Patterson v. Holmes , 202 Ala. 115 ( 1918 )

As the bill filed by appellees shows, appellant foreclosed his mortgage upon the land of appellees, and became the purchaser at the sale; no irregularity in the sale is averred, but no deed was executed to evidence the new right or title thus acquired, nor did appellant then go into possession. The averment of the amended bill is that appellant "never claimed any right in said land as such purchaser, and expressly denies any claim or right to said land for and on account of any foreclosure of said mortgage." Afterwards appellees made a deed to appellant without expressed condition or defeasance, after which, and according to agreement, appellant went into possession. By their bill in this cause appellees seek to redeem under and according to the terms of a concurrent parol agreement into which the parties entered; their understanding being, perhaps, that such deed and parol agreement served in lieu of a formal foreclosure.

The bill avers that:

"Soon after the alleged or attempted mortgage foreclosure sale," appellant "requested, urged, and insisted that complainants [appellees] execute to him a deed in proper form conveying to him said land, and suggested that such deed recite as a consideration the amount of the indebtedness on said mortgage, stating that no deed had been made under the foreclosure; that, in compliance with said request, the complainants executed said deed upon condition and with the agreement and understanding" — resting in parol, evidently — "between complainants and respondent [appellant] that, at any time within two years from the date of the execution of said deed, complainants could redeem said land from the respondent by paying to respondent the consideration stated, being the amount of the original debt together with 10 per cent. interest thereon."

It is further averred that the land is worth considerably more than the amount of the debt, and that:

"Said deed was executed upon the sole consideration of said debt together with the agreement with the grantee * * * that complainants' right to redeem said land would not be in any way affected by said deed, * * * and after repeated promises and assurances on the part of the respondent that complainants would be permitted to redeem said land, and after repeated promises upon the part of the respondent that, upon payment to him of the consideration stated in said deed with 10 per cent. interest thereon at any time within two years from the date of said deed, he would reconvey said land so as to vest the absolute title in and to said property back in the complainants."

The bill is not clear or consistent in all respects, it may be conceded — the demurrer takes no objection on this account — and, as appears from their briefs, the parties are not agreed as to the ground upon which it proceeds or the precise nature of the relief sought; but we construe it as above stated, that being perhaps the most fair and natural construction, and one, we take it, of which the appellant will not complain, since it gives point to the most vital objections urged in the brief against the bill, demurrer to which was overruled in the court below.

It may be noted further that a prayer for cancellation, which the bill contains, in connection with some of the circumstances under which it is alleged the deed was executed, might be construed as intimating in some sort fraud in its procurement; but the bill draws no conclusion of oppression, undue influence, or fraud of other character, and it would seem that it recognizes the validity of the instrument by offering to redeem under an agreement which is alleged to have constituted an essential part of the contract in virtue of which the deed was executed.

Appellant's argument is that the conventional deed extinguished the statutory right of redemption absolutely — a proposition that need not be denied as to the strict statutory right — and that the original foreclosure must be held valid, and that the statutory right of redemption thereafter existing as the only element that survived such foreclosure could not be made the subject of a mortgage, nor could it survive a deed absolute in form, with a defeasance merely oral; in short, appellant contends that there is no equity in the bill for the reason that the alleged agreement for redemption was not expressed in writing.

In Stoutz v. Rouse, 84 Ala. 309, 4 So. 170, this court held that mortgagor and mortgagee may by fair contract, without resort to the courts, do what the law would do for them or what the law would compel one to do for the other. The court said of an agreement in that case similar to the agreement averred in this — evidenced, however, in that case by an instrument in writing — that it merely converted the equity of redemption into the statutory right of redemption, in order to save the expenses of foreclosure incident to a suit in chancery.

In Peagler v. Stabler, 91 Ala. 308, 9 So. 157, the court said:

"There is no reason why a mortgagor and mortgagee may not contract with each other that a sale and conveyance of the mortgaged property to the mortgagee shall stand for a mere formal foreclosure" — citing Stoutz v. Rouse, supra.

But the court added:

"And they may contract at the same time that the mortgagor may redeem or repurchase the property within two years, or within any reasonable specified time; but such agreement for the right to repurchase or redeem cannot rest in parol, or be established by parol evidence" — and this expression is cited by appellant as authority for his contention stated above.

It is conceded that the expression relied upon must be accepted as always correct if used in a court of law (Bragg v. Massey, 38 Ala. 89, 79 Am. Dec. 82); but it is well settled that:

"In a court of equity, the character of the conveyance must be determined by the clear and certain intention of the parties; and, if there be an agreement between them that it shall operate as a security for a debt, it can and will operate only as a mortgage. The agreement may be expressed in the deed, or in a separate writing, or it may rest in parol." Harrison v. Maury, 157 Ala. 227, 47 So. 724.

The expression relied upon was entirely correct in the case in which it was used, for the true ground of the decision, in accord with our cases generally (see cases cited in the notes to section 286 of 1 Jones on Mortg. [7th Ed.]), appeared in the further course of the opinion where it was said: "We agree with the chancellor that the evidence fails to show that the deed was intended to operate as a mortgage, or that it expresses any other than the true intention of the parties at the time of its execution" — viz. that it was a conveyance in satisfaction of the debts due from the mortgagors in that case, thus absolutely and beyond redemption destroying all rights growing out of the mortgage relation between the parties. I do not agree, therefore, that the statement made in the case of Peagler v. Stabler can be properly applied to the case at hand.

Counsel for appellant in his brief, very correctly, as I think, states the matter at issue as follows:

"Now, there can be a formal foreclosure, and there can be an informal foreclosure. A formal foreclosure cuts off the equity of redemption, leaving the statutory right of redemption. But a formal foreclosure may be dispensed with by agreement of parties, and an informal or conventional foreclosure be substituted. This conventional foreclosure must take the shape of a deed from the mortgagor to the mortgagee. If there has been no previous foreclosure, of a formal nature, this conventional foreclosure merely does that which would be done by the formal foreclosure — extinguishes the equity of redemption, leaving the statutory right of redemption just where it would have been left had there been a formal foreclosure. But" — and here is stated in a few words the whole force of appellant's argument on this point — "where there has been first a formal foreclosure, as there has been here, there is left, thereafter, no field for the operation of an absolute deed save only the extinguishment of that statutory right of redemption. When Patterson foreclosed, there was nothing but the bare right to redeem left; and that passed irrevocably by the deed. It was not property that could have been mortgaged."

Pursuing his argument, appellant cites Harris v. Miller,71 Ala. 26 (a case arising out of a contest of a claim of exemption to a debt sought to be subjected by garnishment, and in which, for aught appearing, a deed was executed) to the effect that, where the mortgagee becomes the purchaser at his own sale, bidding the amount of his debt and expenses, the mortgage debt is by operation of law satisfied and extinguished — a proposition in no wise questioned, if the mortgagee gets what he bids for, i. e., all the original right and title of the mortgagor.

Further the appellant quotes from Mewburn v. Bass, 82 Ala. 622,2 So. 520, this language, which in that case was quoted from Comer v. Sheehan, 74 Ala. 452:

"We are of opinion that one who purchases as mortgagee at his own sale comes within the benefit designed to be secured by this statute (Code 1876, § 2878, statutory redemption), although no deed, or other written memorandum of the sale, is made at the time, so as to rescue the transaction from the influence of the statute of frauds."

From the report of Comer v. Sheehan it appears that the court was speaking of section 2878 of the Code of 1876 (section 5747 of the present Code), providing that possession of the land must be delivered to the purchaser within ten days, etc. In Cooper v. Hornsby, 71 Ala. 62, the court said:

"It is true that no deeds were executed between the parties, but this was material only as affecting the legal title to the lands in question, which could be divested only by the execution and delivery of a conveyance in writing" — citing 2 Jones on Mortg. § 1894; Graham v. Newman, 21 Ala. 497.

And in Mewburn v. Bass, supra, the court further said:

"The case of Cooper v. Hornsby, 71 Ala. 62, decides that 'such a sale is valid, as against third parties, on collateral assailment; not being strictly void, but voidable merely by interposition of the statute [of frauds], which is considered as waived, unless specially pleaded by one having the right to set up the defense. The sale therefore is binding, so long as the parties do not object to its validity, as it would operate to cut off the equity of redemption of the mortgagor, and reduce it to a mere statutory right of redemption.' "

But in an action of ejectment, Hambrick v. New England Mortgage Security Co., 100 Ala. 551, 13 So. 778, also cited by appellant, the court said:

"We have before now held that so long as the foreclosure sale under a mortgage stands, and no affirmative legal steps are taken to avoid it, the purchaser, although he is the mortgagee, must be regarded as the owner of the land. Not being competent to make a conveyance to himself, his title may be only equitable, and, standing alone, might be insufficient to support ejectment; but, by virtue of his title as mortgagee, both the legal and equitable title become vested in him, and constitute a perfect title, subject only to the right of the mortgagor, seasonably expressed, in a court of equity, to be let in to redeem, and this he cannot do, without offering to do, and doing equity" — citing cases.

Whatever result might flow from the cases referred to, if held applicable to the case under consideration, it is quite clear that under the statute as it now is, section 5746 of the Code of 1907, the right of redemption is transferable, either before or after foreclosure, as a property right. The right of redemption, as now defined by statute, falls within the common definition of property as the right to possess, use, enjoy, and to sell or otherwise dispose of a thing according to the will of the owner, without diminution or control save only by the laws of the land. 32 Cyc. 677. At any rate, it is evident that appellees had a substantial, assignable, and descendible interest in the property, notwithstanding the foreclosure, and that appellant needed a deed to make even his foreclosure title perfect in form and in fact. If then appellant conceived it to his interest to waive what right he had acquired by the foreclosure, still resting in parol, and to bargain with appellees for a deed which would vest in him the form of a perfect title, agreeing nevertheless that it should operate as a security — of a peculiar sort, it may be admitted — no sufficient reason is perceived why the court should not give effect to the agreement according to the intention of the parties. The instrument purports to be an absolute conveyance, and was executed as planned; but if the relation of debtor and creditor still existed — and we so construe the bill — and both parties actually intended a transfer for security only, then it would seem, on a familiar principle of equity, that the grantor may treat the transaction as though its mortgage nature were expressed in terms. Such agreement merely substituted for one security another of different form, conferring additional benefits upon the appellant mortgagee, and is in principle no more obnoxious to the statute of frauds than any other which is saved from the statute by the spirit of the maxim, "Once a mortgage, always a mortgage." Even if, as argued, a deed conditioned by such agreement did not improve appellant's position — though this cannot be successfully maintained, for thereafter he was put into possession in order, it may be inferred, that he might enjoy rents and profits as owner — that consideration would not control the construction of the bill, but would be a matter of evidence, to be weighed in determining the issue of fact whether the instrument was intended to operate as a security, as alleged, or as a deed forever foreclosing the relation of debtor and creditor between the parties and substituting another, entirely new, such was the use made of a like consideration in the case of Adams v. Pilcher, 92 Ala. 477, 8 So. 757, cited by appellant. Nor does it answer the case averred by appellees to say, as appellant does in effect, that a bill by appellant to foreclose under the agreement could not be maintained, and therefore that no security could have been intended — we would prefer to say such a bill could hardly serve any useful purpose — for appellees have by contract placed appellant in a position of advantage in which he could never need to foreclose. The burden of any action, necessity for which might arise out of the new relation between the parties, was left to rest entirely and exclusively upon appellees, and that action must be taken within a limited time.

It is further urged against the bill that appellees are seeking to avail themselves of the provisions of the statute of redemptions without complying with the prime condition imposed by the statute, which, as appellant states it, requires payment of the redemption money into court, or such part thereof as the redemptioner knows or can ascertain to be due. Pretermitting possible objections to this statement, for that it harks back to old decisions and ignores the provisions of section 5748, new to the Code of 1907, as amended by the act of 1911 (p. 391), and putting aside, as immaterial and superfluous, those averments of the bill which indicate an apprehension on the part of appellees that they needed to proceed as in a case of statutory redemption, and by which appellees have sought to avail themselves of the benefit of that section, appellees' bill is not a bill to redeem under the statute, but it is a bill to redeem under and according to the terms of a valid parol agreement, made, along with the deed, in substitution for a foreclosure; such agreement, and the redemption under it, being unaffected by the statute, though evidently entered into with the purpose of securing rights and imposing liabilities like unto those secured and imposed by the statute. Such being the case, appellees come into court, not with the burdens imposed upon statutory redemptioners, but more in the fashion of equitable redemptioners, in whose case it is not essential to the equity of their bill that it should allege a previous tender nor that any amount should be brought into court. McCalley v. Otey, 90 Ala. 302, 8 So. 157; Hammett v. White,128 Ala. 380, 29 So. 547; Johnson v. Smith, 190 Ala. 521,67 So. 401.

The Chief Justice bases his opinion that there is no equity in the bill upon the authority of Goree v. Clements, 94 Ala. 337, 10 119 So. 906, and Peagler v. Stabler, 91 Ala. 308, 9 So. 157. I have stated the reason why, in my judgment, Peagler v. Stabler is not an authority in the circumstances of this case. As for Goree v. Clements, it is indeed a very apt authority against the opinion of GARDNER, J., in which MAYFIELD and SOMERVILLE, JJ., have concurred. But it must be noted that the bill in that case proceeded upon the theory that a sale or release of the equity of redemption had been fraudulently, oppressively, or inequitably procured, and relief was denied on the ground that the proof sustained no such case. However, the court proceeded to state its consideration of the rights of the parties on defendant's theory of the character and purpose of the bill, and the majority of the court were of the opinion that the evidence of the complainant, who was the only witness testifying to the terms of the agreement, if accepted as true, showed a conditional sale. Accepting now that finding of the majority, I would have no difficulty in agreeing with the conclusion that the agreement to allow the right to repurchase, not being in writing, was void under the statute of frauds. But I do not so construe the averments of the bill in this case. My construction of the bill is that the debt, by agreement, survived the imperfect foreclosure, and that complainants' bill is a bill, not to repurchase, but to redeem. I do not, of course, know what the proof will develop; but, if it makes out a case in consonance with the bill as I construe it, I think complainants should have relief.

The conclusion reached by THOMAS, J., who concurs in the foregoing, and the writer, is that the objections taken by demurrer and urged in argument against the bill cannot be sustained, and that the decree of the circuit court, overruling the demurrer, should be affirmed, and the opinion of the majority of the court is that the decree should be affirmed, though the majority is not in agreement as to the grounds upon which the judgment should stand. The other Justices have expressed their own different views.

Affirmed.