author: Wood, J.

text:
    Leonard v. State.
    Opinion delivered January 11, 1926.
    1. Contempt—order directing payment op money.—Where a complaint seeking to impound assets of a debtor alleged that he had “considerable assets” in his hands, consisting of notes aggregating over $13,500, and had entered into a scheme to defraud his creditors by placing his assets beyond their reach, and the answer denied such allegations, an order of the court that the debtor pay into the court $5,000, and that he would be in contempt of court if he failed, was erroneous when made without allegation or proof that the debtor had any such amount of money in his possession.
    2. Judgment—lien on lands fraudulently conveyed.—Where a debtor had conveyed land fraudulently before the rendition of a judgment, the judgment was not a lien thereon.
    3. Execution—return op nulla bona—lien.—No lien on lands fraudulently conveyed is fixed by a return of nulla bona to an execution.

      4. Constitutional law—imprisonment for debt.—A judgment imprisoning a debtor for disobeying an order requiring payment of a specific sum into court, without finding that he had such sum in his possession, amounted to imprisonment for debt, in 'violation of Const., art. 2, § 16.
    Appeal from Independence Chancery Court; Lyman F. Reeder, Chancellor;
    reversed.

      W. K. Ruddell and Cole & Poindexter, for appellant.

      H. W. Applegate, Attorney General, and John L. Carter, Assistant, for appellee.

      8. M. Bone and 8. M. Casey, of counsel....
   Wood, J.

On the 13th of August, 1924, Lawrence McSpadden filed a complaint in the Independence County Chancery Court in which he alleged that he had obtained a judgment against T. F. and Virgie Leonard in the sum of $5,000, and that an execution had been issued and returned nulla bona, and that the. judgment was wholly unsatisfied ; that on the 12th of July, 1924, a few days before the rendition of the .judgment, Leonard and wife had made certain fraudulent conveyances of their property in which they took the notes of the purchasers instead of money, the notes amounting in the aggregate to $13,-500; that the defendants had thus systematically and premeditatedly entered into a scheme or plan for the purpose of placing their property beyond the reach of their creditors; that the defendants had considerable assets,consisting of money and notes, concealed f or the purpose of avoiding payment of plaintiff’s judgment. The prayer of the complaint was that the defendants be summoned to answer the complaint under oath, and that they, and each of- them, be required to make a full disclosure of all the assets and property belonging to them, and that they be required to deliver said property in court in satisfaction of plaintiff’s judgment, and that the conveyances of the lands made by the defendants be canceled, and that the. lands be sold to satisfy plaintiff’s judgment.

T- F. Leonard answered and admitted that he had made certain conveyances of lands as alleged in the complaint, but denied that these conveyances were made for the purpose of defrauding his creditors, and alleged in substance that the notes given for the purchase money had been disposed of by him prior to the service of the writ upon him in the present action, and alleged that he was a citizen of Texas, and that he had no money except a few hundred dollars, on his person; that he had no property within the State of Arkansas at the time of the service of summons upon him in this action. He denied that he had entered into 'any scheme or plan to defraud creditors by making fraudulent conveyances of his property or concealing any of his assets for the purpose of avoiding, the payment of the plaintiff’s judgment. He concluded his answer by offering to make any further disclosures that the court might desire under oath, and asked that the plaintiff’s complaint be dismissed.

The cause was heard upon the above pleadings and oral testimony, and the court made the following findings: That the defendant, T. F. Leonard, left the State of Arkansas after the service of summons on him in this cause and after the rendition of judgment against hipa and Virgie Leonard for $5,000 on July. 15,1924, in this court, and further found that he converted his property here into liquid-assets consisting of moneys, notes and county warrants in a sum far in excess of the amount of the judgment, interest and costs which had been rendered against him and the defendant, Virgie Leonard; that, the defendant Virgie Leonard permitted the defendant T„ F. Leonard to take her property with him from the State of Arkansas, and that neither of them have any property in the State of Arkansas subject to execution or. to the payment of the plaintiff’s judgment, and the court found that the defendant, T. F. Leonard, should turn over and pay into this court the sum of $5,000 with interest thereon from July 15, 1924, at six per cent, interest to date of payment, and the costs of said suit, including this suit, in the sum of $238.95.

Upon the above findings of fact the court then rendered the following judgment: “It is therefore■ considered, ordered and decreed by the court that the defendant, T. F. Leonard, do pay into tbe registry of this court, or to the clerk thereof, the above-named sum of $5,000, with interest at six per cent, per annum from July 15,1924, to date of payment, and the sum of $238.95 costs to date, on or before, and not later than October 1, 1924, in satisfaction of said judgment, interest and .costs, and, upon his failure so to do by .the date aforesaid, he shall be and is hereby adjudged in contempt of this court, and the clerk of' this court is hereby directed to issue proper citation and warrant for his arrest that he may be brought before this court to be dealt with in such manner and upon such terms as the court may then deem suitable and proper.” From the above decree the defendant Leonard prayed an appeal, but did not perfect the saíne. v

On the 8th of October,-1924, the plaintiff McSpadden applied to the chancery court for a citation and warrant of arrest for T. F. Leonard for contempt of court, and the court issued, an order citing Leonard to appear before the court to answer the charge of contempt, and a warrant directing the sheriff to arrest him and bring him before the court. , Leonard responded to the citation for contempt, setting up that he disclaimed any intentional or wilful failure to comply with the orders of the court. He alleged that the court was without jurisdiction to render the decree of the 12th of September, 1924; that he did not have in his possession at the time the decree was entered or at any time'subsequent thereto'the sum of money he was directed to pay into court, and that it was physically impossible for him to comply with the order and judgment of the court. He set up that the debt which the plaintiff was seeking to collect was a debt due on contract, and also that, subsequent to the judgment and subsequent to the order adjudging the defendant in contempt, he had been adjudged a bankrupt by the District Court of the United States for the Eastern District of Texas, and had received his discharge in bankruptcy, and that therefore the chancery court was without jurisdiction tó proceed further against him on the trial of the citation for contempt.

The court, after hearing the testimony, found “that the defendant, T. F. Leonard, wilfully and deliberately and without any excuse, violated the order of this court made on September 12, 1924, directing him to pay into this court the sum of $5,000 and the costs of this court in satisfaction of the judgment of Lawrence McSpadden, and the court finds that, at the time of the order made requiring the defendant Leonard to turn over and pay into the registry of this court said sum, he had then more than that amount of money and property which were the proceeds of notes and scrip which he had fraudulently taken away from the State to the State of Texas, and of which he had made fraudulent transfer to one Hargrove, in the State of Texas, and in violation of and notwithstanding this order of the court the defendant continued to dispose of said property and make way with it, and made no effort to comply with the order of this court, and the court finds that his subsequent voluntary bankruptcy and pretended insolvency in the State of Texas was not bona fide, and the court finds that he has now in his possession and under his control property and assets of the value of $4,500 or more, which is the proceeds of some of the property that he took away from here in August, 1924, and which property belonged to his wife, Virgie Leonard, or the defendant, and that it should be paid into this court to satisfy the prior order of this court, and that the defendant T. F. Leonard is in contempt of this court in failing to comply with the order of this court aforesaid, and that he has failed to purge himself of such contempt.” The court thereupon found that Leonard was in contempt of court, and entered a judgment committing him to the Independence County jail “there to remain until he shall pay into this court the sum of $4,500 to be applied as provided by the order of this court on September 12, 1924, together with all costs of this action,” from, which judgment defendant duly prosecutes this appeal.

McSpadden admitted that the debt sought to be collected by this proceeding was a debt due on contract. It was also admitted that on February 11, 1925, T. F. Leonard was adjudged a bankrupt in the United States District 'Court for the Eastern District of Texas, and that subsequent thereto he was duly discharged as a bankrupt. The court erred in holding that the appellant was guilty of contempt in violating its order of September 12, 1924. The allegations of the pleadings and the findings of the trial court upon which that order was based show that the court was without jurisdiction to enter such order. The material allegations of the complaint are sét forth above. They show that McSpadden had obtained a judgment against Leonard and his wife in July, 1924, for $5,000, and that before such judgment was rendered Leonard and his wife had made certain fraudulent conveyances of land in Independence County and certain personal property for the purpose of defrauding McSpadden; that the purchasers had executed their notes in the aggregate sum of $13,500; that Leonard and wife had systematically and premeditatedly entered into a scheme and plan for the purpose of placing their property beyond the reach of their creditors, and especially McSpadden; that they had considerable assets consisting of money and notes concealed for such fraudulent purposes. The prayer of the complaint was for a discovery of such assets in the hands of Leonard and wife, and for the canceling and setting aside the fraudulent conveyances of the land and the sale of the same to satisfy McSpadden’s judgment, and for all proper relief.

Leonard answered admitting the conveyances alleged, but denied that they were fraudulent, and alleged that 'he had sold the notes executed in payment for the property conveyed and had not any interest in the same, and that he had solid the notes in good faith and with no intention to defraud his creditors, and that he had had no interest in these notes since the service of process upon him. He denied specifically that he had entered into any scheme or plan to defraud McSpadden.

It will thus be seen that McSpadden did not allege that Leonard had any specific amount of money in his hands or any particular notes which should be impounded for the purpose of satisfying the judgment which he held against Leonard. The allegations were general to the effect that he had considerable 'assets consisting of money and notes, which Leonard should be required to reveal in order that they might be impounded and subjected to McSpadden’s judgment. The general allegations of the complaint were not aided by any allegations of the answer, for Leonard denied that he had any assets “except such money as he had on his person, amounting to probably a few 'hundred dollars.” "We deem it unnecessary to set forth the testimony which was heard by the court upon the issues thus joined, for the reason that the findings of fact by the court from the testimony adduced were in their nature as general as the allegations of the pleadings, to-wit : that Leonard had “converted his property here into liquid assets consisting of moneys, notes and county warrants in a sum far in excess of the amount of the judgment.” The allegations of the complaint show that, before the rendition of the judgment which McSpadden is seeking to have satisfied, the Leonards had fraudulently conveyed their lands in Arkansas. Therefore, such judgment was not a lien on these lands. Doster v. Manistee National Bank, 67 Ark. 325; Sears v. Sester, 111 Ark. 11. The allegations further show that, at the time of the institution of the action to uncover and sequester assets, in which the order of September 12, 1924, was made, no lien had been fixed on these lands by the levy of an execution because it is alleged that the execution had been returned nulla bona. ■ See Merchants’ & Farmers’ Bank v. Harris, 113 Ark. 100. There was no legal inhibition upon the Leonards from disposing of their property in any manner they saw fit. It will be observed that the court, in the action to discover and impound assets, found generally “that Leonard had converted his property here into liquid assets,- consisting of moneys, notes and county warrants in a sum far in excess of the amount of the .judgment, interest and costs,” hut the court did not find that Leonard had in his possession the sum of $5,000, or any other specific sum as the proceeds of fraudulent conveyances. The court found that Leonard had notes and county warrants in his hands, hut in its order the court did not sequester these. Without finding that Leonard had the specific sum of $5,000 in his hands, or any other particular sum, the court simply found and directed that he “should turn over and pay into this court the sum of $5,000, with interest thereon from July 15, 1924, at six per cent, to the date of the payment, and the costs of the suit in the sum of $238.95.” The legal effect of the above findings and order of the court was to say to Leonard, “You have fraudulently converted your property into liquid assets in excess of the amount of 'McSpadden’s judgment against you, and, unless you pay the amount of such judgment with interest thereon and the costs of the suit on or before the first day of October, 1924, you will be adjudged in contempt of court,” and, unless he complied with the order, the clerk of the court was authorized to issue proper citation and warrant for his arrest, to 'be brought before the court to be dealt with as for contempt.

These findings and this order were made in the face of the allegations of Leonard in his answer, and without any proof to the contrary, so far as this record discloses, that he had no property in the State of Arkansas except such money as he had on his person, amounting to probably a few hundred dollars. Now, under the decisions of this court, the Independence County Chancery Court, under its own findings of fact, was wholly -without power to direct Leonard to pay into the registry of the court the specific sum of $5,238.95, the amount of the McSpadden judgment, interest and costs, and to adjudge that he would be in contempt of court if he failed to do so. Because the court had not found as matter of fact that Leonard had in his possession and under his control at the time the order was made the specific money or property which he was directed to bring into the registry of the court. Meeks v. State, 80 Ark., 579; Hand v. Haughland, 87 Ark. 105; Dodson v. Butler, 101 Ark. 416. See also Lane v. Alexander, 168 Ark. 700. In the last case we said, “Of course, the judgment would be erroneous unless it was shown that appellant had possession of the property and was able to comply with the court’s order.”

In Dodson v. Butler, supra, we said: “But this power to punish as in cases of contempt for disobedience of such order of restitution only applies where the court has first found that the specific property, or the specific funds, are in the possession or under the control of the person ordered to make restitution thereof at the time of the trial.” In Martin v. State, 162 Ark. 282, we held: “This court is committed to the doctrine that one cannot be held in contempt for disregarding a void order or judgment.” A correct general statement of the rule is found in 23 C- J., at page 896, as follows: “It is a good defense to an application to punish for a contempt that the order or direction charged to have been disobeyed or violated was made without authority or jurisdiction.” Numerous cases are here cited in note to support the text.

It is admitted of record that the debt which was the basis of the McSpadden judgment which he is seeking to have satisfied was one by contract. The citation for contempt under which the judgment of imprisonment herein appealed from was rendered was bottomed on an alleged disobedience of the order of the chancery court of September 12, 1924. That order, as we have seen, was without authority, erroneous and void. We have not overlooked the provisions of §'§ 4366 to 4371 of Crawford & Moses’ Digest, which learned counsel for the State cite to sustain the judgment against Leonard for contempt. But, under the facts as found by the trial court upon which the order of September 12, 1924, was predicated, those sections have no application, and can not be invoked to sustain the trial court’s judgment against Leonard for contempt. It occurs to us that under the facts of this record the proceeding of the trial court which resulted in a judgment committing Leonard to imprisonment in the county jail are, in their last analysis, but an imprisonment for debt, which is expressly forbidden by our Constitution except in cases of fraud. Art. 2, § 16, Constitution.

This case, on the issues raised by the pleadings and the findings of the trial court upon which the order of September 12,1924, was predicated, does mot come within the exception.

It follows that the judgment ¡must be reversed, and the same is hereby quashed and held for naught, and the sheriff and jailer of Independence County is ordered, if Leonard be still held in custody, to release him therefrom.


source: Caselaw Access Project

author: Humphreys, J.

license: Public Domain

text:
    Security Bank & Trust Company v. Warren Light & Water Company.
    Opinion delivered December 14, 1925.
    1. Corporations—validity op bonds.—Where the owner of a corporation pledged its bonds secured by an unrecorded mortgage of the corporation’s property, and subsequently transferred the property of the corporation to another corporation which he likewise owned, it was not a good defense to a foreclosure suit that the bonds were not authorized by the Railroad Commission or stockholders or certified by a trustee named in the mortgage, or that the corporation never received the proceeds.
    2. Mortgages—validity op unrecorded mortgage.—A corporate mortgage is good between the parties, though it is neither acknowledged nor recorded.
    Appeal from Bradley Chancery Court; E. G. Hammock, Chancellor;
    reversed.

      Fred L. Purcell, for appellant.

      Clary $ Ball and Wilson & Martin, for appellee.
   Humphreys, J.

This suit was brought in the chancery court of Bradley County on June 22, 1925, by appellants against appellees, Warren Light & Water Company and others, and afterwards amended so as to make, the Republic Power & Service Company a party defendant to the suit, to obtain judgment for $30,000 and interest on certain bonds, and to foreclose a mortgage executed to secure same upon the property described therein. These bonds were a part of an $80,000 ¡bond issue. The bonds and mortgage were executed by the president and secretary of the Warren Light & Water Company. The bonds contained a provision that they should not be valid until certified by the trustee therein named. The trustee refused to .countersign them'.because they were not authorized by the Arkansas Corporation Commission. After the bonds were executed, the whole issue was left with S. R. Morgan of Little Rock, who hypothecated $30,000 of them, along with other. collateral, on August 14, 1920, for. a loan of $65,000 to the Security Bank & Trust Company, one of the appellants herein. The other appellant, S. S. McConnell, became receiver for. the Security Bank & Trust Company When it failed in business, by virtue of his office of Superintendent of Banks for the 'State of Tennessee. Morgan failed to pay the $65,000 loan when it matured; so the bank sold the.bonds pledged to it under the terms of the collateral note and bought them at the sale for a nominal sum, after which it and its receiver brought this foreclosure proceeding. On June 30,. 1920, the Warren Light & Water Company conveyed all of its property, by warranty deed, to Morgan & Company. Morgan & Company afterwards changed its name to the Republic Power & Service Company.

The following defenses were interposed to the suit: first, that the bonds were not authorized by the Arkansas Corporation Commission nor by the stockholders of the Warren Light & Water Company; second, that they Were not certified by the trustee; and third, that the Warren Light & Water Company never got the proceeds of the loan.

The .canse was submitted upon the pleadings and testimony, which- resulted in a decree dismissing appellants ’ bill, from which an appeal has been duly prosecuted to this court'. ■

The facts gleaned from a careful reading and an-alysis of the testimony, succinctly stated, are as follows: S. R. Morgan and his associates, M. B. Morgan, A. G. Miller, R. LI.. Burtz, and F. J. Dove, bought lall the stock of the Warren Light & Water Company in 1917; at that time this company was a Bradley County corporation capitalized at $50,000; in the purchase S. R. Morgan became the owner of stock to the amount of $48,000 and Burtz and Miller 'became the owners of the other $2,000 except three shares; according to the books, these three shares were owned by the Wheelers in 1919; the following year only one share seemed to be outstanding, and it was -owned, according to’ the books, by J. N. Wheeler; Miller was made president and Burtz' secretary of the company ; to all intents and purposes S'. R. Morgan and his associates were the directors and stockholders of the corporation; S. R. Morgan, however, controlled and directed the affairs of the corporation, and Miller and Burtz obeyed his orders; he handled the funds and completély dominated the firm; on August 17, 1919, pursuánt to resolution, the president and secretary were directed to issue 80 serial bonds of $1,000 each and to execute la mortgage, on the company’s property to secure samp, presumably to obtain a loan to pay indebtedness and-enlarge the plant'; pursuant to the resolution the bonds were issued and signed, and the mortgage -was executed and the seal of the company impressed thereon; the bonds were not authorized by the Arkansas Corporation Commission or certified by-the trustee named therein; they were turned over to S. R Morgan, who negotiated a loan and pledged' $30,000 of them to appellant bank herein, upon the representation that they were valid, binding obligations upon bis corporation, notwithstanding tie fact that they hlad not been presented for allowance to the commission and had not been countersigned by the trustee; he represented that the trustee had refused to act land that his failure to countersign the bonds did not invalidate them; the mortgage was not acknowledged nor placed of record; after the issuance of the bonds, execution of the mortgage, negotiation of the loan, and pledge of the bonds, the Warren Light & Water Company sold and conveyed its corporate property to Morgan & Company, which company wlas in fact S. R. Morgan; a short time thereafter Morgan & Company changed its name to the Republic Power & Service Company ; this company was made a party defendant to this suit, and did not offer to file an answer until the day of the trial; the court refused to permit it to do so at that late date.

Under these findings of fact clearly reflected by the record we do not think the technical defenses made by appellees had any place in the case. So far as this transaction is concerned, the Warren Light & Water Company must be regarded and treated as a partnership composed of S. R. Morgan and his associates. It was what might aptly be denominated a one-man corporation. To allow it to avoid its bonded obligation and escape with its property would, in effect, permit its owner, under corporate cloak, to obtain money from a fellow man through deceit and fraud with impunity. S. R. Morgan and his associates are clearly estopped by the representations he made to deny liability on the bonds or repudiate the mortgage. The mortgage was good between the parties, whether acknowledged and recorded or not. Under this view of the evidence the decree must be reversed, but, in doing so, we think the Republic Power & Service Company should be permitted to file its answer and assert any equities it may have in the property, if any it has. It is so ordered.


author: Humphreys, J. McCulloch, C. J.,

text:
    Fort Smith v. Quinn.
    Opinion delivered December 21, 1925.
    1. Municipal corporations—discharge of employee—review.— Acts 1913, No. 13, § 19, subdiv. (c), providing that a' civil service employee, when discharged, may appeal to the board of city commissioners, did not cut off review of such matter by the courts, the proceedings before the board being quasi judicial in nature and not exclusively administrative or ministerial.
    2. Municipal corporations—discharge of employee.—A civil service employee could not, under Acts 1913, No. 13, § 19, subdiv. (c), be discharged merely for failure to pay his debts out of his salary, where no rules governing the discharge of employees had been adopted and the employee had not violated any rules or failed to perform any duties.
    3. Garnishment—public employees.—Creditors of public officials are not permitted to garnish their salaries.
    Appeal from Sebastian Circuit Court, Fort Smith District; John E. Tatum, Judge;
    affirmed.

      George W. Dodd, for appellant.

      Cravens & Cravens, for appellee.
   Humphreys, J.

This is an appeal from the judgment of the circuit court of Sebastian County, Fort Smith District, rendered in a 'certiorari proceeding by appellee against the board of commissioners of the city of Fort Smith, setting aside the discharge of appellee from the Fort-Smith Fire Department and ordering his reinstatement. Appellant contends for a reversal of the judgment upon the ground that the circuit court was without jurisdiction to review the proceedings of the board of commissioners of the city of Fort Smith in discharging appellant. At the time of appellee ’s discharge on the 26th day of May, 1924, he was a duly qualified and acting member of the Fort Smith Fire Department under civil service rules arid regulations provided by § 19, sub-section (b) of act 13 of the Acts of the General Assembly of 1913. It is argued that the intention of the Legislature was to make the action of said board in discharging a civil service employee final and not reviewable by courts, because subsection (c) of said act contained the following provision: “Such employee (or officer discharging or suspending him) may within five days after such ruling appeal therefrom to the hoard of commissioners, who shall fully hear and determine the matter.”

"We do not think the language of that provision broad enough to evidence an intention on the part of the Legislature to cut off a review by the courts. Had the intention of the Legislature been to cut off a judicial review of the board’s proceedings in discharging a civil service employee, it could have expressed such intention in definite terms. The language employed was appropriate language to use in conferring original jurisdiction withr out reference to the review of the proceedings. Under the rule announced in the case of Hall v. Bledsoe, 126 Ark. 125, the proceeding before the board was quasi-judicial in its nature and not exclusively administrative or ministerial. This is an additional reason why the language of the provision should not be interpreted as precluding the right of judicial review.

Appellant also contends for a reversal of the judgment upon the alleged ground that there is some substantial evidence in the record made before the board and certified to the circuit court to sustain the discharge of appellee. The only ground upon which a civil service employee, may be discharged under § 19, sub-section (c) of said act, is for misconduct or a failure to perform his duties under such rules and regulations ias the board may adopt. As we understand the record, neither the board of commissioners nor the civil service board had adopted any rules and regulations governing the discharge of such employees at the time appellee was discharged, and it is not claimed that appellee violated any such rules or that he failed to perform his duties. It seems that appellee was discharged by the chief of the fire department under the order of one of the board of commissioners, which order took the form of a letter directed by the commissioner to the chief. The letter is as follows :■

“Mr. M. J. Brun, Chief Fire Department; Mr. Eugene
Quinn, Member Fire Department, City.
“Gentlemen: This is to notify you that it has become necessary to reduce the expenses of the fire department for the reason thiat during the months of July, August, and September, we have bills against the fire department which will have to be met, therefore I am adopting a policy when it becomes necessary to reduce the force of the fire department to lay off those whose service is unsatisfactory first.
“Mr. Quinn’s service has been very unsatisfactory, especially in regard to playing bills that he justly owes. This will he your authority to relieve Mr. Quinn from service effective Monday morning, May 26, 1924.
“Yours truly,
“Commissioner No. 1.”

It will be ¡observed that the gist of the charge in the letter was a failure on the part of appellee to keep all his debts promptly paid. It is true the letter recites it had become necessary to reduce the expenses of the fire department on account of bills which had to be met during the months of July, August, and September, and that it bad become necessary to reduce the force in order to meet these bills, but the testimony responsive to this declaration was too general to be tangible. Even if it had been necessary to reduce the force for this purpose, we cannot agree that the method adopted was reasonable and just. Creditors of public officials and employees are not permitted to garnish their salaries. A rule requiring civil service employees in the fire department to pay their debt out of their salaries would in effect impound their salaries for such purposes. Besides, no such rule had been adopted by either the civil service board or the board of commissioners before appellee was discharged on this account. The undisputed evidence in the case reveals that appellee was discharged because he had failed to pay all of his debts out of his salary, and not because of a bona fide effort on the part of the board of commissioners .to reduce the expenses of the fire department 'by reducing the force. The commissioner who ordered the discharge testified himself that he offered to let appellee go right back to work if he would show an effort to pay Ms bills.

Under this interpretation of the testimony, we think there is an entire want of substantial testimony in the record to sustain the discharge of appellee, and that the action of the board iñ discharging this veteran in service for the sole reason that he was unable to meet all his bills out of his salary was arbitrary.

No error appearing, the judgment is affirmed.

McCulloch, C. J.,

(dissenting). It is conceded that a discharged employee is not without remedy, and that the proper remedy is certiorari, as was adopted in the present case, but the authority of the court is to review merely for error and not to substitute the judgment of the court for that of the commissioners. The only question therefore, as said by this court in the case of Hall v. Bledsoe, 126 Ark. 125, is whether or not there was substantial evidence to support the finding of the board. Appellant had a hearing before the board, and, if the evidence was legally sufficient to justify his discharge, then the action of the board should not be disturbed.

The statute under which the Fort Smith city government operates provides a civil service plan for the protection of employees, but it does not hamper the power of the board of commissioners in discharging employees for cause, nor does it affect the power of the commissioners to select the ones to be discharged in case of a reduction of force. There is no rule of seniority created which requires the commissioners, in discharging employees in order to reduce the number, to begin with those lowest in seniority. The commissioners decided that it was necessary to discharge some of the force in order to bring the expenses within the revenues of that department, and they selected appellant as one of those to be discharged. He was selected for the reason that his services .had become unsatisfactory on account of his having continuously lived beyond his salary and caused annoyance and inconvenience to the board in frequently giving orders to creditors on the city clerk. The reasons for the discharge are set forth in the letter copied in the opinion of the majority, and .it seems to me that the reasons given in that letter,, which are fully substantiated by the testimony, are sound. It is not a question of compelling a man to pay debts, but an exercise of judgment on the part of the commissioners in determining that a man who is living beyond his salary at all times and giving orders on the clerk for deductions out of his salary is an unsatisfactory employee. At. least the. commissioners had a right to adopt that as a reason why they should discharge him; instead of some other employee, in reducing the expenses of the department. I am unable to perceive how a conclusion can be reached that the action of the commmissioners is wholly without justificatioD.' The effect of the decision is, I think, to substitute the judgment of the court for that of the board of commissioners, where it has been lodged by the statute.

Mr. Justice Skim agrees with me in these views.


author: Hart, J.,

text:
    Glover v. Bullard.
    Opinion delivered January 11, 1926.
    1. Vendor and purchaser—deficiency in acreage.—Where it appears by definite boundaries or by words of qualification, such as “more or less” or the like, that the statement of the' quantity of acres in a deed is a mere matter of description, and not of the essence of the contract, the buyer takes the risk of the quantity, .in the absence of fraud.
    2. ■ Vendor and purchaser—deduction in price for deficiency in i acreage.—Where a sale of land is by the acre, and the statement of the quantity of acres is of the essence of the contract, the purchaser, in case of a deficiency, is entitled in equity to a corresponding deduction from the price.
    3. ■ Vendor and- purchaser—deficiency in acreage—gross mis- . take.—Where the difference between the actual and the estimated quantity of acres of land sold in gross is so great as to warrant the conclusion that the parties would not have contracted had the truth been known, the injured party is entitled to relief in equity on the ground of gross mistake.
    4. Reformation of instruments—abatement of price.—Where the parties to a sale of land believed that the deed described land south of the river only, though the description included land north of the river, the deed was properly reformed to include only the property intended, with proportionate abatement of the price.
    5. Vendor and purchaser—deficiency of acreage—abatement of price.—Where the parties to a sale of land at a stipulated price per acre believed that the deed included only land south of the river, when it included land north of it also, it was error, in allowing abatement of the price, to consider the inferior quality of the land north of the river.
    6. Vendor and purchaser—failure of title—deduction.—Where part of the land described by a deed was owned by the government, abatement of the price accordingly was properly allowed, though an act of Congress passed after the deed was executed gave landowners claiming the land a preferential right to purchase at $1.25 per acre.
    7. Contracts—construction.—The rights of the parties to a contract must be determined as they existed at the time the contract was executed.
    Appeal from Poinsett Chancery Court; J. M. Futrell, Chancellor;
    reversed in part.
    STATEMENT BY THE COURT.
    Mrs. Lula G. Glover and Mrs. Lillie G. Weathersby brought this suit in equity against Samuel A. Bullard and others to reform a deed on the ground of mutual mistake, and to secure an abatement of the purchase price on the ground that there was a material deficiency in the quantity of land conveyed to them from that represented to be in the tract.
    The land in controversy is situated in the northeast quarter of section 8 and in the north half of section 9, township 10 north, range 7 west, in Poinsett County, Arkansas. Samuel A. Bullard purchased the land from Richard G. Hobbs on the 6th day of May, 1902, and the description of the deed is, “south of river, fractional northeast quarter of section 8, south of river, fractional north half of section 9, containing in all 244.63 acres more or less according to government survey, all in township 10 north, range 7 east.”
    These lands were surveyed by the United States Government in 1841, and the above description is correct according to the meander lines of the Tyronza River as it appears from the field notes.
    On the 14th day of May, 1917, Halliburton & Moore, real estate agents who had the exclusive agency from Samuel A. Bullard for the sale of said land, entered into a written contract with Mrs. Lillie G. Weathersby and Mrs. Lula G. Glover for the sale thereof, “at and for the stipulated price of $65.41 dollars for each acre of said tract of land which a survey shall show. ’ ’ In this contract the land is described as all of the northeast quarter of section 8 lying south of the Tyronza River and all of the north half of section 9 lying south of said river'. Pursuant to said contract on the 14th day of June, 1917, Samuel A. Bullard and his wife executed a warranty deed to said land to Mrs. Lillie G. Weatherby and Mrs. Lula G. Glover. The consideration is recited to be $4,001.25 paid in cash and the further consideration of $12,000 evidenced by notes for $1,000 each to be due on the first of January of each year in the next succeeding twelve years. The deed describes the land as all of the northeast quarter of section 8 lying south of Tyronza River, and all of the north half of section 9 lying south of said river, all in township 10 north, range 7 east, containing 244.63 acres. The agent of Bullard who made the sale for him represented to the agent of the purchasers that the Tyronza River was the boundary of the land on the north, and that a fence was the boundary on the south. He also represented that the tract contained 244.63 acres, and the agent of the purchasers entered into the contract for the purchase of said land in behalf of his principals, relying upon said representations being true, and the deed was subsequently made to his principals in reliance upon the representations made to their agent. Subsequently it was ascertained that, as the Tyronza River now runs, and as it flowed at the time of the execution of the contract and deed in question, the land claimed by Bullard south of the Tyronza River in the northeast quarter of section 8 is 73.50 acres, including 12.27 .acres belonging to the United States; that the land actually owned by him in the northeast quarter of section 8 is 61.23 acres; and that the land owned by him in the north half of section 9 south of Tyronza River as it flowed at the time of the execution of the deed is 101.34 acres. Thus it will be seen that at the time of the execution of the. contract and deed in question Bullard only owned 171.57 acres south of Tyronza River, and this left a deficiency of 73.06 acres of land attempted to be conveyed south of the Tyronza River as it now flows through said sections eight and nine. Other facts will'be stated or referred to in the opinion.
    The chancellor found that the agents of Bullard represented to the agent of the plaintiffs that the Tyronza River as it flowed at the time was the north boundary of the land in question, and that it was the intention of the defendant to sell, and or the plaintiffs to buy, only the land in sections 8 and 9 described in the deed south of Tyronza River as it actually flowed, and that its description otherwise in the deed was due to a mutual mistake of fact, and that the deed should be reformed so as to describe only the land intended to be sold and purchased. The court found that the plaintiffs were entitled .to an abatement of the purchase price on account of the deficiency in the quantity of the land; but, in doing this, took into consideration that the land owned by the defendant north .of Tyronza River as it actually flowed was less valuable by one-third than the land owned by him south of the river.
    A decree was entered in accordance with the findings of the chancellor, and to reverse that decree the plaintiffs have duly prosecuted an appeal to this court.

      Hughes <& Hughes, for appellant.

      Mann <& Mann, for appellee.
   Hart, J.,

(after stating the facts.) The chancery-court correctly found that the deed in question should be reformed so as to vest the title in the land in sections 8 and 9 north of Tyronza River, as it actually flows, in the defendant. The undisputed evidence shows that the agent of the defendant represented to the agent of the plaintiffs that the tract of land intended to be sold was situated south qf the Tyronza River as it actually flowed at the time.' The agent of the plaintiffs and of the defendant were on the land at the time, and it was intended by. both parties that only the land south of Tyronza River as it actually flowed should be sold, and it was their intention to describe this land only in the contract of sale and in the deed which was subsequently executed pursuant to the terms of the contract. Both parties were ignorant at the time that the defendant owned any land in sections 8 and 9 north of Tyronza River as it actual flowed. The defendant did not intend to sell, and the plaintiffs did not intend to buy, any land north of Tyronza River. Hence the land north of Tyronza River as described in the deed was the result of the mutual mistake of both, and, under the undisputed evidence, it was the duty of the chancery court to correct the mistake and reform the deed accordingly.

It follows that the decision of the chancellor on this branch of the case was correct.

On the part of the plaintiffs, it is earnestly insisted that the court erred in taking into consideration the inferior quality of the land north of Tyronza River, in allowing the abatement of the purchase price for the deficiency in the quantity of. land intended to be conveyed.

On the other hand, it is the contention of counsel for the defendant that the court erred in allowing any abatement of the purchase price on account of the alleged deficiency in the quantity of land intended to be conveyed.

The general rule on this question is clearly stated in Weart v. Rose, 16 N. J. Eq. 290. It is there said that the general rule as laid down by 'Chancellor Kent is that where it appears by definite boundaries, or by words of qualification, as “more or less,” or as “containing by estimation,” or the like, that the statement of the quantity of acres in the deed is a mere matter of description, and not of the essence of the contract, the buyer takes the risk of the quantity, if there be no intermixture of fraud in the case.

On the.other hand, where the sale.is by the acre, and the statement of the quantity of acres is of the essence of the contract, the purchaser, in case of a deficiency, is entitled in equity to a corresponding deduction from the. price.

There is a further qualification of the general rule recognized in that case and by our own decisions to the effect that, where the difference between the actual and the estimated quantity of acres of land sold in gross is so great as to warrant the conclusion that the. parties .would not have contracted had the truth been known, in such case the party injured is entitled to relief in equity on the ground of gross mistake.

As sustaining these principles of law, in addition to the case above cited, see Harrell v. Hill, 19 Ark. 103; Haynes v. Harper, 25 Ark. 541; Drake v. Eubanks, 61 Ark. 120; and Solmson v. Deese, 142 Ark. 189.

Gross mistake is where the difference between the actual and the estimated quantity of land represented is so great as to .clearly warrant the conclusion that the parties would not have contracted, had they known the truth. Melick v. Dayton, 34 N. J. Eq. 245.

As we have already seen, the undisputed evidence shows that neither the vendor nor the purchasers knew that the former owned any land north of. Tyronza River, and that the former intended to sell, and the latter to purchase, only the land in .sections 8 and 9 south of Tyronza River as it actually flowed. The agents of the respective parties were on the land when the contract was made, and the agent of the vendor pointed out to the agent of the purchasers Tyronza River as the north boundary line of the land. The agent of the vendor represented, and the agent of the purchasers believed,that the tract shown as the land of Bullard, south of Tyronza River, contained 244.63 acres. It turned out that there were only 171.57 acres south of Tyronza River owned by Bullard. This was the difference of 73.06 acres, which is material. Both parties in fixing the price believed that the tract of land south of the river contained 244.63 acres. The land north of the river was not considered at all. The plaintiffs were damaged in failing to get 244.63 acres south of the river, and the abatement ought to be in proportion to the price agreed to be given for the land as represented. This is shown to be $65.41 per acre. According to the rule laid down in the cases cited above, the plaintiffs are entitled to a reduction of 73.06 acres at the rate of $65.41 an acre, which amounts to $4,778.85.

The land in sections 8 and 9 north of Tyronza River, which it turns out belongs to Bullard, was not considered by the parties in making the purchase of the land in question. Neither party believed that Bullard owned any land north of Tyronza River, and that fact did not enter into their minds at all in making the contract for the sale of the land, or in the execution of the deed in consummation thereof. Therefore, it did not make any difference whether or not the land owned by Bullard north of the Tyronza River is of inferior quality to that owned by him south of the river. Bullard only intended to sell, and the purchasers to buy, the land owned by him south of Tyronza River. Bullard’s agent sold the plaintiffs a tract of land which he pointed out and represented as lying south of Tyronza River and as containing 244.63 acres. The land turned out to contain only 171.57 acres, leaving a deficiency in quantity of 73.06 acres. This, as we have already seen, under the principles of equity entitles the plaintiffs to an abatement of the purchase price in proportion to the price agreed to be given for the land as represented.

Again it is claimed that this abatement should not be allowed as to the 12.27 acres of land in the northeast-quarter of section 8 south of Tyronza River, which turns out to belong to the United States. The contention of the defendant in this respect is based upon the factthat an act of Congress was passed, when the mistake in the original survey was discovered, which gave to the landowners who had claimed the land la preferential right to purchase it at $1.25 per acre. The rights of the parties must be determined as they existed at the time the contract was entered into between them. The act of Congress was not passed until afterwards. The plaintiffs were not required to enter into negotiations with other parties or with the United States for the purchase of land in order to mitigate the damages which the defendants must pay them on account of his breach of the contract.

The decree of the chancery court is therefore affirmed, in so far as it reforms the deed so as to vest the title to the land in sections 8 and 9 north of Tyronza River in the defendant Bullard. As to the abatement of the purchase price, the decree is reversed, and the cause is remanded with instructions to the chancery court to enter a decree in accordance with this opinion.


text:
    Deming Investment Company v. Bank of Judsonia.
    Opinion delivered January 11, 1926.
    1. Landlord and tenant—effect of assignment of rent note.—Assignment by a lessor of a rent note to a bona fide •purchaser for value before the transfer of the reversion by the lessor operates as a severance of the rent from the reversion.
    2. Mortgages—effect of mortgage on rent of land.—Where a mortgage of land did not expressly include the rents thereon, the rents and profits belonged to the mortgagor or to a third person claiming under him, though a receiver may be appointed to collect the rents where it appears that the mortgaged property is in danger of being lost, or that the conditions of the mortgage have not been performed, and the property is probably insufficient to discharge the mortgage debt!
    3. Mortgage—power op mortgagor.—A mortgagor may lease, sell or deal with the mortgaged premises as owner so long as he is permitted to remain in possession, and so long as it is understood that every person taking under him takes subject to all the right of the mortgagee unimpaired and unaffected.
    4. Mortgages—rights op assignee op rent note.—Where a foreclosure decree appointed a receiver and directed him to rent the land to a lessee who had given rent notes to the mortgagor, but the receiver did not qualify or interfere with the lessee’s possession until after the land had been sold, there was no sequestration of the rents until the receiver qualified, and the holder of the rent notes was entitled to the rent up to that time.
    .Appeal from White Chancery Court; John E. Martineau, Chancellor;
    reversed.
    statement by the court.
    .The Deming Investment Company brought this suit in equity against Thomas W. Taylor and others to foreclose a mortgage on real estate. The suit was filed on February 1, 1924.
    J. C. Rhew, one of the defendants, filed an answer in which he stated that he had rented the land from Thomas W. Taylor and was in possession of it. That he had executed his promissory note in the sum of $300, due and payable on November 1, 1924, for the rent of said land for the year 1924.
    The Bank of Judsonia filed an answer in which it claimed that Thomas W. Taylor had transferred the rent note of J. C. Rhew to it in good faith for value received.
    The decree of foreclosure was entered of record on March 10,1924. The chancery court found that the mortgage indebtedness of Thomas W. Taylor to the Deming Investment Company amounted to $2,460.83, and a decree of foreclosure was entered for that amount. A commissioner was appointed to sell the mortgaged property, if payment was not made within sixty days. It was also decreed that a receiver 'be appointed to rent the property to J. C. Rhew for the year 1924, for the sum of $300, and the Bank of Judsonia was directed to deposit in the registry of the court the rent note of J. C. Rhew for $300 payable to Thomas W. Taylor for the rent of said land for the year 1924 and transferred by said Taylor to the Bank of Judsonia.
    Default having been mlade in the payment of the mortgage indebtedness, the commissioner sold the land pursuant to the decree of the court on the 9th day of June, 1924, and the Deming Investment Company became the purchaser at the sale for the sum of $1,000. The report of sale was approved by the court on the 8th day of September, 1924. The receiver did not qualify as such until the 28th day of June; 1924, and on that day subscribed to an oath as receiver and also filed the bond required by the court.
    The chancery court found that J. C. Rhew was not liable to the plaintiff or to the receiver for the rent of the land for the year 1924, but that he was liable to the Bank of Judsonia on his rent- note. It was therefore decreed that the complaint of the plaintiff Deming Investment Company against J. C. Rhew and the Bank of Judsonia be dismissed for want of equity. To reverse that decree, the plaintiff and J. C. Rhew have duly prosecuted an appeal to this court.

      JohnE. Miller and Culbert L. Pearce, for appellant.

      W. D. Davenport, for appellee.
   Hart, J.,

(after stating the facts). In Gaily v. Ricketts, 123 Ark. 18, it was held that the purchaser of land at a commissioner’s sale in partition, in the absence of a reservation of the rent or the right to growing crops, acquires, upon confirmation of the sale-, a right to the same. This court has also held that a purchaser at a mortgage foreclosure sale is entitled to possession and to the rents and profits, including ungathered crops, after notice to quit and the demand for rents and profits has been made. Oliver v. Daffenbaugh, 166 Ark. 118.

Reliance is placed upon the principles of law decided in these cases for a reversal of the decree and the direction to pay the whole of the $300 rent note to the plaintiff. We do not regard the principles of law decided in these cases as controlling here; for the reason that in neither of them were the rights of a bona fide purchaser of the rent note involved- An assignment of a rent note hy the lessor to a bona fide purchaser for value before the transfer of the reversion by him operates as a severance of the rent from the reversion. Therefore, in such cases the rent can not pass to the grantee of the reversion. Cheatham v. J. W. Beck Co., 96 Ark. 230.

In the application of this rule to a case- like Gailey v. Ricketts, supra, where the rights of a purchaser at a commissioner’s sale, in a partition suit were under consideration, it would be said that the holder of the rent note would be protected. In such a case the owners of the land would have the absolute right to transfer the rent note, and the purchaser thereof in good faith would be the owner of the rents, and no subsequent sale could affect his rights. It is manifest that a subsequent sale would impair the obligations of his contract. It is equally manifest that nothing can be done by the mortgagor subsequent to the execution of a valid mortgage which Can impair the rights of the mortgagee.

In -the case at bar there was no mortgage of the rent. Consequently the rents, and profits were ' not pledged by a mortgage on the land, and they belonged to the mortgagor or third person claiming under him, subject to the rights of the mortgagee in the premises. In equity a mortgage of lands is only security for the mortgage indebtedness. Hence the mortgagor has a right to lease, sell, and in every respect to deal with the mortgaged premises as owner so long as he is permitted to remain in possession, and so long as it is understood and held that every person taking under him takes subject to 'all the rights of the mortgagee unimpaired and unaffected. 4 Kent, Com. * 157; Greer v. Turner, 36 Ark. 17; Teal v. Walker, 111 U. S. 242; Rider v. Bagley, 84 N. Y. 461; and Gaynor v. Blewett, 82 Wis. 313, 33 Am. State Rep. 47.

In the case last cited, it was said that the rents and profits of lands are not pledged by a mortgage of the lands merely, but belong to the owner of the equity of redemption until the court, for equitable reasons, shall appoint a receiver to collect them for the benefit of the mortgagee, or direct the receiver to take possession of the mortgaged premises and the rents and profits of the same, to the end that the rents realized may be applied to the payment of any deficiency that may remain unpaid after applying the proceeds of the sale of the mortgaged premises.

It was further stated that the appointment of a receiver for that purpose is a matter resting in the sound discretion of the court, and gives the plaintiff in the foreclosure suit an equitable lien upon the accrued and unpaid rents.

In recognition of this equitable rule, our Legislature has provided that, in an action by a mortgagee for the foreclosure of a mortgage, a receiver may be appointed where it appears that the mortgaged property is in danger of being lost, or that the conditions of the mortgage have not been performed, and the property is probably insufficient to discharge the mortgage debt. Crawford & Moses’ Dig., § 8612, and Van Pelt v. Russell, 134 Ark. 236.

Under the facts disclosed in the record, we are of the opinion that there was no sequestration of the rents in this case 'until the receiver took the oath of office and filed his bond on the 28th day of June, 1924. It is true that the decree of foreclosure entered on the 10th day of March, 1924, provided for the appointment of a receiver; but that decree also directed the receiver to rent the land to J. C. Rhew for the sum of $300 due on November 1, 1924. The Bank of Judsonia was also directed to deposit in the registry of the court the rent note of J. C. Rhew to Thos.. W. Taylor due November 1, 1924, for the sum of $300. So the decree recognizes the rights of the tenant to the possession of the land and reserved for adjudication the rights of the Bank of Judsonia as transferee of the rent note, and Rhew will only he required to pay the rent note one time.

Now it was not known that there would be a deficiency in the mortgage indebtedness until the commissioner’s slale was had on June 9, 1924. No other ground for equitable interference in the possession of the mortgagor of the mortgaged premises was shown. The receiver did not take the oath of office nor file his bond as receiver until the 28th day of June, 1924. Hence we do not think his appointment became effective until that date, and that there was no sequestration of the rents until that time. Accrued rents, are those which have been earned lat the time the rents are actually impounded. As above stated, we do not think that there was any actual sequestration of the rents until the receiver qualified as such. There is nothing in the record to show that there was any actual interference with the possession of the tenant of the mortgagor in the land until that time. Consequently we are of the opinion that the Bank of Judsonia, as transferee of the rent note of the mortgagor, is entitled' to the rent which had been earned or accrued when the receiver qualified as such on the 28th day of June, 1924, and that the mortgagee is only entitled to the rents after that date.

It follows that the chancellor erred in holding that the Bank of Judsonia wlas entitled to the whole of "the $300 rent note. Under the views expressed above, the bank was entitled only to one-half of the amount of the rent note, and the plaintiff as mortgagee was entitled to the remaining half. •

■ • Therefore the decree will be reversed, and the cause will be rémanded with directions to enter a decree in accordance with this opinion, and for further proceedings in accordance with the principles of equity.


author: Smith, J.

text:
    Jewett v. Norris.
    Opinion delivered January 11, 1926.
    Counties—authority op separate districts to issue bonds.—The two districts of Sebastian County, created iby Constitution, art. 13, § 5, with powers defined by Acts 1874-5, pp. 86, 135, are to be regarded as separate counties -within the meaning of Amendment 11 to the Constitution, authorizing counties to issue bonds to pay outstanding indebtedness.
    Appeal from Sebastian Chancery Court, Fort Smith District; J. V. Bourland, Chancellor;
    affirmed.

      George W. Dodd, for appellant.

      Daily $ Woods and A. A. McDonald, for appellee.
   Smith, J.

The question for decision in this case is whether the Fort Smith District of Sebastian County has the authority to issue bonds to pay its outstanding indebtedness under the authority of Amendment No. 11 to the Constitution. So much of this amendment as we need -to consider here reads as follows: “Provided, however, to secure funds to pay indebtedness outstanding at the time of the adoption of this amendment, counties, cities and incorporated towns may isue interest-bearing certificates of indebtedness or bonds with interest coupons for the payment of which a county or city tax, in addition to that now authorized, not exceeding three mills, may be levied for the time as provided by law until such indebtedness is paid.”

The insistence of appellant, who is a -citizen and taxpayer of the Fort Smith District of Sebastian County, is that the Fort Smith District is neither county, city nor incorporated town within the meaning of the amendment, and that the authority was not conferred on such district to issue bonds to pay its outstanding indebtedness existing at. the time the amendment was adopted.

The 'Constitution of -1874 contains a unique provision in regard to Sebastian County. It reads as follows: “Sebastian County may have two districts and two county seats, at , which county, probate and circuit courts shall bo held as may be provided by law, each district paying its own expenses. ’ ’ Section 5 of article 13.

The history of this section of the Constitution is set out in the brief filed on behalf of the district in the present litigation. ' It is as follows: An act was passed by the General Assembly of 1861, which provided that, for the purpose of holding circuit and probate courts, Sebastian County should be divided into two judicial districts, and defined the jurisdiction of these courts within the territorial limits. At the 1871 session of the General Assembly an amendatory act was passed, which, in addition to providing for separate judicial districts for that county, also provided that each district of the county should pay its own expenses, and should separately assess, levy and collect its taxes, and should have county and quorum courts in each district for this purpose.

The validity of both the original and the amendatory acts was questioned, but that involving the amendatory act of 1871 was first decided in the ease of Patterson v. Temple, 27 Ark. 202, and the amendatory act was declared unconstitutional. In the case of Ex parte Jones, 27 Ark. 349, the original act was upheld. Both decisions were rendered at the December, 1871, term of the Supreme Court, and thus the law stood when the Constitution of 1874 was written and adopted.

Obviously the purpose of the provision of the Constitution set out above was to make valid and constitutional subsequent legislation like that which had been stricken down when the amendatory act of 1871 above referred to was declared unconstitutional. This section of the Constitution permitted the division of Sebastian County into two districts, and provided that when this was done each district should pay its own expenses.

Pursuant to this authority there was passed at the first session of the General Assembly which convened after the adoption of the Constitution of 1874 two acts making effective this permission to create the two districts, each bearing and paying its own expenses. The first act was approved January 12, 1875 (Acts 1875, page 86), and the second February 3, 1875 (Acts 1875, page 135).

Section 1 of the first of these acts provided that the boundaries of the two districts should remain as they were until the ensuing April term of the county court to be convened at Greenwood, the county seat, at which time the county court should define the boundaries of said districts, and that after such order had. been made “the .jurisdiction of said county court shall cease in said county, and said jurisdiction shall be transferred to the district county courts of said districts, respectively, as hereinafter provided.”

Section 2 of this act provided that the circuit, chancery, county and probate courts of said county should be held at the county seats of their respective districts, and that the authority and. territorial jurisdiction of said courts “shall extend-over the respective districts, the same and in like manner as if said districts were respectively constitutional counties of this State.”

Section 10 of the act provides that the said districts shall respectively defray all expenses “accruing within and on account of their respective districts, as if separate and distinct counties,” with a provision that both districts should remain liable for any outstanding indebtedness of Sebastian County, and the further provision that neither district should be liable for any debt or liability that might thereafter be incurred by the other district.

■Section 11 provided for the keeping of separate records in the two districts, and by § 12 it was provided “that the county court of said respective districts shall be composed of the county judge of Sebastian County and a majority of the justices of the peace within their respective districts, and‘shall be subject to the same regulations respectively as other county courts of this State, as if separate and distinct counties. ”

Section 13 provided that, as to all matters not within the provisions of the act, the county of Sebastian should be one entire and undivided county.

As has 'been said, this act—which might be called an enabling act—was amended at the same session of the General Assembly, and complete provision was made whereby the fiscal affairs of the respective districts might be as completely separated and administered as if the districts were in fact separate counties.

Section 3 of this second act reads as follows: “That so much of section twelve of said act as enacts that the county judge of said county and a majority of the justices of the peace of each of said districts shall compose the county court of said districts, is hereby repealed, and that the county judge of said county shall be the probate judge of each of said districts, and the county judge for each of said districts, except that for the purpose of levying the county taxes for either of said districts, and for making appropriations for the county expenses, in either of said districts, the county court for said districts shall be composed of the county judge and the justices of the peace of said districts respectively.”

Other sections of this second act provided for the separate assessment, levy and collection of taxes, that of each district being levied, assessed and collected without reference to the action taken by the other.

Sebastian County has now proceeded for more than fifty years under the authority of these acts passed pursuant to the power contained in the section of the Constitution set out above, and the Fort Smith District of the county now proposes to pay off its outstanding indebtedness by an issue of bonds under the authority of Amendment No. 11 to the Constitution set out above.

In opposition to this proposed action appellant, a protesting citizen and taxpayer, cites authorities defining the meaning of the word “county”, and he insists, upon the authority of these decisions, that the Fort Smith District of Sebastian County is not a county within the meaning of Amendment No. 11, which authorizes counties to issue ¡bonds.

It may be conceded that these districts, aré not counties within the ordinary meaning of that word; but we think, in view of the unique provision of the Constitution in regard to Sebastian County, that the two districts thereof are to be treated as if they were in fact separate counties, so far as their fiscal affairs are concerned.

Section 1 of article 16 of the Constitution contains an inhibition against the State and the cities, counties, towns and other municipalities thereof ever loaning their credit, and prohibits the counties, cities, towns and other municipalities of the State from- issuing interest-bearing evidences of indebtedness, except such as were necessary to secure the payment of the then outstanding indebtedness of such counties, etc.

Unless these districts of Sebastian County, which are separate units in the administration of their fiscal affairs, are embraced within the word “county”, they are not included at all, and this constitutional inhibition does not apply to these districts.

Section 9 of the same article provides that no county shall levy a tax to exceed one-half of one per cent, for all purposes, but may levy an additional one-half of one per cent, to pay indebtedness outstanding at the time of the ratification of the Constitution.

The Constitution contains no limitation as to the districts of Sebastian County which the General Assembly was authorized to establish, and, unless these districts be treated as counties for the purpose of levying taxes, there is no limitation as to the amount of taxes which ■such districts may levy, as the limitation applies only to counties, etc.

So also Amendment No. 11 to the Constitution, which provides that no county shall expend in any year any sum in excess of the revenues of that year, would not apply to the districts of Sebastian County unless they were treated, for the purpose of collecting and disbursing the public revenues, as counties, and there would be no restraint on the annual expenditures which such districts might make, although the constitutional restraint extended to the remainder of the State.

It is pointed out that, in the more than fifty years which have elapsed since the passage of the act authorized by the Constitution of 1874 and which created the two districts of Sebastian 'County, there have been passed many acts relating to the fiscal affairs of counties, all of which have been treated as applicable to the respective districts of that county.

¡We conclude therefore that these districts of Sebastian County are to be regarded as counties within the meaning of Amendment No. 11, and that by this amendment they are authorized to issue bonds to pay their outstanding indebtedness, and that they are also to be regarded as counties within the requirement of that amendment that their subsequent expenditures shall be kept within their revenues.

We think there is nothing in the case of Williams v. State, 160 Ark. 587, which conflicts with the views here expressed. The point there decided was that an accused person applying for a change of venue might show that the inhabitants of Sebastian 'County as a political unit were so prejudiced against him 'that he would be entitled to have the venue changed to another county of the judicial circuit of which Sebastian County was a part. In other words, Sebastian County as a composite unit of government has not been destroyed, although the separate districts thereof have been given separate control of their respective fiscal affairs.

The court below sustained a demurrer to the complaint of appellant by which he sought to enjoin the county judge of Sebastian County from proceeding under Amendment No. 11 to refund the indebtedness of the Fort Smith District, and, as that decree is correct, it is affirmed.


text:
    Barham v. Crittenden County Bank.
    Opinion delivered January 11, 1926.
    1. Banks and banking—insolvency—sale of assets.—Under Crawford & Moses’ Dig., § 720, the chancellor is authorized in vacation without notice to its stockholders to direct a sale of all of the assets of a defunct bank, including the liability of its directors for dereliction in duty; provided that the bank itself or any of its stockholders may, within 10 days after the Bank Commissioner took possession, apply to the chancellor to enjoin such proceeding, as provided by § 724, Id.

      2. Banks and banking—sale of assets of defunct bank to former directors.—A sale of the assets of an insolvent bank to its former directors, including the liability of such directors to the bank, was not fraudulent as to the stockholders, though it was an indirect way of payment by the directors of their liability, where the sale was advantageous to the stockholders and for an adequate consideration.
    3. Banks and banking—insolvency—sale of assets—fraud.— Where the chancellor, before approving a sale of the assets of an insolvent bank to its former directors, was fully informed by a written proposal that the liability of the directors was to be conveyed as one of the assets, the sale was not fraudulent as concealing a purpose of the directors to obtain immunity.
    4. Banks and banking—insolvency—sale of assets.—Where a new bank purchased outright all of the assets of a defunct bank, and agreed that if, in the liquidation, the loans and discounts realized more than a certain sum, the surplus should go to the reduction of the' stockholders’ liability, the fact that no valuation was placed on such loans and discounts would not convert the sale into a mere assignment.
    ■ Appeal from Crittenden Chancery Court; J. M. Futrell, Chancellor;
    affirmed.

      Hughes é Hughes, for appellant.
   Humphreys, J.

The question presented for determination 'by this appeal is whether the amended bill of appellants states a cause of action against the directors of the Crittenden County Bank & Trust Company. The trial court sustained the 'special demurrer of the Crittenden County Bank and the general demurrer of the directors of the Crittenden County Bank & Trust Company to the amended bill of appellants, who were stockholders of the Crittenden County Bank & Trust Company at the time it passed into the hands of the State Bank Commissioner for liquidation. Appellants stood upon their amended bill, whereupon the court dismissed the bill, from which dismissal an appeal has been duly prosecuted to this court.

Appellants sought by their amended bill to enforce an alleged liability of the directors of the Crittenden County Bank & Trust Company for misfeasance, malfeasance, and nonfeasance in the performance of their duties. The amended bill alleged derelictions of the directors of the ¡Crittenden County Bank & Trust Company, and a fraudulent sale of the assets of said bank, including its directors ’ liability, to the Crittenden County Bank, and, further, that the contract and sale of said assets, when properly interpreted, was to the effect that the stockholders of the defunct bank should have a residuary interest in the assets thereof. The proceedings in insolvency of the Crittenden County Bank & Trust Company in the chancery court of Crittenden County were made exhibits to appellants’ amended bill. The facts revealed by the amended bill and the exhibits attached thereto necessary to a determination of this question are as follows:

The ¡Crittenden County Bank & Trust Company was a banking corporation duly incorporated and doing its banking and trust business under the banking laws of Arkansas. Its main bank was at Marion, and its branches at Earle and Crawfordsville in said county. It became insolvent, and on December 10,1923, its affairs were taken over by the State Bank 'Commissioner for liquidation. The ¡Crittenden County Bank was immediately organized with a paid-up capital and surplus of $220,000 by some of the directors of.the old bank-and ¡other parties for the purpose of purchasing the assets of the defunct bank and doing a general banking business at Marion. The new bank made an offer in writing to the State Bank Commissioner to purchase the assets -of the old bank, including the liability of the directors to the old bank on account of derelictions in the performance of their duties, and the 100 per cent, assessment against the stockholders of the old bank, except the surplus, if any, of loans and discounts after the collection of $1,180,156.01 out of them by the new bank, in consideration of the assumption of the indebtedness of every kind and nature of the old bank by the new bank, except the indebtedness of the old bank to its stockholders. An examination of the assets and the liabilities of the old bank by the State Bank Commissioner showed that the bank was insolvent, even if the 100 per cent, assessed against the stockholders could be fully collected. Ten days after the written proposal of the new bank to buy the assets of the old bank was made, the State Bank Commissioner accepted the offer, subject to the approval of the chancellor .in whose court the insolvency proceedings were pending. At the expiration of that time, no objection having been interposed by the 'Stockholders of the old bank, the State Bank Commissioner made a full report of the condition of the old bank and the organization and proposal of the new bank to purchase its assets, including the liability of the directors for derelictions in office, to said chancellor in vacation at his office in Paragould in Greene County, and by petition requested that he be permitted to consummate the sale upon the terms set out in the written proposal. The chancellor, being fully advised, found that the administration of the affairs of the defunct bank had been duly docketed in the Crittenden Chancery Court, and that it was to the best interest of the estate to accept the offer, whereupon he directed the Bark 'Commissioner to consummate the sale. On the same day the sale was consummated, reported, approved and confirmed by the chancellor in vacation. The assets of the old bank were delivered to the new bank, whereupon it proceeded to do business under its charter. The written proposal and acceptance of the sale of the assets of the old bank and the report made to the chancellor placed a valuation on a large part of the assets, but did not value the directors’ liability for mismanagement of the affairs of the old bank, nor the loans and discounts. The value of the loans and discounts was to be ascertained and determined by liquidation. It is unnecessary to detail the facts alleged as constituting the derelictions of the directors of the old bank, for appellees admit the sufficiency of the allegations in this respect, if the sale was invalid for any reason.

It is first contended that the sale was fraudulent because the order authorizing and approving it was made in vacation without notice to the appellants. The proceedings for winding up the affairs of an insolvent bank are summary in nature. Under § 720 of Crawford & Moses’ Digest orders for sales of the assets of a defunct bank may be made and confirmed by the court in vacation without notice. If the old bank or its stockholders were of the opinion that the liability of the directors for derelictions in office should have been enforced through the courts rather than sold, application should have been made to the chancellor in vacation within ten days after the Commissioner took possession of the affairs and assets of the old bank to prevent the sale of the liability. Section 724 of Crawford & Moses’ Digest so provides.

It is next contended that the sale was fraudulent because the effect thereof was to destroy the liability of the directors as an asset, for the reason that the newbank, composed largely of the directors of the old bank, would not sue themselves for their own derelictions in the management of the eld bank’s affairs. There can be no question, under the allegations of the bill as controlled by the exhibits, that one of the objects of the directors in organizing the new bank and purchasing the assets of the old bank was to obtain immunity from their derelictions. We are unable to see any fraud in this transaction, for it was an indirect way by the directors of paying their liability. To state it another way, they liquidated the claims against them for derelictions in office by buying this particular asset along with all other assets of the bank for a fair consideration. It is not alleged in the bill thatvthe sale was an improvident one or that a grossly inadequate consideration was paid by the new bank for the assets of the defunct bank. On the contrary, it appears from the exhibits to the bill that the sale was an advantageous one and to the best interest of the creditors of the old bank, even saving to the stockholders of the defunct bank the equity in the loans and discounts after $1,800,156.01 had been realized out of them by the new bank.

It is next contended that the sale was fraudulent because the purpose of the directors to obtain immunity through the transaction was concealed from the chancellor. The written proposal to purchase the assets of the old bank and the report of the commissioner to the chancellor reveal that the liability of the directors was to be conveyed as one of the assets. The chancellor must have known that, when this asset passed by the sale, the purchaser could release the directors from liability. According to the exhibits, the chancellor was fully apprised of all the- facts in the case and must have understood the transaction and the effect thereof on the liability of the directors.

We do not think the bill as controlled by the exhibits alleges facts sufficient to show that there was fraud in the sale and purchase of the assets of the old bank to the new bank.

Appellants contend, however, that the written proposal by the new bank and the acceptance thereof by the Commissioner amounted to an assignment, and not to a sale of' the assets of the old bank. We have carefully read the proposal and acceptance, and are of the opinion that it amounts to an absolute sale and purchase by the new bank of the assets of the old bank. Certainly, it could not have been the intention of the parties for the new bank to assume all the liabilities of the old bank for the mere privilege of recouping out of the assets of a defunct bank which were delivered, to it. "Such a conclusion is not warranted by the fact that a present valuation was not put upon the loans and discounts, and that their value up to $1,800,156.01 was to be ascertained by the proceas of liquidation. The proposal was to buy all the assets of the defunct bank in consideration of the assumption of all the indebtedness of the old bank by the new bank. It was not necessary to value any of the assets in order to consummate a sale thereof. The failure then to value a part of them would not convert a sale into an assignment of them. Neither would the adoption of a plan or method to arrive at the value of any particular asset convert a sale into an assignment of the assets. The demurrer was properly sustained to the bill, and the decree is affirmed.

Mr. Justice Smith did not participate.


author: Per Curiam.

text:
    Wolford v. Warfield.
    Opinion delivered January 11, 1926.
    Appeal and error—acts inconsistent with appeal.—Under Crawford. & Moses’ Dig., § 3703, providing that in actions to recover possession of land a defendant in possession under color of title is entitled to recover the value of improvements and taxes, and that the same shall be paid before the successful party shall have possession, held that where a successful party took possession of the land before paying the defendant for his improvements, such party was not entitled to appeal, because she accepted the benefit of the judgment favorable to herself, and it is immaterial that she executed a supersedeas bond to pay the judgment in the event of an affirmance.
    Appeal from Phillips 'Circuit Court; E. D. Robertson, Judge;
    appeal dismissed.

      Sheffield & Coates, for appellant.

      W. G. Dinning and Bevens £ Mundt, for appellee.
   Per Curiam.

Appellee moves to dismiss the appeal under § 2168, Crawford & Moses’ Digest, on the ground that appellant has forfeited the right of appeal by accepting benefits under the judgment appealed from.

Appellant was plaintiff below, and sued to recover possession of a tract of land. Tbe judgment of tbe circuit court was in appellant’s favor for recovery of tbe land in controversy, but there was a judgment in favor of appellee for the recovery of a sum of money as compensation for improvements made on the land. Appellant gave a supersedeas bond and then took possession of the land. It is contended by appellee that this was such an acceptance of benefits as would be inconsistent with the right of appeal from the judgment awarding those benefits.

The statute (Crawford & Moses’ Digest, § 3703) provides that in actions to recover possession of land a defendant in possession under color of title who has “peaceably” improved the lands in controversy is entitled to recover compensation for the value of such improvements together with the amount of taxes paid by him and those under whom he claims, and that the same shall be paid by the successful party “before the court rendering judgment in such proceedings shall cause possession to be delivered to such successful party.” Appellant was therefore not entitled to take possession of the land until payment of the compensation awarded, and such taking was an acceptance of benefits under the .judgment inconsistent with the right of appeal from the other part of the judgment. Bolen v. Cumby, 53 Ark. 514. The fact that appellant executed a supersedeas bond to pay the judgment in event of an affirmance did not affect the inconsistency of accepting the benefit of the judgment without performing that part of it which awarded compensation to the occupant. The statute requires payment of the compensation before possession is awarded, and if the plaintiff in ejectment takes possession he waives his right to appeal from the judgment awarding compensation.

The conclusion of this court therefore is that the right of appeal has been forfeited, and that the appeal should be dismissed. It is so ordered.


text:
    Reuter Milling Company v. McKinney.
    Opinion delivered January 11, 1926.
    1. Evidence—parol evidence rule.—Where an accepted order for the sale and purchase of a carload of flour is unambiguous, and is a complete contract for its sale, evidence is inadmissible to show that the flour was consigned to the consignee to be sold for the consignor’s benefit.
    2. Sales—loss by fire—judgment.—Where a carload of flour was sold to appellee and was destroyed by fire while in his possession, the seller was entitled to judgment against him for the unpaid purchase money and to judgment against insurance companies indebted to him upon policies issued by them, as shown by their answers in garnishment proceedings.
    3. Trial—right to open and close argument.—In an action for the price of flour which defendant denied purchasing, plaintiff had the burden of proving the contract, and would have lost his case in the absence of evidence, and was entitled to open and close the argument.
    Appeal from Montgomery Circuit Court; Earl Witt, Judge;
    reversed.

      Isaac L. Awtrey and Frauenthal & Johnson, for appellant.

      Witt S Witt, for appellee.
   Humphreys, J.

This suit was brought by appellant, a Missouri corporation, against appellee, C. T. McKinney, to recover $1,236, the balance due on a car of flour alleged, to have been sold appellee on the 29th day of January, 1923, at prices set forth in the complaint. A writ of garnishment was procured against the Hartford Insurance Company and the Firemen’s Fund upon an allegation ithat said companies were indebted to said appellee upon policies issued. to it by said company, covering the flour and other goods.

Appellee C. T. McKinney filed an answer denying the material allegations of the complaint and alleging that the flour in question was consigned to him for sale, for which he was to account weekly as he sold same. Appellee also prayed for damages in 'the sum of $50 on account of the issuance of the garnishments.

Appellant filed a reply to the answer denying that the flour was consigned to appellee for sale and accounting as a factor or agent. The garnishees filed an answer admitting that they were each indebted to appellant in the sum of $946.32 under fire insurance policies issued by each of them to it.

The cause was submitted to the jury upon the pleadings, the testimony adduced by the parties, and the instructions of the court, which resulted in a verdict and consequent judgment in favor of appellee, from which an appeal has been duly prosecuted to this court.

Appellant introduced the following written order for the flour:

“Reuter Milling Company, January 29,1923.
“■Sold to C. T. McKinney, at Womble, Arkansas. To be shipped to jC. T. McKinney at Womble, Arkansas. How shipped: At once.
“130 barrels of Wonderful highest patent flour in 48 pound sacks, at $7.30 per barrel; 5 barrels of Self Rising flour in 48 pound sacks, at $7.60 per barrel; 70 barrels of Wonderful highest patent flour in 24-pound sacks, at $7.50; '5 barrels of Self-Rising flour, at $7.80. Pay weekly as sold.
“ Signature of Buyer: C. T. McKinney.
“Signature of Salesman: W. C. Green.”

It also introduced proof showing that $315 had been paid on the account by appellee, leaving a balance due it of $1,236.

Appellee introduced proof, over the objection and exception of appellant, to the effect that the flour was consigned to him for sale as a factor or agent of appellant, and that he fully accounted to appellant for the sale of the flour which he made prior to the destruction of same by fire, which occurred without carelessness or negligence on his part.

At the conclusion of the testimony appellant asked for three instructions, each of them being in effect a peremptory instruction, all of which the court refused to give, over its objections and exceptions.

Appellant also requested that it be permitted to open and close the argument, which request'was refused by the court, over its objection and exception.

There were no allegations or proofs offered of fraud practiced by appellant or its agent in the procurement of the written order which appellee admitted signing. The order on its face is unambiguous and is a complete contract for the sale and purchase of the car of flour in question. The written contract was not subject to contradiction or impairment by oral testimony. Under the allegations and proofs, therefore, the court should have instructed a verdict in favor of appellant for the unpaid purchase money due upon the car of flour, and should have adjudged the payment thereof out of the garnished moneys.

The court also erred in refusing to allow appellant to open and close the argument. Under the pleadings, the burden was upon appellant to prove the contract, and, if no evidence had been introduced, appellant would have lost the case. This entitled it to the opening and closing of the ¿rgument before the jury.

On account of the errors indicated the judgment is reversed, and the cause is remanded for a new trial.