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the knowledge or consent of appellee, permitted Cahoon to sell the mortgaged chattels to other parties, who assumed payment of the note, but paid only $70 thereof, and that the balance of $10 and interest should be credited on appellee's note. These two credits, if allowed, are sufficient to extinguish the balance claimed by appellants to be unpaid on appellee's note. The chancellor found in favor of the defendant, allowing the credits, and entered a decree accordingly, from which decree the plaintiffs, Johnson, Berger & Co., appealed.

Frierson & Frierson, for appellants. N. F. Lamb, J. F. Gantney, and J. M. Virgin, for appellee.

MCCULLOCH, J. (after stating the facts). According to the pleadings and testimony in the case, the Cox note was delivered by appellee to appellants as collateral security for debt owing by the former to the latter. The note bears date of September 27, 1898, and was payable in 49 days after date, and therefore fell due on November 15, 1898. The evidence is conflicting as to whether appellants presented this note to the makers, and in due time notified appellee of its nonpayment; but it is undisputed that the note was indorsed and delivered to appellants by appellee before maturity, or at least some time before the date of the execution of appellee's note to appellants, December 13, 1898. This being true, appellants cannot be held liable for a failure to make demand of payment and notice of nonpayment. Appellee, by subsequently executing to appellants his note and mortgage for the full amount of his debt, waived any liability of appellants to him as indorser by reason of their failure to have made demand and given notice of nonpayment. If he intended to insist upon a credit of the amount of the Cox note, he should have claimed it before executing his note to appellants for the full amount of his debt. By retaining possession of the Cox note as collateral security to appellee's note to them, appellants were bound only to use reasonable diligence to collect it, and are liable only for gross negligence in failing to take the proper steps to collect the note and protect appellee from loss. Colebrook on Col. Securities, § 114; Jones on Pledges & Col. Securities, §§ 692, 693; 22 Am. & Eng. Ency. L. pp. 901, 902; Hanover Nat. Bank v. Brown (Tenn.) 53 S. W. 206; Reeves v. Plough, 41 Ind. 204; Cooper v. Simpson, 41 Minn. 46, 42 N. W. 601, 4 L. R. A. 194, 16 Am. St. Rep. 667.

The evidence in this case does not show (the burden of proof being upon the appellee to establish that fact) that appellants failed to exercise due diligence to collect the note, or that any loss resulted from appellants' alleged failure to present the note for payment and promptly notify appellee of the nonpayment. Appellants were not liable for mere delay in enforcing the collateral, especially

where there has been no demand upon them to sue the makers of the note. Colebrook on Col. Securities, § 208; Friend v. Smith Gin Co., 59 Ark. 86, 26 S. W. 374.

Appellee had a perfect right to pay off the debt to appellants at any time, and require a surrender of the collateral note, but, having failed to do this, or make demand upon appellants to sue on the note, he cannot complain of mere delay on the part of appellants in forcing payment of the collateral note. The same may be said of the Cahoon note. The evidence does not show that appellants ever accepted the note as a pro tanto payment, or otherwise than as collateral security, or that they ever consented to a sale of the mortgaged chattels. At most, they were only guilty of delay in bringing suit to enforce the security. We think the chancellor erred in allowing appellee credit for either of these notes.

The note sued on stipulated that it should bear "interest from date at the rate of ten per cent. per annum," without any stipulation for interest after maturity. Under the rule established by many decisions of this court, interest must be computed at the rate of 10 per cent. from date to maturity, and thereafter at 6 per cent. Newton v. Kennedy, 31 Ark. 626, 25 Am. Rep. 592; Pettigrew v. Summers, 32 Ark. 571; Gardner v. Barrett, 36 Ark. 476; Johnson v. Myer, 54 Ark. 437, 16 S. W. 121. Computing interest according to this rule, and after allowing appellee all credits for payments made, including the payment of $56.09 made since the commencement of this suit, we find that appellee is still indebted to appellants in the sum of $124.38, with interest at 6 per cent. per annum from February 4, 1902, the date of the last payment.

The decree is therefore reversed and remanded, with directions to enter a decree in favor of appellants for the above amount and interest aforesaid, and costs of suit, and that the mortgage be foreclosed.

LITTLE ROCK RY. & ELECTRIC CO. v. CITY OF NORTH LITTLE ROCK. (Supreme Court of Arkansas. June 17, 1905.) 1. INJUNCTION-RECIPROCAL OPERATION.

Kirby's Dig. § 5522, authorizes parts of one municipal corporation to be annexed to another, and provides that, if a majority of those voting at the election held to determine the advisability of annexation shall vote in favor of annexation, the council shall so declare and record it, after which the consolidated territory shall constitute a municipal corporation. After an election to determine the question of consolidation had been held, the council of the annexing municipality was, at the instance of the other municipality and a private corporation, enjoined from declaring the result, which was in favor of annexation. Pending the injunction the municipality to which the annexed territory had formerly belonged granted to the private corporation a franchise to construct and operate a street railroad in the annexed territory. Held, that the franchise was

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The fact that pending the injunction the private corporation expended a large sum in partially constructing its road without objection from the annexing municipality did not estop the latter from asserting the invalidity of the franchise.

3. SAME-ANNEXATION OF TERRITORY-COMMENCEMENT OF JURISDICTION.

Kirby's Dig. § 5522, authorizes parts of one municipal corporation to be annexed to another, and provides that, if a majority of those voting at the election held to determine the advisability of annexation shall vote in favor of annexation, the council shall so declare and record it, after which the consolidated territory shall constitute a municipal corporation. Held, the jurisdiction of the annexing municipality over the annexed territory commences when the result of the election is declared, and does not relate back to the time when the election was ordered.

4. SAME FRANCHISES DITIONS PRECEDENT.

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ENJOYMENT-CON

Where an ordinance granting a franchise to a street railway company provided that before the rights conferred should be enjoyed the company should obtain from the county court a confirmation of the right of way over a bridge, the obtaining of the consent of the county court was a reasonable and enforceable condition precedent to the acquisition of any rights under the franchise.

5. SAME REASONABLE TIME.

Where an ordinance granting a franchise to a street railway company provided that, before the rights conferred should be enjoyed, the company should obtain from the county court a confirmation of the right of way over a bridge, the company was required to obtain the consent of the county court within a reasonable time, but one month was not a reasonable time.

Battle and Wood, JJ., dissenting. Appeal from Pulaski Chancery Court; Jesse C. Hart, Chancellor.

Action by the city of North Little Rock against Little Rock Railway & Electric Company. From a judgment for plaintiff, defendant appeals. Reversed.

On the 16th of March, 1903, the General Assembly passed an act authorizing parts of one municipal corporation to be annexed to another municipal corporation. This act is contained in section 5522, Kirby's Dig. On the 11th of May, 1903, petitions were filed with the town council of the town of North Little Rock, signed by a majority of the citizens of that town and a majority of the citizens of the Eighth Ward of the city of Little Rock, praying for the annexation of the Eighth Ward of Little Rock to the incorporated town of North Little Rock. On the 15th of June, 1903, an ordinance was passed, calling for an election to be held in the affected territory on the question of annexation, pursuant to the terms of the act. The election was called for July 21, 1903. On the 6th of July, 1903, the city of Little Rock, its mayor and aldermen and numerous citizens and corporations-among the latter, the appellant, which will hereafter be called the "Street Railway Company"

filed a complaint in the Pulaski chancery court against the town of North Little Rock. The complaint set forth fully the relation of the Eighth Ward to the city of Little Rock, and the alleged effect upon it and the city of Little Rock, should the proposed annexation to North Little Rock be consummated. The complaint alleged that the act under which the proceedings were progressing was unconstitutional, for various reasons set forth therein, and consequently the whole proceeding under it was void, and sought to arrest by injunction the election ordered for July 21st. The complaint further alleged: "Complainants further state that, unless defendants are restrained from holding such election and proceeding further under said act, defendants will hold said election, will declare the result in favor of disannexation, and will then proceed to grant all kinds of franchises, privileges, licenses, and contracts of public nature; that said franchises, privileges, and contracts will conflict with those heretofore granted by the said city of Little Rock; that it will grant street car, lighting, and water franchises to parties other than those to whom they have been granted by said city." Other probable conflicts in rights and jurisdiction were alleged to be imminent. The prayer was to restrain the holding of said election, and from taking any further steps towards annexing the Eighth Ward to North Little Rock. On July 16th a demurrer was sustained to the complaint and the injunction refused, and the city of Little Rock and its coplaintiffs appealed to the Supreme Court. The court was not then in session, and application was made to Hon. Henry G. Bunn, then chief justice of the Supreme Court, for an injunction pending the appeal. The petition to the chief justice recited the status of the annexation proceedings and the litigation, and alleged "that for the reasons and grounds set forth and referred to in said complaint, and for others hereinafter set forth, it is of the utmost importance that a temporary restraining order should be issued by your honor in vacation of said Supreme Court, to restrain said defendants from all further proceedings in the matters set forth and referred to in said complaint and exhibits, during the vacation of said Supreme Court, and until its further order." Then other and additional reasons were alleged why the injunction should issue. This further statement appears in the petition: "Plaintiffs further state that the granting of the injunction herein prayed for will work no injury or detriment to the defendants; that it will only result, so far as the defendants are concerned, in a postponement of the election, if said act is hereafter adjudged to be constitutional; that said injunction will in all respects merely result in the maintenance of the status quo of the parties, property, and interests herein involved." On July 18th Chief Justice Bunn

refused to enjoin the holding of the election, allowing the proceedings to go to the extent of holding the election, counting the votes, and completing the election returns, but enjoined the declaration of the result, and from entering the same on the record of the proceedings of the council of North Little Rock, and enjoined North Little Rock from doing any act towards the assumption of jurisdiction or control over the property or affairs of the Eighth Ward, or the exercise of any municipal function whatever over the same, and from interfering with the existing jurisdiction of the city of Little Rock, until the further orders of the Supreme Court, or one of the judges thereof. It was further ordered that the ballots and returns of the election were to be counted and cast up and transmitted to the council of North Little Rock, and, without opening or further action thereon, were to be kept until the further orders of the Supreme Court, or one of the judges thereof.

The act under which this proceeding was held provided that, if a majority of those voting at the election should vote in favor of annexation, the council "shall so declare and enter [it] upon its record book of proceeding." And "thereafter the said consolidated territory, and the inhabitants thereof, shall constitute a municipal corporation of this state," etc. The declaration of the vote in favor of annexation, and the record thereof, constituted the point where the jurisdiction of the enlarged corporation began. The chief justice allowed the proceedings to go to this point, but arrested the changes of jurisdiction until the appeal was heard and determined. The vote at the election July 21st resulted in 475 votes for annexation, and 44 against it. The returns were counted, cast up, and delivered pursuant to the order, but the declaration and record of the result stayed by this injunction. On February 6, 1904, the Supreme Court affirmed the decision of the chancellor, and on February 22d time for filing motion for reconsideration was waived, the injunction dissolved, and the annexation proceedings then completed. On the 25th of June, 1903-the same being after the election was ordered and before it was held-the council of the city of Little Rock granted to the street car company a franchise to build and maintain a street railway over certain streets in the Eighth Ward. The franchise, however, contained conditions, so far as material, in substance as follows: That before the rights conferred should be enjoyed the free bridge over the Arkansas river (the Eighth Ward being on the north side of the river) should be so strengthened to bear with safety the weight of the cars. Details in regard to this were provided for in the ordinance. The next condition is: "Nor shall said rights herein granted be enjoyed until the grant hereby made of a right of way over the said free bridge has been confirmed by the coun

ty court of Pulaski county." The bridge was constructed by the county of Pulaski, and not by the city of Little Rock. It was further provided that the grant would be void unless within 30 days after said confirmation by the county court the street car company should begin the work of laying tracks and strengthening the bridge, and prosecute the work with reasonable dispatch, and complete it within 18 months; but it was provided that, if the work was stopped by judicial proceeding, the time it was so suspended should be excluded. The ordinance provided that it should not be operative until the street car company should accept its terms and conditions in writing, within 15 days, and deposit with the city treasurer $10,000 in cash, or, at its option, a good bond in that sum, conditioned to comply with the terms of the ordinance, and containing, among others, this condition: "If the county court declines to confirm the right of way herein granted, then the council reserves the right to revoke this ordinance at such time as it sees fit, or wait on said confirmation at its option." In another section it is provided that such confirmation shall not be necessary if there is obtained a final judgment of the Supreme Court holding the right of way valid without such confirmation. It is conceded that no litigation has been begun or had wherein this question could be finally passed upon by the Supreme Court. The final section is that the ordinance should be a binding contract between the city of Little Rock and the street car company upon its passage, and the acceptance in writing, and depositing the cash or bond. The ordinance was duly passed. It was accepted in writing within the time, and the bond duly made and delivered. On the 10th of August, 1903, the city council of Little Rock materially amended this ordinance. The part important here is that the provision requiring confirmation of the grant of right of way by the county court of Pulaski county to be obtained before any rights therein conferred became operative was stricken out, and the company given an absolute franchise to construct and maintain a street car line over certain streets in the Eighth Ward. Similar provisions were made as to acceptance in writing, the giving of bond, and other matters not entering into this case. This was passed, as stated, on the 10th of August, while the injunction suit was pending in the Supreme Court, and while the temporary injunction of Chief Justice Bunn was in force. After the passage of this ordinance, and before the case was finally determined, the street car company began the construction of its line in the Eighth Ward, laid considerable track, and spent in all about $27,000 on the work. It was not completed in any part or ready for operation when the decision in the injunction suit was rendered by the Supreme Court. After the latter event the town of North Little Rock, which had been advanced

to the grade of a city of the first class, brought this suit to annul the franchises, and succeeded in the chancery court.

Ashley Cockrill and Rose, Hemingway & Rose, for appellant. James P. Clarke, for appellee.

HILL. C. J. (after stating the facts). 1. The franchise sought to be enjoyed was granted by the council of Little Rock August 10, 1902, when the jurisdiction of the city of Little Rock over the Eighth Ward thereof, where the franchise was to have been enjoyed, would have ceased for all purposes but for the injunction granted at the instance of the city of Little Rock, this appellant company, and other parties to the suit. One of the grounds relied upon for the injunction was the probability that the other municipality seeking to absorb this territory would grant therein street car franchises conflicting with those theretofore granted by the city of Little Rock. So far as this record shows, the franchise to this company, granted subject to several conditions set out in the statement of facts, was the franchise sought to be protected against encroachment and conflict. This franchise was amended after the injunction so as to take out the conditions which prevented it from becoming at once operative. The injunction was granted upon this and other allegations, and unquestionably was intended to preserve the status quo of the two municipalities, so far as the Eighth Ward was concerned, pending the appeal to determine whether or not the proceedings for its annexation to North Little Rock were valid. Lord Chancellor Eldon held that where a party obtained an injunction which prevented his adversary from pursuing and enjoying rights, and the injunction was finally dissolved, the party could not take advantage of any rights which he had thus wrongfully prevented his adversary from enjoying. The Lord Chancellor said: "If there be a principle upon which courts of justice ought to act without scruple, it is this: To relieve parties against that injustice occasioned by its own acts or oversights at the instance of the party against whom the relief is sought. That proposition is broadly laid down in some of the cases." In such cases it is reasoned by the great chancellor that the plaintiff seeking relief by the mere circumstance of filing the bill would be required to submit to everything conscience and justice required; that the plaintiff seeking the relief impliedly says he asks it on the terms of putting his adversary in exactly the same situation if it be determined in his favor. Pultenay v. Warren, 6 Vesey, Jr., Chan. Rep. 73. This principle has found secure lodgment in equity jurisprudence, and is applied to varying kind of cases involving its application. Frequently it is applied when an injunction stays an action and it becomes

barred, or right to execution lapses; and in many other cases, when an injunction wrongfully prevents the assertion of a right or causes it to lapse, then the court treats the plaintiff wrongfully causing this effect to be reciprocally bound by the injunction. Mercantile Trust Co. v. St. L. & S. F. Ry. Co. (C. C.) 69 Fed. 193; Hutsonpeiler's Adm'r v. Storer's Adm'r, 12 Grat. (Va.) 579; Marshall v. Minter, 43 Miss. 666; Work v. Harper, 66 Am. Dec. 549; Sugg v. Thrasher, 30 Miss. 135. Chief Justice Schofield, in applying this doctrine in a case in Illinois, said: "The only function of an injunction is to stay threatened action and suspend the conflicting claims of right of the respective parties where they are until they can be properly adjudicated. 2 Daniell, Ch. Pr. (5th Ed.) 1639, and note. And so it must necessarily follow that to allow one party to obtain any advantage by acting when the hands of the adverse party are thus tied by the writ, or the order for it, is an abuse of legal process which cannot be tolerated." Lake Shore Ry. Co. v. Taylor, 134 Ill. 603, 25 N. E. 588. While the hands of the city of North Little Rock were effectually tied by the injunction sought at the instance of the city of Little Rock and the street car company, then the street car company obtains from its coplaintiff the franchise in question in territory over which the city of Little Rock would not have had at that time a vestige of jurisdiction except by reason of the injunction preserving the status quo in regard to franchises as well as police and municipal control. The statement of the situation shows more clearly than argument that it is inequitable to allow rights to be thus acquired.

It is argued that these cases proceed upon the ground that the party obtaining the injunction has violated its spirit, or that the restraining party took advantage of something he could not have had before, or that the position of the party enjoined was more favorable before the injunction. Many of the cases do proceed on such propositions, but the underlying principle is that the injunction acts reciprocally, and binds in spirit the moving party, while binding expressly the other. While the city of Little Rock could have granted an absolute franchise the day it obtained the injunction, it did not do so, and when it did grant the absolute franchise the city of North Little Rock was then under injunction from granting such franchise. If it had not been under such injunction, it could have then granted a franchise over these streets, and the city of Little Rock could not have done so. The court is of the opinion that the principles of these cases apply to this case.

2. Counsel for the appellant contends that the city has no property interests in the streets; that it is a mere agent of the state, to whom the state has delegated control of the streets, and the state in the first in

stance, and the city in the second instance, is but a trustee for the public. Many authorities are cited on this proposition, and it is summed up in a recent case in the Supreme Court of the United States in this language: "The statutes show that there was lodged by the Legislature of Ohio in the municipal council of Cleveland comprehensive power to contract with street railway companies in respect to the terms and conditions upon which such roads might be constructed, operated, extended, and consolidated. * ** That, in passing ordinances based upon the grant of power referred to, the municipal council of Cleveland was exercising a portion of the authority of the state, as an agency of the state, cannot in reason be disputed." Cleveland v. Cleveland City Ry. Co., 194 U. S. 517, 24 Sup. Ct. 756, 48 L. Ed. 1102. The argument of counsel on this line is fully conceded as established in principle and by authority. But it does not follow from this status of the city that it may by its own act prolong its governmental agency, and grant rights otherwise divested from it by the state. In this case the state, by appropriate legislation, authorized the transfer of the control of the streets in question from one agent to another agent. The holding agent prolonged its holding by this injunction, contrary, as it was afterwards determined, to the act of the Legislature. Can it be said that on account of these governmental functions it is freed of the ordinary rules governing litigants? In City of Ft. Smith v. McKibben, 41 Ark. 45, 48 Am. Rep. 19, the statute of limitations was invoked against the city's control of an alley of the city of Ft. Smith. The doctrine of governmental agency was there presented, but this court held, on a conflict in the authorities, that the weight of authority and the better reason were in favor of applying the statute. In Town of Searcy v. Yarnell, 47 Ark. 269, 1 S. W. 319, this court quoted approvingly from Bailey v. Mayor of New York, 3 Hill, 551, 38 Am. Dec. 669, as follows: "A municipal corporation, when in the exercise of franchises and the prosecution of works for its emolument or advantage, and in which the state in its sovereign capacity has no interest, is answerable as a private corporation, although such works may also be in the nature of great enterprises for the public good; and 'powers granted exclusively for public purpose belonging to the corporation in its public, political, or municipal character.' Powers granted for private advantages, though the public may also derive benefit therefrom, are to be regarded as exercised by the municipality as a private corporation." In that case an estoppel was invoked against the town of Searcy. In fact, an estoppel may be invoked against the government of the United States, the government of a state, or a municipality. State of Indiana v. Milk (C. C.) 11 Fed. 389, and numerous authorities

there cited; La Fayette Bridge Co. v. Streator (C. O.) 105 Fed. 729; United States v. La Chapelle (C. C.) 81 Fed. 152. In the case of Indiana v. Milk, supra, Judge Gresham said: "Resolute good faith should characterize the conduct of states in their dealings with individuals, and there is no reason in morals or law that will exempt them from the doctrine of estoppel." If the state may be estopped, certainly the agent of the state, who prolongs the power of the state in itself, may be estopped by reason of its action in so prolonging this power. Passing, however, from the governmental agency of the city to the result of the action of the city in pursuance of this agency: In the recent case, heretofore referred to, of Cleveland v. Cleveland City Ry. Co., 194 U. S. 517, 24 Sup. Ct. 756, 48 L. Ed. 1102, the court said "that in the courts of Ohio the acceptance of an ordinance of the character of those just referred to is deemed to create a binding contract." Citing authorities. Then the court considered the question as one of general law, without treating the decisions of Ohio as binding, and reached the same conclusion. A like view is taken of the question in this state. "Now, a grant which has been accepted and acted upon by the grantee is a contract, within the meaning of the Constitution of the United States, which forbids laws impairing the obligation of contracts." Hot Springs Elec. Light Co. v. Hot Springs, 70 Ark. 300, 67 S. W. 761. There is the general rule. McQuillan, Mun. Ord. § 238. grants in this case were duly accepted, and constituted contracts; and hence it follows, aside from any estoppel of the governmental agency, that the grant in question was a contract right, and subject to all the protection and liability of other contractual rights, and among the latter is the sound equitable rule that such rights cannot be acquired in violation of an injunction obtained for the benefit of the contracting parties. All of these reasons would be applicable if a stranger had obtained the franchise, but when it is obtained from one party to the injunction in favor of a coplaintiff therein they are doubly applicable. Without pursuing the question further, the court is of opinion that neither the city of Little Rock nor the street car company can hold rights acquired over the streets of the Eighth Ward during the life of the injunction.

The

3. An estoppel is sought against the city of North Little Rock on account of its permitting the street car company to partially construct its line over these streets, and expend about $27,000, without protest or resistance. The city of North Little Rock was enjoined from interfering in any manner with the jurisdiction and control of the city of Little Rock over the Eighth Ward. The street car company was acting with open eyes. If it won its injunction suit its rights were perfect, and necessarily it knew that if it lost that its rights were builded solely on

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