Appeal from a judgment of dismissal in favor of the defendant, Gilbert Imported Hardwoods, Inc. (Gilbert). We reverse and remand.
The action began with a complaint for a declaratory judgment filed by The First National Bank of Mobile (First National) praying that the circuit court acknowledge plaintiff-bank as the priority lienholder with respect to a certain lot of land located in Mobile County. According to the complaint, Leslie and Jessie Sims conveyed the lot to Gayle Roberts by deed dated August 2, 1978, reserving a vendor's lien. Then on January 26, 1979 Roberts and his wife executed a mortgage on the property to Commercial Guaranty Bank of Mobile. Later that year, on December 10, 1979, the Robertses executed another mortgage on this same property to First National.
On March 24, 1980 the Robertses conveyed the property by deed to Gilbert. On that same date Gilbert took an assignment of their vendor's lien from the Simses. An assignment of the mortgage held by Commercial Guaranty was made by Commercial to Gilbert on April 23, 1980. The effect of these transactions, alleged the plaintiff, merged the legal and equitable titles in the defendant, Gilbert, with First National's mortgage lien being elevated to priority lienholder status. The plaintiff alleged further an imminent foreclosure of the Commercial Guaranty mortgage by the assignee, Gilbert, when that lien had been extinguished by merger, and when there was no basis for a foreclosure because the only remaining mortgage lien, the Robertses' mortgage to First National, was not in default.
The defendant, Gilbert, moved to dismiss the complaint, inter alia, for failure to state
The plaintiff moved for a reconsideration of the judgment of dismissal, alleging that it could prove that the consideration for the deed from the Robertses to Gilbert was the satisfaction of the Simses' vendor's lien, the Commercial Guaranty mortgage lien, and the plaintiff's mortgage lien, but that instead of satisfying those liens the defendant took assignments of the first two but failed to satisfy that of the plaintiff. Thus the plaintiff contended that dismissal was not appropriate because of the intent of the parties (apparently the Simses, the Robertses and Gilbert). The motion for a reconsideration was also denied, and this appeal followed.
Whether the motion to dismiss was properly granted depends in the first instance upon the effect of the deed and assignments to Gilbert.
With regard to mortgages, Alabama is a "title" state, i. e., upon the execution of the mortgage legal title passes to the mortgagee. See Trauner v. Lowrey, Ala., 369 So.2d 531, 534 (1979) and cases cited. The mortgagor retains an equity of redemption which he may convey. McDuffie v. Faulk, 214 Ala. 221, 107 So. 61 (1926). Under these principles, when the Robertses executed the mortgage of January 26, 1979, Commercial Guaranty took legal title to this lot of land as security for the mortgage debt, with the Robertses retaining an equity of redemption only. The subsequent assignment of this mortgage by Commercial vested that legal title in Gilbert. The Robertses' intervening deed to Gilbert on April 23, 1980, together with the Simses' assignment of their vendor's lien to Gilbert on the same date, vested all legal and equitable interests in Gilbert, subject to the Robertses' mortgage to First National. What was the effect of these transfers on the Commercial Guaranty mortgage?
According to the plaintiff, the effect was to extinguish the debt represented by the Commercial Guaranty mortgage, leaving the First National mortgage as the sole mortgage obligation. In any event, the plaintiff states, whether that result follows is a question of intention.
Tiffany, Law of Real Property, Vol. 5, § 1497 at 504 comments upon the effect of the acquisition of the mortgaged land and the mortgage debt:
And he added at 505:
Tiffany, § 1480 at 506 continues:
The doctrine of merger is recognized in Alabama. The general principle was recited with approval in Barnett & Jackson v. McMillan, 176 Ala. 430, 58 So. 400, 401 (1912):
The case of A. M. Robinson Co. v. Anniston Land Co., 217 Ala. 648, 117 So. 29 (1928) is in accord:
In that case and in Stewart v. Stephenson, 243 Ala. 329, 10 So.2d 159 (1942), this Court did not apply the doctrine of merger, in the former because of a deficiency in the pleadings, and in the latter because of the wording of the agreement between the mortgagor and the mortgagees, consistent with the noted exceptions. See also Ehrman v. Alabama Mineral Land Co., 109 Ala. 478, 20 So. 112, 114 (1896):
It should be noted that this review is based upon the grant of a motion to dismiss and the denial of a motion for reconsideration of that decision. In that posture, the allegations of the complaint must be construed in a light most favorable to the plaintiff, with all doubts and allegations resolved in his favor, and a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff could prove no set of facts in support of his claim which would entitle him to relief. Dunson v. Friedlander Realty, Ala., 369 So.2d 792 (1979). Under the allegations of this complaint the plaintiff could prove that by virtue of the transactions between the grantors-mortgagors Roberts, the assignors Sims, the assignor Commercial Guaranty, and the grantee-assignee Gilbert, it was the intention of the parties that a merger take place which would have extinguished the mortgage indebtedness of Roberts to Commercial Guaranty, giving the First National mortgage priority. Additionally, the plaintiff might prove no basis for the foreclosure proceeding alleged.
REVERSED AND REMANDED.
TORBERT, C. J., and MADDOX, JONES and SHORES, JJ., concur.