text:
    Fullerton v. Fullerton.
    5-2312
    348 S. W. 2d 689
    Opinion delivered May 29, 1961.
    [Rehearing denied September 11, 1961.]

      James R. Howard of Moses, McClellan, Arnold, Owen <& McDermott, for appellant.

      G. P. Houston, Murphy & Arnold, for appellee.
   Carleton Harris, Chief Justice.

This case is here for the second time on appeal, and involves the ownership of two separate tracts of land, one, a six-acre tract on which the home place is located, and the other, an adjoining forty-acre tract. The parties hereto were husband and wife, residing in Heber Springs, Cleburne County, Arkansas. In July, 1944, the six-acre tract was deeded to appellant by third parties, while appellee was serving with the armed forces. In April, 1946, the forty-acre tract was acquired, likewise being deeded to appellant. The Fullertons lived on the properties until late in 1955, when appellant came to Little Rock. She filed a complaint for absolute divorce in the Pulaski Chancery Court, alleging general indignities. The complaint contained a paragraph as follows: “Plaintiff states there is no property • right or title, either real or personal, at issue in this cause of action * # In his answer, Mr. Fullerton denied the material allegations of the complaint, but agreed “there are no property rights involved herein * * On May 4, 1956, the Chancery Court entered its decree granting appellant an absolute divorce, and directing the payment of alimony and attorney’s fee. Subsequently, appellant filed her petition, asking that appellee be cited for contempt for failure to make the payments required under the decree. Fullerton failed to appear on the date set for hearing, and the court entered an order directing Fullerton to “vacate the premises and property belonging to Plaintiff, Lois Fullerton, situated in Cleburne County, Arkansas.” Fullerton then filed a petition asserting unemployment and physical inability to work, and further alleged that the farm was his own property, inasmuch as, while a member of the armed forces, he had sent the money for the purchase of same, and that his then wife had acted fraudulently in obtaining the deed, and he had only recently learned of her fraud and deception. In her response, appellant asserted that she had owned the lands for more than seven years with the full knowledge of appellee, and that any claim or cause of action against the property should have been presented by him to the court prior to the entry of the original divorce decree. On hearing, the court confirmed title to the forty acres in Mrs. Fullerton, and further decreed that title to the six-acre tract was held by the parties as tenants by the entirety. On appeal, we reversed the decree, holding that the Pulaski Chancery Court was without jurisdiction to determine the issue of the ownership of the property. See Fullerton v. Fullerton, 230 Ark. 539, 323 S. W. 2d 926. This Court said:

“We do not pass upon any question relating to ownership of the property. * * * The ownership of the property can now only be legally determined by the proper court in Cleburne County.”

On July 23, 1959, appellee filed his complaint in the Cleburne Chancery Court, containing the same allegations relative to the purchase of the property, as in his Pulaski County petition; further, that he had placed improvements on the lands in the amount of $11,000, and he asked that the court cancel and void the two deeds, and quiet and confirm title in him. Appellant filed her answer, denying the allegations, asserting that the property was purchased by her' with her own money, and that appellee had long been aware of the fact that title to the properties was in her; that appellant had been in wrongful possession of the tracts since 1956,. and should be required to pay ■ to her the reasonable value of the rental on said properties since that date. On trial, the court held as follows:

“The above described Forty-Acre tract of land is the sole and separate property of Lois Fullerton, and title thereto is hereby vested and confirmed in the said Lois Fullerton; That title to the above described Six-Acre Tract of land is in Lois Fullerton and Ira Fullerton as owners by the entirety, and title to same is hereby vested and confirmed in them as such.

That the reasonable rental value of the Six-Acre Tract of Land is $40.00 per month and that Ira Fullerton is hereby ordered and directed to pay to Lois Fullerton One-Half thereof, or $20.00 per month so long as he shall remain in exclusive possession of the said Six-Acre Tract of Land.”

The Chancellor further found that Fullerton had been in possession of both tracts of land since the divorce; that he had made improvements on the lands, “the value of which is equal to any rent which might have accrued to Lois Fullerton by reason of her interest therein, and that the rent, if any, to which the said Lois Fullerton might be entitled, is off-set by the improvements made by Ira Fullerton.” The $20.00 per month ordered paid was based on the fact that the court found the reasonable rental value of the six-acre tract to be $40.00 per month. Appellant appeals from that portion of the decree finding that the six-acre tract is held by the parties as tenants by the entirety, and also from that portion which sets off the improvements placed on the forty-acre tract against the rental value. Appellee cross-appeals from the entire decree.

We first discuss the circumstances surrounding the purchase of the six-acre tract. This tract was acquired in July, 1944, from Vernard Stanton and wife. Fullerton testified that his wife wrote him (appellant was then stationed in New Orleans), and advised that the Stan-tons had offered to take $900 for the tract; that they would require $50 down and $10 per month. The witness stated that he wrote his wife back, and told her that he did not desire to purchase the property on the installment plan, and directed that she ascertain the cash price that would be acceptable to the Stantons. After receiving her letter stating that the Stantons would accept $700 cash, he wrote her a cheek for that amount, sent it to her, and told her to buy the property. Appellee testified that he sent his wife money to live on between February and July, but did not make an allotment to her until after the six-acre tract was purchased. According to his evidence, he sent her $250 after three weeks’ service, and approximately $100 a month thereafter until after the allotment started, this last being in the amount of $175, and commencing in October, 1944. Mrs. Fullerton testified that she learned the property could be purchased for $700, “and I thought we should buy it.” According to her evidence, she wrote her husband, and he told her that if she ■wanted the property, to buy it, and purchase it in her name. She denied that he sent the $700 check, but stated that she purchased the tract with money from the bank account; that it was her money. “He had sold his pickup truck, and left this money for me to get by on while he was gone.” The witness stated that only $500 or $600 was in the bank, but her husband was sending her money each month, and she put everything in the bank “except what I had to get by on.” The record reflects that the property was paid for by check from Mrs. Fullerton, appellee contending that she tore up the check that he sent. It is interesting, in view of appellant’s contention that it was understood between the parties that the property was being purchased by her, and solely for her benefit, to note statements from her testimony. For instance, during examination by her attorney:

“Did he tell you when he left that he wanted you to use this money for any particular purpose, these hundred dollar payments he’d sent you, or hundred and a quarter, whatever . . . (Interrupted).

“A. Well, not, not particularly when he left until we decided to buy this little place.”

Further:

“Well, I would write Ira, and he’d write back, and I wrote him, of course, about that we could buy it, and he wrote back and told me to go ahead and buy the property in my name.”

Appellant contends that since Mr. Fullerton did not assert his alleged rights in the property in the Pulaski County divorce suit, he is now, under the doctrine of res judicata, precluded from doing so, this argument applying to both the six-acre and forty-acre tracts. We hold this contention to be without merit. See Deal v. Deal, 220 Ark. 134, 264 S. W. 2d 429. This argument was also made in Fullerton v. Fullerton, supra, and, of course, if we had found that the original divorce decree did adjudicate the property rights between the parties, the plea of res judicata would have been sustained at that time.

Likewise, appellant argues that appellee is now estopped to deny the title of appellant to either tract. This argument is predicated on the pleadings in another case, Klinefelter v. Fullerton, et al, filed in the Cleburne County Chancery Court in 1950. There, apparently, Mrs. Bertha Klinefelter claimed to be a co-tenant with Stanton’s grantors (who later conveyed the six acres to Mrs. Fullerton), and asserted that she had not joined in the deed; the same contention was made relative to the forty acres, which was deeded to appellant by C. E. Fraser and wife. In their answer, the Fullertons asserted “that the defendants, Lois and Ira Fullerton, are the owners of, and in possession of, the following described land situated in Cleburne County, Arkansas, and the plaintiff has no interest in said lands” (listing the property here involved). In the prayer, the Fullertons asked that title be “quieted in the defendant, Lois Fullerton, as against the plaintiff * * *.” The Fullertons likewise filed a cross-complaint, paragraph four of which, provides, “Vernard Stanton and his wife, Alma Stanton, conveyed by general warranty deed, to Lois Fullerton, the above described six acres * * Paragraph six asserts that “C. E. and Ernestine Fraser conveyed to Lois Fullerton by general warranty deed the above described forty acres, conveyed by A. L. and Ruby Lessard to the Frasers.” Paragraph seven provides that “Lois and Ira Fullerton further say that a consideration of $700.00 was paid for the six-acre tract of land and $1,500.00 was also paid by them for the forty-acre tract of land.” The answer was signed by both Mr. and Mrs. Fullerton, and verified by Mrs. Fullerton. The cross-complaint was signed by the attorney for the Fullertons, and verified only by appellee. We agree that the pleadings were proper evidence to aid the court in determining the rights of the parties, but we do not agree that appellee is estopped to question appellant’s title because of allegations contained in those pleadings. In fact, about all that is shown by the pleadings is that the title to the property was purchased in the name of Mrs. Fullerton, and, of course, that fact occasions this litigation. Actually, some of the allegations, quoted above, would indicate co-ownership. At any rate, it is not shown that appellant was misled to her detriment by the conduct of appellee; as far as the property is concerned, the parties occupy the same position that they held at the time of the Klinefelter litigation, except that they are no longer husband and wife. Appellee testified that he has paid the taxes and insurance each year since returning from the Army, except for one year, when he was confined to the Veteran’s Hospital. This testimony is not disputed.

We think the Chancellor was clearly correct in finding that the six-acre tract is held as an estate by the entirety. Admittedly, Mrs. Fullerton was not working at the time this tract was purchased, and accordingly, the money used for the purchase was turned over to appellant by appellee. Mrs. Fullerton admitted that the truck (which was sold for $700 and the money deposited) belonged to both, and her statements, heretofore quoted, are potent evidence that the six-acre tract was purchased for the benefit of both. We think the Chancellor’s finding was not only supported by the weight of the evidence, but also reaches an equitable conclusion.

Relative to the forty-acre tract, Fullerton testified that he was sent home from the Army in 1946 for a rest, and that a man by the name of Fraser offered to sell him forty acres joining the six-acre tract for $1,500 cash; he wrote a check in that amount, and left it with his wife, for the purpose of making the paymént when the deed was delivered. Mrs. Fullerton agreed that her husband wrote the check in payment of that tract, but stated that he purchased it and insisted that “it be put in my name.” When asked if she had any idea why he placed the title to the forty-acre tract in her name, appellant replied:

“The only reason I can think, he had an es-wife that he thought that he might have to — might sue him for some hack alimony or something. We had also had some domestic trouble before that, and he’d gone with some little girls, under age. He probably thought maybe that they might sue him or something, and he wanted it all in my name. Now that’s the only reason, the only things that I can think of.”

We have many times held that where a husband purchases and pays for lands, taking the deeds therefor in the name of his wife, there is a presumption of a gift to her. See Simpson v. Thayer, 214 Ark. 566, 217 S. W. 2d 354. The Chancellor found “that Lois Fullerton has proved by a preponderance of the evidence that title to the forty-acre tract of ground was purchased by Ira Fullerton and placed in her name, and therefore is a gift to her and is her sole and separate property. ’ ’ This finding means that the court rejected appellee’s testimony that he had given his wife the check for the forty acres, telling her to purchase the property in his name, but rather, found that the property was purchased by Fullerton, and at his direction, placed in his wife’s name. Certainly, we cannot say this finding was erroneous or against the preponderance of the evidence. The Chancellor saw the witnesses, observed their demeanor on the stand, and was in a better position to determine the true facts. Appellee states: “Even if appellant’s testimony be accepted, we have her own statement that title was placed in her, not as a gift to her, but as a purpose to permit appellee to defeat the payment of some potential judgments.” This testimony by Mrs. Fullerton cannot benefit Mr. Fullerton, for we have held that a husband who conveys land to his wife in fraud of creditors, is not permitted to invoke the assistance of equity in setting aside the deed, for he does not come into equity with clean hands. See McClure v. McClure, 220 Ark. 312, 247 S. W. 2d 466, and cases cited therein. The fact that this conveyance was not made directly to appellant by appellee is of no moment, for, under our holdings, a conveyance by a third person to the wife, upon consideration of payments made by the husband, is, in effect, the same as if the husband made the conveyance to the wife himself. See Bennett v. Hutson, et al, 33 Ark. 762.

On the whole case, we are unable to say that the Chancellor’s findings are against the preponderance of the evidence.

Affirmed on both direct and cross-appeal.

       Emphasis supplied,

       Emphasis supplied.

       V. H. Dickson, insurance agent of Heber Springs, testified that he carried the insurance on the property, and that the insurance had been originally written in the name of “Ira and Lois Fullerton”; that in 1956, Mrs. Fullerton wrote him from Little Rock “that the property was then hers individually”, and he accordingly changed the name of the assured to read, “Mrs. Lois Fullerton.” Subsequently, in the same year, he again amended it, “Ira and Lois Fullerton.” The witness testified that Mrs. Fullerton paid the premiums while appellee was in the Army, but that he had made all payments since 1946. He also testified that he met appellant one day in Blass’ store in Little Rock, along about the time the premium was due, and she asked if it had been paid. Dickson then told her that it had not, “but Ira had always taken care of it promptly, and if he did not, I would let her know; and he came in and paid it.”


source: Caselaw Access Project

author: J. Seaborn Holt, Associate Justice.

license: Public Domain

text:
    Camp v. George.
    5-2403
    346 S. W. 2d 517
    Opinion delivered May 29, 1961.

      Jeff Duty, for appellant.
    No brief filed for appellee.
   J. Seaborn Holt, Associate Justice.

This is a suit on contract which resulted in a verdict and judgment in favor of appellee, Lewis George, in the amount of $420.00. Appellee, George, alleged in his complaint that during the time from June 8, 1960 to July 14, 1960 he did bulldozing for the appellant and operated his bulldozer for appellant 45 hours at which time the appellant ordered the appellee from his premises and to remove his equipment; that appellee has made demands upon the defendant for payment for his labor and that payment has been refused; that the usual and customary price for bulldozing is $10.00.per hour and that appellee is entitled to recover $400.00 from appellant; that he did other work for appellant which was also bulldozing the early part of 1960 and that the appellant owes appellee a balance of $20.00 on said work and prayed judgment against appellant in the sum of $420.00.

Appellant filed the following answer: “1. That he denies each and every material allegation contained in the complaint of the plaintiff not herein specifically admitted. 2. Defendant states that on or about June 8, 1960 he entered into a contract with the plaintiff under the terms of which the plaintiff agreed to perform work and labor on certain real estate owned by the defendant. That said work consisted of bulldozing. That said plaintiff entered into the performance of said contract on or about July 14, 1960. That on said date the plaintiff refused to continue said work under said contract. Defendant states that the plaintiff agreed to perform said work for the total price of $400.00. That said plaintiff has failed and refused and now fails and refuses to complete said work under said contract and that this defendant stands ready, willing and able to carry out his obligation under the contract.”

A jury trial resulted in the following verdict: “We, the jury find for the plaintiff against the defendant and fix his damages at the sum of $420.00'.”

From the judgment appellant brings this appeal and relies on the following point: “That the verdict of the jury and the judgment rendered thereon is a judgment for damages and is error. The action was brought in contract and not tort.” Appellant says in his brief and argument that his appeal is confined to the one point above set out. As shown by the pleadings, the sole issue was whether or not the appellant owed the appellee for labor and services performed. The case was submitted to the jury on this issue and in keeping with the pleadings. This case does not present a question of damages, but one of contract to do the bulldozing work. The plaintiff alleged work performed and that the price was $10.00 per hour; that he had made demands for payment for his labor and that payment had been refused.

Appellant argues that since the jury’s verdict was a judgment for damages it was not responsive to the issue involved which was a debt on contract alleged to be owed by appellant to appellee, and was not an action in tort. We do not agree with appellant’s contention. On the record presented we think the jury clearly meant by using the word damages in its verdict the amount which it appears undisputed appellant owed appellee for the use of appellee’s bulldozer which, as indicated, the jury found to be $420.00.

Accordingly, the judgment is affirmed.


author: Ed. F. McFaddin, Associate Justice.

text:
    American Express Field Warehousing Corp. v. First Natl. Bank.
    5-2352
    346 S. W. 2d 518
    Opinion delivered May 29, 1961.

      Rose, MeeTc, House, Barron, Nash & Williamson, for appellant.

      Coleman, Gantt & Ramsay, for appellee.
   Ed. F. McFaddin, Associate Justice.

The only parties to this appeal are the appellant, American Express Field Warehousing Corporation (hereinafter called “American”), and Walter J. Garic, Inc. (hereinafter called “Gario”); and the only item challenged on this appeal is the judgment rendered by the Circuit Court in favor of Garic and against American for $54,325.73. All other parties and issues have passed out of the case.

To understand the issue, a somewhat lengthy statement of background facts is necessary. At all times herein, Garic was a corporation, domiciled in New Orleans, Louisiana and engaged in the rice exporting business ; American was a warehousing corporation engaged in the storage of rice in McGehee, Arkansas; and John Lammers was an individual, operating a rice mill in McGehee, Arkansas. In September 1958 Lammers, by contract, came into possession of the McPherson rice mill and storage warehouses in McGehee. The McPherson facilities were so arranged that the storage warehouses could he operated entirely separate from the rice mill; yet, by suitable conveyors, rice could be transferred by conduits to or from the storage warehouses and the rice mill. Lammers leased all of the facilities of the storage warehouses to American for all times herein involved, and these facilities consisted of twenty concrete silos and a metal-clad wooden building in which there were five storage bins and a small office. There was a driveway between the wooden building and the concrete silos; but rice could be conveyed by conduit to or from the silos and the bins in the wooden building.

Lammers continued to operate the rice mill while American operated the storage facilities as just described. Elbert Ikard was American’s warehouse custodian, and he alone carried the key to the wooden building and the key to the master switch where the current could be turned off and on to operate the conveyors to carry the rice to or from the mill and/or the-silos and wooden building. American, being a warehousing corporation, would generally issue a nonnegotiable receipt, signed by Ikard, for rice stored in its facilities at McG-ehee. But, under the contract between Lammers and American, Lammers was permitted to store rice in the American warehouse facilities at McGehee free of charge if no warehouse receipt was. issued for such rice. The Lammers-American contract provided that if Lammers stored rice with American without obtaining a warehouse receipt, then such rice was stored at Lammers’ risk. Lammers also agreed to indemnify and hold American harmless against all damage, risk, or claims — including claims of third parties— that American might incur by reason of permitting such storage of rice without warehouse receipts being issued.

With all of the foregoing as background, we come to the events that caused the present litigation. In May 1959 Garic, for $66,068.19, purchased 1,061,850 pounds of rough rice from the Commodity Credit Corporation. This rough rice was stored in Dumas, Arkansas and was covered by warehouse receipts. Baric and Lammers entered into a contract by the terms of which Lammers, for $5,225.97, would get the rough rice from the Commodity Credit Corporation at Dumas, transport it to Lammers’ rice mill at McBehee, mill the rough rice, and deliver to Baric or its order a total of 7,666 bags of milled rice. Time was of the essence of the contract. Baric sent Lammers the said warehouse receipts and Lammers obtained the rice and transported and stored it in the American warehouse facilities, without obtaining any warehouse receipts therefor. Later, Lammers shipped to Baric 670 bags of milled rice (each bag being 100 pounds), but never shipped the remaining 6,996 bags. It is for the value of the undelivered rice that the present action is concerned.

For some unexplained reason, Lammers delayed the milling of the remainder of the Baric rough rice. At the trial he claimed that it had been transferred from the concrete silos to the wooden warehouse of the American facilities. Elbert Ikard testified that he did not know why the Baric rice was not milled when Lammers first received it; that on Thursday before the fire on Saturday night, all of the Baric rice in question was transferred from the concrete silos to the wooden warehouse facilities of American; that there were two bins entirely filled and one partially filled; and that each of the wooden bins was 20x30x40 feet. Ikard also testified that he left McBehee about 5:00 p.m. Saturday afternoon, July 18th (before the fire that night or Sunday morning) ; that he went to his home in Lake Providence, Louisiana; that he returned to McBehee, Arkansas Tuesday morning, July 21st; and that he then learned for the first time that the wooden warehouse (wherein it was claimed the Baric rice was stored) had been destroyed by fire on Saturday night, July 18, 1959.

Baric made demand on American for the Baric rice; the demand was refused; and Baric sued American, the insurance company that carried American’s insurance, and also Lammers, for the value of the unreturned Garic rice. Tire alleged liability of Lammers was because of the contract. The alleged liability of the insurance company was because, if the Garic rice were destroyed by fire, the insurance company was liable. The insurance company convinced the jury (on evidence subsequently to be briefly mentioned) that the Garic rice was not in the wooden building at the time of the fire; that, in fact, the bins in the wooden building were practically empty; and the jury verdict was for the insurance company. The alleged liability of American to Garic was because American knew the rice belonged to Garic when it was received from Lammers, and that American was negligent in allowing the rice to disappear from the wooden warehouse: that is to say, if the rice was not destroyed by fire, it was removed before the fire, and such removal was because of the negligence of American, its agents, servants, or employees. The jury verdict and judgment thereon was for Garic and against American in the sum of $54,325.73; and from that judgment American brings this appeal, presenting the issues now to be discussed.

I. American says: “A verdict should have been directed for appellant.” To support'this point American says that Garic neither alleged nor proved any negligence on the part of American and hence Garic cannot recover; and, secondly, the only inference permissible from the evidence is that Lammers obtained the Garic rice from American, in which event the appellant has no liability to Garic. While the evidence is conflicting on several matters, nevertheless, on appeal, we must give the evidence its strongest probative force' in favor of the jury verdict. See Albert v. Morris, 208 Ark. 808, 187 S. W. 2d 909, and cases there cited. In so viewing the evidence we find:

1. There is substantial evidence that American all the time knew, or had notice, that Garic was the owner of the rice which came from the Commodity Credit Corporation at Dumas, Arkansas. Such knowledge or notice is true because the truck weight tickets issued at Dumas stated that the rice was “shipped to Walter J. Baric, Inc. ’ ’; and the copies of these weight tickets were delivered to Ikard when he received the rice for American and stored it in the concrete silos; and notice or knowledge so received by Ikard in the course of his duties for American was knowledge or notice to American. Sov. Camp W. O. W. v. Cole, 192 Ark. 326, 91 S. W. 2d 250; and Bank of Hoxie v. Meriwether, 166 Ark. 39, 265 S. W. 642.

2. American received the rice and stored it in the concrete silos in the latter days of May or the early days of June 1959. The receipt of the rice by American is conceded. Thus American became, with notice or knowledge, the bailee of Baric’s rice. The contract between Lammers and American provided that American would not be liable to Lammers for rice stored without warehouse receipts being issued; but that contractual provision between American and Lammers could not be stretched by American to extend to Baric, who did not know of such a contractual provision. As between American and Baric, the ordinary rules of bailment apply.

3. One of the rules governing the liability of the bailee (American) to the bailor (Baric) is that when the bailor sues the bailee for the conversion of the bailment (the rice), the bailor has the duty of proving (a) that the bailment was delivered to the bailee, (b) that due and seasonable demand was made on the bailee for the return of the bailment, and (c) that the bailee could not or would not return the bailment. When the bailor proves these three points, the law says that the bailee had converted the bailment unless the bailee goes forward with the proof and shows either (1) that the bailment was destroyed by fire without the negligence of the bailee, or (2) that the bailment was lost or stolen from the bailee without the negligence of the bailee. National Garages v. Barry, 217 Ark. 593, 232 S. W. 2d 655; Warren v. Geater, 206 Ark. 518, 176 S. W. 2d 242; 6 Am. Jur. (revised) 458 “Bailments” § 370; 8 C. J. S. 341 “Bailments” § 50.

4. In the case at bar, Garic’s complaint had a couni against American that sounded in conversion. To that count American answered with a denial. At the trial, Garic established by the evidence the three requirements in a conversion action — i. e., delivery of the bailment, demand for return, and refusal — so that American then had the burden of going forward and establishing that the bailment was lost or destroyed without the negligence of American. American offered no evidence, but it was established by other litigants in the trial below — and so found by the jury — that the Garic rice was not destroyed in the fire which consumed the wooden warehouse. The evidence is overwhelming on this point. A number of witnesses — some of them entirely disinterested — testified that after the fire there were no ashes in the ruins which could have been from rice. Sampling cups were pushed deep in the debris, and only burned hulls were found. Bulldozers and other large machines scattered the debris in a vain effort to find any signs that rice had been burned in the fire. The jury wisely concluded that the bins in the wooden warehouse, destroyed by fire, did not contain rice at the time of the fire. It was on this evidence that the jury exonerated the insurance company. So American failed to prove loss of the bailment by fire, without the negligence of American; and American offered no evidence, and there is none in the record, as to any other loss of the bailment without negligence of American. In such a situation, the jury, under the instructions of the Court (hereinafter to be discussed), returned a verdict against American for what the jury found to be the value of the bailment. We conclude that the evidence was sufficient to submit the case to the jury and also to support the verdict rendered.

II. American says: “The Court erred in giving Instructions Numbers 9 and 10 on behalf of Garic.” Each of these instructions is rather lengthy. In Instruction No. 9 the Court told the jury that if it found from a preponderance of the evidence that Garic was the owner of certain rice delivered to American, and that Garic demanded the return of the rice and American refused to return it, then the verdict would be for Garic, unless the jury further found that the rice was destroyed by fire or removed from the warehouse by Garic or Lammers. This instruction was correct, in view of what we have heretofore said. There was no evidence that the rice involved in this litigation was ever redelivered by American to Lammers or Garic. Of course, Lammers did mill and deliver to Garic a small portion of the rice, as will be mentioned in Topic III herein; but the redelivered rice was not the rice involved in this case. Ikard admitted that he received the Garic rice from Dumas, Arkansas, and said it was transferred to the wooden warehouse before the fire. Wliat we have said, and the cases we have cited, in Topic I of this opinion dispose of the objections as to Garic’s right to sue American for conversion. The matter of the value of the missing rice will be discussed in Topic III of this opinion. Instruction No. 10 was likewise on the theory of conversion; and what we have already said disposes of appellant’s objections to that instruction. To summarize, we find no merit to appellant’s objections to Instructions Numbers 9 and 10.

III. American says: “The' verdict is excessive We do not know how the jury determined the figure of $54,325.73, but appellant has not established that the verdict is excessive: quite to the contrary, we find ample evidence that would have supported a verdict for even a slightly larger amount, as we will now detail.

1. According to the evidence, Garic purchased 1,064,850 pounds of rough rice from Commodity Credit Corporation, for the total price of $66,068.19. This would be 6.2 cents per pound as the cost of the rough rice.

2. Lammers milled enough rough rice to deliver to Garic 670 bags of milled rice, which would be 67,000 pounds of milled rice. It was shown by the evidence that it would require 100 pounds of rough rice to make 69 pounds of milled rice. So the 67,000 pounds of milled rice would equal 97,150 pounds of rough rice.

3. Deducting 97,150 pounds from the original figure of 1,064,850 pounds would leave 967,700 pounds of rough rice remaining as belonging to Garic; and this, at the cost figure of 6.2 cents per pound, would total $59,997.40 that Garic lost.

There is some testimony as to cost of milling and also as Garic’s profit; but it is not shown that the rice had a less value on August 28, 1959 (the day of demand by Garic) than the original cost to Garic. So it is not shown by appellant that the verdict is excessive.

Affirmed.

George Rose Smith, J., not participating.

       In the Trial Court, the plaintiffs were the First National Bank of Lake Providence, Louisiana, the Hibernia National Bank of New Orleans, Louisiana, the National Bank of Commerce of Pine Bluff, and Walter J. Garic, Inc.; and the defendants were the American Marine and General Insurance Company, John Lammers, and the American Express Field Warehousing Corporation. The litigation was to determine the liability of the defendants, or some of them, to the plaintiffs, or some of them, for rice destroyed by fire or otherwise lost from the warehouse of American Express Field Warehousing Corporation. All of the plaintiffs have been satisfied in various ways by the result of the trial in the Circuit Court except the plaintiff Walter J. Garic, Inc. In the Trial Court, after all the evidence had been heard, Lammers confessed judgment in favor of Garic; the Circuit Court jury found in favor of the Insurance Company on the Garic claim; and the Circuit Court jury found in favor of Garic on its claim against the American Express Field Warehousing Corporation. It is to reverse the said judgment against it and in favor of Garic that the American Express Field Warehousing Corporation prosecutes this appeal.

       The appellee contends that, regardless of any question of negligence, American is liable to Garic under the terms of the Uniform Warehouse Receipts Act, because — claims appellee — the Act covers liability in cases where the receipts were issued or should have been issued. We do not have to decide whether the Uniform Warehouse Receipts Act applies because the application of common law principles leads to the conclusion here reached. See annotation in 13 A.L.R. 2d 681.

         This was item 1(b) of the complaint and is entitled, “Alternative Claim Against John Lammers and American Express Field Warehousing Corporation”; and in that paragraph Garic alleged that the rough rice was received by American Express Field Warehousing Corporation on behalf of Walter J. Garic, Inc.; that subsequent to the receipt of the rice, it was removed from the warehouse without authority from Garic; that due demand has been made on American for the delivery of the rice; and that American has wrongfully failed and refused to deliver the same. This was a count in conversion.

       We copy American’s objection to this instruction: “American Express Field Warehousing Corporation objects generally and specifically because it is a peremptory instruction and because said instruction is not a correct declaration of law, further specifically because the evidence is undisputed that if all or a portion of that rice was delivered to Mr. Lammers upon his request that such delivery was lawful under the statute; and that any of the Garic rice remaining, if any, was in the warehouse at the time of the fire and was destroyed by fire. So that there is no basis on which the jury could find at this time that this defendant was liable to the plaintiff Garic, Inc.; further specifically because it omits the matter of the burden of proof; further specifically because there is no competent evidence from which the jury could determine how much of the Garic rice in question was delivered to Lammers and milled by him, so that the jury would have to speculate on that matter; further specifically because the plaintiff, Garic has no standing to sue this defendant on the rice in question; further specifically because the instruction permits the jury to find us liable for the value of the rice whereas suit against us is not for value of rice but for the contract price that Garic paid the CCC for the rice; further specifically because it omits to give credit for the amount of Garic rice admittedly delivered by Lammers to Garic; further specifically because under the undisputed evidence Lammers was the depositor of that rice with this defendant and that we were a gratuitous bailee of that rice and therefore could not be liable for failure to deliver or for any loss of the rice in the absence of gross negligence of which there is no allegation or proof.”

       One witness testified that all of the purchased rice was not received from the Commodity Credit Corporation by Garic; but the weight tickets in the record showing the Garic rice hauled to American’s warehouse total 1,329,480 pounds of rough rice. We use the original figure of 1,064,850 pounds of rough rice for calculation purposes; but even if we should take the lower figure of 1,058,820 pounds, as the rough rice actually received by Garic from the Commodity Credit Corporation and delivered to American’s warehouse, the final net figure of Garic’s loss would be $59,623.54 instead of $59,997.40, as shown in the paragraph number 3 of this topic, which, at all events, disproves the statement that the jury verdict is excessive.


author: Ed. F. MoFaddin, Associate Justice.

text:
    Cheney, Commissioner v. East Texas Motor Freight, Inc.
    5-2408
    346 S. W. 2d 513
    Opinion delivered May 29, 1961.

      Herrn Northcutt and Lyle Williams, for appellant.

      Warren & Bullion, for appellee.
   Ed. F. MoFaddin, Associate Justice.

The ultimate question presented on this appeal is whether the appellee is liable for additional State income, taxes as claimed by the appellant.

Appellee East Texas Motor Freight, Inc. (hereinafter called “East Texas”) is a Texas corporation engaged in interstate and intrastate transportation of property as a common carrier. It operates partly within and partly without Arkansas, and is duly certificated by the Interstate Commerce Commission and the Arkansas Commerce Commission, and is subject to the regulation of both agencies. At all times herein involved East Texas was authorized, and doing business in Arkansas, as such carrier. Appellant J. Orville Cheney (hereinafter called “Commissioner”) is, and was at all times herein involved, the Commissioner of Revenues of the State of Arkansas and charged by law with enforcing the Arkansas Income Tax Law (Act No. 118 of 1929 as amended and as found in § 84-2001 et seq., Ark. Stats.).

East Texas operates on a fiscal year basis ending on June 30th; and for the fiscal years 'ending in June 1955, 1956, 1957, and 1958 (the four years here involved) East Texas made its Arkansas Income Tax return to the Commissioner and paid the tax as shown on such return. By letter of April 27, 1959, the Commissioner advised East Texas that an additional tax was due by it for each of these four years because of the method East Texas had used in figuring depreciation. The Commissioner also advised East Texas that an additional tax was due for the year 1958 because of certain sales tax payments East Texas claimed it had made to the State of Texas. Upon receipt of the letter by East Texas, there ensued a series of conferences between the representatives of East Texas and the representatives of the Commissioner, with each side trying without success to convince the other. Finally, East Texas paid the claimed additional tax of $3,426.99, and filed this suit for refund, alleging that in seeking such refund East Texas was proceeding under § 84-2031 et seq., Ark. Stats. The Trial Court rendered a decree in favor of East Texas, and the Commissioner prosecutes this appeal, presenting, inter alia, the points now to be discussed.

I. The Method For Determining Depreciation. In the returns filed for each of the four years here involved, East Texas had claimed depreciation according to the ‘‘ declining balance ’ ’ method (§ 84-2016 (f)(2), Ark. Stats.); and this method allowed a larger amount of depreciation for each of these four years than did the “straight line” method. The Commissioner insisted that East Texas should have calculated and claimed the said depreciation on the “straight line” method, being $ 84-2016(f) (1), Ark. Stats.; and on this “straight line” method East Texas would owe a larger tax. As authority for his position, the Commissioner relies on § 84-2003(e), Ark. Stats., which says that utilities and some other corporations (snch as East Texas) must nse the method of calculating income tax “according to the standard classification of accounting of the Interstate Commerce Commission.”

Thus the question here posed is whether East Texas is free to calculate and claim depreciation as it desires under § 84-2016(f) (2), Ark. Stats., or whether the State may prescribe — as the Commissioner claims — that depreciation be calculated by East Texas according to the standard classification of accounting of the Interstate Commerce Commission, which latter is the “straight line” method. We hold that § 84-2003(e), Ark. Stats, is valid as applied to this case, and that East Texas must use the same method in calculating its depreciation on its Arkansas income tax return as is prescribed by the standard classification of accounting of the Interstate Commerce Commission. The pertinent portion of § 84-2003(e), Ark. Stats., as here involved, reads:

“(e) Mode of determining taxable income of utilities. The basis of ascertaining the net income of every corporation engaged in the business of operating a steam or electric railroad, express service, telephone or telegraph business, or other form of public service, when such company is required to keep records according to the standard classification of accounting of the Interstate Commerce Commission, shall be the ‘net income’ of such corporation as shown by their records kept in accordance with that standard of classification of accounts, . . . ”

The constitutionality of the section, of which the above copied language is a part, was sustained by this Court in Cook, Commissioner v. K. C. So. Ry. Co., 212 Ark. 253, 205 S. W. 2d 441; and certiorari denied by the Supreme Court of the United States in 333 U. S. 873, 68 S. Ct. 902, 92 L. Ed. 1150. In that case we held that the statute fixing the method of determining taxable income of interstate utilities was not shown to be discriminatory. And in the later case of Commissioner of Revenues v. Trans-Continental Bus System, 227 Ark. 811, 301 S. W. 2d 569, there was involved the “direct accounting” method of allocating operating expenses claimed by the bus company as opposed to the statutory formula of miles in Arkansas as compared to total miles of the system. We again sustained the statute, and concluded: “We accordingly conclude that appellee failed to sustain the burden of proving the statutory formula oppressive and discriminatory, or that they have been deprived of any constitutional right by reason of its application in the instant case.”

Aside from the matter of constitutionality,- East Texas argues that § 84-2003 (e), Ark. Stats, (which comes to us from § 3 of Act 118 of 1929) has been superseded and amended by § 84-2016 (f), which was added to the Income Tax Law by Act 156 of 1957. But we do not agree with East Texas’ contention. Act 156 of 1957 is. captioned: “An Act to Amend Section 13(f) of Act 118, Approved March 9, 1929, and for Other Purposes,” which section was concerned with depreciation generally, and did not apply to particular corporations such as those concerned in Section 3(e) of the Act of 1929 (§ 84-2003(e), Ark. Stats.); and that section governs here. If East Texas were a business corporation not engaged as a common carrier and not subject to regulation by the Interstate 'Commerce Commission and not certificated - by the State of Arkansas, then East Texas could claim depreciation under § 84-2016 (f), Ark. Stats., that is, under Act No. 156 of 1957. But East Texas is a corporation of a particular status, in that it is a corporation engaged in public service under the control of the Interstate Commerce Commission and required to keep its accounts in accordance with the standard classification of accounts of the Interstate Commerce Commission; so East Texas is governed by the particular language of § 84-2003 (e), Ark. Stats, instead of the general language of § 84-2016 (f), Ark. Stats.

It was not the intention of -the Legislature that the Act 156 of 1957 should amend or supersede Section 3(e) of Act 118 of 1929. Our cases hold with uniform refrain, as stated by Chief Justice Hill in Lawyer v. Carpenter, 80 Ark. 411, 97 S. W. 662:

“A general law does not apply where there is another statute governing the particular subject, irrespective of the date of either the general or particular law; neither repeals the other; the particular legislation covers the narrower field where it is applicable. Dunn v. Ouachita Valley Bank, 71 Ark. 135; Mills v. Sanderson, 68 Ark. 130; Ex parte Morrison, 69 Ark. 517; Chamberlain v. State, 50 Ark. 132; State v. Kirk, 53 Ark. 339; Thompson v. State, 60 Ark. 59.”

This was reiterated in Faver v. Golden, Judge, 216 Ark. 792, 227 S. W. 2d 453, wherein Justice Millwee said:

“We have held that a general law does not apply where there is another statute governing the particular subject, irrespective of the dates of their passage. Lawyer v. Carpenter, 80 Ark. 411, 97 S. W. 662. It is also well settled that repeals by implication are not favored and that two statutes should be construed so as to give effect to both, if possible.”

We therefore conclude that the depreciation which East Texas was entitled to claim for each of the four years here involved is the depreciation according to the Uniform System of Accounts, as prescribed by the Interstate Commerce Commission; and that the Commissioner was correct in this matter of depreciation.

II. Deduction Of Certain Sales Tax Items. In figuring its net income for 1958 East Texas claimed as a deduction the amount of retail sales taxes it had paid in the taxable year to the State of Texas on motor vehicles purchased in that State. The Commissioner claimed that East Texas could not claim such taxes as deductions in the taxable year; but, instead, East Texas should add the amount of the taxes paid to the cost of the motor vehicles purchased, and thus the tax would be a part of the capital account and depreciated as such.

Because of what we have said in Point I, supra, we must also agree with the Commissioner on this point, since the requirements of the Uniform System of Accounts of the Interstate Commerce Commission prescribe such method regarding sales taxes. The rules for the deduction of taxes and licenses are contained in § 182.5200 et seq. of the rules prescribed by the Interstate Commerce Commission on Uniform System of Accounts. These rules allow many taxes to be deducted as expenses in the year paid; but as regards sales taxes the said rules provide:

“All sales and excise taxes not provided for in these accounts shall be included in the account charged with the cost of the material, equipment or services to which the taxes apply.”

So under the plain wording of the Uniform System of Accounts prescribed by the Interstate Commerce Commission, the Commissioner is correct on this matter of retail sales taxes in this case.

III. Exhausting Of Administrative Remedies. The Commissioner insists that East Texas did not exhaust its administrative remedies before filing this suit in the Chancery Court and, therefore, cannot maintain this suit. The rule is uniform that administrative remedies must be exhausted before judicial relief can be sought. We have a number of cases on that point, some.of which are: Cook, Commr. v. Wofford, 209 Ark. 824, 192 S. W. 2d 550; LeCroy v. Cook, Commr., 211 Ark. 966, 204 S. W. 2d 173, 1 A.L.R. 2d 1032; City of Little Rock v. Griffin, 213 Ark. 465, 210 S. W. 2d 915; Dixie Downs, Inc. v. Arkansas Racing Comm., 219 Ark. 356, 242 S. W. 2d 132; and Consumers Co-op. Addn. v. Hill, 233 Ark. 59, 342 S. W. 2d 657. There is no weakening of this rule by failure to decide this point in this case; bnt there is a division in the Court as to whether the administrative remedy had been ■exhausted, so we find it better to rest the opinion on the ultimate question presented, rather than on the procedural point. But nothing herein is a weakening of the rule that administrative remedies must be exhausted before judicial relief can be sought; and nothing herein is a decision on whether administrative remedies had been exhausted in the case at bar. The course we have pursuéd is like that adopted by Judge Holtzoff in Burnham Chemical Co. v. Krug, 81 F. Supp. 911, in that we have decided the ultimate question rather than the threshold question.

Conclusion

The decree of the Chancery Court is reversed and the cause is remanded, with directions to dismiss the complaint filed by East Texas and assess all costs against it.

       The “declining balance method” is stated in the cited statute to be the declining balance method, using a rate not exceeding twice the rate which would have been used had the annual allowance been computed under the method described in paragraph (1), . . .” i.e., “straight line” method.

       A witness for East Texas explained the difference between the declining balance method and the straight line method as follows: “Well, the depreciation method employed by East Texas Motor Freight was the declining balance method and I can illustrate the difference by using a simplified cost. Let’s assume an item cost a thousand dollars and was to be depreciated over a five year life. Normal, straight line depreciation would be 20% per year or $200.00 per year. On the accelerated basis you double the percentage and apply it to the declining balance. The first year it would be 40% of the thousand dollars or $400.00. Then, the following year it would be 40% of the remaining balance or 40% of $600.00, making $240.00. Then, the third year you would have a basis of the declining balance, which would be $360.00 and 40% of that would be $144.00. The depreciation for each year continues to get less . . .”

       The Texas tax was imposed by Act of 1950, 51 Leg. 1 C.S. p. 10, Chap. 2 Art. VI (as found in Title 122, Art. 7047k-l of Vernon’s Civil Statutes of Texas), and is called the “Texas Retail Sales Tax,” and applies only to motor vehicles. The tax was increased by Act of 1959, 56 Leg. 3rd C.S. p. 187, Ch. 1 (as found in Title 122 A, Art. 6.01 of Vernon’s Civil Statutes of Texas).


author: George Rose Smith, J.

text:
    Platt v. Ponder, Judge.
    5-2413
    346 S. W. 2d 687
    Opinion delivered May 29, 1961.

      Ivan Williamson, for petitioner.

      J. Frank Holt, Attorney General, by Jack L. Lessen-berry, Asst. Attorney General, for respondent;
   George Rose Smith, J.

The petitioner, Bobby Platt, was charged by information with the crime of having failed to support his illegitimate child. Ark. Stats. 1947, § 41-216. By demurrer he questioned the jurisdiction of the circuit court on the ground that exclusive jurisdiction in all matters relating to bastardy is vested in the county court by Article 7, Section 28, of the constitution. The circuit court overruled the demurrer, and the petitioner then filed this application for a writ of prohibition to prevent the circuit court from proceeding further. At the hearing below it was stipulated that the petitioner had never been judicially found to be the father of the child in question.

The Attorney General, appearing on behalf of the respondent, first contends that prohibition is not the proper remedy to test a ruling on demurrer, citing Harris Distributors, Inc. v. Marlin, 220 Ark. 621, 249 S. W. 2d 3, and Casey v. Strait, 221 Ark. 130, 252 S. W. 2d 75. In those cases, however, the question was not one of jurisdiction; instead, the issue was whether the complaint stated a cause of action. Our reason for denying prohibition was thus stated in the Harris case: “The respondent undoubtedly has jurisdiction both of the person and of the subject matter. Petitioner is in no sense faced with an irreparable injury. In substance its motion to dismiss asserts only that it has a defense to the plaintiffs’ cause of action. If prohibition may be used to test the sufficiency of a defense, there is no reason why it could not also be used to review the trial court’s action in overruling a demurrer to the complaint. Of course that is not the office of the writ.”

In the case at hand the petitioner raises a true question of jurisdiction in that he insists that the county court’s power is exclusive, so that the circuit court has no authority whatever to act. This is the point that he sought to raise by demurrer. When an application is made to the supreme court for a writ of • prohibition it is ordinarily proper, though not always essential, for the petitioner to show that his objection to the jurisdiction has first been presented to the court below. The proper method of presenting the objection in the trial court varies with the circumstances. In State ex rel. Butler v. Williams, 48 Ark. 227, 2 S. W. 843, the point was contained in a motion to dismiss. In Western Union Tel. Co. v. Bush, 191 Ark. 1085, 89 S. W. 2d 723, 103 A. L. E. 367, a motion to quash the service of summons was used. In the case at bar it happens that a demurrer was appropriate, for the point relied upon was apparent on the face of the information. But the controlling fact is that the petitioner’s pleading raised an issue of jurisdiction rather than a mere question about whether the information stated a cause of action. We are accordingly of the opinion that the writ of prohibition is the proper remedy for the petitioner to obtain a review of the circuit court’s decision upon the jurisdictional point.

On the merits the trial court’s ruling was correct. We have frequently held that although a bastardy proceeding in the county court is brought in the name of the State it is nevertheless a civil action rather than a criminal prosecution. Chambers v. State, 45 Ark. 56; State v. Davis, 178 Ark. 692, 11 S. W. 2d 479. There is no sound reason for saying that the county court’s power to determine paternity and provide support in a civil proceeding prevents the legislature from creating the criminal offense involved in this case and vesting jurisdiction thereof in the circuit court. It is quite apparent that the issue of paternity might arise in various proceedings, such as custody cases, guardianship matters, inheritance disputes, criminal proceedings,' etc. The county court’s jurisdiction over bastardy cases would not prevent other courts from determining the question of paternity for themselves. Indeed, it is doubtful if the county court’s judgment in the matter would even be admissible in a criminal case such as this one. See Ireland v. State, 99 Ark. 32, 136 S. W. 947; Holmes v. State, 144 Ark. 617, 224 S. W. 394.

A point so similar as to be almost identical was decided in Brizzolari v. State, 37 Ark. 364. Article 7, § 28 of the constitution vests in the county court jurisdiction over vagrants in the same language as it uses to confer jurisdiction over bastards. In the Brizzolari case it was contended that the county court’s jurisdiction over vagrants was exclusive and that therefore a criminal prosecution for vagrancy could not be maintained in the mayor’s court. We rejected this argument, holding that the mayor’s court could properly entertain the criminal proceeding. By the same reasoning the county court’s authority in bastardy cases is not a bar to the present action.

The writ is denied.

McFakdin, J., concurs.


text:
    Ark.-Best Freight System, Inc. v. Missouri Pacific Transport Co.
    5-2421
    348 S. W. 2d 694
    Opinion delivered May 29, 1961.
    [Rehearing denied September 11, 1961.]

      Clifton Wade and Louis Tarlowski, for appellant.

      Pat Mehaffy, William J. Smith, B. Ben Allen, for appellee.
   George Rose Smith, J.

This case is a sequel to two earlier proceedings which reached this court, Ark. Express, Inc., v. Columbia Motor Transport Co., 212 Ark. 1, 205 S. W. 2d 716, and Ark. Motor Freight Line, Inc. v. Mo. Pac. Freight Transport Co., 230 Ark. 587, 326 S. W. 2d 820. In the first proceeding Columbia Motor Transport Company, which was the appellee’s predecessor, was granted authority to operate as a common carrier of general commodities over certain highway routes, but it was not permitted to carry freight originating in Little Rock and destined for El Dorado or Gurdon. In the second proceeding the appellee sought the removal of the restriction just mentioned. We held that the removal of the restriction would amount in substance to the granting of a new certificate, so that the applicant was required to submit proof that the public convenience and necessity would be served by the requested removal of the restriction.

In the present proceeding the appellee, which is a wholly owned subsidiary of the Missouri Pacific Railroad Company, again seeks permission to engage in the carriage of general commodities from Little Rock to El Dorado and Gurdon. The application was resisted by the appellant and by Atlas Transit & Warehouse Company, both of which are motor carriers already operating in the field that the appellee proposes to serve. The Commerce Commission, by a vote of two to one, found that the appellee’s application should be granted, and that order was upheld by the circuit court. The appeal brings the record to this court for a trial de novo. Wisinger v. Stewart, 215 Ark. 827, 223 S. W. 2d 604.

The preponderance of the evidence supports the Commission’s finding that the appellee should be permitted to transport freight from Little Rock to Gurdon. The present service between those cities is shown to be inadequate. The appellant, Árkansas-Best, carries most of the tonnage along this route, but it does not make deliveries in Gurdon. Instead, it unloads Gurdon-bound merchandise at Arkadelphia, and from there deliveries to Gurdon are made twice a week by another carrier. Arkansas-Best regards its Little Rock to Gurdon business as unprofitable, and, owing to the light volume of traffic, it has no plans to expand its present service. By contrast the appellee proposes daily service from Little Rock to Gurdon, with the exception of Saturdays and Sundays. Without discussing the proof in detail we think it sufficient to say that the Commission was fully justified in approving the appellee’s application as far as Little Rock-to-Gurdon shipments are concerned.

On the other hand, the weight of the evidence does not support the view that the proposed additional service from Little Rock to El Dorado would serve the public interest. This route is already being adequately served by at least three authorized motor carriers. All that the appellee really proposes to do is to improve the service slightly by offering later afternoon pick-ups in Little Rock and earlier morning deliveries in El Dorado. Our reasons for finding the appellee’s proof to be insufficient can best be explained after first discussing the service already being rendered by Arkansas-Best, which is the principal carrier between the two cities in question.

Arkansas-Best’s testimony shows, and it is reasonable to believe, that overnight service such as this ordinarily involves picking up the freight during the afternoon, transporting it from one city to the other during the night, and delivering it the next morning. There is no suggestion in the record that any other method of operation would be equally as efficient as this.

Arkansas-Best maintains a fleet of about thirty pick-up trucks at its depot in Little Rock. These trucks are used to make the afternoon collections of outgoing freight and to take it to the carrier’s depot. There is some testimony, principally hearsay, that Arkansas-Best does not make collections after 3:00 p.m., but the more direct and convincing proof is that collections ordinarily continue until about five o’clock, with even later service being available in emergencies. It is shown that the Little Bock city officials have asked the appellant to have its trucks off the streets before the late afternoon traffic becomes heavy.

At the depot the merchandise is sorted and loaded into the large vehicles used on the highways. The first El Dorado-bound shipment leaves Little Bock at about midnight and reaches El Dorado at about 4:00 a.m. Arkansas-Best’s depot there opens at 6:00 a.m. A second shipment usually arrives at about eight in the morning, but in view of the testimony in this proceeding the company plans to reschedule the second shipment so that it will reach its destination somewhat earlier.

At El Dorado the freight must be unloaded from the large vehicles, sorted, and reloaded in the pick-up trucks that are used for deliveries. This process takes an hour or more. It appears that deliveries begin at about nine o’clock and may continue until as late as the early afternoon.

The appellee produced eight public witnesses from El Dorado, whose testimony is substantially similar. These men say that the appellee has promised to make early morning deliveries; several of the witnesses mentioned 8:00 a.m. as the proposed time for deliveries. These witnesses also understand, though this is based on hearsay, that the carriers now operating do not make collections in Little Bock as late in the afternoon as the appellee has promised to do. Almost no complaint, however, has been made to the present carriers, and for the most part the witnesses would be equally well satisfied if those carriers would improve their service in the two particulars mentioned. There is testimony on the part of Arkansas-Best that the suggested improvements are being put into effect on its line.

The appellee also offered one company witness who simply stated, without going into detail at all, that his company proposes to make a late afternoon pick-np of shipments in Little Rock and to transport these shipments by trucks leaving Little Rock at midnight and reaching El Dorado at 7:00 a.m. The Commission’s order granting the application makes no requirement that the proposed improvements be put into effect by the appellee. As far as we can see there is really no assurance whatever that the appellee’s service will actually be superior to that already available to the public.

We are unable to say that the appellee has met the burden of proving that its application should be granted with respect to the Little Rock-El Dorado route, under the principles approved in Mo. Pac. R. Co. v. Williams, 201 Ark. 895, 148 S. W. 2d 644. The proof is noticeably deficient in that no attempt has been made to show how the appellee will carry out its promises, such as that of early morning deliveries. According to the appellee’s own witness its truck will arrive in El Dorado at seven in the morning, which is an hour later than the Arkansas-Best depot opens there. The appellant’s uncontradicted evidence proves that after the freight reaches El Dorado it must be unloaded, sorted, reloaded in smaller trucks, and delivered to the various consignees. There is no basis in the record for finding that these necessary steps can be performed more quickly by the appellee than by the other carriers. Thus we are unable to find support in the testimony for the principal premise upon which the majority members of the Commission rested their order.

It is not clear from the record and briefs whether the appellee wishes to serve Gurdon without also serving El Dorado, or whether that limited authority would have been granted by the Commission. The cause will therefore be remanded, through the circuit court, to the Commission, with directions to deny the application insofar as it involves the Little Rock-El Dorado route and to enter an appropriate order with respect to the Little Rock-Gurdon route.

Reversed and remanded.


author: Paul Ward, Associate Justice. Ed. F. MoPaddin, Associate Justice, Jim Johnson, Associate Justice,

text:
    Hackler v. Baker, County Judge.
    2423 & 2461
    346 S. W. 2d 677
    Opinion delivered May 29, 1961.
    [Rehearing denied June 23, 1961.]

      Thomas B. Tinnon, for appellant.

      J. M. Smallwood and Richard Mobley, for cross appellants.

      Rose, Meek, Rouse, Barron, Nash & Williamson, for appellee.
   Paul Ward, Associate Justice.

This litigation stems from an attempt by Baxter and Marion Counties (adjoining) to enter into a compact, under the provisions of Act No. 2 of the First Extraordinary Session of the 1960 General Assembly, for the purpose of promoting industrial development in those counties. The primary issue concerns the constitutionality of said Act.

Provisions of the Act. Generally speaking, Act No. 2 provides a method whereby two or more adjoining-counties can form a compact “for the purpose of engaging- in joint efforts to secure and develop industry of mutual benefit,” and to finance the same by issuing bonds under Amendment No. 49 of the Constitution. The Act provides for the establishment of an Inter-County Commission (hereafter called Commission) composed of one person from each county (appointed by the County Judge) and the other one (where only two counties are involved, as here) selected by the said two appointees. The Commission is empowered to make contracts and agreements necessary to secure and develop industry, to acquire property, to construct buildings, and to hold title (as trustee) for the counties. Any contract (where there is a bond issue) and any sale of property must be approved by the county court of each county.

Act No. 2 further provides that each county to the compact may “issue bonds under Amendment No. 49” to provide the necessary money, and the counties, by agreement, shall determine the proportion of the total cost of any project each one is to bear.

The Compact. Baxter and Marion Counties, through the judge and court of each, took the necessary legal steps to enter into a compact under the provisions of Act No. 2. A provisional Commission was formed, an election in each county was called and held, and a provisional Lease Agreement was entered into with the Mar-Bax Shirt Co., Inc., looking to the establishment of a factory in a building to he erected on 25 acres of land in Baxter County near the Marion County line. Baxter County favored a bond issue by a vote of 2,378 to 1,375 and Marion’s vote was 1,473 for and 437 against.

Issues in Litigation. After the previously mentioned steps had been taken, four separate suits were filed challenging the constitutionality of Act No. 2 and other aspects of the proceedings.

One suit in Baxter County was filed by a taxpayer against the County Judge, questioning the constitutionality of Act No. 2 as being in conflict with Amendment No. 49 and Article 7, § 28 of the Constitution. In this same suit there was an intervention (and cross-complaint) filed by taxpayers, naming as additional third parties defendants the sheriff and county clerk, and also the provisional members of the Commission. Still another suit was filed in Baxter County which for all purposes of this opinion was the same as the intervention.

The intervention asserts, among other things, that Act No. 2 violates Amendment No. 49, Article 7, § 28 and Article 16, §§ 5 and 6 of the Constitution, and that the Lease Agreement is not economically sound. These two suits were consolidated and now appear here as No. 2423.

In Marion County two similar suits were filed, applicable to that county. These suits were .consolidated and now appear here as No. 2461. Cases No. 2423 and No. 2461 were consolidated for hearing on appeal. For the sake of convenience and clarity we will hereafter refer to those who first challenged the compact proceedings in each county as “appellants”, to those who sought to uphold said proceedings as “appellees”, and to the intervenors as “cross-appellants.”

Trial Below. The trial court held in favor of appellees, upholding the constitutionality of Act No. 2, after deleting certain portions of the proposed Lease Agreement. Appellees have not appealed from these “deletions.” We have used the word “proposed” and “provisional” in speaking of the compact, the Lease Agreement and the Commission because, as it developed during the trial below, legal confirmation depends on the outcome of this appeal. Testimony given at the trial by the two county judges was to the effect that confirmation will be forthcoming upon an affirmance of this court.

The Issues. Appellants contend that Act No. 2 violates Amp.udTn.ent No. 49 and also Article 7, § 28 of the Constitution. Cross-appellants make the same contention and in addition thereto they contend: (a) The expenditure by Marion County under the Lease Agreement is not an economical expenditure of money as provided by § 5 of Amendment No. 49; (b) The notice of election in Baxter County was not published as required by § 6 of said Amendment No. 49; and (c) Act No. 2 requires a compact before the bonds can he issued, and; (d) Marion County cannot issue bonds to erect a factory building in Baxter County.

Amendment No. 49. All of the arguments of appellants and of cross-appellants in this contention seem to he encompassed in one proposition, viz: Since Amendment No. 49 to the Constitution makes no provision for two counties to make a compact such as here attempted, Act No. 2, which does make such a provision, must necessarily and ipso facto he in violation of said Amendment. We do not agree that such conclusion is so easily deducible, and no decisions are cited to confirm it. Rather, we think, a broad view of the Amendment and the purpose of its adoption by the people tends to refute such conclusion. Before the adoption of Amendment No. 49 in 1948 no county (or city) had a constitutional right to lend its credit (vote bonds) — prohibited by the express terms of Article 16, § 1. Later, by Amendments to the Constitution (13 and 17 for example) this prohibition was modified for certain specific purposes — such as to purchase rights-of-way, and to build courthouses, jails and hospitals. In each instance the purpose for modifying the prohibition (against lending credit) was definitely stated. Likewise, in adopting Amendment No. 49 the purpose was just as definitely stated and understood, viz: “. . . for the purpose of securing and developing industry.” (§ 1 of No. 49.) For that “purpose” every county in the state was given the right to issue tax supported bonds. The question raised is: Do two counties, each having the right to issue bonds, have the right to form a compact (or go in together) to accomplish the same purpose for their mutual benefit? This right was given to them by the legislature in Act No. 2. To sustain appellants’ and cross-appellants’ contention they must take the position that the right to form such a compact is a right that springs from constitutional authority only. They have cited no authority, and we know of none, to sustain that position. As is well known, under our system of government the legislature represents the people and as such is the reservoir of all power not relinquished to the Federal Government or prohibited by the State Constitution. The right of counties to cooperate in a lawful undertaking for their benefit certainly has not been given away to our Federal Government, and it has not been prohibited by our State Constitution. As we see it, the legislature had the right to enact Act No. 2.

Article 7, § 28 of the Constitution. We are unable to agree with the argument that the project undertaken by Baxter and Marion Counties (under Act No. 2) violates the above section of the Constitution. It reads:

“The county courts shall have exclusive original jurisdiction in all matters relating to county taxes, roads, bridges, ferries, paupers, bastardy, vagrants, the apprenticeship of minors, the disbursement of money for county purposes, and in every other case that may be necessary to the internal improvement and local concerns of the respective counties. The county court shall be held by one judge, except in cases otherwise herein provided.”

As heretofore mentioned, all essential steps must be approved by the county court. No “tax” can be voted without the county court’s approval, and the same is true of the “disbursement of money.” The order of the trial court, which we approve, specified that the proceeds of the bonds should be turned over to the county courts and not to the Commission. We see no reason why the disbursement of such proceeds in this instance, under the general laws, should not be subject to the same safeguards as any other revenues. No actual abuse of these safeguards is before us at this time. It is not pointed out to us how two counties should encounter any more legal difficulties in disbursing bond proceeds than one county would have. The latter was approved in the case of Wayland v. Maurice Snapp, County Judge, 232 Ark. 57, 334 S. W. 2d 633, where an industry was established under said Amendment No. 49.

(a) There is no merit in the contention that the proceeds of the bonds will not be economically spent as required by § 5 of Amendment No. 49. This section reads:

“The governing body of the municipality or the County Court of the county shall exercise jurisdiction over the sale or exchange of any such bonds voted by the electors at an election held for that purpose and shall expand (expend) economically the funds so provided. ’ ’

In the first place no part of the bond proceeds have been spent, and no evidence was introduced to show the money will not be spent economically. As has been heretofore pointed out, the County Courts will have jurisdiction over the proceeds of the bonds.

(b) It is here contended that the Notice of Election was not published as required by § 6 of Amendment No. 49. The objection is that the Notice was published only twice while the above section requires it to be published four times. To support the objection attention is directed to Intervenors’ Exhibit No. 4. But this Notice (given by the sheriff) is the one referred to in the first part of said Section 6, and its function is to let the people know an election will be held. It does not have to be published four times. Further down in the section there is another provision which requires that “Notice of the election shall be given by the . . . County Judge of the county by advertisement weekly for at least four times . . .” There is no contention that this latter notice was not properly given as required by Amendment No. 49.

(c) Again we can find no merit in the contention that Act No. 2 requires a “compact” before bonds can be issued under Amendment No. 49. It must be understood that the word “compact” used in Act No. 2 refers to no single written agreement or contract, but generally to the undertaking to proceed jointly in an effort to secure industries. There is no contention that Baxter and Marion Counties have not taken every step required by said Act and Amendment up to this time. Further steps must necessarily await the conclusion of this litigation. Also, we think, appellants and cross-appellants attach undue significance to the words “issue bonds.” Undoubtedly the legislature had in mind the issuance of bonds that were legal and binding on the taxpayer, and not to the mere preparation and printing of bonds. They point out no alternative procedure, and we know of none, that would more fully comply with Act No. 2 than the procedure here followed.

(d) Finally, and somewhat more troublesome, is the contention that bonds issued by Marion County (under Amendment No. 49) cannot be used to erect (or help erect) a (factory) building in Baxter County. This contention is based on the wording in § 1 of the Amendment which reads:

“Any city of the first or second class, any incorporated town, and any county, may issue, by and with the consent of the majority of the qualified electors of said municipality or county voting on the question at an election held for the purpose, bonds in sums approved by such majority at such election for the purpose of securing and developing industry within or near the said municipality holding the election, or within the county holding the election.”

Special significance is attached to the phrase “for . . . securing and developing industry . . . within the county holding the election.” Of course, in this case the election was held in Marion County and the building is to be built in Baxter County. This circumstance, they say, shows a violation of the plain provisions of the above section. It must be conceded that, if the words “securing and developing industry” means (necessarily) the same as the words “securing and developing a factory building,” this case must be reversed.

However, we do not feel that we are obligated to, or that we should, be bound to such a strict interpretation of the Amendment. We have heretofore briefly mentioned the purpose for the adoption of Amendment No. 49. It is certainly reasonable to assume that the people’s principal concern was to create jobs and thus prevent unemployment and loss of’ population rather than to assure the erection of a building. The accepted meaning of the word “industry” as shown by Webster’s New International Dictionary, is “systematic labor or habitual employment; esp., human exertion employed for the creation of value.” Therefore, if it can reasonably be said (and we think it can) that the money expended by Marion County (in this instance) will furnish employment to its citizens, the Constitution has not been violated in letter or spirit. Manifestly the people of Marion County felt that an industry domiciled only two miles from the county border would be beneficial and would likely furnish them with employment, because they approved it by a larger percentage of votes than did the people of Baxter County.

In liberally construing the provisions of Amendment No. 49 (if a liberal construction is required) to effectuate its acknowledged purpose, we are following the well recognized rule of constitutional interpretation as it is clearly stated in the case of Myhand v. Erwin, 231 Ark. 444, 330 S. W. 2d 68, which construed this same Amendment. It was there stated:

“This court has been liberal in its construction of constitutional amendments, so as to carry out ■ the obvious purpose of the people adopting the amendment.”

It is our conclusion therefore from what we have heretofore said that the decree of the trial court must be, and it is hereby, affirmed.

Affirmed.

McFaddin and Johnson, JJ., dissent.

George Bose Smith, J., not participating.

Ed. F. MoPaddin, Associate Justice,

dissenting.. These two cases were consolidated in this Court. The first is from Baxter Chancery Court, and the second is from Marion Chancery Court. My dissent goes only to the case from the Marion Chancery Court, styled Burnes v. King, No. 2461. I am of the opinion that a permanent injunction should be granted against the issuance of the bonds by the Marion County Court because the industry is not to be ‘ ‘ within the county. ” • '

It was conceded by appellee in the oral argument that Amendment No. 49 is the only authority for Act No. 2; and that Act No. 2 is the only authority under which Marion County is issuing the challenged bonds. I concede that Act No. 2 is broad enough to cover what was attempted here; but I maintain that Amendment No. 49 is not broad enough to cover Act No. 2. Here is the germane language of Amendment No. 49:

“. . . any county may issue, by and with the consent of the majority of the qualified electors of said . . . county voting on the question . . . bonds . . . for the purpose of securing and developing industry . . . within-the county holding the election.” (Emphasis supplied.)

Two points stand out: the bonds are for the purpose of (1) securing and developing industry (2) within the county. I am firmly of the opinion that obtaining and developing a manufacturing plant in Baxter County is not an industry within Marion County. All Marion County can hope to gain is an increase in population to result from people coming to Marion County to work in Baxter County. That is fine; but it is not within the provisions of the Constitutional Amendment No. 49.

The majority opinion defines industry as “ . . . systematic labor or habitual employment; esp. human exertion employed for the creation of value.” Even accepting the definition, still the Amendment 49 says that such systematic labor or habitual employment must be within the county. In the case at bar, the labor and employment is to be in Baxter County and not in Marion County: so the Constitutional requirement is not met.

That the framers of Amendment No. 49 recognized the force of the words, “within the county,” is clear: because, in regard to municipalities the amendment says, “within or near said municipality,” whereas, in speaking of counties the amendment says, “within the county.” Yet the Majority is in effect saying, as regards a county, that ‘ ‘ within ’ ’ means ‘ ‘ within or near. ” If this holding of the Majority in this case should be extended to our venue statutes, where would be the end to the confusion?

The words, “within the county, ’ ’ mean what they say; and I refuse to torture the words to achieve a different meaning, even to help two well meaning Counties obtain an increase in population in one and a plant in the other. As I see it, the Chancery decree should be affirmed in the Baxter County case, but reversed in the Marion County case.

Jim Johnson, Associate Justice,

dissenting. I am unable to agree with the majority opinion because as I see it there are two glaring constitutional defects in Act 2 of the First Extraordinary Session of the Sixty-Second General Assembly. I think it would be difficult to imagine a more patent conflict with Amendment No. 49 than that contained in the proposal to establish a factory to be erected on 25 acres of land in Baxter County. The majority has not simply given a liberal interpretation to Amendment No. 49. Instead it has strained the definition of the term “industry” beyond reason and it has misapplied the doctrine that the Legislature has the power to do anything1 which is not prohibited by the Constitution and adopts an interpretation of Act 2 which would permit, for example, the establishment of a factory at Damascus in Faulkner County under the terms of a compact between Faulkner County and Perry County, in spite of the fact that Damascus is in the extreme northern part of Faulkner County and accessible to the inhabitants of Perry County only by way of Toad Suck Ferry or by a circuitous highway route through either Conway County or Pulaski County. Going further, the majority’s interpretation of Act 2 would permit the adjoining counties of Little River and Miller to enter into a compact under which a factory could be constructed in Oklahoma, Texas, or Louisiana, because if the majority’s understanding of the term “industry” is. correct, jobs would be created in these bordering states in which the inhabitants of Little River County and Miller County could find employment and thereby benefit. If these examples seem absurd, the fault lies wholly with the basic misconception of the meaning of the Constitution on which the majority proceeds.

The majority’s theory that the Legislature has all legislative power except where limited expressly or by implication by the Constitution is undoubtedly correct. The fallacy lies, however, in its application. The original Constitution, Article 12, Sec. 5, laid down a flat prohibition on the lending of credit by a county. Certain express exceptions have been made as in Amendments 10, 13, 18, 32 and 38. Amendment 49 is nothing more than an additional exception to the general constitutional prohibition on the lending of credit by a county. In other words, Amendment 49 removes from the prohibited area the lending of credit by a county “for the purpose of securing and developing industry . . . within the county . . . ” The conclusion is inescapable that the general prohibitions on the lending of credit by a county prohibit what is sought to be done by Act 2 unless Amendment 49, either expressly or by necessary implication, has removed the prohibition for the purposes stated therein. It is clear, then, that the theory of the majority that the Legislature may do all things which it is not prohibited from doing is irrelevant to the case at bar. In my opinion, this case presents the following questions: Does Amendment 49 permit the issuance of bonds in the county for the purpose of establishing an industry in another county? Does “within the county” mean what it says? If it does not mean what it says, then how far beyond the borders of a county may the industry be established and still comply with the constitutional restriction? In my view, the Constitution does mean what it says. The industry must be established within the county. The word “within” means physically within the limits of the county. The word “industry” means what common language has always dictated, i.e., a factory, a plant, a complexity of physical manufacturing or processing operations having a more or less well defined center. It does not mean the indirect effect of such an establishment. For, if this were true, it is no far cry to hold that the General Motors Corporation industry is located in Pulaski County, because certainly the economic effects of that industry are of great benefit to the inhabitants of Pulaski County. The decision of the majority espouses the ‘ ‘ trickle down” theory of economics, the logical conclusion of which is that it makes no difference where an industry (factory, plant, etc.), is established so long as the benefits therefrom in some way will accrue to the inhabitants of the county involved. Thus, I am convinced that the majority has made a radical departure from the plain meaning of Amendment 49 and other relevant prohibitions of the Constitution, a departure without precedent and one moreover which contains the seeds of destruction insofar as the system of constitutional limitations on the lending of credit by counties is concerned.

Not only do I believe the majority has made a fundamental error in its construction of Amendment 49,1 think that it has completely ignored the true meaning of Article 7, Section 28 of the Constitution. In my judgment Section 2 of Act 2 is an obvious attempt to delegate the powers of the County Court to a three-member commission. Under this section, the Commission is empowered to hold title as trustee to any property or construction with the proceeds of bonds which may be issued. They are empowered “to take all steps and to make and enter into all contracts and agreements necessary or incidental to the securing and developing of industry that is mutually beneficial to the parties to the compact” subject to the approval of the County Court. The Commission may employ engineers, architects, inspectors, managers, attorneys and such other employees as in its judgment may be necessary in the execution of its powers and duties and may fix their compensation. All expenses and liabilities incurred in carrying out the duties and powers of the Commission may be paid from available funds, including without limitation, funds obtained from the issuance of bonds or from revenues derived from facilities constructed or acquired from the proceeds of such bonds.” The Commission is empowered “after the construction or acquisition of any lands, buildings or facilities, and subject to the limitations contained in this Act ... to reconstruct, extend, equip, improve, operate, maintain, sell, lease, contract concerning, or otherwise deal in or dispose of the said lands, buildings or facilities. ’ ’ All of this the Commission is empowered to do in the face of the following constitutional language:

‘ ‘ The county courts shall have exclusive original jurisdiction in all matters relating to county taxes, roads, bridges, ferries, paupers, bastardy, vagrants, the apprenticeship of minors, the disbursement of money for county purposes, and in every other case that may be necessary to the internal improvement and local concerns of the respective counties. The county court shall be held by one judge, except in cases otherwise herein provided. ’ ’ Art. 7, Sec. 28.

These purported powers of the Commission created by Act 2 are exactly the kinds of powers which this Court held belonged exclusively to the County Court in the case of Campbell, County Judge, v. Little Rock School Dist., et al., 222 Ark. 615, 262 S. W. 2d 267. The majority apparently has assumed that so long as the County Court has some control over the expenditure of funds there is no unlawful delegation. This is a direct reversal of the principles stated in the Campbell decision. The Commission under Act 2 is given discretionary power, not merely the duty of performing ministerial functions. If the system of management by County Courts contemplated by the Constitution is to be maintained, then Act 2 must fall. Article 7, Section 28, and Act 2 cannot simultaneously be the law.

For the reasons stated above, I respectfully dissent.


author: Jim Johnson, Associate Justice.

text:
    U. S. Fidelity & Guaranty Co. v. Moore.
    5-2429
    346 S. W. 2d 524
    Opinion delivered May 29, 1961.

      Odell Pollard and W. R. Hastings, Jr., for appellant.

      Yingling, Henry & Boyett, by Comer Boyett, Jr., for appellee.
   Jim Johnson, Associate Justice.

This is an appeal from an order sustaining a demurrer filed by appellee, Mary Ellen Moore, resulting in the dismissal of appellant U. S. F. & G. ’s complaint.

On August 20, 1958, appellant issued its family automobile policy, No. AF2603179, to appellee for pleasure and business use which provided, inter alia, comprehensive coverage.

The insured automobile was confiscated on October 30, 1958, by agents of the Alcohol and Tobacco Tax Division of the U. S. Treasury Department. A forfeiture was entered upon the confiscation, the insured automobile was sold, and the U. S. Treasury Department kept the proceeds from such sale.

At the time of the confiscation and forfeiture, The Searcy Bank of Searcy, Arkansas, held appellee’s title retaining note on the insured automobile. A balance of $875.36 was owed by appellee to the said bank at the time of the confiscation and forfeiture.

Attached to appellant’s policy was appellant’s long form loss payable clause. Said long form loss payable clause was in favor of The Searcy Bank and provided that the insurance as to the interest of the bank would not be invalidated by acts or neglect on the part of appellee.

Appellant denied that it owed appellee anything under the policy for the loss of the insured vehicle on the grounds of public policy but did pay The Searcy Bank the sum of $875.36, the balance owed on the appellee’s title retaining note.

Appellant demanded payment of appellee for the amount which it had paid The Searcy Bank. Appellee refused to pay appellant, whereupon appellant filed suit in the Circuit Court of White County against appellee for the sum of $875.36.

Appellee demurred to appellant’s complaint. The trial court sustained appellee’s demurrer and in so doing held that appellant owed appellee for the loss of the insured automobile by confiscation and forfeiture.

The long form loss payable clause provided that appellant should be subrogated to the rights of The Searcy Bank when appellant paid the balance owed the bank on appellee’s title retaining note.

Upon the trial court’s sustaining appellee’s demurrer, appellant filed its notice of appeal, designation of contents of record on appeal, and then filed a transcript and brief with the Clerk of this Court, whereupon this Court entered a per curiam order dated October 10, 1960, dismissing appellant’s appeal for lack of a final order. Upon receipt of this order, an Order of Dismissal was entered by the trial court upon which the present appeal is based.

For reversal, appellant relies on the following point: “The trial court erred in sustaining appellee’s demurrer because it is against public policy to permit one to profit from the consequences of one’s illegal act.”

By proper assignment in accordance with 'its insurance policy, appellant was subrogated to the position of The Searcy Bank. Suit was brought on the subrogation agreement and the note was attached to the complaint. Paragraphs 5 and 7 of appellant’s complaint are as follows:

“On October 30, 1958, agents of the alcohol and Tobacco Tax Division of the United States Treasury Department confiscated the hereinabove described automobile. Pursuant to said confiscation, said federal agency legally sold said automobile and retained the proceeds from same.

“Plaintiff’s Policy No. AF2603179 which is set out in paragraph No. á hereinabove specifically did not provide coverage for losses to said automobile sustained as a result of confiscation by governmental authorities. Said policy did provide, however, in its long form loss payable clause (which was attached to said policy), that plaintiff would pay any amount owed by any lien holder on said automobile. Said loss payable clause further provided that upon plaintiff’s payment of any such lien that it would become subrogated to all the rights of said lien holder against defendant.”

Appellant argues that:

“The contract of insurance does not contemplate granting indemnity for a loss which is due to the intentional act of the insured, for one of the requisites of insurance is that the risk shall not be subject in any wise to the control of the parties. Upon this principle, as upon deeper grounds of public policy, the insuror is not required to indemnify the insured for a loss that has been caused by his own wrongful act. ’ ’

And in support of his contention cites the following-authorities: Vance on Insurance, Hornbook Series, 2d Ed., 1930, p. 64; Ritter v. Mutual Life Ins. Co., 169 U. S. 139, 18 S. Ct. 300, 42 Law Ed. 693; Names v. Dwelling House Insurance Co., 95 Iowa 642, 64 N. W. 628; Western Horse & Cattle Ins. Co. v. O’Neill, 21 Neb. 548, 32 N. W. 581.

In answer to appellant’s argument, appellee contends that:

“At no place in the complaint is any allegation made that appellee participated in, had knowledge of, or was in any manner connected with the confiscation of the automobile. The complaint simply states that the appellee was the owner of the automobile and the insurance policy and that the ear was confiscated. ’ ’

The settled law relative to demurrer is that when the facts stated in a complaint with every reasonable inference deducible therefrom constitute a cause of action, the demurrer should be overruled. McLaughlin v. City of Hope, 107 Ark. 442, 155 S. W. 910, 47 L.R.A., N.S.; and that every reasonable intendment is to be made in favor of a pleading, and a complaint will not be set aside on demurrer unless so fatally defective that taking all facts to be admitted, a court can say they furnish no cause of action whatever. Sharp v. Drainage Dist. No. 7 of Poinsett County, 164 Ark. 306, 261 S. W. 923.

Following the rules set ont above, we find that appellant’s complaint specifically alleges a confiscation and by the nse of the following language “Pursuant to said confiscation, said federal agency legally sold said automobile and retained the proceeds from same” alleges a forfeiture of the insured automobile from appellee by the agents of the Alcohol & Tobacco Tax Division of the United States Treasury Department.

This confiscation was merely the taking possession of the vehicle by said agents, but the forfeiture was an Order of the court following an adjudication of the right to possession and complicity of the owner. We take judicial notice that the Federal Courts will not decree a forfeiture unless there is participation, actual knowledge, or knowledge which can be imputed to the owner. U. S. v. One 1955 Model Buick, D. C. Ga., 1956, 145 F. Supp. 72; General Motors Acceptance Corp. v. U. S., 249 Fed. 2d 183; U. S. v. One 1949 G. M. C., CCA Okla. 1952, 200 Fed. 2d 120; U. S. v. One 1936 Ford, D. C. Ga. 1938, 22 Fed. Supp. 507; U. S. v. One 1937 Ford Truck, Ohio 1938, D. C. Ohio, 29 Fed. Supp. 278; U. S. v. One 1950 Mercury Sedan, C. A. Ala. 1953, 207 Fed. 2d 528; U. S. v. C. I. T. Corp., C.C.A., N.Y. 1938, 93 Fed. 2d 469; U. S. v. One Terraplane Sedan, D.C. N.Y. 1938, 23 Fed. Supp. 710. The allegation of forfeiture in appellant’s complaint necessarily infers this adjudication by the Federal Court. Appellee by her demurrer has admitted the truthfulness of these allegations.

Therefore, the judgment is reversed and the cause is remanded for further proceedings consistent with this opinion.