Kelley Trust Company v. Zenor

• Decision Date: 18 June 1923
• Docket Number: 49
• Citation: 252 S.W. 39,159 Ark. 466
• Parties: KELLEY TRUST COMPANY v. ZENOR
• Court: Arkansas Supreme Court

252 S.W. 39

159 Ark. 466

KELLEY TRUST COMPANY v. ZENOR

No. 49

Supreme Court of Arkansas

June 18, 1923

Appeal from Sebastian Chancery Court, Fort Smith District; J. V Bourland, Chancellor; reversed.

Judgment reversed and cause remanded.

Geo F. Youmans and Pryor & Miles, for appellant.

Appellees procured a donation of a site worth $ 7,000 for a glass factory, the Business Men's Club paying $ 3,000 and appellant giving remainder of value of site conveyed, all conditioned on the erection and operation of a factory of designated capacity thereon by appellees, and a vendor's lien was retained for the price of the site to compel a performance of the condition. The change in the deed, after its execution, by the secretary of the Business Men's Club, would not affect its provisions. 113 Ark. 289. Not entitled to relief on account of act of God or inevitable accident. 6 R. C. L. sec. 367. Appellees failed to perform the condition of the contract, and appellant was entitled to foreclose lien for purchase money. Provision retaining lien not one for penalty or forfeiture. 93 Ark. 371. Was one for liquidated damages, 122 Ark. 235. The consideration expressed for the location and operation of the factory was a valuable consideration. 162 U.S. 40, L. ed. 960. Appellees got a conveyance of the lands, and failed to pay therefor in money or by location and operation of the factory. 99 Ark. 438. There was no sufficient reason for appellees' failure to perform contract that would relieve them from paying for the land. 93 Ark. 447. Doctrine of 93 Ark. 371 supported also by 14 Ala. 169, 48 Am. Dec. 93. A provision for payment of land in cotton does not impair vendor's lien. 6 Am. Rep. 707. Written agreement fixes the amount of the lien herein which would be liquidated damages if factory not operated.

Joseph R. Brown and James B. McDonough, for appellees.

93 Ark 371, cited by appellants, has no bearing on question involved here. 162 U.S. 40 is hardly in point, and 122 Ark. 235 is not applicable to the facts of the case. Appellees complied substantially with the terms of the Kelley Trust Company deed, although they were not bound thereby. They knew nothing about its terms till it was rescinded, and from then during the one year it had to run the plant was operated five months. The war excused the operation of factory and performance during 1917. 25 Ark. 138; 148 Ark. 132; 190 N.Y. 539, 83 N.E. 1122. The plant operated 52 weeks by June 1, 1922. The chancellor found the contract had been substantially complied with. 65 W.Va. 531; 64 S.E. 836; 84 Mo. 263; 13 Mo. 191. Substantial compliance is sufficient. 5 Ark. 596; 97 Ark. 278; 131 Ark. 481. Each case must depend on its own facts in determining whether a stipulated sum is a penalty or forfeiture, as the chancellor held here, or liquidated damages. 112 Ark. 126. The secretary of the Business Men's Club was justified in making the change correcting the deed to conform to the terms of the contract made. "Equity regards that as done which ought to be done." 21 C. J. 202; 121 Ark. 550; 91 Ark. 468; 2 C. J. 202. Under doctrine of equitable estoppel, two people may find themselves charged with all the consequences of agency as to third persons. 2 C. J. 461; 96 Ark. 350. Appellee relied on Gill's, said secretary's, representations. 2 C. J. 465. This reliance entitled Zenor to a conveyance in accordance with the contract made with the Business Men's Club, and he was entitled to proceed as he did, considering that as done which ought to be done. The court held the stipulation in the deed a provision for a penalty, and its finding is not against the clear preponderance of the testimony. 44 Ark. 216; 27 Ark. 200; 95 Ark. 523; 106 Ark. 123; 149 Ark. 670. Appellant, by the construction and operation of a glass plant by appellees, secured all the benefits, and is not entitled to relief. It is undisputed that appellees invested $ 150,000 in the plant, and because it only employed 125 instead of 150 men it would be nothing but a forfeiture to allow appellant to recover back the property. Forfeitures are not favored in equity. 142 Ark. 539. Equity should not enforce such a penalty. 132 Ark. 473; 59 Ark. 66; 235 Pa. 443, 84 A. 427; 64 S.E. (W. Va.) 836. If appellant has any remedy it is an action at law for damages. 83 N.E. 1072; S.W. 631. Conditions are not favored in contracts of this kind. 200 N.Y. 224, 93 S.E. 516. Conditions subsequent are not favored. 77 Ark. 168; 113 Ark. 92.

Geo F. Youmans and Pryor & Miles, in reply.

Appellees, of course, were bound by the terms of the deed. Inability to procure labor no excuse for failure to perform contract. 93 Ark. 447. No substantial performance of contract by appellees. 43 Minn. 357, 45 N.W. 845, 9 L. R. A. 52; 124 Wis. 84, 102 N.W. 356; 4 Words & Phrases, 751. Contract does not constitute a condition subsequent nor involve a forfeiture. 70 N.Y. 303; 177 P. 138, 13 Wyo. 37; 109 Va. 676, 64 S.E. 982; 2 Words & Phrases, 1402; 1 Words & Phrases (2d S.) 865. No forfeiture. 10 Pa. Co. Ct. 8. 565; 105 S.W. 366; 3 Words & Phrases, 2893; 2 Words & Phrases (2d S.) 611.

OPINION

WOOD, J.

The Kelley Trust Company (hereafter, for convenience, called appellant) is an Arkansas corporation, with its principal place of business in Fort Smith, Arkansas. Harry E. Kelley is its president, and owns a majority of its stock. On the first of May, 1917, the appellant executed to one C. P. Zenor, Sr., his heirs and assigns, a warranty deed to block 38, Midland Heights Addition to the city of Fort Smith, Arkansas. The consideration named in the deed was $ 7,000. The deed contained the usual clauses and covenants, and in addition the following:

"Three thousand dollars of the above mentioned consideration is paid in cash by the Business Men's Club of Fort Smith, Arkansas, and the receipt thereof is hereby acknowledged. The remaining four thousand dollars is to be paid by the said C. P. Zenor, Sr., by the erection, maintenance and operation, on said real estate, until January 1, 1921, of a glass factory, having a daily pay-roll of not less than six hundred dollars, and employing not less than one hundred fifty men; the meaning and intent hereof being that said real estate is donated to said C. P. Zenor, Sr., his heirs and assigns, upon condition that said C. P. Zenor, Sr., his heirs and assigns, erect, maintain and operate on said real estate, during the period above indicated, a glass factory having a daily pay-roll of not less than six hundred dollars, and employing not less than one hundred and fifty men, a lien being hereby retained on said real estate to secure performance of said conditions. "And in the event said C. P. Zenor, Sr., his heirs and assigns, should fail to erect and put in operation on said real estate, within eight months from this date, a glass factory having a daily pay-roll of not less than six hundred dollars and employing not less than one hundred fifty men, or in the event that C. P. Zenor, Sr., his heirs and assigns, after erecting and putting such glass factory in operation, should be or become at any time during the period aforesaid unable to continue operating the same, or should suspend operation thereof for four months at any time during said period, or should, for four months at any time during said period, fail to operate such factory on a scale requiring a daily pay-roll of not less than six hundred dollars and the employment of not less than one hundred fifty men, then in any such event said C. P. Zenor, Sr., his heirs and assigns, shall become and be considered indebted to the said Kelley Trust Company, its successors and assigns, in said sum of seven thousand dollars, 4/7 for said company and 3/7 for said Business Men's Club, and the lien herein reserved on said real estate may be foreclosed for such indebtedness. And in the event said Kelley Trust Company should become the purchaser of said real estate in said foreclosure proceedings, it shall hold the title thereto in trust, 4/7 for said company and 3/7 for said Business Men's Club."

This action was instituted by the appellant to foreclose its vendor's lien. It set up in its complaint the deed, and alleged, in substance, that Zenor had failed to comply with the conditions above set forth, and that, by reason of such default, he was indebted to the appellant in the sum of $ 7,000, 4/7 for the appellant and 3/7 for the Business Men's Club. It prayed for judgment for $ 7,000, and that a lien be declared upon the lots described in the complaint, and that the same be subjected to the satisfaction of the judgment.

The Model Window Glass Company appeared and made itself a party defendant to the action, and it and Zenor and his wife answered, alleging, in substance, that the obligations of the contract under which the deed was executed to Zenor had been fully complied with. The trial court, after hearing the testimony in the cause, found the issues in favor of the defendants, and entered a decree dismissing the complaint for want of equity, from which is this appeal.

The facts are substantially as follows: Zenor, who had been interested in the operation of a glass factory outside of the State, came to Fort Smith to locate a glass factory. One R S. Robinson and his associates had developed what is known as the Kibler Gas Field in Crawford County, near Fort Smith. Harry Kelley and the appellant were large landowners in the city of Fort Smith, and had about three hundred acres of land in what is known as Midland Heights Addition to the city of Fort Smith, in which was situated block 38, containing 35 city lots 50x140 feet, located on both the lines of the Frisco and the Missouri Pacific railways, on the highest point of ground between the cities of Fort Smith and Van Buren, and only a short distance from the...