author: McHaney, J. McHaney, J.

text:
    Lena Lumber Company v. Brickhouse.
    Opinion delivered March 21, 1927.
    1. Principal and surety — breach of contract. — A contract to construct a house requiring payment of 80 per cent, of estimated value to contractor as work progressed, held not to have have been breached by paying full contract price without retaining 20 per cent., in absence of evidence that payments were in excess of 80 per cent, of estimated value, since such requirement do.es not limit payment to 80 per cent, of contract price.
    2. Principal and surety — breach of contract. — A surety on a contractor’s bond and indemnitor, alleging that owner breached contract by paying full contract price without retaining 20 per cept. thereof, had the burden of proving a breach of the contract in manner claimed.
    3. Mechanics’ lien- — right to sue on contractor’s bond. — Where a bond, furnished by a contractor under contract for construction of a house, provided that it was made for use and benefit of all persons entitled to liens, lienors held entitled to judgment on bond, although it had not been filed in office of circuit clerk.
    4. Corporations — defense of ultra vires. — A lumber corporation, seeking to avail itself of ultra vires of indemnity agreement executed by it in that it was not authorized by articles of incorporation, must plead such want of power as special defense.
    5. Corporations — right to defense of ultra vires. — Where a lumber company executed indemnity agreement for the purpose of securing a contract to furnish lumber and millwork for construction on a house and had accepted benefits flowing from such contract, it cannot thereafter escape performance of the indemnity agreement on ground that it was ultra vire sand void in not being authorized by articles of incorporation.
    Appeal from Pulaski Chancery Court; John E. Mar-tineau, Chancellor;
    modified.

      Ernest Briver and Brouse S McDaniel, for appellant.

      JohnF. Clifford, for National Surety Company, for appellee; Ben D. Brickhouse, Limvood L. Brickhouse, and J. C. Marshall, for Brickhouse.
   McHaney, J.

On March 7, 1923, appellee, W. W. Brickhouse, being the owner of a certain lot at 1915 Izard Street, in the city of Little Rook, employed J. H. Levillian, a local building contractor, to build for him an eight-room brick veneer residence thereon, according to certain plans and specifications made by Bay Burks, architect, and to furnish and supply all labor and materials therefor, for the contract price of $6,000. The contract between them is in writing, and it provides that the payments thereon shall be made- ‘£ on certificates of superintendent, from time to time as the work progresses, to-wit, 80 per cent, of the estimated value of same, subject to additions land reductions as hereinafter provided. Said 80 per cent, to be paid as the work progresses on said residence, and the remainder on satisfactory completion and acceptance of the entire work, after the expiration of ten days.” The following clause, written in the contract between them, was stricken out before the contract was signed. “It is agreed by the parties that-per cent, of the contract price shall be held by the owner as security for the faithful completion of the work, and may be applied, under the direction of the superintendent, in the liquidation of any damages, under this contract; furnishing to the owner a release from any liens or right of lien, also a sworn statement, as required by law, before commencing work on this contract, and hereby acknowledges receipt of notice to furnish same.”

Appellee Brickhouse required Levillian to give a bond to complete the house according to the plans and specifications and in accordance with said written contract, and, on 'the same date, the appellant, National Surety Company, became surety on Levillian’s bond, binding itself unto Brickhouse “(as well as to the persons who may become entitled to liens under the contract hereinbefore mentioned), in the sum of $6,000, * # * to be paid to the said W. W. Brickhouse, and to said parties who may be entitled to liens,” etc. Said bond is conditioned for the due performance by Levillian of all the “covenants, conditions, and agreements” in said contract, “and shall duly and promptly pay and discharge all indebtedness that may be incurred by said J. H. Levillian in carrying out the said contract, and complete same free from all mechanics’ liens, * # * as well as all costs, including attorney’s fees, in enforcing the payment and collection of any and all indebtedness incurred by said J. H. Levillian in carrying out said contract.” Another clause in said bond is as follows: “This bond is made for the use and benefit of all persons who may become entitled to liens under said contract, according to provisions of law in such cases made and provided, and may be sued upon by them as if executed to them in proper person.”

On the same date appellant, Lena Lumber Company, executed and delivered to appellee, National Surety Company, an indemnity agreement by which it agreed “to indemnify the company (National Surety Company) from and against any and all liability, loss, costs, damages, attorney’s fees, and expenses of whatever kind or nature which the company may sustain or incur by reason or in consequence” of executing the bond for Levil-lian. The whole matter is based on the fact that Brick-house wanted to build a house for $6,000 by contract with a bond. Levillian wanted the contract, but had to have help to make the bond. The Lena Lumber Company wanted to sell the lumber and millwork, and agreed to indemnify the surety company on the bond to get this contract from Levillian, and so it was done to the satisfaction of all concerned.

■Construction work was begun, and, on July 9, 1923, the house was completed, and appellee and his family moved into it on July 10. Shortly thereafter his troubles began. Various material furnishers, within the time limited by law, served notices of their claims on him and thereafter filed affidavits for liens, with their accounts attached, in the proper office. It was agreed by counsel, in open court, that, up to and including September 25,1923, appellee Brickhouse had paid out for labor and material $6,085.62, $85.62 in excess of the original contract price.

On October 1, 1923, appellant, Lena Lumber Company, brought suit in the Pulaski Chancery Court, alleging that it had furnished to Levillian for said house lumber and other building material amounting to $1,801.84; that it had been paid $1,300, leaving a balance due it of $501.84, for which it asked judgment, and that same be declared a lien on said property. The various lienors filed interventions in said suit for the amounts due them. Appellees, in due time, filed an answer, later an amended answer and cross-complaint, against Lena Lumber Company, and still later an amended cross-complaint against both appellants, Lena Lumber Company and National Surety Company, and still later a substitute for amended answer and cross-complaint, setting out the bond hereinbefore mentioned, and alleging that, after the completion of the house, and after he had paid the contract price of $6,000, liens had been filed amounting to $2,300, which Levillian and the surety company had failed and refused to pay, for which he prayed judgment, for all costs and attorney’s fees.

The court entered its decree as follows:

1. In favor of Lena Lumber Company against Levillian and costs, and its complaint as to all other parties dismissed for want of equity ......................................................................................................$ 501.80

2. In favor of Brickhouse against the surety company for amounts paid by Brickhouse to settle liens of

Crabb Electric Company........................$ 50.00

Little Bock Paint & Wallpaper Co. 130.00

Gregg Hardware Co. .................................... 36.85

Bracy Bros. Hardware Co................... 145.00

Attorney’s fee taxed by court in this cause ............................................................ 150.00 511.85

3. In favor of interveners who are decreed to have a lien on Brickhouse property against the surety company, as follows:

B. A. Thiemie...................................................... 434.12

Henry-Johnson Co........................................ 84.90

D. W. Dwiggins & Co.................................. 81.00

Stuart Booting Co........................................... 66.50

Arkansas Brick & Tile Co..................... 396.22 1,062.74

4. In favor of Bracy Bros. Hardware Co. against Briekhouse for extras.................................... 198.50

5. In favor of surety company against Lena Lumber Co. on its indemnity contract, which included the $150 attorney’s fee allowed Briekhouse against it............................................................ 1,724.59

6. In favor of Lena Lumber Co. against Levil-lian, including the $501.80 awarded it under item 1, the total sum of...................................................... 2,024.59

(This was an error. The total amount should be $2,076.39).

From the decree against them as aforesaid, the National Surety Company and the Lena Lumber Company have appealed to this court. ■

There is no dispute about the correctness of the items due to the holders of liens or the lienable items paid by Briekhouse. Counsel for Lena Lumber Company feel that the court should have given it a lien for the $501.80 balance due it by Levillian, but, under the view we take of this case, if the bond is valid, it would’ be immaterial, for* as indemnitor for the surety, it would have to pay its own claim.

• Counsel for both appellants earnestly insist that appel-lee, Briekhouse, breached the contract by paying to the contractor the full contract price without retaining 20 per cent, thereof, as they claim the contract requires. The germane provisions of the contract have already been set out, and we will not-repeat them. But that is exactly what the parties refused to put in their contract. By one paragraph of the written contract it was provided that “20 per cent, of the contract price shall be held by the owner as security for the faithful completion of the work, ’ ’ but the contracting parties struck out this section and refused to make the contract with that provision in it. This was done, no doubt, for the reason that appellee required Levillian to give a bond “for the faithful completion of the work,” and, so far as he was concerned, that was the only security he desired “for the faithful completion of the.work. ” The striking out of this section of the contract is very significant that the parties did not intend that any part of the contract price should be retained by the owner. But they say that the clause preceding, which provides that the owner should pay, from time to time “80 per cent, of the estimated value of the same * * * as the work progresses on said residence, and the remainder on satisfactory .completion and acceptance of the entire work, after the expiration of ten days,” means that he is required to retain 20 per cent, of the contract price. But not so. The 80 per cent, he is required to pay as the work progresses is not 80 per cent, of the contract price, but 80 per cent, “of the estimated value of the same.”

It is shown by the evidence that the actual cost of the house was largely in excess of the contract price, the items being as follows:

Paid by Briekhouse to September 25, 1923............$6,085.62

Liens thereafter paid by Briekhouse................................. 361.85

Liens of interveners ........................................................................ 1,062.74

Total cost of house .......................................$7,510.21

It is not shown by the evidence just when Briekhouse made payments to the contractor or the amounts of such payments aggregating $6,085.62, or, if so shown, it has not been abstracted, and we cannot therefore say that he violated the contract by paying more than 80 per cent, of the estimated value of same, from time to time as the work progressed, even though it be conceded that it would be in violation of the contract to do so. Moreover, payments in excess of 80 per cent, of the estimated value or of the contract price, so far as we can tell from an examination of the evidence as abstracted, may have been made “after the expiration of ten days,” as the contract provided he should do. He accepted and moved into the house on July 10, and it is agreed that, up to September 25, 1923, he had paid out $6,085.62. We cannot tell when these payments were made, and, in the absence of a showing to the contrary, we will presume that the payments were made as the work progressed, in accordance with the contract, and the remainder after the expiration of ten days from the acceptance of the house. The burden was on appellants to show by a preponderance of the evidence that appellee breached the contract in the manner claimed.

The exact point we have been discussing was decided in the case of Graves v. Merrill, 67 Minn. 463, 70 N. W. 562, where the court used this language: “The contract was not that no more than 85 per cent, of the contract price of the building should be paid during the progress of the work, but that such payments should not exceed 85 per cent, of the ‘total amount of the materials and labor furnished at the building at the time the certificate is issued.’ Such is the plain reading of the contract, and such is the construction placed upon the language of the contract by the defendant in his answer. There is no room for construction or argument. The simple statement of the facts (of this case) is the argument of the case. It by no means follows that 85 per cent, of the contract price would equal or exceed 85 per cent, of the amount of materials and labor furnished. As the only breach of the building contract here claimed is that payments were made by the plaintiff in violation of the contract, and as there is no evidence in the record to support the claim, it follows that the order appealed from must be affirmed. ’ ’

The case of National Surety Company v. Long, 85 Ark. 158, 107 S. W. 384, came to this court on two separate appeals. The first, being reported in 79 Ark. 323, 96 S. W. 745, had a clause in the contract between the owner and contractor very much like the contract in this case, which is as follows: “The said party of the first part agrees to pay to the party' of the second part for said work the sum of six thousand six hundred dollars ($6,600), the contract price, to be paid in installments according to written estimates to be made by the architect or the superintendent as the work progresses, payments to be made not oftener than as allowed in the bond, and said installments are to be 75 per cent, of the value of the work done and materials furnished and incorporated in the building, the remaining’ 25 per cent, of said contract price to be paid by the party of the first part to the party of the second part in ten days after the building is completed and accepted. ’ ’

Appellant in that case urged that it was a breach of the contract for the owner to pay more than 75 per cent, of the contract price, but the court held that the clause meant 75 per cent, of the value of the work done and materials furnished and incorporated in the building, rather than 75 per cent, of the contract price, and, in disposing of the matter, used this language:

“Exactly the same question was raised in Howard County v. Baker; 119 Mo. 397, and the same conclusion was reached by the Missouri court that was reached by this court heretofore and now. It is true that this clause does not contemplate that there should be a material divergence between 75 per cent, of the contract price and 75 per cent, of the value of the work and materials furnished and incorporated in the building. The contract was evidently drawn in the’ contemplation that these terms would be, as they should be, identical. But in this case, and it may happen in many others, these terms were not identical. The ‘contract price’ and ‘value of labor and materials furnished’ may be widely separated. In this case the value of the work and material was over $3,000 more than the contract price. Therefore, where these two standards are different, it becomes necessary to see which must control; and there is no better or sounder rule to observe than to follow the language of the contract itself.

“It first agrees that the contract price shall be paid in installments, according to written estimates made by the architect or the superintendent, as the work progresses. This is a certain, definite and sensible agreement. Then there is another certain, definite and sensible agreement that the installments are to be 75 per cent, of the value of the work done and materials furnished and incorporated in the building. It would have saved many words, if the other 'construction was the correct one, to have said that the said installments were to he 75 per cent, of the contract price. But that is not said; and it is expressly stipulated that the 75 per cent, is to he the value of the work done and materials furnished and incorporated in the building. The next clause provides that the 25 per cent, remaining of the contract price is to be paid ten days after the building is completed and accepted. This evidently contemplates that, after paying 75 per cent, of the value of the work and materials, there should still remain 25 per cent, of the contract price; and this is as it should be. But all things are not as they should be; and this is a case where it is the misfortune of some one that the contract price and the value of the work and materials were radically different. There are three provisions in this clause, each of .them definite and certain of itself, and it is the duty' of the court, in construing them, to give each its proper force and meaning; to harmonize them, if possible; if not, to give each the meaning which proper construction requires.”

We therefore hold that there was no breach of the contract shown on the part of appellee, Brickhouse.

It is next insisted that the interveners holding liens were not entitled to judgment on the bond, for the reason that same had not been filed in the office of the circuit clerk, and for the further reason that there was no privity of contract between the surety company and the inter-veners. The same question was raised in the recent case of Stewart-McGehee Construction Co. v. Brewster, 171 Ark. 197, 284 S. W. 53, where this court said: “We cannot concur with this view. It is conceded by the company that the bond was executed under the authority of § 6912, supra (0. & M. Dig.), and, by its express terms the com--pany as principal and the Fidelity and Deposit Company of Baltimore, Maryland, as surety, ‘are held and firmly bound unto the State of Arkansas, for the use of * * *• and material furnishers and other persons having claims which might be the basis of liens, ’ etc. This court, in a long line of oases, has ruled that, where a promise is made to one upon a sufficient consideration for the benefit of another, the beneficiary may sue the promisor for breach of his promise.” (Citing eases).

In the present case the language of the bond is even stronger. It says: “This bond is made for the use and benefit of all persons who may become entitled to liens under said contract, according to provisions of law in such cases made and provided, and may be sued upon by them as if executed to them in proper person.”

It is finally insisted by counsel for appellant, Lena Lumber Company, that its act in executing .the indemnity agreement to the surety company is ultra vires and void, for the reason that it is not authorized to do so in its articles of incorporation. This contention is without merit, for the reason, first, it failed to plead that special defense, and second, for the reason that it was interested in getting the contract to furnish the lumber and mill-work in said house, which it did, and, having accepted the benefits flowing from said contract, it would be wholly unjust to allow it to escape performance of its contract, having received the benefits thereof. Relative to the first proposition, this court has held that, “if a corporation seeks to avail itself of ultra vires, or for want of power to make a contract, it must plead that special defense.” Anderson-Tully Company v. Gillett Lumber Co., 155 Ark. 233, 244 S. W. 29; Simon v. Caffe, 80 Ark. 67, 95 S. W. 1011; Winer v. Bank of Blytheville, 89 Ark. 435, 117 S. W. 232.

Relative to the „ second proposition, above stated, there are numerous decisions of this court sustaining this principle. In Richeson v. National Bank of Mena, 96 Ark. 602, 132 S. W. 916, it is said: “If the corporation has received the profits resulting from the compliance of the other party with the contract, it would be wholly unjust to allow the corporation to escape performance of the contract by which it realized these profits. As is said in the case of Wright v. Hughes, 119 Ind. 324: ‘The rule is now too thoroughly established to be longer open to question that, where a contract has been executed and fully performed on the part of the corporation, or the party with whom it contracted, neither will he permitted to insist that the contract was not within the power of the corporation’.” A case exactly in point with this is that of Wittmer Lumber Co. v. Rice, 23 Mid. App. 586, 55 N. E. 868, the syllabus of which is as follows: ‘‘Where one, having a contract with another to build a house, executed a bond to the other to secure the payment of any mechanics’ liens or claims for material to be furnished in such building, and a lumber corporation becomes surety on such bond, in consideration of the contractor’s agreeing to purchase from it material to be used in such building, such corporation, in an action by it to enforce a lien for material furnished in such building, cannot defeat a plea alleging its suretyship as defense by claiming the contract was ultra vires, since, by receiving the benefits of the contract, it was estopped from denying that it had power to become surety thereon.”

The decree of the lower court gave judgment in favor of appellant, Lena Lumber Company, against Levillian in the total sum of $2,024.59. It is entitled to a judgment against Levillian for the sum of $501.80, balance due it for lumber and millwork; $1,062.74, being the amount of the liens of interveners for which judgment was rendered against the surety company; $361.85, being the amount of liens paid by Brickhouse for which judgment was rendered against the surety company; and $150 attorney’s fee for Brickhouse in prosecuting his suit to enforce the payment of such liens, making a total of $2,076.39, for which appellant, Lena Lumber Company,, is entitled to a judgment against Levillian, instead of $2,024.59, as allowed in the decree. The decree of the lower court will be modified in this respect, and, as modified, will be affirmed. It is so ordered.

OPINION ON REHEARING.

McHaney, J.

In the original opinion we allowed excessive amounts under items 2 of the decree of the lower court in favor of Brickhouse against the surety company, as follows:

Amount Correct [allowed amount

Crab Electric Co. 50.00 45.00

Little Rock Paint & Wall Paper Co.130.00 120.00

Gregg Hardware Company. 36.85 36.85

Bracy Bros. Hardware Co..145.00 100.00

Attorney’s fee ...:.150.00 150.00

Totals ..511.85 451.85

Therefore the correct amount is $451.85, which results in a corresponding reduction of $60 in the total decree against the surety company and'Lena Lumber Company. The opinion will be so amended. The motion for rehearing is otherwise overruled.


source: Caselaw Access Project

author: McHaNey, J.

license: Public Domain

text:
    Perritt v. Saxon.
    Opinion delivered March 21, 1927.
    Attorney and client — right to lien. — Under a decree enforcing specific performance of a contract to convey an interest in the oil and gas and other minerals in a certain tract of land to plaintiffs for services -rendered as attorneys for their client, held that plaintiffs were not entitled to have a lien on the client’s interest in addition to specific performance of the contract.
    Appeal from Union Chancery Court, Second Division; A. D. Pope, Special Chancellor;
    affirmed.

      L. B. Smead, for appellant.

      McNalley <& Betters, for appellee.
   McHaNey, J.

This action grows out of an intervention by appellees, Saxon & Davidson, attorneys at law, Camden, Arkansas, filed in the case of Buchanan Graves and wife v. Thomas A. Foster el al., pending in the Union Chancery Court, Second Division, on a new trial from a reversal by this court in the case of Foster v. Graves, 168 Ark. 1033, 275 S. W. 653.

The suit/as it originally appeared in this court, was brought by Graves against-Poster, and Ratcliff, Wilson, Hawkins, LeOroy and Ellison, to whom Poster had conveyed certain portions of the royalty, to cancel two deeds, under which Poster claimed title to one-half the royalty from Graves in a certain forty-acre oil lease. Saxon & Davidson were employed by appellant, H. -0. Ratcliff, to represent him as his attorney in defending that suit, which they did, both in the lower court and on appeal, and, for their services, Ratcliff agreed to deed them an undivided one-sixty-fourth (1/64) interest in the oil and gas and other minerals in the southwest northeast (or lot 5 of the northeast quarter), section 3, township 16 south, range 15 west. Ratcliff failed to make a conveyance to them of this 1/64 interest, and, after the reversal of the case by this court, they filed their intervention in the lower court, setting up these facts.and praying that they be declared to be the owner of an undivided 1/64 interest of all the oil, gas and other minerals in, under and upon said land.

Later they filed an amendment to their intervention, stating that W. D. Perritt claimed some interest in the property involved in this action, which was unknown to the interveners, but that, whatever interest he had, if any, was inferior to the rights of the interveners, and they asked that he be made a party defendant therein, which was done. Service of summons was had upon both Ratcliff and Perritt, but they failed to appear, and made default, and, on the 3rd day of October, 1925, the court entered a decree on the intervention, finding the facts in favor of the interveners, and, continuing, the decree recites:

“It is therefore considered, ordered, adjudged and decreed by the court that interveners, Ed P. Saxon and James Davidson, are the owners of an undivided one sixty-fourth interest in and to all of the oil, gas and other minerals in, under and upon the following described lands situated in Union County, Arkansas, to-wit: southwest quarter of the northeast quarter (or lot No. 5 of the northeast quarter) of section 3, township 16 south, range 15 west, containing 40 acres, more or less. And that said interest is free, clear .and unincumbered of and from any and all claims of the defendants, H. C. Ratcliff and W. D. Perritt, or either of them, and subject only to the claim of Buchanan Graves and Jennie Graves, under the suit herein, and that said interest above described is by this order quieted and confirmed in said interveners, Ed F. Saxon and James Davidson, as against said defendants, H. C. Ratcliff and W. D. Per-ritt, and all other persons holding or claiming under, Joy or through them or either of them. ’ ’

And the court further decreed that interveners were the owners, subject to the claims of Buchanan Graves and wife, of an undivided one-sixty-fourth of all moneys collected theretofore or that may thereafter be collected by M. G. "Wade, receiver in the cause pending in said court between Graves and Foster.

From this order and decree of the court comes this appeal.

The decree recites that it was heard upon certain record evidence and “the oral testimony of witnesses adduced before the court upon the trial of the cause on said intervention, from all of which, the oral testimony and the recorded instruments of writing, the court finds,” etc. Then follow the findings of the court. Neither the documentary evidence nor the oral testimony has been brought into the record by bill of exceptions or otherwise, and we will therefore indulge the presumption that there was ample evidence to sustain the decree. The only question raised on this appeal is that the decree of the court declared a lien upon the royalty interest in controversy, which would be error on the face of the record,' for the reason that appellees could not have a lien under the statute (§§ 6304 and 6306 of Crawford & Moses’ Digest), having represented one of the defendants in the litigation and did not obtain any affirmative relief for his client by the recovery of a judgment. In other words, that the statute giving liens to attorneys cannot be extended to cases where the services of the attorney merely protected an existing title or defended a suit attaching the title, and that, before the lien will attach, there must he a service rendered in the recovery of the property.

That is undoubtedly correct, but such is not the effect of the decree in this ease. While the petition of inter-veners prayed for a lien upon the property and the decree of the court found that they were entitled to a lien, yet the effect of the decree was for specific performance by divesting the title to the one sixty-fourth interest out of appellant, Ratcliff, and investing same in appellees. The effect of the decree was not to establish or enforce a lien in favor of the attorneys, but it was, in effect, specific performance of the contract which the court found had been entered into between the parties.

No error appearing, the decree of the chancery court is affirmed.


author: McHaNEy, J.

text:
    Life & Casualty Company v. Sanders.
    Opinion delivered March 21, 1927.
    1. INSURANCE — FRAUDULENT SETTLEMENT — EVIDENCE.—In an action to recover weekly benefits under health and accident policies, evidence held, to make it a jury question whether insurer’s agent made false representation to get insurer to surrender the policies and accept a small sum in full satisfaction.
    2. Evidence — competency.—In an action on health and accident insurance policies, it was proper to exclude the testimony of a physician that he had examined a specimen of blood supposed to he that of the insured where the witness was unable to testify positively that the specimen examined was taken from the insured.
    3. Insurance — penalty and attorney’s fee. — In an action to recover weekly benefits under health and accident policies, where the insured denied any liability, it was not error, after verdict for the plaintiff, to assess the statutory penalty and an attorney’s fee, where the court permitted plaintiff to amend his complaint at the conclusion of the testimony of plaintiff’s first witness, thereby reducing the claim to the amount for which the jury returned a verdict.

      4. Pleading — discretion to permit amendments. — Generally, it is within the trial court’s discretion to permit a complaint to be amended during the trial or at the close of the» testimony to conform to the proof.
    Appeal from Pulaski Circuit Court, Third Division; Marvin Harris, Judge;
    affirmed.

      Isgrig & Dillon, for appellant.

      Longstreth & Longstreth and J. A. Weas, for appel-lee.
   McHaNEy, J.

This is an action by appellee against appellant to recover weekly benefits accruing to him under two policies of health and accident insurance, providing for a total indemnity of $8 per week, issued by appellant to him. The policies were issued by appellant in 1918, and the premiums thereon were paid for several years. In his original complaint he alleged that he had become totally disabled in July and continued so between August 1, 1923, and the date of bringing this suit, a total of seventy-nine weeks, for which he had not been paid, as provided in said policies, making a total of $632, for. which he asked judgment.

Appellant denied liability on the ground, first, under a provision of the policy wherein it is provided “that, should sickness begin prior to the date of said policy, or be caused by intemperance, immorality or venereal disease, no payments will be made”; that appellee, at the time of the delivery of the policy, had a venereal disease, syphilis, from which he is still suffering; and, second, that on January 29,1924, they paid him a small sum under each of said policies, which was accepted by him in full satisfaction of his claim against it, and that this payment amounted to a-settlement in full for all liability thereunder.

The case was tried before a jury, under instructions which are not complained of by appellant, except its request for a directed verdict in its favor, which the court refused, and the jury returned a verdict for plaintiff in the sum of $468.70, to which amount the court added $125 as attorney’s fee, and the twelve per cent. penalty provided by law-. Thereafter appellant filed a motion for a new trial, which was overruled, and it has appealed to this court.

Appellant’s first contention is that the court should have instructed a verdict in its'favor, “unless the release or contract of settlement, signed by fhe appellee, was void for the reasons as alleged in the complaint and pleadings of appellee.” The complaint alleged that the settlement was procured from appellee through false and fraudulent representations and statements of appellant’s agent, and that it was therefore void. Appellant testified that he is a negro, is married, and has been living with his wife as husband and wife about thirteen years; has never had syphilis or any other venereal disease, and has not now; that he is now totally disabled, and has been since July 11, 1923; that the agent of the company came to him and wanted him to settle with them; “they told me we just as well get the money, they wasn’t going to pay me no more”; that the doctor had reported he had syphilis; that he didn’t know the doctor had reported he had syphilis, as the doctor had never told him that he had syphilis.

“Q. Why'did you accept the money and make these settlements? A. Well, just because I didn’t want to be bothered with them. They kept worrying me to death. Of course I knew I didn’t have syphilis. The agent said I just as well take it because they were not going to pay me any more claims, whether I had syphilis or didn’t.”

His wife, Millie Sanders, testified with reference to this settlement to substantially the same things testified to by her husband, and, in addition, she said that, when the agent told her her husband had syphilis, she asked him who said so, and he said “That is what the blank shows.” She further said that she told the agent that they had paid her five claims, and she wanted to know the reason they wouldn’t pay her, and he told her that her husband had syphilis. Further, that she accepted the money after he wouldn’t receive money on the policies, making the policies lapse, and that is another reason why she made the settlement, that they wouldn’t take the premiums, and said the policies would lapse and she wouldn’t get anything, so she settled with them.

Dr. E. H. White testified that he made a blood examination of appellee for' syphilis, and found that he .didn’t have it. Several other doctors testified that plaintiff did not have syphilis. There appears in the bill of exceptions the statement of Dr. Oscar Cray, the physician who examined him on his application for sick benefits, and on the form required by the company, in which he stated that the appellee was suffering with paralysis and strangulated hernia, and, in answer to question 10, “Is disease venereal or of venereal origin?” he answered “No.”

There was sufficient testimony in the record therefore to go to the jury on the question of whether appellant’s agent made false and fraudulent representations to the appellee in getting him to surrender his policies and accept a small settlement in full satisfaction thereof.

He made the statement to both appellee and his wife that appellee had syphilis; that the doctor in his report had so stated, and that the company wouldn’t pay any benefits for this reason; that they would not accept any more premiums, and that the policies would lapse.

It is undisputed that appellee relied upon these statements and accepted a nominal sum in settlement thereof, and we think the court properly submitted this question to the jury, and that appellant’s request for a directed verdict was properly denied.

It is next insisted that the court erred in excluding the proffered testimony of Dr. Grebauer, to the effect that he had examined- a specimen of blood, supposedly that of appellee, Harris Sanders, and found it to be “2 plus Wasserman positive,” showing that appellee was afflicted with syphilis. But the witness was unable to testify that the specimen examined was taken from .appellee. He said that probably ninety per cent, of their • specimens were taken by him, but that he is not positive whether, in this case, he took the specimen himself or whether Dr. Judd took it and delivered it to witness. The court properly excluded the-proffered testimony, for the reason appellant failed to show that the specimen examined was that of appellee.

It is finally insisted that the court erred in assessing the twelve per cent, penalty and attorney’s fees,- because the court permitted appellee to amend his complaint, over appellant’s objection, at the conclusion of the testi- ' mony of witness Dillingham, manager for appellant, who was appellee’s first witness, and thereby reducing the amount claimed from $632 to $468.70. Generally it is within the discretion of the court to permit the complaint to be amended during the trial or at the close of the testimony to conform to the proof. Duff v. Ayers, 156 Ark. 17, 246 S. W. 508. ■ But it is urged that, having brought suit and gone to trial on a demand for more than justly due, appellee could not amend his complaint by reducing the demand to the correct -amount, and recover the statutory penalty and attorney’s fees in addition thereto. We do not agree with appellant in this contention. If, instead of proceeding with the trial of the case and denying any liability whatever on the grounds here urged, it had either offered to pay the reduced amount, or had asked to be given the time in which to pay same as provided in the policies, appellee could not have recovered the penalty and attorney’s fees, and, in addition, would have been required to pay all costs, for the reason that he demanded a sum greater than he was entitled to under the policies.

In Queen of Ark. Ins. Co. v. Milham, 102 Ark. 675, 145 S. W. 540, appellee brought suit on the policy, and appellant answered, denying that it -owed him the amount claimed, and set up a breach of certain conditions of the policy. Later it amended its answer, in which it said that appellee owed it the sum of $12 and interest on a note given for a part of the premium for the policy sued on, and asked.that the same be allowed as a credit or set-off against any amount that might be found to be due appel-lee.. Appellee then filed an amendment to his complaint, in which he admitted that he owed the appellant the premium note of twelve dollars and interest, and asked for judgment in the sum of $423.36 as the amount sued for.” The jury returned a verdict for this amount, and the court allowed the twelve per cent, penalty and attorney’s fees. On appeal the only question raised was the error of the court in 'assessing’ the penalty and attorney’s fees under the statute, and, in disposing of the case, this court said: “When appellant filed its'amended answer and claimed as a set-off the amount due it by appellee on the premium note, appellee at once conceded that the amount should he deducted from the amount sued for in his original complaint, and only asked judgment for the difference, which was $423.36. If appellant wished to avoid the penalty and attorney’s fee provided for in the statute, it should have offered to confess judgment for that amount, and thus have ended the suit. . It did not do so, but elected to go on and contest the claim of the appellee on other grounds, and thereby became liable for the penalty and attorney’s fees provided for in the statute when appellee recovered the amount sued for.” Great Southern F. Ins. Co. v. Burns & Billington, 118 Ark. 30,175 S. W. 1161; Queen of Ark. Ins. Co. v. Milham, 102 Ark. 675, 145 S. W. 540; Queen of Ark. Ins. Co. v. Bramlett, 103 Ark. 1, 145 S. W. 541; Am. Natl. Ins. Co. v. White, 126 Ark. 494, 191 S. W. 25.

The.jury returned a verdict for the sum demanded, $468.70, and the court properly assessed the penalty and attorney’s fees. No error appearing, the judgment is affirmed.

Smith, J., dissents in part.


author: McIíaNEy, J.

text:
    Bank of Rison v. Layne & Bowler Company.
    Opinion delivered March 21, 1927.
    1. BANKS AND BANKING — LETTER ACKNOWLEDGING ESCROW. — A letter written by the cashier of a bank stating that the hank acknowledged receipt of money, which sum was placed in escrow with 'the bank, to he paid out only to the party to whom the letter was addressed, held binding on the bank.
    2. Escrows — diversion op funds — liability.—Where a deposit in escrow with a bank was made upon condition that the money was to be paid only to plaintiff, who was to drill a well for the depositor, and the bank paid out the money on order of the depositor to a third person who used plaintiff’s rig and machinery and injured same in an amount exceeding the amount in escrow, held that the bank was liable to plaintiff for the amount of deposit with interest.
    3. Banks and banking — escrow—ultra vires. — An escrow agreement with a bank, providing that the deposit in escrow should be paid out only to plaintiff company engaged in drilling a well for a depositor held not ultra vires.

    4. Banks and banking — authority of cashier. — The cashier of • a bank held authorized to accept a deposit in escrow to be used solely for _drilling purposes.
    Appeal from Cleveland Chancery Court; TI. B. Lucas, Chancellor;
    affirmed.

      Palmer Danaher, M. Danaher and Woodson Mosley, for appellant.

      W. A. Leach, for appellee.
   McIíaNEy, J.

Appellee, Layne & Bowler Company, had, in 1920, drilled a test well in Cleveland County, Arkansas, for the Success Drilling, Lease & Oil Company, to a depth of 800 feet. The drilling company became indebted to appellee in the sum of $2,042, which it was unable to pay, and all work under the contract ceased about the 9th day of October, 1920. Later the parties resumed negotiations for the completion of the test-hole already commenced, and the appellee, on account of the previous indebtedness, required the drilling company to make a deposit of $1,000 in the appellant bank to pay for further work before it would enter into another contract for the completion of the well. On the 19th day of May, 1921, appellant wrote appellee as follows: “We understand from Mr. J. D. Newton that you are to resume operations on Elliott well No. 1 when the hank will guarantee you $1,000. This amount is in our hands now, with the understanding that it is to he used solely for drilling purposes.” The J. D. Newton mentioned was the secretary and general manager of the drilling company.

On the 24th day of May, 1924, the appellant bank wrote the appellee as follows:

“Rison, Arkansas, May 24, 1921.

“The Bank of Rison, Rison, Arkansas, hereby acknowledges receipt from Success Drilling, Lease & Oil Company, one thousand dollars, which sum is placed in escrow with the said Bank of Rison, to he paid, out only to Layne & Bowler Company, on orders of -J. D. Newton, representative of Success Drilling & Lease & Oil Company.

(Signed) “Bank of Rison,

“By Walter Elrod, Cashier.”

It appears that Walter Elrod, cashier of the appellant hank, was also very closely identified with the drilling company, holding in his name, as trustee, all the leases owned hy it.

On the 25th day of May, 1921, an agreement in writing was prepared between appellee and the drilling company and signed by the. drilling company, subject to the approval of the Memphis office of the appellee, by the terms of which drilling of the test-hole was to be resumed by appellee, for which he was to be paid at the rate of $6 per foot, not only for that part of the well which had caved in or clogged up, but for drilling through new soil. It was further agreed that $1,000 had been deposited with the appellant bank to guarantee the performance of all obligations on the part of the drilling company under the contract, and that no part of the said $1,000 was subject to withdrawal by the drilling company, but was to be paid to appellee from time to time as the work progressed, as therein provided. The contract was approved by the Memphis office on the 26th day of May. There was some little delay by appellee in getting its men’on the job and resuming drilling operations, and on May 31 the drilling company wrote- appellee that it was disappointed that the men had not come, and requested that they do so at once. The next day, June 1, the drilling company again wrote appellee that the seriousness of the delay of getting the men there had passed, and that, if they had good’places or jobs elsewhere, not to disturb them, as this one might not last long; that the 'delay would not inconvenience him, and to let him know beforehand when he would bend the men. On June 19 the drilling company again wrote appellee that, upon his return to Bison the evening before, Mr. J. W. Elrod told him that he had a “phone message” from appellee, stating that it could send a crew of men there Monday to commence drilling. He said: “I am sorry to tell you that I have been unable to secure the finances with which to drill my well, and, knowing this to b¿ so, I went ahead and cleaned out the well, and am going to get the casing to case it so that the hole will be preserved. I go Monday to Shreveport to get this casing.”

Again in this letter he said: “It would be folly for me to have your men come, knowing my financial status, while I have quite a lot of leases sold, but the abstract and signatures are in escrow in the bank, and have been for some time, awaiting redemption.” Again he said: “I hope this will be satisfactory to you, and, if it is not, you can give me the seven days’ notice, as set out in the contract, which will terminate it, arid I will deliver your machinery F. O. B. cars Bison, Arkansas, unless we can come to some agreement more favorable. I am perfectly willing to pay you rental for the time I have used the machinery, as I may go some deeper to see if I cannot find production at the shallow depth, as was indicated in the Branner well near by.”

In response to this letter of the 19th, appellee sent Mr. E. Brown Sanderson to Bison to find out what they were doing with the well and appellee’s machinery, and he found that they had another driller out there, and were using their rig and machinery, and had been for a month or so; that it was damaged and needed.repairs, and that they had used about fourteen hundred feet' of appellee’s four-inch iron pipe, and had twisted it off in the hole about thirty feet from the top, and that this pipe was worth ninety-one cents a foot.

On June 22 the drilling company again wrote appel-lee in part as follows: “As to the money in escrow, there will be no difficulty in adjusting this. I would like to keep, the machinery as long as possible, and can see no reason why I cannot pay you a reasonable rent for it, that you could not permit me to do so.”

Several other letters were introduced in evidence between the parties to the same general effect. The evidence showed that the rental value of the machinery was not less than $25 per day, and that the drilling company had used the machinery for a period of about fifty days, and finally the drilling company twisted off the drill stem, leaving about 1,400 feet of it in the hole.

At the conclusion of the testimony, the court rendered a decree against appellant for $1,240, being $1,000 principal and $240 interest from the time the suit was filed, from which comes this appeal'.

Appellant says the two writings of the bank are insufficient to bind it. But we differ with appellant as to this. By the writing of May 24 the bank received the $1,000 and held same in escrow, and agreed that same was “to be paid out only to Layne & Bowler Company, on orders of J. D. Newton.”

It therefore had no authority to pay it to any one else, and, by so doing, it became liable to appellee for the amount thereof, with interest from the date of suit. Elrod was the cashier of the bank and trustee for the drilling company. He also knew of the contract between the drilling company and appellee. The writing of May 24, as well as of May 19, was executed by Elrod for the bank .for the purpose of inducing appellee to enter into the contract with the drilling company, and to get the well drilled deeper. Thereafter, instead of permitting appellee to do the drilling nnder the contract, the drilling company took possession of the rig and machinery, hired another driller, operated the outfit for fifty days, without the knowledge or consent of appellee, broke about 1,400 feet of the drill stem off in the well, of the value of 91 cents per foot. While all this was going on, the cashier of the bank permitted the escrow money in his possession to be checked out, for these or other purposes, which he had agreed in writing should “be paid out only to Layne & Bowler Company.” If he had kept this money as he agreed, it would have been available to pay the rental value, or damages for the value of the drill stem destroyed, and other damages claimed, either of which was in excess of the judgment against it.

There is no merit to the contention that the bank is not bound because the escrow agreement is ultra vires, and that the cashier had no authority to accept this deposit for this special purpose.

The decree of the chancery court is right, and it is therefore affirmed.


author: Hart, C. J.,

text:
    Standard Pipe Line Company v. Index-Sulphur Drainage District.
    Opinion delivered March 28, 1927.
    1. DRAINS — assessment op pipe line. — The right-of-way of a pipe line company is subject to assessment as real property for preliminary expenses of a drainage district, as provided by the Index-Sulphur Drainage District Act, approved February 4, 1920.
    2. Highways — assessment op pipe line. — The right-of-way of a pipe line company is subject to assessment as real property for preliminary expenses of a highway district, as provided by the South Miller County Highway District Act, approved February 4, 1920.
    3. Commerce — assessments for local improvements. — Special assessments on a pipe line used in interstate commerce for the construction of drainage and highway districts held not a tax which is forbidden by the interstate commerce clause of the Constitution of the United States.

      4. Drains — highways—assessment for preliminary expenses. — ■ Levy of a special assessment to pay the preliminary expenses of drainage and highway districts held not arbitrary because levied on the assessed valuation of property for State and county purposes, since this method does not imply that it is not also according to benefits to be derived from the two improvements.
    5. Drains — ’Highways — improvement tax — benefit.— In the absence of flagrant abuse or purely arbitrary action by the Legislature, it may establish drainage and road districts and tax lands therein for local improvement, and lands will not escape liability solely because they will not receive direct benefits.
    6. Drains — highways—special assessment on pipe line— validity. — Assessments on a pipe line for preliminary expenses of a drainage district and of a highway district provided by special acts of the Legislature held, under the evidence, not to be arbitrary or an unreasonable exercise of the legislative taxing power.
    7. Drains — highways—validity of assessment of pipe line.— Where a property owner had not made complaint in the manner provided by law that the assessment of its property for State and county purposes was discriminatory, it could not complain on that account when such assessment was used as the basis, for a special assessment to pay the preliminary expenses of drainage and highway districts.
    Appeal from Miller 'Chancery Court; G. E. Johnson, Chancellor;
    affirmed.
    statement oe facts.
    Index-Sulphur Drainage District and South Miller County Highway District brought separate suits in the chancery court against Standard Pipe Line Company, Inc., to recover the amount of special improvement taxes against said company for the payment of preliminary expenses in winding up the affairs of said improvement districts. The suit in each case ivas defended on the ground that the assessment of benefits was arbitrary and discriminatory and, in any event, that the defendant company was not in any sense benefited by said improvements. The cases were consolidated for the purposes of trial.
    The record in the case is very voluminous, but a brief statement of facts will suffice to indicate what issues of law are involved in the appeal.

      Index-Sulphur Drainage District was created by a special act of the Legislature, approved February 4,1920. It was ascertained by the commissioners that the cost of the improvement would exceed the benefits to the real property situated in the district, and they recommended that further proceedings be discontinued and the affairs of the district should be wound up. The Legislature of .1923 passed an act to repeal Index-Sulphur Drainage District of Miller County, Arkansas, and provided that the affairs of the district be wound up by the commissioners and its legal indebtedness paid. Special Acts of 1923, p. ’282. Section 9 of the repealing act provides that the commissioners of the district should levy upon the real estate within the district a tax sufficient to pay the indebtedness of the district, and that said tax should be levied upon the real estate, using the assessment for State and county purposes as assessed and fixed for the year 1923. The section further provides that the commissioners should declare the per cent, to be levied annually on said assessment for State and county purposes for the year 1923 that would be required to pay off the outstanding indebtedness of the district. The section also provides that, if the commissioners deem it to the best interest of the property owners, the taxes may be spread over four annual installments. Pursuant to the authority given by this act, the commissioners levied a tax upon the real property in the district of 1.6 per cent, of the assessed value o'f the real property of the district, including said company’s pipe line, as fixed-by the Arkansas Railroad Commission under the provisions of our statute authorizing it to assess the property of pipe-line companies in the State of Arkansas. The amount of said tax or special assessment for the year levied was $457.23, and for the four annual installments the aggregate amount which would be paid by said pipe-line company would be $1,828.92. The act creating the district provided that the property of railroad, telegraph, telephone and pipeline companies situated within the district should be classed as real estate and an assessment of benefits be levied against such property as was done upon other real estate. The Standard Pipe Line Company, Inc., had its pipe line in said improvement district, and it extended into the State of Louisiana. It was engaged in piping oil from the State of Arkansas into the State of Louisiana. Other facts with reference to this case will he stated in the opinion.
    South Miller County Highway District was created by special act, approved February 4, 1920, and was repealed by special act of the Legislature, approved February 9, 1923. Special Acts of 1923, p. 126. It was ascertained by the commissioners that the cost of the improvement would greatly exceed the benefits to the real property, and, for that reason, the construction of the improvement was abandoned. For a more particular statement of the acts of the commissioners in winding up the affairs of the district and determining its indebtedness see Meek v. Christian, 168 Ark. 313, 20 S. W. 614. The original act creating the district provided that railroad, telegraph, telephone and pipe-line companies situated in the district should be classified as real estate and that their property should be assessed as other real estate for the construction of the improvement. The act creating the district also provided that if, for any cause, the improvement was not constructed, the preliminary expenses should be paid by the commissioners, and they were directed to determine the percentage to be levied annually on the assessment for county and State purposes for the year 1923, and that the amount of taxes should be spread over four annual installments. A rate of 1.6 per cent, was levied against the assessed value of the lands, railroads, pipe lines, etc., using the assessment for State and county purposes for the year 1923.as a basis for assessing .said property. The amount assessed against the Standard Pipe Line Company, line., was $1,655, which was the amount due under the plan of assessment provided to be made for the payment of preliminary expenses as above set forth. Other facts will be stated in the opinion.

      The court found the issues in favor of the plaintiffs, and a decree was entered of record ■ declaring that the amount assessed in support of each improvement district against the Standard Pipe Line Company, Inc., was a lien on the right-of-way and pipe line within said district, and provided for the collection of the same by sale of the property assessed. The consolidated case is here on appeal.

      T. M. Milling, W. II. Arnold, W’E. Arnold, Jr., and David G. Arnold, for appellant.

      Henry Moore, Jr., and T. B. Vance, for appellee.
   Hart, C. J.,

(after stating the facts). It is first contended by counsel for the defendant that its pipe line is not real estate and could not be classified as^ such by the Legislature in the acts creating said improvement districts. There is a conflict in the adjudicated cases as to whether or not the right-of-way of a railroad company or of a telegraph company is subject to local assessments, but this court has held that the right-of-way of a railroad corporation or of a telegraph company is subject to local assessment as real property. Missouri Pac. Rd. Co. v. Comway County Bridge Dist., 142 Ark. 1, 218 S. W. 189; and Western Union Tel. Co. v. Road Imp. Dist. No. 1, 144 Ark. 476, 222 S. W. 717. Such holding is in accord with the weight of modern authority on the question. The reason is that the railroad or telegraph company has an easement in its right-of-way -which is permanent in its nature and which may be specially benefited by drainage or road improvements. It is not like the case of allowing streetcar companies, gas and water companies to use the streets of a city under legislative authority. In all such cases the Legislature merely gives such.public service corporations the use of the streets, and they acquire no permanent easement in them; while, in the case of railroad or telegraph companies, they have the exclusive light to use their rights-of-way for the purposes for which such corporations are organized, and such uses carry with is an interest in the ground which is in the nature of real property and is the subject of a special assessment as such. North ern Pacific Ry. Co. v. Richland County, 28 N. Dak. 172, 148 N. W. 545, Ann. Cas. 1919E, p. 574, and case-note; and L. B. A. 1915A, p. 129, and case-note.

By analogy the right-of-way and pipe line of the defendant was subject to assessment for the preliminary expenses of each improvement district the same as the other real property in the district.

It is next insisted that the pipe line of the defendant extends from the State of Arkansas into the State of Louisiana, and that it is wholly engaged in interstate commerce, and that to levy a special assessment upon its pipe line for a 'drainage district or road improvement district would be in violation of the Constitution of the United States, which prohibits the State from laying a tax on interstate commerce in any form. We do not think that a special assessment of real property to construct a local improvement is a tax which is forbidden by what is commonly called the interstate commerce clause of the Constitution of the United States. Northern Pacific Ry. Co. v. Richland County, 28 N. D. 172, Ann. Cas. 1916E, and cases cited on page 579. This is the effect of numerous cases heretofore decided by this court relating to road improvement districts, which-have been affirmed by the Supreme Court of the United States. Indeed, this is the view of the matter taken by the Súpreme Court of the United 'States in the earlier case of Illinois Central Rd. Co. v. Decatur, 147 U. S. 190, 13 S. Ct. 293, where it was held that an exemption from taxation is to be taken as an exemption from the burden of ordinary taxes, and does not relieve from the obligation to pay special assessments, imposed to pay the cost of local improvements, and charged upon contiguous property upon the theory that it is benefited thereby. In discussing the subject it was said:

“And whether the charges are called special taxes or special assessments, and by whatever tribunal or by whatever mode the question of benefits may be determined, the fact remains that the charges are for a local improvement, and cast upon the contiguous property, upon the assumption that it has received a benefit 'from such improvement, which benefit justifies the charge. The charges here are not taxes proper, are not contributions to the State or to the city for the purpose of enabling either to carry on its general administration of affairs, but are a charge only and specially for the cost for a local improvement, supposed to have-resulted in an enhancement of the value of the railroad company’s property. ’ ’

Moreover, there is a distinction between a tax upon property which is used in interstate commerce which is valid, and a tax upon the act of interstate commerce which is not. Cleveland, etc., R. Co. v. Backus, 154 U. S. 439, 14 S. Ct. 1122, and Adams Express Co. v. Ohio State Auditor, 165 U. S. 194, 17 S. Ct. 305.

It is next insisted that the levy of the special assessment is arbitrary because it is levied upon a percentage of the assessed valuation of the property for State and county purposes. We cannot agree with counsel in this contention. The Legislature provided that the preliminary expenses in each case, in the' case of- the abandonment of the project, should be paid by a special assessment based upon a percentage of the value of the real property in the district for State and county purposes' as shown by the assessment roll for 1923. This constituted a legislative determination of the justice of this method of assessing benefits, and such legislation has been expressly upheld by this court as a proper exercise of legislative power. Missouri Pacific Rd. Co. v. Sears, 166 Ark. 104, 265 S. W. 653. The court expressly held in this and other cases that the fact that the special assessment is •made upon the whole value of the property as assessedfor State and county purposes does not imply that it is not also according to the benefits to-be derived from the improvements. Hence it is not an arbitrary method of ascertaining the amount of benefits to assume that they will accrue in proportion to the actual value of the whole property. In Western Crawford Road Imp. Dist. v. Missouri Pacific Rd. Co., 157 Ark. 304, 248 S. W. 563, it was held that a legislative determination that the preliminary expanses of an abandoned highway improvement levied on the basis of the assessed value of the property in the district for State and county purposes would not exceed the anticipated benefits from the construction of the improvement, is conclusive unless shown on its face to be arbitrary and unreasonable. This case was carried to the Supreme Court of the United States, and it was there held that, where a special road improvement is abandoned, after preliminary publication and inquiry, because the cost would probably exceed the benefits to the land included in the improvement district, the State may defray the expenses of the inquiry by assessing the lands according to their value as assessed for purposes of State and county taxation. Missouri Pacific Rd. Co. v. West Crawford Rd. Imp. Dist., 266 U. S. 187, 45 S. Ct. 31. It was there said that it is only against a flagrant abuse or purely arbritrary exercise of the taxing power that the Constitution of the United States affords protection. Again, the Supreme Court of the United States has reaffirmed the rule that it is only where the legislative determination is palpably arbitrary, and therefore an abuse of the taxing power, that it can be said to offend the due process of law clause of the Fourteenth Amendment. Kansas City So. Ry. Co. v. Rd. Imp. Dist. No. 3 of Sevier County, 266 U. S. 379, 45 S. Ct. 136.

It is now well settled by the decisions of our own court above cited and many others which might be cited, and by the decisions of the Supreme Court of the United States, that, in the absence of flagrant abuse or purely arbitrary action on the part of the State Legislature, it may establish drainage and road districts and tax lands therein for local improvements, and that none of such lands may escape liability solely because they will not receive direct benefits. Houck v. Little River Drainage District, 239 U. S. 254, 36 S. Ct. 58; Miller & Lux, Inc., v. Sacramento & San Joaquin Drainage Dist., 256 U. S. 129, 41 S. Ct. 404; and Valley Farms Co. of Yonkers v. County of Westchester, 261 U. S. 155, 43 S. Ct. 261.

Tested 'by these settled principles of law, it cannot be said that the action of the Legislature in fixing the levy for the payment of the preliminary expenses of each district at a certain per cent, of the assessed value of the ;real property of the district was palpably arbitrary and i an abuse of the taxing power. It is true that, according to. the evidence of the defendant company, it could not receive any benefit from either the drainage district or the road district. According to the testimony of the witnesses for it, it was wholly engaged in the business of carrying oil in its pipes from the State of Arkansas into the State of Louisiana. Its pipes were laid under the ground, and had a life of about twenty years. They were not affected by the water standing on the ground, and the telegraph line operated by the company was merely used as an aid of its pipe-line business, and was not in any sense benefited by the proposed road or drainage system. It may be said that a decided preponderance of the evidence establishes this view; but, under the principles of law decided in the cases above referred to, this does not end the matter; for it does not show that the legislative action was palpably arbitrary. According to the evidence of the plaintiffs, the drainage system would drain the water off of the right-of-way of the defendant company, and this would enable its employees to enter upon its land and more easily dig down to its pipe lines when it was necessary to replace or to repair them. Then, tpo, it would better enable the company to repair its telegraph line when the water had been drained off of its right-of-way. Under the charter of the company, it had a right to lay additional pipe lines and to operate its telegraph line as a telegraph line when in the future it was deemed necessary or expedient to do so. As we hgve already seen, it was not necessary that the special benefits should be direct and immediate. The Legislature, in an investigation of the matter, would have had a right to accept the testimony of the plaintiff as true and to have ascertained as a fact that'the construction of the drainage system, by draining the right-of-way of the defendant, would result in special benefits to its real property along the lines indicated. In addition, it may be said that, in case of a break in the pipe line, it would be necessary to repair this quickly in order to prevent a great wastage of oil,/ and this could be more easily and readily done if the' water was drained off of the right-of-way along which the!pipe lines were laid.

For the same reason it may be said that the construction of the proposed highway would result in a special benefit to the pipe line of the defendant. In case a dis-' covery of oil should make it expedient or necessary to lay new pipe lines, an improved highway would be of great benefit in distributing the material along the right-of-way for the purpose of' laying additional pipe fines. Then, too, it would be beneficial in cases of ordinary repairs of the pipe fine and of the telegraph lire. Hence we are of the opinion that the legislative determination that the preliminary expenses should be paid by a per cent, of the assessed valuation of the real property in the district for State and county purposes for the year 1923 i was not palpably arbitrary and therefore an unreason-¡: able exercise of the legislative taxing power. 1

Finally, it is insisted that the assessment is discriminatory because it makes the pipe-line company pay an undue proportion of the special assessments levied to pay the preliminary expenses. Now, under our statute, pipeline companies have the power of eminent domain and various other privileges, and the uses for which such companies are organized necessarily make them subject to the unit system of taxation. They are classified for the purposes of taxation, and a special board is given the power to assess them when other real property is assessed by the local taxing authorities of the various counties. No complaint was made by the company when its property was assessed for taxation in 1923 by the Arkansas Railroad Commission, whose duty it was to assess its property. If the company thought that its property was being discriminated against in the assessment made at that time, it should have made complaint in the manner provided by law. Not having done so, it must be assumed that it considered the assessment of its property for State and county purposes to be just and reasonable and that it was not in any manner discriminatory when compared with the assessment made on other real property by the county assessors. In Valley Farms Co. v. Westchester, 261 U. S. 155, 43 S. Ct. 261, it was held that, where the State law gives a property owner an opportunity to be heard upon the valuation of his property for general taxation, he is not entitled, under the Fourteenth Amendment to the Constitution of the United States, to ;a further hearing on that subject when such valuations are used as bases for apportioning special assessments.

The result of our views is that the decision of the chancery court, holding that the assessment of benefits against the pipe, line of the defendant was not palpably arbitrary and a plain abuse of legislative taxing power, was correct, and its decree is therefore affirmed.


author: Wood, J.

text:
    Long v. Volz.
    Opinion delivered March 28, 1927.
    1. Appeal and' error — liability on supersedeas bond. — Where a „ decree by its terms was in rem, it was error, in a subsequent action on a supersedeas bond given to stay execution on such decree, to find that the decree was in personam.

    2. Pleading — motion to make more specific. — Denial of a-motion to make a complaint more specific and to require plaintiff to state how and in what manner plaintiff had been damaged by defendants’ failure to perfect an appeal in a case in' which they had executed a supersedeas bond, held error.
    3 Appeal and error* — liability on supersedeas-bond. — A super-sedeas bond providing that, if the appeal should not be perfected, the sureties should pay the damages and “perform the judgment of the court appealed from,” held to render the sureties liable only for da.máges growing out of failure to perform the judgment.
    4. Appeal and error — damages on supersedeas bond — duty to MINIMIZE. — Where the execution of a decree has been stayed by filing a supersedeas bond, and the appeal is never perfected, the prevailing party should minimize his damages for which the sureties on the bond are liable by procuring a sale of the property on which a lien was declared by the decree. '
    Appeal from Union Circuit Court, Second Division; W. A. Speer, Judge;
    reversed.

      McNalley <& Sellers, for appellant.

      Coulter & Coulter, for appellee.
   Wood, J.

On July 8, 1924, a decree was rendered in the Union Chancery Court in favor of Fred Volz in the case therein pending of Fred Volz v. C. A. King and others. No personal decree was entered in the case, hut a decree in rem was rendered which recites, in part, as follows:

‘ ‘ That plaintiff is entitled to a judgment in rem for the sum prayed for, less one-half of $30 for hauling on January 17, 1924; that this sum constitutes a'lien on the leasehold estate covering the east half Of the east half-of the northwest quarter of section 28, township 16 south, range 14 west, in Union County, Arkansas, and that this lien should be foreclosed and said property be sold if said sum be not paid within fifteen days from this date. It is therefore by the court considered, ordered, adjudged and decreed that the plaintiff have judgment m rem in the sum of $642.50 with interest thereon from this date until paid at the rate of 6 per cent, per annum; that the same be and it is hereby declared to be a lien on the leasehold estate covering the west half of the east half of the northwest quarter of section 28, township 16 south, range 14 west, in Union County, Arkansas, together with all personal property located thereon and used in connection therewith; that'said lien, together with all the equities and rights of every kind of J. P. Stone and the Stone Oil Company be foreclosed and said property be sold free from the equities of any of the defendants herein unless said sum be paid within fifteen,days from this date; that H. Gr. Williams be, and he is hereby, appointed commissioner,” etc.

J. P. Stone and 'the Stone Oil Company, who were made parties defendant in the action in chancery, prayed an appeal and were allowed to file a supersedeas bond, which bond recites as follows:

“Whereas, the appellant, J. P. Stone, trustee for the Stone Oil Company, has taken an appeal from the judgment of the Union Chancery Court rendered at its July term, 1924, on the 8th day of July, 1924, against the west half of the east half of the northwest quarter of section 28, township 16 south, range 14 west, in Union County, Arkansas, in rev>%, in favor of the appellee, Fred W. Volz, for the sum of $565, with costs, and said appellant desires to supersede said judgment.

“Now the said J. P. Stone, trustee for the Stone Oil Company, which owns the above described leasehold interest, and J. M. Long and A. J. Perdue, as sureties, hereby covenant with the said appellee that appellant will pay to appellee all damages, interest and cost that may be adjudged against appellant on such appeal, or in the event of appellant’s failure to prosecute such appeal to final judgment in the Supreme Court, or if said appeal should be for any cause dismissed, that said sureties shall pay to appellee all damages, interest and cost and shall perform the .judgment of the court appealed from; also that said appeal shall be prosecuted without delay,” etc.

The bond was signed by J. P. Stone, trustee for the Stone Oil Company, principal, and by J. M. Long and A. J. Perdue, as sureties. The appeal from the decree in the chancery court was not perfected.

In May, 1925, this action was instituted in the Union Circuit Court against J. M. Long and A. J. Perdue on the above bond. The defendants answered and alleged that the bond on which the action was founded ceased to be effective on January 8,1925, the date when the time for the taking of the appeal in the chancery cause expired. They alleged that it was the duty of the plaintiff in that cause to have minimized his damages by procuring a sale under said lien declared in said judgment and decree, and to have had execution issued against the defendants in that action personally, all of which he had neglected and refused to do, and that, not having done so, he is entitled to only nominal damages against the defendants, for which they offer to confess. They prayed that plaintiff recover of them nominal damages only, together with his costs.

The plaintiff, Volz, demurred to the answer. The court sustained .the demurrer. Thereupon the defendants stood upon their answer and refused to plead further. The cause was thereupon submitted upon the complaint, the bond sued on, and the record of the decree of the chancery court. The court found that the plaintiff had obtained judgment in the Union Chancery Court against J. P. Stone and J. P. Stone, trustee for the Stone Oil Company, in the sum of $642.50, together with the costs in the cause; that an appeal was prayed and granted and the supersedeas bond sued on was executed ? that the appeal was not perfected within the time allowed by lawv, and that the plaintiff Yolz was entitled to judgment in the siim of $689.61, together with the costs in the chancery cause, and entered judgment for that sum, from which is this appeal.

The court erred in finding that the chancery court rendered a decree in favor of the appellee against J. P. Stone, trustee for the Stone Oil Company, in the sum of $642.50. The decree in the chancery court set out above controverts this finding of the court. The decree itself proyes conclusively that only a decree in rem was rendered in the chancery cause in the sum of $642.50, and the same was declared a lien on a certain leasehold estate, describing it, and directing that same be sold to satisfy the decree. No personal judgment was rendered against J. P. Stone and J. P. .Stone, trustee for the Stone Oil Company. Now, the applicable provisions of the bond on which this action is founded are as follows: “In the event of appellant’s failure to prosecute such appeal to final judgment in the Supreme Court, or if said appeal should be for any cause dismissed, that said sureties shall pay to appellee all damages, interests and costs and shall perform the judgment of the court appealed from.” The .judgment appealed from was a judgment in rem in the sum. of $642.50 against a certain leasehold estate, declaring the same a lien on that leasehold estate and directing that the same be sold to satisfy the decree.

In the court below the appellants, before filing their answer, moved the court to require the appellee to make his complaint more specific, and that he be required to state how and in what manner he had been damaged by the giving of the bond and the failure to perfect the appeal. The court should have granted this motion, because it is manifest from the recitals of the decree and the language of the bond that the appellants are only liable on the bond because of the failure of J. P. Stone and the Stone Oil Cpmpany to prosecute the appeal from the decree of the chancery court, and, under the express ■ language'of the bond, the appellants herein, as sureties for J. P. Stone, trustee for the Stone Oil Company, are only liable on the bond for the damages, interest and costs growing out of the failure to perform the judgment of the court appealed from. The judgment of the court appealed from required that the leasehold estate therein described be sold to satisfy a judgment in the sum of $642.50, together with the interest and costs in the chancery cause, which sum was declared a lien against such leasehold estate. The filing of the supersedeas bond by the appellants in the chancery cause had the effect of staying the proceedings in that cause until the time .for the appeal had expired, and, if such stay of the proceedings in the chancery cause resulted in damage to the plaintiff in that cause, the appellee here is entitled to recover the amount of such damage against the appellants in the present action on the bond.

This is an issue which the appellants sought to have presented to the trial court by their motion to have the appellee make his complaint in the chancery court more specific, and by their answer setting up that it was the duty of plaintiff to minimize his damages by procuring a sale of the property on which a lien was declared by decree of the court. The court erred in overruling appellants’ motion to require appellee to make his complaint more specific as set forth in the first paragraph of such motion, and also erred in sustaining the appellee’s demurrer to appellants’ answer. The court erred in not having the issues joined and tried as indicated.

For such errors the judgment is reversed, and the cause remanded for a new trial.

Justices Smith and McHaney dissenting.


text:
    Cleveland v. Breckenridge.
    Opinion delivered March 28, 1927.
    1. Deeds — acceptance.—Evidence held to sustain a finding that there was no acceptance of a deed.
    2. Deeds. — sufficiency of delivery. — To constitute a valid delivery of a deed, th’e grantor, by acts or words, or both, must have manifested an intention to pass the title to the grantee and the latter must have intended to accept the deed.
    Appeal from Clay Chancery Court, Western District; J. M. Futrell, Chancellor;
    affirmed.

      J. L. Taylor, for appellant.

      G. T. Bloodworth, for appellee.
   Wood, J.

This is an action by the appellant against the appellee begun in the circuit court of Clay County, and afterwards, without objection, so far as the r.ecord shows, found its way to the chancery court, where it was tried and a decree entered in favor of the appellee, from which is this appeal.

The appellant alleged in substance that she was the owner of the land in controversy, describing same in her complaint; that her mother, Mary Breckenridge, died on April 14, 1924, and, at the time of her death, she was in possession of the land and was the owner thereof, having a fee simple title thereto; that the appellant is the only surviving heir of her mother, and as such is entitled to the possession of the property and to damages for the unlawful detention thereof by the appellee. She alleged that, before the death of her mother, the house situated on the land had been insured by her against loss by fire, and that the same had been destroyed and the amount of the insurance in the sum of $250 had been collected by the appellee and converted to his own use. Appellant prayed for possession and for damages.

The answer denied all the material allegations of the complaint.

A. H. Breckenridge intervened and alleged that he was the owner of the land under an agreement between J. F. Breckenridge, his father, and Mary Breckenridge, His stepmother, by which they agreed to convoy to him the land in consideration that he take care of them and furnish them such cash aud other supplies as they might need, which the intervener did in the sum of $2,000: He prayed that the title to the land be vested in him. The appellant answered the intervention, stating that, if such an agreement had been made, it was not in writing, and that no part thereof had been performed; that the same was without consideration and void, and that the appel-lee, A. H. Breckenridge, was barred by laches from maintaining the action.

The facts are substantially as follows: J. F. Breckenridge was the OAVner of eighty acres of land in Clay Couuty Avhich had been purchased by him in 1907. He sold off fortv acres to one T. R. Cleveland, aud A. H. Breckenridge, his son by a former marriage, purchased the land from OUweland, and appellee, J.F. Breckenridge, and the then Mrs. Breckenridge. the stepmother of A. PI. Breckenridge, sold to A. H. Breckenridge 27 acres of the adjoining forty. J. F. Breckenridge desired to sell to his son the entire fort\r acres, but Mrs. Breckenridge, the stepmother, objected. She desired that they retain the remaining thirteen acres for a home. A scrivener AATas called in to make the deeds. One deed Avas made out to A. PT. Breekerp-blo'p to twentv-<?oA’eu acres. and another deed was executed by Breckenridge to his AAnfe for the remaining thirteen acres of the forty. The deeds were executed and acknowledged by J. H. Breckenridge and his wife to A. H. Breckenridge, and by J. H. Breckenridge to his wife. The scrivener testified that he wrote the deeds, took the acknowledgments, and laid the deeds on the table. . He testified that Mr. and Mrs. Breckenridge were living on the land at the time. Mrs. Breckenridge turned over a span of young mules on the purchase price of the land in controversy. They lived there on the place until Mrs. Breckenridge died. The title was in the name of J. F. Breckenridge. The deeds were witnessed by one Barnes.

The appellant testified that she was the daughter of Mrs. J. F. Breckenridge by a former husband, Lovell. She -was the only child, and she married a man by the name of Cleveland. She stated that the thirteen acres of land in controversy belonged to her mother. Her mother died on the land. Appellant knew about the deed her stepfather, Breckenridge, made to her mother. Her mother showed her the deed, which she kept in a trunk. Her mother told the appellant that Mr. Breckenridge had given her the' deed to sign over the rest of the land to Albert Breckenridge. Witness’ mother had been living on the land since 1903. The last conversation witness had with her mother was in March, 1924. At that time she told the appellant she had lost the deed. She died April 14, 1924. Witness stated that her mother’s trunk was then at witness’ house; that her mother also told her that she had turned a span of young mules in on the purchase price. Her mother had $191 in money -and she said that Breckenridge spent it. Witness’ mother had-been in possession of the land claiming it since witness’ stepfather made the deed to her.

Ten witnesses testified on behalf of the appellant, and their testimony tended to prove that Mrs. Breckenridge claimed the land since 1907 after J. H. Breckenridge made the deed to her. One witness stated that Mrs. Breckenridge showed her the deed in 1908. At least three of the witnesses stated that she had shown them the deed, and practically all of them stated that she claimed to own the land and would not sell the same; that she wished to keep the land for her daughter, the appellant. Several of the witnesses stated that J. F. Breckenridge spoke :of the land as belonging to Mrs. Breckenridge, and that he could not get her to dispose of it. The testimony of some of the witnesses was also to the effect that they never heard of Albert Breckenridge claiming the land. One of the witnesses stated that, in 1920, Mrs. Brecken-ridg’e rented the land to witness’ brother, and that Mrs. Breckenridge was in possession in 1921; that old man Frank Breckenridge had sold all of his property and left, and that Mrs. Breckenridge thought he" was gone for good.

The testimony of the appellee was to the effect that; on the occasion when J. F. Breckenridge and wife sold the twenty-seven acres to A. H. Breckenridge, J. F. Breckenridge made out a deed also to his wife, but she did not accept it, and afterwards burned the same by throwing it in the stove. The deed was in witness’ trunk. 'Witness and his wife lived on the place all the time, but his son, Albert, took care of them and paid all the taxes. Albert- also collected the rents on the whole place and had the management of it. Mrs. Breckenridge told A. H. Breckenridge, witness’ son, that he could have the land if he would take care of them, and she stated that is the reason why she would destroy the deed. She wanted to make A. H. Breckenridge a deed, and they did make a deed to the 27 acres, and he also made out a deed to Mrs. Breckenridge. She never, did accept it, and burned the same two or three years afterwards. She was unwilling to make Albert H. Breckenridge a deed to the thirteen acres because she was afraid he might die, and she wanted a place to live. Witness and his wife had been living on the place all along.

The gréater number of witnésses testified on behalf of the appellee to the effect that A. H. Breckenridge had control and management of the land in controversy, and rented it out and collected the rents. Some of them stated that he claimed to own the land, and the rents were paid to him. One witness testified that he was present when the scrivener wrote the deeds in 1907 and witnessed the deeds with Frank Barnes as the other witness. After the deeds were written and signed, the scrivener laid them on the table and left. Mrs. Breckenridge said several times that there was not any nse in making the deeds to her. J. F. Breckenridge threw the deed to the 13 acres in his trunk.

Another witness testified that he saw- the deed and talked to Mrs. Breckenridge about having it recorded, and went out to get it and put it on record for her, but she declined. This was in 1908 or 1909. She didn’t want to take it, and .said as long as she lived it wasn’t necessary, and at her death it was to go to Calla. Several of the witnesses testified to hearing Mr. and Mrs. Breckenridge state that they had agreed to sell the land to Albert Breckenridge, since he had been furnishing them with money, paying their bills and taking- care of them.

From the evidence adduced the trial court found that there was no delivery and acceptance of the deed to Mrs. J. F- Breckenridge, and that no title ever passed to her. Without pursuing the subject further, we are convinced that the finding of the trial court, to say the least, was not against the preponderance of the evidence. Whether or not there has been a delivery of a deed depends upon the intention of the parties as manifested by their acts and words. The grantor, by his acts or words, or both, must have manifested an intention to pass the title to the grantee and the grantee must have intended to accept such deed in order to constitute a valid delivery and conveyance of title. Cribbs v. Walker, 74 Ark. 104, 85 S. W. 244; Russell v. May, 77 Ark. 89, 90 S. W. 617; Ames v. Ames, 80 Ark. 8, 96 S. W. 144, 117 A. S. R. 68; LaCott v. Quertermous, 84 Ark. 610, 107 S. W. 167; Maxwell v. Maxwell, 98 Ark. 466, 136 S. W. 172; Battle v. Anders, 100 Ark. 427, 140 S. W. 593; Faulkner v. Frasel, 113 Ark. 289, 168 S. W. 568; Wood v. Wood, 116 Ark. 142, 172 S. W. 860; 8 R. C. L., Deeds, par. 47.

It occurs to us that a preponderance of the testimony sustains the finding of the trial court. The decree is therefore correct, and it is affirmed.