St. Clair Industries, Inc. v. Harmon's Pipe & Fitting Co.

• Decision Date: 11 July 1968
• Docket Number: 7 Div. 803
• Citation: 282 Ala. 466,213 So.2d 201
• Parties: ST. CLAIR INDUSTRIES, INC. v. HARMON'S PIPE AND FITTING COMPANY, Inc.
• Court: Alabama Supreme Court

Page 201

213 So.2d 201

282 Ala. 466

ST. CLAIR INDUSTRIES, INC. v. HARMON'S PIPE AND FITTING COMPANY, Inc.

7 Div. 803.

Supreme Court of Alabama.

July 11, 1968.

Bainbridge & Mims, Martin, Balch, Bingham, Hawthorne & Williams, Birmingham, and Starnes & Holladay, Pell City, for appellant.

Maurice F. Bishop, Bishop & Carlton, and Wm. P. Jackson, Jr., Birmingham, for appellee.

KOHN, Justice.

The appellee (complainant) is an Alabama corporation with its principal place of business in Pell City, Alabama. The appellant (respondent) is a corporation with its principal place of business in Pell City, Alabama. Appellee (complainant) became the purchaser of certain land. At the time of its purchase, such property was subject to a first mortgage and a second mortgage, both of which were assumed by appellee (complainant) when it became the owner of such land.

The holder of the first mortgage foreclosed its first mortgage, and at such foreclosure sale the respondent corporation (appellant) purchased the property at the foreclosure sale. Subsequently, appellee (complainant) sought to redeem the property from the foreclosure of the first mortgage. The appellee (complainant) offered to pay all lawful claims and charges due pursuant to the original debt covered by the foreclosed first mortgage. But, as to the second mortgage that was on the property foreclosed, there is and was a dispute as to what amount must be paid respondent (appellant) who purchased the second mortgage subsequent to the time the first mortgage was foreclosed, but prior to this action of appellee to redeem. When, on October 5, 1962, appellee (complainant) became the owner of this property, the recited consideration included the following:

'NOW, THEREFORE, IN CONSIDERATION of the assumption of the payment of the mortgage indebtedness to SMALL BUSINESS ADMINISTRATION in the amount of $113,570.00 as of March 15, 1962 and the interest thereon since said date to the date of the delivery of this conveyance and the execution of a note to I. J. Ginsberg, the holder of a second mortgage on the properties hereinafter conveyed and delivered in the amount of $55,071.27 which note is payable in four (4) annual installments--the first commencing on February 1, 1965 and each year thereafter until the full amount is paid with interest at the rate of six per cent (6%) per annum from date thereof (IJS) the receipt whereof is hereby acknowledged, the parties of the first part do hereby grant, bargain, sell and convey unto the party of the second part, the following described real property, to-wit: * * *'

On this same date, October 5, 1962, the appellee and Ira J. Ginsberg, mortgagee, owner of the second mortgage, executed another note, providing that the second mortgage indebtedness which was payable on a demand note should now be payable in four annual installments. The following is quoted from this extension agreement:

'WHEREAS, Ira J. Ginsberg is the holder of a mortgage on premises situated in and near Anniston, Calhoun County, Alabama, and at Pell City in St. Clair County, Alabama, which mortgage is recorded in the Office of the Judge of Probate in St. Clair County in Volume 100, Page 45, and in Calhoun County in Book 1033, Page 97;

'WHEREAS, said mortgage is to be extended in consideration of One Dollar and other valuable considerations each to the other in hand paid, it is agreed as follows:

* * *

* * *

'(3) That the terms and conditions set forth in the mortgage recorded as hereinabove mentioned and described are herewith ratified, confirmed, approved, and unchanged.'

On January 31, 1964, a written instrument was executed by Ira J. Ginsberg and appellee releasing another tract of property located in Calhoun County from the lien of the Ginsberg second mortgage. The following is quoted from this agreement:

'* * * all of the other terms, conditions of the mortgage and the note agreement are herewith ratified, approved and confirmed and remain unaffected.'

On June 5, 1965, SBA foreclosed its first mortgage dated February 1, 1957, and executed a foreclosure deed to the appellant who was the purchaser at the foreclosure sale.

On October 1, 1965, Ira J. Ginsberg executed a bill of sale conveying to appellant the second mortgage and note. The consideration paid was $15,000, although the then amount of the debt secured by the mortgage was $55,071.27. The following is quoted from the bill of sale:

'In consideration of the payment of Fifteen Thousand Dollars ($15,000.00), and other good and valuable consideration, receipt of all of which is hereby acknowledged, the undersigned, Ira J. Ginsberg, does hereby grant, bargain, sell and convey unto St. Clair Industries, Inc., its successors and assigns, that certain mortgage executed by Peerless Pipe and Foundry Company, Inc., a corporation, to Ira J. Ginsberg, on February 10, 1960, and recorded in the office of the Judge of Probate of St. Clair County, Alabama on February 12, 1960, in mortgage record volume 100 at page 45, in the original total amount of Sixty-five Thousand Dollars ($65,000.00) and Ira J. Ginsberg does hereby deliver and assign to St. Clair Industries, Inc., such mortgage, together with the indebtedness thereby secured, all notes executed in connection therewith, and the entire interest of the said Ira J. Ginsberg in and to the lands and property interest conveyed by such mortgage.

'Ira J. Ginsberg does hereby aver, certify and warrant that there is presently due under the mortgage hereinabove assigned the total sum of Fifty-five Thousand, Seventy-one and 27/100 Dollars ($55,071.27), together with interest thereon at 6% From February 1, 1962, down to the present date.'

On May 31, 1966, the appellee successfully instituted this action to redeem the property from the foreclosure sale. The appellee's bill to redeem the property offered to pay all charges with regard to the first mortgage but refused to pay the full amount owed on the second mortgage. The court below upheld the position of appellee and ruled that the debt represented by the second mortgage had been settled for the price ($15,000) paid therefor by the appellant, St. Clair Industries, Inc. Appellant thereafter filed a motion for a rehearing which was denied by the court below. The court in denying this motion held that to allow appellant more than it had actually paid for the second mortgage would constitute unjust enrichment to it.

The appellant on this appeal does not question the right of the appellee to redeem the property, nor does it question the amount allowed it by the court below in regard to the foreclosure sale under the first mortgage. The appellant does contend, however, that the appellee should pay the full amount under the second mortgage.

The only issue, therefore, to be decided on this appeal is whether appellee, Harmon's Pipe and Fitting Company, Inc., should be required to pay the balance of the indebtedness due under the second mortgage and note thereby secured, or whether it is only bound to pay the $15,000 with interest paid by appellant, St. Clair Industries, Inc., when it purchased the second mortgage and note.

In this case, the testimony was heard ore tenus by the court below. We are cognizant of the rule that in such situations there is a presumption as to the correctness of the trial court's findings of fact. Harrison v. Harrison, 279 Ala. 675, 189 So.2d 471; Johnson v. Godin, 279 Ala. 443, 186 So.2d 722; Adams Supply Co. v. United States Fidelity & Guaranty Co.,269 Ala. 171, 111 So.2d 906; Richards v. William Beach Hardware Co., 242 Ala. 535, 7 So.2d 492. However, this presumption does not exist where the trial court erroneously applies the principles of law involved. Waters v. Merritt, 277 Ala. 346, 170 So.2d 492; Turner v. Turner, 251 Ala. 295, 37 So.2d 186; Murphree v. Hanson, 197 Ala. 246, 72 So. 437. Also, it is to be noted that even if there is a presumption in favor of the trial court's findings of fact, this court will reverse where the evidence does not furnish a sufficient basis for the trial court's decree. Baker v. Citizens Bank of Guntersville et al., 282 Ala. 33, 208 So.2d 601; Young v. Young, 262 Ala. 254, 78 So.2d 265. We are at the conclusion that in this case the trial court misapplied the principles of law involved, and that there is no evidence upon which the decree of the lower court can be based.

The trial court rendered its final decree on June 2, 1967, and in this decree the court held that the $55,071.27 indebtedness due under the second mortgage had been settled for the sum of $15,000. This was the purchase price paid by appellant to Ginsberg. We find no evidence in the record to support this conclusion of the trial court, as the only testimony concerning any type of settlement was given by witness, T. L. Harmon, president of appellee corporation. The following question was propounded to Mr. Harmon on direct examination, with his answer thereto:

'Q. Prior to this purported foreclosure to the SBA mortgage did you have any conversation with I. J. Ginsberg, or his representatives as to a compromise or settlement to that note and indebtedness?

'A. Not the indebtedness?'

This clearly shows that the debt was not settled. However, even if it is conceded that there were some private negotiations between the appellee and Ira J. Ginsberg, in regard to a settlement, this would not be binding upon the appellant as a third party transferee. Stewart v. Stephenson, 243 Ala. 329, 10 So.2d 159; Cunningham et al. v. House, 212 Ala. 557, 103 So. 578. The appellee paid nothing to effect any compromise or settlement, and there is no evidence that the appellant was acting on behalf of appellee when it purchased the mortgage and note from Ginsberg.

The only other ground given by the trial court as to why it disallowed the payment of the full amount of the indebtedness, due under the second mortgage, was that it would constitute an unjust enrichment in favor of appellant. We do not believe that the...