author: MoHaney, J.

text:
    Commercial Credit Company v. Hardin.
    Opinion delivered December 12, 1927.
    1. Sales — fraud.—In an action by one who had purchased an automobile left with the dealer by the owner to sell, in which it was shown that the ear had been transferred to another before plaintiff purchased, and note and sales contract had been taken by the dealer, and sold to a credit company, evidence held to show that the first transfer was fraudulent as to the owner.
    2. Principal and agent — liability of principal. — Upon the principle that, where one of two equally innocent persons must suffer, he should bear the burden whose conduct has induced the loss, held that, where an automobile owner placed his car with the regular dealer for display and sale, and the dealer fraudulently disposed of the automobile, as between the original owner and the innocent purchaser of the notes and sales contract derived from the sale, the original owner hrast bear any loss, since he placed it within the power of the dealer to commit the fraud.
    3. Sales — rights of innocent purchaser. — Where an' automobile dealer fraudulently disposed of a car placed with him for sale, taking a note and contract which was sold to a credit company innocent of the fraud, and subsequently the dealer again sold the car to another purchaser, held that, as between the purchaser of the note and sales contract and a second purchaser, the rights of the former were superior.
    Appeal from Clark Chancery Court; C. E. Johnson, Chancellor;
    reversed.

      McMillan & McMillan, for appellant.

      Joe Hardage, Rogers, Barber S Henry and Raymond Jones, for appellee.
   MoHaney, J.

This action was instituted in the Clark Circuit Court by the Knight-Overland Company, hereinafter called the Knight Company, against appellee, J. J. Hardin, ■appellamit, Commercial Credit 'Company, hereinafter called the credit company, O. L. McElhanon, J. 0. Jones and Mack-Overland Company, hereinafter called the Mack Company, to recover possession off one Star coupster automobile. .The credit company filed an answer and cross-complaint, making Hardin and the others defendants in the cross-complaint, and, by agreement, the case was transferred to the chancery court and tried there. It is undisputed that the title to the Star coupster was originally in appellee, Hardin, and was acquired by him in the following manner:

He traded V. L. Massey a piece of land for two automobiles, one of which was !a Willys-Knight. He left the Willys-Knight in the show window of the Mack Company, a corporation in the automobile business at Arkadelp'hia, in which he had formerly been a stockholder, with instructions to the Mack Company to sell the car for $1,135 in cash. The Mack Company traded the Willys-Knight to a man from Hope for the Star coupster in question, and a difference represented by title-retaining notes to the Willys-Knight, which were made payable to the Mack Company, on the forms of the credit company, and these notes were sold to the credit company and the proceeds paid to Hardin in the form of a check from the Mack Company. The Star .coupster was then put in the show window <of the Mack 'Company, by instructions from Hardin, to be sold, as he says, for $735 cash, and, if sold on a credit, the security to be approved by him; but, according to MicElhanon, who was. the manager of the Mack Company, it was'left there to be 'Sold as a second-hand car at the best price obtainable, and to be handled in the same manner as he had formerly handled" the deal for the Willys-Knight.' The Star coupster remained in the Mack 'Company’s show room for some three or four months, and was sold by J. M. Bobo, who was in charge of the sales department for the Mack Company, to J. 0. Jones, on June 29,1926, for $850 plus service charge, making a total cost to the buyer of $946.90, of which, according to the conditional .sales agreement signed by Jones and the Mack Company, by McElhanon, the buyer had paid $340 cash and agreed to pay the balance of $609.90, in twelve monthly installments cf $50.57 each, the first one month after date, and monthly thereafter. Jones was an employee of the Mack Company at the time. Jones executed his note for the deferred payments, and this note and the conditional sales contract were sold and assigned to the credit company for the net sum of $510 cash, Which was received by the Mack Company and deposited to its credit in the Bank of Arkadelphia. Hardin did not get this $510. On or about September 9, thereafter, at the suggestion of Hardin, O. L. McElhanon, acting for the Mack Company and Hardin, called up the Knight Company at Little Bock about trading the Star coupster for a new Overland car, and, as a result of that conversation, went to Little Bock, where he made a trade with the Knight Company for a new Overland, by turning in the Star coupster and paying $489 cash, check for which had been given him by Hardin, signed in blank, and the new Overland ear was taken back to Arkadelphia, and was left by Hardin in the Mack Company show window for sale. The July, August and September payments on the Jones note, held by the credit company, were made by the Mack Company, Jones never having taken the 'Star coupster out of the possession of the Mack Company, or made any payments thereon, none having been made at the time of the alleged purchase, and none of the installment payments having been made by him. The October and November payments became delinquent, and a representative of the credit company was sent to Arkadelphia to check the matter up, collect payments or take possession of the car. He interviewed Jones, who denied that he had ever purchased the car, signed the note or the contract, and he there learned that the Star couipster bad been traded to the Knight-Overland Company in Little Bock, where he came and demanded the car or the money. The Knight 'Company, after consulting with its attorney, turned the Star coupster over to the credit company’s agent, and the credit company has had the same in its possession since that time. A short time thereafter the Knight Company instituted this action as above stated, and, on a trial of the case, the court rendered a decree in favor of the Knight Company against the credit company for $550 or the delivery of the oar in as good condition as it was when surrendered; in favor of the credit company against J. 0. Jones and the Mack Company for the balance due on its note, $455.13, and dismissed the complaint of the plaintiff and the cross-complaint of the credit company as to J. J. Hardin, J. B. Hardman and O. L.' McElhanon for want of equity, it appearing that the' Mack Company had become insolvent and J. B. Hardman had ’been appointed receiver therefor.

From the judgment against it the credit company has prosecuted an appeal to this court.

We think the evidence shows there were three innocent parties to this controversy: J. J. Hardin, the Knight-Overland Company and the Commercial Credit Company. We are furthermore of the opinion that the evidence conclusively shows that the pretended sale of the Star coupster to J. 0. Jones by the Mack Overland Company, acting through Bobo, was fraudulent, 'and made for the purpose of defrauding Hardin and the credit company. The credit company is an innocent purchaser of the paper executed by Jones to the Miack Company, -without any knowledge of the fraudulent transaction, and Mr. Hardin, through his agent, McElhanon, or the Mack Company, sold this car to the Knight Company without any knowledge of the former sale, although it is quite probable that his agent, McElhanon, knew all about this transaction, as it is undisputed that-he signed the checks which paid the installments that were paid to the credit company on the Jones note, and, since the Mack Company was in financial straits, if not entirely insolvent at the time of the pretended sale to Jones, it is hardly possible for the company to have received $510 which was deposited to its credit as the proceeds of the sale of the Jones.note to the credit company, without McElhanon knowing about it.

This case must therefore be decided, as was stated in the case of Coffman v. Citizens’ Loan & Investment Co., 172 Ark. 889, 290 S. W. 961, “upon the principle that, where one of two equally innocent persons must suffer, he should bear the burden whose conduct has induced the loss.” In this case Mr. Hardin, although equally innocent of any wrong or fraudulent conduct with the credit company, must hear the burden, because it was his conduct in putting the car in the place of business of McElhanon and the Mack 'Company for sale, and thereby putting' it in their power to do the very thing’s that have, been done in this 'Case. And we are of the opinion that this case is ruled by that case, in which the court quoted with approval from the Supreme Court of Appeals of Virginia, in Boice v. Finance & Guaranty Corporation, 127 Va. 563, 102 S. E. 591, 10 A. L. R. 654, in which it was held, substantially, that chattels bought by a dealer for the purpose of indiscriminate sale to the public, offered for sale at the place of business of the dealer, and of which the dealer has charge, to all intents and purposes as that of owner, cannot be mortgaged by him, though it be an automobile and easily identified. We do not quote from this case again, as it would serve no useful purpose to do so, but we do reaffirm the principles announced in that case, which were expressly approved in the Coffman case,- and hold, as a matter of law, that the fact that Hardin placed the Star coupster in the possession of the Mack Company for ©ale, even though with a limitation upon the price and terms of sale, puts him in no better position as regards the disposition thereof than the holder of a void chattel mortgage. Although the sale to Jones was a pretended, fraudulent and fictitious sale, the Commercial Credit Company, being an innocent purchaser of such notes, must be held to be the purchaser of such car subject to Hardin’s right of redemption therein, and, it having acquired its interest in said car prior to the sale thereof to the Knight Overland Company, its rights therein are prior and paramount to that of Knight Overland Company.

We are therefore of the opinion that the chancellor erred in rendering a decree in favor of the Knight Overland Company against the credit company for $550 or the return of the car, or on any other account. We are also of the opinion that the appellee, Knight Overland Company, is entitled to a judgment against J. J. Hardin, O. L. McElhanon and thé Mack Overland Company for the market value of the Star car taken in by it in its sale to Hardin of the new Overland, which the court found to be $550, and that J. J. Hardin is entitled to a judgment ag’ainst O. L. McElhanon, the Miack Overland Company, J. M. Bobo and J. 0. Jones for the full amount of loss sustained by him, with the right on his part'to redeem the Star car from the Commercial Credit Company by paying- the amount of its debt and interest, if he so desires.

The case will therefore ‘be reversed, and the cause remanded with directions to enter a decree in accordance with this opinion.


source: Caselaw Access Project

author: Hart, C. J.,_

license: Public Domain

text:
    Milburn-Johnston Grocer Company v. Davis.
    Opinion delivered December 19, 1927.
    1. Sales — waiver of breach. — A letter to a seller stating that the buyer would accept bagging, not delivered within the time required by the contract, if delivery were made at once, waived breaches of contract theretofore existing.
    2. Sales — waiver by accepting part of goods. — A buyer’s acceptance of half of 'the goods ordered, not delivered within the time required by the contract, held not to constitute a waiver of the seller’s second breach of contract in not delivering such goods promptly as stipulated in the buyer’s letter offering to accept them; such acceptance being merely the exercise of a reasonable effort to reduce damage.
    3. Sales — duty of buyer to minimize damages. — It is the buyer’s duty to minimize damages from the seller’s breach of contract, in failing to deliver goods by purchasing similar goods in the market, if possible, by the exercise of reasonable prudence.
    4. Sales — failure to deliver goods — damages.—The measure of a buyer’s damages for the seller’s failure to deliver part of the goods promptly is the difference between the contract price and the market price of similar goods at the time and place when the undelivered goods should have been delivered pursuant to agreement.
    Appeal from Pulaski Circuit Court, Second Division; Richard M. Mann, Judg-e;
    reversed.

      STATEMENT OF FACTS.
    The Milburn-Johnston Grocer Company, a company engaged in the wholesale grocer business, sued S. P. Davis, a merchandise broker, to recover damages in the sum of $1,200 for an alleged breach of contract in the sale of bagging and ties.
    John H. Johnston, president and manager of the plaintiff company, was a witness for it. According to his testimony, a contract for the sale of • the bagging and ties was first made by conversations over the telephone. On July 16, 1925, the defendant wrote to the plaintiff a letter in which he confirmed the sale of 1,000 sixty-yard rolls of Hindoo new 2-lb. bagging and 2,000 bundles of new 45-lb. arrow ties at a stipulated price contained in the letter. Shipment was to be made as ordered to October 1, without carrying charge. The letter also contained a stipulation as follows: “All contracts subject to conditions over which I have no control.” The defendant sent duplicate copies of the letter, and the plaintiff accepted the terms of the contract. On account of delay in the ships carrying baggage and ties of that make, only 600 rolls were delivered under the contract up to the first of October, 1925. After some further correspondence about the matter, on the 17th day of November, 1925, the defendant again wrote the plaintiff that he was doing the best he could about the bagging and ties, and was willing to substitute a different kind of bagging if the plaintiff would accept the substitution. On the 19th day of November, 1925, the plaintiff replied to this letter of the defendant and reminded him that'it had 400 rolls of Hindoo bagging due under the contract, and that this amount was needed to take care of the contracts of sale it had made to its customers. The letter stated that the plaintiff had done the best it could to get its customers to .accept the excuses which the defendant had made to the plaintiff in regard to the delay in the delivery of the bagging. The letter told the defendant that, if the plaintiff could get delivery at once on the 400 rolls of bagging, in order to stop suits which, its customers had brought, it would accept the shipment.
    ' According to the testimony of Johnston, the plaintiff agreed to accept the 400 rolls of bagging on November 19 in performance of the contract if the defendant would ship it at once. On the 28th day of December, 1925, a shipment containing 400 rolls of Hindoo bagging was received by the plaintiff from the defendant. The plaintiff accepted 200 rolls of the bagging because it could use that much in carrying out its contracts with its customers. The plaintiff refused to receive the remaining 200 rolls of the bagging, because it did not need them, on account of the season having closed. ‘ At the conclusion of the testimony of Johnston, the circuit court directed a verdict for the defendant, on the ground that the plaintiff had waived the breach of the contract on the part of the defendant by accepting the 200 rolls of bagging in December, 1925. From the judgment rendered in favor of the defendant the plaintiff has duly prosecuted an appeal to this court.

      Mehaffy £ Miller and Culbert L. Pearce, for appellant.

      McMillen £ Scott, for appellee.
   Hart, C. J.,_

(after stating the facts). The judgment of the circuit court was wrong. Under the terms of 'the original contract, the bagging and ties were to be delivered by' October 1, 1925. Up to this time the defendant had only delivered to the plaintiff 600 rolls of bagging, so that there was still due under the contract 400 rolls of bagging. The failure to deliver the bagging in the time required by the contract constituted a breach of the contract on the part of the defendant; but, according to the plaintiff’s own testimony, this breach was waived by it. On November 19, 1925, Johnston, as president and manager of the plaintiff company, wrote to the defendant that the plaintiff would accept the remaining 400 rolls of bagging under the contract if delivery was made at once. The defendant delayed delivering the 400 rolls of bagging until the latter part of December, 1925. This did not constitute a shipment and delivery at once, as required by the plaintiff.

The court, in instructing a verdict for the defendant, proceeded upon the theory that this additional breach of the contract was waived by the plaintiff accepting 200 rolls of the-bagging when it was delivered in the latter part of December, 1925, and based its ruling upon Truemper v. Thane Lumber Co., 154 Ark. 524, 242 S. W. 823. In that case there was acceptance of money for a shipment of logs after knowledge of a breach of the contract. There the money was received in payment of the logs in performance of the contract, and the other party had a right to consider that a breach of the contract had been waived by the acceptance of the money in part performance of it. Here the facts are different. The letter of November 19,1925, written by Johnston to the defendant, was a waiver of all breaches of the contract which had occurred prior to that time, under the doctrine of the case just cited.

It became the duty of the defendant, however, to ship the remaining 400 rolls of the bagging promptly. This he did not do, and his delay in delivering the 400 rolls of bagging constituted an additional breach of the contract. It cannot be said, however, that, because the plaintiff received 200 rolls of this bagging, it waived this breach of the contract. If it had accepted the 400 rolls of bagging, the contract .would have been at an end by performance on the part of the defendant and acceptance by the plaintiff. The plaintiff would have had the right, however, to reject the whole 400 rolls of bagging because of the delay in delivering it. Under the settled rules of law in this State, however, it would have been the duty of the plaintiff to minimize its damages ; and if, by the exercise of reasonable prudence on its part, it could have purchased similar bagging in the market in the fulfillment of its contract, it would have been required to do so. Young v. Berman, 96 Ark. 78, 131 S. W. 62, 34 L. R. A. (N. S.) 977. Hence the action of the plaintiff in receiving the '200 rolls of bagging which could be used by it was the exercise of a reasonable effort on its part to reduce the damages suffered by it, and did not in any sense amount to an acceptance■ of the bagging under the terms of the contract so as to constitute a waiver of the breach of it.

In this view of the matter, under the plaintiff’s own evidence it is. only entitled to damages for the failure to deliver 200 rolls of bagging promptly after its letter of November 19, and the measure of damages in such a case would be the difference between the 'contract price and the market price of similar 'bagging' at the time and place when the 400 rolls should have been delivered pursuant to the letter written by the plaintiff to the defendant on November 19,1925. Clear Creek Oil & Gas Co. v. Bushmaier, 165 Ark. 303, 264 S. W. 830.

For the error in directing a verdict in favor of the defendant the judgment must be reversed, and the cause will be remanded for a new trial.


author: Hart, C. J.

text:
    Ogan v. Jackson.
    Opinion delivered December 19, 1927.
    Waters and watercourses — sale of water improvement district— distribution of profits. — Where the plant of an old water and light improvement district was purchased by a new district, and, in consideration of the price of the plant, the landowners in the old district received a reduction in assessment of benefits, and thereafter the new district was purchased by a light and power company, which assumed the payment of outstanding bonds, the amount in the hands of the new district as profits and purchase price was properly distributed equally among the landowners of the old and new districts.
    Appeal from Oross Chancery Court; A. L. Hutchins, Chancellor;
    affirmed.

      T. E. Lines, for appellant.

      Killough, Killough & Killough, for appellee.
   Hart, C. J.

Appellants prosecute this, appeal to reverse a decree of the chancery court ordering them, as commissioners of Water and Light Improvement District No. 2 of Wynne, Arkansas, to pay to appellees, as owners of real property in said district, a certain per cent, of the benefits assessed by said improvement district against the real property of appellees as their part of the profits derived from the sale of the plant of said improvement district.

A statement of the facts sufficient for the purposes of this appeal is as f ollows: In 1899, Water and Light Improvement District No. 1, embracing a portion of the incorporated town of Wynne, was organized.' The corporate limits of the town were subsequently extended, and, it having the requisite population, Wynne became a city of the second class. Water and Light Improvement District No. 2 embraces the territory of District No. 1 and much other territory of the city of Wynne, and was organized for the purpose of reconstructing the existing waterworks and extending the same. An attack upon the validity of the new district was sustained on the ground that it had no power to acquire the water and light plant constructed by the old district. Sembler v. Water & Light Improvement District No. 2, 109 Ark. 90, 158 S. W. 972. Subsequently the Legislature of 1915 passed an act validating the organization of Light and Water Improvement District No. 2 of Wynne and authorizing the organization of improvement districts for the purposes of reconstructing and extending waterworks and electric lights. Acts of 1915, p. 9. Pursuant to the power conferred by the provisions of this act, said District No. 1 sold its plant to said District No. 2 for the sum of $10,000. The old plant was incorporated into and became a part of the new plant of said District No. 2. The new plant cost a total of $100,000. Bonds to the amount of $90,000 were issued to raise funds with which to pay the additional cost of the new plant. It was agreed that the $10,000 owed to District No. 1 should be paid by allowing a set-off to the property owners in the assessment of benefits upon their property. The Legislature of 1923 passed an act authorizing the sale of waterworks, gas or electri e plants belonging to or operated by municipal corporations or improvement districts. Gren. Apts 'of 1923, p. 252. Pursuant to the provisions of this act, the Arkansas Light & Power Company purchased the plant of said District No. 2 in February, 1926. The consideration was $35,000 in cash and the assumption of outstanding bonds of the district aggregating $83,000. District No. 2 already had on hand profits from .the proceeds of operation of its plant in the sum of $10,525.53. This made a total of $45,525.53 to be disbursed to the property owners in said District No. 2.

Appellees owned property in said District No. 2, but not in said District No. 1. It is the contention of appellees that the proper distribution of the sum of $45,525.53 in the hands of appellants entitles each owner of real property in said District No. 2 to a pro rata share of said profits, and that the plant of the original district, valued at $10,000, should not be taken into account in making the disbursement.

We are of the opinion that the decision of the chancellor was correct. It is true that the plant of District No. 1 was valued at $10,000 and sold to District No. 2 for that sum. In consideration of the sale, and in part payment of the price, the owners of real property in District No. 1 for a period of three years received a reduction in the assessment of benefits upon their property. When the property of District No. 1 was sold to District No. 2 and bonds in the sum of $90,000 were issued, the property situated in District No. 1 became liable for its proportionate part of these bonds. In other words, its property was liable for an assessment of benefits for the payment of these bonds the same as the other property in District No. 2. When District No. 2 sold its property to the Arkansas Light & Power Company and that company assumed the payment of the outstanding bonds, this relieved the property in District No. 1 from that burden as well as the other property in District No. 2. Besides this, there was a sum of money already on hand which had accrued as profits to District No. 2 in operating its plant. In the purchase of the plant, the Arkansas Light & Power Company agreed to furnish certain free service and also to pay a cash con■sideration, which has already been stated. Under these circumstances the 'owners of real property in District No. 1 have only the interest, in tbe money to be reimbursed to the property owners of District No. 2 as have the other property owners in said district. The chancellor recognized this equality of interest, and rendered a decree based thereon. It follows that the decree will be affirmed.


author: Hart, C. J.,

text:
    Brown v. Bradford.
    Opinion delivered December 19, 1927.
    1. ■ Landlord and tenant — damages for breach of covenant.— Probable profits to a lessee from cultivation of rented land is not the true measure of his damages resulting from a' breach of covenant of possession, and cannot be considered in determining the amount of such damages.
    2. Appeal and error — prejudice.—Where, in an action to recover damages for an alleged breach of a rent contract of a farm, plaintiff failed to allege any certain amount which he suffered in damages, a judgment of dismissal will not be reversed, since he would be entitled to recover only nominal damages.
    3. Appeal and error — nominal damages — new trial. — A new trial will not be granted for failure to assess nominal damages, where no question of permanent right is involved.
    Appeal from Pike Circuit Court; B. E. Isbell, Judge;
    affirmed.
    STATEMENT OF FACTS.
    D. A. Brown instituted this action in the circuit court against J. W. Bradford to recover damages for an alleged breach of a rent contract of a farm. According to the allegations of the complaint, the plaintiff rented twenty-three acres from the defendant, to be cultivated in cotton and corn during the year 1926, and was to furnish teams and tools to cultivate the land and harvest the crop for three-fourths of the cotton and two-thirds of the corn. It is also alleged that he took possession of the land, and was unlawfully evicted therefrom by the defendant in 1926, to his damage in the sum of $612.
    The defendant filed a motion to require the plaintiff to make his complaint more definite and certain. The court sustained the motion, and granted the plaintiff leave to file an amended and substituted complaint.
    According to the allegations of the amended and substituted complaint, the plaintiff was a tenant on the farm of the defendant, and rented from him twenty-three acres of land, to be cultivated in corn and cotton during the year 1926, and he was to pay as rent one-third of the corn and one-fourth of the cotton. He took possession of the land under the rent contract, and the defendant refused to permit plaintiff to work the land, and rented it to another person. The complaint further alleges that, on account of the late time for renting the land, he was‘unable to procure land for the year 1926 of sufficient amount and of the quality of the defendant’s farm. The complaint further alleges that the rental value was fifteen dollars per acre more than plaintiff contracted to pay, or a total amount of $345. It is also alleged that the plaintiff suffered special damag’es on account of being unable to procure employment for himself and for his two sons during a part of the year 1926. The complaint also alleges the following: “and that he and 'his sons and other members of Ms family were worth $5 per day,.and that they lost sixty days’ work, to his damages in the sum of $300.”
    The defendant filed a demurrer to the amended and substituted complaint, which was sustained by the court. The plaintiff refused to plead further, and the court dismissed his complaint. The case is here on appeal.

      P. L. Smith and Tom Kidd, for appellant.

      Alfred Feather ston and Pinnix & Pimmx, for appellee.
   Hart, C. J.,

(after stating the facts). The judgment of the circuit court was correct.

This court has held that the probable profits to a lessee from the cultivation of demised land is not the true measure of his damages resulting from the breach of a covenant for possession, and cannot be considered in determining the amount of such damages. Rose v. Wynn, 42 Ark. 257; Thomas v. Croom, 102 Ark. 108, 143 S. W. 88; and Reeves v. Romines, 132 Ark. 599, 201 S. W. 822, and cases cited. To attempt to measure the general damages by the probable profits to be had from a performance of a contract like the one in question involves too many uncertain factors, such as the fluctuation in the price of labor and the price of the crop, the weather, and other matters affecting the yield. Any estimate of the quantity and value of the crop must necessarily be conjectural, and the uncertainties in the matter make it very difficult to estimate the profits in cultivating a! farm-. Under the allegations of the original complaint, the plaintiff was to furnish the teams and tools, and cultivate the crop and receive a part of it. The amount of profits which he might receive, on account of the conditions mentioned above, could not even be approximated. The crop might be large or small, depending on the cost of labor and the price of the crop lafter it was raised; and, as we have already seen, this might fluctuate greatly. After the court sustained a motion to make the complaint more definite and certain, the plaintiff filed an amended and substituted complaint in which, in varying form, he made substantially the same allegations, as were contained in his original complaint. It is evident from the allegations of his amended and substituted complaint that his measure of damages would necessarily be the profits to be made in raising the crop, since the ■ rent which he was to pay was a part of the crop, and since he was to receive a part of the crop as his compensation for raising it. The allegation that the rental value was fifteen dollars per acre more than he contracted to pay did not add any element of certainty to the contract. After all, the loss of his bargain depended upon the amount of the crop which he might raise and the price he might receive for it.

In the complaint the plaintiff also asked for the recovery of special damages. Now, if his complaint had contained any definite allegation that lie had suffered special damages in any certain amount on account of the expense he had been put to in moving on and off the place and in preparing the land for cultivation, he would, under the authorities above cited, be entitled to recover such amount. He does not allege any certain amount which he suffered in special damages, and would therefore only be entitled to recover nominal damages. His complaint does contain a definite allegation that he and his sons and other members of the family lost sixty days’ work, which was worth $5 per day, but this was not an element of special damages. He should have alleged that he suffered damages in a definite sum on account of the expense he was put to in moving on and off the place and in preparing the land for cultivation. As we have already seen, under the allegations of the complaint he would only be entitled to nominal damages in this respect, and a new trial will not be granted for a failure to assess nominal damages where no question of a permanent right is. involved. The reason is that it is the settled rule of this court not to reverse a judgment unless for prejudicial error, and no prejudice could have resulted to the plaintiff in this action. The court gave him permission to make his complaint more definite and certain either in respect to general damages or special damages alleged to have been suffered by him, and he refused to do so.

Therefore the judgment will be affirmed.


text:
    Jackson v. Madison County.
    Opinion delivered December 19, 1927.
    1. Counties — powers of county court. — Under Const, art. 7, § 28, the county court is the general fiscal agent of the county, and has power to do all things necessary to the management of its internal affairs.
    2. Constitutional law — construction of amendments. — In construing constitutional amendments, the courts keep in view the Constitution as it stood at the time the amendment was made, the evil to be remedied by the amendment, and the amendent proposed, by which the evil is to be remedied.
    3. Counties — object- of amendment 11. — When the whole scope and purpose of Amendment 11 is' considered, • it is evident that it was intended to provide for the payment of county warrants outstanding at the time when the amendment was adopted, as well as to keep the counties within the amount realized from the maximum tax levy for county purposes in their yearly expenditures for running the county government in the future.
    4. Counties — civil divisions of the state. — Under Constitution of 1874, counties are civil divisions of the State for political and judicial purposes, and are its auxiliaries and instrumentalities in the administration of its government.
    5. Counties — duty to issue bonds. — Where it affirmatively appears that the ordinary governmental expenses of the county will require a maximum tax levy of -five mills annually, leaving nothing for the payment of warrants outstanding at the time of the adoption of Amendment 11, it became the imperative duty of the county court to issue bonds to pay such outstanding warrants, and its action in failing to do so is the subject of judicial review.
    Appeal from Madison Circuit Court; J. S. Maples, Judge;
    reversed.
    STATEMENT OF FACTS.
    This appeal is prosecuted to reverse a judgment of the circuit court refusing to issue a writ of mandamus to compel the county court of Madison County to issue interest-hearing bonds under Amendment No. 11 for the payment of its outstanding warrants.
    The facts raising the issues in this appeal may be stated in a condensed form as follows: Appellant, E. F. Jackson, was, on and prior to December 7, 1924, and is now, the holder of $14,045.86 of valid county warrants of Madison County. These warrants, together with other warrants, aggregating the sum of $30,000, were outstanding at the time of the adoption of Amendment No. 11 to the Constitution, on December 7, 1924.- It was shown to the county court of Madison County that the maximum tax levy of five mills under our Constitution was consumed in payment of the annual budget of Madison County, and had been so consumed for several years past. It was also shown that the value of property in said county is decreasing and that there is no prospect, for a reasonable time in the future, for any increase in the value of the taxable property so that the maximum levy for county purposes will meet the annual budg'et for running the county government and leave any margin for the payment of warrants outstanding at the time of the adoption of Amendment No. 11.
    Application was made to the county court, under these facts, to issue interest-bearing bonds in payment of said outstanding warrants and to make a levy of not exeeedi-ng three mills on the dollar, as provided in said Amendment No. 11, for the payment thereof. The county court refused to issue the bonds, and application for mandamus was made to the circuit court to compel it to do so. The circuit court dismissed the application of appellant for the writ of mandamus, and, as above stated, the case is here on appeal.

      Duty & Duty, for appellant.

      F. S. Rice and J. B. Harris, for appellee.
   Hart, C. J.,

(after stating the facts). In the beginning it may be stated that, under our Constitution, a county court is the general fiscal agent of the county, and has, in general, power to do all things necessary to the management of its internal affairs. Leathem & Co. v. Jackson County, 122 Ark. 114, 182 S. W. 572, Ann. Cas. 1917B 438; and Martin v. State, 171 Ark. 576, 286 S. W. 873. Bearing* this in mind, the particular question raised by this appeal is whether or not the county court is bound, under any circumstances, on the application of the holder of warrants outstanding at the time Amendment No. 11 was adopted, to issue interest-bearing bonds in payment therefor;- or, in short, whether the discretion given the county court, as heretofore held by this court, is the subject of judicial review. In deciding this question we deem it proper to review, in a brief way, our previous decisions construing the Amendment and the rules of interpretation which the court has endeavored to apply.

From the early history of the court to the present time, in determining the intention of the framers'of a constitutional amendment, the court has kept in view the Constitution as it stood at the time the amendment was made, the evil to he remedied by this amendment, and the amendment proposed by which the evil is to be remedied. State v. Scott, 9 Ark. 270; Ferrell v. Keel, 105 Ark. 380, 151 S. W. 269; Kirk v. High, 169 Ark. 152, 273 S. W. 389, 41 A. L. R. 783; Combs v. Gray, 170 Ark. 956, 281 S. W. 915; Pioneer Construction Co. v. Madison County, 174 Ark. 298, 296 S. W. 729; and Polk County v. Mena Star Co., ante p. 76. In other words, it is the duty of courts to give effect to all provisions of an amendment and harmonize them by construing the language used according to its natural and ordinary meaning, to the end that the object and purposes sought by the framers of the amendment may be accomplished.

Amendment No. 11 is very broad in its scope, and evidently contemplated a radical departure from the existing way of managing the fiscal affairs of 'Counties, and manifestly intended to place them on a cash basis and to keep them so. When its whole scope and purpose is considered, it is evident that it was intended to provide for the payment of county warrants outstanding at the time the amendment was adopted as well as to keep the counties within the amount realized from the maximum tax levy for county purposes in their yearly expenditures for running the county government in the future. So it will be readily seen that, in order to harmonize the provisions of the amendment and at the same time to remedy the defects in the Constitution on the same subject, grave and perplexing difficulties necessarily arose in the minds of the officers whose duty it became to carry into effect the provisions of the amendment, and in many instances these perplexities and doubts could only be settled by an appeal to the courts. In turn it has given the courts great concern to interpret the amendment in such a way as to carry out the object and purposes of the framers of it by giving the' language used its ordinary meaning and by giving some effect to every provision of the amendment without emphasizing or giving undue prominence to any part of its provisions.

In construing the amendment the court has recognized that, under our Constitution, counties are civil divisions of the State for political and judicial purposes, and are its auxiliaries and instrumentalities in the administration of its government. Cole v. White County, 32 Ark. 45; and Pulaski County v. Reeve, 42 Ark. 54.

The court has also recognized that the only means of payment of the debts contracted by counties is by levy of taxes on property in the county, as provided for in the Constitution. Keeping this in view, we have held that the quorum court, which is presided over by .the county judge, may make an annual levy up to its constitutional limit for county purposes, and that the county court may set apart so much of this levy for the building of a new courthouse as may be spared from meeting other governmental expenses in running the county. The court has said that, where the county court, in good faith, finds, upon an investigation of the fiscal affairs of the county, that there will be a margin left, if spread over a series of years, sufficient to meet the annual payments for the construction of a courthouse,such contract will be a valid one, and the annual payments will be considered allocated or appropriated to the construction of a courthouse, and cannot be used for any other purpose: The court said that this will not amount to an appropriation of the annual payments out of a specific fund, because all payments must be made-out of the county general revenue fund, but they are set apart or appropriated for the specific purpose of building a courthouse and cannot be diverted from the purpose for which it is levied. Kirk v. High, 169 Ark. 162, 273 S. W. 389; Ivy v. Edwards, 174 Ark. 1167, 298 S. W. 1006; and Lake v. Tatum, ante p. 90.

In Pioneer Construction Co. v. Madison County, 174 Ark. 298, 296 S. W. 729, a holder of the county warrants of Madison County brought before us the question of whether or not-Amendment No. 11 should be interpreted as making it mandatory in all cases upon county courts to issue interest-bearing bonds where there was a valid outstanding indebtedness of the county at the time the amendment was adopted. This case involved the consideration of the proviso in Amendment No. 11, which 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 issue 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.”'

It was contended that the word “may” should be construed as “must,” under the rule of construction in Washington County v. Davis, 162 Ark. 335, 258 S. W. 324, that, whenever the rights of the public or third persons depend upon the exercise of a power or the performance of a duty to which the word “may” refers, it should be construed to mean “shall.” We recognized that the word “may” is construed as “shall” or “must” where the context or subject-matter compels such construction, but we held that the word “may,” as used in the proviso to Amendment No. 11, gave a discretion to be exercised by the county court in the issue of interest-bearing bonds to pay the indebtedness of the county existing at the time the amendment was adopted.

Again, in Polk County v. Mena Star Co., ante p. 76, the court had under review whether or not the county court of Polk County had abused its discretion in refusing to issue bonds in payment of valid warrants outstanding at the time of the adoption of Amendment No. 11. tinder the facts of that case it was shown that the county court was, in good faith, endeavoring to pay such outstanding warrants out of the five-mill tax levy for general county purposes, and that it was actually making material progress in the payment of such outstanding warrants. The evidence showed that, if the affairs of the county were economically and judiciously administered, the warrants outstanding at the time of the adoption of Amendment No. 11 could be paid within a reasonable time under a five-mill tax levy for general county purposes, and that, at the same time, the annual budget of the -county for the expenses of administering its affairs and running its government could also be met. Under these circumstances we held that the county court did not abuse its discretion in refusing to issue bonds under Amendment No. 11 and to make an additional tax levy of not exceeding three mills with which to pay them.

In the case at bar we have an entirely new phase of the question presented to us. The record contains an affirmative showing, upon undisputed facts, that the ordinary governmental expenses of the county will require a maximum tax levy of five mills annually, or, in other words, that the annual budget of the county for its governmental expenses will absorb all of • the maximum levy for taxation which can be made under the Constitution for general county purposes. This, will leave nothing for the payment of the warrants outstanding at the time of the adoption of the amendment. Thus it will be seen that one of the objects of the amendment will be defeated, if it be held that the county court, at will, may refuse to issue bonds, under any circumstances, for the payment of the county indebtedness existing at the time of the adoption of the amendment. In all cases involving the interpretation of the amendment we have recognized that there were two controlling purposes in the minds of the framers of the amendment. One of them was to pay the running expenses of the county government cut of the taxes levied annually, for county purposes, and not to permit the county, under any circumstances, to go in debt beyond the amount of money they could derive from the maximum amount that could be levied under the Constitution for general county purposes. The other object was to provide for the payment of the existing indebtedness at the time of the adoption of the amendment. As we have already seen, the question of issuing interest-bearing’ bonds or not for the ¡payment of this outstanding indebtedness was left to the discretion of the county court; but the discretion given the county court was not one to be exercised at will, but it was subject to judicial review. Under the facts of this particular case it became the imperative duty of the county court to use the power eonf erred upon it under the provision of Amendment No. 11 to carry out the intention of the framers of the amendment, and its action in failing to do so is the subject of judicial review. The principle here decided was recognized in Julius v. The Bishop, 42 Law Times Reps. 546. In that case the court had under consideration the words “it shall be lawful,” and said that they were words making that legal and possible which there would be no rig'ht or authority to do. Continuing, the Lord Chancellor said:

“They confer a faculty or power, and they do not of themselves do more than confer a faculty or power. But there may be something in the nature of the thing empowered to be done, something in the object for which it is to be done, something in the conditions under which it is to be done, something in the title of the person or persons for whose benefit the power is to be exercised, which may couple the power with a duty, and make it the duty of the person in whom the power is reposed to exercise that power when called upon to do so. Whether the power is one coupled with a duty such as I have described is a question which, according to our system of law, speaking generally, it falls to the Court of Queen’s Bench to decide on an application for a mandamus.”

We think the quotation from that case is applicable to the question which has to be considered in the case at bar, and are of the opinion that, when the facts of this particular case are read in the light of our former decisions interpreting the amendment, and considered in the light of what we have here said, the county court abused its discretion, and that its action was arbitrary in law. The circuit court should have issued a writ of mandamus to compel it to issue interest-bearing bonds in payment of tbe indebtedness of tbe county existing at tbe time of tbe adoption of Amendment No. 11. Therefore tbe judgment of the circuit court will be reversed, and tbe cause will be remanded with directions to tbe circuit court to grant tbe writ of mandamus as prayed for, and for further proceedings according to law. It is so ordered.

Humphreys, J., not participating.

Smith, J., dissenting.


author: Wood, J.

text:
    Portis v. Ballard.
    Opinion delivered December 19, 1927.
    1. Municipal corporations — improvement district — collateral attack on proceedings. — Where a property owner delays until after the period of time prescribed by statute for a direct attack on the action of the city council in establishing a water or sewer district and on the assessment of benefits: to the real property situated therein, a suit by the property owner to review the proceedings of the council establishing the district or the report of assessors in assessing the benefits to the real property within the district is a collateral attack, and such proceedings can only be set aside when they appear on their face to be demonstrably erroneous.
    2. Constitutional law — due ' process. — The opportunity given to owners against whose property assessments in an improvement district have been levied to attack such assessments within the time fixed by law is due process.
    3. Municipal corporations — assessments for improvements — collateral attack. — Where property owners attack collaterally the proceedings creating improvement districts or the proceedings for levying assessments therefor, extraneous testimony, such as that of engineers, tending to prove that certain portions of the territory embraced in the district could not be benefited by the contemplated improvements, is not admissible.
    4. Municipal corporations — assessments in improvement district — collateral attack. — Cross-complaints of property owners, when sued for the collection of assessments in improvement districts, alleging that such assessments were void, because the property embraced within the districts could not be benefited by the improvement, held a collateral attack on the validity of the organization of the district.
    5. Municipal corporations — improvement assessments — demonstrable mistake. — In actions by the commissioners of water and sewer districts to collect assessments levied against property, wherein the defendants filed cross-complaints attempting to show that the formation of such districts and the assessments levied were void, in that lands of defendants were not, ‘and could not be, benefited by including same in the districts, the fact that a river ran through the town, and separated certain portions of the lands embraced in the district, and that certain of the lands were farming territory, held insufficient to show a demonstrable mistake in assessing benefits on the property in controversy.
    Appeal from Poinsett Chancery Court; J. M. Futrell, Chancellor;
    reversed in part.

      John 8. Mosby, for appellant..

      J. Brinkerhoff, for appellee.

      Cooley, Adams <$> Fuhr, amici curiae, for appellants.
   Wood, J.

Separate actions were instituted in the chancery court of Poinsett County by the commissioners of Water District No. 1 and Sewer District No. 2 of the town of Lepanto against W. B. Ballard and others, appellees, for the collection of alleged delinquent improvement district taxes, penalty and costs, and praying that liens be declared on the real property in the district and that same be subject to the payment of the delinquent taxes and penalties. The lands alleged to be delinquent were described and the amount of the assessments thereon set forth in a list which was attached as an exhibit to the complaint. There was an answer in each of the actions by property owners of the district, denying all the material allegations of the complaints, and raising the only issue involved here, to-wit, that the lands upon which the benefits were assessed and upon which liens are sought were not benefited and could not be benefited by the improvements because they were not connected with the present improvements, and it was not contemplated that they would be connected, and that the assessments sought to be collected bv this action were therefore void.

The causes were, by consent, consolidated and heard by the chancellor. The court heard the consolidated cause upon the pleadings, exhibits, depositions of witnesses, stipulation of counsel, and the maps of the improvement districts, from all of which the court found as follows:

That a certain tract of land belonging to the Union &• Planters'’ Bank & Trust Company, lying east of Little River and east of J. R. Hirschman’s. 4th Addition, containing about forty-two acres, and part of another tract lying east of Little River and west of the town of Lepanto, containing twenty acres, received no benefit whatever from the construction of the water and sewer improvements, and canceled the assessments on these tracts. The court further found that certain lots belonging to the Union & Planters’ Bank and Trust Company in J. R. Hirschman’s 4th Addition and certain lots and blocks in J. R. Hirschman’s 3rd Addition, and also certain lots and blocks belonging to J. R. Hirschman and Wilna Hirschman in J. R. Hirschman’s 4th Addition to the town of Lepanto, all of which are -described in the decree, had received no benefit from the sewer improvement district, and canceled and set aside the assessment for such sewer improvement district. But the court further found that this same property had received benefits from the water improvement 'district, land that the assessment for the water improvement district should be sustained. The court entered a decree according to its findings, permanently enjoining the collection of the assessments on the acreage property for both the water and sewer improvements and enjoining the collection of the assessments on the other property, that is, the property consisting of the lots and blocks in the town of Lepanto, for the sewer improvement, but declaring a lien and ordering the assessments paid on the lots and blocks in the town of Lepanto for the water improvement. This appeal by the districts and their 'Commissioners challenges the court’s decree canceling the assessments and denying the collection on the acreage property for both the water and sewer improvements, and also the decree canceling the assessments and enjoining the collection thereof on the town lots for the sewer improvements, and the appeal by the appellees challenges the decree declaring a lien on the town lots for the amount of the assessment thereon for the water improvement, and awarding the collection of the assessment for such improvement.

Every question at issue on these appeals is ruled by the opinion of this court in the case of Carney v. Walbe, ante p. 746. In the above case, among other things, we ■said:

“Where the property owner delays until after the period of time prescribed by statute for a direct attach on the action of the council establishing the district, and the assessment of benefits to the real property situated therein, a suit by the property owner to review the proceedings of a common council establishing the district or the board of assessors in assessing the benefits to the real property within the district is a collateral attack, and such proceedings can only be set aside when they appear on their face to be demonstrably erroneous.” .

In this case we reviewed former cases, especially the cases of House v. Road Improvement District, 158 Ark. 350, 357, 251 S. W. 12, and Blytheville v. Baker, 171 Ark. 602, 286 S. W. 945. The effect of our holding in these cases is that, on .collateral attack, what is' meant by a “demonstrable mistake” is such a mistake as can be shown only on the face of the record of the proceedings creating the district or assessing the benefits. Extraneous testimony, such as that of engineers and others, tending to prove that certain portions of the territory embraced in the district could not and would not be benefited by the improvements contemplated, is not relevant and competent on collateral attack. Such testimony is only competent and relevant where a direct attack is made by property -owners affected on the proceedings creating the districts and laying the assessments of benefits. The opportunity given property owners under the law to make such direct attack is due process; if they let this opportunity pass, they have no right to call in question the regularity of the proceedings either in creating the districts or laying the assessment of benefits, except where it can be demonstrated by an examination of the record itself creating the districts and laying the assessments that a mistake has been made. Such is the effect of our"decisions as shown by the review thereof and the conclusion reached in the case of Carney v. Walbe, supra. See also Stiewel v. Fencing District No. 6 of Johnson County, 71 Ark. 17, 70 S. W. 308, 71 S. W. 247; Board of Improvement v. Offenhauser, 84 Ark. 257, 105 S. W. 265; 25 R. C. L. 592; Hibben v. Smith, 191 U. S. 310, 24 S. Ct. 88, 48 L. ed. 195.

It would be supererogation to pursue the matter further.

The cross-actions by the defendants, in the case at bar are collateral attacks upon the assessments Which are sought to be collected by the original complaints herein. It is conceded that all the proceedings were regular under which these districts were created and the benefits assessed, but it is contended by the property owners who are resisting the collection of assessments that these assessments were void because their property was not benefited. If the testimony of the engineers were competent to prove such fact on this, collateral attack, we would agree with the learned chancellor that such testimony in this case is sufficient to prove that the property here involved is hot benefited. But we have examined the maps and plats showing the territory embraced in the districts and the topography thereof, with reference to the town of Lepanto, and it is impossible, to conclude from the face of the record of the proceedings creating the districts and assessing the benefits that the lands on which’the assessments are soug’ht to be collected are not benefited by the improvements. Certainly the fact that Little River runs'through the town and separates certain portions of the lands embraced in the districts, and that certain of these lands are shown to be acreage or farming territory, is not sufficient to show a demonstrable mistake in the assessment of benefits on the property'in controversy. There is nothing on the face of the record of the proceedings creating the districts and making the assessments from which the court will take judicial notice that there was a demonstrable mistake in making the assessments. As we have already seen, in this collateral attack on the assessments the testimony of engineers is not competent, under our decisions, for the purpose of demonstrating that a mistake was made in the proceedings creating the districts and making the assessments. The time for that has passed.

It follows that the decree of the court annulling the assessment on the acreage property for both water and sewer improvement is erroneous, and the same is reversed, and remanded with directions to dismiss the cross-complaints and to grant the prayer of the original complaint for the collection of the delinquent assessments on the acreage as well as on the town lots and for both-the water and sewer improvements. It follows also that so much of the decree as awards the collection of the assessments on the town lots for the water improvement is correct, and it is therefore affirmed.


author: Smith, J.

text:
    Whaley v. Niven.
    Opinion delivered December 19, 1927.
    1. Fraud — sale of bank stock — instruction.—In an action to recover the sum paid for bank stock and the amount of a subsequent assessment, an instruction that, to enable plaintiff to recover for false representations, it must' appear from the evidence that defendant seller, vice president of the bank, asserted the representations to be true, “of his personal knowledge,” held erroneous, since it was not essential for the jury to find that the defendant represented the bank to be solvent of his personal knowledge.
    2. Fraud — liability for false statement: — In order to charge the seller with fraud, it must be shown that he made an active attempt to deceive the buyer relative to some matter material to the contract, either by statements which he knew to be false, or by acts, conduct, or representations which suppress the truth and induce in the buyer a false impression.

      3. Fraud — when representations actionable. — To.be considered fraudulent in law, representations must be of a 'nature material to the contract, made by one who either knows them to be false or, not. knowing, asserts them to be true, and made with intent to have the other party act on them to his injury, and such must be their effect.
    4. Fraud — when representations fraudulent. — A false representation by a seller will be fraudulent, though he had no- knowledge of its falsity, if it is made as of a matter of truth of his personal knowledge.
    5. Fraud — -when representations fraudulent. — Though a purchaser must act with prudence in seeking the available means of ascertaining the truth, yet, if the seller, having peculiar knowledge of the matter, by misrepresentations or artifice induces the buyer to rely on his false statement, he will not be heard to say that the buyer could have ascertained the truth.
    6. Fraud — knowledge of falsity of representations. — Where a vice president of a bank selling the stock was charged with knowledge that the bank was insolvent when he asserted that it was solvent, he cannot excuse himself in an action to recover the sum paid by saying that he merely expressed an opinion.
    7. Fraud — jury question. — In an action to recover a sum paid for bank stock and the amount of a subsequent assessment, the questions whether the seller, who was vice president of the bank, had merely expressed an opinion as to its solvency, and if so, whether that opinion reflected the honest judgment of the seller, held properly submitted to the jury.
    8. Trial — instruction as to burden of proof. — An instruction that the plaintiff must prove all the material allegations in his complaint by a “fair” preponderance of the evidence, was erroneous in using the word “fair” where specific objection was made.
    Appeal from Jefferson Circuit Court; Richard fd. Ma/im, Judge on exchange;
    reversed.

      Rowell db Alexander, for appellant.

      D. R. Niven, Jr., and II.. Jordan Monk, for appellee.
   Smith, J.

Appellant seeks by this s-uit to recover the sum paid by him for a thousand dollars of the capital stock of the Citizens ’ Bank of Pine Bluff and the amount of a subsequent stockholder’s liability he was required to pay by reason of the ownership of this stock.

In supp-ort of the allegations of his complaint, appellant testified that a close and intimate relationship existed between himself and appellee, who was an active vice president of the bank, and the owner of a large amount of its capital stock. Appellant desired to make a small investment, and spoke to appellee, in 1923, about the punchase of a thousand dollars of the capital stock of the bank, and, to induce this purchase, appellee represented that the bank was solvent, and, in reliance upon this representation, appellant contracted to buy and later purchased from appellee a thousand dollars of this stock, for which he paid $1,250; that the bank was at the time insolvent, and known so to be by appellee; and that, in January, 1925, the State Bank Commissioner took over the bank and required appellant, as the then owner of the stock, to pay an assessment of 100 per cent, against it, as provided by law.

Appellee admitted selling the stock, but denied mak-^ ing any false representations, in regard to its value, and stated that such representations as he did make were made in good faith and were mere expressions of his opinion, and were not made for the purpose of inducing the sale.

Certain instructions were given to which appellant excepted, and from the verdict and judgment in appellee’s favor is this appeal.

The law applicable to the issues stated was declared in the case of Hunt v. Davis, 98 Ark. 44, 135 S. W. 458, and the doctrine of that case was 'later reaffirmed in the cases of Jarratt v. Langston, 99 Ark. 438, 138 S. W. 1003; Bell v. Fritts, 161 Ark. 371, 256 S. W. 53; and Myers v. Martin, 168 Ark. 1028, 272 S. W. 856. It will not be necessary therefore to again review the law of the subject. It will suffice to determine whether the instructions given conformed to the law as declared in the cases cited.

The court gave, at the request of appellee, and over the objection and exception of appellant, an instruction numbered 6 reading as follows:

“To enable the plaintiff in this case to recover for false representations it must appear from the evidence that the defendant asserted the misrepresentations to be true of his personal knowledge, and made them with-. intent to have the plaintiff act-upon them to his injury. If defendant made such representations, honestly believing them to be true, and made them in good faith, without any intention to induce the sale to plaintiff, then the plaintiff cannot recover, and you will find for the defendant. ’ ’

This instruction was erroneous. It was not essential to a recovery for the jury to find that appellee represented the bank 'to be solvent ‘ ‘ of his personal knowledge,” and the instruction was erroneous in imposing this requirement before finding appellee liable.

The instant case is similar, under the relevant facts, to the case of Hunt v. Davis, supra, and, as the law there declared is directly applicable to the issues here joined, we make the following extensive quotation from that opinion, it being borne in mind that the alleged false representation in each case was made by an officer of the bank, whose relation thereto placed him in position to have, or in which he should have had, peculiar knowledge as to the bank’s condition. It was there said:

“The principles on the subject of fraud which are applicable to contracts for the sale of property generally apply likewise to contracts for the sale of shares of stock. In order to charge the seller with fraud, it must be shown that he has made an active attempt to deceive the buyer relative to some matter material to the contract, either by statements which he knows to be false, or by acts, conduct or representations which suppress the truth and induce in the buyer a false impression. Representations which are considered fraudulent in law must be of a nature that are material to the contract, and ‘must be made by one who either knows them to be false, or else, not knowing, asserts them to be true, and made with the.intent to have the other party act upon them to his injury, and.such must be their effect.’ Louisiana Molasses Co., Ltd., v. Fort Smith Gro. Co., 73 Ark. 542, 84 S. W. 1047. If a representation is made by the seller which he knows to be false, it will constitute fraud, but a representation will also be fraudulent, even if he had no knowledge whatever, if it is made of a matter as truth of personal knowledge. Cooper v. Schlesinger, 111 U. S. 148, 4 S. Ct. 360, 28 L. ed. 382; Kountze v. Kennedy, 147 N. Y. 124, 41 N. E. 414, 29 L. R. A. 360, 49 Am. St. Rep. 651; Cole v. Cassidy, 138 Mass. 437, 52 Am. Rep. 284.

“Although a purchaser must act with prudence and diligence in seeking the available means of ascertaining the truth, yet if the seller, having peculiar knowledge of the matter, by any misrepresentation or artifice induces the buyer to rely on his false statement, then the seller will not be heard to say that the buyer could have ascertained the truth. The very representations relied upon may have caused the purchaser to forbear from making further inquiry. If the false representations are made with the intent to induce the other party to act thereon, ordinary prudence does not require the other party to test the truth of such' representations where they are within the knowleldge of the party making them, or where they are made to induce the other party to refrain from seeking further information. Gammill v. Johnson, 47 Ark. 335, 1 S. W. 610; Graham v. Thompson, 55 Ark. 296, 18 S. W. 58, 29 Am. St. Rep. 40; Stewart v. Fleming, 96 Ark. 371, 131 S. W. 955; Evatt v. Hudson, 97 Ark. 265, 133 S. W. 1023.

“While, ordinarily, statéments of the value of property are mere expressions of opinion upon which a purchaser is not entitled to rely, yet statements of fact which affect the value of the property, if false and made for the purpose of inducing the purchaser to rely thereon, are false representations which will constitute fraud in law. False statements made of material facts relating1 to the property or condition of a corporation which necessarily affect the value of the stock (6,f such corpora^ tion are not mere expressions of opinion upon which a purchaser of such stock has no right to rely, but they are representations which will constitute fraud if, by means of sudh misrepresentations, the purchaser has been induced to 'buy such stock. Clark & Marshall, Private Corp., § 616b; 20 Cyc. 60.”

Appellant insists that, inasmuch as appellee was actively connected with the management of the bank, he cannot be heard to say that any statement made by him as to the bank’s condition was the mere expression of an opinion, and that he is liable for having made a fal.se representation if he falsely stated the bank was solvent, although in so doing he professed merely to be giving his opinion on that subject. The opinion quoted from does not go to that extent. Of course, the statement as to the bank’s condition, althoug’h expressed as a mere opinion, must have reflected the honest judgment of the officer making the statement. If, under all the circumstances, appellee was charged with knowledge that the bank was not solvent when he asserted that it was, he cannot excuse himself by saying that he merely expressed an opinion. Nor can he be heard to say that he had merely expressed an opinion, if he made a false statement of a material fact relating to the property or condition of the bank, which necessarily affected the value of the stock.

It was therefore proper, as was done in this case, in instructions given to the jury, to submit the question whether appellee had merely expressed an opinion as to the solvency of the bank, and, if so, whether that opinion reflected the honest judgment of appellee. If it did not, appellee is' liable as having made a false representation, although it was expressed in the form of a mere opinion, if appellant relied and acted upon this opinion.

The court also gave, over appellant’s objection, an instruction lettered C, reading as follows.:

“The burden of proof is on the plaintiff in this ease throughout the whole case, and must prove all the material allegations in his complaint by a fair preponderance of the evidence.”

■Specific objection was made to the use of the word “fair” as imposing the requirement that something more than a mere or bare preponderance was required.

This court-has several times condemned instructions which appeared to impose the requirement that something more than a mere preponderance is required to establish the plaintiff’s case, and several of these cases were reviewed in the late case of Sealy Mattress Co. v. Southern Cotton Oil Co., 167 Ark. 405, 268 S. W. 611, where it was said:

‘ ‘ There was no specific objection made to either of the rulings of the court in giving instruction No. 4 and in modifying instruction No. 2, and the objection in each instance was general. It must be conceded that the use of the word ‘clearly’ or ‘clear,’ in connection with an instruction concerning the preponderance of the evidence, is improper, for, in a trial of the issues, the burden of proof is, discharged by producing a mere preponderance of the evidence. Shinn v. Tucker, 37 Ark. 580. But a general objection is not sufficient to bring the erroneous use of these words to the attention of the trial court. This should be done by a specific objection. In the case of St. L. I. M. & S. Ry. Co. v. Sparks, 81 Ark. 187, 99 S. W. 73, the court had under consideration an assignment of error relating to the giving of an instruction by the trial court which declared the duty of the defendant to establish its defense of contributory negligence ‘by a preponderance of the testimony to the satisfaction of the jury.’ This court condemned the use of the word ‘satisfaction’ as inaccurate, but held that a general objection was not sufficient to raise the question for review on appeal. In Hays v. Williams, 115 Ark. 406, 171 S. W. 882, an instruction was, given which used the word ‘fair’ in connection with a declaration as to the duty of the party to make out his ease by a preponderance of the evidence, and the use of the word was condemned by this court, but we held that it was necessary to raise the question by a specific objection. The same principle has been announced in other decisions of this court. Morris v. Collins, 127 Ark. 68, 191 S. W. 963; Bocquin v. Theurer, 133 Ark. 448, 202 S. W. 845.”

The judgment in the case quoted from was not reversed because no specific objection was made to the use of the word, “fair,” but in the instant case a specific objection was made, and it was therefore erroneous to impose this additional requirement on the plaintiff before permitting him to recover.

For the errors indicated the judgment must be reversed, and it is so ordered.


text:
    Luther v. Walker.
    Opinion delivered December 19, 1927.
    1. Boundaries — fixed monuments. — In determining boundaries, •fixed monuments are to be considered and to govern over courses and distances called for by the field-notes.
    2. Boundaries — deficiency in acreage of section — apportionment. —Where the original government survey of a section was incorrect, in that field-notes showed the length of the southern line to be 92.50 chains, when, the actual length was 75 chains, the deficiency in acreage should be apportioned between the southwest and the southeast quarter sections.
    3. Public lands — rules of land department.' — Courts recognize the right of the Land Department of the United States Government to make rules for the direction and control of surveyors in establishing the lines of the original government survey.
    Appeal from White Chancery Court; W. P. Beard, Special Chancellor;
    reversed.

      G. E. Yingling and A. W. Taylor, for appellant.

      Mehaffy $ Miller and Culbert L. Pearce, for appellee.
   Smith, J.

Appellants are the owners of lots 6, 7, 9 and 10, in the southeast quarter of section 1, township 9 north, range 4 west, and broug’ht this .suit to recover possession of a house alleged to be located on lot 10 in that quarter section. Appellee, Mrs. Denny, is the owner of the southwest quarter of this section, and insists that the house in question is on her land. The question between these coterminous owners is therefore the location of the true line between these two quarter sections.

The field-notes of the original United States survey and the Grovernment plat of section .1, township 9 north, range 4 west, was offered in evidence, and it appears from these records that the southwest quarter contains 160 acres and that the southeast quarter is. divided into four lots, numbered 6, 7, 9 and 10, each containing 40 acres, and a fifth lot, numbered 8, a parallelogram in shape, containing 46 acres, which last named lot lies along the east line of the section, which line is also the range line 'between ranges 3 west and 4 west. White River runs near the southeast corner of this section, and the testimony shows that, to such an extent as the river has changed its course since the original Government survey, which is very slight, the river has moved east, and not west.

The field-notes show the south line of this section to be 92.50 .chains in length, while the undisputed testimony shows, according to four separate surveys thereof, that the actual length of the south line of the section is only 75 chains, and that the south line of the section, if run from the southwest corner thereof in accordance with the field-notes, for a distance of 92.50 chains, as called for by the field-notes, would not only run across the range line which divides section 1, township 9 north, range 4 west, from section 6, township 9 north, range 3 west, but would also extend across White River, no part of which stream, according to either the field-notes or the plat, is in section 1, township 9 north, range 4 west.

The southwest corner of the section was found, and exists as an established corner, and the northwest corner of the southwest quarter was also located and established, but neither the southeast corner of the southwest quarter nor the southeast corner of the section itself has ever been found. In fact, every survey of the south half of this section made since the original Government survey demonstrates the inaccuracy and falsity of the original field-notes and the plat thereof. These field-notes and the plat thereof show the course and distance of the interior lines dividing the southeast quarter into five lots, but the conclusion is inevitable that the survey as reported was never in fact made on the east and south lines. The location of the range lines and the river makes it impossible for tbe field-notes to be correct, so that tbe southeast corner of the section, according to the field-notes, has never been found and is nonexistent in fact, yet this corner must be placed' in the range line, because that line forms the boundary of section 1, township 9 north, range 4 west, on the west, and section 6, township 9 north, range 3 west, on the east. This southeast corner of the section must be in the range line, because it cannot be anywhere else, yet the field-notes show the length of the south line of section 1 to be 92.50 chains, whereas every survey shows the actual length of this south line to be only 75 chains. We have therefore the case of an incorrect original Government survey, resulting in the loss of the southeast corner of the south-west quarter of the section and the southeast corner of the section itself.

A witness named Shelton, who was a farm laborer, and who did not profess to know anything about the field-notes, testified that he was present when the south.line .of the southwest quarter of the section-was surveyed, and assisted the surveyor, whose name he did not remember* in making the survey. He testified that the southwest corner of the section was found and marked, a fact about which none of the witnesses, differ, as the location of that corner has been definitely and accurately established. He also testified that the surveyor ran the south line of the southwest quarter, and rocks were placed at the southeast corner of the quarter section according to that survey.- He admitted, however, that the southeast corner of. the section was not found, and that that corner would be in, or across, the river. According to the testimony of this witness, the southeast corner of the southwest quarter, as thus located, would place the house in question on appellee’s land, and would give her the strip of land here in question.

We attach no importance, however, to the testimony of this, witness. He did not testify that the southeast corner of the southwest quarter was located, or that any witness trees or other monuments were found showing that corner. The surveyor did not find this quarter' section corner; he merely located a corner, and this was evi clently done by surveying on the course indicated by the field-notes for a distance of 40 chains from the southwest corner of the section. If the field-notes were correct, such a survey would have located the southeast corner o.f the southwest quarter, but the section cannot be surveyed according to the field-notes, because the superficial area does not exist for which the field-notes, call.

It was adjudged, in the decree from which this appeal comes, that appellee, Mrs. Denny, “is the owner of the southwest quarter of section one, township nine north, range 4 west, and that the east line of said southwest quarter should be and the same is. hereby established as being a line running due north from a point on the south line of said section one, 40 chains east of the southwest corner of said section one as established by the United States Government surveyor, so as to give 160 acres, of land in the said southwest quarter of said section; and that the title to said quarter section as herein established be and the same is hereby quieted and confirmed” in appellee, Mrs. Denny.

It is, of course, obvious that, in establishing the east line of the southwest quarter so as to give that quarter section 160 acres, a proportionate quantity of land was taken from the four lots owned by appellants in the southeast quarter, which lots, according to the field-notes and the Government plat, also contained 160 acres. It is also obvious that if, after thus establishing the east line of the southwest quarter by measuring 40 chains' from the southwest corner of the section, a similar method was' employed to establish the east line of the four lots owned by appellants, by extending the south line of the section 40 chains further, in accordance with the field-notes, lot numbered 8 would cease to exist, and the south line of the four lots, taking no account of lot 8, which is east of them, would extend five chains beyond the range line. as it is only 75 chains from the southwest corner of the section to the range line. This, of course, could not be done, as the boundary line of the section could, in no event, extend beyond the range line of the township in which the section is located.

Authority for the court’s action is asserted under § 57 of Clark on Surveying and Boundaries, which reads as follows:

“As to the proper manner of .placing the deficiency in a fractional section the courts hold, in sections having less than the full number of acres, where the quarter section corner cannot be found, the deficiency will not be divided between the quarter sections but must fall on the quarter directly on the township or range line.”

The author cites in support of the text quoted the case of Vaughan v. Tate, 64 Mo. 491, and that case alone. The doctrine of that case was expressly repudiated by this court in the case of Tolson v. Southwestern Imp. Assn., 97 Ark. 193, 133 S. W. 603.

Before discussing the last mentioned case it rpay be said that the statute (§ 1891, C. & M. Digest) provides that it shall be the duty of a surveyor, “in subdividing any section or part of a section of land originally surveyed under the authority of the United States, to make his survey conformably to the original survey,” and the Tolson case followed this statute by bolding that, where the official government survey established the section and quarter section corners, such corners will stand, though erroneous. But, as we have said, we have here a case where the southeast corner of the southwest quarter and the southeast corner of the section itself have not been and cannot be found. The facts here recited warrant the statement that these corners were never actually located by the government surveyor. Indeed, it is not too much to say that the survey is a false one, and was never made except on paper.

Under the rule that fixed monuments must govern, the south line of sootion 1 begins at the southwest corner of that section, an ascertained point, as that corner was found, and it must end in the range line, another fixed point, and the distance between these two points is 75 chains, or 4,950 feet, whereas the field-notes show the length of this south line to be 92.50 chains, or 6,105 feet, a discrepancy of 17.50 chains, or 1,155 feet. A difference so great in the survey of a line so short — considerably less than a mile — is strong evidence that the survey was never made, except on paper. Notwithstanding this fact, under the rules of surveying prescribed by the Government Land Department, this survey would govern the Location of the Lines of the coterminous owners if the corners established by that survey could be found. This is true because fixed monuments are to be considered and govern over courses and distances .called for by the field-notes. Meyer v. Board of Imp. Paving Dist. No. 3, 148 Ark. 623, 231 S. W. 12.

But it must be borne in mind that the only corners which have ever been located in the survey of the south half of this section are the southwest corner of the section and the northwest corner of the southwest quarter. The other corners cannot be found, nor can they be located by the field-notes, which are demonstrably and admittedly incorrect. These other corners are therefore lost and obliterated corners. Under these circumstances, should the deficiency in the acreage, which results from the error we have here several times stated, fall entirely upon the southeast quarter of the section, or should the deficiency be apportioned between the two quarter sections and each share proportionately in the loss'?

The question stated was covered by a quotation from 5 Cyc. 974, quoted with approval in the note in the case of Tolson v. Southwestern Imp. Assn., supra, as follows:

“ ‘In the case of government sections, interior lines in the extreme northern or western tiers of quarter sections, containing either more or less than the regular quantity, are to be 20 chains wide, and the excess or deficiency of measurement is always to be thrown on the exterior lots; elsewhere the assumed subd’ivisional corner will always be a point equidistant from the established -corners. This rule, however, has no application where the original surveys are found to be erroneous, in which case the excess or deficiency is to be apportioned to each subdivision within the boundaries where the corners are lost.’ ”

After approving the above quotation, this court proceeded to say:

“In the case of Caylor v. Luzadder, 137 Ind. 319, 45 Am. St. Rep. 183, 36 N. E. 909, the court recognized the general rule, but said: ‘ There seems to be a well recognized distinction between this rule as applied to original surveys, whether in the making of such surveys or in allotting the deficiency or overplus, when the correctness of such surveys is not questioned, and that where such original surveys are found to have been erroneous or the original corners and lines are wholly lost. ’
“The following authorities which we have examined are cited as recognizing the distinction: Bailey v. Chamblin, 20 Ind. 33; Jones v. Kimble, 19 Wis. 452 (429); Moreland v. Page, 2 Clarke (2 Iowa) 139; Westphal v. Schultz, 48 Wis. 75, 4 N. W. 136; James v. Drew, 68 Miss. 518, 24 Am. St. Rep. 287.
“The Supreme Court of Missouri has taken the contrary view. See Vaughan v. Tate, 64 Mo. 491; Knight v. Elliott, 57 Mo. 317.’’

After thus disapproving the doctrine of the Missouri case, upon which the text quoted from Clark on .Surveying and Boundaries was based, this court proceeded further to say:

“Continuing, the Supreme Court of Indiana said: ‘The Surveyor-General was not required to, and did not, locate the half-quarter posts or line, and, having surveyed the quarter, established the lines and located the corners thereof, these defined irrevocably the boundaries or limits of the quarter; the purchasers and the Government acted upon the assumption that the lines were correctly measured and returned 'by tbe deputy surveyor; in this all were alike deceived; the length of lines is less than that so acted upon, and, by every principle of equity, the deficiency should be borne by the several tracts in proportion to the quantities so presumed to be contained therein at the time of the purchase.’ ”

In that case, as in this, there were no ¡corners which served as fixed monuments which would govern, notwithstanding errors as to course and distance, and in that case, as in this, the field-notes were demonstrably erroneous, but, unlike the present case, there was in that case an excess instead of a deficiency as exists here.

In applying the rules there announced and here quoted the court said:

“The official plat shows that the distance from the quarter section corner on the west side of the section to the northwest corner of the section is 90 chains, when by actual measurement it is 93 chains and 62 links. The official plat also shows that the west line of lot 18 is 20 Chains, and that of lot 11, immediately adjoining and north of it, is 20 chains. By the rule announced above, lot 11 is entitled to its proportionate part of this excess of 3 chains and 62 links.”

All the courts everywhere have always recognized the right ¡of the Land Department of the United States Government to make rules for the direction and control of 'Surveyors in establishing the lines of the original government survey, and we quote §§ 59 and 60 of the rules and regulations issued by the United States Government General Land Office, in a pamphlet entitled “Restoration of Lost or Obliterated Corners and Subdivisions of Sections, Revision of June 1, 1909:

“Section 59. Re-establishment of quarter-section corners on closing section lines between fractional sections. This class of corners irnu-st be re-established proportionately, according to thepriginal measurement of 40 chains from the last interior section corner. If.the whole measurement does not agree with the original survey, the excess or deficiency must be divided proportionately between the two distances expressed in the field-notes of tbe original survey. The section started from and the corner closed upon should be connected by a right line, unless the retracement should develop the fact that the section line is either a broken or a curved line, as is sometimes the case.
“Section 60. Re-establishment of interior quarter section comers. In some of the older surveys these corners are placed at variable distances, in which case the field-notes of the original survey must be consulted, and the quarter-section corner re-established at proportionate distances between the corresponding section corners in accordance therewith. The latter surveys being more uniform and in stricter accordance, with law, the missing quarter-section corner must be re-established equidistant between the section corner making the line, according to the field-notes of the original survey. The remarks made under § 56, in relation to section lines, apply with full force here also; the caution there given, not to neglect sight trees, is equally applicable, since the proper establishment of the quarter-section corner may in some instances very largely depend upon its observance, and avoid one of the many sources of litigation.”

The case of Tolson v. Southwestern Imp. Assn., supra, defines what is meant by proportionate measurement by quoting from pages 22 and 23 of a Government pamphlet on the “Restoration of Lost or Obliterated Corners and Subdivisions of Sections,” above referred to, as follows: “ 'By proportionate measurement of a part -of a line is meant a measurement having the same ratio to that recorded in the original field-notes for that portion as the length of the whole line by actual resurvey bears to its length'as given in the record.’ ”

The case of Tolson v. Southwestern Imp. Assn., supra, is cited in an extensive note to the case of Booth v. Clark, Ann. Cas. 1912A 1272, 59 Wash. 229, 109 Pac. 805, where a large number of other cases are also cited, and the annotator’s note states the general rule as follows:

“It is a general and well established rule that, where a tract of land is divided into smaller tracts or lots, the title to which becomes vested in different persons, none of the grantees is entitled to any preference over the others on the discovery of an excess or deficiency in the quantity of the land contained in the larger tract, and the excess must be divided ¡among, or the deficiency must be borne 'by, all of the smaller tracts or lots in proportion to their ¡areas.”

In vol. 8 Century Digest, § 278 of the chapter on Boundaries, a number of cases which have construed the rules and regulations of the Land Department for the location of the lines of an original Government survey are cited, and the following rule is deduced, which is based upon the authority of decisions of the Supreme Courts of Iowa, Kansas and Wisconsin there cited:

“Section 278. In general. On a line of the same survey, and between remote corners, the whole length of which is found to be variant from the length called for, it is not to be presumed that the variance was caused from a defective survey in any part, but it must be presumed, in the absence of circumstances showing the contrary, that it arose from imperfect measurement of the wholé line; and such variance must be distributed between the several subdivisions of the line, in proportion to their respective lengths.”

So here it must not be presumed that the error in the Government survey of the south line of section 1 was made in surveying the south line of the southeast quarter, but it must be presumed, in the absence of any circumstances showing the contrary, that the error arose from an imperfect measurement of the entire south line of the section, and the deficiency must therefore be distributed between the various subdivisions of the line in proportion to their respective lengths.

The decree of the court below is therefore reversed, and the cause will be remanded for further proceedings not inconsistent -with this opinion.

Mehaeey, J., dissents.