Farrow v. Farrow

• Decision Date: 28 October 1918
• Docket Number: 201
• Citation: 206 S.W. 134,136 Ark. 140
• Parties: FARROW v. FARROW
• Court: Arkansas Supreme Court

206 S.W. 134

136 Ark. 140

FARROW v. FARROW

No. 201

Supreme Court of Arkansas

October 28, 1918

Appeal from Cross Chancery Court; E. D. Robertson, Chancellor reversed.

STATEMENT OF FACTS.

On the 11th day of January, 1917, P. B. Farrow brought suit in the chancery court against A. A. Farrow and others to foreclose a mortgage on a stock of goods given by A. A. Farrow to himself.

It appears from the record that on the 20th day of September 1910, P. B. Farrow furnished to J. P. Farrow, his brother, $ 2,500 for the purpose of enabling the latter to purchase a stock of goods and conduct a mercantile business. J. P Farrow failed to make a success of the business and in February, 1914, turned back to P. B. Farrow the stock of goods and fixtures of the mercantile establishment amounting in the aggregate to $ 2,618.50. On the 17th day of February 1917, P. B. Farrow turned over the stock of goods and fixtures to A. A. Farrow, wife of J. P. Farrow, for the operation of a mercantile business to be known as Farrow's C. O. D. Store. On that date P. B. Farrow and A A. Farrow entered into an agreement in writing as follows:

"That whereas, on the 20th day of September, 1910, J. P. Farrow entered into the mercantile and grocery business in the city of Wynne, Arkansas, together with P. B. Farrow of Panola County, Mississippi, under the firm name of Farrow's Variety Cash Store, and whereas the said P. B. Farrow furnished the entire amount of money and capital for the purchase of stock and the setting up of said business, in the sum and amount of twenty-five hundred dollars ($ 2,500), and whereas, on the same day, September 29, 1910, as a guarantee by said J. P. Farrow that the money so invested by the said P. B. Farrow should earn the amount of 10 per cent. per annum, the said J. P. Farrow executed and delivered unto the said P. B. Farrow his promissory note, or written evidence of indebtedness for the sum of twenty-five hundred dollars ($ 2,500), bearing interest at the rate of 10 per cent. per annum, of date of September 20, 1910, and due and payable one year after date; that whereas after maturity of said note it was agreed by and between the said P. B. Farrow and the said J. P. Farrow that the said note of evidence of indebtedness should remain unpaid and be due upon demand of said P. B. Farrow; that whereas the said P. B. Farrow has, and does on this day, demand the payment in full of said note or evidence of indebtedness, and the said J. P. Farrow having this day paid and turned over to said P. B. Farrow the following property and amount, towit:

One check on Bank of Wynne

$ 800.00

Cash in hand

1,200.00

Furniture and fixtures

347.50

Mule, wagon and harness

177.50

Merchandise per bill rendered

93.50

$ 2,618.50

and taken credit on this said last mentioned note on the amount of two thousand six hundred eighteen and 50/100 dollars ($ 2,618.50), which said amount is this day loaned A. A. Farrow for the operation and carrying on of Farrow's C. O. D. Store; and the said A. A. Farrow does execute and deliver unto the said P. B. Farrow her promissory note of even date herewith for the amount of two thousand six hundred eighteen 50/100 dollars ($ 2,618.50), bearing interest at the rate of 10 per cent. per annum from date until paid, and due and payable three years after date.

"Now, for and in consideration of the sum of one dollar and the consideration above mentioned, it is understood and agreed by and between the said A. A. Farrow and the said P. B. Farrow that the entire property of the said Farrow's C. O. D. Store, consisting of stock invoiced above mentioned, furniture, fixtures, horses, mules and wagons, together with all other property at the business houses of the said Farrow's C. O. D. Store, on Front Street, in the city of Wynne, Arkansas, shall be and remain the property of the said P. B. Farrow, to secure said note, together with all the interest the said A. A. Farrow has or may have therein, and that said P. B. Farrow may declare said note due and payable at his option and demand and may enter upon and take possession of said property for the purpose of enforcing the payment of said note and amount now due, and that such may be done either at public or private sale at the option of the said P. B. Farrow; the amount over, however, after the payment and discharge of said note, to be paid to the said A. A. Farrow. The said A. A. Farrow is to conduct said business in all things in good faith for the profit of the said business and to keep all moneys and property in the name of the Farrow's C. O. D. Store."

This instrument was duly acknowledged by A. A. Farrow on the same day and filed for record as a mortgage in the recorder's office. Pursuant to the agreement, A. A. Farrow executed to P. B. Farrow her note in the sum of $ 2,618.50. She also took possession of the property and began the operation of a retail store in the city of Wynne, Arkansas, Counsel for the respective parties have agreed that it was the intention of P. B. Farrow and Mrs. A. A. Farrow under the agreement that any and all of said stock of goods or fixtures might be sold in due course of business and be replaced by other goods or fixtures which might also be sold in due course of business; that goods were sold and others purchased under this agreement; that a considerable quantity of goods remained on hand on the 20th day of December, 1916. Mrs. A. A. Farrow was unable to meet her obligations and had failed to pay P. B. Farrow the amount of the note due him, as above set forth. Upon demand of P. B. Farrow, Mrs. A. A. Farrow turned all the goods and fixtures on hand over to him to be applied in satisfaction of his mortgage debt. Then Mayo & Robinson, creditors of the firm, filed a suit in attachment against A. A. Farrow and caused the attachment to be levied upon part of said goods. On the following day P. B. Farrow filed this suit in the chancery court against A. A. Farrow, Mayo & Robinson and R. A. Martin, sheriff of the county. The complaint alleges that the instrument above referred to and set forth is a mortgage. The prayer of the complaint is for a foreclosure of the mortgage and the application of the proceeds towards the satisfaction of the debt of the plaintiff and that the defendants be enjoined from further interfering with the plaintiff in the foreclosure of the mortgage. Mayo & Robinson and other creditors of A. A. Farrow intervened in the action, alleging that the execution of the mortgage by A. A. Farrow to P. B. Farrow on the stock of goods was fraudulent and that the transfer of said stock of goods by A. A. Farrow to P. B. Farrow is in violation of the provisions of the Bulk Sales Law. During the pendency of the proceedings P. B. Farrow, on his own motion, was appointed receiver of the stock of goods and fixtures. They were sold for an amount less than the debt due either to P. B. Farrow or the other creditors. The court found that P. B. Farrow retained such an interest in the stock of goods and fixtures as made him liable to all of the interveners for the amounts of their several claims. A decree was accordingly entered, holding the receiver accountable to the interveners for all the goods, wares, merchandise, and fixtures which came into his hands by virtue of Mrs. A. A. Farrow turning over to him the mortgaged property. The plaintiff has appealed.

Decree reversed, and cause remanded.

Killough, Lines & Killough, for appellant.

1. The mortgage on stock of goods was valid. 97 Ark. 57; 25 L.R.A. (N. S.) 937; 52 Ark. 385; 49 Id. 279; 41 Id. 186.

2. The mortgage covering after-acquired property was valid. 187 S.W. 927; 18 Id. 609; 97 Ark. 57; 108 Id. 162; 35 Id. 304-322.

3. The bulk sales law has no application. 12 R. C. L. 525; 25 L.R.A. (N. S.) 758; 12 R. C. L. 26; 12 L.R.A. (N. S.) 178, note; 46 L.R.A. (N. S.) 455, note; 2 Id. 341; 12 Am. Cas. 344, note; 9 Id. 332; 12 L.R.A. (N. S.) 178, note; 46 Id. 455, note; 2 Id. 341.

4. The mortgage was valid between the parties and before any liens were created by others. Appellant took possession under the mortgage and it became valid as to all parties. There is no proof of fraud or improper motives. The mortgage was duly recorded and notice to every one.

S. W. Ogan, for Mayo & Robinson; J. C. Brookfield, for Iowa City State Bank.

1. The entire instrument was a mere partnership contract--not a mortgage. It was fraudulent as to creditors. 88 Ark. 56.

2. If a mortgage, Mayo & Robinson are entitled to superiority. 97 Ark. 57.

Chas. E. Robinson, for interveners.

1. The transaction is within the bulk sales law, because (1) the mortgage conveyed the stock and fixtures in bulk and possession was taken thereunder, and (2) the stock and fixtures were delivered by A. A. Farrow in payment of her debt to P. B. Farrow, which was made a sale under the bulk sales act. 46 L.R.A. (N. S.) 455, 459; 23 Mont. 425; 12 L.R.A. (N. S.) 178; 112 Ark. 187; 9 A. & E. Ann. Cas. 331; 193 Mass. 106; 163 Ind. 422; 93 Md. 432; 40 Wash. 566.

OPINION

HART, J., (after stating the facts).

The decision of the court below proceeded upon the theory that under the agreement between P. B. Farrow and Mrs. A. A. Farrow, the former retained such an interest in the goods and fixtures as to render him liable to the interveners for the amount of...