Farmville Oil & Fertilizer Co. v. Smith

BbogdeN, J. Tbe case is this: A married man executed six notes for $1,000 each and secured tbe same by a first deed of trust upon property in tbe city of Greenville which said deed of trust was duly executed by both husband and wife. Thereafter, tbe said parties executed notes aggregating $7,596.88 to the plaintiff and secured same by a second deed of trust upon tbe same property in tbe town of Greenville. Three of tbe notes secured by tbe first deed of trust were paid and tbe husband died. Thereafter, tbe wife, having money of her own, went to tbe bolder of tbe remaining three notes of $1,000 each and purchased one of the $1,000 notes and bad the same duly assigned to her by tbe bolder. Tbe plaintiff held tbe notes secured by tbe second deed of trust and default in tbe payment thereof having been made, demanded that tbe trustee, Turnage, sell tbe property under said deed of trust. Pending tbe advertisement, tbe bolder of an indebtedness made by tbe husband and wife and secured by a mortgage upon farm land, demanded payment of tbe notes held by her. Thereupon, tbe widow transferred tbe $1,000 note which she owned in her own right to tbe attorney of tbe bolder of tbe indebtedness on tbe farm to be applied as a payment upon said indebtedness when collected. Sale was made by tbe trustee under the second deed of trust on tbe town property and after applying tbe proceeds of tbe sale, there was a deficiency of $2,610.95 due by tbe defendant. Tbe plaintiff contends that tbe $1,000 note secured by tbe first deed of trust and purchased by tbe widow, Ella Smith, was not properly applied as a payment on tbe Quinerly indebtedness, and therefore tbe said defendant is deemed to be tbe bolder of said $1,000 note, and, as tbe defendant, Ella Smith, owes tbe plaintiff $2,610.95, tbe said plaintiff is *726 ■entitled, to set off said $1,000 note in paying the balance due on the first deed of trust. That is to say, there are three notes -of $1,000 each secured by the first deed of trust if the note held by the defendant is secured by the lien of the Darden deed of trust. If not so secured, then the plaintiff must pay only $2,000 to discharge the first or Darden deed of trust and thus eliminate the $1,000 note held by the defendant, Ella Smith, and transferred to Mr. James, attorney for Mrs. Quinerly. The question of law thereupon arises: If the owner and holder of a note properly transfers the same to a creditor with the understanding that the proceeds thereof shall apply as a payment upon the indebtedness of the creditor when collected, does such transfer amount to a payment when the funds are in hand available to pay said note? The defendant,1 Ella Smith, purchased the $1,000 note signed by her hus.b'and, with her own money, and the same was duly transferred to her. Thereupon, she became the legal owner of said note and entitled to the proóeeds thereof. Hence, she had a right to sell, transfer or assign the note. She did assign and transfer the note to Mr. James, attorney for her creditor, Mrs. Quinerly, and authorized him to receive payment thereof and apply same upon the Quinerly indebtedness. Manifestly the defendant, Ella Smith, being the. owner of the note and having the legal title thereto, transferred the legal title to the attorney for Mrs. Quinerly with the attendant right to receive, the proceeds of said note when collected. Therefore, Mrs. Quinerly held a valid note secured by the Darden deed of trust which entitled her to collect the note and apply the proceeds to her indebtedness. The proper transfer of a valid note secured by a deed of trust by the owner and holder of such note cannot in any way affect the lien upon the property securing payment thereof. The agreement of Mrs. Quinerly through' her counsel, Mr. James, to apply the proceeds of the note when collected, amounted to payment at the instant the funds were properly available for the purpose of payment. This principle was established by the decision of Grandy v. Abbott, 92 N. C., 34. The Court said: “But it was correct to tell the jury that if the money was borrowed by aiid for - the debtor, Abbott, under an express arrangement that it should be for the discharge of the debt of the plaintiff, which the attorney then held for the purpose of collection by plaintiff’s authority, the debtor'has1 the right to consider the appropriation made as soon as the money sufficient to discharge the claim was thus raised upon his credit. In this the contract is between the debtor and the attorney and agent of the plaintiff, acting in this for his creditor principal. The case is not unlike one in which a debtor places claims against other persons in the hands of the creditor or of his collecting agent, under an .agreement'that any money derived from the claims shall go in discharge of the debt. If moneys *727 sufficient are tbiis received tbey are eo instanti applied in extinguishment of the debt, precisely as if the debtor had paid the money, for he does thus pay the money as soon as it passes into the hands of the collecting agent, and must be deemed to be thus applied.” Applying the principle of law to the facts, it is obvious that Mrs. Quinerly is the owner of the $1,000 note transferred to Mr. James, .her attorney, by the defendant, Ella Smith. Hence the' ruling of the trial judge was erroneously made. The plaintiff invokes the equity of marshaling and setoff, but these equities are not raised by the facts and are not involved in the merits of this controversy. Harrington v. Furr, 172 N. C., 610. Eeversed.