#### E. Clyde Scott *et als. v.*Mortgage Service & Realty Co. *et als.*

(No. 6833)

Submitted April 28, 1931.

Decided June 2, 1931.

*Carl C. Sanders*and *Clarence W. Meadows,*for appellants.

*Floyd M. Sayre*and *Dillon, Mahan <& Molt,*for appellees.

Litz, President:

The plaintiffs, E. Clyde Scott, Herbert Stansbury, J. R. Tolley and L. B. Legg, sue as creditors of defendant, Mortgage *575Service &• Realty Company, a defunct corporation, for administration of its assets under chapter 53, sections 58 and 59, Code 1923, (31-1-82, 83, Code 1931), and to enjoin the collection of numerous negotiable promissory notes executed severally by themselves and defendants, F. S. Kitts and Elliott H. Cook, as makers, and held by defendants, J. S. Lewis, W. A. Falconer, W. R. Wray, L. A. Wilson and M. W. Powers.

The corporation was chartered and organized in September, 1925, with authority, among other powers, to negotiate money loans. C. F. Lyda and J. G. Ridinger, who owned all of its capital stock, except a qualifying share to each of the three other incorporators, immediately assigned to it a money loaning agency conducted by them as subagents of Mortgage Security Corporation of America, Norfolk, Virginia. A partnership formed between Lyda and Ridinger on September 1, 1926, under the firm name of Lyda & Ridinger to sell life insurance as agents of Lincoln National Life Insurance Company, continued until the death of Lyda, November 26, 1926. The notes in question, payable to Lyda *&*Ridinger, were delivered to Lyda by the makers and by him endorsed for value to defendants, Lewis, Falconer, Wray, Wilson and Powers. Lyda had previously negotiated to said defendants and others numerous notes executed by plaintiffs and defendants, Kitts and Cook. Prior to his death, the business of the corporation and partnership seemed to be stable and prosperous and no one appears to have suspected his business integrity or ability. The plaintiffs and defendants, Cook and Kitts, complain that the various notes in controversy were executed by them for the accommodation of Lyda or delivered to him to be discounted for their benefit and that he violated his trust by failing to pay to them the proceeds obtained by him from the other defendants. Lyda left no assets applicable to his common debts. Payment of the notes having been refused by the makers, actions thereon were - brought by the respective holders, and this suit followed. On a former appeal, the ruling of the circuit court, sustaining a demurrer to the bill, was reversed. The cause having been remanded, the bill *576was dismissed at tbe final bearing upon tbe pleadings and proof.

The plaintiffs failing to prove that they are creditors of the corporation, upon the theory that the proceeds of the notes were used for its benefit, contend (1) that defendants, J. S. Lewis, W. A. Falconer, W. R. Wray, L. A. Wilson and M. W. Powers, are not holders in due course of the contested notes, and (2) that they are entitled to credits thereon, by reason of assignments to said defendants of insurance on the life of Lyda to secure said notes and other indebtedness. Finding no circumstances in the proof which would have put said defendants upon inquiry at the time of discounting the notes and the uncollectible indebtedness secured by said assignments being largely in excess of the insurance, we are constrained to affirm the judgment of the circuit court.

*Affirmed.*