Carleton Harris, Chief Justice.
This litigation concerns the validity of a certain clause contained in a mortgage which provieds, inter alia, that the maturity of the indebtedness secured may be accelerated “If the mortgagor sells or conveys (or contracts to sell or convey) all or any part of the Mortgaged Premises without the written oonsent of the holder of said note”. Dan Tucker, a white resident of Little Rock, purchased in late December of 1965, property located at 2010 West 17th Street in Little Rock. Tucker testified that the property was a three unit apartment, and he lived in one unit and rented two. According to the evidence, at that time, this property was located in an all white neighborhood. The neighborhood gradually became black and Tucker testified that he had trouble keeping renters.1 A rental agency was able to obtain but one renter, who stayed a few months and moved off, the property remaining vacant for a year. Consideration for the purchase was $25,000, $2,000 being paid down and a note being executed by Tucker and his father for $23,000 with Pulaski Federal Savings and Loan Association, hereinafter called Pulaski. Tucker also executed a mortgage on the purchased property to secure payment. Tucker endeavored to sell his interest in the property and eventually, through a realtor, found purchasers, Mr. and Mrs. Vassie Belcher, a black couple. Pulaski would not approve a transfer to the Belchers, but nontheless, Tucker sold his interest for $1,500 and executed a deed to them subject to the mortgage. Thereafter, on April 14, 1970, Pulaski instituted suit against Tucker and his father and Belcher and wife, wherein the aforementioned clause was set out, Pulaski stating that because of the violation of this provision of the mortgage, the entire unpaid principal balance of the secured note was declared due and payable and it was prayed that the company have judgment in the sum of $20,243.18 with 10% interest, judgment for costs and attorney’s fees, foreclosure of the mortgage and sale of the property, possession of the lands, and the extinguishment of the interest of the Belchers in the property. The Tuckers answered, asserting that the acceleration was capricious, oppressive, arbitrary, and an unconscionable restraint on the right of Tucker to freely convey the equity of redemption in the mortgaged property; that said provision was invalid and void. A counterclaim was also filed as a class action on behalf of similarly situated borrowers from Pulaski wherein it was asserted that Pulaski had attempted to assert a regulation by which it would charge the Belchers a sum of $100.00 as a transfer fee; that such charge is against public policy and was an inequitable effort to interfere with the power of an owner to sell his property freely and for adequate consideration. It was asserted that appellee should be enjoined from levying such charge. Also, as a part of the counterclaim, it was alleged that Pulaski requires a borrower pay to it, as escrow agent, a sum of money each month, in addition to the payments on the note and mortgage, for the purpose of taking care of payments of taxes and insurance premiums; that said monies so paid are trust funds and cannot be used for the profit and personal benefit of the association; that the escrow money is invested with the company which makes a profit from it, but retains the profit for itself, a practice that is in violation of its fiduciary relationaship. The Belchers adopted the answer and counterclaim of the Tuckers and prayed for appropriate relief. On trial, and after the taking of testimony, the court made the following findings which are pertinent to the issues on appeal in this litigation:
“1. The provision in the mortgage set forth in paragraph 7 of the findings of fact above, which gives plaintiff the right to accelerate the payment of the mortgage secured debt upon a sale or transfer of the mortgaged property without plaintiff’s consent, is valid, enforceable andi is not against public policy.
2. Plaintiff validly exercised the right to declare the entire mortgage debt to be due and payable at once.
3. Plaintiff has no obligation to justify its refusal to consent to the sale of the mortgaged property to the Belchers.
4. Notwithstanding the absence of any such obligation, plaintiff had valid business reasons for withholding its consent to the sale of the mortgaged property to the Belchers.
5. The Tuckers are indebted to Plaintiff in the sum of $20,327.44 plus interest at the rate of 6% per annum from February 1, 1970, until April 24, 1970, and plus interest at the rate of 10% per annum from April 24, 1970.
6. The Tuckers are also indebted to Plaintiff for an attorney’s fee of $2,000.00 and costs.
7. Plaintiff is entitled to foreclosure of its mortgage and judicial sale of the said lands.
8. The counterclaim of defendants for monetary and injunctive relief as to earnings made by plaintiff on escrow accounts and transfer fees is not a valid class action.
9. The earnings, if any, made by plaintiff on escrow accounts are not payable to defendants either individually or as members of a class.”
In accordance with these findings, judgment was rendered and the property ordered sold if said judgment was not paid within 10 days, and the Tuckers were given judgment against the Belchers for any portion of plaintiff’s judgment against the Tuckers remaining unpaid after crediting the Pulaski judgment with amounts received from the sale of the property. From the decree so entered the Tuckers and Belchers bring this appeal. For reversal four points are relied upon, viz:
"I
The Chancellor erred in permitting the Savings & Loan Association to accelerate the mortgage debt and to forclose the mortgage, because the acceleration provision is against public policy and void.
II
The escrow funds are held by the Savings & Loan Association as a fiduciary, and the Chancellor erred in permitting the Association to retain for its own the profits realized from investing the fiduciary funds.
III.
The amount of the transfer fee is not related to costs or services performed by the Association, and the Chancellor erred in permitting the Association to charge it.
IV
The Chancellor erred in rejecting the testimony that the loan closing agent, while acting within the apparent scope of his authority, at the closing of the Association’s loan to Dan Tucker assured the Tuckers that the property would stand for the loan.”
I
In passing upon this litigation,2 we very quickly state that we agree with appellants that appellee cannot, simply on the basis of the quoted clause, accelerate the note, declare the indebtedness due and payable, and foreclose upon the property. This procedure cannot be countenanced in a court of equity.
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Carleton Harris, Chief Justice.
This litigation concerns the validity of a certain clause contained in a mortgage which provieds, inter alia, that the maturity of the indebtedness secured may be accelerated “If the mortgagor sells or conveys (or contracts to sell or convey) all or any part of the Mortgaged Premises without the written oonsent of the holder of said note”. Dan Tucker, a white resident of Little Rock, purchased in late December of 1965, property located at 2010 West 17th Street in Little Rock. Tucker testified that the property was a three unit apartment, and he lived in one unit and rented two. According to the evidence, at that time, this property was located in an all white neighborhood. The neighborhood gradually became black and Tucker testified that he had trouble keeping renters.1 A rental agency was able to obtain but one renter, who stayed a few months and moved off, the property remaining vacant for a year. Consideration for the purchase was $25,000, $2,000 being paid down and a note being executed by Tucker and his father for $23,000 with Pulaski Federal Savings and Loan Association, hereinafter called Pulaski. Tucker also executed a mortgage on the purchased property to secure payment. Tucker endeavored to sell his interest in the property and eventually, through a realtor, found purchasers, Mr. and Mrs. Vassie Belcher, a black couple. Pulaski would not approve a transfer to the Belchers, but nontheless, Tucker sold his interest for $1,500 and executed a deed to them subject to the mortgage. Thereafter, on April 14, 1970, Pulaski instituted suit against Tucker and his father and Belcher and wife, wherein the aforementioned clause was set out, Pulaski stating that because of the violation of this provision of the mortgage, the entire unpaid principal balance of the secured note was declared due and payable and it was prayed that the company have judgment in the sum of $20,243.18 with 10% interest, judgment for costs and attorney’s fees, foreclosure of the mortgage and sale of the property, possession of the lands, and the extinguishment of the interest of the Belchers in the property. The Tuckers answered, asserting that the acceleration was capricious, oppressive, arbitrary, and an unconscionable restraint on the right of Tucker to freely convey the equity of redemption in the mortgaged property; that said provision was invalid and void. A counterclaim was also filed as a class action on behalf of similarly situated borrowers from Pulaski wherein it was asserted that Pulaski had attempted to assert a regulation by which it would charge the Belchers a sum of $100.00 as a transfer fee; that such charge is against public policy and was an inequitable effort to interfere with the power of an owner to sell his property freely and for adequate consideration. It was asserted that appellee should be enjoined from levying such charge. Also, as a part of the counterclaim, it was alleged that Pulaski requires a borrower pay to it, as escrow agent, a sum of money each month, in addition to the payments on the note and mortgage, for the purpose of taking care of payments of taxes and insurance premiums; that said monies so paid are trust funds and cannot be used for the profit and personal benefit of the association; that the escrow money is invested with the company which makes a profit from it, but retains the profit for itself, a practice that is in violation of its fiduciary relationaship. The Belchers adopted the answer and counterclaim of the Tuckers and prayed for appropriate relief. On trial, and after the taking of testimony, the court made the following findings which are pertinent to the issues on appeal in this litigation:
“1. The provision in the mortgage set forth in paragraph 7 of the findings of fact above, which gives plaintiff the right to accelerate the payment of the mortgage secured debt upon a sale or transfer of the mortgaged property without plaintiff’s consent, is valid, enforceable andi is not against public policy.
2. Plaintiff validly exercised the right to declare the entire mortgage debt to be due and payable at once.
3. Plaintiff has no obligation to justify its refusal to consent to the sale of the mortgaged property to the Belchers.
4. Notwithstanding the absence of any such obligation, plaintiff had valid business reasons for withholding its consent to the sale of the mortgaged property to the Belchers.
5. The Tuckers are indebted to Plaintiff in the sum of $20,327.44 plus interest at the rate of 6% per annum from February 1, 1970, until April 24, 1970, and plus interest at the rate of 10% per annum from April 24, 1970.
6. The Tuckers are also indebted to Plaintiff for an attorney’s fee of $2,000.00 and costs.
7. Plaintiff is entitled to foreclosure of its mortgage and judicial sale of the said lands.
8. The counterclaim of defendants for monetary and injunctive relief as to earnings made by plaintiff on escrow accounts and transfer fees is not a valid class action.
9. The earnings, if any, made by plaintiff on escrow accounts are not payable to defendants either individually or as members of a class.”
In accordance with these findings, judgment was rendered and the property ordered sold if said judgment was not paid within 10 days, and the Tuckers were given judgment against the Belchers for any portion of plaintiff’s judgment against the Tuckers remaining unpaid after crediting the Pulaski judgment with amounts received from the sale of the property. From the decree so entered the Tuckers and Belchers bring this appeal. For reversal four points are relied upon, viz:
"I
The Chancellor erred in permitting the Savings & Loan Association to accelerate the mortgage debt and to forclose the mortgage, because the acceleration provision is against public policy and void.
II
The escrow funds are held by the Savings & Loan Association as a fiduciary, and the Chancellor erred in permitting the Association to retain for its own the profits realized from investing the fiduciary funds.
III.
The amount of the transfer fee is not related to costs or services performed by the Association, and the Chancellor erred in permitting the Association to charge it.
IV
The Chancellor erred in rejecting the testimony that the loan closing agent, while acting within the apparent scope of his authority, at the closing of the Association’s loan to Dan Tucker assured the Tuckers that the property would stand for the loan.”
I
In passing upon this litigation,2 we very quickly state that we agree with appellants that appellee cannot, simply on the basis of the quoted clause, accelerate the note, declare the indebtedness due and payable, and foreclose upon the property. This procedure cannot be countenanced in a court of equity. There is no Arkansas decision governing the circumstances at issue, but we have said that equity will grant relief against an attempted acceleration for inequitable conduct. See Crone v. Johnson, 240 Ark. 1029, 403 S.W. 2d 738. We like the reasoning of the Court of Appeals of Arizona, District 1, Department A, in the case of Baltimore Life Insurance Company v. Hugh L. Harn et al, 486 P. 2d 190. This case was decided on June 30, 1971, amended July 8, 1971, and rehearing denied September 10, 1971. There, the Harns borrowed money and executed a note and mortgage, the note containing the following provision:
“All sums due and payable under this note and the mortgage or mortgages securing the same, *** shall become due and payable without notice forthwith upon the conveyance of title to all or any portion of the mortgaged premises or property, or the vesting thereof in any other manner in, one other than to Mortgagor named therein.3”
The mortgage contained this language:
“This mortgage and all sums hereby secured,*** shall become due and payable at the option of Mortgagee and without notice to Mortgagor forthwith upon the conveyance of Mortgagor’s title to all or any portion of said mortgaged property and premises, or upon the vesting of such titles in any manner in persons or entities other than, or with, Mortgagor.”
Subsequently the Hams conveyed the mortgaged property to other persons. The appellant asserted that these conveyances were in direct violation of the contractual agreement, and thus gave appellant the right to accelerate and foreclose. The trial court held contrary to this view and on appeal, the appellant urged that the violation of the quoted clause entitled it to acceleration and foreclosure. In holding adversely to appellant, the court said:
“The underlying reason for an acceleration clause of the type before us is to insure that a responsible party is in possession, thus protecting the mortgagee from unanticipated risks.
[3] The acceleration clause in this case is clearly a restraint on the mortgagors’ ability to dispose of their property. We believe that so long as an acceleration clause does not purport to restrict absolutely the mortgagor’s ability to dispose of their property there is not the type of restraint on alienation that would render the clause void. It follows that the invocation of the clause must be based on grounds that are reasonable on their face.
[4] An action to accelerate and foreclose a mortgage being an equitable proceeding, [citing cases], it is not enough to allege merely that the acceleration clause has been violated. Absent an allegation that the purpose of the clause is in some respect being circumvented or that the mortgagee’s security is jeopardized, a plaintiff cannot be entitled to equitable relief. Otherwise the equitable powers of the trial court^ would be invoked to impose an extreme penalty on a mortgagor with no showing that he has violated the substance of the agreement, that is, that he would not make a conveyance that would impair the security.
We note that the complaint contained no allegation that there had been default in payments as they became due and at oral argument counsel for the plaintiffs, responding to a question directed to this point, affirmed that there had been no missed payments. At no place in the pleading does an allegation appear that the plaintiffs security is in any way jeopardized. [our emphasis]”
Of course, we can certainly see why a mortgagee would object to some transfers; a mortgagor, if permitted, could sell his equity in property and transfer the indebtedness to a person who had been convicted of operating a bawdy house, operating a gambling house, or illegally selling whiskey or drugs, and naturally a mortgagee would not desire to accept such a person, realizing that the property could be used by that person for a similar purpose. The same might be true of an individual who persistently had failed to pay his obligations, who was without a job, or who had a record of permitting property to deteriorate.
On the other hand, and this frequently happens, a mortgagor could be transferred from his job to another location and, if persons to whom he desired to sell the property could be arbitrarily disapproved by the loan company, he could be in the position of being forced to sell to someone at great sacrifice.4 This could well be true even though a loan might be three-fourths paid. The validity of such a requirement would leave a mortgagor much at the mercy of the ■ mortgagee. Accordingly, we are in full agreement with the court that decided the case dted that there must be legitimate grounds for refusal to accept a transfer to a particular individual or concern.
This premise being established, let us examine the facts in the litigation before us to determine whether appellee company had reasonable grounds to reject the Belchers. A pertinent fact is that the record reflects that Vassie Belcher and wife Esther, in the latter part of 1966, purchased a home, financing the purchase through Pulaski, in the amount of $8,211.09. This loan was to be repaid commencing on February 1, 1966, with monthly payments of $65.00 per month for a little over sixteen years. In the testimony at the trial, various officers of the company testified. W. P. Gullev, Tr.. President of Pulaski, testified that in disapproving the Belchers for the transfer, the loan committee considered the Belchers’ payment record on the already existing loan, and a credit report obtained on the Belchers. It does not appear that he ever positively stated that the Belchers’ loan payment record was considered before the loan was disapproved. One other officer testified that the Belcher loan was referred to in the meeting of the loan committee. Two other company officers, Guy Maris, III, and Howard E. Boddy, stated that the payment record of the Belchers on the loan was not considered by them prior to the original disapproval, and that the loan had already been turned down before this matter was checked.
Six items are listed from September 1966 through 1968 including the repossession of an automobile. The record reflects that the other 5 items were paid; however, 2 items were past due before being paid. As to the repossession, Belcher stated that he had great difficulty with the automobile; that it would never perform satisfactorily; that he did not succeed in getting the company to fix it, and he finally turned it back in.
It might be mentioned that the company never did inspect or investigate the occupancy of the Belchers on the property under mortgage, and accordingly could not have known whether the property was being properly taken care of. The record reflects that Belcher is current in his payments to Pulaski on his original loan, payments being $65.00 per month, and undisputedly, he has tendered the sum of $198.41 each month as payments on the property purchased fromTucker, but these payments have not been accepted. Belcher offered during the trial to make all monthly payments due in open court.
Let it be remembered that Dan Tucker is still liable on the note, irrespective of the transfer. Of course, Tucker could leave the state, which would make enforcement more difficult, though there is nothing in the record to indicate that this appellant has any thought of leaving. However, Tucker’s father is also liable on the note. There is yet additional security; Tucker purchased the property from two Little Rock residents, Mrs. Dessie Patrick Keck and Mrs. Doris Marie Koon, mother and daughter. In financing the purchase, Tucker applied to Pulaski for a $23,000 loan. Mrs. Keck and Mrs. Koon, as a matter of inducing Pulaski to make the loan, entered into an agreement to put up as additional security (for performance of the obligations assumed by Tucker) a savings account held with Pulaski in the amount of $5,500. The agreement provides for a release of a portion of the $5,500 deposit for each $1,000 reduction of the principal of the loan. Mr. Gulley testified that $1,000 had been released, the company being obligated to release $500 for each $1,000 reduction on the principal. The agreement even provides that, in case of a foreclosure which results in a deficiency, the indemnitors agree that they are indebted to Pulaski up to the amount of their pledge in taking care of any deficiency judgment. All in all, it would appear that Pulaski is adequately secured.
In filing suit for judgment on the note and foreclosure, Pulaski sets out only one ground, viz, that Tucker, without the consent of Pulaski, sold and conveyed the mortgaged lands to the Belchers; that appellee then declared the entire unpaid principal balance due and payable.5
We think it would be extremely unfair to hold that the Belchers are a bad risk when they are not only current in the original loan, but have likewise tendered the monthly payments each month on the property purchased from Tucker.
Accordingly, we hold that the chancellor erred, first, in holding that plaintiff had no obligation to justify its refusal to consent to the sale of the mortgaged property to the Belchers, and further erred in holding that Pulaski had valid business reasons for withholding its consent.
II
We do not agree with appellants on this point. At the outset, it might be stated that filing a class action as a counterclaim seems to be entirely beyond the scope of the counterclaim statute. Ark. Stat. Ann. § 27-1121 (Repl. 1962) Paragraph 3, provides that the defendant’s pleadings shall contain, “A statement of any new matter constituting a defense, counterclaim or set-off, in ordinary and concise language, without repetition.” This very definitely appears to be a personal statute. There is no evidence in this record that appellee coerces its borrowers to establish escrow accounts; in fact, the Belchers, on their present loan, do not pay any monies into an escrow account. Actually, the escrow account results in a service to the borrower, for it absolves him of the responsibility and trouble of paying the taxes and insurance. A mortgagee is entitled to be in a position where he knows the taxes and insurance will be paid, for otherwise, his security would be very much in jeopardy. Of course, taking care of these items requires quite a bit of time of the clerical employees. The record also reflects that in loans guaranteed by the Federal Housing Authority or the Veteran’s Administration, there is a requirement that an escrow account must be maintained for those loans which exceed 80% of the value of the appraised property. All in all, we are unable to see any merit in this contention.
Ill
Here again, this contention was advanced by a counterclaim for the benefit of a class, and what was said in Point II relative to this phase, is equally applicable here. Pulaski charges a transfer fee of $100.00. Of course, Belchers have never paid a transfer fee because they were not approved for the transfer, although they did tender the $100.00. Since the Belchers are prevailing in this litigation, the question will undoubtedly legitimately arise. There was testimony that one other building and loan company in Pulaski County charges $100.00, and testimony that one bank charges $50.00. There was no evidence as to charges made by other building and loan associations, or other lending institutions. This is all the proof in the record. While Mr. Gulley detailed to some extent the work involved in making the transfer, there is nothing in the record which reflects the relationship between the work involved and the amount charged; in other words, there is no “time analysis”.6 As stated, the question is not, because of the nature of the pleading involved, before us at this time.
IV
Troy Tucker, father of Dan Tucker, who also signed the note, testified that he went to the Beach Abstract & Guaranty Company, the closing agent, and asked questions of the loan closing officer. Testimony was offered that the officer told the Tuckers that the property would stand for itself and there would be no deficiency judgment in case of foreclosure. The court refused to accept this testimony, and we think correctly so since there was no evidence to show that the officer of Beach Abstract had any authority to do anything other than to close the loan. Certainly, Beach Abstract had no authority, real or apparent, to bind Pulaski by oral statements in contradiction of the written instruments.
In accordance with what has been said, the decree as to Point I is reversed (including findings one through seven) and we hold that Pulaski Federal Savings & Loan Association was not justified in refusing consent to the sale of the mortgaged property from the Tuckers to the Belchers, and accordingly must accept the transfer; as to the other three points, the decree is affirmed, and the cause is remanded to the Pulaski County Chancery Court (Second Division) for the entry of a decree not inconsistent with this opinion.
It is so ordered.
Fogleman, J., dissents. This testimony by deposition.