author: Paul Ward, Justice. John A. Fogleman, Justice,

text:
    ARKANSAS STATE HIGHWAY COMMISSION v. Katheryn Childress DARLING et al
    5-4303
    420 S. W. 2d 94
    Opinion delivered November 6, 1967

      John B. Thompson, for appellant.

      John Eldridge, for appellees.
   Paul Ward, Justice.

This is a condemnation suit brought by the Arkansas State Highway Commission to procure three parcels of land to be used in the construction of U. S. Highway No. 64. Each parcel was a part of a larger acreage — each parcel owned by one or more heirs of E. F. Childress and wife, who are deceased.

The parcels of land mentioned in the complaint will, for clarity, be designated as follows:

Parcel (1.) 6.87 acres owned by Katherine Chil-dress Darling and T. R. Childress, for which there was a deposit of $1,700 for compensation.
Parcel (2.) 5.38 acres owned by R. Childress et al, with a deposit of $1,500.
Parcel (3.) 0.76 acres owned by T. R. Childress and wife, with a deposit of $5,520.

In answer, appellees alleged the deposits were insufficient compensation for the lands taken and the damages done to the remainder of the lands, and accordingly prayed for judgment.

The trial resulted in a judgment against appellant (Commission) as follows: Parcel (1) $2,850; Parcel (2) $3,050, and, Parcel (3) $10,167.

On appeal appellant relies, for a reversal, on three separate points which we now examine.

One.
“The trial court erred in overruling appellant’s motion to strike the value testimony of appellee, T. R. Childress, because he failed to state the market value of the whole tract before the taking and the market value of the remainder after the taking.”

We are unable to agree with appellant’s contention. According to appellant’s own abstract of Childress’ testimony he stated i

“My house is 32 x 67, 2,080 square feet of livable area, three bedrooms and two bathrooms. At $12.50 a square foot the house would be worth $26,000.00 and my 480 square feet of carport at $5.00 a square foot would be $2,400.00 and I had to put in a water pump extra. The relocation of the highway has diminished the fair market value at least fifty percent, or $14,350.00.”

On cross-examination Childress again testified to the same effect. This Court has many times approved this kind of testimony. For a recent case see Herman B. Young et al v. Ark. State Highway Commission, 242 Ark. 812, 415 S. W. 2d 575.

We have also many times held that the owner of property has the right to give his opinion as to the value of same.

Two.
“The trial court erred in overruling appellant’s motion to strike the value testimony of C. J. Peacock because he failed to state the market value of the whole tract before the taking and the market value of the remainder after the taking.”

In our opinion the trial court was correct in refusing to strike the testimony of this witness. In essence, he testified: I have been actively engaged in farming for about ten years; I have bought and sold land in the vicinity of the lands here considered, and I am familiar with the fair market value of land of a similar type and character; I consider the fair market value of the house as about $12,000 and the shed at about $3,500, and I would value the house and. ground after the highway was built as about $4,000 less.

It is apparent from the above abstract of Peacock’s testimony that it does not conform strictly with the before and after formula, but we think it reaches the same result. In effect it says that the property was valued at not less than $15,500 before the taking and $11,500 after the highway was built, i. e., after the taking. The witness was cross-examined by appellant and if he didn’t mean what we say he meant, then *this fact could have been, but was not, revealed. We agree that some of Peacock’s testimony was not entirely clear, but no objection was made on that ground. If part of his testimony was competent, anl we so find, then a motion to strike all his testimony was properly denied. Ark. State Highway Comm. v. Carpenter, 237 Ark. 46, 371 S. W. 2d 535 and Ark. State Highway Comm. v. Bowman, 237 Ark. 51, 371 S. W. 2d 138.

Three.
“The trial court erred in overruling appellant’s motion to strike damages to the property assessed by C. V. Barnes for valuation based on trees and drainage impairment and attributed as severance damage, inasmuch as no special damages were set out in the pleadings of the appellee.”

Again we are unable to agree with appellant’s contention. The testimony given by Barnes was comprehensive and in detail — covering ten pages in appellant’s abstract — and we deem it sufficient to make only brief references to it. He is a real estate expert, having engaged in making real estate appraisals for twenty years. He not only gave his opinion as to the before and after value of the property but explained the reasons therefor. He pointed out, as a result of the taking, certain damages, such as, drainage, damage to fences, houses, yard, cost of removing houses, removal of trees, etc.

Appellant moved to strike this kind of testimony on the ground that no such damages were pleaded. The trial court overruled the motion over objections. We agree with the trial court.

In appellant’s abstract of appellees’ answer it is stated that the court deposits were “insufficient for the property taken and the damages done to the remainder of the lemds. . In appellees’ Answer and Cross-Complaint (Tr. p. 16) it is alleged they . should recover the sum of $2,500 for the value of the land and $3,000 for damages to the remainder of the tract” (referring to one parcel). The same allegations were made with reference to another tract.

Affirmed.

Brown and Fogleman, JJ., concur.

John A. Fogleman, Justice,

concurring. I concur in the majority’s result, but I reach it by approaches which wbuld not result, even, unintentionally, in erosive action on our “before and after” rule for testimony directed to the measure of compensation. I agree, however, that when a witness has shown sufficient knowledge to convince the trial judge that his opinion may be of value, he may state his opinion of the damages in a case such as this, when it is obvious that the opinion is based on the proper measure — i. e., the difference between the value of the land before the taking and after. St. L. I. M. & S. Ry. Co. v. Brooksher, 86 Ark. 91, 109 S. W. 1169. This is not exactly what is involved in this case, in my opinion.

In addition to the testimony set out in the majority opinion, the landowner-witness did testify on cross-examination, after the motion to strike, that he valued his house at $28,700.00 before the taking and $14,350.00 after the taking. Even if it be urged that all his testimony as to values should have been stricken before this examination, certainly this testimony supplied any alleged deficiency so that his entire testimony as to values could not be stricken. Witness Childress not only testified as to the diminution of the value of his residence by reason of the taking, but he also testified as to “per acre” values of certain of the lands actually taken.

There is ample precedent in partial taking cases to permit a witness to testify about the value of things situated on the land taken and about other factors relating to the relative desirability of the remaining lands. This testimony is admissible, not as the measure of damages, but in order to show damage and to explain the elements that a seller or purchaser, either before or after the taking, would consider in arriving at the market value. Arkansas State Highway Comm. v. Hood, 237 Ark. 202, 372 S. W. 2d 387; Kirk v. Pulaski Road Improvement District No. 10, 172 Ark. 1031, 291 S. W. 793.

Generally speaking, a landowner, as an aid to the jury in arriving at just compensation, may show anything that a buyer of ordinary prudence would consider before he would purchase or that a seller would weigh either before or after the taking. Little Rock Junction Railway Co. v. Woodruff, 49 Ark. 381, 5 S. W. 792; Yonts v. Public Service Co., 179 Ark. 695, 17 S. W. 2d 886; Pulaski County v. Horton, 224 Ark. 864, 276 S. W. 2d 706; Arkansas State Highway Commission v. Carpenter, 237 Ark. 46, 371 S. W. 2d 535. For example, rental income or value may be shown. Desha v. Independence County Bridge Dist. No. 1, 176 Ark. 253, 3 S. W. 2d 969; Housing Authority v. Winston, 226 Ark. 1037, 295 S. W. 2d 621; Springfield v. Housing Authority, 227 Ark. 1023, 304 S. W. 2d 938. Other examples are: Cost of restoration of a retaining wall or relocation, reconstruction or reproduction of a building (Kirk v. Pulaski Road Improvement District No. 10, 172 Ark. 1031, 291 S. W. 793; City of Little Rock v. Sawyer, 228 Ark. 516, 309 S. W. 2d 30; Arkansas State Highway Commission v. Bryant, 233 Ark. 841, 349 S. W. 2d 349); Cost of construction of a road connecting the remaining parts of the land taken (Arkansas State Highway Commission v. Speck, 230 Ark. 712, 324 W. 2d 796); moving costs (Arkansas State Highway Commission v. Jackson County Gin Co., 237 Ark. 761, 376 S. W. 2d 553); cost of replacing fence, replacement of shrubs and flowers, moving a house back from a right-of-way line, replumbing, rewiring and loss of trees (Arkansas State Highway Commission v. Carpenter, 237 Ark. 46, 371 S. W. 2d 535); value of buildings which enhance the market value of the property (Arkansas State Highway Commission v. Griffin, 241 Ark. 862, 411 S. W. 2d 495).

Furthermore, it has been said that evidence should be directed first to the value of the land taken, and then to damages resulting to the remainder. Springfield & Memphis Railway Co. v. Rhea, 44 Ark. 258. This procedure is particularly applicable where there is no contention that the remaining property is benefited by the improvement.

The motion was to strike all the values testified to by the witness. His testimony as to the depreciation in value of the house, and as to the values of certain of the lands taken and as to some of the remaining lands affected by the taking, was admissible as hereinabove noted. It was not error to refuse to strike all his testimony.

Under the rules ábove set out, about the same comments can be made on the testimony of Peacock. He definitely stated that the Darling land was worth in excess of $500.00 per acre and the Childress land $500.00 per acre before the highway was built; that the two acres on which the Childress house was situated were worth $2,000.00, the house $12,000.00, .a shed $3,500.00; and that the value of the Childress house and grounds was off $4,000.00 after the highway was built. These are certainly elements to show that the property was damaged.

I think there was no error in the court’s refusal to strike the testimony of C. Y. Barnes because of testimony as to damages resulting from drainage impairment and loss of trees. Lack of trees and poor drainage are certainly items which any purchaser who sought to buy the remainder would consider. The loss of the trees and the impairment of drainage would certainly be kept in mind by a seller.

It was said in Springfield & Memphis Railway Co. v. Rhea, 44 Ark. 258, that, where the construction has been completed, the court and jury may properly consider evidence of permanent injury to the land by a substituted drainage system that was insufficient. The contention there made was that this element should have been the subject of a separate action. The court’s holding was to the effect that, after construction, the jury may consider the state of facts then existing in determining what damage had been done, embracing all past, present and future damage which the improvement may reasonably produce. It has further been held that under these circumstances impoundment of water as a result of the completed construction, properly or improperly done, may be shown to the jury as an element of damages, as against an objection that such constitutes an element of special damages. Arkansas Cent. R. Co. v. Smith, 71 Ark. 189, 71 S. W. 947. Loss of trees has been held to be a proper factor to consider in arriving at the before and after value. Arkansas State Highway Commission v. Carpenter, 237 Ark. 46, 371 S. W. 2d 535. Appellant contends that this latter item should be excluded since it was not specifically pleaded. The statement in Bradley v. Keith, 229 Ark. 326, 315 S. W. 2d 13, with reference to pleading damages as to lands remaining (probably dictum) is not applicable. Here, Barnes identified the trees as being in the area taken, on both direct and cross-examination. Certainly it was proper that appellant’s counsel ask, as he did, the basis for the witness’s testimony and the elements of damage he considered. The answers could not be calculated to have misled the jury as to the measure of damages. He had already given his valuation of the property before and after, the taking.

Brown, J., joins in this concurrence.


source: Caselaw Access Project

author: Paul Ward, Justice.

license: Public Domain

text:
    Dean E. BDOWNING et ux v. Sylvester HICKS et al
    5-4327
    420 S. W. 2d 545
    Opinion delivered November 6, 1967
    [Rehearing denied December 4, 1967.]

      F. C. Crow, for appellants.

      Graves & Graves, for appellees.
   Paul Ward, Justice.

This is a suit in ejectment to obtain possession of a part of Lot 1, Block 1, London’s Addition No. 1, to the City of Hope. The litigation arose in the manner presently summarized.

One J. J. Moore acquired title to the said Lot in 1941, and immediately took possession. In 1947 he conveyed the south seventy feet of the Lot to one Mabel Washington. Moore failed to pay taxes on Ms part of the Lot in 1960, and it was conveyed to the iState in November, 1961. On February 11, 1964 the state deeded the forfeited parcel to the Southwest Land and Development Company. (Note that the description in tMs deed reads: “Part of Lot 1 of Block. . .”). On May 12, 1966 the land company (by accurate, description) conveyed the land to Dean E. Browning and wife, who are the appellants here. Appellants never took actual possession of the property on wMch there was a house.

Appellants filed a complaint in circuit court containing, in substance, the following material allegations: (a) The facts set out above; (b) The property is occupied by Sylvester Hicks and bis wife; and his parents, who are appellees herein; (c) Appellees are trespassers, and they have refused-to surrender possession; (d) A search of the records fails to show appellees have any interest in said property, and they have not paid taxes thereon.

The prayer was; for possession of Lot 1, less the south seventy feet; for eviction of appellees, and; to have title quieted in the plaintiffs (appellants).

To the above complaint appellees filed a Demurrer and a Motion for Summary Judgment. The .trial court sustained the Demurrer and also granted the Motion, stating:

“Plaintiffs are basing their claim on a tax forfeiture and deed from the State of Arkansas to Southwestern Land and Development 'Company, which are both void because the lands described by a ‘part’ description . . .. it is undisputed that the plaintiff’s alleged title is based on this void tax forfeiture and sale and that is the only real issue in the case. . .”

It is our conclusion that the trial court was correct in his analysis of the case, and must be áffirmed.

Appellants do not contend that the trial court misstated any material fact or that there are any disputed material facts in this case. Therefore the Motion for a Summary Judgment was proper, there being only a question of law for the trial court to decide. See Ark. Stat. § 29-211 (c) (Repl. 1962) and Trinity Universal Ins. Co. v. Robinson, 227 Ark. 482, 299 S. W. 2d 833.

There are numerous decisions of this Court holding a “part” description or an indefinite description conveys no title. See: Price v. Price, 207 Ark. 804, 182 S. W. 2d 879: Clem v. Missouri Pacific Rd. Co., 223 Ark. 887 (p. 888), 269 S. W. 2d 306; Teer v. Plant, 238 Ark. 92, 378 S. W. 2d 663, and; Thomason v. Abbott, 217 Ark. 281, 229 S. W. 2d 660. In the last cited case we said that an indefinite description would not support an action in ejectment or quiet title.

It is of no avail to appellants to show that the deed they received from the Land Company contained a definite description, since the deed to the Land Company was void by reason of the indefinite description. American Portland Cement Company v. Certain Lands, 179 Ark. 553, 17 S. W. 2d 281.

Affirmed.

Brown, J., not participating.


author: Lyle Brown, Justice.

text:
    Clarence E. ROUSE v. James N. WESTON et al
    5-4320
    420 S. W. 2d 83
    Opinion delivered November 6, 1967

      W. B. Howard, for appellant.

      Barrett, Wheatley, Smith & Deacon, for appellees.
   Lyle Brown, Justice.

Appellant Rouse was the plaintiff below. His action against Weston and Chadwick arose out of a minor automobile collision in which vehicular damages resulted. Before filing suit, plaintiff gave notice to the defendants in accordance with the Small Property Damage Claims Act 283 of 1957. Ark. Stat. Ann. § 75-918 (Repl. 1957). Plaintiff’s notice, as well as his complaint, alleged damages to be $200.

At the trial plaintiff introduced two estimates of repairs to support his prayer for damages. Those estimates slightly exceeded $200. That was all the evidence offered to prove damages. At the conclusion of plaintiff’s testimony the trial court deleted from plaintiff’s complaint the pleas for double damages and attorney’s fee. Under an instruction which limited Rouse’s recovery to a maximum of $200, the jury returned a verdict for that amount.

Plaintiff-appellant asks us to approve the jury verdict and to direct the trial court to enter a verdict for double damages and attorney’s fee.

The court’s action in striking the prayer for double damages and attorney’s fee was error. Apparently that action was taken on the theory that the estimates exceeded $200; therefore, so the court reasoned, the damages exceeded $200. The estimates are merely evidence to be considered in determining the fair market value of the automobile before and after the accident. Jurors are permitted to examine the estimates; they are allowed to take into consideration their own common knowledge. Utilizing those factors the jury may well have concluded that the fair market value of the car should be upgraded or downgraded from the estimates. It is common knowledge that repairs will ofttimes not fully restore an automobile substantially damaged. On the other hand, it is similarly true that an old automobile, moderately damaged, could be a better car with new parts.

First, appellant asks this court to hold that a claimant can reduce his claim and bring himself within the cited small claims act. This Act imposes double damages and attorney’s fee on a defendant, who, “without meritorious defense,” fails to pay the damages when they are $200 or less. The tenor of the statute is penal in nature and the title of Act 283 removes any doubt as to the intent of the Legislature to treat the provisions as penal. The title specifies the purpose of the Act is to provide a penalty for failure to pay small property damage claims. The title of an act may be looked to, in event of doubt, to shed light on legislative intent Warfield v. Chotard, 202 Ark. 837, 153 S. W. 2d 168 (1941).

It is well settled that penal statutes should be strictly construed. We are bound by the legislative declaration that the Act is restricted to those cases whose “loss or damage occurs . . . amounting to two hundred ($200.00) dollars or less ...” We are not permitted to apply the penalty in a case where the damages exceed the ceiling fixed by the Legislature.

Second, we are asked to direct the trial court to enter a judgment for $400 and attorney’s fee. That we cannot do, because it would have to be predicated upon a finding that has not yet been determined, namely, that the actual damages were $200 or less. The jury was specifically told that any recovery by Rouse should be limited to $200; additionally, the jury was instructed to reduce any award to Rouse in proportion to any negligence on his part. The case was submitted on general verdicts and Bouse’s award was fixed at $200. It is impossible to tell whether (1) the jury thought Rouse was damaged more than $200 but reduced the verdict to the maximum fixed by the court, or (2) whether Rouse was found to have been damaged more than that amount but his negligence caused a reduction, or (3) whether the verdict represents the exact amount of full damages.

For the error indicated with respect to the striking of the prayer for double damages and attorney’s fee, the case is reversed. Since a determination of full damages has not been made, only a new trial can resolve that amount. Because of the need for a special finding on total damages, the case could better be handled by the use of interrogatories.

Reversed and remanded.


author: John A. Fogleman, Justice.

text:
    Harold R. CLARK v. GENERAL ELECTRIC CO. et al
    5-4288
    420 S. W. 2d 830
    Opinion delivered November 6, 1967
    [Rehearing denied December 11, 1967.]

      Michael Heindle, Wayne Owen and James R. Howard, for appellant.

      Wootton, Land & Matthews, Roy H. Mitchell, M, G. Lewis, Jr., William R. Mitchell, Robinson, Thornton, McCloy & Young, Clayton Farrar, and Wood, Chesnutt & Smith, for appellees.
   John A. Fogleman, Justice.

The principal question in this case requires the determination of priority between a construction money mortgage on the one hand and several liens of materialmen, suppliers and mechanics on the other.

In 1964 Morehead Properties, Inc., (hereinafter called Morehead) having in mind construction of a large complex of “garden apartments,” acquired certain lands in Hot Springs. Morehead had previously dealt with appellant for materials, supplies and financing in connection with similar construction in Texas. Appellant arranged for both permanent and construction financing for Morehead on the project in question. He accomplished this by guaranteeing the $400,000.00 construction loan by the Exchange National Bank of Dallas and acquiring a commitment for permanent financing by John Hancock Life Insurance Company when construction was completed and the apartments occupied. On April 14, 1965, Morehead executed a proper and valid mortgage on the property to the bank as security for the construction loan. It was not filed for record until April 21, 1965, at 11:21 a.m. It contained a recital that the money was to be advanced to Morehead from time to time. Actually, the entire amount of the loan was disbursed pursuant to preliminary agreement, however, by advances by the bank to appellant from time to time. He, in turn, made advances to Morehead for the payment of various costs incident to the project, with the proposed application of the advances usually specified by Morehead. The latter commenced construction on the project, making contracts with appellees for labor and materials. Morehead became insolvent before the buildings were completed or appellees paid. Appellant then paid the Morehead note upon demand of the bank and took an assignment of the note and mortgage. He also took possession of the apartment complex. Appellees then filed suits to enforce their liens and appellant filed a suit for foreclosure of the construction money mortgage. The suits were consolidated for trial and the chancellor found that the liens of appellees were prior to the lien of the construction money mortgage. The principal contention of appellant is that the trial court erred in holding that the appellees’ liens had priority over his mortgage.

The court’s findings in this respect were based upon the activities of appellee Carroll Pyron, d/b/a Carroll Pyron Construction Company. Pyron was a heavy construction contractor, operating bulldozers and similar machinery. He was employed in October 1964 to' clear the land of brush, debris and trees in order for a topographical survey of the premises to be made. This assignment was completed, Pyron billed Morehead and was fully paid. While no agreement was reached, Pyron was told at the time he did this work that Morehead would like to have him do the excavation for the concrete work. In the early part of April 1965 Morehead contracted with Pyron for the leveling of the land for a proposed apartment complex to consist of more than one building. After the clearing in 1964, several large trees and two old houses remained on the site, but these latter had been removed when Pyron first went there in 1965. The old foundations remained, however, and the land itself was of an uneven elevation. Pyron was furnished with a set of plans and building elevations were discussed. An agreement was made for Pyron to clear the property of remaining debris and to grade elevations for the building sites with compensation to be paid on an hourly basis. The latter undertaking was to be accomplished by moving dirt from one place to another on the site so as to bring the sites for the buildings to elevations satisfactory for the laying of concrete slab foundations.

On the morning of April 19th Pyron went to the building site with an employee named Terry to commence work. Pyron spent about 45 minutes establishing cut and fill elevations with a transit and an elevation rod. Terry had brought a large bulldozer with which he started moving the foundations of the old houses. That day he worked approximately six hours, during which he removed the foundations of the old buildings and commenced the leveling operation. The condition of the soil after this work would have revealed that it had been “bulldozed over.” The machine remained on the job site and was actually not removed therefrom for at least one week. An employee named Taylor went to the property at 7 a.m. on April 21st and spent about thirty minutes with Pyron, becoming oriented' to the elevations. He then worked for an hour and a half, using the same machine. Nothing else was done on the apartment site before the filing of the mortgage. Ultimately Pyron completed the leveling work. Shortly prior to May 13th he dug the footings for the concrete foundations. This was the first actual work in connection with building the apartments, other than the bulldozer work.

Appellees contend that the work done by Pyron establishes the priority of all their liens, relying upon Ark. Stat. Ann. § 51-607 (1947). They argue that this work constituted “commencement of the buildings or improvements” in the sense of that section of the statute, so that all such liens dated from this “commencement” under the rule announced in Planters Lumber Co. v. Jack Collier East Co., 234 Ark. 1091, 356 S. W. 2d 631. Appellees have virtually abandoned their original contention that the work in October 1964 constituted a commencement from which the priority would date, but rely on the work done on April 19th and 21st. We had occasion to determine whether there was a “commencement” of a building sufficient to establish lien priority recently in Mark’s Sheet Metal, Inc. v. Republic Mortgage Co., 242 Ark. 475, 414 S. W. 2d 106. There we held that the work done must be such as to make it obvious that improvements, on the property were being commenced or were underway. We said that the clause in question means some visible or manifest action on the premises to be improved, making it apparent that the building is going up or other improvement is to be made. Reference was made in that opinion to Rupp, Trustees v. Earl H. Cline & Sons, 230 Md. 573, 188 A. 2d 146, 1 ALR 3d 815. In that case, the Maryland Supreme Court held that neither the removal of soil from a part of a development site intended for the erection of an apartment building to another part of the site, intended for the construction of cottages, nor the grading and leveling of the apartment site constituted such “ commencement’ ’ under a similar statute as to give a mechanic’s lien preference over a subsequently recorded mortgage. They relied on their previous decisions holding that commencement of the building is “the first work on the ground which is made the foundation of the building and forms a part of the work suitable and necessary for its construction” (Brooks v. Lester, 36 Md. 65) and that driving of stakes and digging away of soil to level the ground prior to beginning construction were not sufficient (Kelly v. Rosenstock, 45 Md. 389). They had said in the earlier cases that the work must be such that everyone can readily see and recognize it as commencement of a building. This rule is followed by a great majority of the cases in which the question has arisen in states with statutes similar to ours.. It is generally held that the mere preparation of the land for the construction is not sufficient. See Annot., 1 ALR 3d 822.

Even though not followed as an unqualified rule, actual and visible improvement to establish priority has been held in many of these cases not to begin until such work as excavation for a basement or foundation has begun. National Lumber Co. v. Farmer & Son, Inc., 251 Minn. 100, 87 N. W. 2d 32; North Shaker Boulevard Co. v. Harriman Nat’l Bank, 22 Ohio App. 487, 153 N. E. 909; Hagenman v. Fink, 19 Pa. Co. Ct. R. 660; Roy Bldg. & Loan Ass’n v. King, 17 Pa. D & C 83, 22 Del. Co. 297; Davis-Wellcome Mtge. Co. v. Long-Bell Lbr. Co., 184 Kan. 202, 336 P. 2d 463; George M. Newhall Engineering Co. v. Egolf, 185 F. 481 (3d Cir.). It has also been held that the labor or materials must be such as could afterward become, or be considered, a component part of the structure. Conn. General Life Ins. Co. v. Birzer Bldg. Co., 61 Ohio L. Abs. 477, 101 N. E. 2d 408; Sheridan, Inc. v. Palchanis, 172 So. 2d 872 (Fla. 1965). At any rate, the weight of authority seems to be that clearing, grading and filling of the land do not constitute the commencement of a building for the purpose of establishing priorities of mechanics’ and materialmen’s liens. See, Kiene v. Hodge, 90 Iowa 212, 57 N. W. 717; Central Trust Co. v. Cameron Iron & Coal Co., 47 F. 136; New Hampshire Savings Bank v. Varner, 216 F. 721 (8th Cir.); aff’d 240 U. S. 617, 36 S. Ct. 409, 60 L. Ed. 828; Maule Industries, Inc. v. Gaines Const. Co., 157 So. 2d 835 (Fla. 1963).

We hold that the work done in this case by Pyron was not such as to be visible or manifest action on the premises, making it apparent that a building or improvement was being commenced or underway. It was at most a preparatory operation. '

Appellees contend, however, that there is no evidence that the bank or appellant made any visual inspection of the premises before the construction money mortgage was recorded so they could not have relied upon what they saw. This is analogous to. an argument that one who does not examine the public records of mortgages would not be entitled to assert the priority of a mortgage taken by him and filed for record over a subsequently filed mortgage of which he had no notice otherwise. The question is not whether an inspection was made, it is rather what an inspection would have disclosed.

Appellees also contend that removal of the old foundation was sufficient to establish the priority, relying upon Pratt v. Nakdimen, 99 Ark. 293, 138 S. W. 974. In that case this court only held that the trial court correctly included the amount paid by a defaulting contractor for the removal of an old building and its foundation from the job site in the total sum of liens against the building for the purpose of fixing the percentage to be distributed upon the lienable claims asserted against the building, after default and completion of the building by the owner. No question of priorities was involved. In that case the court said that this cost was for labor that went into the construction of the new building because it was impossible to build the new without the removal of the old. It must be noted that the contract with the original contractor called for the removal of a three-stóry building and the construction of a six-story structure. Even if it can be said that the cost of removing the old foundations was a lienable claim, this does not mean that this step establishes the priority of the lien. The statute provides for a lien for work upon a building or improvement [Ark. Stat. Ann. § 51-601 (1947)] but the priority is determined by the “commencement” (§ 51-607). The mere fwt that the work was the proper subject of a lien cannot establish priority when it does not give notice of the commencement. The removal of the old foundations would no more give notice that a new building was to be erected than the wrecking and removal of the old building did, yet the lien claimants have not sought to use that date as the date of commencement. It is to be noted that priority was denied by the court in the Rupp case, even though Maryland’s lien statute gave a lien for grading, filling and landscaping. Maryland Code (1957) Art. 63, § 1. The point is further illustrated by considering that the fabrication of fittings for the heating and air conditioning system was a proper item for a lien when the system was put in the building involved in Mark’s Sheet Metal v. Republic Mortgage Co., 242 Ark. 475, 414 S. W. 2d 106, but this step furnished no notice whatever of the commencement of the building.

We cannot say that appellant is entitled to priority for the entire amount of the judgment awarded him, however. Appellees question his entitlement to priority for the cost of the land, brokerage fees paid to Clark, a stand-by mortgage fee, title insurance, taxes and interest. The testimony showed that of the total advanced, the sum of $57,780.00 was for the purchase price of the land and was advanced by Clark to Morehead. This item may properly be considered as secured by appellant’s prior lien, as the purpose of the loan and not the use of the proceeds is the determining factor. Sebastian Build ing & Loan Assn. v. Minten, 181 Ark. 700, 27 S. W. 2d 1011. The present case is distinguishable from Planters Lbr. Co. v. Wilson, 241 Ark. 1005, 413 S. W. 2d 55, in that there is no evidence here that either Clark or the Exchange Bank ever represented in any way that the purchase price of the lot had been paid, nor did either of them receive or retain any part of the purchase price, as did the construction money lender in the case last cited. However, under the holding of the Wilson case, appellant would not be entitled to priority for his brokerage fee of $4,000.00 or the stand-by mortgage fee of $8,000.00 paid to the insurance company which was to make the permanent loan after completion and occupancy of the building.

Appellees also question the disbursements for interest, title insurance and taxes. We need not consider the effect of control of loan disbursements (as we did in the Wilson case) on the general rule that loan purpose, not use, is the key priority factor because the question of lien priority on the remaining items is not dependent thereon. The item of taxes is a proper item for priority as it was paid to protect the property from what was or would be a prior lien. Ashdown Hardware Co. v. Hughes, 223 Ark. 541, 267 S. W. 2d 294. We see no reason why the charge for title insurance — an outlay for a necessary prerequisite for temporary financing —should not he a proper item. Interest would not he allowable on those sums deducted or paid for brokerage and stand-by mortgage fees (Planters Lbr. Co. v. Wilson, supra) but this appears to have been included in the judgment in favor of appellant and included in the court’s decree.

We find no reason why payment to Clark for materials and supplies furnished by him or companies in which he had an interest should not be allowed as items properly disbursed under the construction loan.

Many other interesting questions are presented on the appeal, as well as on the cross-appeal of General Electric Company which seeks to establish a lien for electric ranges furnished for the apartments. In view of our holding, these questions have become moot. By stipulation of the parties, a commissioner’s sale of the property was had pending this appeal. The proceeds of that sale are to be distributed after final determination of this case. At that sale appellant became the purchaser for $340,000.00. He is entitled to priority for an amount in excess of this sum, so there will be nothing for distribution to the lien claimants in any event.

Reversed and remanded for entry of a decree pursuant to this opinion, an appropriate order on distribution of the proceeds of sale, and a release of supersedeas bond posted by appellant pursuant to stipulation of the parties.


author: J. Fred Jones, Justice.

text:
    A. E. HENSLEY et ux v. FARM BUREAU MUTUAL INSURANCE COMPANY of Arkansas
    5-4326
    420 S. W. 2d 76
    Opinion delivered November 6, 1967

      Lightle & Tedder and Catlett & Henderson, for appellants.

      Cochrill, Laser, McGehee, Sharp & Boswell, for appellee.
   J. Fred Jones, Justice.

Mr. and Mrs. A. E. Hensley brought suit in the White County Circuit Court against Farm Bureau Mutual Insurance Company of Arkansas to recover on a fire insurance policy issued in the face amount of $2,000.00. A jury was waived and the cause was tried before the trial court sitting as a jury. The trial court denied recovery and dismissed the complaint on the equitable theory of unjust enrichment. Mr. and Mrs. Hensley have appealed and rely upon the following points for reversal:

“1. The contract of insurance was valid at its inception, and remained valid until the time the insured property was totally destroyed, and under the ‘Valued Policy Statute’ became a liquidated demand on the date of loss.
“2. Appellants as vendors under a Contract of Sale of the realty upon which the insured property was located retained a separate insurable interest in the insured property and subsequent transactions with persons not parties to the contract sued upon did not alter the fixed liability of the insuror.
“3. The lower court erroneously applied the doctrine of unjust enrichment to an action at law controlled by the ‘Valued Policy Statute.’ ”

For. some time prior to 1965, appellants had carried their fire insurance in separate policies with the appellee, Farm Burean Mutual, and one of the policies was on a rent house in the face amount of $2,000.00. This policy was renewed on January 24, 1965, with loss payable clause in favor of the Searcy Bank who held a mortgage on the property, and the annual premium for 1965 was paid by appellants. On March 2, 1965, appellants entered' into a sales contract with H. D. Taylor whereby they agreed to sell the property to Taylor for $2,000.00, with $200.00 paid in cash and the balance to be paid over a period of three years in $600.00 annual installments. The contract of sale provided:

“BUYER hereby covenants and agrees that he will keep the improvements on the property fully and adequately insured with a reputable insurance company with minimum coverage of $2,000.00, and will reflect the interest of SELLERS and of the Searcy Bank, Searcy, Arkansas.”

Mr. Taylor did not have money for an insurance premium when the contract of sale was entered into, but subsequently, and without notice to, or knowledge of, the appellants, he did procure an insurance policy on the property from Glens Falls Insurance Company in the amount of $2,000.00 with loss payable to himself and to the Searcy Bank as mortgagee. On September 9, 1965, the house was completely destroyed by fire. Glens Falls paid the face amount of its policy to Taylor, who in turn paid appellants the balance due on the sale price. Appellants paid their indebtedness to the Searcy Bank and transferred title by appropriate deed to Taylor as provided in the contract of sale.

We agree with appellants on all three points relied on for reversal. As a matter of fact, appellee agrees with appellants on the first two points, but contend in their argument as follows:

“This appeal does not involve a question of the amount of damages, hut whether appellants have a right to recovery.
“A question for determination is whether appellants. breached a condition or conditions of their policy so that appellee may avoid a liability it would otherwise owe. The trial court found that they did. A second issue is whether appellants would be unjustly enriched if permitted to recover. The trial court found that they would.”

We do not agree with the trial court on either of these points. We find nothing in the declaration, or in the application for membership and insurance signed by appellant, that is shown to be false when signed by appellants. As a matter of fact the declaration recites that the premises were inspected by appellee’s agent, Lloyd L. Brown, who personally inspected the risk, and considering utility value, recommended that appellee accept same. The property insured was a “one-story one-family tenant dwelling.” Appellant testified that this property had been sold the previous year on a contract which was forfeited, and that agent Brown advised him, upon inquiry, that such contract would not affect' the insurance so long as a deed had not been delivered. This is not denied by appellee. Certainly the insurable risk should be no greater on premises occupied by a prospective purchaser who had paid $200.00 toward the purchase price than it would be when occupied by a tenant.

We find no merit to appellee’s contention that appellants violated any of the provisions of the policy by willfully concealing or misrepresenting any material facts concerning the insurance subsequently procured by Mr. Taylor and of which the appellants knew nothing, until several days after the house burned down.

The policy contains a clause providing that “other insurance may be prohibited or the amount of the insurance may be limited by endorsement attached hereto,” but we find no such endorsement to the. policy.

The policy also contained a provision as follows:

“This Company shall not be liable for a greater proportion of any loss than the amount hereby insured shall bear to the whole insurance covering property against the peril involved, whether collectible or not.”

This provision in the policy avails appellee nothing in the way of defense in this case, as the insured property was a total loss.

We have in Arkansas a “valued policy law” with little change since 1889. Ark. Stat. Ann. § 66-3901 (Repl. 1966) provides as follows:

“A fire insurance policy, in case of a total loss by fire of the property insured, shall be held and considered to be a liquidated demand and against the company taking such risk, for the full amount stated in such policy, or the full amount upon which the company charges, collects or receives a premium; provided, the provisions of this section shall not apply to personal property.”

The Arkansas case of Mann v. Charter Oak Fire Ins. Co., 196 Fed. Supp. 604, was a very similar case to the one involved here. In the Mann case, Mr. Mann had a policy in force with Trinity Universal Insurance Co. for $15,000.00 with a mortgage clause to First Federal Savings and Loan. He owed First Federal $8,000.00. The Trinity policy prohibited other insurance. First Federal requested physical possession of the Trinity policy from Mann, but never did receive delivery of it, so First Federal procured an additional policy from Charter Oak in the amount of $8,000.00. The house was destroyed by fire, Mann collected on the Trinity policy, paid off the First Federal mortgage and sued on the Charter Oak policy.

In holding that Mann was entitled to recover, the court said:

“The defense based on the prohibition of other insurance contained in the Trinity policy and upon the conduct of Mann in connection with his obtaining payment under that policy does not lack some ethical appeal, but it cannot be sustained legally.
“An insurance company has the right to stipulate against other insurance on the insured premises, and Trinity exercised that right. Charter Oak did not do so, and, in fact, the prorata clause in its policy recognizes that the insured may- carry other insurance on the property. Since the Mann property was totally destroyed by the fire, the Arkansas ‘valued policy’ statute, Ark. Stats. 1947, Cum. Supp. § 66-3901, is applicable, and the measure of the loss is the aggregate of the concurrent policies in force, with each insurer being liable for the full amount of its policy. 29 A Am. Jur. Insurance, § 1552; 45 C.J.S. Insurance § 922, p. 1032, supra; see also Tedford v. Security State Fire Ins. Co., 224 Ark. 1047, 278 S. W. 2d 89.”

In 29 Am. Jur., Insurance § 1196, we find the following:

“It is recognized by all the cases decided upon the question that under a valued policy or the provisions of a valued policy statute, the insured insuring the property at a given valuation accepted by the insurer at the time of the issuance of the policy as the value of the insured’s interest may recover the full value insured, even though he in fact has a limited or qualified interest worth less than the amount of the insurance. The insurer may not go behind the policy and show that the insured’s interest is worth less than the amount of the policy. ’ ’

In Couch on Insurance 2d Vol. 16, § 62:28 is found the following statement:

“The cases in general hold that provisions of policies on real property for a proportionate liability in case of co-insurance are inconsistent with statutes providing for valued policies, and are therefore invalid. ’ ’

And again in Couch §§ 62:94-95 appears the following :

“A provision in a policy that in case of other insurance on the property insured, made prior or subsequent to the policy, the insured shall be entitled to recover no greater proportion of the loss than the sum insured bears to the whole amount so insured therein, applies only to cases where the insurance covers the same interests, and can have no application to insurance obtained upon another distinct insurable interest in the property. Conversely stated, ‘other insurance’ within the meaning of an apportionment of loss clause in a policy is other insurance on the same interest.
“Other insurance relates only to insurance held by the person insured by the policy in question, as contrasted with policies naming other persons as the insured. ’ ’

See United States Fire Ins. Co. v. Hodges, 275 Ala. 243, 154 So. 2d 3; American Century Ins. Co. v. Harrison, (Texas Civ. App.) 205 S. W. 2d 417

Couch at § 62:100 states

‘ ‘ The policy covering the interest of a vendee under a purchase contract has no application to the insurance issued on the vendor’s separate and distinct insurable interest.”

In the Wisconsin case of Ciokewicz v. Lynn Mut. Fire Ins. Co., 248 N. W. 778, Wisconsin had a standard value policy statute and also had statutory provisions whereby an insurance company could provide by policy provisions for non-liability for loss or damage occurring while the insured has another contract of insurance, etc. The owner of a barn obtained a fire insurance policy on tbe barn in the amount of $1,400.00 from Lynn Mutual. He later applied to Lynn Mutual for additional insurance and the application was denied. He then purchased a policy from American Insurance Company in the amount of $1,900.00 and attempted to cancel his policy with Lynn Mutual. The barn was totally destroyed by fire before the cancellation was fully accomplished and American paid the face amount of its policy. The owner sued Lynn Mutual on its policy and the facts of that case, the contentions of the parties, and decision of the court on the pertinent point involved, may be concisely quoted from the body of that opinion as follows :

“[4] The policy issued by the defendant contained the following clause: ‘This Company shall not be liable under this policy for a greater proportion of any loss on the described property or for loss by an expense of removal from premises endangered by fire, than the amount hereby insured shall bear to the whole insurance, covering such property.’ It is contended by the defendant that in view of this provision in the policy, the so-called Valued Policy Law, section 203:21, which provides: ‘Whenever any policy of insurance is written to insure real property and the . property insured is wholly destroyed, without criminal fault on the part of the insured or his assigns, the amount of the insurance written in such policy shall be taken conclusively to be the true value of the property when insured and the true amount of loss and- measure of damages when destroyed,’ does not apply in this case.” * * *
‘ ‘ [6, 7] It. is further argued that the plaintiff, having already been paid $1,300 by the American Insurance Company, if he be now permitted to recover the amount named in the policy of the defendant, Ms total recovery will exceed the value of the property. This is no doubt true. Most insurers protect themselves in a situation of that kind by including in their policies a provision that the insurer shall not be liable for loss or damage occurring while the insured shall have any other contract of insurance, etc., in which event section 203:215 appears to be applicable. The provisions of the valued policy law are valid and we perceive no reason why the law does not apply in this- case. Fox v. Milwaukee Mechanics Insurance Co. (Wis.) 246 N. W. 511. Courts cannot suspend the operation of statutes merely because an unexpected result may work out in a particular case. The Valued Policy Law being applicable, it being stipulated that the property was totally destroyed and the fire was accidental, the plaintiff should have had judgment for the amount named in the policy, $1,400, with interest.”

In the case before us there is no evidence at all of fraud in the procurement of either of the policies. Each insured had a separate insurable interest. Subrogation rights as between the two insurance carriers are not involved. Had the contract purchaser not procured his own policy, certainly appellee would have been liable on its policy and payment to appellant on that policy would not have affected the purchaser’s liability under the sales contract in the least. Whether the purchaser paid his indebtedness to appellant out of funds paid to him by his own insurer or out of some other funds is no concern to appellee. The liability of Grlens Falls to its own insured is not before us, but its liability could in no wise affect appellee’s liability to it's insured. Although appellee’s policy provided ‘ other insurance may be prohibited or the amount of insurance may be limited by endorsement attached hereto,” no such endorsement was attached. Although the policy provides “this company shall not be liable for a greater proportion of any loss than the amount hereby insured shall bear to the whole insurance covering the property against the peril involved, whether collectible or not,” we interpret “the whole insurance covering the property” to mean the whole insurance procured by the insured on his own insurable interest and not including insurance on the insurable interest of some third party who has contracted to purchase the insured premises. Even if we should interpret this provision otherwise, it would be ineffective as in conflict with the Valued Policy Statute in this case. (Mann v. Charter Oak, supra.)

The appellant did not breach his insurance contract by not advising appellee of matters he had no knowledge of until some thirty days after the fire. The actual value of the insurable interest of the purchaser was not necessarily confined to the amount he agreed to pay for the premises or the cost of rebuilding the house. The value of the interest he did insure was fixed at the full face amount of his policy under the statute, and what he did with the proceeds was of no concern to appellee. The insurable interest of the appellants is not questioned, and we fail to see where unjust enrichment is involved in this case.

If the appellants were unduly ^enriched at all in this case, it was because the purchaser honored his purchase agreement and paid for the property even though the house had been destroyed by fire. As between the appellants and appellee, there was no unjust enrichment involved. Appellants paid the premium for one year on insurance in the amount of $2,000.00. The house was totally destroyed by fire within the year, so appellants should be paid the face amount of the policy in the amount of $2,000.00. The record does not show how many annual insurance premiums appellants had previously paid to appellee on this and his other property, but if he had continued to pay premiums on a $2,000.00 policy for any number of years and no fire had occurred, appellants would be entitled to no payment under the terms of their policy, neither would the appellee be unjustly enriched by the premiums paid.

We conclude that the judgment of the trial court should be reversed and this cause remanded to the trial court for entry of a judgment not inconsistent with this opinion. The trial court will fix and award the penalty and attorney fee.

Reversed and remanded.


author: Conley Byrd, Justice.

text:
    Basil PATRICK et ux v. Warren E. WOOD, Judge
    5-4334
    420 S. W. 2d 92
    Opinion delivered November 6, 1967

      Jones & Stratton, for petitioners.

      Gannaway & Darrow, for respondent.
   Conley Byrd, Justice.

This is a petition for prohibition. At issue is the question of whether the Pulaski Circuit Court dismissed cause No. 56930 therein pending, in which Vada Cowan was plaintiff and Basil Patrick and Florence Patrick, his wife, were defendants.

The docket sheet shows that Vada Cowan’s complaint for injuries arising out of an automobile collision in North Little Rock was filed on December 3, 1964. On December 18 the ease was assigned to the Second Division of Pulaski Circuit Court. Defendants’ motion for summary judgment and their answer and counterclaim were filed on December 28, 1964. On January 5, 1965, plaintiff filed her answer to defendants’ counterclaim. The next docket notation is on March 13, 1967, dismissing the canse for failure to prosecute. On April 28, 1967. the Pulaski Circuit Court entered its order setting aside the “dismissal of failure to prosecute.”

After the March 13, 1967 dismissal for failure to prosecute in the Pulaski Circuit Court, Basil Patrick et ux, on April 13, 1967, filed a complaint in the Faulkner Circuit Court for injuries arising out of the same accident. Service on this complaint was obtained on Vada Cowan in Pulaski County on April 17, 1967.

The order of dismissal of March 13, 1967, in the Pulaski Circuit Court is as follows:

“PULASKI COUNTY CIRCUIT COURT,
MARCH TERM, 1967
MONDAY, MARCH 13, 1967
“By order of the court upon its own motion after reviewing the civil docket and finding that there has been no activity in the following cases for a substantial length of time; notices having been sent in these cases and no notices having been sent in others, said cases are to be dismissed for failure to prosecute without prejudice to wit:
“VADA COWAN PLAINTIFF VS 56930 “BASIL PATRICK and “FLORENCE PATRICK DEFENDANTS”

The record does not show that the foregoing order was signed by the court.

The Pulaski Circuit Court order which was signed by the judge on April 28, 1967, provides:

“The Court finds that on March 9, 1967 it denied the motion of Florence Patrick for summary judgment, and on that same date mailed to Attorneys Guy H. Jones, Homer Tanner and Bert Barrow a letter enclosing a copy of the order denying said motion and notifying the attorneys that this court had set this case for trial on June 27, 1967.
“The Court further finds that thereafter on March 13, 1967, one of the deputy clerks of this Court inadvertently made a notation on the docket that this case had been dismissed for failure to prosecute, that this docket notation should not have been made, that it in no way constituted a dismissal of this case and that this case is now fully pending in this Court and has been continuously without interruption.
“IT IS THEREFORE BY THE COURT CONSIDERED, ORDERED AND ADJUDGED that the entry referred to herein shall be stricken from the docket as having been inadvertently made, that this case is fully pending in this Court now, and has been continuously active and pending since its original inception, without any interruption.”

Under our holding in Oliver v. Miller, 239 Ark. 1043, 396 S. W. 2d 288 (1965), petitioners had a right to file their cause of action in the Faulkner Circuit Court IF cause No. 56930 in the Pulaski Circuit Court had been dismissed. Herein lies, under the record, a fact issue which we are unable to determine upon a writ of prohibition in this court. In Keenan v. Strait, Judge, 221 Ark. 83, 252 S. W. 2d 76 (1952), we held that prohibition did not lie where the jurisdiction of the trial court turned upon a fact issue — the remedy for correcting an erroneous ruling by the trial court being by way of appeal.

In the record before this court, there appears to be a disputed fact as to whether the cause of action No. 56930 was dismissed by the court or whether the clerk made an inadvertent or unauthorized entry of an order. Therefore the petition for writ of prohibition is denied.

Brown, J., not participating.


author: Conley Byrd, Justice. Carleton Harris, Chief Justice,

text:
    Robert Y. McCLURE v. William H. McCLURE Jr., Trustee
    5-4336
    420 S. W. 2d 98
    Opinion delivered November 6, 1967

      Laws & Schulze and Lester & Shults, for appellant.

      Williams & Garner, for appellee.
   Conley Byrd, Justice.

Appellant Robert Y. McClure brings this appeal to determine the authority of appellee William H. McClure, Jr., as trustee of the “W. H. McClure Trust,’’ to place the cotton allotment assigned to lands belonging to the trust in the Cropland Adjustment Program, Pub. L. 89-321, Title VI, § 602, Nov. 3, 1965, 79 Stat. 1206, 7 U.S.C.A. § 1838. For reversal of the trial court’s decree upholding the authority of the trustee to place said lands in the Cropland Adjustment Program,for a period of ten years, appellant relies on the following points:

I. Placing the trust lands under the Cropland Adjustment Program was in violation of the trustee’s mandatory obligation to “obtain a tenant or lessee for all farm lands owned by the trust.”

II. The Trustee had no authority to enter into the Cropland Adjustment Agreements for a period of ten years.

The trust principal consists of some 3,100 acres of land located in the Dai danelle District of Yell County. Appellee is made trustee. He is also a life beneficiary thereof along with appellant, their brother, David B. McClure, and their sister, Janet M. Chivers. The remainder beneficiaries are the natural grandchildren of the set-tlor, who take upon the death of the last surviving life beneficiary. The authority and duties of the trustee are described in the trust agreement as follows:

“The Trustee is charged with the custody, management and protection of all assets of the Trust estate. The Trustee is expressly authorized to lease any real estate owned by the Trust to himself individually or to any other beneficiary of the Trust, provided that any such lease shall not exceed a term of ten years and the rental shall not be less than the prevailing rental value of comparable lands in the surrounding area. The Trustee shall obtain a tenant or lessee for all farm lands owned by the Trust, and shall not without the unanimous consent of Grantor’s living children, use Trust funds to finance the cultivation of or any farming operation upon the lands owned by the Trust.
“The Trustee is authorized, with the consent of Grantor’s living children, to purchase additional real or personal property to be added to and become a part of the principal of the Trust, pledging and using the net income of the Trust to pay the purchase price for such additional assets. The trustee shall not have the authority to sell, exchange, convey, mortgage or hypothecate any real or personal property of the Trust without the unanimous consent of Grantor’s living children.
“The Trustee is authorized to receive and receipt for all rents, property or interests received by the Trust estate; to satisfy liens upon real or personal property of the Trust; to institute or defend legal proceedings for the recovery or protection of assets of the Trust estate; . . . and otherwise, to exercise all duties, rights and authority reasonably incident to the holding of legal title to the Trust assets and discharge of his Trust responsibilities.
“The Trustee shall not be required to give bond and shall not be required to render any accounting to, or be subject to the supervision of, any Court. The Trustee shall not be personally liable for any losses incurred by the Trust for any reason other than fraud.
“No person dealing with the Trustee shall be bound to inquire into the power or authority of the Trustee to do or perform any .acts as Trustee of this Trust. Nor shall any person paying money or other valuable consideration to the Trustee be required or bound to see to the application, reinvestment or disbursement of such money or other consideration paid or delivered to the Trustee.
“The Trustee shall keep proper records and books of account of his administration of the trust, which books and records shall be subject to inspection at all reasonable times by the income beneficiaries of the Trust. ...” (Emphasis supplied.)

The Cropland Adjustment Agreement, after identifying the fields placed in the program and the payment schedule, provides:

“Each undérsigned producer agrees to participate in the Cropland Adjustment Program and to comply with, the terms and conditions herein and th© provisions of the regulations governing the program which are hereby made a part of the agreement. Bach such producer agrees that in accordance with the provisions of the regulations: (1) The designated acreage shown above will be diverted for the agreement period from the production of crops to approved practices and uses as shown in column 23. (2) No crop will be harvested from the designated acreage and such acreage will not be grazed during the agreement period except as provided in the regulations. (3) The acreage permitted to be devoted to the crops diverted from production as shown above shall be zero except as provided in the regulations. (4) The feed grain base and acreage allotments on this farm with respect to which no diversion is shown above and the feed grain base and acreage allotments on any other farm in which the producer has an interest will not be exceeded. (5) The conserving base for the farm will be maintained for the agreement period. Each producer understands that he is jointly and severally responsible with the other producers on the farm for compliance with this agreement and for any refund or forfeiture of payments determined according to the regulations for failure to comply fully with the agreement. All producers entitled to share in the annual adjustment payments under this agreement are shown herein and the division of the annual adjustment payments is fair and equitable. Each undersigned producer applies for the total number of annual adjustment payments due him under this agreement.”

The proof shows that appellee in his individual capacity has been leasing a portion of the lands on a crop rental basis, and that M. Y. Chi vers, Jr., husband of Janet M. Chivers, as a partner in a partnership d/b/a Cotton Town Farm, has been leasing the remainder of the lands.

We are assuming that counsel for appellant are correct in their statement that the lands can be withdrawn© from the Cropland Adjustment Agreement on request of appellee.

There was ample evidence from which the trial court could have found that the Cropland Adjustment Agreement was temporarily more beneficial to the trust from the standpoint of income than a crop rental of the lands, hut for purposes of our decision herein, we do not concern ourselves with the issue.

I

Appellant’s argument that the trustee was without authority to enter into the Agreement is based on two premises: (1) that the trust agreement is mandatory in requiring that “the Trustee shall obtain a tenant or lessee for all farm lands owned by the trust,” and (2) that the placing of lands under a Cropland Adjustment Agreement does not amount to obtaining a “tenant or lessee.” From these two basic premises appellant concludes that the lands cannot he placed in the Cropland Adjustment Program without his consent.

The purpose of the Cropland Adjustment Program is to hold acreage out of production as a supplement to the Commodity Adjustment programs, 1965 U. S. Code Congressional and Administrative, News, 89th Cong. P. 3963. A review of the act, 7 U.S.C.A. § 1838, shows that the landowner, in agreeing to the program, is required to do little more than permit the lands to remain idle with some sort of conserving cover crop for the period of the agreement. The act, 7 U.S.C.A. § 1838 (m), recognizes that lands under lease to a tenant can he placed in the program and contains directions to the Secretary of Agriculture to set up safeguards to protect the tenant’s rights to share in the payments.

We hold that appellant’s contention is not sustained by the trust agreement. While the Cropland Adjustment Agreement is not, strictly speaking, a lease, it accomplishes the purposes of a lease — i. e., it furnishes the landowner an income for a period of years without any appreciable financial risk or necessity for management. The Agreement certainly cannot be classified as a sale, exchange, conveyance, mortgage or hypothecation for which the trust requires the unanimous consent of the settlor’s living children.

Furthermore, when the section on which appellant relies as mandatorily requiring a “tenant or lessee” is read in its entirety, it appears that the dominant purpose of the trust settlor was that the lands, while producing an income, should not be subjected to the risks and hazards of a farming operation. Beading the section in this light, we are unwilling to hold that the trustee was not authorized to enter into the Cropland Adjustment Program.

It should be noted that the trustee, in his individual capacity, and M. Y. Chivers, as tenant of the lands prior to the Cropland Adjustment Agreements, were, under the Cropland Adjustment Program, entitled to a portion of the payments. It appears, however, that they have elected to turn the total payments over to the trust.

II

Nor can we agree with appellant that the trustee exceeded his authority by placing the lands in the program for ten years. There was ample testimony to show that men of prudence, discretion and intelligence in the management of their own affairs were signing up their cotton allotments in the Cropland Adjustment Program for a period of ten years. We think this sufficiently meets the test for a trustee’s conduct as authorized by Ark. Stat. Ann. § 58-302 (Supp. 1965).

Affirmed.

Harris, C. J., dissents.

Carleton Harris, Chief Justice,

dissenting. I cannot agree with the disposition of this case. 'The extent of the duties and powers of a trustee depends upon the terms of the trust, and we have held that a court should restrict a trustee’s powers to those conferred in the trust instrument; further, that mandatory language must be given full effect. Patterson v. Polk, 229 Ark. 272, 317 S. W. 2d 286. In that ease, we said:

“The distinction between mandatory and precatory words in wills and trust instruments could make a treatise in itself. In wills and trust instruments, directions are held to be mandatory when such words direct, command, or require something to be done; and directions are held to be precatory when such words merely express a hope or wish, and leave it to the trustee or the occurrence of some fortuitous circumstance as to whether the desires will be accomplished.”

The language of the trust instrument here at issue is quoted in the majority opinion. To me, “The trustee shall [my emphasis] obtain a tenant or lessee for all farmlands owned by the trust” is absolutely mandatory, and I cannot view it in any other way.

To my way of thinking, the only valid reason that the trustee could have (under the trust) for placing the lands under the Cropland Adjustment Program would be the failure to find a tenant. This certainly was not true in the present case. The record reflects that a Mr. Harold Snyder made a bid to lease the bottom land of the trust property for $50,000.00 per year for a ten-year period. Of course, I do not think that the matter of whether the trust would earn more money by leasing the land, or by placing it in the government program, is pertinent, and the majority say that they do not concern themselves with that issue.

This trust was created by Mr. W. H. McClure, Sr., and he had a perfect right to make the requirement under discussion — whether it be wise or unwise. The majority admit that the Cropland Adjustment Agreement is not a lease, and certainly the government agency is not a tenant. In Chastain v. Hall, 182 Ark. 920, 33 S. W. 2d 45, this court defined a tenant as, “One who holds possession of real estate by any kind of right; one who has the occupancy or temporary possession of land or tenements, the title of which is in another.” Here, the government agency (Agricultural Stabilization and Conservation Service) does not occupy, nor have temporary possession, of the trust lands. Possession remains with appellee, who is obligated to plant some type of cover crop. It simply appears to me that the trial court, and now, this court, have rewritten the contested portion of the Declaration of Trust.

I also agree with appellant that the trustee exceeded his authority by placing the lands in the program for ten years. The lands could have been placed there for a period of five years, which is much more in line with leasing customs in Yell County. The majority say:

“There was ample evidence from which the trial court could have found that the Cropland Adjustment Agreement was temporarily [my emphasis] more beneficial to the trust from the standpoint of income than a crop rental of the lands, but for purposes of our decision herein, we do not concern ourselves with the issue.”

I cannot agree that ten years constitutes a temporary period.

For the reasons herein stated, I would reverse the trial court.

      The payment from the government agency to the trust for the year, 1966, amounted to a little over $24,000.00.


text:
    W. J. STYERS et al v. Dalton NORTHERN et al
    5-4349
    420 S. W. 2d 74
    Opinion delivered November 6, 1967

      J. B. Milkam, for appellants.

      Fred E. Briner, for appellees.
   Conley Byrd, Justice.

This case was here before, Styers v. Northern, 241 Ark. 1023, 411 S. W. 2d 296 (1967). Appellants W. J. Styers and Chloe Styers Lord appeal from the decree entered on the mandate, contending that it does not comply with our opinion. The decree entered by the trial court describes only a portion of the lands on which we held appellants were entitled to have their title quieted. It also gives appellee Davis an easement in perpetuity over a greater portion of the lands than was included in the agreement between appellant W. J. Styers and Davis’s predecessor in title, Dr. Buffington.

The facts show that in 1929 appellant’s son, W. A. Styers, acquired title to the tract of land now owned by appellee Davis under the following description:

Beginning 358 feet West of the East line and 15 feet South of the North line of Section 14. Township 2 South, Range 15 West, thence runs West according to Section line 111 feet. Thence South according to Section line to the right of way of the St. Louis Iron Mountain and Southern Railway. Thence North Easterly along said right of way to a point exactly South of point of beginning according to Section line. Thence North to point of beginning.

Appellants acquired title to the tract of land in the East ½ of the Northeast ¼, Section 14. Township 2 South, Range 15 West, described as follows:

Beginning at a point which is 15 feet South and 499 feet West of the Northeast corner of said Section 14 and runs thence West according to Section line 100 feet; thence South to right of way of Missouri Pacific Railroad; thence Northeasterly along right of way to a point due South of point of beginning; and thence North to point of beginning.

In our opinion we held that the trial court erred in failing to quiet appellant’s title to the 30-foot strip of land between the two above-described tracts, subject, however, to the easement by way of estoppel, with Dr. Buf-fington, respecting the concreted portion of the driveway.

Furthermore, as pointed out in our former opinion, the easement by estoppel in favor of Davis, as per the agreement between Mr. Styers and Dr. Buffington, runs only so long as the Davis tract is used for a service station. On this appeal appellants contend that the easement expires with the death of either Dr. Buffington or appellant Styers, but this matter is concluded by our previous opinion.

Therefore, the decree of the trial court entered June 1, 1967, is hereby set aside and this matter is reversed and remanded to the trial court with directions that title to the 30-foot strip north of the railroad tract be quieted in appellants, subject to the right of appellee Davis to use same for driveway purposes so long as the service station is maintained on Ms premises. Tlie order should further direct that the driveway shall also be kept open for the use and benefit of appellants.

Reversed and remanded.


author: Carleton Harris, Chief Justice, Conley Byrd, Justice,

text:
    Homer L. BAILEY et al v. Clint JONES, SECURITIES COMMISSIONER
    5-4163
    419 S. W. 2d 585
    [Rehearing denied November 6, 1967;
    original opinion delivered May 22, 1967, Ark. 242, 668]

      Spitzberg, Bonner, Mitchell & Hays, for appellants.

      Leon B. Catlett, for appellee.
   Carleton Harris, Chief Justice,

concurring. On petition for rehearing, an entirely new argument is presented by appellant. The argument is relevant to the issue in the litigation, but I do not think that it can properly be considered. For the first time, it is urged that Act 459 of 1965 was passed as a matter of enabling the Insurance Commissioner to adopt the N.A.I.C. regulations. Appellant, in its rehearing brief, says:

“Act 459 represents the legislation necessary to enable the Insurance Commissioner to adopt the N.A.I.C. regulations. The Commissioner is directed by sub-paragraph 5 of the Act to conform to the regulations adopted by the N.A.I.C. insofar as possible. * * *
“In amending Section 66-4220 (Supp. 1963) to enable the Insurance 'Commissioner to adopt N.A.I.C. Regulations, it was necessary to eliminate any provisions of the section which appeared inconsistent in any respect with the N.A.I.C. regulations. The provision of the former section authorizing an irrevocable proxy if coupled with an interest, appeared to be inconsistent with the provision of the Regulations, which provides that “No proxy shall confer authority ... to vote at any meeting other than the next annual meeting (or any adjournment thereof)” [N.A.I.C. Regulations, Section 6 (4)] and the former provision was therefore deleted from the Act.
“The deletion of the provision relating to a proxy coupled with an interest does not mean that the General Assembly intended to invalidate all arrangements whereby the voting right is separated from a share of stock. ’ ’

This same argument is used in two amicus curiae briefs filed with the court on rehearing.

We have many times said that we will not consider matters that are not argued in the brief, nor will we consider, on rehearing, contentions not originally advanced. In Bost v. Masters, 235 Ark. 399A, in a supplemental opinion on rehearing, this court said:

“Appellee’s petition is without merit for three reasons. In the first place, appellee did not argue in her original brief that service was obtained upon a trustee of the insurance fund, though appellants devoted considerable space in their brief to the argument that service on the fund was not obtained. Appellee’s sole argument, relating to service, was to the effect that this action was brought as a class action. * *
“In other words, appellee never made the contention, now advanced, in her original brief. We have said on numerous occasions that we do not consider matters, in civil actions, which are not argued in the brief, and any point not argued is deemed waived. [Citing cases.] ”

As stated, the present position of appellant, as reflected in the quote from appellant’s brief on petition for rehearing, and pertinent, because it deals with the legislative intent, was not mentioned in the original brief, nor was it mentioned in appellant’s reply brief, though Act 459 of 1965 (amending the Insurance Code), construed together with the General Corporation Statute of this state, was one of the principájfpoints relied upon by appellee for affirmance of the trial court judgment.

I reiterate that I do not feel we ¿an properly, under our rules, and under our prior opinions, consider the argument advanced in the petition for rehearing.

Conley Byrd, Justice,

dissenting. I dissent from the majority view for the following reasons:

1. The decision is contrary to the overwhelming weight of authority. See annotation 98 A.L.R. 2d 376, 380, which the majority opinion cites as supporting its position. The annotator in § 4 (a) there says:

“Although there is language in some cases condemning voting trusts as invalid, the view supported by the overwhelming number of cases is to the effect that a voting trust may be validly created under certain circumstances even in the absence of a statute expressly authorizing its creation.”

2. The majority opinion overlooks the difference between a voting trust and a proxy when applying our proxy statutes. A proxy, or a reciprocal proxy agreement, differs from a voting trust agreement in that the proxy creates an agency whereas the voting trust does not. The difference lies in the location of the legal title. If the stock is transferred to true trustees, their right to vote it is incident to their legal title to the stock, notwithstanding the trust agreement contains terms to govern the voting of the stock. See 159 A.L.R. 307, 98 A.L.R. 2d 376, Bankers’ F. & M. Ins. Co. v. Sloss, 299 Ala. 26, 155 So. 371 (1934), and Dougherty v. Cross, 65 Cal. App. 2d 687, 151 P. 2d 654 (1944).

In the Dougherty case the court made the above distinction between a voting trust and a proxy and distinguished Simpson v. Nielson, 77 Cal. App. 297, 246 P. 342 (1926). The voting trust there, in existence for more thán 21 years, was upheld notwithstanding a California statute providing that no proxy would be valid after eleven months from the date of execution, unless it specified the length of time for which it would continue in force (in no case to exceed seven years from the date of execution).

This same distinction between a voting trust and a proxy is recognized by the Securities Act enacted by the United States Congress and the regulations issued thereunder. 15 U.S.C.A. § 77 (b) (1) requires that a voting trust be registered with the Securities and Exchange Commission. The regulations promulgated by the Commission, 17 C.F.R. 240, 14a-2 (d), exempt voting trusts from the proxy regulations.

The Arkansas Securities Act, Acts of 1959, No. 254 §§ 13 (g) and 13 (1), contains provisions relative to the registration of voting trusts identical to those set out in the federal act, 15 U.S.C.A. § 77 (b) (1) & (4).

Since there is a basic distinction between the generally recognized definitions of “proxy” and “voting trusts,” it follows that a statute regulating the use of a proxy would not apply to voting trusts.

3. Furthermore, I think the majority is placing too much emphasis on the presumed legislative intent of Act 459 of 1965 (Ark. Stat. Ann. § 66-4220 [Repl. 1966]). The act reads as follows:

(1) Every proxy of a stockholder of an insurer shall be revocable at will, and this provision cannot be waived.
‘ (2) The revocation of a proxy shall not be effective until notice thereof has been given to the secretary of the insurer.
‘ (3) The Commissioner shall have the authority to regulate the solicitation of proxies by any person; to require the disclosure of information deemed relevant to an understanding of, issues and matters with respect to which proxies are, or are proposed to be, solicited; to specify general requirements as to form and contents of proxies; to determine the length of time for which proxies may be effective, unless sooner revoked; to prohibit solicitations of proxies which do not comply with such rules and regulations as the Commissioner may issue hereunder, or as to which disclosures required by such rules and regulations are not made; to prohibit the making or use of false or misleading statements, or the distribution of any false or misleading material, with respect to the solicitation, of any proxy or with respect to any election or election contest; and to issue such other rules and regulations respecting proxies and elections as the Commissioner may deem necessary or appropriate in the public interest or for the protection of stockholders of insurers.
(4) Rules and regulations issued by the Commissioner under authority of this section shall be made or amended as provided in Section 26.
‘ (5) Insofar as may be practical, rules and regulations with respect to proxies, consents, or authorizations then currently approved or formulated by the National Association of Insurance Commissioners, or its successor organization, shall be followed.’ ”

At the time Act 459 was passed, the United States Congress had just amended the Securities Act to subject all insurance companies to the reporting requirements of Section 13 of the Securities and Exchange Act of 1934 (15 U.S.C. § 78m [1964]), unless the states .where they were domiciled met the conditions set forth in. 15 U.S.C. § 781 (g) (2) G (iii), as follows:

“The provisions of this subsection shall not apply in respect of—
“(G) any security .issued by an insurance company if all of the following conditions are met:
“ (i) Such insurance company is required to and does file an annual statement with the Commissioner of Insurance (or other officer or agency performing a similar function) of its domiciliary State, and such annual statement conforms to that prescribed by the National Association of Insurance Commissioners or in the determination of such State Commissioner, officer or agency substantially conforms to that so prescribed.
“ (ii) Such insurance company is subject to regulation by its domiciliary State of proxies, consents, or authorizations in respect of securities issued by such company and such regulation conforms to that prescribed by the National Association of Insurance Commissioners.
“(iii) After July 1, 1966, the purchase and sales of securities issued by such insurance company by beneficial owners, directors or officers of such company are subject to regulation (including reporting) by its domiciliary State substantially in the manner provided in section 16 of this title.”

The committee comment upon the Securities Acts Amendments of 1964, with reference to the above exemption, commencing at page 3021 of U. S. Code Congressional and Administrative News, 88th Congress Second Session, 1964, is as follows:

“ (b) Stock insurance companies. — The bill, as introduced, would have covered stock insurance companies meeting the statutory standards. The committee amendment [to sec. 3 (c) of bill] exempts such a company from the jurisdiction of the Securities and Exchange Commission, but only if the company is regulated under State law or the State insurance commissions in all three of the following respects:
“(1) Such insurance company is required to and does file an annual statement with the commissioner of insurance (or other officer or agency performing a similar function) of its domiciliary State, and such annual statement conforms to that prescribed by the National Association of Insurance Commissioners or in the determination of such State commissioner, officer, or agency substantially conforms to that so prescribed.
“(2) Such insurance company is subject to regu-altion by its domiciliary State of proxies, consents, or authorizations in respect of securities issued by such company and such regulation conforms to that prescribed by the National Association of Insurance Commissioners.
“ (3) After July 1,1966, the purchase and sales of securities issued by such insurance company by beneficial owners, directors, or officers of such company are subject to regulation (including reporting) by its domiciliary State substantially in the manner provided in section 16 of the Securities Exchange Act of 1934.
“This committee amendment was adopted following testimony by a number of State insurance commissioners and representatives of stock insurance companies who unanimously opposed the subjecting of these insurance companies to the jurisdiction of the Securities and Exchange Commission in addition to the jurisdictions of the various State commissioners. Further, these witnesses opposed departure by the bill from the doctrine embodied in the McCarran Act that the regulation of insurance companies be left to the States. The basic objection advanced by these witnesses went not to the requirements for the protection of investors for disclosure but only to the jurisdictional question.
“The State insurance commissioners through their organization, the National Association of Insurance Commissioners, testified that they recognized some validity to the contention in the commission’s special study report that their procedures were primarily directed to matters concerning the protection of policyholders and to the need for some improvement in these procedures insofar as they relate to the protection of investors in the stock of these companies.
“The thrust of the testimony by these representatives of the State insurance commissioners was that they be given an opportunity to demonstrate their ability effectively to protect the investors as well as the policyholders. The committee amendment gives these State commissioners this opportunity so to do.
“The insurance regulatory authorities of all of the 50 States and the District of Columbia are members of this voluntary association, the National Association of Insurance Commissioners (NAIC), one of the major purposes of which is to achieve a substantial degree of uniformity in the regulation of the insurance business by the various States. NAIC has adopted a uniform annual * reporting form, known as the convention blank (or convention form annual statement), which, in turn,.has been adopted in every State as the required annual report form for insurance companies. An NAIC committee, under the chairmanship of Mr. Stafford Grady, insurance commissioner for California, has recently developed also a ‘stockholders’ information supplement’ which will become an integral part of the basic form for 1964 and later years. The commissioners of each of the 50 States and the District of Columbia have advised the committee by letters that they would require insurance companies within their respective jurisdictions to file and comply with the supplement and any future revisions thereof as they are adopted by the association.”

As pointed out by the majority opinion, the law on proxies in insurance companies at the time of the enactment of the Securities Acts Amendments of 1964 (Acts of 1959, No. 148, § 472), provided as follows:

“(1) Every proxy of a stockholder of an insured, unless coupled with an interest, shall be revocable at will, and this provision cannot be waived.”

Obviously, before the Commissioner of Insurance of the State of Arkansas could comply with the exemption section of the Securities Acts Amendments of 1964, it was necessary for the legislature to take some action. Section 1(5) of Act 459 shows pointedly that Act 459 was intended to comply with the Securities Acts Amendments of 1964 by specific reference to and recognition of the National Association of Insurance Commissioners.

Act 459 of 1965 does not mention voting trusts. It was passed so that the laws of Arkansas would permit Arkansas’s regulation of domestic insurance companies to come within the exemption of the Securities Acts Amendments of 1964, above set out. Consequently, I cannot read into Act 459 of 1965 a legislative intent to put a more stringent regulation on domestic insurance companies, with respect to voting trusts, than that required by the Securities and Exchange Act of 1934.

4. Furthermore, I can find little distinction between the voting trust established here, whereby the beneficial owner, or cestui que trust, is issued a certificate of ownership while the title remains in the trustees, and that which exists in the ordinary “Massachusetts trust” or so-called “business trust.” 13 Am. Jur. 2d, Business Trusts, § 1, defines the “Massachusetts trust” or so-called “business trust” as follows:

“One of the distinctive devices by means of which individuals may combine their resources to operate a business for profit is the so-called business trust, or ‘Massachusetts trust,’ which may be comprehensively defined as an unincorporated business organization created by an instrument by which property is to be held and managed by trustees for the benefit and profit of such persons as may be or may become the holders of transferable certificates evidencing the beneficial interests in the trust estate. .

Surely this court is not finding that the many trustees operating mutual funds (such as Crown Western) are illegally holding stock in the many domestic insurance companies in Arkansas.

Therefore, I would grant the rehearing.

George Rose Smith and Jones, JJ., join in dissent.