be released upon the payment of the amount so assumed by him.
It appears from what we have said that necessary parties were omitted from the bill, and the court should not have proceeded without them. It is true that it is alleged that those not made parties were insolvent; but this does not alter the rule as to necessary parties in a case such as now before us. Persons insolvent today may be otherwise tomorrow. The decree is reversed, and the cause remanded, to be proceeded with along the lines indicated in this opinion.
Reversed and remanded.