author: Hart, J.,

text:
    State ex rel. Attorney General v. Lion Oil Refining Company.
    Opinion delivered May 24, 1926.
    1.' Taxation — unit system. — The unit system of taxation can be applied only to public carriers and similar public corporations.
    2. Taxation — oil company. — There is no organic relation between the plants in different States of a corporation engaged in drilling for oil and refining it and no such connected use of such plants as authorizes a tax on its capital stock or justifies the application of the unit system of taxation.
    3. Taxation — capital stock of foreign corporation. — Under the due process clause of the Fourteenth Amendment, the State is prohibited from taxing the capital stock of foreign corporations which is neither located nor used within the boundaries of the State.

      Appeal from Union Chancery Court, Second Division; George M. LeCroy, Chancellor;
    affirmed;
    STATEMENT BY THE COURT.
    Pursuant to the authority given him by § 10204 of Crawford & Moses’ Digest, the Attorney General instituted this action in the chancery court, against the Lion Oil Refining Company to recover taxes for the years 1922 to 1924, 'both inclusive, which he alleges escaped taxation.
    According to the allegations of the complaint, the Lion Oil Refining Company is a private corporation organized under the laws of the State of Delaware for the purpose of engaging in the production, refining and marketing of oil, gas, and their.products. On November 19, 1923, the Lion Oil Refining Company complied with the laws of the State of Arkansas and was duly authorized to do business in this State. It has since been engaged in refining and marketing oil and gas and their products in this State. The corporation has paid the taxes assessed on its tangible property in this State, but has failed to assess or pay the taxes on that proportion of its capital stock which is represented by its tangible property in this State.
    The complaint alleges that the tangible property of said corporation- represents a large percentage of the market value of its capital stock, which has escaped taxation in the State of Arkansas during said years.
    The chancery court sustained a demurrer to the complaint, and, upon the plaintiff’s declining to plead further, it was decreed that the' complaint should be dismissed for want of equity.
    The case is here on appeal.

      H. W. Applegate, Attorney General, B. E. L. Johnson, J. E. Harris and Robert A. Kitchen, special counsel, for appellant.

      Mahony, Yocum J Saye, for appellee.
    • Bryan, Williams & Cave and Patterson & Rector, amici curiae, on behalf of appellee.
   Hart, J.,

(after stating the facts). The Attorney General claims the right to levy and collect the tax under the provisions of §§ 9965 and 9966 of Crawford & Moses’ Digest. The act was passed by the Legislature of 1917, and among other things the title provides that it is an act assessing for taxation the tangible property of all corporations.

Section 9965 reads as follows: “All corporations doing business in this State, except corporations whose property is assessed by the Arkansas Tax Commission and the corporations required to make and file the special returns provided for in § 9904, shall, in addition to the list prescribed by § 9904, make and file with the assessor of the county wherein its principal office is situated a statement wherein shall be distinctly set forth:

“(1). The name of the corporation and the location of its principal 'office.

“(2). The number of shares of stock of said corporation outstanding and the face value of each share.

“(3). The market value of each share, and, if no market value, the actual value of each share of stock, and the net income of the corporation shall be considered in determining the actual value of the shares of stock, if they have no market value.

“ (4). 'The aggregate market value, or actual value as the case may be, of all outstanding stock.

“ (fi). The total bonds of the corporation secured by mortgage or deed of trust on property belonging to the company, and the aggregate market value, or actual value, of such bonds. •

“(6). The assessed value of all real estate owned by the corporation.

“(7). The assessed value of all tangible personal property owned by the company and assessed under § 9904.

“The sum of items four and five, less the sum of items six and seven, shall be held to be the value of the intangible property of the corporation, and shall be listed and assessed by tbe corporation, as agent for its shareholders, under the heading, ‘Intangible Property.’

“The return prescribed by this section is required in addition to that required by § 9904, and its purpose is to secure the assessment of the intangible property belonging to the corporation.

To sustain his right to collect the tax, the Attorney General relies upon our decisions construing the act under consideration and our earlier acts providing for the assessment of the intangible property of corporations. State ex rel. v. Bodcaw Lumber Co., 128 Ark. 505; State ex rel. v. Ft. Smith Lumber Co., 131 Ark. 40; Crossett Lumber Co. v. State, 139 Ark. 397; and State v. Gloster Lumber Co., 147 Ark. 461.

These decisions were dealing with the power of the State to’ tax the intangible property of domestic corporations. It is contended, however, by the Attorney General that the act is sufficiently broad and comprehensive to include foreign corporations, and that foreign corporations authorized to do business in this State fall under the provisions of the statute and must comply with its terms.

If the provisions of the statute are to be extended to apply to foreign corporations, it is apparent that the statute would be unconstitutional, at least so far as it applies to foreign corporations.

The Supreme 'Court of the United States has uniformly held that a State may not, consistently with the due process provision of the Fourteenth Amendment, include, at least as against any foreign corporation, any part of its tangible property lying without the State for purposes of taxation. Louisville & Nashville Rd. Co. v. Greene, 244 U. S. 522; Looney v. Crane Co., 245 U. S. 178; and Union Tank Line Co. v. Wright, 249 U. S. 275.

In the case-last cited it was expressly held.that a State cannot tax the property of a foreign corporation which has never come within its borders.

Again, in Wallace v. Hines, 253 U. S. 66, it was. .said that the only reason for allowing a State to look beyond its borders when it taxes the property of foreign corporations is that it may get the true value of the things within it, when they are part of an organic system of wide extent, that gives them a value above what they otherwise would possess. In that case the court was considering the unit system of taxation as applied to' railroad companies carrying on business in two or more States.

It has also been held that a State cannot tax the property of a foreign corporation outside the State, regardless of whether the corporation is a carrier or trading company. International Paper Co. v. Massachusetts, 246 U. S. 135; and American Bauxite Co. v. Board of Equalization, 119 Ark. 362.

The Attorney General seeks to uphold the validity of the statute on the ground that the general rule of the unit system of taxation in cases of railroads and other public service corporations carrying on business in two or more States should be applied to oil companies organized in another State and doing business in this State. ''

In Cooley on Taxation, 4 ed., vol. 2, § 811, it is said that it is properly held that the unit rule should not be applied to mining companies, oil companies, or the like. Continuing, the author said that this doctrine never has been applied, nor can it justly be applied to manufacturing or other similar plants or industries which are under common ownership but used or operated, in different States. Our case of American Bauxite Co. v. Board of Equalization, 119 Ark. 362, is first cited. That ease in principle sustains the text.

In discussing the method of arriving at the value of property for taxation under our Constitution, it was said that property is assessed in this State whether it produces income or not, and property is not taxed according to its income, and indeed the question of income is of importance only as it relates to and affects the value.

In discussing the uses made of the ore after it was shipped out of the State, for any purposes other than to determine the value of the land from which it was mined, the court said: “After property is taken out' of this State it ceases to be subject to taxation within this State, and no attempt is made by the Constitution or laws of this State to impose upon such property any of the burdens of taxation.”

In Standard Oil Co. v. Howe, 257 Fed. 481, it was held that the Civil Code of Arizona providing for the unit rule of value in the taxation of private car lines, railroad property, and telegraph and telephone lines, does not authorize the unit rule valuation for taxation of the property of a foreign oil company.

Again,in Utah-Idaho Sugar Co. v. Salt Lake County (Utah), 210 Pac. 106, 27 A. L. R. 874, it was held that a. lump assessment upon a corporation for intangible property arising out of tangible property located in several States, must fail in toto if there is no method of separating .the assessments arising out of the extraterritorial property from that arising out of the property within the State.

In discussing the right of an assessing officer to take into consideration- the value of tangible property situate in one- State to enhance the value of property in •another State, the court quoted with approval from the United States Supreme Court in Delaware, Lackawanna & West. Rd. Co. v. Pennsylvania, 198 U. S. 343, the following: “So, if the State cannot tax tangible property permanently outside of the State and having no situs within the State, it cannot attain the same end by taxing the enhanced value of the capital stock of the corporation which arises from the value of the property beyond the jurisdiction of the State.”

Continuing the discussion, the Supreme Court of Utah further said: “While it is quite true that, in taxing the property of a foreign corporation which is in the taxing State, the latter State may ‘look 'beyond its borders # * * that it may get the true value of the things within’ the State, yet the ‘only reason’ why that may be done is to obtain the true value of the property in the taxing State. Wallace v. Hines, 253 U. S. 69, 64 L. ed. 786, 40 Sup. Ct. Rep. 435.”

It is apparent from the reasoning of the Supreme Court of the United States that the unit system of taxation can only be applied to public carriers and other like public corporations, and that the rule is not applicable to corporations like the oil refining company.

In discussing the reasons for the rule, in Cleveland, Cincinnati, Chicago & St. Louis Ry. Co. v. Backus, 154 U. S. 439, the court said: “The rule of property taxation is that the value of the property is the basis of taxation. It does not mean a tax upon the earnings which the property makes, nor for the privilege of using the property, but rests solely upon the value. But the value of property results from the use to which it is put, and varies with the profitableness of that use, present and prospective, actual and anticipated. There is no pecuniary value outside of that which results from such use. The amount and profitable character of such use determines the value, and if property is taxed at its actual cash value it is taxed upon something which is created by the uses to which it is put. In the nature of things it is practically impossible — at least in respect to railroad property — to divide its value, and determine how much is caused by one use to which it is put and how much by another.”

In Adams Express Co. v. Ohio, 165 U. S. 194, the difference between a unity of use and management and the unity of ownership of property is clearly expressed by Mr. Chief Justice Puller as follows: “We repeat that, while the unity which exists may not be a physical unity, it is something more than a mere unity of ownership. It is a unity of use, not simply for the convenience or pecuniary profit of the owner, but existing in the very necessities of the case — resulting from the very nature of the business.”

“The same party may own a manufacturing establishment in one State, and a store in another, and may make profit by operating the two, but the work of each is separate. The value of the factory in itself is not conditioned on that of the store, or vice versa, nor is the value of the goods manufactured and sold affected thereby. The connection between the two is merely accidental and growing out of the unity of ownership. But the property of an express company distributed through the different States is ah essential condition of the business united in a single specific use. It constitutes but a single plant, made so by the very character and necessity of the business.”

Again, in Fargo v. Hart, 193 U. S. 490, the court said: “A State cannot tax the privilege of carrying on commerce among the States. Neither can it tax property outside of its jurisdiction belonging to persons domiciled elsewhere. On the other hand, it can tax property permanently within its jurisdiction, although belonging to persons domiciled elsewhere and used in commerce among the States. And when that property is part of a system and has its actual uses only in connection with other parts of the system, that fact may be con-' sidered by the State in taxing, even though the other parts of the system are outside of the State.”

In the case of a corporation engaged in drilling for oil and refining it, it is manifest that there can be no organic relation between its plants situated in different States, and there can be no connected use of these plants within the rule laid down above.

The corporation in the case at bar was organized in the State of Delaware, and was engaged in drilling for oil and refining it in the State of Arkansas. It might have had similar plants in the States of Texas and Louisiana. If so, its various plants would not be operated as a unit. Each one would be separately operated, and might be shut down without any impairment of the operating power of its plants in the other two States.

It seems clear from the reasoning in the cases above cited, and others which might be cited, that the unit system of taxation cannot be applied to corporations like the one in the case at bar engaged in drilling for oil and refining it.

Moreover, the State was assuming to exercise its power of taxation over the intangible property of corporations in the act under consideration. It is in no sense an excise tax, such as was under consideration in Alpha Portland Cement Co. v. Massachusetts, 265 U. S. 203, and cases cited. The tax levied under the statute is a tax on property, and was intended to reach the intangible value of the capital stock of a corporation. This is clearly shown by the language of the statute. It is expressly provided that the sums of items four and five, less the sums of items six and seven, shall be held to be the value of the intangible property of the corporation, and shall be assessed by the corporation as agent for its shareholders under the heading, “Intangible Property.”

Item four is a statement of the aggregate market value of all outstanding stock.

Item five is the aggregate market value of all the bonds of the corporation secured by a mortgage on its property.

Items six and seven are statements of the assessed value of all real estate and all tangible personal property of the corporation.

Thus it will be seen that the Legislature provided that the aggregate market value of all outstanding stock and the total bonds of the corporation, less the assessed value of all real estate and all tangible personal property belonging to the corporation, should be assessed as the intangible property of the corporation.

The statute therefore could in no sense apply to the taxation of foreign corporations without violating the holding of the Supreme Court of the United States and of our own court to the effect that a tax on property wholly beyond the confines of the State constitutes the taking thereof without due process of law.

The capital stock of a foreign corporation is property permanently beyond the borders of this State, and, under the authorities cited above, the due process clause would preclude the State from taxing the capital stock of foreign corporations which is neither located nor used within the boundaries of the State.

The provisions of the statute do not fit in with any constitutional power of the State over the taxation of the property of foreign corporations, and we do not think that it was the intention of the Legislature that the statute should be applicable to foreign corporations.

It follows that the decree of the chancellor must be affirmed.


source: Caselaw Access Project

author: Hart, J.

license: Public Domain

text:
    Mutual Life Insurance Company v. Hynson.
    Opinion delivered May 24, 1926.
    1. Insurance — imposing condition to reinstatement. — Where 'a life insurance policy contained no condition to reinstatement, the company could impose any condition not contrary to public policy on which reinstatement might be had.
    2. Insurance — reinstatement—authority of local agency.— Where a life insurance policy contained no provision for reinstatement, and the application for reinstatement recited that reinstatement should not take effect until approved by the home office, a local agency had no authority to reinstate the policy, and its acceptance of a check did not constitute a reinstatement; and it was immaterial that insured died before the check was returned . by the home office after refusing to reinstate the policy.
    Appeal from Fulton Circuit Court; John C. Ashley, Judge;
    reversed and dismissed.

      Frederick L. Allen, Oscar E. Ellis, Rose, Hemingway, Cantrell S Loughborough, for appellant.

      H. A. Northcutt, Geo. T. Humphries and Thos. T. Dickinson, for appellee.
   Hart, J.

This is an appeal from a judgment in favor of Carrie E. Hynson against the Mutual Life Insurance Company of New York, which was entered on the verdict of a jury on a life insurance policy.

Counsel for appellant seek to reverse the judgment on the ground that the undisputed evidence shows that tli© policy sued on had been forfeited and had not been reinstated.

In March, 1905, the Mutual Life Insurance Company-of New York issued a policy in the sum of $1,000 upon the life of L. M. Hynson in which his wife, Carrie E. Hynson, was named as the beneficiary. The policy was a twenty-year deferred dividend policy, and no dividend would be accumulated or accredited to the policy unless the insured was alive and the policy in force on March 16, 1925.

In June, 1921, L. M. Hynson applied for and received a loan on the policy for the amount of $378. A note was given for this amount to the company, which was not paid at maturity. On April 17, 1922, the policy was canceled for the nonpayment of the loan due on March 16, 1922, and for the nonpayment of the annual premium due on the same day. At the time the policy was canceled it was of the value of $378, and the entire cash surrender value was applied in liquidation of the loan.

The records of the company show a cancellation of the policy on April 17, 1922, and the reason is that the company gives to each policy-holder thirty-one days time after due within which to pay or renew the loan. The policy contained no provision for reinstatement, and on the contrary contained a provision as follows: “Notice — No person, -except an executive officer of the. company or its secretary at its head office in New York, has power on behalf of the company to make, modify or alter this contract, to extend the time for paying a premium, to bind the company by making any promise or by accepting any representation or information not contained in the application for this contract. ”

On March 16, 1924, L. M. Hynson wrote to the Mutual Life Insurance Company of New York at its home office to advise him of the status of his policy. On March 24, 1924, the company advised him that his policy •had lapsed for nonpayment of the premium and interest on the loan due March 16, 1922,

This letter was written by the manager of the Memphis agency of the insurance company, and informed Hynson that it had written the home office to quote the cost of reinstating the policy, and that as soon as the information was received he would be notified. On April 7, 1924, the manager of the Memphis agency wrote L. M. Hynson at Mammoth Spring, Arkansas, that he was advised by the home office that it would consider the restoration of the policy upon receipt of satisfactory certificate of health, restoration of the loan agreement, and the payment of $149.34, made up of certain items which are set out. The letter inclosed a health certificate form and a restoration note. The letter concludes as follows: “If health certificate is furnished and approved and the $149.34 paid, your policy will be fully reinstated.”

R. T. Hynson, a brother of L. M. Hynson, went to the Memphis agency of the insurance company to see about getting the policy of his brother reinstated. The manager of the office told him that there was a further loan value on the policy, and that by the execution of a new note for the amount of the old loan and the additional loan value with a payment of $50.34 in cash the policy would be reinstated. R. T. Hynson took the application for reinstatement to Mammoth Spring, Arkansas, and procured his brother’s signature to it.

The application contained the following: “It being understood and agreed that such placing in force shall not take effect until this application shall have been finally aproved at the said company’s home office in New York City, nor until the said premium and interest have been paid.” R. T. Hynson also procured the signature to a note for $477 as required by the manager of the Memphis agency. He delivered this note, together with the health certificate and a check for $50.34, to the manager of the Memphis agency of the company, and said that he considered the transaction closed.

On this point we quote from his testimony on direct examination as follows: “Q. Did he tell you that this policy was reinstated when you delivered this note for $477 and the check for $50.34? A. Yes sir. Q. iWhat did he say about the policy being reinstated? A. I asked him what it would take to reinstate the policy, and he gave me these papers, and when they were executed the policy was to he reinstated, and when I gave him the note and check there was no further conversation after that.”

On the same point we quote from his cross-examination as follows:

“Q. You took the papers and delivered them, with your check for $50.34, at Memphis? A. Yes sir, those papers and my check for $50.34. Q. On your second visit did you talk to the same man? A. Yes sir. Q. You had no further conversation about the matter? A. No sir, no further conversation, except to hand him the papers, and he looked them over and said they were all right. ’ ’

On May 29, 1924, the manager of the Memphis agency wrote to L. M. Hynson at Mammoth Spring, Arkansas, the following:

“We regret to advise you that, the company has declined to reinstate your policy. We will return the loan agreement recently executed as soon as it can he sent to us from the home office.”

On June 1, 1924, L. M. Hynson wrote to the manager of the Memphis agency to advise him the reason why the company would not reinstate the policy, and also to inform him if he was entitled to any surrender value, as the policy lapsed for nonpayment on March 16, 1922.

On June 4,1924, the manager wrote to L. M. Hynson as follows: “Referring to your letter of the 1st, we do not know why the home office declined to reinstate this policy, but are today writing them, stating that you would like to know why, and will write to you farther upon receipt of their reply.

“The full cash value of this policy on March 16, 1922, Avas $378, which amount you had previously drawn as a loan. There was therefore no reserve left to he applied to the purchase of paid-up insurance.”

On June 16, 1924, the manager of the Memphis branch office wrote to L. M. Hynson at Mammoth Spring, Arkansas, inclosing a copy of the letter from the home office telling why it would not restore the policy in question. On June 27, 1924, the manager of the Memphis agency wrote to R. T. Hynson in Memphis, the following:

“Policy Number 1574519 — L. M. Hynson.
“Dear sir: We are returning herewith loan note executed by L. M. Hynson under this policy, which the company has declined to reinstate.
“If you will have him sign and return the inclosed voucher, we will send our check for $50.34 covering refund of amount paid as balance required to complete the loan. ” ,

L. M. Hynson was suddenly killed in Pulton County, Arkansas, on June 22, 1924. The home office had a com'mittee which alone was authorized to pass on applications to restore policies which had lapsed for the nonpayment of premiums, or which had been canceled for the nonpayment of loans. The application of L. M. Hynson for the restoration of his policy was submitted to this committee, and it reached a decision on May 22, 1924, and at once caused the applicant to be notified that his application to restore his'policy had been denied. This was the usual method of procedure in- such cases.

This' is the substance of the evidence,- presented in the light most favorable to the-plaintiff. It will be noted from our statement- of facts that the policy' itself did not contain, any provision -for its reinstatement after forfeiture. On the contrary, it contained' a clause notifying the insured that-no person except an executive officer of the company, or its secretary at its head office in New York, had the power to modify any offer of contract of insurance or to 'bind the company by making' any promise, or by accepting any representations or information not contained in the application for insurance.

. ‘ The insured was advised by a letter which he received from the manager of the Memphis agency that it would be necessary to apply to the home office. In the written application which he signed to procure the reinstatement of the policy there was a clause that the policy would not be reinstated until the application had been finally approved at the company’s home office in New York City. •

, Thus it will be seen that it was expressly stipulated that the reinstatement should not take effect until it wus approved at the home office. Inasmuch as the provisions of the contract did not provide for the reinstatement of the policy, it was optional with the company to impose any condition which it pleased, not contrary to public policy, on which reinstatement might be had.

It is conceded that the undisputed evidence shows that the policy had been forfeited, and that the home office in New York City had refused to reinstate the policy. But it is sought to uphold the judgment upon the ground that the Memphis office had at least the apparent authority to represent the company in reinstating the policy, and that its action in the premises bound the company.

The Memphis agency had no real or implied authority to reinstate a policy. There was no actual reinstatement. Hence the plaintiff must establish the doing of something that was indispensable, to the right to reinstate. Tins he has wholly failed to prove. It is true that his brother testified that, when he returned the application, the 'manager of the Memphis agency accepted it, together with a check for the balance necessary for a reinstatement of the policy, and that he considered the matter closed. This is not sufficient. It is apparent from his direct examination and from his cross-examination, which is explanatory, that he merely handed in the' application and other papers accompanying it to the manager of the Memphis agency. The act of the manager, under the circumstances, could in no sense be said to be an agreement by the company to reinstate, the policy.

The application on its face stated that the reinstatement should not take place until it was finally approved at the company’s'home office in New York City. All the correspondence between the parties' showed that the manager was sending all conrnrunications relative to the matter to the home office in New York City, and that the reinstatement would be passed on there.

The case is entirely unlike that of Ætna Life Ins. Co. v. Duncan, 165 Ark. 395, where the reinstatement was upheld. In that case the policy itself contained a clause for reinstatement, and the testimony of the general agents of the company showed that they were authorized to solicit the reinstatement of policies and to reinstate the same when the company had sent down the reinstatement receipts showing that the application for reim statement had been approved by the company.

The cancellation of the policy resulted from the insured’s own acts in failing to comply with its provisions, and, as has been pointed out, the policy containing no provision on the subject, the company might impose such conditions for reinstatement as seemed to be advisable to it.

It is true that the insured died before the check for the $50.34 was returned; but the manager of the Memphis agency had written to the insured that the amount of the check would be sent to him as soon as it obtained authority from the home office. This was according to their usual method of procedure in cases of this sort. The insured has recognized that the company might impose any terms that it saw fit as a condition to restoring the policy. This is shown by his letter of June 1,1924, in which he asks the manager of the Memphis agency to advise him the reason why the company would not reinstate the policy, and also to inform him if he had any surrender value under it.

It appears from the record that the $50.34 is held by the company to be refunded to the duly qualified administrator of the estate of L. M. Hynson, deceased, when said administrator will accept the same.

The result of our views is that the undisputed evidence shows that the policy was not reinstated, and that the court erred in refusing to direct a verdict for the defendant company.

For this error the judgment mil he reversed, and, inasmuch as the case appears to have been fully developed, the cause of action -will be ordered dismissed here.


author: Smith, J.

text:
    Dyke v. Magdalena.
    Opinion delivered May 24, 1926.
    1. Appeal and error — harmless error — instruction.—Though a writing evidencing the sale of a butcher’s refrigerator did not contain an express warranty of its fitness as such, an .instruction submitting to the jury the question of an express warranty, if erroneous, was not prejudicial, where there was an implied warranty.
    2. Sales — implied warranty of manufactured article. — The sale of a butcher’s refrigerator to be manufactured for preserving meats carries an implied warranty that it is reasonably fit for that purpose.
    3. Sales — breach of warranty — recovery of payment. — One who purchased a refrigerator for the purpose of preserving meats is entitled to recover a cash payment on the refrigerator proving worthless, though he had agreed that such payment should be retained for rent and wear and tear in case of default in further payments.
    Appeal from Sebastian Circuit Court, Greenwood District; J ohm, E. Tatum-, Judge;
    affirmed.

      Warner, Hardin db Warner, for appellant.

      Holland, Holland & Holland, for appellee.
   Smith, J.

Appellants manufactured and sold to appellee a butcher’s refrigerator for the contract price of $300, of which $100 was paid in cash and the balance was evidenced by the following written instrument:

“F'ort Smith, Ark, Sept. 10, 1924.
“$200.00 No.........................
Due........................
“In monthly installments after date, without grace, we, or either of us promise to pay to the order of Dyke Bros. of Fort Smith, Arkansas, two hundred' and no/100 dollars, in installments as follows:
. “Twenty and no/100 dollars on the tenth day of: each and every month, commencing the 10th day of October, 1924, with interest from date upon the several sums from maturity only, at the rate of ten per cent, per annum, said installments to be applied first upon the interest, and the balance upon the principal.
“This note given for purchase price of the following, personal property:
“1 butcher’s display refrigerator counter, 4.0 high, 3.0 deep, 10.0 long, style No. 200:A, stained dark oak — glass top and front, center icer.
.• - “The title and ownership of the above described personal property shall remain in the said Dyke Bros, until this note and the interest thereon is paid in full. The makers hereby agree to fully insure said property from loss by fire, said loss-, if any, to be payable to Dyke •Bros, as their interest may appear. No extension of the time of payment, whether given with or without- our knowledge; shall release us or either of us-from the obligation of payment. The makers' and indorsers of this note hereby waive demand, notice and protest. If this note is not paid in full, all payments made hereon.shall be appropriated by the said Dyke Bros, for wear and rent of said property. In the event that the maker of this noté shall sell or shall attempt to- sell or ’dispose of said above-described personal property, or any equity he may have therein, or in the event he shall deliver possession of same to aiiy other party, or if said personal property shall be removed from1 the county of 'Sebastian, State of Arkansas, or if the maker fails to maintain said insurance, then, at the option of Dyke Bros.,' this note shall become immediately due and payable, and said Dyke Bros, may, at its election, sue on said - note or immediately retake possession of said property. This note is an installment note, and if any of said installments be not paid at maturity, all of said principal and interest shall, at-the option of Dyke Bros., 'become immediately due and.payable, and the holder thereof may proceed to sue for and collect the same.
(Signed) “L. P. Magdalena.”
P. O. Midland, Ark.
“State of Arkansas, County of Sebastian, ss.
. ‘ “Subscribed and sworn to before me this 11th day of September, 1924. (Signed) Sophie Hennig, Notary Public.
“My commission expires Nov. 16,1926.” '

The refrigerator was installed, and'was properly iced, 'but it was found that it would not preserve meats, and notice of that fact was given appellants' a few days after'the refrigerator was put in use. We so state the fact, because the testimony of appellee was to this effect, and thé' verdict could not have been returned in his- favor unless the jury had found the fact so to be. A mechanic was sent to examine the refrigerator, who did some work on the doors to make them close more tightly. The refrigerator was again iced, and it was again found that it would not preserve meats placed therein, because the temperature could not be sufficiently reduced. Notice was again given of this fact, and a second attempt was made to- adjust and repair the defects, but without success. .This procedure was repeated at intervals of several days, and at last the mechanic said, “This beats me, I have done dll I can do. It is no good. ” Appellee thereupon abandoned the use of the refrigerator, and declined to make the payment which about that time had fallen due. Thereupon appellant brought suit in replevin to recover possession of the refrigerator and damages in the sum of $100 for the detention thereof. The $100 asked as damages was the amount of the cash payment, aud it is appellant’s theory of the casé that this payment should be credited against the wear and rent of the refrigerator, under the' provisions of the contract that, “if this note is not paid in full,' all payments made thereon shall be appropriated by the said Dyke Bros.-for wear and rent of said property.” Appellee, the defendant below, alleged that the refrigerator was bought and sold with knowledge on the part of hoth parties that the refrigerator was to be nsed for a definite purpose, that of keeping meats, and that it was worthless for that purpose. The answer prayed .judgment for the return of the $100 paid and for the value of the meat which had spoiled because of the failure of the refrigerator to preserve it. There was a verdict and judgment in appellee’s favor for the sum of $127, from which is this appeal.

Appellee alleged in his answer that there was an express warranty of the refrigerator, and offered testimony tending to support that allegation, and that issue was submitted to the jury, over the objection and exception of appellants, who sought to exclude this testimony by requesting an instruction — which the court refused to give — that the jury should not consider any testimony tending to show that there was an express warranty.

It will be observed that the writing evidencing the sale of the refrigerator does not contain an express warranty of the fitness of the refrigerator for use for the purpose for which it was sold, and appellants have cited cases holding that a warranty is so clearly a part of a sale that, where the sale is evidenced by a written instrument, it is incompetent to engraft upon it a warranty proved by parol. Lower v. Hickman, 80 Ark. 505; Federal Truck & Motors Co. v. Tompkins, 149 Ark. 664.

Appellee insists that this rule is not applicable here, for the reason that the writing does not set out, and does not purport to set out, the entire contract, as it is shown by the allegations of the complaint and by testimony on behalf of the appellants that a payment of $100 was made, concerning which the contract is silent.

Assuming that it was error to submit the question of an express warranty, for the reason that the writing evidenced the entire contract, we think no prejudicial error was committed in submitting the question of an express Avarranty, for the reason that there was in fact an implied warranty.

The testimony is that the refrigerator was sold to be used for a known purpose, that of preserving meats. It was not a known defined article of commerce. It was a manufactured article, sold to be used for a particular purpose, and the vendee bad no opportunity to make any inspection wbieb would have determined its usefulness for the intended purpose. The agent of appellants who made the sale, when testifying concerning the thickness of the walls of the refrigerator, the dead-air spaces, and the cork insulation between the walls, admitted that none of these things could be seen or their condition discovered by any ordinary inspection, and that all a person looking over the refrigerator could see would be a nicely finished piece of furniture. Neither the refrigerator bought, nor any other one like it, was in use when the sale was made, and no test of it was made by icing it until the refrigerator had been delivered and placed in position for use. We think there was therefore an implied warranty that the article sold was reasonably adapted to the purpose for which it was intended.

In the case of Western Cabinet & Fixture Mfg. Co. v. Davis, 121 Ark. 370, a ease in which the issues were very similar to those of the instant case, we quoted from the case of Curtis & Co. v. Williams, 48 Ark. 325, the following statement of the law: “Proof of an express warranty by the defendant of the quality of this machinery was not essential to a recovery. Ordinarily, upon sale of a chattel, the law implies no warranty of quality. But there are exceptions to .the rule, as well established as the rule itself. One of these exceptions is where a manufacturer undertakes to supply goods manufactured by himself.to be used for a particular purpose, and the vendee has not had the opportunity to inspect the goods. In that case the vendee necessarily trusts to the judgment and skill of the manufacturer, and it is an implied term in the contract that he shall furnish a merchantable article, reasonably fit for the purpose for which it is intended” ('Citing other cases).

In the case of S. F. Bowser & Co. v. Kilgore, 100 Ark. 17, this court quoted with approval from the case of Kellogg Bridge Co. v. Hamilton, 110 U. S. 108, the following statement of the law: “When therefore the buyer has no opportunity to inspect the article, or when, from the situation, inspection is impracticable or' useless, it is unreasonable to suppose that he bought on his own judgment, or that he did not rely on the judgment of the seller as to latent defects of which the latter, if he used due care, must have been informed during' the process of manufacture. If the buyer relied, and under the circumstances had reason to rely, on the judgment of the seller, who .was the manufacturer or mater of the article, the law implies a warranty that it is reasonably fit for the use for which it was designed, the seller at the time being informed of the purpose to devote it to that Use.”

The serviceability and usefulness of the refrigerator was submitted to the jury as a question of fact, and the verdict of the jury is conclusive of the fact that the refrigerator was valueless as such. Indeed, the undisputed testimony appears to establish that fact, and no inspection which appellee could have made at the time of the purchase would have disclosed this fact, so that the principle announced in the cases quoted from is applicable here.

It is earnestly insisted by appellants that the court was in error in rendering judgment for the $100 purchase money which had been paid. But it will be remembered that this suit was based upon a note which reserved the title to the refrigerator in appellants until the purchase money was fully paid, and the suit was not brought to recover the balance of the purchase money but to recover the refrigerator itself under the reservation of title. Nor is the case one where the breach of the implied warranty was waived. Appellants did not give appellee the option of waiving the breach of warranty. On the contrary, there was an election on appellant’s part to assert title and to sue for possession. Appellee was not in default in failing to sue for breach of warranty. The testimony shows that the entire time which elapsed between the sale of the refrigerator in Fort Smith, which is appellant’s place of business, to the date of the institution of the suit was only thirty-seven days, and within that time the refrigerator was shipped to Midland, appellee’s place of business, the refrigerator was installed, and four attempts, at intervals of several days, were made to remedy the defects which made it useless as a refrigerator.

It could not therefore be said — and certainly not as a matter of law — that appellee had kept the refrigerator for such a length of time that he had waived the right to sue for breach of warranty. Indeed, the testimony on appellee’s part was to the effect that he did not accept the refrigerator after testing it. Besides, a.s we have said, appellants gave him no option so to do, when it brought suit to recover possession of the article sold. Courtesy Flour Co. v. Westbrook, 146 Ark. 17. If the jury, in making up the amount of the verdict, allowed appellee the $100 paid on the refrigerator, and we must assume that this was done, as the right to recover that sum was submitted to the jury, then the remainder of the verdict, $27, was much less than the loss which appellee’s testimony shows was sustained through the spoiling of meat and expenses in attempting to repair, and use the refrigerator.

In opposition to appellee’s right to recover the $100 paid, appellants cite the case of B. A. Stevens Co. v. Whalen, 95 Ark. 488. In that case it was held that, where there was a breach of warranty of the soundness or fitness of an article which the vendee had no opportunity to inspect before delivery, he may elect to rescind the contract or affirm by keeping the property, and, when sued for the price, set up the false warranty by way of recoupment, but that he must exercise his right of election within a reasonable time after he discovers the defect, and if he fails so to elect, and thereby waives his right of rescission, he will only be entitled, in a suit for the purchase money, to recoup the cost of correcting the defect, if it could be corrected at a reasonable cost, or the difference between the value of the defective article and one free of such defect.

We think, however, that, if that measure of damages were applied here, appellee would be entitled, under the verdict of the jury, to recover the $100, for the jury has found that there w:as a breach of the implied warranty and that the refrigerator was not adapted to the use for which it was sold. If the article sold could not be used as a refrigerator, then it was practically without value, as there was no attempt to show that it could be used for any other purpose, and the difference between its purchase price and its actual value was therefore more than $100.

We are of the opinion therefore that no error prej- * udicial to appellants appears,' and the judgment will be affirmed. '


author: Humphreys, J.

text:
    Dunbar v. State Building & Loan Association.
    Opinion delivered May 24, 1926.

    1. Usury — promise to pay upon contingency. — Where a promise to pay a sum above legal interest depends upon a contingency and not upon the happening of a certain event, the loan is not usurious.
    2. Building and loan association — usury.—Where a borrower from a'building and loan association was required to subscribe to stock, for which he paid in monthly installments, together with interest on the Toan, the paid-up stock to be surrendered for the loan, and the borrower was entitled to the profits on the stock while it was maturing, the contract was not usurious, though the interest exceeded 10 per cent., since there was a hazard or contingency in the contract.
    Appeal from Pulaski Chancery Court; John E. Martineau, Chancellor;
    affirmed.

      George M. Heard, James E. Hogue and Minor Wallace, for appellant.

      Gray, Burrow ■<& McDonnell, for appellee.
   Humphreys, J.

Appellee instituted this suit against appellants in the chancery court of Pulaski County to foreclose the mortgage on property described therein for $1,962.95, which, together with a bond or note, was executed to it by Annie Spears Dunbar, one of appellants, on the 10th day of November, 1922. It was alleged in the bill that said appellant had made default in her payment, and that, under the terms "of the bond and mortgage, the total amount aforesaid had become due and payable and subject to judgment and foreclosure.

Appellants filed an answer denying' the material allegations in the bill, and, by way of further defense, pleading that the contract was usurious and void, and praying for a cancellation and annulment thereof, and for the dismissal of appellee’s bill for the want of equity.

The cause was submitted to the court upon the pleadings and an agreed statement of facts, which resulted in a personal .judgment against Annie Spears Dunbar for $1,951.83, with interest at the rate of 10 per cent, per annum from May 10, 1923, until paid on $1,921.90; with interest at the rate of 6 per cent, per annum from said date until paid on. $29.63; and a decree of foreclosure against said property, and an order of sale thereof to apply on said judgment, from which judgment an appeal has been duly prosecuted to this court.

The agreed statement of facts upon which the judgment and decree was rendered is as follows:

“The plaintiff, State Building & Loan Association, is a corporation organized under and by virtue of the laws of the State of Arkansas, and is engaged in what is generally known as 'building and loan’ business, which is to accumulate funds upon the sales of its building and loan stock and lend' them to its stockholders at interest to be repaid by the borrowers in monthly installments, along the usual and customary lines of such associations. That its interest earnings on loans-, after the-payment of overhead and operating expenses, is prorated among its borrowing and non-borrowing stockholders alike and in equal proportions. That it maintains an office in the city of Little Rock, in the State of Arkansas, with a manager in charge. That it keeps stenographers, bookkeepers and other clerical help and assistants in its employ, all at the expense of the corporation, and that its officers and members of its board of directors are paid for their services out of the earnings of the corporation.
. “That the defendant, Annie Spears Dunbar, some time prior to November 10, 1922, applied to the plaintiff for a loan of two thousand dollars ($2,000), and that the plaintiff agreed to make said loan of $2,000 to the defendant on condition that the defendant would take and subscribe to stock in the plaintiff’s corporation of the face value of $2,000, and carry said stock to maturity by paying ten dollars on said stock each month until it should mature, and then surrender the matured stock to the plaintiff in payment and' satisfaction of the loan. That these terms were accepted by the defendant, and she-received a loan of $2,000 from the plaintiff, and executed and delivered to the plaintiff on that date her note and bond, a copy of which note and bond is attached to the plaintiff’s complaint and marked Exhibit ‘A’ thereto,' and is by reference made a part of this statement of facts the same as if set out in full herein.
“That said defendant Annie Spears Dunbar, for the purpose of securing said loan, also executed and delivered to the plaintiff a mortgage upon the following described property situated in Pulaski County, Arkansas, to-wit: Lot ten (10), block nine (9), R. C. Butler’s Addition to Little Rock. The original of said mortgage is attached to and made a part of the - complaint which the plaintiff has filed in this case, and is incorporated as a part of the statement of facts by reference; it was filed and recorded in the Pulaski County recorder’s office on November 13, 1922, in record book 178, page 467.
“That at the time of making the loan, as stated in the foregoing copy of bond, defendant Annie' Spears Dunbar subscribed for twenty shares of stock in Class ‘O’, totaling the sum of $2,000 of said -State Building & Loan Association, the subscription for said stock being, a condition upon which the plaintiff agreed to make the loan, pledging the stock as collateral for said sum of money borrowed. That the plaintiff estimated but did not guarantee that said stock would mature said sum in 123 months from October 1, 1922.
“That it was'agreed between the plaintiff and the defendant that monthly payments would be made by the defendant at the rate of twenty-six and 70/100 dollars ($26.70) per month, of which ten dollars ($10) should be applied as principal on the purchase price of the stock, and sixteen and 70/100 dollars ($16.70) as interest on the loan until her monthly payments of ten dollars ($10) each on her stock, augmented by such portion, of the interest and profits as she was entitled to receive as a stockholder in said corporation, should equal the sum of $2,000, at which time said stock was to be considered as having matured. It was also agreed that the defendant should pay the past dues on the stock purchased by. her as of the time when the series was started by said plaintiff, which, in this instance, was October, 1922.
“That the plaintiff gave to the defendant a pass book in which was receipted such payments as she made to the association. That on November 10, 1922, there was deducted from the amount paid to her on the loan, the sum of $36.70; that on May 1, 1923, she paid to the plaintiff the sum of $20 dues, $33.50 interest, and $2.65 fines; that on September 10, 1923, she paid $30 dues, $50.10 interest, and $4.80 fines. Said defendant’s pass book is credited with payments of principal of $10 for .the month of October, 1922, and principal of $10 and interest $16.70 for the months of November, December, 1922, arid January, February, March, and April, 1923. Said deferidant was not charged a fine for the months of October or November, 1922, and only paid the fines as hereinbefore set out for the nonpayment of dues at the time specified in the by-laws, which fines are authorized under the by-laws.
“At the time of receiving the loan, defendant was charged with the following items of expense, which were deducted from the amount of the loan: cost of bringing abstract down to date, $2.70; attorney’s fees, $10; for appraisal of value of property mortgaged, $3; recording of mortgage, $1.75; notary fee, 25 cents.
“That the by-laws of the plaintiff under article VI contain the following provisions:
“ ‘Section 1. The funds of the association shall be loaned to its members on real estate security, or on its stock, and the association shall have the first lien thereon.
“ ‘Section 2. A member desiring a loan shall file a written application with the secretary, which applications shall be numbered in the order of their receipt, and they shall take precedence in such order, other things being equal. He shall also furnish an abstract of title, pay for the examination of the same and all other expenses thereof, which, unless otherwise provided for, may be deducted from the amount of the loan.
“ ‘Section 3. Loans on real estate may be repaid as a whole or in part at any time on thirty days ’ notice, but in no case can a partial payment be made for less than one or more full shares; also the stock for the original amount of the loan shall be kept in force until all the loan is repaid.’
“That after the time set forth above said defendant made no other payments, and after demand for payment-plaintiff filed this suit on March 27, 1924. Prior thereto plaintiff, on December 11, 1923, paid improvement district taxes assessed against said above-described property, in the sum of $7.68; on December 1, -1924, $18; on March 26, 1924, for bringing abstract of title on said property down to date, abstracter’s fee, $4.25; and charged these items against the said defendant.
“That any rights, titles, or interests which any of the other defendants may have in and to said above described property were acquired subsequent to November 13, 1922, and the date of the recording of the mortgage.
“That at the time of making the- loan plaintiff advised said defendant, Annie Spears Dunbar, that it estimated that the stock for which she subscribed would mature the sum of $2,000 in 123 months, if she continued to pay the monthly payments of $10 on principal and $16.70 as interest.”

The test laid down hy this court to determine whether a loan of money by a building and loan association to a stockholder therein is usurious and void is to ascertain whether the contract is an unconditional agreement to pay more than 10 per ceiit. per annum for the use of money or whether an agreement to pay more is dependent upon a contingency. Before the agreement can be characterized as usurious, a contract to pay. more than 10 per cent, per annum for the use of money by- a stockholder therein must depend upon the happening of a certain event. If dependent upon a contingency, the agreement is not such a usurious contract as is inhibited by our -Constitution and laws. If there is an element of uncertainty and hazard in the -contract relative to the amount of interest to be paid, this contingency excludes the idea of usury in the agreement. In giving expression to the rule applicable to this class of contracts in the case of Reeves v. Building & Loan Assn., 56 Ark. 316, this court quoted from the syllabus in the case of Spain v. Hamilton’s Admr., 1 Wall. 604, as follows:

“Where the promise to pay a sum above legal interest -depends upon a contingency and not upon the happening of a certain event, the loan is not usurious.”

In the contract before us it is clearly provided that Annie Spears Dunbar should receive, in the settlement of her loan, her frill share of the profits-which the association might earn during the period her stock was maturing. Although she was required to pay a small amount as interest in excess of 16 per cent, per annum, the interest payments, had she made them, would have automatically been reduced by earnings of the association upon her monthly payments in case of a full performance of the contract on her part. Just what interest she might have paid under the contract had she matured her stock and liquidated her loan by a surrender thereof cannot be computed, as the time her monthly payments were to continue was dependent upon the maturity of her stock through the payment of dues and the net amount earned on her monthly payments. If loaned out immediately and continuously, the monthly interest payments might have been compounded for her benefit many times. This element of hazard or contingency in the, contract eliminated any usury from the agreement.

.We think the instant case is ruled by the principles announced in the case of Reeves v. Building and Loan Association, supra.

No error appearing, the decree is affirmed.


author: , McCulloch, C. J.

text:
    McGuire v. State.
    Opinion delivered May 31, 1926.
    1. ’ Perjury — sufficiency of evidence. — A conviction of perjury cannot be had merely upon the contradictory statements of the accused, even though made under oath.
    2.' Perjury — -sufficiency of evidence. — In a prosecution for perjury in testifying on the trial of another' that liquor was not sold - to accused by defendant therein, it being shown that accused testified that the wife of such defendant had delivered liquor to him and that accused had previously sworn that defendant sold him the liquor, testimony of the wife that she had .not done so held not a corroboration of alleged perjury in stating that defendant had not sold liquor.
    Appeal from Pulaski Circuit Court, First Division; John W. Wade, Judge;
    reversed.

      W. A. Boyd, for appellant.

      U. W. Applegate, Attorney General, and Darden Moose, Assistant, for appellee.
   , McCulloch, C. J.

Appellant was tried, below on an .indictment charging him with the crime of perjury, in giving false testimony in the trial of Will Moore on.- the charge of -selling intoxicating liquor.. The false testimony set -forth in the indictment was that appellant went to the home of Will Moore, in the city of. North Little Eock, to obtain a half-pint of liquor, but that “the said Will Moore did not at any time hand or deliver to him any liquor for himself or any one else.” On the trial of the case the State, after proving by the court stenographer the testimony of appellant in the trial of Will Moore, introduced' the reporter, or stenographer, of the grand jury which investigated the charge' against Will Moore and returned the indictment,, and the reporter testified from his notes concerning the statements of appellant before the grand jury, and it was thus shown that appellant testified before the grand jury that, at the request of one Arnold, he went to the home of Will Moore., in North Little Rock, to obtain one pint of whiskey, and that Moore sold him the whiskey and delivered it to,him at the latter’s home. The State also introduced a police officer who arrested appellant on the street and took from him a bottle of whiskey, and .the officer, testified that appellant stated that he had purchased it, from. Will Moore at the latter’s home,.- Another witness also testified that .appellant, stated that he had purchased liquor from Will Moore at the latter’s home. In, the stenographer’s transcript .of the testimony of appellant in the Will Moore trial there appears a statement .of- appellant to the effect that the whiskey was delivered-to him at Will Moore’s home by the latter’s wife. On the trial of this case the State introduced Moore’s wife, who testified .that appellant had not been to her home that day, and ■ that she had not had any conversation with him. This was all the testimony introduced in the case.

It is insisted by counsel for appellant that the evidence is not sufficient to sustain' the conviction, for the reason that there is no testimony except the contradictory statements of appellant. This contention is sound, and calls for a reversal of the judgment. There were two contradictory sworn statements made by appellant — one before the grand, jury and the. other before the trial jury in thé casé'of State v. Moore, the last mentioned testimony being that charged in the indictment to be false. .There was also proof of two other contradictory statements of appellant not made under oath.

This court announced the rule in State v. Binkley, 123 Ark. 240, that in a prosecution for perjury the falsity of the testimony cannot he established by contradictory statements alone or by admissions of the defendant, but that .his statements were competent to be considered by the jury in passing upon the issue as to the truth or falsity of the testimony alleged in the indictment to be false. The rule seems to be firmly established that a conviction cannot be had merely upon contradictory statements of the accused, even though such statements were under oath. 3 Bishop’s New Crim. Procedure, § 931; 2 McClain on Criminal Law, § 891; 21 it. C. L., 271; People v. McClintock, 193 Mich. 589. In Bishop’s Criminal Procedure (§ 931) the rule is stated as follows: “Where, on different occasions, the defendant has sworn both in affirmation and denial of the same thing, oath nullifies oath; and the rule that the testimony of one witness will not authorize a conviction does not apply. The further doctrine as to the effect of his contradictory statements, whether made on oath or not, is that in neither case are they alone a sufficient foundation for a'conviction for perjury.” The doctrine is stated in McClain on Criminal Law (§ 891) as follows: “Proof that accused has given contradictory testimony under oath at a different times will not be sufficient to establish the falsity of the testimony charged as perjury, for this would leave simply one oath- of the defendant as against another, and it would not appear that the testimony charged was false rather than the testimony contradictory thereof. The two statements will simply neutralize each other; there must be some corroboration of the contradictory testimony. Such corroboration, however, may be furnished by evidence aliunde tending to show the perjury independently of the declarations or testimony of the accused.”

There is no corroboration of the testimony concerning appellant’s contradictory statements. Moore’s wife testified that appellant did not come to her home and that she did not see him on the day the liquor was said to have been purchased, but this testimony merely served as a contradiction of appellant’s testimony in the trial of Will Moore to the effect that he had bought the liquor from Moore’s wife, and it did not constitute substantive proof that appellant bought liquor from Will Moore, hence it did not tend to show the falsity of appellant’s testimony with regard to the particular statement charged in the indictment. The charge in the indictment is that the testimony is false in stating that appellant did not purchase the liquor from Will Moore. The testimony of Moore’s wife shows that appellant did not purchase the liquor from her, but it does not tend to show that appellant purchased the liquor from her husband, Will Moore.

The testimony being insufficient, the judgment must be reversed, and it is so ordered, and the case will be remanded for a new trial.


author: McCulloch, C. J.

text:
    Allen v. Allen.
    Opinion delivered May 31, 1926.
    1. Divorce — allowances of temporary alimony and suit money.— In making allowances for temporary alimony and suit money in a divorce case before trial of the suit, the court should not consider property conveyed to the husband’s mother before marriage. which the mother reconveyed to him with reservation of the right to control the property and receive the rents and profits, where there was no proof that the conveyance was fraudulent or that the husband was receiving the rents and profits.
    2. Divorce — allowance of attorney’s fee. — Allowance of an attorney’s fee of $500 in a divorce suit before trial of the issues held excessive and reduced to $250, since it cannot be determined in advance what fee will be earned.
    3. Divorce — fraudulent conveyance by husband. — Whether a conveyance by a husband to his mother shortly before his marriage was in fraud of the wife’s marital rights cannot be adjudged in a divorce suit .before trial of the issues in the suit.
    Appeal from Independence Chancery Court; Lyman F. Reeder, Chancellor;
    modified and affirmed.

      I. J. Matheny and 8. M. Casey, for appellant.

      T. A. Gray and McCaleb S McCaleb, for appellee.
   McCulloch, C. J.

Appellee, Imogene Brown Allen, instituted this action against her husband, the appellant, Balph Allen, in the' chancery court in Independence County, for divorce. The parties intermarried on August 4, 1923, and separated during the month of November, 1924. The grounds for divorce set forth in the complaint are that appellant was guilty of such cruel treatment of appellee as to render her condition intolerable. In addition to the prayer for divorce, appellee alleged that, prior to the intermarriage, appellant was the owner of real estate of the aggregate value of at least $200,000, and that shortly befOre the marriage he had conveyed said property to his mother, Mággie L. Mayhue, for the fraudulent purpose of depriving appellee of her property rights to result from the then approaching intermarriage. Appellant answered, denying the charges of misconduct on his part, and denying that he conveyed his property to his mother to deprive appellee of any of her rights. He stated in his answer that he and appellee were not engaged to be married prior to the day on which the marriage occurred; that the marriage relation was entered into at the solicitation of appellee on that day, and that' he had previously conveyed his property to his mother in good faith and without any fraudulent intention with respect to appellee or any one else. Appellee’s prayer also embraced cancellation of the deed from appellant tó his mother. Mrs. Mayhue was made a party-defendant, and filed an answer denying the charges of fraudulent intent in the execution of appellant’s conveyance to her.

There has not yet been a trial of the issues in the case, but appellee ashed for an allowance of attorney’s fees, temporary alimony and suit money, and, upon hearing of the motion, the..court entered a decree allowing her $100 a month temporary alimony, $100 as suit money, and $500 as attorney’s fees.' Both parties have appealed from that decree.

The court heard the motion upon ex parte affidavits introduced by the respective parties. The testimony embraced in those affidavits tended, on the part of appellee, to show that appellant had been guilty of cruel and inhuman treatment of appellee, and that she was forced to leave him on that account. The testimony adduced by appellant tended to contradict this and to show that he was not guilty, of any misconduct towards appellee, and that she left, him without cause.

There appears in the record a deed, dated July 10, 1923, executed by appellant to. his mother, Maggie L. Mayhue, conveying numerous tracts of land for the nominal consideration of one dollar. This deed was- placed of record on July 12, 1923. There is also in the record a deed executed by Mrs. Mayhue to appellant reconveying the lands to. him “and unto his bodily heirs.” The deed contains a-recital in the. granting clause, that the grantor, “beingthe mother of the said Ralph Allen, and realizing his limited business experience, do hereby in all things retain and reserve absolute right to rent, lease, let and control said lands above described, and further reserve the right to receive and collect any and all rents or profits accruing therefrom and during the rest of my natural life."

One .of- the questions debated in the brief- of -counsel is whether or not the court, in making the allowances, should have taken into consideration appellant’s rights in the real éstate-and the rents-and profits therefrom; We are -of the opinion-that the court should not-have taken into consideration those alleged rights, for the reason -that there was no proof introduced tending to show that the conveyance by appellant to his mother -was fraudulent, or that he was in fact-accorded by his mother the present right to use the rents and profits of' the lands. There was no proof on this issue introduced, and the extent of the proof was merely that the conveyance was executed a short time before the intermarriage of the parties. Nor was it shown that appellant was enjoying any considerable income from any. other source. The appeal of Mrs. Allen is therefore unfounded, for no reason is shown why the allowances should havebeen made in larger sums than that made by the chancellor in his decree. Nor do we find' any cause for reducing the amount of the temporary alimony of $100 per month, or of the $100 allowance for suit money. We are of the opinion, however, that the allowance of $500 attorney’s fees in advance of the trial of the cause was excessive. It cannot be determined in advance what amount of fee will 'be earned, and it must be left to a decision at the end of the litigation, when the extent of the services will be known and the result of the recovery and appellant’s ability to pay. It is true that we have in some cases approved an allowance in advance for the total fee to be earned in litigation, but that is a matter of discretion in each case, and we do not think that in this case it can be determined in advance just what the full amount of the fee in- the case should be. Our conclusion is that an allowance of $250 as attorney’s fees is, under the circumstances shown in the case, sufficient, and the allowance will be reduced to that amount.

Counsel for appellee also insist that the court should have rendered a decree concerning the validity and good faith of the conveyance by appellant to his mother, but the answer to that contention is that the litigation had not reached the stage for a final decree on that issue; there was no trial of the issues demanded, and all of the issues in the case remain to be determined. The correctness of the court’s decree with respect to the prayer for divorce, and the cancellation of the deed must .be determined after the final decree on those issues is rendered by the trial court.

The allowance of attorney’s fees will be modified so as to reduce the fee to $250, and in all other respects the decree will be affirmed. It is so ordered.


text:
    Little Rock v. Boullioun.
    Opinion delivered May 31, 1926.
    T. Municipal corporations — annex to improvement district— mandamus. — Under Crawford & Moses’ Dig., § 5733, providing for annexation of territory to an improvement district in a city or town, which provides that the city or town council shall hear protests and’make a finding ofi the question whether a majority in value of the owners of real property in the territory sought to be annexed have signed such petition, and that their findings “shall have all the force and effect of a judgment, .and shall be conclusive” unless suit is brought to review it, and that, in case the finding is in favor of the petitioners, the territory sought to be annexed shall become a part of the improvement district, held that the council has no discretion to go behind the face of the • petition and determine whether or not the annexation is appropriate, and may be compelled to pass the ordinance of annexation unless it is shown that a majority in value did not sign the petition or there was an obvious mistake in the inclusion or exclusion of property.
    2. Municipal corporations — annex to street improvement district. — Although it is customary, in creating street improvement districts in cities and towns, to extend the bounds of the districts 150 feet from the street line, the fact that a petition for annexing territory to an improvement district in one place included more than 150 feet and in another place 12 feet less than 150 feet from such street does not indicate such a demonstrable mistake as would render the annexation proceedings void.
    3. Municipal corporations — annex to improvement district— limit op cost. — The fact that the maximum cost of a street improvement, expressed in a petition for annexation of territory to a street improvement district, exceeds the maximum expressed in the petition for the original district, does not render the proceedings void, as the statute (Crawford & Moses’ Dig., § 5733) which requires the added improvement to be made “on the same basis as if said territory was included in the original district” is also a limitation on the cost of the added improvement, and is controlling.
    Appeal from Pulaski Chancery Court; John E. Martineau, Chancellor;
    affirmed.

      J. G. Marshall, for appellant.

      Melbourne M. Martin, for appellee.

      E. G. Shoffner, amicus curiae.

   McCulloch, C. J.

A local improvement district, designated as Street Improvement District No. 349 of the city of Little Bock, was regularly organized for the purpose of paving portions of Summit Avenue and Ninth Street adjoining the intersection of those streets, and on August 29,1925, there was filed with the city council a petition purporting to be signed by a majority of the owners of real property in the locality to be affected, praying for the annexation of adjoining territory (describing it) to District No. 349 for the purpose of paving Schiller Avenue from Ninth to Twelfth, Eleventh Street from Schiller to Marshall, and Marshall Street from Seventh to Wright Avenue. Notice of the proceedings was given in accordance with the statute (Crawford & Moses’ Digest, § 5733), and, after hearing protests, the city council refused to pass an ordinance for the annexation of territory as requested in the petition. The present action was instituted by appellee, who is the owner of property and one of the commissioners of the district, to-compel the city council to pass the ordinance in accordance. with the prayer of the petition. On hearing the cause the chancery court rendered a decree in accordance with the prayer of appellee’s complaint, and an 'appeal has ¡been duly prosecuted to this court.'

It is the contention of counsel for appellant's that the statute authorizing the organization of original districts by ordinance of a city or town council, and likewise'the statute authorizing the annexation of territory, vests in the city council judgment and discretion, to determine whether or not such organization or addition thereto is just and. appropriate, and that the discretion'of the council cannot ‘be controlled by mandamus. In other words, the contention is, as we understand it, that the action of a municipal council in refusing to create a district or to annex territory thereto cannot be controlled, unless such action is fraudulent or arbitrary.

It will be seen, as we proceed with the discussion of this question, that there is a marked difference between the language of the statute authorizing the creation of an original district and the one authorizing annexation of property thereto for additional improvement. The only constitutional provision in regard to local improvements in municipalities is § 27, art. 19, which reads as follows:

“Nothing in this Constitution, shall he so construed as to prohibit the General Assembly from authorizing assessments on real property for local' improvements in towns and cities, under such regulations as maybe prescribed by law, to be baséd upon the consent' of a majority in value of the property-holders owning property adjoining the locality to be affected; but such assessments shall be üd valorem and uniform. ’ ’

Pursuant to this constitutional provision, the General Assembly enacted an appropriate statute for the organization of improvement districts and proceedings thereunder. The section of the statute which authorizes the organization of such districts appears now, "with slight amendment to the original statute, as § 5649, Crawford & Moses’ Digest, and reads as follows:

“When any ten owners of real property in any such city, or incorporated town, or any portion thereof, shall petition the city or town council to take steps toward making of any such local improvements, it shall be the duty of the council to at' once lay off the whole city or town, if the whole of the desired improvement be general and local in its nature to said city or town, or the portion thereof mentioned in the petition, if it be limited to a part of said city or town only,' into one or more improvement districts, designating the boundaries of such district so that it may be easily distinguished; and each district^ if more than one, shall be designated by number and by the object of the proposed improvement.”

It will be observed that the Constitution places no restriction upon the method of imposing taxes for local improvements, except that a majority in value of the property holders must consent and that the assessments “shall be ad valorem and uniform.” The silence of the Constitution in other respects left the Legislature in possession of complete power to provide for the organization of such districts and the proceedings thereunder, hence the court has only had to deal with the interpretation of the legislative enactments on that subject.

In construing the above-quoted section of the statute as originally enacted, this court, in the case of Little Rock v. Katzenstein, 52 Ark. 107, said: “The General-Assembly, in the exercise of a well-recognized constitutional power, imposed the duty of forming improvement districts and defining* their boundaries upon the various city councils. The city council is invested with discretion, in this behalf, necessary to a just performance of the duty, and, when it has acted, the property included by it in any district is prima facie adjoining the locality to be affected. * * # That the action of the city council in including property in an improvement district is conclusive of the fact that it is adjoining the locality to be affected, except when attacked for fraud or demonstrable mistake. ’ ’ That interpretation has frequently been approved in. later decisions of this court. Matthews v. Kimball, 70 Ark. 451; Lenon v. Brodie, 81 Ark. 208; Ferguson v. McClain, 113 Ark. 193; Freeze v. Improvement District, 126 Ark. 172.

The validity of the organization of the original district (Street Improvement District No. 349) and the proceedings thereunder is not involved in the present litigation, and the only controversy arises as. to the present attempt to make an annexation thereto. It is unnecessary therefore to determine in this case the extent and full effect of the discretion of a city council in creating or refusing to create an original district, and to what extent, if any, the courts will disturb that discretion. What we have to deal with now is the effect of the action of the city council in refusing to proceed with the annexation. The statute on that subject reads as follows:

“Section 5733. When persons claiming to be a majority in value of the owners of real property in any territory contiguous to any improvement district organized in any city or town desire, that said territory shall he annexed to such improvement district, they may present their petition in writing to the city or town council, describing the territory to be annexed and the character of the improvement desired. Thereupon the city or town council shall direct the clerk or recorder to publish for two weeks, in some newspaper issued and having a general circulation in the county where such city or town is situated, a notice calling upon the property owners to appear before said council on a day named, and show cause for or against such annexation. On the day named in said notice, the city or town council shall hear all persons who desire to be heard on the question whether a majority in value of the owners of real property in the territory sought to be annexed have signed such petition, and its finding shall have all the force and effect of a * judgment, and shall be conclusive, unless, within thirty days thereafter, suit is brought in the chancery court to review it. The finding of the council shall be expressed in an ordinance in case it is in favor of the petitioners, and ip that event the territory sought to be annexed shall become a part of the improvement district, and the improvements petitioned for shall be made by the commissioners. The commissioners shall make the assessment for said improvement on the territory annexed under .the provision of this act on the same basis as if said territory was included in the original district. If petitioned for, the improvement in the territory annexed may be of different material or of a different method of construction from that in the original district.” Crawford & Moses’ Digest.

The distinction between this statute and the one already quoted authorizing the organization of the district is noticeable, for, in the first statute, the district is created upon the petition of ten owners of real property situated in the territory to be affected, whereas the annexation, is made upon the petition of a majority of the owners of property. 'The annexation statute in express terms authorizes the city council to hear protests and to make a finding “on the question whether a majority in value of the owners of real property in the territory sought to be annexed have -signed such petition,,” and provides that the findings of the council “shall have all the force and effect of a judgment, and shall be conclusive, unless, within thirty days thereafter, suit is brought in the chancery court to review it.” There is no authority expressly conferred upon the council to determine any other question, except whether the majority of the owners of property has signed the petition, and the language does not warrant the implication of any further power, for the statute reads that the findings of. the council “shall be expressed in an ordinance in case it is in favor of the petitioners, and in that event the territory sought to be annexed shall become a part of the improvement district.” In dealing with a petition for annexation, the city council is confronted with the expressed will of the majority of the owners of property in the affected territory, acting within their constitutional rights in consenting to the improvement. It was,.the manifest design of the_lawmakers, in providing for an .annexation to be made only on the petition of a majority of the property owners, to leave no discretion ■in the city council other than to ascertain whether or not the petition had been signed by a majority. The statute contains a direct command that, when it is ascertained that a majority has signed, a finding to that effect “shall be expressed in an ordinance * * * and in that event the territory sought to be annexed shall become a part of the improvement district.” If the petition is defective on its face, so that it does not comply with the statute, the city council is not bound to do a vain and useless thing by passing an ordinance which is void, but the council has no discretion which permits them to go behind the face of the petition to determine whether or not the annexation is appropriate. The property Owners themselves are authorized to select the territory to be annexed and to decide the question whether or not the annexation shall 'be accomplished, and the wishes of the majority as expressed in the petition are conclusive, except for fraud or demonstrable mistake in the selection' of the territory to be annexed. Our conclusion therefore on this feature of the ease is that the city council had no right to refuse to pass the ordinance, unless it is shown that a majority in value did not sign the petition or that there was an obvious mistake in the inclusion or exclusion of property.

It is contended that there was such an obvious mistake in the inclusion of parts of certain lots and in the exclusion of others.

The general plan fixing the boundaries was to follow what was said to be the prevailing custom of extending the bounds of the district to the middle line of the blocks, in other words, a distance of one hundred fifty feet from the street line. In several respects this general plan or custom was departed from. In two instances one block occupied as a hospital and another as a 'school-more than one hundred fifty feet next to the street to be improved — were included, so as to include in the district the whole of the lots covered by the building, whereas in' another instance and in another place a strip twelve feet wide, within one hundred fifty feet of the street to be improved, was omitted. It is contended that this presents an obvious instance of discrimination between property similarly situated, in that a part' of the school and hospital property is included while other property under similar circumstances is excluded, and also that the exclusion of the twelve-foot strip mentioned above is discriminatory and prevents uniformity in the special taxes to be levied to construct the improvement. Counsel rely upon Heinemann v. Sweatt, 130 Ark. 70, and Sanders v. Wilman, 160 Ark. 133, and other decisions where we held that the organization of a district was rendered void by the exclusion of property which would be obviously and necessarily benefited. Those cases, however, and all of our cases under similar circumstances, presented facts where outlying tracts or lots were included in the district, but other tracts lying between them and the improvement, which -would necessarily be benefited, were omitted. There is no such question involved in the present case. There is no statute or rule of law requiring that in street improvement districts the property to be assessed shall be within a given distance of the improvement. It seems to be merely a custom to include property within one hundred fifty feet of the improvement, and it cannot be said that the variation of this rule necessarily presents a case of discrimination. In other words, there is no demonstrable mistake involved which renders the annexation proceedings void.

It is next, contended that the annexation proceeding is void, and that the city council should not be compelled to pass the ordinance for the reason that the petition specified a maximum cost of the improvement in excess of the maximum expressed in the original petition for the organization of District No. 349. The petition for the annexation specifies a maximum cost of fifty per cent, of the value of the real property in the territory as shown by the last county assessment, and in the petition of property owners for the improvement in District No. 349 there was a specification that the cost of the improvement should not exceed sixty per cent, of the value of the real property in the district as shown by the last preceding assessment. The specification in the petition for annexation related to the assessment of 1925, and the specification in the original petition related to the assessment of 1922. Oral and documentary testimony ' was introduced to prove that the maximum cost expressed in the annexation petition was in excess of that expressed in the original petition, and the contention is that this invalidated the proceedings and absolved the council from passing the ordinance. A review of the law on this subject therefore becomes unnecessary.

The statute in force at the time of the organization of District No. 349 (Acts 1921, p. 416) provided that the petition of property owners for the improvement should specify the maximum percentage of cost of the improvement with reference to the value of the real estate in the district as shown by the last preceding county assessment. The statute governing the annexation proceedings contains no such requirement, but it provides that the assessments on the annexed territory to pay for the cost of the added improvement shall be made “on the same basis as if said territory was included in the original district.” This court decided in Pledger v. Soltz, 169 Ark. 1125, that the percentage of cost of the added improvement must be the same as that of the original improvement, otherwise the assessments would not be on the same basis as required by the statute. Now, it is seen that this statute governing annexation, as interpreted by this court in the case just referred to, limits the maximum cost of the improvement, and of course that limit cannot be exceeded. But we do not think that the cost expressed in the petition for annexation, even though shown to exceed the maximum expressed in the original petition, necessarily renders the petition void, for such a specification is not a requirement that the cost shall reach the maximum, hence it is not in conflict with the statute, which, of course, must control. In other words, the maximum expressed in the petition for annexation is necessarily subordinate to the maximum expressed in the statute itself, and the commissioners, in attempting to make the improvement, must be controlled by the statute, and, if the maximum expressed in the petition exceeds that of the maximum allowed by law, then it must be disregarded. There are two limitations placed upon the commissioners, one the maximum expressed in the petition and the other in the law itself, and the commissioners are required to keep themselves within both limitations, whichever should turn out to be the lowest or most restrictive. Therefore the variance between the two máximums was not fatal to the validity of the proceedings. Before any expense is incurred in the construction of the added improvement, the commissioners must form plans and ascertain the cost and assess the benefits on the basis prescribed by the statute, and, if there is an attempt on the' part of the commissioners to construct the improvement in excess of the maximum specified in the statute itself, then the property owners have the right to prevent such violation by resort to an action in a court of chancery for that purpose. The effort to determine the actual cost of the improvement now is premature, for the petition itself does not require the commissioners to violate the statute, and objection cannot be made to the proceedings until it develops that the cost will exceed the limitation fixed by law.

It is also contended that the signature covering the property of the Baptist Hospital and the Junior High School of Little Bock School District were not authorized afid should be stricken from the petition, thus reducing it below the majority. Without going into the details of this matter, we think that the proof shows that the signatures were authorized. The petition was signed in behalf 'of the Baptist State Hospital by Dr. C. E'. Witt, a member of the committee or board of control, and there wás a resolution passed authorizing Dr. Witt and another member, Mr. Pugh, to “take such steps as seemed best and necessary to get our property in above mentioned district.” The minutes were thereafter amended to as to show that “Dr. Witt had full authority to sign the petition in matter of getting streets adjacent to hospital paved.” We think, that this was sufficient to show. Dr. Witt’s authority to sign the petition. Lewis v. Forrest City Dist., 156 Ark. 356. It is undisputed that the petition for the school property was signed by the directors in full meeting. There is proof of some misunderstanding. about the facts on which the signature was obtained, but the proof shows clearly that it was the intention of the directors to sign the petition, if already signed by a majority, and it is shown that there was in fact a majority at that time, when the petition was signed by the school directors.

Our conclusion upon the whole case is that the' lower court was correct in holding that, the proceedings were .regular and in compelling, the city council to pass the ordinance in accordance with the prayer of the petition. The decree is therefore affirmed.. ...

Hart and Humphreys, JJ., dissent.