Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

PACIFIC INDUSTRIES, INC. v. MOUNTAIN INN

August 26, 1964

PACIFIC INDUSTRIES, INC., PLAINTIFF,
v.
MOUNTAIN INN, INC., ROY BRUMFIELD AND KATHARINE P. BRUMFIELD, DEFENDANTS, J. ORVILLE CHENEY, COMMISSIONER OF REVENUES, STATE OF ARKANSAS, INTERVENOR.



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

This is a diversity action commenced by the plaintiff March 3, 1964, seeking judgment against the defendants in the sum of $130,236.12 and foreclosure of a second mortgage. Plaintiff, Pacific Industries, Inc., (Pacific), is a Texas corporation with its principal place of business in that State and is the corporate successor of Itasca Draperies, Inc., (Itasca), also a Texas corporation with its principal place of business in that State. The defendant, Mountain Inn, Inc., (Inn) is an Arkansas corporation with its principal place of business in Fayetteville, Washington County. The individual defendants, Roy Brumfield and Katharine P. Brumfield, (Brumfield), are citizens of the State of Arkansas and residents of Fayetteville, Washington County.

Plaintiff, Pacific, in its complaint alleged: On or about April 25, 1962, defendant Inn and Itasca entered into a purchase and sale agreement for the sale of certain furniture, fixtures and equipment to be delivered by the plaintiff's predecessor, Itasca, and installed in the hotel and motel operated by the defendant Inn at Fayetteville, Arkansas. The complaint contains a specific description of the furniture, fixtures and equipment shipped to and installed in the Inn under the purchase agreement at a total sales price of $147,188.98. To the purchase price there was added what is described in the complaint as "tax 3%" in the amount of $4,415.67 for a total obligation of $151,604.65.

It was further alleged that the Inn agreed to pay a "Time Price Balance" of $169,873.20 for the property described in the agreement payable in 60 consecutive monthly installments*fn1 beginning May 28, 1962, in the amount of $2,831.22 and bearing interest after maturity at the highest legal contract rate; that the purchase agreement instrument reserved title in the seller until payment was made in full of the entire debt. That this instrument was sufficient in form as a financing statement, was signed by the seller and purchaser, and was properly filed in the office of the Secretary of the State of Arkansas. That the plaintiff, Pacific assigned and delivered all its interest in the purchase contract instrument to Westinghouse Credit Corporation (WCC). That the individual defendants Brumfield executed an agreement with WCC under the terms of which they personally guaranteed the debt due WCC under the assigned purchase contract; that the individual defendants executed an escrow agreement with WCC under the terms of which they placed with the First National Bank of Fayetteville, Arkansas, the following described corporate stock:

20 shares of Union Carbide
45 shares of Standard Oil of New Jersey
30 shares of Westinghouse
10 shares of Kennecott Copper
30 shares of Atchison, Topeka & Santa Fe
12 shares of Morgin Trust
 7 shares of Sun Oil
60 shares of General Motors

It also was alleged that the guaranty agreement and escrow agreement were executed to secure the payment of furniture, fixtures and equipment in the assigned purchase contract. That on January 29, 1962, defendant Inn executed and delivered to WCC the second mortgage conveying the following described lands in the City of Fayetteville, Washington County, Arkansas: Lots 2, 16, 17, 18 and 19 in Block 28 in the original town (now city) of Fayetteville, which was to secure the payment of the debt due by the terms of the purchase contract. That the second mortgage was given subject to a first mortgage executed by the defendant Inn to certain individuals as the Trustees for Central States, Southeast and Southwest Areas Pension Fund, Teamsters Union, dated October 1, 1960, and of record in Washington County Mortgage Record Book 545 at page 190, and to a supplemental mortgage between the same parties dated January 1, 1962, to secure an additional $50,000, making the sum due under the first mortgage $725,000.

The complaint further alleged that on or about April 25, 1962, the first mortgagee, Central States, et al., entered into an agreement with WCC, in which it agreed that the furniture, fixtures and equipment sold to Inn by Pacific would remain personal property so that the holder of the above described purchase agreement would have recourse in the enforcement and payment of the debt. That on January 5, 1962, plaintiff entered into an agreement with WCC, and by the terms of which it agreed to guarantee the payment of any contract assigned to WCC and that it would repurchase these contracts in case of default of payment in 60 days. That defendant Inn and individual defendants Brumfield executed an extension of the debt with WCC. That defendant Inn has failed and refused to pay the installments due under the terms of the purchase agreement and the extension agreement, and that WCC demanded that the plaintiff, Pacific, perform its guaranty contract to repurchase the purchase agreement.

On or about March 1, 1964, plaintiff, Pacific, paid WCC the full consideration for the purchase contract, whereupon WCC reassigned and redelivered to the plaintiff the purchase agreement, the guaranty agreement, the escrow agreement, the second mortgage and the mortgage agreement and waiver. The title to these five documents is now in the plaintiff. That the plaintiff elected, as authorized by the terms of the purchase agreement, to accelerate the maturity of all of the installments due under that agreement, and that the corporate defendant Inn and the individual defendants Brumfile are now indebted to the plaintiff in the sum of $130,236.12, together with interest at 6 percent per annum from March 1, 1964. That the purchase agreement provided for the payment of attorneys' fees in the event of litigation to enforce the obligation.

In its prayer plaintiff seeks judgment against the defendants in the sum of $130,236.12 (at the trial plaintiff's attorney stated amount due is $115,483.17), with interest at 6 percent per annum, for any additional sums which plaintiff may be forced to pay to protect its security, for a first lien on all of the described furniture, fixtures and equipment sold by plaintiff's predecessor, Itasca, a first lien on all corporate stock held in escrow by First National Bank of Fayetteville; to have a lien on the real property described in the first and second mortgages subject to the first mortgage; appointment of a commissioner to sell said property and lands, if judgment is rendered in favor of plaintiff and is not paid within a reasonable time fixed by the court, a receiver be appointed to take charge, manage and preserve all the above-described property; that any purchaser under a sale of the above described property be decreed to have the right to immediate possession of the property and be given a writ of assistance to be issued by the Clerk of the Court, and that the equity of redemption, as well as all rights or possibilities of dower and homestead, of the individual defendants be foreclosed and barred and that the plaintiff be awarded an attorneys' fee equal to 15 percent of the debt due by the defendant and for costs and all other proper relief.

On April 14, 1964, defendants Brumfield filed their answer in which they admitted the court has jurisdiction of the controversy and the parties, and denied the purchase contract was executed or entered into on April 25, 1962, and affirmatively alleged that the contract was signed by Inn on January 27, 1962, and that it was materially altered by changing the date from January 27 to April 25, 1962. They also alleged that the contract is void as it provides for a charge of interest in excess of that allowed by the law of Arkansas.

Defendants admitted the purchase agreement was assigned by Itasca on or about April 26, 1962, and delivered to WCC; that they signed the alleged guaranty agreement in favor of WCC, but in defense averred that it is void for want of consideration because it provides for interest in excess of the rate allowed by the law of the State of Arkansas.

Defendants also averred that they are not bound by the guaranty agreement because it was special and not general and thus not assignable; admitted they executed the escrow agreement but averred that it is void because of the lack of consideration of the guaranty agreement; admitted the execution and delivery to WCC of the second mortgage of the real property involved; that a waiver was executed by the first real property mortgagee in favor of the second mortgagee, WCC, which provided that the furniture, fixtures and equipment would remain personal property.

The individual defendants in their separate answer admitted that the corporate defendant has not performed the purchase agreement contract, and they averred they are without knowledge as to whether the plaintiff reacquired said contract from WCC. They further alleged that if plaintiff reacquired the purchase contract from WCC, plaintiff acquired no title or property rights therein for the following reasons:

1. That the purchase agreement has been materially altered by the plaintiff and provides for interest at a rate in excess of that provided by law and under the law of Arkansas is absolutely void.

2. That the guaranty agreement executed by the individual defendants is void because it has been materially altered and provides for interest at a rate in excess of that allowed by law; that neither WCC nor Pacific gave any consideration to the individual defendants for their execution of the guaranty agreement.

3. That the escrow agreement is without force and effect because the original purchase contract is void for the reasons given above, and that the guaranty agreement is void for the reasons given above, and that neither WCC nor Pacific gave defendants any consideration for the execution of the escrow agreement.

Defendants in their answer further admitted that plaintiff is entitled to accelerate the payments under the purchase agreement provided that their defenses as otherwise set out are without foundation, and that Inn is in possession of all property described in the complaint except the corporate stock described in the escrow agreement. Defendants denied that the personal property, stocks and bonds and mortgaged real property is in danger of loss by being removed or materially injured, and that the property is insufficient to discharge the debt alleged to be due the plaintiff.

Defendants admitted the contract provides for attorneys' fees but denied that the plaintiff is entitled to an allowance for attorneys' fees. The prayer in the separate answer of the defendants Brumfield is that the plaintiff take nothing and that the complaint be dismissed and for all other proper relief to which they might be entitled.

Defendant Inn's separate answer contains substantially the same admissions and denials, together with a counterclaim in which it alleged that the plaintiff impliedly warranted that the furniture and fixtures were fit for the purposes for which they were intended; that the warranty has been breached by virtue of the unfitness of the furniture and fixtures, but at the trial the counterclaim was withdrawn and abandoned by Inn.

On April 18, 1964, Pacific filed a motion for the appointment of a receiver, and on April 20, 1964, the court appointed Mr. Charles E. Aubrey, an officer of plaintiff, as receiver of the property of Inn, and required a bond to be posted in the sum of $10,000. The order provided that the receiver operate the hotel-motel business and preserve and conserve the assets of the corporate defendant. It further provided that an inventory of the property be prepared and filed with the Clerk of the Court.

On July 8, 1964, the Commissioner of Revenues, State of Arkansas, sought to intervene. In his petition he alleged that tax in the amount of $4,415.67 collected by the plaintiff, Pacific, had not been remitted to the State of Arkansas or to intervenor whose duty it is to collect it. Intervenor prayed that plaintiff be required to pay the State of Arkansas that sum plus 10 percent penalty, plus interest at the rate of one half of one percent per month from May 28, 1962.

On July 9, 1964, Foremost Dairies, Inc., a corporation, filed a motion to continue the receivership of defendant Inn for the benefit of general creditors. Foremost in its statement in support of its motion stated that Inn is indebted to it in the amount of $1,061.15, said balance due on open account for goods, wares and merchandise sold and delivered to Mountain Inn between February 26, 1964, and April 22, 1964.

On July 10, 1964, defendants Brumfield filed an amendment to their answer in which they admitted that the corporate defendant executed an agreement with WCC in January 1963 amending the terms of the original purchase contract and extending it, but they denied, however, that the extension was executed with WCC by them individually. Defendants further alleged that the guaranty agreement and the escrow agreement are unenforceable in that they were personal and special guaranty agreements in favor of WCC, and that subsequent to the execution of said guaranty agreement the terms of the original contract of sale were materially altered without the consent of the individual defendants. They also adopted the allegations of the original answer, and prayed that the complaint against them individually be dismissed.

At the trial the court allowed the intervenor to dismiss its petition as all taxes due and payable the State of Arkansas had been paid in full.

On July 13, 1964, the case was tried to the court and the parties adduced evidence, ore tenus and documentary. The motion of Foremost Dairies to continue the receivership was considered by the court but action was deferred. At the conclusion of all the testimony the case was submitted and taken under advisement by the court and the parties were requested to submit briefs in support of their respective contentions, which have been received and considered by the court.

The issues as developed by the pleadings, testimony and briefs may be stated generally as follows: (a) Is the primary obligation (conditional sales contract) between Inn and Pacific usurious? (b) Is the personal guaranty and escrow agreement executed by the individual defendants supported by consideration?

CLAIM OF USURY

The defendants, as heretofore stated, contend that the primary obligation of Inn exacts an amount of interest in excess of that allowed by law and is, therefore, usurious. The defendants ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.