Johnson v. Graham Brothers Company

• Citation: 135 S.W. 853,98 Ark. 274
• Parties: JOHNSON v. GRAHAM BROTHERS COMPANY
• Decision Date: 13 March 1911
• Court: Supreme Court of Arkansas

135 S.W. 853

98 Ark. 274

JOHNSON v. GRAHAM BROTHERS COMPANY

Supreme Court of Arkansas

March 13, 1911

[Copyrighted Material Omitted] [Copyrighted Material Omitted]

Appeal from Jackson Chancery Court; George T. Humphries, Chancellor affirmed.

STATEMENT BY THE COURT.

On May 27, 1909, Frances M. Johnson executed a note to Graham Bros Company, a corporation, for the sum of $ 6,000, with interest at the rate of seven per cent., payable semiannually. The note was due May 27, 1911. The note was secured by deed of trust executed by Mrs. Johnson to S. M. Stuckey, trustee, in favor of Graham Bros. Company, the beneficiary and payee of the note. The deed of trust included lots 1, 2 and 3 in Lyon's Addition to Newport; lot 5, block 2, in Davis's Addition, and lots 3 and 4 of Stephen's Addition to Newport. The deed of trust provided that "if default be made in the payment of the interest thereon semiannually when due, the whole of said indebtedness shall immediately become due." Mrs. Johnson acknowledged that she had executed the deed of trust "for the consideration and purposes therein mentioned and set forth." The first installment of interest was not paid when due, and this suit was instituted by the appellees to foreclose the mortgage. Appellant resisted the foreclosure upon the ground that the consideration of the note was not her debt, and that the note and deed of trust were not executed with reference to her separate property. She averred that the real consideration for the note was an agreement of T. J. Graham, acting for Graham Bros. Company, to dismiss certain indictments that were pending in the Jackson Circuit Court against her husband, R. M. Johnson. She alleged that the indictments had not been dismissed; that the note and deed of trust were void, and she prayed that the complaint be dismissed, and that the note and mortgage be cancelled.

Appellees replied to the answer, denying its allegations as to the consideration for the note and deed of trust and pleading res judicata of that matter by judgment of the Jackson Chancery Court rendered at a former term, and setting up that judgment in estoppel of appellant's defense here.

R. M. Johnson, the husband of appellant, was a director and also cashier of the Bank of Newport. The bank failed, owing depositors over one hundred thousand dollars. The directors were sued for the amount. R. M. Johnson was named in the complaint, but service was not had upon him. Judgment was rendered against the others. R. M. Johnson and the other directors, including T. J. Graham, were indicted in the Jackson Circuit Court in connection with the failure of the bank. T. J. Graham, in an effort to compromise and settle the claims of the depositors, induced the directors, each, to agree to pay a certain pro rata of the sum that was named as the amount to be paid through the compromise. R. M. Johnson agreed to contribute to that sum the amount of $ 6,000. He did not have the money, and John R., Thomas J., Nimrod, John S. and James Graham advanced the sum of $ 6,000 for him. Johnson through his attorney delivered to the Grahams a promissory note for six thousand dollars executed by Mrs. Johnson, also a deed executed by R. M. Johnson and Mrs. Johnson for about fourteen hundred acres of land in Jackson County, and the town lots in controversy. Mrs. Johnson owned the farm and all the lots except those in Lyon's Addition to the city of Newport. The title to the latter was in R. M. Johnson.

The Grahams executed to the Johnsons as a part of the same transaction an agreement in which the Grahams stipulated in part as follows:

"Now, therefore, in consideration of the premises and the sum of one dollar to us in hand paid, the receipt of which is hereby acknowledged, we, John R. Graham, Thomas J. Graham, Nimrod Graham, Joseph S. Graham and James Graham, the grantees in the deed aforesaid, do hereby covenant with the said Frances M. Johnson, her heirs, assigns, and with the said R. M. Johnson, his heirs and assigns, that we will, and the heirs and survivors of us shall, reconvey said lands, hers to her, the said Frances M. Johnson, and his to him, the said R. M. Johnson, and unto their heirs and assigns if on or before one year after the date said compromise shall be effected, the said Frances M. Johnson and the said R. M. Johnson, their heirs or assigns, shall pay or cause to be paid to us, or to our legal representatives, the said sum of six thousand dollars ($ 6,000) with interest as aforesaid. Said conveyance so to be executed by us to be free of any incumbrances suffered or done by us, but subject to whatever part of the incumbrances now on said lands may then remain."

After the time given for the redemption of the lands mentioned had expired, the Grahams treated the deed of the Johnsons to them and their contract with the Johnsons to reconvey as an equitable mortgage, and accordingly brought suit in the Jackson Chancery Court to foreclose the lien created by the deed and the defeasance contract. The suit was brought in the name of John R., Thomas J., Nimrod, Joseph S. and James Graham, the grantees in the deed, against Mrs. Johnson and R. M. Johnson et al. Mrs. Johnson, in defense to that suit, set up, among other things, the same defense she pleads here, namely, that the sole consideration, so far as she was concerned, for the execution of the note and the deed in that suit was the promise on the part of the Grahams, the grantees in the deed, that her husband should be immune from further prosecution on the indictments that were then pending against him. At the May term, 1909, a decree was entered by consent confirming and quieting the title in the Graham brothers, as joint tenants, to the land and town lots which were included and described in the deed that the Johnsons had executed to the Grahams, and which the latter were treating and seeking to foreclose as a mortgage. By the consent decree in that case the absolute title to the lands described in the complaint in that suit embracing the town lots in controversy in this suit passed to the Grahams as tenants in common, as shown by the decree, which in part recited as follows: "And it appearing to the court that the defendants R. M. Johnson and Frances M. Johnson have withdrawn their defense herein, and have consented that judgment might be taken and decree rendered herein for confirmation of a certain deed mentioned in the complaint therein the same having been executed by R. M. Johnson and Frances M. Johnson on the 18th day of June, 1907, and filed for record on the 26th day of June, 1907, conveying to the plaintiffs the lands hereinafter described in said deed. * * * And it further appearing to the court from the agreement of the parties and the pleadings on file that the plaintiffs are entitled to a confirmation of said deed, it is therefore considered, ordered and decreed that the said deed executed on the 18th day of June, 1907, conveying the following lands (describing them) be and the same is hereby in all things confirmed, and the fee simple title in and to said lands vested in the plaintiffs, John R. Graham, Thomas J. Graham, Nimrod Graham, Joseph S. Graham and James Graham, as joint tenants, as per the terms of said deed."

The appellees introduced the note and deed of trust and testimony to the effect that the Grahams, joint tenants, sold to appellant the lots in controversy for the sum of six thousand dollars; that they made her a deed to the lots upon her executing to the Graham Bros. Company, a corporation, the note and mortgage in suit. The Graham brothers were the stockholders of the Graham Bros. Company, the corporation. T. J. Graham, who conducted all the negotiations on the part of the Graham brothers, joint tenants, and Graham Bros. Company, the corporation, testified that "the debt we are seeking to foreclose is not the debt for money I put up in the compromise settlement. The title to this property was by decree put in Graham brothers, joint tenants, and we as such joint tenants sold her the property." S. M. Stuckey wrote the note and deed of trust in suit, and the deed from Graham brothers, joint tenants, to Mrs. Johnson, and was present part of the time when negotiations were pending for the settlement of the suit between the Grahams and appellant at a former term and when the consent decree was agreed upon, was present when the note and deed of trust in suit were delivered. He testified that "there were present F. D. Fulkerson, M. M. Stuckey, M. B. Brewer, Frances M. Johnson, Gustave Jones and myself; am sure F. D. Fulkerson was present. There was not anything said about dismissing any indictments against R. M. Johnson, either at the delivery of the deed and note and deed of trust or before."

The testimony of F. D. Fulkerson, an attorney who represented the Grahams, was to the effect that he was present during the negotiations when the consent decree was agreed upon, and when the note and deed of trust were delivered, and that appellant "did not say a word about delivering these instruments on condition that the indictments against her husband should be dismissed." M. M. Stuckey, one of the attorneys for appellees, testified in part as follows:

"We that is, Colonel Murphy and the attorneys for the Grahams had a consultation in my office in regard to a settlement of that case. We agreed upon a settlement, and the result was a decree of the court was entered at that term, in which the matters of difference between the two parties were agreed upon. The decree in that case confirmed the title to certain lands and town lots, which were embraced in several mortgages and a certain deed of conveyance that had been given by Frances M. Johnson and R. M. Johnson to the Graham brothers as joint tenants, naming them severally. ...