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UNITED STATES v. BAPTIST GOLDEN AGE HOME

March 2, 1964

UNITED STATES OF AMERICA, PLAINTIFF,
v.
THE BAPTIST GOLDEN AGE HOME AND VALLEY PLUMBING & SUPPLY CO., DEFENDANTS, MARVIN HILTON, D/B/A HILTON FURNITURE COMPANY, INTERVENOR.



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

This is a foreclosure action by the plaintiff, United States, brought for the use and benefit of the Federal Housing Commissioner under 28 U.S.C.A. § 1345. Plaintiff commenced this action April 11, 1963, and the defendant, Baptist Golden Age Home, filed its answer April 26, 1963, together with an offer of compromise which was not accepted by plaintiff. On May 8, 1963, the court entered an order allowing the defendant Baptist 60 days additional time in which to otherwise plead.

On April 11, 1963, the court appointed Frank B. Harper of Hot Springs, Arkansas, receiver of the defendant Baptist. The bond of the receiver, Harper, was filed and the oath administered April 15, 1963.

Plaintiff filed an amendment to its complaint June 19, 1963, adding Valley Plumbing & Supply Company as a defendant.

On July 10, 1963, Marvin Hilton, d/b/a Hilton Furniture Company, filed a motion to intervene as plaintiff, which was granted the same day. The United States Attorney on September 9, 1963, moved the court for an extension of time to file an additional answer or otherwise plead. On September 17, 1963, the plaintiff's answer to the intervention of Marvin Hilton was filed, and on September 25, 1963, the reply by Hilton to the plaintiff's answer to the intervention was filed.

On October 2, 1963, a pretrial conference was held, at which all answering parties were represented by their respective attorneys. An additional pretrial conference was held December 17, 1963, at which the attorneys for the respective parties were present. No formal pre-trial orders were entered, but the plaintiff advised all parties that it desired to file a motion for summary judgment.

Mr. Roy Mitchell, attorney for the defendant Baptist, on January 22, 1964, filed a motion for allowance of attorney's fee. Mr. John M. Lofton, on January 31, 1964, filed a motion for allowance of attorney's fee.

On January 24, 1964, the plaintiff filed its motion for summary judgment accompanied by affidavit. On January 30, 1964, defendant Baptist filed its reply to the plaintiff's motion for summary judgment. On February 3, 1964, response to motion of plaintiff for summary judgment was filed by Marvin Hilton in opposition to the plaintiff's motion for summary judgment, and on February 10, 1964, the intervenor, Hilton, filed his motion for summary judgment, together with affidavits in support thereof.

On February 14, 1964, plaintiff filed its response to the motion of Roy Mitchell for allowance of attorney's fee, together with its response to the motion of John M. Lofton for allowance of attorney's fee. The court will defer action on the motions for attorneys' fees until after the entry of the decree in the instant foreclosure suit.

The case is now before the court on the cross motions for summary judgment. Briefs have been submitted by the parties in support of their respective contentions and have been considered by the court.

The pertinent facts as disclosed by the pleadings, motions and affidavits are not in dispute. The defendant Baptist Golden Age Home is a nonprofit corporation organized and existing under the laws of the State of Arkansas, with its principal place of business at 213 Fountain Street, Hot Springs, Arkansas. On August 18, 1960, the defendant Baptist executed and delivered its deed of trust note in favor of T. J. Bettes Company of Houston, Texas, in the sum of $666,000. The note provided for payment in monthly installments of principal and interest at the rate of 5.25 percent per annum. Defendant executed its deed of trust on the same date in favor of the T. J. Bettes Company, which was recorded August 19, 1960, in Record Book 486, page 467, in the office of the Recorder of Garland County, Arkansas, and provided that in the event any installments be unpaid on the due date of the next maturing installment, the entire indebtedness would become at once due and payable without notice.

On August 24, 1960, T. J. Bettes Company by "assignment of mortgage" assigned all of its interest in the deed of trust and accompanying note to the Worthen Bank and Trust Company of Little Rock, Arkansas. The "assignment of mortgage" was recorded April 24, 1961, in Record Book 496, page 443, in the office of the Recorder of Garland County, Arkansas. On October 1, 1961, at the request of the mortgagor, Worthen Bank & Trust Company executed a modification agreement extending a deferment of principal payments.

The "modification agreement" was recorded July 26, 1962, in Record Book 521, at page 167, in the office of the Recorder of Garland County, Arkansas. On July 25, 1962, Worthen Bank & Trust Company reassigned its interest in the deed of trust and note to T. J. Bettes Company. This "assignment" was recorded July 26, 1962, in Record Book 521, page 331, in the office of the Recorder of Garland County, Arkansas.

On August 2, 1962, T. J. Bettes Company "assigned" its interest in the deed of trust and note to the Arkansas Teachers Retirement System. This assignment was recorded August 3, 1962, in Record Book 521, at page 641, in the office of the Recorder of Garland County, Arkansas.

The defendant failed to make the installment payment due September 1, 1962, and by reason of such failure defaulted under the terms of the deed of trust prior to the due date of the next installment and continues in default since that date. On February 12, 1963, the Arkansas Teachers Retirement System exercised its option under the provisions of the National Housing Act, and assigned all its interest in the deed of trust and note to the Federal Housing Commissioner and his successor and assigns. This assignment is recorded in Record Book 541, page 22, in the Records of Garland County, Arkansas. In accordance with the provisions of the deed of trust and note, the Federal Housing Commissioner seeks a judgment against the defendant Baptist for the entire outstanding balance of principal and interest due and payable.

In paragraph numbered 12 of the complaint, the plaintiff stated:

    "Defendant, The Baptist Golden Age Home, is now
  indebted to the Plaintiff in the following
  amounts:
    "(a) $660,460.71 of unpaid principal balance as
  of the date of default;
    "(b) $20,226.64 of interest on said principal
  balance accrued at 5.25% per annum from September
  1, 1962; the due date of the last payment made on
  the Deed of Trust Note and after which no
  interest has been paid through March 1, 1963."

In its complaint the plaintiff, United States, asserts that it has a lien prior and superior to any other lien or claim against the property described in the deed of trust, and that the encumbered property has a fair market value less than the outstanding indebtedness. Plaintiff prays for the appointment of a receiver, for judgment against the defendant for the sums recited in paragraph 12 quoted above, costs of this action, for an order and decree foreclosing the security instruments and subjecting the property to sale, and for a deficiency judgment in such an amount as the court may find proper in the event the sale price of the property is not sufficient to satisfy plaintiff's judgment.

The defendant, Baptist Golden Age Home, in its answer denied the allegations and amounts set out in paragraph 12 of the complaint, and alleged:

    "That the defendant paid the sum of $4,226.00
  to the T. J. Bettes Company by check No. 958,
  dated January 11, 1963, to apply on defendant's
  note and that the defendant has not received
  credit for the payment.
  "That the defendant, The Baptist Golden Age Home,
  paid the Federal Housing Administration,
  Washington, D.C. the sum of $4,426.00 by check
  No. 982, dated February 20, 1963, to apply on
  said note; that the defendant has not received
  credit for this payment.
    "That the defendant, The Baptist Golden Age
  Home, paid the Federal Housing Administration,
  Washington, D.C. the sum of $5,226.00 by check
  No. 1019 dated March 18, 1963, to apply on said
  note and that the defendant has not received
  credit for said payment."

Attached to the defendant's answer are photostatic copies of checks Nos. 958, 982 and 1019.

The defendant in paragraph 6 of its answer admitted that the plaintiff has a lien prior and superior to any other lien and claim against the real property described in the deed of trust, and a lien prior and superior to any other lien or claim of the interest or equity in any and all personal property owned by the defendant and used in the operation of the Baptist Golden Age Home, but defendant denied plaintiff has any claim to the furniture, furnishings and carpet supplied by the intervenor Hilton.

In paragraph 7 of defendant's answer, it admitted that the deed of trust and note provided that in an action to foreclose, the parties shall be entitled to the appointment of a receiver, but it emphatically denied that the encumbered property has a fair market value less than the outstanding indebtedness.

In the plaintiff's amendment to its complaint, it stated that the lien of Valley Plumbing & Supply Company in the sum of $153.60, recorded February 19, 1962, is inferior to that of the United States, and prayed that any interest of Valley Plumbing & Supply Company be declared inferior to that of the plaintiff. Valley Plumbing & Supply Company, although duly served, has not answered and is in default.

The intervenor, Marvin Hilton, d/b/a Hilton Furniture Company, stated in his motion to intervene and complaint that he is in the furniture business in Hot Springs, Arkansas; that he is the owner of certain personal property now held subject to the control of this court in the foreclosure action filed by the plaintiff, United States. The intervenor, sometime during the first six months of 1962, sold and delivered under what the intervenor described as a "conditional sales contract note" 821 yards of nylon carpet and padding, furniture for the manager's apartment, and other items of furniture at a purchase price of $9,400.75 to the defendant Baptist. On June 18, 1962, the defendant, by and through its President, John B. Lowrey, and the then manager, Delmer Cook, executed and delivered to the intervenor, Marvin Hilton, a conditional sales contract in the sum of $9,400.75, due and payable six months after that date bearing interest at the rate of 10 percent per annum. Intervenor, Hilton, asserted in his answer that the conditional sales contract granted him a lien on all other furniture in the Baptist Golden Age Home as additional security for the payment of the conditional sales contract note with the understanding and agreement that the title to the property sold by him was to remain in the intervenor until the note was fully paid with interest. The intervenor in his complaint stated that he had made numerous demands upon the defendant for payment of said note, but no part has been paid and the entire amount is due and remains unpaid.

Intervenor asserted in his complaint that his claim under the "conditional sales note" is a prior lien on the carpet, pad and furniture supplied by him, and therefore he is entitled to recover said property for the purpose of resale to apply on the note. Intervenor prayed for a judgment against the defendant for any deficiency arising after said sale, or, in the alternative, that he be granted a judgment for $9,400.75, plus 10 percent attorney's fee, ...


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