text:
    John VAUGHN v. STATE of Arkansas
    5675
    478 S.W. 2d 759
    Opinion delivered April 3, 1972

      Wilbur L. Bentley, for appellant.

      Ray Thornton, Atty. Gen., by Milton Lueken, Asst. Atty. Gen.
   Lyle Brown, Justice.

Appellant John Vaughn was convicted of assault with intent to kill and was given the maximum sentence of twenty-one years. Appellant, together with James Ridgeway and Gene Cannon, went to the Arkansas River near Little Rock on the night of June 10, 1970, to gig frogs. Shortly after their arrival James Ridgeway shot Gene Cannon in the head and (according to the jury finding) appellant attacked Cannon with a knife, inflicting severe wounds about the neck. According to the evidence Cannon was left on the river bank to die. The sufficiency of the evidence to sustain the conviction is not attacked and therefore we will not recite extensive details. Eight points are advanced for reversal.

Point I. The court erred in sustaining the prosecuting attorney’s objection to a relevant question propounded to Linda Carey. The witness testified on cross-examination by counsel for the accused that after the incident on the river bank, Ridgeway kept close to the appellant, going with him everywhere he went. Then appellant’s attorney asked this question: “In other words John [appellant] could not get away from Ridgeway?” The court sustained the prosecutor’s objection to the question. There was no error in the ruling. The question clearly called for an opinion on the part of the witness.

Point II. The court should have sustained objection to the prosecuting attorney harassing State witness Linda Carey. When the State called the witness she obviously changed her testimony previously given to shift guilt from her brother, appellant, to James Ridgeway. Taken by surprise, the prosecuting attorney tried to glean from the witness that she had been threatened if she told the truth about her brother. Counsel for appellant objected to “unjustified and improper harassment” of the witness. He now complains that the court did not rule on his objection or admonish the jury. Counsel did in fact make an objection but never asked the court to rule on it, nor was there a request that the jury be admonished not to consider the evidence. In fact the prosecuting attorney, when surprised by the testimony of his own witness, has a right to examine her about prior contradictory testimony. Johnson v. Daniels, 221 Ark. 276, 254 S.W. 2d 946 (1952).

Point III. The court erred in sustaining the prosecuting attorney’s objection to a question propounded by the defense to State witness Betty Kratina. On direct examination Betty was asked by the State if she had been convicted of a. felony, to which she replied in the affirmative. On cross-examination defense counsel asked Betty who she was with when she committed the felony. The court sustained the State’s objection. It is proper to cross-examine a witness about his “residence, habits, antecedents, and associations.” Wilson v. Thurston Nat’l. Ins. Co., 251 Ark 929, 475 S.W. 2d 881. However, this was cross-examination seeking to attack the witness’s credibility. When such a question concerning a collateral matter is asked on cross-examination and objection is made it is required that counsel advise the court the purpose of the question and make a proffer as to what the answer would be. The trial judge is entitled to that information in order to control inquiry into collateral matters. Dixon v. State, 162 Ark. 584, 258 S.W. 401 (1924); Kingrey v. Wilson, 227 Ark. 690, 301 S.W. 2d 23 (1957). Also, see Washington National Insurance Co. v. Meeks, 249 Ark. 73, 458 S.W. 2d 135 (1970).

Point IV. The court erred in refusing to let the defense expose the hostility and bias of the State’s witness Betty Kratina. The witness was a sister of the defendant and was called to testify against him. On cross-examination she was being asked about the number of children in the family, whether she was adopted, and how she felt about the adoption. The court sustained the prosecuting attorney’s objection to that line of questioning. Defense counsel stated that he was attempting to show hostility between the witness and the defendant. To which the court replied that he would be permitted to do that but admonished counsel not to go about it in such a roundabout manner. Following that colloquy defense counsel did interrogate the witness directly about trouble she had had with her brother. We find no merit in the point.

Point V. The court erred in failing to sustain appellant’s objection to the prosecution displaying to the jury the scars of the prosecuting witness. The trial court did not abuse its discretion in permitting the exhibiting of the scars. See 2 Wharton Criminal Evidence § 680, p. 632 (12th Edition).

Point VI. The court erred in curtailing the defense’s cross-examination of the principal prosecuting witness. The prosecuting witness stated several times on both direct and cross-examination that the accused was the person who cut his throat with a knife. As we read the record the court was merely curtailing repetition.

Point VII. The court commented on the evidence offered by the defense witness, Jo Ann Smith. This sister of the defendant resided in Ohio and Ridgeway and the defendant visited her in Ohio for some time after the attack on Cannon. The witness was testifying about the demeanor of the two men and the court ruled her testimony to be incompetent. The court ruled correctly that the particular line of questioning was incompetent. Thereupon the witness was excused. We find no error in the court’s ruling.

Point VIII. The court erred in refusing to give defendant’s instruction number three. This instruction interposed the defense of drunkenness to the extent that appellant could not have formed the specific intent to commit the crime. The instruction is not abstracted. The trial court was warranted in refusing it because there appears to be insufficient evidence to submit that defense to the jury. Appellant testified in substantial detail about the entire incident and described his defense that Ridgeway, and not appellant, wielded the knife. He testified that he had been drinking considerably but the closest he came to saying that he was drunk was when he testified he was “feeling pretty good.” Another witness, Linda Carey, said appellant was “feeling pretty high.” The burden was on the appellant to establish that he was so drunk that he could not have formed the necessary intent and in that respect the evidence falls short. At least we cannot say the trial court committed reversible error.

Affirmed.


source: Caselaw Access Project

author: John A. Fogleman, Justice.

license: Public Domain

text:
    ARKANSAS SAVINGS And LOAN Association Board v. CORNING SAVINGS AND LOAN Association
    5-5850
    478 S.W. 2d 431
    Opinion delivered April 3, 1972

      Kenneth E. Suggs, for appellant.

      Smith, Williams, Friday, Eldredge ir Clark, by William L. Terry, for appellee.
   John A. Fogleman, Justice.

Appellee filed two notices of appeal from appellant’s denial of its application for a state savings and loan association charter. The first notice was filed in the Circuit Court of Clay County on August 19, 1971. The second was filed in the Circuit Court of Pulaski County on August 23, 1971. Appellant filed the transcript of the proceedings before it on September 17, 1971. On September 23, appellee filed a motion to transfer the record to the Clay Circuit Court. Appellant responded on October 13. Appellee’s motion was granted on October 23. The Pulaski Circuit Court held that the Arkansas Administrative Procedure Act [Ark. Stat. Ann. § 5-701 — 714 (Supp. 1971)] supplemented but did not repeal the Arkansas Savings and Loan Act provision for appeal [Ark. Stat. Ann. § 67-1811 (Repl. 1966)] from an order of the Arkansas Savings and Loan Board, so that, under § 13 (Ark. Stat. Ann § 5-713) of the former act, the record must be transferred to the Clay Circuit Court.

Appellant’s appeal from that order is based upon its argument that Ark. Stat. Ann. § 5-713 did not confer jurisdiction upon any circuit court outside Pulaski County because “full jurisdiction” of such appeal is conferred upon the circuit court of the latter county by § 67-1811, and that § 5-713 is controlling for venue purposes only, so that a notice of appeal could properly be filed in the Circuit Court of Clay County but that exclusive jurisdiction of the appeal remained in the Circuit Court of Pulaski County.

The order of transfer is not an appealable order. It is somewhat analagous to an order for a change of venue which we have held was not appealable. State v. Langstaff, 231 Ark. 73, 332 S.W. 2d 614. It is also in many respects similar to an order transferring a cause from the circuit court to the chancery court which we have also held was not appealable, even though it affects a substantial right, because it does not determine or discontinue the action or prevent an appealable judgment, but only transfers the cause to another forum where it continues until disposed of. Womack v. Connor, 74 Ark. 352, 85 S.W. 783; Johnson v. Plant, 207 Ark. 871, 181 S.W. 2d 240; Vaughan v. Hill, 154 Ark. 528, 242 S.W. 826.

We have also said that an appeal will not lie from an interlocutory order relating only to some question of law or matter of practice in the course of the proceeding leaving something remaining to be done by some court having jurisdiction to entertain the same and proceed further therewith. Johnson v. Johnson, 243 Ark. 656, 421 S.W. 2d 605.

Under the provisions of § 5-713, the Circuit Court of Clay County does have jurisdiction of this appeal. Filing a petition for review in that court was permissible under § 5-713(b)(l) if the parties taking the appeal did in fact reside in that county, even though they might have elected to file it in Pulaski County. The act clearly provides for the transfer made. § 5-713(e). This act provides an alternate appellate procedure and jurisdiction.

We cannot construe the words “full jurisdiction” in § 67-1811 to mean exclusive jurisdiction which is unimpaired by the later act. Nor can we agree that the words “delegation of authority” in the disclaimer by the General Assembly of any intention to repeal ( § 5-701) refer to jurisdiction placed in a court. In any event § 5-713 did not repeal the section permitting appeal to the Pulaski Circuit Court, but simply provided additional tribunals which might hear such an appeal.

We are not impressed by the argument that it was intended that a notice might be filed in another county for an appeal to the Pulaski Circuit Court. We can find no logical or rational reason for the legislature to take such a step. The provision in § 5-713(e) for filing the record in the court where proceedings for review were first commenced and for transfer of proceedings filed in other courts to that court clearly negates this idea.

We do not take Ark. Stat. Ann. § 34-201 (Repl. 1962) to fix jurisdiction rather than venue or to be unaffected by the Administrative Procedure Act, as appellant argues. >.

Other arguments advanced by appellant as to the inconvenience to it and detriment to its orderly and efficient operation are matters to be addressed to the legislative branch rather than to the courts.

The question whether the order is final and subject to appeal is a jurisdictional question which we ourselves raise. H. E. McConnell and Son v. Sadle, 248 Ark. 1182, 455 S.W. 2d 880; Worth Insurance Co. v. Patching, 241 Ark. 620, 410 S.W. 2d 125.

Although appellee has attempted to waive the question of finality of the order, this court does not have jurisdiction and it cannot be conferred by consent. Green v. Thomas, 8 Ark. 56; Hamilton v. Buxton, 5 Ark. 400. See also, 4 C.J.S. 246, Appeal and Error, § 92.

Whether the question is raised by the parties or not, it is not only the power but the duty of a court to determine whether it has jurisdiction of the subject matter. 20 Am. Jur. 2d 452, Courts, § 92; 21 C.J.S. 175, Courts, § 114.

The appeal is dismissed.

      Ark. Stat. Ann. § 5-704 has been repealed by Acts 1969, No. 495, § 2.


author: J. Fred Jones, Justice.

text:
    BRACY DEVELOPMENT, Co., Inc. v. Max MILAM, Director of Department of Finance and Administration for the State of Arkansas
    5-5836
    478 S.W. 2d 765
    Opinion delivered April 3, 1972
    [Rehearing denied May 8, 1972]

      Smith, Williams, Friday, Eldredge & Clark by Byron M. Eisemah, Jr., and James C. Clark, Jr., for appellant.

      Dewey Moore, Jr., for appellee.
   J. Fred Jones, Justice.

This is an appeal by Bracy Development Co., Inc. from an adverse decree of the Pulaski County Chancery Court in a suit by Bracy Development to void a corporate income tax assessment made by Max Milam, Director of Department of Finance and Administration for the State of Arkansas, hereinafter referred to as “director.”

The question presented, under carefully stipulated facts, is whether a net operating loss carryover available to a corporation as a deduction for state income tax purposes under Ark. Stat. Ann. § 84-2016 (1) (Repl. 1960) is available to another corporation with which the first corporation has merged. The question is not answered by state statute or by prior decision of this court.

According to the stipulated facts, Bracy Realty, Inc. and Bracy Development Co., Inc. were separate domestic corporate entities having the same designated principal place of business and the same officers. Both corporations were primarily engaged in the same business of constructing public housing projects. During the period December 1, 1966, through July 31, 1968, Bracy Realty accumulated a net operating loss of $164,506.24. By August 1, 1968, Bracy Realty was near financial collapse and on that date it formed a legal, or statutory, merger with Bracy Development, and Bracy Development emerged as the surviving corporation.

The record is silent as to when the two corporations were formed and as to the ownership of stock in Bracy Realty, but in Bracy Development’s state income tax return for the fiscal year ending October 31, 1968, the $164,-506.24 operating loss accumulated by Bracy Realty was carried over by Bracy Development as a deduction under Ark. Stat. Ann. § 84-2016 (1) (Repl. 1960) which provides as follows:

“In addition to other deductions allowed by this law there shall be allowed as a deduction from gross income a net operating loss carryover under the following rules:
1. The net operating loss as hereinbelow defined for any year ending on or after the passage of this act and for any succeeding taxable year may be carried over to the next succeeding taxable year and annually thereafter for a total period of three (3) years next succeeding the year of such net operating loss, or until such net operating loss has been exhausted or absorbed by the taxable income of any succeeding year, whichever is earlier. The net operating loss deduction must be carried forward in the order named above.
(A) As used herein the term taxable income, or net income shall be deemed to be the net income computed without benefit of the deduction for income taxes, personal exemptions and credit for dependents. The net income of the taxable period to which the net operating loss deduction, as adjusted, is carried, shall be the net income before the deduction of Federal income taxes, personal exemption and credit for dependents, and such income taxes, exemption and credits shall not be used to increase the net operating loss which may be carried to any other taxable period.
2. As used in this subsection the term ‘Net operating loss’ is hereby defined as the excess of allowable deductions over gross income for the taxable year, subject to the following adjustments. * *

The director disallowed the deduction and assessed Bracy Development an additional tax in the amount of $8,075.12. The chancellor found that the operating loss carryover available to Bracy Realty as a deduction against its future years’ income under the statute, was personal to Bracy Realty and expired when Bracy Realty ceased to exist. The chancellor found that Bracy Realty’s operating loss was not available to Bracy Development as a carryover deduction and the chancellor upheld the validity of the assessment. The point on which Bracy Development relies for reversal is designated in its brief as follows:

‘The chancellor erred in his determination that Bracy Development Co., Inc. was not entitled to a deduction as permitted by Ark. Stat. Ann. § 84-2016 (1) for premerger losses of Bracy Realty, Inc.”

The appellant and the appellee both recognize that in Arkansas we do not have a state statutory provision comparable to §§ 381 and 382 of the Federal Internal Revenue Code expressly permitting such carryover by a surviving corporation following a merger. The appellant argues, therefore, that in the absence of such statutory provision we should follow prior federal decisions and regard the resulting or surviving corporation as a union of component corporations into an all-embracing whole which absorbs the rights and privileges, as well as the obligations, of its constituents, and permit the surviving corporation to utilize the unused net loss carryovers of its component corporations.

The appellee argues that in the absence of specific statutory authority to the contrary, we should hold the taxpayer to the strict burden of proving his right to a tax deduction under the same strict rule of construction applicable to tax exemptions, and that we should recognize the deductible net loss carryover as a matter of statutory grace available only to the corporation sustaining the loss. The appellee contends that the net loss carryover that would have been available to Bracy Realty in the case at bar, was personal to Bracy Realty and was not available as a deduction against income earned by Bracy Development following the merger.

Following statutory merger or consolidation of domestic corporations, Ark. Stat. Ann. § 64-705 C, D, E, (Repl. 1966) provides as follows:

“C. Such surviving or new corporation shall have all the rights, privileges, immunities and powers and shall be subject to all the duties and liabilities of a corporation organized under this act [chapters 1-10 of this title].
D. Such surviving or new corporation shall thereupon and thereafter possess all the rights, privileges, immunities and franchises, as well of a public as of a private nature, of each of the merging or consolidating corporations; and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, and all other choses in action, and all and every other interest, of or belonging to or due to each of the corporations so merged or consolidated, shall be taken and deemed to be transferred to and vested in such single corporation without further act or deed; and the title to any real estate, or any interest therein, vested in any of such corporation shall not revert or be in any way impaired by reason of such merger or consolidation.
E. Such surviving or new corporation shall henceforth be responsible and liable for all the liabilities and obligations of each of the corporations so merged or consolidated; and any claim existing or action or proceeding pending by or against any of such corporations may be prosecuted as if such merger or consolidation had not taken place, or such surviving or new corporation may be substituted in its place. Neither the rights of creditors nor any liens upon the property of any such corporation shall be impaired by such merger or consolidation.”

The appellant points to three federal court decisions, Newmarket Mfg. Co. v. United States, 233 F. 2d 493 (1st cir. 1956); Helvering v. Metropolitan Edison Co., 306 U. S. 522 (1939) and Stanton Brewery v. Comm’r of Internal Revenue, 176 F. 2d 573 (2d cir. 1949) in support of its argument. In the Newmarket case an operating loss carry-back was involved and we agree with the court’s observation in that case that, "an issue of this sort peculiarly lends itself to logic-chopping, finespun distinctions, and dubious arguments by analogy.” In Newmarket a Massachusetts corporation engaged in the business of weaving synthetic fibers, formed a wholly owned subsidiary corporation under the laws of Delaware and then merged with the Delaware corporation in order to avoid the application of a Massachusetts franchise tax on goods sold in New York. The court observed in Newmarket that after the merger everything remained the same as before except the corporation had changed its domicile from Massachusetts to Delaware. In holding that the new corporation was entitled to the refund claimed through net operating loss carry-back, the court distinguished the merger in Newmarket from mergers in other cited cases by pointing out that in Newmarket the merger was statutory and did not have the results of allowing Newmarket to obtain a carry-back in refund that otherwise would have been unavailable. The court also observed that the government placed undue emphasis on the term “taxpayer.”

In the 1939 case of Helvering v. Metropolitan Edison Co., supra, a parent corporation formed a number of subsidiary electric power producing corporations and guaranteed the payment of the bonded indebtedness of the subsidiary corporations. The subsidiaries sold all the energy they produced to the parent corporation and after the bonded indebtednesses were paid, they transferred all their assets to the parent corporation. The parent corporation deducted from its gross income the unamortized discount and expense of one of its subsidiaries. The Commissioner of Revenues ruled against the deduction and determined a deficiency. The Board of Tax Appeals sustained the Commissioner and the Circuit Court of Appeals reversed the Board. The question in Helvering was whether or not the transaction between the corporations amounted to a sale or a true merger. On certiorari the United States Supreme Court affirmed the Circuit Court of Appeals and held that the transaction amounted to a statutory merger. The Commissioner in Helvering conceded that if there had been a true merger or consolidation whereby the identity of the corporation issuing the bonds continues in the successor and the latter became liable for the debts of the former by operation of law, the successor could deduct amortization of discount and expense in respect to the bonds issued by its predecessor as well as amortized discount and expense on any of such bonds retired prior to maturity.

The 1949 case of Stanton Brewery v. Comm’r of Internal Revenue, supra, involved the merger of a brewery holding corporation with an operating brewery company and the new corporation took the name of the operating company. The new company deducted the unused excess profit credits of its component corporation. The issues turned upon the nature of the merged corporations after the merger and involved the question of which corporation swallowed up the other. The court in allowing the credit regarded the “resulting corporation” as the union of component corporations into an all-embracing whole which absorbed the rights and privileges, as well as the obligations of its constituents.

The appellee has cited no court decisions directly in point with the question presented here, but the appellee does cite decisions in support of its argument that the burden rests on the taxpayer to show that he clearly qualifies for an exemption under a specific statutory provision granting an exemption. The appellee then argues that deductions and exemptions fall under the same classification, and that Arkansas has no statutory provision granting the deduction claimed by Bracy Development in the case at bar.

Certainly there are a number of state and federal court decisions tending to sustain the appellee’s position. In the 1958 case of Fall River Canning Co. v. Wisconsin Dept. of Taxation, 3 Wis. 2d 632, 89 N.W. 2d 203, five vegetable canning corporations merged and retained the name “Fall River Canning Co.” which was the name of one of the merging corporations. Apparently the Wisconsin statute in 1958 contained the same or similar language as the present § 71.06 pertaining to “Corporation business loss carry forward” which is as follows:

“. . . For the purposes of this section, net business income shall consist of all the income attributable to the operation of a trade or business regularly carried on by the taxpayer, less the deduction of business expenses allowed in s. 7104.” (Our emphasis).

In Fall River, all the corporations had sustained net business losses prior to the merger. Following the merger Fall River reported carry-back deductions on its income tax return which were denied by the Revenue Commissioner; Fall River paid under protest and sued for refund. The trial court sustained the Commissioner and in affirming the trial court, the Supreme Court of Wisconsin refused to follow the federal and other state court decisions and held that under the Wisconsin statute only the taxpayer who sustained the loss is entitled to the deduction. The Wisconsin court held that after statutory merger, even though the surviving corporation succeeds to the liabilities and obligations of the merged corporations to the same extent as though it had incurred them in the first instance, such a circumstance does not constitute the survivor as the corporation incurring the liability. The court held that the taxes Fall River paid under protest were paid as obligations of the merged corporations and held in effect that the carryover provision privilege was a matter purely of legislative grace available only to the corporation that paid the taxes. The Wisconsin court also pointed out that tax statutes are to be strictly construed against the granting of tax deduction privileges and held that it would require a specific and unambiguous provision of the Wisconsin statute to accomplish the results contended for by the appellant.

While Lisbon Shops, Inc. v. Koehler, 353 U.S. 382, was decided by the United States Supreme Court after the 1954 enactment of §§ 381 and 382 of the Internal Revenue Code, the contentions of the parties in that case were so near identical to the contentions in the case at bar, we quote from Koehler as follows:

“In support of its denial of the carry-over, the Government argues that this statutory privilege is not available unless the corporation claiming it is the same taxable entity as that which sustained the loss. In reliance on New Colonial Co. v. Helvering, 292 U.S. 435, and cases following it, the Government argues that separately chartered corporations are not the same taxable entity. Petitioner, on the other hand, relying on Helvering v. Metropolitan Edison Co., 306 U.S. 522, and cases following it, argues that a corporation resulting from a statutory merger is treated as the same taxable entity as its constituents to whose legal attributes it has succeeded by operation of state law. However, we find it unnecessary to discuss this issue since an alternative argument made by the Government is dispositive of this case. The Government contends that the carry-over privilege is not available unless there is a continuity of business enterprise. It argues that the prior year’s loss can be offset against the current year’s income only to the extent that this income is derived from the operation of substantially the same business which produced the loss. Only to that extent is the same 'taxpayer’ involved.”

The court in Koehler concluded that the petitioner was not entitled to a carryover since the income against which the offset was claimed was not produced substantailly by the same business which incurred the losses. The court also pointed out in Koehler that three of the merged units were still encountering losses and that had they not merged, they would not have been entitled themselves to carryovers.

It might reasonably be contended that the alternative argument in Koehler is unavailable in the case at bar because the Arkansas Legislature has enacted no such provision as did the Congress in §§ 381 and 382 of the Internal Revenue Code, making available to surviving corporations following a merger the net loss carryover deductions accumulated by the constituent corporations. But in Good Will Distrib. (Northern), Inc. v. Currie, 251 N.C. 120, 110 S.E. 2d 880, the North Carolina Supreme Court took note that the court in Koehler denied the carryover because the income against which the offset was claimed was not produced by substantially the same businesses which incurred the losses, and on the theory that the plaintiff was not the “same taxable entity” as the corporations which suffered the loss. The North Carolina court then pointed out, that the United States Supreme Court in Koehler did not reject the separate entity theory in express terms, blit chose to place the decision on other grounds. The North Carolina Court then said.

“We do not reject that theory. There are situations in which justice may well require its application. But we adhere to the reasoning in the Koehler case as the basis for decision in the case before us.”

After further pointing out that the Koehler case rested on a lack of “continuity of business enterprise,” the North Carolina court said:

“This expression has a definite and well defined meaning. There is continuity of business enterprise when the income producing business has not been altered, enlarged or materially affected by the merger."

The North Carolina court in Good Will Distrib., supra, in distinguishing that case from Industrial Cotton Mills Co. v. Comm’r of Internal Revenue, 61 F. 2d 291, (4th cir.) [a federal court case arising in North Carolina], pointed out that in the Cotton Mills Co. case a corporation engaged in textile business suffered substantial economic loss and could not pay its creditors. A holding company was organized to avert financial disaster and the creditors were induced to take stock in lieu of their claims. The resulting corporation brought forward the pre-merger economic loss of the constituent manufacturing company as a deduction from post-merger net income. This was allowed by the court and in that case (Cotton Mills) the court said:

“If it had owned any business or any property other than the stock and obligations of the (constituent corporation), there would be reason for denying to the corporation resulting from the merger the right to deduct such loss from its income.”

The North Carolina court in Good Will Distrib. then continued:

“Where there has been a merger of corporations, the resulting corporation may not deduct from its post-merger net income the pre-merger economic loss of its constituent corporations unless there is a ‘continuity of business enterprise’ as above defined.”

The court then concluded in Good Will Distrib. as follows:

“The facts in this case are analogous with those in the Koehler case. Before the merger the three corporations operated in separate territories, though somewhat overlapping, made separate incomes and filed separate income tax returns. By virtue of the merger a larger and more expanded business came into being and included all of the former income producing businesses. There was no continuity of the business of either of the constituent corporations. By reason of the merger a new and more extensive enterprise has emerged. This new enterprise did not suffer the loss and cannot claim a deduction therefor.
As was said in the former opinion of this Court in the instant case, the enactment of loss carry-over legislation by the General Assembly was purely a matter of grace. The provision should not be ‘construed’ to give a ‘windfall’ to a taxpayer who happens to have merged with other corporations.’ Its purpose ‘is not to give a merged taxpayer a tax advantage over others who have not merged.’ Libson Shops, Inc. v. Koehler, supra.

See also Holly Farms Poultry Industries, Inc. v. Clayton, 176 S.E. 2d 367.

Thus it appears, that in the absence of specific statutory provision for the allowance or disallowance of the net operating loss of a constituent corporation as an income tax deduction to the surviving corporation in case of a statutory merger or consolidation, two separate theories have been adopted by the courts in dealing with the problems. One is the “same or separate taxable entity” theory as followed by the Wisconsin court in Fall River Canning Co., supra; and the other is the “continuity of business enterprise” theory as followed by the federal courts in the Newmarket, Helvering and Stanton cases, supra.

We think thtT better procedure, however, is that followed by the North Carolina court where the “separate taxable entity” theory is not rejected in a proper case, but the “continuity of business enterprise” theory is followed in a proper case. We disagree with the chancellor in the case at bar and hold that the “continuity of business enterprise” theory should apply under the facts of this case.

Perhaps we could have reached our decision with less difficulty if more of the facts had been stipulated, so we make clear that we do not go so far as to say that in the absence of further statutory clarification, the net business loss suffered by any corporation, may be carried over as a state income tax deduction by any other corporation with which the first corporation may merge or consolidate. But, under the stipulated facts in the case at bar, Bracy Realty and Bracy Development have all the earmarks of “family” corporations with common stock ownerships prior to the merger. The purpose of the merger, and as for that matter, the purpose of the separate entities, are not clear from the record before us. It is clear, however, that Bracy Realty lost money prior to the merger and Bracy Development made money after the merger, and that both corporations were engaged in the same type, if not identical, business. It is clear that the deduction claimed by Bracy Development would have been available to Bracy Realty had there been no merger or if Bracy Development had merged with Bracy Realty rather than the other way around. Under the stipulated facts it would appear, therefore, that following the statutory merger the business of Bracy Development was not altered, enlarged or materially affected by the merger but that it constituted, or at least included a continuation, of the business enterprise of Bracy Realty, but on a much sounder financial basis, and almost to the exclusion of separate entities.

The decree is reversed.

Harris, C.J., and George Rose Smith., J., dissent.


author: Conley Byrd, Justice.

text:
    F. J. GRIFFITH v. Edgar ROZELL et al
    5-5814
    478 S.W. 2d 762
    Opinion delivered April 3, 1972
    [Rehearing denied May 8, 1972]

      Dobbs, Pryer ér Hubbard, for appellant.

      Carl Creekmore, for appellee.
   Conley Byrd, Justice.

This litigation arises out of a three car collision on Highway 59 near its intersection with Interstate 40. Appellant F. J. Griffith was traveling in a southerly direction, followed by appellee Jimmy Rozell driving an automobile owned by his uncle Edgar Rozell. Griffith attempted a left turn into a Gulf service station. While part of his car was in the north bound lane Griffith was struck by a vehicle driven by appellee Carl Richmond, and owned by appellee and cross-appellant Randall Ford, Inc. After striking Griffith, the Richmond vehicle then collided in the south bound lane with the Rozell vehicle. Jimmy Rozell, by his next friend Edgar Rozell, and Edgar Rozell ihdividually brought suit against Griffith. Griffith filed a third party complaint against Richmond and Randall Ford, Inc. The attorney representing Rozell, notwithstanding the apparent conflict, filed an answer and cross-complaint on behalf of Carl Richmond against Griffith. Randall Ford, by other counsel, filed an answer and cross-complaint. Subsequently Randall Ford’s cross-complaint was dismissed with prejudice. Upon trial the jury, in answer to interrogatories, found that Rozell was not negligent, that Griffith was not negligent and that Carl Richmond was negligent and at the time was acting as an agent within the scope of his employment with Randall Ford, Inc. No interrogatories on damages were submitted to the jury. Thereafter, the Rozells, represented by other counsel, filed a motion to set aside the verdict on the ground that the verdict was contrary to an overwhelming preponderance of the evidence. Richmond also filed a motion for a new trial contending that the court erred in instructing and directing his attorney not to mention a settlement between Griffith and Randall Ford, Inc., and also because the verdict was contrary to a preponderance of the evidence. Thereafter, the trial court entered the following order:

“Now on this 23 day of April 1971 comes on for consideration the Motions previously filed by the plaintiff, Edgar Rozell and by the third party defendant, Carl Richmond, asking that this Court set aside the verdict previously received herein and grant to the respective parties a new trial, and from the pleadings, the file, the briefs heretofore filled by the parties hereto, the arguments of counsel and other matters and things the Court has prepared and filed its opinion relative thereto in the form of a letter to the respective counsel, and in accordance therewith:
“IT IS, THEREFORE, Considered and Ordered that the Motion to set Aside Verdict filed herein by the plaintiff, Edgar Rozell, be and the same is hereby, granted, and the Motion to Set Aside Verdict filed by the third party defendant, Carl Richmond, be, and the same is hereby, granted and a new trial is hereby granted.
“IT IS, FURTHER, Considered and Ordered that any of the parties herein shall have the right to file any additional pleadings herein if any of said parties should so desire to do.”

For reversal of the trial court’s order setting aside the jury verdict, Griffith contends that the trial court abused its discretion in granting a new trial against him in order to permit the plaintiffs to seek recovery against a third party defendant. Randall Ford, Inc., also appeals and contends that the trial court abused its discretion in granting a new trial and in the alternative that the evidence was not sufficient to permit a finding that Carl Richmond was acting as an agent of Randall Ford, Inc., in the scope of his employment at the time.

This appeal probably results from some rather inconclusive statements of the trial court in his letter opinion to counsel stating his reasons for granting the motions to set aside the verdict. Appellants point to that portion of the opinion as follows:

“. . . It is recognized that it is sometimes necessary that in order to see that justice is done to one party some injustice might necessarily be done to another party. . .”.

The appellees on the other hand point to the following portions of the opinion:

“. . . It would then only seem to be a matter of a court in its best judgment, doing that which is fair, reasonable, equitable and just under the circumstances and facts of the particular case before the court within the bounds of reasonable use of the court’s discretion. . .”.
. . . On the other hand however the court does have the ultimate responsibility to endeavor to see that justice is done in any lawsuit which comes before the court.”
“In view therefore of the applicable law, the pleadings filed herein, the testimony offered at the trial of this case, the interrogatories submitted and answered by the jury it is the Court’s opinion that in order that justice be more properly done the verdict of the jury, as reflected by the answers to the interrogatories submitted by the court, should be set aside and a new trial granted to both the plaintiff and the third party defendant, Carl Richmond. In view of this action by Court any of the parties to this law suit shall be granted the right to file any additional pleadings they might so desire herein.”

That the trial court’s opinion leaves much to be desired in the way of clarity is demonstrated not only from the positions taken by the parties themselves but also by the difference of the opinions on this Court. However, when it is construed in connection with the order actually entered, we feel that it must be interpreted as holding that the jurors’ answers to the interrogatories are contrary to a preponderance of the evidence. That the trial court has discretion to act where he considers the verdict to be contrary to preponderance of the evidence is supported by many decisions of this court. See Koonce v. Owens, 236 Ark. 379, 366 S.W. 2d 196 (1963), Worth James Construction Co. v. Fulk, 241 Ark. 444, 409 S.W. 2d 320 (1968) and Bowman v. Gabel, 243 Ark. 728, 421 S.W. 2d 898 (1967).

The record shows that Jimmy Rozell, age 18, was traveling south behind Griffith, age 21. Some 75 to 100 yards before Griffith made his turn, he gave a left turn signal. In making the turn Griffith made it so slowly that Rozell practically came to a stop. Griffith testified that he saw the Richmond vehicle when he began making his turn and at that time the Richmond vehicle was some 900 or more feet south of him. On cross-examination Griffith admits that some 5Vi or 6 feet of his vehicle was still on the highway when the tail end of the Richmond vehicle struck the right side of Griffith’s vehicle. Richmond testified that he did not see the turning Griffith vehicle until he (Richmond) was between the two entrances to the Gulf service station and that at that time the Griffith vehicle was at an angle. He testified that Griffith hit him and knocked him across the lane into the Rozell vehicle. Billy Howell, a passenger in the Griffith vehicle, testified that they had already given thier left turn signal and started their turn when he first saw the Richmond vehicle. He estimates that the Richmond vehicle was 400 yards or something like that away from them at that time. There was considerable difference between the witnesses as to the speed of the Richmond vehicle. Admittedly, however, the Richmond vehicle laid down approximately 120 feet of skid marks.

Gary Wilkins, an attendant at the service station, testified about the speed of the Richmond vehicle and that he laid down 126 feet of skid marks. He too admits that Griffith’s car was sticking out into the north bound lane some 514 or 6 feet at the time of the collision. Tommy Martin, investigating officer at the scene of the collision, testified that he stepped off some 40 or 50 steps of skid marks which he estimated to be between 120 and 150 feet.

If the trial court had taken the testimony of Griffith and his witnesses at face value, it would have shown that the Richmond vehicle traveled 900 to 1200 feet during the time the Griffith vehicle traveled only 10 to 12 feet across the north bound lane — indicating a speed in excess of 300 miles per hour. Thus we cannot say that the trial court abused its discretion.

We do not reach Randall Ford’s, Inc., alternative argument on appeal because it does not abstract the objections it made. Upon our search of the record we have been unable to find where it had at any time asked the trial court to direct a verdict in its favor. Under the record here there is no verdict against it, no judgment against it and no showing that it ever requested the trial court to rule upon the issue. We will not reach an issue for the first time on appeal. Fine v. City of Van Buren, 237 Ark. 29, 371 S.W. 2d 132 (1963).

Affirmed.


author: Frank Holt, Justice.

text:
    Larry Oliver SHIPMAN v. STATE of Arkansas
    5695
    478 S.W. 2d 421
    Opinion delivered April 3, 1972

      Louis W. Rosteck, for appellant.

      Ray Thornton, Atty. Gen., by Milton Lueken, Asst. Atty. Gen., for appellee.
   Frank Holt, Justice.

By felony information the appellant was charged with first degree murder. A jury found him guilty and assessed his punishment at life imprisonment in the state pentientiary. From that judgment appellant, through his court-appointed trial counsel, brings this appeal. For reversal we first consider appellant’s contention that “the evidence is insufficient to sustain the conviction of first degree murder.”

The decedent’s oldest child, a nine-year-old daughter, was a witness to the alleged crime. She testified that the appellant, decedent’s brother-in-law, came to the apartment where she and her mother were staying that night with a relative. After being there a few minutes, the appellant went into the bathroom and four or five minutes later reappeared with a brick which was used as a doorstop. Without any warning or provocation the appellant struck the decedent on the back of the head three or four times while the decedent had her back turned attending one of her five small children. Appellant then dragged the mother outside and put her in his car and left. The child’s screams attracted the landlord in a nearby apartment and he telephoned the police. The landlord testified that appellant had come to him about an hour earlier in the evening and complained that someone was peeping in the apartment where decedent was staying. This witness accompanied the police to the apartment and described the front room as being spattered with blood. The autopsy report revealed that decedent died from head wounds inflicted by some type of object.

The alleged crime occurred about 9 p.m. and appellant was apprehended a few hours after midnight. During the day appellant made two oral confessions to law enforcement officers before discovery of the body late in the afternoon. He then signed a written confession. In each of these statements the appellant admitted that he had beaten his sister-in-law and detailed how he had disposed of her body. The decedent’s body was finally found in the general area indicated by appellant. Appellant told the officers that he struck his sister-in-law with a brick following an argument about her treatment of her children; having his brother “locked up” and not signing the necessary papers to have him released from jail; and also that she made derogatory remarks about appellant’s wife. Appellant stated: “At this time I hit her with a brick that I picked up next to the front door that was being used for a doorstop. This was during a scuffle while we were fighting.” After striking her he admitted placing decedent in his car for the purpose of taking her to the hospital and after discovering she was dead, he hid her body in a wooded area and covered it with leaves. According to the state’s evidence, appellant spoke coherently and he assisted in locating the body.

Appellant did not testify. He interposed a plea of insanity. Four lay witnesses testified, in effect, that from their long acquaintance with the appellant they considered him to be mentally deficient and that he suffered from loss of memory. One witness described him as being “like a little child” with memory lapses. The trial court fully instructed the jury on all degrees of homicide, as well as the issue of insanity.

The thrust of appellant’s argument is that the evidence is insufficient to establish the required elements of specific intent, premeditation, and deliberation. In Figeroa v. State, 244 Ark. 457, 425 S.W. 2d 516 (1968) we quoted with approval that: “While the intent to kill cannot be implied as a matter of law, it may be inferred from the facts and circumstances of the assault . . . and all other facts and circumstances tending to reveal defendant’s state of mind.” Further, it is an oft stated rule of law that premeditation and deliberation in the act of murder can be formulated in the assailant’s mind upon an instant. “It does not have to exist in the mind an appreciable length of time. All that is necessary is for it to exist when the assailant commits the act.” Jackson v. State, 133 Ark. 321, 202 S.W. 683 (1918). On appeal we must, of course, view the evidence in that light which is most favorable to the appellee and affirm the finding of a jury and its verdict where there is any substantial evidence to support it. Stanley v. State, 248 Ark. 787, 454 S.W. 2d 72 (1970). Certainly in the case at bar we cannot say there is no substantial evidence to support the jury’s verdict of guilty of first degree murder.

Appellant also contends for reversal that the court erred in admitting certain photographs into evidence which showed the position of decedent’s body when found by the investigating officers. We find no merit in this contention. Appellant argues that the photographs served no purpose except to inflame the minds of the jurors to the prejudice of appellant. It must be remembered that the burden was upon the state to prove all the elements of first degree murder beyond a reasonable doubt. These photographs merely showed the position of decedent’s fully-clothed body in a wooded area, partially covered by leaves. These pictures were of a corroborating nature as to appellant’s admissions and the officers’ testimony. Further, it is well established that the trial court is accorded wide discretion in admitting photographs into evidence. Stanley v. State, supra; Harris v. State, 239 Ark. 771, 394 S.W. 2d 135 (1965). We find no abuse of discretion in the case at bar.

Appellant also asserts for reversal that the court erred in admitting a purported written confession signed by him. After the state had rested its case, the appellant presented four witnesses who testified that appellant suffered from lapses of memory or inability to recall events. The court then permitted the state to introduce a signed written confession by the appellant. This statement, found to be voluntarily made following a Denno hearing in chambers, recited in detail the appellant’s commission of the alleged offense and the disposal of the victim’s body following the alleged crime. The court then instructed the jury that it was perrAitted in evidence as a rebuttal to the evidence adduced by appellant that he was incapable of recalling or remembering events. Our trial courts are granted wide discretionary powers in determining the nature and extent of rebuttal testimony. City of Fayetteville v. Stone, 194 Ark. 218, 106 S.W. 2d 158 (1937); Harger v. Harger, 144 Ark. 375, 222 S.W. 736 (1920); Chunn v. London & Lancashire Fire Ins. Co., 124 Ark. 327, 187 S.W. 307 (1916). In the case at bar we are of the view there was no abuse of discretion by the trial court in admitting appellant’s statement, accompanied by the cautionary instruction, as rebuttal evidence. Furthermore, this signed confession, given after discovery of the victim’s body, appears in conformity with the two oral statements previously given to the officers and admitted into evidence during presentation of the state’s case in chief. In our view the undisputed evidence by the state, in a Denno hearing, established that appellant’s signed statement was freely and voluntarily made and followed a recital of the Miranda warning with a full explanation of his rights.

After reviewing the trial proceedings for any errors prejudicial to the rights of appellant, as we are required to do by Act 333 of 1971 [Ark. Stat. Ann. § 43-2725 (Supp. 1971)], and finding none, the judgment is affirmed.

Affirmed.


author: Carleton Harris, Chief Justice.

text:
    William F. LAMAN, MAYOR et al v. Roland SMITH
    5-5781
    478 S.W. 2d 741
    Opinion delivered April 10, 1972

      John T. Harmon, for appellant.
    No brief for appellee.
   Carleton Harris, Chief Justice.

On December 14, 1970, the City Council of North Little Rock adopted ordinance 3862, such ordinance appropriating $18,600 per year to defray expenses of public relations activities of the mayor and city clerk of that city; $15,000 was appropriated for the use of the mayor and $3,600 for the use of the city clerk, the ordinance providing that the council had determined such amounts to be reasonable and justifiable, and directing the officials named to draw warrants upon the city treasury “in an amount not to exceed one-twelfth of the aforesaid appropriation allocated to each official”. Roland Smith, a resident taxpayer of the city, instituted suit in the Chancery Court of Pulaski County wherein he sought a declaratory judgment that the ordinance violated Article 19, §23 of the Arkansas Constitution, and was thus invalid. After the filing of an answer, a stipulation was entered into between the parties that Smith is a taxpayer of the City of North Little Rock and qualified to bring the action; that the certified copy of the ordinance attached to the complaint is true and correct; and that the present salaries as authorized to the mayor and city clerk are in the sum of $5,000 each per annum. On trial, the court held that the ordinance was null and void and the aforesaid officers and the City of North Little Rock were enjoined from disbursing city funds pursuant to the ordinance. From the decree so entered, appellants bring this appeal.

The court found that ordinance 3862 violated Article 19, §23, of the Arkansas Constitution, which reads as follows:

“No officer of this State, nor any county, city or town, shall receive, directly or indirectly, for salary, fees and perquisites more than five thousand dollars net profits per annum in par funds, and any and all sums in excess of this amount shall be paid into the State, county, city or town treasury as shall hereafter be directed by appropriate legislation.”

Appellants contend that this constitutional provision is not self-executing and thus requires enabling legislation, and that such legislation was never passed, leaving the provision inoperative. In support of this argument, we are cited to the case of Griffin v. Rhoton, 85 Ark. 89, 197 S.W. 2d 380 (1907). The case, which involved the question of the fees and emoluments of the office of prosecuting attorney, is confusing, but a careful reading of same indicates that the court, in saying that enabling legislation was required, was only referring to the effect of the constitutional provision upon the office of prosecuting attorney, and not to other offices, including those of cities or towns. The court recognized that the General Assembly had, in 1875, passed legislation, Act 47 of 1875, in aid of the constitutional provision, carrying out the requirements as to numerous officers, but not including the prosecuting attorney’s office.. This is made clear by the case of White v. Williams. 187 Ark. 113, 59 S.W. 2d 23 (1933), where this court, through Justice Butler, stated flatly that Act 47 was enabling legislation for Article 19, §23 of the Constitution, and discussed a number of the provisions, hereafter mentioned. So, we think it is clear that enabling legislation was passed; and we so hold.

Pertinent portions of § 5 of Act 47, i.e., those relating to the implementation of the constitutional requirements, have never been changed, and Act 47 of 1875 appears in Ark. Stat. Ann. §12-1801 (Repl. 1968) through §12-1811. Section 5 appears as §12-1805 through §12-1807. Section 12-1805 requires an annual report of county, city, and township officers who come within the purview of the Act, and §12-1806 provides for the review of reports. Section 12-1807 reads as follows:

“If the total amount of the receipts of the office shall exceed in par funds, or their equivalent of value the sum of five thousand dollars ($5,000), then the officer shall further report the amount expended by him in the conduct of the business of his office for said year, and voucher for all such expenditures shall be produced by the officer reporting, and examined by such Judge, Mayor or other chief officer, and, if such expenditures be approved, the amount thereof shall be deducted from the gross amount or receipts as estimated as hereinbefore prescribed by the reviewing officer, and in all cases where the balance remaining in the hands of any officer shall exceed the sum of five thousand dollars [$5,000], or its equivalent, the excess shall at once be paid into the treasury of the county, city, town or village to which the said office may be appurtenant.”

There have of course been changes in the law since 1875 which preclude a literal compliance with all provisions of the sections mentioned; for instance, at the time of the passage of Act 47, numerous governmental officers, including mayors, received part, or all, of their compensation from fees which were paid to them; in other words, the money was first paid to the officer, who, after making the deductions authorized by §12-1807 (Act 47 of 1875), including his salary, turned the balance over to the county or city treasury, depending on the office held. Today, most mayors are paid their salaries from tax funds taken in by the city and few fees are received by the mayor himself. We think §12-1807 makes clear that it was the intention of the legislature, in passing Act 47, in implementing the provisions of Article 19, §23, to permit the reimbursement of necessary expenditures of the office involved in addition to the $5,000 salary. The City Council of North Little Rock has declared public relations expenses of the mayor and city clerk to be proper expenses for the welfare of the city and we think such expenditures, under §12-1807, to be authorized in addition to the maximum salary of $5,000.

The court erred in declaring the ordinance unconstitutional but this is not to say that one-twelfth of $15,-000 can be paid to the mayor, and one-twelfth of $3,600 paid to the city clerk each month. The ordinance does not so provide; rather, it provides that these officers “are hereby authorized and directed to draw a warrant or warrants on the city treasury in an amount not to exceed [our emphasis] one-twelfth of the aforesaid appropriation allocated to each official”. If the ordinance authorized the flat sum payment of $15,000 for the mayor and $3,-600 for the city clerk, or authorized one-twelfth of that set amount each month, the ordinance would be unconstitutional as being in conflict with Article 19, §23, for in such event the payments would constitute emoluments in addition to the salary. The language of the ordinance itself, by using the italicized words, recognizes that the public relations expenses may not be the same each month, and that the full amount appropriated for the year may not be used. In other words, these officials are entitled to reimbursement for public relations expenditures made up to the maximum amount of the appropriation. This is, of course, entirely different from making a set allowance of funds to a public officer to be used at will.

This is in line with our decision in Berry v. Gordon, 237 Ark. 547, 376 S.W. 2d 279, which involved public relations expenses for certain state officers. There, different constitutional provisions were involved but the principle and law relative to each is the same. In that case, we were construing Act 399 of 1961, which provided public relations expenses for seven state officers, in the amount of $1,800 each per annum. Section 3 of that Act provided as follows:

“On the first day of each calendar month in each of the foregoing fiscal years, the Auditor of State shall issue a warrant drawn in favor of each of the officials named in Section 2 hereof in the amount of one-twelfth of the appropriation allocated to each such official, and the State Treasurer is hereby authorized and directed to pay said warrants from funds herein appropriated.”

It will be noted that that section is different from the city ordinance here under discussion in that §3 of Act 399 provided that each of the officials named should draw one-twelfth of the $1,800 each month, while here, the ordinance provides that the officer may draw not to exceed one-twelfth of the total amount appropriated. There is a vast difference, and in Berry v. Gordon supra, we struck §3 from Act 399 as a violation of our Constitution. This court said:

“Any fair construction of Act 399 of the Legislative Acts of 1961 leads us to the conclusion that the Legislature intended to afford reimbursement of public relations expenditures incurred by certain state officials, as provided in Section 1 of the Act. Section 3 would authorize monthly payments of public relations expenditures by the state officers whether or not they had incurred such expenditures. Therefore, we conclude that Section 3 of Act 399 must be stricken. Otherwise, such reimbursement would violate our Constitution. In view of the expressed intent of the Legislature to provide these state officials with limited public relations expenditures, the officials are not entitled to reimbursement of expenditures not expended. That Section, when severed, does not affect the intent of the Legislature.”

In accordance with what has been said, we hold the ordinance valid, reiterating however that the officers involved in this litigation are not entitled to one-twelfth each month of the total amount appropriated for public relations expenses, but are entitled only to reimbursement up to that amount for public relations expenses actually incurred.

It is so ordered.

       Smith also testified that ho was a resident of North Little Rock, was purchasing property, and that he was a registered voter.

       See also Williams v. Buchanan, 86 Ark. 259, at 276, 110 S.W. 1024, at 1029, decided by the identical court members who decided Griffin.


text:
    BORDEN, INC. v. William Clay SMITH et al
    5-5846
    478 S.W. 2d 744
    Opinion delivered April 10, 1972

      Eichenbaum, Scott ¿r Miller and Walker, Campbell ir McCorkindale, for appellant.

      Fitton, Meadows ir Adams, for appellees.
   Carleton Harris, Chief Justice.

William Clay Smith, appellee herein, executed contracts of employment with appellant’s predecessor organization and with appellant, Borden, Inc., the last such contract being entered into on January 25, 1969. This last agreement restricted Smith, for the period of one year, from competing with appellant, who sold frozen and non-frozen foods, within the latter’s trade area, described as being sixty-three counties in Arkansas, two counties in both Missouri and Oklahoma, and one county in Texas. After Smith left appellant’s employment, and went to work for appellee company, Borden instituted suit to enforce the agreement. On trial, the court held that “there were no trade secrets involved and that the territory embraced in the restriction is unreasonably large and would unreasonably interfere with appellee’s right and necessity to earn a living; that the restrictive clause of the contract in this instance constitutes an unreasonable restraint of trade and as such in invalid and unenforceable”. From the decree dismissing such complaint for want of equity, appellant brings this appeal. It is asserted that the court erred in finding the contract to be invalid and unenforceable.

The proof reflects that the company has two sales districts, consisting of a nor then district and a southern district, with eleven salesmen in each of the two districts and a sales supervisor for each of the districts. The salesmen are employed entirely on a commission basis, being paid no salary except during a training period of a few weeks. Sam Vogel General. Manager, said that Smith, and other salesmen in the northern district, would receive a route schedule for their area, but that they were also familiar with the territory schedule for the southern district because both schedules were posted in sales meetings which were held every three weeks. The witness stated that any salesman would have knowledge of the entire company operation as to routes, workdays, and delivery days. Vogel said that if a competitor knew the days on which Borden’s sales people would be working, it would be easy to work ahead of those salesmen and obtain orders. He stated that the schedules even reached an hourly basis, and if a competitor learned that one of appellant’s salesmen would call on a certain customer at 11:00 o’clock, such competitor would be in a position to call on the prospect at 10:00 o’clock and thus have first opportunity to obtain the business of that customer. “Well, the same thing is true with the truck deliveries, if our trucks are scheduled to deliver on Monday from working on a Friday or a Sunday evening by phone, it would be logical that a competitor company working on Thursday and delivering on Friday precludes us from getting the just amount of business that we desire from that particular area.” Vogel said that the company changed these schedules only about once a year, changes being costly because 22 salesmen’s routes had to be coordinated as well as 14 trucks. The witness testified that there was a great advantage in knowing the schedule of compe- ' titors, but that such information was difficult to obtain.

“Well, it would be very difficult. I have been in the business twenty-five (25) years now and still am curious about how most all of my competitors operate. I have in the past had my district managers follow competitors’ trucks to see what they were selling and what they were delivering and after maybe two or three hours over the territory they would lose the driver and would actually waste a day then trying to track them down, and really that is not a satisfactory method. There really is no way in the world I can obtain the knowledge that I need, other than through hiring a competitor’s salesman.”

. Smith voluntarily quit his employment when his territory was changed in April, 1971, and between two and three weeks later was employed by Lady Baltimore Foods, Inc., a competitor of Borden. Of course, the contention is that Lady Baltimore has taken advantage of the knowledge given by Smith while an employee of appellant, to enhance its competitive position.

Appellant insists that Smith had access, through the aforementioned sales meetings and schedules, to “trade secrets”, and that the contract entered into was valid as a protection of those trade secrets. We cannot agree that the information mentioned constitutes “trade secrets”. Actually, only appellant’s manner of doing business was learned by appellee Smith, which is very similar to the situation in Miller v. Fairfield Bay, 247 Ark. 565, 446 S. W. 2d 600, where it was contended that a former employee, who subsequently went to work for a competitor, had learned the advertising schedule and the routes of incoming customers, and thus should have a restrictive contract enforced against him. We did not agree with the contention and pointed out that the case was entirely different from Orkin Exterminating Co. v. Murrell, 212 Ark. 449, 206 S.W. 2d, 185, that case being relied upon in Miller as well as in the case before us. This court said, referring to Orkin:

“In that case, trade secrets were involved, the company maintaining a research department, wherein the nature and habits of insects and rodents were ascertained, and chemicals and compounds were prepared to be used in the destruction of these pests without danger to human beings or damage to furniture or woodwork. Chemicals were mixed and formula reported. Those circumstances were, of course, vastly different from the circumstances in the case before us.”

This language is entirely apropos to the instant litigation. It is true that business information was divulged at these sales meetings which would not be passed out as general information to the public, but this is probably true in every type of business, vocation, or profession, and certainly, anyone engaged in selling frozen or non-frozen foods would know the institutions that use such products. Nor are we impressed by the argument that Lady Baltimore’s salesmen could learn the hours that customers were called upon by salesmen of appellant company by virtue of the schedules heretofore mentioned. It would appear that this information could be obtained without having access to confidential records. Actually, the principal injury in this type of case comes from the good will that a particular salesman builds with customers, those customers continuing to give him orders, even though he is employed by another company, i.e., they purchase from the salesman rather than from the company. So — we hold that no trade secrets are involved in this litigation, and the agreement must be passed upon in that light.

As previously stated, the contract prohibits Smith from competing with Borden within appellant’s trade area, which the court found to be fifty-nine counties in this state, and two counties in each of the states of Texas, Oklahoma, and Missouri. The present territory of Smith only includes three counties in this state, two of which he worked as an employee of appellant. Yet he is barred, under the agreement, from working in nearly four-fifths of the state. Without any hesitation whatsoever, we find that this restricted area is much too broad for this type of business and we accordingly hold the restraint void as an unreasonable restraint on trade. This holding makes it unnecessary to discuss the time limitation in the contract.

Appellant recognizes that we have held that the contract must be valid as written, and we will not apportion or enforce such a contract to the extent that we might consider it reasonable. See McLeod v. Meyer, 237 Ark. 173, 372 S.W. 2d 220. There, we stated that we would not vary the terras of a written agreement between the parties; to do so would mean that we were making a new contract and we have consistently held that this will not be done. Appellant urges that we reconsider this holding in line with the recent Iowa case of Ehlers v. Iowa Warehouse Company, 188 NW 2d 368, and the New Jersey case of Solari Industries Inc. v. Malady, 264 A 2d 53, but we decline to do so.

Affirmed.

      The court’s decree found that the trade territory was fifty-nine counties in Arkansas, and two counties in each of the states of Texas, Oklahoma, and Missouri. This enumeration appears correct under a 1963 contract, but does not coincide with the provisions of the last contract. Sam Vogel, President and General Manager, and founder of Vogel’s Inc., (owned by Bordens, Inc., the sole stockholder) listed a territory different in some respects from either. He testified that appellant’s territory was “All of Arkansas except eleven counties in Eastern Arkansas***, three or four counties in Missouri***two counties in Oklahoma, and***one county in Texas”. These small differences in area however are not significant.

      Appellee company was not completely in competition with appellant, since appellee only sells to institutions while appellant sells to both institutions and retailers.

      David Edward Kampschroeder, of Springfield, Missouri, Branch Manager of the Springfield division of Lady Baltimore, testified that even if Smith had delivered schedules and information to the company, it would have been of no benefit since his Gompany did not maintain route schedules and delivery schedules in the manner testified to by Vogel. He insisted that he hired William Clay Smith and not whatever records he might have.

         At the time appellee left Borden, he was working in Boone, Searcy, Newton, and Marion counties in Arkansas, and Taney county in Missouri.


author: George Rose Smith, Justice.

text:
    Walter McDONALD et al v. Jerry W. HICKMAN
    5-5861
    478 S.W. 2d 753
    Opinion delivered April 10, 1972

      Daggett & Daggett and John D. Eldridge, for appellants.

      Knox Kinney, for appellee.
   George Rose Smith, Justice.

This is an action for personal injuries sustained by the appellee, Jerry W. Hickman, when he fell into an unguarded open stairwell in a house that was being constructed for one of the appellants, Walter McDonald (or MacDonald). The other appellant, also a defendant below, is Gerald Rooks, who was McDonald’s chief carpenter. The jury returned a verdict for the plaintiff, fixing his tptal damages at $17,500 and apportioning the negligence in the ratio of 25% to the plaintiff and 75% to the defendants. For reversal the appellants contend that they were entitled to a directed verdict, on the ground that Hickman’s negligence exceeded their negligence as a matter of law, and, alternatively, that the court erred in not submitting to the jury their asserted defense of assumption or risk. We find no merit in either contention.

First: Comparative negligence. On the day of the accident Hickman, an employee of a rural electric co-operative company, had gone to the unfinished house to determine what kind of circuit breakers would be needed. Rooks escorted Hickman and another co-op employee into the house. While Hickman was standing in a somewhat dark windowless hall, examining the electrical panel, he stepped to his left and fell eight or nine feet to the concrete basement. He actually fell through a four-by-eighteen-foot opening in the upper floor, where a staircase was to be installed later. The opening was. unprotected. Hickman testified that Rooks later said that he should have told Hickman about the hole being there.

The court was right in refusing to direct a verdict for the defendants. The jury could well have concluded that the open hole in the dimly lighted hallway was in the nature of a concealed hazard about which Hickman should have been warned. It is not our province to compare the negligence of the litigants when fair-minded men might reach different conclusions in the matter. Willingham v. Southern Rendering Co., 239 Ark. 858, 394 S.W. 2d 726 (1965); Wood v. Combs, 237 Ark. 738, 375 S.W. 2d 800 (1964). Here we are firmly of the opinion that the trial judge properly left to the jury the apportionment of the total negligence in the case.

Secondly: Assumption of risk. Hickman testified that he was aware that there was danger in any construction job. Although he had not been in an unfinished house that had a basement, he had seen holes in floors, as for floor furnaces. On the day of the accident he probably had a flashlight in his truck, but he did not go back to get it when he found the hallway to be poorly lighted. Upon the foregoing proof the defendants requested the court to submit to the jury the issue of assumption or risk.

That request was properly refused. Assumption of risk, a harsh doctrine, depends upon actual knowledge and appreciation of the danger. As Prosser puts it: “ ‘Knowledge of the risk is the watchword of assumption of risk’ Under ordinary circumstances the plaintiff will not be taken to assume any risk of either activities or conditions of which he is ignorant. Furthermore, he must not only know of the facts which create the danger, but he must comprehend and appreciate the danger itself.” Prosser on Torts, § 68 (4th ed., 1971). See also the Restatement of Torts (2d), § 496 D (1965), where it is stated: “The standard to be applied is a subjective one, of what the particular plaintiff in fact sees, knows, understands and appreciates. In this it differs from the objective standard which is applied to contributory negligence.”

In the case at bar there is no proof that Hickman actually knew that he was standing near a dangerous opening in the unfinished floor. Absent such knowledge, his conduct was to be tested by the standard of negligence rather than by the rule of assumed risk. Inasmuch as the court properly submitted to the jury the question of comparative negligence, the appellants have no basis for complaint.

Affirmed.


author: Lyle Brown, Justice.

text:
    DERMOTT TRACTOR Co. v. Preston SIMMONS et al
    5-5855
    478 S.W. 2d 747
    Opinion delivered April 10, 1972

      John F. Gibson, for appellant.
    G. B. (“Bing”) Colvin, III, for appellees.
   Lyle Brown, Justice.

Appellant Dermott Tractor Company was awarded a personal judgment against one of the nine appellees, Preston Simmons; however, the chancellor denied appellant’s prayer for foreclosure against Preston Simmon’s alleged undivided interest in heir property. Preston’s eight brothers and sisters were made parties because it was alleged that they also had an interest in the land. Appellant here contends that the finding of the chancellor that Preston owned no interest in the land was against the preponderance of the evidence.

In December 1967 Julia Mae Simmons died testate, survived by nine children. She willed a ten-acre tract of land to three of the nine children and bequeathed to Preston and the others one dollar each. In April 1968, Preston executed a note and mortgage to Dermott Tractor Company and referred to “The undivided interest of Preston Simmons, an heir at law of Julia Simmons, deceased,” and then described the ten-acre tract.

In October 1970 Dermott filed its suit in foreclosure. It alleged that the will had been nullified by an agreement of all the Simmons heirs to divide the land as if there had been no will. A few months thereafter the will was filed for probate.

In support of its contention of renunciation of the will, Dermott offered four facts from which an inference could be drawn that there was a renunciation:

(1) The mortgage — Preston Simmons to Dermott— was dated four months after the death of the mother and purported to mortgage an undivided interest in the land at issue;

(2) The mortgage was executed at a time when apparent record title to the land was in the heirs (this is because the will had not been filed for probate);

(3) A house burned on a lot that was willed to a grandchild. All the heirs signed a release at the request of the insurance company; and,

(4) One of the heirs, Julia Mae Simmons Webb, signed an affidavit for the collection of a small estate (the fire insurance) and in that instrument it stated that there was no will. That was also done at the request of the insurance company.

Three of the Simmons heirs testified categorically that there was no agreement renouncing the will. One of them explained that they did not go to a lawyer and did not know the will had to be processed through court proceedings. In other words it was thought that the will carried the strength of a deed and automatically transferred the property.

Preston Simmons gave this explanation of the signing of the mortgage. In 1966 Dermott obtained a judgment against him. As a result of that judgment being on record the Farmers Home Administration would not finance Preston in making his crop. The refusal occurred in 1968. He was told by Dermott that if he would sign a new note secured by his interest in his mother’s land then it would satisfy the judgment. He executed those instruments and the 1966 judgment was satisfied. Consequently he secured a crop loan from FHA. Preston Simmons said he was renting the land from Julia Mae Simmons Webb; that his three-fourths of the crop is paid to FHA and the other fourth goes to Mrs. Webb, representative of the estate, to pay the rent on the land.

Lee Hester Denzy, the youngest of the Simmons children, testified. She had some contact with the insurance agent when the house burned. She said the agent inquired about a will and she obtained the will from her sister and produced it. The agent, she testified, made a copy of it. Notwithstanding the production of the will (and apparently because it had not been offered for probate) the insurance agent prepared a release for all the heirs to sign. The witness said she knew nothing about an affidavit for collection of a small estate. She insisted that there was never any agreement about renouncing the will, and that they considered the property to belong to those mentioned in the will. She said the insurance proceeds were put in the bank in the name of Julia Mae Simmons Webb because she was the executrix named in the will. She said she had received a part of the rent money, it being divided between the three named beneficiaries.

Bert Simmons, Jr., testified that he claimed no interest in the property and that all the heirs considered as owners those children who were named as beneficiaries in the will. He said he was not given any part of the insurance proceeds, nor has he ever received any part of the rent money; in fact he insisted that those proceeds belonged to the named beneficiaries.

It appears that the affidavit for collection of small estate was prepared in the insurance office. It is notarized by the insurance agent. (That is the instrument which contains a printed recitation that “The decedent left no will.”) It is confusing as to why the affidavit was executed because the insurance agent said he saw the will and made a copy of it. The only logical conclusion is that neither the insurance agent nor the one heir who signed the affidavit noticed the recited statement. Appellant would have us apply estoppel to the heir who signed the affidavit. Suffice it to say we find no merit in that contention.

The chancellor determined that the positive testimony of the three heirs who testified that there had been no renunciation of the will was stronger than the circumstances proved in evidence by appellant. The credibility of the three heirs, their stations in life, their education or lack thereof, and their financial ability or inability to probate the will, were crucial matters which the chancellor could evaluate so much better than this court. We are unable to say that the chancellor’s findings were clearly against the preponderance of the evidence.

Affirmed.


text:
    B-W ACCEPTANCE Corp. v. Hon. G. B. COLVIN, Jr., Judge
    5-5810
    478 S.W. 2d 755
    Opinion delivered April 10, 1972

      Barber, Henry, Thurman, McCaskill ¿r Amsler, for petitioner.

      Huey ér Vittitow, for respondent.

      It appears from a stipulation and certain interrogatories that this action was brought in February or March 1965.

   John A. Fogleman, Justice.

Petitioner, a cross-defendant in an action brought April 8, 1968, in the Circuit Court of Bradley County against Norman Polk by Douglass Distributing Company, seeks to prohibit the circuit court from proceeding against it. Douglass is admittedly a domestic corporation doing business in Bradley County. It filed a complaint seeking judgment against Polk on notes executed by Polk for the purchase price of goods sold him by Douglass. It alleges that its principal place of business is in Pulaski County. The notes were payable to petitioner, B-W Acceptance Corporation. It was alleged in the complaint that Polk had defaulted in payments on the note and that B-W had required Douglas to pay the balance due. Polk filed a pleading in which he denied the allegations of the complaint, cross-complained against Douglass and B-W, alleging that they conspired to maliciously prosecute a replevin action, and separately alleged in his “third party complaint” that B-W had maliciously and without probable cause instituted a replevin action against him. He alleged in the cross-complaint that the cross-defendant’s actions had damaged his credit, customer relations and reputation and sought to recover $26,300 actual, and $50,000 punitive, damages. He asserted in his “third party complaint” that petitioner had instituted the action for the purpose of harassment and to put him out of business and injure his credit rating, fame and reputation. He sought to recover the identical amount of damages sought on his cross-complaint.

Petitioner has filed its answer to Polk’s cross-complaint and “third party complaint” in the form of a general denial and counterclaim. In it, petitioner both raised and reserved its contention that the venue of the claims asserted against it is in Pulaski County and that the Circuit Court of Bradley County has no jurisdiction over it._______

Summons for petitioner was issued to the Sheriff of Pulaski County and served upon the designated agent for service of B-W Acceptance Corporation in that county. It is alleged by Polk that B-W Acceptance Corporation is a foreign corporation doing business in Bradley County. This allegation is not controverted in the pleadings in the trial court and petitioner makes no contrary assertion here. Petitioner then is a nonresident of the state and has no county residence. Missouri Pacific R.R. Co. v. Fox & Sons, Inc., 251 Ark. 247, 472 S.W. 2d 726. There is no allegation that B-W has a place of business in Bradley County.

Venue in an action for abuse of process, malicious prosecution and vexatious suit is controlled by general venue statutes or principles rather than Ark. Stat. Ann. § 27-610 (Repl. 1962). Arkansas Valley Industries, Inc. v. Roberts, Judge, 244 Ark. 432, 425 S.W. 2d 298; Robinson v. Missouri Pacific Transportation Company, 218 Ark. 390, 236 S.W. 2d 575. An original action by Polk against B-W and Douglass, or either, would be governed by these general statutes.

It was necessary that Polk assert whatever claim he had against Douglass in the pending action and the venue of that claim was fixed by the filing of the suit by Douglass. Ark. Stat. Ann. § 27-1121 (Repl. 1962); Northwest Motors v. Creekmore, Judge, 229 Ark. 755, 318 S.W. 2d 614. Another party may properly be charged with joint liability along with the plaintiff on the same cause of action by a defendant’s counterclaim and cross-complaint. Ark. Stat. Ann. § 27-1134 (Repl. 1962); Thurman v. Farmers Cooperative, Inc., 227 Ark. 488, 299 S.W. 2d 650. But the new party charged with joint liability cannot be brought into the case by this method unless his liability is based upon matter affecting the subject matter of the action brought by plaintiff, at least where the defendant could at his election proceed separately against either of those jointly charged. Meyers Store Co. v. Colorado Milling and Elevator Co., 187 Ark. 636, 61 S.W. 2d 440; Naler v. Ballew, 81 Ark. 328, 99 S.W. 72. See also, Pindall v. Trevor and Colgate, 30 Ark. 249.

While Ark. Stat. Ann. § 27-11B4 is not primarily a venue statute, certainly venue will be fixed by it if the cause of action asserted in the cross-complaint is one affecting the subject matter of plaintiff’s cause of action. The very salutary purpose of the statute is to encourage litigation of all questions between the original parties in one forum and to bring into that forum other parties who would not otherwise be involved, if the issues between the defendants, or any of them, and the new parties actually affect the subject matter of the suit brought by the original plaintiff. If the statute did not affect venue insofar as such a claim against the new party or parties is concerned, its salutary purpose would be severely and unreasonably limited.

The subject matter of the complaint filed by Douglass was the alleged debt of Polk evidenced by notes on which Douglass sought a judgment against Polk. The subject matter of Polk’s cross-complaint was an alleged malicious prosecution of a replevin action resulting from an alleged conspiracy between B-W and Douglass for which he sought damages for injury to his credit and reputation. The subject matter of tbe “third party complaint,” which can only be considered as a cross-complaint against B-W asserting a separate liability against it for malicious prosecution of a replevin action, was the same.

Petitioner alleged in its motion to dismiss in the trial court that Polk’s claim did not arise out of the same transaction or occurrence relied upon by Douglass in the original complaint and alleges here that the cause of action asserted against it is “separable.” Our review of the pleadings in the lower court exhibited with the petition sustains petitioner’s assertion that Polk’s cause of action was not one “affecting the subject matter of the action.” The cross-complaint alleges that the replevin suit was for recovery of Polk’s floor plan merchandise. The “third party complaint” is based upon the same replevin action. Even if it were material, we find nothing in the pleadings to show that the property B-W sought to replevy is the same property for which Polk allegedly executed the notes representing the debts he admitted owing, on discovery, except for his counterclaim. Furthermore, there is nothing in the record before us to support respondent’s argument in its brief here that Polk is now being sued for the same amount on the same trust receipts as he was sued in the replevin action on which he bases his cross-complaints.

Respondent contends that venue is in Bradley County by virtue of Ark. Stat. Ann. §§ 27-1134 and 27-613 (Repl. 1962). Of course, venue cannot be fixed as to B-W under 27-613, under any circumstances, unless it were served in Bradley County or unless Douglass can be said to “reside” in, or have been summoned in, that county. There is nothing in this record to contradict the allegation in the complaint filed by Douglass that it is a domestic corporation with its principal place of business in Little Rock. It is alleged by Polk that Douglass does business in Bradley County, but nothing is said about its having a place of business there. We are unable to say that Douglass has a “residence” for the purpose of applying Ark. Stat. Ann. § 27-613 other than Pulaski County. It was not summoned in Bradley County. But Ark. Stat. Ann. § 27-613 does not purport to fix venue for the purpose of a cross-complaint, which is governed only by Ark. Stat. Ann. § 27-1134. We find nothing in the record to support any venue under these statutes for an independent action by Polk. See International Harvester Company v. Brown, 241 Ark. 452, 408 S.W. 2d 504; Terry v. Plunkett-Jarrell Grocer Co., 220 Ark. 3, 246 S.W. 2d 415, 29 A.L.R. 2d 1264; Duncan Lumber Co v. Blalock, 171 Ark. 397, 284 S.W. 15, overruled on another point, see Anheuser-Busch, Inc v. Manion 193 Ark. 405, 100 S.W. 2d 672.

We cannot agree with respondent that petitioner’s removal of the case to the United States District Court or its subsequent remand had the effect of waiving the question now raised as to venue. Upon remand, the case stood in the state court in the same position it would have had it never been removed, and it was the duty of the state court to proceed as if it had never been removed. Trinity Universal Insurance Co. v. Robinson, 227 Ark. 482, 299 S.W. 2d 833; Meyers Store Co. v. Colorado Milling and Elevator Co., 187 Ark. 636, 61 S.W. 2d 440. Furthermore, petitioner’s motion to dismiss, relied upon by respondent as a submission to its jurisdiction, was first filed in the United States District Court, and its assertion that there was a misjoinder of parties was based substantially upon petitioner’s allegation that the claim asserted against it did not arise out of the same transaction or occurrence as the claim asserted by Douglass, the plaintiff, against Polk, the defendant. The same arguments as to venue and jurisdiction advanced here by petitioner were urged by it when this motion was submitted to the circuit court, as disclosed by memorandum brief filed there and exhibited with the petition here.

Since we find no basis on which the Bradley Circuit Court can properly exercise jurisdiction over Polk’s cross-complaints, against petitioner, the writ is granted.

      This situation is not within the purview of the third party practice authorized in an action instituted for tort recovery under Ark. Stat. Ann. § 34-1007 (Repl. 1962).

      Polk’s general denial of the allegations of the Douglass complaint cannot well be taken to contradict allegations pertaining to the plaintiff’s corporate status. See Ark. Stat. Ann. § 27-1121; Meek v. United States Rubber Tire Company, 244 Ark. 359, 425 S.W. 2d 323.

       Inasmuch as some of our past decisions would sustain the proposition that venue in a transitory action against a foreign corporation authorized to do business in Arkansas could be laid in any county in the state, we point out that the effect of these decisions was nullified by the United States Supreme Court in Power Manufacturing Company v. Saunders, 274 U.S. 490, 47 S. Ct. 678, 71 L. Ed. 1165 (1927), as recognized in Crutchfield v. McLain, 230 Ark. 147, 321 S. W. 2d 217. The Supreme Court of the United States held that our law, which permitted venue to be placed in any county, unconstitutionally discriminated against foreign corporations and in favor of domestic corporations and individuals. Consequently, venue cannot constitutionally be laid against such a foreign corporation in any county where the venue would not be proper in a suit against a domestic corporation or a resident individual.