Co-Operative Oil Co. v. Greenwood Agency Co.

• Decision Date: 31 October 1927
• Docket Number: 26634
• Citation: 114 So. 397,148 Miss. 536
• Court: Mississippi Supreme Court
• Parties: CO-OPERATIVE OIL CO. v. GREENWOOD AGENCY CO. et al. [*]

114 So. 397

148 Miss. 536

CO-OPERATIVE OIL CO. v. GREENWOOD AGENCY CO. et al. ^[*]

No. 26634

Supreme Court of Mississippi

October 31, 1927

Division B

1 PLEADING. Pleading should be taken most strongly against pleader.

A pleading should be taken most strongly against pleader.

2 MORTGAGES. Bill to enjoin mortgage foreclosure, alleging that on an accounting it would be shown that mortgagee had funds belonging to mortgage, held not to make case for cancellation of mortgage because of fraud in its procurement.

Bill to enjoin foreclosure of mortgage, alleging that on an accounting between the parties it would be shown that mortgagee had in its possession belonging to mortgagor certain funds which would extinguish mortgage indebtedness held not to make case for cancellation of mortgage because of fraud in its procurement, since bill did not charge that mortgage was brought about by fraudulent acts, and it should be presumed that mortgagee had funds in its custody belonging to mortgagor as result of mere errors arising out of dealings between parties, in absence of specific charge that mortgagee acquired, and had possession of such funds as result of fraud.

3. FRAUD. Fraud must be specifically alleged.

Fraud is never presumed, and must be directly and specifically charged and clearly proven.

4. MORTGAGES. Sale under power given in mortgage could not be enjoined to enable mortgagor to set up counterclaim, where mortgagor did not show that irreparable injury would probably result otherwise.

Foreclosure of mortgage through advertisement and sale by trustee under power in mortgage could not be enjoined until an accounting could be had between parties for purpose of ascertaining whether or not mortgagor had counterclaim against mortgagee, arising out of separate and distinct transaction from that out of which mortgage indebtedness arose, where bill did not aver that mortgagee was insolvent, or that it was nonresident, or any other ground showing that denial of injunction would probably result in irreparable injury to mortgagor.

Suggestion of Error Overruled Nov. 28, 1927.

APPEAL from chancery court of Leflore county.

HON. HARVEY MCGEHEE, Chancellor.

Suit by the Co-operative Oil Company against the Greenwood Agency Company, and others, for an injunction. Temporary injunction was issued, and from an order dissolving it, complainant appeals. Affirmed and remanded.

Affirmed and remanded.

S. L. Gwin and S. Rosenthal, for appellant.

A court of equity may by injunction restrain the prosecution of an action for the foreclosure of a mortgage on the ground of fraud or duress, in the inception of the mortgage. 27 Cyc. 1538; Jones on Mortgages (7 Ed.), sections 1804, 1807. Alcorn v. Alcorn, 76 Miss. 907, aptly states the rule governing the dissolving of an injunction on motion before full proof and final hearing on the merits. The statement of Judge WHITFIELD is peculiarly applicable here particularly in that the entire bill is predicated upon allegations of fraud on the part of the defendants. See also Chancellor Griffith's excellent work on Mississippi Chancery Practice, section 456, and also Irwin v. Lewis, 50 Miss. 363; Harleston v. West La. Bank, 129 Miss. 111, 91 So. 423; Swearingen v. Steers, 49 W.Va. 312, 38 S.E. 510.

Although for the purposes of this hearing it is admitted that the defendant agency company is indebted to complainant in a sum equal to or greater than the amount of the indebtedness secured by the deed of trust sought to be foreclosed, the defendants contend that the injunction ought to be dissolved because an accounting is necessary to show the indebtedness of the defendant to complainant. While an accounting is necessary to reveal the major portion of the indebtedness to the complainant, nevertheless, as stated in the bill, complainant has ascertained and discovered sufficient funds in the hands of the defendant agency company belonging to the complainant to state an account greater than the amount of the indebtedness secured by the deed of trust, but even though it was necessary for an accounting to establish the indebtedness of defendants to complainant, nevertheless, this injunction should not be dissolved. Evans v. Hoye, 101 Miss. 244; Aust v. Rosenbaum, 74 Miss. 893; Purvis v. Woodward, 78 Miss. 929; Peebles v. Yates, 40 So. 996; Nestor v. Davis, 56 So. 347; Spinks v. Jordan, 66 So. 405; Smith v. Werkheiser et al. (Mich.), 115 N.W. 964, 15 L. R. A. (N. S.) 1092.

Where a promissory note is secured by fraud, equity will cancel the note. The prayer in the bill of complainant in this cause asked that the notes and deed of trust be cancelled. Crawford v. Mobile, etc., R. R. Co., 83 Miss. 708, 36 So. 82, 102 A. S. R. 476.

Certainly, if equity has the right to cancel the notes and deed of trust in controversy, it will have the right to enjoin the foreclosure of the deed of trust given as security for said notes, until the trial of said cause on its merits to determine whether or not the court will decree the cancellation of the notes and deed of trust.

The claim of appellants in this cause is not based upon a mere mutual indebtedness and is not in fact a set-off, but the indebtedness due appellants by the appellees consists of funds belonging to the appellant in the hands of the appellee, Greenwood Agency Company, received and retained by it as a depository of the appellant corporation funds so designated and constituted by the defendant, W. S. Barry, as the managing officer of appellant corporation.

We submit that the motion to dissolve should have been overruled and the injunction maintained until final hearing on its merits.

Alfred Stoner and Pollard & Hamner, for appellees.

Will equity enjoin a perfectly solvent mortgagee from foreclosing a deed of trust until an accounting can be had for the purpose of ascertaining whether or not the mortgagor has a counterclaim against the mortgagee, when such alleged counterclaim is alleged to have arisen out of an entirely separate and distinct transaction? Our answer is, no.

Necessarily, the agreement between counsel relegates the entire argument back to one question: Should the injunction have been granted in the first place?

Counsel have a great deal to say with reference to charges of fraud contained in the bill. We have examined the bill carefully and nowhere is it alleged that Mr. Barry or any of the corporations in which he was interested was guilty of fraud. We might consider for the sake of argument, however, that the bill charged the grossest fraud on the part of Mr. Barry and still the complainant would not be able to find one authority to substantiate its contention that an injunction will issue against a perfectly solvent mortgagee so that a debt can be set-off against another debt which arose through fraud, out of an entirely distinct transaction.

All of the authorities make a clear distinction between set-offs arising out of another transaction. All of the cases that we have found hold that a solvent mortgagee, who is not a nonresident, will not be enjoined from foreclosing for the purpose of having an accounting of a matter growing out of another transaction.

The sale of the gin could not possibly have been connected with the set-off alleged in the bill of complaint. 19 R. C. L., pages 617, 618; 28 Am. & Eng. Ency. of Law (2 Ed.), 810; 3 Jones on Mortgages (7 Ed.), sec. 1811; Caldwell v. Caldwell (Ala.), 52 So. 323; 28 Am. & Eng. Ency. of Law (2 Ed.), page 838; 32 C. J. 93, sections 84, 115.

The court will observe from the last cited authority that equity will usually refuse to enjoin even an action at law for the purpose of interposing an equitable defense, unless it is alleged that the plaintiff at law is insolvent. We submit that the authorities above cited point out the fact that a deed of trust is of by far greater dignity than an action at law. The courts even go so far as to say that the mortgagor should consider when he executes the deed of trust whether he is giving too much power to the mortgagee.

Counsel also argue that an injunction will be issued and upheld in cases where it is impossible to ascertain the amount of the indebtedness. It is very evident that counsel are confused in this and have failed to apprehend the meaning of the cases. We are anxious that the court get this distinction clearly in mind: If the confusion as to the amount of the indebtedness arises from within the particular transaction itself, then equity will enjoin a foreclosure of a deed of trust until the correct amount can be ascertained, but not otherwise. In the case at bar it is necessary that an accounting be had in order to ascertain the amount due by Mr. Barry to the Co-operative Oil Company.

Counsel also argue that in cases of this kind the matter of retaining or dissolving an injunction is a matter of discretion. Counsel are mistaken, in that we construe the authorities to hold that the injunction should not have been issued in the first place. However, if counsel are correct in their contention that its retention is a matter of discretion, then we say that the chancellor has exercised that discretion adverse to appellants. The only Mississippi case that we consider in point is Perkins v. Coleman, 51 Miss 298. There the court was eminently correct in making an exception to the rule, because irreparable and irremediable injury would have resulted, and great injustice would have been done. We also call the especial attention of this court to the notes annotating the case of Ekeberg v. Mackay, 35 L. R. S. (N. S.) at page 912. See, also, Tate v. Evans, 54 Ala. 16. Other authorities to the same effect are shown at page 912, 35 L. R. A. (N. S.), supra, wherein quotations are made from Georgia, North Carolina, Missouri, Virginia...