78 Ark. 141 | Ark. | 1906
(after stating the facts.) This is an appeal from a judgment of the Pulaski Chancery Court, holding that the German National Bank had a lien on certain rails claimed by defendant Greeson. The rails were at one time the property of the Eongview Eumber Company, and, while they were the property of that company, the company borrowed $3,000 from the bank, gave a note therefor, and executed a bill of sale for the rails to the bank to secure the note. Afterwards the company became bankrupt, and the rails were sold by the trustee in bankruptcy, and purchased by Greeson. The $3,000 note to the bank has been paid, but the bank claims that, by virtue of the note and bill of sale above referred to, the bank had a lien on the rails, not only for the $3,000 and interest, but also for subsequent loans made by it to the lumber company.
Now, in the first place, there is no claim that there was any subsequent agreement by the lumber company with the bank that the bank should hold the rails for these subsequent advances. These subsequent advances were in each instance secured by transfer’ of bills of lading for shipments of lumber. When the cashier of the bank was asked whether at the time they were made anything was said about the rails standing as security for them also, he replied that he did not remember that anything was said about it at the time the loans were made, but he said that on several occasions when the bank refused to make such advances to the company, Howell, the president of the company, had said that the bank had the rails, which were greater in value than the specific obligation they were given to secure. This testimony, which is all the evidence on that point, shows clearly that there was no agreement, subsequent to the execution of the note for $3,000, that these rails should he held by the bank as security for subsequent advances. So, if the bank has any lien on these rails, it must rest on the note and bill of sale given at the time the loan for $3,000 was made to the company.
This bill of sale, though in the form of an absolute transfer of title, was exectited to secure a debt, and was in equity only a mortgage. In the case of Martin v. Holbrooks, 55 Ark. 569, Chief Justice Cockriee said that “an unequivocal agreement in a mortgage that the instrument shall secure all indebtedness of whatever nature that may be due from the mortgagor to the mortgagee at a future date named would not be invalid between the parties for want of certainty.” Now, we agree with the contention of the bank that, as the bill of sale was absolute in form, there was no requirement that the note given at the same time should be recorded, for equity would not set aside such conveyance and permit a redemption without requiring the mortgagee or party holding under him to do equity by paying the debt secure by the absolute bill of sale. The bill of sale was recorded, and that was sufficient to notify all persons dealing with the property conveyed that the bank claimed an interest in it. But, to create a lien on this property for subsequent debts, it should appear that there was, to quote the language of Judge Cockrile, “an unequivocal agreement to that effect.” Now, there does not appear to be an express stipulation in the note sued on that the bank should have a lien on these rails for subsequent debts. The note is, no doubt, in the usual form required by the bank of borrowers where collateral was deposited to secure the loan. It speaks of these rails as having been deposited with the bank as security for the payment of the note and interest, though as a fact the rails were never delivered to the bank.
The only reference to the subsequent debts in the note is found in that part of the note which deals with the disposition of the proceeds of the rails in the event they were sold to pay the debt. The language of the note clearly intimates that the debtor has the right to redeem the rails at any time before such sale by paying the amount of the three-thousand-dollar loan and interest. But the note provides, in the event that the debt is not paid, and the rails are sold by the bank, that “the surplus, if any, * * * shall be paid to the drawer of the note, or, at the election of the holder thereof, be paid on any other obligation of the drawer hereof.” This language seems to give the bank a lien, not on the rails, but on any funds arising from the sale of the rails by the bank, in the event that the note was not paid. But, if we treat this rather equivocal language as creating a lien on the rails in favor of the bank for any subsequent debts due from the lumber company to the bank, it was a lien that the bank could waive. If the rails had been sold by the bank, and after payment of the note a surplus had remained, it could, perhaps, under this provision have applied it to other debts due it from the company. The note says that it could be done at “the election” of the bank. But if, instead of making such a disposition of the proceeds, it had elected to return such funds to the maker of the note, it is clear that afterwards the bank could not recall such action and demand the return of such funds. In this case the rails were never sold, for the party who purchased the rails at the sale by the trustee in bankruptcy, and who succeeded to the rights of the owner thereof, paid the note and interest in full. The bank thereupon returned to him the bill of sale and the note marked “Paid.” This was an election by the bank not to claim any lien on the rails for other indebtedness; and if it had any lien for such debts, it thereby waived it. But this action of the bank, together with the doubtful language of this note and the other circumstances under which the note was made, convinces us that this bill of sale was executed to the bank as security only for the loan of $3,000 and interest, and that the bank has now no right to hold these rails for loans made to the lumber company after the execution of the bill of sale in question. After consideration of the matter, we are of the opinion that there is no equity in the complaint.
The judgment is therefore reversed, and the action of plaintiff is dismissed for want of equity.
