Alston v. Bitely
| Decision Date | 13 March 1972 |
| Docket Number | No. 5--5710,5--5710 |
| Citation | 252 Ark. 79,477 S.W.2d 446 |
| Parties | Berthola ALSTON, Appellant, v. M. H. BITELY, Jr., et al., Appellees. |
| Court | Arkansas Supreme Court |
Brockman, Brockman & Gunti, Pine Bluff, for appellant.
Coleman, Gantt, Ramsay & Cox, Pine Bluff, and Sam F. Cole, Jr., Memphis, Tenn., for appellees.
This appeal brings into question the correctness of the amount or portion of the debts of appellant and her former husband, I. T. Alston, to M. H. Bitely, Jr., and E. C. Hardin, Sr., for which she was held liable and lands assigned to her as dower held to be security. We find that there was error in determining these amounts which requires further proceedings in the chancery court.
Prior to 1960, M. H. Bitely, Sr., and E. C. Hardin, Sr., had both financed the Alston farming operations. A sizeable indebtedness to both had accumulated, and neither was willing to make additional loans. It was agreed that, if I. T. Alston could obtain a loan from which he would make certain payments to Bitely and Hardin, each of them would subordinate his liens on I. T. Alston's property to that lender. As a result of this agreement, Alston obtained a loan of $11,000 from Metropolitan Life Insurance Company, and gave a first mortgage on all his lands as security. Payments were made by Alston to Bitely and Hardin from the proceeds of this loan. About one month later--on February 6, 1960--I. T. and Berthola Alston joined in mortgages in favor of Bitely and Hardin to secure the balances due upon their respective debts. It was specified in these instruments that the Bitely mortgage was subject to that of Metropolitan and the Hardin mortgage subject to both.
The Bitely debt of $11,450 was evidenced by six promissory notes for $1,908.33 each bearing interest at 10% per annum from date until paid, executed by I. T. and Berthola Alston on February 10, 1960, the first of which was due on December 10, 1960, and another on the same date in each succeeding year. The Hardin debt of $9,683.38 was divided into seven notes of $1,383.34 with interest at 6% per annum from date until paid, each signed by I. T. and Berthola Alston with the same date of execution and annual maturity as the Bitely notes. Thereafter, appellee M. H. Bitely, Jr., succeeded to the ownership of the Bitely debt. In 1960 and during each subsequent year Bitely, Sr. or Jr., loaned I. T. Alston substantial sums for crop production. A separate account of these loans was kept by the Bitelys. Each was secured by a mortgage on the crops and a mortgage on equipment, cattle and hogs owned by Alston. The proceeds of each annual crop were applied to the reduction of the debt for that year. Bitely thought that Mrs. Alston might have signed one or two of these crop mortgages. He did not remember her having signed any of the notes for these loans. She denied that she had signed any such note or mortgage. The crop proceeds were insufficient to pay these production loans in every year except 1962, when the excess was applied on the Metropolitan debt. Unpaid balances included the following:
1960--$3,497.21
1961--$2,963.19
On February 23, 1964, the unpaid balance on the total Bitely debt amounted to $20,019.63. After the 1964 crop the total had increased to $25,929.48, and at the end of 1965 to $27,984.77. Bitely testified that the crop loans were additional advances secured by the mortgage which contained a statement that it was security for any indetedness Bitely might hold against the mortgagors by reason of future advances.
In October, 1963, the Alstons separated, and Berthola was subsequently granted a divorce from I. T. The decree of divorce was entered in June, 1966, and a decree setting aside 117 acres of the property of I. T. Alston to Berthola for life was entered on April 15, 1968. This tract was part of the mortgaged land. In 1966, Bitely knew of the Alston domestic difficulties when Alston requested a five-year extension of his indebtedness. An extension agreement was entered into between Alston and Bitely on April 2, 1966. The total indebtedness then amounted to $28,480.43. In the agreement, Alston acknowledged that this debt was secured by the 1960 real estate mortgage and stated that he was the owner of the land subject to his wife's dower.
The extension was further evidenced by a new note executed by I. T. Alston only. It provided for annual payments of $5,696.09 plus accrued interest at 6% per annum on January 1 of each year beginning with 1967. The agreement contained this clause:
It is further understood and agreed that a new note in the amount of $28,480.43 is executed simultaneously herewith and shall be to the exclusion and not in addition to any note previously executed for said indebtedness or any part thereof.
Bitely did not surrender the original notes, however, and still held them when he filed this foreclosure suit on March 13, 1970. Appellant did not join in either the extension agreement or the new note. Before this agreement was made she had asked Bitely the amount of the total debt, and put him on notice that she would not be responsible for any later advances.
In 1967, Bitely loaned Alston $2,104.22 more than was repaid. After advancing money for payment of taxes on the land and the Metropolitan payments, the total debt amounted to $30,884.05 in 1968. Bitely testified that the accrued balance, including all interest charged, amounted to
38,399.78 on August 17, 1970. No payment was ever made on the 1960 notes to either Bitely or Hardin. Application of crop proceeds to the annual crop loans was in accord with I. T. Alston's instructions and the agreement between him and the Bitelys.
E. C. Hardin sought foreclosure of the lien of his mortgage. He contended that the crop loan advances made by Bitely did not take precedence over his third mortgage and that it was prior and paramount to the Bitely lien based on the extension agreement. I. T. Alston pleaded the statute of limitations against the Hardin notes maturing prior to 1965. Berthola Alston pleaded the statute as to the entire Hardin debt.
In addition to her general denial, appellant pleaded the statute of limitations as a complete defense to the Bitely foreclosure action, alleged that the extension agreement constituted a novation relieving her and the land assigned to her of the entire Bitely claim, and asserted that her rights were superior to those of any other party. She counterclaimed for award of the lands to her free and clear of the Bitely lien, or of the value of her life estate from the proceeds of any sale. She also cross-complained against I. T. Alston for indemnification of any loss she might sustain.
The decree setting aside the 117-acre tract to appellant prorated the indebtedness against this portion at 22.44% of the total debt secured by mortgages. Mrs. Alston testified that she had paid her proportionate part of the taxes and Metropolitan payments coming due after she took charge of these lands and rented them.
Appellee Sidney Marvin Bilsky is the current owner of a judgment rendered against I. T. Alston in favor of Sam Levine on September 11, 1961. The lien of this judgment expired after three years (Ark.Stat.Ann. § 29--131 (Repl.1962)) but was revived on October 3, 1969. Bilsky, along with numerous other junior lienors and judgment creditors of I. T. Alston, was a defendant in the foreclosure action instituted by Bitely.
The opinion of the chancellor which was incorporated in the court's decree included the following findings pertinent to this appeal:
1. The extension agreement removed the bar of the statute of limitations as to I. T. Alston only and all of the Bitely notes except the last one are barred as to Berthola Alston, so that Bitely was entitled to personal judgment against both Alstons for the principal amount of the last note with accrued interest and against I. T. Alston for the balance of the indebtedness, or $35,491.45.
2. All of the Hardin debt was barred as to both Alstons except the notes due in 1965 and 1966, and the bar was not removed by any testimony relating to the indebtedness given by the Alstons in the divorce action.
3. 'Future advances' made by Bitely were optional, not obligatory.
4. The Hardin lien had priority over the additional advances made by Bitely because the latter, knowing of the lien of the former, had a duty to notify Hardin if and when such advances were made, even though the Hardin mortgage was specifically made subject to the Bitely lien.
5. Bilsky took priority over the future advances for the same reason the Hardin lien did.
6. The priorities of the parties to this appeal were as follows:
Claimant Amount Debtor
(1) Bitely $1908.33 plus interest Both Alstons
(last note)
(2) Bitely The first five notes I.T. Alston
plus interest
(3) Hardin Two notes of $1383.34 Both Alstons
each plus interest
(4) Bilsky Trust $1775.61 plus interest I.T. Alston
at 6% since 8/1/69
(5) Bitely All indebtedness in I.T. Alston
excess of (1) and (2)
above up to $38,399.78
7. The property of both Berthola and I. T. Alston should be sold by a commissioner and the proceeds applied first to expenses of sale, second to judgment creditors according to the priorities above listed, and third to the Alstons according to their rights as determined in the divorce action with appellant's cash value computed according to Ark.Stat.Ann. § 50--701 to 50--706 (Supp.1969).
8. Appellant should be allowed to pay her proportionate amount of the indebtedness as set out in the opinion, in which event the lands assigned to her would be withheld from sale.
After this opinion was filed the court was reminded by Hardin's attorney that there had been a waiver of the statute of limitations by appellant as to the Hardin debt. The chancellor then advised...
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