Adler v. City of Hot Springs

• Decision Date: 26 November 1945
• Docket Number: 4-7744
• Citation: 190 S.W.2d 528,209 Ark. 400
• Parties: Adler v. City of Hot Springs
• Court: Arkansas Supreme Court

190 S.W.2d 528

209 Ark. 400

Adler v. City of Hot Springs

No. 4-7744

Supreme Court of Arkansas

November 26, 1945

Appeal from Garland Chancery Court; Sam W. Garratt, Chancellor.

Affirmed.

C Floyd Huff, Jr., House, Moses & Holmes, W. Horace Jewel, for appellant.

Wootton Land & Matthews and Jay M. Rowland, for appellee.

OPINION

McFaddin J.

This appeal grows out of an attempt by the appellant, Jack Adler, to collect the principal and accumulated interest on a bearer bond for $ 1,000, executed by the Hot Springs Water Co. on July 1, 1909, and due thirty years thereafter.

Appellant filed this suit on June 13, 1944, (18 days short of the period of limitation) naming as defendants the City of Hot Springs, Arkansas, and also the Hot Springs Water Co., a dissolved corporation. The Hot Springs Utilities Co. and Gus B. Walton, trustee, were permitted to intervene on a showing of liability for payment of any judgment rendered on the bond sued on. These interveners denied the valid issuance of the bond, and pleaded that it had been fully satisfied. They also cross-complained against the Central Arkansas Public Service Corp. for any judgment the interveners might be required to pay in this suit. The Central Arkansas Public Service Corp., by answer, made the same defenses against the bond as the interveners, and also pleaded laches. The Garland chancery court, after hearing the evidence, rendered its decree, dismissing the complaint of the plaintiff, and he has appealed.

At the outset, we point out that Arkansas adopted the Uniform Negotiable Instruments Law by Act No. 81 of 1913 (now found in § 10152, et seq., Pope's Digest). Section 195 of the Uniform Negotiable Instruments Law is now § 10157 of Pope's Digest, and reads:

"The provisions of this act do not apply to the negotiable instruments made and delivered prior to the taking effect hereof."

The bond herein sued on is dated July 1, 1909, and was certified by the trustee, and delivered to the Hot Springs Water Co. in 1909. Therefore, the provisions of the Uniform Negotiable Instruments Law have no application to this case.

Stated chronologically, the facts herein are:

1. On July 1, 1909, the Hot Springs Water Co. (hereinafter called "Water Company") was a public utility owning and operating the water works system of Hot Springs, Arkansas; and already had outstanding $ 500,000 in its first mortgage 5 per cent. bonds. On July 1, 1909, the Water Company executed its deed of trust to the Commonwealth Trust Co. of St. Louis, Missouri (hereinafter called "Commonwealth"), to secure an additional bond issue of $ 1,000,000. These bonds were to be 6 per cent. first mortgage refunding bonds, payable to bearer, and to consist of 1,000 serially numbered coupon bonds, each for $ 1,000, and each to mature thirty years from date, with interest payable semi-annually as evidenced by attached coupons. These refunding bonds were to be certified by Commonwealth, as trustee, and to be issued when needed to retire the 5 per cent. first mortgage bonds, and also to provide additional funds for the water company. The bond here sued on is No. 216 of these first mortgage 6 per cent. refunding bonds. We will later set out some of the pertinent provisions of this bond, as well as of the deed of trust securing the bond. The decision herein will largely turn on the language of the bond and the deed of trust.

2. The bond, No. 216, here sued on was certified by the trustee, and was delivered to the Water Company in 1909, and in 1913 was surrendered by the Water Company to Commonwealth for cancellation.

3. On March 4, 1913, Commonwealth executed its power of attorney to the clerk of the circuit court of Garland county, Arkansas, authorizing him to satisfy of record the said deed of trust from the Hot Springs Water Co. to Commonwealth, dated July 1, 1909, and being the deed of trust securing the bond No. 216 here sued on. The power of attorney was duly executed, acknowledged and delivered, and filed for record in the office of the circuit clerk and recorder in and for Garland county, Arkansas, on March 6, 1913, and duly recorded in Record Book 75 at page 583 of the records and deeds and mortgages of Garland county, Arkansas. Under that power of attorney, the clerk of the Garland circuit court duly satisfied the deed of trust by marginal endorsement on March 6, 1913.

4. The properties of the Water Company, in the intervening years from 1913 to 1943, passed through a series of ownerships, to-wit: Federal Light & Traction Co., Central Arkansas Public Service Corp., Gus B. Walton, Trustee, and Hot Springs Utilities Co. On October 11, 1943, the City of Hot Springs acquired the properties, and is now operating the same as a municipal plant. During all the years no demand was ever made by anyone for the payment of this bond No. 216, until appellant's attorney made demand on the City of Hot Springs, shortly before the filing of this suit. All of the coupons from July 1, 1920, to maturity are still attached to the bond No. 216. The records of the Water Company were destroyed in a fire in 1913.

5. At the trial of this cause in the chancery court the bond sued on was introduced; and, by stipulation, plaintiff's attorney was permitted to testify as to plaintiff's "ownership of the bond and how plaintiff came into possession of same, which stipulation is entered into due to absence of the plaintiff who resides in St. Louis, Missouri." Under that stipulation plaintiff's attorney testified "my client came in possession of the bond, which is a bearer bond, from his deceased father. The bond had only recently been discovered in a prayer book belonging to the plaintiff's father during his lifetime." The above quotation is the only explanation of where the bond might have been from 1913 to the filing of the suit, or how the plaintiff acquired the bond.

In the briefs, the following questions are discussed:

(a) whether the bond in question was ever validly delivered by the Water Company;

(b) whether the records of Commonwealth are admissible under the ancient documents rule; and

(c) whether the plaintiff is barred by laches.

We find it unnecessary to consider any of these questions, because, from the admittedly competent evidence, it is shown that the bond was satisfied by the trustee; and we hold that under the provisions of the deed of trust in this case, the satisfaction by the trustee was satisfaction by the bondholder. We elucidate:

I. The Bond Made Apt and Sufficient Reference to All the Provisions Contained in the Deed of Trust. The bond sued on contained on its face this language, inter alia:

". . . as provided in the said mortgage or deed of trust, securing the same, and reference is made thereto for a description of the mortgaged premises and the terms and conditions subject to which the said bonds are issued, with like effect as if said instrument were recited herein at length."

If it requires any citation of authorities to sustain the statement, that this language was sufficient to charge the holder of the bond with notice of all the provisions contained in the deed of trust, then the cases and treatises mentioned in the next section of this opinion are such authorities.

II. The Deed of Trust in This Case Made the Trustee the Agent of the Bondholder to Receive Satisfaction and Issue Receipt and Release. The deed of trust securing the first mortgage refunding bonds (of which bond No. 216 here sued on was one) was dated July 1, 1909. By its terms the Water Company transferred all of its properties to Commonwealth to secure the bond issue. The deed of trust is quite lengthy, but some of its salient provisions are here summarized (with references in each instance to the article and section in the deed of trust), to-wit:

1. No bond was valid until authenticated by the certification of the trustee endorsed on the bond, "and such authentication shall be conclusive evidence that every bond which it has endorsed is duly issued . . ." (Art. I, § 2.)

2. The trustee was also the registrar and transfer agent of the bonds, in case any bondholder desired to have a bearer bond made a registered owner bond. (Art. II, § 1.) (The bond, No. 216, was always a bearer bond.)

3. In case any mortgaged property should be destroyed by fire and rebuilding be not undertaken, then the insurance money "shall be paid over to the trustee . . ." (Art. VI, § 2.)

4. The trustee had authority to release from the lien of the deed of trust any property of the Water Company, "provided . . . bonds of the issue hereby secured and . . . equal in amount to the value of the property released, shall be delivered to the trustee and be canceled at the time of the execution of any such release." (Art. VIII, § 1.)

5. If the Water Company and the trustee could not agree as to the value of the property sought to be released, then they might arbitrate by each appointing an arbitrator. (Art. VII, § 2.)

6. The execution by the trustee of any release of any property should "at all times be deemed and taken as conclusive evidence that the trustee was fully warranted in executing such relase, and the validity thereof shall not thereafter be questioned. . . ." (Art. VII, § 3.)

7. Any of the bonds might be called and redeemed by the trustee at any time prior to maturity. (Art. IX, § 1.)

8 ". . . in case, at the time named for redemption of any bonds, if the funds be deposited as aforesaid, and if such bonds be not presented, the trustee shall hold the funds provided for the redemption thereof as special deposit for and on behalf of the owner or holder of the bonds called for redemption, and such bonds and all unpaid coupons thereto belonging and returned on and after the day named for redemption shall be null and...