The Planters Bank of Fort Valley vs. Prater et al.

Supreme Court of Georgia1880-02

64 Ga. 609

Summary · law.co

Holding. The court affirmed the trial court's decree, holding that the bank acquired no legal title to the notes or the land because the notes were payable to order and were never indorsed or assigned in writing to the bank, and therefore the children's equitable claim to the land purchased with their money takes priority over the bank's interest.

Children of W. G. Prater, who served as trustee, sued to prevent the Planters Bank from enforcing a judgment against lands purchased with the children's money. Their father had conveyed part of the land to Mathews & Co., who gave promissory notes to secure a reconveyance. Those notes were transferred to the bank by delivery (not in writing), and the bank obtained a judgment in Mathews & Co.'s name, then levied on the land. The trial court ruled in favor of the children, ordering the land sold with proceeds first applied to repay the children's principal and interest.

The bank challenged the decision on three grounds: that the deed transfer should have been in writing, that notice to one director was not notice to the bank, and that the children's claim should not be prioritized. The court rejected all three arguments, finding that since the notes were never formally assigned in writing to the bank, legal title remained with Mathews & Co., who had full knowledge of the children's beneficial interest in the land. Because the children could trace their money into the purchase of the land, they held an equitable claim superior to the bank's.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether transfer of promissory notes by delivery alone, without written assignment or indorsement, vests legal title in the transferee
Whether a beneficiary may follow trust money into land purchased by a trustee and assert a lien against that land
Priority of claims when a trustee improperly conveys trust property and the property becomes subject to a judgment lien

Procedural posture

The children filed a bill in equity seeking an injunction against the bank's enforcement of a judgment lien on lands purchased with their trust money, and the trial court decreed in their favor; the bank appealed.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Jackson, Justice.

Sarah J. Prater et al., children of W. G. Prater, brought their bill against W. G. Prater, their father and trustee, and the Planters’ Bank of Fort Talley, for a perpetual in junction against the bank, prohibiting it from enforcing a judgment against W. G. Prater, on certain lands which were purchased with their money by their father and trustee. Part of these lands had been conveyed to Mathews & Co. by Prater absolutely, Mrs. Prater signing the deed with her husband, and Mathews & Co. obligating themselves to re-convey on Prater’s paying them certain notes, payable to their order. These notes were transferred by delivery to the bank, and were sued to judgment in the name of Mathews & Co. for its use. Execution issued on this judgment was levied on the land so conveyed to Mathews & Co., that firm having re-conveyed it to Prater for the purpose of selling it under the execution. To stay this sale, and to have the title assured to them, and for general relief, the certui que trusts filed this bill.

The equities arising upon these facts were submitted to the court, and the decree was in favor of the complainants, directing that all the lands be sold, and complainants be paid the principal and interest of their fund which went into the lands, and balance, if any, to the bank. To this decree the Bank excepted, and it makes three points. First, that the court erred in holding that the transfer of the deed from Mathews & Co. to the bank should have been in writing ; secondly, in holding that notice to one of the directors of the bank, who took no part in the negotiation with Mathews & Co., was notice to the bank, and thirdly, that the decree was wrong in ordering the proceeds of the sale first to be applied to the payment of complainants.

In regard to the first point, it will be remarked that the note itself was only transferred by delivery to the bank, though payable to the order of Mathews & Co., and therefore that the question does not arise whether the transfer of the legal title to the note carried with it in equity the conveyance of the land as a security. It might well be doubted that if it had been indorsed it would carry an absolute deed to the land, such as this transaction is made by our statute, over to the indorsee. Code, §§1969, 1970. And even if the transaction made a mortgage, it would seem that under the act of 1873 — acts of 1873, pp, 1-2,17— Code, §1996 — the assignment must be in writing to be valid; inasmuch as the twenty-first section of that act declares “ that all liens herein provided for, may be assigned by writing and not otherwise,” and mortgages are provided for in that act;

But this case is one where neither the note, though payable to order, nor the conveyance, has been assigned in writing, by indorsement or otherwise, to the bank. The legal title is in Mathews & Co.; they had full notice of the equities of complainants, and they held, and hold it, subject to those equities. To make the best case possible for the bank, it only had an equity in the land through the transfer of Mathews & Go. to it by delivery of note and deeds, and complainants had also an equity — well known to Mathews & Co., because they knew, according to evidence, all about the money of complainants having gone into the land and participated in the misconduct of the trustee. Code, §3151; 19 Ga., 130.

So that it makes no difference whether the*bank had or had not notice of the trust; and the point that notice to a director who did not participate in the transaction or negotiation, is not notice to the bank, need not be considered.

If it be true.that the money of complainants bought thp land, then they had the right to- follow it into the land, and take the land bought with the proceeds of-what their grandfather bequeathed to them, or assert and enforce their lien thereon. 19 Ga., 66. If so, it is clear that the court did not err in ruling that their claim be first paid ; for if they could have held the land at their election, they would be entitled to be paid out of its proceeds when sold, at least to the extent of their money which went into it with interest, and such is the decree.

The truth seems to be that the bank never bought these notes before due. It got no title — legal title — to them. They were payable to order and not indorsed. So. that it cannot claim that the deed was carried to it with the title to the notes; nor did the deed pass by any writing. Mathews & Co. held the legal title to the land levied on with full notice of the trust, and whatever right the bank has is dependent on their legal title. The bank is therefore affected with notice to Mathews & Co.

The entire transaction — notes and conveyance, with defeasance or bond to re-convey — make a chose in action, and such must be assigned to vest title in- the assignee, Code, §2244; and such assignment must be in writing, under the construction given “ assignment,” as used in that section of the Code, in the case of Turk vs. Cook, decided last term. Therefore, in any view we can take, the judgment is right and must be affirmed.

Judgment affirmed.