author: HumpiíReys, J.

text:
    Kansas City Southern Railway Company v. United States Fidelity & Guaranty Company.
    Opinion delivered June 6, 1927.
    1. CARRIERS — DELIVERY OP FREIGHT WITHOUT BILL OF LADING — C0N-STRUCTION OP bond. — Where a bond to secure a carrier against loss from delivery of freig-ht without the hill of lading was clearly intended by the parties to be in accordance with Crawford & Moses’ Dig-., § 793, in order to avoid the penalty imposed by § 792, the court will presume that the amount fixed in such bond is double the value of the goods, as required by the statute, whether the 'bond so provides or not, since the statute will be read into and become part of the bond under such circumstances.
    2. Principal and surety — paid surety not favored. — A paid surety is not favored in law, any more than any other contracting party.
    3. Carriers — construction of bond' for delivery of freight.— Where a'surety was author of a bond to secure a carrier against loss for delivery of freight without the bill of lading, all provisions therein must be construed most strongly against it and favorably to the beneficiary.
    4. Carriers — delivery without surrender of bill of lading. — In a provision in a bond to secure a carrier against loss in delivery of freight without a bill of lading, providing that no delivery would be required or made where draft with bill of lading was in the bank at the point of delivery for collection, the word “made” held to mean “requested, accepted or received,” and not to require the railroad to use reasonable diligence to ascertain whether the draft and bill of lading were in the bank.
    Appeal from. Sebastian Circuit Court, Fort Smith District; John E. Tatum, Judge;
    reversed.

      James B. McDonough, for appellant.

      Hill & Fitzhugh, for appellee.
   HumpiíReys, J.

This suit was brought by appellant against appellee in the circuit court of the Fort Smith District of Sebastian County to recover $3,000, and is predicated upon an alleged breach of the following’ bond, omitting clause B, which relates to a change in route, and clause C, which relates to stopping shipments in transit, which have no relation to the facts in this case.

“Know all men by these presents:

“Whereas, the undersigned principal ships and expects to ship or cause to be shipped, or to receive or cause to be received, as consignor or consignee, or otherwise, goods, wares, merchandise or chattels over the line of railroad operated by the Kansas City Southern Railway Company, Texarkana and Fort Smith Railway, herein referred to as the railway company, or carrier, or by other carriers operating lines of railroad connecting therewith, directly or indirectly; and
“Whereas, said principal, for his own advantage, expects to request, from time to time during the life of this bond, the railway company, or one or more of the carriers which may have transported or received such goods, wares, merchandise, or chattels shipped by said principal, or consigned to said principal, or consigned to others with directions to notify said principal, or consigned to said principal with directions to notify others, including what are commonly called other shipments, to-wit:
“A. To undertake, at the request of said principal, to deliver or cause to be delivered to said principal, or to others, such goods, wares, merchandise or chattels, prior to surrender of the original shipping receipt or bill of lading therefor.
“Now therefore, in consideration of the premises and of the compliance with any request of said principal or of any attempts or efforts to comply with the same by the railway company, or by any connecting carrier at the request of the railway company, we, the undersigned principal and surety (or sureties), jointly and severally undertake, covenant and agree with each railway company and connecting'carriers, that, in the event any such request or requests shall be made by said principal during the life of this bond, and any such request shall be complied with, or any effort to be made to comply with the same by any of said carriers, that we and each of us shall and will fully indemnify, protect and save harmless each and every said carrier and all carriers complying therewith or causing compliance with such request or requests, or attempting to do so, from and against any and all liability, suits, actions, costs, damages, expenses, losses and claims for loss or damage of every kind and nature which might or may be made against, or suffered, sustained or incurrd by any such carrier or carriers, on account of or by reason of any compliance with any such request, or requests, or of any attempt or attempts to comply with'the same, or in any way connection therewith, including all reasonable attorney:^ fees paid or incurred in the premises by such carrier or carriers.
“1. The railway company and such other carriers may, in their discretion, settle and pay any claim that may be made against it or them on account of the ■ compliance with such request of the principal, and the amount of such settlement shall be repaid by the principal or sureties upon receipt of bill from the railway company or such other carriers.
“2. That neither the principal nor its agents nor employees shall request, accept or receive from said railway company the delivery or possession of any freight to which it would not be entitled upon the production and surrender of bills of lading of .shipping receipts therefor, and that no delivery of freight on account of this bond will be requested or made where the draft with the bill of lading is then in any bank at point of delivery for collection.
“3. That said principal shall and will promptly, after the delivery of such freight, not, however, to exceed five (5) days, surrender to the railway company the original bill of lading or shipping receipt therefor, duly indorsed, or, if any such bill of lading or shipping receipt shall have become delayed or lost, will, if and when same shall have been received or found, promptly deliver to said railway company.
“4. The liability of the principal and of the surety (or sureties) under this bond shall not exceed the sum of three thousand dollars ($3,000) for each principal and each surety.
“The surety (or sureties) shall not be liable hereunder for claims accruing after the expiration, of sixty (60) days after the receipt by said railway company.of written notice from the surety (or sureties) of its desires to withdraw as surety (or sureties) for said principal, and-any claim-hereunder against the surety (or sureties) must be duly presented to the surety (or sureties) within nine' (9) months after such determination of the surety’s (or sureties’) liability.
“In event of any payment by the surety (or sureties) of any claim hereunder, the surety (or sureties) shall be subrogated to all the rights of the obligee with respect to such claim, and the obligee shall execute the necessary assignment of the said subrogation.
“No such carrier or carriers shall in any event be liable or responsible to said principal by reason of any failure or of any delay to comply with, or of errors or mistakes in complying or attempting to comply with, such request or requests of such principal, or to accomplish in any respect whatsoever any of the matters so requested.
“6. This agreement and all of the covenants and undertakings thereof shall inure to the benefit, separately, of each of the carriers over whose lines any such shipment or shipments, or any part thereof, may be transported, or by whom any such goods, wares, merchandise or. chattels may be received, or delivery thereof may be made, and also to the benefit of the successors and assigns of each of said carriers, and the same may be enforced jointly or severally by such carriers as their interest, may be, joint or several.
“7. This bond shall not be void on the first of any subsequent breach thereof, or on the first of any subsequent suit and recovery thereon, but may be sued on and enforced until the full sum herein named shall have been recovered.
“This bond shall become effective on the date of its execution, and shall continué in force as provided for in § 3, except that it is distinctly understood and agreed that the circumstances, in the opinion of the officers, agénts or employees' of said railway company, fully justify such compliance, and that said, railway , company may at any time discontinue, without notice, the making of deliveries or charges under any or all of the aforesaid conditions. •
“In ivitness Avhereof the undersigned principal (or principals) and surety (or sureties) have executed this instrument this 22d day of January, A. D. 1923. ..
“Western Grain Company (Seal). ■
“By W. J. Pendergrass, President.
“Attest: Chas. F. Kent,. Secretary., -s
“United States Fidelity & Guaranty Company,
“By W. E. Atkinson.
“Approi^ed: I. C. McGee, Treasurer” (Seal).'

The gist of the complaint Avas that the bond sued upon Avas executed under § 793 of Crawford & Moses’ Digest to enable appellant, Avithout violating § 792- of said Digest, to deliver three cars of grain and other products to the consignee or principal in the bond, which had arrived in Fort Smith, Avithout first presenting the bills of lading therefor, to Avhich drafts had been attached; that said bond had been breached by failure of the principal in the bohd to pay the several drafts and deliver said bills of lading to it, by reason of Avhich failure it Avas compelled to pay the drafts attached to the several bills of lading in order to obtain pqssession of them, same having been forAvarded to the First National Bank at Fort Smith for collection.

Tavo defenses Avere interposed to the alleged cause of action by appellee. First, that the bond did not conform to the requirements of said statute; and second, that, under § 2 of the bond, appellant was prohibited from delivering the several cars of grain and other mill products, because the bill of lading for each of the three cars was in the possession of the.First National Bank at Fort Smith at the time appellant delivered said cars to the principal in the bond, Western Grain Company.

. The cause Avas submitted upon the pleadings, testimony introduced by the respective parties and the instructions, of the court, Avhich resulted in a judgment dismissing the complaint of appellant, from which an appeal has been duly prosecuted to this court.

(1).’ The two sections of Crawford & Moses’ Digest alluded to, the one prohibiting the delivery by common carriers of shipments without the presentation of bills of lading,- and the other providing for the delivery of shipments'without the presentation of bills of lading upon the execution of a bond, are as follows:

‘‘‘■Section 792.' Receipts given by any warehouseman, wharfinger or other person or firm for any goods, wares, merchandise, cotton, grain, flour or other produce or commodity, stored or deposited, and all bills of lading and transportation receipts of every kind given by any carrier, boat, vessel, railroad, transportation or transfer company, may .be transferred by indorsement in writing thereon, and the delivery thereof so indorsed, and any and all persons to whom the same may be transferred shall be'deemed and held to be the owner of such goods, wares, merchandise, cotton, grain, flour or other produce or commodity, so far as to give validity to any pledge, lien or transfer given, made or created thereby, as on the-faith thereof, and no property so stored or deposited, as specified in such bills of lading or receipts, shall be delivered, except on surrender and cancellation of.such receipts and bills of lading; providing, that all such receipts and bills of lading which shall have the words ‘not negotiable’ plainly written or stamped on the face thereof, shall.be exempt from the provisions of this act.
“Section 793. It shall be lawful for a shipper or a consignee of goods to make, execute and deliver to, and the carrier to take, and receive, a good, sufficient and valid bond, in a-sum double the value of the goods, conditioned that the shipper or consignee shall, within a reasonable time thereafter, deliver to the carrier the original receipts and bills of lading issued for said goods or shall pay the value of said goods to the carrier upon demand; and upon the execution and delivery of said good, sufficient and valid bond, as aforesaid, it shall.be lawful for the carrier to deliver up the said goods to the shipper or consignee; without requiring the immediate surrender of said original bills of lading and receipts, and for so doing the carrier shall not incur the penalty of the law as set forth in this chapter.”

The objection made to the bond is that it did .not obligate the principal and surety in a sum double the value of the goods, conditioned that the shipper or the consignee would deliver the hills of lading issued for said goods to the carrier within a reasonable time, or else pay it the value of said goods upon demand. The preamble, § A and § 3 of the bond indicate that the intention of the parties was to execute a bond in accordance with said § 793 in order to avoid the penalty imposed by said § 792. The amount or $3,000 is fixed in the bond, which we must presume to be a sum in double the value of the goods, whether it specifically says so or not. Where it is manifest that the intention of the par: ties was to execute a bond under this or any particular statute, the rule is that the statute will be read into and become a part of the bond. There is no doubt that this bond was intended as a continuing bond, and that its purpose- was to cover each shipment, when delivered without the production of the bill of iading, at the request of the consignor or consignee. Under this construction of the bond the sum of $3,000 was more than double the value of either one of the cars shipped and delivered to the consignee. Appellee is, a paid surety, and is not favored in the law any more than any other contracting party. It was the author of the bond, and all of the provisions therein .must be. construed most strongly against it and favorably to the beneficiary. Any other construction would allow appellee to take advantage of its own wrong, errors and inaccuracies in the preparation of the bond or contract.

(2): The facts are undisputed. The Western Grain Company, the principal in the bond, purchased three cars of corn and other mill products.from different grain or mill companies. Each company shipped the car purchased from it to shipper’s order,-“Notify the Western Grain Company,” and to the bill of lading received by each the shipper attached a draft on the Western Grain Company for the purchase price of the car, including the freight thereon. Each bill of lading and draft was delivered to the respective shipper’s bank and credited to his account. The several bills of lading with drafts attached were forwarded by the receiving bank, through correspondents, to the First National Bank of Fort Smith, Arkansas, for collection. The First National Bank of Fort Smith received all three bills of lading with drafts attached severals days before the cars arrived. The Western Grain Company had accepted one of the drafts and the bank had paid it and charged same to its account before the delivery of the particular car of grain to the Western Grain Company. The Western Grain Company requested appellant to deliver the cars of grain to it without presenting the bills of lading; and, in accordance with its custom, the appellant complied with its request. After the delivery of the cars, and before the Western Grain Company paid the several drafts, it failed in business, and was unable to pay them. In order to obtain possession of the bills of lading and avoid the penalty imposed by statute upon appellant, it was compelled to pay the drafts. Appellant delivered the cars to the Western Grain Company, the consignee and principal in the bond, without actual knowledge that the bills of lading were in the First National Bank of Fort Smith for collection, or without making any investigation as to the whereabouts of the bills of lading and drafts.

Appellant and appellee each requested a peremptory instruction, at the conclusion of the testimony, which the court declined to give, and, instead, sent the case to the jury upon the issue of whether appellant exercised reasonable diligence to discover that the bills of lading with drafts attached were in the bank at Fort Smith when the deliveries of the cars were made. The trial court construed § 2 of the bond to mean that appellee was not liable thereon, unless appellant • used reasonable diligence to ascertain whether the bills of lading with drafts attached were in the bank at Fort Smith at the time it made the several deliveries of the cars to the Western Grain Company.

The majority of the court are of the opinion that the trial court erred in its interpretation of said section of the bond. The majority interpret the word “made” contained therein as synonymous with “request, accept or receive” in the first part of the section and the word “requested” disjunctively connected with it. They are impelled to the construction because a request on the part of the principal in the bond for a delivery of the shipments necessarily amounted to a statement or representation that the bills of lading attached were not in the bank for collection at the point of delivery. Chief Justice Hart and the writer are of the opinion that the words are not synonymous, and that the word “made” relates to and is a restriction upon appellant, whereas the word “request, accept, receive” and “requested” relate to the principal in the bond, and are restrictions upon it. We think our construction correct, because a delivery of the property could not have been made by any one except the carrier in possession thereof. Under the majority view the trial court should have peremptorily instructed a verdict in favor of appellant for $3,000 and interest.

On account'of the error indicated the judgment is reversed, and a judgment will be entered here in favor of appellant for said amount.


source: Caselaw Access Project

author: Humphreys, J.

license: Public Domain

text:
    Prudential Insurance Company of America v. Barton.
    Opinion delivered June 6, 1927.
    Subrogation — lender paying off mortgage debt. — One lending money on mortgaged land in reliance on the borrower's representation that it was unincumbered and taking a mortgage thereon, held not entitled to be subrogated to the rights under a prior mortgage, to the extent to which the loan was used to pay off such mortgage, where there was no agreement as to payment of the prior mortgage, and where the prior mortgagees were unawáre of the fraud, and the prior mortgage was recorded.
    Appeal from Crittenden Chancery Court;. A. L. Hutchins, Chancellor on exchange;
    affirmed.

      R. V. Wheeler, for appellant.

      Mann & Mann, for appellee.
   Humphreys, J.

This suit was instituted by appellees against R. S. Morris, the legal owner of about 1,900 acres of land in Crittenden County, Arkansas, his wife, the appellant and other parties, to foreclose a deed of trust by R. S. Morris and wife on the tract of land referred to, on the 7th day of February, 1920, and recorded on the 14th day of the same month, to secure a loan of $32,000 which, after allowing all credits, amounted to $37,480.57 on the date of the foreclosure. The 1900-acre tract included the northeast quarter of section 32, township 8 north, range 7 east; and was also intended by the parties to include the ■ southeast quarter of section 29 in said township and range, hut, through mistake, was described as the southwest quarter of said section, township and range.

Appellant tiled an answer and cross-complaint, alleging that its assignor, the Guaranty Bank & Trust Company, loaned R. S. Morris $9,600 on the southeast quarter of said section 29 and the northeast quarter of said section 32, under the representation that the 320-acre tract was unincumbered except by the mortgage for $3,500 to the Southern Abstract & Loan Company; that out of the money it loaned Morris he paid off the mortgage to the Southern Abstract & Loan Company, amounting to $4,096, including interest, and paid the balance of $5,500 to appellees on their mortgage; that, by reason of paying the indebtedness due the Southern' Abstract & -Loan Company, which was a superior lien to the mortgage lien of appellees-, and by reason of paying $5,500 to-appellees on their mortgage, it was entitled, under the doctrine of subrogation, to have its mortgage lien declared a prior and paramount lien to that of appellees on the northeast quarter of section 32, township 8 north, range 7 east.

On the hearing of the cause upon the pleadings and testimony adduced by- the respective parties, the court adjudged the lien of appellant prior and paramount to that of appellees on the southeast quarter of said section 29, and declared the lien of appellees prior and paramount to that of appellant on the northeast quarter of section 32, township 8 north, range 7 east, from which latter judgment an appeal has been duly prosecuted to this court.

The facts are undisputed, and are as follows:

R. S. Morris, who was the owner of the southeast quarter of said section 29 and the northeast' quarter of said section 32, executed a mortgage to the Southern Abstract & Loan Company for $3,500, prior to February 7, 1920, in which his wife joined. On the 7th day of February, 1920, R. S. Morris and wife conveyed to R. B. Barton, as trustee for F. G-. Barton Cotton Company, the appellees herein, by deed of trust to secure an indebtedness to F. G-. Barton Cotton Company of $32,000 on about 1,900 acres of land, including the northeast quarter of said section 32, and intending to include the southeast quarter of said section 29, but, through mistake, described the látter 160-acre tract as being in the southwest quarter of said section 29. The deed of trust recited that it was made subject to the mortgage of the Southern Abstract & Loan Company for $3,500. The mortgage to R, B, Barton, as trustee for.the F. Gr. Barton Cotton Company, was recorded on the 14th day of February, 1920. On the 16th day of October, 1920, B. S. Morris and his wife executed a mortgage on the southeast quarter of said section 29 and the northeast quarter of said section 32 to appellant’s assignor, the Guaranty Bank & Trust Company, to secure a loan of $9,600, which was recorded on November 9, 1920. It was represented, and the abstract showed, that the only mortgage on said 320-acre tract was the mortgage held by the Southern Abstract & Loan Company for $3,500. The abstract failed to show the mortgage of B. S. Morris and wife to B. B. Barton, as trustee, on the northeast quarter of said section 32 and other lots, to secure an indebtedness of $32,000.

B. S. Morris used a part of the money he borrowed from appellant on the 320-acre tract to pay off the $3,500 mortgage and accumulated interest to the Southern Abstract & Loan Company, and used the balance, amounting to $5,500, to pay on the mortgage to B. B. Barton, as trustee, and F. G. Barton Cotton Company. B. B. Morris and the F. G. Barton Cotton Company knew where and how B. S. Morris obtained the money with which he paid the Southern Abstract & Loan Company and the $5,500 to themselves, but had nothing to do with procuring and negotiating the loan, either directly or indirectly.

The only question involved on this appeal is whether the court erred in declaring the lien of appellees on the northeast quarter of said section 32 prior and paramount to that of appellant on said quarter section.

Appellant contends that, because B. S. Morris used a part of the money procured from its assignor, the Guaranty Bank '& Trust Company, to pay off the prior mortgage lien to the Southern Abstract & Loan Company, it is entitled to be subrogated to the rights of said Southern Abstract & Loan Company and have its lien declared prior and paramount to the lien of appellees. The exact point involved was decided adversely to appellant’s contention in the case of Southern Trust Co. v. Garner, 145 Ark. 58, 223 S. W. 369. The rule announced was:

“A bank which lent money on mortgaged chattels, in reliance on the borrower’s representation that they were unincumbered, and took a mortgage thereon, was not entitled to be subrogated to the rights of the prior mortgagee to the extent to which the loan was used to pay off the prior mortgage, there being no agreement in regard to the payment of the prior mortgage, and the prior mortgagee being unaware of the fraud practiced on the bank, and the prior mortgage being duly recorded. ”

In the instant case there was no agreement between E. S. Morris and appellees that he should borrow money from the Guaranty Bank & Trust Company with which to pay the prior mortgage of the Southern Abstract & Loan Company, and, if any fraud was practiced by E. S. Morris upon the Guaranty Bank & Trust Company, appellees were ignorant thereof. It is not alleged or proved that they advised or suggested that Morris borrow the money from the Guaranty Bank & Trust Company to pay off the first mortgage of the Southern Abstract & Loan Company or to borrow the money from the Guaranty Bank & Trust Company to pay them. E. S. Morris negotiated the loan on his own account. Appel-lees had nothing to do with furnishing the abstract of title which omitted their mortgage.

No error appearing, the judgment is affirmed.


author: Kirby, J.

text:
    Standard Pipe Line Company, Inc., v. Haynie Construction Company.
    Opinion delivered June 6, 1927.
    1. Corporations — authority of agents. — An agreement by the . agents of a pipe line company, authorized to haul and distribute pipe, to pay for the damages to the road, the use of which was necessary for distribution of the pipe, held within the apparent scope of their authority.
    2. Corporations — authority of agents. — One dealing with ■ the agent of a corporation is put upon notice of limitations of: his authority, and must ascertain what that authority is, or deal with such agent at his own risk.
    3. Corporations — power of agent. — The power of an agent of a corporation to bind his principal is determined by the actual authority expressly given him, and by the authority necessarily implied in order to carry out or perform the duty he is diréeted to do.
    4. Appeal and error — conclusiveness of verdict. — The verdict of a jury upon conflicting testimony is conclusive on appeal.
    Appeal from Little River Court; B. E. Isbell, Judge;
    affirmed.

      Arnold & Arnold, for appellant.

      ■ A. P. Steel, A. D. DuLaney ánd John J. DuLaney, for appellee.
   Kirby, J.

Appellees, contractors for the construction of a gravel road in Road Improvement District No. 6, Little River County, brought this suit against the pipe-line company, appellant, for $185.25 damages alleged to have been caused by appellant to the roads under construction by the contractors and before its completion and acceptance by the district.

The testimony tends to show that, while T. S. Haynie and Brown Arnold, a partnership, the Haynie Construction Company, were engaged in the construction of this road, the pipe-line company was engaged in stringing the pipe and constructing a pipe line through the road district, and was using the uncompleted road in hauling and distributing the heavy pipe therefor; that the contractors objected to the use of the road; that Lee and Allison, both for the pipe-line company, agreed to pay the. cost of any necessary repairs to the road if they were allowed to continue to use it in the distribution of the pipe; that, after this agreement, they continued to.use the road from the 15th to the 20th of November in distributing the pipe, and plaintiffs were compelled, to use $175.24 worth of gravel and an operator at a cost of.$10 to recondition the road after such damage.

The pipe-line company denied having-made any such agreement and that any agent with authority to do so had attempted to make or even been consulted about it.

Plaintiff’s testimony tends'to show that agreement was made' with a Mr. Cummings,' whose office was in Ashdown, and who. was said to be superintendent" of the pipe-line company, by B. C. Jenkins, superintendent of construction and bookkeeper for the Haynie Construction Company. They agreed that damage would result from such use by the pipe-line company, and Cummings said, if they would permit his company to haul pipe over the new road, his company would pay for putting new gravel on the damaged portion and for grading and shaping the road after the hauling was completed. The agreement was made early in November, probably after one load of pipe had been hauled. The damages' to be paid under the agreement were to be the actual cost of repairs to the Haynie Construction Company, as stated by Jenkins. After the repairs were made, the bill was presented to Cummings, who said he would O. K. it and forward it to the Shreveport office, which would allow it and return the check in payment, but this was never done.

The pipe was being hauled from Wilton, where it wás being shipped by train, on the gravel road to the location west, where it was to be used -in constructing the line. “This was the only road leading from Wilton to where they wanted to haul the pipe, except an old road they could not use because of the heavy loads they were hauling and bad weather conditions.”

Haynie testified that the contract was made with Mr. Allison, who appeared to be the foreman of the company — he was riding horseback — and that the damage was done by the hauling of the heavy pipe over the road, and that the actual cost of the repairs was the amount claimed. ■ '

Cummings testified that he was in the employ of the pipe-line company as clerk to the district foreman, when Jenkins came to the office and complained that a truck was tearing up the road; that he'was on the road during the time the pipe-line company was hauling pipe; that he went to payoff the men,' which was'done twice a month; that he made one or two trips a day over the road west of-.Wilton,, checking up on labor and seeing that all were furnished with tools. Said Allison was the foreman out there, to see that the hauling was done and how much was done; that Lee, -the district foreman, who was authorized to make contracts with reference to the work,was not in town, ‘ ‘ and Allison and I' had authority to move'the trucks and put on wagons, and did so, at'which time they had been running three or four days. We had two miles of pipe to haul. A joint of pipe was 21 feet long and weighted 750 pounds. It xvas muddy off! the gravel roads, and we- saw the road was open, and used it;” Witness knew that the road xvas being worked on, and, if there was any such agreement, Allison and himself made it; that they took the trucks off ■ the road .on Jenkins’ complaint, and he turned the bill in the latter part of December. ...

Allison stated that he xvas assistant “stringing foreman” of the pipe-line company in Little River County, and went to Ashdown xvith Mr. Jenkins, who had told him that they would like for him to take the truck's off the road or agree to pay for the damages. Witness took Jenkins to Lee’s office, but Lee was not there, and -Cummings, Jenkins and himself were the only ones'.present. Jenkins asked them not to use the trucks any more, and there was .probably two miles of pipe to be distributed from the station, and that they took the trucks off the road, as they had the authority to use the trucks or take them off and put on wagons without consulting Mr. Lee, the foreman. Allison said further that hauling and stringing the pipe along the pipe line would ,be part- of the construction, and also directing when and where the trucks and wagons should haul; that Cummings had authority to do that, hut nothing to do with stringing the pipe; that he was stringing foreman; also that, after the agreement, the pipe-line company did haul its pipe over that road and got the benefit of passing over it. It .was pretty had hauling over other roads. Witness heard no complaint “from any of my foremen or superintendents about this agreement having been made.”-

There was some testimony tending to show that the road was being used indiscriminately by the traveling public, but one of the commissioners testified that it had not been completed nor accepted by the district, and the plaintiff’s witnesses testified that they had made the tie-haulers and all other heavy traffic quit using the road.

The court instructed the jury, and from this judgment against the pipe line company this appeal is prosecuted.

Appellant insists that no agreement was made by it nor by any of its agents acting within the scope of their authority to pay for damages or repairs for the use of this road. The clerk of its superintendent of construction, in the absence of the superintendent, was shown to have made this agreément, which was concurred in by the “assistant stringing foreman,” whose duty it was to see to the distribution of the pipe along the right-of-way and the putting it into the ground and connecting it up into a pipe line. The testimony shows that these agents or employees of the pipe-line company had the authority to haul and distribute the pipe, put it into the ground and connect it up, and the undisputed testimony shows that the gravel road under construction was the only one that could be used to any advantage in the performance of this work, the dirt roads being in bad condition on account of the weather. That appellee was in possession of the uncompleted gravel road under construction, with the right to exclude appellant’s trucks and teams from the use of it. That they continued the use of it, after objection was made, by consent of tlie contractor of . the road district, under an agreement to pay the damages caused by such use, according to 'the testimony on the part of appellees, and on their change from trucks to wagons for the hauling, as attempted to be shown by appellant. Neither is it disputed that it cost the amount' claimed for reconditioning and repairing the road after its continued use by appellant.

It is true that one dealing with an agent of a corporation is put upon notice of the limitations of his authority, and must ascertain what the authority is or deal with such agent at his own risk, but the power of the agent. to bind his principal is. determined by the actual authority expressly given him and by authority necessarily, implied in order to carry out or perform the duty he is directed to do.

As said in the case of United States Bedding Co. v. Andre, 105 Ark. 111, 150 S. W. 413, 41 L. R. A. (N. S.), 1019, Ann. Cas. 1914D, 800:

‘ ‘ This implied authority to do acts by which the principal will be bound, which are not expressly authorized, is also spoken of as those acts which' are within the apparent scope of the agent’s authority. But, to authorize an inference of authority in an agent, it must appear that the thing done or transaction made was necessary in order to promote the duty or carry out the purpose expressly delegated to him.”

This court approved, in Pierce v. Fioretti, 140 Ark. 313, 215 S. W. 648, the following-as a correct statement of the law from 2 C. J. 573:

“Apparent authority in an agent is such authority as the principal knowingly permits the agent to assume or which he holds the agent out as possessing; such authority as he appears to have by reason of the actual authority which he has; such authority as a reasonably prudent man, using diligence and discretion, in view of the principal’s conduct, would naturally suppose the •agent to possess.” See also Lumber Co. v. Fowler, 137 Ark. 418, 208 S. W. 786; Ferguson v. Guydon, 148 Ark. 295, 230 S. W. 260; Benton v. Auto Co., 147 Ark. 415, 227 S. W. 608; and Forrest v. Benson, 150 Ark. 89, 233 S. W. 916.

This is not so much an agreement to bind the principal to 'the payment of damages as appellant contends was beyond the apparent scope of . the authority of its agent, but rather an agreement for procuring the.use of this road, indispensably necessary for the distribution of the pipe for the construction of the pipe line by appellant’s agents and employees having the matter in charge, and was binding upon the appellant, being, if not expressly authorized, easily within the apparent scope of the authority of its agents.

There is no question of ratification of the unauthorized acts of appellant’s agents in this case, and no prejudicial error could have resulted from the giving of instruction No. 3 complained of.

The testimony was conflicting to some extent on the terms of the agreement made for payment for use of the road, but all doubts have been resolved in appellee’s favor by the jury, and its verdict will not be disturbed.

No prejudicial error- appearing in the record, the judgment is affirmed.


author: Mehaffy, J.

text:
    Morgan v. Shackleford.
    Opinion delivered June 6, 1927.
    1. Compromise and settlement — consideration. — Where there was a bona, fide dispute as to the liability of one party under a judgment, there was a sufficient consideration to support his contract to pay a less sum than the amount of the judgment as a compromise settlement.
    2. Contracts — rescission. — The parties to a contract of any kind, whether written or verbal, may at any time rescind or terminate it by a mutual consent and agreement, and restore each other to the status quo or fix their respective rights and liability upon the abrogation of the contract.

      3. Contracts — rescission — consideration.—So long as the contract remains executory, the mutual agreement of the parties to rescind it requires no new or independent consideration.
    Appeal from Pulaski Circuit Court, Second Division; Richard M. Mann, Judge;
    reversed.

      Busbee, Pugh & Harrison, for appellant.

      J ohn D. Shackleford, for appellee.
   Mehaffy, J.

This suit was begun in the Pulaski Circuit Court by appellee as assignee of M. P. McDonnell to revive a judgment for $1,528.81 obtained by said M. P. McDonnell in March, 1922, against S. E. Morgan, M. B. Morgan and F. J. Dove, doing business as Morgan Construction Company.

■ S. E. and M. B. Morgan filed answer, pleading, among other things, that a compromise settlement had been effected, whereby M. B. Morgan had agreed to pay and appellee had agreed to accept the sum of $820 as a compromise settlement and satisfaction in full of said judgment. M. B. Morgan contended that he was not a partner nor in any way interested in the Morgan Construction Company, and that he was never served with summons, and knew nothing whatever about the suit or about any .judgment having been taken against him until proceedings were begun in Union County.

The parties agreed to waive a jury and submit the matter to the court sitting as a jury, and, after the testimony had been taken, the court took the matter under advisement, and thereafter made the following findings:

“1. That M. B. Morgan was a partner with S. E. Morgan and F. J. Dove, and therefore liable for the debt due M. P. McDonnell, which had been assigned to John D. Shackleford, therefore the judgment against M. B. Morgan should not he set aside.
“2. That the said J ohn D. Shackleford entered into an agreement with S. E. Morgan on behalf of M. B. Morgan by the terms of which M. B. Morgan would pay and John D. Shackleford would accept $820 in full settlement of the judgment for the larger amount. This agreement was never executed, but M. B. Morgan was ready and willing to perform Ms part, namely, the payment of $820, the amount due under the agreement, and tendered same. Shackleford refused ■ to accept this amount in settlement after the agreement was made.
“3. Theré was no consideration for this ¿greóment. It is claimed that the trip to El Dorado by S.'R. Morgan and his attorneys constituted- a consideration, but it does not appear from the testimony that the agreement was a prerequisite to this trip. Therefore, this court holds as a matter of law that there was no consideration for the agreement to remit the remainder of the judgment, and that the plaintiff, John D. Shackle-ford, should have the full amount of the judgment against M. B. Morgan and S. R. Morgan.”' ■

The court'rendered judgment reviving the original judgment as to S. R. and M. B. Morgan,' gave the defendants T5 days within which to file their motions for a new trial; motions for a new trial were duly filed, and thereafter said motions for a'new trial were overruled by the court, exceptions were saved, and appeal taken to this court. ■ ' ■

The appellee wrote the following letter to his son at El Dorado:

“January 4, 1926.
“Dear Marshall: I guess I have allowed Morgan to talk me out of some of my McDonnell judgment. But after all it is probably the best I can do at present."
“I am agreeing with him to have you dismiss the case pending down there on payment to you of $820. This is to' be in full satisfaction of the McDonnell judgment. Make them give you the cold green, so there will be no hereafter about it, and let me hear from you.
“You are on the ground, and know the situation better than I do. If you think we can get more out of it— hold him up and make him come across. I am' going' to leave it to you.
“I am, As ever.” ■

We agree with the trial court that-Shackleford and Morgan entered into an agreement by which Morgan was to pay and Shackleford was to receive $820 and satisfy the judgment. Morgan contended that he was not interested in the construction company, and that he was never served with process and was therefore not liable for any amount. The evidence shows that Dove was a bankrupt, and evidently Mr. Shackleford was unable to collect the judgment from S. R. Morgan. At any rate it had not been collected, and M. B. Morgan was contending that he was not liable, for the reasons above mentioned.

There was a bona fide dispute as to the liability of M. B. Morgan, and the parties had the right to make a new contract, and the only question is whether there was a sufficient consideration to support the new contract. We think it wholly immaterial whether Mr. Shackleford at El Dorado, as agent of appellee, was authorized to accept settlement, and wholly immaterial whether he was the agent. According to our view of the ease, the agreement was made between Mr. Shackleford and Mr. Morgan just as the circuit court found. We do not agree with the trial court, however, that there was no consideration to support the contract. Appellee concedes that, if the $820 had been paid and had been accepted in full satisfaction, then it would be an executed settlement and therefore binding, but he contends that it is not binding because it was not executed.

This court in a recent case quoted with approval the following statement made by the United States Supreme Court in Chicago, Milwaukee & St. Paul R. Co. v. Clark, 178 U. S. 353, 20 S. Ct. 924, 44 L. ed. 1099:

“ The result of modern cases is that the rule only applies when the larger sum is liquidated and when there is no consideration whatever for the surrender of a part of it, and while the general rule must be regarded as well settled, it is considered so far with disfavor as to be confined strictly to cases within it.”

And continuing, this court said:

While our own court has adhered to the ride, it has recognized exceptions to it. One of these is that part payment of a liquidated indebtedness by a third' person is sufficient consideration for its acceptance by the creditors in .the discharge of the entire debt.” Martin v. State ex rel. Saline County, 171 Ark. 576, 286 S. W. 873.

A sufficient consideration to support the agreement, as we have already said, we think exists in this case, and we do not think it depends so much upon the question of accord, and satisfaction, but is a rescission of the former contract by mutual consent of the parties, and the entering into a new agreement by which Morgan, who claimed he did not owe anything, agreed.to pay $820 and Shackle-ford .agreed to accept it in settlement. ,

“The parties to a contract of any kind, whether written or verbal, may at any time rescind or terminate it by their mutual consent and agreement, and either'restore ■each other to the status quo or fix their respective rights and liabilities upon the abrogation of the contract. As remarked by the Supreme Court of Pennsylvania, ‘it-may be doubted if any business man in the State is so ignorant of law as not to know that the parties to a contract may rescind it at any time by mutual act and consent.’ The right to do this is not at all dependent upon any provision to that effect in the contract itself, but is based on the principle that whatever the parties have power to bind themselves to by contract they may release themselves from by subsequent contract. • And it is likewise immaterial whether the contract to be rescinded is exe-cutory or executed. It may be abrogated, if the parties so agree, before it is performed, or after partial performance, or even after complete execution. Further, it is open to the parties, if they will so agree, to change or modify the terms of their contract without rescinding it entirely. * * * So long as a contract remains executory, a mutual agreement of the parties to rescind it requires no new or independent consideration, for the release of each of the parties from his duties and obligations under the existing contract is a sufficient consideration for his agreement to release’the other. *• * * But, if the parties agree not merely to rescind the existing contract, but make a new contract'with reference to the same subject-matter, tlie new contract taking’ tire place of' the old, the substitution of the one for the other is a sufficient consideration to support the new agreement.” Black on Rescission and Cancellation,' 1233 et seq.

Since we have concluded that the agreement made between the parties is binding on both parties, it becomes unnecessary to determine the other question, because, whether Morgan wa's a partner or not and whether he wás served or not, there was a judgment against him, and, to get that judgment satisfied, he entered into an agreement to pay $820, and he is bound to pay that amount whether he was interested or not and whether he was served or not.

' The trial court was correct in holding that an agreement had been made, but erred in holding that there was no consideration and that' it was therefore void. The cause is- therefore reversed, and remanded for further proceedings not inconsistent with this opinion.


author: McHaNey, J.

text:
    Hunt v. Quarles.
    Opinion delivered June 6, 1927.
    Judgment — res judicata. — Where the judgment of the Supreme Court determined an issue between the parties, but left open the settlement of certain items of account between them, it was held res judicata on a re-trial as to the issue litigated and decided.
    Appeal from Phillips Chancery Court; A. L. Hutchins, Chancellor;
    affirmed.

      Brewer & Cracraft, for appellant.

      W. G. Dinning, for appellee.
   McHaNey, J.

This suit is an aftermath of the case of Quarles v. Little Cypress Drainage District, 168 Ark. 368. By it appellant seeks to recover $40,000 damages for the alleged breach by appellee of the contract set out in the original opinion in this casé, whereby he was prevented from removing 292,273 cubic yards of earth for the district on which he claims he would have made a profit in said amount. Appellee pleaded the former decision of this court as res judicata, which the court sustained, and gave judgment for appellee.

The court was right in so doing, as the exact question was decided in the former appeal. In the statement of the case this court stated that “ appellant, Hunt, also instituted a separate action against the ■ district and against Quarles to recover the amount of earned compensation under his contract and for damages for breach of the contract. ’ ’ And in that case this court gave judgment here for this appellant against the district in the sum of $4,456.87 with interest, and a judgment for Quarles against the district. This court further said: “It is conceded by both Quarles and Hunt that there are items of account to be settled between them in the litigation, and that, on the remand of the cause, those matters will be either settled or litigated,” but this did not authorize a retrial of the issue litigated and decided in the former appeal, which appellant seeks to do by this action.

We find no error in the record, and the decree is accordingly affirmed..


author: Hart, C. J.,

text:
    McCrory Special School District v. Curtis.
    Opinion delivered June 13, 1927.
    1. Schools and school districts — annexation op territory. — The county board of education has no jurisdiction to annex territory within a special rural school district created by Sp. Act of February 18, 1920, to another special school district.
    2. Certiorari — void order. — An order of the county board of education annexing territory within a special rural school district created by the Legislature to another special school district may be quashed by certiorari, since the order was void, though the parties could have appealed from the order.
    Appeal from Woodruff Circuit Court, Northern District; W. D. Davenport, Judge;
    affirmed.

      STATEMENT BY THE COURT.
    R. H. Curtis and others filed a petition in the circuit court against the members of the board of education of Woodruff County, Arkansas, the directors, of McCrory Special School District and the directors, of Rural Special School District No. 22 of Woodruff County, to quash an order of said board of education annexing the territory of Rural Special School District No. 22 of Woodruff County to McCrory Special School District.
    The order of the county .board of education recites that the territory of Special School District No. 22 of Woodruff County is adjacent to McCrory Special School District; that a majority of the qualified electors of said Special School District No. 22 of Woodruff County signed the petition for annexation; that said petition, is also signed by the board of directors of said McCrory Special School District, and that it has, in all other respects, complied with the requirements of § 8949 of Crawford & Moses’ Digest and other sections of the statute relating to the matter. The order annexes all of the territory of said Rural Special School District No. 22 to said McCrory Special School District and adjudges that all property of said Special School District No. 22 be vested in said McCrory Special School District and that all moneys of said Special School District No. 22 be transferred to said McCrory Special School District.
    The defendants filed a demurrer to the petition, on the ground that the circuit court had no jurisdiction. The circuit court overruled the demurrer, and the defendants refused to plead further. Whereupon the circuit court quashed the order of the county board of. education annexing said Rural Special School District- No. 22 to said McCrory Special School District.
    The case is here on appeal.

      Jonas F. Dyson, for appellant.

      F. M. CarlLee and W. J. Duncja/n, for appellee. ■
   Hart, C. J.,

(after stating the facts). The judgment of the circuit court was correct. The record shows that Rural Special School District No. 22 of Woodruff County, Arkansas, was created by special act of the Legislature of 1920, which was approved February 18, 1920. Said district is a rural special school district, and this court has expressly held that, when the whole of our statutes relating to our system of. organizing territory into school districts is considered, it is apparent that the Legislature did not intend that any part of thé territory once organized into a rural special school district could thereafter be taken and organized into another district of like kind. Crow v. Special School District No. 2, 102 Ark. 401, 144 S. W. 226; and Helvering v. McDougal, 119 Ark. 162, 177 S. W. 937. Again, this court has said that the sections of the Digest authorizing the county board of education to change the boundary lines' of school districts did not authorize such board to change the boundary lines of a district created by special act of the Legislature. School District No. 25 v. Pyatt Special School District, 172 Ark. 602, 289 S. W. 778; Park v. Rural Special School Dist. No. 26, 173 Ark. 514, 892, 292 S. W. 697. In a still later case the court said that, w’hen the Legislature itself creates a special school district, neither the county-board of education nor any other governmental agency has the power to change the boundaries thereof, without express authority from the Legislature so to do. Carter Special School District v. Hollis Special School District, 173 Ark. 731, 293 S. W. 722. Hence, it may be said .that the county board of education has no jurisdiction to annex territory already comprised in a special rural school district created by the Legislature to another special school district.

Again, it is insisted that the judgment of the-circuit court should be reversed because certiorari was not the proper remedy. In making this contention counsel rely-upon an act of the Legislature of 1925 providing that any party to the record in a proceeding brought before the county board of education, should he feel aggrieved by any final order of such board, may prosecute an appeal from such final order. Acts 1925, page 546.

While the parties might have- prosecuted an appeal from the order of the county board of education, this did not prevent them from quashing the order by á writ of certiorari. The reason is that the order of the county board of education, under the authorities above cited, was absolutely void, and not merely irregular or erroneous. The county board of education, in the absence of a statute giving it the power to annex rural special school districts to other school districts, special or common, had no jurisdiction whatever in the matter, and its judgment was absolutely void. Browning v. Waidrip, 169 Ark. 261, 273 S. W. 1032. This view of the matter was recognized in some of the later cases which we have cited above.

It follows that the judgment of the circuit court was correct, and will therefore be affirmed.


text:
    Smith v. Globe & Rutgers Fire Insurance Company.
    Opinion delivered June 13, 1927.
    1. Judgment — relief for unavoidable casualty — defense. — One who has to be relieved írom a judgment on the ground of unavoidable casualty, preventing a defense to the action, must show that he has a meritorious defense.
    2. Insurance — proof of loss. — Failure of the insured to file & proof of. loss within the time .provided in an insurance policy constitutes a valid defense to a suit on the policy. ,
    3. Judgment — relief from default judgment — prima facie case.— An insurance company seeking to set aside a default judgment on the ground of unavoidable casualty, in showing as 'a defense that the insured had failed to file a proof of loss, was not required to show affirmatively that it had not waived such proof, where the question of waiver was not put in issue by the pleadings.
    4. Judgment — evidence to justify vacating. — The finding of the court that a judgment against an insurance company should be vacated, held supported by evidence that the insurance company’s attorney resided outside of the place of trial,- and was not notified when the case was set for trial, as agreed by opposing counsel. •
    Appeal from Union Circuit Court,' Second Division; W. A. Speer, Judge;
    affirmed.

      STATEMENT OE EAOTS.
    Tom Smith and the Commercial Credit Company brought suit, on March 11, 1925, against the Firemen’s Fire Insurance Company, to recover $387 for loss sustained by theft of an automobile under a policy of insurance issued to the plaintiffs by the defendant. On March 19, 1925, the same plaintiffs filed, a complaint against the Globe & Rutgers Fire Insurance Company to recover $350 for loss by fire of an automobile under an insurance policy issued by the defendant to the plaintiffs. ' The defendant in each case filed an answer to the complaint upon April 4, 1925. On October 23,1925, each case was reached upon call of the calendar, and the defendant in each case did not appear. A jury was therefore impaneled in each case and, after hearing the evidence, returned a verdict for the plaintiffs in each case separately. Judgment was accordingly entered upon the verdict in each case. After the expiration of the term, the defendant in each ease filed a motion to vacate the judgment for unavoidable casualty, under the seventh subdivision of § 6290 of Crawford & Moses ’ Digest. The two cases were consolidated for the purposes of trial, and, having heard the evidence introduced, the court rendered a judgment vacating the judgment already rendered in favor of the plaintiffs against the defendants. To reverse that judgment the plaintiffs have duly prosecuted this appeal.

      S. E. Gilliam, for appellant.

      Carmichael & Hendricks and McMillen & Scott, for appellee.
   Hart, C. J.,

(after stating the facts). It is the settled law of this State that one who asks to be relieved from a judgment on the ground of unavoidable casualty preventing the defendant from making a defense to the action, the party asking to be relieved from the judgment must show merit; otherwise the court would be asked to do the vain thing of setting aside a judgment when it would be its duty to enter again the same judgment upon a re-trial of the case. It is not required of the defendant to establish his case conclusively-, but he must make out a prima facie defénse, the- final determination being left to .the court,, if the judgment is set aside. McDonald Land Co. v. Shapleigh Hardware Co., 163 Ark. 524; 260 S. W. 445, and Halliday v. Fenton, 164 Ark. 11, 260 S. W. 961.

In the case at bar the defendants alleged, as a defense to the actions to recover on the insurance policies, that the plaintiffs had failed to file proof of loss within the time provided in the policies. This, if proved, Avould constitute a valid defense to a suit on the ..policies.. Queen of Arkansas Insurance Co. v. Laster, 108 Ark. 261, 156 S. W. 848, and Illinois Bankers’ Life Association v. Byasse, 169 Ark. 230, 275 S. W. 519, 41 A. L. R. 379. In the motion to vacate the judgment proof was introduced by the defendants to show that no proof of loss had been filed by the plaintiffs in either- case. No question of the waiver to file proof of loss within the time provided in the policies has been raised -in the pleadings: Hence it was not necessary for the insurance companies to prove anything concerning a waiver, because the fact of waiver was not put in issue in the cases. The insurance companies would not be required to prove something that had not been put- in issue in the cases in order that they might have the judgments vacated on the ground of unavoidable casualty. In the case of Halliday v. Fenton, 164 Ark. 11, 260 S. W. 961, it was held that a finding of the circuit court that there was unavoidable casualty, within Crawford & Moses’ Digest, § 6290, subdivision 7, authorizing the vacation of a judgment, if supported by substantial evidence, will not bé set aside upon appeal. It was further held that evidence of a misunderstanding as to a continuance, resulting in the defendant’s absence from the trial, entitled him to have the judgment vacated under this subdivision of the statute.

In the present case one of the attorneys for. the insurance companies was a witness for them. According to his testimony he lived in Little Rock, and had practiced law for fifteen years. The eases in question were brought in -the circuit court in Union County, Arkansas. The attorney for the insurance companies saw the attorney for the plaintiffs about the cases, and told him to send him an affidavit as to the facts relative to the loss and he Avould see if there could not be a settlement of one of the cases. Subsequently he filed answers for the insurance companies. The attorney for the plaintiffs told the attorney for the insurance companies that he would’ notify him when the cases/were set for trial, and the attorney for the insurance companies relied upon him to do so. He did not know that judgments had been rendered in the cases until the term at which they were tried had lapsed. The attorney for the insurance companies sent the answers to the clerk of the circuit court in which the cases' were pending by mail. He asked the clerk to acknowledge receipt of the answers and advise him when the cases would be set for trial. The clerk answered the letter and acknowledged the receipt of the answers. He also stated that it would he impossible to tell just when the cases would be set for trial, and said that civil cases were usually- set by agreement of the attorneys.

The attorney for the' plaintiffs admitted having a conversation with the attorney for the defendants about setting’ the cases, hut denied that he promised to notify him when the cases were set for trial. The complaints were filed in the cases against the insurance companies in March, 1925, and the answers of the defendants were filed in April, 1925. On September 26, 1925, the court set the cases for trial on the 23rd day of October, 1925. During the period of time between the filing of these suits and their actual trial there were several adjournments of the court. The second division of the circuit court in which the cases were pending had just beeii created, and the docket was considerably congested. On the 26th day of September, 1925, the attorneys were called in attendance upon the court, and the cases were set for trial for the October term. Among other cases, the cases in question were set. for trial on the '23rd day of October.

The court made a specific finding that he did not think that counsel on either side of the case tried to take any advantage of the other. The court found that, without any fault on-his part, the attorney for the insurance companies was absent when the insurance cases were set for trial and tried by the court. He was not a member of the local bar, and the court found that the cases had been set hurriedly without notifying the attorney for the insurance companies. It is inferable from what the court said that it was the custom to set cases for trial, and that, on account of the congested state of the docket, the court was proceeding as expeditiously as possible to try the cases and clear the docket. The court seemed to take the blame on itself, and thought that, under all the circumstances, the judgments in the insurance cases should be vacated.

Under the peculiar circumstances of the case it cannot be said that the circuit court erred in finding that the cases had been set down for trial by mistake without notifying the attorney for the insurance companies, who did not reside in the city where the court was being held. It is inferable that it was the custom' for the local bar to be called together and cases set for trial. This showed that it was the intention of the circuit court to have all interested attorneys notified when their cases were set for trial. By some mistake or inadvertence, this was not done in these insurance cases. The court, by its action in setting aside the judgments, evidently thought that the usual practice of notifying attorneys had not been complied with. The whole trend of his reasoning in vacating the judgments 'shows that it - was his intention to have all interested attorneys notified that their cases were set for trial. It is an ancient maxim of the law that the action of the court shall injure no one. The circuit court evidently thought that his effort to clear the congested docket was the cause of the cases being set without any notification to the attorney for the insurance companies. Under these circumstances it cannot be said that his finding that the judgment should be vacated on the ground of unavoidable casualty is without any ■ substantial evidence to support it.

It follows that the judgment of the circuit court must he affirmed. •


text:
    Lester v. Thomas.
    Opinion delivered June 13, 1927.
    1. Courts — following decisions of federal courts. — In the construction of the bankruptcy statute, the State court will follow the decisions of the United States Supreme Court, and the State decisions will he overruled in so far as they conflict with the United States Supreme Court decisions.
    2. Bankruptcy — presumption of insolvency. — Under- the Bankruptcy Act, § 67f (U. S. Comp. St. § 9651), no presumption arises from an adjudication in bankruptcy that the bankrupt was insolvent four months before the petition was filed.
    3. Bankruptcy — validity of garnishment lien. — Under ■ Bankruptcy Act, § 67f (U. S. Comp. St. § 9651), the trustee in bankruptcy, contending that there was a preference by reason of a garnishment on a fund due the bankrupt concern, in order to defeat the validity of the garnishment lien which was obtained within four months of the bankruptcy adjudication, must allege and prove that the 'bankrupt was insolvent at the time the garnishment lien was secured.
    4. Pleading — exhibit. — An exhibit’ is not a part of the complaint at law, and cannot be made so by a reference to it as explanatory .. of the allegations of the complaint.
    5. Bankruptcy — allegation .of insolvency. — Where a complaint specifically made the special master’s report in bankruptcy. proceedings a part of it, as if incorporated therein, and exhibited the report with the complaint, and the report contained an allegation that the bankrupt was insolvent when the garnishment lien was obtained within four months of the bankruptcy, held that .insolvency'at the time the garnishment lien was obtained is inferentially alleged in the complaint.
    6.. • Bankruptcy — insolvency as question of fact. — In a .proceeding wherein it was contended that a garnishment lien obtained within four months of a bankruptcy was a preference, the question whether the bankrupt was insolvent at that time is one of fact and not of law. • ...

      7. Bankruptcy — evidence — master’s report. — In a suit wherein it was contended that a garnishment lien obtained within four months of bankruptcy was a preference, the report of a special ' master to the bankruptcy court which stated that the bankrupt was insolvent when the garnishment was obtained, held not in itself evidence of the fact of insolvency.
    Appeal from Lawrence Circuit Court, Eastern District; Dene II. Coleman, Judge;
    affirmed.
    STATEMENT OE EACTS.
    As stated by counsel for appellant, this is a consolidated appeal of the cases of J. M. Lester v. W. E. Thomas, Trustee (No. 131), and W. E. Thomas, Trustee, v. J. M. Lester (No. 9955). The consolidation of these two appeals has been agreed upon, and the facts presented by the record may be briefly stated as follows:
    On December 22,1925, Plunkett-Jarrell Grocer Company, hereinafter called grocer company, sued Wilson Mercantile Company, hereinafter called mercantile company, in the Lawrence Circuit Court, to recover the sum of $4,073.32, alleged to be due upon a merchandise account, and J. M. Lester was joined as defendant upon a written guaranty of the account. Just prior to this date the mercantile company had a part of their stock of goods destroyed by fire and the balance of their stockmore or less damaged by fire and water. The mercantile company had policies of insurance on its stock of goods in various insurance companies which amounted to something near $8,000. On December 23, 1925, writs of garnishment were sued out by the grocer company against these insurance companies and duly served upon them. The insurance companies paid into the registry of the court the amount due by them upon their insurance policies, to be paid out as directed by the court. On February 11, 1926, an involuntary petition in bankruptcy was filed against the mercantile company by its creditors, in the Federal court at Jonesboro, Arkansas, and W. E. Thomas was appointed by said court as receiver of said mercantile company. Whereupon W. E. Thomas, as such receiver, filed an intervention in the suit of said grocer company against said mercantile company-, claiming that the insurance money impounded by said garnishment should be paid over to him as receiver in bankruptcy.
    On March 11,1926, the circuit court rendered a judgment in favor of said grocer company against said mercantile company and J. M. Lester in the sum.of $4,127.10 and the accrued costs, and judgments were al-so rendered in favor of said grocer company against said insurance companies as garnishees, j. M'. Lester, for a valuable consideration, became the purchaser of said judgment of- said grocer company.
    On the 28th day of .April, 1926, the said mercantile company .was adjudged a. bankrupt in said Federal, court. W. E. Thomas, as trustee aforesaid, filed,a-reply to the intervention of J. M. Lester, asking thata sufficient amount of the proceeds of said insurance policies so paid into the registry of the court be applied to the satisfaction of the judgment of said grocer company assigned to him,, in which he admitted the facts as above stated. His reply also contained a paragraph alleging, in 'substance* that said mercantile company,, while insolvent, had made a transfer and conveyance to 3. Gr. Richardson.of a material portion of its property, with intent to prefer the lien of a .bank of which Richardson, was. president, and had also made a -general assignment of its property to said Richardson within four, months of the.filing of said bankruptcy petition, -at a time when said mercantile corporation was insolvent. Their said pleading contains the following: '
    ■“That thereafter, on the 28th day of April, 1926,. the said Wilson Mercantile Company was-adjudged, a.bankrupt by the United .States District-.Court' of the Eastern District of Arkansas; Jonesboro- Division, certified ropy of said involuntary petition in bankruptcy, said report of said special master and said order of-said adjudication being made a part hereof as fully as though incorporated herein.-”. - . . - -, , ,v
    The special' master certified to said Federal court as .a finding of facts the following:

      “3. That said Wilson Mercantile Company, within four, months prior to the filing of this petition, and while insolvent, has suffered or permitted certain creditors to obtain ¡a preference by reason of garnishments on certain insurance funds due said. Wilson Mercantile Company,, and had not, within five days before the final disposition of said property, vacated such preferences or discharged the same.”
    The special .master’s finding of facts, in part, is as follows: ..
    “That the Wilson Mercantile Company is a cor.po.-ration organized and existing under the laws of the State of Arkansas, and that said corporation had, for a greater portion of six months next preceding* the time of the filing of this petition, its principal place of business and domicile at Walnut Nidge, Arkansas* in Lawrence County. That said corporation owes debts at the time of . the filing of this petition in the sum of approximately. $47,000.89. Prior to the filing of the petition in bankruptcy in December, 1925, a large portion of the property of Wilson Mer: cantile Company, which consisted of.a, stock of merchandise at Walnut Nidge, Arkansas, was destroyed by fire,, and the principal assets of the company after that time consisted of all amounts due on these fire insurance policies, the remaining salvaged stock-of merchandise, and some notes and accounts due said corporation. The insurance which has been adjusted amounted to. approximately $12,000, but, under the undisputed value,, did not have a market value of to exceed $3,000. The accounts due the company amounted to approximately $12,000, hut, according to the undisputed evidence, did not have a value in excess of' $2,500, making a total amount of assets of $13,500 on its fair market value and a total amount bf liabilities of $47,000.89: this being the condition of the concern from the time that* the fire occurred in December, 1925, up to the present time. Prom which the special master finds that the company, from the time of the fire, which occurred on December 17, 1925, has been insolvent at all times.” * ■ ■< ■

      Neither the grocer company nor J. M. Lester .appeared in any of the.bankruptcy proceedings.
    It was by the chancery court decreed that the intervention of J. M. Lester should be dismissed for want of ■ equity. - it was also- decreed that the .clerk should pay to W. E. Thomas, trustee in bankruptcy of Wilson Mercantile Company, the money paid into the registry of the court'by the insurance companies: 1 The consolidated case is diere on appealpand1 upon the correctness of the" deci■sion' of the chancery court''depends- the issues raised by the appeal. : • . -n •
    ''' George M: Gibson and Moóre, Gray, Burrow & McDonnell, for Lester.

      H. L:-"PovCdér alad Cooley, ‘Adams & 'Fuhr, for Thomas.
   Hart, C. J.,

(after statiiíg the facts). Counsel'for appellant rely for a reversal of the decree upon the decision of' the United States Supreme Court in Liberty Bank v. Bear, 265 U. S. 365, 44 S. Ct. 499, 68] L. ed. 1057. In that case it was held:

“1. To invalidate the lien o'f a judgment under' § 67f of the Bankruptcy Act, he who challenges it must show not only that the judgment was recovered' within four months prior to the' filing of the petition in bankruptcy, but also, by pleading and proof, that the judgment debtor was insolvent when the lien was obtained.
“2. Assuming (but not deciding) that the adjudication of the bankruptcy of a partnership necessarily adjudges the partners, as individuals, bankrupt, it raises no presumption that théy were insolvent for ¡any ¡period before the petition in bankruptcy was filed.
“3. Nor does the fact that sales of the property' of the partnership and partners,, made some months later by .the trustee in bankruptcy, did not realize enough to pay for the ¡partnership or individual debts, establish that the partners were insolvent at a time anterior to the filing of the bankruptcy petition'. ”

Under this decision, in order to set aside the garnishment lien obtained by the grocer company before the petition in bankruptcy, was filed, it was necessary for the trustee in bankruptcy',, W. E. Thomas, to allege and prove that the mercantile company was insolvent at the time, the grocer company sued out its writs of garnishment and obtained a lien on the insurance funds of the mercantile company. It is our duty to follow the decisions of the Supreme Court of the United States in the construction of the .bankruptcy statute; and in this connection! it. may be stated that the decision in Garrett v. Big Bend Plantation Co., 150 Ark. 180, 233 S. W. 1079, is modified and overruled in so far as it is in conflict with the decision of the United States Supreme Court' above cited.”

It follows that no presumption arises from the adjudication' in bankruptcy that the bankrupt'was insolvent for four months before the petition was filed. Under the decision above cited it was incumbent upon the trustee to allege and prove- insolvency at the time the garnishment lien was obtained. While the complaint itself does not, in express terms, allege insolvency at the- time the garnish^ ments were sued out, it specifically makes the report of the special master a part of the complaint as if incorporated in it, and the report is exhibited with the complaint. Section 3 of that report contains a'specific allegation that said, mercantile company, within- four months prior to the filing of the petition in-bankruptcy, while insolvent, permitted certain creditors-to obtain a preference by- reason of garnishments on.certain insurance-funds.- Under our system of pleading, an ^exhibit is not a part of the complaint at law and cannot be made so by reference, still the exhibit may be’ referred to as. explanatory of the allegations of the complaint. Abbott v. Rowan, 33 Ark. 593, and Louisiana Northwestern Rd. Co. v. McMorella, 170 Ark. 921, 282 S. W. 6. When the whole complaint is.considered with t-he exhibit' just referred to, we are of the opinion that insolvency at the-time the garnishments were obtained is inferentially alleged.

The trouble, however, is that there is no proof of insolvency. • The' question of insolvency is one of fact and not of law. It cannot be established, by mere belief without evidence.- It is true that the report of. the special master shows insolvency at the time the garnishments were obtained, but the report itself is not evidence of the fact of insolvency. The garnishments were sued out on. the 23rd day of December, 1925, and the petition was not filed until the 11th day of February, 1926. There is nothing in thé record whatever to establish the fact that the alleged, bankrupt’s debts were, more than the value, of. his assets at the time the writs of garnishments were sued out. Of course, if the matters sat forth in the report of the special master are true, the mercantile company was insolvent at the time the writs of garnishment were sued out and served on the insurance companies; but, as we have already seen, the recitation'of purported facts in the report of the special master is hot proof of these alleged facts. The facts themselves must be shown by direct or circumstantial evidence. There was no attempt whatever to show that the mercantile company was insolvent at the time the garnishments were obtained.

For this reason the judgment in 'the case number 9955 must ¡be affirmed, and that in case No. 131' must be reversed, and-the cause will be remanded for further proceedings not inconsistent with the opinion of this court.


author: Wood, J.

text:
    Christian v. State.
    Opinion delivered June 13, 1927.
    1. Criminal .law — -hearsay evidence. — In a-.bigamy prosecution, testimony of the prosecuting attorney that he sent a telegram t.o defendant’s wife in Kansas and received a telegram on the same date sighed by her, introduced to show That she was living, was inadmissible, being hearsay.
    2. Criminal law — identification or telegram.^-In a prosecution for bigamy, where the prosecuting attorney testified that he sent a telegram to the alleged wife of defendant, and received an answer by telegram on. the same date, purporting to be signed by her, where it was not shown that she signed it, it was not sufficiently identified to be admitted as her telegram.

      3. Bigamy — instruction as to venue. — In a prosecution for bigamy, the court correctly instructed that the indictment charged defendant as-having been married to a woman who was still living, and that, in violation of the law, he married another woman in the county of the venue, and that the last marriage must be proved to have taken place within the county of the venue, and to have been within three years before return of the indictment.
    4. Criminal law — burden op proof. — In a prosecution for bigamy, the court correctly instructed that the burden is on the State to prove the material allegations of the indictment.
    5. Bigamy — burden op proof. — In a prosecution for bigamy, the fact that the first wife is living must not depend on presumption merely, but must be' established by proo'f beyond a reasonable doubt.
    6. Criminal law — admission of hearsay testimony — prejudice.— In a prosecution for bigamy, it was prejudicial error to permit the State to prove, by purely hearsay testimony, that the alleged first wife of defendant was living on the day of the alleged second marriage.
    Appeal from Tell Circuit' Court, Dardanelle District; J. T. Bulloch, Judge;
    reversed.

      Strait & Strait, for appellant.’

      H. W. Applegate, Attorney General, and Barden Moose, Assistant, for appellee.
   Wood, J.

J. A. Christian was indicted by the grand jury of Yell County for the crime of bigamy. He was tried, convicted, and sentenced by judgment of the court to three years’ imprisonment in the State Penitentiary, from which judgment he prosecutes this appeal.

The indictment followed substantially the language of the statute, and was valid. The testimony was sufficient to sustain the verdict. During the progress of the trial the prosecuting attorney, over the objection of the appellant, testified that he sent a telegram to one Essie J. Christian, at 216 South Topeka Avenue, apartment No. 9, telephone 6331, Wichita, Kansas, on February 18, 1927, and received an answer on the same date, signed by Mrs. Christian. The prosecuting attorney was asked if Mrs. Essie J. Christian was still living, and answered, “Yes sir; I introduced those for the purpose of showing that she is living.” He repeated that he sent the telegram to the above address and received a telegram in reply signed “Mrs. Christian.”

The introduction of the above testimony was made one of the grounds of the motion for a new trial. The court erred in admitting this testimony. It was pure hearsay. The court permitted the above testimony of the prosecuting attorney to be introduced for the purpose of showing that Mrs. Essie J. Christian, the alleged wife of the defendant, was living at the time of his alleged last marriage to one Yerna Duke Higgerson. If the prosecuting attorney'had testified that Mrs. Essie J. Christian was living on the' 18th day of February, 1927, and stopped there, the' testimony would have be'en relevant, and the prosecuting attorney was a competent witness to testify to that fact, if it was a fact within his knowledge. But the fact that he sent a telegram to Mrs. Essie J. Christian at the address mentioned and received a telegram in,reply signed “Mrs. Christian” did not tend to prove that Essie J. Christian, the alleged wife of the appellant, signed the telegram. It will be observed that the prosecuting attorney did not- testify that Mrs. Christian, the wife of the defendant, signéd the telegram. He did not testify that he- sent the telegram to Mrs. Essie J. Christian, the wife'of the defendant, nor did he testify that the telegram he received was signed by Mrs. Essie J. Christian, the wife of the defendant. His testimony only shows that he sent a telegram to Mrs. Essie J. Christian at a certain address in Wichita, Kansas, and received in answer a telegram signed by “Mrs. Christian.” That is very far from showing that the telegram was sent to Essie J. Christian, the alleged wife of the defendant, and that the telegram in reply to the oñé sent by the district attorney was signed by Essie J. Christian, the alleged wife of the defendant. In other words, the telegram was not sufficiently identified to be admitted as the telegram • of Essie- J. Christian, the alleged wife of the defendant.'.

The court correctly instructed the jury that “the material allegations in the indictment are that the defendant, Dr. J. A. Christian, having heretofore been married to Essie Christian, who, the State contends, is still living, and while their marriage relations existed, that he, in violation of law, married Mrs. Yerna Duke Hi'ggerson, in Yell County, Arkansas. That is, the last marriage must be proven in the Dardanelle District of Yell'County, and it must have been within'three years before the returning of the indictment.” The court further correctly instructed, the jury that the burden was . on the State to prove these material allegations. Russell v. State, 66 Ark. 185-188, 49 S. W. 821; 74 Am. St. Rep. 78; 3 Greenleaf on Evidence, § 207; Underhill’s Criminal Evidence, § 59.9; 4“Elliott on Evidence, % .2866. , ...

Our statute defines bigamy as follows: “Every person having a wife or husband living, who shall marry any other person, whether married or single, except in the cases specified in the next section, shall be adjudged guilty of bigamy.” Section 2606, C. &. M. Digest.

Mr. Elliott states the law "as follows:

“In order to establish the offense under .such statutes it must be proved beyond a reasonable doubt that the former husband, or wife is living,, or was alive at the date of the alleged second marriage.. Such proof is essential to a conviction; but it is not necessary that the evidence on this subject be direct and positive; the fact may be shown by circumstantial evidence.” 4 Elliott, §• 2866. But, where the State depends on circumstantial evidence, the circumstances must be such as to establish the fact that the first spouse is living at the time of the. second marriage' beyond a reasonable doubt. The fact that the first wife is living must not depend upon .presumption merely but must be established by proof. For, as was further said by Mr. Elliott, “the presumption of innocence, supplemented by the presumption of the validity of the second marriage, must prevail over the presumption that the first husband or wife is still living.” 4 Elliott, § 2867. See Hallbrook v. State, 34 Ark. 511; 36 Am. Rep. 17; Russell v. State, supra.

In E. C. L. it is said:

“Proof that the first wife was living at the time of the second marriage is essential to conviction; bnt direct and positive evidence of this is not indispensable; and the fact may be shown by circumstantial evidence. * '* * There are many circumstances where proof that the first wife was alive only a short time before the second marriage may be insufficient for conviction, and the whole question depends on the circumstances of each case, bearing in mind, of-course, that the burden is on the prosecution to show that the first wife is still alive at the date of the second marriage.” 3 E. C. L., § 24, page 810.

In Squire v. State, 46 Ind. 459, it is held, quoting syllabus :

“In a prosecution for bigamy the State must prove beyond a reasonable doubt that the first wife was liying at the time of the second marriage. Where there is no direct evidence on this point, and the only evidence is that the first wife was alive two years previous to the second marriage, the presumption of the continuance of her life is neutralized by the presumption of the innocence of the defendant, and in such case there can be no conviction. ’ ’

If the prosecuting attorney had testified as a fact that he knew Mrs. Essie J. Christian, the wife of the appellant, was living on February 18, 1927, or if he had introduced any witness to testify to that fact, that would have been sufficient evidence- of the fact that she was living at the time of the appellant’s alleged second marriage on January' 3,' 1927, or if the prosecuting attorney, or any other witness, had testified as. a fact that Mrs. Essie J. Christian, the wife of the appellant, .sent, the telegram which was received by the prosecuting attorney on February 18,-1927, that would have been competent and relevant testimony tending to'prove that Mrs. Essie J. Christian, the wife of the appellant, was alive on January 3, 1927, the date of appellant’s alleged second marriage. The testimony of the.prosecuting.attorney only showed that he sent a telegram to a person named Mrs. Essie J. Christian at a- certain address in Wichita,-Kansas, and that he received an answer thereto from “Mrs. Christian” on February 18, 1927, that is, a message that was signed by “Mrs. Christian.” But the testimony of the prosecuting attorney to which the appellant objected falls short of proving that Mrs. Essie J. Christian, the wife of the appellant, sent the telegram of February 18, 1927, and of tending to prove that Mrs. Essie J. Christian, the alleged wife of the appellant, was living on the day of the alleged second marriage.

The court erred in permitting the State to prove this material fact in the case by purely hearsay- testimony, and it follows that the ruling of the court in admitting such testimony was highly prejudicial to the appellant.

There are many assignments of error in the motion for a new trial, all of which we have carefully examined and find that none of them are well taken except the above, and it could serve no useful purpose to set them out and comment upon them. For the error indicated the judgment is reversed, and the cause will he remanded for a new trial. .