text:
    Ford v. Taylor.
    Opinion delivered April 2, 1928.
    1. Banks and banking — duty op directors. — While bank directors are liable to stockholders as well as creditors for failure to exercise diligence and good faith in managing the affairs of the bank, the mere exercise of poor judgment is not sufficient to form a basis for liability.
    2. Banks and banking — liability op directors. — Where directors of a bank met regularly and kept their records properly and were unaware of the precarious condition of the bank before examination by a bank examiner, they are not liable, on the bank’s insolvency, for losses sustained as a result of bad loans and depreciation in values, notwithstanding the exercise of bad judgment in making loans.
    3. Banks and banking — duty op directors. — Where the report of a ¡bank examiner disclosed that a bank was in a precarious condition at the time such report was filed, the directors were required to give closer attention to the bank’s affairs than they had previously done.
    4. Banks and banking — liability op directors. — On a bank’s insolvency its directors held not liable for worthless loans made by way of renewal of loans given at a time when the directors were not aware of the bank’s precarious condition, or for money borrowed from correspondent banks without the directors’ knowledge, where the original loans resulted from bad judgment only, and the bank received the benefit of ¡money obtained from correspondent banks, though such money was obtained by use in part of forged collaterals as part of the cashier’s mismanagement of the bank’s affairs.
    5. Banks and banking — liability op directors. — Bank directors, when informed by the report of the bank examiner of the precarious condition of the 'bank, who nevertheless failed to appoint a discount or loan committee or to supervise loans made by the cashier or to require reduction of excessive liability of officers to the bank, held liable for worthless loans subsequently made by the cashier and for aditional loan to the bank’s president, since such losses were due to the failure of the directors to exercise diligence in managing the bank’s affairs.
    Appeal from Franklin Chancery Court, Ozark District; J. V. Bourland, Chancellor;
    reversed.

      Webb Covington, J. D. Benson and G. C. Carter, for appellant.

      Hill, Fitzhugh & Brizzolara, for appellee.
   Smith, J.

This suit was brought by the State Bank Commissioner against the directors of the People’s Bank of Ozark. The complaint alleged that the bank had become insolvent, and that the plaintiff commissioner had taken over its affairs, and, through a partial liquidation of its assets, had paid ¡a dividend of ten per cent, to its creditors, and that the bank had become insolvent through the failure of the defendant directors to discharge the duties imposed upon them by law as directors.

The complaint alleged that the directors failed and neglected to discharge their duties in the following respects: At the first meeting of the board in January,' 1925, the directors ordered that the policy of the bank should be to make no further loans except small loans to regular customers in the due course of business, and the directors so instructed F. E. Stockton, the cashier. This order was made because *the bank at the time was in a badly extended condition, with a large amount of frozen assets and past due paper, but, notwithstanding this condition, the directors, through lack of ordinary care and prudence, permitted the cashier to make many new loans, several of them being in large amounts, and without adequate collateral, and to irresponsible persons. A list of these loans, aggregating $42,695.02, was set out. It was further alleged that a number of these alleged loans were evidenced by notes to which the names of the makers had been forged by the cashier, and that this practice could not have, proceeded far if the directors had discharged their duty by examining the notes.

That on February 12, 1925, the board of directors adopted a resolution authorizing the cashier and other officers of the bank to borrow money from the City National Bank of 'St. Louis, the Merchants’ National Bank of Fort Smith, and the Bankers ’ Trust Company of Little Bock, and to pledge the notes held by the bank as collateral therefor, but, instead of this resolution being correctly entered upon the minutes of the meeting of the directors, the cashier entered a resolution giving him authority to rediscount notes held by the bank as security for loans made by it with any of the correspondent banks, and, by reason of the failure of the directors to see that this resolution was properly entered, the cashier was enabled to obtain large sums of money, which he dissipated in reckless and unauthorized loans. At the time of the trial of this cause in the court below litigation was pending in which liability to the St. Louis bank was denied on account of notes rediscounted to the St. Louis bank, but that case was recently determined by this court in favor of the St. Louis bank. Grand National Bank of St. Louis v. Taylor, 176 Ark. 1, 1 S. W. (2d) 818. That the cashier of the bank erected a business house in Ozark in 1925, and paid the contractor for his work by permitting the contractor to overdraw his building account, and that these overdrafts were carried as bills receivable on the books of the bank, and in this manner the bank sustained a loss of $9,-673.07. That the directors were negligent in permitting and approving loans to the president of the bank and to a brother and a son of the president, and testimony was offered tending to show that all these loans were in fact loans to the president, but were made to the president’s brother and son to prevent it from appearing that the loan limit to any one person had been exceeded.

In response to a motion to make the complaint more definite and certain, an amendment to the complaint was filed, in which it was alleged that the nominal assets which came into the hands of the Bank Commissioner amounted to $550,000, but included in this amount was $67,072.38 of old notes which had been previously charged off as being of no value, and $150,000 of other assets which were without value, and $30,000 in duplicated notes, leaving total assets of $302,927.61, of which $90,000 had been collected, and it was estimated that $90,000 more would be collected. The actual liabilities of .the bank were alleged to be $480,499, and the contingent liabilities were $150,000.

,A demurrer to the complaint was overruled, las was also an additional motion to make the complaint more definite and certain.

The answer filed by the defendant directors denied that they had failed to exercise ordinary care in the matter of seeing that the directions given by them to the cashier were obeyed in the matter of making new loans, and they alleged the fact to be that the cashier was a man in whom they and all others had implicit faith and confidence, and whose good character was unquestioned either for business capacity or integrity. That the cashier had forged the resolution increasing his authority to obtain money from the correspondent banks, and had kept the books of the bank, including the note register, in such manner that they did not know of the unauthorized loans or the forged notes which had been used as collateral to borrow money. They were not aware that the cashier of the bank was using the funds of the bank in an unauthorized way in the construction of a business house, and could not by ordinary care have discovered that fact. The loans to the president of the bank were alleged to have been made at a time when his solvency was not questioned, and it was further alleged that he was solvent, and that the loans to the brother and son of the president were made in good faith and in the exercise of an honest judgment as to the solvency of these parties. The testimony appeal’s, however, to show that the president of the bank is not solvent, at least the Bank Cornmis-' sioner has been unable to collect from him the amount due the bank.

All the allegations of the complaint were put in issue, including the allegations as to the value of the assets which the Bank Commissioner had taken over and those in regard to the actual and contingent liabilities of the bank.

A voluminous record was made at the trial from which this appeal comes, and this opinion would be wearisomely protracted if we were to discuss all the notes and transactions upon which the liability of the directors is predicated. We will content ourselves therefore with a declaration of the legal principles which should be applied, and the liability of the directors will be accordingly determined.

We have had frequent occasion to consider the liability of directors of banks to stockholders as well as creditors for inattention to their duties ¡and for the mismanagement of the bank’s affairs, and a late case is that of Muller v. Planters’ Bank & Trust Co., 169 Ark. 480, 275 S. W. 750. This case cited and to some extent reviewed the leading cases in this State on this subject, land in the syllabus in that case it is said: “While bank directors are liable to stockholders as well as creditors for failure to exercise diligence and good faith in managing the affairs of the bank, the mere exercise of poor judgment is not sufficient to form a basis of liability.”

In the body of the opinion in that case it was said:

“The statute, however, in broad terms, as we have seen, places the ‘stock, property, ¡affairs and business of such corporations’ under the care of their board of directors, to be managed by them. The statute creates a relation and confers a power which necessarily carry with them corresponding duties and liabilities, independent of any statute specifically defining or limiting those duties and liabilities; and in the absence of any statute they must be ascertained and controlled by common-law rules applicable generally to such relations and powers.’ The court then adopted the rule announced by Mr. Justice Harlan in the case of Briggs v. Spaulding, 141 U. S. 132, 11 S. Ct. 924, 35 L. ed. 662, as follows: ‘Directors cannot, in justice to those who deal with the bank, shut their eyes to what is going on around them. It is their duty to use ordinary diligence in ascertaining the condition of its business, and to exercise reasonable control and supervision over its officers. They have something more to do than, from time to time, to elect officers of the bank, and to make declarations of dividends. That which they ought, by proper diligence, to have known as to the general course of business in the bank, they may be presumed to have known, in any contest between the corporation and those who are justified by the circumstances in dealing with its officers upon the basis of that course of business. * * * A rule no less stringent should be applied as between a banking association and directors representing the interests of stockholders and depositors/ The substance therefore of the test laid down in that case of the responsibility of directors to stockholders as well as to creditors, is good faith and diligence.”

Testing the liability of the directors by these rules, we find that they were grossly negligent in the performance of their duties as directors from and after the first of January, 1925.

The testimony shows that an examination of the bank was made about that time by an examiner of the State Banking Department, and it was a mere matter of indulgence on the part of the examiner that the bank was permitted to continue in business. Copies of this report were filed with both the Bank Commissioner and the directors of the bank, and the most casual examination of this report would have shown that the bank was then in a most critical condition.

With a capital of only $'25,000, the president of the bank was liable to it upon two notes totaling $11,020.17, and as an indorser upon the note of his brother for $3,405.15, and the maker of this note testified that the cashier told him that the bank was carrying the president for more than the bank rules would permit. “He asked me if I would take part of it. That is how I took it.” The officers and employees of the bank Avere carrying loans with the bank, including their indorsement, of $24,899.27. The total loans of the bank, as shown by the examiner’s report, amounted to $276,675.10, and included therein were 569 past due notes totaling $165,-853.56, and $16,928.83 in notes were carried as cash items, and there Avas a deficit in the reserve of 11.5 per cent. The report called attention to the fact that the practice of permitting overdrafts appeared to-be habitual, and that these were carried as cash items, and the attention of the directors was also called to the fact that the bank’s other paper was not fairly or sufficiently liquid.

Notwithstanding these facts, we are of the opinion that the directors of the bank are not liable for any losses sustained by transactions occurring before this examination by the bank examiner. Prior to that time the directors were not aware of the precarious condition ■. of the bank; they had met regularly, and had kept their records properly, and had a discount committee which had functioned, and the directors had made an audit of ' the bank’s affairs in the year 1924, The honesty of the directors themselves is not called in question, and it is charged only that they were grossly inattentive to their duties. Most of the loans then existing were renewals of old loans made in more prosperous times and to persons who were regarded as good when these loans were made. A crushing depreciation in values had occurred, which rendered many-persons unable to pay whose paper had .been previously regarded as good. The directors had evidently used poor judgment in making many of these loans, but, as was said in the.Muller case, supra, “the mere exercise of poor judgment is not sufficient to form a basis of liability, for, when- directors are selected by the stockholders, the latter assume the risk of losses occurring on account of mere defects in judgment, and in acceptance of the office by the director he merely assumes the obligation to manage the affairs'of the'institution with diligence and good faith.”

But, as we have said, the directors must have known from the report of the bank examiner, if not otherwise, that the bank was in' a precarious condition when the examiner’s report was filed with them on January 4, 1925, and under these circumstances diligence and good faith reouired them to give closer attention to the bank’s affairs than they had previously done.

In discharge of this duty the directors, at their meeting in January, 1925, directed the cashier to make no new loans except small ones to regular customers in the ordinary course of business. It appears, however, that no intelligent or serious effort was made to enforce this rule. It may be said, in this connection, that the record does not show lany • criminal conduct on the part of the cashier prior to 1925, and that the directors and the community generally had implicit confidence in the cashier’s integrity prior to that time. But with the beginning of this year the cashier commenced a systematic misuse of the bank’s funds. He purchased an eighty-acre tract of land in the city limits, (and he erected a house costing five or six thousand dollars, and he erected a. ten-thousand-dollar business house on one of the principal streets. In addition to this, he engaged in oil ventures; he operated a coal mine; he invested in a diamond cave, and assisted in promoting ¡a vineyard company and a life insurance company, and in aid of these projects he made large and unauthorized loans to himself and to the persons associated with him. In the erection of his business house he directed the contractor to draw against a small account the contractor had with the bank, and these overdrafts were carried as cash items. The directors admitted knowing that the cashier was erecting the building, but they testified that they supposed the money for this purpose had been derived from a loan obtained from a building and loan company, which, however, was not the fact.

The directors made no audit of the bank’s affairs during the year 1925, and had no discount or loan committee. The directors testified that the entire board acted as a discount or loan committee, but'it appears that the cashier made no report on loans until they had been made, and the directors testified that they would have authorized such loans as were reported to them had application therefor been previously submitted to them. Most of the important loans, however, were never submitted to the directors, and the cashier’s practice was to conceal questionable and unauthorized loans by giving them the same numbers possessed by smaller and unimportant loans made to persons to whom the directors would have made loans had they been requested so to do.

The cashier commenced the practice and continued it throughout the year 1925 of forging notes to the order of the bank, which he rediscounted with the correspondent banks, • which transactions were without the knowledge of the directors. The practice of the cashier in this respect was detailed in the opinion of this court in the case of Grand National Bank of St. Louis v. Taylor, Bank Commissioner, supra, in which case we held that the bank was liable for the rediscounts so made. It appears, however, that the bank actually received the proceeds of these rediscounts, so that no liability could be predicated upon the transactions themselves. The liability, if any, arises out of the disposition of the fuhds thus obtained.

It appears that the directors not only did not make an audit of the bank’s affairs during the year 19'25, as the rules of the- Banking Department required them to do, but no director ever made any examination of the notes taken by the bank; indeed, they did not even examine the note register, but contented themselves by listening to the cashier read from a prepared statement a list of the loans he had made. The directors failed entirely to hold one monthly meeting, and no minutes of any meeting after September were -ever written up, or approved or signed by the board or its officers.

The directors appeared to have made no effort to require the president of the bank to reduce his own indebtedness to the bank, but actually permitted him to increase his liability from January to September by three thousand dollars.

The directors insist that no supervision on their part would have enabled them to know'the corrupt and criminal practices of the cashier, as he was falsifying his records and forging paper. But it may be said, in answer to this contention, that the cashier’s criminality did not consist of a single or only a few transactions and entries, but was a systematic course of conduct which he no doubt felt free to pursue without fear of detection by the directors through their failure to discharge the functions of their office. The peculations of the cashier were so' open that detection must have resulted from any reasonable attempt at siipervision. Had the directors exercised good faith and reasonable diligence, the cashier would soon have been detected in his practice of making unauthorized loans and rediscounting forged notes with correspondent banks.

We do not hold that the directors were insurers of the honesty or good, faith of the cashier, or that they became liable for his fraudulent conduct simply because, they were directors, for such is not the law as announced in the prior decisions of this court, cited in the Muller case, supra. But’ we do hold them liable for their lack of diligence and good faith in supervising the affairs of the bank. Their inattention to the bank’s affairs furnished the cashier assurance that the boldest and most flagrant conduct on his part would escape their detection and give the cashier an opportunity to loot the bank systematically.

The court below made a finding in favor of the Bank Commissioner on each count o.f the complaint, including a count added at the conclusion of the testimony, which was added to conform to the testimony, and a judgment was rendered against the directors accordingly.

The decree must be reversed, because the court held the directors liable for certain worthless loans made by way of renewal of loans made prior to 1925, and also for certain money borrowed from the correspondent banks without the knowledge of the directors. We think the decree must be reversed in these respects because the loans made prior to 1925 and the renewals of such loans appear to have resulted from bad judgment only, and the money obtained from tbe correspondent' banks was credited to tbe account of tbe bank on tbe books of tbe bank. In other words, tbe bank received tbe benefit of tbe money obtained from the correspondent banks, although that money was obtained by the use, in part, of forged collaterals.

"Without discussing in detail the various transactions through which the'bank sustained losses and for which the Bank Commissioner seeks to hold the directors liable, we announce our conclusion to be that the directors should be held liable only for the loans made after January 1,1925, to the cashier and his associates in their enterprises, including the overdrafts of the contractor incurred in the erection of the business building, and the three thousand dollars increase in the president’s indebtedness after the beginning of 1925. These losses would not have been sustained had the directors, in good faith and in the exercise of ordinary diligence, enforced the resolution adopted in January, 1925, which wlas intended to prevent just such loans being made. This liability should, of course, be credited with any collections made on account of these loans.

■ The decree of the court below will therefore be reversed, and the cause remanded with directions to enter a decree fixing the liability of the directors and ascertaining the amounts thereof,' in accordance with this opinion.'


source: Caselaw Access Project

author: Humphreys, J.

license: Public Domain

text:
    Hudson v. Bradley.
    Opinion delivered April 2, 1928.
    1. Gifts — sufficiency of delivery. — Where a father took out time certificates payable to the order of himself or his son with money which he had saved, this did not constitute a gift to the son of the certificates or the money represented by them, where the certificates were never delivered to the son and remained in the father’s possession until his death.

      2. Dower — antenuptial contract. — A finding that a wife, unable to read or write, signed an antenuptial contract waiving her right to dower in her future husband’s estate or that she authorized its execution, held contrary to the weight of evidence in a suit involving the question of recovery of dower interest after the husband’s death.
    Appeal from Monroe Chancery Court; S. H. Mann, •Special Judge;
    reversed.

      C. F. Greenlee, for appellant.

      Bogle & Sharp, for appellee.
   Humphreys, J.

Two questions are presented by this appeal and cross-appeal for determination. The first question to be determined is whether Joe Hudson is entitled to $6,000 on deposit in the Bank of Brinkley and $1,000 on deposit in the Monroe County Bank, or whether W. T. Hudson was seized and possessed of said money at the time of his death in 1926. The certificates of deposit are as follows:

■ “Certificate of Deposit.
“Brinkley, Ark., Sept. 6, 1925. No. 1787.
“Bank of Brinkley.
“‘W. T. Hudson has deposited in this bank exactly six thousand no/100 dollars ($6,000), payable to the order of himself or Joe Hudson, his son, in current funds, on the return of this certificate, properly indorsed, twelve months after date, with interest at 4 per cent, per annum. No interest after maturity.
“Not subject to check.
“L. H. Bradley, Cashier.”
“Certificate of Deposit.
“Not subject to check.
“Monroe County Bank 81-190 — No. 994.
“Brinkley, Ark. 5-21-26.
“This certifies that W. T. Hudson or Joe Hudson has deposited in this bank exactly one thousand dollars ($1,000), payable to his or either own order 12 months after date, with interest to maturity only at the rate of 4 per cent, per annum on return of this certificate.
“No interest after maturity. Non-negotiable.
“L. W. Brown, Cashier.”

These certificates of deposit were found in the trunk of the deceased after his burial, at the home of himself and appellant. Joe Hudson, a son of the deceased, obtained the key to the trunk from appellant, and found the certificate of deposit therein. He claimed the money as a gift inter vivos from his father. He testified relative to the gifts as follows:

“My father told me that this money was placed in bank so that no one could touch it, only himself and me, and at his death I would have full possession of it; that the rest of the outfit had done got all that was coming to them, and that this money belongs to me. My father told me that if Mrs. Hudson was left any money she would throw it away, therefore he did not want her to have any money; I refer you to marriage contract on file. My father told me about the money being a joint account at the time I visited him in the spring of 1924. ’ ’

Joe Hudson insists that he is the sole owner of the money, whereas the widow and other heirs, who are grandchildren of the deceased, land nieces and nephews of Joe Hudson, and the administrator of the estate of W. T. Hudson, deceased, insist that the money belongs to his estate and is subject to division among them according to the statute of descent and distribution.

In the case of Lowe v. Hart, 93 Ark. 549, 125 S. W. 1030, this court defined gifts inter vivos in substance as follows: To constitute a gift a donor must actually deliver the property to a donee with intent to pass the title immediately, and the donee must accept the same. See also Stifft v. W. B. Worthen Co., ante, p. 585.

The evidence in the instant case does not meet the requirements of this rule. The time certificates, of deposit were in the joint names of W. T. Hudson and Joe Hudson, and were not subject to check. The. money constituted the savings of W. T. Hudson, land the certificates themselves were never delivered to Joe Hudson, but were retained under lock and key by W. T. Hudson. There was no actual delivery and acceptance of either the certificate or the money they represented in such manner that W. T. Hudson surrendered dominion over them. W. T. Hudson could at any time during his life have presented the certificates and got the money out of the bank, without the consent or permission of Joe Hudson. Joe Hudson could not have presented the certificates and got the mone3^, because he never had possession of them. There was no intention in the acts of the parties to pass the title to the certificates or money. The evidence is insufficient to support a gift. -

In addition to claiming the money as a gift, Joe Hudson interposed the further defense to appellant’s claim for dower that she entered into an antenuptial contract with his father, waiving her right of dower in and to his estate. The contract is as follows:

“This agreement made and entered into this the '2d day of December, by and between W. T. Hudson and S. B. Hudson, is 'as follows: That whereas we, the said "W. T. Hudson and S. B. Hudson desire and have decided to be remarried again, and become as husband and wife, and now before said marriage it is hereby agreed and fully understood, and in consideration of this agreement and of said marriage, and the further consideration that we have once . divided our property between. each other mutually and agreeably to each of us, it is now hereby agreed and understood by and between each of us that I, the said S-. B. Hudson, do hereby agree and waive all my right or possibility and future claims or any and all dower or financial claims that would come to me or be allowed to me under the matrimonial laws of the State of Arkansas. To make it more explicit, I, S. B. Hudson, waive all right to a dower or other claims in or to said W. T. Hudson’s estate either during his natural life or after his death, and our property to be kept separate and distinct apart and in each other’s name and control as separate individuals do, with no future claims of dower or curtesy whatever. And it is hereby -understood and agreed that, in case of any disagreement between us that would result in separation as husband and wife, each one of us to take the individual property owned by ns individually, and that to be the final settlement between us as herein agreed and made binding between us.
“Witness our hands and seals this the second day of December, 1916.
“W. T. Hudson
her
“Mrs. S. B. (x) Hudson
mark
“Witness, R. M. Henderson.
“Witness to mark, R. M. Henderson.”
“State o,f Arkansas, county of Monroe.
“On this the 2d-day of December, 1916, appeared - before me, R. M. Henderson, a justice of the peace, duly commissioned and acting, Mrs. S. B. Hudson, to me well known, and acknowledged that she had signed the foregoing transfer, for the consideration and purposes therein mentioned, of her own free will and accord.
“Witness my hand as such justice of the peace, on this the 2d day of December, 1916. R. M. Henderson, J. P.”
Certificate of Record.
“State of Arkansas, County of Monroe.
“I, R. A. Holloway, circuit clerk and ex-officio recorder of the county aforesaid, do hereby certify that the annexed and foregoing instrument of writing was filed in my office on 1st day of December, 1917, at 2:30 o’clock p. m., and that the same is now duly recorded with the acknowledgments and certificates thereon in record book 21, page 46.
“In witness whereof I have hereunto set my hand and affixed the seal of said court this 13th day of December, 1917. R. A. Holloway, circuit clerk and ex-officio recorder. By................................................” (Seal).

Appellant denied signing the contract or authorizing any one to sign it for her. She said her husband proposed entering into such a contract before their second marriage, but that she declined to do so, and that she never heard of nor saw the purported contract until it was shown to her hy Mr. Milwee after her husband’s death. Appellant could neither read nor write. Appellant’s second initial is V, and it will be observed that it appeared as B on the contract. 'Counsel for appellee° argue that the contract had been on record for nearly ten years. We do not see how that fact can help them, unless they had shown that appellant knew of the existence of the contract and that same had been recorded.

The trial court’s finding to the effect that appellant signed the antenuptial contract was contrary to the weight of the evidence.

The trial court’s finding against a gift of money by W. T. Hudson to Joe Hudson is in accordance -with the weight of the evidence.

The judgment on the cross-appeal is affirmed, but the judgment on the direct appeal is reversed and the cause is remanded, with directions to allow the widow one-third of the money and to divide the balance between the heirs according to the statute of descent and distribution.


text:
    Herbert v. Herbert.
    Opinion delivered April 2, 1928.
    1. Parent and child — preferential rights of parents. — Where not detrimental to the welfare of children, the law recognizes the preferential rights of parents to the custody of their children over relatives and strangers.
    2. Parent and child — custody op child. — The parents of a child which had been cared for hy an uncle and aunt for the period of about two years because of the mother’s illness, held entitled to the child’s custody as against such uncle and aunt, both families being fit persons to have custody and able to support and maintain the child.
    Certiorari to Crittenden Circuit Court; G. E. Keck, Judge;
    affirmed.

      C. T. Carpenter, for appellant.

      Berry & Berry, for appellee.
   Humphreys, J.

This is a contest over the custody of Lee Donald Herbert, a child two years of age, between his father and mother on one side and his uncle and aunt on the other.

The child wias brought before Judge Keck, circuit judge of the Second Judicial District, on a writ of habeas corpus. After hearing the evidence, the judge awarded the custody of the child to its parents, and appellants contend for a reversal of the order, upon the authority of the case of Verser v. Ford, 37 Ark. 27. In that case it was said:

“As against strangers, the father, however poor and humble, if of good moral character and able to support the child in his own style of life, cannot be deprived of the privilege by any one whatever, however brilliant the advantage he may offer. It is not enough to consider the interest of the child alone, and, as between father and mother, or other near relations of the child, where . sympathies of the tenderest nature may be relied on, the father is generally to be preferred.”

The court however made an exception to this general rule in that case, because the infant was motherless and needed the care of the grandmother, in whose custody the father had placed it when the mother died. In the instant case the infant was not motherless.

The record reflects that H. E. Herbert and R. T. Herbert are brothers, and that, on account of the illness of Mary Herbert, the mother of the child, for about six months after its birth, the uncle and aunt offered and were allowed to take care of the infant. The father and mother had three other children to care for, and the necessity of the situation demanded that temporary disposition be made of the infant. The uncle and aunt offered to nurture and care for the child, and were permitted ■ to do so. They retained the custody of it for about two years, and during that period furnished food and raiment for it. The father and mother paid little or no attention to the child during that time. At the expiration of two years the father and mother requested the return of the child, which request was refused on account of the affection which the parents had permitted to grow up between the uncle and aunt and the child. Both families were fit persons to have the custody of the child, and were able to support and maintain it.

The instant case is not parallel to and ruled by the case of Verser v. Ford, supra. The child will receive the tender care of its own mother under the order of the court. Every attention which could be bestowed upon it by the aunt can be and will be bestowed upon it by its mother. Where not detrimental to the welfare of children, the law recognizes the preferential rights of parents to them over relatives and strangers. Paramount rights of parents will be respected, unless the special circumstances demand that such rights be ignored. In the instant case the child is yet a mere infant, not having arrived at the age of discretion enabling’ it to intelligently consider its future welfare. It is true that it had learned to call the uncle and aunt father and mother, but' its affection for them has not been allowed to root too deeply by lapse of time. The relationship has not been allowed .to exist for such a period of time that it can be reasonably said that a severance thereof would be detrimental to the child and a rank injustice to the uncle and aunt. It is better that the ties be severed now than to permit them to grow stronger and then attempt to sever them.

No error appearing, the judgment is affirmed.


text:
    Giller v. Hollyfield.
    Opinion delivered April 2, 1928.
    Mines and minerals — operation of lease. — In a suit by a lessee of oil and gas property, who was entitled to use the surface for . agricultural and other purposes, to restrain the lessor from constructing a dam at the junction of creeks for the purpose of establishing a pick-up station to catch waste oil, evidence held to sustain the .chancellor’s finding that the construction of the - dam would interfere with the effective operation, of the lease.
    Appeal from Union Chancery Court, Second Division; George M. LeCroy, Chancellor;
    affirmed.

      Patterson & Rector, for appellant.

      Powell, Smead & Knox, for appellee.
   Humphreys, J.

Appellants were enjoined by decree of the chancery court of Union County, Second Division, from constructing a dam at the junction of two small creeks near the southeast corner of the northwest quarter of the southwest quarter, section 11, township 16 north, range 15 west, in said county, for the purpose of. establishing a pick-up station to catch waste oil running into said creeks from oil wells on lands, other than the 40-acre tract described and the 40-acre tract immediately west of.it, said 80-acre tract having been leased by appellants to appellees for development of oil and gas for commercial purposes. An appeal has been duly prosecuted to this court from the decree.

There is no dispute between the parties as to the law applicable to the facts under the terms and provisions of the oil and gas lease made between the parties. It is an ordinary commercial oil and gas lease, known as the producers’ 88 form,'in use in the Arkansas oil fields, except that it required the lessees to begin drilling within a month from the date thereof, to pay a portion of the consideration out of the proceeds of oil and gas produced on the lands, and without a provision for extending the lease by payment of rents. The dispute in the case is one of fact and not of law.

The construction of leases of this kind with reference to the use of the surface of the lands leased is that the lessor and lessee have concurrent possession thereof, the lessee being entitled to such parts thereof as are necessary for developing the oil or gas thereunder for commercial purposes and to market same, and to do everything on the premises necessary to make the operation of the lease effective, without hindrance or interference on the piart of the lessor. The lessor is entitled to use all other portions of the surface for agricultural and other purposes, provided, in doing so, he does not interfere with the effective operation of the lease. This is the substance of the rule announced in the case of the Standard Oil Company of Louisiana v. Oil Wells Salvage Company, 170 Ark. 729, 281 S. W. 360.

Appellants contend for a reversal of the decree upon the alleged ground that .the finding of the trial court, to the effect that’the construction of the dam will interfere with the effective operation of the lease, was contrary to the weight of the evidence.

The proposed dam was to be 450 feet long and 3 feet high, ¡across the space where the two creeks intersect near the southeast corner of the leased lands. The witnesses introduced by appellants testified that the dam, would not cause the water and oil in the creeks above the dam to go any higher than the high water marks along 'the sides of the creeks, and that the high water in the creeks had never interfered with the effective operation of the lease. They testified that, according to the survey made by them, when the water and oil is raised against the proposed dam, as gauged by the spillways to be made therein, it would not be higher against the dam than two feet above low-water level. Also that the two-foot raise would cause the water to back toward and not closer than within 50 feet of well No. 6 in the southeast corner of said leased lands. Also that the high-water line around well No. 6 coincides with the level of two feet of water in the dam. Also that the construction of the dam would not interfere with the passageway appellees had .constructed over the upper creek to go to and come from wells 5 and 7, in the northeast comer of the leased lands, and would not interfere with the pipe lines used to convey oil from wells 5 and 7. They testified that they were unable to find the pipe lines leading from wells 5 and 7, but that if they were lying on the bottom of the creek they could easily be jacked up after the dam was built to make necessary repairs upon them.

The witnesses introduced by. appellee testified that the construction of the proposed dam would back the water over well No. 6 and wash out the foundation under the derrick. Also that the water would back over the walkway ¡across the upper creek and cover the pipe lines lying on the bottom of the creek through which oil was carried from wells Nos. 5 and 7.

The testimony was also conflicting between the two sets of witnesses as to whether the pick-up station made by the construction of the said dam would increase the fire hazard on the leased premises. Eighteen wells had been drilled upon the 80-acre tract which appellants leased to appellees, and fourteen of them were producing oil in commercial quantities when the construction of the dam wias commenced.

It may be said, in passing, that the witnesses introduced by the respective parties were men of broad experience in the oil fields. It could serve no useful purpose to set out the substance of the testimony of each. The record is voluminous, and it would extend the opinion to an unusual leng-th to do so. The testimony of each witness has been carefully read and ¡analyzed, and a majority of the court is of opinion that the chancellor’s finding to the effect that the construction of the dam will interfere with the effective operation of the lease is correct, and is supported by the weig-ht- of the evidence. Mr. Justice Woon and the writer are of the opinion that the construction of the dam will not interfere with the effective operation of the lease.

The decree is therefore affirmed.


author: Mehaffy, J.

text:
    Continental Gin Company v. Clement.
    Opinion delivered April 2, 1928.
    1. Fixtures — machinery sold with reservation of title. — A gin elevator sold under contract retaining title to the seller until payment and expressly providing that it should not be considered a fixture, held, as between seller and buyer, not to constitute a fixture, and to authorize the seller to retake the property on failure to pay .the purchase price. • '
    2. Fixtures — definition.—Fixture is generally understood as property originally a personal chattel which has been affixed to the soil or to some structure legally a part of the soil, and which, being physically attached or affixed to the realty, has become a part thereof.
    3. Fixtures — intention of parties. — As between seller and buyer of personal property, the intention of the parties is the real test as to whether the property becomes a fixture after sale.
    4. Fixtures — innocent purchaser. — In view of the common knowledge that gin machinery is sold in this country on time, with reservation of title, one who purchased real property without inquiry to ascertain whether a gin elevator had been paid for, held not an innocent purchaser as respects the right of the seller to retake the elevator under a contract-retaining title.
    5. Damages — detention of gin elevator. — The measure of the damages for detention of a gin elevator held the usable value of the property.
    Appeal from Jefferson Circuit Court; T. G. Parham-, Judge;
    reversed.

      Joe S. Harris and George A. McConnell, for appellant.

      Rowell & Alexander, for appellee.
   Mehaffy, J.

The appellant, who was plaintiff below, filed its complaint in the Jefferson Circuit Court in replevin, alleging that it had sold to J. M. Grade one 50-inch class C elevator for 4-70 saw gins (except fan and telescope), also a pulley and some belting. It was alleged that Gracie purchased this property and agreed to pay the sum of $750 and the freight, amounting to $63.05. Plaintiff alleged that it retained title to the property until the purchase price should be paid, and that nothing had been paid on purchase price or freight, the plaintiff having prepaid the freight. The plaintiff alleged demand for the property and $150 damages for wrongful detention of same, and prayed for the possession of the property, and damages.

An affidavit and bond were filed, and a writ of replevin issued. The New Gascony Investment Company filed a cross bond in the sum of $1,200, and retained possession of the property. Defendants (filed an answer, denying the material allegations of the plaintiff’s complaint, and stating that Clement had no interest in the litigation, but that the New Gascony Investment Company claimed to be the owner by purchase.

A jury was waived and the case was tried before the court sitting as a jury, and the court rendered judgment for the defendant. Plaintiff filed motion for new trial, which was overruled, exceptions saved, and plaintiff prosecutes this appeal to reverse the judgment of the circuit court.

The undisputed evidence showed that the Continental Gin Company, on the 16th day of July, 1925, sold and delivered to J. M. Gracie the property described, and that the sale was evidenced by a sales contract, wherein the title to said property was retained by the plaintiff until the full purchase price should be paid; that no part of the purchase price had been paid, and the freight had not been paid. The contract contained the following clause:

“It is understood that the title to said machinery shall remain in you and the same shall be your property until payment in full for same is. made,' and until all other sums herein agreed to be paid are paid, and if default is made in the payment of either of said notes when due, or in payment of any other sum herein agreed to be paid, then you, at your option, may enter upon the premises where said machinery is, take possession of and remove the same, without beine: liable to account for any sumí or sums, paid thereon, the sum or sums to be paid to be in payment for the use of said machinery. Said machinery shall not become or be considered a fixture to the real property whereon the same is situated.”

The undisputed proof also was that plaintiff demanded possession of machinery before suit, and that defendants retained possession of the property. The testimony showed a fair rental value to be $150 for the season.

The elevator purchased by Gracie is a complete outfit, but he did not purchase the fan or the telescope, which is a part of the elevator, and the elevator cannot run without the distributor being connected with the line shaft, or without a fan. The elevator is used to elevate cotton from the wagon to' the feeder, driving cotton to the feeder and feeding same to the gin.

The property sued for was not actually attached to the gin stands, but was placed directly over them, and held in position by joists resting upon the floor and nailed and screwed to the building housing the gin. The property sued for could be removed without physical damage to the gin stands and without material damage to the building.

J. M. Gracie, who purchased the machinery, had owned the land, but he had by warranty deed conveyed to his daughter, Sallie E. Gracie, on December 10, 1924, the land on which this gin was situated, for the consideration of $1. The land conveyed contained 960 acres, in Jefferson County, Arkansas. On December 13, 1924, three days after the land was conveyed to Sallie E. Gracie by her father, she executed a note and mortgage to secure the payment of $32,000. Then on June 3, 1925, Sallie E. Rose, who was before her marriage Sallie E. Gracie, executed a deed of trust to secure $5,000 indebtedness to W. C. Hudson and R. Carnahan. On January 6, 1926, Sallie. E. Gracie, by special warranty deed, conveyed to W. C. Hudson and R. Carnahan the said 960 acres for the consideration of $5,000 and the assumption by the purchasers of the $32,000 debt above mentioned. At the time Miss Gracie executed the deed of trust above mentioned, her father, J. M. Gracie, was managing the property. This was in January, 1925.

The testimony tended to show, that the gin could not be operated without the elevator, but that the elevator could be removed without material damage to the gin stands or the building. The testimony shows that the defendant purchased the property without any knowledge that said property was placed in the building by the plaintiff, and without knowledge that plaintiff retained title to property. After Hudson and Carnahan purchased the property, they conveyed the same to the New Gascony Investment Company, a corporation, whose stockholders are Carnahan, Hudson, Clement and McGeorge.

The court found the value of the property at the time of the trial was $600, and the usable Value for the season was $150. But the court held that the property sold by plaintiff to J. M. Gracie became a fixture, and passed with the conveyance of the realty.

The only question for our consideration is whether the appellee, the New Gascony Investment Company, is an innocent purchaser. As between the vendor of the property involved and the purchaser of said property it was not a fixture, and the vendor, having retained title, had the right, as against the original purchaser, to retake the property upon Gracie’s failure to pay the purchase price.

The term “fixture,” as generally understood, is property, originally a personal chattel, which has been affixed to the soil or to some structure legally a part of the soil, and which, being physically attached or affixed to the realty, has become a part of the realty. It is annexed to the freehold for use in connection therewith and so arranged that it cannot be removed without injury to the freehold.

It is sometimes said also that the intention of the party making the annexation is the chief test, and that in case of doubt the intention has a controlline: influence. But iu the instant case there is no dispute as to the character of the property as between the original vendor and original purchaser. They agreed that they should not be fixtures, but it is contended by the appellee that, while title was retained to the property until plaid for, it was sold to J. M. Gracie, who was a tenant, and it is urged that the court has decided many times that if a landlord was ignorant of such reservation of title and the machinery was. of such character that, when attached, it could not be removed without injury to the freehold, then it would become a fixture, and the vendor was not entitled to recover.

Attention is called to a number of decisions of this court which, it is claimed, support the contention of appellee.

The first case cited and relied on is the case of Peck-Hammond Co. v. Walnut Ridge School District, 93 Ark. 77, 123 S. W. 771.

The facts in that .case were that a school board entered into a contract with one J. S. Park for the construction of a schoolhouse. The plans and specifications, which were a part of the contract, provided for the installing of a heating plant. Peck-Hammond Company furnished the material and installed the heating apparatus under a contract with Park. The title to the material furnished was to remain in the vendor until paid for. The board paid out more than the contract price to erect the building, and knew nothing of the terms of the contract between Park and Peck-Hammond Company, and Park failed to pay, and the vendor brought suit in replevin to recover the property. The evidence was conflicting as to whether the material could be removed without defacing and otherwise injuring the building. The lower court dismissed the complaint, and plaintiff appealed. This court said the judgment was right, and that the cases cited by appellant are cases where the contract reserving title in the chattels was made with the owner of the land, and have no application to the facts of this case, and said further that the case of Peck-Hammond against the stockholders was ruled by the principle announced in Brannon v. Vaughan, 66 Ark. 87, 48 S. W. 909.

In the case in the 93 Arkansas the proof tended to show that the material could not be removed without defacing and injuring the building, hut also it was shown that the directors had no knowledge of the conditions of the contract for material furnished.

This court has held that a house built upon land and not attached to the land, except by its own weight, was not a fixture, under the agreement of the parties. If was held, however, that another room built onto the orig inal one, without any notice to the vendor until after-wards, was a fixture, since it was attached to the.main building, and could not be detached without great injury and damage to such building, evidently meaning that, if could be removed without injury, it would not be held a fixture. Brannon v. Vaughan, 66 Ark. 87, 48 S. W. 909.

Appellee next calls attention to the case of Thomas Cox & Son Machinery Company v. Blue Trap Rock Company, 159 Ark. 209, 251 S. W. 699. In that case the court held that the lower court had erred in declaring as a matter of law that the articles sued for were fixtures, and further held that, if title was reserved and appellant knew at the time Fulton intended to attach it to the realty of the company, and if appellant knew that the same was of a character that, when attached, would become a fixture, and could not be removed without injury to the freehold, and if the company was ignorant of the fact that the appellant had reserved title to machinery for which the notes in controversy were executed, then.the appellant would not be entitled to recover. But the appellee contends that the ease of Hachmeister v. Power Mfg. Co., 165 Ark. 469, 264 S. W. 976, is controlling in this case. The court said:

“It was wholly beyond the power of the makers of the deeds of trust or the mortgagees to pass title to or to place a mortgage lien upon chattels which they did not own at the time the deeds of trust were executed and the title to which they did not have at the time these chattels were attached to the freehold embraced in the mortgages.” And the court quoted with approval the following language:
“When a chattel is sold with "a reservation of title in the vendor until the price is paid, the title remains in him until the condition is performed, and á purchaser from the vendee acquires no title, though he buys in good faith for a valuable consideration and without notice of condition.”

The court then cites numerous Arkansas cases to the same effect.

Appellee next calls. attention to the annotation to the case of Lawton Press Brick & Tile Company v. Ross Heifman T. P. M. Co., in 49 L. R. A. (N. S.), at page 396. The court said in the case last above mentioned:

“We think there is evidence reasonably tending to show that the machinery did not become part of the buildings constructed to shelter it; the removal thereof would not take away or destroy that which is essential to the support of such buildings, foundations, walls, or other parts of the real estate to which it was attached; that it would not destroy or of necessity injure the machinery itself. So the limitation hereinbefore stated does not apply. Hence we conclude that the agreement between the vendor and brick .company, fully expressing their distinct purpose that the annexation of the machinery should not make it'part of the real estate, was sufficient to that effect, without any concurring intention on the part of the subsequent purchaser of the land.”

Most of the annotations or notes to which appellee calls attention are from cases where the facts show the property could not be removed without injury to the realty. It is also held in the cases referred to in the notes that a purchaser with notice of the rights of the seller of fixtures cannot retain the fixtures in a suit for same by the vendor.

The appellee calls attention to numerous other authorities, but it would serve no useful purpose to discuss those authorities or to review the cases to which attention has. been called by counsel.

The principles of law governing this .ease have been many times discussed by this court, and are well settled. And it has been repeatedly held by this court that, as between the vendor and purchaser of articles, the intention of the parties is the real test. Thompson v. Lewis, 120 Ark. 252, 179 S. W. 343; Bache v. Central Coke & Coal Company, 127 Ark. 397, 192 S. W. 225, Ann. Cas. 1918B, 198; National Bank of Wichita v. Spot Cash Coal Company, 98 Ark. 597, 136 S. W. 953.

But the chief thing relied on by appellee in this case is that it was an innocent purchaser, although, as between the original vendor and vendee of the property in controversy, the property remained a chattel, it purchased the property without notice, and that it was an innocent purchaser, and therefore as to it the property is a fixture, and cannot be removed by the plaintiff.

This court has said:

“This instruction excludes the idea that it was the duty of appellant, in order to bring himself within the doctrine of innocent purchaser, to make inquiry concerning the ownership of fixtures of this character, even though substantially fastened into the soil. It is true appellant testified that he inquired from his vendor concerning the ownership of the fixtures, and was informed that they were a part of the real estate. He was an interested party, and facts established by his testimony alone cannot be said to be established by the undisputed evidence.” Salmon v. Boyer, 139 Ark. 236, 213 S. W. 383.

In the instant case appellee does not seem to have made inquiry of iany one. It is a matter of common knowledge that property of the character of that involved in this suit is purchased in this country on time, and that contracts for this kind of property are constantly made wherein the title is retained until paid for. And in purchasing property under the circumstances existing in this case it was the duty of the appellee to make inquiry and. ascertain whether this property belonged to the vendor of the real estate.

Hudson and Carnahan knew that the owners were indebted, and that the property was mortgaged for $32,000.

J. M. Gracie, on December 10, 1924, conveyed the property to his daughter, Sallie E. Gracie, for the consideration of $1. Then on December 13, 1924, three days later, Sallie E. Gracie mortgaged the property to secure payment for $32,000. On June 3, 1925, Hudson and Carnahan loaned Sallie E. Rose, formerly Sallie E. Gracie, $5,000, and of course they knew of the $32,000 indebtedness. After they had loaned the $5,000 on July 16, 1925, the appellant sold the property involved in this suit to J. M. Gracie. It is true that they testify that when they purchased the property they took into consideration this property and its value, but when they loaned the $5,000 this property had not yet been purchased. They loaned the $5,000 before this property was. installed there, when they knew that there was indebtedness against it for $32,000, and when they finally purchased the place they gave $5,000 and assumed the payment of the $32,000 debt. The knowledge that the parties must have had of all these facts required them to at least inquire of the parties who sold this property before they could bring themselves within the doctrine of innocent purchaser.

From the evidence in this case we have reached the conclusion that the property was not a fixture, and that the appellee was not an innocent purchaser. The case is therefore reversed, and remanded with directions to enter judgment for the Continental Gin Company for the property or its value, which the court found to be $600, and for the damages for the wrongful detention of said property. The damages for detention would be the usable value of the property. It is so ordered.


author: McHaney, J.

text:
    Cate v. Crawford County.
    Opinion delivered April 2, 1928.
    1. Eminent domain — damages foe taking land foe highway. — - In determining the damages for taking land for a public highway in a proceeding under Crawford & Moses’ Dig., § 5249, the value of benefits received by the landowner will be taken into consideration, since § 5231 has no application, and Const., art. 12, § 9, forbidding the appropriation of property without full compensation, applies only to private corporations, and art. 2, § 22, relates entirely to the owner’s right to compensation but not to a remedy therefor.
    2. Eminent domain — set-off of special benefits. — The increase in value to a landowner’s property by reason of a public road being established adjacent to his land constitutes a special benefit which may be offset against damages for land taken in a proceeding under Crawford & Moses’ Dig., § 5249.
    Appeal from Crawford Circuit Court; J. O. Kin-cannon, Judge;
    affirmed.

      Starbird & Starbird, for appellee.
   McHaney, J.

Appellant is the owner of a tract of land in Crawford County, Arkansas, through which, by order of the county court, a public highway was laid out and constructed, and in doing so 3y2 acres of his land were taken. He presented his claim in apt time to the county court for damages in the sum of $1,350 caused by the taking of said land and for damages to the remaining land. The county court disallowed his claim, and an appeal was taken to the circuit court, where it was tried before the court without a jury. The court found “that the plaintiff had been damaged by the opening of the road complained of, by the taking of the land used for the road, by the irregular shape and isolated position of the smaller piece of land cut off from the larger, and by the unfenced condition in which the land was left after the opening of the road. That the plaintiff’s land was benefited by the building of the road in the particulars set forth in the testimony of defendant’s witnesses. That the benefits so testified by defendant’s witnesses are special and peculiar benefits as a matter of-law, and that the defendant has a right to have such benefits set-off against the value of the land as well as against the damage to the land not taken. That the damage to the land not taken plus the value of the land taken exceed benefits to the remaining land by the sum of $250,’’-for which amount judgment was entered in appellant’s favor.

The proof shows that the road was. laid out through appellant’s farm so as to cut off a three-acre triangular piece on the south side of the road, and a one-half acre triangular piece on the north side, and that the value of these two separate pieces of land has been reduced by virtue of being detached from the main body of land one-half its original value, and the proof on the part of appellant was ito the effect that the value of the bottom land, of which the three-acre tract was a part, was $135 or $140 per acre, whereas the upland was worth about $50 an acre.

The proof on the part of appellee tended to show that the building of this road through the farm had materially ■ increased the value of the farm. One witness stated that the increased value of the land .by reason of the building of the highway was from $500 to $1,000 more than it was before; that this land was peculiarly benefited in that it made it a mile and one-half nearer to Alma, both because of the highway and the new bridge across the creek adjacent to the farm. The witnesses on behalf of appellee testified that the whole country was. benefited by reason of the construction of the highway, but that the property adjacent to the highway was specially benefited thereby. Counsel for appellee has not favored us with a brief in its behalf.

It is the contention of counsel for appellant that the circuit court erred in offsetting the increased value of the land by reason of the improvement against the damages suffered by reason of the land actually taken, and it is urged that § 5231 of C. & M. Digest prescribes the rule in this regard, that is, that the damages shall be ascertained without deduction for benefits to the property of the owner. This section reads as follows:

“On presentation of the petition and proof of notice of publication as aforesaid, and the county court being satisfied that proper notice has ibeen given in accordance with the provisions of said act, said court shall appoint three disinterested citizens of the county as viewers, who shall also be a jury to assess and determine the compensation to be paid in money for the property sought to be appropriated, without deduction for benefits to any property of the owners; and they shall also assess and determine what'damages each owner of the lands over which the road is to run shall suffer by the opening and constructing of said road.”

It will be noticed that this section applies to the old system in effect prior to 'act of May 31, 1911, now § 5249, C. & M. Digest. We think § 5231 has no application to this case, as it is not the system resorted to in the laying out and establishing this highway, or any change «therein. The county court made the opening order of this road under § 5249, C. & M. Digest, and the claim was filed in pursuance of the provisions of such section, and the appeal to the circuit court was prosecuted by authority thereof. It will therefore be seen that, even though both statutes exist, and that either method of procedure might have been resorted to, the procedure provided by the later statute was followed by both parties, and the method of determining the damages provided by § 5231 can have no application here. The act of 1911 does not prohibit the court from taking into consideration, in determining the landowner’s damages, the value of' the benefits received by such owner from the improvement. In this respect it differs from § 5231 and also with the eminent domain statute fixing the measure of damages for rights-of-way for railroads, and other corporations, as, by § 3998, C. & M. Digest, the damages shall be determined and assessed irrespective of any benefit such owner may receive from the improvement.

Section 9 of article 12 of our Constitution provides that: “No property, nor right-of-way, shall be appropriated to the use of auy corporation until full compensation therefor shall be' first made to; the owner, in money, or first secured to him by a deposit of money, which compensation, irrespective of any benefit of - any improvement proposed by such corporation, shall be ascertained by a jury of twelve men, in a court of competent jurisdiction, as shall be prescribed by law.”

And § 22 of article 2 of the Constitution prohibits the taking of private 'property for public use without just compensation. It will therefore be seen that the acquisition of property for right-of-way or other purposes cannot be taken by a pifivate corporation, such as a railroad company, without payment therefor in money, and that benefits by reason of the construction of the improvement cannot be considered.

This court has held that the word “corporation,” as used in § 9, article 12, refers to private corporations, and that when land is appropriated for the use of the public it is not “appropriated to the use ,of any corporation,” as set out in the above section. Paragould v. Milner, 114 Ark. 334, 170 S. W. 78. In that case the city of Paragould, a municipal corporation, sought to condemn a strip of land, privately owned, for the purpose of widening a street. It was stipulated that witnesses would testify, if permitted to do so, that the benefits to the property left after the strip was condemned would exceed the value of the property appropriated by $300. The court refused to permit such offered testimony, and it also instructed the jury, over the city’s objection, that they “should not take into consideration any betterment that may accrue to the defendant by reason of this proposed improvement,” and that “you cannot pay a man for his property in betterment,” etc. This court reversed the case, and held to the effect, as already stated, that the word “corporations,” as used in the section of the Constitution, did not apply to a municipal corporation, and that, quoting the first syllabus, “where the public use for which a portion of a landowner’s land is taken so enhances the value of the remainder as to make it of greater value than the whole was before the taking, the owner will he held in such case to have received just compensation in benefits.” It was further held in that case that the benefits to be considered must be those which are local, peculiar, and special to the owner’s land.

It was further held, in Dickerson v. Tri-County Drainage District, 138 Ark. 471, 212 S. W. 334, that § 22 of article 2 of the Constitution, providing that “private property shall not be taken, appropriated or damaged for public use, without just compensation therefor,” relates entirely to the owner’s right to compensation, hut not to the remedy therefor. And that a drainage district may take private property for its right-of-way under the State’s right of eminent domain, and that it may exercise such right without notice to the owner, and without giving a hearing upon that question. See also Sloan v. Lawrence County, 134 Ark. 121, 203 S. W. 260.

In Cribbs v. Benedict, 64 Ark. 555-559, 44 S. W. 707, 708, this court said:

“Where the Constitution is silent .upon the subject, the decisions of the courts present diverse views upon the right to consider, by way of compensation for a portion of his land taken for public use, the benefits thereby accruing to the remainder. Lewis, Em. Dom., § 465. The view which seems to us to accord with reason, and which is supported by high authority, is that, where the public use for which a portion of a man’s land is taken so enhances the value of the remainder as to make it of greater value than the whole was before the taking, the owner in such case has received just compensation in benefits. And the benefits which will be thus considered must be those which are local, peculiar, and special to the owner’s land, who has been required to yield a portion pro bono publico.”

This ease was cited and quoted from with approval in Paragould v. Milner, supra, and in the more recent case of Weidemeyer v. Little Rock, 157 Ark. 5, 247 S. W. 62, where a- strip of Weidemeyer’s land had been condemned by the city of Little Bock for the opening of Broadway Street. It was again held that the benefit accruing to the remaining portion of Weidemeyer’s land exceeded the value of the strip taken, and compensation was properly denied. In that case the lower court directed a verdict for the city, on the ground that the benefit to be derived by the improvement to be made exceeded the value of the property taken for such improvement, and this court sustained such instructed verdict. We are unable to make any distinction between that case and the one now before us as to the principle of law now under consideration. If it applies to the opening of a city street through city property, why should the same rule not apply to the opening or laying out of a rural road through rural property?

The Constitution and statutory provisions of this State with reference to the taking of private property by railroads and other private corporations, as well as the decisions of this court relating, thereto, are wholly different from the statute now under consideration. There is no provision either in the Constitution or the statute prohibiting the offsetting of benefits against damages in 'cases of this kind, and we therefore conclude that the circuit court did not err in taking these special, local and peculiar benefits to this tract of land into consideration in arriving at the judgment in this case.

It is next insisted by counsel for appellant that the benefits testified to by the -witnesses for appellee were all such benefits as accrued to the general public, and were therefore not special, local or peculiar to this particular land, and therefore cannot be taken into consideration in the reduction of damages. We cannot agree with counsel in this contention. The proof shows that the value of appellant’s land has been greatly increased by reason of this road lying adjacent to his land, and that his farm in its present condition is worth from $500 to $1,000 more than it was' before the construction of this road. Under the rule announced in Weidemeyer v. Little Rock, supra, these benefits may be offset against the damages. The circuit court found that the damage to the land not taken plus the value of the land taken exceed the benefits to the remaining land by the sum of $250. There is substantial testimony to support this finding of the court, and, under the rule above announced, the judgment must he affirmed. •

Mehaffy, J., dissents.


text:
    Mutual Life Insurance Company of New York v. Raymond.
    Opinion delivered April 2, 1928.
    1. Insurance — burden of establishing suicide. — Where the defense to an action on a policy of life insurance is suicide, the insurer has the burden of establishing such defense by a preponderance of the evidence.
    2. Insurance — jury question. — In an action on a life insurance policy where the defense was suicide, and the evidence showed insured was comparatively young, was living happily with his wife and children, holding a position of honor and trust, and where there was no showing of a motive for suicide, and where there was no evidence to show how insured was killed, the question whether he committed suicide was for the jury.
    3. Evidence — presumption against suicide. — There is a presumption of law against a man’s taking his own life intentionally, even where it is shown that he came to his death at his own hands; the law presuming that the death was accidental rather than suicidal.
    4. Insurance — testimony tending to rebut suicide. — In an action for the death of the insured, where the defense was suicide, testimony of the insured’s wife as to a conversation with the insured regarding the payment of premiums on his life insurance, which tended to show that insured was not contemplating- suicide, but was expecting to live at least past the next premium period, before which death occurred, held competent evidence.
    5. Trial — instruction as to sufficiency of evidence. — In an action on a policy of insurance where the defense was suicide, an instruction that, for the jury to be'justified in finding that the insured committed suicide, there must be evidence from which the conclusion would be reasonable and probable and not merely speculative or conjectural, held not error.
    6. Trial — instruction—weight of evidence. — In an action on a policy of insurance, where the defense is that insured committed suicide, an instruction that the jury had a right to consider insured’s conduct prior to the shooting and any facts and circumstances which took place during his last illness tending to explain any motive, held not erroneous as being upon the weight of evidence.
    Appeal from Woodruff -Circuit Court, Central District; W. D. Davenport, Judge;
    affirmed.

      Owens & Ehrman and Rose, Hemingway, Cantrell é Loughborough, for appellant.

      Roy D. Campbell, for appellee.
   McHaney, J.

Appellees are the widow and two daughters of George O. Raymond, deceased. On June 4, 1925, each of the appellants issued to said George O. Raymond a policy of life insurance in the sum of $1,000, with a double indemnity clause covering death by bodily injury through “external, violent and accidental means.” The policy issued by the appellant, Mutual Life Insurance Company, designated appellee, Alice M. Raymond, as the beneficiary, and the policy of the .¿Etna Life Insurance Company designated the appellees, Mary F. and Johnnie E. Raymond, las his beneficiaries. On April 26, 1926, George O. Raymond came to his death from a pistol-shot wound, which all parties admit was self-inflicted, but they differ as to whether his death was by suicide or by accident — whether intentional or unintentional. Suicide, whether sane or insane, within one year after the date of said policies, was not -a risk assumed by the appellants. Appellants having denied liability after proof of death, separate suits were instituted against them, but, the defense being the same, they were consolidated, tried together, separate judgments of $2,000 each, under the double indemnity clause, had, and they jointly prosecute this appeal to reverse such judgments.

Suicide being the defense relied upon by appellants, the law places upon them the burden of establishing this fact by a preponderance of tbe evidence, which they undertook to do. The facts developed are substantially as follows:

The insured was a deputy for the- county clerk and the circuit clerk, and had been during the year 1925, and up until the time of his de'ath in 1926, his office being in the rear of the Bank of McCrory, McCrory being one of the county sites of Woodruff County. For two or three months prior to his death he had been drinking somewhat, but none of the witnesses testified that he had been drinking to excess. -Some complaint had been made against him by one or two persons on hi® bond to the clerks that he was neglecting his duties by remaining awiay from his office too much, and on the morning of his death both the county and circuit clerks came to McCrory for the purpose of talking to him about these matters, and of checking over his accounts. Mr. Raymond was at home, ill. He had been suffering with what his physician thought was influenza for about two weeks, and on the morning in question, April '26, after the arrival of the clerks, one of his bondsmen called him on the telephone and advised him that the two clerks were there for a conference with him, and to check over his accounts, and requested him to come to his office, if he was able to do so, which he agreed to do. It appears that he had been taking'medicine during the night, which necessitated his going to the toilet, a small wooden structure to the back of his house, twice before his death, being accompanied on both occasions by his wife. He had borrowed a pistol from a friend in McCrory, who had requested the return of same, and he had been cleaning the pistol with a handkerchief. -Shortly after the telephone call he took the pistol, got in his car, and started to his office, but, after going a short distance, he returned, got out of his ear, and ¡again went to the toilet, in response to a call of nature, apparently, and a short time thereafter a shot was heard in the toilet, and a scream of pain was heard by his wife, who was at the time in the garden near the toilet. His brother, Jack Raymond, land two other gentlemen immediately responded, being the first ones to him, and they found him .sitting on the toilet with his trousers down, as if in the act of responding to a call of nature, slumped over, with this borrowed pistol and the handkerchief he had used in cleaning it lying between his feet. They found that he had been shot through the left breast, the bullet entering, according to the doctor, ■ right under the heiart and passed through his back, going through the body, whether straight through or not the doctor did not know. He was taken into his house, where he died shortly after the arrival of the physician. No powder-burns were found on his clothes. The toilet on which he was sitting had a metal lid, which had been elevated, and the bullet from his body passed through this lid near the top, and through the wall of the toilet, the bullet-hole in the seat covering being 13 inches above the seat, and in the wall one inch lower, which would tend to show that the bullet ranged slightly downward.

It was further shown that, during’ his illness, he got out his insurance policies, which he kept in the dresser drawer, and examined them. His wife stated that he and she read the policies together, including the suicide clause, and that he was familiar with this clause, and knew it was in the policies. Other members of the family saw him reading the policies and heard him discuss them with his wife. ■ On cross-examination of Mrs. Raymond she was asked this question, and permitted to give the following answer, over appellants ’ objections and exceptions: ‘ ‘ Q. I want you to tell the jury what, if anything, was said by your husband, when he wias examining these policies, about paying the next premiums that came due? A. He told me that he was very sick, he was feeling awfully bad, and he didn’t think he would ever be able to work any more, and he wanted his premiums to be kept up. He said, ‘Wife, if I haven’t the money when they come due, I have' a friend who will help you out. They must be kept up’.” This conversation occurred three days before his death.

The undertaker who took charge of his body found two notes in his clothing which he wore at the time, both of which had been destroyed or been misplaced; one to J. C. McCrory, and the other to Senator Walter W. Raney, the undertaker. The note to McCrory, in substance, read: “Dear J. C. You have been good to me and my family. Good luck.” In the note to Senator Raney he stated that he was sick, did not know whether he would get well, and, if not, for him to take charge of his body. 'Both McCrory and Raney were warm personal friends of the deceased, McCrory having loaned him money to send his two girls away to school.

It is also shown that he was overdrawn in a small amount at the bank. An examination of his accounts at the office of the county and circuit clerk disclosed no shortage, and nothing of a criminal nature. It was developed that some warrants of duplicate numbers had been issued, but on examination thereof by the county judge they were held to be valid, and were reissued.

Under the above state of facts, the appellants insist that the court should have directed a verdict in their favor. We do not agree with counsel in this contention. There is little or no dispute about the facts. As was said in Grand Lodge A. O. U. W. v. Banister, 80 Ark. 190, 96 S. W. 742: “The only disputed question is whether the shot was accidental or an act of intentional self destruction. The burden of proving suicide was upon the defendant. It alleged that fact as a defense to the action, and must prove it, for, until that fact is established, liability of the defendant for the amount of the policy is clear.

. “There is no dispute about the facts, which were susceptible of direct proof, but the case turns upon the conclusion to be drawn therefrom — whether or not they establish suicide indisputably. For, if the facts are such that men of reasonable intelligence may honestly draw therefrom different conclusions on the question in dispute, then they were properly submitted to the jury for determination. Judges should not, under that state of the case, substitute their judgment for that of the jury.” And, as was further said in the same case: “After careful consideration of the evidence we are of the opinion that this question was properly submitted to the jury, and that there was evidence sufficient to support the verdict. Conceding that the theory of death by suicide finds more rational support in the facts established by direct proof than the theory of death by accident — that there is greater probability from the evidence that death resulted from a suicidal act than an accident — still we cannot say that death by suicide is the only reasonable conclusion to be drawn from the evidence. The proof does not exclude with reasonable certainty death from accidental shooting, and, the burden being upon the defendant to establish the defense by proof, it was properly left to the jury to say whether or not it was a case of suicide. ’ ’

In that case the universal rule was again announced that there is a presumption of law against a man’s taking his own life intentionally, even where it is shown that he came to his death at his own hands. The law presumes rather that the death was accidental instead of suicidal. This presumption of law is strengthened in the case at bar by the fact that he was a comparatively young man, 42 years of age, living happily with his wife and children, holding a position of honor and trust, being- a deputy for two of the county’s officials; that, while he was suffering from an illness prior to the day of his death, he had discussed with his family his insurance policies, and his desire the keep the premiums paid; that, in response to the telephone call, he had started to his office to consult with his employers, taking with him the borrowed pistol, when he was overcome by a call of nature, and suddenly returned to his home to answer it; the seating of himself -and so arranging his clothes to answer such call, no doubt taking the pistol out of bis pocket in order to prevent it from falling on the floor while sitting upon the toilet. • No one knows just how the fatal shot happened to be inflicted, whether he was again polishing the gun with the handkerchief he had formerly used, and accidentally discharged it, or whether it might have fallen on the floor and was discharged in such a manner as to receive the bullet in his breast, where it was deflected by a bone and passed straight through his body, or whether he deliberately shot himself, no one can tell. It would seem unreasonable to believe, or at least it would be improbable, that he would take his life intentionally in the place where he was ¡and in the undressed condition in which he was found. It was therefore not impossible, nor even improbable, that the shooting of himself was accidental. We fail to find in the evidence any motive for suicide. The notes that were found in his clothing may be explained without reference to suicide. Taking into consideration his condition of health, his ide'a that he might not get well, might not be able to work any more, and all the facts and circumstances surrounding him at the time, we are unable to say that men of reasonable intelligence might not honestly draw therefrom different conclusions on whether his death was suicidal or otherwise.

The facts in this case are wholly different from those in New York Life Ins. Co. v. Watters, 154 Ark. 569, 243 S. W. 831; Ætna Life Ins. Co. v. Alsobrook, 175 Ark. 523, 299 S. W. 744; and Fidelity Mutual Life Ins. Co. v. Wilson, 175 Ark. 1094, 2 S. W. (2d) 80, in which cases it was held that the undisputed facts unmistakably pointed to suicide, and the death could not be accounted for upon any other reasonable hypothesis than that of suicide.

It is next insisted that the court erred in permitting Mrs. Raymond to testify, as above set out, regarding her conversation with the deceased about the payment of premiums. It is said that this testimony is hearsay, and for that reason inadmissible, and, being highly prejudicial, calls for a reversal of the case. We cannot agree with this contention, for the reason that it seems to ns that any testimony which tends to throw light upon the question at issue, that is, whether the deceased committed suicide, or came to his death by accidental means, is relevant and competent. His statements regarding the payment of premiums on these policies to his wife tended to show that at that time he was not contemplating suicide, but, on the contrary, was expecting to live at least past the next premium period, which was June 4 following, and was therefore competent for this purpose.

In the case of Scott v. Sovereign Camp W. O. W., 149 Ia. 562, 129 N. W. 302, the Supreme Court of Iowa held that, on the issue whether a member of a fraternal beneficiary association committed suicide, evidence of his conversation’ over the telephone with his daughter, shortly before his death, to the effect that he would return home soon, in time to keep an engagement, that there were some clients in his office at the time, was admissible, as bearing’ on his apparent state of mind, contradicting the theory of suicide. And in an extensive note to Rosman v. Travelers’ Ins. Co., 127 Md. 689, 96 A. 875, Ann. Cas. 1918C, p. 1050, it is said:

“In like manner declarations of an insured shortly before his death have been held in recent cases to be admissible to refute an inference that he committed suicide. Thus, in Woodmen of World v. Wright, 7 Ala. App. 255, 60 So. 1006, declarations made by the insured, who had shot himself, manifesting a hope or desire to recover, were held to be admissible ‘for the purpose of showing whether or not the act was intentional.’ So in Messersmith v. Supreme Lodge, etc., 31 N. D. 163, 153 N. W. 989, proof that, shortly before his death, the insured stated that he was going to the house to fix the fire and would then come back for his wife and baby, was held to be admissible to rebut evidence of suicide.”

In Browner v. Royal Indemnity Co. (C. C. A.), 246 Fed. 637, it was held that statements of the insured tending to show a disposition to commit suicide made some months before his death were held to be admissible. The court said:

“The fact that threats or intimations of suicide were made some time prior to the death in question does not make evidence of them inadmissible, when it is fairly inferable from circumstances disclosed that, immediately prior .to the de'ath, the deceased was subjected to a depressing influence which was the same as or similar to the one by which he was affected when, not very long before, the incidents testified to occurred. As above stated, it was inferable from other evidence adduced in the instant case that the cause of the gloomy and despondent mood or state of mind, as to manifestations of which the witness referred to testified, had not ceased to exist at the time of Brawner’s death. This being so, the conclusion is that those incidents are not to be regarded as being too far removed in point of time and sequence from his death to justify the consideration of them in connection with other circumstances throwing light upon the question of his death being accidental or suicidal.”

And in the case of Benjamin v. District Grand Lodge No. 4, 171 Cal. 260, 152 Pac. 731, statements of the deceased showing intent to commit suicide, made seven months before the time of death, were held to be admissible. The court held that their remoteness went to their weight and not to their admissibility. An examination of the authorities discloses that the tendency of courts, in recent times at least, is to hold -that any evidence, including statements of the deceased, which tends to throw light upon the question of whether the deceased came to his death by suicide or not, is competent. We therefore hold that there was no error in permitting Mrs. Raymond to testify as above set out.

It is next said that instruction No. 3, given at the request of the appellees, was improper. It is as follows:

“In attempting to determine whether or not the said George Raymond committed suicide, you would be authorized to take into consideration all of the proved facts and circumstances which have been testified to 'in this case. Before you would be justified in finding that he did commit suicide, there must be evidence from which a conclusion would be reasonable and probable, and not merely speculative or conjectural. - If you find from a consideration of all the evidence in this case that it is merely speculative or conjectural as to whether the said George Raymond committed suicide, your verdict should be for the plaintiffs.”

It is objected to because it contains the words “speculative” and “conjectural,” and the court was asked to strike this clause froni the instruction. It is said that the instruction is erroneous because it permits the jury to apply a test of law, which is the proper function of the court. This same instruction was used and similarly criticised in the case of Benefit Association of Railway Employees v. Jacklin, 173 Ark. 937, 294 S. W. 353, and the court there held it to be a proper instruction. It would serve no useful purpose to make the same argument again, and we therefore overrule appellants’ contention in this regard.

It is finally contended that instruction No. 8 was erroneous. It follows:

“In passing upon the question of whether or not the deceased, George Raymond, shot himself accidentally or intentionally, you have a right to consider all the facts and circumstances leading up to and surrounding the fatal shooting. You have a right to consider the conduct of the deceased prior to the shooting, any facts and circumstances which took place during his last illness which may tend to explain any motive in his mind, that might or might not explain the shooting, and you are to pass upon the facts and circumstances in the light of reason and common sense.”

It is s'aid that the last clause in this instruction particularly emphasizes certain portions of the testimony, and for that reason is an instruction upon the weight of the evidence, which trial courts may not give. We do not think this instruction is open to this criticism. What we have already said relative to the assignment of error relating to the testimony of Mrs. Raymond has some application here. The court did not tell the jury to take into consideration any particular testimony in the case, hut, in effect, told the jury to take into consideration all of the facts and circumstances surrounding his death, and those during his last illness, lany facts which might or might not tend to explain the shooting. We think this was a correct instruction, and was no more than instruction No. 8 given at the request of appellants, by which the jury was told that, “in determining whether or not the insured committed suicide, you will consider all the facts and circumstances surrounding Raymond’s death; the nature of the wound, the position of the body, and all the circumstances which might explain the cause of his death.” It appears to us that this last instruction is more nearly subject to the criticism appellants have made of the other instruction. However, we regard them both as correct statements of law for the jury’s guidance.

We find no error, and-the judgment is affirmed.