Shaw v. Lacy

SOMERVILLE, J.

(1) The right of the mortgagee to acquire by purchase the mortgagor’s equity of redemption in the mortgaged property is everywhere recognized by the courts. But equity looks with a jealous and distrustful eye upon such trans actions. —Hitchcock v. U. S. Bank, 7 Ala. 386, 443 ; Locke v. Palmer, 26 Ala. 312, 324 ; Parmer v. Parmer, 74 Ala. 285, 288 ; Stoutz v. Rouse, 84 Ala. 309, 311 , 4 South. 170 ; Peagler v. Stabler, 91 Ala. 308, 311 , 9 South. 157 ; Pearsall v. Hycle, 189 Ala. 86 , 66 South. 665 . And they will be sustained only when “supported by a sufficient consideration, and there is an absence of fraud, oppression, and undue advantage.” —McMillan v. Jewett, 85 Ala. 476 , 5 South. 145 ; Peagler v. Stabler, supra; Stoutz v. Rouse, supra; Goree v. Clements, 94 Ala. 337 , 10 South. 906 ; Thornton v. Pinckard, 157 Ala. 206 , 47 South. 289 ; Pearsall v. Hyde, supra; Cassem v. Heustis, 201 Ill. 208 , 66 N. E. 283 , 94 Am. St. Rep. 110 , 111, note. In Pearsall v. Hyde, supra, the authorities are collected and reviewed by Gardner, J., and it is declared that in such transactions equity “will not permit a mortgagee to use his position of superiority to oppress the debtor, or drive an unconscionable bargain, or take any undue advantage.” See, also, Compton v. Collins, 190 Ala. 499 , 67 South. 395 . In Villa v. Rodriguez, 12 Wall. 323, 339 , 20 L. Ed. 406 , Mr. Justice Swayne, for the court, states the law in language that is worthy of repetition: “The law upon the subject of the right to redeem where the mortgagor has conveyed to the mortgagee the equity of redemption is well settled. It is characterized by a jealous and salutary policy. Principles almost as stern are applied as those which govern where a sale by a cestui que trust to his trustee is drawn in question. To give validity to such a *452 sale by a mortgagor it must be shown that the conduct of the mortgagee was, in all things, fair and frank, and that he paid for the property what it was worth. He must hold out no delusive hopes; he must exercise no undue influence; he must take no advantage of the fears or poverty of the other party. Any indirection or obliquity of conduct is fatal to his title. Every doubt will be resolved against him. Where confidential relations .and the means of oppression exist, the scrutiny is severer than in cases of - a different character-. The form of the instruments employed is immaterial. That the mortgagor knowingly surrendered and never intended to reclaim is of no consequence. If there is vice in the transaction the law, while it will secure to the mortgagee his debt, with interest, will compel him to give back that which he has taken with unclean hands. Public policy, sound morals, and the protection due to those whose property is thus involved, require that such should be the law.”

(2) In these cases the burden of proof is on the mortgagee to show that the transaction was fair and honest — free from the infection of fraud, oppression, or any form of undue influence.— Locke v. Palmer, 26 Ala. 312, 324 ; Villa v. Rodriguez, 12 Wall. 339, 20 L. Ed. 406 ; Holridge v. Gillespie, 2 Johns. Ch. (N. Y.) 34; 9 Am. & Eng. Dec. in Equity, note, 686; 27 Cyc. 1373, 1374. In Locke v. Palmer, supra, it is declared that the release must “be established by the clearest and most convincing proof.” This rule as to the burden of proof results logically and necessarily from the attitude of “jealous suspicion” adopted by courts of equity.

We have examined all the evidence in this case with critical care, and, in view of the principles stated, we are constrained to the conclusion that the respondent has not met the burden of proof in vindication of his purchase of complainant’s equity of redemption in the mortgaged property, and that complainant is entitled to the relief prayed. The contrary conclusion of the chancellor is evidently founded on a misapplication to this case of the rules of law that govern the impeachment of original transactions which are absolute in form, by parol proof that they were intended to be mortgages only'. But that is a different case, and is ruled by different principles.

• (3) The rule that a “landlord can only be required to litigate title with his tenant, upon the vantage ground of possession” (Barlow v. Dahm, 97 Ala. 414, 416 , 12 South. 293 , 294 [ 38 Am. *453 St. Rep. 192 ]), is manifestly inapplicable to a proceeding like this, where the landlord has by actual or constructive fraud acquired the mortgagor’s title and thereafter reduced him to the position of a tenant, and redemption is sought as against the fraudulent purchase. In such a case the tenancy itself is a fruit of the fraud, and cannot survive its annihilation.

The decree of the chancery court will be reversed, and a decree will be here rendered setting aside the release executed by complainant to respondent on November 26, 1912, and granting to complainant the right of redemption from the mortgage exhibited by the bill of complaint. The cause will be remanded for a reference to ascertain the amount of the mortgage indebtedness, and for further appropriate action by the trial court in the premises for the effectuation of the relied here ordained.

Reversed, rendered, and remanded.

Anderson, C. J., and Mayfield and Thomas, JJ., concur.