Prestidge v. Prestidge

• Decision Date: 22 January 1987
• Docket Number: No. 86-1751,86-1751
• Citation: 810 F.2d 159
• Parties: Agnes PRESTIDGE, Appellant, v. W.R. PRESTIDGE, Appellee. *
• Court: U.S. Court of Appeals — Eighth Circuit

Page 159

810 F.2d 159

Agnes PRESTIDGE, Appellant, v. W.R. PRESTIDGE, Appellee. ^*

No. 86-1751.

United States Court of Appeals,

Eighth Circuit.

Submitted Dec. 22, 1986.

Decided Jan. 22, 1987.

William B. Howard, Jonesboro, Ark., for appellant.

David C. Shelton, West Memphis, Ark., for appellee.

Before McMILLIAN, ARNOLD, and BOWMAN, Circuit Judges.

ARNOLD, Circuit Judge.

This is an appeal from a decision of the District Court holding in part that Agnes Prestidge, one of two joint makers of a promissory note, would have to indemnify the other maker, W.R. Prestidge, for any sum the latter might be compelled to pay toward satisfaction of a judgment obtained on the parties' joint obligation. Because it appears that either of the parties to this appeal has a right of contribution should he or she be required to pay more than one-half of the amount necessary to satisfy the obligation, we reverse.

I.

In 1978, Agnes and W.R. Prestidge obtained a loan from the Commodity Credit Corporation, an agency of the United States Department of Agriculture. In return, the Prestidges jointly executed a promissory note secured by certain real and personal property. The real property consisted of two acres of land in Poinsett County, Arkansas; the personal property consisted of farm storage and drying equipment, including two grain bins, located on that land. At the time they executed the note, Agnes and W.R. Prestidge were husband and wife. However, they were divorced in 1983, and as part of the property division, Agnes Prestidge was awarded the two acres of land mortgaged to secure the loan. Under the terms of the divorce decree, she took the property "subject to valid outstanding liens of record." ¹

In April 1985, the United States filed suit against Agnes Prestidge and W.R. Prestidge to obtain judgment on the promissory note, and to foreclose on the property mortgaged to secure the loan. The Prestidges conceded that they were wholly in default, and in July 1985, the District Court entered a consent judgment against them. The District Court noted, however, that a question remained about which defendant would be personally liable for any deficiency judgment, and delayed the foreclosure sale until a hearing could be held to resolve the liability issue.

Following the hearing on May 12, 1986, the District Court concluded that, because Agnes Prestidge had been awarded the realty in question subject to liens and mortgages which were outstanding in favor of the United States, she was personally liable for the entire amount of the judgment. Accordingly, in an order dated May 13, 1986, the District Court entered judgment in favor of the United States and against W.R. Prestidge and Agnes Prestidge, jointly and severally, in the sum of $16,024.41 plus interest and costs, ² and further requiring Agnes Prestidge to indemnify W.R. Prestidge for all sums he might be compelled to pay toward satisfaction of the judgment. In addition, the Court entered judgment in favor of the United States on the decree of foreclosure on the two acres of land mortgaged to secure the loan, together with all improvements and appurtenances thereon. Agnes Prestidge now appeals from the District Court's decision insofar as it requires her to indemnify W.R. Prestidge.

II.

The sole issue on appeal is whether the District Court erred in concluding that, as between the two joint obligors, Agnes Prestidge is solely liable for the entire amount of the judgment. Appellant concedes that she is jointly and severally liable to the United States on the note and resulting judgment. She further concedes that all proceeds from the foreclosure sale of the mortgaged property should be applied toward satisfaction of the judgment, and that she is not entitled to contribution for any sums so realized. Appellant contends, however, that she and W.R. Prestidge are jointly and severally liable for any deficiency remaining after proceeds of the sale are credited toward the judgment debt, and that either party paying more than one-half of the deficiency is entitled to contribution from the other party. We agree.

The trial court apparently concluded that Agnes Prestidge was personally and solely liable on the joint indebtedness simply because she took the property securing the obligation "subject to valid liens of record." However, the Supreme Court of Arkansas long ago established that

[t]he acceptance of a deed subject to a specified mortgage, does not imply a promise on the part of the grantee to pay the mortgage debt. If the deed contains a stipulation that the property is subject to a mortgage which the grantee agrees to pay, then a duty is imposed on him by the acceptance, and the law implies a promise to perform it, on which promise, in case of failure, assumpsit will lie. But here no express agreement is proved that the defendant would become personally liable, and no facts from which such an agreement can or ought to be implied.

Patton v. Adkins, 42 Ark. 197, 199-200 (1883). In other words, the mere conveyance of property "subject to" a mortgage or lien does not impose liability on the grantee for the payment of that mortgage or lien absent some indication that the grantee has agreed to assume that obligation. See, e.g., Hood v. Young, 178 Ark. 439, 442, 11 S.W.2d 767, 768 (1928); Fretwell v. Nix, 172 Ark. 230, 233, 288 S.W. 8, 9 (1926). In the present case, the record contains no indication that Agnes Prestidge either agreed to assume--or was otherwise required by the Decree of Divorce to assume--sole liability for the debt in question.

In support of its conclusion, the District Court relied upon Crosser v. Crosser, 121 Ark. 64, 180 S.W. 337 (1915), and Hackett v. Hackett, 278 Ark. 82, 643 S.W.2d 560 (1982). We cannot agree that either of these cases supports the District Court's ruling. ³

Crosser involved a challenge to the division of property made upon the dissolution of the Crossers' marriage. As in the present case, various tracts of land to be divided between the parties were subject to outstanding mortgages which had been executed by both the husband and wife. One issue was whether the wife was entitled to receive the land allocated to her free of any encumbrance, or whether she took it subject to the mortgage. The Arkansas Supreme Court concluded that:

The mortgaged lands having been divided in kind, the husband and the wife each take their interest subject to the mortgage. If the mortgage indebtedness equals the value of the land, then neither takes anything of value by the division, but the interest of each is subject to the mortgage and the value of that interest depends on the proportion which the indebtedness secured bears to the value of the land. Of course, the mortgagee can look to the land as a whole for the satisfaction of his debt. This indebtedness has not been paid, but when it is paid, if the payment shall not be made in the proper proportion, then the right of contribution will exist in favor of the one who pays more than his or her share. No such question has yet arisen in this case, and we need not discuss it further, except to say that the rule for ascertaining the share to be paid by the wife is stated in the case of Salinger v. Black, 68 Ark. 449, where the personal property of an estate had been used to discharge an encumbrance upon the lands, out of which the widow's dower had been carved, and in which case it was held that the general creditors of the estate had a right of contribution against the interest so assigned the widow.

121 Ark. at 70-71, 180 S.W. at 339 (emphasis added).

Crosser thus does not stand for the proposition that a party taking land subject to an outstanding mortgage is necessarily liable for the entire amount of the obligation. Rather, it expressly recognizes that a right of contribution exists between a husband and wife in a divorce action when one party is required to pay more than his or her share of the indebtedness owed against land taken subject to a mortgage. Crosser is not inconsistent with the principle enunciated in Patton v. Adkins, or with Arkansas case law generally holding that when a maker of a promissory note upon which others are jointly liable pays the entire obligation, he is entitled to proportionate contribution by the other joint makers. See, e.g., Halford v. Southern Capital Corporation, 279 Ark. 261, 263, 650 S.W.2d 580, 582 (1983) (citing Hazel v. Sharum, 182 Ark. 557, 32 S.W.2d 315 (1930)); Thorsen v. Poe, 123 Ark. 77, 81, 184 S.W. 427, 428 (1916).

Hackett, the other case...