text:
    King v. Dickinson-Reed-Randerson Company.
    Opinion delivered March 2, 1925.
    1. Judgment — motion to vacate — meritorious defense. — An application by nonresident defendants to set aside.a decree of foreclosure, on the ground that the service of notice by publication of a warning order was defective in misnaming the plaintiff corporation, was properly refused when the motion failed to set up a meritorious defense.
    2. Judgment — presumption from recital of decree. — Though the poof of publication misnamed the plaintiff corporation, yet where the decree recites that defendants were duly notified by .publication of a warning order, it will be presumed, on motion to vacate the decree, that the court had competent evidence before it to show proper service, and amended the proof of publication accordingly.
    3. Mortgages — foreclosure—necessity of bond. — Gen. Acts 1923, p. 551, § 1, which 'amends Crawford & Moses’ Dig., § 6261, by making the bond required of the plaintiff in proceedings by constructive service by publication unnecessary in mortgage foreclosures, held to apply to mortgages executed prior to the passage of such act.
    Appeal from Benton Chancery Court; Ben F. McMa-han, Chancellor;
    affirmed.
    STATEMENT 03? FACTS.
    This is an appeal by nonresident-defendants from an order of the chancery court refusing to set aside its decree in a mortgage foreclosure suit.

      It appears from the record that Dickinson-Reed-Randerson company, a foreign corporation, brought suit in equity against P. W. King and Louella King, his wife, and Henry King and Florence Y. King, his wife, to foreclose a mortgage on certain lands situated in Benton County, Arkansas.
    P. W. King and Louella King, his wife, after having been served with summons, entered their appearance to the suit. An affidavit for a warning order was made as to Henry King and Florence V. King, his wife, on the ground that they were nonresidents iof the State of Arkansas. The warning order was duly issued by the circuit clerk, and both the affidavit for the warning order and the warning order itself contained the proper style of the suit and the proper name of the plaintiff. The proof of publication of the warning order showed Dickinson-Reed-Henderson Company, a corporation, as plaintiff.
    The decree of foreclosure, amongst other things, contains the following: ‘ ‘ The court finds that the defendants, P. W. King and Louella King, his wife, were duly served with actual service on the 5th day of August, 1922, in Cherokee County, Iowa, as provided by law for service on defendants out of the 'State; that Henry King and Florence Y. King, his wife, were duly notified of the nature and pendency of this action by publication of a warning order in the Benton County Democrat, a weekly newspaper of general and bona fide circulation in Benton County, Arkansas, printed and published at Bentonville, for the time and in the rüaner provided by law,” etc.
    After the commissioner appointed for that purpose had made his report of the sale of thre lands, Henry King and wife filed exceptions to the report. Among other grounds, they asked that the decree of foreclosure be set aside because no proper service of summons by publication of warning order had been had upon them, and also that the plaintiff had not executed the bond required by § 6261 of Crawford & Moses’ Digest.
    On the 13th day of October, 1923, the chancery court refused to set aside its decree, and approved the report of sale of the commissioner. It was also ordered that the commissioner execute a deed to said land to the purchaser.
    As above stated, the case is here on appeal.

      Bice & Bice for appellants.
    The bond statute, C. & M. Digest, § 6261, et seq., wias enacted specially for the benefit and protection of nonresident defendants; it is mandatory, and is applicable in this case. Act'661, 'General Acts 1923 p. 551, amending § 6261, supra, is inapplicable in the caise of a mortgage executed prior to its passage; but, if held to be applicable, then it is unconstitutional under art. 1, § 10, U. S. Constitution, and under our State Constitution prohibiting legislation that will impair the obligations of a contract, or injuriously affect vested rights. 6 R. C. L. 329, § 319; 40 Ark. 423 ; 48 Ark. 219; 94 N. O. 134; 59 Iowa 200; 50 Ala. 342; 35 Conn. 563; 84 Ky 1; 45 Md. 546; 106 U. S. 124; 62 Me. 488; 36 Cyc. 1210;.3 Ark. 285.
    The means and methods provided by statute for obtaining service by publication of warning order must be strictly followed, the proceeding being in derogation of the common law. The publication and service in this case was fatally defective. 32 Cyc. 483; Art. 2, § 21, Const. Ark. 7 R. C. L. pp. 131-2, § 102; Id. § 41; 120 S. •W. 1155.

      Nance & Seaomster for appellee.
    The decree of the court finding that appellants were duly notified of the pendency and nature of the action etc., is prima facie evidence of that fact, and will be taken as true, in the absence of evidence in the record showing to the contrary. 164 Ark. 340; 126 Ark. 164; 100 Ark. 63. See also 57 Ark. 49; 144 Ark. 382; 144 Ark. 436; 149 Ark. 215; 156 Ark. 134; 160 Ark. 277; 156 Ark. 453; 129 Ark. 193; 161 Ark. 87.
    There can be no vested right in a mere remedy. The act No. 661, complained of by appellants, applies to causes of action pending as well as to those thereafter brought. 141 Ark. 512. Moreover, appellants have not asked for a retrial of tlie cause, and have not shown any meritorious defense. 157 Ark. 86.
   Hart, J.,

(after stating the facts). The chancery court did not err in refusing to set aside the decree of foreclosure on the ground that Henry King and wife had not been properly served by publication of warning order. The foreclosure suit was brought by Dickinson-Reed-Randerson Company, a corporation.' In the affidavit for a warning order, and in the warning order itself, that corporation is named as plaintiff. The proof of publication of the warning order names the plaintiff as Dickinson-Reed-Henderson Company, a corporation. Hence it is claimed that there was no valid constructive service on the defendants. A sufficient answer to this contention is that no meritorious defense to the foreclosure suit is set up in the motion to set aside the decree. This court has expressly held that, on application by a defendant constructively summoned to set aside the decree, a meritorious defense must be shown by him. Moreland v. Youngblood, 157 Ark. 86.

Then, too, the foreclosure decree recites that Henry King and wife were duly notified of the nature and pend-ency of the action by publication of warning order, and the usual presumption which attaches to this finding in a decree must be had.

Because there is no statute forbidding it, parol evidence may be received to prove the publication of the warning order, and this carries with it the right of the court to hear parol testimony to amend the proof of publication. Hence it will be presumed that competent evidence was ¡before the court to sustain the finding that Henry Rung and wife were duly notified of the pendency of the suit by publication of warning order.

In short, it will be presumed that the court heard oral evidence, and amended the proof of publication of the warning order to show that it had been published in. the name of Dickinson-Reed-Randerson Company, a corporation, instead of Dickinson-Reed-Henderson Company, a corporation. Fiddyment v. Bateman, 97 Ark. 76, and Wallace v. Hill, 135 Ark. 353.

It is next insisted that the court erred in refusing to set aside the foreclosure decree, because the bond required by § 6261 of Crawford & Moses’ Digest was not given. It is conceded that this section was amended by the Legislature of 1923, in which it . was provided that such bond should not apply to a mortgage foreclosure decree. General Acts of 1923, p. 551. But it is claimed that this section could not be made to apply to foreclosure decrees where the mortgage was executed before the passage of the amendatory act. In this respect counsel liken it to the right of redemption - in a mortgage foreclosure decree. In such cases it has been held by the Supreme Court of the United States that a State statute which allows the mortgagor a specified length of time after a sale under a decree of foreclosure to redeem, confers a substantial right, and thereby becomes a rule of property. The holding proceeds upon the theory that the right of redemption which exists at the time the mortgage is executed becomes a part of the contract, and that, to deprive the mortgagor of this right by a statute subsequently passed, would impair the obligation of the contract. Brine v. Insurance Co., 96 U. S. 627, and Parker v. Dacres, 130 U. S. 43.

The giving of the bond in question did not confer any substantial right or equity upon the nonresident defendants. It was merely a method of procedure. Such statutes do not affect the substantial rights of the parties, but are intended to confer a method of procedure in dealing with existing rights. The forms of administering justice and^the powers of courts in this respect are subject to the legislative will, and one Legislature cannot bind subsequent Legislatures in this respect. The requirernent or non-requirement of a bond by the plaintiff in the case of a defendant constructively summoned is, in the very nature of, things, remedial and not contractual.

In this respect the principle to he applied is like that in Brown v. Creekmore, 141 Ark. 512. It was there held that an act of the Legislature defining a counterclaim applied to suits pending at the time of its passage, as there can be no vested right in a mere remedy.

It follows that the decree must be affirmed.


source: Caselaw Access Project

author: Hart, J.,

license: Public Domain

text:
    Jordan v. Bank of Morrilton.
    Opinion delivered March 2, 1925.
    1. Appeal and error^-conclusiveness op chancellor’s finding.-— A chancellor’s finding of fact, which is not against the preponderance of the evidence, is conclusive upon the Supreme Oourt.
    2. Payment — application.—Where a creditor had notice that money paid to him by his debtor had been furnished to the debtor upon the understanding that it should be applied to the payment of a particular -debt, the money could not be appropriated by the creditor to the payment of another debt.
    3. Payment — application.—Where a first mortgagee had notice that a second mortgagee lent money to his mortgagor with the understanding that it should be -applied to the payment of the first mortgage debt, the first could not apply it to the payment ■of an unsecured debt owning to him by the mortgagor, even with the latter’s consent.
    4. Notice — facts putting one upon inquiry. — Notice of facts and circumstances which would put a man of ordinary intelligence upon inquiry is equivalent to knowledge of -all the facts that a reasonably diligent inquiry would disclose.
    5. Payment — notice of intended application. — Where a check given to a first mortgagee by the mortgagor, who had received the money from a second mortgagee with the understanding that it was to be applied on the first mortgage, was marked “in full,” and the first mortgagee could have ascertained that the check was given in payment in full of the first mortgage debt, the first mortgagee could not apply it to payment of an unsecured debt owing him by the mortgagor.
    Appeal from Conway Chancery Court; W. E. Atkinson, Chancellor;
    affirmed.

      STATEMENT OF FACTS.
    This appeal is prosecuted to reverse a decree of the chancery court in directing the application of payment between two mortgagees of the same land.
    On July 8, 1919, Jas. P. Turner and wife executed to D. L. Jordan a mortgage on certain land in Oonway County, Arkansas, to secure ¡the sum of $3,211.90, evidenced by two ¡promissory notes and an open account of $1000, more or less, for merchandise to be ¡furnished during 1920.
    On the 24th day of March, 1920, Jas. P. Turner and wife executed a mortgage on the same land to the Bank of Morrilton to secure the sum of $6,340.
    According to the testimony of the cashier of the bank, Turner represented that he owed D. L. Jordan a balance of $2,735.29 on his mortgage indebtedness, and the bank retained that amount of money to be applied in satisfaction of the balance of the mortgage indebtedness from Turner to Jordan. Turner expressly agreed to apply the money in this way. Turner then gave a check to D. L. Jordan for $2,735.29, dated March 25,1920. The check was drawn on the Bank of Morrilton, and was cashed by'Jordan in due course.
    According to the testimony of Jas. P. Turner, the cashier of the bank knew that the check for $2,735.29 was to be used in the payment of an open account which Turner owed D. L. Jordan. Turner told the cashier of the bank that he owed an account to Jordan of at least that amount. Turner agreed with Jordan that the check should be applied towards the payment of his merchandise account, which was not secured by the mortgage.
    According to the testimony of D. L. Jordan, the open account was not secured by the mortgage on the land, and, by agreement with Turner, he applied the check in question to the payment of the open account. This left the mortgage indebtedness due and unpaid.
    The present suit was commenced in the fall of 1922 by the Bank of Morrilton to foreclose its mortgage, and subsequently 1). L. Jordan was made a party to the foreclosure suit, and testimony substantially as above set forth was taken to show the rights of the respective parties.
    The chancellor found the issues in favor of the Bank of Morrilton, and, to reverse the decree in its favor, D. L. Jordan has prosecuted this appeal.

      E. A. Williams, for appellant.
    A debtor has the primary right to direct the application of the payment. 91 Ark. 458; 93 Ark. 224; 32 Ark. 645; 54 Ark. 444; 117 Ark. 260; 91 Ark. 458. The court erred in applying the payment otherwise than as directed by the debtor. 81 Cal. 56; 97 Cal. 290; 29 Ga. 142; 36 Ala. 482; 15 Conn. 437 ; 34 Mo. 70; 13 Vt. 15; 26 N. J. Eq. 494; 45 Ga. 565; 39 Mass. 305; 11 W. Ya. 549; 21 A. L. R. Ann. 690. The right to apply payments is one existing between the original parties. 21 A. L. R. Ann. 681; 21 R. C. L. 107; 75 N. Y. 461.

      Strait & Strait, for appellee.
    A creditor having a lien on property for a debt cannot, even by agreement with his debtor, apply any part of the property to a debt which is not a lien upon it. 39 Ark. 349; 108'Ark. 555; 44 Ark. 507. Where money is furnished for a specific purpose, it must be applied to that purpose, and cannot be diverted to any other purpose. 96 Aim. St. Rep. 54; 37 Pa. 68; 9 Pa. 475; 36 Ark. 162; 39 Ill. 312; 77 Ala. 367; 78 Ill. 17. Where a third party advances money for the payment of a debt, the debtor and creditor cannot apply it to the disadvantage of such party. 21 R. C. L. 107.
   Hart, J.,

(after stating the facts). As will be seen from our statement of facts, the cashier of the Bank of Morrilton testified that it was expressly understood between Turner and the bank that $2,735.29 of the money borrowed from the bank should be applied towards the payment of a prior mortgage given by Turner to Jordan on the same land. When Turner received the money from the hank, he left on deposit there the sum of $2,735.29 to be applied towards the payment of the Jordan mortgage'. The check given by Turner to Jordan for this sum contains the notation “in.full,” and was drawn on the Bank of Morrilton.

It is true that Turner testified that he told the cashier of the bank that this sum of money was to he applied towards the payment of an open account which he owed to Jordan, and which was not secured by a mortgage on the land in question. The chancellor, however, found this issue in favor of the bank on the testimony of its cashier, and it cannot be said that his finding is against the preponderance of the evidence. Therefore, under our settled rules of practice it may be treated as settled that the bank lent the money to Turner with the express understanding that the sum of $2,735.29 was to be applied towards the payment of the mortgage indebtedness of Turner to Jordan.

Counsel for Jordan seek to reverse the decree under the general rule that, at the time of making a payment, a debtor has the primary right to direct the application of payment, and may apply it to the payment of his unsecured debt. Snow v. Wood, 163 Ark. 280. Counsel for appellant claim that the exercise of the right of appropriation of payments belongs exclusively to the debtor and the creditor, and that no third person can control or be heard for the purpose of compelling a different appropriation from that agreed upon by them. Hence they contend that it does not make any difference what the cashier of the bank understood would be done with the money, as the right of the creditor and the debtor to make the application is absolute, and a third person cannot control this right.

There is a well-recognized exception to this rule, and that is, if the creditor had notice that money had been -furnished his debtor upon an understanding that it was to. be applied towards the paymént of a particular debt, it could- not be appropriated to the payment of •an®ther- debt. Here, according to the finding of the chancellor, the bank lent the money to Turner with the express understanding that a • specified part ■ of it should be applied towards the payment of a debt of Turner to J or-dan secured 'by a mortgage upon the same land which he had mortgaged to the bank. If Jordan had notice of these facts, he would not be permitted, even with the consent of Turner, to misapply it. Harding v. Tifft, 75 N. Y. 461. In short, if Jordan had notice that the bank had lent the money upon the understanding that a part of it should be applied towards the payment of his mortgage debt, he could not apply it to the payment of his unsecured debt as against the bank, even with the consent of Turner. In this connection it may be stated that notice of facts and circumstances which would put a man of ordinary intelligence on inquiry is equivalent tó knowledge of all the facts that a reasonable diligent inquiry would disclose. In other words, where a person has sufficient information to put him on inquiry, he shall be deemed to know what the inquiry would disclose. Bland v. Fleeman, 58 Ark. 84; Waller v. Dansby, 145 Ark. 306; and Krow & Neumann v. Barnard, 152 Ark. 99.

The check given by Turner to Jordan contained the notation, “in full,” which was dated1 March 25, 1920. According to the testimony of Jordan himself, this did not pay the whole of the indebtedness of Turner to him. If he had made any inquiry whatever at the bank, he would have found out that the money had been lent to Turner with the understanding that the amount of the cheek should be “in full” of the mortgage indebtedness of Turner to Jordan. Therefore in law Jordan will be deemed to have notice that Turner had agreed to apply the amount of the check towards the payment of his mortgage indebtedness to Jordan, and Jordan had no right to divert the fund to the payment of his unsecured indebtedness.

The result of our views is that the decree will be affirmed.


author: Hart, J. McCulloch, C. J.

text:
    Sample v. Manning.
    Opinion delivered March 2, 1925.
    1. Appeal and error — time for appeal. — Crawford & Moses’ Dig., § 2140, fixing the time -within which an appeal must he taken, is jurisdictional in its nature.
    2. Appeal and error — jurisdiction.—The Supreme Court has no jurisdiction to review or try a chancery case after the time for appeal has expired.
    3. Appeal and error — right to have appeal dismissed. — Where time for appeal in a case has expired, the prevailing party has a right to execution against the losing party, and may sue on a supersedeas bond, if given; but no useful purpose could be served by permitting the prevailing party to docket the case and have the appeal dismissed, since he could acquire no greater right thereby.
    Appeal from Union Chancery Court, First Division; J. Y. Stevens, Chancellor; case stricken from 'docket.

      Mahoney, Yocum & Saye, for appellant.

      J. S. Townsend, for appellee.
   Hart, J.

John Manning filed in this court a duly certified copy of a decree in a chancery case from Union County, Arkansas, wherein hé is the plaintiff and Clark Sample is the defendant. He alleges that he obtained a decree against the defendant in the chancery court of Union County to enforce a vendor’s lien for purchase money. The decree was entered of record on the 3rd day of July, 1924, and the defendant was granted ah appeal to this 'court by the chancery court. An appeal bond was filed with and 'approved by the tel-erk of the chancery court, and a supersedeas bond, issued thereon in conformity with the statute.

Manning filed a certified copy of the decree in this court more than seven months after the decree was rendered in the chancery court, and moved the court to dismiss the appeal. The defendant resisted the motion on the ground that it showed on its face that this court is without jurisdiction in the case, because the appeal was never perfected within the time prescribed by statute.

Our statute provides that an appeal shall not be granted except within six months next after the rendition of the decree appealed from, unless the party applying therefor is under certain disabilities, which do not affect the decree in this action. Crawford & Moses’ Digest, § 2140.

The time within which an appeal must be taken being fixed by statute, it must be taken within the time designated. The provision which limits the time is jurisdictional in its nature. Spratlin v. Haller, 69 Ark. 289.

In order to give this court jurisdiction, it is necessary to file with it a copy of the record in the court below, because it is the source from which the court obtains its knowledge of the facts in the case and of the questions upon which it is its duty to pronounce judgment. Robinson v. Arkansas Loan & Trust Co., 72 Ark. 475. Thus it will be seen that a bar is fixed by law as to appeals from decrees which are appealable. After the time fixed for an appeal has expired, the appellate court has no jurisdiction to review or to try the case de novo. No useful purpose could be served by permitting the prevailing party in the court below to file a certified copy of the judgment or decree of the court below for the purpose of dismissing the appeal which had been granted to the losing party, and which he had lost by not perfecting within the time allowed by law. The dismissal of an appeal removes the case from the appellate court and places the parties in the same conditions as they were before the appeal was taken. Ashley v. Brasil, 1 Ark. 144, and Burgess v. Poole, 45 Ark. 373. So it will be seen that, if the appeal should be dismissed, the parties would be just where they were before, and no useful purpose could be served, except to tax one or other of the parties with the trouble and expense of the appeal.

Inasmuch as the prevailing party in the court below could obtain no greater rights by docketing the case here 'and then having the appeal dismissed than he already had, no useful purpose can be served by allowing such a course, and the better practice would have been for the clerk to have refused to allow the appeal to be filed because it was not perfected within the time allowed by law.

It is claimed, however, that this practice is contrary to that adopted in Gross v. State, 89 Ark. 482. In that case the Attorney General filed a certified copy of the judgment of conviction in a misdemeanor' case, and moved this court to affirm the judgment on account of the failure of Gross to prosecute his appeal. Tlhe court denied his motion to affirm the judgment, but dismissed the appeal “with directions that the judgment of dismissal be certified down to the circuit court of Perry County, to the end that the judgment may be enforced, and that the prosecuting1 attorney may institute proceedings on the supersedeas bond,'if so advised.”

Thus it will be seen that the relief asked in that case was to affirm the judgment. This was for the manifest purpose of enabling the State to have execution issued in this court on the supersedeas bond. This relief was denied by the court and the appeal dismissed, which, when tested by the directions given, amounted to no more than to strike the case from the docket. This is far from holding that the docketing of an appeal and a motion to dismiss is the proper practice, ,in cases where the time for appeal has elapsed. ' '

. Here the case was docketed for the very purpose of dismissing the appeal, and, as we have already seen, the dismissal would leave the parties in exáetly the same condition as they were if the appeal had not been docketed in this court. Plence it is apparent that no useful purpose can be served by .adopting such a course. If such a practice.was adopted, it would be useless and expensive, for the parties acquire no greater rights than they already possessed. This is made perfectly clear by the directions given in the Gross ease.

To sum up: in cases where the time for appeal has expired, the party recovering judgment in the court below has the right to have execution against the losing party. If a supersedeas bond has been given, he may sue on it. He could acquire no greater rights if we should hold the better practice to be to allow.him to docket the appeal in this court for the very purpose of dismissing it.

Therefore we conclude that the better practice would have been for the clerk to have refused to have docketed the appeal in this case, and, in conformity with this view, the cause will be ordered stricken from the docket of this court.

McCulloch, C. J.

(dissenting). The decision of the majority has overturned a rule of practice which has ¡been adhered to in this court for a great many years, and which found expression in the opinion of the court in Gross v. State, 89 Ark. 482. The effect of that decision, however, is brushed aside by the majority with the .statement that it amounted to no more than an order dropping the case from the docket. Such was not the decision of the court. In that case the appellant had obtained an appeal from the lower court and had superseded the judgment, with bond, hut failed to perfect the appeal within the time prescribed by statute, and the Attorney General filed the transcript here with a motion to affirm the judgment. We declined to affirm, on the ground that the court was without jurisdiction to hear and determine the cause, but we dismissed the appeal and ordered the judgment certified down to the circuit court for enforcement. We said nothing about merely striking the transcript from the docket. If that was the proper rule in a criminal case, certainly it is proper in a civil case in order that the appeal may be brought to an end and the judgment of the lower court enforced.

The cases cited'by the majority and many other decisions of this court hold that where an appeal is not perfected by the filing of the transcript with the time prescribed by law it becomes the duty of this court to dismiss it. This is the universal rule of all courts. 4 C. J. p. 566. “It results from the doctrines stated that if an appeál is not perfected by doing all that the law commands vdthin the time fixed the' court should dismiss it, and so the authorities declare.” Elliott .-on Appellate Procedure, § 524.

In testing the jurisdiction of an appellate court to dismiss an appeal on account of failure to perfect it within the time prescribed by law, it is unimportant which of the parties files the transcript. If the transcript is filed with the court and a motion is made to dismiss it, then the jurisdiction of the court to render a decision upon the motion is complete. The views 'of the majority overlook, I think, the distinction between the jurisdiction of this court to hear and determine a cause and jurisdiction to dismiss an appeal. Upon the filing of the transcript at any time the court has jurisdiction to determine whether or not the appeal has been properly taken and perfected, and, if it decides that the appeal was not properly taken and perfected, it has power to render a judgment dismissing the appeal. In other wtords, the court always has the power to decide a question relating to its own jurisdiction, and, for the purpose of determining whether or not it has jurisdiction, it may decide whether or not an appeal has been properly taken and dismiss an appeal which has not been properly taken and perfected. But the majority say that it is a useless proceeding for the appellee to file a transcript here and procure a dismissal of the appeal, and that it is not essential to the enforcement of the .judgment appealed from. I think the mlajority is incorrect in the assumption that it is unnecessary to dispose of the appeal before the judgment of the lower court can be enforced. A supersedeas bond suspends the execution of the judgment, and the judgment remains suspended until the appeal is set aside or the judgment affirmed. Mere lapse of time does not remove the suspension of the judgment, and it requires an order of the court to do that. Therefore it is proper and necessary for this -court to make an order dismissing an appeal before the suspension is removed so that the judgment may be enforced. “The mandate of the appellate court remitting the cause to the lower court,” says 2 R.C.L. p. 287, “is the official mode of communicating its judgment to the inferior tribunal.” Until the lower court is officially notified of the dismissal of 'an appeal, there is no method for the ascertainment of that fact. If an appel-lee applies to the clerk of the trial court for an execution after the expiration, of the time for perfecting an appeal, what evidence can he furnish to the clerk, other than the mandate of this court, that the appeal has 'been abandoned or dismissed? Or, if the appellee sues on the bond, what evidence can he furnish that the appeal has not been perfected?

I am of the opinion, therefore, that the majority have not only overturned a long-settled practice which has been observed in 'all courts, but have established an awkward practice with respect to the remedy of an appellee after an appellant has failed to prosecute an appeal.

Mr. Justice 'Smith agrees with me in this dissent.


author: Smith, J.

text:
    Palmer v. Taylor.
    Opinion delivered March 2, 1925.
    1. Business trusts — fraud.—Inconsistent recitals in a declaration of a common-law trust stating on one page that the subscriptions were paid for and on another page that they were paid with notes held not to. show that the whole scheme was fraudulent or that the trustees practiced a fraud upon the Bank Commissioner to secure a permit to do business.
    2. Business trusts — fraudulent representation. — Evidence and declaration of trust filed with the Bank Commissioner as a public record, under Crawford & Moses’ Big., § 764, held not to support a finding that subscriptions to' a common-law trust were secured by fraudulently representing, that the organization was •in fact a corporation.
    3. Business trusts — authority to do business. — Trustees under a common-law trust may do business in this State under general statutes other than those regulating limited partnership and corporations.
    4. Business trusts — authority to sell stock. — 'Whether a business trust formed to manufacture automobiles should be allowed to sell stock in the State held to be within the discretion of the Bank Commissioner.
    5. Business trusts — sale of stock — fraud.—Sale of stock in a business trust for anything other than cash was not evidence of fraud where the Bank Commissioner’s permit did not require cash payments.

      0. Business trusts — powers and liabilities of trustee. — Under a declaration of a common-law trust, the trustees are principals and not merely agents of the stockholders, and they are personally liable for the indebtedness growing out of transactions relating to the trust estate.
    7. Business trusts — stock subscriptions. — Subscriptions to stock in a common-law trust are not gifts but investments of which the trustee takes title as owner.
    8. Business trusts — fraud.—A provision in a declaration of a commion-law trust that a shareholder shall not have the right to call for a partition or division or dissolution of the trust, or an accounting, held not fraudulent as entitling the trustees to convert the assets of the company or to render them immune from accounting therefor, but only to preclude a suit for partition or division, or for an accounting, from operating to. dissolve the trust.
    9. Business trusts — fraud.—Authority conferred by a declaration of trust to expend 30 per cent, of the proceeds of the sale of stock held not to show a fraudulent intent in organizing the trust.
    10. Business trusts — fraud.—Payment by a common-law trust of 30 per cent, of the proceeds of stock subscriptions for commissions to sales agents pursuant to authority conferred by the declaration of trust held not a fraud on prospective investors.
    11. Business trusts — subscription—rescission.—A subscription to stock in a common-law trust will not be rescinded because the trustees failed to perform fully a printing contract given to the subscriber in consideration of his purchase of stock where it appeared that the contract might have been fully performed if the trust had not failed.
    'Appeal from Puliaski 'Chancery Court; John E. Martin&am, Chancellor;
    affirmed.

      Gawnaway & Gaamaway and E. G. Shoffner, for appellants.
    The whole scheme was inherently fraudulent. 159 Ark. 621; 16'2 Ark. 90; 110:U. S. 630; 98 N. E. 391; 52 N.Y. 492, 497; 3 N. Y. >Supp. 392-93. W. Va. 324; 112 S. E. 579; 144 S. W. 158; '209 Pac. 36.
    The stock sales were void because the permit was secured by violating the penal provisions of the ¡Blue Sky law. 129 Ark. 416; Act No. 242, Acts 1915 § 885, title; Cowan’s Manuel of Securities Laws, 1923; 147 Ark. 408; C. & M. Dig. §§ 751, 753, 754, 756, 757, 762, 764, 766, 770; 147 Ark. 252; 6 B. C. L. 833, § 223; 236 S. W. 694; 104 Cal. 473, 38 Pao. 102; 168 Minn. 386, 134 N. W. 482; 172 N. W. 620; 187 N. W. 874; 50 Pa. St. 399; 144 S. W. 158.
    False representations to the Bank Commissioner constituted a fraud upon him1 and upon all subsequent purchasers of stock. 162 N. W. 753; Thomipson on Corporations, 1922 Supp. 718, § 4150.
    Particular false representation to, and breaches of contracts with, plaintiffs justify rescission. 112 S. E. 579; 122 N. E. 634; 189 Pac. 116; 52 N. Y. Supp. 139; 98 N. E. 391. Failure to disclose material facts ’constituted fraud upon the plaintiffs. 98 N. E. 391; 131 Ark. 382.
    The chancellor erred in refusing relief under the alternative prayer for a receiver and an accounting 150 Ark. 398.

      Mehaffy & Mehaffy, for appellees.
    There is no proof in the entire record of any fraud on the part of the appellees. The cases cited by the appellants have no application here, and, on the facts, the findings of the chancellor will not be disturbed unless found to be clearly against the preponderance of the evidence. 158 Ark. 641; 157 Ark. 600 ; 156 Ark. 473; 153 Ark. 56; Id. 133; 155 Ark. 305.
   Smith, J.

George E. Palmer, J. H. Parkin and J. T. Coyer, appellants here, filed separate suits in the Pulaski Chancery Court against Charles E. Taylor, C. F. Bizzell, A. W. Sloss and H. W. Anderson. The basis of the complaint in each case was that the defendants were the promoters and trustees of the Curtis Motor Car Company, which had been organized under a declaration of trust, and it was alleged that, for various reasons, the entire organization was invalid, and that the sales of stock which had been made by the trustees were in violation of law, and were void.

These plaintiffs alleged that certain material misrepresentations had been made to them to induce them to purchase stock, and that these misrepresentations constituted a fraud upon them, and they prayed a rescission.of tíhe contracts of sale of the stock-made to- them,, which ■ they alleged was worthless, and there was an alternative prayer that, if the validity of the sales of stock was upheld, the defendants, as officers and trustees of the company, be required to make an accounting to the stockholders of the funds and property of' the trust estate. A tender of the stock to defendants was made, and judgment was prayed for the amounts paid therefor.

The general allegations of misrepresentation and fraud will be set out and discussed. In addition to these allegations common to all three complaints, Palmer alleged that he was induced to buy stock by reason of a promise made to him that he would be, and later had been, made a member of a board of associate directors, and still later that he had been made a member of the advisory board of the company, when .there was, in fact, no such board. Parkin alleged' that he had agreed to buy a thousand dollars of stock in consideration of an agreement on the part of the trustees to buy from him two thousand dollars’ worth of printing and printing supplies, whereas the trustees bought only fifteen hundred dollars’ worth of supplies, of which a thousand dollars had been paid in stock and the balance in cash. G-oyer alleged that he had been induced to buy stock in consideration of an agreement that he should be made a member of the advisory board, and he alleged, as Palmer had done, that there was no such board.

The cases were consolidated for trial in the chancery court, and, upon final hearing, were dismissed as being without equity, and they have been consolidated here and briefed as a single case.

The general allegations of fraud are that authority to do business was secured from the Bank Commissioner on October 13, 1919, by reason of false statements in regard to the assets which had been assigned to the trustees by the parties making the declaration of trust, in that it was represented that the company had sold 163 shares of stock, and had on hand in actual cash $1,545.65, and $6,603.35 in notes, which statements were false, and that, after authorization to do business and to sell stock had been obtained, misrepresentations were made to prospective purchasers of stock in advertising matter which the defendants had caused to be published and circulated over the State as to the character of the organization, it being represented that the organization was in effect a corporation and was doing business as such, and had an authorized capital of two million dollars, when it was not a corporation at all. That the defendants Represented to the Bank Commissioner that they had each invested a thousand dollars in cash in the company, when they had, in fact, invested nothing. That it was falsely represented to the State Bank Commissioner that three persons, to-wit: E. Audigier, A. S. Maddox and Ben Q. Adams, had, for themselves and for all others who might become interested, transferred certain money and personal property to the trustees, whereas they had not, in fact, transferred to the trustees either money or personal property. That the declaration of trust contained the provision “that the shareholders shall not have the right to call for a partition or division or a dissolution of the trust, or an accounting,” and that these provisions evinced a fraudulent intent. That the provisions of the declaration of trust allowed the trustees to expend thirty per cent, of the proceeds of all stock for commissions in selling stock and for promotion purposes, and that this itself so impaired the capital of the concern as to render it fraudulent. That a prospectus was prepared by the trustees on the faith o.f which plaintiffs purchased the stock;.that in this prospectus it was represented that there was no preferred stock, and that every shareholder had equal rights and privileges, and that the company would be controlled by a board of trustees or directors who were selected by the shareholders themselves, when, in fact, the trustees had already been chosen, and their appointment was for life, and no shareholder had any voice in the management of the company, as the management was entirely in the hands of the trustees. And that there were certain false representations in regard to operating expenses.

Upon these allegations a large amount of testimony was taken, which we shall only summarize, and, stated in a chronological order, it is as follows:

In March or April, 1919, defendants Sloss and Bizzell conceived the idea of organizing a company to manufacture and sell automobiles, trucks and tractors in Little Eock. Neither of them had ever had any experience in operating factories or in the automobile business, and neither appears to have had any considerable capital to invest in the business. After deciding that there were wonderful possibilities in the enterprise, they enlisted the interest of Charles E. Taylor, who was about to retire from the office of mayor of Little Eock, but who, like themselves, was without experience in operating factories, and who had no considerable capital to invest. These three men made an extensive investigation of the automobile industry, and obtained figures showing some of the great fortunes which had been made in this industry on small investments. At that time money was plentiful, credit was easy, and the manufacturers of automobiles had a demand for cars which they were unable to supply. These gentlemen pursued their investigations in Detroit and in eastern cities, and became convinced that the necessary capital was the only thing required.

They were advised that a number of industries had been started by trustees under the common-law declaration of trust whereby the trustees assumed permanent control of the project and sold stock entitling the holders thereof to a proportionate part of any profits earned. Among other concerns of this kind to which their attention was called was a company in Dallas, Texas, known as the Texas Motor-Car Company, and they went to Texas and, after investigation, they decided to organize as that concern had done, and to this end they secured a copy of the declaration of trust under which the Texas company was operating, and, after making a few comparatively unimportant changes in the instrument to meet local conditions, they submitted their plans to the State Bank Commissioner, who was persuaded that the scheme was feasible, and who stated that he would grant authority for it to do business in the State and to sell stock.

As a part of the preliminary plans, Audigier, Maddox and Adams were interested in the project and induced to become parties thereto and to subscribe for stock, and their names were used in the declaration of trust as the promoters of the scheme, and it was recited that they had transferred “ certain moneys and personal property with the intention that same shall be held upon the trust hereinafter expressed concerning said properties so transferred.”

Adams had, at the time, subscribed for $100 in stock, of which $30 had been paid at the time the declaration of trust was filed with the Bank Commissioner. The balance of $70 was later paid. Similar subscriptions were obtained from Audigier and Maddox, and similar payments were made by them.

The declaration of trust named Taylor, Sloss and Bizzell as trustees, and they had each subscribed for a thousand dollars of the stock, and so also had H. W. Anderson, who, although not named as trustee, had been employed by the trustees to assist in promoting the scheme.

It is earnestly insisted that the statement in the application for a permit to do business in regard to these subscriptions shows that the whole scheme was fraudulent, because authority to do business was obtained as a result of the false representation made to the State Bank Commissioners in regard to these subscriptions, in this, that it was recited in the application for a permit that said parties had each subscribed for a thousand dollars in stock and had paid cash therefor, when they had only given their notes for their stock.

It is true that, on one page of the application for a permit there was a recital that these four persons had paid for their stock, but -on another page, it was shown that they hiad only given notes,, and these parties, as ■witnesses, testified that they did not observe this discrepancy, and that they treated their notes as payments for the stock, and it was shown in the application how the payments were made by them.

It must he conceded that this was indeed a small beginning for what was intended to be a two-million dollar- concern, but it had to begin, and, as counsel for appellees say, no one had the right to expect another to donate the capital for the concern to operate on. When one views the wreck of the enterprise, it does appear now that the scheme was visionary; but we must view-the undertaking from the perspective of the promoters, ■ for the question is not whether it was visionary — a fact which now certainly appears — but is rather, whether it was fraudulent, and we have reached the conclusion that-it was not.

We do not think any fraud was practiced on the State Bank Commissioner to secure his permit to do business. The very instrument which shows the erroneous, and therefore false, statement of the company’s assets, also shows the truth in that respect.

Departing, for the moment, from the chronological order of the statement to further discuss the notes executed by- the appellees for their stock, it may be said that appellants insist that these notes were never paid,.and were never intended to be paid, and that the fraudulent character of the whole scheme was thus shown. Appel-lees insist, however, and so testified, that these notes were paid, and that payment was made in the performance of necessary services which the declaration of trust contemplated should be rendered by them to the company.

We do not stop to inquire whether the notes could have been legally paid in this manner. If they could not, this was a proper matter for the chancery court to have considered in winding up the affairs of the company, as was done by that court in the receivership which was later ordered. If these notes were not in fact paid, they were a part of the assets of the company, to he distributed by the chancery court in winding up the company’s affairs, and the appellants would have had no right to wholly appropriate the proceeds thereof to the satisfaction of the demands they are here seeking to assert. Indeed, this is not a suit to collect these notes, but is one to hold appellees, as trustees, liable for stock which.appellants say they were induced to buy by reason of false and fraudulent representations made them.

In this connection, it may be said that appellees contend that they had already rendered, at the time the notes were executed, services of a greater value than the face of the notes, and had incurred large personal expenses in their preliminary travels and investigations, exceeding the face of the notes, which inured to the benefit of all subsequent subscribers for stock. It is unnecessary to decide here whether these promoters had the right to charge these expenses to the company or not, and we do not do so. It is' only necessary to decide whether the giving of these notes shows a plan to defraud, and we have concluded that this fact does not show any such intention, and we have also concluded that there were no such representations in regard to assets contained in the application for the permit as would warrant a finding that the iBank Commissioner’s permit was obtained through fraud practiced on that official.

We do not think the testimony supports the contention of appellants or warrants the finding by us that subscriptions for stock were secured by the representation that the company was, in fact, a corporation. It is true that the advertising matter circulated by the sales agents in making sales of stock referred to the trustees as president, vice president, secretary and treasurer, respectively; but these titles only indicated the functions which the respective trustees performed.

The declaration of trust, which, when filed with the Bank Commissioner, became a public record (§ 764, C. & M. Digest), disclosed the nature of the enterprise, and there was nothing about it to indicate an intention to leave or to create the impression that the .concern was in fact a corporation, ■ and it appears from various hits of correspondence in the record that, when the question of. its character was involved, it was plainly stated.

The enterprise was not an unlawful one, however ill-considered it may have been.

In the recent case of Coleman v. McKee, 162 Ark. 90, we held, as we had previously done in the case of Betts v. Hackathorn, 159 Ark. 621, that the trustees under a common-law trust may do business in this State under general statutes other than those regulating limited partnerships and corporations.

As to whether or not such authority should have' been given in this case, was a question calling for the exercise of a discretion vested at that time in the 'State Bank Commissioner, and, in fairness to that official, it may be said that this discretion was exercised at a time when, according to the testimony, money was plentiful and the apparent demand for .automobiles was insatiable.

It is next insisted that the fact that stock -whs sold for anytning except cash paid, at the time, was an evidence of fraud, as that action was not authorized by the State Bank Commissioner. The indorsement on the application'for a permit to do business was: ‘‘Examined, and sale of shares at par for $50 each authorized. ’r The declaration of trust had stated that the shares would be $50 each, that is, any one investing $50 would be entitled1 to a receipt, called a share, showing that fact. But. this was not a corporation, and the Bank Commissioner did not impose the requirement that the full amount of ihe subscription should be paid when made.-

It is insisted that the provision of the declaration of trust, “that the shareholders.shall not have the right to call for a partition or division or a dissolution of the trust or an accounting,” on its face evinced a fraudulent intent.

We do not- think the presence of this recital in the declaration of trust proves fraud. Its purpose was to give permanency to the trust thus created. Under agreements of this character the trustee is principal, and it is not a mere agent for the cestui que trust who invests] and it is upon this theory that he is held personally liable for the indebtedness growing out of transactions in relation to the trust estate. Betts v. Hachathorn, supra.

We do not construe the language quoted as giving the trustees the right to convert or otherwise misappropriate the assets of the concern or to‘ have immunity from accounting therefor. It could not be said that the trustees were asking or had been granted any such power if any other construction could be given the language. This was not a gift, but was supposed to' be an investment, of which the trustees took the title as owners, and we think the fair and proper construction of the language is that no suit for partition or division or for an accounting should operate to dissolve the trust. ' :

There was at least no false representation about this language, for it appeared in the declaration of trust upon which the permission to do business was asked, and was existent when all the stock purchases in question were made.

It is next urged that authority to expend thirty percent. of all sums collected so operated necessarily to impair the capital of the concern as to doom it to failure from the beginning, and was therefore fraudulent. What we have said about the provision in regard to a dissolution or an accounting is equally applicable to this contention.

It appears, further, that it was contemplated that a large part of the thirty per cent, was to be paid, and was in fact paid, to sales agents for selling stock. It does appear to be a large per cent., but there was no proof that it was unusually large for an enterprise of this kind. A very large amount of money must necessarily have been raised to have made the enterprise a success, and we cannot say judicially that this was a fraud on prospective investors. It is not denied that authority'was conferred to charge it.

The prospectus was filed with the Bank Commissioner in connection with the other papers in the case, and in this prospectus it was stated: ‘ ‘ There is no preferred stock or bonds. Every shareholder has equal rights and privileges, and all shares have equal earning capacity. This company will be controlled by a board of trustees or directors who are selected by the shareholders.”

This does not appear to have been a candid statement of the facts; but we presume the Bank Commissioner considered it in connection with the recitals of the declaration of trust which he had before him when his permit was issued, and he knew, of course, that the concern would be controlled by the trustees who were therein named. ■ i

There were no preferred stocks or bonds, and the shareholders did have equal rights and privileges.

The concern was to be controlled by the trustees, who acquired their power as such under the declaration of trust, which became effective after the application for a permit was approved. This recital was intended to advise the Bank Commissioner how the concern would operate if the permit was granted, and the same thing may be said of other recitals in the prospectus filed with the Bank Commissioner in regard to the protection of shareholders and savings to them.

In regard to the specific allegations of misrepresentations which appellants testified Were made to them, it may be said that Palmer and G-oyer were, in fact, selected by the trustees as associate directors, and Palmer was selected' a member of what was designated as an advisory committee. Palmer and Coyer were given certificates showing that they had been selected as associate directors, but there was nothing in these certificates to indicate that the original trustees did not have 'the title to and control of the property. These certificates recited what the duties of the associate directors would be, to-wit: (1) To advise with the officers of the company concerning local investments; (2) to give the company such information as it may desire concerning the financial responsibility of prospective subscribers for stock living in Little Rock and vicinity; (3) to assist, by proper and consistent means, the officers and authorized representatives of the company in the sale of its shares until same had been disposed of.

The certificate given Palmer appointing him a member of the advisory committee was of similar purport.

These appointments ceased to be of value because the enterprise failed and was abandoned.

Parkin testified' that he was induced' to buy a thousand dollars of the stock by the promise that printed matter amounting to two thousand dollars would be purchased from him. As a matter of fact, the company did order printing matter from him amounting to $1,497, which paid for his stock, and the balance was -paid him in cash. But this is not a suit on his part for damages for a breach of this contract, but one for its rescission, and we do not think this shows any fraud or misrepresentation which warrants rescission. The contract contemplated that the company would continue in business, and had it done so the balance of the order might have been filled.

We have discussed the principal allegations and testimony in support thereof, which appellants contend show that the enterprise was fraudulent and entitle them to a rescission of their contracts for the purchase of the stock, and have concluded, upon the whole case, that the chancellor’s finding that the complaints are without equity is not clearly against the preponderance of the evidence.

The testimony shows that the trustees were men of good standing, and that they devoted about two years of their time in an earnest but unsuccessful effort to launch the enterprise. Stock subscriptions totaling $178,900 were received, of which $21,800 were canceled, and $107,500 were actually paid in for stock.

A statement showing the expenditure of this money was furnished Palmer, and was made an exhibit to his testimony. Much evidence was offered in regard to the items there.shown which we will not discuss. It suffices to say that the company incurred and discharged large expense in preparing to manufacture or to assemble automobiles. The company purchased a patent on a tractor, which, after investigation and experiment, was believed1 to be one which could be manufactured and sold profitably. Actual operation of a plant was begun, and, after large expense had been incurred, about twenty-six four-cylinder cars were put on the market, as well as one six-cylinder car. But, about the time, the trustees had expected to begin operations, the panic following the war, which brought ruin to so many people, came, and no more stock could be sold, subscriptions for stock were canceled by some and others refused to pay the balance due on subscriptions, and most of the sales of automobiles which were made were effected by accepting old cars in payment of new ones, and the enterprise ended in a receivership.

Much stress is laid on the fact that, at one of the last meetings held by the trustees, they entered an order on their records appropriating to themselves certain second-hand cars in payment of alleged1 balances due them from the company, and the good faith of this' transaction was called into question. It suffices to say, in answer to this contention, that, if this ■ action was unauthorized, it did not warrant the rescission. of the contracts for the sale of the-stock.

. Summarizing this testimony, we have concluded, after carefully considering it, that the testimony does not establish the contention of appellants that the-project was a fraudulent one.

In addition to the facts herein stated, there are two other outstanding facts which lead to the conclusion that the trustees were acting in good faith in soliciting subscriptions for stock. One is that they paid the debts of the concern as they went along, and the second is - the comparatively small amount the three trustees received for about two years’ work. They did receive a very large per cent, of the amount of the subscriptions paid, but the testimony shows that this was largely paid to sales agents for selling stock. If we charge the trustees with all amounts which, according to appellants, they must have received1, they did not receive compensation at all indicative of dishonesty.

It follows, from what we have said, that the chancery court properly dismissed the suits for rescission, and that finding also inures to the benefit of Anderson. In addition, it is shown that Anderson was not a trustee, but a mere employee who had no control of the business.

Affirmed.


text:
    Missouri Pacific Railroad Company v. North Arkansas Highway Improvement District.
    Opinion delivered March 2, 1925.
    1. Evidence — hearsay.—Testimony of a railroad demurrage inspector that demurrage was due by defendant road district on certain cars of gravel was hearsay where he had no personal knowledge of the time of arrival of the cars or of the alleged delay in unloading them, but drew his information from records required to be kept by the station agent.
    2. Bills and notes — eight to stop payment op deaft. — Where defendant bank issued a draft on ia correspondent bank in favor of plaintiff upon the supposition that its depositor hiad ordered a claim to ibe paid to plaintiff, upon learning that this was a mistake the bank had a right to stop payment of the draft, without becoming liable therefor, where the draft was not certified and delivered to an innocent purchaser.
    Appeal from White Circuit Court; E. D. Robertson, Judge;
    affirmed.

      Thos. B. Pryor and 11. L. Ponder, for appellant.
    A preponderance of the evidence shows both the authority of the engineer to make the settlement, as well as the ratification thereof later by the commissioners. It was therefore 'error to direct a verdict, as the evidence was conflicting. The court can only direct a verdict where from the evidence only one conclusion could be reached. 147 Ark. 206; 144 Ark. 229; 126 Ark. 427; 132 Ark. 97; 132 Ark. 508. The hank was liable after it 'accepted the demurrage bills and issue its draft to appellant. 7 C. J. 705-707; 54 Am. Rep. 50; 17 Am. Ref. 305; 160 Fed. 642; 116 Ark. 1; 10 Wall (U, S. ) 604; 217 Mass. 441; 85 Mo. 173; 120 Pac. 886; 6 Jones & S. (49) 190 ; 9 A. L. R. 960.

      Brundidge é Neely, for appellee.
    The check in question was not a certified one, nor accepted by the bank upon which it was drawn, and still was in the hands of the original holder. No rights of third parties had intervened, and, as the check was given through mistake, the bank had the right to stop payment. 7 C. J. 709 and 710; 31 N. E. 386; Ann. Cas. 1914 A. 1302; 9 A. L. R. 1069.
   Smith, J.

The appellant railroad company brought suit to recover the sum of $201 alleged to be due it for demurrage on shipments of gravel to Higginson, Arkansas, to appellee road1 district, which was engaged in building a hard-surface road in White County.

The original complaint alleged that there ivas a settlement of the amount claimed for demurrage between appellant and appellee, and that $201 was agreed upon as the amount due appellant. Later appellant filed an amended complaint making the People’s Bank of Searcy, a party defendant, it being further alleged that, after a voucher had1 been given by the road district in payment of the demurrage, the agent of appellant company surrendered the voucher to the People’s Bank, the depositaryof the district, and that the bank took up said voucher and gave its draft on a bank in St. Louis for said amount. That appellant received the St. Louis exchange for said sum in full settlement of all amounts due it by the road district, and thereafter the bank stopped1 payment of the exchange, without cause. It was also alleged that the defendant bank was also liable to appellant by reason of the exchange given appellant.

At the concliision of all the testimony the court directed the jury to return a verdict in favor of the defendants, and from the judgment pronounced thereon is this appeal.

For the reversal of the judgment it is first insisted that the road district was bound by reason of the settlement of these items made between its agent and the engineer of the district. It was shown that the company’s agent and the engineer of the district went over the files and waybills of the railroad company, and it was agreed by the engineer that the district owed The railroad $201 by way of demurrage on cars of gravel which the district had failed to unload within the time allowed for that purpose, and that, after this settlement was made, the engineer of the road district directed the cashier of the bank to pay the amount agreed upon, and that this was done by issuing to the order of the railroad St. Louis exchange.

There was no testimony, however, that the engineer of the district possessed the authority to thus bind the road district. Upon the contrary, the undisputed evidence shows that he did not possess any such authority, and, when the commissioners of the district were advised what had been done, they immediately repudiated the settlement made by the engineer, upon the ground that the district did not owe and would not pay the demurrage claimed, and both the engineer of the district and the cashier of the bank were notified that, if the St. Louis draft was paid, either the engineer or the bank would have it to lose. The payment of the draft on St. Louis was thereupon stopped by the bank.

It is insisted that the court should at least have submitted to the jury the question whether there was any demurrage due the railroad.

The only testimony, however, to support the claim for demurrage was that of a demurrage inspector for the railroad company, who lived in Little Rock, and he had no personal knowledge of the time of arrival of any of the cars of gravel or of the alleged delay in unloading them. He could only testify what the records of the station ag’ent at Higginson showed. He testified that the station agent was required to keep such records. His only knowledge of the facts was based on the showing thus made. We think this testimony was hearsay, and did not establish the fact that the district was liable for any demurrage. The agent who made these records might have used them to refresh his recollection, and might have-testified that the records were correct when made, but the testimony offered amounted to no- more than a detailed showing as to what the records disclos-ed. However, the witness admitted that he knew nothing about any of the cars except what the records showed.

The testimony offered on behalf of the district was to the effect that there was no demurrage due the railroad.

It is next insisted that the bank was liable after it accepted1 the demurrage bills and gave its draft to the railroad company, and cases are cited as to the binding effect of the certification of the draft by the bank.

We think, however, that those cases do not apply to the facts of this case. The exchange drawn by the defendant bank was not a certified check, nor had it been accepted by the bank upon which it was drawn, nor had it passed into the hands of an innocent third1 party.

The defendant bank issued the check to the railroad upon the assumption that the road district had directed that the claim for demurrage be paid. But this was shown to be a mistake. The road district did not desire any -part of its funds held by the bank as its depository to be appropriated to the payment of this claim, and there was therefore no consideration to support the check drawn by the defendant bank on its St. Louis correspondent, and it had the right to stop its payment without becoming liable for the amount thereof on that account.

The case of Taylor v. First National Bank of Minneapolis, 138 N. W. 783, Ann. Cas. 1914A, 1302, was one in which the drawer of a check had ordered payment stopped on the ground that the payee had obtained it from the drawer by fraud and without consideration. It was there insisted that, inasmuch as a check is a pro tanto assignment of the funds of the drawer on deposit with the drawee bank, the drawer could not stop payment or revoke the authority of the bank to pay, and that, so far as the drawer is concerned, the money belongs to the payee. After pointing out that the court was not considering a check which had been transferred to a bona fide holder for value, it disposed of the contention stated by saying: “We do not think the decisions of this court point to the conclusion contended for by appellant, nor do those of any other court committed to the doctrine that a check is an assignment pro tanto of a depositor’s funds, unless it be that of Illinois.”

The court further said that it saw no good reason for a rule of business or of law which would throw upon the bank upon which a check was drawn the duty of determining, at its own peril, who is entitled to the funds represented by a check, after notice from the depositor that the instrument by which the payee claims the fund is for some reason invalid.

This case is extensively annotated, and many cases are cited which support the conclusion announced by the Supreme Court of Minnesota.

In the case of Tremont Trust Co. v. Burack, 9 A. L. R. 1067, 126 N. E. 782, it was said by the Supreme Judicial Court of Massachusetts that, “by the great weight of authority, the drawer of a check retains the right to countermand1 its payment at any time before it is paid or is certified and delivered to a bona fide holder for value.”

iWe conclude therefore that defendant bank was not liable for the amount of the check on St. Louis by stopping its payment, as it had the right to do so after being notified that there was no consideration to support it.

No error was committed in directing a verdict for the defendants, and the judgment is affirmed.


author: HUMPHREYS, J.

text:
    Missouri Pacific Railroad Company v. Henry.
    Opinion delivered March 2, 1925.
    1. CARRIERS — negligence of passenger. — W here a passenger entered the caboose of a local freight train, and, while the train was switching in the yard, was told by the trainmen that when they got through switching they would stop at the depot, it was not negligence for him to debark and wait for the train at the depot.
    2. Carriers — negligence in boarding train, — Whether ¡a passenger attempted to hoard a train at the depot or at a distance Ibeyond the platform held for the jury under conflicting testimony.
    3. Carriers — negligence in boarding train. — Whether a passenger was negligent in attempting to hoard a moving train held for the jury where the evidence was conflicting as to whether the train was moving slowly or rapidly.
    4. Carriers — presumption of negligence. — Where a passenger is injured by a moving train, it is 'prima, facie evidence of negligence on the part of the railroad company, under Crawford & Moses’ Dig., § 8562.
    5. Carriers — junction of railroads. — Under Crawford & Moses’ Dig., § 960, requiring all passengers trains to depart from a depot “at all junctions where two or more trains connect,” the word “junction” means a place where two or more tracks of same or different railroads meet or cross.
    6. Costs — attorney’s fee. — Under Crawford & Moses’ Dig., allowing an attorney’s fee to the successful plaintiff in an action against a railroad for “violation of any law regulating the transportation of freight or passengers,” the allowance of an ■attorney’s fee under this statute is in the nature of a penalty, and should be restricted to suits based exclusively upon a violation of some .statute, and not applied to suits involving the issues of negligence and contributory negligence.
    Appeal from. Randolph Circuit Court; John C. Ashley, Judge;
    affirmed.

      Thomas B. Pryor and II. L. Ponder, for appellant.
    The court should have directed a verdict for appellant. This is entirely unlike that in 110' Ark 232, relied on by appellee in the trial court. Appellee was guilty of contributory negligence and not entitled to recover in that he attempted to board a fast moving train, which was an obviously dangerous thing to do. 5 R. O. L. 680'; 43 L. R. A. 297; 9 L. R. A. (N. S.) 848; 56 S. E. 748;. 100 Mo. 194; 114 N. W. 571; 36 Ark. 867; 5 Am. Rep. 109; 92 Am. Dee. 322; 23 N. E. 973. 61 Am. Dec. 214. Instruction No. 1 was error. The fact that appellee was injured by a moving train was not prima facie negligence on the part of appellant. 75 Ark. 479. Before there could be a presumption of negligence on the part of the appellant, the plaintiff must prove that he was in the proper place. 163 Fed. 106; 40 Ark. 298; 69 Ark. 380; 82 Ark. 522; 131 ¡8. W. 958. Instruction No. 3, based on § 960, C. & M. Digest, was erroneous, as that statute imposes a penalty fine. 110 Ark. 367.

      Geo. M. Booth and Tom. W. Campbell, for appellee.
    Appellee had the right to leave the train for exercise and air, and in so doing did not lose his character as a passenger. 153 Ark. 77; 88 Ark. 225; 82 Ark. 393. It is a question for the jury to determine whether or not it constituted contributory negligence to hoard a slowly' moving train. 110 Ark. 232; 153 Ark. 77; 82 Ark. 393. Proof that injury was caused by the movement of a train makes a prima, fade case of negligence against Company. 119 Ark. 179; 88 Ark. 12; 73 Ark. 548; 105 Ark. 180. Knobel was a junction, such as is referred to in § 960 C. & M. Digest, and it was proper to give instruction No. 2. Contributory negligence would not defeat recovery, but only diminish it. 153 Ark. 77. Plaintiff was entitled to an attorney’s fee under § 851, C. & M. Digest.
   HUMPHREYS, J.

Appellee brought suit against appellant in the circuit court of Randolph County to recover damages in the sum of $3,000 on account of an injury received while attempting to 'board its mixed freight and passenger train at Knobel, en route to Peach Orchard. The complaint alleged, in substance, that, on the 5th day of October, 1923, appellee was at Knobel, a junction station on the line of appellant’s railroad, and that he purchased a ticket at Knobel for Peach Orchard, entitling him to ride as a passenger on the local freight train running 'between said towns; that, at the time, said train was switching at Knobel, and that he was informed by those operating the train that, after they got through switching, they would stop at the depot for passengers; that said train passed the depot without stopping, and, while same was moving slowly, he attempted to board the caboose, and was jerked by the train, thrown to the platform, and injured'.

Appellant filed an answer denying the material allegations of the complaint, pleading contributory negligence and assumption of the risk by appellee in attempting to board the train.

The cause was submitted to the court upon the pleadings and testimony, which resulted in a verdict and consequent judgment against appellant for $2,000, from which is this appeal.

The first insistence of appellant for a reversal of the judgment is that the court erred in refusing to instruct a verdict for it, because appellee left the caboose after purchasing his ticket and boarding the train; second, that appellee was not at the depot when the local freight train came by, and that he attempted' to board the train 150 feet north of the station platform; and, third, that appellee attempted to board the train when it was moving fifteen miles an hour, and, in doing so, was guilty of such contributory negligence as precluded him from recovering for the injury.

The undisputed testimony shows that appellee arrived at Knobel on an incoming train at 1:30 o’clock p. m. ; that he immediately purchased a ticket and boarded the mixed train, then switching in the yard, for Peach Orchard, the point to which he was going; that it was not very light in the caboose, and, after ascertaining that the train would 'stop at the depot for passengers and wiould not leave for forty-five minutes, he got out of the caboose and went up to the depot to await its arrival. We do not think it was incumbent upon appellee to remain in the caboose while the train was being switched about in the yard. It was his right and privilege to debark and wait for the train at the depot. This court held in the case of St. L. I. M. & S. R. Co. v. Glossup, 88 Ark. 225, that “a passenger is not compelled to continuously remain aboard the train until he reaches his destination. He may, at regular stopping places, leave the train for refreshment, exercise, or other matters of convenience or necessity, provided he exercises proper care.” The same doctrine was announced in the recent case of Missouri Pacific Railroad Co. v. Kennedy, 153 Ark. 77.

The second reason assigned by appellant in support of its contention that it was entitled to a peremptory instruction is not tenable, for thfe testimony is in sharp conflict as to whether appellee attempted to board the caboose at the depot. The testimony most favprable to appellee upon the point is that he attempted to board the train almost in front of the depot, and where passengers usually get on the train.

The third reason assigned by appellant in support of its contention that it was entitled to an instructed verdict is likewise not sound, because the testimony is in conflict as to whether the train was moving slowly or rapidly when appellee attempted to board the caboose. The testimony most favorable to appellee upon the point is that the train failed to stop at the depot for passengers, and that, when he attempted to board the caboose, the train was moving not to exceed four or five miles an hour. This court has held in several cases that the question of whether or not an attempt by a passenger to board1 a slowly moving train constitutes contributory negligence, is one for the jury. Arkansas Cent. Rd. Co. v. Bennett, 82 Ark. 393; St. L. I. M. & S. R. Co. v. Green, 110 Ark. 232; Mo. Pac. Rd. Co. v. Kennedy, 153 Ark. 77.

The second insistence of appellant for a reversal of the judgment is because the court instructed the jury to the effect that, if a passenger is injured by a moving train, it is prima fade evidence of negligence on the part of the railroad company operating the train. The instruction is based upon § 8572 of Crawford & Moses’ Digest, .and is correct. Barringer v. St. L. I. M. & S. R. Co., 73 Ark. 548; St. L. I. M. & S. R. Co. v. Fambro, 88 Ark. 12; Huckaby v. St. L. I. M. & S. R. Co., 119 Ark. 179.

Tlie third insistence of appellant for a reversal of the judgment is because the court gave the following instruction:

'‘You are instructed that the law of Arkansas requires that all railroad' companies operating railroads in this State shall, at all junctions where two or more trains connect, require that all trains carrying passengers departing from such junctions shall depart only from the station-house or depot at such junction.”

The instruction is based upon § 960 of Crawford & Moses’ Digest, and, as given, conforms to the language of the statute. The testimony reveals that the Missouri Pacific Railroad Company owns two lines of railroad connecting at Knobel, one being the main line of the Missouri Pacific, and one a branch line known as the Para-gould and Nettle ton road. Learned counsel for appellant argues that a junction within the meaning of the statute is where main lines of different roads cross. We think “junction” as used1 in the statute means a place where two or more tracks of a railroad or railroads meet or cross, regardless of whether the tracks are owned by the same or different railroad companies. The language of the statute is “at all junctions where two or more trains connect.”

The fourth insistence of appellant for a reversal of the judgment is that the court erred in giving instruction No. 3. It is suggested that the instruction is fatally defective because it left out entirely the requirement that appellee should have exercised ordinary care for his safety, and because it was argumentative. We have read the instruction carefully and find that it fully covers the question of contributory negligence; and, while very long, it is not argumentative, but simply states the facts necessary to sustain a finding for appellee. We do not commend the form and length of the instruction, but find no inherent error in the subject-matter contained therein.

We do not regard tlie other suggestions of error contained in appellant’s brief as well grounded, so shall proceed to discuss the claim of appellee on his cross-appeal for the allowance of a reasonable attorney’s fee. The trial court overruled appellee’s motion for the allowance of an attorney’s fee. The claim is based upon § 85Í of Crawford & Moses’ Digest, which is as follows:

“In all actions at law or suits in equity against any railroad company, its assignees, lessees or other person or persons owning or operating any railroad in this State (or) partly therein, for the violation of any law regulating the transportation of freight or passengers by any such railroad, if the plaintiff recover in any such action of suit, he shall also recover a reasonable attorney’s fee, to be taxed up as a part of the costs therein, and collected as other costs are or may be by law collected. ’ ’

The allowance of an attorney’s fee under this ¡statute is in the nature of a penalty, and should be restricted to suits based exclusively upon a violation of some ¡statute ¡and not to suits involving issues of negligence and contributory negligence. This suit involves other issues than a mere failure to stop the train at. the depot in Knobel to receive passengers, as required by § 960 of Crawford & Moses’ Digest.

The judgment is therefore affirmed upon both the direct and cross-appeal.


author: Humpheeys, J.

text:
    Norris and Hamlett v. State.
    Opinion delivered March 2, 1925.
    1. CRIMINAL law — accessory.—Mere silence, in the absence of a duty to act, will not constitute one an accessory before or after the fact.
    2. Criminal law — concealment oe crime. — Whether a State’s . - witness who concealed his knowledge of defendants’ commission of crime of murder, while he was 'a member of the coroner’s jury-investigating it, was an accessory before or after the fact, so as to require corroboration of his testimony held for the jury on proper ■instruction, as it was his duty to use iall proper means to ascertain the murderer’s identity.
    3. Criminal law — accomplice.—¡An accessory before or after the fact is an accomplice, on wihose uncorroborated testimony the accused cannot be convicted.
    Appeal from Polk Circuit Court; B. E. Isbell, Judge;.
    reversed.

      Norwood & Alley, for appellant.

      II. W. Applegate, Attorney General, John L. Garter and Darden Moose, Assistants, for appellee.
   Humpheeys, J.

These are companion cases, each appellant having keen indicted, tried, and convicted in-the circuit court of Polk County for the crime of murder in the first degree, and, as a punishment for the crime, each was adjudged to serve a life term in the State Penitentiary. Each prosecuted an appeal to this court, and the cases were abstracted land briefed separately, but one opinion will suffice in the two cases, as the convictions are for the same crime. The two appellants and Emmett Norris, brother of Wood Norris, were charged with killing 'Smith Wilcox and his wife, Nannie Wilcox, oil the night of April 30, 1924, at their home in said' county.

On Thursday afternoon , May 1, 1924, Smith Wilcox and his wife were found dead in their home, it appearing from their surroundings that they had been brutally murdered1 by robbers. The murder was perpetrated and robbery effected on Wednesday night. Immediately after the discovery of the dead bodies, a coroner’s jury was impaneled. Lee Crawford, upon whose evidence the appellants were convicted, served as a member of the coroner’s jury, but concealed the information he possessed relative to the commission of the crime by appellants, according to his subsequent testimony. Appellant Ted Hamlett was suspected of having been implicated in the crime, and was arrested the following Sunday. He was interrogated by the prosecuting attorney, and released on Tuesday. On the d'ay of his release, Emmett and Wood Norris were charged with the crime, and they, together with appellants, who had been rearrested, were held in cnstody, subsequently indicted, and convicted on the testimony of Lee Crawford. He testified, in substance, that he was making his home with Emmett Norris before and at the time of the murder; that, two or three weeks before the crime was committed, Wood and Emmett Norris discussed the robbing of Mrs. Nannie Wilcox, in the presence of appellant himself and Mrs. Norris, at her home, and that appellant expressed a willingness to help commit the crime; that Mrs. Norris remarked that it would be an easy job; that witness declined to assist, stating that he was not mean enough to undertake it; that, on Wednesday evening prior to the crime, Wood Norris came to the home of Emmett Norris, and asked Emmett if he was ready to go help get that money, and Emmett said that he would go; that witness was again invited to go, but declined on the ground1 that the old people had got their money honestly; that Wood Norris said that appellant was to meet them at Jim Hill lane on the way to the home of Wilcox; that witness went to bed between eight and nine o’clock, and slept soundly until he was called to breakfast the next morning; that, before witness was summoned on the jury, Wood Norris and appellant came to him, at the southwest corner of Wilcox’s garden, before the coroner’s inquest, and told him that they had killed the old folks to get their money; that they both cautioned him not to say anything about it; that the reason he did not reveal the information he had concerning the crime to the jury was that he was afraid of the boys; that he had as much protection when on the jury as he had when he later revealed the information.

The main contention of appellants for a reversal of the .judgment is the refusal of the court to instruct the jury that one charged with a felony cannot be convicted on the uncorroborated testimony of an accomplice, and that the corroboration is not sufficient which merely shows the commission of the offense and circumstances thereof. The argument is made by appellants that the evidence tends to show that Lee Crawford was an accessory both before and after the fact, and, this being the case, the court erred in holding as a matter of law that Lee 'Crawford was not an accomplice. On the other hand', learned attorneys for the State make the argument that the undisputed evidence reveals that all Lee Crawford did was to conceal the fact that a felony was about to be committed, and later to conceal the fact that appellants had committed the crime of murder, and that such concealment was not to shield appellants, but through anxiety for his own safety. It is true that mere silence in the absence of a duty to act will not constitute one an accessory before or after the fact. As a member of the coroner’s jury, however, a duty rested upon Lee Crawford to use all proper means to ascertain who murdered Smith Wilcox and Nannie Wilcox. He claims to have known at that time who planned the robbery, and the physical conditions surrounding the dead bodies indicated that the murders resulted' from an attempt to rob Smith and Nannie Wilcox. The failure to perform his duty as a juror shielded, for the time being, appellants from arrest and prosecution. The jury might have reasonably inferred from the statements that he withheld the information for the purpose of shielding his confederates, and not through fear for his own safety. The jury might also have reasonably inferred, from his failure to perform his duty as a juror, when considered in connection with the fact that he slept soundly with the full knowledge that the robbery was to be committed in the neighborhood, that he was also an accessory before the fact. Such an inference might have been drawn1 from his conduct and close association with appellants. Since such inferences might have been drawn from the testimony, the issue became one of mixed law and fact, and it was the duty of the court, under proper instruction, to submit the issue of whether Lee Crawford was an accessory before or after the fact to the jury for determination. Melton v. State, 43 Ark. 367; Edmonson v. State, 51 Ark. 115; Green v. State, 51 Ark. 189. It is the law that an accessory before or after the fact to a felony is an accomplice. Stevens v. State, 111 Ark. 299; Murphy v. State, 130 Ark. 353.

Many other alleged assignments of error have been argued relating to the refusal of the court to continue the cause, the selection of the jury, and the admissibility of the testimony, which will not likely arise on a new trial of the cause, and for that reason it is unnecessary to discuss them.

All other instructions given by the court were substantially correct, and fully covered the cases.

On account of the error indicated the judgments are reversed, and the causes are remanded for new trials.


author: Per Curiam.

text:
    Stolz v. Patee.
    Opinion delivered March 9, 1925.
    Appeal and error — dismissal for nonjoinder op party. — Crawford & Moses’ Dig., § 2144, requiring all parties' against whom judgment is rendered to join in an appeal helé not to require dismissal of an appeal joined in by two only of three defendants, where time for appeal by the third defendant had expired, as the intent of the statute was to protect the winning party from successive appeals.
    Appeal from Union Chancery Court, First Division; J. ¥. Stevens, Chancellor;
    motion to dismiss appeal overruled.

      McNally & Sellers, for appellants.

      Henry Stevens, for appellee.
   Per Curiam.

Appellee instituted this action in the chancery court of Columbia County to recover on a promissory note executed to him by A. L. Meisner as principall, and appellant A. H. Stolz as indorser or surety, and also against Hattie W. Meisner, wife of said A. L. Meisner, to procure the setting aside of a deed alleged to have been made in fraud of A. L. Meisner’s creditors. On the hearing of the cause all the relief prayed for in appellee’s complaint was granted. A personal decree was rendered against A. L. Meisner and appellant Stolz for the amount of the note. The deed to appellant Hattie W. Meisner was set aside as a fraud on her husband’s creditors, and the lands thus conveyed were decreed to be subject to a lien for appellee’s debt. Appellants A- H. Stolz and Hattie W. Meisner prayed an appeal, and have properly perfected the appeal by filing the transcript here within the time prescribed by law. A. L. Meisner did not appeal, and his time for appeal has expired.

Appellee filed -a motion to dismiss the appeal on the ground of the nonjoinder therein of the other defendant, A. L. Meisner. Appellee invokes the operation of the statute (Crawford & Moses’ Digest, § 2144 et seq.) which provides in substance that all persons against whom a judgment may have been rendered shall join in the appeal, except where it may be otherwise provided by law, and that, if they are omitted1, the appeal “shall be dismissed on motion of the appellee upon due proof of the fact, unless one or more of such persons be allowed by the court to proceed.” The-statute further provides 2145) that, where appellants show an excuse for not joining the other parties in the appeal, the court shall make an order directing the person so refusing to appear in court within such time as may be reasonable, and .join in the appeal; and in another section (2150) the statute provides that, if the person named in the order does not'appear -and join in the -appeal, “the-default of such person shall be entered, and he shall thereby be forever precluded from bringing any -appeal or writ of error on the same judgment, and the cause shall proceed in the same manner as if such person had -been named in such appeal and the proceedings thereon.” It is obvious from the language of the' statute that it was intended merely to protect -the successful party in a judgment or decree from separate appeals prosecuted by losing parties, where there is more than one of them. It is not the purpose of this statute to cut off the right of appeal of either of the losing parties, either separately or jointly. As long as the right of appeal exists as to all of the unsuccessful parties, the successful party has a right to compel them all to join in the appeal, and it imposes upon either one of the appealing parties the duty of joining the others in the appeal, or at least bring them before the court so that they can be barred of an appeal unless they prosecute one.

Appellants have responded in the present case by showing that they requested said A. L. Meisner to join in the appeal, but that -he refused to do so. The time within which an appeal could be taken has expired, and it would serve no useful purpose for the court to require that A. L. Meisner be brought into court to determine whether or not he desired to appeal, for the two appellants have an absolute right to appeal, and, as we have already seen, the statute does not make that right conditional upon the prosecution of an appeal by other unsuccessful parties in the decree. The purpose of the statute has been served now, or, rather, its operation is inapplicable for the reason that the time for the other party to appeal has expired, and the appellee is in no danger of being subjected to another appeal.

The motion to dismiss is therefore overruled.