New England Mortg. Sec. Co. v. Powell

• Decision Date: 16 December 1892
• Citation: 97 Ala. 483,12 So. 55
• Parties: NEW ENGLAND MORTG. SEC. CO. v. POWELL.
• Court: Alabama Supreme Court

12 So. 55

97 Ala. 483

NEW ENGLAND MORTG. SEC. CO. v. POWELL.

Supreme Court of Alabama

December 16, 1892

Appeal from chancery court, Lowndes county; John A. Foster Chancellor.

Suit by W. G. W. Powell against the New England Mortgage Security Company to cancel a mortgage and enjoin a foreclosure of same. From a decree refusing to dissolve the injunction defendant appeals. Affirmed.

Caldwell Bradshaw and Webb & Tillman, for appellant.

J. C Richardson, for appellee.

HEAD J.

The purpose of the bill is to annul and cancel, and perpetually enjoin the foreclosure of, a mortgage executed by the complainant, the appellee, to the appellant, on the 24th day of December, 1886, upon lands therein described, to secure a promissory note made by complainant to appellant for the sum of $1,200, borrowed money, and interest coupons thereto attached. Previously, in January, 1882, complainant executed to appellant a mortgage on the same lands to secure a note contemporaneously made, for the sum of $850; and the mortgage and note of December 24, 1886, above mentioned, were given in renewal and extension of the last named, as well as to secure an additional loan of money then made to complainant by appellant, and embraced in the note for $1,200. The bill avers that complainant received from appellant, of the two loans for which the two mortgages were given, only the sum of $1,000, which sum he admits he has never paid. The validity of the note and mortgage is assailed, and their cancellation sought, on two grounds: (1) Treating them as contracts and transactions made and had in the state of Alabama, the tenth paragraph of the bill avers that the appellant is a foreign corporation, organized under the laws of Connecticut, and that, at the times of the execution of said notes and mortgages, it did not have a known place of business in the state of Alabama, and an authorized agent therein, as required by section 4, art. 14, of the constitution; and (2) that the said notes and mortgages are governed by the laws of New York, because "said application [for the loans] and the alleged mortgage and notes were presented to, passed upon, and accepted by said New England Mortgage Security Company, and the contracts and agreements to loan the said sums of money by it to complainant, and the actual loans of the sums which the New England Mortgage Security Company actually loaned to complainant, and the actual delivery of the notes and the alleged mortgages hereinbefore mentioned and the payment of the said sums of money to this complainant, and the repayment by complainant to the said New England Mortgage Security Company, were, each and every act, done and performed, consummated and carried on, in the city and state of New York."

The bill then alleges that by the statute laws of New York the rate of interest on such loans is fixed at 6 per centum per annum, and that contracts of the character of those in question, whereupon or whereby a greater rate of interest shall be reserved or taken, secured, or agreed to be reserved or taken, etc., shall be and are void, and that such greater rate than 6 per centum per annum was reserved or taken by appellant for the loans in question. The mortgage of December, 1886, exhibited with the bill, in connection with averments relating thereto, shows that it was executed in Lowndes county, Ala.; that the mortgagor then resided, and the lands lay, in that county; and that the advertisement and sale of the lands under the power of sale contained in the instrument, if foreclosure became necessary, should be had in that county. It contains, also, a stipulation that the note and mortgage shall be governed and construed by and under the laws of Alabama, where the same are made. The note was made payable at the office of the Corbin Banking Company, in the city of New York. Relying upon these two grounds of attack upon the validity of the note and mortgage, the complainant, in the twelfth paragraph of the bill, avers his conclusion that he is "not indebted, under the law as administered in this court, in any manner whatever, to the said New England Mortgage Security Company, but," he proceeds to state, "if complainant is mistaken in this, he is ready and hereby offers to pay to the said New England Mortgage Security Company whatever sum or amount this court may adjudge that is due and owing to it on account of the matters contained in this bill of complaint." The bill prays for a cancellation of the mortgage, or that the exercise of the power of sale therein contained, and the collection of said mortgage and notes, be perpetually enjoined; to which is added the prayer for general relief. The defendant demurred to the bill, assigning several grounds, the principal of which are that complainant does not sufficiently offer, in the bill, to pay the defendant, as a condition of relief, the sums of money he admits he received by virtue of said mortgage securities, with lawful interest, and that the allegations are repugnant. The demurrers were overruled.

It is settled in this state, and it is believed to be a principle recognized generally in equity jurisprudence, that where a party applies to a court of equity to cancel a contract or agreement entered into by him, on the ground of illegality in violating the provisions of some statute prohibiting the making of such contract or agreement, the court will require him, as a condition to granting the relief, to do equity, by restoring or repaying whatever he may have received under the contract or agreement sought to be canceled; and he must expressly offer in his bill so to do. Mortgage Co. v Sewell, 92 Ala. 163, 9 South. Rep. 143, and cases there cited. See, also, Pom. Eq. Jur. § 391; 2 Story, Eq. Jur. §§ 693, 694. We need not decide on this appeal whether, under the averments of the bill, the transactions assailed were Alabama transactions, or governed by the laws of New York. If either be true, and there was such violation of the local law in respect of them as is charged in the bill, the note and mortgage are void, and complainant is entitled to have them delivered up and canceled, upon repaying to the defendant the sums of money actually received by him, or to his use and benefit, with lawful interest thereon. Has complainant made sufficient offer in that behalf? We have copied above his language. The offer, it must be admitted, is somewhat equivocal. It is not an unconditional offer to repay what complainant received or had the benefit of, with lawful interest, but the allegation, in effect, is that, if the position taken by him, that he is not indebted at all, by reason of the said invalidity of the transactions, be a mistaken one, then he is ready and offers to pay whatever sum the court may adjudge that is due and owing to the defendant. Technically, if the notes and mortgages are void for either of the reasons assigned, complainant does not owe defendant anything by virtue of any contractual obligations they create. His duty to repay arises, as we have indicated, from the principle of equity, that a complainant must come into court with clean hands; that he will not be permitted to invoke the aid of a court of equity to obtain relief against a prohibited contract, in the making of which he and the other contracting party were in pari...