Court Opinion

ID: 7993250
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:33:44.550561+00
Date Added: 2024-06-11T16:35:27.073435
License: Public Domain

Ethridge, J.
(dissenting).
I am unable to concur in that part of the' opinion of the majority which holds that 'the appellants were entitled to preference as to the notes held by them as collateral security to secure a debt due the appellants by the First Natchez Bank. It appears that *394the First Natchez B'ank was indebted to the Canal Louisiana Bank & Trust Company in the sum of one hundred and twenty-five thousand dollars, represented by five promissory notes of twenty-five thousand dollars each, secured by certain collateral, among which were three unsecured notes of the Ellen Green Company in favor of the First Natchez Bank in the sum of ten thousand three hundred and fifty dollars, five thousand one hundred and seventy-five dollars and five thousand one hundred and seventy-five dollars respectively. An arrangement was made between the Ellen LI. Green Compány and the First Natchez Bank under which certain lands in Louisiana were sold to the First Natchez Bank in satisfaction of the debt due by the Ellen LI. Green Company to said bank. These notes to the First Natchez Bank were unsecured and the Ellen IL Green Company had given mortgages to persons named Green in" Louisiana; said Greens being the owners of the Ellen LI. Green corporation. By this arrangement lands were sold to the First Natchez Bank, and these liens were released, giving the First Natchez Bank title to these lands.
A corporation was formed for the purpose of taking over these lands and operating them known as the Tensas River Planting Company, which corporation executed the notes involved in this suit to the First Natchez Bank, payable at the First Natchez Bank, Natchez, Miss., and secured by the lands above mentioned. When these notes were executed and delivered to the First Natchez Bank, two of the notes of ten thousand dollars each were sent to the Canal Louisiana Bank & Trust Company to be substituted for the unsecured notes of the Ellen H. Green Company held by such bank as collateral. These notes were acepted, and the Ellen H. Green Company notes were returned to the First Natchez Bank. Later the First Natchez Bank sent another ten thousand dollar note of the said Tensas River Planting Company to be held also as *395collateral security for the debt of the First Natchez Bank.
The other notes of the Tensas River Planting Company were delivered to different banks to secure other debts owed by the First Natchez Bank, Some of these notes were held by a bank'in New York City, some held. by a bank in St. Louis, Mo., and some held by another bank at Natchez, .Miss. In this condition the First Natchez Bank failed, being insolvent, and the appellees were appointed receivers of said bank to liquidate its affairs. A petition was presented to the chancery court by said receivers requesting authority and permission to use funds in their custody as receivers of said bank for the purpose of buying these outstanding notes at a discount in the interest of all the creditors of the bank.
The Canal Louisiana Bank & Trust Company notes were included in this application to the chancellor administering the affairs of the said First Natchez Bank, and an order was made by the chancellor permitting the said receivers to acquire the said notes with the assets of said bank for the, benefit of the creditors of the said bank generally. It seems, however, that a misunderstanding arose between the Louisiana Bank and the receivers of the First Natchez Bank, and the arrangement was not carried out so far as the Louisiana Bank was concerned, but the other outstanding notes were acquired by the receivers by the use of the assets of the First Natchez Bank for the benefit of its creditors. . This presents a different situation from what the case would be if the First Natchez Bank had held these notes at the time of the appointment of the receivers as assets of said bank. All of these notes were secured by a common mortgage, and there was no express agreement between the First Natchez Bank and the Louisiana Bank that said notes would have priority over the other notes secured by said mortgage, and the opinion of the majority is not *396founded upon any such contract, but is founded upon the theory that under the laws of Louisiana the assignment of the notes would be given priority over the other notes, as the notes involved in this suit were governed by the Louisiana law.
The notes involved in this suit are payable in Mississippi, and are governed by the Mississippi law, under a long line of decisions of this court holding that the note is governed by the law of the place of the payment. Miller, Mayhew & Co. v. Mayfield, 37 Miss. 688; Harrison v. Pike Bros., 48 Miss. 46; Johnson County Savings Bank v. Yarbrough, 106 Miss. 79, 63 So. 275; Lienkauf Bank Company v. Haney et al., 93 Miss. 613, 46 So. 626; Fellows v. Harris, 12 Semedes & M. 462; Hart v. Livermore Fdy. & Mach. Co., 72 Miss. 809, 17 So. 769; Emanuel v. White, 34 Miss. 56, 69 Am. Dec. 385; Coffman v. Bank of Ky., 41 Miss. 212, 90 Am. Dec. 371; Bank of La. v. Williams, 46 Miss. 618, 12 Am. Rep. 319; Dalton v. Murphy, 30 Miss. 59; Kendrick v. Kyle, 78 Miss. 278, 28 So. 951; First Nat. Bank of Iowa City v. McGrath & Son, 111 Miss. 872, 72 So. 701; Allen v. Bratton, 47 Miss. 119.
In ease of Lienkauf Banking Company v. Haney et al 93 Miss. 613, 46 So. 626, it was held that a note and the obligation and rights growing out of a .note were governed by the law of the state where the note was payable, although given for purchase money of property within this state and reserving the title to the property until payment.
In the case of Kendrick v. Kyle, 78 Miss. 278, 28 So. 951, it was held that, where notes dated and payable in Tennessee were given for the purchase price of lands in Mississippi, and secured by a deed of trust on such lands, the rights of the parties under such notes were governed by the laws of Tennessee.
In the case of First National Bank of Iowa City v. McGrath & Son, 111 Miss. 872, 72 So. 701, where Mc-Grath & Son gave a note payable to the Purity Manu*397facturing Company in the state of Illinois, and pledged by such company to the First National Bank of Iowa, which hank brought the suit, and where McGrath attempted to make defenses permissible under the laws of Mississippi, hut not entertainable under the laws of Illinois, court held the law of Illinois governed, and such defenses were not permissible.
In the case of Allen v. Bratton, 47 Miss. 119, one Dobbins sold Bratton a tract of land in Mississippi and took three notes payable in Memphis, Tenn., but secured by vendor’s lien on the lands. Dobbins sold one of the notes to Allen in this state and another in the city of New Orleans, La., to the Crescent City Bank, and this court held that the rights of the parties were governed by the Tennessee law, where the notes were payable, and not by the Mississippi law or the Louisiana law, where the transfers were made.
This court has held in a number of cases that, where several notes were secured by the same déed of trust, or other instrument, all of the notes were entitled to share pro rata in the proceeds of the sale of the security where such proceeds are not sufficient to pay all of the notes, and that the assignment of notes secured carries with it as an incident part of the security pledged for its payment.
In Davidson v. Allen, 36 Miss. 419, this court held that the indorsement by the vendor of a note given for a portion or for all of the purchase money without recourse in law or equity would not' prevent a vendor’s lien passing to assignee in case where the lien is assignable; also that, where in the vendor assigns a portion of the purchase money to which his lien attaches, and retains a balance, the proceeds of the land if insufficient to pay all would be distributed pro rata between the vendor and. his assignee.
In the case of Cage v. Iler, 5 Smedes & M. 410, 43 Am. Dec. 521, this court held that, where several notes maturing at different periods are secured by a deed *398of trust and have passed maturity, and a sale takes place under the deed of trust, the proceeds of the sale are to be applied ratably to the several notes.
In the case of Terry v. Woods, 6 Smedes & M. 139, 45 Am. Dec. 274, this court held that, where the holder of one of the series of mortgage notes indorses a note to the third person before due, and after its maturity and non-payment takes it up and again becomes the holder thereof, he would not thereby lose his recourse upon the mortgaged premises, but will be substituted again to his original rights.
In Pugh v. Holt, 27 Miss. 461, this court held that all debts secured by mortgage and due at the date of foreclosure unless a preference be given to some of them by the terms of the mortgage, or unless the original creditor designed by his contract in assigning them to impart a right of prior satisfaction to the assignee, should be paid pro rata, in case of an insufficiency in the mortgage fund to pay the whole. This rule applied to controversy between the security of the mortgagor and the mortgagee, or between different assignees of the note.
In Wooten v. Buchanan, 49 Miss. 386, this court held that, where there are several notes secured by a mortgage, and all of the notes are due, the money arising from a sale of the mortgaged property should be applied ratably to the several notes secured by the instrument, and this whether there had been a judgment obtained upon one of the notes or not.
In the case of Green v. Morris, 78 So. 550, we held that bona-fide purchasers from the indorsee of a part of a series of notes secured by a deed of trust are not affected by collateral oral agreements between the payee and his indorsee, by which the notes rendered should have a priority of payment over those indorsed in the absence of notes to the purchasers of such agreement, but they are entitled to share pro rata.
*399There is not a syllable in the record to show that the New York bank, the St. Louis bank, or the bank at Natchez, which brought the other notes of this series, had any notice whatever of the transfer of the note held by the Louisiana bank, or of any agreement by understanding between the First Natchez Bank and and the Louisiana Bank, and certainly under the decisions above cited these parties had a right to share in the security for these debts.
The receivers of the bank, while they have the legal titles of the bank to its assets and paper, represent the creditors generally, being more the representatives of the creditors than of the bank.
The decision of the majority puts this court in this attitude: If a note is payable in some other 'state, and transfer is made here, and the security is in Mississippi, then Mississippi law does not govern, but that the law of the state where the note is payable governs, but if the note is payable in Mississippi, and the transfer is in the other state, and the property is in the other state, that the transaction is also governed by the laws of the other state, and not the laws of Mississippi..
The consequences of this decision has been tellingly illustrated in brief of one of the counsel for appellee in-substance as follows: Suppose that the New York law, where one of the notes was assigned, held that the note first due had preference over the balance, and that it held this note, and was therefore entitled to preference under the laws of New York, where the assignment was made. Suppose that the Missouri law held that the notes first assigned had preference, and that its note was assigned prior to the others, and that the Missouri law governed, and that it would take in preference to the New York, Mississippi, and Louisiana holders of these notes, and suppose that the Mississippi law held that, where the notes was assigned in Mississippi, the holder was entitled to- share equally with all the *400others, the fund being insufficient to pay all, and suppose the Louisiana holder contended that under the Louisiana law, where his assignment was made, the residents of Louisiana, where the property was situated, would have preference, then we would have four inconsistent claims of preference, all based ■ upon the doctrine of the majority in this case that the law of the place of assignment governs as to the rights of the parties, and not the law of the place where the contract is to be performed.
There is no question in this record affecting the validity of contract of assignment to the Louisiana Bank. Its right to the note and such rights as the ownership or possession of said note gives is concededly the property, for the purpose of this suit, of the Louisiana Bank or its assignee, the, appellants, but when the Louisiana Bank took this note, it took it subject to the law of the place where the contract is to be performed. It could not require the maker of the note to come to Louisiana, to pay it or to consent that it should become payable in Louisiana, but it must present it at the place of payment named in the note, to wit, at the said First Natchez Bank in Natchez,. Miss. It bought, only such rights as the bank, its assignor, had in the note. It could not force other holders of notes to recognize any superior rights. Suppose that, instead of the Tensas River Planting Company assigning all of the notes to the First Natchez Bank, it had itself made the same assignments that the First Natchez Bank made. Is there any reason why the same rule would not prevail? The notes being payable in Mississippi, would they then have been governed by the Mississippi law? To hold that the obligation of the note is changed by each assignment of the note would create the utmost confusion in the business world. Suppose, for instance, that the Louisiana Bank, instead of bringing this suit, had in turn assigned this note to a party in Texas. Would the obligation of the note then by such assignment be *401the law of Texas, and would other holders of notes have to surrender whatever rights they had to conform to the Texas law? And, if so, suppose then the Texas Bank or holder should transfer the paper to a party in Oklahoma; would the obligations and rights of parties interested in the notes be governed by the law of Oklahoma? Manifestly not. The - obligations of all the notes are governed and the rights of the holders are determined by the law of the place where the note was made payable, and the rights do not shift by any transfer or assignment. In this case, however, the right of the Louisiana Bank in the note is not absolute, but is conditional. It is not shown that it has ever acquired any more right than to hold the note as collateral security, or to sell the same in default of payment of the original debt; and it is not shown that the note of the First Natchez Bank held by the Louisiana Bank has been credited for any amount derived from the sale or collection of this note, or the- claim against the First Natchez Bank diminished or satisfied. The decision of the majority gives the appellants an unfair preference over other creditors of the First Natchez Bank.