Atlas Subsidiaries of Miss., Inc. v. Nixon

• Decision Date: 04 August 1971
• Docket Number: 6 Div. 99
• Citation: 251 So.2d 235,47 Ala.App. 103
• Parties: ATLAS SUBSIDIARIES OF MISSISSIPPI, INCORPORATED v. Marie NIXON.
• Court: Alabama Court of Civil Appeals

Page 235

251 So.2d 235

47 Ala.App. 103

ATLAS SUBSIDIARIES OF MISSISSIPPI, INCORPORATED v. Marie NIXON.

6 Div. 99.

Court of Civil Appeals of Alabama.

Aug. 4, 1971.

R. A. Norred, Birmingham, for appellant.

Lorant, Bouloukos & Kopelousos, Birmingham, for appellee.

WRIGHT, Judge.

Suit was begun in the Circuit Court of Jefferson County, Alabama, by plaintiff, Atlas Subsidiaries of Mississippi, Inc., a Corporation, against defendant Marie Nixon, a single woman. The suit was founded upon an installment note executed by defendant on April 6, 1965. The sworn complaint was lengthy and contained allegations that defendant for valuable consideration executed the note in the amount of $2,537.10, together with a mortgage as security upon certain described real estate, to Southern Improvement Company, Incorporated. That on the same date the payee and mortgagee assigned the note and mortgage to Atlas Financial Corporation, predecessor to plaintiff, Atlas Subsidiaries of Mississippi, Inc. On November 5, 1966, the sum of $2247.50 was due and unpaid on the note and the note was declared in default. That on said date, plaintiff being then the holder and sole owner of the note, began foreclosure under the power of sale contained in the mortgage.

Foreclosure sale was had on February 22, 1967, and plaintiff was highest bidder at a bid of $7744.66.

It was further averred in the complaint that after deducting costs of sale the remainder of the sale price was exactly the balance unpaid on a first mortgage, leaving no remainder to credit on the note. That the security was exhausted and the note was still due and unpaid, thus the suit was brought.

Attached to the complaint as Exhibits 'A' and 'B', respectively, were the note and mortgage with their assignments. We observe here that the assignment of the note was to Atlas Credit Corporation, and the assignment on the mortgage was of both it and the note described therein. Both assignments were by the payee and mortgagee, Southern Improvement Company, Incorporated.

To the complaint, defendant filed various pleas, all of which were disposed of by withdrawal prior to selection of a jury and beginning trial, except plea 5. Plea 5 came in by amendment and is termed a plea in recoupment. It is couched in terms of a common count on account, and claims of plaintiff the sum of $5497.16, due from Atlas Subsidiaries of Mississippi, Inc., by account from the 24th of February 1967, with interest thereon. Demurrer to plea 5 was overruled.

After trial began plaintiff introduced into evidence the original note and mortgage, with the attached assignments to Atlas Credit Corporation and Atlas Financial Corporation. Plaintiff's counsel then stated to the court that since it appeared on neither exhibit that assignment had been made to plaintiff, and since neither of the corporations to which assignment had been made were parties, plaintiff was casting a nonsuit.

Upon entry of voluntary nonsuit by plaintiff, defendant elected to proceed in recoupment. Thus the burden to go forward was upon defendant-plaintiff in recoupment.

Defendant introduced into evidence plaintiff's complaint, together with attached copies of the note and mortgage as hereinbefore described. There was then introduced the foreclosure deed wherein Atlas Financial Corporation was seller and Atlas Subsidiaries of Mississippi, Inc. was purchaser. The deed was signed by the auctioneer on behalf of Atlas Financial Corporation, with Atlas Subsidiaries of Mississippi as purchaser and grantee. Both of the above exhibits were admitted over the objection of plaintiff.

Defendant was called as a witness and testified concerning the events surrounding the note and mortgage. There was introduced in evidence a letter to defendant from Atlas Financial Corporation dated May 12, 1965, notifying her of the purchase of the note and mortgage, the amount and date of payments and to whom to send them. Another letter dated September 20, 1965, was introduced. This letter complained of failure to make payments and contained the amount past due. It was signed on behalf of Atlas Credit Corporation, was on the same stationery as the first letter signed on behalf of Atlas Financial Corporation with the same return address in Philadelphia, Pennsylvania. Plaintiff also operated from the same address.

During cross examination of defendant there was sought to be introduced in evidence a copy of a mortgage from defendant to City Federal Savings & Loan Company executed by defendant in 1961. This was admittedly a first mortgage and a first lien on defendant's property at the time of the execution of the note and mortgage, the subject of the suit and counter suit. Objection to its introduction by plaintiff was sustained by the court. There was testimony that this first mortgage was still being paid. There was no evidence that it was in default, either at the time of foreclosure of the second mortgage or at time of suit.

Upon submission to the jury, verdict and judgment was rendered in favor of defendant on her plea of recoupment in the amount of $6,807.28 and cost. After denial of motion for new trial, appeal was taken by plaintiff below, Atlas Subsidiaries of Mississippi, Inc., hereinafter referred to as appellant.

Appellant has first assigned as error the overruling of its demurrer to appellee's plea 5 on the specific ground that the provisions of Title 7, Section 356, Code of Alabama 1940, precludes pleading of set-off or recoupment by appellee in this case. Title 7, Section 356 is as follows:

'Paper governed by the commercial law, negotiated before maturity, is not subject to set-off or recoupment.'

The complaint of plaintiff-appellant contained statements that appellant as successor of Atlas Financial Corporation, and being then the holder and owner of the note and mortgage executed by appellee proceeded to foreclose the same at public sale. If the allegations of the complaint are accepted as true, appellant, though a holder in due course and endorsee of the note and mortgage, was in fact the mortgagee by assignment and corporate succession and exercised the right of foreclosure. It was thus the recipient of the sum bid at the foreclosure sale. When property is sold at a foreclosure sale, conducted under the power of sale contained in a mortgage, at an amount greater than the indebtedness secured by said mortgage, the mortgagee is liable to the mortgagor for such surplus. Bartlett v. Jenkins, 213 Ala. 510, 105 So. 654. Thus, under the allegations of its own complaint, appellant opened the door for a cause of action against it by appellee-mortgagor for any surplus brought at the foreclosure sale.

It was stated in the case of Industrial Savings Bank v. Greenwald, 229 Ala. 529, 158 So. 734 as follows:

'* * * (Section 10178)* was intended to protect holders of commercial paper, negotiated before maturity, from the defense of set-off which the original maker had against the original payee. It was never intended by this provision of the Negotiable Instruments Law, that the maker, when sued by a holder in due course, could not set off against such holder a debt or demand due and owing by such holder to the maker * * *' (*Now Section 356.)

We think the rule should apply equally to the instant case in recoupment when the claim arises out of a transaction alleged to have been initiated by the plaintiff. Whether the acts giving rise to a right of action in recoupment were in fact the acts of plaintiff was a matter for the jury's determination. The plaintiff's pleadings stated so, and as against demurrer to the plea, such was sufficient. The demurrer of plaintiff, on the ground argued on this appeal was...