Case Name: Benjamin F. BARTON, et ux v. George E. PERRYMAN, et al
Court: Arkansas Supreme Court
Jurisdiction: Arkansas
Decision Date: 1979-03-05
Citations: 265 Ark. 228
Docket Number: 78-169
Parties: Benjamin F. BARTON, et ux v. George E. PERRYMAN, et al
Judges: Fogleman, J., dissents.
Reporter: Arkansas Reports
Volume: 265
Pages: 228–242

Head Matter:
Benjamin F. BARTON, et ux v. George E. PERRYMAN, et al
78-169
577 S.W. 2d 596
Opinion delivered March 5, 1979
(In Banc)
Kenneth E. Suggs, for appellants.
No brief for appellees.

Opinion:
Darrell Hickman, Justice.
This is an appeal of a chancery foreclosure decree and judgment on a contract of sale. We find the decree must be reversed.
The sellers and appellees, George E. Perryman and others, had sold a house trailer and lot located in Perry County. The initial sale was to Vernon and Elizabeth Highfill in 1973. The sale was perfected by the execution of a Purchaser's Agreement and promissory note which was prepared by the appellees calling for payment in monthly installments.
In 1974, the original Purchaser's Agreement was assigned to the appellants, Benjamin and Connie Barton. The appellees consented in writing. In 1975, the Agreement was again assigned from the Bartons to Michael and Melissa Black using an identical assignment and consent form signed by the parties.
The trailer burned and it was discovered that there was no insurance. The appellees filed a foreclosure suit seeking a judgment against all of the purchasers and assignees for the balance due on the note and, after an agreed sale, a deficiency judgment was entered against these appellants and the Blacks.
The chancellor held that none of the parties had been released from their agreement to buy the property.
The appellants argue on appeal that the chancellor was incorrect because it was the intention of the parties that upon each assignment, the assignors were discharged, and the assignees were substituted in their place as a result of a novation. We agree with this argument and reverse the decree of the chancellor.
The chancellor, no doubt, relied upon the law that when rights are assigned and duties delegated, as in this case, the original obligor remains liable as a surety unless he is discharged by novation. Restatement of Contracts §160 (1932). However, an examination of the facts in this case leads us to conclude that it was the intention of the parties in this case that the Blacks be substituted as obligors in place of the Bar-tons, rather than merely added as additional debtors.
The original Purchaser's Agreement was prepared by the appellees, who were not attorneys, and it is a form instrument. There are two relevant provisions, one which was added by the Perrymans and the other which was contained in the form instrument. The added clause, typed in by the Perrymans, reads:
Buyer agrees to reimburse seller for yearly insurance premiums in the event that seller must maintain insurance. Buyer also agrees that said mobile home shall not be removed from property without the written consent of seller.
The printed instrument contained a standard provision which reads as follows:
This AGREEMENT shall not be sold, transferred or assigned, nor shall said property be leased, without written consent of SELLER, and in the event of any sale, assignment, transfer or lease, without written consent, SELLER shall have the right to exercise the options hereinbefore provided in Paragraph 3. In the event of a sale, transfer or assignment of this AGREEMENT with SELLER'S written consent, the assignee or grantee shall succeed to all the rights and liabilities of BUYER, according to the terms of the assignment and consent to be attached hereto.
In 1974, when the appellants purchased the property from the Highfills, the Perrymans prepared an assignment and a consent, which we reproduce.
"Novation is the substitution by mutual agreement of one debtor, or of one creditor, for another, whereby the old debt is extinguished, or the substitution of a new debt or obligation for an existing one, which is thereby extinguished. "
Riddick v. White, 194 Ark. 1010, 110 S.W. 2d 9 (1937). That intention need not be expressly declared, but may be found upon examining the surrounding circumstances. Home Life Insurance Co. v. Arnold, 196 Ark. 1046, 120 S.W. 2d 1012 (1938).
Like any other contract, a novation must be supported by consideration. Here the consideration was approximately $400.00 the Bartons paid the Perrymans, and an additional fee of $100.00 to the Perrymans for preparing the simple assignment and consent.
The Bartons testified that they were assured that there was insurance on the property and they would be billed for any insurance and taxes. The Perrymans produced evidence that the Highfills paid $26.67 as their pro rata share of the insurance. The Perrymans, of course, point to the provision in the original contract which holds the purchaser responsible for maintaining insurance. However, it was not disputed that the Perrymans never billed the Bartons for any insurance or taxes or took any steps to make certain that the property was insured at any time after the assignment to the Bartons. (The Bartons held the property from October 2, 1974, until June 17, 1975).
In 1975, the Bartons decided to sell the property to the Blacks for $1,000.00. Benjamin Barton sought the Perrymans' consent and was told that it was the policy of the Perrymans to require new purchasers to buy some equity in the property because it prevented people from moving in and out. It was agreed that the Blacks would pay $1,000.00. However, at Perrymans' insistance, $410.15 was paid directly to the Perrymans as equity. $100.00 was paid to the Perrymans for preparing an identical assignment and consent as we have reproduced herein. The Blacks paid the Bartons $500.00 and executed a note for $500.00 to the Bartons which was never paid.
The trailer burned and it was discovered that there was no insurance on the property and this lawsuit naturally resulted from that fire loss. While the assignments and consents did not expressly release the old purchaser, we have no difficulty in finding that it was the intention of the Perrymans to release the old obligations by accepting the new ones.
First, all of the instruments, none of which were recorded, were prepared by the Perrymans. The assignment, prepared by the Perrymans and consented to by them in writing, provided that the Bartons "do hereby sell, assign, transfer, and set over all their right, title and interest in and to the property" to the Blacks. There was no express assignment of the note but only of the Purchaser's Agreement. We have said in a similar situation that a note and mortgage are inseparable. As assignment of the note carries the mortgage, while an assignment of a mortgage alone is a nullity. Bryant v. Easton Tire Co. 262 Ark. 731, 561 S.W. 2 79 (1978). Considering the language of the assignment, which seems to set over all rights and interest in the property, and the fact that the Perrymans in preparing the assignment and consent did not mention that the note was assigned, there would seem to be an uncertainty as to the liability imposed by these documents.
It is a rule of law that documents that contain ambiguities will be construed against the party who drafted them. Christmas v. Raley, et al, 260 Ark. 150, 539 S.W. 2d 405 (1976).
Next, the Perrymans, who were not authorized to practice law, in two instances charged a fee of $100.00 for the preparation of the simple but brief documents. In each instance they required the new buyer to pay equity to them in the property. The Bartons paid approximately $400.00 and the Blacks paid $410.15 to the Perrymans upon assignment.
Furthermore, there is the testimony of the Bartons that they were told that insurance did exist on the property and that they would be billed for any future insurance. While it was the buyer's obligation to maintain insurance, the contract clearly provided that the sellers, who were the Perrymans under that document, could bill them for it. There was no effort on the part of the Perrymans to make certain that the property was insured.
One of the most important factors is that each time the Purchaser's Agreement was assigned, the Perrymans required of the assignee a substantial payment of principal.
In summary, this is a case where the original seller chose to directly deal with each assignee requiring payment towards the principal due instead of remaining at an arms length distance from the transaction. Considering all the facts we have recited herein, there is no doubt there was a mutual agreement of the parties to release the Bartons of liability. Therefore, we reverse the decree of the chancellor.
Reversed.
Fogleman, J., dissents.
(The first buyers were never served. The Blacks did not appeal.)