Latham v. First Nat. Bank

• Decision Date: 22 November 1909
• Citation: 122 S.W. 992
• Parties: LATHAM v. FIRST NAT. BANK OF FT. SMITH.
• Court: Arkansas Supreme Court

Page 992

122 S.W. 992

LATHAM v. FIRST NAT. BANK OF FT. SMITH.

Supreme Court of Arkansas.

November 22, 1909.

Appeal from Sebastian Chancery Court, Ft. Smith District; J. Virgil Bourland, Chancellor.

Action by the First National Bank of Ft. Smith against Daisy B. Latham. Decree for plaintiff, and defendant appeals. Reversed, with directions to enter decree for defendant and dismiss complaint.

On December 15, 1906, appellee loaned to W. F. Latham $1,000, for which Latham executed his note, due 60 days after date. The note was not paid, and appellee brought this suit to recover the amount of the note. The complaint alleged that W. F. Latham, to secure the note, assigned to the bank a lease on a certain lot in the city of Ft. Smith; that Mrs. Latham claimed the lease, that the tenants would pay the rents to W. F. Latham or Mrs. Latham unless restrained. The prayer was for judgment on the note, for sale of the lease, and that the rents and the proceeds of the sale of the lease be subjected to the payment of the amount found due the bank, for which judgment was asked. A temporary restraining order was issued restraining the tenants under the lease from paying the rents to W. F. Latham or Mrs. Latham. Mrs. Latham answered the complaint, setting up, among other things, that she was the owner of the lot and of the lease mentioned in the complaint; that the lot was deeded to her by warranty deed from W. F. Latham, her husband, on the 5th day of October 1905; that if the lease was assigned to appellee as collateral security for the note, such assignment was without her knowledge or consent. She prayed that her rights to the rents under the lease be recognized; that the proceeds of the lease and the rents paid into the registry of the court be turned over to her; that the restraining order be dissolved etc.

The proof showed that W. F. Latham deeded the lot in Ft. Smith to his wife October 5, 1905. The consideration for the deed was several thousand dollars. There is no question as to the bona fides of the sale from Latham to his wife. He had used between $4,000 and $5,000 of her money, and the lot was deeded to her in consideration of this money. The deed was placed on record October 7, 1905. At the time the deed was executed there was a lease on the lot which would not expire until December 31, 1909. The deed did not contain any reservation in the grantor of the right to collect the rents under the existing lease. The deed, on the contrary, in the usual form, conveyed the lot "with all the privileges, appurtenances and improvements thereupon situate, appertaining and thereunto belonging." After the deed was executed and recorded, W. F. Latham February 20, 1906, borrowed of appellee $1,500, for which he executed his note, and deposited with appellee the contract of lease on the lot as collateral security for the loan. This note was paid before the note in suit was executed. On December 12, 1906, W. F. Latham made application by letter for the loan in suit. He inclosed the note, and in his letter asking for the loan he says "You have my rent contract which you can hold as security." Appellee accepted the note, and advanced him the money. W. F. Latham collected the rents from the tenants after the deed was made to Mrs. Latham, and after the note in suit was executed. As the rents accrued, W. F. Latham drew drafts on the tenants in favor of the Commercial Bank of Alexandria, La., for the amounts. The Commercial Bank sent the drafts to the American National Bank at Ft. Smith for collection, and credited W. F. Latham's account with the amount collected. One witness stated the drafts were given to secure a debt due the Commercial Bank. W. F. Latham collected the rents in this way until, and including, the month of July, 1907, when the payment to him was enjoined. In a letter to appellee after suit was brought Latham, complaining of the temporary order restraining him from collecting the rents, says: "Mrs. Latham has loaned me this money to help me along." It was alleged and not denied that W. F. Latham was a nonresident of the state of Arkansas, and that he owned no property in the state out of which the note in suit could be collected. Latham was in good financial condition when the deed to Mrs. Latham was executed, but has become insolvent since. Mrs. Latham testified that the rental was collected monthly by W. F. Latham, and that the money was used for living purposes for the family. She authorized Mr. Latham to collect it. She did not know that the lease contract was assigned by Mr. Latham to secure his note to appellee. If it was so assigned, it was without her knowledge or consent. If her husband assigned the rents to the Commercial Bank of Louisiana, to secure or pay money borrowed of that bank, she knew nothing of it. She did not know that her husband drew drafts on the tenants of the lot for the monthly rents, payable to the Commercial Bank of Alexandria, La.

The court rendered a decree in favor of appellee for the amount of the note and interest. The court found that to secure the payment of said note the said W. F. Latham placed in the hands of the said plaintiff a lease on the building No. 502 Garrison avenue, Ft. Smith, Ark.; that said W. F. Latham, on the 4th day of October, 1905, conveyed to said Daisy Latham, who was then and still is his wife, the said building and the ground on which it stands, but he retained the lease on said building and the rights to collect the rents therefrom and appropriated them to...