Stewart v. Hamilton Building & Loan Ass'n.

• Decision Date: 27 August 1898
• Citation: 47 S.W. 1106
• Court: Tennessee Supreme Court
• Parties: STEWART et ux. v. HAMILTON BUILDING & LOAN ASS'N.

47 S.W. 1106

STEWART et ux. v. HAMILTON BUILDING & LOAN ASS'N.

Court of Chancery Appeals of Tennessee.

August 27, 1898.

Appeal from chancery court, Hamilton county; T. M. McConnell, Chancellor.

Bill in chancery by R. C. Stewart and wife against the Hamilton Building & Loan Association. From a decree for complainants, defendant appeals. Modified and affirmed.

E. Y. Chapin and E. M. Dodson, for appellant. T. Paul and G. W. Chamler, for appellees.

NEIL, J.

The bill in this case is filed for the purpose of setting aside a sale of the complainants' property under a trust deed, made to secure a sum of money borrowed from the defendant association, and also charging that the loan contained usury, and asking that the amount of usury be ascertained and allowed to the complainants. The answer denies all fraud, and also denies the charge of usury. The chancellor sustained both charges of the bill, and the defendant has appealed and assigned errors.

The facts are as follows: In April, 1891, the complainants, R. C. Stewart and wife, borrowed from the defendant association the sum of $1,600, under the rules of said association. Out of this a premium of 34½ per cent. was taken, and the rest was paid to the complainants in cash. At the time the loan was made, shares of stock were taken out by the complainant Mrs. M. R. Stewart, and they were pledged for the security of the loan. Likewise, a trust deed was executed upon the property described in the bill. In March, 1894, the trust deed was foreclosed, and also the pledge of the shares of stock. The real estate was purchased by the defendant association, at the sum of $500. Shortly after this time, the parties came together, and settled this matter, by the execution of a note by the complainants to the association for the balance due, on the basis of the original loan, this balance amounting to $1,345. The association made a deed back to the complainants, and they executed a trust deed to the treasurer of the association, to secure the new loan. $100 was paid in cash, and 78 notes, of $16 each, were executed to cover the balance of the debt. There was a provision in the trust deed that, if any installment should not be paid, the trust deed might be foreclosed. After the complainants had fallen in arrears, within the terms of the contract, upon that subject, the property was again advertised and sold, and was purchased by the defendant association, at the price of $1,250.51.

Now, the charge of fraud is that the property was purposely advertised in an obscure paper, so as to escape observation, and then purchased in by the defendant association, at far less than its value. We think the proof sustains this charge. Instead of advertising the property in one of the daily papers in Chattanooga (as the custom was), the defendant association caused the property to be advertised in the Weekly News, which had a large circulation in the country, but a very small circulation in the city of Chattanooga where purchasers were likely to be found for this property, the property being in the suburbs of Chattanooga. It is proven by Mr. Dickey, and admitted by the secretary in his deposition, that the advertisements about this time were placed in this obscure paper in order to escape observation, for the reason that certain injunction suits had followed upon the advertisements in the Daily News. The secretary said that there were certain lawyers in Chattanooga who watched the daily papers, and, on seeing advertisements, would hunt up persons who owed the defendant company, and cause them to institute injunction suits. For this reason the new system of publishing in an obscure paper was adopted. The complainants were not present at the sale, and knew nothing of it. The property brought not more than a third of its value, and, as stated, was sold by the treasurer of the defendant association, acting as trustee, and purchased by the defendant association itself. Taking all these facts together, we think the fraud is made out, and that the sale should be set aside. Coffee v. Ruffin, 4 Cold. 487, 508, 509; Wright v. Wilson, 2 Yerg. 294; White v. Flora, 2 Tenn. 426; Birdsong v. Birdsong, 2 Head, 290; Insurance Co. v. Hamilton, 3 Tenn. Ch. 228, 231, 232. Under several of the authorities above referred to, the fact that the property brought only one-third of its value, and was purchased in by the beneficiary, would of itself be sufficient to authorize us in setting aside the sale. In...