Sherrod v. Hollywood Holding Corporation

• Decision Date: 04 March 1937
• Docket Number: 6 Div. 991
• Citation: 173 So. 33,233 Ala. 557
• Parties: SHERROD v. HOLLYWOOD HOLDING CORPORATION.
• Court: Alabama Supreme Court

173 So. 33

233 Ala. 557

SHERROD v. HOLLYWOOD HOLDING CORPORATION.

6 Div. 991

Supreme Court of Alabama

March 4, 1937

Appeal from Circuit Court, Jefferson County; E.M. Creel, Judge.

Bill to remove cloud from title by the Hollywood Holding Corporation against F.C. Sherrod and others, wherein respondent F.C Sherrod filed cross-bill. From a decree for complainant respondent Sherrod appeals.

Affirmed.

Robt. E. Smith and Robt. W. Smith, both of Birmingham, for appellant.

Harold H. Himrod, of Birmingham, for appellee.

THOMAS Justice.

The bill was to remove a cloud from title. The decree granted the relief prayed.

Complainant avers that "it entered into a contract with Georgia Innes Whitney for the sale of the property" known as "Lot 15, Block 11, Owenton Survey, as per map recorded in Map Book 2, Page 26, in the office of the Judge of Probate of Jefferson County, Alabama, situated in Jefferson County Alabama"; that "a warranty deed conveying said property was executed on December 31, 1931; at the same time a purchase money mortgage was also executed by the said Georgia Innes Whitney in accordance with the terms of said contract and that said papers were held in escrow, but were not delivered until, to-wit: the 19th day of January, 1932, at which time the transaction was consummated. *** that while said papers were held in escrow, and prior to the completion of said transaction, the respondent, S.P. King, borrowed the abstract, contract and other papers from the escrow agent, one Alan Drennen, and prepared certain mortgages between the purchaser, Georgia Innes Whitney and her mother, Mrs. A.I. Whitney, together with a transfer to the respondent of the said mortgage in which it was attempted to obtain a first mortgage on the above described property and certain alleged personal property, *** although the respondent, S.P. King, knew at the time of the execution of the said mortgages, that complainant's purchase money mortgage was to be delivered upon the consummation of said transaction"; that "the respondent, S.P. King, attempted to sell said property under the terms of said mortgage, at which sale the respondent, F.C. Sherrod, became the purchaser at and for an alleged consideration of $360.00; that he subsequently received a foreclosure deed"; that "the said F.C. Sherrod under claim of said purchase is claiming said real estate therein described, and is asserting, or attempting to assert a superior claim over and above complainant's title. Complainant avers and shows unto the Court that in the foreclosure of the said mortgage, the said S.P. King did not advertise the same as required by law; that the sale was made en masse and not by parcels, nor was any of the personal property produced at the place of sale, and that, therefore, said sale was illegal and irregular; that the articles named in said mortgage and deed as personal property are chiefly fixtures in the apartment house built on the realty and essential to the operation thereof, and that complainant's interest in said property was jeopardized due to the irregularity and illegality of said sale. Complainant avers that it is informed and believes that the said respondent, F.C. Sherrod, in the purchase of said property at said foreclosure sale was acting solely as the agent of the said S.P. King, that no consideration was passed between said parties and that the said S.P. King is the real owner of any rights acquired at said foreclosure sale."

Complainant prays that, "upon a final hearing of this cause, the Court will set aside the foreclosure of said mortgage and will cancel and annul the alleged foreclosure deed made by the respondent, S.P. King, to the respondent, F.C. Sherrod, for and on account of the irregular and illegal sale in the failure to advertise the sale, the conducting of the sale en masse and the failure to have any of the personal property present at the place of said sale; that this Court will declare and decree that the mortgage executed by the said Georgia Innes Whitney to Mrs. A.I. Whitney and subsequently assigned to the respondent, S.P. King, is junior and subordinate to complainant's purchase money mortgage, and that the respondents and neither of them, has any right, title or interest in said land or any part thereof, except the statutory right of redemption, resulting from the foreclosure of complainant's purchase money mortgage."

The decree appealed from granted relief as prayed by complainant and denied relief to the respondent and cross-complainant, F.C. Sherrod, as prayed in his cross-bill; decreed that S.P. King and F.C. Sherrod, the respondents, "have no right, title, interest in, lien or encumbrance upon" the real property specifically described.

We think the submission had was broad enough to cover the respective pleadings, evidence and exhibits, and affidavits introduced and exhibited as documentary evidence. Code, §§ 6873, 6874; Stewart Bros. v. Ransom, 204 Ala. 589, 87 So. 89.

It is established in this and other courts that generally a mortgage given to secure unpaid purchase money, and delivered simultaneously with a conveyance of the property, has precedence over other claims and liens against such property, to the extent of the property sold or the balance due thereon. Blackman v. Engram, 214 Ala. 262, 107 So. 741; Matheson et al. v. Farmers' Bank & Trust Co., 217 Ala. 606, 116 So. 906; Electrical Research Products v. Ford, 227 Ala. 647, 151 So. 594; 39 Cyc. 1770; 41 C.J. p. 528, § 470; 19 R.C.L. p. 416, § 196.

In McRae et al. v. Newman, 58 Ala. 529, the holding was, that "Where the owner executes a conveyance of lands, and deposits the same with an agent to be delivered to the purchaser when he complies with the contract, and executes a mortgage back to secure the unpaid purchase money, such instruments become operative only from the date of delivery; the title remains in the vendor until such delivery and eo instanti returns to him by the mortgage so as to preclude the interposition of any title or right in any other person; and the vendee's mortgage, if duly recorded within ninety days (Rev.Code, § 1557), operates as a notice of its contents to one purchasing in the interval between its delivery and record." 3 Tiffany on Real Property (2d Ed.) p. 2563, § 636; Hassell v. Hassell et al., 129 Ala. 326, 29 So. 695; Shaddix et al. v. National Surety Co., 221 Ala. 268, 128 So. 220; Bank of Oakman v. Thompson et al., 224 Ala. 87, 139 So. 238.

The complainant's purchase-money mortgage recites, among other things, that "This is a second mortgage and is subject to a prior mortgage recorded in Volume 2054, page 29, Probate Records of Jefferson County, Alabama. This is a purchase money mortgage and is given to secure the balance of the purchase price on the property herein described, warranted free from all encumbrances and against any adverse claims." This was sufficient to put all subsequent purchasers on notice or inquiry as to the relation of the parties to such conveyance. Dewyer v. Dover et al., 222 Ala. 543, 133 So. 581; Wittmeir v. Leonard et al., 219 Ala. 314, 122 So. 330; First Nat. Bank of Eutaw v. Barnes et al., 229 Ala. 612, 159 So. 68; Planters' Warehouse & Commission Co. v. Barnes et al., 229 Ala. 572, 159 So. 63; Shorter v. Frazer, 64 Ala. 74.

The testimony of Alan T. Drennen as to the escrow was to the effect that about December 31, 1931, the appellee's warranty deed and the "purchase money mortgage by Georgia Innes Whitney to" appellee were executed and placed in escrow with witness "as an escrow agent, in accordance with the terms of an escrow agreement"; that the said mortgage was held by him "in escrow in accordance with the aforesaid escrow agreement." Witness further states the facts as to the action of Mr. B. George, which are material to a determination of the issue before us, as follows:

"While these papers were being held in escrow by me Mr. B. George called me and asked me if I had the abstract to this property and asked me what the substance of the trade was between the Hollywood Holding Corporation and Miss Whitney. I loaned him the abstract and told him the substance of the transaction, that is, the purchase price, the first mortgage to be assumed and the purchase money mortgage to be given, which purchase money mortgage was then held by me in escrow.

"A few days after this, which would be about January 21st, 1932, the trade was closed by the deliveries of the deed and mortgage and payment of the down payment."

While the deed and purchase-money mortgage were in the hands of the repository under the agreement of escrow, the grantee in the deed (grantor in the mortgage under which King and Sherrod hold) could not execute and deliver a conveyance to a third party and give such conveyance precedence over the purchase-money mortgage to the Hollywood Holding Corporation. As said by Mr. Tiffany, "as against such preexisting claims it is immaterial when he [the vendor] records his purchase money mortgage, since the prior claimant is not a subsequent purchaser within the protection of recording laws." Volume 3, Tiffany on Real Property (2d Ed.) § 636, p. 2563. As the King mortgage was executed and assigned to him prior to the delivery of the deed to his mortgagor the latter was not able to convey the land (to King) freed from complainant's mortgage. That is, the prior date of record of the mortgage to King did not affect the prior title in complainant as the owner and holder of the purchase-money mortgage, which was still held in escrow with the warranty deed to King's grantor. Until delivery of the escrow, the failure or defect in the title of nondelivery (under the terms of the agreement of escrow) was known or chargeable to King, and he could not be a bona fide...