Jones v. Norton

• Decision Date: 07 June 1911
• Docket Number: 2,910.
• Parties: JONES v. NORTON et al.
• Court: Georgia Court of Appeals

71 S.E. 687

9 Ga.App. 333

JONES v. NORTON et al.

No. 2,910.

Court of Appeals of Georgia

June 7, 1911

Syllabus by the Court.

The maker of a series of negotiable notes executed a mortgage to his indorser or surety on the notes to protect him against loss on the contract, and stipulated in the mortgage that, on a failure to pay any one of the notes when due, the indorser or surety should have the right to declare the other notes due and proceed to foreclose the mortgage to protect himself as such indorsee or surety. The maker of the notes defaulted in the payment of several of them, whereupon the indorser or surety paid the unpaid notes to the original payee and became the holder thereof, and, under the stipulation of the mortgage, declared them to be due, and proceeded to collect them by suit. Held, the mortgage was a valid contract and the stipulation referred to was enforceable by the surety or indorser, either while the notes were still held by the payee, or after the surety or indorser had become the lawful transferee of the notes.

A premium or commission paid by the principal maker of a promissory note to the indorser or surety to protect the latter in the risk assumed and to compensate him for his services in procuring a loan for which the note is given, in which premium or commission the lender has no interest, is in no sense usury.

An indorser has the right to purchase a negotiable note from the payee; and, when the note is due by its terms or becomes due by a contract between the maker and the endorser, the latter can sue the former on the note. In such case the suit is based, not upon the obligation of the maker to reimburse his indorser for money paid out for his benefit, but upon the obligation to pay his negotiable note to whomsoever may be the lawful holder thereof.

Questions raised by assignments of error not referred to in the argument or brief for the plaintiff in error will not be decided.

The pleas were properly stricken, and the evidence demanded the verdict as directed.

Error from City Court of Savannah; Davis Freeman, Judge.

Action by J. V. Norton and others against N.N. Jones. Judgment for plaintiffs, and defendant brings error. Affirmed.

This is a suit on promissory notes to recover the principal interest, and stipulated attorney's fees. The petition contains three counts. The first count alleges, in substance that on August 6, 1909, the defendant, Jones, made and delivered to the Citizens' & Southern Bank 11 notes for $200 each, due, respectively, from 7 to 17 months after date and one note for $100, due 18 months after date; that all of these notes were indorsed and transferred by the bank to the plaintiffs for value, without notice of any defect; that the notes due 7, 8, and 9 months after date were transferred to them after maturity, and the others before maturity; that the maker had defaulted in the payment of the notes due 7, 8, 9 and 10 months after date, and they were still unpaid; that to secure the payment of these notes to the bank, and the payment of other notes made directly to the plaintiffs by the defendant, he made a mortgage (a copy of which was set out, and which was referred to solely for the purpose of showing the maturity of the notes sued on, and was not sued on as a mortgage), in which he covenanted that, if default should be made in the payment of any one or all of said notes when due, it should be lawful for the parties of the second part (the plaintiffs) to declare the whole remaining indebtedness to be due and payable at once; that on June 9, 1910, the plaintiffs personally served the defendant with notice, in the terms of the mortgage, declaring all of the said notes due because of default in the payment of the past-due notes, and stating their intention to bring suit thereon to the July term, 1910, of the city court of Savannah. The second count alleged that the defendant was indebted to the plaintiffs in the sum of $550 principal, besides interest and attorney's fees on 11 notes for $50 each, payable to the plaintiffs, dated August 6, 1909, and due, respectively, from 7 to 17 months after date, and that the defendant had defaulted in the payment of the notes due from March 6 to June 6, 1910. These allegations were followed by allegations similar to those set out in the first count, as to the mortgage, etc. The third count was based on a separate transaction, being for $100 principal and for interest and attorney's fees on a note, and prayer for the enforcement of the lien given to secure the payment of the note.

The defendant demurred to the first count of the petition, contending that the relation between the plaintiffs and himself was that of principal and surety, and that, upon payment of the notes by the sureties, the notes were discharged, and the action should have been in assumpsit, and not on the notes; and that if the sureties did not pay the notes, but had merely had them transferred, there was no right of action in them, and their suit was premature. The demurrer was overruled, and this is assigned as error.

The answer admitted the execution of the notes and the mortgage, the default in payment of the past-due notes, and service of notice in regard to attorney's fees, but denied indebtedness for the principal sums, as well as for attorney's fees. It stated that for want of sufficient information the defendant neither admitted nor denied the transfer of the notes as alleged, or the declaration of the maturity of the remaining notes on account of the default. The answer further alleged that the defendant borrowed from the Citizens' & Southern Bank the sum of $3,500, payable in monthly installments of $200, for which he gave his notes, and that the plaintiffs became sureties on the notes and not indorsers; that he gave also his notes for the aggregate sum of $900, payable monthly to the order of the plaintiffs, and executed a mortgage to indemnify them against loss by reason of their suretyship, and that he paid all the notes, both those to the bank and those to the plaintiffs, up to and including February 6, 1910; that on February 18, 1910, the plaintiffs, without just cause or reason, and before any legal default had been made or the liability of the sureties fixed and determined, attempted to foreclose the indemnity mortgage, and that, if he had made default in payment of any of the notes, it was caused without fault on his part, and without his consent, but was due to the illegal and wrongful attempt to foreclose this mortgage whereby the sheriff of Chatham county had taken charge of his business and caused his default in performing his contract. The answer alleges that the only notes past due are "for March, April, May, and June, aggregating $800," that the rest of the notes have not matured, and that the plaintiffs are sureties on the notes, and cannot charge the defendant for moneys that they have not been called upon to pay, and for which their liability in law has not become fixed and determined by judgment or otherwise. It is further alleged by the defendant that the contract and notes sued on and set out in the first and second counts of the petition are tainted with usury; that he has paid $300 in excess of the legal rate of interest on these notes for the amount of money loaned him by the bank up to February 6, 1910; that the $550 sued for in the second count is for money promised and contracted to be paid for the use of money in excess of legal interest, and is usurious; that, as the sums of money sued for in the first and second counts are not due, the plaintiffs were not entitled to attorney's fees, and that the $100 sued for in the third count is infected with usury.

The answer was demurred to both generally and specially. The court sustained the demurrer to the answer as to the first and second counts of the petition, and overruled it as to the third count, and thereupon the defendant amended by setting up the transactions more in detail, but in substance repeating the answer as originally filed. On demurrer, both general and special, the amended answer was also stricken; and this is assigned as error. A second amendment to the answer set up that the notes transferred to the plaintiffs before maturity were not due, and that the plaintiffs as sureties, being subrogated to the rights of the creditor, the Citizens' & Southern Bank, which was without power or authority to demand payment of the same before maturity, they could not declare the same due and demand payment thereon before maturity; that the relations between the plaintiffs and the defendant being that of principal and surety, and the sum sued for not yet due, said sum could not now be demanded by either the creditor or the surety, as the transfer of the notes was without the consent of the defendant, and the sureties could not recover thereon before legally called on to pay the sum; that, even if the transfer of the notes was valid, the plaintiffs were under no legal obligation to make payment until after maturity of the notes, and therefore could not recover for any of the notes not matured. This second amendment was demurred to generally, and also on the ground that the mortgage covenanted that the plaintiffs had a right to declare all the notes due in case of default as to any one of them, and that the facts presented by the answer contained an attack on the title of the plaintiffs which was not necessary to let in the defense claimed. The amendment was stricken, and this is assigned as error.

The plaintiffs by amendment struck the third count of their petition. Exception is taken to the allowance of the amendment. The pleadings are voluminous, but it is not necessary to set them forth more in detail; the foregoing statement being sufficient to present the substantial...