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February 9, 1954


The opinion of the court was delivered by: John E. Miller, District Judge.

This case was tried to the court on ore tenus testimony February 3, 1954. Prior to that date, the able attorneys for the respective parties had filed exhaustive briefs in support of the contentions of the parties. At the conclusion of the testimony, the case was submitted and taken under consideration and now, having considered the pleadings, the ore tenus testimony and exhibits thereto, the stipulations of the parties and the briefs heretofore filed herein, the court makes and files herein its Findings of Fact and Conclusions of Law, separately stated.

Findings of Fact


The plaintiff is the United States of America. The defendants, Robert G. Forrester and Cora L. Forrester, his wife, are citizens of Arkansas and reside on their 77-acre farm near Fayetteville in Washington County in the Western District of Arkansas.

The defendant, Farm Bureau Cooperative Mill & Supply, Inc., commonly known as Farm Bureau Cooperative, is a cooperative association organized under the laws of the State of Arkansas, with its principal place of business in the City of Fayetteville in Washington County, Arkansas. The defendant, Swift & Company, is a corporation organized and existing under the laws of the State of Illinois and authorized to do business in the State of Arkansas.

In view of the issues that were tried, no further reference will be made to the corporate defendants.


On April 15, 1948, the defendants executed their promissory note in the principal sum of $6,050 payable to plaintiff acting by and through the Administrator of the Farmers Home Administration, with interest on the note at the rate of 3 1/2 per cent per annum. The note provides for the payment of principal and interest in installments of $283.32, beginning on March 31, 1949, and on the same date for the next succeeding thirty-nine years.

The note further provides:

    "Upon default in the payment of any installment
  when due, or upon breach by the maker of any of the
  covenants and agreements on his part to be performed
  under the mortgage or deed of trust which secures
  this note, or under his loan agreement with the
  government or of any of the terms or conditions
  thereof, the holder, at its option may declare the
  entire indebtedness to be due and payable.
    "This note is given as evidence of a loan to the
  maker hereof by the government pursuant to the
  provisions of the Bankhead-Jones Farm Tenant Act, as
  amended, and is subject to the provisions of that Act
  and to all of the provisions of the maker's loan
  agreement with the government, and of the mortgage or
  deed of trust, which secures such indebtedness."
  (Plaintiff's Exhibit No. 1.)

At the trial the plaintiff offered in evidence the loan agreement and, upon objection thereto by defendants, the court suggested that, since the mortgage sued upon was executed subsequent to the loan agreement, the mortgage superseded the provisions of the loan agreement, and the plaintiff thereupon withdrew his offer of the loan agreement in evidence.

To secure the payment of the note, the defendants on April 23, 1948, executed, acknowledged and delivered to plaintiff a real estate mortgage upon a 77-acre tract of land therein specifically described. The land had previously been acquired by the defendants by warranty deed from the former owners, which deed was recorded simultaneously with the mortgage.

The mortgage was recorded in the Office of the Circuit Clerk and Ex-Officio Recorder of Washington County, Arkansas, on the same date of its execution and now appears of record in said office in Record Book 399 at page 337. (Plaintiff's Exhibit No. 2.)

On January 22, 1952, the plaintiff, acting through J.V. Highfill, State Director for Arkansas of Farmers Home Administration, mailed to defendants "Notice of Acceleration of Indebtedness and Demand for Payment." This notice was received by defendants on the next day, January 23, 1952. The notice stated:

Demand was made for the payment of the alleged balance due on the note. (Plaintiff's Exhibit No. 5.)

At the time the notice of acceleration and demand for payment was made by plaintiff, the defendants had made all payments under the terms of the promissory note and had paid all taxes and insurance premiums. However, the statement introduced by the plaintiff as Exhibit No. 4 disclosed, according to the testimony of Howard Martin, Chief Accountant for Farmers Home Administration, that defendants owed plaintiff $1.60 for which no bill or statement had been rendered. An examination of the exhibit discloses that this charge was evidently made to cover the cost of a certified copy of the judgment against defendants as mentioned by Mr. Highfill in the notice of acceleration and demand for payment.

The instant suit was filed by plaintiff on May 29, 1952. In the meantime, following the receipt of notice of acceleration, the defendants had paid on March 24, 1952, the installment of $283.32 that was due, according to the terms of the note, on March 31, 1952.

The plaintiff in its complaint alleged the execution and delivery of the note and mortgage by defendants and the provision of the note giving the holder its option to accelerate the payment of any balance due on the note, and that the defendants had defaulted, breached and violated certain covenants and conditions of the mortgage.

The covenants and conditions alleged by plaintiff and upon which plaintiff based its notice of acceleration are set forth in the complaint as follows:

    "Clause 1 — To pay, before the same shall
  become delinquent, all taxes * * * and encumbrances
  of every nature whatsoever which affect said property
  or Mortgagee's rights and interests therein under
  this mortgage or the indebtedness hereby secured, and
  promptly to deliver to Mortgagee, without demand,
  receipts evidencing such payments.
    "Clause 2 — Immediately upon the execution of
  this mortgage, to provide, and thereafter
  continuously to maintain, fire insurance policies and
  such other insurance policies as Mortgagee may then
  or from time to time require upon the buildings and
  improvements now situate or hereafter constructed in
  or upon said property * * *.
    "Clause 3 — Personally and continuously to
  use said property as a farm, and for no other
  purpose; at all times to maintain said property in
  proper repair and good condition; * * * promptly to
  effect such repairs to said property as Mortgagee may
  require; to institute and carry out such farming
  conservation practices and farm and home management
  plans as Mortgagee shall, from time to time,
  prescribe; * * *.
    "Clause 6 — That the indebtedness hereby
  secured was expressly loaned by the Mortgagee to the
  Mortgagor to enable the Mortgagor to purchase * * *
  said property * * * and that Mortgagor did or will
  use said monies for the foregoing purposes.
    "Clause 7 — That Mortgagee, its agents and
  attorneys, shall have the right at all times to
  inspect and examine said property for the purpose of
  ascertaining whether the security given is being
  lessened, diminished, depleted, or impaired, and if
  such inspection or examination shall disclose, in the
  judgment of Mortgagee, that the security given or
  property mortgaged is being lessened or impaired,
  such condition

  shall be deemed a breach of the covenants of the
    "Clause 13 — That should Mortgagor * * *
  lease * * * or encumber said property or any interest
  therein, voluntarily, involuntarily, or
  otherwise * * * or fail to keep, perform, and comply
  with any covenant, warranty, or condition in this
  instrument without the consent of Mortgagee * * *
  Mortgagee may declare the amount unpaid immediately
  due and payable and thereupon exercise any remedy
  provided herein or by law.
    "Clause 20 — That time is of the essence of
  this mortgage and of the note and other instruments
  herein referred to and * * * (or) should Mortgagor
  fail to keep or perform any covenant, condition or
  agreement herein contained or referred to, then in
  any of said events Mortgagee is hereby irrevocably
  authorized and empowered, at its option and without
  notice and without affecting the lien hereby created
  or its priority or any right of Mortgagee hereunder,
  (1) to declare the entire indebtedness herein secured
  immediately due and payable and to foreclose this
  mortgage in the manner hereinafter set out * * *. All
  monies advanced or expended by Mortgagee as herein
  provided, including the costs of evidence of title to
  and survey of said property, reasonable attorney's
  fees, court costs, and other expenses incurred in
  enforcing the provisions hereof, with interest at
  three and one-half percent (3 1/2%) per annum until
  paid, shall become a part of the indebtedness herein
  secured and shall be payable by Mortgagor to
  Mortgagee immediately after such expenditure and
  without demand, in lawful money of the United States,
  at Fayetteville, Arkansas, or at such other place as
  Mortgagee may designate.
    "Clause 21 — That Mortgagee may foreclose
  this mortgage in a court of competent jurisdiction in
  accordance with the laws made and provided therefor
  and existing at the time of said foreclosure."


The answer of the defendants was filed on April 12, 1952, in which they admitted all allegations of the complaint except that they denied that they had failed and refused to pay the taxes as alleged by plaintiff and denied that they had failed to pay all insurance premiums as required by the terms of the mortgage.

They further alleged that they had in good faith expended from their own funds more than $2,000 in repairs and improvements of the property and had improved the pastures and other parts of the farm not included in the pastures. They also denied that they had failed to maintain the property in good repair and condition and that the security of the plaintiff had been lessened, diminished, depleted and impaired and that the plaintiff was entitled to accelerate the payment of the note or to foreclose the mortgage.

The defendant, Robert G. Forrester, further alleged that the loan was obtained as a disabled veteran's loan; that at the time the loan was granted the defendant was not physically able to operate the farm as a row crop farm and that such disability still exists; that the farm was purchased primarily as a permanent home and for stock grazing purposes to which it is best adapted and that all of the facts were thoroughly understood and agreed to by plaintiff at the time the loan was granted; that the plaintiff has accepted all payments due under the terms of the mortgage including taxes and insurance premiums and that they were not ...

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