author: Wood, J.

text:
    Hughes v. Cordell.
    Opinion delivered July 11, 1927.
    1. Abandonment — intent. — /To constitute forfeiture of an oil and gas lease by ceasing operations, the relinquishment must be actual and the abandonment intentional, and such matters are questions of fact.
    2. Mines and minerals — abandonment op lease. — Under the facts established, held that a finding that there was no abandonment of an oil lease cannot be said to be clearly against the evidence.
    3. Mines and minerals — forfeiture op lease for nondevelopment. —Where an oil lease of a tract contemplated for development of it in its entirety, the lessor cannot forfeit-a part of his for nondevelopment where the rest has been developed.
    4. Reformation of instrument — intention of parties_A deed conveying an undivided one-eighth interest in the oil, gas and minerals in certain lands, with a right to collect a fractional part of the royalties under the lease, held properly reformed as to the interest in the royalty conveyed to conform to the mutual intention of the parties.
    Appeal from Ouachita Chancery Court, First Division; J. Y. Stevens, Chancellor;
    affirmed.

      George W. Hays, Align Smith and Morris Few, for appellant.

      Neil C. Marsh and Gaughan & Sifford, for appellee.
   Wood, J.

The facts of this case are correctly stated by counsel for the appellees as follows:

“On February 16, 1920, Oeorge Flannagan executed an oil and gas lease to R. Y. M. Cordell, describing therein lot 1 in the northeast quarter and lot 1 in the northwest quarter of section 6, township 16 south, range 15 west, containing 90.26 acres. In form, the lease is an ordinary oil and gas lease, containing only the usual provisions relating to the payment of royalty and the development of the land. There is no provision in the lease for a forfeiture for failure to develop. .
“The lease was afterward subdivided by R. V. M. Cordell, the Humble Oil Refining Company acquiring lot 1 in the northeast quarter of section 6, containing approximately 50 acres, the Sinclair Oil & Cas Company acquiring the west 30 acres of lot 1, in the northeast quarter of section 6, and the remaining 16 acres off the east side of lot 1 in the northwest quarter of section 6 was retained by R. Y. M. Cordell. It is this 16 acres that is in controversy in this suit.
‘ ‘ On September 27,1922, R. Y. M. Cordell contracted for the drilling -of this 16-acre tract, Cordell retaining a 7-32 overriding interest in the oil production. The 16-acre tract was further subdivided, and drilling commenced. The first well came in on January 14, 1923. Seven wells were drilled by five different operators, who had acquired separate distinct parts of the 16-acre tract. These wells were drilled to the first producing sand, which began to fail and show considerable salt water after about three months. As these wells failed, the machinery was moved off and some of the casing pulled.
“During the fall of 1923 and the winter and spring of 1924 this lease was submerged by Smackover Creek. During 1923 and 1924 Miss Alice Cordell, who had an interest in the royalty, and her brother, R. V. M. Cordell, who had an interest in the leasehold, visited the lease on several occasions, and found water standing on the lease every time. They were trying to get some one to drill the property, as they had no drilling rig of their own. After production failed on the 16-acre tract, the title to the leasehold was' outstanding in numerous individuals and companies, some of which were involved in litigation, and, in order to secure some operator'who would accept the title and operate the property, it was necessary to acquire all of these outstanding interests. This Miss Alice Cordell undertook to do. It required at least fourteen deeds and assignments and affidavits to get the outstanding title back into one individual. This was finally accomplished by September; 1925. In the meantime the Superior Oil Company had agreed to buy the lease if the outstanding titles could be secured, and a number of conveyances and assignments were executed by Alice Cordell transferring the title to the several tracts to the Superior Oil Company.
“Just prior to November 6, 1925, the Superior Oil Company commenced drilling its first well. The contract price for this well was $14,500. This well was commenced before any objection was made by Dr. Hughes, and, according to Robert Tate and C. 0. Tate, before they had any intimation that Dr. Hughes or any one else claimed that the lease had been forfeited for abandonment. This suit was not filed until after the second well was started by the Superior Oil Company.
“The lease cost the Superior Oil Company $16,600, and it has drilled three wells on the lease. L. C. Peters, production superintendent for the Humble Oil Refining Company, testified concerning the wells drilled on lot 1 in the northeast quarter of section 6, which was held under the same lease as the 16-acre tract acquired by the Superior Oil Company. Five wells were drilled in 1923 to the first sand. Well No. 5 was deepened to the second sand in May, 1925, and wells Nos. 6, 7 and 8 were drilled to the second sand. Well No. 6 was later deepened to the third sand. The second sand was discovered about March, 1925.”

Mr. Stephenson, of the Sinclair Oil & Gas Company, testified that seven wells had been drilled on the west 30 acres of lot 1 in the northwest quarter of section 6, and two were drilling at the time he testified. The first well was drilled in December, 1922. Six wells were completed in January, 1923. There are three first sand wells still producing.

The following stipulation was made in open court and entered of record: “It is admitted that lot 1, in the northeast quarter of section 6-16-15, which is described in the lease executed by George Flannagan to R. Y. M. Cordell, came into possession of Humble Oil Refining Company by assignments, and that the Humble Oil & Refining Company entered this land and drilled the same and commenced producing oil on the 7th of January, 1923, therefrom] and have been continuously engaged in producing oil from the same at all times since that date; and it is admitted that the west 30 acres of lot 1 in the northwest quarter of section 6-16-15, in so far as the lease of Flan-nagan to Cordell affected the same, was assigned to the Sinclair Oil & Gas Company; that it drilled a well thereon in December, 1922, and began producing oil therefrom on the 23d day of December, 1922, and has been continuously producing oil from said west 30 acres of lot 1 in the northwest quarter of said section, ever since the 22d day of December, 1922, and that this production and all their operations have been carried on under the terms and by virtue of assignments of parts of the acreage covered in the original lease from Flannagan to Cordell.”

Dr. Hughes became connected with. this property when he secured a power of attorney from George Flan-nagan, May 28,1923. The power of attorney was revoked June'S, 1923. Flannagan again appointed J. F. Hughes his attorney in fact on July 24, 1923. This power of attorney was revoked on September 14,1923. Thereafter, on September 15,1923, Flannagan appointed Frank Betts as his attorney in fact. It does not • appear that Dr. Hughes was ever again appointed attorney in fact for Flannagan.

On April 14, 1924, Flannagan conveyed the fee simple title to this tract to G. F. Hughes, daughter of J. F. Hughes. On August 33, 1925, G. F. Hughes conveyed the land to Dr. J. F. Hughes. Prior to the conveyance by Flannagan to G. F. Hughes, he had sold undivided interests in the oil, gas and minerals on this land as follows:

On September 28,1922, to Alice Cordell, an undivided one-eighth interest in the oil, gas and minerals. On September 30, 1922, to Eula Greer, an undivided one-half interest in the oil, gas and minerals.' On September 30, 1922, to Texas Leasing Corporation, an undivided one-eighth interest in the oil, gas and minerals. On December 20, 1922, to Alice Cordell, trustee, and G. Gillespie, trustee, an undivided one-eighth interest in the oil, gas and minerals.

By these deeds Flannagan ■ conveyed % undivided interest in all the oil, gas and minerals in this land, subject to the outstanding oil and gas lease previously granted to R. Y. Cordell. Flannagan therefore had only an undivided one-eighth interest in the oil, gas and minerals left at the time he conveyed the land to Gr. F. Hughes. On November 6,1925, J. F. Hughes conveyed to Superior Oil Company an undivided one-eighth interest in the oil, gas and minerals, subject'to the lease to R. Y. M. Cordell. This conveyance left J. F. Hughes with the bare fee simple title to the land, with no interest in the oil, gas and minerals at the time this suit was brought.

This action was begun on November 28, 1925, in the Ouachita Chancery Court by J. F. Hughes against Alice Cordell, trustee, and the Superior Oil Company, a corporation, to cancel a mineral, oil and gas lease held by Alice Cordell, trustee, and the Superior Oil Company on sixteen and two-fifths acres of land covered by original mineral, oil and gas lease from George Flannagan to R. V. M. Cordell. The complaint alleged title to the land in the plaintiff through mesne conveyances from Flannagan, and that the leases on the lands in controversy had been abandoned, and that, after their abandonment, the plaintiff took possession for more than a year when the Superior Oil. Company acquired and was attempting to hold possession of the land that was unlawful and in excess of the rights he had' obtained under a surface lease for a pick-up station. The plaintiff alleged that the leases in controversy were a cloud on his title, and prayed that the same be canceled, and that he be awarded a writ of possession.

The defendants, in their answer, denied the allegations of the complaint as to. abandonment, and alleged that they were the owners and in lawful possession of the property under leases from R. V. M. Cordell, the original lessee of the property from Flannagan. The defendant, Superior Oil Company, alleged that there was an error in the deed from Hughes to it, in that the deed specified one sixty-fourth royalty when it should specify one-eighth, and prayed that the deed be reformed so as to effectuate the intention of the parties. •

The above are the issues and facts upon which the' trial court found that there was no abandonment, and therefore no forfeiture of the lease in controversy, an,d that the same was in full force and effect; and further, that there had been a mutual mistake in the mineral deed'from J. F. Hughes to the Superior Oil Company of date November 6,1925, in describing the royalty interest conveyed; that it was the mutual intention of the parties to convey one-eighth of the royalty interest instead of one sixty-fourth. The court therefore granted the prayer of the Superior Oil Company that the deed be reformed accordingly. The court entered a decree in accordance with its findings, from which is this appeal.

The first question presented is one of fact as to whether there had been an actual abandonment of the lease in controversy. As to whether or not there has been an abandonment, as a matter of fact, in any given case, is largely a question of intent to be determined, to he sure, by the conduct of the party charged with the abandonment. As is said in Cadillac Oil & Gas Co. v. Harrison, 244 S. W. 669, 196 Ky. 290, quoting syllabus: “To constitute the forfeiture of an oil and gas lease by ceasing operations, the relinquishment must he actual and the abandonment intentional, and such questions. are questions of fact.” See also McDaniel v. Conlan, 134 Ark. 519, 204 S. W. 850; Wooten v. Farmers’ & Merchants’ Bank, 158 Ark. 179, 249 S. W. 569.

It could serve no useful purpose as a precedent to argue purely a question of fact. The facts are set out above, and they speak for themselves. The trial court made a specific finding that there had been no abandonment of the lease in controversy, and certainly it cannot be said from the above facts that such finding is clearly against the preponderance of the evidence.

But, if it be conceded that the lease in controversy was in fact abandoned by the sub-lessees, such abandonment by them could not work a forfeiture as against those who claim under R. V. M. Cordell, the original lessee of the lease from the lessor, Flannagan. Learned counsel for the appellants say in their brief: “The evidence shows that the oil has been produced on the other 39 acres of this lease practically during all the time since the first discovery well. Cordell made assignments of his lease to the land in controversy to two or three parties, and it is as to these segregated portions that a forfeiture is claimed. * * * It is our contention that, when a tract is segregated and assigned, it here becomes a separate lease as between the assignee and the lessor, without affecting the balance of the lease, and we insist that that was done in this case.” We cannot concur in the contention of counsel that an abandonment of the segregated and sub-leased land by the sub-lessees would entitle the lessor and owner to have the lease canceled as to such portions. The lease from Flannagan, the original lessor and owner, to Cordell was a lease for the development of the 90 acres in its entirety, and these sub-leases were for the purpose of development. The law in cases of this kind is accurately and succinctly stated in syllabus to Duke (Tex. Civ. App.) v. Stewart, 230 S. W. 485, as follows:

“Where owner leased land as-an entirety land by lease required lessees to develop the land for oil, without providing for development of any particular acre or tract thereof, the development- of a portion of the land by a sub-lessee accrued to the benefit of the lessee, precluding the owner from declaring lease forfeited as to another portion held by lessee or successors for nondevelopment thereof.” See also Gypsy Oil Co. v. Cover, 78 Okla. 158, 189 Pac. 540, 11 A. L. B. 129.

The case of Cox v. Sinclair Gulf Oil Co., 265 S. W. 196 (Tes. Civ. App.), upon which counsel rely to sustain their contention, as we read it, does not conflict with the doctrine above expressed, but rather sustains the same. In that case the action was by the lessor against all the assignees of segregated portions of the oil lease to cancel the entire lease because of nondevelopment and abandonment. The 16th syllabus to the case is as follows: “On failure of assignee of segregated portion of lease to properly develop, as required by implied covenants, lessor is entitled to cancel lease of assignee so in default, or entire lease, as to all assignees, where they all rely on development by the one in default to vest in them the right to thereafter drill for oil.” In the case at bar the action is to cancel the leases only as to the segregated portions sub-leased, and not the entire lease. As between 'the lessor, Flannagan, and Hughes, who claims title under him, and the original lessee, R. Y. M. Cordell, and those claiming under him, such an action will not lie, because there has been development on the tract not segregated and sub-leased, and, under the doctrine above stated, “the fee owner may not forfeit the lease in part only while it is valid as to the remainder.”

The court did not err in reforming the deed executed by Dr. Hughes to the Superior Oil Company. The facts on this issue are as follows: The deed was prepared by C. 0. Tate and sent to the 'Bank of Smack-over to be executed, and a voucher for $1,000' was sent to ihe bank to be delivered when the deed was delivered. The deed as prepared by Tate was in usual form, and in the granting clause conveyed an “undivided one-eighth interest in and to all oil, gas and other minerals in, under, and upon the following described land, lying in the county of Ouachita and State of Arkansas, to-wit: (Here follows a description of the lands containing the 16 acres in controversy). The deed recited that “it is subject, however, to a certain oil, gas and mineral lease executed by George W. Flannagan and wife on the 13th day of February, 1920, unto R. Y. M. Cordell,” etc. The deed as originally written granted to the Superior Oil Company the right to collect and receive under the aforementioned lease such undivided “one-eighth part and interest of all oil royalties and gas rentals due or that might become due under the aforementioned leáse. ’ ’ The appellant took the deed, and, without the knowledge of the bank, the escrow agent, or the grantee, changed the deed in the last paragraph thereof to read one sixty-fourth instead of one-eighth. The check was indorsed by the appellant, and lie collected the $1,000. The check bore the following* notation: “One-eighth oil, gas and minerals on Hughes Ey2 lot 1, NW%, 6-16-15.” The deed was made pursuant to an escrow agreement whereby appellant agreed to sell to the Superior Oil Company one-eighth of the oil, gas and minerals in, on and under the land described, the same constituting one sixty-fourth royalty on same. The deed was reformed by the trial court to carry out the manifest intention of the parties, which was that the grantor should convey to the grantee one-eighth of the oil, gas and minerals in, on and under the land described, constituting one sixty-fourth royalty on the same, whereas the deed as changed by the appellant would entitle the Superior Oil Company to collect only 1/500 twelfth royalty. Such was not the intention of the parties.

We find no error. The judgment is therefore affirmed.


source: Caselaw Access Project

author: Wood, J:

license: Public Domain

text:
    Lenon v. Tunnah.
    Opinion delivered July 11, 1927.
    1. Municipal corporations — organization of improvement district. — During the pendency of a petition to annex territory to a street improvement district, and of an action for mandamus to require the council to take action thereon and of a suit to. enjoin the council from establishing another district containing such territory, the city council had no right to organize another improvement district containing such territory.
    2. Municipal corporations — annexation of territory to improvement district. — A city council must act with reasonable diligence and promptness on a petition to annex territory to a street improvement district, under Crawford & Moses’ Dig., § 5733.
    3. Municipal corporations — improvement district — injunction against annexation. — Property owners and taxpayers have a right to sue to enjoin the city council from annexing territory to a street improvement district while a petition to annex such territory to another district was still pending.
    Appeal from Pulaski Chancery Court; Frank H. Dodge, Chancellor;
    affirmed.

      Miles & Taylor, for appellant.

      Sam M. Wassell, for appellee.
   Wood, J:

It is conceded by counsel for the appellees that counsel for the appellants “have given a fairly good statement” of the facts of this record as follows: “On November 9, 1925, under the provisions of Crawford & Moses’ Digest, § 5733, there was filed with the city council of Little Bock a petition representing the signers to be owners of a majority in value of real estate within the territory affected for the annexation of such'territory to Street Improvement District No. 363 of Little Rock. The purpose of the petition was to drain, grade, pave, curb and gutter .streets hereinafter more particularly set out. The council appointed a hearing for the petition to be held on December 7,1925, and caused notice to be given thereof. No hearing being had, the commissioners of District No. 363, on February 20, 1926, requested the council to take action on the petition. The matter was referred to the finance committee, and has since lain practically dormant.

“On July 19, 1926, more than ten individuals, representing themselves to be owners of property in territory sought to be organized into Street Improvement District No. 454, filed with the city council the first petition looking to such organization, under Crawford & Moses’ Digest, § 5649. An ordinance establishing the district pursuant to the petition was passed on the same day.

“District No. 454 embraces all the territory proposed to be annexed to District Ño. 363 and much additional territory. Its purpose is to improve the same streets contemplated by the annexation proceeding and some additional streets for a much greater length. In short, District No. 454 proposed to improve throughout an extent of about three miles a highway beginning at the intersection of Sixth and Cross streets north to Lincoln Avenue; thence on Lincoln Avenue to Valley Street; thence on Valley street to its intersection with South Lookout Avenue, Hillcrest Avenue and Beech Street; and Riverside Avenue from the north line of Lincoln Avenue to the West line of Riverside Park Addition to Little Rock. The highway contemplated by District No. 454 stretches from near the heart of Little Rock to the residence section in the west and northwest part of the city commonly designated ais ‘Pulaski Heights.’ This highway coincides with the highway sought- to he improved in the annexation proceeding, throughout the entire course of the latter; and one. of the announced purposes of District No. 454 is to improve the highway common to both districts in substantially the .same manner as proposed by District No. 363. The lines of the two districts adjoining the highway common to both are, roughly, the same. The common highway is only about one-fourth the total length of highway proposed to be improved by District No. 454, and that district also embraces a large area outside the territory proposed for annexation and adjoining that part of the highway peculiar to District No. 454.

“The second petition for District No. 454, purporting to carry a majority in value, was filed with the city council on October 20, 1926, and was approved on January 3, 1927. Meanwhile a suit to enjoin further steps in the organization of District No. 454 was filed in the Pulaski Chancery Court on December 11, 1926, by plaintiffs, alleging themselves to be owners of property in the annex territory against the city of Little Rock and its board of alderman. This suit has never proceeded to a hearing. Two days after its institution the same plaintiffs filed a mandamus proceeding in the Pulaski Circuit Court to compel the same defendants. to' hear and dispose of the petition for annexation. The mandamus suit, too, has remained pending without a hearing.

“Within thirty days after approval by the city council of the second petition for District No. 454, this suit was brought to review that finding. As property owners in the district, plaintiffs sue its commissioners, and ask that the district be invalidated on the following grounds : “(1) The district includes property not benefited. (2) It excludes benefited property. (3) The second petition does not contain a majority in value of signatures of property owners. (4) District No. 454 embraces certain property designated for annexation to District No. 363.

“The chancellor found for the defendants (appellants) on all issues except the last. On that the finding' was for plaintiffs, with a consequent •order invalidating District No. 454,” from which is this appeal.

The record is exceedingly voluminous, and it could serve no useful purpose to set out.and discuss any other issue except that upon which the chancery court based its decree. Concerning this issue the chancery court, in a written opinion, said:

“The third question to be passed upon is whether District No. 454 can legally be organized and include within its boundaries property in an annex petition to another district for a similar improvement when the said annex petition is pending before the city council, without action, and when said annex petition was filed before the filing of petition in No. 454. Counsel for defendant insist that the passing by the council of the petition in No. 454 is tantamount to a rejection of the annex petition to District No. 363. If this be true, it leaves the matter of passing ordinances on petition for improvement districts pending before the • city council a matter of discretion with the council. As set out by attorneys for plaintiffs, it seems to us that the better rule is stated in the case of Little Rock v. Boullioun, 171 Ark. 245, 284 S. W. 745, where the court stated that the city council should dispose of a petition in one of two ways, either by a definite finding that the majority had signed for the improvement or by a definite finding that a majority had not signed for the improvement. In this case the council has made no such definite finding in regard to the annex petition to District No. 363, although the council has been repeatedly requested to do so, and there is now pending in the circuit court of Pulaski County a mandamus petition to compel them to take action upon this petition.
“If No. 454, which includes all the property in annex petition No. 363, is held to he a valid district, then the granting of a mandamus in the case pending'would give the parties no relief, because No. 454 would have swallowed up the territory in their petition ánd would be in process of making a similar improvement contemplated in the annex petition. We doubt very much whether the statute intends that the city council should have- such a broad discretion in determining what districts should he formed and what districts should not he formed, but are rather of thé opinion that, unless a district is abandoned after its petition is presented, the council should act on petitions both of which cover part or all of the same property, in the order in which they are filed. To hold otherwise would he to invest a, legislative discretion in the city council which would cause undue political activity and favoritism in the formation of improvement districts. It is very clear to the court that, if the annex petition to No. 363 had been granted and the work commenced, or even completed, the property in the boundaries of this annex petition could not be included in No. 454, or any other district that might be organized. Of course, the assessment of benefits could not be made for the improvement already made by the annex, but the measure of benefits would be whatever advantage accrued to the property in its district being linked up with a through highway.”

The opinion of the chancery court is a correct interpretation of the opinion and a correct application of the decision of this court in the case of Little Rock v. Boullioun, 171 Ark. 245, 284 S. W. 745. The gist of the opinion, as it affects the issue here involved, is expressed at page 251 as follows:

“Our conclusion therefore on this feature of the case is that the city council had no right to refuse to pass the ordinance, unless it is shown that a majority in value did not sign the petition or that there was an obvious mistake in the inclusion or exclusion of property.”

Tiie facts set forth above show that, as early as November 29, 1925, a majority in value of the real estate within the territory affected petitioned to be annexed to Street Improvement District No. 363. The city council took no action whatever on the petition, although as early as December 7, 1925, there was filed with the city clerk a certificate of the Little Rock Abstract & Guaranty Company to the effect that the petition for annexation was signed by a majority in value of the owners of real estate in the territory to be annexed. Notwithstanding the attention of the council was thu's directed to the petition, it took no action thereon, and on February 20, 1926, the commissioners of District No. 363 requested the council to act upon the petition. At that time the city council, on February 22, 1926, referred the petition to its finance' committee, and recommended that it be referred to the new city council, and the new council again referred it to the finance committee. Still no action was taken thereon by the council, and on December 13, 1926, some of the original signers to the annexation petition instituted an action by petition filed in the circuit court for mandamus against the city council of Little Rock to require it to take action on the petition for annexation. Appearance was entered for the defendants and an agreement entered into by the attorney for the petitioners and the attorney for the city council for the matter to be heard on' December 27.’ F. L. Bruner and three other signers of the original petition for annexation filed a complaint in the chancery court of Pulaski County against the city council of Little Rock, asking that it be restrained from establishing District No. 454 until the city council had taken up the annexation petition and finally disposed of same.

Such being the facts of this record, the trial court did not err in holding that the city council had no power to create Improvement District No. 454 and to proceed with the improvement contemplated thereby until' it had definitely disposed of the petition for annexation to District No. 363. The reasoning of the chancery court as to why the decision in Little Rock v. Boullioun, supra, is applicable to and governs this case, is sonnd and unanswerable. To hold otherwise would, in effect, overrule that decision and vest the city council with legislative authority instead of an administrative and ministerial function which it must perform and which, under the decision in Little Rode v. Boullioun, supra, it has no right to refuse to perform when conditions exist, as they did here, calling for some action to be taken upon the part of the city council specifically with reference to the petition for annexation to District No. 363, which had been lodged with the city council before any steps were taken to create District No. 454. The law requires that the city council shall act with reasonable diligence land promptness. But it must act — it cannot dilly-dally with the rights of the property owners and pigeon-hole their petition.for annexation, as was done in this case. The law is mandatory in requiring them to act upon the petition for annexation, either to grant it or to disallow it. Such is the effect of the Boullioun case, supra. The trial court ruled correctly in so holding.

It follows, as a result of the views of the majority, 'that the action of the city council in ignoring the petition for annexation of territory to No. 363 and afterwards including this same territory in the attempted creation of District No. 454, was without authority, and void. Such being the case, the appellees, without doubt, as property owners and taxpayers in the alleged Improvement District No. 454, had the right to institute this action to' .challenge the validity of that district and the making of the improvement therein contemplated.

The judgment of the trial court is therefore correct, and it is affirmed.

Hart, C. J., and Mehaeey, J., dissent.


author: Wood, J,

text:
    American Insurance Company of Newark, New Jersey, v. Hays.
    Opinion delivered July 11, 1927.
    1. Insurance — forfeiture of policy — waiver. — Although a fire insurance policy gave the insurer the right to forfeit the policy for a change in the possession of the premises, it will be held to have waived such right where it require'd insured to pay an additional premium because of putting the tenant in possession and accepting insured’s promise to pay such increased premium, although the loss occurred before the annual premium became due to which the .increase was to be added.
    2. Insurance — loss by fire during' temporary vacancy. — Where insured put a tenant in possession and notified the insurance company and met the company’s proposition that he should pay an increased premium because of such tenancy, and stated- that he would pay it, if, when the premium became due, he was not occupying the property, and still owned it, the insurance company’s subsequent letters indicating its satisfaction with such statement and sending in an indorsement requiring an increased premium because of tenancy, which he was requested to attach to the policy, constituted a contract for insurance and rendered the company liable for loss during temporary vacancy.
    3. Insurance — loss by fire during temporary vacancy. — Where, although an, insurance policy contained a clause for forfeiture by reason of vacancy, the company consented to tenancy in return for an extra premium, and, on tenant’s moving out, the owner promptly applied for a vacancy permit, which was refused, the company was liable for a loss occurring four days after the tenant moved out and before the owner had received an answer to request for a vacancy permit.
    4. Insurance — fire loss during temporary vacancy. — If a fire insurance policy be taken on tenant property, a provision for forfeiture in case the premises become vacant will operate only after a reasonable time has elapsed in which to obtain other tenants.
    Appeal from Ashley Circuit Court; Turner, Butler, Judge;
    affirmed.

      Compere & Compere, for appellant.

      Y. W. Etheridge, for appellee.
   Wood, J,

This is an action by W. II. Hays against the American Insurance Company of Newark, New Jersey, and the Fidelity & Deposit Company of Maryland on a fire insurance policy issued by the insurance company on November 3, 1924, insuring the plaintiff’s residence in the sum of $1,000 and his barn in the- sum of $300. The insurance company will hereafter, for convenience, be called company. The residence of plaintiff at the time was occupied by the plaintiff, and the buildings — residence and barn — were situated on a farm three miles from Hamburg, Ashley County, Arkansas. The policy insured the property for a period of five years. The first premium of $21.60 was paid when the policy was issued, and the succeeding 'annual premiums were to be paid on the first of November of each year thereafter until November 1, 1928. On September 16, 1925, the plaintiff wrote the company that he was then living in St. Louis, and requested the company, when the premium was due, to send him notice at 1268 Delaware Avenue, St. Louis. On September '23, 1925, the company wrote the plaintiff that his note for $21.60 would be due on November 1, 1925. On October 24, 1925, the plaintiff sent his check for $21.60 to the company. On October 29, 1925, the company wrote the plaintiff, acknowledging receipt of the check for $21.60 for premium due November 1, 1925, and stated that, if he had rented his farm, he would have to pay an additional premium per annum therefor of $2.32, making the annual premium. $23.92. In this letter, as well as in the letter by the company to plaintiff of November 13, 1925, the company tells the plaintiff that, if he had a tenant occupying the property, he would have to pay the additional premium specified, and further states: “If- a man pays his premiums, he certainly wants protection, and we do not want you to do anything to violate the terms of policy contract without our consent.” On November 14,1925, in answer to these letters, the plaintiff wrote, notifying the company that he had a tenant occupying the property, and stated: “I understand from your letter that I am to pay an increase of $2.32 on the next installment, due November 1, 1926, which I expect to pay if I am not occupying the property myself and still own the same.”

On tbe 17th of November, 1925, the company wrote the plaintiff, inclosing permission to occupy the property by tenant, specifying the extra premium of $6.96 to be paid therefor, and requested the plaintiff to attach the same to his policy. On December 4, 1925, the plaintiff wrote the company as follows:

“I just received notice that my tenant whom I had on my place at Hamburg, Arkansas, moved out yesterday. Since I don’t think I can get my business arranged to get another in there before about the 20th of January, 1926, I am asking you if you will issue me a vacancy permit till that time.” ' On December 7, 1925, the company wrote the plaintiff as follows: “In reply to your favor of the 4th instant, will say that we cannot grant vacancy permit, so, if you will return your policy to us we will cancel the same, pro rata, and return your note and whatever amount cash that may be due you. Thanking you to let the policy come forward at once,” etc.

On December 9,1925, the plaintiff-wrote the company as follows: “I just received word that my house burned, and all other buildings were destroyed by fire Monday night last, the night of December 7, 1925, so I think my policy covering house and barn is due.” Plaintiff gave the number of his policy. He again wrote the company on December 21, 1925, to the same effect, stating that he had notified the company of the destruction of his property by fire and that he had not had any reply to his letter, that the policy was due, giving number of same. .On December 22, 1925, the company wrote the plaintiff, saying: “The matter with reference to the above policy was referred to our special agent, Mr. Oscar Dillehay, Hall Building, Little Bock, Arkansas, who no doubt will give attention to the same at his earliest convenience.” On January 7, 1926, the plaintiff wrote to Dillehay, stating he had written to the company notifying it of the fire and loss about a month previous, and had received an answer on December 22, 1925, stating that the company had referred the matter to him as special agent, and requesting bina to send tlie plaintiff blanks for proofs of loss, •concluding the letter with the following: “I will send the proof and estimate to you, as I would like to have an early adjustment, so I can build.”

On January 20,1926, the company wrote the plaintiff, stating, in substance, that its agent had visited the premises and found that the property was vacant ‘and had been vacant for some time.” This letter concluded as follows: “We refer you to the terms and conditions of your policy, without waiving any terms and conditions of policy and reserving all rights under terms of the policy, and neither admitting nor denying liability.” .On January 22, 1926, the plaintiff wrote the company, inclosing the plans of the buildings and cost of same, and requested the company .to give him a definite answer in the matter. Oü January 26,1926, the company answered, saying: “I can only refer to the terms and conditions of your policy without waiving any of the terms and conditions of the policy.” After this letter the plaintiff sent in his proof of loss about January 26, 1926, and on the 2d of February, 1926, wrote the company stating that he had written it four times previously,, and that the company had ignored his letters, and notified the company that, unless he heard from it in a short time, .he would put the matter in the hands of his 'attorney. This letter closed the correspondence. . ;

. The .company is a member of the. Fire Prevention Bureau, which is a rating bureau for fire insurance companies in Arkansas, .one of the rules of which is that, when permission is given for premises to become vacant, by reason of the increased hazard by reason of such vacancy or unoccupancy, one-third of the insurance is suspended, and in case the property is destroyed, by fire, through such vacancy, the company would be liable for not exceeding two-thirds of the amount of the insurance.

The policy and-a certified copy of the bond for the prompt payment of all claims with the Fidelity & Deposit Company as surety thereon were made exhibits to the complaint.

. The plaintiff instituted this action, and set np the policy, alleged a compliance on his part with its provisions, and prayed judgment for the amount of the policy in the sum of $1,228.24, less the premium notes. Plaintiff also prayed for penalty and a reasonable attorney’s fee.

The defendant answered, and denied formally the allegations as to the destruction of the property, and denied specifically that the plaintiff had complied with the terms of the policy as to notice and proof of loss, and that defendant had waived any proof of loss, and alleged that the plaintiff had wholly failed to comply with the terms of the policy, and therefore denied any liability on the policy and on the bond of the Fidelity & Deposit Company.

The policy, among other things, contains this provision : “If the risk be increased in any manner, or if any change takes place in the title, possession'or interest of the assured in the above mentioned property, * * * or if any of the above mentioned buildings BE OR BECOME VACANT OR UNOCCUPIED WITHOUT THE CONSENT of an officer or the Southern Farm Department manager of this company indorsed hereon, then, in each and every one of the above cases this entire policy shall be null and void. ” ' •

The cause was, by consent of parties, submitted to the court sitting as a jury upon the above issues and facts, and the court rendered a judgment in favor of the plaintiff against the defendants in the sum of $1,228.24, the amount due under' the policy, with interest, and twelve per cent, penalty., and an attorney’s fee in the sum of $250, from which judgment is this appeal.

It will be observed that the policy provides that if any change takes place in the possession of the property without the consent of the insurance company, the policy should be null and void. The policy and the correspondence between the appellee and the insurance company show that the appellee, after issuance of the policy, changed possession of the property without the consent-of the insurance company. It appears from the policy that W. H. Hays insured his dwelling house, situated within three miles of Hamburg, Ashley County; his address in the policy is Hamburg, Arkansas, and his letter to the company of September 16, 1925, states he was then living in St. Louis. There is nothing in the record to show that, up to this time, he had obtained the consent of the company to change possession of the property, and if the company had then declared a forfeiture of the policy, it would have been entitled thereto, under the express terms thereof; hut the company clearly waived this right to a forfeiture of the policy by its letters to appellee of October 29, 1925, November 13, 1925, and November 17, 1925, which show that the company consented to the occupancy of the property by tenant and accepted appel-lee ’s promise to pay the company an increase of $2:32 on the annual premium in consideration of the permission granted by it for appellee to have the premises occupied by tenant. We cannot therefore agree with learned counsel for the appellants in their contention that the appellee has not paid anything for the tenancy permit and made no promise to pay. On the contrary, appellee did promise to pay the increasód premium, which was not due until November 1, 1926, and, before this premium became due, the fire destroyed the property, and the company has-denied all liability under the policy. The parties agreed that, in case of recovery on the policy, the balance due on the unpaid premium note of $71.76 should be deducted from the amount due on the policy, and such was the judgment of the trial court.

It appears from the letter of the insurance company to the appellee of October 29, 1925, that the company proposed to continue the insurance on the property to the end of the term, with permission for tenant occupancy during that time, upon appellee’s paying an increased premium of $23.92. At the next due date of the premium, which was November 1, 1926, the premium for the year 1925 had been paid, as the letter shows. Appel-lee accepted the company’s proposition in a letter of November 14, 1925, in'which, he states that he understood that he was expected to pay the increased premium for tenant occupancy, and that he would pay the same if, at the time the premium became dne, he was not occupying the property himself and still owned the same, and hoped that this would be satisfactory. The insurance company, by its letter of November 17,1925, indicated that this was satisfactory to the company by sending to the appellee an indorsement which they requested him to attach to his policy, which indorsement contained this provision: “In consideration of extra premium of $6.96 permission is granted for property under this policy to be occupied by good reliable tenant during remaining term of policy contract.” This concluded a contract between the insurance company and the appellee for the insurance of the property in controversy until November, 1929. This contract of insurance for tenant occupancy of the property insured was therefore in force and binding upon the parties on the 7th of December, 1925, when the loss occurred, unless, in the meantime, the appellee’s rights thereunder had been forfeited by reason of the fact that, at the time the loss occurred, the property was vacant. The letter of the appellee to the insurance company of December 4,1925, shows that the property became vacant on December 3, 1925, and the appellee notified the insurance company by letter of that fact on the next day, and requested a vacancy permit until January 20, 1926. The appellant replied to the letter on December 7, 1925, the day the fire occurred, and refused to grant appellee permission to continue the policy if the property remained vacant, and requested appellee to return the policy at once, saying, “We will cancel same, pro rata, and return your note and whatever amount of cash may be due you.”

The policy provides: “If any of the above buildings be or become vacant or unoccupied without the consent of an officer or the Southern Farm Department manager of this company indorsed hereon, * * * then this entire policy shall be null and void.” The crux of this lawsuit therefore is to determine whether or not, under the above facts, there was in law a vacancy which, under' the terms of the policy, wrought a forfeiture thereof.

In Planters’ Fire Insurance Company v. Steele, 119 Art. 597, 178 S. W. 910, Ann. Cas. 1917B, 667, the insurance company issued to Steele a policy of fire insurance on his dwelling- which he was then occupying- as such. Afterwards he moved-out, without permission of the company, and rented the same to a tenant. The tenant moved out, and Steele made application to the company for a vacancy permit. The company granted the permit for a period of thirty days. After the time for the vacancy permit had expired, Steele re-rented the house, and it was again occupied hy a tenant, who occupied the same until four days before the fire. The tenant’ moved out on July 11 and the fire occurred on July 15, and the house was vacant when the fire occurred. The vacancy permit had expired before the tenant moved out of the house the last time, and Steele, the insured,- did not ask for and did not obtain la renewal vacancy permit.

Under the facts of that case we held that the policy was void for two reasons; first, because there was a change of occupancy within the meaning of the policy, the owner having moved out and having rented the property insured to a tenant, who took possession thereof; and second, because the house covered by the insurance was vacant at the time of the fire. In that case, at page 602, we said:

“There are authorities to the effect that, where the insured property is occupied by a tenant, it is impliedly contemplated by the parties to the contract of insurance that any temporary vacancy caused by, or incident to, such change, is not within the purview of the vacancy clause. 2 Cooley’s Briefs on Insurance, 1675. That principle does not apply, however, in this case, for the reason that the property was occupied as a dwelling, and it was contrary to the terms of the policy to change the character of the occupancy. Insurance Association v. Dewberry, 69 Ark. 295, 62 S. W. 1047, 86 Am. St. Rep. 195. Therefore there could be no presumption that a temporary vacancy or period of tmoccupancy was within the contemplation of the parties. * * * The stipulation of the present policy was unconditionally to the effect that, if the building become 'vacant ¡and unoccupied,’ the policy should be void, and it cannot be said that there •was any period of time contemplated at all for unoccu-pancy for the reason that the policy also provides that any change of occupancy should also operate as an avoidance of the policy. No presumption could be indulged in the face of that express stipulation.”

Learned counsel rely upon the above ease, and cite a great many authorities from other jurisdictions to support their contention that, under the terms of the policy, the property in controversy, upon the undisputed facts of this record, was vacant at the time of the fire, and therefore that the policy lat that time was void. One of the leading cases which support the contention of counsel for the appellants is that of Farmers’ Insurance Company v. Vogel, 73 N. E. 612, 166 Ind. 239, 3 L. R. A. (N. S.) 966, 117 Am. St. Rep. 382, 9 Ann. Cas. 91. In that case the policy contained a provision similar to the one here under review. The building insured was occupied by a tenant with the knowledge of the insurer. The tenant, without the knowledge of the assured, moved out of the building, and, four hours thereafter, and before the assured had learned of it, and before he had reasonable time to make application for a vacancy permit, and before he had opportunity to procure another tenant, the building was destroyed by fire. The court held, under those facts, that the building was vacant within the meaning of the policy at the time of the fire, and that the policy was void. The ease is exhaustively treated, and many authorities are cited to sustain the court’s views, and the authorities holding otherwise are reviewed and distinguished to the satisfaction of the majority of .the court. There was a dissenting opinion, however, in which the judge states that the appellee, the insured, “was entitled to a reasonable time in which to ascertain that the tenant had moved out and within which to procure the indorsement of a vacancy permit upon liis policy,” and he cites a- great many cases to support his conclusion. So we concede that there is a great contrariety of views upon the question. But we aye in accord with Mr. Cooley when he says: “It is a well settled rule that, when the premises are described in the policy as occupied by a tenant, change of tenants is contemplated by the parties, and therefore any temporary vacancy caused by or incident to such change is not within the purview of the vacancy clause. ’ ’ 2 Cooley, Briefs on the Law of Insurance, page 1675. A great many cases are cited to support the text.

In R. C. L. it is said: “According to the prevailing view, if a fire insurance policy is taken on tenement property, a provision for forfeiture in case the premises become vacant- will operate only after a reasonable time has elapsed, in which to obtain other tenants.” R. C. L., page 1104, § 282. See also 26 C. J., page 216, § 263. Numerous authorities are cited to support the text above announced.

In this connection we approve the doctrine announced by the Supreme Court of Wisconsin in Hotchkiss v. Insurance Co., 76 Wis. 269, 44 N. W. 1106, 20 Am. St. Rep. 69, as follows:

“Under certain circumstances, premises may be vacant or unoccupied when, under other circumstances, premises in like situation may not be so, within, the meaning of that term in insurance policies. Thus, if one insures his dwelling ho,use as occupied as his residence, and moves out of it, leaving no person in occupation thereof, it thereby becomes vacant and unoccupied; but if he insures a tenement house or one occupied by tenant, it may fairly be presumed, nothing appearing to the contrary, that the parties to the contract contemplated that the tenant was liable to leave; and that more or less time might elapse before the owner could procure another tenant, and hence that the parties did not understand that the house should be considered vacant and the policy forfeited, immediately upon the tenant’s leaving it. ’ ’ See also Insurance Co. v. Davis, 59 N. W. 700, 40 Neb. 700; Texas Fire Ins. Co. v. Kempner, 34 S. W. 393, 396, 12 Tex. Civ. App. 533.

Now, it will be observed that tlxe case of Planters ’ Fire Insurance Co v. Steele, supra, upon which counsel rely, does not sustain appellant’s contention that, in the -contemplation of the parties to this contract, there was a vacancy of the property at the time of the fire. On the contrary, we think the doctrine there announced, at least by implication, tends to support the views we here express. In that case the property was the dwelling of the insured, and it’does not appear that there was any consent to a change of occupancy of the property insured. As the court said, “No temporary vacancy or period of unoccupancy was within the contemplation of the parties ; ’ ’ but here, as we have shown, there was an express contract that the policy should cover the property when occupied by a tenant. So it occurs to us that, under the facts of this record, it was in the contemplation of the parties that a vacancy might occur necessarily incident to a change of tenancy which would not affect the validity of the policy. "When we consider the fact, which is undisputed, and which the insurance company had knowledge of, that the appellee at the time of the fire was residing in St. Louis and that the property insured at Hamburg, Arkansas, was occupied by a tenant, that the property became vacant on the 3d of December, 1925, and the appellee notified the insurance company of that fact the next day, certainly it cannot be said that the appellee was negligent in entering upon negotiations with the insurance company for a continuation of his policy until he could have the premises reoccupied. Before appellee received an answer to this request for a vacancy permit, on December 7,1925, the fire occurred. It cannot be said that four days was an unreasonable time to conduct such negotiations, nor can it be said that four days was an unreasonable time incident to a change of tenancy. We think the argument unsound that the appellee did not .intend to occupy the premises until January 20, 1926, because he requested the insurance company to give him a vacancy permit until that time. On the contrary, we doubt not that, if the insurance company had notified the appellee, in answer to his request, that it would grant him a limited vacancy permit, and, after such time, if the property were,'still vacant, the policy would be declared forfeited, appellee would have immediately arranged to reoccupy the premises either by himself or by a tenant.

Our conclusion on the whole case therefore is that, at the time the fire occurred, there had been no forfeiture of the policy, that the same was in full force and effect, and that the appellants are liable thereunder for the amount .of the judgment rendered against them in favor of the ■appellee.

The judgment is in all respects correct, and it is therefore affirmed.


author: Hart, C. J.,

text:
    Pfeiffer v. Missouri State Life Insurance Company.
    Opinion delivered July 11, 1927.
    1. INSURANCE — FORFEITURE FOR NONPAYMENT OF PREMIUM. — Where a life insurance policy provides for forfeiture for failure to pay premiums, neither sickness nor insanity will avoid a forfeiture for such cause.
    2. Insurance — application of funds to avoid forfeiture. — Where an insurance company has in its hands sufficient funds of the insured- to pay an assessment or premium when due, it should Apply them! to the payment of the premiums and prevent a forfeiture.
    3. Insurance — construction of policy against insurer. — Forfeitures of insurance policies are not favored, and conditions affecting such forfeiture should be strongly construed against the party making them, especially where liability in whole or in part has already accrued and nothing remains to be done by the insured except to give notice to the insurer, and make proof of disability according to the terms of the policy.
    4. .Insurance — requirement of notice of disability. — The clause in a life insurance, policy requiring notice of a permanent disability of insured is a condition subsequent which should be construed liberally in favor of the beneficiary.
    5.. 'Insurance — excuse for failure to give notice of disability.— Under a life insurance policy providing for payment of a monthly sum on total or permanent disability, permanent insanity . causing the complete or partial permanent disability excuses the insured from giving notice of such disability.
    6. Insurance — accrual of permanent disability. — Where insured became totally and permanently disabled through insanity, and payments due under a disability clause in the policy were sufficient to keep the policy in force until his death, the company was liable under the policy, regardless of his failure to give notice of his disability.
    7.- Insurance — evidence of permanent insanity. — In 'an action .on a life insurance policy providing for payment of a stated monthly sum on total or permanent disability, and payment of a stipulated sum in case of death, evidence that insured became permanently insane prior to the expiration of an extension of the policy pursuant to agreement, and' that he remained insane until death in the following spring, held to support a judgment for plaintiffs, the benefits due under the permanent disability clause being sufficient to continue the policy in force. -
    8. Insurance — test of insanity. — In determining whether insured became permanently insane so as to excuse him for failure to notify the insurer of his permanent disability, the test is not whether he was able at the time to talk rationally about matters presented to him, but whether he was able to comprehend such affairs as needed his attention.
    Appeal from Lonoke Chancery Court; John E. Mar-tinecm, Chancellor;
    reversed.
    STATEMENT BY THE COURT.
    Missouri State Life Insurance Company brought this' suit in the chancery court against Will S. Pfeiffer, administrator of the estate of Samuel C. Pfeiffer, deceased, and others to foreclose a mortgage on approximately 1,072.07 acres of land in Lonoke County, Arkansas,, to secure an indebtedness of $40,000 of said Samuel C. Pfeiffer to said life insurance company. The defendants filed an answer, in which they admitted the execution ' of the mortgage but denied that the mortgagor owed the mortgagee the amount alleged in the complaint. By way' of cross-complaint, the defendant alleged that said insurance company issued to said Samuel C. Pfeiffer an insurance policy on his life for $25,000, and that said policy contained a disability clause in-favor of the insured for $250 per month in case of total disability, and that said company refused to pay any of the amounts due under said policy, and claim that the same has been forfeited for the nonpayment of premiums.
    The application for said policy of insurance states the age of Samuel C. Pfeiffer to be forty-five and his residence at Coy, Lonoke County, Arkansas. The policy provides for the payment of $25,000 immediately upon the receipt of due proof of the death of Samuel C. •Pfeiffer, the insured. The policy was dated March 20, 1922. The policy also contained the following:

      “ Total and permanent disability benefit. — The company will pay to the insured a life income of ten dollars each month for each $1,000 of the face amount hereof if the said insured shall become totally and permanently disabled, as hereinafter defined, before attaining age sixty. The first payment of said income shall be made six months after receipt by the company of due proof of total and permanent disability, and subsequent payments shall be made monthly thereafter as long as the insured lives and suffers such disability, and shall be in addition to all other benefits provided by this policy. The company will also pay for the insured the premium required on this policy for every policy year following the date of approval by the company of proof that the insured has become totally and permanently disabled, as hereinafter defined, before attaining age sixty, and the premiums so waived will not be deducted in any settlement' of the policy, which will be continued in full force to maturity, with loan, cash and other guaranteed values increasing from year to year in like manner as if the premiums were being duly and regularly paid by the insured. Total and permanent disability may be due either to bodily injuries or to disease, which must occur and originate while this policy is in full force, after the first premium has been paid on it, but not before six months from the date hereof, and must be such as to prevent the insured then and at all times thereafter from engaging in any gainful occupation. * * * The annual premium for the total and permanent disability benefits is.$76.50 and is included in the premium stated in the consideration clause.”
    Samuel C. Pfeiffer ivas forty-five yearj old when the policy in-question was issued to him, and had been a successful farmer and business man. He became involved in debt in nearly the whole value of his property. He was a deputy sheriff of Lonoke County in 1923, and, on August 4,1923, was shot in the hip while in the discharge, of his duty. He was carried to a hospital in Little Bock and stayed there until September 26,1923. He was then carried home, but was not able to sit up. He had a drain from his side, and had no strength at all. He remained confined to his bed as a result of this gunshot wound for several months. He finally recovered to such an extent that he was able to go to a small commissary store, about fifty or one hundred yards from his dwelling-house, and. help his young son, who was about sixteen years of age, and his wife to run the store. Occasionally he sold some small. articles of merchandise, but was not able to remain at the store for more than two or three hours at a time. Some days he could not go to the store at all. Frequently he made mistakes in giving change for one dollar when he sold small articles of goods to customers. He believed that his mind had become affected, and frequently spoke of it. to friends and acquaintances. He was informed -by his physicians that he had pellagra, and was treated, for that disease. In December, 1924, he became fearful lest he should harm his family, and gave directions that his firearms be taken, charge of by some one else.. He died May 15,1925, in .a hospital at Little Bock, Arkansas. Pellagra was the cause of his death, and he died after being in the hospital for eleven days.. He was physically in a dying condition and mentally as unbalanced. as could be when he was carried to the hospital.
    ■ Dr. B. F. Darnall, a- specialist in mental and nervous diseases for twenty-nine years, and Dr. C. C. Kirk, at one time superintendent of the Arkansas 'State Hospital for the Insane, and who has heeu engaged in hospital work practically ever since 1902, were witnesses for the appellants. ' According to their testimony, as expert witnesses, the average case of pellagra is a toxic condition, and manifests itself by roughening and reddening the skin. Pellagra causes the mind to become affected and the victim to become insane. The time of the insanity and the length of time that the patient is affected before death ensues depends on the individual. After having been given a history of the insured, both of these expert witnesses testified unqualifiedly that the insured became insane as a result of being afflicted with pellagra, and that he was insane during the fall of 1924, and must have continued so until the time of his death.
    Two physicians for the appellees testified .that the insured had pellagra, and was mentally disturbed. According to their testimony, however, he was not permanently insane from the early fall of 1924 until his death in May, 1925. According' to their testimony, at times he would be capable of attending to his affairs. Numerous lay witnesses, including the widow and children of the insured, testified that, he was never the same man after he was shot, in August, 1923, and that he was permanently insane and incapable of attending to his business from early in the fall of 1924 until his death in May, 1925.
    The appellees introduced about an equal number of witnesses, who testified that,' while the insured was mentally unbalanced on occasions during the fall of 1924 and the early part of 1925, he was at times capable of attending to his own affairs. The testimony on this point will be stated and discussed more at length under an appropriate heading in the opinion.
    The chancellor found that the insured was not permanently insane from some time in the fall of 1924 until his death in May, 1925. Hence he found that there had been a forfeiture of the policy for the nonpayment of the premiums and that no amount was due the beneficiaries in the policy under the terms thereof at the date of the death of the insured. A decree was entered of record in accordance with the findings of the chancellor, denying the right of the beneficiaries in the policy to recover any amount under it, and a decree of foreclosure was also entered of record in favor of the appellees, and the lands embraced in the mortgage were' ordered sold for the payment of the mortgage indebtedness. The ca,se is here on appeal.

      George E. Morris, J. B. Reed and W. P. Beard, for appellant.

      Allen May and Rose, Hemingway, Cantrell & Lough-borough, for appellee.
   Hart, C. J.,

(after stating the facts). At the outset it may be stated that the annotator, in a case-note to 15 A. L. B., at page 318, states the general rule to be that insanity or incapacitating sickness of the insured will.not excuse the failure to pay insurance premiums at the required time so as to prevent a forfeiture of the policy, where the policy expressly provides for such forfeiture in the event of nonpayment. The rule is supported by many decisions of courts of last resort, including the Supreme Court of the United States. Such holding is in application of the well-established doctrine that nonperformance of a contract which does not require or contemplate performance by the promisor personally is not excused by his sickness or other disability which- renders him unable to perform it. Hence it has been said that, while a court of equity will relieve against forfeiture for a breach of a condition subsequent caused by unavoidable accident, that power has never been extended to a condition precedent so as to excuse a breach of contract arising from the disability of the party by sickness or insanity.'

In the application of the rule counsel for appellants concede that, when a life insurance policy provides for a forfeiture of the insurance in case of a failure to pay •premiums, the policy, in case of failure to pay, is forfeited, and sickness or insanity will not avoid the forfeiture. They contend, however, that the facts of the case at bar take it out of the rule and bring it within the rule, equally well settled in this State, that, if an insurance- company has in its hands sufficient funds due the insured to pay an assessment or premium when diie, it is the insurer’s duty to apply them to the payment of the premiums and prevent a forfeiture. The rule has been applied by this court in the following cases: Union Central Life Ins. Co. v. Caldwell, 68 Ark. 505, 58 S. W. 355; Mutual Life Ins. Co. v. Henley, 125 Ark. 372, 188 S. W. 829; American National Insurance Co. v. Mooney, 111 Ark. 514, 164 S. W. 276; and Knights of Pythias of North America v. Sanders, ante p. 279.

In the Caldwell ease it was held the duty of the insurer to apply dividends in its hands to the payment of interest on premium notes where a default in the payment of the interest would work a forfeiture of the policy.

In thé Henley case the premiums were payable on a certain date annually, but the policy contained a provision that the premiums might be paid semi-annually or quarterly. The court held that, although the insured had not elected to pay quarterly, the policy was not forfeited for nonpayment of the premium where the insurer had in its hands a dividend to the credit of the insured sufficient to pay the premium for the first quarter. The court said that the consent of the insured to the application of the dividend to the payment of the quarterly installment to prevent a forfeiture might be presumed. The court relied upon the decision in the Caldwell case. In the latter ease the court said that the doctrine had its origin in that fundamental principle of justice which null compel one who has funds in his hands belonging to another, which may be used, to- use such funds, if at all, for the benefit and not the injury of the owner; for his consent to the one and dissent to the other will be presumed. It is reasonable that, when the object and purpose of insurance policies are considered, the company will know that, when it has in its possession'money sufficient to pay premiums, it would certainly embarrass the unfortunate insured if a forfeiture was declared; As a matter of fact the consent of the insured to the appropriation should be presumed.

In the Mooney case the rule was applied where sick benefits were due on an industrial policy which were sufficient to pay the premium. The insurance company in that case was a stock company, and the court, in the application of the rule, said:

“If, however, as plaintiff contended, a sum of money was due, sufficient to pay the premiums and keep the policies alive up to the death of Weatherall, then there was no forfeiture of the policies, for the reason that the amount due should have been applied by the company in satisfaction of the premiums, so as to keep the policies alive.”

Therefore it may be said that it is the settled, law of this State that forfeitures of insurance policies are not favored and conditions which affect such forfeitures should be strongly construed against the party making-them, especially in cases where the liability, in whole or in part, has already accrued and nothing remains on the part of the insured to be done except to give notice to the company and make proof of disability in accordance with the terms of the policy.

In discussing principles governing cases of this sort after the liability has accrued, the Court- of Appeals of New York said:

“Those conditions which relate to matters after the loss have for their general object to. define the mode in which an accrued loss is to be' established, adjusted, and recovered, after the reciprocal rights and liabilities of the parties have become fixed by the terms of the contract, and are to receive a more liberal construction in favor of the insured. In determining the liability of the defendant it is entitled to the benefits of its contract, fairly construed, and can stand upon all of its stipulations.' But, when its liability has become fixed by tbe capital fact of ,a loss, within the range of the responsibility assumed in the contract, courts are reluctant to deprive the insured of the benefit of that liability by any narrow or technical construction of the conditions and stipulations, which prescribe the formal requisites by means of which this accrued right is to be made available for his indemnification.” McNally v. Phoenix. Ins. Co., 33 N.E. 475, 137 N.Y. 389.

Again, in Trippe v. Provident Fund Society, 35 N.E. 316, 22 L. R. A. 432, 37 Am. St. Rep. 529, the Court of Appeals of New York said:

“Such conditions in a policy of insurance must bé considered as inserted for some reasonable and practical purpose, and not with a view of defeating a recovery, in case of loss, by requiring thé parties interested to do something manifestly impossible. The'"object of the notice was to enable the defendant, within a reasonable time after death or injury, to inquire into all the facts and circumstances while they were fresh in the memory of witnesses, in order to determine whether it was liable or not upon its contract.”-

The indemnity provided for in the case at bar was twofold. One was to pay" a stated monthly sum when the insured became totally or permanently disabled from engaging in any gainful occupation. The other was to pay a stipulated sum in case of his' death.

A decided preponderance of the evidence shows that the insured became permanently disabled, by reason of his gunshot wound and pellagra, from pursuing any gainful occupation in the fall of 1924 and that such permanent disability continued until his death in May, 1925. No notice of this disability was given the insurance company,' as required .by. thé terms of the policy, and counsel for the insurance company invoke the rule announced above with regard to forfeitures because the immediate notice of disability as provided in the policy was not •given. On the other hand, counsel for appellants contend that the insured was excused from giving this notice because he became permanently insane in the fall of 1924 and so continued until the date of his death in May, 1925. The clause of the policy with respect to giving notice of permanent disability of the insured is a condition subsequent, and, as we have already seen, should be construed liberally in favor of the beneficiary. The condition of the policy in respect to giving notice of permanent disability as well as making proof of death operates upon the contract subsequent to the fact of loss. The insured has done all that he can do toward carrying out his part of the contract, and the liability of the company under the terms of the policy has attached. Nothing remains to be done except to give the ’company notice of its liability and make proof thereof. If the . insured has become permanently insane at the time the permanent disability attaches, it is evident that he is in no condition of mind to give the notice or make proof of his disability. Hence, if the policy in such case is to receive a liberal and reasonable construction in favor of the beneficiaries, it should be said that permanent insanity, which, causes, in whole or in part, permanent disability, should operate to excuse the insured from giving the required notice. The very object and purpose of the policy, in a large part, would be defeated where the company inserted in the policy a condition which it knew that the insured could not perform in person and would not be in a state of mind to obtain its performance at the hands of others. There is nothing in the terms of the policy from which it might be said that it was the duty of the beneficiary to give the notice.

As a case directly in point we cite Woodmen Accident Association v. Byers (substituted for Pratt), 62 Neb. 673, 55 L. R. A. 291, 89 A. S. R. 777, 87 N. W. 546. In discussing what would excuse the giving of notice because of insanity, the court said:

“The evidence discloses that the injury was occasioned by plaintiff falling from a windmill tower, pro-during a concussion of the brain, from which he was utterly unconscious for about sixteen hours, and thereafter his mind appeared deranged and crazed for some three or four months. At times he was somewhat-rational ; he had lucid intervals in the sense that he could recognize the members of his family and immediate friends, could come and go to and from his house. But that he had not regained the possession and use of his mental faculties in their normal state, during the time intervening between the accident and the time notice was given, is entirety manifest from the evidence, and that he did not, in fact, recover from his mental derangement until long subsequent to the time is equally apparent. He was, because of Ms mental condition, incapacitated from attending his ordinary affairs of life. He was wild and visionary, trying to run away, and imagined that he was preparing to go to another State. His mind during all this period was deranged and disordered, and at times he became violently insane. His ivife knew nothing of the policy. She was opposed to his carrying such insurance, and, from the litigation following, her confidence in its wisdom and prudence is probably not strengthened. She discovered among his papers correspondence indicating that he carried accident insurance, and when she asked him if he held such a policy he answered in the negative. She however discovered the policy and sent the required notice in his name. The verdict of the jury was proper and the evidence sufficient, in our opinion, to excuse the plaintiff from earlier notifying the defendant of the accident and the injury following, with the particulars and other information called for by the terms of the provision quoted. The justness of the judgment and the regularity of the proceedings are fully established by the record. ’ ’

This view is supported by the Supreme Court of the United States in an opinion delivered by Mr. Justice Miller in the case of Insurance Companies v. Boykin, 12 Wall. 433, 20 L. ed. 442, where it was said:

“Based on the facts of the case, the defendants at the trial asked instructions, the substance of which is condensed iii the proposition that they had a right to proof of 'loss by an intelligent being, and, if plaintiff was, insane, no- such proof had been given, and if hé Was sane, then his ‘ affidavit showed such • ‘fraud as 'should defeat recovery. • ’The last of these propositions'is not •denied, but was not asked' aá an indepéndent instruction. But the 'first is too repugnant to justice and humanity to merit serious consideration; ■ There áre two obvious answers to it. First, the affidavit, whether of an insane man or not, is sufficient in the information which it conveys at the time, the nature, and amount of the loss. Second, if he was so insane as to he incapable of making an intelligent statement, this would of itself excuse that condition of the policy.”

The agents of the insurance company admit that, if the insured had died prior to December 20, 1924, the death claim' would have been paid. On March 20, 1922, for an annual, premium of $840, the company issued the policy in question to Samuel C. Pfeiffer. The premium due on March 20,1923, was paid. The insured borrowed $475 from the company and paid $393.50 in cash. The $475 was the surrender value of the policy at the end of the second year. This payment carried the policy to March 20, 1924. On that date the insured made a small cash payment and gave, the company his note for the balance. The policy, was kept in force until December 20,1924, by virtue of an extension agreement. The policy calls for $67.50 a year as the premium for total and permanent, disability-benefit, and this, amount helps to make up the' total premium of $840. On December 17, 1924, the company wrote the insured, inclosing an extension note for $530, due February 20, 1925, and calling for $94.22 in cash. No payment was made, and the policy, was declared forfeited on December'20, 1924, when the extension note became due and was not paid. We have already seen that; if the insurance company had in its hands disability benefits ■ owing the insured at the time it declared the policy forfeited on December 20, 1924, it bad no right to forfeit the policy, but should have applied the disability benefits to the payment of the extension note in order that the policy might be kept in force. Under the terms of the policy the insured was entitled to a disability benefit in the sum of $250 monthly, and a decided preponderance of the evidence shows that be became permanently disabled by a com- ' bination of causes, consisting of bis gunshot wound and pellagra and insanity incident thereto, in the early part of the fall of 1924. Thus it will be seen that bis disability benefits for the months' of October, November and December would have more than paid the amount of bis extension note. In fact, according to the terms of the policy, be might have paid $94.22.in cash and might have obtained another extension note payable February 20, 1925. Under the views we have stated above the insured was excused from giving notice of bis permanent disability, if be wras insane' at the time such notice ivas required to be given, bnd continued in that state until the date of bis death.

This brings up the question of whether or not the insured became permanently insane in the fall of 1924 and continued in that state until the date of bis death in May, 1925. The chancellor was of the opinion that he was insane at times during that period, but that-he had intervals of sanity, and, for this reason, he was not excused from giving notice of his permanent disability as provided in the policy. The facts relating to this branch of the case are very, voluminous, and it will not be practical for us to set out the evidence and review it in detail. We shall state the substance of the evidence as best we may and give our views in as concrete form as practicable as to the impression made upon us by it. After a careful consideration of it as.a whole, the majority of the court is of the opinion that the insured became permanently insane during the , early part of October, 1924, and continued in that state until the date of his death on May 15, 1925.

The record shows that Samuel C. Pfeiffer was a successful farmer and business man in Lonoke County, Arkansas, and, like many others, became involved financially by business losses during that-same period of time. He gave the Missouri State Life Insurance Company a mortgage on his land, comprising about 1,072.07 acres in Lonoke County, Arkansas, to secure a loan of $40,000. On March 20, 1922, the policy in question was issued to Samuel C. Pfeiffer. He was at that time forty-five years of age, and operated a commissary or supply store in connection with his farming operations. He held a commission as deputy sheriff of Lonoke County in 1923, and was shot in the hip while in the discharge of his duties on August 4, 1923. He was carried to a hospital at Little Rock, and kept there until September 26, 1923. He was not able to sit up when he was carried home. He was confined to his bed for several months as a result of his gunshot wound. After he recovered his strength to some extent, he was able to go to his store, about fifty yards from his dwelling-house, and help his wife and sixteen-year-old son run the supply store. He could only stay two or three hours each day, and some days he could not go at all. In the spring of 1924 the family of Pfeiffer noticed that his hands began to peel off. The doctors pronounced it pellagra, and treated him for that. It soon developed that Pfeiffer could not make settlements at -the store with customers, and frequently could not even make small change. His mind gradually weakened, and Pfeiffer frequently spoke of his mental incompetency to his friends and acquaintances. He had been an unusually strong-minded and self-reliant man. In the fall of 1924 he became afraid that he might injure some of his family, and requested his fire-arms to be 1 alcen from him in order to prevent this.- Thus it will be seen that his troubled spirit had a premonition of his impending fate. At the last there was no question in tlie minds of any but that he was insane eleven days before his death, when he was again carried to Little Bock and placed in a hospital.

The widow and son of the insured operated the supply store and, in the main, looked after the business of the insured after he was shot. They also looked after the insured, and permitted him to come to the store after he gained enough strength to do so. In their opinion he became wholly disabled from insanity as a result of pellagra about the first of October, 1924, and continued in that state until his death on May 15, 1925. They did not know anything- about the policy in question. Numerous other persons, who were friends of the insured and came in contact with him in a business and social way, testified that he was insane from the first.part of October, 1924, until his death in May, 1925. About the same number of friends and acquaintances, who had an equal opportunity, except as to the family, to observe the mental condition of the insured, thought he was sane at times during the period of time in question, and at such times capable of comprehending and attending to his own affairs. If this was all there was in the record, we would be unwilling to disturb the finding of fact made by the chancellor on this point; but we think that, when the .testimony of the expert witnesses for the appellants is considered in the light of the situation of the parties .and the attendant circumstances, it turns- the scales in favor of the appellants, and that a preponderance of the evidence shows that the insured was permanently insane from the first part of October, 1924, until his death on May 15, 1925. In reaching this conclusion we do so with the full realization of the frailty and uncertainty of expert testimony in many cases; but no such uncertainty rests upon such testimony in this case. Their testimony is in full and complete accord with the teachings of medical science, and, when viewed in its broadest scope, is explanatory of the testimony of several witnesses for appellees, who testified that the insured appeared sane at times during the period of time in question.

. To illustrate, F. H. Martineau, sheriff of Lonoke County, was a witness for appellees. He saw insured ■about two weeks before lie died, and be did not know anything; He was in the last stages of pellagra. Witness saw insured in December, 1924, and in January and February, 1925. He ivas in poor health, (but talked rationally. He was not exactly sane in 1924. • His health would not permit him to follow a gainful occupation in 1924. He offered the insured ia commission for 1925 as a matter of courtesy and not with the view of :putting him in active service. The insured refused the commission on the ground that at times he was not mentally all right. When he told the witness that, his mind seemed to be all right.

Dr. C. C. Kirk had been engaged in hospital work for nervous and insane patients since 1902. At one time he had been superintendent of our State institution. He testified that pellagra affects the memory after it affects ■ the'nervous system. Pellagra usually runs from six months to two or three years before death, sometimes longer. Patients of that-type may have good days, and .bad days. Practically all mental cases have certain days when they are better than they are on other days, but .it does not follow that they are sane because they have one day when they are better than they were the day .before. Such persons have difficulty in thinking,-and f.or this reason they neglect their affairs. From the history of the case he would not consider Mr. Pfeiffer capable of carrying on the ordinary affairs of life. .

, There lies the whole nub of the matter; it seems that the lay witnesses for appellees thought that Pfeiffer was sane at times because he was able to talk rationally about the matters which were presented to his mind. This was not sufficient. He must have been able to carry on.the ordinary affairs of life, and this meant that his mind must be capable of sustained effort so that he would comprehend such affairs as needed his attention, and not .merely that he might talk with seeming intelligence upon a subject brought directly to his attention by some' one. There is nothing in the record to show that his mind during the period in question was over in condition to realize that his policy was in danger of being forfeited. The cloud on his mind was'lifted only to the extent that he realized that he might hurt some of his family.

Dr. Kirk’s testimony is corroborated in every respect by that of Dr. R. F-. Darnall; who had made-a specialty of mental and nervous diseases for twenty-nine years. Prom the history of the case given them,- both wére of the opinion that Pfeiffer became insane as a result of pellagra and that he was not capable of attending to the ordinary affairs of life. No effort was made to show that pellagra patients do not become insane. Some effort was made to show that Pfeiffer had not suffered with it long enough to have become mentally incapable at the period of time in question. But we must remember that Pfeiffer' received a severe gunshot wound in the early part of August, 1923, and that he never recovered his strength. It is fairly inferable that his impaired physical condition hastened the ravages of pellagra. His physicians warned him that, pellagra, if not treated, would cause him to become insane. He replied that he was already in a bad mental state at times. This indicates that he had found out something about pellagra after he first thought, from his symptoms, that he might have that ■ disease. Then, too, his business reverses might have caused him to brood over his condition and thus have hastened his unfortunate mental condition. We desire to state again that, while we have not deemed it of sufficient, practical importance to set out and discuss all the evidence introduced on this branch of the case, we have carefully read and considered all of it, and a majority of us have reached the conclusion that the weight of the evidence establishes the fact that Samuel C. Pfeiffer was mentally incompetent from the first of October, 1924', until May 15, 1925, the date of his death, and that such mental incompetency furnished sufficient legal excuse for .not giving the notice of his total disability as-provided by the terms of the policy. Therefore we find that the company had in its bands sufficient funds from tlie total disability benefits to pay the note given by the insured, under the extension agreement, when it became due, and that it was its duty to have so applied a sufficient-amount of such benefits.

The result of our views is that the company could not legally declare the policy forfeited, and it was in force at the time of the death of the insured. Therefore the decree will be reversed, Avith directions to the chancery court to render judgment in favor of appellant against the Missouri State Life Insurance Company for $25,000, and for the statutory penalty, interest and attorney’s fees, and that same may be set-off against the mortgage debt of said insurance company, unless the foreclosure proceedings have proceeded to such an extent as to make such course impracticable, and for further proceedings in accordance with the principles of equity and not inconsistent with this opinion. It is so ordered.

Smith, J., dissenting.