Opinion
14446
March 3, 1937.
Before BELLINGER, J., Greenville, September, 1936. Reversed and remanded for entry of judgment in accordance with opinion.
Suit by the Peoples National Bank of Greenville, South Carolina, against O.K. Upchurch, Ruby F. Upchurch and another. From an adverse decree, the named defendants appeal.
Master's report follows:
The above case was referred to the Master for Greenville County by a general order of reference signed by Hon. T.S. Sease, presiding Judge, on October 15, 1935. Subsequent thereto and before the reference, by a consent order the defendant Life Insurance Company of Virginia was eliminated from the action as provided in the order of Hon. A.L. Gaston, presiding Judge, dated February 15, 1936.
The suit was duly commenced by the plaintiff against the defendants by the service of a summons and complaint on all of the defendants on June 29, 1935, the action arising out of the following state of facts, which I state as briefly as possible:
In the spring of 1925, the defendant Ruby F. Upchurch sought a loan from the plaintiff on her home situate on East Earle Street in the City of Greenville, S.C. in the sum of $1,500.00. The home was inspected by the president of the bank, and on April 7, 1925, Mrs. Upchurch with her husband went to the bank, where she signed the papers and delivered them to the president or cashier of the bank. The papers were made payable to O.K. Upchurch, her husband, and either then or later the note was indorsed in blank, and the assignment on the mortgage bears date of April 8, 1925, but this assignment was not recorded until April 30, 1930. The transaction was at the bank, and it had prepared the papers for the loan, and retained them after execution by Mrs. Upchurch. Apparently from the date of said execution and delivery the matter rested without further communication between the bank and Mrs. Upchurch until September 28, 1930, although payments had been made from time to time on said $1,500.00 indebtedness. On the last date, however, Mr. Upchurch, for himself and wife, offered to pay the bank the balance due on said indebtedness represented by his collateral note of $300.00, to which was pledged said real estate note and mortgage: the said sum being offered in full settlement of the indebtedness and calling for the surrender and cancellation of the collateral. Whereupon the bank declined to accept said amount and claimed that it had the right to collect the face amount of the note and mortgage under the terms of the collateral note, which provided that said collateral "is also to stand pledged to said bank for any other indebtedness, either as maker, endorser, or otherwise." The bank's reason for making this claim was that it held a $4,000.00 past-due unpaid note dated January 22, 1930, given by Upchurch Motor Company, whereupon O.K. Upchurch, the maker of the collateral note, was indorser.
The $300.00 it is claimed was the balance due on said $1,500.00 indebtedness was thereupon tendered by them in cash to the bank at the time, and thereafter same was tendered to plaintiff's attorneys, and then said amount was paid into Court, and is now in the possession of the Clerk of Court for Greenville County. The plaintiff refused all tenders of said amount.
This action is to foreclose said note and mortgage given by the defendant Ruby F. Upchurch. Judgment is sought against O.K. Upchurch on the $300.00 collateral note and on the $4,000.00 note given by Upchurch Motor Company whereon he became indorser. Plaintiff seeks to apply the proceeds of sale representing the face amount of the real estate note and mortgage with interest toward the payment of said indebtedness represented by said notes.
The defendant Ruby F. Upchurch resisted foreclosure, claiming that the real estate note and mortgage on her home was given at the culmination of negotiations with officials of the bank for the purpose of securing a specific loan on her home in said amount of $1,500.00, and the matter was so handled, and she knew of no collateral requirement or arrangement whatsoever, and the first she knew of such contention or claim was when the bank declined to accept the $300.00 balance on September 28, 1930. The plaintiff seeks by motion to strike portions of her answer raising these questions. I hold that the motion to strike should not be granted, but should be refused in view of the facts and circumstances in this case, and also under authority of Ex parte Moore, 161 S.C. 107, 159 S.E., 503.
The defendant O.K. Upchurch answers, admitting the execution of all the notes in question, but asserts similar claims to those of his wife as to the special purpose of the execution of her note and mortgage. Certainly such portions of his answer as tend to vary the terms of his collateral note could avail him nothing. However, since the notes are admitted, and the defense as interposed by Mrs. Upchurch is permissible under the authorities, and under my view of the case, the striking of specific portions of the answer of O.K. Upchurch becomes academic, as the refusal or granting of same cannot affect the vital issues in the case.
I find that the contention of the defendant Ruby F. Upchurch is sustained by the facts and the evidence in the case, most of which facts are uncontradicted. The bank officials were familiar with the fact that the mortgage was being given by her on her home for the specific purpose of procuring a loan of $1,500.00, which the bank had agreed to make. She had no notice of any intention by the bank to use her paper merely as collateral, and certainly no notice of any intention of its use as collateral to past, present, or future obligations of her husband. No additional loan or credit was extended by virtue of the execution of said note and mortgage, but it was handled as a separate and distinct transaction, the money was being procured for the known and special purpose of paying off another mortgage on her home. The amount of this indebtedness had been reduced from time to time by payments to $300.00, which was the amount due and payable on September 28, 1930, when said sum was tendered.
Further, the $1,500.00 transaction was actually consummated and the money placed to the credit of Upchurch on April 22, 1925, the net proceeds from this loan being $1,445.30, and on the same date Mrs. Upchurch procured the proceeds of $7,500.00 from the Life Insurance Company of Virginia as a loan on the home, and these two sums were used to retire a mortgage of $8,850.00, which was satisfied on the same date, and the canceled note and mortgage were offered in evidence.
It is the contention of the bank that a collateral note was given by O.K. Upchurch either at the time the real estate note and mortgage were executed, or on the 22d of April, 1925, when the money was deposited. Several collateral notes given by O.K. Upchurch bearing date subsequent to the maturity of the real estate note and mortgage were offered in evidence. All of these collateral notes bear date either March 28th or September 28th, each being payable six months after date. These dates do not correspond with the date on which the real estate note and mortgage was given, or with the date on which the moneys were placed to the credit of Upchurch. There is no direct testimony, except a conflict in that of O.K. Upchurch, that a collateral note was given on either of said dates. The only entry in the bank books offered in evidence shows a note loan to Upchurch on April 22, 1925. This could have been a loan to Mrs. Upchurch or to her husband, and could have been on the real estate note and mortgage direct or on a collateral note given by Mr. Upchurch. Be this as it may, and assuming that a collateral note was given by O.K. Upchurch on one of said dates, conclusions and findings herein announced would not be altered, as the testimony clearly shows that the defendant Ruby F. Upchurch sought and procured a loan from the bank on her home in the sum of $1,500.00 and for this purpose she executed her note and mortgage. If the bank elected to handle it as a collateral transaction with her husband, she knew nothing of it, according to the uncontradicted testimony. And the bank officials knew that it was her home and her collateral, and for what purpose the money was being procured, and it never at any time indicated to her anything inconsistent with the original purpose of the loan.
According to the testimony, Mrs. Upchurch kept up with the payments being made on said indebtedness, and the bank never claimed either principal or interest from her as an assignee of the papers, but obviously was satisfied with the payments being made on the debt until it saw a possibility of applying said collateral under the terms of the collateral note toward the payment of the Upchurch Motor Company note. The first transaction Upchurch Motor Company had with the bank, so far as the testimony reveals, was in 1929, about four years after this note and mortgage transaction. The $4,000.00 note sued on was given approximately five years after the execution of the real estate note and mortgage. Such contingent obligations could not have been in the minds of the parties at the time of the original transaction, and there was no other indebtedness due the bank by either Mr. or Mrs. Upchurch. It would therefore manifestly be a very harsh judgment that would require in these circumstances Mrs. Upchurch to pay her note and mortgage in full with interest, which would now approximate twice the original amount of the loan, and would probably occasion the loss of her home.
In the case of Ex parte Moore, 161 S.C. 107, 159 S.E., 503, 505, the Court had under consideration collateral of a wife used by her husband in procuring a specific loan from the bank. Her contentions in endeavoring to establish her right to the collaterals or the proceeds thereof over and above the specific indebtedness were very similar to the contentions of the defendant Ruby F. Upchurch here.
The following general rule was announced in the Moore case, supra: "It is a well-established rule that parol testimony is not rendered inadmissible because it contradicts or varies the terms of a written instrument to which the litigant offering the testimony is not a party." The unanimous opinion written by Justice Bonham cites other authorities to the same effect. Further in the opinion the Court says: "We think that the evidence, which tended to show that the authority given by Mrs. Moore to W.C. Moore to pledge the stock to the bank was limited to a pledge for the money then being borrowed, was admissible. She was a stranger to the contract which culminated in the note."
The Court then quotes with approval a portion of the circuit decree as follows: "It seems to me that when the Cashier of the bank made the loan in question with full knowledge that the security belonged to another person, the bank was by that fact alone charged with knowledge of the limitations of the authority of Mr. Moore to pledge the stock, and that it was not within the power of Mr. Cook to place the bank in the position of a bona fide holder for value in respect to any other obligations than the one upon which the new money was obtained."
Since the defendant tendered to the plaintiff the correct amount due, which tender was kept good and open, and the money paid into Court, I hold as a matter of law that the lien of the mortgage has been discharged, and the plaintiff is not entitled to foreclosure. In support of this finding, see Section 8703, S.C. 1932 Code; Salinas v. Ellis, 26 S.C. 337, 2 S.E., 121; Owens v. North State Life Insurance Company, 173 N.C. 373, 92 S.E., 168; Barron v. Thompson, 111 S.C. 339, 345, 97 S.E., 840; Tolbert v. Fouche, 129 S.C. 338, 123 S.E., 859.
Further, it is my conclusion that in the circumstances hereinbefore enumerated, and under the facts as they are revealed from the record, and as I have found them, plaintiff has no right to demand of the defendants more than the $300.00 which they offered to pay and duly tendered. The plaintiff, however, is entitled to judgment against O.K. Upchurch and Ruby F. Upchurch in the sum of $300.00 without interest, costs, or attorney's fee. which amount is the balance due on the said $1,500.00 indebtedness, or in lieu thereof the plaintiff may accept the $300.00 in the hands of the Clerk of Court and duly surrender said notes and cancel said mortgage.
Further, I find that the plaintiff is entitled to judgment against O.K. Upchurch as indorser on the Upchurch Motor Company note dated January 22, 1930, for the principal sum of $4,000.00, with interest calculated to March 27, 1936, in the sum of $1,897.78, with 10 per cent. attorney's fee, amounting to $589.77, making a total of $6,487.55.
The defendant O.K. Upchurch in his answer asks for an accounting on account of the indebtedness by the Upchurch Motor Company to the plaintiff for the purpose of determining what, if anything, was due on the $4000.00 note involved in this action. The question of accounting, however, has not been referred to in this report for the reason that defendants' attorneys admit that the said indebtedness of $4,000.00 by the Motor Company to the bank was due and unpaid, and that Mr. Upchurch was liable thereon as indorser.
Messrs. Mann Arnold, for appellants, cite: Evidence: 186 S.E., 641; 61 S.C. 166; 39 S.E., 346; 72 S.C. 362; 51 S.E., 980; 27 S.C. 324; 3 S.E., 538; 98 U.S., 161 S.C. 107; 159 S.E., 503; 17 L.R.A., 270; 13 S.E., 153; 24 A.S.R., 657; 9 So., 372; 21 A., 777; 10 R.C.L., 1020; 14 Am. Rep., 239.
Messrs. Blythe Bonham, for respondents, cite: Right of bank to whole collateral: 21 R.C.L., 932; 20 F.2d 644.
March 3, 1937.
The opinion of the Court was delivered by
For the reasons stated in the report of Hon. E. Inman, Master in Equity, the exceptions of appellants to the decree of Judge Bellinger are sustained; and the said report is adopted as the opinion of this Court.
Reversed and remanded for entry of judgment in accordance herewith, and for such additional orders, if any, as may be necessary to give effect to the judgment of this Court.
MR. CHIEF JUSTICE STABLER and MESSRS. JUSTICES CARTER and FISHBURNE concur.
MR. JUSTICE BONHAM did not participate.