George v. New England Mortg. Sec. Co.

• Decision Date: 16 January 1896
• Citation: George v. New England Mortg. Sec. Co., 20 So. 331, 109 Ala. 548 (Ala. 1896)
• Parties: GEORGE ET AL. v. NEW ENGLAND MORTGAGE SECURITY CO. ET AL. [1]
• Court: Alabama Supreme Court

20 So. 331

109 Ala. 548

GEORGE ET AL. v. NEW ENGLAND MORTGAGE SECURITY CO. ET AL. ^[1]

Supreme Court of Alabama

January 16, 1896

Appeal from chancery court, Limestone county; Thomas Cobbs Chancellor.

Action by Thomas F. George and others against the New England Mortgage Security Company and others for cancellation of mortgages as clouds on plaintiff's title. From a judgment for defendants for foreclosure of the mortgages, plaintiffs appeal. Affirmed.

McClellan & McClellan, for appellants.

Jas. E Webb and Caldwell Bradshaw, for appellees.

COLEMAN J.

The bill was filed by appellants for the purpose of having a mortgage executed by them to respondents canceled as a cloud on their title to certain lands conveyed in the mortgage. As originally filed, the relief prayed for was based upon the averments that the New England Mortgage Security Company was a foreign corporation, and that the mortgage was taken in prosecution of business in Alabama, without having complied with the constitutional and statutory laws, which require every foreign corporation doing business in this state to have "a known place of business, and an agent or agents residing thereat," and that the mortgage was taken in violation of law, and was therefore illegal and void. The bill was subsequently amended by making the Corbin Banking Company and James Benaugh parties defendant also, to whom was executed, at the same time, a second mortgage on the same lands, to secure a further stated indebtedness. The Corbin Banking Company was a firm, not a corporation, and James Benaugh an individual. As such, the constitutional and statutory provisions as to foreign corporations have no application to these parties. The bill avers, however, that the Corbin Banking Company, for whose benefit the second mortgage was taken, was in fact the agent of the New England Mortgage Security Company in procuring the loan, and substantially avers that the debt secured by the second mortgage constituted a part of the consideration of the first mortgage, and rendered it usurious, illegal, and void. The complainants in the bill as amended offer to do equity, and submit themselves to the jurisdiction of the court, "and pray that, for the satisfaction of whatever may be found to be equally due on both of these mortgages, a sale of the land be made by this court, and that both of these mortgages be foreclosed, according to the practice of this court, to the full extent of all that may be legally due on either or both." It is a maxim of equity, of almost universal application, that he who seeks equity must do equity. 6 Am. &amp Eng. Enc. Law, 707; 1 Story, Eq. § 64e. In 1 Pom. Eq. Jur. § 391, it is said that "the rule extends to all cases where a party seeks to have a contract set aside and canceled on the ground of its illegality in violating the provisions of some statute. The court will require him, as a condition to its granting relief, to pay what is really due on the agreement, unless the illegality is a malum in se, or the statute itself prevents the imposition of such terms." The rule has been applied in this state to contracts for securing loans from foreign corporations doing business without having complied with the statute; the court using this strong language: "We cannot assent to the proposition that a person can obtain another's money upon the faith and assurance of a mortgage security, and the next moment, after securing and appropriating it, go into a court of conscience, and ask that court to cancel the security as a cloud on his title, still retaining the money, and making no offer to repay the money he has received, with lawful interest." Grider v. Mortgage Co., 99 Ala. 281, 12 So. 775. Security Co. v. Powell, 97 Ala. 483, 12 So. 55; Ross v. Security Co. (Ala.) 13 So. 564; Hartly v. Matthews, 96 Ala. 224, 11 So. 452; Mortgage Co. v. Sewell, 92 Ala. 163, 9 So. 143.

The respondents answered the amended bill, in which they deny that the Corbin Banking Company and Benaugh, or either of them, were the agents of the New England Mortgage Security Company in procuring or negotiating the loan, deny that the Security Company ever had any interest in the second mortgage, aver that the Corbin Company did an independent brokerage business, wholly disconnected from the business of the Security Company, and that the Corbin Company acted for and represented the borrower, solely, throughout the entire transaction, for an agreed price, to secure the payment of which the second mortgage was executed. They deny all usury, and deny the facts upon which the allegations of usury were based. The New England Mortgage Security Company by its answer accepts the offer of the complainant to do equity, by paying the amount of money borrowed, with legal interest, and demands no more.

The pleadings narrow the issues down to the single one of usury and this issue depends upon the determination of the question as to whether the consideration of...