Frankel v. Smith , 147 Miss. 873 ( 1927 )

^* Corpus Juris-Cyc. References: Creditors' Suits, 15CJ, p. 1441, n. 11 New; Mortgages, 41CJ, p. 985, n. 23 New. Leo Frankel, formerly the owner of certain real estate in Sunflower county, Miss., sold the same to H.W. Smith for a part cash payment and notes evidencing the deferred balance, which were secured by a deed of trust upon the lands sold. Subsequently Smith sold the land to W.D. Parker, who assumed Smith's debt to Frankel. The notes secured by the deed of trust were not paid when due; and Frankel filed a bill in the chancery court seeking to foreclose the deed of trust upon the land so sold to Smith, and by Smith to Parker, and also asked for a personal decree against Parker for the amount unpaid which he had assumed under Smith's contract to him. Some of the Frankel notes had been assigned to a bank in Greenville, Miss., and the bank joined with Frankel in the suit to foreclose the deed of trust and to recover the balance due against Parker under his agreement to assume Smith's debt. Some other of the Smith notes had been assigned to different parties, and these parties had requested the trustee to foreclose in order to secure the payment of their notes; and the trustee did advertise and sell the said lands to satisfy such notes, and the holders of those notes bid the property in for a small sum. Frankel received notice of this transaction on April 1, 1922, after the trustee's sale, through a letter from the trustee in which was inclosed a check for Frankel's pro rata part of the purchase money. He rejected same, returning the check to the trustee, and filed an amended bill of complaint seeking additional relief by canceling the foreclosure deed and seeking a foreclosure in equity. Later on Frankel purchased the other holders' interest in the notes, and they disappeared from the suit.

On May 12, 1922, Frankel learned that W.D. Parker had given his wife a deed of trust, for one hundred thousand dollars, on a plantation, known as the Klondike plantation, near Moorhead, Miss., owned by him, and in this deed of trust Parker had conveyed a certain series of notes, twenty in number, aggregating three hundred forty thousand dollars, given to him by Stone and Toler for the purchase money of certain lands which they had bought from Parker, and that Parker had also conveyed other property to secure the said deed of trust. Frankel and others filed a second bill setting up that such conveyance was fraudulent as to their rights against Parker, and amended the bill by making Parker and Mrs. Parker parties defendant, and also the Greenwood Grocery Company, which company was in possession of certain of the Stone and Toler notes, and sought to set aside the sale of the deed of trust from W.D. Parker to Mrs. Norah D. Parker and the assignment of the Stone and Toler notes to the Greenwood Grocery Company. Mrs. Parker answered the bill, denying the fraud, and claimed that she had borrowed thirty-five thousand dollars from the Maxwell Investment Company and had loaned it to W.D. Parker, her husband, to pay a note due by him to the Wilson Banking Company, and that he owed her various and sundry other sums ranging back as far as 1902 for money alleged to be owing her from him in excess of sixty-five thousand dollars, additional to the thirty-five thousand dollars loaned him.

In 1919, Mrs. Parker owned a section of land in the Klondike plantation, and her husband owned the remainder. They sold this land to Stone and Toler for about seven hundred thousand dollars, taking about two hundred fifty thousand dollars cash out of the deal within a year of the sale. Certain persons, unnecessary to name, had secured judgments against Parker, and the bill was then amended so as to make it also a general creditor's bill. The bill sought to set aside for the creditors of W.D. Parker the deed of trust to his wife, above mentioned, and the assignment of the Stone and Toler notes. Upon hearing the cause the court dismissed the bill as to Mrs. Parker and the Greenwood Grocery Company, and from the decree so dismissing the bill, it was appealed to this court and reversed, the opinion of the court thereon appearing in 103 So. 16. In this opinion, the court held that the indebtedness secured by the deed of trust from W.D. Parker to Norah D. Parker was valid only to the extent of thirty-five thousand dollars, and that the remainder of the indebtedness was fictitious, and set aside the sale of the Stone and Toler notes to the Greenwood Grocery Company. After such litigation, and before the decision in the supreme court, the deed of trust from W.D. Parker to Mrs. Norah D. Parker was foreclosed, and Mrs. Parker purchased the property at a trustee's sale for seventy-five thousand dollars, and the trustee credited this amount on the notes given Mrs. Norah D. Parker by W.D. Parker.

When the cause was remanded, the complainants amended their bill, seeking to recover the difference between the seventy-five thousand dollars, bid by Mrs. Parker at the trustee's sale, and the thirty-five thousand dollars adjudicated by the supreme court as being the amount which W.D. Parker owed Mrs. Parker, and to require her to pay this amount and to subject it to the demands of the complainants. Mrs. Parker filed an answer and cross-bill to this amended bill setting up that she bid seventy-five thousand dollars on the belief that her deed of trust was valid; that no money passed; that the bid was not a money bid, but a bid on her indebtedness; and that she thought she was entitled to pay her bid by having the same credited upon the note of her husband to her. She offered in the cross-bill to have the sale set aside and the status quo restored to what it was prior to the sale, and asked that the sum due her, with interest thereon, together with certain attorneys' fees provided for in the deed of trust and notes to W.D. Parker and herself, be added to her debt, and that the property be resold to pay the sum. This application on the part of Mrs. Parker was allowed and sustained by the court; and a decree was entered accordingly setting aside the former sale, ordering a resale, and finding and allowing fees for the attorneys representing the defendant Mrs. W.D. Parker in the said suits. The sum owing to Mrs. Parker by this decree amounted to forty-eight thousand dollars. The property was readvertised and resold, and at the sale of same it brought less than the amount adjudged to Mrs. Parker at the first sale, all of which was done over the objection of appellants.

From the showing in the record, we think the court erred in setting aside this sale and the bid, on the application of Mrs. Parker. Mrs. Parker was cognizant of the whole transaction and thoroughly familiar with all the facts at the time she made the bid; and the record does not make such a case of mistake of fact and law as would warrant the court to set aside the sale. The facts in the case do not make such a case of mistake of law as to afford ground for equitable relief in her favor. There are, of course, situations where equity will relieve for mistakes of law; but the present case does not present a case falling within the principles governing such situations.

We think also that it was error for the court to allow attorneys' fees provided for in the deed of trust against the property in this suit on the facts contained in the record. The deed of trust contained a stipulation for reasonable attorneys' fees for its defense in case of attack, and that was to be charged against the property, being a contract between Mr. Parker and Mrs. Parker. The attorney in the suit prosecuted was employed for the purpose of defending and maintaining the instrument for one hundred thousand dollars, sixty-five thousand dollars of which was fictitious and fraudulent as to the creditors of W.D. Parker. If the suit had proceeded on the theory of defense as to the real validity of the instrument and had been sustained, such suit would, of course, be upheld. The suit, however, was an effort to maintain a fraud, and the creditors had to attack it as being fraudulent; and they sustained their suit to practically two-thirds of the amount of the deed of trust. To uphold fraud and make such fees a charge upon the land would be to make the courts an instrumentality to aid fraud and wrong. The suit was not an effort to collect the notes from W.D. Parker personally, and the attorneys' fees provided for in his notes should not have been allowed against the complainants' rights in this suit on the real estate embraced in the deed of trust. Of course, Mr. Parker would be liable to Mrs. Parker for attorneys' fees incurred by her in collecting the note against him. The judgment of the lower court will therefore be reversed as to Mrs. Norah D. Parker, and she will be required to pay the difference in the debt of thirty-five thousand dollars, with interest, and the amount of her former bid, interest to be calculated from maturity to the date of bid.

As to the appellee, the Greenwood Grocery Company, the rights of that company, fixed by final decree of May 12, 1926, will be affirmed; but inasmuch as the reversal of the cause as to Mrs. Parker will necessarily change clause B of paragraph 4, fixing the rights of Mrs. Norah D. Parker secondary to the Greenwood Grocery Company and prior to the complainants in the Stone and Toler notes, that clause of the paragraph will be eliminated; and as the reversal of the decree as to Mrs. Parker holding to her former bid by bidding at the commissioner's sale, ordered by the final decree of May 12, 1926, the commissioner's sale will be set aside and the court below will fix the date for a new sale to be made, in order that all parties may protect their interests in accordance with such decree, as modified by this judgment; and, in addition to selling the lands securing the Stone and Toler notes, the court will direct the commissioner, after selling the lands, to credit the Stone and Toler notes with the amount bid for such lands at said sale, and then sell notes at public outcry for the balance due thereon and apply the proceeds thereof in accordance with this opinion.

Reversed in part and affirmed in part and remanded.