First National Bank v. Elliott

DOWDELL, J.

Tbe present appeal is prosecuted from the decree of the city court sustaining respondent’s demurrers to the complainant’s bill. The facts pertinent to the question involved, as stated in the bill, are substantially as follows: On the 16th day of May, 1890, J. B. Bobinson loaned to Algernon Culberson and E. J. Cobb $3,500 for three years, and took as security a mortgage on a lot in the city of Anniston, Ala., on the corner of Tenth Street and Quintard Avenue, fronting 30 feet on Tenth Street, and running back 85 feet, said real estate being a part of lots 5 and 6 in block 16. On October *65024th, 1890, said Robinson transferred this debt and mortgage to May R. Elliott, one of the appellees in this case. Some time prior to the 13tk of July, 1893, the Corning Land, Industrial & Trust Company assumed the payment of said debt, the property embraced in said mortgage having been conveyed to it. On that day, desiring an extension of said debt to the 16th-of May, 1894, the said Corning Land, Industrial & Trust Company mortgaged to said Elliott, a lot adjoining that above described on the west side, fronting 28 feet on Tenth Street and running back 85 feet. On the 1st of April, 1895, said ’Company, again desiring an extension of said debt, mortgaged to said Elliott a part of lots 7, 8,- 9 and 10 in block 16, with the livery stable thereon. The Corning Land, Industrial & Trust Company, having made default in the payment of said debt, and said Elliott having duly advertised the lands embraced in said several mortgages, sold the same at public auction to the highest bidder for cash on the 7th of April, 1897, and at said sale, ■ said May R. Elliott, being authorized under the terms of the mortgage to bid and purchase at the foreclosure sale, became the purchaser of the property 'in the first described mortgage for $500, in the second mortgage for $15, and in the third mortgage for $1,100. Since the foreclosure she has sold the property mentioned in said mortgages to A. Gr. Donakoo for $4,000, one-fifth cash, ’and the balance in equal installments in one, two, three and four years, executing to said Donahoo her bonds for title, and said Donahoo lias sold the property mentioned in the mortgage first described to A. H. Smith for $1,000, one-fifth cash and the balance in equal installments in one, two, three and four years, the said Donahoo executing to said Smith his bond for title. On the 8th of October, 1896, appellant, the First National Bank, obtained a judgment against said Corning Land, Industrial & Trust Company for $6,080.98 and costs $9.20, upon which execution was issued October 19th, 1896, and returned December 7th, 1896, “No property found.” Under this judgment the appellant has filed the bill in this case, asking to redeem all of said property embraced in all of said mortgages foreclosed and bought in by May R. Eliott as *651aforesaid, offering to pay the amounts bid for said several lots, with ten per centum interest per annum, and lawful charges, and the cost of permanent improvements, but expressly declining to pay the 'balance due on the mortgage debt to- May R. Elliott, after crediting the amounts of said purchases. Appellee filed demurrers to said bill based upon the ground that appellant did not offer to pay the balance of her mortgage debt, Avhicli, as she insists, Avas a laAvful charge upon the land.

Thus it Avill be seen that the question presented by the record for our determination is as to Avhat, Avithin the language of sections 3507-3510 of the Code of 1896, constitutes a Ci lawful oharge.'3 While cognate questions have been passed upon and decided by this court, yet the exact question as presented by -the facts in this case has neArer been decided, and it may be said that up to this time the question is res integra. -

There is no difference between counsel in this case as to the real issue. That issue is, whether the unsatisfied balance of the mortgage debt is a “lawful charge” against a judgment creditor seeking to redeem from the mortgagee who purchased at his -own foreclosure sale. If it is a laAvful charge, then this case, as to that proposition, should be affirmed. If it is not, it should be reversed.

Generally lawful charges, such as the party coming-in to redeem must pay, or offer to pay, may be divided into two classes: (1) All liens, legal or equitable, Avhich the purchaser at the foreclosure sale may have upon the premises and for which either at tew or in equity he Avould be entitled to hold them as security; (2) all claims of any kind to Avhich a court of equity would condemn the premises in -the hands of the person redeeming after he had acquired the title.

In Grigg v. Banks, 59 Ala. 311, it was said by this conrt: “The word charge is of very large signification, and in the statute its proper signification is every lien or incumbrance or claim the purchaser- may have upon the premises, and for which, at tew or in equity/he would be entitled to hold the lands as security, and to the satisfaction of Avhich a court of equity would condemn them.”

*652Again, in Lehman v. Collins, 69 Ala. 127, it was said: “Every lien, or incumbrance, or claim for wbicb the purchaser would be entitled to hol'd the land as security, and to which a court of equity would subject them, whoever comes to redeem is bound to satisfy. But it is only liens, legal or equitable, claims capable of enforcement, the creditor coming to redeem can be required to satisfy.”

In Cramer v. Watson, 73 Ala. 127, the same definition of “lawful charges” is given as quoted above from Grigg v. Banks.

In Parmer v. Parmer, 74 Ala. 285, in.an opinion by Somerville, J., wherein it was decided that the ordinary debts not covered by the mortgage were not lawful charges against the mortgagor seeking to redeem from the mortgagee, it was said: “Lawful charges embrace only such claims or demands as are in the nature of an incumbrance or lien for which the purchaser would be entitled to hold the land as security;” citing Lehman v. Collins, supra; Grigg v. Banks, supra; Walker v. Ball, 39 Ala. 298 and Cauthway v. Berghaus, 28 Ala. 393. Judge Somerville then adds: “It is manifest that if the sets-off claimed by the mortgagee before the register had been allowed, the legal effect would have been indirectly to create them liens upon the mortgaged property, in the face of the fact that there was no agreement between the parties to this effect.”

In Graham v. Ware, 79 Ala. 192, Clopton, J., in deciding that statutory damages and protest fees on a bill of exchange were “lawful charges,” says: “The statutory damages- accruing on the protest of a bill of exchange-constitute a part of the debt and are recoverable in an action on the bill. It is true the acceptor is not personally liable for them. They are, however, secured by the mortgage so far as respects the property of Robert Ware, equally with the principle and interest, and in ascertaining the 'amount to be paid by the complainant on redemption, and the extent to which his property shall be applied 'in exoneration of hers, all claims and demands having by the mortgage a valid lien on his property must be taken into the estimate.”

*653In Harris v. Miller, 71 Ala. 26, in an opinion by Judge Brickell, who also delivered the opinion in the cases of Grigg v. Banks, Lehman v. Collins and Cramer v. Watson, after defining “lawful charges” in almost the same language as used in Grigg v. Banks, then adds:. “The charge may and will vary with different purchasers.”

Under subdivision “(1),” the lien discharged by the purchaser must not only be an existing, valid lien, but such that its satisfaction and removal is necessary to the full and absolute ownership and enjoyment of the property by the purchaser. It makes no difference whether the purchaser be the mortgagee himself or a stranger, such lien or incumbrance, when paid off by the purchaser, constitutes a “lawful charge” within the meaning of the statute. The measure of the amount of the “lawful charge” which the redemptioner is required to pay is not determined by the sum or amount originally secured by the lien, but by the amount actually paid by the purchaser for its discharge and removal. It is to this extent that the purchaser, in a sense, becomes subrogated to the rights of the original lienor, and no further.

It is, therefore, not an unimportant inquiry 'as to whether, upon the foreclosure of her mortgage by the appellee, Mrs. Elliott, the mortgage lien became thereby extinguished. When Mrs. Elliott foreclosed her mortgage, buying in the property at the foreclosure sale as she was authorized to do under the mortgage contract, she went into the possession of the property as absolute owner, discharged of all lien which existed under the mortgage before foreclosure. — Cramer v. Watson, supra ; Spoor v. Phillips, 27 Ala. 193.

We think the proposition too well settled to admit of doubt that the sale of land under execution or by foreclosure of a mortgage extinguishes the lien, and this is true, whether the entire debt secured be satisfied or not. Black on Judgments, § 479; Curtis v. Cutler, 37 L. R. A. 737; Willis v. Miller, 23 Ore. 352; Ogle v. Koernor, 140 Ill. 170; Clayton v. Ellis, 50 Ia. 590; Tuttle v. Dewey, 44 Ia. 306.

In Ogle v. Koernor, supra, it was said: “A mortgage, or as in this case, a deed of trust in the nature of a mort*654gage, vests in the party secured by it a lien upon the mortgaged premises. By virtue of that lien the mortgagee is entitled to have the mortgaged property sold under a decree of foreclosure and the proceeds of the sale applied to the payment of the debt secured. This is the mode prescribed by law for the enforcement of the lien; and when the lien has been once enforced by the sale of the property, it has, as to such property, expended its force and accomplished its purpose, and the property is no longer subject to it. When the redemption is made by the party primarily liable on the mortgage debt, it may be that the same property may be resorted to again for the purpose of subjecting it to an unpaid balance due on the mortgage debt, but it is not because of any right bo enforce the mortgage lien against the property the second time, but because of the rule of law which subjects all the property of the debtor to the payment of his debts until they are satisfied in full. But where the redemption is made by a party not liable upon the mortggage debt, the mortgage lien having been exhausted,'the mortgaged property cannot be subjected a second time to the satisfaction of the same lien.” The principle here laid down is in harmony with the proposition laid down in Harris v. Miller, supra, that the “lawful charge” “may and will vary with different purchasers. ” It would not for a moment be contended that the unpaid balance of the mortgage debt after foreclosure sale would constitute a “lawful charge” against a creditor offering to redeem from a stimnger who purchased at the foreclosure sale.

In Harris v. Miller, supra, which was the case of a mortgagor seeking to redeem from the mortgagee who purchased at the foreclosure sale, it was decided that the-unsatisfied balance of the mortgage debt was a “lawful charge” which the mortgagor must pay before his redemption could be effected; but it must not be overlooked that this conclusion was put upon the distinct proposition that the title acquired by the mortgagor upon redemption would at once inure to the benefit of the mortgagee, and for that reason, as to the unpaid balance of the mortgage debt, the mortgage would be a valid and *655operative security. It is not pretended that a lien would still exist under the mortgage upon the property after a valid foreclosure sale; but a different and distinct principle of equity is involved, growing out of the relation existing between the purchaser, who is the mortgagee, and the mortgagor, seeking to redeem, and would be inapplicable to a different purchaser than the mortgagee, or a different person seeking to redeem than the mortgagor, or one claiming under him.

In the discussion of this phase of the case, Avhich might properly fall under subdiAdsion “(2)” as stated above, i. e., all claims of any kind to AAdiieh a court of equity Avould condemn the premises in the hands of the person redeeming after he had acquired the title, it Avill be well to take into consideration the object and purpose of the enactment of this statute of redemption. ' The first act on the subject of redemption was passed January 1st, 1842, and Aims entitled, “An act to prevent the sacrifice of real estate.” — Clay's Dig. pp. 502-3. There have been some changes in the terms of this original statute since 1842, but no substantial or material change has occurred. — Code of 1852, §§ 2118-20; Code of 1867, §§ 2511-13; Code of 1876, §§ 2879-81; Code of 1886, §§ 1881-83; Code of 1896, §§ 3507-10. All of these sections of the various Codes are the same, and in effect are the same as the act of 1842, in so far as the principle involved in .this case is concerned. They all have the same purpose as the original act, the primary object being to prevent a sacri-' fice of the real estate of the debtor, and thereby enable the debtor to pay with his property his indebtedness to the fullest extent of its Amlue, as Avell as to afford to Ms other creditors an opportunity to collect their debts by bidding at its full value. In determining whether the unsatisfied balance of the mortgage debt constitutes a “lawful charge” within the meaning of the statute, the primary purpose of the statute should be borne in mind. The present case arises under section 3510 of the Code of 1896, Avlrieh proAddes for redemption by the creditor. This section contains the same phrase, “lawful charges,” as contained in section 3507, which provides for redemption by the mortgagor, debtor, or person holding under *656him. It is a general rale of construction that words or phrases twice used in the same statute are presumptively used in the same sense, and, ordinarily, should receive such construction; but the rule is not an unbending one, or without exception. Without doing violence to any cardinal rule of construction, when possible the statute should receive that interpretation which tends to promote the ends for which it was created, and not one which would render it possible to pervert it into a means of oppression of that class for whose benefit it was passed. Where the statute is open to a construction that is in harmony with its spirit and promotive of its manifest aim and object, in order to attain the ends for which it was enacted such construction should always be given it by the court. It would be difficult to give the phrase, “lawful charges,” an absolute meaning, alike applicable to all cases. That the very language itself leaves it open to interpretation by the-court seems clear, and it can be -safely asserted from the decisions of this court that in giving this phrase interpretation, the situation of the parties must be taken into consideration.

Conceding that the primary object of the statute was for the benefit of the debtor, it is urged by counsel for appellee in argument that to require the mortgagor, offering to redeem from the mortgagee, purchaser under the fore.closure sale of the mortgage, to pay the unsatisfied balance of the mortgage debt as a “lawful charge,” and not to require the creditor, seeking to redeem, to pay such unsatisfied balance, would be conferring a greater benefit upon the creditor than upon the debtor for whose protection the statute was enacted. This contention, however plausible it may appear upon a casual consideration, is superficial and not supported by sound reasoning. An example may here serve to illustrate the fallacy of the position taken: A mortgages to B his land for $10,000, that being the value of his property. C is also a creditor of A for $1,000. A makes default in the payment of the mortgage debt, and the same is fore-cl osed by the mortgagee, -and at such sale the mortgagee becomes the purchaser for $5,000, one-half of the actual value -of the property. Under the equitable principle, *657growing out of 'the relation between the mortgagor and mortgagee, as laid down in Harris v. Miller, supra, the mortgagor A coming into redeem must pay the balance of the mortgage debt. This he is unable to do, and the result of his inability is a loss to him of one-half the value of the property, which is sacrificed by his misfortune without lessening his debt to his other creditor, C. Upon the creditor C coming in to redeem, under section 3510, in addition to the payment of the purchase price bid with 10 per cent per annum thereon, together with all other lawful charges, he is further required to credit his judgment against the debtor with an amount not less than ten per cent, of the price bid. It is evident that if the creditor be required to pay the unpaid balance of the .mortgage debt as a “lawful charge” and in addition give to the debtor the credit imposed by the statute, such creditor would be requireed to pay more than the value of the property in order to redeem the same. And it is hardly reasonable to suppose that any creditor in the given case would undertake such redemption; nor is it reasonable to conclude that it was the intention of the law-making power in giving the creditor the right to redeem at the same time to make such right a practical failure. It is equally clear that in giving to the creditor the right to redeem without requiring the payment of the unpaid balance of the mortgage debt operates to the benefit of the debtor and without working any prejudice or injustice to the mortgagee, purchaser. It should not be overlooked that under section 3511 of the Code of 1896, which forms a part of the chapter relating to redemption, the mortgagee, as to the unpaid balance of the mortgage debt after foreclosure sale, is himself a creditor within the meaning of the statute, and as such creditor, upon the offer of another creditor to redeem, he has a right to avail himself of the provisions contained in section 351.1-3512, which also form a part of this chapter upon redemptions, and which provide that the offer to redeem may be met by a ■ responsive offer to credit the debtor with like sum offered to be credited by the proposed redemptioner, which responsive offers may be alternately repeated until one or the other declines to *658further credit — thereby securing to the debtor the fullest benefits intended by the statute.

It is, however, insisted by counsel for appellee in argument that the case of Grigg v. Banks, supra, is a parallel case with the one at bar and conclusive of the question here involved. In this conclusion counsel has evidently fallen into error. In that case, Mrs. Grigg, who was a judgment creditor of the common debtor, Gilmer, sought to redeem by merely paying off the amount for which the property had been sold at execution sale. The facts were, the property had been levied upon by attachment at the suit of Gold'tbwaite and Holmes against Gilmer, in which suit they obtained a judgment. Banks, who held a mortgage against the property, which, however, was subsequent in time to the levy of the attachment, took a transfer of the judgment of Holmes and Goldthwaite to himself and had the property sold under execution on this judgment, he, Banks, becoming the purchaser at the execution sale. Subsequent to this sale, Banks foreclosed his mortgage upon the property, to which he had acquired title under the execution sale, and became the purchaser at the foreclosure sale. Mrs. Grigg, as above stated, sought to redeem the property from Banks under the execution sale, insisting that the mortgage debt did not constitute a lawful charge. The question of an unpaid balance on the mortgage debt after foreclosure did not arise in the case. There was no question that i f Banks had sold under his mortgage, after having first entered satisfaction of the judgment which lie purchased, he would have been entitled to be reimbursed what he paid in the extinguishment of the prior execution lien. It was observed by the court in that case that such course should have been pursued by Banks, and the fact •that he had made a mistake in selling under the-execution instead of entering satisfaction, of the judgment would not be visited upon him, but that a court of chancery would relieve him of such mistake and require the redemptioner to pay all the mortgage debt.

From what we have said it is our conclusion that as against the judgment creditor, offering to redeem from the mortgagee who purchased at her own foreclosure *659sale, the unpaid balance of the mortgage debt, within the meaning of the statute, does not constitute a lawful charge which the judgment creditor, offering to redeem, is required to satisfy.

As we have stated, this being the first time that the exact question involved in this case has been presented for a decision by this court, no rule of property has been established, and the doctrine of stare decisis, insisted upon by counsel, is without application, and we therefore consider it unnecessary to discuss that proposition.

The only other question presented by the demurrer to the bill is that of a misjoinder of John M. Elliott, the husband of May R. Elliott, as a party defendant. It is shown in the bill that John M. Elliott and his wife both entered into the contract of sale with Donaboo. The bill prays that the equities of all the parties be adjusted; that John M. Elliott be required to join in a deed with his said wife upon redemption. This is not a suit upon any contract made by the wife, or upon any engagement into which, she has entered within the meaning of section 2527 of the Code. But whether John M. Elliott, the husband, was a necessary party or not, we thinlc it clear that he Avas not an improper party to the bill.

The decree of the city court must be reversed and the cause remanded.