Saenger Theatres Corporation v. McDermott

• Decision Date: 28 March 1940
• Docket Number: 1 Div. 82.
• Citation: 239 Ala. 629,196 So. 265
• Parties: SAENGER THEATRES CORPORATION v. MCDERMOTT.
• Court: Alabama Supreme Court

196 So. 265

239 Ala. 629

SAENGER THEATRES CORPORATION v. MCDERMOTT.

1 Div. 82.

Supreme Court of Alabama

March 28, 1940

Rehearing Denied June 6, 1940.

Appeal from Circuit Court, Mobile County; J. Blocker Thornton Judge.

Bill for redemption of property sold under mortgage by Clara McDermott against Saenger Theatres Corporation and others. From a decree overruling a demurrer to the bill as amended the named respondent appeals.

Affirmed.

Ball &amp Ball, of Montgomery, for appellant.

Vincent F. Kilborn, of Mobile, for appellee.

BROWN Justice.

This appeal is from an interlocutory decree overruling the demurrers of the defendant, Saenger Theatres Corporation, to the bill as last amended.

The bill filed by a judgment creditor, under § 10148, Code of 1923, in one of its aspects asserts and seeks to enforce the statutory right of redemption of the "Lyric Theatre property," consisting of the building and the lot on which it is situated, and the appurtenances thereto belonging, located on the corner of Joachim and Conti Streets in the City of Mobile, formerly owned by the Theatre Company, Incorporated, and upon which it, in October, 1927, executed a mortgage or deed of trust to the Merchants National Bank of Mobile as trustee to secure the payment of an indebtedness of $60,000, evidenced by first mortgage bonds.

In June, 1929, The Theatre Company, Incorporated, acting in conjunction with its president, Michael A. McDermott, executed a second mortgage on the said Lyric Theatre property to James E. and Walter P. Martin to secure an additional indebtedness of $30,000, said second mortgage covering other properties owned by McDermott and in which the Theatre Company, Incorporated, had no interest, as additional security. Said other property, as the bill alleges, is of the value of $40,000.

The mortgagor made default in the payment of said first mortgage indebtedness; the trustee on June 15, 1937, foreclosed under the power of sale, and treating as true the allegations of the bill as last amended, became the purchaser of the property on its bid of $50,000, taking title in the name of its "nominee," C. C. Inge.

Subsequently Inge and wife conveyed to Henry C. Stearns "as nominee" for Saenger Realty Corporation, said conveyance being made on a recited consideration of $50,000.

Thereafter in July, 1937, soon after said foreclosure, the said trustee named in the first mortgage, and the Martins, junior mortgagees, transferred and assigned, without consideration therefor to Manning, "all of the rights of the said James E. Martin and Walter P. Martin to redeem" the Lyric Theatre property.

Manning, as the bill alleges, was the agent and mere "nominee" of the Saenger Realty Corporation securing said transfer, and acting as such in redeeming the Lyric Theatre property, from the said Realty Corporation. Subsequent to such foreclosure, Manning transferred the title to the respondent Saenger Theatres Corporation, a mere subsidiary and alter ego of the Saenger Realty Corporation, from which the complainant now seeks to redeem.

The bill alleges that there was no consideration for said redemption and no consideration for the transfer of the property from Manning to the respondent. "That the entire series of transactions over [of] the acquisition by Manning of any rights of the Martins up to and including the time the property reached the hands of the Saenger Theatres Corporation, were but a scheme to cut off your Complainant and cut off other parties entitled to redeem, from redeeming said property."

The bill avers that there is a dispute between the complainant and the defendant, appellant here, as to the amount necessary to redeem the Lyric Theatre property; that the defendant claims that complainant must pay $50,000, the amount bid for the property, plus 10% from the foreclosure to date of redemption; taxes and special assessments accrued against the property, and in addition thereto the $30,000, evidenced by the junior mortgage, and 8% interest, less payments, to wit, $1,250.

And the bill "avers that Respondent Saenger Theatres Corporation refuses to accept any sum of money less," than that above mentioned.

The complainant offers to do equity, and to credit the debtor on the subsisting judgment as provided by § 10148 of the Code.

The demurrer is addressed to the bill, and to the aspect of the bill seeking a declaratory judgment. The parties before the court seem now to agree that the bill is not filed under the Declaratory Judgment Act, but is filed under the statute conferring on judgment creditors the right to redeem property sold under mortgage foreclosure, and it is well settled that such creditor may redeem from a junior mortgagee, who has exercised the statutory right of redemption conferred on such junior mortgagee by § 10140 of the Code 1923. Code 1923, § 10148; Allison v. Cody et al., 206 Ala. 88, 89 So. 238; Owen v. Kilpatrick, 96 Ala. 421, 11 So. 476; Johns v. Anchors, 153 Ala. 498, 45 So. 218.

The question, therefore, whether the transfer and assignment of the junior mortgage held by the Martins to Manning was merely fictious and colorable for the purpose of effecting a mere colorable redemption from the Saenger Realty Corporation, to prevent a redemption by the complainant and others, is material only in determining the amount necessary to redeem from the operating agency of said Realty Corporation.

A court of equity looks through form to substance. Therefore, taking as true the allegations of the bill, as must be done on demurrer, said transfer and assignment was without consideration and fictitious, and the alleged redemption on the strength thereof was merely colorable designed to embarrass or cut off the right of others to redeem, and in law fraudulent. Fairclough v. St. Amand, 217 Ala. 19, 114 So. 472; Elkins v. Bank of Henry, 180 Ala. 18, 60 So. 96; C. W. Zimmermann Mfg. Co. v. Wilson, 201 Ala. 70, 77 So. 364; Smith v. Thompson, 203 Ala. 87, 82 So. 101; Rollings v. Gunter et ux., 211 Ala. 671, 101 So. 446; Jefferson Lumber Co. et al. v. Powers et al., 223 Ala. 63, 134 So. 464; Horticultural Development Co. v. Lark, 224 Ala. 193, 139 So. 229.

In such circumstances the complainant was under no duty or obligation to pay the debt evidenced by the junior mortgage, and inasmuch...