June 27, 2008

Notemakers obligated to indemnify owner of land that secured the note after foreclosure sale


This appeal focuses on a dispute as to whether the defendants, Jimmie R. Jones ("Mrs. Jones") and Larry D. Jones ("Mr. Jones"), are obligated to indemnify the plaintiff, the Estate of Lorine Goodwin Hindmon ("the Estate"), for the value of property owned by Mrs. Hindmon that was foreclosed upon and sold, the proceeds from which were applied against a debt for which the Joneses were obligated. The trial court held that the plaintiff had a right to indemnification from the defendants and, as a consequence of that holding, granted the plaintiff summary judgment. We affirm.

Opinion may be found at:

"The Estate is entitled to a judgment for indemnity against Mr. and Mrs. Jones. Indemnity may be recovered on the basis of implied indemnity. A right to indemnity “exists whenever one party is exposed to liability by the action of another who, in law or equity, should make good the loss of the other.” 41 Am. Jur. 2 Indemnity § 25 (1968). It is undisputed that Mr. and Mrs. Jones owed a note obligation to Capital Bank. This note obligation was secured by two parcels of real estate owned by the Decedent. The note obligation went into default. The note and deed of trust were subsequently assigned to the Moores, who foreclosed upon the Decedent’s real estate. The amount of $330,000 was realized from the sale of the property and applied toward the note obligations owed by Mr. and Mrs. Jones. In Jarnigen v. Stratton, 32 S.W. 625 (Tenn. 1895), the Tennessee Supreme Court noted as follows:
Mr. Story says: “Where the note is the several as well as the joint note of the makers, the holder is at liberty to elect upon whom he will make the demand and presentment.” Story, Prom. Notes, § 256. To the same effect, see 1 Daniel, Neg. Inst. § 596. The reason of the rule in both cases is the same. It is only necessary to make demand in the one case of all the makers where they are joint makers, and to give notice to all the indorsers where they are joint indorsers, to bind those notified. If they are joint and several indorsers, notice to any one is sufficient to bind him. Id., 32 S.W. at 626. The estate was entitled to choose from whom it desired to seek indemnification. As to the assertion by Mr. and Mrs. Jones that this claim is barred by any statute of limitation, the contention lacks merit, as the action did not arise until the foreclosure occurred in 2006." Id.