#### Harper *v.*T. N. Hayes Co., *et al.*

*Bill to Subject Assets of the Corporation to the Payment of its Debts.*

(Decided Feb. 7, 1907.

43 So. Rep. 360.)

1. *Appeal; Submission of Cause; Objections to Evidence.*— The cause submitted for final decree on pleadings and evidence as noted by the register, and the note of submission was silent as to any objection to evidence, and it not otherwise appearing that any objections were made on the hearing of the cause, questions raised on appeal on objection to evidence may be disregarded, as raised for the first time on appeal.

2. *Husband and Wife; Conveyance by Wife to Secure Husband’s Debt; Validity.*— A conveyance by a husband and wife of the wife’s separate estate to secure the debt of the husband is absolutely void and confers no title.

3. *Witnesses; Competency; Pecuniary Interest.*— The conveyance by the husband and wife of the wife’s separate estate, constituí*175mg her homestead as security for the husband’s debt, being absolutely void, the legal title to the same, under section 2077, on the death of the wife, vests in the surviving minor children' and cuts off any estate by curtesy in the husband; and the husband lias no pecuniary interest iii the result of a suit to subject the land to the debt of the grantee under the conveyance as will disqualify him as a witness.

4. *Mortgages; Absolute Deed as Mortgage; Evidence.*— The evidence must be clear and satisfactory to show that a conveyance purporting to be an absolute deed is a mortgage.

5. *Same; Sufficiency of Evidence.*— The evidence in this case is examined and held that a deed absolute in form was intended as a mortgage.

*G. Dismissal; Grounds; absence of Necessary Parlies.*— Where it appears from the answer and testimony that there was an absence of necessary parties to the bill, the bill is properly dismissed, but without prejudice.

Appeal from Tuscaloosa County Court.

Heard before Hon. H. B. Foster.

Bill by B. T. Harper against tbe T. N. Hays Company and others. From a decree dismissing tbe bill, complainant appeals.

Modified, and, as modified, affirmed.

B. T. Harper filed bis bill against tbe T. N. Hays Company, a corporation, H. W. Sloan, Annie G. Hays, individually and as administratrix of T. N. Hays, and Maud Webb, as an heir of T. N. Hays. Tbe allegations are that the T. N. Hays Company is a corporation, with the principal place of business in the town of North-port, and that it has been out of business for nearly five years; that E. F. Sloan and J. J. Neilson are the only surviving stockholders; that T. N. Hays is the other stockholder, and that he is dead; that orator has a judgment in the Tuscaloosa county court in the sum of $300 against the said T. N. Hays Company; that execution has been issued thereon, and has been returned “No property found”; that during the lifetime of T. N. Hays he was the largest individual stockholder of the company, and its president and general manager; that about the first part of the year 1894 the respondent H. W. Sloan was largely indebted to said corporation on account, and in order to pay off and settle his said indebt*176edness said Sloan sold to said company, or to T. N. Hays, now deceased, a tract of land which is described fully in the bill; that the legal title to the same was made to T. N. Hays in his individual capacity, and has passed into his heirs. The deed is made an exhibit to the bill, and shows that the land described in the bill was decided by W. H. and Julia Sloan to* T. N. Hays. It is alleged that Sloan is now, and has been for a number of years, and since the making of the above deed, in possession of the land therein described; that the T. N. Hays Company has been out of business for nearly five years, and has no property subject to execution; and that in equity and good conscience the property above described belonged to the said T. N. Hays Company, and ought to be subjected to the satisfaction of orator’s judgment against the respondent’s corporation. And to this end it is prayed that the surviving stockholders of the corporation, and H. W. Sloan, Annie Hays, individually and as executrix of T. N. Hays, deceased, and Maud Webb, an heir of said Hays, deceased, be made parties respondent to the bill; and prayer is made for a sale of the land and an application of the proceeds to the payment of orator’s debt. The defendant H. W. Sloan moved to dismiss the bill for want of equity, and demurred to the bill on various, grounds not necessary to be here set out. Annie G-. Hays and Maud Webb denied the allegations of. the bill and demanded strict proof of the same. The stockholders also denied the allegations of the bill and demanded strict proof. H. W. Sloan filed an answer, admitting he owed the T. N. Hays Company about $800, and admitted the making of a deed, but alleged the facts to be, in respect thereto, that the account was his own, and was made for gods purchased by him to be used in the store he Avas then operating in Northport, but the land conveyed belonged to his wife, and made an exhibit to his answer of the deed conveying the land to his Avife from another party, and denying that the land Avas or ever had been his property. He alleges the real facts concerning the execution of the deed to be that Hays approached him concerning the closing of the account and asked him to give him some collateral that Hays could use at a bank for the purpose of securing money, and it was agreed be*177tween Hays, respondent’s wife, and respondent that she was to execute a deed to the land, and that Hays was to hold the deed as collateral. Respondent’s Avife was to remain in possession of the land, and Hays was to reC0Arey the land to her at any time that the account Avas paid. He further alleges that his wife is dead, that her estate is insolvent, that the land conveyed was the homestead of the wife at the time of her death, and she left surviving her certain minor children named therein, and that the land really, in equity and good conscience, belonged to the children of his deceased wife, that he Avas in no sense a proper party to the bill, and prayed that he go hence, with his reasonable costs in this behalf expended. The other facts sufficiently appear in the opinion. On final submission of the cause the chancellor dismissed the bill, and from this decree this appeal is prosecuted.

J. J. Mayfield, and O. B. Verner, for appellant.—

The burden to establish by clear and satisfactory evidence that the deed from Sloan to Hayes, absolute on its face, Avas intended as a mortgage for the security of Sloan’s debt, is upon *Sloan.*— Jordan *v.*Garner, 101 Ala. 414; *Adams v. Pilcher,*92 Ala. 477; *Peagler v. Stabler,*91 Ala. 308; *Downing v. Woodstock Oo.,*93 Ala. 262. H. W. Sloan Avas incompetent to testify as a witness, Hays being dead. — § 1794, Code 1896; *Hayas v. Building*cG *Loan*Association, 124 Ala. 663. The proposition that a deed absolute on its face may be declared a mortgage by a court of equity, does not apply ad cannot be extended to third parties or strangers; especially, when they are bona fide purchasers of judgment creditors Avithout notice of the secret *equity.*— Reeves *v. Brooks,*80 Ala. 26; 2 Hermann on Estoppel, §§ 1100-1101-1113; 3 DeAdin on Deeds, § 1141.

Henry Fitts, for appellee. —

On the admitted facts in this case upon the death of Mrs. Sloan no estate passed to her husband and the title Arested absolutely in her minor *children.*— Quinn *v. Campbell,*126 Ala. 280. The evidence clearly establishes that the sole purpose of Mrs. *178Sloan’s deed was to secure the debt of her husband. The inadequacy of consideration and the fact of the continued possession of the grantor is the strongest evidence that the paper was intended as a *mortgage.*— McCoy *v. Gentry,*73 Ala. 105; *Paolos v. Paolos,*66 Ala. 326; *Turner v. Wilkinson,,*72 Ala. 361; *Glass v. lleironymous Bo-os.,*125 Ala. *140.*The conveyance of a wife’s land *absolute*in form, but intended only as a mortgage for the husband’s debt, has no- force or effect as against the heirs •of the wife and the rights of the creditor whose debt is so secured is limited to the curtesy estate of the hus*band.-*— Bone *v. La/nsdcn,*85 Al.a 562, s. c. 90 Ala. 446. Sloan had no pecuniary interest and the mere fact of relationship to one of the parties of the suit does not dis*qualify.*— Myers *v. Myers,*141 Ala. 343; *H oneway v. Haraomy,*136 Ala. 506; *Stevenson v. Stevenson,*6 Tex. Civ. App. 529; *Albaoiy Ge. etc. McCarty,*149 N. Y. 71. His testimony was contrary to- the interest which is asserted to disqualify *him.*— Street *v. Street,*1.13 Ala. 333. This alone would take him without the *statute.*— Hill *v. Hilton,*80 Ala. 528. The interest which disqualifies is a direct and immediate conflict in the issue being tried. *—Hill v. Hilton, supra; Huekabee v. Abbott,*87 Ala. 410; *Sclmlmaoi v. Fitzpatrick,*62 Ala. 571; *Manegolcl v. Life Ins. Co.,*131 Ala. 182. There is nothing in the contention of appellant that the act approved Feb. 8, 1895, (Acts 1894-5, p. 1162) is *unconstitutional.*— Staita *v. Rogers,*107 Ala. 444.

DOWDELL, J. —

This cause was submitted in the court below by the parties for a. final decree on the pleadings and evidence as noted by the register, and it is from the final decree rendered on this submission and hearing that the present appeal is prosecuted. The note of submission made by the register is silent as to any objection or objections by either party to the evidence, or any part of the evidence, offered, and it does not otherwise appear that any objections to the evidence were made to the court on the hearing of the- cause. For this reason we might now disregard questions here raised on objections- to evidence as being now raised for the first time.

*179The undisputed evidence in the case shows that the 30 acres of land sought to he subjected by the complainant was the separate estate of Mrs. Julia Sloan, the legal title to which resided in her. If the conveyance, Avhich purported on its face to be an absolute deed from H. W. Sloan and Julia Sloan to T. N. Hays, conveying the 30 acres in question, was- intended by the parties to be and operate as a mortgage and to secure the debt of the husband, H. W. Sloan, it was absolutely void as a security by the Avife for the husband’s debt, and therefore conveyed no title. The evidence Avithout dispute further shows that the 30 acres formed a paid of the Avife’s homestead, upon AAdiicii she and her husband at the time resided, and Avhich in area Avas less than 160 acres and in value less than $2,000. If the .conveyance Avas Amid for the reason that it Avas made on the Avife’s land to secure a debt of the husband, then at the death 'of Mrs. Julia Sloan the legal title to the homestead vested in the minor children surviving her, cutting off any estate by curtesy to the husband. — Code 1896, .§ 2077; *Quinn v. Campbell,*126 Ala. 280, 28 South. 676. This being true, H. W. Sloan had no such pecuniary interest in the result of the suit as would disqualify him to testify as a Avitness in the case.

If E. T. Sloan, by reason of being a nominal stockholder of one share in the T. N. Hays Company, could be said to he a person having a pecuniary interest in the result of the suit, affecting his competency as a Avitness, which Ave do not decide, the fact remains that he was called to testify by the persons to Avhom his interest was opposed. It is a Avell-settled rule that, Avhen a conveyance which purports on its face to be an absolute deed is sought to be shoAvn to be a mortgage, it must be done by evidence that is clear and *satisfaclry.*— Jordan *v.*Garner, 101 Ala. 414, 13 South. 678; *Adams v. Pilcher,*92 Ala. 477, 8 South. 757; *Peagler v. Stabler,*91 Ala. 308, 9 South. 157.

We think the evidence in this case very clearly and satisfactorily sIioaa'S that the deed in question was intended to operate as a mortgage. All the circumstantial facts in the case are corroborative of the testimony of the Avitness along this line. It appears, from the an*180swer of the respondent Sloan and the testimony on which the cause was submitted for final decree, that the children, heirs at law of Mrs. Sloan, deceased, were necessary parties to the bill, and they were not made parties. This was sufficient to justify the chancellor in dismissing the bill; but it should have been dismissed without prejudice, and to that extent the decree will be here modified, and, a,s modified, will be affirmed.

Tyson, C. J., and Anderson and McClellan, JJ., concur.