Interstate Trust & Banking Co. v. National Stockyards Nat. Bank

• Decision Date: 24 May 1917
• Docket Number: 2 Div. 644
• Citation: 76 So. 356,200 Ala. 424
• Parties: INTERSTATE TRUST & BANKING CO. et al. v. NATIONAL STOCKYARDS NAT. BANK.
• Court: Alabama Supreme Court

76 So. 356

200 Ala. 424

INTERSTATE TRUST & BANKING CO. et al. v. NATIONAL STOCKYARDS NAT. BANK.

2 Div. 644

Supreme Court of Alabama

May 24, 1917

Rehearing Denied June 30, 1917

Appeal from Chancery Court, Sumter County; Thomas H. Smith Chancellor.

Suit by the National Stockyards National Bank against the Interstate Trust & Banking Company and another. From an adverse decree defendants appeal. Reversed, rendered, and remanded.

Anderson C.J., and McClellan, J., dissenting.

Howe Fenner, Spencer & Cocke, of New Orleans, La., and R.B. Evins, of Greensboro, for appellants.

M.W. Borders, of Chicago, Ill., and Thos. F. Seale, of Livingston, for appellee.

GARDNER J.

Bill by appellee, complainant in the court below and a judgment creditor with a lien of the Pinson & Geiger Land Corporation, an Alabama corporation, to enjoin the foreclosure of a mortgage executed by said corporation to the Interstate Trust & Banking Company, under the power of sale conferred by the mortgage or deed of trust, and to have same canceled and declared void and an order entered for the sale of the property embraced in said mortgage for the satisfaction of the judgment lien of the complainant. The mortgage was executed January 10, 1913, and filed for record the same day. The mortgagor, said corporation, became indebted to complainant on May 27, 1915, as evidenced by its promissory note, and on April 21, 1916, a judgment was recovered on said note against the said corporation; and on May 2, 1916, the certificate of said judgment was duly certified to by the clerk of the said court in the office of the judge of probate of Sumter county, and the same was duly recorded.

Complainant bases its right to relief upon the allegation that at the time of the transaction resulting in the execution of the mortgage by the Pinson & Geiger Land Corporation to the Interstate Trust & Banking Company the latter was a foreign corporation and had not qualified under the statute to do business in this state, as provided by sections 3642, 3644, 3651, and 3653 of the Code. The mortgage in question was to secure bonds in the principal sum of $100,000. The bill contained no offer on the part of complainant to refund to the mortgagee the money advanced on the faith of said security. The demurrer taking this point presents the question which is treated and considered by us as of prime importance on this appeal; and, while it was insisted by counsel for appellant that the complainant, being in no manner of privity with the transaction here attacked, cannot be held to question its validity, yet, having reached the conclusion that the bill is without equity for the reason just stated, we pass this by as unnecessary to be determined.

Conceding, without deciding, for the purpose of this case, that the complainant could maintain the bill, we have reached the conclusion that it is fatally defective in failing to offer a refund of the money advanced on the faith of the security under the familiar equitable maxim, "He who seeks equity must do equity." Speaking of this maxim, our court in Grider v. Am.F.L.M. Co., 99 Ala. 281, 12 So. 775, 42 Am.St.Rep. 58, in which case the mortgagor sought the cancellation of the mortgage on the homestead for a fatal defect in acknowledgment, said:

"We held in Mortgage Co. v. Sewell, 92 Ala. 163, 9 So. 143 , and again in Security Co. v. Powell (present term) , 12 So. 55, that a complainant seeking to cancel, as a cloud on his title, a mortgage executed by him to a foreign corporation, for money loaned, on the ground that the mortgage was void because the corporation had not complied with the laws of this state authorizing it to do business here, or because the mortgage, being governed by the laws of New York, was void for violation of the usury laws of that state, must offer in his bill to repay what he had received under and in faith of the mortgage security as a condition of the relief sought. We intend to adhere to that doctrine. 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 he received and appropriates it go into a court of conscience, where the maxim that he who seeks equity must do equity has ever been vigorously upheld and applied, and ask that court to cancel the security as a cloud on his title, still retaining the money, and making no offer to return or repay it. If Grider needs and desires the aid of a court of chancery to clear his title of the void incumbrances, he must offer to repay the money he received, with lawful interest. If he is unwilling to do this, he must stand upon his rights at law. Equity will not help him."

This equitable maxim has been consistently adhered to by this court, in cases of this character, as disclosed by the following decisions: Coburn v. Coke, 193 Ala. 364, 69 So. 574; Douglass v. Standard Co., 189 Ala. 223, 66 So. 614; Mitchell v. Baldwin, 154 Ala. 351, 45 So. 715; Marx v. Clisby, 130 Ala. 502, 30 So. 517; George v. Mortgage Co., 109 Ala. 548, 20 So. 331; Grider v. Mortgage Co., 99 Ala. 281, 12 So. 775, 42 Am.St.Rep. 58; Security Co. v. Powell, 97 Ala. 483, 12 So. 55; Mortgage Co. v. Sewell, 92 Ala. 163, 9 So. 143, 13 L.R.A. 299.

There can be no doubt, therefore, that, under the above-cited authorities, had the bill been filed by the mortgagor, failing thus to offer equity, it would have been held by this court to be without equity. The latest expression by this court upon cases of this character is contained in Coburn v. Coke, supra, where many of our authorities are collected.

The provisions of section 3653 of the Code have not been deemed sufficient, as held by this court, to abrogate this equitable maxim. That section and the two preceding sections are but codifications of the act of March 4, 1907 (Gen.Acts 1907, p. 290). None of the provisions of said act attempted in any manner to amend sections 3642-3644 of the Code, but merely impose an additional requirement upon such foreign corporations to secure from the secretary of state the permit therein specified; and the provision of section 3653, that upon failure to obtain such permit all contracts made with, by, or to such corporations shall be null and void, was but the equivalent of what this court had held in the above-cited cases as the result of failure on the part of the foreign corporation to comply with the provisions of section 3642, requiring the filing in the office of the secretary of state of an instrument in writing, designating at least one known place of business in this state and an authorized agent or agents residing thereat. Notwithstanding this court had held that contracts entered into by foreign corporations which had not complied with our laws were void, yet we have consistently given application to the above-noted equitable maxim, and required of the mortgagor, upon his becoming the actor, seeking relief in a court of equity, to offer to do equity by a refund of the money actually advanced as a condition to relief.

There is nothing in the above-cited act of March 4, 1907, codified as sections 3651-3653, Code 1907, which indicates any purpose on the part of the Legislature to abrogate this equitable maxim and dispense with its application. It is a maxim as old as equity jurisdiction itself that "he who seeks equity must do equity," and it has been held that in its broadest sense it will be regarded as the foundation of all equity, since courts do not protect equitable rights unless such rights are in pursuance of settled juridical notions of morality, based upon conscience and good faith. 1 Pom.Eq.Jur. § 385. In regard to its application to the usury laws of the state, the courts required rather a plain expression of the legislative intent before dispensing with its application. Lindsay v. U.S.S. & L. Co., 127 Ala. 366, 28 So. 717, 51 L.R.A. 393; Barclift v. Fields, 145 Ala. 264, 41 So. 84. In the Lindsay Case, it was recognized that the power of a court of equity in the enforcement of the maxim is not one conferred by statute, nor is it exercised for the purpose of enforcing any contractual right. In the case of Barclift v. Fields, supra, it is pointed out that this rule was but the invention of a court of chancery for regulating its own procedure, and that the mortgagee had no vested right therein, and could not complain that the lawmaking power had enabled the mortgagor to have relief without paying interest. The rule being an invention of a court of equity, such court in its application exercises a discretion as conceived to be in the interest of equity and justice. Mo-Kan., etc., Co. v. Krumseig, 172 U.S. 351, 19 Sup.Ct. 179, 43 L.Ed. 474; 1 Story, Eq.Jur. (12th Ed.) § 301.

We think it clear therefore, that there is nothing in the history of section 3653 of the Code indicating a legislative intent that this equitable maxim be not given application in certain cases, just as had been done theretofore under numerous decisions of our court. That the provisions of said section have wrought no change in the application of the equitable maxim was presented and decided in the recent case of Douglass v. Standard R.E. Co., 189 Ala. 223, 66 So. 614, and we adhere to that ruling.

It is therefore clear that had the bill been presented by the mortgagor, it would, under these authorities, be held without equity. Indeed, learned counsel for the appellee do not in their brief seem to seriously controvert this proposition but they insist that they were not in privity with the mortgagor, but only a judgment creditor with a lien, in the exercise of a lawful right to subject the property of the judgment debtor to the satisfaction of its lien, and that under no line of reasoning should the maxim, "He who seeks equity must do...