Arkansas Iron and Metal Co. v. First Nat. Bank of Rogers

• Decision Date: 11 December 1985
• Docket Number: No. CA,CA
• Citation: 16 Ark.App. 245,701 S.W.2d 380
• Parties: ARKANSAS IRON AND METAL COMPANY et al., Appellants, v. FIRST NATIONAL BANK OF ROGERS, Arkansas, Appellee. 85-103.
• Court: Arkansas Court of Appeals

Page 380

701 S.W.2d 380

16 Ark.App. 245

ARKANSAS IRON AND METAL COMPANY et al., Appellants, v. FIRST NATIONAL BANK OF ROGERS, Arkansas, Appellee.

No. CA 85-103.

Court of Appeals of Arkansas Division I.

Dec. 11, 1985.

Taylor & Watson by W.H. Taylor & Jeff Watson, Springdale, for appellants.

Kelley & Luffman by Eugene T. Kelley, Rogers, for appellee.

CORBIN, Judge.

This is an appeal from a judgment entered jointly and severally against appellants Arkansas Iron and Metal Company and Wilma F. Yaffee in the amount of $538,301.84 plus interest and costs. Appellant Wybash Corporation also appeals from an in rem judgment of foreclosure entered against it. Appellants contend for reversal that (1) the court erred in refusing to grant a continuance, (2) the court erred in failing to direct a verdict for appellant Wybash Corporation, and (3) the court erred in failing to direct a verdict for appellants Arkansas Iron and Metal Company and Wilma F. Yaffee. We affirm.

This action was instituted by appellee's filing of a complaint in equity and petition for receiver. Appellant Arkansas Iron and Metal Company subsequently filed for relief under the United States Bankruptcy Code. Appellant Yaffee answered appellee's complaint, denying that any collateral and security claimed by appellee was significantly impaired and affirmatively pleading that the appointment of a receiver was not necessary nor an appropriate remedy. Appellant Wybash Corporation also answered, affirmatively pleading that the mortgage held by appellee upon property owned by Wybash Corporation was granted to appellee without consideration. Its answer further alleged that it received nothing from appellee in connection with the mortgage and that the granting of the mortgage to appellee without consideration was ultra vires as to Wybash Corporation and without any legal effect. Thereafter, appellant Arkansas Iron and Metal Company's petition in bankruptcy was dismissed and the trial court issued an order naming appellee as receiver of appellant Arkansas Iron and Metal Company. A hearing was conducted and the issues addressed were whether appellee should be allowed to accelerate the total indebtedness due it and whether appellee should be allowed to foreclose its interest in certain personal and real properties. Judgment favorable to appellee was entered upon a finding that appellee's property and security was significantly impaired and that appellants Yaffee and Arkansas Iron and Metal Company were in default and appellants appeal.

Appellant Yaffee was president of and owned 100% of the corporate stock in appellant Arkansas Iron and Metal Company and Yaffee and her three children worked in this scrap metal business. Stock in appellant Wybash Corporation was owned by appellant Yaffee and her three children. Appellant Yaffee held 62.5% of its stock while each of her children held 12.5%.

In its decree, the chancellor found that on or about July 16, 1981, appellant Yaffee, d/b/a Arkansas Iron and Metal Company, executed and delivered a promissory note to appellee in the amount of $300,000. In order to secure the note, appellants Yaffee and Arkansas Iron and Metal Company executed security agreements. To further secure payment of the indebtedness, appellant Yaffee executed, acknowledged and delivered a mortgage covering real property in Benton County, Arkansas. Appellant Wybash Corporation, to further secure the payment of the note, executed, acknowledged and delivered its mortgage on real property also located in Benton County, Arkansas. On or about October 19, 1981, appellant Yaffee, d/b/a Arkansas Iron and Metal Company, executed and delivered her promissory note to appellee in the amount of $75,000. The note was secured by certain mortgages on real property and was executed by appellants Yaffee and Wybash Corporation. It was also secured by personal property, including accounts receivable, inventory and equipment of appellant Arkansas Iron and Metal Company. On March 4, 1982, appellant Yaffee executed and delivered another promissory note to appellee in the amount of $50,000. A promissory note was executed by appellant Yaffee, d/b/a Arkansas Iron and Metal Company, on August 25, 1982, in the amount of $50,000. The note was secured by appellant Yaffee's security agreement on accounts receivable, inventory and equipment of Arkansas Iron and Metal Company. On or about June 8, 1983, appellant Yaffee executed and delivered her promissory note to appellee in the amount of $10,069. This note was secured by appellant Yaffee's assignment of her interest in a 1981 Cadillac. The vehicle was surrendered to appellee in full satisfaction of the debt. Another promissory note was executed by appellant Yaffee, d/b/a Arkansas Iron and Metal Company to appellee in the amount of $10,000. It was secured by accounts receivable, inventory and equipment of Arkansas Iron and Metal Company. On March 31, 1983, appellant Yaffee executed her personal guarantee to appellee, guaranteeing all notes in the name of Arkansas Iron and Metal Company. On that same date, appellant Yaffee and Yaffee, d/b/a Arkansas Iron and Metal Company, executed an agreement for the assumption of indebtedness whereby Arkansas Iron and Metal Company assumed the indebtedness of the promissory note dated July 16, 1981, in the amount of $300,000; the promissory note dated October 19, 1981, in the amount of $75,000; the promissory note dated August 25, 1982, in the amount of $50,000; the promissory note dated March 4, 1982, in the amount of $50,000; and the promissory note dated November 5, 1982, in the amount of $10,000.

The chancellor further found that appellee's property and security was significantly impaired and that appellants Yaffee and Arkansas Iron and Metal Company had failed to make payments and were in default.

In their first assignment of error, appellants contend that the trial court erred in refusing to grant a continuance because First National Bank of Fayetteville, Arkansas, was an indispensable party under ARCP Rule 19. It is well settled that a trial court is vested with broad discretion in determining whether to grant a continuance and that its determination will not be overturned by this Court unless that discretion has been manifestly abused. Odaware v. Robertson Aerial-AG, Inc., 13 Ark.App. 285, 683 S.W.2d 624 (1985). In denying appellants' motion for a continuance, the trial court found that appellants were entitled to raise the issue at that point but that it was unnecessary for a minority stockholder to be named a party in a mortgage foreclosure.

ARCP Rule 19, which deals with compulsory joinder of parties, provides in pertinent part as follows:

(a) Persons To Be Joined If Feasible. A person who is subject to service of process shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties, or, (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter, impair or impede his ability to protect that interest, or, (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple or otherwise inconsistent obligations by reason of his claimed interest. If he has not been joined, the court shall order that he be made a party. If he should join as a plaintiff, but refuses to do so, he may be made a defendant; or, in a proper case, an involuntary plaintiff.

(b) Determination By Court Whenever Joinder Not Feasible. If a person as described in subdivision (a)(1)-(2) hereof cannot be made a party, the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed, the absent person being thus regarded as indispensable. The factors to be considered by the court include: (1) to what extent a judgment rendered in the person's absence might be prejudicial to him or those already parties; (2) the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; (3) whether a judgment rendered in the person's absence will be adequate; (4) whether the plaintiff will have an adequate remedy if the action is dismissed for non-joinder.

The Reporter's Notes to Rule 19 state that subsection (a) concerns itself with the question of who is a "necessary" party while 19(b) deals with whether a necessary party is an "indispensable" party. It is further stated in the Reporter's Notes that this rule abolishes the rigid distinctions between necessary and indispensable parties and instead places the emphasis upon the practical effects a judgment might have upon an absent party. For other cases construing ARCP Rule 19, see Loyd v. Keathley, 284 Ark. 391, 682 S.W.2d 739 (1985); Cox v. Stayton, 273 Ark. 298, 619 S.W.2d 617 (1981); Toney v. Haskins, 271 Ark. 190, 608 S.W.2d 28 (Ark.App.1980).

Appellants contend that the First National Bank...