text:
    City National Bank v. Citizens' Bank of Pettigrew.
    Opinion delivered January 24, 1927.
    1. Banks and banking — acceptance op check. — The general rule is that, where a check is offered a.nd accepted by the drawee bank as a deposit, credited to the holder’s account and charged to the account of the drawer, the transaction is closed and cannot be rescinded or -recalled except for fraud or mistake.
    2. Contracts — -fraud or mistake. — In equity fraud or mistake vitiates every transaction.
    3. Banks and banking — mistake in accepting check. — Where a bank forwarding a check for collection suffered no loss by reason of the drawee bank mistakenly crediting the forwarding bank’s account therewith, the drawee bank, on discovering the same day that the drawer had no funds to "meet the check, had a right to correct the mistake by notifying the forwarding bank.

      4. Bills and notes — acceptance of check. — There can be no acceptance of a check by delivery to the bank on which the cheek is drawn until the draft passes through the books of the bank, charging the drawer’s account and crediting the account of the remitting bank and making a complete transaction.
    Appeal from Washington Chancery Court; Lee Seamster, Chancellor;
    reversed.
    STATEMENT OE EACTS.
    So far as the issues raised by the appeal in this case are concerned, this is a suit in equity by the Citizens’ Bank of Pettigrew against the City National Bank to recover the sum of $1,000, the amount of a draft drawn on the defendant in favor of the plaintiff and alleged to have been accepted by the defendant. The suit is defended on the ground that the drawer of the draft had no funds in the defendant’s bank with which to pay it, and that the acceptance of the defendant was made under a mistake of fact.
    The record shows that, on November 10, 1923, the Citizens’ Bank of Pettigrew, in Madison County, Arkansas, mailed at Pettigrew to the City National Bank of Fort Smith, Arkansas, the following draft:
    “The Farmers’ State Bank
    Oklahoma City, Okla., Nov. 6, 1923.
    “Pay to the order of Citizens’ Bank ($1,000) one thousand dollars for value received, and charge to account of R. J. Conneway.
    “To City National Bank,
    “Fort Smith, Arkansas.”
    November 11 was Sunday, and November 12 became Armistice day, and a holiday. When the City National Bank opened for business on Tuesday, November 13, the draft had arrived. One of the clerks in the bank mailed on the same day a postal card to the Citizens ’ Bank of Pettigrew, which is as follows:

      “The City National Bank, Fort Smith, Ark., November 13, 1923. Your letter of 11 received.
    We credit your account...................................................$1,000
    We entered for collection..........................................
    We debit your account...................................................
    “Checks and drafts on other points credited subject to payment.
    “Yours truly,
    “The City National Bank.”
    The account of R. J. Conneway was also charged with the sum of $1,000 by another clerk. The attention of the cashier of the City National Bank was called to the matter later in the da^ of the 13th inst., and he examined the account of Conneway to see if he had any funds in the bank. Finding that Conneway had no funds in the bank, he directed the draft to be at once returned to the Citizens’ Bank of Pettigrew. This direction was given before the close of banking hours, but it seems that the letter returning the draft was not received by the Citizens’ Bank of Pettig'rew until November 15, 1923. The advice-card or acceptance copied above was received by the Citizens’ Bank of Pettigrew on November 14,1923.
    According to the testimony of the cashier of the City National Bank, Conneway was not a regular customer of the bank, but had borrowed money from it on one occasion previously and had deposited some collateral security with the bank. The amount so borrowed was due and unpaid at the time of the transaction in question, and the collateral was still in the hands of the City National Bank. The draft and the notice of nonpayment were dated November 15, but this was a mistake of the stenographer, and the actual date‘was November 13. The direction of the cashier to return the draft with notice of nonpayment was made during banking hours, but too late to be forwarded to the Bank of Pettigrew on that day.
    The Citizens’ Bank of Pettigrew refused to accept the return of the draft, on the ground that the postal card received by it, above referred to, was an absolute acceptanee of the check, and was not merely an advice-card showing the receipt of the draft, as claimed 'by the Citizens’ National Bank. B. J. Conneway had been connected with the Citizens’ Bank of Pettigrew, and that bank knew that he had no funds on deposit in the City National Bank at the time the draft in question was drawn, but it expected that Conneway would be in Port Smith on November 12, 1923, and arrange for the payment of the draft. Conneway had returned from Oklahoma, and was in the Citizens’ Bank of Pettigrew on the day the card of acceptance or advice was received, which was November 14, 1923. The Citizens’ Bank of Pettigrew, as soon as it received the postal card in question, treated it as an acceptance or payment of the draft, and made an entry in its books crediting the account of B. J. Conneway with $1,000. The draft was given by Conneway to the bank in payment of an antecedent indebtedness, and it is not shown that the Citizens’ Bank of Pettigrew will in any wise be injured if the postal card in question is not treated as an absolute acceptance and payment of the draft.
    The chancellor found the issues in favor of the plaintiff, and rendered a decree in favor of the Citizens ’ Bank of Pettigrew against the City National Bank of Port Smith in the sum of $1,000. To reverse that decree this appeal has been prosecuted by the City National Bank.

      James B. McDonough, for appellant.

      W. N. Ivie, for appellee.
   Hart, J.,

(after stating the facts). Michie, in his treatise on Banks and Banking, vol. 2, § 141 (1c), lays down the general rule governing cases of this sort as follows:

“Where a check is offered and received by the drawee bank as a deposit, credited to the holder’s account, and charged to the account of the drawer, the transaction is irrevocably closed and cannot be rescinded or recalled by the bank or the drawer without the consent of the person to whom payment- was made, except for fraud or mistake ’ ’

The general rule proceeds upon the theory that, when a bank accepts a check or draft on itself, by depositing to the credit of the person presenting it the amount of the check, it is presumed to know whether the check at that time is good or not, and, if it unconditionally accepts it, it cannot thereafter repudiate it in this respect. The general rule has been recognized and followed by this court. Burns v. Yocum, 81 Ark. 127, 98 S. W. 956; and Sanders v. W. B. Worthen Co., 122 Ark. 104, 182 S. W. 549.

In American National Bank v. Miller, 185 Fed. 338, the Circuit Court of Appeals, Sixth Circuit, lays down the rule to be that, where a check was offered and received by the drawee bank as a deposit, credited to the depositor’s account and charged to the account of the drawer, the transaction constituted complete payment of the check and could not be rescinded except for fraud or mutual mistake.

This case was appealed to the Supreme Court of the United States and the judgment affirmed in 229 U. S. 517, under the style of the American National Bank v. Miller. Mr. Justice Lamar, who delivered the opinion of the court, in discussing the subject said:

“There are some, disadvantages of sending a check for collection directly to the bank on which it is drawn, but, when such bank performs the dual function of collecting and crediting, the transaction is closed, and, in the absence of fraud or mutual mistake, is equivalent to payment in usual course. National Bank v. Burkhart, 100 U. S. 686, 689.”

We are of the opinion that the exceptions recognized in the cases just cited are in accord with the holding of this court on the subject. In Arkansas Trust do Banking Co. v. Bishop, 119 Ark. 373, 178 S. W. 422, the court said:

“The only question in this case for the decision of the jury was whether the bank accepted the cheek and became liable for the payment of the amount for which it issued its deposit slip to the drawee thereof. The intention of the parties to the transaction could properly have been shown for the determination of this question, and, the bank having issued its regular deposit slip or ticket for the amount of the check to the drawee thereof, the burden rested upon it to show that it was not in payment of the check.”

Again, in Sanders v. W. B. Worthen Co., 122 Ark. 104, 182 S. W. 549, the court said:

“When a check is taken to a bank and the bank receives it and places the amount to the credit of the customer, the title to the check is vested in the bank. The rule as stated is not an absolute rule, but it is prima facie merely, and yields to the intention of the parties, express or implied, from the circumstances.”

It is a well recognized doctrine of equity jurisprudence that fraud or mistake vitiates every transaction. It is evident that, if the bank acted through a mistake of fact in making the acceptance, it should not be bound thereby, unless the other party suffered some loss on account of its act in making the acceptance.

In the case at bar no loss was suffered by the Bank of Pettigrew. It knew that Conneway had drawn the draft in its favor in payment of an antecedent indebtedness and that he had no funds in the City National Bank at that time with which to meet it. It also knew that he intended to go to the City National Bank at Port Smith by the 12th of November and make arrangements for the payment of the draft. Conneway was in the bank when the postcard copied in our statement of facts was received. The Citizens’ Bank of Pettigrew did not ask hi-m if he had made arrangements to pay the draft with the City National Bank, but credited his account with the amount of the draft. In doing so, the Bank of Pettigrew treated the postcard as an absolute acceptance instead of a card advising it that the draft had been received by the City National Bank. It is true that the card, on its face, is an absolute acceptance, but, according to the testimony of the cashier of the City National Bank, it was not intended as such, hut was only intended to be a notification that the bank had received the draft.

It is also true that the bookkeeper credited ¡the account of Conneway with the sum of $1,000, the face value of the draft, on the day that it was received, but, according to the testimony of the cashier of the bank, this was done through mistake. On account of the two previous days being holidays, an accumulation of business had come through the mails, and the routine work of the bank was being done hastily on Tuesday, which was the day the draft was received and on which the transactions with regard to it were had by the City National Bank. As soon as the cashier discovered that this had been done, he examined Conneway’s account to see if he had any funds on deposit with which to pay the draft. Finding that he had none, he directed the item to be charged off of the books of the bank and that the Bank of Pettigrew be notified that the draft was returned to it because the drawer had no funds with which to pay it. This was done during banking hours on the day of the 13th of November, the day it,was credited, although the letter notifying the Citizens ’ Bank of Pettigrew that the draft was returned for nonpayment for want of funds was dated November 15. The cashier of the City National Bank, however, testified that was due to a mistake of the stenographer, and that the letter was directed to be. sent on the 13th, although the mistake was discovered too late for it to be mailed on the train going to Pettigrew on that day.

The City National Bank acted in the dual capacity of collecting agent of the Citizens’ Bank of Pettigrew, the holder of the draft, and as drawee. In such case there can be no acceptance by delivery until the draft passes through the books of the bank, charging the account of the drawer and crediting the account of the remitting bank, and making a complete transaction. First National Bank of Murfreesboro v. First National Bank of Nashville, 154 S. W. 965.

Under the circumstances of this case, it is evident that the City National Bank charged the amount of the draft to the account of Conneway in the hurry of the day, which was caused by the accumulation of business on account of the two previous days being holidays, and that there was no intention to .treat the transaction as completed until the close of the day’s business.

The postal card was not intended to be an absolute acceptance, but was only intended by the bank to be a card advising the Citizens’ Bank of Pettigrew that the draft had been received. No loss was. suffered by the Citizens’ Bank of Pettigrew on account of the transaction.

The result of our views is that the City National ¡Bank never intended to treat the transaction as a completed one and that it had a right to correct the mistake when it discovered, on the same day, that Conneway had no funds in the bank with which to meet the draft. The Citizens’ Bank of Pettigrew, having been promptly notified and having suffered no loss on account of the mistake, is in no position to claim that the facts of this case did not bring it within the exception that the acceptance was made under a mistake of fact. It follows that the decree must be reversed, and, inasmuch as the case of the plaintiff seems to have been fully developed, its cause of action will be dismissed here.


source: Caselaw Access Project

author: Smith, J.

license: Public Domain

text:
    Rainwater v. Federal Reserve Bank of St. Louis (Little Rock Branch).
    Opinion delivered January 24, 1927.
    1. Banks and banking — authority to sub bank commissioner.— A bank which has been constituted the agent of certain drafts and was the legal holder thereof was authorized to sue the State Bank Commissioner in charge of an insolvent bank, which had collected the drafts, to have.claims therefor allowed as preferred, where drafts sent in remitting such collections were not honored.

      2. Banks and banking — insolvency—preference.—The claim of the Federal Reserve Bank against the Bank Commissioner in charge of a bank which made collections for claimant and had funds sufficient to honor drafts sent as remittance of collections, which were not paid, owing to the bank being closed, held a preferred claim, since the collecting bank was the claimant’s agent and held the money collected in trust.
    3. Banks and banking — remittance in exchange. — A bank making collections for the Federal Reserve Bank may remit in exchange, instead of in money, in view of the large amount of collections made by the Federal Reserve Banks.
    4. Banks and banking — collections—negligence.—It is not negligence for banks receiving for collection checks or drafts payable in another city to send them for collection to the bank on which they were drawn, in view of Acts 1921, p. 914, § 14.
    Appeal from Franklin 'Chancery Court, Ozark District; J. V. Bourland, Chancellor;
    affirmed.

      Ilill & Fitshugh, for appellant.

      James G. McConhey, for appellee.
   Smith, J.

The Little Rock Branch of the Federal Reserve Bank of St. Louis, hereinafter referred to as the Reserve Bank, filed a complaint which contained the following* allegations: The Reserve Bank is a corporation created by an act of Congress approved December 23, 1913, popularly known as the Federal Reserve Act, and among* its functions is the collection of all items payable in its district when received from member banks and other Federal Reserve banks. The People’s Bank of Ozark, Arkansas, is a corporation created under the laws of Arkansas, and was engaged in the banking business at Ozark, Arkansas. Under the Federal Reserve Act all national banks are required to become member banks of the Federal Reserve system, and all State banks and trust companies which are eligible may become members, and all member banks are required to clear at pax items drawn on or payable at their respective banks. Nonmember banks voluntarily agreeing to do so are permitted to enter into an agreement with the Federal Reserve Bank to clear at par all items drawn on or payable at such noninember banks when sent direct to them.

The People’s Bank was not a member of the Federal Reserve System, but was a party to an arrangement existing 'between nonmember banks and the Federal Reserve Bank and branches, whereby the Federal Reserve Bank of St. Louis agreed that, through its Little Rock Branch, it would send through the United States mail direct to the People’s Bank and other nonmemiber banks, as the Federal Reserve Bank’s agent, for collection and remittance, all items drawn on or payable at such nonmember banks, and that remittances for collections could be made either by the shipment of money at the expense of the Federal Reserve Bank or by exchange acceptable to the Federal Reserve Bank. It was a part of the agreement on the part of the People’s Bank (and other nonmember banks) that it would, as agent of the Reserve Bank, present such items as were drawn on it to itself for collection,, and, if the drawer had sufficient funds on hand to entitle the payment of the draft, to pay it to itself as collection agent of the Reserve Bank, and immediately remit the funds so collected, and in the case of the People’s Bank the agreement was that the remittance should be made to the Little Rock Branch, either by shipment of money or by furnishing satisfactory exchange, and would cause to be protested and returned all items it was not willing to pay or could not collect.

The arrangement recited had been in operation for some time, when, on January 20, 1926, the Reserve Bank forwarded to the People’s Bank, indorsed ‘‘For collection and remittance,” its certain cash letter containing items aggregating $2,569.71. The People’s Bank collected $2,502.46 worth of these items, and, on January 21, 1926, forwarded to the Reserve Bank its draft drawn on the Bankers’ Trust Company of Little Rock for the amount collected. On January 21, 1926, the Reserve Bank forwarded to the People’s Bank, indorsed “For collection and remittance, ’ ’ a cash letter containing items aggregating $2,503.51, of which the People’s Bank collected $2,458.76, and, on January 22, 1926, forwarded to the Reserve Bank its draft for the amount of the collection on the Grand National Bank of St. Louis,- Missouri. In each case the uncollected items were also returned.

The Reserve Bank, upon receipt of the respective remittance drafts, duly presented the same to the Bankers’ Trust Company of Little Rock and the Grand National Bank of St. Louis for payment, and payment was refused and the drafts protested. In the meantime the People’s Bank had been closed by order of the State Banking Department and placed in its hands for liquidation.

At the time these items were collected by the People’s Bank, the drawers and makers thereof had on deposit with the People’s Bank funds sufficient to pay them, and the People’s Bank had sufficient funds in its vault and with solvent correspondents to have paid the items, although the account of the People’s Bank with the Grand National Bank was at the time overdrawn.

After the Bank Commissioner had reconciled the various correspondent bank balances as of the date of closing on January 22, 1926, the date on which the Commissioner took charge of the People’s Bank, it was found that the true amount of balances due from all banks amounted to $7,738.99, and that the cash in the vault of the People’s Bank amounted to $8,155.59. At no time between the collection of the items contained in the cash letters referred to and the time the liquidating agent took charge had the cash in the People’s Bank been less than $8,155.59, nor the balances with solvent correspondents been less than $7,738.99. The total assets of the People’s Bank at the date of closing amounted to $197,374.37. Its liabilities were not shown.

The Reserve Bank, acting on the request of and as the agfent for its immediate indorsers and the owners of the respective items, filed a claim with the Bank Commissioner, in the manner required by law, and' prayed, that the claim so filed be allowed as a preferred • claim. The claim was approved by the Bank Commissioner as a common claim, leaving the court to determine whether the claim is a preferential one.

It was stipulated that the facts as recited in the complaint were true, and, in addition, it was further stipulated that the items involved in the cash letters referred to in the complaint were items drawn on or payable at the People’s Bank, and were collected by charging the accounts of the makers, and that there were no bills of lading or similar instruments accompanying any of the items.

Upon the facts so stipulated to be true, it was prayed that the court decree that the claim of the Reserve Bank is entitled to a preference and the Bank Commissioner be directed to allow it as such. The court granted the relief prayed, and the Bank Commissioner has appealed.

It is first insisted that the Reserve Bank was without authority to sue, for the reason that a statute of this State requires that every action must be prosecuted in the name of the real party in interest (§ 1089', C. & M. Digest), except as provided in certain other sections which, it is insisted, do not apply. We think, however, that the Reserve Bank had the right to sue. The Reserve Bank had been constituted the agent of the owners, and was the legal holder of the various items, all of which had been accepted and an abortive attempt had been made to pay. The agency was not discharged until the purpose of the agency had been accomplished, which was to make the collections and to remit the proceeds.

•Section 1092, C. & M. Digest, provides that:

“An executor, administrator, guardian, trustee of an express trust, a person with whom, or in whose name, a contract is made for the benefit of another, or the State, or any officer thereof, or any person expressly authorized by the statute to do so, may bring an action without joining with him the person for whose benefit it is prosecuted. ’ ’

We think the relation of the Reserve Bank to the items sued on is such, under the facts stated, as to make the statute quoted applicable. The owners of the respective items cannot recover from the drawers direct, for the reason that the People’s 'Bank has collected the amounts thereof from the drawers and has charged to them their canceled checks, duly marked “Paid.” Loth v. Mothner, 53 Ark. 116, 13 S. W. 594. Nor can the owners of these claims, after their allowance by the Bank Commissioner, maintain suit thereon, for they have expressly authorized this suit to be filed by the Reserve Bank for their benefit.

In the case of Second National Bank of Baltimore v. Bank of Alma, 99 Ark. 386, 138 S. W. 472, the facts were that the Judge Machine Company deposited to its account with the Second National Bank of Baltimore a draft with bill of lading attached on the Alma Canning Company. The Baltimore bank sent the draft with the bill of lading attached to the Bank of Alma for collection, which last-named bank surrendered the bill of lading without collecting the draft. The Baltimore bank brought suit against the Bank of Alma for the face value of the draft, and, among other defenses, it was insisted that' the Baltimore bank had no capacity to sue. It was there said:

“It (the Baltimore bank) had the right to sue in its own name for any default of the defendant (the Bank of Alma) by reason of which any liability was incurred by it to the Judge Machine Company, and it also had the right to institute suit against the defendant for any loss which it caused by reason of a breach of duty committed by it in collecting the draft, because the title thereof had been actually transferred to it, although for collection, by the Judge Machine Company.”

Upon the question of the right to preference, respective counsel have filed elaborate briefs, which review many authorities. It may be said that these authorities are in hopeless conflict, and it is impossible to reconcile them. We do not review these cases because, in the case of Darragh Co. v. Goodman, 124 Ark. 532, 187 S. W. 673, we announced the principles which are controlling here. Two cases were involved in that appeal, but, as they presented tlie same legal questions, they were disposed of as a single case. It will suffice therefore to state the facts in a single one of them.

The First National Bank of Atchison, Kansas, sent drafts with bills of lading attached on Darragh Company of Little Rock to the State National Bank for collection. This bank, of which Darragh Company was a customer, presented the drafts on June 15, 1914, and they were paid by that company’s checks on the collecting bank, which charged the checks against the account of the payer, and sent its drafts on the National Bank of Commerce of St. Louis to cover the collection. Immediately upon receipt of the exchange the Kansas bank forwarded it to St. Louis for collection, but, before it reached there, the State National Bank had suspended business, and payment of the draft was refused by the St. Louis bank because of the failure of the drawer.

During the day, and before the close of business on June 15, 1914, the State National Bank had on hand over $32,000 in cash, and when it closed its doors it had $7,000 in cash, which went into the hands of the receiver who took charge of the assets of the bank. This sum was the lowest amount of cash the defunct bank had on hand at any time after the collection of the drafts. The chancery court held that the collection constituted a trust fund, and ordered it paid out of the cash going into the hands of the receiver, to the exclusion of the general creditors of the bank.

It was contended there, as it is here, that the transaction detailed created only the relation of debtor and creditor, and that the collection did not become a trust fund because the funds of the bank were not augmented. It was insisted that the Federal courts had so held, and that we should follow the decisions of the Federal courts so holding. These contentions were not sustained, and in the opinion holding to the contrary it was said that, while a general deposit of money in a bank passes the title immediately to the bank and establishes the relation of debtor and creditor between the bank and the depositor, yet, where a bank receives a draft for collection merely, it is the agent of the remitter, drawer or forwarding bank, and takes no title to the paper, or the proceeds when collected, but holds the same in trust for the purpose of remitting it.

It was there recited that the drafts were sent for collection only and with the expectation that the proceeds of the collection should be remitted immediately upon the receipt thereof by the collecting bank, and that there was nothing to indicate that the parties intended .that the drafts, or the proceeds, should not remain the property of the owner, and that, such being the case, the proceeds of the collection did not' become the property of the collecting bank nor establish the relation of debtor and creditor for the amount thereof between it and the drawer bank, but that the relation created was that of principal and agent, and that the agency could be discharged only by remitting to the principal the collection made, and that, the agent bank having failed before the payment of its check on- the presentation thereof in due course of business for payment, the drawer was entitled to the proceeds of the collected draft out of the defunct bank’s cash going into the hands of the receiver, in preference to the general creditors.

It will be remembered that it appears from the agreed statement of facts and the stipulation filed herein that the items were forwarded to the People’s Bank “for collection and remittance” of the proceeds collected; that the drawers of the items here involved had sufficient balances with the People’s Bank to authorize the items to be charged to the account of the respective drawers, and this was done, thus paying them, and that, at the time these charges were made, the People’s Bank had sufficient funds available to honor the drafts, and that sufficient of its funds went into the hands of the Bank Commissioner, as receiver, to pay them, and that at no time between the collection and the time the Bank Commissioner took charge of the People’s Bank were its funds less than the items involved.

The case of Federal Reserve Bank of St. Louis v. Millspaugh, 282 S. W. 706, arose out of an agreed statement of facts which does not differ in any material respect from the facts in the instant case, and the Supreme Court of Missouri held that the Reserve Bank was entitled to have its claim against the defunct hank paid as a preferential one, for the reason that the receiver took the funds of the defunct bank impressed with a trust. In so holding the court cited as authority therefor our case of Darragh v. Goodman, supra.

Other courts, in announcing the same conclusion under similar facts, which have cited the case of Darragh v. Goodman as authority for so holding, are: In Re Messenger v. Carroll Savings & Trust Co., 193 Iowa 608, 187 N. W. 545; Goodyear Tire & Rubber Co. v. Hanover State Bank, 109 Kans. 772, 204 Pac. 992; Kesl v. Hanover State Bank, 109 Kans. 776, 204.Pac. 994; Federal Reserve Bank of Richmond v. Peters, 139 Va. 45, 123 S. E. 379; Federal Reserve Bank of Richmond v. Bohanan, 141 Va. 285, 127 S. E. 161; Federal Reserve Bank of St. Louis v. Quigley (Mo. App.) 284 S. W. 164; Bank of Poplar Bluff v. Millspaugh (Mo. App.), 275 S. W. 579; Hawaiian Pineapple Co., Ltd., v. Brown, 69 Mont. 140, 220 Pac. 1114; In Re City Bank of Dowagiac, 186 Fed. 250 (S. D.).

It is insisted for the reversal of the decree of the court helow that it was an act of negligence on the part of the Reserve Bank to constitute as its agent for the collection of the items the People’s Bank, the hank upon which they were drawn, and that authority was only conferred to collect and remit for those items in money, and not in exchange.

In the Darragh case the remittance for the collection was made in exchange, and not in.cash, and on that feature of the case the court, after stating that it is uniformly held that an agent having for collection obligations due to his principal can receive only money in payment, unless otherwise directed, and that this principle applied to hanks holding drafts for collection, said:

“The payment by the drawee of the draft of the amount thereof by the delivery of its check therefor against his account in the collecting bank, and the charging of the amount against his account, constituted, to all intents and purposes, a payment in cash of the drafts, the check being merely the vehicle of transfer of the cash.”

Continuing the discussion of this feature of the case, it was said: “Certainly there is.no necessity for the drawee of the drafts to take its check to its bank, the collector, and present it and receive the money and hand it back to the bank in payment of the draft. ’ ’

It is stated in one of the briefs, and conceded to be true in the other, that the 1925 report of the Federal Reserve board’s statistical department shows that the Federal Reserve banks collect on an average each month approximately 65,000,000 items, amounting to $20,500,-000,000, in items drawn on or payable at 26,000 different banks and /trust companies. It is quite apparent therefore that, if all remittances were required in cash, the entire volume of the currency would not suffice, even though all 'of it were kept in transit.

It may be said that the rule announced by this court, that it was negligence for a bank receiving for collection a check or draft payable in another city or town, to send it for collection to the bank upon which it was drawn, has been changed under § 14 of act No. 496, Acts 1921, page 514. Farmers’ S Merchants’ Bank v. Bay, 170 Ark. 293, 280 S. W. 984.

This act was passed prior to the transaction out of which this litigation arose, but our holding would not be different if there were no such statute, if it be true that the relation between the Reserve Bank and the People’s Bank was that of principal and agent, and not that of debtor and creditor. The cases which have followed the Darragh case make no such distinction in determining whether there is a preference. The controlling question is not how the item was forwarded and presented, but whether the drawer had sufficient balance against which the items were charged, and whether the bank so charging them had sufficient funds which went into the hands of the receiver, upon its failure, to pay these and other similar items.

In the case of Federal Reserve Bank of St. Louis v. Millspaugh, to which we have already referred as being identical with the instant case, the court said: “When the relation existing between two banks, as in the case at bar, is that of principal and agent, the funds collected by the collecting bank for the forwarding bank become impressed with a trust in favor of the owner of the item collected. This is true, although the item collected be one drawn on the collecting bank, and it is collected by charging the item against the drawer’s account, or if it be an item payable at the collecting bank and it is collected by a check drawn on it. The trust in either case follows the funds into the hands of the receiver — in this instance the Finance Commissioner — although the collecting bank may fail before remitting the proceeds collected, provided the following conditions exist: (1) That the item was forwarded for collection and remittance of the collected proceeds; (2) that the drawer of the check had a sufficient balance with the collecting bank to authorize the charging of the item to his account; (3) that, at the time the charge was made, the collecting bank had sufficient funds available to honor the check; (4) that the bank which failed had, at the time the receiver took charge of same, sufficient funds on hand to pay the amount it had collected (citing authorities). ’ ’

It is stipulated that the conditions there recited exist in the instant case. If, when the items here involved had been accepted and charged to the respective drawers, the People’s Bank had shipped currency, instead of issuing exchange, but had closed its doors before the money was actually delivered to the Reserve Bank, the right of the latter to receive and appropriate the money would hardly be questioned, not alone because the delivery to the carrier was a delivery to the consignee, but for the reason also that the consigning bank had segregated so much of its assets to the discharge of its agency — had thus designated the sum remitted as a trust fund belonging to its principal. In the Millspaugh case, from which we have quoted, the court said:

“Further than this, the creation of the relation of principal and agent, under the original agreement, by the terms of which the proceeds of the funds collected were to be forwarded to the principal, in currency or acceptable exchange, did not change the relation to that of debtor and creditor by reason of an attempted remittance in uncollectable paper. The sending therefore of exchange drafts by the Bank of Oran on the First National Bank, as an attempted remittance for the collection made, was indicative of a purpose to segregate or set apart, out of the funds in the First National Bank, the amount represented in the drafts, under an assignment for the benefit of the Federal Reserve Bank, the respondent [citing cases].”

So here, the People’s Bank had, by accepting’ the items, assumed the trust relation of an agent, and was bound, as an incident to the agency, to remit either in cash or exchange the. sum collected. It would have been a serious breach of trust not to have remitted. The money was not remitted. It remained either in the vault of the bank or in the hands of its correspondents, and was taken over by the Bank Commissioner as receiver, as appears from the stipulation set out above.

The court below was therefore correct in holding that the claim of the Reserve Bank should be allowed as a preferential one, and that decree is affirmed.


author: McCulloch, C. J.

text:
    Manufacturers’ Furniture Company v. Read.
    Opinion delivered January 10, 1927.
    1. Brokers — contract not within statute of frauds. — A contract by which plaintiff was to obtain a lease on a building for a period of three months with an option to renew for a period of more than a year, in consideration of a cash payment and of further payments each month during the period of the lease and renewal,
      held not within the statute of frauds, where the contract was completely executed on plaintiff’s side within a year and nothing remains on the other side but the payment of compensation during a period of more than a year.
    2. Brokers — compensation—misrepresentation as defense. — In an action to recover compensation for obtaining a lease, testimony as to plaintiff’s misrepresentations concerning the use of a switch track on the leased property was properly excluded where the right-of-way for the track was secured by defendant without cost, and where the alleged misrepresentation was not pleaded in answer.
    3. Appeal and error — issue raised at trial. — The court had the discretion to refuse to permit an issue to be introduced into a lawsuit for the first time during the progress of the trial.
    4. Contracts — breach—measure of recovery. — The rule that, where one party to a contract incapacitates himself from performing or unequivocally refuses to perform, the other party may sue for the whole of the anticipated damages resulting from the breach, does not apply to contracts to pay money at specified times.
    5. Contracts — payment of money in installments — breach.— Where a contract or the unperformed part of it was merely to pay money at specified times, the refusal to pay does not accelerate the maturity of unmatured installments.
    6. Courts — jurisdictional amount. — In an action for breach of a contract, where the allegations of the complaint stated a cause of action within the jurisdictional amount, the court had jurisdiction to render judgment for less than the jurisdictional amount, according to the proof in the case.
    Appeal from Pulaski Circuit Court, Second Division; Richard M. Mann, Judge;
    judgment modified.

      Abner McQekee, for appellant.

      Edward Dillon and Robinson, Rouse •<£ Moses, for appellee.
   McCulloch, C. J.

This action was instituted by appellee's testator against appellant to recover compensation alleged to have been earned under verbal contract between him and appellant, and in the trial below there were a directed verdict and judgment, from which an appeal has been duly prosecuted. The plaintiff died after the appeal was perfected, and the cause has been revived in the name of the present appellee as executor. It was alleged, in substance, that the defendant entered into a verbal contract with the plaintiff, whereby the latter was employed to negotiate a lease from the owner of a certain building in Little Eock for a term and period of three months, with an option to renew the lease for a further definite term, and that the defendant would pay the plaintiff fifteen dollars per month during the rental period of three months and the further sum of ten dollars per month, payable monthly, for the remainder of the rental period, if defendant renewed the lease; that plaintiff performed the service by securing a written lease contract from the owner of the building, and that, after the expiration of the fixed period of three months, defendant renewed the lease contract with the owner of the building, and that the plaintiff thereby earned the full compensation specified in the verbal contract. It was further alleged that the sum of $535 was earned under the terms of the contract, of which $45 was paid by defendant, but that the balance was due and owing, for which there was a prayer for judgment.

The answer contained a plea of the statute of frauds, and also contained a denial that there was any contract for the payment of compensation in the event of renewal of the contract.

It appears from the uncontradicted testimony that the plaintiff, A. C. Eead, was employed by appellant to secure for the latter a rental contract with Kress & Company, the owner, for the lease of a building in the city of Little Eock, and that Eead performed the contract by securing a lease contract with Kress & Company. The lease contract was in writing, and specified that the lessee should have the use of the premises for ninety days for the sum of $600, with an option to extend the lease for the balance of a term fixed in the lease .contract between Kress & Company and Sawyer, its lessor.

It is also uncontradicted that appellant was to pay Eead $45 as compensation for securing the contract, which was, in fact, paid; and also that appellant was to pay Bead the sum of $10 per month, payable monthly, during the period of the renewal contract, if appellant should elect to exercise the option of renewal.

Appellant offered to prove by witness Jacobs that there was a misrepresentation made by Bead concerning the presence of a railroad switch, or spur, which could be used in connection with the building. The court excluded this testimony, and the ruling of the court is assigned as error.

It is undisputed that the term of the renewal contract was for more than one year, and it is earnestly contended on behalf of appellant’s counsel that this brought the contract between Bead and appellant within the statute of frauds. We do not agree with that contention, for the contract between Bead and appellant was one which could have been, and in fact was, completely performed by Bead in much less than a year’s time, and all that was left of the performance was the payment of compensation by appellant. This took the original contract between. the parties out of the operation of the statute of frauds, for the rule seems to be quite well settled that the statute applies only to contracts not to be performed on either side within a year, and it does not apply to contracts which may be completely performed on one side and nothing remains on the other side but the payment of compensation during a period of more than a year. Reed Oil Co. v. Cain, 169 Ark. 309, 275 S. W. 333, 25 R. C. L. 37.

It is next contended that the court erred in excluding the testimony of witness Jacobs with reference to the alleged misrepresentations of Bead concerning the use of the switch track. The court’s ruling on this question was correct, for two reasons: One is that, according to the testimony of this witness, no injury was sustained by appellant, inasmuch as the right-of-way for the track was secured without cost by appellant; and the other reason is that the alleged misrepresentations were not pleaded in the answer as a defense. We cannot say that there was any abuse of the court’s discretion in refusing to permit the issue to be introduced for the first time during the progress of the trial.

The most serious question raised in the case is whether or not there can be a recovery for immature installments of the compensation earned under the contract. According to the uncontradicted proof, the compensation of ten dollars for each month after the renewal contract was payable monthly, and at the time of the commencement of the action there were only four payments, aggregating forty dollars, matured. Counsel for appellee invoke the rule that, where one party to a contract incapacitates himself from performance or unequivocally refuses to perform, the other party may sue for the whole of the anticipated damages resulting from the breach. Counsel cite authorities in support of that rule, but the rule does not apply to contracts, either written or verbal, to pay money at specified times. Roeha v. Horst, 178 U. S. 1; Moore v. Security Trust & Life Ins. Co., 168 Fed. 496. Where the contract' or the unperformed portion of it is merely to pay money at specified times, the refusal to pay does not accelerate the maturity of installments which are not due under the contract. We do not overlook the recent case of Ætna Life Ins. Co. v. Phifer, 160 Ark. 98, 254 S. W. 335, where the action was treated and found to be one to recover damages for a breach of contract. Our conclusion is that the trial court erred in rendering judgment for the immature installment of compensation under the contract., However, the court had jurisdiction to render judgment for the aggregate amount of installments due under the contract, even though the amount was below the jurisdictional amount. The jurisdiction of the court is determined by the allegations of the complaint and not by the proof in the case adduced during the trial. Therefore, if the allegations of the complaint are sufficient to give the court jurisdiction over_ the amount involved in the controversy, the court has jurisdiction to render a judgment for a less amount, according to the proof in the case, even though the amount is below that over which the court has jurisdiction. The complaint in this case stated a cause of action within the jurisdiction of the court, for it was alleged that there was the sum of $490 due and payable under the contract.

It results from what we have said that the judgment must be modified by reducing it to the sum of $40, without prejudice to the right of appellee to sue for future installments as they mature. It is so ordered.


author: ■McCulloch, C. J.

text:
    Pettigrew v. Pettigrew.
    Opinion delivered January 17, 1927.
    1. Divorce — right to file cross-complaint.- — In an action by a wife for divorce, the husband may file a cross-complaint for divorce on the ground of cruel treatment, though his cause of action accrued since the commencement of her suit.
    2. Divorce — filing cross-complaint — prejudice.—As a husband’s cause of action for divorce could have been the basis of an independent action by him and consolidated with a prior suit by her against him, under Crawford & Moses’ Dig., § 1081, it was not prejudicial error to permit him to assert it by a cross-complaint in her suit.
    3. Divorce — evidence.—-Evidence held to sustain a finding against a wife on her prayer for divorce, and in favor of the husband on his cross-complaint.
    4. Limitation of actions — amended plea. — It is within the court’s discretion to permit an amendment of the pleadings so as to bring, in an additional defense, such as the plea of the statute of limitations.
    5. Limitation of actions — -law applicable__Questions arising
    upon the statutes of limitation are governed by the law of the forum.
    6. Appeal and error — conclusiveness of chancellor’s finding.— A chancellor’s finding of facts is conclusive on appeal where the evidence is evenly balanced or where it is not clearly against the preponderance of the testimony.
    Appeal from Union Chancery Court, Second Division; Neill C. Marsh, Special Chancellor;
    affirmed.

      Powell, Smead & Knox and J. W. Warren, for appellant.

      Allyn Smith, for appellee.
   ■McCulloch, C. J.

The plaintiff, Mabel Pettigrew, and defendant, R. L. Pettigrew, intermarried, at Shreveport, Louisiana, in September, 1920, and lived together .until March, 1924, when the plaintiff left the defendant for causes, which she set forth as grounds for divorce. Each of the parties had been married before, and each had children. The. plaintiff has two daughters, who were approaching womanhood, but who were yet schoolgirls 'during the time that these parties lived together. They resided at Shreveport for a time after the intermarriage, and afterwards moved to Union County, and resided at Smackover until the separation.

The defendant built a hotel at Smackover, in conjunction with a man named Moore, and the same was operated by defendant, he and his wife and her two daughters residing at the hotel, and were there up to the time of the separation. In April, 1924, just about a month after the separation, plaintiff instituted this action against the defendant for a divorce and for alimony and suit money, and also to recover sums of money alleged to be due her by her husband for money loaned prior to their intermarriage. These sums were alleged to have been loans in the early part of the year of 1914, and evidenced by promissory notes falling due at various times up to the autumn of 1914. Plaintiff exhibited with the complaint four of these notes, aggregating $3,876.

The grounds set forth in the complaint for a divorce were that defendant had been “guilty of such cruel and barbarous treatment as to endanger the life” of the plaintiff, and that he offered such indignities to the person of the plaintiff as to render her condition intolerable. The complaint alleged acts of cruel conduct and various indignities, such as abusive language and physical violence.

It was also alleged in the complaint that the defendant had made indecent proposals to the plaintiff’s daughters. The complaint was answered by defendant with denials of all the allegations with respect to misconduct on his part, and there was also a denial of any indebtedness to the plaintiff. He admitted that he had borrowed small sums from the plaintiff before their intermarriage, but asserted that he had paid the same in full.

The complaint also set forth a list of items comprising, in part, furniture in the hotel, which plaintiff claimed to be her property, and in the answer of the defendant it was conceded that certain items in the list constituted property owned by plaintiff, but there was a denial of plaintiff’s ownership of other items.

On February 2, 1925, the plaintiff filed an amended complaint, reiterating the allegations of the former complaint and containing others with respect to misconduct of the defendant, also alleging that the plaintiff had, subsequent to the intermarriage with defendant, made loans of money to him aggregating $3,100, which sums remained unpaid, and for which there was a prayer for recovery. It was also alleged that the loans made at Shreveport in 1914 aggregated the sum of $6,000, and that evidences of the indebtedness, in the form of promissory notes, were executed to plaintiff by defendant, but that some of these had been lost, only those exhibited with the original complaint remaining in possession of plaintiff. It was also alleged that defendant had, by threats and violent conduct, secured from plaintiff a diamond ring and a diamond stud of the aggregate value of $500, which he was wrongfully withholding, and there was a prayer for the recovery of those items.

Defendant’s* answer and cross-complaint denied all the allegations with respect to misconduct on his part toward plaintiff or her daughters, and all allegations with respect to the indebtedness and the ownership e>f the diamond ring and stud, and the statute of 'limitations was pleaded against the notes and other alleged indebtedness for money loaned in the year 1914.. This plea of defendant was also made a cross-complaint against the plaintiff, alleging gross misconduct of plaintiff which amounted to such cruel and barbarous treatment as to endanger his life, and there was a prayer for divorce from the bonds of matrimony.

It was alleged that, on March 22,1925, plaintiff came to the hotel in Smackover, which the defendant was operating, and made a murderous assault upon him with a pistol, firing several shots at him. This last plea was objected to by plaintiff, and the objection was overruled, whereupon the parties stipulated that answer to the cross-complaint be waived and the allegation treated as denied.

The court heard the evidence, and rendered a decree against the plaintiff on her prayer for divorce, but granted a divorce on the cross-complaint of defendant. The court found for the plaintiff for the recovery of the sum of $3,100, alleged to have been advanced or loaned after the intermarriage, and for the recovery of $500, the value of the diamonds, and also for the recovery of the hotel furnishings set forth in exhibit to plaintiff’s complaint, and an allowance was also made by the court for attorney’s fees. The court found against the plaintiff on the prayer for recovery of money loaned at Shreveport, on the ground that the claim was barred by the statute of limitations. Each party has duly prose* cuted an appeal to this court.

It is insisted by counsel for plaintiff, in support of her appeal from the decree for divorce rendered on the cross-complaint, that a'cause of action which accrued to the defendant and cross-complainant after the institution of the action could not be pleaded, and that the court erred in overruling plaintiff’s objection and in granting the divorce on the cross-complaint. This contention is not well founded, for the cause of action set forth in the cros9*complaint was a separate one, in favor of the defendant against the plaintiff, which was mature at the time the cross-complaint was filed, and the defendant had the right to assert it against the plaintiff in this action, even though it had accrued since the commencement of the original action. Nelson on Divorce and Separation, § 744; Martin v. Martin, 33 W. Va. 695, 31 S. E. 12; Wilson v. Wilson, 40 Iowa 230; Armstrong v. Armstrong, 27 Ind. 186.

Mr. Nelson, in the section cited above, says: “It is convenient and practical to adjust all the marital rights of the parties in one proceeding and thus avoid a multiplicity of suits. No useful purpose could be subserved by compelling the defendant to prosecute separate proceedings for divorce or annulment of marriage when the issue in the first proceeding will involve the validity of the marriage and the causes for divorce set up in recrimination, and must be proved by substantially the same evidence.” And in the same section the author gives his approval to the statement of law contained in the authorities cited above.

In the ease of Slocum v. Slocum, 86 Ark. 469, 111 S. W. 806, we cited with approval the section above cited from Mr. Nelson, but the question of right to set up in a cross-complaint a cause of action which arose subsequent to the commencement of the original action was not involved. In that case we said:

“It is recognized and permissible practice for the defendant to file a cross bill and ask independent relief in divorce suits. When he does so, his suit is as separate and distinct from that of his wife as if the wife had brought no suit, and the finding of the court should be upon each separately.”

But, even if it were not permissible to embrace such cause of action in a cross-complaint, it could have been made the subject-matter of an independent action instituted by the defendant against plaintiff, and, under the statute (Crawford & Moses’ Digest, 1081), the two actions could have been consolidated and tried together. Hence there could have been no prejudice in permitting the plea to be made by way of cross-complaint.

After careful consideration of the evidence we have reached the conclusion that the chancellor was correct in his finding against plaintiff in her prayer for divorce and in his finding in favor of defendant on his cross-corn-plaint. No useful purpose would be served in discussing the testimony in detail. The plaintiff and her two daughters testified as to numerous instances of misconduct on the part of defendant in his relations with the plaintiff, and the girls also testified in regard to alleged improper conduct of defendant toward them. There was also some corroboration with regard to the charge that the defendant was at times quarrelsome in his dealings with plaintiff, but this was all denied by defendant, and he was corroborated by a number of witnesses, who were in position to have had information as to misconduct on his part if it had occurred as claimed by plaintiff. The testimony of the girls, in regard to certain misconduct of defendant toward them, is without any corroboration at all, and is denied by defendant. In addition to that, he is supported by the fact that the undisputed evidence shows that he took an interest in the girls and furnished money to educate them — conduct on his part which is wholly at variance with the charge that he had at times been guilty of such reprehensible conduct toward them as they described in their testimony.

The defendant relied, in seeking a divorce on his cross-complaint, on the single charge that plaintiff made a murderous assault upon him. It was shown by undisputed evidence that plaintiff walked into the hotel lobby, armed with a pistol, and, after roughly accosting defendant, fired several shots at him. She testified that she had no recollection of the incident, though it was, as before stated, proved by undisputed testimony, and occurred just a short time before the trial. She relied, in defense against the charge, that she was laboring under mental incapacity at the time of the alleged assault. But the testimony warranted the chancellor in finding against her on that feature of the case. Her conduct on the occasion, as described by many witnesses, indicated uncontrolled wrath instead of mental aberration. Physicians-testified that, after the assault, her condition indicated a nervous breakdown. This could "be true and yet she could have been mentally responsible when she made this assault. We think the chancellor’s finding on this question should be sustained.

The principles of law governing this feature of the ' case were announced in Crabtree v. Crabtree, 154 Ark. 401, 242 S. W. 814, 24 A. L. R. 912, and the facts of the present case fall within that decision.

The next contention of plaintiff is that the court erred in sustaining defendant’s plea of limitations against recovery on the debt for money loaned in 1914, at Shreveport. It is insisted that the court erred in permitting defendant to plead the statute of limitation for the first time in his amended answer. This contention might be disposed of by saying that plaintiff, in filing an amended complaint varying the allegations of the original complaint, invited the amended answer with any defense which would have been permissible under the original complaint; but the contention is otherwise unsound, for the obvious reason that it was in the discretion of the court to permit amendment to the pleadings so as to bring in additional defenses.

It will be observed from the above recital that, according to the pleadings, and also according to the testimony in the case, the loans of money which formed the basis of this feature of plaintiff’s case were made in the year of 1914, in the State of Louisiana, and matured more than six years before the intermarriage between the parties. Therefore, if the statute bar attached at all, it was complete before the intermarriage. The parties resided in the State of Louisiana from the time the alleged indebtedness accrued up to the time of their intermarriage in the year 1920. No question relating to the running of the statute as between husband and wife is involved in this case. As before stated, the indebtedness accrued and the statute bar attached, if at all, prior to the intermarriage.

It is a rule of universal application that questions arising upon the statutes of limitations are governed by the law of the forum, and the doctrine has been often announced by this court. Blackburn v. Morton, 18 Ark. 384; Chisholm v. Crye, 83 Ark. 495, 104 S. W. 167; Rock Island Plow Co. v. Masterson, 96 Ark. 446, 132 S. W. 216; Rock Island Railroad v. Lena Lumber Co., 99 Ark. 105, 137 S. W. 562.

There is what may appear to he an exception to this rule where both parties have resided, in the State where the cause.of action arose for the full period of the statute of limitations of that State, so that the cause of action there was extinguished by operation of the statute, and the laws of that State control. Moores v. Winter, 67 Ark. 189, 53 S. W. 1057; Finnell v. Southern Kan. Ry. Co., 33 Fed. 427.

This case involves, however, not a question where the cause of action was extinguished in another State, but is one where the right of action is asserted in this State, and it falls within the rule that the law of the forum controls. It may be said, however, that it is conceded that, under the Louisiana statutes, the right of action was barred, but counsel seeks to avoid that by relying on the provision of the Louisiana statute excepting husband and wife from its operation. The answer to this is, the parties were not husband and wife when the statute bar attached-. The statute bar had attached, unless something had been done to interrupt its operation, and the only thing claimed by plaintiff is that there was á payment of $1,000 made by defendant to her on the notes which she held, in the year 1922. This feature of the case, of course, turns on the disputed question of fact whether or not the defendant made payment to the plaintiff on the notes. She and her two daughters testified that defendant paid plaintiff $1,000 on the notes. This is denied by defendant. He admits, in his testimony, that he delivered to plaintiff, at the time claimed, two checks aggregating $1,500, but that no part of those funds was intended to be a payment on the indebtedness, but, on the contrary, both sums were delivered to plaintiff for the purpose of buying furnishings to install in the hotel, and it was so used, except a small part of it, which he told plaintiff she could use for her personal expenses and those of her daughters. In this contention defendant is corroborated by witness Moore, who was joint owner with defendant in the construction and operation of the hotel. Moore testified that he sold out his interest to defendant, and that they had a full settlement, in which the question arose concerning the cost of the furnishing of'the hotel, and in the conversation which occurred between him and defendant, and at which the plaintiff was present, the defendant made the statement and claimed that he had furnished $1,500 to his wife for the purpose of purchasing furnishings for the hotel, and that she had spent all of the money, except about $120, in that manner, and that he was entitled to a credit in the settlement. . Moore testified positively that plaintiff was present and acquiesced in the statement, and, upon the strength of it, he allowed credit to defendant for $1,500, without deducting the small amount which had been used by plaintiff for her own personal expenses. The chancery court decided' this issue of fact in favor of defendant, and we cannot say that the finding is against the preponderance of the evidence.

This disposes of the question based on the statute of limitation, for it is not contended that any other payments were -made or anything else done to interrupt the running of the statute.

The 'defendant has appealed from that part of the decree which awarded recovery to plaintiff of $3,100 and interest for borrowed money during the marriage. The contention is that this claim is not supported by the evidence. The decision of this question turns upon the weight of testimony given by the parties themselves. Plaintiff testified that she advanced this amount of money to defendant for his use in a second-hand automobile business in which he was engaged. Defendant admitted that he had, a few times, borrowed very small sums of money from plaintiff, but in each instance had repaid the amounts within a short time, and that he owed her nothing. He claimed that he had paid everything he had borrowed, both before and after the marriage, but the chancellor has found against him on that quéstion of borrowing money after the marriage, and we are unable to discover that the finding of the chancellor, in this regard, is against the preponderance of the testimony.

The same may be said with reference to the finding of the chancery court concerning the two diamonds. The decision of this feature turns upon the conflict in the evidence of the parties, and we cannot say that the testimony is against the court’s finding on both those issues. The testimony appears to us to be about evenly balanced, depending upon which one of the parties is to be believed, and, under those circumstances, it is our duty to leave the findings of the chancellor undisturbed.

Our conclusion therefore is that the decree of the chancery court should be affirmed upon each appeal, and it is so ordered.


author: Wood, J.

text:
    Dunbar v. Street Improvement District No. 1 of Dardanelle.
    Opinion delivered January 17, 1927.
    1. Municipal corporations — attack on improvement district— BURDEN OF proof. — In a direct attack upon the organization of a street improvement district, the burden was on the plaintiffs to show that the ordinances creating the district and providing for the improvement were invalid.
    2. Municipal corporations — improvement district — presumption. —The finding of a city council that a petition for a street improvement contained a majority in value of the real property owners in the district is ;prima facie correct.
    3. Municipal corporations — improvement district — evidence.— . Evidence held to show that the valuation of nontaxable school property in a street improvement district was extended by the assessor on the assessment roll filed 'by him with the county clerk, before the city council determined whether a petition for the improvement was signed by a majority in value of the owners of real property in the district.
    4. Municipal corporations — improvement district — irregularity. —Where a list of exempt property and its value was extended by the county assessor on the regular assessment roll, his failure to file a separate list at the time of filing the roll with the county clerk, under Crawford & Moses’ Dig., § 9936, was a mere irregularity which did not avoid the assessment roll as a guide to the city council in determining whether a petition for a street improvement was signed by a majority in value of the property owners.
    5. Municipal corporations — street improvement — evidence.— Where the city recorder testified that an initial petition for creation of a street improvement district was duly filed, and the ordinance creating the district recited that more than ten owners of real property within the 'bounds of the district petitioned for its creation, a finding that the petition was filed will be upheld.
    Appeal from Yell Chancery Court, Dardanelle District ; W. E. Atldnson, Chancellor;
    affirmed.

      Ward & Caudle, for appellant.

      Louis M. Robinson, Herbert C. Scott, and Hays, Priddy & Rorex, for appellee.
   Wood, J.

By ordinance No. 266 the town council of the city of Dardanelle, Arkansas, on September 29, 1925, created Street Improvement District No. 1 in the town of Dardanelle for the purpose of paving certain streets. On the 29th of October, 1925, the council repealed ordinance No. 266 and passed ordinance No. 270, creating an improvement district in the town of Dardanelle designated as Street Improvement District No. 1. This'district was created for the purpose of paving certain streets in. the town of Dardanelle. On November 6, 1925, a petition was presented to the council, purporting to contain a majority in value of the real property within the bounds of the district, and praying that the improvement be made. At the same meeting a number of citizens, property owners, presented their petition protesting against the improvement and asking that their names be stricken from the petition praying for the improvement to be made. The town council, at this meeting, by resolution directed that notice to property owners in the district be given by publication, once a week for two weeks, of the filing of the petition praying for the improvement, and fixing November 27, 1925, as the day for hearing the petition. On November 27, 1925, the council met pursuant to the notice, and adjourned until November 28, 1925. Upon reconvening, the council granted the prayer of the protesting property owners who had petitioned that their names be stricken from the petition praying for the improvement to be made, whose property values, as shown by the assessment, amounted in the aggregate to the sum of $16,850. The council thereupon, by resolution, declared that they had examined the remaining signatures on the petition and found that it contained a majority in value of the owners of real property in the district. On December 21, 1925, certain citizens and property owners in the district, hereafter called appellants, filed their complaint against the district and its commissioners, hereafter called the appellees. The complaint alleged, first, that the original petition, required to be signed by ten or more property owners within the proposed district, did not contain a description of the property as appeared in the ordinance creating the district. Second, that the petition purporting to contain a majority of the real property owners was circulated and signed by a great majority before an ordinance was passed creating the district. Third, that ordinance No. 270, attempting to create the district, did not describe the boundaries as the same were described in the original petition signed 'by ten real property owners. * * * Eighth, that the petition for the improvement did not contain a majority in value of the property owners of the real property in the district, as shown by the last county assessment. Other grounds were alleged in the complaint, but these have been abandoned.

The answer denied all the material allegations of the complaint. The decree recites that the cause was heard upon the pleadings and the depositions of the witnesses; a list and description of the. property, and the value thereof, located within the district as shown by the last county asséssment; the petition purporting to contain a majority in value of the real property in the district; a plat of the town of Dardanelle showing the boundaries of the district; a copy of ordinances Nos. 266 and 270; the minutes of the meeting of the town council showing the names of the property owners stricken from the petition purporting to contain a majority of the property owners praying for the improvement, and showing that, after these names were stricken, the town council found that the petition praying for the improvement contained a majority in value of the real property owners within the district, and that the list of these persons signing the majority petition was presented to the court, alphabetically arranged.

The county clerk of Yell County was called as a witness for the appellant. According to his testimony, the assessment record of property owners in the district, the description of their property and the valuation thereof in 1925, were delivered to him by the county assessor September 20, 1925. The extension of churches and schools was not made at that time. Such extension was made the latter part of December. Witness made some kind of a certificate to the town council of Dardanelle, on the 27th of November, at the request of Lewis Robinson. He certified that the petition before the town council praying for the improvement contained a majority in value, of the property owners. He did not check to find out. Robinson presented the certificate to witness. The record had been checked and the totals estimated, and witness certified to those totals. When the books were turned over to witness by the assessor, in September, everything was extended on the list except church and school property. The value of church and school property was extended on the list by the county assessor of Yell County. Witness then made another list and made another certificate about the 12th of January. Witness testified, in answer to questions as to how he arrived at the valuations which he certified to the town council as containing a majority, “Well, I took the valuations extended — I don’t recall whether I totaled that or they had been totaled, I simply took the totals that had been made of the signers of this petition, and saw that it was more than the other figures. Whether I made them I don’t recall, or whether they were checked over by Mr. Robinson or some one else.” Witness further testified that the valuation of the school district property on which the public school building was located is $35,000. That was extended either by witness or by Howard, the county assessor, before the taxbooks were given to the sheriff. Also an additional school item of $2,500 was put on at the same time.

Violet Coleman testified for the appellants that she was the deputy county clerk, and made the list of the property attached as an exhibit to the deposition of Chester O. Hill, county clerk. Another witness, McCray, testified that he identified the assessment list of real property situated within the corporate limits attached as an exhibit to the deposition of Chester O. Hill. He extended the value of the property on the list within the limits of the district, and also the value of the property of all persons who signed the petition for the improvement as their names appeared on the list. He did not include in the totals the value of church and school property, but did include all other real estate shown on the list. The total value of the real property as shown by the list was $227,310. In making this assessment, witness was guided by the list of the persons who signed a petition for the improvement, and extended the value of their property as it appeared on the assessment list. That was the only property they gave the owner credit for.

Another witness testified substantially to the same effect. These two witnesses didn’t make any investigation to find out who were the actual owners of the property appearing on the list made an exhibit to Hill’s deposition. Unless the name or initial on the majority petition was on the list furnished by Chester Hill, witness did not count it. The witness said they did the best they could without hunting anybody up.

Lewis Robinson testified that he had made an investigation and checked the signers of the purported second petition for the improvement. He prepared a list showing the names of the signers and the property owned by each of them. His list was made from the last assessment list on file with the county clerk of Yell County. The total amount of property shown to have been owned by the property owners was $170,065. He attached a list showing the names of all persons signing the petition for the improvement, with the valuation of all the property owned by each individual set opposite his name. The testimony of this witness shows that he examined the assessment record to see if the schoolhouses were assessed, and found that they were assessed by the assessor at $35,000, before the council passed on the question as to whether the petition contained names of a majority in value of the property owners embraced in the district.

The testimony of the assessor and of his assistant, and the testimony of the president of the school board at Dardanelle, tended to show that the value of school property, $37,500, was extended on the assessment record prior to November 28, 1925, the date on which the town council made its finding that the petition contained a majority in value of the property owners in the district.

1. The appellants contend that the trial court erred in finding that the petition for the improvement was signed by a majority in value of the real property owners in the district. This action was a direct attack upon the proceedings creating the district and providing for the improvement. The burden was upon the appellants to show that the ordinances creating the district and providing for the improvement were invalid. The finding of the city council that the petition for the improvement contained a majority in value of the real property owners in the district is prima facie correct, and we are unable to say, from the above testimony, that the finding of the council and of the trial court, to the effect that the petition for the improvement contained a majority in value of the real property owners in the district, is against the clear preponderance of the evidence.

In Henry v. Board of Improvement of Paving District No. 3, 170 Ark. 673, among other things, we said: “The statute provides how the ownership shall be ascertained, and, in the absence of direct testimony showing that the petitioners were not the owners of a majority in value of the property in the district, we must indulge the presumption that the city council heard evidence and correctly determined, upon the basis prescribed in the statute, that the petitioners constituted a majority in value of the owners of property in the district. There is no requirement in the statute that the proceedings before the city council shall be reduced to writing, and it is not proper to permit an inquiry in this action as to how the city council arrived at the conclusion. Until the prima facie effect of the findings of the city council is overturned by evidence, we must, as before stated, indulge the presumption that only leg*al evidence was heard and that the finding was made upon the basis prescribed by the statute.” Learned counsel for the appellants contend that the assessor did not comply with the provisions of the law.

The statute provides that, in determining whether those signing the petition for the improvement constitute h majority in value of the owners of real property within the district, the council and the chancery court shall be guided by the record of deeds in the office of the recorder of the county, and shall not consider any unrecorded instrument. Section 5652, C. & M. Digest. There is no testimony in the record tending to prove that the council and chancery court, in determining the value of the property, did not follow the above provisions.

Learned counsel for the appellants contend that the town council should not have considered the value of the nontaxable school property in the district in determining whether the petition for the improvement was signed by a majority of the owners of real property in the district, because, as they assert, the assessor did not file a separate list of same at the time he filed the original assessment roll with the clerk of the county, in compliance with § 9936, C. & M. Digest. But we are convinced that the preponderance of the testimony shows that the valuation of such, property was extended by the assessor on the assessment roll filed by him with the county clerk before the council determined the question of whether the petition for the improvement was signed by a majority in value of the owners of real property; and this wns sufficient to meet the requirements of the law with reference to filing a list showing the nontaxable property in the district and its value.

Since the list of nontaxable -property and its value was in fact extended on the regular assessment roll, the fact that the assessor did not file a separate list of said property was wholly immaterial and is a mere irregularity which would not avoid the assessment roll as a guide to the council in determining the question of whether or not the petition for the improvement was signed by a majority of the owners of real property in the district. To hold otherwise would be magnifying form above substance. According to three witnesses (the assessor and his assistant, and Bobinson) the council, at the time it determined that the petition for the improvement was signed by a majority in value of the real property owners in the district, had before it the assessment roll that had been filed with the county clerk, containing a list of names of owners of all taxable property, and likewise the list of all nontaxable property in the district and its value. The testimony of the county clerk tends to prove that the nontaxable property was extended on the assessment roll after the council acted on the petition for the improvement. But the preponderance of the testimony is to the contrary. There was a decided conflict in the testimony. But a decided preponderance of the evidence shows that the council, at the time it determined that the petition for the improvement was signed by a majority of the owners of real property in the district, had before it an assessment roll which complied substantially with the requirements of the law, and" the finding of the council and of the trial court, that a majority in value of the property owners in the district had signed the petition for the improvement, is sustained by a preponderance of the evidence. At least, such finding of the trial court is not clearly against the preponderance of the evidence. It was purely a question of fact as to whether the petition for the improvement was signed by a majority of owners of real property in the district. The finding of the council and of the trial court was in conformity with the statutes applicable in such cases as construed by this court in Improvement District v. Railway, 99 Ark. 508, 139 S. W. 308, and Malvern v. Nunn, 127 Ark. 418, 192 S. W. 709.

2. A more serious question in the cause, and which has given us the greatest concern, is whether or not ordinance No. 270 creating the district was bottomed on an initial petition sighed by ten resident property owners asking for the establishment of the improvement district and designating the boundaries of the district as prescribed in ordinance No. 270 creating it. The first and third paragraphs of the complaint alleged in substance that ordinance No. 270 creating the district does not describe the boundaries of the district as they were described in the original petition signed by ten resident property owners of the district. The answer denies these allegations as specifically as they are set forth. The testimony on this issue is substantially as follows: Albert Bo rex testified that he was the city recorder of the city of Dardanelle, Arkansas. He identified the record containing the mixxutes of the meetings of the city council. He testified that ordinance No. 266 was passed creating a paving district in the town of Dardanelle on September 28, 1925. At that time there had been a petition, known as the initial petition, presented to the council, praying for the passage of such an ordinance. On October 29, 1925, ordinance No. 266 was repealed, and on that date ordinance No. 270 was passed. There was a difference in the boundaries of Street Improvement District No. 1 as created by ordinance No. 266 and as created by ordinance No. 270. Witness was asked this question: “After the repeal of ordinance No. 266 was there another initial petition presented to the council!” He answered, “Yes.” The witness was then handed a petition purporting' to he signed by a majority of the owners in Street Improvement District No. 1 designated as ‘ ‘ second petition. ’ ’ He testified that this petition was circulated both under ordinance No. 266 and ordinance No. 270; that that petition had the same description as the first petition. They copied the second from this one; that the description in the second petition is the same as that in ordinance No. 270. Two or three dozen petitions were circulated. The 07'iginal petition signed by ten resident property owners, upon which ordinance No. 266, creating the district, was passed, which was afterwards repealed, is not in the record. Neither do we find in the record the original petition signed by ten resident property owners upon which ordinance No. 270, creating the district in controversy, was passed. The city recorder, however, testified that, after the repeal of ordinance No. 266, there was another initial petition presented to the city council. The minutes of the meeting of the city council at which an oi'dinance was passed repealing ordinance No. 266 and at which ordinance No. 270 was passed, creating Improvement District No. 1 of the town of Dardanelle, Arkansas, do not show that an initial petition containing ten resident property owners in the district created by ordinance No. 270, was before the council when ordinance No. 270 was passed. Ordinance No. 270, however, recites as follows: “Whereas, more than ten owners of real property within the bounds herein mentioned have petitioned the town council of the incorporated town of Dardanelle, Arkansas, to take steps toward the making of local improvements:

“Now therefore be it ordained by the town council of the incorporated town of Dardanelle:
“Section 1. That Street Improvement District No. 1 be and the same is hereby created, laid out and established for the purpose of making local improvements therein by grading and paving the following streets.” Here follow a description of the streets and a description of the boundaries of the district. In the absence of a petition signed ’by ten resident property owners describing the boundaries of tbe improvement district and the.real property to be embraced therein, it cannot be determined by a comparison of the initial petition that the ordinance No. 270 creating the district describes the property and boundaries embraced in the district the same as the property and boundaries were described in the initial petition. But the testimony of the city recorder shows that, after ordinance No. 266 was repealed, another initial petition was presented to the council, and the recitals of ordinance No. 270 above show that:
“More than ten owners of real property within the bounds herein mentioned have petitioned the town council of the incorporated town of Dardanelle, Arkansas, to take steps toward the making of local improvements therein and designating the nature of said improvement.”

The above testimony, we believe, is sufficient to show that an initial petition was filed (after the repeal of ordinance No. 266) for the creation of an improvement district describing the property embraced therein and boundaries of the district as same were described in ordinance No. 270 creating the same. We have held that “a special limited jurisdiction is conferred on the city council to lay off the district as designated by the property owners in the first petition, and the council must conform strictly to the authority eonferrred upon it. The filing of such a petition is mandatory and. jurisdictional. * * # The city council has no authority to establish a district the boundaries of which are not in conformity with the territory as described and set up in the petition.” Riddle v. Ballew, 130 Ark. 101, 197 S. W. 27.

The burden, as we have stated, was upon the appellants who are attacking the validity of the district to prove that ordinance No. 270 creating- the district is not valid. It occurs to us that there is testimony in the record tending to prove that ordinance No. 270 was based upon an initial petition describing the property embraced therein and the boundaries thereof the same as they are described in ordinance No. 270. The testimony of the city recorder and the recitals of the ordinance itself tend to prove that such was the case and are sufficient for that purpose, in the absence of the initial petition itself or other proof to the contrary. The appellants have not brought into the record any such proof. We conclude therefore that the decree of the chancery court is in all thing’s correct, and it is affirmed.

Hart, J., dissents.


author: Hart, J.,

text:
    Schweitzer v. Crandell.
    Opinion delivered January 17, 1927.
    1. Appeal and error — objection to parties. — In a suit to cancel a deed, where plaintiff died and the suit was revived in the names of certain persons as his heirs, the objection, raised by answer, that these persons were not plaintiff's heirs was waived by not insisting on it at the trial.
    2. Frauds, statute of — sufficiency of memorandum. — A memorandum of an agreement to deed land is sufficient if, in connection with the attendant circumstances, a surveyor could locate the land.
    3. Vendor and purchaser. — construction op contract. — In construing an ambiguous contract for the sale of land the court will put itself in the position of the contracting parties as nearly as possible, and interpret the language used in the light of the attendant circumstances.
    Appeal from Boone -Chancery Court; Lee Seamster, special Chancellor;
    affirmed.
    STATEMENT BY THE COURT.
    H. A. Crandell brought this suit in equity against Robert Gaston, as administrator with the will annexed of the estate of L. H. Schweitzer, deceased, and the minor heirs at law of said L. H. Schweitzer, who were specifically named in the complaint, to cancel a deed to certain land in the town of Harrison and vest the title to said land in said H. A. Crandell. Among other defenses introduced was that of the statute of frauds.

      On December 31,1912, L. H. Schweitzer and Ms wife executed a deed to H. A. Crandell, conveying to bim one and one-quarter acres of land in the town of Harrison, Boone County, Arkansas. The deed specifically describes the land conveyed and also recites that, if the grantor or his heirs should sell or convey the land south of the tract described, there should be left open a street, fifty feet wide, along the south side of the land conveyed. On the 2d day of June, 1913, L. H. Schweitzer conveyed to H. A. Crandell the tract of land in Boone County wMch is specifically described by metes and bounds in the deed. The conveyance also recites that the grantor will keep and maintain an open street not less than fifty feet in width upon the north, south and west sides of the land conveyed. Both of these deeds were duly acknowledged and filed for record.
    On the 7th day of September,, 1922, the death of H. A. Crandell was suggested and proved, and the cause was revived in the names of Ms heirs at law, who are named in the order, and leave was given to them to file an amended complaint. On the 12th day of July, 1923, Mae H. Schweitzer, wife of said L. H. Schweitzer, deceased, filed her answer.
    Upon the trial of the case, the parties agreed that, after executing the deed in which L. H. Schweitzer agreed to open the streets and alleys above referred to, he did convey other property adjacent to said land, and failed to keep open the streets- as provided in said deeds.
    The following memorandum in writing was .introduced in evidence.
    “Harrison, Arkansas, July 6, 1920. Memorandum of agreement. I will deed you 2V2 acres, block 1, including south street and alley, in satisfaction of all claims fox damages to date.
    “L. H. Schweitzer.
    “I accept the above offer if deed sent at once. TMs July 6, 1920.
    “H. A. Crandell.”

      This agreement was written across what purported to be “Schweitzer Addition to the Town of Harrison,” as shown on a printed plat prepared by said L. H. Schweitzer. He issued a circular containing a plat of the land which he proposed to dedicate, which contained the following: ‘ ‘ This addition is laid out on the nearest tract of land available for residence purposes, being platted on the east, south and north. It is only two blocks north and three blocks west of the public square.”
    It was proved that the signatures to the memorandum copied above were the genuine signatures of said L. H. Schweitzer and H. A. Orandell.
    On the 9th day of November, 1920, L. H. Schweitzer conveyed to his wife, Mae Schweitzer, the land in controversy.
    The chancellor found the issues in favor of the plaintiffs, and it was decreed that the contract between L. H. Schweitzer and H. A. Orandell was a valid and binding contract and that the deed from L. H. Schweitzer to Mae Schweitzer to the land in controversy should be annulled.

      Shouse S Botvland, for appellant.

      Woods (& Qreenhcm, for appellee.
   Hart, J.,

(after stating the facts). It is first insisted that the decree should be reversed because there is no proof that H. A. Orandell died intestate and that the persons named in the amended complaint are his sole heirs at law. It is true that the answer denies that the plaintiffs in the amended complaint are the heirs at law of H. A. Orandell, deceased, but the answer contains a caption in which the plaintiffs are named as heirs at law of H. A. Orandell, deceased. This answer was filed after the court had entered of record an order in which it had recited that the death of H. A. Orandell was proved and that the cause- was revived in the name of his heirs, who are specifically named in the order, and who are the identical persons named in the amended complaint and in the caption to the answer of the defendant, Mae Schweitzer.

In addition to this, the record shows that the defendants did not insist npon this point at the trial. The court was not asked to make any findings on this point, and no reference was made to it throughout the trial. The proof was directed to the ground upon which the defendant predicated her defense. Under these circumstances the defendant, Mae Schweitzer, will be deemed to have waived this point. Allen-West Commission Co. v. People’s Bank, 74 Ark. 41, 84 S. W. 1041. It will be noted that the case just cited was tried in the circuit court, and the case at bar was determined in the chancery court. We think, however, that the principle applied in the law case will apply here under the facts just stated.

Counsel for the defendants rely on the defense that the memorandum in writing relied upon by the plaintiff for recovery is too indefinite, under the rule laid doAyn in Richardson v. Stuberfield, 168 Ark. 713, 271 S. W. 345, where it was held that an agreement for the sale of land, which is required to be in writing by the statute of frauds, must be certain in itself or capable of being’ made certain by reference to something else. The memorandum in writing relied upon by the plaintiff is copied in our statement of facts and need not be repeated here.

Extrinsic evidence is admissible to explain the calls of a deed for the purpose of identifying the land described and thus give effect to the deed. It is true that, under our decisions, a deed must so describe land sought to be conveyed that it may be identified, yet it is considered that that is certain which can be made certain, and in construing a doubtful description in a deed the court will put itself in the position of the contracting parties as nearly as possible and interpret the language used in the light of the attendant circumstances. Scott v. Dunkel Box & Lbr. Co., 106 Ark. 83, 152 S. W. 1025; Snyder v. Bridewell, 167 Ark. 8, 267 S. W. 561.

The extrinsic proof in this case locates the land described in the written memorandum set out in our statement of facts as being an addition which Schweitzer had platted into lots and blocks and called “Schweitzer Addition to the Town of Harrison.” The addition, as laid into lots and blocks, ivas advertised in printed circulars to be sold as lots and blocks by L. H. Schweitzer. The memorandum in question was written upon one of these circulars and upon that part of it upon which Schweitzer had specifically described the lots and blocks in his platted addition. The circular contains an advertisement by Schweitzer in which it is referred to as being platted into lots and blocks. Under the rule announced in the cases cited, with the information contained in the written memorandum, in connection with the attendant circumstances, a surveyor could lo.cate the ' ground described in the memorandum. Hence the memorandum is a valid and binding one, and is not void under the statute of frauds above referred to.

It follows that the decree of the chancery court was correct, and should be affirmed. It is so ordered.