Opinion
13555
January 12, 1933.
Before, SEASE, J., Spartanburg, April, 1930. Affirmed.
Action by T.A. Green and First National Bank of Spartanburg against the E.B. Gresham Company. From decree dismissing plaintiff's complaint, and from order refusing to reopen case for a rehearing, plaintiffs appeal.
The order of Judge Sease and certificate of counsel directed to be reported are as follows:
ORDER OF JUDGE SEASEThis action of foreclosure comes before me on the report of the master and exceptions. Counsel for plaintiff also served notice of a motion to substitute as plaintiff herein the First National Bank of Spartanburg as assignee of the plaintiff's rights and interests herein. The motion was opposed by defendant, who moved to dismiss the action upon the ground that the plaintiff is not the real party in interest and has never been. I overruled defendant's motion to dismiss and ordered the First National Bank of Spartanburg made a party plaintiff. It appears also that an attachment has been made upon whatever interest the plaintiff Green may have herein. The question thus raised as to which is entitled to priority, the bank as assignee of the plaintiff Green, or the attaching creditor, does not become important in my view of the case as hereinafter expressed.
The exceptions raised by the defendant to the master's report question the correctness of the report in its essential details. The plaintiff excepted to the report upon one ground only, that the attorney's fee allowed was to small.
The mortgage sought to be foreclosed was executed by defendant to the plaintiff Green on May 25, 1911. At that time Green sold defendant one-half interest in the Gresham Hotel, in Spartanburg, for which he received cash $1,000.00 and a number of notes, one for $500.00 due 15 days after date, three for $2,000.00 each, due 60, 90, and 120 days after date, and four notes for $5,000.00 each, due 6, 12, 18, and 24 months after date respectively. Defendant at the time agreed to assume payment of one-half of a mortgage for $30,000.00 then upon the entire property.
The note for $500.00 and the three $2,000.00 notes were unsecured. The four $5,000.00 notes were secured by two mortgages, covering the half interest conveyed, one securing the 6 and 12 month notes and the other the 18 and 24 month notes. These mortgages were recorded at the same time on June 3, 1911, one in Volume 77, page 53, and the other in the same book at page 52. Each mortgage refers to the other as being "coextensive with another of like tenor and date."
In instituting this action, plaintiff sought to obtain Judgment of foreclosure of the mortgage recorded in Book 77, page 53. In his complaint he makes no reference to the other mortgage, but he sets forth two notes, one payable 12 months after date and the other 18 months after date, which he alleges evidenced "a single indebtedness of ten thousand ($10,000.00) dollars," which he alleges was secured by the mortgage recorded in book 77 page 53. In this he was mistaken. In the progress of the trial before the master it appeared that the mortgage originally given to secure the notes payable 18 and 24 months after date was canceled by the Bank of Spartanburg, as assignee, by its cashier, John B. Cannon, on January 9, 1914. Mr. Cannon testified that he would not have canceled this mortgage if it had not been paid. While the plaintiff contended there was a balance of $45.49 and interest still due him on the 18-month note, this note and the mortgage securing it were eliminated from further consideration, counsel for plaintiff apparently conceding the elimination of this note and asking for strict foreclosure of the mortgage securing the other note upon which he claimed a balance of $1,541.68 (the difference between $5,000.00 and the credit of $3,458.32), with interest at 8 per cent., payable semiannually, and also 10 per cent. attorney's fees.
The master, to whom the action was referred by consent, held reference on four different dates, at which considerable testimony was taken and many exhibits offered, consisting mainly of account books, kept by the two parties to the action, account books kept by the Bank of Spartanburg, and various checks and notes, as well as correspondence between plaintiff and officers of the bank and others. The master reported, recommending judgment for defendant for the sum of $8,706.17 and foreclosure, together with a fee of $500.00 for plaintiff's attorneys.
A whole day was consumed in the trial of this case before me, and the argument of counsel thereon. I have since then given the matters involved full consideration and I cannot escape the conclusion that the master's report is not sustained by the evidence, and should be reversed. My reasons are as follows:
The plaintiff sold the remaining half interest in the hotel to defendant on June 1, 1912, defendant then agreeing to assume all of the $30,000.00 first mortgage thereon and to pay $26,000.00 represented by three notes one for $6,000.00, payable December 1, 1912, and two for $10,000.00 each, payable April 1, 1913, and January 1, 1914, respectively, all secured by a mortgage of the other half interest in said hotel then conveyed, which was recorded in the register's office and which also is uncanceled upon the records. In his testimony, the plaintiff Green admits that this indebtedness has been paid, but states he does not know what has become of the mortgage. The testimony offered by defendant also shows that these three notes were paid as follows: the $6,000.00 note at the Bank of Spartanburg at its maturity; the $10,000.00 note due April 1, 1913, likewise on April 7, 1913, by check for $10,702.66, and the remaining $10,000.00 on National Bank of Wilmington, N.C. handled through the American National Bank of Spartanburg, the amount paid being $11,319.24. This was rather prompt payment of notes evidencing a large indebtedness created a little more than one year after the note herein sued upon was given and shows defendant's ability to pay.
It is shown conclusively that the note for $5,000.00 given May 25, 1911, and payable six months after date, was paid by check on January 25, 1912. Prior to that time the $500.00 note and the three $2,000.00 notes given also on May 25, 1911, had been paid.
The 18-month note has already been referred to hereinabove, the last payment on it being credited November 26, 1912. The 24-month note was not discovered till after the evidence before the master had been concluded, when upon forcing open lock boxes belonging to the Bank of Spartanburg this note and some others were brought to light. The note shows its own credits and extensions in the bank where it was carried, the final payment being made January 2, 1914, just 7 days before the mortgage which had been given to secure it and the 18-month note was canceled by the cashier of the bank.
This leaves undisposed of only the note for $5,000.00, which was given May 25, 1911, payable 12 months after date. Defendant contends it is also paid and should be surrendered and the mortgage securing it canceled. Plaintiff concedes a number of payments shown in his account book and the statement, Exhibit R, offered in evidence. These are a list of drafts and checks aggregating $6,250.00 covering a period of time from March 5, 1912, to July 17, 1912. He claims they were applied on account, however, and that they left a balance of only $3,458.32 to be applied upon the note in question. Counsel for defendant questions the correctness of this account since it relates to matters pertaining to the equipment of the hotel which took place prior to the sale of the first half interest therein and also included rent of a sample room for the hotel, no part of which expense plaintiff assumes, although he reserves full rent for his half interest in the hotel from May 25, 1911, to June 1, 1912.
These questions are unimportant, however, in my view of the whole case. At the first reference before the master, plaintiff Green admitted that neither the defendant nor Mr. Gresham owed him any other notes than the notes executed in the purchase of Gresham Hotel. All four of the $5,000.00 notes given plaintiff Green by defendant on May 25, 1911, were handled in one way or another through the Bank of Spartanburg. The 12-month note was used by plaintiff Green as collateral security on his own note for $5,000.00, Exhibit M, which he executed to the bank on August 31, 1911, payable four months after date, and bearing the bank's note No. 10880. It was paid by plaintiff Green on February 6 to 9, 1912. He contends that he has had possession of this 12-month note ever since February 9, 1912, but in this he is evidently mistaken. The records of the bank show that a note for $5,000.00 was being carried by the bank to its maturity on May 25, 1912, under the bank No. 11730. Just in this connection, I think the master made a mistake. In some way he got the impression, and so reported, that this note No. 11730 was a $10,000.00 note and that plaintiff Green was not connected with it. There is no evidence to sustain this finding. The bank's book known as the note tickler, which Mr. Cannon identified and explained the use of, shows beyond dispute that the bank was carrying a $5,000.00 note on which the defendant was maker and plaintiff Green indorser to its maturity on May 24, 1912. In all probability, on February 9, 1912, when the records of the bank show that plaintiff Green borrowed a large sum of money from the bank, he used this 12-month note either by direct or as a collateral security on his own note, making it fall due on the maturity of the 12-month note. Mr. Cannon, the cashier of the Bank of Spartanburg at that time, who handled these notes and a good part of the correspondence with plaintiff Green, testified that, in his opinion, based upon the records of the bank note No. 11730 was renewed as note No. 13734 and that note No. 13734 was paid so far as the bank was concerned in two payments, one of $4,000.00 on February 21, 1913, and the other of $1,000.00 on March 10, 1913.
The master in his report, referring to note No. 13734, says "No item on Green's deposit account can be identified as proceeds from this note." If this note was in fact a renewal of No: 11730, there would, of course, be no proceeds to deposit. In view of the master's findings in this connection, I shall review the record evidence a little more fully as to this particular note.
The bank's general ledger shows note No. 13734 both under plaintiff Green's account and also under the account of the defendant. Under the plaintiff's account, it appears as a $5,000.00 note with "E.B. Gresham Company" as "maker" and "T.A. Green" as "security" — that it fell due February 15, 1913, and was paid in two payments as above indicated, one of $4,000.00 on February 21, 1912, and the other of $1,000.00 on March 3, 1913. The number of this particular note is repeated on this account three separate times. Under defendant's account on the same book, it also appears three times by the same number, showing "Gresham Hotel Company" as maker and indicating the same two payments but with no date to either payment. Gresham Hotel Company must be the same as the E.B. Gresham Company.
It is significant that on the same page of this same general ledger there also appears the 18-month note set out in the complaint, which was carried by the bank as No. 4099. And the record here shows that note No. 4099 was of the same character as note No. 13734 — that is that the defendant was the maker and that plaintiff Green was the security. Just over the column indicating the security are three significant letters, "R.E.M.," indicating real estate mortgage.
From this evidence, the conclusion is irresistible that note No. 13734 was a note executed by defendant to plaintiff Green in the sum of $5,000.00, and that from Mr. Green's own testimony it must necessarily have had something to do with the purchase of the Gresham Hotel. The evidence of Mr. Crews, bookkeeper of the Merchants' Farmers' Bank, establishes the fact that the $4,000.00 credited on this note on February 21, 1913, was paid by defendant by check on its account in the Merchants' Farmers' Bank bearing the same date. There is no satisfactory evidence, however, showing who paid the remaining $1,000.00 on March 10, 1913. It may have been paid by plaintiff, which fact would account for his having possession of this note.
From these well-established facts, I must conclude that the 12-month note which was executed by defendant to the plaintiff Green on May 25, 1911, has been paid and that the mortgage securing it should be canceled. If this were an action for a strict accounting between the defendant and the plaintiff Green, I should recommend judgment in favor of the defendant against the plaintiff Green for the difference involved in this transaction. The defendant would also be entitled to have the plaintiff account to him for the following checks for which the defendant does not appear to have been credited: $720.14 on August 8, 1913, and $1,500.00 on September 1, 1913. Both of these checks were executed by Gresham Hotel Company to Bank of Spartanburg and were paid, according to the records, on some note of T.A. Green. The check for $720.14 was paid "on T. A. Green's note" and the $1,500.00 check "on Green's note." Plaintiff Green has failed to account for those checks, and the fact that the notes in question were then being carried by the Bank of Spartanburg strongly indicates that they should have been applied on one of defendant's notes to T.A. Green. The note in question indicates that it was one attached to some other paper or papers by rusty clip, and these papers may have carried credits. This is only conjecture, however.
Another view of this case confirms my conclusions as hereinabove expressed. In October, 1916, suit was begun by Messrs. Carson Boyd, attorneys for plaintiff Green, against defendant and C. Gresham on the same two notes and mortgage herein sued upon. At the same time an action was begun also by the plaintiff through the same counsel against the defendant for rent of a sample room used in connection with the hotel. On both of these suits, defendant C. Gresham accepted service on the back of the original summons. At the same time Mr. C. Gresham, according to the evidence, was the owner of all of the stock of the Gresham Hotel Company. He states that he called in the office of the plaintiff's attorneys and accepted service on the back of each summons and stated that he did not owe the plaintiff anything. This was in October, 1916. The suits were never pressed. All papers relating to these suits remained in possession of the plaintiff's attorneys until the dissolution of the firm of Carson Boyd. After this, they appear to have remained in the office of Mr. Carson. Mr. Carson later formed a partnership with Mr. A.E. Tinsley. Carson Tinsley continued the active practice of law until Mr. Carson's death, about 1922. After this the papers were deposited in Mr. Tinsley's barn, where they were discovered in 1930. It appears that their discovery was caused by a visit to Spartanburg, S.C. by Rev. R.C. Gresham, who came at the instance of his father Mr. C. Gresham, to obtain a loan on the Gresham Hotel in order to assist a crippled bank in Georgia of which his father was president. For the first time, according to the testimony of Rev. R. C. Gresham, he discovered the existence of the uncancelled mortgages against the property. Immediately a wire was sent to Mr. Green with the request that these mortgages be canceled. Instead of a cancellation of the mortgages, this suit resulted.
In view of the letter of Mr. Green to his attorneys, Messrs. Carson Boyd, which was written on May 10, 1916, in regard to these suits, in which he uses this expression: "Please prosecute this collection vigorously," I have no doubt that the suits would have been prosecuted vigorously, if they had any basis of merit in them at that time.
There is also another indication of payment. On September 25, 1913, the plaintiff Green wrote to Mr. Arch B. Calvert, who was then president of the Bank of Spartanburg, informing Mr. Calvert that he was offering for discount a note of Gresham Hotel Company for $10,000.00, which was unquestionably the last one of the series of notes aggregating $26,000.00 executed by the defendant to the plaintiff Green on June 1, 1912, in the purchase of the remaining half interest in the hotel. This letter states: "I offer for discount to Murchison National bank of this city today the last one of the series of $10,000.00 Gresham Hotel Company's notes. They wanted some reference, and I took the liberty of referring to your bank. You have handled most of these notes and they have all been paid." The last five words above quoted are significant. If in fact at the time the twelve-month note in question had not been paid, Mr. Green was not dealing with Mr. Calvert and the Murchison National Bank frankly.
Defendant's answer also set up a credit which it claims on account of repairs to the elevator and also an alleged agreement made with Mr. Green when a quitclaim title was executed to certain Wilmington property. In view of my conclusions as hereinabove expressed, it is unnecessary to consider these additional defenses.
It is therefore ordered, adjudged, and decreed that the report of the master herein be reversed and the complaint dismissed. It is further ordered that the clerk of this Court be and he is hereby authorized and empowered to cancel upon the records in the office of register of mesne conveyance for Spartanburg County the mortgage herein sued upon.
CERTIFICATE FROM COUNSELI, Samuel T. Lanham, an attorney at law, practicing at the Spartanburg bar, do hereby certify to the following facts:
At the request of counsel for appellants in Green v. Gresham (Case No. 386, Opinion 13555, filed January 12, 1933), I have carefully read the transcript, arguments, the opinion of the Court, and the petition for rehearing, and have given some study and thought to the decisions therein cited, with a view of ascertaining whether or not I could give the opinion required of rule 17.
Being in thorough accord with the pronouncement of the Court in Arnold v. Carolina Power Light Co., contained in the opinion filed therein January 10, 1933, I have made a conscientious effort fully to comply with the Court's ideas as to what should be done in such a matter, by "counsel not concerned in the case," and now give it as my professional opinion that there is merit in the grounds of the petition for rehearing, and that same is not intended for any purpose of delay.
Messrs. Nicholls, Wyche Russell and J.W. Boyd, for appellants, cite: As to affirmative defense by defendant: 153 S.C. 309; 150 S.E., 789; 15 S.C. 80. Circuit Judges have same power at chambers as at open Court: Sec. 36, Code 1932 ; 121 S.C. 290.
Mr. Horace L. Bomar, for respondent, cites: As to motion for new trial on ground after-discovered evidence: 33 S.C. 403; 87 S.C. 157; 138 S.C. 318; 165 S.C. 357. Real party in interest only can maintain an action: 155 S.C. 457; 5 C.J., 942.
January 12, 1933. The opinion of the Court was delivered by
This action, in equity, was one for foreclosure of a real estate mortgage. The main defense of the defendant was that of payment.
The master, to whom the cause was referred, found in favor of the plaintiffs that there was a balance due on the mortgage debt, and recommended foreclosure of the mortgage.
On exceptions to the master's report, his Honor, Circuit Judge Sease, held that the evidence showed payment of the mortgage debt, and he decreed a dismissal of the complaint.
The arguments on the exceptions to the master's report, before the Circuit Judge, were heard on March 12, 1932. The case was taken under advisement, and the decree of the judge was made on March 24 or 25, 1932, there is conflict in the record as to the exact date.
On March 25, 1932, plaintiff's counsel noticed by mail application for permission to introduce additional evidence. Before the Circuit Judge received the information as to the making of that application, he had signed and filed his decree. Thereafter, on April 2, 1932, plaintiffs' counsel moved before Judge Sease for permission to produce additional evidence and for a rehearing of the case. The defendant objected to the motion of the plaintiffs, and Judge Sease, on the authority of Turner v. Foreman, 47 S.C. 31, 24 S.E., 989, held that he did not have jurisdiction at chambers to entertain the motion. In dismissing it, he took occasion to say that, if he had jurisdiction, he would grant the plaintiffs' application.
From the decree dismissing the complaint, the plaintiffs appealed to this Court. The plaintiffs also appealed from the order of Judge Sease refusing to open up the case for the purpose of allowing plaintiffs to offer additional evidence and for a rehearing of the cause.
The defendant has submitted sustaining grounds for the upholding of the last order of Judge Sease, the only one necessary to be noticed being the one that the showing made was not sufficient to justify a rehearing of the cause.
In the appeal of the plaintiffs from the main decree, the burden rests upon them to convince this Court that there was error in the finding of the Circuit Judge as to the payment of the mortgage debt.
The evidence in the case, requiring about 125 printed pages, is set out in full in the transcript of record. We shall not attempt a review, or even a summary, of that evidence. The decree of the Circuit Judge has sufficiently stated the essential matters. It is only necessary to say that a careful examination of all the evidence is convincing that there was no error on the part of the Circuit Judge in the conclusion he reached that the mortgage debt had been paid.
As to the appeal of the plaintiffs from the second order of Judge Sease, and the ground upon which the defendant asked that that order be sustained, we are of the opinion that the cause should not have been opened on the showing made. The case continued in the Circuit Court under reference for something like eighteen months. The taking of evidence required four separate days. The plaintiffs did not make a proper showing of due diligence, which they should have made when they asked for a further hearing. While we appreciate the evident desire of Judge Sease to give all the parties a full hearing, we think that the parties had had full opportunity to present the cause, and after it had been fully and fairly heard, and the Circuit Judge had rendered his decree, there was no good reason to have the case tried over. We think, too, that the evidence which the plaintiffs sought to have introduced would not have changed the result of the decree which was adverse to them.
We disagree, however, with the holding of Judge Sease that he did not have the authority to grant the motion to open up the case at chambers. The case of Turner v. Foreman, supra, relied upon by the Circuit Judge, was decided in 1895. Circuit judges did not then have the broad powers at chambers with which they are now vested. See Section 37, Code 1932.
The main decree of Judge Sease will be reported.
The judgment of this Court is that the main decree and the second order of the Circuit Judge, appealed from, be, and the same are hereby, affirmed.
MESSRS. JUSTICES STABLER, CARTER and BONHAM concur.
ON PETITION FOR REHEARING
For two reasons, we have given careful consideration to the petition for rehearing presented in this cause. One is the apparent earnestness of counsel for the appellants that our former opinion was erroneous. The other is due to the certificate of "counsel not concerned in the case," Hon. Samuel T. Lanham, to the effect that, in his opinion, there is merit in the grounds of the petition. For the information of the bar, it is well to have that certificate reported. Eliminating the reference to the opinion of this Court in Arnold v. Carolina Power Light Company, 167 S.E., 234, the certificate presented in this case is worthy of emulation in the preparation of a certificate on a petition for rehearing.
Another review of the cause has not convinced us, however, that we were wrong in affirming the decree of his Honor, Judge Sease.
We were not unmindful, as counsel for the appellants seem to think we were, of the legal principle that payment is an affirmative defense. In deciding the case, we had that principle fully in mind. The burden to establish payment was on the defendant, but the burden to show that the Circuit Judge erred in his finding that there was payment was on the appellants in this Court.
The petition for rehearing is dismissed.
MR. CHIEF JUSTICE BLEASE and MESSRS. JUSTICES STABLER, CARTER, and BONHAM concur.