text:
    Flower v. Bricker.
    Opinion delivered January 7, 1929.

      Daily & Woods and C. W. Knott, for appellant.

      Owens & Ehrman, for appellee.
   Smith, J.

'The New England Securities Company was for many years engaged in making farm loans on farm property in Arkansas and other States, and its custom was to take a first mortgage for the loan and a second mortgage for its commissions or agent’s fees. The first mortgage would he sold to investors and the second retained by it. In assigning the first mortgages the company would execute an agreement with the assignee whereby “it agrees to look after the collection of the interest as it falls due, and the principal at maturity, and to remit same; to keep insurance in force for and on behalf of the holder hereof according to the provisions of the deed of trust securing this bond; to make an annual examination of the taxbooks and to report any delinquencies, and to advise the holder hereof of the status of the borrower and the condition of the security whenever deemed necessary, hereby guaranteeing the deed of trust securing this bond to be a first and valid lien upon the premises described therein.”

On October 23,1919, J. T. Tye borrowed $3,000 from the securities company and gave a deed of trust to secure it, and at the same time executed to the securities company a second deed of trust covering the commissions charged for making the loan.

The securities company, on or about January 7,1920, sold this first deed of trust, with other first securities, to the Winooski Savings Bank, a Vermont corporation, and executed an agreement containing the recitals above quoted in regard to the taxes, etc. The annual interest on this loan, amounting to $180, was paid promptly for the years 1920,1921, 1922,1923,1924 and 1925, and the taxes were also paid for those years, the payments being made, as the bank later learned, by the securities company and not by Tye.

The securities company became insolvent, and Henry C. Flower was appointed receiver for it, and thereafter the annual interest on this loan was not paid to the bank, and default was made in payment of the taxes on the land. Thereupon the bank caused suit to be brought by the substituted trustee to foreclose its lien. Tye, who was made a party, filed no answer, but an answer and cross-complaint was filed by the receiver for the securities company, in which there was set up a claim for the payment of certain taxes which, it is admitted, were paid by the securities company for the years 1921 to 1925, both inclusive, the contention being that the taxes were paid by the securities company as a junior mortgagee for the purpose of protecting its interests under a junior lien, and therefore within the rule that, where a junior mortgagee pays taxes for the protection of its security, it thereby becomes entitled to be subrogated to the rights of the State for the amount thereof.

Officials of the securities company testified that these taxes, were paid at the request of the bank and upon the agreement that the bank would reimburse the securities company for1 the taxes; but this was denied by the representatives of the hank, who testified that they supposed Tye was paying’ the taxes and the interest, and that the loan was carried on that assumption, and they were not advised to the contrary until default was made in the payment of the taxes and interest.

Pursuant to its agreement so to do-, the securities company advised the bank each year that the taxes had been paid, and as late as February, 1926, wrote the bank as follows: “Beg to advise all taxes in this case are paid. I mean -all-taxes prior to the year 1925.”

The court ordered the foreclosure of the deed of trust sold to the bank as a first lien on the land, and denied the prayer of the receiver for subrogation for any of the taxes paid by the securities company, and this appeal is from that decree.

It is conceded that, where a junior' incumbrancer pays- taxes to protect his security and that of a prior lien as well, he is entitled to be subrogated to the paramount lien of the State or the taxing agency for the amount of such taxes, and may enforce this payment as a lien having the same priority which the taxing agency had. Lester v. Richardson, 69 Ark. 198, 62 S. W. 62. We think,' however, that doctrine is not applicable here.

We think the testimony does not show that the securities company paid the taxes upon the faith of a promise by the bank to refund them or to allow the securities company credit therefor. These tax payments were made for five years, and no such credit was given, nor does it appear to have been asked prior to the beginning of this litigation.

The testimony shows that the securities company acquired title to the land from Tye by a deed in 1923. This deed was of course taken subject to the deed of trust which had been assigned to the ¡bank, and it was thereafter to the interest of the securities company to have the bank continue to carry the loan, and this it did upon the assumption that the mortgagor was paying the taxes and interest, and this it ceased longer to do when default was made in the payment of the taxes and interest.

The testimony shows that, after ■obtaining' the deed from Tye, the securities company collected the rents for the years 1924, 1925 and 1926, amounting to $496.03, and appropriated these rents to its own account, and that all the- taxes paid by the securities company amounted to less than $125. It is argued, however, that, while the rents collected by the securities company exceeded the taxes paid by it, the rents, did not equal the taxes and the interest which the securities company paid to the bank. This is true, but it is unimportant.

Certainly, after acquiring the title to the land'the securities company should have paid the taxes when the rents were sufficient for that purpose. We are also of the opinion that it would- be inequitable to permit the securities company to claim the right of subrogation for taxes paid prior to the time the title was acquired. We find the fact to be that there was no promise on the part of the bank to refund these taxes or to allow the securities company credit for them. On the contrary, as late as 1926 the securities company reported that all taxes prior to those of the year 1925 had been paid, and there was no intimation that the mortgagor himself had not made these payments .and the interest payments as well. Had the bank known in 1921, when'the taxes first became delinquent and were paid-by the securities company, that the borrower was not paying them, it could then have determined whether it would foreclose its prior lien, as it had the right to do. It was lulled into inaction by the implied representation of the -securities company that the borrower was paying the interest and the taxes, when such was not the fact, as both were being paid by the securities company.

The right of subrogation was properly denied, and the decree is affirmed.


source: Caselaw Access Project

author: Smith, J.

license: Public Domain

text:
    Morgan v. Leon.
    Opinion delivered January 7, 1929.

      Zeb -A. Stewart and Align Smith, for appellant.

      Gaughan & Sifford, for appellee.
   Smith, J.

A decree was rendered May 7,1925, in the Union Chancery Court-, in favor of Morgan et al., plaintiffs, against Koury and certain other defendants, for the sum -of $3,375, but, upon the appeal to this court, the decree was reversed on December 20, 1926 (Koury v. Morgan, 172 Ark. 405, 288 S. W. 929), and the cause was remanded with permission to all parties to take additional testimony. Isadore Leon, was named as a defendant in the case, and the decree appealed from was against him- and all of the other defendants named. No appeal was prosecuted on behalf of Leon.

In August, 1925, an execution was issued against Leon, who, on August 29, 1925, filed a complaint in the court which had rendered the decree upon which the execution had issued, praying that the execution of the decree ag’ainst him be enjoined and that it be declared void as against him, for the reason that it had been rendered without notice to him. A temporary restraining order was granted Leon, which, on final hearing, was made permanent, and this appeal is from that decree.

In making- the temporary restraining- order permanent the court found the fact to be that Leon had not been served with process, and this finding is clearly sustained by the testimony; indeed, it appears to be established by the undisputed testimony.

It is insisted, however, that the appearance of Leon was entered by the attorney who represented the other defendants. On this issue the testimony was to the effect that Mr. Hamp Smead, who was employed , by Koury, who was trustee for himself and certain other owners of an oil lease, Leon being among that number, first filed a demurrer to the complaint, in which he named the defendants who were his clients, and Leon was not included in this number. The demurrer was overruled, "thereupon Smead filed an answer on behalf of all the defendants, and upon this answer the decree from which the former appeal came recited the appearance of Leon. Smead testified that he inadvertently failed to exclude the name of Leon as one of the defendants for whose benefit the answer was filed, but that he did not at any time represent Leon and had no authority to enter his appearance. Leon’s appearance was not otherwise entered, and the testimony clearly established the fact that he was never summoned, as he was not in the State until after the rendition of the original decree.

Smead duly perfected an appeal on behalf of the defendants whom he represented, and the decree appealed from was reversed, and, as has been said, the opinion (172 Ark. 405, 288 S. W. 929) gave all the parties the right to introduce additional testimony. Upon the remand of the cause Smead filed an amended answer on behalf of all of the defendants who had been appellants in the first appeal, and Leon’s name was not included.

The cause was transferred to the circuit court, where a verdict was rendered by a jury against the answering defendants for $2,000. Leon’s name was not included in this number. A motion for a new trial was filed, which the court overruled in so far as it applied to Koury, individually and as trustee, but granted it as to all other defendants, and set aside the judgment against them which had been entered by the clerk in the meantime, so that final judgment was rendered only against Koury, individually and as trustee. The plaintiffs duly excepted to this action, but the subsequent history of that branch of the case does not appear from the record now before us.

It is pointed out by appellants Morgan et al. that, although Leon did not appeal from the original decree, he was advised of its rendition in time to have made himself a party to the appeal which the other defendants prosecuted, as is shown by the fact that he brought suit to enjoin tbe enforcement of the decree before the expiration of the time within which he might have appealed. The testimony does not show that Leon was apprised of the litigation until after the rendition of the decree, and he testified that his first knowledge of the decree against him pel'sonally was obtained when the sheriff levied an execution on certain of his property. Leon alleged in his petition for an injunction, and he testified in support of its allegation, that he had no personal interest in the oil lease, the title being in a trustee, and it was this allegation which constitutes, the meritorious defense against appellant’s attempt to recover a personal judgment against Mm, which he was required to show before asMng to have the enforcement of the judgment enjoined.

It is true, as appellant insists, that Leon might have ■appealed from the original decree; but it is not true that this was his only remedy. Had he appealed, his appearance upon the appeal woiild have been entered, and after the remand of the cause he would have been a party to the suit, as the successful prosecution of the appeal reversing the decree for the error of its rendition without service would have entered his appearance.

Appellant insists that this proceeding is a collateral attack upon the original decree, and he invokes the numerous cases of this court in which it has been held that, upon a collateral attack on a judgment or decree, the sufficiency and validity thereof must be determined by an inspection of the judgment or decree itself, and the recital therein of service or the entry of appearance cannot be disproved. It has been so held in cases of collateral attack; ■but this is a "direct, and not a collateral, attack upon the original decree. First Nat. Bank v. Dalsheimer, 157 Ark. 464, 248 S. W. 575; Montague v. Craddock, 128 Ark. 59, 193 S. W. 268; See v. Haskins, 129 Ark. 131, 195 S. W. 8; Crawley v. Neal, 152 Ark. 232, 238 S. W. 1054. See also Williams v. Alexander, 140 Ark. 442, 215 S. W. 721, in which case it was expressly held that equity has power to relieve against a judgment rendered upon the unauthorized appearance of an attorney.

The ease of Hall v. Huff, 122 Ark. 67, 182 S. W. 535, was a proceeding under § 4431, Kirby’s Digest (which is now § 6290, O. & M. Digest), to vacate a decree rendered at a former term of court which had been entered without notice to the defendant, and the instant suit is one of the same character. In the Hall case, swpra, it was held that a proceeding to set aside or to vacate a judgment rendered at a former term upon the ground that it had been entered without notice to the defendant was a direct, and not a collateral, attack, and that the relief prayed would be granted where the testimony warranted.

We conclude therefore that the chancellor was warranted in making perpetual the injunction against any attempt on defendants’ part to enforce the decree rendered against Leon without notice, and that decree is affirmed.


author: Humphreys, J.

text:
    Boyd v. Duncan.
    Opinion delivered January 7, 1929.

      J. C. & Wm. J. Clark, for appellant.

      George F. Hartje, for appellee.
   Humphreys, J.

The only question involved on this appeal is whether the probate court of Faulkner County had authority, under § 71 of Crawford & Moses’ Digest, to order appellee, who was the duly appointed administrator of the estate of W. P. Ledrick, deceased, to loan $2,655.69 belonging to said estate, on January 19, 1927. Section 71 of Crawford & Moses ’ Digest is as follows:

“If, on the return day of an inventory, or at any other time, it shall appear to the satisfaction of the court that there is a surplus of money in the hands of an executor or administrator that will not shortly be required for the expenses of administration or the payment of debts, such court shall have discretionary power to order the executor or administrator to lend out such money on such time and on such security as may be approved by the court.”

Appellee was appointed administrator of the estate on October 10, 1924, and filed his first account current over three years after his appointment, showing a balance on hand in cash of $3,989.04, .after paying the debts and expenses of said administration. On January 19, 1927, he applied to the probate court for permission to lend $2,655.69, the balance remaining in his hands after advancing certain of the heirs $1,333.33. The court ordered him, to lend the money, and approved the loans, and no appeal was taken from either order, and the time for appeal has expired. On February 19, 1928, the heirs filed a petition in the probate court to require appellee to malee a. final settlement and distribution of the estate. In response, to a citation he filed a report showing a debit of $3,989.02, the amount he charged himself with in his last annual settlement, and credits for advances made to the heirs of $1,333.33, leaving a balance undistributed of $2,655.69, which amount he had loaned to certain persons, naming them, upon notes and personal security which had theretofore been approved by the court, stating that he had been unable to collect the notes, and requesting he be given until December 15, 1928, to collect same and make final settlement. Before any action was taken by the court upon the petition for final settlement and distribution and appellee’s response thereto, appellee filed an amendment to his response, setting out the orders made by the court in 1927, authorizing him to. lend the money, and the court's approval of the loans after being made, with a prayer on his part that he be given credit for the notes and allowed to turn them over to the heirs in final settlement, and that he and his bondsmen be discharged. The heirs excepted to these responses upon several grounds, one being that the probate court was without jurisdiction to order the loans made after the debts and expenses of the administration had been paid. Under our view of the oa-se it is unnecessary to set out the other exceptions to the responses.

Appellee then filed a motion to dismiss the excep.tions of the heirs to his responses, upon the ground that the orders made by the probate court to lend the money became final upon the adjournment of the terms of court at which the orders were made, and, not having been appealed from, were not subject to attack in the probate court. The probate court .sustained the motion of appellee to dismiss the exceptions to his responses, from which an appeal was prosecuted to the circuit court. The circuit court affirmed the judgment of the probate court, from which is this appeal.

As stated in the beginning of this opinion, the question of the authority of the probate court to order appellee to lend the money depends upon the construction of § 71 of Crawford & Moses ’ Digest.

By reference to that section, which has been set out verbatim in this opinion, it is apparent that no authority was conferred by it upon the probate court to order an administrator to. lend money ready for distribution after all debts, and expenses of the administration have been paid. It only confers authority upon the probate court to order an administrator to- lend any surplus money in his hands that will not shortly be required for expenses of the administration and for the payment of debts. It appears from the pleadings in the instant case that the time had expired for creditors to present claims, and all the debts had been paid, leaving a net balance in the hands of appellee of $2,655.69 at the time he applied to the court for the order to lend the money. This net balance clearly belonged to the heirs, and was ready for distribution to them at the time the loans were ordered and approved. We find nothing in the section of the statute referred to authorizing the lending of money belonging to an estate after the time for distribution to the heirs by an administrator. The lending of money which should have been distributed to the heirs was an illegal expenditure. This court is committed to the doctrine that a probate court has jurisdiction to disallow credits claimed by administrators for unlawful expenditures made by them, even though ordered to be made by the court. This doctrine was 'announced in the case of Burke v. Coolidge, 35 Ark. 180, and governs the instant case.

On account of the refusal of the court to entertain the exceptions filed by appellants to the final account filed by appellee, the judgment is reversed, and cause remanded.


text:
    Security Life Insurance Company v. Matthews.
    Opinion delivered January 7, 1929.

      Arthur S. Lytton and Caraway, Baker & Gautney, for appellant.

      T. T. Mardis and Charles D. Frierson, for appellee.
   Humphreys, J.

Appellee recovered damages in the sum of $838.73 against appellant in the First Division of the Circuit Court of Poinsett County upon the alleged breach of a life insurance contract, from which is this appeal.

The trial court instructed a verdict in favor of appellee upon the theory that the undisputed facts showed that, at the time the policy in controversy was forfeited, appellant had in its hands a sufficient sum of money belonging to appellee with which to pay the overdue premium and thereby prevent a forfeiture.

The life insurance policy in question was issued March 12, 1919, and the quarterly premium of $29.65 had been regularly paid thereon for seven years and nine months, but appellee overlooked paying the quarterly premium due on December 12,1926, for a few days beyond the thirty-day period of grace, which would have carried the policy to March 12, 1927. A check for the premium was mailed and not received by appellant until January 25, 1927, at which time it declared a forfeiture of the policy and returned the check to appellee with directions how to be reinstated if he desired to apply for reinstatement. Appellee complied with the requirements for reinstatement, but appellant refused to reinstate him, without assigning any reason for its action. On the trial it appeared that appellant refused to reinstate him because it learned, from the medical examiner of the Cotton States Life Insurance Company, as a result of an urinalysis test, that appellee was not an insurable risk.

On March 12, 1926, appellee borrowed $335 from appellant, which was the full loan value available on the policy at that date. The policy provides that loans (per table of loans, etc., in the policy) may be obtained, “all premiums, including the current year’s premium, having-been duly paid.” The table referred to provides that “If full year’s premiums have been paid and this policy lias been in force for.................years,” and “If premiums be paid for years stated,” certain loan values, are available.

J. C. Seitz, secretary and actuary of appellant, testified that tbe policy in question had no- additional loan value under the provisions quoted when same was declared forfeited by appellant.

Under the terms of the policy it was optional on the part of appellee to pay the premiums either quarterly or annually. Appellee elected to pay the premium quarterly,- and it is undisputed that had he paid the fourth quarterly premium in the eighth year of the life of the policy on or before January 12, 1927, same being the last day of grace, he would have been entitled to an additional loan of $60.

On account of appellee’s option, and his election, to pay the premiums quarterly instead of annually, the trial court took the view — and we think correctly — that the loan value on the policy should and would accrue quarterly, just as it would have accrued annually had he elected to pay the premiums annually. It is true that the table of loan values contained in the policy is fixed upon the basis of payment of -annual premiums, but, where premiums are paid quarterly, the loan value for the year ought to be pro-rated to the quarterly premium payments. This construction is reasonable and should be placed upon the contract to prevent forfeitures, which are odious in the law and never favored unless the language of the contract clearly justifies it.

It follows, from this construction of the contract and the undisputed fact that, if the loan value is prorated to quarterly payments of premiums, upon the payment of the third quarterly premium appellee was entitled to borrow $45 additional on the policy, more than enough to have paid the quarterly premium of $29.-65 due December 12, 1926.

The rule is. that insurance companies cannot declare forfeitures of policies for nonpayment of premiums when they have sufficient funds in their hands belonging to the .insured to pay the premiums, and the duty rests upon them to use the funds to pay the premiums and thereby prevent forfeitures. American Nat. Ins. Co. v. Mooney, 111 Ark. 514, 164 S. W. 276; Missouri State Life Ins. Co. v. Miller, 163 Ark. 480, 260 S. W. 705; Pfeiffer v. Missouri State Life Ins. Co., 174 Ark. 783, 297 S. W. 847; Knights of Pythias v. Sanders, 174 Ark. 279, 295 S. W. 25.

Reversal of the judgment is also sought on the ground that the court adopted an incorrect rule for the measure of damages on account of the breach of the contract.

■ The court followed the rule announced in the case of Mutual Relief Assn. v. Ray, 173 Ark. 9, 292 S. W. 396, as follows:

‘ ‘Where an assessment benefit association wrongfully repudiated its contract, the insured may treat the contract as rescinded and recover all assessments paid with interest from the date of payment of each assessment.”

The rule is applicable to premiums paid by the insured on account of any breach of a contract.

No error appearing, the judgment is affirmed.


text:
    Harding Construction Company v. Drainage District No. 17.
    Opinion delivered January 7, 1929.

      J. T. Coston, for appellant.

      Trieber <& Lasley, Coleman <& Riddick and Little S Buck, for appellee.
   Humphreys, J.

The correctness of three decrees rendered by the chancery court of Mississippi County, in the Chickasawba District thereof, is involved on this appeal. The first was rendered on May 18, the second on July 14, and the third on August 1,1928. J. T. Flanagan, Toleff Jacobson, Andrew Jacobson, J. O. Shulind, A. G-. Shulind, and Harding Construction Company obtained a decree on the 27th day of September, 1926, in said court for $32,515 against Drainage District No. 17, growing out of a construction contract for a part of the improvement. During the pendency of that suit in the trial court, Flanagan, the Jacobsons, the Shulinds and Harding Construction Company procured an injunction on November 16, 1921, impounding $100,000 of the money of the district to pay such amount as they might recover from it. The injunction was not dissolved until ¡September 24, 1923, at which time a master was appointed to state an account between the parties to the suit, the court reserving for future decision the question of damages on account of the issuance of the injunction. The reservation in the decree is as follows: ‘ ‘ The question of the liability of J. T. Flanagan and the other cross-complainants for interest on the $100,000 of the district’s funds which were held by the bond purchasers pursuant to the order heretofore made in this cause, is expressly reserved for future decision.”

In February, 1928, Drainage District No. 17 filed a petition in said court against "Flanagan and his associates on the injunction bond for $5,247.68, praying that said amount be offset against the $32,515 judgment rendered against it in their favor on ¡September 27, 1926. Flanagan and his associates interposed several defenses to the petition as follows: (1) Res judicata. (2) That the funds were tied up at the request of the district. (3) That the district was not damaged because it had been receiving interest on the funds, which had never been out. from under its control.

The causes were submitted to the court upon the pleadings and testimony introduced by the parties, which resulted in a finding that the injunction was wrongfully issued and the funds wrongfully impounded, and a decree for damages in the sum of $3,666.66, directing that the amount be credited on the $32,515 decree, from which the Harding Construction Company and the Jacobsons appealed.

The trial court erred in rendering a decree for damages on account of the issuance of the injunction impounding the funds in the original action. That issue was reserved for future decision by the trial court when the master was appointed in 1923, and, being an issue by express reservation, should have been decided when the final decree was rendered in 1926. The trial court had statutory authority to adjudge damages in the original case for wrongfully impounding- the funds at the time the injunction was dissolved. 'Section 5822 of Crawford & Mioses’ Digest provides:

“Upon the dissolution in whole or in part of any injunction or restraining order of any and every land and nature whatsoever, the chancery court wherein the same was pending may assess and render against principal and sureties on the injunction bond a valid judgment for any and all damages occasioned by the issuance of such injunction or"restraining order; and the court may either appoint a master to report as to such damages, or may render summary judgment therefor, or at its discretion may cause a jury to be impaneled to find such damages.”

■ The plea of res judicata should have been sustained, as the question of damages on account of the issuance of the injunction was an issue in the original action, made so by express reservation of the court.

After the $32,515 judgment had been rendered against the district in favor of Flanagan, the Jacobsons, the Shulinds, and the Harding Construction Company, on September 27, 1926, and after both parties had appealed the ease to this court, and during the pendency of the appeal, the Farmers’ National Bank of Alexandria, Minnesota, brought suit in said court to recover large sums from the Harding Construction Company and the Jacob-sons and to subject their interests in said $32,515 judgment to the payment of the amounts they owed it. It made Drainage District No. 17 a party defendant. The district filed an answer in the action. Service was obtained upon the Harding Construction 'Company and the two Jacobsons by warning order. Upon the hearing of the cause on May 18, 1928, the trial court ascertained the amount due the Farmers’ National Bank by the Harding Construction Company and the Jacobsons, and directed that certain of the funds which had been deposited with the clerk of the court by the district in payment of the judgment against it in favor of Flanagan and his associates be applied toward the payment of the ambunt due said bank. The Harding Construction Company and the Jacobsons filed a motion at a subsequent term of the court to vacate the judgments on the ground that they were rendered upon insufficient service, which was overruled on July 14,1928. Appeals from both decrees were perfected, and the reversal of them' is sought on the alleged grounds: First, that the service upon the district was insufficient to sustain an equitable garnishment; second, that the affidavit for the warning order, warning them to appear, was defective and void for failure to comply with 1159 and 1219 ¡of 'Crawford & Moses’ Digest. The sections referred to are as follows:

“'Section 1159. Where it appears by the affidavit of the plaintiff, filed in the clerk’s office at or after the commencement of the action, that he had made diligent inquiry, and that it is his information and belief that the defendant is: (1) A foreign corporation, having no agent in this State; or (2) a nonresident of this State; or (3) has departed from this State with intent to delay or defraud his creditors; or (4) has been absent from this State four months; or (5) has left the county of his residence to avoid the service of a summons; or (6) conceals himself so that a summjons cannot be served upon him; or where either of the last two mentioned facts is stated in the return, by the proper officer, of a summons against the defendant, the clerk shall make and file with the papers in the case an order warning such defendant to appear in the action within. thirty days from the time of maiking the order. ’ ’

“'Section 1219. Whenever the affidavit of the plaintiff or defendant is required to verify a pleading’, to obtain a warning order, a provisional remedy, or any other order in an action, or on a motion or proceeding therein, it may, unless otherwise 'expressed, be made by the agent or attorney of the party, if the party is absent from the county, or is mentally incapable of taldng an oath, or is physically unable to attend before the court or officer for ’.the purpose of making the affidavit, in which case the affidavit shall state the reason, and that the affiant is the agent or attorney of the party. ’ ’

(1) District No. 17 filed an answer in the equitable garnishment proceeding, thereby entering its appearance for all purposes. It is therefore unnecessary to determine the sufficiency of the service upon it.

(2) The complaint of the Farmers’ National Bank states that it is a banking corporation; that its 'principal place of business is in Alexandria, Minnesota; that it has made diligent inquiry and that it is its information and belief that Harding Construction Company, Toleff Jacobson and Andrew Jacobson are each nonresidents of the State of Arkansas, and that the Harding Construction Company is a foreign corporation and has no agent in this State.

Indorsed upon the back of the complaint is the following affidavit:

“C. M. Buck states on oath that he is attorney for the Farmers’ National Bank of Alexandria, Minnesota, and that said interpleader is a corporation and a nonresident of the State of Arkansas, and that the statements in the foregoing interplea are correct to the best of his knowledge and belief.”

It is permissible to treat a complaint and an affidavit as one instrument in ascertaining whether the necessary essentials are set forth to warrant the issuance of a warning order by the clerk of the court. Sannoner v. Jacobson, 47 Ark. 31, 14 S. W. 458; Ballard v. Hunter, 74 Ark. 174, 181, 85 S. W. 252.

When read as one instrument, it reflects that the bank is a nonresident corporation and, by necessary inference, absent from the county and physically unable to attend before the court or an officer for the purpose of making an affidavit that the Jacobsons and the Harding Construction Company are nonresidents of the State and that the Harding Construction Company has no agent in the State upon whom summons might be served. These are the only essentials necessary to warrant the issuance of a warning order.

It is provided by § 1215 of Crawford & Moses’ Digest that pleadings of corporations may be verified by their attorney in the action.

We attach no importance to the suggestion of the appellants that the use of the word “correct,” instead of “true,” in the affidavit, vitiates it. The statutes referred to do not require the use of the word “true” as the only means of verification.

The service upon both the district and the appellants was sufficient to ascertain the amount due from appellants to the bank and to impound and apply the funds due appellants by the district thereon.

Appellants also contend that the fund' was not subject to equitable garnishment, because the drainage district was not completed. It is true the whole improvement had not been made, but the construction of the work covered by the contract in question was at an end on account of the breach, and whatever amount was due thereon was available and subject to equitable garnishment.

The decree rendered May 18, 1928, sustaining the garnishment proceeding commenced by the Farmers’ National Bank of Alexandria, Minnesota, and the decree rendered July 14, 1928, refusing to set it aside, are affirmed; and the decree rendered August 1, 1928, allowing the drainage district damages on its injunction bond, is reversed, and the complaint of the drainage district for an allowance of damages is dismissed.


text:
    Hill v. Brittain.
    Opinion delivered January 7, 1929.

      Dean, Moore & Brasil, for appellant.

      C. A. Holland and B. W. Robins, for appellee.
   Humphreys, J.

This is the second appeal in this case. On the first appeal the decree was reversed, and the cause remanded because the trial court rendered a judgment against the administrator of the estate of F. O. Stobaug’h, deceased, in part for unmatured indebtedness, and decreed a foreclosure and sale of the property described in the mortgage to pay same. Reference is made to the case of Hill v. Brittain, 174 Ark. 1163, 299 S. W. 615, for a statement of the issues joined by the pleadings. It will be 'Observed in reading the case that, during the pendency of the suit, F. O. >Stobaugh, the owner and mortgagor, died, and the cause was revived in the name of R. E. Hill, administrator of Stobaugh’s estate. It does not appear in the opinion when Hill was appointed administrator nor when the cause was revived. It is reflected by the transcript on this appeal that he was appointed sometime between April and December 2, 1925, and that the cause was revived against him by his consent on December 2, 1925, within a year after his appointment. The transcript also reflects that the cause was not revived at that time nor since against the heirs of F. O. Stobaugh. On remand of the casé, further testimony was taken, and the cause was retried on March 19, 1928, resulting in a judgment against appellant as administrator of the estate for the amount evidenced by the notes, and a decree of foreclosure and order of sale of the lands described in the mortgage to pay the judgment.

Oh April 17, 1928, appellant filed a motion to set aside the decree on the ground that the cause had not been properly revived in that it had not been revived against the heirs of F. O. Stobaugh, deceased. On the hearing of the motion the court refused to set aside the judgment against appellant as administrator of the estate, but set aside the decree of foreclosure and order of sale of the lands to satisfy the indebtedness.

Appellant contends that the trial court should have set the judgment ag’ainst him as representative of the estate aside as well as the decree of foreclosure and order of sale of the lands, because appellee failed to revive the cause against the heirs of F. O. Stobaugh upon the suggestion of his death; and appellee contends that the decree of foreclosure and order of sale of the lands should have been permitted to stand.

The ruling of the court upon the motion was correct. The -purpose of the suit against F. O. Stobaugh was twofold; first, to obtain a judgment against him for the indebtedness evidenced by his notes, and, second, to foreclose and sell the mortgage security to pay the judgment, if obtained. Upon. Stobaugh’s death, and during the pendency of the suit, the action for the indebtedness survived against his administrator, and the action to subject the security to the payment of the indebtedness survived against his heirs. Section 98 of Crawford & Moses’ Digest provides:

“All actions pending against any person at the time of his death which by law survive against executor or administrator shall be considered demands legally exhibited against such estate from the time such action shall be revived, and shall be classed accordingly.”

And § 1058 of Crawford & -Moses’ Digest provides in part: “If the order is made by the consent of the parties, the action shall forthwith stand revived. * * # ”

Under these statutes the -cause for the recovery of the indebtedness was properly revived again-st the administrator and amounted to a presentation of the claim to him within the time required by -law. As stated above, one purpose of this suit instituted against F. O. Stobaugh was to recover a judgment for the indebtedness evidenced by the notes he had executed to A. J. Brittain, the appellee, and we know of no good reason why a mortgagee might not take a personal judgment against the estate of a deceased mortgagor, -and forfeit his claim under the mortgage to a mortgage lien on the property described in the mortage by failing to- revive the suit upon the death of the mortgagor against the heirs within one year from the date of his death. Sections 1062, 1063, 1065 and 1066, Crawford & Moses’ Digest; Blake v. Thompson, 176 Ark. 840, 4 S. W. (2d) 514.

This court is -committed to the doctrine that the heirs of a decedent mortgagor are necessary parties in a foreclosure proceeding to subject the lands described therein to the payment of the mortgage indebtedness. This rule is based upon the fact that the title to the real estate described in a mortgage descends to the heirs of a deceased mortgagor as well as the right to redeem same from the mortgage lien. They are necessary parties because of their ownership of the equity of redemption in the lands. Buckner v. Sessions, 27 Ark. 219; Pillow v. Sentelle & Company, 39 Ark. 61; DeYampert v. Manley, 127 Ark. 153, 191 S. W. 905. The trial court committed an error in rendering a judgment of foreclosure and order of sale of the lands in the instant case to pay the judgment against Stobaugh’s estate because appellee failed to- make 'Stobaugh’s heirs parties defendants, and the court’s action was correct in sustaining the motion to set the decree of foreclosure aside. It was error, however, for the court to grant permission to appellee to make the heirs parties at the time he set the foreclosure decree aside because appellee had, at the time of the rendition of the judgment against the administrator, lost his right to a lien under the mortgage by failing* to revive the suit to foreclose said mortgage against the heirs of the deceased mortgagor within one year from the death of the mortgagor. The effect of the revivor of this suit against appellant as administrator was to present the claim as a general creditor against the estate for the indebtedness. The effect of the' failure to revive the foreclosure proceeding against the heirs of the deceased mortgagor forfeited appellee’s mortgage lien and right to foreclose same.

The decree therefore of the trial court will be in all things affirmed except that part thereof granting permission to appellee to make the heirs of Stobaugh parties at the time the foreclosure decree -was set aside. In that respect the final decree of the -court upon the motion is modified.


author: Kirby, J.,

text:
    Powell v. Griffin.
    Opinion delivered January 7, 1929.

      Pat McNalley and Jordan Sellers, for appellant.

      Walter L. Goodwin, for appellee.
   Kirby, J.,

(after stating the facts). It is conceded that the testimony, being in direct conflict between appellant and her former attorney, Go"odwin, as to the nature of the transactions resulting in the execution of the conveyance from appellant to her said attorney, Goodwin, does not meet the requirements of the rule that a deed absolute on its face can be shown to have been intended as a mortgage only by clear, unequivocal and convincing evidence but the rule of evidence is different in transactions of this kind between attorney and client, during the continuance of. such relation, which is one of trust and confidence requiring a high degree of fidelity and good faith.

In Swain v. Martin, 158 Ark. 469, 251 S. W. 26, the court said:

“The procuring of the conveyance of the Carlisle property from Martin to Swain was during the existence of the relation of attorney and client. In such cases the burden is upon the attorney of proving the fairness and equity of the transaction and the adequacy of the consideration, and, upon his failure to make such proof, a court of equity will treat the ease as one of constructive fraud. * * * The rule that an attorney who contracts with his client has the burden of proving-that no advantage has been taken of the situation of the latter, is not restricted to contracts or dealings with respect to the rights of property in controversy in the particular proceeding in which the attorney is acting for the client, but it may extend to other transactions and contracts, where the relationship may be presumed to give the attorney some advantage over the client.” See also Thweatt v. Freeman, 73 Ark. 575, 84 S. W. 720, and McMillan v. Brookfield, 160 Ark. 518, 234 S. W. 621.

As said in 2 B. C. L., pp. 967 and 968: “No presumption of innocence or improbability of wrongdoing-can be considered in the attorney’s favor. The power to enforce this rule does not depend upon the proof of actual fraud. Its application is the same whether attorneys abuse their trust, or act on generous impulses to assume risks and burdens of clients who are poor. Its enforcement does not involve an inquiry into the motives which prompt clients to sue for profits, when viewed from an ethical standpoint. 'Solicitude for them on account of their improvident contracts is not the basis of relief. The doctrine is founded on public policy. It is demanded by the welfare of -society. It arises from the necessity of protecting proper relations of trust and confidence wherever they exist. Adherence to a principle which deprives fiduciaries of undue profits lessens the temptation to violate confidential relations. ’ ’ The proof herein does not meet the requirements of this rule; the burden imposed by law upon the attorney was not discharged. He admitted, and all the proof showed, the value of the property to be around $1,000 at the time he took the conveyance from his client, agreeing to pay only $625 of indebtedness of the grantor, part of which was in payment of his fee for services rendered his client in the divorce case in the settlement of the rights of the parties therein to the property in controversy. The testimony also shows that he did not pay the $50 expressed consideration ■ in the deed to his client, the grantor, but paid it in discharge of a plumbing bill for work done upon the premises he acquired under the conveyance; and further, he testified that he sold thmproperty to the appellees herein, within about five months after it was conveyed to Mm, for an expressed consideration of $1,800, and that he actually received $1,500 in cash therefor. Also that there had been no appreciable change in value of property in the locality, and no decrease between the time he received his conveyance and the date of his deed conveying same to appellees.

Appellant stated the conveyance was a deed in form, as her attorney informed her at the time it was made, but was the same as a mortgage, and the property would be reconveyed to her upon payment of the debt. It is undisputed that she went to her grantee, having arranged for the money, the amount necessary to redeem the property, according to her understanding of the transaction, after she had been notified to quit possession by him, and he did not deny her statement about this occurrence further than to say he did not see the money at the time, and did admit that appellant, kept after him so persistently that he had agreed, after he received the conveyance from her, to allow her to buy it back, but insisted that the amount for which it could be repurchased was not stated to her.

The undisputed testimony showed that appellant refused to relinquish possession of the premises to Goodwin, the grantee in her deed, upon his demand therefor, claiming that she had the right to redeem the property upon the payment of the debt it was transferred to secure, according to her contention, and that Goodwin made the conveyance to appellee after such refusal, of appellant to quit and her offer to redeem made, and while she was still in possession.

Appellees purchased the property from Goodwin while appellant continued in possession, and, so far as the testimony shows, without inquiry made as to the nature of such possession, which they were aware of, and neither of them testified on the trial. There is no question of estoppel, so far as they are concerned, and they cannot be regarded innocent purchasers, nor to have acquired any greater right under the conveyance than was possessed by their grantor when it was made.

Appellant was entitled to redeem the land from the conveyance to Goodwin, grantor of appellees, and the court erred in not so holding and declaring said conveyance to be in effect but a mortgage for the security of the money advanced by him. The decree is reversed, and the cause will be remanded with directions to allow the redemption of the lands by the appellant upon the payment of the amount of the advancement from Goodwin, with interest, and for all further necessary procedure to effect this result, in accordance with the principles of equity and not inconsistent with this opinion. It is so ordered.


text:
    Sewer Improvement District No. 1 v. Duggans.
    Opinion delivered January 7, 1929.

      Pearson & Pearson, for appellant.
    ' W. A. Dickson and Price, Dicks on, for appellee.
   Kirby, J.,

(after stating the facts). It is insisted for reversal of the judgment that it is not supported by sufficient testimony and that the court erred in giving said instructions No. 4 and No. 7.

The burden was upon appellee to show that he was entitled to recover in the action and the amount of such recovery. He testified that the only contract made by him with the sewer board was limited to the expenditure of the $600 paid in by Jackson and Graham for its construction, and that nothing was said about stopping the work when the money was expended. That he reported that the $600 had been expended, when it was done, to Mcllroy and also to Mr. Graham, but had no further agreement with Mcllroy, nor ivas he directed by him to proceed further. He relied for recovery-mpon the fact that he continued with the construction, after the expenditure of the $600 provided therefor, at his own expense, upon the theory that the members of the commission saw him doing the work without any objection thereto, allowing him to complete the sewer, which was accepted and used by the city.

According to Mellroy, the officer and agent of the district, with whom the contract was claimed to have been made, no authority whatever was given for the expenditure of any more money than the $600 that had been provided for the purpose by individuals living in the territory to be served by the construction of the sewer. He denied any-knowledge whatever of any expenditures by appellee of his own funds in the completion of the sewer after the expenditure of the said $600 provided therefor until more than a year after its completion, and explained his, asking appellee about the progress of the work in the belief only that appellee was proceeding with the construction of the sewer under the authorization only for the expenditure of the said amount contributed therefor, the estimated cost of construction, $600.

There was therefore no substantial testimony warranting the jury’s finding, and the contention that the judgment is not supported by sufficient evidence mus't be sustained. Since the judgment must be reversed, and there may be a new trial, it is necessary also to pass upon the other assignments of error.

Instruction No. 4, objected to, was erroneous in telling the jury that, if they found that Mellroy was employed to oversee the building of the -sewer, and performed the services, and if they found, after the funds provided had been exhausted, that the agent and officer of the district, Mellroy, further authorized plaintiff to go ahead and finish the sewer, and that he -had completed it in good faith and paid for its construction out of his own money, the verdict should be for the plaintiff against the district “for the amount you find plaintiff has expended.”

There was no testimony showing any contract or agreement on the part of the district by any of its, officers to repay for the construction of the sewer the amount expended by appellee in having- it done, and if the facts proved had warranted a continuation and completion of the work by appellee after the expenditure of the fund provided therefor, he was not entitled to recover more for such work than the reasonable value thereof as upon quantum meruit ¿no agreement having been made relative to the amount to be paid therefor.

Mcllroy testified that the amount charged was excessive, and the city engineer, who had investigated the construction after the claim for compensation, testified that 75 cents per foot was the outside reasonable price for such work of construction.

Under the instruction given, this testimony was disregarded and the jury directed to find against the district for the amount of money expended in the completion ■of the sewer, without regard to the reasonable value of the work done, which was a question for the jury.

The court erred also in giving said instruction No. 7, allowing- the jury, if they found from a preponderance of the evidence that members of -the board of the sewer district had personal knowledge that appellee was constructing the sewer and “permitted him to complete same without notifying him to cease work, and you further find from a preponderance of the evidence that plaintiff expended his own money in completing same, and that the money of his own was actually spent in good faith by him, and it was necessary to spend same for the proper completion of said improvement, then defendant, commissioners, are estopped from' claiming that the district should not pay for said improvement, and you will find for plaintiff against said district.”

This instruction was erroneous, as contended, since it left out entirely of the jury’s consideration the question of whether the commissioners had knowledge that the sum contributed for construction of the sewer had been exhausted and any knowledge on the part of the commissioners that the appellee was proceeding to the completion of the construction' of the sewer after the expenditure of the money provided therefor, in which event only could the district have been estopped, if at all.

It is true that in instruction No. 8 the court told the jury that the district would not be liable if the money was expended by appellee without authority of the beard of commissioners, unless “you find that said commissioners, or some of them, bad knowledge or information that the plaintiff was making such expenditures in excess of the amount of money borrowed from Ii. E. Jackson and W. E. Graham for that purpose.” This statement, however, was not a qualification of instruction No. 7, which allowed the jury to find against the district if any of the members of the board had information that he was constructing' the sewer and permitted Mm to complete same without notifying him to cease work. He was directed by the board to construct the sewer, for which they expected to pay out of the money contributed for the pur-' pose, and certainly their knowledge that he was proceeding with the work, and failure to notify him to cease operation if such amount had been expended, could not estop the district from denying liability for payment for work done after the amount contributed had been exhausted, nor without it being shown, which was not done, that the members knew of the continuation of the work to completion by the appellee at his own expense after exhaustion of the fund provided for its construction.

In cases of conflicting instructions the jury is left without proper direction, and the error in giving said instruction No. 7, which authorized the jury to find against the district, was not relieved against by the provision in correct instruction No. 8.

On the cross-appeal it will suffice to say that the undisputed testimony shows that appellee had no contract with the district through its Commissioner Mcllroy, warranting his expenditure of his own funds in the completion of the construction of the sewer with the expectation of its repayment by the district, nor was there any testimony showing any conduct on the part of Mcllroy, as commissioner, that warranted any inference or finding that he had induced the appellee to expend his money in the 'completion of a contract which he had attempted without authority to make for the sewer district. - The court properly directed the verdict as to him.

For the errors designated the judgment will be reversed, and the cause remanded for a new trial. It is so ordered.


author: Mehaffy, J.

text:
    Ford Hardwood Lumber Company v. Bryant.
    Opinion delivered January 7, 1929.

      John E. Swepston, W. G. Riddick and Chas. T. Coleman, for appellant.

      Berry, Berry & Berry, for appellee.
   Mehaffy, J.

The appellant brought suit in the Crittenden Circuit Court in replevin against the appellee, alleging that it was the owner and entitled to the immediate possession of. certain horses, mules and camping and logging outfit, located near Louise, Arkansas, of the value of $2,500; and asked for judgment for said property and damages for its detention. The affidavit alleged the value of the property to be $2,500, and alleged that plaintiff was the owner and entitled to possession by reason of a chattel mortgage recorded in Crittenden County, Arkansas, on the 26th day of November, 1924, in which the appellee had conveyed the property to plaintiff to secure a note for $5,000.

The appellant executed bond, and the writ of replevin was issued, and property delivered to the appellant.

Appellee answered, denying* the material allegations in appellant’s complaint, and alleged that appellant failed to furnish him an itemized statement of his account, as required by law, and that said property was taken and sold in Arkansas instead of Tennessee, as provided by the mortgage. He also alleged that appellant took possession of certain property not included in the mortgage, and alleged that he was not indebted to the appellant in any sum, but that the appellant was indebted to him in the sum of $26,614.25.

The case was transferred to the chancery court, and the appellee there alleged, among other things, that the transactions between the parties were executed over a period beginning February, 1924, and ending in November, 1926; that, during the operations in Tennessee, the appellee delivered to appellant logs of the value of $19,692.99, and that on the 24th of August, 1924, appellee executed the note sued on and the mortgage to secure the payment of said note, but alleged that, before the termination of operations in Tennessee, he had paid all of his indebtedness, including the $5,000 note.

After the case had been transferred to the chancery court and pleadings had been filed therein, the matter was referred to a master by the chancery court, and testimony was taken, and thereafter the master filed his report, finding in favor of appellee in the sum of $5,880 damages, plus $2,810, value of the property. The damages were for wrongful detention of the property after it was taken by appellant in replevin suit.

Testimony was introduced by both ¡sides covering the transactions between the parties, but the master only reported on that part represented by the note sued on. The master found that no account was delivered to the appellee by appellant before the institution of the suit; that the trust deed was given by defendant to secure the sum of $5,000 of indebtedness which appellee owed appellant on August 26, 1926, and that the indebtedness at that time amounted to $9,928.80; that the $5,000 note was executed at the same time, and that the account between the parties was continued as an open account, no credit being given for the note; that the trust deed did not secure any future indebtedness. The master also found that the indebtedness secured by the trust deed was paid before the institution of the ¡suit, and that appellant was not entitled to any of the property •described in the trust deed; that appellee was entitled to judgment for the return of the property, or its value, and for damages for its detention. The master further stated that it is difficult to determine the value of the property, but he found it to be $2,660, giving a value of $120 each for the mules, $125 each for the wagons and chains. The master fixed the value of miscellaneous items not covered by the mortgage, but taken by the plaintiff, at $150-. He reported, however, that there was no testimony taken on this item, but he estimated it. He also found that the trust deed was not given to secure any particular indebtedness, but merely to secure $5,000 indebtedness of appellee.

Appellant filed exceptions to the master’s report, but the court entered a decree approving the master’s report and holding that the right to an ultimate accounting between the parties was not involved in the action, and the right of appellant to a set-off against the amount adjudged was not decided, and dismissed the plea of set-off without prejudice.

Appellee suggests that the questions to be decided are:

(1) . Is the appellant entitled to the possession of the property?

(2) . If not, what is the amount of damages for the wrongful detention?

(3) . Under the pleadings and proof developed up to the time the report :of the master was approved by the chancellor, can the appellant have a set-off against the appellee for the account?

The appellee contends that the appellant was not entitled to the possession of the property, first, because it failed to comply with the statute requiring the making and delivering to the mortgagor a verified statement of his account, etc. The statute reads as follows:

“Before any mortgagor, trustee or other person shall proceed to foreclose any mortgage, deed of trust, or to replevy under such mortgage, deed of trust or other instrument, any personal property, such mortgagee, trustee or other person shall make and deliver to the mortgagor a verified statement of his account, showing each item, debit and credit, and the 'balance due.”

' This court has held that the purpose of the statute is to give the mortgagor an opportunity, before suit, to pay the debt and to settle any controversy of any items that might he in dispute without g'oing to law. The Legislature did not have in view the matter merely of saving the mortgagor the costs that might he incident tó a lawsuit. Its purpose was not only to prevent that, but also any amioyance and inconvenience he might suffer by having property taken from him by process of law before giving him an opportunity to adjust any differences with the mortgagee, and to settle his account, if possible, without a lawsuit. The burden was therefore placed on the mortgagee, as a condition precedent to the maintenance of a suit to foreclose or for possession, that he comply with the statute. He still has the right to his debt and to any other remedy provided by law for the enforcement of its payment. See Lawhon v. Crow, 92 Ark. 313, 122 S. W. 999.

This suit, as originally brought by appellant, was for the purpose of getting possession of' the property described in the mortgage, in order that it might be sold to pay the note secured by the mortgage. The appellant did not sue on any account, did not seek to recover any other indebtedness, but sought simply to' replevin the property for the purpose of selling it to pay the $5,000 note. This court has said:

“Does this statute require a sworn statement of the amount of a note secured by the mortgage, as in this case, where no payments have been-made thereon? We think not. Construing the statute literally, it applies only to an account secured by the mortgage; and to hold that it applies to a note, without credits thereon, would be to extend it beyond the spirit and reason as well as beyond the letter of the law. Manifestly, the Legislature intended only to require a mortgagee to furnish a verified statement of an account under the mortgage, the amount of which is or might be in dispute, so as to give the mortgagor an opportunity, before suit, to pay the debt; and not to the single item represented by a note without credits, .which is fully identified in the mortgage, and about which there can be no dispute. The court therefore erred in holding that the furnishing of the verified statement is a prerequisite to the bringing of the suit.” Perry County Bank v. Rankin, 73 Ark. 589, 84 S. W. 725, 86 S. W. 279.

The statute provides for making and delivering to the mortgagor a verified statement of his account, and, as said in the case last referred to, this is not a suit on an account. It is a suit on a note on which there are no 'Credits. The furnishing the itemized statement would simply have been a showing of the $5,000 note, and this question is ruled by the decision in Perry County Bank v. Rankin, and there was no necessity to file a verified statement of the account between the parties, because the account was not sued on.

This court again said: “The facts bring the case squarely within the rule announced in Perry County Bank v. Rankin, 73 Ark. 589, 84 S. W. 725, 86 S. W. 279, and no verified statement of account under the statute was required. It appears from the record that the chattel mortgage was .given as additional security for the mortgage indebtedness. The mortgagee had a right to first foreclose his mortgage on the land, and, when it did not sell for enough to satisfy the mortgage indebtedness, to foreclose his mortgage on the chattels.” Van Pelt v. Russell, Admr., 134 Ark. 236, 203 S. W. 267.

In the above case there was a foreclosure and sale of the land, and that left a balance of the sum between the amount of the indebtedness and the amount the land sold for, and it may be said here, as there, that no useful purpose could have been served by the rendition of an account.

After the replevin suit had been begun, the appellee filed answer and cross-complaint, and brought .into the case the entire accounts between the parties, and asked for an accounting, alleging that the note had been paid, and that the appellant was indebted to the appellee in the sum of several thousand dollars. And it was the contention of appellant that it was entitled tó a full accounting between the parties in that suit after it had ■been transferred to chancery and appellee had asked for an accounting.

■Since there must be an accounting, according to appellee's contention, before it could be determined whether the note had been paid, it was the duty of the court to settle the entire matter and all disputes between the parties in the one suit. To do otherwise would require a. multiplicity, or at least would require an additional suit, and the taking of the same testimony in the second suit that was taken in this; and, for that reason, a full and complete settlement should have been made, and the decree should have adjusted the rights and equities of the parties and determined' all matters involved in the litigation growing out of or connected with the subject-matter thereof. It should have finally disposed of the controversy. 10 R. C. L. 370; Short v. Thompson, 170 Ark. 937, 282 S. W. 14; McGaughey v. Brown, 46 Ark. 25; Horstman v. LaFargue, 140 Ark. 558, 215 S. W. 729; Tallman v. McGahhey, 164 Ark. 205, 261 8. W. 306; Ferguson v. Rogers, 129 Ark. 202, 195 S. W. 22; and Estes v. Lucky, 133 Ark. 98, 201 8. W. 815.

The court erred in not determining the matters involved in the litigation between the parties or growing out of or connected with the suit; it should have finally disposed of the entire matter.

The doctrine as to the application of payments is stated by this court as follows:

“The general rule is that, where'neither debtor nor creditor makes an appropriation at the time' of payment, the law applies it to the liabilities of earliest date. The reason is because that course is presumed to conform to the intention of the creditor. Kline v. Ragland, 47 Ark. 119, 14 S. W. 474. If there is any particular reason for a different appropriation, the rule does not apply. Thus, where cotton covered by a mortgage is delivered to the mortgagee, with authority to sell and retain the proceeds, the law appropriates the payment to the discharge of the mortgage debt, because the parties have impliedly agreed in advance how the proceeds shall be disposed of. * * * Whenever the relation of the parties or the nature of the account or transaction between them shows that an appropriation of payments to the earliest items of the account would do injustice between them or fail to conform to their understanding or agreement, another application is made.” Faisst v. Waldo, 57 Ark. 270, 21 S. W. 436.

If it had been intended that the payments made right along after the execution of this mortgage went to the payment of the mortgage debt, it being the oldest debt, the giving of the mortgage would have been perfectly useless. The parties would be in the attitude of having the mortgage given to secure a debt which the mortgagor was paying off at the time and leaving the parties without any security, when the evident intention of the parties was to give security for at least $5,000. But the testimony in this case shows that the intention of the parties was that the payments made should not be applied on the note. The appellee himself testified that he understood that the- note was not to be paid until a year. Therefore, according to his understanding, at the time he made the payments which he claims should be applied to- the note, the note was not due, and the general rule in the application of payments is that they shall be applied to debts due rather than to debts not due.

It clearly appears from the testimony in this case that it was the understanding of the parties that this note was not to be paid at once, and therefore the conclusion is irresistible that the payments made were to be applied on the account and not on the note. At least, not on the note until th<3 time when, according to the agreement of the parties, it was to be paid. This time, the appellee saiys, he understood to be one year. If he thought the note was not to be paid within a year, he could not have thought that these payments made before the expiration of a year were to be applied on the note.

“The account exhibited by appellee^, pursuant to the request of appellants, showed a running account with credits on' it, and appellants insist that those credits should be applied to the earlier items according to the ordinary rule of application of payments on a running account, and that, when so applied, they extinguish a portion of the claim which appellees now assert. There is an explanation, however, given in the testimony of the witness to the effect that all of the contract with Shenk Construction Company had not been completed by appellees in furnishing materials when the job was abandoned by contractors, and that the items of credit were entered on the books at the time the payments were made, all of which tended to show that the credits were not intended to be applied on the earlier items as shown on the account. The rule as to application of payments on an account to the earlier items is not an inflexible one, to be enforced when contrary to the intention of the parties. ’ ’ Terry v. Klein, 133 Ark. 366, 201 S. W. 801.

Not only did both parties testify that the note was not to be paid at once, but the testimony also shows that statements of the account were sent to appellee from time to time, and this statement necessarily showed debits and credits, and appellee was bound to know that the payments were not being applied on his note.

Again, while appellee claims that he had paid the entire note before he moved to Arkansas, he also is positive that he secured the consent of the mortgagee before he moved the property. This itself -is inconsistent with the contention that the payments were to be applied, or were applied, to the payment of the note rather than the open account, because, if his contention that these payments were to be applied to the note and that it had been paid, then, when he moved the property to Arkansas, there would have been no reason to get the consent of the mortgagee, because, according to his contention, the mortgage had been paid.

For the errors indicated the decree will be reversed, and remanded with directions to settle the entire account between the parties, and enter a decree not inconsistent with this opinion.


text:
    Driesbach v. Beckham.
    Opinion delivered January 7, 1929.

      John, P. Streepey, for appellant.

      Walter L. Goodwin, for appellee.
   Mehaffy, J.

The appellee brought suit against the appellant in the Union Chancery Court, alleging that he was the owner of the southeast quarter of the southwest quarter and the southwest quarter of section 22, township 17 south, range 14'west, in Union County, Arkansas, and lives on said land as his homestead; that said land has been leased for oil and gas, and there has been more or less prospecting for oil and gas in that neighborhood; that, in the late spring of 1922, the defendant, J. F. Driesbach, well knowing that the plaintiff was the owner of the above described land, and well knowing that plaintiff was unaccustomed to the methods of trade and title to land in so far as oil rights are concerned, approached this plaintiff, and told him that there was an oil lease on his land, which lease was an incumbrance on the title to said land, and that he would, lose his land, or a great interest therein, unless said lease was removed as a cloud on his title; that the defendant persuaded this plaintiff that said lease-was a serious obstacle to the title to his land, and that he, the said defendant, would remove said lease from the land if the plaintiff would deed him a one-fifth interest in the .oil and gas and other minerals under said land; and that this plaintiff, being inexperienced as to the titles of said land, and believing that there was something seriously the matter with the title to his land, executed a conveyance to the defendant, conveying one-fifth interest in and to all the oil, gas and other minerals in and under the above described land, which said instrument is recorded in book 131, at page 251 of the deed records of Union County, Arkansas, a copy of which instrument is attached to said complaint.

Plaintiff also alleged that said instrument was fraudulently procured from him by the defendant, and that the defendant did nothing towards straightening out the title to his land, and that he paid nothing in consideration for the conveyance of said interest. Plaintiff stated that the conveyance to defendant was a cloud upon his title, and he had been greatly damaged by reason of said instrument in that he had not been able to have his land prospected for oil and gas.

There was a prayer for a cancellation of the instrument made to defendant and for the lands to be vested in the plaintiff, etc. There was attached to the complaint a copy of the deed made to defendant, and, among other thing's, the deed stated that the parties were desirous of having the oil, gas and mineral lease canceled in order that they might be able to execute a valid lease on the property described; and to plaintiff’s complaint the defendant filed the following demurrer:

First, that the complaint on its face does not state a cause of action; second, the complaint shows on its face that any right of action that may have existed is barred by the statute of limitations; third, that plaintiff is estopped from asserting any cause of action he may have had because of his being guilty of laches. The court overruled the demurrer, and the defendant appealed. Defendant had filed his answer, but withdrew the answer and stood on his demurrer.

It is first contended that the demurrer should be sustained because it contended that the complaint does not state any facts constituting a cause of action. It does, however, state the fact that the defendant knew that the plaintiff was unaccustomed to the methods of trade and title to land, and that defendant told him there was an oil lease on his land, which lease defendant alleged to be an incumbrance on the title, and that plaintiff would lose his land, or a great interest therein, unless this lease was removed. He further alleged that defendant persuaded plaintiff that the lease was a serious obstacle to plaintiff’s title, and that plaintiff, being inexperienced, and believing that there was something serious the matter with the title to-his land, executed the conveyance sought to be canceled. He alleges that the instrument was fraudulently procured, and that defendant never at any time did anything towards straightening out the title; that he paid nothing in consideration for the conveyance, and that the conveyance is'a cloud on the title of plaintiff.

It is true that a complaint must state something more than mere conclusions, but the fraud charged by plaintiff;, we think, is a sufficient statement of the facts constituting the fraud to justify the court in overruling the demurrer.

This court has frequently held that, in testing the sufficiency of a pleading by general demurrer, every reasonable intendment should be indulged to support it, and that, where facts are defectively stated, the remedy is by motion to make more definite and certain, and not by demurrer. It is also true that, while the 'Code forbids the allegation of mere conclusions of law, its spirit and object require that the facts constituting the cause of action shall be stated according to their legal effect. The rule requires the statement of fact, and not the evidence of fact. Ellis v. First National Bank, 163 Ark. 471, 260 S. W. 714; Cox v. Smith, 93 Ark. 371, 125 S. W. 437, 137 Am. St. Rep. 89; Bruce v. Benedict, 31 Ark. 301; Turner v. Tapscott, 30 Ark. 312; Ferrell v. Elkins, 159 Ark. 31, 251 S. W. 380.

“The allegations of the bill, which are confessed by the demurrer, control in this case. Contrary to the common-law rule, under our Code every reasonable intendment and presumption is to be made in favor of a pleading, and a complaint will not be set aside on demurrer unless it be so fatally defective that, taking all the facts to be admitted, the court can say they furnish no cause of action whatever. A demurrer will not lie to a complaint if it states sufficiently, but imperfectly, a cause of action; but the remedy in such case is by motion to make the complaint more definite and certain.” Williams v. Memphis, Dallas & Gulf Railroad Co., 133 Ark. 188, 202 S. W. 228. See also Shelton v. Landers, 167 Ark. 638, 270 S. W. 522; Lane v. Alexander, 168 Ark. 700, 271 S. W. 710; Harnwell v. Ark. Rice Growers’ Cooperative Assn., 169 Ark. 622, 276 S. W. 371; and Fitch v. Walls, 169 Ark. 745, 276 S. W. 578.

Tested by these rules, the complaint was sufficient on demurrer.

It is next contended by appellant that the demurrer should have been sustained because it is alleged that the complaint shows on its face that it was barred by the statute of limitations. We do not agree with appellant in this contention. The defense of the statute of limitations should be raised by answer and not by demurrer, where the facts stated in the complaint do not show that the action is barred.

This complaint alleges, in effect, that the plaintiff was ignorant; did not know about transfers and land titles and things of this sort, and that he was made to believe by the defendant that there was a serious defect in his title. But, of course, it cannot be assumed that the plaintiff knew, at the time that he alleges the fraud was committed, that it was a fraud, and there was no indication as to when he discovered it. The complaint does not therefore show on its face that the cause of action was barred by the statute of limitations.

This court has many times held that, in an action at law, the statute of limitations cannot be taken advantage of by demurrer unless the complaint shows that the action is barred. And it has also been said that it must not only show on its face that the action is barred, but it must show the non-existence of any ground of avoidance. See Banders v. Flenmken, 172 Ark. 454, 289 S. W. 485; Brown v. Ark. Central Power Co., 174 Ark. 177, 294 S. W. 709; Central Clay Drainage Dist. v. Hunter, 174 Ark. 293, 295 S. W. 19; Miles v. Scales, 174 Ark. 412, 295 S. W. 375.

There was no error in overruling the demurrer, and the decree is affirmed.


text:
    Joiner v. Sorrels.
    Opinion delivered January 7, 1929.

      Henry Stevens, for appellant.

      McKay’ & Smith, for appellee.
   Mehaffy, J.

The appellees brought suit, alleging ihat they were the owners of the northeast quarter of seotion 28, township 18 south, range 22 west, in Columbia County, Arkansas, and that they were informed that the appellant, Joe Joiner, claimed some interest in said land, and asked that the deeds by which the appellant claimed title be canceled as a cloud on appellee’s title, and that appellee’s title be quieted and confirmed against the appellants.

Appellees deraigned title to said lands as follows: That the said lands were patented to the State of Arkansas as swamp land, and conveyed by the State of Arkansas to certain parties, and that afterwards said land was forfeited for the nonpayment of taxes, and that the State thereby acquired title, and that in March, 1884, the State issued to George Crouch a donation certificate, and afterwards, on August 29, 1885, issued to the said George Crouch a donation deed.

Appellees alleged that George Couch went into possession of said land, and improved the same, and commenced paying taxes thereon; that he continued in the exclusive, open and adverse possession of said lands, paying the taxes thereon each year, until his death in 1899. The said George Couch died intestate, the owner and in possession of said lands. And the administrator of Crouch’s estate, under order of the probate court, sold said lands to Emerson and Davies, and, after the sale had been confirmed by the court, the administrator made a deed to Emerson and Davies. Emerson thereafter died, leaving his interest in said property to Sarai Emerson, Alice Emerson Sorrels and Donan Emerson Thomas, and that the appellees, through these conveyances, became the owners of the property described.

The appellant filed answer, denying that plaintiffs were the owners of the property, and denying the possession of Crouch — in fact, denying all the material allegations of plaintiff’s complaint, and alleged that he was the owner in fee simple of said land by virtue of deeds from A. J. Marsh, to whom it had been conveyed by T. E. Wilson, and that Wilson claimed under a donation deed from the State. The parties entered into a stipulation, agreeing to the following facts:

“Agreed Statement oe Facts.

“The plaintiffs and the defendant in the above styled cause, by their respective attorneys, hereby agree that the following facts may be considered as evidence upon the trial of the above styled cause:

“(1) The lands, in controversy were patented to the State of Arkansas by the United States as swamp land. (2) In 1857 the State of Arkansas conveyed the southwest quarter of northeast quarter of section 28, township 18 south, range 22 west, to William H. Key. (3) In 1857 the northwest quarter of section 28, township 18 south, range 22 west, was entered from the State of Arkansas by Perry G. Key, but no patent was ever issued thereon. (4) In - I860 the State of Arkansas patented the east half of northeast quarter of section 28, township 18 south, range 22 west, to N. T. McAlister. (5) All the lands in controversy forfeited for nonpayment of taxes, for the year 1868, and said forfeiture was duly certified to the State, as required by law. (6) That on March 8,1884, the State of Arkansas issued to George Crouch a donation certificate covering all the above described lands. (7) That on the 29th. day of August, 1885, Paul M. Cobbs, as Commissioner of State Lands, executed and delivered to George Crouch a deed covering-lands in controversy, which deed was recorded on the 23d day of September, 1885, and appears, of record in record book P, at pages 15 and 16 of the deed records of Columbia County, Arkansas, a copy of which is hereto attached, marked Exhibit A, and made a part hereof. (8) That George W. Crouch died intestate, and W. W. Souter was duly appointed administrator of his estate by the probate court of Columbia County, Arkansas. (9) The probate court of Columbia County, Arkansas, entered an order authorizing- W. W. Souter, as such administrator of the estate of George W. Crouch, deceased, to sell the lands in controversy belonging to the estate of George W. Crouch, a copy of which order is hereto attached, marked Exhibit B, and made a part hereof. (10) That W. W. Souter, as such administrator, reported the sale of said lands to the probate court of Columbia County, Arkansas, and said court entered an order purporting to confirm the same, which was entered of record, which is hereto attached, marked Exhibit C and made a part hereof. (11) That W. W. Souter, as such administrator of the estate of George W. Crouch, deceased, executed his^deed to R. L. Emerson and A. W. Davies, purchasers of said lands, which deed is recorded in record book W, at pages 263-264 of the records of Columbia County, Arkansas, a copy of which is hereto attached, marked Exhibit D, and made a part hereof. (12) That R. L. Emerson died testate, and that by the terms of his will Alice Emerson Sorrels and Donan Emerson Thomas, by virtue of said will, became the owners of whatever interest R. L. Emerson might have had in the above described lands; that,both Alice Emerson Sorrels and Donan Emerson Thomas are dead; that Alice Emerson Sorrels died testate, and that W. W. Sorrels is the owner of whatever interest she might have held in said lands at the time of her death; that Donan Emerson Thomas died intestate and solvent, and that Sarai Rosalie Thomas, Riley Emerson Thomas and Mabel Louise Thomas, minors, her sole and only children, are now the owners of whatever interest Donan Emerson Thomas may have owned in said lands at the time of her death, and that S. R. Thomas is the duly qualified and acting guardian of said minors. (13) That taxes have 'been paid on said lands by the person shown in statement hereto attached, marked Exhibit E, and made a part hereof. (14) It is agreed that the only suit under the overdue tax act of 1881 in which the lands in controversy were included in the warning order entered of record by the clerk, or in any decree of foreclosure, is a certain case No. 241, which is styled ‘The State of Arkansas, on relation of W. H. Arnold, v. the northwest quarter of the southwest quarter of section 4, township 16 south, range 18 west, and other lands,’ upon which taxes are due and unpaid. (15) That chancery records, volumes B and C of the chancery records of Columbia County, Arkansas, contain all orders made and entered of record by the circuit-court in chancery sitting in Columbia County, Arkansas, from 1860 to November 4, 1894, and that the only orders in the above styled cause appearing of record are as follows:

“ ‘No. 1. Page 490, volume B, dated June 2, 1882, attached hereto and marked Exhibit 1. No. 2. Page 571, volume B, dated June 13, 1883, attached hereto, and marked Exhibit 2. No. 3. Page 22, volume C, dated September 11,1883, attached hereto, and marked Exhibit 3. No. 4. Page 62, volume C, dated March 6, 1884, attached hereto, and marked Exhibit 4. No. 5. Page 64, volume C, dated March 6, 1884, attached hereto, and marked Exhibit 5. ’

“ (15-A) That there is hereto attached copy of chancery court docket D, page 121, marked Exhibit E-l. (16) That there is hereto attached, marked Exhibit F, copy of an instrument appearing of record in book labeled ‘Lands Sold to State and Individuals, 1859-83,’ pages 225-246, county clerk’s office. (17) That there is hereto attached certificates of Herbert E. Wilson, Commissioner of State Lands, dated March 17, 1926, marked Exhibit Q-, and that this certificate covers the only instrument on file or of record in the State Land Office purporting to show any disposition of the lands in controversy in the overdue tax suit. (17-A). That there is hereto attached statement issued by the State Land Office, dated June 17, 1924, marked Exhibit G--A. (18) That on the 15th day of November, 1919, William B. Owens, Commissioner of State Lands, executed and delivered to T. E. Wilson a deed covering the lands in controversy, which deed was recorded on the 6th day of December, 1919, and appears of record in record book 47, at pages 105-106 of the deed records of Columbia County, Arkansas, a copy of which is hereto attached, marked Exhibit H, and made a part hereof. (19) That on the..................day of......................., ............, T. E. Wilson executed a quitclaim deed to A. J. Marsh, which deed was recorded on the..................day of ............................,............, and appears of record in record book ..................at page..................of the deed records of Columbia County, Arkansas, a copy 'of which is hereto attached, and marked Exhibit I, and made a part hereof. (20) That on the 29th day of April, 1922, A. J. Marsh executed a quitclaim deed to Joe Joiner, covering the east half of northeast quarter of section 28, township 18 south, range 22 west, which deed was recorded on the 1st day of January, 1923, and appears of record in record book 56, at page 236 of the deed records of Columbia County, Arkansas, a copy of which is hereto attached, marked Exhibit J, and made a part hereof. (21) That on the 28th day of December, 1922, A. J. Marsh executed a deed to Joe Joiner, covering the Avest half of northeast quarter of section 28, township 18 south, range 22 west, which deed was recorded on the 1st day of January, 1923, and appears of record in record book 56, at page 235 of the deed records of Columbia County, Arkansas, a copy of which is hereto attached, marked Exhibit K, and made a part hereof.

“It is especially agreed and understood that, notwithstanding it is agreed that the matters set forth herein may be considered as evidence in the trial of this cause, exceptions for incompetency, irrelevancy and immateriality are specifically, separately and severally saved as to each of the statements and as to each of the exhibits herein, and that said exceptions shall be preserved as a part of this agreement.

“This the..................day of June, 1927.”

At page 32 of the transcript is a State donation deed from Paul M. Cobbs to George Crouch, covering the land in controversy. Pages 34-37 inclusive cover the proceedings in the Columbia Probate Court, wherein the land was sold to R. L. Emerson as the property of George Crouch, deceased.

Page 38, Exhibit 6, shows the payment of taxes by George W.* Crouch for the years 1886-1897 inclusive, and in 1898 by W. W. Souter as administrator; in 1899 by B. L. Emerson; 1900-1919 by B. L. Emerson, A, W. Davies, and estate of B. O. Emerson; 1920-21 by W. W. Sorrels, A. W. Davies and the estate of Donan Emerson Thomas; 1922 by Joe Joiner; 1923 and 1924 by Sorrels and others.

The material facts in this case are identical with the facts in the case of Wilson v. Chisholm, 157 Ark. 418, 248 S. W. 273, and it would serve no useful purpose to set them out more fully here, and we will simply call attention to what the appellant claims is the difference between the facts in this case and the case of Wilson v. Chisholm.

Appellant contends that this differs from the Wilson-Chisholm case because Crouch had possession only 14 years, and died, and that there is therefore no continuous possession. The undisputed proof, however, is that Crouch took possession of the property under a donation deed from the iState, made improvements, and actually occupied the land until the time of his death, which was about 14 years from the time he took possession, and that he paid the taxes all this time. After his death, in 1899, the property was sold under an order- of the probate court by the administrator of Crouch’s estate, and was purchased by the parties alleged in appellee’s complaint, and that appellees became the owners by proper conveyances from the persons-who purchased at the administrator’s sale.

It is admitted by appellant that the taxes were paid by Crouch and those claiming under him, from 1886 to 1924 inclusive, except taxes for the year 1922, which were paid by appellant. Practically the same questions of law were raised in the case of Wilson v. Chisholm as are raised in this case. In fact, the appellant contends that the material difference is that Crouch himself did not pay the taxes for the 38 years, but that he only paid for 14 years, and that his possession did not continue. But, if the presumption of redemption be indulged, as it was in the case of Wilson v. Chisholm, then this distinction, if there be any distinction, is immaterial. The appellant does not claim to have ever had possession of the property. There is no claim of possession by anybody except Crouch and those claiming under him; no taxes were paid by anybody during the entire 38 years, except for one year, and this case is so nearly identical -with the case of Wilson v. Chisholm that we think it is clearly within the rule announced in that case.

In that case the authorities were reviewed, and it is wholly unnecessary to review them again. We simply call attention to the authorities and reasoning of that case, and hold that this case is g-overned by that. The court there said, among other things:

“The only question presented by this appeal is whether the presumption will be indulged that the land was redeemed from the overdue tax foreclosure for the taxes of 1869 and 1870 by James M. Owen or his successors in title. Appellants take the position that James M. Oiwen and his successors in title had no right to redeem the land, because they acquired no interest therein under the donation certificate and the donation deed made pursuant thereto.”

• The appellant here makes exactly the same claim as was made in the above case. The court further said:

“The case of St. Louis Ref. & Wooden Gutter Co. v. Langley, 66 Ark. 48, 51 S. W. 68, is cited in support of their contention that they acquired no interest whatever in said land under said certificate and deed. That case does hold that the State, by purchase at such sale, acquired no title which the State Land Commissioner had power to convey until after the redemption period expired, and that, during the pendency of the overdue tax suit, the Commissioner of State Lands had no authority to issue a donation certificate and deed based upon a foreclosure of land for the nonpayment of taxes; and also that after-acquired titles had no application to conveyances made by the State. It is true that James M. Owen and his successors in title acquired no interest in the land as against the true owner under the donation certificate, but it served the purpose of showing that he went into possession of the land in g-ood faith, and not as a squatter or mere trespasser. His possession and claim of title in good faith constituted such an interest in the land as gave him a right to redeem the land from the sale in the overdue tax foreclosure against any one other than the true owner. ’ ’

The decision of the chancellor in this case is not only in accord with the principles announced in the case of Wilson v. Chisholm, but it is in conformity with the principles of justice and right. When one has purchased property from the State, taken possession, and made valuable improvements in good faith, occupied such property for many years, and paid the taxes thereon, it would be manifestly unjust to deprive him of the property, if there is any ground for indulging the presumption that there has been a redemption.

■ The decision of the chancellor is not only in accord, as we have said, with the principles announced in the case of Wilson v. Chisholm, but in conformitj^ with th^ principles of equity, and is therefore affirmed.