De Moville v. Merchants Farmers Bank

Appellant urges us to make response to his contention that he has a right under section 10428, Code, to follow the notes and mortgages into the possession of Banks and Company, as trustees in invitum, and hold them responsible for whatever sums have been realized by them out of such assets.

This Court on former appeal agreed with the decision of the lower court in holding that in making such sale to Banks and Company there was no fraud or conspiracy sufficient to vacate the sale to them on that ground, and affirmed the decree insofar as Banks and Company were discharged from liability on account of that transaction. That ought to be an end to that question. But we will amplify that opinion to meet the urgent appeal of appellant on rehearing.

When the sale was made to them there was a default in the payment of the mortgage debt, and the mortgagee had the right to sell those assets in foreclosure of the mortgage. There was no occasion to claim that the sale be set aside except on account of fraud or conspiracy, heretofore decided against appellant, or inadequacy of the purchase price.

It was pointed out in Harmon v. Dothan National Bank,186 Ala. 360, 64 So. 621, that after default the legal title of the mortgaged personalty is complete in the mortgagee, and foreclosure does not add to that title, but cuts off the equity of redemption. And a sale by the mortgagee privately made is not a conversion, and does not exceed his power to convey the property. And that inadequacy of price paid by the purchaser at a foreclosure sale will not of itself, even in a court of equity, invalidate or affect the sale — at page 371, 64 So. 621 citing Ward v. Ward, 108 Ala. 278, 19 So. 354; Hunter v. Mellen, 127 Ala. 343, 348, 28 So. 468; Windes v. Russell, 150 Ala. 625, 43 So. 788; Hayden v. Smith, 216 Ala. 428 (6), 113 So. 293.

It may be one circumstance material on the question of fraud, but it is not enough taken alone. But that when the mortgagee has exercised a power to sell personalty by a private sale he is chargeable upon a bill for redemption of the balance of the property with the reasonable value of that sold regardless of the price actually received, citing Zadek v. Burnett, 176 Ala. 80, 57 So. 447.

In the instant case, the mortgage authorized a sale of this property at any time and place with or without notice, publicly or privately. The sale was made after default and privately without published notice. So that in the absence of fraud or conspiracy participated in by the purchaser, he received a good title to the property and became its complete and unconditional owner. Marsh v. Elba Bank Trust Co.,221 Ala. 683, 130 So. 323.

Section 10428, Code, relied upon by appellant only applies when the sale made by the trustee does not pass to the purchaser complete ownership of the property, free from the claims of the beneficiary. It is no more than a codification of a principle which has long prevailed in equity.

In this case the validity of the sale was adjudicated on the former appeal. The only question now is whether the court has allowed appellant proper credit for the value of the personalty thus sold. We responded to that question on this appeal, and nothing has been suggested on this application which satisfies us of any error in that respect which entered into our former opinion. We thought then that it was unnecessary to repeat the principles of law to which we have here referred.

Appellant also insists that we did not respond to his contention in respect to interest on payments for taxes and repairs made by the mortgagee of real estate in possession, when he is also collecting rents. He objects to the computation, by making the following statement as to the manner in which it is done: "The way the account is stated by the register, the income was immediately applied in reduction of delinquent interest on the mortgage debt, and each item of expenditure was immediately added to the principal of the mortgage debt. This results in no interest being charged to the bank on the income account for the several years in question, but on the other hand, interest was charged against DeMoville on disbursement for taxes, insurance and upkeep, from the date each item was expended." On that subject it is said of a mortgagee in possession before foreclosure in the case of Mahone v. Williams, 39 Ala. 202, at pages 220, 221, that: "The chancellor, in his decree settling the principles upon which the account should be taken, directed the register to charge the mortgagee with the hire of the slaves from the commencement of his possession, and to make annual rests, and appropriate the annual hire, first, to the discharge of the interest, and then to the reduction of the principal. * * * The chancellor has followed the general rule, which governs in taking an account between mortgagor and mortgagee, and which is consistent with our statutory mode of computing interest; and he certainly committed no error. — Code, § 1522; 3 Powell on Mortgages, 956, 957, 958, and notes; 1 Hill on Mortgages, 424, 420; Shephard v. Elliott, 4 Mad.R. 254; Quarrel v. Beckford, 1 Mad.R. 269, 274. The question has been between allowing no interest on the annual profits, and computing interest upon the plan adopted by the chancellor. It seems never to have been supposed that a mortgagor had any cause of complaint, where the chancellor's mode of computation was adopted."

The register in the instant case did exactly that thing. The contention now is that the rents should have been applied to the payment of repairs and taxes before they should be credited on the interest calculated on the principal to that date.

But when a mortgagee before foreclosure is in possession and pays for taxes, insurance and repairs, he is in the attitude of paying out money due to be paid by the mortgagor, which amounts add that much to the mortgage debt. Fidelity Deposit Co. v. West Blocton Sav. Bank, 216 Ala. 465, 113 So. 489. And it is explained in 19 R.C.L. 332, note 2, that he is entitled to interest on such amounts. And to the same effect is Pollard v. American Freehold L. Mortgage Co., 139 Ala. 183, 207,35 So. 767. Interest is but a just compensation for the withholding of the principal, and when that is due and is unpaid interest follows as an incident. Whitworth v. Hart,22 Ala. 343.

We do not think the mortgagor on those principles can complain because interest on the amount of such payments was computed to the date of the next credit, whether received from rents received or from other sources, and then added to the interest calculated on the balance of the principal making an amount of total interest then chargeable on which the credit is first applied, before it is applied to the principal or any part of it.

Application for rehearing overruled.

All the Justices concur, except that GARDNER, THOMAS, and BROWN, JJ., are of the opinion that appellant should have credit for $4500 instead of $3630, on account of the gin stock transaction.