Evans v. Sheriden
| Decision Date | 15 July 1944 |
| Citation | 186 S.W.2d 911,28 Tenn.App. 90 |
| Parties | EVANS et al. v. SHERIDEN et al. |
| Court | Tennessee Court of Appeals |
Certiorari Denied by Supreme Court December 3, 1944.
Appeal from Chancery Court, Hamilton County; J. Lon Foust Chancellor.
Suit by John R. Evans and others against John L. Sheriden and others involving the validity of notes and a second mortgage or deed of trust securing them. From a decree, complainants appeal.
Reversed and decree entered for complainants.
J. W. Wagner and Chas. H. Neighbors, both of Chattanooga, for appellant evans.
Chas Allen Ward, of Chattanooga, for appellant Ward.
H. B Mack, of Chattanooga, for appellees Sheriden.
H. W. Schoolfield, of Chattanooga, for HOLC.
This suit involves the validity of a series of 75 notes of $20 each and the second mortgage or deed of trust securing the payment thereof, executed by Sheriden and wife to appellant Ward, and of which appellant Evans purchased the last 42 without recourse. It is claimed the notes and mortgage were executed in violation of regulations of the Home Owners Loan Corporation, holder of first mortgage on this property, and were contrary to public policy. The Chancellor so held and complainants appeal.
In 1926, Mr. Ward contracted to build a residence for Mr. Sheriden at the price of $6338, to which were added certain extra items, making the total cost $6465, of which $3,000 was financed by a first mortgage to Chattanooga Savings Bank & Trust Co. The remainder, $3465, was represented by a second mortgage executed by Mr. and Mrs. Sheriden to Ward, securing 99 notes of $35 each. In 1932 the remainder due on this second mortgage, $2040, was refinanced by the execution of a new second mortgage to Ward, securing 68 notes of $30 each.
Default was made on certain payments due on both the first and second mortgages, so that in the summer of 1934 there was due on the first mortgage something over $3800, and on the second mortgage approximately $2086.
Application was made by Mr. Sheriden to the Home Owners Loan Corporation for a loan, the amount of which is not shown. The date of this application is not shown and we do not know what disclosure, if any, was called for or made as to unsecured indebtedness, although Mr. Sheriden says he and Mr. Ward discussed the matter with HOLC officials. About this time--whether before or after the execution of the application is not shown--Mr. Ward took his notes and mortgage to the Register's office and released his second mortgage by marginal entry. At the same time Mr. Ward says he took from Sheriden and wife their note for $1500, due in 90 days, with the agreement that it would be covered by a second mortgage after the first had been refinanced. Mr. Sheriden admits executing a note but claims it was for $1,000. The evidence showed it was later surrendered to him. He does not produce it or account for its absence. It was the consideration for the notes in suit which amount to $1500. Consequently we hold the preponderance of the evidence establishes that the note was for $1500, although this is of minor importance. Pursuant to the application so made, the HOLC appraised the property at $4170 and upon which it made a loan of 80%, or $3336. Of the proceeds of this loan, the sum of $600.49 was deducted for taxes, repairs and closing expenses, and the remainder, $2735.51, was paid the holder of the first mortgage in discharge of its debt which as noted amounted to over $3800. Nothing was paid to Ward. He made no statement to the HOLC, and was not a party to the transaction.
The HOLC mortgage is dated July 6, 1934, and was registered August 1, 1934. It contains this provision: 'If during the term of this deed of trust or any renewal thereof, the grantor or grantors shall execute any instrument or conveyance creating any lien on the property herein described, without the written consent and approval of the Home Owners Loan Corporation, then, at the option of the Home Owners Loan Corporation, or the lawful owner and holder of the indebtedness herein secured, the entire balance of said indebtedness, principal and interest, shall immediately become due and payable, and the right of foreclosure as herein provided shall immediately accrue'.
The notes in suit, and second mortgage securing payment thereof, bear arbitrary date of July 6, 1934, but the mortgage was not executed until September 27, 1934. As pointed out, Ward's debt was $2086. He accepted $1500 in notes, or an abatement of $586. These notes were not to bear interest until three years after their maturity--an additional concession amounting to $270, or a total of $856 yielded by Ward. And the second mortgage in question had this provision: .
Ward said that when these notes in suit and second mortgage were delivered, Sheriden told him this three year moratorium was in accordance with an HOLC ruling. Mr. Sheriden substantiates this by his redirect testimony:
A. It does state it, yes sir.'
Sheriden insists that Ward had the notes and mortgage prepared, while Ward says it was done by Sheriden. Sheriden insists it was executed under a form of duress by Ward's threat to turn the matter over to his attorney for suit. However, on July 8, 1937, at the matrity of the first of these notes, Mr. Sheriden wrote Ward he was unemployed but had prospects which should materialize by October 1st, and saying: 'In the meantime if something develops for me I will take the notes up as fast as I can, but will appreciate it very much if you will help me along this line until I can get something to do.'
We hold there was no duress.
No HOLC official testified. So far as the record goes, it acquiesced in the giving of the second mortgage. Certainly, it has not exercised the option conferred by the portion of the mortgage heretofore quoted. It was made a party to this suit, but has not raised any question on the validity of the notes and mortgage in question. There is no evidence whatever as to any rules, orders or directives issued by or under the authority of the HOLC.
The Chancellor found the following regulation was adopted by that authority:
On request for additional findings, he found that this regulation was adopted by the Board of Directors of HOLC on August 21, 1934, effective October 10, 1934, or after the notes and mortgage in question were executed. There is no evidence of the existence of this or any order by HOLC.
May we take judicial knowledge of the existence of such an order, when in fact we do not know that it exists? If so, must we read into it something retroactive so as to deprive the parties of the right to contract?
Counsel for appellant Ward has appended to his brief what he contends are copies of the Board's minutes of September 8, 1933 approving the following bulletin: ...
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