Canal Bank & Trust Co. v. Brewer

• Decision Date: 06 June 1927
• Docket Number: 26344,26527
• Citation: 113 So. 552,147 Miss. 885
• Parties: CANAL BANK & TRUST CO. et al. v. BREWER et al. [*] (two cases)
• Court: Mississippi Supreme Court

113 So. 552

147 Miss. 885

CANAL BANK & TRUST CO. et al. v. BREWER et al. ^[*] (two cases)

Nos. 26344, 26527

Supreme Court of Mississippi

June 6, 1927

Suggestion of Error Overruled Oct. 10, 1927.

APPEALS from chancery court of Coahoma county, Second district.

HON. S I. OSBORN, Special Chancellor, and HON. N. R. SLEDGE Chancellor.

Suit by the Canal Bank & Trust Company and another against Earl Brewer and others. From decrees dissolving preliminary injunctions granted therein, complainants separately appeal and defendants cross-appeal. Affirmed as to one appeal, and reversed as to other, and case remanded.

See also, 112 So. 394.

Decree affirmed in case No. 26344, and reversed in case No. 26527, and case in both appeals remanded. Motion overruled.

Maynard, FitzGerald & Venable, for appellants.

I. Jurisdiction of Judge Sledge. In our opinion the stipulation of counsel and the appointment of him by the governor constituted Judge Sam I. Osborne the sole and exclusive power to hear and determine Cause No. 3851 in all of its branches and no earthly power could remove him from that position other than impeachment.

Kelly v. Kiersky, 79 Miss. 168, has absolutely no bearing on whether or not Judge SLEDGE could exercise jurisdiction herein. As stated by Judge MCGOWBN in Cashin v. Murphy, 138 Miss. 853, "Sections 995, 996, 998, Code of 1906 (Hemingway's Code, sections 715, 716 and 718) contain and comprise all the law of Mississippi on the subject of the disqualification of a judge and aside from the statement contained in the Constitution were under the common law." See, also, McCloud v. McCloud, 88 Miss. 729.

It is our first contention that no chancellor can act out of his own district in vacation, and can act out of his own district in term time only by virtue of section 717, Hemingway's Code (Code of Mississippi, section 996). This is plainly announced in Adams v. Kyzer, 61 Miss. 407.

Our idea of the statute is based on the statement in the law, section 689, Code of 1906 (section 467, Hemingway's Code). If however, this court should differ with us and hold that under section 998, Code of 1906 (section 718, Hemingway's Code), upon the disqualification of the rightful judge of the Seventh chancery court district and a certification by him that the judge of the Third chancery court district, the Honorable N. R. Sledge had the right to come into the Seventh chancery district in vacation and hear a cause there, then, nevertheless, we still say without fear of contradiction that under the agreement, Exhibit A hereto, and the appointment by the governor, Exhibit B hereto, the Honorable Harvey McGehee had already been disqualified and that the Honorable Sam I. Osborne was the sole and exclusive presiding judge in Cause No. 3851 in the Seventh chancery court district of Mississippi.

But the appellees answer to this that under the decision of Kelly v. Kiersky, 79 Miss. 168, Judge Sam I. Osborne, being a special chancellor appointed by the governor, could not act in vacation. Our reply to this is: (1) That the appellees having agreed that Judge Osborne could try the case in vacation were in no position, without his certificate of disqualification, to ask any other chancellor to act, under the objection of appellants; and (2) Judge Sledge had no authority to act until it had been certified to him by Judge Osborne that he, Judge Osborne, was disqualified.

The hearing before Judge N. R. Sledge was coram non judice, and this case should be reversed on that ground alone.

II. The liability of Brewer to the Canal Bank & Trust Company on the notes of Gidden & Townsend and McNally. The Canal Bank & Trust Company received these notes as collateral security for the five hundred thousand dollars owing to it by Mr. Holland. They were received for a present loan and in good faith, and the bank occupied then and now the position of bona-fide purchasers and holders for value. Jones on Collateral Security, section 89, page 105; Swift v. Tyson, 16 Pet. 1 (10 Ed.), page 865; Brooklyn, etc., R. B. Co. v. Nat'l Bank, 102 U.S. 14, 26 L.Ed. 61; Dix v. Tully, 14 La. Ann. 456; Smith v. Isaacs, 23 La. Ann. 454; La. State Bank v. Gaiennie, 21 La. Ann. 555; Gardner v. Maxwell, 27 La. Ann. 561; Steeg v. Godifer (La.), 102 So. 407; First Nat'l Bank v. McGrath, 111 Miss. 672; Joyce on Defences to Commercial Paper, section 561; Am. Nat'l Bank v. Hill, 169 N.C. 235, 85 S.E. 209; Jones on Collateral Security, section 104.

If the bank had failed to sue Brewer or to collect the Gidden & Townsend and McNally notes to the best of its ability, it would be liable to Holland for such failure.

Brewer's defenses are untenable and fallacious. He is estopped to set up that his endorsement was voluntary or for accommodation; and this cannot be true for the reason that Mr. Earl Brewer and Mr. Ed. Brewer endorsed these notes at the time of their taking by the bank. Benjamin Pearl v. Cartwright, 81 Miss. 300; Stubblefield v. Roper et al., 136 Miss. 831.

The other defense that Mr. Brewer makes to these notes is that the notes have been subordinated. This is no defense. This court has decided in Tarleton v. Bank of England, 23 Miss. 173, that although the proceeds of a mortgage should be distributed pro rata among all the notes secured by the mortgage, yet, nevertheless, the owner of all the notes may, if he so desires, subordinate certain ones of these notes to the payment of certain other ones of said notes and the maker or co-maker or endorser of all the notes cannot complain. See Goar v. McCanless, 60 Miss. 248; Pugh v. Hold, 27 Miss. 461, 468; Trustees v. Prentiss, 29 Miss. 46; Cheesborough v. Milliard, 1 John. Ch. 2, 412 (7 Am. Dec. 494); Union Bank of Maryland v. Edward, 1 Gill & J. 363; First Nat'l Bank v. Powell, 149 S.W. 1096; Barkwell v. Swann, 69 Miss. 907; Picard v. Shantz, 70 Miss. 381; Clopton v. Spratt, 52 Miss. 251; Chaffee v. Telliaferro, 58 Miss. 544; Payne v. Commercial Bank, 6 S. & M. 24.

All of the above cases have reference solely and entirely to a surety on the notes. In this case we insist that Mr. Brewer is not a surety, nor is his cousin, Mr. Ed. Brewer, surety; but they are both in equity and in law co-makers and under the decision of Tarleton v. Bank of England, 23 Miss. 173, and Goar v. McCanless, 60 Miss. 248, they have absolutely nothing to say with reference to whether or not some of the notes are subordinated to the others in point of security under the trust deed.

The Negotiable Instrument Act, section 2698, Hemingway's Code, provides how an instrument may be discharged so far as parties secondarily liable are concerned, and this is the only way that it can be discharged. The question of suretyship is abrogated by the Negotiable Instrument Act. Merchants Nat'l Bank v. Smith, 59 Mont. 280; 196 P. 523, 15 A. L. R. 430.

The fraudulency of the assignment from Mr. Brewer to Messrs. Cutrer & Smith. Chancellor Osborne, as well as Chancellor Sledge in this cause held that the transfer and assignment to Messrs. Cutrer & Smith was valid. Judge Osborne held that Messrs. Cutrer & Smith were "bona-fide purchasers for value without notice."

No case has been produced, or can be produced in any court, which holds that there can be such a thing as bona-fide purchasers for value without notice of an undivided interest in a chose in action. Under the common law one could not assign a chose in action and it is only by virtue of section 497, Hemingway's Code, that a chose in action can be transferred and assigned in this state. It provides that in order to give notice of the assignment, it is required by the statute that the assignment should be filed with the papers in the cause. On this point see, 2 R. C. L., Assignments, section 3, page 595; sections 26, 27 and 39, pages 618-19 and 630; Ford v. Sprale, 2 A. K. Marsh (Ky.) 528, 12 Am. Dec. 439; Natchez v. Minor, 9 S. & M. 544; Duke v. Clarke, 58 Miss. 466; Field v. Weit, 28 Miss. 56; Scott v. Metcalf, 13 S. & M. 563; Anderson v. Williams, 24 Miss. 686; 5 C. J., Assignments, section 150, page 962.

While the Canal Bank & Trust Company was the pledgee in possession of the Gates and Bobo notes, Brewer in December, 1923, and January, 1924, attempted to convey his equity in these notes by assignment to his attorneys and his daughter. We say that regardless of any written pledge, or whether or not the renewal notes had been marked "paid," the possession of the Gates and Bobo notes by the Canal Bank was full and complete and actual and constructive notice to the assignees of any claim or right and title that the Canal Bank had to the said Gates and Bobo notes. Muller v. Pondir, 55 N.Y. 325, 14 A. S. R. 259; Jones on Collateral Securities, section 85, page 99; Buck v. Payne, 52 Miss. 271; Brown v. Smith, 5 How. (Miss.) 387.

The fraudulency of the assignment from Mr. Brewer to Mrs. Earline Brewer Shelton. We call the court's attention to the following points denominated by law writers as being badges of fraud:

(1) Failure to record within a reasonable time. In this connection we call attention to the fact that the assignment from Mr. Brewer to his daughter was dated January 24, 1925, and not recorded until November 10, 1925. The assignment made by Mr. Brewer to his attorneys, Messrs. Cutrer & Smith, was dated December 21, 1923, and not recorded until December 2, 1925. See 12 R. C. L., page 580; Polk v. Polk, 40 Miss. 516.

(2) The value of the property exceeds the amount of the debt. See 12 R. C. L., page 582; Kaufman v. Whitney, 50 Miss 103; Price v. Martin, 46 Miss. 429. If the difference in value is great, the transaction is entirely void; if a small amount, void for the difference. 12 R. C. L., page 587; Griswold v. Szwanek, 21 L. R. A. 22 and note; Rice v. Harrison, 2 Miss. Dec. 403; Thompson v....