Union & Mercantile Trust Company v. Harnwell

• Decision Date: 16 April 1923
• Docket Number: 306
• Citation: 250 S.W. 321,158 Ark. 295
• Parties: UNION & MERCANTILE TRUST COMPANY v. HARNWELL
• Court: Arkansas Supreme Court

250 S.W. 321

158 Ark. 295

UNION & MERCANTILE TRUST COMPANY v. HARNWELL

No. 306

Supreme Court of Arkansas

April 16, 1923

Appeal from Pulaski Chancery Court; John E. Martineau, Chancellor affirmed.

Decree affirmed.

Moore Smith, Moore & Trieber and J. C. Marshall, for appellant.

No proof of an agreement by the bank to give appellees $ 850 on their note, and, if there had been, it was without consideration. The executory agreement to make the gift, if it existed as claimed, was not consummated by the execution of writings or by the entry of a credit in the note, and was invalid. 20 Cyc. 1202, 1208; 100 Ill.App. 75; 28 Mich. 221 42 Am. Rep. (N. Y.); 32 N.Y.S. 1103. Execution by appellee of his note for extensions for full amount of debt estops him from claiming a reduction. 111 Ark. 358; 118 Ark. 465; 126 Ark. 14; 96 Ark. 268. Another complete answer to this defense is that all evidence offered to support it was incompetent being contradictory of the terms of the writing. 19 Ark. 690; 17 Cyc. 589. The indorsement, pledge and subsequent sale of the note, according to the terms of the collateral contract, vested the title to the note in the bank, with right to collect same in full. 94 Ark. 387; 32 Ark. 742; 95 Ark. 542; 31 Cyc. 878, 872, 880, 883; 88 F. 217; 104 F. 409; 165 F. 802; 90 A. 189; 149 U.S. 327; 76 Mo. 290; 21 R. C. L. 694; 123 U.S. 562; 54 F. 759; 45 Ark. 177.

No brief for appellees.

OPINION

WOOD, J.

This action was instituted by the appellant against the appellees to foreclose a mortgage on lots 1, 2 and 3, block 11, Pulaski Heights Addition, Little Rock, Arkansas. The appellant alleged that the appellees executed their promissory note on July 11, 1914, to one Harry Wirbel in the sum of $ 3,000, with interest at the rate of seven per cent. per annum from date until paid; that, to secure the note, Louise B. Harnwell executed her mortgage on the lots mentioned; that on October 22, 1918, the note above mentioned was duly transferred and assigned on the mortgage and on the record of the mortgage to the appellant, and that it is now the owner of the note and mortgage; that no part of the note had been paid; that two notes were executed by the appellees to the appellant in the sum of $ 105 each for the interest due, one on Jan. 11, 1919, and the other on Jan. 11, 1920; that these notes bore interest at ten per cent. from due date; that the debt as evidenced by the notes was due the appellant, and that the mortgage was subject to foreclosure, and the complaint concluded with a prayer for judgment and foreclosure of the mortgage.

The appellees, in their answer, admitted the execution of the note for $ 3,000, and the mortgage, but denied that the appellant was the owner thereof. They alleged that the appellant loaned to Harry Wirbel $ 2,150, and that the note and mortgage were never transferred and assigned to the appellant as alleged, but were still the property of Irma Wirbel; that the appellant, after Harry Wirbel applied to be adjudged a bankrupt, sold said note and mortgage to itself without authority and without notice to the owner, and have since claimed to be the owner by reason of such sale; that the appellant collected interest at 7 per cent. from the appellees, and had not accounted for the same. They set up the plea of usury (which has been abandoned); that the appellees had a distinct understanding with the appellant that it would be satisfactory to pay $ 2,150, the amount of Wirbel's note, and appellant acknowledged it was entitled only to that sum; that later appellant demanded $ 3,000 with interest. Appellees refused to pay, and demanded that the appellant bring suit, or they would do so; that the appellant has never paid or accounted to Wirbel or to the appellees for the interest paid subsequent to the bankruptcy of Wirbel, or two installments of interest prior thereto. That the appellant is not entitled in any event to more than $ 2,150 and interest, and they prayed that the excess interest be refunded.

On the 11th of July, 1914, Mrs. Louise B. Harnwell executed a promissory note to Harry Wirbel, indorsed by C. P. Harnwell, in the sum of $ 3,000, bearing seven per cent. interest from date until paid, payable in four years after date, interest payable annually. This note was secured by a mortgage on lots 1, 2 and 3, block 11, Pulaski Heights Addition, Little Rock. Harry Wirbel borrowed from the appellant the sum of $ 2,150, evidenced by his promissory notes, one dated Feb. 15, 1917, for $ 1,650, and the other dated March 5, 1917, for $ 500. These notes bore interest from maturity at ten per cent. per annum until paid, interest payable semi-annually. Each of the notes contained a recital showing that the note of Mrs. Harnwell for $ 3,000 was pledged to the appellant as collateral, and that the collateral note was secured by lien on the lots above mentioned. Each of the notes also contained the following recital: "It is hereby agreed that, upon the nonpayment of this obligation, or any installment of interest thereon, the said company or holder thereof may sell the same at public or private sale, for cash or on credit, as a whole or in parcels, at any place in the city of Little Rock, without notice, and said company or holder may, at any such sale, purchase the same, or any part thereof, for its or his own account, and, after deducting all costs of sale, the balance of the proceeds shall be applied to this obligation," etc. The interest accruing, and paid to the appellant on the Harnwell note, was applied on the Wirbel note, and part of the excess was applied on the principal of the Wirbel note, and the sum of $ 152.33 was sent to Wirbel. On the 19th of November, 1917, appellant wrote to Wirbel, in substance telling him that, by reason of the default in the payment of his notes, which were then some months past due, it would offer for sale to the highest bidder on Nov. 30, 1917, at ten o'clock a.m., at the office of the bank, the collateral note of Mrs. Harnwell for $ 3,000, describing the same as above, and would apply the proceeds derived from the sale to the satisfaction of its debt.

After testifying to the above facts, the assistant secretary of the appellant further stated that the appellant carried out the sale, at the time designated, in the lobby of the bank, and the note was bid in by representatives of the bank for the amount of its debt, which was $ 2,030.15 after applying all just credits. The price paid for the collateral was a fair one. Neither Harnwell nor Wirbel was there to bid on it or to redeem it. The sale was conducted fairly and without fraud, and in compliance with the terms of the contract. Two officers of the bank and one or two others were present at the sale. The contract did not require the appellant to make a public sale, but it made it public to that extent. Appellant gave the notice that was required. The appellant did not notify the Harnwells, but only notified Wirbel.

The secretary of the appellant testified that the collateral was bought in for less than its face value. The appellant paid a fair price for the collateral at that time. Appellant would rather have had the money than the collateral.

Moorhead Wright, president of the appellant, testified that Wirbel wanted to sell the appellant the collateral note of Harnwell, but appellant did not want to buy it, and the question with appellant was how much they would lend on it. Witness was familiar with the sale of the collateral and its purchase by the bank; thought the amount paid was the full value of the note at that time. The property in the mortgage had increased considerably in value since appellant purchased the note five years ago.

Harnwell testified that, without notice to witness, who lived in Little Rock and passed the bank many times a day, and without notice to witness' wife, the appellant, on Nov. 30th, sold to itself witness' note and mortgage for the amount of the Wirbel notes. When witness' note to Wirbel became due in 1918, witness went to the bank to see about paying or renewing it, and was told that his note had been sold under the collateral agreement. This was the first witness knew that the bank claimed title to the note and mortgage. Witness objected, and told the bank that he was perfectly willing to pay the $ 2,150. He said he could go out and borrow it somewhere else, or renew it with them, but he didn't expect to have to pay the $ 850 that didn't belong to the bank. The testimony of Harnwell and the Wirbels was to the effect that the $ 850 had been given to Harnwell by Mrs. Wirbel for legal services.

The conclusion we have reached upon the facts as above set forth makes it unnecessary to set out in detail further testimony in the record. The court found that the appellees were indebted to the appellant in the sum of $ 2,328, and entered its decree for that sum, with directions that same be paid out of money from the sale of the lots in controversy, which had been deposited in the registry of the court, and that the balance be paid to the appellees. From that decree appellant prosecutes this appeal, and the appellees cross-appeal.

1. The first and principal question for decision is whether or not the appellant is the owner outright of the Harnwell note to Wirbel. Wirbel pledged...