Everett v. Pickens , 203 Ala. 322 ( 1919 )

In order to present an equitable defense which would be effective to defeat the respondents' title under the mortgage executed by foreclosure, and entitle complainant to injunctive relief against the ejectment judgment, and the cancellation of the mortgage itself, the burden is on complainant to show either (1) that the mortgage obligation was without any consideration of substantial value (13 C. J. pp. 367, 368, §§ 242, 243), or else (2) that it was effectually avoided by complainant for breach of the mortgagee's warranties of title to the bottling works property and other chattels for the purchase price of which the mortgage security was given.

1. Whether or not, as held by the trial court, the horse and wagon acquired by complainant along with the bottling business (and which was not covered by the prior Hall mortgage) was subject to a lien for Sheppard's unpaid rent due to Mrs. Hall as lessor of the premises, we think that the delivery to complainant of the works and its equipment, though incumbered in part by a mortgage, and in part by a landlord's lien, and though all of it may have been afterwards lost to complainant by the enforcement of those liens, was unquestionably a sufficient consideration to support the contract of purchase.

It is no doubt a sound rule of law that, if chattels sold with a warranty against incumbrances have not a value in substantial excess of prior incumbrances at the time of the sale, the purchaser may defeat any recovery in whole or in part of the purchase price, as for an entire want of consideration for his promise to pay, provided such incumbrances have prevented any substantial use or enjoyment of the property by the purchaser. But if the purchaser receives possession and enjoys any substantial use of the property, his possession and use being rightful, it cannot be said that there is an entire failure of the consideration.

It is, of course, conceded that, where the vendor had no title to the property, the purchaser's deprivation thereof by the paramount owner would constitute an entire failure of consideration. Johnson v. Oehmig, 95 Ala. 189, 10 So. 430,36 Am. St. Rep. 204; 35 Cyc. 541 (B). But that is not the case here. Moreover, in this case, it appears that some other items of the property purchased by complainant, besides the horse and wagon, were not included in the Hall mortgage, and that the aggregate value of all these was substantially in excess of the amount of the Hall rent lien.

2. Where there has been a clear act or declaration of rescission by the purchaser, made complete by tendering back to the vendor what has been received from him, so as to place him in statu quo, and the tender is refused by the vendor, the purchaser may retain possession of the property, and even use it — if such use is necessary to its safety and preservation — without thereby revoking his previous rescission. Smith v. Thomas, 78 So. 820.¹ But he may, by any unequivocal assertion of beneficial ownership in himself, inconsistent with the ownership of the vendor, forfeit his proffered rescission, and disable himself from asserting it. Comer v. Franklin, 169 Ala. 573,577, 53 So. 797; Smith v. Thomas, supra; Tarkington v. Purvis, 128 Ind. 182, 25 N.E. 879, 9 L.R.A. 607; 6 R.C.L. 933.

In the instant case it is doubtful if complainant's mere statement to Sheppard that he wanted him to take the property back and give complainant his papers was an effective offer of rescission. Sheppard evidently regarded it as a mere proposal to trade back, and the testimony is convincing that complainant, after this proposal, used the property as his own, operating the plant and its appurtenances in all respects as a proprietor, and treating his mortgage and notes as a subsisting obligation. Indeed, his letter to Mrs. Sheppard in November, 1914, about five months afterwards, seems absolutely conclusive as to this. We do not overlook the argument of counsel that his operation of the plant as stated was under a lease from Hall, the prior mortgagee, and was therefore not inconsistent with his supposed rescission. But the testimony convinces us that, if he ever had any such arrangement with Hall, it was not made until after Hall's foreclosure of his mortgage, and that, for six months prior thereto, he was operating as owner in his own right, and recognizing his obligation to pay for the property.

Complainant's situation is unfortunate, and compels our sympathy; but we are constrained to hold that he is not entitled to pursue the remedy here invoked against the purchaser at the mortgage sale. Let the decree of the circuit court be affirmed.

Affirmed.

ANDERSON, C. J., and McCLELLAN and THOMAS, JJ., concur.

¹ 201 Ala. 442.