Brewer v. Atkeison , 121 Ala. 410 ( 1898 )

HARALSON, J.

— Action for money bad and received, tried on pleas :of the general issue, and a special plea of estoppel.

. The. principle is well understood with us, that the transfer of one of several notes secured by mortgage, clothes’the transferee with the right to be first paid out of the mortgaged property.. — Knight v. Ray, 75 Ala. 383; Preston v. Ellington, 74 Ala. 133. In the first case cited, the mortgagee, Knight, held three notes 'secured by mortgage, one of which, for a Valuable consideration he transferred' to Ray, retaining the other two. The mortgagor made, partial payments to Knight, the mortgagee, but left unpaid on his notes $400. Thereupon, Knight, after due advertisement, sold the lands under the power in the mortgage, and,.through another, became the purchaser of them at $350, a sum in excess of the amount due Ray, on his note. NO money was paid, but the mortgagee entered a credit On the mortgage, of the sum realized oft the' sale.' Ray filed a bill and sought thereby to trace.her money into this land and to charge it with its reimbursement. The court held that the sale under the mortgage was in effect, an investment by Knight, the mortgagee, of the funds realized from'the sale, in the lands sought' to be 'subjected by the bill. They said of the transaction: “While all the notes remained the property of Knight, the mortgaged lands were equally bound for the payment of each. When, however, Knight traded and transferred one of the notes to Mrs. Ray, retaining the' others, although the transfer was by mere delivei’y, he clothed her with the right to be first paid out of the proceeds of the property mortgaged. — Doe ex clem. McGloskey, 1 Ala. 708; Outturn v. Ecltoin, 4 Ala. 452; Wallace v. Nichols, 56 Ala. 321. When Knight made the sale the proceeds of right being primarily due to Mrs. Ray, it was his duty to pay, first, her demand, before applying any of the proceeds to his claim. Failing to do so, an action for money had and received lay in her favor; and when, instead of paying the money to her he in-vested it in lands, he armed her with the right to have a lien declared on the land thus purchased for the payment to her of her money thus improperly invested.”

Yol. 121.

. The principle underlying this and our other decisions to the same effect is, that an assignment by the mortgagee of one of the mortgage notes operates as an assignment pro tanto of the lien upon the lands, and entitles the assignee to payment in priority of the note retained by the mortgagee out of the funds arising out of the mortgaged property' — the lien extending through the property mortgaged, to the money for which it may -have been sold. But, the principle ■ has no application to money paid by the mortgagor to the mortgagee on the remaining note, when, so to speak, the money so paid never saAv the mortgaged lands, was independent and not the legitimate offspring of them. Such money could in nowise be imbued or infected with the mortgage lien security. — Code, § 1040 (1844); Knight v. Ray, Preston v. Ellington, supra.

The evidence in the case shows without conflict, that the money paid by Goodwin the mortgagor to the defendant, was not the proceeds of the sale of the mortgaged property, and that the, property was not burned over to her on account of such payment.

The contention of appellee’s counsel is, — to express it in their oivn language, — that “The payment by Goodwin, the mortgagor, of two of the three notes secured by the mortgage, and securing thereby a full satisfaction from the mortgagee of the mortgage debt and a re-convevance by the mortgagee of the legal title standing in her to the lands covered by the mortgage, we submit, was in effect a foreclosure of the mortgage, and entitled the appellee to his action for money had and received.”

But in this insistence we apprehend counsel are in error. We have seen that the assignment by the mortgagee of one of the secured notes operated as an assignment pro tanto of the mortgage lien upon the lands, authorizing the assignee to foreclose the same under the power in the mortgage (Code, § 1040; Hartley v. Matthews, 96 Ala. 224). Goodwin, the mortgagor, knew when lie paid the.two notes to the defendant, — the executrix of the mortgagee, — that there was another mortgage note outstanding, in the hands of the plaintiff, who claimed the same. When the defendants, therefore, upon the payment to her of the two notes she held, executed to the mortgagor a quit-claim to the mortgaged lands, she did not thereby destroy the mortgage security the plaintiff held on these lands for the payment of his debt. She was'without authority to satisfy the mortgage as to 'plaintiff’s debt; and, between the plaintiff and the mortgagor, the mortgage remains, as for anything appearing to the contrary, a valid security for the payment of the note held by the plaintiff, if, and to the extent, the same remains unpaid. — 1 Jones on Mortgages, § § 814, 818; Wildsmith v. Tracy, 80 Ala. 258; Johnson v. Beard, 93 Ala. 96.

' From the foregoing it will appear that under the plea of the general issue, charges 1 and 2 requested by defendant and refused, should have been given.

Rever sed. and remanded.