Pearsall v. Hyde

• Decision Date: 07 November 1914
• Docket Number: 762
• Citation: 189 Ala. 86,66 So. 665
• Parties: PEARSALL v. HYDE.
• Court: Alabama Supreme Court

66 So. 665

189 Ala. 86

PEARSALL v. HYDE.

No. 762

Supreme Court of Alabama

November 7, 1914

Appeal from Chancery Court, Colbert County; W.H. Simpson Chancellor.

Bill by Jere Pearsall against John F. Hyde. Decree for defendant, and complainant appeals. Reversed, rendered, and remanded.

Kirk Carmichael & Rather, of Tuscumbia, for appellant.

George P. Jones, of Florence, and Jackson & Deloney, of Tuscumbia for appellee.

GARDNER J.

The bill in this case was filed by the appellant against the appellee, and shows that in 1903 the appellant became indebted to the appellee in the sum of about $300 and secured the same by a mortgage upon the lands in controversy. Payments were made from time to time, and credited upon said mortgage. We will hereafter refer to the parties as complainant and respondent.

The complainant was also indebted to one Perry, the amount being secured by a mortgage upon two mules; and, default having been made upon said mortgage, said Perry took the mules. The complainant was left without any stock to work on his farm and with no meat or corn or other supplies. He applied to the respondent, the one who held the mortgage on his land, for assistance. The respondent agreed to buy back from Perry one of the mules, and to furnish enough corn and meat for complainant to make his crop, and demanded security on the land. Respondent had prepared a deed to the land to himself, and at the time of its execution it was complainant's understanding that he was merely giving a lien on the land as security, and he only recently learned that respondent claimed to hold a deed to the land. The mule and some meat and corn were furnished complainant by respondent. The deed, a copy of which is made Exhibit No. 2 to the bill, dated January 16, 1911, recites a consideration of $515; but the complainant received only the one mule, about 20 bushels of corn, and a small amount of meat, and the above recital of consideration was untrue. Such are the allegations of the bill.

It is further alleged that the land was worth $1,800 or $2,000 and that $515 would be not more than one-fourth of its value; that the complainant is a colored man, about 60 years of age, ignorant, and cannot read or write, and knows nothing of any business transaction, and that, due to mental and physical infirmities, he has never been able to do more than make a living for himself and family on land given him by his father and mother; that he had confidence in respondent, and trusted him to treat him right, and that in the execution of the deed complainant was overreached and taken advantage of, and that it was never his intention to sell his land. There are some other averments as to usury, etc., not necessary to be noticed. The prayer of the bill is for an accounting and redemption of the mortgage indebtedness of 1903, and that the deed of January 16, 1911, be held and considered only as a mortgage to secure the amount then advanced; and complainant offers to pay whatever amount is due on said mortgage, and also on said deed of January 16, 1911, and prays that he be permitted to redeem the property. There is also the general prayer for relief.

The sufficiency of the bill was not tested by demurrer. The answer denies the valuation of the land as stated, and denies that complainant was overreached, and insists that the complainant deeded to respondent the land with full knowledge of what he was doing, and that the consideration therefor was satisfaction of mortgage indebtedness and agreement on his part to advance complainant a mule and some supplies to make a crop that year, and that the consideration named, of $515, was an estimate of what the two sums would aggregate.

The case is argued by counsel for appellee--and was so treated by the learned chancellor, as shown in his opinion--as governed by the rules which are applied where a bill seeks to have a deed declared to be a mortgage, and which require that the proof must be clear and convincing (Reeves v. Abercrombie, 108 Ala. 535, 19 So. 41), and that in such cases it must appear that both parties intended the deed to so operate as a mortgage (Douglass v. Moody, 80 Ala. 61). The chancellor dismissed the bill, but without prejudice to the prosecution of another suit concerning the same subject-matter.

We do not so construe the bill as did the court below, and as insisted by counsel for appellee, and therefore do not think the rules referred to in the above authorities have application here. The bill shows the relationship of mortgagor and mortgagee, the ignorance, and indeed mental infirmity, of the mortgagor, his necessitous condition, and his confidence in the mortgagee; that the mortgagee took advantage of him and secured a deed, when he, the mortgagor, thought he was giving only a lien or mortgage, and obtained land worth near $2,000 for the recited consideration of $515. The bill is one for the exercise of the equity of redemption, and to that end seeks to have the deed declared a mortgage for security of the sum advanced at that time. The rules of law governing such cases have been many times stated in our decisions. A few appropriate quotations will suffice.

"The right of a mortgagor to redeem his property before foreclosure is jealously guarded in equity, so that agreements for its extinguishment, as by a sale from the mortgagor to the mortgagee, will be closely scrutinized by the court, and, if found to have been induced by unfair or oppressive use of the advantage which is presumed to be held by the mortgagee, such an agreement will be set aside and redemption allowed." Oakley v. Shelley, 129 Ala. 467, 29 So. 387.

"A court of chancery will set aside any agreement entered into by a mortgagor, contemporaneously with the execution of the mortgage, by which he waives, unduly fetters, or agrees not to exercise his equity of redemption in event of default in the payment of the mortgage debt. And, as observed by Lord Chancellor Northington, in Vernon v. Bethel, 2 Eden, 110, 'there is great reason and justice in this rule, for necessitous men are not, truly speaking, free men, but to answer a present exigency will submit to any terms that the crafty may impose upon them.' *** But the reason of this rule, however, does not apply to any fair and bona fide purchase of the right of redemption which is entered into subsequently to the execution of the mortgage. Although courts of equity will scan such a purchase with watchfulness, it will still be upheld, unless procured by fraud, actual or constructive, including any unconscientious advantage, or undue influence, or on a consideration which is grossly inadequate." Stoutz v. Rouse, 84 Ala. 309, 4 So. 170.

In Goree v. Clements, 94 Ala. 337, 10 So. 906, it is said:

"The expression, sometimes used, that the release must be for an adequate consideration, is thus defined by Field, J., in Peugh v. Davis, 96 U.S. 332 [: 'That is to say, it must be for a consideration which would be deemed reasonable if the transaction were between other parties dealing in similar property in its vicinity. Any marked undervaluation of the property in the price paid will vitiate the proceedings.' It may be conceded that, though there is the absence of actual fraud and undue advantage, gross inadequacy of consideration--'marked undervaluation of the property'--will, of itself, avoid an absolute and unconditional release. Also, if the circumstances are merely suspicious, casting a shadow over the fairness of the acquisition of the equity of redemption, but not rising to the dignity of proof, a consideration so unreasonable that

a party, not unduly influenced, free to act according to his own volition and judgment, would not surrender the property for the price paid, may suffice to vitiate the release."

The Supreme Court of Ohio has stated the rules governing such transactions in these few words:

"Courts will scrutinize such a transaction, and will not allow the mortgagee to take any undue advantage. He will not be allowed to use his position as a creditor to oppress, or to drive an unconscionable bargain. But where such a sale is a fair one, under all the circumstances, it will be sustained." Shaw v. Walbridge, 33 Ohio St. 1.

The following authorities have also been reviewed, and we here cite them in this connection: Noble v. Graham, 140 Ala. 413, 37 So. 230; Parmer v. Parmer,...