text:
    Arnold v. Oliver.
    Opinion delivered February 13, 1922.
    1. Courts — test op jurisdiction. — The jurisdiction of the court is tested by the allegations of the complaint.
    2. Equity — jurisdiction to enforce attorney’s lien. — Equity has jurisdiction to enforce a client’s agreement to give the attorney a lien upon collections to be made by him for her to reimburse him for advances made to her.
    3. Courts — pendency op case in another court. — Where the circuit court on appeal from the probate court refused to adjudicate a controversy between an attorney and client as to advances to the client, and limited consideration to fixing fee to which attorney was entitled and remitted the parties to the chancery court to litigate the question of advances, the fact that the circ.uit court held the case in abeyance until the litigation over advances could he adjusted did not divest the chancery court of its jurisdiction to determine such question and whether the attorney had a lien to secure same on the funds in hand.
    Appeal from Clajr Chancery Court, Western District; Archer Wheatley, Chancellor;
    affirmed.

      ■G. T. Bloodivorth, for appellants.
    The chancery court had no jurisdiction and erred in overruling defendant’s demurrer. 145 Ark. 540; 145 Ark. 262; Cosby v. Hurst, 149 Ark. 11.

      The court erred in overruling defendant’s motion for a jury trial.

      F. G. Taylor, for appellee.
    The chancery .court had jurisdiction. 31 Cyc. 797 (11); jurisdiction cannot be defeated by conceding that the party invoking it is entitled to the relief asked for. 15 C. J. 822, sec. 135; 69 S. W. 447.
    Granting of jury trials in chancery court is a matter within the discretion of the court. C. & M. Digest, §§ 1266 and 1267. There was no error in refusing it.
   Smith, J.

Samuel Watson died in March, 1915, leaving five children, all of whom were of age. He and his wife, who survived him, and who was the stepmother of his children, had been separated for some time before his death. The heirs took possession and disposed of most of the personal property upon the death of their father. The right of the widow, Maggie Watson, to any interest in the real estate or personal property of her husband was denied by the children, and the widow, being without funds, employed G. B. Oliver to prosecute the necessary suits to obtain for her her distributive share of the real estate and the homestead and the dower interest which she claimed in the personalty, and agreed to give Oliver, as compensation for his services, one-third of the recovery.

The suit brought to recover an interest in the land was decided adversely to the widow, and that decree was affirmed by us on appeal. Watson v. Hill, 123 Ark. 601.

The widow recovered judgment in her suit for dower in the personalty and for the statutory allowances, and this judgment was affirmed by us in a case not officially reported. Arnold v. Watson, 131 Ark. 593, 198 S. W. 119.

Afterwards Oliver instituted, in the name of the administrator, a suit in the circuit court for additional dower and attached the land. There was a judgment in this suit on October 29, 1919, finding the total value of the personal property to be $1,419.80 and sustaining the attachment. It appears that two of the heirs paid their pro rata part of the widow’s claim, as did also the purchaser of the shares of two of the other heirs. The administrator himself purchased, and is now the owner of, the remaining share, and, without paying anything on account of his own interest, he satisfied the judgment which had been recovered in his name as administrator.

On February 9,1920, Oliver filed in the probate court a petition, in the name of the widow, asking for additional dower. The widow herself filed a response to this petition, in which she stated that she was satisfied with the original judgment of the probate court awarding her dower, and that she did not desire any further litigation of her dower rights. This petition was heard, and, in connection therewith, Oliver prayed that he be allowed to retain, out of the money in his hands which he had collected for Mrs. Watson, certain advances made by him to her, an itemized list of which he then filed. The probate court heard the evidence and refused to take jurisdiction of the demand of Oliver for advances to Mrs. Watson, but did allow him the fee claimed and the costs advanced, and ordered Oliver to pay over to Mrs. Watson the balance in his hands • amounting to $363.09, and denied the prayer for additional dower. Oliver appealed to the circuit court from this judgment of the probate court, and that appeal is now pending awaiting the outcome of this suit. Thereafter Oliver brought this suit in the chancery court, and upon the trial thereof a decree was rendered in his favor for the advances made by him to Mrs. Watson in the sum of $450.89, and a lien thereon was declared in his favor as prayed in his complaint, and this appeal is from that decree.

The chancery court overruled a motion to transfer to law, and that action is assigned as error. We-think the court did not err in this ruling. The complaint alleged that, at the solicitation of Mrs. Watson, Oliver made numerous advances to her, and that these were made upon the express agreement that he should reimburse himself out of the collections made. The truth of this allegation was denied; but we test the jurisdiction of the court by the allegations of the complaint. Merchants’ Bank of Vandervoort v. Affholter, 140 Ark. 480.

The testimony at the trial was conflicting as to whether such an agreement existed or not; but we think the testimony supports the finding that there was such an agreement. Mrs. Watson was shown to be without means, in fact, to be in almost destitute circumstances, and had no security of any kind except the contingent .interest in the estate of her husband for which she had employed Oliver to sue, and it appears very plausible that he would have required this agreement before making these advances.

If there was such an agreement, and the court has so found, then the suit to enforce it was within the jurisdiction of the chancery court. Oliver sought to have not merely an adjudication of the amount due him, but to have a lien declared in his favor on the money in his hands, which would authorize the appropriation of so much thereof as was required to reimburse him for the advances made. 31 Cyc. p. 397; 3 Pomeroy’s Equity Jurisprudence (4th Ed.) § § 1231; 1235-6-7; Rose City Bottling Works v. Godchaux Sugars, Inc., 151 Ark. 269.

It is insisted that Oliver claims a fee based on the recovery of $1,419.80 as dower, whereas the testimony shows that a less sum was recovered. It does appear that two of the heirs were permitted to settle for $250 each, and the recovery calculated on that basis would, of ■course, be only $1,250. But it appears that the answer filed in the present case admits the correctness of the charge for the fee; and it further appears that no attempt has been made here to litigate the question of the amount of the fee; in fact, the decree here appealed from contains the recital that “the amount due for fees and costs not being passed on in this case on account of said matters being pending in the circuit court. ’ ’ In other words,. it appears that the circuit court has refused to adjudicate the controversy between Oliver and his client, in regard to the advances made her, in the case pending in the circuit court, on appeal from the probate court, but remitted the parties to another forum to litigate that question, and the circuit court has held the case on appeal in abeyance until the litigation over the advances could be adjusted. We see no error in this. Certainly, the pendency of the case on appeal in the circuit court did not divest the chancery court of its jurisdiction to determine what amount was due Oliver for his advances and whether he had a lien to secure the same on the funds which he had collected.

In the decree appealed from the chancery court adjudicated only the advances made and that a lien existed therefor. The administration of this estate has not been lifted out of the probate court, as is contended, and there has been no interference with the jurisdiction of the pro bate court, as is insisted.

The chancery court had jurisdiction to determine the amount of the advances, and it only remains to decide whether the finding on that subject is against the preponderance of the testimony. Upon this subject, it may ¡be said that most of the advances consist of checks upon a bank or orders to a store, and Mrs. Watson does not question any of these checks or orders. The principal item in dispute is a charge of $3 per month for the rent of a house owned by Oliver and occupied by Mrs. Watson for a period of forty months. Mrs. Watson admits occupying the house, but denies liability for rent for the reason, as she testifies, that she was employed for a part of the time as a domestic servant, and the house was furnished free on that account, so that she would be accessible when her services were desired. Oliver testified that, after Mrs. Watson had vacated the house, he told her he had charged her $3 per month for its rent, and she stated she would not have vacated the house had she known the rent was so small. There is also conflict in the testimony concerning one or more other items. But we dispose of these items by saying that, after carefully considering the testimony, we have concluded that the chancellor’s finding is not clearly against the preponderance of the evidence.

Upon the whole case, tlie decree appears to be correct, and will be affirmed.


source: Caselaw Access Project

author: Humphreys, J.

license: Public Domain

text:
    Johns v. Rollison.
    Opinion delivered February 13, 1922.
    1. Mortgages — failure to acknowledge satisfaction — penalty.— Crawford & Moses’ Dig., §§ 7395-6, requiring a mortgagee receiving full satisfaction, at the request of the person making satisfaction, to acknowledge same on the margin of the record, and imposing a penalty for failure to do so, penalizes the mortgagee receiving satisfaction for not satisfying the record upon the request of the mortgagor making satisfaction; the statute meaning interested parties, not mere volunteers.
    2. Mortgages — failure to acknowledge satisfaction — amount of penalty. — Under Crawford & Moses’ Dig., § 7396, providing that a mortgagee receiving satisfaction and failing to acknowledge same shall forfeit to the party aggrieved any sum not exceeding the' amount of the mortgage money, an award of $600 for a persistent refusal to satisfy a mortgage for $4,400 was not excessive.
    Appeal from Arkansas Circuit Court, Southern District; George W. Clark, Judge;
    affirmed.

      John L. Ingraon, for appellant.
    The court erred in refusing to direct a verdict for appellant. The request for satisfaction cannot be made by one of two joint mortgagors alone. 27 Cyc. 1427.
    The statute is penal and calls for strict construction. Jones on Mortgages, vol. II, 7th Ed. sec. 990. Not only were the mortgagors joint, but also the appellees. The suit should have been brought by both mortgagors. J ones on Mortgages, supra.

    The mortgager did not tender any fee for satisfaction of record. See J ones on Mortgages, supra.

    The verdict is excessive. 82 Ark. 309.

      John W. Moncrief, for appellee.
    Appellant did not file any demurrer or pleading as to Bollison not being made a party to the suit, and it is now too late to raise that question. 78 S. W. 283; 122 Ark. 566; 89 Ark. 252.
    The issue of the fee for satisfaction was not urged below, but, if so, appellant wavied it by promising to satisfy the mortgage. 56 Atl. 510; 90 Ark. 469; 94 Ark. 378.
    The verdict is not excessive. Appellant wilfully refused to satisfy the mortage, and is therefore liable to appellee. 62 Ala. 302; 35 N. W. 284.
   Humphreys, J.

This suit was instituted by appellee against appellant to recover the statutory penalty for failure to satisfy a mortgage of record within sixty days after the payment thereof and notice to appellee to appellant to satisfy same. The substance of the pleadings upon which the issues in the case were joined are briefly set out in appellant’s abstract, and are as follows:

“Appellee filed his complaint in the circuit court of Arkansas County, Southern District, alleging that on April 9, 1919, he and one W. L. Bollison executed and delivered to appellant and one C. E. Corley a chattel mortgage to secure $4,400, which was recorded; that appellant and said Corley were partners; that appellee paid said indebtedness and requested appellant to satisfy said mortgage on the record; that appellee acquired, during the life of the mortgage, all of the rights of his co-mortgagor, W. L. Bollison, in the mortgaged property; that appellant failed to satisfy said mortgage for more than sixty days, and because thereof appellee is entitled to recover from appellant an amount equal to the mortgage money. He prayed for judgment in the sum of $4,400 and interest. Afterwards appellee filed an amendment to his complaint reducing the amount sued for from $4,400 to $2,900.
“Appellant answered and admitted that appellee and W. L. Bollison executed said mortgage to himself and C. E. Corley, and admitted that same was recorded; denied that he ever refused to accept the full amount due on said mortgage; denied that appellee paid all money that said mortgage was given to secure; denied that appellee ever requested him to satisfy said mortgage of record; denied that he had any knowledge or information sufficient to form a'belief as to whether or not appellee acquired all of the rights of "W. L. Rollison in and to said mortgaged property, or as to whether or not appellee assumed all obligations of W. L. Rollison under said mortgage; denied that appellee is entitled to recover from him an-amount-equal to said mortgage money for failing to satisfy said mortgage.”

The cause was submitted upon the pleadings, evidence and instructions of the court, which resulted in a verdict and judgment in favor of appellee for $600. From that judgment an appeal has -been duly prosecuted to this court.

Section 7395 and 7396 of Crawford & Moses’ Digest were made the basis of the suit. These sections are as follows :

“7395. If any mortgagee, his executor, administrator or assignee, shall receive full satisfaction for the amount due on any mortgage, he shall, at the request of the person making satisfaction, acknowledge satisfaction thereof on the margin of the record in which such mortgage is recorded.
“7396. If any person thus receiving satisfaction do not, within sixty days after being requested, acknowledge satisfaction as aforesaid, he shall forfeit to the party aggrieved any sum not exceeding the amount of' the mortgage money, to be recovered by civil action in any court of competent jurisdiction.”

The facts necessary to a determination of the material questions presented on this appeal are, in substance, as follows:

On the- 9th day of April, 1919, N. J. Rollison, the appellee, jointly with W. L. Rollison, executed a chattel mortgage to Robert Johns and C. E. Corley to secure a note to tliem of even date in the sum of $4,400 on a lot of personal property and. tlieir one-third interest in an undivided one-half interest in a certain rice crop then being grown. Subsequently appellee acquired, by purchase and written transfer, all the interest in the mortgaged property from W. L. Rollison and assumed the payment of the indebtedness. After purchasing the interest of W. L. Rollison, appellee entered into a contract with the mortgagees to the effect that he would expeditiously cut and thrash the crop of rice which was growing and remove the mortgaged property off of the place. In this contract it was recited that appellee had purchased the interest of W. L. Rollison. Pursuant to the agreement the crop was thrashed, and a large portion of it was sold by appellee and appellant, whereby the mortgage indebtedness was reduced to about $2,500. Appellee then deposited the money in the bank to pay the balance due the mortgagees. C. E. Corley was a resident of Illinois, and was absent from Arkansas. Appellee requested appellant to accept the money, which he refused to do. Appellee then had the cashier of the bank notify appellant that the money was in the bank to liquidate the mortgage indebtedness. Appellant ignored the notice. Appellee then advertised a sale of the mortgaged property so that it might be moved off of the place in accordance with the contract he had made with Robert Johns and C. E. Corley subsequent to the execution of the mortgage. On Sunday evening before the sale was to be made on Monday, appellant notified appellee not sell the property unless in the meantime the money was paid to him in currency. > Thereupon appellee communicated with the bank by ’phone and directed it to send the money to his farm Monday morning. This was done, and after a settlement was reached between appellant and appellee in the presence of their respective attorneys, the balance due was paid to appellant in cash, and the mortgage and note marked paid and delivered to appellee. The evidence adduced by the appellee tended to show that a demand was then made upon appellant to satisfy the record, which appellant promised to do; that appellant failed to satisfy same, and was requested by appellee at later date, through the medium of a letter, to do so; that the first demand to satisfy the record by appellee was made on the 9th day of February, 1920, and that the record had not. been satisfied on the day of the trial, July 7, 1921. The testimony adduced by appellant tended to show that no request or demand was made on appellant to satisfy the record. This issue of fact was submitted to and determined by the jury adversely to the contention of appellant.

Appellant’s theory and contention is that under a proper construction of the statute, in order to subject him to a penalty for not satisfying the record, it was necessary that both mortgagors request or demand both mortgagees to satisfy the- record. Appellant cites 27th Cyc. p. 1427, and § 990, 2nd Jones on Mortgages (7th Ed.) to support his contention that it was necessary for both mortgagors to make the demand or request to satisfy the mortgage of record. The text in each work is supported by the citation of Alabama -cases, which were construing an Alabama statute, which was broad enough in its language to include all mortgagors and mortgagees. It will be observed in reading sections 7395 and 7396 of Crawford & Moses’ Digest that the duty is imposed upon any mortgagee, his executor, administrator or assignee, who shall receive full satisfaction for the amount due on any mortgage to satisfy same of record if requested to do so by the person making satisfaction. In other words, our statute penalizes the ones receiving satisfaction for not satisfying the record upon the request of those making satisfaction. The statute, of course, means interested parties, not volunteers. The interpretation placed by us upon this statute is the result of a strict construction when the natural meaning- is given to each word and paragraph contained in the statute.

Appellant insists that the verdict is excessive, and for that reason the judgment should be reversed. The statute provides for recovery in any amount not to exceed the amount of the mortgage indebtedness. The purpose of the statute was not only to'award compensatory, but also exemplary, damages as a punishment against the mortgagee for refusal to comply with the request or demand of the mortgagor to satisfy the mortgage of record. A substantial recovery was intended. The mortgage, as recorded, showed a lien against the property for $4,400. The mortgagee, without excuse, persisted in his refusal' tj satisfy the record. The mortgag’or being entitled to a substantial amount, it cannot be said that $600, under all the circumstances of the case, was exorbitant or excessive.

No error appearing, the judgment is affirmed.


text:
    Medlock v. Jones.
    Opinion delivered February 13, 1922.
    1. Adverse possession — sufficiency ' of evidence. — -Evidence held sufficient to carry to the jury the question of plaintiff’s adverse possession.
    2. Witnesses — husband and wife. — A husband was not competent, in an action by his wife, to testify as to a certain transaction where he was not acting as her agent in the matter.
    3. Evidence — conduct of plaintiff’s husband. — In an action by plaintiff, who claimed to have acquired title by adverse possession against cotenants, in which plaintiff testifies that her . husband was looking after land and making contracts concerning it for her, testimony that the husband saw some one with reference to dividing the land, where he testified that he was not representing his wife in doing so, was not admissible to show that hei possession was not adverse to the cotenants.
    4. New trial — newly discovered evidence. — It was error to deny a new trial for newly discovered evidence, not cumulative, which tended to break down appellee’s testimony,, upon which alone she relied for recovery.
    Appeal from Conway Circuit Court; A. B. Priddy, Judge;
    reversed.

      M. H. Dean, for appellant.
    The court erred in refusing to direct a verdict for defendant. To uphold a verdict on appeal there must be evidence to support it. 118 Ark. 249. A new trial will be ordered where a verdict is directly against the evidence. 21 Ark. 468; 24 Ark. 224; 70 Ark. 385; 79 Ark. 608; 28 Ark. 550; 34 Ark. 632; 39 Ark. 491.
    Possession of one co-tenant under common title is presumed to be for the benefit of all, and if he wishes to hold adversely he must bring notice to them of such adverse holding; the statute begins to run from the receipt of such notice. 125 Ark. 181; 99 Ark. 446; 42 Ark. 289; 3 Peters 43; 1 Spears, 225; 90 Am. Dec. 451; 10 L. R. A. (N. S.) 185.
    The acts and declarations of the party in possession will be construed most strongly against him. 58 Tex. 257.
    A tenant in common to avail himself of the statute of limitations must repudiate the title of his co-tenant. 19 S. W. 136.
    Mere acts of ownership by one tenant in common are not sufficient to bring notice to the other co-tenant of an adverse holding. 20 Ark. 359; 52 An. Dec. 212.

      Edward Gordon, for appellee.
    Exceptions saved but not argued will be treated as abandoned. 133 Ark. 250; 135 Ark. 372.
    To sustain the verdict on appeal the evidence must ■be received in the light most favorable to appellee. 135 Ark. 385. This court must give the testimony the strongest probative value in favor of the verdict. 133 Ark. 30 ; 131 Ark. 509. A verdict on conflicting evidence is conclusive. i82 Ark. 603; 86 Ark. 622. If there is any legal evidence to support a verdict it will not be disturbed. 136 Ark. 84.
    The court properly overruled the motion for new trial on the ground of newly discovered evidence. 130 Ark. Ill; 137 Ark. 107; 130 Árk. 365; 129 Ark. 218.
   Humphreys, J.

Appellee instituted suit in ejectment against appellant in the Conway Circuit Court to recover possession of one-third of the west half of the southwest quarter of section 15, township 6 north, range 15 west, in said county, alleging, in substance, that she was the owner of the entire tract, and that said appellant wrongfully claimed to be the owner of a one-third in7 terest therein, and unlawfully took possession thereof. Appellee alleged ownership of a one-third interest in said real estate by patent from the government and ownership of the other two-thirds interest by adverse possession for more than seven years.

Appellant filed an answer denying the material allegations of the complaint, alleging ownership in one-third interest by virtue of a purchase of same for a valuable consideration on the 20th day of June, 1920, from Sallie Winston, a sister of appellee, who was one of three joint patentees of said tract of land from the United States government.

The case was submitted upon the pleadings, evidence and instructions of the court, which resulted in a judgment ejecting appellant from the premises. From that judgment an appeal has been duly prosecuted to this court.

The record reflects that the real estate in question was entered by Adam Berry, the father of appellee, her sister and Andy Berry, her brother; that afterwards the entryman, Adam Berry, died, and a patent was issued to his children aforesaid; that Andy Berry went to Texas in 1885, leaving the two sisters upon the property and instructing them to keep the taxes paid; that the land was sold for delinquent taxes on June 10, 1895, to B. F. Nesbitt, and was redeemed Mar'ch 5, 1896, by Aaron Woodson, who was at that time the husband of Sallie Berry, who, after Woodson’s death, married a man by the name of F. G. Winston; that the delinquent sale and redemption was shown by exhibit introduced by appellant. Appellee testified, however, that she redeemed the landsfrom this delinquent sale, and that, before doing so, she notified her brother, who was then in Texas, that if she paid the taxes she intended to claim the land adversely to him; that she received no response from him; that at the time she paid the delinquent tax her sister agreed to repay her, but that the matter rocked along, and later .her sister informed her that she was unable to pay the taxes and to go ahead and pay them and -take the land; that she continued from that day forward to pay the taxes and claim the land; that her sister resided with her for a number of years, but later married Winston and moved away from the place; that she had paid the taxes and claimed and occupied the land as her own for more than twenty years. On cross-examination appellee made statements conflicting with her evidence in chief.

Several of appellee’s neighbors' testified that she had held the continuous unbroken possession of the land for about twenty years, claiming to be the owner thereof.

The testimony adduced by appellant tended to show that the payment of taxes by appellee was for herself and her brother and sister as joint tenants, and that her occupancy of the land was not adverse to them; that, after appellant purchased an undivided one-third interest in 1920 from appellee’s sister, Sallie Winston, appellee and her husband, who was looking after the property, agreed to buy appellant’s interest from him, and that the terms of sale were agreed upon; that a part of the purchase price was to be paid by sale of timber to be cut from the land; that appellee permitted appellant to cut a part of the timber in part payment of the consideration; that afterwards appellee refused to carry out the contract, but agreed upon a division of the land; that subsequent to the delinquent sale appellee paid taxes in the name of herself, sister and brother; that appellee mortgaged an undivided one-third interest in the land to raise money.

During the progress of the trial appellant attempted to prove by J. S. J ones, the husband of appellee, that he went to Morrilton and represented to some one that he wanted the land divided. The court thereupon asked the witness whether he was attending to the business for his wife, to which he responded that he was not. Thereupon ihe court excluded the evidence, over the objection and exception of appellant. Appellee testified in her own examination that her husband was looking after and making contracts in reference to the property for her. In appellant’s motion for a new trial he alleged that the court erred in excluding the evidence of J. S. Jones, the husband of appellee, to the effect that he had filed a partition suit in the chancery court of Conway County for the lands in question in the name and style of Paralee Jones and Jeff Medlock against Andy Berry.

After the rendition of the verdict and judgment appellant filed a motion for a new trial and an amendment thereto. The amendment is as follows:

“After the verdict was rendered and judgment rendered herein the defendant learned that on the-day of- 1917, plaintiff, Paralee Jones, and Sallie Winston, of whom the defendant purchased the undivided one-third interest of the land in controversy, jointly executed to J. B. R. Streeter an oil lease on the land in controversy, and since said date of judgment defendant is informed by W. H. Duff, assistant cashier of the Bank of Plummerville, Arkansas, that he, the said W. H. Duff, was with the said J. B. R. Streeter, or his agent, on the date of the execution of oil lease, and that the said W. H. Duff would testify as follows: ‘ On going to the home of said Paralee Jones on the-day of-1917, for the purpose of procuring an oil lease on the W]/2, SW%, sec. 5, township 6 N., R. 16 W., known as the Adam Berry land, in Conway County, we obtained signature to said lease of said Paralee Jones, and the said Paralee Jones advised us that her sister, Sallie Winston, owned an undivided interest in said land and stated that we would have to go to her to get her signature to the lease, as she, the said Sallie Winston, owned an interest in said lands, and that we went from there to the home of Sallie Winston and obtained her signature to said lease.’ Wherefore defendant prays that he be given a new trial herein.
“J. K. Medlock, the defendant herein, states on oath that the allegations contained in the foregoing motion are true, and that the said W. H. Duff would testify in substance as set out in said .motion, and that this information was given him by said W. H. Duff after judgment had been rendered herein; therefore is the reason the same was not obtained and used in trial of said cause.
“J. K. Medlock.
“Subscribed and sworn to before me this 10th day of March, 1921. J. L. 'Williams, Clerk. ’ ’

Over the objection and exception of appellant, the motion for a new trial was overruled.

Appellant’s first insistence for reversal of the judgment is that the evidence was insufficient to carry the issue of limitation by adverse possession to the jury. Appellant argues that appellee never expressly disclaimed or repudiated the interest of her co-tenant, Sallie Winston, or by acts tantamount thereto notified Sallie Winston that she was claiming adversely to her, and that for this reason the court erred in submitting the issue of limitations to the jury, and should have peremptorily instructed for appellant. Appellant fails to give full effect and purport to the testimony of appellee. Appellee testified that it was agreed between herself and sister, Sallie Winston, that she should pay the taxes and take the land, and that pursuant to such agreement she did pay the taxes and occupy the land thereafter adversely to her sister. In this appellant was, to some extent, corroborated by the testimony of several of her neighbors. While appellee’s evidence was to some extent unsatisfactory, on account of contradictions in it, yet it was sufficient 'to carry the claim of adverse possession to the jury.

Another ground insisted upon by appellant for reversal of the judgment is that the court excluded the evidence of J. S. Jones in reference to the partition suit filed by him for appellee and her sister against their brother, Andy Berry, in the Conway Chancery Court. The evidence in this respect in the record was not as broad as the allegation in the motion for a new trial. In other words, the record does not support this allegation in the motion for a new trial. If the testimony disclosed ¡by the record had 'been to the effect that J. S. Jones had 'brought a suit for partition of the land in question for appellee and her sister against their brother, it would have been error to exclude it, because appellee’s evidence tended to show that her husband was looking after and making contracts concerning the land for her; but the evidence excluded by the court was not developed to this extent. It was only attempted to be shown by Jones that he went to Morrilton to see some one about dividing the land, and he himself testified in response to the court’s question that he was not representing his wife on that occasion. We do not think the court erred in excluding the evidence.

Appellant also insists on reversing the judgment because the court refused to grant a new trial for newly discovered evidence set forth in the amendment to the motion for a new trial. Appellee suggests that the court properly overruled the motion because, first, it was not shown ‘why the new evidence was not discovered before the trial, and second, that diligence was not used in discovering it before the trial. The evidence ■was not of that character which could be discovered before it was disclosed by the witness W. H. Duff, It is stated in the motion that W. H. Duff did not communicate the fact to appellant until after the rendition of the judgment. The motion also states that for that reason the same was not obtained and used in the trial of said cause. We think the motion sufficiently shows why the evidence was not discovered before the trial, and, inferentially, why more diligence was not used than was used in procuring it. Again, appellee suggests that the evidence is cumulative, and for that reason the court properly overruled the motion for a new trial. The newly discovered evidence was in the nature of an admission made by appellee that her sister, Sallie Winston, owned an undivided one-third interest in the land. It tended to break down the evidence of appellee. Appellee’s whole case rested upon the truth of her own testimony. According to her testimony, she had a contract or agreement with her sister by which she was to pay the taxes and take the property. In other words, appellee fixed a time by contract at which the statute of limitations began to run against her sister. No other witness testified to this fact. Her sister denied it. It is true there was evidence in the record tending to show that appellee had made several mortgages of an undivided one-third interest in said property as security for borrowed money, but the newly discovered evidence to the effect that she joined her sister in an oil lease on said land, and at the time stated that her sister had an interest in the land, is more definite and certain than any other evidence which had been introduced, contradicting her statement that she had claimed title to and occupied the land for more than seven years adversely to her brother and sister. In fact, it was independent evidence, not in any sense cumulative, tending to contradict and break down appellee’s own evidence upon which she relied for recovery.

Other assignments of error are insisted upon for a reversal of the judgment, but as they will not likely occur upon a new trial we deem it unnecessary to discuss them.

For the error indicated the judgment is reversed and the cause remanded for a new trial.


author: McCulloch, C. J. Smith, J.,

text:
    United States Fidelity & Guaranty Company v. Maxwell.
    Opinion delivered February 20, 1922.
    1. Insurance — warranties in applications. — A mere reference in an insurance policy to the application does not constitute a warranty, even though the application itself states that the truth of its statements shall constitute a warranty; the reason being that the policy itself is the evidence of the contract, and must either contain the warranty or by proper reference incorporate therein the application which contains it.
    2. Insurance — incorporating warranty in policy. — A policy of guaranty insurance will be held to warrant statements in the application to be true where it refers to the application and provides that the representations and promises therein “are hereby expressly warranted to be true.”
    3. Insurance — promissory warranty — breach.—Where an application by a bank for guaranty insurance stipulated that an examination of applicant’s accounts would be made once or twice a year by some reputable auditing firm “outside of the audit of the State or National Bank Examiners,” and such stipulation was made a warranty, proof .that no other audits were made after the State Banking Department began making audits established a breach of warranty.
    4. Insurance — breach of warranty — waiver.—The basis of the rule that a request for further proofs of loss is a waiver of forfeiture is that the forfeiture must he known at the time; the mere 'fact that it could have been known by diligent inquiry not being-sufficient.
    5. Set-off and counterclaim — waiver.—One sued by the Bank Commissioner as receiver of an insolvent bank does not lose his right to set-off a claim against the bank by presenting the claim to the chancery court in the proceeding wherein the affairs of the bank were wound up.
    6. Banks and banking — liability of bank commissioner. — Rights capable of assertion against an insolvent bank may be asserted against the Bank Commissioner on his being appointed receiver to wind up its affairs.
    7. Set-off and counterclaim — insolvent bank — preference.— Since to permit a debtor of an insolvent bank to offset a claim assigned to it after the bank passed into the receiver’s hands would be allowing a preference against an insolvent corporation, which is forbidden by Crawford & Moses’ Digest, § 1798, held that where the Bank Commissioner, as receiver of an insolvent bank, sued a guaranty company on the fidelity bonds of two of its employees, defendant was not entitled to offset the amouni; of a deposit in the bank which it had guaranteed to the depositor, and had paid to him after the bank’s insolventv- taking an assignment of the depositor’s claim.
    Appeal from Mississippi Chancery Court, Chickasawba District; Archer Wheatley, Chancellor;
    reversed.

      Bloch £ Kirsch ami Joseph II. Norville, for appellant.
    The terms of the policy made the employer’s statement a part thereof. 4 Ark. 251; 26 Ark. 249; 89 Ark. 239; 127 Ark. 535; 18 Ark. 65; 45 Ark. 17; 49 Ark. 320; 94 Ark. 90. The representations and promises therein were warranties. 80 Ark. 49; 89 Ark. 481; 105 Ark. 115; 236 111. 444; 19 L. R. A. (N. S.) 88. A warranty is a matter of contract, must appear from the contract itself, and show that it was the intent of the parties to warrant. 58 Ark. 532; 66 N. C. 70; Mete. (Mass.) 114; 35 Conn. 225; 69 Mass. 580.
    The warranties and covenants relied on by appellant are not in contravention of substantive or statutory law, 183 U. S. 402; 176 S. W. 368.
    The breach of the promissory warranty to audit voided the bonds. 58 Ark. 277; 53 Ark. 753; 61 Ark. 207; 57 Ark. 279; 87 Ark. 349; 74 Ark. 603.
    The bonds were voided by the retention of the employees after knowledge of their peculations; by the failure of the bank to notify the surety upon discovering acts capable of giving’ rise to a claim; and by not making claim within the time specified in the bond. 308 U. S. 402; 224 Fed. Rep. 866; 67 So. 318.
    The bonds were void because of the misrepresentations of the bank in'stating and warranting that the accounts of the applicants were correct. 36 Me. 179; 10 Bush (Ky.) 23.
    The failure of the bank to notify the surety that audits liad not been made voided all renewals of the policies.

      Driver £ Simpson and Moore, Smith, Moore & Trieber, for appellee.
    The employer’s statements were not copied into the bonds, nor attached to same, nor do the bonds con-* tain express stipulations that they were part of the bonds, and therefore can be nothing but representations, and were in no sense warranties. 133 Ark. 348; 236 111. 444; 105 Ark. 101.
    The knowledge of Sudbury was not such as required the bank to give notice to the surety, as he was in no sense aware of the wrongdoing of the officers accused. 118 Iowa 729; 92 N. W. 686; 170 U. S. 160; 186 U. S. 342; 154 Fed. 545; 200 Fed. 675; 38 S. E. 908.
    Appellant waived whatever grounds of forfeiture it otherwise had by calling upon the appellee for further proofs after discovery, or opportunity to discover, the forfeiture. 53 Ark. 494; 67 Ark. 584; 14 R. C. L. (Ins.) par. 376. It either had the information of the forfeiture, or else it intentionally acted without such knowledge, which is the same in legal effect, in sending the telegram, the effect of which was that appellant was ready to settle upon being advised of the value of the property turned over to the bank by the defaulting officers. 114 Md. 130, 91 Atl. 753; 121 Mich. 591; 80 N. W. 573; 72 Iowa 261; 33 N. W. 663; 117 Pa. 492; 35 Atl. 612.
    Appellant having elected to reduce its claim, arising from its bond to the Mo. State Life Ins. Co., to a judgment in the administration of the affairs of the bank, can not rightfully be permitted to disregard such judgment and claim the residue of the amount for which it has received no payment, as a set-off against a judgment under its bonds to the bank.

      Bloch c& Kirsch and Joseph H. Norville, for appellant, in reply.
    The rights of third parties are not affected by the appointment of a receiver of a banking corporation. 98 Ark. 200; 138 Ark. 38. The indebtedness of a bank to a depositor can be set-off in full against his indebtedness to the bank. 98 Ark. 294; 141 Ark. 16; 134 Ark. 311.
    In order that there may be an election of remedies, a party must have two or more such remedies. Here the appellant only liad one, whi'cli was to prove its claim against the hank. Sec. 3 C. J., Election of Remedies, pgs. 5, 21 and 26,.
    The employer’s statements need not be physically attached to the bond.
    There can be no waiver without knowledge of the facts. 53 Ark. 494; 67 Ark. 584; 14 R. C. L. par. 376; 112 Ark. 176; 87 Ark. 326.
   McCulloch, C. J.

This is an action on two policies •of insurance issued by appellant company, whereby the •company undertook to reimburse to the assured such pecuniary loss as might be sustained by the assured by reason of the fraud or dishonesty of two of its employees in connection with their respective duties amounting, to embezzlement or larceny. The bonds were each in the sum of $10,000, and were issued to the Bank of Blytheville, a banking institution doing business at Blytheville, Arkansas, the undertaking being to reimburse for loss caused by the misconduct of B. IT. Wilhite and W. O. Anthony, respectively, the cashier and assistant uashier of the bank.

The original bonds were issued and dated March 17, 1914, to cover a period of one year, and were renewed from time to time under the same terms and stipulations. The bank was found to be insolvent, -and was taken over by the Bank Commissioner on March 1], 1920, while the last renewal was in force, and this action was instituted by the Bank Commissioner as receiver. The action was commenced in the circuit court, but on motion of appellant and without objection it was transferred to the chancery court, where it proceeded to a final decree.

An audit of the books of the bank and an examination of its affairs disclosed the fact that at the time of the failure Wilhite and Anthony were short in their accounts in the sum of $896,244.96, and were indebted to the bank in that sum. The items of the defalcation consisted of overdrafts of those parties in the sum of $607,-526.65, promissory notes in the sum of $19,800, and certain other items consisting of unreported collections from other banks, bills payable, time deposits and cash, all aggregating $268,919.41. Subsequently, Wilhite and Anthony turned over to the Bank Commissioner, on their indebtedness to the bank, property of the estimated value of $216,000, leaving a shortage of approximately $680,000. ' .

The application for the policies, which was signed by Mr. Sudbury, the president of the bank, contained the following statements:

“employer's statement.
“For completion by proper officer on behalf of the employer, the company desires to have answers to the following questions, and the answers will be taken as the basis of the bond if issued.
* * *
“Will any examination of the applicant’s accounts be made outside of the audit of the State or National Bank Examiners?
“Yes.
“How frequently will this examination be made, and by whom?
“Once or twice each year by some reputable auditing firm.
* * * *
“Are the applicant’s accounts correct in every respect at this date?
“Yes.
“Will the applicant authorize the loans and discounts of the bank?
“No.
* * -X- *
“It is agreed that the above representations are to be taken as the basis of the said bond applied for, or any renewal or continuation of the same that may be issued by the United States Fidelity & Guaranty Company to the undersigned on behalf of the applicant herein, ’ ’

The policy also -contained the following introductory clause:

“Whereas, the employer has heretofore delivered to the -company certain representations and promises relative to the duties and accounts of the employee, and other matters, it is hereby understood and agreed that those representations and such promises, and any -subsequent representation or promise of the employer, hereafter required by or lodged with the company, are hereby expressly warranted to be true.”

The defense offered by appellant and sought to be maintained in the trial of the cause was that the statements contained in the- application were warranties, and that there was a breach of the warranty with respect to the truth of each of the questions set forth. The first-question, therefore, presented for our consideration is, whether the statements in the application were warranties or mere representations.

The distinction between warranties in a contract and mere misrepresentations which induce the execution thereof — what constitutes the one or the other, and what is the legal effect of each — is well understood and too well settled by the decisions of this -court to need further comment. Providence Life Assurance Society v. Reutlinger, 58 Ark. 528. It has been decided by this court that a mere reference in a policy to the application does not constitute a warranty, even though the application itself contains a statement that the- truth of the statements shall constitute a warranty. The reason for this rule is that the policy itself is the last word between the contracting parties and should be the evidence of the extent of the contract. Metropolitan Life Ins. Co. v. Johnson, 105 Ark. 101; Southern Surety Co. v. Barham, 133 Ark. 220; American Life & Accident Assn. v. Walton, 133 Ark. 348. The policy itself -must -contain an express warranty -or by proper reference must incorporate therein the application which contains it, otherwise the statements in the application are deemed to be mere representations. American Life & Accident Assn. v. Walton, supra; Spence v. Central Accident Ins. Co. 236 Ill. 444. Measured by this rule, the language of the policy in the present case is sufficient to constitute a warranty of the truth of the statements and stipulations in the application. The clause in the policy which we have quoted specifically refers to the application and expressly provides that the representations and promises therein ‘ ‘ are hereby expressly warranted to be true. ” It is difficult to conceive of more definite language expressing the contract to be that the representations and promises shall be warranties.

It is conceded that no attempt was made to comply with the promise in the application that an examination of the accounts would be made ‘ ‘ once or twice each year by some reputable auditing- firm. ’ ’ The only witness who-testified on that subject said that soon after the-policies were issued the State Banking Department began making audits, and it was deemed unnecessary to have any further audits made. This was in violation of the contract, for the stipulation was that these audits would be made in addition to those made by “State or National bank examiners.” This breach of warranty was sufficient to defeat recovery unless the forfeiture was waived.

It is unnecessary to discuss the question of other •breaches of warranty or failure to perform the conditions with respect to prompt notice of defalcations prior to the time the affairs of the bank passed into the hands of the Bank Commissioner.

Appellant was notified by the Commissioner immediately after he took charge, and appellant’s agents and officers began an investigation to determine the extent of the defalcation.

It is claimed on behalf of appellee that appellant waived the forfeiture arising from breach of warranty by calling upon the Bank Commissioner for further -proofs after discovery of the forfeiture. This claim is based upon the correspondence between Mr. Hall, the Memphis agent who had charge of the matter, and Mr. Trieber, one of the attorneys for the Bank Commissioner, residing in the city of Little Rock. In a telegram dated August 12, 1920, Hall inquired what property Wilhite and Anthony turned over, the valuation thereof and the application of same, and stated that he would be ready to ‘ ‘ dispose of the bank claim” when the information was furnished. Shortly thereafter a statement was made up from tile office of the Bank Commissioner giving the desired information, and the same was forwarded to appellant’s agent, Mr. Hall.

There is no proof in the record tending to show that the company knew of the breach of warranty with respect to the failure to audit the accounts when this communication took place. On the contrary, Hall testified that the first information he had in regard to the breach of warranty was in a letter received in October, 1920. It has been often held by this court that a request for further proofs of loss constitutes a waiver of known forfeitures, but the basis of this rule is that the forfeiture must be known at the time, the mere fact that it could have been known by diligent inquiry is not sufficient. German Ins. Co. v. Gibson, 53 Ark. 494; Planters’ Mut. Ins. Co. v. Loyd, 67 Ark. 584; Patterson v. Equitable Life Assurance Society, 112 Ark. 171. Proof on this question does not seem to have been fully developed in the trial below, and, instead of dismissing the complaint, the cause will be remanded with leave to the parties to take further proof on the issue whether or not appellant or its agent had knowledge of the forfeiture at the time further proofs were called for in the communication of Mr. Hall to the attorney for the Bank Commissioner.

There is another feature of the case which calls for discussion. At the time of the failure of the Bank of Blytheville, the Missouri State Life Insurance Company had on deposit in said bank the sum of $1,660.86 and held a policy of insurance issued by appellant, whereby appellant undertook to indemnify said depositor against loss of the deposits not in excess of $2,000. Appellant paid the loss to the Missouri State Life Insurance Company and took an assignment of the -claim against the hank and filed it for allowance. Pursuant to the order of the chancery court, a dividend of 15 per centum was declared in favor of all claimants against the bank, and a check was sent to appellant for the sum of $241.13, as its pro rata under the claim filed. The -check was received by appellant, but had not been cashed up to the time of the trial • of this cause. Appellant presented a counterclaim in this action for the amount of $1,660.86 due on the claim, and the court allowed it, as a set-off against appellee’s claim under the policy sued on. _ Appellee has cross-appealed from that part of the decree allowing the set-off. The reason urged by counsel for appellee why this feature of the decree should be reversed is that appellant had elected to present- its claim to the chancery court for allowance in the proceedings wherein the affairs of the bank were wound up, and that the amount was allowed there. This did not, however, constitute an election not to -claim the amount in other proceedings. If appellant was entitled to counterclaim this amount, or to assert it as a set-off in the action broug’ht on the bond, it did not waive that right by presenting the -claim to the chancery court for allowance. It had a right to present its claim there independently of any other litigation then pending or which might subsequently arise. Rivers v. House, 150 Ark. 452. The Missouri State Life Insurance Company was a creditor of the bank to the extent of its deposit, and it assigned its claim to appellant, who succeeded to the rights of the depositor. If the bank, before its failure, had instituted this action on the bond, appellant would have had the right to set-off the debt which the bank owed to its depositor, and the Bank Commissioner as receiver, in taking charge of the affairs of the bank, merely took the place of the bank, and rights capable of assertion against the bank were not displaced or abrogated by the appointment of the receiver. Jordan v. Harris, 98 Ark. 200; Funk v. Young, 138 Ark. 38.

The law is well settled that where there is a statute prohibiting preferences in claims against insolvent corporations, claims acquired after insolvency or after the appointment of a receiver cannot be set-off against debts owing to the corporation in the hands of the receiver for collection, for, if the law were otherwise, the statute against preferences could be defeated by the purchase of outstanding claims and having them allowed in full as a set-off. The right of set-off exists only to the extent of the concurrence of the two claims, and in case of insolvency proceedings under a statute prohibiting preferences the concurrence of claims must have existed before the insolvency occurred and the proceedings were instituted. 34 Cyc. 194-198; Miller v. Audenried, 67 N. J. E. 252; Smith v. Mosby, 9 Heisk. (Tenn.) 501. Such is the effect of our decision in the case of Funk v. Young, supra. In that case a depositor in an insolvent bank sought to set-off his claim against his own liability to the bank on a promissory note, and we held that he was entitled to do so on the ground that his right to set-off existed at the time that the affairs of the bank passed into the hands of the receiver., and that the right was still intact. The converse of that doctrine is that,.if his right of set-off did not exist at the time the receiver took charge, he could not have acquired the right.

The question then arises whether appellant’s claim against the bank arose prior to the insolvency of the bank or the taking over of its affairs by the Commissioner. Our conclusion is that the claim in favor of appellant did not arise until after the Bank Commissioner took possession of the insolvent bank, and that the claim is not available as a set-off against appellant’s liability under the bond.

In the transaction between appellant and the Missouri 'State Life Insurance Company there was no privity of contract between appellant and the Bank of Blytheville. Appellant had no claim against the Bank of Blytheville and never acquired any claim until it made good its contract of indemnity after the Bank Commissioner took possession of the affairs of the hank. There was no concurrence 'between the respective claims of the Bank Commissioner, as receiver, under the bond sued on, and the claim which appellant acquired by complying with its contract of indemnity with the Missouri State Life Insurance Company. Appellant was not a surety for the bank, -but was a mere guarantor or insurer of the Missouri State Life Insurance Company against loss. Appellant took an assignment of the claim when it paid to the Missouri State Life Insurance Company the amount of the deposit, but, if we treat appellant as being entitled to the right of subrogation without a formal assignment of the debt, it is in no better attitude to claim the right of set-off, for, as we have already stated, there was no privity of contract between the bank and appellant prior to such payment, and, in the absence of a formal assignment of the debt, the payment of the amount was tantamount only to an equitable assignment. The right of subrogation carries with it all the securities held by the original claimant, but this does not extend to the right to set-off a claim which the party entitled to subrogation did not own prior to that time.

If appellant be allowed to set-off this claim, the effect would be to give it a preference on a claim against the ■bank acquired subsequent to the time that the bank became insolvent and passed into the hands of the receiver.

Our attention is called to the decision of the Supreme Court of Oregon in the case of County of Wasco v. New England Equitable Insurance Company (L. R. A. 1918-D, 732), announcing a doctrine which is said to be controlling in the present case in favor of allowing appellant’s set-off. We do not think that case has any bearing on the present one, whether it was decided right or wrong. That case involved the right of a surety to subrogation to the funds held by the obligee in the bond of suretyship, and the court held that there was a right of subrogation as against a prior assignment of the funds by the principal debtor. The statement in that case of the general principles of law in regard to the doctrine of subrogation is undoubtedly correct, but we think it has no application to a case like the present one, where there was no privity of contract between the parties now before the court until the acquisition of the claim by the payment of the debt to the insurance company.

The decree is therefore reversed and the cause is remanded, with directions to dismiss the counterclaim, or set-off, of appellant, and to permit further proof upon the issues indicated above, and render a decree not inconsistent with this opinion.

Smith, J.,

(concurring). I concur in the majority opinion except that portion of it which deals with the right of appellant guaranty company to set-off: the deposit paid by it to the life insurance company against the demand of the receiver.

Subrogation is of two kinds, legal and conventional, according to the text-writers. Conventional subrogation arises out of the agreement of the parties, but ordinarily, when the term subrogation is used, legal subrogation is meant; and this is the kind of subrogation with which we are here dealing.

The annotator’s note to the case of American Bonding Co. v. National Bank, 99 Am. St. Reps. 466, constitutes a treatise on this right, covering fifty-nine pages and collects a very great many authorities on the subject. In this note it is there said: “Legal subrogation is not founded upon contract or privity or strict surety-ship. It is bom of equity, and results from the natural justice of placing the burden where it ought to rest. It does not How from any fixed rule of law, but rather from principles of justice, equity, and benevolence. It is a purely equitable result, depending like other equitable doctrines upon the facts and circumstances of each particular case to call it forth. It is a device adopted or invented by equity to compel the ultimate discharge of a debt or obligation by him who in good conscience ought to pay it.”

This court is thoroughly committed to the proposition that a receiver is not -an innocent purchaser. The cases cited in the majority opinion so hold. The receiver takes over the assets of the bank subject to all outstanding equities, and the question for decision is, therefore, what are the equities in regard to the deposit of the life insurance company paid by thei appellant guaranty company.

The majority treat the appellant guaranty company as having acquired its rights after the bank became insolvent, and disposes of the claim of subrogation by saying that, if it were allowed, persons could purchase claims of depositors and thus secure preferences. The trouble ■with this declaration of the law is that it assumes as true the point really in controversy, and that is, that the rights of the guaranty company did not accrue until after the bank became insolvent. It may be freely conceded that, if appellant’s right did not accrue until payment was actually made by it, the right of subrogation must be denied as constituting a preference. But just here is where the majority falls into error.

In the case of Wasco County v. New England Equitable Insurance Co., L. R. A. 1918-D, 732, the point presented was when the surety’s right of subrogation accrued, and in that case, where the court considered the principles involved and the authorities thereon, the court (Supreme Court of Oregon) held that “* * * the right of subrogation dates back to the time when the insurance company entered into the contract of suretyship.” In that case, as in this, the surety received compensation for his suretyship, but it was there said that “a court of equity 'grants the right of subrogation because the surety has paid the debt of the principal, and the right of subrogation is not dependent upon whether the surety was or was not paid to sign the bond. ’ ’

In 25 R. C. L. page 1328, it is said: “This right of a surety to subrogation stands upon the principles of natural justice. Payment by the surety is deemed equivalent to a purchase from the creditor, and operates as an equitable assignment of the debt, and all its incidents, to the former. It has well been said that in these cases the law creates or implies a contract on the part of the creditor that such property or securities will be turned over to the one who is secondarily liable as soon as he pays the creditor’s claim. The right of a surety to subrogation begins with the contract of suretyship, and is not simply inchoate until he pays the debt.”

In Michie on Banks & Banking, vol. 2, p. 1073, sec. 135, it is said: “Where a party executes a guaranty for the payment of sums deposited in a bank to which he is indebted, which sums are due and payable at the time of the bank’s suspension, equity will give him credit on his indebtedness for the payments made because of the bank’s failure to do so, whether he is regarded as a surety, and becomes subrogated to the rights and claims of the depositors, or simply that by the bank’s failure and default he became liable for such sums. Where such guarantor owed certain notes to the bank, which became due before a receiver was appointed for such bank, but owing to the time required to fix plaintiff’s liability, he did not pay the creditors for some time after, suspension, that claim will be deemed to relate back, and to have been made at the time of suspension, and the amount so paid may be set-off against the notes held by the bank against plaintiff. ’ ’

It is not necessary, however, that we should search beyond our own decisions to determine when the right of surety attaches, as this court decided that question in the case of Griffin v. Long, 96 Ark. 271, where it is said: “The principal thus becomes indebted to the surety for the payments he is compelled to make for the former, and the question which arises is, does such indebtedness have its inception from the time the party became surety or from the time payment is made by the surety? The true rule seems to be that the surety becomes a creditor of the principal at the time he signs the note as surety, and not at the time he pays the same. In the case of Wiggin v. Flower, 5 Rob. (La.) 406, it is said: ‘Though the obligation of a surety cannot be enforced till after the event on.which it becomes absolute, it exists from the time it was contracted, so the rights of the surety against his principal exist before the obligation of the former becomes absolute.’ ” See also McDonald v. Mueller, 123 Ark. 226.

It required payment of this deposit by the guaranty company to the insurance company to make the right of subrogation enforceable, but when payment was made —and it has been made — the guaranty company was put in the shoes of the insurance company, and has all the rights against the receiver which are incident to the ownership of that deposit, and it has therefore the right io set-off this deposit, which, in equity, became the property of the guaranty company, upon payment thereof, against the demand of the receiver. In other words, the guaranty company has the same right of set-off it would have had had- the deposit been in its own name at the time the bank closed its doors, because, by subrogation, it is given the rights which the insurance company itself would have had had the receiver asserted some demand against appellant’s surety company. Funk v. Young, 138 Ark. 38.

Justice Hart concurs in the views here expressed.


author: McCulloch, C. J.

text:
    Springfield Fire & Marine Insurance Company v. State.
    Opinion delivered February 20, 1922.
    1. Insurance — waiver of proof of loss. — Where the authorized adjuster of an insurance company, within the time specified for making proof of loss under the policy, entered into negotiation with the representative of the insured, and in the negotiation agreed that insured should have the repairs made and the insurer would pay for same on presentation of the bill, this constituted a waiver of the requirement of proof of loss.

      2. Insurance — agreement to pay for repairs. — In insured’s action against the insurer for damag'es to a building by wind, a subsequent agreement that insured should make repairs and insurer pay for them eliminated the question of the amount of liability.
    Appeal from Arkansas Circuit Court, Southern District; George W. Clark, Judge;
    affirmed.

      Meliaffy, Donham & Meliaffy, for appellant.
    The failure to furnish proof of loss was fatal to a recovery. 77 Ark. 484; 87 Ark. 171; 108 Ark. 261; 88 Ark. .120; 84 Ark. 224; 91 Ark. 43.
    Agency is a fact, proof of which must be made by the party affirming it. 93 Ark. 603; 105 Ark. 446; 53 Ark. 208; 92 Ark. 320; 2 Clements on Fire Insurance, 443.
    The court erred in refusing to give instruction No. 1 requested by appellant, as to “Contributions.” 51 S. W. 879.

      Boils & O’Daniel, for appellee,
   McCulloch, C. J.

This is an action instituted in the name of the State of Arkansas, for the use and. benefit of Arkansas County, on a policy of insurance issued by appellant whereby the latter agreed to insure Arkansas County against loss or damage to the courthouse from windstorms, cyclones and tornadoes. The policy was for the sum of $10,000, and the premium of $75, based on the total amount of the policy, was paid, as recited in the policy. The policy reads that the insurer does indemnify the assured “against all direct loss or damage by windstorms, cyclones and tornadoes, except as. hereinafter provided, to an amount not exceeding $10,000.” Among the conditions printed on the reverse side of the policy there is the following:

“Contribution Clause: It is a part of the consideration of this policy, and the basis upon which the rate of premium is fixed, that it is expressly stipulated and made a condition of the contract that, in event of loss, this company shall be liable for no greater proportion thereof than the amount hereby insured bears to fifty per cent. (50 por cent.) of the actual value of the property described herein at the time when such loss shall happen, nor for more than the proportion which this policy bears to the total insurance thereon. If this policy be divided into two or more items, the foregoing conditions shall apply to each item separately.”

The courthouse was damaged by a windstorm and this action is to recover the sum of $511, the cost of repairing the damage. It is alleged in the complaint, and the testimony tends to prove, that there was an adjustment of the claim between the agent of appellant and the county judge, acting on behalf of the county, whereby it was agreed that the county should have the damage repaired and send the bill to appellant’s agent, and that appellant would pay the amount of the repair bill. The proof is that it cost the sum mentioned above to make the repairs.

Appellant defended in the' trial below on two grounds: first, that there was no proof of loss within the time specified in the policy, and second, that. the liability was diminished by the so-called contribution clause hereinbefore set forth.

It was admitted by appellee that no proof of loss was made in accordance with the terms of the policy, but the contention was that there was a waiver based on the adjustment made by appellant’s agent with the county judge within the time allowed for making the proof. There was proof to sustain the issue in regard to the waiver. Judge Wilcox, who was at that time the county judge, testified that Mr. Campbell, the agent of appellant, came to DeWitt shortly after the loss occurred, and entered into an oral agreement with him that the county should make the repairs and send him the bill, and that, acting upon this agreement, the repairs were made at the expense of the county, and the bill sent in to the company. The testimony of Judge Wilcox justified the finding of the jury that such an agreement was made by appellant’s agent, and that Campbell was the man who acted in that capacity. Mr. Campbell testified as a witness in the case, and stated that he was agent of appellant and had authority to make adjustments, but he denied that he went to DeWitt at the time mentioned by Judge Wilcox, or that he ever agreed to any such adjustment.

The testimony of Judge Wilcox is vague as to the identification of Mr. Campbell as the person who made the adjustment agreement with him, and the weight of his testimony is impaired, but, when considered in connection with the testimony of Campbell himself as to his interviews with Wilcox, the inference is justified that Campbell was the man with whom Wilcox claims to have made the agreement. There is, as before stated, an irreconcilable conflict between the testimony of the two witnesses, as to whether or not the alleged agreement was entered into, but the verdict of the jury settled that issue in favor of appellee.

If, as contended by appellee, the authorized adjuster entered into negotiation with the county judge within the time specified for making proof of loss under the policy, and in that negotiation made an agreement that the county should have the repairs made and that the company would pay for the same on presentation of the bill, this constituted a waiver of the requirement of proof of loss. National Union Fire Ins. Co. v. Crabtree, 151 Ark. 561.

The policy contained a clause permitting the company to repair the damage, if it elected to do so, and the adjustment'of the loss on that basis constituted an election to settle under that clause of the policy. The company was not required to make its election before proof of loss was presented in accordance with the terms of the policy, but, as it saw fit to make the election and enter into an agreement to that effect before the time expired, this constituted a waiver. The election to make the repairs also eliminated from the case the auestion of the amount of the liability under the contribution clause. Appellant asked the court to give instructions limiting the amount of recovery to such amount as was due under that clause, hut those instructions ignored the question of the election of the company to repair the damage and the agreement to do so. The court was therefore correct in refusing to give those instructions.

Our conclusion is that there was sufficient evidence to sustain the verdict, and that the issues were properly presented to the jury.

Affirmed.


text:
    Van Buren Water Company v. Van Buren.
    Opinion delivered February 20, 1922.
    1. Public service commission — appeals.—-Under Acts 1921, p. 205, providing for taking appeals from orders of the defunct Corporation Commission, and for preservation of appeals therefrom already pending, where an appeal had been allowed by the Corporation Commission before the act was passed, but their appeal had not been perfected by filing a transcript of the proceedings In the circuit court, the city had a right to perfect the appeal without having another formal order allowing it entered by the Railroad Commission as successor of the Corporation Commission.
    z. Public service commission — dismissal of appeal discretionary. • — -Under Acts 1921, p. 205, § 22, providing for appeals from the Railroad Commission, held the circuit court’s refusal to dismiss an appeal on the ground that the secretary of the Railroad Commission did not file the transcript within 30 days after the passage of such statute was not an abuse of discretion, in the absence of a showing that the appellant was at fault in suffering the delay.
    S. Public service commission — irregularities in proceedings.— The fact that the testimony in a hearing before the Corporation Commission was adduced before the appointment of two members of the Commission at the time the final order was made was at most a mere irregularity which did not affect the validity of the proceedings.
    4. Waters and watercourses — rates.—Where the old rates of a water company were unremunerative upon any reasonable valuation of the property, the fact that the rates proposed by the company were too high did not justify the circuit court in compelling' the company to restore the old rates; it is the duty of the court to fix such rates according to the testimony in the record as would be reasonable and would afford a just return upon the investment.
    Appeal from Crawford Circuit Court; James Cochran, Judge;
    reversed.

      W. L. Curtis, for appellant.
    All questions as to the constitutionality of act 571 of the Acts of 1919, conferring jurisdiction upon the Commission to authorize the setting aside of franchise rates entered into between municipalities and public utilities have been completely answered in the following cases: 145 Arle. 205; 80 Ark 108; 99 Ark 178; 3 A. L. ft. 685; 3 A. L. ft. 715; 225 Fed. 295.
    The motion to dismiss the appeal of defendant should have been granted. Act 571 Acts 1919, see. 27; act 105 Acts 1921, secs. 20, 21 and 22.
    The rates promulgated by the water company were fair and reasonable and not sufficient to produce an income in excess of a reasonable amount upon the valuation of the plant. 12 A. L. ft. 390; 12 A. L. ft. 737; 11 A. L. ft. 454; 10 A. L. ft. 1425; 65 U. S. (1 Ed.) 514; 65 U. S. (L. Ed.) 518; 186 Pac. 730; 250 Fed. 304; Collier on Public Service Companies, chap. 24, sec. 121.

      E. L. Matlo-ck, for appellee.
   McCulloch, C. J.

Appellant is a domestic corporation owning the waterworks system in the city of Van Burén and operating the same under a franchise from the city council.

On May 26, 1920, appellant filed with the Arkansas Corporation Commission notice of its intention to cancel the rates then in force and to put in force new rates and charges for the various services rendered by it. The Commission made an order suspending the proposed increased rates during the pendency of the hearing of protests, and the city appeared by its attorney and protested against the new schedule. The matter was heard by the Commission, and an order was entered on February 12, 1921, .canceling the suspension order and approving the proposed schedule of increased rates. The city of Yan Burén prayed an appeal from the order of the Corporation Commission to the circuit court of Crawford County, as then provided by statute. Crawford & Moses’ Digest, § 1698.

Act No. 124 of the General Assembly of 1921 (Acts of Arkansas, 1921, p. 177) abolishing the Corporation Commission and transferring certain of its powers and duties to the Railroad Commission, was approved by the Governor and went into effect on February 15,1921, three days after the entry of the order by the Corporation Commission in this case. A transcript of the proceedings was thereafter prepared and filed by the secretary of the Railroad Commission, in the office of the clerk of the Crawford Circuit Court, and the cause proceeded to trial in that coiirt on the record. Appellant moved to dismiss the city’s appeal to the circuit court, but the motion was overruled.

On the trial of the cause the circuit court made a finding that the increased lates proposed by appellant were not justified by the facts, and the court entered its judgment .canceling said schedule and directing that the original rates in force prior to the filing of the new schedule be reinstated and kept in force. The judgment also contained an injunction forever restraining appellant “from charging and collecting from its customers the said increased water rates set forth and allowed by the Corporation Commission and put into force and effect by said water company.” An appeal has been prosecuted to this court from the judgment of the circuit court.

The first point urged here is that the appeal was not properly taken and prosecuted within the time prescribed by the statute. Act No. 124, supra, contains a section providing for the continuation of proceedings pending before the Arkansas Corporation Commission, and also providing for appeals from orders which had been rendered prior to the time that the new statute went into effect abolishing the Corporation Commission. That section (§ 22), reads as follows:

“That all investigations, proceedings or hearings that may be pending before the Arkansas Corporation Commission at the time this act becomes effective and the hearings of which are embraced within the powers herein conferred on the Arkansas Railroad Commission shall be transferred to the Arkansas Railroad Commission for such adjudication as may be made by it under the terms of this act; provided, however, in all cases where the Corporation Commission has made a final decision or order, any party to the said proceedings shall have the right to have the matter heard on appeal by the circuit court in the county of the municipality or locality affected by the matter under investigation, which appeal shall be tried by de novo proceedings by instituting said proceeding within thirty days after the passage of this act, and the secretary of the Arkansas Corporation Commission is hereby required to furnish a full, true and complete transcript of the proceedings before the Corporation Commission, the cost of which shall be paid by the party desiring it, and all cases which have heretofore been appealed to the circuit courts of this State from any decision or order of the Corporation Commission and which appeals are now pending, shall be heard and determined by said courts on the merits as in other cases by law made and provided.” (Act No. 124, Acts of Ark. 1921, p. 205).

It will be seen from an examination of the language of the section just quoted that there is a provision for taking appeal from orders of the Corporation Commission within thirty days after the enactment of the new statute, and it provides for the preservation of appeals which have already been taken before the passage of the new statute, and which were pending at that time. Counsel debate the question whether the appeal in this case was “pending” within the meaning of the statute, the appeal having been allowed by the Corporation Commission but not having been docketed in the circuit court prior to the enactment of the new statute.

It is unnecessary to determine which clause of the statute the appeal falls under, for, if the appeal was then pending within the meaning of the statute, the right to continue the prosecution of it was preserved; and, if it was not a pending’ appeal, then the city had the right to take an appeal within thirty days, and, having already prayed for and obtained from the Corporation Commission an order allowing the appeal, it was unnecessary to have another formal order entered by the Railroad Commission.

The transcript was not filed within the forty days prescribed by the old statute nor within thirty days after the passage of the new statute. The statute imposed upon the secretary of the Commission the duty of filing with the clerk of the circuit court a transcript of the proceedings before the Commission. This duty was imposed by the old statute, and this duty fell to the secretary of the Railroad Commission under the new statute. It does not appear that the city was at fault in suffering the delay, and there was no abuse of the court’s discretion in refusing to dismiss the appeal.

It is contended by counsel for the city that the order of the Corporation Commission was void, and that the judgment of the circuit court should be affirmed for the reason that the record shows that the testimony in the case was adduced prior to the appointment of two new commissioners who were members of the Commission at the time the final order was made. This, at most, was a mere irregularity which did not affect the validity of the proceedings. The circuit court, under the statute, hears causes of this kind ele novo, and not merely for the purpose of reviewing the proceedings before the Commission for error. St. L. S. W. R. Co. v. Stewart, 150 Ark. 586. The contention, therefore, of appellee that the order is void for the reason stated above is untenable.

It appeal’s from the record that three witnesses were introduced and testified in considerable detail upon the merits of the questions involved. One of them was Mr. Shocklgy, who was the manager of appellant’s plant. Another was Mr. Helmreich, engineer of the Commission, who not only testified orally but filed a written report of his findings concerning the physical condition and valuation of the water plant and other matters connected therewith that might affect the questions at issue in the proceedings. The other witness was Mr. Kiersted, an engineer employed to make estimates in regard to the condition of the plant, and who testified in detail concerning matters affecting the propriety, of the new schedule of rates. The differences between the-three witnesses related to matters of physical valuation of the plant. Witness Shockley placed the valuation, for rate making purposes, at $153,554.68; Helmreich placed the valuation at $129,813,28, and Kiersted placed the valuation at $99,-519, including the value of real estate, which he appraised separately. The Corporation Commission seems to have accepted the valuation fixed by witness Helmreich, and to have made a finding of facts in detail to the effect that the schedule of increased rates based on that valuation was not unreasonable. The circuit court evidently rejected that testimony, and we must assume that it accepted the lower estimate of witness Kiersted. We cannot say that this was unwarranted, and that.the circuit court erred in finding that the new schedule of rates was unreasonable and excessive. The court erred, however, in putting in force the old rates, which, according to the undisputed evidence, were unremunerative upon any reasonable valuation of the property. There is testimony that is undisputed that the company had never paid.a dividend, and it is not shown that this resulted from mismanagement or any untoward circumstance. The only inference to be drawn from the testimony is that under the old schedule of rates the company cannot earn compensation for its stockholders upon their investment. The fact that the new rates were unreasonable did not justify the court’s order in compelling* the company to restore the old rates, which were confiscatory. It was within the power and the duty of the circuit court to fix such a rate according to the testimony in the record as was reasonable and which would afford a just return upon' the investment. Clear Creek Oil & Gas Co. v. Fort Smith Spelter Co., 148 Ark. 260.

The judgment of the circuit court is therefore reversed, and the cause remanded for further proceedings.


text:
    Matyski v. Buczkowski.
    Opinion delivered February 20, 1922.
    Appeal and error — appeal from order granting new trial — dismissal.' — Where the trial court set aside a verdict in favor of plaintiff and granted a new trial to defendant, and plaintiff appealed without filing- the stipulation required by Crawford oí Moses’ Dig., § 2129, subdiv. 2, that “if the order be affirmed, judgment absolute shall be rendered against the appellant”, the appeal will be dismissed.
    Appeal from Prairie Circuit Court, Northern District; George W. Clark, Judge;
    appeal dismissed.

      Emmet Vaughan, for appellant.

      Cooper Thivedtt, for appellee.
    An ’ appeal will not lie from an order granting a new trial unless the appellant in his notice of appeal agrees that if the order be affirmed judgment absolute shall'be rendered against him. C. & M. Digest § 2129; 82 Ark. 490; 305 Td. 324; 303 Id. 90; 138 Id. 448.
   McCulloch, C. J.

Appellant instituted this action against appellee in the circuit court of Prairie County, (Northern District) to recover the sum of $221.80, alleged to be due on account for money deposited by appellant with appellee for safekeeping. Appellee answered, denying that the money was deposited with him for the purposes mentioned in the complaint and alleging that the amounts were delivered to him (appellee) as par.tial payments on certain land notes. There was a trial of the issues, which resulted in a verdict in appellant’s favor for .the full amount claimed in the complaint. Appellee filed a motion for a new trial, and the court, in passing on the motion, required appellant to enter' a remittitur of $110, and, upon refusal of appellant to enter a remittitur, the court set aside the verdict and granted a new trial.

Appellant prayed for an appeal, which was granted by the court, but he failed to stipulate, as required by the statute (Crawford & Moses’ Digest, § 2129, subdivision 2), that “if the order be affirmed, judgment absolute shall be rendered against the appellant.” The appeal therefore was not properly taken and is unavailable. Osborn v. LeMaire, 82 Ark. 490; St. L. I. M. & S. Ry Co. v. Hix, 101 Ark. 90; Yowell v. Fort Smith Pure Milk Co., 118 Ark. 448.

The appeal not being properly taken, the cause still stands for trial on the docket of the circuit court, the same as if an appeal had not been attempted.

Appeal dismissed.