Combs v. Salyer

• Decision Date: 02 October 1942
• Parties: COMBS et al. v. SALYER.
• Court: Kentucky Court of Appeals

165 S.W.2d 40

291 Ky. 592

COMBS et al. v. SALYER.

Court of Appeals of Kentucky

October 2, 1942

Rehearing Denied Nov. 13, 1942.

Appeal from Circuit Court, Perry County; Joseph D. Harkins, Special Judge.

Action by K. N. Salyer against Van B. Combs and others to foreclose a mortgage. From a judgment for plaintiff, defendants appeal.

Affirmed.

D. G Boleyn, of Hazard, for appellants.

Jesse Morgan, of Hazard, for appellee.

MORRIS Commissioner.

In April, 1928, the Perry County State Bank and the Hazard Bank and Trust Company consolidated under the name of Perry Bank and Trust Company, and functioned as such until November 15 1928, when taken over for liquidation by the then Banking Commissioner. Coming into his hands was a $2,000 renewal note which had been originally executed to the Perry County State Bank by Mr. Combs and his wife, on June 11, 1927; of even date the makers had executed a mortgage on a tract of land in Perry County, to secure the payment or renewal of the note.

The note was renewed to the consolidated bank on June 12, 1928. The process of liquidation was tardy, and on March 28, 1938 Cisco, bank agent, under court orders sold all the assets of the consolidated bank to Salyer. Among them was the note above mentioned, and upon which he later filed suit seeking judgment, and for a sale of the tract of land.

The defendants admitted the execution of the note, but plead that after the note was executed to the Perry Bank and Trust Company, and before it was placed in the hands of the commissioner, and before the note was due, the holder, for value, negotiated the note in due course, so that thereby the note was placed on the footing of a bill of exchange, and that since five years had elapsed between due date and institution of suit, action was barred. Mrs. Combs alleged that she signed the husband's note as surety receiving no part of the proceeds of the note, hence she was not personally bound.

As further defense she plead that at the time the note was sued on, she was and is now the owner of the mortgaged real estate; that when the note became due (December, 1928) her property was subject to the claim of plaintiff, but before it became due the payee bank turned it over to the agent, who knew the people of the county and parties; that it was his duty to reduce the note to cash for the benefit of the creditors, but the agent stood by without undertaking to collect and saw her property gradually decline in value.

She also pleads that the agent treated the note as uncollectible along with thousands of dollars worth of notes, which with other properties were sold in 1938 to plaintiff. She repeats that although she could have paid the note at maturity, and had some $5,000 left, it would now take all her property to pay the note and interest. She charges that by reason of Cisco's neglect the plaintiff should be estopped to lay claim, since he took the note after maturity with knowledge of said facts, as did his assignee.

She further alleged that at the due date of the note, or soon thereafter, Mr. Combs was placed in involuntary bankruptcy, and the agent took no steps to collect the claim in the bankruptcy proceeding, and she was led to believe that the note was settled in one way or another. Further, that after the suit was instituted by Salyer, and the controversy arose between them, "although contending that her property was not liable on said note," she made an agreement by which she was to pay him $500 in full settlement; that after he had agreed, B. W. Baker, an attorney, learning that she was about to settle, in order to stir up litigation entered into a champertous agreement with Salyer whereby he purchased the note for $500, and had the note assigned to his brother Prentiss Baker, and agreed that the action was to continue in the name of Salyer, and the brothers would stand the cost for further prosecution, accepting for services all over the amount paid to Salyer.

All these allegations were denied in reply, thus apparently joining issues. Upon submission the chancellor adjudged plaintiff the relief sought, and directed the sale of so much of the land as would meet payment of the obligation. The land was appraised at $3,000, and at the sale Prentiss Baker bid the appraised value and deed was executed, following conformation of the report of sale, to which the defendants had filed exceptions:

(a) Because the person making the sale was and is not the master commissioner of the court, since he was appointed more than four years prior to the date of sale, and at time of sale another regular judge of the Perry circuit court had never appointed him as commissioner. (b) The judgment of the court is erroneous "inasmuch as defendant appeared at said sale and publicly notified the bidders and the purchaser of said property of the invalidity of the judgment and her intention to appeal." (c) Because "she, as the defendant in the action, bid the sum of $500, with interest and cost as set out in the petition, which amount was all that she owed or agreed to pay on said property, and which the plaintiff had agreed to accept." (d) Because the judgment was brought about by fraud, in that she and one of plaintiff's attorneys had agreed to compromise at $500; that she paid him $62.50 for his services in negotiating the settlement, and he, with plaintiff, in violation of her rights took advantage of the services for which she had paid him, and plaintiff caused a transfer of the property to be made to Prentis Baker, brother of the attorney. (e) The purchaser caused the property to be appraised at $3,000, when it was worth only $2,000.

It may be noted, if it affects the case, that the commissioner in a supplemental report said: "The plaintiff offered the best and only bid upon the property for $3,000, being the appraised value; the master commissioner thereupon asked if any one present would take a less amount of the land than the whole and pay the debt, and no one responding to this offer plaintiff was declared the successful bidder." All exceptions were overruled.

As argued in brief for appellant, the three chief grounds for reversal are: (1) The court erroneously overruled exceptions to the commissioner's report. (2) Because of the bankruptcy proceedings the Perry circuit court had no jurisdiction of the subject matter. (3) Because the collection of the note was barred by limitation and by laches on the part of the liquidating agent and the assignee.

There are no records showing the involuntary bankruptcy proceedings, and the proof as to whether this note was before the bankruptcy court is vague. The note was executed on June 12, 1928, and due in six months. It went into the hands of the banking commissioner on November 15, 1928. On October 24, 1928, it was attached as collateral to the consolidated bank's note of more than $40,000. This note was paid by the Perry Bank and Trust Company and all collateral was returned by the pledgee on or about May 16, 1929. Cisco apparently did not testify as to this $2,000 note going into the bankruptcy proceeding, although he had notice of the proceeding.

W. E Faulkner served as referee from 1931 or 32 until 1936. When he took office he found the Combs' bankruptcy proceeding, which was still pending when he turned the office over to a successor in 1936, though under court orders he was to wind up this case with others; his record showed a list of 27 creditors, among them the Hazard Bank and Trust Company. He said that creditors were notified that Combs was adjudged a bankrupt August 21, 1928. He found a claim filed by the Perry Bank and ...