Court Opinion

ID: 3228156
Source: CourtListenerOpinion
Date Created: 2016-07-05 16:04:17.278189+00
Date Added: 2024-06-11T07:40:08.895924
License: Public Domain

With respect to assignments of mortgages of land as collateral security for the debt of the mortgagee, and the ensuing rights and relations of the parties, we approve the following statement of the law as declared by the Court of Appeals of New York:
"That the assignment is in substance a mortgage or pledge of the transferred security; that it gives to the assignee merely a defeasible title, which ends upon payment of the debt, leaving the ownership in the assignor precisely as if no transfer had been made; that such defeasible title cannot be changed or enlarged, as against the assignor, by any act or dealing of the assignee, or his representatives, to which the assignor is not in some manner a party; that if the assignee forecloses the mortgage without also foreclosing the assignor's right, and becomes a purchaser at the sale, he holds the land as a substitute for the mortgage and precisely as he held the latter, and by no other, or different, or stronger title; and that whatever of benefit results from extinguishing the mortgagor's equity inheres in the security assigned in its changed form and goes of necessity to him who resumes its ownership by payment of the debt. The sale to the assignee, freeing the property from the mortgagor's equity, affected the relations of both assignor and assignee with the original mortgagor, but not at all their relations with each other. The security was thereby strengthened and made more valuable but remained a security still, and held by the same defeasible title and upon the same conditions as at first. That is not only the logical but the just view of the transaction. The assignee gets exactly what he bargained for, and what is his of right. While he holds the security, whether in the form of mortgage or of land, he gains the added protection of the added value; but when his debt is paid, and his title annulled, he has no claim to anything more." Matter of Gilbert, 104 N.Y. 200,211, 10 N.E. 148, 151.
See, also, Colebrooke on Col. Securities, § 183, and 31 Cyc. 831, c, where the law is thus substantially stated.
The assignor's ultimate right extends no further than the redemption of his pledged securities from his assignee before his foreclosure of the pledge. "Generally speaking, a bill in equity to redeem will not lie on the behalf of the pledgor or his representative as his remedy, upon a tender, is at law. But if any special ground is shown, as if an account or a discovery is wanted, or there has been an assignment of the pledge, a bill will lie." Nelson v. Owen, 113 Ala. 372, 376, 21 So. 75,76. *Page 537 
In the case before us, the fact that the assigned mortgage has been foreclosed by the pledgee, and thereby converted into land to which he has taken the legal title in himself as purchaser, very clearly calls for equitable relief to effectuate a complete redemption in favor of the pledgor. Rice v. Dillingham, 73 Me. 59. The case is also brought specifically within the exception noted above, by the showing that the pledgee has himself in effect assigned the pledge by mortgaging the land to the bank.
It follows that the bill here exhibited may be maintained for the purpose of redeeming the pledged security, which relief may be granted under the general prayer, supported by complainant's offer to do equity by paying whatever is due to the pledgee on his debt. In this aspect the bill is not subject to any of the grounds of demurrer interposed.
As in the case of mortgaged property, the pledgee must account to the pledgor for all the income, profits, and benefits derived by him from the pledged property while in his possession. Geron v. Geron, 15 Ala. 558, 50 Am. Dec. 143; 31 Cyc. 825, 3. The prayer of the bill for such an accounting is therefore a proper one.
There are several other aspects of the bill in which it would be demurrable if the appropriate grounds of demurrer were properly addressed and limited, as, however, they are not. Nevertheless, we deem it proper to refer to them here, in order that the bill may be hereafter disincumbered of such irrelevant matters.
The right to disaffirm a mortgage foreclosure sale at which the mortgagee, or his assignee, has become the purchaser without authority to do so, is a right accorded by law to the mortgagor, or his privies, only, and is not available to third persons. Woodruff v. Adair, 131 Ala. 530, 32 So. 515. Complainant, as mortgagee, might have bought at his own foreclosure sale under this mortgage, subject to the mortgagor's right of disaffirmance. By his assignment of the mortgage to respondent Hicks, he armed Hicks with the same right, and complainant can no more disaffirm Hicks' purchase, on such ground, than he could his own, if he himself had foreclosed the mortgage. Of course, if Hicks had conducted the sale with fraud, or unfairness, or negligence, and with resulting prejudice to complainant, this would be a ground for impeachment; but the bill makes no such case.
It follows, of course, that, the foreclosure being an accomplished fact, the prayer for another foreclosure is wholly inapt for the purposes and limitations of this proceeding.
Complainant's remedy is for the redemption of his pledge, and to that end he must pay what, upon a proper accounting, he is found to owe to Hicks. As an incident to that redemption, if decreed, he is also entitled to a decree for the reconveyance of the land from Hicks to himself.
We have not, in the present state of the pleadings, considered the rights of the respondent bank from the standpoint of a bona fide purchaser for value of the mortgaged property. If upon answer and proof it should so appear, it seems clear that redemption from the bank's mortgage would be a prerequisite to redemption from the original pledgee; the amount paid therefor being theoretically applied as a credit on the debt due to the pledgee. There would be no practical difficulty here, however, since the mortgage debt is less than the pledge debt, and a decree for redemption against both respondents jointly, and for prior payment of the mortgage debt, would do full equity in any case.
The demurrers were properly overruled, and the decree will be affirmed.
Affirmed.
ANDERSON, C. J., and MAYFIELD and THOMAS, JJ., concur.