text:
    Smith v. Thomas.
    Opinion delivered December 21, 1925.
    1. Covenants — when right of action accrues. — Á right of action for ¡breach of a covenant against incumbrances accrues immediately upon the execution of a deed.
    2. Covenants — measure of damages. — The measure of damages for breach of a covenant against incumbrances is the amount necessary to remove the incumbrance, not exceeding the consideration expressed in the deed, and the covenantee must first discharge’ the incumbrance by payment unless he has actually lost the estate in consequence of the incumbrance.
    3 Covenants — incumbrance—enlargement of damages. — On a breach of a covenant against incumbrances in the sale of timber, in that there was a lien against the land for delinquent taxes, the covenantee’s right of action accrued immediately to the breach, and he could not enlarge the amount of his recovery iby permitting the lien to be foreclosed.

      4. 'Covenants — damages for breach. — Where a covenant against incumbrances in the sale of timber was breached by a sale of the land for delinquent taxes, the measure of the grantee’s damages was the value of the timber which he could have removed after such tax sale, less the value of the timber which he did in fact remove, not exceeding the amount of the incumbrance.
    5. Covenants — breach—evidence.—In an action by a purchaser of timber for breach of a covenant against incumbrances by reason of the land being sold for delinquent taxes, refusal to admit evidence tending to show interference from other causes with the removal of the timber within the time specified in the deed was error.
    Appeal from White Circuit Court; E. D. Robertson, Judge;
    reversed.

      Brundidge £ Neellg, for appellant.

      John E. Miller, for appellee.
   McCulloch, C. J.

This is an action instituted by appellee against appellants L., A. Smith and J. F. Watkins and E. L. Plant to recover on [breaches of warranty in the sale of the timber on certain lands in White County. Smith and Watkins were the owners of the land, and conveyed the timber to E. L. Plant with covenants of warranty, and Plant in turn conveyed to appellee with like covenants. The deed from Smith and Watkins to Plant was dated December 9, 1919, reciting a consideration of $800, cash in hand paid, and giving the grantee two years from that date within which to cut and remove the timber. The deed from Plant to appellee was dated December 10,1919, reciting a consideration of $1,000, cash in hand paid, and giving two years within which to cut and remove the timber. There was no failure of title, but it appears from the testimony that the lands were situated within the boundaries of an improvement district called Little Eed Eiver Levee District, and that at the time of the execution of each of the deeds there was a lien on the lands for delinquent levee taxes aggregating about the sum of $272.

Appellee entered upon the lands pursuant to his purchase from Plant and proceeded to remove the timber, and did in fact remove a considerable portion of it, but there was a considerable portion of the timber left on the land at the expiration of the time given in the deed for its removal.

On February 4, 1921, the commissioners of the levee district instituted an action in rem in the chancery court to enforce its lien for delinquent taxes on this and other lands in the district. A foreclosure decree was rendered by the chancery court, and these lands were sold by a commissioner and purchased by the levee district, there being no other bidder.' The sale was confirmed on June 9,1921, but no deed was executed by the commissioners for the reason that the period of redemption had not expired up to the time this case was tried below.

Appellee testified that he removed from the land 76,000 feet of timber of the value of four dollars per thousand, and that he also sold to a man named Knox 18,000 feet, the price for the sale to Knox being $2.<50 per thousand, and that there was left on the land at the éxpiration of the time allowed for removal, about 285,000- feet. The testimony introduced by the defendants was to the effect that there was only about 150,000 feet of merchantable timber on the land at the time of the execution of the deeds.

The testimony on the part of appellee was that Knox was working on the land removing timber in September and October, 1921, but that there was an interference with the removal of all the timber on the land within the time limit on account of the demand made upon him by the attorney for the levee district to stop cutting. There was ah action brought against him by the levee district, after the confirmation of the commissioner’s sale, to restrain'the cutting and removal of timber, but no injunction was-granted. The court sustained a demurrer to the complaint in that case, and there was an appeal to this court, and this court reversed the decree, holding that a case was stated in the complaint, and that the court erred in sustaining the demurrer. Little Red River Levee District v. Thomas, 154 Ark. 328. This decision -was rendered after the expiration of the time limit in the deeds executed by the defendants.

The defendants also offered testimony, which' .the court excluded, tending to show that, on account of high water and the delay in appellee’s effort to remove the timber, it could not have been, removed within the time limit after the date that appellee ceased operations in October, 1921. The court refused all of the instructions requested by the defendants and gave the, following peremptory instruction:

“No. 1. You are instructed that under the law you should return a verdict.for the plaintiff.against the de-. fendants, L. A. Smith and J. F. Watldns, for the amount-they sold the timber to Plant for and interest thereon from December 10, 1919, at six per cent, le.ss: stumpage value of the timber removed by plaintiff, and your verdict-should be for the plaintiff against the defendant, .R. L. Plant, for the amount he received for the timber, and the interest thereon less the stumpage value of the timber removed by plaintiff. ” . . , .

The jury returned a verdict in favor - of appellee against Smith .and Watldns for recovery of the sum of $628.63, and they have appealed. , The jury also returned a verdict against Plant in the sum of $256.80, but no appeal has been prosecuted by Plant.

We are of the opinion that the court erred in its instruction. There was no failure of title, therefore -there was only a breach of the covenant against incumbrances, and the right of action for the breach accrued immediately upon the execution of the deed. Jerome Hardwood Lumber Co. v. Munsell, ante p. 201.

In Kahn v. Cherry, 131 Ark. 49, we said: “A covenant against incumbrances in a deed is one in presentí. If an incumbrance exists, the covenant is broken as soon as made. The breach of such covenant is single, entire 'and perfect in the first instance, and the right of action accrues at once. ”

The measure of damages for the breach of a covenant against incumbrance is the amount necessary to remove the incumbrance, not exceeding the, consideration expressed in the deed containing- the covenants of warranty, and ordinarily the covenantee cannot recover on the mere existence of the incumbrance, but must first discharge it by payment, unless he has actually lost the estate in consequence of the incumbrance. In 7 R. C. L. p. 1104, the rule is stated as follows: “In a number of jurisdictions it has been held that, although a covenant against incumbrances, like a covenant of seisin, is broken if at all as soon as made, yet the covenantee can found no right to actual damages on the mere existence of incumbrances, but will be limited to a nominal recovery, unless he has paid off the incumbrance or actually lost the estate in consequence of it. ’ ’ In the present case it is undisputed that appellee did not remove the incumbrance by payment, but the testimony which he adduced tended to show that he lost a portion of the timber in consequence of the incumbrance. The testimony offered by appellants, and excluded by the court, tended to show that the remainder of the timber could not have been removed after the time appellee ceased operations. The maximum of appellee’s recovery was, as we have already said, the amount necessary to remove the incumbrance. His right of action accrued immediately on the breach, and he could not enlarge the amount of his recovery by delay until after the foreclosure.

Appellee had no legal right to cut and remove the timber after the confirmation of the commissioner’s sale (Little Red River Levee District v. Thomas, supra), and the measure of his right of recovery is the value of the timber which he could have removed 'after that time less the value of the timber that he did, in fact, remove, not exceeding the amount of the incumbrance. In other words, he was entitled to recover the value of the timber which he was prevented from removing by the foreclosure sale, not exceeding the amount of the incumbrance. The court should have admitted evidence tending to show interference from other causes with the removal of the timber within the time limit specified in the deed.

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


source: Caselaw Access Project

author: Smith, J.

license: Public Domain

text:
    Bracy v. Miller.
    Opinion delivered December 14, 1925.
    1. Infants — specific performance. — An infant cannot specifically enforce an executory contract to purchase land, though after suit he attained his majority and ratified the contract; there being an absence at the time the contract was made of mutuality of right and remedy.
    2. Infants — right to rescind contracts. — The protection given by law to an infant in his contracts is the right of rescission, and, in the absence of rescission, his contracts are construed like those of an adult, and, so long as an infant asserts contractual rights, he is bound by reciprocal obligations.
    S. Infants — specific performance. — Where an infant 19 years old purchased land under an executory contract making time of the essence of the contract, he cannot have the contract performed specifically after attaining majority on account of failure to act promptly, nor could he have that relief during minority, since the relief asked would not then be mutual.
    4. Specific performance — diligence in asserting right. — A party entitled to specific performance of a contract to convey land cannot hold back from assertion of his rights and speculate on the advantage of performance, but must be vigilant and prompt in asserting those rights, or he will be left to his remedy at law.
    Appeal from Pulaski Chancery Court; Verne McMillen, Special Chancellor;
    affirmed.

      Horace Chamberlin, for appellant.

      Carmichael & Hendricks, for appellee.
   Smith, J.

On May 11, 1922, appellant Bracy; then a minor under nineteen years of age, entered into the following contract:

“Received of Buford Bracy the sum of fifty and no 100 dollars as pant payment on the following described property: lots 1 and 2, block 2, C. H. Taylor’s Addition. Balance to be paid as follows: $500 on or before J une 12, 1922, and $1,300 on or before August 12, 1922, with interest at seven per cent, per annum from date. The purchase price of this property is $1,850, and the above payment is accepted on the following conditions, viz: that the owner will approve the terms of sale and furnish a good title; otherwise the above payment shall he returned to Buford Bracy and the deal canceled. Property to he free of all incumbrances. If the deal is not completed as above specified, then the payment made herewith shall be forfeited as liquidated damages.
“Accepted, Buford Bracy, Purchaser
“Louis Miller, Owner and Agent.”

This suit was brought by appellant to enforce the specific performance of this contract, and it was alleged in the complaint that Louis Miller was the authorized agent of his mother, Mrs. Christina Miller, who was the defendant below and is the appellee here. The payments required by the contract to be made on June 12,1922, and August 12, 1922, were duly tendered, with interest, but were refused by Mrs. Miller, who declined to execute a deed. Thereupon appellant tendered .the sum due under the contract, with interest, and again demanded a deed, and, when this demand was refused, he brought this suit, and prayed that' the specific performance of the contract be decreed- This suit was brought by appellant’s father as next friend, and remained on the docket .without being tried until appellant bad attained his majority, at which time he prayed and was granted permission to prosecute the suit in his own name.

The chancery court found all the disputed questions of fact in appellant’s favor, but denied the relief prayed ■upon the grround that appellant was a minor at the time the contract was made, and also at the 'time suit was brought to enforce it, and, notwithstanding the fact that 'he had attained his majority before the date of the trial and had affirmed the contract, the court held he was not entitled to equitable relief because of his'infancy at the time the contract ivas signed, and at the time suit was begun. Was appellant entitled to the relief prayed? The appeal presents no other question.

In Fry on Specific Performance, § 460, it is said that “a contract to- be specifically performed by the court must, as a general rule, be mutual, that is to say, such that it. might, at the time it was entered into, have been enforced by 'either of the parties against the other of them. When, therefore, whether from personal incapacity to contract, or the nature of the contract, or any other cause, the contract is incapable of being enforced against one party, that party is generally incapable of enforcing it against the other, though its execution in the latter way might in itself be free from the difficulty attending its execution in the former. ” ■

Illustrating this statement of the law, it is said, in the following section of the same work, that “an infant cannot sue (for specific performance), because he could not be sued for a specific performance.”

At § 196 of Waterman on the Specific Performance of Contracts it is said: “To entitle a party to specific performance, there must not only be a valid and binding agreement, but, as a rule, the contract, at the time it was entered into, must have been capable of being enforced by either of the parties against the other. In other words, there must be mutuality both as to the 'obligation and the remedy. It follows, that a party not bound by the agreement itself has no right to call upon the court to enforce performance against, the other contracting party by expressing a willingness in his bill to perform his part of the agreement.”

In 25 R. G. L.,: page 232, at § 33 of the chapter on Specific Performance, it is said: “It is frequently stated .as .a general principle of equity that a contract will not be specifically enforced unless it has such mutuality that it may be enforced by either party, and the language adopted by numerous courts is to the effect that equity will grant a decree of specific performance only in cases where there is a mutuality of obligation and of remedy. In accordance with this doctrine of mutuality it is held that when a contract for any reason cannot be enforced against one of the parties such party will not be permitted to enforce it specifically against the ' other party, although except for this particular rule the contract would otherwise have been enforceable. It has been 'said that the whole contract must be enforceable on both sides, or at least such part of it as the court can ever be called upon to enforce; but this rule seems to be subject to some exceptions, and among the exceptions are the cases of contracts where the consideration is entire, but the performance separate.”

A;t § 35 of the same chapter it was also saiid: “By-reason of the doctrine of mutuality an executory contract containing mutual covenants which is not enforceable as regards one of the parties because of infancy, coverture, or other disability, will not be enforced in,equity against the other party. Hence it is a general rule that where a married woman does not have capacity to bind herself to the performance of an executory contract, the party assuming to contract with her is not, in equity, obliged- to perform such contract on his part. Similarly an infant cannot sustain a suit for the specific performance of a contract, because the remedy is not mutual.”

In the notes to the text quoted from many cases are cited, a number being cases which have been annotated, and cases to an indefinite number could be cited to support the text quoted. It is unnecessary to do this, however, as the rule appears to be universal that- there must be mutuality both as to liability and remedy before relief by way of specific performance will be granted either party. This doctrine was announced by this court in the early case of Nicks’ Heirs v. Rector, 4 Ark. 251, and has since been reaffirmed in a number of cases.

Appellant insists, however, that this rule is not applicable here for the reason that he has tendered full performance of the contract, and ratified the contract after attaining his majority. He states his position as follows: “One who voluntarily makes an executory contract with an infant is, under our law, charged with knowledge of the fact that the infant has a designated period of time after he reaches his majority in which to elect whether he will affirm or disaffirm his contract.”

, ' At paragraph 10 of the chapter on specific performance in 36 Cyc. page 629, it is said: “Specific performance of an infant’s contract at his suit is refused, in England, on the ground that there is no mutuality of remedy; hut this ruling has not been universally followed in this country, since it enables the other party to the contract to take advantage of plaintiff’s infancy, and thus contravenes the general policy of the law relating to infant’s contracts. After the inf ant'becomes of age, he may enforce in equity contracts made by him during his minority; the fact that they were previously voidable by him is no defense.”

In support of the statement of the text that, after an infant becomes of age, he may enforce in equity contracts made by him during his minority, and that the fact that they were previously voidable by him is no defense, the ease of Clayton v. Ashdown, 9 Vin. Abr. 393, pl. 1, is cited.

In our present investigation of the question under consideration we have found many citations to this old English case. The facts there were that Fuller, during his minority, by himself and through his guardian, entered into articles with the defendant to let "him a farm at a certain rent. The defendant entered upon the farm and paid rent until after Fuller became of full age. After that Fuller conveyed the fee to the plaintiff in that case, who sought to enforce the provisions of the original contract in regard to the renewal of the lease, whereupon the defendant quit the farm, insisting that he was only ¡a tenant at will, and refused to accept a lease because Fuller was an infant at the time of making the agreement, and for that reason was not bound by it and therefore the defendant ought not to be bound. It was insisted that the defendant was bound by the articles though Mr. Fuller had his election, at full age, to perform or not perform the articles, “for though in such cases the infant has his election at his full age, the other party has not his election, but is bound by such agreement with an infant. ’ ’, Upon this statement of facts the opinion in this old case was as follows: “Bnt Harconrt, C., decreed that the plaintiff should execute a lease to the defendant, and the defendant execute a counterpart of such lease to the plaintiff in pursuance of the articles, and the defendant to pay costs. Ms. Rep. Trin. 13 Ann. in Cane. Clayton v. Ashdown.”

It will he observed that in this case just quoted from the tenant entered into and retained possession and paid rent until after the minor was of full age. These facts imposed a continuing obligation on the tenant to perform the agreement of tenancy by renewing the lease, and this possession continued until the minor was of age, after which time it was, of course, too late for the tenant to raise the question that the original contract was voidable on account of Fuller’s minority. Of course, if one who contracts with a minor remains in possession of and enjoys the consideration inducing the contract until the minor attains his majority, he cannot then be heard to say that he will not further perform because the minor could" not have been required to perform during' the period of his infancy.

There can be no question here but that appellant Bracy could not, during his minority, have been compelled to comply with the contract to purchase the lots.

In the case of Arkansas Reo Motor Car Co. v. Goodlett, 163 Ark. 35, a girl slightly under the age of eighteen years purchased a used car from the motor company, paying part cash and giving notes for the balance, two of which she subsequently paid. After using the car in such manner that its value was destroyed the girl brought suit to rescind her contract of purchase on account of her infancy, and to recover the payments in cash which she had made on the car.' The right of the infant was upheld by us, and in that connection we said: “There is a wide conflict in the authorities as to the rights of an infant in the disaffirmance of a contract, and different reasons have been given by various courts in reaching the same conclusion; but this court is firmly committed to the rule that an infant may disaffirm his contracts, except those made in the course of his necessities, notwithstanding the other parties to the contracts may he unaware of the infant’s disabilities, and without requir-' ing the infant to return the consideration received, except such part as may remain in specie in his hands. (Citing cases).”

We recognized and there stated that it was a harsh rule which permitted an infant to rescind under the circumstances, 'but it was our view that the rule was justified, even in instances where its application was harsh, as the only means whereby infants might be protected from improvident contracts.

Now it is certain that appellant Braey could not have been required to perform the contract of purchase by completing the payments during his minority. On the contrary, he had the right to rescind at any time during his minority, and to recover back the payment he had made. It appears, therefore, that he was asking a remedy against appellee which she could not have enforced against him. There was lacking, therefore, that mutuality of right and remedy which must exist to entitle one to specific performance.

In the case of Davie v. Padgett, 117 Ark. 544, this court reaffirmed what it had previously said, that the contract of an infant was not void, but was voidable only at the- instance of the infant himself, and that only the infant can take advantage of his incapacity to contract.

But appellee is not asking any affirmative relief. She only prays that the relief be not granted appellant which she herself could not have asked because of his minority, and this lack of mutuality appears to be a sufficient reason for denying appellant the relief prayed.

Appellant insists that one who makes an executory contract with an infant must know that the infant has the right until he reaches his majority to elect whether he will affirm or disaffirm his contract. We think this declaration of law has no controlling effect here. The protection which the law gives an infant is the right of rescission. His contracts which are not rescinded are construed like those of an adult, and so long as he asserts contractual rights he is.bound by reciprocal obligations.

The contract out of which this litigation arises makes time of its essence by providing a forfeiture of the pay-" ment made as liquidated damages. But, if this were not so, the law would imply that the contract should be performed within a reasonable time, and appellant’s minority would have given him no right to require appellee to stand seized and. ready to convey at appellant’s election until he.had attained his majority, and had then determined, what he would do. It is a general rule of equity that a party entitled to a specific conveyance of property will not be permitted to hold back from an assertion of his rights and thus speculate on the advantage of performance, but he is required to be viligant and prompt in the assertion of those rights; .otherwise equity will refuse its aid and leave the party to such redress, which the law had left him by a suit for damages. DeCordova v. Smith, 9 Tex. 129.

Appellant would not, therefore, have hacl the right to insist that appellee stand seized of this title for the more than two years remaining of his minority. He' could not have asked the enforcement of his contractual rights without complying with the implied condition of the contract that he act with reasonable promptness, and this is a condition which equity also imposes as -a prerequisite .before granting the relief of specific performance. . .

. Appellant must, therefore, necessarily have moved to obtain specific performance at a time when he was still a minor, for to have waited beyond that time would have violated the equitable requirement that he move promptly, as well as the condition of the contract implied by law that he close the contract of purchase within a reasonable time. And when he did thus move his attitude would necessarily have been that of one who was asking for a relief which was not reciprocal, and which could not have been awarded against him on account of his minority. For this reason a minor cannot maintain a suit to specifically perform a contract. ...

The case of Cooper v. Pena, 21 Cal. 403, was one in which a party agreed to perform certain services in consideration of the conveyance to him of a tract of land. Performance of the services was tendered and refused,whereupon a suit was brought to -enforce' -specific per formance of the contract. In the opinion of the Supreme Court of California, in which Chief Justice Field, after-wards a member of the Supreme Court of the 'United States, participated, it was held that, inasmuch as thé plaintiff could not be compelled to complete the services which he agreed to perform, the fact that he offered to complete the services could not be treated as the equivalent of actual performance. The court said that the rejection of the offer by the defendant did not'release the plaintiff from his obligation to perform as long as he insisted upon the agreement, but, as this was an obligation which the court'could not enforce there was no principle of law which would justify the court in enforcing the obligation on- the other side, and that the only course open to the court was to refuse the reliéf of specific performance, and leave the plaintiff to his remedy for damages. In the course of the opinion it was said: “Various grounds are urged by the defendant in support of the order, the principal one of which is the 'want of mutuality in the agreement. So far as the agreement is unperformed, the plaintiff cannot be compelled to perform it on his part, for equity will not enforce a contract for personal services, but leave the' party to his remedy at law. In respect to the remedy, therefore, there is nó mutuality, and it is universally admitted that equity will not enforce a contract, where the party asking its enforcement cannot himself be compelled to perform it. The contract must be just ánd equal in its provisions, and the subject-matter must be such that equity can take jurisdiction of it, and compel performance by both of the parties. The remedy must be mutual as well as the obligation, and where the contract is of such a nature that it cannot be specifically enforced as to one of the parties, equity will not enforce it against the other. As a general rule, the question of mutuality is to be determined by the contract itself, and is not affected by circumstances occurring after the contract is made, and the rights of the parties are fixed.”

The court then quoted from the case of Duvall v. Myers, (2 Maryland Ch. Dec. 401) as follows: “The right to a specific execution of a contract, so far as the question of mutuality is concerned, depends upon whether the agreement itself is obligatory upon both parties, so that upon the application of either against' the other the court would coerce a specific performance.’ ”

After announcing certain exceptions to the general rule that the want of mutuality at the time the contract was entered into (none of which exceptions are applicable here) is a sufficient reason for refusing to enforce the contract, the opinion proceeded to say: “In these cases, however, there are considerations .which override the principle of mutuality; and we are not aware of any case involving a reciprocity of obligation, in which a contract has been enforced in favor of a party who had not actually performed it, or could be compelled to do so. It is safe to say that no such case exists, and that equity will not interfere in favor of one of the parties where it is incapable of doing justice to the other, by enforcing the entire contract according to its terms.”

Appellant insists, however, that he has at all times offered to perform, and that he ratified the contract after attaining his majority. We think, however, that this insistence is sufficiently answered by what we have said. When the contract was entered into, and when the performance thereof was due, appellant was a minor, and could not have been required to perform. There was lacking that mutuality of right and remedy which is essential to granting relief by decreeing specific performance, and the court below was right in denying that relief to appellant, and the decree to that effect is affirmed.


author: McCulloch, C. J.

text:
    Pledger v. Soltz.
    Opinion delivered December 21, 1925.
    1. Municipal corporations — annexation to improvement district — petition.—A petition for annexation of territory to a paving district, created under Crawford & Moses’ Dig., § 5666, as amended by acts 1921, p. 416, need not, under § 5733, specify the limitation on the cost of the improvement.
    2. Municipal corporations — -annexation to improvement district — limitation OF cost. — On the annexation of territory to a -street improvement district, the cost of the additional improvement, under Crawford & Mioses’ Dig., § 5733, must be limited to a cost proportionate to that of the original improvement, but such limitation need not toe expressed in the petition for annexation.
    3. Municipal corporation — cost of improvement — construction of ACT. — Acts 1925, p. 548, limiting the cost of improvements, does not apply to annexation of territory to a municipal improvement district, but to the formation of the original district, and has no retroactive application where the original district to which annexation was made had been formed prior to the effective date of the act of 1925.
    4. Municipal corporations — cost of improvement — limitation.— On the annexation of territory to a street improvement district, the permissible cost of the new improvement is not controlled toy the "combined cost of the entire improvement, but the cost of the new improvement is limited in the same proportion to the assessed value of the new territory to be added as the proportionate cost of the original improvement bore to the assessed value of the property -in the original district.
    Appeal from Jefferson -Chancery Court; H. R. Lucas, Chancellor;
    affirmed.

      GoyM. Nixon, for appellant.

      Coleman & Gantt, for appellee.
   McCulloch, C. J.

Appellant is the owner of real property in the city of Pine Bluff, situated in territory sought to be annexed to a street improvement district, and he instituted this action to prevent the annexation on the ground that the statute regulating the proceedings had not been complied with.

Paving District No. 84 of the city of Pine Bluff was duly formed by an ordinance of the city council on July 21, 1924, and the organization was completed, and the ordinance finally levying the assessment to pay for the improvement' was passed by the city council on March 16,1925. On -July 20, 1925, the proceeding to annex contiguous territory was initiated by the filing with tile city council of the petition of, a majority in value of .the'real property in the teiwitory sought to be annexed. Pursuant to this petition, an ordinance was passed by the city council authorizing the annexation, and subsequently appellant instituted this action against the commissioners Of the district to restrain further proceedings. The court sustained a demurrer to the complaint and dismissed the action, from which decree an appeal has been prosecuted to this court. -

The contention of appellant is that' the proceeding’s for annexing Territory are .void for the reason that the petition failed, to. specify any limitation; upon the, .maximum cost of the improvement. This contention calls for a construction of our statute on the subject to determine whether or not the expression of such a limitation in the petition of property .owners 'is required. 1 ‘

The original statute in regard -to- the formation of municipal improvement districts (Crawford & Moses’ Digest, § 5666) provided that “no single improvement shall be undertaken which ,alone will exceed in cost twenty per centum of the value of the real property in such district as shown by the last county assessment” The General Assembly of 1921 (Acts of 1921, p. 416) amended the statute referred to above by a new statute, which contained the following provision:

' “The petition.for such improvement signed by a majority in value of the owners of real property in the district shall specify what percentage of the value'of the real property in the district, as shown, by the last'county assessment, the said improvement shall not exceed in cost; and any improvement may be undertaken -which in cost does not exceed the percentage of the value of the real property in the district specified in the petition.-■ But, in determining whether or not said improvement will in cost exceed the percentage of the value of the real property in said district as shown by the- last county assessment, interest on borrowed money shall not be computed as part of the cost. ”

The statute just quoted was in force at the time of the formation of. Paving District No., 84 of Pine Bluff, and in the petition, of property owners it .was specified that the cost of.the improvement should not exceed 100 per centum of the value of. the real property in the district as sho.wn by the last preceding county assessment. There -is no question raised in the.present case .qs to the validity of the organization-of-the district.

The General-Assembly of 19.25 enacted another statute amending the act -of 1921, supra, (Acts 1925, p. 548), and this -statute contained the-following provision:

“The petition for such improvement signed by a majority in value of the owners of real property in the district shall specify what percentage of the value of the real property in the district, as shown by the last county assessment, the said improvement shall- not exceed in cost -, provided,' no single improvement' shall be undertaken ■which alone will exceed -in cost fifty per centum of the value of the real property in such district as -shown by the last county assessment; but'in determining- what shall be fifty per centum of the value of the real property in the district, interest upon money borrowed shall'not be computed as pa'rt’óf the cost. Provided, further, an improvement may'be made which-does not exceed-100: per cent, of the assessed value determined-as-above if 75 per cent, of the property ■ owners, in value, in said district petition therefor. - ■ • -' :

• This statute- did not contain an emergency clause, therefore did not go into effect until-ninety days after the adjournment of the Legislature. The statute now in force regulating the method of procedure in annexing contiguous territory to an improvement district is the act of 1919 (General .Acts 1919, p. 218),-brought forward as § 5733, Crawford & Moses’ Digest. Tire statute reads as follows:

“Section 5733. When persons claiming to be a majority in value of the owners of real property in any territory contiguous to any improvement district organized in any city or town desire that said territory shall be annexed to such improvement district, they may present their petition in writing to the city or town council, describing the territory to be annexed, and the character of improvement desired. Thereupon the city or town council shall direct the clerk or recorder to publish for two weeks, in some newspaper issued and having a general circulation in the county where such city or town is situated, a notice calling upon the property owners to appear before said council on a day named, and show cause for or against such annexation. On the day named in said notice, the city or town council shall hear all persons who desire to be heard on the question whether a majority in value of the owners of real property in the territory sought to be annexed have signed such petition, and its findings shall have all the force and effect of a judgment, and shall be conclusive, unless, within thirty days thereafter, suit is brought in the chancery court to review it. The finding of the council shall be expressed in an ordinance in case it is in favor of the petitioners, and in that event the territory sought to be annexed shall become a part of the improvement district, and the improvements petitioned for shall be made by the commissioners. The commissioners shall make the assessment for said improvement on the territory annexed under the provision of this act on the same basis as if said territory was included in the original district. If petitioned for, the improvement in the territory annexed may be of different material or of a different method of construction from that in the original district. ’ ’

It will be observed that the statute regulating annexation proceedings does not contain any express requirement that a limitation upon the cost of the additional improvement must be speoified by the property owners in their petition. The only express requirement is that “the character of the improvement desired” must be stated in the petition, and there is a requirement by necessary implication that the territory to 'be annexed must be specified. There is no requirement, however, in express language or by necessary implication that the petition must set forth a limitation upon the cost of the improvement. There is nothing in the Constitution of the State which fixes any limitation upon the cost of the improvement, except that the cost shall not exceed the benefits. Since the Legislature has not seen fit to enact a law containing any requirement for a specification of a limitation, we cannot read such a requirement into the statute. It does not follow, however, that the power to annex is unrestricted. While it is unnecessary for the petition for annexation to specify the limitation upon the cost, we interpret the statute itself to mean that the cost of the additional improvement shall be limited to the proportionate cost of the original improvement. This limitation is expressed in the statute itself, and need not be expressed in the petition of the property owners. The statute (Crawford & Moses’ 'Digest, § 5733) provides that the assessments on the annexed territory shall be made “on the same basis as if said territory was included in the original district.” This means that the proportionate cost shall be the same as in the original district, that is to say, the cost of the improvement ehall be in the same proportion to the assessed valuation as the cost of the improvement in the original district is to the assessed valuation of the property in that district. Otherwise the assessments on the annexed territory would not be “on the same basis as if said territory was included in the original district. ’ ’

We have decided in White v. Loughborough, 125 Ark. 57, Bahlau v. Bloom, 154 Ark. 349, and Miller v. Seymour, 156 Ark. 273, that the annexation of territory “is tantamount to the creation of a new district without the imposition of new burdens on the originJal district, or the assumption of any burdens on the annexed territory for-the cost of the original improvement.-But we held in Poe v. Street Improvement District, 159 Ark. 569, that, under the annexation statute, supra, the additional territory and the proposed improvement are brought within the operation of the law the sanie as if the territory had originally been embraced in the district. In other words, our decisions in those cases were that under the annexation statute the additional territory is brought into the original 'district for the construction of the improvement and the levying’ of assessments, the same as if the territory had originally been a part of the district, but that, so far '-as. imposing the burden of the expense of the improvement, the annexation is tantamount to the creation -of a new district without the imposition of new burdens on the original distinct, or the assumption of any burdens on the annexed territory for the cost of the original improvement. We think that it follows from this interpretation of the statute in those decisions that the annexation of the territory comes within the' restrictions specified in the original petition of the property owners in creating the district, and that it is unnecessary for a new specification to be made in the petition for the annexation. It becomes the duty of the commissioners under the law to ascertain the proportionate cost of the original improvement and to limit the cost of the new improvement'to the same proportion — not exceeding the same proportion to the couiity assessment of the property in the annexed territory for the year next preceding the formation of the original district. ‘

It is next contended that the annexation is controlled by the act of 1925, supra, and that the proportionate cost must be that of the combined improvement in its relation to the entire territory, both in the original district and the annexation. In. the first place, we tfiink that, counsel, are mistaken in the contention that the act of 1925, supra, has any bearing upon these proceedings. The statute has. nothing to do with- the question of annexation, but merely changes the law as to the formation of an original district, and, as the original district in this instance had been formed under prior statutes, the new statute is without effect. The'statute is not retroactive. The annexation statute, under our interpretation, places the limitation of cost the same as that in the original district, therefore The act of 1925 could have no bearing upon these proceedings. Nor do we agree with counsel as to the other contention that, in determining the proportionate cost, ' the combined cost of the entire improyement must be considered in its relation to the assessed value of the property in the entire territory, original and added. All that the annexation statute requires is that the new assessment of benefits on- the added territory must be made on the same basis as the assessments in the original territory, and this is fully accomplished by limiting the cost of the new improvement in the same proportion to the assessed value of the new territory to be added, the same as the proportionate cost of the original improvement to the property in the original district., ‘"If we construe the statute to mean that in arriving at this, proportion the cost of thecombinedimprovement is to be considered, then the basis of assessment in the new district would not be the same as that in th.e old district because'the assessments in the old district have already been made on a basis of the proportion of the cost of the original improvement to the assessed value of the property in the original district. It is shown in the present case, however, that the estimated cost of the additional improvement will not exceed fifty' per centum of the assessed value of the territory to be annexed.' Therefore, if the act 'of 1925, supra, had any application it would not' affect the validity of the present proceedings.

Orar conclusion is that the chancery court.was correct in 'sustaining a demurrer, and the decree is affirmed.


author: Wood, J.

text:
    Taylor v. Gordon.
    Opinion delivered December 21, 1925.
    1. Principal and agent — dealings between. — While an agent or trustee for the sale of property is not absolutely inhibited from purchasing the property himself, yet in an action by the principal or cestui que trust ag’ainst the agent or trustee to set aside a transaction or to hold the agent or trustee to .an accounting, the burden is on the agent or trustee to show that he acted in the utmost good faith.
    2. Principal and agent — finding of good faith. — A finding by the chancellor that an agent met the burden of proving his good faith in purchasing an oil and gas lease from his principal held not clearly against the preponderance.
    3. Principal and agent — good faith of agent. — The obligation of the agent to use good faith in buying an oil and gas lease from his principal is to be judged by the situation and the relation of the parties to each other, and not by subsequent events not known to either which caused the value of the lease to be greatly increased.
    Appeal from Ouachita Chancery Court, First Division; J. Y. Stevens, Chancellor;
    affirmed.

      O. E. Westfall and G. B. Haynie, for appellant.

      Gaughm & Sifford, for appellee.
   Wood, J.

This action was instituted by the appellant ag’ainst the appellee to recover the sum of $5,000. The appellant alleged that on or about the 29th of May, 1922, the appellee induced the appellant to permit the appellee to handle and negotiate as appellant’s agent the leasing of certain lands for oil and gas; that appellee insisted that he was in a position to negotiate said lands to the advantage of appellant in that he would be able to secure a higher price than the appellant would be able to do; that appellant and his wife, induced by these representations, executed to the appellee a lease on a certain tract of land in Ouachita County; that, after procuring this lease, appellee, on the 13th of October, 1922, with the further intention to defraud the appellant, executed and delivered a written assignment of the lease of the lands to one J. E. Gaughan, as trustee, naming as a consideration therein the sum of $25 per acre, when in truth and fact the lease value of the lands at that time was $125 per acre, which the appellee well knew; that J. E. Gaughan never in fact purchased the lease, and did not pay any consideration therefor, and had no interest therein, and that such pretended assignment of the lease to bim by the appellee was a fraudulent device to conceal from the appellant the true value of the lease, and to give the appellee an opportunity to sell and assign the lease for a much greater price than the pretended consideration mentioned in the assignment by the appellee to Gaughan; that the appellee falsely and fraudulently represented to the- appellant that he had sold the lease described on appellant’s land to J. E.' Gaughan for the sum of $25 per acre, and that appellee settled with the ¡appellant on that basis; that on November 28, 1922, appellee sold the oil and gas lease on appellant’s land to one J. H. Snowden for $150 per acre, making a total sum of $6,000; that appellant had no means of knowing, and did not know, the appellee’s fraudulent acts and conduct as above set forth in handling appellant’s lands until long after appellee had finally assigned the lease to Snowden. The appellant prayed judgment against the appellee in the sum of $5,000, the difference between the amount for which the appellee assigned the lands to Snowden and the amount paid by appellee to appellant.

Appellee, in his answer, admitted that the appellant was the owner of the lands described in the complaint, but denied that he had induced the appellant and his wife to execute to him a written lease on the lands with the intent to cheat and defraud the appellant, and denied that he executed a lease to Gaughan as trustee with the intention to cheat and defraud the appellant. Pie denied that the execution of the assignment by the appellee to Gaughan as trustee, and the consideration named therein, was a fraudulent device or subterfuge employed by the appellee to deceive the appellant and conceal from him the true value of the lease. He denied specifically the allegations of fraud set up in the complaint, and alleged in substance that the appellant was a negro and unfamiliar with business practices and values of lands or oil and gas leases, and requested the appellee to assist him in disposing of the oil and gas lease on appellant’s land: To this appellee consented, and, in order to enable appellee to -handle the lands to better advantage, appellee requested the appellant to execute an oil and gas lease covering the lands described to the ■ appellee, which the appellant did;-that on or about the 13th of October the appellant stated to the ¡appellee that he (appellant) -could get $10 or $15 per acre for his lease and wanted appellee to sell-it at that price; that appellee then told the appellant that the lease was worth more than $10 or $15 per acre, and that he (¡appellee) would give appellant as much as $25 per acre for the lease, which at .that time was a fair price for the same; that the appellant accepted the offer; that -other parties were.interested-with the appellee in the purchase, and for convenience it was agreed that title should be conveyed to Gaughan as trustee for the benefit of the appellee .and the other parties •associated with him in the purchase; that, since the sale of the oil and-gas lease to the appellee, oil had 'been discovered -on the land adjoining the territory in which the land' of the appellant was-situated, causing the price of oil and gas leases to greatly increase in value, and that it was because of this fact that the appellant became dissatisfied and instituted this action.

The appellant testified in substance that he had known the' appellee for eighteen years; that he executed to him a lease on 40 acres of land on Miay 29,1922. Appellant didn’t know anything about oil and gas leases, and-had confidence in the .appellee.. Appellee had promised to help -appellant out in handling Ms oil and gas leases. Appellant therefore made the appellee his trustee and a-gent to sell the lease .on hig land. Appellant received $1,000 for the lease which the appellee later sold to Snow-den ¡and McSwinney. On the 13th of October, 1922, appellee sent word to appellant to come to town, and on the 14th of October appellant went to Camden and appellee gave him $1,000, and stated that the lease had been sold. In the conversation appellee stated to appellant that he was not charging appellant for his services, bnt would like to- have a little piece of royalty. Appellant thought one good turn deserved another, and agreed to let-the appellee have half of the royalty on 20 acres, for which the appellee paid $125. It was worth more than that, but appellant thought that appellee had been looking out attending to the sale of the lease for him, and on that account he let appellant have the royalty -at a reduced price. Appellee did not tell the appellant at that time the name of the party to whom he had sold the lease. Appellant asked appellee who was going to pay the rental' if they did not drill the land, and appellee replied, “The other fellow, ’ ’ but did not say who the other fellow was, and appellant did not know to Whom the appellee had sold the lease until he obtained the second abstract. , Just before appellee paid the appellant $1,000, leases were being sold -on lands further from production than appellant’s land for $30 per acre, and -on land a half mile nearer at $40 per acre. Appellant never offered to sell the land for $10' or $15 per acre, and after he turned the lease over to the appellee, and before appellee paid him the $1,000, appellant had been offered from $22 to $30 per acre, and he told the persons making the offers that he would not sell it- for $1,000 per acre unless the party would make arrangements with appellee' to buy, as he (appellant) had turned the handling of his lease over to the appellee. After he turned the lease over to the appellee, he referred all persons to him, as he understood that he had made the -appellee his agent to sell the lease, and he expected to pay the appellee for his trouble. Appellant testified that the ¡appellee never told him that he would give him-$25 an -acre for the lease’if appellant was willing to take it, if appellee could get- others to take part of it. A man -by the name of Sutton had offered appellant $25 an acre with a ninety-day drilling contract, and appellant told Sutton that he had placed his lease in appellee’s -hands, and at ‘Sutton’s request gave Sutton an order to appellee for the purchase of the lease at $25 an acre with a drilling’ contract. One or two days after appellant had signed the oi’der for Sutton, the appellant and his wife came to town and received the payment from the appellee for the lease. Appellant at that time did not tell the .appellee about Sutton’s offer, as it was then too late. The appellant testified that he was not posted on the value of oil and gas leases, as he had turned the same over to the appellee. Twenty-five dollars an acre was not a fair price for the lease at the time appellant sold the same to the appellee. Some time after the appellant received the $1,000 from the appellee he ascertained from the new abstract that the appellee had sold the lease for $6,000. Appellant had no knowledge of who was buying the lease, as he was fifteen miles from Camden when the lease was sold.. He did not ask the appellee the name of the man who purchased the lease. The man who came out with the paper for appellant to sign told appellant that he (appellant) was not leasing, but was just giving the appellee permission to lease same for'the appellant. Appellant took his word for it, and what he signed might have been a lease- At the time the money was paid, appellant did not ask the appellee for the lease that he might sign it.

There was testimony on behalf of the appellant to the effect that about the time, on the 13th of October, 1922, some leases were selling on lands adjoining the Taylor tract at $30 per aere. These leases were about two miles from the Pát Marr well, which was producing oil. One of the witnesses testified that at that time he considered appellant’s lease worth from thirty to thirty-five dollars per la'ere. This witness stated that he was willing to pay that much money on the consideration of the fact that a well was to be drilled in that vicinity; that but for that fact the lease would not have been worth that much money. They had a speculative value on account of the location of the well to be drilled in that vicinity. One of the witnesses stated that he offered appellant $35 per acre for his lease, and that appellant declined to take it. The witness did not know whether the Bat Marr well came in before the 13th or 14th of October or not.

"Witness Patton testified for the appellant to the effect that he had sold a lease on a forty-acre tract in the neighborhood for $255, and on another forty for $235. He sold a lease on one forty about a mile from appellant’s after the Pat Marr well came in. The lease on the land in controversy in witness’ opinion did not have any value to witness on the 13th of October. The buyers were grabbing what- they could get. It was shown that the Pat Marr well in that vicinity began to make oil on the 12th of October, 1922.

A. M. Sutton testified for the appellee, to the effect that he was instrumental in 'blocking up the acreage and securing the drilling of the used- well" in the same section in which the land owned ,by appellant was located. On October 13,1922, he tried to buy the lease on appellant’s land. Tile Plat Marr well had not come in at that time. Witness paid Mrs. Hughes $12.50 per acre for 460 acres, and Sam McElroy $30 per acre for 20 acres that joined appellant’s land on the north. He offered app'ellant $25 an acre, which was satisfactory to appellant, and had written an order authorizing the appellee to assign the lease to witness, which the appellant signed. Witness made an agreement with the appellant to start a well within ninety days, or pay him $1 an acre. About that time $25 was the average per acre for leases in that vicinity. Witness was familiar with the values of land, and what was being paid for leases in that territory, and before witness went in there leases had not sold for anything like $25 per acre. Ten dollars per acre would have been a fair price before witness began talking about drilling un the Hughes land. Witness presented the order signed by the appellant to appellee on the next day after same was signed, and appellee told witness that he had sold the lease two hours before. Appellee asked witness what he was giving, and appellee told witness that that wias what he had received for it. The order signed •by the appellant instructed the appellee to make an assignment of the lease to witness for $25 án acre.' The Pat Miarr well in that vicinity had not come in at that time.1 "When that well came in, after the 13th of October, it had a material effect in figuring the value of the leases in 'that vicinity. The witness further testified that the agreement he had with the appellant was that he would drill on appellant’s tract, and would give appellant $25 an acre, and 'begin drilling within ninety days, or pay rental from the date of the lease. Appellant wanted to sell the lease for $25 an acre, and stated to witness that he was sure it would ¡be ¡all right with the appellee to let witness have the lease, and gave witness the order to appellee to that effect.

Witness Campbell testified for, the appellee that on the 13th of October, 1922, he paid $500 for a half interest in the lease of appellant’s land for himself and Ursery. 'The appellee was also interested in the purchase. The lease was in the name of Gaughan, trustee, to whom it had ¡been assigned by the appellee, as trustee. This lease was sold ¡about six weeks later to Snowden and MeSwinney. At the time,witness purchased the interest for himself and Ursery, he was not aware of any unusual or added value to the property on account of the Pat Marr well coming in ¡after he purchased the interest. Witness was interested with the appellee in the purchase of oil and gas leases. The lease was assigned to .Gaughan as trustee for convenience.. There, was no understanding between the witness, appellee and Ursery that witness would refund to appellee the amount witness- received on sale of the lease if appellee should lose the suit. But if appellee should lose the suit, witness would refund the money. Witness had no knowledge that the purchase of the lease from the appellant was not satisfactory. The $500 paid by witness represented, the half interest of himself and Ursery in the lease.

■Appellee testified in substance that he was in the mercantile supply business in October, 1922; at Camden and also working actively in the Ouachita Valley Bank as vice president. ■ The appellant had 'been trading- with the appellee for several years.' Appellee -had extended appellant credit when he did not have the money to pay for ■supplies. Appellant turned the lease in controversy over to witness to try to sell for him. Witness finally bought the lease from the appellant himself bn October 12,-1922. Appellant told the appellee that he thought the lease- was worth $26 an- acre, as that was- what was being paid for leases in that neighborhood, and stated that he was-willing to take that, for his -forty. Appellee stated to appellant that he-didn’t want to gamble that much on it himself, but.would get some one.else to go in with him -and take, part -of it, and that appellee would pay that much for it. Appellant replied that-it didn’t-make any difference to him, so -he got the money.- On fhe next day, October 13th, -appellee sent'word to appellant to come to town. Appellee had made arrangements with Campbell -and Urséry to go in with him to -purchase the lease.- They deposited the money with the witness at the- store to appellant’s credit. On the 14th appellant came in answer to appellee’s message. Appellee gave appellant his check for $898.93 in payment for the - lease,.-which was the amount left of the $1,000 after -deducting appellant’s account with the appellee -at the store. Appellant lagreed with the appellee that he wanted to sell it, and was willing to take $25 per acre for it.' On .the- 13th of October, 1922, .appellee received, a note from the -appellant to the effect that Button., had offered him $25 per acre, and asking appellee, if he had not already made any disposition of it, to sell it to Sutton for -the same price he had agreed with appellee to take for it. There was -nothing in the note appellee received in regard to a drilling proposition. -The note simply said that Sutton was willing to pay $25 per acre; When appellee ■ decided to purchase the lease, he assigned it to J. E. Gaughian as trustee, who was to hold the title for the.appellee, and his associates. This was .for convenience, because the lease from appellant to..the appellee was-in appellee’s name. After the transaction was completed, the appellee gave the appellant $125 for a half royalty in 20 acres, which was the amount the appellant asked and was a fair price. Witness sold the lease to -Snowden and MoSwinney six weeks after he purchased it from the appellant. In the meantime the Pat M¡arr well had come in, which made the lease more valuable than it was when appellee purchased it. At the time appellee purchased the lease he knew of no development or production in that section.

The appellee testified that the reason appellant turned the sale of the lease over to him was that the appellant was going to try to handle it where he lived, and appellee was going to try to handle it from where appellee lived. Appellee made the suggestion to appellant. He wanted to help the appellant sell the lease so appellant could pay what he owed the appellee. Appellee was handling the lease as best he could for the appellant. Campbell was employed by the appellee in the appellee’s store, and Hrsery was appellee’s brother-in-law. Witness had no written contract with Campbell or Ursery about their interest in the lease. He didn’t know about the 12th, 13th and 14th of October -that there was a considerable scramble among lease buyers to get lands in the neighborhood of the lands involved in this suit. On the 12th of October appellant had told the appellee that if appellee could get $25 per acre in cash, and not bind the land up in an escrow agreement, to sell it. Appellee simply told appellant that, if he could find somebody to join with him in the purchase at that price, appellee would take it himself. Appellant said, “AH right; that is what I want for it, and if you can get the money let me know. ’ ’ The purpose in assigning the lease to Mr. Graughan as trustee was for convenience and to close the relation appellee had in it with the appellant, and for the protection of the different interests. The reason appellee had the title to the lease put in his name was to enable appellee to sell it quicker, and easier than to go- out to appellant’s house, and get the lease signed from appellant and his wife. Witness stated that he didn’t think that appellant asked him on the 13th of October to whom the lease had been sold other than himself. The purchase money was paid to appellee by the parties interested with him in the purchase on the 13th of October, 1922, and the assignment to Gaughan as trustee was made on the same day.

Several witnesses testified on behalf of the appellee to the effect that $25 an acre was a fair price for the lease in controversy at the time same was sold to the appellee and his associates, and that $125 for a hlalf royalty in 20 acres was a fair price for that royalty at that time.

One witness by the name of Lide testified for the appellee that he was engaged in the oil and gas lease business and insurance business, and was familiar with ■the conditions in -the Smackover field in October, 1922. He considered $25 an acre cash for a lease on appellant’s land a fair price at that time. Leases in that vicinity had brought anywhere from thirty to thirty-five dollars an acre, and further south brought as high as $55 ¡an acre. Witness thought that $25 was a fair value for the lease in controversy.

Appellant and another witness for him testified in rebuttal of some of the statements of the appellee.

The trial court found generally in favor of the appellee and entered a decree dismissing the appellant’s complaint for want of equity, from which is this appeal.

'The law applicable to cases of this kind is well stated by Mr. Justice Frauenthal, speaking for this court, in the case of American Mortgage Company v. Williams, 103 Ark. 484, at page 497, as follows: “The principle, we think, is well settled that a trustee or one who occupies a relation of confidence in the management or sale of property can not deial with it in any manner for his own benefit. This doctrine applies to the relation of principal and agent with reference to property which is the subject of the agency. It is uniformly held that ‘no one can be permitted to purchase an interest where he has a duty to perform that' is inconsistent with the character of a purchaser.1’ Where an agent who is intrusted with the sale of property purchases it himself without disclosing the fact that'he is the purchaser to the owner, the sale will he canceled in a court of equity at the instance of such owner. Boysen v. Robertson, 70 Ark. 56; Thweatt v. Freeman, 73 Ark. 576; Bank of Pine Bluff v. Levi, 90 Ark. 166. Brit such purchasés are not absolutely void; they are only voidable. If the transaction is made in perfect fairness, and if disclosure is made to the owner that the agent is the purchaser, and with such knowledge the owner agrees to or ratifies such sale, then equity will not avoid and cancel same. Under such circumstances, the agent is not precluded from buying property placed in his hands for sale.”

In the case of Thweatt v. Freeman, supra, cited by Judge Frauenthal, speaking of the confidential transaction between an attorney and client in which the attorney wás intrusted with the handling of certain personal property and real estate belonging to' his client, and which-was afterwards acquired by the attorney, we said: “But the burden of establishing its perfect fairness, ade•quiácy, and equity is thrown upon the attorney, upon the general rule that he who bargains in, a matter of advantage with a person placing a confidence in him is bound to show that a reasonable use has been made of that confidence; a rule applying equally to all persons standing in confidential relations with each other!” (Story’s Eq. Jur. § 311). While a trustee or agent for the sale of property, is -not absolutely inhibited from the- purchase of the property himself, yet in an action by the cestui que trust or the principal against the trustee or agent to set aside the transaction or to hold the trustee or agént to an accounting, the burden is upon the trustee -or agent to show that he acted in the utmost good faith. That is, the trustee or agent must show he used-no undue influence and took no advantage of. the confidential relation to bring about a sale to himself of-the-property with which he was intrusted. He must show that he put: the party to whom he stood in a confidential relation in possession of all the facts within his knowledge to enable .the - party who intrusted him to act understandingly and freely.'- -In other, words, the transaction, to.use the apt language quoted by us in Thweatt v. Freeman, supra, “must be uberrima fides”; and the. burden,,is on the" trustee or agent occupying- the -confidential relation, to show that the transaction was. in the. utmost, .good faith; otherwise, a court of equity, will s-e,t- it aside. Numerous cases of this court are cited in American Mortgage Co. v. Williams and Thweatt v. Freeman, supra, where- the-above -doctrine is announced.. Therefore, there can, be no doubt about the law -applicable to the, facts of this record. It is -conceded by the appellee that he was -the trustee or agent -of the appellant to :sell the oil and gas lease which the appellee and his associates purchased. Therefore, the only question of -serious character in the case has been to determine under the evidence whether or not -the appellee has met the-burden which the law requires of hi-m to, prove that the transaction by which he and- his associates acquired the -oil and gas lease from the appellant was, conducted and consummated in the utmost good faith on the appellee’s, part. .

: This is purely a-question of fact, and we have set out the above salient features of the testimony bearing upon that issue, and do not believe i't would, subseiwe any good purpose to restate or argue them at 'length in giving the reasons for the conclusion we have reached. Suffice it to say, we are convinced that the finding of the chancellor is not -clearly agiainst the preponderance of the evidence. The testimony on be-half of the appellee tends to prove that, before the purchase was--consummated by him for himself' and his associates, he let the appellant know that he himself would purchase the land,' and-give appellant $25 an acre for the same if he could get some one to go in with him.. A preponderance of the evidence shows that $25 an acre was a fair price for the lease at that time, and that appellee was not cognizant of any facts at the time the sale was made that would justify him in believing that the lease was of greater value or that appellant could obtain more for it. The testimony of A. M. Sutton, who was a witness for both the appellant and the appellee, was to the effect that the average value of leases in the vicinity of appellants land at that time was $25; that witness had offered appellant that price for his land, and that the price was satisfactory to appellant, and appellant signed an order to the appellee to that effect. Another witness, by the name of Lide, testified that $25 an acre cash wlas a fair price for the lease at that time. At that time the Pat Marr well had not come in. After it came in the price of leases in that vicinity advanced very rapidly. The testimony of appellant himself tends to prove that at the time the sale was made to the appellee he considered $25 an acre a fair price for his land, but he thought at that time that the appellee hiad really sold the lease and received a greater price for it, and was not paying the appellant the price he had received. This is indicated by the testimony of appellant when he says that the trade would have been all right if the appellee had given appellant what was coming to him; that appellant thought at the time the appellee settled with him that the appellee had received more money for the lease thanhe was giving appellant. Notwithstanding appellant so thought, he did not so inform the appellee, and express any dissatisfaction with the settlement. Indeed, the testimony of the appellant tends strongly to show that his dissatisfaction with the settlement was brought about after he discovered from the abstract that the appellee had sold the lease for $6,000, and had only accounted to> appellant for $1,000 or at the rate of $25 an acre. :But, as before stated, a preponderance of the evidence shows that $25 an acre at the time the sale was consummated was a fair price. Of course, the duties and obligations of the appellee to the appellant must be judged by the situation of the parties and their relation to each other at that time, and not by the subsequent events unknown to both which caused the price of leases in that vicinity to soar skyward in so short a time. • , |

After a careful consideration of all the testimony in the record, we dannot say that the general findings of law and fact by the chancellor in favor of the appellee are erroneous. The decree is therefore affirmed.


text:
    Wright v. Webb. Webb v. Montgomery.
    Opinion delivered December 7, 1925.
    1. Trusts — fraud.—Evidence held not to show that the trustees of a common-law trust violated any legal duty to those interested in the trust estate or committed fraud or misappropriated any funds of the estate in selling their personal interests to others and resigning from the trusteeship.
    2. Attorney and client — right to fee. — Evidence held to support a finding that an attorney suing for fees performed substantial services on behalf of his clients, and that his acting as attorney for the clients’ opponent in another suit did not bar recovery.
    Appeal from Lafayette Chancery 'Court; J. Y. Stevens, Chancellor;
    affirmed.

      R. L. Montgomery and John W. Pope, for appellant.

      Charles M. Coche and King & Whatley, for appellee. -'
   McCulloch, C. J.

On January 2, 1919, W. M. Webb, one of the appellees, and A. A. Cocke created a common law trust by proper declarations in writing, duly acknowledged and placed of record, for the purpose of operating, under the name of United Home Builders of America, the business of selling interest-bearing contracts and lending money to holders of contracts at a low rate of interest for the purpose of building homes. The place of business of the concern was at the city of Dallas, Texas. The declaration, which was the foundation of the trust, provided for issuing contract certificates, which, were to be paid, for in installments, and lending money to contract holders, and the two parties mentioned above, W.-M. Webb and A. A. Coche, were each declared to be a trustee until he should die or resign. One of the stipulations in the trust was that, after every contract- had been called in by the trustees ‘ ‘ and every obligation has been met and fully satisfied, there being no outstanding obligations against the United Home Builders of America, then the trustees shall have any balance left in the reserve fund as further reward or compensation for faithfully and honestly carrying* out the trust comlmitted to them. ’ ’ Authority was conferred upon the contract holders to appoint or approve new trustees upon the death or resignation of both of the trustees -mentioned in .the declaration. Full power and authority is conferred upon the trustees with reference to the management -of the -business.

The business of -the concern, was. put into operation by the. trustees, and the funds handled in.the progress of the affairs reached the sum of more than $1,500,000.

Webb and-Cocke served together- as co-trustees until December 2, 1921, when Cocke resigned and sold his interest in ‘the concern to William -Sacks, who -served with Webb as trustee from then until November 17, 1922, when they (Webb -and -Sacks) - sold their interests in .the concern to the Hawkins Mortgage Company, a corporation doing business at Indianapolis, Indiana. Webb and Sacks then resigned as trustees, and M. F. Hawkins and A. A. Schieb, who were president and vice-presidént, respectively* of the Hawkins Mortgage Company,- shortly thereafter' became the trustees in succession to-Webb and -Sacks. The terms of' the sale by Webb and Sacks to the Hawkins Mortgage -Company were expressed in writing in the form of a -proposal from the purchasers, which was accepted 'by Webb and Sacks. The writing provided -that -Webb and Sacks should, in consideration of the -sum of $150,000 -paid to each, sell to the Hawkins Mortgage» Company all of-their “right, title -and interest of every kind whatsoever in and to the capital stock, issued and unissued, owned by the two. trustees,- namely, Sacks and- Webb, and every other interest of whatsoever kind, excepting contracts. personally owned,- including whatever is left to the trustees after liquidation.” The contract provided that the purchase price due to Webb should be paid by the assignment of certain Arkansas mortgages in the aggregate sum of $76,000 and-a note of the purchaser for $65,000,- due in four years.. After this transfer was consummated,-Hawkins -and- Schieb were named as trustees-at a meeting of -the-,contract holders, but at that time there was pending in the district court at -Dallas a proceeding by certain -holders of contracts for the appointment of a receiver,. and -subsequently the appellant, Gr. Gr. Wright,-was appointed1 as such receiver. ■ ' :• .•

■ On October 30, 1920, the Mississippi Valley Land &• Livestock-Company, being the owner ola tract of farm land containing 1920 acres in Lafayette: Co-ji-nty, Arkansas, executed to the Indiana Life Insurance-Company of Indianapolis a mortgage on said lands, to -secure an indebtedness of $76,000, -evidenced.by three negotiable promissory notes. The Indiana Life - Insurance Company assigned those notes -before maturity to-the Hawkins Mortgage Company, and the latter ¡assigned the same to W. M. Webb as ¡part of the purchase price of his in-terest in the business of the United' Home Builders of America as stipulated in the contract of purchase. Webb subsequently assigned the motes to- his- wife, Laura A. Webb, and the two joined in this action in the chancery court of Lafayette! County to foreclose- thé mortgage. This was after the 'appointment of the receiver at Dallas;- and he intervened-for the purpose of asserting owner-1 ship in behalf of the United Home -Builders -of America of the notes in suit. • He alleged in substance that appellee Webb, acting in collusion with Hawkins and Sacks, had fraudulently misappropriated the funds ó'f ■ the United Home Builders of America, had sold the business and property of the concern and converted the proceeds -of the sale to their own use,: and -that the 'transfer of the notes from the Hawkins Mortgage Company to Webb was paid for by the sale of the property of the United Home Builders of America in violation of the trust. He also alleged that Mrs. Webb 'accepted the notes with knowledge of the fact that they had been derived by her husband through a. misappropriation of the funds of the trust estate.

Appellees answered denying all the charges of fraud and misappropriation of funds; denied that Webb and Sacks had sold the business of the United Home Builders of America or misappropriated any of its funds, and alleged, on the contrary, that they had merely sold their interests in the business and capital stock, and their right to share in the remainder after final liquidation in accordance with the terms of the declaration of trust, and that they had resigned as trustees, and were succeeded by Hawkins and Sehieb.

The appellees first employed R. L. Montgomery, an attorney at law at Lewisville, the county seat of Lafayette County, to institute the foreclosure proceeding, and agreed to pay him a fee of $1,000. After a time they discharged him and .employed other attorneys. Montgomery then sued appellees for his fee, and the two cases were consolidated and tried together, resulting in a decree dismissing the intervention of appellant for want of equity, and a decree in favor of Montgomery against appellees, the Webbs, for the recovery of the full amount of his fee. Each of the unsuccessful parties in the two controversies has appealed.

Learned counsel for appellant has discussed with much learning and zeal the principles of law bearing upon the controversy and the authorities in support thereof. There seems, however, to be no controversy with reference to the law applicable to the case. The sole controversy relates to the facts established by the evidence, or rather to the effect of the testimony.

It is contended on behalf of appellant that the evidence establishes the charge that Webb and Sacks violated the trust by selling out the property and business of the United Home Builders of Amercia and appropriating the funds to their own use, and that the notes in suit were received by Webb from the Hawkins Mortgage Company in consideration of the sale of the trust estate. We are of the opinion, however, that the evidence does not establish the charge made by appellant. The contract between Webb and Sacks and the Hawkins Mortgage Company is in writing, and speaks for itself. It shows that the trustees, Sacks and Webb, were not selling the trust estate, but were merely selling their interest therein, and their right to receive whatever might remain after the termination of the trust. The trustees were clothed with great power and authority in the management of the trust estate, and it was a valuable position they occupied for the reason that they could fix their own salaries, and could hold the position for life. It is clear from the evidence that all that they did was to sell their interest and agree to resign as trustees so that Hawkins and Schieb could be elected as trustees in succession. Whatever may be said as to ,the propriety or impropriety on the part of these trustees in thus trading upon the position of trust which they occupied, they did no violence to the legal duty which they owed to those interested in the trust estate in selling their interest, and in resigning from the trusteeship. They were given the right under' the terms of the declaration to resign at will, and, whatever their motives may have been, they had the legal right to exercise that option, and in resigning the trust they inflicted no wrong nor violated any legal duty which they owed to the cestui que trust. The proof fails to show fraud on the part of the trustees or any misappropriation of funds. The mortgage notes in suit were never owned by the United Home Builders of America, and were never in the hands of trustees as the property of that concern, and none of the funds or other assets of the trust estate were used in the purchase of these notes. Under this state of facts we are unable to discover any principle of equity which would compel the trustees to account to the trust estate for this property, which liad been received as a part of the consideration of the sale of the personal interests of the-trustees.

We make no comment upon the character of'the business of the United Home Builders of America — its providence or improvidence — as outlined in the declaration of trust. We are not called bn to' express any opinion on that subject, as none of'the bontraot holders are complaining here or seeking for an accounting by the trustees, further than the effort of the receiver to claim the notes in suit as a part of the trust estate on the ground that they were purchased with property of the estate. We are of the opinion that the appellant has' not made out his case, so as to entitle the receiver to recover the notes in suit or the proceeds' thereof.

The controversy' ¡between Montgomery and the Webbs is • entirely separate from the other controversy,, but, as the cases were consolidated below and briefed together here, we dispose of them in otíe opinion.

The Webbs pleaded below that they , had rightfully discharged Montgomery as their attorney on account of his failure of duty to them in making misrepresentations as to his relationship with the officers of the Mississippi Valley Land & Livestock Company, and in making a false indorsement on the back' of some of the notes showing that the indorsement to Webb was without recourse, and negligently failing to institute the action to foreclose the' mortgage in due time. These questions were all tried in the chancery court, and the evidence completely refuted the charge against Montgomery of neglect of duty and failure to perform the task according to the terms of his employment. It is not true, according to the evidence, that Montgomery had misrepresented his professional relationship with the'officers of the Mississippi Valley Land & Livestock Company or that he had neglected his duty with respect to bringing the suit, or that he had made the'alleged assignment oh the back of the note, restricting the liability of the indorser. The.evidence supports the finding of the chancery court that he performed substantial service in handling the 'business for appellees, and was entitled to compensation1 according to the terms of the contract. ■ After his discharge by appellees, Montgomery accepted employment by appellant Wright, in the litigation with the Webbs. It must be borne in mind that that -coíLtróversy is entirely Separate from the foreclosure suit against the Mississippi Valley Land & Livestock''Company. 'In fáct, there was no controversy about the foreclosure of the mortgage, and that was the proceeding in which Montgomery was to earn" his fee. He performed all- of the duties he. was called upon to do ■ with respect to ■ that proceeding. If he-had accepted employment by the adversary 'of appellees in that proceeding, it might well be said that he had acquiesced in his discharge, and could recover no fee, but this is not the state of- the case, for the controversy in which Montgomery represents appellant is not the one in which he was employed by appellees. ..

We are of the opinion that each of the decrees-was correct, and the same are in all things affirmed.

Wood -and' Humphreys,. J.J., dissent only, as to Wright v. Webb. . . , .


author: Mart, J.,

text:
    Johnson v. Johnson.
    Opinion delivered December 7, 1925.
    1. " Judgment — vacating for fraud. — The fraud which 'jbstifies setting aside a judgment or decree on the facts-in issue must be .. such as prevented the unsuccessful-party, from fully presenting his case, or which operated;-as an imposition on the -jurisdiction of the court.
    2. New trial — newly discovered evidence. — Evidence; to be newly discovered, must not have been known'-at the time of the trial, and such as could not have been known by the exercise of reasonable diligence. . . .
    3. New trial — failure to- attack credibility of opponent’s witnesses. — Where an unsuccessful defendant was well acquainted with plaintiff’s witnesses and their general reputation for truth and veracity -at the time of the original trial, it was no excuse for his failure to impeach their credibility that he 'could- not , hear very well, and did not understand the proceedings.

      Appeal from Garland Chancery 'Court; J. P. Henderson, 'Chancellor ;
    affirmed.
    STATEMENT BY THE COURT.
    This is an appeal from a decree of the chancery court refusing to set aside a decree of divorce in' favor of the husband on the ground of adultery.
    In the original proceedings S. P. Johnson sued Susie Johnson for !a divorce on the ground that she had been guilty of adultery with James Smith. Susie Johnson filed an answer denying the allegations of the complaint, and seeking a divorce on her own account on the statutory ground of ill treatment. She also asked for a division of his property under the statute.
    Upon final hearing of the cause the court found that the charge of adultery was established by a clear preponderance of the evidence, and S. P. Johnson was granted a decree of divorce from Susie Johnson.
    Subsequently Susie Johnson filed a motion to set aside the decree of divorce on the ground that it was secured by flalse testimony, and she was permitted to introduce evidence in support of her petition to set aside the divorce decree.
    According to the evidence adduced in her behalf, it was shown that James Smith, the principal witness against her to prove the Charge of adultery, was a man of dissolute habits, and of such bad reputation in the community for truth and honesty, that the witnesses testifying about his character would not believe him on oath.
    Mrs. Ida Johnson was another witness in t'he divorce case against Mrs. Susie Johnson, and it was shown that the house where she lived was a place where intoxicating liquors were sold in violation of law. Mrs. Susie Johnson also introduced other witnesses who testified that her reputation for truth, morality and chastity was good. Another witness testified that Mrs. Ida Johnson’s reputation for truth and morality was good, and that the charge of violating the liquor laws was against her sons.

      The decree, of divorce in the original case was granted on the 29th day of March, 19'23,-which w'as a day of the December term, 1922, ‘ of the Garland Chancery Court. The decree refusing to set aside the divorce decree was made on the 26th day of June, 1924, at a day of the June, 1924, term of the Garland Chancery Court..
    To reverse that.decree, Mrs. Susie Johnson has prosecuted the .present appeal.

      John D. Hoskins,-for appellant.

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

(after stating the facts)'. It'is the settled rule in this State that the fraud which would justify the setting aside of a judgment or decree of a court on the facts in issue must be such as prevented the unsuccessful party from fully presenting' his case, or which operated as an imposition on the jurisdiction of the court. Mere false testimony is not enough, if the disputed matter has been actually presented to and considered by the court. The mischief'in retrying’ every clase in which a decree rendered on false testimony given by perjured witnesses would be greater, by reason of the endless nature of the strife, than any compensation arising from doing justice in individual cases.

The same rule .applies to newly discovered evidence. Evidence to be newly discovered must be found out since the rendition of the decree, and it must not have been known at the time of the trial, or could .not have been known by the exercise of reasonable diligence. It is apparent that otherwise motions to set aside decrees might be made use of as a method for vexatious persons to be oppressive, and for causes never to be at an end. Bank of Pine Bluff v. Levi, 90 Ark. 166; Smith v. Rucker, 95 Ark. 517; Long v. Long, 104 Ark. 562; and McMurray v. McMurray, 153 Ark. 365.

Mrs. Susie Johnson was well acquainted with the witnesses' whose testimony is alleged to be false, and with their general reputation for truth and morality at the time their testimony was taken in the original divorce suit, and no sufficient reason is given for her not attacking their credibility in that suit in the same manner in which it has been attacked in the application to set aside the divorce decree. The only excuse given tby 'Mrs. Johnson is that she could not hear very well and did not understand the proceedings. This is not sufficient. She appe'ars to be a woman of ordinary intelligence, and there is no reason why she could not have secured the testimony tending to show that the witnesses in the divorce case against her swore falsely, or that they had a bad reputation for truth and honesty as well when they testified as after the trial. She was well 'acquainted with both witnesses, and certainly knew their reputation at the time of the trial as well as she did afterwards.

In this connection it may he stated that the same chancellor who granted the divorce refused to set it aside after allowing Mrs. Johnson to introduce testimony on the question.

It follows that the decree will be affirmed.