Newald v. Valley Farming Co.

• Decision Date: 25 March 1918
• Docket Number: (Nos. 246, 338.)
• Parties: NEWALD et al. v. VALLEY FARMING CO. et al.
• Court: Arkansas Supreme Court

202 S.W. 838

NEWALD et al. v. VALLEY FARMING CO. et al.

(Nos. 246, 338.)

Supreme Court of Arkansas.

March 25, 1918.

On Rehearing April 29, 1918.

Appeal from Clay Chancery Court; Charles D. Frierson, Chancellor.

Suit by the Valley Farming Company and others against L. J. Newald and others. Decree for plaintiffs, and defendants appeal. Affirmed.

This was a suit in equity to foreclose a mortgage on real estate. Certain persons who had purchased tracts of land after the execution of the mortgage were allowed to become parties, and asked that their contracts for the purchase of the lands be set aside on account of fraud practiced upon them by the mortgagors. Still other persons who had purchased some of the lands from the mortgagors since the execution of the mortgage were allowed to intervene for the purpose of asserting their rights to have the lands purchased by them released from the mortgage by the payment of certain sums.

On the 31st day of March, 1914, the plaintiff Valley Farming Company conveyed to the defendant L. J. Newald a large tract of land in the western district of Clay county, Ark., consisting of something over 8,000 acres, about 500 acres of which were cleared and in cultivation. The consideration was $85,000, evidenced by the promissory notes of L. J. Newald and S. E. Newald, his wife. Of these notes one was for $5,000, due six months after date, four were for $15,000, each due respectively, 12, 18, 24, and 30 months after date, and the remaining note was for $20,000, due 36 months after date. The notes bore the date of March 31, 1914, and on that date L. J. Newald and S. E. Newald executed a mortgage to the Valley Farming Company on the lands to secure the payment of these notes. Said mortgage contains the following provision:

"It being expressly agreed by and between the Valley Farming Company and L. J. and S. E. Newald, or assigns, that upon paying the pro rata amount per acre of this mortgage any part or parcel of the land covered by said mortgage shall be released."

According to the contention of the plaintiff the draft of the mortgage submitted to its officers did not contain this provision, and evidence was introduced tending to show that the provision was inserted in the mortgage without the knowledge and consent of the plaintiff, and was not discovered until after the mortgage was filed and recorded. The plaintiff at once caused the following notice to be entered on the margin of the record where said mortgage was recorded:

"Notice is hereby given that the clause contained in this mortgage providing for the release of the portion of the lands therein conveyed upon the payment of the pro rata amount per acre of the indebtedness was inserted without his knowledge or the authority of the undersigned, and that no such release will be given unless satisfactory consideration is paid and arrangement hereinafter made. This 30th day of April, 1914.

                    "[Signed]     Valley Farming Company
                                    "By J. M. Hoffman, Pres."
                

The original bill of foreclosure in this case was filed on the 23d day of November, 1914. The question of whether or not the release above referred to was contained in the mortgage and was placed there without the consent of the mortgagee was made an issue by the answer tendered by the mortgagors. Evidence was introduced by the mortgagee to show that the release was placed there without its knowledge and consent, and by the mortgagors to show that it was placed in the mortgage by the agreement of the parties. On the 8th day of October, 1915, at the October term of the chancery court, the following order was entered of record:

"On this October 8, 1915, come the plaintiffs by their attorneys, T. J. Crowder and D. Hopson, and the defendants Dorough-Newald Company, L. J. Newald, and S. E. Newald, by their attorneys, Ben M. Goldberg, C. W. Terry, and F. G. Taylor, and submitted to the court for its approval their agreement and adjustment of all controversies herein involved as follows:

"It is stipulated and agreed that all matters in this controversy be settled on the following basis:

"First. The marginal notice heretofore caused to be placed on the record of the mortgage herein sought to be foreclosed shall be ordered canceled and expunged from the record.

"Second. The defendant shall pay or cause to be paid on or before 90 days from this date, one-half of the amount due for and on account of the notes past due, and interest on the remaining notes secured by said mortgage, including the amount heretofore paid by plaintiffs for the drainage taxes on said land in the sum of $1,898.60, together with interest on the said last-mentioned sum at the rate of 6 per cent. per annum from the 1st day of December, 1914, and further agrees to pay the remaining one-half of the said amount in 180 days from this date. Said amounts shall bear interest at the rate of 6 per cent. from this date until paid.

"Fourth. It is agreed that in figuring interest on the notes now due that the same is to be figured at straight simple interest from date of said notes to the present date, at the rate of 6 per cent. per annum. That the interest afterwards shall be computed according to the terms and conditions of the notes.

"Fifth. That the defendant shall be allowed in full for all its claim for damages the sum of $7,500, same to be credited of this date. The said allowance is to be made and credited upon the $15,000 note secured by the mortgage in controversy herein, which matures on the 31st day of March, 1916, the payment of which is extended until the 30th day of June, 1916; that said credit of $7,500 is to be credited upon said note heretofore described, when and not until the balance of the $15,000 note, with interest, is paid. The said credit, however, is not to be allowed unless the amount of said note is paid on or before the 30th day of June, 1916.

"Sixth. The plaintiff shall release all lands heretofore sold, except the lands sold to Seigel, on payment of $17.50 per acre, the first 16 tracts described in the Defendant's Exhibit 8 to be released when and during the payment of the said sum first before mentioned to be paid as per paragraph No. 3, and the remaining tracts shown in Defendant's Exhibit 8 to be released when and during the payment of the second one-half for said lands shown in Defendant's Exhibit 8, provided, if defendant desires to make partial payments on either of said sums, it may do so, and have the land released at the rate of $17.50 per acre of the amount paid.

"Seventh. All lands sold hereafter and not mentioned in Defendant's Exhibit 8 are to be released upon the payment of the pro rata amount per acre as per the terms of the original mortgage herein as the same was originally recorded; said payment to be credited on first notes coming due after the sale is made.

"Eighth. That upon the payment of the amounts herein provided to be paid as per clauses No. 2 and No. 3 above, an order shall be entered dismissing plaintiff's bill, and each party to pay its own costs.

"Ninth. That in the event said defendants fail to make payment of either of the payments at the time and in the manner as provided herein for the payments mentioned in clause No. 3, a decree of foreclosure in vacation may be rendered; defendant's counterclaim to be dismissed.

"Tenth. It is further stipulated between the parties that the plaintiffs shall cause to be brought to remove clouds from the title of the lands included in their conveyance to the defendants and confirm the title to said lands so as to stand for trial at the next term of the chancery court, at plaintiffs' expense."

The cause was then continued for the performance of the conditions mentioned in the stipulation. On the 5th day of January, 1916, L. J. Newald met with Judge F. G. Taylor and C. W. Terry, his attorneys, at Corning, Ark. Mr. Newald then decided that he was unable to comply with the provisions in the stipulation above referred to. C. W. Terry purchased 1,407 acres of the mortgaged lands from Dorough-Newald Company, a corporation which had been organized to purchase the lands from L. J. Newald. All the stock in this corporation, except one share, was owned by L. J. Newald, and the corporation did not pay him anything for the lands. It was the intention of the parties that the lands should be sold in small parcels to different persons in order to pay the purchase money thereof to the plaintiff. Terry made a tender according to the release provision as originally written in the mortgage, and demanded that the mortgage be released as to the lands purchased by him. The plaintiff refused his tender, and demanded payment according to the stipulation entered of record on October 8, 1915, before it would release the land sold to him by the mortgagors. The mortgagors had not complied with the terms of that stipulation, and no offer of tender under its provision was made to the plaintiff. On the 20th day of January, 1916, by consent the bill for foreclosure of the mortgage on the land came on before the chancellor for hearing. On the same day Judge F. G. Taylor and Morgan filed a petition alleging that he had purchased a portion of the lands included in the mortgage sought to be foreclosed, and was allowed to become a party defendant to the action. C. W. Terry had already been allowed to file a similar intervention. Taylor, Terry, and Morgan in their petitions claimed the right to have the lands purchased by them released from the mortgage upon the payment by them of the sums provided for in the release provision as contained in the mortgage.

The court entered a decree of foreclosure in favor of the plaintiff Valley Farming Company against the defendants L. J. and S. E. Newald and the Dorough-Newald Company.

Judgment was rendered in favor of the plaintiff against these defendants for the sum of $93,139.36. The cross-bill of the defendants against the plaintiff, in which damages were claimed on account of a breach...