Case Name: Martin v. State ex rel. Saline County
Court: Arkansas Supreme Court
Jurisdiction: Arkansas
Decision Date: 1926-06-28
Citations: 171 Ark. 576
Docket Number: 
Parties: Martin v. State ex rel. Saline County.
Judges: 
Reporter: Arkansas Reports
Volume: 171
Pages: 576–585

Head Matter:
Martin v. State ex rel. Saline County.
Opinion delivered June 28, 1926.
B. M. Cloud and W. B. Bonham, for appellant.
W. A. ‘Utley and Brouse S 'McDaniel, for appellee.

Opinion:
Hart, J.,
(after stating the facts). We deem it unnecessary to make an abstract of the evidence. While the testimony of A. Y. Martin flatly contradicts that of John F. Kirkpatrick, county judge of Saline County, to the effect that the agreement found by the chancellor, was made, still the testimony of Kirkpatrick was corroborated by that of other witnesses, and we think that it cannot be said that the finding of the chancellor was against. the preponderance of the evidence. Leach v. Smith, 130 Ark. 465, 197 S. W. 1160.
It may be then taken as settled, in so far as this opinion is concerned, that the chancellor was warranted in finding that Martín and the county judge of Saline County made á contract whereby the former was to receive 75 cents on the dollar for the county wárrants Which he owned at'the time the agreement was made and those purchased pursuant to the agreement, and' that; these Warrants had been deposited with the county treasurer for payment in accordance with the agreement.
The main reliance of Martin 'for a reversal of the decree is that the agreement in question was Without consideration,'and is.'unenforceable.
Counsel invoke the application of the common-law rule, which has been followed in this State, that,, where. part payment of a liquidated demand is made iii full settlement of the debt, no consideration exists for this promise of the creditor to release the remainder of his debt, and an action may be maintained for , it by the creditor. North State Fire Ins. Co. v. Dillard, 88 Ark. 473, 115 S. W. 154; Pettigrew Machine Co. v. Harmon, 45 Ark. 290; St. L. Sw. Ry. Co. v. Mitchell, 115. Ark. 339, 171 S. W. 895; Ledwidge v. Ark. Nat. Bank, 135 Ark. 420, 205 S. W. 808; United States v. Bostwick, 94, U. S. 53; said Fire Insurance Assn. v. Wickham, 141 U. S. 564.
In Clayton v. Clark, 21 So. 565, 37 L. R. A. 771, 60 Am. St. Rep. 521, the Mississippi Supreme Court, in a vigorous opinion, declared the rule to be absurd and unreasonable, and expressly set it aside.
In a case-note to 41 A. L. R. 1490, it is said that the. general rule that part payment of a liquidated indebtedness is no consideration for the discharge of the entire debt has-always been regarded as technical and unjust, and that the modern tendency of the courts has been to enlarge-the exceptions to the rule in order to avoid its harshness, and to carry into effect settlements,' adjust7 ments and compromises.
In Chicago, Milwaukee & St. Paul Ry. Co. v. Clark, 178 U. S. 353, the Supreme Court of the United States, in commenting upon the rule, said:
'The result of modern cases is that the rule only applies when the larger sum is liquidated, and when there is no consideration whatever for the surrender of part of it; and, while the general rule must be regarded as well settled, it is considered so far with disfavor as to be confined-strictly to cases within it."
While our own court has adhered to the rule,'it has recognized exceptions to it. One of these is' that part payment of a liquidated indebtedness by a third person is a .sufficient consideration for its acceptance by the creditor in the discharge of the entire debt. Pope v. Tunstall, 2 Ark. 209; Gordon v. Moore, 44 Ark. 349; and Wilks v. Slaughter, 49 Ark. 235, 4 S. W. 766.
In the Pope v. Tunstall case the court said that any change or alteration which renders the creditor's situation more advantageous or the debt more secure, will suffice.
This court has also held that, in cases of contract for the payment of a liquidated sum-of money, the payment of a less sum will not be a good satisfaction unless it was-paid 'and accepted before the time when it'was to have been paid, or at a different place from that appointed for the payment. Cavaness v. Ross, 33 Ark. 572, and Martin-Alexander Lumber Co. v. Johnson, 70 Ark. 215, 66 S. W. 924.
So, too, it has been held that an agreement by a debtor not to go into bankruptcy and thereby be discharged from his debts furnishes a sufficient consideration to support a contract by the creditor to accept less for his debt than the full amount thereof. Dawson v. Beall, 68 Ga. 328; Hinckley v. Arey, 27 Me. 362; and Her man v. Schlesinger, 114 Wis. 382, 91 A. S. R. 922, 90 N. W. 460.
We think that, under the facts of this case, the contention of Martin that the agreement to take 75 cents on the dollar for his county warrants was without consideration and for that reason invalid, is without merit, In the first place, it may be said that, under our Constitution, the county court is the general fiscal agent of the county, and has power to do all things necessary to the preservation of its funds. Leathem & Co. v. Jackson County, 122 Ark. 114, 182 S. W. 572. In the exercise of this power the county court might have called in all the county warrants for cancellation and reissuanee, and might have canceled all those which had been illegally issued or whose issuance had been procured by fraud. Monroe County v. Brown, 118 Ark. 524, 177 S. W. 40; Izard County v. Vincennes Bridge Co., 122 Ark. 557, 184 S. W. 67; and Izard County v. Bank of Melbourne, 123 Ark. 458, 185 S. W. 794.
Constitutional Amendment No. 11, authorizing county courts to issue bonds to secure the indebtedness outstanding at the time of its adoption, is self-executing, and the county court need not await the passage of an enabling act to order a sale of bonds. Matheny v. Independence County, 169 Ark. 925, 277 S. W. 22, and cases cited.
Before the agreement under consideration was made between Martin and the county judge, the former owned certain county warrants, which are general orders payable when funds are found in the county treasury, and which are to be paid in the order of their presentation. These warrants could not be paid until there were funds in the county treasury available for the purpose. Since the issuance of the warrants in question, it appears that there had been no funds out of which they could be paid, and they had not been paid for want of funds.
It is true that the warrants could be used in the payment of taxes by the holders thereof, but, on account of there being no available funds from which to pay them, they had depreciated in value until they were not worth exceeding 60 cents on the dollar. In order to secure the price of 75 cents on the dollar, Martin made an agreement with the county judge that, if he would exercise his discretion in issuing bonds, he would buy up other outstanding warrants and take 75 cents on the dollar for them.
Upon the situation being explained to the prosecuting attorney and others who held county warrants, they sold their warrants to Martin at a discount, and the county judge assisted Martin in buying up these warrants, so that he could make a profit by the county paying him 75 cents on the dollar for them. Then, pursuant to the agreement, he exercised his discretion and issued bonds to an amount which would pay off these warrants at 75 cents on the dollar, and thereby put the county on a cash basis.
These facts differentiate this case from Schlessinger v. Schlessinger, 39 Col. 44, 88 Pac. 970, where it was held that payment by a debtor of a sum less than is due under his agreement to the creditor, who executes a release, not under seal, purporting to discharge the debtor of all claims under the agreement, is not a satisfaction of the debt, though the debtor borrowed the money with which to make the payment.
In the first place, it may be said that one reason for so holding was that there was no averment that the plaintiff knew about the defendant's borrowing the money. Then, too, the debt was due at a certain date, and it was the duty of the defendant to pay it on that date, either with his own money or with borrowed money. It was a question whether the county judge could be compelled to issue bonds under Amendment No. 11 to secure money to pay off the existing county warrants. Martin is also charged with knowledge that the county judge had the power to call in the scrip for cancellation and reissuance, and that he might refuse to issue scrip which was illegal or whose issuance had been fraudulently procured in the beginning.
It is true, that there is no evidence in the record tending to show that any of the scrip held'by Martin was illegal or fraudulently .issued, hut Martin was a scrip dealer, and had purchased all of his county warrants from various persons, and knew the hazards attached to the calling in of the county warrants by the. county judge for cancellation and reissuance. Martin also knew that no levy of taxes could be made beyond the. constitutional limit for the purpose of paying county warrants. These facts were sufficient to make the case at bar .an exception to the general rule, and the mutual promises and forbearance of the county judge and Martin were sufficient consideration for the execution of the agreement in question.
On the question of the statute of frauds, but little need be said. The facts recited above constituted such a substantial part of the performance of.the contract as in any event to take it out of the statute of frauds. Storthz v. Watts, 117 Ark. 500, 175 S. W. 406; and Newton v. Mathis, 140 Ark. 252, 215 S. W. 615.
Again, on the question of the jurisdiction of the chancery court a short discussion will suffice. The record shows that Martin had numerous county warrants of various denominations, which would cause a multiplicity of suits, had a resort been made to 'law; Again, under the allegations of the complaint and the proof made' in the case, Martin'was not entitled to collect more thah 75 cents oh the dollar of the facé value of his county warrants, and the' collection of an amount in excess of that sum would have amounted to an illegal exaction, which any citizen of the county might prevent by the injunctive process of a court of equity. ' '
' The result of our views is that the decree of the chancery court was- correct, and it will he affirmed.