Title: Fed. Land Bank of New Orleans v. Jones
Citation: 456 So. 2d 1
Docket Number: N/A
State: Alabama
Issuer: Alabama Supreme Court
Date: April 6, 1984

456 So. 2d 1 (1984)
The FEDERAL LAND BANK OF NEW ORLEANS
v.
Glenn E. JONES, et al.
Glenn E. JONES, et al.
v.
The FEDERAL LAND BANK OF NEW ORLEANS.
82-60, 82-65.

Supreme Court of Alabama.
April 6, 1984.
Rehearing Denied August 24, 1984.
*2 J. Garrison Thompson of Pitts, Pitts &amp; Thompson, Selma, for appellant/cross-appellee.
John E. Pilcher of Pilcher &amp; Pilcher, Selma, for Glenn E. Jones and Lynne L. Jones.
Charles H. Sims, III and Cartledge W. Blackwell, Jr., Selma, for Rawls Machine and Supply Co., Inc.
Archie T. Reeves, Jr. of Reeves &amp; Stewart, Selma, for Henry Brick Co., Inc.
James B. McNeill, Jr. of Bryant, Edwards, McNeill &amp; Poole, Selma, for J.M. Brown, individually and t/d/b/a Johnny Brown Plumbing Co.
William J. Gamble of Gamble, Gamble &amp; Calame, Selma, for Don Tillery and James M. Tillery, Jr., individually and trading and doing business as Tillery House of Carpets.
BEATTY, Justice.
This is an appeal by Federal Land Bank of New Orleans (Bank) and a cross-appeal by Glenn E. and Lynn L. Jones (the Joneses) from judgments entered against them in favor of multiple claimants. The actions arose from a loan made by the Bank to the Joneses and the Land Bank Association of Selma (Association) for long-term financing to cover the construction costs of a new residence. The construction contract provided for three monetary disbursements to the original contractor, Webb A. Hargrove d/b/a Azalea Construction Company (Hargrove or Azalea), upon certain stages of completion of the residence.
The Association made two disbursements to Hargrove, and he failed to pay the subcontractors and materialmen who were working on and supplying materials for the Jones residence. Consequently, a subcontractor, Central Alabama Sheet Metal Company (Central), commenced an action in the district court asserting claims against Glenn Jones on open account and for work and labor done. The action proceeded to judgment, and Jones appealed to the circuit court. Tillery House of Carpets (Tillery), another subcontractor, also commenced an action against Glenn Jones in the district court to enforce a materialmen's lien upon the Joneses' home and sought money damages for work and labor done.
Subsequently, the Bank instituted an interpleader action in the circuit court, naming the following defendants: the Joneses, Central, Tillery, Hargrove, Rawls Machine and Supply Company (Rawls), Johnny Brown Plumbing Company (Brown), Henry Brick Company, Inc. (Henry), Dallas Concrete Pipe Company, Inc., Johnny Lee Gilmore, Warrior Concrete Company, and Prince Electric Company.
Brown, Rawls, and Henry filed cross-claims against the Joneses. The Tillery action and the appeal from the judgment in the Central action were later consolidated with the Bank's interpleader action, and Central and Tillery cross-claimed against the Joneses.
The Bank sought to interplead into court the sum of $6,078.50, which remained undisbursed under the construction loan to the Joneses. The complaint requested the court to determine how the money should be disbursed between the Joneses and the other defendants who were materialmen and subcontractors.
The Joneses answered and counterclaimed against the Bank, alleging, among other things, the following:
The Joneses also cross-claimed against Tillery, Brown, Rawls, Central, and Henry and asked for a declaratory judgment, declaring:
During the trial, the Joneses amended their counterclaim against the Bank to allege that the Bank wantonly controlled and disbursed the loan proceeds, misrepresented to the Joneses that the Bank would pay materialmen and subcontractors, required the Joneses to execute false lien waivers, and committed the tort of outrageous conduct which resulted in additional damages to the Joneses' reputation, and caused humiliation, mental anguish, emotional pain, and stress.
The Bank in its answer denied the allegation of abuse of process and filed a motion to dismiss the counterclaim, based upon the absence of a fiduciary relationship and the absence of a duty owed to the Joneses. The trial court overruled the motion. In addition, the Bank's answer to the Joneses' counterclaim affirmatively set up the defense of statute of limitations, and by amendment affirmatively pleaded contributory negligence by the Joneses and estoppel on the abuse of process claim.
Rawls also counterclaimed against the Bank, averring that the Bank had guaranteed payment for all building materials furnished by Rawls on the Jones job. Rawls initially sought damages in the amount of $11,509.22, but he later amended the counterclaim, alleging false representations by the Bank and claiming punitive damages for $100,000.00.
Brown filed a counterclaim on similar grounds, seeking judgment for $1,208.68. He later amended the counterclaim to ask for $5,000.00 punitive damages for alleged false representations.
Henry counterclaimed for $1,393.25 on open account for brick sold to the Bank. Henry, Rawls, Tillery, and Central filed a joint amended counterclaim against the Bank seeking attorney's fees.
The Bank moved to dismiss all counterclaims and that motion was overruled by the trial court. The Bank's answer denied all allegations of the counterclaims and affirmatively pleaded the defenses of Statute of Frauds, statute of limitations, and contributory negligence.
Evidence was presented before the circuit court without a jury. The court announced its decision from the bench April 23, 1982, and final judgment was filed July 2, 1982. The judgment was amended on July 25, 1982.
The following judgments were rendered against the Bank:
The trial court denied the Bank's post trial motions and the Bank appealed October 7, 1982.
The following judgments were entered against the Joneses in favor of:
On October 21, the Joneses filed their notice of appeal.
A number of issues are presented by the Bank's appeal; however, in view of our conclusion that the issue of agency is the controlling one, we need not reach other issues posed by the Bank's appeal. That controlling issue is whether or not the trial court could have found that the officers of the Association were the agents of the Bank and that, accordingly, their actions bound the Bank. In that connection, the Joneses alleged in their counterclaim that the Bank assumed the duties of trustee for the Joneses, and in their brief the Joneses characterized these alleged duties as those *5 of a "quasi-trustee." It is apparent that throughout the litigation below the parties tried the case against the Bank on the theory of agency. Rule 15(b), A.R.Civ.P.
Among other things, the Joneses alleged in their counterclaim, and now allege in brief, that the Bank voluntarily assumed the duties of a quasi-trustee and breached its fiduciary duties to the Joneses of fairness and good faith. They state that "the Land Bank voluntarily assumed and exercised direct control not only over the disbursement of the loan, but also over supervision of construction, payment of suppliers and subcontractors, and over the ordering of materials."
As a corporate entity, the Bank can only act through its duly authorized agents, servants, or employees. Alabama Music Co. v. Nelson, 282 Ala. 517, 213 So. 2d 250 (1968). From the evidence presented at trial, the only three possible agents of the Bank were H.D. Ellzey, Ken Gresham, or Rosemary Harris, the president, vice president, and assistant vice president-treasurer, respectively, of the Federal Land Bank Association of Selma.
The Joneses dealt only with the local Association officers and had no direct dealings with the Bank; therefore, under the peculiar facts of this case, any relationship between the Joneses and the Bank would of necessity be based upon a finding of agency between the Bank and the Association. The trial court did not specifically find that the officers of the Association were the agents of the Bank; however, such a finding is implied by the trial court's judgments in favor of the Joneses, Rawls, Brown, and Henry, and against the Bank. Rawls, Brown, and Henry, like the Joneses, dealt only with the officers of the local Association and not with the Bank. Because all of the parties dealt with the local Association officers, and not the Bank, their claims, if found to be valid, also must have been based upon an agency relationship between the Bank and the Association. In the absence of such a relationship, the Bank cannot be held liable for the actions of Ellzey, Gresham, or Harris. In that case, the Joneses' claim that the Bank assumed representative duties must fail along with all of their other claims against the Bank, and the claims of Rawls, Brown, and Henry against the Bank as well.
The Bank asserts that the officers of the Association did not act as its agents in the Jones transactions, and that the trial court should be reversed for finding that the Association officers were the Bank's agents. In support of its position, the Bank cites several Alabama decisions in which this Court held that Association employees are not the agents of the Bank.
The first of these decisions is Gantt v. Gunter, 225 Ala. 679, 145 So. 146 (1932). Plaintiff brought an ejectment action against a mortgagor, who defended on the basis of mental incapacity to make a valid mortgage. The issue before this Court was "whether, in the matter of making a loan and obtaining a mortgage from the borrower, the National Farm Loan Association, or its executive officer, the secretary-treasurer, is the agent of the Federal Land Bank in such sort that notice to him of the mental status of the mortgagor is notice to the bank." 225 Ala. at 679, 145 So.  at 147. This Court stated that the question is one of law and briefly discussed the structure of the Federal Land Bank and National Farm Loan Association:
Next, the Bank cites Hinds v. Federal Land Bank of New Orleans, 235 Ala. 360, 179 So. 194 (1938). In that case, the Bank brought an action to quiet title and defendants filed a cross-bill seeking an accounting and damages against the Bank for misappropriating the money borrowed and alleging the following:
This Court held:
Again, in Federal Land Bank of New Orleans v. First National Bank of Scottsboro, 237 Ala. 84, 87, 185 So. 414, 416 (1939), this Court reaffirmed the rule followed in Gantt and Hinds, supra: "[T]he association, in supervising the distribution of the funds, was not the agent of the complainant Bank, but acted for the borrower, and itself as a guarantor of the loan."
In Hinds and First National Bank of Scottsboro, this Court relied on Federal Land Bank of Columbia v. Gaines, 290 U.S. 247, 54 S. Ct. 168, 78 L. Ed. 298 (1933). Gaines was a suit brought by a borrower to cancel her mortgage given to the Bank as being invalid for failure of consideration. Mrs. Gaines, the borrower, applied to the Bank, through the Columbia Farm Loan Association, for a loan. She executed a promissory note to the Bank secured by a mortgage upon her land. The loan check, payable to the secretary-treasurer of the local association and Mrs. Gaines, was endorsed by the payees and deposited in a bank to the credit of the association. Immediately after collecting the check, the bank closed and the proceeds became unavailable to Mrs. Gaines and the association.
The Supreme Court of North Carolina concluded that, under the provisions of the Federal Farm Loan Act, the association was an intermediary between the borrower and the Bank and acted as a public agent in receiving and depositing the check. The court held that the loan check had not been received on behalf of Mrs. Gaines by the association and that, accordingly, she was not liable on the note.
The United States Supreme Court granted the Bank's petition for writ of certiorari and, after reviewing the case, reversed the North Carolina court, stating:
In the Gaines decision, supra, it appears that the Federal Land Bank issued one check representing the loan funds to the borrower and the local association which was subsequently endorsed by the payees and deposited to the credit of the association.
This Court cannot determine from the record in the present case the method of transfer of the loan funds from the Federal Land Bank in New Orleans to the Joneses and the Association. The logical assumption is that the Bank transferred the loan funds to an account in the name of the Association, because the disbursement checks were drawn on the Hibernia National Bank in New Orleans in the name of the Association and signed by Ken Gresham, vice president. No evidence can be found in the record that the Bank had any power to recall the loan proceeds.
The Joneses, Rawls, Brown, and Henry assert that certain statements by Gresham and Ellzey at trial support a finding of agency in fact between the Association and the Bank. On cross-examination, Gresham testified in part:
Several excerpts from Ellzey's testimony are set out below:
Contrary to the assertions of the Joneses, Rawls, Brown, and Henry, however, agency is not determined by how the parties characterize their relationship, but by the facts of the case. Semo Aviation, Inc. v. Southeastern Airways Corp., 360 So. 2d 936 (Ala.1978). In the present case, the controlling statutes clearly provide for the creation of two autonomous entities, and the courts interpreting those statutes have recognized that statutorily there is no agency relationship between the Bank and the Association. (See preceding discussion of these decisions.) The Court in Gaines implied that particular circumstances attending a loan giving the Bank a right of control over the Association, or power to recall the loan funds, might create an agency relationship [in fact]. Alabama law is in accord with Gaines, because one of the facts necessary to establish agency in Alabama is a right of control by the principal over his agent. Wood Chevrolet Co. v. Bank of the Southeast, 352 So. 2d 1350 (Ala.1977). Therefore, absent a showing that the Bank had some power to control the Association, Gresham's testimony that his duties were performed for the local association but in turn for the "parent company" is not conclusive on the question of whether he was authorized to act on behalf of the Bank as its agent in the Jones transactions. Similarly, Ellzey's statements that he was the Bank's "representative" and that Gresham was authorized to do anything in connection with the loan on behalf of the Bank do not create an agency relationship. Our review of the record disclosed no factual basis for these statements by Gresham and Ellzey.
Ellzey also stated that the Bank "recommended" that the Joneses acquire another contractor to finish the house, and they "advised" the Association to file the interpleader and disburse money to the second *10 contractor. These statements do not show that the Bank had a right to control the Association; instead, they show that the Bank counselled the Association, the guarantor on the loan, on how to protect the Association's interest.
The burden of proving agency rests upon the party asserting its existence. Johnson v. Shenandoah Life Ins. Co., 291 Ala. 389, 281 So. 2d 636 (1973). The Joneses, Rawls, Brown, and Henry did not meet this burden, and the judgments in favor of them against the Bank are due to be reversed.
Because this Court has determined that the Bank had no control over the funds and, therefore, was not the proper party to interplead them, this case must be remanded to the trial court for further proceedings to determine to whom the interpleaded funds should be paid.
The next issue with respect to the Bank's appeal is whether the trial court erred in requiring the Bank to account to the Joneses for interest charged to them on the sum interpleaded. The trial court found that the interpleader constituted an abuse of process, and that, therefore, the sum interpleaded continued to belong to the Bank. This Court agrees that the Bank must account to the Joneses for the interest charged to them on the funds sought to be interpleaded by the Bank, but our conclusion is not based upon abuse of process grounds. Rule 22, A.R.Civ.P., provides:
The interpleaded funds could not have been treated as a disbursement because of the nature of an interpleader action. The stakeholder in an interpleader action admits that he is uncertain as to whom the stake belongs. See Finn v. Missouri State Life Ins. Co., 222 Ala. 413, 132 So. 632 (1931). It is inconsistent for the stakeholder (the Bank here) to claim, on the one hand, that he is uncertain about the owner of the funds and then, at the same time, to claim that the funds have been disbursed to a particular party who is chargeable with interest on those funds. Thus, the trial court's judgment requiring the Bank to account to the Joneses for interest charged on the money interpleaded is due to be affirmed.
The Joneses cross-appeal from judgments entered against them and in favor of Tillery, Brown, Central, Rawls, and Henry (82-65). The trial court made no specific findings disclosing the theories upon which those judgments were based. "In the absence of specific findings of fact by the trial court, this Court will assume that the trial court made those findings necessary to support its judgment, unless such findings would be clearly erroneous and against the great weight and preponderance of the evidence." Hand v. Stanard, 392 So. 2d 1157, 1159 (Ala.1980).
The record in the case at bar is long, confusing, and consists in major part of handwritten pleadings which are difficult to decipher. Some of the claims asserted against the Joneses were presented in a form designated as "Summary of Claims" and apparently these were intended to serve as pleadings in the nature of amendments to cross-claims. This Court has searched the record, and it appears that Tillery filed counts of open account and for work and labor done; Rawls apparently filed on open account; Henry also apparently filed on open account; Brown apparently filed on open account, and for work and labor done; and Central apparently filed a count for work and labor done. The question then becomes whether or not the trial court's presumed findings under those theories were supported by the evidence.
The Joneses allege that they never contracted with Tillery to pay for the carpet installed in the house, and that Tillery dealt only with Hargrove. Therefore, they assert that the trial court erred in entering the judgment against them, which was entered *11 jointly against Hargrove in favor of Tillery in the amount of $2,021.60.
Tillery's claims were apparently based upon recovery for work and labor done and open account, and this Court assumes that the trial court found that Tillery was entitled to recover on those theories. The trial court heard the evidence without a jury and its findings based upon that evidence are presumed correct in the absence of palpable error. First Alabama Bank v. Coker, 408 So. 2d 510 (Ala.1982).
James Tillery testified at trial:
This evidence was sufficient to support a finding by the trial court that the Joneses were obligated to Tillery on an account. Accordingly, the trial court's judgment is due to be affirmed.
The Joneses assert that the judgment in favor of Rawls and against them is clearly erroneous and contrary to the great weight of the evidence in this action. They cite the following testimony by Rusty Rawls in support of their assertion that Rawls was looking to the Bank and not to the Joneses for payment:
Both the Joneses and Rawls cite the following testimony by Rawls in support of their position:
Rawls claims that the preceding excerpt shows that he extended credit to the Joneses as well as the Bank. Additionally, Rawls asserts that there is ample evidence to support a finding for him against the Joneses on open account based upon quasi-contract.
This Court discussed the remedy of quasi-contract in Opelika Production Credit Association, Inc. v. Lamb, 361 So. 2d 95, 99 (Ala.1978):
The Joneses clearly received a benefit by having Rawls deliver supplies and materials to be used in their house. Likewise, Rawls clearly suffered a detriment in the amount of $12,775.23. Accordingly, the trial court's judgment for Rawls is due to be affirmed because there was sufficient evidence from which the trial court could find for Rawls under the theory of quasi-contract on the count of open account or goods sold.
Doug Sellers testified as follows in connection with the claim of Henry Brick:
Therefore, Henry suffered a detriment in the sum of $1,393.25, plus interest accrued, and the Joneses received a benefit by having the brick installed in their house. The Henry judgment against the Joneses is due to be affirmed for the same reasons supporting the Rawls judgment.
J.M. Brown testified that he installed plumbing in the house and that the amount owed to him was $1,208.68. The Court entered judgment for that amount plus interest. Under the rationale set out in the Rawls discussion, the Brown judgment is due to be affirmed.
The Joneses allege that the judgment in favor of Central and against them is erroneous and contrary to the great weight of the evidence. Central installed the heating and air conditioning in the Jones home. Nelson Free, a partner in Central, testified:
This evidence is sufficient to support a finding by the trial court in favor of Central and against the Joneses on the count for work and labor done.
To summarize, the judgments in favor of Tillery, Brown, Central, Rawls, and Henry against the Joneses are affirmed. The judgments against the Federal Land Bank of New Orleans in favor of Henry, Brown, Rawls, and the Joneses are reversed, except that the judgment requiring the Bank to account to the Joneses for interest charged on the sum interpleaded is affirmed. The judgment requiring the Bank to pay attorney's fees out of the interpleaded funds is reversed and the cause remanded for the trial court to determine to whom the interpleaded funds should be paid. Accordingly, the judgments are affirmed in part, reversed in part, and the cause remanded.
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED WITH DIRECTIONS.
TORBERT, C.J., and MADDOX, JONES and SHORES, JJ., concur.