author: Baker, J.

text:
    Smith v. Smith.
    4-3730
    Opinion delivered November 12, 1934.

      Miller & Ymgling and Gulbert L. Pearce, for appellant.

      Gordon Armitage, Gregory & Taylor, Boss Mathis and W. J. Dtmgan, for appellee.
   Baker, J.

This is an election contest case. The only question to be determined is the sufficiency of the complaint on demurrer. The complaint alleges in effect that at the Democratic primary election, on August 14, 1934, the plaintiff, appellant here, the defendant, appellee, and Grafton Thomas, qualified electors and residents of White County, qualified and entered the race as rival candidates for the nomination to the office of county and probate- clerk. The names of the plaintiff, the defendant and Grafton Thomas were properly placed upon the official ballots used in the various precincts of the county, to be considered and voted upon for said nomination; that, after said primary election was held on August 14, returns were duly made under the law and the rules of the party showing the ballots cast in the various precincts of the county.

The Democratic County Central Committee at.its meeting tabulated, totaled and declared and published the returns.

On the face of said returns, said committee found and declared that the defendant received 2,503 votes and the plaintiff received 1,642 votes and the said Grafton Thomas received 1,470 votes. The committee certified that the defendant had received the highest number of votes and plaintiff had received the second highest number cast for the nomination for said office and were therefore eligible and entitled to enter the race in a second primary election to be held on August 28, 1934, under the provisions of act 38 of the General Assembly of 1933, known as the “Bun-Off Primary Act,” to ascertain which of them might receive a majority of all votes cast in said second primary and thereby become entitled to final certification as the nominee for said office as aforesaid.

The names of the plaintiff and defendant were so certified by the chairman and secretary of the said committee and placed upon the official ballots used in said second primary election, to be considered and voted upon ,as rival candidates for said nomination, as in the first primary.

On August 28, 1934, said second primary was held under the rules of the party and the law, and in due time the judges and clerks of said election in the various precincts made returns of the ballots cast in their respective precincts, as required by the rules of the party and the law.

On August 31, 1934, the county central committee met at the court house in the city of Searcy and tabulated, totaled, declared and published the returns as sent in by the various precincts. On the face of said returns, it found and declared that the defendant received 2,190 votes and the plaintiff received 2,114 votes. Said committee then certified that the defendant was the nominee of the party for said office, to be voted upon at the general election.

Plaintiff alleged that, as a result of fraud and errors, the defendant was declared the party nominee when the plaintiff should have been so declared. The contestant further alleged that there were 475 persons having no poll tax receipts issued to them for the year 1933, who, by reason thereof, were totally disqualified to vote in said primary election, but were permitted to vote and did vote in said election, and cast their ballots for the defendant; that all such votes should be declared illegal and void and should be deducted from the number of votes certified in favor of the defendant. Then followed a list of those voting in the separate townships, which list showed the number of the ballot and the name of each alleged disqualified voter.

The second allegation was to the effect that there were 161 persons voting in the election who, if their names were correctly entered on the poll books, do not have poll tax receipts issued to them for the year 1933, although receipts were issued to persons of similar names. That the contestant was not advised as to whether that matter is the result of an error in entering these names on the poll books or in recording their names in the poll tax records, and alleges that they do not have poll tax receipts for the year 1933 legally issued to them prior to June 15, 1934, and that they were not entitled to vote in said primary election; that all of said persons cast their ballots for the defendant; that their votes, being illegal and void, should be deducted from the number of votes certified in favor of the defendant by the Central Committee. The names of the persons were listed.

The plaintiff further alleged that more than 750 persons in the county held illegal poll tax receipts, issued to them for the year 1933 by the collector of White County; that said receipts are illegal because of being predicated upon false and fraudulent assessment lists and because of having been, in most instances, issued after June 15, 1934.

There was a further allegation that through concerted action and collusion of the defendant, who was tax assessor of White County, and the county tax collector, one of his partisan supporters, and other persons associated with them, some eight or nine hundred poll tax assessment lists were made up and entered upon the assessment records of White County; that said assessments were so made without authority from persons whose names were used, and later poll tax receipts were issued upon said illegal assessments and delivered to such of said persons as the defendant and his associates, after investigation, considered friendly to them and likely to cast ballots for the defendant and other candidates for whom said persons, so collusively acting, were interested; that the poll tax receipts were paid for by the defendant and his associates who, like him, were candidates for nomination in said election; that most of said receipts were issued after June 15,1934, and were wrongfully certified by the collector as having been issued prior to June 15, 1934, and, by reason of said false and fraudulent certification, the names of the persons to whom said poll tax receipts were issued appeared in the printed list of qualified electors as among those who were entitled to vote in all legal elections held between July 1, 1934, and July 1, 1935.

Plaintiff further alleged that the defendant agreed to pay, and did pay, $300 into a fund to be used in paying for and distributing said illegal poll tax receipts. The recipients of said illegal poll tax receipts have not paid the defendant and his associates for said poll tax receipts and did not agree to do so.

No list was made of the several hundred alleged holders of illegal poll tax receipts. Contestant alleged that more than 500 of these persons were permitted to vote, did vote in said election, and cast their ballots for the defendant.

He alleged further that in Dogwood township, by error and wrongful certifications, sixteen more votes were certified for defendant and sixteen less votes for plaintiff, than were actually cast for them respectively.

Then followed a prayer wherein the plaintiff prayed the court to find and declare that he received a majority of all legal votes cast for the nomination for county and probate clerk of White County, and that an order be issued, directed to the chairman and secretary of the White County Democratic Central Committee requiring them to certify said nomination as should he done. He prayed an order imppunding the ballot boxes, ballots, tally sheets, poll books and all other papers and records used in holding said primary election and that the same be placed in the custody of some suitable, disinterested person whom the court might select, to be held subject to its orders; that all assessment lists and records pertaining to poll taxes issued for the year 1933, payable in 1934, in the custody of the defendant as assessor of White County, Arkansas, be likewise impounded and placed in the custody of some suitable, disinterested person whom the court might select, to be held subject to its orders; that all records, papers and memorandums in the collector’s office pertaining to the issuance of 1933 poll tax receipts be likewise impounded and put in the custody of some suitable, disinterested person, subject to the orders of the court and for all other proper relief.

The complaint was verified by the contestant and by 22 reputable citizens. It is unnecessary to set forth the oath made by the plaintiff and the supporting affiants, as this is not called into question.

On 'September 12, an amendment to the complaint was filed setting forth the names of some of the persons voting, the townships in which they voted and the number of ballots, with the challenge as to the validity thereof. This statement is sufficient to show the issues.

On September 22 the defendant filed a general demurrer to the effect that the complaint does not state a cause of action under the laws of the State of Arkansas regarding election contests. The court sustained the demurrer and dismissed the complaint.

We think the court was in error in sustaining this demurrer. Contestant alleged that he received 2,114 votes and that the contestee had received 2,190 votes. There was a difference between the number of votes they received, as certified, of only 76 votes. The contestant did not say that the votes he had received were “legal votes.” Upon this failure to plead that fact, the demurrer is based. An analysis of this complaint will demonstrate that was unnecessary. He was not impeaching the votes he received in any particular, except in the fourth division of the complaint he alleged that he was entitled to sixteen more votes, received in Dogwood township, than had been certified for him, and otherwise he was treating the number of votes he received, and which were certified to him by the county democratic central committee, as being the total number of votes to which he was entitled. The other portions of the complaint differ somewhat from the usual complaint filed in election contests. He alleged that his opponent received a considerable number of votes that were illegal, specifically pointing out all such illegal votes in every instance except one, but he did not claim that these illegal votes should be credited to him, or be counted for him, but only that they should be deducted from the number of votes received by the contestee. For instance, he alleged that there were 475 persons, whose names were listed by township and ballot number, who were not qualified to vote and asserted that they did vote for the contestee. If this statement, as alleged, is correct and can be proved, then the number of 475 votes should be deducted from the number of votes certified to the contestee. The fraud charged was alleged to have taken place at the voting precincts as distinguished from a chargé of error or bad faith of the election officers.

The contestant did plead the number of votes received. He alleged affirmatively that there should have been certified to him sixteen more votes. For consideration upon the demurrer, it must be conceded he did receive 2,130 votes and that they were legal.

In Tucker v. Meroney, 182 Ark. 681, 32 S. W. (2d) 631, the court said: “We do not agree with contestant in this contention. The official returns of the election are quasi records, and are prima facie correct. The burden is upon the contestant to show by affirmative proof that they do not speak the truth.”

In the case of Morrow v. Strait, 186 Ark. 384, 53 S. W. (2d) 857, the court said: “The official returns of the election are prima facie correct, and the burden of showing that they are not correct rests upon the person who alleges that fact.”

Under the authority of these two cases, we have no hesitancy in holding that there is an affirmative allegation that the votes received by the contestant were leg'al votes, though the word ‘ ‘legal” is not used; but his pleading is susceptible of no other interpretation.

There is also the allegation that this number of votes contestant received, as certified, is substantially in excess of the number of ‘ ‘ legal ’ ’ votes received by the contestee, so it must be seen that the contestant alleged, at least, a prima facie case. Contestant had the right, after the issues were made up, and could have been required by proper motion to file a list of names of voters whose names had been omitted as among those whose votes were challenged. We held this in the ease of Winton v. Irby, ante p. 906.

We but recently said in effect that the statute providing for contesting elections should be liberally construed; that the purpose of the contest is to determine what candidate received the greatest number of legal votes, and if there are sufficient facts stated to give the other party reasonable information as to the grounds of the contest, then the case should be tried on its merits. LaFargue v. Waggoner, ante p. 757. We also said in the same case that the rule relating .to pleadings must not be so strict as to afford protection to fraud, by which the will of the people is set at naught.

The court said in the same case: “The statute does not require supporting affidavits of the citizens to these permissible amendments. These amendments may be made without the supporting affidavits and after the expiration of the original ten days, when unreasonable delay in the trial of the cause will not result therefrom.”

In Winton v. Irby, supra, we said: “The real issue is, which candidate received a majority of the legal votes cast? If his competitor was ineligible, this would not entitle the contestant to receive the certificate of nomination, unless the contestant received a majority of the legal votes.

The instant case is peculiar in one respect, and that is that the candidate relies on the certificate of the Democratic County Central Committee as to the number of votes received by liim, but impeaches, by his complaint, the count in favor of his opponent and alleges that his opponent, the contestee, did not receive the number of legal votes as certified by the committee.

Whole we do not think that it is absolutely essential to the trial of the cause that the amendment offered by the contestant after the demurrer was sustained should be filed, but, since it adds no new cause of action, and only states the result or effect of the matters already pleaded, it was not improper. It was helpful, however, to file it, as it did aid, by way of explanation or amendment, the pleadings already filed, and upon which the issue, by demurrer, was raised.

We held in the case of Winton v. Irby, supra, that it was proper to permit the contestant to amend his complaint after the ten-day limit, by filing the list of names of the voters whose ballots were challenged. Such amendment did not set up any new cause of contest. The amendment was only explanatory of matters already, perhaps, somewhat imperfectly pleaded.

It follows that the judgment should be reversed. It is therefore ordered that the judgment be reversed with directions to overrule the demurrer, and permit the cause to proceed to trial upon its merits.


source: Caselaw Access Project

author: Johnson, C. J.

license: Public Domain

text:
    Western Clay National Farm Loan Association v. Lilly.
    4-3596
    Opinion delivered November 19, 1934.

      Guy V. Head, C. 8. Hale, A. T. Welborn and A. P. Patton, for appellant.

      Oliver & Oliver, for appellee.
   Johnson, C. J.

In 1926 J. B. Lilly, now deceased, applied for and was granted a loan in the sum of $2,500 by the Federal Land Bank of St. Louis, Missouri. As a condition precedent to the granting of this loan, the borrower was required to purchase and pay for twenty-five shares of stock of the par value of $5 per share in appellant Western Clay National Farm Loan Association, and the association in turn was required to purchase a like amount of stock from the land bank. Subsequent to the granting of this loan, J. B. Lilly died, and thereafter on June 1, 1931, Mrs. J. B. Lilly, appellee here, and wife of the said J. B. Lilly, paid the loan in full to the Federal Land Bank of St. Louis. Upon payment of the loan the land bank canceled its stock issued upon this loan and gave the association credit on its contingent liabilities for the full value thereof. Thereafter, due demand was made upon the local association for the retirement of the shares of stock held by appellee which was refused by appellant, and this suit was instituted to compel retirement. Upon trial a judgment was rendered in favor of appellee and against appellant, and the cause is here on appeal.

Appellant is a corporation organized under the Federal Farm Loan Act, same being 12 USCA, c. 7, § 641, approved July 17, 1916. The Federal Land Bank of St. Louis is a corporation organized under said act, and is domiciled at the city of St. Louis in the State of Missouri, and as such serves the territory embraced in Arkansas, Illinois and Missouri making farm loans.

By § 7 of the act referred to, appellant is a separate and distinct corporation from the Federal Land Bank of St. Louis. Under the provisions of said act, appellant association is required to indorse all paper handled by the borrowers of such association and therefore has a contingent liability upon such indorsed paper. Section 4 of said act creates twelve Federal Land Bank districts and creates therein a Federal Land Bank for the purpose of making loans on farm lands situated in such districts. The act further provides that the original capital stock of each Federal Land Bank shall be divided into shares of the par value of $5' each.

The theory of the act is co-operative in purpose, spirit and effect. Upon approval'of a loan by the.local association, it issues stock to the borrower in the amount of 5 per cent, of the loan applied for, and the local association is thereupon required to purchase from the Federal Land Bank in the district capital stock therein to the amount of 5 per cent, of the loan granted by it. The borrower by the terms of the act is liable to the local association for an assessment against this stock to the extent of 100 per cent, thereof upon insolvency. In each instance the issued stock is held as collateral security to the loan.

No contention is made that the Federal Land Bank of St. Louis is liable to appellee for stock held by her in the local association; therefore this question and the cases bearing thereon have no application to the facts of this case.

Appellee does contend, however, that the local association which issued her stock is liable upon the. retirement thereof for its par value, regardless of the solvency or insolvency of the local association.

The question here under consideration was determined by the Supreme Court of North Dakota in Byrne v. Federal Land Bank, etc., 61 N. D. 265, 237 N. W. 797, and the logic and reasoning of the opinion are such as to warrant the following quotation therefrom:

“It is true the act says upon payment of his loan ‘the national farm loan association shall pay off at par and retire the corresponding shares of its stock which were issued when such land bank stock was issued. ’ The plaintiff, however, is a stockholder in a corporation. The corporation cannot pay off at par the. stock held by the plaintiff if it be insolvent, or if it has no money. The pleadings and the stipulated facts admit the practical insolvency of the Farm Loan Association. The shareholders are ‘individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such association to the extent of the amount of stock owned by them at the par value thereof, in addition to the amount paid in and represented by their shares.’ Section 9 of the act. Consequently it is possible for the plaintiff to be held for double liability.
“Plaintiff contends that the pleadings do not show the insolvency of the loan association at the time of the repayment of the loan; that is, at the time the land bank bid in the property for the full amount. It may be the answers are somewhat indefinite on this point; but it is shown the land bank applied the value of the stock held by the loan association on its debts to the bank, because of the inability of the association to pay them. Then, also, if the. association was insolvent at the time of the commencement of the action and is still insolvent, it cannot be compelled to pay plaintiff the value of his stock when it is not yet known whether he may lose, not only the $500 which he has already paid, but in addition be required to pay an assessment of $500 or part thereof. While the statute requires the retiring of the shares at par, it contemplates a solvent institution. The plaintiff, by merely paying his loan, cannot escape the responsibility which he assumes as a stockholder. The relationship which he bears to the other shareholders and to the whole, system is such that he cannot evade responsibility. When he applies for and receives a loan under the provisions of the act, he takes the loan according- to the tenor of the law. The act makes provision for earnings and for dividends on his stock, and it provides also that in case the dividends are sufficient the directors of the loan association ‘with approval of the Federal Farm Loan Board’ (12 USCA, § 721) may in their discretion pay off at par, and retire the stock, even if the loan be not paid. The payment of the loan does not relieve the borrower from his liability as a stockholder. The only assets which a Farm Loan Association has or can have are the shares which it takes in the Federal Land Bank to counterbalance. the shares of stock in the association taken by the borrower, such dividends as the shares of stock in the land bank taken by the association may earn, and such ‘reasonable initial charges to be made against applicants for loans and, to borrowers in order to meet the necessary expenses of the association’ as specified in subdivision 3' of § 11 of the act; but such charges can ‘in no case exceed 1 per centum of the amount of the loan applied for.’ It is true the association may acquire and dispose of property, real and personal, that may be necessary or convenient for the transaction of its business, and it may invest its earnings so as to have increased income; but this is the extent of its capital and assets. The statute. contemplates that when the loan is paid the stock shall be. canceled, and the necessary corollary of this is that the par value of the stock be returned; but it is evident from the statute that Congress had in mind the possibility that such Farm Loan Association may become insolvent.
“Section 29 of the act makes provision for the dissolution of a Farm Loan Association upon insolvency, and the appointment of a receiver. The power to declare an association insolvent and to appoint a receiver therefor is vested in the Federal Farm Loan Board. But ‘no national farm loan association shall be declared • insolvent by said board until the total amount of defaults of current interest and amortization installments on loans indorsed by national farm loan associations shall amount to at least $150,000 in the Federal Land Bank district, unless such association shall have been in default for a period of two years.’ 12 USCA, § 961.
“It is true the pleadings do not allege that the Federal Farm Loan Board declared this association to be insolvent; but the facts alleged in the pleadings show that the status described by the act obtains, and it is therefore insolvent. Manifestly the association cannot be compelled to pay the plaintiff the value of his stock when it has no assets out of which the stock can be paid. This association has no property, received no dividends, has no earnings, and there is no fund which the association can be compelled to distribute to its stockholders. The only source from which it could pay is this stock in the Federal Land Bank. The pleadings show this had been pledged and was held by the land bank as collateral. The plaintiff proceeds on the theory that, as soon as the loan is repaid, the Farm Loan Association must ‘pay off at par and retire’ the shares of stock in the association issued to him. The last paragraph of § 7 of the act (12 IISCA, § 721) describes the procedure for subscription of stock in the Federal Land Bank and requires the association to subscribe for capital stock when it applies for a loan to a borrower. After making provision for this capital stock to be held as collateral to the loan, it says: ‘■Such stock (that is the stock in the land bank taken by the loan association) may, in the discretion of the directors (that is the directors of the land bank), and with the approval of the Federal Farm Loan Board, be paid off at par and retired, and it shall be so paid off and retired upon full payment of the mortgage loan. In such case the national farm loan association shall"pay off at par and retire the corresponding shares of its stock which were issued when said land bank stock was issued. ’ But this is only a portion of the act. When we consider the act as a whole, it is apparent ‘Congress did not intend the Farm Loan Association to pay off the stock at par when it had nothing with which to pay the stock.
‘ ‘ The plaintiff is a stockholder in a corporation. He has rights therein, but he has also corresponding duties and liabilities. As shown heretofore, he is individually responsible equally and ratably for the debts of the corporation in which he is a stockholder. Section 9 of the act. This provision for double liability is similar to the one regarding liability of stockholders in banking-corporations, both State and National. His responsibility to his corporation is the same.
“As we have already pointed out, the principle involved in the act is co-operative in nature. It is only through the co-operation of his neighbors, with their assistance, upon their recommendation and the pledge of their liabilities he can secure his loan. They pledge their faith and credit to aid him, and he pledges his faith and credit to aid them. Having secured their co-operation and assistance and finding his loan paid,- he now wants to avoid his responsibilities to those who made it possible for him to get his loan. His rights are not superior to the rights of any stockholder in the corporation.”

Appellee tacitly admits that the opinion just quoted reached the correct conclusion of no liability against the local association under the facts and law there discussed and decided, but contends that the opinion overlooked or ignored the amendatory act of 1923 as follows:

“Upon liquidation of any national farm loan association, the stock in the Federal Land Bank held by such association shall be canceled and the Federal Land Bank shall thereupon issue to the borrowers through such association an amount of stock in the Federal Land Bank equal to the amount of stock held by such borrowers in the liquidated association, such stock to be held by the bank as collateral to the loans of such borrowers and to be paid off and retired at par in the same manner as stock held by borrowers in farm loan associations, and the Federal Land Bank shall pay to the borrowers holding' such stock the same dividends as are paid to national farm loan associations by such bank. The personal liability of the stockholders in such liquidated association to the association shall survive such liquidation and shall be vested in the bank in that district, which may enforce the same as fully as the association could if in existence.” Section 966, USCA, chapter 7. Section 29 of the original act so amended provides: '
“If any national-farm loan association shall be declared insolvent and a receiver shall be appointed therefor by the Farm Credit Administration, the stock held by it in the Federal Land Bank of its district shall be canceled without impairment of its liability, and all payments on such stock, with accrued dividends, if any, since the date of the last dividend shall be first applied to all debts of the insolvent farm loan association to the Federal Land Bank, and the balance, if any, shall be paid to the receiver of said farm loan association: Provided, that in estimating said debts contingent liabilities incurred by national farm loan associations under the provisions of this chapter on account of default of principal or interest of indorsed mortgages shall be estimated and included as a debt, and said contingent liabilities shall be determined by agreement between the receiver and the Federal Land Bank of the district, subject to the approval of the Farm Credit Administration, and if said receiver and said land bank can not agree, then by the decision of the Farm Bank Commissioner, and the amount thus ascertained shall be deducted in accordance with the provisions of this section from the amount otherwise due said national farm loan association for said canceled stock. Whenever the capital stock of a Federal Land Bank shall be reduced, the board of directors shall cause to be executed a certificate to the Farm, Credit Administration, showing such reduction of capital stock, and, if said reduction - shall be due to the insolvency of a national farm loan association, the amount repaid to such association.” 12 USCA, c. 7, § 964

The amendatory act just quoted amends § 29 of the original act of 1916 in the particular that, upon -liquidation of a local association, it is the duty of a land bank in that district to cancel out all stock in the possession of the local association and re-issue same to the individual borrowers of such local associations and subsequent thereto all dealings in reference to such stock shall be had and done between the Federal Land Bank and the borrower. No contention is made that the association stock here in controversy was ever reissued by the Federal Land Bank of St. Louis as is provided for in the amendment, but it is contended that the amendment of 1933 demonstrates the legislative policy of such institutions with and towards the borrowers therein, and that the amendment evinces a clear legislative intent that the borrower’s stock, whether it be issued by the local association or by the Federal Land Bank of such district, shall be retired upon payment of the loan of such borrower, regardless of the solvency or insolvency of the local association. We can not agree with this contention. We are convinced that the amendment of 1923 has application to solvent local associations only which are in process of voluntary liquidation. Any other construction of the amendment nullifies and destroys the clear intent and purposes of the original act, and would nullify and destroy the whole theory of co-operation by the borrowers which is significantly demonstrated by all provisions of the original act. If a borrower be permitted to pay off his loan and withdraw his capital stock at par value in an insolvent association, there is no cooperation left.

Manifestly co-operation is the groundwork of the original act. Ten borrowers are required to co-operate in the formation of a local association, and each borrower is required to purchase capital stock in the local association to the approximate amount of 5 per cent, of his loan. This stock is never surrendered to the borrower, but is held by the local association as collateral security to the borrower’s loan. In other words, each borrower in a local association, to the extent of his stock plus an individual liability upon insolvency of a 100 per cent, assessment on such stock, is surety for the loans of all other members and borrowers in such local association, and this liability continues until the loan is paid off and retired during the solvency of such local association.

The co-operative feature of the original act also extends and applies to the Federal Land Banks, but it is not deemed necessary to go into this phase of the situation. It suffices to say that the destruction of the cooperative features of the original act would nullify and destroy the clear and unmistakable intent of the Congress as exemplified in the act, and we are unwilling to give the 1923 amendment such construction and interpretation.

The conclusion thus reached leaves only the question of whether or not the local association was solvent on June 1, 1931, when appellee retired her loan. On August 23, 1930, appellant and the Federal Land Bank of St. Louis, its principal creditor, made and entered into a written contract or agreement, lo the effect “that, whereas defaults have accrued, etc. * * * and whereas the association desires to reimburse the bank for the actual loss, etc.” This contract defines the respective rights and liabilities of the local association and the Federal Land Bank which are dealt with in minute detail, but we deem it sufficient to say that the parties to this contract definitely determined the insolvency of the local association on the date of its execution and arranged the date for final reckoning of the aggregate of the liability by the local association to the Federal Land Bank on January 1, 1935. Moreover, the agreed statement of facts upon which this cause was submitted and decided provides:

“That, at the time said loan was paid off, on June 1,1931, the total outstanding capital stock of the Western Clay National Farm Loan Association was two thousand fifty-seven shares (2,057) of a par value of $10,285, including the twenty-five (25) shares of said capital stock issued to John B. Lilly.
That from time to time, prior to June 1, 1931, defaults had occurred under the terms and conditions of the aforesaid indorsed first mortgages taken by the Federal Land Bank of St. Louis from the members of said association and pursuant to the terms and provisions of § 25 of said Federal Farm Loan Act, said association had been notified of said defaults and had been called upon by said bank to make good each of said defaults either by the payment of the amount unpaid thereon in cash or by the substitution of an equal amount of Federal farm loan bonds with all unmaturecl coupons attached. Notwithstanding its liability as indorser as aforesaid, said association has failed, and still fails, to make good such defaults and was indebted on June 1, 1931, and still is so indebted by reason thereof; and that said association had been in default in the payment of its said obligations for more than two years prior to June 1, 1931, and still so in default.”

Section 921, USCA, c. 7, provides in reference to defaults:

“If there shall be default under the terms of any indorsed first mortgage held by a Federal Land Bank under the provisions of this chapter, the National Farm Loan Association through which said mortgage, was received by said Federal Land Bank shall be notified of said default. Said association may thereupon be required, within thirty days after such notice, to make good such default, either by the payment of the. amount unpaid thereon in cash or by the substitution of an equal amount of Federal farm loan bonds, with all unmatured coupons attached.”

Clearly, it appears that on June 1, 19:31, when appellee retired her loan in the Federal Land Bank of St. Louis, the Western Clay National Farm Loan Association had defaulted in its obligations to the Federal Land Bank and had been in such default for more than two years prior thereto. This was a state of insolvency on the part of the local association, and the mere fact that no receivership was procured thereon in no wise alters the situation under consideration. We know of no rule of law, and have been cited none by counsel, which permits a stockholder in an insolvent corporation to withdraw his capital investment at par. True, if the amendment of 1923 had the purpose and effect contended for by appellee this would be the result, but, as has been shown, the amendment produced no such result.

Since we have concluded that the Western Clay National Farm Loan Association was insolvent in 1930 and was insolvent on June 1,1931, when the loan was retired, appellee has no lawful' right to maintain this suit as a stockholder against the local association.

The conclusion reached renders it unnecessary to consider or decide other questions argued orally and in briefs.

For the reasons stated, the judgment is reversed, and the cause of action dismissed.


author: Humphreys, J.

text:
    Arkansas Power & Light Company v. Hughes.
    4-3588
    Opinion delivered November 19, 1934.

      Rose, Hemingtvay, Cantrell & Loughborough, for appellant.

      George W. Emerson, Hargraves, $ Johnson, Fred A. Isgrig and Harry Robinson, for appellee.
   Humphreys, J.

Appellee brought suit in the circuit court of St. Francis County against appellant for damages resulting from a fall which was caused by negligently operating a street car which had a worn, slick steel plate across the platform, near the door for passengers to step upon as they entered the car.

Appellant denied that the plate inset in the platform for passengers to step upon as they entered the doorway of the car was worn or slick or that the condition of the plate rendered the entrance of the car unsafe. As an additional affirmative defense, appellant pleaded contributory negligence on the part of appellee in failing to exercise proper care for her own safety and in failing to keep a proper lookout while boarding the car.

The cause was submitted to a jury upon the issues joined, the evidence adduced, and the instructions of the court, which resulted in a verdict and consequent judgment against appellant for $10,000, from which is this appeal.

• The first contention for a reversal of the judgment is that the evidence is insufficient ,to support the verdict.

A statement, in substance, of the evidence in its most favorable light to appellee is as follows:

On April 22, 1932, appellee attempted to board a street car at 5th and Main streets in Little Rock. She got on the step and put one foot on the platform, and, in attempting to lift the other foot to go in, she slipped and fell on her back and would have fallen on the pavement if she had not been caught by her brother-in-law, Mr. Cain, who was behind her. A number of witnesses saw her fall and attributed the cause to the worn and slick condition of the steel plate upon which she stepped with one foot as she attempted to board the car. Her own witnesses were not in perfect accord as to the exact manlier in which she fell, but all agreed that she slipped and fell as she was attempting to get on the platform from the step and that the steel plate upon which she was compelled to step was worn and slick.

Appellant contends that, on account of contradictions in the testimony of each of the witnesses and the conflicts between their several testimonies, they are all discredited to such an extent that their testimony should have been disregarded by the court and that he should have peremptorily instructed a verdict for it. Tn reading the testimony of each witness, we do not find contradictions therein which render the testimony of each wholly and entirely unbelievable, nor do Ave find such a contradiction between the several witnesses upon material matters that we can say as a matter of law that there is no truth in what any of them said concerning the unsafe condition of the steel plate and that she slipped and féll because of its worn and slick condition. Most, of the contradictions relate to the Avay or manner in which she fell or AAdiether there AVas a center rod in the doorway or one on each side thereof and as to what was said or done by her immediately after the fall and after she AAras seated in the car. The jury was the sole judge of the credibility of the witnesses and the AVeight to be attached to the evidence of each. There Avas sufficient substantial evidence introduced on behalf of appellee to submit the issues joined to the jury. The court did not err in refusing to instruct a verdict for appellant.

Appellant objected to the court’s instruction No. 3 on the alleged specific ground that it made it the insurer of the safety of appellee as she entered the car as a passenger and that on account of this inherently erroneous instruction, the judgment should be reversed. The instruction is as follows:

‘ ‘ The jury is instructed that it is the duty of a common carrier of passengers by street car to exercise such degree of care which may reasonably be expected of intelligent and prudent persons employed in that business, in view of the instrumentalities employed and the danger naturally to be apprehended, to see that every appliance connected Avith its car is kept in repair and in a safe condition for the protection of passengers.”

Our interpretation of the instruction is that it told the jury that it was appellant’s duty to exercise that degree of care Avhich may reasonably be expected of intelligent people to see that its car was kept in repair and in a safe condition consistent Avith the practical operation thereof. This instruction, as thus construed, Avas more favorable than appellant was entitled to, for the law imposes the highest degree of skill and care upon common carriers, consistent with the. practical operation of their cars, to furnish their passengers a safe place to get on and oil. Prescott & Northwestern Railroad Company v. Thomas, 114 Ark. 56, 167 S. W. 486; Beech v. Eureka Traction Company, 135 Ark. 542, 203 S. W. 834, and cases therein cited.

The same, specific objection was made to instruction No. 4 given by the court, but we find nothing in the instruction which told the jury directly or by reasonable inference that the appellant was the insurer of the safety of appellee, as she entered the car.

Appellant also specifically, objected to instruction No. 4 because it submitted the issue of assumed risk on the part of appellee to the jury as an abstract, proposition of law to be determined by them. No prejudice resulted to appellant on this account, for it was not entitled to the defense of assumed risk. No contractual relation existed between appellant and appellee. This is a suit based on tort and not growing out of contract.

Appellant also specifically objected to the court’s instruction No. 6 on the measure of damages because it permitted a recovery for the loss of earnings after the injury and up to the trial of the cause, the diminution of appellee’s earning capacity in the future, and for medical, hospital, and doctor bills. It is arg-ued that no evidence was introduced in support of these items of damage. We cannot agree with learned counsel for appellant in this contention. The record contains ample evidence in support of these, alleged items of damage.

Lastly, appellant contends that the verdict is excessive. It is true, as argued by learned counsel for appellant, that appellee had little, or no earning capacity in dollars. She was a housekeeper and earned her living in that way. She was able before her injury to work and earn small amounts, as she was strong and healthy. On account of her injury, she was incapacitated to do hard work or to work long at a time. She was 47 years of age when injured, and had an expectancy of 23.08 years. She received a very serious and painful injury. Her left sacroiliac was sprained and fractured and a contusion formed in same. Her left knee was sprained and fractured. She was placed in a cast and kept there eight weeks with a weight upon her foot, and a tumor formed on her 'back, necessitating a surgical operation. Her suffering was intense and after two years she still suffers much pain. The result is she is crippled so that she is compelled to walk with a cane. Her deformity will remain with her. Dr. Carrnthers ’ bill alone was $250. He testified that she still has a spasm and rigidity of the left knee and in the left sacroiliac region and advises that she have a bone graft at her sacroiliac joint. Her hospital bill was $50 and her medicine hill $15. Considering the loss of her small earning capacity, the extent of her injury, her very intense suffering during the early months after her injury and the suffering she still endures and will likely continue, to endure, the amount she has already expended for medical, hospital, and doctor hills, and the operation yet to be had and the probable expense thereof, we think the amount of the recovery was not excessive.

No error appearing, the judgment is affirmed.


author: Mehaffy, J.

text:
    Union Trust Company v. Pocahontas Special School District.
    4-3598
    Opinion delivered November 19, 1934.

      Moore, Gray, Burrow SChoivning and 8. 8. Jefferies, for appellants.

      George M. Booth, Frauenthal & Johnson and Walter L. Pope, for appellees.
   Mehaffy, J.

The Randolph State Bank of Pocahontas, on October 10,1930, borrowed $20,000 from the Bankers ’ Trust Company of Little Rock, and executed its promissory note- for said amount, and pledged as collateral security for the payment of said note or other indebtedness, notes and warrants aggregating $37,723.37. The Randolph State Bank was also indebted to the Union Trust Company of Little Rock in the sum of approximately $27,000. The payment of this note was also secured by collateral. In November, 1930, the Randolph State Bank became insolvent, and thereafter the Bankers’ Trust Company, the Union Trust Company and the State Bank Commissioner concluded that the collateral held by the Union Trust Company7 as security for the debt due it was insufficient, and that, the collateral held by the Bankers’ Trust Company was more than sufficient to pay the debt due it. They therefore concluded that the Union Trust Company should purchase, and it did purchase, the note held by the Bankers’ Trust Company, which at that time amounted to $7,484.59, and they applied the collections from the collateral held by the Bankers’ Trust Company to the entire indebtedness, treating the debt to the Union Trust Company and to the Bankers’ Trust as one item. Among the collaterals held by the Bankers’ Trust Company were school warrants of the Pocahontas Special School District, amounting to $6,238.23.

In November, 1932, the appellants filed suit in the Randolph Chancery Court against the Pocahontas Special School District and others. They prayed judgment for $3,103.98, the amount of the warrants held at that time by the Union Trust Company against the Pocahontas Special School District and H. L. Haynes, treasurer of Randolph County, and the sureties on his bond, and against the State Board of Education for any part of the money now in its hands. Appellants also asked that a mandamus be granted commanding the treasurer to pay the appellants the amount sued for, together with interest, and that a writ of mandamus be granted directing the State Board of Education, its members and C. M. Hirst, Commissioner of Education, to refund and pay to appellants the sums of money sued for, and they also prayed that said money be impounded by order of the court. Appellants also asked for a restraining order and injunction.

The appellees filed answer denying the sale and delivery of the warrants to the Randolph State Bank; denied the execution of the note to the Bankers’ Trust Company, and denied the transfer of the note to the Union Trust Company, together with the warrants as collateral security; denied that appellants had any right to judgment or injunction or restraining order; and alleged that the appellee, Pocahontas Special School District, had on deposit in the Randolph State Bank, on November 4, 1930, $7,400, and that the treasurer had no opportunity to pay the warrants mentioned in the complaint, and that the loss of the deposit was caused by the negligence and indifference of appellants.

A reply was filed by appellants denying all affirmative allegations in the answer.

A. Brizzolara, Jr., vice president of the Union Trust Company, testified in substance that he had a conversation on August 21,1931, with Mr. Haynes, who represented the Pocahontas Special School District, and that Mr. Haynes offered to pay $3,100 in full settlement for the school warrants. Witness referred the matter to Mr. Jernigan, vice president of the Union Trust Company in charge of out-of-town banking matters, and the matter of settlement was left in the. hands of Mr. Tom Bigger, and that said settlement was rejected. Mr. Bigger declined to recommend the settlement because, the value of the remaining pledged assets was doubtful. The school warrants taken over from- the Bankers’ Trnst Company amounted to approximately $6,000. The note of the Bankers’ Trust Company and collateral was purchased by the Union Trust Company at the request of the State Banking Department, and also to strengthen the collateral held by the- Union Trust Company. The note held by the Bankers ’ Trust Company was for $7,484.59. After the Union Trnst -Company purchased the note, it treated the amount due from the Randolph State Bank as one item, and credits were made upon collections of .collateral without reference to the former indebtedness due the Union Trust Company as distinguished from the indebtedness bought from the Bankers’ Trust Company. The authority for consolidating the collateral was obtained from the State Banking Department. Witness does not know whether the collections on the collateral obtained from the Bankers ’ Trust Company exceeds the sum of $7,484.59. The Randolph State Bank still owes the Union Trust Company approximately $12,000 exclusive of the Bankers’ Trust Companj'- note. The purpose of purchasing the note of the Bankers’ Trust Company was for the benefit of the Banking Department, the benefit of the depositors in Randolph State Bank, and for the benefit of the Union Trust Company, and the transaction did result in material benefits. The Union Trust Company took over $37,723.37 in face value collateral from the Bankers’ Trust Company. The amount realized on this collateral has been applied on the entire indebtedness of the Randolph State Bank to the Union Trust Company at the time of the purchase from, the Bankers ’ Trust Company.

We do not deem it necessary to set out tlie evidence in full, nor any further evidence except the evidence' relating to the settlement.

The county treasurer testified in substance that the school district had on deposit in the Randolph State Bank on November 4, 1930, the day the bank became insolvent, approximately $7,400; warrants aggregating approximately $3,160 held by the Union Trust Company had been paid. Witness testified to a conversation with Mr. Brizzolara, offering to pay $3,100. The amount of warrants held by the Union Trust Company at that time was something over $6,000; that Brizzolara told him that the proposition sounded interesting, and that he would write Mr. Bigger, and that, if Mr. Bigger thought it would be satisfactory, he would accept the proposition. Witness took the matter up with Mr. Bigger, who had received a letter from Mr. Jernigan, about the compromise. When asked to state his understanding about the compromise, witness said: “Well, I just paid him according to the agreement, and the agreement Avas that he was to pay half to them, and we would talk about the matter of the offset.” The reason all the Avarrants were not demanded AA^as that witness understood there would have to be an order of the chancery court authorizing the offset.

G-. S. Jernigan testified that they were holding the warrants and other collateral which they received from the Bankers’ Trust Company as security for the total indebtedness due from the Randolph State Bank. As to the settlement, this witness testified in substance that he did not favor the settlement unless he was absolutely assured that the remaining collateral would be sufficient to pay the full indebtedness. Bigger was given authority to settle if he thought the remaining collateral would be sufficient. He had never heard from Mr. Bigger. Witness did not know how much had been collected out of the collateral attached to the Bankers’ Trust Company note, but would furnish a list showing collections. The purpose of purchasing the note from the Bankers’ Trust Company Aras to strengthen the position of the Union Trust Company, and assist the Randolph State Bank in protecting collateral. Mr. Bigger had no authority to make any compromise except by consent of Union Trust Company.

Mr. Bigger also testified that the note of the Bankers ’ Trust Company and collateral were taken over by the Union Trust Company with the consent of the State Banking Department; that the collateral and other unpledged assets of the Randolph State Bank would be security to the Union Trust Company for the total indebtedness of the Union Trust Company. This witness also testified about receiving a letter from the Union Trust Company authorizing him to accept 50' per cent, compromise if he thought that the remaining collateral would be sufficient to make the Union Trust Company absolutely safe. Mr. Haynes, the treasurer, paid to witness $3,100, and told witness he would get a letter from Little Rock authorizing him to release all the warrants.

Contract between Union Trust Company and Bankers’ Trust Company, with the approval of the Bank Commissioner, was introduced in evidence; letter from Jernigan to Bigger, and letter from Bigger to Jernigan; a list of school warrants and other collateral was introduced.

The court found for the defendants, and the case is here on appeal.

It is contended by the appellants that the Union Trust Company had a right to apply the proceeds of the collateral which it received from the Bankers’ Trust Company to the payment of the pre-existing indebtedness of the Union Trust Company, as holder of the note. The word “holder” used in the note from the Randolph State Bank to the Bankers’ Trust Company had reference only to negotiable instruments. The statute defines the word “holder” as follows:

“Holder means the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof.” Section 7761, Crawford & Moses’ Digest.

The first case to which attention is called by the appellants is the case of Oleon v. Rosenbloom, 247 Pa. 250, 93 Atl. 473, Ann. Cas. 1916B, 233, and the same case in L. R. A., 1915F, 968. This case was discussing a negoliable note as collateral, and the court said: “The term ‘holder,’ as applied to negotiable paper, has always had the well-recognized legal meaning of the payee or indorsee of it, entitled, to receive the sum for which it calls.” The court further said in the same ease: “These notes were in every respect negotiable, and these, plaintiffs had given them that character. * * * With knowledge which the law presumes the appellants had that their notes, negotiable in form, might, .and probably would, pass from the payee into the hands of another holder, no other meaning is to be given to their agreement as to the right of a subsequent holder to use the collateral than that given to it by the superior court.”

Appellant calls attention to the case of Richardson v. Winnissimmet National Bank, 189 Mass. 25, 75 N. E. 97, and to the case of Mulert v. National Bank of Tarentum, 210 Fed. 857. These cases both are to the effect that the word “holder” means either the payee or his indorsee; and since the note gives power to sell, this power may be exercised by the indorsee.

In the case of Richardson, supra, the note is not set out, but the court said: “This note plainly shows the. intention of the parties that the right to enforce the payment of it should pass to the order of the payee, and that the party thus designated would be the holder.”

The court however called attention to Gillet v. Bank of North America, 160 N. Y. 549, 55 N. E. 292, and the court in that case said: “The note was a printed one prepared by the defendant, which, -in addition to the promise of payment, contained provisions as to the collateral security furnished and its application by the bank. *= # The undersigned further agree that upon transfer of this note, the Bank of America may deliver said col-laterals or any part thereof to the transferee, who shall thereupon become vested with all the powers and rights above given to said bank in respect thereto. * * ’* The respondent’s contention is that this agreement on the note authorized the defendant to hold the property pledged, not only as security for the sum loaned, and such other liabilities as were contracted or existed between them as bank and customer, but also for any and all claims against the plaintiff’s assignors which it might purchase, regardless of their character, so long as they were liabilities of the assignors and owned by the defendant. It further claims that under the contract it. could have transferred the note and collaterals, and that thereupon the transferee, would be entitled to retain and sell the property pledged or in its possession for safe-keeping or otherwise, not only for the payment of the liabilities of the assignors to the defendant, but also for the payment of all and any claims or liabilities of theirs held by the transferee.”

The court further said: “If there is any uncertainty or ambiguity as to the meaning of agreement, it should be resolved in favor of the plaintiff, as it was the defendant who prepared this contract. * # * If the language can, without violence, be interpreted to include only such liabilities to the defendant as resulted from transactions between the plaintiff’s assignors as customers and the defendant as a bank, or their liabilities which came into its hands in the ordinary course of its banking business, it should be adopted.”

The court then held that the collaterals could be resorted to only for The payment of the debts due the bank, to which the note was made.

In the other case relied on, Mulert v. National Bank of Tarentum, supra, the note involved there expressly provided for the payment of this or any other liability or liabilities of the undersigned to the holder thereof.

But the note given by the Randolph State Bank pledges the collateral security for the payment of this note or any other indebtedness or any other liability of the said undersigned to the Bankers’ Trust Company. It does not say, “or the holder.” Therefore there is no authority in this note to give the assignee, as holder, a right to apply the collections from this collateral to any other indebtedness. It is true that the clause giving a right to sell the collateral uses the word “holder,” but there is no authority in the note for the payment to any holder except the Bankers’ Trust Company.

This transfer or sale by the Bankers’ Trust Company to the Union Trust Company would not, in any event, deprive the debtor of any defense that he might have had against the original assignor previous to the assignment. Section 477, Crawford & Moses’ Digest. The question then is, what defense would the debtor have as against the Bankers’ Trust Company?

Evidently when it paid the debt due the Bankers’ Trust Company, it would be entitled to a return of its collateral. The Bankers’ Trust Company could not hold' it to pay the debt of another. Moreover, the Randolph State Bank, being insolvent, the title to all of its assets was vested in the State Bank Commissioner. The Bankers ’ Trust Company had the right to resort to its collateral for payment of its debt, and nothing more.

The Randolph State Bank became insolvent on November 4,1930, and the Union Trust Company purchased the note from the Bankers ’ Trust Company on March 19, 1931. The sale and transfer was made without any order of the chancery court, and without any authority of law. After the Randolph State Bank failed, no one had authority to make a contract by which the collateral held by the Bankers’ Trust Company could be used to pay the debt of the Union Trust Company, and, even if the sale and transfer were valid, and the securities liable for the payment of the Bankers’ Trust Company note, the collateral could not have been used to pay anything except the indebtedness due the Bankers’ Trust Company. The sale, as we have said, could not have been lawfully made without permission of the chancery court. Section 720, Crawford & Moses’ Digest; Act 496 of 1921.

“Where the principal debt is sold and the collateral is transferred with it, the purchaser takes the debt and collateral on the same footing on which it was taken by the original creditor, being charged with the same duties respecting it, and entitled to the same benefits therein. He stands, so to speak, in the shoes of the seller. Thus the assignee holds the collateral subject to the right of redemption by the pledgor on payment of the debt.” 21 R. C. L., 673.

The Bankers’ Trust Company held this collateral subject to the payment of its debt. The pledgor had a right to pay that debt and redeem the collateral. No contract by any of tbe parties- could deprive him of this right.

When the Bandolph State Bank failed, the rights of its creditors became fixed, and it would be a fraud on its creditors to permit anybody to make a contract whereby any portion of its assets should be applied to the payment of a debt other than the debt which they were given to secure.

Appellants also contend that there was no compromise made, and they call attention to several authorities discussing the law of accord and satisfaction. This principle of law is not involved. In the first place, it is not claimed that the debt was reduced in any way, or satisfied by paying a sum less than the debt. The Union Trust Company held no obligation of the school district, except certain school warrants. The school district did not owe the Union Trust Company any debt, and there was therefore no compromise of a debt. The undisputed evidence shows that the school district had refused to pay the warrants held by the Union Trust Company, but that the school district agreed to pay approximately $3,100 if the Union Trust Company would deliver to them all the warrants, amounting to something' more than $6,000.

Mr. Bigger was given authority to make the settlement. He however testifies that he did not approve it because there was not enough collateral remaining to pay the entire debt. He evidently meant the debt due the Union Trust Company, and the debt due the Bankers’. Trust Company, because all the evidence shows that they treated the two debts as one item and applied the collections from the collateral attached to the Bankers’ Trust Company note to the payment of both notes. This they had no right to do. But Mr. Bigger knew that they had at all times refused to pay the warrants; he knew that the $3,100 which he. received was paid with the understanding that all the warrants would be delivered. It cannot be. claimed that the payment was made except on this condition, because all of the evidence shows that the school district had refused to pay. Mr. Bigger was told by the treasurer, who acted for the school district, that he would receive a letter from the Union Trust Company with reference to the compromise, and he did afterwards receive this letter. Mr. Haynes, the treasurer, after his conversation at the bank with Mr. Brizzolara, went back to Pocahontas and gave Mr. Bigger a check for $3,134.25, which Mr. Bigger accepted and kept for several days, and then sent to the Union Trust Company.

We think there was substantial evidence to show that this compromise was made. If it was not the intention to carry out the agreement, the check should not have been kept.

There is some evidence about an offset, and Mr. Haynes said that they could attend to that later. The offset that he had in mind evidently was to use its deposits in the Bandolph State Bank as an offset against the warrants, and to do this, the treasurer understood that they would have to have authority from the chancery court.

As to whether the compromise was made was purely a question of fact, and we cannot say that the finding of the chancellor was against the preponderance of the evidence. The decree is therefore affirmed.


author: McHaney, J.

text:
    Farmerville State Bank v. Harmon.
    4-3576
    Opinion delivered November 19, 1934.

      Neil G. Marsh, Neil C. Marsh, Jr., Tom Marlin and G. W. McKay, for appellant.

      J. V. Spencer, McNalley & Sellers and H. S. Yocum, for appellees.
   McHaney, J.

In the year 1926, appellee, T. L. Grubbs, was engaged in the construction of highways in Louisiana near Farmerville, and owned considerable tools, machinery, mules and horses, which he used in his road construction 'business. He became indebted to appellant in that year, and executed to appellant a note secured by a mortgage on said property which is now in controversy. On April 17, 1928, Grubbs was so indebted to appellant in the sum of $4,500, evidenced by his note for said amount due and payable August 20, 1928, which was secured by mortgage on said property. The property was then located in Louisiana, but was afterwards without appellant’s consent brought into Union County, Arkansas. Grubbs failed to pay his indebtedness to appellant when due, and on October 2, 1929, he executed and delivered to appellant a bill of sale of the property in controversy, which was then located near Huttig, in Union County, Arkansas, and was in the possession of the appellee, J. W. Valliant, who was employed by Grubbs and was using said property in hauling logs for the Union Sawmill Company. A short time after the execution and delivery of the bill of sale, appellee Valliant went to Farmerville, Louisiana, for the purpose of obtaining appellant’s consent for him to keep possession of the property for a while and until they could pay the indebtedness that Grubbs was due his employees. According to Valliant, Mr. Selig, appellant’s vice president, refused permission to keep such possession for this purpose. According to Mr. Selig, he agreed to let Valliant keep possession of the mules and other property involved in this suit for the purpose of finishing some hauling. A short time thereafter Yalliant brought an attachment suit in the Union Circuit Court against Grubbs on an alleged indebtedness of $834.95 which he claimed Grubbs owed him for services rendered, and levied an attachment on the property in controversy. Thereafter Grubbs entered his appearance and consented that judgment go against him, and on the 20th day of November, 1929, judgment for said sum. was rendered, the attachment sustained, and the property was ordered sold to satisfy said judgment. Before the sale, appellant learning of this proceeding, brought a replevin suit against John W. Harmon, sheriff of Union County, Arkansas, as also Valliant and Grubbs, to recover possession of the property. Issue was joined, and on Yalliant’s motion the court required appellant to elect whether it claimed title and right to possession of this property under its mortgages above mentioned or its bill of sale dated October 2, 1929. Under the order of the court appellant elected to stand on the bill of sale. It was tried to a jury, and judgment rendered against appellant in the sum of $1,762, the property having been delivered to appellant under its replevin bond.

The bill of sale is the ordinary form of a bill of sale covering personal property. It provided that, in consideration of the sum of one dollar and other valuable considerations to him (Grubbs) cash in hand paid by appellant,- receipt of which is acknowledged, “have bargained, sold and delivered, and do by these presents bargain, sell and deliver,” unto the appellant the personal property therein described, which is the property in controversy. It further contained this clause: “It is agreed that any money received by the seller under this bill of sale for any of the livestock, tools, or equipment herein mentioned, shall and will be credited on and against my indebtedness to them, memorandum of such sale shall be made to me at my address at Maud, Texas, said credits to be applied as, where and if the money is received, less all expenses of sale.” It concluded with a warranty clause, but no defeasance clause. At the same time Grubbs executed a note to appellant covering all of his indebtedness to it up to that time, and also executed a mortgage on other property that he had in Cass County, Texas.

The court instructed the jury that the instrument above mentioned, called a bill of sale, is a bill of sale. The only question submitted to the jury was whether. there was a constructive or symbolical delivery made of the personal property therein described by Grubbs to appellant. The jury found that there had been no such delivery, and under the instructions of the court returned a verdict against appellant for the value of the property.

We are of the opinion that the court erred in submitting that question to the jury, and in refusing to direct a verdict for appellant at its request. The undisputed evidence shows that the sale by Grubbs to appellant was complete, and the execution and delivery of the instrument to it constituted a constructive or symbolical delivery of the property to the -appellant. The instrument was executed in Texarkana, Texas. The property was located in Union County, Arkansas, and was not subject to manual delivery at that time. We agree with the trial court that the- instrument is in fact a bill of sale and not a mortgage. There is no question of fraud involved in the case as between appellant and Grubbs. Appellee is merely an attaching creditor, and, if the execution and delivery of the bill of sale was a sufficient delivery of the property, either actual or constructive, to pass the title, to it, a judgment should have been directed in the appellant’s favor. It was said bj^ this court in Cate-LaNieve Co. v. Plant, 172 Ark. 82, 287 S. W. 750: “It has always been the rule of this court that constructive delivery on the sale of a chattel is sufficient to pass the title, and that the intention of the parties, when manifested by any overt act, is controlling” (citing a number of cases).

Now in this case both appellant and Grubbs testified positively that the execution and delivery of the instrument was intended by both parties to be a complete sale, and to pass the title to the property therein described at that time. Appellee, Valliant, also recognized this to be the fact and recognized appellant’s title, to the property by his trip to Farmerville, and by his request of permission to retain the property for a short time for said purposes. Valliant ’s possession of the property was Grubbs’ possession prior to the. execution and delivery of the bill of sale, as he was Grubbs’ agent. After the execution and delivery of the bill of sale, he held possession for appellant. Appellees contend that the clause above quoted renders the instrument a mortgage and not a bill of sale. Assuming that it might be so held in equity, we think it can make no difference to Valliant for in either case his lien acquired by attachment was subsequent to the title or lien conveyed by the instrument.

Under our view of the case, the court should have directed a verdict in appellant’s favor. Not having done so, the judgment will be reversed, and judgment will be rendered here for the possession of the property in appellant’s favor.


text:
    Commonwealth Building & Loan Association v. Wingo.
    4-3595
    Opinion delivered November 19, 1934.

      Lake, Lake & Carlton, for appellant.

      E. K. Edwards and Will Steel, for appellee.
   McHaney, J.

On August 25, 1926, the late Congressman, Otis Wingo, and his wife, the appellee, conveyed by warranty deed a certain eleven-acre tract of land adjacent to DeQueen, in Sevier County, Arkansas, to Robert A. Brown for a consideration of $5,500, of which $500 was paid in cash, and for the remainder notes were executed and a vendor’s lien was retained in the deed to secure the payment of the unpaid purchase money, represented by said notes. Said deed contained the following clause: “It is further agreed that, upon full compliance with all of the conditions herein set out, the grantor will release the lien herein retained upon any lot or parcel of said land, and upon the payment to the legal holder of the notes of 3% cents per square foot, embraced in the said lot, provided that interest due at the subsequent semi-annual interest payment periods is paid, which said payments shall be applied upon the indebtedness.”

This clause was placed in the deed to enable Brown, who was constructing a number of residences in DeQueen and vicinity at that time, to construct houses on certain lots in said eleven-acre tract, clear the title thereto by procuring a release of the vendor’s lien to such lots without paying the whole of the balance of the purchase money due on the whole tract. This enabled him to borrow money to construct the houses by showing a clear title to any particular lot or tract on which he decided to build a house. The tract in controversy is a lot 100 by 110 feet. Brown began the construction of a residence and garage thereon in the fall of 1926. He applied to appellant for a loan of $2,000 thereon for the purpose of completing the construction of said building, and, in order to clear the title, he procured a release deed from Mr. Wingo to said lot, which was placed of record. Thereafter appellant approved Brown’s application for a loan, advanced to him the sum of $2,000 on January 14, 1927, taking a mortgage on said plot of ground which described the plot the same as in the release deed from Wingo to Brown which was executed on the 3d day of December, 1926. Brown completed the residence and garage, and he built two other residences on the eleven-acre tract in the same way. Brown failed to pay for certain materials and labor entering into the construction of said buildings, and mechanics’ liens were filed against them. Suits were brought to enforce said liens in which Wingo was made a party, and he filed an answer and cross-complaint, alleging default of Brown in the payment of his notes, and prayed a foreclosure of the lien retained in his deed to Brown. It was granted as to the entire tract less three small lots upon which buildings had been erected and which had been released from his vendor’s lien. Appellant’s mortgage on the lot in controversy was held to be second and subsequent to the materialmen’s liens which were adjudged against it. The property was sold under the decree of foreclosure, and Mr. Wingo became the purchaser of all the land not released, and appellant became the purchaser of the lot in controversy, said sales being duly approved and deeds thereto acknowledged and approved. In all these proceedings the lot in controversy was described as in the release deed from Wingo to Brown above mentioned. Later, appellant sold the lot in controversy to one McCown, taking a mortgage from him and wife for the purchase price. In December, 1930, appellant foreclosed the McCown mortgage and reacquired the property at the foreclosure sale, and in all these proceedings said lot was described as in Wingo’s release deed to Brown. Mr. Wingo died testate in 1930, and, under the terms of his will, appellee became the owner of his real estate, subject to all of the rights and liabilities attaching to it at the time of his death. In October, 1932, appellee wrote appellant a letter stating that in running the lines on her property known as Wingo Hill, she found that the house owned by appellant, being the tract in controversy, was on. a part of her property; that one-half of the garage, two door steps, the southwest corner of the house and all of the front yard were on her land. She demanded $500 rent for the use of it, and offered to sell sixteen feet of it on the east side, forty feet on the south side, and fifty feet on the west side, in order to enable appellant to handle its property. Mr. Byington, agent for appellant at DeQueen, and a surveyor, assisted the appellee in making the survey in which it was discovered that the house on the appellant’s tract of land extended over the lines, and onto appellee’s property as heretofore stated. Thereafter appellant instituted this action to reform the release deed from Wingo to Brown and all subsequent transactions affecting the title to said lot so as to describe a tract of ground 100 by 110 feet on which the improvements' would be situated without extending over to appellee’s property. The court denied reformation, and this appeal is from that decree.

We think the court erred in refusing to reform the release deed in question, and all other instruments thereafter affecting the title to said lot based on said description. It is clear from the language used in the deed from Wingo to Brown that it was the intention of Mr. Wingo to release any particular plot or tract of ground which Mr. Brown desired to have released, upon the payment to him or to the holder of the notes of 3% cents per square foot. It was manifestly the intention of Brown and of Wingo in the execution of the release deed to the plot in controversy to release from the vendor’s lien the ground on which Brown was then building the improvements mortgaged to appellant. His failure to do so was the result of a mutual mistake. While Brown did not testify and Wingo is now dead, we think all the facts and circumstances clearly indicate that Brown did not intend to build a house or any improvements on land belonging to Wingo, and that Wingo did not intend that he should do so. The error was due to Brown’s failure to properly describe the tract he wished released. Brown intended to get released the land on which he was then building a house, the foundation of which had already been laid, and it was Wingo’s intention that this should be done. Brown’s error in describing the tract was also Wingo’s error in releasing it. This makes a clear case of mutual mistake. This court has many times held that courts of equity are vested with jurisdiction to reform instruments, including deeds and mortgages, in order to give effect to the intention of the parties. Clark v. Roots, 50 Ark. 179, 6 S. W. 728, 8 S. W. 569; Smith v. Kaufman, 145 Ark. 548, 224 S. W. 978; Glover v. Bullard, 170 Ark. 58, 278 S. W. 645; Foster v. Dierks Lumber & Coal Co., 175 Ark. 73, 298 S. W. 495. The general rule is that equity has jurisdiction to cancel or reform written instruments, either where there is mutual mistake or where there has been mistake of one party, accompanied by fraud or other inequitable conduct of the other. "We held in Sherwin-Williams Co. v. Leslie, 168 Ark. 1049, 272 S. W. 641, that, where the uncontroverted proof showed that it was the intention of the parties to a deed that certain lands should have been included, and that it was omitted through the oversight of the scrivener who prepared the deed, as between such parties, the deed will be reformed. Many other eases might be cited. This court has also held in Blackburn v. Randolph, 33 Ark. 119, that: “Where a mistake in description of land occurs in a series of conveyances, under such circumstances as would entitle any one of the vendees to a reformation as against his immediate vendor, the equity will work back through all, and entitled the last vendee to a reformation against the original vendor,” to quote the second syllabus. This same rule was reaffirmed in the case of Modica v. Combs, 158 Ark. 149, 249 S. W. 567.

Nor do we agree with appellee that the decision in the mechanics’ lien case herein referred to constituted res judicata of appellant’s rights. All these proceedings were based upon the erroneous assumption that the description in Mr. Wingo’s release deed was correct. This holding will work no injury to appellee, but the contrary holding would work a great loss to appellant.

The. decree will be reversed, and the cause remanded with directions to reform the release deed of Mr. Wingo, and also all subsequent instruments incorrectly describing the tract of land, in accordance with the prayer of appellant’s complaint.