Thanks for visiting! Welcome to a new way to research case law. You are viewing a free summary from Descrybe.ai. For citation checking, legal issue analysis, and other advanced tools, explore our Legal Research Toolkit — not free, but close.
Benton State Bank v. Reed
Citations: 240 Ark. 704; 401 S.W.2d 738; 1966 Ark. LEXIS 1380Docket: 5-3858
Court: Supreme Court of Arkansas; April 25, 1966; Arkansas; State Supreme Court
Carleton Harris, Chief Justice, presided over a case involving appellee Donald A. Reed and appellant Benton State Bank. Reed, a creditor, provided multiple loans to William R. Buchanan and Anna B. Buchanan, who operated Benton Glass Company in Saline County, Arkansas. Between May and July 1960, Buchanan borrowed a total of $10,000 and executed a promissory note, secured by a mortgage on real estate in Saline County. The mortgage included a clause stating that failure to pay any installment would make all amounts due immediately. Subsequent to the initial loan, Reed advanced additional sums to Buchanan in 1960. On October 3, 1964, Buchanan executed a $30,000 note to Benton State Bank, also secured by the same property. Buchanan attempted to settle his debt with Reed by offering $2,722.62, which Reed rejected, asserting that additional loans of $15,200 were secured by the original mortgage. Buchanan contended that these subsequent loans were not secured, prompting him to file suit against Reed for satisfaction of the mortgage, which led to the bank being included as a defendant. The trial court ruled in favor of Reed, awarding him $12,851.97 plus attorney fees, and also ruled in favor of Benton State Bank and Binswanger Glass Company for their respective claims. The court determined that Reed's lien took precedence over the bank's and Binswanger's liens, with the bank's lien prevailing over Binswanger's. The appellant then appealed the decision. The case references prior rulings regarding mortgage security for future advances, noting that outcomes depend on specific facts. The similarities and differences between this case and precedent were highlighted, particularly the clarity of the mortgage language concerning future advances. Appellant's reliance on *Jacobs v. City National Bank* is challenged due to differences in mortgage language. The relevant defeasance clause states that the mortgage becomes null and void if the mortgagors pay the indebtedness; otherwise, it remains in effect. In contrast, *Word v. Cole* had similar language but was less clear than the current case, where the intent to secure future advances is more explicit. Buchanan testified against including future advances, while the appellee affirmed their inclusion. The circumstances suggest the appellee's position is more credible, as Reed began lending to Buchanan in May 1960, ultimately securing $10,000 but later lending over $15,000 without seeking additional security. Appellant argues that checks made out to Benton Glass Company were not directly to Buchanan, yet they were endorsed by Buchanan. Concerns about the printed size of the mortgage language are dismissed, as it is consistent with the rest of the document. Appellant had notice of Buchanan's debt to Reed, given the issuance of a cashier's check. The bank should have conducted due diligence before approving a $30,000 loan, especially since the mortgage language regarding future advances was identical to Reed's. The Chancellor's findings are upheld, affirming the decree, and a request for a $200 attorney's fee for Reed is granted. Additionally, past rulings confirm that language in a defeasance clause can secure future advances if that intent is evident.