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 &
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
"Defendant, The Baptist Golden Age Home, is now
indebted to the Plaintiff in the following
"(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.
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
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, ...