Lavretta v. First Nat. Bank

• Decision Date: 16 December 1937
• Docket Number: 981,980,1 Div. 976-978
• Citation: 178 So. 3,235 Ala. 104
• Parties: LAVRETTA et al. v. FIRST NAT. BANK OF MOBILE.
• Court: Alabama Supreme Court

178 So. 3

235 Ala. 104

LAVRETTA et al. v. FIRST NAT. BANK OF MOBILE.

1 Div. 976-978, 980, 981

Supreme Court of Alabama

December 16, 1937

Appeal from Circuit Court, Mobile County; J. Blocker Thornton Judge.

Bills in equity by the First National Bank of Mobile, individually as trustee under the will of W. Marshall Turner, and as trustee under agreement with Samuel S. Foshee, Jr., against John Lawrence Lavretta and Leota Lawrence Lavretta. From decrees overruling demurrers to the bills, respondents appeal.

Affirmed.

Harry T. Smith & Caffey, of Mobile, for appellants.

Robert H. Smith, of Mobile, for appellee.

THOMAS Justice.

The transcripts are abbreviated under authority of the statute. Code 1923,§ 6110, and Stokes v. Stokes, 212 Ala 190, 101 So. 885. The five cases are argued and submitted together by agreement. The cases will be so considered and decided.

The appeals and assignments of error are from decrees overruling demurrers to the bills as amended. It is conceded that the pleas present matter incorporated in the amended bills, and that the overruling of demurrers thereto presented the questions sought by a ruling on the pleas to the several bills. We, therefore, proceed to a consideration of the decrees overruling demurrers to the amended bills, seeking foreclosure of the several mortgages.

All of the material matters are stated in the several bills and are set out in full in the transcript No. 976.

The bills in the transcripts Nos. 977, 978, 980, and 981 make reference to certain matters contained in the transcript of case No. 976, under the statute and the rule of our decisions. Section 6110, Code 1923, and Stokes v. Stokes, supra.

A summary of the several cases is now to be made.

In case No. 976 the mortgage dated March 22, 1932, was for the purpose of paying interest then in default on the other four mortgages. This mortgage was subsequent to the agreement of December 17, 1931. The principal of this mortgage matured September 22, 1932, and has been in default as to principal, interest, and taxes since that date.

In case No. 977 the foreclosure of mortgage for $15,000 is involved. This mortgage was made to the bank as trustee of W. Marshall Turner and was dated March 3, 1931, payable March 3, 1933, with interest payable semiannually. This mortgage was in default for failure to pay taxes, on December 17, 1931, when the agreement in question was made. After postponements and discussions, this mortgage was foreclosed on October 15, 1934, and the property was purchased at sale by the bank as trustee for the estate of W. Marshall Turner. Possession was taken of a part of the property, but the home of Lavretta was not included in that sale.

Prior to the filing of the instant bill, the mortgagor through his solicitor insisted that the sale was void, and the bank filed this bill, thus admitting the invalidity of the sale, and prayed the court to set aside the sale and foreclosure, and to foreclose the mortgage in equity. This suit was filed January 29, 1936.

It is admitted by the solicitor for appellant that the validity of such sale was denied before the instant bill was filed, and that the contention of invalidity was bona fide.

We will indicate later whether or not this was a sufficient basis for filing the bill in equity to set aside the former sale under the power contained in the mortgage and sufficient to warrant proceedings in equity to foreclose because of the fact of bona fide doubt of the validity of the foreclosure sale, to which we have adverted. The mortgagee's insistence as to this is that the sale of October 15, 1934, be held valid or else a decree setting aside such sale be entered, ordering a new foreclosure in equity. To this effort appellant invokes the rule of coming into court with unclean hands and as barring the further right to foreclose in equity.

In case No. 978 the foreclosure of mortgage made to the bank individually for $3,333.33 dated March 2, 1928, was involved. The bill showed that on June 6, 1932, Samuel S. Foshee, Jr., became the owner of the mortgage and debt secured thereby, and on that day conveyed the mortgage and debt to the bank in trust upon conditions set forth in the bill. It is averred that the trust is still in existence, and was in existence at the time the bill was filed. That mortgage was payable on October 17, 1928, and was in default for failure to pay principal and interest on December 17, 1931, when the agreement in question was made. After postponements and discussions, this mortgage was sought to be foreclosed under the power of sale on October 15, 1934, and the property purchased at such sale by the bank as trustee for Foshee. Under that sale the bank took possession of the property. The mortgagor's solicitors insisted that this sale was likewise void and the bank acquiesced therein and filed the instant bill to set aside the sale and foreclosure under the power therein, and prayed a foreclosure and sale in equity. This suit was filed January 29, 1936. And what has heretofore been said relative to the mortgage sought to be foreclosed under the power contained therein has application here. Appellant likewise insists that this case should not proceed further in a court of equity under the rule of unclean hands. The argument of appellants' counsel indicates that payment of these debts could not have been made by the mortgagor, and hence there is no basis for estoppel, in that Lavretta has not been injured, as he could not have redeemed the property within the period of two years' redemption from such sales, if said sales are held not to be valid. Of this a further consideration will be taken.

A summary of cases Nos. 980 and 981 is the same. Case No. 980 is for the foreclosure of a $16,000 mortgage due appellee bank dated December 15, 1930, the principal payable six months after date. In case No. 981 foreclosure is sought of the bank's mortgage made by appellant for $44,000, dated March 1, 1928, the principal payable $5,000 three years after date, March 1, 1931; $5,000 four years after date, March 1, 1932; and $30,000 five years after date, March 1, 1933. Interest was payable semiannually. Both mortgages contain provisions for due payment of taxes and were in default on December 17, 1931, when the bank made its agreement with Lavretta looking to the postponement or foreclosure, and had been in default for several years before the bill was filed.

For the purpose of consideration of the demurrers, it is noted that exhibits to the several bills became a part thereof and will aid that pleading. Grimsley v. First Ave. Coal & Lumber Co., 217 Ala. 159, 115 So. 90; Wilson v. First Nat. Bank of Gadsden, 209 Ala. 70, 95 So. 340; Chancery Rule 16; Michie's Code, Chancery Rule 109; and Clements v. Clements, 200 Ala. 529, 76 So. 855. It is further declared that an exhibit made the basis of a cause of action or defense and contradicting the averments of the pleading to which it is made a part will control such pleading. 49 Corpus Juris, 619, § 883, and South v. First Nat. Bank of Fayette, 17 Ala.App. 569, 88 So. 219.

It may be further observed as to necessary parties, as affecting the trust mortgages of Foshee and Marshall Turner, that the intention of the parties originating the beneficial interest in the funds must appear clear in order to constitute the party in whom the legal title of the action is vested, and that the representative of the beneficiaries form an exception to the general rule that in equity the cestui que trust shall be parties to a suit by their trustee for recovery or foreclosure, and entitles the trustee to sue in equity without joining the beneficiary. This has long been the rule in this jurisdiction. Walker v. Miller & Co., 11 Ala. 1067, 1085; Mobile & C.P.R. Co. v. Talman and Ralstons, 15 Ala. 472; Silverstein et al. v. First Nat. Bank of Birmingham, 231 Ala. 565, 165 So. 827; Birmingham Trust & Savings Co. v. Ansley, 234 Ala. 37, 173 So. 378; 19 R.C.L. p. 272, § 43; 41 Corpus Juris, p. 882, § 1094; and 41 Corpus Juris, p. 445, § 328, Parties. It appears from this pleading that all necessary parties are before the court--it was not for the establishment of respective interests of beneficiaries. Hodge v. Joy, 207 Ala. 198, 92 So. 171.

The rule or maxim, he who comes into equity must come with clean hands, is based on conscience and good faith. It follows that bad faith or unconscionable conduct that falls within the maxim must rest upon a positive or willful wrong, must involve intention as opposed to an inadvertent act or a misapprehension of legal rights. Such is the effect of the decisions in this jurisdiction. Schuessler v. Shelnutt, 233 Ala. 188, 171 So. 259; Wilkes v. Teague, 224 Ala. 283, 286, 140 So. 347; Montgomery v. Wadsworth, 226 Ala. 667, 148 So. 419; Byrum Hardware Co. v. Jenkins Bldg. Supply Co., 226 Ala. 448, 147 So. 411; Anders v. Sandlin, 191 Ala. 158, 67 So. 684; Galliland v. Williams, 181 Ala. 173, 61 So. 291; Harton v. Little, 188 Ala. 640, 65 So. 951; 21 Corpus Juris, p. 181, § 163, and p. 187, § 173; 60 Corpus Juris, pp. 708-724; and 4 A.L.R. 48.

We recognize the distinction in the maxims discussed by Mr. Pomeroy, 1 Eq.Jur.§ 397, and reproduced in the opinion of Harton v. Little, supra, and other authorities. When the whole correspondence is duly considered, we find no application of this rule to the conduct of the bank.

It is well recognized that a court of equity having acquired jurisdiction for one purpose will determine all rights presented as to all parties and give full relief, whether legal or equitable. Baggett Mercantile Co. v Vickery, 213 Ala. 427, 105 So. 207; Wright v. Wright, 230 Ala. 35, 159 So. 220; First Nat. Bank of La Pine v. Bradley, 223 Ala. 22, 134 So. 621, and Dewberry v. Bank of...