109 F.2d 336 | 5th Cir. | 1940
This litigation began in 1935 with a bill on the part of Reconstruction Finance Corporation to foreclose a mortgage given by John McCulloch and Arthur C. Marshall to secure a note for $50,000 payable to First National Bank & Trust Company in Orlando, Florida. After pleading to it McCulloch died March 12, 1936, testate. The bill as to him was revived on Aug. 31, 1938, by substituting his executor, John G. Baker, as a defendant. To an amended bill answer was made in behalf of the execu
The essential facts touching the present validity of the mortgage are these: Mc-Culloch and Marshall were in 1932, and since, directors and stockholders in First National Bank and Trust Company in Orlando. Their Bank owed Federal Reserve Bank a large sum and needed more money. To obtain it they joined three other directors in a plan by which individual notes secured by mortgages should be given their Bank to be used by it with Federal Reserve Bank as additional collateral for past and future advances, the several directors to receive nothing for their notes issued as an accommodation to their Bank. McCulloch and Marshall accordingly on June 29, 1932, gave the Bank a negotiable note for $50,000 due in six months and secured by the mortgage in controversy duly attested and recorded. The other directors also gave their notes with security as agreed. All were placed with Federal Reserve Bank, which gave the additional credit desired. The Bank in Orlando suspended business March 6, 1933, and was not reopened, but a conservator was appointed. It owed Federal Reserve Bank $181,601. The Conservator arranged with Reconstruction Finance Corporation to borrow $525,000 to pay Federal Reserve Bank and some other obligations, and to provide a fund for a dividend to depositors, offering among other collateral the directors’ notes still in the hands of Federal Reserve Bank. On Jan. 22, 1934, McCulloch and Marshall executed a paper under their seals and duly attested by two witnesses, which recited the situation and the proposed loan and covenanted thus: “In consideration of the premises, and the payment of the sum of $1.00 and other valuable considerations, the parties of the second part do herein -and hereby consent to the assignment and transfer of the note and mortgage securing the same hereinabove described, by the party of the first part to the Reconstruction Finance Corporation as a portion of the collateral to secure said loan of $525,000, if, as and when the money now due the Federal Reserve Bank of Orlando by the First National Bank and Trust Company of Orlando is paid in full and the collateral consisting of a note by the parties of the second part and a mortgage securing the same is returned to the party of the first part as Conservator of First National Bank and Trust Company in Orlando.” On Feb. 12, 1934, a similarly executed agreement was made between the same parties that the note and mortgage, after the loan from Reconstruction Finance Corporation has been paid in full, should revert to and be held by the Conservator till all indebtedness to the Bank and assessments of the makers as stockholders shall have been paid.
On Feb. 14, 1934, Reconstruction Finance Corporation as a part of the loan of $525,-000, sent the Comptroller of the Currency a check for $181,601, the exact amount due Federal Reserve Bank, which was paid to it; the Federal Reserve Bank having assigned the note and mortgage to the Conservator, and he having already assigned them to Reconstruction Finance Corporation as part of Reconstruction Finance Corporation’s security. The loan of Reconstruction Finance Corporation has been reduced now to about $114,880. The present foreclosure is on account of this balance. Reconstruction Finance Corporation knew the history of the note and mortgage as above recited, and acted on the faith of the above quoted consent.
The contention that the note and mortgage were discharged when the debt due Federal Reserve Bank was paid, and that they could not be revived and reissued to Reconstruction Finance Corporation we overrule. They were accommodation paper in origin, without value moving to the makers. Negotiable Instruments Law, Comp.Gen.Laws of Florida, § 6789. But they were not without consideration, for consideration may be found not only in benefit to the promisor but also in detriment incurred by the promisee. The credit given by Federal Reserve Bank to the Bank in Orlando was the consideration for the
Reconstruction Finance Corporation did not press payment of the $525,000 loan at its maturity, but made a resolution on Sept. 15, 1934, through its board of directors intended to postpone the maturity date from June 1, 1934, to Jan. 1, 1935, without the consent of McCulloch and Marshall. They contend that they stood, to the amount of their note and mortgage, as sureties on the debt due Reconstruction Finance Corporation and are discharged by the extension of its maturity. Whether the provisions of the negotiable instruments act of Florida permit them to contend that they are sureties we will not enquire.
Reconstruction Finance Corporation after McCulloch’s death in due time filed in the probate court a claim for the debt in controversy, but did not file suit on the note within the time limited by the Florida statute of non-claim. Comp.Gen. Laws Supp. §§ 5541(92), 5541(94). We presume that no claim for money could now be asserted against the executor and the general estate. But the statute expressly says no claim need be filed on a mortgage if the mortgaged property alone is to be pursued, and we think if a claim against the whole estate is filed and not pursued, the mortgage is not thereby forfeited. A mortgagee is not put to an election between the remedy on the note and that on the mortgage but may pursue either or both until satisfaction is had. Though the note be barred the mortgage may be enforced. Especially is this true when foreclosure
No error appearing, the judgment is affirmed.
The Negotiable Instruments Law has been held to forbid one who appears as maker of a negotiable instrument, though for accommodation, to contend as against a holder for value that he is a surety. 11 C.J.S., Bills and Notes, page 289, § 739 (b); Union Trust Co. v. McGinty, 212 Mass. 205, 98 N.E. 679, Ann.Cas. 1913C, 525. See Mortgage Guarantee v. Chotiner, 8 Cal.2d 110, 64 P.2d 138, 108 A.L.R. 1080.