text:
    Davis v. White.
    Opinion delivered June 7, 1926.
    1. Equity — withdrawal of reference to master. — Under Craw-‘ ford & Moses’ Digest, § 7162, a court of equity has .the discretion, after having referred a case to a master, to proceed to a< decision before the coming in of the master’s report.
    2. Schools and school districts — authority of urban districts to issue bonds. — Under Crawford & Mose.s’ Dig., § 8984; giving urban school districts authority to issue bonds, such districts may issue bonds without consent of a majority of the legal voters; and where they have done so, and have received the contract price, they are estopped to question the legality of the transaction.
    3. Schools and school districts — issuance of bonder without, advertisement. — Though any person interested' haá a right to enforce the provisions of Crawford & Moses’ Dig., § 8984, requiring bonds of urban special • school districts, to be advertised -for . 20 days, yet where bonds are issued without compliance. therewith and the proceeds are received by the district, it will be estopped to assert ’its own default, as also will be its patrons.
    4. Schools and school districts — authority of patrons to sue.— Patrons of a.school district have no greater right to sue to pro-, tect the interests of the district than the directors have, since • their right to sue arises out of the directors’ failure or refusal to . act..
    5. Schools and school districts — payment of proceeds of bonds to treasurer. — Under Crawford & Moses’ Dig., § 8987, directing the proceeds of a bond issue to be deposited with the county treasurer or to the treasurer of the district, payment of 'such • proceeds- to a de facto treasurer of the district was a payment to the district.
    6. Schools and school districts — ratification of oral contracts. —Where a school district failed to require written contracts with teachers and where schools were taught without funds and without petition of the patrons authorizing same, but no objection was raised until the contracts were fully performed by the teachers and warrants were issued for their services, the contracts were ratified.

      7. Schools and school districts — failure to present warrants in 60 days. — School warrants are not rendered invalid by failure to present them to the county treasurer within 60 days after issuance, as provided by Crawford & Moses’ Dig., §§ 8981-2.
    8. Costs. — In an action by patrons of a school district to determine the legality of bonds and warrants issued by a school district, it was not an abuse of the chancellor’s discretion to assess the costs against the plaintiffs, though a warrant for interest was held to have been illegally issued; such toeing a mere incident to the litigation and only a small part of the relief prayed.
    Appeal from Fulton Chancery Court*; Lyman F. Reeder, Chancellor;
    affirmed.

      Geo. T. Humphries, David L. King, John H. Caldwell and T. H. Caraway, for appellant.

      H. A. Northcutt and Cole <& Poindexter, for appellee.
   Smith, J.

This suit was begun by appellants, who pay taxe's and reside in Mammoth Spring Special School District No. 2, against the directors of said district, the treasurer of the county, and the Citizens’ Bank of Mammoth Spring, and certain other parties.

After much testimony had been taken, the court made an order, at the joint request of both parties, wherein a master was appointed to continue the taking of testimony and to make findings of fact on the issues raised. Testimony was taken from time to time, and, after the cause had been pending for about a year and a half, the Hanchett Bond Company, hereinafter referred to as the bond company, filed an intervention, in which it alleged that the district had issued certain bonds, which the bond company had purchased, and that the district had defaulted in the payment of both principal and interest. The bond company prayed judgment for the unpaid interest and for the amount of the bonds which had matured and had not been paid. The appellants filed a response to this intervention and a cross-complaint, in which they alleged that the bonds had not been legally issued and were not valid obligations of the district, and it was prayed that these bonds be canceled. The bond company filed a demurrer to this response and cross-complaint, which was sustained by the court, whereupon appellants filed a substituted response. Thereupon the bond company renewed its demurrer to the substituted response, and this demurrer was also sustained, and a decree was thereupon rendered in favor of the bond company requiring the district to pay the bond company the matured part of the bonds and the interest.

We will not review the immense record in the case, as the court appears to have found in favor of appellants on the disputed questions of fact, but, after doing so, the court rendered a decree dismissing the complaint as being without equity, except that the court found that the district had illegally issued a warrant for $691.36 interest due the Citizens ’ Bank on warrants of the district which the bank had cashed, and the costs of the entire case were assessed against appellants.

The court made findings of fact which reflect what the issues were upon which the testimony was taken, as follows:

(1). Appellants are citizens and taxpayers, and as such brought this suit on behalf of the school district to protect what they conceived to be the interests of the district, as the directors of the district had refused to bring the suit.

(2). B. L. White is the county treasurer of Fulton County, as alleged in the complaint.

(3). C. W. Dixon was a director of said district and the secretary and acting treasurer of the school board, and the president of the Citizens’ Bank at the time said bank cashed the various school warrants which had been issued by the district in paying the' salaries of school teachers and for other purposes.

(4). That all the school revenues for the fiscal school year of 1919-1920 were paid out on warrants issued for the maintenance of said school, and, in the absence of sufficient funds on hands, and without a petition signed by a majority of the patrons of said district, the directors issued warrants covering the operating cost of the school for the year 1919-1920.

(5). Warrants bearing date 1920-1921 were also issued by tbe directors, although the school revenues collected for the maintenance of said school during the fiscal year 1920-1921 would be absorbed by the payment of warrants previously issued for the operation of the school, and in the absence of sufficient revenue for that school year, and without any petition signed by a majority of the patrons of the school district.

(6). That warrants dated during 1921-1922 were issued, although all school revenues collected for the maintenance of the school during said school year would have been absorbed in the payment of warrants previously issued for the maintenance of the school. These warrants had been'cashed by the Citizens’ Bank for the holders thereof at their face value.' (A part of the relief prayed by the appellants was that these unredeemed, warrants be canceled).

(7). That in 1922 the county treasurer paid on excessively issued and left-over warrants of 1919-1920 all the school revenues of the district collected and turned into the county treasury during the fiscal school year .of 1922-1923, leaving nothing for the maintenance of the school during that year.

(8). That the bonds of the district, which had been issued and used in building an addition, to the schoolhouse, were issued and sold without any election being held in said district for such purpose; were sold below par; the' sale was no.t advertised; nor were any of said bonds registered with the county treasurer or indorsed by the State Superintendent of Public Instruction; and the proceeds from the sale of the bonds were never turned over to the county treasurer, but were delivered to and deposited with the Citizens’ Bank and paid out in cash for building purposes.

(9). (a) Although said warrants were issued in excess of all available revenues on hand or contemplated for the respective fiscal school years during which same were issued, and (b) in the absence of petitions signed by a majority of the district patrons for the employment of teachers for which said warrants were given, they are valid evidences of debt against said special school district, and due and payable as funds are collected and turned into the county treasury from year to year until said warrants are paid.

(10). That the school district made oral, instead of written, contracts with the teachers for whose services the warrants were drawn.

(-11). And when said teachers- were so employed there were no funds on hand with which to pay the teachers, and these contracts of employment were made without any petition signed by a majority of the patrons of the school district.

(12). Said warrants were not registered with the county treasurer within sixty days of their issuance.

(13). The teachers’ contracts were not reduced to, writing and filed with the county -treasurer.

(14). The county treasurer paid out all the school revenues turned into his office from 1919 to 1923 without a copy of any contract of employment of teachers being filed in his office.

Upon these findings of fact, appellants insist that the bonds of the district should be declared void, and canceled; that the warrants anticipating the revenues of the district, which were cashed by the bank, should also be canceled; and judgment was prayed against the county treasurer and the sureties on his bond for. the amount of warrants paid to teachers who had no written contracts, etc.

The court denied the relief prayed, except that it decreed the cancellation of the warrant issued by the district in payment of the interest to the bank on warrants which the bank was carrying.

The court found that the failure of the directors of the district to fully comply with the law in the issuance of the warrants, and in the issuance and sale of the bonds, were mere irregularities of procedure, which did not invalidate them; and that the county treasurer was not liable for paying out the revenues of the district to the teachers; and also found that the directors were not liable for so issuing said bonds and warrants. Upon this finding of law and fact a decree was rendered in favor of the bank for the amount of the warrants held by it, less the one for interest, and, as has been said, a decree was rendered in favor of the bond company awarding it judgment for the amount of the matured unpaid bonds and interest.

It is insisted that the court erred in proceeding to a decision of the case before the coming in of the master’s report. But we think it was within the discretion of the court to withdraw the reference to the master. Counsel for appellees say that the master had never qualified and had never entered upon the performance of his duties. But in any event his report, had he made one, would not have been binding on the court. Section 7162, C. &. M. Digest. Moreover, it appears that the court found the facts in appellant’s favor.

For the reversal of the decree of the court below appellants first insist that the court erred in sustaining the demurrer of the bond company to the answer of the district to the intervention of the bond company, and in .not canceling the bonds of the district, for the reason that the provisions of the statute on the subject were not complied with.

Appellants cite the cases of Robertson v. Rural Special School District No. 9, 155 Ark. 161, and Rural Special School District No. 30 v. Pine Bluff, 142 Ark. 279, in which cases it was held that the school district bonds issued by the rural special school district, without the consent of the majority of the legal voters granted at the annual school meeting, and in accordance with § 8837, C. & M. Digest, are void, even in the hands of an innocent purchaser. It was so held in those cases as to such districts, because, under the statute conferring this authority on rural special school districts, it was provided that the power to issue bonds might be exercised only upon the vote of the legal electors at an annual school meeting. But Mammoth Spring Special School Dist, No 2 is not a rural special school district, and did not derive its authority to issue bonds from § 8837, C. & M. Digest. Section 8984, C. & M. Digest, is the section of the statute under which appellee school district proceeded, and this section does not require, as a condition precedent to the issuance of bonds, the consent of the electors. Milwee v. Board of Directors of Horatio Special School Dist., 105 Ark. 77. In other words, the affirmative vote of the electors is not required to confer this authority on the- urban special school districts of the State, which derive their authority to issue bonds under § 8984, C. & M. Digest. Having this power, and having exercised it, and having received from the purchaser of the bonds the contract price therefor, the beneficiaries of the transaction are estopped from questioning the legality of the sale.

It is true, of course, that while § 8984, C. & M. Digest, does not require an election to confer authority or power on urban special- school districts to issue bonds, it does prescribe the manner in which such bonds may be sold, and these provisions cannot be treated as being directory. They are in fact mandatory in the sense that any person interested in the issuance of such bonds or affected thereby would have the right, in an appropriate action, to require compliance with the provisions of this section before the district could issue or sell its bonds. This section contains the express limitation that the bonds issued shall not bear interest at a greater rate than six per cent, per annum, and a bond bearing interest greater than six per cent, would, to the extent of such excess, be void because of the lack of power or authority on the part of the board of directors to issue bonds bearing a higher rate of interest. But the bonds here sought to be canceled did not bear a higher rate than six per cent.

It is also provided in § 8984, C. & M. Digest, that the sale of the bonds shall be advertised for twenty days, and that the bonds shall not be sold for less than par, and, as has been said, any person interested would have the right to enforce compliance with these provisions of the statute. But these provisions, although mandatory, do not relate to the power of the hoard of directors to issue the bonds, and, if bonds are issued (without collusion or fraud) without compliance with these provisions, the district is estopped, after receiving the proceeds of the bonds and using them, from asserting its own default. So also are the patrons of the district, who have no greater right to sue to protect the interests of the district than the directors have, and whose right to sue to protect the district arises out of the failure or refusal of the directors so to do.

In the case of Arkansas Foundry Co. v. Stanley, 150 Ark. 127, a taxpayer in an improvement district brought suit to enjoin the commissioners of the district from selling the bonds of the district below par, it being provided in the act creating the district that bonds might be issued, but could not be sold below par. We recognized the right of a taxpayer to bring the suit, and held that he would be entitled to the relief prayed, had the showing been made that the district was in fact about to sell its bonds below par. Relief was denied in that case, however, because it was only shown that the district proposed to pay a reasonable brokerage fee to negotiate the sale, and it was held that the district had this right, although this fee was paid out of the proceeds of the sale of bonds for which the purchaser paid only par.

So here appellants, had they proceeded before the sale was made, would have been entitled to enjoin the sale of the bonds if they were offered for sale without advertisement or at a price less than par and a reasonable brokerage fee. However, they did not do so, and it is now inequitable to grant the relief prayed, that of the cancellation of the bonds, after the district has received and expended their proceeds.

As to the allegation and finding that the proceeds of the sale of the bonds were not paid to the county treasurer, it may be said that the court also found that the district had a treasurer who was, at least, a de facto officer, and this officer received the proceeds of the bonds and deposited the money to the credit of the district in a bank of which he was president, bnt the court found that this money had been regularly paid out on the warrants of the district, and had been used in the construction of an addition to the district’s school building.

By § 8987, C. & M. Digest, it is provided that, where a school district has sold bonds, the proceeds thereof shall be deposited with the county treasurer, but this section has the proviso “that, when any district has a treasurer of its own, all money shall be paid to said treasurer, instead of the.county treasurer. ’ ’ As the money was paid to an officer who was at least a de facto officer, and as this money was expended by the district in the enlargement of its school building, we do not think it can be' said that the district did not receive the proceeds of the bond sale.

As to the warrants issued to the teachers, it may be said that, while the court found the fact to be that the teachers did not have written contracts as required by law, and while these contracts were not filed with the-county treasurer, and while the schools were taught at a time when the school district had no funds with whieh to pay the teachers, and there was no petition on the part of the patrons of the school authorizing the schools to be taught, the fact remains that these questions weré not raised until after these contracts had been fully performed on the part of the teachers and warrants- had been issued to the teachers for the services performed. These contracts were therefore ratified.

In the very recent case of Bald Knob Special School District v. McDonald, ante, p. 72, we held that the authority conferred upon school directors in regard to employing teachers is limited to employment by written contract, and that, while an oral contract might be ratified, the ratification extended only to the portion of the contract which had been performed, and not to the-entire contract, and that the district was liable only for • the services actually performed. Here however the question arose over warrants issued to teachers for services completely performed. The warrants were issued after the schools had been taught, and were cashed without discount by the bank, and the relief prayed is to cancel these warrants which are now held by the bank. The case cited is against the contention that the warrants are void because there was no written contract between the teachers and the district.

Upon the' issue that the schools were taught when the district had no funds to pay the teachers, and this without a petition signed by a majority of the patrons of the school requesting that this be done, it may be said that the case of Dell Special School District No. 23 v. Johnson, 129 Ark. 211, is decisive of the question. Upon this issue, the facts in that case are similar to those of the instant case, except there was a petition in that case to determine which of two teachers should be employed. The directors had agreed to employ the teacher receiving the highest number of favoring signatures. Neither petition circulated among the electors was predicated upon the fact that the district was without funds and that the petitions were intended to confer authority to have a school taught notwithstanding that fact. Johnson received a majority of favoring signatures, "and was employed, but it was stated in the opinion “that there was no valid and binding contract made with the school board, but recovery is sought solely on the theory that the informal, verbal contract entered into between Johnson and the school board was subsequently ratified by the conduct of the school board and the patrons of the school in permitting Johnson (and his assistant, who had been paid by him), without objection, to teach the school for the full period’of six months (the period of time covered" by the verbal contract).” The right of the teacher to recover was upheld, and in affirming the judgment which he had recovered against the district we said: “The ratification in this instance was complete, because the directors had full knowledge of the operation of the school, and by their conduct expressed their acquiescence and favor. "We must of course recognize the limitation upon this doctrine that a contract which was void in the beginning for want of power to make it cannot be ratified. (Citing cases).”

What was there said is equally applicable here, and we must therefore hold that by ratification the district has become liable on the warrants drawn in payment of the salaries of the teachers.

It is finally insisted that the warrants are void because they were not registered by the holders thereof within sixty days of the date of their issuance. This contention is based upon § 8981, C. & M. Digest, which reads as follows: “The order of any board of directors, properly drawn, after the passage of this act, shall be presented to the treasurer of the proper county within sixty days after it was drawn by the said board of directors.' All such orders shall be paid in the order of their presentation; provided, this act shall not apply to school warrants registered prior to May 1,1899.”

Section 8982, C. & M. Digest, provides the procedure where warrants are not paid for the want of funds. It reads as follows: “If there are no funds with which to pay such order, the treasurer shall indorse the same: ‘Not paid for want of funds, ’ giving the date and signing his name officially. He shall number and. record each warrant in the book provided for such purpose, keeping a separate record for each district, and shall pay said warrants in order of their number. ’ ’

We do not think the purpose or. effect of this legislation was to render void the warrant of the district because of the failure to register it with in sixty days from its issuance.

By section 6250, Mansfield’s Digest, the county treasurer was required to keep a record in which he registered school warrants presented for payment, and § 6255, Mansfield’s Digest, reads as follows: “The order of any board of directors, properly drawn, after the passage of this act, other than those of single school districts in cities and towns, shall be presented to the treasurer of the proper county within sixty days after it was drawn by said board of directors. Provided that, if such order is not presented within the above specified time, it shall be rejected and become null and void. All such orders shall be paid in the order of their presentation.”

This section 6255, Mansfield’s Digest, was amended by act No. 70 of the Acts of 1885 (Acts 1885, page 107), and the amendatory act of 1885 was construed in the case of School District v. Reeve, 56 Ark. 64, in which it was held'that the provision contained in § 6255, Mansfield’s Digest, that school warrants should be void unless presented to the treasurer within sixty days after their issuance, had been repealed by the act of 1885. It appears therefore that the purpose of the aethf 1885 was to repeal the law which rendered a warrant void if it were not presented to the treasurer within sixty days of its issuance, and the existing statute must be interpreted in the light of this prior legislation as construed in the case of School District v. Reeve, supra, Moreover, the warrants of special school districts in cities and towns were expressly exempted from the provisions of § 6255, Mansfield’s Digest, invalidating warrants which w.ere not registered within sixty days of their issuance.

We-conclude therefore that the failure to register the warrants within sixty days did not render them invalid, and this failure can be taken into account only in determining the order of their payment, their payment being postponed until those of prior registration have been paid.

It is finally insisted that the court erred in assessing the costs of the case against appellants, plaintiffs below, inasmuch as the court granted relief, to the extent of canceling a warrant which had been issued in payment of interest which the district had agreed to'pay on other warrants which were outstanding. This was, however, a mere incident to the litigation, and was only a small part of the relief prayed. The chancellor had the discretion to adjudge the costs in the manner which he considered equitable, and we think no abuse of his- discretion was shown.

Upon the whole case we find no error in the decree of the court below, and it is therefore affirmed.


source: Caselaw Access Project

author: Humphreys, J.

license: Public Domain

text:
    Duncan Lumber Company v. Blalock.
    Opinion delivered June 7, 1926.
    1. Corporations — venue of action. — Under Crawford & Moses’ Dig., §§ 1152, 1171, a transitory action against a domestic corporation should be brought in the county where the corporation has its principal place of business or in a county where it has a branch office or other place of. business by service upon the; agent or employee- in charge thereof.
    2. Corporations — venue of action — service of process. — Under Crawford & Moses’ Dig., § 1152, 1171, service of process in a transitory action against a domestic corporation, issuing'from a court of the county where the corporation had-a branch office and served on the manager of the principal office in another county : .where the corporation had its principal place- of -business, should have been quashed.
    3. Appeajrance — effect OF taking APPEAR. — Though service of process upon a defendant was insufficient', and it entered its appearance specially by motion to quash the service, and preserved the objection throughout the trial, it will be held to have entered its appearance generally when it appealed to the Supreme Court.
    Appeal, from Scott Circuit Court; John É. Tatum, Judge;
    reversed.

      Pipkin & Frederick, for appellant.

      A.'F. Smith, for appellee.
   Humphreys, J.

This is an appeal from a judgment in the sum of $255 obtained by appellee against appellant in the circuit court of Scott County upon the service of a summons directed to the sheriff of Polk Counfy by the clerk of the circuit court of Scott County and-served by said sheriff in Polk County on Phil -T. Stevenson, manager of appellant’s lumber plant at Éagleton, in Polk County. Before the rendition of the judgment, appellant appeared specially and filed a motion to quash the service, on the ground that it was a domestic corporation domiciled and with its principal place of business in Polk County.

The court heard testimony in support of and against the motion, and overruled same, over the objection and exception of appellant. The objection and exception was preserved at each material step throughout the progress of the trial, and the only purpose of this appeal is to determine the correctness of the ruling of the court upon the sufficiency of the service.

The record relative to the issue of service reflects that appellant is a domestic corporation, with its principal place of business at Eagleton, in Pollc County; that Phil T. Stevenson, a resident of said town and county, was its general manager, and was served in Polk County with process issued out of the circuit court of Scott County; that it operated several sawmills in Scott County as feeders to its principal mill and business at Eagleton, which were under the immediate control and management of ,J. B. Johnson; that process was not served or attempted to be served on him; that the action was transitory, being for lumber sold by appellee to appellant on open, account; and that the suit was brought • against appellant only.

Under our statutes a domestic corporation must be sued in the county in which it is situated or has its principal office or business, or in which its chief officer resides, or in a county where it has a branch office or. other place of business, by service of process upon the agent or employee in charge thereof. Sections 1152 and 1171 of Crawford & Moses’ Digest; Beal-Doyle Dry Goods Co. v. Odd Fellows’ Building Company, 109 Ark. 77; Fort Smith Lumber Co. v. Shackelford, 115 Ark. 272.

In the instant case the only remedy was to have brought the shit in Polk County, the action being transitory, or else to have obtained service on the agent or employee in charge of the branch office or place of business, conducted by appellant in Scott County, where the suit was brought. Neither course was pursued. The trial court should have sustained appellant’s motion to quash the service, and committed reversible error in overruling it.

Appellant requests that the trial court be directed, in case of the reversal of the judgment and remand of the cause, to abate the action, unless and until proper and legal service has been bad upon it. Such direction cannot be given, for the reason that appellant has entered its appearance in the suit by taking an appeal to this court. Beal-Doyle Dry Goods Co. v. Odd Fellows’ Building Co., supra.

On account of the error indicated, the judgment is reversed, and the cause is remanded for a new trial.


author: McCulloch, C. J.

text:
    Harris v. Ashdown Potato Curing Association.
    Opinion delivered June 14, 1926.
    1. Associations — note—evidence op liability. — In an action against alleged subscribers to an association on a note executed in the name of the association, it was competent to prove anything the parties said or .did in formation of the association, in order to determine its nature, and to show that words in the articles of association indicating an attempt to form a corporation were erased and others adopted which could be construed as an intention to form an unincorporated association.
    2. Associations — evidence—matter op opinion. — In an action against alleged subscribers to an association on a note executed in the name of the association, statement of a witness that the word “corporation” was stricken out of the articles of association and the word “association” substituted, because they wanted an association in the nature of a partnership, and not a corporation, held properly excluded as being the conclusion of the witness as to what the intention of the parties was.
    3. Associations — evidence—intention op subscribers. — In an action against subscribers to an association on notes executed in its name, it was error to exclude evidence that, at a meeting of the subscribers, a vote was taken whether a corporation or an unincorporated association should be formed, and that the latter form of organization was adopted.
    4. Associations — evidence—intention of subscribers. — In an action .on notes of an association against subscribers thereto, every circumstance tending to show that the subscribers intended .to form an unincorporated association, and not a corporation, was competent to establish their liability as partners.
    5.- Appeal and error — exclusion op evidence — harmless error.— The exclusion of competent evidence was harmless where admitted evidence established the fact sought to be established by the excluded evidence.
    6. Appeal. a.nd error — refusal of instruction — harmless error. — Eefusal to give an instruction as asked by appellant was harmless where other instructions given contained a complete statement of the law and were as favorable to appellant as the instruction asked.
    7. Associations — instruction — applicability. — In an action against members of an association on notes executed in the name of the association, an instruction that, if the association was conducting business in the name of a proposed corporation and notes were signed in the name of such proposed corporation, and plaintiff transacted business and accepted notes as notes of the corporation, the jury should find for the defendants, held erroneous .where there was no evidence that the business was conducted as a corporation.
    8. Associations — estoppel.—Though the payee of notes executed by an association accepted them under the belief that they were ' executed by a corporation of the same name, it would riot estop her to assert liability against members of the association as partners.

      9. Associations — liability of subscribers. — Where subscribers to a contract for formation of an association intended to form a corporation, but had no part in the operation of the business as a partnership,' or in the selection of agdnts to do' so, they are not liable as partners.
    10. Associations — nature of relation’. — Where subscribers to a contract to form an association made no attempt to incorporate it, the association was not a de facto corporation, but a voluntary unincorporated association, which in effect is a partnership.'
    11. Associations — liability = of subscribers — evidence.—W h e r e there was evidence that defendants subscribed for stock in an . unincorporated .association for the purpose of building a potato-curing house, an instruction that purchasers of-space in the curing Jiouse would not be liable was confusing, since, if their sub- . scription .was intended for the purpose of organizing an unincorporated association, those participating would be liable for its obligations.
    12. Associations — liability of members — jury question. — In an 1 action against the members of an unincorporated association on notes executed in the name of the association, where certain defendants, not having signed the subscription list, subsequently attended meetings, paid shares of stock, and executed notes for amounts subscribed, the question whether they participated in • the organization of the association so as to make them liable as members, held for the jury.
    13. Associations — liability for obligations. — Persons making mere voluntary donations to an unincorporated association, without participating in its organization or operation, are* not liable for obligations incurred by the association.
    Appeal from Little Eiver Circuit Court; B. E. Isbell, Judge;
    reversed.

      Seth Reynolds, for appellant.

      DuLaney & Steel and Shaver, Shaver & Williams, for appellee.
   McCulloch, C. J.

Appellant instituted this action against appellees, who are numerous residents of Little Eiver County, Arkansas, to recover on two promissory notes, executed in the name of Ashdown Potato Curing Association, for borrowed money, it being alleged in the complaint that appellees had voluntarily associated them-, selves together under that name, without forming a corporation, for the purpose of engaging in the business 'of curing and preserving potatoés; that appellees were copartners in the business, and that the money for which the notes were executed was borrowed for the purpose of operating the business. There were originally about sixty defendants, and some of them defaulted, and judgments against them were rendered in. favor of appellant, and the. cause was continued as to three of the defendants. The remainder of the defendants filed answers denying the allegations of the complaint with respect to the formation of a partnership and denying that they were in anywise liable on the notes in suit. On the trial of the case the court directed a verdict in favor of two of the appellees; P. S. Davis and J. E. Wood, and the trial jury returned a verdict in favor of the other appellees.

Each of the notes in suit was for the sum of $1,000, signed by the Ashdown Potato ’Curing Association, by the president and secretary, and were indorsed by four of the defendants against whom judgments by default were taken below. One of the notes was executed to appellant, and the other to her husband, O. Harris, who assigned it to her. The sum of $200 has been paid on one of the notes, and nothing on the other one.

In the .early part of the year 1920 a movement was started, for the purpose of encouraging the growing of sweet potatoes, to form some kind of an association to build and operate a potato-curing house, so that sweet potatoes grown by local farmers could be properly prepared and held for market. Pursuant to this effort there was circulated a subscription list with the following caption:

“Ashdown, Arkansas, March 4, 1920.
“Cooperative Sweet Potato Crowing and Curing Association :
“I hereby agree to grow the number of acres of sweet potatoes set opposite my name. I further agree to take stock in a potato-curing house at the rate of one dollar per bushel for the number of bushels I expect to cure out. I further agrée to market my potatoes cooperatively. ”,

The list was circulated by Ceorge M. Johnson, who was then engaged in farm demonstration work in that county, and he secured, a large number of signatures. He testified at the trial of the cause as. to the authenticity of those signatures, but there is a conflict in the testimony as to whether some of the signatures were properly authorized. Opposite each name on the list there was a specification of the number of bushels that each signer agreed to put in the house. Each of the subscribers was expected to pay in advance the amount-indicated in the subscription, list, or to execute a note to the association for the amount. There is testimony that a number of persons who did not sign the list either paid to .the association an amount to be applied on stock or gave notes. Several of the appellees, who did not. sign the subscription list made payments or gave notes.

Appellant introduced testimony tending to establish the fact that there were several meetings of the subscribers for the purpose of organizing the association and providing for the construction of a potato-house and its operation. The first meeting was held on May 22, 1920. A temporary organization was made, and the name of the association was selected. A committee was also appointed to “locate and purchase a site for the building and ascertain the cost of erecting a suitable building.” At another meeting, on June 5; no business was transacted except to add another individual to the committee-appointed at the former meeting. The meeting to complete the organization was held on, August 9, 1920, and at that meeting a certain instrument in. writing, designated as “Articles of' Association, ” was formally adopted, and the board of directors and other; officers were selected to operate the business. There is a conflict in the testimony as to whether all of the appellees attended this meeting, -or rather as to which ones attended. It is undisputed, however, that certain of them attended the meeting, and also that certain of the appellees did- not attend. These articles of association were never filed -for record, and no steps were taken towards-incorporating the association, until at least a year thereafter, and after the indebtedness involved in this litigation had been incurred. There is a conflict as to whether these particular articles were ever filed at all, the contention of-appellant being that the effort to incorporate a year later related to another association- and n,ot to the one formed as indicated above. . • ‘

The officers selected at the meeting referred to above' proceeded to make arrangements to carry out the plan, and they'borrowed money and executed the two notes in' suit. They built the curing-house, and it was operated for a timé, but did not prove a success.

It is undisputed that the association .known .as Ashdown Potato-Curing Association was not incorporated; that no steps were taken to effect a legal incorporation of the association; that it did not constitute a corporation either de jure or de facto (Rainwater v. Childress, 121 Ark. 541), and that money was borrowed from appellant and her husband and the notes in suit executed therefor by those who were selected to manage the business of the .association. The notes were executed on the same day, September 20,1920, and the money borrowed was used in the construction of the curing-house.

The case made in .the trial below is thus stated in the. light most favorable to appellant for. the purpose of determining whether, or not there was error in. the proceedings below.

The principal issues of fact in the trial below related to the intention- of the subscribers, whether it was to form a corporation or a partnership, and whether appellees, or any-of them, participated in -the operation-of the business.

There are several assignments of error in regard to the court’s ruling in, excluding testimony offered by appellant. The court admitted testimony to the effect that the articles of association adopted at the meeting on August 9, 1920, as originally printed and presented, contained' in several places the words “corporation’-’ and “incorporation,” and that by consent of all present those words were erased and the word “association” interlined in substitution thereof. Appellant'attempted to show by witness Johnson, who' testified concerning these erasures and interlineations, that the changes'were made for the purpose of showing that a partnership was intended to be formed, and not a corporation. Counsel, asked the witness whether he knew why the word “corporation” was stricken out and the word “association” interlined, and the answer of the witness was that they wanted “to have an association in the nature of: a partnership and not a corporation. ’ ’ The court excluded this testimony, and exception was duly saved. The same thing substantially occurred in the testimony of other witnesses, and the ruling of the court was the same. It was competent to prove anything that the parties said or did in the formation of the association in order to determine what the nature of the association was, and it was of course competent to show that the words indicating an attempt to form a corporation were erased from the articles adopted and another word substituted which did not express unmistakably such an, intention but could be construed, in the light of all the circumstances, as an intention to form an unincorporated association. It would have been competent also to prove what was said and done in the meeting when these changes were made, but the testimony of the witnesses does not go that far. The statement of the witne'ss Johnson was merely his own conclusion as to what the intention of the parties was, and the court properly excluded that, statement. Appellant offered to prove by another witness that a vote was taken. at the meeting as to whether they would form a corporation or merely an unincorporated association, and the court excluded that testimony. This was error, for, as before stated, appellant had the right to prove any fact or circumstance tending-to show the intention of the parties in the formation of the association.

.The defense in this action is that there was never any intention to form a. partnership, but-that, on the contrary, the intention was to form a corporation, and that appellees, or at least some of them, did. not, either directly or indirectly, participate in the operation of the business — that they merely signed subscription lists and took stock in a corporation which was never incorporated, and that they did nothing more. This being true, every circumstance which tended to show that 'they did not intend to form a corporation, but that an unincorporated association was to be formed, was compétent to establish liability on the ground that they formed the. association, as a copartnership in' the name used in borrowing money for which these notes were executed.

. It is also contended that the court erred in refusing to permit appellant to prove all that the committee appointed by the shareholders did in putting the business of the association into operation, and it is particularly pointed out that the court excluded the statement of a witness that the committee was directed to confer with a representative of the railroad company for a location of the potato-house. It was competent to prove that the committee put the business into operation by selection of a site, building the house, borrowing money and operating the business, and so. the fact that the business was publicly operated throws light on the question of participation of the shareholders in the operation of the business.. We do not thinlc, however, that the ruling of the court, in excluding this single instance of the activities of the committee was prejudicial, for abundant testimony was introduced tending to show that the officers and managers selected by the shareholders secured a site, built the house and operated the business, and that many, if not all, of the appellees participated in, some way in the operation of the business, either directly or indirectly.

Appellant asked for instructions defining partnership, but the court refused those instructions, and gave its own. We think that the instructions given by the court sufficiently defined a partnership, and that there was no error committed by the court in substituting its own instructions for those proposed by appellant.

Appellant requested the court to give the following instruction:

‘ ‘3. If you should find from the testimony in this case that all the defendants, or any number of them, associated themselves together for the purpose of forming a partnership, and that, in pursuance of this purpose, the articles of association under date of August 9, 1920, were formed, and also, in order to carry out the purpose of the association, the money represented by the two notes introduced in evidence was borrowed by said Baggarly and Park for said association, you will find for the plaintiff against such defendants so associating themselves together.”

The court modified the instruction and gave it in the following form:

“If you should find from the testimony in this case that all the defendants, or any number of them, associated themselves together for. the purpose of forming a partnership, and the money represented by the two notes introduced in evidence was borrowed by said Baggarly and Park for said association, you will find for the plaintiff against such defendants so associating themselves together.”

The instruction as requested by appellant was a correct statement of the law, but no prejudice could have resulted from the exclusion of the words stricken out by the court. That part of the instruction as given by the court made it a complete statement-of the law, and was as favorable to appellant as the original instruction.

The court, over the separate objections of appellant, gave the following two, among other, instructions:

“No. 4. You are instructed that if you find from the evidence that the Ashdown Potato-Curing Association, at the time of the execution of the notes alleged in the complaint, was conducting business in the name of a proposed corporation, and the said notes were signed in, the name of such proposed corporation, if any, by its president, secretary, or both, and that said association was held out to the public as a corporation, and that the plaintiff, or the original payee of said notes, transacted, business with said association and accepted said notes as the notes of a corporation, then, if you so find, you will find for the defendants.
“6. You are instructed that, if you find from the evidence that the defendants, or any of them, signed the subscription contract with the intention to form a corporation for the purpose of operating a potato-curing plant or house, that they took no further part looking towards the organization of the corporation or the operation of the plant after it was put in operation, that they took no part in the business transacted by the plant as principals, partners, agents or directors, that they did not sign articles of association, incorporation or partnership, bnt, in good faith, supposed or believed that the corporation was duly organized by the promoters or those actively engaged in the organization thereof, then you will find for such defendants, if any.”

Instruction No. 4 was erroneous, and the court erred in giving it. In the first place, there was no evidence tending to show that the business was being conducted “in the name of a proposed corporation,” or that appellant “transacted business with said association and accepted said notes as the notes of a corporation.” The notes did not purport on their face to have been executed by a corporation. The fact that they were signed in the name of the association by officers did not indicate that the association was a corporation. It could just as well, under that name, have been a common-law joint stock association. Doyle-Kidd Dry Goods Co. v. Kennedy, 154 Ark. 573. The promise recited in each of the notes is that “I, we, or either of us promise to pay,” etc., and this language refers to one or more individuals' as well as to an association, or even a corporation. Certainly the language of the note and the manner of the signature are not sufficient to carry the necessary implication that it was the contract of a corporation acting through its officers. There is-no evidence tending to show that appellant or her husband dealt with the association as a cor•poration and not a voluntary association. The récord is entirely silent on that subject, except the contents of the note itself. But, even if there were proof tending to show that appellant accepted the note under the belief that it was executed by a corporation of the name indicated, this would not estop her to assert liability against the members of a copartnership under that name or a common-law joint stock association. The maker of the note, under whatever name employed, was liable thereunder, whether a corporation or individuals doing business under that name, and the fact that the payee of the note was under an erroneous belief -as to the identity of the maker would not absolve the maker or makers from liability. We have held, it is true, that those who hold themselves out as dealing in the name of a corporation are. estopped to deny the corporate existence, but that is a different question from holding that a person who, under mistake, deals with an association as a corporate entity, is estopped from denying the corporate existence. In an action to recover on a written obligation the execution of which is denied by the defendant or defendants, the real question under inquiry is the identity of the obligor, whether it be a corporation, or, if not, who the persons are who assumed to obligate themselves under that name, and, as before stated, a mistake on the part of the obligee as to the identity of the obligor does not work an estoppel. The court erred therefore in giving that instruction.

The next instruction quoted above (No. 6) is substantially in the language of our decision in Rainwater v. Childress, supra. It was a correct declaration of law, and submits the principal defense tendered by appellees, whose contention was that they did not intend to- join ill a partnership, but, on the contrary, intended to form a corporation, and took no part, either directly or indirectly, in the operation of the business, which was subsequently put into operation without completion of the corporation project. If it was true that they intended to form a corporation and had no part in the operation of the business or the selection of agents to do so, then they would not be liable as partners in an association in whose activities they did not in fact participate.

The law applicable to this case is fully stated in recent decisions of this court. Rainwater v. Childress, supra; Doyle-Kidd Dry Goods Co. v. Kennedy, supra; Morse v. Burkhart Mfg. Co., 154 Ark. 362. The facts of this case are very similar to those developed in Doyle-Kidd Dry Goods Co. v. Kennedy, supra, so far as they call for an application of the law. In that case it was said:

“ But our court has taken a definite stand contrary to the above doctrine as to the stockholders in a de facto corporation and holds that snch stockholders are liable as partners. # * * If stockholders in a de facto corporation are liable as partners, then it occurs to us, a fortiori, that the stockholders in a joint stock company also would be liable as partners to third parties for the debts incurred by such company. Such unquestionably is the effect of our own decisions.”

There was no attempt in the present case, as we have already seen, to incorporate, therefore there was no semblance of a de facto corporation.

In Rainwater v. Childress, supra, we said:

“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 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. * * * Here there was no attempt whatever to comply with the statutes relating to the formation of a corporation. It is not enough that there is a law under which the subscribers might have incorporated and that they agreed to form a corporation. They had not even signec| articles of incorporation.”

Now, it may be added that a mere signing of articles of incorporation is not a substantive step in the act of incorporation under the statute. The signing of the agreement constitutes merely a joint obligation of the parties to form a corporation, but it is not a step in the formation of it. The court should have instructed the jury that there was no corporate existence of the Ash-down Potato-Curing Association; that it was a voluntary, unincorporated association, in effect a partnership, and that the only question in the case was the identity of the persons who composed the association at the time the notes in suit were executed.

Error of the court is also assigned in giving instruction No. 11, which reads as follows:

“You are instructed that the defendants or any other person had the right to buy or rent space in the curing-house for curing their potatoes, and the fact that any one of them did so did not of itself create any liability except to pay for space — and this would not make the purchaser of space liable as a partner merely by reason of such purchase. You will find for any and all defendants who just occupied this relation to the association, if any.”

This instruction, we think, was confusing and should not have been given. Of course, the mere purchase'of space in the curing-house by one who was not otherwise interested in the business would not constitute a membership in the association, but this instruction might have been, and doubtless was, intended as a declaration that a subscription for stock and space in the curing-house would not of itself make the subscriber a member of the association, even though there was no intention to incorporate. We think that is wrong, for, if the subscription list was intended for the purpose of organization of an unincorporated association, or was afterwards converted into such an organization without effecting incorporation, those who participated in or authorized the business of the unincorporated institution were liable for the obligations of the' association. The subscription was not merely for space, but was for stock “at the rate of one dollar per bushel” for the number of bushels promised. Hence it necessarily follows that, if there was to be an unincorporated association, the subscription constituted membership, unless subsequently abandoned before the obligations in suit were incurred.

The court also erred in giving a peremptory instruction in favor of appellees Davis and Wood. These parties did not sign the subscription list, but they subsequently attended the meeting, bought shares of stock and executed notes for the amount subscribed. The question should have been submitted to the jury whether these parties participated in the organization of the voluntary association so as to make themselves members.

There was evidence tending to show that some of the appellees merely'made donations with the express understanding that they were not becoming members of the association. The court submitted that issue to the jury. Of course, if it was a mere voluntary donation, without any participation in the organization or the operation of the business of the association, there would be no liability for obligations incurred by the association.

For the errors indicated the judgment is reversed, and the cause remanded for a new trial.


author: McCulloch, O. J.

text:
    Crawford County Levee District v. Alexander.
    Opinion delivered June 14, 1926.
    Levees — lands subject to tax. — Acts 1909, p. 159, creating a levee district and manifesting the intent that lands lying in front of the levee should not be taxed, held to exempt lands in front of a new section of the levee, though behind where the original levee stood before it caved in.
    Appeal from Crawford Chancery Court; J. V. Bourland, Chancellor;
    affirmed.

      E. L. Matlock, for appellant.

      Starbird & Starbird, for appellee.
   McCulloch, O. J.

The Crawford County Levee District was created by special statute enacted by the General Assembly of 1909. Acts 1909, p. 159. The purpose of the organization was to provide for the construction of á levee along the bank of the Arkansas Eiver between two stated points to protect the lands lying in that locality. The board of directors was named in the statute, and there was provision for letting- contracts for the construction of the levee and the issuance of bonds and an annual levy of taxes on the lands in the district, according to valuation, “as it shall appear each year upon the real estate assessment hook of Crawford County. ’ ’

The direction in the statute with reference to the duty and authority of the hoard of directors was that they should construct a levee along the Arkansas River front “on a line to be indicated and laid out by them so as to afford protection to the 'lands included in said levee district, and to protect and maintain the same in such effective condition as honest, able and' energetic efforts on their part may obtain, by'building, renewing, repairing "or raising the levee herein provided for. * *’*•”

Section 5 of the statute contains a provision that if, “in adjusting and preparing a list of lands subject to levee tax, it is found that lands have been listed not subject to levee tax, the board of directors of said levee district shall cause the taxes on such tracts to be refunded, and in no- case shall taxes be collected for any land lying between the levee and the river or creeks,'riot protected from overflow by said levee.” Pursuant to this statute, the board of directors of the district caused to be constructed- a -levee of standard height along the bank of the river, between the points named, and borrowed-money to pay for the construction; and issued bonds, and taxes have -been annually levied in accord: anee with the statute. Some of the bonds are still outstanding and unpaid, but the record does not disclose how much of the bonded debt is unpaid.

' At the time of the creation of the levee district and the construction of the improvemerit, appellee was the owner of a tract of land containing orie hundred sixty acres fronting on the Arkansas River, and his lands were taxed from year to year as other lands in the district. The levee thus constructed was of the standard height pf thirty-eight feet, but the levee along the front of appellee’s land'has since then caved into the river, and the directors have constructed a levee twenty-seven feet high, back from the river, so- as to give partial protection to the lands. This levee is not connected with the broken ends of the original levee, bnt is constructed across a depression or swale, and connects at each end with lands on the same level with the top of the levee. There were ninety-five acres of appellee’s land left after the levee and part of the adjacent lands caved into the river, and of this acreage there are forty-nine acres between the levee and the fiver, and forty-six acres lying back of the levee and partly protected by it. The board of directors has continued the levying of taxes upon the whole of the lands of appellee, and the latter objected to paying on any of the lands except that part which is behind the levee and receives protection. That forms the controversy in this case. Appellee offered to pay the taxes on the lands back of the levee, but refused to pay on the lands in front of the levee, and instituted this action to prevent the board of directors from enforcing the payment of taxes. The chancery court granted the relief which appellee prayed for, and an appeal has been prosecuted by the levee district.

Our conclusion is that, upon the peculiar language of this particular statute, the chancery court was correct in its conclusion. This is not a case like Salmon v. Long Prairie Levee District, 100 Ark. 366, where we held that the destruction of a levee by caving or washing away did not absolve the lands from the lien for the payment of the cost of the construction. Nor is it a case where the assessment is made in advance for the whole cost of the improvement, for the statute now under consideration provides for an annual assessment upon the valuation fixed for State and county taxation in order to pay for the construction of the levee and for renewing, maintaining and repairing it. The statute provides that, whenever deemed advisable, the board of directors “may employ one or more competent surveyors, whose duty it shall be to survey any or all of the lands of the district, as they may be directed by the board, for the purpose of ascertaining the lands subject to taxation hereunder.” This provision, when read together with the portion of § 5 quoted above, shows that the statute was intended to mean that, whenever it was found that lands were lying in front of the levee, they should not be taxed. The board of directors is authorized by statute to protect and maintain the levee by “building, renewing, repairing or raising” it. The new section of levee across the broken space where the levee had caved into the river was constructed by the board pursuant to the authority conferred by the statute, and we think that the exemption of lands in front of the levee applies the same as if the lands had been in front of the original levee. Now, if we had a case where the whole of the levee caved in and it was necessary to rebuild it, none of the lands formerly behind the original levee would be exempt from taxes to pay the cost of the original improvement. But this is a case of renewing or repairing the levee, pursuant to the statute, which, as 'before stated, manifestly provides that, whenever the lands fall in front of the levee, they shall not be taxed to pay for such renewal or maintenance. Any other view would continue the burden of taxation on lands of appellee which could not receive any benefit.

Decree affirmed.


text:
    Gilliland Oil Company v. State ex rel. Attorney General.
    Opinion delivered June 14, 1926.
    1. Statutes — repeals.—The presumption is against repeals of statutes by implication.
    2. Taxation — franchise tax — repeal.—Acts 1923, p. 317, § 1, fixing the value of nonpar stock for taxation of the franchises of foreign corporations, was not repealed by Acts 1925, p. 687.
    3. Taxation — franchise tax of foreign corporation. — Computation of the franchise tax of a foreign corporation, partly of the par value of $100 per share and partly without par or face value, in accordance with Acts’ 1923, p. 317, by taking the face value of par stock and the value of the nonpar stock at $25, was proper.

      Appeal from Pulaski Chancery. Court; . John E. Martineau, Chancellor;
    affirmed.

      Carmichael S Hendricks. and Robert N. Maxey, for appellant.

      H. W. Applegate, Attorney General, and John L. Carter, Assistant, Utley & Hammock and 8am M. Clark, for appellee.
   McCulloch, C. J.

This is an action instituted by the State, on the relation of the Attorney General, against the appellant, Gilliland Oil Company, a foreign corporation doing business in this State, to enforce payment of frauchise tax and penalty for nonpayment.

Appellant is a Delaware corporation, and-is doing business in the State of Arkansas. Its capital stock is partly of par value of $100 per share and partly without par or face value, being what is termed nonpar value stock. Appellant complied with the statutes of the State in order to do business here, and filed its report for the year 1925 with the Eailroad Commission. The Commission fixed and certified to the Auditor the franchise tax,in accordance with the statute (Acts 19.23, p. 317), which provides, in relation to a corporation having stock without par value, that “for the purpose of the taxes or fees prescribed by law to be paid on the filing of any certificate or other paper relating to corporations and of franchise taxes prescribed by law to be paid by corporations to the State of Arkansas, but for no other purpose, such shares shall be taken to be of the par value of twenty-five dollars each.” The statute fixing the amount of the tax (Crawford & Moses’ Digest, § 9804, as amended by Act of March 27, 1925, Acts 1925, p. 687) provides that all foreign corporations shall pay “for the privilege of exercising its franchise within this State, a tax of one-tenth of one per cent, each year upon the proportion of the issued and outstanding capital -stock of the corporation used in Arkansas, as represented by property owned and business transacted in this State.”

Appellant protested the amount of the tax fixed by the Eailroad Commission, and offered to pay the tax on the proportion of the actual market value of its stock. The chancery court decided in favor of the State’s contention, and rendered a decree for the amount of the tax certified hy the Railroad Commission and the penalty therefor. An appeal has been prosecuted.

The question of the validity of the act of 1923, supra, fixing the taxable value of nonpar value stock, and the question of the application of that statute to foreign corporations, must be treated as foreclosed by the decision of this court in State v. Margay Oil Corporation, 167 Ark. 614. That case is now pending in the Supreme Court of the United States on writ of error, but we adhere to our own decision and find no reason to recede from it, unless a later decision of the Supreme Court of the United States conflicts therewith.

It is also contended that the act of 1923, supra, has been repealed by the act of 1925. The contention is that the last-mentioned statute covers the whole subject completely and operates as a repeal by substitution, and that it also works a repeal for the reason that it is in conflict with the prior statute. We do not think that there has been a repeal upon either theory. The well-settled presumption against repeal by implication is not overcome by the substance of the later statute. Section 1 of the act of 1923, supra, quoted above, relates solely to the question of fixing, for taxation purposes, the value of nonpar value stock of any corporation, domestic or foreign. It is a separate and distinct subject, which is not covered by any prior statute or by the act of 1925, supra. The act of 1925 cannot be treated as a substitution, for it does not cover the whole subject. It merely amends certain specified sections of the Digest and repeals others, and those sections have no reference to the subject contained in the act of 1923. Nor is there any repugnant provision in the act of 1925, supra, for the reason that it does not deal with the question of fixing the value of nonpar value stock. Our conclusion is that there has been no repeal of that feature of the act of 1923, supra, relating to the value of nonpar stock, and that it is still in force for the purpose of ascertaining the amount of franchise tax of corporations issuing that land of stock.

It is finally contended that, even if the statute is constitutional and has not been repealed, the Commission made-the computation on the wrong basis. .This contention is, we think, unsound. If § 1 of the act of 1923, supra, is in force, the computation was correct, for that statute provides in express terms that, for the purpose of “franchise taxes prescribed by law to be paid by .corporations to the State of Arkansas, * * * such shares shall be taken to be of the par value of twenty-five dollars each. ’ * That was the very point of our decision in the Margay case, supra, for the same argument was made in that case as is now made by learned counsel for appellant in this case. The statute then in force requiring foreign corporations to make report to the Commission provided that there should be a report of the market value of stock, and yet we held that the other statute controlled and made the face value of the par stock and the statutory value of nonpar stock the basis for measuring the tax. This is not a property tax. Neither the tangible property in or. out of the State, nor any part of the capital stock itself, is taxed. It is a tax on the franchise, and is measured by the proportionate amount of capital stock represented by the property and business of the corporation in. this State. The statute does not attempt to deal with the separate ownership of stock or the different kinds of stock, but it deals with the capital stock as a whole, and measures the .tax by the proportionate part represented by property and business in the State. . . .

.Our conclusion, is that this .case is controlled by our decision in the Margay case, supra, and that if that decision is to be adhered to — and it is — the decree of the chancery court should be affirmed, and it is so ordered.

Wood, J., dissents.


author: Hart, J.,

text:
    Adler v. St. Louis Southwestern Railway Company.
    Opinion delivered June 14, 1926.
    1. Railroads — failure of trainmen to keep lookout. — A railroad is liable for injuries due to a breach of its duty to keep a constant lookout, notwithstanding the contributory negligence of the person injured.
    2. .Railroads — failure to give warning. — Where plaintiff was struck by a train at a station, on his admission that he had seen the train stop at the wáter tank 246 feet, south of the station and knew that it would approach the station in a few minutes, it wás not error to fail to submit defendant’s negligence-in not giving statutory, warning by bell or whistle.
    Appeal from Lonoke Circuit Court; George W. Clark, Judge,-
    affirmed.
    STATEMENT BY THE COURT.
    M. Adler sued the St. Louis Southwestern Bailway Company for personal injuries received on account of the alleged negligence of the defendant, in, operating one of. its passenger trains . in approaching the station -at England, Arkansas.
    The defendant denied negligence in operating its train.
    According to the testimony of the' plaintiff, on the morning of the 10th day of Janbury, -1924, he came from Stuttgart, Arkansas, to England, Arkansas, to meet his intended wife- and to accompany her to Little Book, where they were to be’married. His train arrived- at England about 8:45 a. m., and he got out on the platform to meet his inténded wife and some friends. After conversing with them, he started down the station platform north to where the passenger coach was placed, for the purpose of boarding 'the train and being carried to Little Bock, when the train from Pine Bluff should come in and the coach should be attached to it. The plaintiff saw a train at the water-tank,' taking water, 246 feet south of the station, and knew ‘that this train was- coming on up to the station. He did not know, however, which track it would come on, and supposed it would give the statutory warning by blowing tbe whistle or ringing the bell after it left the water-tank and approached the station. As he walked up the platform with his intended wife and her friends, he found the platform crowded with persons, and could not make his way along except by pushing through the crowd. There was a small space, probably fifteen inches, between where the mail-bags were placed and the main track. He started to pass between the mail-bags and the track, and was struck by the train. He did not look back after he started walking towards the station to see if the train was coming. He did not know the train was approaching, because he did not hear the bell ringing or the whistle blowing. The train was coming in slowly, and there was nothing to prevent the engineer from seeing the plaintiff and the rest of the crowd. When the pilot-beam of the engine struck the plaintiff, he was knocked over, and both bones in his left leg were broken near his ankle.
    According to the testimony of the engineer operating the train that struck the plaintiff, the engine was equipped with a good bell which operates automatically. After leaving the water-tank, he started the bell ringing and kept it ringing until after the plaintiff was struck. The engine had an automatic air-brake, which was in first-class condition, and it was pulling three cars. The engineer saw the crowd of people on the station platform, and for that reason slowed down the train, and was moving into the station about as fast as one could walk. Suddenly and unexpectedly the plaintiff stepped over close to the track, and the pilot-beam pushed him over and caused his leg to catch on the step. As soon as the engineer saw the plaintiff so approaching close to the engine, he slammed the brakes on and stopped, the train in about five feet after it struck the plaintiff. He also gave the whistle a short pull as soon as he saw that the plaintiff was in danger of being struck by the engine.
    Several witnesses who were on the station platform, and saw the accident, corroborated the testimony of the engineer.

      The court, over the objections of the plaintiff, gave to the jury the following instructions:
    “Ño. 5. In this case, as I stated to you a while ago, the plaintiff having admitted that he had knowledge of the existence of train at the water-tank, you cannot predicate a verdict on the alleged failure of defendaht to ring the bell or sound the whistle, even though you may find from the evidence in this case that the bell was not ringing as it approached the crossing there and approached the station; that failure, in view of the plaintiff’s admission that he saw the train down there, would not authorize you in finding a verdict against the company.
    “No. 6. Under the evidence in this case, gentlemen of the jury, the only act of negligence submitted to you as against the defendant in this case is whether or not they kept a lookout required under the statute, after discovering that the plaintiff was at or near their tracks. All other alleged acts of negligence have passed out of the case as not material, and you are to determine the right of the plaintiff to recover here and whether or not the law has been met and complied with upon, the part of the engineer in charge of the locomotive in keeping a lookout required under the statute for persons at or near the track of the approaching trains.”
    The jury returned a verdict in favor of the defendant, and from the judgment rendered the plaintiff has duly prosecuted an, appeal to this court.

      Gray (& Morris and Emerson & Donham, for appellant.

      J. B.. Turney, A. II. Kiskaddon, II. T. Wooldridge and W. T. Wooldridge, for appellee.
   Hart, J.,

(after stating the facts). Under our statute it is the duty of the railroad to maintain a constant lookout, and if it appears that those in control of a train, in discharge of their statutory duty to keep a lookout, discovered or should have discovered a person upon or near the track in time to avert an injury to him, and failed to do so, the railroad becomes liable to him in damages, notwithstanding the fact of the contributory negligence of the person walking upon or near the track placed him in peril. Gregory v. Mo. Pac. Rd. Co., 168 Ark. 469; Davis v. Scott, 151 Ark. 34; and St. Louis S. W. Ry. Co. v. Douglas, 119 Ark. 33.

The instructions' copied in our statement of facts show that the court submitted to the jury the doctrine of discovered peril and the statutory duty of the defendant to keep a lookout.

It is contended by counsel for the plaintiff that the circuit court erred in not submitting to the jury the question of the negligence of the defendant in failing to give the statutory warning of the approach of the train by ringing the bell or sounding the whistle.

While several witnesses for the defendant testified that the hell was ringing after the train left the water-tank and while it was approaching the station, still, according to the testimony of the plaintiff, the jury might have found that the bell was not kept ringing after the train left the water-tank.

The plaintiff admitted that he saw the train stop at the water-tank to take water, and that this was 246 feet south of the station. In company with his intended wife and some friends, the plaintiff then started up the platform to get in a coach which was placed on the- track to be attached to the train going north to Little Rock. The plaintiff admits that he did not look back as he walked up the platform, but claims that the defendant was negligent in not ringing the bell so as to warn him of the approach of the train.

In this respect the case at bar is different from the Douglas and Davis cases just cited. In each of those cases the plaintiff admitted that he saw the train approaching, and of course had all the warning which could have been given him by ringing the bell or sounding the whistle.

In the present case, while the plaintiff did not look back and see the train approaching, still he had all the warning of its approach that was necessary. He had formerly lived at England, and was perfectly familiar with the situation there. He knew that the coach in which he had ridden from Stuttgart would be placed on the main track at England and would be taken, up by the northbound passenger train from Pine Bluff. He saw a train 246 feet south of the station, taking water. He started up the platform for the purpose of getting in the coach which was to be attached to a train from the south going north. He knew that his train was due,'and there is no other reasonable inference but that he' must have known that the train which stopped to take water was the train which he was waiting for. He knew that, within a few minutes, the. train would approach the station. Thus it will ;be seen that he had all the warning -which could have been given him by ringing the bell dr sounding the whistle. There was no evidence from which to predicate negligence on the part of the defendant in failing to.give the statutory signals as to the approach of the train as the proximate cause of the injury to the plaintiff.

In this connection it may be stated that the court instructed the jury on, the doctrine of comparative negligence under § 8575 of Crawford & Moses’ Digest in accordance with its construction in the cases above cited.

We find no reversible error in the record-, and the judgment will therefore be affirmed. . '


text:
    Selz v. McGehee East and West Highway District.
    Opinion delivered June 14, 1926.
    1. Highways — zonal assessments. — Zoning of rural lands for road assessments does not invalidate the assessments, in the absence of proof that it is arbitrary, discriminatory or confiscatory;
    2.. .Highways — percentage assessments. — Assessment of town lots ; in a road district at 20 per cent, of the assessed, value for .State and county taxes is not invalid, in the absence of proof that-it is arbitrary, discriminatory or confiscatory.
    S. Highways — validity of assessments. — Assessments by a road district held not arbitrary or discriminatory on its face where the zone system was adopted as the basis for assessing rural lands and the percentage basis for assessing town property.
    Appeal from Desha Chancery Court; E. C. Hammock, Chancellor;
    affirmed.
    STATEMENT BY THE COURT.
    This is a suit by a landowner in a road improvement district to restrain the commissioners from proceeding with the work of the improvement, and to declare void the assessment of benefits made by'them as being arbitrary and discriminatory.
    The McGehee East & West Highway District was created by a special act of the General Assembly in 1923, and the validity of the act was upheld in Rayder v. McGehee E. & W. Highway Dist., 161 Ark. 269.
    The Legislature of 1925 provided for a reassessment of the benefits of the lands in, the district, and Joe Selz, a landowner in the district, brought this suit in equity against the -district and the commissioners thereof to set aside the assessment of benefits as being void.
    It is alleged that the assessment of benefits is discriminatory, arbitrary, and confiscatory. In making the assessment the commissioners divided the rural lands in the district into three zones. All the benefits were assessed against all lands in zone one at $2 per acre; in zone two at $1.50 per acre, and in zone three at $1 per acre. The benefits of the town property -situated in the district were assessed at twenty per cent, of their last assessed valuation for general taxation. The chancellor found the issues in favor of the highway district and the commissioners thereof, and that the- assessment of benefits was in all thing regular, as required by the statute.
    It was therefore decreed that the complaint of the plaintiff, Joe 'Selz, be dismissed for want of equity, and to reverse that decree the plaintiff has prosecuted this appeal.
    P. 8. Seamans, for appellant..

      I. N. Moore, for appellee.
   Hart, J.,

(after stating the facts). The reassessment of benefits attacked in this case was made by the commissioners pursuant to an act amending §§ 2 and 10 of the original act creating the highway district. Acts of 1925, p. 543.

Section 2 of the act of 1925 reads as follows:

“Section 2. That § 10 be amended to read as follows:
“ ‘Section 10. The commissioners may annually order a reassessment of the benefits; and, in that event, such reassessment shall be filed, advertised, and equalized as in the case of the first assessment; provided, the commissioners, both in making original assessment and any reassessment, shall take into consideration the assessed value of the property within said district, as shown on the assessment books, for State and county taxes, and also the income of said property, and the income derived from said property, to be ascertained by the commissiouers by such method as they may deem advisable; but, if the district has borrowed money or incurred indebtedness, the total amount of the assessment of benefits shall never be diminished. ’
“Whereas, it is found that the commissioners have heretofore made an assessment which is inequitable, unjust and unfair, the commissioners are directed as soon as practical to proceed to make an assessment as provided for in. the original act, and as amended herein.”

It will be noted that it is provided that the commissioners, in making the reassessment, shall take into consideration the assessed value of the property within the district, as shown by the assessment books for State and county taxes, and also the income of the property, which is to be ascertained in such method as the commissioners may deem advisable.

It is contended that the rural lands in, the district could not be divided into zones for the purpose of assessing the benefits in compliance with the provisions of the statute just referred to, without the assessment pf benefits being made in an arbitrary and discriminatory manner.

Now, the words of the statute add no duty to the commissi oners. All the matters provided in the amendment were proper elements to be considered by the commissioners in making the original assessment. That is to say, in arriving at the amount of benefits against each tract of land, the commissioners might take into consideration its assessed value and the income from it, as well as other facts and circumstances which would tend to shed light on the amount of benefits to be assessed against the land. This court has expressly held that the adoption of the zone system in assessing benefits in a road improvement district for the construction of roads does not render the assessment, invalid, unless it is shown in. a direct-attack that it is excessive or discriminatory. Road Imp. Dists. 1, 2, 3 v. Crary, 151 Ark. 484, and Ford v. Plum Bayou Road Imp. Dist., 162 Ark. 475.

There is no proof whatever in the record tending to show that the act of the commissioners in laying off the rural lands into, three zones for the purpose of assessing the benefits was arbitrary or discriminatory, oí that it amounted to a confiscation of the lands of the district.

Again, it is insisted that the assessment is arbitrary and discriminatory because the rural lands were divided into zones for the purpose of assessing benefits, and that the benefits to the lots within the incorporated towns in the district' were assessed at twenty per cent, of their value according to the last assessment for State and county taxes. There is no proof in the record tending to show that this method of assessing the benefits on town lots was arbitrary or confiscatory. . For aught that appears to the contrary in the record, this may have been the fairest way of arriving at the amount of benefits to be assessed against such town lots. See Watson, v. Boydstun, 141 Ark. 184.

. Again, it is insisted that the assessment of benefits is arbitrary and discriminatory because the zone system was adopted as a basis to govern in assessing benefits against tbe rural lands and'a percentage of tbe assessed valuation as a-basis for assessing tbe benefits to- town property-. No proof appears in tbe record to sbow that tbis made tbe action of tbe commissioners arbitrary or discriminatory, and it cannot be said that tbis method of assessing the benefits to tbe property shows on-its..face that the assessment is arbitrary or discriminatory..

In Bulloch v. Dermott-Collins Road Imp. Dist., 155 Ark. 176, it was held that tbe classification of property within a road improvement district for tbe assessment of benefits is not discriminatory against the various property owners in that tbe commissioners adopted an acreage basis for rural property, a valuation basis for city property, and a mileage basis for railroads, telegraphs, and telephones.

It follows that tbe decree of tbe chancery court was correct, and it will therefore be affirmed.