text:
    Oliver v. Henry Quellmalz Lumber & Manufacturing Company.
    Opinion delivered April 19, 1926.
    1. Corporation—dealings with director.—A director of a corporation is not prohibited from dealing with the corporation upon the principle of agency where the corporation was represented by other directors who constituted a majority of the board.
    2. Corporations—contracts with directors.—Contracts between corporations and their directors are not void but voidable.
    3. Corporations—rights of creditors to attack conveyances.—■ When a sale of property of a corporation to one of its directors is attacked by its creditors, they are not clothed with the same rights to set aside the transaction as those possessed by the stockholders; the rights of the creditors depending upon the fraudulent character of the sale.
    4. Corporations—validity op conveyance.—A deed made by a corporation to one of its directors for the purpose of transferring the property to a third person, which purpose was subsequently consummated by a conveyance to the latter for an adequate consideration, held valid, in absence of proof that the corporation was insolvent at the time of its excution, or that the deed was executed to hinder or delay creditors in collecting their debt.
    5. Judgment—lien.—A judgment obtained by a creditor against a corporation is not a lien upon land which it had previously conveyed to one of its directors, and the judgment-creditor acquired no lien by levy of an execution upon the land after the director had conveyed the land for valuable consideration to a third person.
    Appeal from Clay Chancery Court, Western District; J M. Futrell, Chancellor;
    affirmed.
    STATEMENT OE EACTS.
    This is a suit in equity by the Henry Quell'malz Lumber & Manufacturing Company against G-. B. Oliver Jr. and Charles L. Payne, -as sheriff of Clay County, Arkansas, to have annulled and set aside a sale under execution of the lands described in the complaint of Gr. B. Oliver Jr., and to restrain Charles L. Payne, as sheriff, from executing a deed to him as purchaser under said execution sale.
    The lands in controversy originally belonged to the Ferguson, & Wheeler Land, Lumber & Handle Company, a corporation duly organized under the laws of the State of Missouri. William Ferguson was the president and Henry Schwauer was the secretary of said corporation in October, 1914, at the time said corporation conveyed said lands to William Ferguson. The deed from the Ferguson & Wheeler Land, Lumber & Handle Company was executed to William Ferguson on the 2d day of October, 1914, and was a warranty deed in common form. The deed recites a consideration of $1 and other valuable" consideration paid by William Ferguson. The deed was signed as .follows: “Ferguson & Wheeler Land, Lumber & Handle Company, by "William Ferguson, President. Seal. Henry Schwauer, Sec’y.” The deed was duly acknowledged before a notary public by William Ferguson, as president of said corporation, and was duly filed for record on the 6th day of October, 1914. A certified copy of the directors’ meeting authorizing the execution of the above deed is as follows:
    “Directors’ Meeting.
    “Be it remembered:
    “That, pursuant to notice given, a meeting of the board of directors of the Ferguson & Wheeler Land, Lumber and Handle Company, a corporation, was duly convened and held at the office of said company in the city of Poplar Bluff, in the county of Butler, and State of Missouri, on the 24th day of September, 1914, there being present at said meeting William Ferguson, George B. Wheeler, and Henry Schwauer, the following resolution was unanimously adopted:
    “Resolved that, for and in consideration of one dollar and other valuable consideration, the Ferguson & Wheeler Land, Lumber & Handle 'Company convey to William Ferguson the following described lands, of which it is the owner thereof, towit: (Describing the lands in controversy in this suit); in the county of Clay and State of Arkansas; that the president and secretary be and they are directed to execute and deliver a good and sufficient deed to convey said lands.”
    “State of Missouri,
    County of Butler.
    “I, the undersigned, do hereby certify that the above ajnd foregoing is a true and complete copy of the record and proceedings of a meeting of the board of directors of the Ferguson & Wheeler Land, Lumber and Handle Company, held at the office of said company in the city of Poplar Bluff, in the county of Butler and State of Missouri, on the 24th day of September, 1914, as fully as the same appears of record in the office of said company in the records thereon.

      “ Attest: Henry Schwauer, Sec’y. William Ferguson., President.”
    On the first day of September, 1920, William Ferguson executed a deed to said land to Henry Quellmalz, which was duly acknowledged on the 9th day of September, 1920, and filed for record on the 26th day of October, 1922. The consideration recited in the deed is $26,686.80, payable as follows: One thousand in cash, the assumption by Henry Quellmalz of a mortgage debt for $10,000 and the accrued interest due the Central States Life Insurance Company of St. Louis, and the balance in deferred payments evidenced by promissory notes.
    The deed to Henry Quellmalz was for the benefit of the Henry Quellmalz Lumber & Manufacturing Company, which was the real purchaser of said lands. Henry Quellmalz died intestate on the 25th day of October, 1922, and his heirs, since his death, have conveyed the lands in controversy to the Henry Quellmalz Lumber & Manufacturing Company.
    Momme O. Monsen obtained judgment against the Ferguson & Wheeler Land, Lumber & Handle Company on the 10th day of November, 1914, in the sum of $1,203.50. Execution was issued on this judgment by the clerk of the circuit court on the 26th day of October, 1922. The sheriff of Clay County, Arkansas, levied the execution upon the lands in question and issued a certificate of purchase to G. B. Oliver Jr., who became the purchaser thereof at said execution sale. The tax records show that for the year 1914 the lands in question were forfeited to the 'State for the nonpayment of taxes and redeemed by Ferguson & Wheeler oh July 19, 1915; that William Ferguson paid the taxes for the years 1915, 1916, 1917, 1918 and 1919; that the taxes for the years 1920 and 1921 were paid by Henry Quellmalz Lumber & Manufacturing Company.
    The chancellor was of the opinion that the execution sale whereby G. B. Oliver Jr. became the purchaser of said lands was void and should be set aside, and that Charles L. Payne, as sheriff of Clay County, Arkansas, should he restrained from executing a deed under said execution sale, and that said execution sale should he canceled as a cloud upon the title of the Henry Quellmalz Lumber & Manufacturing Company.
    A decree was entered of record in accordance with the findings of the chancellor, and to reverse that decree Gr. B. Oliver Jr. has prosecuted this appeal.

      Harper E. Harb and G. B. Oliver, for appellant.

      C. T. Bloodworth, for appellee.
   Hart, J.,

(after stating the facts). The record shows that the lands in question originally belonged to the Ferguson & Wheeler Land, Lumber & Handle Company, a Missouri corporation,, and that it conveyed them to William Ferguson, who was its president. It is contended that, as Ferguson was president of the corporation and a member of its board of directors at the time the lands in question were conveyed to him by the corporation, he occupied such a fiduciary relation to the corporation and its creditors as disqualified him from purchasing at all, since, in doing so, he would act in, a double capacity, and his interest as purchaser would conflict with his duty as a director.

In the transaction in question the corporation was represented by its other directors, who constituted a majority of the board, and Ferguson dealt with such majority. Under such circumstances the principle of agency does not apply, and Ferguson was not disqualified from dealing with the corporation, when so represented by other agents.

This court has expressly adopted the rule that contracts between corporations and their directors dealing with corporate assets are not void, but voidable. Ward v. McPherson, 87 Ark. 521, and Nedry v. Vaile, 109 Ark. 584, and cases cited.

When a sale of the property of a corporation to one of its directors is attacked by its creditors, they are not clothed with the same rights to set aside the transaction as those possessed by stockholders of the corporation. The right of a creditor to impeach the transaction depends upon its fraudulent character. A clear and concise statement of the rule governing cases of this sort is contained in Fletcher’s Cyclopedia of the Law of Private Corporations, vol. 8, § 5052, p. 8664. It is as follows:

“The doctrine which prevents directors from binding a corporation by contract in which they have an interest adverse to' that of the corporation does not of itself give the creditors of the corporation the right to attackvsuch a transaction in cases where the corporation or its stockholders could attack it. The fiduciary relation existing between the corporation and the directors does not authorize creditors to attack a transfer-regardless of the fairness or unfairness of the transaction, but, in order that they may impeach it, they must show that the corporation was insolvent at the time of the transaction, or that it was entered into with the intent to hinder, delay or defraud them.” See also Thompson on Corporations, 2 ed., vol. 2, § 1227; O’Conner Min. & Mfg. Co. v. Coosa Furnace Co., 95 Ala. 614, 10 So. 290, 36 Am. St. Rep. 251; Swentzel v. Franklin Inv. Co., 168 Mo. 272, 67 S. W. 596; Crymble v. Mulvaney, 21 Colo. 203, 40 Pac. 499; Barr v. Bartram & Fonton Manufacturing Co., 41 Conn. 506; and Buell v. Buckingham, 16 Iowa 284, 85 Am. Dec. 516.

According to the authorities just cited, the mere fact that the corporation in selling the lands dealt with Ferguson, its president, does not by itself render the transaction fraudulent. Of course such fact is a circumstance to be considered along with the other facts and circumstances in the case as tending to show fraud when the transaction is assailed by a creditor.

In the present case, the resolution passed at the directors’ meeting shows that there were three directors of the corporation, including William Ferguson, and that the other two directors authorized the transfer of the lands to Ferguson. It recites a consideration of $1 and other valuable consideration. The record shows that the Henry Quellmalz Lumber & Manufacturing Company was negotiating with the Ferguson & Wheeler Land, Lumber & Handle Company for the purchase of said lands, and that the transfer was made to William Ferguson so that he could convey the lands to the Henry Quellmalz Lumber & Manufacturing Company when the sale should be consummated between the parties. Subsequently Ferguson conveyed the lands to Henry Quellmalz for the sum of $26,686.80. One thousand of this amount was paid in cash, $10,000 was the assumption of a mortgage to an insurance company, and the 'balance was in notes signed by the grantee. The deed was made to Henry Quellmalz for the benefit of the Henry Quellmalz Lumber & Manufacturing Company. He died intestate, and his heirs conveyed the lands to the Henry Quellmalz Lumber & Manufacturing Company, the plaintiff in this ■action. This constitutes a complete chain of title in the plaintiff. The deed to Ferguson, was executed by himself as president and attested by the secretary of the corporation, which was the grantor in the deed. The deed also contained the corporate seal of the corporation. This constituted a prima facie showing that the grantor as such corporation was regularly incorporated, and that the president and secretary were authorized to make the deed. Cotton v. White, 131 Ark. 273.

Besides this, the resolution, which was unanimously adopted by the directors, gave “the president and secretary express authority to execute the deed. It is true that the deed does not purport to have been acknowledged by the secretary, but it does indicate that he signed it and attached the corporate seal.

Moreover, it was a matter of no concern to the creditors of the corporation whether it was acknowledged at all or not. As we have already seen, it was good against the creditors unless the corporation was insolvent at the time the deed was executed, or unless the deed was made to hinder the creditors in the collection of their debts. There is nothing in the record fending to show either that the corporation was insolvent or that the lands embraced in the deed constituted all the property of the corporation. The only suspicious circumstance was the execution of the deed by the president of the corporation to himself. Under the authorities cited above, that fact, standing alone, does not show fraud. Besides that, the record contains a reasonable explanation, of it. The title was placed in Ferguson for the purpose of immediately completing a sale which was already in contemplation, of the parties. When the sale was finally completed by the execution of the deed to Henry Quellmalz, the consideration was recited as one thousand dollars in cash and the assumption by the grantee of an existing mortgage of $10,000. Notes of- the grantee were given for the balance of the purchase money. So far as the record discloses, the consideration was adequate. The deed was made 'by the Ferguson & Wheeler Land, Lumber & Handle Company before the judgment upon which the execution was issued was rendered. Hence the judgment was not a lien upon the lands when it was rendered.

The execution which was levied upon the lands was n,ot issued until the 26th day of October, 1922. The deed from Ferguson to Henry Quellmalz, which finally completed the sale between the two lumber companies, was executed and delivered on the first day of September, 1920. Therefore no lien was fixed upon the lands by the rendition of the judgment, and no lien was afterwards fixed on it by the levy of the execution. Sears v. Setser, 111 Ark. 11.

It follows that the purported sale under the execution was void, and that U. B. Oliver Jr., the purchaser at the sale, acquired no title whatever to the lands in question. The chancellor was correct in so holding, and the decree of the chancery court will be affirmed.


source: Caselaw Access Project

author: Humphreys, J.

license: Public Domain

text:
    Missouri Paint & Varnish Company v. Merck.
    Opinion delivered April 19, 1926.
    Sales—implied warranty.—Where articles are sold by the manufacturer for a particular purpose without an opportunity for inspection, the law implies a warranty that the articles are fit for the purpose intended.
    Appeal from Jefferson Circuit Court; T. G. Parham, Judge;
    affirmed.

      A. R. Cooper, for appellant.

      Danaher & Danaher, for appellee.
   Humphreys, J.

This suit was brought by appellant against appellee in the circuit court of Jefferson County to recover $522 and interest for roof paint sold by the salesman of appellant to appellee upon a written order. The order was signed by appellee and the salesman, was absolute on its face, and, in addition to other provisions, contained the following conditions:

“This order is not subject to countermand.
“This order is not sold on consignment or approval.
“No agreement recognized unless incorporated in writing on original or duplicate of orders. ’ ’

Appellee interposed the defense to the alleged cause of action that the salesman represented that the paint was suitable for use on the roof of the Jefferson Hotel in Pine Bluff, Arkansas, and that it woul’d cover more than fifty square feet to the gallon, which representation induced the order; whereas the paint shipped to appellee was not suitable for use on said roof and could not be made to cover more than fifteen feet to the gallon; that he immediately notified appellant of the'defect in. the paint, and offered to return it; that appellant refused to take it back, and same was being held subject to appellant’s order.

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

The testimony introduced by appellant established the execution and acceptance of a written contract or order for the roof paint at an f. o. b. price, St. Louis, Missouri, amounting to $552, and containing the conditions set out above, shipping* directions, etc., and the fact that the paint was Shipped in accordance therewith and received by appellee, but not paid for. Its testimony was to the effect also that it made no representations as to the kind and quality of the paint or the number of square feet per gallon it would cover as an inducement to obtain the contract.

The testimony introduced by appellee was to the effect that he owned the Hotel Jefferson, and was painting the roof with paint that covered fifty square feet to the gallon, when appellant’s salesman offered to sell him liquid paint that was better than the kind he was using, and that would cover more than fifty feet to the gallon at a cheaper price; that, upon the representation thus made, he was induced to enter into a written contract with appellant for the purchase of a large amount of paint to finish painting said roof; that, instead of being a liquid paint, as represented, it was a paste as heavy as mortar plaster, which could not be spread effectively by his painter; that it took one gallon of it to cover fifteen square feet, and that it was wholly unsuitable for use on the roof.

Appellant’s main contention for a reversal of the judgment is that the court erred in admitting oral testimony relative to representations of the salesman, which, if made, were promissory warranties to be performed in the future, arid not binding unless incorporated in the written contract. The representations were not promissory warranties, but were representations as to the character and quality of the paint made to induce appellee to buy it instead of the paint he was using. The representations, if made, were those of a manufacturer selling an article for a particular purpose without an opportunity for .inspection. The paint was not sold on sample, so the vendee must have relied upon the representations of the salesman concerning the quality and use of the article, and in such sale the law implies a warranty to the effect that the article is fit for the purpose intended. Bunch v. Weil, 72 Ark. 343; Main v. Deering, 73 Ark. 470; Bankers’ Utility Co. v. Savings & Trust Company, 152 Ark. 138; O. L. Gregory Vinegar Co. v. National Fruit Canning Co., 167 Ark. 435. Under this view of the law applicable to the case, appellant was not entitled to an instructed verdict. The court therefore properly refused its request for a peremptory instruction.

Appellant also contends for a reversal of the judgment because the court erred in refusing- to submit to the jury its theory of the particular representations relied upon by appellees. Appellee has directed our attention to his requested instruction No. 3, which, we think, fully covered the point. It is as follows: “If you find from the evidence that the salesman of plaintiff knew the kind of roof upon which the paint was to be used at the time the contract was signed, and that it was not suitable for use on such a roof, your verdict should be for defendant, even though you further find that the salesman did not tell defendant that the paint was fit for use on such a roof.”

We have read .the instructions given and those refused by the court, and have concluded that the real issues in the case were submitted to the jury under correct declarations of law.

No error appearing, the judgment is affirmed.


author: Wood, J.

text:
    Graysonia, Nashville & Ashdown Railroad Company v. Newberger Cotton Company.
    Opinion delivered March 29, 1926.
    1. Equity—jurisdiction.—A complaint by the owners of certain bales of cotton destroyed by fire in a warehouse alleged that the warehouse company bound itself to deliver the cotton to holders of its receipts; that plaintiff had surrendered their receipts to the railroad company, which accepted the cotton for shipment and issued bills of lading; that the railroad company was liable to plaintiffs as insurer, and the warehouse keeper was liable to the railroad company on account of its negligence; that the railroad company had policies on the cotton, and that the sum of $20,000 had been collected on such policies and held by the railroad company, but it refused to pay same to plaintiffs. Held to state a cause triable in equity, (1) to prevent a multiplicity of suits and furnish an adequate remedy, (2) to give plaintiffs the benefits of the doctrine of subrogation, and (3) to order distribution of the trust fund held by the railroad company.
    2. Carriers—liability for cotton lost by fire in warehouse.— Where a-shipper surrenders all control over its cotton by delivering the warehouse receipts to a carrier for immediate shipment, and the carrier accepts the receipts in lieu of the cotton and executes its bills of lading therefor, the carrier at once becomes an insurer, and liable for the subsequent loss of the cotton by fire while in the warehouse.
    3. Trusts—payment of trust fund into court.—Where a railroad company was carrying insurance in the sum of $20,000 to indemnify it against loss of cotton on which it had issued bills of lading, and the insurer, on. the happening of a fire in a warehouse wherein the railroad company had cotton covered by bills of lading, had • paid the above sum to the railroad company, which had deposited it in a bank, it was not error to order the fund, paid into the court’s registry for the benefit of those entitled thereto.
    4. Carriers—subrogation to insurance held by shipper.—Under a stipulation in a 'bill of lading that the carrier shall have benefit of insurance on the property “so far' as this shall not avoid the policies,” held that the carrier was not entitled to the benefit of policies held by the shippers which provided that the insurers shall not be liable “for merchandise shipped under a bill of lading containing a stipulation that the .carrier may have the benefit of any insurance thereon.”
    5. Insurance—liability of carrier—reimbursement of insurer.— Where a fire insurance policy stipulated that the insurer should not be liable for merchandise shipped under a bill of lading, an agreement, entered into after a loss of goods while in the carrier’s hands, whereby the insurer was to lend the shipper the amount of the loss, to be repaid only in so far as the shipper recovered from the carrier, and the shipper agreed to sue the carrier for the insurer’s benefit, was a lawful arrangement.
    6. Corporations—prohibition against foreign corporations doing business.—A foreign corporation authorized to do business in the State is not prohibited from suing for the benefit of another corporation not authorized to do business in the State,

      Appeal from Howard Chancery Court; G. E. Johnson, Chancellor;
    affirmed.

      J. G. Sain and DuLaney & Steel, for appellant.

      Theodore L. Bailey (New York) and W. P. Feazel, for appellee.
   Wood, J.

Three separate actions were instituted in the Howard Chancery Court. The plaintiffs in the actions, the Newberger Cotton Company and the Lesser-Groldman Cotton Company, are foreign corporations authorized to do business in this State as cotton brokers, and during the year 1923 engaged in that 'business in this State. The actions were instituted against? the Craysonia, Nashville & Ashdown Railroad Company, a common carrier for hire in this State with its line of railroad extending from Nashville to Ashdown, and the Mineral Springs Farmers’ Union Warehouse & Marketing Company, a bonded warehouse company engaged in the warehouse business at Mineral Springs, Arkansas, a station on the railway company’s line. The complaints in substance alleged that the railway company, prior to September, 1923, had constructed a sidetrack along the side of the warehouse of the warehouse company at Mineral Springs, Arkansas, for the purpose of receiving cotton and loading the same on cars for shipment from the warehouse of the warehouse company; that this was the only place from which the railway company received and accepted cotton for shipment at Mineral Springs; that the railway company had established a custom of issuing bills of lading for cotton stored with the warehouse company upon surrender to the railroad company of the warehouse receipts or tickets representing the cotton to be shipped. It is alleged that cotton was purchased by the plaintiffs and stored with the warehouse company, which company issued receipts for the cotton so purchased and stored, which receipts specified that such cotton would be delivered to the bearer of the receipt upon the surrender of the receipt and the payment of lawful charges; that these warehouse receipts were negotiable' instruments, and that the title and right to possession of the cotton represented by them passed with their delivery. The plaintiffs alleged that they delivered to the ag’ent of the railroad company at Mineral Springs on certain dates certain warehouse receipts for certain numbers of bales of cotton, and gave the agent directions for their shipment, and received in return from the agent bills of lading for the shipment of the cotton to the plaintiffs at Ash-down, Arkansas; that the railroad company neglected tó ship the cotton as it was required to do under its contract, but instead allowed the cotton to remain in the warehouse of the warehouse company for an unreasonable length of time, and until* the cotton was destroyed by fire on September 24, 1923. The plaintiffs alleged that the railroad company was liable to it as insurer on its contract of’ shipment for the loss of the cotton; that the warehouse company was liable to the holder óf the warehouse receipts under the terms of the contract contained therein also as an insurer; that the fire that caused the destruction of the cotton was by reason of the negligence of the warehouse company in failing to maintain a watchman; that the railroad company had in its hands the warehouse receipts, and that, as holder of such receipts, it had a cause of action against the warehouse company for the loss of the cotton; that the plaintiffs had insured the cotton, 'but there was a provision in their contract of insurance to the effect that the insurer should not be liable for any l'os's or damage for any goods or merchandise in the possession or control of any common carrier or bailee, or where any carrier or bailee had effected insurance on the goods, and that because of said clause the plaintiffs were unable to enforce their claim against the insurance companies for the loss of the cotton. The plaintiffs alleged that the railroad company and the warehouse company had also effected insurance on the cotton in controversy; that they had collected their insurance, but had refused to pay the plaintiffs for the cotton; that, after such refusal, the insurance companies with which the plaintiffs had insured the cotton advanced to the plaintiffs the value of the lost cotton as adjusted under those contracts upon an agreement of plaintiffs to repay the sums advanced only to the extent of any net recovery that the plaintiffs might have of the carrier or bailee on account of the loss' or damage to the cotton, or any net recovery the plaintiffs might procure by reason of the insurance effected by the carrier or bailee on the cotton, and upon an agreement that the plaintiffs would with due diligence enter and prosecute suits against the railroad company, carrier, bailee, or other persons liable for said loss. The plaintiffs therefore alleged that these actions were instituted by them for the benefit of the insurance companies with which they had insured the cotton, and with whom they had made the agreements for the loan. They alleged that, if it should be determined that the railroad company is not liable for the loss of the cotton, then plaintiffs were entitled to be subrogated to any rights that the railroad company might have against the warehouse company for the loss of the cotton. The complaints concluded with a prayer in the alternative that the plaintiffs have judgment against the railroad company for the value of the cotton lost by fire, or, if it should be determined that the railroad company was not liable, that the plaintiffs be subrogated to the rights of the railroad company as the holder of the receipts as against the warehouse company for the value of the lost cotton. The complaints in all the actions were the same or similar, except as to the respective amounts claimed by each of the plaintiffs.

The defendants filed separate demurrers in which it is alleged that the complaints do not state a cause of action in equity, and that there was a misjoinder of parties. The court overruled the demurrers, and the defendants filed their separate answers, in which all the material allegations of the complaints were specifically denied. It was also set up that one of the insurance companies for whose benefit the action was brought was not authorized to do business in this State, and that the plaintiff, who was insured with that company, was not authorized to bring the action for the benefit of such company. The answers concluded with a prayer, first, that the causes be transferred to the law court, and, second, that the plaintiffs take nothing 'by reason of the actions.

The testimony on behalf of the appellees tended to prove that they were cotton brokers, and that their agents, several years prior to 1923 and during that year, purchased cotton for them at Mineral Springs, Arkansas, a station on the appellant’s railroad. Their agents would purchase the cotton, and it was stored in the warehouse company’s warehouse, which company issued its receipts for same; that these warehouse receipts would be taken by plaintiff’s agents to the agent of the railroad company, and that company accepted these receipts and issued bills of lading for the cotton. ¡When the plaintiffs’ agents delivered the warehouse receipts to the agent of the railroad company, and received its bills of lading, the cotton was ready for shipment, and was delivered by the plaintiff to, and accepted by, the railroad company for shipment. The railroad company’s sidetrack on which it loaded oars with cotton for shipment ran by the door of the warehouse, and the cotton was loaded from the warehouse of the warehouse company. The railroad company had no separate warehouse in which cotton was stored, and from which same was shipped, 'but for several years it had been its custom to accept cotton for shipment, and to load same on its cars from the warehouse of the warehouse company. During the year 1923 it shipped only one carload of cotton from Mineral Springs that was not loaded on its cars directly from the warehouse of the warehouse company. That cotton was loaded on the car of the railroad company by the owners of the cotton on the track of the railroad company, and shipped direct to a co-operative cotton association. When the cotton in controversy had thus been delivered and accepted by the railroad company for shipment, and the company was ready to load the same on its cars, its depot agent at Mineral Springs would give one of the company’s servants, employed for the purpose of loading the cotton, an order containing the list and number of tbe bales of cotton to be shipped, and he would take the same to the manager of the warehouse company, who would turn over the cotton to the loader, and the same was loaded on the cars direct from the warehouse. The cotton was shipped out by the railroad company in the order- in which it had issued its bills -of lading, the cotton first received and accepted by it being shipped out first. As soon as the cotton was loaded on the cars for shipment, the loader would return the list of the cotton thus loaded to the station agent, who placed the same on his file, and turned over to the owner the warehouse receipts corresponding to the bales -of cotton thus loaded for shipment.

There was testimony on behalf of the defendant, the railroad company, to the effect that the warehouse company charged the plaintiffs the sum of fifty cents per bale for weighing, sampling, and handling their cotton for shipment. The total receipts of the warehouse company for storage, insurance and handling the cotton, and for all services rendered by it to the plaintiffs, was the sum of $1.10 per bale. Before the railroad company could get possession of the cotton stored in the warehouse, it was the business of the warehouse company to segregate the cotton called for by the list in the hands of the loader, and check it in the cars: When the warehouse company had room, it kept the buyers’ cotton segregated—each man’s cotton to itself—but, when the warehouse was crowded, the cotton was all mixed up together, and the warehouse company had no means of knowing what 'bales it would be called upon to deliver for shipment until it received the shipping list. It was then the duty of the warehouse company to segregate the cotton according to such list, which it did before surrendering the possession of the cotton. When the cotton was loaded in the cars, the warehouse company took up its receipts and canceled them. The railroad company did hot have any right in the warehouse or permission or authority to control any of the cotton while it was in the warehouse. During that time it was under the control of the warehouse company. The railroad company had no authority to load the cotton from the warehouse, and the manager of the warehouse accepted the loader’s check when the cotton was loaded. The loader did not know where the cotton was, and did not have any right to go into the warehouse and get the cotton without the consent of some officer of the warehouse company. The railroad company had no keys to the warehouse. It didn’t pay anything* to the warehouse company for storage and insurance on the cotton while left in the warehouse. It didn’t surrender possession of the cotton or permit the cars to leave until it had gotten the warehouse receipts. The plaintiffs had never notified the warehouse company that the warehouse receipts had been delivered to the railroad company, and the railroad company had not given the warehouse company any notice that they held the warehouse receipts. The sidetrack owned by the warehouse company from which cars were loaded with cotton from the warehouse was under construction for several years. The warehouse company did the grading and furnished the ties, and the railroad company furnished the steel. The only interest the railroad company had in the sidetrack was the right to remove steel if the track should be abandoned and removed.

The warehouse receipts recited, among* other things,thak said bale of cotton will be delivered to bearer hereof upon surrender of this receipt and payment of all lawful charges.” It was shown that the warehouse was destroyed by fire on September 24, 1923, and the cotton, for the value of whiph recovery is here sought, was burned. The plaintiffs held bills of lading of the railroad company for the cotton in controversy. There was proof to establish the value of the cotton as claimed by the plaintiffs, at least to the extent of the decree as rendered in their favor. The cotton was insured by the plaintiffs, the amount of the loss was adjusted, and the insurance companies advanced to the plaintiffs the amount of the loss as adjusted, as a loan repayable to the extent of the net recovery that the plaintiffs might have of any carrier, bailee, or others, on account of the loss, and the amount thus recovered, if any, was pledged to the insurance companies for the loan; and it was agreed between the plaintiffs and the insurance companies that the plaintiffs would prosecute an action with due diligence and at their own cost against the carrier, bailee, or others, to recover the amount of the damage from the loss by fire.

The insurance policies carried by the plaintiffs contained the following clause: “And warranted by the assured free from any liability for merchandise in the possession of any carrier or other bailee, who may be liable for any loss or damage thereto; and for merchandise shipped under a bill of lading containing a stipulation that the carrier may have the benefit of any insurance thereon; and that any insurance granted herein shall not cover where any carrier or other 'bailee has insurance (whether prior or subsequent in date to this policy) which would attach if this policy had not been issued; and that any insurance against fire granted herein shall not cover where the assured has fire insurance ¿whether prior or subsequent in date to this policy) which would attach if this policy had not been issued.”

The bill of lading contained among others the following clause: “‘That any carrier or party liable on account of loss or damage to any of said property shall have the full benefit of any insurance that may have been effected upon or account of said property, so far as this shall not avoid the policies or contracts of insurance. ’ ’

There was in evidence a policy issued by the Royal Insurance 'Company, Ltd., of Liverpool, to the railroad company, insuring the latter company against -all direct loss or damage 'by fire from the first of September, 1923, to September 1, 1924, and in the policy the insurance company agreed to indemnify the railroad company for payments on account of the latter’s liability as a common carrier or warehouseman for loss or damage by fire to cotton in bales for which bills of lading had been issued, and which such cotton was being held in the warehouse of the warehouse company at Mineral Springs, Arkansas. It was proved that the insurance companies paid to J. G.’ Sain, as trustee for the railroad company, the sum of $18,130, tlie amount of the loss as adjusted under the policies, which amount was deposited in the Planters’ Bank & 'Trust Company in the name of J. G. Sain, as trustee, and is held by him subject to the decision in these actions. Sain, in the event of recovery against the railroad company, was to distribute the money pro rata among those who had made claims against the railroad, company for loss of cotton in the fire amounting .in the aggregate to $37,000. It was shown that there were about 450 bales of cotton in the warehouse at the time of the fire, and the warehouse company didn’t have any watchman employed to look after the warehouse while the employees who worked there were away. The fire occurred about one o.’clock on Monday morning; there had been no one in the warehouse since the Saturday evening before.

During the progress of the trial the railroad company tendered to the plaintiffs the warehouse receipts for the cotton in controversy and also the premiums, paid by the plaintiffs to’ the insurance compaiiies, upon the policies insuring the cotton, which tenders were refused by the plaintiffs.

The above are substantially the facts upon which the court found in favor of the defendant warehouse company, against the plaintiffs, and entered a decree dismissing the complaints against that company for want of equity. The court also found in favor of the plaintiffs against the defendant railroad company, and entered a decree in favor of the plaintiff Newberger 'Cotton Company against the defendant railroad company in the sum of $11,672.28, with interest at six per cent, from November 1, 1923; and also entered two decrees in favor of the plaintiff Lesser-Goldman Cotton Company each in the sum of $2,863.60, with .interest at six per cent, from November 1,1923. The court found that the money in the hands of Sain was a trust fund belonging to the plaintiffs and others, and entered an order directing the railroad company, or its attorney Gain, to pay into the registry of the court the money in his hands, or a sufficient amount thereof to satisfy the decree, and directing that, if the whole sum he deposited, the same should he distributed among all claimants similarly situated, as the pro rata of such claims could not then be adjudged. The “court further directed that, if the money was not paid into the registry of the court within twenty days, and if the judgments were not satisfied within that time, the cleric of the court, as a commissioner appointed for that purpose, should proceed to sell the property of the railroad company, after giving twenty days ’ notice by publication in a newspaper having a general circulation in Howard County.

The plaintiff Newberger Cotton Company excepted to the finding of the court on the value of the cotton, and prayed and was granted an appeal. The defendant railroad company excepted to the findings and decree of the court against it, and prayed and was granted an appeal.

1. The appellant railroad company contends that the chancery court had no jurisdiction. Whether or not the chancery court had jurisdiction must be determined by the allegations of the complaints. The railroad company and the warehouse company were parties defendant to the actions, and, under the allegations of the complaints and the recitals of the receipts embodied therein, the warehouse company bound itself to deliver the cotton to the bearer of the receipts. It was- alleged that these receipts at the time the fire occurred were in the possession of the railroad company, having been accepted by the railroad company in lieu of the cotton which the receipts represented, which constituted a delivery to the railroad company and an acceptance by it for shipment of the cotton which the- receipts specified. The complaints alleged that the railroad company was liable to the plaintiffs, and that the warehouse company was liable to the holder of the receipts because the latter company was, under the terms of its receipts, an insurer, and because the warehouse company was negligent in not having a watchman to prevent the. fire which caused the destruction of the cotton. There were further allegations in the complaints to the effect that the railroad company and the warehouse company had effected insurance on the cotton in controversy to indemnify them against loss of the cotton delivered to them, and that the sum of $20,000 had been collected on these policies, which amount the railroad company had refused to pay the owners of the cotton. There was prayer for judgment against the railroad company and, in the alternative, that the plaintiffs be subrogated to the rights of the railroad company as holder of the receipts against the warehouse company, and “for all proper and equitable relief.”

The complaints thus stated facts which, if true, entitled the appellees (plaintiffs below) to recover against the appellant railroad company (defendant below), or, if not against the railroad company, then facts were stated which entitled the appellees as the owners of the cotton to be subrogated to the rights of the railroad company, the holder of the warehouse receipts, as against the warehouse company, under the terms of its receipts, or under the allegations of negligence in causing the loss of the cotton by fire. Under the allegations of the complaints the doctrine of subrogation was properly invoked, as well as the power of a court of chancery to make proper orders for the preservation of the insurance funds in the hands of the trustee Sain, in order to conserve the rights of the parties before the court who might have an interest in such funds. It is clear, under the allegations of the complaints, that only a court of chancery could give present, complete and adequate relief to all.the parties whose rights were 'involved in the litigation, without subjecting them to a multiplicity of suits. The facts set forth in the complaints therefore show three distinct grounds of equity jurisdiction; first, to prevent a .multiplicity of suits, and to give plaintiffs an adequate remedy (Redbud Realty Co. v. South, 153 Ark. 381; Little River Levee District v. Thomas, 154 Ark. 328); second, to give the plain tiffs the bénefit of the equitable .doctrine of subrogation (Wilson v. White, 82 Ark. 407; Southern Cotton Oil Co. v. Napolcon Hill Cotton Co., 180 Ark. 555; Cowling v. Britt, 114 Ark. 176); and, third, the proper distribution of the funds held in trust by J. G. Sain for the benefit of those entitled thereto. (Symmers v. Carrol, 207 N. Y. 632).

2. The trial court found, “that the delivery shown by the evidence in this case was sufficient to, and did, create the relation of shipper and carrier from the time the bills of lading were issued and delivered to the shipper. ” This finding of the trial court was bottomed upon a recital of facts which the court set forth at length in its decree, and which we have already summarized above. It could serve no useful purpose and would unduly extend this opinion to reiterate and argue at length these facts. Our conclusion on this branch of the case is the same as that of the trial court. Certainly it cannot be said that its finding is clearly against a preponderance of the evidence. The facts show that the appellees had done all in their power, and all that they were required to do, to deliver the cotton in controversy to the appellant railroad company for shipment. They had fully complied with the custom established by the railroad company itself for the delivery to, and the acceptance by, it of goods for shipment. While the cotton was delivered to the railroad company in the warehouse of the warehouse company, this was the place which the railroad company had adopted as the place for the delivery to, and acceptance by, it of cotton to be shipped over its railroad. The railroad company accepted the warehouse receipts turned over to it by the agents of the appellees as the owners of the cotton, in lieu of the cotton itself. This it did because it had adopted the warehouse pf the warehouse company as the place where it would receive the cotton, and from which it would ship the same. A preponderance of the testimony shows that, when the appellees’ agents at Mineral Springs delivered the warehouse receipts to the agent of the railroad company and took bills of lading, evidencing the contract of the railroad company for the shipment of the cotton, nothing further remained for these agents to do. So far as they were concerned, the cotton was then delivered to the railroad company for immediate shipment. It then became the duty of the carrier to do whatever else was necessary to put the cotton in transitu for its destination under the contract of shipment evidenced by the bills of lading. The contractual obligation of the railroad company as a common carrier had then begun, and its liability as such for loss of the cotton was complete.

The facts of this record, as found by the trial court and by us, bring the case clearly within the doctrine that was announced by this court in Railway Company v. Murphy, 60 Ark. 338, where it is said: “When the shipper surrenders the entire custody of his goods to the carrier for immediate transportation, and the carrier so accepts them, eo instanti the liability of the common carrier commences. When this occurs, the delivery is complete, and it matters not how long, or for what cause, the carrier may delay putting the goods in transitu; if a loss is sustained, not occasioned by the act of God or the public enemy, the carrier is responsible. But, on the contrary, as there is no divided duty of safe-keeping, and no apportionment, in the event of a loss, between the owner and the carrier, the surrender of control over the goods by the shipper must be such as to give the carrier the unqualified right to put at once in ifinere, and the carrier must have received them for that purpose.” See also Pine Bluff & Arkansas River Ry. Co. v. McKenzie, 75 Ark. 100; St. L. I. M, & S. Ry. Co. v. State, 84 Ark. 154; St. L. I. M. & S. Ry. Co. v. Ozier, 86 Ark. 182; Bogart & Co. v. Wade, 132 Ark. 49; Hutchinson on Carriers, §§ 113 and 119; 4 Elliott on Railroads, § 2116; 4 R. C. L., chapter on Carriers, §§ 167 to 170 inclusive.

It is contended by counsel of the appellant that the above cases of our own court, cited by counsel for the appellees* are not in' point because of a difference in the facts of those cases and the facts of the cases at bar. But we do not find that the difference in the facts of those cases from the facts of this case is sufficient to make any difference in the application of the doctrine announced in those cases. As we find the facts of this record, the doctrine of the above cases is as applicable here as to the facts of those cases.

The liability of the railroad company in this case is not predicated upon the fact that it issued a bill of lading contrary to the provisions of § 790 of C. & M. Digest, forbidding railroads as common carriers to issue bills of lading unless the merchandise or property specified in the bills of lading shall be at the time of the issuance of such bills actually on board their cars. . It is the duty of common carriers under our statute, § 877, C. & M. Digest, “to receive, load, unload, transport, store and deliver to the consignee thereof any and all property offered for shipment,” and the liability as a common carrier attaches when goods are delivered to, and accepted by, it for shipment, regardless of whether it has delivered a bill of lading therefor or not. But, in view of the statute, where bills of lading have been delivered contrary to the statute, such fact may be considered, in connection with all the uther evidence, in determining whether the relation of shipper and carrier exists. The facts here justify the conclusion that the railroad company did not issue its bill of lading until the cotton had been delivered to, and received by, it for shipment.

3. The undisputed testimony shows that the railroad company was carrying insurance in the sum of $20,000 to indemnify it against any loss it might sustain as a bailee or common carrier for loss or damage by fire of cotton in bales, for which it had issued bills of lading. After the loss occurred the insurance companies, not denying their liability on the policies, paid over the amounts to J. G. Sain, the attorney for the railroad company. The railroad company, denying that it was liable to the owners of the cotton for the loss sustained by them ■by reason of the fire, refused to make payments to the owners, and refused to accept the insurance money; but the same was deposited hy its attorney in the Planters’ Bank & Trust Company, -and it is conceded by the appellant that the same is held in trust for the benefit of those who may establish their claims against it for the loss of the cotton. Therefore, it was proper for the court, in these circumstances, to direct Sain, the trustee, to pay the money held in trust by him into the registry of the court for the benefit of those who might be entitled thereto. It will be noted that the court did not order the money to be paid over to the railroad company, but that the railroad company, if it satisfied the judgments rendered against it herein, would'be entitled to its pro rata part of the trust fund to indemnify it for the satisfaction of these judgments. This order was certainly for the protection, and inured to the benefit, of the railroad company, and it is not in an attitude to complain of the ruling of the court directing that the insurance money be paid into the registry of the court. Other parties interested therein are6not complaining, and they are fully protected by the court’s order, although not nominally parties to this action. The court’s order did not make final disposition and distribution of the funds, but the effect of it is to preserve them for the benefit of those who might establish claims against the railroad company, and for the benefit of the railroad company as well.

4. The bills of lading under which the cotton was delivered to, and accepted by, the appellant for shipment provided that “any carrier or party liable on account of loss or damage to any of said property shall have full benefit of any insurance that may have been effected upon or on account of, said property so far as this shall not avoid the policies or contracts of insurance.” In the policies or contracts of insurance between the appellees and the insurance companies, it is provided that the insurance companies shall not be liable, among other things, “for merchandise shipped under a bill of lading containing a stipulation that the carrier may have the benefit of any insurance thereon; and that any insurance granted herein shall not cover where any carrier or other "bailee lias insurance (whether prior or subsequent to date of this policy) which would attach if this policy had not been issued.”

Construing the provisions of the contract of affreightment as contained in the bill of lading above in connection with the provisions of the contract' of insurance above, it is clear that the appellant carrier was not entitled to be subrogated to the rights of the appellees, the assured under the policies, for the loss sustained by the latter. This, for the reason that- the appellant carrier, under the express terms of its contract, was not entitled to any benefit of insurance effected by appellees, the shippers, if the contract of shipment had the effect to avoid the policies or contracts of insurance. By the provisions of the contract of insurance above set out there were three existing conditions by which the policies were avoided; first; the property insured at the time of its loss by fire was in the possession of the appellant carrier, as we have seen, and if not, certainly it was in the possession of the warehouseman as bailee, one or the other of which was certainly liable for the loss; second, the bill of lading under which the cotton was received for shipment contained a stipulation that the carrier should have the benefit of the insurance thereon; and third, it appears that the appellant carrier did have insurance on the cotton in controversy at the time o,f its loss by fire, for which loss the companies insuring the cotton for appellant conceded liability. We conclude therefore that the appellant, under the terms of its contract of shipment with the appellees, was not entitled to any benefit of the insurance policies effected by the appellees on the cotton in controversy. See Pa. Ry. Co. v. Maheim Ins. Co., 56 Fed. 301; Southard v. Minn, etc., Ry. Co., 60 Minn. 382; Ins. Co. of N. A. v. Easton, 73 Tex. 167, 3. L. R. A. 424, 11 S. W. 180; Kally & Co. v. Morton, 141 N. Y. Sup. 374, 216 N. Y. 655, 110 N. E. 1043; see per contra Adams v. Hartford Fire Ins. Co., 24 A. L. R. 182.

But it is insisted by learned counsel for appellant that the above printed clauses in the original insurance policies are superseded by typewritten riders' attached thereto, which provided in substance that the insurance is extended to cover cotton or linters consigned to the assured, and attaching only from the time of the issue of a railroad bill of lading therefor, or in case of cotton consignedjo the assured and delivered at the compress or warehouse when the assured had received compress or warehouse receipts therefor. But there is no conflict between the provisions of these typewritten riders and ■ the printed clauses above set forth. They cover different hazards, the original policies covering the cotton owned by the appellees, while the riders covered cotton consigned to them, so that by the original clauses in the policies and the riders not only the cotton which the appellees owned themselves, but also all cotton which was consigned to them, was brought within the terms of the policies.

5. It is contended by the appellant that the insurance companies have paid to the appellees the amount of their loss, and that those companies are the real parties in interest here, and that the appellees have no right to maintain this action for the benefit of- the insurance companies. The decided weight of authority is against this contention. Although it is a question of first impression in this State, the validity of such loan agreements as that set forth in the complaints and established -by the testimony of the appellees under the bills of lading and policies of insurance, has been thoroughly established in other jurisdictions, and by a decided weight of authority. We deem it unnecssary to enter upon a discussion of the matter ourselves for the reason that precisely similar agreements have been considered in exhaustive opinions to the force of which we could not hope to add, and we therefore find it only necessary to refer to these cases with the reasoning and conclusions of which we are fully satisfied.

In Luckenbach v. W. J. McCahan Sugar Refining Co., 248 U. S. 139, the facts are similar to those of the case at bar, and the holdings of the court bottomed on sncli facts are succinctly stated in tbe syllabus as follows: "Where the bills of lading stipulated that the carrier should have the benefit of any insurance that might be effected by the shipper, but the shipper’s policies provided that the insurers should not be liable for merchandise shipped under bills containing such stipulations, or in the possession of any carrier who might be liable for its loss or damage, held, that an arrangement between the insurers and the shipper, whereby the former loaned to the latter the amount of a loss caused by the carrier’s negligence, to be repaid only in so far as the shipper recovered from the carrier, otherwise to operate in effect as absolute payment under the policies, and whereby, as security, the shipper pledged such prospective recovery and the bills of lading, and agreed to prosecute suit against the carrier at the expense and under the exclusive direction and control of the insurers,—was a lawful arrangement; that the loan was not a payment of the insurance, and the carrier was not entitled to the benefit of it, and that a libel brought in the shipper’s name, for the benefit of'the insurers, pursuant to the agreement, could be maintained against the carrier and the ship.” See also Southard, v. Minn. etc. Ry. Co., 60 Minn. 382, 62 N. W. 442, and other cases cited in appellees ’ brief.

6. It is contended that the appellee, Lesser-Goldman Cotton Company, cannot maintain this action for the benefit of the Atlantic Mutual Insurance Company for the reason that the latter company has not complied with the Arkansas law authorizing it to do business in this State. Sections 1825-1932 inclusive, C. & M. Digest. These are actions by the Lesser-Goldman Cotton Compaiiy, and not by the Atlantic Mutual Insurance Company. There is nothing in the statutes, supra, prohibiting this character of action.

7. The appellant contends that the court erred in the amount of its decree in favor of the Newberger Cotton Company. 'The court found that the value of the cotton belonging to the appellee Newberger Cotton Company at the time it was burned was $11,672.28. The appellant contends that that price is excessive, and the appellee Newberger Cotton Company appeals from the decree ■fixing this as the amount of its loss, and contends that the amount is too small; that the lowest amount that the court should have found under the evidence was $12,875.80, and therefore it asked that it have judgment here for that sum, instead of the amount fixed by the court. There is no controversy as to the price of the cotton belonging to the appellee Lesser-Goldman Cotton Company. The value of that cotton as found by the trial court is not questioned. The value of the cotton belonging to the appellee Newberger Cotton Company at the time of its loss is purely a question of fact, and it would serve no useful purpose to set out and discuss the testimony bearing upon this issue. • We have examined the same and have reached the conclusion that, when all the competent testimony is considered, the finding of the court as to the value of the Newberger cotton is correct; certainly the finding is not clearly against a preponderance of the evidence.

The decrees are free from error, and they are therefore affirmed.

      See cases cited in appellees’ brief: The Turret Crown, 282 Fed. 354; Leland v. Hornblower, 255 Fed. 289; Bradley v. Lehigh Valley R. Co., 153 Fed. 350; Yazoo Railroad v. Blim, 86 So. 805; Lee v. Barrett, 144 N. Y. Supp. 941; Gulf, C. & S. F. R. Co. v. Zimmerman, 81 Tex. 605; Penn. R. Co. v. Burr, 65 C. C. A. 331; Kalle & Co. v. Martin, 141 N. Y. Supp. 374. (Rep.).


author: McCulloch, C. J.

text:
    Laconia Levee District v. Stevens.
    Opinion delivered April 26, 1926.
    1. Levees—conversion op levee district into drainage district.— Whether an improvement district .created under special statute for the sole purpose of constructing a levee may be converted into a drainage district, under Crawford & Moses’ Dig., § 3652, quaere.

    2. Levees—conversion into drainage district.-—-Crawford & Moses’ Dig., § 3652, authorizing the conversion of á drainage district created under special statute into a drainage district under the general statute (Crawford & Moses’ Dig., §§ 3607-3654) does not authorize the conversion of a levee district created under special-statute into a drainage district where the levee district had proceeded to make contracts and expend money under the special act which created it.
    Appeal from Desha Chancery Court; E. G. Hammock, Chancellor;
    affirmed.

      DeWitt Poe, for appellant.
   McCulloch, C. J.

Laconia Levee District is, as its name indicates, an improvement district organized for the purpose of constructing’ a levee, and was created by special statute. The improvement authorized by the statute was completed and paid for with money borrowed on the issuance of bonds in the sum of $400,000, authorized by a special statute enacted by the General Assembly of 1917, Acts 1917, vol. 1, p. 2119. The commissioners of the district are now seeking to become a drainage district under order of the county court, pursuant to the general statute' of the State authorizing the creation of such districts. Crawford & Moses’ Digest, § 3652.

The section of the statute cited above reads, in part, as follows: Any drainage district which has been heretofore organized or which may hereafter be organized under any special act of the Legislature, may become a drainage district under §§ 3607-3654 by proceeding in the following manner. * * * The county court shall hear the evidence, and shall either grant the petition or deny the same, as it deems most advantageous to the' property owners of the district; -and, if it grant the petition, the said district shall have all the rights and powers, and be subject to all the obligations, provided by the terms of the sections aforesaid and of this act; provided, however, that if a majority of the landowners of the district, or the owners of a majority in value or a majority in acreage of such lands, petition for the change, the county court must make an order declaring said district shall henceforth be governed by the terms of the sections aforesaid; and such-clidy may be enforced by mandamus.”

Another section of the drainage statute reads as follows :

“Section 3638. The ‘ditch’ as used in this act shall be held to include branch or lateral ditches, tile drains, levees, sluiceways, floodgates, and any other construction work found necessary for the reclamation of wet and overflowed land. And this act shall apply to the organization of districts the main object of which is the construction of levees.” Crawford & Moses’ Digest.

Appellee is the owner of property in the district, and instituted this action to restrain the commissioners from proceeding with the conversion of the levee district into a drainage district under the general statute. The chancery court granted the prayer of appellee’s complaint, and restrained the commissioners of the district from further proceedings, and they have prosecuted an appeal' to this court.

We deem it unnecessary to discuss the question whether or not an improvement district created under special statute for the sole purpose of constructing a levee may be converted into a drainage district pursuant to the statute cited above, for we have reached the conclusion that on other grounds the decree of the chancery court was correct. The statute referred to is manifestly intended to cover instances where no construction work had been done or contracts therefor made or money expended under the special statute, and the change cannot be made after that progress has been made in the affairs of the district. In the recent case of Britt v. Laconia Circle Sp. Drainage Dist., 165 Ark. 92, we said: “Under the allegations of the pleadings, no work had been done under the special act prior to the time of the filing of the petition for a change to the alternative system under the general law, and after the order of the county court making the change. After that order, the provisions of the general law applicable to the alternative system of drainage districts govern the subsequent proceedings by which the improvement is made. Otherwise interminable confusion would result in the proceedings under the drainage law.” It can be readily seen that a necessary conflict would arise if the organization depended upon the provisions of the special statute creating the district and also the provisions of the general statute authorizing drainage. The confusion which might arise is illustrated ¡by the present situation with reference to this district, which has completed its levee and borrowed money and issued bonds, and which is restricted in its exercise of the power of taxation, the limitation being to an annual tax of ten per cent, on the assessed valuation as fixed for State and county purposes. The proposition of organizing a drainage district in an original proceeding under the statute is not involved in this case.

The decree of the chancery court being correct, the same is affirmed. .


author: Hart, J.,

text:
    Stepp v. State.
    Opinion delivered April 26, 1926.
    1. Homicide—sufficiency of evidence.—In testing the sufficiency of evidence to support a verdict for murder in the second degree, it must he viewed in the light most favorable to the State.
    2. Criminal law—province of jury in testing evidence.—In arriving at its verdict, the jury is not required to accept or reject the whole of the testimony of a particular witness, hut may accept that part of his testimony which is believed to be true and reject that part which is found to be false.
    3. Homicide—sufficiency of evidence.—Evidence held sufficient to sustain a conviction of murder in the second decree.

      4. Criminal law—order op introduction op evidence. —It is within the sound discretion of the trial court to permit testimony to be introduced out of time, and the exercise of that discretion will not be disturbed by the Supreme Court unless an abuse is shown.
    5. Criminal law—demonstrative evidence.—On a prosecution for killing a son, where it was admitted that defendant killed the father and son with a shotgun at the same time, it was not prejudicial error to admit in evidence the garment worn at the time by the father to show where the shots hit the father’s body.
    6. Criminal law—admonition to jury.—While the trial court may admonish a jury which has been unable to agree to weigh the opinion of the majority, it is prejudicial for the trial court to use language from which the jury may reasonably infer that the court intimates that the minority should yield their opinion to the majority.
    7. Criminal law—admonition to jury.—The trial court may detail to the jury the ills attendant upon a disagreement, the expense, the length of time required to try the case, the length of time the case has been pending, and may admonish them that the case will have to be decided by some jury upon the same pleadings and probably upon the same testimony, and may warn them to lay aside all pride of opinion and consult with each other to harmonize their views, if possible, and to apply the law as given by the court.
    Appeal from Clay Circuit Court, Eastern District; G. E. Kech, Judge;

    ^affirmed.
    STATEMENT OP PACTS.
    Bill Stepp was indicted for murder in the first degree, charged to have been committed by killing Noble Piety.
    Mrs. Everett Piety was the principal witness for the State. According to her testimony, she is the widow of Everett Piety and the mother of Noble Piety, both of whom were killed by Bill Stepp in Greene County, Arkansas, in June, 1925. Noble Piety would have been ■twenty-two years of age had he lived until the 22d day of December, 1925. Her husband had rented the "Woosley place, and was living on it with his family at the time he was killed. Her husband had rented a part of the land from Mr. Woosley himself and a hayfield from Mr. Stepp, who was Mr. Woosley’s overseer. On the morning her son and husband were killed, Mrs. Piety went with a little boy named Welch to a drainage ditch on the Woosley farm to pick berries. When she got in sight of the hayfield, she saw the defendant and her husband in it, fighting. She went on to where they were,- but they stopped fighting before she got there. Mr. Stepp went over into the woods adjoining the hayfield, after the fight. Her husband told Mr. Stepp to take his team and get off of the place and stay off until his rent ran out. In a few moments Mr. Stepp started towards a little house, and Mr. Piety started to unhitch the horses. Her son, Noble, was assisting his father in unhitching- the traces. The witness begged her husband and son to go to the house with her. Her husband replied that Stepp had rented him the hayfield, and that he was going to have the hay. By that time Mr. Stepp was coming back, and the witness told her husband to run and not have any trouble with him. Her husband replied, “Pie won’t shoot me. He rented that hay to me himself. ’ ’ The witness then turned to her son and told him to run, and he said, “No, mamma, I’ll stay with papa as long as there is breath in my body. ” About that time Mr. Stepp came up with his gun drawn on Mr. Piety, and Mrs. Piety begged him not to shoot. Noble took a few steps toward Mr. Stepp, and Mr. Stepp shot him down. Her son was not armed at the time. He did not have a hoe or anything else. The witness was begging Mr. Stepp not to shoot her husband at the time, and her son was also begging Stepp not to shoot his father. Her husband was not making any demonstration as if to hurt Stepp at the time. When Stepp shot her son, he started to run back towards the house, and her husband ran towards him. The witness went to her son, and, about that time she heard the gun fire again. She looked around, and saw her husband on his knees. As soon as Stepp could load the gun again she heard another shot, and her husband fell on his face. She went to him, but he was not able to ■speak; Her husband never made a move or said a word after he was shot. Her husband was not armed when he started towards Mr. Stepp. In a short time the defendant came back for the horses, and the witness said, “Mr. Stepp, I’m afraid you’ll have to punish for this.” He said, “If I do, you’ll never know anything about it.” Noble was shot under the right arm with a single-barrel shotgun, No. 12 gauge. He lived something like an hour after he was shot, but her husband died instantly after he was shot the second time.
    On the morning in question Mr. Stepp began mowing the hay, and, after he had gone about three rounds, her husband and son started for the hayfield. Their home was -situated a quarter and a half-quarter from the hayfield. After Stepp started to running the mower in the hayfield, the witness heard her husband and son talking. They said that they were not going to let him cut the hay, because he had rented it to them. When she first saw Mr. Stepp and her husband fighting, they had nothing in their hands, and Noble was- just standing there looking on. She saw her husband knock Mr. Stepp down, and then saw Mr. Stepp knock her husband down. Neither one of them had-any weapons. They were just fighting with their fists. Her husband and son had left home with their hoes that morning, but did not have -them when they commenced to fight.
    Ralph Adams, a sixteen-year-old boy, was also a witness for the State. The first that he saw of the difficulty was when Noble Piety fell. He saw Noble fall .just after the first shot was fired. He was then asked what Noble was doing when he was shot, and replied that he did not see that he was doing anything. He was then asked if Noble was armed in any way, and answered, “No sir, not that I seen. ” In a few minutes after the defendant shot Noble Piety, he sjiot the father of the boy twice. The witness was hoeing cotton at the time the defendant shot Noble Piety and his father. On cross-examination, he said that the whole hayfield was between him and the scene of difficulty, and the witness stated that he could not see whether Noble had anything in his hands or not.
    R. B. Sanders, one of the. tenants on the Woosley farm, was plowing cotton when the trouble occurred. Stepp ran across the cottonfield to where the witness was working, and asked him if they had a gun. After Stepp and Everett-Piety stopped fighting with their fists, Stepp came towards him and asked him to go after Will iWeaver, who was also a tenant on the farm. Everett Piety told the witness if he knew which side his bread was buttered on he would not go. The witness then started to take a short cut to where his brother was, and Mrs. Piety forbade him to go across the hayfield. The witness then had to go around the field to get to where Will Weaver and his brother were. After the fist fight, Stepp started to run, and Everett Piety chased him with a hoe, and struck him in the back with it after he had started running. Stepp had lived in their house for several weeks, and knew where the gun was kept.
    Dr. Gr. S. Self was called as a physician, after the shooting, and testified that Noble was shot in the right side just under the right arm. Dr. Self told Noble he did not think that he could live but a little while.
    Several witnesses testified that Tom Faulkner talked to Noble about dying, and asked him about how he had been shot. Noble replied that he had just been shot in order for the defendant to have something to shoot at.
    Elmer Burns, a deputy sheriff, was a witness for the State. Stepp surrendered to him, and he heard a conversation between Stepp and Woosley, in which Stepp stated: “I done what I told you I would have to do.” Woosley asked,'“Did you kill them?” and Stepp replied that he did not know, that he was close to them and they fell.
    According to the evidence for the defendant, Everett Piety had rented 100 acres of land in G-reene County for the year 1925 from H. W. Woosley, but the hayfield in question was not included.
    According to H. W. Woosley, Elmer Burns and Stepp drove up to his house. There was blood on Stepp’s face, and his hat was torn. After speaking to them, Stepp said that he had had trouble over in the bottom. Woosley asked him with whom he had had trouble, and Stepp replied with Piety and his son, and said that he had to shoot them. Woosley asked him why he had to shoot them, and Stepp replied to keep them from killing him.
    Another witness testified that, on the day before- the shooting’, he heard Everett Piety say to his sou,, “All hell could not have kept me from cutting that hay. ”
    Bill Stepp was a witness for himself. Some days before the defendant commenced mowing the hay, Everett Piety said to him, “Bill, if you are figuring on cutting that hay next week, you had better bring your coffin along with you. ’ ’ On the morning in question, after the defendant had completed about three rounds with the mower in the hayfield in question, Everett Piety and his son came up and stopped his team. The defendant attempted to start his team, but they stopped it again, and said, “Stepp, what do you God damned sons of bitches mean by cutting this hay?” The defendant then told Piety that there was no use of having any trouble, and proposed to go with them to see Mr. Woosley about who the hay belonged to, and then Everett Piety hit the defendant and knocked him down, and Noble said to his father, “Take this hoe and let’s kill the God damned son of a bitch.” Both'of them ran after the defendant across the cottonfield, and, while he was still running, struck him once. • When the witness went to the house he saw the gun on the rack, and started back with it, intending to defend himself if they attacked him while he was getting his horses. When he got back the two men had their hoes, and he told them to let him alone, that he was going to get his team and go home. He made an effort to pick up the lines with his foot, and Piety said to his son, “When he picks up them lines, cut him in two.” Mrs. Piety said, “Go ahead and do what your pa says.” The boy struck at the witness with his hoe, but missed him. The boy stepped around the team, to strike the witness a second time, when the witness' shot him. The witness then unbreeched his gun and loaded it, and saw the elder Piety coming towards him. He turned and ran, with Piety after him.' When he saw that Piety was gaining on him, he shot him. He then turned towards the house, loading the gun as he ran, and, looking back, saw that Piety was close to him, and shot again. He then saw Piety fall. He then went to the house and put up the gun. When he came back to the scene of the difficulty, the boy raised up and said, “I will kill you yet,” and fell back. The witness came back to get his team and leave the place. Two of his ribs were fractured where one of the Pietys had struck him with a hoe. One of them also struck him with a hoe on the back of the head. Again the witness stated that, in the first difficulty, Noble Piety struck him with a hoe and Everett Piety struck him with his fist.
    The jury found the defendant guilty of murder in the-second degree, and fixed his punishment at fifteen years in the penitentiary.
    Prom the judgment rendered, the defendant has duly prosecuted an appeal to this court.

      Lamb <& Ellis and Block & Kirsch, for appellant.

      H. W. Applegate, Attorney General, and Darden Moose, Assistant, for appellee.
   Hart, J.,

(after stating the facts). The first assignment of error is that the evidence is not sufficient to warrant the verdict. Whether the offense is murder or manslaughter depends upon the presence or absence of malice, which may be express or implied. The law implies malice where there is a killing with a deadly weapon and no circumstance of mitigation, justification or excuse appears at the time of the killing.

Inasmuch as no one can look into the mind of another, the'only way to decide upon its condition at the time of the killing is to judge from the attending circumstances, and the question of the presence or absence of malice at the time of the killing is for the jury, when there is any evidence to support its finding. Dame v. State, 164 Ark. 430, and cases cited; Sullivan v. State, 163 Ark. 353; Cash v. State, 161 Ark. 75; Adams v. State, 160 Ark. 405; Fields v. State, 154 Ark. 188; Webb v. State, 150 Ark. 75; Crofton v. State, 144 Ark. 164; and Brooks v. State, 141 Ark. 57.

Under our rules of practice, the jury is the judge of the credibility of the witnesses and the weight to be given to the evidence. Hence, in testing the legal sufficiency of the evidence to support a verdict for murder in the second degree, it must be viewed in the light most favorable to the State. We have set out the substance of the testimony relied upon by the defendant to justify the killing, as well as the evidence for the State to support the verdict, in order to better get at the viewpoint of the jury. In arriving at its verdict, the jury is not required to accept or reject the whole of the testimony of a particular witness. In the discharge of its duty it may accept that part of his testimony which is believed to be true and reject that part which it finds to be false. Tested by this rule, it cannot be said that the killing was done in the heat of passion and without malice.

It is fairly inferable from the evidence that bad blood existed between the defendant and the two Pietys, father and son. It was claimed by Everett Piety and his son that they had rented the hayfield from the defendant, who was the overseer of Woosley, and that they had the right to cut the hay. On the other hand, it was the contention of the defendant that he had not rented them the hayfield, and that he, as the agent of the owner of the laud, had the exclusive right to harvest the hay.

According to the testimony of Mrs. Everett Piety, the defendant and her husband first had a fist fight about the hay. Her husband knocked the defendant down and the defendant then knocked her husband down. After this occurred, the defendant went to the house where he had been staying and came back with a twelve-gauge single-barrel shotgun. He shot her son at a time when he was unarmed and when neither he nor his father were making any demonstrations of any kind against him. After shooting Noble Piety, the defendant shot Everett Piety twice, and he was killed instantly. Neither Everett nor Noble Piety were armed or had their hoes in their hands at the time they were killed. It is true that they were still in the hayfield, which they claimed they had rented, but, according to the testimony of Mrs. Piety, they were not trying to harm the defendant in any way. Then, too, the deputy sheriff, to whom the defendant surrendered, testified that he heard the defendant say to Mr. "Woosley, “I done what I told you I would have to do. I shot both of those fellows.” This was said when they first met Mr. Woosley, and the jury might have inferred from it that they had had some previous conversation about the matter.

Of course, according to the testimony of the defendant, he brought the gun back with him in order to protect himself while getting his team and carrying it away. The jury by its verdict rejected his testimony and accepted as true the testimony given by Mrs. .Everett Piety. This it had a right to do, and the testimony for the State was legally sufficient to warrant the verdict.

It is next insisted that the court erred in admitting in evidence the garments worn by Everett Piety at the time of his death.' In the first place, it may be said that the only objection urg’ed to exhibiting the garments as evidence was because the offer was made in rebuttal. No objection whatever was made that the garments were incompetent as evidence. It is well settled in this State that it rests within the sound discretion of the trial court to permit testimony to be introduced out of time, and the exercise of that discretion will not be disturbed by this court unless an abuse is shown. Wells v. State, 151 Ark. 221, and Jordan v. State, 165 Ark. 502.

Mrs. Piety testified that the garments worn by her son at the time he was killed had been burned. She had washed the garments worn by her husband at the time he was killed, and was permitted to exhibit them to the jury. The garments worn by the deceased had been admitted in evidence as tending to disclose to the jury the situation of the deceased and as tending to show upon what part of his body the bullets took effect. Hornsby v. State, 163 Ark. 396, and eases cited.

The killing of the father and son was all a part of the same difficulty, and if the defendant thought the introduction of the garments worn by the father was calculated to confuse and mislead the jury with regal'd to the killing of the son, he should have objected to the evidence as being incompetent, instead of objecting merely •because it was introduced in rebuttal. Moreover, the garments had been washed, and could have served no purpose whatever except to show where the shots had struck the body of Everett Piety. The undisputed evidence shows that he died instantly after being shot twice by the defendant. The defendant admitted the killing, and we cannot see how any prejudice whatever could have resulted to him from exhibiting the garments to the jury. No objection was made to any part of the argument of the prosecuting attorney.

It is next insisted that, after the jury had retired and returned into open court, the court, over the objection of the defendant, gave 'them an additional instruction, which reads as follows:

“Well, gentlemen, we have been engaged in the trial of this case for a considerable length of time. There has been a whole host of witnesses here in attendance on the court, brought here on account of this trial, and this case ought to be decided at this term of the court, at this time, if it can be done without any jurors doing’ violence to their consciences. I do not mean in anything I say to the jury that any juror should forego or give up any firm or fixed conviction or opinion he may have, but I am trying, the best I can, to impress upon you the importance of reaching a verdict in this case if you can do so without doing violence to your conscience. 'If you gentlemen don’t reach a verdict in this case, it simply means that this case must be tried again, and the same time consumed and the same expenses incurred here; the same witnesses brought back again that were brought here this time, and the same expenses incurred that have been incurred at this time, and everything done again that is done here now. I don’t know of any more reason why any twelve men selected from this district of this county should, be any more ready, willing and able to agree on a verdict in this case than you men. You, as reasonable men, should make an honest effort to arrive at a verdict. You should undertake to reason together as reasonable men'and to iron out and settle the differences of opinion, that exist between you. I realize, of course, that in a great majority of cases, when jurors go into the jury room, there are differences of opinion among them, but if you sit down and discuss those differences of opinion between, yourselves as reasonable men, having in mind the desire, and all having in mind the desire to reach a verdict in the case, you will, in a great majority of instances, be able to iron out your differences and arrive at some verdict. It is peculiarly within the province of the jury in cases of this kind to settle the case. There is no other way or manner provided by law for the disposition of this kind of a case except by a jury’s verdict, and they must be settled and decided by some jury some time or other. I am going to ask you to make an honest effort and undertake to reason together as reasonable men. If any man has an opinion about certain things, he should discuss that opinion with his fellow jurors and tell them his reasons for the opinions and views he has, based upon the law and the evidence in this case, and he should let the juror who has an adverse opinion tell his reasons for his opinion based upon the law and the evidence in this case, and then they should undertake, as reasonable men, to iron out the differences of their opinions, and try to arrive at some verdict. Criminal trials are always expensive, and the bigger the trial, the more time it takes, and the greater number of witnesses in attendance, the greater is the expense. I am going to ask you gentlemen, to go back to the jury room and, as reasonable men, undertake to reason together and iron -ujt your differences in this case and arrive at some vermut. I’ll pass back your forms of verdict to you and the instructions. If there is anything else you gentlemen desire or any other aid that might help you in this case —how do you stand with reference to numbers, without saying whether you are for the defendant or for conviction or acquittal? ' Don’t say, if you are divided that way, how you stand, except just with reference to numbers.”

This court has held that the circuit court in its discretion may admonish a jury which has been unable to agree to -weigh the opinion o£ the majority. St. L. I. M. & S. Ry. Co. v. Carter, 111 Ark. 272. But it is prejudicial, however, for the trial court to use language from which the jury may reasonably infer that the court intimates that the minority should yield their opinion to the majority. Simonson v. Lovewell, 118 Ark. 81, and J. F. McGehee & Co. v. Fuller, 169 Ark. 920.

This court, however, is committed to the general rule announced in a case note to 11 Ann. Cas., p. 1134, to the effect that the trial’ court may detail to the jury the ills attendant upon a disagreement, the expense, the length of time it has taken to try the case, the length of time the case has been pending, and that the case will have to be decided by some jury upon the same pleadings and in probability upon the same testimony.

Again, in a case note to Ann. Cas. 1915D, p. 675, the general rule is stated to be that the tidal court may detail to the jury the ills attendant on a disagreement and the improbability of securing a more honest or intelligent jury to try the case again in the event of a mistrial, and the evils of a hung jury generally.

This court has, in effect, adopted the general rule just stated, and has held that the trial court may warn the jury to lay aside all pride of opinion and consult with each other for the purpose of harmonizing their views, if possible, under the evidence, and that it was their duty to apply the law as given by the court to the facts in the case and deal with each other in a spirit of candor in order to arrive at a verdict. Evans v. State, 165 Ark. 424; Benson v. State, 149 Ark. 633, and cases cited; Mallory v. State, 141 Ark. 496; and Clarkson v. State, 168 Ark. 1122.

There was nothing in the instruction in the case at bar which tended to coerce the jury. It merely admonished them as to their duty in harmonizing their views, and did not contain any statement that over-emphasized the importance of an agreement. It will be noticed that the court did not in any sense advise the jury that an agreement should be reached in, violation of the honest conviction of any of the jurors.

We have carefully read and considered the record, and find no reversible error in it. The judgment will therefore he affirmed.