Constantine v. U.S. Fidelity and Guar. Co., Inc.

• Decision Date: 28 April 1989
• Citation: 545 So.2d 750
• Parties: Rita CONSTANTINE v. UNITED STATES FIDELITY AND GUARANTY COMPANY, INC., et al. 87-1163.
• Court: Alabama Supreme Court

Page 750

545 So.2d 750

Rita CONSTANTINE v. UNITED STATES FIDELITY AND GUARANTY COMPANY, INC., et al.

87-1163.

Supreme Court of Alabama.

April 28, 1989.

Stephen D. Heninger of Heninger, Burge & Vargo, Birmingham, for appellant.

James L. Clark and Lynn Baxley Ault of Lange, Simpson, Robinson & Somerville, Birmingham, for appellees.

JONES, Justice.

This is an appeal from a judgment on a directed verdict in favor of notary public Ardith Srack McMicken and her surety, United States Fidelity and Guaranty Company, Inc. ("USF & G"), on the ground of "estoppel by judgment." We affirm.

Because the estoppel-by-judgment defense is based on the judgment of the Court of Civil Appeals (Constantine v. First Alabama Bank of Birmingham, 465 So.2d 419 (Ala.Civ.App.1984), which adopted the trial court's findings of fact and conclusions of law, we set out the trial court's final judgment as contained in the Court of Civil Appeals' opinion:

" 'Based upon the testimony and evidence, the Court makes the following findings of fact:

" '1. The suit was brought by the plaintiff [First Alabama Bank of Birmingham] as a purchaser at a foreclosure sale to recover possession of certain real property under the provisions of Act. No. 327, Ala. Acts 1931, as amended by Act No. 172, Ala.Acts 1933, codified in Ala.Code, Title 62, Section 129 (1940, as recompiled 1958), and preserved by Code of Ala.1975, § 1-1-10. Defendant Emmanuel T. Constantine in his answer averred that the foreclosed mortgage was void and further that he was not in possession of the subject property. In her answer, defendant Margaret R. Constantine also averred that the foreclosed mortgage was void and further alleged that the plaintiff had violated federal and state consumer protection laws. In addition, Margaret R. Constantine filed a motion for equitable relief and a counterclaim and later filed an amendment to the counterclaim. The counterclaim as amended prayed that the subject foreclosure deed and two notes and two mortgages be set aside and declared null and void and that the counterclaimant be awarded damages for alleged negligence, wantonness, and fraud on the part of the plaintiff.

" '2. On August 21, 1979, the defendants executed a $60,000.00 note in favor of the plaintiff ... and as security signed a mortgage on the subject property.... The defendants signed a $20,000.00 note in favor of the plaintiff on October 25, 1979 ... and a second mortgage on the subject property....

" '3. On the occasion of each loan both defendants signed an authorization directing that the borrowed funds be deposited to various corporate checking accounts relating to family restaurant businesses. Even though Mrs. Constantine was employed, income from the restaurant businesses was used by the family to pay for utilities, food, clothing, and other living expenses. Mrs. Constantine saved most of her income for periodic gifts to their older children.

" '....

" '5. In connection with both loans both defendants signed mortgage loan extension agreements on November 20, 1979, ... February 19, 1980, ... July 11, 1980, ... January 7, 1981, ... and April 7, 1981. Interest payments were made on the occasions of the execution of the various extension agreements but no payment was ever made on either principal balance.

" '6. By letter of August 3, 1982, the attorney for the plaintiff advised Mr. Callahan, then attorney for both defendants, that a notice of foreclosure sale relating to the first mortgage would be published in the August 7, 14, and 21 editions of Alabama Messenger and that the foreclosure sale would be held on August 30, 1982. By agreement the sale was not held as scheduled. On December 3, 1982, the attorney for the plaintiff advised Mr. Callahan in his capacity as attorney for both defendants that another notice of foreclosure sale relating to the first mortgage would be published in the December 4, 11, and 18 editions of Alabama Messenger and that the foreclosure sale would be held on December 27, 1982. The foreclosure sale was held on December 27, 1982, as advertised and the plaintiff became the purchaser. A foreclosure deed was executed and recorded....

" '7. On January 4, 1983, the plaintiff made written demand by certified mail on the defendants for possession of the subject property.... Defendant Margaret R. Constantine signed a certified mail receipt on January 12, 1983, ... acknowledging receipt of the demand for possession. Between that date and the date of the hearing, the defendants obtained a divorce, Emmanuel T. Constantine conveyed all of his interest in the subject property to Margaret R. Constantine, and Emmanuel T. Constantine moved himself and all of his belongings to another address.

" '8. The signatures of defendant Margaret R. Constantine on the first mortgage ... and the second mortgage ... were not made in the presence of the notary public, Ardith Srack, and no acknowledgement was taken from Mrs Constantine on either occasion by Mrs. Srack. Because Margaret R. Constantine could not leave her place of employment on August 21 or October 25, 1979, Emmanuel T. Constantine was allowed on each occasion by J. Stanley Mackin, Sr., Executive Vice President of the plaintiff and a personal friend of both defendants, to take the mortgage to Mrs. Constantine's place of employment, where she signed each mortgage, along with various other papers, in the presence of only Mr. Constantine. On each of the two occasions when Mr. Constantine returned the mortgage to the plaintiff, Mr. Mackin instructed his secretary, Ardith Srack, now Ardith McMicken, to complete the acknowledgement paragraph that related to the signature of Mrs. Constantine.

" '9. Neither defendant offered to do equity by making restitution to the plaintiff of the value they received after the execution of the mortgages.

" '....

" 'Based on the facts set out above, the Court finds that the notes and the mortgages and the foreclosure deed are not due to be cancelled or vacated because the defendants did not offer to do equity by making restitution to the plaintiff of such things of value as they received. [Montgomery v. Parker Bank & Trust Co., 256 Ala. 20, 53 So.2d 566 (1951); and Rhodes v. Schofield, 263 Ala. 256, 82 So.2d 236 (1955) ]. All documents are due to be enforced to the extent that they embrace property not covered by Margaret R. Constantine's homestead exemption in the sum of $5,000.00 [Rhodes v. Schofield, supra.] Defendant Margaret R. Constantine should surrender possession of the premises sued for to the plaintiff within ten days from the date of the judgment [Ala.Code, Title 62, Section 129 (1940, as recompiled 1958), Code of Ala.1975, § 1-1-10] and at such time the plaintiff should deliver the sum of $5,000.00 to Defendant Margaret R. Constantine.

" 'Defendant Emmanuel T. Constantine was not in possession of the subject property at the time this suit was filed. He has since conveyed all his right, title, and interest in the property to Margaret R. Constantine.

" 'The Court further finds that there were no violations of any federal or state consumer protection laws and that the plaintiff was not guilty of negligence, wantonness or fraud.' "

Constantine v. First Alabama Bank of Birmingham, 465 So.2d at 420-21.

Finding evidence that supported "those actual findings ... as set forth in the [trial court's] final judgment," the Court of Civil Appeals affirmed the trial court's judgment and reasoned as follows:

" 'It is of course well understood that when a mortgage is invalid and the mortgagor files a bill in equity to have it vacated on that account relief will be denied him unless he restores the consideration which he received from the mortgagee. (Citations omitted.)' Rhodes v. Schofield, [263 Ala. 256, 260, 82 So.2d 236, 239 (1955).] Here, a reasonable inference from the findings of fact in paragraph number 3 of the judgment is that Mrs. Constantine benefited from the funds which were borrowed from the bank, and there was other evidence to that effect. A signed, but improperly acknowledged, mortgage may be enforced in equity to the extent that it embraces property not exempt as a homestead and, in substance and effect, that is what the trial court did in this instance. Rhodes v. Schofield, supra. In short, the judgment of the trial court was correct."

Constantine v. First Alabama of Birmingham, 465 So.2d at 422.

We now quote from the record in the instant case the colloquy among the trial judge and the counsel for the parties during the argument on the defendants' motion for directed verdict, which took place outside the hearing of the jury:

"MR. CLARK [counsel for the defendants]: Let the record show that the defendants rest..... [A]t this time the defendants United States Fidelity & Guaranty Company, Inc., and Ardith McMicken, separately and severally file a motion for directed verdict.

"MS. AULT [counsel for the defendants]: Your Honor, ... attached to our motion for summary judgment before this trial was the original case of Constantine v. First Alabama Bank of Birmingham, and in that case it was established that when there is faulty notarization of a mortgage that is not signed by two witnesses that an equitable lien arises and it provides an equitable remedy for the mortgagor ..., and unless the mortgagor is willing to do equity by making restitution of the monies received the mortgage is enforceable. Because Mrs. Constantine's signature was not notarized properly, her homestead exemption was conserved and the bank was ordered to pay Mrs. Constantine $5,000, but their mortgage was good because the Constantines did not make restitution to the bank for the monies they received.

"The testimony in that first trial which was in the judge's findings also shows that Mrs. Constantine benefited from the monies that were loaned by the bank, that she lived on those monies and ... also through her husband's salary which was paid by the business and she used her own monies...