author: John A. Fogleman, Justice.

text:
    J. Q. FLOYD v. HOME INSURANCE COMPANY
    5-5614
    467 S. W. 2d 698
    Opinion delivered June 14, 1971

      W. G. Dinning, Jr., for appellant.

      Schieffler if Murray and Terral, Rawlings, Matthews ¿r Purtle, for appellee.
   John A. Fogleman, Justice.

This appeal is a satellite of Home Insurance Company v. Dearing, 248 Ark. 574, 452 S. W. 2d 852. It comes from a summary judgment for the recovery by appellee Home Insurance Company of $2,348.88 paid appellant Floyd as its insured on a policy of automobile insurance which included collision coverage. Appellant and Mrs. P. M. Dearing were involved in an automobile collision on May 14, 1967. As pointed out in Dearing, appellant’s suit against her for damages was concluded by an order of dismissal with prejudice entered on November 28, 1967.

It is admitted that appellee paid Floyd the above amount for collision damage on January 8, 1968, on the basis of a loan receipt and proof of loss executed by Floyd. The loan receipt recites that appellee made the payment as a loan, payable only to the extent of Floyd’s net recovery from anyone on account of the collision. In the receipt, Floyd pledged his recovery as security for repayment and agreed to prosecute suit for said loss with due diligence, at the expense and under the exclusive direction and control of appellee. In the proof of loss, Floyd made the following assertions:

Nothing has been done by, or with, the privity or consent of the insured or this affiant to violate the terms and conditions of this policy or render it void . . . No attempt has been made to deceive the insurer in any manner as to the cause and the extent of said loss or otherwise.

It is also admitted that before making said payment the supervising adjuster of appellee addressed a letter dated December 18, 1967, to appellant’s attorney acknowledging receipt of all copies of the- pleadings in appellant’s case against Mrs. Dearing, forwarded by the local representative of the General Adjustment Bureau which had represented appellee in the investigation and processing of matters pertaining to the collision. This letter contained the following paragraph:

Before making payment on this claim, we would like to have your assurance that our subrogation claim has been protected in the settlement of this claim. We note that you did delete the property damage prayer from the pleadings but would just like to have your assurance that our claim will be protected.

Reply was made by appellant’s attorney on January 2, 1968, as follows:

I have furnished you copies of the proceedings, and the Farm Bureau Insurance Company and Mr. Jimason Daggett of Marianna, its attorney, are completely advised that the settlement made with them covered personal injuries only.

On August 20, 1968, appellant filed the suit against Mrs. Dearing which is the action that culminated as Home Insurance Company v. Dearing, supra. When Mrs. Dearing entered her plea of res judicata based on the order of dismissal, appellee filed an amendment to its complaint making Floyd a party to the action. In this amendment appellee alleged that, if defense of res judicata were sustained, it would then be entitled to recover the amount it paid to appellant Floyd for breach of his proof of loss and loan receipt upon the basis of which he was paid. To this pleading Floyd filed an answer and cross-complaint, alleging that he included the property damage claim in his suit against Mrs. Dearing at the insistence of, and with the knowledge of, the adjustment bureau, with the understanding that, if he did not recover from Mrs. Dearing, recovery would be had under his policy with appellee. His cross-complaint was based upon his assertion that appellee had breached its contract of insurance by filing suit against him.

After our decision in Dearing, appellee moved for summary judgment upon the basis of the correspondence between its supervising adjuster and appellant’s attorney. Appellant responded and filed the affidavit of his attorney. This affiant stated that he was in constant contact with the adjustment bureau and its Helena manager whose office adjoined the attorney’s, that this manager investigated the accident, interviewed witnesses and delivered all information gathered to the affiant for the purpose of attempting to collect the vehicle damage from Mrs. Dearing, and obtained a replacement vehicle for appellant at a discount. He further stated that there was a complete understanding with the adjustment bureau manager that Floyd would withhold his claim under appellee’s insurance policy until the settlement of the Dearing litigation but that appellant received nothing from Mrs. Dearing or her insurance carrier for his vehicle damage by reason of the amendment to the complaint and the dismissal of the action. He also deposed that the loan receipt was filed by Floyd in his presence and in the presence of the adjustment bureau manager with full knowledge of the facts set out in the affidavit.

We have clearly recognized that a cause of action in tort may be split upon settlement with the tort-feasor by specific agreement of the parties. St. Paul Fire and Marine Insurance Company v. Wood, 242 Ark. 879, 416 S. W. 2d 322. There is no suggestion that there was any agreement between Floyd and Mrs. Dearing to this effect, as we pointed out in Dearing. We have also said that no act of an insured releasing a tort-feasor from liability could defeat the insurer’s rights when it was done without knowledge or consent of the insurer and with the tort-feasor’s full knowledge of the insurer’s right of subrogation. Sentry Ins. Co. v. Stuart, 246 Ark. 680, 439 S. W. 2d 797. In that case, we held that a settlement made by the tort-feasor under those circumstances constituted consent to the splitting of an otherwise indivisible cause of action. In Dearing we pointed out that the appellee had no subrogation rights in this case prior to the recovery by Floyd from Mrs. Dearing or her insurance carrier and that there had been no court judgment or even any suit filed in Sentry.

The only reasonable inference to be drawn from the inquiry by appellant’s supervising adjuster is that the insurance company was aware of our holdings that settlement could be accomplished in a manner which split a cause of action in tort and which would protect the rights of appellee. Appellee’s response through his attorney did not put the company on notice that a dismissal with prejudice of the Floyd v. Dearing case had been entered, and there is nothing else in the record which would have indicated to either the company or the adjustment bureau employed by it that this was the manner in which the case was being terminated. Appellee’s statement that the agent of the adjustment bureau had full knowledge of all the facts set out in his affidavit falls far short of controverting the only reasonable inference to be drawn from appellant’s statements in the proof of loss and loan receipt and the cited correspondence, i. e., that appellant assured appellee that the Floyd-Dearing litigation had been settled without impairment of the right of recovery of the vehicle damage from Mrs. Dearing. As we said in Dearing, the order of dismissal constituted a complete defense against this recovery under the principle applied in Motors Ins. Corp. v. Coker, 218 Ark. 653, 238 S. W. 2d 491, and nothing was done which amounted to a splitting of the cause of action. Appellant cannot be heard to say that he was not aware of the effect of this order, as the rule of law has been well established in this state. Since the admissions upon which appellee relied for its motion showed a prima facie right to recover, and appellee’s controverting affidavit did not set forth specific facts showing that there was a genuine fact issue for trial, we affirm the summary judgment.

The judgment might also have been affirmed for appellant’s failure to abstract the subrogation agreement and loan receipt in compliance with Rule 9, had the appellee not cured the defect by abstracting both. Wells v. Smith, 198 Ark. 476, 129 S. W. 2d 251; Gardner v. Farmers Electric Co-op. Corp., 232 Ark. 435, 338 S. W. 2d 206; DeSoto Hotel & Baths v. Luth, 239 Ark. 424, 389 S. W. 2d 897.

Harris, C. J., dissents.


source: Caselaw Access Project

license: Public Domain

text:
    Tommy LYONS v. STATE of Arkansas
    5598
    467 S. W. 2d 701
    Opinion delivered June 14, 1971

      Odell C. Carter, for appellant.

      Ray Thornton, Attorney General; Milton R. Lueken, Asst. Atty. Gen., for appellee.
   John A. Fogleman, Justice.

Appellant was convicted of escape from the Arkansas State Penitentiary. His oral demurrer to the information, based upon the contention that the venue was not in Lincoln County, made after a jury was empaneled, but before any evidence was heard, was overruled. His attorney argued that, since he had been granted a five-day furlough to go to Pulaski County, the venue of any alleged crime of escape would be in that county. The attorney also asked that the case be transferred to Pulaski County, but this motion was denied.

The trial proceeded and the state’s witnesses, all officials of the Arkansas .Department of Correction, testified that: under the terms of his furlough, Lyons was supposed to go directly to Pulaski County; appellant did not return from his furlough on April 1, 1970, when he was scheduled to do so; none of them knew of his being in Lincoln County on that date; he was apprehended in Missouri on November 20, 1970.

Although appellant’s attorney had stated during the in camera hearing on his original demurrer that the evidence would show that appellant reached Pulaski County, and left from that county, rather than Lincoln County, no witness testified that Lyons ever reached the county to which he was authorized to go. After the state rested, appellant renewed his demurrer and rested. He had also renewed his demurrer after the testimony of the first witness called by the state.

He asserts two points for reversal, but both are based upon the same argument, i.e., that the proper venue was in Pulaski County, and that the state failed to prove venue in Lincoln County, relying upon Thetstone v. State, 32 Ark. 179, and Jenks v. State, 63 Ark. 312, 39 S. W. 361. The sufficiency of the evidence to otherwise show the crime of escape is not questioned.

Both of the above cases were decided long before the adoption of Initiated Act No. 3 in 1936. One section of that act [Ark. Stat. Ann. § 43-1426 (Repl. 1964)] provides:

It shall be presumed upon trial that the offense charged in the indictment was committed within the jurisdiction of the court and the court may pronounce the proper judgment accordingly, unless the evidence affirmatively shows otherwise.

In considering this section of the statute in Meador v. State, 201 Ark. 1083, 148 S. W. 2d 653, we stated that an allegation in an information filed in Grant County that a crime was committed in Hot Spring County would have been a fatal variance were it not for this section, stating that it was the obvious purpose of this act to prevent miscarriages of justice for such reasons. We also stated that the evidence did not affirmatively show that the larceny charge was committed outside the jurisdiction of the trial court.

In Wise v. State, 204 Ark. 743, 164 S. W. 2d 896, we held against a similar contention in a case where the charge was carnal abuse, because there was no evidence showing that the offense, if committed at all, was at another place in another jurisdiction. In Stewart v. State, 214 Ark. 497, 216 S. W. 2d 873, we held that the contention that the state failed to establish the venue was untenable by reason of the statutory presumption, because we found no affirmative evidence to show that the crime of larceny was not committed in the district and county alleged in the information. In Cecil v. State, 234 Ark. 129, 350 S. W. 2d 614, we held that the trial court correctly refused to instruct the jury that the state was required to prove the venue, in reliance on this statutory provision.

We find nothing in our statute which offends Article 2, Section 10, of the Arkansas Constitution providing that the accused is entitled to trial by impartial jury of the county in which the crime shall have been committed. There is no evidence that the crime was committed in any place other than Lincoln County, or that Lyons ever reached Pulaski County.

Because there was no affirmative evidence to show that the offense was committed outside Lincoln County, we affirm the judgment.

Byrd, J., dissents.


author: J. Fred Jones, Justice.

text:
    Melba Ann JACKSON v. F. B. SMITH
    5-5540
    467 S. W. 2d 704
    Opinion delivered June 14, 1971

      House, Holmes if Jewell, for appellant.

      Moore if Logan; By: Roger V. Logan, Jr., for appellee.
   J. Fred Jones, Justice.

Melba Ann Jackson and F. B. Smith are the parents of a nine year old son, Tracy Lynn Smith. In September, 1967, they were divorced in the state of Texas and the custody of the minor child was awarded to the mother with the rights of visitation in the father. The mother married Mr. Jackson in 1968 and in 1970 they moved to Fairfield Bay in Van Burén County, Arkansas, where both Mr- and Mrs. Jackson are employed. Mr. Smith also remarried and on June 1, 1970, he filed a petition in the Van Burén County Chancery Court for a change in custody of the child. The chancellor awarded a change in custody vesting the exclusive custody of said child in the father, F. B. Smith, subject to the rights of the mother to have the child visit her during Christmas school vacation each year, and from the second Sunday in June to the second Sunday of August of each year, with child support payments to continue at $20 per week during the period the child is with his mother.

On appeal to this court Mrs. Jackson relies on the following points for reversal:

“The court erred in talking with the child privately in chambers.
The court erred in granting permanent custody of the nine year old son to the father.”

It is well settled that in child custody cases between divorced parents, the courts are primarily concerned with the welfare of the child. Stephenson v. Stephenson, 237 Ark. 724, 375 S. W. 2d 659. While chancery cases are tried de novo on appeal, (Fye v. Tubbs, 240 Ark. 634, 401 S. W. 2d 752) the rule is well established that a decree of the chancery court will not be disturbed on appeal unless it is against the preponderance of the evidence. Lynn v. Quillen, 178 Ark. 1150, 13 S. W. 2d 624; Henry v. Irby, 175 Ark. 614, 1 S. W. 2d 49; Bornhoft v. Thompson, 237 Ark. 256, 372 S. W. 2d 616. This rule is especially applicable in child custody cases where the chancellor is in a position to observe the parties as well as to hear their testimony. Wilson v. Wilson, 228 Ark. 789 310 S. W. 2d 500; Cheek v. Cheek, 232 Ark. 1, 334 S. W. 2d 669.

As to the points relied on, it seems to be universally held that an interview with children in child custody cases is permissible with the consent or acquiescence of the parties. See 24 Am. Jur., Divorce and Separation, § 794. The child involved in the case at bar was a nine year old boy, and when interviewed by the chancellor, with the consent or acquiescence of the parents, we are unwilling to say that his attitude and wishes should not have been considered by the chancellor, along with the other evidence in the case, in arriving at his decision as to the child’s best welfare and resulting in the decree rendered. The case of Grumlin v. Gray, et ux, 246 Ark. 622, 439 S. W. 2d 290, cited and relied on by Mrs. Jackson in her brief, is distinguishable from the case at bar. In Grumlin the chancellor not only talked with the children in chambers, but he reviewed a welfare department report which was not in the record. In that case we expressed our handicap in having no information about the reasoning that led the chancellor to deny Mrs. Grumlin’s petition, but we are not so handicapped in the case at bar.

In the case at bar the chancellor set out in his decree that there had been substantial changes in the circumstances of the parties growing out of the remarriage of both parties since the entry of the decree in Texas. He based his decree on the “oral evidence adduced in court, both parties having agreed that the court should be allowed to talk privately with Tracy Lynn Smith.” The chancellor is sustained by the record as to the agreement that he should talk with the child. The record reveals that the solicitor for Mr. Smith requested the chancellor to talk with the child privately and the chancellor stated as follows: “The court would advise or visit with the boy only by the consent of both parties.” Whereupon the solicitor for Mrs. Jackson stated: “Your Honor, my client has the child downstairs and for the purpose here if the court wanted to confer with him.”

Both Mr. Smith and his present wife testified in the case. Mr. Smith testified as to difficulty he had experienced in exercising his visitation rights under the Texas decree, and as usual, in cases of this nature, there is some conflict in the testimony as to the reason for the difficulty experienced by Smith. The mother of the child had been married twice since she and Smith were divorced, and she had been married to Jackson for approximately two years. As to a part of Smith’s difficulty, he testified as follows:

“Q. Since she has been married to this last husband have you ever gone to their home and been ordered away?
A. Yes.
Q. Have you ever been ordered away with a gun?
A. I was told the next time I come there I would be blowed off of the front porch, in those words.
Q. That is quote of what was said?
A. Yes.”

Mr. Jackson did not testify in the case and the above testimony of Smith was not contradicted. Mr. Smith’s testimony was also to the effect that the mother drinks intoxicants in the presence of the child and is neglectful of him. The evidence also indicates however, that a part of the difficulty was occasioned by Mr. Smith’s objection to the way the child’s mother was spending the $20 per week child support he was sending to her. Mr. Smith also testified that the child sustained an injury to his arm from the discharge of a sawed-off shotgun loaded with .00 buckshot kept in a a closet of his mother’s home.

Mrs. Smith testified that she was anxious to have the child in their home in Texas; that neither she nor Mr. Smith drink intoxicants; that her marriage to Mr. Smith was her first marriage and that they have no children of their own. She testified that her husband had been married to the child’s mother twice; that she has come to love the child very much and is anxious to assist in rearing him.

Mrs. Jackson testified that she is presently employed at Fairfield Bay and was also employed in Fort Worth, Texas, before coming to Arkansas. She testified that she attended church with the child in Texas, but has bem unable to do so since coming to Arkansas because of work habits; she says her husband works seven days a week and that she works six and sometimes seven days a week. As to the shotgun accident, Mrs. Jackson testified that she purchased a double-barreled modified (sawed-off) shotgun for protection when she was in Fort Worth; that she usually kept the gun locked up but that she and her husband had been awakened two previous nights before the accident by their dog barking in the backyard,

“and we could tell that someone was in the alley way and my husband got up and went and got the gun and went outside, and naturally, he couldn’t find anything and he brought the gun back and he locked it back up the first night and the second night he didn’t lock it up and that is when the accident happened.”

Under questioning by the court, Mrs. Jackson testified that the child comes to a playground near the office where she works, and that she is with him off and on during the day. As already stated, Mrs. Smith testified that she is willing and anxious to have the child in their home. Mrs. Jackson testified that she has been married to her present husband for approximately two years and, as already stated, Mr. Jackson did not testify at all in this case.

We are of the opinion that the chancellor’s decree is not against the preponderance of the evidence and that it should be affirmed.

The decree is affirmed.


author: Conley Byrd, Justice. John A. Fogleman, Justice,

text:
    MODERN AMERICAN MORTGAGE CORP. v. William R. NELSON et ux
    5-5592
    469 S. W. 2d 124
    Opinion delivered June 14, 1971
    [Rehearing denied August 9, 1971.]

      Wright, Lindsey <h Jennings; By: Isaac A. Scott, Jr., for appellant.

      Shackleford & Shackleford, for appellees.
   Conley Byrd, Justice.

The trial court cancelled a deed from appellees William R. and Doris Nelson to Jimmy Ray Jones and voided a mortgage from Jones to appellant Modern American Mortgage Corporation. For reversal, appellant contends:

“I. The evidence failed to establish fraud or misrepresentation in the procurement of the warranty deed.
II. The failure of either Mr. or Mrs. Nelson to read the warranty deed estops them from denying the conveyance.
III. Modern American Mortgage Corporation is a bona fide purchaser of a mortgage without notice of defects, and the claim of fraud cannot be asserted against it.”

The undisputed facts show that for some time prior to June 20, 1969, the Nelsons were in possession of and living on a small plot of land on Kenova Road in Smackover, Arkansas. After negotiations with R. W. Miller, Jr., agent of Jimmy Ray Jones d/b/a Imperial Builders Inc., the Nelsons on June 20, 1969, entered into a contract for construction of a new hpuse on the same plot. The printed contract referred to Imperial Builders as “Contractor” and the Nelsons as “Purchasers.” After stating that the contractor was to provide all labor, materials and things necessary for the proper construction, the contract recited:

“In consideration of the performance of the Contract, the Purchasers agree to pay the Contractor in current funds as compensation for his services hereunder the sum of $10,300.00 (for house only) to be paid on closing of FHA insured loan of $10,300.00. Buyer to furnish lot valued at $600.00. Builder to pay all closing cost. It is further agreed that said Purchasers will execute a note in the sum of $10,300.00 to Imperial Builders Inc., and also execute a mortgage upon said property to Imperial Builders Inc. as security herein, said property to be mortgaged is described as follows: (Legal description sanje as above.) It is further agreed that the note is to be returned and said mortgage removed and released upon closing of the loan and full payment thereof in the sum of $10,300.00 to Imperial Builders Inc. It is further agreed that this Contract is contingent upon the approval of Purchasers’ loan from Modern American Mortgage Co. and Purchasers providing satisfactory proof of title to said land to Imperial Builders Inc.”

Imperial Builders through R. W. Miller, Jr., again contacted the Nelsons sometime in July and had them execute another contract explaining that either the description or the wording was not right.

Thereafter Imperial Builders (Jones) through appellant obtained an FHA loan commitment on August 26, 1969, to insure a loan by appellant to the Nelsons when Imperial Builders completed the house.

On September 15, 1969, Jones and his wife executed a construction money mortgage on the same plot of ground to appellant. Appellant in making the loan relied upon a title insurance binder showing Jones to be the owner of the property. Neither appellant nor any of its agents inspected the property prior to the mortgage. Based upon FHA appraisals, appellant advanced a total of $6,310.00 to Jones.

Before the house was completed, Jones d/b/a Imperial Builders went bankrupt. After numerous labor and materialmen’s liens had been filed, Mrs. Nelson contacted appellant and for the first time learned that she and her husband had conveyed the land on which they lived to Jones by a deed dated September 4, 1969.

Mrs. Nelson testified that they had never built a house before this one; that after they arrived at the terms of the June 20th contract, Miller again contacted them about the July contract; that the house was commenced in the latter part of August; and that Miller and Jones again contacted them about September 4th. At that time Miller had two or three papers clipped together—one of which was shorter than the other. At the same meeting she and her husband were to pick out the paneling. At this meeting Miller told them (the Nelsons) these additional papers had to be signed to get on with the building. Admittedly, Mrs. Nelson and her husband signed the papers without reading them. She concluded that one of these papers was the deed dated September 4th bearing her signature. She also testified that she would not have signed the deed had she known that it was a deed.

Mr. Nelson’s testimony is similar to Mrs. Nelson’s except that he thought that at one time he signed an application for an FHA commitment and also an authorization for a credit check.

John Kooistra, senior vice president of appellant, testified that a copy of the June 20th contract was in appellant’s files; that appellant obtained the FHA commitment at the instance of Imperial Builders for the loan to be made to the Nelsons; that in making the construction money mortgage, appellant did not check to see who was in possession of the premises but relied solely upon the title insurance binder as to the fee title; and that disbursements had been made in the total amount of $6,510.00 based upon the FHA inspections. Mr. Kooistra stated that before appellant would make a construction money mortgage to a builder, appellant required a take-out letter from a lender and a copy of the builder’s contract.

Jimmy Ray Jones denied that he was present when any documents were signed by the Nelsons. He admitted that Miller had been his salesman and that he had been unable to reach Miller.

POINT I. Appellant argues that this was a normal business transaction and that the circumstances of the execution of the warranty deed as related by the Nelsons cannot be construed as an attempt on the part of the builder to deceive. We disagree. It appears from the testimony that the Nelsons were ignorant of the papers necessary to secure the FHA commitments required to comply with the contract and that these details were gratuitously undertaken by the builder who apparently had had some experience in the matter. The representation that the execution of the papers was necessary to get on with the building was a misrepresentation, for by the express terms of the bargained contract a conveyance of the premises to the builder was not necessary to get on with the building.

POINT II. In arguing that the Nelsons are estopped to deny the conveyance to Jones, appellant relies upon Upton v. Tribilcock, 91 U. S. 45 (1875) and Stewart v, Fleming, 105 Ark. 37, 150 S. W. 128 (1912).

In Upton it was pointed out that “a contractor must stand by the words of his contract, and, if he will not read what he signs, he alone is responsible for his omission.” The same rule was applied in Stewart v. Fleming, supra, but in doing so the court pointed out that there was no misrepresentation as to any matter of inducement to the making of the lease, which, from the relative position of the parties, the one could be presumed to contract upon the faith and trust reposed in the other party. However, in the first appeal of Stewart v. Fleming, 96 Ark. 371 (1910), the applicable law was stated in this manner:

“ ‘It is true that when the means of information are open to both parties alike, so that with ordinary prudence and vigilance each may be informed of the facts and rely upon his own judgment in regard to the thing to be performed or the subject-matter of the contract, if either fails to avail himself of his opportunities, he will not be heard to say he has been deceived. * * * But when the representation is made of a fact that has nothing to do with opinion, and is peculiarly within the knowledge of the person making it, the one receiving it has the absolute right to rely upon its truthfulness, though the means of ascertaining its falsity were fully open to him. It does not lie in the mouth of the declarant to say it was folly in the other party to believe him.’ ”

Thus it can be seen from the record that Jones was an experienced builder. The Nelsons who were building their first house had no knowledge of the papers necessary to be signed to get on with the construction. While it may have been folly for the Nelsons to sign without reading whatever Jones or his agent stuck in front of them, we cannot agree that as between them and Jones, Jones is in a position to argue that the Nelsons are estopped to say that they believed the representations made by Jones’ agent. Of course appellant as assignee of Jones stands in no better position than Jones, unless it stands in the position of a bona fide purchaser for value without notice.

POINT III. The question of whether a subsequent purchaser or mortgagee can be a purchaser for value and without notice as against a grantor continuing in possession after the execution of a conveyance has been before us a number of times. See Turman v. Bell, 54 Ark. 273 (1891); Morgan v. McCuin, 96 Ark. 512, 132 S. W. 459 (1910); American Bldg. & Loan Assn. v. Warren, 101 Ark. 163, 141 S. W. 765 (1911); and Temple v. Tobias, 186 Ark. 851, 56 S. W. 2d 585 (1933).

In American Bldg. & Loan Assn. v. Warren, supra, the applicable rule was stated:

“Ordinarily, possession by a person under a contract of purchase, though unrecorded, is notice of his equitable rights and interests in the property. Actual possession is evidence of some title in the possessor, and puts the subsequent purchaser or mortgagee on notice as to the title which the occupant holds or claims in the property. Generally, actual, visible and exclusive possession is notice to the world of the title and interest of the possessor in the property, and it is incumbent upon the subsequent purchaser or mortgagee to make diligent inquiry to learn the nature of the interest and claim of such possessor; and if he does not do so, notice thereof will be imputed to him. (Citing cases.)
“But it is urged that this rule does not obtain in cases where the grantor continues in possession of the property at the time of the grant and after the execution of the conveyance. It is urged that in such cases the law presumes that the grantor holds in subordination to the tide which he has conveyed, and not in opposition to it; and that third persons dealing with property may presume that the possession of the grantor is only by sufferance of the grantee.”

Here appellant had obtained an FHA commitment insuring a loan to be made by appellant to the Nelsons upon completion of the building. Appellant, as a prerequisite to making the construction loan, required not only the FHA commitment but also a copy of the builder’s contract with the Nelsons. The contract showed that the Nelsons owned the lot upon which the house was to be built. Furthermore appellant relied upon the FHA inspections on the commitment to the Nelsons to advance the construction money to Jones. It would be illogical to say that appellant under the circumstances could presume that the possession of the Nelsons was at the sufferance of Jones. Since appellant cannot come within the exception to the rule that possession is notice to the world, it follows that appellant was not a purchaser for value without notice as against the Nelsons.

For the reasons herein stated, the decree is affirmed.

George Rose Smith and Fogleman, JJ., dissent.

John A. Fogleman, Justice,

dissenting. I cannot agree with the decree canceling Modern American Mortgage Company’s mortgage and its affirmance here. If ever there was a case where the principle that, as between two innocent parties, the one whose negligence made a loss possible should bear it and be estopped to set up his prior right against the party without fault, this is one. See Turman v. Bell, 54 Ark. 273, 15 S. W. 886, 26 Am. St. R. 35. This rule applies in favor of a subsequent purchaser for value even where the maker of a deed carelessly executes it in reliance upon the false representations of a person in whom he placed confidence and trust. Davidson v. Davidson, 42 Ark. 362.

Bypassing the extremely doubtful proposition that appellees could possibly contend that their failure to read the deed they signed, and which they admit they had every opportunity to read, was justified by any express or implied representation by persons in whom the Nelsons had no specific reason to place trust and confidence, this record falls far short of showing that appellant was not a bona fide purchaser, as mortgagee, without notice, actual or constructive, of defects in the title of Jimmy Ray Jones or unknown equities in the Nelsons and the claim of fraud should be unavailing against it.

The only contract of which Modern American can be charged with either notice or knowledge is that of June 20, 1969. In that contract, the Nelsons were called “purchasers.” That contract specified that the “buyer” was to furnish a lot valued at $600. The completed house was to be mortgaged to appellant when completed to secure a loan to be insured by the Federal Housing Authority pursuant to its commitment issued to appellant. In making the construction loan, appellant relied upon the record tide held by Jimmy Ray Jones d/b/a Imperial Builders and placed in him by the Nelsons, intentionally or negligently. Mr. Kooistra testified that, in every case in which there is an FHA commitment and the builder has title to the property, there is an assumption that the property will be conveyed to the person to whom the commitment runs upon termination of construction. He also said that the FHA does not insure construction loans on single family units. This testimony was undisputed. The construction by Jones was commenced in August and ceased in December. There were several inspections by the FHA upon the basis of which appellant made advances on the construction loan. The porch of the house in which the Nelsons lived was torn off to make room for the new one. The Nelsons themselves constructed a carport on the new house.

There can be no doubt that appellant gave valuable consideration for the mortgage executed by Jones. Consequently, the burden was upon the Nelsons to show that Modern American had actual or constructive notice of their rights and that appellant was not acting in good faith. Ellis v. Nickle, 193 Ark. 657, 101 S. W. 2d 958; Scott v. Carnes, 183 Ark. 650, 37 S. W. 2d 876; Story v. Grayson, 208 Ark. 1029, 185 S. W. 2d 287; Smith v. Olin Industries, 224 Ark. 606, 275 S. W. 2d 439. Appellees do not contend that there was actual notice or that Modern American did not act in good faith. Good faith is presumed unless notice to the alleged bona fide purchaser is shown. Ellis v. Nickle, supra. Unless it was shown that the fact that the Nelsons were residing on the tract on which the house was being built constituted constructive notice that they claimed the property adversely to Jones, the mortgage must be held valid.

Before possession can constitute constructive notice, the occupancy must be apparently exclusive, otherwise possession is presumed to follow the title and those dealing with the owner of the record title are warranted in treating him as the exclusive owner. Walden v. Williams, 128 Ark. 5, 193 S. W. 71. Possession cannot be exclusive, when it might be referable to possession of another. Alphin v. Blackmon, 180 Ark. 260, 21 S. W. 2d 426. There can be no constructive notice where occupancy is joint or referable to the record title or in connection with the occupancy of another. Walden v. Williams, supra; Ellis v. Nickle, supra; Story v. Grayson, supra. If the possession of the claimant is referable to the possession of the holder of the record title, it is not such as would require a subsequent purchaser to make inquiry as to the nature of the possession or any hidden equities which might exist in favor of the claimant. Ellis v. Nickle, supra; Story v. Grayson, supra. The claimant’s possession must be adverse, exclusive, unequivocal and inconsistent with the claims of any other person in order to constitute constructive notice. If it is to put a purchaser on his guard, it must be sufficiently distinct and unequivocal that it is not likely to be misunderstood or misconstrued. Scott v. Carnes, 183 Ark. 650, 37 S. W. 2d 876.

Possession of a grantor after execution of a deed is deemed to be subordinate to the rights of his grantee, if not long continued. Turman v. Bell, 54 Ark. 273, 15 S. W. 886, 26 Am. St. R. 35. If the possession of the grantor is continued but a short time, it may reasonably be referred to the sufferance of the grantee. Turman v. Bell, supra; Morgan v. McCuin, 96 Ark. 512, 132 S. W. 459.

In this case, the deed to Jones was executed by the Nelsons on September 4. The mortgage to Modern American was executed on September 15, 1969. Construction was underway. In view of the designation of the Nelsons as “purchasers” in the contract with Jones, the obligation of the Nelsons to furnish the lot upon which the house was built, the short lapse of time between the execution of the deed and appellant’s acceptance of the mortgage, and the natural association of their continued occupancy of the old dwelling house on the property with the construction contract and the occupancy by Jones, the holder of the record title by deed of the Nelsons, it seems to me that appellant was not put to any inquiry more than that which it made. The possession of the Nelsons was equivocal and subject to misunderstanding and misconstruction. It was certainly not so inconsistent with the Jones title, under the circumstances, as to put appellant on guard. It was certainly not exclusive.

I would reverse the decree and direct a foreclosure of the mortgage.

I am authorized to state that Justice George Rose Smith joins in this dissent.


author: Conley Byrd, Justice.

text:
    H. C. AHRENS, Jr. v. Monnie Ruth HARRIS et al
    5-5594
    468 S. W. 2d 236
    Opinion delivered June 14, 1971

      Clark, Clark & Clark, for appellant.

      Robert W. Henry, for appellees.
   Conley Byrd, Justice.

Appellant H. C. Ahrens, Jr., the owner of lands in sections 30, 31 and 32, T. 6 N., R. 12 W., brought this action against appellees Monnie Ruth Harris and Jim and Peggy Harris, husband and wife, to lay off a private road pursuant to Ark. Stat. Ann. § 76-110 (Repl. 1957), across a seven acre tract owned by Jim Harris, subject to the homestead and dower rights of his mother. The county court denied appellant’s application for lack of necessity. A circuit court jury also found adversely to appellant on the issue of necessity. For reversal appellant here contends that the trial court erred in permitting the introduction of evidence showing a unity of use between the 7 acre tract and a 172 acre adjoining tract owned only by Jim Harris and his wife Peggy, and that there was no substantial evidence to support the verdict.

Appellant purchased his property in 1959. At that time the access across Palarm Creek to his property from Highway No. 36 was by way of a low-water bridge which is still in existence. There is also a public mail route road along the western half of his south property line. In 1959 there was a three-way trade of some property between Ahrens and Jim Harris’ father and grandfather whereby appellant acquired some right-of-way out to Highway No. 36. In 1961 the Highway No. 36 bridge across Palarm Creek washed out. When the bridge was rebuilt the highway dump was raised approximately 3 feet and the bridge reconstructed so as to permit a greater flow of water.

Mr. Ahrens testified about the difficulty in crossing the low-water bridge following heavy rains. With reference to the access available along the public mail road along the western part of his southern boundary, he stated that to build a private road from his house back to where the public road leaves his property would require the building of a road approximately three-quarters of a mile or more. There being a steep grade in the area, he rejected this possibility because of the cost of the initial construction of the road plus maintenance problems. Another alternative would be to move down Palarm Creek a short distance from the low-water bridge and construct an all-weather bridge at an estimated cost of $11,000.00. The third alternate, which he asked the court to lay out, would be to cross 600 feet of the seven acre tract to intersect Highway No. 36 at a point north of where the highway crosses Palarm Creek. This latter alternative would only require a bridge across the West-fork of Palarm Creek and according to appellant’s estimate would cost around $4,000.00 plus the cost for acquisition of the easement. On cross-examination appellant testified that there was no roadway on the south and west portion of his property which is passable with a vehicle but admitted that there had been a logging road in that area.

Monnie Ruth Harris testified about the title to the 7 acre tract and the title to the 172 acre tract owned by her son and his wife, both of which are used in a partnership cattle operation. All of the improvements relating to the cattle operation, consisting of a barn, silage pits and feeders, are located on the 7 acre tract. According to her, appellant’s proposed route across her property would create great inconveience to their cattle operation and also possible damage to the silage pit. In addition she pointed out that there was a mail route that touched appellant’s property on the west which is frequently used. She testified that when Willis Smith, one of the appellant’s tenants, lived on the property, he used the so-called logroad to get in and out of the property when water would not permit crossing the low-water bridge to Highway No. 36.

Jim Harris testified about the difficulty that appellant’s proposed road would have with their cattle operation and also that it would run water into their silage pits. He too testified that there was a road across appellant’s farm going toward the south and that appellant’s tenant Willis Smith had used it when Palarm Creek was up.

Both parties recognize that the applicable law is well stated in Pippin v. May, 78 Ark. 18, 93 S. W. 64 (1906), wherein it is said:

“In determining whether such a road is necessary, the court must, of course, take into consideration not only the convenience and benefit it will be to the limited number of people it serves, but the injury and inconvenience it will occasion the defendant through whose place it is proposed to extend. After considering all these matters, it is for the court to determine whether the road is, within the meaning of the law, necessary or not.”

From a review of the record we find that there is substantial evidence to support the jury’s finding that there was no necessity for a private roadway on the property of the appellees.

Furthermore, we think that the evidence with reference to the inconvenience that the roadway would cause the appellees was properly admissible. The record title to the 7 acre tract stood in the name of Jim Harris subject to the homestead and dower rights of his mother, Monnie Ruth Harris. The record also shows that this 7 acre tract was used through a partnership arrangement between Jim Harris and his mother with an additional 172 acre tract owned by Jim Harris and his wife Peggy. Of course the issue here was the inconvenience that it would cause the landowners and not necessarily the unity of use for condemnation purposes. However, the authorities do no necessarily support appellant’s contention that such evidence is not admissible for condemnation purposes. See I. I. & I. R. R. Company v. Conness, 184 Ill. 178, 56 N. E. 402 (1900).

Affirmed.


author: Frank Holt, Justice.

text:
    Claudia H. AHRENS et al v. William T. McNUTT, Individually and as best friend of William Michael McNutt et al
    5-5604
    467 S. W. 2d 721
    Opinion delivered June 14, 1971

      Botts ir Jenkins, for appellants.

      Allen, Young ér Bogará, for appellees.
   Frank Holt, Justice.

This is an appeal from a decree holding that the will of Claude L. McNutt gave Inez H. McNutt, his second wife, a life estate only in a parcel of real property and that upon her death, appellee William T. McNutt (the testator’s son and her stepson) became vested with the title to be held in trust for his children, the other appellees. The will in pertinent part provides:

“[I] BEQUEATH to my wife and companion, Inex[z] H. McNutt, for her, love, affection and happy companionship, all of my personal property, including all the cash on hand and in the bank, also all notes, bonds, corporation stocks, Building and Loan savings, also any and all personal property not listed herein.
I hereby further DEVISE, UNTO MY WIFE Inex[z] H. McNutt, all the real estate, including all real estate notes and mortgages, held in my name at the time of my demise, at which time this document shall become effective.
CODICIL;
Upon the demise of the Testator, Claude L. McNutt and the demise of the Legatee, Inez H. McNutt, all property, both personal and real, remaining in the estate of the Testator, Claude L. McNutt, I do hereby Devise and Bequeath to my son William T. Mc-Nutt, to be used by him, at his own discretion, for the education of his Children. The said William T. McNutt, shall serve as Executor of the. Estate and shall serve without bond.
Read considered and signed in the presence of two witnesses, on the 17 day of Feb. 1961.”

About five years later an “Appendix” to this will provided that his wife would receive a fee simple title to his equity and interest in certain lands situated in another county.

Following the death of the testator in 1968, the will was duly probated and the estate distributed to Inez Mc-Nutt. The estate was closed on September 29, 1969. On September 25, 1969, Inez McNutt conveyed the house and lots by quitclaim deed to appellants (Claudia H. Ahrens, Elloise H. Jones and Ralph C. Haller), who are her nieces and nephew. Inez died on December 2, 1969 and thereupon appellees filed a petition asking the court to construe the will and asserting that by the terms of the will Mrs. McNutt was devised only a life estate, and that appellees now own the property as trustee and remaindermen. No testimony was taken and the case was submitted to the chancellor upon oral argument and memorandum briefs, together with the stipulations that the only property involved was a house and two lots, and that the deed executed by Inez McNutt and placed of record is true and correct.

For reversal of the decree which upheld appellees’ contention, appellants assert that the will of Claude L. McNutt, on its face, showed no intention to limit the fee simple estate granted to Inez McNutt therein; that the wording of the so-called codicil provision of the will was not sufficient to limit the fee simple devise to Inez H. McNutt. In support of their contention, appellants argue that the wording of the codicil was not an attempt to limit the estate granted to Inez McNutt, but merely provided for the disposition of the testator’s estate in the event his wife predeceased him or died simultaneously with him. Appellants cite the first sentence of the codicil:

“Upon the demise of the testator, Claude L. McNutt and the demise of the Legatee, Inez H. McNutt, all property, both personal and real, remaining in the estate of the Testator, Claude L. McNutt, I do hereby Devise and Bequeath to my son William T. Mc-Nutt, * * *

The appellants assert that had the testator not intended this provision to provide only for disposition of his estate in the event his wife predeceased him or died with him, there would have been no reason for him to include his name along with his wife’s in the codicil portion of the will. Appellants also assert that the language in the codicil and the appendix, subsequent to the devise of a fee simple estate, did not clearly indicate an intention to diminish this devise to a life estate.

Appellees agree that if the grant to Inez McNutt is set forth in “clear language sufficient to convey an absolute fee” [Gist v. Pettus, 115 Ark. 400, 171 S. W. 480 (1914)] or there was an “unmistakable direction that it should be absolutely hers,” [Collie v. Tucker, 229 Ark. 606, 317 S. W. 2d 137 (1958)] then there would be no controversy. In support of their contention that the will devised only a life estate to Inez with a remainder to appellees, the appellees forcefully argue that the use of the word “Codicil" as a caption to the paragraph pertaining to the asserted limitation, and the “Appendix” to the will, written five years afterwards, which granted to Inez the fee title to his equity and interest in property located in another county without mentioning any other property, are sufficient indicia of the testator’s intent to give Inez only a life estate in the house and two lots.

We hold that the testator conveyed a fee simple estate to his wife and that the subsequent paragraph, or “Codicil,” and the later “Appendix” did not diminish or reduce the fee simple estate to a life estate. This is in accord with the general rule of law which we recognized as controlling in Bernstein v. Bramble, 81 Ark. 480, 99 S. W. 682 (1907):

"* * * It is the rule that where property is given in clear language sufficient to convey an absolute fee, the interest thus given shall not be taken away, cut down or diminished by any subsequent vague and general expressions. * * * If it is clearly the intention of the testator that the devisee shall own the fee simple, his subsequent language, directing that what remains of the property at the death of that devisee shall devolve upon a particular person or class of persons, will not cut down the fee to a life estate. The fee, being vested by express and appropriate words, will not be diminished by subsequent words of a vague and general character which are absolutely repugnant to the estate granted.”

Further, in Ollar v. Roy, 212 Ark. 682, 207 S. W. 2d 313 (1948) we also recognized that: "* * * whenever an estate in lands is created by a will, it will be deemed to be an estate in fee simple, if a less estate is not clearly indicated.”

Appellees rely upon that part of Baum v. Fox, 192 Ark. 406, 91 S. W. 2d 601 (1936), wherein this court cited with approval 28 R. C. L. 215, 216:

"The intention of a testator is to be collected from the whole will, and from a consideration of all the provisions of the instrument, taken together, rather than from any particular form of words. The intention is not to be gathered from detached portions alone, and the court should not consider merely the particular clause of the will which is in dispute.”

Also cited is McLaren v. Cross, 236 Ark. 648, 370 S. W. 2d 59 (1963). However, in Baum v. Fox, supra, relied upon by appellees, the will read in part as follows:

“I wish to bequeath to my beloved wife, Sarah H. Wright, my house and three lots, * * * Also my liberty bonds * * * and my other moneys that may be received after all debts are paid. If she needs any assistance in managing the property, I appoint my son, W. J. Wright, to assist to the best of his ability. After death of said Sarah H. Wright after the debts are paid all property and moneys are to be equally divided among my four children.”

We held there that Sarah received the fee.

In Collie v. Tucker, 229 Ark. 606, 317 S. W. 2d 137 (1958), after devising his estate in fee simple to his wife, the testator then provided that:

“Fourth. It is my will in case my wife should not use and dispose of all my property during her lifetime, that whatever she may leave undisposed of, shall be equally divided between her heirs and my heirs.”

There we held that the limitation over was void and the fee simple estate was undiminished. In doing so we aptly said: “We are not willing to set aside the rule of property that was announced in the Bernstein case and that has been adhered to ever since.”

In our view there was an intent clearly shown by the testator to give a fee simple estate to his wife in the first part of his will. There was not a clear intention in the succeeding paragraph, entitled “Codicil,” or the subsequent “Appendix” to the will to reduce that estate to a life estate. Since we hold that an undiminished fee simple estate existed, it becomes unnecessary to consider appellants’ other contention.

Reversed and remanded with directions for entry of a decree consistent with this opinion.


author: Robert L. Jones, Jr., Special Justice.

text:
    James R. LONG, T. B. Jackson and Thorp Thomas v. Leo Mabry
    5-5356
    470 S. W. 2d 319
    Opinion delivered June 14, 1971
    [Rehearing denied October 4, 1971.]

      Thorp Thomas, Fred A. Newth, Jr., Rose, Barron, Nash, Williamson, Carroll & Clay; By: John Haley, for appellants.

      House, Holmes & Jewell; By: Robert L. Robinson Jr., for appellee.
   Robert L. Jones, Jr., Special Justice.

The appellants and the appellee entered into an agreement, dated July 28, 1966, under the terms of which appellee agreed to advance the sum of $5,000.00 “for administrative and printing costs to form a non-profit corporation to be known as National College Award Foundation.” The duties and obligations of the appellants are not specifically stated, but it is implied that they would furnish services rather than money as their part of the investment. The appellee actually advanced $4,750.00. The Agreement further provided a method whereby the appellee was to receive back all of the money he had invested out of fees from the sale of memberships. The “non-profit corporation” was formed, but never became operational and appellee filed suit against appellants for rescission of the Agreement, alleging that there was a failure of consideration. Later an amended complaint was filed also alleging violations of the Arkansas Securities Act, Act 254 of 1959, Sections 1, 7, 14 and 22. The trial court found that appellee was entitled to rescission, ordered restitution of the sum of $4,750.00, plus court costs, from which order the appellants bring this appeal.

There is very little dispute in this case about the facts. After the written agreement was entered into, on July 28, 1966, the appellee advanced the sum of $4,750.00. $2,250.00 was paid to John B. May to reimburse Mr. May for money that he had paid to Mr. Jackson and Mr. Long as an investment in the National College Award Foundation. A second check was issued by the appellee to Mr. Jackson and Mr. Long in the amount of $2,500.00. It is obvious from the testimony of all of the parties that all four of the persons connected with this transaction expected to make a profit. Appellee was to get his money back first, then the appellants and the appellee were to share equally in the profits. It also appears obvious that all of the parties knew that there was some question as to the legality of the proposal. The appellee inquired of Mr. Jackson how it was possible to make a profit out of a non-profit corporation, and Mr. Jackson told him that they would do it the same way that private clubs operate. The appellee admits that he was told that it would be necessary to secure the approval from either the Attorney General’s Office or the Securities Commissioner’s Office before the corporation could commence business; he further admits that he was not led to believe that such approval had already been secured before he entered into the contract.

The non-profit corporation was formed, and Mr. Thomas attempted to secure the approval of the State Securities Commissioner. The Securities Commissioner failed to find any merit in the program for the public of Arkansas, and so advised Mr. Thomas by letter. After Mr. Thomas failed to obtain the approval of the Securities Commissioner, he did some further legal research and found that under Ark. Stat. Ann. § 67-1248, there is a specific exemption for any corporation organized not for profit, but exclusively for educational purposes. Based on this exclusion, Mr. Thomas told Mr. Long and Mr. Jackson that in his opinion, they could go ahead without the approval of the Securities Commissioner. An effort was also made (through an official authorized to receive an opinion from the Attorney General) to obtain an opinion from the Attorney General as to the legality of the plan but no such opinion was obtained.

There is testimony that by this time, the money advanced by appellee had been spent. It also appears that the appellants were reluctant to proceed without the approval of the Securities Commissioner or the Attorney General, and for these reasons, the matter became dormant, which resulted in the filing of this action for rescission by the appellee.

It is a well-established rule that this Court hears and determines appeals from chancery courts de novo. As stated in Sharum v. Terbieten, 241 Ark. 57, 406 S. W. 2d 156 (1966):

“Whether the Chancellor makes a finding or bases his decision on an erroneous conclusion does not preclude our reviewing the case ‘de novo.’ Culber house v. Hawthorne, 107 Ark. 462, 156 S. W. 421; Langley v. Reames, 210 Ark. 624, 197 S. W. 2d 291.”

1. Was there a failure of consideration? It is not contended that any of the appellants made false or fraudulent representations to the appellee to induce him to invest $4,750.00. Rather, appellee contends that there was a failure of consideration on the part of the appellants. The basis of this contention is that appellants made certain promises which they failed to fulfill. The written agreement between the parties contains no promises on the part of appellants. However, the undisputed oral testimony is that appellants would seek to obtain the approval of the Securities Commissioner, or an opinion from the Attorney General that “memberships” in the Foundation could be sold without being registered as a security under the provisions of the Arkansas Securities Act (Ark. Stat. Ann. § 67-1235, et seq.). Appellants formed the corporation and made an effort to obtain the approval of the Securities Commissioner, and an opinion from the Attorney General, but were unsuccessful on both counts. Accordingly, it appears that the appellants did what they agreed to do, and that there is no failure of consideration.

2. Were the parties in pari delicto? Even if there was a failure of consideration, the appellee is not entitled to rescission of the Agreement and to obtain restitution if he was in pari delicto with the appellants. It is well settled that courts of equity will not aid parties to an illegal agreement, but will leave the parties where it finds them.

In Williams v. Wilson, 181 F. Supp. 351 (1960), Judge Henley correctly stated the law of Arkansas on this point as follows:

“It is a settled principle of law in Arkansas that courts will not enforce illegal bargains or those that are contra bonos moros, and that where the parties to such bargains are in pari delicto, the law will leave them where it finds them. Womack v. Maner, 227 Ark. 786, 301 S. W. 2d 438, 60 A. L. R. 2d 1271, and cases there cited.”

All of the parties connected with this transaction knew from the outset that the legality of the undertaking was questionable and the appellee admits that he was told that it would be necessary to obtain the approval of the Securities Commissioner or an opinion from the Attorney General that registration under the Arkansas Securities Act was not necessary. Knowing that such approval had not been obtained, he was willing to risk his money on the possibility of making a profit. All of the parties are therefore in pari delicto.

3. Was the agreement a security? Appellee contends that even though the parties are in pari delicto, that appellee is still entitled to rescission of the Agreement under the provisions of Ark. Stat. Ann. § 67-1256, if the Agreement entered into between the parties is a “security”. We have examined the definition of “security” as contained in Ark. Stat. Ann. § 67-1247 (1), and find that the Agreement between the parties, dated July 28, 1966, was not a “security” within the meaning of the Statute.

It is, therefore, the opinion of the Court that the appellee is not entitled to rescission of the Agreement and is not entided to full restitution. Appellee is only entitled to an accounting of the funds which were agreed to be spent “for administrative and printing costs”. The decree is therefore reversed and the cause remanded to the trial court for the purpose of determining that all of the money advanced by appellee was spent for the purposes provided in the Agreement. The appellee is entitled to a return of any funds that remain unexpended, and is entided to judgment for any funds spent by appellants for purposes other than “administrative and printing costs”. In making such determination, appellants are not entitled to compensation for time expended for the reason that time and services constituted their investment in this venture.

Reversed and remanded.

Smith and Fogleman, JJ., and Murphy, S.J., dissent.

Byrd and Holt, JJ., not participating.


author: Carleton Harris, Chief Justice.

text:
    LOWELL PERKINS AGENCY, INC. v. Velma J. JACOBS and Russell JACOBS
    5-5576
    469 S. W. 2d 89
    Opinion delivered June 21, 1971
    [Rehearing denied August 9, 1971.]

      Lightle & Tedder, for appellant.

      Darrell Hickman, for appellees.
   Carleton Harris, Chief Justice.

This litigation arises out of a sale made by Lowell Perkins Agency, Inc., automobile dealers and appellant herein, to Velma J. Jacobs, appellee herein. On July 22, 1969, Mrs. Jacobs purchased a 1969, 4 door, 8 cylinder, Rebel automobile from the appellant for the sum of $3,044.20. This automobile was in the category of what is generally known as a “factory” car, being a vehicle that the manufacturer had rented to an agency and then, after a few thousand miles had been driven, was reclaimed by the manufacturer and reconditioned. Such cars carry a full new car warranty. At the time of the transaction between the parties, Mrs. Jacobs traded in a 1966 Rambler automobile as a down payment of $645.00, and executed a purchase contract and note for the balance, this contract and note being hypothecated the following day to the Universal C.I.T. Credit Corporation in the usual course of business. On the same day, the purchased automobile was delivered to Mrs. Jacobs in Augusta, together with the papers, and the title and transfer papers were obtained from appellee for the 1966 Rambler. Thereafter, apparently also on the 23rd, Mrs. Jacobs applied for a license but was told by the revenue office that she would have to pay sales tax on the car, this tax amounting to $86.00 or $87.00. She then took the papers back to the salesman and advised that she did not want the automobile. Appellee went to see the manager of the automobile agency, Jack Stubbs, and learned that Mr. Perkins was in Little Rock. She advised that she would go home and wait for him to call, and that if he called by 3 p.m. and said that he would pay the tax, she would keep the car. No call was received and the following morning appellee called Perkins, told him that she was bringing the car over, and was going to have Universal C.I.T. cancel it. She said that he advised her that he could not cancel it and that he was not going to pay the tax on it. She then went to the Universal office and, according to her testimony, which will be subsequently discussed, was told by a Mr. Weir that the contract would be cancelled. Appellee returned to the automobile agency, parked the car in the driveway, and gave the keys to the manager’s wife.

Mrs. Jacobs, on August 19, instituted a replevin action for the 1966 Rambler, simply alleging that appellant was in possession of this property which belonged to her. However, no order of delivery was issued and no bond was made.

The first payment to Universal C.I.T. was due on August 22; Mrs. Jacobs had already sent a letter saying that she was not going to pay for the car, and on September 9, this company sent notice to appellee, in compliance with the Commercial Code, that unless she paid the amount due under the contract, including expenses of repossession and delinquent charges, within seven days, the car would be sold at private sale. Mrs. Jacobs received the notice, but made no payment. Perkins was then requested by the finance company to repurchase the contract, which was done, and thereafter this car was sold by appellant on October 22, for $2,565.78. The car traded in by appellee had been sold on September 3rd. Witnesses were not sure of the sale price but it is pretty well agreed that the value of the car was $600.00.

With reference to the suit filed by appellee, appellant moved to make the complaint more definite and certain and appellee amended to allege that appellant’s agent had stated that no taxes would be due or payable on the automobile when the license was purchased; that she discovered that taxes would be due and payable and returned the vehicle “and rescinded the contract”. An answer was filed denying the allegations of the complaint and both parties then moved to transfer the case to chancery court, which was done. There, appellee amended her complaint to allege unjust enrichment on the part of appellant company. On trial, the court found:

“1. On July 22, 1969, the parties entered into an agreement whereby the Plaintiff was to purchase a 1969 vehicle from the Defendant, and the Plaintiff traded in a 1966 vehicle of a value of $600.00.
2. Subsequently, the Plaintiff rescinded the contract by her actions, and the Defendant sold both of the vehicles.
3. It is the finding of the Court that the Plaintiff should recover from the Defendant the sum of $600.00, the value of the 1966 vehicle which she transferred to the Defendant.”

Judgment was then entered against appellant for $600.00 together with interest and costs from which judgment (decree) appellant brings this appeal. For reversal, it is simply asserted that the evidence was insufficient to sustain a judgment for appellee.

We agree with appellant that the evidence is insufficient to sustain the decree. Of course, there is no evidence of mutual mistake, and so the sole question is when rescission is proper for a unilateral mistake. In Hubbert v. Fagan, 99 Ark. 480, 138 S. W. 1001, it is •said:

“Where relief is given because of the mistake of one party alone, it is where it is induced by the conduct of the other party or because the other seeks unconscionably to take advantage of it, and the ground of jurisdiction is really fraud.”

Likewise, in American Laundry Machinery Company v. Whitlow, 198 Ark. 175, 127 S. W. 2d 817, this court commented:

“In 12 American Jurisprudence 624, § 133, it is held, as the rule sustained by practically universal authority, that a unilateral mistake alone will not justify a rescission. May it not be sufficient to say the law upon this subject is black type textbook law.”

In Gall v. Union National Bank of Little Rock, Trustee, 205 Ark. 1000, 159 S. W. 2d 757, we quoted from Black on Rescission and Cancellation, 2d Ed., Vol. I, § 128, p. 597, as follows:

“The generally accepted rule is that rescission cannot be enforced or ordered on account of the mistake of one party only/ which the other did not share, but for which he was not responsible, unless some special ground for the interference of a court of equity can be shown. That is, there can be no rescission on account of the mistake of one party only, where the other party was not guilty of any fraud, concealment, undue influence, or bad faith, did not induce or encourage the mistake, and will not derive any unconscionable advantage from the enforcement of the contract.”

What does the evidence show in the case before us? In the first place, the original complaint simply contained the allegations that the car belonged to appellee, and was being held by appellant. The amended complaint stated that she was told no taxes would be due or payable on the automobile when the license was purchased. This is the only allegation that bears on fraud or concealment, and the evidence, hereafter discussed, does not support that allegation. What is the evidence on this point? Mrs. Jacobs first testified that she was satisfied with the trade, and that title papers were delivered to her for the new car; she turned in the papers for the old one and said she thought she was getting a “good buy”. She was then asked the following question “When you found out you had to pay the sales tax you wanted to rescind your contract?” The answer to that question is, we think, most pertinent, her reply being, “No I didn’t. I thought it wasn’t fair. He should have told me I had sales tax to pay on this car [Our emphasis] and I would have took the car had he agreed to pay the sales tax”. Further,

“Q. He did not mislead you about that in any way?
A. No but he did not tell me either. * * * He should have made it clear to me. * * *
Q. That is the reason you decided you were not going to take the car or pay for it?
A. I agreed to pay for the car if he would call me about three o’clock but he did not have the courtesy to call me.
Q. It is not the tax but because he did not call you?
A. No if he had called me by three o’clock and said he would pay the tax, and he didn’t call me.
Q. That was the condition you were making?
A. Yes.”

It is thus apparent from the evidence of appellee herself that no one told her that she would not have to pay the sales tax. It was simply an assumption on her part. Certainly no fraudulent statements were made, nor was there undue influence, nor does the record indicate that the sales tax payment was intentionally concealed. Also, Mrs. Jacobs had every opportunity to acquire any information needed before the contract was signed, or to ask any question desired, for this apparently was no “hurried up” affair. It appears that while Mrs. Jacobs was conversing with Mr. Perkins in closing the transaction, that another lady came in who was bitten by the Perkins’ dog, and this occasioned some delay in completing the transaction. The statute (Ark. Stat. Ann. § 84-1903 [Repl. I960]) provides who shall pay the tax, and we are unwilling to place the additional requirement that every purchaser must be told who will pay the tax or else his contract will be subject to rescission. For that matter, from the testimony of Mrs. Jacobs, it appears that the fact that she was due to pay the tax was not the sole reason she attempted to revoke the contract; also, she gave him a “deadline” of calling her by three o’clock and telling her that he would pay the tax “and he didn’t call me”. Actually, the testimony reflects that subsequently appellant company did agree to pay it. Marlin Stubbs, who had sold appellee the car, stated that the subject of who would pay the sales tax was never mentioned, but when she returned the day after the transaction, she wanted appellant to pay this tax; that the company had consented to pay one-half, but she replied that that was not good enough. She subsequently called again, and his father, Jack Stubbs, “told her we would pay the sales tax on it. Then she said 'Well, if you are willing to pay the sales tax, there is bound to be something wrong with the car’ I said ‘I guess you know the car is backed by five years, fifty thousand mile warranty. You have no right to be scared of the car.’ ”

The record reflects that the provisions of the Commercial Code were followed in selling the repossessed automobile, following Mrs. Jacobs leaving it at the company agency, and, of course the car which she was trading in was daily losing value from depreciation as it remained on the lot. The sale of this car could have been prevented simply by the making of a bond, but this was not done by appellee.

Appellee argues that her claim was for unjust enrichment and that the court properly found that appellant was enriched and “very unjustly”. We do not agree with this contention. There can be no “unjust enrichment” in contract cases. In Materese v. Moore-McCormack Lines, 158 F. 2d 631, the matter is stated very succinctly as follows:

“The doctrine of unjust enrichment or recovery in quasi-contract obviously does not deal with situations in which the party to be charged has by word or deed legally consented to assume a duty toward the party seeking to charge him. Instead, it applies to situations where as a matter of fact there is no legal contract, but where the person sought to be charged is in possession of money or property which in good conscience and justice he should not retain, but should deliver to another.”

In 17 C. J. S. Contracts § 6 p. 574, we find:

“It is generally held that where there is an express contract the law will not imply a quasi or constructive contract. The courts will not indulge in the fiction of a quasi or constructive contract where contracts implied in fact must be established, and will not substitute one promisor or debtor for another.. A quasi-contractual principle of unjust enrichment does not apply to an agreement deliberately entered into by the parties, however harsh the provisions of such contract may seem in the light of sdbsequent happenings.”

This court has recognized this principle at least as far back as 1860, where in Jackson v. Jones, 22 Ark. 158, we stated that the law never accommodates a party with an implied contract when he has made a specific one on the same subject matter.

It is apparent from what has been said that we find the judgment entered to be erroneous, and the decree of the White County Chancery Court is accordingly reversed.

It is so ordered.

       Though the name of Mr. Jacobs appears as an appellee, the suit having been brought in his name as well as his wife’s, he does not appear to have any interest in the proceedings. The contract of sale was strictly between the agency and Velma J. Jacobs, and she testified that the car belonged to her; accordingly, this opinion will only refer to the appellee.

       Marlin Stubbs, a car salesman for appellant, testified that such an automobile is handled like a demonstrator, and that customarily i. e., meaning in the absence of an agreement, the purchaser pays the sales tax; the car comes from the manufacturer, and bears a dealer’s tag.

         No “Mr. Weir” testified, but Mr. Billy Robinson, district manager for the company, testified that such a contract cannot be can-celled except by the dealer, who, of course, has to repurchase the car.

       From the record of the testimony of Mrs. Jacobs: “But I stayed there four hours trying to get this contract signed while he called his lawyer, his wife and everybody else in the country about this dog bite. By that time I was getting a little bit unhappy but I really wanted the car and they knew it.”


author: George Rose Smith, Justice.

text:
    Herman F. WRIGHT v. BEN M. HOGAN COMPANY et al
    5-5578
    468 S. W. 2d 233
    Opinion delivered June 21, 1971

      Youngdahl, Sizemore, Brewer, Forster & Uhlig, for appellant.

      Terral, Rawlings, Matthews & Purtle, for appellees.
   George Rose Smith, Justice.

This workmen’s compensation claim was denied by the referee, the commission, and the circuit court on the ground that the claimant’s injuries did not arise out of and in the course of his employment. Whether that finding was correct is the principal question now before us.

The ultimate controlling facts may be stated quickly, for the commission quite properly gave the claimant the benefit of the doubt upon disputed issues. Wright was employed as a concrete worker upon the Eighth Street Expressway construction job in Little Rock. He came to work in his own pickup truck and voluntarily used it in hauling a spraying rig and other company-owned equipment from place to place on the job site. Wright’s foreman did not require him to use his own truck, but he did allow Wright to take gasoline from the company’s tank. Wright was never told that he could use company gasoline for traveling to and from his home.

Wright lived with his wife at Lamar, almost 100 miles from Little Rock. He went home on weekends, but during the week he stayed at a motel in North Little Rock, just across the river from the job site. On a certain Wednesday in 1968 a rainstorm halted all concrete work at midafternoon. Wright decided to drive to Lamar and spend the night with his wife. The next morning he arose early and started for Little Rock in his truck. At Lamar he entered a long stretch of interstate highway not yet open to the public. After having traveled that route for about 20 miles he ran into a pile of gravel on the pavement and sustained the injuries for which compensation is sought.

The going and coming rule ordinarily denies compensation coverage to an employee while he is traveling from his home to his job. A familiar exception to the rule recognizes coverage when the employer furnishes home-to-work transportation as an incident to the employment. Ark. Power & Light Co. v. Cox, 229 Ark. 20, 315 S. W. 2d 91 (1958). In comparatively recent years some courts have approved a related exception by which home-to-work coverage is sustained if the employer requires the worker to bring his own vehicle to work and use it on the job. Larson, Workmen’s Compensation, § 17.50 (1968); Smith v. Workmen’s Comp. Appeals Board, 73 Cal. Rptr. 253, 447 P. 2d 365 (1969); Marshall v. Tribune-Star Pub. Co., 251 Ind. 557, 243 N. E. 2d 761 (1969); Borak v. H. E. Westerman Lbr. Co., 239 Minn. 327, 58 N. W. 2d 567 (1953).

In the case at bar the commission expressed its approval of the more recent exception but went on to say:

We think that claimant would have been within the exception had he been en route to and from his motel in North Little Rock. However in the instant case claimant had made a trip to his home in Lamar, Arkansas, for the purpose of spending the night with his wife. This brings in focus the purpose of the trip which determines this case.
The Arkansas Supreme Court, in Martin v. Lavender Radio & Supply, 228 Ark. 85, 305 S. W. 2d 845 (1957), quoted with approval the test as stated by Chief Judge Cardozo in the case of Marks Dependents v. Gray, 251 N. Y. 90, 167 N. E. 181 (1929): “Unquestionably injury through collision is a risk of travel on a highway. What concerns us here is whether the risks of travel are also risks of the employment. In that view, the decisive test must be whether it is the employment or something else that has sent the traveler forth upon the journey or brought exposure to its perils.”
This is commonly known as the dominant purpose rule, which Arkansas apparently adopted in the Martin case, supra. Claimant testified that the job was rained out on September 4, 1968, and he decided to go to Lamar to spend the night with his wife. This was the dominant purpose of his trip. Therefore . . . the Opinion of the Referee ... is hereby affirmed.

Assuming, without so deciding, that the exception in question should be added to our going and coming rule, we are nonetheless of the opinion that the distinction drawn by the commission was soundly grounded in the facts. Evidently Wright did not think it practical to travel back and forth between Lamar and Little Rock every day. Hence the commission was justified in treating the North Little Rock motel as Wright’s work-connected home during the week. There is nothing in the rule in question that logically or reasonably demands that the workman be allowed to maintain two homes as a matter of right, expecially when one of them is so inconveniently placed that he gives it up temporarily to maintain his job. We accordingly conclude that the commission was supported by substantial evidence in finding that Wright’s excursion to Lamar was a personal mission that took him out of the exception to the going and coming rule, just as if he had been a permanent resident of North Little Rock and had driven to Lamar to go fishing or to achieve some other purely personal purpose.

The claimant also argues two other possible theories for an award of compensation in the case at hand. Neither theory was mentioned in the commission’s opinion, which indicates either that the points were not raised below or that the commission did not think them sufficiently meritorious to call for a discussion. We would affirm in any event.

One, in the course of the testimony it was casually mentioned now and then that Wright had also worked for the appellee Hogan on other highway construcdon jobs in Arkansas, there being references to Malvern, Fort Smith, and Clarksville. It is now suggested that Wright was therefore required to travel about the state and was entitled to the broad compensation coverage granted to traveling salesmen. The short answer to this argument is that the traveling salesman’s work requires him to travel away from his employer’s premises while he is on duty. Larson, supra, § 25.10. Wright’s travels, by contrast, were merely between his home and various job sites.

Two, Hogan was the paving contractor for the unopened interstate highway upon which Wright was injured. It is now argued that Wright was therefore upon his employer’s premises and is entitled to invoke the premises exception to the going and coming rule. As Larson points out, however, the basis for the premises rule is the existence of a causal connection between the employment and the particular risk, as when the employees must cross railroad tracks near the plant entrance. Larson, § 15.15. There is patently no causal connection between Wright’s employment in Little Rock and the risk involved in his election to travel an unfinished highway some eighty miles away.

Affirmed.

Fogleman, J., not participating.


text:
    James DAILEY, Jr. and Ralph William ERWIN v. STATE of Arkansas
    5594
    468 S. W. 2d 238
    Opinion delivered June 21, 1971

      Wiggins ir Christian, for appellants.

      Ray Thornton, Attorney General; Garner L. Taylor, Jr., Asst. Atty. Gen., for appellee.
   George Rose Smith, Justice.

The two appellants, James Dailey, Jr., and Ralph William Erwin, were charged with having unlawfully dynamited a building in Fort Smith. Ark. Stat. Ann. § 41-4237 (Repl. 1964). The jury found both men guilty and assessed the same punishment for each of them: A fine of $2,000 and imprisonment for 15 years. Each appellant argues a single point for reversal.

Dailey contends that the trial court erred in refusing to suppress part of the testimony of Officer Eddie Brooks, who was allowed to testify that Dailey had orally admitted his guilt. After studying the record we are unable to say that the trial court was in error.

Dailey was arrested on July 24, 1970, and, according to the State’s evidence, was then fully informed of his constitutional rights. He understood the explanation and did not then make any statement to the officers. While Dailey was still in jail his attorney filed a motion for an examination to determine Dailey’s sanity. The motion was granted, the examination being set for 9:30 a.m. on September 1.

Early that morning Dailey sent word that he wanted to talk to Officer Brooks. Brooks’s testimony about the occurrences during the day was to this effect: Brooks went to the jail to see Dailey. Dailey mentioned the psychiatric examination, which Brooks had not known about, and went on to say that “they” had stated that he (Dailey) was crazy and were trying to sent him to the nut house. Brooks explained that he could not talk to Dailey while he was represented by an attorney. Brooks did not urge Dailey to discharge his attorney, Bill Wiggins, but Brooks admitted that he did suggest that course to Dailey. Dailey said that he had not paid the attorney anything and also that he did not need an attorney if the best they could do was to send him to Little Rock (presumably meaning to the State Hospital).

Officer Brooks then left the jail and came back about an hour and a half later. Dailey indicated that he had seen his attorney, Wiggins, during the interval and had fired him. Dailey was taken to the office of a deputy prosecuting attorney, where he was told that he still had the right to have an attorney present. Dailey stated that he did not want a jury trial, that he knew he was guilty, that he had done wrong, and that he wanted to get it over with. Dailey refused to make a written statement but indicated that he would do so later on.

The foregoing testimony of Officer Brooks is almost uncontradicted. Dailey did not elect to testify, even at the in-chambers hearing on the motion to suppress the evidence. Attorney Wiggins testified positively that he was not discharged by Dailey on the day in question; but he had no way of knowing, and of course did not attempt to say, whether Dailey had represented to Officer Brooks that Wiggins had been discharged. We are impressed by the fact that both Officer Brooks and the prosecuting attorney immediately made written records of what happened on the day in question. Their notes support their testimony. On the other hand, Wiggins apparently did not make any notes and admitted with candor that in some respects he had no basis for admitting or denying the prosecutor’s statements. Upon the record as a whole we are unable to say that the trial court erred in refusing to suppress the challenged testimony of Officer Brooks.

The question presented by Erwin’s appeal is comparatively free from difficulty. In effect he complains of three questions that were put to him on cross examination. First, he was asked about a threat that he had supposedly made. He denied having made the threat. Secondly, he was asked if he had thrown a brick through the vehicle of a guard at the plant where certain disturbances (in connection with a labor dispute) were taking place. Erwin’s answer was “No, sir.” Thirdly, he was asked if he had brandished weapons at Mexican laborers who were working at the plant during the dispute. Counsel objected at that point, and the question was not answered. Thus none of the three questions was answered in the affirmative and consequently no information whatever, much less any prejudicial information, reached the ears of the jury. In the circumstances there was clearly no reversible error.

Affirmed.