author: Ed. F. McFaddin, Associate Justice.

text:
    Geominerals Corporation v. Grace.
    5-2107
    338 S. W. 2d 935
    Opinion delivered October 10, 1960.

      Pickens, Pickens é Boyce, by Fred M. Pickens, Schwarts, Schwarts and Landsman, by Burnett Sclnoarts, St. Louis, Mo., Lee Young, Union, Mo., for appellant.

      James A. Finch, Jr., Cape Girardeau, Mo., M. F. Highsmith, for appellee.
   Ed. F. McFaddin, Associate Justice.

The appellant, Geominerals Corporation, seeks relief against appellees; Grace, one of its stockholders, and Potashnick, one of its directors. The claimed relief arises because of dealings the appellees had with the Corporation. Geominerals is a Delaware corporation, undertaking to make money through mineral leases and developments. Its principal place of business is in Louisiana, but it is duly domesticated in Arkansas. At all times herein, appellees Grace and Potashnick were stockholders in Geominerals Corporation; and from October 1957 to October 1958 Potash-nick was a director of Geominerals.

In February 1957 Geominerals paid Grace $175,000 for 250,100 shares of stock in U. S. Manganese Corporation, which is an Arkansas corporation organized, inter alia, to engage in manganese development. This sale by Grace to Geominerals is not under attack in this case. In order to pay Grace the $175,000 Geominerals borrowed $109,000 from appellee Potashnick, who was then a stockholder, but not a director, of Geominerals. The debt was evidenced by a note due in thirty days, bearing 5 % interest, and secured by a pledge of tbe 250,100 shares of stock in U. S. Manganese Corporation. As aforesaid, in October 1957, Potashnick was elected a director of Geominerals, and was such director until October 1958.

At the request of Geominerals, Potashnick several times extended the due date of the note, but in the fall of 1957 he began to press Geominerals for payment. In early December 1957 he set a date for the sale of the collateral (the 250,100 shares of U. S. Manganese stock); and appellee Grace was prepared to make a bid on this stock for the amount of the note and interest, and then proposed to sell one-half of the 250,100 shares of stock to Potashnick for one-half of the amount that Grace had paid. Because he was importuned by some of his fellow directors of Geominerals, Potashnick postponed the scheduled December sale of the collateral, but set a final date in January, 1958, when, if not paid, he would foreclose his collateral, and also proceed against the directors who had endorsed the note.

When Geominerals learned of Grace’s interest in the stock he was requested to make a loan to Geominerals for sufficient to retire the Potashnick note and interest; and Geominerals offered Grace 50,100 shares of the stock as a bonus if he would make Geominerals such a loan. Grace advised that he was not interested in making any loan, but was interested in buying all or a part of the 250,100 shares of the U. S. Manganese stock. Since the stock had cost Geominerals $175,000 it wanted some opportunity to try to sell the stock either for a profit or for enough to pay the cost; and the President of Geominerals (Mr. Tschirn) and Grace had telephone conversations about the matter. On January 17, 1958 there was a meeting of the directors of Geominerals held in Louisiana — at which Potashnick was absent — and the following Resolution was adopted:

“RESOLVED, that Charles W. Tschirn be given the authority to execute a sales contract in behalf of the Corporation to sell 250,100 shares of presently held U. S. Manganese Corporation stock under the following terms and conditions:
“(1) Geominerals will sell 250,100 shares of TJ. S. Manganese Corporation stock to R. B. Potashniek and Preston W. Grace in exchange for a note being held by R. B. Potashniek in the amount of $109,000 plus accumulated interest.
“ (2) Geominerals will receive an option from R. B. Potashniek and Preston W. Grace to purchase 200,000 shares of U. S. Manganese Corporation stock for the sum of $125,000. Said option shall become effective on August 2, 1958 and shall become null and void on October 1, 1958 . . .”

Clothed with the authority stated in the resolution, Mr. Tsehirn acting for Geominerals, entered into the following contract with Potashniek and Grace:

“THIS CONTRACT, Made and entered into this 29th day of Jan. 1958, by and between GEOMINERALS CORPORATION, a Delaware Corporation hereinafter referred to as ‘ Seller’, and R. B. POTASHNICK, of Cape Girardeau, Missouri, and PRESTON W. GRACE, of Batesville, Arkansas, hereinafter referred to as ‘Buyers’, WITNESSETH:
“ (1) Seller agrees to sell and Buyers agree to buy 250,100 shares of stock in U. S. Manganese Corporation for the sum of $113,798.99, and Seller agrees to deliver the said stock certificate with stock power duly executed attached, and Buyers agree, upon receipt of said stock certificate on this date, to pay the purchase price to Seller.
“(2) Buyers hereby grant to Seller an option to purchase from them on or after August 2, 1958, for a period extending to and ending on October 1, 1958, all or any part of 200,000 shares of U. S. Manganese Corporation stock at a price of 62%^ per share. If Seller herein elects to exercise said option, it shall give written notice thereof to Buyers, specifying the number of shares to be purchased. If such notice is given, Buyers agree to deliver stock certificate, with properly executed stock power attached, to Seller upon receipt of the purchase price therefor. This option to purchase shall expire October 1, 1958.
‘ ‘ IN WITNESS WHEREOF, the parties hereto have executed this instrument, Seller executing it by and through its President, Charles W. Tschirn, and Buyers executing this instrument by having the same executed on behalf of them by R. B. Potashnick. ’ ’

These copied instruments are hereinafter referred to as the “Resolution” and th.e “Contract”. Grace and Potashnick had the 250,100 shares of U. S. Manganese stock transferred on the books of U. S. Manganese Corporation and reissued: 125,000 shares to Grace and 125,100 shares to Potashnick. On September 30,1958, Geominerals notified Grace and Potashnick that Geominerals would exercise its full option to purchase, but never made any tender of money. On October 14, 1958 Grace and Potash-nick filed the present suit in the Independence Chancery Court against Geominerals, praying: “. . . that a declaratory Judgment be entered herein construing the terms and provisions of the written contract executed by the plaintiffs and defendants on January 29, 1958, and determining the rights of the plaintiffs and defendant under the terms of said contract and declaring specifically that defendant, Geominerals Corporation, has no right, title or interest in and to all or any part of the 250,100 shares of U. S. Manganese Corporation stock . . .” By answer and cross complaint Geominerals claimed, inter alia-. (1) that the contract of January 29, 1958 involving the stock was not a sale of the stock with an option to repurchase, but was, in fact, a loan and a cloak for usury; and (2) that Grace, as a stockholder, and Potashnick as a director of Geominerals, did not deal fairly with the Corporation. Trial in the Chancery Court resulted in a decree in favor of Grace and Potashnick on all points; and from that decree Geominerals brings this appeal, presenting the issues now to be discussed.

I. The Contract Of January 1958. Geominerals most vigorously urges that the contract of January 1958 (as previously copied) was a loan, and not a sale of the stock with an option to repurchase. Of course, if Geominerals should prevail on this point it would recover the entire 250,100 shares of stock and the debt would be cancelled because it is practically conceded that there would be usury in the transaction. So the first question is, whether the transaction of January 29, 1958 was in fact a loan. The rule is, that one who seeks to convert an absolute conveyance into a defeasanced instrument has the burden of proving the defeasance by evidence that is clear, unequivocal, and convincing. Newport v. Chandler, 206 Ark. 974, 178 S. W. 2d 240, 155 A.L.R. 1096; and Marshall v. Marshall, 227 Ark. 582, 300 S. W. 2d 933.

Tested by the rule of these cases, we cannot say that the Chancery Court was in error in holding that Geo-minerals failed to discharge such burden. It is true that the President of Geominerals, Mr. Tschirn, and three of the Directors testified that they intended all the time for the transaction to be a loan. But there are many circumstances which negative the effect of such testimony. Grace was approached to make a loan and he said he was not interested in a loan but that he was interested in buying the 250,100 shares because at that time' it was believed that U. S. Manganese would be involved in a merger which would increase the value of its stock. Furthermore, the Potashniek note had on it the personal endorsement of some of the Directors of Geominerals, and by the sales contract of January 1958 these Directors escaped all personal responsibility. If the transaction were to be a loan, certainly Potashniek would not have released the personal endorsements on the obligation. Again, after executing the contract on January 29,1958, the President of Geominerals advised all the stockholders that by paying the note of $109,000 the financial position of Geominerals had been considerably improved, and that Geominerals still had the option to reacquire the stock. The same directors, who testified that they intended the transaction to be a loan, admitted on cross examination that they voiced no objection when they saw the financial reports to the stockholders which stated that the transaction was a sale.

Finally, on September 26, 1958, Geominerals, while still unable to obtain funds to reacquire the stock, nevertheless wrote a letter to Potashnick and Grace as follows:

“Please accept this letter as notice that Geominerals will exercise a certain option dated January 29, 1958 by and between Preston W. Grace, R. B. Potashnick, and Geominerals Corporation.
‘ Geominerals will exercise the full option to purchase 100,000 shares of U. S. Manganese stock from Preston W. Grace at 62%^ per share, and 100,000 shares of IT. S. Manganese stock from R. B. Potashnick at 62% (i per share.
“Please make the stock available on October 1, 1958 at which time Geominerals will deliver the full purchase price.”

If Geominerals had thought on September 26th that the transaction was a loan, then it would not have been writing about exercising the option to purchase. Potash-nick and Grace waited all of October 1st for Geominerals to pay the money to exercise the option to repurchase, but no money was ever paid and no money has ever been tendered. Instead, sometime in October 1958 Geominerals entered into a contract with a Mr. Hess, who agreed to finance the litigation to try to recover some part of the 250,100 shares of stock.

Without further discussion of the evidence, we conclude that Geominerals failed to offer the quantum of proof required to sustain its contention of a loan; and such holding disposes of all question of usury since the transaction was not shown to be a loan.

II. Geominerals’ Claim Against Grace. Geominerals urges that even though we should hold — as we have — that the transaction of January 1958 was in fact a sale and option, nevertheless we should set the sale aside because appellee Grace was a stockholder of Geominerals and could not lawfully exercise, as lie did, the duress and business compulsion on Geominerals which culminated in the contract of January, 1958.

As heretofore recited, Grace was only a minority stockholder in Geominerals and was never an officer or employee of the corporation. In 13 Am. Jur. p. 468, ‘ ‘ Corporations ’ ’ § 415, the holdings are summarized: ‘ ‘ Shareholders, it is said, have as much right to contract with a corporation as if they were strangers, provided the contract is bo na fide, . . . Stockholders of a corporation have the same right that strangers have to purchase its property, . . .” In Fletcher’s “Cyclopedia of Corporations”, Permanent Ed., Vol. 13, § 5737, many cases are cited to sustain the text: “As stated in a preceding chapter, there is nothing in the relation between a corporation and its stockholders which per se prevents dealings between them. A stockholder may deal with the corporation through its duly authorized officers and agents, making any contract with it which a stranger might make, and the transaction is just as valid as if it were between the corporation and a stranger, . . .” See also 18 C.J.S. p. 1163 ‘ ‘ Corporations ’ ’ § 489, et seq.; and see also annotation in 31 A.L.R. 2d p. 663. Tested by these rules, and bearing in mind that Grace was only a minority stockholder, we fail to see wherein Geominerals can now complain against Grace. That he drove a hard bargain is quite apparent, but he dealt with the corporation at arm’s length and the Board of Directors of Geominerals understood the bargain that Grace was driving when it adopted the resolution (previously copied) authorizing the execution of the contract. Thus, insofar as Grace is concerned, the Chancery decree is affirmed.

III. Geominerals’ Claim Against Potashniclc. This is the point in the case that has given us the most concern. In February 1957, when Potashnick loaned Geominerals the $109,000, he was only a stockholder; and what we have said about Grace would apply to Potashnick if he had remained as only a stockholder. But in October 1957 Potashnick became a director in Geominerals and so continued until the annual stockholders’ meeting in 1958. It was during the time when he was a director that he pressed Geominerals for the repayment of the loan and finally took the contract of sale in January 1958. A stockholder may deal with a corporation as Grace dealt in this instance; but a director owes the corporation a higher duty than does a mere stockholder. In Ward v. McPherson, 87 Ark. 521, 113 S. W. 42, we said:

“. . . contracts between corporations and their directors, dealing with the corporate assets, are not void but voidable. Where they are held voidable, however, all agree that they are more closely scrutinized than ordinary contracts; and the burden is upon those claiming under them to prove that they are made in good faith and fair to the corporation. 2 Thompson on Corporations, §§ 4040-4049, 4060-4064; 3 Clark & Marshall on Corporations, p. 2302-2307, § 761; Helliwell’s Supp. to Clark & Marshall, § 76; Jones, McDowell & Co. v. Ark. Mech., etc. Co., 38 Ark. 17; Searcy v. Yarnell, 47 Ark. 269, 1 S. W. 319. The burden was upon Ward to show the fairness to the corporation of this lease, and this he has wholly failed to do.”

To the same effect see also Walker-Lucas v. Hudson Oil Co., 168 Ark. 1098, 272 S. W. 836; Oliver v. Henry Quellmalz Co., 170 Ark. 1029, 282 S. W. 355; Harris v. United Service Co., 182 Ark. 779, 32 S. W. 2d 618; and Oil Fields Corp. v. Hess, 186 Ark. 241, 53 S. W. 2d 444. The Arkansas rule is the rule generally. In Fletcher’s ‘ ‘ Cyclopedia on Corporations”, Permanent Ed., Vol. 3, § 921, the above quoted Arkansas cases and cases from many other jurisdictions are cited to sustain this statement; ‘ ‘. . . the burden is on the director seeking to uphold the transaction not only to prove the good faith of the transaction, but also to show its inherent fairness from the viewpoint of the corporation and those interested therein.” In 31 A.L.R. 2d 663 there is an annotation on dealings between a director and the corporation, and in regard to loans by a director the holdings are summarized in this language: “. . . a director or an officer of a corporation will not be permitted to make a profit of Ms official position. He must give to tbe corporation the benefit of any advantage which he has obtained thereby . . .”

Tested by the holdings just summarized, we conclude that Potashnick did not offer sufficient proof to satisfy the burden resting on him to establish that the contract of January 1958 between him and the corporation was fair to the corporation. In January 1958 Geominerals owed Potashnick a debt and interest which amounted to $113,-798.99 and tMs debt was secured by 250,100 shares of stock in U. S. Manganese Company. Potashnick knew, or had notice, that Geominerals had paid $175,000 for this stock. The burden was on Potashnick to show that in January 1958 the 250,100 shares of U. S. Manganese stock had no greater value than the $113,798.99 which was the debt and interest then due Potashnick. If the stock had a greater value than $113,798.99 it was Potashnick’s duty, as a director of Geominerals, to attempt the sale of the stock for the greater value and, after liquidation of his debt and interest, render the remaining balance to the corporation. He could not reap a windfall profit by pressing the corporation into delivering to him the stock at anything less than its full value.

Furthermore, in dealing with the corporation Potash-nick accepted the benefits under a contract (i.e., of January 1958) whereby if Geominerals should ever exercise its option it could never recover the entire 250,100 shares of U. 8. Manganese stock but could only recover 200,000 shares; and that at a price in excess of what the Potashnick note and interest would have been at the time the option was exercised. We cannot say that this contract between Potashnick and Geominerals was fair to the corporation. It was a hard bargain to drive with a financially weak corporation that was struggling for its very existence. That tMs was known, or should have been known, to Potashnick is shown by the recitals in the minutes of the January 1958 meeting, which was the same meeting that authorized the Potashnick-Grace contract. These minutes read:

“Mr. Tschirn submitted an up-to-date financial statement to the Directors which showed the critical financial position of the Company at the present time. He stated that the Company had to secure $15,000 financing immediately, or the Company was in danger of Bankruptcy . . .”

Without further reviewing the evidence we conclude that Potashnick has not discharged the duty imposed on him of proving that his contract with Geominerals of January 1958 was fair to the corporation. The result is, that Geominerals must still have the right to pay Potashnick one-half of the original debt and interest and recover of him the 125,100 shares of U. S. Manganese stock (which he received by virtue of his contract with the corporation in January, 1958), together with any dividends received by Potashnick on the stock since January 28, 1958. Geo-minerals should have sixty days from the date of this opinion in which to make said tender, but upon failure to make such tender, all rights of Geominerals to the said stock will be terminated. Only insofar as concerns Potashnick is the decree reversed. In all other respects the decree of the Chancery Court is affirmed, and the cause is remanded to the Chancery Court for further proceedings in accordance with this opinion. The costs of this Court are taxed, one-fourth against Potashnick and three-fourths against Geominerals.

Robinson, J. dissents on the first point. He is of the opinion that the sale was a loan and was usurious.

       This is true because the debt on January 18,1958 was $113,798.99, whereas the option figure for repurchase was $125,000; and in addition 50,100 shares of stock would be retained by Grace and Potashniek.

       Of course, Geominerals urges the same arguments against Potash-nick as a stockholder that are urged against Grace; hut we reserve the claim against Potashnick for Topic III of this opinion because he was also a director of Geominerals, and we are considering in this topic only the stockholder phase of the case.

       Appellant cites ns to the annotation in 79 A.L.R. 855 entitled: “Doctrine of business compulsion”; but the facts in this case show no application for such a doctrine, even if permissible under our cases.

       As we calculate this figure, it would be $56,899.50 (one-half of the $113,798.99 for which amount Potashnick receipted Geominerals on January 29,1958), together with interest thereon at the rate of 5% per annum (the rate of interest stated in the original note) from January 29, 1958 until paid.


source: Caselaw Access Project

author: George Rose Smith, J.

license: Public Domain

text:
    Weston v. Hilliard.
    5-2196
    338 S. W. 2d 926
    Opinion delivered October 10, 1960.

      Thomas, Phillips & Warner, for appellant.

      Wood, Chesnutt & Smith, by James W. Chesnutt, for appellee.
   George Rose Smith, J.

This is a boundary line dispute between the owners of two adjoining forty-acre tracts. For about fifty years the line now in controversy was marked by a fence that was maintained between the two forties. In 1959 the appellant, who owns the tract lying east of the disputed line, attempted to extend his possession by the construction of a new fence along what he contends to be the true line, which lies from 37% to 62 feet west of the old fence. The appellee then filed this suit for an injunction, and the chancellor found the old fence line to be the correct boundary.

The proof is amply sufficient to show that the fence line became the established boundary by acquiescence. The Hilliard property was occupied by the appellant’s parents from 1909 until her mother’s death in 1941. During those years the Weston land was occupied either by the appellant, who bought it in 1926,or 1927, or by his predecessor in title. For thirty-two years the adjoining owners silently acquiesced in the location of the fence as the visible evidence of the boundary line. These facts bring the case within the principles recently reaffirmed in Tull v. Ashcraft, 231 Ark. 928, 333 S. W. 2d 490, and Neely v. Jones, 232 Ark. 411, 337 S. W. 2d 872. The appellant relies upon Cossey v. House, 227 Ark. 100, 296 S. W. 2d 199, but that case was distinguished in Neely v. Jones, supra, and need not be discussed again.

The appellant urges two other points for reversal. First, he insists that the trial court erred in refusing to permit him to prove that at some time after 1941 he acquired title to the disputed strip by adverse possession. The record does not support this contention. It merely appears that the appellee’s attorney objected to one question on the ground that adverse possession had not been pleaded; but the court made no ruling, and in any event the appellant is not in a position to complain, as he failed to show what the proffered testimony would have been. Wallace v. Riales, 218 Ark. 70, 234 S. W. 2d 199.

Secondly, the appellant contends that after 1941 the Hilliard land was wild and unimproved and that therefore he acquired title to the full extent of his governmental subdivision of forty acres (including the disputed strip) by the payment of taxes for more than seven successive years. Ark. Stats. 1947, §§ 37-101 and 37-102. In answer to this contention it is enough to say that the proof does not show that the Hilliard land was unimproved and uninclosed for seven years after 1941. The house was unoccupied and eventually fell into disrepair, but it appears that the dwelling was still standing at the date of trial. It is also indicated that underbrush had grown up to some extent while the land was unoccupied. The present point, however, was not really developed at the trial, and the proof falls decidedly short of showing that the property had reverted to its original natural state and thus could be found to have become unimproved and uninclosed within the intent of the statute. See Moore v. Morris, 118 Ark. 516, 177 S. W. 6.

Affirmed.


text:
    Hammon v. Dixon.
    5-2206
    338 S. W. 2d 941
    Opinion delivered October 10, 1960.

      J. Loyd Shouse, W. 8. Walker and Eugene W. Moore, for appellants.

      Virgil D. Willis, and Fitton & Adams, for appellees.
   George Rose Smith, J.

On August 17, 1951, the city of Harrison conveyed a tract of about three acres, lying within the city and across the street from the county hospital, to Boone Lodge No. 314, Free and Accepted Masons. In 1959 the Lodge announced its intention of constructing a shopping center upon the land. This proposal aroused at least a limited amount of opposition, especially on the part of certain physicians who felt that the tract was needed for the future expansion of the county hospital. In the course of the controversy the Lodge’s right to use the property for commercial purposes was questioned. In order to settle the dispute the appellees, officers of the Lodge, brought this suit on June 16, 1959, to quiet the Lodge’s title. The city made no defense, but the county and the doctors, who were joined as representative taxpayers, attacked the city’s 1951 deed to the Lodge. This appeal is from a decree upholding the deed and quieting title in the Lodge.

The appellants first contend that the tract in question was dedicated to park purposes by the city council in 1948 and that the restriction is still in force. The facts pertinent to this contention are these:

Back in 1943 the city had purchased a tract of about ten acres which was known as Johnson Park (though it was not used as a park) and included the land now in issue. Five years later the city sold the west half of Johnson Park to Boone county as a site for a county hospital. In preparing to build the hospital the county applied, through the State Board of Health, for a grant of federal funds. The Board of Health, before approving the proposed site, asked the county to obtain from the city a written agreement that the east half of Johnson Park would be maintained as a park and would never be used for business or residential facilities. To this end the city council, on April 21,1948, adopted a resolution reading in part as follows :

“That the City of Harrison enter into an agreement with Aubrey Hickenbottom, Boone County Judge, wherein for the consideration of the construction of the Boone County Hospital on the west half of Johnson Park, the City of Harrison agrees that the east portion of said park shall be hereafter maintained by the city as a park and shall never be used for the construction of business or residential facilities.”

A signed and attested copy of the resolution was filed with the Board of Health, but nothing else was done toward putting the resolution into effect. The resolution was left in the city recorder’s office, unsigned and unpublished. No written agreement between the city and the county, as contemplated by the resolution, appears to have been made. No instrument of any kind, giving notice of the resolution, was placed of record in the county recorder’s office. And there is no proof that the Lodge, in buying the property from the city three years later, had any knowledge of the resolution.

Upon these facts the tract was not irrevocably impressed with its asserted character as a public park. By the resolution the city council expressed its intention to execute a contract dedicating the land to park purposes, but the intent was not carried into effect. No notice of the city’s proposal was given, either by publication of the resolution, by the recordation of an acknowledged instrument in the county recorder’s office, or by actual use of the property as a park.

Regardless of the city council’s expectations, the mere passage of the resolution did not create in any one a vested right to demand that the land be devoted forever to public use. Legislative measures are, in the absence of vested rights, subject to repeal by later action of the legislative body. Files v. Fuller, 44 Ark. 273. It is our opinion that the resolution was effectively abrogated by the 1951 ordinance which authorized a sale of the property to the Masonic Lodge without any restrictions upon the use of the land.

A second contention is that this 1951 ordinance, by which the sale was authorized, was not properly enacted, for the reason that the aldermen’s yeas and nays were not recorded. Ark. Stats. 1947, § 19-2403. The minutes of the council meeting recited that seven aldermen, who were named, were present and that one alderman, also named, was absent. In recording the passage of the ordinance in question the minutes recited that all the aldermen present voted in favor of it.

These facts constitute a substantial compliance with the statute. The purpose of recording the votes is “to make the members of the council feel the responsibility of tbeir action when important measures are before them, and to compel each member to bear his share in the responsibility, by a record of his action which should not afterwards be open to dispute.” Cutler v. Russellville, 40 Ark. 105. The procedure in this case satisfied the purpose of the statute, by making the position of each alderman a matter of record, and consequently this procedure has uniformly been held to be sufficient. McQuillin, Municipal Corporations (3d Ed.), § 14.04.

We do not reach the merits of the appellants’ other two attacks upon the city’s sale to the Lodge. It is contended that the purchase price of $1,000 was so grossly inadequate as to indicate fraud and that the sale should be set aside because five of the seven aldermen who voted for the sale were members of the Lodge, though not themselves pecuniarily interested in the transaction. Even if these two charges be conceded to be well founded the sale would at most be voidable, not void. Ordinary principles of limitations and laches operate against the city with respect to a proprietary matter such as the sale of land. Helena v. Hornor, 58 Ark. 151, 23 S. W. 966; Jensen v. Fordyce Bath House, 209 Ark. 478, 190 S. W. 2d 977. Any right the city may have had to avoid the sale for inadequacy of price or for conflict of interest is evidently barred by its unexcused inaction for nearly eight years.

Affirmed.


author: Paul Ward, Associate Justice. Paul Ward, Associate Justice,

text:
    Ark. State Highway Commission v. Dobbs.
    5-2146
    340 S. W. 2d 283
    Opinion delivered October 10, 1960.
    [Rehearing denied December 5, 1960]

      Dowell Anders and Thomas B. Keys, for appellant.

      Jack Tates, Clinton B. Barry and D. L. Grace, for appellees.
   Paul Ward, Associate Justice.

This litigation relates to the taking of property for highway purposes, and the principal question involved is the sufficiency of the notice of entry by the State Highway Department. The chancellor held in effect that there was no sufficient notice of entry, hence this appeal by the Highway Department.

The essential facts are not in dispute.

At the July, 1929 term of the Johnson County Court there was placed of record, at the request of the Arkansas Highway Commission, an Order appropriating certain lands for the purpose of making ‘ ‘ changes ’ ’ in State Highway No. 64 (commonly known as the Ozark-Clarksville Road). The lands affected by this Order extended along or near highway 64 a distance of 6 or 7 miles, and they were described relative to a Centerline, starting at the Franklin-Johnson County Line and running west. Said Centerline was designated by a lengthy compilation of survey notes setting forth “Stations”, degrees, and distances — there being 39 Stations in all. Following this there was a separate compilation of figures showing the extent of the appropriated lands north and south of each Station, varying in an overall width of from eighty feet to one hundred eighty feet. At the end of the Order was a warning that the affected landowner “must present his claim to the court within one year from the date of this Order (July 13, 1929) or be forever barred. ”

A portion of the Centerline ran along a street in the town of Coal Hill upon which street abutted the property of the three appellees herein. At this place the Order affected property forty feet on each side of the Centerline, whereas the existing street was apparently only twenty feet wide. None of the appellees made a claim for damages within the said one year period.

In 1932 or 1933 the State Highway Department improved and surfaced the entire width of the said street without objections from appellees. After this and up to the year 1959 the Highway Department, according to the great weight of the evidence, did nothing to indicate it was claiming control over or intended to use any of appellees’ property abutting the street or highway, but it did maintain the street or highway for a width of approximately twenty feet. Also, at no time after the Order and before it began its improvements in 1932 or 1933 did the Highway Department mark off, stake off, or otherwise physically indicate it was claiming use of more land than the original street.

In 1959, when the Highway Department undertook to improve and widen the street or highway in front of appellees’ property they refused to give possession or entry, and the Highway Department asked for injunctive relief in the Chancery Court to obtain possession of and entry upon the additional land covered in the County Court Order. The chancellor granted the Highway Department the right of entry to the extent it desired, but only on condition that it post a cash bond “to guarantee payment of the defendants’ damages, if any” for the land so appropriated.

In reaching the conclusion to affirm the Chancellor, in requiring the Highway Department to post a bond to guarantee payment to appellees for their land used in widening the street or highway in front of their homes, we by-pass certain procedural questions raised by the pleadings and argued in the briefs, and base our decision on the ground that, under the facts and circumstances of this particular case, appellees had no adequate notice of entry by the Highway Department relative to the subject lands.

Underlying our approach to this issue is Article 2, Section 22 of the Arkansas Constitution which reads: “The right of property is before and higher than any constitutional sanction; and private property shall not be taken, appropriated or damaged for public use, without just compensation therefor. ” It is conceded that appellees ’ property has been taken and that they have received no compensation therefor. It is also reasonably certain that they will not receive compensation unless it is paid by the Arkansas State Highway Department.

For a reversal appellant relies heavily on the general rule well established by many decisions of this court that a landowner has a limited time to file a claim for land condemned for public purposes under a lawful court order, and that this limited time begins to run when the land is actually taken, that is, when an entry is made by the condemner. Thus it is here argued that the Highway Department made an entry in 1932 or 1933 when it improved the street or highway in front of appellees’ property, that such entry was made pursuant to a lawful Order by the County Court in 1929, and that appellees filed no claim within the time provided by the Order. It is taken as conceded that the County Court Order was lawful and that appellees filed no claims within the time allowed by the Order. It is appellees’ contention however that under all the facts and circumstances shown by the record here the entry by the Highway Department in 1932 or 1933 did not constitute notice to them that the State was entering upon or was taking any land outside the bounds of the original street or highway. As heretofore indicated we agree with appellees’ contention.

From a practical or common sense standpoint, it is not unreasonable to believe that appellees were lulled into inaction and entrapped into a failure to file claims. It is axiomatic that insufficient notice is no notice at all. Certainly the County Court Order would have conveyed to appellees no clear conception of the extent of the taking had they known about it. The Order was not even published and it is not shown that appellees had actual knowledge of its existence. Therefore the entry by the Highway Department on the already existing street was not actual notice that abutting lands were being taken or would ever be used. It is not unreasonable to assume that appellees, like most people in similar circumstances, would not object to but would be pleased with the improvement that was being made, and consequently they had no desire to seek compensation. Under these circumstances the chancellor was properly alert to prevent an obvious injustice to appellees, providing he could do so without violating previous decisions of this court. A careful examination of some of our decisions leads us to conclude that the Chancellor’s findings were proper and justified.

In Bollinger v. Arkansas State Highway Commission, 229 Ark. 53, 315 S. W. 2d 889, there existed a factual situation almost parallel to the one in this case, and the court there gave Bollinger an opportunity to file his claim with the county court some 30 years after the condemning order was made and after the first taking by the Highway Department. Also in that case, unlike this case, there was evidence that the landowner had actual notice of the original taking. In State Highway Commission v. Holden, 217 Ark. 466, 321 S. W. 2d 113, where there was a County Court Order without notice to the landowners the court approved this language:

“It is our view that the act of taking is not complete when the judgment of condemnation is rendered. Since such judgment may be without notice, the lawmaking body must have had in mind an order of condemnation followed by entry upon the land. Such entry, being physical and visible, affords the proprietor an opportunity to exact payment or to require a guaranteeing deposit.” (Emphasis supplied)

In that case the Court said “. . . that the landowner is entitled to damages as of the date when the act of taking is complete — that is, when his lands are actually-entered and taken under the order. ’ ’ (Emphasis supplied) The Court also said: “The fact that the Highway Commission had put stakes through Holden’s land before he planted the crop is not determinative. There were several sets of stakes; and the highway was not constructed along one line of stakes, but went according to another line. ’ ’

Appellant cites several cases to sustain the proposition that entry upon part of a right-of-way is an entry on all of it. Typical of the cases cited are Campbell v. Southwestern Telegraph & Telephone Company, 108 Ark. 569, 158 S. W. 1085, and Arkansas Fuel Oil Company v. Downs, 205 Ark. 281, 168 S. W. 2d 419. In the former case the right-of-way was deeded by the landowner, hence there could be no question about the extent of the right-of-way. In the latter case appellee sued in tort for injuries received on the right-of-way, and the decision in no way affects the issue here involved. The cases heretofore cited emphasized the important distinction between a situation where the landowner is a party to the condemnation proceedings and a situation, as here, where the landowner was not a party and where he had no actual notice.

Our conclusion therefore, based on the facts and circumstances of this case as heretofore set forth, is that appellees did not have such notice, either in 1929,1932 or 1933, of appellant’s intention to take to the full extent of the Order so as to start the running of the statute of limitations against their claims. Consequently, the decree of the trial court is affirmed, but the cause is remanded to give appellees an opportunity to prove their damages and recover judgments therefor. Also, in order to avoid further misunderstanding and litigation, we here announce that when and if such judgments are obtained they must be paid by appellant provided they are not paid upon proper presentation to the County Court of Johnson County.

Affirmed and remanded.

Paul Ward, Associate Justice,

on rehearing. Appellant strenuously contends that if the original opinion is allowed to stand it will seriously interfere with its Primary Road Program. This fact if true has, of course, no binding legal significance, but the assertion does impel us to carefully re-examine the opinion in the light of other suggestions of error.

The essence of appellant’s objections appears to be: (1) There is no evidence in the record to sustain the finding that the new highway construction in 1932 or 1933 was along an already existing road or street; (2) If there was such a street there is no evidence to sustain the finding that it was 40 feet wide, and (3) The evidence does not sustain the finding that appellees had no notice of the taking by the Highway Department when the entry was made in 1932 or 1933. A careful re-examination of the record reveals no support for appellant’s contentions.

(1) On this point, a re-examination of the record sustains our finding that the 1932 or 1933 road was constructed where a street already existed in the Town of Coal Hill. The opening statement in appellees’ brief on appeal contains this statement: ‘ ‘ The appellees own property adjacent to and fronting upon a street in the incorporated town of Coal Hill, Arkansas. This street was dedicated to public use and was in actual use as a public highway long prior to 1929; its width was 20 feet on each side of the center line, or a total width of 40 feet.” This statement was not contradicted by appellant although the ease was orally argued.

(2) Appellant, on rehearing, says: “There is no evidence in the record that there was a forty-foot street.” In the opinion there is this statement: “At this place the Order affected property forty feet on each side of the Centerline, whereas the existing street was approximately only twenty feet wide.”

(3) This objection begs the answer to the one fundamental issue of sufficient notice. It is obvious from the entire record that appellees knew appellant was engaged in improving (concreting a strip 18 feet wide) along the existing street, and also that the shoulders were being maintained for a few feet on each side. The essence of the opinion is that this kind of notice, under the facts in this case, was insufficient as to the full extent of the land described in the County Court Order.

In the last paragraph of the opinion we stated that it was “based on the facts and circumstances of this ease.” To further emphasize the limited scope of the opinion we here reaffirm that statement, now that the facts and circumstances have been re-examined.

Rehearing denied.


author: Sam Robinson, Associate Justice.

text:
    Francis v. Thomas.
    5-2174
    338 S. W. 2d 933
    Opinion delivered October 10, 1960.

      Q. W. LooJcadoo, for appellant.

      Richard W. Robbs and B. W. Thomas, for appellee.
   Sam Robinson, Associate Justice.

The issue here is the priority of liens. On August 17,1959, appellees filed suit against Bonnie N. Connelly for an attorney’s fee in the sum of $3,559.90. On the same date the plaintiffs filed an affidavit and bond for the attachment of a certain Ford automobile alleged to be owned by Mrs. Connelly. The summons and attachment were served by the sheriff on August 20th and the sheriff took possession of the automobile under the order of attachment. On August 29,1959, appellant Francis filed an intervention alleging that on July 23, 1959 he had loaned Mrs. Connelly $1,000 on the automobile later attached by the appellees and that his mortgage was superior and paramount to the attachment which appellees had caused to be executed against the automobile. Later the case was tried and there was a judgment in favor of appellees against Mrs. Connelly for the amount asked in the complaint. The order of attachment was sustained and on order of the court the sheriff sold the automobile. It sold for $1,475, and the court ordered this money paid to appellees to be credited on the judgment. Francis, the intervenor and mortgagee, has appealed.

Ark. Stat. § 75-160 provides, among other things: “(a) No conditional sale contract, conditional lease, chattel mortgage, or other lien or encumbrance or title retention instrument upon a registered vehicle, other than a lien dependent upon possession, is valid as against the creditors of an owner acquiring a lien by levy or attachment or subsequent purchasers or encumbrances with or without notice until the requirements of this article . . . have been complied with, (b) There shall be deposited with the department [Department of Revenues] a copy of the instrument creating and evidencing such lien or encumbrance, which instrument is executed in the manner required by the laws of this State with an attached or indorsed certificate of a notary public stating that the same is a true and correct copy of the original and accompanied by the certificate of title last issued for such vehicle.”

In Cross v. Fombey, 54 Ark. 179, 15 S. W. 461, this Court said: “We have no hesitation in saying that, under the statutes of this State, an order of attachment becomes a lien upon the property of the defendants, subject to seizure on execution for the debts of the defendant in the county, from the time the order comes to the hands of the officer, and that, by levy of the attachment and judgment sustaining the same, such inchoate lien is perfected, and takes precedence of the lien of a mortgage executed before the order of attachment came to the hands of the officer, but not recorded until afterwards. ’ ’

In the case at bar, a copy of the mortgage was not filed with the Department of Revenues, as required by the foregoing statute. Section 60, par. (c), of Act 142 of 1949 originally required that holders of title retaining notes or contracts of purchase on registered vehicles must record same with the circuit clerk in the county where the payor resides. By Act 208 of 1951, paragraph (c) was specifically repealed. In 1959 a new title registration act (Act 307) was passed, which in many respects is indentical with Act 142 of 1949, but which omits any requirement that liens or encumbrances be recorded in the county of the purchaser. We therefore conclude that it was the intention of the Legislature to eliminate any requirement that such instruments be recorded by the circuit clerk. See West v. General Contract Purchase Corp., 221 Ark. 33, 252 S. W. 2d 405.

Affirmed.


author: Jim Johnson, Associate Justice.

text:
    Carney v. Barnes.
    5-2203
    338 S. W. 2d 928
    Opinion delivered October 10, 1960.

      Douglas Bradley, for appellants.

      Gerald E. Pearson, for appellees..
   Jim Johnson, Associate Justice.

This case involves a boundary line dispute. Appellants H. A. Carney and Olva Carney, his wife, own a farm in the "Western District of Craighead County. This farm is situated immediately north of the farm owned by appellees D. A. Barnes and Ethel Barnes, his wife. Appellee Lloyd Browning is a tenant on the Barnes farm. The disputed boundary line runs between these two farms.

At the conclusion of appellants ’ proof, appellees filed a written demurrer to the evidence which was sustained by memorandum opinion of the court. Appellants made formal objections and were granted leave to file specific objections to the court’s ruling which were duly filed, and the court thereafter entered its order sustaining the demurrer and dismissed appellants’ complaint, from whence comes this appeal.

The only real question presented here is whether the demurrer to the evidence was properly sustained. This depends under our holding in Werbe v. Holt, 217 Ark. 198, 229 S. W. 2d 225, upon whether the proof, viewed in its most favorable light, would have presented a question of fact for the jury if the case had been tried at law.

Viewing appellants’ proof under this rule, we find evidence to the effect that as early as the year 1921 there existed a woven wire fence with two strands of barb wire between appellants’ land and the adjoining owner to the South and said fence and/or fence row remained in position through the years until the Spring of 1959. The record gives the exact geographic location of most of that fence. In the Spring of 1959 appellee Barnes (owner of South Farm) tore the fence down, or what remained thereof, and cleared out and disked down the elevation of the fence row and cut ditches across the fence row and the land immediately beyond, draining his land to the North thereby changing the drainage from a natural southern and eastern flow to a northern and western flow into an old slough bed on appellants’ farm which had no natural outlet.

Appellant had possession and claimed ownership of all the lands lying North of the fence and fence row from the time of his purchase in 1938, and former adjoining owners to the South, at least as early as 1941 and 1946, acquiesced in the fence and fence row being the line between the adjoining owners. Appellees acquiesced in the fence and fence row being the line between the adjoining owners until the Spring of 1959.

Certainly we cannot say that the proof set out above is not substantial upon the controlling question of fact. Therefore, we must conclude as we did in the recent case of Neely v. Jones, 232 Ark. 411, 337 S. W. 2d 872:

“We are of the opinion that the demurrer to the evidence should have been overruled, for the appellants’ proof raised a question of fact as to the existence of a boundary by acquiescence. As we said in Tull v. Ashcraft, 231 Ark. 928, 333 S. W. 2d 490: ‘We have frequently held that when adjoining landowners silently acquiesce for many years in the location of a fence as the visible evidence of the division line and thus apparently consent to that line, the fence line becomes the boundary by acquiescence. [Citing cases.] ’ In such cases the existence of a boundary line by acquiescence is an issue of fact, to be determined upon the evidence in each individual case. Thompson on Real Property (Perm. Ed.), § 3309.”

Reversed.


author: Carleton Harris, Chief Justice.

text:
    Storey v. Brewer.
    5-2280
    339 S. W. 2d 112
    Opinion delivered October 17, 1960.

      Ben B. Williamson, Nobe J. Henley and Caldwell T. Bennett, for appellant.

      Marcus Fiets, Ivan Williamson and Kaneaster Hodges, for appellee.
   Carleton Harris, Chief Justice.

Tbis appeal relates to an election contest. Appellee, Dexter Brewer, following the Democratic Primary on July 26, 1960, was certified on July 29th, as the nominee for the office of Sheriff of Stone County, by the Democratic Central Committee o f that county. Appellant, Jake Cullen Storey, was his opponent in that election. On August 18th, which, under our statute, was the last day for the filing of an election contest (Sec. 3-245, Ark. Stats., 1956 Replacement), appellant took a complaint and summons (which had been prepared by one of his attorneys) to the office of the clerk for filing, but the clerk refused to file same until one of the attorneys listed as counsel for appellant signed the complaint. Appellant offered to sign this attorney’s name, but the clerk would not permit this, and the latter placed a long distance call for the attorney at Harrison, but was unable to reach him. Appellant then took the papers back to the office of his Stone County attorney, but returned to the clerk’s office about one hour later, and filed his complaint. In the meantime, the summons had been handed to Dr. T. J. Burton, coroner of Stone County, by either this attorney or his secretary, and Dr. Burton took the summons and proceeded to the court house. Before entering the building, he met appellee at the west steps, and according to the testimony of this witness, Brewer stated, “ ‘I understand you’ve got some papers for me.’ And I said, ‘I do, and I appreciate it. I thought I’d have to hunt you.’ ” Burton then handed one copy of the summons to Brewer, and returned his copy to the office of appellant’s Stone County attorney, where it has remained since that time.

Shortly after Burton and Brewer met on the court house steps, Storey offered his complaint for filing in the clerk’s office, and the clerk filed same and accepted the fee for the filing. The record does not reflect that Storey asked that summons be issued on the complaint, though he stated that the fee included issuance of summons. Apparently appellant, knowing that Burton was in possession of the summons, was under the impression that the coroner would properly take care of that phase of instituting the suit. Later on in the day, Anita Vickers, secretary to appellant’s Stone County attorney, took the unsigned summons to the clerk, and according to Miss Vickers, requested the clerk to sign that summons or issue another. She stated that the clerk refused to do so. The testimony on this point is in conflict. The clerk’s version, which was verified by Luther Avey (who happened to be in the clerk’s office), was that she remarked “this is for Dexter Brewer, and he’s done been summoned”. The clerk stated that she did not refuse to sign it nor refuse to issue a new one, but after the aforementioned remark, Miss Vickers “picked it up and took it with her”.

Appellee, appearing especially, and without entering his appearance, filed a Motion in Abatement, setting up that since no summons had been issued, the complaint had not been filed within the twenty days, and he asked that the cause be abated. On the same day, subsequent motions and pleadings were also filed in the following order:

(b) Motion in Abatement (Ineligibility of appellant to become nominee).
(c) Motion to Quash Summons.
(d) Demurrer.
(e) Motion to Strike.
(f) Motion to Strike.
(g) Answer and Response.

In each of these motions and pleadings, appellee commenced by stating that he was “not waiving any rights under any or either of the motions or pleas heretofore filed, but still insisting thereon”. On September 15th, after the taking of testimony, the Circuit Court found “that the Contestee by his attorneys * * * filed with the Circuit Clerk of Stone County, certain motions and pleadings; that the Contestee was not entering his general appearance, but was appearing specially and reserving his right to question the jurisdiction of the court; that the court considered these motions to be filed before the demurrer and answer and so ruled; that no summons had ever been issued by the Clerk of the Court and, therefore, suit was never begun and the motion to abate should be granted.” Judgment was accordingly entered dismissing the complaint. From such judgment comes this appeal. For reversal, appellant first contends that appellee, by his conduct, is estopped from questioning the validity of the service, and second, that the pleadings filed by appellee had the effect of entering his general appearance.

Article VII, Section 49, of our State Constitution, provides:

“All writs and other judicial process shall run in the name of the State of Arkansas, bear teste and be signed by the clerks of the respective courts from which they issue. ’ ’

This provision is reiterated in Section 27-303 (Ark. Stats., Anno.). Section 27-306 provides:

“The summons shall be dated upon the date it is issued, and signed by the clerk.”

Further, Section 27-313:

“No summons or order for a provisional remedy shall be issued by the clerk in any action before the plaintiff’s complaint or petition therein is filed in his office.”

While there is some authority to the effect that acceptance or acknowledgment of service precludes a party from taking advantage of defects or irregularities in the service, it will be noted here that this is not the case of a defective summons; rather, no summons was ever issued. In other words, this suit was not properly commenced, and appellant is accordingly compelled to rely upon one of the two points heretofore mentioned for reversal. We do not agree that the doctrine of estoppel can apply in this case. Appellant refers to the testimony of Dr. Burton, who testified that Brewer took the “summons” willingly and stated “I understand you’ve got some papers for me. They didn’t have to do this. I would have been glad to have volunteered anyway”. The testimony of the clerk, wherein she stated, “This is for Dexter Brewer and he’s done been summoned”, is also relied upon. In addition, appellant contends that the clerk refused to issue a new summons. Of course, appellee is not responsible for the actions of the clerk, and whatever statements were made by her are not binding upon him unless it be shown that the sheriff and clerk were acting in concert. This was not shown. At any rate, an essential element of estoppel is that the complaining party relied upon the act or statement of the person sought to be estopped, and suffered detriment because of such reliance. It is readily apparent in the instant cause that appellant did not rely upon either the alleged statement made by Brewer to Dr. Burton, or the statement attributed to the clerk, for Miss Vickers, who testified on behalf of appellant, was subsequently sent to the clerk’s office to get the clerk’s signature and seal, and, according to her evidence, also requested the issuance of a new summons. As to the contention that the clerk refused to issue a new summons, this was disputed, and was purely a question of fact. We have repeatedly held that we will not reverse the Circuit Court upon a question of fact if there is any substantial evidence to support the findings. Even if it were shown that appellant had relied upon Brewer’s statement to his (Storey’s) detriment, we are of the opinion that appellant still could not prevail. In Corpus Juris Secundum, Vol. 72, § 113, p. 1168, it is stated that a defendant may waive certain defects or irregularities in process or service, by failure to assert the irregularity by timely plea or motion, or by participating in the trial on the merits of the case — but where the defect in the process or service is so substantial as to render same void, it cannot be cured by waiver, consent or agreement. On page 1169, “acceptance or acknowledgment of service precludes the party from taking advantage of any defects or irregularities in the service, but such a waiver cannot bind third parties; nor does it apply to any de fects in the summons itself.” . In other words, a defendant may, by his conduct, be estopped to object to the manner in which service is made, but estoppel does not apply where the defect in the summons itself is so substantial as to render the process void. Certainly, this litigation deals with a substantial defect, for the summons was never issued by the clerk, and the “summons” served on Brewer by Dr. Burton, prepared away from the clerk’s office, bearing’ no signature, and no return made to the office of the clerk as required by law, was totally ineffective.

We likewise find appellant’s second contention to be without merit. It is the position of Storey that the filing of the demurrer to the complaint, and the various motions thereafter, prior to any action being taken on the first motion, had the effect of entering the appearance of appellee. The filing of either a general demurrer or answer would have had this effect. We so held at least as far back as 1892. See Hawkins v. Taylor, 56 Ark. 45, 19 S. W. 105. As previously mentioned, the first line in this demurrer contains the language “not waiving any rights under any or either of the motions or pleas heretofore filed, but still insisting thereon”, and each pleading or motion following the original motion in abatement contains substantially the same language.

Appellant cites, in support of his contention, the cases of Nichols v. Lea, 216 Ark. 388, 225 S. W. 2d 684, and Federal Land Bank of St. Louis v. Gladish, 176 Ark. 267, 2 S. W. 2d 696, but these cases are not applicable to the cause before us. In each of those cases, the defendant appeared specially by motion for the purpose of questioning the jurisdiction of the court over the defendant; however, in each case, the defendant filed a cross-complaint, and we held that the question of jurisdiction was accordingly waived. The determining factor is whether defendant seeks affirmative relief, i.e., whether the pleading filed is more than a defensive action. In the Federal Land Bank case, supra, the Court said: “Where he preserves his protests he cannot be said to waive Ms objection. But certainly he cannot go into Court and ask affirmative relief and enter into the stipulations entered into in this case, without entering a general appearance”. No affirmative relief was sought in the cause before us, and the mere fact that the various pleadings were filed before action was taken on the first pleading is without significance. Actually, it would seem that the filing of the several motions and pleadings, each conditioned upon the failure of the prior defense, would have been of benefit to the court and all parties, since this was an election contest, and an early trial advisable.

Though perhaps it seems that appellant, while apparently seeMng in a bona fide manner to institute suit, was somewhat the victim of circumstances, the provisions of our Constitution and Statutes were not complied with, and this appeal must fail.

Finding no reversible error, the judgment is affirmed.

       Appellee contends that Burton was not legally serving as coroner, but a discussion of this contention is not necessary.

       For instance, failure to properly sign a summons after issuing same, signed by an improper party, or other clerical omission of the clerk.

       Other alleged acts are also mentioned in appellant’s brief, but all took place after August 18th, which was the last day for filing suit. Reliance upon these acts could not have worked to the detriment of appellant, for it was then too late to institute action.

       Emphasis supplied.


author: J. Seaborn Holt, Associate Justice. Ed. F. McFaddin, Associate Justice

text:
    Leigh and Thomas v. Hall, Secretary of State.
    5-2273; 5-2274
    339 S. W. 2d 104
    Opinion delivered October 17, 1960.

      Wright, Harrison, Lindsey S TJpton, for plaintiff Leigh.; Rose, Meek, House, Barron & Nash, for plaintiff Thomas.

      Bruce Bennett, Attorney General, for defendant; McMath, Leatherman, Woods $ Youngdahl, for intervenor.
   J. Seaborn Holt, Associate Justice.

These two actions (No. 2273 and No. 2274) are original actions under Amendment Seven (7) to the Constitution of the State of Arkansas to test the sufficiency of the popular name and ballot title of an initiated measure sponsored by Arkansas State AFL-CIO bearing the popular name “Arkansas Minimum Wage And Overtime Act” and questioning the following ballot title:

“An Act to prescribe for employees, with certain exceptions, a minimum wage of eighty cents per hour increasing after one year to ninety cents per hour and increasing after two years to one dollar per hour. Further to prescribe for employees, with certain exemptions and exceptions, overtime wages of at least one and one-half times their regular rate for all hours worked over forty-eight in each workweek, for all hours worked over forty-four in each workweek after one year; and for all hours worked over forty in each workweek after two years; and to provide for the administration of minimum and overtime wage provisions by the Arkansas Department of Labor; to provide for the enforcement of such provisions; and for other purposes.”

Specifically, the plaintiffs, Leigh and Thomas, present for our consideration (1) the sufficiency of the popular name, (2) the sufficiency of the ballot title and (3) the sufficiency of the publication of the measure.

(1)

We have only a small body of case law dealing with the sufficiency of the popular name title of initiated measures. In Pafford v. Hall, 217 Ark. 734, 233 S. W. 2d 272, the term “A Statewide Prohibition Act” was attacked. The opponents argued that since the measure actually allowed possession of a single quart of intoxicating liquor, the name was misleading. But this court upheld the title concluding: “It seems too clear for argument that the popular name need not have the detailed information as is required for the formal ballot title, else there would be no difference between the two . . .”

We did, however, point out in Moore v. Hall, 229 Ark. 411, 316 S. W. 2d 207, that catch phrases and slogans which tend to mislead and to color the merit of a proposal would be rejected. In Bradley v. Hall, 220 Ark. 925, 251 S. W. 2d 470, the popular name “Modern Consumer Credit Amendment” which was considered along with the ballot title was rejected. We there said: “. . . no convincing explanation is offered for the use of the word ‘modern’. It is certainly not descriptive of the amendment, unless we are to say that every amendment is modern merely because it is new. Rather, the word is used as a form of salesmanship, carrying the connotation that the original constitution is old-fogyish and outmoded, while the proposed amendment is modern and therefore desirable. Even though the popular name need not be as explicit as the ballot title, Pafford v. Hall, 217 Ark. 734, 233 S. W. 2d 72, it should not be used as a vehicle for unnecessary praise of the measure. In studying his ballot the voter is not bound by the rule of caveat emptor. He is entitled to form his own conclusions, not to have them presented to him ready-made.”

Plaintiff Thomas argues that the word “Arkansas” is useless in the popular name and that it tends to give partisan coloring to the act and is calculated to arouse state pride. Only a general response need be made to this contention. The term “Arkansas” seems most appropriate in view of the fact that the act would apply only in the State of Arkansas. It is also argued that the word “overtime” in the popular name is misleading because it does not say overtime for what. Although individual words may be singled out for attack in a popular name title, their meaning should be ascertained from their context. Only the most naive would not understand the meaning of overtime when he reads the title “Arkansas Minimum Wage and Overtime Act”. Besides, as we have previously pointed out, the popular name need not have detailed information in it. We see no merit in the contention that the popular name is partisan colored and misleading.

(2)

As to the sufficiency of the ballot title, the general principles of law applicable to ballot titles were well stated in Bradley v. Hall, 220 Ark. 925, 251 S. W. 2d 470: ‘ ‘ On the one hand, it is not required that the ballot title contain a synopsis of the amendment or statute . . . It is sufficient for the title to be complete enough to convey an intelligible idea of the scope and import of the proposed law . . .We have recognized the impossibility of preparing a ballot title that would suit everyone . . . Yet, on the other hand, the ballot title must be free from * any misleading tendency, whether of amplification, of omission or of fallacy’, and it must not be tinged with partisan coloring.”

In the order in which they appear in the court’s opinion, a ballot title must be (1) intelligible (2) honest, and (3) impartial. The ballot title here in question is intelligible, concise and clear. It summarizes in about 130 words an act containing over 4,000 words and 18 sections. We have in some of our cases indicated that a ballot title of unusual length would be objectionable. See Newton v. Hall, 196 Ark. 929, 120 S. W. 2d 364. In the case of Coleman v. Sherrill, 189 Ark. 843, 75 S. W. 2d 248, we said: “. . . The real objection urged to the title of the act . . . is the fact that it is not sufficiently elaborate. Any other ballot title would be susceptible of the same criticism unless it were in itself a complete abstract of the act which would be impracticable under ordinary conditions.” And further, “. . . it has never been understood that the title of a statute should disclose the details embodied in the act. It is intended simply to indicate the subject to which the statute relates . . . When the general subject is indicated, no detail matters need be mentioned in the title.” (emphasis supplied)

The title of a measure does not have to constitute a synopsis of the measure, Bradley v. Hall, supra. Here the act in question informs the voter that a minimum wage of $1.00 per hour will take effect in three years; stair-stepping from $ .80 an hour the first year to $ .90 an hour the second year and finally to $1.00 an hour the third year. Further, that all time worked over 48 hours, then 44 hours, and finally 40 hours is to be paid at the rate of time and one-half over a period covering three years from enactment. Also, that the administration of the minimum wage is provided for and that the Arkansas Department of Labor will administer the provisions of the act. The voter is also apprised of the fact there are certain exceptions and exemptions in the act. We conclude that the title meets the requirement that it must be intelligible.

The second requirement of a ballot title is that it must be honest. There can be no misleading tendency, whether of amplification, omission, or of fallacy. West- brook v. McDonald, 184 Ark. 740, 44 S. W. 2d 331. It would be difficult to find a title which more honestly conveys an idea of what the act is intended to enact. The act provides for a stair-stepping of the minimum wage from $. 80 to $1.00 per hour and the ballot so states. The act provides for certain exemptions and the ballot so states. The act provides for administration of the act and the ballot title so states. The act provides for overtime wages and the ballot title so states. We find no dishonesty or improper amplification in the title

A third requirement is that the title be impartial. It is interesting to note that although both plaintiffs refer to the rule against partisan coloring, neither apparently is able to create specific allegations to this effect in relation to the ballot title. Crawford, Statutory Construction, pp. 85-86, states: “It would appear sufficient if the title would fairly convey to the average voter the general purpose and tenor of the law, without a tendency to mislead or to give a partisan coloring, since the ballot title is obviously intended to be a means of identification of the measure submitted to the electorate.” We fail to find any misleading tendency in the ballot title.

(3)

The last contention of the plaintiffs is that the defendant did not comply with the publication requirements of Amendment Seven (7) of the Arkansas Constitution. Amendment Seven (7) to the Arkansas Constitution provides in relevant part that:

“Initiative petitions for State-wide measures shall be filed with the Secretary of State not less than four months before the election at which they are to be voted upon; provided, that at least thirty days before the afore-mentioned filing, the proposed measure shall have been published once, at the expense of the petitioners, in some paper of general circulation.”

The publication of the initiated act was had on June 5, 1960. Parts of the petition were filed on June 27, some 22 days later; the remaining parts of the petition were filed on July 7, 32 days after the publication. It is urged by the plaintiffs that the petition was not published 30 days before the filing of the petition.

We cannot agree with the plaintiffs for a number of reasons. We have previously held that the filing of several parts constitute but one petition. Such was the holding in Hammett v. Hodges, 104 Ark. 510, 149 S. W. 667, decided under our previous Initiative and Eeferendum Amendment (referred to as number ten in the case but more accurately number four) to the Constitution which was superseded by the present Amendment Seven. Although there was no provision for a thirty-day publication of the act in this previous Initiative and Eeferendum Amendment, the language with reference to filing petitions is practically the same as the language in the present Amendment Seven. The court, in passing upon the question of filing petitions, there held that all names in an initiated petition, even though on different sheets and filed on different dates should be considered as one petition. We there stated:

“We are of the opinion that the requisite number may be ascertained by adding together the names of the legal voters signed to the separate sheets that have been filed with the Secretary of State within the time prescribed by the act where these separate sheets, embodying the petition of the signers thereto, are in the form prescribed by the statute, and all containing the same subject-matter, the language of each petition being the same. The separate sheets, thus presented and filed in the contemplation of the Constitution and statute, constitute but one petition. ’ ’

To support the above ruling, the court in the same case cited Bridewell v. Ward & Key, 72 Ark. 187, 79 S. W. 762, decided under our old three-mile local option law which provided for local option within three miles of any church or school upon petition for a majority of the voters within the three-mile area. Several petitions were filed with the county court, a remonstrance was filed and allowed by county court, whereupon it was discovered by the petitioners that several petitions were not filed and it was asked that they be allowed to file them in support of tbeir original petition. This was denied. Several days later another group of citizens asked leave to file supplemental petitions which the county court denied. This court, on reviewing the proceedings of the lower court, reversed the action of the county court saying of the petitions: “The fact that there were many of them, and that they were filed on different times, did not change their prayer or lessen the number of petitioners. The filing of the remonstrance made no such change, nor did it cut off the right of the petition. They were in effect only one petition and were evidently intended to be used as one.”

To the same effect is Reeves v. Smith, 190 Ark. 213, 78 S. W. 2d 72, decided under the present Initiative and Eeferendum Amendment, where we said: “Amendment No. 7 to the Constitution of the State is the Initiative and Eeferendum Amendment, and provides, among other things, that the petition for an act to be initiated by the people may be circulated and presented in parts, but each part of any petition shall have attached thereto the affidavit of the persons circulating the same, etc. This means necessarily, that the ‘parts’ constitute but one petition for any proposed act filed with the county clerk, who shall pass upon the sufficiency of the petition.”

Thus it can be seen that there is a definite thread running through our cases which says that all petitions in initiated measures should be counted as one petition even though filed on different dates. The only reasonable conclusion we can draw from the above citations is that the filing on June 27 and the filing on July 7 were but one petition.

The remaining problem then is, what is the proper date to consider the filing of the petition (since all parts are one); should it be June 27 or July 7? In considering this the following rules must be taken into account. This court is definitely committed to the proposition that Amendment Seven should be liberally construed to effectuate its purpose. In the case of Reeves v. Smith, supra, this court enunciated the following guide posts for interpreting Amendment Seven: “. . . Amendment No. 7 necessarily must be construed with some degree of liberality in order that its purposes may be well effectuated. Strict construction might defeat the very purposes, in some instances, of the amendment.

“Another reason, not less cogent, is that Amendment No. 7 permits the exercise of the power reserved to the people to control, to some extent at least, the policies of the State, but more particularly of counties and municipalities, as distinguished from the exercise of similar power by the Legislature, and, since that residuum of power remains in the electors, their acts should not be thwarted by strict or technical construction. "We are supported in this idea of more liberal construction by the following case: Ferrell v. Keel, 105 Ark. 380, 385, 151 S. W. 269, 272. In construing this amendment, it is our duty to keep constantly in mind the purpose of its adoption and the object it sought to accomplish. That object and purpose was to increase the sense of responsibility that the lawmaking power should feel to the people by establishing a power to initiate proper, and to reject improper legislation.’

“In Townsend v. McDonald, 184 Ark. 273, 278, 42 S. W. 2d 410, 413, Chief Justice Hart, discussing State ex rel v. Olcott, 62 Ore. 277, 125 Pac. 303, said: ‘This would make each sheet a separate petition and would be putting form above substance. No matter how many signers there are to a petition and how many sheets are used, they are pasted together and become a constitutent part of the same petition. It is only necessary that a full and correct copy of the measure on which the referendum is asked be filed with the petition and attached thereto, in order that the petitioners may have the opportunity to read it and inform themselves as to the act to be referred before signing the petition, if they wish to do so.’

“A realization that behavior and conduct in all affairs of life is never perfect, requires due allowances must be made for human frailties. Therefore only a substantial compliance is required. Westbrook v. McDonald, 184 Ark. 740, 746, 43 S. W. (2d) 356, 43 S. W. (2d) 331.”

In this particular case there are sound reasons for applying the liberal construction rule. In the first place, the pertinent language in Amendment Seven (7) relative to 30 days notice is far from being unambiguous. In the second place, we can conceive of no purpose for requiring the 30 days advertisement other than to inform the electors of the provisions of the proposed act so that they may vote intelligently at the November election. The purpose manifestly was not to inform the electors so that they might decide whether or not to sign the petition. This is true for in many instances most or all of the signatures are obtained before the act is published. It is common knowledge that it requires much time and effort to obtain petitions on a state-wide basis, and that it is necessary to have a large number of petitions, and further that these petitions are filed from time to time with the Secretary of State. This being true, we think the only reasonable interpretation and conclusion to be drawn is that the filing date must be as late as the date the last petition is filed and this would be July 7, which was more than 30 days after publication.

The act was properly certified by the Secretary of State and the prayer for an injunction is denied.

McF addin and Robinson, JJ., dissent.

George Rose Smith, J., not participating.

Ed. F. McFaddin, Associate Justice

(dissenting). I find myself unable to agree with the majority opinion, because I am thoroughly convinced that the sponsors of the proposed Act failed to comply with the clear requirements contained in Amendment No. 7 to the Constitution relating to the publication of the proposed Act thirty days before filing. Here is the said provision in the Constitution:

“Initiative — The first power reserved by the people is the initiative. . . . Initiative petitions for State-wide measures shall be filed with the Secretary of State not less than four months before the election at which they are to be voted upon; provided, that at least thirty days before the aforementioned filing, the proposed measure shall have been published once, at the expense of the petitioners, in some paper of general circulation. . . .” (Emphasis supplied.)

The Constitution says that at least thirty days before the petition is filed the proposed measure shall have been published in a newspaper. On June 5, 1960 the proposed measure was published; on June 27,1960 the petition was filed; and that is twenty-two days after publication and not thirty days. Twenty-two does not equal thirty: that is the basis of my dissent.

I say the petition was filed on June 27th, and such is the record before us. Under the provisions of Amendment No. 7 the sponsors of a proposed initiated measure were required to file signatures of 8% of the legal voters. That would mean 22,950 signatures were required on this petition. On June 27th the sponsors of the measure filed a petition containing 40,103 signatures, and the Secretary of State on June 27th (in keeping with § 2-210 Ark. Stats.) notified the sponsors as follows: “I have examined your petition and according to our count you have 40,013 signatures. Since 22,950 signatures are required for an initiated act, this is to advise you that your petition has met this requirement. . .

What was that filing date ? The answer is, June 27, 1960, because on that date the certificate was issued by the Secretary of State and the filing was complete. Anything occurring after that date is mere surplusage. The present lawsuit was filed in this Court on September 7, 1960; and one of the attacks against the measure was the failure to comply with the thirty-day publication requirement. Under date of September 20, 1960 (thirteen days after the filing of this suit in this Court), the Secretary of State issued a certificate reading: “This is to certify that the sponsors of the proposed initiated act, which has for its popular name, ‘Arkansas Minimum Wage and Overtime Act’, completed the filing of their petitions on the 7th day of July, 1960 when they filed petitions containing 1057 signatures proposing said measure. Dated this 20th day of September, 1960.” So, after this lawsuit was filed in this Court, the sponsors went back to the Secretary of State and obtained a certificate that on July 7th 1057 additional signatures had been filed; and the sponsors say that this 1057 additional signatures filed on July 7th “completed the filing”, and made the “substantial compliance” to be on that day. I cannot follow such reasoning: the Secretary of State had already issued a certificate on June 27th, as required by § 2-210 Ark. Stats., that the petition had been filed on June 27th. The filing on July 7th was entirely an afterthought, just as was the September 20th certificate from the Secretary of State, which was obtained by the sponsors after this lawsuit had been filed, and which was brought into the record by amendment to the sponsors ’ original answer. If the July 7th filing of 1057 additional signatures had been required by law, then the Secretary of State (under § 2-210, Ark. Stats.) was obligated to issue his certificate of that filing within fifteen days from July 7th; and the Secretary of State is too careful an official to have failed to comply with § 2-210, Ark. Stats. He would have issued a certificate within fifteen days of July 7th (rather than on September 20th) if anyone had thought that July 7th was the filing date. It is crystal clear that the July 7th filing has been seized on by the sponsors as a crutch to support a broken limb. July 7th cannot have been a date of “substantial compliance” because the whole filing had been completed and certified on June 27th.

As to why Constitutional Amendment No. 7 required that the publication of the measure must be thirty days before the filing, I do not know. Some say that the purpose of the thirty-day publication requirement prior to filing was to inform the voter, rather than the signer, of the proposed measure. Such an argument is making a surmise to be stronger than plain words. I do know that this provision of thirty days publication is in the Amendment No. 7; and its presence is quite commanding. Arkansas originally adopted the Initiative and Referendum by a Constitutional Amendment in 1909, which is not the present Amendment No. 7. Nowhere in the said 1909 Initiative and Referendum Amendment was there any requirement of thirty days publication before filing. At the General Election in November, 1920 there was adopted by the people our present Amendment No. 7; and in our present Amendment No. 7 there appears, for the first time, the provision requiring the publication of the proposed measure to be thirty days before the filing of the petition. The point I am making is, that this language was put into the amendment deliberately and after we had operated under a previous Initiative and Referendum Amendment for a number of years. So it must have been thought that there should be publication before the proposed petition was filed. The framers of the Constitutional Amendment said thirty days; I cannot make twenty-two days equal thirty days.

In tax sales we have repeatedly held that when a statute states a number of days for publication such provision is mandatory. In McWilliams v. Clampitt, 195 Ark. 908, 115 S. W. 2d 280, the statute required the notice to be published weekly for two weeks before the sale. Notice was published on June 1st and June 8th and the sale was held on June 12th. The Court found that the notice was published for only eleven days, and held the sale was, therefore, void. Some of the other tax sale cases holding the time of publication to be mandatory are: Laughlin v. Fisher, 141 Ark. 629, 219 S. W. 199; and Thweatt v. Howard, 68 Ark. 426, 59 S. W. 764. In 82 C. J. S. 235 the general holdings are summarized: ‘ ‘ Constitutional and statutory provisions with, respect to the publicity which must be given initiative and referendum measures are mandatory; . .

The sponsors say that the filing on July 7th was ‘£ substantial compliance”; but there is another rule of law which says that before an election the provisions of the election law are mandatory, even though after the election they may be held merely directory. Orr v. Carpenter, 222 Ark. 716, 262 S. W. 2d 280; and Horn v. White, 225 Ark. 540, 284 S. W. 2d 122. We are now considering this case before the election; and in that situation the thirty-day provision for publication is mandatory. It has not been complied with in this case.

Therefore, I respectfully dissent.

       The 1909 Initiative and Referendum Amendment is listed as Amendment No. 10 to the Constitution and may be found on pages 121 and 122 of Kirby & Castle’s Digest of 1916, and on pages 1239 and 1240 of the Acts of the Legislature for the year 1909. It may also be found listed as Amendment No. 7 on pages 131 and 132 of Crawford & Moses’ Digest of 1921. To provide procedural matters for the 1909 Amendment, the Arkansas General Assembly of 1911 adopted Act No. 2 of the Extraordinary Session that convened on May 22, 1911 (see pages 582 et seq. of the printed Acts of 1911).