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Braun v. Askew
Citations: 223 Ark. 22; 264 S.W.2d 399; 1954 Ark. LEXIS 606Docket: 5-278
Court: Supreme Court of Arkansas; February 1, 1954; Arkansas; State Supreme Court
Frances Rhoton Askew, acting as executrix and trustee for her brother Riff el G. Rhoton, initiated a lawsuit to establish and foreclose a lien on Lot 10, Block 11, Faust’s Addition to Little Rock, which was sold by her deceased parents to W. L. Fodrea in 1921. The sale involved a $2,500 payment plan with a $100 cash down payment and a $2,400 note payable in installments over ten years at 8% interest. Fodrea occupied the lot and made payments until 1930. In 1932, Mrs. Rhoton took possession of a residence on the property with Fodrea's agreement, while he moved into a sheet iron building on the lot. Mrs. Rhoton collected $1,048.08 from a judgment assigned to her by Fodrea and used it to reduce the debt. They converted the residence into six small apartments, with Mrs. Rhoton investing $4,700 and an additional $593 in improvements. Fodrea contributed $300 in 1934, but after that, no further payments were made. Mrs. Askew filed the lawsuit in May 1945, and a decree was issued in July 1953. The Chancellor found several unpaid obligations totaling $30,473.65, with a lien of $16,790.52 before interest. After accounting for a credit due to the appellant of $12,805.71, the court noted that the financial dealings included unprovable furniture costs as part of rental value. It was determined that Fodrea's occupancy was conditional on Mrs. Rhoton’s efforts to maintain and generate income from the property, while he had not contributed to taxes or upkeep. Over twenty years, gross rental income reached $29,611.52, with real estate experts testifying about property values. The arrangement reflected a passive role for Fodrea and an active management role for Mrs. Rhoton in operating the property. The court determined that unfurnished apartments would have generated $8,250, equating to 27.86% of the gross income of $29,611.52, which, with interest, totals $12,805.71. After calculating the net balance, a judgment of $17,667.94 was rendered, accompanied by an order of foreclosure. The computation method was challenged, particularly concerning the rental income ratio for furnished versus unfurnished apartments and the rebuilt property, alleged to be unjust. Testimony indicated that unfurnished apartments typically held three-fourths the value of furnished ones, but conditions during the depression led to occupancy rates as low as 30%. The Chancellor’s findings were upheld despite these discrepancies. Fodrea's response acknowledged that Mrs. Rhoton had rights surpassing the typical mortgagor-mortgagee relationship. It included a commitment from the plaintiff to undertake repairs and improvements on the property, with the understanding that they would manage rentals and apply net income to debt repayment, while retaining costs incurred in generating those rentals. The recognized legal principle states that a mortgagee in possession is limited to recovering ordinary repair costs, not the value of permanent improvements. The court noted that Mrs. Rhoton managed the property with Fodrea's full consent during the depression, creating a favorable living situation for him. Given these circumstances and the absence of direct witnesses due to the deaths of relevant parties, the court found no error in the Chancellor's evaluation of evidence or legal theory. The case was affirmed. Following W. L. Fodrea's death on May 16, 1951, his daughters were recognized as sole heirs, with Mrs. Braun appointed as administratrix. The cause of action was revived in their names. Mrs. Goforth later conveyed her interests to Mrs. Braun. Lewis Rhoton died in 1936, and Bessie Riffle Rhoton passed in 1944. Interest was calculated to December 31, 1952.