Loop Nat. Bank of Mobile v. Cox

• Decision Date: 29 March 1951
• Docket Number: 1 Div. 442
• Citation: 255 Ala. 388,51 So.2d 534
• Parties: LOOP NATIONAL BANK OF MOBILE v. COX et al.
• Court: Alabama Supreme Court

Page 534

51 So.2d 534

255 Ala. 388

LOOP NATIONAL BANK OF MOBILE v. COX et al.

1 Div. 442.

Supreme Court of Alabama.

March 29, 1951.

Vickers & Thornton, of Mobile, for appellant.

Hamiltons & Denniston and John T. Gray, all of Mobile, for appellees.

STAKELY, Justice.

The questions for decision are (1) whether under the facts in this case a temporary restraining order can be issued under § 1054, Title 7, Code of 1940 without bond and (2) whether there is sufficient equity in the bill filed in this cause to justify the issuance of a temporary restraining order.

Don N. Cox and Dorothy A. Cox (appellees) filed their bill in equity seeking as owners of certain real estate located at Mobile, Alabama, upon which certain improvements had been undertaken, for a declaration of the rights and liabilities, if any, existing between themselves and the Loop National Bank of Mobile (appellant), the holder of a promissory note purporting to be secured by a mortgage on the real estate and various holders of alleged materialman's liens on the real estate.

Subsequently Don N. Cox and Dorothy A. Cox filed an amendment to their bill supported by sworn affidavit seeking an injunction pendente lite against foreclosure of the alleged mortgage and seeking further relief against the mortgagee in the event foreclosure was not restrained pendente lite. At the same time the appellees filed a motion to set the cause for hearing on the application for injunction.

Thereafter the motion for a temporary restraining order was heard and submitted on the sworn allegations of the bill of complaint as amended. Oral arguments of the solicitors for both appellees and appellant were heard by the court. An injunction was issued temporarily restraining appellant from making any foreclosure sale under the mortgage. No bond was required. Whereupon this appeal was taken.

The bill of complaint alleges in substance the following. Don N. Cox and Dorothy A. Cox entered into a contract, a copy of which is attached to and made a part of the bill, on or about November 30, 1949 with Wayne E. Banks. Under the terms of the contract Wayne E. Banks agreed to build a house and garage on the property of Don N. Cox and Dorothy A. Cox for 110 percent of the cost of labor and materials not to exceed $7,500.00. The real property is located in the City of Mobile, Alabama.

Wayne E. Banks undertook construction of the improvements but thereafter abandoned the contract on or about June 17, 1950. At the time the contract was made Don N. Cox and Dorothy A. Cox paid Wayne E. Banks $2,000.00 in cash and since abandonment of the contract by Wayne E. Banks have expended or become obligated for labor and materials to complete the improvements in the sum of towit $2,577.86, leaving an alleged unpaid balance of $2,922.41. Materialmen's liens are asserted by Jack C. Galallee and Frank A. Bailey Lumber Co. for $230.14 and $764.35, respectively, both of whom were made respondents to the bill.

Loop National Bank of Mobile claims of Don N. Cox and Dorothy A. Cox the sum of $4,000.00 with interest by virtue of an alleged promissory note dated January 11, 1950 and which was tendered to Wayne E. Banks, undated, with the mutual understanding and condition precedent that the note would not be used or negotiated until the construction of the dwelling and garage had substantially progressed and in no event until Don N. Cox and Dorothy A. Cox were further consulted. Contrary to the aforesaid understanding and condition precedent Wayne E. Banks on February 28, 1950 endorsed the note and purported to transfer the same to Loop National Bank. At the same time and as a part of the same transaction Wayne E. Banks purported to transfer to Loop National Bank an alleged mortgage on the property of Don N. Cox and Dorothy A. Cox securing the note. The aforesaid note and mortgage were a part of one transaction to finance the construction of the house and the garage and this fact was known to Loop National Bank at the time it took the note and mortgage from Wayne E. Banks. At the time of the purported transfer, to the knowledge of the Loop National Bank, the mortgage had neither been witnessed nor had it been acknowledged by either Don N. Cox or Dorothy A. Cox before an officer authorized to take acknowledgments. Notwithstanding these facts Loop National Bank accepted the purported transfer of the note and purported assignment of the alleged mortgage without inquiry of or notice to Don N. Cox and Dorothy A. Cox. With the knowledge of the Loop National Bank the acknowledgments on the alleged mortgage were signed by a notary public in the absence of and without the will of either Don N. Cox or Dorothy A. Cox.

On February 28, 1950, Wayne E. Banks endorsed the note and deposited it to an account which he carried with the Loop National Bank in the name of W. Edward Banks and his account was credited with the sum of $4,000.00, the amount of the note. The note matured on May 12, 1950, and during the interim of the deposit and the maturity of the note the aforesaid account with the Loop National Bank was never exhausted and at all times had a balance of not less than $1688.06, so that the Loop National Bank paid out before maturity not the full amount of $4,000.00 but only the sum of $2311.94.

The amendment to the bill alleges that subsequent to the filing of the bill but prior to service of summons, Loop National Bank published the first advertisement of a foreclosure sale to be held on November 27, 1950 under the purported authority of the power of sale contained in the alleged mortgage, that the fair and reasonable market value of the property as of the date of filing of the amendment was not less than $10,000.00, that Don N. Cox and Dorothy A. Cox were the fee simple owners of the property free from all liens or incumbrances except those mentioned in the bill as amended, that the property was insured for $8,000.00 against all common and usual risks by a reliable insurance company, that a bona fide dispute and controversy existed with respect to the amount of the indebtedness owing to Loop National Bank and as to whether Don N. Cox and Dorothy A. Cox had executed a valid conveyance or mortgage and that Don N. Cox and Dorothy A. Cox offered to do equity and to pay the Loop National Bank such amount as the court may find to be due and owing by Don N. Cox and Dorothy A. Cox to the Loop National Bank. Don N. Cox and Dorothy A. Cox then prayed the court to enjoin or restrain the Loop National Bank from foreclosure of the mortgage until final determination of the cause and for such other and further and different orders as might be necessary to preserve the dignity of and prevent pendente lite the impairment of the just exercise of the inherent right of the court to protect and enforce its jurisdiction over the entire subject matter of the litigation. Don N. Cox and Dorothy A. Cox further prayed that if the Loop National Bank was not so restrained from foreclosure, the court would on final hearing of the cause set aside such foreclosure and allow Don N. Cox and Dorothy A. Cox to remain in possession of the property and pay in discharge of any indebtedness owing the Loop National Bank such sum as might be found proper by the court.

As stated the court heard the case which was submitted on the motion for a temporary restraining order and on the...