Bell v. Farmers' Nat. Bank of Opelika

• Decision Date: 03 December 1925
• Docket Number: 5 Div. 929
• Citation: 214 Ala. 211,106 So. 851
• Parties: BELL v. FARMERS' NAT. BANK OF OPELIKA et al.
• Court: Alabama Supreme Court

106 So. 851

214 Ala. 211

BELL v. FARMERS' NAT. BANK OF OPELIKA et al.

5 Div. 929

Supreme Court of Alabama

December 3, 1925

Rehearing Denied Jan. 21, 1926

Appeal from Circuit Court, Lee County; S.L. Brewer, Judge.

Bill in equity by Helen N. Bell against the Farmers' National Bank of Opelika and others. From a decree denying relief complainant appeals. Affirmed.

Barnes & Walker, of Opelika, and J.J. Mayfield, of Montgomery, for appellant.

Denson & Denson and T.D. Samford, all of Opelika, for appellees.

BOULDIN J.

The primary purpose of the bill is to cancel a mortgage upon real estate of the wife, upon the ground that it was given as security for the debt of the husband. The case made by the pleadings and proof is briefly this:

J.S Bell, the husband, was a cotton buyer in Opelika. In the summer of 1923 he applied to the Farmers' National Bank of Opelika to finance his business during the approaching cotton season. Because of former dealings wherein J.S. Bell had become and was still largely indebted to the bank, his request was refused, unless he would arrange an advance credit or deposit of $5,000 for use in the business. Thereupon it was arranged to obtain a loan of $5,000 from the bank, to be secured by mortgage upon a vacant lot owned by him, and upon the home owned by Helen N. Bell, his wife. Accordingly, the wife signed an application in writing saying:

"For the purpose of obtaining funds with which to aid my husband, J.S. Bell, in the prosecution of his business, I hereby make application to you for a loan of $5,000, to run for a year. I will execute my note for the amount and offer as security for the loan a mortgage on my home," followed by a description of the property.

At the same time the wife executed her individual note for the loan with a mortgage on the property reciting that it was to secure her own indebtedness. At the same time she issued her check for $5,000 payable to her husband. Entries were made crediting her with $5,000 loaned, charging her with the check for like amount, and placing the same to the credit of the husband, subject to check. Thereafter the husband checked out the fund at will. The bank financed the husband's cotton business through the season, making further loans upon cotton receipts as collateral. No part of the mortgage debt was paid. No part of the $5,000 loan was applied, nor agreed to be applied, to the existing indebtedness of the husband. Mr. Bell testifies that in the negotiations for the loan he offered to apply any profits made on the season's business to his old debt. This is controverted by Mr. Farley, who represented the bank. This is not an issue material to the merits of this case. Assuming that the hope of getting something on the husband's indebtedness was an inducement to the bank to lend its aid in setting him up in business, this could not affect the loan of $5,000 made to the wife, no part of which was to go to pay on the husband's existing debt.

The record shows no contract, express or implied, by which the husband became bound as the principal debtor to repay the $5,000 loan. There is evidence that the husband promised the wife that he would clean it all up before Christmas; and the letter from the bank to Mr. Roy Nolen indicates that such was the expectation, if the business succeeded. But this was a duty from the husband to the wife, who had thus aided him in the business. The written contract entered into by all the parties negatives any right of the bank to sue the husband for the $5,000 loan. As a part of the transaction, it was stipulated that this was the debt of the wife alone. She alone executed the note therefor. There is no evidence that the writings were merely colorable, and the real transaction was something else. With immaterial variations, the parties agree as to what transpired and what was their real purpose. That purpose was, as expressed in the application, to obtain a loan to the wife, the fund to be turned over to the husband to aid him in financing his cotton business. The case reduces itself to one question of law, namely: Is a loan to the wife for the benefit of the husband in financing his future business, the fund to be deposited in the lending bank to the credit of the husband, the bank thereupon agreeing to finance the business for the season, in contravention of the statute forbidding the wife to become, directly or indirectly, the surety for the husband?

"In dealing with these transactions, courts look through the form to the substance; but, to be obnoxious to the statute, the substance must, when analyzed, disclose a debt or obligation due from the husband to the person who seeks to enforce the ancillary promise of the wife. If there was no such debt, there can be no occasion for the operation of the statute. In that case, although the loan is made to the wife upon the

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