Solomon v. First Nat. Bank of Meridian

• Decision Date: 29 April 1895
• Citation: 72 Miss. 854,17 So. 383
• Court: Mississippi Supreme Court
• Parties: J. S. SOLOMON v. FIRST NATIONAL BANK OF MERIDIAN

17 So. 383

72 Miss. 854

J. S. SOLOMON v. FIRST NATIONAL BANK OF MERIDIAN

Supreme Court of Mississippi

April 29, 1895

FROM the chancery court of Lauderdale county, HON. W. T. HOUSTON Chancellor.

The case is fully stated in the opinion.

Decree reversed.

Walker & Hall, for appellant.

The right of Solomon to direct the application of his dividend cannot be questioned. McLaughlan v. Green, 48 Miss 175; Hiller v. Levy, 66 Ib., 30; Wooten v Buchanan, 49 Ib., 386; Champenois v. Fort, 45 Ib., 355; Crisler v. McCoy, 33 Ib., 445; Dennis v. McLaurin, 31 Ib., 606. The fact that ho directed the application is not denied. The bank relies on the resolution of its board of directors as authorizing an appropriation of the dividend to pay the $ 4,000 note. No resolution is necessary to authorize the bank to apply a dividend to the indebtedness of stockholders, but the bank could not, by any resolution, destroy the right of the debtor to direct to what debt the money should be applied, However, the resolution itself relates to the indebtedness of stockholders, and then only to such indebtedness "as is not fully secured." This was Fewell's, not Solomon's debt and it was amply secured.

Solomon testified that he would not have signed the note but for the collaterals by which it was secured. The bank saw fit to surrender these upon the application of Fewell, and Solomon consented only upon condition that the bank should take a mortgage on real estate in lieu thereof; but the bank, instead of taking a mortgage in lieu of the surrendered stock, embraced therein another debt of Fewell, and afterwards took the mortgaged property in payment of both debts, first, however, applying the dividend of Solomon as a credit on the note. Thus Solomon has been deprived both of his money and the security furnished by the principal debtor for his protection. He is, therefore, discharged to the extent of any impairment of his right. Sheldon on Subrogation, §§ 120, 123, 128, 182; McMullin v. Hinkle, 39 Miss. 142; Anthony v. Capel, 53 Ib., 350; 19 S.E. (Va.), 654.

The mortgage was taken, so far as the note was concerned, in lieu of the collaterals. The additional indebtedness was unsecured, and no agreement touching it was had with Solomon. Under the circumstances, we submit the mortgage should be held to operate, as to the additional indebtedness, subordinate to the note, and Solomon, as surety on the note, should be held entitled to have the proceeds appropriated first to the payment of that note. See Stamps v. Brown, Walker (Miss.), 526; Parker v. Mercer, 6 How. (Miss.), 320; Cage v. Iler, 5 Smed. & M., 410; Wooten v. Buchanan, 49 Miss. 386.

Hamm, Witherspoon & Witherspoon, for appellee.

It was undoubtedly the right of the bank, even if the resolution of the directors had been silent upon the subject, to apply the dividend of Solomon to the note of Fewell on which he was surety. An effort was made to show that the note was amply secured, and therefore the resolution did not apply to it; but Fewell shows the note had been secured by stock of an electric company, but that it was not secured at the time the dividend was declared. It was then not secured at all. Subsequently, Fewell gave the bank a deed of trust on real estate to secure the note and an additional indebtedness, and afterwards conveyed to the bank the real estate in payment of such additional indebtedness and a balance due on the joint note. The proof shows the real estate was not worth as much as the amount of the debts. Solomon never offered to pay the debts and take security. It was shown that Fewell had been the attorney of Solomon, and that there was an open, unsettled account between them, and when the bank applied the dividend on the $ 4,000 note, Fewell told Solomon he would credit him for the amount on his account. See Hendrick v. Lindsay, 93 U.S. 143; Bank v. Grand Lodge, 98 Ib., 123; Pollock on Contracts, 1991, note 4.

OPINION

COOPER, C. J.

The appellant, Solomon, is one of the joint makers of a note with the appellee and Weems and Robinson, payable to the order of Haas, Guthman & Co., for the sum of $ 1,678.30. This note is dated August 16, 1892, and due four months after date. It was given for the purchase of furniture for the Southern Hotel, in which the interest of the respective parties was: the appellant, 33 1/3 per cent.; the appellee 25 per cent.; Weems, 40 per cent.; and Robinson, 1 2/3 per cent. And, as between themselves, such was the proportion of the note each was to pay. When the note was given, each of the makers, except the bank, placed in the hands of one J. H. Wright securities to be held by him until the party depositing the same should pay his proportion of the note, when Wright was to deliver to him the security he had deposited. Soon after the execution of the note, the bank purchased it from Haas, Guthman & Co., and Weems and Robinson paid, at maturity, their respective portions thereof. The bank exhibited its bill, in this cause, against all the parties, including Wright, seeking to recover from Weems, Robinson and Solomon the amount remaining unpaid on said note, and to subject to the payment thereof the securities deposited with Wright by Solomon. Solomon demurred to the bill, and, that being overruled, answered, and made his answer a cross bill. By his cross bill, he avers that he was, in June, 1892, the owner of ninety-three shares in the capital stock of the complainant, of the par value of $ 100 each, that in that month a dividend of 10 per cent. was declared, amounting to $ 930, on the stock owned by him; that he directed the bank to apply a sufficient sum thereof to the payment of his part of the debt evidenced by the note here sued on, and to pass the remainder to his credit on the books of the bank; that the bank has never so applied said dividends nor accounted to him therefor. The prayer of the cross bill is that an account of such dividends may be taken, and a sufficiency thereof to pay his part of the note sued on may be applied thereto, and that, for the balance remaining due he may have a decree over against the bank. To this cross bill the bank answered, admitting that Solomon was, in June, 1892, the owner of eighty-three shares of its capital stock, but denied that he owned ninety-three shares; that a dividend of 10 per cent. on this stock was declared, amounting to the sum of $ 830. In reference to this dividend, the bank responded to the cross bill, saying: "This respondent admits that it has not paid to said Solomon any part of said $ 830 dividend, but it shows and states that in 1892, when said dividend was declared, the...