Case Title: Ex Parte AmSouth Mortg. Co., Inc.

Citation: 679 So. 2d 251

Docket Number: 1950550

State: alabama

Court: Alabama Supreme Court

Date: 1996-05-31T00:00:00Z

Document:
679 So. 2d 251 (1996)
Ex parte AmSOUTH MORTGAGE COMPANY, INC.
(In re Madelaine B. STEWART v. AmSOUTH MORTGAGE COMPANY, INC.).
1950550.

Supreme Court of Alabama.
May 31, 1996.
*252 J. Knox Argo, Montgomery, for petitioner.
Allen W. Howell of Shinbaum & Howell, Montgomery, for respondent.
HOUSTON, Justice.
This case involves a contest between a payor (AmSouth Mortgage Company, Inc.) and the beneficiary of the payment (Madelaine B. Stewart) wherein AmSouth seeks, under equitable principles, repayment of the moneys it paid to satisfy a debt of Stewart.
The following statement of pertinent, undisputed facts is taken from the opinion of the Court of Civil Appeals:
Stewart v. AmSouth Mortgage Co., 679 So. 2d 247, 248-49 (Ala.Civ.App.1995).
The Court of Civil Appeals reversed the trial court's holding that AmSouth was equitably entitled to a security interest in the entire piece of property in question. The Court of Civil Appeals based its decision on its determination that parties who are culpably negligent are not entitled to relief under a quasi-contract or unjust enrichment theory *254 that is, that "the equitable doctrines that might, under other circumstances, afford relief are unavailable here because of AmSouth's culpable neglect and the mother's freedom from fault." 679 So. 2d  at 251. The Court of Civil Appeals also reversed the trial court's holding that the mother was the sole owner of the property, which she had held with her deceased daughter pursuant to a deed creating a joint tenancy with right of survivorship. According to the Court of Civil Appeals, when the daughter mortgaged the property, she severed the joint tenancy, destroyed the survivorship provision, and created a new tenancy, from which both the mother and the daughter acquired an undivided one-half interest in the property as tenants in common, with only the daughter's interest being subject to the AmSouth mortgage.
Neither party sought certiorari review of the second holding. Rather, only AmSouth sought certiorari review, and only on the issue whether it was equitably entitled to a security interest in the entire piece of property in questionthat is, the issue whether AmSouth's negligence in failing to discover that the mother was co-owner of the property with her daughter and to have the mother sign the mortgage on the property prevents the application of the traditional equitable remedies of restitution or subrogation that would enable AmSouth to recover the $84,201.71 it paid to Wachovia with the mother's knowledge and for the benefit of the mother.
Although AmSouth concedes that the closing attorney was negligent and that his negligence resulted in his failure to discover that the deed did not convey the entire title to the daughter, AmSouth nonetheless contends that, in this case, the attorney's negligence does not bar the application of the doctrine of equitable subrogation based upon a "money had and received theory" and does not justify conferring upon the mother the windfall it says she seeks.[1]
The mother relies on the following statement as governing in cases that involve equitable lien principles:
Costanza v. Costanza, 346 So. 2d 1133, 1136 (Ala.1977), quoted with approval in Lewis v. Johnson, 507 So. 2d 918 (Ala.1987); Azalea City Motels, Inc. v. First Alabama Bank of Mobile, 551 So. 2d 967 (Ala.1989). The mother also maintains that to be entitled to equitable subrogation, the lender must have been ignorant of the intervening lien. She also maintains that there was no intervening equitable lien, because, she says, equitable liens can arise under Alabama law only when improvements or expenditures are made in good faith and under mistake as to title and cannot arise where expenditures are made with knowledge of the real or true state of the title. The mother also contends that because AmSouth knowingly accepted a mortgage from her daughter based on her credit and her qualifications, AmSouth is not entitled to an equitable lien. The evidence, at most, the mother insists, showed only passive conduct on the part of the mother, which, she says, is insufficient under Alabama law to justify the imposition of an equitable lien.
AmSouth argues that the cases relied on by the Court of Civil Appeals to support its holding that "culpable negligence" disqualifies a party from obtaining equitable relief are distinguishable, correctly pointing out that those cases involved innocent third parties who would have been harmed if the negligent plaintiff had obtained the relief sought. AmSouth also points out that the cited cases are not "money had and received" cases or cases seeking equitable liens upon a *255 "money had and received" theory, but instead are cases involving bona fide improvers of land. We agree with AmSouth that the cases relied upon by the Court of Civil Appeals should not be applied to bar equitable relief under the particular facts of this case. Both of the cases the Court of Civil Appeals cited as establishing a general "culpable negligence" bar to equitable relief, Manning v. Wingo, 577 So. 2d 865 (Ala.1991), and Gresham v. Ware, 79 Ala. 192 (1885), involved efforts to recover costs of substantial improvements to land made by parties who thought that they had good title to the property when they made the improvements. Interestingly, though, in Manning, 577 So. 2d  at 869, this Court, after denying any relief based upon traditional equitable remedies, granted relief to the improving party based upon a "balancing of the equities" theory:
The law of restitution was created with the purpose and design of forcing a defendant to return benefits that it would be unjust to allow the defendant to keep; the law of restitution is not intended to compensate the plaintiff. Recovery for "money had and received" is one of the principal categories of restitution. See Davis, Tilley's Alabama Equity, §§ 12-1 and 12-2, p. 277-79 (3d ed. 1994).
Id., at 277-78, citing Murphree Ins. Agency v. Pinnington, 201 Ala. 500, 78 So. 854 (1918), and Blackwood v. Rutherford, 212 Ala. 630, 103 So. 689 (1925). (Emphasis added.)
If this is not a case where there was at least an "implied request" on the part of the defendant that the plaintiff pay her debt, then there probably could never be such a case. The mother was present at the closing, and she asked AmSouth's attorney if it was necessary for her to sign the papers. Obviously, the mother was interested in getting her debt to Wachovia paid off and fully consented to that payment.
The "culpable neglect" the Court of Civil Appeals found consisted solely of AmSouth's lawyer's failure to look at the deed before the closing. There was no culpability associated with this failure. This act of simple negligence was not intended to harm the mother, nor did it harm her; and it did not confer a benefit on AmSouth. Rather, it was the mother's actions taken in an attempt to benefit from AmSouth's mistake that caused this controversy.
If all persons who negligently confer an economic benefit upon another are disqualified from equitable relief because of their negligence, then the law of restitution, which was conceived in order to prevent unjust enrichment, would be of little or no value. However, it is uniformly accepted by courts throughout this country that a payor's negligence in the payor-versus-beneficiary situation does not disqualify the payor from obtaining equitable relief unless the beneficiary has been damaged by the payor's negligence. See Restatement of the Law of Restitution, § 59, p. 232 (1937):
The comments to § 59 state:
See, Douthwaite, Attorney's Guide to Restitution (1977), § 9.1, "Defenses," p. 361; Palmer, The Law of Restitution, vol. III, § 16.3, "The Effect of Negligence," pp. 462-63. A contrary result "would be curious indeed." Palmer, The Law of Restitution, at 462-63. The mother suffered no harm or damage as the result of AmSouth's negligence; it would be inequitable to allow her to retain the benefit of the payment.
In denying AmSouth's request for equitable relief, the Court of Civil Appeals confused the law of restitution with our law dealing with one's good-faith improvements to another's land and, therefore, erroneously allowed the mother to assert AmSouth's carelessness as a justification for retaining the benefit conferred upon her. We reverse the judgment of the Court of Civil Appeals and remand the case for an order or proceedings consistent with this opinion.
REVERSED AND REMANDED.
HOOPER, C.J., and MADDOX, SHORES, KENNEDY, INGRAM, and COOK, JJ., concur.
BUTTS, J., concurs in the result.
[1]  In Count I of its counterclaim, AmSouth specifically alleges that the mother "owes AmSouth $84,201.71 for money had and received ... paid by AmSouth [to Wachovia] for the benefit of [the mother]."