Scott v. Liddell

Atkinson, Justice. The official report states the facts. 1. The question as to whether the contract to pay the principal of a promissory note and the contract to pay interest thereon are so united as to be incapable of separate assignment and enforcement in the hands of separate holders, we are now for the first time in this State called upon' to determine: "We know of no principle of law which is violated by such an arrangement, and can see no reason why it should not be allowed; While the contract to pay interest is dependent upon the contract to pay principal, it is also in a certain sense independent. They may be made to stand for execution at different times. The agreement to pay interest may be void for usury, and yet the ágreement to pay principal remain unaffected. By agreement between the parties, the principal may be discharged and the accrued interest still remain due, and vice versa. So it would seem that the right to demand an enforcement of the one is not dependent upon the enforcement of the other; and hence we can see no good reason why the holder of a promissory note cannot retain title to it and give or sell the increment of interest to another, so as to retain to himself the right to* collect the principal and vest in that other the right to* collect the interest, and vice versa. If this be true, then one may well be pledged without the other. Nor does the fact that actual delivery of the evidence of indebtedness is essential to the validity of the pledge, affect the principle stated, as the one evidence of indebtedness may well represent several obligations to pay. The quality of separability between principal and interest is recognized in many classes of cases, notably in case of bonds bearing interest, with coupons attached representing the accruing interest. So if in the* one case principal and interest are separable, they are not so indissolubly connected as- to be incapable of dissociation. That the contract to pay principal and interest may be [29] separated, we think, has been practically determined by those cases in which it has been held by this court that a contract to pay interest upon interest accrued and unpaid is valid and not opposed to the statutes against usury; otherwise, the collection of interest upon interest could not be upheld. See Scott, trustee, v. Saffold, 37 Ga. 384. So a separate action may be maintained for the recovery of interest accruing before maturity of the note, even though there be no provision in the note expressly authorizing such action. Calhoun et al. v. Marshall, trustee, 61 Ga. 275. So under ordinary circumstances dividends upon the stock of incorporated companies, accruing after it is delivered in pledge, follow the stock and vest in the pledgee the right to have them paid to him; but the contrary may be provided by special agreement, and then the pledgor is entitled to receive them. Guarantee Co. v. East Rome Co., 96 Ga. 511. So in the present case we see no difficulty in holding that the holder of the note could lawfully deliver it in pledge, and by special agreement with the pledgee provide' that his interest as pledgee should attach only to the principal, leaving the right to the accruing interest in v the pledgor, and subject to his control. 2. The promissory note sued on in the present case was made payable at the expiration of ten years from its date, •but contained a stipulation that if the accruing interest were not paid at stated times, the entire debt should immediately become due. The principal of the note was pledged before any instalment of interest became due, and the accruing interest with the right to collect the same was reserved by the payee. When an instalment of interest became due, the payee extended to the «drawer time within which to pay the interest beyond that stipulated in the note, and thereafter the pledgee brought suit for the principal debt, alleging that it had matured by reason of the non-payment of interest to the payee. A plea in abatement was filed upon the ground that the suit was premature, and this [30] plea was sustained and the suit dismissed. The question is, could the payee, after delivery of the note in pledge, enter into an arrangement with the maker by which the contract as expressed in the note could be affected or changed so as to prevent its maturity because of the non-payment of interest? It must be admitted that, as a general proposition,, two persons cannot by contract between themselves affect a right of a third person not a party to the agreement, as against either of the two so agreeing. The stipulation for prompt payment of interest made time of the essence of the agreement, and so it would have remained had not the person to whom the obligation to pay interest was due agreed with the person obliged to pay, that another, and to tire debtor more convenient, season should be substituted. It will be observed that in the agreement under which the note sued on was delivered in pledge it was expressly stipulated, not only that the title to the interest should be reserved to the pledgor, but that in the matter of its collection he should have absolute control. He had over it the unlimited power of disposition. He could have given the interest as it accrued to the person from whom it was due, and the holder of the principal could have had no cause to complain. Nor is it a reply to the exercise of this right, that thereby the probable maturity of the pledgee’s right to-sue would be postponed. If prompt actual payment of interest had been deemed of sufficient importance, he should, in accepting the pledge, have stipulated for the control of the interest as well as the principal. The power of unlimited control of'the matter of collecting the intei*est involved the exercise of unlimited discretion as to the means to that end, and these were the rights reserved to the pledgor. Nor is the pledgee without his remedy, not against the maker of the note, but against the pledgor. It is one of the obligations of the pledgor that he will do no act which will tend to deprive the pledgee of his title to the thing pledged, nor pending the bailment do unlawfully any act to lessen the [31] security afforded, thereby; and hence if in the exercise of a right reserved by him in the thing pledged he does any act not authorized in the contract upon which the bailment rests, which tends to either of these results, to the injury and damage, of the pledgee, he is answerable for such damages. Whatever rights he may have must be exercised in such manner as not to wrongfully deprive the pledgee of the benefit of the bailment. Judgment affirmed.