White River Production Credit Association v. Fears

• Decision Date: 15 March 1948
• Docket Number: 4-8421,4-8427
• Parties: White River Production Credit Association v. Fears. Fears v. Volentine
• Court: Arkansas Supreme Court

209 S.W.2d 294

213 Ark. 75

White River Production Credit Association v. Fears.

Fears v. Volentine

Nos. 4-8421, 4-8427

Supreme Court of Arkansas

March 15, 1948

Appeal from Greene Chancery Court; Francis Cherry, Chancellor.

Reversed. Affirmed.

No 4-8421 Pickens & Pickens, for appellant.

L A. McLin, J. Brinkerhoff and Adrian Coleman, for appellee.

No 4-8427 L. A. McLin, J. Brinkerhoff and Adrian Coleman, for appellant.

Ras Priest, for appellee.

OPINION

Ed. F. McFaddin, Justice.

The most important issue on these appeals is the extent and effect of lien waivers, signed by the landlords. Other questions are incidental to this one. In case No. 8421, appellees Fears, Bone and Carter are the landlords, and will be so designated. R. E. Coleman is the tenant. The appellant White River Production Credit Association (hereinafter referred to as "Association") made advances to Coleman on the strength of the waivers signed by the landlords. In case No. 8427, the said landlords are the appellants, and Volentine -- a pendente lite purchaser from the Association -- is the appellee.

In October, 1943, Coleman, as tenant, leased 240 acres from Fears, 120 acres from Bone, and 120 acres from Carter. All of these lands were in Greene county, and were leased by Coleman for rice farming for the 1944 Calendar year. A written rent contract was executed between Coleman and each landlord, and all contracts were identical except as to land descriptions, parties and dates. Coleman agreed to pay as rent "one-fourth of all monies derived from the sale of rice grown and marketed from said lands." He represented to each of the three landlords that he would need cash advances to plant, cultivate, harvest and market the rice crop, so in each contract there was this language:

"Lessor by these presents agrees to sign and execute a waiver of his landlord's lien on said crops for the purpose of assisting lessee in procuring a loan thereon."

On November 8, 1943, each of the three landlords executed a written waiver reading as follows:

"LANDLORD'S WAIVER OF LIEN

"In consideration of the sum of $ 1.00, the receipt of which is hereby acknowledged, and other valuable considerations, I/we hereby, and by these presents relinquish and waive unto White River Production Credit Ass'n., its transferees and assignees, all and singular, the priority of any right, claim, interest, equity or lien I/we may have for rent, advances or other indebtedness on, in and to the crops now growing on or to be grown during the year 1944 on lands described in the mortgage executed by R. E. Coleman to White River Production Credit Ass'n. dated the 8th day of November, 1943, to which mortgage this waiver is attached; such waiver to extend to and cover the amount now due under and secured by said mortgage or which may be hereafter secured thereby under the terms thereof, and I/we hereby waive the right to a marshalling, ^[1] and consent to the collection of said mortgage out of any and all said crops.

"I hereby certify to the said association, its successors or assigns, as an inducement to make the loan, that I have not heretofore executed any assignment or waiver of my said lien in favor of any other person, partnership or corporation.

"Witness my/our hand and seal on this 8th day of November, 1943."

These three waivers were attached to, and became a part of, the mortgage from Coleman to the Association, which mortgage (dated November 8, 1943) recited in part as follows:

"The undersigned R. E. Coleman of the County of Clay, State of Arkansas, (hereinafter referred to as the mortgagor), in consideration of the sum of $ 21,000 loaned to said mortgagor by White River Production Credit Association (hereinafter referred to as the mortgagee), the receipt of which is hereby acknowledged, and evidenced by note(s) of the undersigned in said amount described as follows:

Date

Principal Amount

Date of Maturity

November 8, 1943

$ 21,000.00

December 5, 1944

payable to the order of the mortgagee at its office in Newport Arkansas, with interest from date until paid at the rate of 4 1/2 percentum per annum, for the purpose of securing the payment of said debt and the note(s) evidencing the same, and all renewals and extensions thereof, and all additional loans and advances which may hereafter be made by the mortgagee, its successors or assigns, to the mortgagor, whether made before or after the maturity of the note(s) described herein and during the life of this mortgage, whether or not evidenced by note or notes, and any and all other present or future liabilities of the mortgagor to the mortgagee, its successors and assigns, does hereby sell, assign, transfer, set over and mortgage unto said mortgagee, its successors or assigns, the following decribed personal property: . . ." (there follows description of the rice crop to be grown on the farms of the three landlords and also a description of the chattels belonging to Coleman.)

Coleman personally owned approximately 800 acres in Clay county, and had borrowed money from the Association on his 1943 crop. He still owed the Association a balance in excess of $ 1,000, which was secured by a mortgage on his chattel property. In February, 1944, he applied to the Association for a loan to enable him to make a rice crop on the said Clay county lands. This loan was approved in the sum of $ 15,000, and a mortgage on the Clay county crop was executed by Coleman to secure not only the said $ 15,000 loan, but the $ 21,000 loan previously referred to. The language in the February, 1944, mortgage as to "all additional loans and advances" was the same as in the November, 1943, mortgage, as previously copied.

In 1944, Coleman made a crop on his own lands, as well as on the lands of the landlords; and on the security of the two mortgages previously mentioned, the Association made loans and advances to Coleman in excess of $ 56,000. These facts appear to be conceded as true:

1. Some of the said money was used by Coleman to pay old debts and personal expenses, and items not connected with the rice crops. One such "old debt" was the said balance due by Coleman to the Association on the 1943 mortgage previously mentioned.

2. The weather in the fall of 1944 was so unfavorable to the harvesting of rice that the major portion of the crop on Coleman's Clay county land was never harvested or marketed.

3. All of the proceeds of the crops gathered from the landlords' lands were not delivered by Coleman to the Association pursuant to the terms of the mortgages: Coleman allowed others to have some of the proceeds.

4. The Association received about $ 40,000 from the 1944 rice crop of all of the lands, and still had a claim against Coleman for about $ 16,000 secured by the mortgage of November 8, 1943, on the chattels.

5. The landlords received nothing.

Thereupon, on March 10, 1945, the landlords brought suit in the Greene Chancery Court, naming as defendants the Association, Coleman, Volentine, and others. The complaint alleged, inter alia, that the lien waivers were signed by the landlords for the sole purpose of enabling Coleman to obtain money with which to make a crop on the lands of the three landlords; that the Association had no right to charge against the crops grown on the lands of the landlords the total indebtedness of Coleman to the Association, including the old debts and the other advances; that Coleman and the Association had fraudulently induced the landlords to execute the said lien waivers as a part of a scheme to defraud the landlords out of their rents; that the Association had collaborated with Coleman in secreting a part of the crops, and had allowed Coleman to take a portion of the crops away from the payment on the mortgage. The prayer of the complaint was for (1) a judgment against Coleman for the rents of each landlord; (2) an accounting against Coleman and the Association for the crops grown; (3) a fair determination of the advances made for the planting, cultivating, harvesting and marketing of the crops on the lands of the three landlords, including the segregation of their crops from the entire Coleman crops; and (4) a judgment against the Association for the amounts of the plaintiffs' crops received by the Association over and above the amount required for the repayment to the Association of the money advances by the Association to the planting, cultivating, harvesting and marketing of the crops on the lands of the three landlords. Also, the landlords prayed that they be subrogated to the lien of the Association in its mortgage on the chattels of Coleman, in order to enable the landlords to collect their rents against Coleman.

Contemporaneously with the filing of the complaint, the landlords filed notice of lis pendens in both Greene and Clay counties, and described all the chattel property as contained in the Association's mortgage. Thereafter Volentine paid the Association its balance of $ 16,000 on the Coleman indebtedness, and took an assignment of the indebtedness and the mortgage held by the Association on the Coleman chattels. Then Coleman surrendered the chattels to Volentine, and he disposed of them. ^[2] By reason of the transactions pendente lite, the landlords claimed that Volentine had rendered himself personally liable for their judgments, and they therefore prayed judgment against Volentine. This claim against Volentine is the issue in Case No. 8427 in this court.

All phases of the causes proceeded to trial in the chancery court, being heard entirely on depositions and stipulations. The record is voluminous. The decree of the chancery court found and held:

1. That the landlords were entitled to judgment against Coleman for $ 9,306.02 as the amount of their rentals, together with...