Opinion ID: 1606319
Heading Depth: 1
Heading Rank: 3

Heading: Plaintiff's Theory of Suretyship

Text: Plaintiff has urged as an alternate theory of recovery that either the estate of Bessie Whigham, by suffering the foreclosure and sale of its property, or Plaintiff James Whigham, by paying the mortgage indebtedness to City Federal, paid a debt owed by the defendants, and therefore the defendants are liable to the estate of Bessie Whigham or to James Whigham on a suretyship basis. This theory is not supported by either the facts or the law. Throughout this case the plaintiff has sought to treat the estate of Bessie Whigham as a legal entity wholly separate and apart from James Whigham and to persuade this Court that the actions of James Whigham after the death of Bessie Whigham should not be attributed to the estate. This Court finds that such a separation of interests and actions cannot be made as a matter of fact and of law. On March 4, 1975, Bessie Whigham died, naming in her will her husband James Whigham as her sole devisee and legatee and as the executor of her estate. Under well-established principles of Alabama law, the title Bessie Whigham held to interests in the mortgaged property vested in her sole devisee, James Whigham, on March 4, 1975. `On the death of a testatrix the title to and right to possession of land devised vests as of that date subject to certain statutory rights and duties of the executor, though the will is, of course, not probated until a later date.' Whorton v. Snell, 226 Ala. 525, 526, 147 So. 602, 603 (1933); accord, Glasgow v. Blackwell, 285 Ala. 204, 207, 231 So.2d 80, 82 (1970); Whorton v. Moragne, 62 Ala. 201, 207-08 (1878); Hall's Heirs v. Hall, 47 Ala. 290, 297 (1872). James Whigham therefore acquired the mortgagor's interest of Bessie Whigham in the August, 1973 mortgage. When James Whigham purchased the mortgage from City Federal Savings and Loan Association, he acquired the mortgagee's interest in the August, 1973 mortgage as an assignee of the original mortgagee. By the doctrine of merger, when a mortgagor acquires the note and mortgage from the mortgagee, the debt, and mortgage are extinguished. Barnett & Jackson v. McMillan, 176 Ala. 430, 58 So. 440 (1912). James Whigham's interest as a mortgagor merged with his interest as a mortgagee and with respect to the mortgagor's interest acquired from Bessie Whigham the mortgage was extinguished. No legal or actual distinction ever existed between the interests of James Whigham individually and the interests of James Whigham as the executor and sole beneficiary of the estate of Bessie Whigham. Accordingly, all of the acts and interests of James Whigham after March 4, 1975the purchase of the debt from City Federal, the institution of foreclosure proceedings, the purchase of the foreclosed interest at the saleare to be considered the acts and interests of the estate of Bessie Whigham as well. Thus narrowed, the considerations ostensibly before the Court are whether James Whigham became a surety by his purchase of the indebtedness from City Federal and, if so, what rights he thereby obtained with respect to the defendants. Rather than belabor the former question, the Court will assume that James Whigham enjoyed the status of a surety, since it is clear that his rights were the same whether or not he is accorded surety status. Title 9, section 78 of the Code of Alabama provides: `A surety who has paid his principal's debt is entitled to a transfer of the original and collateral security which the creditor holds; he has all the rights to realize thereon and to reimburse himself to the same extent as the creditor might have done before the surety paid him, whether paid before or after judgment or decree. He shall be substituted for the creditor and subrogated to all his rights and remedies; in effect, he shall be a purchaser of the debt and all its incidents.' (emphasis supplied.) As a surety, then James Whigham would enjoy the identical rights he possessed as assignee of the mortgage and mortgage debt. As assignee of the mortgage and mortgage debt, James Whigham had available two mutually exclusive remedies against the defendants. He could sue the joint venture as maker and TraveLodge as guarantor on the note and recover the sums owing or he could foreclose on the property secured by the mortgage and satisfy the debt in the foreclosure sale. Although his original complaint included what appeared to be a demand for relief under the former remedy, James Whigham subsequently elected the latter remedy and purchased for himself at the sale; in so doing he foreclosed any further claim against the defendants on the indebtedness: `[W]here a mortgagee or assignee of mortgage on land purchases the premises on foreclosure for a sum equal to the mortgage note or debt and lawful expenses and charges secured thereby, this action operates as an extinguishment of the notes secured by the mortgage, and the mortgagee or assignee of the mortgage cannot thereafter maintain an action on the note or debt.' Oden v. King, 216 Ala. 504, 508-9, 113 So. 609, 612, (1927); see Osborne, Handbook on the Law of Mortgages § 333, at 698-99 (2d ed. 1970). Whether considered as surety or assignee of the debt and mortgage, James Whigham elected a remedy for the defendants' indebtedness which preempts his present demand. The plaintiff is entitled to only one satisfaction of the debt, and he has already received it. The final observation that the Court must make with regard to the plaintiff's demands for relief is that, holding aside the invalidity of his legal theories, the plaintiff has failed to establish that he suffered any injury by the acts or omissions of the defendants. Rather, the evidence shows that the circumstances plaintiff complains of are circumstances he intentionally and advisedly brought about himself and from which he has substantially benefitted. The plaintiff now holds title to the motel premises in fee, unencumbered by lessor mortgages. It is clear from the evidence that the securing of such title was the plaintiff's objective from the time he acquired the note and mortgage from City Federal. As suggested above, the plaintiff could have recovered against the defendants by suing on the note. Such a recovery would have reimbursed the plaintiff for the money he expended to purchase the note and mortgage and would have entirely freed the motel property from mortgages; however, the property would have remained subject to TraveLodge's leasehold interest for an additional thirtysix years at a fixed rental. The undisputed testimony at trial demonstrated the substantial value that the right to possess and operate the motel for the remaining leasehold period had. The testimony of Gene Dilmore, the expert appraiser that City Federal hired in 1973 to value the motel, was to the effect that, based on projected earnings, he had placed a value of approximately $345,000 on TraveLodge's leasehold interest in August, 1973, and that its value as of May, 1975, the time of foreclosure, would have been in excess of $344,000. Moreover, defendant Loyd Baker testified that the joint venturers had invested at least $317,000 in the motel facility itself since 1963. While the plaintiff has at various points contended that the foreclosure was necessary to protect the plaintiff's interests in the property, there was in fact no danger to the plaintiff's interests after he had purchased the note and mortgage. His interests in the property could not have been lost by foreclosure since he was then the mortgagee; his investment in the purchase of the note and mortgage could be recouped in a suit on the note. The record clearly shows that self-interest rather than the compulsion of circumstance prompted the foreclosure. As plaintiff James Whigham himself testified at trial, he foreclosed the mortgage `to get rid of the Bakers and Travelodge,' and the foreclosure had precisely that effect. Because the lessor's and lessee's interests were pledged as security for the August, 1973, mortgage, the lease was an interest subject to the mortgage and the very act of foreclosure operated to destroy it. See, e. g., First National Bank v. Welch, 222 Ala. 144, 132 So. 44 (1930). Moreover, even if the lease had survived the foreclosure, both the lessor's and lessee's interests would have vested in the plaintiff as purchaser at the foreclosure sale, and accordingly the lease would have been destroyed under the doctrine of merger. See, McMahan v. Jacoway, 105 Ala. 585, 17 So. 39 (1894); Otis v. McMillan & Sons, 70 Ala. 36 (1881); Martin, Bradley & Co. v. Searcy, 3 Stew. 50, 52 (1830). Following his foreclosure and purchase on May 9, 1975, plaintiff James Whigham assumed exclusive possession of the motel facility and has operated the motel himself since that date. The net result is that for an investment of $190,000 plaintiff James Whigham has obtained title to physical improvements totaling in excess of $300,000 and has obtained exclusive possession of that property, in which the present right to possession alone has been valued in excess of $344,000. The plaintiff has failed to show any injury at all, much less an injury occasioned by the defendants. IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED BY THE COURT that judgment be and the same is hereby rendered in favor of the defendants and against the plaintiff. Costs taxed to the plaintiff. Whigham, by his statement of the issues presented for review, says the trial court committed reversible error in its findings of fact and misapplied the law to the facts. He says this is true in four particulars: 1. The evidence was undisputed that the Whighams were ill and aged, and by improper conduct upon the part of the defendants were induced to join in the August 1973 mortgage pledging the Whigham motel property together with their lease from TraveLodge, therefore, defendants are indebted to Whigham, or Mrs. Whigham's estate. 2. The evidence was undisputed that the Whigham's pledged their real property as security for the $180,000 loan to defendants; defendants did not pay the loan; defendants breached a contractual obligation to pay that loan, therefore, defendants are liable in damages for the breach. 3. That he, Whigham, as mortgagee, or assignee of same; or surety with rights of a mortgage, or assignee of same, when he purchased the motel premises on foreclosure for a sum equal to the mortgage indebtedness, plus lawful charges, secured by the mortgage it did not operate to extinguish the indebtedness and bar an action to recover it. 4. That he, Whigham, in this case is not limited to two mutually exclusive remedies, foreclosure or an action for recovery of the mortgage indebtedness, because his interest in the mortgaged property was insufficient to pay the indebtedness; in other words, there was a deficiency. As to Whigham's first assertion of error, we must state that not only was the evidence in dispute but the substantial weight of it was against the conclusion he would draw from it. Under this state of the record we cannot disagree with the trial court's findings of fact in this regard nor can we say he misapplied the law to the facts. Rule 52(a), ARCP. Eubanks v. Richards, 294 Ala. 30, 310 So.2d 883 (1975) Regarding Whigham's contention that defendants breached a contractual obligation owed him, we observe there was a finding by the trial court that the August 1973 mortgage loan was not a refinancing within the purview of the terms of the lease. It follows, then, there was no contractual obligation breached when the mortgage indebtedness, secured by the August 1973 mortgage, was not paid by defendants. The evidence supports the trial court's finding and we cannot disturb it. Eubanks, supra . Although Whigham raises on appeal, for the first time, the point made in his fourth contention it is inherent in his third contention and adequately dealt with by the trial court under the judgment heading: Plaintiff's Theory of Suretyship. The trial court's reasoning and conclusions under that section of the judgment are sound and amply supported by the evidence and the authorities cited by the trial court. Whigham had mutually exclusive remedies under the facts in this case; and under those same facts it is clear there was no deficiency according to the evidence of the value of the real property and improvements together with the benefits accruing from termination of the lease and regaining possession of the property unencumbered either by the mortgage or lease. AFFIRMED. TORBERT, C. J., and BLOODWORTH, JONES and ALMON, JJ., concur.