Case Name: AGNEW v. CHARLOTTE, COLUMBIA & AUGUSTA R. R. CO.
Court: Supreme Court of South Carolina
Jurisdiction: South Carolina
Decision Date: 1885-11-27
Citations: 24 S.C. 18
Docket Number: 
Parties: AGNEW v. CHARLOTTE, COLUMBIA & AUGUSTA R. R. CO.
Judges: Mr. Chief Justice Simpson concurred.
Reporter: South Carolina Reports
Volume: 24
Pages: 18–29

Head Matter:
AGNEW v. CHARLOTTE, COLUMBIA & AUGUSTA R. R. CO.
A debtor gave to his surety a mortgage of land to secure the debt and to indemnify the surety; afterwards another creditor obtained judgment against this debtor; and after that, such surety being required to pay the debt, the debtor conveyed some of this land to such surety, the conveyance stipulating that it -was made subject to said mortgage, which was to remain open to protect the surety against dower, liens, and encumbrances. The judgment creditor then levied, sold, and purchased a portion of the land so conveyed, and brought action for its recovery. Held, that the express agreement of the parties prevented a merger, that the mortgage remained open, and that the plaintiff was not entitled to recover the land. Mr. Justice McIver, dissenting.
Before Wallace, J., Richland, December, 1884.
This was an action by John Agnew against the Charlotte, Columbia & Augusta Railroad Company, commenced May 30,1884. The opinion states the case. The Circuit Judge rendered the following judgment:
The issue presented for me to decide is as follows: The plaintiff claims that the tract of land, having been conveyed by the mortgagor to the mortgagee, the equity of redemption and the legal estate became merged; and the mortgage, upon the bond being paid, became extinguished- The defendant claims that the intention expressed in the conveyance from Hoffman to defendant kept the mortgage open and prevented its extinguishment.
The general rule of law is, that where the mortgagee purchases the land mortgaged to him, the equitable and legal estates, becoming thus united in him, are merged and the mortgage thereby extinguished. The courts of most of the States and of England and the United States Supreme Court hold that where it can be shown that it was the intention of the parties, or where this intention can be inferred from it being the interest of the grantee, to keep the mortgage open, then the mortgage will not be extinguished. Insurance Company v. Murphy, 111 U. S., 744. This, however, seems not to be the law in South Carolina, as I interpret Devereux v. Taft, 20 S. <7., 555.
But no case has been cited from the decisions of this or any other State, where a court has held that when the intention to keep the mortgage alive is written in the deed of conveyance of the land and duly recorded, in such case the mortgage is extinguished. Dr. Pomeroy, in his admirable work on Equity Jurisprudence, vol. 2, pp. 248-9-50-1, tells us that the rule is universal, that where the intention is expressed in the conveyance, the mortgage remains open, and is not extinguished. The cases cited by the Supreme Court in the case of Devereux v. Taft (nor any cited by counsel here) do not involve or consider the question when there is an express stipulation that the mortgage shall be kept open to protect against liens and encumbrances. The case now under consideration by me illustrates how great injustice would result from a departure from the rule last stated by me.
This case is of novel impression in South Carolina, yet I have no hesitation in making my decision. I find the issues presented before me in favor of the defendant-; and it is therefore adjudged and decreed that the complaint be dismissed with costs for the defendant.
Mr. E. O. Haynsworth, for appellant.
Mr.,J. IT. Rion, contra.
November 27, 1885.

Opinion:
The opinion of the court was delivered by
Mr. Justice McG-owan.
This was an action to recover 210 acres of land under the following circumstances: On September 9, 1872, James M. Rutland and James H. Rion, as executors, conveyed to one G-. P. Hoffman a tract of land containing 1,159 acres, which included the small tract in dispute. Hoffman gave his bond for the purchase money, with the defendant corporation as surety, and on the same day executed to the said railroad company a mortgage of the premises, to indemnify them against loss as such surety. On May 11, 1882, the plaintiff, Agnew, recovered a judgment against the said Hoffman and issued execution thereon. On October 27, 1882, the railroad company, as surety, having been required to make payments on the purchase money, settled with Hoffman, who assigned certain choses in action, paid a sum in lumber, and conveyed 560 acres of the land mortgaged, to them, including the 210 acres now in dispute, towards payment of the mortgage debt.
This conveyance contained the following clause: "All of said tracts being portions of a tr-act of 1,159 acres purchased by me of James M. Rutland and James H. Rion, as executors, &c., on September 9, 1872, payment secured by my bond with the aforesaid company as surety, and a contemporaneous mortgage of the premises for joint security of grantors and surety; this grant, bargain, sale, and release being made with the consent of James-H. Rion as a conveyance of the said three tracts of land, the same having been paid for by said railroad company ; and hence I do hereby grant, bargain, sell, and release the said land subject to a mortgage to said company, which is to remain open to protect against claim of dower, liens, and encumbrances, together," &c.
On March 8, 1884, the sheriff, under plaintiff's execution, sold the tract of 210 acres, and the plaintiff, becoming the purchaser, brought this action for the land. Trial by jury was waived, and Judge Wallace dismissed the complaint. The plaintiff appeals to this court upon the following grounds: "1. Because his honor did not find, in his fifth finding of fact, that on October 27,1882, the said Gr. P. IToffman and the defendant herein came to a settlement, in which said Gr. P. Hoffman assigned some choses in action and paid the defendant- $>205 in lumber, and conveyed to the defendant, in settlement of the balance due by him, 568 9-10 acres, it being a part of the original tract, and consisting of three tracts, of which the tract of 210 acres mentioned in the complaint is one. 2. Because his honor held that there being an express stipulation in the deed of conveyance that said mortgage should remain open, the conveyance from Hoffman to the defendant did not operate to merge or satisfy said mortgage as to the land conveyed to the defendant. 3. Because his honor did not hold that said mortgage was merged or satisfied by such conveyance, and that the plaintiff is entitled to the possession of said tract of land. 4. Because his honor did not hold that even if said mortgage was not merged or satisfied, the plaintiff is entitled to recover the possession thereof, subject to the lien of said mortgage," &c.
It is true that under our law a mortgage of real .estate is merely a security for the debt, the legal title remaining in the mortgagor. The conveyance of the land by Hoffman to the railroad company was subsequent to the recovery of Agnew's judgment against Hoffman, and, therefore, that conveyance alone could not stand in the way of title acquired under Agnew's judgment. The answer to this, however, is, that there was a lien upon the land when Agnew's judgment was recovered, viz., the mortgage of the railroad company, and that the land was conveyed to the company, in payment of the debt secured by that senior lien. But to this it is replied that the conveyance of Hoffman, the mortgagor, to the company, the mortgagee, operated, by way of merger, to extinguish not only the whole mortgage debt, but the mortgage itself, leaving the land subject to the next lien, precisely as if the. mortgage had never existed; so that the question is whether the court must apply the technical legal doctrine of merger, and thereby declare the mortgage extinguished, notwithstanding the stipulation of the parties, expressed in the conveyance itself, that the mortgage should "remain open" to protect the purchaser, who had paid the debt, against liens subsequent to the mortgage, but prior to the conveyance of Hoffman to the railroad company.
In this State the legal doctrine of merger has been applied to the case of a mortgagee purchasing from the mortgagor, or under legal process against him, the interest known as the equity of redemption. See Devereux v. Taft, 20 S. C., 558. The general doctrine, as stated by Chancellor Wardlaw in the case of Allen v. Richardson (9 Rich. Eq., 53), is, "that a mortgagee, who buys the estate under mortgage, not under process of foreclosure of his lien, extinguishes the debt or claim with lien on the land," &c. It will be observed that the rule as here announced excludes from its operation a case, where the mortgage premises are sold to pay the mortgage debt, under process of foreclosure. In such case the mortgagee may purchase and take good title. So far as title to the premises is concerned, it is somewhat difficult to draw a distinction in principle between a sale for the purpose of paying the mortgage debt under proceedings of foreclosure and one for the same purpose by the mortgagor himself. It is at least intelligible how such a purchase might be held as an extinguishment of any portion of the mortgage debt which the conveyance of the land failed to pay. But it is not equally clear why a private sale for the same purpose should be considered as placing the matter in the same condition as if neither the mortgage debt nor the mortgage had ever existed. It would seem that a conveyance in part payment of the debt secured should at least carry good title to the extent of the payment made upon the debt. Such is undoubtedly the result when the sale is made under proceedings to foreclose the lien.
But, assuming the rule to be as stated, none of the cases in our books deal with any of the exceptions and qualifications of the general rule; as, for instance, the case of an express written agreement by the parties that there should be no merger, but that the mortgage shall remain open for the protection of the purchaser. Although this precise point has never before arisen in this State, it seems that the general law upon the subject is well settled. Mr. Pomeroy states the doctrine as follows: "When the owner of the fee becomes absolutely entitled in his own right to a charge or encumbrance upon the same land, with no intervening interest or lien, the charge will at law merge in the ownership and cease to exist. Under like circumstances a merger will take place in equity, where no intention to prevent it has been expressed, and none is implied from the circumstances and interests of the party. Generally the same results follow, whether a mortgagee assigns a mortgage to the mortgagor or the mortgagor conveys the land to the mortgagee." 2 Pom. Eq. Jur., § 790. And in the sections following he further says: "If there is no reason for keeping it (the mortgage) alive, then equity will, in the absence of any declaration of his intention, destroy it; but if there is any reason for keeping it alive, such as the existence of another encumbrance, equity will not destroy it. In short, where the legal ownership of the land and the absolute ownership of the encumbrance become vested in the same person, the intention governs the merger in equity. If the intention has been expressed, it controls," &c. 2 Pom. Eq. Jur., § 791, and authorities in note; Jones Mort., § 848; Insurance Company v. Murphy, 111 U. S., 744.
We agree with the Circuit Judge, that in this caáe the express agreement of the parties prevented a technical merger, and the senior mortgage of the company is still open. The plaintiff, Agnew, only purchased the equity of redemption, and he is not entitled to recover possession of the land in this action. Possibly he may, upon tender of the mortgage debt, have his action to redeem, but upon that subject we rule nothing in advance.
The judgment of this court is, that the judgment of the Circuit Court be affirmed.
Mr. Chief Justice Simpson concurred.