Eatman v. Goodson

• Decision Date: 04 November 1954
• Docket Number: 2 Div. 336
• Citation: 78 So.2d 625,262 Ala. 242
• Parties: F. I. EATMAN v. Floyd GOODSON et al. F. I. EATMAN v. Naomi GOODSON.
• Court: Alabama Supreme Court

Page 625

78 So.2d 625

262 Ala. 242

F. I. EATMAN v. Floyd GOODSON et al.

F. I. EATMAN v. Naomi GOODSON.

2 Div. 336.

Supreme Court of Alabama.

Nov. 4, 1954.

Rehearing Denied March 10, 1955.

Jones, McEachin & Ormond, Tuscaloosa, for appellant.

LeMaistre, Clement & Gewin and Perry Hubbard, Tuscaloosa, for appellees.

SIMPSON, Justice.

These two cases, tried together below and consolidated here in one record, involve bills in equity, brought by Floyd and Naomi Goodson, seeking to enjoin the enforcement of two judgments in an effort to effect a setoff against them. From a decree granting relief to complainants the defendant appeals.

Only the salient facts as found by the trial court and established by the evidence and necessary to an understanding of our decision will be mentioned. In 1922 Floyd and Naomi Goodson, being husband and wife, were joint owners of some real estate in Greene County. On July 29, 1922, they executed a mortgage on this property to Banks & Company to secure the payment of two notes totaling $908.31. In January, 1925, Banks & Company transferred this mortgage to F. I. Eatman, the respondent and appellant in these cases. At this time there was balance due on the notes in the amount of $328.68. This amount was still due on January 29, 1932, when Eatman foreclosed the mortgage and bought in the property for $2,500. The difference of $2,171.32 Eatman never paid over to the Goodsons and it was a finding of the trial court that the same was still owing and due. (Eatman's evidence, however, tended to show that this amount was credited to an account which the Goodsons owed at his store.) On March 9, 1932, Naomi Goodson redeemed or bought the property back from Eatman for $2,557.97.

Floyd Goodson kept a running account with Eatman which covered purchases made to operate the farms belonging to the Goodsons. At the end of each year the account was balanced and Floyd and Naomi would sign a note covering the amount. On March 9, 1931, Floyd and Naomi executed such a note to Eatman for the amount of $2,700. This note was due and payable on October 15, 1931. Eatman brought suit on this note claiming a balance due of $718.32 as of January 29, 1932, the balance being reduced to that amount by reason of the $2,171.32 credit owing the Goodsons from the foreclosure sale. A judgment by default was taken against Floyd and Naomi in this suit on September 18, 1933. The judgment was for $912.15. So much for the facts in the case where the judgment was rendered against Floyd and Naomi.

The other case relates to a judgment against Floyd, Charles and Lula Goodson. On October 14, 1929, Floyd Goodson signed a note as surety for Charles and Lula. Suit was brought on this instrument and on March 21, 1932, a judgment was taken against all three for $413.90.

In November, 1952, an order of scire facias revived the above two judgments pursuant to a decision of the Court of Appeals in the case of Eatman v. Goodson, 36 Ala.App. 360, 58 So.2d 129, certiorari denied 257 Ala. 239, 58 So.2d 133.

Complainants by the present bill as last amended seek to set off against these two judgments the $2,171.32 debt which Eatman became owing to Floyd and Naomi Goodson when he purchased the real estate at the foreclosure sale in January, 1932. Several defenses, including res judicata and statute of limitations, were interposed, but as we view the cases it is not necessary to treat all of the issues raised thereby.

The trial court permitted the setoff against the $912.15 judgment against Floyd and Naomi Goodson, denied it on the $413.90 judgment against Floyd, Charles and Lula Goodson, and enjoined the levy of executions against any lands of Naomi Goodson.

It is, of course, true that a claim is not lost just because it is not asserted as a setoff at the earliest opportunity. Dunham Lumber Co. v. Holt, 124 Ala. 181, 27 So. 556.

And in a proper case equity will enforce a setoff against a judgment at law. Stewart v. Burgin, 219 Ala. 131, 121 So. 420. In the Stewart case equitable intervention to permit the setoff against an insolvent judgment creditor was rested on the fact that the judgment had been obtained in an action of detinue in which the setoff could not have been pleaded. But the court quoted with approval the statement in the case of North Chicago Rolling-Mill Co. v. St. Louis Ore & Steel Co., 152 U.S. 596, 615, 14 S.Ct. 710, 715, 38 L.Ed. 565, 572, which pointed out:

'Cross demands and counterclaims, whether arising out of the same or wholly disconnected transactions, and whether liquidated or unliquidated, may be enforced, by way of set-off, whenever the circumstances are such as to warrant the interference of equity to prevent wrong and injustice.'

'And '* * * that equity will entertain jurisdiction, and afford relief against the collection of a judgment, where, in justice and good conscience, it ought not to be enforced, as where there is a meritorious, equitable defense thereto, which could not have been set up at law, or which the party was, without fault or negligence, prevented from interposing. * * *' (Emphasis supplied.)

In Adams v. Alabama Lime & Stone Corp., 221 Ala. 10, 14, 127 So. 544, 548, this court stated:

'But * * * A purely legal demand owned by the defendant at law at the time of suit brought, and purposely or by mere neglect not interposed at law, will not support a bill in equity for set-off on the sole ground of insolvency. This is only another way of saying one may not of his own election or by mere neglect create in himself an equity.

'True, a defendant at law is not required to interpose a set-off. He may elect to sue upon it separately; but this does not mean an election to create an equitable right in himself. * * *' (Emphasis supplied.)

To come within the purview of the cases permitting equitable intervention to invoke a setoff and to avert the operation of the rule that the judgment debtor may not create an equitable right in himself by refraining from enforcing his claim at law, the complainants alleged that due to the fraud or mistaken representations of Eatman at the time of the mortgage foreclosure and at the time of the redemption of the property therefrom they did not know of their being entitled to the claim which they now try to set off. On this specific point (if well pleaded) the trial court made no finding, but considering the evidence in its most favorable aspect to the complainants, we are unable to say that the allegations were made out. But even more, complainants' own testimony shows their utter negligence in failing to ascertain the existence of the claim if it were in fact bona fide and enforceable. Though it is said that a severe rule of negligence will not be imposed where there is fraud or concealment, the effect of our decisions is that neglect in discovering the claim is equally as fatal in equity as neglect in asserting it. Adams v. Alabama Lime & Stone Corp., supra.

The evidence clearly established that Floyd and Naomi are far from illiterate. Floyd testified that he had completed the twelfth grade in school and Naomi testified that she had taught school for years. At least, they seem to have had sufficient intelligence and business knowledge to successfully manage a large plantation for many years. Their numerous executions of notes and mortgages would indicate a knowledge of their nature and significance. There was testimony that Naomi's attorney, when in consultation with Mr. Eatman's attorney and looking into the question of the liability on the note for the balance of $718.32, said to her, 'Naomi, you should pay this balance just as soon as you can,' and that Naomi spoke up, followed by Floyd, and said, 'If we have good crops and good prices we can make a payment this Fall and maybe pay it all.' Naomi testified she was present when the property was sold under foreclosure. They employed a lawyer of ability to negotiate the redemption for them and the transaction was closed in his office. All of Eatman's records were available to them at all times. Floyd testified he had told the same lawyer before the sale 'to take care of it' for him. It also appeared that they consulted their attorney about the suit in which the judgment against them was obtained. On cross-examination Naomi testified:

'Q. How many times did you see Mr. Aldridge and discuss any of the Eatman matters with him after the redemption on March 19th, 1932? A. I didn't have any other contact with him no more than when the judgment paper came out, we asked him about it. We consulted him about it, and he said, 'Well, it's not necessary for you to go down there to meet that because you don't have anything to protect yourselves; you don't have any money,' he said, 'It's a false judgment anyhow,' and that's why we didn't come.

'Q. And Mr. Aldridge said there was no use in your going to court to defend yourself against Mr. Eatman's case? A. Yes sir.'

That they relied on the advice of their attorney, if he did so advise them, does not create an equity. Duckworth v. Duckworth's Adm'r, 35 Ala. 70.

Under these circumstances, although other defenses interposed might lead to the same result, we cannot escape the holding that complainants have not shown sufficient grounds for a setoff in equity. So considered, that phase of the decree is reversed and a decree will be here rendered dismissing the bill on that aspect.

The trial court further found that the lands levied on were the sole property of Naomi Goodson and accordingly decreed that the other judgment against Floyd Goodson (and Charles and Lula) could not be satisfied out of such lands and the levy was enjoined. No argument is made with respect to the adequacy vel non of remedy at law, but the finding is assailed here because it is contended that in the same court in case No. A 552 there was a decree rendered in 1950 that the lands are the joint property of Floyd and Naomi Goodson. Part of the bill of complaint and decree in that case were made a part of...