author: Hart, J., McCulloch, C. J.,

text:
    Ellis v. First National Bank of Fordyce.
    Opinion delivered March 24, 1924.
    1. Bills and notes — duress in procuring bill. — It is not duress to threaten to do that which a party has a legal right to do, and the fact that a creditor, by threats to sue, induced his debtor to sell goods at a sacrifice did not constitute duress.
    2. Evidence — parol evidence rule. — As between the immediate parties to a blank indorsement of a draft, it is competent to show, by parol evidence, either want or failure of consideration, or that the indorsement was procured by fraud, or upon some special trust, or for collection merely.
    3. Pleading — construction.-—In testing the sufficiency of a pleading by general demurrer, every reasonable intendment should -be indulged to support it.
    4. Pleading — indefiniteness.—Where facts are defectively stated in an answer, the remedy is by motion to make more definite and certain, and not by demurrer.
    5. Pleading — legal effect of facts. — Although the Code forbids the allegation of mere conclusions of law, facts constituting the cause of action should be stated according to their legal effect, since the fact and not the mere evidence of it must be stated.
    6. Bills and notes — sufficiency of answer. — In an action by the indorsee of a draft against the indorser, the latter’s answer alleging that the indorsee was pressing him for payment of a debt, and induced him to sell lumber at a sacrifice under an agreement that the indorsee would take the buyer’s acceptances in payment of such debt, and that, when the acceptances were delivered to the indorsee, the latter marked the indorser’s account paid, held to raise an issue as to whether the indorsement was made merely to transfer title.
    Appeal from Dallas Circuit Court; Turner Butler, Judge;
    reversed.
    STATEMENT oe eaots.
    First National Bank of Fordyee sued the Morse Brothers Lumber 'Company and the Ellisville Lumber Company upon three drafts. Each of these drafts was drawn 'by the Ellisville Lumber Company on the Morse Brothers Lumber Company. Each draft was payable to the order of the Ellisville Lumber Company, and was indorsed by it in blank to the First National Bank of Fordyce.

      The first draft was for $750, dated October 20, 1921, payable sixty days after date. The second draft was for $1,068.93, dated December 12, 1921, payable sixty days after date. The third draft was for $1,089.75, dated December 13, 1921, payable thirty days after date.
    The drafts were presented to the Morse Brothers Lumber Company at the place of payment, and, upon the failure of said company to pay the same, each one was duly protested and notice thereof duly given to the Ellisville Lumber Company. The drafts were made exhibits to the complaint.
    The first draft was in form as follows:
    “$750. Oct. 20, 1921.
    ‘ ‘ Sixty days after date pay to the order of Ellisville Lumber Company seven hundred fifty dollars, value received, and charge the same to account of Morse Bros. Lbr. Co. Little Rock, Ark.
    “Ellisville Lumber Co.
    “By S. C. Ellis.”
    The draft was duly accepted by the Morse Brothers Lumber Company. It was indorsed in blank by the Ellisville Lumber Company. Each of the drafts was in the same form, and each was indorsed in blank by the Ellisville Lumber Company.
    The Morse Brothers Lumber Company made no defense to the suit.
    The Ellisville Lumber Company filed an answer in which it made a general denial of the allegations of the complaint. It also filed a specific answer in two paragraphs as follows:
    “The defendants above named state the truth to be that the plaintiffs herein forced them and coerced them to sell to the Morse Brothers Lumber Como anv 201.688 feet of lumber, an itemized statement 'of said lumber being- hereto attached, marked ‘exhibit A’ and made a oart of this answer, and that said plaintiff forced the defendants above named to sell said lumber at a price per thousand of $5 less than its actual value, therebv damaging the defendants herein named in the sum of $1,008.44.

      “The plaintiff, at the time that it coerced these defendants into the selling of this lumber to the Morse Bros. Lumber Company, Little Bock, Arkansas, did so. with a specific understanding that they were to take the acceptance, payable as designated therefor, in full payment of the indebtedness due by these defendants, to the said First National Bank of Fordyce, Arkansas. And when said acceptances were all delivered to the said plaintiff, the plaintiff canceled the papers of these, defendants, marked them paid, and .closed the transaction as per the terms of the agreement.
    ‘ ‘ Since that time, and within the last sixty days, the plaintiff has brought suit against these defendants and the Morse Bros. Lumber Company, and are now seeking to hold these defendants for the indebtedness, which has been fully paid and discharged.”
    A demurrer was filed by the plaintiff to these two paragraphs, which was sustained by the court. The Ellisville Lumber Company declined to plead further, and the court rendered judgment in favor of the plaintiff for the amount of the drafts and the protest fees. The case is here on appeal.

      Wilson é Martin, for appellant.
    Parol evidence is admissible to explain or qualify an unrestricted indorsement on commercial paper. 86 Ark. 82; 23 Kansas 311; 1 Daniel on Negotiable Instruments, § 722; 93 Ark. 379; 97 Cal. 403.

      Frauenthal & Johnson and 8. F. Morton, for appellee.
    Parol evidence of a prior or contemporaneous agreement is not admissible to vary, contradict or explain an unrestricted indorsement of a negotiable instrument. 93 Ark. 376; 104 U. S. 30; 26 L. ed. 647; 1 Daniel on Negotiable Instruments- (3d ed.), § 719; 4 A. L. B. 760; 104 IT. S. 30.
   Hart, J.,

(after stating the facts). The defense relied upon in the first paragraph of the answer copied in our statement of facts is that the Ellisville Lumber Company was coerced into selling the lumber for which the drafts sued on were given.

It is claimed that, by intendment at least, this paragraph shows that, by persistent pressure, the Ellisville Lumber Company was compelled to sell the lumber for which the drafts were given, in order to pay its debt to the bank. This did not in any sense constitute duress in law. It is not duress to threaten to do that which a party has a legal right to do, and the fact that a party threatens to bring suit to collect a claim constitutes neither duress nor fraud, and a compromise of such a claim is binding in law. Vick v. Shinn, 49 Ark. 70; Gardner v. Ward, 99 Ark. 588; Fonville v. Wichita State Bank & Trust Co., 161 Ark. 93; 9 R, C. L. 721, and 13 C. J. 399.

The facts stated in the first and second paragraphs of the answer are admitted to be true, and it is also claimed that they show, inferentially at least, that the Ellisville Lumber Company indorsed the drafts in blank without consideration. In other words, it is claimed that, under the allegation of these two paragraphs of the answer, the Ellisville Lumber Company had the right to introduce parol evidence to show the real transaction between the parties and that the indorsement was without consideration.

It will be noted that the Ellisville Lumber Company is the drawer of the drafts sued on, and indorsed them in blank to the bank. There is much conflict of authority upon the question of whether or not parol evidence is admissible to contradict or vary the implied terms of a blank indorsement as between the immediate parties. The prevailing view favors the rule excluding parol evidence, since the contract implied by the blank indorsement is as definite as if it was expressed. See case-note to 4 A. L. R., p. 764 et seq.

There are, however, certain well recognized exceptions to the general rule. As between the immediate parties, it is always competent for the defendant to show, by parol evidence, either want or failure of consideration as between bimself and the plaintiff, or that the indorsement was procured by fraud, or that it was made upon some special trust, or to make .collection. In these and similar instances, parol evidence is admitted to show the absence of any valid or sufficient consideration for the alleged liability of the defendant to the plaintiff, and its admission violates no principle established for the protection of third persons as bona fide holders of negotiable paper. Daniel on Negotiable Instruments, 6 ed., <§§ 720-723 inclusive, and cases cited, and 2 Randolph on Commercial Paper, 2 ed. , §•§ 782-784 inclusive.

In recognition of the exceptions to the general rule, this court has held' that parol evidence is admissible to show that the negotiable paper was assigned for collection merely as oral testimony to prove that the indorser had not parted with his beneficial interest therein, does not vary the effect of the indorsement. Dickinson v. Burr, 15 Ark. 372; Smith v. Childress, 27 Ark. 328; and Johnson v. Schnabaum, 86 Ark. 82.

Again, one of the exceptions to the general rule was recognized in First National Bank v. Reinman, 93 Ark. 376. In that case it was held that an indorser may show that he indorsed, under an understanding made at the time this was done, merely to pass title to the indorsee, and not as a sale of the note and a guaranty of its payment, when the indorser was not interested in the note.

Reinman was the owner of. the four mules set out in the note sued on, and Brown wished to buy them on credit. Reinman declined to sell to him on a credit, and made an arrangement with the First National Bank, whereby he would sell the mules to it for $450 and take a note from Brown for $600. It was agreed that the note should be payable to Reinmaii, and that he should then transfer it to the bank.

The court held that, under these circumstances, the substance of the transaction was a sale of the mules by Reinman to the 'bank, and that Reinman’s indorsement was merely for the purpose of transferring the title to the bank. Parol evidence to this effect was held admissible to show the nature of the transaction and the purpose of the indorsement. In other words, the evidence tended to show that there was no consideration for the indorsement, but that the indorsement was merely in aid of the principal transaction, which was to place the title to the note given for the purchase price of the mules in the name of the real owner.

It is claimed, however, that the real basis of the holding in that case was that there was an element of fraud in procuring the indorsement. The only element of fraud that could arise under the facts was the perversion by the bank of the purpose of the indorsement. The noté was by Reinman indorsed in blank to the bank, and the law implied a contract on the part of Reinman to guarantee payment of the note. Under these circumstances, the indorser is allowed to show the real facts by parol evidence, not to vary the legal import of the indorsement, but to show that he indorsed it without any consideration whatever. The rule that parol evidence is not admissible to contradict or vary the legal import of a written contract is founded in the highest principles of public policy, and it is absolutely essential to the negotiability of commercial paper that the general rule should be applied to it. As between the parties to negotiable paper and others having notice, the want of consideration for a blank indorsement may be shown, not because there is an element of fraud in the matter, but because, as stated by Mr. Randolph, the exclusion of such evidence would make the courts themselves an engine of fraud.

The substance of the facts alleged in the answer is very similar to those proved in the Reinman case. In the case at bar the bank was pressing the lumber company for payment of the amount due it, and induced it to sell lumber at a price per thousand of $5 less than its actual value. The bank agreed to take the acceptances of the Morse Brothers Lumber Company in payment in full of the indebtedness due by the Ellisville Lumber Company to the amount of these acceptances. "When the acceptances were delivered to the bank it marked the account of the defendant paid in this amount, according to the agreement. This tended to show a want of consideration for making the indorsement. It would have been a vain and idle thing for the Eilisville Lumber Company to have made an agreement to settle a part of its indebtedness by.selling its lumber at a sacrifice, and at the same time, by indorsing in blank the paper for the price of the lumber, have thereby guaranteed the payment thereof to the bank.

In testing the sufficiency of a pleading by general demurrer, every reasonable intendment should be indulged to support it. Cox v. Smith, 93 Ark. 371; Bruce v. Benedict, 31 .Ark. 301; Turner v. Tapscott, 30 Ark. 312; Person v. Wright, 35 Ark. 169; and Ferrell v. Elkins, 159 Ark. 31.

Where facts are defectively stated in an answer, the remedy is by motion to make more definite and certain, and not by demurrer. Bowers v. Hutchinson, 67 Ark. 15; Gates v. Solomon, 73 Ark. 8; and Jennings v. Bouldin, 98 Ark. 105. The Code system of pleading was adopted in order to secure to the parties to a suit in every case a full and fair hearing upon the merits. While the Code forbids the allegation of mere conclusions of law, its spirit and object require that the facts constituting the cause of action shall be stated according to their legal effect. In short, the rule requires that the fact, and not the mere evidence of it, must be stated.

It is true that the defendant does not, by direct and express terms, aver that the indorsement in blank made by it on the drafts was pursuant to an express agreement that it should be done for the purpose of transferring the title to the bank, yet, when all the facts alleged in the answer are considered together, the substance is that such was the intention of the parties. That this was the tenor and effect of the agreement between the parties is fairly inferable from the facts alleged by the defendant in its answer. If the court had overruled the demurrer and put the .parties to the proof, the plaintiff could not have been misled by the averments of the answer. It would have understood perfectly well that the defendant was claiming that the indorsement was made to carry out the principal agreement between the parties, which, in short, was that, if the Ellisville Lumber Company would sell its lumber to the Morse Brothers Lumber Company at a sacrifice, the bank would take the acceptances of the Morse Brothers Lumber Company in satisfaction of the debt owed it by Ellisville Lumber Company, to the amount of such acceptances.

As we have already seen, the presumption of liability arising from a blank indorsement is prima■ facie merely, and not conclusive. Hence, as against all except bona fide holders for value, the true terms of the contract may be shown by evidence resting in parol. That is to say, as between the original parties and others having notice, oral evidence is admissible with respect to ■contracts of indorsement as well as other contracts tp show the true consideration or want or failure to consideration.

In the case before us, in order to bind the plaintiff by the alleged agreement it will be necessary for the defendant to prove that the plaintiff agreed to take the acceptances as a payment in full of the indebtedness to it of the defendant to the amount of the acceptances, regardless of the fact of whether or not the Morse Bros. Lumber Company paid the acceptances; and that the defendant indorsed the acceptances in blank for the purpose of transferring the title of the acceptances to the plaintiff and thereby carry out its original agreement with the plaintiff.

As above stated, if the Ellisville Lumber Company intended to guarantee the payment of the acceptances, no useful purpose could have been served by making the original agreement. The object of the present suit was to hold the Ellisville Lumber Company liable as indorser on the three drafts; and we think that, by fair intendment, the answer raises the issue that there was no consideration for the indorsements, and that it was made to carry out the original agreement between the parties. If the plaintiff thought there was any ambiguity in the pleading and that it might be taken by surprise by the proof, it should have filed a motion to require the defendant to make the answer more definite and certain.

It follows that the court erred in sustaining the demurrer to the answer, for the reason above given. As bearing upon the principles of law decided, we cite the following cases: National Bank of Rising Sun v. Brush, 6 Fed. 132; Brown v. Summers, 91 Ind. 151; Kirkham v. Boston, 67 Ill. 599; and Hamburger v. Miller, 48 Md. 317.

'Therefore the judgment will be reversed, and the cause .remanded for a new trial.

McCulloch, C. J.,

(dissenting). This action was brought to recover on the indorsements on the drafts, and not on the original debt which was discharged by the delivery of the drafts. If the action had been to recover on the original debt, then it would, of course, be competent for defendant to prove that the debt had been discharged by an absolute acceptance of the draft in payment of the debt. No rule of evidence would be violated in permitting oral testimony to be introduced to establish that fact. But, as before stated, the action being on the indorsement, the case is fully made out by presenting the unrestricted indorsement made on the draft, notwithstanding the fact that the draft may have been accepted in full payment of the original debt, unless it be proved that the indorsement was not intended to be unrestricted, but was made only for the purpose of passing title to the paper. I believe that, under the authority of our decision in First National Bank v. Reinman, 93 Ark. 376, a blank indorsement on negotiable paper may be proved by parol to have been for the sole purpose of passing title to the instrument, but there is no plea in this case, upon which such proof could be let in. It is nowhere alleged in the answer that the blank indorsements were made with any intention otherwise than that which the law attributes. All that the answer contains is an allegation that the plaintiff accepted the draft “in full payment of the indebtedness -due by these defendants,” and that “when said acceptances were all delivered to the said plaintiff, the plaintiff canceled the papers of these defendants, marked them paid, and closed the transaction as per the terms of the agreement. ’ ’ If there is any allegation in the answer to the effect, either expressly or by fair implication, that the indorsements were made merely for the purpose of passing title, I am unable to comprehend it. It is manifest from the language of the. answer that the pleader erroneously concedes the law to be that the defendant might defend against an unrestricted indorsement merely on the ground that the paper was accepted in satisfaction of the original debt. This conception is clearly manifested in the last sentence of the answer as copied in the opinion of the majority, where it is said that the plaintiffs “are now seeking to hold these defendants for the indebtedness, which has been fully paid and discharged.”

The defendant selected his own ground upon which he soug'ht to make a defense, and elected to stand upon the demurrer. I think that the answer was insufficient, and that the demurrer was properly sustained.


source: Caselaw Access Project

author: Wood, J.

license: Public Domain

text:
    Missouri State Life Insurance Company v. Miller.
    Opinion delivered April 7, 1924.
    • 1. Insurance — duty to continue policy in force. — Where, under the terms of a life insurance policy, it was the duty of the insurer to continue the insurance, on a failure of insured to pay any premium, so long as there were available funds for that purpose, and under the evidence it appeared that, from the time insured made default in payment of his premium until his death; there was sufficient loan value on his policy to extend the insurance until after the insured’s death, there was no duty resting on insured to make application for a loan, in order to get the benefit of such insurance.
    2. Contracts — forfeitures.—Forfeitures are ' not favored, and should not be declared except where there is the clearest evidence to justify it.

      Appeal from Crittenden Circuit Court, First Division; W. W. Bawdy, Judge;
    affirmed.

      Jourdan, Rassieur & Pierce, L. P. Berry and R. V. Wheeler, for appellant.
    This is simply one of the unfortunate eases where the insured realized on his insurance in his lifetime by borrowing the full legal reserve on the policy, and, when overtaken by adversity, he was unable to carry the insur-. anee further, and death removed him before he had done the things required of him. Patterson v. Equitable Life Assurance Society, 112 Ark. 171, 165 S. W. 454, is an almost identical ease. For an exactly parallel case see 109 S. E. 919 (G-a.). The facts are undisputed, and, under the decisions of this court, there was no payment of the premium. 75 Ark. 556, 88 S. W. 305; 28 Ark. 166; 48 Ark, 267; 3 S. W. 181; 111 Ark. 529, 164 S.-W. 283. There can be no waiver of the requirements of prompt payment of this premium, as no act of the company or any of its agents to any such state of facts appear; on the contrary, Miller was notified of the consequences which would attend upon nonpayment. He was advised, before he gave the two checks to the agent in Memphis, that the policy would be void if those checks were not paid. The court’s finding “that the retention of the checks and the fact that decedent had sufficient funds in the Crittenden County Bank & Trust Company shortly after the checks were presented for payment and refused because of ‘insufficient funds’ was a waiver of the clause of the policy sued on providing for the lapse of the policy unless premiums are paid in thirty days after due,” was a finding of waiver by implication, and was contrarv to the facts in evidence, and erroneous. 104 Ark. 288, 148 S. W. 1019. The second finding bv the court was erroneous because, (1) the loan value of the policy was ■onlv $697; (2) the company -could only make a loan on a nolicy after annlication therefor; (3) the company could not accept partial payments of premiums, and, according to the court’s findings, there was only a difference of $73, while the annual premium due was $79.45; and (4) the finding does not take into account any interest on the loan previously procured by the decedent. . The loan value, after the expiration of the thirteenth policy year, %. e., after September 2, 1921, presupposes the payment of the premium due on that date, before the advanced loan value ($770)- would have been available. 130 Ark. 419, 197 S. W. 700.

      W. B. Scott, for appellee.
    1. ' The annual premium on a policy of insurance is not a debt of the insured,' and its settlement'is hot governed by the strict rule controlling in the. payment of debts. Hence the cases relied on by appellant on the question of payment by check have no application. 150 Pac. 190; 6 Ga. App. 721; 65 S. E. 714; 114 Ky. 611, 71 S. W. 650; 20 Ky. L. Rep. 441, 46 S. W. 518. See also 14 R.' C. L. 963, §.136; L. R. A.; 1916A, 669-682; 2 Sask. L. R'., 355. In the light of these authorities; it appears that, a check having been made and delivered to an authorized agent of the company, and a receipt 'having been given for the payment of the premium, even though the Receipt contained a provision that- the check should ■’not'be considered as payment of the premium until the check was actually paid, yet, if the company retained the check after its nonpayment on account of -insufficient funds, and the insured thereafter' deposited ‘ sufficient funds in the bank to pay the check, the company was estopped to declare a forfeiture for nonpayment. See also 68 L. R. A. 87, 63 O. C. A. 130, 128 Fed. 383.
    2. With reference to t'hé second • finding, the company’s own construction as indicated by its'offer to lend the insured the additional $70, is sufficient evidence that there was an additional value available on and after Sep- ' fember 3,' 1921. The Fry case, 130 Ark. 419, relied ón by appellant, is not in point. ■
   Wood, J.

This is an action by the appellee against the appellant to recover on a life insurance policy issued by the appellant insuring the life of H. C. Miller in the sum of $2,500 for the benefit of his wife, Maudie L. Miller, the appellee. The complaint alleged the issuance of the policy, the death of Miller on February 8, 1922, the payment of the premiums, and the compliance with the terms of the policy on the part of the insured and the appellee. The answer admitted the issuance of the policy, but denied that the premium due April 3, 1921, was paid, and alleged that on April 5, 1921, a loan of $697 was made to Miller, which loan equaled the reserve or cash value thereof, and that the policy, by its terms, became null and void on October 4, 1921, and therefore was not in effect when Miller died. The cause, by consent, was submitted to the court sitting as a jury, on an agreed statement of facts, which it is unnecessary to set forth at length, but the material parts of which will be stated.

The policy was issued September 3,1908. The completion of the first-policy year would have been September 2, 1909, and the completion of the 13th policy year would have been September 2, 1921. The policy provided for the annual payment of premiums. If any premium was not paid when due, the policy was to continue in force for a term of one month, and, after the second year, if. the premium was not.paid within the period of grace, the insurance was to continue automatically, as term insurance, for the face value thereof, and the total term of continued insurance, including -the period of grace granted at the completion of any policy year, was set forth in a table. At the completion.of the thirteenth policy year the term of continued insurance was 23 years and 11 months, representing a paid-up life policy of $1,575 with a cash value of $697.50. The cash value of the policy, at the completion of the second policy year and thereafter, was the full reserve thereon, and at any time was equal to, or exceeded, the net value of the corrés'ponding non-forfeiture benefit thereunder. If there was any indebtedness to the company the cash-value thereof was to be' diminished thereby and the amount of paid-up life policy reduced in the ratio of indebtedness to the cash value. The policy provided for annual payment' of premiums, with a thirty-day period of grace, and, in case of failure of premiums, for reinstatement as of the due date, upon satisfactory evidence of insurability, upon the payment of all arrears of premiums, indebtedness, etc. There was a provision authorizing the insured, after the first year, to borrow money, within the loan value specified in the table, on the security of the policy. According to this table the loan value, after the expiration of the 12th policy year, was $697.50. All premiums had been paid up to September 3,1921, and it was agreed that the policy was in full force at that date. On that day the premium became due and had a period of grace of thirty-one days.

On the 5th of April, 1921, the insured borrowed on his policy the sum of $697. The interest on the loan was payable in advance upon the due date of the premium. On the 28th of September, 1921, the insured delivered to the general agent of appellant at Memphis, Tennessee, two checks, which, in the aggregate, equaled the premium and interest due on the policy, and which, if cashed, would keep the policy in force until September 3,1922. Upon delivery of the checks, the appellant gave the insured receipts for same, which receipts recite as follows: “Received payment described below; Policy No. 36858; Annual Premium $79.45; due date of premium, 3rd Sept., 1921. On the life of Hezrika Miller, Turrell, Ark. Not valid unless countersigned by P. M. Harper, General Agent, 616 Union & Planters Back Bldg., Memphis, Tenn. James J. Parks, Secretary. Countersigned, 9/30/21 by P. M. Harper, Gen’l. Agent. Any check, bank draft or express money order given in exchange for this receipt will not be considered payment of the premium for which this receipt is issued unless such check, draft or money order is actually paid to the company in cash on presentment in due course of business.”

The checks were indorsed by Harper, general agent of appellant at Memphis, Tennessee, and deposited in the National City Bank of Memphis for collection, the proceeds to be placed to the credit of the appellant. The National City Bank, through its oashier, indorsed the checks, “Pay to the order of any bank, banker, or trust company, prior indorsements guaranteed, October 1, 1921.” These checks were presented in the ordinary course of business through the Memphis branch of the Federal Reserve Bank of St. Louis, to the Crittenden County Bank & Trust Company, at Marion, Arkansas. They were also indorsed, “Pay to any bank, banker, or trust.company, prior indorsements guaranteed, October 2, 1921,” by the Memphis branch of the Federal Reserve Bank of St. Louis, and were presented to the Crittenden County Bank & Trust Company, at Marion, Arkansas, and by that bank dishonored and returned, marked “insufficient funds,” to the Memphis branch, which, in the ordinary course, returned them to the National City Bank, which bank charged the amount of the checks to the account of the appellant, on October 6, 1921, and on 'that day wrote appellant to that effect and returned to it the checks. The appellant retained possession of the checks and made no further effort to present them to. the Crittenden County Bank & Trust Company, or in any other manner to collect the same. The St. Louis office of the appellant was notified of the nonpayment of the checks on October 8, 1921, and it wrote the insured the following letter: “We exceedingly regret to advise you that your checks for $79.45 and $41.82, respectively, dated September 29, 1921, drawn on the Crittenden County Bank & Trust Company, Marion, Arkansas, ten-' dered in settlement of annual premium, also loan interest, due September 3, 1921, under the above numbered policy, have been returned for nonpayment; reason, ‘insufficient funds.’ In view of the fact that the grace period of thirty-one days automatically allowed in which to make settlement under said policy has long expired, and as a result of the return of the checks given in settlement of premium and loan interest referred to above, policy has therefore entered into and now stands in a lapsed condition. In order to revive the same, reinstatement will be necessary, and are accordingly indos-' ing blank application for that purpose, which we will thank you to complete, sign in the presence of witness, and return to this office, together with bank draft, postal or express money order in the sum of $121.27 covering arrears. Upon receipt of the same, application for reinstatement will be referred to our medical department for their examination, and, if approved by them, proper acknowledgment will be made. Undoubtedly the lapsing of- this insurance was the loss of a very valuable asset, and trust there will be no delay incurred on your part in taking necessary steps toward reviving the same. Assuring you that we stand- ready at all times to render any assistance possible in this connection, we beg to remain, ’ ’ .etc.

After October 8, 1921, the appellant wrote Miller, the insured, several letters, calling his attention to the nonpayment of the premium and soliciting him to pay the same and to reinstate his policy. On the 18th of December, 1921, Miller wrote to the appellant, in which letter he stated that he had received appellant’s letter in regard to his policy, and further stating that he did not want his policy to remain in its lapsed condition; that he was not able to take care of all the premiums.and interest, and requested the appellant to help him.carry over the balance until the next premium date. In answer to this letter, the appellant wrote Miller several letters, soliciting reinstatement by him and telling him that, upon part payment of the premium, the company would carry the remainder. Appellant had written Miller on the due date of the premium, September 3, 1921, that, unless the premium and interest were paid within thirty days,'the policy would lapse, and specified the amount of interest due on the loan. The insured made no further effort to pay the premiums and interest due September 3, 1921, except the giving of the checks, as above specified. The insured carried an account in the Crittenden County Bank & Trust Company, which account showed that from September 1,1921, to February 8,1922, he had more than 'sufficient money on deposit to pay the premiums and •interest, except prior to September 9, 1921, and from September 29, 1921, to October 10, 1921; from October 24, 1921, to November 2, 1921, and from November 28 to December 6, 1921, and from January 23 to January 26, 1922.

If the insured' was entitled to extended insurance, the premium for such insurance was $0,058 per day on the face value of the policy. The trial court made the following- finding’s of fact;

“1. The court finds that retention of the checks and the fact that decedent had sufficient funds in the Crittenden County Bank & Trust Company, shortly after the checks were presented for payment and refused because of ‘insufficient funds,’ was a waiver of the clause of the policy sued on, providing for the lapse of the policy unless premiums are paid in thirty days after due.

“2. The court further finds that the policy at the end of the year ending- September 3, 1921, had a loan value of $770, and the difference between that amount and the amount borrowed, which was $697, should have been applied by the defendant in the payment of the premium check given.”

. Thereupon the court deducted from the face of the policy the loan for $697 and the amount of the two checks, and rendered judgment in favor of the appellee in the sum of $1,640.75, from which is this appeal.

It will be observed that the insured had paid twelve annual premiums on his policy from September 3, 1908, to September 3, 1920, inclusive. The 13th policy year extended from September 3, 1920, to and including- September 2, 1921, and, after the expiration of the period beginning September 3, 1920, to and including September 2, 1921, would be “after the expiration.of the 13th policy. year. ’ ’ On page 33 of the transcript there is a table headed “Table of Non-Forfeiture Values,” which places the cash value of the policy at the completion of the 13th policy year at $697.50. But on page 38 of the transcript is a table entitled “Table of Loan Values,” and this table recites that “ after the .expiration of the 1.3th policy ye.ar the loan value of the policy was $770. ’ ’ The court found that the policy, at the end of the year ending September 3, 1921, had a loan value of $770. The premium due September 3, 1920, was paid. This kept the policy in force until the expiration of the 13th policy year, as above stated. It. therefore appears that on September 3, 1921, the appellee’s policy had a loan value of $770. It appears from these tables that there is a difference between non-forfeiture values and the loan values, as the non-forfeiture value, at the completion or after the expiration of the 13th policy year, was $697.50, while the loan value at the completion or after the .expiration of the 13th policy year was $770. The finding of the court was therefore correct according to the loan value as s.et forth in that table. The court found that there was a difference between the loan value and the amount which the insured had borrowed of the appellant, amounting to $79, and held that such amount should have been applied by the appellant on September 3, 1921, in order to prevent a forfeiture of the policy. The court was correct, under the facts of this case, in so holding. After the days of grace had expired, and after the appellant had notified the insured that his checks given to pay the premium had been dishonored, they further wrote him several letters in which they reminded him that his policy was in a lapsed condition, and urged him to have the same reinstated. Among these letters was one dated December 16, 1921, in which appellant stated that the insured had not favored them with a remittance of $121.27 and had not made an application for reinstatement. In this letter the appellant informed the insured that, if his financial condition rendered it impossible for him to make a full cash settlement of the amount stated, appellant would be glad if he would advise the appellant ‘•‘in just what way settlement could be made conveniently,” and concluded by- saying that the company was willing to assist him in every way possible, and asking him to let the company know as to what could be done towards placing” his policy in force. The insured answered this letter December 18, 1921, stating that he did not want his policy to stay in the present lapsed condition, bnt that he was not able to take care of all the premiums and interest, and asking appellant how it could help him carry over the balance until the next premium date. Appellant answered this letter December 27, 1921, and, among other things, said: “We are quite sure that you appreciate the value of this insurance and that you have every intention of again placing this policy in full force and effect, if possible, and we are therefore only too glad to offer you the following proposition: If you will kindly sign the inclosed note extension agreement for $70 due March 3, 1921, and return it to this office, with a remittance of $51.27 and a satisfactory application for reinstatement, we will be in a position to immediately consider the reviving of this insurance. Of your remittance of $51.27, $9.45 will be applied in part payment of the past due premium, and the balance in payment of the past due loan interest. We are very anxious to see this policy reinstated at the earliest date possible, and sincerely hope that this arrangement will meet with your entire approval. May we expect to hear from you in this connection in the very near future? Yours faithfully, ’ ’ etc.

The insured died (February 8, 1922) about forty days after receiving the last letter, without answering same.

Now it was the contention of the appellee that the insured, on September 3, 1921, was entitled, under the terms of the policy, to borrow of the appellee $770, the loan value of the.policy at that time. On the other hand, the appellant contends that the policy at that time had no loan value because the premium due September 3, 1921, had not been paid, and that therefore the loan value of the policy was not available. To sustain this contention appellant relies upon the case of Mo. State Life Ins. Co. v. Fry, 130 Ark. 419. While the policy in that case was precisely similar to the policy under review as to extended term insurance, non-forfeiture values and loan values, yet the facts of that case clearly distinguish it from the case at bar. In that case Fry made an application to borrow enough money on his policy to pay the entire premium for the current year, and was unwilling tó borrow less. In that case we said: “The increased loan value would' not have been available until the policy holder, Fry, had paid the premium on February 2, 1916, for the current year. This he never did; the increased loan value, had it been available, was only sufficient in amomit to pay the interest on the loan and to pay three months’ premiums. Fry never made application to borrow this amount, nor had he made application, in accordance with the terms of the contract, to pay the premium quarterly instead of annually. His failure in these respects clearly prevented his beneficiary from claiming an automatic extension or continuation of the policy beyond the period of grace provided in the contract.”

In the case at bar, the above correspondence shows ■clearly, at least the trial court was justified in finding therefrom, that the appellant, as late as December 27, 1921 (two months after the period of grace had expired), offered to loan the insured $70. The letters of appellant to the insured showed clearly that appellant interpreted the policy to mean that the loan value of the policy in excess of the loan to the insured was available to the insured if he desired to borrow that sum. It is not reasonable to conclude that the appellant would have offered tó loan the insured $70 on his policy if the policy did not have a loan value equal to that sum. It would not have been just to other policy-holders for appellant to have loaned the insured $70' that was not secured by accrued loan values under the policy. If this available loan value of $70 had been applied by appellant to the payment of term insurance, under the provision of the policy, it .would have entitled the insured to extended term insurance at a premium rate of $0.058 per day. This available loan value of $70 on September 3, 1921, would have paid the interest then due, of $41.82, leaving a balance of $28.18 to be applied' for term insurance at tbe premium rate of $0,058. In other words, the trial court was justified in finding, from the appellant’s letters, that the insured had an available loan value in the hands of the appellant, which, if applied by appellant for the payment of term insurance, would have been more than sufficient, after paying the interest due on the loan, to have- paid the premium on term insurance for the entire year, which would have carried it beyond the date of the death of the insured.

There were clauses in the policy, set out in the agreed statement of facts, which made it the duty of. the appellant, having available funds for that purpose, to have adjusted the values and continued the insurance as indicated. This appellant could and should have done. Under the provisions in the policy, the insurance automatically continued if there were any available funds for that purpose, and no duty rested upon the insured to make application for a loan in order to get the benefit of the term insurance provided for in the policy. When the case at bar is considered in the light of the facts as found by the trial court, sustained by abundant evidence, .that there was an available loan value on September 3, 1921, sufficient to pay the interest due and extend the term insurance until after the insured’s death, then it is readily differentiated from the case of Mo. Life Ins. Co. v. Fry, supra, upon which appellant, on this point, relies, and is in harmony with that case.

Forfeitures are not favored, but, on the contrary, are odious in law, and should not be declared except where there is the clearest evidence to justify it. The evidence here is' to the contrary. The conclusion thus reached makes it unnecessary to discuss the other issue of whether or not there was a waiver on the part of appellant by never returning the checks given by the insured.

The judgment of the trial court is correct, and it is therefore affirmed.


author: Hart, J.,

text:
    Ætna Casualty & Surety Company v. Henslee.
    Opinion delivered April 7, 1924.
    1. Highways — contractor’s bond — liability.-—Under Crawford & Moses’ Dig., § 6913, providing that contractors engaged on public works shall execute a bond conditioned to pay for labor performed or materials furnished, held that the bond of a contractor inures to the benefit of those furnishing labor and materials.
    2. Highways — contractor’s bond. — A bond for labor and materials given by the principal contractor to a road improvement district, which was organized under the general statutes providing for the creation and establishment of road improvement districts, was given under Crawford & Moses’ Dig., § 5446.
    3. Highways — contractor’s bond. — Acts requiring highway contractors to give bonds to secure persons furnishing labor and materials are intended to furnish the obligation of a bond as a substitute for the security which might be obtained by a mechanic’s lien; such liens- not -being given in the case of public works.
    4. Highways — contractor’s bond — liability to subcontractor. — - Under a bond given by a principal contractor to a road improvement district in compliance with Crawford & Moses’ Dig., § 5446, the surety is liable on the failure of the contractor to pay a subcontractor for labor performed and materials furnished in the construction of a proposed public road.
    5. Highways — contractor’s bond — parties.—Under § 1089, Crawford & Moses’ Dig., providing that every action must be prosecuted in the name of the real party in interest, a subcontractor who furnished labor and materials for building a public road may sue in his own name on the contractor’s bond. .
    6. Highways — contractor’s bond — parties.—Crawford & Moses’ Dig,, § 5446, providing that any person supplying labor and materials shall have a right of action and may sue in the name of the road district, does not preclude the person for whose benefit the statute was enacted from suing in his own name.
    7. Judgment — principal and surety. — -In an action by a subcontractor against a surety on the contractor’s bond for failure of the contractor to pay for labor and material used in building a public road, the court did not err in allowing to be read to the jury a decree obtained in the chancery court Ijy the subcontractor against the contractor, though the surety was not a party to that suit, such decree being prima facie evidence of a breach of the bond.

      8. Highways — contractor’s bond — sufficiency of evidence of breach. — In an action by a subcontractor against the surety on the contractor’s bond for labor and materials furnished in the building of a road, evidence held to show that the subcontractor had substantially complied with his contract.
    9. Highways — liability of contractor to subcontractor. — -Where the work done by a subcontractor under his contract. substantially complied with his contract, he is entitled to recover the contract price, less the fair cost of remedying any defects in the work.
    10.. Appeal and error — conclusiveness of verdict. — Where the jury’s verdict has evidence of a substantial character to support it, it is binding upon the appellate court.
    11. Highways — contractor’s bond — liability of surety for costs. —In an action by a subcontractor against a surety of the principal contractor for labor and materials furnished in the building of a road, it was error to allow to the subcontractor against the surety the costs of a former suit against the contractor to which the surety was not a party.
    Appeal from Jefferson Circuit Court; T. G. Parham, Judge;
    modified.
    STATEMENT OE EACTS.
    This is an action brought by a subcontractor against the principal contractor and the sureties on his bond for work done and materials furnished in constructing an improved road for an improvement -district in Woodruff County, Arkansas.
    The- Cotton Plant Road Improvement District No. 1 of Woodruff County, Arkansas, was organized under the general laws of the State relating to road improvement districts. R. Mobley entered into a contract .with the commissioners for the construction of the road in August, 1917. The JEtna Casualty and Surety Company signed his bond, in .the sum of $40,000 for the faithful performance of his contract and for the payment of all labor and materials entering in the construction of said road. In September, 1917, E. A. Henslee, as subcontractor, entered into a contract with R. Mobley, the principal contractor, by the terms of which he agreed to furnish all tools, labor and equipment and do all the work necessary to prepare a crushed rock base for an asphaltic top for the road to be improved: Tbeir contract provided that the payment for the work done by the subcontractor was to' be made; at the prices set out in their contract,, at the times the principal contractor received payment .from the commissioners of the road improvement district upon monthly estimates.
    In August, 1918, R. Mobley refused to make the payments, because he insisted that Henslee had breached the contract by refusing to repair the rock base, which had become worn, and to put it in shape so that the asphalt surface might be laid on it, and because Henslee would .not bring up the shoulders of the road in the manner provided in the contract between Mobley and the com■missioners of the road district. Henslee refused to do this work because the rock base had become worn by the traffic and weather, due to the delay of Mobley in spreading the asphalt upon the rock base when it had been finished by Henslee. Henslee refused to round up the shoulders of the road, because that was not his duty under the terms of his contract. Testimony was introduced by each party to sustain his contention. Other facts will • be stated in the opinion.
    The cause was tried before a jury, which returned a verdict in favor of the plaintiff, .and from the judgment rendered the defendants have duly prosecuted an appeal to this court.

      J. II, Carmichael and J. A. Sherrill, for appellant.
    The suit should have been brought in the name of the district. Appellee relied on act. 446 of the Acts of 1911, in bringing the suit in his own name, whereas act 338 of the Acts of 1915 repeals the former act, so far as relates to roads. 149 Ark. ,576. The execution of the bond required by the 191Í act is mandatpry... ..159 Ark. 275. If the action must be maintained under § 5446, C. & M. Digest (Acts 1915), then appellee must follow that statute to be entitled to the relief provided for, and maintain the same in the name of the district; having, failed to do this, his suit should be dismissed. 82 Ark. 407; 82 Ark. 247; 153 Ark. '321. Even if both § 6913 (Act 1911) and § 5446 are available to road districts, appellee should seek his relief under the same statute followed by the district. If the suit was brought under § 6913, relating to those who furnish labor and material, it should be dismissed, since appellee did neither. 65 Ark. 183; 102 Ark. 539; 125 Ark. 590; 159 Ark. 21. The fact that a ¡borrower used money loaned to pay persons having a mechanic’s lien does not subrogate the lender to such lienor’s rights. 155 Ark. 201; 158 Ark. 137. It was prejudicial to introduce the judgment obtained in the former suit, since the surety was not a party thereto. 147-111. 634, 35 N. E. 820; 21 it. C. L.-1090.

      A. F. Triplett, for appellee.
    ' A judgment against a principal is prima facie evidence in‘a suit against his surety. 89 Ark. 378; 98 Ark. 143; note 16 L. B. A. (N. S.) 911. A construction bond to an improvement district inures to the benefit of a person furnishing the contractor with labor and materials, where the bond contains appropriate provisions w-ith reference to such labor and materials. -126- Ark. 474; 152 Ark: 414; 153 Ark: 142. A subcontractor is a person furnishing labor or materials, and can claim the benefit of such, a bond. 152 Ark. 414; note 27 L. N. A. (N-. S.) 573. ■ It is the policy-of our law that a -suit should be prosecuted in the name of the real party in interest,- and the statute to this effect, § 1089, O. &-M.- Digest, is to-be read along with § 5446. Section 5446 does -not repeal § 1089, nor provide an exclusive remedy. - - - - . -
   Hart, J.,

(after stating the facts).- Inasmuch as the cause of action of the plaintiff is based, upon -a statutory bond for work done in the construction of a public road, by an -improvement district, we have - deemed it appropriate to give a brief history of statutes of this sort and our - decisions construing -the same-. ....

• Section 6913 of Crawford & Moses’ Digest, which was passed by -the -Legislature of 1911,- provides that, whenever any .public officer shall, under-the.laws, of this State, enter into a contract with any-person for the -purpose.of making any.public improvement, or constructing any public building, such officer shall take from the principal contractor a bond with sufficient sureties, conditioned that such contractor shall pay all the indebtedness for labor and materials furnished in the construction of said public building or in making .said public improve, ment.

This court has held that school directors and commissioners of road districts are public officers, and that the bond of the contractor given under the statute inures to the benefit of those furnishing labor and materials, and that an action may be maintained thereon by one of such persons for labor performed, or materials supplied in the construction of a schoolhouse or an improved public road. Reiff v. Redfield School Board, 126 Ark. .474; Oliver Construction Co. v. Williams, 152 Ark. 414; and Arkansas Road Const. Co. v. Evans, 153 Ark. 142.

In the two cases last cited special acts of the "Legislature had been enacted creating the road improvement districts, and the acts contain no provisions providing for the execution of a bond by the principal contractor to pay subcontractors and other persons furnishing labor and materials for the construction of the improved road, and the court held that the provisions of § 6913 were broad enough to include laborers who have performed work on the road proposed to be improved, or those who have furnished materials which the principal contractor had obligated himself to furnish.

The record in the case at bar .shows that the road district was organized under the general statutes of this State providing for the creation and establishment of road improvement districts. This act was passed 'by the Legislature of 1915, and $ 5446 of Crawford & Moses’ Digest is § 30 of the act. It reads as follows: “All contractors shall be required to give bond for the faithful performance of such contracts as may be awarded to them, with good and sufficient security, in an amount to be fixed by the board of commissioners, and said bond shall contain an additional obligation that such contractor, or contractors, shall promptly make payment to all persons supplying him or them labor and materials in the prosecution of work provided for in such contract. Suit may be brought by and in the name of the district upon the bond given to the board.' Any person, individual or corporation supplying labor and material shall have the right of action, and shall be authorized to bring suit in the name of the district for his, their, or its use and benefit, against said contractor and surety, and to prosecute same to final judgment and execution, but such action and its prosecution shall involve the district in no expense whatsoever.”

Inasmuch as the improvement district in question was organized under the general laws of the State, it results that the bond given by the principal contractor was given in compliance with the terms of § 5446 of the Digest quoted above. The bond sued on was given for two purposes. In the first place, it was given to secure to the commissioners .of the district the faithful performance of the contract of the principal contractor with the district; and, in the second place, to protect third persons from whom the contractor may obtain materials or labor used in the construction of the improved road. Acts of this kind are intended to furnish the obligation of a bond as a substitute for the security which might be obtained by a mechanic’s lien, such liens not being given in the ease of public works. The purpose of the Legislature in providing security for the payment for labor and materials going in the construction of an improved public road was intended to provide indemnity to persons furnishing such labor or materials, thereby enabling the principal contractor to meet his contracts with road improvement districts in supplying the labor and materials necessary to the construction of the proposed road.

In construing a similar statute passed by Congress, the Supreme Court of the United States has held that work done and materials furnished by subcontractors come within the provisions of the statute, and that they are protected by it. Guaranty Co. v. Pressed Brick Co., 191 U. S. 416, and Mankin v. United States, 215 U. S. 533.

In Hill v. American Surety Co., 200 U. S. 197, the protection of the statute was extended to materials furnished to subcontractors. Inasmuch as persons furnishing materials and labor used in the construction of an improved public road cannot secure themselves by a mechanic’s lien upon the proposed improvement, the Legislature, for the protection of these persons, passed a statute for the prompt payment of their claims and the same security that it requires for the faithful performance of the contract of the principal contractor with the commissioners of the district. The surety company was organized for the purpose of furnishing bonds of this kind. It understands perfectly well the nature and extent of its obligation, and its liability is 'fixed by the terms of the bond, construed in connection with the act of the Legislature in compliance with which the bond is executed.

This is the effect of our own decision in the ease of Kerby v. Road Improvement Dist. No. 4 Saline Comity, 159 Ark. 21. In-construing § 5446 of the Digest the court said that the benefits of the act were extended to those who supply the labor of others as well as those who labor themselves. Thus-subcontractors and those working for them -are brought within the provisions of the act.

While the statute .does not require it, it- has been well said that - the contractor can -protect himself by requiring’ a bond securing him against liability on account of engagements of-the-subcontractor-with persons-who furnish labor and materials upon his order. Therefore we are of-the -opinion - that the- terms of- the -bond make the surety liable for the failure-of the contractor to pay the subcontractor for labor performed and materials furnished in the construction of the proposed public -road.

■ It is- insisted, -however, that, under the statute, the subcontractor has-no right to bring -suit in his own name against the contractor for a breach'of contract. We cannot agree with counsel in this contention. Section 1089 of Crawford & Moses ’ Digest is a part of our Civil Code, and provides that every action must be prosecuted in the name of the real party in interest, with certain exceptions which do not relate tothe subject of the controversy in this suit. Since the adoption of the Code, it has been held that actions on bonds given to the State for the faithful performance of the duties of a public officer may be prosecuted by the State, or by the real party in interest— that is, by the person entitled to receive the money occasioned by the breach of the official bond. Hunnicutt v. Kirkpatrick, 39 Ark. 172, and State v. Wood, 51 Ark. 205. Subsequently it was held that those performing labor or furnishing materials upon a public building for whose benefit the bond required by § 6913 of the Digest referred to above was given, may sue upon the bond, on the principle that a third person for whose benefit a statute requires a bond to be executed may maintain an action thereon although the consideration does not directly move from such third' person. Reiff v. Redfield School Board, 126 Ark. 474.

But it is claimed that, inasmuch as § 5446 provides that any person supplying labor and materials shall have a right of action and shall be authorized to bring suit in the name of the district for his use against the contractor and his surety, this method is exclusive. While there is some conflict in the authorities on this point, we think that the better reasoning is that the language of the statute is permissive merely, and does not prevent the person for whose benefit the statute was enacted from suing in his own name, under the principles above announced. No prejudice whatever ’ can result to the contractor from this construction. The statute, in providing that the persons supplying labor and materials shall be authorized to bring suit in the name of the district for his use, in effect makes such persons’ interested parties, and the omission of the name of the district could not in any manner prejudice the rights of the contractor. The provision authorizing suit in’ the name of the district for the usé of those supplying labor and materials merely provides a convenient method for styling the case, and was evidently not intended to be the exclusive remedy for its enforcement. The object of the statute was to give the same relief by a proceeding upon the bond as could be had, in the case of the erection of a building by a private owner, by the enforcement of a lien against the building, and, such being the evident intention of the statute, it should receive such construction as will render it most effective for that purpose. While the statute ought to be obeyed, yet, inasmuch as it named the district for the use and benefit of those furnishing labor and materials as the plaintiff, it is to be regarded as directory merely. The condition of the bond is the important requirement. Of course, where there are several claimants who have the right of participation, and the funds should be insufficient to pay all parties in full, it might become necessary to make the district a party, so that the rights of all the parties might 'be settled and the distribution of the funds available might be in proportion to the amount due to each one. Hence we are of the opinion that the subcontractor, under the provisions of our .Code, had the right to maintain the suit in his own name as the real party in interest.

In the trial of the case the court allowed to be read to the jury a decree obtained in the chancery court by E. A. Henslee against R. Mobley upon this same cause of action. This decree was obtained pursuant to directions given in reversing the decree of the chancery court in the case of Henslee v. Mobley, 148 Ark. 181. The surety was not a party to that suit, but it was upon the same cause of action, and we are of the opinion that the decree was properly admitted in evidence against the surety in this case. It proved at least a prima facie breach of the bond by showing the amount due by Mobley to Henslee for a breach of the contract which the bond was given to secure. Ingle v. Batesville Grocery Co., 89 Ark. 379; Baxter County Banle v. Ozark Insurance Co., 98 Ark. 143; and Moses v. United States, 166 U. S. 571.

The court, iu its instructions to the jury, told it that the judgment or decree against the principal was only prima facie evidence in the subsequent suit against the surety, who had no notice or opportunity to defend the former suit. Hence the circuit court committed no error in allowing this judgment or decree to be read in evidence in the present case.

The instructions of the court were in accordance with the principles of law announced above.

It is also insisted that the evidence is not legally sufficient to support the verdict. As we have just .seen, the chancery .court, pursuant to the directions of this court, rendered a decree in favor of Henslee against Mobley upon the same cause of action. This judgment or decree was prima facie evidence in a suit based upon the same cause of action against the surety upon the bond of Mobley. In addition to this, other evidence was introduced by the plaintiff tending to establish his cause of action. It was shown that he performed his contract substantially according to its terms, and that the rock base put on the road by him became smooth by the action of the weather and of persons traveling over the road after he had completed his work. It was shown by him that this was caused by the delay of the principal contractor in spreading the asphalt surface upon the rock base. The principal contractor attempted to justify his delay by the action of the United States Government in requisitioning his machinery which was to be used in laying the asphalt surface on the road. His testimony, however, is flatly contradicted by that of an engineer, who stated that he was familiar with the whole transaction, and that the United States Government had not requistioned his machinery for laying asphalt at the time claimed by the principal contractor.

It was also shown by the defendants that the plaintiff failed to round up the shoulders of the road after the asphalt surface was laid.

On the part of the plaintiff it was shown that it was not his duty to do this work, but that it devolved upon the principal contractor to do it in connection with laying the asphalt surface of the road.

The jury settled the conflicting evidence on these points in favor of the plaintiff. The court told the jury that if it found, from a preponderance, of the evidence, that the work done by Henslee, under his subcontract with Mobley, was done substantially in compliance with the contract, its verdict should be for the contract price . of the work done by him, less the fair cost of remedying any defects in the work. This was a correct declaration of law, and the verdict of the jury, having evidence of a substantial character to support it, is binding upon us upon appeal.

Finally it is insisted that the court erred in allowing the plaintiff to recover the costs of the suit in the case of Henslee against Mobley, which was introduced in evidence in this case as above stated. The costs in that case amounted to the sum of $342.23, with interest thereon at 6 per cent, from September 11, 1918. The verdict in this case was returned on January 5, 1923. The surety was not made a party to that suit, and was never called upon to defend the same. Hence it should not be charged with .the costs of that suit, and the court erred in so instructing the jury.

The verdict of the jury in the present case was for $6,231.63. The error may be eliminated by deducting from this amount the sum of $342.23 with interest thereon from September 11,1918, to January 5,1923.

The court directs that the remittitur be entered here, and, inasmuch as this is a law case, the' costs of appeal will ‘ be adjudged against Henslee. American Soda Fountain Co. v. Battle, 85 Ark. 213; Brown v. Yukon Nat. Bank, 138 Ark 210; and Sweet Springs Milling Co. v. Gentry, 142 Ark. 234.

For the'error in charging the .¿Etna Casualty, and Surety Company with the costs of the appeal in the chancery suit of Henslee against Mobley, the .judgment ■must be reversed. But, inasmuch as the case has been fully developed, judgment will b,e rendered here in favor of the plaintiff against the surety company for the amount-indicated in the opinion. It is so ordered.


author: Smith, J.

text:
    Cartwright v. Dennis.
    Opinion delivered April 7, 1924.
    1. Subscriptions — authority to sign. — Where defendant. authorized a solicitor to sign his name to a subscription for the benefit of a high school, such authorization constituted a signature By him.
    2. Subscription — misrepresentation as defense. — Where the defense in an action on a subscription to establish a high school was that defendant signed on the representation that it was proposed to establish a college, and there was evidence that defendant knew that the intention was to establish a high school, although the solicitor had employed the word “college” in procuring the subscription, whether the subscription was procured through a misapprehension held for the jury.
    8., Appeal and error — presumption from absence of instructions. —Where instructions are not set out in the briefs, it will be presumed that the cause was submitted under proper‘instructions.
    4. Subscriptions — right of action. — In an action to collect an-installment due on a subscription contract for the benefit of an academy, in the absence of an allegation showing that plaintiffs had such an interest as entitled them to sue, they had no right of action.
    5. Parties — right to sue — general demurrer. — A general demurrer is sufficient to raise the question of the right of plaintiffs to sue.
    6. Appeal and error — question not raised below. — Where- the question as to plaintiffs’ right to sue was not raised at the trial by general demurrer or otherwise, the question cannot be raised on appeal.
    Appeal from Boone Circuit Court; J. M\ SMnn, Judge;
    affirmed.

      E. G. Mitchell, for appellant.
    1. The plaintiffs below were not the real party in interest, and had no right to sue. The church did not sue. C. & M. Digest, § 1089.
    2. There'can be no contract without a mutual agreement, - The minds of the parties must meet in' mutual assent and agreement upon the subject-matter of the contract. 13 C, J. 263, and authorities cited; 191 S. W. 234; 86 Ark. 97, 109 S. W. 117.8.

      Shouse & Rowlandf for appellee.
   Smith, J.

This suit was brought by Sam Dennis and others, “acting for the Valley Springs Academy, of Valley Springs, Arkansas,” to collect an installment due on a subscription contract for the benefit of that institution which had been signed by the defendant Cartwright and a number of others. The defendant resisted payment on the ground that he made his subscription upon the representation that it was proposed to build a college, whereas the promoters of the enterprise did not intend to erect a college, and had not done so, but had only promoted an academy doing four years high-school work.

The testimony shows that the Methodist Episcopal Church South contemplated establishing a high school in North Central Arkansas, and sought, to interest citizens who desired its location in their community, to the end that subscriptions to secure its location might be offered. Citizens of Valley Springs became interested in the project, and committees were appointed to solicit subscriptions. Considerable interest was aroused, public meetings were held, and news items concerning* it appeared in the local newspapers. According to the testimony on behalf of the plaintiff, the plan of the church was repeatedly stated and generally understood, and the institution established conformed to that plan.

Among others who subscribed was the defendant Cartwright, who made a subscription of $250, payable in annual installments, and this suit was brought to collect one of the past-due installments. Cartwright’s subscription was solicited by Dr. J. I. Jackson and Dock Wilson, faho were members of the committee designated for that purpose. When Cartwright was approached by these members of the committee, he was engaged in digging a, cistern, and was standing in the excavation, which was about five feet deep. Cartwright testified that Dr. Jack-, son was the spokesman, and stated that the subscription was being taken to erect a college, and that he subscribed on that condition.

Dr. Jackson admitted that he used the word “college, ’ ’ .but stated that lie did this in explaining the purpose of his visit, rather than the character of the institution, and that, when he employed this word, Wilson .corrected him and referred to the institution as an academy or a high school, and that -Cartwright directed him to sign his name to the subscription list' for $250. This list was lost by Dr. Jackson before he returned home, but there was no question about Cartwright having authorized the signing of his name, nor is there any question about the amount .of. the subscription. This authorization constituted ' a signature by Cartwright. Lipscomb v. Blanz, ante p. 1.

Cartwright testified that his hearing is defective, but he did hear Jackson say the subscription was for a college, and that he did not hear any correction of that statement, and Wilson testified that Jackson did refer to the institution as a college, and that he had no recollection of correcting the statement.

A witness named Keeling testified that he discussed the project with Cartwright, and that he attended a public meeting called to consider it, at which a representative of the church explained fiilly the plan to build a four-year high, school. Before attending this meeting Cartwright asked witness to attend and to report what' the plans were, and he did so, and explained the matter fully to Cartwright, and, if this testimony is true, Cartwright knew that it was not' proposed to build a college, although Dr. Jackson had employed that word in soliciting his subscription,- at least it was a question for the jury whether Cartwright had signed the subscription list through misrepresentation, or because of a misapprehension induced by the language. employed by Dr. Jackson while soliciting his subscription.

The instructions are not set out in the briefs, and it will therefore be conclusively presumed that the cause was submitted to the jury under proper declarations of law, and, as the jury might have found from the testimony that there was no misrepresentation, the verdict against Cartwright is conclusive of that question.

It is insisted that the plaintiffs have no such interest, in the litigation as entitle them to maintain this suit, and that the court erred in overruling the demurrer filed in the cause. After a careful examination of the record we find no- showing that a demurrer was ever filed. If one was filed, it does not appear from the record, and the judgment of the court contains no reference thereto.

It does not appear from the complaint just what interest the plaintiffs had in the cause of action, except the recital in the caption, and the complaint was demurrable on that account. In the absence of some allegation showing that the plaintiffs had a recoverable interest in the subject-matter, they had no right to sue.

- ' We have held that, while a general demurrer does not raise the question of a mere defect of parties, it does raise the'question of the right to sue at all, that is, that proper parties, have not sued. Henry v. Knights and Daughters of Tabor, 156 Art. 165; Creamery Package Mfg. Co. v. Wilhite, 149 Ark. 576; Deloney v. Dillard, 152 Ark. 159.

A general demurrer would therefore have been suffi.cient here to raise the question of the right of the plaintiffs to sue at all, but, as we have said, it does not appear that a demurrer, either general or special, was filed.

The question arises therefore, whether the judgment must be reversed because it does not appear from the face of the complaint what interest the plaintiffs had in the cause o'f action. We think this question cannot prop•'erly be raised here for the first time. It is conceivable .that the plaintiffs, as members of the soliciting committee, had an interest in or an obligation in regard to the subscription list which they delivered to the representatives of the church, and in consideration of which the academy was located in Valley Springs, which would • have made them proper parties at least to a suit to enforce the subscription contract, and, if this question had been raised in the court below, that showing might have been made.

In the case of Robinson v. Insurance Co., 51 Ark. 441, it was insisted that the plaintiff, a foreign corporation, could not maintain the suit because it had not complied with the laws of this State relating'to foreign corporations doing business in the State. The point was raised for the first time on appeal, and the court, in disposing of the question, said: “No such objection was made in the circuit court, and an objection to the ability of a plaintiff to prosecute an action will not be entertained in this court-if not made below.”

In the case of Arkansas Road Construction Co. v. Evans, 153 Ark. 142, it was held that a defect of parties is waived unless objection to the complaint on that account is raised in the court below, either by answer or by special demurrer for that purpose, and, as the point does not appear to have been raised in the court below, it cannot be raised here for the first time. Driver v. Lanier, 66 Ark. 126; Hadley v. Bryan, 70 Ark. 197; Kraft v. Moore, 76 Ark. 391; Paris Mercantile Co. v. Hunter, 74 Ark. 615; St. L. I. M. & S. R. Co. v. Watson, 97 Ark. 560; Kansas City Sou. Ry. Co. v. Crossen, 103 Ark. 613.

No error appearing, the judgment is affirmed.


author: Humphreys, J.

text:
    Pullen v. Cowan.
    Opinion delivered April 7, 1924.
    1. Adverse possession — evidence.-—In an action in which plaintiff claimed to have acquired title to a strip of adjoining owner’s land constituting a part of plaintiff’s inclosed yard fey adverse possession, evidence held sufficient to overcome presumption that plaintiff’s predecessor held possession of the strip under and in subordination to the legal? title of his grantee, defendant’s predecessor, and not adversely to such grantee.
    2. Adverse possession — retention op possession by grantor.— Retention of possession of land by a grantor after conveyance thereof is presumed to be for the grantee, but such presumption will not extend over an unreasonable length of time.
    Appeal from 'Benton Chancery Court; H. L. Pearson, special chancellor;
    affirmed.

      Sullins & Ivie, for appellant.
    Wherever a Vendor retains possession after the execution of the deed, limitation will not begin to run against the grantee until notice of the hostility of the vendor’s claim. 85 Ark.'520; 69 Ark. 562; 58 Ark. 142. If a grantor in a deed containing a covenant of general warranty conveying away the title in fee simple remain in possession, he is presumptively the tenant of the grantee, and cannot set up an undisputed title in himself without having shown some act of ouster of his landlord, or the equivalent thereof. 16 L. R. A. (N. S.) 1147. See also 1 R. C. L., p. 751, § 75. Where the language of the deed is plain, certain and unambiguous, its construction is a question of law, and the court will not consider the surrounding facts or circumstances. 103 Ark. 425; 111 Ark. 220. See also 158 Ark. 10.
   Humphreys, J.

This suit was commenced in the circuit court' of Benton County, but, on motion of appellants, was transferred to the chancery court without objection, where the issues' were joined, tried, and determined. The court found that appellee was the owner and entitled to retain possession of a strip of land ten feet wide squarely off the north side of lot 6, in block 28, in B. F. Sikes’ addition to the town, now city, of Rogers, Benton County, Arkansas, and divested all the interest, or apparent interest, of appellants therein out of them, and invested same in appellee, from which finding and decree an appeal has been duly prosecuted to this court.

According to the plat of B. F. Sikes’ addition to the city of Rogers, lots 3 and 6, in block 28, adjoined, and each is fifty feet wide. Lot 3 is north of lot 6. On October 22, 1911, J. H. Groodwin was the owner of both lots, and resided upon the property. The main part of his house was on lot 3, but it extended over on lot 6 several feet. The testimony is in conflict as to the exact distance, but tbe court found tbe distance to be seven feet, and we cannot say that the finding is contrary to the weight of the evidence. His residence had a fence around it, and his south line fence was ten feet over on lot 6, or, to state it differently, he had ten-feet squarely off of lot 6 included in his yard. On that date he sold that part of lot 6 south of the division fence, the south forty feet thereof, to his son-in-law, E. B. Johnson, who took immediate possession thereof and built a home thereon. The property intended to be conveyed was described in the deed from Goodin to Johnson as lot 6, in block 28, in B. F. Sikes’ addition to the town of Rogers. E. B. Johnson occupied the south forty feet of lot 6 until the second day of February, 1920. During his occupancy he never claimed any part of the ten-foot strip. The front part of the fence was torn down, except the posts, which remained intact. Some time in 1917 the front part of the fence was rebuilt. -On February 2, 1920, E. B. Johnson sold his place to appellants, and, in conveying same, described it as lot 6, block 28, in B. F. Sikes ’ addition to the town of Rogers. The property was sold through an agent, Bill McGarrah. Oscar Pullen, one of appellants, testified that a division fence was between the two places at the time he purchased lot 6; that some one told him before he closed the deal that there was only forty feet in the Johnson lot; that he mentioned this fact to McGarrah, who replied that the party was “kidding” him, and, in order to assure him that the lot was fifty feet wide, took him to the clerk’s office and showed him the plat. Bill McGarrah denied that he made this statement to Pullen, but, on the contrary, said he informed him that it was a narrow lot; that he took him to the clerk’s office in order to get the correct number to the lot and not for the purpose of showing him that the lot was fifty feet wide.

On January 21, 1920, J. H. Goodin sold his home place to appellee, including the strip in question, but, in conveying same, described the property as lot 3, in block 28, in B. F. Sikes’ addition to the town of Rogers. J. H. Goodin testified that, after lie sold the south forty feet off of lot 6 to E. B.. Johnson, his son-indaw, he remained in the open, adverse, continuous possession of the ten-foot strip on the south side of lot 6, claiming title thereto; that E. B. Johnson made no claim whatever to the strip '; that, when he sold his home place to appellee, he informed him that the division fence was on his south line. Appellee testified that, when he bought J. H. Goodin’s home place, he understood the division fence was on the south line of the property, and that he immediately took and retained open, adverse and continuous possession of the property up to the division fence, claiming title thereto. W. B: Fields, Clarence Boyd, and John Kerr each testified that appellee told him he understood he was buying a forty-foot lot, but the plat and deed called for fifty feet, and he intended to hold them to it. Oscar Pullen denied making'this statement to them.

After carefully reading- and analyzing the testimony, we are convinced that the finding- and decree of the chancery judge is supported by the decided weight of the evidence. Appellants contend, however, that, under the law, a presumption must be indulged that J. H. Goodin held possession of the ten-foot strip in question under and in subordination to the legal title of his grantee, E. B. Johnson, and not adversely to him. It is true, the retention of the possession of land by a grantor^ after conveying same, is presumed to be for the grantee, but this presumption will not extend over an unreasonable length of time. Such a presumption will only be indulg-ed for a reasonable length of time. In the instant case the presumption was overcome by the great weight of the testimony. .

No error appearing, the decree is affirmed.


text:
    Barker v. Wist.
    Opinion delivered April 7, 1924.
    1. Courts — appeals prom county courts.. — In hearing appeals from the county court, the circuit court hears all cases de novo, whether administrative matters or judicial causes, so that, on appeal from an order of the county court creating a n'ew township, the circuit court had jurisdiction to make an adverse find- ■ ing on the same testimony that was heard by the county court.
    2. Appeal and error — appeals prom circuit court. — On appeal from the- circuit court the Supreme Court does not try the case de novo, nor try the case on the preponderance of the evidence.
    Appeal from Madison Circuit Court; W. A. Dickson, Jrldge;
    affirmed.

      ■Sulims & Ivie, for appellant.
    ■ The county court is vested with power,.» and'it4s -its duty, to divide the county inte» convenient town-ships and to subdivide those already established as occasion-may’ require. . Sections 10288, 10290, C. & M. Digest. I-t is a general principle that appellate courts will not review questions the determination of which, rest in the sound discretion of. the lower court. 7 R. C. L., p. 1073, § 110. The circuit court should not have interfered with the finding of the county court, unless it had differént facts to base its decision on. -No evidence was takeh, and the case was submitted on, the' record made in the county court.
   Smith, J.

A petition was filed by appellants and one hundred other citizens of Kentucky - Township, in Madison County, with the -county court of that county, praying the court to organize a new township, to be known as Pettigrew Township, out of a -portion of Kentucky Township. A remonstrance was filed-by appellees and eighty-eight other- citizens 'of' Kentucky' Towns-hip. The court made an order -creating a new township,- and appellees prayed and perfected an appeal to the -circuit court.- ' •

• The'judgment, of the circuit-court'recites -that -the cause ‘‘was--submitted to the-court--upon the pleadings and petitions and remonstrances,' maps, and plats, and agreement of counsel as to the facts,” and the court found the issues for the remonstrants, and adjudged that the order of the county court be vacated and. set aside, and the petitioners for the organization of the new township have appealed to this court.

It is asserted that the circuit court heard only the same evidence as was submitted to the county court, and it is insisted that, inasmuch as the county court had found from this evidence that the township should be organized, the circuit court was without jurisdiction to find against the new township on the same testimony. It is the insistence of the appellants that the question of dividing the territory of a county into townships is a matter within the discretion of the county court, and, if subject to review at all by the circuit court, the orders of the county court can be set aside only upon a showing of an abuse of discretion on the part of the county court.

Learned counsel misapprehend the function of the circuit court in these matters.

In the case of Horn v. Baker, 140 Ark. 168, we said that, upon the authority of § 33 of article 7 of the Constitution, appeals have 'been uniformly granted as a matter of constitutional right from all judgments of the county court to the circuit court, and no distinction had been made between administrative matters and .judicial causes, and that appeals were heard de .novo. The subject was there thoroughly considered, and the authorities-need not be again reviewed.

It was therefore within the power of the circuit court to make á finding on the same testimony heard by the county court adverse to the finding of the county court. This results from the fact that the circuit court hears the cause de novo. It is from the circuit court that the appeal comes to this court, and.we do not -try the case de novo, and, as it does not appear that the judgment of the circuit court was arbitrary, but- was based upon a showing that there was no necessity for the creation of a new township-, that judgment must be affirmed, for we do not, on an appeal from the circuit court to this court, consider the question of the preponderance of the testimony. The judgment of the circuit court is therefore affirmed.