Samuels v. Scott

The bill in this cause was filed by appellants against the appellees, seeking to set aside the foreclosure sale under the power contained in a certain mortgage executed by complainants to respondents and the exercise of the equity of redemption by complainants, the mortgagors. Subsequent to the foreclosure sale the respondents instituted an ejectment suit against complainants to recover possession of the mortgaged premises, and a temporary writ of injunction against the prosecution of this suit pending the cause was prayed, and the same was ordered issued. This appeal is from the decree of the chancellor dissolving this temporary injunction on respondents' motion.

We are not of the opinion the dissolution of the injunction can be rested upon a want of equity in the bill. The sale was under the power in the mortgage, which provided for publication thereof in a newspaper, and the bill alleges that publication was not had in a newspaper as therein required (3 Jones on Mortgages, p. 631), and that the bill was seasonably filed is not questioned. So, also, if the mortgage debt was not due, or the mortgagee had not performed his part of the contract so as to entitle him to a foreclosure, it will be set aside. 3 Jones on Mortgages, supra.

The bill shows that the mortgage was executed to secure the balance due upon the purchase price of the house and lot therein described, which was purchased by complainants from respondents as a home. The payments were to be made monthly and in small amounts. The house was not fully completed, some repairs being considered necessary, and at the time of the consummation of the sale, execution of the deed and mortgage, the respondents entered into a separate written agreement (Exhibit C to the bill) to have the work on the house completed, and the same put in first-class condition, particularly designating certain improvements. It is alleged that at the time of the foreclosure respondents had entirely ignored this agreement, although repeatedly requested to make the repairs by complainants, and that respondents were due complainants on account of the breach of this agreement a sum in excess of the small monthly payment past due, and for default of which the foreclosure was had.

Respondents answer, however, that the general rule applies to the effect that the mere existence of a legal demand in favor of the mortgagor against the mortgagee, ordinarily the subject of set-off, will not justify injunction against foreclosure or a decree setting aside the sale, in the absence of an averment of insolvency of the mortgagee or some other equitable grounds. Caldwell v. Caldwell, 166 Ala. 406, 52 So. 323, 139 Am. St. Rep. 48; Knight v. Drane, 77 Ala. 371; Glover v. Hembree,82 Ala. 324, 8 So. 251; Gafford v. Proskauer, 59 Ala. 264; Conner v. Smith, 88 Ala. 300, 7 So. 150.

The bill shows, however, that the agreement for completion of these repairs, executed by the respondents, was a part of the sale transaction, and, indeed, the agreement upon its face so recites.

Under these circumstances this agreement should be considered in connection with and as a part of the mortgage transaction, and complainants' claim arising from the breach thereof is in the nature of a recoupment and not a set-off. It grows out of the mortgage transaction, and is to be treated and considered as a covenant contained therein. We think the bill comes within the influence of Birmingham Ind. Co. v. Phillips, 206 Ala. 467,90 So. 498, and that the evident meaning of the agreement was that, in the event respondents failed to make the repairs, the mortgage debt should be reduced to the amount of the reasonable and proper cost thereof to complainants.

In view of the reversal of the cause, it may not be amiss first, in this connection (though unnecessary for the purposes of this appeal), to state that in our opinion much of the damages claimed by complainants as a result of the breach of this agreement are not recoverable, as only such damages as may reasonably be supposed to have been within the contemplation of the parties at the time of its execution as a probable result of its breach are recoverable (17 Corpus Juris, 742), or, as stated by this court, such damages as flow naturally and directly from the breach. Southern R. Co. v. Moody, 169 Ala. 292,53 So. 1016; Southern R. Co. v. Coleman, 153 Ala. 266,44 So. 837. There is equity in the bill.

Nor do we think the dissolution of the injunction can rest upon the sworn denials in the answer, for the following reason: It appears from the pleadings, together with the proof offered by way of affidavits, that complainants have obtained a decree pro confesso against the respondents, followed by a final decree in their favor based thereon.

Application was made by counsel for respondents to set aside these decrees to the end that respondents may defend the cause upon its merits. Complainants had pending in the law court a suit for damages against respondents growing out of the breach of the agreement, and the ejectment suit was also pending. It was agreed by counsel for respondents and complainants in open court that these suits at law be dismissed and the entire controversy tried and settled in the equity suit, and that, if the decrees were set aside, no motion would be made to dissolve the injunction, and no effort made to continue the litigation on the law side of the docket, but all matters would be litigated in this suit; that, relying upon this agreement, the decrees were set aside and respondents permitted to file answer and defend, and pursuant to this agreement each of the cases on the law docket was dismissed. The counsel who represented respondents at that time, and with whom the agreement is alleged to have been made, filed an affidavit corroborative of complainants. Upon this question there is no conflict. The agreement was in open court, and acted upon by the court and by counsel, and it was binding, though not in writing. Prestwood v. Watson, 111 Ala. 604, 20 So. 600, wherein it is shown that rule of practice 14 is without application to such agreements made in open court. In view of the binding character of this agreement, therefore, the dissolution of the injunction could not rest upon denials of the answer. It is but proper to state that present counsel for appellees were, very clearly, in no manner connected with the cause at the time and had no part in any agreement made.

Counsel for appellees do insist, however, that such agreement, if made by former counsel for respondents, did not contemplate that the injunction would not be dissolved. This insistence, however, overlooks the statement in the affidavit of complainants that it was agreed "that no motion would be made to dissolve the injunction," and there is no denial thereof.

It results, therefore, that the motion to dissolve the temporary injunction should have been denied. The decree will be reversed, and one here rendered overruling the motion.

Reversed and rendered.

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