Marsh v. Elba Bank & Trust Co.

• Decision Date: 18 May 1922
• Docket Number: 4 Div. 963.
• Citation: 93 So. 604,207 Ala. 553
• Court: Alabama Supreme Court
• Parties: MARSH ET AL. v. ELBA BANK & TRUST CO. ET AL.

93 So. 604

207 Ala. 553

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

4 Div. 963.

Supreme Court of Alabama

May 18, 1922

Appeal from Circuit Court, Coffee County; A. B. Foster, Judge.

Bill by J. T. Marsh and others against the Elba Bank & Trust Company and others. From a decree sustaining demurrers to the bill complainants appeal. Reversed, rendered, and remanded.

J. A Carnley, of Elba, and J. J. Mayfield, of Montgomery, for appellants.

W. W Sanders, of Elba, for appellees.

MILLER J.

This bill of complaint was filed by J. T. Marsh, Mildred Marsh and Luie Frank Marsh, minors, by their next friend, Eva C. Marsh. They are the heirs, and their next friend is the widow of Tavner Marsh, who died intestate January 17, 1916. The Elba Bank & Trust Company, a banking corporation, George M. Forman, J. A. Marsh, and L. A. Boyd, are the defendants.

The original bill was amended twice. The defendants demurred to the original bill, and to the bill as amended in each instance. The court sustained the demurrers to the original bill, and to the bill as amended. The decree of the court is assigned as error. The bill as amended is for an accounting and redemption under a senior mortgage on real estate before foreclosure, to declare null and void for fraud a foreclosure sale of the real estate and personal property under a junior mortgage on the said real estate, which is a senior or first mortgage on the personal property, and for an accounting and redemption, and to set aside a resale of a part of the real estate.

Tavner Marsh, the father of complainants, owned and possessed 237 acres of land in Coffee county, Ala. Tavner Marsh and said Eva C. Marsh [his widow] did on January 29, 1915, execute and deliver a mortgage to the defendant George M. Forman on this 237 acres of land to secure $4,000. It has not been foreclosed. This mortgage not having been foreclosed, the complainants, heirs of the deceased mortgagor, have an equity of redemption in the land conveyed by it. Lewis v. McBride, 176 Ala. 134, headnote 2, 57 So. 705. The complainants to enforce this equity of redemption must make a tender of the amount they concede to be due on the debt secured by the mortgage, or they must offer to pay whatever may be found to be due by the court. Jackson v. Putman, 180 Ala. 39, headnote 4, 60 So. 61. A part of this mortgage debt is past due, and part has not yet matured. The complainants make no admissions as to the exact amount due, they make no tender of any amount, but they offer to pay, and aver they are ready, willing, and able to pay, whatever amount may be found due, and to pay it according to the terms and conditions of the mortgage contract, as the court may direct. These averments are sufficient to give the complainants the right in equity to enforce their equity of redemption in the land described in and conveyed by this mortgage which has not been foreclosed. Lewis v. McBridge, 176 Ala. 134, headnote 2, 57 So. 705; Jackson v. Putman, 180 Ala. 39, headnote 4, 60 So. 61.

Tavner Marsh and Eva C. Marsh executed and delivered on April 6, 1915, to the Elba Bank & Trust Company, defendant, a mortgage, second mortgage, on the 237 acres of land and a first mortgage on some of the personal property therein described, to secure a debt due the bank. This mortgage authorized and permitted the mortgagee to sell the real or personal property or both at public or private sale as it may deem best. The bill avers that the defendant bank, after the maturity of the mortgage debt, after the death of the mortgagor, father of complainants, made a pretended, sham, and fraudulent sale of the real and personal property at private sale to J. A. Marsh, father of the mortgagor, and the grandfather of the complainants. The bill avers the bank sold all the personal property in mass to him for $1,600, and then sold him the real estate for $1,072.22 on February 3, 1916. The bill avers:

"That the personal property thus taken over was sufficient in value and amount to satisfy and pay of all indebtedness due the said Elba Bank & Trust Company, without any sale of the lands, but it was the purpose to name and fix a price as to each land and personal property, in the same pretended foreclosure deed, in order that these complainants might be forever barred of their equitable right to redeem the said lands; and they aver that there was not in fact a real, bona fide sale, under the power contained in the said mortgage, Exhibit A, but that the same was a mere sham of form or pretext, and made for the purpose of depriving these complainants of their right to redeem; *** and that said personal property more than paid off and discharged the indebtedness due said bank on its said mortgage, and at the time the said pretended foreclosure sale was made at Elba, at private sale under the power of said mortgage, and the deed made to the lands described for a recited consideration of $1,072.22, there was in fact and in truth no balance due on the said mortgage, Exhibit A, and the said pretended foreclosure was absolutely void as to said lands."

When the debt secured by a mortgage on real or property property or on both is paid, the title to the property passing by the mortgage divests. Section 4899, Code 1907, and authorities there cited. If the proceeds of the personal property conveyed by the mortgage, which was received by the bank and sold, exceeded in amount or paid the mortgage debt, as averred in the bill, then this released the 237 acres of land from the mortgage, the title to it divested out of the bank into the heirs of the mortgagor, and the bank had no right or authority to sell it at public or private sale. A sale of the real estate under the mortgage after the mortgage debt was paid would be void; such a sale would pass no title; the title to the land was divested as soon as the mortgage debt was paid by a sale of the personal property if it brought an amount sufficient to pay the mortgage debt. Section 4899, Code 1907.

Under these averments, if true, the complainants could properly seek in this bill to have the sale of the land under the mortgage by the bank to Marsh declared null and void; and the deed by the bank to Marsh, conveying the real estate, canceled and annulled. The bill alleges this personal property received by the bank under the mortgage, and pretended to have been sold privately to J. A. Marsh for $1,600, was in fact in truth worth, at a fair and reasonable valuation, $5,000, instead of $1,600.

This court in Zadek v. Burnett, 176 Ala. 88, 57 So. 450, wrote:

"'Although the mortgagee, by the terms of the mortgage, was authorized to sell the personal property embraced in the mortgage at private sale, this did not relieve him, in taking possession of and selling the property, from the duty of acting in the utmost good faith in selling the same. 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.' Per Dowdell, J., in Johnson v. Selden, 140 Ala. 418, 37 So. 249, 103 Am. St. Rep. 49. 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."

This is clear and comprehensive. Under the alleged facts, if true, the court in this cause can ascertain a fair and reasonable valuation of the personal property, and on the accounting and redemption charge the mortgagee, who sold it at private sale under the power of sale in the mortgage, with the reasonable value of the personal property sold, regardless of the price actually received by the bank for it. Harmon v. Dothan Bank, 186 Ala. 360, 64 So. 621; Zadek v. Burnett, 176 Ala. 88, 57 So. 447; Johnson v. Selden, 140 Ala. 421, 37 So. 249, 103 Am. St. Rep. 49.

The complainants aver that the foreclosure sale under the mortgage of the personal property and real estate is void, that it was a sham and a pretense, and that it was not a bona fide but a fraudulent sale.

In Struve v. Childs, 63 Ala. 476, this court quoted approvingly:

"In Robertson v. Norris, 4 Jurist, N. S. 155, Sir J. Stuart, vice chancellor, said: 'The legitimate purpose, for which the power to sell in this defendant's mortgage deed was given, was to secure him repayment of his mortgage money. If he uses the power to sell, which he gets for that purpose, for another purpose, from any ill motive, to effect means and purposes of his own, or to serve the purposes of other individuals, the court considers that to be what it calls a fraud in the exercise of the power, because it is using the power for a purpose foreign to the legitimate purposes for which it was intended.' This ruling was affirmed on appeal."

If the power of sale in the mortgage is used by the mortgagee to oppress the debttor or his minor heirs or widow, a court of equity will declare it void and set it aside after it is made. This would be a fraudulent foreclosure sale. Henderson Law...