[Elliott v. Sibley et al.]

and VIII of Cook on Stocks & Stockholders. But these principles have no application where the corporation is proceeding to collect a past due debt, fixed by contract between the parties, and for which the other stockholders are in no way liable. On such an indebtedness the debtor, although a stockholder, is treated as a stranger. Section 1674 of the Code declares a lien upon the shares of stockholders for any debt or liability incurred to the corporation by such stockholder and provides for the sale of the same. To enforce such a lien, prima facie, no action is necessary on the part of the directors.

These principles dispose of all the errors assigned as to the ruling of the court upon the demurrers to the bill, except that of multifariousness.

It is urged that the bill is multifarious in this, that the bill seeks to enjoin the sale of complainant's stock, and in the same bill, it is sought to enjoin certain parties from acting as directors on the ground that their election was illegal and void. The rule declared by this court is, that a court of equity will not primarily take jurisdiction to determine the legality of an election of directors or to remove a director who is in possession of the office. The court will enquire into the regularity of the election, or the right of the person to the office, only when the question arises incidentally and collater ally in a suit of which the court has rightful jurisdiction and the grant of relief depends upon its decision.”—Perry v. Tuscaloosa Cotton Seed Oil Mill Co., 93 Ala. 364, 9 So. Rep. 217; Nathan v. Tompkins, 82 Ala. 437, 2 So. Rep. 747.

The relief sought in the present case is against the corporation. The validity of the claims of the corporation against the complainant, and his defense to the note, and the rightfulness of his claim for improvements, which he avers to be in excess of his indebtedness for rent to the corporation, in no way depend upon any act of the alleged illegal directors or of the corporation since their election. The The note for five hundred dollars passed to the corporation before their election, and the rental contract was executed prior to their election. Whether, therefore, the election of these directors was legal or illegal can have no influence upon his right to relief. We hold, therefore, complainant's bill does not present a case which will authorize a

[Elliott v. Sibley et el.]

court of equity to enquire into the legality of the election of the directors. It does not present a case so much of multifariousness as a want of equity in this respect. We have not overlooked the fact, that complainant's claim for improvements seems to be based upon a resolution adopted at the meeting of the directors, alleged by complainant to have been an illegal meeting of directors.

Upon the denials of the answer the court decreed a dissolution of the injunction. The rule is not inflexible, that a temporary injunction will be dissolved, upon the denials of an answer, however definite and specific. Facts and circumstances attending each case should be considered, and whether and how far the denials of the answer are sustained by them. The consequences to the parties should enter into and weigh in forming a proper conclusion. Amendable defects are to be considered as amended when there is equity in the bill.-East & West R. R. Co. v. East Tenn. Va. & Ga. R. R. Co., 75 Ala. 275. We are clear that as to the shares of stock pledged as collateral security for the payment of the note for five hundred dollars, the injunction was properly dissolved. The allegations of the bill, that the money was advanced to complainant to be expended in the adjustment of a law-suit is specifically denied. The execution of a note, which apparently bears interest, and the pledge of the stock to secure its payment do not comport with complainant's claim, but tend to support the averment of the respondent, that the note was executed for a loan of money to complainant.

As to the claim of complainant for improvements which he avers is in excess of the debt due from him for rent, and which complainant asked to be applied in extinguishment of his own indebtedness, the principle which governs was stated in Gafford v. Proskauer & Co., 59 Ala. 264, as follows: "But if it becomes necessary for the mortgagor to resort to equity for relief upon the ground that he has a proper set-off against the mortgagee, he must show some other fact, than the mere existence of the demand which is the proper subject of set-off."

The bill does not aver the insolvency of the Round Mountain Coal & Iron Co., or any fact in respect to the alleged claim for improvements, which justifies the interposition of a court of equity, to enjoin the sale of the

[Kent & Barnett v. Marks & Gayle.]

stock, for the payment of the debt admitted to be true. Tate v. Evans, 54 Ala. 16. In fact the corporation is not even a party defendant to the bill. But considering all necessary averments and amendments made, the specific denials of the answer, the resolution of the board of directors authorizing the improvements, the failure of the bill to bring complainant within the terms of the resolution, upon which he bases his claim, we think the court was justified in decreeing a dissolution of the injunction.

There is no error in the record available to appellant, and there are no cross assignments of error by appellee. Affirmed.

Kent & Barnett v. Marks & Gayle. Bill in Equity to set aside the Cancellation of a Mortgage, and to foreclose it.

1. Application of a payment on a debt; right of creditor in absence of specific direction.-A debtor may, at the time of payment, direct its application; but if, at the time of payment, he is indebted to the same creditor in two separate accounts, and fails to give any direction as to how the said payment shall be applied, the creditor has the right to apply it to either one of his debts; and when so applied, at the time of payment, both parties are bound by such application, which can not be changed except by mutual consent.

2. Burden of proving specific direction.-The burden of proving an alleged specific direction as to the application of a payment upon a debt to a creditor, is upon the debtor who affirms such special direction.

3. Cancellation of mortgage by mistake; application of a payment.—Defendants owed complainants on a mortgage and on an open account, and, a payment having been made by defendants, the mortgage was surrendered, as complainants alleged, through a mistaken impression of one of their employés that the mortgage debt had been paid. Defendants testified that they called for a statement of their "mortgage account," and complainants' bookkeeper testified that they called only for a statement of their open account, which he furnished. There was no such account on complainants' books as a "mortgage account," and the amount paid by defendants was the exact amount of the open account. Defendants knew that the money paid by them was less than

[Kent & Barnett v. Marks & Gayle.]

the mortgage debt. Complainants produced in evidence the statement of the open account which they claimed to have furnished, while defendants failed to produce the statement of the "mortgage account," which they alleged was furnished them. Held, that the payment was on the open account, and that the mortgage was surrendered by mistake.

APPEAL from the City Court of Montgomery, in Equity.

Heard before the Hon. THOS. M. ARRINGTON.

The bill in this case was filed by the appellees, Marks & Gayle, against the appellants, Kent & Barnett, on November 7, 1891; and sought to have annulled and set aside the cancellation of a certain mortgage, given by respondents to the plaintiffs, and then to have the said mortgage foreclosed. The facts of the case are sufficiently stated in the opinion. Upon the final submission of the cause, on the pleadings and proof, the chancellor granted the relief prayed for. The defendants appeal, and assign as error this decree of the chancellor.

JOHN GINDRAT WINTER, for appellants.-(1.) The debtor has the right to direct the application of payment if made at the time of payment.-McCurdy v. Middleton, 82 Ala. 137, 2 So. Rep. 721. (2.) A mistake to justify the annulling of the cancellation of a mortgage must be mutual.-Porter v. Collins, 90 Ala. 510; 8 So. Rep. 80. (3.) Courts of equity will not interfere unless the mistake is shown by clear and satisfactory proof; or unless a demand and refusal to correct is alleged and proven.Alexander v. Caldwell, 55 Ala. 517; Campbell v. Hatchett, 55 Ala. 548; Berry v. Sowell, 72 Ala. 14; Berry v. Webb, 77 Ala. 507; Guilmartin v. Urquhart, 82 Ala. 570, 1 So. Rep. 897; Harold v. Weaver, 72 Ala. 373; 1 Brick. Dig. 681, § 611.

T. SCOTT SAYRE, contra.-The application of a payment by the respondents to the open account having been made at the time of payment, without objection on the part of respondents, is binding; and the burden of proving the specific direction is upon the debtor making the payment.-Levystein v. Whitman, 59 Ala. 345.

HARALSON, J.-The primary object of the bill in this case is the foreclosure of a mortgage given on real

[Kent & Barnett v. Marks & Gayle.]

estate by appellants, who were defendants in the lower court, to appellees, the complainants there, to secure a note of the defendants to the complainants, for $508.88.

This note and mortgage were due and unpaid, on the 2d February, 1891. The defendants were also indebted to complainants, on that date, for a balance on open accounts, in the sum of $432.43. On that day, defendants paid to complainants the sum of $432.43, the amount due and owing by them on their open account; and one of the employés of complainant, under the mistaken impression, as is averred, that it was the mortgage debt that had been satisfied, delivered to defendants the mortgage, but did not deliver to them the note, secured by it, which note, it is alleged, was lost or mislaid.

The appellants claim, that they paid their mortgage, and not the balance on their open account, and there is, therefore, no mortgage debt due, and no mortgage to foreclose, whereas, the complainants in the suit allege, it was the balance of the account that was paid, and the mortgage is still alive, unaffected by its delivery, through mistake to the defendants. There is no dispute as to the amount that was paid on the 2d of February, 1891, but the sole contention between the litigants is one of the application of the payment, whether to the mortgage or open account debt.

The prayer of the bill is to have the surrender and cancellation of said mortgage set aside, and for a foreclosure of the same. The chancellor granted the relief prayed, and this appeal is to reverse that decree.

The case is not one, nor is it similar to one, for the reformation of a written instrument for an alleged mistake in its execution, and the authorities referred to and the argument submitted by counsel in reference to such a case as analogous to this, are without application. The question here, as stated, is one purely of fact, as to the application of the payment of the money made by defendants to complainants. If the money was paid on the open account, and to close it up, and the mortgage was delivered up by mistake, when nothing had been paid on it, then its delivery to defendants did not affect it at all, and it remained in their hands, though marked cancelled by complainants, just as valid and of as much force and effect, as if it had remained in complainants hands. Defendants, in such case, would be held to be the depositaries of it, in trust for complainants.