Bank of New Brockton v. Dunnavant

• Decision Date: 11 November 1920
• Docket Number: 4 Div. 859
• Parties: BANK OF NEW BROCKTON v. DUNNAVANT.
• Court: Alabama Supreme Court

87 So. 105

204 Ala. 636

BANK OF NEW BROCKTON v. DUNNAVANT.

4 Div. 859

Supreme Court of Alabama

November 11, 1920

Appeal from Circuit Court, Coffee County; A.B. Foster, Judge.

Bill by J.J. Dunnavant against the Bank of New Brockton to redeem from foreclosure. From a decree overruling the demurrers to the bill, respondent appeals. Affirmed.

W.W Sanders, of Elba, for appellant.

H.L Martin, of Ozark, for appellee.

SOMERVILLE J.

The allegations of the bill present two distinct theories upon which the right of redemption is grounded: (1) That the foreclosure sale under the power is voidable at the instance of the mortgagee because the two farms, which are separate and distinct in location, equipment, and use, were sold en masse, which was highly disadvantageous and injurious to the mortgagor; that the mortgagee was the only bidder; and that the price of $5,517.45, which was bid and paid for the entire property, was grossly disproportionate to its real value, which was not less than $20,000; and (2) that, though the foreclosure sale were valid, the verbal agreement between the mortgagor and mortgagee, made thereafter, was an effective waiver of the mortgagee's rights under that sale, so as to keep alive the original indebtedness and preserve the original relation of the parties, with an extension of the time for payment.

"In a court of law a power of sale is merely part of a legal contract to be executed according to its terms. In a court of equity it is quickened with the elements of a trust, and the donee of the power is charged as a quasi trustee with the duty of fairness and good faith in its execution, to the end that the mortgagor's property may be disposed of to his pecuniary advantage in the satisfaction of his debt." Harmon v. Dothan Nat. Bk., 186 Ala. 360, 369, 64 So. 621, 624. To the same effect is Dozier v. Farrior, 187 Ala. 181, 65 So. 365, cited in note, L.R.A.1917B, 527, 528.

In Dozier v. Farrior, supra, it was held that a sale, under the power, of widely separated tracts, devoted to separate and distinct uses, made en masse, and bringing for the property a price greatly less than its real value, would be set aside in equity, letting the mortgagor in to redeem. In this aspect of the bill its allegations are sufficient to authorize the relief prayed, and the demurrer was properly overruled. We do not overlook respondent's contention that the mortgagee's equitable duty in the premises was abrogated by that provision of the power which authorized a sale "when, as, and where it shall seem best to them, for cash or on credit." A court of equity, however, will not allow the mere latitude of the mortgagee's discretion--a specific mode not being prescribed--to nullify a duty enjoined by law as essential to the ends of justice, and constituent in the obligations of a trust. As said by the Supreme Court of Illinois in a similar case:

"The power given, by its very terms, implies that the trustee assumed the duty of thinking on the subject, and that he should adopt that course which he should think would secure a good price. It does not mean that the trustee may do as he may please, or that he may do that which should be the most convenient for him." Cassidy v. Cook, 99 Ill. 385, 388.

One of the demurrers is addressed to the bill "as a bill to redeem," and the other is addressed to the bill "as a whole." The bill, however, is nothing but a bill to redeem, other relief prayed being incidental only; and hence, not being subject to demurrer in one of its aspects as a bill to redeem, both demurrers were properly overruled.

Some of the grounds of demurrer, though not limited, as they should have been, to that aspect of the bill which grounds the right of redemption on a parol agreement in derogation of the legal status resulting from the foreclosure sale, may be of vital importance in the future progress of the cause, and we shall therefore consider their merit on this appeal for the guidance of the trial court.

Conceding, without deciding, that the deed executed to the mortgagee, as purchaser at the sale, by its cashier, was not properly executed in the name of the mortgagor by the donee of the power, nevertheless the foreclosure sale, with or without a deed to the purchaser, was effective as to the mortgagor and his heirs to cut off the equity of redemption, extinguishing the debt and the former relation of the parties, and subjecting them to the new status and obligations prescribed by the statute (Code, § 5746 et seq.) governing redemption. Cooper v. Hornsby, 71 Ala. 62; Comer v. Sheehan, 74 Ala. 452; Mewburn's Heirs v. Bass, 82 Ala. 622, 2 So. 520; Welch v. Coley, 82 Ala. 363, 2 So. 733; Durden v. Whetstone, 92 Ala. 480, 9 South, 176; Tipton v. Wortham, 93 Ala. 321, 9 So. 596; Hambrick v. N.E.M. Sec. Co., 100 Ala. 551, 13 So. 778; Drake v. Rhodes, 155 Ala. 498, 46 So. 769, 130 Am.St.Rep. 68.

This being the state of the title as between the mortgagor and mortgagee after the foreclosure sale, and the mortgagor's right of redemption being thereafter statutory only, and limited by law to a period of two years from the date of the sale, it is clear that, under the theory of mortgages and mortgage titles prevailing in this state, no parol agreement of the parties to reinstate the original mortgage by a revival of its equity of redemption and extension of the debt can be given effect, since it would contravene the statute of frauds (Code, § 4289). The asserted effect of that agreement was to reconvey to the mortgagor an equitable estate in the land--a result that could be effected only by a signed memorandum of the agreement, or by a delivery of the land to the mortgagor as owner, accompanied or followed by a payment of some part of the purchase price. The retention of the land by the mortgagor, under an agreement to hold it as tenant and pay rent for its use, did not satisfy the requirements of the statute.

The facts of this case sharply distinguish it from those cases which hold that inequity a written conveyance, absolute in form, will operate only as a mortgage, if there was a continuing debt, and the parties contemporaneously...