Kelley Trust Co. v. Zenor

252 S.W. 39, 159 Ark. 466, 1923 Ark. LEXIS 60

• Court: Supreme Court of Arkansas
• Decided: June 18, 1923
• Status: Published

Opinion

Wood, J.

The Kelley Trust Company (hereafter, for convenience, called appellant) is ¡an Arkansas corporation, with its principal place ¡of business in Fort Smith, Arkansas. Harry E. Kelley is its president, and owiis a majority of its stock. On the first of May, 1917, the appellant executed to one C. P. Zenor, Sr., his heirs and assigns, a warranty deed to block-38, Midland Heights Addition to the city of Port Smith, Arkansas. The consideration named in the deed was $7,000. The deed contained the usual clauses and covenants, and in addition the following:

“Three thousand dollars of the above mentioned consideration is paid in cash by the Business Men’s Club of Fort Smith, Arkansas, and the receipt thereof is hereby acknowledged. The remaining four thousand dollars is to be paid by the said C. P. Zenor, Sr., by the erection, maintenance and operation, bn said real es-tale, until January 3, 192.1, of a glass factory, having a daily pay-roll of not less Ilian six hundred dollars, and employing- not less than one hundred fifty men; the meaning and intent hereof being that said real estate is donated to said C. P. Zenor, Sr., his heirs and assigns, upon condition that said C. P. Zenor, Sr., his heirs and assigns, erect, maintain and operate on said real estate, during the period above indicated, a glass factory having a daily pay-roll . of not less than six hundred dollars, and employing not less than one. hundred and fifty men, a lien being hereby retained on said real estate to secure performance of said conditions. “And in the event said C. P. Zenor, Sr., his heirs and assigns, should fail to erect and put in operation on said real estate, within eight months from this date, a glass factory having a daily pay-roll of not less than six hundred dollars and emplo}dng not less than one hundred fifty men, or in the event that C. P. Zenor, Sr., his heirs and assigns, after erecting and putting such glass factory in operation, should be or become at anytime during the period aforesaid unable to continue operating the -same, or should suspend operation thereof for four months at any time during said period, or should, for four months at any time during said period, fail to operate such factory on -a -scale requiring a daily pay-roll of not less than six hundred dollars and the employment of not less than one hundred fifty men, then in any such event said C. P. Zenor, Sr., his heirs and assigns, shall become and be considered indebted to the said Kelley Trust Company, its successors and assigns, in said sum of seven, thousand dollars, 4/7 for said company and 3/7 for said Business Men’s Club, and the lien herein reserved on said real estate may be foreclosed for such indebtedness. And in the event said Kelley Trust Company should become the purchaser of said real estate in said foreclosure proceedings, it shall hold the title thereto in trust, 4/7 for said compa^ and 3/7 for said Business Men’s Club.”

TMs action was instituted by the appellant to foreclose its vendor’s lien. It set up in its complaint the deed, and alleged, in substance, that Zenor had failed to comply with the conditions above set forth, and that, by reason of such default, he was indebted to the appellant in the sum of $7,000, 4/7 for the appellant and 3/7 for the Business Men’s Club. It prayed for judgment for $7,000, and that a lien be declared upon the lots described in the complaint, and that the same be subjected to the satisfaction of the judgment. .

The Model Window Class Company appeared and made itself a party defendant -to the action, and it and Zenor and his wife answered, alleging, in substance, that the obligations of the contract under which the deed was executed to Zenor had been fully complied with. The trial court, after hearing the testimony in the cause, found the issues in favor of the defendants, and entered a decree dismissing the complaint for want of equity, from which is this appeal.

The facts are substantially as follows: Zenor, who had been interested in the operation of a glass factory outside of the State, came to Fort Smith to locate a glass factory. One R. S. Robinson and his associates had developed what is known as the Kibler Gas Field in Crawford County, near Fort Smith. Harry Kelley and the appellant were large landowners in the city of Fort Smith, and had about three hundred acres of land in what is. known as Midland Heights Addition to the city of Fort Smith, in which was situated block 38, 'containing 35 city lots 50x140 feet, located on both the lines of the Frisco and the Missouri Pacific railways, bn .the highest point of ground between the cities of Fort Smith and Van Burén, and only a short distance from the interurban line connecting the two cities. The Business Men’s Club, as its name implies, was a civic organization in the city -of Fort Smith for the promotion of the prosperity of the city. Its president was B. I). Crane and its secretary was Ray Gill. When Zenor came to Fort Smith, the club offered him a free site for his glass factory, and sites were shown him by Robinson, but he was not pleased with these. Whereupon Robinson showed him other sites, and among them block 38, which he se’ected. This block was on the market for $7,000. The club had the sum of. $3,000 which it desired to donate towards securing- a free factor}- site for Zenor’s glass plant. Kelley owned about 200 acres of land adjoining block 38, which he proposed to sell for homes to employees who worked permanently in some factory located on block 38. Robinson asked Kelley if he would not donate $4,000, the balance of the market price of block 38. Kelley had already contributed five per cent, of $20,000 which had been raised by the club for the purpose of locating- factories in the city, and had pledged himself to pa}*- five per cent, of $20,000 more. This donation and pledge had been made just before Robinson approached him, and therefore he declined to contribute the $4,000 more to the club. However, he informed Robinson of the terms on which he would sell block 38, which terms are as already set forth in the deed. Before this deed was executed on the 31st day of March, 3917, Zenor and the club had entered into the following- contract, to-wit: “O. P. Zenor, Sr., and -associates agree, whether as individuals or as stockholders, or through the medium of a corporation to be organized, to erect a plant at Port Smith, Arkansas, on the. property hereinafter described, for the purpose of making- window glass and kindred products, said plant to cost not less than $75,000, and to be in operation and employ at least 125 laborers, by the 15th day of December, 1917. The Business Men’s Club of Port Smith, Arkansas, agrees that when said C. P. Zenor and associates have complied, with the terms of the agreement on their part to be performed, it will convey, by proper warranty deed, to such person or. persons as the said C. P. Zenor may designate. block 38, Midland Heights Addition to the city of Port. Smith, Arkansas, provided that said deed shall recito that, if the said C. P. Zenor and associates, or a corporation to he organized, does not continue to operate said plant for a period of three years, employing, during operating periods, an average of 125 laborers, the title to the property above mentioned .shall revert to the grantor who conveys said property by means of the aforesaid deed.”

This agreement was signed by Zenor, and by Crane as president of the club. Zenor organized the Model Window Class Company, a corporation, of which he was general manager. Robinson, who was a director of the Business Men’s Club and present at its meeting, and who wias largely instrumental in bringing about the negotiations between the club and Zenor, and between the club and Kelley, told Kelley that Zenor had said that he would build a plant a great deal bigger than they had agreed upon, and that he was going to double the men and double the pay-roll; that he was going to operate the plant practically the whole year. Kelley told Robinson that he was mistaken about the benefits that the glass company would be to the town, and was reluctant to sell the property, but finally said, “I will sell the property to the Business Men’s Club for $3,000 provided certain conditions are put in that deed as to how this plant is to be operated.”

The appellant executed the deed, as already mentioned, on the first of May, 1917, and delivered the same to the secretary of the Business Men’s Club. In the meantime, after the execution of the agreement between the club and Zenor, the construction of the glass plant had been parried on and the factory began operation before the 15th of December, 1917. It was some time after the deed wa,s delivered to the secretary of the club before he succeeded in delivering the deed to Zenor. After the deed had been delivered to Zenor, he returned it once or twice. The deed was in the office of the club until about the day it was recorded, which was the latter part of 1919. Zenor said to the secretary of the dub that if he would add to the agreement a note at the bottom reciting that the deed should read “125” instead of “150” and instead of “all times,” “during operating period an average of” he would accept the deed and record it. The original contract called for 150 men. The interlinea-tions were made in the contract in 1919, and Zenor stated that he would accept it if the secretary of the club would put that in, which he did. No member of the appellant was there at the time, and the secretary of the club did not notify any member of the appellant that he was going’ to make the changes in the contract. There was never any resolution of the board of directors authorizing the -secretary of the club to malee the interlineations in the agreement that he did make after the same had been signed by Zenor .-and the president of the club. Zenor simpty stated to the secretary that if he would make the changes in the contract as indicated, he (Zenor) would accept the deed as written.

Harry Kelley testified, among other things, that he had given land to other factories and donated money to them, and they had failed to comply with the representations with reference to continuous operation. He could not definitely ascertain the amount to which he had been damaged, and, if such a factory as was represented to him by Gill and Robinson would be built and operated by Zenor were not in fact 'built -and operated as specified in his deed, he figured from his past experiences that his damages would be the amount of $4,000 that he was donating, which he placed in the deed as liquidated damages in case the conditions of the deed were not complied with by the grantee. During the year 1918 he did not pay any attention to whether the factory was complying with the terms of the deed, because the country was at war. After the World War was over he began to look into the question as to whether or not Zenor and the Model Window Glass Company were going to comply with the terms of the deed. He did not keep close track of them in 1919. In 1920 the factory operated until the 17th of May, and never, again operated that year. He bad tenant houses close to tbe glass plant and found no tenants. Tbe plant bad been shut down through long periods. Since the execution of tbe deed be had sold only two lots out of approximately two hundred acres. He had never seen tbe contract between the club and Zenor until be called Zenor’s attention to tbe fact that he had not complied with the terms of the deed. This was after January 1, 1921. He was not a member of the board of directors of the club, and knew nothing of its transaction with Zenor. The deed was executed by him in accordance with the understanding with Robinson, and delivered to the secretary of the club.

Leigh Kelley, vice-president of the appellant, testified that he was not a director of the club at the time the agreement between tbe club and Zenor was executed. He was familiar with the terms of the deed, but did not know that there was any agreement between the club and Zenor.

Zenor testified that they began the construction of the plant about the first, of May, 1917, and began to operate it in December, 1917. In tbe construction of tbe plant they hired about 145 men daily. He and bis associates had invested about $22S,000 at tbe time bis testimony was taken. During tbe years 1917, ’18, ’19 and ’20 tbe appellant did not complain that be and bis associates’ bad not complied with tbe terms of tbe deed. The appellant, did complain in 1921. Zenor made tbe contract with tbe club, and never at any time bad any conversation with any representative of the appellant until after it raised objection. Witness did not know that tbe appellant was associated with tbe transaction in any way until be went to get tbe deed and contract. After be read tbe deed be returned it to the secretary of tbe club and refused to accept it, because it did not conform to the contract be bad entered into with the club. The secretary assured him that everything would be satisfactory, and be thou accepted tbe deed and placed it on record. They started operating the plant in jJecem-ber, 1917, and finished in 1918, operating eighteen weeks. In 1918-1919 they operated twelve weeks — had operated just 52 weeks in three years. In 1918 his operations were interfered with by the government, and this interference ended on December 7, 1918. They did not operate the plant at all in 1920, because they did not have any labor and could not get it. They did not operate from-1920 to January 15, 1921, because the union labor organization would not let them. The plant was closed down from May 22, 1920, and did not start up again for a period of eighteen months. During the period when the plant was closed down in 1918 he did not employ 125 men, or 150 either, and did not have a pay-roll amounting to six hundred dollars. The most men he ever employed at any time was 146. Ordinarily 128 men would be employed in his plant. During all the period that he was closed down ho was trying to get a working scale from the union. Operating periods were fixed by the union. There was testimony tending to prove that prior to 1917 it was customary to run glass plants about eight or nine months in each year, sometimes ten.

1. The consideration of the appellant’s deed' to Zenor was $7,000, $3,000 of which was to be paid in cash, which was paid, and the remaining $4,000 was to be liquidated by complying with the conditions expressed in the deed. The undisputed testimony shows that these conditions have not been complied with. The testimony of Zenor himself conclusively proves that the conditions specified have not been fulfilled by him or his associates.

In Stanley v. Schwalby, 162 U. S. 256-257, it is said: “A valuable consideration may be other than the actual payment of money, and may consist of acts to be done after the conveyance.” The testimony of Kelley shows clearly that the acts specified by appellant to be done by the grantee in its deed, in lieu of the $4,000' which was the balance of the consideration named, were estimated by him to be worth at least that sum, and that, in designating tliese acts, it was Ms intent that, npon a failure upon the part of the grantee to perform them, the grantee should pay to him the sum of $4,000. It. occurs to us that the testimony of Kelley and the recitals set forth in the deed prove that a failure to perform the conditions would result in damages to appellant in the balance of the purchase money unpaid fixed as the liquidated sum of such damages. The damages, in their nature, were uncertain and not easily estimated, but nevertheless would at least be equal to the sum of $4,000, and that sum was specifically named by him to cover his damages, in addition to the cash consideration of $3,000, making the whole purchase money $7,000, for which sum the appellant reserved a lien on the land conveyed. See Nevada County Bank v. Sullivan, 122 Ark. 235.

This court has several times ruled that a vendor’s lien will not arise to secure the performance of an act the nonperformance of which would make a claim for unliquidated damages. Harris v. Hanie, 37 Ark. 348; Bell v. Pelt, 51 Ark. 433; Salyers v. Smith, 67 Ark. 526; Cox v. Smith, 93 Ark. 371. But this is not that sort of an action. On the contrary, it is an action to recover a liquidated sum which the deed specifies may be recovered in case certain acts are not performed, which sum was named and clearly considered and intended by the parties to the deed as part of the purchase money. The case at bar, under the allegations of the complaint and the testimony adduced in support thereof, is brought clearly within the doctrine announced in Cox v. Smith, supra, -where we said: “If this sum stipulated to be paid in the event of the nonperformance of the contract on bis part shall be considered in the nature of damages, then it must be held to be liquidated damages, for which he is liable. * * * But this is not a claim for unliquh dated- damages; it is a debt for unpaid purchase money, the amount of which is definitely fixed. And where such debt for' the purchase money may be paid in work or services, the vendor’s lien therefor does exist, and may be enforced if such, work is not done or the services rendered.” Citing Young v. Harris, 36 Ark. 162, and Nix v. Draughon, 54 Ark. 340. See also Winters v. Fain, 47 Ark. 493; Tupy v. Kocourek, 66 Ark. 433.

In Jarratt v. Langston, 99 Ark. 438, we said: “It has been held by this court that, if land is sold for a price or consideration not named, which it is agreed may be paid in the note of a third party, or in personal services, the vendor’s lien therefor exists and may be enforced if the note is not delivered or the' services rendered.” Since we have concluded that this -should be treated as an action to enforce a vendor’s lien for the purchase money, what we have already said disposes of all the contentions made by learned counsel for the ap-pellees to sustain the decree of the trial court, except that the appellees were excused from complying with the conditions expressed in the deed requiring certain >acts to be performed in lieu of the payment of the unpaid purchase money by reason of untoward circumstances over which they had no control, caused by the World War and labor unions. The proof shows 'that the appellant waived the performance of the terms- of the contract, which were made impossible by the war. The other hardships alleged as excuses for nonperformance cannot -avail the appellees, according to the doctrine announced by this court in Ingham Lbr. Co. v. Ingersoll, 93 Ark. 447. The appellees hold the -title and possession to this land under the deed of appellant, and they must pay the purchase price.

No issue is made in this record between the appel-lees -and the Business Men’-s Club of Fort Smith, and hence it would not be germane here to discuss the effect of the agreement between the club and Zenor. It follows, from what we have.;said, that the court erred in dismissing the appellant’s complaint for want of equity. For this error the judgment is reversed, and the cause is remanded, with directions to enter a decree in appellant’s favor for the sum of $4,000, with interest from tlie date of tlie institution of this suit, and that the ¡same be declared a lien upon the real estate described in its complaint, and for such other proceeding’s, according to law and not inconsistent with this opinion, as may he necessary to enforce such decree.