Court Opinion

ID: 7813209
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:25:33.132122+00
Date Added: 2024-06-11T16:28:35.067059
License: Public Domain

Fred M. Pickens, Special Judge, dissenting. Unable to concur in the decision reached by the majority of this court, and without unduly extending the record, I would like to present the minority’s views. We agree with the majority that this decision turns upon an interpretation of the trust indenture, the Federal Bankruptcy Court Order, and the Proposal (referred to as the “Amendment and Substituted Proposal”) since all are integral parts of the same agreement and transaction even though executed at different times. We, too, think the purposes and intention of the parties can be discovered from the series of instruments as a whole, for, as the majority state, there was no express provision as to what was to become of the fund now in litigation at the end of the five-year period. Referring to the pertinent sections or Paragraphs of the Indenture and Proposal for brevity’s sake we construe Par. Ill (b) of the Indenture and Proposal, Par. XII of the Indenture and Proposal and Par. Y of the Indenture and Proposal in the light of all other circumstances and verbiage somewhat differently. Par. V relates to the disposition of any balance of funds on hand at the end of every six months period. This was to enable the Fulks, the mortgagors, to reduce their debt — which was for the mortgagors ’ benefit — and thus it must have certainly been contemplated by all parties at the time of execution that the balances would accrue to the mortgagors’ benefit — as well as to that of the noteholders. Some of the majority feel the law of a mortgagee in possession is controlling and cite Denham v. Lack, 200 Ark. 445, 139 S. W. 2d 243, and Cantley v. Turner, 191 Ark. 607, 87 S. W. 2d 642. We do not believe this decision can properly be governed by those cases which are still good law. As we view it, the law of a mortgagee in possession is applicable when there is no controlling agreement between the parties. Here, the agreement and the acts performed under the agreement do away with the applicability of the pronouncements in the above decisions. On November 1, 1944, when the deeds were “taken down” by the Trustee, the noteholders received an absolute title to the land in full and complete satisfaction of the debt. Prior to that date, the law governing a mortgagee in possession might have controlled — on that date, after receipt of the deeds by the Trustee, this law no longer controlled, for the deeds had been taken from escrow. As a matter of fact the agreement itself provided that if taking down the deeds were necessary the law of a mortgagee in possession should no longer apply (Par. XII of the Indenture and Proposal). The agreement was, as we see it, that from the time the deeds were taken from the escrow agent, the land belonged absolutely to the noteholders in satisfaction of the debt, and that at that time the previous mortgage character of the transaction ended. Thus, foreclosure process, redemption, or any other process whereby the debtors might claim to have the lands sold and the excess turned back to them was excluded. The question of whether or not parties can contractually circumvent the normal mortgage foreclosure and redemption processes under the Arkansas law is not before this court for consideration, for we believe that all parties being properly before the Federal Court, all parties entering into the judicial proceeding in that Court whereby proposal was finally accepted and the Federal Court Order signed by Judge Thomas C. Trimble formally approving the proposal and the creditors’ agreement, and the execution of the indenture in faithful compliance with that Federal Court Order exclude that question. We think that Pars. Ill (b) and XII provide that the noteholders were to receive absolute title to the land on November 1, 1944, unless the debt were satisfied prior thereto — that the noteholders did so receive that absolute title, extinguishing the debt prior to the application of the funds in litigation here towards the debt. The majority draw the conclusion that the Trustee must have credited the balance to the noteholders in some manner, otherwise the Bank would not have delivered the deeds held in escrow to the Trustee — assuming without deciding this be pertinent, that conclusion is not substantiated by the record. The records show that the funds were not applied toward satisfaction of the notes prior to extinguishment — we think that would cut off the rights of the noteholders in this fund, and arguments contending that the so-called tender provisions do not apply to the funds held by the Trustee at the end of the five-year period fails, in our opinion, to take into consideration the entire transaction and we believe that Par. Y of the Indenture and Proposal referred to each and every six-months period during the trust — not just the first nine six-months periods. The noteholders had the right to demand delivery of the deeds placed in escrow — this they did — on November 1, 1944 — thus, upon the exercise of that right the liability and obligation of the debtors was extinguished as provided by Par. XII, and as there was no provision for the disposition of the balance on hand held by the Trustee, we think the noteholders lost any right they might have had upon delivery of deeds to the Trustee. The majority emphasize the repetitive feature of several clauses in the Indenture and Proposal relative to the noteholders owning the property if their notes remained unpaid at the end of the five-year trust. Assuming repetition strengthens their conclusion, we find that the notes did not remain unpaid at the end of the five-year trust (the question of who is the loser financially being immaterial, as we see it) — on the contrary by the express provision throughout the Indenture and Proposal — the notes were to be paid by delivery of the deeds. Simply because there is nothing in the agreement indicating that the surplus at the end of the trust was not to be applied to the satisfaction of the debt is not sufficient reason, in the minority’s view, to rationalize negatively that it was solely for the benefit of the noteholders. The case of Greer v. Turner, 47 Ark. 17, 14 S. W. 383, and the case of Danehauer v. Dawson, 65 Ark. 129, 46 S. W. 131, 44 L. R. A. 193, have no application here, in our opinion. We believe the cause should be reversed in accordance with our interpretation of the entire transaction between these parties and that this fund now in the hands of the Trustee should be paid to the Fulks. I am authorized to state that Justices Millwee and Leelar join with me in the above opinion.