City Nat. Bank of Dothan v. First Nat. Bank of Dothan, 4 Div. 382
| Decision Date | 26 February 1970 |
| Docket Number | 4 Div. 382 |
| Citation | 285 Ala. 340,232 So.2d 342 |
| Parties | CITY NATIONAL BANK OF DOTHAN, a National Banking Institution v. The FIRST NATIONAL BANK OF DOTHAN, a National Banking Institution. |
| Court | Alabama Supreme Court |
Richard H. Ramsey, III, J. Huntley Johnson, Dothan, for appellant.
Farmer & Herring, Dothan, for appellee.
This is an appeal by City National Bank from a judgment establishing the priority of notes and mortgages held by First National Bank over notes and mortgages held by City National Bank, and awarding First National Bank the proceeds of its mortgage foreclosure sale.
The facts of the case were stipulated. J. Lee Benton and wife executed and delivered to the First National Bank three promissory notes prior to July 8, 1965. On that date they executed notes and a first mortgage on certain real estate to First National securing $12,000. On the same day, they executed and delivered a note and second mortgage on the same property to one Stewart B. Carter securing $2,000, which note and mortgage were assigned to City National Bank. Subsequently, the Bentons executed and delivered to City National Bank another note and third mortgage on the same real estate securing $20,000. After the execution of those mortgages, the Bentons gave another promissory note to First National Bank in the sum of $5,053. Thus, three notes to First National Bank were made prior to the date of execution of the notes and first mortgage, and one note to it was executed subsequent to the City National mortgages.
The first mortgage to First National contained the following language:
'KNOW ALL MEN BY THESE PRESENTS, that being indebted to THE FIRST NATIONAL BANK OF DOTHAN by 2 notes of even date herewith and due, respectively, as follows, to-wit:
'* * * and for the purpose of securing the payment thereof, together with additional amounts furnished me, or either of us, or which I, or either of us owe, or may owe on any account to said THE FIRST NATIONAL BANK OF DOTHAN, its successors or assigns before such debts are fully paid, in money or otherwise, we J. Bee Benton and wife, Myrtle M. Benton do hereby grant, bargain, sell and convey to THE FIRST NATIONAL BANK OF DOTHAN, * * *.
'* * * and this debt, together with all other debts and obligations that I, or we, owe or may hereafter owe to the said THE FIRST NATIONAL BANK OF DOTHAN, under this instrument or otherwise shall be also secured by the said mortgage or lien, * * * IT IS CONTEMPLATED THAT SAID BANK WILL MAKE ADDITIONAL ADVANCES.
'* * * AND IF I OR WE SHOULD PROCURE MORE MONEY OR BECOME INDEBTED TO THE SAID BANK, ITS SUCCESSORS OR ASSIGNS, IN EXCESS OF THE AMOUNT HEREIN STATED BEFORE THE PAYMENT THEREOF, I HEREBY EXPRESSLY AGREE THAT SUCH DEBT SHALL BE AND THE SAME IS HEREBY MADE A PART OF THIS MORTGAGE DEBT, WITH ALL THE RIGHTS, POWER AND AUTHORITY, AS TO THE COLLECTION AND FORECLOSURE HEREIN EXPRESSED, * * *.'
This mortgage was foreclosed by First National Bank and bid in by the buyer for the sum of $18,900. First National continues to hold the amount received at the sale and declines to pay anything to City National Bank, maintaining it is entitled to all of the foreclosure funds which were less than the total amount of its notes plus expenses and attorneys' fees.
City National filed a bill for declaratory judgment claiming it is entitled to all of the proceeds received by First National at the foreclosure sale above the actual amount of the notes executed contemporaneously with the first mortgage plus the foreclosure expenses and attorneys' fees. The trial court ruled adversely to City National, holding that First National's mortgage also secured the three promissory notes made prior to its execution, and the First National note made subsequent to the City National mortgages. Thus, the trial court concluded that First National's notes and first mortgage had priority over the notes and mortgages executed by City National. All mortgages were duly recorded.
The third mortgage, to City National, contains the following provision:
'This mortgage is given * * * subordinate to that certain mortgage from J. Lee Benton to First National Bank of Dothan * * *.'
It was expressly stipulated by the parties that each of the promissory notes and real estate mortgages expressed the intention of the parties to the notes and mortgages. It was also stipulated that each party had notice of the mortgages of the other as is provided by the recording laws.
The questions on this appeal involve priority of the notes and mortgages, specifically: Does the First National note executed subsequent to the two junior mortgages to City National constitute an 'advance' secured by the lien of the First National mortgage and therefore superior to the junior mortgages? Are the three 'antecedent' notes to First National secured by the lien of its mortgage?
Appellant City National's contentions are: That First National was entitled to satisfy only the balance of the amount actually advanced under its first mortgage at the time of its execution, notwithstanding that the mortgage contained both a conglomerate and additional advance clause; and, that City National is entitled to have its second and third mortgages satisfied from the balance of the proceeds of the sale.
Appellant City National admits it is well settled that parties may agree in the mortgage instrument that a mortgage stand for both antecedent and subsequent debts. But, it argues such mortgage provisions do not permit advances to take precedence over an intervening junior lien when the advances are not made until after attachment and notice of the junior encumbrance.
Appellee First National contends: That because of the conglomerate and advance clauses in its first mortgage: the stipulation that all notes and mortgages expressed the intention of the parties thereto; and, City National's notice of the first mortgage; it is entitled to apply the proceeds of the sale to all of the notes held by it, whether executed prior or subsequent to its first mortgage.
We agree with First National's contentions, being of the opinion that all of its notes are secured by its mortgage and that it is entitled to all of the proceeds from the foreclosure sale.
Alabama has long been committed to the proposition, as expressed by the late Justice Bouldin in the leading case of First National Bank of Guntersville v. Bain, 237 Ala. 580, 582, 188 So. 64, 66, viz:
'* * * it is now the settled law of Alabama, and throughout this country, that clear and express provisions (in a mortgage) extending the...
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