Arkansas Val. Compress & Warehouse Co. v. Morgan, No. 4-9133

CourtSupreme Court of Arkansas
Writing for the CourtMcFADDIN
Citation229 S.W.2d 133,217 Ark. 161
Decision Date17 April 1950
Docket NumberNo. 4-9133
PartiesARKANSAS VALLEY COMPRESS & WAREHOUSE CO. v. MORGAN et al.

Page 133

229 S.W.2d 133
217 Ark. 161
ARKANSAS VALLEY COMPRESS & WAREHOUSE CO.
v.
MORGAN et al.
No. 4-9133.
Supreme Court of Arkansas.
April 17, 1950.

Page 135

[217 Ark. 162] Townsend & Townsend and House, Moses & Holmes Little Rock, for appellant.

Bailey & Warren, Little Rock, for appellees.

McFADDIN, Justice.

The principal question posed by this litigation is the validity of a lease made by the City of Little Rock to the appellant, and covering property known as Building No. 19 near the Municipal Airport. Intertwined are also other questions relating to actions, parties, municipal powers, estoppel, and laches.

The litigation--of which this appeal is the fruition--was initiated by a complaint filed in the Chancery Court on April 2, 1948 by W. S. Morgan, as a citizen and taxpayer of the City of Little Rock. Defendants were Arkansas Valley Compress and Warehouse Company (hereinafter called 'Arkansas Valley') and the City of Little Rock (hereafter called 'City'). The complaint alleged that on December 31, 1931 the City leased to White Brothers (now Arkansas Valley) certain lands and a warehouse thereon (hereinafter referred to as Building No. 19); that the lease was illegal and void: 1 [217 Ark. 163] because of constructive fraud; that in 1936 the City and Arkansas Valley amended the original lease but the amendment was also void because of constructive fraud; that Building No. 19 was occupied in 1948 by U. S. Time Corporation and the rental should be paid to the City of Little Rock. The prayer of the complaint was for the cancellation of the lease rights of Arkansas Valley and the receipt by the City of the rentals paid by U. S. Time Corporation.

The City, in its answer, denied that there was any actual fraud connected with the leasing of the property to Arkansas Valley but admitted that the lease 'was an attempted improvident agreement on the part of the City * * *'. The City prayed that the Court 'grant the relief as prayed

Page 136

in the complaint. Obviously, the effect of this pleading was to array the City on the side of the plaintiff; and this is further demonstrated by the fact that the City is one of the appellees. So we bypass the question of the plaintiff's right to bring the suit. The defendant, Arkansas Valley, after various objections as to parties, etc., filed answer in which it denied all allegations as to fraud or improvidence; affirmatively stated that all contracts had been fairly and legally made; and denied that the City held the property as trustee for the public. By way of cross-complaint, Arkansas Valley claimed that when the Federal Government returned possession of the airport property to the City in 1948, the City failed and refused to return to Arkansas Valley a vacant strip of approximately 72 feet. To this cross-complaint the City pleaded the Statute of Frauds.

[217 Ark. 164] The cause was tried upon the issues joined. The evidence is voluminous, including 360 pages of testimony and 61 exhibits. The Chancery decree cancelled all rights of Arkansas Valley to Building No. 19, required Arkansas Valley to account to the City for rentals received after September 1948, and allowed the City to continue receiving future rentals under the sublease to the U. S. Time Corporation. 2 Arkansas Valley has appealed.

Numerous questions are presented in the excellent briefs, but we discuss only those questions essential to a determination of the issues:

I. The Evidence as to Fraud in the 1932 Lease and 1936 Amendment. Courts have always been reluctant to define 'fraud' (either actual or constructive) lest man's fertile mind invent a new scheme outside the definition but just as nefarious as previously denounced schemes. 3 So most Courts have stated the elements of fraud rather than an all-inclusive definition. In Mid-Continent Life Ins. Co. v. Hill, 192 Ark. 667, 94 S.W.2d 364, Mr. Justice Mehaffy quoted from Black's Law Dictionary as to the elements of fraud: 'Fraud consists of some deceitful practice or willful device resorted to with intent to deprive another of his right or in some manner do him an injury.'

[217 Ark. 165] To the same general effect see Bouvier's Law Dictionary, Rawle's Third Revision, page 1304: 'Actual or positive fraud includes cases of the intentional and successful employment of any cunning, deception, or artifice, used to circumvent, cheat, or deceive another. 1 Story, Eq. Jur. Sec. 186.'

It is not contended that there was any actual fraud in the transactions here involved. The complaint says the dealings were 'a constructive fraud on the rights of the citizens of Little Rock'. We come then to the matter of constructive fraud, which--while not defined--has been stated to consist of certain elements. In Levinson v. Treadway, 190 Ark. 201, 78 S.W.2d 59, 63, Mr. Justice Mehaffy said: 'Persons, in order to be guilty of legal or constructive fraud, or, as it is sometimes called, fraud

Page 137

at law, do not necessarily have to be guilty of moral wrong, but a constructive fraud is a breach of either legal or equitable duty which, irrespective of moral guilt of the fraud feasor, the law declares fraudulent, because of its tendency to deceive others, to violate public or private confidence, or injure public interests. Neither actual dishonesty of purpose nor intent to deceive is an essential element of constructive fraud. 26 C.J. 1016 and cases cited.'

Bouvier's Law Dictionary, Rawle's Third Revision, p. 1304 says: 'Legal or constructive fraud includes such contracts or acts as, though not originating in any actual evil design or contrivance to perpetrate a fraud, yet by their tendency to deceive or mislead others, or to violate private or public confidence, are prohibited by law.'

In Hildebrand v. Graves, 169 Ark. 210, 275 S.W. 524, Mr. Justice Hart pointed out that in determining the question of fraud, all the surrounding circumstances are to be considered. Therefore, we examine the evidence in the case to see whether there was any constructive fraud in connection with the 1932 lease and the 1936 amendment.

[217 Ark. 166] The testimony shows that because of World War I, the United States Government 4 owned property in Little Rock known as the 'Airport Site' on the west side of which was located Building No. 19, a concrete building, approximately 800 feet long and 300 feet wide, and served by two railroad tracks. In 1929 the United States Government offered to lease to the City of Little Rock the entire airport property, including Building No. 19; but the City declined the offer chiefly because of the obligation of maintaining the building. The United States Government then advertised for bids. White Brothers made the best bid and in 1930 leased 5 from the United States Government the entire airport property, including Building No. 19, for five years, with option to renew for five additional years. Under this lease, White Brothers agreed to pay the United States Government $2,400 per year, and also agreed to maintain Building No. 19 in good condition.

Some time after 1930 White Brothers organized the Arkansas Valley Compress and Warehouse Company (i. e. 'Arkansas Valley') which assumed all obligations of the lease; and White Brothers and Arkansas Valley, for the purpose of this statement of facts, are identical. In 1930, 1931, and 1932 Arkansas Valley spent, for improvements on and maintenance of Building No. 19, a sum of approximately $40,000, and the building was used as a cotton compress and warehouse until World War II.

When Arkansas Valley became the owner of the lease in 1930, it had no need for any of the property, except Building No. 19 and some land contiguous, so Arkansas Valley subleased the airport to the City of Little Rock for an annual rental of $3,000 a year. It will be observed that the City had refused to lease all the property from the Federal Government because it did [217 Ark. 167] not want to be obligated to repair and maintain Building No. 19, but the City was willing to pay $3,000 a year for the airport.

This arrangement between Arkansas Valley and the City continued until 1931 when the City and Arkansas Valley agreed--subject to approval of the United States Government--to a different arrangement which was considered, at that time, to be beneficial to both Arkansas Valley (because it obtained a longer lease than its original ten year lease) and the City (because it would be out less money for the lease of the airport). The United States Government acquiesced in the new agreement; and the result was that the City, on December 31, 1931, made 'the 1932 lease' which is under attack in this suit. This lease provided:

Page 138

(a)--That Arkansas Valley would surrender its lease to the United States Government on all the airport property, including Building No. 19;

(b)--That the United States Government would then lease all the airport property, including Building No. 19, to the City of Little Rock for twenty-five years with a renewal option for an additional twenty-five years;

(c)--That the City would pay the United States Government rental of $1,200 per year for nine years, and $1 per year thereafter;

(d)--That the City would lease Building No. 19 and a 72 foot contiguous strip to Arkansas Valley for twenty-five years, with right of renewal for an additional twenty-five years; and that the rental paid by Arkansas Valley to the City would be $600 per year for nine years and...

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18 practice notes
  • Bishop v. Tice, No. 79-1607
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • May 16, 1980
    ...deceive another," Mazander v. Reed, 233 Ark. 511, 345 S.W.2d 469, 471 (1961) (quoting Arkansas Valley Compress & Warehouse Co. v. Morgan, 217 Ark. 161, 229 S.W.2d 133, 136 (1950)). Relying on this authority, Bishop contends and defendants do not dispute that Arkansas would recognize a cause......
  • FDIC v. Deloitte & Touche, No. LR-C-90-520.
    • United States
    • United States District Courts. 8th Circuit. United States State District Court of Eastern District of Arkansas
    • October 1, 1992
    ...scheme outside the definition but just as nefarious as previously denounced schemes." Arkansas Valley Compress & Wharehouse Co. v. Morgan, 217 Ark. 161, 164, 229 S.W.2d 133 (1950). When dealing with a deliberately vague legal standard, a court must exercise caution and common sense. The FDI......
  • Vanderboom v. Sexton, No. FS-68-C-47.
    • United States
    • United States District Courts. 8th Circuit. Western District of Arkansas
    • January 24, 1969
    ...a matter of public policy. Lane v. Rachel, (1965) 239 Ark. 400, 389 S.W.2d 621; Arkansas Valley Compress & Warehouse Co. v. Morgan, (1950) 217 Ark. 161, 229 S.W. 2d 133; Kersh Lake Drainage District v. Johnson, (1941) 203 Ark. 315, 157 S. W.2d 39; Stewart v. Clark, (1938) 195 Ark. 943, 115 ......
  • Seltenreich v. Town of Fairbanks, No. 6926.
    • United States
    • United States District Courts. 9th Circuit. District of Alaska
    • March 4, 1952
    ...capacity ordinarily may be alienated without consent of Legislature." In Arkansas Valley Compress & Warehouse Co. v. Morgan et al., 217 Ark. 161, 229 S.W.2d 133, at page 134 it is held as stated in the "A city entering into contracts involving, not government of its citizens, but only conve......
  • Request a trial to view additional results
18 cases
  • Bishop v. Tice, No. 79-1607
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • May 16, 1980
    ...deceive another," Mazander v. Reed, 233 Ark. 511, 345 S.W.2d 469, 471 (1961) (quoting Arkansas Valley Compress & Warehouse Co. v. Morgan, 217 Ark. 161, 229 S.W.2d 133, 136 (1950)). Relying on this authority, Bishop contends and defendants do not dispute that Arkansas would recognize a cause......
  • FDIC v. Deloitte & Touche, No. LR-C-90-520.
    • United States
    • United States District Courts. 8th Circuit. United States State District Court of Eastern District of Arkansas
    • October 1, 1992
    ...scheme outside the definition but just as nefarious as previously denounced schemes." Arkansas Valley Compress & Wharehouse Co. v. Morgan, 217 Ark. 161, 164, 229 S.W.2d 133 (1950). When dealing with a deliberately vague legal standard, a court must exercise caution and common sense. The FDI......
  • Vanderboom v. Sexton, No. FS-68-C-47.
    • United States
    • United States District Courts. 8th Circuit. Western District of Arkansas
    • January 24, 1969
    ...a matter of public policy. Lane v. Rachel, (1965) 239 Ark. 400, 389 S.W.2d 621; Arkansas Valley Compress & Warehouse Co. v. Morgan, (1950) 217 Ark. 161, 229 S.W. 2d 133; Kersh Lake Drainage District v. Johnson, (1941) 203 Ark. 315, 157 S. W.2d 39; Stewart v. Clark, (1938) 195 Ark. 943, 115 ......
  • Seltenreich v. Town of Fairbanks, No. 6926.
    • United States
    • United States District Courts. 9th Circuit. District of Alaska
    • March 4, 1952
    ...capacity ordinarily may be alienated without consent of Legislature." In Arkansas Valley Compress & Warehouse Co. v. Morgan et al., 217 Ark. 161, 229 S.W.2d 133, at page 134 it is held as stated in the "A city entering into contracts involving, not government of its citizens, but only conve......
  • Request a trial to view additional results

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