text:
    Solomon v. First National Bank.
    Opinion delivered March 15, 1926.
    1. Partnership—nontrading firm—power of member to issue negotiable paper.—One seeking to hold a nontrading or noncommercial partnership liable on a note, given by one member in the name of the firm' has the burden of showing that the instrument was executed by the authority or with the knowledge and consent of all the partners, or that it was necessary in the course of their business, or usual in similar partnerships, or that the act of such partner has been ratified by the firm.
    2. Partnership—custom of issuing negotiable paper.—Proof df the execution of notes in payment of partnership indebtedness for supplies for their farm would not, of itself, support a finding that authority existed to issue notes for other purposes if the partnership was in fact a nontrading one.
    • 3. Appeal and error—exclusion of evidence.—That the trial court erred in excluding evidence will not be considered on appeal where it is not shown what the evidence would have been, bad the witness been permitted to answer.
    Appeal from Phillips Circuit Court; E. D. Robertson, Judge;
    reversed.

      John I. Moore, Sr., and J. G. Burke, for appellant.

      Brewer é Cracraft and W. G. Dinning, for appellee.
   Smith, J.

This suit was brought to enforce the collection of a note dated October 28, 1920, due ninety days after date, signed “Solomon & Jarman, by Amos Jar-man,” payable to the order of R. B. -Campbell, and by the payee indorsed, for value, to the First National Bank of Helena, Arkansas, the plaintiff in the case.

The president of the bank testified that Campbell was extensively engaged in operating farm property, and that it was necessary from time to time for Campbell to borrow large sums of money. That the bank bought a note from Campbell and placed the proceeds to Campbell’s credit, and that this note was renewed from time to time until October 28, 1920, when the last renewal was made, and that the renewal note then executed was the note in suit. The witness did not remember whether the interest had been paid by Campbell or by Jarman, but the interest was paid at each renewal. 'The witness knew nothing about the transaction between Campbell and Solomon & Jarman evidenced by the note.

On December 17,1917, the bank had bought a note of Jarman & Solomon, payable to N. Straub & Sons, for $3,902.12. This note was renewed from time to time, and was .paid on May 27, 1919. The bank had also bought another note signed by Jarman & Solomon, payable to Straub & Sons, dated March 24, 1917, for $1,375.88, and this note was paid November 15, 1917- The bank had also bought a note signed by Jarman & Solomon, to the order of "W. N. & S. Straub, dated February 6, 1919, for $1,344.47, which was paid November 14, 1919. The bank had no knowledge of any defect in the note here involved. The president of the bank further testified that it is customary for farmers and planters, especially those operating on a large scale like Jarman & Solomon, to borrow money from time to time in making and gathering their crops. The witness did not see the note signed which the bank bought, but the signature was that of Amos Jarman, who was a member of the copartnership of Jarman & Solomon. The style of the copartnership was Jarman & Solomon, and the witness did not notice that the note in suit was signed Solomon & Jarman. Straub & Sons sold supplies and feed and hay to farmers and others, but Campbell, who was a lawyer, was not in business except to furnish tenants on his own lands, for which purpose he borrowed money from other people. Campbell was a director in and tbe attorney for the plaintiff bank. Jarman always renewed tbe note, and Campbell indorsed it. Jarman died in November, 1920.

C. E. Nicholson testified that from 1913 to 1919 he was employed as farm manager by Jarman & Solomon in the cultivation of a farm, of about six hundred acres. The tenants on the place were furnished supplies out of the commissary of Jarman & Solomon on' the place, and the copartnership owned enough stock • and farming-implements to cultivate the land. From 150 to 400 bales of cotton were usually grown on the farm, and a gin was operated on the place where the cotton was ginned. Some outside cotton was ginned, and sometimes the firm of Jarman & Solomon bought the seed after ginning the custom cotton. Most of the tenants farmed as share croppers, and their cotton and cottonseed were usually bought and paid for at the gin by Jarman & Solomon, and the cotton was usually shipped to Helena once each week. The' commissary on the place was kept open one day each week, when plantation supplies were sold the tenants. The stock of supplies at the commissary average about $300, and was operated solely for the purpose of furnishing the tenants on the place. Most of the supplies for the firm were bought from Straub So Sons and the Helena Grocery Company, and nothing- had ever been bought by the firm from Campbell.

¡S. Straub of the Straub firm testified that it was customary for farmers to borrow money from the banks to operate on; that the firm of Jarman So Solomon bought supplies from witness’ firm, usually on a credit of from thirty to ninety days, and note would be given in payment. The notes so given by the firm of Jarman So Solomon, which were executed by Jarman, were sold to the plaintiff bank, and later paid by the firm of Jarman So Solomon. The notes of Jarman & Solomon so given were for merchandise and supplies used on the plantation.

Defendant Solomon testified that the copartnership of Jarman & Solomon was formed in 1912 for the purpose of farming about 650 acres of land, and tbe farming-operations were carried on by a farm manager, and the money borrowed for tbe copartnership business was borrowed from tbe Security Bank & Trust Company, and tbe copartnership bad never bad any business'with tbe plaintiff bank. Witness knew about the execution of tbe notes to tbe Straub firm. These notes were for farm supplies. Tbe firm of Jarman & Solomon bad never bad a business transaction with 'Campbell, and was never indebted to Campbell at any time. When Jarman died, witness qualified as administrator of Jarman’s estate, and found among Jarman’s papers a note to tbe effect that Jarman bad loaned Campbell tbe sum of money evidenced by tbe note in suit. This was tbe first information witness bad of tbe transaction. Tbe firm of Jarman & Solomon kept books showing tbe business of tbe firm, and there was no entry on tbe books of tbe copartnership showing this loan. Witness Solomon further testified that the copartnership was engaged in farming; that it did not buy or sell notes, or do any other commercial business not connected with tbe operation of tbe farm; that it did not operate a store or other mercantile business, and that a small commissary was maintained for tbe sole purpose of supplying tbe tenants on tbe farm; that a gin was installed for tbe use of tbe farm, and, while some outside cotton was ginned, it did not amount to much; that tbe gin was a necessary incident to tbe operation of the farm, and tbe stock of merchandise carried in tbe commissary consisted of staple articles, such as meat and flour, to be furnished to tbe tenants on tbe place.

At tbe conclusion of tbe introduction of tbe above testimony tbe court directed tbe .jury to return, a verdict for tbe bank, which was done, and from tbe judgment pronounced on that verdict is this appeal.

We think tbe above testimony made a case which should have been submitted to tbe jury. The evidence appears to be undisputed that tbe note to Campbell was not for a partnership indebtedness or transaction, and it can not be said to be an undisputed fact that Solomon was aware of this transaction or had in any manner ratified it. It is true there had been several renewals of the note, but Solomon testified that he was as ignorant of that fact as he was of the original transaction,»and, according to Solomon’s testimony, the copartnership was essentially a nontrading one. It is true that Solomon admitted the copartnership had borrowed money and had executed notes, but he testified that in each instance of which he had knowledge this was done in payment of supplies required in the operation of the farm. This may have been more than a mere farming partnership, but we do not think it can be said that no other inference can reasonably be drawn from the testimony.

In the annotator’s note to the case of Gordon v. Marburger, 9 A. L. R. 369, it is said: “It is well established that a member of a nontrading or noncommercial partnership has no power to execute negotiable paper in the firm name, unless it is the common custom or usage, or is necessary for the transaction of business of the firm, or unless other facts are shown to exist, sufficient to warrant the conclusion that the acting partner had been invested by his copartners with the requisite authority, or that the firm has ratified the act by receiving the benefit of it. 20 R. O. L. 900. A partnership for the purpose of working land or raising crops being a nontrading partnership, the general rule naturally follows that a member of such a firm has no implied authority to bind the firm by the execution of negotiable paper.”

At § 111 of the chapter on partnership, 20 R. C. L. page 901, the law is stated as follows: “The restrictions surrounding the right of noncommercial partnerships to issue negotiable paper are such that one seeking to hold such a firm liable on a note given by one member in the name of the firm has the burden of showing that the instrument was executed by the authority, or with the knowledge and consent, of all the partners, or that it was necessary in the course of their business, or usual in similar partnerships, or that the act of such partner has been ratified by the firm.”

Onr own ease of Alley v. Bowen-Merrill Co., 76 Ark. 4, agrees with these general statements of the law. In that case it was said: “It is generally held that non-trading firms have no power to borrow money and sign negotiable paper, and that one member of such firm has no power to bind the other members by signing the firm name to such paper. Worster v. Forbush, 171 Mass. 423; Smith v. Sloan, 37 Wis. 285; 22 Am. & Eng. Enc. Law, p. 154, note (Lawyers). This is because such transactions are not generally within the legitimate scope of the business of such firms. There is no reason why such firms should not be bound by the acts of their members within the scope of their business. This would be true, even in the case of negotiable paper, where it was shown that such paper was executed within the scope of the firm’s business. 1 Bates, Part., § 343. Mr. Bates, after an exhaustive review of the authorities on the powers and liabilities of nontrading partnerships, says: ‘Each partnership must stand largely on. the nature of its peculiar business, and no rule of universal application is possible.’ This is the correct doctrine.”

It is insisted for the affirmance of the judgment of the court below that the testimony shows such long continued custom on the part of Jarman to execute paper in the name of the firm that authority so to do will be implied. This too is, in our opinion, a question of fact properly for the jury. In this connection we take occasion to say that proof of the execution of notes in payment of partnership indebtedness for supplies for a farm would not, of itself, support a finding that authority existed to issue notes for other purposes if the copartnership is, in fact, a nontradiug one.

A witness named Sanders was called to testify in behalf of the defendant Solomon, and was shown the note in suit, and was asked whether the signature was in the handwriting of Jarman. An objection to this question was sustained, and the witness was not permitted to answer, and an exception was duly saved to that ruling. This assignment of error may be disposed of by saying that it was not shown what the witness’ answer would have been had he been permitted to answer.

Under the facts stated, the court should have submitted the questions: (a)' whether the copartnership was a nontrading one, and, if so, (b) whether there had been a custom for Jarman to use the firm credit in a manner to imply authority; and for the error in not submitting these questions the judgment of the court below must be reversed and the cause remanded, and it is so ordered.


source: Caselaw Access Project

author: Smith, J.

license: Public Domain

text:
    Parker v. State.
    Opinion delivered March 15, 1926.
    Criminal law-former testimony of absent witness.—The former testimony of an absent witness is inadmissible in a criminal case upon a mere statement of the prosecuting attorney that he was informed that the witness was sick and unable to be present, and a statement of defendant’s attorney that he was satisfied that the witness was sick; the nature of the illness should be shown and its probable duration.
    Appeal from Crawford Circuit Court; James Cochran, Judge;
    reversed.

      E. D. Chastain, for appellant.

      E. W. Applegate, Attorney General, and Darden Moose, Assistant, for appellee. .
   Smith, J.

Appellants were tried and convicted in the court of a justice of the peace for unlawfully transporting intoxicating liquors, and appealed. At the trial, on the appeal in the circuit court, the State was permitted to prove what the testimony of one Jim Baldridge had been in the trial before the justice of the peace. Upon objection being made to the admission of this testimony, the following colloquy occurred between the prosecuting attorney and counsel for the defendants; Prosecuting attorney: “If the court please, counsel for defendants stated to me last evening, after we had adjourned court, that Jim Baldridge was not here, that it was his information that Baldridge was at home sick and unable to be here. He was subpoenaed in this case, and he lives in this county about twenty miles east of here. ’ ’ Counsel for defendants: “I am satisfied that he is sick, and he was subpoenaed by both parties.”

The testimony of the absent witness was held competent, and defendants duly excepted. No other testimony was offered showing the character of the illness of the absent witness, or its probable duration.

The testimony of this witness was highly material, and its necessary effect was to show the guilt of the accused, and without this testimony it is doubtful whether the other testimony is legally sufficient to support the verdict of guilty which was returned by the jury.

It is our opinion that a proper foundation was not established for the admission of this testimony.

At § 143 of the chapter on evidence, 10 B. C. L., page 966, it is said: “The mere fact that testimony has been given in the course of a former proceeding between the parties to a case on trial is no ground for admitting it in evidence. The witness must be produced under such circumstances just as much as one testifying de novo. If for any reason, however, it is impossible to produce the witness and have him testify in the subsequent proceeding, the rule may be otherwise. The textbooks quite generally state broadly that the evidence of a witness given at a former trial or examination between the same parties, may be introduced if the witness has since died, become insane or sick, and hence unable to testify, is out of the jurisdiction, or has been kept away from the trial by the opposite party. * * * The question whether a witness is ‘inaccessible,’ within the meaning of a statute permitting the introduction of former testimony given by a witness who is inaccessible, is, under all the circumstances of the case, a question for determination by the trial court in the exercise of a sound discretion. Temporary illness of the witness, sufficient to prevent him from appearing in court, is, as a rule, insufficient ground for the admission of such testimony.'”

In 2 Jones on Evidence, 792, it is said: “In harmony with the views expressed in the preceding section, such testimony (that of absent witnesses) has been admitted when the witness was unable to testify by reason of sickness, mental incapacity, or advanced age. The courts were slow and cautious in relaxing the rule in cases of sickness. * * * 'The condition of the witness, the nature of the ailment, its past and probable future duration, and what efforts could have been made to take a deposition, must be clearly established. A' certificate from the attendant physician is not enough. The court has to make a finding of the fact which is conclusive and is entitled to have all the circumstances placed before it. * * * Although the sickness of a witness is generally only ground for the postponement of the trial, the sickness may be of such a character as to amount to a permanent disability to testify; and in such case it would be within the reason of the rule to admit the testimony given on the former trial, and this has been recognized as an exception to English statutes. ’ ’

In the case of Smith v. Moore, 62 S. E. 892, the Supreme -Court of North Carolina quoted with approval the following statement of the law from the case of Wabash R. Co. v. Miller, 158 Ind., 174, 61 N. E. 1005: ‘ The admissibility of such evidence constitutes an exception to the general rule of exclusion of hearsay evidence, and rests upon a kind of legal necessity springing from an apparent impossibility or impracticability of procuring the testimony of the person from whom the information emanates. It is therefore incumbent upon the party offering such testimony to show affirmatively the existence of all facts necessary to the bringing of the secondary evidence clearly within the exception, and, unless this is done, the evidence should -be excluded.”

All the courts which have held that such testimony may be admitted at all, recognize the admission of the testimony as a violation of the rule against hearsay evidence, an exception made necessary to prevent the loss of material testimony, but, to render such testimony competent, a prima facie showing, at least, must be' made that otherwise the testimony cannot be procured in the orderly administration of justice; in other words, that, if it is not impossible to otherwise secure the testimony, it is impracticable or improbable that it can be obtained, due regard being had to the proper dispatch of the business of the courts.

Here, however, there was no showing as to the nature of the illness of the absent witness, nor any showing as to its duration or probable continuance. The attendance of the witness might, so far as there was any showing to the contrary, have been had the next day, or at a later day during the term. Under these circumstances we think an insufficient showing of necessity was made, and the testimony of the absent witness should not therefore have been admitted, and for the error in admitting it the'judgment must be reversed, and the cause will be remanded for a new trial.


author: Humphreys, J.

text:
    Andrews v. State.
    Opinion delivered March 15, 1926.
    Intoxicating liquor—sale—EViDENCE.^-On a prosecution for selling whiskey, evidence held to sustain a conviction, though the alleged buyer testified that he did not consider that he was buying from defendant.
    Appeal from Columbia Circuit Court; L. 8. Britt, Judge;
    affirmed.

      A. D. Stevens and Joe Joiner, for'appellant.

      H. W. Applegate, Attorney General, and Darden Moose, Assistant, for appellee.
   Humphreys, J.

Appellant was indicted, tried, and convicted in the circuit court of Columbia County for the crime of selling whiskey, and was adjudged to serve a term of one year in the State Penitentiary as a punishment therefor, from which he has duly prosecuted an appeal to this court.

A reversal of the judgment is sought upon the alleged ground that the evidence is insufficient to support it. The contention is made that the State is bound by the statement of the prosecuting witness, J. D-. Thomas, to the effect that he did not consider the transaction between appellant and himself a sale and purchase of whiskey. The facts detailed by witnesses control juries in arriving at verdicts, and not the conclusions or opinions deduced therefrom by lay witnesses. J. D. Thomas testified, in substance, to the following facts:

He came to Magnolia in search of whiskey, and talked to appellant Saturday night relative to procuring some. Appellant informed him that he had not used whiskey for a long time on account of kidney trouble, but that he thought a man was selling whiskey in the woods near his home. The next day, Sunday, he went in his car to appellant’s home in company with him and prevailed upon him to search for the whiskey in the woodland. Appellant led the way; and, after passing through a chicken yard back of his house, they crossed the fence and entered the woodland. After following a trail quite a distance, appellant found one-half gallon of whiskey in a stump hole. Witness remarked that he wished he could find some more; whereupon appellant resumed the search and soon found another one-half gallon in the ground. Witness placed $11 on a stump and took the whiskey. Appellant then showed him how to get out of the woodland to his car, which he had parked on the pike. As witness neared the car, he was arrested by a deputy sheriff. The deputy sheriff testified that in the afternoon he searched the house of appellant and found no whiskey, but, in following the trail through the woodland back of the house, he found several lots of whiskey in holes in the ground.

Although it is true that J. D. Thomas stated that he did not consider he bought the whiskey from appellant, the circumstances warranted exactly the opposite conclusion. The only reasonable conclusion that could have been drawn from the circumstances attending the transaction was, that appellant had the whiskey hidden in the places where he got it, and that he appropriated the money that was left by Thomas on the stump in payment for same. The transaction smacks of a subterfuge. The whiskey was hidden, and readily found by appellant. The name of the supposed owner was not disclosed, and no one appeared upon the scene to deliver the whiskey and accept the money except appellant.

We regard the evidence as ample to support the only reasonable theory, that appellant was the owner of the whiskey, and made a sale of it to J. D. Thomas.

No error appearing, the judgment is affirmed.


text:
    Sanders v. Lovelace.
    Opinion delivered March 15, 1926.
    Corporations—failure of officers to file annual report.—Under §§ 1715, 1726, Crawford & Moses’ Dig., fixing a primary and absolute liability upon the president and secretary of a corporation for q.11 debts contracted by the corporation during the time they are in default in filing the annual report of the condition of the corporation’s business, this liability accrues in favor of stockholders acquainted with the financial condition of the corporation who have extended credit to it.
    Appeal from Clay Circuit Court, Eastern District; G. E. Keck, Judge;
    affirmed.

      Ward S Ward, for appellant.

      Gautney & Dudley, for appellee.
   Humphreys, J.

Appellee, as administrator of the estate of S. G, Lovelace, deceased, brought this suit against appellants in the circuit court of Clay County, Eastern District, to recover $1,642.25, with interest according to the tenor thereof, evidenced by certain notes which appellant executed to S. C. Lovelace for borrowed money in his lifetime. Appellants were respectively the president and secretary of the Greenway Milling Company, an Arkansas corporation, in 1923, when said company borrowed the money and executed said notes to S. C. Lovelace, and failed and neglected to file an annual report of said corporation at any time during the year 1923, in accordance with §§ 1715 and 1726 of Crawford & Moses’ Digest. The case was based upon these sections of the statute.

Appellants denied liability because, prior to and at the time of the execution of the notes, S. C. Lovelace was a stockholder in the corporation and a participant in the annual meeting of the stockholders held on January 12, 1923, at which time the semi-annual report of the president and secretary of the corporation, containing the financial report thereof, was adopted and spread on the minutes of the meeting; and because the report was called for and examined b3 S. C. Lovelace before he made the loan to the corporation. A jury was waived, and the cause was decided by the court, which resulted in a judgment in favor of appellee for the amount of the notes and interest, from which is this appeal.

A reversal of the judgment is sought upon the ground that §§ 1715 and .1726 of Crawford & Moses’ Digest do 'not apply to stockholders acquainted with the financial condition of a corporation who have extended credit to their corporation. The sections in question fix a primary and absolute liability upon the president and secretary of the corporation who fail to file a financial report of the condition of said corporation in the office of the county clerk where it is located, at designated times. Jones v. Harris, 90 Ark. 61; Griffin v. Long, 96 Ark. 268; McDonald v. Mueller, 123 Ark. 226. In construing these sections of the Digest, this court said in the case of Gallo way v. Stallings, 154 Ark. 16: “The purpose of the statute w.as to apprise persons dealing with the corporation of information as to its affairs, but actual lack of information on the part of a creditor is not essential to liability under this statute, which imposes the liability, reg’ardless of the fact that the creditor may or may not have had actual information concerning the affairs of the corporation. By failing to comply with the statute, the officers mentioned assume legal liability for the debts of the corporation which accrued during the period of such default.”

The undisputed evidence in the instant case reveals that the president and secretary of the Greenway Milling Company, who are the appellants herein, failed to file a report of the financial condition of said corporation at any time during the year 1923, which failure or default rendered them personally liable for all the indebtedness of the corporation created during the period of their default. The court did not err in rendering this judgment against them in favor of appellee.

The .judgment is therefore affirmed.


author: Wood, J. McCulloch, C. J.,

text:
    Standard Oil Company of Louisiana v. Oil Well Salvage Company.
    Opinion delivered January 18, 1926.
    1. Mines and minerals—recovery of escaping oil.—Oil which, against defendant’s will, escaped from its pipe line and found its way into plaintiff’s pick-up station may be recovered by defendant.
    2. Mines and minerals—construction of lease.—An oil and gas lease conveys not merely a license but an interest and easement in the land itself.
    3. Mines and minerals—construction of surface lease.—Where the owner of land executed an oil and gas lease in the usual form, and subsequently executed to appellee a surface lease authorizing such lessee to operate a “pick-up station” on the same land, the latter lease was subordinate to the former, but not in conflict with it.

      4. Mines and minerals—right to build pick-up station.—An oil and gas lease confers on the lessee the right to preserve the lessee’s own oil, and, if necessary, to erect a pick-up station or stations, and to hold oil captured in such station except as against the true owner; .but confers no authority to build such a station merely to capture fugitive oil belonging to' others.
    5. Mines and minerals — capture of fugitive oil — right to recover.-—-Where the owner of land, after executing an oil and gas lease to appellant’s assignor, executed a second lease authorizing appellee’s assignor to erect a pick-up station, which appellee thereupon erected, appellee will be liable to appellant for so much only of the recaptured oil as belonged to appellant. •
    Appeal from Union Chancery Court, Second Division; Jordan Sellers, Special Chancellor;
    reversed.

      Gaughan & Sifford, for appellant.

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

On April 24, 1919, one E». P. Combs and his wife executed an oil and gas lease to certain lands in Union 'County, Arkansas, which, by mesne conveyances, passed to the Standard Oil Company of Louisiana, hereafter called Standard company. That company entered upon the land and proceeded to develop the same under the lease. On August 2, 1921, Combs and his wife, the original lessors, executed to one W. L. Murray a surface lease on the - lands which authorized Murray or his assignees to operate what is commonly known as a pick-up station on a small branch running through the lands, the purpose of this station being to catch the waste and escaping oil which ran down the branch. Murray operated this station for a while and assigned the same to the Oil Well & Salvage Company, hereafter called salvage company. On December 22, 1921, the salvage company took possession of the lands and erected a dam across the branch 'and also an earthen reservoir adjacent to the branch which had a capacity of approximately 10,000 barrels of oil. The salvage company, by the 12th of January, 1922, had collected approximately 3,500 barrels of oil. About the 12th or 13th of January, 1922, the Standard company informed the salvage company that it objected to the latter company operating under its surface lease, stating that the Standard company had had a break in its pipe line, and notified the salvage company to vacate the lease. The Standard company then began taking the oil from the salvage company’s dam and from the creek, whereupon the salvage company instituted this action against the Standard company, and alleged that the Standard company had appropriated oil from its reservoir and from behind its dam over its protest, to the salvage company’s damage in the sum of $12,400. It prayed that it have judgment against the Standard company for that sum, and that said company be enjoined from appropriating waste oil from the salvage company’s leased premises and from taking any oil from the salvage company’s reservoir and from the creek flowing through its leased premises.

The Standard company, in its answer, set up that it was the owner of the oil and gas lease by assignment from Combs and wife, and that it was the owner of the land in which the salvage company claimed to own surface rights for waste oil. It admitted that the salvage company had erected a dam, ¡but denied that it was with the%Standard company’s .consent or acquiescence, and alleged that the salvage company in so doing was a trespasser and was gathering and disposing of oil that belonged to others. It also denied the other material allegations of the complaint.

The salvage company introduced testimony tending to prove that from December 2, 1921, the time it established its pick-up station on the eighty acres of land covered by the lease, until January 18,1922, it had picked up between 2,500 and 3,500 barrels of oil, and had sold a total of 958 barrels. There were some 3,500 barrels in the pit when the Standard company put its line in and commenced pumping. The salvage company had put in about a thousand barrels after the break in the Standard’s pipe line. Seventy-two wells would drain oil into the watershed in which this branch or creek was the outlet. Both the. Standard company and the Humble company had wells within 250 and 560 yards of the pick-up station, the waste oil from which ran into the creek that came against the dam. The waste oil from other tanks besides that of the Standard company operating on the watershed that migrated and ran down this shed into the •creek commingles with that of the Standard company. One of the witnesses for the salvage company estimated that there were from six to eight thousand barrels of oil that would have found its way into the salvage company’s dam and storage tank. The oil was worth on an average of $1.50 per barrel at the time the Standard company appropriated the property. No one ever informed the representatives of the salvage company that it had no right to be on the premises. It cost the salvage company $450 to build the earthen storage and the piping and additional material cost about $300. The holdings of the salvage company consisted of its lease and the pickup station, and one of its witnesses estimated that the reasonable cash market value of the holdings of the company was around $24,000 or $25,000. After the Standard company objected to the salvage company maintaining its pick-up station and claimed the right to take the oil and put in its larger powered pumps into the salvage company’s pool and reservoir, the latter company discontinued operations because it was useless to proceed, further. The salvage company protested and objected to the Standard company taking possession. .The lease under which the salvage company operated was a lease whereby the lessor leased to the lessee and his heirs and assigns the surface of 117 acres of land including the land upon which the salvage company had established its pi'ck-up station. It was recited in the lease that it was executed for the purpose of gathering, storing, and selling therefrom waste crude oil. The lease contained a further recital as follows: The lessee shall have the right to locate his plant at a point on the creek best suited for gathering crude, this lease to remain in force so long as waste crude oil is found in paying quantities. Said lessee shall have the right to remove all tanks, machinery, boiler, or other equipment from the premises at the expiration of this lease and shall leave the premises in the same condition as found. As a further consideration for the above lease, the said -lessor shall receive one-eighth of all waste oil received, or its equivalent in cash.

The manager of the Standard company testified that during the months of December and January he had charge of the production of oil for the company in the El Dorado district. The ■company was operating on eighty acres of land under an oil and gas lease. It had six wells on the lease, and four of these wells drained into the creek on which the pick-up station already mentioned was situated. Witness remembered when the station was built there, and went to see the lessor about it. Witness had told the lessor that the Standard company intended to put in a pit whenever they could accumulate the equipment, and explained to him that he would receive the same royalty from the pick-up station as from the company’s wells. The company credited the lessor with a one-eighth royalty out of the oil that was picked up on the occasion when the Standard company’s pipe line broke. The Standard company took no action to stop the operation of the pick-up station other than to notify the lessor that it would in time put a dam on the creek and pick the oil up themselves. Witness understood that the lessor was interested in the pick-up station, and witness was remonstrating against it. The Standard company always objected to having these stations' operated on its leases, and its objection to the lessor was in line with its usual objection. There was a break in the company’s pipe line about 350 feet from the channel of the creek on which the pick-up station was situated, and the oil from this break would run directly into the creek and down it. The witness notified the salvage company that he was directed by the Standard company to put its pump on the creek and pick up the oil that had been wasted, and- to continue such operation as long as any oil could be had from the creek. The Standard company itself put in a dam and pump about thirty days after this and pumped the oil out of the salvage company’s pit and kept it going as long as they could get any oil. Some thirty days- later the Standard company put in a dam. There were other places on the creek where oil could be picked up besides the salvage company’s pick-up station. The Standard company was operating such a station at another place on the creek. The Humble company operated a pick-up station after the break in the pipe line of the Standard company. The wells that discharged into the creek between the Humble company’s pick-up station and the salvage company’s pick-up station were all Standard company wells except one.

There was a conflict in the testimony as to the 'amount of oil that was taken by the -Standard company from the salvage company’s pick-up station and as to the price of the oil, 'but it is unnecessary, in view of the conclusion we have reached, to set forth this testimony. One of the witnesses for the Standard company testified to the effect that, in bringing in wells and in building tanks, when they swabbed out wells on the watershed, the waste oil would drain into the creek and run down it, and, if this oil was not picked up, it would be a loss. There was not a great deal of oil. on the creek after the Standard company picked up the oil that came from the line break. The Standard company had a surface pit on its lease up the creek, but didn’t have any pick-up station, as far as witness knew.

The Standard company was operating under a lease which recites in part as follows: ‘ ‘ That the said lessor, for and in consideration of one dollar, cash in hand paid, receipt of which is hereby acknowledged, and of the covenants and agreements hereinafter contained on the part of the lessee to be paid, kept and performed, has granted, demised, leased and let, and by these presents does grant, demise, lease and let unto the said lessee, for the sole and only purpose of mining and operating for oil and gas, and laying pipe lines, and building tanks, power stations and structures tbereon, to produce, save and take care of said products all that certain tract of land situated in the county of Union, State of Arkansas, described as follows, to-wit:

“In consideration of the premises the said lessee covenants and agrees: 1st. To deliver to the credit of lessor, free of cost, in the pipe line to which he may connect his wells, the equal one-eighth part of all oil produced and saved from the leased premises.” •

The trial court found the issues of law and fact in favor of the salvage company, and entered a decree in its favor in the sum of $5,760, from which decree the Standard company duly prosecutes this appeal.

1. The opinion in the case of Crosson v. Lion Oil & Refining Co., 169 Ark. 561, was handed down by this court on October 19, 1925, and the opinion in the case of Burton v. Miller, 169 Ark. 740, was handed down November 2, 1925. Under the doctrine of these recent cases the oil that escaped from the Standard company’s pipe line, and which found its way down the creek and into the salvage company’s storage tank and pit, and also the oil from this pipe line which was in the creek and behind the salvage company’s dam, as well as that flowing in the creek, was the oil of the Standard company, and the Standard company could follow it wherever it had migrated and recover it if it could identify the same from any third party who may have impounded it. We think it likewise follows from the doctrine of these cases that the Standard company was entitled to all the oil that was brought to the surface through wells on its lease, whether such oil had been confined in its pipe line or not, so long as the Standard company did not voluntarily permit the escape of such oil, and so long as it had not abandoned the project of reclaiming or recovering such oil. In other words, the Standard company was the owner of all oil produced from the wells it was operating which it had not allowed voluntarily to escape from its possession, wherever it could be traced and identified, and the Standard company was entitled to recover the same from any third party who may have impounded it.

There was testimony tending to prove that the Standard company not only took the oil that escaped from its own pipe line and wells which had been gathered into the salvage company’s storage tank and pit and behind its dam, but also all the oil that was flowing down the creek from all other wells. in the watershed that drained into this creek. In short, it was taking all the oil from the salvage company’s pick-up station and from the creek behind its dam which would have ultimately been impounded by the salvage company, regardless of the source from which it emanated. It occurs to us that, as between the salvage company and the Standard company, the Standard company would have prima facie the superior right in all such oil under the provisions of its lease, which lease was prior to the surface lease of the salvage company. It will be observed that the Standard company’s lease under which it operated was executed to the lessee “for the sole and only purpose of mining and operating for oil and gas and laying pipe lines and building tanks, power stations and structures thereon to produce, save and take care of said products,” and in consideration of such grant and lease of the premises the lessee was to pay to the lessor the equivalent of a one-eighth part of the oil produced and saved from the leased premises. Under the express terms of the above lease to the Standard company, it certainly had the right to establish a pick-up station at the most eligible location on the leased premises to take care of and save all the oil produced from its own wells on those premises. The Standard company had the right, under its lease, to mine and operate for oil and gas, lay pipe lines, build tanks, power stations and structures anywhere on the leased premises to produce, save and take care of the oil and gas produced from those premises, and, in order to enjoy fully these rights, the Standard company might find it necessary or expedient to occupy the site, or sites, thereon best suited for the building of a pick-up station for the gathering of waste crude oil. Therefore, since these rights were embraced in the lease of the premises to the Standard company, the lessor could not thereafter grant to a third party an exclusive lease of surface rights that would be in conflict with the rights already granted in the prior lease to the Standard company. The grant to the subsequent lessee of the surface right “to locate his plant at a point on the creek best suited for the gathering of waste crude oil” would be in necessary conflict with the Standard company’s prior lease if the point on the creek best suited for the gathering of waste crude oil was likewise the point best suited for gathering oil and gas produced by the Standard company in the operation of its lease. Under such circumstances two such leases would be wholly repugnant to each other, and the prior lease would be paramount and superior. To be sure, the landowner and lessor would have the right, notwithstanding a prior lease of the premises for the production and conservation of oil and gas products, to grant surface rights to a subsequent lessee not in conflict with the provisions of the prior lease. A subsequent lease might be so worded as not- to contain provisions repugnant to the provisions of the prior lease. Such subsequent lease might in express terms be made subject to the prior lease, or appropriate language might be used to protect the rights of the prior lessee, and thus avoid a conflict or repugnancy between the two leases. But, as we have stated, the lease under review contains no such .language; and circumstances might arise, as above indicated, which would render the leases wholly in conflict with each other. For aught this record shows to the contrary, such conditions may have existed at the time this controversy arose. In order to warrant a recovery from the Standard company, the burden was upon the plaintiff, the salvage company, to prove that there was no conflict in the leases, and that the point where it had erected its pick-up station was not at a place essential to be used by the Standard company in the operation of its lease; that is, in the production, conservation and disposition of oil and gas products on the premises covered by the .prior lease to the Standard company. If the pick-up station erected by the salvage company was not at a point best suited for the conservation of the oil and gas products produced by the Standard company from its own wells, and was not essential for use by the Standard Company for the full enjoyment of the rights granted it under its lease, then the salvage company, under its lease, would have the right to build its pick-up station and would have the title to the fugitive and abandoned oil gathered by it in such station. But otherwise the salvage company, in entering upon the premises already leased to the Standard company without the consent or acquiescence of the latter company, would be a trespasser, and have no right whatever to the fugitive and abandoned oil it had gathered thereon. Because, if the Standard company had the right to use the site on which the salvage company’s pick-up station was located in order to operate its own lease and to save and conserve the oil produced from its own wells, then if, in so doing, it also came into the possession of fugitive and abandoned oil that had found its way from other premises into the pick-up station erected by the salvage company, as between the salvage company and the Standard company the latter company would have the right and title to this fugitive and abandoned oil.

2. The rights granted to the lessee and which passed by mesne conveyances to the Standard company were not a license, but an interest and easement in the land, itself. Swert v. Robinson, 289 Fed. 740; Smith v. McCulloch, 285 Fed. 689; Rich v. Donaghey, 3 A. L. R. 352; Barnsdale v. Gas Co., 26 L. R. A. (U. S.) 614; Blair v. Clear Creek Oil & Gas Co., 148 Ark. 300-310. The instrument under which the Standard company was operating being a lease and conveying an interest and easement in the leased premises to the lessee, the lessor had no right by a subsequent lease to convey any interest that would lie in conflict with such prior lease, and those holding under the subsequent instrument could not enter upon the premises and exercise alleged rights in conflict with the rights of those claiming under the prior lease without the knowledge, consent or acquiescence and over the protest of those holding under the prior lease. The salvage company had actual, as well as constructive, notice of the lease of the Standard company, and therefore, when it entered upon the land covered by the lease to the Standard company without its consent and erected its pick-up station, it was a trespasser, unless the pick-up station was erected at a point on the creek that did not conflict with the rights of the Standard company under its prior lease, as above explained. If the salvage company was a trespasser, then it had no title to the fugitive and abandoned oil in controversy, and was likewise not entitled to any reimbursement of the amount expended by it in the establishment of the pick-up station. Pittsburg & W. Va. Gas Co. v. Pentress Gas Co. and Chartiers Oil Co., 7 A. L. R. 901; 38 Cyc. 1035; 26 R. C. L., pages 949 to 951; Forsythe v. Shryack-Thom Grocery Co., 10 A. L. R. 711.

In reaching the above conclusion we have but followed, at least in principle, the opinion in the case of Caldwell-Guadalupe Pick-Up Station v. Gregg, handed down by the Court of Civil Appeals of Texas, June 26, 1925, reported in 276 S. W. 342. This opinion was elaborately and well considered, and we think its conclusions entirely sound, and do not hesitate to adopt them. It follows from what we have said that the court erred in entering a decree in favor of the salvage company. But, inasmuch as the cause has not been fully developecl along the lines indicated in this opinion, the appellee’s complaint will not be dismissed for want of equity. Instead, the cause will be remanded with leave, if the parties so elect, to amend their pleadings and take further proof in order to determine which of the parties, under the rules above announced, is entitled to the fugitive and abandoned oil gathered in the pick-up station erected by the salvage company or that would have been gathered .iu such station, and which the Standard company appropriated to its own use.

McCulloch, C. J.,

(on rehearing). The views entertained by the majority call for modification of the original opinion, as well as of the judgment of this court in its directions to the trial court on remand of the cause.

Most of what is said in the original opinion is in accord with the views of the majority, but in some important respects the opinion does not conform to their present views.

We are of the opinion that there is no necessary conflict between the respective leases held by the parties from the same lessor. Our conclusion upon the facts is that appellee is entitled to recover from appellant the value of the oil taken by appellant from appellee’s reservoir, except that portion which escaped from appellant’s own pipe line or wasted from its own wells. In other words, our conclusion is that appellant was entitled to recapture its own oil, and no more. The lease held by appellant did not confer the right, independently of the conservation of its own oil, to erect a pick-up station or stations on the leased premises. There is nothing in. the lease referring to the right to capture fugitive oil, and the only right in that respect is that which is merely incidental to the right to preserve its own product. A fair interpretation of appellant’s lease is that it had the right to erect a pick-up station or stations necessary to protect its interest in the preservation, of its own product, and would be entitled to the use of an available site for the most efficient accomplishment of that purpose. Incidentally, it would be entitled to hold fugitive oil captured in its own station except as against the true owner. The subsequent lease to appellee placed it in the shoes of the lessor, and conferred all the rights with respect to the erection, and operation of pick-up stations, subject only to any superior rights of the prior lessee which might be in conflict. One of the leases was in subordination to the other, and they were not conflicting. A conflict might arise in the assertion of rights under the leases, but there was no conflict upon the face of the instruments themselves, for the rights and interests conferred by the lessor in the two ‘leases were in perfect harmony. No conflict could arise unless a hostile claim arose between the lessees as to the occupancy of a particular site for a pickup station. According to the undisputed evidence in this case, no such conflict arose, for the simple reason that appellant had never erected a pick-up station nor made any effort to do so, nor did it ever make any objections to the appellee to the latter erecting a station until the oil in controversy had been captured 'by appellee and appellant started to retake it, over appellee’s objection. The question of superiority of rights in the erection of a station at that particular place is not involved in the present controversy. If the site occupied by appellee is the only available place for the erection of a pick-up station for use by appellant in preserving its own oil, then the rights of appellant are superior, and those rights may be asserted. But, as before stated, appellant had never attempted to erect a pick-up station, and appellee did not become a trespasser by occupying the site which appellant might have claimed if it was the one most available for use in the preservation of its own product. When the question of priority of the right to use a particular site arises, it must be determined upon the question whether or not it is essential to appellant in preserving its own oil. But that is not the question involved in the present controversy. Appellee’s occupancy of the site was rightful until appellant asserted its superior rights thereto. Appellee being rightfully in possession, it is entitled to hold the captured oil against all comers, including appellant, except as against the true owner.

The views now expressed are not in conflict with the case of Caldwell-Guadalupe Pick-Up Stations v. Gregg, 276 S. W. 342, which has been so earnestly pressed upon our attention by counsel and relied on by the writer of the original opinion. We think that our views are really in harmony with the decision, in that case. The facts there were that the plaintiff was the owner of an oil and gas lease, and erected a pick-up station for the purpose of preserving its own product. The defendant was the holder of the junior lease, and also erected a pick-up station above the site occupied by the plaintiff, and which interfered with the operation by the latter of its station. Suit was brought by the plaintiff, alleging- interference with superior rights, and under the decision he recovered on the ground that there was a necessary conflict between the assertion by the lessees of their respective claims. If the appellant in the present case had erected a pick-up station for the preservation of its own oil, it would have been in the same attitude as the plaintiff in the Texas case, and could have prevented appellee from erecting or operating a station which interfered with its own rights under the prior lease. But, as we have already shown, there is no such state of facts existing, for appellant has never erected a pick-up station nor asserted its right to do so until it became necessary to recapture its own oil, and then it claimed not only its own product but the fugitive .oil which had flowed down the stream and had escaped from the wells of other owners. Appellant is therefore in no attitude to claim the fugitive oil which had been captured by appellee; it can claim its own oil and no more.

The judgment of this court will be modified, so as to direct the trial court to hear further testimony, if offered, as to the value of oil taken from the reservoir of appellee other than oil which had escaped from appellant’s pipe lines or wells, and to render judgment therefor in favor of appellee. To that extent, and no further, the petition for rehearing is sustained.

Wood, J., dissents.


author: Per Curiam.

text:
    Dorathy v. Hutchins.
    Opinion delivered March 8, 1926.
    1 Receivers—enforcement of lien.—A complaint alleging* that plaintiff has a lien on a growing crop and on certain livestock and farming implements, and asking for appointment of a receiver upon the ground that defendant has raised a crop but is permitting it to go to waste, held to state a cause of action in „ equity.
    2. Receivers—remedy at law.—Equity has no jurisdiction of a suit by a landlord praying* for appointment of a receiver to take possession of the leased premises upon allegation that the tenant is wrongfully holding over 'after expiration of the term of lease or after breach of conditions of the lease, since plaintiff’s remedy at law is complete.
    Prohibition to Cross Chancery Court; A. L. Hutch-ins, Chancellor;
    writ granted in part.
    J. G. Brookfield, for petitioner.

      8. A. Gooch, for respondent.
   Per Curiam.

The petitioner, T. W. Dorathy, has applied here for a writ of prohibition to restrain the chancellor from proceeding* with a receivership in a cause pending* where A. C. Huddleston is plaintiff and petitioner is defendant. The record of the proceeding’s is brought up with the petition for our consideration.

• . It appears from the record that plaintiff, Huddleston, filed his complaint against petitioner in the chancery court of Cross County, alleging that petitioner was plaintiff’s tenant on a farm in that county for the year 1925; that petitioner had raised a crop on the farm, but had refused to gather it, and was permitting it to go to waste; that petitioner is indebted to the plaintiff in the sum of $1,140, for which plaintiff has a lien as landlord, and the prayer of the complaint was for recovery of the amount of the rent, and for the appointment of a receiver to gather and market the crop, to the end that plaintiff’s lien could be enforced. There is also an allegation that petitioner is in possession of certain livestock and farming implements on which plaintiff has a lien, and the prayer is that this property he also taken into custody by the receiver.

Notice was given of the application for a receiver, and the record shows that when the chancery court heard the application in term time the petitioner was present by his attorney.

The court appointed the receiver, with directions to him to take possession of the crop and personal property, and hold the same until further orders of the court, and the order of the court also contained a direction to the receiver to “rent the farm upon which T. W. Dorathy is now living for the year 1926.” This order was made over the objections of petitioner, and the latter subsequently made application to the chancellor for a dissolution of the order. The court later granted a writ of assistance to the receiver to put him in possession of the land for the purpose of renting it for the year 1926. It is contended that the order was made without a complaint being filed, and without notice, but the record does not bear out the contention of petitioner in this regard. There is a complaint in the record, upon which the chancery court acted in appointing the receiver. The suit was one to enforce a lien, and the allegations of the complaint were sufficient to give the court jurisdiction to appoint a receiver to preserve the property upon which there was a lien. To that extent we are of the opinion that the chancery court acted within its jurisdiction. Now, it is different as to the order directing the receiver to take charge of the land and rent it out. In the first place, there is no allegation at all in the complaint with reference to the land; but, even if there had been any allegation or prayer for relief concerning the occupancy of the land, the court had no jurisdiction to appoint a receiver, for the reason that it was necessarily implied from the statement in the complaint that petitioner was in possession as tenant of the plaintiff, and, even if he was holding the premises wrongfully after the expiration of the term, or after breach of the conditions of the lease, plaintiff’s remedy at law was complete, and the chancery court had n.o jurisdiction. A court of law had no jurisdiction to appoint a receiver in ejectment or unlawful detainer, and jurisdiction could not be conferred upon the chancery court merely by praying for the auxiliary remedy of a receivership.

To the extent that the receivership relates to the crop and other personal property, the petition for prohibition will be denied, but the writ will be granted to the extent of restraining the chancery court from proceeding with the receivership over the land. It is so ordered.


author:
Wood, J.
      "Wood, J.,

text:
    Mutual Aid Union v. Lovitt.
    Opinion delivered March 8, 1926.
    1. Insurance—benefit society—by-laws as fart of contract.— Where a benefit certificate of a mutual benefit society made the application a part of the contract, and the application stated .that the applicant accepted the by-laws and regulations of the society, the by-laws became a part of the contract.
    2. Insurance—benefit certificate—forfeiture.—In an action on a benefit certificate, where the defense was that the certificate had lapsed by reason of nonpayment of a certain assessment, it was error to exclude proof that the particular assessment had been regularly called by- authority of the board of directors of the benefit society.
    Appeal from Crawford Circuit Court; James Cochran, Judge;
    reversed.
    . V. Walker and Duty & Duty, for appellant.

      D. H. Howell, for appellee.
   Wood, J.

This action was instituted by J. W. Lovitt, the beneficiary in a policy of life insurance issued by the Mutual Aid Union to Mary O. Lovitt, dated the first of October, 1915. Lovitt alleg'ed that Mary O. Lovitt, the assured, died on the sixth of May, 1924, and that the Mutual Aid Union was due .him the sum of $1,000 on the policy. In its answer, the defendant set up that the policy had lapsed because of the nonpayment of assess-merits on the policy in January, 1924. The cause was by consent tried by the court sitting as a jury..

The plaintiff testified, and identified the policy or certificate of insurance, and stated that he was the beneficiary therein. The death of his wife as alleged was admitted by the defendant. Witness stated that he paid all of the assessments of which he received notice. He notified the company of the death of his wife, and it failed to pay. The witness was asked if he paid the January assessment for 1924, and answered that he sent a check in December, and the check was turned down. Witness got notice that the check was turned down, and then he sent a money order to cover this check and pay his last assessment. Witness sent the money order about the tenth of January. After he sent the money order in, he never got any further notice. Witness wrote the conn pany a letter stating that he sent the money order to pay the turned-down check and the last assessment. Witness identified the letter.

After witness wrote the letter and returned to them the $3.53 refund check, he did not send the company any more money; never received any more notices. Witness did not know whether there was a double assessment in December. He only knew as he got notices from the company. The double assessment in the certificate and •the other certificates witness was paying on amounted to $7.06. That amount was for a double assessment. His single assessment amounted to $3.53. The amount of $7.06 constituted the payment of the three certificates on which witness was paying. When witness sent the money order back, about” the tenth of January, he included enough to take up the check of $7.06 and the last assessment of $3.53, making the total amount of the money order $10.59. Witness never sent the company any more money after sending the money order for $10.59, except he returned just what they had returned to witness. Witness never got any further notice. Witness stated that the Mutual Aid sent him a refund check of $3.53, but did not remember that the company wrote him a letter, inclosing a little printed card, telling him that they could not accept the amount sent in as a deposit account, but witness did write the letter introduced in evidence.

J. W. Walker testified that he was the president of the Mutual Aid Union. He identified the application of Mary O. Lovitt and the certificate of insurance.' A double assessment was issued on the certificate in controversy on November 12, 1923, amounting, to $2.16. Lovitt was paying also on two other certificates. The total assessment against the three certificates in November, 1923, amounted to $7.06. The company received a check December 12, 1923, from Lovitt on the Farmers’ & Merchants’ Bank of Mulberry, Arkansas, for $7.06, covering the three assessments on which he was paying, for November, 1923. The check was returned to the company unpaid. The company, on December 31, 1923, wrote to Lovitt a letter in which it notified him that the $7.06 had been returned unpaid, and requested him to remit at once in order that the certificates might not lapse, and inclosed a self-addressed envelope for Lovitt to use in making his remittance.

The witness explained that the company was a mutual insurance company, doing business on the assessment plan.

In December, 1923, another assessment was called on the certificates on which Lovitt was paying, including the certificate in controversy. On January 12, 1924; another assessment was called against the certificate in controversy, and notice of the January assessment was mailed to Lovitt, he being the person designated in the application to receive such notice, showing the amounts due on the certificates on which he was paying. On January 15 the company received a money order from Lovitt in the sum of $10.59; this order was cashed by the company, and the sum of $7.06 was applied to the payment of the December and January assessments, the amount due at that time on the certificates on which Lovitt was paying. The company still held Lovitt’s unpaid check for $7.06, sent to pay the November assessments, and it supposed that Lovitt wanted the December and January assessments paid with the $10.59. After paying the December and January assessments out of this money order, there was left a balance of $3.53, which the company returned to Lovitt by refund check, and with this the company sent him a notice advising him that the $7.06'had gone to pay the assessments for December, 1923, and January, 1924.

On January 17, 1924, Lovitt wrote the company, returning to it the refund check for $3.53, and stating that it was to take care of the last assessment; also stating that the $7.06, the balance of the money order, was to pay the check that had been returned for the double assessment. In this letter, he requested the company to notify him by return mail whether the matter had been “straightened up,” as he wanted to keep paid on the three certificates, including the one in controversy. Upon receipt of this letter, the company canceled the January payment on the certificate in controversy, and applied it to the payment of the November assessment, as requested by Lovitt in his letter, and the December assessment, which absorbed the. entire amount of the money order, leaving the January assessment unpaid, on which they had previously mailed notice to Lovitt, which notice he returned to the company in his letter of January 17,1924. After completing this transaction, the company again sent Lovitt a notice of the January assessment, and wrote him a letter on January 25, inclosing the notice cards. The letter was addressed to him at Mulberry, Arkansas, and advised him of what the company had done in compliance with his last letter, and stated that it had canceled the payment of the January assessment, taking up the-turned-down check given for the payment of the November and December assessments, and stating that it was inclosing notice of the January assessment then due, so that he might make payment to cover.

The by-laws of the company were introduced. They provide, among other things, that the levying of an assessment consists of the mailing of a notice to the individual members of the Union, or the person designated by such member to receive the notice, ■ on the authority of the board of directors, giving the date of the assessment and the amount due from the member, and the burden is placed upon the member to show that the notice was not mailed as designated. The levying and mailing of the assessment to the last known address of the members, or the person designated to receive the .notice, shall constitute a legal and valid notice of the assessment, although such notice may not in fact be received by the member or person designated to receive the notice; and the failure to receive the notice in fact shall not prevent the certificate from lapsing if the assessment is not paid within the time provided by the by-laws. All members are subject to each and every assessment made against them on their membership certificates. Prompt and due payment of the assesments must be made within thirty days from the date of the assessment, or the membership certificates lapse and become void. Another provision is that when notice of assessment has been made, as provided under the by-laws, to the person designated at his or her' last known address, the Union shall not be responsible for default or miscarriage of the postal department in delivering the notice, or for the non-receipt of same by the member, and such fact shall not prevent the certificate from lapsing if the assessment is not paid, as in the by-laws specified. There is a provision for reinstatement of the member whose certificate has lapsed within twelve months thereafter, by paying an amount equal to all of the assessments. There is a provision in the application making the same a part of the contract for membership and insurance in the company. Eesolutions were offered by the board of directors showing that the assessments were authorized of the members by the board for the .months of November and December, 1923, and for tbe month of January, 1924. Upon substantially the above facts, the court found in favor of the plaintiff, and rendered a judgment in his favor in the sum of $1,000, from which judgment is this appeal.'

1. The testimony of .Walker by agreement was in the form of depositions. We have set forth the substance of-his entire testimony as if no objections had been made to it in the trial court, because we find that such objections as were made were not well taken, and the court erred in sustaining the objections made by plaintiff to certain portions of his testimony. For instance, interrogatory No. 16, “whether or not another assessment against the certificate in controversy was called in December, 1923, and the amount thereof.” The court refused to allow the answer to this question to be read, in which he explains, as set forth in his testimony above, that another assessment was called by the board of directors on December 12, 1923, and he explains in detail the assessments which Lovitt was paying on the different certificates, including- the certificates in controversy, and stated that on January 12, 1924, another assessment was called against the certificate in controversy, and he tells how the assessments against the other certificates, except the one in controversy, were paid, and shows how the money sent was appropriated. He states that the money sent appellant was appropriated according to the directions of the appellee, who was making the payments, and, after making- such appropriations, the assessment for January, 1924, was left unpaid. This testimony was all relevant to the issue, and the court erred in excluding the answer to interrogatory No. 16.

The trial court also excluded the answer to interrogatory No. 20, in which Walker was asked whether or not an assessment had been called by the board of directors in January, 1924, and to which interrogatory he answered in the affirmative, and stated also that the board of directors called an assessment for November and December, 1923. The court likewise erred in excluding tbe answer to this interrogatory, because this -testimony was relevant to the issue as to whether or not the appellees had placed in the hands of the appellant the assessments that were due on the certificates in controversy, including the January assessment, which appellant claims was not paid, and the nonpayment of same caused the policy to lapse.

The certificate expressly makes the application a part of the contract of insurance, and the application itself states that it is a part of the contract, and that the applicant accepts the by-laws and regulations of appellant. Thus, the by-laws of the association became a part of the contract of insurance. Baker v. Mosaic Templars of America, 135 Ark. 65; Sovereign Camp W. O. W. v. Newsom, 142 Ark. 132. See also United Assurance Association v. Frederick, 130 Ark. 12.

Section 4 of the by-laws of the association provides, in substance, that the revenue of the association shall be derived from assessments of its members. After providing how the amount of the assessment should be ascertained, it provides that the levying of an assessment shall consist of the mailing of a notice to the individual members on the authority of the board of directors, which notice shall include the date of the assessment and the amount due from the member. Then follows the provision that when the assessment has been levied it shall be accepted as prima facie evidence of the mailing of the notices, etc. Now, there is no provision in the by-laws prohibiting the president of the appellant from testifying that the assessments were called by the authority of the board of directors or making the record itself the only evidence, or the best evidence, of the fact that the assessments were called by the authority of the board of directors. In the absence of such provision in the bylaws, the fact that the directors authorized the call of the assessment may be proved by the president or the secretary of its board of directors, and certainly by copies of the resolutions of the board of directors calling the assessments.

The court erred in not taking into consideration the answer of Walker to interrogatory No. 20, in which he testified that there was an assessment by the board of directors for January, 1924, and also November and December, 1923, and presented copies of the resolutions of the board calling such assessments. These resolutions show that the board of directors ordered the assessment, and that the secretary was directed to mail a notice to each member of the particular circles of appellant in which the assessments were levied, showing' the date and the amount thereof. The testimony of Walker in connection with the resolutions was sufficient to show that the assessments for the months of November and December and January were called in accordance with the bylaws of the appellant, and in conformity with the law applicable to such cases announced in Mutual Aid Union v. Perdue, 162 Ark. 551. In that case we said “that the levying of assessments was not a mere clerical duty which the secretary might perform, but that the authority and duty to levy assessments devolved upon the board of directors, and that a valid assessment could only be levied by the board.” In the case at bar the assessments were levied by the board, and the amounts called and the times when they were to be paid were fixed, definite and certain, as shown by the testimony of Walker.

2. Since the testimony of Walker was relevant, and shows that the assessments were duly called, the only remaining question is whether or not the January assessment was paid. This is purely a question of fact, and the undisputed testimony set out above shows that the January assessment was not paid. The correspondence in the record between the appellant and the appellee in regard to the payment of the assessments for November, December and January, proves conclusively that the January assessment was not paid. The appellee’s letter of January 17 directed the appellant specifically how the money he had sent was to he appropriated. In this letter he requested the appellant to let him know by return mail if they had “straightened up” the matter, and expressing a desire to keep the assessments paid on the three certificates, including the one in controversy. The appellant in answer to that letter on January 25, told appellant that they had made the appropriations of the amount of money in its hands in compliance with his request, and that it left the January assessment unpaid, and requested appellee to remit that assessment. And, on February 1, 1924, the appellee was notified that the assessment on the certificate in controversy had not been paid, and, unless paid by February 12, the certificate would lapse. The appellee admitted that he received a letter after the 17th of January, 1924, but denied that he received a letter of appellant of January 25. He stated that the company wrote him that the policy was in good condition. On cross-examination, he stated that he sent them the $10.59 in January, which paid all assessments due at that time, but he did not remember whether it included the January assessment. While he testified that he did not receive any notice after he sent appellant the money on the 10th of January, 1924, he does not deny that he received the letter of appellant to him on February 1, 1924, stating that it had notified him twenty days before the January assessment—that the January assessment was due, and that they had heard nothing from him.

The testimony adduced by appellant shows that the January assessment has not been paid, and there is no testimony of appellee to the contrary.

Therefore we are convinced that there is no testimony to support the finding of the trial court that the January assessment was paid. Under the by-laws, unless the assessments were paid within thirty days, the certificate lapsed and was void. The judgment is reversed, and, inasmuch as the testimony has been fully developed, the cause is dismissed.

"Wood, J.,

(on rehearing). Our attention is called to the fact that the motion for new trial does not assign as error the ruling of the trial court in excluding the answer to interrogatory No. 20 in Walker’s deposition. We therefore cannot consider the ruling of the court in excluding the answer to interrogatory No. 20. But we cannot agree with learned counsel in their contention that the answer to interrogatory No. 16 does not show that the January assessment was called by the authority of the hoard of directors. The answer to interrogatory No. 16 must be considered as a whole. True, by question No. 16 the witness was asked only whether or not another assessment was called against the certificate in December, 1923. But the witness, in answer to the question, not only answered as to the assessment for December, 1923, but also .as to the assessment for January, 1924. Although the answer covered more ground than the interrogatory, nevertheless'the answer was relevant to the issue, and was admissible. After stating that assessments were called by the board of directors for December, 1923, and the amounts thereof, the witness continues: “On January 12, 1924, .another assessment was called against certificate 279 in circle 45, which is the certificate involved in this suit. ” It occurs to us that the information sought by the interrogatory was whether or not the assessment was legally called. That is the necessary implication. That was the information desired, and when the witness stated that the December assessments were called by the board of directors, and followed this immediately by the statement that on January 12 another assessment was called, he necessarily meant that the J anuaf y assessment was likewise called by the board. An assessment could not have been legally called in any other way. When the answer is taken as a whole, it would be “sticking in the bark” to hold that the witness did not say that the January assessment was called by the board of directors.

The motion for rehearing is therefore overruled.


author: McCulloch, C. J.

text:
    Harrington v. Rieff.
    Opinion delivered March 15, 1926.
    Vendor and purchaser—waiver of lien.—A stipulation, in a deed conveying land that the vendor’s lien is waived, and is “subject to -a first mortgage lien not exceeding $12,000 thereof to he placed on the property,” was a valid waiver in favor of a mortgage for $6,000 which was executed by the mortgagor and accepted by the mortgagee, but does not constitute a waiver in favor of certain mechanics’ liens nor in favor of a mortgage for $6,000 which was executed by the mortgagor, but never accepted , by the mortgagee.
    Appeal from Pulaski Chancery Court; John E. Martineaio, Chancellor;
    reversed.

      D. K. Hawthorne, for appellant.

      Carmichael & Hendrichs, for appellee.
   McCulloch, C. J.

The numerous appellees are separately engaged in selling 'building material, and they joined in this action in the chancery court of Pulaski County to enforce their' several statutory liens against certain real estate in Little Rock for material furnished and used in the construction of a building thereon. Appellant has a vendor’s lien on the same real estate for the balance of the purchase price, and the controversy in the case relates to the question of priority between the several liens.

Appellant was the owner of the real estate in question, and conveyed it to the present owner, Mrs. L. O. Fitzgérald, by deed dated April 11, 1924, reciting a total consideration of $9,000, of which $5,000 was paid in cash, and the balance of $4,000 was evidenced by fifty notes, payable monthly, for the sum of eighty dollars each. The deed contains an express reservation of lien for the unpaid purchase price, and also a stipulation in the following language: “The first lien on the property described herein is waived, and these notes are subject to a first mortgage loan not exceeding twelve thousand dollars thereof, to be placed on the property described in this instrument. ’ ’

Mrs. Fitzgerald borrowed $6,000 from the People’s Savings Bank, at Little Rock, and executed a mortgage to that institution to secure the repayment of the loan, and out of the funds so borrowed she made the cash payment of $5,000 to appellant as recited in the deed. Later, Mrs. Fitzgerald built the house on the lot and purchased material from appellees, aggregating $6,233.06 in price. Mjrs. Fitzgerald, on August 30, 1924, executed another mortgage to the People’s .Savings Bank to secure the sum of $6,000, but this mortgage was never delivered and accepted.

Appellees filed their liens within the time prescribed by statute, and then instituted the present action to enforce the same, appellant being made a party on account of the lien reserved in his deed to Mrs. Fitzgerald. The chancery court rendered a decree declaring the hen of appellees to be superior to that of appellant, but subject to the mortgage lien of the People’s Savings Bank for $6,000, and ordered a sale of the property for the purpose of discharging the debts in the order of priority named. The question presented on the appeal is whether or not the lien asserted by appellees comes within the release or waiver expressed by appellant in his deed to Mrs. Fitzgerald.

It will be noted from the language used that the release, or waiver, applies only to “a first mortgage loan not exceeding twelve thousand dollars thereof, to be placed on the property described in this instrument.” It is conceded by all parties that the mortgage executed by Mrs. Fitzgerald to the People’s Savings Bank for $6,000, borrowed money, is a valid lien, superior to all others, and it is not contended that Mrs. Fitzgerald ever borrowed any other funds or delivered any other mortgage. The contention of counsel for appellees in support of the decree is that the effect of the waiver or release was to give priority to any kind of lien to the extent of $12,000, at least a lien for the purchase'of material to be used in building a house. The waiver is in writing, and its effect must be tested by the language used. The lienor had the right to select the conditions upon which the waiver was to become effective, and he saw fit to describe in precise terms the kind of a lien which he agreed should be prior to his own lien as vendor. The language used prescribed as a condition that the lien should be in the form of a mortgage, and that it should be to secure a loan. It certainly cannot be claimed that the lien asserted by appellees was of the character or form prescribed in the waiver. Nor was it the same in substance, for the lien asserted by appellees is one allowed by statute, and must be enforced in the manner prescribed by the statute, whereas the terms of a mortgage lien are fixed by contract of the parties. There is a substantial difference between a mortgage lien, about which the parties may contract as to the length of time it is to run, and the lien of a mechanic or materialman. The balance of the purchase money was divided into monthly notes, and the terms of the mortgage for borrowed money might have allowed him sufficient time to collect the amount due him, but the enforcement of the lien of appellees before the maturity of his notes would force him, if their liens are given priority, to give up his priority and to pay off those liens. There is evidence in the record that appellant expected, if the loan was secured for the full amount of $12,000, to receive as much as $2,000 on his debt in addition to the cash payment, and this fact illustrates the reason why appellant should, be permitted to waive in favor of a mortgage to secure a loan of money without extending it to any other kind of lien. The decree can find no support in the fact that Mrs. Fitzgerald subsequently executed a second mortgage to the People’s Savings Bank. That mortgage was not accepted by the bank, and there was no loan of money made thereon; hence it has no effect at all in this controversy. Appellant’s lien was superior to the liens asserted by appellees, and the chancery court erred in its decree to the contrary.

The decree is therefore reversed, and the cause is remanded with directions to enter a decree in accordance with this opinion.