Penney v. Miller , 134 Ala. 593 ( 1901 )

SHARPE, J.

Complainant, who is the wife of der fediant Miller, is the holder of two notes which with eight others were made by defendants Miller and Palmatier to defendant. Penney, all of which notes were secured by a chattel mortgage made by Miller and Palmatier to Penney. Complainant! acquired the notes by transfer from Penney under the following indorsement placed on each: “I * * * transfer the within note to Mrs. E. B. Miller without recourse on me, but with the understanding that this note is not to be paid until I have collected four hundred and eighteen and 34-100 (dollars.” The consideration for this transfer appears to have anisen from the fact that complainant had furnished money wherewith an outstanding incumberanee in the form of a bill of sale given by Miller and Palmatier was discharged from a part of the property included in Penney’» mortgage, and the amount she paid, had by agreement of parties been included in the amount of the notes made payable to Penney and secured by the mortgage. The bill of sale she 'discharged urns transferred to complainant and prior to the mortgage a receipt was given her by Penney indicating that he held the property described in a bill of sale as hers, yet it is not alleged as a fact that she ever became the owner of that property. On the contrary, the bill alleges in substance, that by the use of the money complainant furnislied, defendants Miller and Palmatier regained the property covered by that bill of sale and included it in their mortgage to Penney, stipulating that the two* notes amounting to the sum she furnished, should be transferred to her. These averments do not warrant the conclusion that by taking this property under h'isi mortgage defendant Penney became bound as a trustee to account to complainant for its specific proceeds. They go no further than to show an inducement for the. transfer to her of the notes and that as their owner, she shares the security furnished by' all the property included in the mortgage and is entitled to a remedy for its enforcement.

An assignment of part of a mortgage debt is an assignment pro tanto of the mortgage security and the assignee may maintain a bill to foreclose. — Cullum v. Erwin, 4 Ala. 452; Ray v. Knight, 75 Ala. 383; Bebee v. Morris, 56 Ala. 525; Puckett v. Sibert, 75 Ala. 315. Ordinarily, where the terms of the transfer are silent, as to priority, the transferee’s debt is given preference as a claim on the property over that retained by the mortgagee, but by stipulating therefor the transferee may be postponed to the mortgagor. — Cullum v. Erwin, supra. So under the terms of Pennev’s transfer, he retained preference over the complainant in collecting from the mortgage property to the extent of his debt as expressed; and by assenting to and claiming under the mortgage, complainant is estopped to impeach that debt. But though her interest in the security ivas subordinate to Penney’» and hi» attitude was not that of a trustee except as to collection in excess of his debt, he was bound to act towards her in good faith.

The possession of part of the property and the right to possession of all, as well as the legal title, being in him, it was Penney’» duty to use care to prevent destruction and spoliation of the property. Losses .occurred from such causes and through any gross negligence or willful' default of his, are matters which properly go in reluction of his mortgage debt. — Shields v. Kimbrough, 64 Ala. 504; Morrow v. Turney, 35 Ala. 131; 3 Pom. Eq. Jur. § 1216; Onderdonk v. Gray, 4 N. J. Eq. 65; Scott v. Webster, 50 Wis. 53.

Complainant had the right to seek by the same bill the enforcement of her entire claim against the mortgaged property including that accruing to her as owner of the Hundley and Wellman mortgage. As such owner alone she could not have compelled, the foreclosure of the first mortgage, but she Avas entitled to an accounting with Penney and an ascertainment of the amount due on his mortgage to the end that the obstacle it presented to the foreclosure of her second mortgage might be removed as the court might direct. — Davis v. Clark, 65 Ala. 617; Gardner v. Morrison, 12 Ala. 547; Cullum v. Erwin, supra.

From findings of the register it appears that of the property mortgaged to Penney there has been disposed of in various ways an amount worth more than double the entire debt secured by that mortgage; that though Penney has actually collected and applied on his notes only enough to pay them in part yet he is properly chargeable on account of the manner of such disposition with more than enough to satisfy his own and complainant’s notes. The evidence shows that Penney permitted much of this property to be consumed and encumbered by the mortgagors, partly under their agreement and attempt to complete unfinished furniture embraced in the mortgage and partly in working mortgaged material into new furniture. Of this the mortgagors could not complain but as to the complainant it was for all that appears, an unauthorized conversion to the extent that it deprived her of the security provided for her notes. According -to'the conclusions of fact arrived at by the register so far as they are confirmed by the chancery court the weight to which they are entitled, it cannot be held that the decree is erroneous in so far as it provides for the collection of those notes. .

But as favoring the Hundley a,nd Wellman mort: gage, Penney’s debt is not subject to be reduced except by collections actually made thereon. We fail to find from the evidence that he knew of that mortgage until after the mortgagors had quit business and abandoned tire factory, and what loss if any occurred through Penney’s fault after he had such knowlédge, is not shown with any degree of certainty. To subsequent encumberanoers of whom he had no notice a mortgagee owes no duty in respect of caring for the mortgaged property. •3 Pom. Eq. Jur. § 1218. Complainant will not be entitled to have the remaining mortgaged property or its proceeds subjected’to her second mortgage, until Penney’» debt has been actually paid.

The decree appealed from will be here modified so as to direct that after paying costs as directed by that decree, the proceeds of the mortgaged property therein ordered to be sold shall be applied to paying so much of complainant’s debt as has accrued upon the notes transferred to her by defendant Penney, and that the remainder if any be retained by the register to await further orders of the chancery court. As so modified the decree will be affirmed on Penney’s appeal and likewise on the cross-appeal. The appellant and-the cross-appellant will each pay one-half the costs of the appeal, which have accrued in the chancery court.