Appelbaum v. First Nat. Bank

• Decision Date: 20 January 1938
• Docket Number: 6 Div. 116
• Citation: 179 So. 373,235 Ala. 380
• Parties: APPELBAUM et al. v. FIRST NAT. BANK OF BIRMINGHAM et al.
• Court: Alabama Supreme Court

179 So. 373

235 Ala. 380

APPELBAUM et al. v. FIRST NAT. BANK OF BIRMINGHAM et al.

6 Div. 116

Supreme Court of Alabama

January 20, 1938

Rehearing Denied Feb. 24, 1938

Appeal from Circuit Court, Jefferson County; Leigh M. Clark, Judge.

Suit in equity by Ann R. Appelbaum against the First National Bank of Birmingham and the Appel Investment Company to set aside the foreclosure of a mortgage and redeem therefrom, in which respondent investment company filed a cross-bill. From a decree denying relief to complainant in part and dismissing the cross-bill, complainant appeals, and cross-complainant cross-assigns error.

Reversed rendered, and remanded.

Alex C Birch, of Montgomery, and Sam C. Pointer and Patrick &amp Appelbaum, all of Birmingham, for appellants.

Cabaniss & Johnston, K.E. Cooper, and Paul Johnston, all of Birmingham, for appellees.

ANDERSON Chief Justice.

This is a bill filed by the grantee of the mortgagor, Appel Investment Company, Inc., seeking to set aside the foreclosure of the mortgage and be let in to redeem under the equity of redemption, and for general relief.

The mortgage was given to secure a loan of $12,500 made by the mortgagee to said Appel Investment Company, Inc., and used by it to discharge two mortgages previously executed covering the property involved; one to the mortgagee for $6,000, and the other to the Protective Life Insurance Company for $1,500, and to pay an indebtedness of M.A. Appelbaum of $5,000 to the North Birmingham American Bank.

The mortgage covers real estate located in that part of the city of Birmingham known as North Birmingham, consisting of three mercantile store buildings and the lots on which they were situated, acquired by the mortgagor, as the evidence shows, for a consideration of $30,000, valued in the application for the loan at $75,000, and of a minimum value at the time of the foreclosure of $20,000.

The complainant acquired her interest through a warranty deed, before default in the mortgage, on a recited consideration of $500.

The evidence shows, however, that she had advanced some money to the mortgagor previous to the execution of the deed to her to keep up payments on the mortgage, and that subsequent thereto made other payments. While there is no assumption of the mortgage debt expressed in the deed, the evidence clearly shows that she assumed the payments of the mortgage debt as part of the consideration of the conveyance to her of the property.

The bill attacks the foreclosure on sundry grounds, notably, that the execution of the mortgage by the corporate mortgagor was ultra vires; that there was no default in the mortgage at the time of its foreclosure that the publication of the mortgage foreclosure was in contravention of the power of sale in the mortgage; and that the price bid at the mortgage sale by the mortgagee was greatly disproportionate to the value of the property; and the sale of the property was in mass and not in separate parcels.

The basis for the contention that the execution of the mortgage is ultra vires the powers of the corporation is that $5,000 of the loan was procured by the corporation and used for the payment of the debt of one M.A. Appelbaum, one of the corporators and the owner of half of the stock in the corporation.

The evidence shows that the Appel Investment Company, Inc., was a mere simulacrum; that it was owned and controlled by the said M.A. Appelbaum and his son, Kelvie, each owning thirteen of the twenty-six shares of stock; that Silberman, whose name was used in the organization of the corporation, was a mere dummy stockholder of one share held for organization purposes and transferred said share to Kelvie after the organization. Therefore, looking through form to substance, as a court of equity will do, the Appelbaums were the corporation and its debts were their debts. Dixie Coal Min. & Mfg. Co. et al. v. Williams, 221 Ala. 331, 128 So. 799; Harris et al. v. First Nat. Bank of Tuscumbia, 227 Ala. 86, 149 So. 86; Birmingham Trust & Savings Co. et al. v. Shelton, 231 Ala. 62, 163 So. 593.

And under its declared powers it had authority "to borrow money for the improvement of its property, and for any other lawful purpose." Therefore, the execution of the mortgage cannot be said to be ultra vires.

Moreover, the complainant having acquired the property and assumed the payment of the mortgage debt, she will not be allowed to question the validity of the loan or any part thereof. There was no duty on the part of the mortgagee, nor had it the power, to follow and supervise the application of the money after it passed into the hands of the corporation.

There is no insistence here that the mortgagor, or its grantee the complainant, was not in default in the payment of the interest on the mortgage debt. Nor does the evidence in the case justify such insistence. Under the acceleration clause in the mortgage, the mortgagee had the power to declare the whole debt due, and foreclose upon default in payment of any of the notes, some of which represented the interest matured on the loan.

The mortgagor, Appel Investment Company, Inc., parted with all of its interest in the mortgaged property by conveying it to the complainant, and it was not a necessary party to the bill, and can take nothing by its cross-assignments of errors. Thomas v. Jones, 84 Ala. 302, 4 So. 270.

The mortgage provides that in case of such default "this mortgage shall be subject to foreclosure as now provided by law in case of past due mortgages, and the said mortgagee its agents or assigns, shall be authorized to take possession of the premises hereby conveyed, and, after giving 30 days' notice, by...