First Nat. Bank v. Bain

• Decision Date: 13 April 1939
• Docket Number: 8 Div. 953.
• Citation: 188 So. 64,237 Ala. 580
• Parties: FIRST NAT. BANK OF GUNTERSVILLE v. BAIN ET AL.
• Court: Alabama Supreme Court

188 So. 64

237 Ala. 580

FIRST NAT. BANK OF GUNTERSVILLE v. BAIN ET AL.

8 Div. 953.

Supreme Court of Alabama

April 13, 1939

Appeal from Circuit Court, Marshall County; A. E. Hawkins, Judge.

Suit in equity by W. N. Bain and Bessie A. Bain against the Federal Land Bank of New Orleans in which there was intervention by the First National Bank of Guntersville as a respondent and cross-complainant, seeking foreclosure of a mortgage by original complainants to it on the lands involved. From a decree favorable to cross-respondents, the cross-complainant appeals.

Reversed rendered and remanded.

J. A Lusk & Son, of Guntersville, for appellant.

D Isbell, of Guntersville, for appellees.

BOULDIN Justice.

The sole question presented on this appeal is the amount of indebtedness secured by mortgage upon real estate executed by W. N. Bain and Bessie A. Bain, his wife, to First National Bank of Guntersville, Alabama, of date March 5, 1925.

The opening paragraph of the mortgage, the consideration clause, reads:

"Know all Men by these presents, that W. N. Bain and Bessie A. Bain his wife, being justly indebted to the First National Bank of Guntersville, Ala., in the sum of Seven thousand five hundred and No/100 Dollars ($7,500.00) evidenced by a Promissory note, dated March 5th, 1925 and due on the 1st day of June, 1925 for Seven thousand Five hundred and No/100 payable to the said First National Bank of Guntersville, Ala., and in consideration thereof, and to secure the payment of the same, and any other indebtedness owing by the said W. N. Bain to the grantee before the full payment of this mortgage."

This is followed by the usual granting clause.

A reference to the register, among other things, directed him to ascertain and report the amount of this mortgage indebtedness. He reported the mortgage "was given to secure only $7500.00, it not being the mutual intention of the contracting parties to secure more by said mortgage."

By a supplemental report, there appears the following:

"The Register further shows for the purpose of clarifying the foregoing report and to make his meaning clear shows to the court that he has come to the conclusion from the testimony that the First National Bank at the time of the execution of the mortgage of W. N. Bain and wife to the First National Bank on March the 5, 1925, the said bank had or was carrying three indebtednesses against W. N. Bain;

"(1) An indebtedness against W. N. Bain alone that amounted to and is evidenced by note No. 7605 dated March 5, 1925 for $7500 which was secured by the mortgage recorded in book 71 page 130.

"(2) Another indebtedness spoken of in the testimony as the 'Grizzell indebtedness' evidenced by notes of Ewing Grizzell and endorsed by W. N. Bain, all of which were taken up by a note of W. N. Bain on March 1, 1928 for $6179.95 by note No. 7667.

"(3) Still another indebtedness spoken of in the testimony as the indebtedness of Bessie A. Bain evidenced by divers notes given by her and indorsed by W. N. Bain and finally taken up by the note of W. N. Bain on March 1, 1928 by note No. 7666 for $5215.30.

"The Register is convinced and finds from the testimony that the indebtedness called the 'Grizzell Indebtedness' and the Bessie A. Bain notes set out in paragraphs (2) and (3) respectively above were not secured by the mortgage of W. N. Bain to the First National Bank recorded in book 71 page 130 for the fact found by him that it was the mutual understanding of the contracting parties, in said mortgage to secure only the indebtedness of W. N. Bain as set out in paragraph (1) above.

"The Register further finds that said mortgage to said First National Bank did not secure any future advances to be made to said Bain by the said Bank such not being in the mutual contemplation of the contracting parties at the time of the execution of said mortgage."

The real controversy is whether the indebtedness evidenced by the two notes given by W. N. Bain, March 1, 1928, and renewed from time to time is secured by the mortgage still held by the Bank. Without dispute the $7500 personal indebtedness of W. N. Bain at the date of the mortgage has never been paid in full, but was also renewed from time to time. The report, confirmed by the court, found the amount of that indebtedness as of January 1, 1938, to be $9811.70, with an additional sum as an attorney's fee.

When a mortgage sets out and defines a specific indebtedness secured thereby, provisions extending the security to other indebtedness in general terms were formerly viewed with disfavor. They may serve to take advantage of the confiding or the illiterate.

But it is now the settled law of Alabama, and throughout this country, that clear and express provisions extending the security to other existing indebtedness or to future indebtedness between the same parties are given full effect. Indeed, it is held on high authority, that in many cases it would be a great hardship if this rule did not obtain as regards future indebtedness incurred or assumed by the mortgagor. For example, a bank customer, having occasion in his business operations, to obtain frequent loans, may thus avoid the necessity of giving repeated mortgages.

Such mortgages have become a recognized form of security. 19 R.C.L. p. 295,§ 68; Note, Ann.Cas.1913C, 552, 553.

In Collier v. White, 97 Ala. 615, 12 So. 385, 386, this court held "A provision in a chattel mortgage reciting that it secures a note and any other amount the mortgagor may owe the mortgagee in the year it is made, is valid and secures every character of indebtedness by the former to the latter arising during the year."

The mortgage need not specify any particular sum. Even as to third persons, this court has said: "If it contains enough to show a contract that it is to stand as a security to the mortgagee for such indebtedness as may arise from future dealings between the parties, it is sufficient to put a purchaser or incumbrancer on inquiry, and, if he fails to make it in the proper quarter, he cannot claim protection as a bona fide purchaser." Lovelace v. Webb, 62 Ala. 271, 281.

To like effect, see Thomas v. Blair et al., 208 Ala. 48, 93 So. 704; Davis et al. v. Elba Bank & Trust Co. 216 Ala. 632, 114 So. 211; Luverne Land Co. et al. v. Bank of Luverne, 200 Ala. 85, 75 So. 461; Guaranty Sav. Bldg. & Loan Ass'n v. Russell, 221 Ala. 32, 127 So. 186; Morgan County Nat. Bank v. Terry, 213 Ala. 313, 104 So. 762; Note, 81 A.L.R. 631.

The words "and any other indebtedness owing by the said W N. Bain to the grantee before the full payment of this mortgage" are clear and...