Bank of Luverne v. Turk

It is urged on rehearing that we are disregarding the case of Bramlett v. Kyle, supra. But if we give full effect to the question there directly involved, it would not necessarily be conclusive in this case. That was between a mortgagor and his mortgagee, and only indirectly affected creditors not parties. It did announce a doctrine of marshaling securities which was only incidentally involved by way of argument, and contrary to our judgment now entertained. However, the conclusion was not followed in principle in our more recent case of Booker v. Booker, 220 Ala. 367, 125 So. 212, and is contrary to the holding in a majority of the states and authorities generally. Mounce v. Wightman, 29 Ariz. 567, 243 P. 415, 44 A.L.R. 754, and note pages 763 et seq.; Nolan v. Nolan, 155 Cal. 476,101 P. 520, 132 Am. St. Rep. 99, 17 Ann. Cas. 1056 and note 1064; 5 Pom. Eq. § 2292 (869).

The controversy in this case is not directly between the mortgagor and the mortgagee, but with a judgment creditor who has no lien on the homestead, and who is seeking to subject the homestead to his judgment by an indirect method, admitting that it cannot be done by direct proceedings. To permit this creditor to redeem and then sell all the land first to pay the mortgage debt and then pay the judgment out of the balance without taking account of the homestead rights would have the same result as to permit him to require the mortgagee to sell the homestead first and leave the nonexempt property subject to sale under the judgment. This is the well-known doctrine of marshaling securities.

Undoubtedly, this doctrine is well recognized as a general rule in Alabama by the decisions (Coke v. Shropshire, 59 Ala. 542; Gusdorf v. Ikelheimer, 75 Ala. 148; Henderson v. Steiner,202 Ala. 325, 80 So. 407; Orr v. Blackwell, 93 Ala. 212,8 So. 413), and declared by statute (section 8938, Code). But when the homestead is involved, it is said in 2 Story on Eq. § 871, that: "This rule will not be enforced where its tendency will be to deprive the debtor of his homestead." And in 5 Pom. on Eq. § 2292, it is said: "That it cannot be invoked to compel a creditor to resort to a homestead in the first instance." In 18 R. C. L. 463, the statement is that: "In most jurisdictions the principle of marshaling does not apply to creditors thus situated, for its application would result in placing a greater burden on the exempt property than has been placed thereon by the debtor himself or by the law, and thus nullify the protection which the law provides for the debtor and his family." To the same effect is the text of 38 Corpus Juris, 1375, with a long list of authorities. The notes indicate that in Wisconsin and South Carolina the early cases did not follow this view, but statutes in both states have applied it effectually, and that Pennsylvania is stated to be the only state now maintaining this view; but Alabama is with the majority through its cases of Bank of Talladega v. Browne, supra; and Ray v. Adams, supra. For a discussion of this situation, see notes in 38 Corpus Juris, 1375 (n. 56 and 58 a and b.); 44 A.L.R. 758, 762, note; 17 Ann. Cas. 1063, note; Mitchelson v. Smith, 28 Neb. 583, 44 N.W. 871, 26 Am. St. Rep. 357.

Our two cases above cited do not contain an extended discussion of the subject, though they announce the principle as conclusive. But in Cochran v. Miller, 74 Ala. 50, 63, a statement is made without citation of authority, and not necessary to the result reached that the doctrine does apply to exempt property.

We take it, therefore, that, when arguendo the doctrine of marshaling securities is stated in our two cases to apply to the homestead, the statements were made without due consideration of our own and other cases on the subject not necessary to the result reached, and not sound in principle and contrary to the overwhelming weight of authority. We therefore cannot follow the dictum there stated as controlling in this case.

Our conclusion is, as expressed in the former opinion, in effect, that a creditor with a lien on property other than the homestead cannot indirectly subject the homestead to his judgment by marshaling of securities, subrogation, redemption, or other method. Equity will never so construe one of its remedies as to conflict with the public policy of the state as expressed in its statutes and Constitution. This in no sense lessens the security of the mortgage to satisfy the debt secured by it. That debt must be satisfied before the homestead rights shall operate.

We wish to modify the former opinion in respect to the taxation of the costs of the circuit court, which did not accrue on appeal, so that we now permit that court to tax such costs without direction from us, and substitute the opinion as it now appears for what was previously written.

As thus modified, the opinion is adhered to, and the application is overruled.

All the Justices concur.