Hughes & Tidwell Supply Co. v. Carr , 203 Ala. 469 ( 1919 )

By the default of the mortgagor, the McColloch mortgage was discharged of its condition on December 1, 1914, and the estate of the mortgagee became absolute, subject only to an equity in the mortgagor to redeem from the forfeiture, which a court of equity, to prevent hardship and injustice, would raise and enforce on his application. McColloch was then absolutely entitled to the land and its possession as of his title of February 14, 1914, created by the execution and delivery of the mortgage. Thompson Co. v. Union Warehouse Co., 110 Ala. 499,18 So. 105; Dennis v. McEntire Mercantile Co., 187 Ala. 314,65 So. 774.

While this equity of redemption is regarded as an interest in the land, and where it arises by express reservation, or necessary implication from the terms of the mortgage, it cannot be transferred, except by an instrument in writing, containing apt words of transfer, yet the mortgagor can, by conduct inconsistent with the right to assert this equity, be estopped from asserting it. McMillan v. Jewett, 85 Ala. 476, 5 So. 145.

For the purposes of this case, conceding that the effect of the transaction occurring between the mortgagor, Carr, and the mortgagee, McColloch, on or about December 1, 1914, was inefficacious to release, transfer, or convey the equity of redemption out of the mortgagor, yet by this transaction Carr induced McColloch to accept the land back in full satisfaction of the mortgage debt, to release him therefrom, and to restore to him as rent a part of the purchase money already paid. The value of the land, according to the averments of the bill, was not disproportioned or in excess of the amount due, and the rent agreed to be paid was not in excess of what was reasonable. The transaction was free from any taint or imputation of fraud, and under these circumstances it would seem a court of equity would not permit Carr to repudiate his trade and assert the equity of redemption, if he sought to do so.

Moreover, the cross-bill avers:

"The further agreement was that McColloch was to take the land back in full settlement of the mortgage debt without any sale thereunder, and Carr was to execute a deed to McColloch, which deed was to be executed at once, [but] owing to thesickness of Carr's wife, and other matters intervening causingdelay, the deed was not executed until January 28, 1915."

A court of equity, applying the maxims that equity regards substance rather than form, and treats as done that which ought to have been done to carry into effect the intention of the parties, will give effect to the transaction by fixing the status and rights of the parties as if the deed was executed on the date it should have been executed. Randall v. White, 84 Ind. 509; Hasbrook v. Paddock, 1 Barb. (N.Y.) 635; 16 Cyc. pp. 134, 135, pars. E and F; Mewburn v. Bass, 82 Ala. 622, 2 So. 520.

However, independent of these principles, after default of the mortgagor, in the absence of contract, he became a tenant at will of the mortgagee, and the mortgagee, by an active assertion of his right, was entitled to the possession of the land, and the rents, incomes, and profits therefrom. Welsh v. Phillips, 54 Ala. 309, 25 Am. Rep. 679; Sadler v. Jefferson,143 Ala. 669, 39 So. 380; Comer v. Sheehan, 74 Ala. 452; Lamar v. Johnson, 16 Ala. App. 648, 81 So. 140.

We know of no rule of law, or principle of equity, that would deny to the parties the right, by contract entered into in good faith, to convert the tenancy at will into a tenancy by contract, or for a term; and we hold the effect of the agreement between McColloch and Carr, entered into about December 1, 1914, was to convert the tenancy at will into a tenancy by contract, under which Carr attorned to McColloch by paying rent for the year 1914. Therefore, whatever possession, or right of possession, Carr had or exercised in the land on January 5, 1915, when complainants' mortgage was executed, was as the tenant of McColloch, and the complainants were not innocent purchasers without notice, in the sense that their mortgage created a lien superior to McColloch's lien as landlord on the crops for the year 1915 for any rent due, or advances made, remaining unpaid. Waite, Lafils Co. v. Corbin,109 Ala. 154, 19 So. 505; British American Mortgage Co. v. Cody, 135 Ala. 622, 33 So. 832; Bush v. Willis,130 Ala, 395, 30 So. 443; McLellan v. Roberson, 171 Ala. 122,55 So. 99.

Whether McColloch has a lien under the Bussey mortgage, superior to that of complainants, depends on whether the debt secured thereby has, or has not, been paid, and McColloch's ownership thereof. These questions are presented in the form of issues of fact by the pleadings, and the law applicable thereto is well stated in Whaley v. Bright, 189 Ala. 134, 66 So. 644, and authorities there cited.

Applying what is said above, the result is that the demurrers to the cross-bill were properly overruled, and the decree appealed from is affirmed.

Affirmed.

ANDERSON, C. J., and SAYRE, J., concur.

GARDNER, J., rests his concurrence as to the result on the authority of Thompson Co. v. Union Warehouse Co., 110 Ala. 499,18 So. 105.