text:
    Koolvent Aluminum Awning Co. v. Johnson.
    5-1975
    331 S. W. 2d 265
    Opinion delivered January 11, 1960.
    [Rehearing denied February 22, 1960]

      James R. Hale, for appellant.

      Rex W. Perkins and Charles Bass Trumbo, for appellee.
   Jim Johnson, Associate Justice.

This is a suit involving an oral contract. In May 1957, appellant, Koolvent Aluminum Awning Company of Arkansas, Inc., made an oral contract with appellee, Zed O. Johnson, to install a fiberglas canopy in front of appellee’s service station near the north edge of Fayetteville. The appellant informed appellee that the material used in the construction would be of the best grade and that the material would also be both leakproof and fireproof. Appellee agreed to pay $2,500 and sales tax of $75 for the job. Appellant undertook the installation and while the work progressed during the summer and fall appellee found fault with various aspects of the work.

When installation of the fiberglas began, appellee discovered from the labeling on the boxes that the appellant was using some “B” grade material instead of the more expensive “A” grade material. He complained to the workers about this fact but was told that only a small portion of the grade “B” material would be used, and such material would be used for the border work around the canopy. He permitted the work to continue. The evidence reflected that there is no practical difference between the two grades of fiberglas, and nobody other than a trained engineer can tell “A” grade from “B” grade.

After the work had progressed for some time, the appellee discovered that the material which had been used in the construction work was not leakproof as represented. He again complained to the employees of the appellant about this variation with the contract, whereupon they attempted to make repairs on the construction work, and patch up the leaks in the canopy. During the course of these repairs appellee told appellant’s workmen to “tear it down and put it in the junk pile.” They did not tear the canopy down. Later on, but before all of the fiberglas was put in, it came to the appellee’s attention that the fiberglas material was not fireproof. Appellee did nothing to stop the work but instead permitted appellant to complete the job.

The work was completed around November 2, 1957. Under the agreement appellee was io pay the total price of $2,575 as soon as the job was completed. When appellant endeavored to collect, appellee complained that the canopy leaked and that the material was not fireproof as it had been represented to be, the evidence on this point being that the material met all of the requirements of the Fayetteville building code and that it is widely used in commercial construction. Upon Johnson’s refusal to pay anything, appellant filed suit asked for judgment for $2,575 and costs and for foreclosure of its material and labor lien. This suit was filed within the statutory period of 90 days on January 21, 1958. Finally, ■ more than one year after the work was completed, on November 26, 1958, appellee filed an answer pleading: (1) a general denial; (2) tbe Statute of Frauds; (3) breach of warranty, with an allegation that be bad rescinded tbe contract; and (4) alleging damages.

Tbe case was tried on December 3, 1958, and tbe proof showed that appellee was at that time enjoying some of tbe benefits of tbe canopy. He offered no proof as to any specific amount of damages. At tbe conclusion of the trial,' tbe trial court delivered an oral ‘‘ opinion” finding, in substance, that appellant bad substantially performed its contract. However, tbe decree, which was later filed, granted Johnson’s prayer for rescission. This appeal followed.

All of tbe points relied upon by appellant for reversal pertain to the law of rescission and will be treated in this opinion as combined into one point.

Appellee contends that the oral contract executed between appellee and appellant contained at. least three express warranties, concerning tbe quality and type of materials which were to be used in tbe construction of tbe fiberglas awning. First, tbe representation by tbe appellant that tbe material used for tbe awning would be “fireproof”; second, that tbe best or highest grade material would be used in tbe construction; and third, that tbe awning would be “leakproof.”

He argues that it is well settled that where two parties contract and express warranties are made by tbe one, a breach of such warranties will give tbe other two alternative courses of action. He may either rescind tbe contract and relieve himself from liability thereon, or be may enforce tbe contract and sue for damages. Appellee in bis answer elected not only to rescind but also elected to sue for damages.

:*c appellee chose to stand on tbe ground of rescission ’.<l the trial after tbe goods bad been delivered to him, we are confronted with tbe question of whether or not be met tbe test required of him by tbe law with reference to exercising his right to rescind within a reasonable time.

Did appellant know of the breach of warranty when he accepted the goods? The record reveals that he learned when the fiberglas was delivered that some of it was grade “B”. Upon explanation of the intended use of the “B” grade material he permitted the workmen to use it.

Appellant learned that the fiberglas was not fireproof before all of it had been installed and he did not stop the installation. Appellant knew that the canopy leaked long before the job was completed, the last work being some months after the completion of the canopy and consisted of concrete repair made necessary by the installation of iron posts which supported the canopy.

In Jones v. Gregg, 226 Ark. 595, 293 S. W. 2d 545, we said of the right to rescind:

“While the law gave them the right to rescind the agreements upon the failure of the appellants to comply with their part of the contract, this was only one of their remedies and they were not required to exercise it. The law does require, however, that in order to rescind a contract, the rescission itself must be made within a reasonable time after the facts giving-rise to the right of rescission arise or become known; and, unless such right to rescission is exercised within a reasonable time after the discovery of the facts justifying the rescission the party otherwise entitled to rescind will be deemed to have waived this right.”

The only evidence in the record tending to indicate that appellee thought of rescinding the contract is his testimony that he told the workmen to “tear it down and put it in the junk pile.” If this statement could be considered as notice to the seller of his election to rescind it must fail for the want of adhering to it since her permitted appellant to perform work on the contract after the statement without protest. The record reveals no affirmative act toward rescission was done by appellee until his answer was filed to the lawsuit which was more than a year after the work was completed. We hold that failure to assert the right to rescind for this period was an unreasonable delay which amounted to a waiver of the right to rescind, hence, the trial court was in error in decreeing rescission.

Appellant has filed certain motions and affidavits ■stating in effect that appellee has destroyed a portion of the canopy since the decree of the trial court. The allegations in these pleadings have been controverted by the appellee. It is very doubtful that the motions and affidavits and response thereto were properly filed. In any event, these are matters which may be presented to and considered by the trial court upon a new trial.

Since this action is properly in Chancery Court on foreclosure of lien and since appellee has properly pleaded damages, in order that justice be done we have concluded that the cause should be reversed and remanded for further development of the action against appellee for damages for breach of warranty, consistent with this opinion. It is so ordered.

Reversed and remanded.

George Rose Smith, J., dissents.


source: Caselaw Access Project

author: Carleton Harris, Chief Justice.

license: Public Domain

text:
    Coleman v. Gardner, Admr.
    5-2045
    330 S. W. 2d 954
    Opinion delivered January 18, 1960.

      Claude F. Cooper, for appellant.

      James M. Gardner and Gene Bradley, for appellee.
   Carleton Harris, Chief Justice.

This litigation involves the determination of parties entitled to receive the proceeds of a fire insurance policy. Prior to January 1, 1956, J. R. Coleman was the owner of a 54 acre farm in Mississippi County. Coleman and his wife, Willie Jane Goza Coleman, lived on the farm, occupying the premises as their homestead. In November, 1955, the Farm Bureau Mutual Insurance Company issued its fire loss policy in the name of J. R. Coleman and/or Willie Jane Coleman, such policy effective until November 20, 1956. Coleman died January 1, 1956, and left surviving, the widow, and five children by a previous marriage, all of age. Late in January, Mrs. Coleman went to the insurance agent and an endorsement was entered on the policy changing the name of the insured to Willie Jane Coleman. On December 31, 1956, an order was entered by the Probate Court award.ing the widow the 54 acre farm as her homestead for and during the period of her natural life. An accounting by the personal representative was subsequently filed, and the affairs of the estate duly completed. On November 20, 1956, the insurance company issued a renewal of the policy for the period ending November 20, 1957, and a like renewal was procured by Mrs. Coleman in November of 1957. In the meantime, the widow had moved from the farm in February of 1957. For the year 1958, the property was rented to Denison Wolford, who was living in the house and paying $25 per month for same. In May of that year, the house was destroyed by fire. The insurance policy was for a sum not to exceed $3,000, and the premiums, following the death of Mr. Coleman, had all been paid by Mrs. Coleman. Mrs. Coleman made demand on the company for payment, and the latter admitted liability in the amount of $3,000, but refused to pay because Mrs. Coleman’s step-children (children of the deceased J. R. Coleman) objected, and were making claim to the proceeds.

On June 19, 1958, Mrs. Coleman died, and proceedings were commenced to probate her estate. James Gardner was named administrator, and under an order of the court, the insurance company paid the $3,000 over to such administrator. Claim was filed by the Coleman heirs, J. C. Coleman, Albert B. Coleman, Yera Belle Coleman Mosley, Emma Sue Coleman Scott, and Martha J. Woods, for $3,000 (proceeds of the insurance policy), which was disapproved by the administrator, and thereafter heard by the court. On May 22, 1959, .the court disallowed this claim, and this appeal by J. C. Coleman follows.

For reversal, appellant contends first, that Mrs. Coleman did not meet the duty incumbent on a life tenant “to keep the premises in good repair and not to permit waste”, second, that at the time of the fire which resulted in the loss of the farm dwelling, the life tenant had abandoned her homestead by virtue of moving away from said premises, and third, that her interest could not have been more than a dower interest in the $3,000, “which could not have been greater than one-third of the $3,000, during her life, or life expectancy.”

Relative to his first contention, appellant asserts in his brief:

“ * * * that the life tenant in this case, occupied the premises in such a manner and conducted the affairs in such a manner, which permitted waste for which she, or her estate, certainly should be liable.
The destruction of the building on the aforesaid premises, and the taking of the entire amount of insurance, for which it was insured, leaving the remainder-men nothing whatsoever, with which to rebuild, would be waste.”

This contention is based upon the assertion that Mrs. Coleman moved a party of questionable character onto the premises, and that this action constituted waste to an extent that the remaindermen were injured, and for such injury, should be compensated. We do not agree with this contention. No oral testimony was taken at the hearing, and the only evidence relating to the tenant Wolford is found in paragraph 5 of the Stipulation. This paragraph reads as follows:

“5. We further state for the record that for the year 1958, the land was rented to Denison Wolford and he was living in the house when it burned and paying $25.00 per month for the house, as well as other considerations for the rental of the farm; that the house that Mr. Wolford had lived in prior to his moving into the house in question, likewise, was destroyed by fire, on other property.”

Certainly, we cannot say that the mere act, by a life tenant, of renting a house to one who has previously lived in a-house destroyed by fire, is an act which constitutes waste. Bouvier’s Law Dictionary, Yol. II, (3rd Revision), page 3433, defines “waste” as:

“Spoil or destruction, done or permitted, to lands, houses, or other corporeal hereditaments, by the tenant thereof to the prejudice of the heir or of him in reversion or remainder.
Any unauthorized act of a tenant for a freehold estate not of inheritance, or for any lessor interest, which tends to the destruction of the tenement, or otherwise to the injury of the inheritance.
An unreasonable or improper use, abuse, mismanagement or omission of duty touching real estate by one rightfully in possession which results in its substantial injury.”

It is obvious that the simple act of renting the property to Wolford, under the record before us, cannot be classed as unreasonable, abuse, or mismanagement; nor can it be said that Mrs. Coleman was remiss in any duty to the remaindermen because of this act. While appellant asserts that a party of “questionable character” was moved onto the premises, the assertion is completely bare. We find no merit in this contention.

Nor do we agree that Mrs. Coleman abandoned her homestead simply because she moved away. The only evidence on this point is found in the stipulation, paragraph 1, which reads as follows:

“1. Mrs. Coleman moved from the farm in February of 1957 and was not living in the house when it burned in May of 1958.”

The law is, of course, well settled to the effect -that merely moving from a homestead does not, in itself, constitute abandonment. In Butler v. Butler, 176 Ark. 126, 2 S. W. 2d 63, this Court said:

“It is the rule of law in this State, announced by many decisions of this court, that the question of whether there has been an abandonment of a homestead once established, is almost entirely a question of intent on the part of the homestead owner so to do. In other words, in order to constitute an abandonment of a homestead, the owner must leave it with the intention of renouncing and forsaking it, or leaving it never to return. The law does not require continuous occupation of the homestead to continue it as such.”

Further, in quoting from the case of Colum v. Thornton, 122 Ark. 287, 183 S. W. 205:

“Our Constitution gives the homestead to the widow for life, without any restrictions. It is the settled policy in this State that laws pertaining to the homestead right of the widow and minor children shall be construed liberally in favor of the homestead claimants. ’ ’

In the case before us, there is no evidence reflecting why Mrs. Coleman moved, or whether she had the intention to forsake and abandon the homestead, or to return. It follows that appellant’s argument is without merit.

Appellant’s final argument is disposed of by our holding in Jackson v. Jackson, Trustee, 211 Ark. 547, 201 S. W. 2d 218. There this Court held that a life tenant, insuring her own interest in the premises, at her own expense, and under no obligation under a will to insure for the benefit of the remaindermen, and having made no agreement to do so, is entitled to the proceeds of the policy of insurance free from the claims of the remaindermen. Appellant admits that the Jackson case controls his third point, but argues that the rule is a harsh one, and should be overruled or modified. ' We see no reason to change this holding, which, as appellant admits, conforms to the view of an overwhelming number of jurisdictions. In the Jackson case, this Court, quoting from 33 American Jurisprudence, § 332, p. 838, said:

“It is clearly the general rule that where a legal life tenant insures the property in his own name and for his own benefit and pays the premiums from his own funds, he is, at least in the absence of a fiduciary relationship between him and the remaindermen existing apart from the nature and incidents of the tenancy itself, or of an agreement between him and the remainderman as to which of them shall procure and maintain insurance, entitled to the proceeds of the insurance upon a loss; and the fact that the insurance was for the whole value of the fee is not generally regarded as affecting the right of the life tenant to the whole amount of the proceeds.”

Further, quoting from 31 Corpus Juris Secundum, paragraph 46, page 59:

“It has been stated, as a general rule, that the life tenant is not bound to keep the premises insured for the benefit of the remainderman or reversioner, unless there is an agreement that he shall do so, or a provision to that effect in the instrument creating the estate; but that either may insure for his own benefit, the tenant for life and the remainderman paying insurance for their respective interests. Ordinarily this is what is done, and it has been held that neither the life tenant nor the remainderman will be benefited by the other’s policy.”

Still further, from the opinion:

“In Restatement of the Law of Property, Vol. 1, § 123, sub-sec. 2, the rule is thus stated: ‘When a policy of insurance against the destruction of, or damage to, land or structures thereon, exists only for the protection of the interest of the owner of the estate for life, the owner of the estate for life has a privilege to retain, as against all claims of owners of future interests in the same land or structures, all moneys received by such owner as the proceeds of such policy of insurance.’ ”

As stated, this is clearly the majority rule. In fact, only a very few jurisdictions hold otherwise. In the case before us, Mrs. Coleman was the life tenant. Appellant was a remainderman. Each had an insurable interest, and the life tenant insured her interest, paying for such insurance from her own funds. The remaindermen did not insure their interest. No agreement was in effect relative to insurance. Clearly, under our holding, Mrs. Coleman was entitled to the entire proceeds of the policy.

Affirmed.

       A final accounting covering the period until April 20, 1959, was filed by the administrator, with a later amendment to the final account, both of which were subsequently approved.

       The company placed a value on the house of $5,000.


author: J. Seaborn Holt, Associate Justice.

text:
    Edwards v. Martin.
    5-2029
    331 S. W. 2d 97
    Opinion delivered January 18, 1960.

      Paul K. Roberts, for appellant.

      L. B. Sinead, for appellee.
   J. Seaborn Holt, Associate Justice.

This is a contest between appellant, the mother, and appellee, the grandmother, over the custody of a minor child. From an order awarding its care and custody to the grandmother comes this appeal. The record reflects that in 1948 appellant (then Ernestine Martin) married Bob Foord and the child in question, Bichard James Foord, was born to them February 19, 1952. While bringing his wife and child to Camden, Arkansas from Indiana on October 22, 1952, Foord’s automobile struck the abutment of a bridge over the St. Francis Biver and he was killed, and the appellant and child were severely injured. Appellant was confined in a hospital for many weeks due to shock and injuries resulting in an operation of major abdominal surgery. After leaving the hospital, appellant went to the home of her parents to convalesce and appellee (her mother) was appointed guardian of appellant.

March 20, 1956 Buby Mae Foord, the child’s aunt, filed a petition in the Probate Court of Ouachita County praying that she be appointed guardian of the child, and without any notice of the hearing of the petition being furnished appellant, Buby Mae Foord was appointed guardian on March 30,1956. September 20, 1957 appellant married Graydon Edwards of Irwin, Ohio and they established a home there. September 16, 1958 appellant filed a motion in the Probate Court of Ouachita County to quash the order of March 30, 1956 wherein Ruby Mae Foord was appointed guardian, and on October 10, 1958 the probate court quashed the previous order appointing Ruby Mae Foord guardian, and ordered that the child remain in the custody of appellee, its grandmother. On October 23,1958, appellee filed her petition in the Probate Court of Ouachita County praying that she be appointed guardian of the child. Appellant resisted appellee’s prayer to be appointed guardian of the child and asked the court to grant to her, appellant, permanent custody of the child. After hearing rather voluminous testimony, the probate court entered its order granting custody of the child to appellee, its grandmother, and denying appellant’s request for custody. It thus appears that all of the above proceedings were had in probate which has the power and authority to appoint guardians, but it is without power or authority to determine a contest over the care and custody of a minor without invading the jurisdiction of chancery courts.

In the present case, the probate court undertook to determine who should have “care and custody” of the minor here, a power reserved to chancery courts only. We said in 178 Ark. 583, 12 S. W. 2d 879, Kirk v. Jones, “Minors are the wards of chancery courts, and it is the duty of such courts to make any orders that would properly safeguard their rights.” See also Richards v. Taylor, 202 Ark. 183, 150 S. W. 2d 32.

This court, in the early case of Myrick v. Jacks, 33 Ark. 425, said: “The general jurisdiction over the persons and property of minors belongs to the Chancery Courts. It is a very high trust, involving the most delicate and important interests of a helpless class, which is peculiarly the subject of the jealous and watchful care of chancery, and which is peculiarly liable to injury from the greed of crafty men and the carelessness of relations. Courts of probate have, by the statute, been entrusted with some limited powers over the estates of minors in the hands of administrators and guardians, and within the scope of those statutory powers they are certainly entitled to all presumptions accorded to superior courts of record. But they had no such jurisdiction by common law, and beyond the limits given they have none now. * * * if they undertake to make an order not authorized under any circumstances, although they may have jurisdiction over the same property for other purposes, it is void.” See also Watson v. Henderson, 98 Ark. 63, 135 S. W. 461 and Crenshaw v. Crenshaw, 203 Ark. 1086, 160 S. W. 2d 37.

Accordingly, the order of the probate court is reversed and the cause remanded with directions to transfer the case to the chancery court for further proceedings consistent with this opinion.


author: Ed. F. McFaddin, Associate Justice.

text:
    St. Paul-Mercury Indemnity Co. v. City of Hughes.
    5-2034
    331 S. W. 2d 106
    Opinion delivered January 18, 1960.

      Norton & Norton, by Robert H. Wright, for appellant.

      Knox Kinney, for appellee.
   Ed. F. McFaddin, Associate Justice.

This appeal is another step in the persistent efforts of appellant to collect from the City of Hughes the amount of $1,050.00 which appellant paid to St. Francis County under a policy of insurance issued by appellant. See St. Paul-Mercury Indemnity Co. v. Taylor, 229 Ark. 187, 313 S. W. 2d 799. We will refer to St. Paul-Mercury Indemnity Company as “appellant”; St. Francis County as “County”; and the City of Hughes as “City”.

On July 9, 1954, for a premium of $53.00, appellant insured the County against any loss or damage in excess of $100.00 to a 2-ton Chevrolet dump truck owned by the County. The truck was loaned by the County to the City and was damaged while in possession of the City; and the appellant paid the County $1,-050.00 under the said insurance policy which contained this subrogation clause: “In the event of any payment under this Policy, the Company shall be subrogated to all the Insured’s rights of recovery therefor against any person or organization and the Insured shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. The Insured shall do nothing after loss to prejudice such rights.”

After making payment to the County the appellant undertook to recover the said $1,050.00 from the city on the theory that the City, as bailee of the truck, was liable in contract to the County, and that the appellant, as subrogee of the County, could hold the City liable in contract. To be maintained the action had to be in contract because in Arkansas a municipality may be liable in contract, but is not liable in tort in a case like this one. The appellant filed action against the City in the Circuit Court in the name of the County, but the County Judge of St. Francis County dismissed the action on behalf of the County. The appellant then filed the present suit in the Chancery Court, which was transferred to the Circuit Court; and the Circuit Court sustained the City’s demurrer to the complaint. From the judgment dismissing the complaint this appeal resulted; and two questions are presented which we now discuss.

I. Did The Complaint State a Cause Of Action In Contracts In determining whether a demurrer to a complaint should be sustained every allegation made therein, together with every inference reasonably deducible therefrom, must be considered. Sallee v. Bank of Corning, 122 Ark. 502, 184 8. W. 44; and Cline v. Smith, 205 Ark. 136, 167 S. W. 2d 872. In addition to alleging the status of the parties, the issuance of the policy to the County, the payment of the loss by appellant to the County, and the right of subrogation, the complaint also alleged:

(a) That the County placed the truck in the exclusive possession of the City “for the purpose of hauling gravel for the streets of the said defendant city,, and then to be returned to the possession of St. Francis County in good condition when such work was completed”.

(b) “That upon the return of the truck in question by the Defendant city to St. Francis County, said truck was in such a complete state of destruction that its salvage value was only $350.00.”

(c) “That the delivery of the truck by the said St. Francis County to the Defendant city created the relationship of bailor-bailee between the County and Defendant (City), and imposed on the Defendant a contractual obligation properly to care for the vehicle.”

That the complaint here involved (the one filed in the Chancery Court) alleged a bailment is almost beyond dispute because there was a delivery by the County (bailor) of personal property (the truck) to the City (bailee) to use safely and return in good condition. See Sullivant v. Pennsylvania Fire Ins. Co., 223 Ark. 721, 268 S. W. 2d 372. The complaint alleged that the City failed to return the truck in good condition and thereby breached the contract of bailment. For such breach of contract of bailment the bailor had a cause of action ex contractu against the bailee. In Ferrier v. Wood, 9 Ark. 85, when common law forms of pleading still existed in Arkansas, this Court held that an action in assumpsit could be brought against the bailee for breach of the contract of bailment. The old common law action of assumpsit was an action ex contractu because the word “assumpsit” means “he promised”. Our own case of Bertig v. Norman, 101 Ark. 75, 141 S. W. 201, Ann. Cas. 1913D 943, is frequently cited because of the scholarly opinion of Mr. Justice Frauenthal. In that case a bale of cotton had been left by Norman’s agent on the platform of Bertig Brothers, the bale of cotton had been lost, and Norman sued Bertig Brothers for damages. Norman was required to state whether he sued “on contract, in bailment, or conversion”; and he said that he sued in bailment. On this statement of bailment this Court held the action by Norman was on contract and not in tort and Mr. Justice Frauenthal said:

“It is urged by counsel for Bertig Brothers that the action as originally brought was one sounding in tort for the conversion of the property, and that the complaint could not be amended so as to base.the action upon a bailment. But we are of the opinion that the allegations of the complaint in the justice of the peace court, and as it was amended in the circuit court, were sufficient to make the action one of assumpsit. The action of assumpsit is one for the recovery of damages for the nonperformance of a simple contract. Such contract may be expressed or implied, and the action is based upon the breach thereof, and is therefore ex contractu. 2 Enc. PI. & Prac. 988.
“Giving to the pleading that liberal construction accorded by our practice, the complaint as originally filed alleged that the defendants had obtained and converted the bale of cotton, and were liable to plaintiff upon an implied promise to pay for the value thereof thus received by them . . . Whether the breach of contract grew but of the failure to pay the proceeds of the bale upon an implied promise to do so by those who had obtained it, or but of the negligence of those who, as bailees, were entrusted with its care, the remedy was an action of assumpsit. Ferrier v. Wood, 9 Ark. 85; Stanley v. Bracht, 42 Ark. 210. The action instituted was therefore based, and recovery can only be had, upon a contract of bailment and the breach thereof by the def endánts. ’ ’

So we hold that the appellant as subrogee of the County could sue the City for breach of bailment contract by action ex contractu as entirely separate from a tort action. Of course, the appellant has a narrow opening through which to direct its efforts at recovery because the City is not liable in tort, as previously pointed out. But we must conclude that the demurrer of the City should have been overruled by the Circuit Court.

II. Should The Case Be Transferred To Chancery Court 1 Appellant insists that the present case against the City should be tried in Chancery Court; and we agree with, that contention which may now be properly urged. In St. Paul-Mercury Indemnity Co. v. Taylor, 229 Ark. 187, 313 S. W. 2d 799, the appellant sought a writ to prohibit the Circuit Court from entertaining jurisdiction of this case and we refused the prayed relief, saying:

“Jurisdiction of this action as well as the authority to pass on the motion to retransfer to chancery court was a matter properly within the jurisdiction of the St. Francis Circuit Court. On the record presented, we cannot say that petitioner’s remedy by appeal from a final judgment that may be rendered in the circuit court action is inadequate, or that irreparable harm to it will necessarily result from an adjudication of the matter there.”

But the present case is an appeal from a final judgment of the Circuit Court, so the ruling on the interlocutory order — i.e., motion to transfer back to chancery — now be properly considered by us. Hemphill v. Lewis, 174 Ark. 224, 294 S. W. 1010; and Bassett v. Bourland, 175 Ark. 271, 299 S. W. 13.

It must be remembered that appellant, as subrogee of the County, first proceeded against the City in the law court in the name of the County. This was proper. St. Louis, A. & T. Ry. Co. v. Fire Assn., 60 Ark. 325, 30 S. W. 350. But the County Judge of St. Francis County dismissed the case in the law court notwithstanding the subrogation agreement in the insurance policy, as previously copied. The appellant then filed the present suit in equity in its own name as plaintiff against the City and also against the County Judge of St. Francis County; and alleged the law action and its dismissal by the County Judge, and prayed for judgment against the City and for a restraining order against the County Judge in this language:

“. . . and that an order issue restraining M. D. Clark, as county judge of St. Francis County, from interfering in any capacity, assumed or otherwise, with the proceedings herein.”

On June 20, 1957 the Chancery Court entered its order which in part said:

“. . . that said Defendant M. D. Clark, as County Judge of St. Francis County, shall be without power to take any action in dismissing this cause, or interfering with its progress and he is restrained from doing so; and that all other issues herein are reserved for further consideration of the court.”

Thus, equity took jurisdiction of the suit and granted part of the prayed relief; and the rule is thoroughly established that when equity acquires jurisdiction for one purpose under bona fide allegations, then all matters at issue will be adjudicated and complete relief awarded. Conner v. Heaton, 205 Ark. 269, 168 S. W. 2d 399; and Goodman v. Powell, 210 Ark. 963, 198 S. W. 2d 199. In Askew v. Murdock Acceptance Corp., 225 Ark. 68, 279 S. W. 2d 557, we said:

“The principle that the Chancery Court, having taken jurisdiction for any purpose, will completely settle the rights of the parties in the subject matter of the controversy is so firmly established that it needs no citations of authority. However, a few of the cases so holding are: McDonald v. Shaw, 92 Ark. 15, 121 S. W. 935, 28 L.R.A., N. S. 657; Jarratt v. Langston, 99 Ark. 438, 138 S. W. 1003; Galloway v. Darby, 105 Ark. 558, 151 S. W. 1014, 44 L. R. A., N. S. 782; School District No. 36 v. Gladish, 111 Ark. 329, 163 S. W. 1194; Hall v. Huff, 114 Ark. 206, 169 S. W. 792. Also, damages may be allowed. Evans v. Pettus, 112 Ark. 572, 166 S. W. 955.”

CONCLUSION. The judgment of the Circuit Court is reversed and the cause remanded with directions to overrule the demurrer to the complaint and to remand the cause to the Chancery Court for further proceedings.

       Case No. 1598 in this Court was a motion for rule on the Clerk, which was denied. Case No. 1614 in this Court was a petition for writ of prohibition, which was denied by opinion in the cited case.

        City of Little Rock v. White, 193 Ark. 837, 103 S. W. 2d 58.

        Cabiness v. City of North Little Rook, 228 Ark. 356, 307 S.W. 2d 529.

       The Circuit Court order sustaining the demurrer recited: “Now on this 17th day of August, 1959, comes on to be heard the Demurrer filed herein by Defendant City of Hughes, and the Court having heard and considered the argument and briefs of counsel for the respective parties, and being fully advised in the premises, finds and holds that Plaintiff by its Complaint is attempting to do indirectly what it cannot do directly, i.e. sue Defendant City of Hughes in tort, and Defendant’s Demurrer should be sustained. It is, therefore, CONSIDERED, ORDERED AND ADJUDGED that Defendant’s Demurrer to Plaintiff’s complaint be and hereby is sustained; and Plaintiff having declined, to plead further, it is CONSIDERED, ORDERED and ADJUDGED that Plaintiff’s complaint be and hereby is dismissed, with costs to be borne by the Plaintiff.”


author: George Rose Smith, J.

text:
    Schwarzlose v. Kingrey.
    5-1991
    330 S. W. 2d 917
    Opinion, delivered January 18, 1960.

      Moses, McClellan, Arnold, Otven & McDermott, by Jack Young, for appellant.

      McMillan & McMillan, for appellee.
   George Rose Smith, J.

In 1957 the plaintiff-appellant, Monroe Schwarzlose, was an established processor of turkeys, operating a processing plant in Cleveland county. He was also a retail dealer in poultry feed, selling an assortment of feeds made by Quaker Oats Company. To supply his plant with turkeys Schwarzlose raised birds himself and also offered a plan by which farmers in the area might raise turkeys for him under a contractual arrangement. The plan contemplated that each grower would establish his credit with Quaker, purchase turkey poults from Schwarzlose in the spring, raise the turkeys with Quaker feed, and resell the mature birds to Schwarzlose in the fall. It was expected, of course, that the market price prevailing in the fall would provide a profit for the grower, who contributed his labor and the use of his premises to the venture.

This case, which represents a consolidation of two suits in the trial court, involves two instances in which the plan resulted in a net loss, the market price being-less than the grower’s outlay for poults, feed, and medicine. By the terms of the written contract the greater part of this loss was to be borne by the grower, and Schwarzlose accordingly sued each of the growers, Kingrey and Wilkins, upon the notes and chattel mortgage each had given in buying poults, brooders, and equipment from Schwarzlose. The defendants filed similar answers and cross-complaints, asserting that the written contracts did not truly express the agreement between the parties and that the growers were entitled to recover all their actual costs plus an amount equal to forty cents for each bird raised to maturity.

After an extended trial the chancellor upheld the defendants’ contentions and granted a reformation of the contracts and a money judgment against Schwarzlose for the amount found to be due each grower. It being conceded that the proof to support a decree of reformation must be clear, unequivocal, and decisive, Nicholson v. Hayes, 166 Ark. 112, 265 S. W. 640, the principal question is whether the evidence in this record measures up to that standard.

The testimony shows that in February and March of 1957 Schwarzlose took the initiative in seeking to persuade farmers to raise turkeys for him. He called upon the two appellees, Kingrey and Wilkins, a number of times before they accepted his proposal and orally agreed to grow birds for his plant. We shall detail the facts with respect to Kingrey only, the two eases being-similar.

The original agreement between Schwarzlose and Kingrey was admittedly oral and was probably made late in March. Schwarzlose sold brooders, feeders, and other equipment to Kingrey, for which Kingrey signed a promissory note for $1,948.54, dated April 1. In April Kingrey bought 10,120 poults from Sehwarzlose, at 75‡ each, and gave a promissory note, dated April 3, for the total purchase price of $7,590.00. Kingrey began raising the turkeys and eventually purchased $37,297.70 worth of feed from Sehwarzlose.

It was not until the night of June 21 that Sehwarzlose took a mimeographed form of contract to Kingrey ’s home and obtained his signature. Sehwarzlose admits that he told Kingrey that the written contract was the same as the oral agreement made in the preceding March. The Chancellor was justified in finding that Kingrey relied upon this statement and signed the contract without reading it carefully. If there was really a material variance between the oral and written contracts it is sufficiently clear that Kingrey signed the latter under a mistaken belief as to its contents and that Sehwarzlose either shared the mistake or was guilty of misrepresentation.

Paragraph 7 of the written instrument provides that Sehwarzlose will repurchase the turkeys in the fall at the greater of the following prices:

“A. The prevailing market price for such turkeys in the State of Arkansas ... as shown in the Federal-State Market News Service distributed by the University of Arkansas.
“B. A price equal to the cost of growing such turkeys, as herein defined, plus a sum equal to $.40 per mature turkey repurchased, provided that the price as determined under this subsection shall never exceed the price as determined under Paragraph 7A plus a sum equal to $.40 per mature turkey repurchased.” (Our italics.)

The pivotal question is whether the oral agreement contained the proviso we have italicized, by which the grower’s recovery of his actual costs could never exceed the market price plus forty cents a bird. Sehwarzlose testified that this limitation was included in his original proposal, but we think that his version of the matter is clearly and convincingly rebutted by the appellees’ proof.

Kingrey and Wilkins both testified that during the negotiations Schwarzlose guaranteed them their costs plus forty cents a turkey, regardless of the market price. This testimony is corroborated by four other farmers and a banker, to whom Schwarzlose made the same explanation of his offer. Ordinarily the negotiations between Schwarzlose and third persons would be inadmissible, on the principle of res inter alios acta, but here Schwarzlose himself testified that his proposal to the others was identical with that made to the defendants. This admission distinguishes the case from Hight v. Marshall, 124 Ark. 512, 187 S. W. 433, cited by the appellant, and opens the way for proof of the other negotiations.

The attorney who prepared the written contract testified, after Schwarzlose had waived the attorney-client privilege, that the first draft of the agreement did not contain the proviso we have emphasized. It is clearly inferable from this lawyer’s testimony that the proviso was suggested to him by Schwarzlose after the parties had entered upon the undertaking in March or early April. Finally, we observe that in the witness chair Schwarzlose was unable to state the substance of the proviso, despite repeated questions during his cross-examination. We think it reasonable to conclude that he did not have the limitations of the proviso firmly •in mind when he first sought to induce the appellees to raise turkeys for him.

The appellant contends alternatively that in any event the chancellor erred in cancelling the appellees’ notes for the purchase price of the brooders and other equipment, since this capital investment was not part of their recoverable costs of raising the turkeys. Even so, the notes were properly canceled. The net balance in favor of the appellees, without taking the purchase of equipment into account, was more than the face amount of the equipment notes, and consequently the chancellor was right in crediting the appellant with the amount of the cancelled notes and giving the appellees a judgment only for the balance then remaining due.

Affirmed.


author: Paul Ward, Associate Justice.

text:
    Cheney, Commr. v. Stephens.
    5-2019
    330 S. W. 2d 949
    Opinion delivered January 18, 1960.
    [Rehearing denied February 22, 1960]

      Eerrn Northcutt, for appellant.

      Mehaffy, Smith & Williams, by William H. Bowen, for appellee.
   Paul Ward, Associate Justice.

The issue presented on this appeal is whether a domestic corporation must pay State income taxes on earnings derived from without the State under the provisions of the State Income Tax Act, Act 118 of the Acts of 1929 and the amendments thereto (Ark. Stats. § 84-2001, et. seq.).

Appellee, Stephens, Inc., derived the subject income from the purchase and sale of a large number of shares of stock in the Arkansas Louisiana Q-as Company (hereinafter called Arkla). Accordingly, appellee filed an income tax return for the fiscal year ending May 31, 1957, excluding therefrom the aforementioned extrastate gain but reporting an income tax liability in excess of $19,-000.00. After a series of conferences between appellant and appellee relative to the taxability of said gain, appellant notified appellee by a letter dated April 9, 1958 of his determination that the gain was subject to Arkansas income tax. Based on that determination appellant made a computation of the additional income tax liability and appellee paid the determined amount under protest on or about April 15, 1958. Invoking jurisdiction of the Chancery Court pursuant to § 32 of Act 118 of the Acts of 1929 (Ark. Stats. § 84-2308) appellee filed a complaint containing substantially the allegations hereinafter set forth.

Stephens, Inc., formerly W. R. Stephens Investment Company, is an Arkansas corporation with its principal office in Little Rock, and the defendant is the duly appointed and acting Commissioner of Revenues for the State of Arkansas. The action is for the recovery and refund for State Income Tax illegally and erroneously collected by the defendant for the period June 1, 1956 to May 31, 1957. In 1954 plaintiff began negotiations for the purchase from the Cities Service Company (hereafter called Cities Service) of its entire stockholdings in Arkla consisting of 1,958,189 shares of $5.00 par common stock; and on October 15, 1954 a contract of purchase of said stock was executed at New York City subject to the approval of the Securities Exchange Commission. Plaintiff intended and warranted to Cities Service that it was purchasing said stock for its own account for investment, and the stock later acquired was so earmarked, accounted for and at all times held in plaintiff’s investment account. Plaintiff’s plan of purchase also involved an offer to purchase all shares of Arkla common stock which minority stockholders should tender for sale in New York City. In order to finance the purchase of said stock plaintiff secured a loan commitment from the First National City Bank of New York obligating the bank to lend plaintiff all the money necessary to acquire said stock, with the understanding that the plaintiff should at all times maintain a cash margin in the bank in the sum of $5,000,000.00. Plaintiff’s purchase agreement with Cities Service and also the minority stockholders required delivery of said stock to the said bank, properly endorsed for transfer and delivery. Cities Service sought and received .from the Securities and Exchange Commission permission to make said sale. Pursuant to the above arrangements plaintiff purchased 1,958,189 shares of. said stock from Cities Service on December 14,1954 in the offices of said bank in New York City, and in like manner, plaintiff also purchased 1,966 shares of said stock from the minority stockholders. Promptly thereafter plaintiff clearly identified the Arkla stock so acquired by listing it in a separate account marked “Special Investment Account, Arkansas Louisiana Gas Company Common Stock”, it being plaintiff’s purpose and intention clearly to earmark said stock as security held for investment as distinguished from inventory within the meaning and purpose cited in the Internal Revenue Code, § 1236 and the Regulations and Rulings to that Code. At all times after acquiring said stock and at all times since that stock was sold plaintiff conducted its affairs in connection with the purchases and sales in the offices of the said bank in New York City, and the stock was at all times held by the bank. On November 16, 1956, plaintiff filed with the Securities and Exchange Commission a registration statement covering said stock proposed to be sold by an underwriting Group headed by Eastman-Dillon and Union Securities and Company in New York City. By a purchase contract dated December 10, 1956, entered into with plaintiff and the aforementioned underwriters, plaintiff contracted to sell 319,235 shares of said stock. The sale of said stock was consummated at the offices of the First National Bank of Jersey City, Jersey City, New Jersey, December 13, 1956.

The Complaint further stated that because the series of transactions involved in the acquisition and sale of the 319,235 shares of Arida stock took place entirely without the State of Arkansas and because they were negotiated and concluded at the offices of the bank in New York City, the gain realized upon said sale was not subject to the Arkansas State Income Tax, the reasons being: (a) that such extrastate earnings are not taxable within the meaning and language of § 2 of Act 144 of the Acts of 1957 [Ark. Stats. § 84-2008(b), (i) ]; (b) the extrastate gains are not covered by the definition of gross income as defined by § 8 of Act 118 of the Acts of 1929 (Ark. Stats. § 84-2008); and (c) the taxation of this extrastate income violates the due process clause and the equal protection clause of both the State and Federal Constitutions.

In the prayer the trial court was asked to declare the tax collection illegal and to order a refund to plaintiff.

On May 27, 1958, the Commissioner of Revenues filed a general denial to the above complaint.

On November 13, 1958, the parties hereto entered into a stipulation which, excluding many facts heretofore set out, reads substantially as follows: Stephens, Inc., acquired by purchase 1,950,155 shares of Arkla stock at a price of $24,501,937.50 plus dividend accruals thereon of $198,501.30 for a total of $24,700,438.80. Participating as principals with Stephens, Inc. in these purchases were two out-of-state parties referred to for convenience as the Dougherty and Union Securities Group. Stephens, Inc. acquired 1,053,085 shares of such stock and the rest of the shares were acquired by said Group. All aspects of the sales of said stocks were negotiated and handled from the offices of the First National City Bank of New York City with actual transfer of stock certificates made in the offices of the First Bank of Jersey City, Jersey City, New Jersey; all sales being consummated between November 20, 1956 and December 13, 1956. No other State income taxes have been paid to any other than the State of Arkansas on the gain realized from said sales.

The correct amount of the certified tax exaction against appellee is not in dispute nor is it an issue in the case.

After a hearing on the pleadings and the stipulations the trial court held that the tax was wrongfully and illegally collected and ordered it to be refunded to Stephens, Inc., hence this appeal by the Commissioner of Revenues.

In an examination of the issue here involved we acknowledge the assistance received from the comprehensive findings of law and fact contained in the trial court’s Memorandum Opinion and Order and from the excellent and exhaustive briefs filed by both parties. For an affirmance of the trial court’s decree appellee relies on three separate and distinct grounds but two of them need not be discussed because we have concluded that the decree must be sustained on constitutional ground in conformity with former decisions of the United States Supreme Court and of this Court.

In the case of F. S. Royster Guano Company v. Commonwealth of Virginia, 253 U. S. 412, 64 L. Ed. 989, 40 S. Ct. 560, the same questions here involved were therein decided against the contention of the appellant. In that case appellant, which was a corporation domiciled in Virginia and doing business and receiving income not only from that State but from other States, returned for taxation purposes the income received only in the State of Virginia and omitted the income from the other States. The tax officials disagreed and assessed a tax against appellant based on the income received from all of the States. This determination was sustained by all of the intermediate courts and was finally appealed to the Supreme Court of the United States. The Virginia statute imposed income tax upon the aggregate amount of the income of each person or corporation including all profits from earnings received within or without the State of Virginia and also “all other gains and profits derived from any source whatever”. Virginia also had another statute (c. 495, Laws 1916 [p. 830]) which exempted from taxation a corporation which was domiciled in Virginia but derived all of its income from transactions and businesses without the State. (Note that this Act is in effect the same as § 2 of Act 304 of the 1953 General Assembly of Arkansas to which we will refer later). Regarding these two Acts the Court said: “Of course, these two statutes must be considered together as parts of one and the same law; and by their combined effect, if the judgment under review be affirmed, plaintiff in error will be required to pay a tax upon its income derived from business done without as well as from that done within the State, while other corporations owing existence to the same laws and simultaneously deriving income from business done without the State but none from business within it, are- exempt- from taxation”. After the Supreme Court observed that corporations could be classified upon a reasonable basis, etc., it held that the classification made by the two statutes was not reasonable but illusory and proceeded to give in detail its reasons for so concluding. The Supreme Court of the United States then reversed the case holding that the tax exaction against appellant was illegal and in violation of the 14th Amendment to the Constitution of the United States.

Essentially the question presented in the case under consideration was the question considered in the case of McCarroll, Commissioner of Revenues v. Gregory-Robinson-Speas, Inc., 198 Ark. 235, 129 S. W. 2d 254, where the Court resolved the issue against the contention of appellant here. In the cited case appellee was essentially in the same position that appellee occupies in the case under consideration in that it was a corporation domiciled in Arkansas but derived a large portion of its income from without the State. The Commissioner of Revenues exacted the tax payment against the appellee based on extrastate gain under the Income Tax Act of 1929 which is the same Act here involved. At the same time the State had another statute, Act 220 of 1931, which was similar to the Virginia statute above referred to, exempting from taxation corporations domiciled in Arkansas but deriving all of its gain from without the State. The Court stated the issue as follows: “We come next to consider the constitutionalityi of the exaction by the State Revenue Commissioner of the tax in question. Is Act 118 of 1929 (Income Tax Act), as construed by appellant as applied to appellee in this case, when read in connection with Act 220 of 1931, which exempts domestic • corporations, doing business wholly without the State, from all income taxes, unconstitutional, because a denial of the equal protection clause of the Fourteenth Amendment to the Federal Constitution? We think that it is”. The Court in the cited case further states: “We are of the opinion that these tw.o Acts taken together impose upon appellee a discriminatory and arbitrary exaction of the tax in question and to this extent is unconstitutional and unenforceable, being violative of appellee’s rights under the Fourteenth Amendment to the Constitution of the United States and Art. II, § 8 of the Constitution of the State of Arkansas”. “We think the identical question presented in this case has been definitely decided against appellant by the Supreme Court of the United States in the case of F. S. Royster Guano Co. v. Commonwealth of Virginia, 253 U. S. 412, . . . under a state of facts practically identical with those in the instant case”. In the cited case, at the end of the opinion, the Court again summarized its holdings with these words: “We think it is clear that Act 220 of 1931, supra, relieves domestic corporations doing business entirely without the State of Arkansas from the payment of any income tax to this State, and that when this Act is read in connection with the general income tax act of 1929, supra, that under the decision of the United States Supreme Court in the Royster case, supra, the imposition of an income tax upon a domestic corporation, doing business both within and without this State, on income derived from sources outside Arkansas denies to such domestic corporation the equal protection of the laws and amounts to the taking of its property without due process in violation of the Fourteenth Amendment to the Constitution of the United States and Art. II, § 8, of the Constitution of the State of Arkansas”. Following the above decision, in the case of Dunklin v. McCarroll, Commissioner of Revenues, 199 Ark. 800, 136 S. W. 2d 675, the Court considered somewhat the same question here involved except that an individual and not a corporation was the taxpayer. In that case the Court considered together the 1929 Income Tax Act and Act 220 of the Acts of 1931 heretofore mentioned. Also the Court there made the distinction between the applications of the two Acts to individuals as opposed to a corporation. It affirmed there in very clear language the holding in the Gregory case, supra, stating: “It is, therefore, settled by the former decisions of this court that domestic corporations doing business both within and without the state are not required to pay income tax to the state of Arkansas on income derived from sources outside of Arkansas”. The only difference between the factual situation and the applicable law in the two cases above decided and in the case under consideration is nominal and not substantive. In the cited cases the Court was dealing with Act 220 of 1931. Said Act has been repealed but exactly the same exemption provisions were re-enacted in § 2 of Act 304 of the Acts of 1953.

The holdings in the Gregory case, supra, and the Dunklin case, supra, have never been overturned and they appear to be decisive of the issue here involved against the contention of appellant. In fact appellant virtually concedes that these former holdings are decisive unless they can be distinguished. So indicating is the following statement contained in his brief: “It is this and the Royster cases which are the main supports of Stephens’ position; and it would seem that the Commissioner of Revenues must show that these two cases (Referring to the Gregory case and the Royster case) have no application here . . .”

After making the above statement appellant cites numerous cases in an attempt to discredit or distinguish the former decisions of this Court and the deci-

sion of the United States Supreme Court above referred to. We have examined carefully all of these cases but failed to find them convincing. For example, the cases of Wiseman v. Interstate Public Service Go., 191 Ark. 255, 85 S. W. 2d 700; Wilson v. Monticello Cotton Mills, 180 Ark. 1090, 24 S. W. 2d 324; Kansas City, Memphis $ Birmingham B.B. Co. v. Stiles, 242 U. S. Ill; Fidelity d Columbia Trust Co. v. Louisville, 245 U. S. 54; and Stanley v. Gates, 179 Ark. 886, 19 S. W. 2d 1000; are among the citations but each of these decisions were rendered prior to the Gregory decision. The Dunlclin case, supra, is cited, but as we have already pointed out, that case involved an individual and not a corporation. Appellant also cites two cases from other jurisdictions which he thinks discredits or are contrary to the Gregory case but we deem it unnecessary to discuss them since the decisions of our own Court, as heretofore pointed out, are in point and are decisive.

Appellant makes the argument that the holdings in the Royster case, the Gregory case, and the Dunklin case, supra, are not applicable to the situation here for the reason that Stephens, Inc. is merely a holding company, but we do not agree with this contention. Black’s Law Dictionary defines a holding company as: “A super-corporation which owns or at least controls such a dominant interest in one or more corporations that it is enabled to dictate their policies through voting power; a corporation organized to hold the stock of other corporations; . . .” We find nothing in the record in this case which shows Stephens, Inc. to be such a company. On the other hand the Articles of Incorporation of the Stephens Company which are included in the record shows its purpose to be: “To buy, sell, lease, mortgage and exchange real estate, to buy, sell, mortgage and pledge notes, bonds, bills of exchange and other evidences of indebtedness, stocks and securities, to lend money, to build houses and other buildings and to generally conduct any such mercantile operations as may be incident and interdependent to the business’. We think it is obvious from the record in this case that the activities of appellee in conducting the transactions and negotiations referred to in this ease were not merely acts of holding stocks in other corporations.

It follows, therefore, from what has been heretofore said that the decree of the trial court must be, and it is hereby affirmed.

Affirmed.


author: Sam Robinson, Associate Justice.

text:
    Hill v. Day.
    5-1981
    331 S. W. 2d 38
    Opinion delivered January 18, 1960.

      Frierson, Walker & Snellgrove, Barrett, Wheatley, Smith <& Deacon, for appellant.

      Rhine & Rhine, James M. Gardner, for appellee.
   Sam Robinson, Associate Justice.

Appellee, Earl Day, filed this action asking that an instrument which appears on its face to be a deed be declared an equitable mortgage, and that under his alleged contract of purchase with the mortgagor he be allowed to redeem from the mortgagee. The issues are whether the deed is in fact an equitable mortgage and if so whether Day has the right to redeem. Mary Brown owned 432 acres in Clay County; her son, Neal, owned 80 acres. They borrowed money from a gin company and as security gave a deed to all the property, retaining.an option to repurchase. They were unable to pay their indebtedness to the gin company, and to secure money for this purpose they executed a deed to appellant, A. A. Hill, the husband of Naomi Brown Hill. Mary Brown was the mother of Neal Brown, Ruth Brownell and Naomi Brown Hill, all of whom, along with- their mother, signed the conveyance to A. A. Hill. An option was retained giving Neal the right to repurchase the property within five years for $20,000 and interest.

The option provided that it is not assignable. Later Mary Brown died intestate, and it appears that Neal Brown and his sisters, Ruth Brownell and Naomi Hill, are her heirs. Neal and Ruth entered into a contract to sell the entire property to appellee, Earl Day, for the price of $40,000. Of course, in order to convey to Day they had to redeem from Hill, but instead of redeeming the land from Hill, for a consideration paid by Hill based on a valuation of $40,000, they cancelled the option to repurchase from him. At the time of this transaction, Hill had knowledge of Day’s contract with Neal Brown and Ruth Brownell to purchase the property for a consideration of $40,000. Therefore, Hill is not an innocent purchaser. Valley Planing Mill Co. v. Lena Lbr. Co., 168 Ark. 1133, 272 S. W. 860; Collins v. Heitman, 225 Ark. 666, 284 S. W. 2d 628.

The general doctrine prevails in this state that the grantor may show that a deed absolute on its face was intended only to be security for the payment of a debt and thus a mortgage. Clark-McWilliams Coal Co. v. Ward, 185 Ark. 237, 47 S. W. 2d 18; Ehrlich v. Castleberry, 227 Ark. 426, 299 S. W. 2d 38.

The Chancellor closely analyzed the facts and cited applicable law to the effect that the conveyance by Mrs. Brown and Neal, Ruth and Naomi to Hill is an equitable mortgage. The chancellor said:

“The court is convinced that the evidence here is of that clear, cogent and convincing character to compel the conclusion that the deed and allied instruments were actually intended as a mortgage. It must be borne in mind that the court is not bound by the terms of the instruments alone, but may consider all of the circumstances in connection with the transaction and, any evidence, written or oral, otherwise competent, may be considered.
“In the first place, the parties here were closely related. The property originally belonged to Mary Brown, the mother of Naomi Brown Hill, Neal Brown and Ruth Brown Brownell. The principal defendant, A. A. Hill, is the son-in-law of Mary Brown and the husband of Naomi Brown Hill.
‘ ‘ The land originally, as indicated, belonged to Mary Brown but in her later years it was farmed by her son, Neal Brown. He became indebted, by reason of his farming operations and entered into an arrangement identical with the one later entered into with the defendant, A. A. Hill, by the terms of which the property was deeded to a Clay County concern that had made advances. This indebtedness was paid off by A. A. Hill and the property was deeded back to Neal Brown. Additional advances were made by Hill and a mortgage was executed on the property to secure that indebtedness. Then, most of the property was reconveyed by Neal Brown to his mother. "When later on no progress was made toward payment of the debt due Hill, an arrangement was made between all the parties by which a deed, regular on its face, was executed by Mary Brown and Neal Brown conveying all of the property to Hill. Some doubt was expressed by the interested parties because of the advanced age of Mrs. Brown as to her capacity at the time to execute the deed and so in order to estop any of the heirs from questioning her capacity to execute the deed they were required to join in for that purpose and that purpose only.
“On the same day that the deed was executed, a purported option to purchase was executed and signed by A. A. Hill and his wife and by Ruth Brown Brownell and Neal Brown by the terms of which Neal Brown was given the right to repurchase the property and for the agreed price of $20,000.00. It is interesting here to note that the agreed price of $20,000.00 was less than $500.00 more than the amounts that Hill had actually advanced to Neal Brown, plus accrued interest at the time he took a mortgage on the property and subsequently advanced. Of course, in addition to the $19,-553.44 that had actually been advanced Hill had put in a considerable amount of time assisting his brother-in-law in his financial difficulty. It is not unreasonable, therefore, to conclude that it was the intention of the parties at the time that the $20,000.00 should be considered as the amount of the debt and that it continued during the life of the five-year option.
“More persuasive, the court believes, was the fact that by the terms of the written option Hill agreed that he would keep an accurate account of his operations of the farm and after paying the farm manager, taxes, insurance, etc. and charging interest he would credit the net received from the farm operations against the agreed price of $20,000.00 in the event that Neal Brown should exercise his so-called option. This is diametrically opposed to the contention that the parties intended to make a contract for the purchase and sale of the land with an option to the grantor to repurchase. But on the contrary, it is entirely consistent with the fact that the instruments were intended as a mortgage and that Neal Brown would be considered as the owner of, and entitled to the rents from the farm operations for the five year period covered by the so-called option.
“As a matter of fact, after it was brought to the attention of Hill that Neal Brown desired to exercise his option and that he had listed the property with a real estate broker and the broker had obtained a purchaser, ready, willing and able to pay $40,000.00 for the property, Hill then agreed to pay $40,000.00 for the property himself. However, it is significant to note that he did not deduct the $20,000.00 from the $40,-000.00 and pay the difference, but he meticulously itemized the income and expenses from the operation of the farm and took these figures into consideration in arriving at his settlement with the parties.
“As indicated above, this is inconsistent with the contention of ownership on the part of Hill, but entirely consistent with the contention of the plaintiff that the instruments, taken together, constituted a mortgage and continuing debt.”

We agree that the conveyance to Hill is an equitable mortgage, but the decree orders that Naomi Brown Hill execute a deed to Day. We fail to see how Mrs. Hill has parted with her interest in the property. By virtue of his contract with Ruth and Nea.l, Day stands in their shoes and has the right to redeem from Hill. Driver v. J. T. Fargason Co., 174 Ark. 114, 295 S. W. 35. The mortgagor has the right to convey his equity of redemption. Kitchens v. Jones, 87 Ark. 502, 113 S. W. 29; Vernon v. Lincoln National Life Ins. Co., 200 Ark. 47, 138 S. W. 2d 61. But if Day redeems from Hill, he takes subject to the interest of Naomi Brown Hill, who owns an interest in the property; she has made no contract with Day to dispose of her interest, and there is no evidence that Neal and Ruth were authorized to act for her. In the event of redemption by Day, Mrs. Hill would still own her interest subject to her proportionate share of the cost of redemption.

Hill, the appellant, contends that under the terms of the deed and option to repurchase, the grantors, whom we are holding to be mortgagors, do not have the right to assign the right to redeem. True, the option has such a provision, but when construed as part' of an equitable mortgage it is against public policy and not enforceable. In 36 Am. Jur. 784, it is said: “A mortgagor cannot, by any agreement made contemporaneously with or as a part of the mortgage transaction, however explicit or forceful, bind himself not to assert his right or equity of redemption. This doctrine is applacable to an equitable mortgage.” It also applies “to a stipulation as to the person or persons by whom;the right of redemption may be exercised.” (Emphasis supplied) See also Restatement “Property”, § 415, illustration (1).

In Clark v. Reyburn, 8 Wall. 318, 19 L. Ed. 354, the United States Supreme Court said: “It (the equity of redemption) is descendible, devisable, and alienable like other interests in real property. As between the parties to the mortgage the law protects it with jealous vigilance. It not only applies the maxim ‘once a mortgage always a mortgage’, but any limitation of the right to redeem, as to time or persons, by a stipulation entered into when the mortgage is executed, or afterwards, is held to be oppressive, contrary to public policy, and void.”

Our conclusion is that the chancellor was correct in holding that the conveyance to Hill is an equitable mortgage, and that under his contract with Neal Brown and Ruth Brownell, Day has the right to redeem from Hill. But Mrs. Hill still owns her interest subject to payment of her pro rata cost of redemption. Therefore the decree must be reversed with directions to render a decree not inconsistent herewith. It is so ordered.


author: Jim Johnson, Associate Justice.

text:
    Bradham Drilling Co. v. Powell.
    5-1998
    331 S. W. 2d 35
    Opinion delivered January 18, 1960

      Mahony <& Yocum, for appellant.
    ' Brown & Compton, for appellee.
   Jim Johnson, Associate Justice.

This is an action for compensation under the Arkansas Workmen’s Compensation Act by appellees Maydell Powell, widow, and Barbara Ann Powell, a minor daughter 16 years of age, against appellant, Bradham Drilling Company, et al, on account of the death of Gordon Ralph Powell, deceased, on the 10th day of July 1956. The Commission awarded maximum compensation. This decision of the Commission was affirmed by the Circuit Court, from which comes this appeal.

For reversal, appellant contends that there is not substantial evidence to support the Commission’s findings.

The facts are substantially as follows:

The deceased, Gordon Ralph Powell, was 50 years of age, and had been regularly employed as an oil well driller by the Bradham Drilling Company for approximately twelve years. As a driller, Powell’s duties were mainly supervisory and light, but approximately every forty-five days he would assist in tearing down (dismantling) the drilling rig, and then he did strenuous work. On July 2, 1956, Powell, along with other employees, was engaged in tearing down the rig. They were working in an open field and the temperature was in the 80’s. The work that they were doing required the lifting of objects that weighed in excess of 100 pounds, and they had been working since about 6:00 o ’clock a.m. At approximately 10:00 o’clock a.m., Powell said, “I like to have got too hot,” and continued to work for 10 or 15 minutes after which Powell was seen stumbling and walking sideways, and fell down. He was pale and perspiring profusely and said, “I can’t see.” His face was colorless and perspiration stood on his face, and wouldn’t run off. He looked like he was “burned out”. Wet rags were applied and he was carried to the hospital in El Dorado, Arkansas, and during the trip he was pale and perspiration stood on his face and wouldn’t run off. He was described by his supervisor as being in ‘‘rough shape.”

The deceased was first seen at the hospital by Dr. D. E. White. Dr. White completed a “Standard Form for Surgeon’s Report” on July 2, 1956, and at the place marked for the patient to state in his own words where and how the accident occurred, there appears the following: “While working on a well near Village, Arkansas, I became too hot and felt as though I was about to faint.” According to Dr. White’s report, his findings were suspected heat prostration, arterial hypertension, possible coronary occlusion. Powell was given first aid, saline solution intravenously, stimulants, and an EKG- was made shortly after his admission to the hospital. Dr. White stated that “In my opinion injured party became too hot while working, but also reveals evidence of some form of heart attack when first examined by me.”

The hospital records reflect that the admitting diagnosis on July 2 was suspected heat prostration and arterial hypertension, and that the patient stated that he became too hot while working on a well. The deceased was allowed to go home on July 6, and at that time the final diagnosis was heat prostration, arterial hypertension, and suspected posterior myocardial infarction.

A few hours after his discharge deceased was readmitted to the hospital for further treatment; Dr. White’s admitting diagnosis was again heat prostration, arterial hypertension, and suspected posterior myocardial infarction. On July 10, 1956, the deceased expired, and the final diagnosis was heat prostration, arterial hypertension, and massive coronary artery occlusion, with massive coronary artery occlusion being given as the cause of death.

Dr. White told Mrs. Powell and her sister that the deceased had had a heat stroke which caused a heart flurry.

Even though Dr. White, at the time of giving his oral testimony, made light of the heat prostration, this diagnosis appears throughout the hospital records which were made by Dr. White. However, on cross-examination, even Dr. White admitted that undue effort would assist in bringing on a coronary occlusion. As stated by the Commission, “Dr. White’s testimony appears to neutralize much of Dr. White’s written reports and medical records.”

Dr. Joe B. Wharton, Jr., after reviewing the entire record in this case, including all of the hospital records, stated that in his opinion the deceased’s overweight and tendency to high blood pressure predisposed him to have a coronary artery thrombosis. Dr. Wharton further stated that in his opinion one got coronary thrombosis as a result of excessive physical strain or exertion and particularly if one is overheated or has exerted himself to the point where he is exhausting himself from strain and becoming too hot. Dr. Wharton’s conclusion was that since the deceased was of the type to have coronary thrombosis and since the deceased was exerting himself strenuously at the time of the accident, there is a strong possibility that the heart attack was precipitated by his work at that time.

Under-these facts we find-that there-is substantial evidence to support the Commission’s findings that claimant suffered heat prostration as a result of - the strenuous nature of his work, collapsed on the job, and subsequently died eight days later as a result of a heart attack. This chain of events, combined with the medical testimony and the hospital records, is sufficient to support an award of compensation in this case since it is clear that the deceased suffered an accidental injury in the course .of his employment which resulted in his death under the meaning and intent of the Workmen’s Compensation Statute as interpreted by this Court. See: Harding Glass Co. v. Albertson, 208 Ark. 866, 187 S. W. 2d 961; McGregor & Pickett v. Arrington, 206 Ark. 921, 175 S. W. 2d 210; J. L. Williams & Sons, Inc. v. Moore, 206 Ark. 766, 177 S. W. 2d 761; Herron Lumber Company v. Neal, 205 Ark. 1093, 172 S. W. 2d 252; Commercial Casualty Insurance Company v. Hoage, 75 F. 2d 677; E. P. Bettendorf & Co. v. Kelley, 229 Ark. 672, 317 S. W. 2d 708; Reynolds Metal Company v. Robbins, 231 Ark. 158, 328 S. W. 2d 489; Safeway Stores, Inc., et al v. Mrs. Betty Ruth Harrison, et al, 231 Ark. 10, 328 S. W. 2d 131.

Therefore, following our rule that the findings of the Workmen’s Compensation Commission will be affirmed if there is any substantial evidence to support them, and that in testing the sufficiency of evidence the testimony must be weighed in its strongest light in favor of the Commission’s findings; Starrett v. Namour, 219 Ark. 463, 242 S. W. 2d 963; Sherwin Williams Co. v. Yeager, 219 Ark. 20, 239 S. W. 2d 1019; the award of the Commission is affirmed.


text:
    Ark. Power & Light Co. v. Murry.
    5-2011
    331 S. W. 2d 98
    Opinion delivered January 25, 1960.

      Joe W. McCoy and House, Holmes, Butler & Jewell, for appellant.

      William C. Gilliam, for appellee.
   Carleton Harris, Chief Justice.

In August, 1922, Arkansas Power and Light Company, appellant herein, obtained a right-of-way permit from W. H. Woodall and wife, owners of a certain 40 acres in Hot Spring County. The right-of-way covered 72 feet in width over the Wood-all lands, giving the company the right to construct and maintain a line across same. In 1952, appellant found it desirable to enlarge and improve the transmission line across this property, and in contemplation of this improvement, obtained from the owner a new permit, which granted a similar right-of-way across the lands, with the right to clear a right-of-way 100 feet in width. In 1954, Orvall and Helen Murry, appellees herein, acquired title to the above 40 acres, with full knowledge of the existence of the two permits. In January, 1957, appellant company went onto the lands, clearing the right-of-way to a width of 100 feet, and also cutting additional trees outside the right-of-way, which the company considered a hazard to the line. Suit was instituted by the Murrys against appellant company, seeking damages for trees cut outside of the right-of-way, and also seeking damages for alleged damage caused to the land by the company, through the use of heavy clearing equipment. The jury awarded damages in the sum of $800, and from such judgment comes this appeal. For reversal, appellant argues two points, as follows, to-wit:

“I.
The Court Erred in Submitting Over Defendant’s Objections, Plaintiffs’ Instruction No. 2 as Modified.
II.
The Verdict of the Jury and Judgment Thereon Was Fot Based on the Evidence and Was Excessive — The Court Erred in Denying the Motions for New Trial.”

I.

Appellant contends that under the provisions of the right-of-way permit, it was permitted to remove timber not only from the 100 foot width, but also to remove timber outside the right-of-way which might be considered a hazard to the line. The permit cites a consideration of “thirty dollars and other good and valuable considerations, to us cash in hand paid, * * *” and the provisions pertinent to this litigation are as follows:

“The rights hereby conferred provide for the privilege and authority to enter upon said lands for the purpose of constructing and building said pole line, maintenance and operation thereof, with the right to clear and keep clear a right of way one hundred feet in width, and to remove all other timber and obstructions that may interfere with the use of said line or that may or might be a hazard to the use of the same, and for the repairing, reconstructing, operating and the removing of same at any and all times. ’ ’

Further:

“The following items are included in this settlement: The right to change from a single pole Une to a double pole line. Value of use of right of way and timber damage?3a Said Grantee agrees that it will pay other damages not included in above settlement inflicted by it in the construction and maintenance of said line.”

Appellant emphasizes the word “other” in the permit, and argues that the cutting of trees considered hazardous to the line was included under the consideration paid by the company. Of course, appellees in opposing this contention, quickly calls attention to the fáct that such a construction is most illogical; i. e., it is not logical that a landowner would give a company a right to perhaps cut any number of valuable trees, outside the right-of-way, over an unlimited length of time, for a consideration of only $30. Appellant points out that the instrument also recites “other good and valuable considerations”, but, were the consideration actually a greater amount, it would appear that appellant would have placed in evidence the amount of the actual and true consideration, particularly since the small consideration, among other things, is one of the points relied upon by appellees in their contention for a different interpretation of the contract. If appellant’s interpretation is correct, the power company is not limited to a 100 foot right-of-way, for if it is entitled to cut hazardous trees outside this 100 feet area without paying additional compensation — then it actually, in effect, has a right-of-way wider than that granted by the 100 feet, since but few, if any, trees in the immediate adjacent area would be permitted to grow to maturity. It is, of course, admitted that the company .had the right to cut trees within the right-of-way without payment of further compensation; appellees, while not conceding that apellant had the right to cut trees beyond the 100 foot right-of-way, do state “that the most the 1952 permit could have done by the clause set out earlier was the right to cut ‘danger trees’ off of the 100 foot right-of-way, and then pay for the damage to the land and trees at a later date.” This view was apparently taken by the Murrys in their interpretation of the contract, for in bringing suit, they did not seek double or treble damages. We think, without question, that the language in the. permit is subject to more than one construction, i. e., is ambiguous, and we have held many times that in case of doubt, or ambiguity, a contract or agreement shall be interpreted against the party who prepared the instrument. See American Insurance Company v. Rowland, 177 Ark. 875, 8 S. W. 2d 452. Likewise, it is well settled that in construing a contract, the intention of the parties is to he gathered, not from some particular phrase, hut from the whole context of the agreement. This agreement was prepared by the appellant company, and consists of a printed form containing several blank spaces to be filled in by hand. Following the first pertinent clause, heretofore set out, relied on by appellant, we particularly observe the language in the second clause set out herein, as follows: < í # * « sai(j grantee agrees that it will pay other damages not included in above settlement inflicted by it in the construction and maintenance of said line.” Considering that the language of the instrument leaves doubt as to the intention of the parties, and noting the other factors, previously mentioned, we have reached the conclusion that the power company, under the permit, is given the right and authority to cut trees beyond the area included in the right-of-way, and which may be considered hazardous to the maintenance of its line — but it must pay for the value of the trees. This clause, so construed, has the value 'to the company of permitting it to cut these trees ivithout^being subject to double or treble damages, and we think the instrument makes manifest that intention.

The trial court instructed the jury as follows: -

“You are instructed that the measure of damages for the destruction of growing trees is the .difference in the value of the land outside the one hundred foot right-of-way with and without the trees. Therefore, if you find that defendant destroyed growing trees on land owned by plaintiffs and not subject to defendants’ right-of-way easement, you will set his damages at the difference in the value of the land outside the one hundred foot right-of-way with the . trees growing and without the trees growing.”

Since we have concluded that the right-of-way permit did not give the company authority to cut beyond the 100 feet without payment of additional compensation, it follows that the court’s instruction was correct. As we stated in Kyle v. Zellner, 215 Ark. 349, 220 S. W. 2d 806 (1949):

“The measure of damages for the destruction of young growing trees is the difference in the value of the land with and without the trees. * * * If that rule is applicable the decree is without support evidence, for there was no testimony as to land values.

The rule is evidently intended to compensate the landowner when his timber is so immature that its value in the market is materially less than its potential worth through continued growth. ’ ’

Appellant’s contention is held to be without merit.

II.

Testimony on behalf of appellees was presented by Orvall Murry, his wife, and Murry’s father, Ralph Murry, and all testified that the value of the entire 40 acres was $2,000 before the cutting, and $1,200 after the cutting. The witnesses stated that trees were cut for an additional width of 25 feet on each side along the entire 100 foot right-of-way. Mrs. Murry testified that 88 pine trees were cut on either side of the original 72 foot right-of-way. None of these witnesses measured or scaled any of the timber cut. Appellant states that the testimony of appellees, relative to the $800 damage, includes trees cut within the right-of-way, as well as those outside the right-of-way, and that there was no evidence to support the amount of damage claimed by the Murrys. The testimony offered by the company reflected that 770 feet of pine, 1,150 feet of hardwood, one cord of pine billets, and half a cord of oak or gum billets were cut. Its evidence showed the market value of the timber to be $40 per thousand for pine, $15 per thousand for hardwood, about $5 per cord for pine pulpwood, and $1 to $2 per cord for gum or hardwood billets. This evidence accordingly indicated that less than $55 worth of timber was cut, including that cut both within and outside the 100 foot right-of-way.

Of course, we give the appellees’ evidence its strongest probative force, but even so, the award is obviously excessive. True, the Murrys stated that the difference in the value of the land before the cutting and after the cutting was $800, but this figure is not borne out by an analyzation of their own testimony. The value of the forty acres prior to the timber cutting, was placed by appellees at $2,000, which sets a value of $50 per acre. Testimony on behalf of appellees showed the right-of-way to be about 1,320 feet long, and that trees were cut approximately 25 feet on either side of this right-of-way. It follows that the total acreage (outside the right-of-way) from which trees were cut, amounted to something less than two acres. This fixes the value of the land beyond the right-of-way from which the trees were cut at less than $100. The only evidence contrary to this compilation was offered by Ralph Murry, but even his testimony is completely in conflict. Prom his testimony:

“Q. Well, now, what part of that Eight Hundred Dollars would you say was done off of the right-of-way?
A. Well, I’d say at least a hundred dollars of it was done outside of the right-of-way.
Q. How much of it was done on the right-of-way then?
A. Seven Hundred.
Q. Seven Hundred?
A. Yeah.
Q. Now, how much — Now, that’s damage to the land you are talking about?
A. No, the land and timber.”

Subsequently, however, he testified as follows:

“Q. How much damage do you attribute to the timber cut outside the right-of-way?
A. I would say the damage to the timber was Six Hundred Dollars ($600.00), and about Two Hundred Dollars ($200.00) to the right-of-way and to the land, that damage would be my judgment on it.”

However, the testimony on the part of appellees reflected that a large number of the pine trees cut were seed trees, and Mrs. Murry testified that these were “cleared out”. There was also testimony to the effect that the timber at the right-of-way grows faster than timber located in the woods because it grows along the edge and can get more air and sunlight. We think, from the record before us, that an award of $300 would be liberal compensation for the damage suffered. Appellees, of course, if they feel aggrieved at the reduction, have the privilege of re-trying the case, and offering more detailed proof in support of the alleged damage.

The judgment is affirmed on the condition that remittitur is entered as indicated within seventeen calendar days; otherwise the judgment will be reversed and the cause remanded for a new trial.

Johnson, J., dissents as to the remittitur.

       Then known as Arkansas Light and Power Company.

       This amount represented only timber damage. Testimony had been introduced showing that $100 damage had been done to the land by the use of the equipment, but the only instruction sought by appellees on this point was refused by the court. This issue, therefore, was not submitted to the jury, and appellees have filed no cross-appeal on this point.

        and 3a The form is printed, but the italicized portions were filled in by hand.

       The right-of-way permit remains in effect unless permanently abandoned by the grantee.

       Even if the evidence justified the amount of damages awarded, the judgment would have to be reduced, for appellees, in filing complaint, only sought $750 for alleged damage to the timber.