author: Jack Holt, Jr., Chief Justice. Otis H. Turner, Justice,

text:
    The UNITED STATES TOBACCO COMPANY v. Mahlon MARTIN, Director, Department of Finance and Administration, State of Arkansas
    90-76
    801 S.W.2d 256
    Supreme Court of Arkansas
    Opinion delivered December 17, 1990

      Wright, Lindsey & Jennings, for appellant.

      John H. Theis, Robert L. Jones, William E. Keadle, Ricky L. Pruett, Cora L. Gentry, David B. Kaufman, Malcolm P. Bobo, and Beth B. Carson, by: Philip Raia, for appellee.
   Jack Holt, Jr., Chief Justice.

The United States Tobacco Company (Company), a Delaware corporation with its principal place of business in Connecticut, appeals from the trial court’s decision to uphold assessments by the State of Arkansas for income taxes, interest, and penalties for tax years 1980 through 1985. The Company contends that the trial court erred in characterizing the Company’s activities in Arkansas as beyond the scope of “solicitation” of orders, and thus subject to state tax, and that it rendered findings of fact which were clearly erroneous and unsupported by evidence in the record. We disagree and affirm.

The appellee, Director of the Department of Finance and Administration of the State of Arkansas (Director), conducted a corporate income tax audit of the Company’s sales of tobacco products to wholesalers in Arkansas and determined that the Company owed a tax deficiency, together with interest and penalties, in the amount of $449,729.84. The Director based his assessment on the Company’s business activities within the state and figured the deficiency in accordance with Ark. Code Ann. §§ 26-51-205 and 702 (1987).

The Company protested the assessment, claiming that its instate activities amounted to nothing more than “solicitation” and were therefore immune from taxation under 15 U.S.C. § 381(a) (1982 and Supp. IV 1986).

Following a ruling in favor of the Director by the Administrative Hearing Board, the Company brought suit in the Chancery Court of Pulaski County to overturn the assessment. After trial, and submission of briefs by the parties, the chancellor held that the Company’s activities exceeded the scope of “solicitation” as set forth in section 381(a) and provided a sufficient and requisite nexus for taxation in Arkansas. The court sustained the assessment with additional interest from the date of the assessment to date of full payment. The Company now appeals.

The “business activities” at issue concern the duties and performances of five full-time consumer marketing representatives (CMRs) employed by the Company, who live and work in Arkansas.

The Company, as we said, is based in Greenwich, Connecticut. It sells its products in Arkansas through wholesalers who place orders by telephone through the Company’s telemarketing department in Greenwich. Upon acceptance, orders are filled at the Company’s warehouse in Greenwich and then shipped, via Nashville, Tennessee, to the wholesalers in Arkansas. The Company does not store any company-owned products in Arkansas, nor does it own or lease any property here.

It is the duty of the CMRs to promote the Company’s products among consumers and retailers, who, it is hoped, will then buy the products from the wholesalers. The CMRs have no authority to accept orders or to conduct credit checks. The five representatives are salaried employees, each of whom is provided a van and approximately four to five cases of smokeless tobacco products.

Fred Dunavant, a Division Manager in the Company who conducts on-site training of the CMRs in Arkansas, testified that the CMRs visit convenience store retail outlets where they organize the display of “point of sale” or advertising materials, discuss pricing setups, and sometimes distribute free samples to patrons of the store.

In addition, the CMRs make inventory checks, both at the wholesale warehouses and at the retail stores. Dunavant testified that the CMRs check for “product movement” and for stale or obsolete products. He stated that the wholesalers normally separate the current from the stale products themselves. The CMRs then pick up the outdated products and the Greenwich office issues credit to the wholesaler.

At the retail store, the CMRs occasionally replace stale products or replenish a retailer’s dwindling supply from the stock in their vans. The CMRs provide the retailer with enough cans to last until the wholesaler is to make a regular visit. Dunavant testified that the wholesale representatives visit the retail stores approximately once or twice a week, while the CMRs visit approximately once every eight to sixteen weeks or maybe only twice a year depending on the account and promotional activities involved.

When the CMRs leave a requested product with the retailer, they usually account for it to the wholesaler through “bill throughs” wherein the retailer signs a document acknowledging receipt of the goods and the CMR delivers it to the wholesaler who bills the retailer for the product. On some occasions, the retailers pay the CMRs in cash for the replacement stock. Dunavant testified that the cash transactions were small and that the bill throughs accounted for only 11/100th of 1 % of the Company’s total sales in Arkansas.

Irvin McClain, former manager of Triangle Warehouse, a wholesaler of the Company’s products, testified that with regard to inventory checks at the wholesaler’s, the CMRs were “real strict on that inventory control.” McClain testified that the CMRs sometimes replenish their van stocks from the wholesalers’ supplies by paying cash or by applying bill throughs from the retailers against the products.

The chancellor, after making specific findings of fact, concluded that the CMRs’ responsibilities “were separate for the most part from solicitation,” in that the solicitation was regularly carried out from the Greenwich office through daily calls to the wholesalers. The chancellor likened the CMRs’ duties to “quality control people.”

SCOPE OF SOLICITATION

Section 381(a), upon which the Company bases its claims of immunity, provides:

(a) Minimum Standards
No State, or political subdivision thereof, shall have power to impose, for any taxable year ending after September 14, 1959, a net income tax on the income derived within such State by any person from interstate commerce if the only business activities within such State by or on behalf of such person during such taxable year are either, or both, of the following:
(1) the solicitation of orders by such person or his representative, in such State for sales of tangible personal property, which orders are sent outside the State for approval or rejection and, if approved, are filled by shipment or delivery from a point outside the State; and
(2) the solicitation of orders by such person, or his representative, in such State in the name of or for the benefit of a prospective customer of such persons, if orders by such customer to such person to enable such customer to fill orders resulting from such solicitation are orders described in paragraph (1).

We last examined this particular section of the United States Code and its effect on corporate income taxation of foreign corporations in Hervey v. AMF Beaird, Inc., 250 Ark. 147, 464 S.W.2d 557 (1971). After contemplating the purpose and language of the act, we concluded that Congress intended a narrow construction of the term “solicitation of orders.” Because the appellee, Beaird, failed to show that its only business activity was the solicitation of orders, we refused to grant summary judgment in favor of tax immunity. Although the pivotal factor behind our decision in Hervey differs from the case at bar, we adhere to our initial, narrow interpretation of “solicitation.”

In Hervey, unlike the present case, we were primarily concerned with the fact that Beaird, a foreign manufacturer of LP storage tanks, maintained consignment arrangements with its customers in Arkansas and therefore its activities did not pertain to solicitation of sales of personal property. We noted, however, that part of the duties of Beaird’s representatives was to make regular checks of customer inventories and that such activity alone extended beyond the scope of solicitation of orders.

We find support for this narrow interpretation of section 381(a) in Clairol, Inc. v. Kingsley, 109 N.J. Super. 22, 262 A.2d 213 (1970). There, the Superior Court of New Jersey found that Clairol’s representatives visited druggists at regular intervals, reviewed and rearranged Clairol displays, and conducted inventory checks. In addition, “detail people” called on beauty salons to instruct in the use of Clairol products. The court refused to extend section 381(a) immunity to any activity beyond mere solicitation.

Granted, other jurisdictions have not taken as narrow a view. Some have extended tax immunity to generally accepted or customary acts in the industry which lead up to the placing of orders, such as promotional activities and the initial organization of displays, yet they refuse to allow tax immunity for activities commonly associated with maintaining a business operation. Such unprotected activities may include maintaining and monitoring displays, replacing damaged or outdated goods, checking product inventory, pricing items for resale by wholesalers to retailers, and handling complaints. See Miles Laboratories, Inc. v. Department of Revenue, 247 Or. 395, 546 P.2d 1081 (1976); National Tires, Inc. v. Lindley, 68 Ohio App. 2d 71, 426 N.E.2d 793 (1980); Drackett Products Co. v. Conrad, 370 N.W.2d 723 (N.D. 1985); William Wrigley, Jr. Co. v. Wisconsin Dept. of Revenue, 153 Wis. 2d 559, 451 N.W.2d 444 (1989).

Still other states have declined to tax many of the activities falling within the “unprotected” category above, holding that such acts are acts of courtesy and are “inextricably related” to the eventual sale of the product. See U.S. Tobacco Co., v. Commonwealth, 478 Pa. 125, 386 A.2d 471 (1978); see also Gillette Co. v. State Tax Comm., 56 A.D. 2d 475, 393 N.Y.S.2d 186 (1977); Indiana Dept. of Revenue v. Kimberly-Clark Corp., 275 Ind. 378, 416 N.E.2d 1264 (1981). For a general discussion see T. Sweeney, State Taxation of Interstate Commerce Under Public Law 86-272: “A Riddle Wrapped in an Enigma Inside a Mystery,” 2 B.Y.U. L. Rev. 169 (1984).

Under our construction of solicitation, however, it is undisputed that the CMRs’ activities of 1) making inventory checks, 2) swapping out products, 3) selling products for cash from stock in their vans, and 4) buying stock from wholesalers exceed the scope of mere solicitation of orders. Even if we chose to follow the rationale of Miles Laboratories, supra, and National Tires, supra, for example, and adopted their more lenient construction of “solicitation,” the CMRs’ activities would still quite arguably fall within the unprotected spectrum of “activities commonly associated with maintaining a business operation.” See Drackett Products, Co. v. Conrad, supra.

The CMRs in Arkansas participated in ongoing display and inventory checks. Although their visits to the retail stores were much more infrequent than the regular visits of the wholesale representatives, they, nonetheless, checked with the retailers and replenished the stock or swapped out stale products at regular intervals. Similar inventory checks were maintained at the wholesale warehouses. This activity, in particular, places the CMRs in the business of maintaining completed sales transactions rather than merely carrying out activities incidental to the solicitation of eventual sales.

On appeal, we review exemption cases de novo and do not set aside the findings of the chancellor unless they are clearly erroneous. Ragland v. General Tire and Rubber Co., 297 Ark. 394, 763 S.W.2d 70 (1989). There is a presumption in favor of the taxing power of the State and the claimant has the burden of establishing the right to an exemption beyond a reasonable doubt. Heath v. Westark Poultry Processing Corp., 259 Ark. 141, 531 S.W.2d 753 (1976). We cannot say, in light of our holding in Hervey, that the chancellor’s finding that the Company’s activities exceed the scope of solicitation and provide a sufficient nexus for taxation in this state was erroneous. The Company failed to carry its burden beyond a reasonable doubt.

FINDINGS OF FACT

The Company also maintains that the court “misinterpreted some testimony and extrapolated too broadly from the evidence,” thus rendering findings of fact which were clearly erroneous and supported by evidence in the record. This argument, however, is of no moment since we find enough evidence in the record to support our holding, regardless of any possible misinterpretation of the facts by the chancellor.

The Company first objects to the court’s finding that car stock kept by the CMRs was “used on a frequent and usual basis by the CMRs to replenish the stock of retailers which the CMR determined to be outdated or damaged.” The Company argues that the evidence shows the visits were infrequent and that the exchange or sale of products on these visits amounted to a small percentage of the Company’s total sales in the state.

It is not the frequency of the visits or volume of sales however, upon which our decision turns. We are concerned with the nature of the Company’s activities, which, here, clearly exceeds our narrow interpretation of solicitation. The same reasoning applies to the Company’s second objection that the court mistakenly found that a CMR might go for “no more than a day or so without replenishing a retailer’s stock out of his own car stock.”

The Company’s third objection is the chancellor’s finding that “CMRs take business calls at home and keep a stock of company-owned products at home.” We concede that there is thin support in the record for this finding. Our decision, however, stands independent of this finding, and a determination of the correctness of this particular finding is not necessary to our holding.

Lastly, the Company’s contention that the court’s finding that the cases carried by the CMRs in their vans “are purchased from various wholesalers either for cash or for trade on bill throughs” is erroneous is without merit. This fact was established by Irvin McClain, state tax auditor, and although Fred Dunavant provided a different explanation for this transaction, and one the Company contends is correct, the chancellor’s finding, based on the testimony as a whole, was not erroneous. Again, we find other support in the record to justify our holding without the need for reliance on this particular fact.

Based on the above reasons, we conclude that the Company’s business activities in Arkansas, through the work of their representatives, exceeded mere “solicitation” as contemplated by section 381 (a) and that these activities provided a sufficient nexus for taxation in this state.

The chancellor’s ruling is affirmed.

Turner, J., dissents.

Otis H. Turner, Justice,

dissenting. The federal statute relied upon by the appellant is 15 U.S.C. § 381(a) (1982 and Supp. IV 1986). This statute provides for immunity from income taxation of revenue derived from business activities within a state if such activities are limited to an agent’s solicitation of orders which are “filled by shipment or delivery from a point outside the state.” The applicable provision of the statute is quoted in the majority opinion.

The majority goes to great length to sustain an extremely narrow interpretation of the federal statute in order to defeat the immunity granted to the appellant. The intent of the federal law is to exempt from state income taxation all revenue derived from “solicitation of orders” in a particular state but sent to another state for approval or rejection and thereafter filled by out-of-state shipment. The statute also exempts solicitation of those orders that amount to consignment orders.

The legislative history of the act reflects federal concern that the individual states might impose taxes on earnings from sales obtained through mere solicitation within the state of an out-of-state company having no other significant activity within the state. S. Rep. No. 658, 86th Cong., First Sess., Reprinted in 1959 U.S.C. Code Cong, and Admin. News 2549.

The activities conducted by the appellant in the State of Arkansas are discussed in the majority opinion. I believe that those activities carried out by the agents for the appellant are logically classified as part of parcel of the solicitation of orders within the meaning of the federal statute. The revenue should thus be immune from income taxation by the State of Arkansas.

With facts quite similar to those presented here, the Supreme Court of the Commonwealth of Pennsylvania correctly concluded:

Where a corporation enjoined in interstate commerce seeks to do business in this Commonwealth, and that corporation’s sole activity in the state consists of the representatives seeking to induce the purchase of a corporation’s products by informing customers of new products, taking orders, and assisting in the display of those products, Congress intended that such corporation be exempt from any state tax based on the corporation’s net income.

U.S. Tobacco Co. v. Commonwealth, 478 Pa. 125, 386 A.2d. 471, cert. denied, 439 U.S. 880 (1978).

I would reverse the trial court and hold that the appellant’s activities within the State of Arkansas are tax-exempt under the federal statute.


source: Caselaw Access Project

author: Robert H. Dudley, Justice.

license: Public Domain

text:
    STATE of Arkansas v. Jeffery VILLINES, Gerald Lamont Cross, and Dennis Lee Miller
    CR 90-181
    801 S.W.2d 29
    Supreme Court of Arkansas
    Opinion delivered December 17, 1990

      Steve Clark, Att’y Gen., by: Ann Purvis, Asst. Att’y Gen., for appellant.

      Greene Law Offices, by: Robert E. Adcock, for appellee.
   Robert H. Dudley, Justice.

The three defendants in this case were jointly charged with possession of marijuana with intent to deliver. They filed a motion to suppress seized evidence because of a warrantless search and seizure. See A.R.Cr.P. Rule 16.2. The trial court granted the motion to suppress. The State filed this interlocutory appeal contesting the trial court’s ruling pursuant to-A.R.Cr.P. Rule 36.10(a) and (c). The trial court ruled correctly. Under the rule providing for an interlocutory appeal by the State, further proceedings against the defendants on.this charge are now barred. A.R.Cr.P. Rule 36.10(d).

The three defendants planned to drive from Dallas to Milwaukee in defendant Cross’s car. They were to share the driving duties. On the morning they left Dallas, defendants Villines and Miller placed their baggage in the trunk of the car. Defendant Villines drove to a rest area off Interstate 30 just south of Little Rock. At that point defendant Miller began driving. The highway had ice on it. Miller drove to a point near the Geyer Springs exit of Interstate 30 in Little Rock. There, the car slid and hit a concrete median barrier in the center of the highway. The car was heavily damaged and defendant Villines went to get a wrecker.

A state trooper was dispatched to the wreck. When he first got there, no one was in the car, but Cross and Miller immediately walked up, and the trooper began talking to them. Soon Villines arrived with the wrecker. Villines got in the car, started it and moved it enough for it to be hooked to the wrecker. The trooper began to examine the car for damage. As he did, he noticed what appeared to be a marijuana cigarette butt and marijuana seeds on the left front floorboard. He felt and smelled the butt and was fairly certain it was marijuana. The trooper testified that he did not arrest the defendants, but did place them in the back of his patrol car. He thought they were “nervous and jittery,” but attributed that to the fact they had just been involved in a wreck. He did not ask Cross for permission to search his car. He told the three of them that he had probable cause and was going to search the car. Miller began crying and said he had never done anything like that before. The trooper tried to open the trunk but, because of the damage, it could not be opened. The trooper then took a tire tool and pried open the trunk lid. Inside, among other personal items, he found a cardboard box with six small packets of marijuana in it. The trial court held that Villines and Miller had standing to contest the search of Cross’s car. The State assigns the ruling as error.

The doctrine of standing to invoke the fourth amendment exclusionary rule has evolved to focus on a defendant’s substantive fourth amendment rights. State v. Hamzy, 288 Ark. 561, 564, 709 S.W.2d 397, 398 (1986); Rakas v. Illinois, 439 U.S. 128, 140 (1978). Accordingly, evidence should be excluded when the court finds that an unlawful search or seizure violated the defendant’s own. constitutional rights, and his rights are violated if the chállenged conduct invaded his legitimate expectation of privacy. Johnson v. State, 303 Ark. 12, 18, 792 S.W.2d 863, 866 (1990); Rakas v. Illinois, 439 U.S. 128, 138-40 (1978). In Rakas, supra, the Supreme Court made clear that a defendant can have a reasonable expectation of privacy in the area searched, or the object seized, if he can show a possessory interest in them. The Court held that the defendants’ fourth amendment claims in that case must fail because they “asserted neither a property nor a possessory interest in the automobile, nor an interest in the property seized.” Rakas, 439 U.S. at 148. The Court held that the defendants were “mere passengers” in the vehicle searched and that “passengers qua passengers” had no reasonable expectation of privacy in the glove compartment, the area under the seats, or the trunk of the vehicle in which they were riding. Id. at 148-49.

Pursuant to the holdings of the Supreme Court of the United States in Rakas, supra, this court held in Koonce v. State, 269 Ark. 96, 598 S.W.2d 741 (1980), that the appellant, who had neither a property nor a possessory interest in the vehicle in which he was apprehended or in the weapon seized had no legitimate expectation of privacy in the area under the seat which would entitle him to invoke the exclusionary rule. That defendant was “only a backseat passenger” in the vehicle searched. Id. at 98, 598 S.W.2d at 742.

Here, the defendants Villines and Miller were more than “passengers qua passengers.” They had placed their personal belongings in the trunk of the car and, because of the joint agreement to share driving, were to be lawfully in joint possession of the car for an interstate trip. In fact, Villines had driven from Dallas to a point just south of Little Rock, and Miller was driving when the wreck occurred. Both had a sufficient possessory interest to exclude anyone who tried to interfere with the car or their luggage.

If the owner of a vehicle has turned it over to another person for some period of time, that person has standing to challenge a search of the car during the bailment. 4 W. LaFave, Search and Seizure, A Treatise on the Fourth Amendment § 11.3(e), at 334 (2d ed. 1987). In United States v. Ochs, 595 F.2d 1247 (2d Cir. 1979), the court held that the appellant had a possessory interest in the searched vehicle because the owner allowed him to use it whenever he wished and he freely availed himself of that privilege. The appellant had permission to use the car and had a key to it. Id. at 1253. A person may have a legitimate expectation of privacy in a place or object he does not own. U.S. v. Perez, 689 F.2d 1336, 1338 (9th Cir. 1982); U.S. v. Reyes, 595 F.2d 275, 278 (5th Cir. 1979).

In sum, Villines and Miller were lawfully in joint possession of the car and had a reasonable expectation of privacy in its trunk. The trial court correctly ruled that they had a possessory interest in the car sufficient to give them standing to challenge the search of it on fourth amendment grounds.

The State next argues that, even if the defendants did have standing to contest the search, the trooper had probable cause to conduct a warrantless search of the trunk of the car.

The real issue is whether the trooper had articulable, objective facts, and not just subjective good faith, which would constitute probable cause to believe that the trunk contained marijuana. He did not have such articulable facts.

In Scisney v. State, 270 Ark. 610, 605 S.W.2d 451 (1980), a case factually similar to the one at bar, we wrote: “Certainly, several marijuana cigarettes found in the passenger compartment of the vehicle do not supply the probable cause required for a search of two sealed suitcases in the locked trunk of the car----” Id. at 613, 605 S.W.2d at 453. In yet another similar case, Burkett v. State, 271 Ark. 150, 607 S.W.2d 399 (1980), we wrote: “A ‘roach clip’ and part of a marijuana cigarette found in the console ashtray of the vehicle did not supply the probable cause required for a warrantless search of the contents of the locked trunk of the car, nor did they provide the reasonable belief required for a warrantless search pursuant to Rule 12.4 of the Arkansas Rules of Criminal Procedure.” Id. at 153, 607 S.W.2d at 400. The reasoning behind these holdings is that the presence of cigarette butts or marijuana seeds, without more, is just as consistent, or perhaps more so, with having only that small amount for personal use as it is with having a cache of marijuana; there is simply no articulable fact to indicate a cache is located in the trunk. In Berry v. State, 263 Ark. 446, 565 S.W.2d 418 (1978), there was more than a single marijuana cigarette butt in plain view of the arresting officer. There was “an open bank bag containing syringes, white powder, and other things which the officers recognized as paraphernalia used in trafficking in drugs.” Id. at 448, 565 S.W.2d at 419. Similarly, in Cook v. State, 293 Ark. 103, 732 S.W.2d 462 (1987), the arresting officer saw a small amount of marijuana on the floorboard, but smelled the odor of another prohibited substance, apparently cocaine. In Milburn v. State, 260 Ark. 553, 542 S.W.2d 490 (1976), the driver staggered and smelled of marijuana, there was a strong and pungent door coming from the car, there was a large amount of money visible in a bank bag, and there was an appearance bond reflecting that the driver had just been released on a charge of possession of a controlled substance. In Munguia v. State, 22 Ark. App. 187, 737 S.W.2d 658 (1987), the officers saw marijuana on the floorboard and then saw that the interior door panel on the passenger side was loose. Although not fully explaining that drug traffickers frequently use car door panels to hide drugs, the court stated that the loose panel, plus the marijuana on the floorboard, would constitute probable cause to believe “that additional marijuana would be found within the door.”

In the case at bar, the State argues that the additional factors are supplied by the three defendants being “nervous and jittery” and by Miller’s crying and saying he had never done anything like that before. The argument misses the mark.

The standard of review on appeal of a trial court ruling on a motion to suppress is now well established: On appeal the appellate court will make an independent determination based on the totality of the circumstances as to whether evidence obtained by means of a warrantless search should be suppressed, and the trial court’s finding will not be set aside unless it is clearly erroneous. Cook v. State, 293 Ark. 103, 732 S.W.2d 462 (1987).

Viewing the evidence in the light most favorable to the appellees, as we must do, it is obvious that Cross’s crying and stating that he had never before done anything like this could well have meant that he never before had smoked marijuana. Further, being “nervous and jittery” could well have been the result of the accident. We cannot hold that the ruling of the trial court was clearly erroneous.

Affirmed.


author: Robert H. Dudley, Justice. Dale Price, Justice, Tom Glaze, Justice,

text:
    Wyliea Lindley SULLIVAN v. Kenneth Leonard EDENS
    90-171
    801 S.W.2d 32
    Supreme Court of Arkansas
    Opinion delivered December 17, 1990
    [Rehearing denied January 14, 1991.]

      Gregory W. Harris, for appellant.

      Crawford Law Firm, by: Michael H. Crawford, for appellee.

      Hays and Glaze, JJ., would grant rehearing. Corbin and Brown, JJ., not participating.

   Robert H. Dudley, Justice.

This is a significant case involving the collection of accrued but unpaid child support. The 1978 divorce decree awarded custody of the children to the mother, appellant, and ordered the father, appellee, to pay monthly child support in an amount equal to 32% of his take-home pay, but, in any event, not less than $200.00 per month. In 1982, the mother filed a petition asking that the father be held in contempt for failing to pay child support. Prior to the hearing, the father paid the mother $ 1,000.00, and they agreed that the future amount of child support would be a fixed $200.00 per month, increasing to $225.00 per month beginning in 1984, and further increasing to $250.00 per month beginning in 1987. Neither party petitioned to have the original decree modified. The mother’s petition was later dismissed for failure to prosecute.

On July 12, 1989, the mother filed a petition to collect 32% of the father’s income as past due child support. In October 1989, she voluntarily dismissed her petition, but re-filed it on December 7, 1989.

After hearing the evidence the trial court found that the applicable statute of limitation was five years, and the mother “is not entitled to the amount previously ordered by this court but shall be entitled to the amount agreed by the parties.” The mother appeals and argues that the trial court erred (1) in applying a five year statute of limitation and (2) in refusing to give judgment for the full amount of past due child support. The trial court did err in fixing the amount of arrearage and, accordingly, we reverse.

The chancellor applied the correct statute of limitation. Prior to 1989, the statute of limitation applicable to arrearages accruing as the result of failure to comply with an order of child support was five years. Ark. Code Ann. § 16-56-115 (1987); Brun v. Rembert, 227 Ark. 241, 297 S.W.2d 940 (1957). In 1989, the period of limitation was changed to ten years. Ark. Code Ann. § 9-14-236 (Supp. 1989) and 16-56-129 (Supp. 1989). This case was heard after the effective date of the 1989 statute. The mother argues that the chancellor erred in refusing to apply the 1989 statute retroactively. The argument is without merit. When a new statute of limitation does not specifically repeal a prior statute of limitation, the new statute is not intended to operate retroactively and result in the removal of a limitation on causes of action already barred. Morton v. Tullgren, 263 Ark. 69, 563 S.W.2d 422 (1978). The old statute of limitation controls for all causes of action already accrued on the date of the enactment of the new statute. Trapnall v. Burton, 24 Ark. 371 (1866). The new statute of limitation applicable to this case does not provide for repeal of the old statute. Thus, the old five-year statute of limitation is applicable to those support payments due prior to the effective date of the new act, and the new ten-year statute of limitation is applicable to payments accruing after the effective date of the new act.

The mother filed her suit for collection of arrearages on July 12,1989. She voluntarily dismissed the suit in October 1989, but re-filed it on December 7,1989, which was within one year of the nonsuit. Thus, the chancellor correctly ruled that the mother’s recovery was limited to July 12, 1984.

Next, the mother assigns as error the chancellor’s ruling that she “is not entitled to the amount previously ordered by this court but shall be entitled to the amount agreed by the parties.” Again, a relatively new statute is applicable and requires that we divide this point into two sub-parts: (1) decide the amount of arrearages due before the statute’s effective date, and (2) then decide the arrearages due after its effective date.

The chancellor made a finding of fact that the parties agreed to reduce the child support to a fixed $200.00 beginning in 1982, $225.00 per month beginning in 1984, and $250.00 beginning in 1987. That finding is not clearly erroneous, and we affirm it. Prior to 1987, agreements between former spouses reducing the amount of child support payments did not bind the court, but the court could recognize such an agreement (1) if the agreement was supported by a valid consideration, Ray, v. Manatt, 250 Ark. 230, 465 S.W.2d 111 (1971), or (2) if it were inequitable to do otherwise, Bethell v. Bethell, 268 Ark. 409, 597 S.W.2d 576 (1980). An example of consideration is where the amount of child support is reduced by agreement and the obligor then takes custody of one of the children. Ray v. Manatt, supra. Here, there was a comparable consideration. The mother gave up the right to 32 % of the father’s income but gained an increase in the fixed amount of support from $200.000 to $250.00 per month over a period of time. This was significant since the father had been unemployed some of the time just prior to the agreement. Accordingly, the chancellor did not err in recognizing the agreement.

However, the chancellor did err in refusing to be bound after the effective date of the new act. Ark. Code Ann. § 9-12-314(b) and (c) (Supp. 1989), effective July 20, 1987, provides:

(b) Any decree, judgment, or order which contains a provision for the payment of money for the support and care of any child or children through the registry of the court shall be final judgment as to any installment or payment of money which has accrued until the time either party moves through proper motion filed with the court and served on the other party to set aside, alter, or modify the decree, judgment, or order.
(c) The court may not set aside, alter, or modify any decree, judgment, or order which has accrued unpaid support prior to the filing of the motion. However, the court may offset against future support to be paid those amounts accruing during time periods, other than reasonable visitation in which the noncustodial parent had physical custody of the child with the knowledge and consent of the custodial parent.

The General Assembly re-adopted identical provisions in 1989. Ark. Code Ann. § 9-14-234(a) and (b) (Supp. 1989).

These statutes were enacted to insure that child support programs of the State of Arkansas would qualify for future funding from the United States Department of Health and Human Services. In Title IV-D of the Social Security Act, Congress appropriated funds for such a program. 42 U.S.C. § 666 (1988) prescribes procedures which states must follow to qualify for funding. In 1986, as part of the Budget Reconciliation Act, Congress amended the qualifying procedures by adding a requirement that each state must have procedures which require that any payment or installment of support under any child support order is:

(a) (9) (A) a judgment by operation of law, with the full force, effect, and attributes of a judgment of the State, including the ability to be enforced,
(B) entitled as a judgment to full faith and credit in such State and in any other State, and
(C) not subject to retroactive modification by such State or by any other State; except that such procedures may permit modification with respect to any period during which there is pending a petition for modification, but only from the date that notice of such petition has been given, either directly or through the appropriate agent, to the obligee or (where the obligee is the petitioner) to the obligor.

42-U.S.C. § 666(a)(9)(A)-(C) (1988).

In April of 1989, the Office of Child Support Enforcement of the Department of Health and Human Services issued its final rule with provisions identical to those set out above. See 45 C.F.R. § 303.106 (1989). This final rule discusses the intent of the federal requirement. It states that child support has been difficult to collect in the past and that to help improve collections it would be better to place an obligation on the party owing the support to diligently petition the court for a reduction rather than to reduce the amount of support retroactively at a later time. Congress was concerned with states which had accorded child support orders a lesser stature than other money judgments and have allowed child support awards to be modified retroactively. In these states the court had the authority to reduce or nullify arrearages by reducing the amounts owed for past periods. 54 Fed. Reg. 15,758 (April 19, 1989). The discussion of the final rule also states that support judgments may be compromised or satisfied by specific agreement of the parties on the same grounds as exist for any other judgment in the state. 54 Fed. Reg. 165,763 (April 19, 1989). The final rule was adopted April 14, 1989. Thus, the passage of the amendment to the Social Security Act and the adoption of the final rule roughly correspond in time to the enactment of the two Arkansas Code sections, Ark. Code Ann. § 9-12-314 and § 9-14-234 (Supp. 1989).

As previously set out, the original decree in this case was never modified by the court. Only a court can modify its decree and, as a result, the original decree remains in effect. After the new statute was enacted, the trial court could not “set aside, alter, or modify” the “order which has accrued unpaid support.” Thus, the chancellor erred in ruling he could recognize the parties’ private agreement for the payments which fell due after the effective date of the act.

This is an áppeal from a chancery case. We hear equity appeals de novo on the record made below, and ordinarily dispose of such cases on that record. Ferguson v. Green, 266 Ark. 556, 587 S.W.2d 18 (1979). However, if the record is not sufficient for us to dispose of the case, we have the discretionary power to remand an equity case for further proceedings. Ferguson v. Green, supra. The record in this case does not reveal what 32% of the father’s income amounted to for the period after the 1987 act became effective. Thus, we do not have a sufficient record to finally dispose of the case. Accordingly, we remand the case for determination of the full amount of child support due.

Affirmed in part, reversed in part, and remanded.

Hays and Glaze, JJ., dissent.

Price, J., concurs.

Dale Price, Justice,

concurring. I concur with the majority. However, for the benefit of the bench and bar I note that in the past some courts devised formulas by which child support would be determined in the future, for example, “32% of take home pay.” Two statutes now require that such a practice be abandoned. Ark. Code Ann. § 9-12-312(a)(2) (Supp. 1989), the family support chart statute, contemplates a fixed amount of support, as does Ark. Code Ann. § 9-12-314(b) and (c) (Supp. 1989), the statute discussed in this case. The latter statute contemplates that a child support order will be akin to a money judgment, and “a judgment ... for money should state the amount which the defendant is required to pay. . . .” Thomas v. McElroy, 243 Ark. 465, 420 S.W.2d 530 (1967).

I concur.

Tom Glaze, Justice,

dissenting in part. The majority court correctly upholds the trial court’s finding that the parties entered into an agreement that, commencing in 1982, appellee would pay child support in the reduced amount of $200 per month and then increase it in monthly amounts to $225 in 1984 and to $250 in 1987. While this agreement varied from the parties’ earlier agreement which was incorporated into their 1978 decree, this court has sanctioned such variances in or modification agreements of both alimony and child support payments. See Cunningham v. Cunningham, 297 Ark. 377, 761 S.W.2d 941 (1988); Bethell v. Bethell, 268 Ark. 409, 597 S.W.2d 576 (1980).

After correctly affirming the trial judge’s finding of a modified child support agreement entered into by the parties in 1982, the majority then mistakenly proceeds to apply Ark. Code Ann. § 9-12-314 (as amended by Act 1057 of 1987) so that agreement is not enforceable after July 20, 1987 — the effective date of Act 1057 (now codified as Ark. Code Ann. § 9-12-314(a)(b)(c) and (d) (Supp. 1989)). In other words, the majority first recognizes the validity of the parties’ 1982 child support agreement and enforces it until July 20, 1987, at which time the court abrogates the parties’ agreement and reinstates their 1978 decree and its child support directives.

In sum, the majority’s decision not only improperly applies Act 1057 of 1987 retroactively to reinstate support payments in the parties’ 1978 deeree, Huffmanv. Dawkins, 273 Ark. 520, 622 S.W.2d 159 (1981), it also places a construction on that Act which unconstitutionally impairs the parties’ 1982 contractual obligation. See James v. Cheney, 253 Ark. 926, 489 S.W.2d 785 (1973);U.S. Const, art. 1, § 10 and Ark. Const.art. 2, § 17. Here, the parties’ child support rights and obligations were modified and vested in 1982. Under these circumstances, Act 1057 should not be applied to nullify the parties’ prior existing child support agreement.

It is settled law that all legislation is intended to act only prospectively, and all statutes are to be construed as having only a prospective operation unless the purpose and intention of the Legislature to give them a retroactive effect is expressly declared or necessarily implied from the language used. Chism v. Phelps, 228 Ark. 936, 311 S.W.2d 297 (1958). When enacting Act 1057, the Legislature gave no hint that it intended to affect prior agreements such as the one entered into by the parties here in 1982. The trial court, and this court on appeal, determined that the 1982 agreement lawfully supplanted the support agreement previously incorporated in the 1978 decree. This court now errs in using Act 1057 to reinstate and enforce the parties’ original agreement.

For the reasons given above, I would affirm this cause in all respects.

Hays, J., joins this dissent.

       As set out in the majority opinion, § 9-12-314(b) and (c) requires a party to file a motion to modify a decree and until that is done, the child support amounts payable under the decree and through the registry of the court shall have accrued as final judgments.


author: David Newbern, Justice.

text:
    Don MINTON, Diane Minton, Steve Brown, and Brenda Brown v. CRAIGHEAD COUNTY
    90-238
    800 S.W.2d 707
    Supreme Court of Arkansas
    Opinion delivered December 17, 1990

      Blackman & Nix, P.A., by. J. Robin Nix II, for appellant.

      Henry, Walden & Davis, by: Mike Walden, for appellee.
   David Newbern, Justice.

This is an inverse condemnation case. The appellants, Don and Diane Minton and Steve and Brenda Brown contended in the circuit court that their residential properties had been devalued because the appellee, Craighead County, had built a jail in their neighborhood. They also contended they were entitled to damages because of loss of access to their properties and the fact that they will have to live in constant fear of jail breaks. The court granted the county’s motion to dismiss for failure to state facts upon which relief could be granted. Ark. R. Civ. P. 12(b)(6). We affirm the dismissal.

In neither their complaint nor in argument made to the circuit court or here have the Mintons and Browns stated how they have been deprived of access to their properties. They do not state that the jail site is contiguous or shares a common boundary with either of them. See Earl v. Arkansas State Highway Comm., 241 Ark. 11, 405 S.W.2d 931 (1966). That leaves only the fact that a jail in the neighborhood lowers the value of their properties.

The Mintons and the Browns base their argument on Ark. Const, art. 2, § 22, which provides: “The right of property is before and higher than any constitutional sanction; and private property shall not be taken, appropriated or damaged for public use, without just compensation therefor.” We have held many times that an injury such as the one alleged here does not constitute a compensable taking, appropriation or damage.

In Wenderoth v. Baker, 238 Ark. 464, 382 S.W.2d 578 (1964), we considered various arguments made by owners of property in a Fort Smith neighborhood through which land had been taken for a new interstate-type highway. The complainants’ lands had not been used directly for the highway, but they had been inconvenienced in various ways. Some contended, for example, that they were entitled to special damages because their lot, which once was bordered by level ground, was bordered by a 27-foot deep cut. We held the contention was not well taken, and explained:

It is not enough for a landowner to show that his damage differs from that suffered by the general public. He must also show either that part of his land has been taken or that a property right has been invaded. Nichols, Eminent Domain (3d Ed.), § 14.1 It must often happen that the value of a city lot is diminished as a result of the condemnation of adjoining property for some distasteful purpose, such as the construction of a city jail. But, as the court convincingly demonstrated in City of Geary v. Moore, 181 Okla. 616, 75 P.2d 891, this is an injury “for which the law does not, and never has, afforded any relief.” [238 Ark. at 466, 382 S.W.2d at 579.]

See also Earl v. Arkansas State Highway Comm., supra; Arkansas State Highway Comm. v. McNeill, 238 Ark. 244, 381 S.W.2d 425 (1964).

Affirmed.


text:
    Douglas W. ROGERS and Vivian Elaine Rogers v. GREAT AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION
    90-89
    801 S.W.2d 36
    Supreme Court of Arkansas
    Opinion delivered December 17, 1990

      Crockett <fe Brown, P.A., by: Richard E. Worsham, for appellant.

      Wooton and Slagle, P.A., by: Richard H. Wooton, for appellee.
   David Newbern, Justice.

The appellants, Douglas W. and Vivian Elaine Rogers, mortgaged their homestead to the appellee, Great American Federal Savings and Loan Association (Great American), to secure a $500,000 note. The Rogerses borrowed the money and executed the note in favor of Great American to finance Mr. Rogers’ home-building business. After default, the Rogerses defended against a foreclosure action on the ground that their homestead was not subject to foreclosure because of the homestead exemption. Ark. Const, art. 9, § 3. They contend the waiver of homestead rights contained in the mortgage instrument they signed is invalid because it violates the Constitution and because of an improper acknowledgement. We affirm the chancellor’s holding th.at the homestead rights were waived.

1. The homestead exemption

The Rogerses have presented research on the history of the homestead exemption in Arkansas, including discussion of the constitutional debates with respect to art. 9, § 3, as it appears today and in the 1868 predecessor to our current document. Article 9, § 3, now reads, in pertinent part, as follows:

The homestead of any resident of this State who is married or the head of a family shall not be subject to the lien of any judgment, or decree of any court, or to sale under execution or other process thereon, except such as may be rendered for the purchase money or for specific liens, laborers’ or mechanics liens for improving the same,

They argue that the exception for “specific liens” is general language limited by the specific succeeding reference to “laborers’ liens or mechanics’ liens.” As the mortgage lien in this case is neither for purchase money nor a laborer’s or mechanic’s lien, they contend it is not excepted from the prohibition. They also argue that the protection they are given by the constitutional provision is not subject to waiver. We need not consider the question presented about the grammatical construction of the constitutional language because we find that, regardless of whether the mortgage was the type of specific lien contemplated, any protection to which the Rogerses might have been entitled was waived by them.

2. Waiver

a. The acknowledgement

The Rogerses argue that the acknowledgment of their signatures required by Ark. Code Ann. § 16-4-101 (1987) for recording purposes was defective. They contend that the waiver of homestead was thus ineffective.

The eligibility of the mortgage for recording is irrelevant to its validity as between the parties to it. Shuffield v. Raney, 226 Ark. 3, 287 S.W.2d 588 (1956); Leonhard v. Flood, 68 Ark. 162, 56 S.W. 781 (1900). See also Cloverleaf Development, Inc. v. Provence, 273 Ark. 12, 616 S.W.2d 16 (1981); Western Tie & Timber Co. v. Campbell, 113 Ark. 570, 169 S.W.2d 235 (1914). Even if we agreed the acknowledgement was defective it would not affect the validity of the mortgage as between the Rogerses and Great American.

b. Constitutionality

The Rogerses argue that because of the mandatory nature of the language in art. 9, § 3, a person entitled to the benefit of a homestead exemption may not waive it. They cite Starr v. City National Bank, 159 Ark. 409, 252 S.W.2d 356 (1923), and Phillips v. Colvin, 114 Ark. 14, 169 S.W. 316 (1914), but neither case supports the argument. Nor do any of several Texas cases cited by the Rogerses go that far in interpreting a similar Texas Constitution provision. See, e.g., Curtis Sharp Custom Homes, Inc. v. Glover, 701 S.W.2d 24 (Tex. App. 5 Dist. 1985); Barnett v. Eureka Paving Co., 234 S.W. 1081 (Tex. App. 1921).

While we are tempted to research and write about the general issue of waiver of constitutional rights, we decline to do so because no argument in that respect has been offered by the parties.

This court has recognized waivers or releases of homestead rights for many years, Mayfield v. Sehon, 205 Ark. 1142, 172 S.W.2d 914 (1943); Free v. Harris, 181 Ark. 644, 275 S.W. 510 (1930); P. Jones, Arkansas Titles, § 889 (1935). Although none of our opinions reveals that an argument was made to the effect that the language of art. 9, § 3, prohibits waiver, we have been presented with no convincing authority that our long standing recognition of waivers or releases of homestead rights has been in error.

Affirmed.


author: David Newbern, Justice. Judith A. Desimone, Special Justice,

text:
    James A. WINN and Juanita B. WINN v. CHATEAU CANTRELL APARTMENT COMPANY, et al.
    89-314
    801 S.W.2d 261
    Supreme Court of Arkansas
    Opinion delivered December 17, 1990
    [Rehearing denied January 22, 1991.]

      Catlett, Stubblefield, Bonds & Fleming,. by: Victor Á. Fleming, for appellant.

      Giroir Law Firm and Heiskell, Donelson, Bearman, Adams, Williams & Kirsch, for appellee First Tennessee Bank.

      John B. Thurman, for appellee E. Ralph Cotham, et al.

      Davidson, Horne & Hollingsworth, for appellee Bearden, Joyce, Slaydon, and Lile.

      Special Justice Judith A. DeSimone would grant rehearing. Holt, C. J., and Corbin and Brown, JJ., not participating.

   David Newbern, Justice.

This is a usury case. James A. Winn and Juanita B. Winn, the appellants, sold an apartment complex to appellee Chateau Cantrell Apartment Company (Chateau Cantrell), a general partnership, for $2,300,000, taking in return a promissory note for $1,600,000 which was secured by a mortgage.

Chateau Cantrell sold the property to Chateau Residential Partnership (Chateau Residential), through its nominee E. Ralph Cotham IV, which in turn executed a deed of trust in favor of appellee Charles T. Tuggle, Jr., trustee, and appellee First Tennessee Bank. The deed of trust provided an assignment to Chateau Cantrell of rents and profits from the complex as security. Chateau Residential also assigned rents and profits as security for its obligation to the bank. Cotham subsequently purchased the interests of the other Chateau Residential partners who took a mortgage from him to secure payment. Also joining as appellees are Mrs. E. Ralph Cotham IV, Mr. and Mrs. James R. Bearden, and Mrs. John W. Joyce, Mr. and Mrs. John E. Slayden, and Mr. and Mrs. Henry A. Lile. The Beardens, Joyces, and Liles are Mr. Cotham’s mortgagees. Mrs. Cotham was named a defendant on the assertion that the Winns’ interest is superior to her dower interest.

Our concern here is with a usury defense raised by Chateau Cantrell to a suit to foreclose the mortgage brought by the Winns. Payments were made on the original note from Chateau Cantrell to the Winns until 1988. When the payments to the Winns ceased, they sought foreclosure. The note from Chateau Cantrell to the Winns was to bear interest at 10 % per annum from November 1, 1982, until paid. The payment clause, however, contained a compounding formula which the chancellor concluded made the interest rate usurious under Ark. Const., art. 19, § 13. The note was executed prior to the adoption of Amendment 60 which eliminated the constitutional flat 10% interest cap. The court also found that the transaction was not “a loan for business purposes” and thus the interest rate was not made legitimate by § 511 of the Depository Institution Deregulation and Monetary Control Act of 1980, 12 U.S.C.S. § 86a, which would have preempted the Arkansas law.

The Winns raise six issues on appeal. We agree with their first contention that it was error for the chancellor to hold that the transaction was not one falling within the preemption contained in § 511. We, therefore, need not consider their second contention which is that the note was not usurious under the 1982 Arkansas law. We also need not consider their third point which has to do with whether the mortgage in favor of the bank was a breach of a clause in Chateau Cantrell’s mortgage to the Winns providing against further mortgages. As the mortgage in favor of the Winns takes precedence over the later ones, the trial court on remand will have to determine the extent to which the bank must reimburse the Winns for rents and profits which the bank received. The fifth point argues that the court erred in not continuing a receivership for the rents and profits from the apartment complex during the appeal. It is now moot. Lastly, the Winns contend they were erroneously denied attorney fees. Upon remand the trial court will have an opportunity to reconsider that question in light of this decision.

1. The partnership’s note

Chateau Cantrell was a general partnership organized for the purpose of owning the apartment complex. The note and mortgage were prepared by counsel for Mr. John Flake and Flake and Company. Mr. Flake testified he was the managing general partner, and the other partners included “two physicians . . ., two or three businessmen, a financial institution service corporation was involved, as well.” Flake and Company was not a partner but was hired by Mr. Flake, acting for the partnership, to manage the apartment complex. The other partners, according to Flake’s testimony, were “there for investment and tax benefits,” and were not to take an active role in managing the property.

The note bears Mr. Flake’s signature and contains this language:

The maker [Chateau Cantrell] acknowledges and represents to the holders [the Winns] that the proceeds of the loan evidenced hereby shall be used solely for a business or agricultural purpose within the meaning of the Depository Institutions Deregulation and Monetary Control Act of 1980 and specifically Sections 511 and 512, Part B: business and agricultural loans, same as being public law 96-211, March 31, 1980, 94 Stat. 164, which law shall govern and control all issues involving all interest charged on the loan proceeds.

The lawyer who prepared the note on behalf of the partnership testified that he inserted that clause because he felt the interest specified might make the loan usurious under the Arkansas law, and he felt as a matter of “fact” the loan was being made for business purposes.

2. The preempting federal law

Section 511 provides:

If the applicable rate prescribed in this section exceeds the rate a person would be permitted to charge in the absence of this section, such person may in the case of a business or agricultural loan in the amount of $ 1,000 or more, notwithstanding any State constitution or statute which is hereby preempted for the purposes of this section, take, receive, reserve, and charge on any such loan, interest at a rate not more than 5 percent per centum in excess of the discount rate, including any surcharge thereon, on 90-day commercial paper in effect at the Federal Reserve bank in the Federal Reserve district where the person is located.

The appellees do not argue that the rate specified in the note to the Winns exceeded that allowed by this language of § 511. They do urge us to accept the trial court’s conclusion that the loan evidenced by the note was not a “business loan” as contemplated by the statute. The Winns argue it is a business loan either as a matter of law or as a matter of fact. The appellees argue that the issue is one of fact and that the chancellor cannot be shown to have been clearly erroneous in deciding that the loan was not one for business purposes as contemplated by § 511.

The Winns cite a number of cases from other jurisdictions, none of which is quite on point. We are asked to infer, for example, that a mortgage loan can be a business loan from the holding in Union National Bank of Laredo v. Nelson, 747 F.2d 310 (5th Cir. 1984), that a mortgage loan was a “variable rate loan” covered by § 511 because it applied to such loans made before the current law came into effect. There was no issue as to whether the loan was a business loan. Even if a mortgage loan can be a business loan, that does not help in deciding whether the mortgage loan in this case is a business loan. Explanation as to how each of the cited foreign cases is not quite on point would not be helpful and would unduly prolong this opinion.

The Winns’ strongest citation is Briggs v. Capital Savings & Loan Ass’n, 268 Ark. 527, 597 S.W.2d 600 (1980), which was decided under the predecessor to the current §511. Briggs was asked to participate with others in developing land Worsham had purchased and mortgaged to Capital Savings & Loan. The development plans fell through. Worsham could not make a loan payment to Capital, so Briggs loaned Worsham $6,250 to make the payment but noted on the check that it was “advance on purchase.” Subsequently Worsham needed $150,000 to keep from losing the property. In order to loan Worsham this additional amount, Briggs borrowed $110,000 from Capital, using other property Briggs owned as security. A usury question arose, and the issue became whether the loan from Capital to Briggs was a business loan and thus not subject to the Arkansas usury limit because of the federal preemption.

Briggs contended he used the money from Capital to lend to Worsham just to help Worsham as a friend, but the loan application Briggs had filed with Capital contained these inserts: “commercial loan” and “cash to purchase property.” In addition, Briggs had signed an affidavit to the effect that he understood the loan was a business loan within the meaning of the federal law permitting interest in excess of the maximum non-usurious interest which was 10%.

In affirming the trial court’s holding in favor of Capital, we pointed out that the trial court had gone too far in declaring that any real estate loan was to be considered as a business loan for the purpose of the federal preemption. We wrote that a loan “for the purchase of a home by an individual may not be a ‘business’ loan. . . .” We agreed, however, that the loan was for business purposes because “Capital had every reason to believe that. . . [Briggs’s] payment of the Worsham note still related to a purchase of . . . [the development property].” We treated the issue as one of fact and held that the chancellor’s conclusion that it was a business loan was not clearly erroneous.

The main difference between the Briggs case and this one is that here the loan was made to allow Chateau Cantrell to purchase property which was already developed whereas in the Briggs case it was to conduct development. In their argument that the difference is essential, the appellees cite In re Lawson Square, Inc., 816 F.2d 1236 (8th Cir. 1987). First South, F.A., loaned Lawson Square, Inc., money to convert an apartment complex into condominiums for sale. A usury question arose, and the issue before the court of appeals was whether the Arkansas usury law (Amendment 60) was preempted by § 501 of the Depository Institutions Deregulation and Monetary Control Act of 1980.

First South argued that the loan to Lawson Square, Inc., was secured by a first lien on “residential property” and thus it was covered by the preemption found in § 501(a)(1)(A) of the act. The court of appeals agreed that the property in question was “residential.” The appellees here argue that if such property qualifies as residential under § 501 the loan may not qualify as one for business purposes under § 511. We know of no authority for that proposition and can see no logic in it. No explanation is given as to why the two preemptions do not or should not overlap.

The only other citation of consequence furnished by the appellees is to an opinion issued by the General Counsel of the Federal Home Loan Bank Board, March 19, 1981. The opinion was furnished to us as an appendix to the appellees’ brief, and the. Winns contest its legitimacy and move that it be stricken. We need not respond to the motion to strike, as we do not find the opinion to be controlling in this case whether or not it should be authoritative.

The opinion does not contain the facts upon which it is based. It states only that it is a response to an inquiry from a supervisory agent of the Federal Home Loan Board in Little Rock. It concludes that the “nature of the loan” for purposes of determining whether it is for business purposes is to be determined by the use to which the loan proceeds will be put and states:

The more difficult question is when does a loan have a business purpose. In construing the language in the National Bank Act, 12 U.S.C. § 85, which is virtually identical to that contained in § 511, the Office of the Comptroller of the Currency (OCC) takes the position that the loan proceeds must be used in the active conduct of a trade or business.. . . This construction would preclude the applicability of § 511 to loans for passive investments, i.e., business ventures in which the borrower will not take an active role in the operation or management of the enterprise.

Further on in the opinion, comments made by congressmen at the time the statute was enacted are discussed. Rep. St. Germain took the position that a loan by a broker to a margin investor would qualify as one for business purposes. The opinion states:

Since Rep. St. Germain’s position is inconsistent with traditional interpretations, we would advise the more cautious course and confine the business loan exemption to those loan transactions in which the proceeds will be used in active business investments.

While the opinion may or may not be authoritative, it does not necessarily cover the situation before us. It does not define “passive investment.” One investment perhaps thus described might be an investment in a stock or bond purchased on a public exchange. The average investor takes no active part in operation or management of AT&T. That is unlike the sort of investment we have here. The Chateau Cantrell partners could be said to be engaged in an “active business investment” albeit they are operating the apartment complex through Mr. Flake’s company as agent. The opinion, by saying that “active business investments” are included in loans for business purposes clearly does not exclude all loans for “investment” purposes, and thus we would not find it helpful even if we were to rule it acceptable as authoritative.

Conclusion

We agree with the Winns that our decision should be controlled by the Briggs case. We can see no significant distinction between the use to which the money was to be put by the borrowers here and the borrowers there. The Briggs case opinion recites nothing to the effect that Briggs and the others Capital was led to believe were engaged in a land development project intended to do the development personally. We have no quarrel with the facts found by the chancellor, but in a de novo review we are free to reach a different result required by the law. Ferguson v. Green, 266 Ark. 556, 587 S.W.2d 18 (1979); Larey, Comm’r v. Cont. Southern Lines, 243 Ark. 278, 419 S.W.2d 610 (1967). We do so here. Mr. Flake, the managing general partner, testified that he was in the business of buying, selling, and organizing the management of real estate properties. He derived part of his income from just such activities as this one. The fact that other partners motives were based on tax avoidance and “investment” does not, in our view, lessen the “business loan” nature of this transaction. Not only could the Winns have believed from the circumstances that Mr. Flake and his partners were buying the apartment complex for business purposes, that very declaration was made by the partnership in the note.

The case is remanded for the chancellor to sort out the entitlements to rents and profits as well as to rule on the question of attorneys’ fees.

Reversed and remanded.

Holt, C.J., not participating.

Justice Glaze and Special Justice Judith A. DeSimone dissent.

Judith A. Desimone, Special Justice,

dissenting. While the majority opinion has summarized the salient facts of the case, a few details provide insight into the background of the unique provision in the $1,600,000.00 promissory note and mortgage at the heart of this case. At the outset of negotiations, the sellers of the apartment complex were asked for special consideration by the buyer. The special consideration requested was a reduction in payments to be made over the first two years of the mortgage. Sellers were amenable to this request, but asked, in return, for some interest on their partially-forgiven sums. The buyer, a general partnership, agreed, and an attorney for one of those general partners was asked to draw the appropriate papers.

The provision at issue read as follows:

“Payable for the first twenty-four (24) months in equal installments of $10,666.67 per month, payable on the first day of each month, commencing on December 1, 1982, such payments to be applied to interest only, with unpaid interest accruing and compounding at the rate of ten percent (10%) per annum for said twenty-four (24) months only; thereafter, payable in equal installments of interest only of $13,333.33 per month for ninety-six (96) months, with the entire principal plus interest thereon at the rate of ten percent (10 %) per annum due November 1, 1992, and in addition, an amount equal to the unpaid and compounded interest which accrues during the first twenty-four (24) months following the date of this Note shall be due and payable November 1, 1992.”

The drafting attorney recognized a potential usury problem, and purposefully inserted language that purportedly classified the loan as one for “business purposes” under the Depository Institutions Deregulation and Monetary Control Act of 1980, the pertinent provision of which reads as follows:

12 U.S.C.S. §86a (a):
If the applicable rate prescribed in this section exceeds the rate a person would be permitted to charge in the absence of this section, such person may in the case of a business or agricultural loan in the amount of $ 1,000 or more, notwithstanding any State constitution or statute which is hereby preempted for the purposes of this section, take, receive, reserve, and charge on any such loan, interest at a rate of not more than 5 per centum, in excess of the discount rate, including any surcharge thereon, on 90-day commercial paper in effect at the Federal Reserve bank in the Federal Reserve district where the person is located.

If the enterprise were determined to fall within the classification “business” under the Act, it would be exempt from the State’s constitutional limitation on interest charges.

The buyer, Chateau Cantrell Apartment Company, was a general partnership organized for one purpose, purchase and sale of the Chateau Cantrell Apartment complex. That purpose came to total fruition approximately one year later, when the partnership was sold. Evidence adduced revealed that one of the general partners had an extensive real estate development background, and in fact owned a real estate development company, which company was hired to manage the Chateau Cantrell complex. There is no evidence, however, that any of the general partners took an active role in the management of the complex.

For the determination of whether the enterprise fits the classification “business” under the Monetary Control Act, the Court has been cited to an Opinion issued by the General Counsel of the Federal Home Loan Bank Board, March 19, 1981, S34. That authority has been termed “convincing” in a relatively recent decision, Bank of Evening Shade v. Lindsey, et ux., 278 Ark. 132, 644 S.W.2d 920 (1983), which decision quoted from Ford Motor Credit Co. v. Milhollin, 444 U.S. 555 (1980), asserting that such an administrative opinion should be dispositive “unless demonstrably irrational.” Milhollin at 567.

The March 19,1981, Opinion of the General Counsel of the Federal Home Loan Bank Board responded precisely to an inquiry as to the meaning of the term “business” under the Monetary Control Act. As noted by the Majority, that General Counsel advised that the nature of a loan is determined by the use to which the loan proceeds will be put, i.e., whether for a business purpose. S34 Opinion, p. 1. Loan proceeds should be used “in the active conduct of a trade or business,. . . .” precluding the applicability of this statute to loans for passive investments or those where a borrower did not take an active role in the operation or management of the business. Id. The General Counsel looked to similar interpretations of the National Bank Act, 12 U.S.C. Sec. 85, which contained the identical provision regarding “business” as the Monetary Control Act. Counsel pointed out that drawing on such interpretations by the Office of the Comptroller of the Currency was consistent with tax law distinctions between business and non-business activities. Id. Further, the General Counsel looked toward interpretation of business loans under the Truth in Lending Act, and detailed case decisions analyzing the individual facts and circumstances presented, which decisions apparently turn on the degree of active management. Id., p. 2. See, for example, Sapenter v. Drayco, Inc., 326 F. Supp. 871 (E.D. La.), aff'd without opinion, 450 F.2d 941 (5th Cir. 1971), cert. denied, 406 U.S. 920 (1972).

Whatever the degree of personal involvement of the principals in the case of Brigg’s v. Capital Savings and Loan Ass’n, 268 Ark. 527, 597 S.W.2d 600 (1980), it is clear that development was part of the enterprise purpose. In this case, the purchase and resale of the Chateau Cantrell Apartment complex was the sole purpose. After several hearings, the Chancellor below found that the buyer, Chateau Cantrell Apartment Company had only one asset, “that being the Chateau Cantrell Apartment complex, . . . and ... did not manage, construct, renovate, or operate the apartment complex.”

In rejecting the active/passive guidepost provided by the General Counsel, the majority provides no criteria with which to analyze such an enterprise, leaving advising attorneys to incorporate “wo~ds of art” into documents in order to persuade future reviewing courts that an otherwise problematical agreement will pass muster under an appropriate statute. The potential that form will triumph over substance provides slight encouragement for those same attorneys to suggest agreements structured so as to avoid such provisions as those which initiated these proceedings.

In view of the patently rational analysis of the General Counsel, See, Bank of Evening Shade v. Lindsey, supra, I would affirm the reasoning of the Chancellor below, and hold that this note and mortgage involved a loan which was not “for business or agricultural purposes within the meaning of 12 U.S.C. Sec. 86A”, and that the key provision was clearly usurious under the Arkansas Constitution.

Glaze, J., joins in this dissent.


author: Tom Glaze, Justice.

text:
    John Edward GLADSON, Jr. v. Vickie Jean GLADSON, Executrix of the Estate of Ilene Godfrey Gladson
    90-213
    800 S.W.2d 709
    Supreme Court of Arkansas
    Opinion delivered December 17, 1990

      Webb & Doerpinghaus, by: Doyle L. Webb II, for appellant.

      F. Wilson Bynum, Jr., P.A., for appellee.
   Tom Glaze, Justice.

llene Gladson, now deceased, had two accounts with Dean Witter Reynolds that she held as joint tenant with right of survivorship with her husband and daughter, Vickie. Sometime after the accounts were opened, Mrs. Gladson’s husband died, but the accounts otherwise remained unchanged. However, Mrs. Gladson did subsequently execute a will nominating Vickie as executrix of her estate and bequeathing, among other things, $5,000 from each of the two accounts to her son, John Gladson, Jr.

After Mrs. Gladson died, Vickie petitioned to admit her mother’s will to probate. Because she claimed ownership to the two Dean Witter accounts as the surviving joint tenant, Vickie did not list those accounts in the inventory of Mrs. Gladson’s estate. John disagreed with his sister’s claim and requested that Vickie account for the funds in the accounts that their mother bequeathed him. The two parties submitted their dispute to the probate judge on stipulations and briefs, and the judge responded, holding in Vickie’s favor. We affirm the trial judge’s decision.

In his first argument, John cites Hall v. Superior Federal Bank, 303 Ark. 125, 794 S.W.2d 611 (1990), and argues his mother’s mere opening of the Dean Witter accounts was not conclusive of her intent to establish them as joint tenancies with right of survivorship. Instead, he contends the trial courts should have considered Mrs. Gladson’s will as controlling of her intent which reflected that the accounts should be included in her estate so her bequests to John could be fulfilled.

John’s argument ignores the manner in which the parties submitted this case to the court below. Both parties stipulated that the two Dean Witter accounts created joint tenancies with right of survivorship in Mrs. Gladson, her husband and Vickie. In other words, they agreed Mrs. Gladson had opened the accounts with the intent to create joint accounts with the right of survivorship. The only issue submitted to the trial court was whether Mrs. Gladson’s will and bequest to her son can be said to have terminated the previously established accounts to which Vickie lays claim as the surviving tenant. The trial judge said no, and that being the only issue properly presented in this appeal, we agree.

Our court apparently has not addressed this issue. However, in Miller v. Riegler, 243 Ark. 251, 419 S.W.2d 599 (1967), we considered with approval the Arizona Supreme Court’s discussion of the history of joint tenancy and that part of the discussion relevant here reads as follows:

Another characteristic of joint tenancy is that it is not testamentary but “is a present estate in which both joint tenants are seized in the case of real estate, and possession in case of personal property, per my et per tout,” that is, such joint tenant is seized by the half as well as by the whole. The right of survivorship in a joint tenancy therefore does not pass anything from the deceased to the surviving joint tenant. Inasmuch as both cotentants in a joint tenancy are possessors and owners per tout, i.e., of the whole, the title of the first joint tenant who dies merely terminates and the survivor continues to possess and own the whole of the estate as before.

Consistent with the foregoing, the rule appears well settled that a devise by a joint tenant, who is survived by other joint tenants, is not effective to pass any title to the real estate in joint tenancy for the reason that the title passes by operation of law to the survivor or survivors. See In re Estate of Alpert, 95 Ill. 2d 377, 447 N.E.2d 796 (1983); First United Presbyterian Church v. Christenson, 33 Ill. App. 3d 928, 339 N.E.2d 15 (1975); see also 4A R. Powell, Real Property § 619.1 (1982); 20 Am. Jur. 2d Cotenancy and Joint Ownership § 3 (1965). Such a rule applies in full measure to personal property. See Miller, 243 Ark. 251, 419 S.W.2d 599. In sum, title to property held in joint tenancy takes precedence over the claim of a devisee, legatee or heir, as the case may be. In re Estate of Alpert, 95 Ill. 2d at 381, 447 N.E.2d at 798.

As previously noted, Vickie was the sole surviving tenant of the survivorship accounts she held with her mother and father. As a consequence, Vickie acquired ownership to those funds by operation of law upon her mother’s death. That ownership could not be terminated by Mrs. Gladson’s will and bequests of funds contained in those accounts to John. Therefore, we affirm the trial court’s holding that Vickie owns both accounts free and clear of any claim John has asserted by virtue of their mother’s will and specific bequests.


author: Tom Glaze, Justice. Tom Glaze, Associate Justice.

text:
    Lee D. NARD v. STATE of Arkansas
    CR 90-111
    801 S.W.2d 634
    Supreme Court of Arkansas
    Opinion delivered December 17, 1990
    [Supplemental Opinion on Denial of Rehearing January 22, 1991.]

      Thomas A. Potter, for appellant.

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

      Corbin and Brown, JJ., not participating.

   Tom Glaze, Justice.

This is a criminal case in which appellant was convicted on three counts of delivery of cocaine arising out of alleged transactions on May 30, 1989, July 12, 1989, and August 18,1989. He was sentenced to forty years and a $25,000 fine on each count, and the terms of imprisonment were set to run concurrently. On appeal, appellant raises two points for reversal.

Appellant first complains that, in trying one of the three charges against him, viz., the August 18 transaction, the prosecutor failed to comply with Ark. Code Ann. § 12-12-313(d) (1) (Supp. 1989). Simply put, the prosecutor, in attempting to prove one of the three charges against the appellant, improperly introduced a chemical analysis report through Norman Kemper, a chemist with the State Crime Laboratory, who had not personally performed the analysis. The analysis report was purportedly prepared by Keith Kerr, another chemist who worked in the laboratory. In introducing the report, the state had Kemper acknowledge Kerr’s signature, which appeared at the bottom of the report, and further had him relate that Kerr was a certified drug chemist who had worked in the crime laboratory for the past three years. Citing § 12-12-313(d)(1), appellant objected to the report’s introduction because the report had not been properly attested. The trial court overruled appellant’s objection, indicating the report’s introduction had been previously decided in “pre-trial.”

In explanation of the trial court’s “pre-trial” remark, our review of the record reflects that, before lunch break on the day of trial, the prosecutor informed the trial court that Kerr could not testify due to a scheduling conflict that made him a witness elsewhere in the state. The prosecutor stated that, in lieu of Kerr’s live testimony, he would introduce Kerr’s report pursuant to § 12-12-313(d)(1), after deleting a reference to another case mentioned in the report. The trial court asked if there was any objection to the report if the deletion was made. The appellant responded, “No.” The state argues the appellant should have objected at this time rather than doing so later when the report was offered during Kemper’s testimony. In other words, since appellant did not object at the first opportunity to the report’s introduction, the state claims he waived his objection. See Asher v. State, 303 Ark. 202, 795 S.W.2d 350 (1990); Boone v. State, 282 Ark. 274, 668 S.W.2d 17 (1984).

We reject the state’s contention. Upon revealing his inability to present Kerr as a witness, the prosecutor informed the trial court and appellant that he would introduce Kerr’s report under § 12-12-313(d)(1) and specifically indicated that the report would be duly attested. While appellant interposed no objection at this initial opportunity, it nowhere appears in the record that appellant was aware that the report to be offered by the state would not be properly attested. When the state actually introduced the report at trial, appellant objected the report did not, in fact, comply with § 12-12-313(d)(1) because it merely contained a certification, not an attestation or “language to the effect [the report] was sworn to.” Thus, under these circumstances, we believe the appellant’s objection was timely.

In addressing appellant’s first argument, we note § 12-12-313(a) (Supp. 1989) provides that, subject to the rules of criminal procedure, courts shall receive drug analysis reports as competent evidence when the reports are duly attested to by the executive director or his assistants, associates, or deputies. Section 12-12-313(d)(1) further provides as follows:

(d)(1) All records and reports of evidence analysis of the State Crime Laboratory shall be received as competent evidence as to the facts in any court or other proceeding when duly attested to by the employee who performed the analysis.

Here, the disputed drug analysis report reflected Kerr’s signature and it was stamped with the words “This is a True and Certified Report of the Analysis of the Indicated Sample.” Superimposed on these words was a notary seal and the signature of “R.L. Keith,” notary public. The question arises as to whether this certification and notarization satisfies the “duly attested to” requirement under § 12-12-313(d) (1). We hold the state’s report was not attested in the manner contemplated by § 12-12-313(d)(1).

Attest has been defined as follows: “To bear witness to, certify; declare the truth of, in words or writing, esp. affirm in an official capacity; to attest the truth of a statement.” See The Random House Dictionary of the English Language.

Section 12-12-313(a) and (d)(1) clearly permitted Kerr’s chemist report to be admitted into evidence for the truth of the findings and statements contained in it if Kerr had attested to their validity. In fact, the General Assembly appears to have provided this exception for the introduction of this type governmental report in criminal proceedings, assuming it meets the prerequisites of the statute; otherwise, such reports are considered inadmissible hearsay under Rule 803(8)(iii) of the Uniform Rules of Evidence. See also Llewellyn v. State, 4 Ark. App. 326, 630 S.W.2d 555 (1982) (the court of appeals, citing Rule 803(8), affirmed the trial court’s exclusion of a chemist’s report as inadmissible hearsay because the testifying witness, the supervisor of the State Crime Laboratory, did not have any personal knowledge of the drug testing done by the chemist who performed the tests and prepared the report.)

Considering the major purposes of § 12-12-313, to allow hearsay reports under limited conditions, we feel confident that the General Assembly intended for the phrase “duly attested to” to require more than the mere signature of the person or chemist who performed the analysis, as was the situation here. Undoubtedly, some indicia of truthfulness must attend such a report’s admissibility when it is introduced into a criminal proceeding as competent evidence. That assurance of truthfulness can best be given by the one who performed the tests and made the analysis as is provided by § 12-12-313(d)(1).

Before leaving this first point, we note the state’s alternative argument that even if the report was not admitted properly under § 12-12-313(d)(1), there was no prejudice because the police officer involved in the drug transaction testified and could identify the substance. See Milburn v. State, 262 Ark. 267, 555 S.W.2d 946 (1977). While such testimony of an officer may be elicited so as to prove an item to be a controlled substance, the state in this case never asked the officer to give her opinion as to whether the substance she purchased and obtained through appellant’s assistance was cocaine.

We do agree with the state’s argument that its failure to prove the one drug charge against appellant does not require the reversal of the other two counts. The state presented strong proof to establish appellant’s guilt as to these other drug delivery charges, and we have held that when a judgment in a criminal case is correct as to the one count but erroneous as to another, this court has the power to sever the judgment and affirm the count(s) upon which there was a proper conviction and reverse the other count. Martin v. State, 290 Ark. 293, 718 S.W.2d 938 (1986). From our examination of strong evidence in this case, we believe the jury’s verdict giving the maximum penalty on the other two counts to run concurrently was not affected by the one erroneous conviction which we hold must be reversed. See Id.; Lee v. Lockhart, 754 F.2d 277 (8th Cir. 1985).

In his second point, appellant contends Officer Barbara Crow’s rebuttal testimony was improper and therefore reversible error. Appellant’s defense was that he never sold, purchased or delivered any cocaine, and he had never seen Officer Crow who testified he had. Appellant’s wife, Jannette, corroborated her husband’s story and specifically denied having met Crow during one of the drug transactions. The state called Crow to rebut Jannette’s version. Clearly Crow’s testimony involved a collateral matter, viz., whether she had ever met appellant’s wife during one of the drug deals. We have held that a witness cannot be impeached on a collateral matter by calling another witness to contradict the testimony of the first witness. Kellensworth v. State, 275 Ark. 252, 631 S.W.2d 1 (1982).

Although we agree, and the state seems to conclude, that Crow’s rebuttal testimony was error, we cannot agree such error requires reversal. This court will not reverse a conviction for an error which is unaccompanied by a showing of prejudice. Richmond v. Smith, 302 Ark. 498, 791 S.W.2d 691 (1990); Goldsmith v. State, 301 Ark. 107, 782 S.W.2d 361 (1990). Here, appellant simply failed to show any prejudice resulting from Crow’s rebuttal testimony.

Thomas A. Potter, for appellant.

Mary B. Stallcup, Att’y Gen., by: Clint Miller, Asst. Att’y Gen., for appellee.

For the reasons given above, we reverse and dismiss the one delivery of cocaine count that allegedly occurred on August 18, 1989, but affirm the remaining two convictions and sentences.

SUPPLEMENTAL OPINION OF DENIAL OF REHEARING

JANUARY 22, 1991

Tom Glaze, Associate Justice.

In its petition for rehearing, the state does not take issue with this court’s reversal of appellant’s conviction of the delivery of cocaine count that allegedly occurred on August 18, 1989. However, it does argue that this court should have remanded that count for retrial rather than dismissing it. The state is correct, and therefore we modify our December 17,1990 opinion to reflect a remand of that count.

This court has held that reversal for trial error will not preclude retrial. Parker v. State, 300 Ark. 360, 779 S.W.2d 156 (1989). More specifically, when a reviewing court determines that a defendant’s conviction must be set aside because certain evidence was erroneously admitted against him, the double jeopardy clause does not forbid his retrial so long as the sum of the evidence offered by the state and admitted by the trial court — whether erroneously or not — would have been sufficient to sustain a guilty verdict. Lockhart v. Nelson, 488 U.S. 33 (1988).

Here, the point requiring reversal was the trial court’s erroneously admitting into evidence a chemical analysis report which did not conform to the requirements of Ark. Code Ann. § 12-12-313(d)( 1) (Supp. 1989). This was clearly trial error. However, when considering the report and other evidence presented by the state, sufficient evidence existed to support the conviction or count in issue. Accordingly, we must reverse and remand that count for possible retrial.

Appellant also petitions for rehearing, but in doing so, merely reargues his earlier contention that Officer Crow’s rebuttal testimony was both improper and prejudicial. Because his petition constitutes nothing more than reargument, we deny appellant’s petition. See Ark. Sup. Ct. R. 20(g).

Corbin and Brown, JJ. not participating.

       Kemper performed the tests on the substances obtained in the other two drug transactions with which appellant was charged, and appellant does not challenge the testimony and evidence underlying those charges.


author: Dale Price, Justice.

text:
    Ruth Brandenburg ANDERSON v. FIRST NATIONAL BANK of Hot Springs
    90-272
    801 S.W.2d 273
    Supreme Court of Arkansas
    Opinion delivered December 17, 1990

      John Wesley Hall, Jr., for appellant.

      Hobbs, Lewis, Mitchell, Garnett andNaramore, by: Ronald G. Naramore, for appellee.
   Dale Price, Justice.

The issue in this appeal is whether the trial court erred in granting the appellee’s motion for summary judgment. We affirm.

The appellant, Ruth Brandenburg Anderson, married William M. Anderson, Jr., in October, 1981. They executed an antenuptial agreement in which the appellant agreed to receive nothing from Mr. Anderson’s estate upon his death. A new will was subsequently executed by Mr. Anderson, leaving the appellant approximately one-third of his real and personal property. The will was prepared by Henry Britt and nominated the appellee, First National Bank of Hot Springs (First National), as executor.

Mr. Anderson died on January 15, 1984, and the will was presented to probate court. The children of the appellant’s deceased husband filed a will contest. First National was appointed administrator of the estate until the will contest was settled. Robert Hargraves was hired by First National as attorney for the estate. On August 6, 1984, the appellant and her deceased husband’s children entered into a family settlement agreement which resolved the issues raised by the will contest and gave the appellant property from the estate.

The appellant alleged in her complaint against First National that (1) First National breached its fiduciary duty by hiring an attorney other than Henry Britt contrary to an agreement between William Anderson, Jr., and First National; (2) First National breached its fiduciary duty by refusing to defend the will in the will contest action and by coercing the appellant into signing the family settlement agreement; and (3) First National’s conduct constituted the tort of interference with an inheritance.

First National filed its motion for summary judgment contending that there was no contractual agreement between First National and William Anderson, Jr., and the appellant had sustained no damages; no consideration was given for First National’s alleged promise to hire Britt; the appellant was not coerced into signing the family settlement agreement; and the appellant was barred by principles of estoppel from denying the validity of the family settlement agreement.

The trial court entered summary judgment against the appellant stating there were no genuine issues of material fact to be decided. The appellant argues on appeal that the trial court erred in granting summary judgment since disputed issues of material fact existed.

It is well settled that summary judgment is appropriate only when the pleadings, depositions, answers to interrogatories, and affidavits show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. ARCP Rule 56. Once the movant makes a prima facie showing of entitlement, the respondent must meet proof with proof by showing a genuine issue as to a material fact. Pruitt v. Cargill, Inc., 284 Ark. 474, 683 S.W.2d 906 (1985). Because this appeal is from the trial court’s granting of summary judgment, our review is limited and focuses on the pleadings, deposition testimony and other documents filed by the parties in support of their respective arguments.

The appellant first contends there was a genuine issue of material fact as to whether First National breached its fiduciary duty by refusing to hire Henry Britt as attorney for the estate. Mr. Britt had prepared the last will of Mr. Anderson, and it was alleged by the appellant in her complaint that Mr. Anderson had agreed to nominate First National as executor on the condition that First National hire Britt as attorney. The appellant testified by deposition that Gene Parker and Mike Dowling, officials of the trust department at First National, entered into an agreement with Mr. Anderson to hire Britt as attorney for the estate. She claimed this occurred following a board meeting in either September or October of 1983. Her only knowledge of the alleged agreement was obtained from conversations with Mr. Anderson. The appellant stated in her answers to interrogatories that Britt was a close personal friend of her deceased husband and that Britt would have served impartially and fairly for all beneficiaries under the will. It was her contention that Robert Hargraves, the attorney hired by First National, was biased and favored the children of Mr. Anderson. The appellant stated in her deposition that First National breached its fiduciary duty by not hiring Britt because it was standard procedure in Hot Springs to hire the attorney who prepared the will to represent the estate.

First National submitted the affidavits of Gene Parker and Mike Dowling, officers of the trust department. Each denied the existence of an agreement with Mr. Anderson to hire Britt as attorney for the estate. The appellant was unable to meet proof with proof as to the existence of an agreement by First National to hire Britt as attorney for the estate. Accordingly, there was no remaining issue of material fact to be tried in this regard and summary judgment was appropriate.

The appellant next contends there was a genuine issue of material fact as to whether First National breached its fiduciary duty by its refusal to defend the will in the will contest proceeding and by its acquiescence in the execution of the family settlement agreement. In support of this contention, the appellant claims First National made threats to her former attorney to the effect that it would withdraw as executor if she did not sign the family settlement agreement. The affidavits of Gene Parker and Mike Dowling provided that they never communicated to the appellant that First National would withdraw as administrator if the appellant did not sign the family settlement agreement. Furthermore, the affiants stated they did not place any kind of pressure on the appellant or encourage her in any way to sign the family settlement agreement. The appellant acknowledged in her deposition that no one from First National intimidated her in this regard. She stated the intimidation was through her deceased husband’s son-in-law and his attorney, and she “attributed this to the bank [First National] because they did not do their duty.” The appellant was again in the position of being unable to meet proof with proof and there was no remaining issue of material fact to be tried in this regard.

A cause of action for the tort of interference with an inheritance was stated in the appellant’s complaint. She alleges in her final assignment of error that First National failed to move for summary judgment on this point, and it was error for the trial court to grant summary judgment on this cause of action. The record reflects First National moved for summary judgment on the basis there was no genuine issue as to any material fact in the appellant’s case and addressed the appellant’s claim for loss of inheritance in its brief in support of summary judgment.

The appellant stated in her deposition that she understood the provisions of the family settlement agreement, acknowledged her signature on it, received benefits from it, and subsequently filed suit for the alleged breach of the agreement by her deceased husband’s children. The trial court found there was no material issue of fact to be decided in this regard, and properly granted First National’s motion for summary judgment on the appellant’s claim of interference with an inheritance.

Affirmed.