text:
    Acme Brick Company v. Ark. Public Service Comm. United States of America v. Ark. Public Service Comm.
    5-1144
    299 S. W. 2d 208
    Opinion delivered February 25, 1957.
    5-1201
    Opinion delivered February 25, 1957.

      Gordon E. Young, J. E. Gaughan, Jeff Davis and Reuben Goldberg, "Washington, D. C., for appellant.

      John R. Thompson, W. 8. Mitchell, Edward L. Wright, and Robert Roberts, Jr., Shreveport, La., for appellee.

      Osro Cobb, U. S. Atty., James W. Gallman, Ass’t. U. S. Atty., and Major J. G. Kinney, Washington, D. C., for appellant.

      John R. Thompson, W. 8. Mitchell, Edward L. Wright and Robert Roberts, Jr., Shreveport, La., for appellee.
   Paul Ward, Associate Justice.

This appeal challenges a decision of the Arkansas Public Service Commission approving a Rate Schedule submitted to it by the Arkansas Louisiana Gas Company, one of the appellees herein. This litigation however differs from most utility rate cases, in which usually the ultimate goal is to ascertain the proper return to the utility company in dollars and cents, in that here we are concerned not only with the amount of return in money but principally with the method of determining that return.

THE PRINCIPAL ISSUE.

Heretofore, under the utility rate decisions in this-state, and, other states, the amount of money a public utility has been allowed to earn has been related in some way to the amount of money it- had invested, or, tosíate it generally another way, a public utility has heretofore been allowed to earn a certain percent of its “rate-base.” The “rate base” has not always been arrived at in the same way, but it is always related either to the-amount of money invested, the present value of asset, the production costs, the prudent investment value or some-other similar factor. Whatever method used in determining the “rate base” the principle heretofore used to-determine a fair rate of return for a public utility has-been the same.

On this appeal we are called on to approve or disapprove an entirely different, and unrelated, method (requested by appellee, Arkansas Louisiana Gas Company, and approved by appellee, Arkansas Public Service Commission) of determining the rate of return allowable to the Gas Company. The question posed above-is, as we see it, the most important one presented by this-appeal, although, as it will later appear, there are other-issues to be resolved.

DESIGNATION OP PARTIES. The Arkansas-Louisiana Gas Company will be referred to as the Company, and the Arkansas Public Service Commission will be referred to as the Commission. The appellants here-were the protestants before the Commission, either directly or by intervention, and for clarity we will refer to them as appellants. Some appellants have chosen to dismiss as to their interest, but these still remain; Acme Brick Company, Columbian Carbon Company, International Paper Company, and Monsanto Chemical Company.

How litigation began. On March 12, 1955 the Company, feeling that it was not recovering sufficient revenues under the existing Schedule which had been in force since November 17,1953, wrote a letter to the Commission asking it to approve a new Schedule proposed, (to be effective April 15,1955), which was inclosed along with certain substantiating data. The new Schedule, which is shown filed March 14, 1955, provided for an increase in the price of gas to be consumed by the Company’s large industrial users — some 34 in number — but for no increase to domestic and small commercial users. The highest rate fixed by the new Schedule was 30 cents per one thousand cubic feet (m. c. f.) for the first 1,000 m. c. f. used in a period of one month, and the lowest rate fixed was 17 and one-quarter cents per m. c. f. for 500,000 m. c. f. or more used in a period of a month. The intervening rates -were graduated according to the monthly consumption of gas.

Before the new Schedule was to become effective (or could under Ark. Stats. § 73-117) on April 15, 1955, appellants, as respondents before the Commission contended, among other things, that the old Schedule provided the Company with a fair return, that the proposed Schedule was unnecessary, and that it discriminated against them in favor of the other gas customers. On March 30,1955, the Commission issued its order suspending the proposed Schedule, but after the Company filed a bond for $1,250,000 (as by statute provided) the Commission allowed the Schedule to become effective as of April 15, 1955. On August 22, 1955, the Commission found that under the new rate Schedule the Company had taken in (through July 1955) $1,260,000 more than the old rate would have produced, and so ordered the Company to execute an additional bond in the amount of $1,000,000, to insure a refund if it should finally be so ordered.

Extended hearings were held before the Commission at which appellants and the Company introduced numerous witnesses and documents, amassing a record of approximately 3,000 pages, and after which the Commission approved the Schedule as it was submitted by the Company, except that two rate adjustment clauses (not material to this opinion) were deleted. This order of the Commission was approved by the Circuit Court, from whence comes this appeal.

Effect of Commission’s Findings.

Very generally speaking, the overall effect and implications of the Commission’s approval of the Company’s proposed gas rate schedule were the following: (a) The Company will receive approximately $4,300,000 more revenue annually than it would have received under the old rate schedule, which had been in effect since November 17, 1953; (b) All this additional revenue will be derived from the Company’s large industrial users, known as 3-B customers — none to be paid by domestic or commercial users; (c) All of the Company’s property devoted to the production of gas — such as gas wells, gas leases, etc. (hereafter called “production property”), valued at approximately $10,000,000, was removed from the rate base; (d) For the purpose of figuring the Company’s net income (on gas sold to 3-B customers) it was permitted to carry as a fixed operation charge the field price (i. e. the price the Company pays other producers for its purchased gas in the various fields where it has gas production) for the gas it produces rather than the net cost of production as it has always done in the past under the rate base method; (e) Because the Commission found that certain risks were involved in servicing 3-B customers, the Company was permitted to earn 8% (instead of the traditional 6%— approximately) on the portion of its properties aliocated to servicing them, and; (f) The Commission made certain other findings relative to allocation of transmission costs, recoupment for previously acquired property, and working capital, all of which we will consider later.

Rate Base v. Fair Field Price. As before indicated, one of the important questions presented by this appeal is what method shall be used by the Commission to determine the monetary return a utility shall be allowed to make? Must we adhere to the traditional rate base method or can we (if it is found to be in the best public interest) approve the fair field price method which the Commission has adopted?

Thp rate base. As recognized by the Commission in its findings, it has been traditional heretofore to limit the net earnings of a utility company to a percent of its invested capital or some other indication of the extent of its capital assets. In Arkansas the rate base is the prudent investment value of the property of the utility, as defined by the Commission and this Court, and about which definition there is no dispute. It is upon this method of rate fixing that the relationship between the utility, on the one hand, and the public, on the other, has been established. Upon this basis the public grants the utility a monopoly (or a virtual monopoly) to do business and guarantees the right to charge a price that will produce a fair and reasonable return to the stockholders on all the capital invested by them. In return for the public’s concessions, the utility is obligated (under the statutes of this state, and under the rate base method) to render services at the lowest possible prices commensurate with a fair and reasonable return on its prudently invested capital. To the above end, the utility holds and must manage its property in the nature of a trusteeship. In the case of City of Ft. Smith v. Southwestern Bell Tel. Co., 220 Ark. 70, 247 S. W. 2d 474, at page 85 of Arkansas Reports, we said: “The utility must use all its receipts as though they were a public trust.”

The Fair Field Price as applied to this case. The production property belonging to the Company is valued at around $10,000,000 as compared to its total assets of approximately $93,000,000. With this production property the Company produces about 20% of all the gas it sells to all of its customers. The rest of the gas sold by the Company it buys on the open market from other gas producing companies. The 3-B customers consume approximately 80% of all the gas passing through the Company’s lines.

The Commission, by its Order of November 3, 1955, approved the Company’s proposal, one effect of which is (as stated previously) to remove the $10,000,000 worth of production property from the rate base and from further jurisdiction of the Commission. Under such order there will be no occasion for the Commission to be concerned with what it costs the Company to produce the gas it sells its customers. This is true because hereafter (under the Commission’s order) the cost of production will be the fair field price (as heretofore defined), which in this instance was found by the Commission to be 9.22 cents per thousand cubic feet.

It should be pointed out here that, under the rate base method, the cost (to the Company and the consumers) of producing gas has been lessened by reason of the fact that the Government allows a depletion cost of 27-1/2 per cent on gas producing wells for income tax purposes. Under the Commission’s order this tax windfall will no longer inure to the benefit of the Company’s gas customers, but it appears that it will inure to the benefit of the Company’s stockholders. Commenting on this phase of the case the Commission said: “While the Company has introduced no other method of arriving at the price of gas to be used in the cost of service computations, it takes the position that whatever method is used, the stockholders are entitled to any benefits from these allowances(emphasis supplied)

It is our understanding, also, that any profit derived from the difference between the fair field price (here determined by the Commission to be 9.22 cents per m. c. f.) and the amount required to produce the Company’s own gas (as it would be figured by tbe Commission under the rate base method) would likewise inure to the benefit of the stockholders and not the gas ■consumers.

In view of the above there are other implications that must be anticipated if this court sustained the Commission’s adoption of the fair field price method. Some of them are: Prom now on any disposition the stockholders of the Company make of its valuable production property (valued around $10,000,000) would be of no concern to the Commission or the Company’s customers. This is true because the Company’s stockholders could sell a part or all of its production properties and put the purchase price in their own pockets, and it would in no way affect the price the consumers would have to pay for gas.

It might be argued that there is no guarantee that the Company can produce gas cheaper than it can buy it on the open market (under the fair field price method), but such an argument is not convincing. Evidently the stockholders feel they will be able to make a profit on the gas they expect to produce and sell to the Company, otherwise they would be unwilling to try it, especially when it is remembered that they are foregoing a virtual guarantee against all losses in gas explorations under the rate base method.

Adoption of the fair field price method suggests a violation of the idea of the trustee relationship which we have said exists between the customers and the stockholders of a utility company. It would place the Company in the position of serving two masters. In order to make money for the stockholders management would be under a duty to sell its own produced gas at as high a price as possible while, out of loyalty to its customers, it would be under a duty to buy its own produced gas as cheap as possible.

If a public utility has the right (or if the Public Service Commission has the power to give it the right) to dispose of one segment of its assets without any kind of an accounting, then there is reason to fear it might some day be urged that it would have the same right to dispose of another segment or all of its assets in a like manner. This could, of course, lead not only to breach of trust but could defeat the very purpose for which utilities are organized to serve the public.

Fair Field Price Method Unlawful. What we have set forth above forces us to the conclusion that the Public Service Commission has no authority, in the absence of further legislation, to discard the rate base method in favor of the field price method in determining the net profits a public utility can earn in this state. In fact it is difficult to pose the question of a proper net return for a public utility company without stating the answer. This is true because the very concept of “net return” means a return on some kind of a basis, and that basis has traditionally been (in some way) the capital prudently invested.

We cannot read our statutes creating and defining the powers and duties of the Public Service Commission without concluding that they limit it to the rate base method for regulating the return allowable to a public utility company. In fact it appears that such a method was so obvious that the legislature did not deem it necessary to spell it out. Sunning through all the pertinent statutes is the idea that earnings or returns are based on the amount of property owned by the utility and on nothing else. To begin with all rates received by a public utility must be “just and reasonable,” and if not they are unlawful (Ark. Stats. § 73-204). The Commission has the power to fix just and reasonable rates for public utilities (Ark. Stats. § 73-218) and in order to do so, it is given the power to “fix the value of the whole or any part of the property of any public utility,” (Ark. Stats, same Section No. (4)). Also the Commission has the power and authority by order to require any public utility to furnish a verified, itemized, and detailed inventory of its property (Ark. Stats. § 73-220). The Commission has power to require a public utility to keep a uniform system of accounts subject to its jurisdiction and inspection (Ark. Stats. § 73-221) at all times. A public utility is required to “prepare and transmit to the Commission a certified statement of the gross earnings from its properties” annually, Ark. Stats., 73-248.

The legislature undoubtedly gave the Commission this power to ascertain and keep informed of the assets of a public utility ‘ ‘ in order to enable it to perform its duties” as set out in § 73-220 above. That duty, of course, is primarily to establish just and reasonable rates (for a public utility to charge) and a just and reasonable return for the stockholders on the money they have invested.

We have somewhat laboriously set out above the reasons that compel us to this inevitable conclusion: The Commission was not empowered under our present statutes to remove approximately $10,000,000 worth of property out of the Company’s rate base (thereby departing from the traditional rate base method), and in lieu thereof to measure the justness and reasonableness of the Company’s earnings on an entirely new basis or theory, viz; the fair field price method. If the Commission and this court should embark on the new and untried fair field price method of regulating public utilities, it would amount to abandoning our entire previous experiences and legal concepts in rate regulation which have thus far proved fair and satisfactory. Our thought on this point is well expressed by the language used in the case of City of Detroit v. Federal Power Commission, 230 F. 2d 810. In that case the Circuit Court of Appeals District of Columbia, in speaking of the rate base method (as compared to the fair field price method) said: “It has been repeatedly used by the Commission (Federal Power Commission), and repeatedly approved by the courts as a means of arriving at lawful — ‘ just and reasonable’ — rates under the act. Unless it is continued to be used at least as a point of departure, the whole experience under the act is discarded and no anchor, as it were, is available by which to hold the terms ‘ just and reasonable ’ to some recognizable meaning. ’ ’

The Public Service Commission of the State of Wisconsin attempted at one time to depart from the long established rate base method in fixing the return allowable to the Commonwealth Telephone Company. The Commission’s order was appealed to the Circuit Court of Dane County, Wisconsin, 71 P. U. R. 65. The Circuit Court posed the question by saying the Commission “failed to make any finding of fact at all and particularly failed and, indeed, emphatically refused to find a rate lase.” Some of the language used by the Circuit Court in reversing the Commission is we think interesting, and also applicable to the question under consideration by us. Some pertinent quotes are: “. . . for the regulatory Commission to repudiate the necessity of finding the ‘fair value’ of the utility’s property, or some other lase, is to us unprecedented in forty years of administrative regulation . . .” “The Commission throws out a half century of rate making as recognized in the forty-eight states and by the Federal Grovernment — and announces that the rates are not based on any rate base,” and; “The Commission finds nothing except that a certain amount of dollars represents a reasonable profit.” Then the Circuit Court, in commenting on the last quoted statement said: “Reasonable profit ON WHAT 1 That is the trouble with the Commission’s decision. It has no bottom. It has a numerator but no denominator.” “The point is that there is, and always has been, a BASE in the fixing of public utility rates. That is where the decision of the Public Service Commission of Wisconsin, now under review, is unique in the decades of rate making. There is no base found or even faintly suggested in the Commission’s decision. ’ ’

We realize of course that only limited weight can be given to a decision of the Wisconsin Circuit Court, but that fact does not detract from the force of the reasoning if it is sound, and we think it is. In addition, this Circuit Court’s holding was reviewed and affirmed by the Supreme Court of Wisconsin in Commonwealth Telephone Co. v. Public Service Commission, 252 Wis. 481, 32 N. W. 2d 247. There the Supreme Court, after reviewing the findings of the Commission, said: “It was not the intention of the legislature to bestow such arbitrary powers upon the Commission, and nothing in the statute can be so construed. ’ ’ Also the Court after stating that the Commission must make specific findings of the “relevant facts and circumstances” to determine whether a return is proper or not, said: ‘ The Commission must determine what those are and set them forth as required by law. Those essential facts which control each case will then determine the rate base” (emphasis supplied). The decision in the Commonwealth case, supra, was cited with approval in New England Telephone & Telegraph Co. v. State, et al., 95 N. H. 353, 64 A. 2d 9, at page 14; New England Tel. & Tel. Co. v. Kennelly, 80 R. I. 436, 98 A. 2d 835 at page 838, and; In Re Petition of New England Tel. & Tel. Co., 115 Vt. 494, 66 A. 2d 135, at page 140. In the last cited case the court (on page 138), after stating that the usual method of fixing rates was to determine a proper rate base and the allowable expenses, made this statement:

“Whether the method adopted in fixing rates follows the one just suggested in the order of the steps taken is immaterial. It is apparent, and it is shown by all the cases which we have read touching on this point, that in order to reach a fair judgment of rates to be fixed, it is necessary that a proper rate base and allowable expenses be determined.” (emphasis supplied)

Even though the Company and the Commission acknowledge that the fair field price method is relatively new and untried, they point to the fact that the Federal Power Commission (Re Panhandle Eastern Pipe Line Company, 3 P. U. R. 3d 396) and the U. S. Circuit Court of Appeals, District Court of Columbia, 230 F. 2d 810, held that it was not an unlawful method of rate fixing under the provisions of the National Gras Act, 52 Stats. 822 (1938) 15 U. S. C. A. § 717 et seq. There are however good reasons, we think, why the above decisions are not applicable to, and certainly not binding, in the matter here considered. First, in the Panhandle case the party seeking an additional return is an independent pipeline company, while here the Company is a public utility, operating under an exclusive franchise. Second, the relationship of the parties is not the same. As we have heretofore pointed out, the Company in this case bears a trust like relationship to its customers and the general public, but this is not the situation in the case of an independent pipe line company. Third, the two situations are not governed by the same statutory provisions. In the Panhandle case the Federal Power Commission operating under the provisions of the Natural Gras Act, above, was under no obligation “to fix rates at the lowest level of reasonableness” . . . but only “to protect consumers against exploitation at the hands of natural gas companies” (City of Detroit, supra). In the case of a public utility however, the situation is not the same. Not only does the spirit of the regulatory statutes require the lowest possible rate commensurate with fair and reasonable return to the stockholders, but Ark. Stats. § 73-1901 makes it plain that: “All gas lines or companies operating within the State who render a domestic or general service to the public in furnishing and sale of gas are hereby required to buy or furnish from the lowest or most advantageous market. ’ ’

The Company has introduced into the record a mass of expert testimony to show (and appellants have done the same to refute) that the very nature of the gas production business makes the base rate an outmoded and impractical method. The Company presents able arguments and pertinent testimony and citations to sustain their contention, but because we have concluded the Commission has no authority, without additional legislation, to abandon the rate base method, it would serve no useful purpose and would unduly extend this opinion to consider the case from that standpoint.

Other Issues. Since onr determination of the principal question above calls for a remand it is necessary, for the Commission’s guidance, to consider four other questions raised by appellants.

1. Rate of Return. After applying the fair field price method and after separating the Company’s gas production properties from the rate base, the Commission fixed 8% (or more) as a fair rate of return on gas sold to 3-B customers. The acceptance of this figure was perhaps influenced by the testimony of Eugene S. Merrill. However, as fully recognized by the Commission, Mr. Merrill did not purport to say what a fair per cent of return would be on an overall basis. On the other hand Dr. Lionel W. Thatcher, whom the Commission described as “eminently qualified,” and he alone, made a study of a proper overall return, and he recommended 6.34 per cent. We have given careful consideration to this matter and it is our best judgment that the Commission should adopt 6.34 per cent as being the proper return for the company, since we find no substantial evidence to support a higher rate. Incidentally it is a higher rate of return than this court has heretofore approved for a public utility company.

2. Allocation of Transmission Costs. In a rate proceeding such as this it is necessary for the Commission to allocate or apportion the joint costs of transmitting gas from the well to the customers according to each class of customer’s responsibility therefor. Generally speaking there seem to be two methods of making this allocation or at least two elements which deserve consideration. One is based on the peak capacity required by each class of customer, and the other' is based on the actual consumption of each class over a stated period of time. Appellants say the former method is preferable, and would result in a saving to them. The Commission, however, chose to allocate 50% of the constant cost of transmission to coincidental peak use and 50% to the annual volume used. It appears to us that this is a matter that cannot be determined to a mathematical certainty but must be left to the determination of the Commission, based on substantial evidence in the record. We find such evidence in this record. Where the same question was under consideration, in Colorado Interstate Gas Co. v. Federal Power Commission, 324 U. S. 581, 65 S. Ct. 829, 89 L. Ed. 1206, it was said: “Allocation of costs is not a matter for the slide rule. It involves judgment on a myriad of facts. It has no claim to an exact science.”

3. Account 100.5. Several years ago the Company (or its predecessor) in acquiring certain distribution, transmission and production properties, paid approximately $5,000,000 in excess of the original costs. The Company now carries in account 100.5, called Gas Plant Acquisition Adjustment — $3,013,468.58, representing the unamortized portion of the $5,000,000 existing on December 31, 1954 (1954 being the test year on which this hearing was based). Appellants introduced testimony to show that the Company had recouped the questioned amount through earnings in excess of 6% per annum (allowed by the Commission) over a period of years. It appears from the record however that there is substantial evidence to support the Commission in finding (as it did find) (a) that the purchase of the aforementioned properties by the Company was made at arms length dealing, (b) that substantial amounts of the Company’s earnings had come from non-utility property, and (c) that the amount of $3,013,468.58 should be included in the Company’s rate base in this case.

4. Working Capital. We do not agree with appellants in their contention that the Commission acted arbitrarily in determining the Company Working Capital allowance, which of course is included in the rate base. It is conceded by appellants that the Company is entitled to set aside some considerable amount, called working capital (estimated at $4,000,000) to buy material and supplies, and to pay day-to-day operating expenses. It is conceded by both sides that the Company collects from its customers (through established rates) large amounts -with, which to pay income taxes. Much of this, of course, is collected in advance of disbursement. Appellants show that approximately 70% of these tax accruals would be available in cash at all times to the Company, and therefore, say appellants, this amount should be deducted from the Company’s working capital requirements. The Commission however, ordered the Company’s working capital decreased by only 50% of the total tax accruals instead of 70% as urged by appellants. This, again, is a matter which we think, addresses itself to the sound judgment of the Commission based on substantial evidence. It seems reasonable that the Commission had a right to consider factors other than the percentage of advance tax collections in arriving at a proper allowance. The Commission states that in a former case its staff developed information from which it determined that a 50% allowance was fair. We are in no position to question the same finding here because, in the absence of proof to the contrary, we must assume that the percentage of advance fax allocation was the same in both instances.

This court has not, of course, made any attempt to determine whether the disposition we have made of this ease calls for any refund to be made by appellants on their bonds. This will be done by the Commission after a redetermination of the whole matter in accordance with the views herein expressed.

This cause is therefore reversed and remanded to the trial court with instructions to remand to the Commission for further action consistent with the holdings in this opinion.

The United States of America, as a large consumer of gas furnished by the Company, was also a remonstrant before the Commission and an appellant to the Circuit Court. It has attempted to lodge an appeal in this court from the decision of the Circuit Court, under appeal docket number 1201, and has been granted the right to use the record in appeal number 1144.

However appellees point out that the United States has not perfected its appeal to this court within the 60 days provided for by Ark. Stats. § 73-236(a). The United States, conceding the above, relies on the fact that it has perfected its appeal within the time provided by Act 555 of 1953. This poses the question of whether said Act 555 supersedes § 73-236(a), and we think it must be answered in the negative.

In the first place a casual reading of Act 555 shows that it was not meant to apply to this kind of a case where the Circuit Court reviews the record made before the Commission. In taking an appeal under Act 555, Section 8 provides for the designation of all or part of the evidence, and Section 19 outlines the procedure where there is no stenographic report of the testimony. None of these provisions would be applicable to the taking of an appeal of this nature.

In addition, we point out that Act 555 does not specifically repeal Ark. Stats. § 73-236(a), which is a special law providing for special appeals. Nor does Act 555, which is a general law, repeal by implication the special law. This court, in Faver v. Golden, Judge, 216 Ark. 792, 227 S. W. 2d 453, in deciding whether a general election law repealed specific provisions for the contest of the election of a school director, 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.” See also Johnson v. Darnell, 220 Ark. 625, 249 S. W. 2d 5, at page 628 of the Arkansas Reports.

It follows therefore that the appeal of case number 1201 must be dismissed.


source: Caselaw Access Project

author: Sam Robinson, Associate Justice.

license: Public Domain

text:
    Breier v. Martin.
    5-1133
    299 S. W. 2d 77
    Opinion delivered February 25, 1957.

      Rose, Meek, House., Barron & Nash and Phillip Gar-roll, for appellant.

      Talley & Owen, Max Howell and Wayne O'wen, for appellee.
   Sam Robinson, Associate Justice.

This litigation involves the title to a strip of ground about 4 1/2 inches wide, running North and South, on the North side of Markham Street, between Main and Louisiana Streets, in the City of Little Rock. A brick wall 4% inches wide is located on this narrow strip of property. The appellant, Mrs. Bertha Breier, owns the West Half of Lot 8, Block 79, Original City of Little Rock; Lot 7, adjacent thereto on the West, is owned by appellee, Mrs. Bernice W. Martin. Both parties claim that the 4 1/2 inch strip of ground in question is a part of their respective lots, and, also, each claims title thereto by adverse possession.

In 1955, Mrs. Martin demolished and removed from her lot a two story brick bnilding, hereinafter called the Martin building; part of the East wall of that building extended upward only as high as the first floor, and the ceiling joists of the South 35 feet of the Martin building rested on that wall. The joists of the South 35 feet of the Martin building above the 4 1/2 inch wall were set in the upper portion of the wall supporting the Breier building located on the West Half of Lot 8. But, Mrs. Martin claims no interest in the wall on the West Half of Lot 8 supporting the Breier building. When the Martin building was demolished, the South 35 feet of the East wall of the building, consisting of one layer of brick about 4 1/2 inches in width, was left standing. This 4 1/2 inch layer of brick runs from the front to the rear of the Breier building; it does not support the Breier building, but is laid flat against the wall that does support that building. Ownership of the 4 1/2 inch layer of brick and ground on which it stands is the principal subject of this litigation. In addition, there are two sewer pipes from the Breier building that extend over the property line of the Martin lot; Mrs. Breier claims prescriptive rights in the Martin property in respect to such sewer pipes. The chancellor held that the 4 1/2 inch strip of ground and the wall thereon belong to Mrs. Martin, the owner of Lot 7, and that Mrs. Breier has gained no prescriptive rights in the Martin property by reason of the location and use of the sewer pipes. Mrs. Breier has appealed.

The issue here is whether the decision of the chancellor is contrary to the preponderance of the evidence. When all of the direct and circumstantial evidence is considered, we cannot say that it does not preponderate in favor of Mrs. Martin, the owner of Lot 7.

In the first place, two registered civil engineers, John P. Powers and W. Terry Peild, surveyed the property, and testified that the wall in question is on Lot 7, and not on -the West Half of Lot 8; and there is other direct and circumstantial evidence which is convincing that the wall is on Lot 7. The wall does not support the Breier building, bnt about 35 feet of it was supporting tbe building on Lot 7. There are many pictures in the record of the property in controversy; it can be seen from these pictures that the front of the Breier building is faced with some kind of white stone. Apparently, this stone covers the entire front of the Breier building, with the exception of the doors and windows, but it does not extend over the front of the 4 1/2 inch wall on the West, which is in controversy; it does, however, extend to the very edge of what appears to be the East wall of the Breier building. A cast iron post, or column, which supported the Southeast corner of the Martin building, was at the South end of the 4 1/2 inch wall; it was located on the same property on which that wall is situated. Exclusive of the 4 1/2 inch wall, both the East and West walls of the Breier building are of the same thickness; but if the 4 1/2 inch single brick wall should be considered part of the West wall of the Breier building, that wall would be thicker than the East wall by 4 1/2 inches, and there does not appear to be any sound reason for making the West wall of the Breier building 4 1/2 inches thicker than the East wall, especially • when this additional 4 1/2 inch wall on the West does not support any part of the Breier building.

Appellant attempts to show by ancient documents, consisting of newspapers published about the time the Martin building was constructed or reconstructed, and by other records, that the wall in question is a part of the Breier building. However, this evidence is not convincing in that respect. Prom the records and ancient documents, it appears that on the first day of December, 1874, John G. Price and Mary B. Price, his wife, who at that time owned both Lot 7 and the West Half of Lot 8, gave Henry Buerger a lease on Lot 7 with the privilege of constructing a building thereon; -and, further, he was to have the use of 35 feet of the West wall of the building then located on the West Half of Lot 8, commencing at the Southwest corner and running North 35 feet. Buerger did use the upper portion of the wall of the building on the West Half of Lot 8, now the Breier building, about which there is no dispute, to place some of the joists of Ms building. But the ceiling joists of the first floor of the Martin building were placed on the wall now in dispute, and the evidence is not at all convincing that the 4 1/2 inch brick wall was ever a part of the building located on the "West Half of Lot 8.

It appears that there had been a building or buildings on Lot 7 at a time before Buerger constructed his building, and it is not improbable that the wall in question was in place on Lot 7 at the time Buerger put up his building. On February 28, 1868, John P. Jones and John Gr. Price entered into a partnership for the purpose of publishing a newspaper, and at that time Jones conveyed to Price property as follows: “Now I the said John P. Jones, party of the first part hereto, do hereby grant, bargain, sell and convey unto the said John Gr. Price, party of the second part hereto and his heirs, executors, administrators and assigns forever, one undivided half of the West Half of Lot numbered Eight in Block numbered Seventy Nine . . . also an undivided half of the buildings and improvements on the lot of ground on the corner of Markham and Louisiana Streets . . .” Lot 7, now the Martin lot, is located on the corner. Hence, it appears that there was a building or buildings on Lot 7 in 1868, about seven or eight years before Buerger built anything on that lot. The conveyance just, mentioned, from Jones to Price, executed in 1868, says “the buildings and improvements on the lot of ground on the corner of Markham and Louisiana Streets.” In 1875, when Buerger constructed his building, Lot 7 was still referred to as the corner. In the “Little Rock Republican,” of April 3, 1875, the following appears: “Buerger will open his Palace Saloon, on the corner of Markham and Louisiana, between the 12th and 15th of this month, . . .”

There is some circumstantial evidence to the effect that the 4 1/2 inch wall is a part of the Breier building, such as evidence that at one time there were openings into that building through both the 4 1/2 inch wall in controversy and the admitted wall of the Breier building, but there is no showing as to when the openings, now closed, were made in the wall, or the circumstances thereof. Also, there are some windows that appear to have been constructed at a time when the 4 1/2 inch wall was in place in the Breier building, but the Breier building is very old, and Lot 7 and the West Half of Lot 8 were at one time controlled by one ownership. There is no evidence as to when the windows were placed in the Breier building.

Another difficult problem is the fact that the 4 1/2 inch wall also appears to be in the rear of the Breier building. But this difficulty is no greater than it would be to assign any reason whatever for constructing the 4 1/2 inch wall as a part of the Breier building.

Mrs. Breier has no title to the wall on the theory of adverse possession. She testified that she claims only what is on the West Half of Lot 8; it is established that the 4 1/2 inch wall is not on the West Half of Lot 8, and is not supporting the building on that lot; her restaurant sign on the front of her building, on the West Half of Lot 8, appears to go to the very edge of her building, but it does not cover the 4 1/2 inch wall, and she has never had possession of the 4 1/2 inch wall.

Appellant also contends that in the year 1874 the Prices, owners of Lot 7 and the West Half of Lot 8, and Buerger, lessee of Lot 7, fixed the boundary between the two lots as West of the 4 1/2 inch wall; but the evidence does not support that contention.

Appellant’s testimony with reference to the sewer pipes extending from her building out over very small parts of the Martin property is vague and uncertain; but, it is certain that appellant is not claiming prescriptive rights in the sewer line which crosses the Martin property from the point where appellant’s pipes join it to the main sewer line. Without the right to use the sewer line crossing the Martin property, the sewer pipes in controversy here would be worthless. The sewer line on the Martin property is not the only one leading from appellant’s building. Appellant has access to the main sewer line by another sewer pipe located on her own property; hence, it is not necessary that she have nse of the sewer line across the Martin property. Furthermore, in the event Mrs. Martin should construct on her own lot a building consisting of two or more stories, in all probability the sewer pipes involved here would be completely enclosed, and it would be impossible to make any necessary repairs on the pipes without entering the new building on the Martin property. Since Mrs. Breier does not claim an easement across the Martin property for a sewer line, an easement over a very small fraction of the lot would be worthless to her. Furthermore, the evidence is not convincing that Mrs. Breier has ever made any claims of prescription or ownership on any part of Lot 7.

Affirmed.

Mr. Justice Smith not participating.


author: Carleton Harris, Chief Justice.

text:
    House v. Hodges.
    5-1183
    299 S. W. 2d 201
    Opinion delivered March 4, 1957.

      Hubert J. Meachum and Charles P. Cole, for appellant.

      Kaneaster Hodges, pro se, for appellee.
   Carleton Harris, Chief Justice.

In September, 1954, Frank Hopwood, a non-resident of this state, employed Charles Howell of Evansville, Indiana, and Kaneaster Hodges of Newport, to represent him in an action which had been brought against him personally by C. T. Roberson in Independence County. An attachment had been levied on a 1953 Ford Pick-up truck belonging to Hopwood. At the time of retaining Howell and Hodges, Hopwood agreed to transfer the truck to them in payment of attorney fees. Other actions were also pending against Hopwood Manganese Company, Inc., in which the two attorneys also represented Hop-wood. Under the agreement relative to attorney fees, Hopwood, on June 9, 1955, gave an absolute bill of sale to the truck (which was still under attachment) to Kane-aster Hodges, trustee, which bill of sale was acknowledged before a notary public in Vanderburough County, Indiana, and was forwarded to Hodges on said date. On October 17, 1955, the Roberson attachment on the truck was released and Hodges gave to Roberson’s attorney a check in the amount of $433.50, with the understanding that the truck would be delivered to Hodges within a week. On October 20, 1955, the attorney for Roberson wrote Hodges, “I will be unable to deliver the truck to you as per our agreement because I filed suit yesterday for one Mary C. House against Frank Hopwood personally for debt (personal loan) for $500 and attached the truck again.” Hodges intervened, claiming title in himself under the bill of sale. The trial court sustained the contention, and from such holding comes this appeal.

Appellant, Mary C. House, argues that the alleged sale to appellee was not complete, and therefore void; that there was no delivery, either actual or constructive, of the truck to appellee and the purported sale was void as to creditors, and that the attempted transfer of the title should have been given by assignment of certificate of title instead of bill of sale.

We do not agree that the sale was incomplete. Hop-wood testified that the sale was complete when he sent the bill of sale to appellee; that the truck was turned' over to Hodges in order that it might be sold, and the proceeds applied on the fees of appellee and his co-attorney, Howell, and that appellee could have sold it for $100 had he so desired. It is true that both Hop-wood and appellee stated that Hopwood was to be notified and his approval obtained when the truck was sold, but they were both even more emphatic that appellee had full control of the vehicle, and the right and authority to make disposition as he saw fit. We do not concur that the statement Hopwood should be notified, imposed a condition precluding an absolute sale. We see nothing unusual in this arrangement. In June, 1955, Hopwood had several lawsuits to defend, with the possibility of others. He retained both an Indiana attorney and an Arkansas attorney, and had no funds with which to pay either. His testimony was to the effect that the truck was his sole means of paying the lawyers. Since the truck could not actually be divided, it was necessary that it be sold in order that both attorneys might be paid. It is understandable that Hopwood might well want to know the price to be obtained, and that it would substantially take care of the attorney fees due. We conclude that there was evidence of a substantial nature to sustain the holding of the Circuit Court that there was an absolute sale rather than a mere mortgage.

We further find that there was a constructive delivery of the truck to Hodges. Section 68-1418, found in Chapter 14, Ark. Stats. (1947) Anno., entitled “Uniform Sales Act,” reads: “Property in specific goods passes when parties so intended.— (1) Where there is a contract to sell specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties, usages of trade and the circumstances of the case.” It was not possible for Hopwood to actually deliver this vehicle, for it was under attachment. From Am. Jur. Volume 46, page 603, Section 434: “* * # there may be a constructive delivery under which title may pass if such is the intention of the parties. Thus, * * * where goods * * * cannot conveniently be delivered manually, title may pass upon a delivery of a writing representing such property, or evidencing ownership thereof, in other words, a document of title such as a bill of sale * * * . ” This truck had been attached by Roberson, so Hopwood could not make manual delivery. Roberson released the attachment when his claim was satisfied. Roberson’s attorney in the matter agreed when receiving the check from Hodges, that he would deliver the property to appellee within a week. Roberson was the man who had actual control of the property, though it was held by the sheriff. "We consider that the bill of sale properly endorsed from Hopwood, together with the promise of delivery from Roberson’s attorney, was constructive delivery.

Appellant contends that the attempted transfer of the title was ineffective because appellee did not receive a certificate of title from Hopwood. Actually, the principal question in this litigation is whether the failure to obtain such assignment of certificate of title prevented the passing of title to appellee, or made the transfer void as to creditors. Appellant argues that the provisions of Act 142 of 1949, (Uniform Motor-Vehicle Administration, Certificate of Title, Anti-Theft Act) are mandatory, and cites the case of West, Sheriff, v. General Contract Purchasing Corporation, 221 Ark. 33, 252 S. W. 2d 405. This case in turn cites Terrell v. Loomis, 218 Ark. 296, 235 S. W. 2d 961. It should be pointed out that both of these cases deal with the question of priority of liens, and both quote from Section 60, Article V. That Section reads as follows: “No conditional sale contract, conditional lease, chattel mortgage, or other lien or encumbrance or title retention instrument upon a registered vehicle, other than a lien dependent upon possession, is valid as against the creditors of an owner acquiring a lien by levy or attachment or subsequent purchasers or encumbrances with or without notice until the requirements of this article-have been complied with.” We agree that these provisions are mandatory, but in the instant case, we hold that the bill of sale was an absolute conveyance of the interest of Hopwood, and not a conditional sale or mortgage. We find nothing in the Motor Vehicle Act which states that a bona fide■ sale of a vehicle cannot be made except by an immediate assignment of certificate of title. It is true that the purchaser cannot obtain a license, nor legally operate the vehicle without obtaining such certificate, and one so doing would be guilty of a misdemeanor, but the matter of obtaining the proper transfer lies between appellee and Hopwood. The failure of appellee to obtain the certificate of title at the tiluche received the bill of sale does not deprive him of title,, for the certificate of title is not title itself but only evidence of title. Section 79 of the Motor Vehicle Act provides several grounds under which the department is. authorized to suspend or revoke a certificate of title,, registration certificate, or registration plate. Such a provision in the statute, of course, negatives any argument that the certificate of title is the only evidence of ownership.

It is pointed out that though appellee had a bill of sale dated June 9, 1955, he made no application for a new certificate of title, which the Motor Vehicle Act requires be made within five days after the transfer of the vehicle. In the instant cause, there was no reason for appellee to make this application since he did not have physical possession of the truck. It was being held by the sheriff under attachment. He does not yet have actual possession of the truck, since it was not delivered to him as per the agreement, but was, instead, attached two days after the attachment of Eoberson was released. Section 31 of the Motor Vehicle Act provides, “It shall be a misdemeanor for any person to drive or move * * * any vehicle of a type required to be registered' hereunder which is not registered, or for which a certificate of title has not been issued or applied for * * * .” Section 32 provides: “Every motor vehicle, trailer, semi-trailer, pole trailer, when driven or moved upon a highway shall be subject to the registration and certificate of title. provisions of this Act. * * * ” Let it simply be added that our statute does not purport to make void, sales which are accomplished without compliance with each provision, where such sale is bona fide.

In summary, we find that there was consideration for the bill of sale from Hopwood to appellee. There was no fraud, nor is any alleged. The sale was not consummated as a matter of prejudicing the rights of appellant. Appellant has not been injured by the transaction, since, except for the services of appellee, the attachment on the truck would not have been released by Roberson.

We are hence of the opinion that appellant’s argument must fail, and the judgment of the trial court is affirmed.

       From the record:
      “Q. In other words, if Mr. Hodges wanted to sell it for $100, he could.
      A. Yes, sir, he could. He could license it in Kentucky with the bill of sale if he had wanted to.”


author: J. Seaborn Holt, Associate Justice.

text:
    Mills v. Deniston.
    5-1187
    299 S. W. 2d 195
    Opinion delivered March 4, 1957.

      Wiley A. Brant,on, for appellant.

      Jay W. Dickey, for appellee.
   J. Seaborn Holt, Associate Justice.

Appellees, Robert Deniston and wife, brought suit against appellant, Annie B. Mills, in which they alleged they owned, by virtue of a deed from M. L. Poss and wife dated May 29,1952, the West 1/2 of Lot 1 in Block 11 of Dorris’ Addition of Brump’s Bayou to the City of Pine Bluff, Arkansas. They further alleged that appellant had caused to be placed on a 30 foot wide strip in the rear of this property (W 1/2 of Lot 1, Block 11) a building which she refused to move, and prayed for an order directing defendant to move said building from the property.

Appellant answered with a general denial and alleged ownership by adverse possession of that part of the above property in dispute and upon which the building was located, and further alleged that appellees “held title by virtue of a deed from the purchaser at a tax sale and could claim no greater interest than the owner of the assessed property at the time it went delinquent for taxes.” Trial resulted in a decree granting appellees the relief prayed and this appeal followed.

For reversal appellant says first, that the court erred in holding that appellant had not acquired title by adverse possession. We do not agree. As indicated, this litigation involves primarily title to the 30 foot strip of land to the rear of the appellees’ lot. The record shows that the above property has been assessed and the taxes paid thereon from about 1928 to 1954 as the W 1/2, Lot 1, Block 11, of Dorris’ Addition of Brump’s Bayou to the City of Pine Bluff, Arkansas, together with the E 1/2 of Lot 2, Block 11 of said addition, two contiguous lots. Following a mortgage foreclosure sale, E. D. Peebles, Jr., was issued a commissioner’s deed, May 10,1941 to the E 1/2 of Lot 2, Block 11 and no mention was made of this 30 foot strip in the rear of tbe W 1/2 of Lot 1, Block 11. Thereafter the E 1/2, Lot 2, Block 11 was conveyed to appellant (Mrs. Mills) and again no mention was made of the 30 foot strip in question. The ~W 1/2 of Lot 1, Block 11, was also conveyed to E. D. Peebles, Jr., on November 23, 1946, and thereafter Peebles conveyed to Annie B. Mills, E 1/2 of Lot 2, Block 11, and this deed was recorded in 1952. In the early part of 1953 Mrs. Mills, appellant, constructed a small frame building on the line between the W 1/2 of Lot 1, Block 11, and the E 1/2 of Lot 2, Block 11, about half of the building being on the E 1/2, Lot 2 and the other half on the W 1/2 of Lot 1, on the 30 foot strip here in question. It further appears that Peebles had sold to Mrs. Mills, appellant, under contract, the E 1/2 of Lot 2, Block 11. Peebles transferred his interest in this contract and deeded the property to Pinchback Taylor, Jr., in 1948, and the latter made a deed to Mrs. Mills, appellant, in 1952 and took a mortgage back as a security for a loan. In all these transactions the property was always described as the E 1/2 of Lot 2, and no mention was made of the 30 foot strip of land in the rear of Lot 1.

Appellees, Deniston and wife, acquired title to the W 1/2 of Lot 1, Block 11, by virtue of a deed from Mr.' and Mrs. Poss, May 29, 1952. It appears that this property became delinquent for the 1948 taxes while assessed under the description W 1/2 of Lot 1, Block 11 of Dorris’ Addition of Brump’s Bayou to the City of Pine Bluff, Arkansas, and a tax deed was issued the Posses under that description December 13, 1951. The tax deed from the State conveyed to the purchaser (M. L. Poss and wife) at such sale whatever right, title and interest the State had in the property, and the Posses in their deed to appellees transferred all the interest they had.

In Osceola Land Co. v. Chicago Mill & Lumber Co., 84 Ark. 1, 103 S. W. 609, we held: “Under Kirby’s Digest, §.7104 (now § 84-1302 Ark. Stats. 1947), providing that a tax deed ‘shall vest in the purchaser all the right, title, interest and estate of the former owner in and to .the land conveyed and also the right, title and claim of the State and county thereto, and shall be prima facie evidence that all the prerequisites of the law were complied with, . . . and that all things whatsoever required by law to make it a good and valid sale and to vest the title in the purchaser were done,’ a valid tax sale transfers, not only the title of the person in whose name the land was assessed for taxes, but the interests of all others therein.”

As we said in U. S. Bond & Mortgage Co. v. Reddick, 199 Ark. 82, 133 S. W. 2d 23, “To be adverse, possession of land must be actual, open, continuous, hostile, exclusive, and be accompanied with an intent to hold adversely to the true owner” for seven years. Appellant attempted to establish adverse possession by an effort to show that she and her predecessors in title had held the property adversely for a period of more than seven years. To do this it was necessary for appellant to prove that her predecessors held this property adversely and that appellees had notice thereof, before she could “tack on” their' possession to hers. "We so held in Fulcher v. Dierks Lumber & Coal Co., 164 Ark. 261, 261 S. W. 645, “One claiming land by adverse possession has the burden of proving that his predecessors in title held adversely, and that the legal owner had notice thereof, before he could tack his possession on to theirs.” In order for Mrs. Mills to establish her claim of seven years adverse possession of the property in question, it would be necessary to take the period of time the property was held by Peebles, May 9, 1941-Novem-ber 15, 1945, and tack on the first 2 1/2 years of the period after she went into possession. • We hold that the preponderance of the evidence in this case is not against the chancellor’s findings, that she failed to do this. It appears undisputed that throughout, including tax assessments, the foreclosure, conveyance by E. D. Peebles, Jr., and the mortgage to Taylor and Company, at no time was any reference ever made to.the 30 foot strip here involved and, in fact, the property was always described as the E 1/2 of Lot 2 and W 1/2 of Lot 1, Block 11. They were two separate adjoining pieces of property separated by a fence which extended on the dividing line to the 30 foot strip for a distance of 125 feet, and the evidence showed that there were signs of an old fence along the remaining 30 feet, the chancellor so found on viewing the property. By stipulation there was put in evidence a plat which shows the W 1/2, Lot 1, Block 11 to be 155 feet deep and 60 feet wide, and the E 1/2, Lot 2, Block 11, which on the east side joins the W 1/2 of Lot 1, is likewise 155 feet deep and 60 feet wide.

It is significant that E. D. Peebles, Jr., was not offered as a witness in this case to show what his intent was in conveying the property (E 1/2, Lot 2) to appellant, or-whether he was claiming any of the property by adverse possession. When Peebles conveyed the E 1/2 of Lot 2 to appellant, there is a presumption that he only intended to convey the property described and no other. Had he intended to include also the 30 foot strip off the side of the W 1/2, Lot 1, Block 11, it would have been a simple matter to have embraced this in the description. This he did not do. “The general rule that parol evidence is inadmissible to vary or contradict the terms of a written contract applies in all its strictness to actions involving deeds. In the construction of a deed, all prior negotiations must be taken as merged in that instrument, the conclusive presumption being that the whole engagement of the parties and the extent and manner of it were reduced to writing . . .” 16 Am. Jur. § 445, p. 686. The evidence also shows that appellant never assessed or paid any taxes on this 30 foot strip.

Finally, appellant says that “the subsequent actions of the owners of the two adjacent lots amounted to an acquiescence of the boundary line that was binding on all parties.” We do not agree. As indicated, the evidence does not show that there was any agreement as to the boundary lines separating the South 30 foot wide strip of the W 1/2, Lot 1, Block 11 of Dorris ’ Addition of Brnmp’s Bayou to the City of Pine Bluff, from this lot.

Accordingly, the decree is affirmed.

Chief Justice Harris- disqualified and not participating.


author: Ed. E. McFaddin, Associate Justice.

text:
    Rogers v. Kaylor.
    5-1188
    299 S. W. 2d 204
    Opinion delivered March 4, 1957.

      Yingling & Yingling, for appellant.

      T. E. Abington, for appellee.
   Ed. E. McFaddin, Associate Justice.

The question presented is whether the deed, here, comes within the Rule in Shelley’s Case.

In 1908, John and Callie Tenniswood conveyed the three lots here involved to their daughter, Johnie Tenniswood. The granting clause of the deed recited: “. . . do hereby give, bargain, sell and convey unto the said Johnie Tenniswood during her natural life, and unto heirs and assigns forever . . .” The habendum clause recited: “To have and to hold the same unto the said Johnie Tenniswood during her natural life, and unto her heirs and assigns forever . . .” The grantee, Johnie Tenniswood, became Mrs, Johnie Rogers, and in due time executed warranty deeds which purported to convey to the grantees — through whom the appellees claim — the entire fee to the three lots conveyed to her by her father and mother, as aforesaid.

Upon the death intestate of Mrs. Johnie Tenniswood Rogers, the appellants, as her children and heirs at law, brought this suit against appellees to recover the three lots. The appellants claimed that under the said deed to their mother, Mrs. Johnie Tenniswood Rogers, she took only a life estate and that the appellants, as her heirs, took the remainder in fee. The appellees claimed that, under the Rule in Shelley’s Case, Mrs. Johnie Tenniswood Rogers owned the fee in the lots which she had duly conveyed. The Trial Court ruled in favor of the appellees; and this appeal resulted.

The ruling of the Trial Court was correct. This case presents the perfect application of the classic “Rule in Shelley’s Case,” which rule, most succinctly stated, is, that when the first taker takes an estate of freehold and in the same instrument there is a remainder to his heirs by way of limitation, then the first taker takes the fee estate. Here, the conveyance was to Johnie Tennis-wood, “. . . during her natural life and unto heirs and assigns forever”; and, under the rule in Shelley’s Case, Johnie Tenniswood took the fee title.

In Hardage v. Stroope, 58 Ark. 303, 24 S. W. 490, Mr. Justice Battle, in 1893 rendered a most scholarly opinion on the Rule in Shelley’s Case; and that opinion has been our landmark case on the question. He gave (a) the statement of the rule; (b) its history; (c) the reasons for the rule; (d) the application of it; and (e) why it was the law in Arkansas. Mr. Justice Battle stated that, under the Rule in Shelley’s Case, the first taker in Hardage v. Stroope took the fee because the word “heirs” was there used by way of limitation and not by way of purchase. We have many cases discussing the Rule in Shelley’s Case, and the tbxtbooks and annotations on the Rule in Shelley’s Case are legion. Our own case of Hardage v. Stroope conclusively settles the question here presented. Mrs. Johnie Tenniswood Rogers took the fee under the deed to her, and the appellants cannot prevail.

Affirmed.

       In addition to Hardage v. Stroope, supra, the following are a few: First National Bank v. Graham, 195 Ark. 586, 113 S. W. 2d 497; Shields v. Shields, 179 Ark. 167, 14 S. W. 2d 545; and Ryan v. Ryan, 138 Ark. 362, 211 S. W. 183.

       In 47 Am. Jur. 791 there is an article on the Rule in Shelley’s Case. See also Annotation in 29 L. R. A., N. S. 963; and American Law Institute’s Restatement of the Law, “Property,” § 312. •


author: Minor W. Millwee, Associate Justice.

text:
    Carmichael v. Little Rock Housing Authority.
    5-1154
    299 S. W. 2d 198
    Opinion delivered March 4, 1957.

      Fred A. Newth, Jr. and Kenneth Coffelt, for appellant.

      Wright, Harrisofo, Lindsey & Upton, for appellee..
   Minor W. Millwee, Associate Justice.

Plaintiff,. Jewell Carmichael, brought this action against Little-Rock Housing Authority to recover damages for the-death of Lonnie Carmichael, her minor son (seven years- and eleven months old), who was drowned in a pond on land owned by the defendant corporation on A-ugust 13, 1955. At the conclusion of plaintiff’s proof, and upon additional facts stipulated by the parties, the trial court sustained defendant’s motion for a directed verdict. "We must decide whether the pond in question constituted an attractive nuisance under the undisputed facts.

In August, 1955, plaintiff and her three minor children lived on that part of U. S. Highway 65 known as Confederate Boulevard which runs along the Eastern side of the City of Little Rock. Plaintiff’s home was about 30 feet from the street and about 150 yards from the pond located on lands acquired by defendant four months before the accident. There was a vacant house and a railroad spur track between plaintiff’s home and the pond. There were two grocery stores nearby and families with children lived along the highway and on the 38th Street which ran East from the highway.

While the origin of the pond was not shown, it had been in existence for at least 50 years and plaintiff testified, without objection, that a 66-year-old neighbor told her it was there before he was born and that he swam in it in 1906. It is in a sunken area and is lined with large sweet gum trees and smaller willow trees. There is a large rock at the East edge and small fish live in the pond. While plaintiff would not say positively that it was fed by springs, she felt “there was bound to be everlasting water there” since it did not go dry in periods of drouth. The pond is unenclosed and children from the heavily populated area congregate there in the shade of the trees and on the large rock to watch and throw rocks at the fish. Parents in the vicinity caution their children against playing around the pond but have difficulty keeping them away.

Plaintiff and a married daughter living with her at the time were away from home on August 13, 1955, but had left Mr. Shirly, a boarder, to look after the three children. About 1:30 p. m. one of Lonnie’s young companions ran from the pond and told a neighbor, “Lonnie is drowning.” The child’s body was found at the bottom of the middle of the pond which is about 35 feet wide and about 60 feet long.

Although it is rejected by some courts, we adhere to the attractive nuisance doctrine or, as it is sometimes called, the “turntable doctrine” in this state. Broadly stated, the doctrine embraces the proposition that one who maintains upon his premises a condition, instrumentality, machine, or other agency which is dangerous to children of tender years by reason of their inability to appreciate the peril therein, and which may reasonably be expected to attract children of tender years to the premises, is under a duty to exercise reasonable care to protect them against the dangers of the attraction. 38 Am. Jur., Negligence, Sec. 142.

We have frequently approved the following statement by Judge Hughes, speaking for the court, in Brinkley Car Co. v. Cooper, 60 Ark. 545, 31 S. W. 154, 46 Am. St. Rep. 216: “The owner of land is not required to provide against remote and improbable injuries to children trespassing thereon. But he is liable for injuries to children trespassing upon his private grounds, when it is known to him that they are accustomed to go upon it, and that, from the peculiar nature, and exposed and open condition, of something thereon, which is attractive to children, he ought reasonably to anticipate such an injury to a child as that which actually occurs. ’ ’ See also, Foster v. Lusk, 129 Ark. 1, 194 S. W. 855, and cases there cited. The mere fact that a thing is attractive to children is not of itself a ground for invoking the attractive nuisance doctrine. Arkansas Valley Trust Co. v. McIlroy, 97 Ark. 160, 133 S. W. 816, 31 L. R. A. (N. S.) 1020.

Although similar cases have frequently engaged the attention of other courts, we have never determined whether the attractive nuisance doctrine is applicable to a pond under a situation similar to that presented here. “The attractive nuisance doctrine generally is not applicable to bodies of water, artificial as well as natural, in the absence of some unusual condition or artificial feature other than the mere water and its location.” 65 C. J. S., Negligence, Sec. 29 (12) j. The weight of authority in this country is to the effect that ponds, lakes, streams, reservoirs, and other bodies of water do not constitute an attractive nuisance in the absence of any unusual element of danger. See 56 Am. Jur., Waters, Sec. 436, where the textwriter further says: “In some cases, the view has been taken that the proT prietor may be held liable where some additional or unusual element of danger is involved in the situation as where the pond or pool is in close proximity to a highway or a playground, or where it is located in an urban or densely populated community, but the weight of authority appears to hold to the contrary, except where the facts bring the case within the rule respecting pitfalls or hazards adjacent to highways.” See also, Restatement of Torts, Sec. 339. Numerous cases on the question are collected in annotations in 36 A. L. R. 34, 39 A. L. R. 486, 45 A. L. R. 990, 53 A. L. R. 1355 and 60 A. L. R. 1453.

Since water hazards exist everywhere, the tendency of a majority of the courts which recognize the attractive nuisance doctrine under other circumstances, is to refuse to apply it to permit recovery for the drowning of a child in a pond or other body of water unless it constitutes a trap or there is some other hidden inherent danger. Many cases to that effect are collected in an exhaustive annotation on the subject in 8 A. L. R. 2d 1259. A few such cases are: Athey v. Tennessee Coal, Iron & R. Co., 191 Ala. 646, 68 So. 154; McCall v. McCallie, 48 Ga. App. 99, 171 S. E. 843; Dennis v. Spillers, 199 Okla. 311, 185 P. 2d 465; Morris v. Britton, 66 S. D. 121, 279 N. W. 531; Fiel v. City of Racine, 203 Wis. 149, 233 N. W. 611, 30 N. C. C. A. 297; Peters v. Bowman, 115 Cal. 345, 47 P. 113; Phipps v. Mitze, 116 Colo. 288, 180 P. 2d 233; Stendal v. Boyd, 67 Minn. 279, 69 N. W. 899; Riggle, v. Lens, 71 Or. 125, 142 P. 346.

A variety of reasons have been assigned for the majority rule. First is the difficulty of placing any practical limitation upon such liability, which is also denied for the reason that the danger inherent in water in a pond is or should be obvious to a child. There is also a disinclination on the part of courts to shift the duty of caring for their children from the parents to the owners of such hazards. There is also the impracticability of guarding or fencing against a hazard of this kind. As the court said in Emond v. Kimberly-Clark Co., 159 Wis. 83, 149 N. W. 760: “The world cannot be made danger proof — especially to children. To require all natural or artificial streams or ponds so located as to endanger the safety of children to be fenced or guarded would in the ordinary settled community practically include all streams and ponds — be they in private parks or upon private soil,- — for children are self-constituted licensees if not trespassers everywhere. And to construct a boy-proof fence at a reasonable cost would tax the inventive genius of an Edison.”

Notwithstanding the weight of authority to the contrary, a few jurisdictions hold that an ordinary pond, artificially created, can constitute such an attractive nuisance as to impose liability on the landowner for the drowning of a child therein. Franks v. Southern Cotton Oil Co., 78 S. C. 10, 58 S. E. 960; Allen v. McDonald Corp., (Fla.) 42 S. E. 2d 706. Since the only evidence on the point indicates we are dealing with a natural condition in the case at bar, it is unnecessary to determine whether we would subscribe to this minority view under the same state of facts. Plaintiff also relies on our own decision in Brinkley Car Co. v. Cooper, supra, where a six-year-old boy was burned by stepping into an unguarded pool of hot water covered with debris, and which the defendant created by draining its boilers in the operation of its manufacturing plant. That case involved unusual elements of danger and artificial features which point up the natural characteristics of the pond involved in the instant case. This pond is not unusually dangerous and contained no trap or hidden hazard which the immature mind would be unlikely to appreciate.

The drowning of a child of tender years is a most regrettable tragedy. In determining a claim of legal responsibility for such a deplorable misfortune it is diffi.cult to resist the temptation to substitute sentiment for law and reason. But under applicable legal principles there can be no recovery for the unfortunate death of plaintiff’s intestate on the facts presented. The judgment is accordingly affirmed.


author: George Rose Smith, J.

text:
    Hudgens v. Olmstead Mfg. Co., Inc.
    5-1179
    300 S. W. 2d 26
    Opinion delivered March 4, 1957.

      II. B. Stubblefield, for appellant.

      Frank J. Wills, for appellee.
   George Rose Smith, J.

This is a suit by the appellees to enjoin the appellants from violating a contract by which the principal appellant, C. C. Hudgens, agreed that for a period of three years he would not engage directly or indirectly in any business competitive with that of the appellees in that part of Pulaski county lying west of Hayes Street as extended southward to the county line. This appeal is from a decree in favor of the plaintiffs.

On March 29,1954, Hudgens was the principal stockholder in two corporations. One of these corporations, Eosedale Building & Supply Company, Inc., was actively conducting a building materials business at 8108 Asher Avenue, which is west of Hayes Street. The other corporation, Asher Avenue Building Supplies, Inc., had an office east of Hayes Street but was not doing an active business.

On the date mentioned the Eosedale corporation and Hudgens individually executed a contract by which the assets of the “building supply business” at 8108 Asher Avenue were sold to the appellee, Olmstead Manufacturing Company, Inc. This contract defines the Eosedale area as that part of Pulaski County described above and further provides: “A part of the consideration for said sale is that neither the Seller nor C. C. Hudgens, individually, shall engage directly or indirectly in the Eosedale Area for a period of three years from April 1, 1954, in any business competitive with that to be conducted by the Buyer ... , it being contemplated that the business to be conducted by the Buyer . . . shall be similar to that heretofore conducted by the Seller.” The plaintiffs were permitted in the court beloAV to shoAv that during the negotiations for the sale Hudgens represented that the Eosedale corporation was engaged in the sale of building materials and in the construction of houses. Whether the latter activity is forbidden by the contract is the basic dispute in the case.

At the time of the sale Hudgens owned more than a hundred vacant lots in the Rosedale area. Within a few months after the sale Hudgens reactivated his other corporation and began constructing and selling homes on these lots, the materials being furnished by the corporation. At the trial Hudgens readily admitted that he was still building houses in the prohibited area and intended to continue to do so.

The chancellor correctly enjoined this course of business on Hudgens’s part. We do not agree with the appellants’ contention that the parol evidence rule was violated by the proof that the selling corporation had, before the sale, been building houses and in that way selling building materials. The contract refers to a building supply business, which is not an exact term, and provides that it is contemplated that the buyer’s business will be similar to that previously conducted by the seller. This general language is open to more than one interpretation and therefore may be clarified by oral evidence. ‘ ‘ The testimony merely makes certain that which the face of the contract leaves uncertain as to what the intention of the contracting parties was.” Montgomery v. Ark. Cold Storage & Ice Co., 93 Ark. 191, 124 S. W. 768. It is immaterial that Hudgens carried on his operations in the prohibited area from a headquarters outside that area, as there is still a violation of the contract. Corbin on Contracts, § 1386; Johnson v. Stumbo, 277 Ky. 301, 126 S. W. 2d 165; Foxworth-Galbraith Lbr. Co. v. Turner, 121 Tex. 177, 46 S. W. 2d 663, 87 A. L. R. 323; Valley Mortuary v. Fairbanks, 119 Utah 204, 225 P. 2d 739. The appellants also contend that the injunctive decree is too broad in scope, but we think it conforms to the contract and affords no greater relief than the appellees are entitled to.

When the suit was brought the plaintiffs filed a notice of lis pendens describing 147 lots assertedly owned by Hudgens in the Rosedale area. By cross-complaint Hudgens charged that this notice was unnecessary and had damaged him in the snm that would he required to show these proceedings in each abstract of title to the lots in question. In his proof to support the cross-complaint Hudgens established the cost of showing the proceedings in an abstract, but he did not show that a separate abstract would be required when he sold each lot or, in fact, that any abstract at all would be necessary. In the absence of agreement there is no duty on the part of the seller to furnish an abstract of title. Thompson, Abstracts and Titles (2d Ed.), § 12; Jones, Arkansas Titles, § 1235; and see Bolton v. Branch, 22 Ark. 435. Upon the record it cannot be said that Hudgens proved the amount of his damages, if any, with a fair degree of certainty.

In one respect the decree must be modified. Before the suit was filed Hudgens sold the business of the reactivated corporation, Asher Avenue Building Supplies, Inc., to third persons. In connection with that sale the purchasers organized a new corporation, which took the identical name of the old Asher Avenue company, and Hudgens changed the latter’s name to Lake Hamilton Corporation. By their complaint the plaintiffs sued Asher Avenue Building Supplies, Inc., which is the new concern, but did not join Lake Hamilton Corporation as a defendant. Upon proof that Hudgens has no interest in the new corporation the chancellor dismissed the complaint as to it but granted injunctive relief against Lake Hamilton Corporation.

In this particular the decree is erroneous. This is not a case in which the plaintiffs merely made an error in the corporate name of the real defendant, as was true in Foster-Holcomb Inv. Co. v. Little Rock Pub. Co., 151 Ark. 449, 236 S. W. 597, and Evans v. List, 193 Ark. 13, 97 S. W. 2d 73. Here there were two distinct corporations, as the plaintiffs presumably could have learned from the records of the Secretary of State, and the plaintiffs sued the wrong one. Lake Hamilton Corporation is not a party to the suit and did not enter its appearance in the court below. In these circumstances the complaint against the Asher Avenue company cannot be treated as one against Lake Hamilton Corporation. Fencing Dist. No. 6 of Woodruff County v. Mo. Pac. R. Co., 180 Ark. 488, 21 S. W. 2d 959.

The decree is set aside insofar as it purports to enjoin Lake Hamilton Corporation; in other respects it is affirmed.


author: Paul Ward, Associate Justice.

text:
    Ellis v. Ashby.
    5-1181
    299 S. W. 2d 206
    Opinion delivered March 4, 1957.

      E. M. Arnold, for appellant.

      Bolland A. Bradley, for appellee.
   Paul Ward, Associate Justice.

In April 1954 W. F. Ashby and his wife, Flora, purchased a lot on Lake Conway, taking title by the entirety. They promptly began the erection of a dwelling on said lot, and on November 16, 1954, when the dwelling was practically completed, they conveyed the property, by regular warranty deed, to Miss Mona I. Ashby, a sister of W. F. Ashby. Mr. Ashby died on May 7, 1955.

In June 1955, appellants filed a suit against Mona and Flora Ashby, and Flora Ashby as executrix of the estate of her deceased husband. The material allegations in the complaint are: T. E. and Gr. A. Ellis are engaged in the lumber business under the name of Capitol City Lumber Company; When W. F. Ashby acquired the property in April, 1954 he was insolvent and was indebted to appellants; W. F. Ashby purchased building material from appellants to construct the said dwelling and he agreed to convey the property to appellants “for debts then existing and to be thereafter incurred, but failed and neglected to do so”; The conveyance to Mona was “without consideration and was made for the purpose of defrauding and hindering plaintiffs ’ creditors” at a time when Ashby was insolvent, and; After W. F. Ashby conveyed to his sister he induced appellants to endorse his notes to the First National Bank in Little Rock in the amount of $3,500 through the representation that he was still the owner of said property. The prayer was that Mona be held as trustee for appellants; that all rights of Flora, the widow, be declared inferior to the rights of appellants, and; that a lien be declared on the property in favor of appellants, and the property sold if necessary.

The chancellor dismissed appellants’ complaint for want of equity, based upon the findings that appellants were secured creditors; that there was no presumption of fraud in the making of the conveyance to Mona; that the questioned conveyance was not voluntary but based on valuable consideration, and; the evidence fails to show that W. F. Ashby was insolvent at the time the questioned conveyance was made or that it was made to defraud his creditors.

It is not necessary to examine the record to determine whether the chancellor’s findings are in accord with the testimony, because we find that he must be sustained for another reason.

The record discloses these uncontroverted facts: The deed to Ashby and his wife conveyed an estate by the entirety; It is not contended that this deed (by the entirety) was a part of any scheme to defraud creditors; The lumber and material furnished by appellants had all been paid for when this suit was filed; The debt upon which appellants are here suing was assumed by "W. F. Ashby (and by him alone) long after the deceased and his wife purchased the lot and after the deed was made to appellee, Mona I. Ashby, and; W. F. Ashby died before this suit was filed.

Under the above factual situation appellants could not maintain a suit to set aside the deed to Mona as being in defraud of creditors. If there had been no conveyance to Mona, appellants would have been in no better position than they are now because upon the death of W. F. Ashby title to the property vested, absolutely, in his widow. Since in this case the widow has executed a deed to Mona, if she should regain title it would revert to Mona under Ark. Stats. § 50-404.

Although this court has not had occasion to pass directly on the question here considered, we have in Moore v. Denson, 167 Ark. 134, 268 S. W. 609, pretty clearly indicated what our decision should be here. The holding there was that property owned by husband and wife by entirety is subject to sale under execution to satisfy a judgment against the husband, subject however to the wife’s right of survivorship. In reaching that conclusion the court quoted with apparent approval that “a conveyance by the husband and wife jointly passes title to the property clear of any claim of creditors of the husband,” It is clear from the context that the court had reference to property held by the entirety.

Since we have held that, where property is held by the entirety, the interest of one spouse cannot be sold on execution for the debt of the other spouse, it seems to follow logically that property so held is similar to a homestead in that respect. It was stated in Davis v. Cullums, 205 Ark. 390, 168 S. W. 2d 1103, that: “It has been many times held that a creditor may not complain that a homestead has been conveyed in defraud of creditors.”

We make clear that we are not here holding that fraud cannot be shown in the procurement of the title by the entirety in the first instance if the evidence warrants such a holding.

Other jurisdictions have dealt more specifically with the question under consideration, and the weight of such authority accords with the view we have heretofore expressed. It was held in Wortendyke v. Rayot, 88 N. J. Equity 331, 102 A. 2, that a voluntary conveyance by a husband and wife of an estate by the entirety could be set aside as in fraud of the husband’s creditors, and the husband’s interest sold under execution, but, that upon the husband’s death, the entire title would vest in the surviving widow. The above case was cited and the holding approved in the case of J. & A. Steinberg Co. v. Pastive, 97 N. J. Equity 52, 129 A. 201, and in other eases cited in 121 A. L. R. at page 1028, et seq.

Prom the above it follows that the decree of the trial court must be, and it is hereby, affirmed.

Affirmed.


text:
    Trinity Universal Ins. Co. v. Robinson.
    5-1185
    299 S. W. 2d 833
    Opinion delivered March 4, 1957.
    [Rehearing denied April 8, 1957.]

      Wm. Andress, Jr., Dallas, Tex.; Jay W. Dichey, for appellant.

      John Harris Jones, for appellee.
   Sam Robinson, Associate Justice.

Lancaster & Love subcontracted the construction of six tunnels through railroad embankments to appellee, George J. Robinson and others, doing business as Robinson Construction Company. According to the terms of the subcontract, Robinson was to receive as consideration $52,792 plus $791.00.

Robinson filed the present suit in the Jefferson Chancery Court against Trinity Universal Insurance Company and the City of Pine Bluff et al., alleging performance of the subcontract; that the sum of $30,208.02 was due and unpaid, and that the subcontractors were entitled to a judgment for said sum plus a 12% penalty and attorney fees. The City of Pine Bluff et al. were brought in on a quantum meruit and assignment theory. See Robinson v. City of Pine Bluff, 224 Ark. 791, 276 S. W. 2d 419, for previous litigation in this court on that angle of this case.

This case was removed to the Federal Court and remanded to the State Court several times. By consent of the parties, the answer filed in the Federal Court by Trinity Universal Insurance Company was considered as filed in its behalf in Jefferson Chancery Court and also considered as being filed on behalf of Lancaster & Love.

In addition to certain denials and admissions, the answer asserts two affirmative defenses: First, that under the terms of the subcontract Lancaster & Love was entitled to liquidated damages at the rate of $25.00 per day because the work under the subcontract was not completed within the time required; and second, that Lancaster & Love was not obligated to pay Robinson prior to the time that the City paid Lancaster & Love. The answer makes these admissions:

“Defendant admits the allegations of paragraph 9, except the allegation that the balance of $30,208.02 is owing and due.”

Paragraph 9 is as follows:

“In addition to the work provided for under the original contract price of $52,792, plaintiffs upon authorization and direction of City of Pine Bluff and Lancaster & Love, Inc. constructed Tunnel No. 6 under said Contract as 42 inches in diameter rather than 36 inches as called for in the original specifications for an agreed additional consideration of $791.00, making a total contract price of $53,583 to be paid to plaintiffs under said Contract and Supplemental Agreement. Of said sum the amount of $13,930.93 has been paid to plaintiffs, and materials, labor and equipment rental of the agreed value of $9,444.05 has been furnished to plaintiffs, leaving a balance of $30,208.02 owing to plaintiffs from the defendants, which sum is now due.”

The answer also admits Paragraph 11 of the complaint, which is as follows:

“Defendant City of Pine Bluff had knowledge of, and agreed to, said Contract by and between Lancaster & Love, Inc. and plaintiffs for the construction to be performed under said Supplemental Agreement and of the performance thereof by plaintiffs. Said City of Pine Bluff has received the benefits of the work performed by plaintiffs under said Contract. That the reasonable value of said benefits of the City of Pine Bluff resulting from the aforementioned construction done by plaintiff was not less than $53,583 of which said City of Pine Bluff would be entitled to the above stated credits totaling $23,374.98, leaving a balance due plaintiffs of $30,208.02 with interest thereon at the legal rate from April 6, 1953, on which date said City of Pine Bluff placed in use said construction work performed by plaintiffs. ’ ’

Appellants, in answer to requests for admissions, admitted that the tunnels had been approved by the Engineer acting for the City of Pine Bluff on or before July 17, 1952 and that Lancaster & Love, Inc. did not complete or turn over to the City the entire works or project until October 31, 1952.

Appellees filed their motion to strike the two affirmative defenses set up by appellants as dilatory and frivolous. After the motion to strike was sustained, appellees moved for judgment on the pleadings. Appellants, Trinity Universal Insurance Company and Lancaster & Love, Inc., have appealed from the order giving appellees a judgment as prayed.

Appellants rely upon nine points for reversal, but they are grouped into four categories for purposes of this opinion:

Appellants say that appellees cannot recover because the contract was for a sum in excess of $20,000 and that appellees did not sustain their burden of proof by showing that they were licensed by the contractor’s Licensing Board for Arkansas, Ark. Stats. § 71-701, et seq. Since this was not an issue in the lower court, it cannot be raised for the first time on appeal. See Stroud v. Crow, 209 Ark. 820, 192 S. W. 2d 548.

It is contended that the trial court erred in refusing to allow all answers filed in the Federal District Court to be treated, after remand, as answers in the Jefferson Chancery Court per agreement of counsel. The general rule is that when a case is removed to the Federal Court and remanded, it stands in the State Court in the same position in which it would have been had it never been removed. See Meyers Store Co. v. Colorado Milling & Elevator Co., 187 Ark. 636, 61 S. W. 2d 440; Reese Bros. v. Allen, 67 Ga. App. 514, 21 S. E. 2d 244; and 76 C. J. S. “Removal of Causes,” Section 312.

The record as abstracted by appellants shows an agreement by counsel relating only to the first answer and the trial court did not err in so ruling.

It is contended that the trial court erred in striking the affirmative defenses set out above because in so doing it accepted a disputed construction of replies to requests for admissions. The general rule with respect to payment of a subcontractor is that “* * * unless the subcontract clearly and expressly so provides the right of the subcontractor to payment is not dependent on the receipt of payment by the contractor, but only on the performance of his subcontract * * * .” 17 C. J. S. “Contracts” § 502 (2) (d). See also Trinity Universal Insurance Company v. Smithwick, 8th Circuit Court of Appeals, 222 F. 2d 16. Appellants have pointed to no provision in their contract that would justify a delay in payment.

The contract on the issue of liquidated damages provides:

“* * * no liquidated damages shall be chargeable against the party of the second part for the failure to complete said work within the time allotted unless such failure to complete the tunneling works delays the final acceptance of the project covered by the principal contract * * * . ”

Appellants have admitted that appellees completed the tunnels on or before July 17,1952; that appellants placed the tunnels in use on or before October 31, 1952; and that the “principal contract,” as distinguished from the supplemental contract, was not completed by appellants prior to October 31, 1952. Therefore, the completion of the prime contract was not delayed by the failure of the subcontractor, and by the express terms of the contract there can be no recovery for liquidated damages.

Appellants argue in their brief that appellees did not complete their contract in accordance with plans and specifications, and that appellants are entitled to certain setoffs because of the work that they did in bringing the tunnels up to contract specifications, but their admission to paragraph eleven of appellee’s complaint precludes this argument.

With the affirmative defenses struck from the record, and the contract price, the credits allowable thereon, and the performance of the contract having been admitted, the trial court properly entered judgment on the pleadings since no justiciable issue was left pending. Crary v. Ashley & Beebe, 4 Ark. 203.

The trial court allowed the 12% penalty provided by statute, but held in abeyance the issue of a reasonable attorney’s fee; and at the time of the appeal to this court, the attorney’s fee question had not been disposed of. Later, the trial court granted a $10,000 attorney’s fee. Appellee has filed a motion in this court for an additional fee for handling the case on appeal. Appellants’ response to that motion states that the decree awarding the $10,000 fee has been appealed to this court. Therefore, a decision on the attorney’s fee question is reserved and will be determined later.

Affirmed.

Carleton Harris, C. J., disqualified and not participating.


text:
    Thurman v. Farmers Cooperative, Inc. Ark. Farmers Association v. Thurman.
    5-1213
    299 S. W. 2d 650
    Opinion delivered March 11, 1957.

      W. B. Putman and James B. Hale, for Thurman.

      Bex W. Perlcins and Davicl J. Burleson, for Farmers Cooperative, Inc.

      John B. Thompson, for Ark. Farmers Ass’n.
   J. Seaborn Holt, Associate Justice.

August 1, 1955, Farmers Cooperative, Inc. (appellee), sued Ellis Thurman to recover $2,061.75 alleged due for “goods, wares and merchandise” as set out in a “verified, itemized account, ’ ’ made a part of its complaint as ‘ ‘ Exhibit A ’ ’, that said itemized account set out the dates and amounts of the purchases and, all credits, and the balance due. Thurman answered denying the accuracy of the account, and denied owing appellee (plaintiff) in any amount. He also filed a cross complaint against appellee, (Farmers Cooperative, Inc.) and against Arkansas Farmers Association, in which he alleged that: “. . . On or about January 19,1954, the cross-defendants, Farmers Cooperative, Inc., and Arkansas Farmers Association sold and delivered to the cross-complainant 1,000 pullets for a laying flock, ■and that said cross-defendants . . . represented and guaranteed to the cross-complainant that the said 1,000 pullets were good, healthy chickens, properly inspected, disease free, and otherwise fit for the purpose for which.they were intended, ... In truth and in fact, said 1,000 pullets sold by the cross-defendants to the cross complainant were ■of an inferior quality, sick and diseased and totally unfit and unsatisfactory for the purpose for which they were intended, ...” that as a result of such diseased condition of said chickens he had been damaged in the amount of $3,750.00 and asked for judgment against Farmers Cooperative, Inc., and Arkansas Farmers Association for this amount. On the issues raised in the complaint and cross-complaint, trial was had July 10, 1956, and at the close of all the testimony the court instructed the jury to return a verdict in favor of cross-defendant, Farmers Cooperative, Inc., on the cross-complaint of Ellis Thurman. The jury returned a verdict in favor of Thurman against Arkansas Farmers Association for $2,061.75 and for appellee (Farmers Cooperative, Inc.) against Thurman in the amount of $2,061.75, and from this $2,061.75 judgment Thurman has appealed, and Arkansas Farmers Association appeals from the judgment of Thurman against it, for $2,061.75.

We first consider the judgment of Farmers Cooperative, Inc., against Thurman on the account for $2,061.75. For reversal Thurman relies on two points: “I. The plaintiff, Farmers Cooperative, Inc., did not prove an ■open account against Ellis Thurman. II. The plaintiff, Farmers Cooperative, Inc., did not prove that it was the real party in interest in the suit against Ellis Thurman on open account, or that it had any right to bring suit against him for the collection of said alleged account.”

As to point I, Thurman contends that the account, Exhibit A, was not proved and that it was not sufficiently itemized to furnish him information as to the various items that he purchased, and that were charged to him. We hold that the evidence was ample to show that he purchased the goods from Farmers Cooperative, Inc., as shown in the account, and that said account was properly verified. The record shows that Thurman did not ask at the trial that the account be itemized. He was content to file the following motion: “Comes Ellis Thurman, defendant in the above entitled cause, and moves the Court to require the plaintiff, Farmers Cooperative, Inc., to furnish to the defendant a copy of Exhibit “A” to plaintiff’s complaint.” This motion was granted by the court and appellee furnished Thurman a copy of Exhibit “A”. Obviously the opportunity was open to him on cross-examination of witnesses of Farmers Cooperative, Inc., to inquire as to what purchases made up the items in the account, and this he failed to do. "We hold that it is now too late to complain.

As to the second point, that there was a defect of parties, it appears that witness Doyle Moad, testified that he was manager of Farmers Cooperative, Inc., from the time it first began doing business, February 15, 1954, until February 15, 1955, and that the verified account, Exhibit “A”, represented purchases by Thurman from the Farmers Cooperative, Inc., covering the period from March 3, 1954, through February 11, 1955, and that there was due $2,061.75. We find no defect of parties in the circumstances. It also appears that Thurman made no objection as to any defect in parties, as to plaintiff, before the trial, the cause went to trial without objections, and in so doing, we hold that he has waived any right to object.

The Arkansas Farmers Association, for reversal of the judgment in favor of Thurman against it, contends that the trial court erred in refusing to grant it a severance, and in refusing to permit it to “ stand trial ’ ’ separate from Farmers Cooperative, Inc., and that there was a misjoinder of parties. Arkansas Farmers Association had been properly served with summons in Washington County. We hold that this contention is untenable. Thurman (who was sued by Farmers Cooperative, Inc.) in his cross-complaint sued both Farmers Cooperative, Inc., and Arkansas Farmers Association and alleged but one cause of action against them jointly, which was for breach of contract — warranty on account of the diseased condition of the chickens which he alleged they sold to him. Here Thurman, as indicated, was sued on a contract for certain feed sold to him by the Farmers Cooperative, Inc., and it was incumbent on him to set up in his cross-complaint any defenses (set offs or counter claims) that he might have, § 27-1121 Ark. Stats. 1947. As indicated, his cross-complaint did not allege a cause of action in tort but one on contract for breach of warranty. In the circumstances, we hold that the trial court did not abuse its discretion when, in an effort (as appears here) to avoid a multiplicity of suits, save unnecessary costs, and delay, it denied Arkansas Farmers Association a severance, § 27-1301 — 4 and 5, Ark. Stats. 1947.

The judgment is affirmed.