Arnett v. Willoughby

de GRAFFENRIED, J. The facts upon which the complainant rested his right to relief in this case were stated by him in his bill of complaint as amended, as follows: — 532 — First. That Lizzie S. Arnett, the wife of H. B. Ar-nett, was indebted to John P. Willoughby in the sum of $7,383.62, which was evidenced by 17 promissory notes, each bearing date July 1, 1910, each for the sum of $400 and drawing interest at the rate of 7 per cent, per annum, and payable at the Birmingham Trust & Savings Bank, Birmingham, Ala., on or before January 1, 1911, July 1, 1911, January 1, 1912, and July 1, 1912, and the others payable on or before six months after July 1, 1912, up to January 1, 1919, and also one note for $383.62. When this last note matures does not clearly appear from the bill. Second. That on July 5, 1910, in order to secure the above indebtedness, the said Lizzie S'. Arnett and her husband, H. B. Arnett, executed and delivered to the said Willoughby a mortgage on certain real estate of said Lizzie S. Arnett which is described in the bill. Third. That in July, 1911, the second, in the series ■of notes secured by said mortgage, became due, and that the complainant, at the request of the mortgagors and under an agreement with them that complainant should succeed to the lien of said mortgage for his reimbursement, paid to the said John P. Willoughby, or to some one for him, the amount then due on said note, to wit, $428, and that the said note, indorsed in blank by the said Wilioughby, was assigned by delivery to complainant or to some one for him, and that the said mortgagors gave to complainant their note, due one year after date, for said sum, with the said mortgage notes attached thereto as collateral security. Fourth. That on January 1, 1912, the third note in said series of notes .secured by said mortgage became •due, and that complainant, at the request of said mortgagors and under an agreement with them that he ■should succeed to the lien of said mortgage for his re — 533 — imbursement, paid to Pauline P. Willoughby the amount then due on said note, to wit, $442, and that the said note was assigned by delivery to complainant or to some one for him, and that the mortgagors gave to complainant their note, due six months after date, for said sum, Avith said mortgage note attached as security therefor; that John P. Willoughby, prior to this time, had died; and that Pauline P. Willoughby, his widow, had become the sole owner of the mortgage and of the mortgage indebtedness secured thereby. Fifth. That on the 1st day of July, 1913, the sixth note in the series of notes secured by said mortgage became due, and that on November 17, 1913, there remained unpaid on said note $200; that S. E. Thompson, at the request of the mortgagors, paid to the said Pauline P. Willoughby the said sum of $200; that the said note Avas assigned to him, or to some one for him, by the said Pauline P. Willoughby by delivery; that said mortgagors executed and delivered to said S. -E. Thompson their two notes for $100 each, with said mortgage note as collateral security therefor, and that before the filing of this bill complainant paid to the said S. E. Thompson the amount due on said note, under an agreement Avith the mortgagors that complainant should succeed to the lien of the mortgage for his reimbursement, and that said Thompson assigned by delivery to complainant, or to some other person for him, the said notes so given to him by said mortgagors Avith said mortgage note as collateral security; that none of the indebtedness evidenced by the notes above referred to as being the property of the complainant has ever been paid. Sixth. That, subsquent to the execution and delivery of the above-described mortgage, the said Lizzie S. Arnett and her husband, H. B. Arnett, executed and — 534 — delivered to one Kyser, to wit, on July 13, 1910, a mortgage to secure an alleged indebtedness of $1,000; that Kyser transferred and delivered the said mortgage and the alleged indebtedness secured thereby to the Jefferson County Savings Bank; that said Jefferson County Savings Bank has sold the property under the power of sale contained in said second mortgage; that at the sale the said Jefferson County Savings Bank became the-purchaser of the property, and has assumed possession of the same. Seventh. Complainant alleges in his bill that the mortgage which Kyser transferred to the Jefferson County Savings Bank was fully paid before the property was sold under the mortgage; and the bill alleges that said mortgage was given by Lizzie S. Arnett to secure an indebtedness of her husband, and not to secure her own debt, and that the Jefferson County Savings Bank well knew these facts when it acquired said mortgage from Kyser. Eighth. Complainant claims that he is entitled to have the amount due him on account of the Willoughby mortgage notes above referred to, including a reasonable attorney’s fee for collecting the same, as well as the amount still due to Pauline P. Willoughby from said mortgagors, Lizzie S. Arnett and H. B. Arnett, ascertained; and said mortgage foreclosed. Complainant also claims that he is entitled to be first paid, out of the proceeds of said sale, the amount which it is ascertained is due him on account of the above transactions. Complainant further prays that the Kyser mortgage and note, and the sale had thereunder, be declared null and void. (1) 1. “The scope and purpose of a bill for the foreclosure of a mortgage on lands is to cut off the equity — 535 — of redemption of the mortgagor, to obtain a decree for tbe sale of the estate created and passing by tbe.mortgage, and tbe application of tbe proceeds of sale to tbe payment of tbe mortgage debt. Sucb being tbe scope and purpose of tbe bill, tbe general rule in a court of equity applies that all persons whose interests are to be affected or concluded by tbe decree must be made parties.” — Wells v. Amer. Freehold Land Mortgage Co., 109 Ala. 430, 20 South. 136. Under tbe allegations of this bill, all of tbe parties to tbe bill except Kyser are proper parties to tbe bill. Kyser, so tbe bill as amended alleges, has no interest to be affected by tbe bill, and in so far as be is concerned tbe bill is without equity.- — Doe ex dem. Duval’s Heirs v. McLoskey, 1 Ala. 708. (2) 2. “A transfer by delivery merely of a promissory note secured by a mortgage, if based upon a valuable consideration, operates as an equitable assignment to tbe transferee of tbe mortgage by which tbe debt is secured.” — Doe ex dem. Duval’s Heirs v. McLoskey, 1 Ala. 708; First National Bank of Gadsden v. Sproull, 105 Ala. 275, 16 South. 879; Prout v. Hoge, 57 Ala. 31; Williams v. Cox, 78 Ala. 327; O’Neal v. Seixas, 85 Ala. 80, 4 South. 745. (3) 3. “Where one who-, though having no previous interest and being under no obligation, pays off a mortgage or advances money for its payment at tbe instance of tbe mortgagor, and for bis benefit, sucb person is in no true sense a stranger and volunteer, but is, under tbe doctrine of equitable assignment, entitled to be subrogated to tbe lien of said mortgage for reimbursement of tbe amount paid thereon.”- — Motes v. Robertson et al., 133 Ala. 630, 32 South. 225; Allen, Adm’r, v. Caylor, 120 Ala. 251, 24 South. 512, 74 Am. St. Rep. 31. — 536 — (4) The agreement between the complainant and the mortgagors was an agreement in furtherance and in recognition of the above-quoted doctrine, and we think that, taking the allegations of the bill as amended most strongly against the pleader, it is also plain that the assignment by delivery merely of the three notes described in the bill, by Willoughby, and after his death, by Mrs. Willoughby, was done for the purpose of aiding the agreements which had been made by the mortgagors with complainant and Thompson, and that the assignment by delivery merely of the notes, under the peculiar circumstances shown by the bill, was not intended or understood by any of the parties as clothing the transferee with the right to be first paid out of the mortgaged property. We think that the giving by the mortgagors of their notes to the transferees — although the original notes were not canceled but were held as collateral — plainly evidences this intention of the parties. In other words, we think that, under the allegations of the bill as amended, the three transactions upon which complainant rests the equity of the bill as amended were, in fact, loans made to the mortgagors with an understanding that the lien of the mortgage was to cover these loans, and that the assignment by delivery of the three notes by the mortgagee was don© for the accommodation of the mortgagors and in furtherance of this agreement, but that it was not understood that thereby the mortgagee subordinated the notes not due to the notes so assigned by delivery.— McGuire v. Van Pelt et al., 55 Ala. 344. For this reason we are not of the opinion that the doctrine announced in Knight v. Ray, 75 Ala. 383, viz., that “the transfer of one of several notes secured by mortgage clothes the transferee with the right to be first paid out of the mortgaged property,” is applicable to the facts set up in the bill. — 537 — (5) 4. We can see no reason why those who claim under the Kyser mortgage, under the facts alleged in the bill as amended, are in a position to object to the foreclosure of the Willoughby mortgage at the suit of complainant. The Kyser mortgage is subordinate to the mortgage through which the complainant claims, and, if the bill as amended correctly states the facts., the complainant has not only done nothing to impair the security furnished by the Kyser mortgage, but the Kyser mortgage was made with the knowledge, either actual or constructive, of the Willoughby mortgage. Those standing in the shoes of the second mortgagee have the right to pay off the first mortgage notes now past due, and the others as they mature; but we do not see how, in a court of equity, they can object to the reimbursement of the complainant of the amount which, under the facts alleged in the bill, was paid by him to the holder of the first mortgage. — Kelly v. Longshore, 78 Ala. 204; Pratt v. Nixon, 91 Ala. 192, 8 South. 751; Ware v. Hamilton Brown Shoe Co., 92 Ala. 145, 9 South. 136. (6, 7) 5. The general rule seems to be that: “Where the debt secured by a mortgage is evidenced by several notes maturing at different times, and there is a provision that default of one matures .all, or, if such construction can be given by implication, the mortgage may be foreclosed as to all; and, if there is no such provision in the mortgage, then as to the amount due only, and the decree stands as security for the balance, to be sold as the debt matures.”- — 4 Mayf. Dig. p. 249, § 1167, and authorities there cited. In this case the interest of the complainant can be conserved, and Mrs. Willoughby at the same time not disturbed as to the notes secured by the mortgage which are not due, by a foreclosure of the mortgage as to all — 538 — the notes which are past due when the decree of foreclosure is rendered; the decree of foreclosure to stand as security for Mrs. Willoughby as to the notes which have not matured at the time of the rendition of the decree. Out of the proceeds of the sale Mrs. Willoughby should first receive the amount due her on her past-due notes, and then the complainant should be paid the amount due him. Of course, as Mrs. Willoughby, in her mortgage, is given the right to foreclose the mortgage as to all of the notes whether due or not, she can, by a cross-bill, if she sees proper to file one praying that relief, obtain a decree of foreclosure as to the entire indebtedness. — Authorities, supra. (8) 6. In the case of Evans et al. v. Faircloth-Byrd Mercantile Co., 165 Ala. 176, 51 South. 785, 21 Ann. Cas. 1164, this court held that, where a wife gives a mortgage on her property to secure her husband’s debt, the mortgage is void, and that a junior mortgagee of the wife, whose mortgage contains covenants of warranty as to title and against prior incumbrances, is entitled to raise the question of the invalidity of the first mortgage- and to have it declared to be void, in order that on foreclosure of the second mortgage the entire land might be subjected to the second mortgage. The allegations of the bill as amended do> not bring the complainant within the reason of the rule declared in Evans v. Faircloth-Byrd Mercantile Co., supra. In so far as the complainant’s rights as sho-Avn by the bill as amended are concerned, it does not matter to him whether the mortgage to Kyser was or was not null and void, and it does not matter to him whether the sale of the lands under the power contained in the second mortgage was or was not void. The complainant, in his bill as amended, shows that his claim upon the land is superior to the claims which are being made to it — 539 — under the Kyser mortgage. It seems to us that the bill, in so far as it seeks to have the Kyser mortgage and the sale had under it declared to be null and void, is seeking relief which is not only not germane to, but which is altogether independent of, and in no way connected with, that feature of the bill as amended which prays for a foreclosure of the Willoughby mortgage. The bill as amended is therefore multifarious and was subject to that ground of demurrer. — Hardin v. Swoope, 47 Ala. 273. In the opinion filed with his decree sustaining the demurrer to the original bill, the chancellor states that the demurrer of the respondent Kyser “is sustained upon the grounds of multifariousness and want of equity, and the demurrers of the other respondents are sustained upon the ground of multifariousness.” The decree sustaining the demurrers to the bill of complaint as amended is simply a decree sustaining the demurrers, but there is no opinion accompanying this latter decree. We presume that the chancellor sustained the demurrers to the bill as amended for the same reasons that he sustained the demurrers to the original bill; but, however this may be, we are of the opinion that the bill as amended is wanting in equity as to Kyser and that it is multifarious. The bill can, however, if amended to meet the views expressed in the above opinion, be rendered free from attack by demurrer. The decree of the chancellor sustaining the demurrer to the bill as amended is affirmed. The appellant is given 30 days within which to amend his bill as amended, so as to meet the views above expressed. Affirmed. Anderson, O. J., and Somerville and Gardner, JJ., concur.