Copeland v. Beard

115 So. 385, 22 Ala. App. 325, 1927 Ala. App. LEXIS 197

• Court: Alabama Court of Appeals
• Decided: February 1, 1927
• Docket: 6 Div. 102.
• Status: Published

Opinions

On Rehearing.

Copeland Bros. Realty Company, a, corporation, owed the plaintiff the debt here' sued for. On June 29, 1923, Copeland Bros., by deed, conveyed to M. M. and Talmage Copeland its property therein described for a' valuable consideration therein named, including a promise on the part of the grantees to pay the plaintiff’s debt. So much is decided in the main opinion and not seriously controverted in this application. The grantees paid the cash consideration named and assumed dominion over the property described. There were no restrictions or . conditions named in the conveyance, other than that grantees should pay the obligations of grantors as described. Subsequently and on the same day this defendant and his joint grantees deeded the property obtained from Copeland Realty Company to Delma Lumber Company, a corporation, upon a cash consideration of $100 and the assumption and payment of certain described “indebtedness of the parties of the first part” (to wit defendant and Mozelle and Talmage Copeland). Thereafter and on the same day the defendant and his associates sold the property obtained from Copeland Realty Company to Delma Lumber Company, and the Copeland Realty Company, without any additional consideration passing to it, passed a resolution releasing defendant and his associates from the payment of the obligations of the Copeland Realty Company named as a part of the consideration in the first deed. It is now urged and insisted that this last resolution of the Copeland Realty Company had the effect of divesting this plaintiff of any right which she may have acquired under the first agreement. There are authorities, some of which are collated- and quoted from in 21 A. L. R. 462, which hold that in contracts between mortgagors and their grantees, whereby the latter agree to assume and pay the mortgage debt, the contract can be rescinded at any time before the mortgagee has accepted the agreement. But we apprehend that even in those cases different conclusions would have been reached, if the mortgagors’ grantees had retained possession of the mortgaged premises or had conveyed them to another. In one of the above cited cases, Youngs v. Public Schools, 31 N. J. Eq. 290, the distinction sought to be made was:

“Between a trust created for the better securing of the debt, and a contract simply to indemnify a surety against his collateral liability. Where a trust is created for better securing the debt, it attaches to the debt, and inures immediately to the benefit of the creditor, and will subsist until the debt be paid. Such a trust, as a general rule, cannot be extinguished or discharged without the concurrence of all parties in interest. But where a collateral obligation is given [as an agreement to pay a mortgage debt], or a trust is created, merely for the indemnity of the surety [in that case the mortgagor], and for his protection and benefit' only, it may be released and discharged by him as the only person interested in it, and his release, as a general rule, will operate as a complete extinguishment, unless, in the meantime, some equitable right in it has arisen in favor of third persons.” Biddle v. Pugh, 59 N. J. Eq. 480, 45 A. 626.

In the above case and in New Jersey generally the mortgagor is treated as a surety to pay the mortgage debt. Youngs v. Public Schools, 31 N. J. Eq. 290. Also, in the New York case of Douglass v. Wells, 18 Hun, 88, it was held that:

“On the making of a contract of assumption by the grantee, the mortgagee was at once vested with a right to hold him on his contract, and in such a case an acceptance was a legal presumption, in the absence of proof of actual dissent, and that therefore the contract could not be rescinded even though there was no evidence of acceptance on the part of the mortgagee.”

To a limited extent the case of Willard v. Worsham, 76 Va. 392, is to the same effect as the above. The courts of Illinois and Colorado place themselves squarely upon the proposition; the grantee cannot by a subsequent contract with the debtor obtain a release from the obligation in favor of the creditors. Bay v. Williams, 112 Ill. 91, 1 N. E. 340, 54 Am. Rep. 209; Starbird v. Cranston, 24 Colo. 20, 48 P. 652. We think that the proper distinction is drawn in the New Jersey cases, supra. In the one instance, if the contract be for the better securing of the debt a trust is created for the benefit of the creditor which inures immediately to his benefit and cannot be released by the grantor; in the other, where a collateral obligation is given, or a trust is created merely for the indemnity of the surety and for his protection and benefit only it may be released and discharged by him as the only party at interest. To the foregoing authorities may be added Tweeddale v. Tweeddale, 116 Wis. 517, 93 N. W. 440, 61 L. R. A. 509, 96 Am. St. Rep. 1003. The recent case of Clark & Co. v. Nelson, 216 Ala. 199, 112 So. 819, is based upon the rescission of the contract, before acceptance by the debtor, thereby placing the parties in statu quo. There is a vast difference between a rescission, where the property transferred as the consideration for the agreement to pay a creditor is reconveyed to the contracting debtor, and a subsequent agreement to release a purchaser of the debtor’s property who had agreed to pay a creditor in consideration of property transferred to him without a reconveyance of the property. When read and understood none of these cases are in conflict with the general rule in this state as declared in the authorities cited in the original opinion.

We see no reason for changing the conclusion reached in the original opinion. The opinion is extended, and the application is overruled.

PER CURIAM. Reversed and remanded on authority of Copeland v. Beard, 217 Ala. 216, 115 So. 389.