Mobley v. Brundidge Banking Co., Inc.

• Decision Date: 24 June 1977
• Citation: 347 So.2d 1347
• Parties: George Wallace MOBLEY v. BRUNDIDGE BANKING COMPANY, INC., a corporation. SC 2085: 2085-X.
• Court: Alabama Supreme Court

Page 1347

347 So.2d 1347

George Wallace MOBLEY v. BRUNDIDGE BANKING COMPANY, INC., a corporation.

SC 2085: 2085-X.

Supreme Court of Alabama.

June 24, 1977.

Rehearing Denied July 29, 1977.

James C. Clower, Troy, for appellant.

John B. Crawley, Crawley & Ford, Troy, for appellee.

BEATTY, Justice.

This is an appeal from an order of the Circuit Court of Pike County denying recovery to the plaintiff in an action of general assumpsit for money had and received. We reverse.

Charles E. Senn and his wife, Cheryl R. Senn, were indebted to Brundidge Banking Company (BBC) for money borrowed, and to secure these loans they executed mortgages on separate parcels of real estate in Pike County. The Senns also borrowed money from the First National Bank of Brundidge ^BB and on December 11, 1971 they executed a mortgage upon 1.42 acres of land in Pike County. This land was not included in the mortgages to BBC. The FNBB mortgage contained the following clause:

Now then in order to better secure the payment of said note, (s) together with all other indebtedness we may owe The First National Bank of Brundidge, before the full payment of this note(s) and mortgage,) (granting have granted, bargained, sold and conveyed, . . .

and a defeasance clause referring to "such other and additional indebtedness. . . ."

On March 11, 1974, the Senns gave another mortgage on the same 1.42 acres to Wiregrass Bank and Trust Company, Headland.

Then on May 16, 1974, the Senns borrowed money from George W. Mobley and executed a mortgage on the same 1.42 acres of land.

Later that year, on October 9, 1974, FNBB transferred the mortgage of December 11, 1971 to BBC, and there is evidence in the record that one of the BBC officials involved in this assignment was informed by an official of FNBB of the existence of the second mortgage on this 1.42 acres. Apparently, the Senns were already indebted to BBC in the amount of approximately $90,000, and BBC took the assignment, in exchange for a payment of $20,800.54, in order to better secure themselves.

On October 9, 1974 the Senns executed a new promissory note in the amount of $50,035.50 payable to the order of BBC. This note recited that it was secured by the mortgage of October 9, 1974 assigned by FNBB to BBC. The proceeds of this note apparently were not paid to the Senns, but were used to pay to BBC the purchase price of the October 9, 1974 mortgage, and to satisfy other past due loans made by BBC to the Senns.

On May 8, 1975, BBC foreclosed the mortgage on the 1.42 acres of land, as well as two Senn mortgages on other parcels. The three parcels were offered separately. The highest bid for the 1.42 acre parcel was $55,676.12. The aggregate sum for which the three parcels sold was $99,506.78. This lump sum bid was made by BBC, which bought the property, by adding the three separate bids, each representing the debt on the respective parcels, and adding $2.00 to that sum. At the time of this foreclosure sale, the Wiregrass Bank had released the 1.42 acre parcel from its mortgage of March 11, 1974, and so the only lienholders claiming an interest in it were BBC and Mobley.

Mobley contends that at the time of the foreclosure sale he was owed a principal balance of $35,000, plus $2,847.90 in interest, or a total of $37,847.90. He claims an additional sum of $2,569.45 as interest from the foreclosure sale to the date of trial, or a grand total of $40,417.35. Mobley's position, simply put, is that he is a lienholder with a second priority upon the sum which the foreclosure sale brought in on the 1.42 acre parcel. Put in another way, he maintains that because BBC purchased the first mortgage from FNBB for $20,800.54, that is the only sum which BBC should receive from the sale before Mobley's second mortgage is satisfied. To collect the sum he claims, Mobley brought this action of general assumpsit under the common count for money had and received, demanding $39,946.66, but on this appeal he claims only the difference between $55,676.12 (the amount bid by BBC for the mortgage) and $20,800.54 (the sum paid by BBC to FNBB for the mortgage), or $34,875.58. We have not overlooked Rule 2, ARCP, which abolishes the forms of action and replaces them with one form of action justifying whatever relief is appropriate under the allegations. This rule, however, does not purport to abolish substantive remedies in existence at the time of adoption of the rules, of which general assumpsit was one.

After a hearing without a jury, the trial court found in favor of BBC, holding that:

The effect of the foreclosure of the senior mortgage was to cut off the equity of redemption in the property covered by the junior mortgage, and the junior mortgagee would be entitled to recover from the senior mortgagee any money which lawfully belonged to him. The suit must be predicated on a valid foreclosure of the senior mortgage.

The senior mortgage assigned to the defendant must be construed to secure any other indebtedness owing by Senn to the mortgagee First National or assignee mortgage holder Brundidge Bank, and such provisions of the mortgage shall be given full effect as provided by law. First National Bank of Guntersville v. Bain, 237 Ala. 580, 188 So. 64 (1939); City National Bank of Dothan v. The First National Bank of Dothan, 285 Ala. 340, 232 So.2d 342 (1970).

After notice of the attaching of a junior lien, the senior mortgagee will not be protected in making optional future advances under his mortgage given to secure such advances. This rule applies in Alabama even though the junior mortgage contains language expressly stating it is subordinate to the senior mortgage. Hampton v. Gulf Federal Savings & Loan Association, 287 Ala. 172, 249 So.2d 829 (1971).

There is credible evidence from disinterested witnesses to the effect that an officer of defendant bank had actual knowledge of the existence of a junior mortgage. Whose the evidence does not reflect. There can be no different result from the fact that the officer of the defendant bank was merely told of an existence of another mortgage rather than specifically the second mortgage of the plaintiff.

The manner of the sale and purchase of several tracts for one price; the lack of evidence as to the market value of the tract covered by the plaintiff's mortgage and failure of the plaintiff to require the defendant to sell the tract separately as provided in Vines v. Wilcutt, 212 Ala. 150, 102 So. 29 (1924), requires that a judgment be entered for the defendant in this civil assumpsit action.

We have no disagreement with the trial court's references to Bain and Dothan, as they pertain to the law of advances. Nor do we take issue with the statement of the general principle of law governing the effect of notice, or actual knowledge, to a senior lienholder of the existence of a junior lien when the senior makes advances under his mortgage, Hampton v. Gulf Federal Savings & Loan Association, 287 Ala. 172, 249 So.2d 829 (1971), although we point out that the issues discussed in the dissent in that case, dealing with exceptions to this general rule, are not presented in the case before us. It should not be overlooked also that the trial court here found as a fact that BBC had actual knowledge which, under the principle stated above, and under the ore tenus rule, would withhold from the bank the protection of the advances clause in favor of the junior mortgagee. 2 A Ala.Dig. Appeal and Error k1008.1(6).

At this point it may be helpful to summarize the issues presented by the parties, both of whom have appealed the trial court's ruling.

BBC contends that: (1) the effect of the trial court's order pertaining to the assigned mortgage was to secure any other indebtedness of Senn to BBC, thus, after the proceeds of the foreclosure sale were applied to those debts no surplus remained for Mobley; (2) that Mobley's failure to argue the effect of the advances clause of the assigned mortgage precludes any consideration of that issue now; (3) that the ore tenus rule requires an affirmance; (4) that the presumption accompanying the trial court's denial of the motion for a new trial requires affirmance; (5) that Mobley's equity, if any, was as a remote third, not second, mortgage in view of the Wiregrass Bank mortgage; (6) that Mobley's rate of interest on the note executed by Senn was usurious and thus Mobley came into court, in his equitable action for money had and received, with unclean hands.

Mobley, on the other hand, contends that the case presents only two principle issues: (1) whether in his action for money had and received the plaintiff was required to prove market value of the asset sold which forms the basis of his action; and (2) whether a second mortgagee is deprived of his common counts action because he failed to require the senior lienholder to sell the property separately when it was offered and bid separately (but sold in the aggregate).

BBC's first and third issues overlook that part of the trial court's order on the effect of notice of a junior lien upon the senior mortgagee who makes advances. Accordingly, whatever was the effect of the advances language in the FNBB mortgage transferred to BBC, the factual finding of the trial court that BBC had...