Northwest Atlanta Bank v. Manning

1. The plaintiff in error, one of several defendants in the trial court, having filed a separate demurrer to the petition as amended, may sue out a bill of exceptions assigning error on the refusal to sustain said demurrer, without making the remaining defendants parties.

2. As a general rule, before the exercise of the power of sale under a security deed could be enjoined on the ground that all the money claimed thereunder is not due, there must be an unconditional tender of the amount admitted to be due.

3. It is not ground to enjoin the sale under a power contained in a security deed, that the creditor has also sued to judgment the note to secure which the deed was given, and a motion for new trial is pending in the case that resulted in the judgment.

4. As against the demurrer of plaintiff in error, the petition can not be sustained on the theory that complainant has the right to compel the creditor bank to first exhaust, as against a third person who is alleged to be debtor common both to plaintiff in error and defendant in error, its securities other than those which affect the title to property of the defendant in error; the doctrine of compulsory election in the Code, § 28-106, being inapplicable when sought to be applied to the detriment of a third person with an equity equal to or greater than that of the creditor seeking to invoke the rule.

5. A petition should not be dismissed on general demurrer interposed by the transferee of a contractor's line on which no foreclosure has begun, although the statutory period therefor has not expired, the petition, attacking the lien as a cloud on the title of petitioner, containing averments which substantially allege facts showing it to be such, and praying to have it canceled.

No. 13923. NOVEMBER 13, 1941. An action in equity was brought in DeKalb superior court by V. E. Manning against J. E. McGuire, Electric Service Company, E. M. Willingham doing business as Willingham Lumber Company, Sears, Roebuck Company, Southern Iron Paper Stock Company, and Northwest Atlanta Bank. The petition in substance made the following allegations: Plaintiff is the owner of described realty in DeKalb County. He contracted with J. E. McGuire (referred to in the petition as the contractor) to erect a dwelling-house on petitioner's lot for $4200, McGuire to pay for all material and labor necessary for the erection and completion of the house. Plaintiff was to procure a loan on the property within ten days after the completion and final approval of the house, and out of the proceeds thereof to pay McGuire the contract price. McGuire did not begin work on the house for more than a month, stating to plaintiff that he was financially unable to obtain and pay for the necessary material and labor, and desired plaintiff to furnish $2250 for such purpose. When plaintiff declined to do this, not wishing to vary the terms of the contract, and not then having the necessary funds, McGuire told him that he had arranged for the Northwest Atlanta Bank to lend to plaintiff $2250 for that purpose. Plaintiff finally agreed to the contractor's suggestion and insistence, and borrowed from the Northwest Atlanta Bank and gave his note for $2250, payable in ninety days, the bank deducting $64.75 as interest paid in advance. To secure his note he executed and delivered a deed to the realty to be improved. The contractor began the erection of the house, and called upon plaintiff from time to time to advance various sums to be used in paying for material and labor. In the petition were set out in detail several payments made by plaintiff to materialmen, and other payments made by him directly to the contractor, the amounts of such payments making a total of more than $2500. McGuire abandoned the work once or twice, finally completely abandoning it about March 15, 1941, leaving the house about half completed. But before that time, about November 11, 1940, McGuire caused to be filed and recorded his claim of lien for $900 as due by virtue of improvements made by him under the contract.

Southern Iron Paper Stock Company, Willingham Lumber Company, Electric Service Company, and Sears, Roebuck Company each caused a claim of lien to be filed and recorded against plaintiff and said property, some stating the amounts of their liens and others not. Plaintiff contends that they represent the cost of material contracted for by McGuire, and that they constitute a charge against him, and would be a proper matter for deduction against the contract price as between him and the plaintiff. It is alleged that the cost of completing the house is less than the contract price of $4200, and that consequently the contractor has no enforceable lien against the property. Plaintiff did not purchase any building material from the lienors, and is not personally liable to them; but if they have any debt due them on said account, their claim is against McGuire. Plaintiff did not discover, until McGuire abandoned the job, that he had caused to be recorded his claim of lien and had transferred it to the Northwest Atlanta Bank; and not until then did plaintiff discover that McGuire was heavily indebted to the bank, resulting from loans made to him for the construction of several other houses, and that the bank had procured a transfer and assignment of McGuire's lien against plaintiff, who offered to pay the bank the $2250 represented by his note, with interest, provided it would release the security and cancel McGuire's lien; but the bank refused to do so, and its attorney notified plaintiff of its intention to file suit on the note in the civil court of Fulton County; and it did so. To this suit Manning filed a plea to the jurisdiction on the ground that he was not a resident of Fulton County, and a plea of usury; but the trial resulted in a finding against him. His motion for new trial is pending in that court. He is informed and believes, and so charges, that the indebtedness of McGuire to the Northwest Atlanta Bank is only a certain sum, and that he executed to that bank several deeds (described) to secure the payment of promissory notes in stated sums; but that each of said properties is worth more than the sum it was given to secure, and that more than one property is worth far more than the note, and that one property in particular is reasonably worth enough to pay all of McGuire's notes to the bank; that, in addition to executing these security deeds, McGuire made full conveyances to the bank of other realty on which the bank held McGuire's notes and security deeds; that McGuire's indebtedness is actually less than the face amounts of his notes; that notwithstanding the pendency of the motion for new trial in the case in the civil court of Fulton County, the bank is undertaking to exercise a power of sale contained in plaintiff's loan deed wherein the bank is authorized and empowered, in the event of a default in the payment of the debt, to sell the property at public outcry, and is advertising that the same will be so sold. He contends that he does not owe the amount of the judgment obtained against him in the civil court of Fulton County, but he has offered to pay the same, provided the bank will cancel and satisfy the lien transferred to it by McGuire. The bank refuses to do so unless plaintiff pays an additional amount which he does not owe.

It is further alleged, that the bank and McGuire have entered into an illegal, fraudulent, wrongful, and collusive scheme to defraud the plaintiff of his property, and that it was in pursuance of such scheme that McGuire executed and delivered to the bank the deeds conveying title to the properties, without crediting the debt which was due by him to the bank with the value of the securities, so that the bank would thereby retain an apparent indebtedness against McGuire and thereby hold the lien field by him against plaintiff and his property, and which he had transferred to the bank, and thus give the bank an apparent reason or excuse for declining to accept payment of the debt due to it primarily by the plaintiff. There are other creditors of McGuire, some of whom have unsatisfied judgments. The plaintiff contends that they would promptly attach any claim McGuire might have against him were the claim transferred back to McGuire by the bank, and the bank wilfully and intentionally neglected to credit McGuire's account with the value of the properties transferred by him to it. It is further contended that the lien against plaintiff and his property, held by the bank as transferee and assignee of McGuire, does not represent a bona fide claim or debt, and was filed by McGuire and transferred by him for the purpose of compelling the plaintiff to pay a large sum to obtain cancellation thereof, or, in default of doing so, have his property brought to sale under foreclosure, they to purchase the property through a dummy and thereby divest plaintiff's title and defraud him of his property; and that this constitutes a cloud on petitioner's title. He alleges, that the liens held by certain materialmen constitute a cloud on his title; that they are unenforceable; but that these materialmen are necessary parties to this case, in order that their respective rights may be determined and adjudicated. It is contended that a court of equity should determine and adjudicate the value of the properties and the amounts of the indebtedness, and should compel an election by the Northwest Atlanta Bank to pursue a course of action, in the collection of the indebtedness due to it, in a manner that will not injure the plaintiff, by first exhausting the securities pledged to it, which, if sufficient to liquidate the debt, would operate to release the lien filed by McGuire which he transferred to the bank; that on learning of the contractor's lien against him and his property, the plaintiff made arrangements, by procuring a bidder, to purchase the properties for a sum sufficient to discharge the debts owing to the Northwest Atlanta Bank by McGuire, but the bank wilfully and deliberately conspired with McGuire to bring about a forced sale of the plaintiff's property through the colorful and fictitious lien, which effectively prevented his procuring a loan to pay whatever indebtedness might be due; and that he is ready and willing to furnish bond conditioned to pay the judgment obtained against him in the civil court of Fulton County, should the court require the same in the granting of an injunction to prevent the foreclosure pending the termination of the issues in the case. The prayers are, that the Northwest Atlanta Bank be enjoined from attempting to exercise the power of sale contained in the security deed executed by petitioner to that bank; that McGuire's properties be marshaled and administered by a court of equity; that McGuire be found to be insolvent; that the bank be compelled to make an election to proceed first to exhaust the securities pledged to it by McGuire, other than McGuire's lien against petitioner and his property; that the bank be enjoined from attempting to collect any sum from petitioner until after his motion for new trial in the case in the civil court of Fulton County is heard and judgment thereon entered; that the liens filed by McGuire and by materialmen against petitioner and his property be declared null and void, and be canceled as a cloud on his title; that an accounting be had with McGuire, and that the plaintiff have judgment against him for the difference between the contract price and the amounts advanced by the plaintiff.

So far as the record shows, only the Northwest Atlanta Bank filed a demurrer. This was overruled, and the bank excepted. The grounds of demurrer are stated in the opinion, infra. 1. In so far as the motion to dismiss the writ of error is concerned, we are content to let our decision rest upon the case of Huey v. National Bank of Fitzgerald,177 Ga. 64 (169 S.E. 491), and cit., where this matter is definitely ruled, without a discussion of the line of cases preceding it.

2. The petition admits that the complainant received from the bank the sum of $2185 at the time he gave it the security deed which contains the power of sale the bank sought to exercise, and that this amount has not been paid. He would not be entitled to enjoin the sale by reason of the fact that the bank was demanding of him more than he owed, until he paid or tendered the amount admitted to be due. Washington Lee University v. SuburbanDevelopment Co., 183 Ga. 130 (187 S.E. 647). In such a case, if a tender be made it must be unconditional. Morris v.Continental Insurance Co., 116 Ga. 53 (42 S.E. 474). The tender alleged in the instant case was coupled with a condition that the bank cancel a lien which was transferred to it by McGuire. This made the tender an insufficient one.

3. It is set up in the petition that the creditor bank has already sued and obtained a judgment on the note to secure which was given the deed that contains the power under which the sale is contemplated, and that a motion for new trial is pending in the case that resulted in the judgment on the note. The creditor has a right to pursue both remedies concurrently until the debt is satisfied. This presents no situation where it is put to an election between inconsistent remedies. This precise question has been recently ruled on by this court. See Oliver v. Slack,192 Ga. 7 (14 S.E.2d 593).

4. We are of the opinion that the petition can not be sustained in so far as it seeks to compel the bank to exhaust the other securities received by it from McGuire, and, if proved sufficient, to relinquish its claim against petitioner arising by virtue of the assignment to it of the contractor's lien. While under the averments the bank and Manning are both creditors of McGuire, the bank having a lien and Manning none, the bank is also a creditor of Manning and in active pursuit of him. Manning's claim against McGuire is unliquidated. This very suit prays that an accounting be had between him and complainant. The bank's claim against Manning is a promissory note, reduced to judgment in a case wherein a motion for new trial is pending, the note being secured by a deed to realty, the deed containing a power to sell, which power the bank is undertaking to exercise. The bank's equity as against McGuire is therefore greater than Manning's. To have the various securities marshaled, as prayed for, and to await an adjudication that the securities transferred to the bank by McGuire were sufficient to satisfy the bank's claim against him, and then another adjudication that the contractor's lien was invalid and to have it canceled, and on those findings to decree that the bank should look alone to the securities other than the contractor's lien which has been assigned to it, would be a misapplication of the equitable principle embodied in the Code, § 28-106. CompareMulherin v. Porter, 1 Ga. App. 153 (58 S.E. 60);Hanesley v. National Park Bank, 147 Ga. 96 (92 S.E. 879); 38 C. J. 1381, 1382.

5. It is disclosed by the petition that Manning borrowed from the bank a sum of money to secure which he gave a deed with power of sale; that the money has not been repaid; that on the real property so deeded as security McGuire has filed a contractor's lien and has transferred this lien to the bank; that McGuire had no enforceable contractor's lien; that the same is a fictitious instrument filed by McGuire and by him transferred to the bank as a fraudulent device whereby a cloud was placed on the title of petitioner's property so as to prevent him from procuring the necessary funds with which to complete the building; that McGuire did owe the bank approximately $3850, and to secure the payment had made certain security deeds to the bank; that the property so conveyed by McGuire to the bank had a fair market value largely in excess of his debt to the bank; that McGuire and the bank have entered into an illegal, fraudulent, wrongful, and collusive scheme to defraud complainant of his property, and that pursuant thereto McGuire executed and delivered to the bank deeds conveying to it the same properties on which the bank already had conveyances given to secure his indebtedness, the bank not crediting McGuire with the value of the properties thus released; that complainant is a creditor of McGuire; that the failure of the bank to credit the account of McGuire with the value of the properties transferred to it by him was a part of the collusive conspiracy referred to, and that would bring about a condition that would compel a public sale of petitioner's property; that the contractor's lien so transferred to the bank constitutes a cloud on petitioner's title to his property; and that petitioner is a creditor of McGuire. It was not alleged that petitioner was in possession of the property covered by the contractor's lien. Among the prayers of the petition was one that the lien filed by McGuire and transferred to the bank be decreed null and void and a cloud on petitioner's title, and that it be canceled; and for general relief. The demurrer which was overruled was general. The order overruling it was likewise general in its terms. We are of the opinion that the petition should not have been dismissed as to the bank, but retained as to it solely for the purpose of permitting the plaintiff to offer evidence in support of his allegations as to the invalidity of the lien, and it having been transferred to the bank as the result of a fraudulent collusion between it and the contractor, to be submitted to the jury, and, if found true, to cancel the same. To that extent and to that extent only did the plaintiff's averments entitle him to relief. It does not appear that proceedings have been begun to foreclose the lien. The claim of lien is open upon the records. If the allegations of the petition are true, it is a cloud on plaintiff's title. He can not compel the assignee of it to go to law and ask to foreclose, so that its invalidity may be shown. Under the statute it had twelve months from the date of its record in which to do this. Code, § 67-2002. The time had not expired when the present suit was filed. It is true that the complainant, although alleging ownership, does not allege that he is in possession of the land on which the cloud exists which he seeks to remove. It is also true that the general rule is that in order for a plaintiff to maintain an equitable petition to remove a cloud upon his title, he must allege and prove actual possession in himself. Simpson v. Kelley,171 Ga. 523 (156 S.E. 198). "The reason of this rule is that where the defendant is in possession the plaintiff has a remedy to test his title at law by bringing an action in ejectment, which is ordinarily deemed an adequate remedy, and in consequence there is no ground for the exercise of equitable jurisdiction, which is based upon the fact that where the plaintiff is in possession he can maintain no action at law to test his title." Mentone Hotelc. Co. v. Taylor, 161 Ga. 237, 241 (130 S.E. 527). Where the basic reason on which the rule rests is absent in a particular instance, the rule itself should not be applied. Such is the present case. The alleged cloud here is a recorded contractor's lien, which affects his right to alienate his property, just as in Crane v. Barry, 47 Ga. 476, a void judgment was treated as a cloud that might be cleared away. While the complainant is not entitled to any other of the relief prayed for against the bank, the judgment refusing to sustain its general demurrer and to dismiss the action as to it must be sustained for the purpose of having the complainant present to a jury that portion of his case relating to his averments that the recorded contractor's lien, held by the bank as assignee, should be canceled as a cloud on his title.

Judgment affirmed. All the Justices concur.