T.S. Faulk & Co. v. Hobbie Grocery Co.

• Court: Supreme Court of Alabama
• Writing for the Court: SOMERVILLE, J.
• Citation: 178 Ala. 254,59 So. 450
• Parties: T. S. FAULK & CO. ET AL. v. HOBBIE GROCERY CO.
• Decision Date: 16 April 1912

59 So. 450

178 Ala. 254

T. S. FAULK & CO. ET AL.
v.
HOBBIE GROCERY CO.

Supreme Court of Alabama

April 16, 1912

Rehearing Denied June 29, 1912.

Appeal from Chancery Court, Montgomery County; L. D. Gardner, Chancellor.

Bill by Hobbie Grocery Company against T. S. Faulk, Ada E. Faulk, George Stuart, receiver in bankruptcy, and B. Frank, as trustee, to treat orator as having a lien of equal dignity with the other creditors in the mortgage on the lands, to reform and correct the mortgage so as to show that the same is and does stand as a security to orator, to foreclose, etc. Decree for complainant, and respondents appeal. Affirmed.

In July, 1907, T. S. Faulk & Co., T. S. Faulk, and Ada E. Faulk executed a mortgage on certain real estate situated in Geneva county, to B. Frank as trustee, to secure the payment of an aggregate indebtedness of $8,368.81 due in specified sums to a large number of the creditors of T. S. Faulk & Co., including $2,876.50 due to Steiner, Lobman & Frank, a firm of which said B. Frank was a member. T. S. Faulk & Co. was a mercantile partnership composed of T. S. Faulk and O. A. Faulk, doing business at Samson, Geneva county, Ala. T. S. Faulk and Ada E. Faulk resided in Geneva county, and O. A. Faulk resided in Pike county. B. Frank resided in Montgomery, and the Hobbie Grocery Company, a domestic corporation, had its residence and principal place of business in Montgomery. Default was made in the payment of said mortgage indebtedness on November 1, 1907. On November 9, 1907, a petition was filed by Steiner, Lobman & Frank and another creditor to have T. S. Faulk & Co. declared a bankrupt, and George Stuart was thereupon appointed as receiver of the property and assets of said firm. On December 11, 1907, the Hobbie Grocery Company filed its original bill against the parties above named, except O. A. Faulk, who was not made a party. The gravamen of the bill was that by agreement between T. S. Faulk, B. Frank, and complainant's representative, at a conference between them prior to, and looking to, the execution of said mortgage, the mortgage should have expressed that complainant's debt of about $700 due from Faulk & Co. was by it equally secured on the same terms as the debts of the other creditors, though it was to be evidenced by separate notes made directly to complainant; whereas in fact the complainant's debt was not mentioned at all in the mortgage. The prayer of the bill was as above stated, and also for an allowance of attorney's fee for complainant's lawyers. B. Frank, as trustee, filed an answer to the bill denying complainant's asserted equity for reformation of the mortgage and a sharing in its proceeds, and also filed a cross-bill against all the Faulks, Hobbie Grocery Company, and George Stuart as receiver, setting forth the mortgage and default in its payment, and praying for a decree of foreclosure with an allowance of reasonable attorney's fees therefor. On October 5, 1909, the Hobbie Grocery Company dismissed its original bill of complaint, and on the same day T. S. Faulk filed a sworn plea in abatement of the cross-bill, alleging that the original bill had been dismissed, and that the appointment of George Stuart as receiver, etc., had been vacated by the federal court, and therefore those parties had no further interest in the subject-matter of the suit; that T. S. and Ada E. Faulk resided in Geneva county, and O. A. Faulk in Pike county; that the real estate involved--the subject-matter of the suit--was situated in Geneva county; and that there was left no material defendant residing in the district in which the bill was filed. Thereupon the cause was submitted for final decree on the plea in abatement, also on the cross-bill, cross-answers, and depositions offered by the cross-complainant. The chancellor overruled the plea in abatement, and decreed that B. Frank, as trustee, was entitled to the relief prayed for, and ordered a reference to the register to ascertain and report the amount due under the mortgage, reasonable attorney's fee, etc. The register reported that, at the time the mortgage was given to the attorneys for B. Frank for collection, there was due thereon $8,249.81; that after the filing of the cross-bill large sums were paid by Faulk & Co. to various of the secured creditors, leaving a balance with interest added to date of $3,894.57; and that a reasonable attorney's fee for the solicitors of cross-complainant was 10 per cent. of the original amount, $824.98. The other material facts appear in the opinion.

Tyson, Wilson & Martin, of Montgomery, and W. O. Mulkey, of Geneva, for appellants.

Steiner, Crum & Weil, of Montgomery, for appellee.

SOMERVILLE, J.

The office of the cross-bill, and its relation to the original bill, are thus stated by Chief Justice Stone in Abels v. P. & M. Ins. Co., 92 Ala. 382, 386, 9 So. 423, 424: "The general rule is that, when the original bill is dismissed, the cross-bill goes with it. This rule is based on the idea that the averments of the cross-bill and its subject-matter constitute simply a defense to the original bill, and therefore, having no individuality, no distinctive relief can be granted." But as said in Wilkinson v. Roper, 74 Ala. 140, "if the averments of the cross-bill relate to and spring out of the subject-matter embraced in the original bill, when such cross-bill prays affirmative relief, which is equitable in its character, and which requires a cross-bill for its presentation, if the cause in this condition is submitted for decree, then, although relief may be denied on the original bill, it is the duty of the chancellor to grant such relief on the cross-bill as its averments and the proof would justify, if they were presented in an original bill." "This rule, however," proceeds the Chief Justice in the Abels Case, "was originally applicable only when the relief asked in the cross-bill was directed against the complainant, and not against a codefendant. * * * It was not until the statute was amended by the act approved January 22, 1885 (Laws 1885, p. 91) the statute as amended now constituting section 3460 of the Code (section 3118, Code 1907), that relief could be had against a codefendant by a statutory cross-bill as well as against the complainant in the original bill; and the same rules govern the filing of a cross-bill against a codefendant as against the original complainant." (Italics ours.)

The statute referred to provides that "a defendant may obtain relief against a party complainant or defendant for any cause connected with or growing out of the bill by alleging in his answer, and as a part thereof, the facts upon which such relief is prayed." Its effect is, as declared in the Abels Case, to enlarge the scope of the cross-bill, and to require an adjustment of the rights of parties defendant inter se when properly presented to the court, regardless of the fate of the original bill out of which the cross-bill sprang. Prior to the statute such a cross-bill, seeking no affirmative equitable relief against the original complainant, must have fallen with the dismissal of the original bill. See Davis v. Cook, 65 Ala. 617, 622. Under the statute relief will be granted against a...