Hunt v. Acre

RICE, C. J. The effect of a decree rendered in a suit for the foreclosure of a mortgage is not so extensive as that of a decree rendered in a proceeding in rem. In the former, the decree does not prejudice the rights of those who ought to be, but are not parties. In the latter, the decree binds not only the parties, but strangers to the proceeding. — 1 Greenlf. on Ev. §§ 522-525; The Branch Bank at Mobile v. Hodges, 12 Ala. 118; Gliddon v. Andrews, 10 Ala. 166; Watson v. Spence, 20 Wend. 260. Our law is materially different from the English law upon the subject of the probate of wills. Before 1836, our statutes had established a peculiar jurisdiction and system for their proof and contestation, and for the final determination of their validity or invalidity. The probate embraced all wills, whether of real or personal estate. The jurisdiction was given to the orphans’ court to determine, in the first instance, the question of will or no will; and, according to its decision of that question, to allow or disallow probate. If it disallowed probate, its 'decree was conclusive upon all persons, until reversed or set aside in some recognized legal mode. If it allowed probate, any person interested in the will might contest its validity, by bill in chancery filed within five years from the time of such probate. Such a contest of the validity of a will, by bill in chancery, is in the nature of a proceeding in rem, to which any person having an interest may make himself a party, by applying in the proper mode and in the proper time; and the decree rendered in such a proceeding is certainly final and conclusive, in all courts, and upon all persons, as to the question of will or no will, until it is set aside or reversed in some direct proceeding authorized by — 594 — law. It cannot be questioned collaterally. Under our system, the question of will or no will, as applicable to the same instrument, cannot be subject, as it was in England, (Baker v. Hart, 3 Atk. 546,) to contradictory decisions prevailing at the same time. — Johnston v. Glasscock, 2 Ala. 218; Hill v. Barge, 12 ib. 687; Bogardus v. Clarke, 4 Paige, 623; Singleton v. Singleton, 8 B. Monroe, 340; Taylor v. Tibbatts, 13 ib. 177; Stevenson v. Huddleson, ib. 299; Laughton v. Atkins, 1 Pick. 535; Enloe v. Sherrill, 6 Iredell, 212. At the death of Samuel Acre, of Mobile county, about November, 1838, he, as mortgagor, was the owner of the equity of redemption in the premises now in controversy. Jonathan Hunt was the owner of the mortgage, which contained no power of sale. On the 9th October, 1838, he filed in the chancery court of said county his bill to foreclose it, in which Acre was named as a defendant. No order or decree had been made under the bill at the death of Acre. A few days after his death, and in November, 1838, an instrument was, by the orphans’ court of said county, admitted to probate, without any contest, as his will, by which his widow was made the sole devisee of the premises now in controversy. In 1839, Hunt revived his suit for foreclosure against her and her second husband, James Erowner, but did not make the heirs of Acre parties to it. Erowner and his wife filed an answer, setting up as defenses usury and satisfaction of the mortgage debt. Afterwards, and in April, 1843, Hunt paid them one thousand dollars, and obtained their deed for the premises, and their consent that a decree should be rendered in his suit according to the prayer of his bill, for the sale of the premises; and thereupon a decree was rendered for such sale, and at the sale Hunt became the purchaser, and obtained the register’s conveyance of the premises, and possession of them. But before this decree was rendered, and in 1841, the heirs of Acre (except Elizabeth Caroline Acre, an infant) had filed their bill in the same chancery court, against Erowner and his wife and others, to contest- the validity of said will. They did not make Hunt a party to it, but he had notice of its pendency, before he obtained his decree. In April, 1844, they obtained a decree under their bill, establishing the invalidity of the will, and the intestacy — 595 — of said Samuel Acre; which decree has never been set aside or reversed. On the 18th January, 1845, they filed their bill in the present case, to redeem the mortgaged premises, to remove the cloud upon their title, created by the decree and register's conveyance obtained by Hunt in his foreclosure suit, and for general relief. The said Elizabeth Caroline Acre was an infant, over fourteen years-old, when this bill was filed, and is one of the defendants to it. After it was filed she married Joseph Tucker, and he was made a defendant. The transaction in which the mortgage had its origin may be thus stated: Samuel Acre was the owner of a promissory note, executed by John Milton, for five thousand and twenty-six 61-100 dollars, payable two years after its date, to the order of James E. Roberts, and endorsed by said Roberts. About March, 1837, and eleven months before its maturity, Acre endorsed it to Charles Smith at a discount of four per cent, per month, and executed a mortgage on the premises now in controversy, to secure the payment of the note, — Acre receiving from Smith only fifty-six per cent, of the note. .For several years before that time, Smith had been the agent of Hunt; but he says, he “ ceased acting for Hunt in January, 1837.” Before Smith thus obtained the note, it had been offered for discount to Hunt, but “ he declined purchasing it.” Smith testifies, that he let Hunt have the note at “ a large discount,” but he does not recollect “ at what rate.” He does not seem to recollect “ at what rate” he obtained it, for he says he took it “ at about three to four per cent, per month discount.” He further testifies as follows : “ I took said note on my own account; but knew, at the time of so doing, I could dispose of it to Hunt. I passed said note to Hunt some few days after I received it”; and that Hunt “ did not take it in payment of any debt.” There is nothing in the testimony of Smith, nor in any other testimony in the case, which shows that he made any profit out of Hunt in the transaction, or that Hunt did not take the note and mortgage at precisely the same rate of discount at which Smith had taken them. Without denying credit to any positive or distinct statement of Smith, the fair inference from all the evidence in the cause, including his testimony, is, that Hunt — 596 — desired to evade the statute against usury, — that therefore he declined to purchase the note, when it was offered to him for discount, before it had been offered to Smith; and that after he had thus declined to, purchase, he assured Smith that, if he would take it on his own account, he (Hunt) would take it off his hands. If there was not some such assurance or understanding, how could Smith “ know, at the time” he took the note, that he could dispose of it to Hunt ? In no point of view can we consider or treat Hunt as a bona fide holder of the mortgage, without notice of the defenses to which it was subject in Smith’s hands, or as entitled to any better rights therein than Smith had, or as exempt from any defense which arises out of the transaction by which Smith obtained the mortgage. — Saltmarsh v. Tuthill, 13 Ala. R. 390; Cram v. Hendricks, 7 Wend. Rep. 573, opinion of Chancellor Walworth, 573 to 595. Hunt died pending the present suit, and it was revived against his heirs and representatives. The appeal to this court is taken only by Hunt’s administrator. Upon these facts, we decide the following points : 1. The decree rendered in the contest of the will in chancery, is as binding upon Hunt as if he had been in fact a party to that proceeding, and concludes him, as against the heirs of Samuel' Acre, from alleging or proving that said Samuel died testate. — Bogardus v. Clarke, and other authorities cited in the first and second paragraphs, supra. 2. The decree obtained by Hunt in his suit for foreclosure,^] after the heirs of Acre had, within the time allowed by statute, actually asserted their statutory right of contesting the will, and after notice thereof by Hunt, without making them parties, is void as to them; and his purchase under that decree is, as to them, also void, and not entitled to protection. — Gifford v. Hort, 1 Schoales & Lefroy, 386; Kennedy v. Daly, ib. 355; 2 Bla. Com. 356; Curtis v. Hitchcock, 10 Paige, 399; Lyerly v. Wheeler, 11 Iredell, 288. The decree of Hunt, and his possession, were acquired by a fraudulent combination between him and Browner and wife, and therefore ought not to create any right, or confer any benefit on him, as against the heirs of Acre, nor to work any prejudice to their defenses against the mortgage. Al — 597 — though the instrument propounded as the will of Samuel Acre purported to give the mortgaged premises to his widow, "and although it was, in the first instance, by the orphans’ court of Mobile county, admitted to probate as his will; yet, for five years thereafter, the right by statute existed in his heirs to contest its validity by bill in chancery. The existence of this right, and its actual assertion by their bill, made them proper parties to Hunt’s suit for foreclosure. His election not to make them parties, but to proceed without them to a decree, and to a purchase under that decree, was made at his own peril, and cannot be allowed to operate so as to impair their right to redeem, or their right to avail themselves in the present suit of any matter which they could have successfully relied on, as a bar to the whole or to part of the relief sought by the suit for foreclosure, if they had been made defendants to it. 8. Discounting the note on Milton, eleven months before its maturity, at four per cent, per month,.and taking the endorsement of Samuel Acre, its holder, and the mortgage on his property to secure its payment, are not in law and fact a mere purchase of the note, but a usurious loanj and although Charles Smith took the note, endorsement and mortgage on “ his own account”, yet, as the fair inference from the evidence is that Hunt took the assignment of the mortgage'from Smith with notice of the usurious nature of the transaction between Acre and Smith, and at the same usurious rate of discount at which Smith'had obtained it, the mortgage is as open to the defense of usury in Hunt’s hands as if it were still in Smith’s hands. — Lowes v. Mazzaredo, 1 Starkie’s R. 385; Massa v. Dowling, 2 Strange, 1243; Ruffin v. Armstrong, 2 Hawks, 411; McElwee v. Collins, 4 Dev. & Batt. 209; Ballinger v. Edwards, 4 Iredell’s Equity Cases, 449; Gaither v. The Firemen & Mechanics’ Bank, 1 Peters, 37; Johnson v. King & Jones, 4 McCord’s Rep. 365; Opinion of Chancellor Walworth, in Cram v. Hendricks, 7 Wend. 573; The King v. Ridge, 4 Price’s Rep. 50; Chapman v. Black, 2 Barn. & Ald. Rep. 589; Hamer v. Harrell, 2 Stew. & Por. 323; Drew v. Power, 1 Schoales & Lefroy, 195; Harrison v. Hannel, 5 Taunt. 780; Coxe v. Rowley, 12 Robinson’s Rep. 273, and eases there cited by the counsel for the appellants; — 598 — Lowe v. Waller, Douglass, 708; 1 Espinasse’s Rep. 11, 40; United States Bank v. Owens, 2 Peters, 535. 4. The usury could have been pleaded and proved by the heirs of Acre, as a defense pro tanto to Hunt’s bill for foreclosure, if he had made them defendants to it; and if they had been made defendants thereto, and had pleaded and proved the usury, they would not' have been charged with any interest, either legal or illegal, on the debt, prior to the rendition of the decree in that suit. — Hamer v. Harrell, 2 Stew. & Por. 323; Richardson v. Brown, 3 Bibb, 207; Cowles v. Woodruff, 8 Conn. Rep. 35. 5. The rule, that a plaintiff who comes into a court of equity for relief against a judgment át law, or other legal security, on the ground of usury, cannot be relieved except upon the terms of paying to the defendant the principal and legal interest, applies to cases where the debtor has, by his own voluntary act, deprived himself of the opportunity to appear in the character of defendant and plead the usury; as by giving his warrant of attorney to confess judgment, upon which judgment has been entered up; or by inserting in the mortgage the power to sell, by means of which the creditor has foreclosed his mortgage by an act in pais, without calling on any court to assist him. But that rulo does not apply to a caseTike the present, where no such voluntary act has been done, either by the debtor or his heirs, and whore the creditor has, under such circumstances as appear in this case, obtained a decree and register’s deed for the mortgaged premises in a suit for foreclosure, so conducted as to deprive them of the opportunity of appearing as defendants and pleading the usury, and to create a cloud upon their title, the removal of which constitutes a ground of relief independent of the usury. — Fanning v. Dunham, 5 Johns. Chan. Rep. 122; Taylor v. Smith, 2 Hawks, 465. The heirs of Acre filed the bill in this case for relief, not merely on the ground of usury, but to avoid the proceedings of Hunt in his suit for foreclosure. Those proceedings are not void on their face. To render them inoperative as to the heirs, it is essential to prove the proceedings and decree in their suit in chancery, by which the invalidity of the will and the intestacy of Acre were established. It is clear, therefore, — 599 — that the proceedings of Hunt in his suit for foreclosure, and the deed thereby obtained by him from the register, form such a cloud upon the title of the heirs of Acre, as to authorize them to apply to a court of equity to set them aside.— Peirsoll v. Elliott, 6 Peters, 95; Van Doran v. Mayor of New York, 9 Paige, 388; Simpson v. Lord Howden, 3 M. & C. 99. As the case is presented on the record, it is not a mere application by a debtor to be relieved from usury. There is a distinct and clear ground for relief, independent of the usury, as above shown, arising out of Hunt’s improper proceedings in and under his suit for foreclosure. To decide that the heirs of Acre ought to be charged' with legal interest, prior to the rendition of Hunt’s decree in that suit, would be to allow him to impose that charge upon them in consequence of his mere election not to make them parties to that suit, and thus to take advantage of his own wrong. We deem it clear that they ought not to be charged with any interest, prior to the rendition of his decree. Whether interest against them would be allowable from the date of that decree, or from some later period, we do not decide. 8. Without deciding whether Hunt acquired any right whatever, as against the heirs of Acre, by virtue of his decree in the suit for foreclosure and his deed from Frowner and wife, our opinion is, that he certainly did not thereby acquire, as against them, more than the right to retain the one third of the rents and profits of the premises, which was allowed to him or his representatives in the report and decree in the present case. — Wallace v. Hall, 19 Ala. 367. Having now considered and decided what we deem the most important questions embraced by the decree of the chancellor, and having attained the conclusion that, if there is error as to them, that error is beneficial to those who have assigned errors in this court; and the assignments of error as to the other and less important questions being waived and abandoned by the appellant, we affirm the decree of the court below, at the costs of the appellant.