Hughes v. Sebastian County Bank

• Decision Date: 21 May 1917
• Docket Number: 391
• Citation: 195 S.W. 364,129 Ark. 218
• Parties: HUGHES v. SEBASTIAN COUNTY BANK
• Court: Arkansas Supreme Court

195 S.W. 364

129 Ark. 218

HUGHES v. SEBASTIAN COUNTY BANK

No. 391

Supreme Court of Arkansas

May 21, 1917

Appeal from Sebastian Circuit Court, Greenwood District; George W Dodd, Special Judge; affirmed.

Judgment affirmed.

A. A McDonald, for appellant.

1. The court exceeded its authority--it could only quash the execution or order the property sold under it. Kirby's Dig., § 3226. The bank had no lien on the homestead. The relation of vendor and vendee never existed. 66 Ark. 442 does not apply. 62 Ark. 398; 72 Id. 433; 66 Ark. 442. 66 Ark. 442 is overruled by 114 Ark. 433. The purchase money for a homestead is a lien thereon. The homestead is liable for money loaned to purchase it, but such is not the case here. The bank held the stock until it became worthless and is estopped.

Geo. W. Johnson, for appellee.

1. The money was borrowed for the purchase of a homestead and was a lien thereon and the homestead was not exempt from sale under an execution. 66 Ark. 442; Ib. 367; 69 Id. 123; 62 Id. 398. The case in 66 Ark. 442 is decisive of this and has never been overruled.

2. There was no waiver of any rights against the homestead by taking security. 62 Ark. 398; 31 Id. 392; 104 Id. 226; 79 N.E. 514.

3. There is no estoppel. 95 Ark. 488.

STATEMENT BY THE COURT.

Thomas J. Hughes filed a petition under section 3224 of Kirby's Digest to quash an execution issued upon a judgment rendered in the circuit court against him in favor of the Sebastian County Bank for $ 2,301.83 on the 6th day of January, 1912. The facts are as follows:

On the 6th day of September, 1904, Thomas J. Hughes executed to the Sebastian County Bank his promissory note for $ 750 with interest from date at 10 per cent. per annum. According to the evidence adduced in favor of the bank, the $ 750 was loaned to him by the bank for the purpose of purchasing the real property in controversy in this suit for a homestead and it has since been occupied and claimed by Hughes as his homestead. R. O. Herbert, the cashier of the bank, was the father-in-law of Hughes and assisted him in obtaining money from the bank and also in purchasing the property. The vendor of the property executed a deed to Herbert, and Herbert at once executed a deed to it to Hughes. The purchase of the property and the loan of the money to pay for it were simultaneous transactions. According to the testimony of Hughes himself he bought the property from the vendor and also borrowed the money from the bank and the two transactions were separate and had no connection with each other. The $ 750 note was renewed from time to time at intervals of six months or more. Additional sums of money were borrowed by him and added to the note and the accumulated interest so that on April 21, 1906, he owed the bank $ 1,136.46. His note was renewed for that amount and he deposited with the bank eighty shares of stock of a coal corporation as collateral security. Thereafter the note was renewed from time to time, and the amount thereof increased by borrowing more money from the bank until finally the last renewal note was for the sum of $ 2,150. The stock of the coal company was continued as collateral to secure the payment of the note when it was renewed. When the stock of the coal company was first put up as collateral it was worth $ 2,000 and the proof shows that Hughes was offered $ 5,000 for said stock at one time while it was held as collateral by the bank but refused to sell it. The stock of the coal company afterwards became worthless. On the 6th day of January, 1912, the Sebastian County Bank recovered a judgment against Hughes upon the note for $ 2,150 with interest. On the 22d day of July, 1912, an execution was issued on the judgment levied upon the property in controversy, and the property was advertised for sale thereunder. Before the day of sale Celia Hughes, a sister of Thos. J. Hughes, instituted an action in the chancery court against the bank and the sheriff to enjoin the sale of the property under said execution. She claimed to be the owner of the property by purchase from a brother and obtained a temporary restraining order. On the 17th day of February, 1914, the chancery court dissolved the injunction and entered a decree in favor of the bank. Celia Hughes appealed to the Supreme Court, and on the 12th day of April, 1915, the decree of the chancery court was affirmed. On the 13th day of May, 1915, Thos. J. Hughes filed his voluntary petition in bankruptcy and was duly adjudged a bankrupt. He claimed the property in controversy as his homestead and the bankruptcy court set it apart to him subject to the right of the Sebastian County Bank to assert its claim in the court having proper jurisdiction. He was also granted a discharge in bankruptcy except as to such debts as were by law excepted from the operation of a discharge in bankruptcy. After Hughes was discharged in bankruptcy, on March 31, 1916, an alias execution was issued in the circuit court against Hughes in favor of the bank and levied upon the property. Hughes then filed his petition to quash the execution as stated above.

The circuit court found that the $ 750 originally loaned Hughes by the bank was for money advanced to him and used by him for the purpose of purchasing the property in controversy which afterwards became his homestead and that this sum together with the accrued interest amounted to $ 1,361.34. The court held that the said sum of $ 1,361.34 constituted the purchase money of the property in controversy and that it was not exempt from sale under execution under article 9, section 3 of our Constitution.

From the judgment rendered Hughes has duly prosecuted an appeal to this court.

OPINION

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

In Acruman v. Barnes, 66 Ark. 442, 51 S.W. 319, the court held that money borrowed of a third person with which to purchase a homestead, when it is understood between the lender and the borrower that it is to be used for that purpose, and it is so used, is purchase money and the homestead is liable therefor.

The circuit court found that the evidence in the present case brought it within that rule. It is true there was a direct conflict in the evidence on this point, but that conflict was settled in favor of the bank by the finding of the circuit court and under the settled rules of this court its finding of fact will not be disturbed on appeal.

It is also contended by counsel for Hughes that the case just cited is overruled by the case of Hardin v. Hooks, 72 Ark. 433, 81 S.W. 386, where the court held that the mere lending of money to pay for land does not create a lien on the land. In Phillips v. Colvin, 114 Ark. 14, 169 S.W. 316, the court distinguished these two classes of cases and held that money loaned to retire purchase money notes of a homestead was not within the operation of the constitutional provision exempting purchase money from the homestead exemption. In that case Phillips was not a party to the original transaction and the money was loaned by him to Colvin to pay a pre-existing debt created for the purpose of purchasing a homestead and was therefore a general loan. In this case the court found upon substantial evidence that the land was purchased with the money of the bank and that the money was borrowed from the bank for the express purpose of purchasing the homestead and that it was used therefor pursuant to a specific agreement.

It is next insisted that the character of the purchase money debt and of the vendor's right of payment out of the homestead was waived because the bank renewed the original note from time to time, loaned...