American Freehold Land Mortg. Co. of London v. McCall

• Decision Date: 09 June 1892
• Citation: 96 Ala. 200,11 So. 288
• Parties: AMERICAN FREEHOLD LAND MORTG. CO. OF LONDON, LIMITED. v. MCCALL.
• Court: Alabama Supreme Court

11 So. 288

96 Ala. 200

AMERICAN FREEHOLD LAND MORTG. CO. OF LONDON, LIMITED. v. MCCALL.

Supreme Court of Alabama

June 9, 1892

Appeal from chancery court, Lowndes county; JOHN A. FOSTER Chancellor.

Bill in equity by the American Freehold Land Mortgage Company of London, Limited, against Laura McCall. From a judgment sustaining certain special grounds of demurrer to the bill complainant appeals. Reversed.

Caldwell Bradshaw and Webb & Tillman, for appellant.

J C. Richardson, for appellee.

THORINGTON J.

Appellant filed its bill of complaint against appellee for the foreclosure of a mortgage on lands, executed by the latter to the former to secure a loan of money. Among other stipulations, the mortgage contains the following: " Fifth. That if it shall become necessary to employ an attorney to foreclose this mortgage, or collect any part of the debt herein secured, they [the mortgagors] will pay such reasonable attorneys' fees, and all other lawful and proper costs and expenses that may be incurred by the party of the second part in that behalf, and this mortgage shall stand as security for the same." And in that part of the mortgage giving a power of sale to the mortgagee the proceeds arising from the execution of the power are authorized to be applied-" First, to the payment of the expenses incurred in advertising and making the sale, and to the payment of such reasonable attorneys' fees as may be incurred therein by the said party of the second part: and, second, to the payment of the principal," etc. The bill charges that a foreclosure of the mortgage in the chancery court is necessary, because the mortgage does not give to the mortgagee the right to purchase at a sale under the power, and that, if complainant should so purchase, the sale would be liable to be vacated on the application, of the mortgagors. As a further reason, showing the necessity for a resort to a court of equity, it is averred that the mortgagors deny the validity of the mortgage, on the ground that complainant was a foreign corporation at the time the loan was made, and had not complied with the law of this state requiring such corporations to have an authorized agent and a known place of business in the state, in consequence of which it is averred that no stranger or third person would buy at a sale under the power, and that, if sold under such a sale, the property would bring much less than its value. It is also shown by the averments of the bill that the property is not of sufficient value to pay the mortgage debt, and that the mortgagors are insolvent, and it asks that the rents of the property may be intercepted and applied to the mortgage debt, and to that end that a receiver be appointed. Appellees, McCall and wife, demurred to the bill on numerous grounds, all of which were overruled, except those directed specifically to that part of the bill which seeks to recover fees for complainant's solicitor for services in the foreclosure proceedings under this bill, which last-mentioned grounds of demurrer were sustained. Appellant, the mortgagee, brings the case here, and the only question assigned for error is the action of the chancery court in sustaining these special grounds of demurrer.

Independently of the contract of the parties, the chancery court has no power to allow fees to the mortgagee's attorney for services in collecting the mortgage debt, or conducting the foreclosure proceedings, but, unless restrained by statute as is the case in some states, parties who are competent to enter into mortgage contracts may stipulate therein for reasonable attorneys' fees for such services. Such stipulations are not opposed to public policy, as insisted by appellee's counsel, and may be enforced as part of the obligation secured by the mortgagee. Bynum v. Frederick, 81 Ala. 489, 8 South. Rep. 198. Stipulations of this character usually assume one of two forms: First. Where the right in the mortgagee to claim such counsel fees is referable alone to the power of sale in the mortgage, and is dependent upon a sale made pursuant to the power. Such was the character of the right in the following cases: Bynum v. Frederick, 81 Ala. 489, 8 South. Rep. 198; Sage v. Riggs, 12 Mich. 313; Hardwick v. Bassett, 29 Mich. 17. Second. Where the right to claim such fees may be exercised either upon a foreclosure under the...