Hudson v. Evans

• Decision Date: 17 July 1937
• Citation: 113 S.W.2d 407,21 Tenn.App. 535
• Parties: HUDSON v. EVANS et al.
• Court: Tennessee Court of Appeals

113 S.W.2d 407

21 Tenn.App. 535

HUDSON v. EVANS et al.

Court of Appeals of Tennessee, Middle Section.

July 17, 1937

Rehearing Denied Aug. 14, 1937.

Certiorari Denied by Supreme Court Feb. 12, 1938.

Appeal from Chancery Court, Part 1, Davidson County; R. B. C Howell, Chancellor.

Suit by Florence E. Hudson against S.E. Evans and others to have a release of a trust deed securing notes held by her declared fraudulent and void and for other relief. From a decree dismissing the bill, complainant appeals.

Affirmed.

Richard S. West, of Nashville, for appellant.

James A. Newman, of Nashville, for appellees.

FAW Presiding Judge.

The bill in this case was filed by Mrs. Florence E. Hudson on April 13, 1931, in the chancery court of Davidson county part 1, against S.E. Evans; Watson Butler, trustee; E. L Dudney, trustee in bankruptcy; Bringhurst-Reid Company; K. O. Reid, individually and as trustee; Walter H. Diehl and wife, Hazelle Diehl; E. E. Murrey, trustee.

Complainant is the holder of ten promissory notes for $50 each, executed by defendant S.E. Evans, payable to Bringhurst-Reid Company, and indorsed (in blank) by the payee. Said notes are of date December 15, 1927. One of said notes matured on September 15, 1929, and one of the remaining nine notes matured on the 15th day of each successive month for nine months thereafter.

The above-mentioned ten notes (along with other notes not in controversy in this case) were pledged to the complainant by defendant Bringhurst-Reid Company, Inc., as collateral security to its note for $1,000, given for money loaned to said Bringhurst-Reid Company, Inc., by complainant, which said note for $1,000 is dated June 26, 1929, and was due ninety days after date.

At the time complainant acquired the aforesaid ten notes of S.E. Evans, they (together with twenty other notes of like tenor and amount, but prior in date of maturity) were secured by a trust deed to defendant Watson Butler, trustee, of date December 15, 1927, conveying to said trustee a certain lot or parcel of land in the registered plan of Bransford Realty Company's subdivision of the Edgar Jones home place in Davidson county, Tenn., which property is fully described in the record. The aforesaid trust deed was the first lien on said realty at the time of its execution and registration.

Subsequently, S.E. Evans conveyed said property by deed to K. O. Reid, trustee, with power to mortgage, sell, transfer, or convey same (but without naming the cestui que trust). K. O. Reid, trustee, and Bringhurst-Reid Company conveyed the property to E. E. Murrey, trustee, to secure a note for $4,000 to the American Trust Company, and Bringhurst-Reid Company, by K. O. Reid, executed a marginal release of record in the register's office purporting to release and discharge the lien of the aforesaid trust deed to Watson Butler, trustee, by which the notes held by complainant were secured.

On August 21, 1928, defendants Bringhurst-Reid Company and K. O. Reid, trustee, conveyed said property, by deed, to defendants Walter J. Diehl and wife, Hazelle Diehl, and the grantees assumed a mortgage of $4,000 on said property executed by Bringhurst-Reid Company to defendant E. E. Murrey, trustee.

Defendants Walter J. Diehl and wife executed a mortgage on said property to defendant K. O. Reid, trustee, to secure twenty-five notes for $50 each, and one note for $1,300.

After the aforementioned transactions and before the bill in this case was filed, defendant Bringhurst-Reid Company was adjudged a bankrupt, and E. L. Dudney was appointed its trustee in bankruptcy.

Complainant alleges in her bill that the aforesaid purported release of the trust deed securing the ten notes held by her was wrongfully and fraudulently executed by K. O. Reid, without the knowledge or authority of complainant; and complainant prays that same be declared fraudulent and void and of no effect; that the indebtedness secured by the aforesaid trust deeds to E. E. Murrey, trustee, and K. O. Reid, trustee, be declared secondary to the rights of complainant in said property, and that the title of defendants Walter J. Diehl and wife, Hazelle, be decreed to be subject to complainant's prior claim for the satisfaction of the aforesaid notes held by her; and that she have a decree against the defendants S.E. Evans, Bringhurst-Reid Company, and E. L. Dudney, trustee in bankruptcy, etc., for $500, with interest from December 15, 1927, together with reasonable attorney's fees as provided in the said notes and trust deed securing same, and that said judgment be declared a prior lien on the aforesaid property, and that said property be sold for the satisfaction of said judgment.

An answer to complainant's bill was filed by E. E. Murrey, trustee, and a separate answer was filed by Walter J. Diehl and wife, Hazelle Diehl. The other defendants made no defense and the bill was taken for confessed as to them.

The deposition of Dr. Thomas M. Hudson, husband of complainant, with exhibits, was filed, and this, together with written stipulations of the parties with respect to certain facts, constituted the evidence upon which the case was heard below.

The chancellor's findings are incorporated in his decree and so fully present the material features of the pleadings, the facts disclosed by the record, and the points in controversy, that we here copy the decree, as follows:

"This cause came on to be heard upon this and former days of the term, upon the regular call of the docket, before Chancellor R. B. C. Howell, holding part 1 of the chancery court at Nashville, upon the entire record in the cause, from all of which it appearing to the court:

"That the original bill was filed in the cause on April 13, 1931, against S.E. Evans and others, reciting that on December 15, 1927, said defendant executed a deed of trust to Watson Butler, trustee, covering the property mentioned in the bill, and to secure the payment of thirty monthly notes of that date in the sum of $50 each, payable to Bringhurst-Reid Company, the first of which notes was due January 15, 1928, and one on the 15th of each month thereafter; that the complainant, Mrs. Florence E. Hudson, was the lawful owner and holder of notes Nos. 21 to 30 of said series, being in the principal sum of $500, with interest from date, and all of which were indorsed by Bringhurst-Reid Company, and delivered to complainant for value prior to July 6, 1928, and since delivered have been in her possession; that on July 6, 1928, another defendant, K. O. Reid, wrongfully, fraudulently, and without complainant's authority, executed, or attempted to execute, a release of the entire series of said notes; that the defendant Bringhurst-Reid Company was bankrupt, and E. L. Dudney was acting as trustee for it; that on December 20, 1927, said defendant Evans sold said property to the defendant K. O. Reid, trustee, this deed being placed of record on July 6, 1928, the same day that said Reid executed, or attempted to execute, said release; that on August 21, 1928, said defendant Reid, as trustee, and Bringhurst-Reid Company conveyed said property to Walter J. Diehl and wife, Hazelle Diehl, the purchaser assuming a mortgage of $4,000, executed by Bringhurst-Reid Company to another defendant, E. E. Murrey, trustee, and on August 8, 1928, defendant Diehl and wife executed a mortgage on said property to K. O. Reid, trustee, to secure twenty-five notes, twenty-four for $50 each, and one for $1,300, the first of which was due October 1, 1928, and the others monthly thereafter. Said bill prayed that complainant have a decree against defendants Evans, Dudney, trustee, and Bringhurst-Reid Company, for said sum of $500, with interest and attorney's fees, and that said judgment be declared a prior lien on said property; that the attempted release of complainant's lien by the defendant Reid be declared fraudulent and void, and that the indebtedness secured by said deeds of trust executed by Diehl and wife to Reid, trustee, and by Bringhurst-Reid Company to E. E. Murrey, trustee, be declared secondary to complainant's right, and for general relief.

"The defendants S.E. Evans and K. O. Reid absconded, and at the time the bill was filed their whereabouts was unknown. Publication was made for them and pro confessos taken against said defendants and the other defendants to the bill, except Walter J. Diehl and wife, Hazelle Diehl, and E. E. Murrey, trustee. These defendants filed answers and made defense to the bill.

"Said Defendants, in their answers, admit the averments of the bill as to the record of instruments, but deny that complainant has any right to have a lien fixed upon said property to secure the notes which she claims to hold, and deny that said release by K. O. Reid was fraudulent or void, and aver that said release was made with full knowledge and authority of complainant, and was in fact a valid release, but that in any event complainant is estopped to attack said release, or assert any lien upon said property for the satisfaction of her claim for the reason that the defendant Walter J. Diehl in September of 1929 fully informed complainant and her solicitor, of the facts of his purchase of said property, and that he had obtained a deed thereto showing the same clear and unincumbered, and notwithstanding which, complainant neglected to take any

action for nearly two years, and by reason of which facts and circumstances, and the other facts set up in said answer, complainant is estopped to assert the claims presented by the bill.

"The facts in the case are these: On December 15, 1927, S.E Evans executed to Watson Butler, trustee, a deed of trust conveying the property mentioned in the bill, to secure thirty notes of $50 each, payable to ...