Stoutz v. Rouse

• Decision Date: 02 May 1888
• Citation: 4 So. 170,84 Ala. 309
• Parties: STOUTZ v. ROUSE.
• Court: Alabama Supreme Court

4 So. 170

84 Ala. 309

STOUTZ v. ROUSE.

Supreme Court of Alabama

May 2, 1888

Appeal from chancery court, Mobile county; THOMAS W. COLEMAN, Judge.

Bill in equity to redeem lands, filed by Frederick A. Stoutz against Susan F. Rouse. Complainant executed a mortgage on certain real estate, known as "Hollinger's" or "Montgomery Island," to secure his indebtedness to appellee. This indebtedness, amounting to $5,940, had become due; and to avoid a foreclosure suit, and a sale of the property under a chancery decree, complainant executed a deed conveying the property to the appellee, for the said sum of $5,940, and put the appellee in the possession of the said land. It was further provided in writing that complainant "might redeem said property within two years from the date of the deed, in like manner and upon the same terms and conditions as if the said land had been sold under a decree of the chancery court to satisfy the mortgage." Complainant filed his bill to redeem, and appeals from the decree of the chancellor refusing to allow him to redeem.

Austell & Ervin, for appellant.

F G. Bromberg, for appellee.

SOMERVILLE J.

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. Bethell, 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." The right of redemption is the creature of law and not of contract. The parties are not, therefore permitted by special agreement to disannex from the mortgage, at the time of its execution, that which the law has declared shall be annexed to it, to prevent the undue oppression of debtors by creditors. And a like rule has been applied, for similar reasons, to the statutory right of redemption. Parmer v. Parmer, 74 Ala. 285. 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. Hitchcock v. Bank, 7 Ala. 386, 443; McKinstry v. Conly, 12 Ala. 678. It is sometimes said that a purchase of the equity of redemption will be sustained only when it is based on an adequate consideration. Thomas, Mortg. § 678; 2 Jones, Mortg. (3d Ed.) § 1045. There is much reason, however, in the rule that, in the absence of fraud, undue influence, or unconscionable advantage, the mortgagor may, at any time after the execution of the mortgage, by a new and separate contract, sell or release his equity of redemption to the mortgagee for a consideration that is not grossly inadequate. This we incline to hold to be the better rule. Wynkoop v. Cowing, 21 Ill. 570; Hicks v. Hicks, 5 Gill & J. 75; 3 Pom. Eq. Jur. § 1193, note 1; Russell v. Southard, 12 How. 139; Adams, Eq. (7th Ed.) *112, note 1; 4 Kent, Comm. *143; 3 Add. Cont. (Morgan's Ed.) 21; 1 Jones, Mortg. (3d Ed.) § 702; Austin v. Bradley, 2 Day, 466. But, without deciding whether a mere inadequacy of consideration will alone authorize a court of chancery to set aside an unconditional release of such equity of redemption, we are of opinion that it will not justify the setting aside of the present transaction, by which the mortgagor contracted with the...