Griswold, Hallette & Persons v. Davis

• Citation: 141 S.W. 205,125 Tenn. 223
• Parties: GRISWOLD, HALLETTE & PERSONS v. DAVIS et al.
• Decision Date: 23 November 1911
• Court: Supreme Court of Tennessee

141 S.W. 205

125 Tenn. 223

GRISWOLD, HALLETTE & PERSONS v. DAVIS et al.

Supreme Court of Tennessee.

November 23, 1911

Appeal from Chancery Court, McMinn County; T. M. McConnell Chancellor.

To be officially reported.

Suit by Griswold, Hallette & Persons against James D. Davis and others. Decree for defendants. Complainants appeal. Reversed and rendered.

W. D Carswell and D. C. Young, for appellants.

McCroskey & Peace and Norman B. Morrell, for appellees.

LANSDEN J.

The bill in this case is filed for the purpose of foreclosing a deed of trust upon a tract of 150 acres of land executed by the defendant Davis to one Allen, trustee, for the purpose of securing two notes and the annual interest coupons attached thereto payable to Burr & Knappe. The chancellor refused to foreclose the deed of trust and dismissed complainants' bill. From this decree, they have appealed and assigned errors.

The facts necessary to be stated are that in 1904 the defendant Davis made application to the Georgia Loan & Trust Company of Macon, Ga., through Allen for a loan of $1,300. This application was forwarded by Allen to the Georgia Loan & Trust Company through the firm of Smith & Carswell, attorneys of Chattanooga. After abstracts of title were prepared by Allen and passed upon favorably by Smith & Carswell, the Georgia Loan & Trust Company approved the loan, and forwarded to them the deed of trust, together with the notes and interest coupons, and the money to be delivered to Davis through Allen. It appears that at the time Davis made application for the loan there was a mortgage on his farm in favor of Mrs. Bloom for $700, and he owed the First National Bank of Athens about $600, and it was to pay these debts that he desired the money secured by this deed of trust.

In making the abstract of title for Davis, Allen failed to show in the abstract that the mortgage existed in favor of Mrs Bloom. At the request of Allen, Smith & Carswell forwarded the money for Davis to him by express. When Allen received the money, he turned over $602.95 to Davis and stated at the time that the balance of the $1,300 had not come, and that Mrs. Bloom would have to wait, but that Davis could take the $600 and pay the debt due the bank. This was done. The notes were dated September 1, 1904, and were due September 1, 1907, with interest payable annually. The interest coupon on the $600 note was $36. Davis paid this first coupon to Allen by delivering to him $34.50, which Allen accepted with some explanation to Davis that is not shown in the record. Allen paid the interest coupon on both notes by remittance to the Georgia Loan & Trust Company of the sum due. Before the maturity of the notes secured by the deed of trust, Davis negotiated a sale of his farm to the defendant Hicks. He made known to Allen his sale to Hicks, stating that it was a condition of the trade that the deed of trust to secure Burr & Knappe and the mortgage in favor of Mrs. Bloom should be paid off and satisfied of record. Allen agreed to accept from Davis the $600 which he paid him at the time the loan was made, but stated that he did not have in his possession either the deed of trust or the two notes that Davis had previously executed in favor of Burr & Knappe; and that he could not get possession of the securities and deliver them to Davis before the following September, at which time an interest payment was due. Allen agreed, however, to satisfy the deed of trust upon the margin of the record. This was done by Davis paying the $600 to Allen and Allen indorsing upon the margin of the record where the deed of trust was recorded that he (Allen) was the holder of the notes secured by the deed of trust, and he acknowledged payment of the same and satisfaction of the deed of trust. This was all explained to Hicks, and upon this satisfaction of the deed of trust Hicks paid the purchase price to Davis, and Davis paid off the mortgage to Mrs. Bloom.

While the Georgia Loan & Trust Company negotiated the loan with Davis, through Smith & Carswell and Allen, and passed upon its desirability, the money which was advanced upon the deed of trust was furnished by Burr & Knappe, and the notes were made payable and delivered to them as payees. On the 29th of September, 1904, Burr & Knappe sold the two notes to Griswold, Hallette & Persons for full value and indorsed them without recourse. Burr & Knappe are bankers and brokers in the city of Bridgeport, Conn., and the complainants carry an account with them as bankers. The complainants are brokers and are regular customers of Burr & Knappe. Payment was made by Burr & Knappe charging the account of complainants with the purchase price of the notes and the complainants crediting the account of Burr & Knappe with like amount. The complainants sold the notes to A. W. Healy for full value and before due. After the notes became due, the Georgia Loan & Trust Company notified Burr & Knappe that the notes would be paid upon presentation, and Burr & Knappe in turn notified the complainants, who likewise notified Healy. Healy brought the notes to complainants and received payment in other securities for their full value. This was after their maturity. The notes were forwarded to the Georgia Loan & Trust Company, and demand of payment was made upon due presentation, which was declined.

Allen represented himself to Hicks as the agent of Burr & Knappe and executed receipts to Hicks for sums received as such agent. Burr & Knappe knew nothing of Allen and were never informed that Allen was receiving moneys from Davis pretending to be their agent. Interest was forwarded by Allen to the Georgia Loan & Trust Company, and by that company to Burr & Knappe, and Burr & Knappe would pay interest received to the holder of the notes at the time. There is nothing to indicate that they ever knew any fact that would suggest to them that Allen was pretending to be their agent or that he had failed to deliver to Davis the entire amount loaned by them, or that Davis had undertaken to pay back the $600 received from Allen, or that Allen had undertaken to satisfy the deed of trust until after the maturity of the notes and just before the filing of this bill.

Upon these facts, it is said in support of the chancellor's decree: First, that Allen was the agent of Burr & Knappe, and as such was authorized to receive the $600 repaid to him by Davis, and also that his failure to pay over to Davis the full amount of the loan was the failure of Burr & Knappe and, second, that the complainants are not purchasers for value in due course of trade, and therefore they hold the securities subject to the defenses that might be interposed to them in the hands of Burr & Knappe. [1] As a general proposition, the maker of a negotiable promissory note can satisfy...