Shinn v. Kitchens

• Decision Date: 19 March 1945
• Docket Number: 4-7539
• Parties: Shinn v. Kitchens
• Court: Arkansas Supreme Court

186 S.W.2d 168

208 Ark. 321

Shinn v. Kitchens

No. 4-7539

Supreme Court of Arkansas

March 19, 1945

Appeal from Columbia Chancery Court, Second Division; W. A. Speer Chancellor.

Affirmed.

Surrey E. Gilliam and Melvin Chambers, for appellant.

W H. Kitchens, Jr., for appellee.

OPINION

McFaddin J.

Appellants seek to reverse a judgment and decree of foreclosure rendered in favor of the appellees, who were plaintiffs below. The events which culminated in the decree took place over a period of several years.

In 1929, I. B. Shinn and wife desired to build a home on their real estate near Magnolia. Shinn sought a loan from Wade Kitchens, who, for a consideration, agreed to help Shinn get the money; and these events occurred:

Shinn and wife on June 26, 1929, executed a note to Peoples' Bank for $ 1,323, and secured the same by a real estate deed of trust, which we call "Deed of Trust A."

Kitchens indorsed the note and executed to Shinn a written instrument of protection; and as payment for the indorsement and letter of protection, Kitchens received a cash fee of $ 100. The written instrument from Kitchens to Shinn was as follows:

"For a valuable consideration, I hereby bind and obligate myself to protect you against foreclosure on a deed of trust this date executed by you and your wife to the Peoples Bank of Magnolia, covering:

The NE 1/4 of the NE 1/4 and the NW 1/4 of NW 1/4, and 6 acres in the NE corner of the NE 1/4 of SW 1/4, all in section 2, township 17 south, range 21 west, Columbia county, Arkansas, and a note for the sum of $ 1,320, bearing ten per cent. per annum as interest until paid, and secured by said deed of trust, for a term of five years from this date, providing and on condition that you pay each year as much as $ 240 on the principal and the interest, and on the further condition that you keep the taxes regularly paid when due.

"If it be necessary, I shall take up said note and deed of trust and have same assigned to me and I will then be the owner of same. I also agree, for said consideration, to sign said note with you as surety, with the right to be substituted for the payee in case I have to take up said note and deed of trust.

"Witness my hand this the 25th day of June, 1929."

On September 28, 1929, the Shinns needed additional money, and executed a note to Peoples Bank for $ 663 due June 26, 1930, and secured the same by another real estate deed of trust which we call "Deed of Trust B." Kitchens likewise indorsed this note, and received as his fee the sum of $ 50. This note bore the notation "this note secured by second D/T on our home place; also secured by prior D/T."

On December 11, 1929, the Shinns needed additional money, and executed a note to Peoples Bank for $ 808 due October 11, 1930, and secured the same by a deed of trust on real and chattel property, called "Deed of Trust C." Kitchens likewise indorsed this note, and received as his fee the sum of $ 50. This note bore the notation "it is agreed that this note be and the same is also secured by two other deeds of trust held by payee on our homestead."

The total of the three notes was $ 2,794, and each note bore interest at the rate of 10 per cent. per annum from date until paid. Each of the three deeds of trust (A, B and C, as above noted) was to "Clyde Fincher as trustee, of the second part, and the Peoples Bank of Magnolia, Arkansas, of the third part." And each deed of trust was security for the particular note therein described, and also for any and all other indebtedness.

When the notes became due the Shinns were unable to pay same, and on December 30, 1930, Kitchens acquired the three notes and three deeds of trust from the bank. Kitchens did not pay the notes in cash, but gave the bank his own note for $ 4,194, which included the total of the three Shinn notes and interest, and also some other indebtedness of Kitchens to the bank; and Kitchens secured this $ 4,194 note in some way satisfactory to the bank, so that on December 30, 1930, each of the three Shinn notes was indorsed "Pay to the order of Wade Kitchens without recourse, Peoples Bank by W. A. Boyd, Cashier." Kitchens left the three Shinn notes at the bank along with other collateral as security for Kitchens' own note.

In November, 1931, the Shinns paid Kitchens $ 200 on the notes; and on November 30, 1932, the Shinns delivered cotton to Kitchens at an agreed price of $ 174.22; and this was offered by the Shinns, and taken by Kitchens, as a credit on the Shinn notes. In 1933, the bank was restricted by orders of the Federal Government; and Kitchens still owed the bank $ 4,194, and the bank still held the Shinn notes as part of the collateral. In an endeavor to get fresh bankable paper the bank proposed that it would take a new note from the Shinns for $ 2,794 if secured by a first mortgage on the homestead. The deeds of trust, A, B and C, already covered the homestead of the Shinns.

There is a sharp dispute in the testimony about the intent, purpose and effect of this transaction; and the contentions of the various parties will be discussed in section II of this opinion. At any rate the Shinns executed a new note to the Columbia-Peoples Bank for $ 2,794, and executed a mortgage on the homestead to secure the note. The three old notes of Shinn, as previously identified, were left at the bank, and shortly thereafter were delivered to Kitchens; and he agreed to subrogate the liens of the deeds of trust A, B and C to the lien of the new mortgage to the Columbia-Peoples Bank. There is testimony in the record that Kitchens later paid the bank the full balance of his $ 4,194 note.

On April 11, 1935, this suit was filed by Kitchens and Clyde Fincher, as trustee, against the Shinns for judgment for the balance due on the three Shinn notes and accumulated interest, less the three credits of $ 200, $ 174.22 and $ 2,794, as aforesaid. This balance at the time of filing the suit was $ 909.02 with interest calculated to April 11, 1935. Plaintiffs asked for a foreclosure of the deeds of trust A, B and C. The defendants by answer admitted the execution of the three notes and the three deeds of trust sued on, but pleaded various defenses which we will enumerate and discuss in this opinion. The case suffered various continuances; but on March 13, 1944, the chancery court rendered a judgment for Kitchens for the balance claimed and accrued interest, and decreed a foreclosure of the deeds of trust A, B and C. To reverse that decree, the Shinns prosecute this appeal, presenting the issues herein discussed.

I. Defect of Parties. The foreclosure suit was originally filed in the name of Clyde Fincher, the trustee named in the three deeds of trust, and Wade Kitchens, as the assignee of the notes, secured by the three deeds of trust. The trustee named in the deeds of trust was a necessary party at the institution of the foreclosure suit, as also, of course, was Kitchens, the holder of the indebtedness. Howell v. Walker, 111 Ark. 362, 164 S.W. 746; Snider v. Dennis, 159 Ark. 231, 251 S.W. 682; Beloate v. New England Securities Co., 165 Ark. 571, 265 S.W. 83. After the filing of the suit and before the decree, Clyde Fincher died; and Wade Kitchens indorsed on the margin of the record where each of the deeds of trust A, B and C was recorded, this notation, which was duly attested by the clerk as an ex-officio recorder: "Clyde Fincher having died, I hereby appoint G. T. Kitchens as trustee this August 26, 1943, Wade Kitchens, assignee and owner." The fact of this indorsement was shown in the evidence. No formal order of the court was made showing the substitution of G. T. Kitchens as trustee in the place of Clyde Fincher; but on February 4, 1944, an amendment was filed by Kitchens (involving some detail of pleading), and in that amendment the plaintiffs were listed as "G. T. Kitchens as trustee and Wade Kitchens." In the decree, from which there is this appeal, the plaintiffs were listed as "G. T. Kitchens as substituted trustee, and Wade Kitchens."

While it would have shown greater nicety if a formal order had been entered substituting G. T. Kitchens as trustee for Clyde Fincher, nevertheless, we hold that the substitution was in fact recognized by the court; and such recognition satisfies any possible legal requirement. Each of the three deeds of trust (A, B and C) contained this language: "provided further, that in case of the death of the said Clyde Fincher, or his removal, refusal or inability to act as trustee herein, then the said Peoples Bank of Magnolia, its agent, assignee or representatives are hereby authorized to appoint some other person to act as trustee herein . . ." Wade Kitchens as the assignee of the notes had the right to make the appointment of G. T. Kitchens; and this was accomplished. G. T. Kitchens was thus a party before the decree was rendered, even if a substitute trustee be a necessary party. See Less v. English, 75 Ark. 288, 87 S.W. 447; Snider v. Dennis, supra; and Annotation in 98 A. L. R. 1171.

II. Accord and Satisfaction. The Shinns admitted the execution of the three notes, and the three deeds of trust sued on, but claimed that when they executed the note for $ 2,794 to Columbia-Peoples Bank, that note was in full for all they owed on the three original notes, and that Kitchens so agreed. Thus, they pleaded accord and satisfaction (1 Am. Juris. 125); and of course the burden was on them to sustain the plea. Western Union Telegraph Co. v. Arkadelphia Milling Co., 156 Ark. 370, 246 S.W. 482. It was incumbent upon them to prove that Kitchens agreed that the execution of the new note was in full settlement of the three old notes, because at all times after December 30, 1930 (when the three old notes were indorsed to him without recourse)...