author: Smith, J.

text:
    Luter v. Pulaski County Hospital Association.
    Opinion delivered January 19, 1931.

      Robert J. Drown, Jr., for appellant.

      Rose, Hemingway, Cantrell S Loughborough, for appellee.
   Smith, J.

.The complaint filed by appellant, a taxpayer of Pulaski County, alleges “That the Pulaski County Hospital Association is a # * * corporation * * * under the laws of the State of Arkansas, * * * and, as such corporation, it proposes to build and finance a hospital by the sale of interest-bearing bonds, * * * which hospital it proposes to sell to Pulaski County, Arkansas, which sale will carry with it the assumption by said county of the said interest-bearing bonds * * The cost of the construction of the hospital will be about $600,000, a sum larger than the county can pay out of a single year’s revenue, but the county can pay for the hospital by meeting the annual bond maturities, thus distributing the payment of the cost of the hospital over a period of years. The plaintiff alleges this proposed contract is violative of the Constitution and laws of the State, and prays that it be enjoined. His demurrer to the answer, which alleged the ability of the county to pay for the construction of the hospital by distributing its cost over a period of years, was overruled, and, as he stood on his demurrer to the answer, the complaint was dismissed, and he has appealed.

At the 1923 session of the General Assembly an Amendment to the Constitution was proposed to be voted on as amendment No. 11 (General Acts 1923, page 797). The amendment was adopted at the ensuing general election (Brickhouse v. Hill, 167 Ark. 513, 268 S. W. 865), and it has since been commonly referred to as amendment No. 11, and has been so designated in the numerous cases which construe or refer to it. The correct number of the amendment, according to Applegate’s Constitution of Arkansas, Annotated, page 219, is No. 8, and it will be referred to herein by that number.

This amendment was designed to amend § 4 of article 12 of the Constitution by adding three paragraphs thereto, the first of which reads as follows:

“The fiscal affairs of counties, cities and incorporated towns shall be conducted on a sound financial basis, and no county court or levying board or agent of any county shall make or authorize any contract or make any allowance for any purpose whatsoever in excess of the revenue from all sources for the fiscal year in which said contract or allowance is made; nor shall any county judge, county clerk, or any other county officer, sign or issue any scrip warrant or make any allowance in excess of the revenue from all sources for the current fiscal year; nor shall any city council, 'board of aldermen, board of public affairs, or commissioners, of any city of the first or second class, or any incorporated town, enter into any contract or make any allowance for any purpose whatsoever, or authorize the issuance of any contract or warrants, scrip or other evidence of indebtedness in excess of the revenue for such city or town for the current fiscal year; nor shall any mayor, city clerk, or recorder, or any other officer or officers, however designated, of any city of the first or second class or incorporated town, sign or issue any scrip, warrant or other certificate of indebtedness in excess of the revenue from all sources for the current fiscal year.’’

A literal reading- of the language quoted would compel the conclusion that the governmental agencies named were prohibited from contracting obligations of any character in any fiscal year in excess of the revenues for that year. In other words, they must pay as they go, and can go only so far as they pay, and are not to make or authorize any contract, or make any allowance, for any purpose whatsoever in excess of the revenue from all sources for the fiscal year in which said contract or allowance is made.

We have had frequent occasion to construe this amendment: Kirk v. High, 169 Ark. 152, 273 S. W. 389, 41 A. L. R. 782 ; Babb v. El Dorado, 170 Ark. 10, 278 S. W. 649 ; Jewett v. Morris, 170 Ark. 71, 278 S. W. 652 ; Nelson v. Walker, 170 Ark. 170, 279 S. W. 11 ; Airheart v. Winfree, 170 Ark. 1126, 282 S. W. 963 ; Martin v. State ex rel Saline County, 171 Ark. 576, 286 S. W. 873 ; McGregor v. Miller, 173 Ark. 459, 293 S. W. 30 ; Independence County v. Lester, 173 Ark. 796, 293 S. W. 743 ; Dixie Culvert Mfg. Co. v. Perry County, 174 Ark. 107, 294 S. W. 381 ; Lybrand v. Wafford, 174 Ark. 298, 296 S. W. 729 ; Ivy v. Edwards, 174 Ark. 1167, 298 S. W. 1006 ; Polk County v. Mena Star Co., 175 Ark. 76, 298 S. W. 1002 ; Lake v. Tatum, 175 Ark. 90, 1 S. W. (2d) 554 ; Jackson v. Madison County, 175 Ark. 826, 300 S. W. 924 ; Hagler v. Arkansas County, 176 Ark. 115, 2 S. W. (2d) 5 ; Campbell v. High, 176 Ark. 222, 2 S. W. (2d) 1101 ; Miller v. State use Woodruff County, 176 Ark. 889, 1 S. W. (2d) 998 ; Norman v. Blair, 177 Ark. 649, 7 S. W. (2d) 328 ; Kleiner v. Parker, 177 Ark. 671, 8 S. W. (2d) 434 ; Chestnutt v. Yates, 177 Ark. 894, 9 S. W. (2d) 37 ; Dixie Culvert Mfg. Co. v. Perry County, 178 Ark. 454, 12 S. W. (2d) 10 ; Carter v. Cain, 179 Ark. 79, 14 S. W. (2d) 250.

The first of these cases, that reported under the style of Kirk v. High, was a consolidated case involving appeals from Lonoke and Nevada counties. In the Lonoke County case it was proposed to build a courthouse, and in the Nevada County case a jail, and it was conceded that neither county could proceed if the amendment were given a literal interpretation, for the reason that the revenues of the counties were insufficient to pay the construction cost of the proposed buildings in a single year.

The construction of the amendment, in view of the practical problem presented, gave us the greatest concern, and, as appears from the report of the case, three opinions were written.

The present Chief Justice was of the opinion that courthouses and jails were absolutely necessary in the administration of the 'State Government, and that the amendment was not designed to take away the powers of counties to repair and erect courthouses and jails which were possessed before its adoption. Judge McCulloch, the then Chief Justice, construed the amendment literally and expressed the view, in a dissenting opinion, that neither courthouses nor jails could be erected unless they could be paid for entirely out of the revenues of the year in which the construction contract was made.

The majority, however, took an intermediate position between the views of the' former and the present Chief Justices.

In the majority opinion it was said: “But it does not mean that the county without a courthouse or a jail must dispense with these essentials because they cannot be fully paid for in one year. Counties may contract for these buildings and may apportion the cost over a number of years, but in doing so the other necessary expenses of Government must be taken into account, and no authority be conferred upon the officers charged with the duty of issuing vouchers or warrants to issue them for a sum which will exceed the total revenues for any single year.”

It also appears, from the majority opinion, that the majority reached the conclusion announced in view of what Chief Justice Bunn had said in the case of Hilliard v. Bunker, 68 Ark. 340, 58 S. W. 362, that “In such an expensive matter as the building of a courthouse and jail, it is not of course expected, under ordinary circumstances, to cover the whole amount by the levy for one year, and in fact this cannot be done, since, together with the ordinary expenses of the county, the levy for erecting these buildings must not exceed in one year the rate of 5 mills. The amount and number of the annual installments necessary to cover the whole cost of the structure must be and is left to the discretion of the levying court, to be exercised so as to accomplish the result intended in a reasonable time.”

It was the opinion of the majority that, in view of the necessity for courthouses and jails, in order that counties might function as contemplated by law, and in view of the known inability to discharge so great an expense out of a single year’s revenues, it was not the purpose of the amendment to stop the erection of courthouses and jails, as would have been done if the amendment were literally construed.

A most unsatisfactory state of affairs arose after the rendition of this opinion, as is evidenced by the facts stated in the opinions above cited. We had said, and had reiterated the holding, that courthouses and jails, however necessary, could not be erected unless their cost could be so distributed over future years in such installments of payments as not to impair the ability of the counties to function and to pay the other necessary expenses of county 'government after paying these installments. We had held, to quote a headnote in the case of McGregor v. Miller, 173 Ark. 459, 293 S. W. 30, that “Under Constitution, Amendment 11, county warrants issued, as well as contracts made, in excess of revenues for a fiscal year, are void, and the action of the county court in issuing such a warrant or in making an allowance on which such a warrant might later be issued is coram non judice.”

There was always some uncertainty and difference of opinion as to whether a county could build a courthouse or jail, as appears from the facts stated in the above cited opinions. Indeed, in the case of Lake v. Tatum, 175 Ark. 90, 1 S. W. (2d) 554, after holding that Union County could not build a courthouse, we held, on rehearing, that it could do so.

With the law in this uncertain state, the G-eneral Assembly, at its 1927 Session, proposed an amendment to be voted on as amendment No. 17 (Acts 1927, page 1192), which authorizes counties, upon the conditions there provided, to issue bonds to build courthouses and jails. This amendment was adopted at the general election in .1928, and is designated as amendment No. 15, in the order of its adoption, in Applegate’s Annotated Constitution, page 235.

We were called upon to construe these amendments as related to each other in the case of Carter v. Cain, 179 Ark. 79, 14 S. W. (2d) 250, and, after reviewing the opinion in Kirk v. High, su,pra, it was there said: “After the court had construed this amendment No. 11 to mean that a county could go in debt for courthouses and jails, the people then adopted amendment No. 17, vesting the authority and right to construct courthouses and jails and to levy taxes to pay for them, in the qualified electors of the county. Amendment No. 17 was evidently adopted for the very purpose of meeting the decision of this court and accomplishing what they thought was accomplished by amendment No. 11, when adopted. That is, to prevent counties from going into debt, and provide a method for building and paying for courthouses and jails. But it is insisted that there are two methods now. We do not agree to this contention.”

Amendment No. 8 must now, since the adoption of amendment No. 15, be construed, as it reads, literally, that is, that contracts and allowances in any year cannot exceed the revenues of that year, not even for a purpose so necessary as that of building courthouses and jails.

It is true the instant case involves a hospital, and not a courthouse or a jail, but, in view of the history of these amendments, we would be unwilling to hold that a county may go in debt for a hospital, when it cannot do so for a courthouse or jail except upon a vote of the people. It is a matter of common knowledge that most of the counties of the State had either a courthouse or a jail, or 'both, while very few owned a hospital, and the opinion in Kirk v. High related only to courthouses and jails, which we held were not covered by amendment No. 8, for the reasons stated. This exception to the amendment has now been stricken out by the adoption of amendment No. 15, and we are unwilling to hold there is any other exception.

We, therefore, conclude that the action of the county in assuming the obligation of buying this hospital should be enjoined, for the reason that it is admitted that its cost cannot be paid out of a single year’s revenues.

The decree of the court" below will therefore be reversed, and the cause remanded Avith directions to enter an order enjoining the county judge, as prayed, from proceeding further towards the purchase of the hospital.


source: Caselaw Access Project

author: iSmith, J.

license: Public Domain

text:
    Rose v. Brickhouse.
    Opinion delivered January 19, 1931.

      Carmichael Hendricks, for appellant.

      Owens <& Ehrman and John F. Clifford, for appellee.
   iSmith, J.

Appellant, who is a citizen and taxpayer of Pulaski County, seeks by this suit to enjoin appellee from collecting a salary from. Pulaski County, which was being paid him for certain services rendered the county and probate judge of that county. The cause was heard in the court 'below on the stipulation of opposing counsel, which recited the character of service rendered, and from which we copy as follows:

“W. P. Sibeck, the county and probate judge of Pulaski County, during the regular 1929 session of the levying court, commonly known as the quorum court; ’ ’ made representations of “the deplorable condition of a large number of the estates handled and being handled in the Pulaski Probate Court, several thousand of which estates extending over a period of many years, had never been closed,” and that the duty of making settlement of these estates “would he long and laborious and largely clerical; that some one with more time than the county and probate .judge of a large county, and also with legal training and experience should be employed as public necessity demanded it” to make settlement of these accounts. Upon the recommendation of the judge, an appropriation of $3,000 was made by the quorum court “for legal expenses with which to employ some attorney or other suitable person of requisite skill and experience to investigate, consult, advise and make recommendations as to probate matters, both present and past, in order that this condition should be alleviated and the county judge rendered all assistance possible.”

Pursuant-to the authority conferred by the action of the quorum court appellee was employed to render the proposed service to the county and probate judge at a salary of $3,000 per annum, payable in monthly installments of $250 each.

Since appellee’s employment, he has acted “in an investigating, consulting, and advisory capacity, attempting to alleviate the conditions recited above; all matters investigated by him or submitted to him have been considered, discussed with the parties in interest, and discussed with the probate judge and such recommendations made as defendant thought were proper. ’ ’

No orders have been made by appellee, but the result of his investigations were indorsed upon the papers examined and signed by him as referee and passed on to the probate judge for such action as that official thought proper.

The chancellor held that the facts recited constituted merely a special employment, which was authorized by law, and dismissed appellant’s complaint as being without equity, and this appeal is from that decree.

It is first insisted that appellant has no capacity to sue in the chancery court, and that a complete and adequate remedy at law is open to her, if, indeed, she is entitled to any relief. Appellant could, no doubt, make herself a party to the order of the county court allowing the monthly installments of the annual salary, and have appealed from each order of allowance; but this would require a multiplicity of appeals. Moreover, we think authority to prosecute, this suit is expressly conferred by § 13, of article 16 of the Constitution, which reads as follows : “Any citizen of any county, city or town may institute suit in behalf of himself and all others interested, to protect the inhabitants thereof against the enforcement of any illegal exactions whatever.”

Among the cases which have authorized citizens and taxpayers to institute suits in the chancery court more or less similar in character against the enforcement of illegal exactions which do not affect them specially or nersoually, but only as citizens, are the following: Tay' lor v. City of Pine Bluff, 34 Ark. 603 ; City of Little Rock v. Prather, 46 Ark. 471 ; Merwin v. Fussell, 93 Ark. 336, 124 S. W. 1021 ; Harrison v. Norton, 104 Ark. 16, 148 S. W. 497 ; Bentonville v. Browne, 108 Ark. 306, 158 S. W. 161 ; Seitz v. Meriwether, 114 Ark. 289, 169 S. W. 1175 ; Quinn v. Reed, 130 Ark. 116, 197 S. W. 15 ; Farrell v. Oliver, 146 Ark. 599, 226 S. W. 529 ; Green v. Jones, 164 Ark. 118, 261 S. W. 43 ; Marshall v. Holland, 168 Ark. 449, 270 S. W. 609 ; Bush v. Echols, 178 Ark. 507, 10 S. W. (2d) 906 ; Rigsby v. Ruraldale Consolidated School Dist., 180 Ark. 122, 20 S. W. (2d) 624.

We think appellant had the right to bring this suit as a citizen and taxpayer. In the case of Lee County v. Robertson, 66 Ark. 82, 48 S. W. 901, it was held that an order of the levying court, appropriating funds to another purpose than that for which they were raised, is tantamount to the allowance and enforcement of an illegal exaction against every taxpayer in the county, and that any citizen had the right to resist that action.

We are also of the opinion that the relief prayed should have been granted. While appellee is called a referee, and professed to act as such in an advisory capacity, he is, in fact, a deputy probate judge, and no authority exists for the creation of such an office.

. The stipulation makes plain the fact that appellee does not render the county any service. He merely audits and examines settlements in the probate court, which are passed on, with his recommendations, for the entry of such order's as the referee thinks should be made, to the probate judge, and this is done because the probate judge is otherwise so engaged that he does not have time to perform the duties which the referee is paid to perform. It is not questioned that these duties are such as probate judges are required by law to perform, or such as would be performed by the probate judge of Pulaski County if the time of that officer were not otherwise employed.

This appears to us to be an attempt to do, without an 'act of the General Assembly, what we held, in the case of Nixon v. Allen, 150 Ark. 244, 234 S. W. 45, could not be done under legislative authority. That was a case in which we held unconstitutional an act dividing the offices of county judge and probate judge of Pulaski 'County, and providing- that each office should be filled ¡by a separate person. We there said that there could not be two county judges. We quote from that opinion as follows: “Under the Constitution there cannot be more than one county judge. The limitation is found in the numeral ‘one’ in the clause, 'the county court shall be held by one judge,; and likewise in the very nature of the jurisdiction of such court and the functions of its presiding judge. State v. Martin, 60 Ark. 343, 30 S. W. 421. The county judge is the governor, so to speak, in the affairs of the county in the matters over which the county courts are given exclusive .jurisdiction. He is given supreme or exclusive original authority over the matters enumerated in the Constitution, and such authority, in the very nature of the case, must be exercised by one presiding and controlling genius. There is no room under the Constitution for a division of authority and responsibility in the office of county judge. The idea that there can be two county judges, either one of whom could preside over the county court, would be incompatible with the intention of the framers of the Constitution in conferring jurisdiction and power upon such court and its judge. The functions of this office in its control over taxes, roads, /bridges, and other matters of local concern and internal improvement, are indivisible and can only be exercised by one person.”

What was there said in regard to the judge of the county court is equally applicable to the judge of the probate court, and there can no more be two probate judges, by whatever name one of them may be called, than there can be two county judges.

We conclude, therefore, that the relief prayed should have been granted, and the decree of the court below will be reversed, and the cause will be remanded with directions to grant the injunctive relief prayed.


author: Humphreys, J.

text:
    Board of Education of Ouachita County v. Morgan.
    Opinion delivered January 19, 1931.

      Gtmghan, Sifford, Gotham Gtmghan, for appellant.

      Haynie, Parks & Westfall, for appellee.
   Humphreys, J.

This suit was brought on September 25, 1930, 'by appellants against appellees in the Second Division of the Chancery Court of Ouachita County to- obtain a transfer to the common school fund from the general county revenue fund of that portion of the treasurer’s commissions in excess of the constitutional limit of $5,000, allowed him as salary, derived from the collection of the county common school funds and credited to the county general revenue fund during the years 1924, 1925, 1926, 1927 and 1928, aggregating $14,350.83; and for interest collected from county depository banks and credited -to the county general revenue fund for the years 1924 to July 1, 1927, inclusive, amounting- to $345.55; and for a transfer to the county common school fund from the several county funds that portion of interest allocated to them which was collected from the county depository hanks during the last half of the year 1927 and all the year 1928, aggregating $8,472.62.

The complaint alleged that the excess commissions aggregating $14,350.83 collected by the county treasurer on the county common school funds were improperly credited to the account of the county general revenue fund contrary to law and to § 11, article 16, of the Constitution of the ¡State of Arkansas which provides that no moneys arising from a tax levied for one purpose shall be used for any other purpose. It also alleged that pursuant to act No. 304 of the Acts of 1913,- interest paid by county depositories should be placed to the credit of the respective funds from which said interest was derived, and that interest in the amount of $345.55 was collected on school funds deposited in county depository banks during the years 1924 to July 1, 1927, inclusive, and improperly credited to the county general revenue fund. It also alleged that pursuant to act No. 163 of the Acts of 1927, interest paid by county depositories should be placed to the credit of the county common school fund, whereas, during the last half of 1927 and all of 1928 interest aggregating $8,472.62 was paid by the county depository banks and improperly credited to the several county funds aforesaid.

Appellees filed an answer and demurrer to the complaint, both of which challenged the right of appellants to have the funds transferred to the county common school fund from the respective county funds to the credit of which they had been deposited, and in addition pleaded the three years’ statute of limitations in bar of appellants ’ claim for excess commissions and interest for the years 1924, 1925, 1926 and 1927 and for interest during the last half of 1927 and all of 1928.

The suit was submitted to the trial court upon the pleadings and a stipulation of facts, which resulted ini denying appellants’ claim for interest and that portion of its claim for excess commissions of the treasurer accruing more than three years before the institution of the suit, and ordering the county .judge and the county clerk to transfer from the county general revenue fund of said county the sum of $6,191.79, excess commissions for the years 1927 and 1928 and interest thereon, amounting to the total sum of $6,568.94, to the several school districts for Ouachita County, same to be apportioned under the orders and directions of the county board of education as required by law.

Both appellants and appellees have appealed from the decree in so far as same is adverse to each.

The agreement of facts is as follows:

“It is agreed by and between all of the parties herein for the purpose of the trial of the-issues in this suit:
“First: That the figures set out in the complaint and the amendment thereto correctly show the amount of money collected by the treasurer of Ouachita County, Arkansas, for and during the years set out in the complaint, and the amounts of money turned back to the county as excess commissions and the amount of interest collected by the said treasurers of Ouachita County, Arkansas, and which has accrued on the said funds.
‘ ‘Second: That the excess commissions turned back to Ouachita County, Arkansas, for each of the years named in the complaint, were by the several treasurers placed to- the credit of the county general fund, together with the interest which accrued thereon as alleged in the complaint.
“Third: That during all of the times named in the complaint, and at the present time, there has been and now is in the county general fund money in excess of the amounts now claimed by the plaintiff to have been and to be now wrongfully diverted to said fund.
“Fourth: That the records of the county court of Ouachita County, Arkansas, show that the treasurers of Ouachita County, Arkansas, immediately after the close of each of the years during which the excess commissions were collected filed their settlements with the county court showing the total commissions collected, the amount of their expenses and the excess commissions turned hack to the county, and said settlements were approved by the county court at the beginning of each succeeding year following the year in which the excess commissions were collected.
“Fifth: That, since the passage of the general county depository law, act No. 163, for the year 1927, which went into effect March 18, 1927, all of the interest derived from county funds paid by the depository has been credited to the several funds from which said interest was derived, and that the amount of interest which accrued to the several funds of Ouachita County are correctly shown in the. itemized statement attached to the complaint. The sum of $2,867.12 interest as shown in said itemized statement, includes interest on the school funds claimed to have been wrongfully diverted to said county general fund as well as interest on other money in the county general fund not claimed to have been wrongfully diverted.
“Sixth: That the sum of $4,000 interest on severance tax fund shown in said statement, together with all of said severance tax fund, was transferred by the present county judge after he went into office in January, 1929, to the county highway fund. That said severance tax fund represents the proportion of the severance tax received by Ouachita 'County, Arkansas, from the State of Arkansas, for use on county roads. It was the practice of the county treasurers during the years complained of, upon receipt of remittance of severance tax from the State of Arkansas, to divide the funds equally for' school purposes and for road purposes. The proportion of the fund going for school purposes was at once apportioned among the several school districts and credited to each school district fund. The portion going for road purposes was placed in the severance tax fund which was on deposit with the county depository. After the present county judge, Watt Jordan, went into office, the severance tax fund was transferred to the county highway fund, and there has been in the county highway fund since that time, up to and including the date of the temporary injunction made in this suit, in excess of $5,000; since the present county judge has been in office, the severance tax fund has been discontinued.
“Seventh: The rate of interest paid by the county depository on county funds during the years complained of up to January 1,1929, was 3% per cent, and since said date, the county depositories have paid 3 per cent.
“Eighth: In agreeing to the above stipulation of facts, it is understood that the defendants do not agree that plaintiffs are legally entitled to the relief prayed for in the complaint or any part thereof. Defendants do not waive any of the legal rights to which they or the county of Ouachita are entitled.
“Ninth: At the time of the filing of this suit, there was on hand in the county general fund of Ouachita County, Arkansas, approximately $100,000 and the outstanding warrants against said fund at that time amounted to approximately $2,000.”

The first question of law arising out' of the pleadings and agreed statement of facts is whether that portion of the treasurer’s commission in excess of the salary allowed him by law, derived 'from the collections of the county common school funds during the years 1924, 1926, 1926, 1927 and 1928 was improperly credited to the county general revenue fund. This identical question was determined by this court in the case of County Board of Education v. Austin, 169 Ark. 436, 276 S. W. 2. In that case it was ruled unconstitutional and improper to augment the county general revenue fund with that portion of excess fees over the salaries of the treasurer and collector derived from the collections of the county common school fund. To cover such excess into the county general revenue fund is ‘inhibited by § 11, artide 16, and also § 3, artide 14, of the Constitution as amended by amendment No. 9 thereto; and when covered into the wrong fund the chancery court may order a transfer thereof to the proper fund. It is argued by appellees that the rule announced in the Austin case, supra, to the effect that the excess fees over the salaries of the treasurer and collector derived from the collection of the county common school fund should be allocated to said county common school fund, conflicts with § 23, article 19, of the Constitution and § 4639 of C. & M. Digest. The argument is without merit because neither the section of the Constitution nor the section of the Digest referred to provides that the excess shall be credited to the county general revenue fund. They only provide that the excess shall be paid into the 'State, county, city or town treasury. The purpose of the Constitution and enabling act referred to was not to divert the excess or turnback, but to provide a place for payment in order fhat same might then be properly apportioned and allocated.

The next question of law arising out of the pleadings and agreed statement of facts is whether § 3 of act No. 163 of the Acts of 1927 is void as an attempt to divert taxes levied for one purpose to another purpose contrary to § 11, article 16, of the Constitution of Arkansas. Section 3 of the act referred to is in part as follows: “Said interest shall be computed upon daily balances and placed to the credit of said county, with said depository, and the same shall be payable to the county treasurer monthly, and shall be immediately placed by said treasurer to the credit of the common school fund of the county and be distributed pro rata to each school district, according to the scholastic population. * * *”

This section deals with interest derived from the funds theretofore levied and collected and not with the tax itself which was levied and collected. The interest derived, from the fund was not levied and collected as a tax. The inhibition of the Constitution referred to is against the use of the tax for any other purpose than that for which it was levied and collected. The principle announced in the case of Easterling v. Cook, 176 Ark. 574, 299 S. W. 1009, and reiterated in the later case of Collins v. Humphrey, 181 Ark. 609, 27 S. W. (2d) 102, governs the instant case.

The next and last question of law arising out of the pleadings and agreed statement of facts is whether any part of appellants ’ cause of action is barred by the statute of limitations. It is conceded in the brief of appellants that the funds sought to be transferred to the county common school fund from the several county funds into which they were diverted, are not trust funds by virtue of an express trust. The general rule of law is that, while the statute of limitations will not run against an express trust until there has been a repudiation of the trust, the statute of limitations will run against implied, resulting and constructive trusts. There are some exceptions to the rule that the statute of limitations will run against implied, resulting and constructive trusts, but we think the instant case comes within the general rule and not within any exception thereto. The three years’ statute of limitations provided for in § 6950 of Crawford & Moses’ Dig-est is applicable to the claims of appellants for excess commissions and interest. It was not alleged in the complaint nor in the stipulated agreement of facts that funds claimed were wilfully diverted by the officer apportioning them, hence § 6960 of Crawford & Moses’ Digest, providing for a five-year statute of limitations, has no application to the instant case.

Under the rules of law announced herein the trial court erred in denying appellants’ claim for interest accruing on funds loaned to the depository bank during the last half of 1927 and all of 1928, aggregating $8,472.62. This part of the decree will be reversed, and the cause remanded with directions to render a decree, in addition to that already rendered, in favor of appellants for interest in the sum of $8,472.62. In all other particulars the decree of the trial court is affirmed.


author: Kirby, J.,

text:
    Sovereign Camp of Woodmen of the World v. Parton.
    Opinion delivered January 19, 1931.

      II. M. Jacoway and Lee Miles, for appellant.

      Robert Bailey and Hays $ Priddy, for appellee.
   Kirby, J.,

(after stating the facts). Appellant contends that there was no completed contract for the new insurance and that the undisputed testimony shows, on account of the false warranties, that' there could not have been any liability on the part of the company under the new certificate; and that the court erred in not so directing the jury.

It is not questioned that the amount tendered by appellant company in settlement of its liability under the first or old certificate was not the correct amount due thereunder after deduction of charges properly made against it, except as to the $301.65 deducted for misrepresentation of insured’s age as one year less than it in fact was. The undisputed -testimony shows that the application for the new certificate was not signed by the member or insured, but was signed by Mr. Eakes, who had the old certificate in his possession and was advancing money thereon to the insured; he having signed it upon the suggestion of the beneficiary, the wife of insured, and J ones, the agent of the company employed by the appellant company to effect the exchanges of certificates. Eakes refused to sign the first application until the agent crossed out the words “while in good health,” and later signed the application that was presented containing the words that had been stricken out of the first application upon the statement by Jones that it would be all right to do so.

If it be regarded that the contract for the exchange of certificates was not completed, there certainly could be no liability of appellant on the new certificate sued on. It is undisputed that the member did not sign a receipt for the new certificate, and also that he died before the delivery of same, the clerk of the Camp, whose duty it was to make such delivery having indorsed thereon, “received after death.”

Without regard to whether the application for the new certificate was in fact signed by the insured, or whether his name was signed thereto by Eakes upon the suggestion of his wife, the beneficiary, or the soliciting agent, not personally present at the time; if it be regarded a valid signature its effect was as binding upon the insured, so far as the representations and warranties were concerned, as though he had signed it himself. The undisputed testimony shows that he had been suffering from Bright’s disease for some time, knew such to be the case, and was confined to his bed much of the time during the three months before his death, and that he died of this same disease within three days of the date of the issuance of the new contract, which was never delivered to him.

The new certificate provided it must be delivered during the lifetime of the member, while he was in good health, and that if his death resulted within a year thereafter from a disease from which he was suffering at the time of the application for and issuance of the certificate, there would be no liability under it. The undisputed testimony also shows that the policy was not delivered at all, that the insured’s health was not good at the time the application was made; that he in fact died before the policy was delivered, within two or three days of the date thereof, of the same disease from which he had long suffered. There was necessarily no liability on the part of appellant company under the new certificate, and the court should have directed a verdict in its favor accordingly.

Since it is not disputed that appellant company offered to pay and tendered the full amount due under the first or old policy “less $301.65 wrongfully deducted on account of the alleged incorrect statement of the insured’s age, the jury having made a special finding to the contrary on the point,” in discharge of its liability thereunder, judgment should have been rendered for such amount, $1,061.85 and said $301.65 wrongfully deducted as aforesaid without- penalties and attorney’s fees, the statute providing for such penalties and attorney ’s fees not being applicable in cases of this kind, and the amount sued for was not recovered anyway.

The judgment will therefore be modified, reducing it to the said amount shown to be due under the terms of the old certificate, $1,363.50, and as modified, will be affirmed. It is so ordered.


text:
    International Harvester Company of America v. McLaughlin.
    Opinion delivered January 19, 1931.

      Trimble, Trimble S McCrary, for appellant.

      Chas. A. Walls, for appellee.
   Kirby, J.,

(after stating the facts). It is insisted for appellant that the court erred in refusing to direct a verdict in its favor for the amount of the notes: sued on, and this contention must be sustained.

Appellee admitted the execution of the notes sued on, that appellant was the holder or owner thereof, and that they had not been paid by him. He alleged that the notes had been satisfied in accordance with an agreement made with the agent of appellant to return the machine and equipment purchased, that he had performed this agreement in accordance with its terms by setting aside the machine for the company, which was to send for it and return the notes to him. The burden of establishing this defense was upon appellee to prove, not only such- agreement, the performance on his part of the agreement of settlement made with the alleged agent of appellant, but also that the agent had authority to make such settlement, his authority having been denied. The general rule in cases of this kind was declared in J. F. Fargason Co. v. Dudley, 173 Ark. 1159, 294 S. W. 6, as follows:

“A person dealing with an agent is at once put upon notioe of the limitations of his authority, and must ascertain what that authority is. Such person cannot presume that such authority exists; he cannot rely upon the representations of the agent as to what his authority is; he must make inquiry and use due diligence to learn the nature and extent of such authority. If he does not, he deals with the agent at his own risk; and if the authority of such agent is disputed, it devolves upon him to prove it.” See also U. S. Bedding Co. v. Andre, 105 Ark. 113, 150 S. W. 413, 11 L. R. A. (N. S.) 1019, Ann. Cas. 1914D, 800.
. Appellee stated that he made a trade with the collector of appellant company, who agreed to take the tractor back and surrender the purchase money notes, and that -Cooper, who had sold him the machine, was with the collector at the time; said he settled without asking what authority the agent had. “I did not do anything to find out whether he had the authority to take this machine back; I didn’t care whether he had authority or not. I just presumed he had the authority. I knew Cooper had the authority, because I bought the tractor from him.”
Mr. Lusk, the collector of appellant company, who was introduced as a witness by appellee, stated he-was collector for appellant company. “I was the agent to collect notes that were past due. I have no other authority without further instructions from my superior. If I fail to collect a note, it is my duty to report to the company. I reported to the company in this ease. They declined to accept the tractor in settlement of the notes. I notified Mr. McLaughlin of this fact.”
W. 'S. Matthews stated he was “collecting manager” for appellant company with full control and jurisdiction over other territory including Arkansas; appointed Lusk traveling collector with authority limited to making collections, “and he has no further authority.” When he failed to make collection of notes, he reported to Matthew’s office. He reported when he went-to see McLaughlin that McLaughlin couldn’t pay the notes, and, if the company wouldn’t grant him an extension, he wanted to return the machine in settlement of the notes outstanding. Witness took the matter under advisement, decided they couldn’t take the machine back, and had Lusk to notify McLaughlin, which was done. “He had no authority to make any other arrangement other than collect the note. ’ ’

Thus it appears that there was no substantial evidence showing -any authority upon the part of the collector, Lusk, to make a settlement of tie notes by accepting the return of the machine; the testimony that he had no such authority being virtually undisputed. Nor does the testimony show any implied authority to receive or take the property or anything but money in. collection or payment of the notes, nor any.conduct indicating apparent authority to do so. U. S. Bedding Co. v. Andre, supra ; Rodgers v. Peckham, 120 Cal. 238, 52 Pac. 483 ; Wales Riggs Plantations v. Graves, 132 Ark. 155, 200 S. W. 804 ; Pierce v. Fioretti, 140 Ark. 306, 215 S. W. 646.

The transaction therefore could not have amounted to more than an offer on the part of McLaughlin to settle the notes by the return of the machinery, which appellant declined to accept, and notified appellee it had done so.

It follows that the court erred in not directing a verdict in favor of appellant, and the judgment is therefore reversed, and judgment will be entered here as should have been rendered in the lower court. It is so ordered.


author: Mehaeey, J.

text:
    Austin v. Dermott Canning Company.
    Opinion delivered January 19, 1931.

      Cook & Trice, for appellant.

      Golden <db Golden, John Baxter and Row-ell & Alexander, for appellee.
   Mehaeey, J.

Lowry Austin and forty-five other farmers brought suit in the Chicot Chancery Court to recover $3,659.29 due them collectively for string beans which they, under written contract, produced during the year 1928 for the Dermott Canning Company.

Judgment was asked against the Dermott Canning Company and C. R. Bates, C. B. Bowman, L. F. Bellingrath, M. C. Magness, R. W. Marks, W. A. Daniels, and W. F. Akin, as directors of the canning company. The articles of association of the Dermott Canning Company were filed May 27, 1927. The certificate showed that $20,000 capital stock had been paid in cash.

The Exchange Bank & Trust Company is the legal successor of the Bank of Dermott, and when'the ¡banks were merged, the Exchange Bank & Trust Company took over all the assets and assumed the liabilities of the Bank of Dermott.

The contract the appellants made was in the spring of 1928. They produced and delivered the beans under the contract for which they have not been paid.

W. L. Akin was president of the canning company and M. C. Magness was secretary, and appellants seek to recover against them for failure to file the annual statement required by the provisions of § 1715 of C. & M. Digest. The canning company borrowed money from the banks and executed a mortgage on all the property, and appellants contended that the vice-president and secretary, who executed the mortgage, had no authority from the directors, and for that reason the mortgage was void.

It is also contended by appellants that the canning company, while insolvent, preferred the two banks over the other creditors, and contended that they were entitled to share in the distribution of the money paid to the banks.

Lowry Austin, one of the appellants, testified in substance that he knew a little about the organization of the canning company, having been present at a meeting when the matter of organizing the company was discussed. He did not know who the incorporators were; signed a contract to grow beans in 1928 on the printed form of the company, and delivered his last beans in July, 1928; talked to Mr. Magness, secretary and treasurer of the canning company about payment, and Mr. Magness said he would be paid; made his last demand for payment in August, after the factory had shut down.

Mr. Magness made a talk at the church and stated that he wanted the people to understand that, if they would be still until the beans were canned and sold, the company would pay all claims, and this satisfied witness. Witness did not know what was done with the bean money except what Magness said. Magness said he turned the money over to the Exchange Bank & Trust Company. Magness did not say what the money was turned over to the bank for. Witness understood that Akin was president of the company and that Bowman was vice-president. Magness was cashier of the Bank of Dermott. Witness was not advised that the company was insolvent when he delivered his beans. Witness and others believed that, as soon as the beans were sold, they would get paid. He never solicited the banks to furnish money to the canning company to buy beans. He never understood that the banks were to be repaid before he was paid, but was made to understand that, as soon as the beans were sold, he would be paid; heard Magness say in the meeting there was 28,000 or 30,000 cases of beans on hand, and if they sold anything like they did the year before there would be enough to pay all the growers; that, if the people would be patient, they would get their money. Witness met Akin at a meeting, and Akin made a talk discussing the canning factory. About all he talked about was his ability to sell the goods if they would go ahead and get the factory. Akin came down to discuss the advisability of a canning plant for Dermott; did not hear him say on what conditions he would move his factory to Dermott. The meeting was before the 1927 flood. Witness did not subscribe for any stock; heard it talked that Akin would bring some junk down if the people would subscribe the stock; did not know that the canning company was having trouble financing itself. Did not know that Mr. Akin had fallen down on the financing. Magness said it was working him to death to keep enough money to pay off.

Guy Courtney testified that he is one of the plaintiffs, that he grew beans for the canning company, and never solicited either of the banks to furnish money, to. the canning company. He did not have anything to do with the organization of the canning company. He planted beans because Mr. Magness asked him to; did not know who the directors of the canning company were; had never heard of the move on the part of the farmers to get the plant located at Dermott. It was gotten np by the people of Dermott. Mr. Magness told bim there would be plenty to pay everybody. Magness never told witness anything about the banks having a big debt against the canning company. He. could not find out anything, and after he had tried for about thirty days he employed lawyers to file suit.

J. B. G-riswood testified that he grew beans for the canning company in 1928', for which he had not been paid. During* the canning* season the canning plant employed from 50 to 150 hands. Witness attended the chamber of commerce meeting in 1927 when Mr. Akin discussed the canning plant and heard Mr. Akin say how it was to be handled. Akin said he could finance the scheme if the people of Dermott would subscribe some capital stock. Akin further said that he had fifteen plants and one of them was off the railroad, and he would move it to Dermott. Witness was not told that he was to get his money first. . He was assured several different times that he would get his money. He did not know how much was advanced by the banks nor what the beans sold for. Magness told him he would get his money.

S. G. Lockhart, cashier of the Exchange Bank & Trust 'Company, testified that in the merger of the two banks his bank took over the debts and assets of the Bank of Dermott. Magness was cashier of the Bank of Dermott. The Exchange Bank & Trust Company loaned the Dermott Canning* Company approximately $11,000. Some of it was loaned in 1927 and some in 1928. The canning company was indebted to the bank at the beginning of 1928 probably $2,000. The People’s Lumber Company was planning to file a lien, and the bank furnished the money to pay off this lien; that is, furnished a part and the other bank furnished a part. The bank furnished the canning* company money to buy bean seed to plant, and after the beans were canned the bank was secured by warehouse receipts. The receipts were delivered sometime after the money was- furnished. The money furnished by the bank in 1928 to 'buy beans and cans and to buy off a lien was $11,000. The lien was about. $2,400. Both banks had been paid in full by the canning company except $2,018. Witness did not know what became of the bank statements of the canning company. The debt of $2,018 is secured by a mortgage and is past due.

C. W. Carlisle, a bookkeeper, testified that he had examined the records of the canning company on file with the chancery clerk, and that they were incomplete and jumbled up. The bank statements for 1928 and 1929 were not among the papers. The 'stock book of the canning company showed that 83 certificates had been issued for 729 shares at $25 per share. The total of all the certificates was $18,225. The tickets at the clerk’s office 'aggregated 278,998 pounds. The labor tickets for 1928 totaled $4,432.

Did not see any minute book authorizing vice-president and secretary of the canning company to execute a mortgage. Witness’ testimony was based on records filed in the clerk’s office.

J. B. 'Cobum, superintendent of the canning factory of the Drew County Cottonseed Oil Mill Company at Monticello, testified that 278,998 pounds of green beans would make about 33,620 cases of canned beans, and that the prevailing prices for canned beans from May to July, 1928, were from 85 cents to $1.20 per dozen cans, which price would include brokerage and discount. The plant at Monticello was a going concern. It failed the first year because it was a promotion scheme, organized for $5,000, with $2,400 paid in, out of which it had to buy and equip the factory and pay for the products. Then the drouth came and the crops were poor. Witness understood that his company didn’t borrow money the last year of its operation but did before that. When a canning company is short of money, it is customary for it to warehouse its products.

M. O. Magness, former cashier of the Bank of Dermott, and former secretary and treasurer of the Dermott Canning Company, testified that he met Mr. Akin when the proposition for a canning plant was started, and that Akin, at a meeting, outlined a proposition to establish a canning plant at Dermott. Akin said he had had a number of years’ experience and that he had a plant he would like to bring to Dermott; that he wanted the local people interested but he wanted control of the stock; said that his machinery was worth $15,000. A committee was appointed to look into the proposition, and thereafter there were other meetings, and the canning factory was incorporated. Mr. Akin was to furnish the machinery at $15,000; the other money was to be raised locally; witness was one of the original incorporators; the capital stock was $20,000, and that amount of money, or its value, was put into the corporation. Akin had a plan for financing the proposition which he submitted to the chamber of commerce. The canning company lost some lumber in the 1927 flood. After the flood in 1927, the factory operated and did a small amount of business. A mortgage was given to the Exchange Bank and the Bank of Dermott in April, 1928, securing a debt of $2,000 to each bank.

The canning company erected a building. It was not, paid for, and the People’s Lumber Company filed suit to enforce its lien for something like $2,300. The balance of the $4,000 represented money to buy bean seed for the year 1928. Akin got into financial difficulties, and after a lot of trouble witness and others got a bonding company to bond the warehouse so that the company could hypothecate warehouse receipts.

The beans were bought from the farmers, and they were given bean tickets. Quite a lot of beans spoiled. The receipts were handled just like cotton compress receipts. When the beans were sold, the banks would be paid equally. The borrowed money was used to pay everything but the farmers. Numbers of them came to see witness; the hanks knew that the farmers had not been paid_, but the banks had warehouse receipts and when the beans were sold the money went to pay the banks.

Akin valued his machinery at $15,000 and gave assurance that it was worth that money. The directors did not undertake to ascertain the value; could not produce the records showing what the 1928 crop brought; kept a minute book, but it was with the records; thought the stock book was properly kept. Akin was to get $10,200 stock, and he testified that the audit made by Eebsamen, Brown & Company would reflect the truth better than he could from memory j told the farmers that if they would be quiet and wait they would get their money, but that the ■banks would have to be paid first; knew before the beans were sold that the company was insolvent; borrowed some money from the banks to can beans; cans were bought in carload lots $1,400 to $1,800 per carload. Witness admitted that neither he nor the president ever filed an annual statement.

John Baxter testified that he wrote the articles of incorporation; that Akin’s stock was valued at $15,000, but Akin only wanted $10,200. Parties around Dermott subscribed and paid for $6,475. If it had all been paid in and the machinery valued correctly, there would have been $25,000 capital stock and surplus. Akin subscribed $17,500 and paid in $2,500 cash. Akin did not pay anything for his capital stock except his machinery and what other folks put in. The Arkansas Power & Light Company had $750.

L. P. Bellingrath testified that he lived in Pine Bluff and was interested in the Coca Cola business with a distributing plant at Dermott, where he owned real estate. Subscribed and paid for $500 stock in the canning company.

O. B. Bowman testified that he lived in Dermott in 1927; attended the meetings when Akin spoke and explained the canning company and situation. He paid $1,000 for stock and had the stock issued to the Dermott Grocery Company.

Board of directors accepted Akin’s word after investigating and considering the matter thoroughly; offered to sell the machinery for considerably less than $15,000.

Appellants ’ first contention is that the directors are liable upon their certificates as to the amount of the capital stock. They rely on § 1711 of C. & M. Digest and the decisions of this court construing this section. This section among other things provides that the president and directors thereof shall file the articles of association and also certificates setting forth the purposes for which such corporation is formed, the amount of its capital stock, the amount actually paid in, and the names of the stockholders and the number of shares by each respectively owned, with the county clerk of the county in which the corporation is to have its principal place of business.

Section 8 of article 12 of the Constitution of Arkansas provides: “No private corporation shall issue stocks or bonds except for money or property actually received or labor done,” etc. It will be observed that the Constitution permits the issue of stocks for money, property, or laibor done.

In the first case referred to by appellant, the court said: “The defendants knew that the certificate made and filed by them was false when they signed it. They did not know or have reason to believe that shares of stock were paid as they certified. The shares certified to be paid included their own shares, and they knew that they or any part thereof were not paid at the time the certificate was made. It was confidently believed that the shares subscribed would be paid, and in belief of that fact they filed the certificate. But good faith is not equivalent to acts done. 'The shares certified were not taken or paid when the certificate was made. The evidence shows, that defendants intentionally neglected to file the certificate required by the statute.” O’Neil v. Eagle Generator Co., 92 Ark. 416, 123 S. W. 373.

We have no such statement of facts in the instant case. The certificate shows that there was paid in $20,000, and the evidence shows that $17,550 were held by Akin, and he sold property to the corporation of practically that value. The evidence, however, shows that it was the intention of the parties when they incorporated to sell stock to others, and that when a sufficient amount of stock was sold $2,500 of the value of Akin’s property was to be returned to him, and $2,500 to remain with the company as surplus, but at the time of its organization it appears that stock to the amount of $20,000 had been paid in property and money.

Mr. Magness testified: “Q. Mr. Magness, at the time this canning factory was organized, its capital stock was to be $20,000. Was that much money, or its value in property, actually put into this corporation at that time? A. It was.”

This witness also testified that the value of Akin’s property was established at $15,000. In addition to this value of the property Magness testified that there were $6,475 paid in.

J ohn Baxter, a lawyer, testified that with the $15,000, value of the machinery, and the cash that was paid in, there was $21,475.

Mr. J. B. Coburn, superintendent of the canning factory of the Drew County 'Cottonseed Oil Mill Company at Monticello, testified that he thought he could buy similar equipment to that of the Dermott 'Canning Company for $4,000. In the first place, the preponderance of the evidence shows that the property put in was worth $15,000; one witness testified that after a careful consideration they reached the conclusion that it was worth that amount.

Capital stock issued for property for the reasonable value of the property is authorized, and is just as valid as if issued for money.

The other case referred to by appellants was where stock had been issued for notes, and the court held that notes were neither property nor money, and the stock issued for notes is void. The chancellor found that the capital stock had .been paid in, and his finding is not against a preponderance of thei evidence.

Appellants ’ next contention is that the president and secretary are liable because of their failure to make and file the certificate required under § 1715 of >C. & M. Digest. The evidence shows conclusively that this section was not complied with, and this section has been construed by the court several times.

This court said in construing the above statute: “In view of the above statute, the president of a banking corporation, when he accepts the office and enters upon his duties, impliedly undertakes, if he neglects or refuses to make the annual statement, to pay all debts of the corporation contracted during the period of such neglect or refusal. The law raises the promise on his part to the creditors of the corporation that he will pay the debts of the corporation to them contracted during the period of his neglect or refusal to comply with the statute.” Hughes v. Kelley, 95 Ark. 327, 129 S. W. 784 ; Interstate Jobbing Co. v. Velvin, 165 Ark. 263, 263 S. W. 966 ; Culberhouse v. Fischer Lime & Cement Co., 167 Ark. 201, 266 S. W. 974.

However, in this case the complaint was filed July 9, 1927. The answer of the defendant, Magness, was filed November 15, 1929. In1 the original complaint there was no mention made of director’s liabilities under this section. On the 19th day of February, 1930, there was an amended complaint filed alleging the liability of the directors for failure to file a certificate as required by § 1715 of O. & M. Digest.

It is contended by appellants that it is the settled rule of practice that when a court of equity obtains jurisdiction of a cause it will decide it for all purposes. That is true, but the jurisdiction of cause of action because of the failure to file the annual statement was not obtained by the chancery court.

The statute provides: ‘ ‘ The plaintiff may amend his complaint without leave at any time before an answer is filed and without prejudice to the proceedings already had. ” iSection 1237, C. & M. Digest.

The answer of defendant Magness, as we have said, was filed on November 15,1929, and this amendment was filed the 19th day of February, 1930. Under the statute, after the answer filed, the plaintiff had no right to amend without permission of the court.

“The court may, at any time, in furtherance of justice, and on such terms as may be proper, amend any pleadings or proceedings by adding or striking out the name of any party, or by correcting a mistake in the name of a party, or a mistake in any other respect, or by inserting’ other allegations material to the case; or, when the amendment does not change substantially the claim or defense, by conforming the pleading or proceeding to the facts proved.” C. &. M. Digest, § 1239.

The court, however, did not amend the pleadings in this case nor was the court’s permission had before filing the amendment. Not only had the answer been filed before the amendment, but much of the proof had been taken, and it is alleged by attorneys for appellees that the first knowledge they ever had of this new cause of action was when the case was called for trial.

In discussing the question of amendments, this court has said: “The statute does not, however, require the court at all stages of! the proceeding to permit the introduction of new issues in the case. That is to some extent a matter of discretion with the trial court, when the amendment does not change substantially the claim or defense, and this court will not disturb a ruling of the trial court in the exercise of that discretion when it clearly appears to have been observed.” Bluff City Lbr. Co. v. Hillson, 85 Ark. 39, 107 S. W. 161.

Of course, the amendment in the instant case did change substantially the claim of the plaintiff. It was a new cause of action.

This court also said: “Under statutes like this it has been uniformly held that no amendment can be allowed after the commencement of a trial which introduces into the case a new cause of action.” Patrick v. Whitely, 75 Ark. 465, 87 S. W. 1179.

The trial court has some discretion as to these matters, and unless its discretion is abused this court will not reverse. Amer. Bonding Co. v. Morris, 104 Ark. 276, 148 S. W. 519 ; Kempner v. Dooley, 60 Ark. 526, 31 S. W. 145 ; Mooney v. Tyler, 68 Ark. 314, 57 S. W. 1105.

It is next contended by appellants that the mortgage on the factory site was unauthorized and therefore void. The mortgage was executed by the vice-president and secretary, and the acknowledgment was regular and shows they had authority.

The burden of course was upon the persons attacking the validity of the mortgage to show that it was void, and that it was executed without authority. There is no evidence at all in the record tending to show this. One witness testified that he did not find any authority in the papers he examined. This does not prove, however, that the authority was not given.

It is true that wherever it is essential to prove a negative the burden is upon the party who alleges it unless the means of making the proof are in control of the opposite party. The production of the mortg’age itself with the proper acknowledgment was sufficient to introduce it in evidence, and it was prima facie valid.

The defendants were no more in possession or control of the means of proof than the plaintiffs were. The defendants did not have the records in their possession, and both of the officers were called as witnesses and the plaintiffs did not ask either of them whether they had such authority.

But evidence of Mr. Carlisle that there were two boxes of papers at the clerk’s office, records of various forms; that there were no adequate records to show the financial condition of the canning company; and that he did not , see any minute book authorizing the vice-president and secretary to execute a mortgage, was not sufficient to show that the mortgage was executed without authority.

It is finally contended that the preferences obtained by the banks should be set aside.

Section 1800 of O. & M. Digest provides among other things that no such preference shall be set aside unless complaint thereof be made within 90 days after the same is given or sought to ibe obtained.

The mortgage was executed on the 18th day of April, 1928, and filed for record immediately thereafter. The filing and recording of the mortgage was notice to plaintiffs as well as others, and no suit was filed until more than a year after the execution of the mortgage.

This court said in a recent case: “If this intervention, as appears to be the case from the allegations of the petition, be considered a proceeding to set aside and cancel the mortgage from the Fort Smith Spelter Company to the American Zinc Products Company as fraudulent and giving a preference to the creditors of an insolvent corporation, it must fail, as not having been commenced within 90 days after the execution of the mortgage complained of, as the law requires, since the mortgage sought to be foreclosed was recorded on June 24,1924, as alleged in the intervention, which was not filed until October 14, 1925, more .than a year after the execution and recording of the mortgage.” American Zinc Products Co. v. Sanders, 175 Ark. 133, 298 S. W. 857.

We find no error, and the decree of the chancery court is affirmed.


text:
    The Maccabees v. Gann.
    Opinion delivered January 19, 1931.

      Calhoun, Matthews £ Nelson and Ogam £ Shaver, for appellant.

      Giles Dearing, for appellee.
   Mehaeey, J.

This suit was begun by appellee to recover on two benefit certificates of $1,000 each issued on December 1, 1928, and April 1, 1929, upon the life of Opal Gann, and payable to appellee as husband of said Opal Gann. Opal Gann died on the 24th day of May, 1929, and prior to her death she had paid the assessments due upon said certificates which amounted to the sum of $13.80. The appellant filed answer in which it admitted the allegations of the complaint, but alleged that certain answers in the application of Opal Gann were warranties and were untrue.

One of the questions was No. 52 and was as follows:

“Q. Name all diseases or injuries for which you have consulted a physician for five years. A. None.”

The appellant alleged that the said Opal Gann signed and certified to said application in the following words: No. 66. “I hereby certify that I have carefully reviewed the answers to the above questions and warrant and agree that they are written as stated by me and are true in every particular”; that in the application for membership and for the second certificate the said Opal Gann, in answer to question No. 76 in said second application, stated as follows:

“Q. No. 76: I hereby certify that I have carefully reviewed the answers to the foregoing questions, 39 to 74, inclusive, and I warrant and agree that they are written as stated by me and are true in every particular, and that they supplement answers made upon my original and former examination or examinations in the Maccabees.”

Appellant further alleged that said applicant, Opal Gann, agreed to conform to the bylaws, rules, and usages of appellant’s society then in force or thereafter enacted, and the articles of association and laws of the Maccabees in force at her death together with her application and medical examination and certificate of membership shall form the basis and constitute her contract for beneficiary membership in the Maccabees; that any untrue statement or answer, or any concealment of facts in said application, would forfeit the rights of herself and beneficiary to benefits and privileges from appellant, that the said Opal Gann, in the application, when asked the question No. 52: “Q. Name all diseases or injuries for which you have consulted a physician within five years. A. None.”

Appellant states that these answers or statements were false and untrue, and that the appellant relied upon the truthfulness of them, that they were warranties, and that the benefit certificate sued on never did go in force and effect but was void.

Appellee filed a reply to this answer denying the allegations as to the warranties.

Appellant defended on the ground that the policies were void. It contends that the answers to the questions above set forth were warranties and were false. It calls attention to and relies on the case of Providence Life Assurance Society v. Reutlinger, 58 Ark. 528, 25 S. W. 835.

Appellant quotes from that case as follows: “As a general rule, a warranty is a stipulation expressly set out, or by inference incorporated, in the policy, whereby the assured agrees “that certain facts relating to the risk are or shall be true, or certain acts relating to the • same subject have been or shall be done.”

The court in that case, however, also said in speaking of warranties and representations: “When made to the insurer at or before the contract is entered into, they form a basis upon which the risks proposed to be assumed can be estimated. They operate as the inducement to the contract. Unlike a false warranty, they will not invalidate the contract, because they are untrue, unless they are material to the risks, and need only be substantially true. They' render the policy void on the ground of fraud, “while a noncompliance with a warranty operates as an express breach of the contract. * * * All reasonable doubts as to whether they be warranties or not should be resolved in favor of the assured.”

Appellant next calls attention to Metropolitan Life Ins. Co. v. Johnson, 105 Ark. 101, 150 S. W. 393. In this case the court said: “The questions propounded in the application, as set out in the statement of facts, calls for answers founded on the knowledge or belief of the applicant, and in such cases a misrepresentation or omission to answer will not avoid the policy unless wilfully or knowingly made with an attempt to deceive. ’ ’

The answers in that case were somewhat like those in this case and the declaration of the applicant at the close was very similar to the answers and declaration in the instant case. It was stated in the application: “Every answer must ¡be true or the policy will be void.”

Next case relied on by appellant is Brotherhood of American Yeomen v. Fordham, 120 Ark. 605, 180 S. W. 206. In that case the court said:

“In the beneficiary certificate before us it was agreed that the answers onade to the medical examiner should be warranties, and that any false or untrue statement or answer should operate to forfeit the rights of the beneficiary. The evidence is undisputed that the insured had a severe attack of typhoid fever in the latter part of 1905 and that disease of the heart and other diseases often result therefrom. The court therefore should have directed a verdict in favor of the insurance association.”

The appellant next quotes from and relies on Bankers’ Reserve Life Co. v. Crowley, 171 Ark. 135, 284 S. W. 4. It quotes as follows:

“A noncompliance with a warranty operates as an express breach of the contract of insurance, while false representations render the policy void on the ground of fraud.” Immediately following this statement in the opinion is the following: “The questions propounded in the application as set out above call for answers founded on the knowledge or belief of the applicant, and a misrepresentation or omission will not avoid the policy unless wilfully or knowingly made with an intent to deceive. * * *
“Ip Mutual Aid Union v. Blacknall, 129 Ark. 450, 196 S. W. 792, it was held that knowledge affecting the rights of the insured, which comes to the agent of the insurance company while he is performing the duties of his agency in receiving applications for insurance and delivering policies, becomes the knowledge of the company; and the insurance company is bound thereby, where the ag’ent who solicited the business was charged with the duty of asking the applicant questions concerning his physical condition.”

In the instant case the questions as to whether the insured had consulted a physician or physicians was not asked; the question was: “Name all diseases or injuries for which you have consulted a physician within five years” and the answer written by the agent of the company was “None.”

The undisputed proof shows that this was not the answer, but that both Gann and Mrs. Gann told the agent about being injured from lifting' a piano. The agent of the company himself Says, when asked what answer Gann gave him: “As well as I remember he advised me that she had not had any disease or accident, but he mentioned the fact that at one time, the date of which I do not recall, as he stated to me, she assisted in moving a piano. And after assisting’ in that work she had a hemorrhage, ¡but he said it did not amount to anything, as he recalls, and so he wrote in reply to the question “None.”

He was then asked: • “Did he tell you whether or not there was a doctor to treat her or consult her for that injury or illness?” He answered: “I think maybe he did.”

Then, he testified, they went to see Mrs. Gann, and he said she made about the same answers that Gann did and told him of this incident, and the witness said: “Well, Dr. Lipsey will have to review this, and he can fill in as he thinks best” and he just let the word remain there subject to Dr. Lipsey’s changing.

Whether the answers were representations or warranties is immaterial in this case because the evidence shows that the agent of the insurance company was advised that she had consulted a doctor about injury and hemorrhage. It is true that one doctor for the insurance company testified that she had tuberculosis and consulted him. This evidence, however, is contradicted by other witnesses and by the circumstances.

Then the physician representing the company examined Mrs. Gann privately, and had an opportunity- to ascertain her condition, and he says there was no one present when he made the examination, and he said that Mrs. Gann told him that she had not been treated for anything that amounted to anything, nothing worth mentioning, and he does not remember whether she told him she had consulted a physician or not. But when the insured stated to the doctor that she did not think her ailments amounted to anything, that statement in itself was sufficient to put him on notice that she had ailments, hut that in her opinion they did not amount to anything. If the company wanted to know, or he wanted to know, what the ailments were, he should have inquired. This doctor also said at the time that he examined her: “She was apparently the perfection of.health.”

Notwithstanding the assured was in excellent health at the time of the application, and notwithstanding the fact that the company’s physician examined her and was advised that she had some ailments but that .she did not think they amounted to anything, still the company seeks to avoid the policy by undertaking to enforce strictly the rule, harsh and unfair as it is, that, if the answers were not literally true, recovery cannot be had, regardless of the good faith of the applicant.

A warranty is in the nature of a condition precedent; it must appear on the face of the policy; it cannot be created or extended by construction.

“The practical operation of such literal warranties is so often harsh and unfair that courts require their existence to be evidenced clearly and unequivocally, and are not inclined to allow it to rest upon a mere verbal interpretation where a reasonable construction of a contract as a whole will authorize a different meaning. All reasonable, doubts as to whether statements inserted in or referred to in an insurance policy are warranties or representations should be resolved in favor of the insured.” Modern Woodmen of America v. Whitaker, 173 Ark. 921, 293 S. W. 1045.

The difference between warranties and representations is discussed at length in the case of Modern Woodmen of America v. Whitaker, supra, and it is unnecessary to discuss it further here. The principles announced in that case are applicable here.

For the reasons given above, instruction No. 2, objected to by appellant, was not erroneous. The appellee would have been entitled to recover in this case, however, if the answers to the questions had been warranties.

Appellant also insists that the court erred in its failure to give the following instruction requested by it: “You are told, gentlemen, as a matter of law, the policy, the application for insurance, the medical examination, the bylaws of the association, altogether create the contract sued on in this case.

A sufficient reason for refusing to give this instruction is that the bylaws make the articles of incorporation a part of the contract, and these were omitted from the requested instruction.

In addition to this, it was made perfectly clear to the jury what the contract was. Instruction No. 3 requested by defendant was properly refused. Certainly there is no evidence that the beneficiary had knowledge that the policies were procured through false warranties. All the proof shows that there was no intentional false statement, and that both the agent and the physician who made the examination were in possession of facts from which they could have learned, if they had made inquiry, everything that they now claim that they did not know.

We find no reversible error in the case, and the judgment of the circuit court is affirmed.


author: McHaney, J.

text:
    Travelers’ Building & Loan Association v. Hawkins.
    Opinion delivered January 19, 1931.

      G. O. Patterson and Rose, Hemingway, Cantrell & Loughborough, for appellant.

      Reynolds <db Mase, for appellee.
   McHaney, J.

On May 30, 1928, the appellees, being directors of the First National Bank of Clarksville, Arkansas, in order to retain the deposit of appellant in said bank, executed and delivered to it their joint and several obligation or bond, guaranteeing that said bank would “at all times” pay on the order of appellant’s agent, Thompson-Sharyer Company, any and all sums on deposit therein. On November 9, 1929, appellant’s said agent drew a check on said bank for the balance of its account, approximately $2,700, and either that day or some two or three days later mailed it to appellant at Little Rock. The account was in appellant’s name, the check was drawn by it, or in its name by its agent, and all business with said bank was transacted in its name. The check was deposited by appellant to its credit in a Little Rock bank on the morning of November 15, 1929, and shortly thereafter, on the same date, it received information by wire that the Clarksville bank was closed, and the check was returned to appellant unpaid. Thereafter payment was demanded of appellees, which they refused, and this suit followed. They defended on the ground that appellant had failed to deposit the cheek in its bank in Little Rock for collection within a reasonable time after its receipt, and that the loss it sustained was therefore caused by its own negligence. They further alleged that, if'the check had been deposited and presented for collection in due course, it would have been paid. Appellee McWilliams further defended on the ground of his mental incapacity to make a contract—that he was non compos—and that he was therefore not bound on the bond. At the conclusion of the testimony, appellant, requested a directed verdict against all appellees, except McWilliams, which the court refused, and submitted the case to the jury on appellees’ defense of negligence in depositing the check, stating, in instruction No. 1: “And the principal question that'you will have to determine in this case is whether or not the failure of the plaintiff, if they did fail, to use due diligence in cashing the check of T'hompson-Sharyer 'Company sent to them, in apt time, or in reasonable time. If they were negligent in that respect and their failure to use due diligence in depositing the check was the cause of the loss here, then your verdict should be for the defendants. The burden is upon the defendants to establish that fact.” Appellant objected and excepted to this instruction. From a judgment on verdict for appellees this appeal is prosecuted.

The court erred in refusing appellant’s request for a directed verdict against all appellees, except McWilliams, and in giving the instruction above quoted. The court and appellees were under the mistaken belief that there was a duty resting on appellant to deposit the check within a reasonable time. There is such a rule as between drawer and drawee, else the drawee sustains all loss caused by the delay. Such a section may be found in our Negotiable Instruments Act (§ 7952, O. & M. Digest) as follows: “A check must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay.” Here, however, the drawer and the drawee are one and. the same person. Appellant was simply taking the money ont of one pocket to pnt it in another. If the money had been on deposit in the name of appellant’s agents, and they had drawn a check against their own account in appellant’s favor, then in an action by appellant against the agents under the facts presented by this case there might have been occasion to submit the question of appellant’s negligence in presenting the check for payment to the .jury. But we have no such case. By accepting the deposit, the First National Bank agreed to pay the checks of appellant, drawn against said account, and signed by its agent, in Clarksville, on demand. The bond executed by appellees guaranteed that the bank would do this “at all times.” The fact that appellee failed to present the check for payment in a reasonable time (assuming it to be a fact) did not relieve the bank of its obligation to pay on demand, nor did it discharge the bank’s bondsmen after insolvency of the bank, because they agreed and bound themselves that it should do so “at all times.”

It necessarily follows that a directed verdict should have gone against all appellees, except McWilliams, and judgment will be entered here for the amount of the check, $2,618.77, with interest at 6 per cent, from November 15, 1929. As to appellee, McWilliams, the judgment will be reversed and the cause remanded for a new trial, with directions to submit to the jury only the question of his mental capacity at the time of signing the bond. The court correctly submitted this question to the jury in instruction No. 2 requested by appellant, but the court did not require the jury to make a separate finding as to his mental capacity, and we cannot determine from a general verdict for all appellees what they based it on as to McWilliams.

Other questions are discussed in appellant’s brief. The question regarding the disqualification of the juror, Dickinson, will not arise again on another trial and need not be decided. Appellee, McWilliams, having the burden to prove his incompetency, will be entitled to open and close the case. Relative to the cross-examination of Dr. R. N. Manley, we think the court erred in refusing to permit counsel for appellant to cross-examine the doctor, in the manner sought, as the testimony was both relevant and competent. By putting the doctor on the stand as a witness to testify regarding appellant’s mental condition, the statutory privilege extended to physicians by § 4149, C. & M. Digest, is waived. M. & N. A. Railroad Co. v. Daniels, 98 Ark. 352, 136 S. W. 651 ; National Annuity Assn. v. McCall, 103 Ark. 201, 146 S. W. 125.


author: Butler, J.

text:
    Blackwell Oil & Gas Company v. Maddux.
    Opinion delivered January 19, 1931.

      Reynolds ds Maze, for appellant.

      Hugh Basham, W. J. Morrow and Limos Williams, for appellee.
   Butler, J.

This case, in all its essential particulars, was before this court and here decided in the case of Blackwell Oil & Gas Company v. Maddux, 181 Ark. 726, 27 S. W. (2d) 514. Pending the appeal in that case, appellant instituted this proceeding in the chancery court setting out in its complaint the same state of facts as that involved in Blackwell Oil Gas Company v. Maddux, supra, with the additional allegation that, since the judgment of the trial court in that case, Thomas W. Flake, the defendant, against whom judgment had been rendered on service based on a warning order, had appeared, and, permission of the court having been granted, filed his answer in which he made specific denial of the allegations of the plaintiff, Maddux, and denied that he was indebted to the said plaintiff in any sum; and that the Blackwell Oil & Gras Company, as garnishee, whose indebtedness to Flake had been found to be the sum of $7,400, was ordered to pay that sum into the registry of the court, or to execute a bond conditioned that, if the appeal taken by the garnishee to the Supreme Court should be dismissed or the judgment affirmed, the garnishee would perform the orders and judgment of the court; that thereafter the answer was withdrawn, and a stipulation of settlement made between Maddux and Flake in which an indebtedness of $5,000 was acknowledged by Flake, and that judgment might be entered in favor of Maddux against Flake for that amount: that thereupon .judgment for that amount was accordingly entered; that subsequently and during the same term of the court, on motion, that judgment was canceled, and in lieu thereof a judgment by consent was entered against Flake in favor of Maddux in the sum of $7,400.

The appellant, in his complaint, further alleged that the consent judgment last named was and is a fraud upon the court and upon the complainant, and that the stipulation and consent judgment were the result of a conspiracy between Maddux and Flake and made for the purpose of defrauding the complainant, and that it had a meritorious defense if permitted to make the same, in that it was not indebted to Thomas "W. Flake in any sum whatever. To this complaint the appellee here demurred setting out a number of grounds, which demurrer was sustained by the court, from which order and judgment is this appeal.

The appellee interposed fourteen grounds of demurrer, the eighth, twelfth and fourteenth grounds being statements in varying language of the same ground as set out in the seventh, which is: “ That the complaint, on its face, shows that the complainant on the 31st day of August, 1929, filed a petition in the circuit court in and for Johnson County, seeking to avoid the .judgment which the complainant now seeks to avoid, and that the circuit court on the 12th day of December, 1929, dismissed said petition and dissolved the injunction theretofore issued,” and “Eighth: That the complaint, on its face, shows that the complainant appealed to the Supreme Court from the order dismissing the petition, and that the order of the circuit court in dismissing said petition was duly heard by the Supreme ’Court and the order of the circuit court in dismissing said petition was affirmed by the Supreme Court.” An examination of the complaint bears out the statements made in the demurrer and shows that all of the material allegations! contained therein had been heard and determined in the case heretofore adjudicated and reported in the 181 Arkansas, supra. It is a judicial axiom that a judgment or decree of a court of competent jurisdiction directly upon the point, or upon all such matters as are necessarily within the issues and might have been litigated in that suit, are conclusive between the same parties or their privies when brought into question in a subsequent suit. This principle was recognized in the case of Peay v. Duncan, 20 Ark. 85, and has been consistently followed and reaffirmed whenever the question has arisen. The last expressions on the subject are found in Robertson v. Evans, 180 Ark. 420, 21 S. W. (2d) 610, and in American Company of Ark. v. Wheeler, 181 Ark. 444, 26 S. W. (2d) 115. In the latter case it is said: “It is a rule of universal application that a question of law in issue in a former suit, and which was there judicially determined, is conclusively settled by the judgment thereon in so far as the parties to that action and persons in privity with them are concerned. The matter concluded by the judgment could not be again litigated in any future action between such parties or privies in the same court or in any other court of concurrent jurisdiction upon the same cause of action.”

The meritorious defense offered in the instant case is that Blackwell Oil & Gas Company, • garnishee in the case of Maddux v. Flake, was and is not indebted to Flake in any stun whatever. This identical question was raised in a former proceeding and the question determined adversely to the contention of the appellant here. Blackwell Oil & Gas Co. v. Maddux, 181 Ark. supra. Therefore, the doctrine announced in Peay v. Duncan, and Robertson v. Evans, and American Co. of Ark. v. Wheeler, supra, applies.

It follows that the decree of the trial court in sustaining the demurrer and dismissing the appellant’s complaint must be affirmed. It is so ordered.


author: (Butler, J.

text:
    St. Louis-San Francisco Railway Company v. Talley.
    Opinion delivered January 19, 1931.

      E. T. Miller, E. L. Westbrooke, Jr., and E. L. Westbrooke, for appellant.

      Alexander é Cooper and T. J. Crowder, for appellee.
   (Butler, J.

The appellee, a negro man, purchased a ticket at Blytheville, Arkansas, entitling him to transportation over the appellant’s line of railway to Hermondale, Missouri. Hermondale was a flag stop at which point the train was not expected to stop except for the purpose of receiving or discharging passengers. The appellee testified that, when he boarded the train of the appellant at Blytheville, he exhibited his ticket to the train porter who was standing at the door of the colored coach. It was on an evening in January, 1926, and the weather was very inclement. The train did not stop at Hermondale, but continued on to a station called Holland, three and a half miles further, at which point the appellee debarked and walked back to Hermondale and from there to his home in the country, a distance of one and a half or two and a half miles. He testified that there was no accommodation for colored people at Holland; that it was dark and cold, misting and sleeting, and that he contracted a cold from which he suffered ten or twelve days.

The train porter was called as a witness for the appellant and did not directly dispute 'the statement made by the appellee that the ticket was shown him when the appellee boarded the train, and the conductor stated that it was the rule of the railway company for passengers to show their tickets when boarding a train, but that this was sometimes not enforced when the weather was inclement as it was on this occasion. The conductor stated that he did not know that any one was to be discharged at Hermondale, and that he never saw appellee’s ticket until after the train had passed that-point. From the testimony of the conductor and that of the porter it might have been inferred that the appellee got upon the train without notifying any of the train crew as to his destination, and thus an issue of fact arose for the jury’s determination.

At the conclusion of the testimony the court instructed the jury that if, when the appellee boarded the train, he showed his ticket to an employee of the appellant stationed at the entrance of the car for the purpose of determining whether passengers getting on the train had tickets or not, the railroad company would be put on notice' of the fact that it had a passenger for Hermondale, and it was its duty to stop the train at Hermondale so that the appellee might have an opportunity to disembark, and that, if with this knowledge it failed to stop the train and carried the appellee beyond his destination, it was liable in damages to- the appellee. The converse of this instruction was given, and it is conceded that the instructions were substantially correct. The jury found for the appellee, and we are of the opinion that the testimony set out above is sufficient to sustain that finding.

The amount of damages awarded, however, appears to us to be unwarranted by any substantial evidence. There was some testimony to the effect that, when the appellee discovered he was being carried beyond Hermondale and requested that the train be stopped so that he could get off, the conductor cursed and threatened to strike him, and that the conductor was drinking. All of this testimony was denied by the conductor whose testimony was corroborated by that of the train porter. But there was no claim or verdict for punitive damages, so that the verdict must rest upon the evidence tending to establish the amount of compensatory damages. The only testimony tending to establish any injury or loss of time to the appellee was his own, and that testimony, viewed in its most favorable light, is not sufficient to support the verdict of $250, the amount assessed by the jury. It tended to show that the appellee was frightened by having to walk down the track in the darkness and that he contracted a severe cold which made him sick for ten or twelve days during which he was unable to work. He had been laid off of his regular jpb and was without employment except helping his father in a new ground for which work he received $2 per day. "We think the appellee is entitled to some compensation for his mental distress and for the ill effects occasioned by his having to walk five or six miles in the wet and cold and for the loss of his time. The damage for loss of time, however, could not have amounted to more than $25 according to appellee’s own testimony. Therefore, we are of the opinion that $75 is ample to cover the other elements of damage. The judgment of the court will be reduced here to the sum of $100, and as modified will be affirmed. It is so ordered.