Court Opinion

ID: 3474042
Source: CourtListenerOpinion
Date Created: 2016-07-05 20:44:55.610513+00
Date Added: 2024-06-11T15:05:33.006565
License: Public Domain

The collateral securities that were attached to the note when Honeycutt indorsed it were previously pledged to the bank to secure a debt of O'Neal. The bank intended to take only a second or subordinate pledge of the collaterals to secure the payment of the note indorsed by Honeycutt, and to retain in full force and effect the previous pledge of the same collaterals to secure the payment of the other debt of O'Neal. But, instead of taking a second or subordinate pledge to secure the note indorsed by Honeycutt, the bank used a printed form of note in which it was stipulated that the pledged securities, or the proceeds thereof, should be applied, after payment of the costs of selling them, first, to the payment of the note which Honeycutt indorsed, and, secondly, to the payment of any other debt then due, or that might thereafter become due, to the bank by the maker of the note.
Having indorsed the note with that stipulation in it, Honeycutt had the right to insist that the stipulation should be carried out. He could not compel the bank to sell the securities and apply the proceeds, first, to the payment of the note that he had indorsed, but he had the right to withhold payment of the note when the bank refused to surrender *Page 260 
the pledged securities, so that he could sell them and apply the proceeds, first, to the payment of the note, and turn over the surplus, if any, to the bank, to be applied to any other debt due by the maker of the note. Honeycutt offered to pay the note if the bank would surrender the pledged securities so that he could sell them and carry out the stipulation as to how the proceeds should be applied. The bank refused to surrender the pledged collaterals on Honeycutt's paying the note, because the bank insisted upon holding the collaterals in pledge to secure, first, the payment of the other debt due by O'Neal. That was a plain violation of the stipulation in the note that the collaterals were pledged primarily to secure the note indorsed by Honeycutt, and only secondarily to secure any other debt due by the maker of the note.
In the judgment appealed from, the district court did not recognize Honeycutt's right, by payment of the note, to become subrogated in accordance with the stipulations in the note which he had indorsed, but declared that Honeycutt could be subrogated only to the rights of the pledgee bank as acquired at the time of the pledge, meaning at the time when the bank received the securities in pledge to secure the other indebtedness of O'Neal, which Honeycutt was not concerned with. The judgment in that respect is contrary to the stipulation in the note sued on, and virtually deprives Honeycutt of the protection that was guaranteed to him by the stipulation in the note.
The reservation in the decree amending the judgment appealed from reserving for future litigation or determination the question as to what right of subrogation Honeycutt may have after he has paid the judgment appealed from, or after it has been satisfied by seizure and sale of his estate, takes away from him all of the protection that was guaranteed to him by the stipulation in the note which he indorsed. The effect of the decree will be *Page 261 
that Honeycutt must first pay the note, or suffer it to be paid by seizure and sale of his estate, before he can even sue the bank to compel a compliance with the stipulation that was written in the note when he indorsed it. I cannot understand why Honeycutt should be relegated to another suit against the bank to enforce the right which was guaranteed to him by the stipulation in the note which he indorsed, or to determine whether he has any right of subrogation in that respect. The court's reservation of Honeycutt's right of action against the bank would be very little consolation to him if the plaintiff in this suit were not as responsible as banks usually are. If the judgment rendered in this case is the law for a bank, it must be the law for an irresponsible person holding a note containing such a stipulation as this note contained when Honeycutt indorsed it.
I respectfully dissent from the majority opinion and decree in this case.