Lankford v. Peterson , 21 Ga. App. 1 ( 1917 )

Jenkins, J.

(After stating the foregoing facts.) 1. If the instrument sought to be foreclosed was a mortgage, the fact that the obligation on which it was based was infected with usury would not render it void. Dwelle v. Blackwood, 106 Ga. 486 (32 S. E. 593); Moseley v. Rambo, 106 Ga. 597 (32 S. E. 698). Under the law then of force, a security deed so infected was absolutely void. By the terms of the supplemental agreement entered into between Lankford and Peterson, as set out above, as well as by the terms of another agreement signed by each of the parties, which was set forth in the amended pleadings, the instrument sought to be enforced was specifically and repeatedly referred to as a mortgage. We think, however, that if by the terms of the original instrument it were apparent that the intent was then to execute a deed and not a mortgage,.such a mere subsequent designation would-not operate to change the nature of the original instrument, in the absence of such a new valid contract as could be taken to supersede the old agreement and substitute a new and different one. . 27 Cyc. 969, 970. It is now the settled policy of the law that an instrument can not seek to retain title to property for the purpose of securing the purchase price thereof and at the same time create a mortgage on the same property. Bacon v. Hanesley, 19 Ga. App. 19 (90 S. E. 1033). In that case it was held that such an instrument operated only as a reservation of title. It is true that in the case of Smith v. DeVaughn, 82 Ga. 574 (9 S. E. 425), cited in the Bacon case, certain earlier cases are distinguished on the ground that in those cases the title to the property sought to be conveyed was in the defendant; but. in Wynn v. Tyner, 139 Ga. 765 (78 S. E. 185), Justice Lumpkin, speaking for the court, said: “Just how the same instrument can convey title and not convey title at the same time, or retain title and not retain title but be a mere lien, as to the same property and the same debt, is not plain. It would seem to be an effort to reconcile the irreconcilable.” We are therefore of the opinion that if, by the terms of the instrument we are seeking to construe, it was sought to give concurrently a mortgage and a valid security deed, both could not be treated as valid, but the latter would prevail. By the third paragraph of the instrument it clearly appears that the intent of the parties was to create, a mortgage lien upon the entire property. Under the terms of the fourth paragraph, Peterson is to “own a two-fifths interest in the building” proposed to be constructed; and at the same time was to have a lien on the entire property. It is apparent, and it is not denied by either of the parties, that this provision of the contract was merely a scheme to cover up the payment of usury under the name of rent. The defendant attacks the instrument as a conveyance, on this ground, and the plaintiff claims no benefit thereunder. Would the abortive and palpably illegal attempt to thus pass title in this portion of the improvements operate to annul, either in whole or in part, the valid lien by mortgage clearly created, where it is plain from the instrument that the intention was not so to do ? We do not think so. In Coleman & Burden Co. v. Rice, 115 Ga. 510 (42 S. E. 5), where an assignment or transfer by an insolvent debtor to a named trustee, with power of sale, was held to be void on account of the illegal reservations, and as a consequence an execution of the power conveyed no title to a purchaser, the court laid down the following rule: “If, however,' the purchaser at such attempted sale, at the time of the transfer, held a valid lien by a mortgage on the property he sought to purchases and neither before nor after such sale gave up, relinquished, or canceled his lien, or agreed or intended to do so, there was no merger of the lien with the title sought to be conveyed, but the same remained intact, and capable of enforcement. Aliter, if he did, as a consequence of his purchase, cancel and relinquish his lien, or if he intended to do so.” In the instant ease we are furthermore much inclined to think this provision of the instrument now under consideration did not pass title to the two-fifths interest in the improvements, for the reason that the agreement within itself contains' a defeasance clause, —not the provision that the two-fifths interest is to be divested by Lankford buying it back and Peterson’s agreement to reconvey on the payment of the advances, for this does not amount to a defeasance clause (Pitts v. Maier, 115 Ga. 281, 41 S. E. 570), but section six, in which it is “agreed that after twelve months from the date hereof the said W. C. Lankford shall be permitted to pay B. Peterson the said $10,000.00 either in whole or in sums of $2,500.00; a proportionate part of the rent herein contracted to be paid by the said W. C. Lankford to the said B. Peterson to cease upon the payment of such amount, or amounts, that is to say for each $2,500.00 so paid, one fourth of said amount of rent no longer due to said B. Peterson each month and collectible by him.” This, w.e think, in effect amounts to providing that title in Peterson shall cease upon the payment of the advances made.

Counsel for plaintiff in error, however, seem to insist most strongly upon their contention that since, by the terms of, the original contract, it was agreed that when Lankford,should have consummated his loan with the annuity company and received back from it a bond for title, the bond should be- (as was actually done) assigned to Peterson, this operated to render null and void the provisions creating a mortgage. In our opinion it is true that a valid assignment of such a bond for title operates to pass to the assignee all the rights and equities to which the assignor was then entitled (McIntire v. Garmany, 8 Ga. App. 802, 70 S. E. 198; Webb v. Harris, 124 Ga. 723, 53 S. E. 247) ; but, under the facts of the present case, this agreement was but ah executory promise, and by the terms of the contract the assignment was not to go into effect until long subsequent .to the creation of the mortgage. Therefore, the question is, as we see it, whether the mortgage lien became merged into a subsequently acquired title. It is a well-recognized principle of law that merger does not in - general take place unless the parties so intended. Knowles v. Lawton, 18 Ga. 476 (63 Am. D. 290); Ferns v. Van Ingen, 110 Ga. 102 (35 S. E. 347); Coleman & Burden Co. v. Rice, supra; Woodside v. Lippold, 113 Ga. 877 (39 S. E. 400, 84 Am. St. R. 267); Goodell v. Hall, 112 Ga. 435 (37 S. E. 725). It will be observed that the agreement in the present case specifically provides that the bond shall later be assigned as “additional” security; which is certainly equivalent to providing that the mortgage lien shall not be superseded. Even if the transfer of title were not, as in this case, void because of usury, and had been made contemporaneously with the creation of the mortgage, we can see how it might be urged with some force that, since, by the agreement, such assignment of title was to be in the nature of additional security only, if either form of security must fail, the latter, though of a higher form, should he declared invalid as being merely an illegal attempt to add to and supplement, though not to supersede an already existing valid lien. But since the assignment of title is in fact subsequent to the creation of the mortgage and is within itself absolutely void, we do not think that the prior valid mortgage should be held to have been merged therein, where it not only does not appear that such was the intent, but where the contrary purpose is definitely expressed.

2. Exceptions are taken to the-direction of the verdict in favor of plaintiff, on the ground that since the instrument foreclosed was merely an executory promise or agreement on the part of Peterson, whereby he obligated himself to advance certain money to Lankford on condition that the latter himself should comply with certain obligations devolving upon him by the terms of the agreement, the instrument does not afford prima facie proof that such advances were actually made. The defendant, by its answer, denied in general terms the amount alleged 'to be due. The plaintiff having become deceased prior to the date of the trial, the defendant was rendered unable to testify in his own behalf as to the transaction had with the decedent. Ordinarily the mortgage and the collateral obligation which it secures are prima facie evidence of the existence and the amount of the debt therein set forth; but where the consideration of the obligation is not definitely ascertained at the time of its execution, or consists of eontingcnt liabilities or advances to be thereafter made, it becomes incumbent on the holder of the obligation to show the amount 'actually advanced thereunder. 27 Cyc. 1613-14. In this case it is conceded that Lankford fully performed the obligations resting on him under the contract, and which constituted the condition upon the performance of which the advances set forth in the contract were to be made. This, however, of -itself would not be sufficient to carry the burden resting upon the plaintiff. We think, however, there being no conflict in the evidence, that what was actually shown, with all reasonable deductions- and inferences therefrom, demanded a finding that the full amount of the advances which the agreement obligated had in fact been actually made. It will be recalled that by the terms of the contract the $10,000 was to be advanced during the course of construction of the building, in four installments of $2,500 each, the first installment to be paid in May, and the payments to continue through June, July, and August. ' Section five of the contract provided that “during the construction of said building. . . W. C. Lankford is to pay $30.00 per month for the first month said building is under course of construction, $60.00 for the second month, $90.00 for the third'month, and $120.00 for the fourth month, and each month thereafter; said amount to be paid to the said B. Peterson as his part of the rents of said building, or part of building during said time.” By section four it was agreed that “W. C. Lank-ford is to guarantee the rental value of said building to be $300.00 per month, that is to say that the said W. C. Lankford is to pay to the said B. Peterson the sum of $120.00 per month as his part of the rents from said building, be the amounts so received more or less.” At the trial it was admitted “by the plaintiff and the defendant and their attorneys ■ that W. C. Lankford paid to B. Peterson the following amounts on the following dates: $30.00 on June 1st, 1912; $60.00 on July 1st, 1912; $90.00 on. August 1st, 1912; $120.00 on September 1st, 1.912; and also $120.00 on the first of each month thereafter up to and including November 1st, -1914; and that these payments were paid-as interest, and that the said payments- were applied, as interest up to November 1st, 1914.” In addition to this, the plea of the defendant sets up that the contract was a scheme or device by which plaintiff was to collect $12.00 per month on each thousand dollars advanced. And then,- too, the collateral agreement subsequently signed by each of the parties on February 1, 1915, states that “The interest due on the -within and foregoing mortgage has been satisfactorily arranged and paid to November 1, 1914, and it is hereby agreed that said mortgage and the indebtedness secured thereby shall from and after said November 1, 1914, bear interest at the rate of 8% per annum, thus superseding the original plan in said-mortgage as to payment of said interest by rents collected.”

From all of which it appears to us that no other finding could have been had than that the entire $10,000 contemplated by the agreement had been actually advanced.

3. The bill of exceptions contains the following statement: “It was admitted by plaintiff and the defendant and their attorneys that W. C. Lankford paid to B. Peterson the -following amounts on the following dates: $30.00 on June 1st, .1912; $60.00 on July 1st, 1912; $90.00 on August 1st, 1912; $120.00 on September-1st, 1912; and $120.00 on the first of each month-thereafter up to and including November 1st, 1914, and that these payments were paid as interest and that the said payments were applied-as interest-up to November 1st, 1914.” It was held in Atlanta Savings Bank v. Spencer, 107 Ga. 630 (33 S. E. 878), that “When not otherwise directed by the debtor, payments made on a debt infected with usury will be applied first to the payment of the legal interest due at the date of the payment; and any balance remaining after such interest is discharged will go in reduction of the principal. A plea alleging such payment may be properly filed to an action on the debt, notwithstanding more than twelve months have elapsed after the payment before the plea is filed.” In the opinion in that case (p. 635) it is specifically, stated that direction is given thereto by reason of the fact that there was no express agreement that the payments made were to be applied otherwise than in the manner the law would direct. See also Cheapstead v. Frank, 71 Ga. 549; Gramling v. Poole, 111 Ga. 93, 96 (36 S. E. 430). In the Gheapstead case,, supra, it was held that'the “statute of limitations relied upon to defeat this defense is alone applicable to suits brought to recover usury which has been paid, or to a sehoff claiming such a demand.” Thus we think that where the payments of usury have by. direction been so applied, the statute of limitations is applicable; and no error was committed by the trial judge in this respect.

Judgment affirmed.

Broyles, P. J., and Bloodworth, J., concur.