Moses v. Home Bldg. & Loan Ass'n

• Decision Date: 21 December 1893
• Citation: 100 Ala. 465,14 So. 412
• Parties: MOSES ET AL. v. HOME BLDG. & LOAN ASS'N.
• Court: Alabama Supreme Court

14 So. 412

100 Ala. 465

MOSES ET AL. v. HOME BLDG. & LOAN ASS'N.

Supreme Court of Alabama

December 21, 1893

Appeal from chancery court, Montgomery county; John A. Foster Judge.

Action by the Home Building & Loan Association against Moses Bros. J. R. Adams, W. R. Nalls, and judgment creditors of said Nalls, to foreclose two mortgages. From a decree granting, in part, the relief prayed, defendants appeal. Reversed.

Richardson & Reese, Lester C. Smith, and Brickell, Semple & Gunter, for appellants.

Arrington & Graham, for appellee.

STONE C.J.

The real question of merit in this case is that of priority and order of lien of the various creditors on the real property which is the subject of the suit. Moses Bros., J. R. Adams and the Home Building & Loan Association are mortgagees of the property, their mortgages bearing date in the order stated. The other contesting claimants are judgment creditors, who assert no claim of lien on the property by virtue of any contract made. Their claims rest in part on judgments recovered and recorded, and in part on executions issued and placed in the hands of the sheriff. They do not claim or pretend that the property in contest is of sufficient value to pay off the mortgage liens as set up, and leave a surplus for them. Their contention is that the mortgage liens are largely usurious and unjust, and that consequently they should be postponed or subordinated, at least in large part, to their said judgment or execution liens. This contention rests mainly on the alleged usury in the claims of J. R. Adams and of the Home Building & Loan Association.

It was early declared in this state that usury is a personal defense, and can only be interposed by the borrower, his legal representative or heir at law. "Usury is a defense personal to the party agreeing to pay it, or those who stand in his place as representatives." Fenno v. Sayre, 3 Ala. 458. That doctrine was ever afterwards adhered to. Harbinson v. Harrell, 19 Ala. 753; Gray v. Brown, 22 Ala. 262; Cain v. Gimon, 30 Ala. 168; McGuire v. Van Pelt, 55 Ala. 344; Greil v. Lehman, 59 Ala. 419; Butts v. Broughton, 72 Ala. 294.

When usury is interposed as a defense, the facts which constitute it must be specifically set forth. Speaking on this subject, and quoting from Tyler on Usury, we said "that the debtor 'must, in his answer or plea, both at law and in equity, set up the usury specifically, stating distinctly and correctly the terms of the usurious agreement and the amount of the usurious premium.' And the pleader is cautioned to make this defense, 'bearing in mind always that the courts are more rigid and technical in their practice in cases of usury than in ordinary cases of equity jurisdiction."' Munter v. Linn, 61 Ala. 492. This doctrine has been ever since followed in this court. Bradford v. Daniel, 65 Ala. 133; Association v. Lake, 69 Ala. 456; Masterson v. Grubbs, 70 Ala. 496; Burns v. Campbell, 71 Ala. 271; Kilpatrick v. Henson, 81 Ala. 464, 1 So. 188; Welsh v. Coley, 82 Ala. 363, 2 So. 733; Woodall v. Kelly, 85 Ala. 368, 5 So. 164. W. M. Nalls was the alleged borrower of the money from the Home Building & Loan Association, and he is made a defendant in this foreclosure suit. All that is shown by him as a plea, or attempted plea, of usury to this bill to foreclose, is in the following language, found in his answer: "Respondents aver that usurious interest was charged for said loan." This is wholly insufficient to raise the defense of usury, and this case must be tried without any reference whatever to that defense.

The defense of usury being eliminated from this record, we find the following ascertained sums to have been due to the several mortgagees at the time the account was taken, and the report of the register confirmed,-April 20, 1892:

To Moses Brothers .................... $3,900 45

To J. R. Adams ........................ 1,273 08

To Home Building & Loan Association ... 1,552 70

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Total of these three debts ........ $6,726 23

Interest on these sums makes them now over $7,500. It is clear that these sums, not taking into the account the costs of this suit, decreed to be paid out of the proceeds of sale, will more than exhaust the value of the property embraced in this suit; the value being shown, by agreement of counsel, to be between four and five thousand dollars. But we need not inquire whether this agreement binds or affects the judgment creditors,-those having no contract lien or security,-for under no circumstances have they, or either of them, any lien or claim that is not subordinate to the rightful claim of the three mortgage creditors named above. Nor is there any controversy between the judgment creditors as to which of them has the prior or paramount claim as between themselves. The decree declares the order of their payment, and, as between them, the rightfulness of that order is not questioned.

The debt to Moses Bros. was created in the purchase of the property which is the subject of this suit. It is oldest in point of time, the mortgage being dated October 3, 1883; and there is no averment or proof that it was not executed contemporaneously with the purchase of the property from Moses Bros. Homestead right cannot attach against this claim; nor can any subsequently contracted debt by Nalls acquire a paramount lien on the real estate purchased, unless by force of some act done, or agreement entered into, by Moses Bros. This debt, then, was and is, prima facie, the first lien on the property.

The second lien was given, or attempted to be given, to Adams. It was given to secure the repayment of $1,500 borrowed money and the note and mortgage bear date February 27, 1884; the debt to be due in 12 months. It conveys the real property purchased from Moses Bros., "together with the improvements and appurtenances, consisting principally of one large lathe, one 20-inch joiner, one 24-inch planer, one 36-inch resaw machine, one improved scroll saw, one borrowing machine, one emery wheel, with shop and fixtures." This mortgage was signed by Nalls alone, without the concurrence of his wife. The third mortgage was made to the Home Building & Loan Association, and bears date January 9, 1885. It was signed by Nalls and his wife, and was recorded. It was not, however, so acknowledged and certified as to convey the homestead. It conveyed only the realty. This conveyance was sufficient, in its granting clause, to carry with it all machinery which became a part of the freehold, save as this question may be affected by the homestead claim, to be considered further on. Before the Building & Loan Association made a loan to Nalls on the security of the lot involved in this litigation, it required that the repayment of its loan should be guarantied and made sure by a first lien or security on the property. This involved the necessity of obtaining from Moses Bros. and from J. R. Adams their consent that the security to the Building & Loan Association should be paramount to theirs. J. R. Adams appears to have been active, and possibly would be benefited by the loan to Nalls; and to induce Moses Bros. to give the required consent he indorsed and became surety or guarantor of the purchase-money notes for the lot which Nalls owed Moses Bros. Carrying this agreement and purpose into effect, both Moses Bros. and J. R. Adams severally made and signed this indorsement on the record of the mortgages Nalls had previously given to them, described above, namely: "Jany. 9, 1885. For value received we hereby agree that the lien created by this mortgage on the property herein described shall operate as a second lien, and be subordinate to the lien created by a mortgage executed on the day above stated by W. M. Nalls and wife to the Home Building & Loan Association." Upon the execution of these consents by Moses Bros. and by J. R. Adams, Nalls obtained the loan from the building and loan association, and executed the mortgaged described above to secure its repayment. Before and up to June 6, 1888, Nalls made monthly payments to the building and loan association, and at that time the admitted balance of his debt to that corporation was $1,800. When he first obtained the loan-January 9, 1885-he was a stockholder in the corporation, owning 100 shares of stock, of the par value of $40 per share. These shares, together with the lot mortgaged, were pledged for the repayment of the money borrowed. On June 6, 1888, a new agreement was entered into between Nalls and the building and loan association; the terms agreed on, and carried into effect, being as follows: Nalls was allowed a credit for the then value of 100 shares in the building and loan association, and they were surrendered up and canceled. They had been issued in series No. 1, and would probably mature, and extinguish the loan, in about seven or eight years from January 9, 1885. The new agreement of June 6, 1888, was made to assume the form of a new loan of the balance, $1,800, as of that date, which would probably mature, and become extinguished by payment, in seven or eight years from that date. To support this new agreement, and to give it its proper form, 75 shares of stock were issued to him, also to be held in pledge for the payment of the unpaid residue of the money lent; and under this new agreement the loan and stock were placed in series No. 2. Under the original contract, and under the laws of the association, Nalls was required to make, and did make, monthly payments of $20 interest, and $20 in the form of dues and calls on his stock, for his 100 shares of subscribed stock, aggregating $480 of payments per annum. Under the new agreement, monthly payments were $15 of interest, and $15 of dues or calls on stock, aggregating $360 per annum. A mortgage on the lot was...