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ARCHER-DANIELS-MIDLAND v. NORTH ARKANSAS MILLING

December 2, 1961

ARCHER-DANIELS-MIDLAND COMPANY, PLAINTIFF,
v.
NORTH ARKANSAS MILLING COMPANY, INC., ET AL., DEFENDANTS.



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

This case is a foreclosure suit by the plaintiff, Archer-Daniels-Midland Company, hereinafter referred to as ADM, against North Arkansas Milling Company, Inc., Jack Stewart, Dorothy L. Stewart, The Peoples Bank of Mountain Home, Ark., and others.

ADM obtained a judgment against North Arkansas and the Stewarts, jointly and severally, in the sum of $82,058.49. A lien was declared on North Arkansas' property, as set forth and described in the plaintiff's mortgage. The defendant bank also obtained a judgment against North Arkansas in the sum of $15,198.71, plus $825.00 attorneys' fees. A lien was declared on the property of the mortgagee, North Arkansas, as set forth and described in the bank's mortgage.

The mortgages were foreclosed and a sale of the property ordered. The property sold for the sum of $16,675.00.

Out of this sum the costs of the sale amounting to $683.00 have been paid, and also the attorneys' fees for the defendant bank in the sum of $825.00 have been paid, leaving in the registry of the court the sum of $15,167.00.

The mortgage held by the defendant bank was executed, acknowledged and delivered on November 16, 1957, and by its terms secures the payment of indebtedness, described as follows:

    "$17,500.00 due and payable $500.00 December
  16, 1957, and $500.00 on or before the 16th of
  each month thereafter until paid in full,
  together with interest at the rate of 6% per
  annum. Interest payable monthly in addition to
  principal. And this mortgage is intended to
  secure to mortgagee, its successors and assigns,
  the due payment of said indebtedness, and the due
  payment of all other indebtedness now owed, or
  which mortgagor may hereafter owe to mortgagee,
  and any renewal and/or extension thereof, with
  interest thereon at the rate of 6 per centum per
  annum, and to the time of payment thereof."

On May 29, 1959, North Arkansas and Jack Stewart executed, acknowledged and delivered a chattel mortgage to ADM to secure certain indebtedness described in the mortgage. The mortgage provides that it "is intended to secure to the mortgagee, its successors and assigns, the due payment of said indebtedness and any renewal and/or extension thereof, with interest as provided in said notes and contract to the time of payment thereof."

Thus, it will be observed that the mortgage held by the defendant bank contains what has sometimes been referred to as the "dragnet clause," while the mortgage held by ADM does not purport to secure the payment of any indebtedness except that specifically mentioned in the mortgage together with any renewals of the specifically described indebtedness.

Thus, the primary question is whether the payment of the notes executed by North Arkansas and the Stewarts to the defendant bank, contemporaneously with or subsequent to the execution of the chattel mortgage on November 16, 1957, is secured by the mortgage held by the bank.

Most of the relevant facts were stipulated as follows:

"8.

    "The Peoples Bank of Mountain Home, Arkansas,
  had participated, aided and assisted in the
  financing of North Arkansas Milling Company,
  Inc.'s operation and business from its inception
  even back as far as the formation of the original
  partnership, out of which the North Arkansas
  Milling Company, Inc. evolved. Of this,
  Archer-Daniels-Midland Company had knowledge.

"11.

    "On September 24, 1957, North Arkansas Milling
  Company, Inc. executed and delivered to the
  Peoples Bank of Mountain Home, Arkansas, a
  promissory note in the sum of $1,200.00 bearing
  interest at the rate of 6 percent per annum,
  payable upon demand. This $1,200.00 was loaned by
  the Peoples Bank to North Arkansas Milling
  Company, Inc. as current operating capital. This
  promissory note was identified as Exhibit `C' to
  the defendant's, Peoples Bank, separate answer
  filed herein. On foreclosure date there was due
  thereon $1,200.00 principal and $153.63 interest.

"12.

    "On November 16, 1957, North Arkansas Milling
  Company, Inc. executed a promissory note payable
  to the Peoples Bank of Mountain Home, Arkansas,
  in the sum of $17,500.00 bearing interest at the
  rate of 6 percent per annum, payable $500.00 on
  or before the 16th day of each month thereafter
  until paid in full, principal and interest. The
  $17,500.00 was loaned to North Arkansas Milling
  Company, Inc. to retire debts and obligations of
  the borrower in connection with its mill
  equipment and to provide additional working
  capital for its operation, including the
  procurement of grain and other ingredients
  necessary ...

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