Case Name: Cate v. Cate
Court: Tennessee Supreme Court
Jurisdiction: Tennessee
Decision Date: 1888-09-27
Citations: 87 Tenn. 41
Docket Number: 
Parties: Cate v. Cate.
Judges: 
Reporter: Tennessee Reports
Volume: 87
Pages: 41–45

Head Matter:
Cate v. Cate.
(Knoxville.
September 27, 1888.)
Vendor and Vendee. Vendor's lien. Assignment of note as collateral. The lien or equity implied, in the absence of any reservation of an express lien, in favor of the vendor of land, as security for the purchase price, is not extinguished by the vendor’s assignment of the notes given for the purchase price as collateral security for his debts.
Cases cited and approved: Greenv. Denross, loHum., 371; Thompson v. Pyland, 3 Head, 537; Thorpe v. Dunlap, 4 Heis., 674; Cowan v. Sharpe, 11 Heis., 450; McWhirter v. Swoffer, 6 Bax., 342; Pillow v. I-Ielen, 7 Bax., 545; 32 Ark., 258; 28 Ark., 66; 40 Miss., 778.
Cited and distinguished: Bowlin v. Pearson, 4 Bax., 343.
EROM MEIGS.
Appeal from Chancery Court of Meigs County. I). C. Trewhitt, J., sitting by interchange.
V. C. & E". Q. Allen and ~W\ L. Harbison for Complainants.
Burkett, Manseield & Turley for Defendant.

Opinion:
Lurton, J.
This case involves the question as to whether the lien which exists in favor of the vendor of land, conveyed without reservation of an express lien, has been lost by the transfer of the obligation of the vendee as collateral security. Complainant BT. L. Cate being indebted to his co-complainant, B. E. Lillard, assigned to him, as collateral security, a note which had been executed by the defendant, M. E. Cate, as part consideration for the sale of a tract of land, no lien having been retained in the deed of conveyance. This note was transferred to Lillard with the following indorsement: "This note is this day assigned to B. E. Lillard as collateral security to secure a debt of one thousand dollars and interest due him from me." At the time of the assignment Lillard executed a receipt for the note, reciting that it had been transferred as collateral security, and "is to he collected by me, and net proceeds to he applied to payment of the two notes due me as here-inbefore described, the legal title to said note to remain in N. L. Cate, but the right to collect and apply proceeds as herein indicated is conveyed to me." LT. L. Cate and B. E. Lillard join in this hill and seek a decree subjecting the land sold defendant to a lien for the payment of this note. The doctrine that the vendor of land has an equity, often designated as a lien, to secure the purchase money, which may be enforced against the vendee and his heirs or assignees with notice, is well settled. The ground upon which the equity rests is much controverted, and it would perhaps be unre-munerative to consider the opposing views. The doctrine originated in the English courts of equity, and they have steadily repudiated the idea that the equity is one personal to the vendor, and therefore hold that an assignment of the debt carries with it the lien. Pomeroy Eq. Juris., § 1254; Dryden v. Frost, 3 My. & Cr., 670; Payne v. Baker, 1 Giff., 241.
Whatever room there may once have been for controversy, it has long been settled in this State that the lien does not pass to the assignee of the ven-dee's obligations. Green v. Demoss, 10 Hum., 371; Thompson v. Pyland, 3 Head, 537; Tharpe v. Dunlap, 4 Heis., 674; Cowan & Dickerson v. Sharpe, 11 Heis., 450; Bowlin v. Pearson, 4 Bax., 343; McWhirter v. Swoffer, 6 Bax., 342; Pillow v. Helm, 7 Bax., 545.
The doctrine is thus stated by Judge McKinney in the leading case of Green v. Demoss: "But this lien is a mere personal, equitable right in the vendor, and is not assignable. It looks only to the security of the vendor, and does not pass to the assignee of the vendee's obligation for the consideration money, and consequently cannot be enforced in his favor. The assignment of the vendee's notes as obligations for the purchase money is not, however, ipso facto an absolute discharge or extin-guishment of the lien; it is only so conditionally. The lien is to secure the payment of the purchase money to the vendor. If, upon a transfer by the vendor of the vendee's note or obligation the former he discharged from all ultimate liability upon his endorsment; or if the assignment were without responsibility, on the part of the vendor, for the payment by the vendee, in either case this would amount to absolute payment, so far as the vendor is concerned, and the lien would be extinguished. But if the vendor is made liable upon his indorsement, or voluntarily takes back the note, the lien will be regarded as merely suspended in tbe meantime, and be will be remitted to bis equitable right, and may enforce the lien against bis vendee as if no such assignment had been made."
In Arkansas, where the lien is held to be nonassignable, the courts hold an assignment as collateral security not to defeat the lien. Blevins v. Royers, 32 Ark., 258; Carlton v. Buckner, 28 Ark., 66.
So in Mississippi, where the rule is as in this State, it has been held that where the assignor repossesses himself of the note the lien revives. Stratton v. Gold, 40 Miss., 778.
The note in the case now under consideration has never been assigned in the sense that the vendor has parted with his title. The debt due from him was not paid by the assignment; on the contrary, if the vendee fails to pay his note to Lil-lard the assignor will continue to remain liable for the whole of his debt to Lillard. The effect of the indorsement to Lillard and-of the receipt given by the latter is to l'ender the transaction nothing more or less than a simple deposit of the note by way of collateral security. Assenting, as we do, to the doctrine of the non-assignability of such a lien, and holding it to be a mere pei'sonal, equitable right of the vendor, yet the facts of this case take it out of the general rule. The vendor is still the legal and equitable owner of this debt, and entitled, therefore, to a decree enforcing his lien, the proceeds to be applied upon his debt due to Lil-lard accoiAing to the agreement between the parties.
Tlie case of Bowlin v. Pearson, 4 Bax., 343, is pressed upon us very zealously by tbe solicitor for tbe defendant as a case in point. That was a case of a bill filed in tbe name of tbe assignor for tbe use of tbe assignee, the note having been assigned. While it is true that the assignor had been made liable upon bis indorsement, yet be bad not repossessed himself of tbe note, nor bad be brought any suit upon bis own rights as an indorser. Tbe case went off on the state of the pleadings, the Court holding that, tbe lien had not passed to tbe assignee, and therefore be bad no use for which tbe indorser could sue, tbe Court saying: " In equity, however, tbe party for whose use the suit is brought is tbe real party, and as be has no right to enforce, tbe bill must fail in any aspect of tbe case. Whether tbe indorser may or may not file a bill before payment of tbe note on becoming owner of it again, in this view makes no difference. He has brought no bill for bis own use to enforce rights of his own, but only to en-foi'ce rights for his assignee, who has none."
It is easy to be seen that the case under consideration is to be distinguished from the one just referred to, and that it presents no real antagonism to the view herein expressed. The decree of the Chancellor will be affirmed in so far as to give to complainant, H. C. Cate, a decree for the debt and enforcing his lien, the net proceeds to be paid over on his debt to Lillard.
Appellant will pay costs of appeal.