Pitts Banking Co. v. Fenn , 160 Ga. 854 ( 1925 )

Hines, J.

1. If two estates in the same property unite in the same per'son in his individual capacity, the latter estate is merged in the greater. Civil Code (1910), § 3682. So where the beneficiaries of a homestead estate acquire an absolute title to the reversionary interest in the property out of which the homestead estate was carved, and it does not appear that it was the intention of the beneficiaries to keep the two estates separate, the latter or homestead estate is merged in the greater or absolute estate, and the beneficiaries in whom the two estates unite may convey the fee in the land absolutely, or for the purpose of securing a debt. Goodell v. Hall, 112 Ga. 435 (37 S. E. 725); Nash v. Peoples Loan & Realty Co., 151 Ga. 40 (105 S. E. 641). Where the mortgagee purchases the equity of redemption under a junior lien, the whole estate is vested in him; and both the mortgage and the debt upon which it is founded are extinguished, unless the actual value of the mortgaged property is ascertained by foreclosure and sale, or express stipulation between the parties. Jackson v. Tift, 15 Ga. 557. Where the mortgagee purchases the mortgaged property from the mortgagor, the mortgage is extinguished by merger. Marshall v. Dixon, 82 Ga. 435 (9 S. E. 167). An absolute deed conveying land as security for a debt is a security of a higher nature than a mortgage for the same debt on the same premises, and when the mortgage is entered satisfied, and surrendered up because of the execution of such deed, the transaction operates as a novation .and amounts to a merger. Patterson v. Evans, 91 Ga. 799 (18 S. E. 31); MacIntyre v. Ferst, 101 Ga. 682 (28 S. E. 989) ; Farkas v. Third National Bank, 133 Ga. 755 (66 S. E. 926, 26 L. R. A. (N. S.) 496); Hinesley v. Stewart, 139 Ga. 7 (76 S. E. 385). The general rule at law is that the mortgage becomes merged in the deed, the latter conveying a greater estate than the mortgage; but in equity the lesser security is not merged in the greater when it appears that the holder of both intended that a merger should not take place. The intent controls. Ferris v. Van Ingen, 110 Ga. 102 (3), 111 (35 S. E. 347). Such intention sometimes expressly appears from the writings, as in the case last cited. If such intention does not expressly appear from the writings, then it must be shown by aliunde proof. If two estates in the same property unite in the same person in the same capacity, and it is contended that no merger took place, the person making such contention, if entitled so to do, must allege and prove facts negativing the existence of such merger. Muscogee Mfg. Co. v. Eagle & Phenix Mills, 126 Ga. 210 (7) (54 S. E. 1028, 7 L. R. A. (N. S.) 1139); Knowles v. Lawton, 18 Ga. 476 (63 Am. D. 290). Presumptively a mortgage is merged when the mortgagee takes from the mortgagor a warranty deed absolute in form to the mortgaged property. Furthermore such a deed is presumptively one of bargain and sale.

2. As a warranty deed, absolute in form, is prima facie one of bargain and sale, and as intention controls in determining whether a mortgage is merged in such a deed from the mortgagor to the mortgagee to the property contained in the mortgage, such deed was relevant and admissible on the issues, (1) whether such deed was made to secure debt, as claimed by the plaintiff in fi. fa., and (2) whether' it was the intention of the grantee in such deed that the mortgage was settled thereby and the mortgage lien merged in the greater estate created thereby. Likewise, the indictment returned against Butts under the Renal Code, § 714, on which Eenn was the sole witness, and upon whose testimony the same was presumptively found, and the evidence of Eenn touching the finding and return of said indictment, were admissible. This evidence threw some light on the questions, whether this warranty deed, absolute in form, was a sale or a security (the indictment reciting that this conveyance was made for a present consideration of $3261.36), and whether there was an intention on Eenn’s part that the mortgage should not be merged in the absolute estate apparently created by this instrument.

No. 4975. August 14, 1925.

3. Applying the above rulings, the court below erred in ruling out said deed, indictment, and evidence.

Judgment reversed.

All the Justices concur. J. E. Dorsey and Strozier & Gower, for plaintiff in error. Eal Lawson, contra.