Gentry v. Holland

Citations: 243 Ark. 172; 419 S.W.2d 130; 1967 Ark. LEXIS 1087Docket: 5-4278

Court: Supreme Court of Arkansas; October 9, 1967; Arkansas; State Supreme Court

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E. J. Holland initiated a lawsuit to quiet title to 111 acres in Madison County, primarily affected by a prior lease of 40 acres that had been transferred among multiple parties, each asserting conflicting claims against Holland and one another. The trial court ruled that the lease was canceled due to nonpayment of monthly rent. The appellants in this case include John E. Yarbro, War Eagle Lime Co. Inc., and Joseph A. Gentry. 

The original lease, executed in 1952, allowed Harwood and Will to extract limestone, stipulating a minimum royalty payment of $25 per month. If this minimum was not met for three consecutive months, the lessor could cancel the lease after providing 30 days' notice. Gentry acquired the lease in 1959 and later assigned it to Yarbro, who simultaneously purchased the War Eagle Lime Company business. Gentry retained a lien on the lease and equipment to secure installment payments. 

Yarbro operated the company until late 1963, paying royalties until December of that year. Following an agreement to purchase the leased land from fee owner Berry Denney, Holland financed the down payment for Yarbro, who later conveyed his interest in the property to Holland shortly after the original sale. On May 22, 1964, Holland paid the remaining purchase price with a bank loan, and three documents were recorded simultaneously, including the deeds and a mortgage. By late 1963, War Eagle was significantly in debt and had ceased production in early 1964.

Holland attempted to secure capital for new machinery but failed. Subsequently, Yarbro, representing the corporation, transferred all merchandise to Holland. Appellants assert that Holland was to keep $2,910 owed by War Eagle and return the remainder to the Company, while Holland claims he is owed $6,554.15 for wages, commissions, and expenses. The status of the lease is crucial; it was potentially extinguished due to non-payment of royalties or rent from December 2, 1963, to May 22, 1964. Yarbro made a payment attempt on May 10, 1964, which Holland rejected, and subsequent payment attempts were also refused. A judgment on June 9, 1965, canceled Yarbro's lease rights, leading to the order to sell personal property to satisfy Gentry's judgment. Gentry attempted to make a rental payment to Holland the day after the judgment. If the lease remained valid when Holland took the deeds out of escrow, the tendered payments would have preserved it. Continuous payment attempts are unnecessary if acceptance is unlikely. Holland's title did not vest until May 22, 1964, and he was aware that the deed's release depended on full payment. The trial court incorrectly held that Holland's rights vested upon deed execution and that tendering payments was ineffective. The court concluded that the lease remains active, with Gentry holding the leasehold interest. Appellants' arguments for vesting title to the lease in them were deemed without merit, as the Madison Chancery Court had already determined Gentry's entitlement. Additionally, their claim for an accounting and judgment against Holland was dismissed.

Holland was accused of selling significant quantities of raw materials and failing to account for them, but the court found no trust had been established, and Holland was not indebted. The court's decision to cancel the lease with War Eagle Lime Co. Inc. was deemed incorrect because the notice to vacate was ineffective. The sheriff’s certificate indicated that the notice was served to both War Eagle Lime Company and its president, John E. Yarbro, though there was ambiguity regarding a possible additional delivery to Yarbro's wife, which was not substantiated by testimony. Gentry's additional claims included seeking an accounting from Yarbro, which was denied since Gentry had already received a judgment against Yarbro in a separate action, foreclosing on his lien related to the lease and fixtures. Gentry also claimed to be a creditor of War Eagle Lime Co. Inc. and sought a judgment against Holland, arguing he lacked notice regarding the bill of sale transferring property from Yarbro to Holland. However, the items in question belonged to War Eagle Lime Co. Inc., and Gentry was only a creditor of Yarbro. The trial court's findings were affirmed, except regarding the lease, which was determined to be vested in Gentry.