Allen v. Smith

• Decision Date: 06 April 1931
• Docket Number: 29200
• Parties: ALLEN v. SMITH & BRAND
• Court: Mississippi Supreme Court

133 So. 599

160 Miss. 303

ALLEN v. SMITH & BRAND

No. 29200

Supreme Court of Mississippi

April 6, 1931

Division B

1. BILLS and NOTES.

Note past due when transferred was not "negotiable instrument."

2. BILLS and NOTES.

Transferee has no right to transferor's indorsement on paper non-negotiable or payable to bearer (Code 1930, section 2705).

3. BILLS and NOTES.

Transfer of nonnegotiable note and deed of trust did not amount to "general indorsement" (Code 1930, section 2722).

4. BILLS AND NOTES.

Transferees of past-due note not indorsed and deed of trust got only legal title and warranty of genuineness.

5. FRAUDS, STATUTE OF.

If person making promise enters into original obligation Statute of Frauds does not apply, and if he enters into collateral obligation, it does (Code 1930, section 3343).

6. FRAUDS, STATUTE OF.

If party to whom consideration moves become personally liable for debt, another's promise to pay it, though made at same time, and upon same consideration, is "collateral undertaking" within statute (Code 1930, section 3343).

7. FRAUDS, STATUTE OF.

Where promise to pay another's debt arises out of new and original consideration, moving between newly contracting parties, it is "original undertaking" and not within statute (Code 1930, section 3343).

8. FRAUDS, STATUTE OF.

Promise to answer for debt, default, or miscarriage of another person, for which the other person himself continues liable is within Statute of Frauds (Code 1930, section 3343).

9. FRAUDS, STATUTE OF.

Where beneficiary of trust deed induced others to make loan to enable borrowers to pay trust deed, his promise to pay indebtedness within two years if borrowers failed to do so was within Statute of Frauds (Code 1930, section 3343).

HON JAS. A. FINLEY, Chancellor.

APPEAL from chancery court, Chickasaw county, Second District, HON. JAS. A. FINLEY, Chancellor.

Action by Smith & Brand against J. H. Allen and others. From a decree for plaintiff, defendant named appeals. Reversed and rendered.

Reversed, and judgment here for appellant.

J. H. Ford, of Houston, for appellant.

Ordinarily an assignment (of a mortgage) does not charge the assignor with any liability to make good the mortgage debt assigned; but he may, by special terms in the assignment, guarantee the debt just as he could make any guaranty.

1 Jones on Mortgages (6 Ed.), secs. 824-830, pages 865, 870.

Assignment of a mortgage for value implies a warranty that it is a genuine instrument and to that extent that it is a valid and subsisting security; but there is no implied warranty that the mortgage debt is collectible or that the mortgagor is solvent, nor does the assignment import a warranty that the mortgage is a first lien on the premises.

41 C. J. 683, par. 699.

An indorsement or transfer by indorsement written on a deed of trust securing a promissory note to which it was pinned was not an indorsement of the note, but was a common law assignment merely.

Norton on Bills & Notes (3 Ed.), p. 100; Clark v. Thompson, 194 Ala. 504, 64 So. 925; 5 C. J. 840, 841; Hughes v. Kaw Investment Co., 133 Miss. 148, 97 So. 465.

The taking of a note and deed of trust in renewal of a former note and deed of trust constituted a new contract, governed by the law in force at the time such new note and deed of trust were executed.

Purvis v. Woodward, 78 Miss. 922, 29 So. 917; Rozelle v. Dickerson, 63 Miss. 538; Warmack v. Boyd, 63 Miss. 488; Norcum v. Lum, 33 Miss. 299; Clayton v. Clark, 74 Miss. 499, 21 So. 565, 22 So. 189, 37 L. R. A. 771, 60 Am. St. Rep. 521.

Appellees seek to bind appellant to pay the debt of the Allens. The alleged agreement of his to do so is a verbal one. It is in contravention of the Statute of Frauds.

Section 3343, Code of 1930; 27 C. J. 159, par. 47; Nelson v. Boynton, 3 Met. 396 (Mass.), 37 Am. Dec. 148; 25 R. C. L., p. 497, par. 81.

Appellant received no benefit by the taking up and payment of the old note and deed of trust to him by appellees, which he would not otherwise have been entitled to.

27 C. J. 150, par. 32.

Leftwich & Tubb, of Aberdeen, for appellees.

The assignment of the deed of trust carried with it the assignment of the note.

Brown v. Yarbrough, 130 Miss. 715; West v. Union Naval Stores Company, 116 Miss. 743.

The endorsement by J. H. Allen is not what is denominated in our Negotiable Instrument Statute qualified endorsement made without recourse (see section 2694, Code of 1930), but is a general endorsement as is specified in section 2722 of the same Negotiable Instrument Act, the Code of 1930.

The fact that the note of D. B. Allen and wife to J. H. Allen was past due does not render the instrument nonnegotiable but is binding between the parties unless there is some legal defense thereto.

Secs. 2708, 2709 and 2712, Code of 1930.

The obligation of J. H. Allen is in writing, as shown at the bottom of the deed of trust, his undertaking having been shown to be in writing, in which he transferred the note and deed of trust as a general endorser and did not limit his obligation, and does not violate the Statute of Frauds.

The obligation of J. H. Allen was not to answer the debt, default or miscarriage of another as provided in the Statute of Frauds, but it was his own independent obligation, the consideration passing direct to J. H. Allen and, therefore, the Statute of Frauds does not apply.

Home Insurance Co. v. Moore & Rawls, 151 Miss. 189; Palmer v. Bridges, 151 Miss. 12; Moore v. Kirkland, 112 Miss. 55; Sweatman v. Parker, 49 Miss. 19; Oliver v. Lewis, 45 Miss. 203; Lee v. Newman, 55 Miss. 365.

OPINION

Anderson, J.

Appellees filed their bill in the chancery court of the Second district of Chickasaw county against appellant and his mother, Mrs. Annie Allen, and her husband, D. B. Allen, who was an uncle of appellant, to foreclose two mortgages on land, one of which was executed to appellees by appellant's mother and stepfather, and the other by the same parties to appellant; the latter having been transferred to appellees. The cause was heard on original bill, answers, and cross-bill of D. B. Allen and wife, and appellees' answer to the cross-bill and proof, resulting in the decree prayed for by appellees. From that decree appellant prosecutes this appeal. D. B. Allen and wife prosecuted no appeal from the decree against them.

Since we have reached the conclusion that under the law and facts of this case the decree appealed from must be reversed, and a decree rendered here for appellant, in stating the case it will be stated most strongly in favor of appellees. In other words, every material fact favorable to appellees which is shown by the evidence, either directly or by reasonable inference, will be set out.

D. B. Allen and his wife, Mrs. Annie Allen owned in Chickasaw county about one hundred eighty acres of land, which was their homestead. As stated, Mrs. Allen was the mother of appellant, and her husband, D. B. Allen, was appellant's uncle. On January 10, 1921, D. B. Allen and wife executed a deed of trust on their land to secure their note for four thousand five hundred dollars, payable to appellant. There was a prior deed of trust on the land to secure a note for eight hundred sixty-four dollars, which was held by Mrs. Hinds. D. B. Allen and wife failed to pay the note due appellant at its maturity. There was due appellant on this note at maturity, principal and interest, five thousand four hundred dollars. Appellant needed funds with which to purchase an ice plant in the town of Houston. His mother and stepfather were unable to pay the indebtedness due him, and he did not want to foreclose the deed of trust, and turn them out of their home. Appellant procured appellees to lend his mother and stepfather enough money to pay off both deeds of trust on their homestead. When this loan was made there was due on appellant's note five thousand four hundred dollars, and on the note secured by the prior deed of trust held by Mrs. Hinds enough to make the aggregate indebtedness against the land six thousand six hundred ninety-six dollars. On the 12th day of February, 1924, appellees lent D. B. Allen and wife that amount of money, taking their note therefor, payable January 1, 1925, with six per cent interest, and a deed of trust on their homestead to secure the same. Appellees thereupon gave their checks for the amount of the entire loan, one payable to appellant for the sum of five thousand four hundred dollars, and the other for the amount of the first mortgage on the land payable to the holder of the note secured thereby. None of the loan, therefore, went to D. B. Allen and wife in cash.

On the same day D. B. Allen and wife executed the note and deed of trust to appellees, and as a part of the same transaction, appellees had appellant to transfer to them the note and deed of trust which he held against D. B. Allen and wife, and for the payment and discharge of which they were advancing the money as aforesaid. This transfer was indorsed below the acknowledgment on the deed of trust in this language: "For a valuable consideration I hereby transfer the within trust deed and note to Smith and Brand. This 2--12--24. [Signed] J. H. Allen." The deed of trust was thereupon delivered to appellees; and appellant, not having the note there in his possession, agreed to deliver it later, but failed to do so.

Appellant went to appellees, and told them that he had bought an ice plant, and could not finance it unless he could realize on this loan due him by his mother and stepfather; that he would not foreclose the mortgage against his mother and stepfather and thereby turn them out of their home; that they were unable to discharge the mortgage indebtedness, and probably never would be...