author: Kirby, J.

text:
    McCrory Special School District v. Rural Special School District No. 22.
    Opinion delivered March 17, 1930.

      Roy D. Campbell, for appellant.

      Elmo CarlLee and W. J. Dung cm, for appellee.
   Kirby, J.

In McCrory Special School District v. Curtis, 174 Ark. 343, 295 S. W. 971, tbis court beld that the county board of education was without jurisdiction to annex territory within a rural special school district, created by special act of the Legislature, to another special school district, and that its order of annexation could be quashed upon certiorari, the order being void, notwithstanding the parties could have appealed from it.

In Rural Special School District No. 22 v. McCrory Special School District, 179 Ark. 195, 14 S. W. (2d) 1110, in a suit to recover the funds transferred from the special school district attempted to be annexed to the McCrory Special School District, this court held, on appeal from the judgment of the lower court, that the rural special school district attempted to be annexed to the McCrory Special School District had a cause of action against the last-named district to recover all funds transferred to its credit and not expended in or for the benefit of the rural special school district, and that the court erred in sustaining the demurrer to the complaint therefor and dismissing the cause of action. Upon remand of the cause for a new trial and ' new hearing, judgment was rendered against the McCrory Special School District for most of the funds so transferred by the treasurer from the rural special school district’s account, and from this judgment the appeal is prosecuted.

It appears that, upon the order of annexation made by the county board of education on September 21, 1926, the funds of district No. 22, in the sum of $3,773.80, were ordered transferred to the appellant district. On September 24, 1926, the directors of district No. 22 filed a petition in the chancery court for an injunction to restrain the county treasurer from transferring the funds, and that the funds were transferred by the treasurer on the 25th day of September, 1926, before the service of summons in the injunction suit was had upon him, and the suit was dismissed. No other suit was filed or attempt made against the treasurer or the McCrory Special School District to prevent the expenditure of any of the transferred funds by appellant district until after all the funds had been expended, when this suit was brought for their recovery. Upon remand of the cause the demurrer was overruled, and upon the hearing the court instructed the jury to return a verdict for $2,327.54, the appellee district conceding in its complaint that the sum of $1,701.81 of its funds wrongfully transferred to appellant district had been expended for the schools in the territory of district No. 22, and from this judgment this appeal is prosecuted.

It is conceded that the amount of $3,773.80, funds of appellee district, was transferred to appellant district upon the order of the county board of education when the consolidation was made, and appellant in its answer contended that the whole amount was expended for school purposes, and considerable more for the benefit of the children of school age in appellee district No. 22. That district had employed a teacher at a salary of $100 per month for nine months. Appellant district maintained schools at Beard sehoolhouse, in the territory of appel-lee district, at a cost of $640; at Chapel Grove, in said district, at a cost of $474.50, and at Possum Creek, in said territory, at a cost of $310. It purchased for the purpose of transporting the children in appellee district, 50 in number, to school in appellant district two busses at a cost of $1,447.55, and paid the drivers of same $441.86. $147.76 was expended for miscellaneous expenses. It claimed an error in the transfer of funds repaid of $2,388, and a total amount of expenses for school purposes in appellee district of $4,711.55. Because of the transfer of the children from the schools in the territory of district No. 22 to the schools in McCrory, it became necessary to employ another teacher, and Miss Wilson, who had already been employed to teach school in district No. 22, was used, although all the pupils transferred were not taught by her, the others being in their respective grades under different teachers.

Appellant insists that the court erred in not directing a verdict in its favor upon the undisputed testimony, and in rendering judgment against it for any amount, and this contention must be sustained. Although it appears from the record that the petition for annexation of the territory of district No. 22 was signed by four of the six directors of the district and some 80 to 85 per cent, of the patrons of the district, the order of annexation was void, and the amount of funds of the district wrongfully transferred to appellant district. The undisputed testimony shows, however, that the entire amount of funds so transferred ivas expended for school purposes, maintaining schools at three of the school houses in the territory of district No. 22, and for transportation of, and teachers for, the other pupils who attended school in town. Of course, it would not have been necessary to provide the busses and operate them in transporting* the children of school age from the old territory of district No. 2'2 to the schools in McCrory, if the wrongful annexation of the territory had not been made; but their addition to the Mc-Crory schools necessitated the employment of another teacher, and appellant district used for this purpose a teacher who had already been regularly employed by the directors of school district No. 22 to teach in the schools there. Schools were maintained by appellant district at three of the schoolhouses in the old district as usual except for slightly longer terms at the expense of appellant district. Appellee concedes that appellant district is entitled to a credit of $1,701.81 against the amount of funds sought to be recovered, $3,773.80, leaving a balance of $2,071.99; but the court instructed a verdict in the sum of $2,327.54, an amount in excess of what could be recovered after the credit given of $255, and directed that it draw interest from September, 1926, instead of from August 2, 1926, when a demand was made therefor; this, notwithstanding the undisputed testimony, showed that there had been expended by appellant district for education purposes in the schools of district No. 22, and in transporting the children therefrom and teaching them in the schools of McCrory, $863.87 in excess of the total amount of funds which had been transferred from appel-lee district to appellant district upon the order of the - county board of education in annexing; the territory thereto and consolidating the districts. This money was expended for school purposes in the district and for education of the pupils of. the district for which the taxes constituting the fund were levied and appropriated, and could not therefore he recovered from appellant district. Mabelvale Special School District v. Halstead School District, 169 Ark. 645, 276 S. W. 584; Lepanto School Dist. v. Marked Tree School Dist., 173 Ark. 82, 291 S. W. 1006.

It is undisputed, that while the funds in controversy were transferred to appellant district on the 21st day of September, 1926, none of it was spent until from and after the middle of October, 1926, to June, 1927, and that appellee made no effort after the transfer was made to prevent the expenditure of the money, but waited and brought suit for its recovery after it all had been expended for school purposes within the territory of its district or for the pupils resident there; and appellant was entitled to have its instruction No. 1 given to the jury, and, the evidence being undisputed, to an instructed verdict in its favor. The case thus made as stated was altogether different from the case on appeal on demurrer to the complaint. In Lepanto School Dist. v. Marked Tree School Dist., supra, it was said:

‘ ‘ This court is committed to the doctrine that school taxes erroneously levied and distributed, pursuant to the levy, to a school district and consumed in educational purposes, cannot be recovered by the school district rightfully entitled thereto. The district to which the taxes rightfully belonged should have proceeded by injunction or other proper remedy to prevent the wrongful assessment, levy and distribution of taxes, or else have brought suit for the recovery of such taxes before they were expended for educational purposes by the district wrongfully receiving them. Mabelvale Special School Dist. v. Halstead Special School Dist., 169 Ark. 645,” [276 S. W. 584].

It follows, from what we have said, that the court erred in instructing the verdict against appellant district which should have, upon the undisputed testimony, been directed for appellant. The judgment is reversed accordingly, and, the suit appearing to have been fully developed, the cause will be dismissed. It is so ordered.


source: Caselaw Access Project

author: Mehaffy, J.

license: Public Domain

text:
    Trimble v. Trimble.
    Opinion delivered March 17, 1930.

      Sam W. Trimble and Beinberger S Beinberger, for appellant.

      Wooldridge & Wooldridge, for appellee.
   Mehaffy, J.

Robert W. Trimble and Hazel P. Trim-ble were husband and wife, and in 1923 the Mutual Life Insurance Company of New York issued a policy of insurance upon the life of Robert W. Trimble, Hazel P. Trim-ble being named as beneficiary. The amount of the policy was $2,000.

Hazel P. Trimble brought suit in the Jefferson Chancery Court against Robert W. Trimble, and was granted a divorce in November, 1927. At the time of the decree for divorce there was a property settlement between Robert W. Trimble and Hazel P. Trimble, but nothing was said at the time about the insurance policy. Premiums had all been paid since the policy was issued in 1923. After the divorce was granted in November, 1927, Robert W. Trimble died on the 29th of June, 1928.

This suit was begun by Sam "W. Trimble, as next friend of David L. Trimble, against the Mutual Life Insurance Company and Hazel P. Trimble, asking that the insurance policy issued in 1923 on the life of Robert W. Trimble be reformed so that the beneficiary would be David L. Trimble, instead of Hazel P. Trimble.

It was alleged that at the time of the divorce decree Hazel P. Trimble had possession of the insurance policy, and at that time requests were made for her to deliver said policy to Robert W. Trimble.

The Mutual Life Insurance Company answered, admitting the validity of the contract, and paid the face value of the policy into the court to be distributed to proper parties.

David L. Trimble is a minor, and a nephew of Robert W. Trimble, deceased, and the defendant, Hazel P. Trim-ble, is the divorced wife of Robert W. Trimble, deceased.

The insured, Robert W. Trimble, had the right under the policy to designate a new beneficiary. The policy, however, provided that he anight do this by filing written notice with the home office, accompanied by the policy for suitable indorsement; that the change in beneficiary should take effect upon the indorsement of the same on the policy by the company.

The only question for this court to determine, as stated by the appellant, is who is entitled to the proceeds of the policy? The chancery court found in favor of the divorced wife, Hazel P. Trimble, and the decree was entered accordingly.

It is contended by the appellant that the deceased, Robert W. Trimble, intended to change the name of the beneficiary under the policy, and that he filled out and signed the necessary papers and delivered them to the representative of the company. It is conceded that he did not deliver them to the home office, as required by the policy, and that he did not deliver the policy for the in-dorsement to be made on it by the company. Appellant says that it is true that the testimony is disputed as to whether deceased ever tried to obtain the policy from appellee, but that the preponderance of the testimony shows that the insured did make repeated requests and demands upon appellee for the policy, and that appellee gave as an excuse for the failure to deliver the policy that it was lost. The only evidence offered by appellant as to any requests made of appellee were statements of witnesses that the deceased, Bobert W. Trimble, had told them that he intended to change the policy and make David L. Trimble the beneficiary, and that the deceased had also told some of the witnesses that the appellee claimed the policy was lost, and refused to make the affidavit required in case of lost policies. There is no witness who testifies that a request was ever made to appel-lee to deliver the policy or to make an affidavit, but, on the contrary, she swears positively that no such request was ever made of her. She swore she did not know where the policy, was, but it was afterwards found in her mother’s safety deposit box.

Appellee testified that she had never been called upon by the deceased during his lifetime to do anything relative to changing the beneficiary in this policy. The deceased had from November, 1927, until June, 1928, to get the beneficiary changed, and he did not do this. The evidence of the witnesses who testify to statements made by him, fix the time as some time in the spring of 1928, and there is no evidence of his ever mailing any other effort. There would have been no difficulty in deceased securing the policy at the time of the divorce decree and the property settlement if he had desired to do so. Moreover, he had ample time, after witnesses say that he announced his intention to change the beneficiary, to do so before his death, and did not do it.

The chancery court had jurisdiction to reform the instrument, but we do not agree with appellant that the evidence shows any fraud upon the part of the appellee, or any mutual mistake, or any mistake on the part of any of the parties.

It is contended by appellant that the evidence clearly shows the intention of the deceased to change the beneficiary. The most that can be said of this is that some time in the spring deceased talked to several witnesses, stating to them that he intended to make the change. The undisputed fact, however, is that he did not make the change, and, so far as the record shows, no further effort was made on his part to do this. Not only this, but the appellee testifies positively that he never called, on her for the policy, or for the affidavit, or for anything with reference to changing the beneficiary. It is, however, contended that what he did constituted an equitable assignment of the policy, and the case of Webster v. Telle, 176 Ark. 1149, 6 S. W. (2d) 28, is cited and relied on as supporting this contention. But the court said in that case:

“But, as we construe the change of beneficiary clauses in these insurance contracts, there has been no change of beneficiary since the change was made from the refining company to that of executors, administrators or assigns of the insured. The beneficiary in the policies at the time of Telle’s death, if there had been no assignment of the policies, was his executor, the appellant. But, if the policies had been assigned by Telle to his wife, then the beneficiary was his assignee, Bernice Phillips Telle, the appellee.”

There was in the above case, we think, much stronger evidence of an intention to change the beneficiary than in the instant case, and yet this court held outright that there had been no change in the beneficiary, and, if the policy had not been assigned, that the beneficiary was the executor of the appellant. The court in the Webster v. Telle case further said:

“The appellee testified that the policies had been in her possession ever since three or four days before she executed a mortgage to the National Bank of Commerce, on January 5, 1926, at which time she examined each of the policies, and they are the policies which were delivered to her. She kept the policies a few days, but did not have any place to lock them up. She next saw the policies of insurance after her husband’s death. The mortgage she referred to secured a loan by her from the National Bank of Commerce at El Dorado, Arkansas, in the sum of $7,500, due six months from date. The property contained in the mortgage constituted her individual property. She did not get the $7,500, for which the mortgage was executed, but her husband took the money and used it in carrying on his business. The insurance policies were delivered to her by Mr. Webster, after her husband’s death, wrapped in his will, in a package sent to her from Little Rock, Arkansas, and addressed to her, and, when she opened it, there were these two policies and the will. No part of the $7,500 which she loaned her husband in 1926, which was borrowed from the National Bank of Commerce of El Dorado, and for- which he gave a mortgage on her El Dorado home property, had ever been paid to her.”

And the court, after quoting some further of the tes-(imony in the case, said:

“We are convinced that the above testimony is amply sufficient to justify a finding that, as between Telle and his wife, Telle had assigned the insurance policy to her. It was unquestionably the intention of Telle that the amounts due under the policies at the time of his death should be paid to his wife, the appellee. The evidence is susceptible of no other conclusion.”

It will therefore appear from the decision in the case of Webster v. Telle, supra, that there was no change in the beneficiary, but that Telle had borrowed $7,500 from his wife, and had delivered to her the policy to secure the payment of this money to her. The court held that there was an equitable assignment, although it was held that there was no change of beneficiary except by the assignment. -

Numerous cases are.cited to the effect that the requirement of an insurance policy as to the change of beneficiary must be complied with strictly before the change will be binding. In the instant case there is no contention that the provisions of the policy were complied with. It is conceded that they were not complied with.

“The cause being in equity for the purpose of determining the rights between the two sets of claimants, the proceedings must be governed by equitable principles. Hence it is unnecessary to discuss or determine what the rule at law is or should be. The established rule and the one adopted .in this State is that the change of the beneficiary cannot be made by the insured unless there is substantial compliance with the by-laws and regulations of the society.” Robinson v. Robinson, 121 Ark. 276, 181 S. W. 300.

In another case decided by this court, it was said: ‘ ‘ It is not claimed that the insured changed the beneficiary during his lifetime. Indeed, the statement of facts show the contrary to be true.” Watkins v. Home Life Ins. Co., 137 Ark. 207, 208 S. W. 587, 5 A. L. R. 791.

In the instant case, the undisputed facts show that there ivas no change of beneficiaries during the lifetime of the insured, and of course there could be no change of beneficiary after his death.

It is next contended by the appellant that the doctrine of equitable estoppel is applicable, and it is stated ' that the undisputed facts show that appellee had possession of the policy from the time of the divorce decree until after the death of the deceased; that repeated requests were made to her by the deceased and by her own attorney for the delivery of the policy to the deceased, and that she refused to deliver it. We do not agree with appellant in this contention. The undisputed facts did not show that any request was ever made to her by the deceased, and there is nothing in the evidence to show an estoppel.

It cannot be said that any of the contentions made by appellant are established by the undisputed facts in the case. The undisputed facts, however, do establish the'fact that the deceased, during his lifetime, never effected a change of beneficiary.

We do not deem it necessary to either set out the testimony or to discuss the authorities further that are cited and relied on by the parties. The undisputed facts in the case sIioav that there Avas no change in the beneficiary made during the lifetime of the insured, and none could be made after his death. There is no evidence tending to establish fraud or misconduct on the part of the appellee that would have prevented the deceased during his lifetime from making the change. Some witnesses, to be sure, testify that the deceased told them that he had requested the policy to be delivered to' him and appellee had refused, but her testimony contradicts this, and we think the overwhelming weight of evidence supports the finding of the chancellor, and the decree is therefore affirmed.


text:
    Merchants’ National Bank of Fort Smith v. Taylor.
    Opinion delivered March 17, 1930.

      Daily ■& Woods, for appellant.

      Hill, Fitzhugh é Brizzolara, for appellee.
   Mehaffy, J.

The People’s Bank of Ozark was a State bank, and Walter E. Taylor, as Bank Commissioner of the State of Arkansas, took charge of the People’s Bank of Ozark on February 2'5,1926, for the purpose of administering same pursuant to the laws of Arkansas, and is administering the property and affairs of said bank pursuant to the statutes of Arkansas.

The People’s Bank of Ozark was indebted to the Merchants’ National Bank of Fort Smith, the appellant herein, on a promissory note, bearing date of January 12, 1926, in the sum of $14,915. The appellant was the owner and holder of said note at the time of the failure of the People’s Bank of Ozark, and presented its claim on said note for the sum of $14,915 to the Bank Commissioner, and said claim was allowed by him as a valid general claim. Said note was secured by collateral notes aggregating the snm of $23,742.36, and the proof of the claim showed that the note of the People’s Bank was secured by this collateral.

The Bank Commissioner, with -a view to declaring a dividend, ascertained from tbe appellant the balance due upon the note held by appellant, and was informed that the balance due upon said note after crediting collections frpm collateral was $11,928.56. On July 8, 1926, the Bank Commissioner filed a petition in chancery court, wherein he set out the amount of claims then outstanding* against the People’s Bank of Ozark, including as plaintiff’s claim $11,928.56. The Bank Commissioner asked for an order authorizing him to pay a 10 per cent, dividend on the amount of the claims filed, and he- did pay 10 per cent., to appellant on the $11,928.56, but did not pay a dividend on the $14,915. In other words, the Bank Commissioner paid a dividend on the amount of plaintiff’s claim at the time of the distribution or payment of the dividend.

Before another dividend was paid appellant’s claim had been reduced by collections from the collaterals to $5,177.40 and an 8 per cent, dividend was declared and' paid on this amount. Thereafter, another dividend of 10 per cent, was paid, but at the time it was paid appellant’s claim had been reduced by collections of collateral to $2,638.59, and the 10 per cent, dividend was paid on this amount.

It is the contention of the appellant that all dividends should have been.paid on the full amount of the proved claim, without deducting the collections made from collateral between dividends. In other words, it contends that at the time it filed its claim there was due from the People’s Bank of Ozark $14,915, and that the dividends each time should have been paid on this amount, and not on the amount as reduced by payments from collaterals.

The question to be decided by this court is whether dividends should have been paid on the full amount of plaintiff’s claim filed with the Bank Commissioner, or whether it should have been paid on the actual amounts due it at the time the dividend was paid.

There is considerable conflict in the authorities as to whether a creditor holding collateral must first seek satisfaction out of such collateral, some jurisdictions holding that a secured creditor is entitled to prove his entire claim as though he had no collaterals, and to take a dividend like other creditors, and afterwards to apply the proceeds of the collaterals to the unpaid balance of his claim, turning over the excess, if any there be, to the trustee or receiver or Bank Commissioner for the benefit of other creditors. This is the rule contended for by appellants. And this rule for the payment of a dividend on the full amount of the creditor’s claim without deducting anything received from the collateral held is supported by decisions of the Supreme Court olf the United States, and other Federal courts and some State courts.

The case of Merrill v. National Bank of Jacksonville, 173 U. S. 131, 19 S. Ct. 360, and Aldrich v. Chemical National Bank, 176 U. S. 618, 20 S. Ct. 498, and other authorities cited, are relied on by appellant in this case. The authorities referred to support appellant’s contention. In the case of Merrill v. National Bank of Jacksonville, supra, the court said that counsel agree that four different rules have been applied in the distribution of insolvent estates, and held that rule No. 4 ivas applicable, and that rule is as follows:

£ £ The creditor can prove and receive dividends upon the full amount of his claim, regardless of any sums received from his collateral after the transfer of the assets from the debtor in insolvency, provided, that he shall not receive more than the full amount due him.”

The rule contended for by appellant and sustained by the authorities referred to, is known as the chancery rule. It is contended by the appellant that our statute or banking act is, in effect, a borrowed act, and that it largely follows the National Banking Act of the United States, and that, for that reason, this court should follow the opinion of the United States Supreme Court construing the National Banking Act.

There are several important differences in the statutes which would justify this court in adopting a different rule than that adopted by the Supreme Court of the United States. We have a statute prohibiting preferences among creditors of all insolvent corporations, except for laborers and employees. And Mr. Justice White, in a dissenting opinion in the case of Merrill v. National Bank of Jacksonville, points out very clearly how the application of the chancery rule would result in preferences to secured creditors. Of course, it is important in matters of this sort that there be uniformity, and, for that reason, where this court has not decided the question, it will follow the decision of the United States Supreme Court where the statutes are similar, or where it is a question involving general business dealings of the citizens of different States. As said by this court:

“In such matters it is important that uniformity should obtain in the different jurisdictions, and that but one rule should be applied to the business dealings of the citizens of the different States with each other, so closely interwoven is such business activity and association with the vast commercial life of the nation; and since the United States Supreme Court is the highest court of last resort, and does not follow the decisions of the State courts upon general banking and commercial questions, we will follow it. ’ ’ Sims v. American National Bank of Fort Smith, 98 Ark. 1, 135 S. W. 356; Exchange Natl. Bank v. Coe, 94 Ark. 387, 127 S. W. 453, 31 L. R. A. (N. S.) 287, 21 Ann. Cas. 934.

We think this question has been settled by the decision of this court in the case of Jamison v. Adler-Goldman Commission Co., 59 Ark. 548, 28 S. W. 35, and that the rule there adopted is applicable here. The statute there construed was not the Banking Act, but the rule adopted by .this court is applicable under the Banking Act, the same as under the statute construed in the Jamison case. In that case the court, speaking through Judge Battle, said: ■ !

“Creditors are required to present their claims for the amount due them when it is presented, and to swear that nothing had been paid or delivered towards the satisfaction of it, except what is credited thereon, and that the sum demanded, naming it, is justly due. They may present their claims within one year and 364 days after the grant of the first letters — -upon the close of the administration — but they must make this oath before their demands can be allowed; the statute thereby showing clearly an intention that they shall not share in the assets of the estate, except upon the basis of what is actually due after all payments are deducted. This being the manifest intention of one, it is presumed that it pervades the other statutes upon the same subject, and that when they say, if there be not sufficient to pay the whole of one class, such demands shall be paid in proportion to their amounts, according- to an apportionment made by the court, they mean by “amounts” the sum actually due at the time of the apportionment. When money is received from collaterals or mortgages held as security, in part payment of claims, they are certainly diminished accordingly, and their amounts become the balances due on them. ’ ’

So we have the construction placed, upon a similar statute by this court, expressly holding that when money is received from collaterals or mortgages held as security in part payment of claims, they are certainly diminished, and their amounts become the balances due on them. This is in harmony with the dissenting opinion by Mr. Justice White in Merrill v. National Bank of Jacksonville, and we think it is decidedly the most equitable rule.

Numerous authorities are reviewed in the opinion in the Jamison case, and also in the Merrill v. National Bank of Jacksonville case, and we do not think it would be of any importance to review the authorities here. There are the different rules, but we think the one heretofore adopted by this court is the most just and equitable rule. The injustice of the rule adopted by the Supreme Court of the United States is pointed out by Mr. Justice White in his dissenting opinion, as follows:

“Let me illustrate the unavoidable consequence of the doctrine now recognized. ,A loans a national bank $5,000, and takes as the evidence of such loan a note of the bank for the sum named, without security. The lender is thus a general or unsecured creditor for the sum of $5,000. B loans to the same bank $5,000, without security. He is applied to for a further loan, and agrees to loan another $5,000 on receiving collateral worth $5,000, and requires that a new note be executed for the amount of both loans, which recites that it is secured by the collateral in question.. While theoretically, therefore, B is a secured creditor for $10,000, he practically has no security for $5,000 thereof. Insolvency supervenes. The general assets received by the 'Comptroller equal only fifty per cent, of the claims. Now, under the rule which the court establishes, A on his unsecured claim ¡of $5,000, collects a dividend of but $'2,500, thereby losing $2,500; B, on the other hand, who proves $10,000, taking no account whatever of his collateral, realizes by way of dividends $5,000, and by collections on collaterals a similar amount, with the result that, though as to $5,000 he was, in effect, an unsecured creditor, he loses nothing. B is thus in precisely as good a situation as though he had originally demanded and received from the borrowing bank collateral securities equal in value to the full amount loaned. It is thus apparent that the application of the rule would operate to enable B, — who, I repeat, virtually held no collateral security for $5,000 of the sums loaned — to be paid his entire debt, though the assets of the insolvent estate of the borrower paid but fifty cents on the dollar, while another creditor, holding an unsecured claim for $5,000,'fails to realize thereon more than $2,500. ’ ’

The illustration by Mr. Justice White shows clearly how the rule might operate. We think that the rule adopted by this court, as announced in the Jamison case, and the rule contended for in the dissenting opinion of Mr. Justice White, is decidedly more equitable and fairer than either of the other rules, with reference to distribution of the estate of insolvent corporations. The rule is that when one files a claim, he files it for the full amount due at that time. If his claim is secured by collateral, and he collects anything from the collateral before a dividend is paid, then his dividend is calculated on the amount, reduced by the amount of the collateral collected. If there is still another collection from collateral before another dividend, the creditor is entitled to a dividend on the amount, reduced by the amount of the collateral received. In other words, he is entitled to a dividend on the amount of his debt at the'time the distribution is made, and not entitled to a dividend on the claim as originally filed if anything has been realized from collateral.

Other questions have been argued by attorneys, but the conclusions we have reached make it unnecessary to discuss or decide those questions. We do not think it worth while to'review the authorities any further, because the only question here is whether a creditor holding collateral can receive dividends each time on the amount of his original claim or whether the other rule applies, permitting him to receive dividends on his claim, as reduced by payments of collateral. "We think the latter rule is the most just, and the one adopted by this court, and we therefore conclude that the decree of the chancellor was correct, and it is affirmed.


author: McHaney, J.

text:
    Shackleford v. Arkansas Baptist College.
    Opinion delivered March 17, 1930.

      John D. Shackleford, for appellant.

      Boo.ker db- Booker and Frauenthal, Sherrill db Johnson, for appellee.
   McHaney, J.

The question presented for our determination in this case is the reasonableness of the fee allowed appellant by the chancery court for his services as attorney for appellee, Arkansas Baptist College, an institution of learning for negroes in Little Bock, under the following facts: W. W. "Wheeler, colored, died testate in Malvern, Arkansas, leaving an estate of from $15,000 to $20,000. By his will, the income from the whole estate, after payment of debts and two specific bequests, was left to his brother and two sisters during their lives, share and share alike, the survivors taking the whole income on the death of either. When all were dead, the corpus of the estate was to be divided equally between the appellee, Arkansas Baptist1 College and Shorter College (Colored) of North Little Bock. One clause in the will further said: “And especially request that my administrator, working in harmony with trustees of said institutions, use my said estate in a manner that shall assist worthy colored boys and girls in obtaining a college education.”

This will was admitted to probate in Hot -Spring County. A contest was threatened by .the collateral heirs, and appellant was employed by the Arkansas Baptist College to represent its interests, he being at the time the regularly retained counsel of said college. No agreement was had between .them as to what the fee should be for this special service coming outside of his retainer. No contest developed, however, and, as above stated, the will was probated. Negotiations for an immediate settlement and division of the property were then begun among counsel representing .the different interests, the collateral heirs contending for a one-half interest in the whole estate, and the two colleges contending for a larger share. The record does not disclose the ages of the heirs, but appellant testified their expectancy, based upon experience tables, was from thirty to thirty-five years. A settlement was finally agreed upon, whereby the two colleges received 29 1/6 per cent, each of the estate, and the three heirs the remainder or 41 2/3 per cent., to be divided among them. Appellant prepared the order admitting the will to probate, drew the deeds making- the division, as above stated, filed exceptions to the ex:ecu-tor’s report and settlement which resulted in a saving to his client of approximately $150, and has filed exceptions to the second report and settlement. The proof shows that at the time of trial appellant had collected from said estate for the account of his client $1,878.58. He could not agree with his client as to the amount of his fee, and brought this action to have the chancery court determine a reasonable fee to be paid out of the funds in his hands. The court allowed a fee of $1,527.77, to be paid on a basis of part cash, and the balance as the real estate was converted into cash for which a lien was fixed on the real estate. From this decree comes this appeal and cross-appeal by the college, and a judgment creditor.

This case was tried on the theory that appellant wa.s entitled to a contingent fee. tie contended for a contingent fee of 35 per cent, of the amount coming to the Arkansas Baptist College under the will. Two reputable attorneys testified that 33 1-3 per cent, would be a reasonable fee. We think there is no basis for a contingent fee, and that his recovery must be limited to the reasonable value of his services. The general rule is as stated in 2 R. C. L., p. 1048: “In the absence of an express contract of employment between an attorney and his client fixing the amount of the attorney’s compensation, it is generally held that the attorney is entitled to what his services are reasonably worth, or what has usually been paid to others for similar services.” Neither the trial court, nor this court on appeal, is bound by the testimony of appellant and his expert witnesses in determining the value of his services. Especially is this true on appeal from chancery courts. In Jacoway v. Hall, 67 Ark. 345, 55 S. W. 12, it was held that the judge could act upon his own knowledge in fixing reasonable compensation, and that this court would not overturn his finding unless clearly erroneous, but this was an appeal from the circuit court. See also Lilly v. Robinson Mercantile Co., 106 Ark. 571, 153 S. W. 820. In Valley Oil Co. v. Ready, 131 Ark. 531, 199 S. W. 915, it is said: “This court, trying the cause de novo, may apply fio the facts proved its own general knowledge of the subject-matter of inquiry in determining the value of the services that were rendered by the attorneys.” Lilly v. Robinson Mercantile Co., supra. In Sain v. Bogle, 122 Ark. 14, 182 S. W. 515, it was held that, in determining- what is a reasonable fee for an attorney, “it is competent and proper to consider the amount and character of the services rendered, the labor, time and trouble involved, the nature and importance of the litigation or business in which the services are rendered, the amount or value of the property involved in the employment, the skill or experience called for in the performance of the services, and the professional character and standing of the attorneys.” In that case an allowance of $4,000 was reduced by this court to $1,000. In Valley Oil Co. v. Ready, supra, the allowance was reduced from $2,500 to $250. In Bayou Meto Drainage Dist. v. Chapline, 143 Ark. 446, 220 S. W. 807, an allowance of $6,000 was reduced to $4,000.

Upon a review of all the evidence, and applying the foregoing rules of law, we are of the opinion that the allowance made by the chancery court is excessive, and that an allowance of $500, payable out of the funds in possession of appellant, is ample compensation for the service rendered, in the absence of any agreement as to what the fee should be, and that a judgment should go against appellant for the balance -with interest from May 27, 1929, at 6 per cent., each party to pay his own costs of this appeal.

The judgment of the chancery oour.fi is therefore modified in accordance with the foregoing, and, as modified, will be affirmed. It is so ordered.


text:
    Sheppard v. Sheppard.
    Opinion delivered March 17, 1930.

      S. W. Garratt, for appellant.

      C. T. Gotham, for appellee.
   McHaney, J.

Appellant and appellee are husband and wife, having been married in Benton, Arkansas, September 23, 1927. They lived in Hot Springs from that time until June, 1928, when they removed from thence to Centerville, South Dakota. They first lived at 104 Dower Street, and later moved to a house on Rector Street. Both of them had previously been married, and each had children by such former marriage. In February, 1928, as a result of a quarrel, they separated. Appellee worked for the telephone company, but appellant was not employed. The separation arose over a trivial matter, and in' a few days they went back together again. In July, 1928, after they had removed to South Dakota to make it their home, they began having trouble again, and separated on the 18th day of.that month. Appellee brought an action for separate maintenance against appellant in South Dakota, and, while that action was pending, appellant returned to Hot Springs, and on August 23 instituted this action for divorce against a-ppellee, alleging cruel treatment and general indignities such as to render his condition intolerable. Appellee then came to Arkansas, filed an answer to appellant’s suit, denying the existence of a ground for divorce in his favor, and also filed a cross-complaint against him, alleging a similar ground for divorce. The court made a temporary order for support money, attorney’s fees and court costs against appellant, the order for support being made on September 18, awarding to appellee all the rents and income accruing from the house located at 233 Henderson Avenue, which is located on lot 9, block 6, of Oaklawn subdivision of Hot Springs. Appellant was also ordered to pay certain expenses appellee had incurred in moving’ back.to Hot Springs, and, on his failure to comply with this order, his complaint was dismissed. The case proceeded to trial on the cross-complaint of appellee, and the court refused to grant a divorce to either party on the g-round that neither had been a bona fide resident of the State of Arkansas for one year next before the commencement of the action, and for that reason the court held that it was without jurisdiction. The court, however, made the temporary order of September 18, 1928, awarding her the rents and income from the house at 233 Henderson Avenue permanently, the decree stating “that said defendant and cross-complainant, Willie Sheppard, continue to have the rents and income from said home at 233 Henderson Avenue, or the right to the free use and occupancy of the same, as permanent maintenance.” From this decree there is an appeal and cross-appeal.

We think the chancery court correctly refused to grant a decree of divorce to either party. Regardless of whether the parties had been residents of the State for one year next before the commencement of the action or not, a question we do not find it necessary to decide, there was no substantial corroboration of the testimony of either party to justify the court in glinting the divorce. We do not review the testimony, as it would serve no useful purpose, but we have examined it very carefully and find it insufficient.

Appellant owned the property at 233 Henderson Avenue, as well as a home in South Dakota. On July 19, 1928, he conveyed his property in Hot Springs to his father, O. C. Sheppard, for an expressed consideration of $1 and love and affection. Appellee alleged that this conveyance was voluntary, and in fraud of her marital rights. She made the father, 0. 0. Sheppard, a party, and asked that the deed be canceled. He failed to appear and make any defense to the action, but wholly made default, and we think the court should have canceled said deed as having been made in fraud of her rights.

Appellant contends that the court erred in awarding appellee support money to the extent of the rents and profits in said property, but he is in no position to complain about this allowance. By his own voluntary deed he attempted to divest himself of any interest therein by a conveyance to his father. If his deed conveyed anything to the father, the father was the proper party to make objections. By his failure to appear in the chancery court and by his failure to appeal to this court, he is presumably consenting thereto, in so far as any interest he may have in the property is concerned. Therefore, appellant is in no position to complain about the allowance made for separate maintenance.

It appears that appellee’s counsel has been allowed a fee of only $25 for his appearance in her behalf in the chancery court. We think an additional allowance for $25 should be made for his services in this court. The decree will be affirmed on the appeal, and reversed and remanded on the cross-appeal, with directions to cancel the deed from appellant to his father, appellant to pay all costs of this appeal, including a fee of $25 to appel-lee’s counsel. It is so ordered.


author: Butler, J.

text:
    Rhodes v. Carter.
    Opinion delivered March 17, 1930.

      W. A. Leach, for appellants.

      M. F. Elms and Joe Morrison, for appellee.
   Butler, J.

The statement of the case prepared by the attorney for the appellant H. H. John is a fair statement of the various contentions of the parties, and of the essential parts of the decree rendered, which statement we adopt as follows:

This action was brought by the appellant H. E. Rhodes against Chickasaw Animal Food Company, M. 0. Carter, H. H. John, G. A. Meyer, H. 1). Dilday, Clarence Weiman and Joe Rosencrantz, as partners, formerly trading as Rimol Pood Company, to recover rent alleged to he dne upon a building owned by the appellant Rhodes. The gist of the complaint is that the parties named as defendants were operating in the appellant’s building a business as partners under the firm name of Rimol Peed Company, and that they were indebted to him in a certain sum for past due rent.

It appears that M. 0. Carter and R. P. Tate were partners doing business under the firm name of Chickasaw Animal Pood Company in the city of Memphis, in the State of Tennessee. They were the owners of the right to install and cause to be operated in Arkansas, certain machinery to be used in the manufacture of feed from rice straw, and other like materials. 'The particular purpose of this machinery was to bale the straw, and inject into the bales molasses or other like substance.

If the process proved successful, the rice straw then of no value could be used to advantage and profit, and a large and profitable business built up. Tate and Carter were especially interested in getting the machinery installed and the business going, on account of the large royalties that would come to them from the business.

They first took the matter up with the Rice Growers ’ Association, and were by it referred to H. H. John, with whom they immediately began negotiations. A subscription agreement was prepared, and was signed by thirty rice growers who agreed conditionally to take stock in a corporation to be formed. H. D. Dilday was named as agent or trustee to collect the stock subscriptions, and H. D. Dilday, G. A. Meyers, H. R. Weiman, J. L. Rosen-crantz and H. H. John were named as a committee to negotiate with Tate and Carter for the machinery.

A contract was entered into with reference to the machinery, in which was set forth the terms and conditions under which the machinery and business was to be operated. This contract was signed by II. II. John, one. of the committee, and contained a provision that the corporation when formed would take it over, and that all rights and obligations under the contract would pass to the corporation when formed.

The subscription agreement was conditioned upon the happening of two events, viz.: 1. That stock in the proposed corporation at least to the amount of $5,000 be subscribed. 2. That satisfactory arrangements be made with Tate and Carter for the necessary machinery.

Tate and Carter refused to guarantee the successful operation of the machinery, so an agreement was entered into whereby the machinery was to be tested, the sum of $2,000 to be put up for that purpose.

Tate and Carter contend that Dilday and his associates had agreed to form .a corporation, and had agreed to take stock in the corporation to be formed, and that they (Tate and Carter) as an evidence of their faith in the machinery, agreed to take stock in this corporation to the amount of $1,000, and that they paid the full amount of their subscription; that Dilday and his associates paid only a part of their stock subscription; that the amount unpaid was more than sufficient to pay the rent alleged to be due, and that Dilday and his associates should be required to pay in the unpaid subscription. They filed a cross-complaint against all persons who signed the subscription, and asked that all such persons be required to pay what they alleged to be the unpaid balance subscribed.

Dilday and his associates contended that they were not liable under the subscription agreement, for the reason that the contingencies upon which liability was to attach had not happened. They contend that, upon the refusal of Tate and Carter to warrant the machinery, another agreement was entered into whereby the machinery was to be tested, and the possibilities of the proposed project ascertained. Tate and Carter agreed to match dollars with Dilday and his associates in paying the expenses incident to the test. It being estimated that $2,000 -would be sufficient for the test, Tate and Carter paid in $1,000, and Dilday and Ms associates paid in a like amount. It was understood that, if the project was successful, the corporation would then be formed; that Dilday and his associates would receive stock in the corporation of the par value of the amounts paid in, and that Tate and Carter at the option of Dilday and his associates could have stock or their money refunded. Dil-day and his associates used the subscription agreement as a basis for collecting the $1,000 required to make the test, and they paid in a total of $1,435, making a total of $2,435 paid in to defray the expenses of the test. The test operations were carried on under the name of Rimol Feed Company.

Dilday and his associates further contend that the lease contract aforesaid and the subscription agreement were not to become effective until the test had been made showing successful operation of the machinery and the business, and that the agreement for the test, in so far as operations for the test were concerned, was a subse-, quent agreement, and that such operations and contributions of money were not under the subscription agreement nor the lease contract. The project failed, and, when operations ceased, the total outstanding indebtedness, including the rent, was $915.89.

Dilday and his associates contend that by reason of this agreement a partnership relationship existed in which Tate and Carter were interested to the extent of one.-half, and Dilday and his associates one-half; that for each dollar put up by them Tate and Carter were to put up a like amount, and that for any debts contracted Tate and Carter were liable for one-half and they the other. They further contended that, since they had paid in $435 more than Tate and Carter, Tate and Carter should be required to first pay in a. like amount to be applied in payment of the debts which would leave a balance of $480.89, one-half of which or $240.45, should be decreed against Tate and Carter, and the balance against them.

Dilday and his associates further contended that the contributions on their part had been unequal, some paying- a certain amount and some another; that it required $365 to make these contributions equal, and that the parties who should have paid this in should be required to do so. Dilday and his associates conceded the right, of appellant Rhodes to recover jointly and severally of and from them and from Tate and Carter.

It was decreed that the plaintiff H. E. Rhodes, have judgment a gains l all defendants and cross-defendants, as follows:

1. All persons who signed the subscription ag-reement who have not so paid shall first be required to pay in sixty per cent, of the sum set forth in the subscription ag-reement, as being subscribed by each of them.

2. All persons who signed the subscription agreement shall pay in 100 per cent, of the sum set forth in the subscription agreement as being subscribed by each of them.

3. In the event the amount thus paid in should not be sufficient, then all parties including Tate and Carter shall pay the balance, ratably according to the amount subscribed.

“It is to reverse this judgment that the plaintiff, Rhodes, and the defendants, Dilday and his associates, have appealed.”

The trial court found that the Rimol Feed Company was a partnership composed of H. H. John, and the other stock subscribers including Carter and Tate, and, as such, ‘ 'liable for the debts of said concern in proportion to the amounts each had subscribed or agreed to pay into the capital stock of said concern,” and that Tate and Carter subscribed of said capital stock the sum of $1,000, and had paid this amount in full.

Carter and Tate contended that there never existed a partnership relation with respect to them and the others, and that such was never the intention, but, as they have not appealed from the finding of the trial court holding them liable as partners, it is unnecessary to discuss the sufficiency of the evidence in this particular. As to the others, that relation is admitted. Since the decree is equivalent to a finding that a partnership resulted from the acts of the parties and inferentially against the contention of the appellant John and others that the liability of Tate and Carter was not by reason of any agreement on their part to become partners, but, because of their subscription to the capital stock of the proposed corporation, John and his associates are concluded by the finding, as, in our opinion, the preponderance of the evidence does not show any express understanding between Carter and Tate on the one hand, and John and the remaining defendants on the other, that a partnership was created for testing the machinery, and that Carter and Tate should bear one-half -of the expense of such test, and therefore this finding of the lower court must stand. While it was in the mind of John and the others to form a corporation for the manufacture of food products, using the machinery to be acquired from Carter and Tate, and a partial subscription to the capital stock was made, the prospective incorporators had not proceeded to that point where, under our decisions, a corporation de facto would exist, and in the conduct of the test preliminary to the incorporation the relation assumed by.the parties, according to the rule laid down in Rainwater v. Childress, 121 Ark. 541, 182 S. W. 280, was that of partners. In that case it is said: “The effect of our decisions in Whipple v. Tuxworth, 81 Ark. 391, 99 S. W. 86, and Bank of Midland v. Harris, 114 Ark. 344, 170 S. W. 67, Ann. Cas. 1916B, 1255, is to hold that a strict or substantial compliance with the laws regulating the organization of corporations is necessary to constitute a corporation de jure. To constitute a corporation de facto, there need not be a strict or substantial compliance with the statute, but there must be a colorable compliance with the statute; that is to say, there must be color of a legal organization under the statutes, and user of the supposed corporate franchise in good faith. Courts differ among themselves as to how much must be done in order to constitute a corporation de facto. But all of the courts agree, that some of the statutory steps must be taken in an honest attempt to comply with the requirements of the law, and exercise by the associates of the corporate powers. (Citing cases).”

It is unnecessary to determine whether the parties defendant in this ease were partners within the rule laid down in Doyle-Kidd Dry Goods Co. v. A. W. Kennedy & Co., 154 Ark. 573, 243 S. W. 66, and the cases therein cited, because, as we have seen, Carter and Tate have not appealed, and the testimony of John, which was not disputed by any of the other signers of the subscription list, was that he acted for himself and the other proposed incorporators in making the rental contract with the appellant Rhodes.

In Doyle-Kidd D. G. Co. v. Kennedy & Co., supra, the court referring to the case of Rainwater v. Childress, said: “That case is certainly authority for the doctrine, that where parties associate, intending to form a corporation, and join hands and capital in the conduct of the business under a name assumed by them, but without attempting to incorporate, they are liable as partners to third parties for the debts incurred.”

We do not desire to be understood as in any sense extending the doctrine announced in Rainwater v. Childress, as construed by this court in Doyle-Kidd D. G. Co. v. Kennedy Co., supra, for, as we have seen, an application of that doctrine is unnecessary for the determination of the liability of the defendants in this case. The court, in directing that the defendants should share liability in proportion to the amount of their subscription to the capital stock of the proposed corporation, doubtless treated the subscription list as an agreement by the subscribers between themselves as to their respective rights and liabilities, and since, as we shall presently show, plaintiff was entitled to collect his rent from all or any one of them, the subscribers are in no position to complain as to the finding of the chancellor, which seems to be most just and equitable.

However, the plaintiff Rhodes could not be bound by any agreement between the defendants as to their respective rights and liabilities, when it is not shown that he assented to any such limitations. The evidence discloses that he merely rented a building to John as agent for the defendants in which to install and operate the machinery during the test to be made. Therefore, as to Rhodes, by their voluntary acts they were liable jointly and severally as partners in their relation to him. This rule is so well settled that the citation of authority is unnecessary.

It appears, on the whole cáse, that the chancellor in determining the rights and liabilities of the conflicting interests has worked out a method which, to our minds, does substantial justice', protecting the rights of part of the litigants without undue hurt to any one, but, as the plaintiff Rhodes must not be deferred in the collection of his debt to an accounting between the various defendants, the cause must be reversed, with directions to the trial court to render a judgment' in favor of the plaintiff Rhodes for the debt due him against each and all of the defendants, jointly and severally, without limitation as to the time or manner in which the judgment shall be enforced, and as to any of the defendants paying the judgment in whole or in part, that they have contribution from their co-defendants in the manner and to the extent heretofore decreed by the trial court.

Humphreys and Kirby, JJ., dissent.


author: Butler, J. Humphreys, J.

text:
    Riggs v. Hot Springs.
    Opinion delivered March 17, 1930.

      C. T. Cotham, for appellant.

      A. T. Davies, for appellee.
   Butler, J.

The appellant was .tried before the circuit court of Garland County sitting as a jury, charged with having violated the occupation tax ordinance of the city of Hot Springs, by failing to pay an occupation tax under item No. 213 of the city ordinance, which item is as follows: “Item 213. Patent Medicine Companies: Meaning those persons or companies that manufacture patent medicines, or agents for patent medicines, $100.”

The entire ordinance, which is very lengthy and deals with all of the occupations engaged in the city of Hot Springs, in addition to the item first mentioned, provided that where persons are engaged in business the following schedule should apply as to the amount of tax: This schedule, entitled “schedule A,” undertakes to fix occupation taxes for businesses wifih stock averaging less than $’250 at $5, and increases the tax in proportion to the amount of stock up to $200,000 and over, when the tax reaches $550.

Items 91, 92 and 182 of the ordinance are as follows:

“Item 91. Druggist: Each retail druggist or dealer in druggists’ sundries. Schedule A.”
“Item 92. Druggist: Each wholesale druggist or dealer in druggists’ sundries. Schedule A.”
“Item 182. Merchandise: Each dealer in any article or articles of line or lines of merchandise not specified in this schedule. Schedule A.”

There is no complaint as to the validity of the occupation tax, the contention of the appellant being, first, that the evidence does not show that he comes within the terms of item No. 213, supra, and that he was neither a manufacturer of, nor an agent for, patent medicine; second, that that item of the ordinance as enforced was discriminatory, in that ifi was not attempted to be enforced against others engaged in like business, and for that reason was unenforceable against him; and, third, that the appellant had effected a compromise agreement with the city and its officers by which he was allowed to and did pay $50 a year in full settlement of his occupation tax due the city, and this agreement had continued through a number of years.

Seven witnesses, including the appellant, testified in the case. From this testimony it developed that ¡the appellant was engaged in business in the city of Hot Springs under the name of Lopez Medicine Company; that his remedy was compounded from roots and herbs grown in various parts of the world and brought to St. Louis by different chemical companies and mixed with alcohol, and sent to the appellant; that he compounded all this into a medicine called “Lopez,” mixing it in a laboratory conducted by him, which occupies the entire upstairs of the building known as the Spencer Building; that the medicine is put in containers with labels, and dispensed to the public to be used in the treatment of certain diseases. This remedy has been sold for a number of years in Hot Springs, and was represented to the public as prepared from a secret formula, but the word “cure” was taken out of the advertisement because of governmental regulations. Not including bottles, corks, or things of that kind, but the ingredients only, the average stock carried by appellant out of which the Lopez remedy was compounded amounted to about $300. The amount of sales ranged from ten thousand to fifteen thousand dollars per annum. The medicine has no trademark, and is not protected by letters patent.

From all of the testimony it is fairly inferable that the ar.ticle compounded and vended by the appellant was prepared from a secret formula, as a medicine for the treatment of certain diseases, put up in packages or bottles, and labeled with a name for immediate use. This was sufficient to constitute it a patent medicine in the sense in which that term is generally used, and in which it was used in the 'city ordinance in question. "While originally the word “patent” was attached .to an article, because it was the subject of a patent, it has lost that significance by usage, and has become merely a part of the name of the article, and where any article intended tlo be used for medicinal purposes is prepared from a secret formula, and is placed in containers, either packages or bottles, for sale to be used without further preparation, and is labeled so that it may be for immediate use, it is a matter of common knowledge that such remedies are called “patent” or “proprietary” medicines. Certain enamel leather is spoken of as “patent leather,” and undoubtedly the word “patent” was originally attached to an article because it was the subject of a patent, but it has lost that significance, and, by usage, has become merely a part of the name of the article. In view of the general use of the word “patent” in this connection, it is employed in the proprietary sense. The natural inference is that the medicine is made according to a secret formula, and not that it is manufactured under letters patent. Bucham v. Jacobs, 159 Fed. 129, affirmed in 221 U. S. 263, 31 S. Ct. 555. To the same effect, see State v. Donaldson, 41 Minn. 74, 42 N. W. 78; State v. Kendig, 133 Iowa 166, 110 N. W. 463; McHenry v. Royal, 211 Mo. 230, 242 S. W. 147.

As the herbs used in appellant’s formula were gathered from various sources by different chemical companies in the city of 'St. Louis and shipped to the appellant in Hot Springs, and there mixed in his laboratory, he is a manufacturer, under the authority of Chattanooga Plow Co. v. Hays, 125 Tenn. 148, 140 S. W. 1068, where it is said, “A manufacturer is one engaged in making materials, raw or partly finished, into wares suitable for use.”

The effect of the judgment of the trial court was that the ordinance, as applied, did not discriminate, and, as the finding of such court has all the weight of a verdict of a jury, such finding must stand, unless there is no substantial evidence upon which to base it. It was shown that there were perhaps five individuals or corporations in Hot Springs engaged in a similar business to that of the appellant, The Yaqui Medicine Company, Comar Medicine Company, Lower Drug Store, and the Moore Drug Store, and that these companies had heretofore been paying about the same as the appellant — $50 per year— but the city clerk testified that the city had sought to collect $100 from each of them, and that he did not1 know why appellant alone had been arrested as the witness was not the collecting officer, and the warrant had been issued by witness at the request of the collecting officer because appellant had refused to pay the occupation tax. At just what time the city decided to collect the full $100 from the above-mentioned individuals and companies is not shown, whether before, at, or after, the time that amount was sought to be collected from the appellant. It was shown that various drug stores handled patent medicines, but it is apparent that these medicines were bought and sold by such stores in the usual course of business, some of them being sold under particular names, such as “Pollard’s So Easy,” “Hot Springs Liver Buttons,’’ and “Johnson’s Cough Syrup”; that this was done for trade purposes. None of these stores are agents for any patent medicine companies but, as stated, buy and sell in the usual course of business, and would be neither manufacturers nor agent's under the terms of item No. 213, supra, of the ordinance.

Moreover, the contention of the appellant that he was being discriminated against, because the tax -was sought to be collected from him and not from others, and that therefore the ordinance as applied would be invalid, cannot be sustained. It would certainly be a novel proposition that the validity of laws and ordinances is to be affected by what police officers and city officials do, or do not do, in regard to their enforcement. If the position of the appellant in this particular was sound, then many of the most wholesome laws might, in par ticular cases, be held to be invalid, because it is a matter of common knowledge that officers clothed with the enforcement of the law not infrequently enforce such law as to some, and not as to others. To sustain his position in this regard, appellant cites 19 R. C. L., § 255, to the effect that a municipality cannot tax occupations so as to discriminate between persons engaged in the same occupation when the distinction is based upon an immaterial fact, or is an attempt to favor one class at the expense of another, and it “cannot accomplish the samo result covertly by enacting an ordinance imposing a license tax, which is fair on its face, and enforce it against' one class and persistently fail to enforce it against another class.” Only one authority is cited by the author to support the text, and that is a case where the facts have little resemblance to those in .the instant case. It is from the Texas Supreme Court, the case of Hoefling v. San Antonio, 85 Tex. 228, 20 S. W. 85, 16 L. R. A. 608, where the plaintiff set up two private markets upon his own property, and was forced to pay a tax of $75, which he did under protest, and brought suit to recover same because others doing business in stalls at the general market were not required to pay any tax in addition to an amount each paid for the privilege of using a stall. The ordinance, by virtue of which the tax was collected from the plaintiff, is as follows: “The city council may grant to individuals the right of establishing in any designated locality within the city stalls for the vending of meat, granting general market privileges. Bach person or firm granted such right shall pay therefor to the market master, for the use of the city, seventy-five dollars per annum, quarterly in advance, and shall post the receipts in a conspicuous place in said stall.” The court held, that the failure by the market master to collect $75 from each individual doing business at the public market made the collection from the plaintiff invalid because in conflict with § 1, article 8, of the State Constitution, providing that “the occupation tax levied by any county, city or town, for any year, on persons or corporations pursuing any profession or business shall not exceed one-half of the tax levied by the State for the same period on such profession or business,” as the State had not levied any occupation tax, and therefore the tax attempted to be levied by the city was invalid. This seems to be the question upon which the decision turned, but there is language in the opinion which would seem to support appellant’s view, and which was based upon § 2, article 8, of the State Constitution providing that “all occupation taxes shall be equal and uniform upon the same class of subjects within the limit of the authority levying the tax. ’ ’

In 1 Dillon on Municipal Corporation, § 311, after laying down the rule that inquiry may not be made into the motives governing the Legislature in the enactment of laws, the author, continuing, says: “In analogy to this rule it is doubtless true that the courts will not, in general, inquire into the motives of the council in passing ordinances. But it would be disastrous, as we think, to apply the analogy to its full extent. Municipal bodies, like the directories of private corporations, have too often shown themselves capable of using powers fraudulently, for their own advantage or to the injury of others. We suppose it to be a sound proposition that their acts, whether in the form of resolutions or ordinances, may be impeached for fraud at the instance of persons injured thereby.” But in the case of People v. Gardner, 143 Mich. 104, 106 N. W. 541, the inaccuracy of the rule laid down by Mr. Dillon is clearly pointed out. The court there said: “It is noticeable that he supports the first proposition of his text by the citation of Cooley, Const. Lim. 186, 187, where many cases are collected, but expressed the opinion that ‘the acts of a council may be impeached for fraud at the instance of persons injured thereby.’ No authority supporting this opinion is cited, except it be the case of State v. Gaslight & Coke Co., 18 Ohio St. 262. That case recognizes the rule, and says: ‘As the Legislature is a coordinate branch of the government, the jurisdiction of the judiciary to declare its acts of legislation within its constitutional sphere invalid on account of the improper motives which induced their enactment may well be denied. And the same rule should, perhaps, govern in the case of an ordinance passed by a city council in the exercise of the legislative powers conferred upon it for the purposes of police regulation or municipal government. But this immunity from impeachment for fraudulent motives, or abuse of power, does not attach to all the acts of a city council which may assume the form of an ordinance.’ This distinction is sufficient to except the present case from the rule there applied, but the case has little support. The suggestion of Dillon has not received the approval of the courts or jurists of the country.”

Air. Cooley, in his work on Constitutional Limitation, 6th edition, page 220, states the rule broadly that the motives of the Legislature cannot be inquired into, but the courts must presume that they were passed for proper reasons, and, continuing on page 257, uses the following language: “And the same presumption that legislative action has been devised and adopted on adequate information, and under the influence of correct motives, will be applied to the discretionary action of municipal bodies, and of the State Legislature, and will preclude, in the one case as in the other, all collateral attack.”

With the exception of the authority cited by appellant, supra, and Dillon on Municipal Corporations, supra, it appears that the great weight of authority is to the effect that the validity of an ordinance cannot be questioned because of any alleged improper motive of the city authorities in the enactment of the same, either as shown by an)1- circumstance prior to, or attending, the enactment or any circumstance regarding its application, and that the failure of the authorities to properly enforce the ordinance, or to enforce it against some and not against others, is no defense in a prosecution for its violation. Chimine v. Baker, 32 Tex. Civ. App. 520, 75 S. W. 330; Hines v. Bay City, 115 Mich. 204, 73 N. W. 116; Centralia v. Smith, 103 Mo. App. 438, 77 S. W. 488. Neither is it any defense that the city authorities acquiesced in the payment of a less sum than that due under the ordinance, or that by agreement appellant and others paid for a number of years the sum of $50 when under the ordinance they should have paid $100'. The authorities supra support this, and to the same effect see also Poe v. Gardner, 143 Mich. 104, 106 N. W. 541; Alexander v. Greenville, 54 Miss. 659.

It follows that the appellant was engaged in the manufacture-of a patent medicine, that as such he was liable for the payment of the occupation tax under item No. 213, supra, that the facts as found by the trial court failed to show any discrimination in fact against the appellant and in favor of others, that, had there been such discrimination, this would be no defense, nor would it be a defense that the appellant had for some years past compounded with the city officials for a less sum than that actually due the city.

Judgment affirmed.

Humphkeys and Kirby, JJ., dissent.

Humphreys, J.

I dissent because the medicine compounded and sold is not a patent medicine within the meaning of the statute.


author: HaRT, C. J.,

text:
    Sillin v. Hessig-Ellis Drug Company.
    Opinion delivered March 24, 1930.

      Joseph Morrison and M. F. Elms, for appellants.

      W. A. Leacli, for appellee.
   HaRT, C. J.,

(after stating the facts). Counsel for appellants contend that appellee is a foreign corporation, and is not entitled to maintain this suit, because it has not complied with the statutory requirements relating to the right of foreign corporations to do business in the State of Arkansas. On the other hand, counsel for appellee contend,, that the transaction here involved does not constitute doing business within the State of Arkansas by a foreign corporation within the meaning of onr statute. The record shows that appellee was engaged in the wholesale drug- business at Memphis, Tennessee, and Webb & Son, a retail drug store at Stuttgart, Arkansas, purchased drugs from it during a period of twenty years, and became indebted to it in a considerable sum. The drugs sold by appellee to Webb & Son were shipped on orders sent in by Webb & Son or by traveling salesmen who secured the orders at Stuttgart, Arkansas, and sent them to appellee at1 its place of business in Memphis, Tennessee.

In the first place, it may be said that no effort was made to show that the traveling salesmen had any special authority from his principal, and his authority was limited to receiving and transmitting orders. Markstein Brothers Millinery Co. v. J. A. White & Co., 151 Ark. 1, 235 S. W. 39. All orders were sent in by Webb & Son from Stuttgart, Arkansas, to appellee’s place of business at Memphis, Tennessee.

Under these circumstances, appellee cannot be said to have come into the State in the sense of transacting its own business here. The general rule deducible from our decisions and from those of the Supreme Court of the United States is that the business transacted must be of such nature and character as to warrant the inference that the corporation has subjected itself to the local jurisdiction, and that the transactions were intrastate in character. Hence it is insisted that, since appellee is a foreign corporation and has never complied with the laws of this State so as to authorize it to do business here, it has no standing in court and should be denied relief. We are of the opinion that all of the transactions between the parties were interstate, and that their legality as objects of interstate commerce was not affected by the fact that appellee has not complied with the laws of this State. Rose City Bottling Works v. Godchaux Sugars, 151 Ark. 269, 236 S. W. 825; L. D. Powell Co. v. Rountree, 157 Ark. 121, 247 S. W. 389; 30 A. L. R. 414; Linograph Co. v. Logan, 175 Ark. 192, 299 S. W. 609; and People’s Tobacco Co. v. American Tobacco Co., 246 U. S. 79, 38 S. Ct. 233.

In a case-note in 60 A. L. R. at page 996, the rule is stated as follows: ‘£ The soliciting of orders for goods within a State by the agent of a foreign corporation and the shipment of goods pursuant to such orders by the corporation from another State to the purchasers do not constitute doing business within the State, so as to subject the corporation or its agent to a local statute prescribing conditions of doing business within the State; since such transactions are in interstate commerce, and are not subject to regulation by the State.”

Among the numerous cases cited in support of the rule is Coblentz & Logsdon v. L. D. Powell Co., 148 Ark. 151, 229 S. W. 25.

These authorities also sustain the principle Of law that a foreign corporation has a right to .take a mortgage, and to foreclose it for the purpose of collecting its account resulting’ from interstate commerce without complying with the laws of the State regulating the admission of foreign corporations for the purpose of doing business within the State. The underlying principle is that, if the indebtedness was incurred in transactions growing out of interstate commerce, the foreign corporation could come into the State and collect its debts, and that such act would not amount to doing business in the State. Appellee purchased the stock of drugs of Webb & Son at the bankrupt sale, and continued the business for a space of time between ten days and two months, until it could sell the same. Appellee never intended to engage in the retail drug business in the State of Arkansas, and the fact that it kept the store open selling at retail until it could dispose of the whole s,ttock was a mere incident to the collection of its debt, and did not amount to doing business -within the provisions of the statute in regard to foreign corporations It is perfectly obvious that, if it had closed the store up, it could not have sold it to as much advantage as if it bad kept the store open, and thereby kept it as a going concern. Only in this way could it have fully preserved the good will of the business, which frequently adds materially to its value.

Again, the record shows that appellee purchased at two different places in the State of Arkansas a stock of drugs for the purpose of collecting its debt against a retail drug store. In each instance, it only operated the drug store until it could dispose of the stock of drugs and thereby collect its debt. This, as we have already ■seen, was a mere incident to the collection of the debt, and did not constitute doing business within the State. In each of the instances cited above the buying in of the stock of drugs by appellee was for the purpose of collecting an account resulting from an interstate transaction, and the practice complained of did not involve doing business in the State which would subject appellee to the regulation of the State concerning foreign corporations. This court has expressly held that our statute prohibiting foreign corporations from doing business in this State without complying with its terms does not prohibit such corporations from taking a note or mortgage to secure a past due indebtedness for goods sold in interstate commerce. Simmons-Burks Clothing Co. v. Linton, 90 Ark. 73, 117 S. W. 775; and Linograph Co. v. Logan, 175 Ark. 194, 299 S. W. 609.

We find no reversible error in the record, and the decree will therefore be affirmed.


author: Hart, C..J.,

text:
    Wilson v. Magnolia Petroleum Company.
    Opinion delivered March 24, 1930.

      Barber $ Henry and Troy W. Lewis, for appellant.

      Marsh, McKay <& Marlin, Mahony, Yocum & Saye, and Patterson <& Rector, for appellee.
   Hart, C..J.,

This appeal is prosecuted to reverse a decree of the chancery court removing the disabilities of a minor for the purpose of signing an oil and gas leas-e with his adult brothers and sisters.

On June 1'2,1923, Walter Wilson by next friend filed a petition in the" Union Chancery Court, asking that his disabilities as a minor be removed in order to enable him to join with his adult brothers and sisters in executing an oil and gas lease. The chancery court granted the petition, and the decree recites that the petition was duly presented, and that, after hearing the testimony of witnesses, the court found that Walter Wilson was a minor over the age of eighteen years, and that he was a resident of Union County, Arkansas, that he was an owner of an undivided one-fifth interest in thirty acres of land in Union County, Arkansas, which is specifically described in the decree, that said Walter Wilson has no mother or father living, and is capable of attending to his own affairs. His disability of minority was removed for the purpose of enabling* him to join with his adult brothers and sisters in tlie execution of an oil and gas lease.

Tlie record shows that the order removing his'disabilities in all respects complied with the requirements of the statute as to age, residence and all jurisdictional matters as laid down in Hindman v. O'Connor, 54 Ark. 627, 16 S. W. 1052, 13 L. R. A. 490; and Young v. Hiner, 72 Ark. 299, 79 S. W. 1062.

It is first insisted that our statute conferring jurisdiction upon the circuit court and the chancery court to remove the disabilities of minors is unconstitutional. We do not deem it necessary to discuss this question for this court has decided in numerous cases including the ones cited above down to Gilmore v. Union Sawmill Co., 178 Ark. 297, 10 S. W. (2d) 517, that the act is constitutional. No doubt numerous rights have grown up under these decisions, and the holding of the court has become a rule of property. Then, too, it may be stated that no good reason has been shown for overruling these eases.

It is next insisted that § 5745 of Crawford & Moses ’ Digest, providing that chancery courts shall have concurrent! jurisdiction with the circuit court to remove the disability of minority in the same way and manner as provided for the removal thereof by circuit courts under § 5744 of the Digest, is unconstitutional, because it violates the provisions of article 5, § 29, of the Constitution which provides, in effect, that no act may be amended by reference to its title, but that the act, as amended, must be set forth at length. We do not agree with counsel in this contention. The two sections of the statute exist as separate and distinct legislative enactments. The later act in no manner attempts to amend or change the existing requirements as to the removal of the disabilities of minors.. It simply confers the power upon the chancery court to remove their disabilities, and provides that it shall be don© under an existing statute as to the procedure. In other words, it confers upon the chancery court the power to remove the disabilities of minors, and provides the same procedure in executing the power as already existed in the ease of circuit courts. State v. McKinley, 120 Ark. 165, 179 S. W. 181; Farris v. Wright, 158 Ark. 519, 250 S. W. 889; Grable v. Blackwood, 180 Ark. 311, 22 S. W. (2d) 41.

It is next insisted that the act conferring upon chancery courts the power to remove the disabilities of minors is unconstitutional. In making this contention, counsel rely upon the principle of law decided in Hester v. Bourland, 80 Ark. 145, 95 S. W. 992; and Gladish v. Lovewell, 95 Ark. 618, 130 S. W. 579, to the effect that under our Constitution the Legislature can only vest chancery courts with jurisdiction in matters of equity, and that the power to remove the disabilities of minors was not a matter of equity jurisdiction at the time of the adoption of the Constitution. We do not agree with counsel in this contention. In the first place a proceeding to remove the disability of minority is not strictly a judicial proceeding. At the common law, both men and women became sui juris at twenty-one years. There being no constitutional restriction, it became a matter of legislative will to fix the age at which minors reach their majority. 31 C. J. 986; and 14 R. C. L. 269, paragraph 43.

The Legislature provided, that males of the age of twenty-one years and females at the .age of eighteen years shall be considered of full age for all purposes. Crawford & Moses’ Digest, § 4986. In addition to fixing the period of minority by general law, it provided for the removal of such disabilities in special cases at a shorter period. Crawford & Moses’ Digest, §§ 5744-5. The general rule is that when this power is conferred upon courts the exercise of the power is not strictly judicial in character. *The reason is that it may be exercised by the Legislature itself, or be committed to other tribunals having no judicial authority. Marks v. McIlroy, 67 Miss. 545, 7 So. 408; and Brown v. Wheelock, 75 Tex. 385, 12 S. W. 111.

This court has in effect held that courts in cases like this áct merely upon the status of the petitioner, and that its action is only g^asi-judieial in the premises. For this reason it is necessary that the record of the court should contain an affirmative recital of all the jurisdictional facts upon 'which it acts. Gilmore v. Union Sawmill Co., 178 Ark. 297, 10 S. W. (2d) 517.

In the second place, this court has always recognized the general jurisdiction of courts of equity from the time of their establishment over the persons and property of minors. Myrick v. Jacks, 33 Ark. 425; Shumard v. Phillips, 53 Ark. 37, 13 S. W. 510; and Kirk v. Jones, 178 Ark. 583, 12 S. W. (2d) 879.

In Marvel v. State, 127 Ark. 595, 193 S. W. 259, it was held that an action of the Legislature authorizing chancery courts to abate a nuisance caused by the selling of intoxicating liquors illegally is valid. In that case it was contended that chancery courts only had jurisdiction in cases where civil or property rights were involved. In the majority opinion'the court held otherwise, and said that courts of equity had always had jurisdiction to abate public nuisances, and that the act in question had not conferred upon the chancery court any additional jurisdiction.' It had only prescribed new conditions upon which the court might act. This court has expressly recognized the power of chancery courts under the statutes to remove the disability of minority. Bickle v. Turner, 133 Ark. 536, 202 S. W. 703; and Gilmore v. Union Sawmill Co., 178 Ark. 297, 10 S. W. (2d) 517.

Finally, it is insisted that the court could not remove the disability of minority for the purpose of enabling the minor to sign an oil and gas lease on his homestead. In the case at bar, the minor was over eighteen years of age, as shown by the record, and was the youngest child. The court removed his disabilities so that he could join his adult brothers and sisters in the execution of an oil aoid gas íease on thirty acres of land which was the homestead of their deceased father. Under onr Constitution, as consumed by this court, infants are entitled to hold a homestead until the youngest child arrives at the age of twenty-one years, and the rights of the other children and of the widow yield to the rights of the infant. Burel v. Baker, 89 Ark. 168, 116 S. W. 181; and Colum v. Thornton, 122 Ark. 287, 183 S. W. 205.

It is insisted b3r counsel for appellants that, inasmuch as the minor was entitled to his share of the rights and profits of the homestead until he reached twenty-one years of age, his disabilities as a minor could not be removed for the purpose of allowing* him to execute an oil and gas lease which might have the result of taking from him the greater part of his interest in the homestead. In Hargett v. Hill, Fontaine & Co., 101 Ark. 510, 142 S. W. 1137, it was held that, while the homestead rights of a female child do not cease until she arrives at twenty-one years of age, she might relinquish or abandon her homestead as soon as she reached the age of eighteen years where there were no younger children. This was in recognition of the rights conferred upon her under our general statute removing her disabilities for all purposes, or, in other words, making her of full age when she arrived at eighteen years.

Reasoning by analogy, if ,tihe general statute making-females of full age for all purposes at eighteen years enables them to sell or abandon their homestead rights, we cannot perceive why the statute which enables the court to remove their disabilities in special cases at a shorter period would not have the same result. In the case cited, the court held that the minor might relinquish her homestead rights because under the statute she had become of full age, and the disability of minority had been removed. In other words, she had become emancipated by a general act of the Legislature. In the instant case, the disabilities of the minor were removed for the express purpose of enabling him to sign the oil and gas lease under statutory authority conferred upon the court. This order of t&ie court emancipated tlie minor to the same extent as if the Legislature by a general act bad fixed bis majority at eighteen years, the same as it did the majority of females.

This was the effect of the decision of the court in Grimes v. Luster, 73 Ark. 266, 84 S. W. 223, 108 Am. St. Rep. 34. In that case it was held that where a father died possessed of a homestead, and leaving a widow and minor children, and the avícIoav subsequently acquired a homestead in her own right, and died leaving one of such children still a minor, the latter is entitled to claim either homestead, but both cannot be enjoyed at the same time. It .Avas further held that AA'here a minor is entitled to claim either of tAvo homesteads he cannot, unless his disabilities haA?-e been removed, Avarve, select or abandon either, and it becomes the duty of his guardian, under the superintending control of the probate or other competent court, to make the selection for him. In that case the court held that an election could be made of one homestead to the exclusion of another. The court further said that such selection could not be made by the minor, as he Avas incapable of this, just as he was incapable of managing and controlling his other property and rights. It will be seen that his right to act in the case of a homestead was placed upon the same basis as his right to act about his other lands, and that was solely upon the ground of minority. The court pointed out that there Avere appropriate methods to preserve that interest, AAdfich it was to the advantage of the minor to preserve. This court said that under the record in the case under consideration the disability of minority had been remoAmd, and that on .this account there AA'as no occasion for a guardian or next friend to take the initiative. If the removal of the disability of minority enabled the minor to make a choice of homesteads, we can perceive no good reason for holding that the removal of such disability would not enable him to join wi,th his adult brothers and sisters in the execution of a gas lease on the homestead. As we have already seen, a female may sell or abandon her homestead rights when she becomes of full age under the statute, and there is no reason why, when a minor’s disabilities are removed by a court pursuant to statutory authority, he may not have the same right. Therefore, the decree will be affirmed.