102 So. 206 | Ala. | 1924
Lead Opinion
The bill is to declare void deeds and mortgage on the wife's property as procured and given in securing the husband's debts. The injunctive relief prayed against a pending suit in ejectment is denied in the sustaining of respondents' demurrer to the bill.
The statute has often been construed, and forbids the wife, directly or indirectly, to become surety for the husband. Code, § 4497; Leath v. Hancock,
In Vinegar Bend Lumber Co. v. Leftwich,
"Where the wife borrows money from her husband's creditor, and hands it back in payment of her husband's debt, thus becoming nominally the principal debtor on a new obligation, she becomes by indirection a surety of her husband's debt within the provision of section 4497, Code 1907.
"Where the wife conveyed her separate property to the husband and joined with him in the mortgage thereof to secure his debt, with the knowledge by the mortgagee of her rights in the premises, the transaction was void as violative of section 4497, Code 1907."
It is also held that where the wife conveys her separate property to the husband and joins with him in the mortgage thereof to secure his debts, the mortgagee having knowledge of her rights in the premises, the statute is violated. Staples v. City Bank Trust Co.,
Looking to the substance rather than the appearance, as equity does, to uncover the truth or facts (Richardson v. Stephens,
The statement has been made that the negotiation of a loan through a collusive arrangement with a third person, whereby the wife becomes surety for the loan with which the debts of the husband are paid, and the ultimate purchase of the securities for said loan by the original creditor, does not constitute the said creditor a bona fide purchaser, and the indirectness of the transaction does not cure the invalidity. In Lamkin v. Lovell, supra, Mr. Justice Sayre said:
"But where, as here, it is entirely clear that the transaction is different from what it purports to be, where the parties move circuitously to the end in view, as if to evade the statute, and where the true intent and meaning of what the wife does is to give her obligation, payable in the future and secured by a mortgage, to the husband's creditor — all facts established in this case beyond peradventure — the necessary effect is to constitute the wife's note and mortgage a collateral security for the husband's debt."
The language of the statute is that "the wife shall not, directly or indirectly, become the surety for the husband." Code, § 4497. Equity's invariable process is to look through form to substance. No superficial appearance will be permitted to lead the court away from the truth of the transaction to avoid the statute if such be its effect and purpose.
In Staples v. City Bank Trust Co.,
"If the debt sought to be enforced against the wife, or any part of it, was infected with this vice in its inception, the infection remains, regardless of renewals or changes of form. And so, with respect to the method by which the proceeds of the loan are returned to the hands of the lender, it is of no consequence whether the payment of the husband's debt is open and direct, or whether the money passes to the creditor through intermediates chosen for the purpose. The law looks to the intention and the result, and not to the means employed." *278
It is charged in the bill, through facts averred, that the bank in this case was a mere conduit, and the passing of the notes and mortgage and its foreclosure through and by the bank cannot impute validity. The circumstances of the transaction averred will tend to arouse suspicion of the evasion of the statute. Elba Bank Trust Co. v. Blue,
The decree sustaining demurrer to the bill was laid in error. The facts should be considered under the statute, after full pleading and proof.
The decree is reversed and the cause remanded.
Reversed and remanded.
ANDERSON, C. J., and SOMERVILLE and BOULDIN, JJ., concur.
Addendum
In addition to the foregoing authorities see Rollings v. Gunter (Ala. Sup.)
In view of the reasons assigned in the decree on demurrer as to the obligation being a "commercial paper," the observation should be made that we have here to do with the right of a creditor who is alleged to have moved circuitously to evade the statute, having the mortgage taken by a third party (in good faith), and by it transferred before maturity to said creditor. The third party here employed is not a defendant to the instant bill, nor is it charged that it knowingly participated in the circumvention of the statute. Are the averments of the original bill sufficient to bring the case within the principle so well stated by Mr. Justice Sayre in Lamkin v. Lovell,
The instant case is therefore different from the Lamkin-Lovell Case, supra, in that in the latter there was understanding between the creditor and the third party for his immediate reimbursement, while no such understanding is averred in the instant bill; and the proceeds of the mortgage in the Lamkin-Lovell Case were paid by Harris to the wife by check, which she indorsed to the creditor; here the proceeds of the mortgage were paid to the husband, who distributed the same to the creditors, etc. That is to say, of the instant bill, the parties (the husband and his creditor — the assignee of the mortgage) are averred to have resorted to an evasion of the statute by the wife's giving her obligation, secured by a mortgage on her property, the effect of which was an indirect security by the wife for the husband's debts — notwithstanding the fact that the security was taken in good faith by a third party at the instance of the husband to secure the moneys to pay the debt, and by such third party transferred, before maturity, to such creditor, who foreclosed the mortgage.
A phase of the case or questions of law entering into this decision are presented by the citation of Wilkinson v. Solomon (1887),
It was recently held that the mortgage securing the note is a mere incident, follows the assignment of the note, and is impressed with the same character and "quality of right." Fortson v. Bishop,
"These notes and mortgages are complete and regular on their face; the notes are payable to the Title Insurance Company, and it is named in the mortgage as mortgagee. If the defendant became the owner of them in good faith and for value, and before maturity, and at the time it was negotiated to her she had no notice of any infirmity or defect in the title of the person negotiating them, then she would be a holder in due course under the statute. As such, her rights would be protected, and the mortgage enforced to pay the notes secured by it, even if they were given under duress, or without consideration, or to secure a husband's debt, the defendant having no notice thereof before she purchased them. If she is a holder in due course, the instruments, notes, and mortgage are 'free from any defect of title of prior parties, and free from the defenses available to prior parties among themselves.' Sections 5007-5014, Code 1907."
Construing the pleadings most strongly against the pleader as to the form of the notes for which the mortgage was given as security, we may inquire when one is a holder "in due course" of "instruments, notes, and mortgage" held "free from the defenses available to prior parties among themselves." The statute defines a holder in due course of a negotiable instrument to be (1) when it is complete and regular upon its face; (2) when it is taken "in good faith" and for value before it was due and without notice of its previous dishonor, if such be the fact; (3) when, at the time it was negotiated, the purchaser had no notice "of any infirmity" in the instrument, or of any "defect in the title of the person negotiating it." Code 1907, § 5007. A defective title is thus defined by the statute:
"The title of a person who negotiates an instrument is defective within the meaning of this chapter when he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud." Code 1907, § 5010.
To constitute notice of infirmity in the instrument or defect in the title, "the person in whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amountedto bad faith." Code 1907, § 5011. (Italics supplied). The rights and disabilities of a holder not in due course are defined by the statute of August 9, 1907 (Gen. Acts, p. 660 et seq.), codified as section 5013 of the Code of 1907, as follows:
"In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were nonnegotiable. But a holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such latter."
In Ex parte Goldberg Lewis,
"* * * That at the time Bishop bought the land from W. A. Fortson and received his warranty deed, there was an outstanding superior seasonably registered mortgage on a part of the land, executed by W. A. Fortson and wife to Mrs. P. F. Pope, securing a note for $450, with interest. Before the maturity of Bishop's note and mortgage to W. A. Fortson, he assigned this negotiable note, secured by the mortgage, to the bank of Albertville, the bank assigned to Sherman, and Sherman, after maturity, assigned to W. S. Fortson, appellant.
"The disaffirming redemptioner, under the thus re-established equity of redemption resulting from Bishop's mortgage to W. A. Fortson, invoked the court to so adjust, to toll, the amount necessary to effect such redemption by the amount necessary to satisfy the Pope mortgage — superior and outstanding at the time Bishop purchased the land from W. A. Fortson — to which Bishop appears to have succeeded by a conditional assignment from Mrs. Pope. The basis of Bishop's claim is predicated of the breach of warranty in the deed (Code, § 3421) from W. A. Fortson to Bishop, because of the outstanding superior incumbrance imposed upon part of the land by the earlier mortgage executed *280 to Mrs. Pope by W. A. Fortson, Bishop's grantor — a covenant that was breached as soon as made."
The court there said of the statutes:
"It was not averred or shown that appellant or Sherman or the bank was a party 'to any fraud or illegality affecting the instrument,' within the purview of Code, § 5013. Brannan's Uniform Negotiable Instruments Law, pp. 204 et seq., and notes.
"* * * If Sherman became a holder in due course, invested with the right to the protection the law accords to a bona fide purchaser, the appellant became invested with the like rights, nothing being attributable to him to conclude against his succession to Sherman's rights in the premises."
This is in line with the analysis of the present statute so well made in Ex parte Goldberg Lewis,
Under the instant pleadings the Merchants' Mechanics' Bank was not a necessary party, and the averments of the bill are to the effect that at the time respondents acquired the notes and mortgage they had notice of the infirmity in the instruments in question. They cannot qualify as "holders in due course" from the bank, a "holder in due course." Fortson v. Bishop,
The application for rehearing is overruled.
All the Justices concur.