author: John I. Purtle, Justice. Darrell Hickman, Justice, Tom Glaze, Justice,

text:
    ARKANSAS LOUISIANA GAS COMPANY, et al. v. Glen MORRIS, et al.
    87-190
    744 S.W.2d 709
    Supreme Court of Arkansas
    Opinion delivered February 16, 1988

      Daily, West, Core, Coffman & Canfield, for appellant Arkansas Louisiana Gas Company, a Division of Arkla, Inc., and Arkla Exploration Company.

      J. H. Evans, for appellant Arkoma Production Company.

      Hardin, Jesson & Dawson, by: Bradley D. Jesson, and Betsy Hall, and Turner & Mainard, by: Lonnie Turner, for appellees.
   John I. Purtle, Justice.

The only issue on this appeal is whether the chancellor correctly granted class action certification. We affirm the chancellor’s decision.

The appellees filed this action alleging that they were representative of a class comprised of all “fixed price” lessors of several hundred mineral tracts in the Cecil Field located in Franklin, Crawford, and Sebastian Counties, Arkansas. The appellees, whose “fixed price” leases were entered into during the 1940’s and 1950’s, want to be paid royalties on the new wells drilled in the Cecil Field based upon the “proceeds” from the sale of gas from the new wells. The original complaint contained eight or ten different theories of recovery including estoppel, waiver, and reformation. After a hearing on the petition to proceed in a class action, the court determined it was proper for the appellees to proceed as a class pursuant to A.R.C.P. Rule 23.

Rule 23, Arkansas Rules of Civil Procedure provides in part as follows:

(a) . . . Where the question is one of a common or general interest of many persons or where the parties are numerous, and it is impracticable to bring all before the court within a reasonable time, one or more may sue or defend for the benefit of all.
(b) An action may be maintained as a class action if the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. ... An order under this section may be conditional and it may be altered or amended before the decision on the merits.

The requirements of section (a) have been met in this case. But this is only a threshold question. The class action must stand or fall on the section (b) holding by the court that questions of law or fact common to the members of the class predominate over any question affecting only individual members and that the class action is superior to other available methods for fair and efficient adjudication of the controversy.

Appellants contend that since the appellees’ pleadings contain estoppel and reformation theories of recovery, the pleadings automatically indicate that questions of fact affecting individual members of the class predominate over questions of law and fact common to all members of the class. Appellants argue that before the appellees can prevail as a class under an estoppel theory, each member of the class would have to show his or her individual detrimental reliance. Appellants also point out that the appellees as a class cannot prove a reformation theory of recovery unless every member of the class can show a mutual mistake or a unilateral mistake accompanied by fraud and inequitable conduct.

The appellants rely primarily on the case of Ford Motor Credit Company v. Nesheim, 287 Ark. 78, 696 S.W.2d 732 (1985). In Nesheim the chancellor granted a conditional class action. We reversed that decision primarily because the defenses of mutual mistake, waiver, estoppel, and set off pled by the defendant as well as the defendant’s possible counter claims would splinter the action into possibly 6,000 individual cases. The foreseeable problems of manageability and the lack of prejudice to anyone by denying certification led us to conclude that the class action would not be superior to individual remedies.

Even if appellants are correct in this respect it does not require decertification of the class action because the appellees allege several other grounds for relief and other valid grounds for relief may be developed during the trial. Additionally, at this point in this case there are no indications of management problems or prejudice to any party in allowing the case to proceed as a class action. We are able to determine from the record a common question of fact that all “fixed price” lessors in the Cecil Field have been treated identically by the defendant lessees for a number of years. The parties have for some reason ignored the royalty amount fixed in the original leases and have paid and accepted royalties of different amounts. It is apparent that the common question of law in this case is whether the defendants’ course of conduct gives rise to a cause of action in favor of the “fixed price” lessors in the Cecil Field. There is no requirement that the trial court find that the facts as to each individual of a class action must in every respect be identical with that of all other members of the class. It is enough to show that a common question of law or fact predominates over other questions affecting only individual members.

If the trial court finds that the evidence presents individual questions of reliance or mistake, it could either defer those individual questions until after it disposed of the questions common to the class, or at any time prior to judgment, order an amendment of the pleadings eliminating therefrom all reference to representation of absent persons, and order entry of judgment in such form as to affect only the parties to the action and those who were adequately represented.

Although our class action rule is patterned somewhat after the federal rule, there is a considerable difference in application. The federal rule leans toward allowing class actions whereas our position tends to discourage class actions if the matter can be handled by individual action. But in Cooper Communities, Inc. v. Sarver, 288 Ark. 6, 701 S.W.2d 364 (1986) and Drew v. First Federal Savings & Loan Association of Fort Smith, 271 Ark. 667, 610 S.W.2d 876 (1981), we held that in determining the appropriateness of a class action, the trial judge has broad discretion. From the record before us we are unable to say that the chancellor abused his discretion in declaring this to be a proper class action.

Affirmed.

Hays, J., not participating.

Hickman & Glaze, JJ., concur.

Darrell Hickman, Justice,

concurring. I agree with the result reached but write to point out that we are, in my judgment, overruling our decision in Ford Motor Credit Company v. Nesheim, 287 Ark. 78, 696 S.W.2d 732 (1985). When the Rules of Civil Procedure were adopted, we took the view that class actions would not be favored. Indeed, we looked upon them with disfavor. That view prevailed through the Ford Motor Credit case, decided in 1985.

I think the court has moderated its view regarding class actions.

Tom Glaze, Justice,

concurring. While I agree with the result reached by the majority, I do so because the limited record before us now reflects that, after these “fixed price” leases were executed in the 1940’s and 1950’s, the appellants have not treated any of the Cecil Field fixed-price lessors in an individual manner. Rather, the appellants appear to have treated those lessors the same, irrespective of the fixed rate set forth in the individual leases. At this point, at least, I cannot say the trial judge was wrong in certifying this case as a class action. As the case develops more fully, the evidence may reflect the class order should be altered or amended, which the trial judge is authorized to do under Rule 23 of the Arkansas Rules of Civil Procedure.


source: Caselaw Access Project

author: Robert H. Dudley, Justice. John I. Purtle, Justice,

license: Public Domain

text:
    William D. YOUNTS v. CITY OF NORTH LITTLE ROCK
    87-351
    744 S.W.2d 715
    Supreme Court of Arkansas
    Opinion delivered February 16, 1988

      L. Gene Worsham, for appellant.

      Philip E. Kaplan, and Joann C, Maxey, for appellee.
   Robert H. Dudley, Justice.

In 1983 the Mayor and City Council of North Little Rock were having numerous differences with William Younts, the Chief of Police. The City Council wanted to replace Younts, the appellant, and, in an effort to do so, passed Ordinance 5554 on July 26, 1983. The ordinance was an offer of settlement in which the City, the appellee, agreed to pay appellant “all the normal retirement benefits that any employee of the City of North Little Rock would expect to receive upon his retirement which include accumulated vacation pay, accumulated sick pay and discretionary days.” The only mention in the ordinance of compensatory time, or accumulated overtime pay, was as follows: “The City Council agrees not to interfere with any right William D. Younts may have to immediate pension benefits based on parity pay and compensatory time” (Emphasis added.) The ordinance provided that the offer would be withdrawn if not accepted by 3:00 p.m. the next day. On the next day, July 27, the appellant submitted his resignation in an attempt to accept the offer. However, his acceptance included a provision that called for payment to him of accumulated compensatory time. The appellee found the provision unacceptable and, in the exchange of letters which followed, made it clear that it had no intention of paying compensatory time. The parties continued to negotiate the terms for the resignation and finally, on August 2,1983, entered into a settlement agreement. The written settlement agreement expressly left the determination of entitlement to compensatory pay open to resolution by the courts.

The appellant filed suit, claiming entitlement to 872 hours of compensatory time. The lower court looked to Ordinance 5172, a 1980 ordinance, which in part provides, “Compensatory time may be accumulated not to exceed ten (10) days but must be used within twelve months.” The court held that under this ordinance the appellant could not accumulate overtime in excess of eighty hours, or ten days at eight hours per day. The appellant brings this appeal, asserting that for several reasons the trial court erred in imposing the ten day limitation. We find the appellant’s arguments are without merit.

The appellant first argues that he is entitled to 872 hours because of assurances given him by various “agents” of the appellee City prior to his attempted resignation of July 27,1983. The lower court rejected his argument, stating in its Order that “these discussions were merely part of the negotiations to the settlement and did not establish an entitlement.” We agree. Even if the alleged assurances induced the appellant to submit the July 27 resignation, that resignation altered the terms of the offer. Therefore, the resignation was not an acceptance which created a binding contract; it was instead a counter-offer which operated as a rejection of the offer. See Smith v. School District No. 89, 187 Ark. 405, 59 S.W.2d 1022 (1933). A binding contract did not arise until the August 2 settlement, and, prior to that time, the appellee had clearly repudiated any assurances given.

The appellant next argues that Ordinance 5172 was repealed by the following language in the original offer: “All ordinances or parts of ordinances in conflict herewith are hereby repealed to the extent of the conflict.” The argument fails for two reasons. First, there is no conflict between Ordinances 5554, the original offer, and 5172, the ten day limitation, since the offer did not include a provision for the payment of compensatory time. Second, Ordinance 5554 on which the appellant seeks to rely never took effect since it was withdrawn by its own terms when it was not properly accepted by the deadline.

The appellant’s final argument is that he is entitled to all compensatory time claimed under the provisions of Ark. Stat. Ann. § 19-1712 (Repl. 1980). This statute, which now appears with slightly amended language at Ark. Code Ann. § 14-52-205 (Supp. 1987), provides in part that police officers are entitled to overtime pay for all hours over forty worked in a given week. We find the appellant’s argument unconvincing for a number of reasons, none of which is more striking than the fact that this case involves the chief of police, and, thus, the statute is simply inapplicable. The statute is directed toward “police officers” and itself makes a distinction between “police officers” and the “chief of police.”

The trial court ruling that the appellant was limited to the accumulation of ten days of compensatory time was correct, and, therefore, is affirmed.

Purtle, J., dissents.

John I. Purtle, Justice,

dissenting. Chief Younts made it clear from the commencement of negotiations that he expected to be paid for accumulated compensatory overtime. The City Council agreed and inserted a provision in the ordinance agreeing not to interfere with either his right to “pension benefits” or “compensatory time.” He made diligent inquiry at the city hall about his compensatory time and specifically made his acceptance conditioned upon payment to him of his “compensatory time.” The city did not reject his conditioned acceptance until long after the deal was struck. Although the city may not have intended to pay compensatory time, such intention was not manifested until much later when it decided not to pay the chiefs compensatory overtime in full.

I believe Chief Younts is entitled to payment for compensatory overtime to the extent revealed by the records at city hall where he was required to daily submit a record of the hours he worked. A citizen ought to be able to deal in trust and confidence with his government.


author:
Steele Hays, Justice.
      Steele Hays, Justice.

text:
    CIGNA INSURANCE COMPANY v. Carrie M. BRISSON, Administratrix of the Estate of Frank Speed, Deceased
    87-181
    744 S.W.2d 716
    Supreme Court of Arkansas
    Opinion delivered February 16, 1988
    [Supplemental Opinion on Rehearing March 21, 1988.]

      Rieves & Mayton, by: Elton A. Rieves IV, for appellant.
    No brief filed for appellee.
   Steele Hays, Justice.

This medical malpractice case comes to us on a procedural issue. In December 1985, a wrongful death suit was filed by the administratrix of the estate of Frank Speed against the Helena Hospital. The complaint was amended in February 1986, to join the hospital’s insurer, Cigna Insurance Company. On June 4, 1986, the circuit court entered an order dismissing the action against the hospital and finding that the claim against Cigna was barred by the statute of limitations.

On June 17,1986, the administratrix moved that the court vacate or reconsider its June 4th order insofar as it related to Cigna. Shortly thereafter, counsel for Cigna and the administratrix contacted the trial judge and evidently agreed that the order should be modified and the court set a hearing on the matter for August 21,1986. On that date counsel appeared and on motion of the administratrix, the hearing was rescheduled for September 15, 1986. At the September hearing, Cigna objected to any further proceedings, arguing that because ninety days had elapsed since the entry of the order of dismissal the court no longer had jurisdiction.

By letter dated October 25, 1986, the trial court wrote counsel that inasmuch as both parties had notified the court within thirty days of the June 4th order that the order should be amended, and that a hearing was scheduled originally within ninety days of that order, it had jurisdiction to hear the matter. The court announced that the June 4th order would be modified to dismiss the action as to the hospital but not as to Cigna. An order to that effect was entered on February 20, 1987.

Cigna appeals from this most recent order, contending only that the court was without jurisdiction to make any further orders after the lapse of ninety days from the order of June 4th, citing ARCP Rule 60(b) and ARAP Rule 4.

We cannot review this case on appeal because the order appealed from, the denial of a motion to dismiss, is not an appealable order. ARAP Rule 2. The denial of a motion to dismiss an action is not a final judgment from which an appeal can be taken. Epperson v. Biggs, 17 Ark. App. 212, 705 S.W.2d 901 (1986). For an order to be final, it must dismiss the parties from the court, discharge them from the action, or conclude their rights to the subject matter in controversy. Roberts Enterprises, Inc. v. Arkansas State Hwy. Comm’n, 277 Ark. 25, 638 S.W.2d 75 (1982). Neither party has raised this point, but the question of a final order is a jurisdictional requirement which the appellate court should raise on its own. Roy v. Int’l Multifoods Corp., 268 Ark. 958, 597 S.W.2d 129 (1980); Fratesi v. Bond, 282 Ark. 213, 666 S.W.2d 712 (1984); Arkansas Savings & Loan Ass’n v. Cornell Savings & Loan Ass’n, 252 Ark. 264, 478 S.W.2d 431 (1972).

While the trial court’s jurisdiction of the subject matter is obviously essential to an action, a disputed ruling on that issue does not render an order appealable. A ruling on jurisdiction is not a basis for appealing an order under ARAP Rule 2. While we have said the question of jurisdiction can be “raised at any time,” Head v. Caddo Hills School District, 277 Ark. 482, 644 S.W.2d 246 (1982), that is not to say that the issue can be appealed at any point in the proceedings, but rather that no previous objection is needed in order to preserve the question at a later stage in the proceeding, i.e., that the objection may be raised at any time. See 20 Am Jur 2d Courts, § 95 (1965): “But an objection based on the ground of absence of jurisdiction over the subject matter must be considered and may be effectively raised at any time. Hence, such an objection may be raised for the first time in the appellate court and may even be raised by way of collateral attack.”

746 S.W.2d 558

The purpose of Rule 2 is to avoid piecemeal litigation. Should we consider Cigna’s appeal and affirm the order, and subsequent disputes occurred in future proceedings, the case could be appealed a second time, resulting in two appeals where one would suffice. Fratesi v. Bond, 282 Ark. 213, 666 S.W.2d 712 (1984). Once a final order has been entered the case is subject to appeal, and the question of jurisdiction is not lost by continuing through a trial of the matter. Heber Springs Lawn & Garden v. FMC Corp., 275 Ark. 260, 628 S.W.2d 563 (1982).

Appeal dismissed.

Supplemental Opinion on Rehearing

March 21, 1988

Steele Hays, Justice.

Our decision in this case, released on February 16,1988, was wrong. We dismissed the appeal because we regarded it as an attempt to appeal from an order denying a motion by the defendant, Cigna, to dismiss the action. We said that because the order was not final it was not appealable. Ark. R. App. P. 2; Heffner v. Harrod, 278 Ark. 188, 644 S.W.2d 579 (1983).

By petition for rehearing Cigna has pointed out that such an order is appealable, even though it does not dispose of the action, when it is entered more than ninety days after an earlier order it purports to modify. Thus, in Schueck Steel, Inc. v. McCarthy Bros. Co., 289 Ark. 436, 711 S.W.2d 820 (1986), we recognized on rehearing that an order setting aside a default judgment, which ordinarily is not appealable because it is not final, becomes appealable when it is entered more than ninety days after the entry of the default judgment. ARCP 60. Maxwell v. Maxwell, 240 Ark. 29, 397 S.W.2d 788 (1966). The same reasoning applies to this case, and therefore we grant rehearing, reinstate the appeal and consider it on its merit.

As noted in our original opinion, on June 4,1986, the circuit court entered an order dismissing the claim of the appellee against Cigna and Helena Hospital. Thirteen days later the appellee filed a motion to vacate or reconsider the order. A hearing was held on August 21, and on motion of appellee the hearing was continued until September 15, more than ninety days after the June 4 order. At this point Cigna asked that the motion be denied because it was not filed within ten days of the order, as required by ARCP Rule 56(b), and because the court had no power to vacate its order after ninety days except in accordance with ARCP Rule 60(c), the requirements of which were not met nor even alleged.

The motion seems to have been taken under advisement, though we find nothing in the record to that effect. However, on February 19,1987, the circuit court ordered the reinstatement of the action as to Cigna. Cigna has appealed, and we reverse.

To decide this case on its merits we need look no farther than the fact the trial court did not act on the motion within ninety days. In Burgess v. Burgess, 286 Ark. 497, 696 S.W.2d 312 (1985), we noted that ARCP Rule 60 was intended to retain Arkansas law in effect at the time the rules were adopted. The rule incorporates three methods for correcting a judgment, decree or order after entry. Rule 60(a) deals with clerical mistakes and errors of omission. It has no relevancy here. Rule 60(b) deals with any error or mistake and authorizes the court to modify or set aside a judgment or decree order on its own motion or on the motion of a party “within ninety days of its having been filed with the clerk.” Rule 60(c) deals with vacating or modifying a judgment, decree or order after ninety days. There is no contention that it applies to this case.

When the circuit court failed to modify or vacate its June 4 order within ninety days, it lost all power to act under ARCP Rule 60(b). Hayden v. Hayden, 291 Ark. App. 582, 726 S.W.2d 287 (1987); Board of Equalization, Washington County v. Evelyn Hills Shopping Center, 251 Ark. 1055, 476 S.W.2d 211 (1972). In St. Louis and N. A. Ry. Co. v. Bratton, 93 Ark. 234, 124 S.W. 752 (1920), we pointed out there is no authority after the term of court has expired for a trial court to revise a judgment. The term of court was later changed to ninety days and is now incorporated in ARCP Rule 60(b).

We are not overlooking the finding in the February 19 order that on July 21,1986, “defendant’s attorney advised Judge Wilkinson by letter that it had no objection to the motion and agreed to modify the order of June 4, 1986.” Whether counsel agreed to partial modification or to the setting aside of the order in its entirety is not explained, as the appellee has filed no brief, and the letter of July 21,1986, is not to be found in the record. Even so, the wording of Rule 60(b) and our cases relevant to it, point plainly to the conclusion that if a change is to be made in a judgment, decree or order under Rule 60(b), it must be done within ninety days or not at all. Thus, it was the responsibility of counsel or the court itself to see to it that any modification of the June 4 order, whether agreed to by counsel or simply directed by the court, was entered within ninety days.

Rehearing granted and the order appealed from is reversed.


author: David Newbern, Justice. Tom Glaze, Justice,

text:
    Doris A. BUNT v. Rodney Earl BUNT, Sr.
    87-121
    744 S.W.2d 718
    Supreme Court of Arkansas
    Opinion delivered February 16, 1988

      Cynthia J. Brandon, Central Arkansas Legal Services, for appellant.

      Richard A. Garrett, for appellee.
   David Newbern, Justice.

The appellant, Doris A. Bunt, was awarded a divorce from the appellee, Rodney Earl Bunt, Sr. Mrs. Bunt contends the court erred in declaring that a personal injury claim of Mr. Bunt was not marital property and in thus refusing to consider awarding any part of it to her. She also contends the court erred in awarding custody of the two children of the marriage, Rodney, Jr., who was 22 months old at the time of the trial, and Alicia, age 10 months, to Mr. Bunt. She is correct as to the personal injury claim, but we find no error in the custody award, thus the decree is affirmed in part, reversed in part, and remanded.

The parties separated in June, 1986, when Mrs. Bunt took the children and moved to the battered women’s shelter. She filed for divorce on July 16,1986. Sometime in July or August of that year, Mr. Bunt was injured in an automobile accident. He consulted an attorney, and, in answer to an interrogatory, stated that he expected to settle his personal injury claim with an insurance company. At the time of the divorce hearing on October 22,1986, he had filed no action on the claim and had been offered no settlement by the insurance company. His attorney in the divorce proceeding, who also represented Mr. Bunt on the personal injury claim, told the court the personal injury action would not be filed until Mr. Bunt had undergone further medical examination.

Mrs. Bunt testified that Mr. Bunt had a bad temper and that he would drink too much and would carry a club with which he threatened her and struck her. He worked off and on during the marriage and was fired from one job, she said, for wrecking a company truck while drinking. She testified that Mr. Bunt took the children from her as she was on her way to a grocery store from the women’s shelter. Since then, she has been to visit her children at Mr. Bunt’s parents’ home where they live with Mr. Bunt. She related an occasion when Mr. Bunt’s father struck Mr. Bunt during an argument which arose when Mr. Bunt refused to let Mrs. Bunt leave the premises. She testified that Mr. Bunt had been drinking on that occasion, and on another occasion when she returned the children from a visit, he reached in the car for one of the children, picked her up in her car seat, and dropped her.

Mrs. Bunt testified further that she was living in a mobile home with her unmarried, 36-year-old uncle who would help her care for the children if she were given custody of the children. He has “bad back” trouble and works periodically as a painter. She has worked for short periods at various waitress jobs, and is now working at a grocery store some 33 hours per week and expects to-work 40 hours per week after her probationary employment period.

Mr. Bunt testified that he did have “a club” when he and Mrs. Bunt were living together. He said “it was a pick handle” and that he did not use it to threaten her, but he did slap her once. He testified that Rodney, Jr., had his hand broken since the separation. Mr. Bunt was unaware of the accident when it happened, but has since concluded that it occurred when he closed a bedroom door, unaware that Rodney, Jr., was following him out of the room. Since the separation, he testified, he has only drunk alcohol to the extent of two cups of beer, which were given to him at an arm wrestling match by his brothers to “settle his nerves.”

He testified that he had been injured in a wreck after the separation and had been on crutches and unable to work except in a very limited way. He also testified that Mrs. Bunt was a very poor housekeeper during the marriage. She left dirty diapers as well as dirty dishes around their home, and did not take good care of the children.

Both of Mr. Bunt’s parents testified. His mother testified about the bad diaper rash Alicia had when she came to live with them. His father confirmed the testimony about the altercation he and his son had had, but denied that Mr. Bunt had been drinking.

Mr. Bunt’s mother testified that when Alicia came to live in their home her diaper rash was so bad it looked as if it were about to bleed. To clear up the rash they had to bathe Alicia every four hours and leave her diaper off. In addition, medical records were introduced showing that Alicia’s arm was injured while she was in Doris Bunt’s care. Doris Bunt confirmed that Alicia had been hurt by Doris Bunt’s brother, resulting in a fluid build-up behind her elbow.

There was testimony corroborating allegations both of Mr. Bunt’s misbehavior and Mrs. Bunt’s poor housekeeping and child care.

1. The personal injury claim

In his decree, the special chancellor ruled that any compensation to be received by Mr. Bunt from his personal injury claim was not marital property because it was not acquired during the marriage and stated, “ [t]he Court notes factual differences in this and the Liles or Goode cases as to the certainty of the award or the offers of settlement.”

The issue here is whether a personal injury claim which has accrued to a party to a divorce action but which has not been made the subject of a complaint or offer of settlement should be included in marital property as defined in Ark. Code Ann. § 9-12-315(b) (1987). The statute defines “marital property” as “all property acquired by either spouse subsequent to the'marriage” with certain specific exceptions stated following the general definition. Until 1987, none of the statutory exceptions to the definition referred to personal injury claims.

In Goode v. Goode, 286 Ark. 463, 692 S.W.2d 757 (1985), we decided that a workers’ compensation claim which accrued during the marriage but which had not yet been adjudicated at the time of the divorce was marital property. To the extent it might have applied to the contrary, we overruled Lowrey v. Lowrey, 260 Ark. 128, 538 S.W.2d 36 (1976), which had held that a personal injury claim was not included in the definition of “marital property” under an earlier statute. In Goode v. Goode, supra, the workers’ compensation claim had been filed, and a settlement offer had been made. We followed the reasoning in In re Marriage of Dettore, 86 Ill. App. 3d 540, 408 N.E.2d 429 (1980), where the court said it would not countenance a result which would allow a workers’ compensation claimant to “protract the arbitration for . . . [the] award so as to shield that award from equitable division by the dissolution court.” In Liles v. Liles, 289 Ark. 159, 711 S.W.2d 447 (1986), we held that a personal injury judgment based on a structured settlement, part of which had been received and part of which was to be received in the future, was marital property, citing Goode v. Goode, supra, again noting that Lowrey v. Lowrey, supra, no longer governs the question.

In 1987, the general assembly added an exception to the definition of “marital property” as follows: “Benefits received or to be received from a Workers’ Compensation claim or personal injury claim when such benefits are for any degree of permanent disability or future medical expenses.” Ark. Code Ann. § 9-12-315(b)(6) (Supp. 1987). By limiting the exception to portions of personal injury and workers’ compensation claims for permanent disability or future medical expenses in the face of our decisions in the Goode and Liles cases, the general assembly has left otherwise intact those decisions interpreting “marital property,” as defined in § 9-12-315, to include workers’ compensation and personal injury awards.

Mr. Bunt argues that the Goode case is distinguishable from the facts before us now because in that case a settlement offer had been made, while in Bunt’s case the claim is nothing more than a “mere expectancy.” He argues the Liles case is distinguishable because the personal injury claim there had been reduced to judgment. He cites our remark in the Liles case that the personal injury judgment there was “liquidated.” We refer again to our rationale in Goode v. Goode, supra. To hold that a personal injury claim is marital property only to the extent that it has become “liquidated” would place the claimant in the position of manipulating the claim so as to “liquidate” it after divorce and thus have the power to determine whether it is included in marital property. Our remark in the Liles case, noted above, was made to show that the claim in the Goode case was clearly not liquidated and yet we held it to be marital property. In the Goode case we held that the claim was marital property, i.e, “property acquired by either spouse subsequent to the marriage,” in the language of § 9-12-315. The argument that no definite value can be assigned to the claim until an award is made is no more persuasive here than it was in the Goode case. The fact that there had been an unaccepted offer of settlement was not the basis of our decision in the Goode case; thus we regard that holding as controlling here. To the extent Mr. Bunt acquired an enforceable right during the marriage to recover for personal injury, he acquired marital property. We note here, as we did in the Goode and Liles cases, that the chancellor is not required to divide any asset equally between the parties if reasons for not doing so are stated. See § 9-12-315(a)(l)(B).

2. Child custody

This was undoubtedly a close case on the issue of custody of the two young children. There were good reasons not to award custody to either parent, as there was evidence that each had severe parenting problems which could affect the best interests of the children. Mrs. Bunt argues that the evidence preponderates in her favor and, in the alternative, that the court should have awarded custody to Mr. Bunt’s parents rather than to him.

We give the chancellor’s findings great weight, especially in child custody cases. Knight v. Deavers, 259 Ark. 45, 531 S.W.2d 252 (1976). The final decree specified that the children are not to be removed from the home of the paternal grandparents until Mr. Bunt has completed a parenting class and filed a certificate of completion with the court. Assuring that the children would remain in the home of the grandparents, at least temporarily, was probably the best available immediate solution. Obviously jurisdiction was retained to act in the best interest of the children and to change the custody order if need be.

For her alternative argument, Mrs. Bunt cites Bornhoff v. Thompson, 237 Ark. 256, 372 S.W.2d 616 (1963), in which we approved a decree placing child custody with grandparents who, as in this case, were not parties to the action. However, there we noted that the grandparents were not only present in the court when the award was made, but that they had “subjected themselves to the jurisdiction”, of the court. There is no such showing here. See also Powell v. Woolfolk, 233 Ark. 893, 349 S.W.2d 657 (1961).

That portion of the decree placing custody of the children with Mr. Bunt is affirmed; the portion holding the personal injury claim is not marital property is reversed, and the case is remanded.

Hickman, Purtle & Glaze, JJ., dissent.

Tom Glaze, Justice,

dissenting. The majority court holds a spouse’s “unliquidated” personal injury claim is marital property, subject to distribution at the time of the parties’ divorce. Because I do not believe such a holding is consistent with Arkansas’s marital property law nor is supported by the prevailing view in other jurisdictions, I dissent.

While the parties in this appeal provide little research on the subject, my own limited research reveals only one other jurisdiction that has held a spouse’s chose in action for personal injuries constituted property subject to equitable distribution in a divorce proceeding. See Heilman v. Heilman, 95 Mich. App. 728, 291 N.W.2d 183 (1980). On the other hand, several jurisdictions have rejected the idea that an unliquidated claim — even if it could be characterized as property — is property that is susceptible of division at the time of divorce. See Queen v. Queen, 308 Md. 574, 521 A.2d 320 (1987) (court held due to the personal nature of the injuries giving rise to a permanent partial disability award, it could not conclude that the General Assembly intended a noninjured spouse to share in the compensation for the injured spouse’s loss of future earning capacity representing a time period beyond the dissolution of the marriage); McNevin v. McNevin, 447 N.E.2d 611 (Ind. App. 1983) (court held that even if spouse’s personal injury claim is classified as a property interest, it fails to qualify as marital property because it was not susceptible to division at the time of dissolution); Fries v. Fries, 288 N.W.2d 77 (N.D. 1980) (court held a pending personal injury claim is far too speculative to include in a property division of a marital estate).

Aside from how other jurisdictions have treated the issue, I believe a close study of Arkansas’s marital property law, Ark. Code Ann. § 9-12-315 (1987), reveals the General Assembly never intended that a contingent or unliquidated claim should be marital property. In construing § 9-12-315 (formerly Ark. Stat. Ann. § 34-1214 (Supp. 1985)), this court has held all marital property shall be distributed at the time a divorce decree is entered. Forrest v. Forrest, 279 Ark. 115, 649 S.W.2d 173 (1983). Obviously, a spouse’s claim for personal damages is a mere expectancy, not susceptible of division. For example, in the instant case, the appellee has filed no suit, no settlement has been offered and, indeed, no liability against a third-party tortfeasor has been established. Under such circumstances, how does a judge evaluate the spouse’s claim under § 9-12-315(a)(1)(A), which requires the judge to consider certain factors when equitably distributing the parties’ other property interests?

Other questions arise as well. What if the injured spouse ultimately loses on his or her claim, and instead, the opposing third party, by counterclaim, obtains a judgment against the injured spouse? Is the noninjured spouse, then, required to assume part of the judgment against the injured spouse, since the inception of the liability, i.e., the accident and resulting injury to the third-party claimants, occurred during the parties’ marriage? Obviously, if unliquidated personal injury claims are now divisible as marital property, the trial court must retain jurisdiction to divide the proceeds, if any, that might be received by the injured spouse. That being true, what effect does such an award have on the other properties previously divided and distributed at the time the divorce decree was entered? Should the trial judge attempt to speculate as to the amount the injured spouse might expect to receive so as to insure the judge, using the required factors under § 9-12-315(a)(1)(A), is fair and equitable when dividing the parties’ property at the time of the divorce? Also, should the judge estimate the amount of the injured spouse’s potential award so the judge can more fairly decide if alimony should be awarded?

While the majority ignores the importance of answering such questions because they are not before the court, I believe to consider and to answer these questions serves to reveal why unliquidated or contingent claims of any nature should not be held marital property. In Lowrey v. Lowrey, 260 Ark. 128, 538 S.W.2d 36 (1976), the court, under prior statutory law, held that an unliquidated personal injury claim of a spouse was not property subject to division between divorcing parties. Later, the court in Goode v. Goode, 286 Ark. 463, 692 S.W.2d 757 (1985), overruled the Lowrey holding, and, in my view, the court clearly was wrong in doing so.

In conclusion, I note that the General Assembly, in enacting . Act 676 of 1987, has amended § 9-12-315(b) to except from the definition of marital property any benefits received or to be received from a workers’ compensation claim or a personal inquiry claim when those benefits are for any degree of permanent disability or future medical expenses. Act 676 is obviously the General Assembly’s response to this court’s decision in Goode. While Act 676 will lessen the impact and effect of today’s decision and the holding in Goode, the Act will not alleviate the problems and the litigation which will ensue as a result of the majority’s holding. By allowing contingent claims to be characterized as marital property, we have only created more work and litigation for attorneys and the judicial system. At the same time, we have extended indefinitely the divorce process, which in most instances means extending existing strife and rift between the divorcing parties.

Because I believe the trial court was correct in declaring the appellee’s personal injury claim was not marital property, I dissent from the majority opinion’s holding.

Hickman and Purtle, JJ., join in this dissent.

       None of the cases cited should be confused with those where a spouse’s personal injury claim was settled or otherwise liquidated, so an award actually was received during the parties’ marriage. Under these circumstances, the general rule clearly appears to be that such an award is marital property. See L. Golden, Equitable Division of Property, § 6.25 (1983); Gan v. Gan, 83 Ill. App. 3d 265, 404 N.E.2d 306 (1980); Maricle v. Maricle, 221 Neb. 552, 378 N.W.2d 855 (1985); Nixon v. Nixon, 525 S.W.2d 835 (Mo. Ct. App. 1985); and Orszula v. Orszula, 356 S.E.2d 114 (S.C. 1987). Cf., however, Amato v. Amato, 180 N.J. Super. 210, 434 A.2d 639 (1981), Brown v. Brown, 100 Wash. 2d 729, 675 P.2d 1207 (1984); and Johnson v. Johnson, 346 S.E.2d 430 (N.C. 1986), wherein these jurisdictions have held a spouse’s personal injury claim is not marital property, except certain components such as lost wages and medical expenses.


author: David Newbern, Justice.

text:
    O.L. LYNCH and Thelma Lynch v. Carol BRUNNER
    87-258
    745 S.W.2d 115
    Supreme Court of Arkansas
    Opinion delivered February 16, 1988

      Peel, Eddy and Gibbons, by: David L. Eddy, for appellants.

      Gordon & Gordon, P.A., by: Allen Gordon, for appellee.
   David Newbern, Justice.

This quiet title action arose from a land ownership dispute. The chancellor decided that neither party had presented sufficient evidence to establish either record title or title by adverse possession to the tract of land in question. He quieted title in the parties equally as tenants in common, “based on the uncertainty of the record title and possession.” We hold that there was evidence before the court from which record title to the tract in question could have been determined. Once it was decided that neither party had established title by adverse possession, it was the chancellor’s duty to decide which of them had record title, rather than to split the land between them. Therefore, the case is reversed and remanded.

Exhibit “A” to the chancellor’s decree is a survey plat of 40 acres, i.e., the SW!4 of the NWW of Section 15, Township 9 North, Range 20 West, Pope County, Arkansas, showing four tracts of land, marked 1 through 4, separated by Illinois Bayou water courses and sloughs or purported sloughs. The plat portion of exhibit “A” follows:

Carol Brunner, the appellee, sought to quiet title to land which had been conveyed to her parents, and which her widowed mother had disclaimed in Carol Brunner’s favor. The description of the land conveyed in 1940 to her parents, Fay and Bertha Price, and to which Carol Brunner now claims record title, is as follows:

S'A of the NW'A (except that part lying between the slough and the main channel of Illinois Bayou, described as beginning at the mouth of the slough at the Southeast corner of said tract and run with the slough along the middle of the bed of the slough in a North and Northeasterly course to the main channel of Illinois Bayou; thence along and with the Bayou in a South and Southeasterly course to middle of the slough to the point of beginning and containing 10.51 acres) containing seventy (70) acres, more or less.

In her complaint, Ms. Brunner alleged that she and her predecessors in title had been in possession and had been paying taxes on the property described since 1940.

The appellants, O. L. and Thelma Lynch, were defendants in Ms. Brunner’s quiet title suit. The Lynches claim record title, based on a deed to them in 1951 of the following:

Part of the SW'A of the NW'A of Section 15, Township 9 North, Range 20 West that lies between the slough and middle of main channel of Illinois Bayou, containing 10.57 acres, more or less, described as beginning at the mouth of the slough aforesaid at the SE-corner of said parsel (sic) of land, and run with the meanderings thereof along the middle of the bed of said slough in a Northwesterly direction to the middle of main channel of said Illinois Bayou; thence along the middle of main channel of said Bayou with its meanderings in a Southeasterly direction to the middle of the mouth of said slough, the point of beginning.

In their answer and counterclaim for quiet title, the Lynches alleged they were the owners and in possession of all of that part of the platted 40 acres lying west of the middle of a slough, containing 27.5 acres, more or less. They claimed to have been in exclusive and adverse possession of all property in the platted 40 acres west of “the slough” since 1951.

If, as the parties and the chancellor seemed to assume, both of the deed descriptions referred to the same slough, the question becomes which of the sloughs shown on the plat was intended to be the monument to which the deeds referred. If it was the easternmost slough, then tracts 2 and 3 were excepted from the conveyance to Ms. Brunner’s parents and were included in the conveyance to the Lynches. If it was the westernmost slough, i.e., the one virtually in the middle of the platted 40 acres, then tract 3 was not excepted from the conveyance to Ms. Brunner’s parents and was not included in the conveyance to the Lynches. The litigation apparently was precipitated by the fact that both parties have leased the mineral rights to their interests. In answer to an interrogatory, it was stated that Ms. Brunner and her predecessors had received $19,705 in royalties. The Lynches claim they are entitled to some or all of that money.

Texas Oil & Gas Corporation and TXO Production Corporation, as well as Chevron Corporation were made parties to the litigation, but Ms. Brunner and the Lynches agreed they would not seek any recovery from those lessees except to the extent the lessees had held royalties in suspension since the filing of the suit, thus the oil and gas companies are not parties to the appeal.

Ms. Brunner’s mother, Bertha Price, testified that she and her husband, Fay Price, moved to a farm they owned, generally east of the land in question, in 1937. She testified that they bought the land described in their deed in 1940, and they rented “the island,” which she pointed out as tract 2 on the map, from Oscar Harwell. She pointed out the westernmost slough on the map as being “the slough as I knew it,” and stated that during the time she was there, it was filled with water in places deep enough to fish. Referring to the easternmost slough on the map, she said it was not a slough, but would be apparent only when the bayou was overly full. The “middle area,” she said, was referred to by everyone as “the slough.” She said that Mr. Lynch owned 40 acres west of the 40 acres shown on the plat, and that they, the Prices, owned all but the island (tract 2) of the 40 acres shown. She said there was a fence along the middle slough in the 1950s to keep Mr. Lynch’s cattle from pasturing on tract 3.

James W. Walters testified that he first leased farm land from Fay Price in 1974 or 1975, and that he now leases it from Bertha Price. He said tracts 1, 2, and 3 are mostly timber now, and that tract 4 is considerably more elevated. He said Mr. Price originally pointed out the line generally between tracts 2 and 3 as being his property line. Mr. Walters now keeps a fence between tracts 3 and 4 to keep his cattle from going into the lowlands which tend to flood. He said Mr. Price told him he kept a fence there because the ground was higher on tract 4 and a fence could be kept there, implying that fences in the bottom land were easily washed out. Mr. Walters testified further that there is usually water standing in the easternmost slough. He first went on the land in the 1970s and did not know how it looked in 1940.

Jerry Scroggins, County Clerk of Conway County and a livestock farmer, testified he leased the Price land during a period when it was not leased to Mr. Walters. He first leased it in the 1970s and up until 1985 or 1986. He said he kept a fence between tracts 3 and 4 as he did not want his cattle getting into tract 3. He thought of the easternmost slough as just a “back up” for the Illinois Bayou. He testified that it would not have water standing in it when “it got real dry,” and that the middle slough had water standing in it from time to time. When asked directly what he would think of if someone spoke of a slough on the property, he responded the area between tracts 2 and 3, but in response to further questioning he could not say whether that area or the other one was “more pronounced.”

Ms. Brunner testified that as a child she would go with her father, Mr. Price, to repair fence between tracts 2 and 3, and that to get to that area, they would sometimes drive around on the western side through Mr. Lynch’s land. She said her father tired of keeping the fence around tract 3 and then kept his cattle up on tract 4.

James Martin, the surveyor who prepared the plat, testified that he had surveyed the property on several occasions. In his original survey, he did not show the middle slough. When he resurveyed the land, he included the middle slough, but its location had to be “pointed out” to him, and he could not tell where it used to be. He said the eastern slough is much more prominent now.

Mr. Lynch testified that after buying the land, including tracts 2 and 3, in 1951, he pastured cattle on it. There was never a fence separating tracts 2 and 3, and he kept cattle on it until 1958 when he placed the land in the government soil bank program which required that he no longer use it. He kept it in the soil bank until 1968. He said that when loggers were cutting timber on the Price land, they came to him and wanted his timber too. He and Mr. Price watched them cutting logs off the land in question, and Mr. Price did not object or ask for part of the proceeds. Mr. Lynch testified further that he knew his deed called for 10.57 acres, more or less, and that he knew there was more land than that in the description. He was also aware that his lease to Texas Oil & Gas Corporation called for 10.5 acres, but he had not questioned that fact with the company, nor had he questioned with the county the fact that he paid taxes on only 10.5 acres.

Vance Churchill, County Executive Director of the Agriculture Stabilization Conservation Service, testified that he is a cousin of Bertha Price and was formerly associated in business with O. L. Lynch. He testified that he was on the property in question numerous times when it was in the soil bank and has been familiar with the land most of his life. He said the slough is on the east side, and that, although there was a place where the creek would cut through in wet weather, the area between tracts 2 and 3 was not a slough.

Bill McAlister testified that he operated Mr. Lynch’s farm for him in 1953, and that the only slough was the one on the east, and he could remember no fences in the middle of the property. To his knowledge, Fay Price never claimed the land, and he did not see any of Mr. Price’s cattle on the land when he was there.

Morris Ray Gibson testified he had been familiar with the property since 1930, and that he and his father began working the bottomland for the Prices in 1938. He said there were low places in the area, but that the only slough was the one at the foot of Mr. Price’s field, apparently meaning the western boundary of tract 4. His testimony is difficult to follow in the record because counsel neglected from time to time to assure that gestures toward the plat, which was being used as an exhibit, were made into oral references. It is clear enough, however, that Mr. Gibson referred to the eastern area as the slough, and that as of 1943 it was the only thing “out there” that could be called a slough. He testified further that the Prices both told him they were renting the bottomland from Mr. Harwell.

William Frank Brunner, Ms. Brunner’s husband, testified that he first went on the property shown on the plat in 1954, and that he helped his father-in-law, Fay Price, with his cattle pastured on tracts 2 and 3.

1. Record title

The Lynches contend the evidence clearly preponderated in favor of holding that the only slough on the land was the easternmost one shown on the plat, and the chancellor erred by not so holding.

The issue before the chancellor was factual. What was the intent of the grantors who made the deeds to the parties with descriptions dependent upon the location of a slough? The evidence was sufficient with respect to the lay of the land, both at the time of trial and at the time the deeds were made, to have supported a decision either way. The problem is that no decision was made. This court has the power to hear chancery cases de novo, and we say we do not remand chancery cases when the facts have been developed fully in the record before us, as it would be pointless to remand for further evaluation. Potter v. Easley, 288 Ark. 133, 703 S.W.2d 442 (1986). However, when the situation warrants it, we acknowledge that we have the authority to remand a chancery case. One such situation arises when the decision to be made depends largely upon evaluation of the credibility of the witnesses. In Henslee v. Kennedy, 262 Ark. 198, 555 S.W.2d 937 (1977), the trial court had tried the case on the wrong theory. The record was well developed, but we remanded, saying:

Ordinarily, we decide an equity case on de novo review, but there are exceptional cases in which we exercise our discretion, in the furtherance of justice, to remand to the chancery court for further proceedings when the trial court has tried the case on the wrong legal theory and where we cannot plainly see what the rights and equities of the parties are. See Wilson v. Rodgers, 250 Ark. 335, 468 S.W.2d 739 (opinion on rehearing) 468 S.W.2d 750 [1971]; Wilborn v. Elston, 209 Ark. 670, 191 S.W.2d 961 [1946]; Carmack v. Lovett, 44 Ark. 180 [1884]; Long v. Charles T. Abeles & Co., 77 Ark. 156, 93 S.W. 67 [1905]. This is such a case, because so much turns on weighing the evidence. [262 Ark. at 210; 555 S.W.2d at 943]

In this case, the chancellor not only viewed the witnesses but also viewed the land in question. He was far better equipped than this court to determine the location of “the slough” described in the deeds. As in Henslee v. Kennedy, supra, we remand the case because the parties are entitled to a resolution of the issue in the first instance by a judge who has a better vantage point for weighing the evidence.

2. Adverse possession

There is no substantial dispute that the Lynches hold record title to tracts 1 and 2, and Ms. Brunner or her predecessors hold record title to tract 4.

The chancellor, upon determining that he could not decide which party had record title to the disputed area, proceeded to consider whether either had demonstrated adverse possession. He held that the Lynches were entitled to tracts 1 and 2 by virtue of adverse possession and that Ms. Brunner had established title to tract 4 by adverse possession. Neither of those holdings has been appealed except to the extent tract 2 may be the subject of the cross-appeal discussed below.

With respect to tract 3, the court stated:

The court finds that neither the plaintiff [n]or counterclaimant [n]or their predecessors in title have exercised continuous control or have ever actually been in exclusive possession of the lands designated as tract 3 on the plat attached hereto. That finding is supported by the court’s view of the property which was found to be covered by sand, water, washed rock, and very large trees. Based on the uncertainty of the record title and possession thereof, the court finds that the area described as tract 3 should be quieted in the plaintiff and defendants equally as tenants in common with each party having an undivided one-half interest.

We know of no authority which permits title to be conferred on the basis of uncertainty of record title or a failure on the part of the contestants to establish adverse possession. In the circumstances presented here, given the failure on the part of either party to prove adverse possession of the land in question, the chancellor was relegated to the question of record title, which, as we noted above, was the question which should have been decided. Given Mrs. Price’s testimony that the Prices rented tract 2 from Mr. Harwell and apparently did not claim to own it, it is pretty clear Ms. Brunner can make no successful adverse possession claim to tract 2, and we find no fault with the chancellor’s determination that neither party has established title to tract 3 by adverse possession. Left for determination is the question of record title to tract 3.

3. The royalties

The Lynches argue that they should have been given a share of the mineral royalties paid to Ms. Brunner and her predecessors for mineral interests in tract 2 and tract 3. They claim that their entitlement to half of tract 3 and all of tract 2 dates back at least to 1958, or seven years after their evidence showed they went on the land. Ms. Brunner’s response is that there has been no showing as to when any such royalties were received and the court made no determination as to when the Lynchs’ possession ripened into title, thus the record does not support a division of the royalties.

We need not decide this issue, as presumably the entitlement to royalties may be affected by the court’s decision on the ownership of tract 3.

4. Cross-appeal

For her cross-appeal Ms. Brunner contends that because she and her predecessors in title have paid taxes on at least portions of tracts 2 and 3, as have the Lynches, for a long period of time, the land should have been divided between them according to the proportion of taxes paid on the tract by each party. This argument was not made to the chancellor, was not supported by records clearly showing that the tax payments were made on the land in question, and is not supported by any cited authority, and thus we will not consider it.

Reversed and remanded.


author: Tom Glaze, Justice.

text:
    HCA HEALTH SERVICES OF MIDWEST, INC., d/b/a Doctors Hospital v. NATIONAL BANK OF COMMERCE (of El Dorado, Arkansas), Guardian of the Estate (only) of James Talley, a Minor, and Shirley Talley and George Talley, Parents
    87-150
    745 S.W.2d 120
    Supreme Court of Arkansas
    Opinion delivered February 16, 1988
    [Rehearing denied March 7, 1988.]

      Wright, Lindsey & Jennings, for appellant.

      Friday, Eldredge & Clark, by: W. A. Eldredge, Jr., Calvin J. Hall, for amicus curiae Arkansas Hospital Association.

      Whetstone & Whetstone, by: Benard Whetstone, Bud Whetstone, and Bobby Davidson, for appellees.
   Tom Glaze, Justice.

This case involves a medical malpractice action against the appellant, HCA Health Services of Midwest, Inc., d/b/a Doctors Hospital, and three of its nurses, Elaine Firestone, Frances Tully and Brenda Swayze. The suit was instituted by the appellees, as guardians of James Talley, who was born at Doctors Hospital in Little Rock on September 7, 1982. James’s birth had been uneventful, and he appeared normal and healthy until shortly after midnight on September 8, 1982. At that time, Tully, who was working in the hospital nursery, noticed James had no heartbeat and had stopped breathing. Although James subsequently was resuscitated, he has since evidenced signs of brain damage. In this suit against the appellant, appellees alleged that the hospital nursery was inadequately staffed and dangerously designed, that the hospital officials knew of the danger and failed to correct it, that the nurses failed to monitor James’s condition adequately and that James had been placed on a defective mattress.

At trial, the judge directed verdicts in favor of nurses Tully and Swayze, and the jury, based upon answers to interrogatories, found in favor of nurse Firestone, who was in charge of the nursery at the time the incident happened. The jury found against the appellant and awarded appellees $2,620,000 in compensatory damages and $2,000,000 in punitive damages. Appellant raises nine points for reversal on appeal, and appellees cross-appeal, challenging the judge’s ruling which dismissed the two nurses out of the case.

We must reverse this case because of prejudicial remarks made by appellee’s counsel in his opening and closing arguments to the jury. However, because that error is inextricably tied to the type and amount of damages awarded by the jury, we first consider the appellant’s contention that punitive damages are not recoverable under the Arkansas Medical Malpractice Act, as compiled in Ark. Code Ann. §§ 16-114-201 to -209 (1987). We hold such damages are recoverable.

In its amici curiae brief, the Arkansas Hospital Association argues that damages recoverable in a cause of action for medical injury are set forth in § 16-114-208, and because the statute fails to specifically enumerate punitive damages as a recoverable element, the legislature intended to exclude punitive damages in medical injury actions. We cannot agree.

Recently, we rejected a similar argument in Vickery v. Ballentine, 293 Ark. 54, 732 S.W.2d 160 (1987). There, Vickery contended that, because Arkansas’s wrongful death provisions were laws in derogation of common law, those laws should not be construed to impose a liability that is not clearly expressed. In rejecting Vickery’s argument, this court noted that Arkansas’s case law was clear that an injured party may recover punitive damages as a consequence of a wrongdoer’s willful and wanton, tortious conduct. We said further that the purpose of punitive damages is not to compensate the injured party but to impose a monetary penalty on the defendant and to discourage others from similar behavior. Id. at 56-57, 732 S.W.2d at 162. In enacting the Arkansas Medical Malpractice Act, the Arkansas General Assembly did not restrict an injured party from claiming punitive damages when a medical-care provider, as defined by that Act, was guilty of willful and wanton misconduct. If the General Assembly had intended such a restriction, it could have easily set it out in the Act. The appellant’s attempt to construe the Act so as to exclude exemplary damages is simply unpersuasive. In holding that punitive damages are recoverable in medical malpractice actions, we follow what appears to be the prevailing view. See 70 C.J.S. Physicians and Surgeons § 127(c) (1987) and David M. Harney, Medical Malpractice, § 3.11 (1973); see also Annot., Medical Malpractice — Punitive Damages, 27 ALR3d 1274 (1969).

Appellant next argues there is insufficient evidence to support the verdict for either compensatory or punitive damages. Further, appellant also contends that the trial court erred in allowing appellees to make certain prejudicial references to the jury concerning the appellant’s parent corporation, Hospital Corporation of America (HCA). That corporation is not, and never has been, a party to this litigation. Because we hold that appellees erred in their arguments to the jury, we discuss that point first.

Appellant, HCA Health Services of Midwest, Inc., is a wholly-owned subsidiary of HCA, and for that apparent reason, was the party the appellees chose to file their claim against. Nonetheless, appellees, in their opening and closing statements, mentioned HCA as though it was the defendant. In anticipation of appellees’ closing remarks, the appellant asked the trial judge to prohibit appellees from arguing punitive damages as though HCA was the defendant-corporation that the jury should punish by awarding such damages. The judge denied appellant’s motion, thereby giving the appellees the latitude and discretion to interweave HCA’s name throughout their closing argument. The following excerpts from appellees’ closing remarks make it clear that appellees implored the jury that HCA, a nation-wide, profit-making corporation, should bear much of the responsibility for James Talley’s injury:

[W]hen I am talking about this item here, about punitive [damages], to deter others from similar conduct, in a sense, I’m talking on behalf of the thousands and tens of thousands of other newborn babies that are in nurseries and right this minute,... in nurseries all over the United States and a lot of them are in hospitals that operate for a profit.
* * *
Up to now, HCA of Midwest [appellee] has been masquerading as a respectable health service institution, but you, in this case, have been privileged in this lawsuit to pull aside the veil of pretense behind which they operate and see the real profit motivated operation that deals with the very lives and minds and bodies of the tenderest newborn babies of its subject matter.
* * *
Now, I want to go into some of the details of what I have designated as their total operation of deceit. To begin with, I’m sure all of you have driven on the freeway and driven by Doctors Hospital and all of you have seen that big sign up there that says, “Doctors Hospital” . . . But the truth is the doctors don’t own a dime of it. . . Actually, it is owned by a bunch of investors for profit.
* * *
Now, Kinder [executive director of Doctors Hospital] told you that it is owned by the HCA Midwest, the HCA Midwest is owned by HCA which, in turn, Mr. Kinder testified, is on the New York Stock Exchange and is operated by investors for profit. So the only way any doctor in Little Rock or anywhere else can own any part of that hospital is if they go up there on the New York Stock Market and buy some stock and invest for profit. So the first deceit they have is putting out the name of Doctors Hospital.
* * *
I was saying that you’ve got these dangerous operations by these profit corporations that are running all these profit hospitals and I think, again, from our own common knowledge, we know about these hospitals running for profit and selling services to patients to make a profit off of it.
* * *
Now, you might wonder, why doesn’t somebody do anything about these situations of these hospitals and these corporations all over the United States operating nurseries for profit and short staffing them and like was done and leaving children alone in a room by themselves, that that’s done just to make money.
* * *
On voir dire ... I asked you, “If you believe from the testimony that plaintiffs are entitled to damages in a large sum and at the same time you feel that the defendants or some of them may not be financially able to pay the amount to which plaintiffs are entitled, will you be willing to go ahead and award the full amount to which you feel that the plaintiffs are entitled and let us worry about collecting it?” And you said, “Yes,” all of you said yes. So, let us worry about it. You give the amount you think would accomplish all these purposes and let us worry about it. Don’t worry about the amount.

Besides appellees’ foregoing closing remarks, they also pointed out in their opening argument that HCA had acquired Doctors Hospital in the name of its subsidiary, the “principal” defendant HCA Health Services of Midwest, Inc., and that HCA had a chain of corporations and a chain of hospitals. Under Arkansas law, the financial condition of a defendant is admissible and may be considered by a jury in determining the amount of exemplary damages to be allowed and what amount of punishment would be inflicted thereby on the theory that the allowance of a given sum would be a greater punishment to a man of small means than one possessing larger wealth. See Holmes v. Hollingsworth, 234 Ark. 347, 352 S.W.2d 96 (1961) and AMI Civil 2d, 2217 (Supp. 1986). While HCA was never made a party-defendant in this case, appellees’ strategy, at least in part, was to emphasize HCA’s size and wealth, as well as its connection to HCA Health Services Midwest, Inc, when asking the jury to assess punitive damages against the appellant. Because HCA Health Services Midwest, Inc. was the sole party-defendant here, not HCA, and no reason was shown why their separate identities should be disregarded, we must conclude the trial court erred in permitting appellees to refer to HCA in their quest for punitive damages.

Because we find it necessary to reverse and remand this cause because of appellee’s improper argument, we need not discuss in lengthy detail the appellant’s arguments that the evidence was insufficient to support the verdict awarding appellees compensatory and punitive damages. Suffice it to say, when viewing all reasonable inferences from the evidence in the light most favorable to appellees, we believe the evidence clearly supports the jury’s finding that appellant’s negligence proximately caused James’s injury and its award of compensatory damages. James Talley undisputedly showed no sign of any problems prior to his cardiac and respiratory arrest. The events leading up to James’s cardiac arrest commenced soon after a shift change that occurred at 11:00 p.m. on September 7,1982. Nurses Firestone, Tully and Swayze were working in the nursery which, at the time, was occupied by about eighteen babies. The nursery consisted of three connecting rooms, divided by walls that were glass from the middle to the top. After being updated on each of the babies by the nurses on the prior shift, Tully worked with a baby in the admissions room, and Firestone and Swayze went to the second room, containing eleven babies, where they gave their priority to two premature babies and a third one with jaundice. As Tully finished with the baby in admissions, she went into the third room, where there were six babies, including James; she immediately noticed James’s condition, and he was rushed to intensive care.

Although the cause of James’s arrest is in question, Dr. Stephen Whaley, a pediatrician who arrived at the hospital after the incident, testified Firestone told him the baby was lying face down, and it had been about thirty minutes between the time the baby was last checked and when he was found not breathing. Dr. Whaley said that he thought the bassinet mattress on which James was lying “unquestionably contributed to, or was the cause of his asphyxia.” He said that “he looked for other explanations and couldn’t find anything else.” He said the mattress was old and soft, and was inappropriate for use in the nursery. Whaley further testified that he was alarmed that there had been no nurse in the room, and he did not “think James Talley’s injury would have occurred if there had been a nurse in the room with him.” Other testimony was given indicating that the hospital administration had been told of an ongoing need for more nurses in the nursery and that the number of staff" on duty the night of James’s incident was below the hospital’s own standards which were in force at the time. The evidence also reflected that hospital policy provided that no baby was to be left in the nursery room without a nurse in attendance. Although appellant countered much of the foregoing with its own evidence and arguments, we have no problem in holding that sufficient evidence exists to support the verdict determining appellant’s negligence caused James’s injury and holding it liable for compensatory damages which resulted from that injury.

Whether the evidence was sufficient to support punitive damages depends, of course, on a different standard than that of mere negligence, viz., whether the appellant knew or ought to have known, in the light of the surrounding circumstances, that its conduct would naturally or probably result in injury and that it continued such conduct in reckless disregard of the circumstances from which malice may be inferred. See Mo. Pac. R. R. Co. v. Ark. Sheriff's Boys’ Ranch, 280 Ark. 53, 655 S.W.2d 389 (1983); Airco, Inc. v. Simmons 1st National Bank, 276 Ark. 486, 638 S.W.2d 660 (1982). Appellees’ theory, underlying their request for punitive damages, focused on the appellant’s and its executive director’s alleged failures to respond to the entreaties of the physicians to provide enough nurses to insure that no newborn baby would be left unsupervised in a nursery. Appellees contended that appellant’s main concern was one of saving money rather than the safe care of babies. Conflicting evidence was presented on this issue and whether or not the evidence is sufficient to support punitive damages is a close question. Upon retrial, this evidence may be different, so we do not address in full the appellant’s argument as to whether appellees’ proof is adequate to support an award of punitive damages. Mo. Pac. R. R. Co., 280 Ark. 53, 65, 655 S.W.2d 389, 395. We merely point out that if it can be shown that appellant knew, or ought to have known, that its hospital policy would inflict damages but continued that policy anyway with a conscious indifference to the consequences, appellant could be liable for punitive damages.

Appellant’s next point that we address, since it will arise again at retrial, is whether the trial court erroneously permitted appellees to introduce into evidence a post-incident disciplinary proceeding involving nurse Firestone. We believe it did. Firestone was disciplined after James’s injury, and a personnel action report, signed by a hospital department director and personnel director, reflected what had happened to James and noted a violation of nursing policy had occurred because no nurse was in James’s room when his problem began. A written reprimand was placed in Firestone’s file. She appealed and filed a written response, which appellees, over appellant’s objection, introduced at trial. In her response, Firestone complained about the inadequate number of nurses on staff at the time of James’s incident and her written response was obviously prejudicial if, indeed, it was erroneously admitted into evidence. Appellees argue that Ark. Code Ann. § 16-46-105(c) (1987) permits the discoverability and admissibility of Firestone’s written response as an “incident report kept with respect to any patient in the course of business of operating a hospital. . .” We cannot agree. Firestone’s response was not a medical record, incident report or other record kept with respect to any patient within the meaning of the language and intent of § 16-46-105(c), but instead it is a record filed with the administrative staff which became a part of a disciplinary action kept with respect to one of the hospital’s personnel, viz., Firestone. As such, the trial court should have excluded Firestone’s written response as privileged communication as proscribed pursuant to § 16-46-105 (a) which reads as follows:

“The proceedings, minutes, records or reports of organized committees of hospital medical staffs or medical review committees of local medical societies having the responsibility for reviewing and evaluating the quality of medical or hospital care, and any records compiled or accumulated by the administrative staff of such hospitals in connection with such review or evaluation, together with all communications or reports originating in such committees, shall not be subject to discovery or admissible in any legal proceeding and shall be absolutely privileged communication-, nor shall testimony as to events occurring during the activities of such committees be admissible.” (Emphasis added.)

Appellant offers two other arguments that could arise at retrial, but the first we dispose of in quick fashion. Appellant argues that the expert testimony of Leslie Ball should have been excluded because he had no experience in the administration of hospitals and is what appellant calls a “general purpose plaintiff’s witness.” Appellant cites no authority and offers no convincing argument to underscore this point. Therefore, we need not address it except to repeat the well-settled rule that an expert witness’s qualifications are a matter lying within the trial judge’s discretion, to be upheld on appeal, absent an abuse of discretion. Hardy v. Bates, 291 Ark. 606, 727 S.W.2d 373 (1987). Based upon the argument presented, we are unwilling to say the trial court abused its discretion in admitting Ball’s testimony.

Appellant’s last contention is that the trial court erred in admitting evidence of a remedial action taken by appellant after James’s incident occurred. Appellees read to the jury two depositions taken of the hospital’s executive director, Kinder. In the first deposition, Kinder denied that the glass partitions, which helped separate the rooms in the nursery, were removed after James’s incident so as to improve the transmission of sound. In the second deposition, Kinder testified that he had learned since his first deposition that the glass had been removed. Appellant objected to appellees’ inquiries of Kinder pertaining to the removal of the glass partitions, and now urges such evidence was excludable under Unif. R. Evid. 407, Ark. Code Ann. § 16-41-101 (1987).

While such remedial changes reflected in Kinder’s testimony may be excludable under Rule 407, we fail to see the prejudice since the same subject matter was fully covered without objection in Firestone’s testimony. In this respect, Firestone was asked if the hospital had structurally changed the nursery after James’s incident, and she revealed it had. She said the window was removed, making a permanent opening between the rooms in the nursery. Firestone said this change allowed the nurses to communicate with one another while being in different rooms. As this court has stated earlier, the admission of evidence is not prejudicial where similar evidence has been previously admitted without objection. See Rhine v. Haley, 238 Ark. 72, 378 S.W.2d 655 (1964);Hooten v. DeJarnatt, 237 Ark. 792, 376 S.W.2d 272 (1964). Since the appellant failed to object to Firestone’s testimony regarding the removal of the window, the admission of Kinder’s testimony is not prejudicial and therefore we find no reversible error on this point. See Peoples Bank and Trust Co. v. Wallace, 290 Ark. 589, 721 S.W.2d 659 (1986).

Appellees’ sole point for reversal on cross-appeal questions the trial court’s granting the appellant’s motion for a directed verdict at the end of appellees’ case, thereby dismissing nurses Swayze and Tully from this cause. We hold the court erred in doing so. Both Kinder and Swayze testified that the hospital’s policy provided that a member of the nursery staff would be present in every room occupied by infants at all times. Although Kinder also testified that it was only a goal of the hospital that no baby in the nursery be left alone without a nurse in the room, he stated at another point in his testimony that this had been made hospital policy, which had been effective since March or April 1982. Swayze, on the other hand, read from a hospital policy and procedures document which indicated that such was hospital policy made effective on May 27, 1982. In either case, Kinder’s and Swayze’s testimonies reflect that this policy was in force prior to and at the time of James’s incident. Nurse Firestone testified that when she came on duty on September 7,1982, she had three nurses, including herself, and she assessed that she needed to move all the babies to one room and she intended to do so later. She had not made the moves or changes by the time of the incident because she said there was a “time lapse in which those arrangements were being made.” The evidence also reflects that the nurses had been on duty one and one-half hours before the time James was found in his arrested condition. And finally, Dr. Whaley testified that he believed James’s problem would have been avoided if a nurse had been in the room with him.

The three nurses who testified in this matter gave their versions of what occurred which, if believed by the jurors, might have justified their noncompliance with the hospital’s policy. Also, they indicated that they believed that having a nurse in each room at all times was actually a goal, not policy, at the time James’s problem arose. Of course, the nurses are parties to this litigation, and their testimonies cannot be regarded as undisputed. Nipper v. Brandon Co., 262 Ark. 17, 553 S.W.2d 227 (1977). However, more on point, this court must review the trial court’s direction of a verdict for nurses Swayze and Tully by examining the evidence in a light most favorable to the losing party, the appellees here. Keck v. American Employment Agency, Inc., 279 Ark. 294, 652 S.W.2d 2 (1983). Furthermore, the evidence must be given all reasonable inferences and conclusions that work in favor of the losing parties. Generally, if there is any conflict in the evidence, or we find the evidence is not in dispute, but is in such a state that fair-minded people might have different conclusions, then a jury question is presented, and a directed verdict will be overturned. Id., at 297, 652 S.W.2d at 4. Given these standards for review, and viewing the evidence most favorably to the appellees, we believe the facts clearly reveal a jury question regarding the nurses’ culpability in failing to comply with hospital policy by not having at least one of them present in each room of the nursery on the night of James’s incident. Therefore, we are compelled to reverse the trial court’s decision directing a verdict in favor of Swayze and Tully.

For the reasons given herein, we reverse and remand this cause for a new trial.

       Over appellant’s objection, appellees read Kinder’s deposition to the jury which included these references to HCA. The trial court denied appellant’s objection and motion for a mistrial.

       The record is confusing and actually indicates the appellant’s objection occurred after Kinder’s depositions were read to the jury, rather than before. Appellees do not suggest the objections were untimely, and we can only assume an error was made in the manner the record was compiled and in some of the introductory language used before listing the appellant’s objections to Kinder’s deposition.


author: Jan R. Cromwell, Special Associate Justice. Robert Edwards, Special Chief Justice,

text:
    Madeline TALBOT and Ben Talbot, Jr. v. Thomas JANSEN and Janet Honeycutt
    87-20
    744 S.W.2d 723
    Supreme Court of Arkansas
    Opinion delivered February 16, 1988

      Hall & Vaught, by: John Wesley Hall, Jr., for appellants.

      Catlett, Stubblefield, Bonds & Fleming, by: Victor A. Fleming; and Wright, Lindsey & Jennings, for appellees.
   Jan R. Cromwell, Special Associate Justice.

This litigation arises from the January 1983 purchase of the corporate stock of “That Little Restaurant” by appellant Ben Talbot, Jr., with money loaned to him by appellant Madeline Talbot. The sellers were John C. Smithers and appellees Thomas Jansen and Janet Honeycutt. In the contract of sale, Smithers represented the liabilities of the restaurant as being $26,104.35, when in fact they were $90,794.95. Ben Talbot, Jr., defaulted on his note to Madeline Talbot and in May 1983 a receiver for the restaurant was appointed at the request of Madeline Talbot. The court authorized the receiver to pursue causes of action on behalf of the owner of the restaurant and in April 1985 the receiver filed a breach of contract action against John C. Smithers and the appellees for the amount of the liabilities understated by Smithers. No claim for fraud was brought by the receiver.

On October 24, 1985, the receiver recommended that appellees’ settlement offer of $ 15,000 be accepted and on December 9 the settlement was approved by the chancellor as a “just and fair” resolution of the dispute between the parties. On December 13,1985, appellant Madeline Talbot filed a motion for modification of the December 9 order and filed a notice of appeal and designation of record on December 19,1985. She failed to pursue this appeal and on May 7,1986, the circuit court complaint was dismissed.

On April 14, 1986, Ben Talbot, Jr., and Madeline Talbot filed this cause of action against appellees Jansen and Honeycutt for compensatory and punitive damages alleged to be the result of the fraudulent misrepresentations by John C. Smithers. The complaint alleges that Smithers knowingly understated the outstanding liabilities of the restaurant, thereby fraudulently inducing Ben Talbot, Jr., to purchase the restaurant and further inducing Madeline Talbot to finance the purchase. The complaint alleges that Smithers, as the agent, and Jansen and Honeycutt, as parties to the contract of sale, profited from such fraud. The fraud was alleged to have occurred on January 13, 1983, but not discovered until April 15, 1983, when an accounting of the liabilities was completed. Appellees moved to dismiss the complaint, for summary judgment based on res judicata and statute of limitations. The motions were granted and the Talbots have appealed.

There are three questions to be decided:

(I) When parties to a lawsuit elect to sue for breach of contract, are they thereafter barred from bringing a subsequent lawsuit on the issue of fraud in the inducement of that contract when all issues of the subsequent lawsuit necessarily fall within the issues of the previous case . . . i.e., res judicata?

(II) When does the statute of limitations begin to run in an action for fraud on the contract?

(III) What relationship does a court appointed receiver for a corporation bear to the principals and shareholders of that corporation when that receiver is appointed at the behest of those principals or shareholders, where the receiver is authorized to file suits and where the principals or shareholders were present (or represented by counsel) at all hearings?

I

Res Judicata

The general rule in Arkansas is that in order for the doctrine of res judicata to apply it must appear that the particular matter involved was raised and determined or that it was necessarily within the issues and might have been litigated in the previous action. [Emphasis added.]

Howard v. Green, 555 F.2d 178 (8th Cir. 1977); Turner v. State, 248 Ark. 367, 452 S.W.2d 317 (1970); Martin v. Citizens Bank of Beebe, 283 Ark. 145, 671 S.W.2d 754 (1984).

In considering the appellee’s motion for summary judgment, we must view the allegations of the pleadings in the light most favorable to appellants. Moeller v. Theis Realty, Inc., 13 Ark. App. 266, 683 S.W.2d 239 (1985); Township Builders, Inc. v. Kraus Construction Co., 286 Ark. 487, 696 S.W.2d 308 (1985).

In this case, the point of controversy has at all times been the misstatement of liabilities. In the previous suit, appellants elected to sue for breach of contract. The receiver knew about the fraud issue, but did not raise it. The complaint was dismissed. Appellants appealed, but did not follow through. In the case at bar, they allege the same facts, but rename their action “fraud,” and seek punitive damages. The facts are identical. Res judicata applies.

II

Statute of Limitations

We are dealing with Ark. Stat. Ann. § 37-206 (Repl. 1962): an action for fraud must be brought within three years from the date the cause of action accrues.

“Fraud does suspend the running of the statute of limitations, and the suspension remains in effect until the party having the cause of action discovers the fraud or should have discovered it by the exercise of reasonable diligence.'” (Emphasis added.) Hughs v. McCann, 13 Ark. App. 28, 678 S.W.2d 784 (1984). The question arises as to whether the appellants used due diligence to discover the fraud.

It is relevant that on March 23 and March 25, 1983, respectively, guardianship and civil commitment actions had been filed against Ben Talbot, Jr., in Pulaski Probate Court with Madeline Talbot acting as petitioner. Madeline Talbot was appointed temporary guardian and authorized to take possession of and administer his property. It was not until May 26, 1983, that Madeline Talbot filed the petition for receivership.

Without giving unnecessary details and based upon all the facts presented, including the family’s knowledge of Ben Talbot’s mental situation, it is obvious that Madeline Talbot did not use due diligence to discover any fraud. Either Ben Talbot did not use diligence or was incapacitated from doing so.

Ill

The Role of the Receiver

The receiver in this case was appointed at Madeline Talbot’s request and she had notice of, was present at, or was represented in all hearings involving Ben Talbot, Jr. When she disagreed with the chancery court’s judgment, she filed an appeal but then abandoned it.

A receiver is a fiduciary representing the court and all parties in interest. A receiver is an “embodiment of the creditors” standing as agent for them, representing them with power to do acts that a mere agent of the defunct company could not do. See 36 Words and Phrases, 741-42 [citing Wimpfheimer v. Perrine, 50 A. 356, 65 N.J. Eq. 770 (1901); Peabody v. N.E. Waterworks, 184 Ill. 625, 56 N.E. 957 (1901)]. This power includes bringing suit on behalf of creditors. See generally 66 Am. Jur. 2d, Receivers §§ 449, 450 and 452 [citing inter alia Converse v. Hamilton, 224 U.S. 243, 56 L.Ed. 749, 32 S.Ct. 415 (1912).]

Receiver Bryant was authorized by court order to pursue causes of action available to the owner of the business. He elected not to allege fraud. There is sufficient identity between the appellants and the receiver to bar this lawsuit.

The trial court is affirmed in all respects.

Edwards, Sp. C.J., and Newbern, J., dissent.

Holt, C.J., and Dudley, J., not participating.

Robert Edwards, Special Chief Justice,

dissenting. The doctrine of res judicata provides that a prior decree bars a subsequent suit when the subsequent cause involves the same subject matter as that determined in the former suit between the same parties, and the bar extends to those questions of law and fact which might have been but were not presented. Turner v. State, 248 Ark. 367, 452 S.W.2d 317 (1970); Martin v. Citizen’s Bank of Beebe, 283 Ark. 145, 671 S.W.2d 754 (1984). Exactly the same parties are not required in order to render issues adjudicated in a former suit res judicata, since it is sufficient if there is a substantial identity of parties. Wells v. Arkansas Public Service Commission, 272 Ark. 481, 616 S.W.2d 718 (1981); Estate of Knott v. Jones, 14 Ark. App. 271, 687 S.W.2d 529 (1985).

Appellees argue that since appellant Madeline Talbot instituted a chancery court action resulting in a receiver being appointed for “That Little Restaurant,” and since the receiver instituted a circuit court action against appellees under an indemnification clause in the stock purchase contract, the present suit for fraud is barred by res judicata since it involves subject matter which could have been raised by the receiver, a party with substantial identity to the appellants.

As the majority states, in considering the appellees’ motion for summary judgment, we view the allegations of the pleadings in the light most favorable to appellants. Also, in this case appellees have the burden of establishing the defense of res judicata. Southern Farmers Association v. Wyatt, 234 Ark. 649, 353 S.W.2d 531 (1962); Hurst v. Hurst, 255 Ark. 936, 504 S.W.2d 360 (1974).

If the fraud was known at the time the prior suit was brought, I agree that a prior suit alleging breach of contract bars a subsequent suit between the same parties alleging fraud in the procurement of the contract. However, I do not agree that in this case the prior suit involved the same parties or parties with substantial identity to the appellants.

The receiver was appointed for the business “That Little Restaurant.” The receiver was authorized to pursue actions available to the owner of “That Little Restaurant.” The owner of “That Little Restaurant” was the corporation.

The present claim alleges personal damages to the appellants as a result of fraudulent misrepresentations made to appellant Ben Talbot, Jr., which were relied on by appellant Madeline Talbot when she loaned money to Ben Talbot, Jr., to purchase stock in the corporation. I cannot agree that the receiver in the circuit court case was a party with substantial identity to the appellants. The receiver was appointed to protect and preserve the assets of the restaurant, and in the performance of those duties he was given authority to pursue actions available to the corporation. While the question of whether or not the receiver was a proper party to bring the circuit court suit is not before us, it should be noted that the order of the chancery court approving the circuit court settlement reflects that the small settlement was being approved in part because of the possible merit of a defense raised in the circuit court case by appellees that the alleged loss was a personal loss of Ben Talbot, Jr., and not a corporate loss. The receiver’s selection of a cause of action in a suit for the corporation over which Ben Talbot, Jr., and Madeline Talbot had no control should not preclude this later cause of action wherein Ben Talbot, Jr., and Madeline Talbot seek to recover damages personal to them for fraudulent misrepresentations relating to the stock purchase.

Accordingly, the motion for summary judgment should not have been granted on the issue of res judicata.

Also, we have held that in order to prevail on a motion to dismiss the complaint on the basis of limitations, it must be barred on its face. Furthermore, we strictly construe the statute, and if there is any reasonable doubt, we will resolve the question in favor of the complaint standing against the challenge. Dunlap v. McCarty, 248 Ark. 5, 678 S.W.2d 361 (1984); McKim v. McLiney, 250 Ark. 423, 465 S.W.2d 911 (1971); Jefferson v. Nero, 225 Ark. 302, 280 S.W.2d 884 (1955).

Under Ark. Code Ann. § 16-56-105 (1987), an action for fraud must be brought within three years from the date the cause of action accrues. Fraud does suspend the running of the statute of limitations, and the suspension remains in effect until the party having the cause of action discovers the fraud or should have discovered it by the exercise of reasonable diligence. Hughs v. McCann, 13 Ark. App. 28, 678 S.W.2d 784 (1984). In actions where the fraud is alleged to have been concealed, the cause of action accrues when the fraud is discovered or should be discovered, with the exercise of reasonable diligence. Wrinkles v. Brown, 217 Ark. 393, 230 S.W.2d 39 (1950); Wright v. Lake, 178 Ark. 184, 13 S.W.2d 826 (1929). Also, mere ignorance of one’s rights does not prevent the operation of the statute of limitations, but where the ignorance is produced by affirmative and fraudulent acts of concealment, the statute of limitations does not begin to run until the fraud is discovered. Williams v. Purdy, 223 Ark. 275, 265 S.W.2d 534 (1954); State of Tennessee v. Barton, 210 Ark. 816, 198 S.W.2d 512 (1926). As stated in 37 Am. Jur. 2d, Fraud and Deceit, § 406 (1968),

Unless the fraud was of such a character as to necessarily imply concealment it is necessary, in order to postpone the running of the statute of limitations until the discovery of the fraud, that the ignorance thereof shall have been produced by affirmative acts of the guilty party. In other words, the fact that the complainant was ignorant of the fraud until after the right of recovery was barred is not per se sufficient to entitle him to the benefit of the exception under consideration, in the absence of any act or conduct on the part of his adversary calculated to mislead, deceive or lull inquiry.

Further, as stated in 51 Am. Jur. 2d, Limitations of Actions, § 148(1970), “Although mere silence or failure to disclose may not in itself constitute fraudulent concealment, any statement, word or act which tends to the suppression of the truth renders the concealment fraudulent.”

Appellants’ complaint alleges that during the purchase negotiations John C. Smithers on January 13, 1983, made fraudulent misrepresentations concerning the corporation’s liabilities and had the true financial condition of the corporation been known, the sale and loan would not have occurred. The complaint further alleges that the appellants did not discover the fraud until April 15, 1983. Appellants’ suit was filed April 14, 1986.

Appellees’ motion to dismiss does not allege that appellants discovered the fraud prior to April 15, 1983. Neither does the motion allege that appellants did not use due diligence to discover the fraud. While questions of fact may arise in a trial of this matter as to whether April 15,1983, was the date of discovery or as to whether or not the appellants exercised due diligence to discover the fraud, based on the record, the question of whether or not the statute was tolled until April 15,1986, should be an issue of fact to be decided in a trial. Crossett Health Center v. Croswell, 221 Ark. 874, 256 S.W.2d 548 (1953); Crissman v. Carl-Lee, 173 Ark. 32, 200 S.W. 133 (1918). Therefore, appellees’ motion to dismiss on the basis of limitations should not have been granted.

I would reverse and remand this cause to the trial court for further proceedings.

Newbern, J., joins in the dissent.


author: Per Curiam.

text:
    Judy L. JONES, a/k/a Judy Colvin v. STATE of Arkansas
    744 S.W.2d 391
    Supreme Court of Arkansas
    Opinion delivered February 16, 1988

      Donald R. Roberts, for appellant.

      Steve Clark, Att’y Gen., by: Theodore Holder, Asst. Att’y Gen., for appellee.
   Per Curiam.

The suspended sentence of appellant, Judy L. Jones, was revoked and a Judgment and Commitment was entered on April 2,1987. A timely notice of appeal was not given. On May 5, 1987, an amended Judgment and Commitment was entered. On September 29, 1987, a corrected order was entered giving appellant credit for 23 days jail time. Appellant gave a timely notice of appeal from this last order. The clerk has refused to file the record because notice of appeal was not timely given and the record is late. The appellant asks for a rule on the clerk. We deny the motion.

Appellant is attempting to appeal from the order of April 2,1987, which revoked her suspended sentence. She is not attempting to appeal from the order of September 23, 1987, giving her credit for her jail time. However, she did not give notice of appeal within 30 days of April 2,1987, and, therefore, the clerk ruled correctly.

If the attorney for appellant states a good reason, we will grant a rule on the clerk. See per curiam, February 2, 1979, 265 Ark. 964.


text:
    Robert SIMMS, Jr. v. The SAFEWAY TRAILS, INC. and Midwest Bus Lines, Inc.
    87-257
    743 S.W.2d 824
    Supreme Court of Arkansas
    Opinion delivered February 16, 1988
    No response.

      Garslere & Wynne, by: Larry J. Bridgefarmer, Douglas S. Lang, and Todd R. Moore, for appellee.
   Per Curiam.

The appellees have filed a motion to stay briefing in this case because they are in bankruptcy. The motion is granted.