author: George Rose Smith, Justice. John A. Fogleman, Justice, George Rose Smith, Justice,

text:
    FIRST NATIONAL BANK of Magnolia v. Joe F. RUSHTON
    5-5587
    472 S.W. 2d 945
    Opinion delivered October 4, 1971
    [Rehearing denied November 8, 1971]

      Wootton, Land & Matthews, for appellant.

      Harry B. Colay, Chambers & Chambers and Warren ir Bullion, for appellee.
   George Rose Smith, Justice.

This suit was brought by the appellee, Dr. Joe F. Rushton, to impose liability upon the First National Bank of Magnolia for a number of obligations that Dr. Rushton had incurred in connection with Numark Manufacturing Company, a concern which was declared bankrupt in 1965. It was Dr. Rushton’s theory that he had acted merely as trustee for the bank in incurring the obligations and that the bank was under a duty to reimburse him for the losses he sustained in the various transactions.

The bank pleaded several defenses, including estoppel, the clean hands doctrine, ultra vires, and the statute of frauds. At the first trial the chancellor sustained the bank’s various defenses. On appeal, however, we reversed the decree and sent the case back for a complete new trial. Rushton v. First Nat. Bank of Magnolia, 244 Ark. 503, 426 S. W. 2d 378 (1968). Thereafter the Honorable James W. Chesnutt, Chancellor of the Third Chancery Circuit, was assigned to try the case anew.

The testimony at the second trial was not materially different from that at the first trial. We need not detail the complicated series of transactions involved in this litigation, because (a) the facts were narrated at length in our first opinion, (b'\ the bank concedes that the chancellor’s findings of fact at the second trial were correct, and (c) the bank’s appeal presents only one aspect of the case for review.

The issue now submitted by the bank concerns a promissory note for $97,787.77 which Dr. Rushton signed as trustee and which was eventually satisfied by the sale of securities belonging to Dr. Rushton. Dr. Rushton has contended all along that it was never intended that he be personally liable on the note, that he signed it as trustee for the bank, for the sole purpose of assisting the bank in its effort to recoup losses it had sustained upon loans made to Numark’s predecessor corporations, and that the bank, through its president, W. C. Blewster, had assured Dr. Rushton that he would» be protected against any loss in the transaction.

In our opinion the preponderance of the evidence would support a finding that Dr. Rushton was in fact acting as trustee for the bank in signing the note. Numark was created at Blewster’s direction, was dependent upon Blewster for its original financing, and was certainly not an independent entity dealing with the bank upon an equal plane when the $97,787.77 note was signed by Dr. Rushton as trustee. In this view the bank would be liable to Dr. Rushton.

The chancellor reached the same end result by a different line of reasoning. The chancellor concluded that Dr. Rushton was acting as trustee for Numark when he signed the note. The bank, however, knew that Dr. Rushton was acting merely as an agent for a disclosed principal. Consequently Dr. Rushton was not personally liable to the bank. Ferguson v. Huddleston, 208 Ark. 353, 186 S. W. 2d 152 (1945). The chancellor accordingly entered judgment in favor of Dr. Rushton for the face amount of the note, with interest and an attorney’s fee.

In seeking a reversal the bank does not rely on any of the various defenses which it pleaded in the court below. Instead, the bank now asserts that Dr. Rushton was a director of the bank when the note in question was signed, that as a director Dr. Rushton owed a fiduciary duty to the bank, that the transaction with Numark resulted in the bank’s having exceeded its loan limit of $100,000 to any one borrower, and that Dr. Rushton is therefore liable to the bank under the statutes governing national banks. 12 U. S. C. A. §§ 84 and 93.

Regardless of whether the bank’s present theory was raised in the court below, which appears to be doubtful, counsel for the appellee have chosen to answer the argument solely on its merits. We adopt the same course.

The bank’s loan limitation was $100,000. Under the federal statute a bank director is liable to the bank for a loss such as this one only if he "shall knowingly violate” the provisions of the statute. 12 U. S. C. A. § 93. The federal cases have consistently emphasized the requirement that the director’s violation of the law must be knowingly committed. As the Supreme Court said in Corsicana Nat. Bank v. Johnson, 251 U. S. 68 (1919): "Under the rule settled by familiar decisions of this court, in order for the Bank to prevail in this action it must appear . . . that defendant, while a director, participated in or assented to the excessive loan or loans not through mere negligence but knowingly and in effect intentionally.” There are many other decisions to the same effect.

Our inclination to think that the bank’s present theory was not presented in the trial court stems in a large measure from the marked absence of convincing proof tending to show that Dr. Rushton knowingly and intentionally violated his fiduciary duty as a bank director. There is no proof whatever that Dr. Rushton was familiar with the bank’s loan limit. He testified at great length, but he was never asked even a simple question about this point. In fact, in the bank’s brief in this court counsel merely say that "it is inconceivable to believe that a man of Appellee’s wide business experience and length of service as a bank director would not have known the Bank’s loan limit was $100,000.00.” We appreciate counsel’s argument, but it falls far short of supplying the necessary proof that Dr. Rushton knowingly and intentionally violated the law.

Again, it is not shown that Dr. Rushton knew that the $97,787.77 transaction between the bank and Nu-mark had the effect, in view of past transactions between the two companies, of exceeding the bank’s $100,000 loan limit. Here again counsel merely say in the brief that it is “inconceivable” that Dr. Rushton would not have known about Numark’s overdrafts at the bank. In fact, there is no proof that Dr. Rushton had any actual knowledge whatever about the overdraft situation. With such glaring deficiencies in the proof we are unable to sustain the bank’s argument for reversal.

It is not inappropriate to add that the equities in the case are with Dr. Rushton. He was a minority stockholder in Numark, with an investment of only $5,000. It is undisputed that when the ■ business encountered financial difficulties he suggested that the stockholders abandon the enterprise and accept their losses. Instead, he was persuaded by the bank’s president, Blewster, to guarantee the payment of various obligations involving huge sums. Blewster’s purpose was unquestionably to rescue the bank from threatened financial losses attributable at least in part to Blewster’s management of the bank, which was admittedly a “one-man” operation. As the chancellor observed, Dr. Rushton’s fellow directors “were fearful that they might be held liable personally for dereliction of duty.” Presumably the statute of limitations has now eliminated that threat. Dr. Rush-ton, however, lost more than a quarter of a million dollars as a result of his efforts to help Blewster and the bank. We do not feel that the chancellor’s decision is contrary either to the law or to the equities in the case.

By cross appeal Dr. Rushton seeks to recover various other sums that he was compelled to pay out upon his various Numark commitments. The chancellor found the evidence insufficient to support Dr. Rushton’s contentions in that respect. In this court counsel present no argument, either legal or factual, to indicate that the trial court was in error. Its decision must therefore be upheld.

Affirmed.

Fogleman, J., dissents.

John A. Fogleman, Justice,

dissenting. I concur in the court’s action and the majority opinion on the cross-appeal. I do not agree with either the action or the opinion on appeal. A part of the disagreement at least arises from my disagreement with the premises upon which the majority based its action.

In the first place I do not agree that appellant’s reliance is placed entirely upon the federal statute governing liability of a director of a national bank when the bank exceeds its statutory loan limitation. Appellant also argued that appellee violated his fiduciary duty to the bank when he permitted the bank’s only security for the $97,787.77 note to be transferred to secure the indebtedness of Numark, in which he had a financial interest, on an obligation to the Texarkana National Bank, thus limiting the extent of his personal liability as endorser on the debt to the Texarkana bank and leaving appellant without any security on the $97,000 note. This argument is completely ignored by the majority, yet I feel that it has substance.

I do not, however, have any doubt that the defense based upon the federal statute was in issue in the trial court. It was alleged in appellant’s amended answer that the acts involved were in violation of numerous laws governing the operation of bank institutions. While the specific act was not mentioned, appellee could easily have asked that the pleading be made more definite and certain, if there was really any doubt in his mind as to the laws invoked. This statute was made a basis of the bank’s argument in support of the decree against Rushton on the prior appeal. Subsequent abandonment of this argument in the trial court would be indeed strange.

Neither do I agree with the majority that the preponderance of the evidence would support a finding that Dr. Rushton was in fact acting as trustee for the bank. Certainly, it cannot be said that the chancellor’s finding that he was trustee for Numark is clearly against the preponderance of the evidence. Rushton was a stockholder and director of Odyssey Trailer Company, which became Numark Manufacturing Company by change of name. While he was elected president of Numark at a meeting from which he was absent, he was persuaded by Blewster, his associate in many business ventures other than the appellant bank, to accept the position. Having accepted, he could not totally ignore his responsibilities with impunity. He entered into an agreement with the Texarkana National Bank guaranteeing the Numark obligation to that bank, as required by it. He personally endorsed Numark notes for additional loans by the Texarkana Bank and Republic National Bank of Dallas, Texas, on October 26, 1964, November 23, 1964, December 28, 1964, and January 24, 1965. Most, if not all, of these were signed by Rushton as president of Numark. Blewster’s connection with the bank was terminated on November 19, 1964, so it is obvious that Rushton was not always motivated to assist in the financing of Numark solely for the benefit of the bank upon the persuasion of its president. The manager of Numark testified that after Blewster resigned from the bank Rushton continued to lend his personal credit for six or seven months by signing notes payable to the Stephens Security Bank and on government invoices on loans obtained from a bank in El Dorado.

A check payable to the bank to be applied on the $97,000 note was signed “Joe F. Rushton M. D. Trustee, Numark Properties.” After the execution of that note, Rushton’s personal financial statement filed with the bank on October 1, 1963, showed a liability to the bank of $97,500. Mr. Drew, manager of Numark, was familiar with the transactions and considered Numark obligated on the note.

Rushton testified that there was a written agreement covering the arrangement for his trusteeship for the bank. He said that the agreement was a four-or five-page document at the bank and that Blewster told him he could have it whenever he wanted it. When Blewster’s discovery deposition was taken, he stated that he would have to look at the bank records to determine whether the bank agreed to hold Rushton harmless and to determine whether there were any records about the transaction. Blewster later testified that if Rushton said there was a trust agreement, there was one. Although Rushton could not recall having received a letter from Numark addressed to him and agreeing to hold him harmless from any liability he might incur by reason of having signed the $97,797 note, he admitted that he must have received it. It bore his signature. It seems as obvious to me as it did to the chancellor that this is the trust agreement ot which Rushton referred.

At the time of the consolidation of Odyssey and Magnolia, Rushton was aware of an indebtedness of Odyssey to the bank in the amount of $35,000, because he was an endorser on the note. He also knew, by his own admission, that Blewster intended that the bank finance the operations of Numark after the merger of Odyssey and Magnolia if Rushton would serve as president "in name only.” Blewster testified that the Odyssey indebtedness amounted to $85,633.99 when the Magnolia Woods Products property was deeded to Rushton as Trustee and the additional loan of $35,000 was made. There can be no doubt that this loan was for the benefit of Numark and made the total indebtedness to the bank amount to $218,421.76, far in excess of the bank’s, loan limit, which Blewster said was not more than $110,000. Even if the $62,000 due for Magnolia Woods property is eliminated under Rushton’s theory that he was trustee for the bank, the Numark debt still exceeded the bank’s loan limit. Later the overdrafts made the debt of Nu-mark nearly triple the loan limit.

The overdrafts covered by the $225,000 note in which the Texarkana bank participated to the extent of $125,000 accumulated over a period of 12 to 16 months. Rushton testified that Numark obtained operating money by overdrafts at the bank. He stated that he realized this, but did not know the extent of the overdrafts until Blewster called his attention to the fact that they amounted to $225,000. He testified that the bank’s loan limit was $100,000 and that it was necessary that the excess be carried by the Texarkana bank. Blewster testified that by the use of his and Rushton’s credit Numark obtained operating capital during 1963 and 1964 based on overdrafts and borrowing from corresponding banks. Rush-ton could not have failed to know the approximate extent of the overdrafts if he had exercised any diligence in the performance of his duty as a director, because after regular audits made for the directors a list of the overdrafts was placed in a folder on the table each month for examination by the directors. Blewster said that at least 45 people knew of the overdrafts. According to Blewster, he realized his own liability for permitting these overdrafts and advised Rushton that if these continued he (Blewster) would lose his job. He said that Rushton then agreed to secure the Texarkana bank for its participation in the loan to clear the overdrafts and put up his Berry stock to help him out of a jam. Blewster added that Rushton kept the First National Bank from losing “all that money.” It must also be remembered that through this transaction the $97,000 note to appellant made by Rushton as Trustee was denuded of security.

I readily agree with the chancellor that liability of Rushton cannot be asserted upon the basis of the note alone. It seems very clear that the bank was on notice that Rushton was acting for a disclosed principal, Numark. This does not reach Rushton’s liability as a director of the bank, either under the federal statute or at common law.

As to the statutory liability, I cannot agree with the majority’s reading of Corsicana National Bank v. Johnson, 251 U. S. 68, 40 S. Ct. 82, 64 L. Ed. 141 (1919). The language quoted in the majority opinion is immediately followed by the words “with this qualification: that if he deliberately refrained from investigating that which it was his duty to investigate, any resulting violation of the statute must be regarded as ‘in effect intentional’ (Thomas v. Taylor, 224 U. S. 73, 82, 56 L. ed. 673, 678, 32 Sup. Ct. Rep. 403; Jones Nat. Bank v. Yates, 240 U. S. 541, 555, 60 L. ed. 788, 799, 36 Sup. Ct. Rep. 429).” In that case, the court also made these pertinent remarks relating to the application of the statute in a suit by a bank against an officer and director:

Nor would the absence of any improper motive or a desire for personal profit on defendant’s part be a defense; nor the fact that in spite of a loss upon this transaction the Bank remained solvent or even prosperous. Neither is the question of defendant’s liability, or the extent of it, to be affected by the fact, if it be a fact, that other officers or directors of the Bank were in part responsible, yet defendant alone was sued; nor that the Bank refrained from suing him until after a change in the stockholding interest or control.
# # *
In the present action the Bank represents the interest of its shareholders, as well as of its creditors; and if there was a violation of the act by defendant, with resulting diminution of its assets, the Bank is entitled to recover the damages thus sustained, notwithstanding it remained solvent, and irrespective of any changes in its stockholding interest or control occurring between the time the cause of action arose and the time of the commencement of the suit or of the trial. Even if it appeared that new stockholders acquired their interests with knowledge of the fact that such a loss had been sustained and that defendant was responsible for it, neither they nor the Bank would be thereby estopped from having full recovery from defendant.

In Corsicana, it was held that there was a jury question whether the defendant officer and director was liable to the bank under the statute. This conclusion was based in part upon an inference that the defendant either knew of a letter from the Comptroller of the Currency requiring reduction of certain loans “or, in the proper performance of his duties, would have known of it.”

The key words in the Corsicana bank case which foreclose the application made of it by the majority are “in effect intentionally” as explained by the qualification. The language of Corsicana, in my opinion, would bar, rather than permit, Rushton’s recovery.

Other courts have held the act applicable to factual situations not unlike the one before us. See Annot. 64 L. Ed. 141, et seq. See also, Annot., 25 A. L. R. 3d 932, et seq. In a case strikingly similar in many respects to the one before us, the Arizona Supreme Court rejected a director’s claim against a bank based upon just such arguments as are advanced by Rushton: i. e., that as a director, he knew nothing about the bank, had nothing to do with making loans, and merely signed when they told him to sign. McQueen v. First National Bank, 36 Ariz. 74, 283 P. 273 (1929). After emphasizing that a director was liable under the Corsicana case only if he assented knowingly or intentionally or had deliberately refrained from investigating that which it was his duty to investigate, the court then elaborated upon the duty of a bank director to the bank, its stockholders and customers, which extends much further than the selection of officers and delegation of management to them. That court pointed out that a director’s duty included supervision of the affairs of the bank, acquisition of a general knowledge of the manner in which its business is conducted and keeping such a degree of intimacy with its affairs to know to whom, and upon what security, its large lines of credit are given. That court aptly quoted from Gibbons v. Anderson, 80 F. 345 (C. C., Mich. 1897) as follows:

The stockholders might elect a cashier, and a president as well. The banks themselves are prone to state, and hold out to the public, who compose their boards of directors. The idea is not to be tolerated that they serve as merely gilded ornaments of the institution, to enhance its attractiveness, or that their reputations should be used as a lure to customers. What the public suppose, and have the right to suppose, is that those men have been selected by reason of their high character for integrity, their sound judgment, and their capacity for conducting the affairs of the bank safely and securely. The public act on this presumption, and trust their property with the bank in the confidence that the directors will discharge a substantial duty. How long would any national bank have the confidence of depositors or other creditors if it were given out that these directors whose names so often stand at the head of its business cards and advertisements, and who are always used as makeweights in its solicitations for business, would only select a cashier, and surrender the management to him? It is safe to say such an institution would be shunned and could not endure. It is inconsistent with the purpose and policy of the banking act that its vital interests should be committed to one man, without oversight and control.

The statute was also applied and interpreted in Grandprey v. Bennett, 41 S. D. 619, 172 N. W. 514 (1919) in a suit by depositors against a bank’s directors after insolvency of the institution. The plaintiffs alleged that the directors made false reports to the Comptroller and did not diligently and honestly manage the bank’s affairs. The court held that these allegations were sufficient to constitute a cause of action under the federal statute, relying upon various decisions of the United States Supreme Court that there is, in effect, an intentional violation of the statute whenever a bank director deliberately refuses to examine that which it is his duty to examine, or deliberately refuses to do any act required by the statute. The South Dakota Court held that allegations charging the directors with lack of diligence and negligence in failing to discover true facts which could have been ascertained by reasonable attention to the performance of the director’s duties were proper statements of a cause of action under the statute.

It is also clear that a national bank director’s liability is not circumscribed by the federal statute, and that factual allegations such as are made in this case are sufficient to charge not only a violation of thé National Bank Act, but a violation of common law obligations, so that, if the evidence fails to establish a statutory liability, a decree may be entered by application of the common law rule for measuring common law liability. Bowerman v. Hamner, 250 U. S. 504, 39 S. Ct. 549, 63 L. Ed. 1113 (1919); Michelsen v. Penney, 135 F. 2d 409 (2nd Cir. 1943); Grandprey v. Bennett, supra.

The whole subject is given excellent coverage in 3 Fletcher, Cyclopedia Corporations 660, et seq., § 1063 wherein it is said:

The National Bank Act imposes upon directors duties which do not rest upon them at common law, among which is the furnishing to the Comptroller of the Currency reports concerning the condition of the bank and the publication thereof. The Supreme Court of the United States held that the former section “affords the exclusive rule by which to measure the right to recover damages from directors, based upon a loss alleged to have resulted solely from the violation by such directors of a duty expressly imposed upon them by a provision of the act,” and that “liability cannot be entailed upon them by exacting a different and higher standard of conduct as regards such commands than that established by the statute without depriving directors of an immunity conferred upon them.” In a later case, the Supreme Court of the United States held that there was liability in case of an intentional violation of a statute by deliberately refusing to examine that which it was the duty of the directors to examine; and that where the Comptroller of the Currency gave notice to directors to charge ■ off certain assets, the disregarding of such notice and representing such assets in a statement to be good was a violation of the statute so as to make the directors liable to one injured thereby. This qualification has since been repeated as a part of the rule. More recently the court has limited earlier decisions to hold that a defense of estoppel which a director might have against the bank as to a violation of the Act will not be good as against the receiver, saying that “it is the evil tendency of the prohibited acts 'at which the statute is aimed, and its aid, in condemnation of them, and in preventing the consequences which the Act was designed to prevent, may be invoked by the receiver representing the creditors for whose benefit the statute was enacted.”
In light of the modern trend toward increasing the responsibility of bank fiduciaries, the courts would not be justified in holding that the statutory liability of directors extends the area of protection accorded a director. It is true, as it is appropriate, that a director conscientiously carrying out the duties of his office cannot be held for statutory violations of which he neither has nor should have knowledge. There the statute is the only measure of responsibility. But where he has substantially abdicated the responsibilities of his office, then the common-law principle which is in addition to the statutory rules operates to make him liable for losses improperly incurred by his co-officers to whom he has abandoned the operation of the bank. Thus, the true rule is that the statutory liability of directors of a national bank is the measure of the right of recovery against them for loss resulting solely from their violation of the express provisions of the statute, but that does not exclude their common-law liability for negligence in the management of business of the bank in violation of their oath of office which results in loss to its creditors and stockholders. Where the gist of the action is a violation of the duty imposed by the National Bank Act to justify a recovery, it must in effect be shown that there has been an intentional violation of the provisions of the act. Beyond this, however, the director is still under the common-law obligation to be honest and diligent in administering the affairs of the bank, and this his oath of office specifically requires.

These principles stated by the above authorities are not new to this court or to Arkansas law. Under Kirby’s Digest 863, a corporate director was made liable for “intentional neglect” to comply with the statutory provisions governing corporations. In Fletcher v. Eagle, 74 Ark. 585, 86 S. W. 810, it was held that directors of a bank were liable to its creditors for misappropriation, mismanagement or unwise investment by the president by reason of having entrusted the management to one whom they believed to be competent, honest and faithful in the discharge of his duties, unless they could not have prevented dissipation of the bank’s assets by attention to the duties required of them by statute, common usage, and the by-laws of the bank. In Bailey v. O’Neal, 92 Ark. 327, 122 S. W. 503, a jury verdict was directed against bank directors in suits by depositors. The clear import of this case is that directors are “intentionally negligent” whenever a series of connected acts of negligence continued for such a length of time that it must be inferred that their acts of negligence were intentional. There, the evidence showed that the directors knew the ability of a principal borrower of extensive amounts which were inadequately secured to repay its indebtedness depended upon profits to be made by it and that the indebtedness had rapidly increased. We pointed out that the directors cannot be mere figureheads and cannot escape liability by delegating the exclusive management to one officer, but must manage, control and generously supervise the affairs of their bank.

In Magale v. Fomby, 132 Ark. 289, 201 S. W. 278, the bank directors were held not liable to shareholders because of the statute of limitations. The court held, however, that bank directors would be liable for losses resulting from inadequately secured loans of $30,000 to a canning company capitalized at $10,000 in which they had stock, and which continually operated at a loss, though they believed it would ultimately pay a profit. It was said that the directors must have known these facts and that they were guilty of such reckless conduct as to constitute actionable negligence. This part of the decision was rested upon Bank of Commerce v. Goolsby, 129 Ark. 416, 196 S. W. 803. In that case, it was said that our statutes create a relationship between directors and stockholders and confer a power of management upon directors which necessarily carry corresponding duties and liabilities, independent of statute, which must be ascertained and controlled by common-law rules applicable generally to such relations and powers. The court declared the relationship as one of such a high degree of trust and confidence as to be more nearly comparable to trustee and cestui que trust than to agent and principal. We adopted the doctrine that it is the duty of bank directors to use ordinary diligence in ascertaining the condition of the bank’s business and that they may be presumed to have known that which by proper diligence they ought to have known, and that a rule no less stringent should apply between the bank and its directors. See also, Muller v. Planters Bank and Trust Company, 169 Ark. 480, 275 S. W. 750, where the doctrine is reaffirmed.

Knowledge of all of the affairs of a bank cannot be imputed to a director for the purpose of charging him with liability, unless there is something about the conduct of an officer or the affairs of the bank that would arouse the suspicion of a man of ordinary prudence. Sternberg v. Blaine, 179 Ark. 448, 17 S. W. 2d 286. Assuming, but not conceding, that Dr. Rushton was not possessed of actual knowledge sufficient to render him liable to the bank, it cannot be said that he was not put upon inquiry when his friend Blewster confessed the extent of the overdraft, his fear of an impending examination and the danger of the loss of his job. I do not see how it is possible to justify the subsequent action effectively stripping the bank (and ultimately its stockholders) of any security whatever for a $97,000 debt.

It is indeed regrettable that one such as appellee should suffer such great losses by reason of his implicit confidence in the integrity, judgment and competence of a friend. Yet, as between a bank director and its stockholders, the loss should fall upon the one who misplaced the confidence whenever he was possessed of knowledge of such facts as would have provoked further inquiry by an ordinarily prudent bank director. I submit that such facts existed and that Rushton, unfortunately, had both a statutory and common law liability.

Supplemental opinion on rehearing delivered November 8, 1971

Banks & banking — director’s duty as fiduciary, violation of — sufficiency of evidence. — Rehearing denied where the proof failed to show bank director was aware of the bank’s loan limit at the time the events were taking place, and the proof failed to establish a violation of director’s common law or statutory duty as a fiduciary.

George Rose Smith, Justice,

on rehearing. The appellant now calls attention to a sentence in Dr. Rushton’s testimony, in which he stated that the bank’s loan limit was $100,000.00. Of course Dr. Rushton learned that fact during the first trial of this case, but there is no direct proof that he was aware of it when the events were taking place. As we indicated in our opinion, that question^was not developed at the trial.

It is also argued on rehearing that we overlooked the appellant’s contention that Dr. Rushton violated his common law duty as a fiduciary, as well as his statutory duty. The point was not overlooked. It was and is our view that the proof did not establish a violation of either duty; so there was no reason for us to make any distinction between the two.

Rehearing denied.

Fogleman, J., would grant the rehearing.


source: Caselaw Access Project

author: George Rose Smith, Justice. Conley Byrd, Justice, dissenting.

license: Public Domain

text:
    HAMPTON SCHOOL DISTRICT NO. 1 of Calhoun County v. Hodge PHILLIPS
    5-5644
    470 S.W. 2d 934
    Opinion delivered October 4, 1971

      Brown, Compton, Prewett ir Dickens, for appellant.

      Shackleford ir Shackleford, for appellee.
   George Rose Smith, Justice.

The plaintiff-appellee, Hodge Phillips, was formerly employed as superintendent of the appellant school district. The district discharged Phillips as of June 30, 1970. Contending that the discharge was in violation of his contract of employment, Phillips brought this suit in equity to obtain a reformation of the contract, on the ground of mutual mistake, and to recover damages for his wrongful discharge. This appeal is from a decree granting the prayer for reformation and awarding damages in the sum of $13,060. For reversal the district insists that equity did not have jurisdiction of the suit and that in any event Phillips is not entitled to damages.

Phillips had been employed as superintendent of the district for several years. It was the parties’ practice to execute two-year contracts of employment, effective as of July 1. Toward the end of the first year, however, the parties always executed a new two-year contract, usually containing a raise in Phillips’s salary. Hence each new two-year contract superseded the second half of the contract executed during the preceding year.

At a meeting of the school board held on July 1, 1969, the board approved a $1,500 salary increase for Phillips, which, according to the minutes of that meeting, made “his total salary $13,000 plus house and utility.”

Phillips and his secretary prepared all the district’s contracts with its teachers and other employees. Phillips also signed all the contracts on behalf of the district, under a board resolution authorizing him to use rubber-stamp facsimile signatures of the president and secretary of the school board. In actual practice, Phillips’s secretary prepared the contracts (as directed by Phillips) and affixed the facsimile signatures.

Both Phillips and his secretary testified, without contradiction, that the secretary made two mistakes in preparing the contract of employment now in issue. First, the secretary used a one-year form of contract instead of the two-year form that the parties intended to use. Second, she failed to include a provision that Phillips was to continue to occupy a dwelling furnished to him by the district, with respect to which the district also paid the utility bills. Phillips signed the contract in his own behalf without noticing the errors.

Under the law a copy of the superintendent’s contract of employment must be filed with the county treasurer. That was done. In February, 1970, Phillips discovered the errors in his contract and tried to correct them himself by preparing and signing a new contract. That effort, however, was abortive, because Phillips used the facsimile signature of a school board president who went out of office before the corrected agreement was filed with the county treasurer. In April, 1970, the school board took the position that Phillips’s contract of employment was effective for only one year. Upon that assumption the board notified Phillips that his employment would be terminated as of June 30, 1970. Phillips then brought this suit for reformation and for damages.

There is no merit in the district’s contention that, because Phillips sought a judgment for money damages, he had an adequate remedy at law. Reformation of written instruments, for mutual mistake, is a matter within the exclusive jurisdiction of equity. Soderman v. Bell, 102 Ark. 83, 143 S. W. 595 (1912). In a case like this one, where the contract must first be reformed to establish the plaintiff’s cause of action for damages, the procedure becomes a two-step process; but both steps are within the jurisdiction of equity. Upon that precise point we had this to say in Martin v. Hempstead County Levee Dist. No. 1, 98 Ark. 23, 135 S. W. 453 (1911): “Here the appellee asks that the contract be made to conform to the agreement entered into according to the intention of the parties, and when so reformed appellee alleges that it is entitled to damages because appellant failed to perform the contract according to its terms; that is to say, appellee first asks that its rights under the contract be established, and, second, that its rights as established be enforced affirmatively against appellant. The first is granted as preliminary to the final relief; and in such cases equity has exclusive jurisdiction.”

The appellant district is also in error in its principal argument, that Phillips’s employment was actually for only one year. What counsel seem to overlook is the rule that when a court of equity reforms a contract, the decree relates back and takes effect (at least as between the parties) from the date of the original execution of the contract. Mason v. Jarrett, 218 Ark. 147, 234 S. W. 2d 771 (1950). In other words, if the chancellor was correct in reforming this contract, then Phillips is now in the same favorable position he would have occupied if his contract had been drafted and signed by the parties in the first instance as a two-year contract.

The evidence clearly and convincingly supports the chancellor’s decree of reformation. For years it had been the district’s unvarying practice to give Phillips a two-year contract of employment. There is not a word of direct proof that the school board meant to change its practice in 1969. To the contrary, both Phillips and his secretary testified that the one-year limitation in the 1969 contract was a mistake on the part of the secretary. That testimony is undenied, for the district introduced no evidence at the trial. Needless to say, the mistake was mutual if both Phillips and the district meant for the renewal contract to be of two years’ duration. That the secretary (or even Phillips himself) acted for the district in affixing the facsimile signatures does not mean that it was impossible for both parties to be mistaken in so signing an agreement that did not express their true intent.

We do not overlook Johnson v. Wert, 225 Ark. 91, 279 S. W. 2d 274 (1955), where we held that a school board’s resolution authorizing the employment of a superintendent is not in itself a contract of hire. Of course not. But here the parties went further and jointly signed a contract that was meant to carry the board’s July 1 resolution into effect. That contract, as retroactively reformed by the chancellor, entitles Phillips to recover.

The school district relies upon the minutes of a board meeting held on March 12, 1970, at which Phillips stated that the contract already on file “was the first half of a two year contract and that another contract would be taken to the courthouse July 1., 1970.” According to the same minutes, however, Phillips also stated that his contract did not expire until June 30, 1971, and a board member verified that statement. There is no suggestion that Phillips was trained in the law or knew his legal rights in the matter. That he mistakenly supposed that he could protect his position by filing the abortive corrected contract which he had prepared does not abrogate his clear right to reformation, especially as the district was not misled to its detriment by Phillips’s statement. We conclude that the trial judge was right in holding that Phillips’s remarks at the March, 1970, board meeting did not impair his existing clear-cut cause of action for reformation of the contract.

By cross appeal Phillips contends that the chancellor should have included in the decree an award of $3,000 to reimburse Phillips for the loss of travel expenses of $250 a month to which he was entitled under the contract of employment. That contention is without merit. After his discharge Phillips did not actually do any traveling for the district. Consequently he is not in a position to claim reimbursement for expenses that were not in fact incurred.

Affirmed.

Byrd, J., dissents.

Conley Byrd, Justice, dissenting.

I dissent because there was no mutual mistake. The school board at a regular meeting authorized the extension of Mr. Phillips’ contract for two years, but as we pointed out in Johnson v. Wert, 225 Ark. 91, 279 S. W. 2d 274 (1955), this resolution of the school board did not constitute a contract. According to Mr. Phillips’ own testimony the school board took no further action on his contract following the resolution. All action taken on the contract after that date was by Phillips himself in preparing the contract and affixing thereto the facsimile signatures of the president and secretary of the board. Thus I am unable to see how the school board could be involved in any mistake that may have been made.

Since the laws of this State, Ark. Stat. Ann. § 80-1304 (1969 Supp.), require that a superintendent’s contract be in writing and filed with the county treasurer before it becomes valid, the patrons of the district should be entitled to rely on the status of their school personnel as shown by the public records when going to the polls to select board members to carry out their wishes.


author: Lyle Brown, Justice.

text:
    ARKANSAS STATE HIGHWAY COMM’N v. ARKANSAS REAL ESTATE COMPANY, INC. et al
    5-5589
    471 S.W. 2d 340
    Opinion delivered October 4, 1971

      Thomas B. Keys, George Pike, Jr. and Hubert Graves, for appellant.

      Moses, McClellan, Arnold, Owen ir McDermott and Gene Worsham, for appellees.
   Lyle Brown, Justice.

Appellees are Arkansas Real Estate Company, Inc. and Arkansas Warehouse Corporation. They owned separate record title to adjacent tracts totalling seventy-seven acres. Appellant condemned some eight acres running north and south across the west side for a controlled access facility; and also a small narrow tract along the entire south side of the acreage for drainage structures. The alleged unity of use, together with the amount of just compensation, was challenged in the trial. Both issues were submitted to a jury on interrogatories. The jury found unity of use and fixed compensation at $50,000. On appeal it is contended that the court erred in (1) permitting certain deeds into evidence which were executed after the date of taking, (2) that the landowner should not have been permitted to testify that the lands were in one ownership at the time of condemnation, and (3) that the question as to whether the tracts constituted a unity should not have been submitted to the jury.

The highway commission based its claim of separate ownership on the fact that at the time of taking (Sept. 8, 1959) the record title to some parcels was in Arkansas Real Estate Company, Inc., and the other parcels were in the name of the other appellee, Arkansas Warehouse Corporation. In fact it named each of the corporations as separate owners and listed under each one’s name those parcels respectively shown in their names.

Morris High, president of Arkansas Warehouse Corporation, testified as to the interlocking nature of the two companies. We summarize his testimony. Initially the seventy-seven-acre tract was owned by Arkansas Real Estate Company. In 1958 the owners of that company created the warehouse company. Ninety-eight percent of the stock of the new company was owned by the parent corporation. Another corporation, Rose Theatre, Inc., was wholly owned by the parent company, and two small tracts within the seventy-seven acres stood in Rose’s name. The entire tract is bound on the north by Roosevelt Road and on the south by Chicago, Rock Island & Pacific Railway. It was decided in 1958 that the 77-acre tract, treated as a unit, would be most profitable for the establishment of a series of warehouses. Thus the warehouse corporation was created and it was agreed, in 1958, that all the tracts would be vested in the new corporation. In May 1958 three separate deeds were executed wherein the grantor was Arkansas Real Estate Co., Inc., and the grantee was Arkansas Warehouse Corporation. The descriptions in those deeds were rather voluminous because part of the lands was in lots and blocks and part was cut into small acreage plots. After the date of taking and some time before trial it was discovered that the transfer of five parcels into the warehouse corporation had not been made. Three of those parcels stood in the name of the real estate company and two parcels in the name of Rose Theatre, Inc. Thereupon, five separate deeds covering those properties were executed and recorded, naming the warehouse corporation as grantee. (Those are the five conveyances to which appellant objected being introduced.) Mr. High explained that the delay was due to two factors: The preparation of the deeds and the checking of title was a complicated job, and titles to some small tracts had to be perfected by obtaining quitclaim deeds. Otherwise, he insisted, the transfer of the parcels represented by the five objectionable deeds would have been executed and recorded along with the deeds in May 1958. Those five deeds included property that was subject to condemnation and of course included in the complaint.

With the recited background we turn to a consideration of the three points for reversal.

1 The Court Erred in Allowing the Introduction of the Five Deeds. First, appellant points out that the trial court entered an order in January 1960, finding that the real estate company owned certain tracts and that the warehouse corporation owned the other. That order was primarily for the purpose of distributing funds deposited in the registry of the court as estimated just compensation. Actual ownership was not in issue when that order was entered. In fact the order was based on an oral petition of the condemnor and does not reflect the presence of anyone representing the landowners. Had the trial court considered that order binding as to title then title would not have later been an issue. Furthermore, the highway commission, on the eve of trial, filed a motion to try the case on the basis of separate and distinct ownership. That motion was overruled in the course of the trial.

Additionally, and with regard to the same question, we refer to the first appeal, Arkansas State Highway Comm’n, v. Arkansas Real Estate Co., et al, 243 Ark. 738, 421 S. W. 2d 883 (1967). The opinion on appeal of that first trial reflects an allegation of single ownership. On that issue we suggested that if the landowners were able to demonstrate a right to close the streets platted in the western portion of the tract but never opened, “they may be in a position to insist that the tract be treated as a single ownership.” Subsequent thereto Arkansas Warehouse Corporation petitioned the City of Little Rock to close the streets and was successful. Thus the dispute over ownership was considered much alive in both trials, showing that the court did not treat the order of January 1960 as settling the issue. We conclude that the order merely recited the “paper title” for the purpose of distributing the deposits.

Finally, in regard to the first point appellant argues that the five deeds should not have been admitted into evidence because they were dated after the date of condemnation. We are afforded no precedent on that issue. We hold they were admissible to support the uncontradicted testimony of Mr. High to the effect that the decision to transfer all title to a single ownership was first made in 1958 and that those deeds were delayed due to the enormity of the work involved and the time required for curing of title. In fact, in a recent case we held that proof of complete record ownership in the landowner is not in every instance a prerequisite to establish unity of use. Ahrens v. Harris, 250 Ark. 938, 468 S. W. 2d 236 (1971).

II. It Was Error to Permit the Landowner to Testify That All the Land Was in One Ownership on the Date of Condemnation. What we have said in answering the first point should be sufficient. Additionally we reiterate that Arkansas Real Estate Co., Inc. owned practically all the stock in Arkansas Warehouse Corporation, and all the stock of Rose Theatre, Inc. Thus it is seen that the lands were the property of three closely held corporations and that the parent company controlled the other two organizations.

Appellant further argues that an intended development of two parcels as a unit cannot be used as a measure of just compensation. We are not furnished any Arkansas precedent to support that contention and we are not persuaded by the cited cases from other jurisdictions. We think it is fundamental that when two contiguous parcels under a common ownership are shown to exist, the owners are entitled to compensation based on the highest and best use of the property. There was abundant evidence to show the most valuable use of the property to be for warehouse purposes and it was uncontradicted that the owners began effecting their plans in that direction in 1958 by placing most of the lands in the warehousing corporation.

III. The Trial Court Should not have Submitted to the Jury the Question as to Whether the Tracts Constituted a Unit. The first interrogatory submitted to the jury asked it to find whether the landowners “have proven by a preponderance of the evidence that the various tracts involved constitute one unit.” The answer was unanimously in the affirmative. The appellant contends that the question was one of law for the court. We cannot agree. Certainly there may arise cases in which the question of unity is actually a question of law; but where the unity hinges on disputed facts, it is appropriate to submit the question to the jury. Arkansas State Highway Comm’n. v. Schanbeck, 240 Ark. 277, 398 S. W. 2d 897 (1966).

Affirmed.


author: John A. Fogleman, Justice.

text:
    Al NORRIS and Gertrude NORRIS, his wife v. Eva Jo DAVES
    5-5616
    470 S.W. 2d 937
    Opinion delivered October 4, 1971

      Guy H. Jones, Phil Stratton and Guy Jones, Jr., for appellants.
    No brief filed for appellee.
   John A. Fogleman, Justice.

This appeal is brought from a judgment against appellants, employers of appellee, for damages resulting from a cut on appellee’s hand suffered while engaged in her employment. Appellants assert that the. circuit court erred in denying their motion for a directed verdict. We agree.

Appellee sued appellants, alleging that her injury resulted from their negligent failure to provide her with a safe place in which to work or with proper utensils. Appellee, an adult female, was engaged in the performance of her duties at the Circle E Barbeque, owned and operated by appellants, when her hand was cut.- She was washing a one-gallon glass vinegar jug used for mixing and storing barbecue sauce. An ordinary pint fruit jar lid would fit on the top of this container. Mrs. Daves was washing the jug in hot water. She said that her hand was too fat to fit inside its opening at- the top. She was using a hot rag to wash around the top of the jug, when it broke and her thumb was cut. She saw no defects in the jug, and there was no evidence that there- were any. There was no other evidence as to the cause of the fracture of the jug. Mrs. Daves, now 41, had worked in restaurants and cafes since she was 12 years old.

Appellants asserted in their motion at the conclusion of the evidence that appellee had failed’ to show that they were guilty of any negligence which was the proximate cause of her injury.

Appellee’s burden of proof was not met by simply showing that the jug broke and that she was injured. Harmon v. Morrison, 201 Ark. 820, 147 S. W. 2d 35. This is not a situation to which res ipsa loquitur applies. A master does not insure his servant’s safety and is not required to furnish a place or equipment so free from danger that the servant is free from all risk of irijury. Caddo River Lumber Co. v. Henderson, 194 Ark. 724, 109 S. W. 2d 425; Hall v. Patterson, 205 Ark. 10, 166 S. W. 2d 667. He is only required to exercise ordinary care to furnish the servant a reasonably safe place in which to work and reasonably safe instrumentalities with which to perform his job. Tucker Duck and Rubber Co. v. Harvey, 202 Ark. 1033, 154 S. W. 2d 828; Basye v. Odom, 205 Ark. 423, 168 S. W. 2d 1092; Harmon v. Morrison, supra. The master’s duty is measured in the light of his right to assume that the employee will exercise some care for his own safety. Caddo River Lumber Co. v. Henderson, supra. An employer is presumed to have performed this duty and the employee cannot recover for his injury unless he shows that the employer was guilty of negligence and that this negligence caused the injury. Tucker Duck and Rubber Co. v. Harvey, supra; Harmon v. Morrison, supra. Our quotation in Harmon from an earlier opinion is equally applicable here. It is, in part:

This court has many times held that, in order to recover because of the failure of the master to furnish an employee with safe appliances or a safe place to work, the burden is upon the complaining party to establish the fact that the appliances or place was unsafe, and also that the master either had notice of the unsafe condition or defect or could, by the exercise of ordinary care, have known of the defect.

Since appellee failed to meet her burden of proof and the case appears to have been fully developed, the judgment is reversed and the case dismissed.


author: J. Fred Jones, Justice.

text:
    John McKOWN et ux v. L. D. STROUD
    5-5558
    470 S.W. 2d 929
    Opinion delivered October 4, 1971

      Felver A. Rowell, Jr., for appellants.

      Gordon, Gordon & Eddy, for appellee.
   J. Fred Jones, Justice.

This appeal is from a decree of the Conway County Chancery Court concerning public rights to an easement by prescription over Lot 2, and particularly over the west half of Lot 2, in Block 5 of Moose Addition to the town of Morrilton. Lots 1 and 2 lie beside each other with the east end of each lot fronting 50 feet on East Street. They extend from East Street west 151.25 feet to an alley. Lot 1 lies south of Lot 2 and Lot 1 is bounded on its south side by North Street.

Robert Lane is the owner of the west half of Lot 2 and the west 79.1 feet of Lot 1. Mrs. R. H. Dickenhorst is the owner of the east half of Lot 2 and the east 72.15 feet of Lot 1. Lane owns a brick building on the southwest corner of Lot 1. It fronts 55.5 feet on North Street and extends north along the alley a distance of approximately 50 feet to the north line of Lot 1. Lane originally owned a cafe building on his east 23.6 feet of Lot 1 but it has been torn down to provide a private driveway from North Street across the east end of Lane’s portion of Lot 1 to his west half of Lot 2.

Mrs. Dickenhorst owns a brick building which extends across the entire length of her east 72.15 feet of Lot 1. Her building also fronts on North Street and extends north approximately 45 feet. All of Lot 2 lying north of Lot 1, and behind the buildings on Lot 1, is vacant except for a small taxi stand owned by Mrs. Dickenhorst in the northeast corner of Lot 2.

Lane leased his building to the appellee, L. D. Stroud, with right to use the vacant area north and east of the building for customer parking and for ingress and egress from North Street and the alley on the west. Mrs. Dickenhorst leased her building to the appellants, John and Christine McKown. Mrs. McKown owns and operates a tavern where beer is sold and consumed in her leased building and Stroud owns and operates a liquor store where beer is also sold in his leased building.

Mr. Stroud decided to install a “drive-in window” on the east side of his building, thus enabling customers to drive in from North Street over the 23.6 foot area between his building and the McKown Tavern; make their purchases at the drive-in window, then drive around his building over the west half of Lot 2 and exit from the premises via the alley west of his building. In preparing the premises for this use and purpose, Mr. Stroud, with Mr. Lane’s approval, erected a fence from the northeast corner of the west half of Lot 2 along the east boundary line of the west half of Lot 2, to a point adjacent to the northwest corner of the McKown Tavern building, thus preventing vehicular traffic from passing from the rear of the tavern building to the rear of the liquor store and vice versa.

The McKowns objected to the erection of the fence and Mr. Stroud objected to McKowns’ customers parking in the area behind and adjacent to his liquor store. The objections finally grew into charges and countercharges of tacks and broken glass in driveways, destruction of fences and damage to business, and resulted in a petition in chancery filed by Stroud for an injunction against Mr. McKown restraining him from trespassing on his leased premises and from interfering with the fence erected by Stroud. Mr. McKown denied in his answer that he owned the tavern or that he interfered with the fence or its erection, but Mrs. McKown filed a separate petition contending that the general public had acquired an easement over the entire length of Lot 2 by prescription and she prayed an order requiring Stroud to remove the fence he had erected across the property subject to such easement. Each of the parties claimed damages against the other.

The cases were consolidated for trial and from the evidence submitted at the trial the chancellor found that the sporadic use by the general public of the lands in the rear of the buildings involved was not sufficient to enable either the McKowns or the public generally to acquire an easement for either parking or passage. The chancellor entered a decree enjoining the McKowns from interfering with the fence erected by Stroud and from trespassing thereon. Damages were denied to both parties and the costs were assessed equally against Stroud and the McKowns. Mr. and Mrs. McKown have appealed to this court and they rely upon the following point for reversal:

“That the findings of the trial court are against the preponderance of the evidence when it found that there had only been sporadic use of the premises to the rear of the buildings which had not ripened into a public way by prescription.”

We are of the opinion that the chancellor’s findings were not against the preponderance of the evidence.

In establishing easements over unenclosed private lands by prescription, the actual use, sporadic or otherwise, is not as important as is the claim of right under which the use is made or exercised. Duty v. Vinson, 228 Ark. 617, 309 S. W. 2d 318.

There had never been an alley or passageway platted or dedicated to the public over the land involved in the case at bar. As a matter of fact there is no evidence of a well-defined right-of-way claimed in this case and the entire east and west halves of Lot 2 are involved. Stroud testified that he has designated private parking areas on Lot 2 at the rear of his liquor store for the use of employees. and customers, leaving room for his customers to drive between the rear of his store building and the parking area. He testified that on many occasions the McKown Tavern customers would park their automobiles in this area for long periods of time blocking the rear doors to his building and the passageway around his building.

There was considerable evidence to the effect that the area involved behind the buildings leased by the respective parties in this case had been used by the general public for parking wagons and automobiles for many years, and that on many occasions people driving to the rear of the buildings on Lot 1 would drive through the length of Lot 2. There is also considerable evidence to the effect that the area involved behind the buildings leased by the parties in this case was no different in public use from many other vacant lots and areas behind business buildings in the town of Morrilton — simply used by the general public for off-street parking and convenient passage without claim of right adverse to the owners. ■

The evidence in this case also indicates that there has always been little occasion for the public generally to use Lot 2 except for off-street parking and for going to and from the rear of the buildings on Lot 1. The evidence is to the effect that at oné time there were four different businesses in the building occupied by the Mc-Kowns, and that for the past few years all of the building has been used for their tavern except for a barber shop in the east end of the building.

Mr. Lane testified that at one time there were five different business tenánts in his building and that they had private parking areas marked as such on his portion of Lot 2 behind their respective businesses. He testified that in recent years someone knocked the curb off the west side of East Street with a sledge hammer in order to drive into the area; that a part of the area is real rough and that he has never driven, and has never seen others drive, an automobile all the way through the area from East Street to the alley.

Wiley McCoy testified that he operates the taxi stand on the northeast corner of Lot 2. He says that in the 1920’s cottonseed was sold on the area involved. Mr. McCoy then testified in part as follows:

“Q. Now to your knowledge, how long has the public generally traveled the passageway immediately behind McKown Tavern, Morrilton Liquor Store and Bishop’s Barber Shop?
A. Well they was the Potteets that bought cottonseed back there. And I’d come with my dad, had some cottonseed in the wagon, and he would sell and you would go either way through there. Now how long ago that’s been, I don’t know.
Q... Since you were a small boy?
A. Yeah.
Q. How long ago has that been?
A. It’s been a good while.
Q. All right, did the public to your knowledge generally travel this area?
A. Yes, I’ve seen them in there with wagons where you couldn’t hardly get through unloading seeds.”

Mr. McCoy testified that vehicles can still be driven to the rear of the tavern from East Street and he then testified as follows:

“Q. Mr. McCoy, prior to the time this fence was erected, did you ever drive through behind the two buildings in operating your taxi business?
A. Yes, I would haul passengers. And they would get off at the liquor store and get their package and I’d go down through there, but I never did drive but a few times because if you’ve got kind of a long car, if you don’t hit it slanted, why it’ll drag on me.
Q. But you have used it?
A. Yeah, I have drove through there.”

Mrs. McKown testified that before the fence was erected her customers could drive all the way through the property involved and that now they cannot. In explaining her loss in business she testified as follows:

“Q. Would you explain that to the court?
A. Well because they can’t drive through there. They just don’t come to the back door any more. People that didn’t want the general public to see them come to the back door and order their beer and put it in their car and drive on through. But now they can’t.
Q. Why can’t they?
A. Because of the fence.
Q. All right, can they turn around?
A. Finally, yes, sir.
Q. Is it inconvenient for them?
A. Very much so.”

On cross-examination Mrs. McKown testified that she had operated her tavern a little over two years; and that she had never claimed any parking rights behind Mr. Stroud’s liquor store. She then testified as follows:

“Q. Did you have any parking space on it that was let to you or did you have a right to park on it?
A. Nothing except just this alley thing what everybody called an alley behind my building. Not behind Mr. Stroud’s building.
Q. You never contended you had any right to pull up there and park?
A. No.
Q. Did Mr. Stroud use it for loading and unloading purposes?
A. Why I think so.
Q. And you used the area behind your store for loading and unloading?
A. Well I don’t believe so. I don’t know why he should. His trucks came through that way if that’s what you are talking about.
Q. You used this space behind your store for loading and unloading also?
A. No.
Q. You did not. How did the trucks unload at your place? How did the beer trucks unload? Where did they park?
A. In the front because there isn’t any room in the back. They can’t drive through.
Q. Have they ever pulled to the back and unloaded?
A. Not that I can remember.
Q. Even before the fence was erected?
A. I don’t think so.
Q. All right.
A. The garbage truck does.”

From the overall testimony in this case it appears that at one time there were nine separate stores and businesses located on Lot 1 fronting on North Street, and that the general public drove wagons over Lot 2 in loading their purchases from the rear doors of the various businesses on Lot 1 and for parking their wagons and hitching their teams off the streets while shopping in town. The testimony further indicates that there has never been any reason for the general public to travel over the area involved except for off-street parking and in patronizing the businesses located on Lot 1. The testimony further indicates that the liquor store and tavern are the only businesses left on Lot 1 with doors opening to the rear and that in recent years there has been little occasion for the general public to use the area involved except for off-street parking.

The chancellor relied heavily on our decision in Duty v. Vinson, supra, and in doing so we are of the opinion that the chancellor was correct. In Duty v. Vinson we said:

“While the owner of one lot may acquire an easement over the unenclosed land of another by open, continuous and adverse use thereof under a claim of right for a period of seven years, a mere user does not ripen into a prescriptive right unless the circumstances are such as to put the owner of the servient estate on notice that the way is being used adversely under a claim of right. Bond v. Stanton, 182 Ark. 289, 31 S. W. 2d 409; Barbee v. Carpenter, 223 Ark. 660, 267 S. W. 2d 768. The burden was upon appellees to show by a preponderance of the evidence that the use of their tenants and the public generally of the disputed strip was adverse to appellants and their predecessors in title and not under their permission.”

We find no evidence in the record that the use made of the property by the general public in recent years, or even in the horse and wagon days, was anything other than permissive.

We have not overlooked Rochelle v. Piles, 244 Ark. 606, 427 S. W. 2d 10, cited by the appellant, which involved the only means of ingress and egress for many years over a part of what had formerly been a clearly defined public way between the properties of the litigants. Neither have we overlooked our decision in Fullenweider v. Kitchens, 223 Ark. 442, 266 S. W. 2d 281, cited by the appellants, in which case the appellant attempted to close a road running from the appellee’s land to a public road and that had been used as the only means of access to the appellee’s land for a period of 35 years. In Fullenweider the appellant fenced the appellee’s property off from access to the public road and refused to designate an alternate route across appellant’s land.

We do not agree with the appellants that the facts in the case at bar are similar to the facts of Barbee v. Carpenter, 223 Ark. 660, 267 S. W. 2d 768, cited by the appellants. In the first place the easement considered in Barbee was over a part of a dedicated street which had been abandoned by city council action because a part of it was inaccessible. The open portion of the street had been deeded to the appellees who were the abutting landowners. The open portion of the street led to the appellants’ backyard and was the only means of ingress to the appellants’ backyard. There was a hedge along the sidewalk in front of their home and the driveway served not simply as an alternative route of convenience, but constituted the only available path to the appellants’ back door. By a correction deed from the city in 1940 the appellee simply undertook to convert into private property what had been a public street since 1881.

We are of the opinion that the chancellor’s decision is not against the preponderance of the evidence in this case, and that the decree should be affirmed.

Decree affirmed.


author: Conley Byrd, Justice.

text:
    ARKANSAS REAL ESTATE CO., INC. v. Claud HEEB et ux
    5-5580
    471 S.W. 2d 327
    Opinion delivered October 4, 1971

      A, Joseph Nussbaum, for appellant.

      Rose, Barron, Nash, Williamson, Carroll & Clay, for appellees.
   Conley Byrd, Justice.

Appellant Arkansas Real Estate Co., Inc. appeals from judgments entered upon a $10,-000 note payable to Claud Heeb, dated April 23, 1965, and a $10,000 note payable to Claud Heeb and Elsie Heeb dated May 17, 1967. For reversal of the judgments appellant contends that the transactions with Mr. Heeb were actually sales agreements for Arkansas Warehouse Corporation stock that both parties knew had not been registered with the Arkansas Securities Commission. Based upon that premise, appellant then argues that the notes were unsupported by consideration and that the transaction is void under Arkansas Securities Act (Ark. Stat. Ann. §§ 67-1235 — 67-1262 [Repl. 1966]).

The instruments were produced and the signatures admitted. Under these circumstances, the Uniform Commercial Code, Ark. Stat. Ann. § 85-3-307 (Add. 1961), placed the burden upon appellant to prove its defenses.

Mr. Heeb had difficulty understanding the questions both on direct and cross-examination. A fair reading of his testimony would indicate that he first met appellant’s president and vice president in his home. From that meeting he became interested in purchasing some Arkansas Warehouse Corporation stock. As a result of this interest he gave appellant a check for $10,000 and received the April 23rd note. The note recites that it is secured by Arkansas Warehouse Certificate No. 201 for 10,000 shares. The certificate No. 201 attached to the note certifies Arkansas Real Estate Co., Inc. is the owner of 10,000 shares. Later the same year Heeb delivered some Foundation Securities and Investors Preferred insurance stock to appellant and received another $10,000 note secured by Arkansas Warehouse Corporation stock. This latter note was renewed May 17, 1967, and recites that it is secured by a pledge of Certificate No. 186 of Arkansas Warehouse Corporation for 10,000 shares of stock. This certificate also certifies that Arkansas Real Estate Co., Inc. is the owner thereof. On re-cross examination the following occurred:

"Q. We were talking about trading for some Arkansas Warehouse Corporation stock. How did that come bout?
A. There wasn’t any warehouse stock delivered to me. This is all I got in my place there.
Q. This is Arkansas Warehouse stock here. This here. These certificates.
A. Well, I got here and he says this is the way we’re doing this.
Q. We were told earlier you remember that the stock of Arkansas Warehouse Corporation had not been cleared by the Securities Department where they could sell their stock on the market?
A. He said what?
Q. You knew the stock of the Arkansas Warehouse Corporation had never been cleared by the Securities Department where it could be sold to the public at large?
A. Well, yes, I knew that.
Q. Was there some discussion at that time as to handling it as a trade of stock or as a loan?
A. No. There wasn’t ... he wasn’t talking about couldn’t be sold or anything. I found that out later.

At the March 4, 1970, hearing, Mr. Traylor, appellant’s president, testified by stipulation by affidavit as follows:

“I was contacted by Mr. Hamilton Moses, a friend of Mr. Heeb’s, to ascertain whether or not I would be interested in accepting certain foundation Securities and Investors’ Preferred stock which Mr. Heeb had, in trade for certain stock in the Arkansas Warehouse Corporation. The Foundations Securities and Investors’ Preferred stock was of questionable value and there was no market for the stock at the time these two trades were made; there likewise was no market for the Arkansas Warehouse Corporation stock. Two separate trades were worked out between us where Mr. Heeb received a total of 20,-000 shares of Arkansas Warehouse Corporation stock in return for the stock he gave Arkansas Real Estate Co., Inc.
# # #
The Securities Department of the State of Arkansas had not authorized Arkansas Warehouse Corporation at that time to sell its stock or debentures to the public and Mr. Heeb was aware of this at the time. For this reason, the trade of the stock was handled as a loan agreement rather than an outright sale, and the Arkansas Warehouse Corporation stock was transferred to Mr. Heeb as a pledge or security for loans, in fact, no money changed hands at all.
The notes given Mr. Heeb was given by me for the purpose, more or less, of my guaranteeing the value of the stock he was receiving.”

At the June 22, 1970, hearing Mr. Traylor testified on direct that the two transactions were sales of Arkansas Warehouse Corporation stock and that as a result Mr. Heeb was made a director of Arkansas Warehouse Corporation. He explained that upon the advice of Mr. Moses, his lawyer, the notes were executed as a precaution against a violation of the Arkansas securities law. On cross-examination Mr. Traylor testified:

“Q. Okay, got that clear. And so your sole explanation of why this note was issued was an effort to avoid running afoul of any Arkansas securities laws?
A. In this particular case. We weren’t selling stock at that time so we just did that as a precaution. We were advised to do it at that time.
Q. Tell me how you can sell stock and not be selling stock? Now, you either made a stock sale or you didn’t make a stock sale.
A. Mr. Campbell, you can sell stock to one person in a corporation without breaking the securities laws. You know that as well as I do.
Q. Well, why didn’t you do it then? Why did you disguise it in this manner?
A. I tried to tell you. We were advised by Mr. Moses to handle it the way we handled it. He drew up this note for that purpose.”

Mr. John Yancey, appellant’s vice president, testified that the transaction was a sale. On cross-examination he stated that he heard Mr. Moses explain to Mr. Traylor how to handle the transaction with Mr. Heeb.

Mr. L. K. Collier testified that as Mr. Heeb’s attorney he had endeavored to collect the notes sued on. As a result he received from appellant’s president the following letter:

“Dear Mr. Collier:
As per our conversation on the notes owed to Mr. Claud Heeb, we are getting the order signed and put on record for the land in Prairie County which we have for sale. Also we hope the opposition will not go to the Supreme Court so that this money derived from the sale of these lands will be available to us. We are also working on liquidation of other holdings as rapidly as possible. We are interested in paying these notes as soon as we can without any problems.
I will call you the end of next week and I should have complete information on the above mentioned lands in Prairie County.”

There. is substantial. evidence in the record from which the trial court could have found that Heeb had no knowledge that the Arkansas Warehouse Corporation stock was not registered with the Arkansas Securities Commissioner. Even if we should accept appellant’s proposition that the transaction was in effect a sale still his assertion in his affidavit that he executed the notes to guarantee the value of the. stocks supports a finding that the notes were executed for a valuable consideration. As pointed out by the trial court in its findings: “Mr. Traylor committed the corporation to the payment of said notes and the Corporation, acting through its president, treated such notes as being liabilities against the company ...” The trial court’s finding is certainly supported by the evidence.

Affirmed.


text:
    STATE of Arkansas v. Richard B. ADKISSON
    5617
    471 S.W. 2d 332
    Opinion delivered October 4, 1971

      Jim Guy Tucker, Prosecuting Attorney; Robert J. Brown, Asst. Pros. Atty., for petitioner.

      Gene Worsham, for respondent.
   Conley Byrd, Justice.

The sole issue on this petition for writ of certiorari by Jim Guy Tucker, the Pulaski County Prosecuting Attorney, is whether the trial court has jurisdiction to hear a motion for new trial after a notice of appeal, pursuant to Act 333 of 1971, has been filed but before the appeal has been docketed in this court.

The record shows that Joe Franklin Calva, Larry Griffith and O. G. “Preacher” Mathis were found guilty of keeping a gambling house contrary to Ark. Stat. Ann. § 41-2001 (Repl. 1964). After sentence and the overruling of their motion for new trial, they filed a notice of appeal. At this time they moved to substitute counsel and to vacate judgment and sentence. The latter motion was premised upon a ruling the trial court had made in a companion case. Over the objection of the State that it was without jurisdiction, the trial court vacated the judgment, suppressed the evidence obtained under color of a search warrant and granted a new trial.

Prior to Act 333 of 1971, criminal appeals were governed by the provisions of the criminal code of 1868 as amended. Appeals in civil cases were controlled by the provisions of Act 555 of 1953. Act 555 modernized and simplified the procedure for taking an appeal and obtaining review of alleged error. It also permitted a review of an alleged error without the technical requirement that exceptions be saved and that alleged errors be brought forth in a motion for new trial. In ruling on the identical issue here involved — i.e., jurisdiction of a trial court following the filing of a notice of appeal in a civil case— in Andrews v. Lauener, 229 Ark. 894, 318 S. W. 2d 805 (1958), we said:

“In construing Act 555 of 1953, we note that the General Assembly said: ‘If an appeal has not been docketed in the Supreme Court. . .’ (Sec. 27-2106.1); '. . .and if the action is not yet docketed with the appellate court. . .’ (Sec. 27-2107.2); ‘The record on appeal be filed with the appellate court and the appeal there docketed. . .’ (Sec. 27-2127.1); ‘Where the Supreme Court has acquired jurisdiction of a cause, but it is made to appear that the record is incomplete for want of documents, exhibits, or a bill of exceptions, and the trial court has lost such jurisdiction. . .’ (Sec. 27-2129.2). In our opinion there is a clear legislative intent in this Act that after notice of appeal is filed the trial court retains jurisdiction of the case until the record (under proper circumstances a partial record, Norfleet v. Norfleet, 223 Ark. 751, 268 S. W. 2d 387) is filed with this Court and the appeal is docketed in this Court, and we so hold.”

The procedure set up in Act 333 of 1971 for criminal appeals follows closely the civil appeal procedure established by Act 555. In fact the emergency clause of Act 333 provides:

“WHEREAS, it is deemed that criminal appeals should, so far as is feasible, be consistent with the statutes governing civil appeals and, WHEREAS, injustice sometimes results from the use and application of the present statutes applicable to the appeal of criminal cases and, WHEREAS, some confusion exists as to the manner in which criminal appeals are perfected, this Act is necessary for the protection of a public peace, health and safety, and an emergency is hereby declared to exist and this Act shall be in full force and effect from and after its passage and approval.”

Petitioner cites cases from other states and federal courts in support of his position that the trial court lost jurisdiction upon the filing of the notice of appeal. However, because of the expressed legislative intent that appeals in criminal cases, so far as feasible, should be consistent with civil appeals, we find that we are bound by the holding in Andrews v. Lauener, supra, and that the petition must be denied.

Petition denied.


author: Frank Holt, Justice.

text:
    Andy KILLIAN et ux v. HAYES BROTHERS LBR. CO., INC.
    5-5584
    470 S.W. 2d 939
    Opinion delivered October 4, 1971

      W. E. Billingsley, for appellants.

      Murphy, Arnold ir Blair, for appellee.
   Frank Holt, Justice.

The appellants and the appellee were prospective purchasers of a farm. The seller conveyed the property to the appellee. Consequently, the appellants instituted this action against the appellee (and the seller) alleging that appellants had a valid contract of sale with the seller and that the property was deeded to appellee by fraud and connivance on the part of the seller and the appellee. The appellants sought cancellation of appellee’s deed, specific performance of appellants’ contract with the seller, and by amendment asked that a constructive trust be decreed in appellants’ favor. In the alternative, appellants sought damages from the seller. The chancellor found that the transaction was not fraudulent and that the appellee-purchaser had no notice, either actual or constructive, of any binding contract between the appellants and the seller. The chancellor dismissed appellants’ complaint as to the appellee-purchaser. However, damages were awarded to the appellants against the seller who does not appeal.

For reversal of the decree in favor of the appellee, the appellants contend that: The chancellor erred in finding that the appellee, acting by and through its agent, general manager and president, Bobby K. Hayes, did not have notice, either actual or constructive, of the fact that the land had been sold to appellants prior to appellee’s purchase.

The land involved is a 355-acre farm. Appellant Andy Killian learned from his father-in-law, Leonard M. Brown, that the land was for sale. Oh January 18, 1969 Killian telephoned Charlie A. Langston and orally entered into an agreement with him for the purchase of the farm which was owned by Langston and his wife as an estate by the entirety. The Langstons live in Texas. The agreed sale price was $10,750 cash and it was agreed that the State Bank of Calico Rock would handle the transaction and that on the following Monday morning when the bank opened he, Killian, would have the purchase money in the bank. Mr. E. C. Rodman, a bank official, was advised of the transaction by Killian who told Rodman that his father-in-law, Brown, would be in the bank Monday morning and make the necessary arrangements. Brown went to the bank on this date and increased his and his wife’s personal bank account to the extent of about one-half of Killian’s orally agreed purchase price. The bank agreed to loan Killian the balance. On January 23 appellant Andy Killian was informed that the bank had received from Langston the necessary papers for preparation of the deed. Langston had also written an accompanying letter to the bank stating that he had sold the property for $10,750 cash to appellants. The deed of conveyance was prepared by the bank and on February 5 it was forwarded to Langston and his wife for their signatures.

At about this time Wayne Fountain told Hayes, his employer, that he understood from Brown that the land had been sold. Fountain, who rented the land, asked Hayes’ advice as to whether he would have to move or could he stay until his rent was up. In Fountain’s presence, Hayes immediately called Langston and inquired if the place had been sold. Hayes testified that Langston told him: “No. I thought I had it sold, but they never come up with no money, and I can’t get nothing done.*** I want to sell it.*** Well, he said he hadn’t seen any money and he hadn’t signed no papers and he was looking for some money. He said the man that would come up with the money would get the place.”

It appears that the following day, February 6, Hayes, with Fountain, viewed the land and then called Langston and agreed to pay $11,750 cash for the farm. Hayes testified as to the second phone call: “Well, he said, ‘have you got the money?’ and I said, ‘yeah’ and he said, ‘when do you want to fix it up?’ and I said, ‘well, one way to do it, I’ll just be down there tomorrow.’ ” Langston then called Rodman at the bank and told him that another purchaser would be in the following day. The next day Hayes went to the bank and picked up a deed prepared by the bank. Rodman testified he indicated to Hayes that another deal was on for the sale of the land and Hayes indicated to him that he understood it. However, Rodman testified that no names were mentioned by him. Hayes denied that he had told Rod-man he knew the farm was sold to someone else. According to Hayes, he had heard only a rumor that the farm was sold. Killian testified that after he had filed this action against the appellee, Hayes told him in a telephone conversation that he knew Killian had purchased the farm.

After acquiring the unsigned deed from the bank on February 7, 1969, Hayes went to the county courthouse and searched the records for any encumbrances against the property; flew to Texas; completed the transaction with Langston and his wife; returned the next day and had the deed recorded by the county clerk after the courthouse had closed that day. There was also evidence adduced that “some real estate men” had looked at the property and that others had tried to buy the farm.

There is never a presumption of fraud and the burden is upon the party alleging it to establish the allegation, in this type transaction, by a preponderance of the evidence. Clay v. Brand, 236 Ark. 236, 365 S. W. 2d 256 (1963).

In the case at bar the chancellor found that the transaction was not fraudulent and that the appellee did not have notice, either actual or constructive, of a binding contract for the sale of the farm. Even if we should consider the contract binding, we cannot say that the findings of the chancellor are against the preponderance of the evidence.

Affirmed.


author: Carleton Harris, Chief Justice.

text:
    Marvin HENSLEE v. STATE of Arkansas
    5627
    471 S.W. 2d 352
    Opinion delivered October 11, 1971

      William E. Johnson and James M. Barker, Jr., for appellant.

      Ray Thornton, Attorney General; Garner L. Taylor, Asst. Atty. Gen., for appellee.
   Carleton Harris, Chief Justice.

Marvin Henslee, appellant herein, was charged by Information with the crime of arson for allegedly burning lands belonging to Georgia-Pacific Corporation in violation of Ark. Stat. Ann. § 41-508 (Repl. 1964). On trial before a jury, he was convicted and fined $50.00. A motion for a new trial was filed, alleging inter alia that the court erred in refusing appellant’s motion on voir dire to excuse as jurors all salaried employees and supervisory personnel for Georgia-Pacific Corporation for cause, and in allowing such an employee to serve as a juror and as foreman of the jury at the trial. The motion was denied and appellant was granted an appeal. For reversal, only the one point is asserted, viz, “The trial court erred in denying appellant’s motion to excuse for cause all prospective jurors who were employees of the company alleged to have been injured by the offense charged, and in denying appellant’s motion for new trial based in part on said error, which error prevented appellant from receiving a fair and impartial trial”.

The record reflects a stipulation between the prosecuting attorney and defense counsel that Hugo D. Miles, who served as foreman of the jury, was a salaried employee of Georgia-Pacific Corporation in a supervisory capacity at the time of the trial. It is further stipulated that appellant exhausted all of his peremptory challenges in the selection of a jury. The record further reflects that during the voir dire of the jury panel, counsel for appellant moved to exclude all jurors who were salaried employees of Georgia-Pacific and supervisory personnel of that company. The court then stated:

“Any of you who are employees of Georgia Pacific, would that in any way bias or prejudice you if you are taken on. this jury in this case? That is the question, would it bias or prejudice you if you are taken?
(No response from jurors)
COURT: I think they are alright.
MR. BARKER: I believe that the record should show that Mr. Gordon Hartrick was excused from jury duty because he is a forester for Georgia Pacific, and that in addition, four supervisory or salaried employees stood up in response to the Judge’s question and we would like to save our exceptions to the failure of the Court to exclude those people as jurors.”

The court then excused one other, a Mr. Vesey, but refused to excuse the remainder of the employees. Here, there is a confusing statement in the record. The court stated:

“Let the record show that none of the employees of Georgia Pacific in a supervisory capacity are on the jury of 12. They were placed on the bottom of the list and not taken on the jury.”

Yet, as already pointed out, it was stipulated that Miles, the jury foreman, was a salaried employee of Georgia-Pacific in a supervisory capacity at the time. It will be noted that in the quoted portion of the court’s remarks, the question was not asked as to how many members of the panel worked for Georgia-Pacific; rather, the record simply reflects that the question was only whether any who were employees would have any bias or prejudice because of that fact.

We agree that the court committed reversible error by not excusing the employees of Georgia-Pacific since appellant exhausted his peremptory challenges, and Miles served on the jury which tried the case. Apparently, the court was confusing actual bias with implied bias, and we have held numerous times that it is within the discretion of the trial court to determine whether a juror has actual bias, and have stated that a judgment will not be reversed unless the court abuses that discretion. Lewis and Wren v. State, 220 Ark. 914, 251 S. W. 2d 490.

But here we are not dealing with actual bias, but with implied bias, which has been defined as that bias arising by implication of law. Ark. Stat. Ann. § 43-1920 (Repl. 1964) provides:

“A challenge for implied bias may be taken: First. Where the juror is related by consanguinity, or affinity, or stands in the relation of guardian and ward, attorney and client, master and servant, landlord and tenant, employer and employed on wages [Our emphasis], or is a member of the family of defendant or of the person alleged to be injured by the offense charged, or on whose complaint the prosecution was instituted.” * * *

While the exact situation now before us does not seem to have arisen heretofore, we have reversed judgments for implied bias. See Railway Company v. Smith, 60 Ark. 221, 29 S. W. 752, and Caldarera v. Giles, 235 Ark. 418, 360 S. W. 2d 767.

As to the facts in the present case, the statute is very clear and, for that matter, its lpgic can hardly be questioned. Not only should a trial be fair, it should also appear to be fair, and the usual relationship between employer and employee, unless litigating against each other, would presuppose loyalty from one to the other. The disqualification herein discussed is in accord with the general rule. See 50 C. J. S. Juries § 221 a (2), where it is stated “One who is in the employ of one of the parties is generally regarded as incompetent to serve as a juror. * * * * The reasons for the rule in civil actions apply with equal or greater force in criminal cases.” At any rate, under the statute, Mr. Miles was disqualified from serving on the jury.

Since appellant made a proper objection, and exhausted all of his peremptory challenges, it follows that prejudicial error was committed, and the judgment is hereby reversed and the cause remanded.

It is so ordered.

      Actual bias is defined by Ark. Stat. Ann. § 43-1919 (Repl. 1964).

      See Snyder v. State, 151 Ark. 601, 237 S. W. 87.


author: George Rose Smith, Justice.

text:
    Matthew LEWIS v. STATE of Arkansas
    5624
    471 S.W. 2d 349
    Opinion delivered October 11, 1971

      Leonard C. Smead, for appellant.

      Ray Thornton, Atty. Gen., by: John D. Bridgforth, Asst. Atty. Gen., for appellee.
   George Rose Smith, Justice.

In 1969 the appellant was charged with first degree murder, committed in the perpetration of robbery. Upon the advice of employed counsel the appellant pleaded guilty to the charge, apparently with the understanding that the prosecution would not seek the death penalty. A jury was empaneled, which found the offense to be murder in the first degree and fixed the punishment at life imprisonment.

In 1970 the appellant filed the present petition for postconviction relief under Criminal Procedure Rule 1. Ark. Stat. Ann., Vol. 3A, Supp. 1969, p. 91. He asserted that at the original hearing the State was erroneously allowed to introduce a confession that had not been made voluntarily. The trial judge denied the petition under subparagraph (C) of Rule 1, finding that the original record conclusively showed that the prisoner was entitled to no relief.

We find no error. Rule 1 is not intended to provide a prisoner with a new hearing upon an issue of fact explored at the trial on the merits. Cox v. State, 243 Ark. 60, 418 S. W. 2d 799 (1967). At the original trial the court found, after a Denno hearing, that the confession was voluntary. Later on the appellant, with the guidance of counsel, took the stand and testified, among other things, that he had signed the confession voluntarily. The same judge presided in both instances. In our opinion he was correct in denying the petition under subparagraph (C) of the rule.

In this court the appellant’s court-appointed counsel attaches to his brief an unsworm letter and statement in which the appellant again asserts that his confession was not voluntary. These documents are not in the record, are not properly before us, and are not entitled to consideration by this court. A Rule 1 proceeding is comparatively informal, but the rules of evidence are not to be ignored. Testimony, to be admissible, must be under oath and subject to cross-examination. We attach no weight to ex parte statements such as those attached to the appellant’s brief.

Affirmed.