author: Smith, J.,

text:
    Illinois Bankers’ Life Association v. Mann.
    Opinion delivered April 23, 1923.
    1. Insurance — mutual life insurance company — liability.— Crawford & Moses’ Dig., § 6071, exempting fraternal benefit societies from the operation of the insurance laws of the State, has no application to a mutual insurance company not coming within the definition of a fraternal benefit society, as defined by § 6068, Id.

    2. Insurance — liability of insurance company for penalty and attorney’s fee. — Crawford & Moses’ Dig., § 6155, making insurance companies liable for a penalty and attorney’s fee for failure to pay the loss within the time specified in the policy, was not intended to require insurance companies to pay anything in excess of their just liability, and no liability was incurred where the beneficiary sued for more than the face of the policy which was tendered before suit, and accepted that amount of such tender after suit brought.
    3. Insurance — breach of warranty — waiver.—Where an insurance company, in a suit upon a life insurance policy, denied liability upon the ground that ‘insured in his application had warranted that he had not associated with the consumptive persons, when his wife had died from consumption, it was competent, as a waiver of such warranty, to prove that defendant’s physician had notified defendant that insured’s wife had died from that disease.
    4. Evidence — proof of contents of letter. — Objection to the testimony of a witness for plaintiff as to contents of a letter from insurer acknowledging receipt of the medical examiner’s report is not tenable as not being the best evidence, where the letter was never in plaintiff’s possession.
    5. Insurance — insurer not bound by knowledge of stranger.— An instruction which charged an insurance company with knowledge possessed by one who, without its knowledge and without authority from it, took an application for insurance, held erroneous.
    Appeal from Clay Circuit Court, Eastern District; W. W. Bandy, Judge;
    reversed.
    STATEMENT OF FACTS.
    On Jnne 18, 1918, the appellant insurancé company issued a policy of insurance for a thousand dollars on the life of J. W. Mann, in which his son, ■ George Lemuel Mann, was named as beneficiary. On March 16, 1920,, a second policy issued on the life of J. W. Mann, this last being payable to R. H. Mann, another son.
    The insured died in June, 1921, and, appellant having refused to pay the amounts demanded by the beneficiaries, separate suits were brought, which were tried separately in the court below, but have been briefed here together.
    In the complaint filed in the suit to collect the first policy it was alleged that, on account of error as to the age of the insured, he paid an annual premium of $29.49, whereas the correct premium at the insured’s true age for a thousand dollars of insurance was $28.19; and the beneficiary, according to the terms of the policy, was entitled to the amount of insurance the premiums actually paid would.purchase according to the correct age of the insured, and that sum was alleged to be $1,046. There was a-prayer for this sum, with penalty and interest.
    - In this first case an answer was filed admitting liability for the sum of a thousand dollars, but denying liability for the additional $46, and the insurance company offered to confess judgment for the thousand dollars and all costs and interest to the date on which that pleading was filed. The offer to confess judgment was accepted, whereupon the court rendered judgment for the thousand dollars, but included in the judgment $120 as penalty and $250 as attorney’s fee, to which action an exception was duly saved. The appeal in that case questions the- right of the court to render judgment for the penalty and"the attorney’s fee, it being insisted by the insurance company that it is not liable, under our statute, for penalty and attorney’s fee, and further, that it would not be liable in this case because the beneficiary demanded a sum in excess of the amount for which the company was legally liable,, and accepted a sum less than the amount demanded. It appears that, when the proof of death was sent :;i-n-on - this- first--policy, the- insurance company tendered a--cheek for a thousand dollars in satisfaction - thereof, which was refused. :. .

      Upon the second policy the company denied liability-011 the ground that its issuance had been obtained by a' false answer in the application for the insurance to the" question, “Have you been associated with consumptive-persons?” there being a negative answer to this question,; when, in truth and in fact, the insured’s wife had con-' sumption and died of that disease on May 15, 1919. The truth of this answer was, by the terms of the application' and policy, expressly warranted. There were other assignments of error which will be discussed in the opinion. There was a verdict and judgment against the insurance company on this second policy, and an attor-ney’s fee and penalty was also assessed in that ease.

      M. P. Huddleston, for appellant.
    Appellant is a mutual insurance society, and not liable to payment of penalty and attorney’s fee's.' United Assurance Association v. Frederick, 130 Arle 12. Comes under provisions of §§4132 and 4133, C. & M."-' Digest. Penalty statute to be strictly construed.- 94 Ark. 578; 131 Ark. 419. Not liable to penalty and at7. to-rney’s fees in 84795 in any event, suit being brought, for more than amount recovered. 92 Ark. 378; 93 Ark.. 84; 135 Ark. 22. Court erred in admitting incompetent; testimony of physician. Continuance should have been granted on ground of surprise. 37 N. W. (Neb.) 308. Court erred in giving instruction numbered 1, requested by appellee, it being shown that the application for . insurance -was taken by the 'brother -of the company’s agent for him. Also in not giving instruction numbered •2, requested by appellant. Excessive attorney’s fees were allowed. 139 Ark 434; 131 Ark. 554; 88 Ark. 550,. lays down the correct rule. Both cases should be reversed, one for a new trial and the other dismissed.

      F. Weldin, for appellee.
    Appellant liable to payment of penalty and attor-'.' nev’s fees. Sec. 6155, C. & M. Digest, 347 Ark. 193';.. 140 Ark. 392; 92 Ark. 378, distinguished on facts, cases of United Assurance Association v. Frederick, 130 Ark. 12. 104 Ark. 417 not in point. Attorney’s fee not excessive. 104 Ark. 119. No error in introduction of testimony. Application being lost, secondary evidence admissible. 44 Am. Rep. 20; 37 L. R. A. (N. S.) 232; 31 Ark. 364. Dr. McGuire was the company’s agent, and his knowledge was that of the company. 71 Ark. 295; 126 Ark. 360. No reply was required filed. Secs. 1205, 1231, 0. & M. Digest; 103 Ark. 201; '84 Ark. 382. No merit in objection to testimony of Ira Merriwether, because no reply filed. No error in giving instruction numbered 1. 64 Ark. 253; 126 Ark. 350. Makes no difference whe solicited insurance, application was signed by company agent. 21 R. C. L. 919. Instruction No. 2 correct statement of the law.- 146 Ark. 140; 71 Arx. 295. Company estopped by knowledge of 'its examining physician. 140 Ark. 192; 64 Ark. 253; 101 Ark. 532. As to waiver of warranties, R. C. L. 1155, paragraphs 334, 340, 346, 357 and 359.
   Smith, J.,

(after stating the facts). Is the appellant company liable in any event for the statutory penalty and-attorney’s fee? The showing is made that appellant company is a mutual company and does business as such, but it was not shown to be a fraternal company.

In the recent case of Indiana Lumbermen’s Mutual Ins. Co. v. Meyers Stave & Mfg. Co., ante p. 199, we said: “It will be observed that the penalty statute applies in the broadest terms to suits to recover for losses by ‘fire, life, health, or accident insurance,’ but in the Anderson case, supra, we held that fraternal benefit societies were exempt from that provision, for the reason that the statute Kirby’s Digest, § 4352, as amended by act of March 28, 1917 (Crawford & Moses’ Digest, 6068 et seq.), authorizing them to do business, exempted them from the general operation of the insurance law, but the statute containing those exemptions related only to fraternal societies paying death benefits, and did not relate to fire insurance. . It follows therefore that appellant company is liable for penalty under tbe same terms as other fire insurance companies are liable therefor.”

The case of United Assurance Assn. v. Frederick, 130 Ark. 12, is cited by appellant as authority for its claim of exemption from liability for the penalty and attorney’s fee. We held in that case that the insurance company was not liable for the penalty and attorney’s fee upon the assumption that it was similar in its operation to the Knights of Maccabees, which was held not liable for penalty and attorney’s fee in the case of Knights of Maccabees v. Anderson, 104 Ark. 417.

By section 6155, C. & M. Digest, it is provided that “in all cases where loss occurs, and the fire, life, health, or accident insurance company liable therefor shall fail to pay the same within the time specified in'the policy, after demand made therefor, ’ ’ the company shall be liable for a penalty and an attorney’s fee. This apparently includes all insurance companies, and does include all companies except those exempted by other legislation from the operation of that section, and those are the companies included in § 4352, Kirby’s Digest, as amended by act of March 28, 1917, C. & M. Digest, § 6068, et seq. Indiana Lumbermen’s Mutual Ins. Co. v. Meyer Stave & Mfg. Co., supra.

As appellant does not show itself to be a fraternal society paying death benefits, it is liable for the penalty and attorney’s fee in a proper case.

Is appellant liable, under the facts stated in the first appeal, for the penalty and attorney’s fee? We answer this question in the negative, for the reason that the beneficiary in that policy demanded a sum in excess of a thousand dollars, the face of the pdlicy, and accepted in satisfaction of his demand a sum less than the amount demanded. The premium paid by the insured may have entitled his beneficiary to a sum in excess of a thousand dollars, but that fact has not been adjudicated. Upon the contrary, the judgment is for the face of the policy only, and this sum was tendered before suit. The penalty is imposed to require insurance companies to pay promptly, the sums for which they are liable. It was not intended to require insurance companies to pay anything in excess of their just liability. .So that the action of the beneficiary here in refusing to accept the face of the policy, and of demanding a sum in excess of the amount for which judgment was rendered, absolved the company from liability for the penalty and attorney’s fee, and the part of the judgment of the court awarding penalty and attorney’s fee is-reversed, and the suit therefor dismissed. Simons v. American Ry. Exp. Co., 147 Ark. 339.

In. the second appeal it is insisted that an excessive attorney’s fee was allowed. As we are reversing that judgment also upon another ground, we do not feel called upon to decide what a proper attorney’s fee would be. But if there should be a recovery in that case upon the remand of the cause, the court may look to the opinion of this court in the case of Indiana Lumbermen’s Mutual Ins. Co. v. Meyers Stave & Mfg. Co., supra, for a proper basis upon which to fix an attorney’s fee.

In the suit on the second policy the plaintiff was permitted to prove by Dr. McGuire, over the objection of the. defendant, that he (Dr. McGuire) had examined the insured, and had mailed the application and medical examination to appellant company, and that the papers which he mailed showed that the insured’s wife had died-of consumption, and then admitted testimony tending to show that. the company did receive these papers, thus bringing notice to the company that the insured’s wife had died of consumption.

The court permitted J. R. Meriwether, the soliciting agent of the company,- to testify that he saw a letter from the company addressed to Dr. Cohn, acknowledging receipt of the papers sent in by Dr. McGuire. This testimony was objected to on the ground that the loss of the> application and the medical examination and the letter to ■ Dr. Cohn was not proved. The objection to this testimony is answered by saying that it was competent for-the plaintiff to prove, if he conld do so, that the insurance company knew the facts in regard to the alleged false answer, for the purpose of showing a waiver of the warranty in that respect; and as to the failure to produce the originals of the writings referred to, it is pointed out that none of them were or had been in plaintiff’s possession.

The second policy issued on an application taken by Ira Meriwether, a brother of J. E. Meriwether, and it is admitted that Ira Meriwether was not an agent for the company, and that in taking the application he acted for his brother, J. E. Meriwether; and it was also shown that no one connected with the insurance company except J. E. Meriwether had knowledge of that fact. Dr. McGuire conducted the first medical examination for the policy sued on in the second suit, and, on account of some- delay, Dr-. Cohn also examined the applicant. The examination sent in by Dr. Cohn answered the question about insured’s association with consumptive persons in the negative, and the plaintiff proved by Ira Meriwether that he was present when this examination was made, and that he heard the questions propounded by Dr. Cohn, and that he was surprised -when no question was asked about the insured having associated with consumptive persons, but that question was not asked, and the insured -gave no answer thereto.

To charge the insurance company with responsibility for this knowledge of Ira Meriwether, an instruction numbered 1 was given, which told the jury that the person soliciting the insurance and the examining physician were both the agents of the insurance company, and that information possessed by either of them would be imputed to the company.

•This was a correct instruction so far as it related to thé examining physician, but it was erroneous -in so far as it related to the knowledge of Ira Meriwether, for1 the reason that, under the undisputed evidence," Ira Meriwether' was not the agent of the- company, and his knowledge could not therefore be imputed to the company; It is true he took the application, but it is not shown that the company ever knew that fact. He took it in the name of his brother, and the company cannot be held to have ratified his action in doing- so, for the reason that it did not know him in the transaction.

The doctrine that an insurance company becomes bound upon the acceptance of an application for insurance from an unauthorized agent is not applicable here. The question is whether the company is chargeable witli notice of the falsity of the answer to the- question in-the application because Ira Meriwether was present when the examination occurred and knew that a false answer was written down, without the knowledge of the applicant for the insurance. We answer that the company was not so chargeable, because, as we have said, Ira Meriwether was not its agent, and it did not know he had assumed to act for it. 21 E. O. L. 840.

For the error in giving- instruction numbered 1 the judgment is reversed, and the cause remanded for a new trial.


source: Caselaw Access Project

author: Smith, J.

license: Public Domain

text:
    Van Etten v. Lesser-Goldman Cotton Company.
    Opinion delivered April 23, 1923.
    1. Landlord and tenant — landlord’s lien — innocent purchaser —One who purchases cotton on which a landlord’s lien exists cannot escape liability therefor except when he has acted in good faith in making such purchase, and good faith requires a reasonable investigation of any information which he has that is calculated to warn him that he is being offered cotton upon which there exists a landlord’s lien.
    2. Landlord and tenant — landlord’s lien — innocent purchaser — evidence.—Evidence" held to justify a finding that A purchase of cotton on which a landlord’s lien existed was made in good faith and with knowledge of such lien. .
    Appeal from' Pulaski Chancery Court; John E. Martinéau. Chancellor;
    affirmed.

      John W. Newman, for appellant.
    Appellee’s agent purchased the cotton on which there was a landlord’s lien from appellant’s tenants after information that put it upon notice that the rent was unpaid. 132 Ark. 592; 56 Ark. 499; 103 Ark. 91; 69 Ark. 306.

      Sherrill £ Mallory, for appellee.
    Appellee purchased the cotton in the usual course of business, in the open market, without any knowledge of its being subject to a landlord’s lien, and is not liable to the landlord therefor at all. Case of 132 Ark. 592, not applicable, being governed by the laws of Mississippi. Before appellee can be charged with the landlord’s lien on this cotton, it must be shown he had notice of the lieu at the time he purchased the cotton. 60 Ark. 357; 67 Ark. 352; 57 Ark. 158. There was no such proof. Appellant consented to the sale of the cotton. 76 Ark. 582.
   Smith, J.

Appellant rented his farm for the year 1920 for the sum of $499.12 to some colored tenants named McGuire, who did not pay any of the rent. These tenants raised eleven bales of cotton on appellant’s land, and sold eight of them to John Adkins, a buyer for appellee, the Lesser-Goldman Cotton Company. It does not appear whether the cotton bought by Adkins brought enough to pay the rent, but appellee was sued for the rent on the theory that the cotton bought exceeded the rent, and that appellee had become liable for the rent by purchasing the cotton. Appellee admitted buying the cotton, but alleged that its agent bought the cotton in the open market, in the usual course of business, and without actual knowledge that there was a landlord’s lien thereon. The court dismissed the bill as being without equity, and this appeal is from that decree.

It is obvious, from the above statement of the issues, that the question in the case is whether Adkins knew there was a lien on the cotton, or was in possession of facts from which knowledge would be imputed to him. For the law is that, while one buying cotton subject to a landlord’s- lien is not liable as for conversion if he has.,no knowledge of the lien, yet ifthe,■.purchaser- is in possession of facts sufficient to.- put -him-upon notice that the cotton is subject to -the-lien' of ,-'a;-. landlord, good faith requires him to pursue the, inquiry.' to the extent of investigating the facts of which he has-knowledge, and, if reasonable diligence in the investigation of these facts would have led to the knowledge of the actual existence of the lien, then the purchaser is, liable for a conversion, just as he would have been had, he possessed the actual knowledge. The act of purchasring the cotton destroys the landlord’s lien, and. pne.pan-. not do this and escape liability for so doing except, when he has acted in good faith in making the purchase, and good faith requires a reasonable investigation .of any. information of which the purchaser has., possession calculated to warn him that he is being offered cotton upon which there exists a landlord’s lien. Jacobson v. Atkins, 103 Ark. 91; Murphy v. Myar, 95 Ark. 37; Neal v. Brandon, 70 Ark. 79; Merchants & Planters’ Bank v. Meyer, 56 Ark. 499; May v. McGaughey, 60 Ark. 357; Hunter v. Matthews, 67 Ark. 362; Bledsoe v. Mitchell, 52 Ark. 158.

Appellant cites and relies upon' the case of Security Bank & Trust Co. v. Bond, 132 Ark. 592. But the:, doctrine of that case is not applicable-.here,. for the:rea-' son that it was governed by the laws of the State of: Mississippi, under which a landlord has a lien on 'all-products raised on his premises against a third per-, son who receives such- products -from the tenant and converts the same, either with or without notice, -of the existence of the lien, and, as we-have just said; there is' no such liability under the laws of this State,--unless the purchaser has knowledge, actual or constructive,, of the existence of the lien. - - .-.

. .The testimony may be summarized, as follows': TheMeGuires had' been renting'the land' for' fifteen" •‘■drtwenty. years; and Adkins' had- been buying" bbttbh ■£or appellee in the neighborhood for twelve -or fifteen years,' and liad bought cotton from the McGuires during this time, and no question had been raised about their au-. . thority to sell it.

U. L. Craven, appellant’s agent, learned that the McGuires had sold two bales of cotton, and this agent went to the office of the Rose City Mercantile Company, hereinafter referred to' as the mercantile company, and notified the persons in charge of that business that the McGuires had not paid the rent, and that he was claiming a lien upon their cotton. Craven also wrote the mercantile company a letter to that effect. Thereafter Adkins bought six more bales of cotton from the McGuires, and this was paid for at the office of the mercantile company. Upon being advised of this fact, Craven demanded the rent of Adkins, who refused to pay it, whereupon this, suit was brought. Thereafter a representative of appellee wrote Craven advising him that the McGuires had other.cotton on the place out of which he could make a part, at least, of the rent, but no action was taken in regard to that cotton.

. Adkins testified on behalf of appellee, and gave the following testimony: “Q. Is there any connection between the Rose City Mercantile Company and the Lesser-Goldman Cotton Company in your work down there? A. No sir, none at all. Q. Did Mr. Craven ever give you any notice that he held a lien on the McGuire cotton and ask you — ? A. No sir. Q. Or any one else give you any notice? A. No sir.” And upon his cross-examination he testified as follows: “Q. You say you didn’t know whether this cotton came off of rented land or not? A. No sir. Q. You knew the McGuires rented some of the land, didn’t you? A. No sir. I. kñew probably they were renting land, but I didn’t know who they-were renting from. Q. You knew they were renting from somebody? A. No, I didn’t know that. I didn’t know whether they were renting any land or not. Q. You half-way believed it, didn’t you? A. No; I didn’t know. I didn’t give it a thought. Q. Did you know they owned some of the land themselves? A. I think so, yes. Q. Did you think they owned enough to raise twelve bales of cotton on it? A. I didn’t know how many they raised. Q. And didn’t care? A. No. Q. Do you know where the Van Etten place is? A. I know where part of it is; I don’t know where all of it is located. Q. Do you know what land is rented out there and what’s- — ? A. Not altogether, no. Q. But pretty well? A. Yes, I know some that rent land and some that don’t. Q. How long have you been engaged in business in that neighborhood? A. I have been buying cotton there 12 or 15 years. Q. In 1920 you stayed most of the time in the Bose City Mercantile Company, didn’t you? A. No time at all. Q. You never were in there? A. Oh, I would go in there, maybe, once or twice a day, I don’t know, but I didn’t have any connection with it in the way of working there.” And on his redirect examination he testified as follows: “Q. When you paid off over there, you paid off just for the convenience of your customers, didn’t you? A. I gave a ticket, and they could go anywhere they wanted to go and get the money. Q. In other words, you gave a due-bill for the amount due, and they could cash it anywhere they wanted? A. Yes sir. Q. Did they ever cash it at other places? A. Quite often at other places.”

It was shown that appellee had an office across the street from the mercantile company’s on which its name appeared, together with that of Adkins as its agent, but he appears when buying cotton to have spent most of his time on the streets.

In addition to the land rented from appellant, the McGuires also owned a forty-acre tract of land, on a portion of which they raised cotton, and it had been their practice for a number of years to sell Adkins the cotton from both farms, just as was done in 1920, and no question had ever before been raised about their right to do so, it having been the practice of the McGuires to deposit the rent in bank to appellant’s credit, but Adkins had no knowledge of that fact.

The case was heard by the court on oral testimony, and we are unable to say that the finding that appellee was an innocent purchaser is contrary to the preponderance of the evidence.

We do not think Adkins’ answers set out above indicated any lack of good faith in pursuing the inquiry, suggested by the facts within his possession. It is true he might, by inquiry of the employees of the mercantile company, have ascertained, that the McGuires were tenants and had not paid their rent, but there is nothing in the record to impose that duty on Adkins. There was no connection between that company and appellee, and no one connected with the mercantile company communicated to Adkins what Craven had said to the employees of that company.

Adkins bought in open market, in the usual course of business, from the McGuires, as he had done for a number of years without any question beinp- rape-''1, and if we credit his testimony, as the court below did — and we see no reason for not doing so — we are unable to find that he did not buy the cotton in good faith and without knowledge of appellant’s lien.

The decree of the court below must therefore be affirmed.


author: Humphreys, J.

text:
    Pruitt v. International Order of Twelve, Knights & Daughters of Tabor.
    Opinion delivered April 23, 1923.
    1, Judgment — insufficient service — remedy.—A court having jurisdiction of the subject-matter of an action has inherent power to determine the sufficiency of the service upon which a - default judgment was rendered, and the proper remedy to attack the • judgment on the ground of insufficient service is by motion to vacate the judgment, and not toy certiorari to quash it.

      2. Judgment — res judicata. — Where defendant moved to vacate a judgment for insufficient service, and his motion was denied, he is concluded by such judgment, not having appealed therefrom.
    S. • Certiorari — loss op appeal. — Certiorari ought not to issue in any ease where there is or has been a right of appeal, unless the , right of appeal has been lost without fault of the petitioner. '
    Appeal from Pulaski Circuit Court, Second Division; A. F. House, Judg-e;
    reversed.

      John C. Sheffield, and Sherrill & Mallory, for appellant.
    The municipal court had jurisdiction of the subject-matter of the original judgment and the right to determine the sufficiency of the service upon appellee as defendant in the suit. Defendant was exempted by § 6117, C. & M. Digest, from the provisions of §§ 6068-6120, and not entitled to 30 days in which to answer, and did not appeal from the judgment so holding. Could be summoned by service on Insurance Commissioner. 45 Ark. 59; 71 Ark. 145; 24 Ark. 371; 91 Ark. 141. Cannot ratify and repudiate same transaction. 47 Ark. 301; 47 Ark. 317. Nor contend for a different theory of the case from that held in the trial court. 64 Ark. 253. Defendant entered appearance by filing motion to vacate judgment anyway. 63 Miss. 1; 74 Wis. 556; 7 Ark. 159; 143 Ark. 506; 3 Cyc. 504; 95 Ark. 302; 85 Ark. 431; 87 Ark. 230 j 101 Ark. 124. Did not move with sufficient diligence had certiorari been proper remedy. 89 Ark. 604; 130 Ark.' 42. Lost right of appeal by its own negligence. 37 Ark. 321; 25 Ark. 518; 3 Ark. 566; 147 Ark. 581; § 6289, C. & M. Digest; 32-Ark. 717.

      Scipio A. Jones, G. W. Hendricks and J. H. Carmichael, for appellee.
    judgment by default void rendered in 21 days after service of summons on Insurance Commissioner. Sec. 6238, C. & M. Digest; act 462 Acts of 1917, § 17. Piling-motion to vacate judgment and appealing therein could not validate void judgment. German Investment Co. v. Westbrook, 101 Ark. 124, and Holloway v. Holloway,
      85 Ark. 431, are not to the contrary. Motion to vacate not having been filed in ten days, court had no jurisdiction to hear it. Sec. 6449, C. & M. Digest; 148 Ark. 22.
    The judgment being void in its face, no delay on part of appellee would give it life. 15 R. C. L. § 146, Judgments.
   Humphreys, J.

Appellant procured a judgment on February 24, 1921, against appellee, by default, in the second division of the municipal court of Little Rock, Arkansas, which was a court of record, for $300, upon a life insurance policy. The summons was served upon Bruce T. Bullion, State Insurance Commissioner, who had been given a power of attorney by said appellee to receive service of legal process in any action which might be brought against it in Arkansas. No appeal was ever prosecuted from the judgment. At a subsequent term of said court appellee filed a motion to vacate said judgment upon the ground that the summons should have been served upon the proper official of said company, instead of said commissioner, alleging that, at the time the summons was issued and served, it was not within the class of fraternal benefit societies governed by act 462, Acts of 1917, Crawford & Moses’ Digest, §§ 6068-6120 inclusive, designating said Insurance Commissioner the proper agent for service upon it. The municipal court heard and overruled the motion, and, upon appeal to the circuit court, said motion was again heard and overruled. The judgment dismissing the motion became final on the 31st day of October, 1921, and no appeal was ever prosecuted from it. Instead appellee, on' the 18th day of January, 1922, sought to quash the original judgment for $300 rendered by default on the policy, by writ of certiorari sued'out of the circuit court. Appellant interposed the defense to the petition for writ of certiorari-that said circuit court had adjudicated the sufficiency of the service on sai'd motion to' vacate the original judgment. The cause.-was heard upon the- -record of the municipal court- brought up by the writ of certiorari, and. the response filed thereto, embracing exhibits of the proceedings on the motion to vacate the judgment aforesaid. The court sustained the petition for the writ of certiorari by quashing the default judgment rendered by the municipal court on February 4, 1921, from which is this appeal. Appellant contends that the trial court' should have sustained his plea of res judicata, and should have denied the writ upon the ground that appellee failed to apply for said writ within a reasonable time after the judgment sought to be set aside became final. Appellee insists that the municipal court had no jurisdiction to hear and determine the motion filed by it to quash the judgment, and for that reason it was not bound by the adverse adjudication to it on said motion. The subject-matter of the original judgment was clearly within the jurisdiction of the municipal court. This being the case, it follows that the court liad jurisdiction to determine the sufficiency of the service upon appellee, who was a party defendant m the suit. Courts having jurisdiction over the subject-matter of any litigation necessarily have inherent power to determine when the parties thereto have been properly brought into court. Appellee, by petition, obtained a bearing and adjudication of the sufficiency of the service upon which the default judgment was rendered. In view of the fact that the court had jurisdiction of the subject-matter involved in the suit in which default judgment was rendered, appellee adopted, in the first instance, the proper remedy to attack the judgment on the alleged ground of insufficient service, and is therefore, precluded by the judgment, not having appealed from same. A motion to vacate the judgment, and not certiorari to quash it, was the proper remedy. Brown & Hackney, Inc., v. Stephenson, 157 Ark. 470.

And again, appellee did not move with sufficient diligence had the proper remedy been by certiorari. Appellee- knew of the pendency of the suit .before judgment was rendered against it, and after the expiration of the time in which to appeal appellee waited about a year before petitioning for the writ of certiorari. This court is committed to the doctrine that “certiorari ought not to issue in any case when there is or has been a right of appeal, unless the right of appeal has been lost without fault of the petitioner.” Payne v. McCabe, 37 Ark. 318; Moore v. Turner, 43 Ark. 243; Ex parte Pierce, 44 Ark. 509; Burgett v. Apperson, 52 Ark. 213.

For the error indicated the judgment is reversed, and the cause remanded, with direction to quash the writ of certiorari.


text:
    Johnson v. Baum.
    Opinion delivered April 23, 1923.
    1. Judicial sales — conditional bid. — As a warranty of title does not accompany a judicial sale, a bid at such a sale upon condition that the title was good was invalid.
    2. Judicial sales — delay for examination of title. — A judicial sale should not be delayed to enable a bidder to examine the abstract of title of the property, as prospective purchasers should make such investigation before the hour of sale.
    3. Judicial sale — confirmation.—A decree confirming a mortgage foreclosure sale of land held supported by the evidence.
    4. Infants — authority of guardian ad litem — consent decree.— A guardian ad litem has no right to consent to a decree against infant heirs.
    5. Judicial sale — irregularity.—A judicial sale made under an erroneous decree is not void where the property is bought by a third person, and the decree can be corrected without interfering with the sale.
    Appeal from Pulaski Chancery Court; John E. Martineau, Chancellor;
    reversed in part.

      Saye S Sage, for appellant.
    The foreclosure decree should be modified. The court erred in allowing credit for the $727.82 claimed by Morris & High for levee taxes paid, the decree therefor declaring a lien, being by consent, with no proof offered and no defense for the minors by guardian ad litem. The final decree erroneously included said amount. 3 Pomeroy’s Equity Jurisprudence, § 1305.; 98 Am. Dec. 733; 44 L. R. A. (N. S.) 1182; 120 N. E. (111.) 542; 60 Ark. 526; 44 Ark. 244; 39 Ark. 235; 42 Ark. 227; 107 Ark. 1, 154, S. W. 947. The amount of the decree must be reduced accordingly. 137 Ark. 58, 207 S. W. 215. The decree of confirmation should be reversed, the owner of the property or those interested in it having-been confused and misled by the manner of conducting the sale. 11 S. E. 508. I'Ve are not unmindful of decisions in 96 Va. 603, 70 A. S. R. 882; 65 Ark. 152, 67 A. S. R. 910; 131 Ark. 397, Ann. Cas. 1918-D, 433, and 237 Mo. 496, 141 S. W. 650. The lands did not, because of the confusing and misleading- manner of the sale, bring-their true, market value. The administrator was making strenuous efforts to get title to the lands, and liad an option from Baum, the bidder, to purchase it for the amount of his debt. 135 Ark. 206, 205 S. W. 113. This agreement between Baum and Leach, the administrator, deprived the estate of the full value of the lands, and the rights of infants were involved. 130 N. W. (Wis.) 952, 112 S. W. 613; 51 A. S. R. 529; 109 S. E. 724; 16 R. C. [L. 97, § 70; 24 Ark. 432; 60 Ark. 526; 107 Ark. 1; 137 Ark. 58; 14 R. C. L. 267, § 42; 2 Paige (N. Y.) 99; 84 Ky. 685, 16 R. C. L. 90, § 65, 97,.§ 71. Decree of foreclosure should be reduced to amount of plaintiff’s debt and interest, and the decree of confirmation reversed.

      John F. Clifford, for appellee.
    No error committed in entering the consent decree permitting the redemption of lands from Morris & High for amount of levee taxes paid and declaring a lien therefor against all parties in interest. Cases cited by appellant not in point. Foreclosure and sale for'taxes and purchase by Morris & High was in the Pulaski Chancery Court before the chancellor who rendered decree herein, and it was only a detail of procedure as to how the tax feature should be worked out. 107 Ark. ’58. There was nothing fraudulent shown about the sale nor that it was.for an inadequate price. 77 Ark. 219.
   Humphreys, J.

This is an appeal from a decree foreclosing a mortgage for $4,355.19, and a tax lien for $727.82 in favor of appellee, Robert Baum, against the following described real estate in Pulaski County, State of Arkansas, to-wit: W% of SW% of section 3, and the SE14 of the SE]4 of section 3, township 2 south, range 10 west, and the SW14 of the SW]4 of section 34, township 1 south, range 10 west, containing in all 160 acres, more or less. The mortgage was executed by M. J. C. Johnson, Alice Johnson, his wife, and Maria Johnson, his mother. M. J. C. Johnson owned the fee in the land, subject to the dower interest of his. mother. Prior to the institution of the foreclosure proceedings M. J. C. Johnson died intestate, leaving as his survivors his wife, Alice Johnson, two minor sons by her, Herman Johnson and Jackson Johnson, and three adult children by Anna Johnson Jackson, his former wife, whose names are Willie Lue Taylor, Maria S. Johnson and Eugene Johnson. The three latter named heirs are nonresidents of the State of Arkansas. The lands were forfeited for the nonpayment of taxes due Plum Bayou Levee District for the year 1910, and were sold and purchased by said district. After the expiration of the time for redemption, same being five years, Morris & High obtained a deed to the land from the district, and subsequently paid the taxes on a part of it. M. J. C. Johnson died in the month of November, 1920, and soon thereafter M. L. Leach was appointed administrator of his estate. In May, 1921, Robert Baum commenced foreclosure proceedings in the Pulaski Chancery. Court, and made Maria Johnson, the mother of M. J. C. Johnson, Alice Johnson, his surviving wife, all of his heirs, M. L. Leach, his administrator, Gr. W. Morris and Ben D.' High; trading as Morris & High, and others who claimed lease-' hold interests in the land, parties defendant in the suit. Personal service was obtained upon all the residents. and constructive service upon the nonresidents. After service was obtained George Vaughan, a regular practicing attorney in said court, was appointed guardian ad litem for the minor children,- Herman Johnson and Jackson Johnson, and an attorney ad litem was appointed to represent the nonresident adult heirs. Answers were filed 'by the resident adult heirs, the guardian of the minor heirs and the attorney ad litem for the nonresidents, denying seriatim the allegations in the bill of Robt. Baum. Morris & High filed an answer and crossbill setting up title to the land under and by virtue of purchase from the Plum Bayou Levee District, which in turn had purchased it at the tax forfeiture sale for the unpaid taxes for the year 1910. Maria Johnson and all the heirs, including the minors, filed answers denying the validity of the deed obtained by Morris & High from the levee district, and denying that they were entitled to any sum on account of the payment of taxes upon the land. The guardian ad litem for the minors did not file a separate answer for them to the crossbill of Morris & High, but they were included in the answers filed by the adult heirs and their grandmother, through their attorneys, who set up every defense to the cross-bill which could have been set up by the guardian ad litem, had he filed separate answers for his wards. Before any evidence had been taken in the case, a compromise consent decree was entered by the court canceling the deed from the Plum Bayou Levee District to Morris & High and declaring a paramount lien against the land in their favor for $727.82 on account of taxes claimed to have been paid by them on the land. Robert Baum immediately purchased their lien, and'included the amount in his bill for foreclosure. The cause was then submitted to the court on the pleadings and testimony, which resulted in a lien being declared against the land in favor of Robert Baum of $5,083.01, and an order for the sale of the land to satisfy said lien. Pursuant to the order of sale, the land was advertised and sold by the commissioner at public auction to C. M. Flynn for $7,025, who made the highest unconditional bid therefor. It was then reported to the court, whereupon Alice Johnson, Anna Johnson Jackson, Eugene Johnson, Willie Lue Taylor, Jackson Johnson and Herman Johnson, minors, by their mother, Alice Johnson, filed exceptions thereto upon the alleged ground that the property sold for only one-half its value on account of the misconduct of M. L. Leach, the administrator, who discouraged bidders in order that he might buy it himself for a nominal sum, and of confusion arising from the manner in which bids were made. An additional exception was filed to the sale, in behalf of the minors, upon the ground that it was error to declare a lien against the lands for taxes in favor of Morris & High without first taking proof of the amount of taxes paid by them. Exceptions were also filed to' the sale by M. L. Leach, the administrator, upon the following grounds: first, that bidders were prevented from attending the sale because notice thereof was not published in the Arkansas Gazette; second, because the sale was postponed two or three times; and third, because the manner in which the purchaser made his bids confused other bidders and prevented them from bidding. The exceptions to the confirmation of the sale were heard by the court upon testimony adduced by the respective parties, which resulted in a confirmation of the sale.

The purpose of this appeal is to assail the decree confirming the sale and to reduce the lien by deducting therefrom the amount, $727.82, claimed by Morris & High on account of taxes paid by them. The record reflects that the' notice of sale was published in accordance with law, and the postponement thereof on- two occasions was for legitimate causes. We have carefully read and considered the testimony relative to the manner in which the sale was conducted, and the market value of the land. According to the weight of the evidence, the fair market value of the land did not materially exceed tlie amount it brought. It is true, a . bid- of $7,500 was made by -W.- E. Cox upon condition- that the title'was good; .-A warranty of title does not-, accompany a judicial sale, so it was not incumbent .-upon tjie commissioner to entertain and report a conditional bid of that character. It seems that the administrator had procured an abstract, which Cox made' a request to inspect. The administrator refused the request unless Cox would pay for the abstract. Even if the request had been granted, the commissioner could not be expected to delay the sale and other -bidders present expected to wait for Cox to examine the abstract. Such a rule would unnecessarily delay sales and inconvenience other bidders. In -fact, such a proceeding might cause other bidders to leave and might create disputes concerning the title which would prevent the sale altogether. The better rule is to require prospective purchasers to make such investigation of the title as they desire before the hour -of sale. It seems that some confusion arose growing out of whether Cox had a right to make a conditional -bid, and out of the fact .that the purchaser stood on the opposite side of the street and instructed his agents the amounts they should bid at intervals during the progress of the sale. When the bids made by the purchaser’s agent were raised, they would cross the street, consult the purchaser, return and raise the bid. /The argument growing out of Cox’s request to make á conditional bid resulted in the refusal of the commissioner to accept it. We do not see how this could have-misled or confused any bidder present. We are also unable to- see how the -consultation between the purchaser and his agents could have misled or confused, any one. The bidder does not have to be personally present; and it was certainly his 'right to .instruct his agents from time to time on amounts to. bid. ' Several of the parties present claimed that they were unable-to understand what was- being done as1 the sale- progressed, and who the successful • biddex’-. was. • klatti-é Powell testified that she. was present and intended to hid as -much as $i8,000 for the land, and had understood from the son' of Robert Baum that his father was going to bid' for her. Baum bid about the amount of his claim hgáinst the property, and stopped. The testimony reveals that he made this bid for himself with thé intention of afterwards selling to M. L. Leach. There had at least been some tentative arrangement to that effect. Mattie Powell did not request Mr. Baum, during the progress of the sale, to bid for her, nor did she attempt to make a bid herself. In fact, her ability to bid more than $7,000 was not definitely shown. She had only $1,000; of her own, and made arrangements to borrow $6,000 on the land if she bought it. Her statement that she became confused on account of the manner in which •the. sale .was conducted had little merit in it, for the commissioner testified that he cried the sale deliberately and c-onducted it in such manner that anybody .could understand the entire proceedings. He was corroborated in this statement by ' several parties who were present. There is nothing tangible in the evidence upon which to base a finding that the sale was fraudulent, or that, the property sold for an inadequate price.

"■ ■.The court, however, erred in allowing appellee, Robert Baum, a credit for $727.82 on account of taxes alleged to have been paid on the land by Morris - & High. It was improper to charge the land of minors With taxes without proper proof showing that Morris &' High had paid them, and the amount thereof. Their land could not be charged with the taxes by a compromise agreement or a consent decree, as the guardian ad litem had no right to make that concession. Frazier v Frazier, 137 Ark. 58. It does not follow, however, that the inclusion" of-the-charge for taxes in the lien avoids the sale. A judicial sale made under an erroneous 'decree is not void where the property is bought by a third person, .and when: the decree can be corrected without interfering with the sale. In the instant ease.the error can be eliminated from the lien upon proper proof. For this purpose the decree will be reversed in so far as it embraces in the lien an allowance for taxes in the sum of $727.82, and will be remanded for proof as to the correctness of that item. In all other respects the decree is affirmed.


author: McCulloch, C. J.

text:
    Grooms v. Minton.
    Opinion delivered April 30, 1923.
    Mines and minerals — consideration for oil and gas lease-t-forfeiture. — Where oil and gas lease for a period of ten years recited a consideration of $1 and that the lease should be void if no prospecting or drilling for oil, gas, lignite or coal, etc., is commenced in the above-mentioned territory within a period of five years, the territory mentioned being- wholly undeveloped, the contract is valid and based upon a sufficient consideration, and no forfeiture can be enforced on account of the lessee’s inactivity within five years.
    Appeal from Poinsett Chancery Court; Archer Wheatley, Chancellor;
    reversed.

      Bloch £ Kirsch and Fuhr £ Futrell, for appellant.
    There can be no implied covenant to begin development in a reasonable time, the lease expressly specifying the time therefor. The cases of 97 Ark. 167 and 150 Ark. 161 have no application, there being no such provision in the leases therein passed upon. The lease herein is similar in most respects to those construed in 139 Ark. 580; 145 Ark. 3.10; 145-Ark. 556, but does not contain a surrender clause, as did some of the leases in said cases. The expressed consideration of $1 is sufficient to uphold the lease. 237 U. S. 101; 106 Fed. 764, 45 C. C. A. 604; 90 Pac. (Kan.) 803, 12 L. R. A. (N. S.) 745; 145 Ark. 310; 3 A. L. R. (Okla.) 352, notes 381, 382; 239 Fed. (Ky.) 298.

      Irving M. Greer, for appellee.
    The chancellor was right in his findings as to the implied covenant to begin development and the consideration expressed. 97 Ark. 167. See also 99 Fed. 606, 40 C. C. A. 12, 48 L. R. A. 320; 150 Ark. 161; 3 A. L. R. 352. The lessees failed to carry out the covenant in the lease, and the $1 consideration recited without payment of a rental or other consideration moving from lessee to the lessors is insufficient to support the lease contract. No operations begun on any of the leased lands, nor any preparation made therefor. Court should determine what is a reasonable time for beginning operations from all the facts and circumstances. 97 Ark. 167; 114 Ark. 419; 99 Fed. 606. Thornton’s “The Law Relating to Oil & Gas,” § 127. The lease herein is so utterly different from those construed in the cases cited by appellant on the point of insufficient consideration as not to be applicable or in point. - In none of said cases did the court hold that one dollar, the nominal consideration alone, would be sufficient. Held insufficient. 97 Ark. 167; 114 Ark. 419; 151 Ark. 161; 3 A. L. R. 352. Lease void for want of mutuality. 57 C. C. A. 428. Lessee cannot hold the lease for purely speculative purposes. Mansfield Gas Go. v. Alexander, 97 Ark. 167. Drilling of a well on other lands has no effect to relieve lessee from obligation to begin operations on lands leased herein.
   McCulloch, C. J.

Appellees are the owners of a tract of land, containing 40 acres, situated near Harrisburg, in Poinsett County, and on August 7, 1919, they executed to a group of persons residing in that portion of the State, who are the appellants in the present case, a mineral lease of the land, authorizing the exploration for and development and production of oil, gas, coal and other minerals.

The lease contract is, in most respects, similar to the form generally in use and like those involved in other cases decided by this court, with the exception of a certain clause, which will be set forth later. The contract provided, in substance, that for the consideration of the sum of one dollar, paid by the lessees, and in further consideration of the covenants “hereinafter contained on the part of the second parties,” the premises are leased for a term of ten years for the purpose of mining for oil, gas, coal and other minerals, and removing the same when mined. The privilege is given to lay pipe lines and place machinery to be used in mining, and the lessees are required to pay royalty upon the production of any of the minerals mentioned. There are other provisions with reference to the manner in which the pipes should be laid and the location of drilling operations as to distance from houses and barns. Two of the clauses of the contract read as follows:

“It is agreed that this'lease shall remain in force for a term of ten years from this date, and as long thereafter as oil, gas or coal, or either of them, is produced therefrom by the parties of the second part, their successors or assigns.”

“It being in the minds of the parties thereto that there has been no prospecting for oil, gas or coal, or lignite, etc., in Northeast Arkansas in many years, and may not be for many years to come, unless extraordinary inducements are made; therefore, this lease is given partly to encourage or make possible the prospecting for oil, gas, coal, etc., in this territory. It is understood and agreed that, if no prospecting or drilling for oil, gas, lignite- or coal, etc., is commenced in the above mentioned territory within a period of five years from this date, this lease will be null and void; provided, however, that this lease may be kept in force for a period of two years longer by the payment to first parties by second parties or their successors, annually, in advance, ground rent at the rate of ten cents per acre per annum, which the first parties hereby bind themselves to accept when tendered; and it is agreed that the commencing of a well as above provided shall be and operate as a full liquidation of all rent, under this provision during the remainder of the term of this lease; and it is agreed that the commencing of a well as above provided shall be considered as a part consideration for ¿his lease.”

Appellants acquired leases covering other lands in the same locality, and later subleased a considerable quantity of the lands to one Scott under a special contract whereby the latter agreed to begin drilling, and, pursuant to the contract, Scott drilled one or more wells, which produced nothing, and proved to be dry holes. The land leased from appellees was not, however, embraced in the lease to Scott, and no mining or drilling operations have been conducted on that land. It is conceded that there has been no discovery of oil, gas or other minerals in that portion of the State, and that the territory is wholly undeveloped as to the discovery and production of minerals.

Appellees instituted the present action against appellants in the. chancery court of Poinsett County on April 6, 1921, seeking a cancellation of the lease on the ground that its execution was procured by fraudulent misrepresentations concerning the intention of the lessees with respect to the time for drilling an oil or gas well on the land in question, and also on the ground that there had been a forfeiture on account of the failure of appellants to begin drilling a well on the land within a reasonable time. Appellants answered, denying the charges of fraud arid disputing the alleged ground of forfeiture.

The chancellor held in the final decree that, notwithstanding the specifications of the contract, there was an implied covenant on the part of appellants, as lessees, to begin operations on the land in question within a reasonable time, and that this covenant had not been performed by commencing operations in apt time, and cancellation of the lease was decreed on that ground. There were no findings made by the chancellor with respect to the charges of fraud in procuring the lease. We have, however, fully considered the testimony on the issue as to fraudulent misrepresentations, and find that the charges of fraud are not sustained by the evidence.

The decree is defended by counsel for appellee on the ground that there is no mutuality in the covenants contained in the contract, that the consideration of the payment of one dollar is not sufficient to support the contract, and that the decree for cancellation was justified on that ground. The validity of the contract is not attacked on that ground in the pleadings, and it does not appear, from the recitals of thé decree, that the chancellor passed on that question, but it is debated by both sides in the briefs, and we must assume that it was treated as an issue below.

Counsel for appellees attempt to distinguish this case from former decisions upholding similar contracts on the ground that, in the former decisions, the length of time specified for commencement of operations (one year) is so much shorter than the time specified in the present contract (five years) that it materially affects the question of consideration. Lawrence v. Mahoney, 145 Ark. 310; Epperson v. Helbron, 145 Ark. 566; Rogers v. Magnolia Oil & Gas Co., 156 Ark. 103; Guffey v. Smith, 237 U. S. 101. The distinction sought to be made is not sound, for the time specified for commencing operations is not unreasonable, in view of -the fact that the territory is wholly undeveloped. The contract itself recites reasons which are sufficient to make the specified time reasonable, and therefore the differences in time as to the contract in other cases referred to do not afford sufficient reason for holding that the consideration failed because of the additional length of time given for beginning operations. We think that the 'contract, so far as concerns the consideration, is governed by the cases cited above, and that it is a valid contract based upon sufficient consideration.

This brings us to a consideration of the question upon which the chancellor based his decree, namely, that, notwithstanding the fact that the contract specified the time for commencement of operations, there was an implied covenant on the part of appellants to begin operations in the development of minerals on this particular land within a reasonable time, and that, there having been no operations begun within a reasonable time, the lease should be canceled. The court evidently based its conclusion on the decisions of this court in Mansfield Gas Co. v. Alexander, 97 Ark. 167, Mansfield Gas Co. v. Parkhill, 114 Ark. 419, and Millar v. Mauney, 150 Ark. 161, and counsel for appellees defends the correctness of the decree on the authority of those decisions. We are of the opinion, however, that those cases are not decisive of the present controversy, for the reason that the contract contains -an express agreement with respect to the time within which drilling operations are to be commenced. The clause hereinbefore quoted expressly provides that, upon failure to commence operations within five years, the lease may be kept in force for a further period of two years by the payment of rentals, and this necessarily means that the full period of five years is given for the commencement of such operations.

In the first of our decisions on this subject (Mansfield Gas Co. v. Alexander, supra), there was no provision in the contract specifying the time within which mining operations should begin on the land involved in that controversy, but there was a provision that work should be begun ondhose lands, or other lands within four miles, within one year from date. Operations were begun within the time on other lands within the specified distance, and the terms of the contract in that respect were complied with, but the operations were not continued, and there was a delay of eight years, up to the commencement of the suit, without any further operations, and none whatever on the land in controversy. The court held that there was an implied covenant that the operations should not only be commenced within the time specified,'but that such operations should be continued with reasonable diligence, and that there was a forfeiture on account of the unreasonable delay. The court expressly recognized the principle that an express stipulation with respect to the time for the commencement of operations would control. In the opinion, the court, after declaring that the lessee was not bound tO' begin work on the particular land involved in the lease, and had the right to begin its operations on other lands within the date specified, but must continue the operations with reasonable diligence, said:

“It is true that, when such a lease expressly provides when and how the search for the minerals shall be made upon the leased lands, then there can be no reason for implication relative thereto, and such provision expressly made must control.”

As before stated, the provisions of the contract gave five years within which to commence operations, and it necessarily follows from that provision that there can be no forfeiture on account of inactivity of the lessee within that time. We are therefore of the opinion that the chancellor erred in holding that there was a forfeiture under the contract, and that there should be a cancellation.

The decree is therefore reversed, and the cause is remanded, with directions to dismiss the complaint for want of equity.


text:
    Itzkowitz v. P. H. Ruebel & Co.
    Opinion delivered April 30, 1923.
    1. Negligence — automobile 'collision — question por jury. — Evidence as to a collision ■ between defendant’s car and the car in which plaintiff was riding held to make it a question for the jury whether defendant was negligent.
    2. Evidence — res gestae. — Where a police officer, hearing a collision between two automobiles a block -away, went to the place of collision and asked the driver of the car in which plaintiff was riding why he did not stop, his reply that his brakes would not work was • inadmissible as part of res gestae, being a narrative of a past event, but was admissible to contradict the driver.
    3. Negligence — imputed negligence. — Negligence of the driver of an automobile is not imputable to a guest or other person riding in the car who is not the employer of the driver, and who exercises no control over him.
    4. Negligence — instruction as to accident. — Where there was no evidence to justify an instruction upon the theory that an automobile collision was the result of an accident, it was error to instruct upon that theory.
    Appeal from Pulaski Circuit Court, Second Division; Guy Fullc, Judge;
    reversed.

      Mehaffy, Donham S Mehaffy, for .appellant.
    The court erred in modifying appellant’s instruction No. 2 and in giving appellee’s instruction numbered 1, which wrongfully imputed negligence of driver of car in which appellant was riding to her. 112 Ark. 421; 123 Ark. 550; 126 Ark. 389; 136 Ark. 31. Appellee’s instruction numbered 4 w)as also erroneous, telling the jury that, if the injury resulted from an .accident, appellant could not recover. Court erred also in admitting the testimony of officer Witt relating his conversation with the driver of the Levin car, which was not part of the res gestae. 137 Ark. 107; 61 Ark. 52; 72 Ark. 572; 66 Ark. 494; 105 Ark. 247; 77 Ark. 599; 119 Ark. 36.

      McGomiell & Henderson, for appellees.
    Negligence of appellant’s driver was imputable to her. Cases nited by appellant reviewed and distinguished. 136 Ark. 272; 102 Ark. 355; 147 Ark. 152; 72 Ark. 572; 159 Fed. 10; 229 S. W. 169; 186 Pac. 160; 174 Pac. (Utah) 817; 88 S. E. (Ya.) 309. The appellant was guilty of negligence. 179 Fed. 577; 216 Fed. 503; 193 Mass. 223, 118 Am. St. Rep. 502; 72 Ark. 572. No presumption of negligence from the mere happening of the accident. 97 Ark. 469. No proof of negligence on part of appellee. 70 Pac. 346. Statement of appellant’s driver was part of the res gestae. 85 Ark. 479; 132 Ark. 551, 10 R. C. L. 974, 976. Neither did appellant object to the same statement of the driver testified to by other witnesses than officer Witt. Admissible to contradict testimony of driver also.
   McCulloch, C. J.

The plaintiff, Sarah Itzkowitz, instituted this action in the circuit court of Pulaski County to recover damages for personal injuries sustained as the result of a collision between an automobile owned by defendant and driven by one of its servants and another ear in which plaintiff was riding. It is charged in the complaint that the collision occurred by reason of the negligence of defendant’s driver in operating the car. There was a denial of the charge of negligence on the part of defendant’s driver, and the answer contained an allegation that the collision was caused by negligence of the driver of the car in which plaintiff was. riding. The verdict was in favor of the defendant, and the plaintiff has prosecuted an appeal.

It is undisputed that the collision of the two 'Cars mentioned occurred, and that plaintiff received substantial injuries. It is unnecessary to inquire on this appeal concerning the extent of the plaintiff’s injuries.

The collision occurred on June 28, 1921, about 2 o’clock in the afternoon, in the city of Little Rock, on East Capitol Avenue, at the intersection on the south side of that street with the alley which runs north and south between Main and Scott streets.

The plaintiff was a saleswoman in the dry goods establishment of the Levin Dry Groods Company, on Center Street, between Fifth and Sixth, and about 2 o’clock in the afternoon she became slightly ill, and the manager of the establishment, Mr. Heiman, instructed the driver of the delivery car to take the plaintiff home, and she was en route home when the collision occurred, the direct route to her house being eastward on Capitol Avenue.

The car in which plaintiff rode was a Ford truck with only one seat, and used as a delivery car. As the car was being driven along East Capitol Avenue, going toward the east, a six-cylinder passenger car, owned by the defendant and driven by one of its employees, came out of the mouth of the alley, headed north, and the two cars collided. The point of collision was at the mouth of the alley, and the right front end of defendant’s car collided with the right rear wheel of the car in which plaintiff was riding. The witnesses all state that the right front spring of defendant’s.car hooked the rear right-hand wheel of the Levin car. There is a sharp conflict in the testimony as- to the speed each car was making at the time. The driver of the Levin car testified that the car coming out of the alley was running at a speed of above fifteen miles an hour, and that he was driving the Levin car at a rate of speed less than that. The driver of defendant’s car testified that the Levin car was running fifteen or sixteen miles an hour, and that his car was moving at a very slow speed, and that he blew the horn before he reached the mouth of the alley, when the Levin car was twenty-five feet or more distant. In other words, there is a sharp conflict in the testimony as to the cause of the injuries — as to which of the two drivers was negligent.

The driver of the Levin car and the plaintiff herself both testified that the Levin car was being driven at a very moderate speed on the right side of the street, a slight distance from the rear end of the cars parked at the mouth of the alley; that, as defendant’s car came out of the alley at considerable speed, no signals were given, and that defendant’s car ran into the rear wheel of the Levin car.

The driver of defendant’s car testified that, after he blew the horn, the Levin car continued to come at a. rapid rate of speed; that the driver seemed to he stooping down, looking at or through his wheel, and that he suddenly swerved the car to the right and ran into defendant’s car, hooking the right rear wheel over the right-front spring.

The defendant introduced Police Officer Witt, who was on duty at the' time at Main Street and Capitol Avenue, and the witness testified that he heard the noise of the collision and ran up to the place where it occurred, and saw people removing plaintiff from the car. He testified that he asked the driver why he did not stop, and that the driver replied, “My brakes would not work.” He said he then asked the boy what was the matter with them, and the boy replied, 4<I don’t know, they would not work.” This testimony was introduced over .the objection of the plaintiff, and exceptions were duly saved.

It is contended by counsel for appellee that the undisputed evidence shows that there was no negligence on the part of defendant’s driver, and that for this reason the judgment ought to be affirmed, regardless of any error in the proceedings. We cannot agree with counsel in this contention, for there is abundant evidence to sustain a finding of negligence on the part of defendant’s driver if the testimony of the witnesses introduced by plaintiff is true. They show that defendant’s car came out of the alley at a speed of about fifteen miles an hour, and that no signal of its approach was given. It is shown that the traffic on East Capitol Avenue at this point is very considerable during all hours of the day, and, this being true, the jury would have been warranted in finding that the driver of defendant’s car was negligent. The fact that the point of collision between the two cars was at the right front side of defendant’s car and the rear wheel of the Levin car is a very strong circumstance tending to show that the collision resulted from negligence of the driver of defendant’s car, for it shows that when the collision occurred the Levin car had nearly passed the mouth of the alley, and if defendant’s driver was moving the car as slowly as he claims he was, he could have stopped the car before it struck the other passing car. In other words, the physical facts in the case tend to show that the fault was with the driver of defendant’s car, and, in order to escape the force of these facts, the defendant undertook to show that the Levin car was suddenly swerved to the right just before the collision occurred, and in that way ran into the right front spring of defendant’s car. The collision could hardly have occurred in any other way, if the fault was with the driver of the Levin car.

It is first contended on the part of appellant that 'the court erred in permitting Officer Witt to testify concerning the conversation with the driver of the Levin car. The driver was first asked, on cross-examination, whether or not he had made the statement to the officer about his brakes not holding, and he denied having made' such a statement. The foundation being properly laid, it is conceded that the testimony was competent for the purpose of contradicting the driver >as a witness in the case, but it is insisted that the court erred in permitting this testimony to go to the jury as a part of the res gestae and as substantive evidence of negligence of the driver. We are of the opinion that the statements and declarations of the driver, as testified to by the police officer, were not part of the res gestae, and that they were not competent evidence in the case except for the purpose of contradiction. In the case of Carr v. State, 43 Ark. 99, this court said:

'“Res gestae are the surrounding facts of a transaction, explanatory of an act, or showing a motive for acting. They are proper to be submitted to a jury, provided they can be established by competent means sanctioned by the law, and afford any fair presumption or inference as to the question in dispute. * * * Now circumstances and declarations which were contemporaneous with the main fact under consideration, or so nearly related to it as to illustrate its character and the state of mind, sentiments or dispositions of the actors, are parts of the res gestae. They are regarded as verbal facts, indicating a present purpose and intention, and are therefore admitted in proof like any other material facts. * * * Nor need any .such declarations be strictly coincident as to time, if they are generated by an excited feeling which extends without break or letdown from the moment of the event they illustrate. But they must stand in immediate causal relation to the act. and become part either of the action immediately preceding it or of action which it immediately precedes.”

The statements do not come within the definition thus given, for, if the statements of the driver merely constituted a narrative of a past event, elicited by questions propounded by the officer in investigating the circumstances of the collision, this does not make them a part of the transaction itself, but a mere history or narrative of the transaction, given afterwards. The investigation and inquiry of the officer necessarily broke the continuity between the main fact sought to be elicited and the narrative given of it, and we think that, under these circumstances, the evidence cannot be received as a part of the res gestae. River, Rail & Harbor Cons. Co. v. Goodwin, 105 Ark. 247; Webb v. Kansas City Southern Ry. Co., 137 Ark. 107.

There are several assignments of error in regard to the rulings of the court in giving and refusing instructions. In the first place, it is contended that the court erred in the modification of plaintiff’s instruction No. 2, which modification told the jury, in substance, that there could be no recovery if “plaintiff or her driver was guilty of negligence.”

There is an assignment also with reference to the giving of defendant’s instruction No. 1, which was to the same effect.

These instructions were clearly erroneous, for they, in express terms, declared the law to be that negligence of the driver of the car was to be imputed to the nlaintiff. This is not the law, and has been so declared by' decisions of 'this court. We have distinctly held that negligence of the driver of a vehicle is not imputable to a guest or other person riding in the car, who is not the employer of the driver and who exercises no control over him. Hot Springs St. R. Co. v. Hildreth. 72 Ark. 572; Carter v. Brown, 136 Ark. 23; Pine Bluff Co. v. Whitlaw, 147 Ark. 152. Any occupant of a car or vehicle who has the opportunity to control the action and conduct of the driver, and fails to do so when ordinary care would require it, is guilty of negligence which prevents recovery of damages, but that constitutes negligence of the occupant and not imputed negligence of the driver. The instruction given by the court, however, in the present case told the jury, in effect, that negligence of the driver must be imputed to the plaintiff, regardless of her own conduct, and this is clearly erroneous. There is no evidence in the case that the driver of the ear occupied the relation of servant to the plaintiff, nor that she undertook to control his movements, further than to tell him, in the beginning of the journey, to drive slowly because she was sick.

It was a question for the jury, if the conduct of the driver was negligent in maintaining too high a speed or in failing to stop when the warning was heard of the car approaching from the alley, if such warning was, in fact, given, to determine whether or not plaintiff was guilty of negligence herself, and this question was submitted to the jury in a correct instruction; but it was incorrect to tell the jury that the negligence of the driver would be imputed to her, and that such negligence on the part of the driver would prevent recovery, regardless of her own conduct.

Error is assigned in the giving of another instruction requested by defendant, which told the jury that, if they found that the collision was the result of a mere accident, the defendant would not be liable. It is contended that there was no evidence to justify a submission of th,e question of accidental collision, and we think this is the true state of the record, for it is manifest that the collision occurred from negligence on account of one or both of the drivers. There are no grounds for the conclusion that it was merely accidental. There is a sharp conflict in the testimony, and if either the one side or the other is to be believed, there was negligence on the part of one of the drivers. The cars came together in collision at the mouth of the alley, and if both drivers had been free from fault the collision would not have occurred. This instruction was therefore misleading and prejudicial.

For the errors indicated the judgment must be reversed, and the cause remanded for a new trial. It is so ordered.


text:
    Bunch v. Empire Cotton Oil Company.
    Opinion delivered April 30, 1923.
    1. Fraudulent conveyances — wife permitting husband to use her property.- — -Where a married woman permits her husband to use her -separate estate as his own and to obtain credit on. the faith that .the estate so used is his -own, she will not be allowed afterwards .-to as-sert her claim to the property as against her husband’s creditors.
    2. Fraudulent conveyances — concealment of wife’s interest.— Evidence held to warrant conclusion that the beneficial interest of a married woman in land conveyed to -a trustee was purposely concealed to defraud future creditors of her husband.
    3. Fraudulent conveyances — voluntary conveyance — presumption. — While no presumption arises from the execution of a voluntary conveyance that it was the intention to defraud future creditors, and such fraudulent intent must be proved, such proof may be made by -showing circumstances which indicate such fraudulent intent.
    Appeal fr-o-m Pulaski Chancery Court; John E. Martineau, Chancellor;
    affirmed.

      Rose, Hemingway, Cantrell & Loughborough, for -appellant, Laura L. Bunch.
    The Southern Trust Company -holds -the beneficial interest in the property for Laura L. Bunch, appellant, and not' for her husband, T. H. Bunch, as -the chancellor erroneously found. The -conveyances to Mrs. Bunch were not fraudulent, an-d this property was given to -her in 1907, 1910 and 1913. There is no evidence of insolvency 'of Bunch until perhaps 1912. At the time the gifts were made he was not indebted to appellee, and bad no intention of becoming indebted to appellee or any one else. Testimony shows conclusively that Bunch and appellee were not known to each other and had no dealings until September 15, 1915. Appellee was a subsequent creditor, and to avoid the gift must show that it was made with the actual intent to defraud. 38 Ark. 427; 50 Ark. 42; 56 Ark. 258; 59 Ark. 614; 96 Ark. 531; 110 Ark. 335. Not shown by proof that donor subsequently become insolvent. 96 Ark. 531.

      H. M. Armistead, for appellee, Empire Cotton Oil Company.
    Question of intent to defraud subsequent creditors may be proved by all the facts and circumstances. .132 Ark. 463. The evidence supports the chancellor’s findings. Appellee would have a right to an accounting in any event for the $15,000 and other sums Bunch paid upon the mortgages. 110 Ark. 335 ; 66 Ark. .419. The fact that all this property was acquired originally by her husband, connected with the other undisputed facts, puts the burden of proof upon Mrs. Bunch. 142 Ark. 104; 134 Ark. 231; 133 Ark. 250; 73 Ark. 174. A voluntary conveyance made with intent to defraud, cheat or lxinder other existing or subsequent creditors is void as to both. 110 Ark. 335; 20 Cyc. 425, 426; 59 Ark. 614; 20 Cyc. 454, 456, 460, also 520. Bunch filed no answer. 113 Ark. 100; 145 Ark. 167. Parol trust in lands must be established by evidence clear, strong and unquestionable. 50 Z. 7, 818; 173 Fed. 798; 59 S. E. (W. Ya.) 964; 54 Fed. 299; 86 Ark. 225; 66 Ark. 98. As to claim of wife of husband’s indebtedness to her, 74 Ark. 161; 129 Ark. 398; 76 Ark. 252; 20 Cyc. 498-500.

      Rose, Hemingtoay, Cantrell Loughborough, in reply.
    No proof that Bunch owed any debts he was unable to pay at the time of conveyance or gifts to Ms wife. 42 Ark. 170; 59 Ark. 614. Time between the conveyances and creation of the debt may be considered to show good faith. 132 Ark. 463. The testimony does not show actual intent to defraud appellee or any other subsequent creditor, and even though there were actual fraud, whicn is denied, appellee was not injured or defrauded by the conveyances, and is not entitled to recover. 132 Ark. 463.
   McCulloch, C. J.

This is an action instituted by appellee to set aside' alleged fraudulent conveyances of real estate and to subject the same to the payment of the indebtedness of T. H. Bunch to appellee, evidenced by two promissory notes aggregating about $7,000, dated September 30, 1916, the notes having been executed to cover an antecedent indebtedness originating during the previous year. There was a decree in favor of appellee subjecting to .the payment of appellee’s debt a portion of the real estate involved in the controversy, and an appeal has been prosecuted to this court.

' T. H. Bunch formerly resided in Little Rock, and was engaged in business here as the sole owner of corporations bearing his own name. His first corporation became insolvent and failed in business in the year 1910. Another corporation was organized, which subsequently went into bankruptcy, and Bunch ceased to do business here in 1916. It appears from the evidence that he had been insolvent as far back as the year 1913.

Bunch acquired, by purchase and inheritance, the property in controversy on this appeal, which is four lots •'at the southeast corner of Broadway and Third streets in the city of Little Rock, valued at about $60,000 or more, and described as lots 1, 2, 3 and 4, block 103, city of Little Rock. He owned other property, acquired in the same manner, on the southwest corner of Third and Broadway, and that was included in this litigation, but passed out by the decree which has not been appealed from.

Bunch acquired the property, and it has been conveyed from time to time in four sections, each part or section covering a portion of .said lots, and was accurately described by metes and bounds. The portion of the lots described in the briefs as parcel I was purchased by-Bunch from Hedges and wife, and Bunch caused the conveyance to be made to the W. B. Worthen Company, a banking corporation, as trustee, under deed dated January 23, 1907. The character and purpose of the trust was not disclosed in the face of the deed, the .only reference to the trust being the coupling of the words “as trustee.” with the name of the grantee. On the next day, January 24, 1907, the Worthen Company executed and delivered to Laura L. Bunch, wife of T. H. Bunch, a declaration of trust reciting the conveyance of the property and declaring that the property would be thereafter held in trust for Laura L. Bunch, subject to the payment of two notes for $5,000 each, guaranteed by T. H. Bunch.

The portion described as parcel II was acquired by deed from the trustee in bankruptcy of the T. H. Bunch Commission Company, the deed being made by the trustee to the Union Trust Company, a banking institution of Little Kock. The deed was dated April 1, 1910, and on March 30, 1910, T. H. Bunch and wife, together with the Union Trust Company, conveyed to the W. B. Worthen Company, as trustee, the conveyance being similar to the one conveying to the W. B. Worthen Company parcel I.

The W. B. Worthen Company conveyed the property mentioned as parcel II to F. T. Vaughan, by deed dated March 25, 1911, and Vaughan subsequently conveyed the property to Laura L. Bunch by deed dated November 2, 1911.

T. H. Bunch and his sister, Mrs. Mathews, inherited a portion of the lots mentioned as parcel III, and Bunch purchased the interest of his sister, who, by deed dated January 31, 1916, conveyed the same to the W. B. Worthen Company, as trustee. It appears from the oral testimony that T. H. Bunch conveyed his half of the property to his wife in the year 1913, bu't the deed was never recorded. The portion of the lots mentioned as parcel IV was inherited by T. IT. Bunch from his mother, and by deed dated January 13, 1904, he conveyed the property to the Union Trust Company, and the latter conveyed to W. B. Worthen Company by deed dated March 30, 1910.

The W. B. Worthen Company, as trustee, executed a deed to the Southern Trust Company, of Little Rook, dated February 16, 1916, purporting to convey all of lots 1, 2, 3 and 4 of block 103, and on August 1, 1913, T. H. Bunch and wife executed a deed of trust to W. M. Kavanaugh, as trustee, conveying the whole of lots 1, 2, 3 and 4, block 103, to secure an indebtedness to the Southern Trust Company, the indebtedness being shown by the proof to have keen that of T. H. Bunch.

The written declaration of trust executed by the W. B. Worthen Company to Laura L. Bunch on January 24, 1907, covering a portion of the property described as parcel I, was never recorded. There was oral ^“Cmony adduced by appellants tending to show that the W. B. Worthen Company held parcels II, III and IV in trust for Laura L. Bunch, but there was no written declaration of trust. Parcel II of the property was, as hereinbefore shown, subsequently conveyed by W. B. Worthen Company to Vaughan and from Vaughan to Mrs. Bunch, where the legal title appears still to rest. T. H. Bunch has never conveyed his undivided half interest in parcel III, which he inherited from his mother, except by an unrecorded deed to his wife and except the mortgage to Kavanaugh as trustee for the Southern Trust Company. The contention of appellants is that the title to all of the property is in the Southern Trust Company as trustee for Mrs. Bunch, but the contention of appellee is that T. H. Bunch is the beneficial owner of the property, to all appearances, and that the attempt to hold the title for the benefit of Mrs. Bunch is a fraud on his creditors.

The property in controversy is rental property, having dwelling houses on it, but it was not actually occupied by Bunch, their home being* on the property at the southwest corner of Third and Broadway.

The evidence shows that since the property was mortgaged to the Southern Trust Company in August, 1913, the real estate department of that institution has managed the property and has accounted to T. H. Bunch. The contention is that Bunch was acting merely as agent for his wife, but there is correspondence in the record which .shows that it is generally referred to as Bunch’s property. At any rate, according to the proof, there was never any visible change in the possession of the property from the time it was originally acquired by T. H. Bunch, and there is nothing of record showing any title or interest in Laura L. Bunch except the deed from Vaughan to Mrs. Bunch covering the property mentioned as parcel II. All the property was held and managed together, and the proof tends to show that, to all appearances, it was held as the property of T. H. Bunch.

The alleged trust in favor of Mrs. Bunch was a secret one, known to no one else except Bunch and his wife and the institution which held it as trustee. The only written declaration of trust was never put of record, and the other declarations were oral. There was nothing to put creditors upon notice that the beneficial interest was in Mrs. Bunch. The conveyances to the Worthen Company showed on their face that they held as trustee, and there was nothing to disclose to the public who the beneficiary was. In the meantime, to all appearances. Bunch himself was controlling the property. While in this condition, Bunch contracted the debt to appellee now involved in the present action, and we are of the opinion that the attempt to hold the beneficial interest in the name of Mrs. Bunch is a fraud upon appellee as one of the creditors.

The proof shows that Bunch had been insolvent since the time he contracted his debt with appellee and for some time before this. The W. B. Worthen Company, as well as the Southern Trust Company, held heavy indebtedness against the property, and Bunch contributed of his own means about fifteen or twenty thousand dollars towards reducing that indebtedness.

We are of the opinion that Mrs. Bunch is estopped to claim a beneficial interest in the property, by reason of the fact that she has permitted the same to be held ostensibly by her husband to form' a basis of his own credit. The case falls within the rule often announced by this court that “where a married woman permits her husband to use her separate estate as his own and to obtain credit on the faith that the estate so used is his own, she will not be allowed afterwards to assert her claim to the property as against her husband’s creditors.” Driggs & Co.’s Bank v. Norwood, 50 Ark. 42; Geo. Taylor Com. Co. v. Bell, 62 Ark. 26; Davis v. Yonge, 74 Ark. 161; Sharp v. Fitzhugh, 75 Ark. 562; Roberts v. Bodman-Pettit Lbr. Co., 84 Ark. 227; Latham v. First National Bank of Fort Smith, 92 Ark. 315; Goodrich v. Bagnell Timber Co., 105 Ark. 90.

Moreover, we are of the opinion that the proof of circumstances is sufficient to warrant the conclusion that the beneficial interest' of Laura L. Bunch was concealed for the purpose of defrauding future creditors.

Counsel for appellant invoke the rule that no presumption arises from the execution of a voluntary conveyance that it was the intention to defraud future creditors, and that the fraudulent intent must be proved. This proof, however, may be made by showing circumstances which indicate such fraudulent intent. May v. State Nat. Bank, 59 Ark. 614; Lee Hardware Co. v. Johnson, 132 Ark. 462.

On either theory we are of the opinion that the evidence is sufficient to sustain the finding of the chancellor, and that the decree should be affirmed.

It is so ordered.