Evening star., 1934-10-15
.SWARTzELL, ,RAEEM.
ruling Reversed
BY APPEALS Court
Decision Dissipates All Hope.
Of NotehoIders to Sal.
wage Losses.
MINNIE {. SIMPSON
SOUGHT $1,000 ON NOTE
Judge Martin Holds Contractor
Had Made Legal Payment
Of Notes.

The last hope Of swartsell. Rheem
b Hensey Co. noteholders to salvage
any Of their losses through the courts
was dissipated today when the District
Court Of Appeals reversed . lower
court ruling that they could recover
from builders financed through the
Swartzell company.
This decision Of the appellate court
was handed down In the suit brought
by Minnie =. Simpson to recover her
losses from David L. Stern, who bor-
rowed $375,000 from the SwartSell
company and built an apartment
house, originally securing two q, 900
notes owned by the plaintiff.
When the case came up In the DIS
trict Supreme Court the trial Judge
decided as . matter Of law that Stern
had not paid the note and directed .
verdict and entered judgment for
$4,000 In favor Of the plaintiff.
Stern Borrowed Money.
It was brought out during the trial
that Stern borrowed the money to
finance construction Of the Ponce
de Leon Apartment. A deed Of trust
naming Luther e. Swartzell and I'd
mund D. Rheem as trustees was given
to secure the loan. A series Of notes,
including the two owned by the plain
TIL, were issued under this trust deed
and sold by the Swsrtzeu company.
The deed authorized Stern, under GER
tain conditions, to pay the notes 1t
any time before maturity at the ONCE
Of the Swartzell company. Suhse-
quently, however, he sold the prop
erty to the Abner Drury Co, and
that concern in q refinancing move
repaid the original loan. The pay.
ment was made to the Swartsell COM
pany, which released the deed Of trust
and credited the note holders with
the face value Of their security. Il
was pointed out that the trust agree
ment gave the trustees authority to
release the trust without canceling
the outstanding notes. Stern pleaded
In the lower courts that . proper pay
ment had been. made by him q the
legal result Of theGe factk TAe lower
court decided othe1 Vie, but the Court
Of Appeals, IN an opinion written BY
Chief Justice Martin. lheld that under
the terms Of the trust agreement the
legal payment had been made to the
swart1eIl company and that the note
holders could not thereafter collect
from Stern.
Not Entitled 70 Recover.
The opinion pointed out that the
Swartxell company was acting as the
the latter were not entitled to recover
from the builders because their own
agent went into bankruptcy before
actually paying over the money It
had received on their behalf.
Attorneys Alvin L. Newmyer and
David q. Bress, representing Stern,
contended the Abner Drury Co., a.
purchaser, acquired Stern's right to
pay the debt before maturity and
that the payment BY that company
was equivalent to payment BY Stern
In 20 far as the rights Of the note
holders were concerned.
This decision Is the 1irst one made
by the Court Of Appeals In . law
suit arising out Of the controversy. Il
follows an earlier decision in an
equity case IN which It was held tho
noteholders could not maintain an
action to re-estsblish the released
trust. It was believed these two rul-
ings definitely eliminate my possi-
bility Of recovery by the noteholder,
through action in equity.