Morris v. Covey

• Decision Date: 20 May 1912
• Parties: MORRIS et al. v. COVEY et al.
• Court: Arkansas Supreme Court

148 S.W. 257

MORRIS et al. v. COVEY et al.

Supreme Court of Arkansas.

May 20, 1912.

Appeal from Benton Chancery Court; T. H. Humphreys, Chancellor.

Action by J. D. Covey, as receiver, against R. S. Morris and V. L. Morris, in which T. C. Churchill, as administrator, intervened. From a judgment for plaintiff and intervener, defendants appeal. Affirmed.

R. F. Forrest, of Siloam Springs, for appellants. Rice & Dickson, McGill & Lindsey, of Bentonville, for appellees.

McCULLOCH, C. J.

This is an action instituted in the chancery court of Benton county by J. D. Covey, as receiver of the Bank of Siloam, a banking corporation formerly located and doing business at Siloam Springs, Ark., against R. S. Morris and his wife, V. L. Morris, to obtain a reformation and foreclosure of a mortgage executed to him by the defendants on August 13, 1910, on certain real estate in the city of Siloam Springs, which now constitutes the homestead of R. S. Morris. T. C. Churchill, as administrator of the estate of Joseph Rutherford, deceased, was permitted to intervene for the purpose of enforcing an attachment lien on the same property. Defendant, R. S. Morris, was president of the Bank of Siloam, and had active charge and control of its affairs. The bank became grossly insolvent, and on August 7, 1910, was placed in the hands of a receiver by the chancery court of Benton county; plaintiff J. D. Covey being appointed as receiver. R. S. Morris was found to be largely indebted to the bank, and on August 13, 1910, he executed to the plaintiff as receiver the mortgage in controversy, which, in addition to other tracts and lots of real estate in Benton county, covered parts of certain lots in the city of Siloam Springs known as the Morris Hotel property, which included the hotel building properly, and some stores and the bank building. A 10-foot strip off one side of the property was omitted from the mortgage, and this is alleged to have occurred by mistake, and reformation was sought so as to include that strip in the mortgage according to the real intention of the parties. Mrs. Morris joined in the execution of the mortgage, and duly acknowledged the same before a notary public. The amount of the mortgage, with interest up to the date of final decree in this case, was, as found by the chancellor, the sum of $83,230.92, and no question is raised here as to the correctness of that finding. Shortly after the execution of the mortgage, defendants moved to the hotel, and occupied the same as a homestead. On October 18, 1910, one of the creditors of R. S. Morris filed a petition to adjudge him a bankrupt in the United States District Court for the Western District of Arkansas at Ft. Smith, and he was duly adjudged to be a bankrupt. The bankruptcy court in an appropriate proceeding for that purpose canceled the mortgage executed to appellee Covey as an illegal preference so far as it covered the property of the bankrupt not exempt, and entered a decree to that effect, and relinquished jurisdiction as to the exempt property of the bankrupt, namely, the homestead in the city of Siloam Springs which is now the subject of this controversy. It should be mentioned, though not material, that the complaint in this case was filed on October 25, 1910, which was before the date of the aforementioned decree in the federal court.

R. S. Morris was formerly executor of the will of J. R. Rutherford, deceased, and, after having filed his settlement account showing property in his hands to the amount of $4,718.49, an order was made on him to pay it over to his successor, the intervener, Churchill, who was appointed administrator in succession with the will annexed; and on March 29, 1911, the intervener commenced an action against R. S. Morris in the circuit court of Benton county to recover said sum of money, and caused an order of general attachment to be issued and levied upon the homestead property of R. S. Morris now in controversy. He bases his claim to subject said property to the payment of his debt on the exception in the constitutional provision, relating to homesteads, as against executors, administrators, guardians, etc., for moneys collected by them. Const. 1874, art. 9, § 3. The intervention in this case is for the purpose of enforcing the lien on the exempt property claimed to have accrued by reason of the attachment. The chancellor rendered a decree in favor of plaintiff Covey reforming the mortgage except as to the inchoate dower right of Mrs. Morris, and decreed a foreclosure of the mortgage as reformed. The court also rendered a decree in favor of the intervener declaring a lien for a certain portion of his claim, which will be referred to later, subject, however, to the mortgage lien of plaintiff Covey. The defendants appealed, and the plaintiff Covey cross-appealed from that part of the decree denying reformation as to the relinquishment of the dower right of Mrs. Morris.

The principal defense put forward by the defendants is that R. S. Morris was incapacitated mentally from executing the mortgage, and that he was induced to execute same by false representations and deception of the plaintiff and the latter's attorney, who had formerly acted as defendant's attorney. It is alleged that said attorney was appointed to represent the receiver in the management of the estate at the solicitation of defendant R. S. Morris, that he agreed to act for the protection of the interests of Morris, and that the latter at the time of the execution of the mortgage was led to believe that the mortgage was executed solely for his protection, and to shield him from other creditors. The chancellor found that the allegations as to mental incapacity of R. S. Morris, and as to false representations and misconduct of the plaintiff Covey and the attorney referred to, were not sustained by the evidence. After a careful consideration of the testimony concerning the conduct of the attorney referred to, we are of the opinion that the charges made against him are wholly unfounded, and that there is nothing in his conduct which is sufficient to form a basis for setting aside the conveyance. Nor is there sufficient testimony as to any misconduct on the part of plaintiff Covey to warrant us in setting aside the mortgage. The testimony as to the mental and physical condition of defendant Morris is not sufficiently abstracted, and counsel for plaintiff insist that the finding of the chancellor on that question should be left undisturbed. It appears from the statements in the briefs that plaintiff introduced numerous witnesses tending to show that the mental and physical condition of defendant Morris was sufficient to establish his capacity to execute the conveyance. The abstract, without containing the testimony of these witnesses, is insufficient to call for a consideration of that question; but assuming, which we must do, that the testimony of each of those witnesses tended to establish sufficient mental capacity on the part of R. S. Morris, that, with the other testimony in the case, places the preponderance of the testimony on that issue on the side of the chancellor's finding, or, at least, makes it not against the preponderance of the testimony. So, in either view of the matter it becomes our duty under those circumstances to accept the finding of the chancellor as correct.

Mrs. Morris, in her separate answer, denied that she executed the mortgage freely and voluntarily, but alleged, on the contrary, that she signed it without it being read over to her and without full knowledge and understanding of its contents, and also alleged that she executed the same in the presence of her husband and...