Woodruff v. Adair , 131 Ala. 530 ( 1901 )

HAKALSON, J.

The motion to dismiss for want of equity, for all purposes of the motion, admitted all the statements of the cross-bill to be true, and the chancellor was not authorized in passing on the motion, nor are we, in review of his ruling, to look into the answers to the cross-hill and proofs in the original cause, but the motion is to be determined upon an inspection of the cross-hill itself, in its relation to the. original bill. Trammell v. Pennington, 45 Ala. 673; Seats v. Robinson, 75 Ala. 363.

Section 1040 of the Code provides, that “Where a power to sell lands is given to the grantee in any mortgage, or other conveyance, intended to secure the payment of money, the power is part of the security, and may be executed by any person, or the personal representative of' any person, who by assignment or otherwise, becomes entitled to the money thus secured.”

Under - the averments of the cross-bill, the assignment by Mm Phillips to Jesse W. Ryder, of the two mortgages held by her, and of the notes they secured, invested him with the power to foreclose the- same in equity, or to sell the property un-deir the powers contained in the mortgages, as -fully as the mortgagee herself, before -she assigned said notes and mortgages, could have done. — Wildsmith v. Tracy, 80 Ala. 258; Martinez v. Lindsay, 91 Ala. 334; Johnson v. Beard, 93 Ala. 96.

The fact that Ryder, — the assignee of the Adair mortgage, — purchased at liis -own sale, not having the power to do so, conferred by the mortgage, -did not on that account, avoid the sale. It was voidable at the option of the mortgagor, exercised within two years, but valid as to all other parties, notwithstanding the- statute of frauds. — Authorities cited supra; Comer v. Shehan, 74 Ala. 453; Alexander v. Hall, 88 Ala. 487; Cooper v. Hornsby, 71 Ala. 62; Harris v. Miller, Ib. 26; McHan v. Ordway, 76 Ala. 347; Code, § 3505.

In -a case of the kind, the mortgagor1, or person claiming under him in privity, may disaffirm the sale and redeem, the election to do so being -seasonably expressed. As to him, untii barred of his election to redeem, the mortgage has not been absolutely -and finally foreclosed, and the mortgagor, or the person -succeeding to his estate, continues, in contemplation of equity, to be the real owner of the fee. — Lovelace v. Hutchinson, 106 Ala. 417. The Brasher mortgage to Mrs. Phillips did authorize the mortgagor, or her transferee, to purchase at a foreclosure -of the mortgage under its power; and, proceeding under the power conferred, Ryder, its transferee from the mortgagee, advertised and sold the lands- mortgaged, and himself became the purchaser, as he did at the sale under the Adair mortgage. But, under neither -did he receive -a deed, but merely a certificate from the auctioneer of sale and his purchase under each mortgage. This sale under this mortgage was a foreclosure and cut off the equity of redemption.

These purchases by Ryder, although 'he could not have maintained under them actions of ejectment -at law, did however, give him a right to -compel the mortgagee, Mrs. Phillips, by specific performance, to -convey to him. Cooper v. Hornsby, 71 Ala. 65.

After the purchase under the Adair mortgage, and after the two years for the exercise of Adair’s right of redemption had passed, and after the foreclosure of the equity of redemption under the Brasher mortgage, Ryder, desiring to borrow money from Mrs. Woodruff, obtained from her, on the 1st January, 1895, a loan of $775, and to secure the same, transferred to 'her, as is alleged, all his right, title and interest in and to said lands by delivering to her as collateral security, each of said -mortgages and notes, and the memoranda of sales made by the auctioneer, by indorsing said notes and mortgages and memoranda to her. The right of Ryder, under his sales, to seek and enforce in equity a confirmation thereof, and conveyances to him from the mortgagors, by this transaction by him with Mrs. Wood-ruff, inured to her benefit, and was intended by Ryder, and so accepted by her, as -a security for- the debt he owed her for the money he borrowed. He had an interest, incident to and inhering in the lands, bestowed by the mortgagors themselves, and an equitable right to the 'confirmation of his sales so as to secure the legal in contradistinction to the equitable title in himself to them, and this interest he duly assigned to Mm Wood-ruff as a security for the debt he owed her. — 1 Jones on Mortgages, § 820, a; Wells v. Cody, 112 Ala. 278; Meeker Co. Bank v. Young (Minn.) 53 N. W. Rep. 630. Whether this be styled an equitable mortgage or lien can make no difference, since the transfer was for' the security of a debt. “There -are many kinds of equitaable mortgages, -as there are variety -of ways in which parties may contract for security by pledging some interest- in lands. Whatever the form of the contract may be, if it is intended thereby to create a security, it is an equitable mortgage, that is, of course, if it is not a legal mortgage.” — Hall v. M. & M. R. R. Co., 58 Ala. 10, 22. “If the transaction resolve itself into a security, whatever mar'- be its form, it is in equity a mortgage lien.” — Flagg v. Mann, 2 Sumn. (U. S.), 486, 533; 13 Am. & Eng. Ency. Law, 608.

In Newlin, Fernley & Co. v. McAfee, 64 Ala. 364, it was said: “Tlie form of the agreement is not material; operative words of conveyance are not essential to the creation of a charge, or trust, which a court of equity will enforce as a mortgage. It is the intention of the parties to charge particular property, rights _ of property, or credits, with the payment of debts, which the court will regard. When that intention is deducidle from their agreement, the court will give effect to it, and the equity created will prevail against all others than innocent-purchasers for value.” — 3 Pom. Eq. Juris., § 1237; Wood v. Holly M. Co., 100 Ala. 326; Ross v. Perry, 105 Ala. 533.

On the averments of the cross-bill, therefore, the right that Mrs. Woodruff derived by said transfer from Ryder, created in her as to Ryder and Mrs. Phillips a lien, in the nature of an equitable mortgage, on the lands in question. She is no intruder, therefore, in this litigation. She acquired by her transfers, according to the averments of the cross-bill, the same right to a confirmation of Ryder’s sale that he had, and to have said sale confirmed and the legal title to said lands invested in her, as a security for her debt. — 1 Jones on Mort., § 820, a.

It is urged that this lien cannot be maintained, since the cross-bill shows it arises out of a deposit of title deeds, which cannot he done under our decisions. — Lehman v. Collins, 69 Ala. 127. The bill, however, does not show that the lien claimed arose from the deposit of title deeds, but quite the contrary, and the case cited has no relevancy to the facts of this case. The lien here arose from the transfer of a security of a debt presently contracted, — the right of Ryder to said mortgages and to have his sale under them confirmed in equity for his benefit, — and this, in the sense referred to in said decision, was not a mortgage arising from the mere deposit of title deeds.

The cross-bill avers that complainant therein, at the time she made said loans to Ryder and received from him 'said transfers, had no knowledge or notice of any claim of Mary J7 Adair in or to said notes and mortgages. She was, therefore, as to Mrs. Adair, on these averments, a bona fide purchaser for value without notice. Mrs. Adair’s deed to Smith Brothers, and theirs, by quitclaim to J. T. Adair, his conveyance of the same to the Brashers, and their mortgage to Mm Phillips, were all of record in the probate office. The deed from Mrs. Adair to said Smith Brothers was signed, not only by herself, but’ by J. T. Adair, the two being the joint owners of the property, — Mrs. Adair’s interest arising under her exemption to the homestead of her deceased husband. Her bill, indefinite in its averments of an escrow, shows that this deed was not delivered by her to Smith Brothers, but was kept in the hands of J. T. Adair,'her joint grantor, not to be deiivered until Smith Brothers had time to examine and become satisfied with the title, and that they, accordingly,' investigated the title and found it to be unsatisfactory. But the bill goes on to aver, that said deed ivas delivered to Smith Brothers, through the agency and complicity of said J. T. Adair and H. W. Phillips, — the latter acting ■as the agent and husband o<f Mrs. T. S. Phillips in the transaction, — and that said Smith Brothers, on the 12th October, 1893, conveyed the lands back to said J. T. Adair by quitclaim deed. It further shows that, thereafter, on the 26th October, 1893, said J. T. Adair and his wife, executed a warranty deed to said lands to D. E. and Henrietta Brasher, 'who in turn, on the 1st November, 1893, mortgaged the 'same to Mrs. T. S. Phillips. It is further averred, that all this, was done by the procurement of said J. T. Adair and IT. W. Phillips in order to divest the title out of complainant, Mx*s. M. J. Adair, and to get it into said J. T. Adair, so that he could thereby, secure a debt he owed Mrs. Phillips, the Avife of said H. W. Phillips.

TJxxless there wasi a delivery of the deed by the grantors 'to a- tlxixd person, not a party to the instrument, it does not come within the meaning of an escroxv. The grantor must have surrendered control over it. Nor can the deed he delivered for such purpose to the grantee. — 1 Dev. on Deeds, § 312; 11 Am. & Eng. Ency. Law (2d ed.), 333, 336. There does, not appear to have been any person designa,ted by the parties who was to receive the deed in escrow, bnt it does appear, that one of the grantors therein retained the deed in hi® custody and delivered it to Smith Brothers. Mrs. Woodruff, as she avers, in making the loan to Ryder, acted bona fide, without any' knowledge or notice of the claim by Mrs. Adair, growing out of/the alleged non-delivery of the deed to Smith Brothers, but she acted on the faith of the status of the title such as the public records showed it at that time to be. Under these conditions, we must hold that Mrs. Adair’® deed to Smith Brothers, as to Mrs. Woodruff was delivered and took effect as a deed from its date, and that Mrs. Woodruff is not to be hindered in the assertion of her rights by the claim of Mrs. Adair.

The decide dismissing the cross-bill for want of equity must be reversed, and tlie cause remanded.

Reversed and remanded.

Sharpe and Dowdell, JJ., dissenting.