text:
    BROWER MANUFACTURING COMPANY, BROWER BETTER-BUILT, and WESTERN INSURANCE COMPANY v. Dicky Wayne WILLIS and Rodney WHITE
    5-5907
    480 S.W. 2d 950
    Opinion delivered June 5, 1972

      Young & Patton, for appellants.

      Mobley ér Smith, for appellees.
   John A. Fogleman, Justice.

Dickey Wayne Willis was employed by Rodney White in the construction of a chicken house and the installation of feeding equipment manufactured by Brower Manufacturing Company for O. J. Robison, a poultry farmer. Willis suffered an injury compensable under the Workmen’s Compensation Act while engaged in the installation of the Brower equipment. The Workmen’s Compensation Commission affirmed a referee’s opinion finding that White was a subcontractor of Brower in the construction and installation work on which Willis was employed. Since White was uninsured the award in favor of Willis was against Brower. The circuit court affirmed the award. The only question on appeal is whether there is substantial evidence to support the finding that White was a subcontractor of Brower Manufacturing Company. We find that there was.

Virtually all of the testimony on the subject was given by White. His statements were not substantially contradicted. He testified that his association with Brow-er originated in March, 1969, when he was employed as a sales representative for the company by Jason Cupp, its sales manager. There was no written contract. White was furnished calling cards, identifying him as the company’s sales representative. He was to be compensated by commissions, which varied depending on whether the sale was made to a distributor, a jobber or a dealer. He was assigned a territory, but he was often directed by his immediate superior, Cupp, to go into different areas and call on different people. He often traveled with Cupp.

White made a sale of Brower equipment to O. J. Robison through Plainview Feed Store, a Brower distributor, but Cupp called and requested White to permit the shipment to be made to White because it would be difficult to get credit for the feed store approved. White agreed to this, but the equipment was actually shipped to Joe Wayne Smith, a brother-in-law of Robison, who resided in Plainview, so that someone would be available to accept it and to direct it to the place it was to be installed. Smith was billed for the equipment at first, but the company later billed White.

Neither Brower nor White had a warehouse in the area. For this reason, and because of the competitive nature of the business, White and Cupp conceived the idea of offering a turn-key job, i.e., construction of chicken houses and installation of equipment as a package, for certain customers. White said that Cupp insisted on this approach. The sale to Robison was made on the basis of a contract signed by Robison and White only. It contained no mention of Brower as a party to the transaction, but did call for specified equipment. White said that this was the first such order. Soon thereafter, White received a letter of congratulations from Fenton Thompson, the president of Brower. This letter concluded with the remark, “Certainly hope there will be more installations like this.” White said that he had been encouraged by both Thompson and Cupp to arrange this type of sale and that Thompson had full knowledge of the package deal. Robison paid White the full purchase price for the equipment. Brower sued White for the purchase price, apparently because White had claimed that he was entitled to $2,800 compensation for installation of the equipment. White testified that Cupp had agreed at the time of the contract to pay him $2,600 to $2,800 for installing the equipment. Settlement was made between Brower and White just before the hearing on the Willis claim by the payment by White of $4,000 on the $6,800 purchase price of the equipment.

William Green, secretary and comptroller for Brower, was the only company official to testify in the case. He stated that he was aware that White was constructing the houses. He said that White was to pay Brower for the equipment and that the company had no control over the manner and means by which the construction was done or installation made, but if White had installed the equipment improperly, the company would have in-sis ted upon correction in order to protect the company name. A repairman would have been sent by the company, if necessary. He denied knowledge of any oral contract between Cupp and White.

It was the duty of the commission to draw every legitimate inference possible in favor of the claimant and to give him the benefit of the doubt in making the factual determination. Herman Wilson Lumber Co. v. Hughes, 245 Ark. 168, 431 S.W. 2d 487. Neither Thompson nor Cupp, either of whom was in position to contradict White’s testimony if it was not true, appeared as a witness. No explanation for their absence is offered. As triers of the facts the referee and the commission could properly draw the inference that the testimony of both these witnesses would have been unfavorable to appellants. Arkansas State Highway Comm. v. Phillips, 252 Ark. 206, 478 S.W. 2d 27. The drawing of inferences, however was for the commission and not the courts. International Paper Co. v. Tidwell, 250 Ark. 623, 466 S.W. 2d 488.

There is little room for doubt that Brower is a ‘‘Contractor” under Ark. Stat. Ann. § 81-1306 (Repl. 1960), if indeed it did contract with Robison to perform substantial services in connection with the sale of its feeding equipment and contracted with White to fulfill this obligation. Brothers v. Dierks Lumber & Coal Co., 217 Ark. 632, 232 S.W. 2d 646; Lofton v. Bryan (on rehearing), 237 Ark. 642, 375 S.W. 2d 221. When the testimony is viewed in the light most favorable to appellees with all reasonable inferences drawn in their favor, we cannot say that reasonable minds could not conclude that White entered into the contract with Robison to perform substantial services to the purchaser on behalf of Brower by installing its equipment, and that Brower agreed to compensate White for these services. That being so, the evidence to support the commission’s finding was substantial, even though we might have reached a different conclusion if we sat as the commission or heard the case de novo. See Harding Glass Co. v. Moore, 230 Ark. 796, 327 S.W. 2d 8.

The commission made a fact finding upon a close question of fact by resolving all inferences against appellants and by giving the evidence the most liberal construction possible in favor of the claimant. The question is not whether the testimony would have supported a finding contrary to the one made, but whether it is substantial in support of the one made. Since we cannot say that reasonable minds could not reach the commission’s conclusion from the evidence, that evidence was substantial. Wilson v. United Auto Workers, 246 Ark. 1158, 441 S.W. 2d 475; Herman Wilson Lumber Co. v. Hughes, supra.

The judgment is affirmed.


source: Caselaw Access Project

author: J. Fred Jones, Justice.

license: Public Domain

text:
    Dorothy MOORE v. J. F. LAWRENCE et ux
    5-5881
    480 S.W. 2d 941
    Opinion delivered June 5, 1972

      Frank J. Willis, for appellant.

      Langston ir Langston, for appellees.
   J. Fred Jones, Justice.

This is an appeal by Dorothy Moore from a decree of the Pulaski County Chancery Court in favor of the appellees, J. F. Lawrence and his wife, whereby a trust was impressed on insurance funds in payment of a promissory note for $1,466.67 given to the Lawrences by Hal Moore, the husband of Dorothy Moore, prior to his death on October 8, 1968.

The complaint filed by the Lawrences alleged that Dorothy Moore is the widow of Hal Moore who died on October 8, 1968; that on August 30, 1968, Hal Moore borrowed $1,466.67 from the Lawrences and stated that he had assigned sufficient amount out of the proceeds of his life insurance to repay said loan, and that he had prepared a document that would insure “ ‘that Lawrence would be paid the loan from proceeds of life insurance on the life of the deceased,’ Hal Moore.” The complaint then alleged that the defendant, Dorothy Moore, had received proceeds from life insurance on the life of Hal Moore in excess of $1,466.67 and had refused to repay the loan to the Lawrences out of the proceeds of the life insurance. The complaint prayed that a trust be impressed upon the proceeds from the life insurance of Hal Moore, and that Dorothy Moore be ordered to pay the sum of $1,466.67 to the Lawrences.

Mrs. Moore filed an answer admitting her marital relationaship to Hal Moore at the time of his death and her receipt of insurance proceeds in excess of $1,466.67 as alleged in the complaint. She stated in her answer that Mr. Moore carried separate life insurance with his estate named as the beneficiary and that the net proceeds from that insurance should be available to his creditors. Mrs. Moore pleaded the statute of frauds as a complete defense to the complaint against her.

The chancellor found facts and entered the decree as follows: “the allegations of fact alleged in the Complaint are true and Dorothy Moore is holding the sum of $1,466.67 in Trust for J. F. Lawrence and Helen Lawrence, which amount she shall forthwith pay to the said J. F. Lawrence and Helen Lawrence together with the costs of this action, for which execution, garnishment or other process may issue as upon a Judgment at Law.”

On her appeal to this court Mrs. Moore relies on the following point for reversal:

“The court erred in entering judgment against appellant. Arkansas Statutes 58-101, Statute of Frauds, Second clause Elm Springs State Bank v. Bradley, 179 Ark. 437, 16 S.W. (2) 585.”

The loan alleged by the Lawrences is evidenced by a promissory note typed on a letterhead of “Hal Moore & Associates, Realtors”; the note is dated August 30, 1968; is signed by Hal Moore and recites as follows:

“$1466.67
FOR VALUE RECEIVED, RECEIPT of the said amount being acknowledged, I, Hal Moore, the undersigned, hereby agree and promise to pay to J. F. Lawrence or Helen Lawrence, 1200 West 35th Street, Little Rock, Arkansas, or order, the sum of $1,466.67, on or before the 6th day of September, 1968.
This note is given in acknowledgment of funds advanced this date by said J. F. Lawrence and Helen Lawrence and this note is to be construed according to the laws of the State of Arkansas.
In the event of the demise of the undersigned prior to the due date, then the holder or holders of this note are to be paid by the Administratrix of the estate of the deceased from proceeds of life insurance on the life of the deceased.” (Emphasis added).

Mrs. Helen Lawrence testified that she and her husband, J. F. Lawrence, had been acquainted with Mr. and Mrs. Moore for more than 20 years and that the two families had maintained a very close relationship throughout the years. She testified that she and her husband first loaned money to the Moores on March 8, 1968, without security and that the money was repaid in June of the same year. She said that in the following month of July, 1968, Mr. Moore again needed money; that she and her husband loaned the money to him and that this loan was repaid by Mr. Moore on August 18, 1968, the loan involved in this litigation was made and in connection with this loan, Mrs. Lawrence testified as follows;

“A. Well, the 29th of August was our wedding anniversary.
Q. You and your husband’s?
A. Me and my husband’s and Dorothy and Hal dropped by for an informal visit. I am not sure they were aware of the fact that it was our anniversary, but nevertheless they did drop by. And he told us of this deal that he had, that he was working on and he was going to have to have some cash, more than he could put his hands on, and wanted to know if we would lend him the necessary cash to fix this deal up and not to exceed $1,500.00 and he said, ‘it will be returned to you. I will assure you of that on my fraternal honor. And if I should die before this is paid, then it will be paid from my insurance.’ Dorothy said, ‘yes, if you will let him have this money, I will pay it from the proceeds of his insurance, because he has several policies of which I am the beneficiary and I will pay the money back to you.’ ”

Mrs. Lawrence testified that Mr. Moore called the following morning and advised that he had to have the money that very day. She said that her automobile was not at home when Mr. Moore called and Mr. Moore proposed, that he send an automobile for her. She said that Mr. Moore did send a Mr. Barnes for her and that Mr. Barnes drove her to the bank where she withdrew the money from her account. She said that she then took the money to Mr. Moore and delivered it to him at his office. She said that when Mr. Barnes arrived at her home, he handed her a sealed envelope containing the note offered in evidence. Mrs. Lawrence then testified as follows:

“Q. Did he ever repay this during his lifetime?
A. No, he didn’t. We called him several times and he always said that red tape had to be unwound and he was working on it and it would be there. I last talked talked to him on the 4th of October, a Friday.
Q. Do you know what date Mr. Hal Moore was killed, or had his accident?
A. Yes. This was the 4th that I called him and he told me to meet him at his office, call him Tuesday Morning, October 8th and that he thought everything would be ready, the money would be there; that it was al^ tied up in a package already, but it had to go through a Monroe Bank and should be there no later than Tuesday. I called Tuesday Morning and the girl who answered said that Mr. Moore was out of town, but they did expect him back early afternoon, but that was the day that Hal didn’t come back.”

Mrs. Lawrence testified that about two weeks after Mr. Moore’s death she took the note out to Mrs. Moore,

“And told her that I knew she knew about this, but I wanted to remind her. Of course, she had so much shock that she didn’t hardly know whether she was coming or going and she said, yes, she did remember it. But she said, ‘Helen, I can’t pay you. I don’t have any money.’ I said, ‘Dorothy, I didn’t expect you to pay, I just wanted to remind you.’ She said, ‘Well, it does say it will be paid from the insurance and when I receive a settlement from his insurance policies, I will pay this debt.’ ”

Mrs. Lawrence testified that in the latter part of January, 1969, she was visiting with Mrs. Moore and Mrs. Moore inquired as to whether she still had the note. She said that when she answered in the affirmative, Mrs. Moore said: "I am ready now to pay it and in a day or two, I will be over and give you the money and pick up the note,” but that Mrs. Moore never did pay the note.

Mrs. Lawrence testified on cross-examination that the reason she did not request Mrs. Moore to sign the note was that when she discussed the loan with Mr. and Mrs. Moore, she didn’t know that a note would be signed. She said that the prior loans were not evidenced by notes and that she and her husband would have loaned the money whether a note was signed or not. Mrs. Lawrence testified that the first time Mrs. Moore saw the note involved in this litigation was about two weeks after Mr. Moore’s death when she took the note to Mrs. Moore and discussed it with her. She said she does not believe Mrs. Moore knew anything about the note prior to when it was presented to her after Mr. Moore’s death. She testified that Mrs. Moore did not participate in any of the prior loans and that the only business transaction she and her husband ever had with the Moores when Mrs. Moore was present, was in connection with the loan and note in this case.

Mr. Lawrence testified that he and Mr. Moore belonged to the same fraternal organization and their families had been closely associated for about 20 years. As to Mrs. Moore’s connection with the loan involved, Mr. Lawrence testified as follows:

“A. When Mr. Moore brought up the question of needing some additional money for another real estate deal, Dorothy volunteered that in the event Hal wasn’t around when the note came due, she would pay it out of the proceeds of his insurance.”

On cross-examination Mr. Lawrence also testified that this one instance was the only business transaction he ever had with Mr. Moore when Mrs. Moore was present.

Mrs. Moore testified that she was employed by the Southwestern Bell Telephone Company where she had been employed for 20 years and that she had never worked in her husband’s real estate office. She denied the close personal relationship as testified by Mrs. Lawrence and did not recall the visit in the Lawrence home on the night prior to the loan made to Mr. Moore, and she denied that she had any knowledge that the loan was made or in existence until after the death of her husband. She said that the first notice she had of the existence of the note signed by Mr. Moore was when it was brought to her home by Mrs. Lawrence after Mr. Moore’s death, and she denied any knowledge of the transaction leading to the signing of the note by Mr. Moore.

On cross-examination Mrs. Moore testified that she and her husband were good friends with the Lawrences through their fraternal work, and that they trusted each other. She said that they visited dn each other’s homes but that she does not recall visiting in the Lawrence home on August 29, 1968. She testified that the last time she recalled being in the Lawrence home was at a wedding anniversary reception held by the Lawrences. She testified that she does not recall what year that reception was held but does recall that there were a number of people attending the reception and present when she was there on that occasion. She testified that Mrs. Lawrence did present the note to her about two weeks after Mr. Moore’s death and that she told Mrs. Lawrence she was not aware of the note. She said that she suggested to Mrs. Lawrence that the note be presented to the administrator of her husband’s estate who was to be appointed in the near future, and that she later inquired of Mrs. Lawrence whether the note had been presented to the administrator for payment. Mrs. Moore testified that prior to Mr. Moore’s death she knew Mr. Moore carried some life insurance with her as beneficiary but did not know the amount of the insurance he carried. Mrs. Moore testified that she was the beneficiary of life insurance amounting to the sum of $71,013.68 which was left on deposit with the Pennsylvania Insurance Company.

Mr. Ben McMinn testified that he was administrator in succession of the estate of Mr. Moore and that there was a $3,000. double indemnity life insurance policy issued to Mr. Moore by a Northwestern Mutual Life Insurance Company with Mr. Moore’s estate as the named beneficiary. He testified that all the insurance in which the estate of Mr. Moore was beneficiary totaled in excess of $8,000.

We, of course, try chancery cases de novo on appeal, and while we recognize that a trust in personal property may be declared, created or admitted verbally, and proved by parol testimony, the rule of evidence for the establishment of such a trust requires more than a mere preponderance of the evidence. The evidence must be clear, convincing and satisfactory. Scott v. Miller, 179 Ark. 7, 13 S.W. 2d 819 (1929). When we apply the above rule to the case at bar, we are unable to agree with the chancellor that the facts alleged in the complaint are true and that Mrs. Moore was holding the sum of $1,466.67 in trust for the Lawrences.

In the first place the loan involved in this case was the third of three loans in similar amounts. The first one, in the amount of $2,000, was borrowed on March 8, 1968, and repaid on June 26, 1968. The second one was for $1,100 borrowed on July 9, 1968, and repaid on August 19, 1968. Both of these loans were made without security and only a memorandum was given in connection with the second loan. The loan involved in the case at bar was made on August 30, 1968, only eleven days after the second loan was repaid, and Mr. Moore gave an unsolicited note in connection with this third loan. According to the tenor of the note, Mr. Moore agreed to repay the loan on or before six days after he borrowed it and the note provided that in the event of Mr. Moore’s death prior to the due date of the note, the holder of the note was to be paid by the administratrix of Mr. Moore’s estate from the proceeds of life insurance on Mr. Moore’s life. Mr. Moore was in the real estate business and the record is clear that he was having some financial difficulty in connection with his real estate business and was relying on Mr. and Mrs. Lawrence for unsecured quick short term loans. Mrs. Moore was separately employed by the telephone company and there is no evidence in the record that she knew anything at all about her husband’s business or financial affairs, and there is no evidence that she ever knew anything at all about the first two unsecured loans he obtained from Mr. and Mrs. Lawrence.

To measure the evidence by the clear, convincing and satisfactory evidence rule as already announced, we turn now to the evidence pertaining to a trust agreement and Mrs. Moore’s participation in connection with the loan here involved. The complaint was against Mrs. Moore and simply alleged that Mr. Moore borrowed the money from Mr. and Mrs. Lawrence and stated that he had assigned sufficient amount out of proceeds of his life insurance to pay said loan; that he further stated he had prepared a document that would insure “that Lawrence would be repaid the loan from proceeds of life insurance on the life of the deceased.” It must be remembered that this loan was only for a period of six days and in so far as the record reveals, Mr. Moore was in perfectly good health at the time the loan was made. There is no evidence of anticipated or impending death, or of anything else that could be considered circumstantial evidence of intention to impress a trust on proceeds of insurance payable to Mrs. Moore as security for a six day loan.

It is obvious from the record that if Mr. Moore did make such promise to Mr. and Mrs. Lawrence, as alleged in the complaint, he had made no assignment at the time he said that he had; and if the aforesaid note was the document that he had prepared to insure “that Lawrence would be repaid the loan from proceeds of life insurance on the deceased,” the instrument only provided that the administratrix of Mr. Moore’s estate would pay from the proceeds of life insurance in the event of Mr. Moore’s death prior to the due date of the note. The complaint against Mrs. Moore does not allege that she knew about, or had anything to do with, this transaction but the complaint simply alleges that she received proceeds of life insurance on the life of Mr. Moore far in excess of $1,466.67, and that she holds insurance funds in trust for Mr. and Mrs. Lawrence in this amount. Of course, we are talking here about what is alleged in the complaint but in the answers to interrogatories, apparently read, but certainly sworn to by Mr. and Mrs. Lawrence, they reiterate under oath the same facts as alleged in the complaint.

The interrogatories propounded to Mr. and Mrs. Lawrence requested them to state in detail “each business transaction had by you, or either of you, with the defendant, giving the dates, the amounts involved, the nature of the transaction, who was present at the times the transactions were entered into and consumated, the considerations therefor, and the dates each was concluded.” It must be remembered that Mrs. Moore was the defendant in this case and in no place in their answers to these interrogatories do Mr. and Mrs. Lawrence mention that Mrs. Moore had any part in any of their transactions with Mr. Moore, or that she was present at any of the transactions or knew anything about them. After reiterating the allegations in the complaint as to Mr. Moore borrowing the money and stating that he had assigned proceeds from insurance to repay the loan and a document to insure its repayment, the answer to this interrogatory then states:

“Upon the delivery of said document to Helen Lawrence, when she delivered the cash to him, Hal Moore turned his head to one side and wiped tears from his eyes and assured Mrs. Lawrence that this money was certain to be repaid because it would be paid out of his life insurance and that plaintiff, /. F. Lawrence, was present at the time. He also stated that he would repay it before he died, however, it was certain to be repaid in any event since he was assigning sufficient life insurance to pay it. Because of the fraternal relationship of these plaintiffs and Hal Moore and wife and Hal Moore’s plea for his great need for the money and the visits of Hal Moore and his wife in the home of Lawrence and the visits of the Lawrence family in the Moore home and because of the close and confidential relationship and the past business relationships and the fraternal relationship the Lawrence family loaned this money to Hal Moore without interest.” (Emphasis added).

It must still be remembered we are talking about a six day loan to a man in apparent good health who had fully repaid two similar unsecured loans in similar amounts within five months just prior to this loan. It is noted that in this answer, both Mr. and Mrs. Lawrence say that upon delivery of the document to Mrs. Lawrence, when she delivered the cash to Mr. Moore, the plaintiff, J. F. Lawrence, was present at the time. Mrs. Lawrence testified at the trial that the Lawrence automobile was in the garage for repairs when Mr. Barnes called for them; that Mr. Barnes handed her the note in a sealed envelope and that Mr. Lawrence stayed at home awaiting delivery of their own automobile, while she went with Mr. Barnes to the bank and then went to Mr. Moore’s office where she delivered the money to him.

As a result of an automobile accident, Mr. Moore died on October 8, 1968, which was more than 30 days after the due date of the note. According to Mrs. Lawrence, she and her husband called Mr. Moore several times in regard to the payment of the obligation. Mr. Moore always said that red tape had to be unwound and the last time she talked with him, which was October 4, he requested her to meet him at his office or get in touch with him on October 8 and the money would be there. According to Mrs. Lawrence, when she first contacted Mrs. Moore in regard to the note following Mr. Moore’s death, Mrs. Moore advised her that she had no money and could not pay and Mrs. Lawrence said: “Dorothy I don’t expect you to pay, I just wanted to remind you.”

We recognize that an allegation in a complaint is usually inserted by an attorney and is not evidence at all. We also recognize that answers to interrogatories are many times prepared by the attorney representing the person to whom interrogatories are directed, but we can only assume that the person who answers interrogatories has read and answered correctly when he says under oath that he has done so. We point out the circumstances and discrepancies in the evidence, not to question the truth or falsity of the testimony of any of the parties, but for the purpose of emphasizing the conflicting evidence in measuring it by the clear, convincing and satisfactory rule. Of course the testimony in this case is in irreconcilable conflict, and when measured by the above rule as stated in Scott v. Miller, supra, we conclude that it is not sufficient to support the creation of a trust in favor of Mr. and Mrs. Lawrence on the proceeds from the insurance paid to Mrs. Moore as the beneficiary.

We now reach the point designated by Mrs. Moore in her brief: There is no question that Mr. and Mrs. Lawrence loaned the sum alleged to Mr. Moore and that Mr. Moore never did repay it. Assuming that Mrs. Moore did promise to pay the debt when it was called to her attention after the death of Mr. Moore; in the absence of a trust on the insurance proceeds, her promise was clearly no more than a moral obligation and clearly within the statute of frauds. Ark. Stat. Ann. § 38-101 (Repl. 1962); Colum v. Imboden, 185 Ark. 890, 50 S.W. 2d 235; Washum v. Lester, 183 Ark. 298, 36 S.W. 2d 76.

We conclude, therefore, that the decree of the chancellor must be reversed.

Reversed.

Byrd, J., not participating.

Harris, C. J., dissents.


author: Conley Byrd, Justice.

text:
    ARKANSAS STATE HIGHWAY COMMISSION v. Helen B. DALRYMPLE
    5-5845
    480 S.W. 2d 955
    Opinion delivered June 5, 1972

      Thomas B. Keys and James N. Dowell, for appellant.

      Tompkins, McKenzie <b McRae, for appellee.
   Conley Byrd, Justice.

For reversal of a judgment upon a jury verdict in this eminent domain action, appellant Arkansas State Highway Commission contends that the trial court erred in refusing to strike veniremen Easterling and Rowe for cause and in refusing to permit dirt sales by appellee Helen B. Dalrymple to a highway construction contractor to be offset as special benefits. We find no error.

Appellant’s challenge to venireman Easterling was made because the voir dire examination showed that he had an opinion of real estate values in the area and because he knew one of the prospective witnesses. The challenge to venireman Rowe was on the basis that he also knew one of the prospective witnesses. After the challenges were overruled the panel was completed and each side, pursuant to Ark. Stat. Ann. Sec. 39-229 (Repl. 1962), struck three names. Appellant struck the names of Easterling, Rowe and one other but made no showing that he would have struck the name of any other juror if he had had a peremptory challenge left. Under such circumstances we hold that appellant has shown no prejudice. See Roark Transportation, Inc. v. West, 188 Ark. 941, 68 S.W. 2d 1000 (1934), and Collins v. State, 102 Ark. 180, 143 S.W. 1075 (1912). It has been suggested that perhaps Ark. State Highway Commission v. Young, 241 Ark. 765, 419 S.W. 2d 120 (1967), states a contrary rule. We do not so interpret the decision which cited as authority Collins v. State, supra, where the rule was recognized. As was pointed out in Mabry v. State, 50 Ark. 492, 8 S.W. 823 (1888), the right of peremptory challenges is conferred as a means to reject jurors — not to select jurors, and until such timei as a party is forced to take an objectionable juror without the privilege of exercising a peremptory challenge, he has shown no prejudice. Green v. State, 223 Ark. 761, 270 S.W. 2d 895 (1954). Here, as in the Roark Transportation case, appellant does not contend that any of the jurors who served were disqualified. Consequently appellant has shown no prejudicial error.

There is no merit in appellant’s contention that it was entitled to offset fill dirt sales to a highway construction contractor as a special benefit. In Arkansas State Highway Commission v. Davis, 245 Ark. 813, 434 S.W. 2d 605 (1968), we denied a similar contention. In doing so we pointed out that before a benefit could be offset, it must be a benefit accruing to the property from the completed highway, i.e., a benefit from the improvement.

Affirmed.


text:
    ALLSTATE INSURANCE COMPANY v. Lanie Sue ORMAND et al
    5-5928
    480 S.W. 2d 939
    Opinion delivered June 5, 1972

      Atchley, Russell, Hutchinson ir Waldrop, by: Victor Hlavinka, for appellant.

      Young ir Patton, for appellees.
   Conley Byrd, Justice.

In an action on an uninsured motorist policy issued by appellant Allstate Insurance Company the jury found the damages of Lanie Sue Ormond to be $10,000 and those of her minor son to be $300. The trial court added the statutory penalty and attorney’s fee to the $10,000 awarded Mrs. Ormond. For reversal Allstate contends that there was no competent evidence to support a finding that the hit and run driver was uninsured; that the trial court failed to properly submit to the jury the question of whether the hit and run driver was an uninsured motorist; and that, this being an action against a policy issued and maturing in Texas, the trial court erred in assessing the penalty and attorney’s fee pursuant to Ark. Stat. Ann. Sec. 66-3238.

On the last point we agree with appellant. The record shows that the policy was issued in Texas to a Texas resident and that it matured in Texas. While the trial court may have been misled by the language in New Empire Life v. Bowling, 241 Ark. 1051, 411 S.W. 2d 863 (1967), a careful review of our cases shows that the statutory penalty and attorney’s fee have been allowed in only those cases having a connection with the State of Arkansas. For instance in the Bowling case, supra, the policy was solicited in Arkansas, and in Aetna Casualty & Surety Co. v. Simpson, 228 Ark. 157, 306 S.W. 2d 117 (1957), the policy matured in Arkansas. Other cases hold that the penalty cannot be assessed on a policy issued in another state, and maturing outside the State of Arkansas. See Inter-Ocean Casualty Company v. Warfield, 173 Ark. 287, 262 S.W. 129 (1927).

On the first two contentions, we find that appellant, having admitted that the hit and run driver was an uninsured motorist, is not in a position to complain of the alleged errors. The record shows the following:

“MR. PATTON: Plaintiffs’ Exhibit 2, which I also understand Mr. Edwards won’t object to, is the original of a letter I received from Allstate Insurance Company. I offer that into evidence.
“MR. EDWARDS: The only objection we have is assuming that the case for the jury is a liability question. It’s a damage question.”

The letter referred to, after reserving the right of Allstate to set up any and all defenses of non-coverage, stated:

“We are making this reservation of rights because of your filing of this lawsuit against Allstate Insurance Company in Arkansas, thus preventing the Allstate Insurance Company from joining the Uninsured Motorist to protect its subrogation rights in violation of Policy Condition No. 5.”

As we construe this letter together with the course of conduct of the parties at the time of its introduction, it constitutes an admission by Allstate that the hit and run driver was an Uninsured Motorist. Consequently the alleged error of the court in failing to properly instruct the jury could not be prejudicial error.

The judgment is affirmed in so far as it awarded a judgment on the policy. That part of the judgment assessing penalty and attorney’s fee is reversed.

Affirmed in part and reversed in part.


author: Frank Holt, Justice.

text:
    Alma OWENS v. SHOE TREE of FAYETTEVILLE, Inc An Arkansas Corporation; R. L. CULPEPPER, David CULPEPPER, and Mrs. R. L. CULPEPPER
    5-5921
    480 S.W. 2d 936
    Opinion delivered June 5, 1972
    [As amended on Denial of Rehearing July 3, 1972.]

      Carl M. Harness, for appellant.

      Putman, Davis é Bassett, for appellees.
   Frank Holt, Justice.

This is a suit for malicious prosecution. Appellant commenced this action against appellees following the court’s dismissal of a charge of grand larceny pending against appellant. The information filed against appellant resulted from appellee-R. L. Culpepper’s sworn statement that appellant had stolen a pair of cowboy boots from the appellee-Shoe Tree Store. Based upon a directed verdict for Mrs. R. L. Culpepper and a jury verdict for the remaining appellees, a judgment was entered in their favor.

R. L. Culpepper is the co-owner and manager of the appellee-corporation and his wife is a part-time employee. David Culpepper, their 22-year-old son, has no position with the corporation and is unemployed. According to appellees, Mr. and Mrs. Culpepper were working in the rear of the store on the date of the alleged theft. David had been instructed by his father to keep watch on the store and was sitting near the center of the store facing the front. Between 5:30 and 6:00 p.m., two women entered the store, walked to the men’s shoe section, picked up a pair of cowboy boots and each woman placed a boot in her handbag. David immediately informed his father of the incident. When Mr. Culpepper approached the women, he was asked by one of them about a certain type shoe. He did not inquire of them about the boots. While he was checking the shoe boxes in the area to determine if the boots were missing, the women left the store. Before Mr. Culpepper could stop them, they drove off in their car. Mr. Culpepper then called the sheriff’s office and reported the theft by the unidentified individuals. Subsequently, David informed his father that he had seen one of the women at a local bowling business. Two weeks after the alleged theft, the three Culpeppers went separately to the bowling lanes where Mr. Culpepper and David each identified appellant as one of the women involved in the alleged theft. Mr. and Mrs. Culpepper obtained appellant’s name from a bowling customer. Mr. Culpepper phoned the sheriff’s office to register his complaint. Immediately thereafter a deputy sheriff arrived at the bowling lanes and Mr. Culpepper signed an affidavit for the arrest of appellant for shoplifting. The appellant called her son, who came to the bowling lanes and drove her to the sheriff’s office where they posted bond. The following day a local daily newspaper published information concerning appellant’s arrest and the charges against her. Subsequently, appellant appeared in court for arraignment and entered a plea of “not guilty.” The charge remained pending from March 28, 1968, to October 27, 1969, when the charge was dismissed for lack of prosecution.

We first consider appellant’s contention that the court erred in instructing the jury concerning termination of the prosecution in appellant’s favor. The court gave the following instruction (No. 10):

“You are instructed that the fact that a prosecution against the plaintiff terminated in her favor is insufficient, standing alone, to sustain plaintiff’s action for malicious prosecution, in the absence of proof of malice and lack of probable cause on the part of the defendants.”

Appellant does not dispute the fact that termination of the prosecution in her favor is “not conclusive or determinative” on the issue of malice or probable cause. She insists, however, that she is entitled to an instruction stating that it is a fact to be considered along with all the other facts and circumstances in the determination of the alleged malice and want of probable cause. We agree. In McNeal v. Millar, 143 Ark. 253, 220 S.W. 62 (1920), we quoted with approval:

“While the defendant in the former proceeding may have been found innocent and acquitted, yet that does not show a want of probable cause in the prosecution, it being not conclusive of anything against the prosecutor, but a mere circumstance which taken along with others may induce the jury to find there was a want of probable cause and also that there was malice.”

In the case at bar, the instruction as given did not sufficiently comport with the law as set forth in McNeal and is, therefore, prejudicial to appellant.

Appellant further contends that the court erred in instructing the jury as to probable cause. The court gave the following instruction (No. 8):

“You are instructed that the term 'probable cause’ or due cause sometimes called, as used in these instructions in connection with the charge of malicious prosecution, means that state of facts in the mind of the defendant or the defendants, either one or all of them, that would lead a reasonable and prudent person to believe or have an honest and strong suspicion that the accused was guilty of the crime for which she was charged.”

Appellant makes the argument that the instruction is erroneous, inasmuch as it did not provide that the defendant or defendants should have considered both the facts and circumstances known to them. Probable cause to institute criminal proceedings is not necessarily limited to the “facts in the mind of the defendant.” Malvern Brick & Tile v. Hill, 232 Ark. 1000, 342 S.W. 2d 305 (1961). Inasmuch as the giving of this instruction is likely to arise upon a retrial, we observe that it is subject to proper specific objections being made.

Appellant, also, contends that the court erred in refusing to allow appellant’s witness, a school official, to testify about the circumstances and facts concerning David Culpepper’s removal from junior high school several years preceding this incident. Mr. Culpepper’s accusation that appellant took the boot was based somewhat on information told to him by David. Mr. Culpepper testified: “I would be dishonest to say that I saw her put the boot in there, when I didn’t.” Whether or not Mr. Culpepper was entitled to rely on his son’s statement that he saw appellant put a boot in her handbag relates to David’s credibility. In Malvern Brick if Title Co. v. Hill, supra, we said:

“In malicious prosecution cases we have defined the words ‘probable cause,’ as, ‘such a state of facts known to the prosecutor, or such information received by him from sources entitled to credit, as would induce a man of ordinary caution and prudence to believe, and did induce the prosecutor to believe, that the accused was guilty of the crime alleged, and thereby caused the prosecution.’ ” (emphasis added)

In the case at bar, it does not appear that the testimony of the former school principal related to David’s credibility. We observe, however, that any properly adduced testimony which relates to David’s credibility is admissible evidence.

Appellant, also, asserts that the court erred in not allowing her defense counsel to testify concerning a written instrument which her counsel received from the deputy prosecuting attorney during the arraignment proceeding. The proffer of proof reflects that the information contained in this “piece of paper” was to the effect that charges against appellant would be dropped if she would sign a statement agreeing not to sue appellees. The “piece of paper” was not produced as the best evidence. Neither was there any evidence adduced on direct or rebuttal to connect appellees with the contents of this written instrument received from the state’s representative. In the circumstances, we think the trial court properly sustained appellees’ objection to this witness’ testimony. See Edwards v. Epperson, 246 Ark. 194, 437 S.W. 2d 480 (1969); 29 Am. Jur. 2d § 472 Evidence; 32 C.J.S. § 625 Evidence.

Appellant further asserts that the trial court erred by commenting on the evidence in the pressence of the jury. There was no objection made to the court’s comments. Therefore, appellant is in no position to complain of this asserted error for the first time on appeal. Thompson v. AAA Lumber Co., 245 Ark. 518, 432 S.W. 2d 873 (1968), Baker v. City of Little Rock, 247 Ark. 518, 446 S.W. 2d 253 (1969).

As to appellant’s other contentions for reversal, suffice it to say that we have considered and find them without merit.

Because of the prejudicial errors as previously indicated, the judgment is reversed and the cause remanded except as to the directed verdict in favor of Mrs. Culpepper.

Affirmed in part and reversed in part.


author: Carleton Harris, Chief Justice. John A. Fogleman, Justice,

text:
    NATIONAL BEDDING & FURNITURE INDUSTRIES, INC. et al v. Drew M. CLARK et al
    5-5889
    481 S.W. 2d 690
    Opinion delivered June 12, 1972
    [Rehearing denied July 17, 1972.]

      C. W. Knauts, for appellants.

      Burris if Berry, for appellees.
   Carleton Harris, Chief Justice.

This litigation relates to the question whether a mortgagee or judgment creditors are entitled to the proceeds of an insurance policy taken out by the mortgagor. In August, 1967, Drew Clark and Doris Clark, appellees herein, loaned their son, B. G. Clark, the sum of $14,615.53, and in addition co-signed a promissory note in favor of the Corning Bank. Young Clark used these funds to purchase an existing furniture store business situated in Corning. In connection with the loan, Clark executed to his parents a promissory note, and a financing statement and security agreement giving to them a first and paramount security interest in the furniture store and inventory assets. Thereafter a financing statement was filed in the county of the debtors’ residence and with the Arkansas Secretary of State as a matter of perfecting the Clarks’ security interest. B. G. Clark operated the store until January 6, 1971, when the building and all contents were destroyed by fire. The destroyed property was covered by insurance in the sum of $25,000 which the insurance company, Maryland Casualty, interpleaded into the registry of the court. The policy contained a loss payable clause in favor of Hupp Credit Company, and this company subsequently received payment of the indebtedness due it under a court decree of July 29, 1971, and is not a party to the present litigation. Appellants, nine judgment creditors of B. G. Clark, received an assignment on January 27, 1971, from B. G. Clark to the insurance proceeds in the total amount of $6,155.22 and Maryland Casualty Company was so notified. Following the filing of the bill of interpleader by Maryland, both appellants and appellees, among others, filed pleadings contending for the balance of the money, $15,798.92. The claim of appellees is based on a provision in the mortgage (security agreement) whereby young Clark agreed as follows:

“7. The Debtor will keep the collateral insured for the benefit of the Secured Party against fire, theft, (including extended coverage), collision, and such other hazards as the Secured Party may from time to time require, in such form and in such companies as the Secured Party shall approve and, if requested, will deliver the insurance policies to the Secured Party. The Debtor appoints the Secured Party the attorney for the Debtor in obtaining, adjusting and cancelling such insurance and endorsing settlement drafts and hereby assigns to the Secured Party all sums which become payable under such insurance, including return premiums and dividends, as additional security hereunder.”

Appellants depend upon the assignment heretofore-mentioned. On trial, the court ordered disposition of the proceeds, and as between mortgagees and judgment creditors, held for appellees Clark, such holding being based on the fact that their security instruments were prior in time to the assignment of appellants. From the decree so entered, appellants bring this appeal.

Let it first be stated that the Uniform Commercial Code does not apply to this litigation, for under specific provisions of Ark. Stat. Ann. § 85-9-104 (Add. 1961) a transfer of an interest or claim in or under any policy of insurance is excluded from the provisions of the code. The priority provisions found in chapter 9 are only applicable to conflicting security interests in collateral. While appellees did have a perfected security interest in the inventory, as collateral for the note, the appellants only had a contractual right by assignment. Since the dispute as to priority is not between conflicting security interests, Ark. Stat. Ann. § 85-9-301 et seq (Add. 1961) do not apply.

Of course as pointed out in 46 C.J.S. Insurance § 1140 p. 19, which deals with insurance proceeds, the general rule is that insurance policies are personal contracts between the insured and the insurer, and not contracts running with the property. This view was expressed by the court in Langford v. Searcy College, 73 Ark. 211, 83 S.W. 994, where we held that a purchaser of realty was not allowed to sue upon an insurance policy issued to the vendor. Accordingly, generally speaking, it may be said that insurance proceeds are payable only to the person whose interest is covered by the policy, provided he has an insurable interest at the time of making the contract and at the time of the loss. However, in 46 C.J.S. § 1147 p. 27, it is stated:

“Where the insurance is taken out by the mortgagor for the benefit of the mortgagee, or is made payable to the mortgagee as his interest may appear, in the absence of a waiver or agreement between the mortgagor and the mortgagee, the mortgagee has a prior or superior right to the proceeds of the policy, to the extent of the mortgage debt. *** Under a standard mortgage clause the rights of the mortgagee are not affected by any act done by insured, and, where such policy is issued in pursuance of a stipulation therefor in the mortgage, the mortgagee is entitled to the proceeds, although he was not informed of the issuance of the policy and had no knowledge thereof until after the fire.”

It is further stated under sub-section b:

“Regardless of whether or not the policy is made payable to the mortgagee, if it is procured by the mortgagor under a covenant or binding agreement to insure for the mortgagee’s benefit, the proceeds recovered by the mortgagor are held in trust for the mortgagee, who is deemed to have an equitable lien on the proceeds of the insurance for the satisfaction of his mortgage.”

The above authority is cited because appellants argue that there was no loss payable clause for the benefit of the mortgagees, but only for Hupp Credit Company, and that the insurance was not obtained by the mortgagor, for their benefit; that in fact, such insurance was not obtained until over three years after the execution of the mortgage. We do not agree with the argument so advanced. In the Iowa case of Winneshiek Mutual Insurance Association v. Roach, 132 N.W. 2d 436, in an opinion by Chief Justice Garfield, the Supreme Court said:

“The rule is that a mere mortgagee has no interest in an insurance policy issued to the mortgagor upon the mortgaged property unless such interest be created by some agreement between mortgagor and mortgagee in relation thereto. In the absence of such an agreement the insurance contract is strictly personal between the insurer and its patron. As a rule, however, the mortgagee has an equitable lien on proceeds of a fire insurance policy procured by the mortgagor pursuant to an agreement to insure for the mortgagee’s benefit, although the policy is not made payable to the mortgagee.”

The court added that it was immaterial whether the policy existed at the time the mortgage was executed, or was subsequently obtained.

In the Texas case of Abilene White Truck Company v. Petrey, 384 S.W. 2d 211, the Court of Civil Appeals of Texas (Fort Worth) held likewise, stating:

“Under the record in this case Petrey was charged with the duty of obtaining a policy of insurance with loss payable to the Abilene White Truck Company. The latter had a prior right to the proceeds of such policy when the property covered was destroyed while the debt was unpaid even though Petrey failed to provide that the loss be payable to it. This right was not affected by Petrey’s subsequent attempt to assign the proceeds of the policy [our emphasis]. Thus the assignees acquired no better right than that of Petrey. The proceeds in question are subject to an equitable lien in favor of the truck company.”

Writ of error was applied for but was denied by the Supreme Court of Texas which found no reversible error.

In the Florida case of Sumlin v. Colonial Fire Underwriters, Etc., 27 So. 2d 730, the Supreme Court stated:

“This court is committed to the doctrine that if a mortgagor covenants to protect his mortgagee the latter thereby is clothed with a lien on the policy to the extent of the mortgagee’s interest, whether the policy carried a loss payable clause or not.”

Appellants argue that paragraph 7 of the mortgage, heretofore quoted in full, does not call for immediate obtainal of the insurance, the agreement stating that such insurance should be obtained as the secured party “may from time to time require” and appellants italicize this phrase. However, it will be noted that this phrase only refers to “such other [our emphasis] hazards as the Secured Party” may require and that the agreement to keep the collateral insured against fire and theft is absolute. Not only does the instrument call for fire coverage on the collateral but the provision further states that the mortgagor “Hereby assigns to the Secured Party all sums which become payable under such insurance [our emphasis].”

It will be remembered that the assignment for the benefit of the judgment creditors, appellants herein, was not executed until three weeks after the fire had destroyed the collateral. We agree with the learned chancellor that the claim of appellees is entitled to priority over the claim of appellants.

Affirmed.

Smith, Brown and Fogleman, JJ., dissent.

John A. Fogleman, Justice,

dissenting. As I understand this case, the result actually turns upon whether appellees had an equitable lien on the insurance proceeds and, if so, whether it was prior and superior to the rights of appellants. I do not think they did. They could not have had any more than an equitable lien, since they were not named in the loss payable clause. The chancery court’s decree was based, at least in part, upon a finding that the insurance money represented the mortgaged property and that there was, in effect, an equitable conversion of the mortgaged property. This is not entirely consistent with our decisions. See Whitley v. Irwin, 250 Ark. 543, 465 S.W. 2d 906; Langford v. Searcy College, 73 Ark. 211, 83 S.W. 944; McDonald v. Rankin, 92 Ark. 173, 122 S.W. 88; National Union Fire Ins. Co. v. Henry, 181 Ark. 637, 27 S.W. 2d 786. We have even held that a mortgagee who effects insurance upon mortgaged property at his own expense and for his own benefit is entitled to the proceeds of the insurance without applying the proceeds to the mortgage debt. Ponder v. Gibson-Homans Co., 166 Ark. 591, 266 S.W. 682. It is true that we have said that the proceeds of insurance procured in compliance with the terms of a mortgage and collected by the mortgagee represented the insured property and constituted an equitable conversion of it, so that the mortgagee was entitled to apply the insurance proceeds to the mortgagor’s debt as he saw fit rather than in a manner which would benefit an endorser of some of the notes secured by the mortgage. Kissire v. Plunkett-Jarrell Grocer Co., 103 Ark. 473, 145 S.W. 567. The same principles were followed in Sharp v. Pease, 193 Ark. 352, 99 S.W. 2d 588. In that case, however, the mortgagor and the mortgagor’s successor in interest had failed to have a loss payable clause inserted for the benefit of the mortgagee, but the mortgage contained a specific provision that the absence of a loss payable clause or an assignment of the policy taken out pursuant to the terms of the mortgage would not affect the right of the mortgagee to the policy proceeds. The rights of third parties were in nowise involved there, because the litigation was between the mortgagee and the administrator of the estate of a purchaser from the mortgagor, and both the mortgagor and the purchaser had contracted to keep the property insured for the benefit of the mortgagee. The court based its holding in favor of the mortgagee upon the premise that had the purchaser lived and collected the insurance herself she could have been held accountable to the mortgagee. The proceeds were actually paid to her administrator.

On January 27, 1971, Gale Clark executed an assignment of the insurance proceeds in consideration of the assignees’ withholding of further legal proceedings to collect certain judgments. The assignment was to Trantham and Knauts for the use and benefit of the following in the sums set opposite their names:

National Bedding & Furniture Industries, Inc.

$3,571.87

Forsyth Williams Company 270.49

Mid-South Bedding Company 662.62

Authentic Furniture Products 126.25

William R. Moore, Inc. 399.97

Cooke’s Mfg. Co., Inc. 435.16

Rawleigh, Moses & Co., Inc. 209.94

Lampcraft Industries, Inc. 118.44

Hi-Lo Ind., Inc. 360.48

Total Assignment $6,155.22

Notice of this assignment was given to Maryland Casualty Company.

A lien on real or personal estate will be enforced in equity against the owner of the property and against anyone who afterwards takes the estate with notice of it, on the basis that the lien is in the nature of a trust which equity will compel the holder of the legal title to perform. Talieferro, Executor v. Barnett, 37 Ark. 511. It might well be that as between the son and the parents there was an enforceable lien against the insurance proceeds. But it does not follow that the lien is enforceable against the assignees who withheld collection procedures in consideration of the assignment.

The equitable lien actually depends upon the insurance having been procured pursuant to the covenant or agreement as to insurance in the security agreement. I submit that the evidence clearly preponderates against such a finding. The policy was not issued until October 13, 1970, more than three years after the execution of the security agreement. Even then appellees were not mentioned in the loss payable clause, which was in favor of Hupp Credit Corporation and GAC Corporation. The debt to the former was paid out of the policy proceeds. The debt to the latter must have been paid before the fire. There was no evidence that the policy was taken out pursuant to the security agreement or that the parents ever knew about it or the insurance company about them. The action of Clark in making the assignment relied upon by appellants is certainly inconsistent with the theory that the policy was obtained in compliance with the security agreement. Certainly there is no reason to believe that, by doing so, he intended to defraud his parents who had furnished original financing for his business venture. Other pertinent facts are that there is no evidence that the parents ever requested the delivery of any insurance policy, or that they availed themselves of the right to obtain insurance as the son’s agent, as they had a right to do under the security agreement. As a matter of fact, there is nothing in the record to show that there was no other insurance which inured to the benefit of appellees.

In Stearns v. Quincy Mutual Life Ins. Co., 124 Mass. 61, 26 Am. Rep. 647 (1878), the court held that a mortgagee was not entitled to recover the proceeds of a fire insurance policy procured by the mortgagor, even though the terms of the mortgage required the mortgagor to keep the property insured against fire for the benefit of the mortgagee. The insurance company issued the policy without any knowledge of the terms of the mortgage, although it knew that there was a mortgage in favor of the mortgagee. There was neither a loss payable clause nor an assignment of the policy or of the claim for loss. It was not shown that the mortgagee had any knowledge of the insurance until after the loss. The court fully recognized the doctrine regarding equitable liens in favor of a mortgagee on the insurance policy and its proceeds whenever the mortgagor procures insurance with the intention of performing his promise to obtain insurance for the benefit of the mortgagee. The court said:

In all the cases found, which support the claim of the mortgagee to insurance obtained by the mortgagor in his own name, the facts were such as to justify the conclusion, by estoppel or otherwise, that such insurance was obtained by the latter as the agent of, or with intent to perform the obligation he had assumed to, the former. * * *
In the case at bar, the facts agreed do not justify the inference that this policy was obtained with the intention, at the time, to perform the condition in the mortgage. That condition required insurance on the dwelling-house only, in a sum not less than $3,200, for the benefit of the mortgagee, at such offices in Massachusetts as he should approve. This insurance was obtained without his approval or knowledge, more than a year after the mortgage was made, for $2,000 in all, $500 of the same being on the mortgagor’s personal property not covered by the mortgage, and only $1,500 on the house. Both mortgagor and mortgagee had an insurable interest in the property, and each had the right to protect himself from loss by his own contract of insurance. So far as these facts go, the inference is that Stearns intended to insure only his own interest in the house as well as in the personal property. And the important element is lacking which is necessary to establish the claim of Andrews.

The Massachusetts court has pointed up the exact reason why the equitable lien doctrine has no application here.

Even if an equitable lien existed, it would not take priority over an assignment unless the assignee had notice of the existence of the lien. Maryland Casualty Co. v. Lincoln Bank & Trust Co., 40 F. Supp. 782 (D. C. Ky. 1941); Stepp v. McAdams, 88 F. 2d 925 (9th Cir. 1937); Prudential Ins. Co. of America v. Wetzel, 212 Wis. 100, 248 N.W. 791 (1933). See also, Beebe Stave Co. v. Austin, 92 Ark. 248, 122 S.W. 482, 135 Am. St. Rep. 172. I submit that the appellants are not chargeable with either actual or constructive notice.

Appellants gave valuable consideration for the assignment of the proceeds of the policy to them, in the form of forbearance of collection procedures, so they are not in the position of one claiming under a voluntary conveyance or transfer. Federal Compress & Warehouse Co. v. Hall, 209 Ark. 274, 189 S.W. 2d 922. They had no notice of the alleged equitable lien. The only basis upon which appellants could have been charged with any notice is the security agreement itself. They certainly were not charged with notice of the “assignment” of insurance proceeds in the security agreement because that is a matter specifically excluded from the operation of the code. Ark. Stat. Ann. § 85-9-104 (Add. 1961). Consequently, filing under the code cannot constitute notice as to the assignment even of insurance obtained in compliance with this security agreement. It could only constitute notice that appellees had a perfected security interest in the collateral. Furthermore, the proceeds of the insurance policy do not constitute “proceeds” of the collateral which the lien of the perfected security interest would reach. Ark. Stat. Ann. § 85-9-306 (Add. 1961); 4 Anderson, Uniform Commercial Code (2d Ed. 1971) 308; Quigley v. Caron, Me., 247 A. 2d 94 (1968); Universal CIT Corp. v. Prudential Invest. Corp., 101 R. I. 287, 222 A. 2d 571 (1966). The holding in the case just cited is premised at least in substantial part upon the rule so often recognized by our decisions, i.e., that an insurance policy is a personal contract which does not attach to or run with the property involved. The Rhode Island court also held that an involuntary conversion of property (loss by demolishment in an accident) cannot be a “sale, exchange, collection or other such disposition” under the code. In that case, a creditor, who was holder of an assignment made after the loss, prevailed over , the holder of a security interest.

Clearly, appellants are not chargeable with either actual or constructive notice of an equitable lien.

I respectfully submit that the cases cited by the majority do not support its result, and are clearly not contrary to my position. In Winneshiek Mutual Insurance Assn. v. Roach, 257 Iowa 354, 132 N.W. 2d 436 (1965), the court only held that the mortgagee’s pleading sufficiently alleged that the policy in question was taken out pursuant to agreement with the mortgagor and that a mortgagee clause furnished actually was intended to apply to the policy involved. In Abilene Truck Company v. Petrey, 384 S.W. 2d 211 (Tex. Civ. App. 1964), the only question involved was the effect of the absence of a loss payable clause. There is little room for doubt that the policy there was procured in compliance with the mortgage. At least no question was raised on this point. In Sumlin v. Colonial Fire Underwriters, 158 Fla. 95, 27 So. 2d 730 (1946), one policy involved was delivered by the mortgagor to the mortgagee, who had not presented it to the insurance company for endorsement and it contained no loss payable clause. Another policy had been taken out by the mortgagee without notice to the mortgagor before the delivery of the first policy. Both policies were for the insurable value of the property. The court merely affirmed a judgment requiring each insurance company to bear one-half of the loss and denying the right of the mortgagor to recover on one policy and the mortgagee on the other. I suggest that a different result probably would have been reached in this jurisdiction.

I would reverse the decree of the chancery court.

I am authorized to state that Mr. Justice George Rose Smith and Mr. Justice Brown join in this dissent.

      Disposition of the proceeds to other parties whom the court found to hold prior rights to proceeds is not questioned, and this appeal relates only to issues between the Clarks and the judgment creditors. The amount of money left for disposition was not sufficient to cover the amount due the Clarks.

      See Whitley v. Irwin, supra; Langford v. Searcy College, supra; McDonald v. Rankin, supra; and National Union Fire Ins. Co. v. Henry, supra.


author: Carleton Harris, Chief Justice. Conley Byrd, Justice,

text:
    ARKANSAS POLLUTION CONTROL COMMISSION v. Charles W. COYNE, Doyle SHIRLEY, Jr., and Raymond DONATHAN
    5-5890
    481 S.W. 2d 322
    Opinion delivered June 12, 1972

      James M. McHaney, for appellant.

      Robert D. Ridgeway and House, Holmes & Jewell, by: Philip E. Dixon, for appellees.
   Carleton Harris, Chief Justice.

The Arkansas Pollution Control Commission issued an order on April 23, 1971, wherein it refused to approve the use of septic tanks as a private sewage disposal system for eight houses proposed to be constructed by appellees, Charles W. Coyne, Doyle Shirley, Jr., and Raymond Donathan, on certain lots owned by appellees in unsewered areas in Hot Springs. On appeal to the Circuit Court of Garland County, the order of the commission was set aside by that court, the court holding that the commission had acted in an arbitrary and unreasonable manner in disapproving the applications. From the circuit court judgment, the commission brings this appeal. For reversal, it is simply asserted that the order of the commission was supported by substantial evidence and was not arbitrary and unreasonable.

As background to this litigation, it might be stated that the commission is a state agency created by the Arkansas Water and Air Pollution Control Act, Ark. Stat. Ann. § 82-1901 et seq (Supp. 1971), and is vested by this Act with broad regulatory quasi-judicial authority and discretion in formulating and applying appropriate remedial measures to prevent pollution. The authority of the commission to act is not questioned in this litigation; rather, it is only asserted that it acted in an arbitrary and unreasonable manner. According to the evidence, 60% of the area within the city limits of Hot Springs is without any public sewer service and it was this situation that culminated in an order on March 27, 1970, by the commission against the city, which inter alia, provided that the city of Hot Springs:

“Shall not issue a building permit for any structures in any unsewered area within the City limits unless the private sewage system for said structure has been first approved in writing by the Arkansas State Board of Health. It is further ordered and directed that the City of Hot Springs shall not approve, allow, or permit the platting or constructing of any subdivisions, residential or industrial, within the City limits, or within five miles thereof unless the sewer collection and treatment system for such proposed subdivision has been first approved in writing by the Commission and a permit issued therefor. The Commission will consider a petition to rescind or modify the foregoing restrictions at such time as the City of Hot Springs can show that its sewer collection system has been repaired or replaced so that the design capacity of its existing sewage treatment plants is not being exceeded and at such time as the City of Hot Springs has officially adopted and filed with the Commission an acceptable comprehensive plan for collecting and treating its sewage in a manner adequate to prevent pollution of any waters of the State, including specifically Lake Hamilton and Lake Catherine, and a permit has been issued by the Commission therefor, and the City has effectively appropriated funds for such initial phase of construction as shall be approved by the Commission.”

This order was not appealed from and became final.

In that area of the city not sewered, individual sewage disposal systems (septic tanks) are principally in use and the applications of persons applying to the city for building permits have been forwarded on to the commission with applications for use of septic tanks. These were reviewed by H. G. Hannah, Chief Engineer of the commission, who either approved or denied such applications.

The principal regulation with which compliance is required before approval to install a septic tank is Bulletin No. 9, pertinent portions of which read as follows:

“The first procedure in the design of sub-surface sewage-disposal systems is to determine suitability of the soil for the absorption of septic tank effluent and the leaching area required. The soil must have an acceptable percolation rate, without interference from ground water or impervious strata below the level of the absorption system. ***
(2) The maximum elevation of the ground-water table should be at least 4 feet below the surface. Rock formations or other impervious strata should be at a depth greater than 4 feet below the bottom of the trench.
Unless these conditions are satisfied, the site is unsuitable for a sub-surface sewage disposal system, except for isolated systems, which shall be considered individually and have the approval of the State Department of Health.
2.2 Percolation tests. Sub-surface explorations are necessary to determine sub-surface formations and to determine the suitability of the soil for a septic tank system. A soil auger, with an extension, is recommended for making investigations. In some cases an examination of road cuts, stream embankments, or building excavations will give useful information. Wells and well-driller’s logs can be used to obtain information on ground water and sub-surface conditions. In some areas sub-soil strata vary widely in short distances and borings must be made at the site of the system. **'*
23.2 Type of test holes. Dig or bore a test hole with horizontal dimensions of from 4 to 12 inches, and vertical sides to the depth of the bottom of the proposed absorption trench (24 inches or more). The holes may be bored with a 4-inch auger.”

There is no contention that the requirements of this bulletin are difficult to comply with, or even that they are unreasonable. To the contrary, it is argued by appellees that they complied with Bulletin No. 9, and that their applications to install septic tanks were refused on the basis of requirements and standards not set forth in the bulletin; that such action was unreasonable and arbitrary. Ray Schneller, Director of Engineering and Planning of the City of Hot Springs, and Charles Summer-ford, a consulting engineer of Hot Springs and his partner, Wayne Irwin, all testified on behalf of appellees, and all stated that the results of percolation tests on the 8 applications met the requirements set out in Bulletin No. 9 (and this is pretty well agreed to by appellant’s witnesses), and in their argument, appellees repeatedly assert that Bulletin No. 9 has been complied with. We disagree. A reading of the requirements in that bulletin, heretofore set out, establishes improtant requirements other than the percolation tests. We refer to (2) which refers to the maximum elevation of the ground-water table. Admittedly, appellees’ engineers did not go below 2 feet in making their tests, despite the fact that evidence of shale was found in all three of the sub-divisions here involved. In other words, there is no showing in any of the 8 applications reflecting that there are no rock strata for a depth of 6 feet.

Irwin testified for appellees and stated that the percolation test holes were dug with posthole diggers; that in some instances solid rock was encountered from 6 to 12 inches down; if solid rock was encountered, they proceeded no further with the tests. He further stated that on encountering shale in excavating for percolation test holes, it was felt that if the shale could be dug with a posthole digger, it was not necessary to dig deeper. Summerford admitted that septic tanks are not ideal because there are any number of things that can go wrong with the tanks that create problems:

“I don’t think that septic tanks is the — is the best method that there is, no sir, I — as a matter of fact, I think that in my opinion, a municipal sewer system with a properly operated collection system and disposal is the preferred method by far, any number of things can go wrong with septic tanks that create problems — they are expensive to the owners in maintaining — not only from roots but stop ups and other problems. They’re more prone to — to maintenance problems than — I think a — municipal system is, and I personally don’t think too much of a septic tank.”

Mr. Hannah testified that shale was evident in all the areas for which there: were applications. As to the lots belonging to Coyne, located in Cedarwood North sub-division, he stated:

“Of Cedarwood North — there was shale evident in all the cuts along the road side. On the second and third inspections, there was evidence of a seepage from a drainage ditch coming down through there; in fact looked like a wet-weather spring, it did not appear to be a water line leak. There was iron particles, it was heavy iron water. There was development in there, something like — 50% development of the area. Generally the drainage conditions weren’t good, essentially the same conditions were evident on Lot number 4 of Block 1.”

Further, “It [shale] was in the cuts from the curb on the street. It was in the utility cuts that had been made. It was broken and fractured but showed evidence of having been laminated.” When asked about the significance of the laminated shale as far as approval or disapproval of a septic tank system is concerned, Hannah replied:

“Well, in this particular type, your effluent can get into these laminations and the material will weather, just as it had out there in the ground, or had on the ground, and you will get effluent running through the layer rather than being absorbed into the ground as is the proper function of a septic tank. Well, it’s a very low degree of treatment — it acts as a sedimentation chamber with some anerobic biological action, the effluent from this, which I say is — is a very low degree of treatment, then goes into a leaching field where it is absorbed into the ground and if properly constructed should never surface and consequently the low degree of treatment has been acceptable when properly done.”

The engineer said that the proximity of other dwellings and the character of the surrounding area were also factors that he considered in denying the applications; that there was a great difference in approving the use of septic tanks in an isolated area where there is a large plot of ground and approving the use of a septic tank in an urban built up area. The disapproval of the applications of the other two appellees was made on the same basis. He mentioned, relative to Shirley, that there were several other houses down stream bn a very steep slope.

Cecil Weir, employed by the Arkansas State Department of Health as an engineer, agreed that Hannah was completely justified in his decision denying the applications. Making reference to requirement (2) from Bulletin No. 9 referring to the maximum elevation of the groundwater table, Weir stated:

“When you have, if you have shale, now our regulations says four feet below the trench or six feet deep as far as there shall be no rock or impermeable layer. In other words, clay or something like which will hold and keep it from traveling on down into, the ground. And when you have shale, such as this, and it forms a layer, you may have soil on top that will exhibit good percolation but once it soaks down and hits this layer of shale it can travel along the surface of the shale or along through the shale and come out, well at this ditch cut I’m talking about, can come out at the surface of the ground, if the shale gets that close enough to the surface of the ground come out from the stream bed or anything like that. Now as far as a built up community and as far as using septic tanks in a built up community, we look at the aspect of these, of kids or children that like to play in water and that sort of thing and in cases they like to get out and playing in the back yard or where ever kids like to play and will get into this material. Animals will get into this material and will be brought into the peoples houses and if its septic tank effluent —its a septic tank effluent that these kids are playing in. This is really I think, the most important factor involved with septic tanks in a built up area.”

We have not detailed the evidence of appellees for the reason that we are only concerned with whether there was substantial evidence to support the order of the commission. By “substantial”, we mean valid, legal, and persuasive evidence. If, of course, such evidence was offered, it automatically follows that the ruling of the commission would not be unreasonable or arbitrary.

Appellees argue that Hot Springs is the only city in the state wherein the commission has ordered that applications be first submitted to it for approval, and it strongly intimates that the commission has no intention of approving applications in that city until definite steps, which the commission deems necessary, are taken with regard to sewage disposal. As to the first mentioned argument, it does not appear that there are any other areas wherein the problem exists to the extent of requiring written approval by the commission before septic tanks are installed; as to the last, there has been approval of some permits, as earlier pointed out. It is likewise argued that the applications were turned down for reasons other than non-compliance with Bulletin No. 9. Hannah so stated, mentioning proximity of other houses in the vicinity, and character of the surrounding terrain. Of course, it is desirable that criteria and standards for the approval of septic tank applications should be set out in writing, and prospective applicants thus apprised in advance of what would be expected. The additional matters considered by Hannah certainly seem to be pertinent to whether applications should be approved, and were even matters that would not seemingly require expert opinion. Be that as it may, the fact remains that Bulletin No. 9 was not complied with as already mentioned and certainly the regulation (2) referred to previously is in black and white, and is actually the first specific requirement in Bulletin No. 9.

We cannot agree that the record reflects any prejudice toward the city on the part of the commission, and it is considered and expected that all applications will be acted upon on an individual basis and approved or disapproved according to the evidence offered. After all, public officers are presumed to act lawfully, sincerely and in good faith in the execution of their duties. Rockefeller v. Hogue, 244 Ark. 1029, 429 S.W. 2d 85, and cases cited therein.

The people of Arkansas are proud of the health fadlities offered in Hot Springs and desire that its function and reputation as a health resort be maintained.

Despite the fact that an ordinance passed by the City Council calling for a substantial increase in the sewage service charges was defeated after a referral to the people in November, 1969, there is evidence that the people of that community have now become acutely aware of the problem. At the hearing before the commission in February, 1970, a resolution of the “Hot Springs Citizen’s Sewer Committee” (composed of 16 citizens) was read into the record. It is pointed out that this committee had recommended an increased sewer tax with a new minimum rate of $1.00 (rather than $.50), and it mentions that the ordinance was adopted. The resolution closed as follows:

“We, of the Citizen’s Committee, have pledged ourselves to give these problems not only the very best efforts, to minimize or eliminate the pollution of our most important resource, namely Lake Hamilton and Lake Catherine, but also to work with as much speed as possible.
You, Gentlemen of the Commission are aware, that such a program to solve these problems will take considerable time and while such time has been given the City freely in the past, we wish to assure you that quite a different climate of cooperation exists now in Hot Springs.”

The record does not reflect results obtained.

While we recognize that the home building industry can suffer to some degree because of a necessary curtailment in the construction of houses in unsewered areas, we think it clear that when the building of such houses contributes to pollution of the area, the welfare of the citizens of that community, and the thousands of visitors to Hot Springs, demands that the control of contaminated areas take precedence.

The judgment of the Garland County Circuit Court is reversed and the cause remanded with directions to reinstate the order of the commission.

It is so ordered.

Byrd, J., dissents.

Conley Byrd, Justice,

dissenting. If the appellant had been denying the applications for permits simply on the basis that the property owners had not complied with Bulletin No. 9, I would agree. The proof however shows that appellant’s chief engineer is denying the applications upon some sort of criteria that are not in print. This alone is sufficient to show that the Commission was arbitrary.

In addition to the criteria not in print, the proof shows that the applications were made in September, hearings were not held until December and a ruling was not made until the following April. This time element alone is so cumbersome that it becomes arbitrary and capricious. New people can wait nine months to find out whether they have a job under today’s cost of living scale.

Furthermore the undisputed proof in the record is that other houses in the same subdivision are properly operating, pollution free, on septic tanks.

For the foregoing reasons, I respectfully dissent.

      Because of insufficient personnel, the Board of Health was unable to fully comply with this duty, and same is handled by the commission.

      In March, 1965, Hollis B. Conway, a sanitation engineer for the Federal Housing Administration, made a report to the office of the FHA director in Little Rock setting out results of an investigation made relative to individual sewage disposal systems in Hot Springs. The report, inter alia, stated:
      “In September and October, 1964 and January, 1965, visits were made to the Hot Springs area to survey the unsewered area to ascertain if individual sewage disposal systems were operating satisfactorily. *** It was learned that the Stokes Creek watershed in the southwest part of the city has no sewer system. In 1952, the City proposed to sell |200,000 worth of bonds to install sewers in the area, but residents did not form the necessary district. Nothing has been done since. *** The soil in the Hot Springs area is primarily broken shale underlaid with a layer of shale or rock. This underlayment may be in various planes depending upon the heave or fold at the time of the mountainous formation. Survey of areas in and around Hot Springs revealed many individual sewage disposal system failures. [There follows a recitation of numerous instances of septic tank failures]. *** Where shale layers outcrop or in low areas, evidence of septic tank system effluent is present. It appears that the broken shale allows the system effluent to percolate to the impervious stratum, then run along the stratum to its outcropping. It is my opinion that septic tank systems will not function properly in a majority of the area in and around Hot Springs. Septic tank systems should not be used where a concentration of houses are built. It is recommended that the Commissioner’s risk not be extended in the Hot Springs area. New construction to be served by septic tank systems should not, in my opinion, be considered acceptable. Properties even though served by the Municipal Sewage System should be investigated it they are located near an area which is served by septic tank systems. Drainage from the septic tank system area might be into the area served by sewers. ***”

        This recommendation was followed by the Federal Housing Administration and it has since refused to approve loans made on the construction of new residences in unsewered sections of Hot Springs.
      L. D. Cockman, Assistant Director of the Arkansas Pollution Control Commission, testified at the February 27, 1970, hearing (order entered the following March) relative to the coliform bacteria counts in Lake Hamilton, Lake Catherine, Hot Springs Creek, Gulpha Creek, and Stokes Creek. Without detailing the report, suffice it to say that it reflects a highly undesirable condition. Mr. Cockman testified that soil conditions in general are not suitable for subterranean disposal such as a septic tank system, mainly because the soil is generally clay underlayed by shale or other types of rock which are most unsatisfacotry for this type of disposal.

      As of the date of the commission hearing in this case, the city had forwarded 56 requests for use of septic tanks of which 19 had been approved by the commission.

      Shale is defined by Webster’s Third New International Dictionary as “A fissile rock that is formed by the consolidation of clay, mud, or silt, has a finely stratified or laminated structure parallel to the bedding, and is composed of minerals that have been essentially unaltered since desposition.” Summerford testified that shale is “actually a material that is formed by heat and pressure in the earth’s crust more or less from sediments in an area. Now shale here as so indicated, to me simply means a low quality rock or grandular material that is present in these conditions. I mean in these locations.” He reiterated “Yes, it is a rock”.

      On rebuttal, Charles Coyne and Doyle Shirley each testified that on one of each man’s lots most of the shale along the curb line had been hauled in as back-fill.


author: George Rose Smith, Justice.

text:
    James Arthur HOWERTON v. STATE of Arkansas
    5699
    481 S.W. 2d 698
    Opinion delivered June 12, 1972
    [Rehearing denied July 17, 1972.]

      Oscar Fendler and Eudox Patterson, for appellant.

      Ray Thornton, Attorney General; James A. Neal, Asst. Atty. Gen., for appellee.
   George Rose Smith, Justice.

This is primarily an appeal from an order revoking a suspended sentence in a criminal case. The appellant also questions the trial court’s denial of a petition for postconviction relief, but since the same arguments are made with reference to both aspects of the case we need not discuss them separately.

We state the essential facts in chronological sequence. In November, 1969, three separate informations charging grand larceny were filed against the appellant, then sixteen years old. The court appointed an attorney for Howerton. One of the charges, Case No. 9947-A, was tried on April 7,1970. The jury returned a verdict of guilty and sentenced Howerton to imprisonment for one year. He served six months of that sentence before being released from confinement (apparently in the usual course of the parole system).

Appellant was again arrested and brought to trial, on November 10, 1970, upon the other two charges of larceny and upon three additional charges of a similar nature. He was again represented by the attorney who had been appointed to defend him. With the advice of counsel Howerton pleaded guilty to all five charges. He was sentenced to six years confinement upon each charge, the sentences to run concurrendy. All the sentences were suspended upon condition that he serve a term of at least 90 days upon the Mississippi County Penal Farm. After having served for 96 days Howerton was again released. He went to his grandmother’s farm in White county and worked there for several months.

In July, 1971, Howerton returned to Blytheville and again got into difficulties with the law. He was convicted in municipal court of having unlawfully possessed intoxicants (he being a minor), of drinking in public, and of carrying a concealed weapon (a length of pipe). Upon the basis of those convictions the prosecuting attorney sought a revocation of the six-year suspended sentences. Howerton’s present counsel were appointed to act for him. After a hearing the court revoked the suspension of the sentences.

It is first argued that the April, 1970, conviction in Case No. 9947-A should be set aside, on the ground that the prosecution was allowed to introduce incompetent evidence. It is shown that a police officer was permitted to read to the jury a confession in which Howerton enumerated more than twenty thefts committed by him and a companion. This contention is without merit. In the first place, evidence of other offenses is sometimes admissible, as we pointed out in Alford v. State, 223 Ark. 330, 266 S.W. 2d 804 (1954). We cannot say from the record before us that the evidence in question was in fact inadmissible. If it was, however, the remedy was by appeal and not by a belated collateral attack upon the judgment. In the second place, the point is actually moot. Howerton served half the sentence that was imposed at that trial. He was then released. Now, more than two years after the conviction, there is no possibility that Howerton can be required to serve the rest of that sentence.

Howerton also contends that the five six-year sentences, the suspension of which was revoked, should be canceled by this court as having been imposed in violation of the constitutional provision against double jeopardy. Here counsel’s theory is that Howerton was tried in April, 1970, for all those offenses, simply because the State was allowed to submit to the jury the confession in which Howerton admitted having committed at least two of those offenses, if not all five of them (the record not being entirely dear).

We find this contention, for which no pertinent supporting authority is cited, to be without foundation. The introduction of the confession at the 1970 trial was, as we have indicated, at most a violation of the rules of evidence, for which the remedy was by appeal. It is clear that the reading of the confession could not possibly have put Howerton in jeopardy of being convicted of the various crimes described in that document. There was no way in which the jury could have found Howerton guilty of those offenses or have imposed punishment for their commission. In the circumstances the plea of double jeopardy is untenable.

Affirmed.

Fogleman, J., not participating.