Deposit Guaranty Nat. Bank v. River Valley Co., 5--4971

• Decision Date: 29 September 1969
• Docket Number: No. 5--4971,5--4971
• Citation: 247 Ark. 226,444 S.W.2d 880
• Parties: DEPOSIT GUARANTY NATIONAL BANK, Appellant, v. RIVER VALLEY COMPANY, Inc. et al., Appellees.
• Court: Arkansas Supreme Court

Page 880

444 S.W.2d 880

247 Ark. 226

DEPOSIT GUARANTY NATIONAL BANK, Appellant, v. RIVER VALLEY COMPANY, Inc. et al., Appellees.

No. 5--4971.

Supreme Court of Arkansas.

Sept. 29, 1969.

Arnold, Hamilton & Streetman, Crossett, for appellant.

Ross & Ross, Monticello, for appellees.

GEORGE ROSE SMITH, Justice.

This suit was brought by the appellant, a Mississippi bank, to enforce a $5,000 promissory note executed by the appellee River Valley Company and personally endorsed by its president and codefendant, the appellee Dr. A. F. Black. A few weeks before the suit was filed the bank had foreclosed in Mississippi a deed of trust securing a $21,000 note executed by River Valley only and had bid in the mortgaged property for $21,000. In the case at bar the chancellor held that the bank should have applied its bid pro rata against both notes, which would have left a balance of only $968 due on the $5,000 note. Judgment was accordingly entered for that amount. The bank contends that it is entitled to judgment for the full amount of the smaller note.

Despite a voluminous record the controlling facts are comparatively simple. In 1965 Black, a resident of Monticello, Arkansas, was the president of River Valley, an Arkansas corporation engaged in the automobile business in Greenville, Mississippi. The business was actually conducted by Black's two sons, with such advice and assistance as Black was able to provide during visits that he made on about every Thursday.

In 1965 Black went to the appellant's branch bank at Greenville and applied for a line of credit for River Valley. The bank, after checking Black's financial statement, agreed to provide River Valley with credit to the amount of $6,000, the debt being evidenced by a note signed by River Valley and endorsed by Black. On December 22, 1966, Black paid $1,000 to the bank and obtained a $5,000 renewal note due March 22, 1967, which is the note now in litigation.

For more than a year the bank had been honoring drafts drawn by River Valley on Dr. Black and presented to him at Monticello. In February of 1967 there was an accumulation of about $24,000 of such drafts for which the bank had given credit to River Valley but which had not been paid by Black. The bank was concerned about the debt and demanded security.

On March 2, 1967--twenty days before the maturity of the $5,000 renewal note--River Valley executed in Greenville a deed of trust encumbering land in Mississippi to secure River Valley's $21,000 note to the bank. The deed of trust recited that it secured not only the $21,000 note but also 'any additional indebtedness heretofore, now, or hereafter contracted with the (bank) by the grantors * * * whether such indebtedness be represented by promissory notes, open account, over-draft or otherwise.'

River Valley's financial condition worsened to such an extent that the bank directed the trustee in its deed of trust to bring an out-of-court foreclosure proceeding in Greenville under the power of sale. As we have indicated, the bank purchased the property for $21,000, applied its bid upon the note for $21,000, plus interest, and brought this suit against Black and River Valley upon the $5,000 note.

The bank makes three contentions for reversal. First, it insists that its motion for summary judgment should have been granted in the circuit court (to which the case was transferred briefly before being returned to chancery). We need not discuss that contention, because the denial of the motion for summary judgment was followed by a trial on the merits. The denial of the motion is therefore not reviewable. American Physicians Ins. Co. v. Hruska, 244 Ark. 1176, 428 S.W.2d 622 (1968).

Secondly, the bank contends that the chancellor erred in applying the law of Mississippi as a basis for holding that the $5,000 note was secured by the deed of trust under the pre-existing indebtedness clause that we have quoted. Coombs v. Wilson, 142 Miss. 502, 107 So. 874 (1926). Under Arkansas law that clause did not describe the $5,000 note with sufficient definiteness to bring it within the coverage of the deed of trust. Bank of Searcy v. Kroh, 195 Ark. 785, 114 S.W.2d 26 (1938). The bank now insists that the Arkansas law should have been followed, because the appellees failed to give the written notice required by § 3 of the Uniform Interstate and International Procedure Act: 'A party who intends to raise an issue concerning the law of any jurisdiction or governmental unit thereof outside this State shall give notice in his pleadings or other reasonable written notice.' Ark.Stat.Ann. § 27--2504 (Supp. 1967...