CRAMPTON v. MASSIE et al. In re CAMPBELL, 236 F. 900

WALKER, Circuit Judge (after stating the facts as above). In the absence of a statute affecting the question, it is the generally, if not universally, accepted rule that, when a debt secured by a mortgage has been paid, the mortgage becomes functus officio and dead, and it cannot be made to stand as security for a new or different debt between the original parties, or reissued to a different creditor. Bogert v. Bliss, 148 N. Y. 194, 42 N. E. 582, 51 Am. St. Rep. 684; Lamphier v. Desmond, 187 Ill. 370, 58 N. E. 343; Bowman v. Manter, 33 N. H. 530, 66 Am.

Dec. 743; 27 Cyc. 1434; 1 Jones on Mortgages (6th Ed.) § 944. An Alabama statute (Code Ala. 1907, § 4899) provides that: “The payment of a mortgage debt, whether the mortgage is of real or personal property, divests the title passing by the mortgage.” The mortgage to Epps had no legal existence after the payment of the debt it secured and the cancellation and delivery of it by Epps to the mortgagor. Cade v. Floyd, 120 Ala. 484, 24 South. 944; Abbett v. Page, 92 Ala. 571, 9 South. 332.

What Campbell did and procured Epps to do amounted to an ineffectual attempt to make a real estate mortgage to a new creditor without a compliance with the requirement of the statute of frauds. The mortgage to Epps was not an existing incumbrance on the land when Crampton made his purchase under the decree of the court. The title which he acquired by his purchase and the conveyance by the trustee pursuant to the decree of the court was not subject to the Epps mortgage as an existing incumbrance.

The record does not disclose any legal obstacle standing in the way of granting the relief which Cr'ampton’s petition prayed. The prayer of the petition indicated the petitioner’s willingness to let the sale at which Duskin bought stand, and to look to the amount of the purchase price paid into court as a substitute for the lot for which it was paid. The case is that of a fund in court undergoing administration, to which a third party asserts a right, based upon proceedings in the same cause, which would be lost if he is not allowed to intervene before the fund is dissipated.

In such a case he has a right to intervene. Credits Commutation Co. v. United States, 91 Fed. 570, 34 C. C. A. 12; Id., 177 U. S. 311, 20 Sup. Ct. 636, 44 L. Ed. 782; Ex parte Printup, 87 Ala. 148, 6 South. 418; Ex parte Breedlove, 118 Ala. 172, 24 South. 363. We are not of opinion that the intervention petition was subject to be dismissed on either of the grounds stated in the motion made to that end. On the facts disclosed by the record it was error to dismiss the petition and to decree the payment of the fund in question to the holder of the extinct mortgage to Epps.

The decree complained of is reversed; the costs to be taxed against Bessie K. Massie.