Case Name: GOLDIN et al. v. FEDERAL INTERMEDIATE CREDIT BANK
Court: Court of Appeals of Georgia
Jurisdiction: Georgia
Decision Date: 1935-02-16
Citations: 50 Ga. App. 790
Docket Number: 23876
Parties: GOLDIN et al. v. FEDERAL INTERMEDIATE CREDIT BANK.
Judges: Stephens, J., concurs. Jenlcins, P. J., dissents.
Reporter: Georgia Appeals Reports
Volume: 50
Pages: 790–800

Head Matter:
23876.
GOLDIN et al. v. FEDERAL INTERMEDIATE CREDIT BANK.
Decided February 16, 1935.
Rehearing denied March 1, 1935.
E. S. & James Loy Griffith, for plaintiffs in error.
Boyldn & Boyldn, contra.

Opinion:
Sutton, J.
The plaintiff bank, as transferee, instituted pro eeedings against the defendants to foreclose a bill of sale executed by the defendants to secure a debt. The instrument recited that it conveyed title to certain crops, including cotton, to be grown upon described lands within 12 months from the date thereof, and was executed pursuant to the act of August 22, 1925. Ga. L. 1925, p. 118; Michie's Code (1926), § 3310 (1). The defendants interposed their affidavit of illegality, in which they set up that the indebtedness secured by the bill of sale had been paid; that when the debt matured, they sent, at the special instance, direction, and command of a duly authorized agent of the plaintiff, thirty bales of cotton grown by them on said lands to the Georgia Cotton Growers Association, where the cotton was to be sold and the proceeds paid over to the plaintiff, and if there were proceeds left over, the defendants were to receive the same. Defendants set up therein that at this time they were offered a price for the cotton that would have more than paid off said secured debt, and they requested this agent of the plaintiff to allow them to sell the cotton to such buyer, but he refused so to do, stating that his principal had a lien on it, that it belonged to his principal, and that the defendants would have to ship the cotton to said association, and that the plaintiff claimed the right, under the bill of sale, to control and dispose of the cotton, and that it exercised this authority by requiring the defendants to turn the cotton over to the cotton association, to sell and apply the proceeds on its note. Defendants further set up that by reason of the foregoing facts, they do not owe the plaintiff anything, the cotton being worth more than the secured debt at the time it was turned over to the plaintiff's agent and shipped to the cotton association. The undisputed evidence shows that the agent of the plaintiff, handling the collection of the indebtedness due it by them, wrote to the defendants and stated that they had to "ship their cotton"; that the defendants gathered thirty bales of cotton to pay off this indebtedness, and called on the plaintiff's agent, in response to the letter, and informed him that they were ready to pay off the indebtedness, and he notified the defendants that the cotton belonged to the plaintiff by virtue of the contract and that the defendants would have to ship the cotton to the Georgia Cotton Growers Association in Atlanta, to be pooled, along with other cotton; that the defendants did not want to do this, but wanted to sell the cotton and pay off such indebtedness; that this agent, who had the bill of sale and note in his possession, told the defendants that they could not do this, but that the plaintiff requested that they ship the cotton to the association; that the defendants were offered a price of 22% cents per pound for the cotton, which weighed 14,902 pounds, and they so informed the plantiff's agent-and asked that they be allowed to sell the cotton for this sum, but he informed the defendants that the plaintiff had a mortgage on the cotton and that it would have to be shipped to the association, but he would guarantee that when sold by the association it would bring.more than enough to pay the debt; that the cotton was then turned over to the association's agent and the plaintiff's agent and tagged with association tickets or tags produced by the plaintiff's agent, and shipped to the association. The application for membership in the cotton association, in the record, was signed by but one of the defendants, and this was on the same day the cotton was shipped. The bill of sale gave authority for the plaintiff to take possession of the cotton on maturity of the debt, and "sell the same as the agent of the" defendants "in the open market in the usual way at private sale." It was contended by the defendants that they had nothing further to do with the cotton when they brought it to the railroad station, but that they turned it over to the plaintiff's agent to be shipped to the association. The contract with the association provided that the cotton was to be sold with other cotton pooled, at the best price obtainable under market conditions, and the proceeds, after payment to the association of its charges and expenses of sale, were to be paid to the plaintiff, and if there was more than enough to pay the note it was to be paid to the defendants. The plaintiff introduced no evidence as to the sale of the cotton, that is, whether part or all of it had been sold, and at what price it was sold for, or the total amount derived therefrom and the disposition thereof. The original amount of the note was $3,200, and two credits appear thereon, one for $1490.20 and the other for $96.21. The only evidence in the record as to the credits or the sale of the cotton is from one of the defendants, as follows: ' "I do not know where the credit that is on this paper came from. I never did make any other payment in any way, except this cotton on this paper. Of course, I know it come from this cotton." The undisputed evidence shows that there were 14,902 pounds of this cotton, and that it was worth 22% cents a pound, according to the prevailing market price of the cotton at the time and place that the-defendants were required by plaintiff to ship the same to the association. The record is silent as to whether the price of cotton went up or down after the defendants parted with possession and control of the cotton. It will be seen that the value of the said cotton at that time was $3,352.95, and that the two credits on the note amount to only $2454.41, there being a difference in these two amounts of $898.54. At the conclusion of the evidence, the trial judge directed a verdict for the plaintiff, that is that the fi. fa. proceed, the mortgage execution being for $745.59 principal, $113.79 interest, and $85.93 attorneys' fees. The defendants moved for a new trial, the motion was overruled, and they excepted.
1. Where a bill of sale is given to secure a debt, and on maturity of the debt the creditor elects to exercise the right given therein to take possession of the security and to sell it at private sale as the agent of the debtor, the creditor is acting as agent for the debtor in thus dealing with the security, and must exercise ordinary diligence, "such as persons of common prudence use in relation to their own affairs," in handling such security, having due regard to the rights of the debtor therein. Code of 1933, § 4-203; Brown v. Clayton, 12 Ga. 564 (4); Pressley v. McLanahan, 14 Ga. App. 366, 368 (80 S. E. 902).
2. In a suit by the creditor against the debtor to recover the balance of the debt, where the creditor has taken possession of, and assumed dominion over, the property, under the right given in the bill of sale, the evidence will not authorize a recovery for the creditor in any amount until the creditor has carried the burden of showing a disposition of the property as agent of the debtor under the terms of the contract, and the amount realized by the creditor on such disposition. The amount of the recovery will then be limited to the difference between the debt and the amount realized from such disposition, provided, the latter is less than the former. Hargett v. Muscogee Bank, 32 Ga. App. 701 (124 S. E. 541).
3. The foregoing principles are applicable where the creditor refuses to permit the debtor to dispose of the security and pay off the indebtedness, but, in exercising control over the security under the authority given in the bill of sale, does not sell the property it self, but requires the debtor to turn the security, consisting of 30 bales of cotton, over to a third person to be sold at the best price obtainable under the market conditions, the proceeds of the sale to be applied to payment of the indebtedness, and the balance, if any, to be turned over to the debtor, and where thereafter the creditor brings an action to recover a claimed balance due on the indebtedness, and it does not appear that when the cotton was sold by the third person, the best price obtainable under market conditions was had for it, how much the cotton was sold for, or how much of it was sold, and what disposition had been made of the proceeds; nor whether ordinary diligence had been exercised in the disposition of the same.
4. A recovery for attorney's fees ivas not permissible, although the note or other instrument may provide for the payment thereof, where there was no prescribed notice of intention given to the defendant makers by the holder that the holder was going to bring suit on the instrument and would claim such attorney's fees unless the obligation was paid on or before the return day of the court to which suit would be filed. Civil Code (1910), § 4252; Turner v. Peacock, 153 Ga. 870 (113 S. E. 585).
5. Applying the above rulings to the evidence in this case, the trial judge erred in directing a verdict for the plaintiff and in overruling the defendant's motion for new trial.
Judgment reversed.
Stephens, J., concurs. Jenlcins, P. J., dissents.