436, Johnson v. Malone

• Decision Date: 13 October 1949
• Docket Number: 8 Div. 435,436.
• Citation: 42 So.2d 505,252 Ala. 609
• Parties: JOHNSON et al. v. MALONE.
• Court: Alabama Supreme Court

42 So.2d 505

252 Ala. 609

JOHNSON et al. v. MALONE.

8 Div. 435, 436.

Supreme Court of Alabama

Oct. 13, 1949

Hutson & Russell and S. A. Lynne, all of Decatur, for appellant johnson.

Thos. G. Steele, of Athens, for appellants Andrews & Wellden.

Thos S. Woodroof, of Athens, for appellees Tucker.

Malone & Malone, of Athens, for appellee Malone.

SIMPSON Justice.

Bill of interpleader by the Hon. W. W. Malone, Jr., as stakeholder of earnest money paid at an auction sale of real estate, against appellant Johnson (who bid in the property); against the Tuckers, owners and vendors of the property; and against Andrews and Wellden, the auctioneers who claimed commissions out of the deposit for having made the sale.

All defendants filed separate answers and cross-bills. Johnson seeks the return of the earnest money on the ground that the terms and conditions of the sale were not complied with, which privileged him under its terms to a refund of his money. The Tuckers claim the entire amount of the earnest money as a forfeiture by way of liquidated damages for Johnson's failure to consummate the transaction, and the auctioneers are claiming--against the contention of the Tuckers--that they are due full commissions out of the deposit money for their services in making the sale.

On a hearing below, the court decreed against Johnson, awarded the earnest money to the Tuckers, but allowed ratable commissions to the auctioneers and attorney's fees to complainant for filing the bill, payable from said fund.

The reporter may note, as necessary, the several matters of contest here, but from the view we entertain it will be necessary to notice in the opinion but two propositions namely, (1) whether a case is made for an interpleader against the asserted demurrer, and (2) whether the appellant Johnson, was entitled to a refund of his money. On a careful consideration of the various aspects of the case in the light of what we regard as firmly settled governing authorities, we have found it necessary to resolve both questions in the affirmative and will discuss them in order.

(1)

The bill was one of strict interpleader and it is argued that error prevailed in the action of the lower court in overruling the ground of demurrer taking the point that the bill failed to disclose perfect disinterestedness on the part of stakeholder Malone, the complainant, as regards the respective claimants of the fund. The heretofore prevailing rule that the complainant must entertain such a position toward the respective claimants no longer obtains. The former statute, Code 1923, § 10390, now Equity Rule 36, Code 1940, Title 7, Appendix, has been enlarged and, inter alia, the proviso has been added that: 'It is not ground for objection to the action that the claim of the several claimants or the titles on which their claims depend do not have a common origin or are not identical, but are adverse to or independent of one another, or that the plaintiff avers that he is not liable in whole or in part to any or all of the claimants.'

Hence it appears that the same principle governs in such proceeding as in one in the nature of an interpleader, where it is not required as a prerequisite to filing the bill that the complainant stand indifferent toward the respective claimants as an innocent depository of the fund.

(2)

As regards the second proposition, research will disclose that the law on this question is replete with casuistries, but, as we read them, our own cases--and there are authoritative ones elsewhere too--are so conclusive to a result contrary to that attained below that we must hold the decree forfeiting the money to have been laid in error.

The following quotations from the evidence in the record proffered in behalf of the respective claimants (except Johnson), with certain parentheses of our own, will suffice to indicate the terms and conditions of the sale.

'The property will be sold to the highest bidder.'

'Nothing was being held back.' (R. 17, 22) (No mention that the property was encumbered.)

'The purchaser would pay 20% of purchase price immediately.' (R. 17, 22)

'The balance within ten days' time upon delivery of abstract and deed.'

'An abstract of title showing merchantable title will be available to purchaser on Saturday following sale.' (November 29th) (R. 31)

(Abstract furnished appellant's attorney on Friday morning, December 5th, though available at attorney's office prior to that date.)

'If purchaser fails or refuses to comply with his bid for any reason other than failure of the abstract to show merchantable title, this 20% shall be forfeited to seller as liquidated damages.' (R. 18)

'If abstract of title so furnished does not show good title, the money is to be returned.' (R. 75)

(Preserved right of purchaser to refuse to consummate sale and procure the return of earnest money upon failure of abstract to show merchantable title.)

'The sale must be or the transaction must be completed within ten days' (showing that time was made the essence of the sale and its closure). (R. 73)

Thus by the terms of the contract it was required that the Tuckers furnish Johnson with a perfect record, merchantable title and an abstract furnished or made available showing same, and the contract could not be modified by delivering an imperfect title or an abstract failing to disclose a perfect marketable title. Whitfield v. McClendon, 251 Ala. 591, 38 So.2d 856.

The sale was cried Wednesday, November 26th, and the appellant became the highest bidder for the property and he deposited the earnest money with the understanding that complainant Malone should hold the money until consummation of the transaction. The abstract of title was not completed until about noon of December 4th and was not furnished to the appellant until the morning of December 5th. The abstract failed to exhibit a marketable title in the Tuckers. Among the defects which Johnson's attorneys pointed out after a hasty and cursory examination were the following unsatisfied liens against the property:

Mortgage in favor of C. E. Poole, the indebtedness amounting to approximately $19,100.00. (R. 68)

A recorded judgment in favor of Louis Namie for $800.00 and court costs.

A tax lien in favor of the State of Alabama (sales tax) amounting to $110.84.

A lien in favor of the U. S. Government (a tax lien) amounting to approximately $347.52. (R. 40)

In addition to the above, there was also a lien for the State and County taxes for the year 1947, past due and unpaid, amount not known, and

A lien for State and County taxes for the year 1948, the amount not known.

There were perhaps other defects in the record as exhibited by the abstract, and pointed out here in argument of appellant, which likewise might have stood in the way of complete fulfilment of the contract on the part of the Tuckers to furnish the character of abstract contracted for, but we will lay aside consideration of these, since one paramount defect was never cured, viz.: the unsatisfied Poole mortgage, first above noticed.

The appellee contends, and presumably the trial court accepted the theory, that Johnson was required to pay the balance of the purchase price for the property without the completion of the abstract exhibiting a perfect record title free of encumbrances or without the record so showing, and that his money could be used to satisfy the Poole mortgage. In this, on the authority of our decided cases, we are impelled to disagree. In essence, the vendors contended for a modification of the contract by insisting on the payment of the balance of the purchase price on the naked promise of the vendors and perhaps the mortgagee too that when paid the mortgage would be released and the record satisfied. We cannot agree that the law could operate to bring about that result. The mortgage, at closure date, was--in fact still was when suit filed--outstanding and no abstract was furnished as stipulated by the contract and the vendee was within his rights to decline to proceed further and demand a return of the earnest money.

Before noticing what we regard as controlling authorities, it should first be observed that this is not a case of specific performance where under certain prevailing circumstances with respect to the individual case, it has been held that equity will decree specific performance and allow satisfaction of an existing encumbrance on the property out of the purchase price to be paid, under its general power to so mold the decree as to properly adjust all equities and protect the rights of all parties. Such cases are the ones mainly relied on to sustain the decree of the lower court and which support such texts as carried in 57 A.L.R. 1378 and 55 Am.Jur. 685, § 227, holding to the general effect that 'the mere existence of an encumbrance at the time fixed for performance by the vendor does not necessarily entitle the purchaser to rescind or to refuse to perform on his part.' (Emphasis supplied)--55 Am.Jur. 685, § 227. We have emphasized in the quoted phrase because even in equity, where specific performance is awarded in certain cases, the law is not too certain and by and large most of the cases which hold to this equitable theory are watered down by many qualifying facts, such as where the vendee acquiesces in the vendor's delay, thus achieving a modification of the strict terms of the contract, or where many other aspects are cognizable in equity which would not be pertinent in a possessory action for a refund of earnest money. Then others, heavily relied on to sustain the decree are such as Keepers v. Yocum, 84 Kan. 554, 114 P. 1063, Ann.Cas.1912A, 748, a case of specific performance, where note was taken in the opinion of the fact that the contract did...