Rossville Federal Sav. & Loan Ass'n v. Chase Manhattan Bank

• Decision Date: 09 March 1967
• Docket Number: No. 23909,23909
• Citation: 154 S.E.2d 243,223 Ga. 188
• Parties: ROSSVILLE FEDERAL SAVINGS & LOAN ASSOCIATION v. CHASE MANHATTAN BANK et al.
• Court: Georgia Supreme Court

Page 243

154 S.E.2d 243

223 Ga. 188

ROSSVILLE FEDERAL SAVINGS & LOAN ASSOCIATION v. CHASE MANHATTAN BANK et al.

No. 23909.

Supreme Court of Georgia.

March 9, 1967.

Frank M. Gleason, Rossville, for appellant.

Shaw, Stolz & Fletcher, George P. Shaw, LaFayette, Andrew W. Cain, Jr., Rossville, for appellee.

Syllabus Opinion by the Court

UNDERCOFLER, Justice.

Rossville Federal Savings & Loan Association brought suit against E. L. Gentry, Abb L. Carter, his wife, Ruby S. Carter and First Trust Company to set aside its cancellation of a security deed and have it declared a first lien as to such property because the check received in payment thereof was invalid. Chase Manhattan Bank was permitted to intervene and claim that it was a bona fide purchaser of a later security deed from First Trust Company and said later security deed was a first lien on said property. Plaintiff's demurrer to the petition for intervention, motion to strike the intervenor's answer, and demurrers to the intervenor's answer were overruled. After the trial the court directed a verdict for the intervenor. The plaintiff appeals to this court contending in its enumeration of errors that the trial court erred in the above rulings on the intervenor's pleadings and in directing a verdict.

The evidence shows that the First Trust Company was a mortgage broker making long term loans on real property. It had what is known as a 'warehousing agreement' with Chase Manhattan Bank whereby Chase would purchase its loans temporarily pending purchase by a permanent lender. Under its agreement with Chase Manhattan Bank, as purchaser, and the Pioneer Bank of Chattanooga, Tennessee, as depository, the First Trust Company would deposit the note, security deed, title binder, insurance, commitment of permanent lender and other pertinent documents pertaining to each of its loans with the Pioneer Bank which, after ascertaining that the required documents were in order, would request Chase to forward the funds for purchase of the same.

In the present case, Gentry delivered a security deed to Rossville Federal to secure a loan on residential property. Thereafter Gentry sold the property to the Carters. The Carters borrowed funds from First Trust Company giving it a note and security deed dated Friday, March 23, 1962 and the First Trust Company issued its check of the same date to Rossville Federal in payment of its note and security deed. That same day, the First Trust Company delivered the Carters' note, security deed and related documents to Pioneer Bank and received from Pioneer Bank the funds. The evidence is in conflict as to whether Chase reimbursed Pioneer Bank on this date but it did so at least no later than the following Monday, March 26, when Chase credited Pioneer's account for the funds advanced by it.

On March 26, 1962 Rossville Federal received First Trust Company's check, marked its note and security deed paid, mailed its note to First Trust Company and mailed the security deed to the clerk of the superior court who canceled the security deed of record on March 27, 1962. Thereafter the check given to Rossville Federal by First Trust Company was returned for insufficient funds and First Trust Company was found to be insolvent. Held:

1. 'It is not the right of a stranger to a pending cause to intervene therein, unless it is necessary to his protection that he be allowed to become a party to the litigation, and thus afforded an opportunity to resist the rendition of a judgment which would operate to his prejudice.' Clarke v. Wheatley, 113 Ga. 1074, 39 S.E. 437; Davis v. Warde, 155 Ga. 748, 118 S.E. 378; and Clark v. Harrison, 182 Ga. 56(3), 184 S.E. 620. The interest of the intervenor must be of such a direct and immediate character that he will either gain or lose by the direct effect of the judgment, and such interest must be created by the claim in suit, or a claim to a lien upon the property, or some part thereof, which is the subject matter of the litigation. Potts v. Wilson, 158 Ga. 316(2a), 123 S.E. 294; Rust v. Woolbright, 54 Ga. 310. The fact that a security deed held by the intervenor would lose its priority under the contentions of the plaintiff is such an interest as would entitle him to intervene as a party defendant to resist the prayers of the plaintiff's petition. Williamson v. Haddock, 165 Ga. 168(3), 140 S.E. 373. It then follows...