Brown v. Scott

• Decision Date: 26 June 1889
• Citation: 6 So. 384,87 Ala. 453
• Parties: BROWN ET AL. v. SCOTT ET AL.
• Court: Alabama Supreme Court

6 So. 384

87 Ala. 453

BROWN ET AL. v. SCOTT ET AL.

Supreme Court of Alabama

June 26, 1889

Appeal from chancery court, Calhoun county; S. K. MCSPADDEN Chancellor.

Bill by Brown and others to foreclose two deeds of trust, and for an appropriation of sufficient of the proceeds from such foreclosure to pay the indebtedness secured by said deeds of trust, which were transferred as collateral security. A cross-bill was filed, to which the complainants demurred, on the ground that the matters undertaken to be set up therein were matters of defense by plea or answer; and on the ground that it undertook to set off claims and demands due from an intermediate indorser or holder. The court overruled these demurrers, and upon final hearing, upon the pleadings and proof, decreed that the complainants were not entitled to the relief prayed for in the bill, and ordered the dismissal of the bill. The complainants appeal, and assign the decree of the chancellor on the demurrers to the cross-bill, and his final decree as error.

Brothers, Willett & Willett, for appellants.

John H. Caldwell and Caldwell & Johnston for appellees.

CLOPTON J.

Appellants, as transferees, seek by the bill to foreclose two deeds of trust in the nature of mortgages, which were executed by William Scott, one January 18, 1875, and the other April 7, 1877, to secure the payment of two notes made by him to Rowan, Dean & Co. The grantor died in 1878. On May 9, 1879, Rowan, Dean & Co. transferred the deeds of trust, and delivered the notes to Winfield Scott, who transferred them, June 23, 1882, to complainants as collateral security for borrowed money. The execution of the conveyances, the justness of the debts, and the transfers are not controverted, and, if they were, are clearly proved. Winfield Scott, who is a son and one of the heirs of the grantor, was indebted to his father at the time of his death for money paid as his surety. The other heirs of William Scott seek by cross-bill to set off the indebtedness of Winfield Scott against the notes secured by the deeds of trust,-a demand against an intermediate holder. Courts of equity, there being no special and intervening equities, adopt and follow the rules at law in relation to set-off. The well-settled and uniform construction of the statute is that the maker of a note will not be allowed to set off a demand against an intermediate holder, unless founded on an agreement supported by a new consideration, in pursuance of which the intermediate holder procured the note, or which was entered into by the parties while it was in his hands. Goldthwaite v. Bank, 67 Ala. 549. Though the transferee of a note not commercial takes it subject to all the equities existing between the original parties, he does not take it subject to any equities which may arise between the maker and an intermediate holder. This settled and uniform construction of the statutes is essential to the transfer of such paper unobstructed by risks other than the original equities between the original parties. The cross-bill alleges no agreement founded on a new consideration, or any special or intervening equity, which withdraws their demand from the operation of the general rule.

The defendants set up the further defense that the transaction by which Winfield Scott obtained the transfer of the notes and deeds of trust operated as a payment and extinguishment. It satisfactorily appears that Winfield Scott used his own funds to pay Rowan, Dean & Co., and took a written transfer of the deeds of trust with the delivery of the notes. These facts unexplained, indicate a purchase. W. J. Scott, who was the administrator and also an heir of William Scott, was present when the transfer was made. His testimony as to what was said in respect to the character of the indorsements which should be put on the deeds is denied by Winfield Scott, who testified that he said that he wanted the papers transferred to him, and is unsupported by Dean, who did not remember the words, but did remember that Winfield Scott said, in substance, he wanted the indorsements to show that the indebtedness was paid by him. It seems that, if payment and satisfaction were intended, the notes and the deeds of trust, instead of being transferred to Winfield Scott as a subsisting demand, would have been surrendered to the administrator, who...