text:
    Atwood v. Ballard.
    Opinion delivered November 23, 1926.
    1. Deeds — mental capacity. — If the maker of a deed has sufficient mental capacity to retain in his memory without prompting the extent and condition of his property and to comprehend how he- is disposing of it and to whom and upon what consideration, he possesses sufficient mental capacity to execute the deed.
    2. Deeds — mental capacity — burden of proof. — Since the sanity and mental capacity of a grantor to make a deed is presumed, the ■burden is upon those who allege that he did not have sufficient mental capacity to make the deed.
    3. Deeds — finding of mental capacity. — A finding that a grantor had sufficient mental capacity to make a deed held not against the preponderance of the evidence.
    Appeal from Cleveland Chancery Court; II. B. Lucas, Chancellor;
    affirmed.
    . Toney cB Smith, and Owens S Ehrman, for appellant.

      B. W. Wilson, for appellee.
   Wood, J.

This action was originally instituted by C. B. Atwood, guardian of Noble Atwood, against Ollie Ballard, Rosa Hardnett, Edward Atwood and Willie Atwood, hereafter called appellees. After the action was commenced, Noble Atwood died, and the cause was revived in the name of O. B. Atwood as administrator, and also in the name of the legal heirs of Noble Atwood, hereafter called appellants. It was alleged in the complaint that Noble Atwood was the owner of six hundred acres of land in Cleveland County, Arkansas, which lands are described in the complaint; that on July 25, 1923, he executed and delivered to the appellees a deed to the 'lands; that on that day, and long prior thereto, Noble Atwood was a person of unsound mind and incapable of executing a valid contract; that the deed was executed without consideration and was void; that the appellees were claiming to be the owners of the land and seeking to oust Noble Atwood from the possession thereof, and that the deed constituted a cloud upon the title of the appellants and the other heirs of Noble Atwood. The prayer was that the deed be canceled and that the title of the appellants be quieted.

The appellees, in their answer, admitted that Noble Atwood was the owner of the lands in controversy and that he executed the deed thereto as alleged, but denied that he was insane before and at the time the deed was executed, and also denied that the deed was without consideration, and void.

John Sandine testified that he had known Noble Atwood for thirty years, and had had occasion to observe his conduct for the last three years past. He was not of sound mind in July, 1922; he acted curious like — he didn’t have good sense — had been getting worse, and was now in the insane asylum. Atwood lived on his old home place in 1922 with colored people, who took care of him after he had a spell of sickness. It was after this spell that he became mentally unsound, and deeded the property to the appellees.

J. W. Greenlees testified that he is a justice of the peace; that he had known Noble Atwood for forty years, and had been immediately associated with him for the last ten years. Atwood is now in the asylum at Little Rock. Witness had an opportunity to observe Atwood’s conduct during the years 1922 and 1923 and’ 1924 From his actions and conduct witness thought he was mentally unsound, and witness did not think he was capable of managing his business affairs in July, 1923.

H. 0. Wilson testified that he was a practicing physician, and had been in the county of Cleveland for fifteen years. He was acquainted with Noble Atwood. He attended him as a physician in January, 1923. Since that time Noble Atwood’s mental condition had been bad. Witness dicl not think that Noble Atwood was capable of managing his business affairs in July, 1923. Witness did not think Atwood was capable of making a deed and of knowing the effect of it. Witness was positive that Atwood did not know what he was doing during the-month of July, 3923. Witness based his opinion upon his observations of Atwood’s actions and conduct.

I. E. Moore testified that he had been sheriff of Cleveland County for six years, and also he had been a merchant, in the county. As sheriff and merchant he had come in contact with Noble Atwood and had had an opportunity to observe his conduct during the last few years. From such observation he regarded Atwood as unbalanced during the years 1923 and 1924, and did not consider that he was capable of transacting and managing his business affairs. Witness considered Atwood totally incapable of looking after and managing his business from the first part of the year 1923.

H. D. Sadler'testified that he was a practicing physician, and had lived and practiced medicine in Cleveland County for twenty-nine years. He had known Noble Atwood forty years. He was called as a physician to treat Atwood in the early part of 1923. After this illness witness did not see him, except when he would come to town. From observing him on the streets of Bison in 1923 and treating him as a physician, witness thought he was mentally unbalanced. There was a trial of some kind as to Atwood’s mental condition, and witness testified at that time that Atwood -was mentally unbalanced. Witness had never examined or treated Atwood except in his relation as physician and surgeon. Atwood was now in the asylum.

J. B. Searcy testified that he had business dealings with Atwood in 1920, and had observed him occasionally during 1923 and 1924, and he did not consider him capable of managing and controlling his own affairs.

Leali Atwood testified that he was a nephew of Noble Atwood; that his uncle had a spell of sickness in 1923, and at that time acted like a crazy man. He did not manage his farm in 1923, because he was mentally and physically incapable of doing so. After this illness in January, 1923, he would stand off by himself and have nothing to say to anybody, and acted so unnaturally that witness did not consider him mentally capable of managing his own affairs.

Another nephew of Noble Atwood testified that, after his uncle’s illness in 1923, he was in very bad shape, and had very little to say.

Three witnesses testified to the effect that, during 1923 and 1924, a negro woman by the name of Eula Bonds, whose reputation for morality was not good, and other negro women, went to the house of Noble Atwood; that Atwood would send money to these women; that he gave Eula Bonds at one time as high as $50; that he would give orders on his merchants for the best grade of silk and shoes to these negroes. Before 1923 he had paid his bills and was conservative in his expenditures, but after that he was reckless in giving these orders, and merchants finally had to turn them down because they had become too large and Atwood had failed to pay his bills. One of the witnesses stated that one day Atwood told the witness that if the bank were on fire he could put it out with magic. This witness considered him mentally deranged for two years before his death.

H. Gf. Atwood, who was the assistant cashier of the Bank of New Edinburgh, testified that Noble Atwood carried an account with that bank, and that, prior to 1922, he was conservative with his funds. After that witness had to turn down a number of checks, which totaled several hundred dollars, on account of insufficient funds.

The above is substantially the testimony adduced on behalf of the appellants. George Brown testified, on behalf of the appellees, that he was an attorney at law; that he had been justice of the peace, deputy prosecuting attorney, Representative, and State Senator. He had known Noble Atwood for seventeen years. During the last half of that time he was well acquainted with him. He had been employed by Noble Atwood’s half-breed children to defend them in a suit that had been filed against them. This action was previous to the present litigation. In order to prepare his defense, witness consulted with Noble Atwood. That was in February, 1924. Atwood told witness that he had an agreement with the'appellees to deed them the land if they would support and furnish him a home and medicine as long as he lived. Witness had several conversations with Atwood. Witness refused to accept employment until he had talked with Noble Atwood and ascertained whether or not he was sane.' Witness talked with Atwood for an hour and a half with reference to the deed that he had made to the appellees. Witness discussed the action that had been brought against the appellees, and informed him that the plaintiffs in that action were seeking to set aside the deed because it was claimed he was insane when he executed it, and witness informed Atwood of the different grounds that had been urged as proof of his insanity. One was that he had issued a number of bad checks, and that was unusual -for him. Another was that he had divested himself of almost all of his property, not retaining enough to support himself and pay his debts; and another, that he had deeded away his ancestral home to ' a gang of negroes. To this Atwood replied as follows: So far as the checks were concerned, he had Liberty bonds to the amount of $1,000 in the Bank of New Edinburgh. He was also a stockholder in the Bank of New Edinburgh. He had expected that the bank would pay the checks and treat them as liens on his Liberty bonds, and that they would also take his bank stock as security, as had been done before. Atwood said, “As to deeding away everything I have without retaining enough to support me and pay my debts, I had an agreement with Ball Atwood (one of the defendants in this suit) and the other children that we would all join in a deed and sell the timber and pay all my debts. Besides that, I have retained enough property in bank stock and Liberty bonds and real estate to support me as long as I am likely to live.” He also said, “Besides all that, they agreed that, if I would deed them this land, they would support me and furnish me a home and medicine as long as I lived. As to the old home of my fathers being deeded away, I inherited one share of that and the other shares I bought from my brother and my sister.” After that, witness had several conversations with Noble Atwood, and, on one occasion, went with him to Pine Bluff and heard him make the same statements as above, and, in addition, on that occasion he heard Atwood say that he had inherited one share of the old home place from his father and had bought one share from his brother and sister, and he did not see why his children might not as well have the land from him as for him to have had it from his father. "When he spoke of his children he had reference to his half-breed children by his negro paramour. Witness saw no difference in his condition in later years from that of former years, except that he had-gown older and a little more feeble physically. Witness discovered no change in his mental condition, and stated that he had a clear conception of what property he had and what he intended to do with it and how to attend to it. In witness’ opinion, Atwood had a clear conception of the effect of the deed. Witness was employed by the appellees to defend the action brought by the guardian and to set aside this same deed. The present attorney for the appellees later became associated with witness in the defense of that suit. Witness is in no way interested in the present case. When the present action was filed, the appellees sought to employ witness, but they could not agree on a fee, and witness was not employed. Noble Atwood had lived mostly among negroes until he apparently cared very little for white society.

Two merchants, Edgar McKinney and J. L. Reed, testified that they were in the mercantile business at Rison and did business with Noble Atwood during the year 1923. One of these witnesses testified that, during the first half of 1923, he did two or three hundred dollars’ worth of business with Atwood. The goods were sold on his order, and these witnesses had filed a claim against Atwood’s estate for indebtedness incurred by him during the year 1923. One of these witnesses stated that the orders were given to negroes. Atwood had always paid his accounts prior to the last one and witness had considered him financially good until he received these bad checks. The other witness testified that he considered Atwood capable of transacting business; that, during the later years of Atwood’s life, witness handled more of his checks than he ever had before, and the estate was indebted to witness in the amount of checks payment of which had been refused because of insufficient funds.

P. H. Harris testified that he operated a sawmill, and lived near Noble Atwood during the years 1923 and 1924. Witness saw him four or five times in 1923, and went over timber lands with him. Witness discussed with him farming and timber business, and was with him on one occasion three hours, looking over some timber. Atwood was showing witness some of the lines, and he pointed out to witness the corners of the land by the usual designations. Atwood showed witness between eight and twelve corners. They went six or seven miles all around the tract of land. Atwood had a good idea of what his timber was worth. He stated that he knew it was high, and he was not going to give it away. Some five or six weeks after this occasion witness entered into a conditional deal with Atwood for the sale of his timber. Witness wanted three years to cut the timber, and Atwood stated that he could give witness but two years. Finally the deal was not consummated. From witness’ conversations with Atwood, at various times and places, witness was of the opinion that Atwood was capable of transacting business and managing his own affairs. “If,” says the witness, “there was anybody in Bison that talked with good judgment, Atwood did.” Another witness talked with him during the early part of 1923 in regard to the extension of oil leases which Atwood had previously signed. Atwood signed a contract of extension. He read the same over, and they talked about it. Atwood said it was “good for all of us getting a well drilled.” He seemed to witness as much interested in that, after he read the contract and found out what they were after, and talked about it as much, as any man witness met on his rounds. Atwood thought it was a g'ood thing, and talked with business sense about it. Witness did not observe any difference in Atwood’s conduct during that year from what it had been in former years. He had known Atwood some thirty-five years.

James F. Crump testified that he was a physician and surgeon, located at Pine Bluff. Prior to moving to Pine Bluff he had practiced medicine' in Cleveland County, Arkansas. He had known Noble Atwood about forty years. Witness had not read any works especially on mental diseases, but had had lectures thereon. He had very little experience in the treatment of mental diseases. His practice had been that of the average practitioner. When witness lived at Bison he would see Atwood possibly once a month. During the spring and summer of 1924, witness saw Atwood in witness ’ office in Pine Bluff. Atwood stayed in witness’ office on that occasion perhaps an hour, and witness examined him as to his mental condition, at the request of- Mr. George Brown, attorney, at Bison (a brother-in-law of witness). Brown brought Atwood to witness’ office, and asked witness to examine him and determine, if possible, his mental condition, stating that a guardian had been appointed for Atwood, and Brown desired to ascertain whether Atwood was capable of making a deed to his property which they •were seeking to have set aside. Witness asked Atwood why he had deeded his estate to his illegitimate children, and Atwood stated that he did so because they had promised to take care of him in his old. age, and he was getting physically unable to farm and make a living. Witness asked him if there was any parental feeling on his part towards them that induced him to make the deed, and whether. or not he would have made the deed to any person who was not kin to him, under the same circumstances, and Atwood replied that he would not. Witness asked him in regard to sofne checks that he had overdrawn at the Bank of New Edinburgh, why he had issued these checks if he knew that the money was not in the bank, and he replied, “I didn’t know how much money I had in there, but I did know that I had a Liberty bond on deposit with them, that would have been sufficient to cover the checks I issued, if I didn’t have sufficient money. ’ ’ In the course of the conversation witness asked about several other things, and Atwood’s answers were such as to convince witness that Atwood knew what he was doing, and that his mental condition was perfectly sound. Witness did not observe any special difference on this occasion in Atwood’s mental condition from what it had always been. In witness’ opinion, Atwood knew and appreciated the effect of the transaction whereby, as grantor, he had conveyed to Ed Atwood and his other illegitimate children the tract of land in controversy, and was mentally capable of managing his business affairs in a reasonable and prudent manner. It is easier for one who is examining another for mental unsoundness to detect signs of insanity than it is when one is not looking for them. Witness had not seen Atwood, before the day he had examined him with special reference to insanity,-for about ten years. In making the examination, witness observed the expression of his eyes, manner of talking, and his conduct generally, from every angle necessary to determine whether or not he was mentally unsound.

E. Br. Mattox testified that he was a merchant and notary public, and was working for the Wonder StateOil Company most of the year 1923, and he prepared the deed in controversy. He took the acknowledgment. Noble Atwood gave him the tax receipts or deeds to get the description from. Atwood told witness that he had some lots in town that he didn’t want to put in the deed. Witness was working for the oil company at the time the deed was executed, and visited Atwood for the purpose of getting an extension on an oil lease. ' Witness had taken Atwood’s acknowledgment before to a lease executed to the Wonder State Oil Company. On the same day that Atwood executed and acknowledged the deed, he executed an extension of an oil lease to the Wonder State Oil Company. This was all done a few days before the first of August, 1923. Witness had known Noble Atwood about eighteen years, and he noticed no difference in his conduct and conversation on the day that he executed the deed and extension of the oil lease as compared with his conduct in former years. Only he was physically a little more feeble because he was older. Noble Atwood read over the oil lease carefully, and went over different phases of it just like any one else would have done, only he was a little slower in his conversation than he had been. From his conduct and conversation in these transactions, witness was of the opinion that Atwood knew and appreciated the nature of the transaction when he executed the deed to these four parties.

J. M. Elrod testified that he was vice president and cashier of the Bank of Bison, and that Noble Atwood carried an account with the bank during the year 1923 and during previous years. He set forth many business transactions between Atwood and different merchants and individuals, all of which went through the Bank of Bison, which were paid, subsequent to July 25, 1923. As late as October 9,1923, Atwood deposited with the Bank of Bison $10.61.

The testimony of J. E. Lybrand and Frank Poteet was to the effect that they had business transactions with Noble Atwood — one in October, 1923, in regard to buying some timber, and the other in December, 1923, and both these witnesses gave the substance of these negotiations with circumstantial detail, and, in their opinion, there was nothing in the conversation and conduct of Atwood to indicate -that he was of unsound mind and incapable of transacting his business and managing his own affairs.

The mother of the appellees, a negress, testified that Noble Atwood was their father. She had lived in the house with Atwood nearly forty years. His attitude toward the appellees, his children, while they were growing up, was that of a father. He provided for them and looked after them in general.

We deem it unnecessary to set out the testimony of the appellees. Suffice it to say, their testimony was to the effect that the relation between them and Noble Atwood was that of father and children. Their testimony details circumstances and facts which tended to prove that Atwood, before and at the time of the making of the deed in controversy, was of sound mind; that the consideration for the deed was that they were his children, and that they should take care of him until he died. The deed was filed for record on January 30, 1924.

The trial court found that “Noble Atwood was sane and fully capable of transacting business, and that, as to this particular transaction, he fully understood the contents and effect of said instrument; and that said deed of conveyance was supported by a good and valuable consideration, and is valid and binding as between the plaintiffs and the defendants herein, and vests title to said lands as against these plaintiffs, as the collateral heirs of Noble Atwood.” The court thereupon rendered a decree dismissing the complaint for want of equity and vesting and quieting title to the lands in the appellees, from which decree is this appeal.

“The familiar principles of law applicable to cases of this kind have often been announced by this court. If the maker of a deed, will, or other instrument, has sufficient mental capacity to retain in his memory, without prompting, the extent and condition of his property, and to comprehend how he is disposing of it, and to whom, and upon what consideration, then he possesses sufficient mental capacity to execute such instrument. Sufficient mental ability to exercise a reasonable judgment concerning these matters in protecting his own interest in dealing with another is all the law requires. If a person has such mental capacity, then, in the absence of fraud, duress, or undue influence, mental weakness, whether produced by old age or through physical infirmities, will not invalidate an instrument executed by him.” Pledger v. Birkhead, 156 Ark. 443, 455, 246 S. W. 510, and cases there cited. See also Beaty v. Swift, 123 Ark. 166, 184 S. W. 442.

It will be observed that the only issue presented in the case is whether or not Noble Atwood had sufficient mental capacity to execute the deed in controversy. This was purely an issue of fact. Since the sanity and mental capacity of Noble Atwood to make the deed in controversy is presumed, the burden was upon the appellants to prove that he did not have sufficient mental capacity to make the deed. We have fully set forth the material testimony adduced by the appellants and the appellees upon this issue. It speaks for itself. It could serve no useful purpose to discuss it in detail. Applying the principles of law announced in Pledger v. Birkhead, supra, to the facts of this record which the testimony tends to prove, we are convinced that Noble Atwood, at the time he made the deed, had sufficient mental capacity to make the same, and the trial court ruled correctly in so holding. We are brought to this conclusion, not so much because of the greater number of witnesses who testified in behalf of the appellees that Noble Atwood did have sufficient mental capacity to make the deed in controversy, but because of the character of the testimony of these witnesses. It occurs to us that the testimony of the witnesses on behalf of the appellees is entitled to greater weight than the testimony of the witnesses on behalf of the appellant, for the reason that the testimony of many of the witnesses for the appellees shows that they had a better opportunity to know Atwood and to observe and understand his mental status than did the witnesses for the appellants. For instance, we are greatly impressed with the testimony of witness Brown and of Dr. Crump, who made a special examination of Atwood with a view of ascertaining whether he was of sound mind. While these 'witnesses were not experts on insanity, 'they did make a special examination of Atwood in the way of questioning him concerning the making of the deed in controversy, his motives for so doing, and his relationship and attitude toward the appellees. The testimony of these witnesses showed that they were entirely disinterested, and their professional character and high standing, in the absence of any showing to the contrary, we believe entitles them to full faith and credit. Since they made a special examination of Noble Atwood to determine his mental capacity, their testimony is entitled to greater, weight than the testimony of the physicians and other witnesses for the appellants, who did not make a particular examination of Atwood for the purpose of determining the precise issue as to whether or not he was mentally capable of making the deed in controversy. Likewise, the testimony of the notary public who wrote the deed and took the acknowledgment, of the vice president and cashier of the Bank of Bison, and of several other witnesses who had business transactions with Atwood, in which it became necessary for them to go over with him various matters of detail, is entitled to more weight than the testimony of witnesses who merely observed Atwood’s conduct and had casual and occasional conversations with him. After giving careful consideration to the testimony of all the witnesses and making all due allowance for any bias or prejudice that might exist on account of relationship and interest, and all other matters brought in review by this record, we are thoroughly satisfied that the finding of the trial court, to say the least, is not clearly against a preponderance of the testimony. On the contrary, the court’s finding of fact is in perfect accord with our own conclusion; and this finding, we believe, is supported by a decided preponderance of the evidence.

It is a well settled rule of this court not to disturb the findings of the chancellor unless the same are clearly against the preponderance of the evidence. Jordan v. Bank of Morrilton, 168 Ark. 117, 269 S. W. 53; Leach v. Smith, 130 Ark. 465, 470, 197 S. W. 1160, and cases there cited.

The decree is in all things correct, and it is therefore affirmed.


source: Caselaw Access Project

author: "Wood, J.

license: Public Domain

text:
    Harahan Viaduct Improvement District v. Martineau.
    Opinion delivered November 23, 1926.
    Injunction — necessity op bond. — Under Crawford & Moses’ Dig., § 5801, providing that a “court or judge granting an injunction shall specify an amount for which the party obtaining it shall give security in a bond to the party enjoined, before the injunction shall become effectual,” held that an order for a temporary injunction not providing for a bond is void, unless made under § 5796, Id.

    Prohibition to Pulaski Chancery Court; John E. Martineau,, Chancellor;
    writ granted.
    - M. B. Norfleet, Jr., for appellant.

      Grover T. Owens, for appellee.
   "Wood, J.

L. S. McFadden, a property owner and taxpayer in Crittenden Count}7', Arkansas, instituted an action in the chancery court of Pulaski County*, for himself and other- taxpayers in Crittenden County, against the State Highway Commission and the individual members constituting that commission and the Harahan Viaduct Improvement District and the county .judge of Crittenden County, seeking to obtain a permanent injunction to restrain them from letting a contract on the 16th of November, 1926, for the construction of a viaduct in Crittenden County which is a part of a bridge over the Mississippi Diver, for which the Harahan Viaduct Improvement District was created by act 569 of the Acts of the General Assembly of the -State of Arkansas of the year 1923. The plaintiff alleged various reasons or grounds in his complaint, which we deem it unnecessary to set forth, and concludes his complaint by a prayer for a temporary injunction restraining the defendants from letting a contract on November 16, 1926, and, on final hearing, that the injunction be made perpetual. On November 15, 1926, the plaintiff applied to Chancellor John E. Martineau of the Pulaski Chancery Court, in vacation, for a temporary restraining order. The judge issued the following order:

“On this day there is presented to the court the application of L. S. McFadden et al., asking a restraining order against the above named defendants, enjoining them and their agents from letting a contract on November 16, 1926, for the construction of Harahan viaduct. And the court, being well and sufficiently advised in the premises, doth hereby order and adjudge: That the above-named defendants be and are hereby temporarily enjoined and restrained from proceeding with the letting of the contract as herefore advertised for the construction of the Harahan viaduct.”

On the 16th of November, 1926, the Harahan Viaduct Improvement District, through its board of commissioners, applied to the judges of this court for a writ of prohibition directed against the Hon. John E. Martineau and the chancery court of Pulaski County, to prohibit the enforcement of the temporary restraining ordei'. It is alleged in the petition for the writ of prohibition that the temporary restraining order above •set forth was issued without notice to the Harahan Viaduct Improvement Commission, and that no bond had been specified in the order or filed, as required by law, before the temporary injunction should become effective. The petition for writ of prohibition was duly verified by the secretary of the Harahan Viaduct Improvement District Commission. At the hearing before four of the judges of this court, in chambers, the plaintiffs in the original action appearing in person and through their attorney, Grover Owens, and the defendants in the original action appearing in person and through their attorney, M. B. Norfleet, Jr., the cause was heard on the petition and exhibits and the affidavits of witnesses showing that no notice had been served on the chairman or ' secretary of the Harahan Viaduct Commission of the application for the temporary restraining order, and an affidavit of M. B. Norfleet, Jr., showing that he' had applied to the chancellor to recall the temporary restraining order, which the chancellor had denied. It was conceded at the hearing that no bond had been filed with the clerk of the chancery court, and no order had been issued.

Our statute provides as follows: “In every case, the court or judge granting an injunction shall specify in the order therefor an amount for which the party obtaining it shall give security in a bond to the party enjoined, before the injunction shall become effectual, which amount shall be sufficient to cover all the probable damages and costs that may be occasioned by the injunction.” Section 5801, C. & M. Digest. Under the above statute, before the injunction order by the court could be issued or become effectual, the court must specify that the party obtaining it shall give a bond to the party enjoined, naming an amount sufficient to cover all possible damages and costs that may be occasioned by the injunction. Compliance with the above statute on the part of the judge of the chancery court was absolutely essential to his jurisdiction to direct the clerk to issue the order and to have the order put into effect. Without compliance with the above statute, any order issued by the clerk would be absolutely void, and disobedience of the order on the part of the defendants could not be held a contempt of the court or of the judge issuing the order. In other words, a compliance with the above statute is essential to the jurisdiction of the chancery court, or judge in vacation, to have the order for a temporary injunction issued and made effectual.

Section 5796 of Crawford & Moses’ Digest provides that the court or judge to whom an application for an injunction is made may direct a reasonable notice to be given to the party against whom the injunction is asked, to attend and show cause against it, at a specified time and place, and may, in the meantime, restrain such party. The chancery judge did not proceed under this section of the statute. The issuance of his order to enjoin the letting of the contract on the 16th of November, 1926, was tantamount to a permanent injunction, so far as the letting of the contract on that ■ day is concerned, and therefore § 5801 supra, requiring the court’s order to specify a bond,, was jurisdictional. The chancery court or judge had no jurisdiction to order the issuance and enforcement of a temporary injunction without complying with the above statute. The Supreme Court of Missouri, in State v. McQuillin, 260 Mo. 164, 168 S. W. 924, had under consideration the provisions of their Revised Statutes of 1909, § 2522, which is very similar to § 5801 su/pra. In that case the applicants for a writ of prohibition, directed to one of the judg'es of the circuit court, contended that the judge had no jurisdiction to award a temporary injunction without complying -with the provisions of the Missouri statute. The court held as follows: ‘ ‘ The right to grant a temporary or preliminary injunction (as one is called in equity jurisprudence which precedes a final decree) is forbidden by statute ‘until’ a sufficient bond is executed to the other party, ‘except in suits instituted by the State in its own behalf’;” citing the Missouri statute and other Missouri cases, and continuing: “If such an injunction is issued without bond, it is inoperative, and disobedience to its commands is not a contempt. Ex parte Miller, 129 Ala. 130, 30 So. 611, 87 Am. St. Rep. 49; State ex rel. v. Greene, 48 Neb. 327, 67 N. W. 162; 2 High on Injunctions, § 1429.” Further on in this opinion the court said: “In the case in hand, the learned respondent did- not issue a stay order to preserve the existing condition of affairs until he could hear the application for the temporary injunction, but he granted the temporary injunction in direct contravention of the terms of the statute making it his duty to require a bond before awarding that writ.”

In Ex parte Miller, 129 Ala. 130, 30 So. 612, the Supreme Court of Alabama, passing upon a statute which required the giving of a bond before the writ- of injunction became effectual, said: “Whatever might be the rule, in the absence of statutory regulations on the subject as to the time the writ becomes operative, we apprehend, under our statute, it can never be operative until the injunction bond has been executed. Such an order is conditional in its nature, and there can be no injunction, and consequently no contempt for its violation, until the bond has been given.” Citing 2 High on Injunctions, § 1429; 1 Beach on Injunctions, §269; Winslow v. Nayson, 113 Mass. 411.

If the judge of the chancery court had jurisdiction to order the temporary restraining order without the execution of a bond as required by statute, then, to be sure, such judge would have the power to punish the chancery clerk for failure to issue the order and to punish any one who acted in disobedience of such order. But, as we have seen from the above authorities, no one would be in contempt of court for disobedience of such, orders. It therefore follows that the judge is without jurisdiction to have such an order issued and enforced, and that such order is absolutely void. The prayer of the petition for writ of prohibition is therefore granted, and the chancery court of Pulaski County and the judge of the chancery court are hereby prohibited from issuing and enforcing an order for a temporary injunction restraining the petitioners herein from letting the contract on this the 16th day of November, 1926.


author: Hart, J.,

text:
    Bank of Dermott v. Measel.
    Opinion delivered November 23, 1926.
    1. Corporations — note given for stock. — Under Const. 1874, art. 12, § 8, prohibiting- the issuance of stock by private corporations except for money or property actually received, a note given to such a corporation for the purchase of stock in it is void.
    2. Corporations — loans for purchase of stock. —Under Const. 1874, art. 12, § 8, prohibiting- the issuance of stock by private corporations except for money or property actually received, held that a corporation cannot lend money to a subscriber to purchase its own capital stock.
    3. Corporations — consideration for issuance of stock.' — The substance, and not the form of a transaction, is controlling whether Const. 1874, art. 12, § 8, prohibiting- the issuance of stock by a private corporation except for money or property actually received, has been violated.
    4. Corporations — void note — effect of renewal. — A note given in renewal of a note for the purchase of stock in a private corporation which was void under Const. 1874, art. 12, § 8, is likewise void, the same defense being available to the maker in a suit on the renewal note as in a suit on the original note.
    5. Bills and notes — renewal note. — A renewal note is-not a payment of an original note, but merely an extension of the time of payment.
    6. Costs — discretion of chancellor. — The taxation of costs is -within the discretion of the chancellor.
    Appeal from Chicot Chancery Court; E. G. Hammock, Chancellor;
    affirmed.
    STATEMENT OF FACTS.
    The Bank of Dermott sued C. M. Measel to recover $900 and the accrued interest alleged to he due upon a promissory note. The suit was defended on the ground that the note was void because it was given for stock in a private corporation, and was therefore void under § 8, art. 12, of the Constitution of the State of Arkansas.
    The note sued on was. introduced in evidence. It is for $900, and dated July 2, 1921. It is payable to the order of the Dermott Bank & Trust Company three months after date, and was duly transferred to the Bank of Dermott.
    C. M. Measel was a witness for himself. According to his testimony, he made a contract with the Dermott Bank & Trust Company to purchase shares of its capital stock, and executed his note thgrefor in the sum of $750. When the note became due, it was renewed, and finally thé witness executed his note for $900, which included the interest and principal upon the original note, and $78.38, which Measel owed the hank on another debt. At the time he executed the note in question, Measel also executed two other notes payable to the Dermott Bank & Trust Company. One of these was for $200 and the other was for $800. These notes were executed for the purpose of securing the money with which to purchase shares of stock in the Dermott Grocery Company. Both of these notes were subsequently paid.
    C. A. Franklin was also a witness for the defendant. While his testimony is not so clear and positive as that of the defendant himself, still it corroborates the defendant’s testimony in every essential matter. According to the testimony of Franklin, he was cashier of the Dermott Bank & ’Trust 'Company at the time the transactions involved in this case were had. Measel gave two notes to the Dermott Bank & Trust Company to secure money with which to purchase stock in the Dermott Grocery Company, and subsequently paid these notes. He first gave a note to the bank for $750 for shares of stock in the bank. This note was renewed, and finally Measel gave his note to the bank for $900, which included the principal and interest of the original note, and the further sum of $78.38, which Measel owed the bank.
    The Dermott Bank & Trust Company went into the hands of the Baidt Commissioner, and the Bank of Dermott acquired all its assets and became its successor in business. In rebuttal, the plaintiff introduced in evidence the record from the. Dermott Bank & Trust Company, made at the time the transactions involved in this case were had. The bank’s record shows that Measel borrowed $1,750 from the bank. Seven hundred and fifty dollars of this money was used in purchasing shares of stock from the bank and the balance was, used in purchasing shares of stock in the Dermott Grocery Company.
    The chancellor found that the note sued on was executed by C. M. Measel in consideration of stock in the Dermott Bank & Trust Company sold him by said bank, and that all of said note ought to be canceled except $78.38, which Measel owed said bank on another debt. A decree was entered of record in accordance with the findings of the chancellor, and, to reverse that decree, the plaintiff has duly prosecuted an appeal to this court.

      John Baxter, for appellant.

      Margin A. Threet, for appellee.
   Hart, J.,

(after stating the facts). Section 8, article 12, of our Constitution provides that no private corporation shall issue stock or bonds except for money or property actually received, or labor done. It is conceded that, in the construction of this clause of our Constitution, this court has held that a note given for the purchase price of corporate stock is neither money nor property actually received, within the meaning of the Constitution, and the note itself is void. Bank of Commerce v. Goolsby, 129 Ark. 116, 196 S. W. 803.

In that case the court said: “When notes are taken in exchange for stock, it is a palpable violation of the constitutional provision, because notes are merely evidences of indebtedness, and such a transaction shows upon its face that the stock has not been paid for. The .design of the framers of the Constitution was that stock should not be issued and sold except for its value in money or property actually received, or labor done. A note is not property, in the sense of the Constitution, because it only indicates that the stock has not, in fact, been paid for, and, where the notes are worthless, the stock has been exchanged* for nothing. Notes are not money and not bankable paper, but mere dioses in action, and it in no sense meets the requirements of the above provision of the Constitution to accept a note in exchange for stock.”

The language here used is too plain to be .misunderstood, and this is conceded by counsel for the plaintiff. He earnestly insists, however, that the substance of this transaction is that Measel first borrowed some money from the bank and subsequent^ used it in the purchase of its capital stock. This contention, however, is contrary to the evidence. Both Measel and Franklin, who was cashier of the bank at the time, testified that the gist óf the transaction was that Measel executed his note to the bank for shares of its capital stock. The purpose of the constitutional provision was to protect creditors of the corporation, as well as stockholders who had purchased stock in the corporation and had actually paid money or property therefor. The words, “actually received,” mean the receipt of something tangible and which could be used in the payment of the debts of the corporation. If the bank could lend money and the same money could be immediately used in payment of the stock of the bank, it is plain that the clause of the Constitution under consideration would serve no useful purpose. The substance, and not the form, of the transaction should be looked to. A preponderance of the evidence shows that the defendant never borrowed a dollar from the bank. The original note simply represents the amount of money which he agreed to pay the bank for stock which it had issued to him. To call it by another name could not in the least change the real character of the transaction. If the corporation could not take the note of a subscriber in payment of its own capital stock, it is plain that it could not lend money to a subscriber to its own capital stock in payment of it. This would be a palpable evasion of the Constitution. There is no more a payment of money where the corporation lends the money to the subscriber and then receives it back in payment of the stock than where it receives a note originally in payment of a stock subscription. Watts v. Worcester Umbrella Co., 193 Mass. 138, 78 N. E. 886.

Again, it is insisted that the note sued on, being a renewal of the original note, takes the case out of the inhibition of the Constitution. We cannot agree with this contention. The same defense which the maker of the note might have made to an action by the holder of the note originally given by him may be made by him in this action on the note given in renewal of the original note. Both notes were given for the same illegal consideration. The renewal note is not a payment of the original note, but is merely an extension of the time of payment of such prior note¡ In Hollan v. American Bank of Commerce & Trust Co., 159 Ark. 141, 252 S. W. 359, it was held that a contract is itself usurious which is issued in renewal of the usurious contract. Again, in City National Bank v. DeBaum, 166 Ark. 18, 265 S. W. 648, it was held that contracts made in violation of law are not rendered valid by renewal or by subsequent promises to pay them. If the law were otherwise, the constitutional provision under consideration would have no practical use. A subscriber of capital stock of a corporation might execute a short-term note in payment of it, and, by executing a renewal contract when the original note became due, could validate the contract which had been declared illegal and void by the Constitution itself.

Finally, it is insisted that the court erred in taxing the cost in the case. The chancellor taxed two-thirds of the cost to the plaintiff and one-third to the defendant. It is well settled that the taxation of the costs is within the discretion of the chancellor. Mt. Nebo Anthracite Coal Co. v. Martin, 86 Ark. 608, 112 S. W. 882, and Hayes v. Bankers’ & Planters’ Life Assn. of Ft. Smith, 164 Ark. 202, 261 43. W. 296. In the case at bar, the principal sued on was $900, and the amount received by the plaintiff was only $78.38. It is evident that the plaintiff has no cause of complaint as to the taxation of costs.

The result of our views is that the decree of the chancery court was correct, and it will therefore be affirmed.


author: ■Smith, J.

text:
    Whitlock v. Barham & Duncan.
    Opinion delivered November 23, 1926.
    1. Evidence — consideration of deed. — The only effect of the consideration clause in a deed is to estop the grantor from alleging that the deed was executed without consideration, but for every other purpose it is open to explanation, and may be varied by parol proof.
    2. Deeds — consideration—burden of proof. — Where a deed recited a consideration of $10, grantors seeking to prove a different consideration have the burden of proof.
    3. Deeds — consideration—sufficiency of evidence. — Grantors in a deed held -not to have sustained the burden of proving a different consideration from that expressed in the deed.
    4. Bailment — damages.—Where plaintiff permitted defendants to use a drilling outfit until the termination of a replevin suit, defendants, upon such termination, became liable for the market Value of a drill §tem which was lost by their negligence,

      5. Judgment — parties bound. — Bailees of a drilling- outfit involved in a replevin suit, not being- parties to such suit, are not bound by the result.
    6. Bailment — liability of bailees. — Where plaintiffs permitted defendants to use a drilling outfit until termination of a pending replevin suit, without agreement on defendants’ part to be liable for its usable value, held on judgment for such usable value being rendered against plaintiffs as sureties on a delivery bond in such suit, that defendants were not liable for such usable value.
    7. Judgment — conclusiveness.—That the sureties on a delivery bond in replevin were held liable for the loss of a drill stem was not evidence that bailees of such drill stem were likewise liable, and the sureties could recover only by showing that the bailees were responsible for such loss.
    8. Interest- — unliquidated Damages. — Where the sureties on a delivery bond in replevin were compelled to pay the value of a lost drill stem, a suit by them against bailees of such drill stem for negligently causing its loss is one for unliquidated damages, though its value had previously been determined in the replevin suit, to- which the bailees were not parties, and hence a decree against the -bailees does not bear interest from the date of the judgment, but only from the date of rendition of the decree.
    Appeal from Saline- Chancery Court; W. R. Buffie, Chancellor;
    affirmed.

      W. R. Bonham, for appellant.

      W. A. Utley and J. T. Goston, for appellee.
   ■Smith, J.

Prior to July 6, 1921, J. Nick Thomas & Company had acquired oil leases covering about 12,000 acres of land in Mississippi County, Arkansas, and, on the date mentioned, entered into a contract with O. R. B. Pace to drill for oil on this land. By the terms of this contract Pace was to furnish, at his own expense, all machinery and necessary tools, and was to pay the labor. This contract required Pace to begin drilling for oil by a designated date, and to continue, without ceasing operations, for a period of more than sixty days until oil or gas was discovered, or a well of a certain depth had been drilled. In consideration of the performance of these obligations by Pace, 8,000 acres of the leases were to become his property, and the contract provided the manner in which the leases would be divided so that Pace would have 8,000 acres and Thomas & Company would own 4,000 acres.

Pace leased a drilling rig and machinery from the Rose City Drilling Company, and began operations, but he soon became involved, and was unable to meet his obligations.. The drilling company brought suit in replevin against Pace to recover possession of the drilling rig, machinery and tools, and Pace consulted and employed Barham & Duncan, a firm of attorneys residing in Blytheville, to represent him, and Barham & Duncan associated with themselves A. F. Barham and J. T. Coston, attorneys residing at Osceola. Pace was without means to employ attorneys, and could only compensate them by conveying an interest in his interest. After investigation, the prospects were sufficiently alluring to enlist the interest and aid of the attorneys, who will be hereinafter referred to as the plaintiffs, inasmuch as they brought this suit. It was first and immediately necessary to execute a delivery bond to retain possession of the drilling outfit, in order to preserve Pace’s interest under his contract with Thomas & Company, and these attorneys personally executed the bond. It then developed that Pace owed a board bill of $162 at a Blytheville hotel, and had borrowed $750 from the Citizens’ Bank of Osceola to pay labor. The attorneys indorsed a note to the hotel, and one to the bank, covering those items.

It was necessary for Pace to have more money to continue operations, and, with this object in view, he interviewed G-us Fulk, T. P, Murrey and J. F. Whitlock, of Little Rock, and his negotiations with these last-named gentlemen culminated in a contract, dated November 4, 1921, which recited that Pace had drilled a well to the approximate depth of 1,400 feet, but was unable to proceed with the drilling' on account of lack of funds. Fulk and his associates will be hereinafter referred to as the defendants, as they are the parties sued in this cause. This contract provided that, in consideration of the sum of $250 paid Pace, he should convey to Fulk and his associates an undivided three-fourths interest in the contract between Pace and Thomas & Company. The contract further recited that Fulk should furnish the expense money for the parties to go to Blytheville and endeavor to sell enough leases to finance the project.

It was further agreed between Fulk and his associates' and Pace that Murrey should make Blytheville his headquarters, and should have charge of the sale of leases and of all collections and disbursements. Pace gave to Fulk and his associates an irrevocable power of attorney, conferring this authority. Whitlock, as the geologist, was to be present and supervise the drilling. Pace was to do the drilling. The contract also provided how the money received from the sale of the leases should be disbursed.

As a result of Pace’s contract with the plaintiffs and his contract with the defendants, he had conveyed 125 per cent, of his interest in his contract with Thomas & Company and was still obligated to drill the well.

Defendants went to Mississippi County, where the well was located, and there discovered, to their surprise, that Pace had previously conveyed an undivided half interest in the leases to plaintiffs by an instrument which was duly of record.

Some very interesting testimony is given by these amateur oil men touching their dilemma. There were four on one side, and three on the other, with Pace between. According to defendants, they decided to charge their loss to their experience account and abandon the field, for the reason that their contract for three-fourths interest had been rendered ineffective through the previous conveyance by Pace of a half interest to the plaintiffs.

It was agreed that plaintiffs should reconvey three-fourths of their interest to Pace, and the consideration for this agreement is the controlling question of fact in the case. After some negotiations, the parties met in Memphis to execute a contract defining their respective rights and obligations. Of this contract more will be .said later. The parties separated without having evidenced their agreement by any writing signed by them. According to plaintiffs, an agreement was reached whereby they should convey three-fourths of their interest to defendants, the consideration therefor being the assumption by defendants of all liabilities existing or dbntingent against the plaintiffs, the liabilities assumed covering specifically the notes to the hotel and the bank and the liability of plaintiffs on the delivery bond in the replevin suit. A part of the consideration was that Pace, through the delivery bond, should retain and continue to use the drilling rig, tools, etc., involved in the replevin suit.

According.to defendants, they were induced by plaintiffs to proceed with the execution of their contract with Pace in consideration of the conveyance to them from plaintiffs of a three-fourths interest in the half interest which Pace had conveyed to plaintiffs, thus giving defendants a three-fourths interest in all of Pace’s interest, as was provided in their original contract with Pace.

A few days after the meeting in Memphis, Coston met a man named Laird, in Jonesboro, who advised him that he had purchased from Pace a half interest in the contract Pace had with Thomas & Company, and, because of this information, plaintiffs executed a deed to defendants, instead of Pace. This deed recites that it was executed “for and in consideration of the sum of $10 to us paid” by defendant.

After the execution and delivery of this deed, the drilling of the well was resumed. Murrey continued in the endeavor to sell leases, but met with only indifferent success. Fulk made advances for promotion purposes, pursuant to his agreement so to do, to the extent of $2,250, and Whitlock supervised the drilling.

Defendants were disappointed in their expectations in regard to the sale of leases, and Fulk declined to advance more money for operating expenses, and drilling operations ceased for the lack of funds with which to continue,

The replevin suit came on for trial, and Pace failed to attend, and a .judgment was rendered against him and plaintiffs as sureties on the delivery "bond for the usable value of the rig and for $1,550, the value of the drill stem, which had become fastened and stuck in the well.

Plaintiffs were compelled to pay about' $3,000 in satisfaction of this judgment, and they thereupon brought this suit to rec'over the amount thereof, together with the amount of the two notes which they had indorsed for Pace. Defendants answered, and denied any liability, and specifically pleaded the statute of frauds.

The court found that the plaintiffs had permitted defendants to have the use of the drilling rig to carry on the operations commenced by Pace, and that defendants, as bailees of the rig and machinery, negligently permitted the drill stem to become fastened in the well, and, upon this finding, rendered judgment against defendants for the value of the drill stem, which was found to be $1,550. The court declined, however, to render judgment against the defendants for the amount of the judgment against plaintiffs for the usable value of the drilling outfit, and also declined to render judgment against defendants for the amount of the two notes which plaintiffs had indorsed for Pace, for the reason that any agreement on the part of defendants to answer for the debt, default or miscarriage of Pace was within the statute of frauds, and, not being evidenced by any writing signed by the parties sought to be charged, could not be enforced. The court also declined to allow interest on the value of the drill stem. From this decree the defendants have appealed, and the plaintiffs have prosecuted a cross-appeal.

We will not attempt to set out the testimony in detail, as we think no useful purpose would be accomplished by doing so. It is apparent, from what has already been' said, that the situations of the parties afforded numerous opportunities for misunderstandings, which were accentuated by the fact that, in the beginning, the plaintiffs and. the defendants dealt with each other on terms of amity and confidence. The venture was one in which all parties would have profited largely, had oil or gas been discovered, and in which all would lose if the venture failed.

Defendants say that the attempt of plaintiffs to hold them responsible for the debts of Pace and for the liability incurred by plaintiffs as sureties on the delivery bond is, in effect, an attempt to reform the deed to them from plaintiffs, and that this relief can be granted only upon testimony -that is clear and decisive. Plaintiffs reply by saying that they are not seeking to reform this deed, but are seeking only to show tha.t the consideration expressed, which was $10 paid plaintiffs, was not the real consideration for this instrument, but that the consideration was in fact the assumption by defendants of all obligations or liabilities which plaintiffs had incurred through their relations with Pace.

Plaintiffs are correct in their contention concerning the law governing this question. In the case of J. H. McGill Lumber Co. v. Lane-White Lumber Co., 90 Ark. 246, 119 S. W. 822, it was said: “This court, in Vaugine v. Taylor (18 Ark. 65) quoted with approval the following statement of the law. on the subject found in the opinion of Cowen, J., in McCrea v. Purmort, 16 Wend. 400: ‘It seems, according to the American cases, that the only effect-of a consideration clause in a deed is to estop the grantor from alleging that the deed was executed without consideration, and that, for every other purpose, it is open to explanation, and may be varied by parol proof. ’ ’ ’ •

. The burden is, however, upon the plaintiffs to show that the consideration expressed in the deed to defendants was not the true consideration. It is clear that plaintiffs were under the apprehension that defendants were relieving them of all the obligations they had assumed; but it is not so clear that defendants had so agreed.

It will be remembered that tbe conveyance from plaintiffs to defendants did not divest plaintiffs of tbeir entire interest in the project. On the contrary, they retained and did not convey a one-eighth interest in the leases which would have been assigned Pace had the venture proved successful. It was to the interest of all parties that Pace should continue operations, otherwise all would lose. When the parties met in Memphis to reduce their agreements to writing, Coston, for the plaintiffs, prepared certain memoranda, and Pulk performed a similar service for the defendants, but the contract was never reduced to writing satisfactory to all parties, and no contract was ever signed. The memoranda prepared by Coston concerning the contract which the parties were to make sustain the contention of plaintiff, but those prepared by Fulk sustain the contentions of the defendants.

Plaintiffs say that, if the testimony is in equal poise between themselves and the defendants, the scales tip in their favor through the testimony of the cashier of the bank holding the note of Pace which plaintiffs had indorsed. This officer testified that he spoke to Murrey more than once about payment of this note, and that Murrey asked indulgence of time, and promised to pay the note. Murrey admits having more than one conversation with the bank cashier about payment of the note, but, according to his testimony — and it is sustained by the Pulk memoranda — the Pace obligations were to be paid out of the proceeds of the sales of leases belonging to Pace, but there were not enough sales to finance the drilling operations, and there was never money on hand to pay the bank. The money realized from the sales of leases, with the exception of a few items of expense, all went into drilling operations. Under the memoranda prepared by Pulk it was agreed that, from the sales of leases, Murrey, as the financial agent of defendants, should discharge the outstanding obligations of Pace to the extent of $1,500 before anything should be paid Pulk to reimburse him for his advances, but, as we have said, the funds out of which this was to be done were never provided.

We conclude therefore that plaintiffs have not met the burden of proof which the law imposes upon them, of showing that the consideration of their deed to defendants was the assumption of payment by defendants of the existing liabilities of plaintiffs through their relations with Pace. '

It does not follow, however, because we so hold, that defendants should not be held liable for the value of the drill stem. The testimony shows that one of the agreements reached by the parties was that defendants should be allowed to use the drilling outfit until the termination of the replevin suit, and that they did so use it, and, while using it, permitted the drill stem to become stuck in the well and to so remain until it ‘'froze” there, as the witnesses expressed it, meaning thereby that it became set in a. way that it could not, after freezing, be removed. Defendants were bailees of the drilling outfit, and the. testimony on the part of the plaintiffs sustains the finding made by the court below, that the drill stem was allowed to freeze through the negligence of the defendants. The testimony shows that, when Fulk ceased to make advances, and Murrey failed to sell enough leases to provide funds to continue operations, defendants abandoned the enterprise, and left the drilling outfit unprotected.

Pace was not sufficiently concerned about the replevin suit to attend the trial. The plaintiffs were therefore without a witness or a defense in that suit, and judgment was rendered against them as sureties on the delivery bond for the usable value of the drilling rig and machinery and the market value of the drill stem which was left stuck in the well.

Defendants were not parties to the replevin suit, and are therefore not-bound by its result. They are not liable for the discharge of the judgment against plaintiff's for the usable value of the rig, because the testimony does not establish an agreement on their part to assume it; and, for the same reason, they are not liable for the payment of the notes to the bank and the hotel, indorsed by plaintiffs; bnt they are liable for the drill stem, because, while it was in their possession, they negligently permitted its loss.

The court below held defendants were liable for the loss of the drill stem, but refused to charge them with the interest on the value thereof which plaintiffs had paid. Plaintiffs say they should have judgment for interest on the sum they were required to pay as the value of the drill stem from the date of the judgment against them in the replevin suit.'

As we have said, defendants were not parties to the replevin suit, and are not bound by the adjudications there made. It was necessary therefore, for the plaintiffs to recover in the present suit, to show that defendants were answerable to them for the return of the drill rig stem and had failed to discharge this duty, and it was essential also for plaintiffs to show the value of any part thereof which had been negligently lost or destroyed. The value of the drill stem, as found by the jury in the replevin suit, was not conclusive of that question in the court below. It was necessary for the court below to find this value, and, while the court found the same valuation, the demand was nevertheless based upon one for unliquidated damages.

The fact that plaintiffs had been held liable for the loss of the drill stem was not even evidence that defendants were also liable, and plaintiffs could recover only by showing that defendants were responsible for this loss. The liability was one which plaintiffs were required to establish, and the amount of the liability could be determined only after a trial. Coburn v. Muskegon Booming Co., 72 Mich. 134, 40 N. W. 198.

In volume 17 C. J., chapter “Damages,” page 822, it is said that “an award of interest, or, more accurately, of damages for the detention of. compensation, is not, according to the weight of authority, a matter of right in actions of tort for unliquidated damages, but is discretionary with the jury ór with the court, where the trial is to the court, except in certain well-defined classes of cases, wherein the recovery is measured by the value or difference in value of the property destroyed or injured, and plaintiff is regarded as entitled, as a matter of law, to interest upon the amount found, if entitled to a recovery.” And at § 146 of the same chapter, page 824, it is said: “In other jurisdictions, in cases of wrongs resulting in depreciation or destruction of personalty, an allowance of interest as such is a matter of discretion, and, according to the weight of authority, is, where the amount of the loss is definitely ascertainable, allowable as of right, and by that name.” Among other cases cited in support of the text last quoted are the eases of Hooten v. State, 119 Ark. 334, 178 S. W. 310, and St. Louis, I. M. & So. Ry. Co. v. State, 119 Ark. 334, 178 S. W. 310, and St. Louis, I. M. & So. R. Co. v. Biggs, 50 Ark. 169, 6 S. W. 724.

The instant case is unlike that of Rogers v. Atkinson, 152 Ark. 168, 237 S. W. 679, where the jury had failed to compute and include interest in the verdict, and, upon appeal, we modified the judgment of the court below by computing and adding the interest. That was a suit on a note, and it was an undisputed fact that, if the plaintiff was entitled to a verdict, he was entitled to interest as in the case of a liquidated demand, and we held therefore that the plaintiff was entitled to have the judgment modified so as to include interest.

The instant case is more like that of McDonough v. Williams, 86 Ark. 600, 112 S. W. 164, which was an action for deceit in the sale of corporate stock, in which case it was held that the plaintiff should have judgment only for the amount assessed by the jury, which did not include interest.

We decline therefore to modify the decree of the court below by adding interest to the value of the drill stem from the date of the judgment against plaintiffs in the replevin suit, as plaintiff insist we should clo. However, the decree here appealed from will and does bear interest from the date of its rendition.

Upon a consideration of the whole case we find no error in the decree of the court below, and it is therefore affirmed both upon the direct appeal and the cross-appeal.


author: Smith, J.

text:
    Frazer v. Pettit-Galloway Company.
    Opinion delivered November 23, 1926.
    1. Evidence — admissibility of copy of writing. — A copy of a writing is inadmissible in evidence until it has been shown that the original is lost or destroyed, or that it is in the possession of the opposite party, who has failed to produce it as evidence after being notified to do so.
    2. Interest — open account. — An open account for goods sold bears interest after maturity.
    3. Sales — waiver of breach of warranty. — Where the seller of a gas plant warranted it free from defects for one year, the buyer will be held to have waived a breach of such warranty by selling the plant.
    4. Sales — remedies of seller. — Though the seller of a gas plant could, under reservation of title, retake the property after the buyer had resold it, it was not required to do so, and could treat the title as having passed to the buyer’s vendee and sue for the balance of the purchase price.
    Appeal from Pulaski Circuit Court, Second Division; Richard M. Mann, Judge;
    affirmed.

      A. J. DeMers and T. N. Robertson, for appellant.

      Carmichael S Hendricks, for appellee.
   Smith, J.

In February, 1923, appellant, Frazer, and his wife purchased from appellee certain household appliances, including’ a gas plant and accessories. These articles were bought on open account, and title was reserved by appellee until the purchase money was paid. The gas plant and accessories were installed in the suburban home of appellants, near the town of Levy, Arkansas. The sale was evidenced by a written contract, which contained the following guaranty: ‘‘Guaranty — All apparatus listed above is guaranteed to be free from defects in workmanship and material for a period of one year, and any parts proving defective within this period will be replaced without charge. On apparatus having guaranty card attached, the card must be properly filled out on date of installation and returned to ns or to the manufacturer.”

Frazer was slow in making payments, and was asked for a note, which appellee thought it could use by discounting it at the bank, and a note was given, which evidenced the balance then due. There was correspondence between the parties in regard to the payment of the note. Appellee had notified the attorneys for appellants in writing that it desired the originals of certain specified letters for the benefit of the record. These letters were not produced by appellants, and the court permitted appellee to introduce copies thereof. When appellants put on their case, they offered to introduce copies of certain letters, which were excluded when objection to their introduction was made. No notice, however, had been given to appellee to produce the originals of the letters copies of which appellants sought to introduce. These rulings are assigned as error.

In the case of Hartford Fire Ins. Co. v. Enoch, 72 Ark. 47, 77 S. W. 899, a syllabus reads as follows: “A copy of a writing is inadmissible in evidence until it has been shown that the original is lost or destroyed, or that it is in the possession of the opposite party, who has failed to produce it as evidence, after being notified to do so. ’ ’ There was therefore no error in the ruling made.

At the conclusion of all the testimony, the court instructed the jury as follows: “Gentlemen of the jury, in this case, as the court sees it, there is nothing for the jury to decide. The proof shows that this gas plant was sold, together with other articles, all of which amount had been put in a note for $1,200; the proof shows further, without contradiction, and it is admitted, that that note, or account, either, was paid down below the cost of the gas plant, and when any amount was paid on the purchase price of the gas plant it was a ratification of the gas plant. Now, the defendant' claims that the gas plant did not perform the service it was intended for, but the law required him, when he found that out, to act by complaining, so, if he paid with knowledge of its condition, then the law imposed on him absolute ratification under his contract. That is one reason. Another reason is, the property has been sold, for a consideration, to a purchaser, and for that reason the plaintiff cannot get its property. -So you will return a verdict for the plaintiff by direction of the court.”

Thereupon the jury, under the above direction of the court, rendered a verdict in favor of the plaintiff for the sum of $750, and judgment was rendered accordingly, and the defendants have appealed.

Appellee had sold appellants other goods, which, upon complaint concerning their quality, had been taken back, and these goods are not involved in this litigation.

There was testimony, which does not appear to be denied, that certain payments were made, which were credited on the note, and, in response to appellee’s demand that the balance be paid, appellants offered to pay the note if no interest was charged thereon, this contention being based on the theory that the account itself bore no interest, and that the note had been given merely to accommodate appellee in raising money by using the note. Of course the account, as well as the note, after maturity, would bear interest.

It appears that, without appellee’s knowledge or consent, appellants sold the house in which the plant had been installed, but appellants say this is unimportant, for the reason that, having reserved title to the heating plant, appellee had the right to retake it, and should do so, inasmuch as appellants contend it did not meet the specifications of the guaranty under which it was sold concerning its heating qualities. It will be observed, however, that the guaranty was in writing, and contained no reference to the heating qualities of the plant.

Appellants did not return the property, or offer to do so, nor did they wait until they were sued and plead partial failure of consideration. On the contrary, they sold the plant, and have the proceeds.

We think therefore that the court was correct in holding, as a matter of law, that appellants had ratified the contract of sale, even though there had been a breach of the guaranty, by selling the plant. It is true, appellee,' under its reservation of title, might have retaken the property, but it was not required to do so. It has elected to treat the title as having passed to appellant’s vendees, and, under this election, it had the right to sue for the balance of unpaid purchase money.

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


text:
    Interstate Jobbing Company v. Velvin.
    Opinion delivered November 23, 1926.
    1. Corporations — liability op officers — failure to make reports. —In an action to enforce the personal liability of the president of a private corporation for debts incurred during a year for which no financial report of the corporation had been filed, as required by Crawford & Moses’ Dig., § 1715, a defense in the nature of a plea of payment of a portion of the account for which defendant would otherwise be liable held unavailable where there was nq plea of payment.
    2. Payment- — pleading.—Where there is no plea of payment, proof thereof is inadmissible.
    3. Corporations — liability of officer — evidence.—In an action to enforce the personal liability of the president of a private corporation for debts incurred during a year for which no financial report of the corporation had been filed, where plaintiff, entitled to a reversal, asked that judgment be rendered in the Supreme Court for what in any event would be the minimum amount for which it is entitled to judgment, held that plaintiff in any event would be entitled to the difference between purchases and payments made during such year.
    Appeal from Hempstead Circuit Court; James II. McCollum, Judge;
    reversed.

      E. F. McFacldin, for appellant.
   Smith, J.

This 'is the second appeal in this case, and, in the opinion reported on the former appeal, which appears in 165 Ark. 263, will he found a statement of the facts out of which the litigation arose. The suit was brought by the Interstate- Jobbing Company to enforce against appellee, as president of the Farmers’ Mercantile Company, a domestic corporation, the liability prescribed by § 1715, C. & M. Digest, for failure to file the annual corporate report required by that section.

Defendant Velvin became president of the corporation on January 1, 1921, and was president thereof during the remainder of that year. The corporation was indebted to appellant, the plaintiff below, on January 1, 1921, in the sum of $367.10, and, during that year, bought more goods amounting to $471.75, and made payments on account during that year amounting to $350.

At the first trial plaintiff asked .an instruction which, after defining the duty of certain corporate officers to file reports, directed the jury, if this duty had not been performed, to return a verdict for it “for whatever amount of accounts, if any, you find were contracted by the Farmers’ Mercantile Company with the plaintiff herein, after the failure to file the report required by law.” The court modified this instruction by adding “less whatever sum, if any, you may find, from a preponderance of the evidence, the Farmers’ Mercantile Company paid to the plaintiff during the year 1921.”

The instruction was modified on the theory that payments made in 1921 should be credited on the items purchased during that year, although there had been no application by the debtor of these payments to the items purchased during that year. We held this modification was erroneous, for the reason that, the debtor having failed to direct the application of the payments, the creditor had the right to apply the payments to the older items of the account, as had been done in the account sued on.

The cause was remanded for a new trial, but there was no amendment of the pleading’s; and the answer upon which the case went to trial contained only a g'eneral denial of the allegations of the complaint. After the jury had been impaneled to try the case and the plaintiff had made a statement of the case, counsel for defendant, in stating his defense, said that an agreement had been made between the secretary of the Farmers’ Mercantile Company and the plaintiff whereby any payments made in 1921 should be applied to any purchases made during that year. Thereupon counsel for plaintiff objected to the statement, for the reason that the answer had set up no such defense, and, when this objection was overruled, a continuance was then asked upon the ground of surprise, which motion was also overruled, to which action plaintiff duly excepted. Thereafter, by appropriate objections, both to the admission of testimony and to the giving of instructions, plaintiff preserved its exceptions to the submission of this special plea to the jury.

It appears therefore that, at the first trial, the defendant sought to have the payments made by the corporation in 1921 credited to the 1921 purchases, as a matter of law, without alleging or attempting to prove any agreement or direction to that effect; while at the second trial defendant asked that this be done because of an agreement to that effect.

It will be remembered that, although the suit was commenced in 1922 and had been pending in court for several years, the answer contained no reference to this agreement, and we are therefore of the opinion that the court should have denied defendant the right to present this special plea under the circumstances, or, having’ granted this right, should, by continuing the case, upon such terms as were thought proper, have afforded plaintiff an opportunity to meet the plea.

This new defense was in the nature of a plea of payment of a portion of the account, for which defendant would otherwise be liable, and it is a rule of pleading well settled by the decisions of this court that, where there is no plea of payment, proof thereof is inadmissible. Robinson v. Woodson, 33 Ark. 307. In the ease of Jarvis v. Andrews, 80 Ark. 277, 96 S. W. 1064, it was held that evidence tending to prove payment of the note in suit was properly excluded in the absence of a plea of payment. See also Hays v. Dickey, 67 Ark. 169, 172, 53 S. W. 887. Cases cited in the notes to 30 Cyc. 1253 and 21 R. C. L., pages 115 and 117, show that this rule is one of general application.

The case must therefore he reversed, and would he remanded except that appellant asks that judgment he rendered here for what, in any event, would he the minimum amount for which it is entitled to judgment.

It appears from the undisputed evidence that payments and purchases were made in 1921 as follows:

Jan. 11, payment............................................$ 75.00
Jan. 31, purchase............................................. $21.25
Feb. 11, payment............................................. 100.00
Mar. 7, purchase ........,................................. 38.00
Mar. 15, payment .......................................... 50.00
June 15, payment.......................................... 50.00
Aug. 16, payment ........... 50.00
Sept. 21, purchase......................................... 128.25
Sept. 21, purchase.......................................... 230.25
Sept. 28,' payment................................... 25.00
Total payments ................................................$350.00
Total purchases................................................ $417.75

It thus appears that purchases exceeded payments by $67.75, and plaintiff is entitled to judgment for this amount in any event, as it is an undisputed fact that defendant had made default in complying with & 1715, C. & M. Digest.

Appellant argues that, as there were payments made in 1921 which exceeded the purchases that had been made during that year up to the time of payments, the excess of those payments should, automatically and immediately, be credited to the older items of the account. And so they would be if there were no agreement to the contrary. But we cannot say that the undisputed testimony authorizes that action, so that plaintiff is entitled only, under the undisputed evidence, to a judgment for the difference between purchases and payments made in 1921.

■ The judgment of the court below will therefore be reversed, and the cause remanded for a new trial, unless appellant elects to have judgment rendered here in its favor for $67.75.


author: Humphreys, J.

text:
    Huddleston v. Burnett.
    Opinion delivered November 23, 1926.
    1. Automobiles — filling station not nuisance per se. — Construction and operation of a filling station and public garage is a lawful business and not a nuisance per se.

    2. Nuisance — nature of injury. — A lawful business may not be conducted in the neighborhood of a dwelling house if the noise therefrom would render its enjoyment materially uncomfortable.
    3. Automobiles — operation of filling station — injunction.— Operation of a filling station and public garage in a residential district, which would result in creating incessant noise in the neighborhood, was properly enjoined.
    Appeal from Pope Chancery Court; W. E. Atldnson, Chancellor;
    affirmed.

      J. II. A. Baler and J. A. Worsham, for appellant.

      E. A. Williams, for appellee. .
   Humphreys, J.

This is an appeal from a decree of the chancery court of Pope County enjoining appellants from building and operating a filling station and public garage on a strip of land 85 east and west by 246 feet north and south, fronting on the Little. Bock & Port Smith highway, in the residence section of the town of Atkins. The lot in question adjoins appellee’s home on the east and Mrs. T. J. Bobinson’s home on the west. The plan was to erect the station and garage nearer the north line of the highway than the other residences situated on the north side, and, when erected, would he located within 100 or 125 feet of appellee’s house. Hundreds of automobiles and trucks passed alongthe highway daily, and, in the tourist season of the year, passed both day and night. The homes of appellee and his neighbors were built in this locality with a view to getting out of the business district of the town. It was distinctively a residence section, located some five or six blocks away from the business district. Appellant, J. W. Huddles-ton, owned and operated a filling station in the business district of the town, and, in partnership with E. W. Lawson, purchased the strip of land in question upon which to build a filling station, garage and residence, to be occupied by appellant, E. W. Lawson, who was to operate said station. The strip of land in question was purchased after appellee and his neighbors had built their homes in that locality.

It was alleged in the complaint that the operation of a filling station and public garage would become a nuisance by creating* such noise, through the honking of horns, racing, and testing' of motors, thereby destroying the peace, quiet and comfort of appellee’s home.

Appellants filed an answer, admitting that they intended to construct a filling station and garage upon the strip of land in question, but denying that the operation thereof would constitute a nuisance.

The testimony introduced was directed to the sole issue presented by the pleadings, of whether the operation of a filling station and garage in that particular locality would constitute a nuisance that would result in irreparable damage to appellee. The trial court found that it would, and permanently enjoined the construction thereof, so the correctness of the finding and decree is before us for trial de novo.

The construction and operation of a filling station and public garage is a lawful business and not a nuisance per se, but one cannot prosecute a lawful business in the neighborhood of a dwelling-house if the noise therefrom would render the enjoyment of it materially uncomfortable. In Junction City Lumber Co. v. Sharp, 92 Ark. 538, 123 S. W. 370, this court quoted with approval from Ross v. Butler, 19 N. J. Eq. 294, 97 Am. Dec. 654, the following paragraph:

“The law, then, must be regarded as settled that, when the prosecution of a business, of itself lawful, in a neighborhood of a dwelling house, renders the enjoyment of it materially uncomfortable, by the smoke and cinders and noise, or offensive odors, produced by such business, although not in any degree injurious to health, the carrying on such business there is a nuisance. Durfey v. Thalheimer, 85 Ark. 544, 109 S. W. 519; Terrell v. Wright, 87 Ark. 213, 112 S. W. 211, 19 L. R. A. N. S. 174.”

The record reflects that appellee purchased a lot and built a home five or six blocks from the business section of Atkins, for the purpose of living in a quiet neighborhood, on account of the nervous condition of his wife and extreme old age of his mother, who was eighty-four years old, before appellants bought the adjoining lot upon which to build the proposed filling station and public garage; that the locality chosen by him was and still is a distinctively residential district.

A decided preponderance of the testimony adduced in the case was to the effect that the operation of a filling-station and public garage upon the lot purchased by appellants for that purpose would produce a disturbing-noise in the neighborhood, and particularly interrupt the peace and quietude of appellee’s home. The witnesses testified that ac great many people on the much-traveled highway would stop and honk their horns for gas and create much noise in stopping and starting their automobiles, testing their motors, etc. It strikes us that the creation of incessant noises of this character, in a strictly residential section, would constitute an intolerable nuisance in the neighborhood.

No attempt was made by appellants to show any public necessity for establishing a filling station and public garage at this particular point. Appellant Huddleston owned 'and was operating- a filling station within five or six blocks of this neighborhood.

After a careful consideration of the evidence, we are unable to say that the finding of the court was contrary to a clear preponderance of the testimony.

No error appearing, the decree is affirmed.