Pollak v. Millsap

• Decision Date: 15 November 1928
• Docket Number: 6 Div. 129.
• Citation: 219 Ala. 273,122 So. 16
• Parties: POLLAK ET AL. v. MILLSAP ET AL.
• Court: Alabama Supreme Court

122 So. 16

219 Ala. 273

POLLAK ET AL. v. MILLSAP ET AL.

6 Div. 129.

Supreme Court of Alabama

November 15, 1928

As Modified, on Denial of Rehearing, February 2, 1929.

Further Rehearing Denied May 2, 1929.

Appeal from Circuit Court, Jefferson County; William M. Walker Judge.

Bill in equity by Robert R. Pollak, Helene Pollak and Charlotte L. D Pollak against P. E. Millsap and E. C. Kinney. From a decree sustaining demurrer and dismissing the bill, complainants appeal. Reversed and remanded.

Anderson C.J., and Thomas, J., dissenting on rehearing.

Cabaniss, Johnston, Cocke & Cabaniss, of Birmingham, for appellants.

Jerone Edmundson and C. C. & Morton Nesmith, all of Birmingham, and A. J. Harris, of Decatur, for appellees.

FOSTER J.

Appellants filed a bill to effect the equity of redemption of property alleged to be subject to an equitable mortgage. The trial court sustained demurrer to the bill, and dismissed it for want of equity.

The facts which appellants claim create such an equitable mortgage are alleged in substance as follows:

They borrowed money from one Kirtley, and executed a mortgage on the land involved in this suit to secure the debt. The debt was not paid when due, and the mortgage was foreclosed, the mortgagee being the purchaser. A few days before the expiration of two years in which to redeem, appellants borrowed, from Judge Joel B. Brown, the amount necessary to effect such redemption, and executed a note to secure him, due twelve months after date, which recited the foreclosure of the mortgage, and that the purpose of the loan was to redeem the property, and that, as security for the debt to Judge Brown, there was deposited in the bank in escrow a deed from the purchaser to him and E. C. Kinney, one of the appellees, to be held by the bank "until the debt is paid," and upon failure to pay the debt at maturity, to deliver same to the grantee. The deed was executed and delivered in escrow. Judge Brown conveyed to appellee Kinney, by deed dated the day before the date of the former deed. When the debt matured it was not paid, but the bill alleges that on the next day appellants tendered the amount of the note to the bank, which was refused, alleging a delivery of the deed; that appellants then made demand upon said Kinney for redemption, and offered to pay him the amount of the note and accrued interest; which he declined, and claimed that appellants had lost the right of redemption; that said Kinney has conveyed the land to appellee Millsap for a consideration equal to many times the amount of the debt; that said Millsap "had actual notice, or was charged with notice" of appellants' rights in the premises. They offer to do equity, and pray that the transaction with Brown be held an equitable mortgage; and that, upon appellants doing equity, the property be conveyed to them; and for general relief.

The respondents, Kinney and Millsap, separately demurred for want of equity, and that the charge of notice was the conclusion of the pleader without a statement of the facts.

As to Kinney, we think that being a grantee in the deed with Judge Brown, notice is sufficiently shown by that fact.

The allegation of notice as to Millsap is not sufficient. This court has held insufficient such an allegation as made in the bill. Bank of Luverne v. Birmingham F. Co., 143 Ala. 153, 39 So. 126. In that case the allegation was that the bank "was charged with notice of the trust." It was held that, with such averment, the bill was without equity, and the cause reversed, and decree rendered dismissing it. The bill in the instant case alleges that Millsap paid only part cash and that the balance of the purchase price of $11,000 was deferred and secured by a mortgage on the property, one installment not due until after the bill was filed. As to said amount of deferred payment unpaid when the bill was filed, Millsap is not an innocent purchaser, and his equities may be adjusted, upon full relief being granted by the court below.

The chief argument of counsel is based upon the contention of appellees that the transaction between appellants and Judge Brown was not an equitable mortgage, nor a trust in the nature of such mortgage, but was, in effect, a conditional sale, and the condition not having been complied with, the rights of appellants terminated with such breach; whereas appellants contend that it was an equitable mortgage, or a trust in the nature thereof, and subject to the equity of redemption not barred by a failure to pay the debt at maturity. This question is fully discussed in briefs of counsel. There have been several cases in Alabama on the subject, and principles which govern the question seem to be settled. The authorities which upon first view seem to support appellees are Downing v. Woodstock Iron Co., 93 Ala. 262, 9 So. 177; Moseley v. Moseley, 86 Ala. 289, 5 So. 732; Micou v. Ashurst, 55 Ala. 607. An examination of these cases will show they do not apply to the facts of this case.

In the Downing Case, supra, the facts made by the bill are substantially, in effect, the facts upon which the equity of this bill is founded, except that there was no writing showing the relation of the parties. The bill in that case alleged that Downing (having the right of redemption) borrowed the money from the Woodstock company, which, to secure the payment, took a deed, and agreed to give Downing all the time he wanted. The bill was filed eleven years thereafter to redeem. The court in that case did not hold that the bill did not have equity, but held that the proof did not sustain the allegations, and did not prove a loan of money to be secured by a deed as a mortgage, but that the agreement was that Downing should have two years in which to redeem it. The opinion, however, does conclude that it would seem that though the testimony should prove the allegations, complainant was not entitled to relief as Downing had no title to mortgage, and quotes Judge Brickell as holding that under such circumstances it is not a mortgage, but may be a trust.

In the case of Moseley v. Moseley, supra, appellee purchased a lot, and paid one half the purchase price, and made an arrangement with appellant to pay the balance, and take a deed from the seller. He did so and took the deed. Appellee contended that the deed was to secure repayment, and sought a redemption. Appellant contended it was an absolute sale. The court quotes from Micou v. Ashurst, supra. It was held that appellee did not execute a deed as a mortgage; that the repayment of the debt would not revest the title in appellee, for he had no title to revest; and that the deed was not made as security for a debt of the grantor therein, and should not be held to be a mortgage; but the remedy was for specific performance in the nature of a trust, but that, the transaction being in parol, the court would not enforce it as a trust, and the bill did not show the elements of a constructive trust, there being no fraud or wrongdoing alleged. The case of Micou v. Ashurst, supra, written by Chief Justice Brickell, is to the same effect. This principle is approved in Parmer v. Parmer, 88 Ala. 545, 7 So. 657; Butts v. Cooper, 152 Ala. 375, 44 So. 616.

The Downing Case, supra, also emphasizes the fact that the party complaining had no property which passed by the transaction, and which is essential to a mortgage, whereas in the Parmer Case, supra, he had a perfect equity. It is also said that, his only right being a statutory right of redemption, it was not property and not subject to sale and transfer. Such right is now assignable, and was so when this transaction occurred. Sec. 5746, Code of 1907. Whether such right being thereby made assignable created an interest in the property so as to bring it within the principle mentioned in the Parmer Case, supra is not necessary to decide at this time.

It must be remembered that appellants executed a note to Judge Brown for a definite sum due at a fixed date, and expressly secured it by a deposit of the deed in the bank in escrow. The transaction was in writing as alleged.

In the case of Hall v. M. & M. R. Co., 58 Ala. 10, the court adopts the following language from Jones on Mortgages: "There are as many kinds of equitable mortgages, as there are varieties of ways in which parties may contract for security, by pledging some interest in lands. Whatever the form of the contract may be, if it is intended thereby to create a security, it is an equitable mortgage"-unless it is a legal one. This language is quoted in Woodruff v. Adair, 131 Ala. 530, 545, 32 So. 515, 519, with the additional statement that "if the transaction resolve itself into a security, whatever *** be its form, it is in equity a mortgage."

Another early and leading case on the subject is Newlin v. McAfee, 64 Ala. 357, written by Chief Justice Brickell. It is said: "The form of the agreement is not material; operative words of conveyance are not essential to the creation of a charge, or trust, which a court of equity will enforce as a mortgage. It is the intention of the parties to charge particular property, rights of property, or credits, with the payment of debts, which the court will regard. When that intention is deducible from their agreement, the court will give effect to it." This is quoted with approval in the case of Lewis v. Davis, 198 Ala. 81, 85, 73 So. 419, 421.

In the case of Nelson v. Kelly, 91 Ala. 569, 8 So. 690, in an opinion by Judge Clopton, the court states the principles as applicable, when the owner of a lot had allowed it to be sold for taxes, and applied to complainant to advance the money, which he did, taking a conveyance of the lot. The tax sale was void, and complainant took no title from the tax purchaser. On his bill the court held...