author: John A. Fogleman, Justice..

text:
    M. L. Walt et al v. William J. Bevis et al
    5-4226
    414 S. W. 2d 863
    Opinion delivered May 22, 1967

      Wright, Lindsey & Jennings, for appellants.'

      Joe P. Melton and Chas. A. Walls Jr. and ‘Stanley R. Price and Walter R. Brown, for appellees. - '" '■
   John A. Fogleman, Justice..

This case turns upon the construction of the will of Samuel B. Kirk ol Lonoke County who died January 27, 1890. Appellants contend that title to certain lands in Township One; North; Range Nine West in Lonoke County, of which the testator died seized and possessed, vested in them ás his néárfe'st, hf kin upon the death of the last of Kirk’s children-without issue. They assert this claim under Item VIII of the will, contending, that the will shows the intention of the testator to leave his children a defeasible estate in fee simple. In seeking to establish their title appellants find support in .several items of the will so we will outline those items which are' pertinént or to which specific reference is made by appellants.

LAST.' WILL. AND TESTAMENT OF SAMUEL B. KIRK OF LONOKE COUNTY, ARKANSAS

ITEM III gives all personal property and all rents to the widow with full, control and powers of disposition without accounting, directing he.r to maintain, educate and school their children until each shall have arrived at’the age of maturity and to rent, lease and improve lands and; collect .rents from the real estate thereinafter <‘ given to my . children until the youngest child shall have arrived at the age of maturity when the lands given the children Hérein' shall he equally divided between them’ as hereinafter namedthe object of this item being :to give nay wife absoute control of all personality and rents with, the power of disposing of same as fully and completely as if the same originally belonged to her.-’ ’ .' "■ .■

ITEM IV. provides that at the death of his widow, the -eldest son, Samuel H. Kirk, regardless of his age at the time, should be vested with the property and .powers granted the .widow and charged with the responsibilities assigned her, with the personal property to be divided among his .children share and share alike when the .youngest, of his children should become twenty-one .years.of age.

ITEM Y, omitting land descriptions, reads:

VI. give arid devise to my beloved children Samuel H. Kirk, Robert Kirk, Thomas F. Kirk and to any other •children thaf may be born unto me hereafter, by my .beloved wife Katie Kirk in common the following de«scribed lands, lying and situated in Lonoke County, Arkansas to wit: [lands in Township One North, Range Nine West; lands in Township Two North, Range Nine West] and all other lands which I now as hereafter own which I have not disposed of in this will either to my said children or to my dear wife to whom I give lands named in item Sixth of this will. I also give to my said children Block, four (4) (Block 4) in Dismukes Addition of the Town of Lonoke, being in Sonth West of North quarter of Section Nineteen in ToAvnship two North Range Eight West.”

ITEM VI devises certain lands to the widow and states, after describing them: “which said lands she may sell convey and dispose of as she may see proper, and for any purpose she may see proper; but all of said lands not disposed of at her decease shall be equally divided between my chidren, then living, and their heirs share and share alike — that is to say to each of my children, then living one share, but if any of my children shall not be living, but shall have left children then the children of that one to take the share of the parent, but the division must not take place until the youngest of my children shall have arrived at the age of maturity.”

ITEM VII: “It is my will and my desire that the lands which I have given to my children shall not be divided between them until the youngest shall have attained his or her majority.”

ITEM VIII: “It is my desire, and I will that if any of my children shall die before attaining his or her majority and without any children surviving them, his or interest shall be inherited in equal parts by the survivors i.e., his or her brothers and sisters and in' case of the death of all children without issue, the property herein willed them and its increase both real and personal shall go to the nearest of kin on my side.”

ITEM IX: “In case all of my children shall die leaving no children surviving, and their Mother should survive them, then I devise direct and will that all the lands which I have herein willed to her which she has not disposed of at her decease shall return to, my side of the house, and become the property of the nearest of kin.” '■ ■'

ITEM X: “It is my will and desire that should my wife see proper to do so, she may sell and convey all the lands which I have given to my children in Township Two (2) north Range Nine (9) West and Block Four (4) in the Dismnkes Addition to the Town of Lon-oke said block being in the South West quarter of North West of Section Nineteen (SW% ofNW^A Sec.'19) Township Two (2) North Range Eight (8) West, Said Block and lands to be sold for the benefit of my said children, and she may convey the same in fee simple, the gift to my children of said lands being subject to this right and power of sale in my said wife their mother/’

ITEM XI: “It is my will and desire and I do order that all the lands which I now own .in Township, One (1) North Range Nine (9) West and all that I may die seized and possessed of in that Township and Range shall become the property of my children to be owned and enjoyed by them in common as their lands absolutely to be governed in the division thereof by the provision of Item Seven of this will.”

The paramount principle in will construction is to ascertain and declare the testator’s intention. Copeland v. Harness, 238 Ark. 143, 379 S. W. 2d 1. This must be done from the language used as appears from consideration of the entire instrument and all of its provisions, and comparison of its various clauses. See Booe v. Vinson, 104 Ark. 439, 149 S. W. 524 ; Murphy v. Morris, 200 Ark. 932, 141 S. W. 2d. 518 ; Morris v. Lynn, 201 Ark. 310, 144 S. W. 2d 472 ; Layman v. Hodnett, 205 Ark. 367, 168 S. W. 2d 819 ; Cox v. Danehower, 211 Ark. 696, 202 S. W. 2d 200 ; Weeks v. Weeks, 211 Ark. 132, 199 S. W. 2d 955 ; McLaren v. Cross, 236 Ark. 648, 370 S. W. 2d 59. The will must be viewed from its four corners. Dyer v. Lane, 202 Ark. 571, 151 S. W. 2d 678 ; Dickens v. Tisdale, 204 Ark. 838, 164 S. W. 2d 990. If possible, it must be construed to give force and meaning to every clause and provision thereof. Archer v. Palmer, 112 Ark. 527, 167 S. W. 99 ; Prall v. Prall, 204 Ark. 1074, 166 S. W. 2d 1028 It should be given that construction which best comports with the purposes and objects of the testator. Parker v. Wilson, 98 Ark. 553, 136 S. W. 981 ; Layman v. Hodnett, 205 Ark. 367, 168 S. W. 2d 819.

When we view the will of Samuel B. Kirk from its four corners, considering its language and giving meaning to all of its provisions, it seems to us that there can be no question that Kirk clearly intended that his children have the lands in Township One North, Range Nine West in fee simple absolute. Reading of the various clauses indicates that he desired that these children be appropriately supported and educated until each bad reached his or her majority and to this end desired that some person in whom he had confidence have uncontrolled discretion in the handling of personal peoperty left by him and in the collection and application of rents from his lands. To this end he established something in the nature of a trust, of which his widow had control, if living, or his eldest son in' case of her death. This made it inadvisable that there be any division of real estate during this period, so he expressed the desire that this not be done until the youngest child should attain his majority. In what seems to be an obvious effort to avoid intestacy he expressly provided for division when the youngest child reached the age of twenty-one years, making provision to pass any interest of a child who died before attaining his majority '¿nd without children surviving to his brothers and sisters and if all died without issue, to his nearest of kin. It is to be noted that Item VIII first treats of the situation if any of his children should die (1) before attaining majority and (2) without any children surviving him. It is only reasonable to believe that consideration of the language and the objects and purposes of the testator points to his intention that the nearest of kin would share only if all his children died before attaining majority and without issue. It does not seem reasonable that surviving brothers and sisters would not share in the interest of a deceased child unless he died before majority, but that the “nearest of kin” would benefit if all children died without issue, regardless of age of the last one when he died. It is to be noted that he devised lands in Township Two North, Range Nine West to his children, as well as lands in Township One North, Range Nine West. He also devised to his children all lands owned by him which he did not specifically devise to them or to his widow. He further provided that all lands left to his widow' remaining undisposed of by her at the time of her death should go to his children, share and share alike.

It is significant that the testator gave his wife the absolute power to convey lands left to his children in fee simple, except for lands in Township One North, Range Nine West, saying that his gift of other lands was subject to this power of sale. This clause is then followed by the provision that all lands owned by him in Township One North, Range Nine West “shall become the property of my children to be owned and enjoyed by them in common as their lands absolutely, to be governed in the division thereof by Item Seven of this will.” [Emphasis ours]

Regardless then, of the meaning and effect of Items VIII and IN as to other lands, the testator could not have more clearly expressed his intention to devise a fee simple absolute to the lands in question to his children.

Appellants argue that the provisions of Item III giving testator’s widow absolute control of rents from the lands and the power to rent, lease and improve the lands indicate an intention that his children take less than a fee simple absolute. We do not agree. In Black v. Bailey, 142 Ark. 201, 218 S. W. 210, this court construed a will in which a testator provided that his residuary estate be held in trust until a certain grandchild attained the age of twenty-one years, or for ten years after the grandson's death if he died before reaching that age, for . the use and benefit of his children. The trustee had full power to handle, manage and control the estate and was directed to divide the rents and profits .among testator’s children or their heirs semiannually. Another clause devised and bequeathed all his estate at the expiration of the trusteeship to his' children, share and share alike with the provision that if any of his children should die before expiration of the trusteeship, leaving issue, said issue should take only the share that would go to his child if living. As against the contention of testator’s grandchildren that they were contingent re-maindermen, this court held that a fee simple title vested in testator’s children, there being no language vesting the legal title in the trustee, the trust being for the purpose of control and management of the property only. It was said that it was the intention of the testator to vest the entire estate in his children with a postponement of their right to enjoy the possession thereof in severalty for a period of years.

Similarly, in Wallace v. Wallace, 179 Ark. 30, 13 S. W. 2d 810, it was held that a clause with reference to maintaining certain farms intact for 25 years did not prevent the vesting of the fee in the brothers and sisters and a sister-in law' of appellant to whom he referred as his legal heirs. The cause there involved is as follows:

“4. It is my desire and I do hereby will that my two plantations situated in Howard county, Arkansas, and known as the McDaniel and Block farm be held intact and in trust for my legal heirs for the term of twenty-five (25) years after my death. The manager or superintendent of said farm is to use my office or residence in Saratoga, Arkansas, as a residence or business office, the net proceeds of the rental of said farm to go to my legal heirs each year. After the twenty-five years have expired said lands may be sold or divided for the benefit of my said heirs. ’ ’

This court said, as against the contention of a nephew that he was entitled to part of the proceeds of a sale of certain of the lands, or that he. was at least a contingent remainderman who might take as one of the heirs of the testator surviving at the end of the twenty-five-year period, that there was no intention on the part of the testator expressed in the will to disinherit the “legal heirs” for a period of twenty-five years or any other time.

As a matter of fact, the testator here could and did postpone the vesting of the fee until the youngest of his children reached the age of twenty-one years, but this did not diminish the estate granted. In Fleming v. Blount, 202 Ark. 507, 151 S. W. 2d 88, it was held that where a testator devised one-third of his real estate to each of three children, but directed that none of the real estate be divided or sold for a period of eleven years, they would take title in fee simple to one-third each at the expiration of that period. There the testator stated purposes to compel frugality and education. There was á clause providing that if either of his children should die, the other two should share equally in the estate, and if two should die, the entire estate should go to the third.

The holding of this court in Jackson v. Sanford, 208 Ark. 888, 187 S. W. 2d 945, seems persuasive here. Sanford died testate, leaving six children. His wife predeceased him. Two of the children, a son and a daughter, died without issue, one leaving a widow as his sole dev-isee and legatee. The will contained this clause:

£ £ Third. At the death of my beloved wife, I direct, devise and bequeath all of said property remaining and undisposed of by her shall be divided equally, to share and share alike, between our children, as follows: Stephen Wyatt Sanford, Ollie Mae Hudson, Florrie Sanford, Bobbins S. Sanford, Sloan M. Sanford, and John William Sanford; and in the event that either of said children shall die without issue, then the interest of said child so dying shall go to the said .children living, to share and share alike.” ' .''•••

It was contended that the son took only a. determinable or contingent fee and - that his share would go. to th'e remaining children, share and share alike: The court held that the children were -vested with a fee simple absolute title upon the death of the father. The court said that the lands could not be divided equally among the children if a child would take a determinable or contingent fee in his share of the estate, dependent’ upon the birth of issue thereafter, holding that the defeasance clause meant-dying without issue before testator’s death, or, if his -wife had’survived him, before her death. There could not be-an equal ■ division, said the court, .where a child having issue would take the fee immediately and others would take a determinable or contingent fee,’ depending on issue in the future. This statement seems particularly applicable here.

“* * ■* Here, these two without issue died six years after their father’s- death. They might have lived .10, 20, 30 or 40 years after his death, during which time it is .easy to perceive the uncertainty of the title to their shares of said-estate and their impotency to hold, use, sell’or enjoy, same.”

It has also been held that a will provision that the residuary estate should be divided equally betwéen’ a son and. a daughter, but in the event" of the’ death of either, the heirs of their body would take his or her share per stirpes meant that if they survived him, 'then they took the fee title. The clause with reference to' death was said to mean the decease of either prior to the death of the testator. Ramseur v. Belding, 206 Ark. 415, 175 S. W. 2d 977.

In Harrington v. Cooper, 126 Ark. 53, 189 S. W. 667, it was held that a defeasance clause related to the time of death of the widow of testator. He devised certain lands to Ms widow and dangMer daring the life of the widow stating that at the death of the widow he desired and intended that the daughter should take the entire interest in her own right should.she survivé her mother. The defeasance clause provided that should the daughter die childless the whole should revert to his estate and be equally divided between his other children and their descendants. This resulted in the vesting of a fee simple title in the daughter upon the death of her mother. The estate would revert only if she should die without leaving a child before her mother’s death.

Following the decisions hereinabove set out can only lead to the conclusion that fee simple absolute vested in the Kirk children when the last attained his majority.

If, 'however, it could possibly be said that this will is not clear on this point, but is doubtful, ambiguous or capable of more than one construction, still appellants could not prevail over settled rules of construction resorted to in such circumstances in this state for many years.

In case of doubt, the construction bf a will is favorable. to the first’ taker because it is against the policy of the law to tie up property. Cross v. Manning, 211 Ark. 803, 202 S. W. 2d 584. The law' favors the vesting of estates as early as possible, and if a will is capable of a dual construction, by one of which the estate becomes vested and. by another it remains contingent, the former wiil Be adopted. Booe v. Vinson, 104 Ark. 439, 149 S. W. 524 ; McCarroll v. Falls, 129 Ark. 245, 195 S. W. 387 ; McKinney v. Dillard & Coffin Co., 170 Ark. 1181, 283 S. W. 16 ; Doake v. Taylor, 195 Ark. 490, 112 S. W. 2d 958 ; Hargett v. Hargett, 226 Ark. 929, 295 S. W. 2d 307.

Where any ambiguity exists in a will, such a construction. should be. given it as favors the heirs at law in preferebce to. persons not so closely related to the testator.. Yeates v. Yeates, 179 Ark. 543, 16 S. W. 2d 996, 65 ALR 466. See, also, 95 C. J. S. 842, Wills, § 616, and 95 C. J. S. 845, et seq., Wills, § 617b.

While the provisions of a will should he so construed as to avoid any conflict, the last clause in the will governs in ascertaining a testator’s intention in case there is any conflict. Little v. McGuire, 113 Ark. 497, 168 S. W. 1084 ; Gist v. Pettus, 115 Ark. 400, 171 S. W. 480 ; Bowen v. Frank, 179 Ark. 1004, 18 S. W. 2d 1037 ; Thomason v. Phillips, 192 Ark. 107, 90 S. W. 2d 228 ; Stayton v. Stayton, 198 Ark. 1178, 132 S. W. 2d 830.

Where an estate in lands is created by will, it will be deemed to be an estate in fee simple if a less estate is not clearly indicated. Ramseur v. Belding, 206 Ark. 415, 175 S. W. 2d 977 ; Ollar v. Roy, 212 Ark. 682, 207 S. W. 2d 313.

All rules of construction lead to the conclusion that the chancellor was correct.

Affirmed.


source: Caselaw Access Project

author: J. Fred Jones, Justice.

license: Public Domain

text:
    Continental Casualty Company v. John R. Campbell
    5-4224
    414 S. W. 2d 872
    Opinion delivered May 22, 1967

      Mobley & Bulloch, for appellant.

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

This is- an appeal from a judgment of the Pope County Circuit Court Avherein a jury was waived and the trial judge, sitting as a jury, rendered judgment in favor of John R. Campbell on a health and accident insurance policy issued by Continental Casualty Company. Continental is the appellant here and designates one point for reversal, as follows:

“There ivas no substantial evidence upon which the court could base its decision in favor of appellee, John R. Campbell.”

In appeals to this court from judgments of Circuit Courts where the trial judge sits as a jury or enters judgment upon . a jury verdict, the “substantial evidence” rule is so firmly established in this state that citation of prior decisions is not necessary. We now examine the evidence as to its substantial nature.

On February 23, 1961, appellee Campbell made application for a health and accident insurance policy through appellant’s agent on a written form. The questions printed on the application form were read to ap-pellee and his answers to the questions were written down by the agent. Questions eight and nine in the application, and the answers thereto, were as follows:

“8. Have you to the best of your knowledge and belief ever had abnormal blood pressure, ulcers, tuberculosis, appendicitis, hernia , diabetes, cancer syphilis, goiter, paralysis, sciatica, arthritis, rheumatism, any disorder or disease of the mental, nervous, genito-urinarv or digestive systems, rectum, eyes, back, spine or heart? (If so, give nature, date, period of disability, name of doctor and result)-No
“9. Have you been under observation or had medical or surgical advice or treatment, or been hospital confined during the past 5 years!-No (If so, give dates, ailment, duration and result)”

A policy was issued by appellant to appellee and became effective on March 9, 1961. Appellee continued his work as a carpenter until November 1963, at which time be became totally and permanently disabled because of cystic lung disease in the left lung and compensatory emphysema in the right lung. Appellee underwent chest surgery performed by Dr. Reiser in Joliet, Illinois in November 1963, and has been disabled since that date.

Claim was made under the policy and was denied by the appellant who contended that the condition causing the disability pre-existed appellee’s application for the insurance; that appellee had knowledge of the condition and intentionally withheld the information from appellant and intentionally and fraudulently misrepresented-his physical condition in his application for insurance'with' the fraudulent intent to deceive the appellant.

This was denied by appellee who filed suit. At the conclusion of the trial, judgment was entered for appel-lee for $2,819.00 accrued benefits under the policy, for attorney’s fees in the amount of $940.00 and penalty in the amount of $338.40 and-for costs.

At the trial of this case the appellee, as well as his wife, testified that the agent for the appellant insurance company came to their home soliciting insurance business and that the agent read the .questions from the application form and then filled in the answers. Both the appellee and his wife testified that to the- best of their knowledge the answer to question No. 8 was true, and that in answer to question No. 9 on the application form, appellee advised the agent that he had been hospitalized for a short period of time in Joliet, Illinois where he was under the care of Dr. Blondis who told him he had Asian flu. Both the appellee and his wife testified that the agent remarked that this short period of hospitalization for Asian flu was of small significance and that the agent wrote “no” as an answer to question No. 9. The agent testified that he wrote the answers correctly as given to him by the appellee.

The appellee, as well as his wife, testified that to the best of their knowledge appellee was in good health and free from physical impairment or deformity, at the time the. application was made. Appellee introduced his income tax statements in support of his and his wife’s testimony that he was regularly employed as a carpenter and that his income was rather constant, and indicative of full time employment for 1960, 1961, 1962 and 1963.

Appellee denied any knowledge of lung disease! prior to the operation, and denied that Dr. Blondis or any other doctor ever told him he had lung disease. He denied that Dr. Blondis told him anything other than he had Asian flu when he was hospitalized for two or three days in 1960.

Dr. Hickey of Morrilton testified that he treated ap-pellee for fracture of the femur and had also rendered “follow up” treatment following the chest surgery. Dr. Hickey testified that in his opinion appellee’s thoracic condition developed over a period of five to fifteen years, but that it was possible that appellee could have been able to perform his normal duties; that many people with such disease work right along with it.

Dr. Blondis testified by deposition that he had treated appellee in the hospital about February 1960; that he diagnosed appellee’s condition as fibrocystic disease of the left lung, extensive with recurrent bronchitis and that he advised appellee of the condition. Dr. Blon-dis testified that he obtained a history from appellee of an automobile injury and hospitalization in the Army-Navy Hospital in Hot Springs for injury to the right chest, and that at that time appellee was advised that he had cystic disease of the left lung; that he also obtained a history of a crushing injury to the left chest in a truck accident during World War II following which appellee was hospitalized in a government hospital in Memphis, Tennessee. Dr. Blondis testified that he relied on his own records and on hospital records for this information, hut admits that some of his records were misplaced when he moved his office.

Appellee admitted he was injured in an automobile accident while in a C.C.C. Camp near Hot Springs in 1938, and that he was hospitalized in the Army-Navy Hospital in Hot Springs for that injury, but denies being told that he had cystic disease of the lung. He denied being in World War II and denied having ever suffered an injury to the left side of his chest. He denied having ever been a patient in any hospital in Memphis, Tennessee.

Both Dr. Blondis and Dr. Hickey were of the opinion that the fibrotic condition of Appellee’s left lung was probably congenital in origin and Dr. Hickey testified that it was entirely possible that a person could have such condition and not know it until it became disabling.

Appellant alleged fraud in this case. It alleged that appellee knowingly gave untrue answers to questions in his application for insurance and that he did so intentionally and with purpose and intent to deceive the appellant and fraudulently procure the issuance of the insurance policy. This case was submitted to the trial court on conflicting testimony and in a situation that placed the burden of proof on the appellant.

In the case of Aetna Life Insurance Company v. Mahaffy, 215 Ark. 892, 224 S. W. 2d 21 (1949) the insured had applied and received some eight insurance policies totaling $20,000.00. The policies were life policies and waived premiums in the event of total disability before age sixty. Mahaffy made claim for the waiver of premiums under the total disability clause, alleging total disability because of blindness which constituted disability under the provisions of the policy. The insurance company disallowed the claim on the ground that Mahaffy had concealed his approaching blindness, and the company sought cancellation of the contestable portions of the policy.

Mahaffy applied for the policy in March 1942. He had started wearing glasses prior to March 1942. He had visited an eye specialist to see about new glasses and the diagnosis revealed a blinding disease but he was not told of the diagnosis.

The application form contained a question as to whether or not the applicant had any impairment of eye sight, to which Mahaffy answered “No.”

In sustaining the trial court’s decision in favor of Mahaffy, this court quoted with approval from the cases in Harper v. Bankers Reserve Life Co., 185 Ark. 1082, 51 S. W. 2d 526, and Old Colony Life Insurance Company v. Julian, 175 Ark. 359, 299 S. W. 366, as follows:

“If the applicant states what he honestly believes to be true regarding his physical condition, the fact that it turns out not to be true does not avoid the policy, as it is a representation merely. Of course, if his statements are false and known to him to be false, and are made fraudulently, they have the same effect as warranties.
“The burden is on (the insurer) to establish the fraud by proving affirmatively the falsity, materiality and bad faith in the representations made by the insured in the application regarding his health.”

In the case of Old American Life Insurance Company v. McKenzie, 240 Ark. 984, 403 S. W. 2d 94 (1966), the appellee was issued an insurance policy on his application solicited by the sales manager for the appellant insurance company. The application stated that the ■ appel-lee had no physical defects at that time, but further medical history on the application form revealed a disc operation in 1962. The appellee received injuries in an automobile accident and brought suit to recover medical expenses under the policy. .

The company alleged a. willful, fraudulent, ;and.material misrepresentation in the application as a defense. This defense was based on the fact that between, 1962 and the date of the policy, appellee had had two- subsequent operations on his back. Appellee had maximum recovery from both operations prior to the purchase of the insurance policy, and in sustaining a judgment for appellee, this court quoting from 1 Appleman, Insurance Law & Practice, § 220 (1965), said :

“. . . ‘an insurer cannot complacently, rely .upon statements made by the insured where the;, type of information is of a character suggesting a-,cautionary investigation as to the accuracy of the' statements given. And where the insured discloses ‘that he has undergone an operation and furnished,, the company with the name of the attending physician, it has ample information from which to investigate further, and cannot complain that the insured failed' to relate an illness ensuing upon such operation.’”,

In the case of Southern National Insurance Company v. Heggie, 206 Ark. 196, 174 S. W. 2d 931 (1943.) the appellant insurance company denied liability on .a; life insurance policy, contending that the insured, had; misrepresented her physical condition by stating she was: in good health when she was not. The application ;was taken by a soliciting agent for appellant who,filled.o.uf the application form,, and there was a conflict in the testimony as to whether he was told by the insured-that she had previously had tuberculosis.

In affirming a decision of the trial court in favor of the validity of the policy, this court said:

“It has been frequently held by this court that, where an applicant for insurance makes to the agent of the insurer a full disclosure of the facts inquired ■ about in the. application, but the agent fails to write down- the answers of the applicant correctly, and the applicant is permitted by the agent to sign the application without reading it or hearing it read, the ” knowledge of the agent as to the physical condition ■-■■of applicant is imputed to the company and, if a : policy is issued on such an application, the company -is estopped in an action on said policy to set up the ’ falsity of the answers in the application.
v: “Tile rule is thus stated in the case of Union Life Insurance Company v. Johnson, 199 Ark. 241, 133 S. W. 2d 841 (headnote 2) : ‘Where the facts have been truthfully stated to the soliciting- agent, but, bv fraud, negligence or mistake, are misstated in the application, the company cannot set up the misstate- > . ments in avoidance of its liability, if the agent was ’ ' acting within his real or apparent authority and ■'•" there is no fraud or collusion upon the part of the • assured.’ ” ■

-The cases are numerous and varied on the points here involved, and the decision in each case is of necessity based on the facts peculiar to the particular case.

■In the case before us there ivas a direct conflict in the- testimony of the appellee and his wife on the one hand, ap'd dbat of the soliciting agent on the other. Much df- the pertinent'testimony of Dr. Blondis was based on history ■ which appellee denied giving and the records from the Army-Navy Hospital in Hot Springs and from the' government hospital in Memphis, where appellee denies he was ever a patient, were not offered in evidence. There is ho question that appellee was able to work, and did work, for at least one year before, and two years following, his application.

The trial court was sitting as a jury in this case and weighed the evidence in favor of appellee. "We are of the opinion that there was- substantial evidence to support the findings of the "trial court, and that the decision of the trial court should be affirmed.

Affirmed.


author: Jambs W. ChesNtjtt, Special Justice. CarletoN Harris, Chief. Justice,

text:
    Arkansas Louisiana Gas Company v. Katherine E. Burkley, et al
    5-4103
    416 S. W. 2d 263
    Opinion delivered May 22, 1967
    [Rehearing- denied July 26, 19-67.]

      Douglas Bradley and Robinson, Thornton, McCloy & Young, for appellant.

      Barrett, Wheatley, Smith & Deacon, for appel-lees.

      Oscar Feridler, amicus curiae.

   Jambs W. ChesNtjtt, Special Justice.

This is ah eminent domain proceeding for the condemnation of an easement for a pipeline right-of-way eighty feet in width across lands owned by Appellees. The area involved consisted of 7.1 acres.

The Appellees, in their Answers, asked damages for the lands actually taken based on the value of the fee, together with damages to thé remaining lands owned by Appellees. At the trial Appellees waived any right to severance damages and the case was presented to the jury only on the issue of damages for the taking of the pipeline right-of-way.

Appellees presented evidence that the value of the lands taken was $1,000.00 an acre. Two witnesses for the Appellant testified respectively that the lands had a value of $800.00 an acre and $780.00 an acre. Both of Appellant’s witnesses testified that the lands would be worth as much after the installation of the pipéline as they were before the taking.'

The parties stipulated that the right-of-way easement condemned was for underground pipelines and that Appellees would have full use and control of the surface of the easement, subject to the right of Appellant to use the surface to service, repair, and lay its underground pipelines, and further stipulated that in the event of future use of the surface of the easement by Appellant, it would pay crop damage and leave the land in the same condition it was in before future repair or construction.

At Appellees’ request, the Court gave the following instruction on measure of damages:

“Under the law of this State the owner of land is entitled to be paid the full value of the land embraced within the right-of-way easement as if a fee had been taken, even though the landowner, after the pipeline has been constructed, has the right to continue using the surface of the right-of-way for farming or other purposes not inconsistent with the use of the easement. The Gas Company acquired by the condemnation proceedings herein the power to make such use of the right-of-way as to future needs required for the purpose for which the right-of-way was condemned.
The landowners herein have not complained of nor are they asking to be compensated for any damage to the remainder of the lands not included in the right-of-way easement. Therefore, you have only one element of damage to consider, which is the market value of the strip of land which was actually taken as an easement right-of-way.”

The Appellant objected to the giving of this instruction and insisted that the proper measure of damages was the difference between the value of the entire tract immediately before and immediately after the partial taking.

The Appellant offered the following instruction, which was refused by the Court.

“You are instructed that it is your duty to assess the damage, if any, to the property of Katherine E. Burkley, and you.will fix the amount of money which will reasonably and fairly compensate her for any of the following elements of damage sustained by reason of the plaintiff’s pipeline crossing the real property described in this litigation:
1. The difference in the fair market value of the entire tract of land immediately before and immediately after the laying of plaintiff’s pipeline across the said real property.
Whether this element of damage has been proved by the evidence is for you to determine.”

The jury returned a verdict, for Appellees in the sum of $5,680.00. The jury obviously accepted the $800.00 an acre valuation placed on the land by one of Appellant’s witnesses and multiplied this .sum by the T.l acres condemned.

The sole issue presented on this appeal is whether the trial court was correct in instructing the jury that the landowners were entitled to the full value of the land embraced within the right-of-way easement as if fee had been taken, or whether the court should have applied the familiar “Before and After” Rule as to measure of damages.

In Lazenby v. Arkansas State Highway Commission, 231 Ark. 601, 331 S. W. 2d 705, we said:

“Since Appellant was only seeking to recover the value of the land actually taken, it was proper to show the market value per acre. This having been done, it was only necessary to multiply that amount by the number of acres taken. There is a long line of cases in support of this rule.”

See Little Rock & Fort Smith Railway Company v. McGehee, 41 Ark. 202 ; Little Rock Junction Railway v. Woodruff, 49 Ark. 381, 5 S. W. 792 ; Fort Smith and Van Buren District v. Scott, 103 Ark. 405, 147 S. W. 441 ; Drainage District No. 11 v. Stacey, 127 Ark. 549, 192 S. W. 904 ; Baucum v. Arkansas Power & Light Company, 179 Ark. 154, 15 S. W. 2d 399 ; and Yonts v. Public Service Company of Arkansas, 179 Ark. 695, 17 S. W. 2d 886.

In only one of the cases cited above — Baucum v. Arkansas Power & Light Company, Supra — did the Court mention the “Before and After” Rulé,' and then only in connection with the landowner’s claim for severance damages in addition to damages for the right-of-way actually taken.

We believe that it is proper to determine the value of the land taken by determining the market value of the land actually taken when, as in this case, no claim is made for severance damages to the remainder of the land. This determination can' be made by determining the value per acre and multiplying by the number of acres taken.

This view is particularly applicable to takings by private corporations in light of Article 12, Section 9 of the Arkansas Constitution of 1874, providing that compensation for such takings shall be determined irrespective of any benefit from any improvement proposed by such corporation.

The Appellant further contends that the “Before and After” Rule must be applied in this case because the Appellant is taking only an easement, and the Appellees will retain the right to cultivate the surface of the ground after the pipeline is installed and should not be awarded the full value of the fee.

In Baucum v. Arkansas Power & Light Company, Supra, a case involving an electric transmission line, this Court, quoting with approval Kentucky Tennessee Light & Power Company v. Beard, 152 Tenn. 348, 277 S. E. 889, held:

“When; an electric light and power company, in condemnation proceedings, acquired a permanent easement across the land of another, it became liable for the full value of the right-of-way as if the fee had been taken. And the fact that the owner was given the permissive use of the right-of-way could not be considered in reduction of the sum to be allowed as compensation.”

In Texas Illinois Natural Gas Pipeline Company v. Lawhon, 220 Ark. 932, 251 S. W. 2d 477, a case involving a pipeline easement, this Court reaffirmed Baucum and said:

“Under the law of this State, the owner of land is entitled to he paid the fnll value of the land embraced within the right-of-way easement, as if the fee had been taken, even though the landowner, after the pipeline was constructed,, had the right to continue using the surface of the right-of-way for farming or other purposes not inconsistent with the use of the easement. Appellant acquired by the condemnation proceedings the power, to make such use of the right-of-way as its future- needs required for the purpose for which the right-of-way was condemned. ’ ’

The instruction given by the trial court in this case was taken almost verbatim from the. Lawhon case.

The rule of the Baucum, case was also followed in Arkansas Power & Light Company v. Morris, 221 Ark. 576, 254 S. W. 2d 684, another electric transmission line case, and in State ex rel Publicity and Parks Commission v. Earl, 233 Ark. 338, 345 S. W. 2d 20, a case involving easements across lands adjacent to an airport.

Appellant relies upon Arkansas Louisiana Gas Company v. Howard, 240 Ark. 511, 400 S. W. 2d 488, in which the “Before and After” Rule is mentioned as the true measure of damages for property taken by eminent domain. This case was reversed on other grounds and did not overrule Baucum and the other cases cited above.

The rule established in Baucum, that the landowner is entitled to receive full value of the fee for an easement of this type, tends to eliminate future litigation over damages sustained by reason of future additional construction on the easement, and should be sustained.

Affirmed.

FoglemaN, J., disqualified.

Harris, C. J., dissents.

CarletoN Harris, Chief. Justice,

dissenting.. I respectfully dissent from the holding of the majority, my views being based .on this court’s rulings in Feibelman v. Trunkline Gas Company, 234 Ark. 276, 351 S. W. 2d 447 (1961), and Ark-La Gas Company v. Howard, 240 Ark. 511, 400 S. W. 2d 488 (1966).

I would reverse and remand.’


author: Oliver M. Clegg, Special Justice.-

text:
    Homer L. Bailey et al v. Clint Jones, Securities Commissioner .
    5-4163
    419 S. W. 2d 585
    Opinion delivered May 22, 1967
    [Rehearing denied November 6, 1967.]

      Spitzberg, Bonner, Mitchell & Hays; By: H. Mau

      rice Mitchell and H. Allan Horne, for appellants.

      Catlett & Henderson, for appellee.
   Oliver M. Clegg, Special Justice.-

We are called upon here to answer the single legal question: May stockholders of a domestic insurance company legally create a voting trust?

Appellants are some of the principal officers, directors, and stockholders of American Foundation Life Insurance Company, a domestic insurer. Believing that a competitor was buying shares of the Company with the view of merging it into another insurer, Appellants entered into a Voting Trust Agreement in April, 1966, and actively solicited other stockholders to transfer shares to the Trust. The term of the Trust was a period of ten years during which time the Trustees would have the sole right to vote the stock so transferred. In exchange for such stock, the former stockholders were to be issued certificates of ownership in the Trust. All dividends received by the Trustees on account of the shares held by them were to be. paid to the owners of the Trust Certificates. The avowed purposes of the voting trust arrangement were to prevent outside control and assure continuity of management.

Appellants then sought to register the Trust Certificates with the Appellee for intrastate sales. Both the Securities Commissioner and the lower court held that under the laws of this state stockholders in a domestic insurance company could not legally establish a voting trust in the stock of such company.

The Voting Trust arrangement has not been unknown in the statutes of this state. The Business Corporation Code of 1931 (Act 255) made provision in Section 17 (formerly § 64-215 Ark. Stats. 1947 Anno.) for voting trusts subject to certain restrictions, the principal one being a term limit of ten years. This provision was, ill 1965, incorporated in the present Corporation Code (Act 567) § 64-221 Ark. Stats. 1947 Anno. Both acts, however, exempted domestic insurance companies from their coverage.

In 1959 the legislature enacted the “Arkansas Insurance Code” (Act 148) which, according to the title, is designed as “A Comprehensive Revision, Consolidation and Classification of the Laws of the State of Arkansas Relating to Insurance Business; to Regulate the Incorporation, Formation, and Corporate Affairs of Domestic Insurance Companies”, etc. No express provision was made in the Arkansas Insurance Code for the formation of voting trusts as was made in the Business Corporation Codes of 1931 and 1965.

Since the Legislature did not expressly make provision in the Insurance, Code for voting trusts, are they valid under the common law, as Appellants contend, or impliedly prohibited, as Appellee contends?

In reaching the answer to this question, the Courts have considered “various statutes, such as those relating to proxies or the right to vote at stockholders meetings or for the election of directors. . . as indicative of the legislative policy approving or disapproving of voting trusts and other similar agreements”. Annotation: Validity of Voting Trust or Other Similar Agreement For Control of Voting Power of Corporate Stock. 98 A. L. R. (2) 376, 384.

Thus, it was said in Boyer v. Nesbitt (1910) 227 Pa. 398, 76 A. 103, that in the leading cases on voting trusts, “the courts treat the 'question of public policy indicated by the statutes of the respective states as the basis for their reasoning and the foundation upon which their conclusions rest. This seems to be the sounder rule, because the public policy which should prevail in the management and control of corporations is primarily a legislative rather than a judicial question”.

In Bostwick et al v. Chapman et al, (1891) 60 Conn. 553, 24 A. 32, sometimes referred to as the “Shepaug Voting Trust Cases”, the Court looked to the spirit and intent of a statute dealing with stock proxies to determine the public policy relating to voting trusts. In so doing, the Court said :

“Were this a power of attorney in formal terms, no claim would he made hut that it was not only contrary to the policy of the law of this state, but in direct conflict with our statute, which says that ‘no person shall vote at any meeting of the stockholders of any bank or railroad company, by virtue of airy power of attorney not executed within one year next preceding such meeting; and no such power shall be used at more than one annual meeting of such corporation’. Gen. St. § 1927. This statute tends to disclose w-hat the policy of the law of this state is, touching the matter of the surrender by a stockholder of his voting power to someone else. It would seem that it is opposed to such surrender for an indefinite period, or for a period of five years ’ ’.

To like effect see: Simpson v. Nielson (1926) 77 Cal. App. 297, 246 P. 342; People ex rel. Arkansas Valley Sugar Beet and Irrigated Land Co. v. Burke (1923) 72 Colo. 486, 212 P. 837; 30 A. L. R. 1085.

Turning, therefore, to the recent enactment by the legislature of the Arkansas Insurance Code and amendments thereto, the public policy of this state has been unmistakably and emphatically stated.

Section 472 of the Arkansas Insurance Code, as originally adopted in 1959, provided:

“(1) Every proxy of a stockholder of an insured, unless coupled with an interest, shall be revocable at will, and this provision cannot be waived”. § 66-4220 Ark. Stats. 1947 Anno.

Under that provision an argument might have been made that voting trusts were not in contravention of the legislatively expressed public policy since the interest to which the power is coupled may he that of protecting the proxy holder’s own property interest in the corporation. Smith v. San Francisco & N. P. R. Co., (1897) 115 Calif. 584, 47 P. 582. 19 Am. Jur. (2) 180, Corporations § 676.

But that question was clearly removed with .the amendment in 1965 (the same legislative session at which the Business Corporation Code was enacted) of the original section quoted above. As so amended, the provision now reads:

“(1) Every proxy of a stockholder of an insurer shall be revocable at will, and this provision cannot be waived”.

In deleting the “power coupled with an interest” clause and thereby prohibiting, absolutely, irrevocable proxies by. stockholders in, domestic insurance companies, even those coupled with an interest, the public policy was made clear, and unmistakable. This is particularly true since the Business Corporation Code adopted by the same legislature provided for irrevocable proxies, whether or not coupled with an interest, and, consistently. therewith, expressly provided for voting trusts. Roberts v. Tice, (1939) 198 Ark. 397, 122 S. W. (2) 258; Cordell v. Kent, (1927) 174 Ark. 503, 295 S. W. 258.

We must presume that the legislative intent and purpose is consistent- throughout the same enactment. This is true in the Corporation Code: Unrestricted irrevocable proxies allowed — Voting Trusts expressly allowed. Contrariwise, the policy so clearly and emphatically expressed in the Insurance Code of prohibiting irrevocable proxies must, necessarily, preclude the allowance of the Voting Trust.

The judgment of the Circuit Court is affirmed.

FoglemaN, J., disqualified.

Byrd, J., dissents.


author: Carleton Harris, Chief Justice.

text:
    Debra Lea, et al, Fenton Stanley, Guardian ad litem v. Lena Nix Byrd
    5-4255
    415 S. W. 2d 336
    Opinion delivered May 29, 1967

      Fenton Stanley, for appellants.

      James G. Cole, for appellee.
   Carleton Harris, Chief Justice.

The question in this litigation is whether a deed should be reformed because of an alleged mutual mistake of fact. Appellants, Debra Lea, Donna Sue Lea, Sandra Lea, and Michelle Lea, are minor grandchildren of appellee, Lena Nix Byrd, appellee herein. Mrs. Byrd sued in equity to reform a deed executed from Dave Wilkins and Lula Wilkins to R. D. Nix and Lena Nix bn December 10, 1949. Both the granting clause and the habendum clause recited that the conveyance was to R. D. Nix and Lena Nix and her bodily heirs. Mrs. Byrd instituted suit in 1966 to reform the deed, asserting that a mutual mistake of fact had been made, in that the intent of the parties was that said deed convey the property purchased to R. D. Nix and Lena Nix for life with the remainder over to ■Carolyn Hntto (Lea), daughter of appellee by a previous marriage. Appellants, through their guardian ad litem, Fenton .Stanley, answered, denying all allegations in the complaint (except those allegations appearing as a matter of public record), and denying that appellee was entitled to any relief. On trial, after the taking of evidence, the court found that appellee had sustained her contention, and entered a decree finding that a mutual mistake had been made in the execution of the original deed; further, that appellants, had never owned any interest in the land, vested, contingent, or otherwise, and their only apparent interest was a result of the mistake made. The court ordered the deed reformed to reflect the grantees as R. D. Nix and Lena Nix for and during their natural lifetime with the remainder to Carolyn Hutto and her heirs and assigns forever. From this decree, appellants bring this appeal.

The deed, of course, created an estate tail under our statutes and decisions. T-he question, thus, is whether it is legally possible to reform, in this state, because of mutual mistake, a deed which created an estate tail. Arkansas has followed the policy that, as a general rule, equity will not reform a contract or a deed occasioned simply by a mistake of law. Louis Werner Saw Mill Company v. Sessoms, 120 Ark. 105, 179 S. W. 185.

Appellee, in support of the court’s finding, argues, in this court, that such a deed can be reformed on proper proof, whether the mistake was a mistake of law, or a mistake- of fact, though the mistake of fact argument is given greater emphasis.

Under the view that we take, it is not necessary that we discuss the question of a mistake of law, for we think that proof of a mistake of fact was established by clear, cogent, and convincing evidence, such proof being necessary before a. deed can be reformed. Meeks v. Borum, 240 Ark. 805, 402 S. W. 2d 408.

Mrs. Byrd testified as follows:

She had one child, Carolyn Hntto (Lea) by a marriage previous to her marriage to Nix. In 1946, she underwent a complete hysterectomy, and knew that thereafter she. would be unable to bear children. In 1948, she married Nix, and the two desired to-buy some land. They became interested in 200 acres owned by Mr. and Mrs. Wilkins, and decided that .they would like to purchase that land. The witness had money of her own before the second marriage, which was to be used as part of the purchase price. An attorney in Malvern advised that a deed made to Mr. and Mrs. Nix would create an estate by the entirety, and the lands would become the sole property of the survivor. Appellee wanted her daughter, Carolyn, to have an interest in the property, and was not willing to purchase same without assurance that the daughter would have an interest. Another lawyer was consulted, who confirmed the opinion of the first attorney, each also telling her that to carry out her desire, the deed could be made to Mr. and Mrs. Nix for life, with the remainder to her daughter. Appellee stated that she and her husband agreed upon this type of conveyance. Upon being* told that Mr. and Mrs. Wilkins had the deed ready which could be obtained at the bank at Sparkman, she and her husband went to the bank for the purpose of closing the transaction; however, she was informed that the deed named only her and her husband as grantees.

“*** When they told me the deed was made out to me and R. D., I backed out. I told them at the bank that I wanted a deed made to me and R. D. for life and then to my daughter, Carolyn Hutto. I left and went back home.”

She subsequently told Wilkins the reason for the refusal of the deed.

“A few days later, I heard from the bank. Was told that the deed and the other papers were ready. R. D. and I went to the bank. I asked if they had the papers fixed right this time and sort of laughed. He .told me it was to me and R. D. for life and then to Carolyn. I didn’t, question it. further and paid the .money and signed the note.”

Her recollection was that her conversation was. with a Mr. Hayes at the bank, who reported that Mr. and Mrs. Wilkins had signed another deed before a Justice of the Peace, and had brought, the instrument .t.o..the bank. The payments made by Nix and wife .were, paid to the bank, and credited on an indebtedness .owed,,by Wilkins to that institution, and the deed was. not.turned over to appellee and her husband until January,, ,1953.

Mr. Nix and appellee were divorced in 1953,..and he deeded his interest in the property to her. She stated that she did not learn about the mistake in' the .¡deed from Wilkins until early in 1966, when she, had already agreed to sell the land to a Mr. Shepherd, and,, intact, had received a partial payment of $5,000.00:

The testimony of appellee is rather convincing, and in line with other evidence offered, which will be hereafter mentioned. The only weak part of , her. contention is the fact that it was a long number of years’ before the mistake was discovered. Yet, this is , sopaewhat Understandable, the evidence reflecting that she. and her husband did not receive the deed until over , four ■•■years after its execution, the bank having .had possession up til the note was paid in full. It is also understandable'that, having refused one deed, because it was not properly drawn, and having been assured that the second one was drawn in accordance with her request, Mrs. Byrd accepted the word of the bank official (who probably was sincere in his statement; that the deed, had been,.ppe-pared in a manner to carry ont her instructions. It must be remembered that Mrs. Byrd was not a lawyer, but a person totally untrained in, and unfamiliar with, legal terminology, and it is undisputed that the deed was prepared by someone other than an -attorney or agent fot appellee..

• . .Aside from the testimony of Mrs. Byrd, there are other-facts which support her version. For one, Mr. and Mrs. Wilkins, when notified of the purported error, immediately executed a Correction' Deed, conveying the property hr the manner contended for by Mrs. Byrd. ■Oiie of the strongest circumstances in her behalf is the fact'that within á month after the purchase of the Wilkins property, Mr. and Mrs. Nix also purchased 40 acres of land from Mrs'. Elsie Bichardson, the language in the deed being in' accord with the language that Mrs. rBvrd' says was intended for the Wilkins deed. The grant-ihgclause states, “***00 hereby grant, bargain, sell and cóiivey unto the-said E. D. Nix and Lena Nix, and upon the death, .of both B. D. Nix and Lena Nix, then unto Carolyn Huttó and unto her heirs and assigns forever***."-

The Richardson deed was a completely typewritten instrument, evidently prepared by someone familiar with legal' requirements. A warranty deed form was used by1 the" scrivener of the Wilkins deed with the granting aind habendum clauses filled in by such scrivener, apparently either an employee of the bank or the Justice of the Peace'who acknowledged execution of . the instrument In Sherwin-Williams Company v. Leslie, 168 Ark. 1049, 272 S. W. 641, we held:

“***Mrs, Fowler vas entitled to a reformation of -the deed of trust so as to include the lands in contro-“vefsy, -under the- úncontroverted proof that it was the mutual ’ intention of all parties, to that deed of trust that such lands should be included and that it was omitted merely through oversight of the scrivener who prepared the deed of trust.”

In Stinson v. Ray, 79 Ark. 592, 96 S. W. 141, we said:

“*** According to the terms of their agreement a right of way eight feet wide, north and south, and extending due east from Depot Street, a distance of forty feet, and lying south of and adjacent to the land sold should have been conveyed.' The draughtsman who drew the deed evidently did not understand the contract of the parties; and the grantor executed it without discovering the error. The evidence adduced at the hearing, clearly, unequivocally, and decisively proves these facts.”

The proof is actually uncontradicted that a mutual mistake was made in the original Wilkins conveyance to Mr. and Mrs. Nix, and we consider the evidence to be clear, cogent, and convincing.

Affirmed.

       At the time of the execution of the deed, Mrs. Byrd was married to R. D. Nix. Mr. and Mrs. Nix were later divorced, and appellee married Lawrence Byrd.

       A certificate from the Chief Medical' Records Librarian of the University of Arkansas Medical Center corroborated this operation.

       Apparently the status of the title was discovered At'a: time'iwhen title to the property was being examined preparatory to'the Shepherd sale. Mrs. Byrd testified that her daughter, Carolyn', was. willing to convey her interest to appellee. •!''


author: George Rose Smith; Justice. J. Fred JoNes, Justice,

text:
    First American National Bank v. Christian Foundation Life Insurance Company et al
    5-4168
    408 S. W. 2d 912
    Opinion delivered May 29, 1967
    [Petition for rehearing withdrawn December 4, 1967.]

      Spitzberg, Bonner, Mitchéll. & Hays, for appellant.

      Shaw & Sha/w and Wright, Lindsey & Jennings; By: George E. Lush Jr., and Pope, Pratt, Shambwrger, Buffalo & Ross, for appellees.
   George Rose Smith; Justice.

This is a suit brought by one of the appellees, Christian Foundation Life Insurance Company, for a declaratory judgment with respect to the validity of certain duplicate bearer bonds ostensibly issued by the First Methodist Church of Mena. That duplicate bonds were outstanding was due to the fraud of the late Lawrence Hayes, former president of Institutional Finance Company, which handled the bond issue as fiscal agent for the church. Parties to the suit include the rival owners of the' duplicate bonds, the church and its trustees, the Union Bank of Mena, which acted as paying agent for the bonds, the estate of Hayes, the receiver for Institutional Finance, and the corporate surety upon Institutional Finance’s qualifying bond as a securities dealer.

The chancellor apparently viewed the case as being primarily a contest between the appellant, First American National Bank of North Little Bock, which holds $28,800 of the bonds, and Christian Foundation Life and Charles B. Bichards, who purchased respectively $20,000 and $5,000 of bonds that are duplicates of some of those held by First American. The chancellor, without stating a reason for his decision, found that First American’s bonds are void and that the duplicates held by Christian Foundation Life and Bichards are valid.

We need state the facts only in broad outline. On January 19, 1964, the church adopted a resolution authorizing a $90,000 bond issue for the construction of a new church and employing Institutional Finance as its fiscal agent to market the bonds. On the same day the church treasurer, Bettie Jean Montgomery, in the presence of the pastor and a trustee of the church, affixed her signature to a blank sheet of paper and delivered it to Joe B. Springfield, executive vice-president of Institutional Finance, for use as a facsimile signature upon the bonds.

Two days later Springfield requested a printing company to print the bonds, which were numbered from 1 to 188 and totaled $94,000. (The record does not explain why an extra $4,000 of bonds was printed.) On January 30 the printer delivered the bonds to Springfield. They bore the facsimile signatures of Springfield and Mrs. Montgomery, with no provision for an authenticating manual signature.

Institutional Finance sold $45,000 of the bonds to members of the church but had trouble in finding buyers for all the rest of the issue. On July 3, 1964, Hayes personally borrowed $25,000' from First American National Bank and pledged as collateral, along with other securities, $27,000 (later increased to $28,800) of the Mena church bonds. There is no sound basis for questioning the bank’s standing as a good faith purchaser for value, as those terms are defined in the Uniform Commercial Code. Ark. Stat. Ann. § 85-1-201 (Add. 1961). Hayes had borrowed money from the bank on a number of occasions. The bank’s president, who handled this loan, understood Hayes to be an employee .of a Texas dealer in church bonds and- was unaware of his connection with Institutional Finance. Nothing in the transaction warned the bank that Hayes did not own the bonds.

On February 1, 1965, Hayes fraudulently ordered the printer to print $25,000 of numbered bonds that included duplicates of some of those pledged to the bank. Later in the month Hayes, in order to complete a sale to Christian Foundation Life, had printed additional bonds in certain larger denominations requested by that insurance company. The duplicate bonds now held by Richards and Christian Foundation Life are among those obtained by Hayes in the two supplemental printings.

We find no merit in the appellant’s insistence that its adversaries were not purchasers in good faith because they bought the bonds at discounts of 10 and 15 per cent. We have held that the price paid for a negotiable instrument may be so grossly inadequate as to support a finding of bad faith, Hogg v. Thurman, 90 Ark. 93, 117 S. W. 1070, 17 Ann. Cas. 383 (1909), but there is no proof in this record to indicate that the discounts offered to the appellees were so great as to arouse suspicion. Nor is there evidence to sustain the appellant’s argument that the purchasers of the duplicates should have been put upon inquiry by the church’s apparent inability to market the entire bond issue within a period of. about a year.

Hayes’s dishonesty finally became known when duplicate interest coupons were presented to the Mena bank for payment. The paying agent refused to honor the coupons until their validity had been established. Hence this suit.

We think the chancellor should have found all bonds held by bona fide purchasers to be binding obligations of the church. It is plain enough that the church was careless in entrusting its treasurer’s facsimile signature to Institutional Finance and in failing to take the precaution of requiring authentication of the bonds by a manual signature. By contrast, the holders of the bonds acquired them in the ordinary course of business and in circumstances entitling them to the protection afforded to bona fide purchasers.

The case is controlled by the pertinent provisions of the Uniform Commercial Code. Before the adoption of the Code the church might have been held liable by contract to one purchaser and in damages to the other, but the draftsmen of the Code point out in their Comment to our § 85-8-202 that the Code- simply validates most defective securities in the hands of innocent purchasers, refusing to prefer one such purchaser over another.

Specifically, this controversy falls within § 85-8-205, which provides that an unauthorized signature is effective in favor of an innocent purchaser when the signing is done either by a person entrusted by the issuer with the signing of the security or by an employee of such person or of the issuer itself. By resolution the church employed Institutional Finance as its fiscal agent to handle the sale of the bonds. The' first line of the printed prospectus for the bond issue identified that concern as the issuer’s fiscal agent. There can hardly be any serious contention that Hayes’s wrongful use of the treasurer’s facsimile signature did not fall within the purview of the Code.

We are not impressed by the appellees’ argument that the appellant’s acquisition of its bonds was in violation of our constitutional declaration that “No private corporation shall issue stocks or bonds, except for money or property actually received or labor done.” Ark. ■Const., Art. 12, § 8. Even if the church is to be considered a private corporation, which we need not decide, it is confronted by the fact that its agent actually received money for the bonds. That the money did not reach the church treasury was not the purchasers’ fault.

It is too early at this stage of the litigation to reach a final conclusion about the exact remedies of the bondholders. The church’s refusal to pay interest was not absolute, being conditioned upon its uncertainty about the validity of the outstanding bonds. Under the Code it is liable to all bondholders who bought in good faith. It does not follow, however, that all bondholders stand in parity if it becomes necessary for them to foreclose the lien against the church property. First American’s priority in time entitles it, as against the holders of duplicate bonds, to priority of lien, under the equitable maxim that as between- equal equities the first in time must prevail. Miller v. Mattison, 105 Ark. 201, 150 S. W. 710 (1912). If the law were otherwise the security interest held by bona fide purchasers of a bond issue could be diluted by the later wrongful sale of duplicate bonds. The cause must also be remanded for the development of the bondholders ’ remedy against Institutional Finance and its surety.

Eeversed and remanded.

J owes, J., dissents.

J. Fred JoNes, Justice,

dissenting. I do not agree with the conclusion reached by the majority in this case, nor do I agree with the decision of the chancellor.

Our Uniform Commercial Code, Ark. Stat. Ann. § 85-8-202 (3) (Addn. 1961), is as follows:

“Except as otherwise provided in the case of certain unauthorized signatures on issue (section 8-205 [<$ ■85-8-205]), lack of genuineness of a security is a complete defense even against a purchaser for value and without notice. ’ ’

Just what constitutes the genuineness of a security is not set out in chapter 8 of the Code on investment securities, but ■§' 85-1-201 contains forty-six numbered general definitions, one of which is as follows:

“(18) ‘Genuine’ means free of. forgery or counterfeiting.”

The First Methodist Church of Mena authorized the Institutional Finance. Company to print and sell $90,-000.00 worth of bonds. Under this authorization Springfield, who was executive vice-president of Institutional Finance, and who held title to church property in trust to secure the payment of the bonds, fully carried out, and in fact. exceeded by $4,000.00, the authority given him by the church. He had bonds printed with consecutive numbers from 1 through 188" in the total amount of $94,000.00. Some of these identical bonds came into the hands of the appellant, First American National Bank, as a bona fide purchaser for value under the Code.

After the entire issue authorized by the church had been printed by Springfield, Mr.'Hayes, the president of Institutional Finance, had printed unauthorized duplicates of the, bonds authorized by the church and printed by Springfield, and without the knowledge of, or authority from, First Methodist, sold these duplicate bonds to Christian Foundation Life Insurance Company and to C. R. Richards, who ‘were also bona fide purchasers for value under the Code.. •

It is my view that the duplicate bonds printed without authority and certainly with the apparent intent to defraud, were forged counterfeits' of the original bonds and lacked the genuineness of the original authorized bonds, and that their lack of genuineness was a complete defense even against Christian Foundation and Reverend C. R. Richards. •

The Commercial Code contains numerous definitions and comments of intention for its use and operation but, it contains no definition of “forgery” or “counterfeit” as would affect the genuineness of bonds. Black’s Law Dictionary defines “forge” as follows:

“To fabricate, construct, or prepare one thing in imitation of another thing, with the intention of substituting the false for the genuine, or otherwise deceiving and defrauding by the use of the spurious article. To counterfeit or make falsely. Especially, to make a spurious written instrument with the intention of fraudulently substituting it for another, or of passing it off as genuine; or to fraudulently alter a genuine instrument to another’s prejudice.”
“Forgery.” is-defined as:
“The falsely making, or. materially altering with intent to defraud, any writing which, ’if genuine, might apparently be of legal efficacy or the foundation of a legal liability. ”
“Counterfeit” is defined in Black’s as:
“To forge;-to copy or imitate, without authority or right, and .with a, view to deceive or defraud, by passr ing the copy or-thing forged for that which is original or genuine.

Over one. hundred years .ago this court defined forgery as having a fixed legal meaning, “It is the fraudulent making or alteration of any. writing to the prejudice of another man’s rights, or a false making, malo animo, of any written instrument,' for the purpose of fraud or deceit * * * to forge o'r counterfeit the instrument is to create or make it.” Van Horne v. The State, 5 Ark. 249.

Under the majority holding in this case, once authority is given to an unscrupulous agent to print and sell a limited number of bonds over a facsimile signature, the principal or issuer has no further protection from being bound by such individual. A revocation of authority, or even confinement in the penitentiary, would offer no protection. Such agent or ex-agent, would be able to bind his former principal, or the issuer of bonds, for as long as such agent could find innocent purchasers and access to a printing press.

I would reverse the chancellor in this case and hold that the original bonds held by First American are genuine and legal bonds, but that the duplicates sold to Christian Foundation and Reverend Richardson are forged counterfeits of the originals and are not genuine but are void as binding obligations of First Methodist.


author: George Rose Smith, Justice. Carleton Harris, Chief Justice Lyle Brown, Justice,

text:
    Kale Payne v. E. Leboy Jones et ux
    5-4195
    415 S. W. 2d 57
    Opinion delivered May 29, 1967

      Spencer & Spencer and Bon Gillaspie, for appellant.

      J. S. Thomas and Bernard Whetstone, for appellees.
   George Rose Smith, Justice.

This is a habeas corpus proceeding by which the appellant, Kale Payne, seeks to obtain custody of his son, Dean Thomas Payne, who was two years and two days old when Kale’s petition was filed on November 24, 1965. The original defendants were the Reverend and Mrs. E. Leroy Jones, appellees, to whom the child’s mother, Betty Jean Payne Ford, had attempted to give the child. Mrs. Ford intervened in the case; but she has not appealed from the decree, which found her to be unfit to have the child. The pivotal question is whether Kale has forfeited his right, as against strangers, to have the custody of his own son. "We find the chancellor’s conclusion that Kale is unfit to have the custody of his child to be against the weight of the evidence.

Both of the child’s parents have been married three times. Kale first married his present wife, Marilyn Sue, in 1957, when they were both children — eighteen and sixteen years old. That marriage ended in divorce in August, 1959. A year later Marilyn Sue bore a son, con-cededly fathered by her former husband, Kale.

After that divorce Kale was drafted and served two years in the army, stationed in Texas and Kansas. He testified that he meant to remarry Marilyn Sue, but he met Betty Jean Admire in Kansas City, started going with her, and eventually married her in 1961. That marriage was not a happy one. The couple had separated five months before their, child — the infant now in controversy —was born in Dallas on November 22, 1963. Kale obtained an uncontested divorce in Missouri on February 3,1964. The decree awarded custody of the child to Betty Jean and directed Kale to pay $30 a month to support the child. Four days later Kale remarried his first wife, with whom he has lived in apparent harmony ever since.

Betty Jean Admire was a divorcee when she married Kale in 1961. After her second divorce she married William J. Ford (whom she met in a bar) on March 4, 1965, and bore his son six weeks later. Their marriage has been marked by one or more separations. In a period of about eighteen months Betty Jean lived for a time in at least five states: Arizona, Arkansas, Georgia, Mississippi, and Texas. In July, 1965, she decided to give away both her children, because, as she testified, she was unable to support them. She gave Dean Thomas Payne to the Joneses ánd gave her other son, Rickey Dale Ford, to another couple who also live in El Dorado, Arkansas.

Kale learned of-the situation in August or September of 1965, when he was asked to consent to his son’s adoption by the Joneses. Kale refused that request and at once filed a petition in the Missouri divorce case to win back the legal right to the custody of his child. The Missouri court, after the child’s mother had been served by warning order, granted ,the requested change of custody on November 15,1965. Nine days later Kale filed the present habeas corpus proceeding against the Joneses, who had had the child in their home for about four months. There was almost no proof about the Joneses’ fitness to have the child, but in the view we take that omission is immaterial.

To take a parent’s child away from him and give it to strangers is an extreme measure — a step which the courts should and do take only when the evidence clearly justifies such a course. Here, as a practical matter, the award of custody to the appellees would in all probability deprive Kale of his child just as permanently and just as effectively as if the boy had been adopted by the Joneses. In Woodson v. Lee, 221 Ark. 517, 254 S. W. 2d 326 (1953), we said that the right of natural parents to the custody of their children, as against strangers, is “one of the highest of natural rights, and the state cannot interfere with this right simply to better the moral and temporal welfare of the child as against an nnoffending parent.” We also said that “abandonment by a parent, to justify in law the adoption of his child by a stranger withont his consent, is conduct which evinces a settled purpose to forego all parental duties continued for a prescribed period of time when the statute so provides. Merely permitting the child to remain for a time undisturbed in the care of others is not such an abandonment.”

In the case at hand there is no sound basis for finding that Kale abandoned his son. Dean Thomas was only two and a half months old when his parents were divorced. It was to be expected that the court would award custody to the mother. Needless to say, no finding of abandonment can be based upon Kale’s acquiescence in his former wife’s custody of the baby. We pointed out in Brown v. Brown, 218 Ark. 624, 238 S. W. 2d 482 (1951), that a divorce decree awarding a child to the mother merely establishes the right of custody during the lives of the two parents. Upon the death of the mother (or, as here, her surrender of her claim to custody) the father’s right to custody is revived.

It is argued that Kale evinced an intention to abandon his son by failing to pay part of the hospital expenses when the child was born and by frequently being late in forwarding the monthly support payments. Most of the hospital bill was paid by the Government, as Kale was in the service. Betty Jean’s mother paid the rest and is not shown to have requested reimbursement. We all know that fathers are often tardy or even completely remiss in making support payments, but that does not prevent them from regaining custody of their children. In the Brown case, supra, the father was cited for contempt for his failure to support his children, but he nevertheless regained them after their mother’s death. Here Kale testified without dispute that he made or tendered all the payments that accrued before Betty Jean relinquished possession of the child to the Joneses.

It is also shown that Kale did not send presents to his son and saw him only twice (once in the hospital and once in Missouri) before this proceeding came on for trial. We certainly cannot attach controlling importance to such conduct with respect to a child so young as to be unable to appreciate his father’s presents or presence. Betty Jean testified that at one time Kale agreed that Ford might adopt the boy. Kale denies that statement, but even if it were true there is all the difference in the world between relinquishing a child to his mother and stepfather and relinquishing him to perfect strangers. There is concrete evidence of Kale’s desire for his son in the promptness with which he brought this proceeding and in the steadfastness with which he has pursued it.

Apart from Kale’s unhappy marital experiences the only testimony tending to prove his unfitness to have his son comes from the Fords and is manifestly tinged with venom. They say that Kale drank about nine cans of beer and used profanity during a. protracted interview in Missouri, when the Fords succeeded in collecting four months of back support money by threatening to file suit. Kale denies that testimony, but in any event the incident was far too trival to serve as a basis for depriving Kale of his son.

On the other side of the ledger the affirmative proof of Kale’s fitness is convincing. Except for his military service Kale has held the same job with General Motors for eight years, earning three dollars an hour as an assembly-line worker. He and his wife and their son live in a permanent trailer park in Kansas City. They take their son to church. Five close neighbors testified that the Paynes are of good character, that their home is clean and well kept, and that their child is neat and well behaved. The testimony of those disinterested witnesses .effectively rebuts the biased statements coming from the Fords. Finally, it is of course desirable that Dean Thomas have the companionship of his half brother while the two boys are growing up.

The decree must be reversed and the canse remanded for the entry of a decree awarding custody to the child’s father, with reasonable visitation rights in the mother. Since it is plainly desirable that the change of custody he made as soon as possible an immediate mandate will be ordered, as in Tassin v. Reynolds, 222 Ark. 363, 260 S. W. 2d 462 (1953), to prevent the matter from being carried over until the court reconvenes in the latter part of the summer.

Harris, C. J., and Brown, J., dissent.

Carleton Harris, Chief Justice

dissenting. The cardinal rule in deciding child custody cases, so often stated as to need no citation of authority, is that the court makes its determination in accordance with the best interests of the child.

I cannot consider, under the testimony in this case, that the little boy’s best interest is served by his custody being awarded to the father. It appears, from the evidence, that, although he had only been ordered to pay $30.00 per month for the support of the child, Payne was frequently tardy in making these payments, and there is evidence that he was at one time behind in the amount of $120.00. When the little boy, Dean, was born, the government paid part of the hospital expenses, and Payne’s wife and her mother paid the balance. Apparently, no support has been paid at all since July, 1965. This father, according to the record, had not seen this child from the time that Dean was two weeks old until the time of this court hearing. Payne’s present wife had never seen the child before the court hearing.

The majority opinion is somewhat critical of the witnesses who testified to the effect that appellant is not a proper person to have the -custody of his son, mentioning that this testimony is “manifestly tinged with venom.” I can only point out that the Chancellor saw these witnesses when they testified, and, of course, had a much better opportunity to determine which witnesses were telling the truth. He reached the conclusion that Payne was not a proper person to have custody of the child, and that the little boy’s welfare would he best served by leaving his custody with Reverend and Mrs. Jones.

It is true that there is no testimony in the record relating to the Joneses, their character, or their suitability for custody of the youngster.

Accordingly, I would remand this case to the Union Chancery Court for the purpose of taking testimony relative to the character of Reverend and Mrs. Jones, their facilities for taking care of the child, etc., as a matter of determining the propriety of placing the custody of Dean with them.

I, therefore, dissent to the reversal.

Lyle Brown, Justice,

concurring in part and dissenting in part. I agree with the majority opinion insofar as it reverses the case. However, I disagree with that part of the opinion which vests custody of the child in Kale Payne. This does not mean I would presently award custody to Rev. E. Leroy Jones. I think the ability and desire of Rev. Jones to have custody should be further explored and made a matter of record. He did not testify at the trial. The father has a two-bedroom trailer and resides at a trailer park in Kansas City. He resides there with his wife and child and proposes to take young Dean there to live. The record before us is very limited with respect to the total environment in which the child will be placed. This is true whether custody be granted to Rev. Jones or to the father.

There were two hearings before the trial court. The first one was continued by the presiding judge for the stated purpose of calling upon the child welfare division of the state welfare department for assistance. It may well be that valuable information was furnished the trial judge, but it is not in the record.

. From the present state of the record we must choose between a father whose past habits are not commensurate with a wholesome atmosphere for the child, and a third party about whom we know very little. If the trial court is in the same predicament — short of his judgment of the demeanor of the witnesses — then I contend the record needs to be more fully developed. If the trial court has information which is not in the record then the cause should be reopened in order that the record can be completed.


author: George Rose Smith, Justice.

text:
    Home Mutual Fire Insurance Co. v. Walter Hagar et ux
    5-4228
    Opinion delivered May 29, 1967

      Peter G. Estes, for appellant.

      Crouch, Blair & Cypert, for appellee.
   George Rose Smith, Justice.

This is an action by the appellees upon an extended-coverage insurance policy to recover $1,131.20 for hail damage to their dwelling house and trailer. The jury returned a $1,000 verdict for the plaintiffs.

The judgment must be reversed for error in the admission of evidence. The principal damage was to the aluminum siding on the house. Over the defendant’s objection the plaintiff was allowed to introduce a letter from an aluminum dealer in Missouri, stating that the damage could be repaired for $780. The author of the letter was not offered as a witness; so the letter was inadmissible, being hearsay evidence. New Empire Ins. Co. v. Taylor, 235 Ark. 758, 362 S. W. 2d 4 (1962). It was unquestionably prejudicial, for the other estimates of damage did not amount to as much as the verdict.

The appellees argue that the appellant did not properly object to the letter. Counsel stated: “Note my exceptions and'objections, Your Honor, for the reason there is no proper foundation laid.” We think the objection as sufficient. .While counsel did not use the word “hearsay,” he did indicate his contention that the letter was not admissible without some foundation or identification, other than the plaintiff’s bare statement that it was an estimate from Southern Aluminum Discount Company. We used rather similar language in Lynch v. Stephens, 179 Ark. 118, 14 S. W. 2d 257 (1929), where, in commenting upon the inadmissibility of a written statement apparently made by an engineer or a bookkeeper, we remarked: ‘ ‘ There is no explanation offered for the failure to put the engineer or the bookkeeper on the stand to testify, the only witnesses that could have testified about the amount of work done and the amount of money received.”

The only other asserted errors that might recur upon a new trial (appellant’s Points 1, 2, and 4) involve an interpretation of the application for the policy and the policy itself. Neither instrument is abstracted by the appellant; in fact, the policy .is' not even in the record. Hence we cannot review those assertions of error.

Reversed and remanded for a hew trial.


text:
    Proctor Tire Service Inc. v. National Surety Corp.
    5-4250
    415 S. W. 2d 45
    Opinion delivered May 29, 1967

      Spitzberg, Bonner, Mitchell & Hays and Allan W. Horne, for appellant.

      Smith, Williams, Friday & Bowen;'By: Frank Warden Jr., for appellee.
   George Rose Smith, Justice.

Wright Contracting Company was the principal contractor for the construction of part of Interstate Highway 40 in Lonoke county. Wright executed a statutory contractor’s bond, with the appellee as its surety, to guarantee the payment of claims for “materials entering into the construction or necessary or incident to or used in the course of construction” of the highway. Ark. Stat. Ann. § 14-604 (Supp. 1965).

The appellant, a tire dealer at Hazen, sold $4,433.21 worth of truck tires and tubes to Flint Construction Company, a hauling concern that was working on several jobs in the vicinity of Lonoke and Pulaski counties.

One of Flint’s jobs was that of hauling dirt as a subcontractor for Wright on the Interstate 40 project. With a trivial exception, none of the tires and tubes sold by Proctor to Flint were used on the Interstate 40 job or were even intended by Flint to be used on that job. Nevertheless, Proctor insists that it is entitled to recover the delinquent Flint account from the appellee, simply because Proctor believed, mistakenly but sincerely, that its tires and tubes would be used by Flint as Wright’s subcontractor. The trial court, upon proof that is virtually undisputed, made findings of fact in favor of the defendant-appellee. We affirm his decision.

Flint, in the performance of its subcontract with Wright, did not use its own trucks. Instead, it leased trucks from men who are referred to as brokers — independent truckdrivers who owned and operated their own vehicles. The brokers furnished their own tires and other accessories. Their trucks bore a painted inscription, “Leased to Flint Construction Company.”

Flint itself owned a fleet of trucks, based in Little Bock. All the tires and tubes sold by Proctor to Flint were delivered to Flint in Little Bock and were mounted by Flint on its own trucks. With one exception the Flint trucks were used exclusively on jobs other than the Interstate 40 project. The exception: Flint’s dispatcher drove a loaded truck to the Interstate job on one occasion, but there were so many brokers waiting in line to deliver their loads that no other Flint-owned truck was ever sent to that job. The proof indicates that of 3,000 truckloads of dirt delivered to the job only that one load was carried in a Flint-owned vehicle.

'Cecil Proctor, who with., his wife owns the appellant company, testified that when he sold the supplies to Flint he knew that Flint was hauling for Wright as a subcontractor on the Interstate 40 contract. He made no investigation of where else Flint might be hauling. A local representative of the Goodyear Tire & Rubber Company, whose products were sold by Proctor, made a superficial investigation, but he too failed to uncover the readily ascertainable fact that Flint was working on a number of jobs in addition to the one for Wright.

The appellant, citing several federal cases construing a federal statute, puts the issue in this language: ‘ ‘ May a supplier recover the purchase price under a construction bond for goods sold and delivered to a subcontractor where the supplier intended in good faith and reasonably believed that such goods would be used on the bonded job, or must he show that such goods were actually used in the construction, of the work?” We think a better statement of the issue would be: “May a supplier compel- a principal contractor or its surety to pay for supplies that were not used on the job and were never intended by the purchaser to be so used, merely because the .seller erroneously concluded, upon inadequate investigation and with no element .of estoppel or misrepresentation, that the supplies would be used upon that particular bonded job?” The question answers itself. We do not stop to discuss the cases cited, for they bear little resemblance to the fact situation now before us. It is plain enough that if the appellant should be held to be entitled to judgment in this case, principal contractors and their sureties would have absolutely no way to protect themselves against liability for supplies sold to subcontractors for use elsewhere.

Affirmed.


author: Paul Ward, Justice.

text:
    Arkansas Louisiana Gas Co. v. Morgan A. Maxey, et ux
    5-4150
    415 S. W. 2d 52
    Opinion delivered May 29, 1967

      Henry & Boyett and Robinson, Thornton, McCloy & Young, for appellant.

      Lightle & Tedder, for appellees.
   Paul Ward, Justice.

This is an eminent domain case.

On October 20, 1964 Arkansas Louisiana Gras Company (appellant) filed a complaint in circuit court to condemn a strip of land eighty feet wide across a 1,000 acre farm, owned by Morgan A. Maxey and his wife (appellees), “for the purpose of constructing, operating and maintaining” a twenty-four inch pipe line. The actual land taken was 12.4 acres. On the same day the court, after taking testimony, authorized appellant to enter immediately upon the land for construction purposes. This was on condition that appellant deposit $820 in court to cover cost of land taken and any damages “which might accrue to the premises because of the condemnation. .

Nearly a year later (after the construction was completed) appellees filed their answer, alleging that “they have suffered damages by reason of the condemnation .. . and by construction of the pipe line ... in an amount in excess of $7,500,” and asking judgment for said amount.

Upon trial the jury assessed appellees’ damages at $5,500 for which amount the trial court (on April 1, 1965) entered judgment. From said judgment appellant now prosecutes this appeal for a reversal, relying on two assignments of error. '

One

“Restoration cost was not a proper element for the jury’s consideration in arriving at the measure of damages suffered by the landowner. ’ ’

Two

There was no fair or reasonable basis for the opinion evidence given by Henry Plant or Dorothy Beck-man. ’ ’

We will not discuss Point Three, which challenges the amount of the verdict, because we find that the case must be reversed on other grounds.

One. We are unable to agree with appellant’s contention that restoration cost.was not a proper element to be considered by the • jury in this case. The factual situation in this case is similar, in material respects, to that in Ross v. Clark County, 185 Ark. 1, 45 S. W. 2d 31. There the Court announced rules,to be followed on retrial which are applicable and controlling in the case here. In the cited case we said:

“In other words, the appellant was entitled to recover the market value of all land taken, and damage done to land not actually taken ...”

See also Arkansas Louisiana Gas Company v. Katherine E. Burkley et al, delivered by this Court May 22, 1967.

As will be pointed out hereafter, appellees do contend their land (not taken) was damaged and, if proven, they should recover for same.

Two. We have concluded, however, this ease must he reversed because improper evidence vas introduced to show damages done to the land not taken, and also as to the land take». There are two separate,errors which call for a reversal.

First, appellees attempted to prove the value of timber removed from.the land taken. This is not an element of damage under our decision in the Burkley case mentioned above wherein we held, in a case of this kind, the condemnor must pay “the- full value of land embraced within the right-of-way easement as if the fee had been taken”. "We think it must follow, therefore, that appellant will have paid for all timber on the land taken when they pay for such land.

Secondly, without considering the, error just pointed out, the case must be reversed because of incompetent testimony introduced to prove damages to the land not taken. We deem it unnecessary to point out in detail the incompetent testimony referred to. We merely' call attention to the fact that the witnesses did not, in our judgment, qualify to give their opinions as to the damages. In the case of Arkansas Highway Commission v. Byars, 221 Ark. 845, 256 S. W. 2d we said:

“Where a witness gives his opinion as to damages, such testimony must be considered in connection with related facts upon which the opinion is based.”

This rule was not complied with by appellees ’ witnesses in this case. We call attention to the rule so that it may be followed upon a retrial.

Reversed and remanded.

Fogleman, J., disqualified.