text:
    Metropolitan Life Insurance Company v. Stewart.
    4-3345
    Opinion delivered February 19, 1934.

      Moore, Gray, Burrow & Chowning, for appellant.

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

Appellee instituted suit against appellant in the circuit court of Phillips County to recover double indemnity under a life insurance policy issued by appellant to her husband on December 28, 1925, in which she (appellee) was the sole beneficiary. The contract provided for double indemnity in case of the accidental death of the insured during the life of the policy.

On August 9,1931, the insured was shot and killed in Kilgore, Texas, without fault on his part.

Appellant filed an answer, denying liability under the double indemnity clause of the policy, on the ground that the insured failed to pay the monthly premiums of $4.48 accruing on and after January 2i8, 1931, until his death. It was alleged in the answer that the insured defaulted in the payment of the premiums and failed to designate either one of three nonforfeiture options in paragraph 9 of the policy, thereby automatically converting the policy, carrying a double indemnity of $4,000, into a nonparticipating, paid-up, endowment insurance policy of $293, for which amount appellant offered to confess judgment. Paragraph 9 provided for three options on the part of the insured after default in the payment of any monthly premium, which he might exercise in three months after default, provided he had theretofore paid all the premiums for two full years. The options were to take the cash surrender value, or a paid-up, non-participating, endowment insurance policy, or a non-participating, paid-up, term insurance policy. The paragraph containing the options was set out in full in the answer. The following clause in the policy was also set out in the answer:

“In the event of default in the payment of any premium, after premiums for two full years shall have been paid on this policy, if the owner or the assignee of record, if any, shall not avail himself of one of the foregoing options, in the manner hereinbefore provided, within three months after the due date of the premium in default, this policy will be continued by the company, for a reduced amount of non-participating paid-up endowment insurance, as provided under option (b) above.”

The cause was submitted upon the pleadings and testimony adduced, resulting in a verdict and consequent judgment for $3,000, from which is this appeal. “When the evidence was concluded, appellant requested the court to instruct a verdict for it on the theory that, as the undisputed evidence showed that the insured made default in the payment of premiums for more than three months before he was 'killed, and that, under the terms of the option clause contained therein, the policy was automatically converted into a non-participating, paid-up, endowment insurance policy, amounting to $293 instead of $4,000, provided for in the indemnity policy. This request for a peremptory instruction overlooks or omits to take into account the provisions of the policy relative to annual distributions of divisible surplus. The policy contains the following paragraph:

“This policy is a participating contract while in force as a premium-paying policy, and the company will annually, as of the 31st day of December of each year, ascertain and apportion any divisible surplus accruing thereon. Such divisible surplus will be payable on the next anniversary of this policy following the next succeeding thirteenth day of April, etc.”

The undisputed testimony reflects that the premiums had been paid for full five years and one month, and that one year only of the divisible surplus or profits provided for in the policy had been allocated to the insured, or, at least, no notice of the balance due him out of the divisible surplus or profits had been sent to him. These paragraphs must necessarily be read together in connection with the option paragraphs in order to properly construe them, and, when read together, mean that, before the policy would be converted automatically from a profit-participating into a nonparticipating, paid-up, endowment insurance policy for a nominal sum on account of the failure to pay premiums for three months, appellant should ascertain the amount due the insured out of the divisible surplus, so that it might be applied to the payment of the monthly premiums, and thereby prevent a lapse of the policy. These provisions in the policy must be construed as a harmonious whole and, in the light of the rule consistently announced by this court to the effect that insurance companies must not allow policies to lapse for the nonpayment of premiums when they have sufficient funds in their hands to pay the premiums. Security Life Insurance Company v. Matthews, 178 Ark. 775, 12 S. W. (2d) 865, and cases cited therein. The same rule was announced in the recent case of Illinois Bankers’ Insurance Company v. Wilken, 187 Ark. 337, 59 S. W. (2d) 1046. The proper construction of the various paragraphs in the policy quoted above is that appellant cannot put the insured to an election of options upon failure to pay premiums for three months after default in the payment of any premium until it first ascertains the profits or dividends due the insured which might be used to pay premiums, and after notification to him of the amount. The burden was upon appellant to show that the divisible surplus in its hands was insufficient to pay the monthly premiums to keep the policy alive during the lifetime of the insured. It not only failed to do this and to notify the insured of the amount thereof, but, when asked on the trial of the cause to reveal the amount, it failed to do so. Under these circumstances, and under the interpretations placed upon the clauses when read together, the trial court would have been warranted in presuming that the profits due the insured were sufficient to pay all the premiums until he was shot or killed, and in instructing a verdict for appellee. The court did not therefore err in refusing to instruct a verdict for appellant.

Appellant also contends for a reversal of the judgment because the court submitted the ease on erroneous instructions which were conflicting. Appellee was entitled to an instructed verdict on the undisputed evidence in the case; hence no prejudice resulted to appellant on account of the instructions, although they might have been erroneous and conflicting. Beene Motor Co. v. Bison, 180 Ark. 1064, 23 S. W. (2d) 971; Hunt v. Hurst, 170 Ark. 644, 280 S. W. 652.

Appellant also contends for a reversal of the judgment because the court admitted testimony relative to a 'different policy issued by appellant to appellee’s insured, to the effect that said policy was not converted into a nonparticipating endowment policy. This testimony was introduced for the purpose of contradicting the testimony introduced by appellant to the effect that all policies of this kind issued by appellant were converted into paid-up insurance policies at the expiration of three months from default in the payment of a premium. The court did not err in admitting the testimony for this purpose.

No error appearing, the judgment is affirmed.

Smith, J., dissents; McHaney, J., concurs.


source: Caselaw Access Project

author: Kirby, J., Butler, J., Smith, J.,

license: Public Domain

text:
    Missouri State Life Insurance Company v. Martin.
    4-3365
    Opinion delivered February 19, 1934.

      Allen May, J. R. Burcham, Charles D. Frierson and Charles Frierson, Jr., for appellant.

      J. Ford Smith and W. J. Fungan, for appellee.
   Kirby, J.,

(after stating the facts). There is but one question involved in this appeal, viz., whether the death of the insured under the circumstances herein resulted from an accident covered by the double indemnity provision of the policy which excepts bodily injuries received “from participation in aviation or submarine, operations.”

Aviation is defined in Funk & Wagnall’s Dictionary as follows: “Aviation- — -is the art of flying, especially the management of aeroplanes.”

“Participation” is defined in Webster’s Dictionary as follows: 1. The state of sharing in common with others. 2. The act or state of receiving or having a part of something. 3. Distribution or division into shares.

It has been held that it was not necessary for one to have mechanical control over a plane in order to participate in its operation, but, when one imposes and enforces his judgment in the venture or about-an undertaking solely for his purpose, he is effectively participating in the operation of the plane. First Nat. Bank of Chattanooga v. Phoenix Mut. Life Ins. Co., 62 Fed. (2d) 681.

It appears here, however, that there was no contractual relation between the pilot of the plane and the insured, and no expectation of a fare to be paid and collected for the trip, the insured being an invited guest only, and not a passenger, and it cannot be said that insured received the injuries from which he died “from participation in aviation operations,” within the meaning of the terms of the policy, and is thereby excluded from its coverage.

The contract of insurance was ambiguous and susceptible to more than one reasonable construction, and the one most favorable to the insured should be adopted. Travelers’ Protective Ass’n v. Stephens, 185 Ark. 660, 49 S. W., (2d) 364; National Life Ins. Co. v. Whitfield, 186 Ark. 198; Gits v. N. Y. Life Ins. Co., 32 Fed. (2d) 7; Charette v. Prudential Ins. Co., 202 Wis. 470, 232 N. W. 848.

No error was committed in allowing attorney’s fee and the statutory penalty, since the entire sum contracted to be paid under the rider in the policy was recovered herein, and the appellee was therefore entitled to a judgment for the penalty and a reasonable attorney’s fee, ‘ ‘ and the fact that the company believes it has a meritorious defense, and in good faith defends the case does not excuse it from the application of the statute.” Life & Casualty Ins. Co. of Terin. v. McCray, 187 Ark. 49, 58 S. W. (2d) 199.

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

Butler, J.,

(supplemental opinion on rehearing). To sustain the contention that the death of the insured resulted from an accident within exemption from liability within the meaning of the terms of the policy, counsel for appellant refer us to the following cases: Bew v. Travelers’ Ins. Co., 95 N. J. Law 533, 112 Atl. 859, 14 A. L. R. 983; Travelers’ Ins. Co. v. Peek, 82 Fla. 128, 89 So. 418 (1921); Meredith v. Bus. Men’s Acc. Co., (Mo.) 252 S. W. 976 (1923); Pittman v. Lamar Life Ins. Co., 17 F. (2d) 370 (1927); Tierney v. Occ. Life Ins. Co., 89 Cal. App. 779, 265 Pac. 400 (1928); Wendorff v. Mo. St. Life Ins. Co., 318 Mo. 363, 1 S. W. (2d) 99 (1927); Gits v. N. Y. Life Ins. Co., 32 Fed. (2d) 7 (1929); Peters v. Prudential Ins. Co., 133 Misc. 780, 233 N. Y. S. 500 (1929); Price v. Prudential Ins. Co., 98 Fla. 1044, 124 So. 817 (1929); Head v. N. Y. Life, 43 F. (2d) 517, 520 (1930); First Natl. Bk. v. Phoenix Co., (C. C. A.) 62 Fed. (2d) 681. We are also referred to the notes assembled in 14 A. L. R. 986; 61 A. L. R. 846; 69 A. L. R. 331; 83 A. L. R. 384, and to the case of Benefit Ass’n v. Hayden, 175 Ark. 565, 299 S. W. 995. In their'brief for rehearing, the following additional authorities are cited in support of their contention: Irwin v. Prudential Ins. Co., 5 Fed. Supp. 382, February 19, 1934; Goldsmith v. New York Life, 69 Fed. (2d) 273; 6 Couch’s Enc. Ins. Law, p. 1252; 6 Cooley’s Briefs on Ins., (2d ed.) p. 5309.

Counsel for the appellant admit that where the words “engaged in aviation” are used in the exempting' clause of a policy, the exemption from liability will not apply to the case of a mere passenger, but they contend, on the authorities cited, that the words “participate in aviation” are to be distinguished from “engaged in aviation” and are sufficiently broad in their meaning to include any one riding in an aeroplane whether as a pilot or a passenger only. Upon an examination of the cases cited, we find those most nearly sustaining the contention are Bew v. Travelers’ Ins. Co.; Travelers’ Ins. Co. v. Peek, and Meredith v. Bus. Men’s Acc. Co., supra. In the first mentioned case the applicable clause is as follows: “The insurance hereunder shall not cover * * * injuries, fatal or non-fatal, sustained by the insured while participating in, or in consequence of having participated in, aeronautics.” The insured was killed while a passenger in an airplane. After quoting the definition of the word “aeronautics” given by the Ency. Britt, “aeronautics is the art or practice of sailing in, or navigating, the air,” the court held that there was nothing in the definition to confine it to- those active in piloting air vessels and to exclude those who are inactive users thereof. The court also quoted from the Standard Dictionary the definition of the word “participate” as meaning, “to receive or have a part or share of; to partake of; experience in common with others; to have or enjoy a part or share in common with others; partake; as to participate in a discussion; to take a part in; as to participate in joys or sorrows.” Prom these definitions it was the conclusion of the court that one who is a passenger in an aeroplane partakes of the pleasure and benefits of the art or practice of sailing in the air and thereby participates in aeronautics. In reaching* this conclusion, the court, however, appears to have given no effect to one of the definitions, supra, vis, “to take part in.”

In Travelers’ Ins. Co. v. Peek, supra, the court had before it a contract similar to that in the Bew case and based its decision solely on the authority of the latter case. In Meredith v. Bus. Men’s Acc. Co., supra, the court followed the views expressed in the Bew and Peek cases without any further elucidation.

A number of cases discussing the meaning of the words “engaged in aeronautics” used in the policies under consideration profess to find a distinction between the meaning of that term and “participating in aeronautics,” but give no particular reason for the discovery of the difference. Thus, in Price v. Prudential Ins. Co., supra, the court merely says, “'Being engaged in aviation operations means taking part in the operations of an airplane in some direct way other than merely participating in aeronautics by being in an airplane while it is in the air”; and, in Flanders v. Benefit Ass’n, 226 Mo. App. 143, 42 S. W. (2d) 973, the court found that “engaged” involved the idea of continuity of action and contented itself with stating the difference between “engaged in” and “participating in” in the following way: “It means that one must take part in the operation of the airplane in some way other than merely participating in flying.” So also, in Head v. New York Life Ins. Co., supra, a distinction is stated without giving the reason why.

The distinction thought by the courts to exist between “engage in aeronautics” and “participation in aviation” may be apparent to, and approved by, those learned in the niceties of the language and accustomed to its precise use, but it is to be doubted whether these hair-splitting and subtle distinctions would occur to, or be understood by, the majority of the thousands of persons who seek insurance against the many hazards to life and limb which are likely to occur to the most prudent and fortunate. Words and phrases used in insurance policies should be construed by their meaning as used in the ordinary speech of the people and not as understood by scholars.

It might well be imagined that if the average tradesman, artisan or farmer, although he had many times taken passage on a railroad train and intended again soon to do so, if asked if he had participated, or intended to participate, in railroading, would at once answer, “No”; and, if then asked if he had engaged in, or intended to engage in, railroading, would reply, “I have just told you, ‘No’.” It might well be assumed that to his mind the word “participate” in the connection used in the question would imply some action, some “taking part in” the movement of the trains, the upkeep of the property, or management of its business. He likely would not think that by the question was meant to learn if he had, or intended merely “to have, enjoy, or share in common with others ’ ’ the privilege of being transported as a passenger on the lines of railway companies.

It is interesting, however, to note that in these cases and others which discover a distinction between “engaged in” and “participate in,” the courts, when they abandon the role of the “precisian” and discuss the case in the language of the ordinary person, they sometimes use the words “engaged” and “participate” or “participation” as conveying a similar idea. In the case of Peters v. Prudential Ins. Co., supra, in discussing the word “engaged” the court said: “It gives the impression of participation as an occupation.” In Benefit Ass’n v. Hayden, supra, the court found for the beneficiary, saying: “The proper construction of those words (engaged in) is that actual employment or participation was contemplated and not merely riding as a passenger.” This case followed the case of Benham v. Insurance Co., 140 Ark. 612, 217 S. W. 462, where the court defined the word “engaged” as denoting action, thus: “It means to take part in.” This is precisely one of the meanings of the word “participate” which is apparent from the etymology of the word: “Participate — a word coming from the Latin words ‘pars,’ a part, and ‘capio,' to take,” therefore meaning to take part in. 6 Words & Phrases, p. 5185.

As defined by the leading lexicographers, “aviation” is a more exact and specific term than “aeronautics” and means “the art or science of locomotion by means of aeroplanes.” Webster. It might appear that if aviation is the science of locomotion by aeroplane and the word “participate” means “to take part in,” the phrase “participate in aviation” would connote an active share in its management; as, where a person of First Nat. Bank v. Phoenix, supra, where he owned the plane and had authority to, and did, direct the pilot as to when he should make the flight. It would seem that this interpretation of the phrase “participate in aviation” is not wholly unjustified. We pass this question, however, without deciding it because it is unnecessary to do so under the language of the exemption clause in the contract before us which is dissimilar to that of any of the cases denying the right to recover relied on by learned counsel.

As noted in the Bew, Peek and Meredith cases, the phrase in the exemption clause was “participating in aeronautics. ’ ’ In Benefit Ass’n v. Hayden, and Flanders v. Benefit Ass’n, supra, the phrase was “engaged in aeronautics.” In Peters v. Prudential Ins. Co., supra, it was “engaged in aviation.” In Wendorff v. Mo. State Life Ins. Co., supra, the applicable exemption phrase is “while on or in any mechanical device for aerial navigation.” In Gits v. N. Y. Life, supra, the phrase was, “engaged in submarine or aeronautic operations,” and in First Nat. Bank v. Phoenix, supra, it was “participation in aeronautic operations.”

In the cases cited, the phrase quoted above from the last case named is the one most similar to the. phrase used in the contract involved in the instant case, but in that case the insured, when killed, was not a mere passenger. The court thus found his relationship to the flight: ‘ ‘ Though the insured was not personally piloting the plane, the venture was his, initiated and undertaken solely for his purposes. He owned the plane, employed a pilot to operate it, determined whether weather conditions would permit of the flight and when it should be made. We agree with the lower court that one who interposes and enforces his judgment in matters so vital as these to the flight of an aeroplane is participating in aeronautic operations.”

We have examined the additional authorities cited by counsel in their brief on rehearing, except that of Goldsmith v. New York Life Ins. Co., supra, to which we do not have access. In Irwin v. Prudential Ins. Co., supra, the exempting phrase is, “from having been engaged in military or naval service, or in aviation, or submarine operations.” The facts were that the insured was killed by the crash of a glider, a device for aerial transport, while he was riding as a pilot and the sole occupant. While the operation of gliders was not his regular business, it was an avocation in which he frequently indulged. He was killed on October 23, 1931, and had flown a glider during the two preceding years approximately 203 times. Under these facts, the court held that he was engaged in aviation within the meaning of the policy and denied recovery.

In the page of Couch’s Cyc. Ins. Law, cited supra, there is this statement: “A passenger in an aeroplane flying in the air, whether he takes part in the operation of the plane or not, is participating in aeronautics within the intent and meaning’ of a provision in an insurance policy specifically excepting such a risk.” For authority for this statement the author cites one Arkansas case— that of Sov. Camp W. O. W. v. Compton, 140 Ark. 313, 215 S. W. 672. This case does not support the text. The question there was whether an exemption of liability, where the insured “engaged in aviation,” was applicable, if the insured were killed while flying as an army aviator. It was the holding of the court that the exemption clause referred to private occupation and not to those of the same character performed while in military service.

The doctrine announced in Cooley’s Brief, supra, was that under a policy exempting from liability while “engaged in aviation” excluded recovery where the. insured was killed while flying in the air, whether piloting or riding as a passenger, and for authority for this the author cites Masonic Acc. Ins. Co. v. Jackson, a case from one of the. Indiana courts of appeal, reported in 147 N. E. at page 156. This case is against the weight of authority and also is not authority in Indiana, as it was superseded in the same case by a decision of the Supreme Court of Indiana, reported in 200 Ind. 472, 164 N. E. 628, 61 A. L. R. 840.

The double indemnity clause in the instant case excepts the insurance company from liability for “bodily injuries received while engaged in military or naval se.rvice in time of war, or for participation in aviation or submarine operations.” It is the word “operations” which distinguishes this exemption from those relied upon by counsel for the appellant and which creates the ambiguity referred to in the original opinion. Counsel for appellant erroneously contend that because the language relied upon does not create a forfeiture of the policy, but simply states a risk which was never assumed, the rule that the language of the phrase involved should be strictly construed — and, where ambiguous, against the insurance company — has no application. The rule of strict construction applies to exemption from liability as well as to forfeitures. Irwin v. Prudential Ins. Co.; Wendorff v. Mo. State Life Ins. Co., supra; Wilson v. Trav. Ins. Co., 183 Calif. 183, 190 Pac. 366; National Life Ins. Co. v. Whitfield, 186 Ark. 198, 53 S. W. (2d) 10.

It may be, as argued by counsel, that if the word “aviation” is intended to qualify the word “operations,” the phrase is not in accord with grammatical rules, and, to be correct under those rules, some adjective form of the word aviation should have been used. The word “aviation” is of comparatively recent origin, and we know of no adjective term for it yet formulated. It is used indiscriminately as a noun and as an adjective, just as the word “submarine.” The use of the word “either” after “or” is frequently implied (see Webster’s Dict.) and it is not an unreasonable construction to say that “operations” is limited by both aviation and submarine participation. At least, this is an interpretation which the ordinary person, not skilled in the niceties of grammatical construction, might give to it. It will be noticed that no comma is used after the word “aviation,” and this is an additional reason for concluding that it as well as submarine was intended to refer to and limit the word operations.

In Peters v. Prudential Ins. Co., supra, the phrase, “from having been engaged in aviation or submarine operations or military or naval service in time of war” was held to be ambiguous, and that it might not include death resulting to a passenger in an airplane in time of peace. It was the contention of the plaintiff that the exception intended to apply only to an accidental death occurring while engaged in aviation in time of war. The court found this construction a reasonable one when the punctuation employed was considered. It pointed out that the use of’a comma after the word “aviation” and one after the word “operations” would clearly show that the insurer intended to limit the expression “in time of war” to the last antecedent, but, having omitted it, it might be inferred that the danger from aviation excepted from the risk was only that occurring in time of war, and, as the phrase was ambiguous, the construction most favorable to the insured should be placed upon it, since the insurer chose the language and was responsible for its ambiguity.

The ambiguity and doubt as to the exact meaning of the phrase involved in the instant case is emphasized by the ease with which the insurer could have made its meaning clear, as was done in the contracts under consideration in Head v. New York Life Ins. Co.; Pittman v. Lamar Life Ins. Co., and Tierney v. Occ. Life Ins. Co., supra. In these cases the limitation was for injury while “participating as a passenger or otherwise in aviation or aeronautics.” It would not have been difficult for the insurer to have clearly informed the insured that it would not be liable for his death while riding or being in a plane either as a passenger or otherwise; but, having elected to use general expressions which might mean one thing or another, the ambiguity thus created must be resolved against it.

The effect of the word “operations” in connection with the phrase “participation in aviation” necessarily limits the scope of the meaning of the word “participation,” and, though the word “participate,” standing alone, might denote activities not included in the narrow compass of “engaged in,” when the effect of the word “operations” is considered, (which can only mean the management and control of the airplane) it becomes more apparent that “participation” is to be considered in its active sense and viewed as the equivalent of “engaged in.”

The question of penalty and attorney’s fees is ruled by the recent case of Life & Casualty Ins. Co. of Term. v. McCray, 187 Ark. 49, 58 S. W. (2d) 199, the holding of which was affirmed by the Supreme Court of the United States on the 5th day of March, 1934. We reaffirm the conclusion reached in the original opinion and overrule the petition for rehearing.

Smith, J.,

(dissenting). The original opinion states that the facts in this case are undisputed. And so they are. The insured, who paid no fare, was invited by an amateur aviator to fly with him from Augusta, Arkansas, to St. Louis, Missouri. They did not reach their destination, as the plane “crashed and struck the ground,” killing the insured. The insured had no control over the plane, but it occurs to me that neither this fact nor the failure to pay fare affected the hazard of the journey.

The original opinion cited only one case to support the conclusion announced that the insured was not participating in aviation at the time of his death, this being the case of First National Bank v. Phoenix Mutual Life Ins. Co., 62 Fed. (2d) 681. The headnote in that case reads as follows: “Insurer held not liable under double indemnity provision 'excepting death from ‘participation in aeronautics operations,’ where insured was killed while passenger in aeroplane. ’ ’ It requires no argument to show that this case affords no support for the conclusion announced.

The labored supplemental opinion on rehearing is equally unconvincing to me, and I therefore respectfully dissent. Quotations appearing in this opinion from a number of cases there cited show clearly that they do not support the conclusions which the majority have reached. These cases are brushed aside with the observation that they are hair-splitting and appeal only to the grammarian and the precisian.

It is a wise and just rule of construction, and one of universal application, that all doubt, or any ambiguity, as to the meaning of an insurance policy is resolved against the insurer, for the reason, often stated, that the language expressing or limiting the liability insured against is carefully chosen by the insurer. But the rule is equally as well established, and is equally as wise-and as just, that courts may not create ambiguities by strained constructions which would not otherwise be found to exist. Insurance policies are to be construed like other contracts, where their meaning plainly appeárs, and it has never been questioned that insurers may assume and insure against some risks and exempt themselves from liability for others.

The courts — all of them — are reluctant to permit insurance companies to forfeit their policies, upon which premiums have been paid, especially upon purely technical grounds, but there is no question of forfeiture in this case. The question is rather whether we shall search for an ambiguity whereby, when it has been found, the insurer may be held liable for a risk from which, in my opinion, it has expressly exempted itself.

Insurance companies first undertook to exempt themselves from liability to persons “engaged in aviation or aeronautics,” but when some of the courts followed our opinion in the case of Benefit Ass’n v. Hayden, 175 Ark. 565, 299 S. W. 995, 57 A. L. R. 622, and held that a passenger having no control over the machine in which he flew was not “engaged in aviation or aeronautics,” the companies writing insurance of this character attempted to clarify their exemption by providing that they should not be liable to persons “participating in aviation.” The. distinction appears to be invisible to the majority, but it is one which has been recognized by a line of decisions previously unbroken.

The exemption existing in the policy here sued on is not merely against the aviator flying the machine, but it is against all persons participating in aviation. Can it be true that the aviator is in any more danger than his passenger? Is not the hazard as great in the one case as in the other? Now, the majority say that a different result would have been reached had the exemption from liability read “while participating as a passenger or otherwise in aviation or aeronautics.” Why so? This is not broader than the language employed. The insurer attempted to exempt itself from liability to the insured from injuries received “from participation in aviation or submarine operations,” not merely as a passenger, but at all. There is no qualification as to- the extent of the participation. If the tradesman, artisan or farmer, to whom the majority refer, had promised his wife, before leaving home, that he would not participate in aviation while gone, he would probably have had trouble convincing her, upon his return, that he had kept his word, if he admitted that a part or all of his journey had been made in a flying machine. But the cases uniformly distinguish between engaging in aviation and participating in aviation. In pointing out this distinction the Supreme Court of Indiana, in the case of Masonic Accident Insurance Co. v. Jackson, 200 Ind. 472, 164 N. E. 628, 61 A. L. R. 840, said: “To say that one is ‘engaged’ in an occupation signifies much more than the doing of one act in the line of such occupation.” (Citing cases.) Further reference will be made to this case, as it appears to have afforded the majority some support for their conclusion.

I might defer to the majority if the text writers on insurance had not construed the numerous cases on the question here under consideration just as I do.

For instance, at § 1252 of Couch’s 'Cyclopedia of Insurance Law, vol. 6, the author says: “Section 1252. Death or injury while participating or engaging in aeronautics, aviation, etc. A passenger in an aeroplane flying in the air, whether he takes part in the operation of the plane or not, is ‘participating in aeronautics,’ within the intent and meaning of a provision of an insurance policy specifically excepting such a risk.”

The majority inadvertently say that Sovereign Camp W. O. W. v. Compton, 140 Ark. 313, 215 S. W. 672, is the only ease cited, and that it does not support the text. On the contrary, the annotated cases reported in 14 A. L. R. 986; 40 A. L. R. 1176; 57 A. L. R. 625; and 61 A. L. R. 846, are cited in note 1 to the paragraph above quoted, and these annotated cases collect innumerable cases on the subject. Note 2 to this paragraph cites cases from California, Florida, Missouri and New Jersey in addition to the Arkansas case.

The majority quote from Cooley’s Briefs on Insurance, but treat the quotation as being without authority because it was based upon the decision of an inferior court of Indiana, which has been superseded by a later decision of the Supreme Court of that State. This statement is as unfortunate as was the reference to Couch’s Cyclopedia of Insurance Law, supra. I give the exact statement from Cooley’s Briefs on Insurance, (vol. 6, 2d ed., page 5309). It reads as follows: “Where insured died from injuries received while riding as passenger in aeroplane, there could he no recovery on a policy which excepted death or disability while ‘engaged in aviation, ’ that phrase meaning the act of flying in the air in machine heavier than air, whether piloting or riding as passenger (Masonic Acc. Ins. Co. v. Jackson, (Ind. App.) 147 N. E. 156). A passenger in an airplane was ‘participating’ in ‘aeronautics’ within the meaning of a provision in an insurance policy providing that it should not cover any person or injuries, fatal or nonfatal, sustained by insured while participating in aeronautics (Bew v. Travelers’ Ins. Co., 95 N. J. Law 533, 112 A. 859, 14 A. L. R. 983).” Numerous cases are cited in the note to this text which fully support it.

This Indiana case was first decided by “Appellate Court of Indiana, ’ ’ and is reported in 147 N. E. 156. The headnote — and the only one — to that case reads as follows: “Where insured died from injuries received while riding as passenger in aeroplane, beneficiary held not entitled to recover on policy which excepted death or disability while ‘engaged in aviation,’ that phrase meaning the act of flying in the air in machine heavier than air, whether piloting or riding as passenger.” It will be observed that the exemption contained in the policy there construed was from, death or disability while “engaged in aviation.” This case reached the Supreme Court of Indiana and is the case to which I have previously referred to as being reported in 61 A. L. R. 840. The Supreme Court of Indiana quoted at length from our case of Benefit Ass’n R. R. Employees v. Hayden, 175 Ark. 565, 299 S. W. 995, 57 A. L. R. 622, and appears to have adopted its reasoning, but, as appears from the. language already quoted from that opinion, the Supreme Court of Indiana recognized the distinction between being engaged in aviation and participating in aviation. The annotator, in his note to this case, says: “These cases make a distinction between ‘engaged’ in aviation and ‘participating’ in aviation or aeronautics, and proceed upon theory that to be ‘engaged’ in aviation imports something more than (as expressed in the latter ease) ‘occasional participation’.”

In the late work of Richards on the Law of Insurance (4th ed.), at page 660, it is said: “A construction urged upon the courts, but consistently refused is, that one participates only when he is physically active in the management and control of an instrument or agency and that the word ‘aeronautics’ is necessarily descriptive of an occupation. Such a construction would give too narrow a meaning to both words. The Standard Dictionary defines ‘participate’ as meaning ‘to receive or have a part or share of; to partake of; experience in common with others; to have or enjoy a part or share in common with others; partake; as to participate in a discussion.’ Nothing in the definition, or in the common use of the word confines it to those who are active in navigating balloons or aeroplanes and to exclude those who are inactive occupants of such vessels.”

In Vance on Insurance, (2d ed.), page 901, § 269, it is said: “If the policy excepts the risk of the insured ‘while participating in aeronautics,’ his injury or death on account of riding as a passenger in an aeroplane is generally held to be within the exception, but not so if the language of the exception is ‘while engaged in aviation’.”

In the case of Pittman v. Lamar Life Ins. Co., 17 Fed. (2d) 370, the Circuit Court of Appeals for the Fifth Circuit held (to quote the syllabus in that case) that: “Assured, killed when struck by airplane propeller blade as he was leaving ship after completing flight, held to have met his death while participating in an ‘aeronautic activity, ’ within the meaning of provision of policy limiting insurer’s liability to premiums paid.” A petition for a writ of certiorari in this case was denied by the Supreme Court of the United States. 274 U. S. 750, 47 S. Ct. 764. It is apparent that this case goes much farther than I am now contending in the instant case, as the insured had not operated the airplane which killed him, after he had gotten out of it.

Inasmuch as the text writers on the subject of insurance construe the adjudged cases as I do, I am constrained to register my dissent.


author: Mehaffy, J.

text:
    Coffield & Moore Manufacturing Company v. El Dorado Laundry & Dry Cleaning Company.
    4-3366
    Opinion delivered February 19, 1934.

      Silas W. Rogers, for appellant.

      Harry Steinberg and McNalley & Sellers, for appellee.
   Mehaffy, J.

This suit was begun by the appellant against the appellee for $957.48. It alleged that the appellee was indebted to it in said sum for machinery and merchandise sold to appellee; that the amount was past due and represented the balance due on the purchase made by appellee. An' itemized statement was attached to the complaint and made part thereof.

Appellee filed an answer and cross-complaint in which it denied the material allegations in the complaint ; denied being indebted to appellant in any sum. In the cross-complaint appellee alleged that the machinery bought was unfit for the purpose for which it was purchased, and that appellee had been damaged in the sum of $700, and asked judgment against the appellant.

There was a trial by jury, and a verdict and judgment for appellee on its cross-complaint for $100. The case is here on appeal.

Appellant first contends that the damages awarded appellee were in excess of the amount claimed in cross-complaint. It is argued that, according to the undisputed testimony, the total amount due appellant at the date of trial was $968.95; of this amount $133.48 is interest. If, as the jury must have found, the machinery sold was unfit for the purpose for which it was purchased, appellant would not be entitled to interest. The evidence as to the damages is not very satisfactory, but we think it was sufficient to show that the damages were equal to the amount due appellant.

The cross-complaint alleged that appellee entered into a contract with appellant for the purchase of a new and complete boiler return system to be used in appellee’s laundry and cleaning plant, and that appellant warranted to appellee that such system, when installed by it, would operate in an efficient and satisfactory manner, and that, when the steam pressure in the boiler reached a certain point, the safety signal valve would blow a warning of such excess pressure, and said valve would automatically cut off or reduce the flow of fuel gas in such manner as to furnish proper steam pressure for the efficient operation of the system and protect the boiler against excessive pressure. It was also alleged in the cross-complaint that the appellant breached this contract by installing a used, second-hand and inferior system, instead of a complete new system; that the system installed by appellant is not the system purchased by appellee; that the agent of appellant informed appellee that the safety signal valve installed was second-hand, but that appellant would replace it with a new safety signal valve, but that the old valve would adequately operate and take care of the operation of the system.

Appellee was not acquainted with the character of equipment purchased, and did not know that a secondhand system had been installed, until some time after the installation. It then requested appellant to comply with its contract. It also alleged that its agents and servants were not familiar with the system, and had to rely on appellant; that, as a result of the breach of contract of purchase as above mentioned, the system failed to operate efficiently, and, because of the defects in it, the system was damaged by steam pressure in the sum of $500. Appellant agreed to install a new safetv signal valve, and appellee thereupon paid $200; that the promises made by appellant were all violated, and the equipment is worthless and of no value. Appellee prayed for judgment for $700 damages.

The evidence also showed that the automatic gas control was second-hand, and was sold to appellee for $37.50, and that a new one was worth $125.

Thomas Conley, a boiler-maker, testified that he was familiar with the value of second-hand boilers, and that a reasonable market value of the boiler in question would be $1,500, and that the damage depreciated it 50 per cent. This evidence seems to have been admitted without objection.

O. 'Brewster testified that he was solicitor for the laundry when the boiler flues burned, and this caused confusion and dissatisfaction and loss of two customers, and that, from these two customers, the laundry was getting $30 a week, $15 from each. There is no evidence as to whether this loss would probably continue, and no evidence showing the loss of other customers, and it is impossible to tell how much the jury found for these items.

Whatever amount of damages was given for loss of customers was speculative and uncertain. We think, however, this error can be cured by disallowing the judgment of $100 in favor of appellee, because there seems to be ample evidence to sustain a finding for appellee; that is, a finding that the damages are equal to the balance due appellant.

It is next contended that the court erred in not permitting the appellant to introduce testimony that the Kisco Return System was a well-known, well-advertised and generally used article of merchandise. There was no error committed by the court in refusing to permit this testimony. The evidence shows that the appellee did not make the purchase because of any advertising or general use of the merchandise, and knew nothing about it itself.

It is next contended that the court erred in refusing to instruct the jurv to find for the appellant in the sum proved to be due. The court, at the request of the appellant. instructed the jury in effect that there was no implied warranty that second-hand parts will perform efficiently, but that the defendant must assume the risk that tbe second-band part will do the work as well as a new part, and that the failure of the second-hand part to perform efficiently does not invalidate the contract. The court also instructed the jury that the burden of proving the counterclaim was upon the appellee. The following instruction was given at the request of the appellant: “Where property sold is not reasonably fit for the purpose intended, the purchaser has two remedies: first, he may rescind the contract, surrender the property and recover his money, or, second, he may retain the property and recoup his damages for the deficiency when sued for the purchase price. In this case the defendant, El Dorado Laundry & Dry Cleaning Company, has elected to retain the property, and under the evidence it will be your duty to find for the plaintiff in the amount sued for, and, if you further find that the defendant is entitled to damages on its counterclaim, you will find for the defendant in whatever sum you find from the evidence it is entitled to. ’

Instruction No. 8 was also given at the request of appellant. It reads as follows: “Before the defendant can recover damages on its counterclaim, it must prove by a preponderance of the evidence that there were substantial defects, not mere minor defects or adjustments, that would make the Kisco Boiler Return System unfit for use, and, if you find from a preponderance of the evidence that the defendant was damaged in any sum, you will arrive at the amount of the damages by determining the difference between the value of the property sold in good condition as represented and the value in its present deficient condition, if it was deficient, and render a judgment against El Dorado Laundry & Dry Cleaning plant for the difference, if any is shown. ’ ’

The. case seems to have been submitted to the jury on correct instructions, and as to whether the property purchased was fit for the use for which it was purchased, and also its value, were questions for the jury. The amount of damages to which appellee was entitled was also a question for the jury. We have already said that the evidence as to loss of customers was uncertain and speculative, and it is impossible to say what amount the jury gave for these items. However, the amount given for loss of customers would not exceed $100, and, as there appears to be sufficient evidence, without the evidence as to these items, to sustain the jury’s verdict in finding for the appellee, this error can be cured by disallowing the $100 in favor of appellee, reversing the judgment as to that, and entering judgment here for the appellee, which is accordingly done.


text:
    Roark Transportation, Inc. v. Sneed.
    4-3376
    Opinion delivered February 19, 1934.

      Festus O. Butt, for appellant.

      C. A. Fuller, A. J. Russell, Jr., and J. W. Trimble, for appellee.
   Mehaffy, J.

On November 15, 1932, W. L. Sneed, who lived at Berryville, Arkansas, was on his way to Eureka Springs, driving a Ford car, which collided with a bus belonging to appellant, which was being driven in the opposite direction. W. L. Sneed died a few hours after the collision from injuries received when his car and the bus collided. Suit was brought by the administratrix, Grace Sneed, for damages for the injury and death of her husband.

The complaint alleged that the appellant is a corporation and was operating the bus at the time of the collision as a common carrier of passengers from Fayetteville through Eureka Springs to Berryville; that, at the time of the collision and injury, the bus of appellant was being driven at an unusual and dangerous rate of speed, and without due care and caution for the safety of deceased and other persons upon the highway; that the driver of said bus negligently and carelessly propelled and drove the said bus against the car in which the deceased was riding, and, as a result of the negligence of the driver of said bus, the said deceased received the injuries which caused his death; that at the time deceased was in the exercise of due care and caution for his own safety, and that the injury received by him was caused solely by the negligent failure of appellant through its agents, servants and employees to operate said bus with care and caution, and with due regard for the safety of the deceased; that said automobile bus was traveling along and upon the highway at an unusual, reckless and dangerous rate of speed, and, immediately prior to the meeting with the deceased, the driver of said bus negligently and carelessly lost control of said bus, and thereby propelled the same against the automobile occupied by deceased, resulting in the injuries and death of deceased; that the deceased, W. L. Sneed, left surviving him his widow, Mrs. Grace Sneed, a daughter 17 years of age, a son 20 years of age, and another son 12 years of age, as the next of Idn and heirs at law; that prior to the injury said Sneed was a strong, healthy, able-bodied and industrious man, and was contributing all his earnings, except a small amount necessary for his own maintenance, to the support, care and comfort of his wife and children.

There was a trial by jury, and a verdict and judgment for the appellee, Mrs. Sneed, in the.sum of $3,000, and a verdict and judgment in favor of the estate in the sum of $2,000. The case is here on appeal.

It is earnestly insisted by the appellant that there is no evidence to support the verdict, and no evidence showing negligence on the part of the bus driver. A map, or diagram, was introduced in evidence, and the evidence shows that the collision occurred at a curve. The deceased, Sneed, was traveling from Berryville to Eureka Springs, and, according to the evidence, the accident occurred just after Sneed had entered into the curve. The road at that place curved to Sneed’s right, and Sneed should have been on the right-hand side of the road, next to the mountain or bluff. The bus driver who was going in the opposite direction, if he was on the right side of the road, as he should have been, would have been at the outside part of the curve, and, according to the diagram and evidence, there was ample room for the cars to pass. It was snowing and sleeting; the bus driver was coming downhill, and Sneed was going uphill.

Mitchell, the bus driver, testified that there is a double curve where the accident occurred, and, before he got around, he saw the other car coming facing him, not yet around the curve, and still below him. He testified that he was on his side of the road, and did not start to slow down, hut thought the driver of the other ear would honk as he came around closer. He then applied his brakes and sounded his horn, and Sneed came right on and hit him, and that was on the right side of the road. He testified that the grade was a steep one; that, when he first saw the approaching car, before he got to the second curve, and making the left turn, the other car was at a point designated as “B” on the diagram, which is some distance on the road toward Berryville; that, when he saw the other car coming straight against him, he applied his brakes and sounded his horn. He also testifies that the cars hit, and for the time being there was a stop; then the bus gradually pushed the car diagonally across the road downhill. He said that he approached the place of the accident driving at from 20 to 30 miles an hour. He had hydraulic brakes, and first applied them, and then used his emergency brakes. It caused the bus to skid some, and cut the speed, and at the moment of impact he said he was going about 10 miles an hour. The hydraulic brakes applied to all four wheels, and would not cause a skid. The bus had dual or double wheels in the rear. Witness said that coming down the grade on his left or the north side of the road was a mountainside, and on his right a sharp drop. He then describes the damage to the cars, and says that the bus pushed the other car down the road to the embankment. This witness testified that he left Eureka Springs driving at 20 to 30 miles an hour; that he did not have a schedule under which he drove 50 to GO miles an hour, but the buses are governed at 40 miles an hour. Witness supposed the bus weighs about 7,000 pounds, and he was going 25 or 30 miles an hour. The natural tendency of the bus was to lean toward the bank. When he first saw the Ford coming, he did not slow up because he thought it was going to turn away, but as he came nearer he applied his brakes. Witness was asked the question: “If you had applied your brakes you could have avoided the collision at that time?” and he answered, “I could have stopped, maybe: I don’t know. ’’ He testified that it was easier to stop a car with hydraulic four-wheel brakes than where it had only two brakes.

Witness Denny testified that he paid little attention to the size of the bus, but that it was eight or ten times larger than the Ford, and would weigh six or seven times as much. Witness found the car against the bank, and thought the collision occurred about 50 feet diagonally up the road from where the car was; saw glass about two or two and a half feet on the north or right-hand center of the road going toward Eureka Springs. This witness also said, from where the glass was, the big car came kind of diagonally off until it took the little car against the bank. Witness traced the tracks to the middle of the road. The hind wheels were two feet south of the middle, and the front wheels were two feet north of the middle. Witness said the bus coming down the grade at 25 or 30 miles an hour could have been stopped in 75 feet. He testified that the Ford would weigh about 2,300.

Other witnesses testified about the condition at the place of the accident, and about the tracks of the bus coming diagonally across from the right side to the left side of the road.

All of the evidence shows that, when the cars had stopped, the Ford car was against the bluff. This bluff was on the right side of the road, the way Sneed was going. Several of the witnesses testified that the bus' went diagonally across the road from the driver’s right to the left side, and pushed the Ford against the bluff. The evidence shows that it was snowing and sleeting, and the road was slick.

There was considerable evidence in addition to what we have set out tending to show the condition of the road, the situation of the cars after the collision, and the tracks made by the bus. We think, however, that, from the evidence’ above set out the jury could have found that the driver of the bus was going down grade on a slippery road at the rate of speed of 30 or 35 miles an hour; that he was not on the right side of the road, and that he made no effort to stop immediately upon discovering Sneed coming from the other direction. In other words, we think the evidence as to the negligence of the bus driver was sufficient to submit this question to the jury, and the jury’s finding on conflicting evidence is conclusive here, although we might think it was against the preponderance of the evidence. It would serve no useful purpose to set out the evidence in detail, for the reason that the finding of the jury on conflicting evidence is conclusive here. The burden of proof was, of course, upon the appellee to show that appellant was guilty of negligence.

Appellant contends that the court erred in asking witness Denny the following question, and permitting him to answer it. “Assuming that the bus has an emergency brake, and from the size of the car you observed and the direction you gave the jury, and it weighing 6 or 7 times as much as the small car, and the character of the road you observed, state -whether or not, if that car had been running at a reasonable rate, 20 to 30 miles an hour, down hill, that it could have been stopped within a reasonable distance with the application of the emergency brake.” The witness answered: “Within a distance of 75 feet.” The evidence shows that Denny is a mechanic in a Ford garage at ¿Berryville, and has operated cars 20 or 25 years. We do not think there was any error in permitting the question and answer. He certainly qualified himself to testify about emergency brakes and hydraulic brakes, and the effect that their application would have on a car.

Appellant, in this connection, calls attention to the case of Malvern & O. R. Rd. Co. v. Smith,, 181 Ark. 626, 26 S. W. (2d) 1107. In that case it was urged that the court committed error in permitting witnesses to express an opinion as to what the damages were without stating the facts upon which the opinion was based, and the court said: “We think no error was committed in permitting the witnesses to express their opinion where it was shown that they had some knowledge of the facts about which they testified.” The court also said in this connection: “Whether a -witness has such knowledge of the facts as to make his opinion of any value is a question largely within the discretion of the trial judge, and the value of such testimony may be tested by cross-examination of the witnesses as to the facts upon which the opinion is based. ” .

In the instant case the witness testified about his experience and qualification, and especially with reference to the effect of emergency and hydraulic brakes, and, even if he had never seen them tested on a large bus, still he could give his opinion as to what the effect would be, if he had experience in the use of such brakes on other cars.

In the other case referred to by appellant, Newport Mfg. Co. v. Alton, 130 Ark. 542, 198 S. W. 120, the court announced the rule that where experience and observation in the special calling of the witness gives him knowledge of the subject beyond that of persons of common knowledge, his evidence is admissible. Certainly the witness, Denny, had had experience and observation that gave him knowledge beyond that of a person of common knowledge. See also Dardanelle Pontoon & Bridge Turnpike Co. v. Croom, 95 Ark. 284, 129 S. W. 280.

“Whether or not the qualification of a witness with respect to knowledge or special experience is sufficiently established is a matter resting largely in the discretion of the trial court, whose determination is usually final and will not be disturbed by an appellate court except in extreme cases where it is manifest that the trial court has fallen into error or has abused its discretion, and that prejudice to the complaining party has resulted, even though the appellate court might have decided differently if the question had been presented to it in the first instance.” 22 C. J. 526.

Appellant next contends that the court erred in excluding the testimony of McCall, who testified that he arrived at the scene of the accident about 15 or 20 minutes after it happened, and talked to Sneed. Sneed asked him whose fault it was, and witness said: “They all say it was your fault; you were on the wrong side of the road.” He testified that Sneed made no reply. This testimony, appellant insists, was a part of the res gestae. Sneed’s question may have been, but certainly the statement of the witness was no part of the res gestae, and was inadmissible. That statement of the witness was purely hearsay and was inadmissible. 10 R. C. L. 980.

Appellant next contends that instruction No. 7 is erroneous and should not have been given. Instruction No. 7 authorized the jury to find for the plaintiff if the defendant negligently, operated the bus, and by reason of said carelessness and negligence, struck the Ford car driven by Sneed and fatally injured Sneed. This instruction also told the jury: “If you fail to so find, you should find for the defendant.”

But in instruction 12 given by the court, after having defined “ordinary care” and “negligence,” the court said that if Sneed, at the time of the injury was also guilty of negligence which caused or contributed to the injuries complained of, the verdict should be for the defendant.

Instruction No. 7, standing alone, would be erroneous, and the court said to the jury at the close of the instructions: “Gentlemen, I have been asked to state to you that no one of these instructions is the law, but all the instructions taken together constitute the law in this case.”

Appellant urges that instruction No. 8 on the measure of damages assumes as a fact without regard to the testimony or what a jury might think about it, that some injuries had been inflicted. We do not think the instruction is subject to this objection, but if it were it would not be erroneous.

Dr. J. F. John testified that he attended Sneed about three or four o’clock on the day of the accident, examined and treated him; that both arms and both legs were broken and crushed, and various injuries on head and body; that he died about 6 p. m.; suffered conscious pain and anguish as much as any man witness ever saw. There was no dispute about his injuries, and, where a person has both legs and both arms crushed and other injuries inflicted, it would not be erroneous even if the court assumed that some injuries had been inflicted. The court, however, did not assume that in said instruction.

Appellant also objected to tbe court’s instructing tbe jury as to the form of the verdict, but we find no error in this instruction. Appellant next contends that instruction No. 13, given by the court, is erroneous. We do not think the instruction as given by the court is open to the objection made by appellant. The instruction is as follows : ‘ ‘ Ordinary care requires of every man who drives a motor vehicle upon a public highway to keep a lookout for vehicles or persons who may be upon the highway and to keep his motor vehicle under such control as to be able to check the speed or stop it if necessary, to avoid injury to others when danger is apparent; and, if in this case you should find that the driver of defendant’s automobile bus discovered the peril of deceased Sneed, and, by the exercise of ordinary caution and care, could have avoided a collision, and failed to do so, then, in that event, he would be guilty of negligence.”

This court said in the case of Madding v. State, 118 Ark. 506, 177 S. W. 410: “Neither did the court err in telling the jury that it was the duty of the defendant to keep his machine under such control as to check the speed or stop it absolutely if necessary to avoid injury to others where danger could reasonably be expected or was apparent.”

The instruction in the instant case stated to the jury that it was the duty of a person driving an automobile on the highway to keep his vehicle under such control as to be able to check the speed or stop .it if necessary to avoid injury to others when danger is apparent.

In the case of Smith Ark. Traveler Co. v. Simmons, 181 Ark. 1024, 28 S. W. (2d) 1052, objection was made to the instruction given in that case. The instruction there given and approved was as follows: “Ordinary care requires of every man who drives a motor vehicle upon a public street to keep a lookout for vehicles or persons who may be upon the street, and to keep his motor vehicle under such control as to be able to check the speed or stop it absolutely if necessary to avoid injury to others when danger may be expected or is apparent.” The court did not err in giving instruction No. 13.

Appellant objects to some other instructions, particularly to appellant’s requested instruction “B.” This instruction was modified by the court by striking out the word “partly. ’ ’ The instruction as requested stated that, if the collision that occurred was due solely or partly to the fault of Sneed, the verdict should be for the defendant. The court modified said instruction by striking out “partly.” It then read, “if the collision that occurred was due solely to the fault of Sneed.” The instruction as requested should have been given, but, for the fact that the jury had already been told in the instruction immediately preceding this that, if Sneed was guilty of negligence which caused or contributed to the injury, plaintiff could not recover. There was no occasion to tell them in another instruction the same thing, and the instruction as given, No. 15, was, of course, correct. Sneed could not recover if his negligence was the sole cause.

After a careful examination of all the instructions requested, given and refused, we are of opinion that the court did not err either in giving or refusing to give instructions. The questions involved were submitted to the jury on correct instructions, and it was therefore a question of fact to be determined by the jury as to whether appellant was guilty of negligence, and as to whether Sneed was guilty of contributory negligence, and the jury’s verdict on these questions is conclusive here.

We find no error, and the judgment is affirmed.


author: McHaney, J.

text:
    McMillan v. Marathon Oil Company.
    4-3369
    Opinion delivered February 19, 1934.

      D. D. Glover, for appellant.

      Henry E. Spitzberg, for appellee.
   McHaney, J.

Appellant, Mrs. Cora A. McMillan, is the owner of a certain filling station property in the city of Malvern. Prior to October 11, 1932, said property was under lease to the Texas Oil Company at a rental of 1 cent per gallon of gasoline sold in said station per month. Through negotiations between her agent and the agents of appellee, which were initiated by the latter’s agents, on October 11, 1932, she executed a lease agreement to the appellee, for a period of twelve months, beginning November 1, 1932, at $90 per month. The lease agreement was prepared by counsel for appellee, who, upon examination of the abstract of title to the property, found that it was mortgaged to the Commonwealth Building & Loan Association of Little Rock in the sum of $7,500. The latter agreed to subordinate its rights to that of appellee, provided the monthly rentals were paid to it, and Mrs. McMillan, on the same day, October 11, executed a written assignment of the rentals to accrue under said lease to said association. Under date of October 14, 1932, she executed a lease upon the same premises for the remainder of the month of October to L. J. Nix, an agent of appellee, at 1 cent per gallon of gas sold during the remainder of the month. This lease agreement, as also the rental assignment aforesaid, made specific reference to the lease agreement with appellee above mentioned. When the Texas company moved its underground tanks and other equipment from the premises, it left the openings in the ground unfilled at Nix’s request, and he immediately moved tanks and other equipment in, the property of appellee, and replaced the concrete which had been removed when the Texas company took its tanks out. All this was done by Nix, as he says, although he had a lease for only sixteen days. The station was, from October 14 on, operated in appellee’s name, displaying its name and brand of products. Appellee never did sign the lease agreement, nor did it pay appellant any rent as agreed or .otherwise. On December 17, Nix gave Mrs. McMillan a check for $19.40 for rent for November, the October rent having been paid. She took this check to the Building & Loan Association, and, upon its advice, refused to accept it, and turned it back to Nix. She thereafter brought this action against appellee to recover the rent as stipulated in the lease agreement. At the conclusion of the evidence on behalf of appellant, the court, upon appellee’s motion, found the facts and law against her, dismissed the complaint for want of equity, and this appeal followed.

We think the court erred in so deciding. To sustain the action of the trial court, appellee insists that there is no proof that either Mr. Springer, its general manager of sales in this State, or Mr. Sheets, who actively solicited this lease and negotiated with appellant for it, and who was its field agent, had any express authority to represent appellee in this particular matter. There is no showing to the contrary. The undisputed proof is that Sheets solicited this lease, and, when the terms had been agreed upon, he requested Mrs. McMillan’s agent to go to see Mr. Springer, general agent for Arkansas, which he did, and he and Springer agreed upon the contract, which was reduced to writing by appellee’s attorney. Springer either sent it or caused it to be sent to Mrs. McMillan for her signature. She signed it and at the same time signed the rent assignment heretofore mentioned and Sheets signed as a witness thereto. This rent assignment was sent to the Commonwealth Building & Loan Association and was approved and accepted by it. No further subordination agreement was necessary, but, if so, the association agreed to subordinate its lien to the lease and offered to sign a proper writing to this effect. Springer, Sheets and Nix were all employees of appellee. They assumed to act for it in the premises, and we think were acting within the apparent scope of their authority. Springer, being the general manager for sales in this State, the others, acting under him, had the apparent authority of transacting any business for his principal that would further or tend to further the business of his principal of which he is the general manager. It is well known that oil companies market their products through -filb'-ng stations or service stations, either owned by them in fee, or operated by them under a lease, or through dealers handling their brands of merchandise. Such being the case, Springer no doubt had the express authority to negotiate for leases on property for filling station purposes, and bind his principal by contracts of this nature. At least, he had the apparent authority so to do. Moreover, both Sheets and Springer were admitted agents, and we have many times held that one dealing with an admitted agent had the right to presume, in the absence of notice to the contrary, that he is a general agent, clothed with authority coextensive with its apparent scope. Hal H. Peel Co. v. Hawkins, 175 Ark. 806, 300 S. W. 420, and cases there cited. Also it is true that Springer is the general agent, and we have many time further held that generally the principal is bound by all acts of a general agent which are within the apparent scope of his authority, whether they have been authorized or not. Oil City Iron Works v. Bradley, 171 Ark. 45, 283 S. W. 362; A. J. Chestnut Co. v. Hargrave, 177 Ark. 683, 7 S. W. (2d) 800.

Appellee’s agents caused appellant to terminate a lease agreement between her and the Texas company, made a contract with her for the lease of the property, entered into possession of the property and have had it in their possession ever since. It cannot escape liability now on the supposed lack of authority in such agents to bind it, or in its failure to have its proper officials execute the lease agreement. The term having now expired, it is liable for the full amount of the rental, $3,080, with interest thereon at 6 per cent, for one-half the term,’ to November 3, 3933, this sum to bear interest thereafter until paid at 6 per cent. Judgment will be entered here for said amount, and all costs here and below.

Severs ed.


text:
    Roark Transportation, Inc. v. West.
    4-3377
    Opinion delivered February 19, 1934.

      Festus O. Butt, for appellant.

      C. A. Fuller, A. J. Russell, Jr., and J. W. Trimble, for appellee.
   McHaney, J.

This case is controlled in nearly all respects by the decision of this date in the case, Roark Transportation, Inc., v. Sneed, ante p. 928. Appellee’s intestate and Mr. Sneed were riding in the same car at the time of the collision between it and appellant’s bus, Sneed being the driver and Mrs. West an invited guest, and both received injuries from which they died. Trial resulted in a verdict and judgment against appellant for $3,000.

For a reversal, a number of errors are assigned and argued, which are the same as in the Sneed case, and we will not repeat them here. Only such assignments as are not covered in the Sneed case will be discussed in this.

In the panel of 24, qualified as prospective jurors, from which to select by lot 18 for a drawn jury, appeared two persons who were related to Mr. Sneed, driver of the Ford car, within the prohibited degree, and they were challenged on this ground. The court held them competent,' and they were stricken from the list by appellant. This was not reversible error for two reasons: (1) that they were not related to Mrs. West or the plaintiff, and (2) appellant was not required to accept them on the trial jury. It exercised its right so to do and struck them off. It is not contended that any of the twelve jurors selected to try the case were disqualified in any way, or that they were not fair and impartial, nor is it shown that any challenge was made to any juror selected. The relationship prohibited by § 6334, Crawford & Moses’ Digest, is to either party to the suit. Sneed was not a party to this suit.

Objection was made to the giving of instruction No. 6 for appellee, on the ground that it “ignores the possible existence of contributory negligence on the part of plaintiff’s decedent.” Only a general objection was made to the instruction as given, but it is now said that it should have contained the clause, and without fault on the part of Fannie Clark West.” No such request was made to the trial court. Contributory negligence is an affirmative defense, and the burden is on him alleging it to establish it by a preponderance of the evidence. There is no proof in this record that Mrs. West was negligent in any particular. The proof is to the contrary. Therefore the court would have been justified in refusing the modification now suggested had the request been made. The same thing is true as to objections made to instructions 10 and 11.

All other errors assigned and argued are covered in the Sneed case.

Affirmed.


author: Butler, J.

text:
    Home Building & Savings Association v. Clay.
    4-3262
    Opinion delivered February 19, 1934.

      Hardin & Barton, for appellant.

      Paul M. Lynch and George W. Dodd, for appellee.

      Wm. H. Clark, Jr., Pettit & Meek, Trieber & Lasley and Will G. Akers, amici curiae.

   Butler, J.

The appellee brought suit to recover upon a certificate of stock issued to him by the appellant association. On a trial of the case, upon the pleadings and testimony adduced, the court held that the appellee was entitled to the relief prayed, and rendered judgment in his favor in the sum of $1,000, with interest from the date of the judgment until paid. From that judgment this appeal is prosecuted.

Prior to September 2, 1931, appellee was the owner of an amount of matured stock in the appellant association, and on that day he surrendered the same and received in exchange therefor the certificate upon which the suit was filed, which certificate is as follows:

“Without Banking Privileges
“Number 721 Ten Shares
“Home Building and Savings Association
“Port Smith — Little Bock — Dallas
“Six Per Cent. Pull Paid Stock
“Upon thirty days’ written notice, given after one year from date hereof, Home Building and Savings Association will pay to J. P. 'Clay, of Port Smith, Arkansas, one thousand and no/100 dollars ($1,000), with all unpaid dividends that have fallen due thereon, at the rate of six per cent. (6%) per annum, falling due semi-annually on January 1st and July 1st each year. In consideration of said dividends being paid in cash, the owner hereof waives all larger participation in the earnings of the association.
“This certificate is subject to the laws of Arkansas and the bylaws of the association. It is especially agreed in no case shall the rate of dividends hereon exceed the rate paid or credited by said association on its instalment and pre-paid stock.
“Witness the corporate seal and the signatures of the president and the general manager of said association at Port Smith, Arkansas, this 2d day of September, 1931.
“(Signed) W. T. Maxwell, President.
“ (Seal) B. W. Ferguson, for General Mgr.
“Transfer of this certificate will be made only upon request of the owner and upon payment therefor of $1 transfer fee.
“Shares $100 Each.”

Endorsed on side of certificate: (Div. paid from July 1, 1931. Issued in lieu Cert. No. 1988.)

It is the contention of the appellee, to which the trial court assented, that the relationship created by the foregoing instrument was that of debtor and general creditor. The appellee here argues that the certificate did not create him a stockholder in the association, but, if so, that at the expiration of thirty days’ notice of demand for payment such relationship ceased, and that of debtor and creditor arose. In support of this contention appellee has referred us to a number of cases which seem to sustain the position he has taken. Among these are: Wise Bros. v. Yazoo Building & Loan Ass’n, 105 Miss. 78, 62 Sou. 1; Eastern Bldg. & Loan Ass’n v. Williamson, 189 U. S. 122, 23 S. Ct. 527; Silvers v. M. & M. Sav. Fund, etc., N. J. Ch. 56 Atl. 294; State, etc., v. Active Bldg. & Loan Ass’n, 80 Mo. App. 585. The doctrine of these cases appears to be founded on the case of U. S. Bldg, & Loan Ass’n v. Silverman, 85 Pa. 394, holding that, in building and loan associations the status of a withdrawing member is changed from that of member to that of general creditor.

It is insisted by the appellee that the form of the certificate is conclusive of the relationship, and that an inspection of it discloses that it is an obligation for the payment of money; that it is not in form a stock certificate, and does not indicate that the appellee was the-owner of stock or a member of the association, and, since it is an obligation to pay a certain sum of money, it is not a stock certificate, nor was the appellee a stockholder, and therefore the bylaws of the association would not apply. This position cannot be maintained because the certificate is not an unconditional obligation to pay a sum of money at a time stated or upon the happening of certain contingencies, the promise to pay being limited by the statutes of this State and the bylaws of the association, which are expressly made a part of the contract.

The association is a mutual building and loan association, operating under the provision of act No. 128 of the Acts of 1929 as amended by act No. 236 of the Acts of 1931, digested in Castle’s Supplement, § 750 et seq. Mutual building and loan associations are permitted by statute to provide by their bylaws the several kinds of classes of shares, stock, or certificates which it may issue and to prescribe the reciprocal rights and powers of the owners of the several classes of stock. Authority is given for the withdrawal of credits on any or all classes of shares, stock or certificates at such times and under such terms and conditions as the association may prescribe by its bylaws. The statute also provides that the withdrawals shall be paid in the order of filing, and that not more than fifty per cent, of the monthly receipts of the association in any one'month may be paid upon such withdrawal applications.

The bylaws of the association provide that all those who become in any way the owner of one or more shares of the capital stock or certificates of the association shall be members of the same; that each member present at any meeting of the association in person, or by proxy, shall be entitled, to one vote for each $25 of value of stock or certificates held by him. They provide further for various classes of stock to be paid for in installments or to be fully paid when issued, the fully paid stock to be issued at $100 cash per share with such rate of interest or dividend and for such length of time as may be determined by the board of directors.

Section 12 of the bylaws provides in part that at no time shall more than one-half of the monthly receipts of the association, in any one month, be applicable to the payments of withdrawals for that month, except by the consent of the board of directors; and, further, that applications for withdrawals shall be paid in the order filed as fast as funds are available for that purpose.

Upon the issuance of the certificate, it is clear that the appellee became the owner of ten shares of the value of $100 each of full-paid stock, and, under the bylaws of the association, had a right to participate in its management, and it seems that he executed a written proxy authorizing certain persons to vote his shares of stock at any meeting of the association. It is argued that § 12, relating to withdrawals, does not apply to fully-paid certificates of stock. No class of stock is excepted, but the statute expressly provides for the withdrawal of “all classes of shares, stock or certificates.” Appellee says he did not give notice of withdrawal, but of demand for pavment. The effect of a demand for payment would be notice to the association of the intention to withdraw membership, and whether it be called “demand for pavanent” or “notice-of withdrawal” is immaterial, for the result would he the same, and the demand or application could not be paid in any event out of more than one-half of the monthly receipts of the association in any one month, and then only in the order of its filing. The maturity of the stock and the demand for its payment would not serve to change the relationship from stockholder to general creditor as contended. Our conclusion in this respect has the support of the weight of authority, and in Pennsylvania and New Jersey, where the rule, was first announced as contended for by the appellee, later decisions seem to have abandoned it. Fornatoro v. Atl. Coast, etc., Ass’n, 10 N. J. Misc. 1248, 163 Atl. 240, and Stone v. Schiller B. & L. Ass’n, 302 Pa. 544, 153 Atl. 758. In the last-named case, the early case of U. S. B. & L. Ass’n v. Silverman, supra, is repudiated. In Heinbokel v. Nat. S. L. & B. Ass'n, 58 Minn. 340, 59 N. W. 1050, 25 L. R. A. 215, 49 A. S. R. 519, referring to the doctrine that a stockholder ceases to be a member of the association after due notice of withdrawal, and may, upon refusal of payment, sue. and recover judgment as any other creditor, it is said: “But it is obvious that a stockholder who withdraws from one of these associations cannot properly be regarded as having the rights of the ordinary creditor, and this was admitted by the same learned court (Pennsylvania) in a later case (Christian’s Appeal, 102 Pa. St. 189), in which it was frankly stated that there was manifest error in U. S., etc., Ass’n v. Silverman, 85 Pa. St. 394, in putting withdrawing stockholders in the position of general creditors. The conclusion in the case just mentioned loses potency when we discover that the reasoning is unsound. ’

As already stated, the later Pennsylvania and New Jersey cases have abandoned the rule laid down in the Silverman case, and have adopted the contrary view, which has the support of our own court in Fort Smith B. & L. Ass’n v. Cohn, 75 Ark. 497, 87 S. W. 1173. In that case certain stockholders had matured their stock in the association and were entitled to a designated sum under the terms of their certificates. They demanded payment, notice of which matured December 1, 1897. Instead of paying cash, the association executed its promissory note on February 25, 1899, for the sum demanded, payable February 25, 1900. On the 5th day of March, 1900, the association was declared insolvent by the chancery court, and receivers were appointed to administer its assets under the orders of the court. The holders of the notes intervened and prayed for judgment for the amount due, as shown by the notes, on the theory that they were general creditors, invoking the rule contended for by the appellee in the case at bar. The trial court gave judgment for the note holders, but the Supreme Court reversed that judgment, saying: “The court erred in rendering judgment for appellees as if they were creditors of the association. The proof shows that the association was insolvent at the time the notice of withdrawal was given, and continued so down to the time of the execution of the notes, which are the basis of appellees’ claims.

“The proof tends to show that appellees suspected that the association was in a critical financial situation. But, even if it be. conceded that they did not know that the association was insolvent, still that would not affect the result here. For the indebtedness of the association to them, evidenced by the notes, grows out of their relation to the association as members. * * *

“While appellees made an honest effort to withdraw, and thought they had withdrawn, and were treated, after expiration of their notice, as if they had withdrawn, so far as the payment of dues, etc., was concerned, yet, as a matter of fact, actual withdrawal had not been consummated. For that could only take place by the. payment for their stock. ’ ’

The doctrine of these eases is that held by a majority of the courts. Among these are the following: Fornataro v. Atl. Coast B. & L. Assn., supra, where the rule of the eariler New Jersey cases is modified; Englehart v. Fifty Ward, etc., Ass’n, 148 N. Y. 281, 42 N. E. 710, 35 L. R. A. 289; Texas Homestead B. & L. Ass’n, v. Kerr, 13 S. W. 1020; Publicker v. Pottash Bros., etc., Ass’n, a late Pennsylvania case, 104 Pa. Super Ct. 530, 159 Atl. 58; Andrews v. Roanoke-Bldg., etc., Co., 98 Va. 445, 36 S. E. 531, 49 L. R. A. 659 ; Mutual Bldg. & Investment Co. v. Fred erick, 43 Ohio App. 270, 183 N. E. 114; Rabbitt v. Wilcoxen, 103 Iowa 35, 72 N. W. 306, 38 L. R. A. 183, 64 Am. St. Rep. 152.

The appellee calls attention to the fact that nearly all of the cases cited by the appellant arose where the association was insolvent, and that the rule in those cases is not applicable to the instant case for the reason that the appellant association is a solvent and going concern. The fact that a building and loan association is solvent or insolvent cannot convert a withdrawing stockholder who may be in a sense a qualified creditor into a general creditor. It is true that a majority of the cases arose in insolvent associations, but there are a number where the association was a solvent and going concern and the withdrawing member contended for the status of a general creditor and sought to have his demand reduced to judgment. Among these are those last above cited.

In the case of Miers v. Columbia Mutual B. & L. Ass’n, 157 Fed. 490, the court, in discussing a contention similar to that of the appellee in the case at bar last noted above, had this to say: “The claimant contends that, assuming the insolvency of the association at the time his withdrawal application was accepted, he is entitled to preferential payment; his status from that time being that of a creditor. The contention ignores the qualification of the liability of the association contained in the bylaws that no more than ‘one-half the monthly dues received in any month’ shall be applied to the payment of withdrawing members.” A number of cases are cited, and the court continues: “It is true that in some of the cases cited by the master the involved associations were insolvent, and in others they had ceased to do business and were unable to repay the dues paid by the withdrawing members; but, even assuming that the evidence in this case does not strictly disclose the insolvency of the respondent at the period of the withdrawal notice in suit, the claimant was nevertheless required to prove that available funds were in the possession of the respondent to meet the repayment demanded at the time of the appointment of the receivers.”

In a majority of the cases holding that a withdrawing member is a creditor, there is no controversy involving the rights of the general creditors, the contentions being between the different classes of shareholders. The members, who had withdrawn and demanded payment for their certificates, claimed to be preferred and entitled to full payment before the other shareholders were entitled to anything. Those shareholders who had not given notice claimed that all the shareholders should participate equally in the distribution of the assets of the insolvent company. Some of these cases turn on the language of the statutes and bylaws, and it is generally held in those cases that the right of the withdrawing shareholder to receive payment must be limited to the manner prescribed by the bylaws and payable out of the funds made applicable thereto.

In Rabbitt v. Wilcoxen, supra, the court said: “It seems to us that these authorities, as well as the language of the bylaws of the association in this case, fix a limitation on the. rights of withdrawing shareholders as to the funds applicable to the payment of their claims, and that beyond such limit they cannot go. In this case there is, confessedly, no such fund available. * * * Insolvency but adds to the strength of such a position.”

In the instant case there is no contention that there is a fund in the treasury of the appellant association available under its bylaws to pay the certificates of the withdrawing members. Indeed, the evidence shows that there are a great number of members holding fully paid certificates who have made application for their money, but have not been paid because there are no funds available, and there is no claim made that the association has diverted any of its funds, but only that it has been paying debts owing to general creditors to the exclusion of the appellee’s claim and the claims of others similarly situated. There appears to be 2,280 applications of holders of certificates for withdrawal and payment. Of this number 820 have been paid in the order of the filing of their applications. There remain 1,460 applications unpaid, and 1,057 of these were filed prior to that of the appellee. The association, in acknowledging the demand made by the appellee, advised Mm that it was allowed to use not exceeding fifty per cent, of its income in any one month to pay for withdrawals; that, because of the unusual business depression, its monthly income had been reduced, and that his claim would be paid at the earliest possible date, and as soon as reached in the order of its filing.

The question of the solvency or insolvency of the appellant and a number of others are raised by the parties. These we refrain from discussing for the reason that we have reached the. conclusion that the appellee’s status, in any view of the case, is not that of a general creditor, and that he therefore is not entitled to the relief he seeks, which was granted by the trial court. It follows that the judgment is reversed, and the case dismissed.


text:
    Agricultural Finance Corporation v. Brinkley.
    4-3370
    Opinion delivered February 19, 1934.

      Frank C. Douglas, for appellant.

      Holland & Barham, for appellee.
   Butler, J.

The Agricultural Finance Corporation of Blytheville was organized under the laws of Arkansas about 1927 for the. purpose of making loans to farmers through the Federal Intermediate Credit Bank of St. Louis. Samuel L. Thomas was secretary and treasurer after the first year or two until suit was filed in March, 1933, by certain stockholders to wind up the affairs of said corporation, in the chancery court for the Osceola District of Mississippi County, and Roy Nelson was appointed receiver and directed to proceed to collect notes and accounts. As such receiver, he filed this suit on April 28, 1933, and made each of the appellees defendants, as they had each borrowed from said corporation, and each had signed the other’s note and mortgage.

It was agreed at the time of the submission of the case that said defendants owed said corporation a joint liability of $640 and interest. Defendants filed an answer and cross-complaint, alleging that, in order to borrow said money, they were required to become stockholders in the Agricultural Finance Corporation of Blytheville to the amount of $900; that they paid in this amount when the loan was made, but never received their stock certificates, and prayed for judgment against the receiver for $900 and interest.

The trial court found for the receiver in the sum of $640, and that the defendants were entitled to recover on their cross-complaint in the sum of $900, a difference of $260 in favor of the defendants, together with six per cent, interest thereon from June 2,1930, until paid. From that decree is this appeal.

The appellants make two contentions; first, that the evidence does not show that the appellees paid the Finance Corporation $900 for their stock, and, if such payment was made to Samuel L. Thomas, it was made to him as the agent for the appellants, and not in his capacity as an officer of the corporation. We need not discuss the testimony adduced on this branch of the case, since we are of the opinion that it is sufficient to support the finding of fact made by the chancellor.

The next contention of the appellants, and the one we think well-founded, is that, by the payment of the $900 by appellees to Thomas, they became stockholders in the corporation, and cannot therefore offset their stock against the debts due by them. The proof shows that those borrowing from the corporation as a condition precedent for the loan were required to purchase stock in the corporation to the amount of seven and one-half per cent, of the sums borrowed. It seems to be conceded that seven and one-half per cent, of the sums borrowed by the appellees would be $900. When the loan had been approved' by the Intermediate Credit Bank, through which organization the Finance Corporation obtained its money, and when the checks were sent to the office of the local corporation, $900 was paid by the appellees to the secretary, Samuel L. Thomas, for the stock and the remainder of the proceeds of the loan was used by them in their business. Certificates of stock were not to be delivered to the appellees, but were, to be retained by the corporation as part of the collateral security for the payment of the loan.

One of the appellees, who handled the transaction for himself and the others, testified that he understood that stock had to be taken in order to get the loan, and that in discussing the question as to the issuance and delivery of the stock with Thomas he was informed that the stock would be issued but would not be delivered until the loan was paid; that the stock would be held as collateral. The records of the corporation contain no entry showing the issuance of the stock and no stock certificates were discovered.

Appellees contend that the dealing between them and the secretary of the corporation amounted only to a contract for the sale and purchase of the. stock, and that, as the evidence fails to show that the certificates were issued or delivered to the appellees, they did not become stockholders. They cite the rule announced in 14 C. J. at page 481, §§ 710 and 711, to the effect that, although the issue or tender of certificates of shares is not necessary to render one a stockholder in a corporation, the rule does not apply to contracts for the sale of stock by the corporation as distinguished from subscriptions. They insist that the transaction, to be considered as a sale, must have been completed by the issuance and delivery of the stock, and argue that, if the transaction was completed, the failure to issue the stock would amount to a conversion of it, and they would be entitled to recover its value as of the date the loan was consummated. It is clear that these contentions are untenable. Nothing remained to be done to complete the purchase of the stock after the $900 was paid to the secretary of the corporation, at which time the appellees became the owners of the number of shares of stock in the corporation as $900 would purchase. It was not the intention of the parties that appellees should receive the certificates of stock until after the loan had been paid and whether or not the certificates were actually issued is immaterial in so far as the relationship existing between the appellees and the corporation is concerned. They acquired all the rights of stockholders and were subjected to all the liabilities as such the moment they paid the $900 for the stock, and were then, and are now, stockholders of the corporation. 14 C. J. 482 § 710; Biscoe v. Tucker, 11 Ark. 145; Galbraith v. McDonald, 123 Minn. 208, 143 N. W. 353, L. R. A. 1915A, page 465. The rule is clearly stated in U. S. Radiator Corporation v. State, 208 N. Y. 144, 101 N. E. 783, 46 L. R. A. (N. S.) 585, as follows: “The certificate of the corporation for the share, or the stock certificate, is not necessary to the existence of the shares or their ownership. It is merely the written evidence of these facts. It expresses the contract between the shareholder and the corporation and his co-shareholders. But it is the payment, or the obligation to pay for shares of stock, accepted by the corporation, that creates both the shares and their ownership.”

There was no conversion because the appellees were not entitled to the possession of the certificates of stock until after their debt was paid. Under the undisputed facts the appellants were entitled to a judgment for the balance of the debt with interest and the prayer of the cross-complaint should have been denied. The appellees may file their claim with the receiver as stockholders and receive their pro rata share of whatever may be due them after the debts of the corporation and the expense of the insolvency proceeding’s have been paid.

It follows that the decree of the trial court is reversed, and the cause remanded with directions to enter a decree in conformity with this opinion.