Wynndam Court Apartment Co. v. First Federal Savings & Loan Ass'n

The allegations of the petition were not sufficient to state a cause of action when tested by the rule that the allegations of a pleading will be construed most strongly against the pleader, and when couched in alternative expressions will be given that construction most unfavorable to the pleader.

No. 16429. NOVEMBER 17, 1948. On May 23, 1946, Wynndam Court Apartment Company Inc. filed a suit in the Superior Court of Fulton County to recover possession of certain described realty, and for an accounting and other relief. Telfair Stockton Company (before a change of corporate name on June 30, 1945, the Mortbon Corporation), Joseph A. West, Southwall Corporation, E. H. Sims, W. K. Grant, and First Federal Savings Loan Association of Atlanta were named defendants therein. Joseph A. West, a nonresident defendant, was served only by publication and made no appearance. The petition, as amended June 30, 1948, alleged: States Realty Company Inc., subject to existing liens which the Mortgage-Bond Company held, conveyed the property in question to the plaintiff by warranty deed on March 7, 1931. Respecting the Mortgage-Bond Company's liens, the petition showed that W. H. Wynne conveyed the property in question to the Mortgage-Bond Company as security for an obligation of $55,000, which he was due the company; that on July 1, 1925, States Realty Company Inc. executed and delivered to the Mortgage-Bond Company a renewal principal note for $49,000, which was given in renewal and extension of the original indebtedness represented by the Wynne note; and that on August 1, 1930, the plaintiff gave to the Mortgage-Bond Company a renewal principal note for $49,000, which was in renewal and extension of the indebtedness represented by the note of W. H. Wynne and the renewal note of States Realty Company Inc. The plaintiff's note was payable by installments, the last of which matured July 1, 1935. On April 1, 1931, in order to better secure the payment of its principal note of $49,000 as well as security for the payment of certain monthly maturing notes, the plaintiff executed and delivered to the Mortgage-Bond Company a bill of sale conveying certain described personal property valued at $10,000, and at the same time and for the purpose of better securing the payment of advancements represented by the monthly maturing notes, the plaintiff also by loan deed conveyed to the Mortgage-Bond Company the realty in controversy. On August 13, 1935, the Mortgage-Bond Company filed a suit in the Superior Court of Fulton County against W. H. Wynne, States Realty Company Inc., and this plaintiff on their notes and prayed judgment for the amount due. During the pendency of that suit, and before judgment was obtained, W. H. Wynne, States Realty Company Inc., and the plaintiff consented and agreed for the Mortgage-Bond Company to take possession of all of the property against which it had liens from them, and E. H. Sims was placed in possession and control of the same with authority to operate and manage it for the benefit of the Mortgage-Bond Company, collect the rents, issues, and profits arising therefrom, and apply them as credits on the obligations they were due the company. On October 21, 1935, and before judgment was rendered on the notes in suit, the Mortgage-Bond Company, subject to specified obligations, conditions, and limitations, which were subsequently duly performed and complied with, did, in writing, and for a valuable consideration, which was duly paid, "bargain and sell, grant, convey, assign, transfer, set-over and deliver unto Mortbon [Corporation] all of the assets, tangible and intangible, property, real, personal and mixed, business and good will of the company (except its corporate franchise and name), and all of its books and records, together with all and singular the privileges and appurtenances whatsoever thereunto belonging or in anywise appertaining, and the rents, issues, and profits thereof after May 31, 1935." The effect of this indenture and bill of sale was to sell, transfer, assign, and convey to the Mortbon Corporation the notes executed by W. H. Wynne, States Realty Company Inc., and this plaintiff to the Mortgage-Bond Company, the loan deeds which had been given as security therefor, and the legal title to the real estate described therein. After the date of that instrument, which, as the petition shows, was never recorded in the State of Georgia, E. H. Sims remained in possession of the property in question and operated it for the benefit of the Mortbon Corporation, and continued to collect the rents, issues, and profits therefrom. After the Mortgage-Bond Company had by consent of the owners taken possession and control of the property conveyed by the loan deeds and the bill of sale before mentioned, and after it had executed and delivered to the Mortbon Corporation its indenture and bill of sale, it continued in its own name, for the benefit of the Mortbon Corporation, to prosecute the suit filed against W. H. Wynne, States Realty Company Inc., and this plaintiff; and on January 7, 1936, obtained a judgment against all of the defendants therein named for $52,795.91 as principal and $8,681.22 as interest to date of judgment. On that judgment the Mortgage-Bond Company caused an execution to be issued. On January 5, 1936, the Mortgage-Bond Company, for the purpose of levy and sale, executed a quitclaim deed to W. H. Wynne reconveying to him the real estate in question and caused the same to be recorded in the office of the Clerk of the Superior Court of Fulton County. Under authority of the Mortgage-Bond Company's execution, and for the purpose of satisfying it, the Sheriff of Fulton County, Georgia, on the first Tuesday in February, 1936, for a consideration of $1000, sold the land in question to Joseph A. West, who was the nominee and agent of the Mortbon Corporation. The sheriff's sale was void, and the deed made to Joseph A. West pursuant thereto passed no title to him because the Mortgage-Bond Company, prior to its quitclaim deed to W. H. Wynne, had divested itself of all title for, and interest in, the land by its indenture to the Mortbon Corporation, and for that reason it could reconvey no leviable interest therein to W. H. Wynne. On March 5, 1936, Joseph A. West executed and delivered a deed which purported to convey the land in question to the Southwall Corporation, a creature of the Mortbon Corporation, for a recited consideration of $100. The Southwall Corporation's "acts in and about the premises were as agent of and for the benefit of the Mortbon Corporation." Following the execution of that deed, E. H. Sims remained in possession of the property, operating it and collecting the rents, issues, and profits for the benefit of the Mortbon Corporation until February 11, 1943, when the Mortbon Corporation, acting through its "creature and subsidiary," the Southwall Corporation, attempted to convey it by deed to E. H. Sims and W. K. Grant for a sale price of $55,000. Possession and control of the property was then delivered to Sims and Grant, who have since been in possession of it, receiving the rents, issues, and profits therefrom.

The Mortbon Corporation and its agents and creatures, Joseph A. West and the Southwall Corporation, acquired no prescriptive title to the property in question by virtue of adverse possession under the sheriff's void deed as color of title, because prior to the time of sale by the sheriff the Mortbon Corporation was entitled to and by consent had actual possession of the property under authority contained in the security deeds which were given originally to the Mortgage-Bond Company.

E. H. Sims and W. K. Grant by loan deed, on July 30, 1945, conveyed the land in question to First Federal Savings Loan Association of Atlanta. None of the defendants, for reasons stated in the petition, have acquired any greater interest in the property than that originally vested in the Mortgage-Bond Company by the loan deeds executed and delivered to it.

The Mortgage-Bond Company, in the manner and way charged in the petition, misappropriated the personal property which the plaintiff conveyed to it by its bill of sale, and credit should now be given on the original indebtedness due that company for the sum of $10,000, which was its fair and reasonable value.

E. H. Sims and W. K. Grant, since taking possession of the property in question, have, as plaintiff is informed and believes, collected in rents therefrom at least $45,000, which they should be required to account for.

The Mortbon Corporation (now Telfair Stockton Company) and its agents and creatures, Joseph A. West and the Southwall Corporation, during the time they were in possession of the premises, collected in rents therefrom $82,573.75, and if this amount should be applied to the payment of taxes due on the property and to the principal and interest due on the plaintiff's debt, it would more than pay the secured debt in full.

The petition alleged further that the plaintiff has more than repaid its debt to the Mortbon Corporation, and for that reason is entitled to have its property returned to it. However, later paragraphs in the petition contain these allegations: "Should, on an accounting, it develop that said debt has not been paid in full, plaintiff stands ready to pay any balance that may be due." And "petitioner says that in the event that there should be any balance due on said property, so that it is not entitled to the return of said property in kind at this time, then petitioner is entitled to have the court declare the rights of the various parties hereto in the premises."

An exhibit attached to the petition shows that the gross operating income from the property in question from March 14, 1936, to December 9, 1942, was sufficient in amount to pay the taxes due thereon, and the principal and interest of the secured debt.

The prayers, besides for process and service on non-resident defendants, were: (1) that the defendants be required to account for the rents, issues, and profits received from the property in question while the same was in their possession; (2) that, upon such accounting being had, and it appearing that the secured debt has been paid by a proper application of the rents, issues, and profits of the property, it be declared that plaintiff is entitled to possession of the same and a judgment against Telfair Stockton Company for any overpayment of said debt; and also an accounting by Sims and Grant for the rents, issues, and profits of said property while the same was in their possession, and a judgment against them for the amount shown to be due upon such accounting; (3) that, in the event an accounting should show that the secured debt has not been fully paid, the rights of the parties in said property be declared, and that it be declared that, when the secured debt has been fully paid by a proper application of the rents, issues, and profits thereto, plaintiff is entitled to the possession of said property, to have the various security deeds to said property marked satisfied and canceled of record, and to have its notes marked paid and surrendered; and (4) for general relief.

Demurrers were interposed to the original petition and renewed to the petition as amended. That the amended petition failed to state a cause of action for any of the relief prayed, was the attack made upon it. The demurrers were sustained and the exception here is to that judgment. It is stated in the brief for the plaintiff in error that this case, in its final analysis, presents but two questions, namely: (1) Are the allegations of the amended petition sufficient to show the plaintiff's right to recover possession of the described premises from the defendants, and to have them account for the rents, issues, and profits received therefrom; and (2) is the plaintiff's right to redeem barred by lapse of time under the Code, § 67-115?

We deal first with the sufficiency of the amended petition to show redemption of the plaintiff's title. Unless this is shown, all other issues in the case necessarily become moot. As shown by our statement of facts, the present suit was filed ten years and some months after the premises sought to be recovered were voluntarily admitted into the possession of the plaintiff's grantee for the purpose of applying the rents, issues, and profits arising therefrom to the payment of the secured debt then in default. In the meantime, so far as the record discloses, there was no recognition by any one of the plaintiff's right to redeem.

Our Code, § 67-115, declares: "If the possession of the property shall be given to the mortgagee, the mortgagor may redeem at any time within ten years from the last recognition by the mortgagee of such right of redemption." The plaintiff in error insists that this section has no application to a case where the grantee in a security deed is admitted into possession of the conveyed property by his grantor, as was done in the present case. This contention is without merit. That the grantee in a security deed is a "mortgagee" within the meaning of this section of the Code, is well settled by the decisions of this court.Polhill v. Brown, 84 Ga. 338 (10 S.E. 921); Gunter v.Smith, 113 Ga. 18 (38 S.E. 374); Coates v. Jones,142 Ga. 237 (82 S.E. 649); Royal v. Edinburgh-American Land c.Co., 143 Ga. 347 (85 S.E. 190); Benedict v. GammonTheological Seminary, 122 Ga. 412 (50 S.E. 162); Hirsch v.Northwestern Mutual Life Ins. Co., 191 Ga. 524 (13 S.E.2d 165). In the Benedict case, supra, where the grantee in a security deed was in possession under a void sheriff's deed, this court said: "If the seminary were in possession legally, as mortgagee in possession, Benedict would have ten years in which to redeem, or to remain silent for that length of time in order to ascertain if the rents and profits received by the seminary would equal the amount of the debt, in which event the land would become his again by operation of law, and he could compel the seminary to make him the title."

It will be conceded that, where title to realty passes under a security deed, redemption can be accomplished only by payment in full of the secured debt. Ashley v. Cook, 109 Ga. 653 (35 S.E. 89); Shumate v. McLendon, 120 Ga. 396 (48 S.E. 10). And where the possession of property so pledged has been recovered in ejectment for the purpose of applying the rents and profits to the payment of the secured debt, or the same has been voluntarily given over to the grantee for such purpose, as here, title is not redeemed until the net profits received therefrom are sufficient in amount to pay the secured debt in full.Kirkpatrick v. Faw, 184 Ga. 170, 177 (190 S.E. 566); Powell, Actions for Land (Revised edition), 463, § 386. InGunter v. Smith, supra, the court said: "If the grantee in a security deed goes into possession of the land thereby conveyed under no other claim than such a deed, he is in possession simply for the purpose of applying the rents, issues and profits to the satisfaction of his debt; and when the net amount received by him from the proceeds of the land is equal to or greater than the amount of his debt, his right of possession ceases, and the grantor, or his legal representatives, and, if none, his heirs may bring an action to recover the land." Therefore it seems clear to us that the purpose of § 67-115 of the Code was to fix a limitation of time upon the right of a mortgagor to redeem his title for land when the mortgagee is legally in possession of it, and it has no reference to the mortgagor's right to recover possession of mortgaged premises where title was redeemed during the ten-year period by actual payment of the secured debt or by operation of law through an application of the rents, issues, and profits thereto, since there is in this State no statute of limitations applicable to an action for the recovery of land. Pollard v. Tait, 38 Ga. 439;Gunter v. Smith, supra. Since payment of the secured debt in full during the ten-year redemption period was a condition precedent to the plaintiff's right to bring the present suit, it was necessary for the pleader to allege that as a fact, positively and unequivocally.

Concerning payment, as our statement of facts shows, it is alleged generally that the plaintiff has more than repaid the secured debt, but respecting this the petition contains these further allegations: "Should, on an accounting, it develop that said debt has not been fully paid, petitioner stands ready to pay any balance that may be due." And "petitioner says that in the event that there should be any balance due on said property so that it is not entitled to the return of said property in kind at this time, then petitioner is entitled to have the court declare the rights of the various parties hereto in the premises. And the petition contains prayers which show that the pleader is not certain that the secured debt has been fully paid. Properly construed, the allegations of the petition respecting payment of the secured debt are in the alternative. One alleges payment of the secured debt in full; the other, that the plaintiff is ready to pay any balance of the secured debt found due on an accounting. One shows redemption; the other does not. For purposes of demurrer, the petition must therefore be treated as pleading no more than the latter, because it must be construed most strongly against the pleader. Code, § 81-301; Baggett v.Edwards, 126 Ga. 463 (55 S.E. 250); Holbrook v.Norcross, 121 Ga. 319 (48 S.E. 922); Fraser v. Smith Kelly Co., 136 Ga. 18 (2) (70 S.E. 792); Central of GeorgiaRy. Co. v. Tapley, 145 Ga. 792 (3) (89 S.E. 841); Doyal v. Russell, 183 Ga. 518, 534 (189 S.E. 32); 49 C. J. 97, § 91; 21 R. C. L. 451, § 15. In the Baggett case, supra, this court said: "Where pleadings do not make distinct and positive allegations, but are ambiguous or couched in alternative expressions, on demurrer they will be given that construction which is most unfavorable to the pleader." And again in Doyal v. Russell, supra, the court ruled: "Where any one of several averments alleged in the alternative is insufficient, the entire pleading is rendered bad. In other words, where two matters are pleaded in the disjunctive, one of which is good and the other not, the petition is treated as pleading no more than the latter, because it must be construed most strongly against the pleader [citations omitted]. In such a case the defect may be reached by general demurrer; whereas if both alternatives are good in substance, the petition might be subject to special demurrer for duplicity, but would not be subject to general demurrer. Gainesville Dahlonega Ry. Co. v. Austin,122 Ga. 823 (50 S.E. 983); Central of Georgia Ry. Co. v.Banks, 128 Ga. 785 (58 S.E. 352); Harris v. Wilcox,7 Ga. App. 121 (66 S.E. 380)."

Since the petition in the instant case, when properly construed, does not unequivocally allege full payment of the secured debt during the redemption period, it fails to state a cause of action and the court did not err in dismissing it on demurrer for that reason.

The ruling here made is not in conflict with that announced inCoates v. Jones, supra, cited and strongly relied upon by the plaintiff in error. The facts there were different. In the first place, Jones was not legally in possession of the premises there involved like the defendants are in the present case, but had possession under a void sheriff's sale. And in the next place, the grantor there, unlike the plaintiff here, had a bond for title from her grantee, which contained an obligation to reconvey the premises in controversy upon the payment of the secured debt. Her right to have a reconveyance of the pledged property was fixed by the terms of the bond for title, and suit was there brought to compel compliance with its terms and within the limitation period of such an instrument, to wit, twenty years.

What we now hold with reference to the sufficiency of the petition to state a cause of action becomes the law of this case.Brock v. Brock, 104 Ga. 10 (30 S.E. 424); Palmer v. Jackson,188 Ga. 336 (4 S.E.2d 28). And that being true, a reversal of the judgment complained of would permit the plaintiff in the instant case to redeem its title for the premises involved on the trial, and after an expiration of the redemption period, by then paying any balance due on the secured debt; thereby wholly defeating the provisions of § 67-115 of the Code.

It therefore necessarily follows from what we have said above that the court did not err in sustaining the demurrers and dismissing the plaintiff's case.

Judgment affirmed. All the Justices concur.