Marsh v. Elba Bank & Trust Co.

• Decision Date: 26 June 1930
• Docket Number: 4 Div. 455.
• Citation: 130 So. 323,221 Ala. 683
• Court: Alabama Supreme Court
• Parties: MARSH ET AL. v. ELBA BANK & TRUST CO. ET AL.

130 So. 323

221 Ala. 683

MARSH ET AL. v. ELBA BANK & TRUST CO. ET AL.

4 Div. 455.

Supreme Court of Alabama

June 26, 1930

Rehearing Denied Oct. 30, 1930.

Further Rehearing Denied Dec. 11, 1930.

Appeal from Circuit Court, Coffee County; Emmet S. Thigpen, Judge.

Suit by J. T. Marsh and others by their next friend, Eva C. Marsh against the Elba Bank & Trust Company and others. From a decree of dismissal, complainants appeal.

Affirmed in part, and reversed and remanded in part.

BROWN J., dissenting in part.

P. B Traweek, of Elba, for appellants.

Wilkerson & Brannen, of Troy, W. M. Brunson, of Elba, and Huey & Huey, of Enterprise, for appellees.

SAYRE J.

Eva C. Marsh, as next friend of her infant children, filed the bill in this cause to redeem a tract of land which had been mortgaged by her deceased husband. Tavner Marsh, the husband, died January 17, 1916. On January 25th, thereafter, the Elba Bank & Trust Company, acting in concert with a brother and brother-in-law of complainant next friend, disposed at private sale of live stock and farm equipment, also covered by the mortgage, for the sum of $1,600. The land was subject to a prior mortgage held by George M. Forman and, by way of private sale also, the equity of redemption was conveyed by the Elba Bank to J. A. Marsh on February 3, 1916, by quitclaim "without any warranty whatever on the part of the Elba Bank and Trust Company as to title, quantity or quality." On the same day complainant, who had joined her husband in executing the mortgage, delivered to Marsh a quitclaim of her interest in the land and personal property described in the mortgage on a recited consideration of "one dollar and other valuable considerations." These dispositions of the real and personal property of deceased mortgagor were made in execution of the power of sale contained in the mortgage to the Elba Bank, and the instruments evidencing them were filed for record in the office of the judge of probate March 1, 1918.

Complainant's bill to redeem on behalf of her children by the mortgagor was filed May 15, 1919. This appeal brings under review the decree of February 28, 1929, dismissing the bill. In her bill, original and as more than once amended, complainant averred the history of the foreclosure, that she was without experience in matters of business, that she was sick and in great distress by reason of the then recent death of her husband, the mortgagor, after a prolonged illness, and that the agent of the bank in charge of the foreclosure and J. A. Marsh, her father-in-law, to whom the bank executed its quitclaim by way of foreclosing the mortgage, colluded to procure her execution of the quitclaim to Marsh with the purpose to obtain an unfair and unconscientious advantage of the infant heirs at law of deceased mortgagor who were then incapable of making deeds or transacting business. These and other averments of similar character reflect some light on the bill of complaint, but its equity and the facts necessary to be proved are found in the averment that "it was the evident purpose and scheme of the said Elba Bank and Trust Company and the said J. A. Marsh to obtain *** for the said J. A. Marsh the said lands and personal property at a most inadequate price, and also to forever cut off and defeat, by the said pretended foreclosure, their [complainant children, heirs-at-law of Tavner Marsh, deceased] right of redemption in said lands *** and for an inadequate consideration take over all of the said property," etc.

"In this state it is settled that a mortgagee who has exercised a power to sell at private sale is chargeable in equity upon a bill for accounting and redemption, with the reasonable value of the property sold, regardless of the price actually received." Harmon v. Dothan Nat. Bank, 186 Ala. 364, 64 So. 621, 623. And in Zadek v. Burnett, 176 Ala. 89, 57 So. 447, 450, this court said of a mortgagee, acting under a power to sell at public or private sale: "In selling the property at private sale for the satisfaction of his mortgage debt, it was his duty to sell it at a fair and reasonable valuation, and failing to do so he became liable to the mortgagor for such failure." In the last-named case this court summarized our decisions as follows: The effect of the authorities is to hold a mortgagee who sells at private sale responsible and accountable for at least the fair and reasonable value of the property, regardless of the price actually received by him." Other cases of ours on this subject are Johnson v. Selden, 140 Ala. 418, 37 So. 249, 103 Am. St. Rep. 49, and Brock v. Headen, 13 Ala. 370.

The question then of prime importance presented by the record is whether in foreclosing its mortgage the bank of Elba achieved a fair and reasonable price for the land and personal property. A great volume of testimony was taken on this subject and has here received due consideration. Mortgagor's live stock and farm equipment were by the bank sold or caused to be sold for $1,600. We are unable to say that this price was so inadequate, unfair, or unreasonable as to call for an impeachment of the sale. But with respect to the price at which the farm was sold cur conclusion is that the bank failed in its duty to the heirs at law of the deceased mortgagor. We do not find that the bank had any other purpose than to collect its debt expeditiously and with as little inconvenience to itself as possible; but we do find that in the accomplishment of that purpose it exercised too little regard for the interests of the infant heirs at law of the deceased mortgagor, complainants in the present case. However, in one particular the bank transgressed the right of the widow, who had an interest in the estate of her deceased husband, the mortgagor. At the time of his death the mortgagor was indebted also to the bank at New Brockton, and this indebtedness was secured by mortgages on crops to be grown in successive years and on live stock on the farm. In the way of a preliminary to the foreclosure of its mortgage, the bank of Elba purchased from the bank of New Brockton accounts which it held against mortgagor, Tavner Marsh, took an assignment of the mortgages held by it, and also a policy of life insurance, worth $1,803, which had been pledged by him to it, but which at the time was in the keeping of the insurance company from which deceased had obtained a loan of something less than $200. For these securities the bank of Elba paid to the bank of New Brockton the sum of $1,185, the amount of the indebtedness of deceased to it. This policy was by the bank of Elba transferred to J. A. Marsh at the price of its then present value. The history of the litigation at the end of which Eva C. Marsh recovered the money represented by this policy will be found stated in Marsh v. Elba Bank, 205 Ala. 425, 88 So. 423, where also many of the facts touching the present controversy do appear.

At the time of the foreclosure by the bank of Elba of its mortgage, the estate of the deceased mortgagor owed the bank, according to its statement, the sum of $4,475.22. The personal property sold by the bank of Elba under its power to foreclose realized $1,600. We are not disposed to deny the adequacy of the price thus credited on the mortgage debt of the deceased for the reason that a brother and a brother-in-law of the widow, now representing her children as next friend, took part in the valuations entering into the sale-this we say notwithstanding the fact that they were estimating the value of the property with a view to an arrangement, afterwards abandoned, by which one of them was to take over the farm for a term of years and pay its debts.

After allowing credit for $1,600, as heretofore stated, the bank of Elba, by way of foreclosure, sold the equity in the land of J. A. Marsh for $1,072.22. This equity along with the debt then due to George M. Forman, to wit, $4,295.11, constituting a prior lien, represented the value placed upon the land in the foreclosure proceeding, to wit, $5,367.33. Testimony as to the value of the land and its improvements at that time varied widely. Our judgment is that the farm properly, with its improvements, was well worth $10,000, probably more, even at that time and notwithstanding the then recent inroad of the boll weavil. Thus it is made to appear that in order to collect its debt the bank sold the farm at private sale for approximately, one-half its value. Of course, the purchaser must be charged with knowledge of this fact and, on the evidence, there can be no doubt that he knew it in fact. Equity will not permit a mortgagee, in a sense a trustee for the mortgagor, thus to exercise the power of private sale to the unreasonable and obvious disadvantage of his cestui que trust, the mortgagor. So then, the...