Ellis v. Crowe

• Decision Date: 07 December 1936
• Docket Number: No. 4-4450.,4-4450.
• Citation: 99 S.W.2d 568
• Parties: ELLIS et al. v. CROWE et al.
• Court: Arkansas Supreme Court

99 S.W.2d 568

ELLIS et al. v. CROWE et al.

No. 4-4450.

Supreme Court of Arkansas.

December 7, 1936.

Rehearing Denied January 11, 1937.

Appeal from Arkansas Chancery Court, Northern District; Harvey R. Lucas, Chancellor.

Suit by Mrs. E. M. Ellis and Mrs. S. D. Pinson against J. R. Crowe and F. E. Ragland. From decree dismissing their complaint, the plaintiffs appeal.

Cause reversed and remanded, with directions to enter decree for plaintiffs.

W. A. Leach, of Stuttgart, and S. S. Hargraves, of Memphis, Tenn., for appellants.

Ingram & Moher, of Stuttgart, and Dixon, Williams & Edmondson, of Memphis, Tenn., for appellees.

JOHNSON, Chief Justice.

In 1931 and prior thereto appellees J. R. Crowe and F. E. Ragland owned and operated the Crowe Drug Company, an Arkansas corporation domiciled at Stuttgart, Ark. On December 31, 1931, this corporation being indebted to Ellis-Jones Drug Company of Memphis, Tenn., in a sum in excess of $4,000, by mutual agreement and consent this indebtedness was divided between Crowe and Ragland as follows: Crowe executed his promissory note in favor of said Ellis-Jones Drug Company for the sum of $2,088, drawing interest at the rate of 8 per cent. per annum due and payable on demand. Eighty-three shares of capital stock of the First State Bank of Stuttgart were pledged as collateral to secure the due and prompt payment of this note. F. E. Ragland executed his promissory note in favor of said Ellis-Jones Drug Company for the sum of $2,088 drawing interest at the rate of 8 per cent per annum from date until paid, payable on demand. Thirty shares of capital stock of the Crowe Drug Company were pledged as security for this note and it was also indorsed by J. R. Crowe. As we understand the record, these notes were identical in tenor and effect save as heretofore pointed out. Certain small credits were made and indorsed upon the Ragland note, but the issues here presented do not necessitate going into detail in this regard.

These notes not being fully paid at or subsequent to their maturity, appellants, Mrs. E. M. Ellis and Mrs. S. D. Pinson, claiming to own the same, instituted two separate suits in the courts of this state endeavoring to enforce collection. One suit was instituted in the circuit court of Arkansas county against Crowe, and the other was instituted in the Arkansas chancery court against Ragland and Crowe. The case filed in the circuit court was transferred to the chancery court, and there the two causes were consolidated for trial purposes. To the complaints thus filed Crowe and Ragland interposed common defenses as follows: First, that the said notes were Tennessee contracts and were usurious and void; second, that said complaints were without equity because the transfer of said notes from the payee to appellants does not constitute them or either of them the legal or equitable owner thereof.

Primarily the cause was submitted for trial and decree upon stipulation of counsel, in substance as follows:

"That the notes sued on were executed by defendants in the office of Ellis-Jones Drug Company in the City of Memphis, Tennessee, on January 31, 1931, and delivered by the defendants to Ellis-Jones Drug Company at its office in Memphis, Tennessee, and were given in settlement of an old account for merchandise sold and delivered to the Crowe Drug Company by Ellis-Jones Drug Company, and not for money lent; and that at that time the said Crowe and Ragland were stockholders and directors of the Crowe Drug Company and that for a valuable consideration received, the said Crowe and Ragland agreed to pay the debt, the amount of which is evidenced by the notes then due and owing to Ellis-Jones Drug Company.

"That the 83 shares of stock in the First State Bank, attached to the Crowe note as collateral, were subsequently mailed to be attached to the Crowe note as collateral security, pursuant to agreement had on the date of the execution of the note in Memphis; that the First State Bank at that time was an Arkansas corporation domiciled at Stuttgart, Arkansas; that the Tennessee code and Supreme Court decisions may be read as the law applicable to this state, without the same being specifically pleaded or proven * * *."

In addition to the stipulation of fact, testimony was adduced to the effect that the notes were not indorsed by the payees at or prior to transfer and delivery to appellants.

The chancellor dismissed appellants' complaints for want of equity, and this appeal seeks reversal.

The notes in suit having been executed and made payable in the state of Tennessee are Tennessee contracts, and the laws of that state must govern their collection and enforcement. White Company v. Bragg, 168 Ark. 670, 273 S.W. 7; Senter v. Bowman, 5 Heisk.(52 Tenn.) 14.

The defenses interposed by appellees to the effect that appellants are not the owners of the said notes, and therefore cannot maintain suits thereon, are not tenable under the facts and circumstances of this record. Section 7373, Williams' Tennessee Code of 1932, provides: "Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the transferree such title as the transferror had therein, and the transferree acquires, in addition, the right to have the indorsement of the transferror. But for the purpose of determining whether the transferree is a holder in due course, the negotiation takes effect as of the time when the indorsement...