James Supply Co. v. Frost ( 1925 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] This is a creditor's bill, seeking to have declared void a mortgage executed by the debtor, Thomas H. Frost, to respondent R. N. Cartwright, executed December 14, 1921, upon the ground the same was without consideration, or, in the alternative, to have said mortgage declared a general assignment under the provisions of section 8040, Code of 1923. The court below denied relief as to either alternative upon which relief was sought, and dismissed the bill. From this decree complainants have prosecuted this appeal.

The learned chancellor has accompanied his decree with an opinion which fully states the case, and in which the pertinent authorities are cited. Upon a review of the cause we find ourselves in the main in accord therewith, and the reporter is therefore directed to set out the opinion of the chancellor in the report of the case.

We will briefly add a few observations in answer to further argument here pressed. It is suggested that the transaction between Frost and Cartwright was not binding on the corporation, as he was an interested officer. In any event, however, such a contract is only voidable at the instance of the corporation, and may be ratified by it. There is evidence justifying the conclusion that the corporation and its stockholders have acquiesced in the transaction. But the right to disaffirm upon this ground does not exist in the creditors; their right to impeach the transaction depends upon its fraudulent character. O'Conner, etc., Co. v. Coosa Furnace Co.,95 Ala. 614, 10 So. 290, 36 Am. St. Rep. 251. This insistence is therefore without merit.

Upon that phase of the case seeking to have the mortgage declared a general assignment, the chancellor has cited several cases applicable to the question of the statute of frauds. But here the parol agreement to execute the mortgage has been performed, the mortgage executed, and therefore the contract is rendered immune to this objection. Sitz v. Robertson, 212 Ala. 99,101 So. 749; Kling v. Tunstall, 124 Ala. 268, 27 So. 420. By such performance, under the doctrine of relation, the contract becomes binding from its inception. Phillips, etc., Merc. Co. v. Banks, 8 Ala. App. 549, 63 So. 31, reviewed by this court in Ex parte Banks, 185 Ala. 275, 64 So. 74, and subsequently cited with approval in Sitz v. Robertson, supra. See, also, 1 Jones on Mortgages (7th Ed.) § 164.

Complainants were not creditors of Frost at the time of the parol agreement to execute the mortgage. Had the mortgage been executed at that time and not recorded, this fact would not have affected the question here under consideration. There is no charge of actual fraud, and it does not appear that complainants have suffered any injury by reason of the conclusion reached.

We conclude with the chancellor that complainants are not entitled to relief upon either aspect of the bill, and that therefore the decree rendered should be here affirmed.

Affirmed.

ANDERSON, C. J., and SAYRE and MILLER, JJ., concur.