text:
    John Wesley HOOVER, Jr. v. STATE of Arkansas
    CR 77-187
    562 S.W. 2d 55
    Opinion delivered February 27, 1978
    (Division II)

      Jack L. Lessenberry, for appellant.

      Bill Clinton, Atty. Gen., by: Joseph H. Purvis, Asst. Atty. Gen., for appellee.
   John A. Fogleman, Justice.

John Wesley Hoover, Jr. was found guilty of obtaining personal property of the value of more than $35 under Ark. Stat. Ann. § 41-1901 (Repl. 1964). He seeks reversal of the judgment, contending that the information should have been dismissed, that the evidence was insufficient to support the verdict and that there was prejudicial error in statements made by the prosecuting attorney in closing argument. We find no error and affirm.

Appellant contends that the information charging him should have been dismissed at the conclusion of the state’s evidence. But the grounds for dismissal argued here were not then urged in the trial court and cannot properly be raised for the first time on appeal. French v. State, 260 Ark. 473, 541 S.W. 2d 680; Dyas v. State, 260 Ark. 303, 539 S.W. 2d 251. Furthermore, appellant has not made a convincing argument or furnished any authority for his present contention that the information should have been dismissed because it should have been laid under Ark. Stat. Ann. § 41-1906 (Repl. 1964), which deals with false written statements to be used as a basis for credit, instead of § 41-1901. This argument is based upon the premises that strict construction given penal statutes requires application of § 41-1906 and that an act containing special provisions must, be read as an exception to a general rule in an earlier act. Under the Dixon rule, this court is not required to treat such points. Dixon v. State, 260 Ark. 857, 545 S.W. 2d 606.

Appellant argues that even though it might appear that he was properly charged under § 41-1901, that the evidence on behalf of the state falls clearly within the provisions of § 41-1906, and that the latter specifically governs the conduct shown by that evidence. When we view the evidence in the light most favorable to the state, as we must, it also clearly falls within the provisions of § 41-1901. No instruction was requested which would have permitted the jury to find appellant guilty of the misdemeanor defined in Ark. Stat. Ann. § 41-1906 instead of the felony of which he was found guilty.

On superficial examination, it appears that the misdemeanor might be a lesser included offense of that charged by the information. We need not decide that question, however. As we will presently point out, the state’s evidence, viewed in the light most favorable to it, clearly tended to show that appellant was guilty of the greater offense, and the verdict was supported by substantial evidence. If § 41-1906 did constitute a lesser included offense, appellant cannot now complain that the jury did not consider that statute, because he failed to ask for an instruction that would have permitted it to do so. Perry v. State, 254 Ark. 939, 497 S.W. 2d 10; Stevens v. State, 231 Ark. 734, 332 S.W. 2d 482.

Appellant’s argument that the evidence was insufficient to sustain his conviction is based upon: (1) the information alleged that the money in question was obtained from Dale Hinckle, but his mother was the owner of it, either in her own right or jointly with his aunt, and (2) the money was originally placed in an escrow account of Southwest Realty Company and was not loaned to Hoover until a later date; (3) since Dale Hinckle was not the real owner of the property and the real owner did not testify, appellant was denied his constitutional right to be confronted by his accusers.

Appellant relies upon Von Tonglin v. State, 200 Ark. 1142, 143 S.W. 2d 185 and Andrews v. State, 100 Ark. 184, 139 S.W. 1134. Those cases are distinguishable, but not because both involve larceny instead of false pretenses. In Von Tonglin, the fatal variance was that the evidence showed that the cow stolen belonged to Mrs. F. M. Randolph, the mother of Joe Randolph, who was named as its owner in the indictment. It was specifically pointed out in that case, however, that there was no evidence that the son had the exclusive possession, or right to possession of the cow. In Andrews, the variance was not fatal. The ownership was alleged to be in a partnership. The partners were named, as was the partnership. It was held that variance in the name of one of the partners was immaterial because the property was sufficiently identified by reason of the fact that the partnership was correctly named. It was clearly indicated in Andrews that correctly naming the injured party is essential to the identification of stolen property in indictments for larceny and kindred offenses. Looking to other cases, we find that in a larceny case, allegation of ownership in one having exclusive possession and control of the property stolen is permissible and that proof that actual ownership or title is in another is not a fatal variance. Cook v. State, 80 Ark. 495, 97 S.W. 683; Monk v. State, 105 Ark. 12, 150 S.W. 133; Houpt v. State, 157 Ark. 171, 247 S.W. 770. Subsequent to our decision in Van Tonglin, we held that it is not error to allege ownership in one who was in possession and control of the property. Tate v. State, 204 Ark. 470, 163 S.W. 2d 150.

We have also held that the allegation of general ownership in a named person is sufficient to allow proof of special ownership, such as that of a bailee, in that person. Brown v. State, 108 Ark. 336, 157 S.W. 934. In Monk v. State, supra, there was not a fatal variance, even though a watch and fob stolen belonged to a wife by virtue of a gift from her husband, who was named as the owner in an indictment for larceny, when the evidence showed that the wife had given them to him for safekeeping and that he had not returned them to her at the time they were taken from under the pillow of the bed occupied by both. It has also been held in a larceny case that it was fairly inferable that a landlord had possession and special ownership of seed cotton grown on his farm by a tenant, when the evidence showed that the landlord had a lien on the cotton to secure the payment of rent amounting to one-fourth of the cotton and that, by agreement with the tenant, the landlord would sell the cotton and apply the excess over the rent to the tenant’s account with him. Holden v. State, 168 Ark. 465, 270 S.W. 596. It is wholly immaterial who owns the stolen property, if, at the time it is stolen, it is in the possession and under the control of another person alleged in an indictment to be the owner, and possession and control in such a case constitutes special ownership. Harrell v. State, 169 Ark. 1038, 278 S.W. 45.

Robbery has been considered a kindred offense, in that the requirements as to allegations of ownership are precisely the same as in larceny. Boles v. State, 58 Ark. 35, 22 S.W. 887. We have held that there was not a fatal variance between allegation of ownership in a bank cashier of money stolen in a robbery of a bank and evidence showing that the cashier was the officer of the bank in charge of the money and that it was taken from the bank and out of his custody by putting him in fear. Jenkins v. State, 131 Ark. 312, 198 S.W. 877. In Powell v. State, 251 Ark. 46, 471 S.W. 2d 335, cert. den. 406 U.S. 917, 92 S. Ct. 1763, 32 L. Ed. 2d 115, a robbery case, we said that ownership may be laid in an indictment, either in the real owner or the person in whose possession the property was at the time of the theft.

We have also held that an allegation that money was obtained by false pretenses from a named person is a sufficient allegation of ownership in that person and a sufficient identification of the money taken to withstand a demurrer. Silvie v. State, 117 Ark. 108, 173 S.W. 857.

We take the crime charged here to be sufficiently analogous to larceny that allegations of ownership in one from whom the money was obtained by the false pretense is sufficient and proof that it was actually owned by someone else is not a fatal variance. See Flannigan v. State, 232 Md. 13, 191 A. 2d 591 (1963); State v. Cobb, 122 W. Va. 97, 7 S.E. 2d 443 (1940). We have held that, in false pretense, it is not necessary that the indictment charge that the person from whom the money or other thing of value is obtained suffered any loss or damage, and that the crime is complete when the property is obtained. Fisher v. State, 161 Ark. 586, 256 S.W. 858. This is the same reasoning we have applied in the case of robbery and analogous to that to which we have resorted in larceny cases where there is a special ownership.

Even in jurisdictions where an allegation of ownership is mandatory, it has been held that proof of actual or constructive possession by, or of any legal interest or special property in the person alleged in the indictment to be the owner is sufficient. See Flannigan v. State, supra; State v. Cobb, supra. See also, Barnett v. State, 152 Tex. Cr. 626, 216 S.W. 2d 218 (1948). Alleging ownership in an agent of the owner is sufficient if the agent is in possession of the property. People v. Emmel, 292 Ill. 477, 127 N.E. 53 (1920).

Appellant contends that Dale Hinckle never had actual physical possession of the funds involved and that they were, when he obtained them, in an escrow account of Southwest Realty Company, a corporation. We find that there was substantial evidence to show that, when the alleged false representations were made by Hoover, Dale Hinckle was an agent of his mother and aunt having constructive possession or such control of the money to support an allegation of ownership by him.

Hoover was an officer and director of Southwest Realty Company. Lee DeBoard was also an officer and director of this corporation. Dale Hinckle was in the insurance business. Hoover and DeBoard wanted an insurance agency in connection with their real estate company and met with Hinckle to promote a consolidation of their businesses. As a result, the three formed an insurance agency known as Financial Insurance Services, Inc. They were to be equal stockholders, but when Hoover failed to pay for his stock, it was revoked. Hinckle testified that Hoover approached him about November 1 for a loan of $16,000. He said Hoover agreed to personally guarantee repayment and showed him a personal financial statement (which was proven false) in attempting to illustrate how the loan would be repaid. Hoover also promised a mortgage on property in Heber Springs to secure the loan. Hinckle said that he caused the loan to be made. His mother gave him a cashier’s check and he turned it over to Southwest Realty and the proceeds were placed in its escrow account. This money was shortly thereafter loaned to Hoover, according to Hinckle. Hoover gave his personal note dated November 11, 1975 for the money payable to Hinckle’s mother and secured it by a mortgage in favor of Hinckle’s mother. Hinckle testified that, when the money was placed in the escrow account, he was not an officer or director of Southwest Realty, but was “an authorized signatory on any account of Southwest Realty.” He also testified that he retained control of the money through an agreement between him and the officers of Southwest Realty that he was to be conferred with as to how it was spent. Although it was understood that the money would be used in the acquisition of property for a prospective corporation to be called Cedar Point Enterprises, Inc., which would develop the property, Hinckle testified that he made the loan on the strength of Hoover’s financial statement, Hoover’s promise to give his own note secured by a mortgage and assurance that he had a commitment from the president of the Arkansas National Bank for a loan on the property to be acquired. (This commitment was denied by the bank president.) Hinckle said that he was willing to invest his mother’s money, because Hoover guaranteed her 10% interest.

DeBoard testified that Mrs. Hinckle loaned the money about October 7, 1975, and that it was placed in an escrow account to be used on a project which did not go through and that the money was to be returned to her. He said that the deposit in escrow was “from Hinckle through his mother.”

Hoover, who was a licensed real estate salesman, made an offer to purchase the Cleburne County property prior to November 11, 1975, the date fixed for closing the purchase. The offer, or option, was in favor of Hoover and he assumed all obligations on it but he testified that he obtained it in behalf of Southwest Realty and others involved. He said that DeBoard and Southwest Realty would have each owned a 10% interest in the project, that Hinckle would have owned 1%, and that the placing of a great deal of the insurance business generated by the ownership and development of the property with Financial Insurances Services would have been assured. He stated that Southwest Realty was not buying the property, but that he was to assign his interest to the new corporation. A fair inference to be drawn from his testimony is that the money placed in the escrow account at Southwest Realty was to be used to buy the land in question; however, Hoover said that DeBoard conducted all the negotiations to obtain the loan and that he gave his personal promissory note to Mrs. Hinckle only because he thought it was the fairest thing to do and that he gave her a mortgage on the property in question to further secure her interests. Hoover attributed the failure of the projected purchase and development to the financial insecurity of Southwest Realty. Hoover denied ever receiving the $16,000. He said that this money, together with $5,000 he furnished, went into a down payment placed in escrow by check of Southwest Realty. Hoover said that he did not apply this money to the purchase, but that DeBoard did and that the money never came to him.

Not only did this testimony afford substantial evidence that Dale Hinckle had sufficient constructive possession and control of the money of his mother, as her agent, to support the allegation of ownership in him, it was also sufficient to show that the money was obtained from Hinckle by Hoover. Hoover contends that the funds went to Southwest Realty, not to him. The testimony clearly furnishes a substantial basis for a finding that the money, wherever it was placed, was obtained for Hoover’s benefit to carry out a contract made by him and on which he personally assumed all obligations. The giving of the note and mortgage by Hoover lends support to such a finding. The fact that Hoover did not actually obtain or receive the money personally, however, does not constitute a fatal variance if it was delivered to another at his request or instance or in accordance with his wishes. Fisher v. State, 161 Ark. 586, 256 S.W. 858.

Appellant supports his contention that the information should have been dismissed with an argument that there are conflicts between the testimony of DeBoard and that of Hinckle. It would not be inappropriate to infer from DeBoard’s testimony that he had sympathy for Hoover. The resolution of these testimonial conflicts was for the jury, and its verdict is conclusive on this score. Barnes v. State, 258 Ark. 565, 528 S.W. 2d 370.

Appellant’s novel argument that the failure to allege ownership in Mrs. Hinckle and her sister deprived him of his constitutional right of confrontation by his accusers, particularly in view of the fact that neither appeared or testified during the trial, must also fail. Of course, neither accused Hoover and, on the record before us, it seems highly unlikely that either would have any knowledge of any pertinent fact. At the outset, we should state that Kerr v. State, 256 Ark. 738, 512 S.W. 2d 13, cert. den. 419 U.S. 1110, 95 S. Ct. 783, 42 L. Ed. 2d 806; Grooms v. State, 251 Ark. 374, 472 S.W. 2d 724, the only authorities cited by appellant, are totally inapposite. They relate only to the right of an accused to cross-examine one who does give evidence against him. Amendment Six to the United States Constitution and Art. 2 § 10 of the Arkansas Constitution only assure an accused that he shall enjoy the right to be confronted with the witnesses against him. In Smith v. State, 200 Ark. 1152, 143 S.W. 2d 190, we stated that the object of these provisions was to protect the accused against adverse testimony from whatever source it might come. We approved and adopted a quotation from Ruling Case Law (8 RCL 84 et seq) in which confrontation was defined as the act of sitting a witness face to face with the accused, in order that, in the presence of the court having jurisdiction to permit the privilege of cross-examination, he may make any objection he has to the witness, and that the witness may identify the accused. It was also pointed out there that these provisions have two purposes, one main and essential, the other secondary. The main and essential purpose is the right of cross-examination. The secondary purpose is to have the personal appearance of the witness, in order first, to enable the judge and jury to observe his deportment while testifying and second, to have the advantage of the subjective moral effect on the witness produced by his presence before the tribunal before which the accused is on trial. In view of the object and purposes of these constitutional provisions, we must say that they assure an accused of confrontation by witnesses against him, but do not require the appearance of the true owner of property alleged to have been stolen or illegally taken or obtained by him, whether he is named in the indictment or information or not.

These constitutional provisions are but a declaration of the common law rule and the constitutional guaranty is confined to those who are witnesses against the accused. State v. Lonergan, 201 Or. 163, 269 P. 2d 491 (1954). They do not require that every witness who has knowledge of relevant facts testify. People v. Mason, 183 Cal. App. 2d 168, 6 Cal. Rptr. 649 (1960). They do not guarantee the accused that a victim, accuser, complainant, complaining witness, or private prosecutor will be called as a witness or appear at the trial, and the establishment of the elements of the crime by the testimony of other witnesses does not constitute a variance from an indictment naming the victim. People v. Jolliff, 31 Ill. 2d 462, 202 N.E. 2d 506 (1964); State v. Malloch, 225 A. 2d 760 (Me., 1967); Gaertner v. State, 35 Wis. 2d 159, 150 N.W. 2d 370 (1967); State v. James, 76 N.M. 376, 415 P. 2d 350 (1966); Harris v. People, 174 Colo. 483, 484 P. 2d 1223 (1971); People v. Gomez, 26 Cal. App. 3d 225, 103 Cal. Rptr. 80 (1972); Commonwealth v. Fisher, 131 Pa. Super. 117, 198 A. 925 (1938). Accord, Hickinbotham v. Williams, 228 Ark. 46, 305 S.W. 2d 841. Certainly, there is no constitutional requirement that one, who has no personal knowledge of relevant facts and cannot give material evidence concerning the crime, be offered as a witness or appear at the trial. State v. Malloch, supra; People v. Mason, supra.

A witness in the sense of these constitutional guaranties is one from whom testimony is adduced and whose testimony or statements on relevant facts are in some way brought to the attention of the court and jury or trier of fact and until there is such testimony or evidence, the right to confrontation does not arise. People v. Kendricks, 190 Misc. 1058, 75 NYS 2d 216 (1947), aff’d. 79 NYS 2d 895, 273 AD 998, aff’d. 300 NY 544, 89 N.E. 2d 257; Gaertner v. State, supra; State v. James, supra. These constitutional provisions do not apply when no testimony, prior statement or utterance of the victim is brought to the attention of the trier of fact, or is offered by the state, or when the accused has been given the right to cross-examine every person whose tesimony or statements have been used to prove the elements of the crime with which he is charged. State v. James, supra; Harris v. People, supra. Neither the failure to name the true general owner of the money involved here in the information, nor the absence of the owner from the trial was a denial of appellant’s constitutional right of confrontation of the witnesses or a variance from the allegations of the information and he was not entitled to a dismissal of the information or a directed verdict on this ground.

Appellant also contends that the judgment should be reversed because of prejudicial remarks of the prosecuting attorney in closing argument. We note that appellant’s objection was sustained on the first statement of which complaint is made and the attorney was admonished to stay within the record. No further action by the court was requested. We certainly cannot say that there was any reversible error on this count, particularly when the propriety of the remark, as an inference drawn from appellant’s own testimony which would bear upon his credibility, is at least arguable. The second statement was not wholly without foundation in the record and the objection made seems to have extended the prosecuting attorney’s remark beyond its actual content. The trial court, in response to the suggestion that the prosecuting attorney had gone outside the record, stated that the jury would remember the testimony. The jury was admonished to disregard the third and last comment to which objection was made. There was no motion for a mistrial. The trial judge, in instructing the jury, appropriately stated that closing arguments of the attorneys were not evidence and were made only to help it in understanding the evidence and applicable law and that any arguments, statements or remarks of attorneys having no basis in the evidence should be disregarded.

We will not reverse a judgment on the exercise of the trial court’s wide latitude of discretion in controlling, supervising and determining the propriety of the arguments of counsel in the absence of manifest gross abuse. Perry v. State, 255 Ark. 378, 500 S.W. 2d 387. We find no abuse here.

The judgment is affirmed.

We agree. Harris, C.J., and Byrd and Holt, JJ.


source: Caselaw Access Project

author: Frank Holt, Justice. John A. Fogleman, Justice,

license: Public Domain

text:
    EVANS LABORATORIES, Inc. v. D. O. MELDER and Louis CINGOLANI
    77-185
    562 S.W. 2d 62
    Opinion delivered February 27, 1978
    (In Banc)

      Spitzberg, Mitchell & Hays, for appellant.

      Gill, Johnson & Burns, for appellees.
   Frank Holt, Justice.

Pursuant to restrictive covenants contained in an employment contract, the appellant sought to enjoin the appellees, its former employees, from “accepting, soliciting, diverting or appropriating or continuing to service” any former customers of appellant’s which were serviced by the appellees during their tenure of employment with appellant. After a hearing, a preliminary injunction was issued which prohibited appellees’ solicitation of former customers but not appellees’ acceptance of business from them if without solicitation. After an evidentiary hearing, the court found the employment contracts did not relate to the sale of a business; no trade secrets or confidential information were involved; the geographical limitations were unreasonable and incapable of reasonably definite location; and the court then concluded that the restrictive covenants were invalid and dissolved the previous injunction. We first consider appellant’s assertion that “[t]he restrictive covenants contained within the contracts are valid and enforceable under the laws of the State of Arkansas, said covenants being reasonably related to the needs of the appellant and restrictive only of competition which is unfair and not of competition which is fair.”

Appellant, which is in the termite and pest control business, employed appellee Melder as its branch manager of their McGehee office. Appellee Cingolani worked as a routeman servicing customers in that area. Appellees’ employment contracts were for an unspecified length of time and could be terminated by either party upon ten days’ notice. The contract provided that acceptance of solicitation of business from appellant’s customers, serviced by appellees while appellant’s employees, was prohibited for a period of two years after the termination of appellees’ employment. Appellant concedes that this provision is inapplicable to appellee Melder, because, as a branch manager, he serviced no former customers. Appellees left appellant’s employment and went into business as the Delta Pest Control. Since that time, appellant lost approximately 278 out of the 307 customers formerly serviced by appellee Cingolani on his route. However, Cingolani stated that only about 125 to 150, or one-half, of the customers presently serviced by him were formerly on his route while working for appellant. There is no proof of solicitation by either of the appellees. In fact, the proof is to the contrary. Appellant correctly states the central issue to be resolved on appeal is the validity of the restrictive covenants.

The validity of a restrictive covenant not to compete in an employment contract depends upon the facts and circumstances of the particular case. United Ins. Agency, Inc. v. Martin, 258 Ark. 916, 529 S.W. 2d 871 (1975); and McLeod v. Meyer, 237 Ark. 173, 372 S.W. 2d 220 (1963). Further, it is well established that we are reluctant to uphold employment contracts which have negative provisions, as here, with reference to future employment elsewhere by the employee. McLeod v. Meyer, supra.

Appellees argue that the covenant in question here is invalid because, due to the two year length of the prohibition and the prohibition on acceptance as well as solicitation, it constitutes a restraint of trade which is void as against public policy. Even so, appellant asserts that the covenant would only have the effect of prohibiting appellee Cingolani from soliciting or servicing customers whom he formerly serviced for appellant. Other Delta employees could do the actual servicing of those former customers. Appellant argues this prohibition is necessary because the relationship between the routeman and the customer is the most important element in developing and maintaining business in this industry. It appears that no trade secrets are involved.

In determining whether or not a restraint of trade imposed by a contract is reasonable, we consider “whether it is such only as to afford a fair protection to the interests of the party in whose favor it is given, and not so large as to interfere with the interests of the public.” Orkin Exterminating Co. v. Murrell, 212 Ark. 449, 206 S.W. 2d 185 (1947); and Edgar Lumber Co. v. Cornie Stave Co., 95 Ark. 449, 130 S.W. 452 (1910). Here the record indicates that when appellant’s prior customers defected from it to Delta, the newly organized firm, it was not due to any solicitation on appellee Cingolani’s part but due to their satisfaction with his prior servicing.

In the circumstances we are of the view that the provision which prohibits Cingolani from accepting the requests of appellant’s former customers, whom he formerly serviced, is undue interference with the interests of the public’s right to the availability of a serviceman it prefers to use. In other words, it results in an unreasonable restraint of trade. We deem it unnecsssary to discuss appellant’s contention that the geographic restrictions in the contract are valid.

Affirmed.

Fogleman, J., dissents.

Hickman, J., concurs.

John A. Fogleman, Justice,

dissenting. The court’s reluctance to uphold a contract having negative covenants with reference to future employment has led it up a one-way blind alley from which it cannot see the basic purpose for these covenants and the legitimate right of an employer to protect himself against unfair competition. By so doing, employers are deprived of their right to contract to protect themselves from business piracy. I feel so strongly that it is high time this court reexamine the posture it has taken in these cases, that I am compelled to voice those feelings, even though time will not permit elaboration to the extent I would like.

It appears to me that the view of employment contract covenants not to compete taken by this court over the last thirty years clearly indicates that the basic reasons for permitting these contracts in restraint of trade at all has become obscured. Originally at common law, no such contract was enforceable. 54 Am. Jur. 2d 958, Monopolies, Restraints of Trade & Unfair Trade Practices, § 511; Annot. 43 ALR 2d 94, 115. Later development produced the rule that a general restraint was invalid, but a partial restraint was valid, recognizing that a purchaser of a business or an employer was entitled to protection, not from competition, but from unfair competition, or business piracy. Annot. 41 ALR 2d 15, 69; 43 ALR 2d 94, 115, 117; 6A Corbin on Contracts 89, § 1394. Ultimately, the rule of partial restraint gave way to the rule of reasonableness, i.e., reasonable restraints are to be enforced. 54 Am. Jur. 2d 959, 982, Monopolies, Restraints of Trade & Unfair Trade Practices, §§ 512, 543; Annot. 43 ALR 2d 94, 115, 123. See Orkin Exterminating Co. of Arkansas v. Murrell, 212 Ark. 449, 206 S.W. 2d 185. The test of reasonableness turns on the facts and circumstances of the particular case, and that rule has been recognized ceremonially by this court. United Insurance Agency v. Martin, 258 Ark. 916, 529 S.W. 2d 871; McLeod v. Meyer, 237 Ark. 173, 372 S.W. 2d 220; Bailey v. King, 240 Ark. 245, 398 S.W. 2d 906; McCumber v. Federated Implement & Hardware Ins. Co., 230 Ark. 13, 320 S.W. 2d 637. Perhaps no better test could be provided, because in every case there is a clash of two important freedoms, freedom to contract and freedom to work. See Annot. 41 ALR 2d 15, 53; 43 ALR 2d 94, 116, 142.

An interesting commentary on this history is found in Arthur Murray Dance Studios of Cleveland v. Witter, 62 Ohio L. Abs. 17, 105 N.E. 2d 685 (1952). That court said:

Over five hundred years of colorful history look down on this type of litigation. In the year 1415 Henry V was king. Skill in a trade was the vital factor in a man’s economic status and it was obtainable only through apprenticeship to an experienced worker. The guild system permitted a man to work only in the trade in which he was apprenticed. Membership in a guild was not easily attained. Travel was difficult. Strangers were not welcome. If a man couldn’t work at his trade in his particular locality, he could hardly work at all; might become a pauper; and the public would be deprived of a worker at a time when the Black Death had made workmen scarce. In that background when, in 1415, the celebrated Dyer’s Case (Y.B. 2 Henry V, pi. 26) came before Judge Hall (Hull?), he became so enraged by an attempt to restrain a dyer from working a town for just half a year that in bad French he cursed the deal void: “By God, if the plaintiff were here he should go to prison until he paid a fine to the king.” 28 Colum. L. Rev. 81, 82-83; 6 Corbin on Contracts 527, Sec. 1395; Lange v. Werk, 2 Ohio St. 519, 526-527.
Pounded by the pressures of social, economic, industrial, communication and transportational change, the law has changed (7 U.T. Toronto L.J. 413-415; 26 Cornell L.Q. 707, 708-709; 31 la. L. Rev. 249-251; 36 Am. Jur. 530, Sec. 50; 5 Peabody L. Rev. 80-82) until today, as a rough rule of thumb, the law is that a covenant restraining an employee, on termination of employment, from competing with his former employer, is valid if it is reasonable in view of all the circumstances of the particular case. 13 U. Detroit L.J. 25, 27; 90 U. Pa. L. Rev. 855, 856; 33 Harv. L. Rev. 320; 31 la. L. Rev. 249, 253; 32 Marq. L. Rev. 282, 283; 5 Williston on Contracts 4580, § 1636; 36 Am. Jur. 532, § 51; 3 Pomeroy’s Equity Jur. 689, § 934 C.

I take issue with the emphasis that has been placed upon the absence of trade secrets. I submit that this is only a matter to be considered. An employer may prevent an employee from disclosing trade secrets- without any contract or covenant. 87 CJS 407, Trade-Marks, Trade-Names & Unfair Competition, § 121; 55 Am. Jur. 28, Monopolies, Restraints of Trade & Unfair Trade Practices, § 704. It is widely recognized that the most important of the legitimate interests of the employer which are entitled to protection is the stock of customers he has been able to develop. Annot. 41 ALR 2d 15, 35, 69, 71; 43 ALR 2d 94, 117, 162. See also, 17 CJS 1141, Contracts § 254. It is the personal relationship existing between the employee and the customers of the employer which has to be taken into account as indicating the likelihood that the employee when leaving might be able to take his employer’s customers with him. This depends upon the extent to which the customer identifies him with the business in hand and replaces the contact he would otherwise have with the employer, which is likely when the employee is the main, if not the sole, contact of the employer with the customer. Annot. 41 ALR 2d 15, 35, 72; 43 ALR 2d 94, 117; 6A Corbin on Contracts 100, § 1394; Masden v. Travelers’ Ins. Co., 52 F. 2d 75, 79 ALR 469 (8 Cir., 1931). The annotator in the annotation first cited finds that the protection of trade or business secrets and special knowledge is a no less important legitimate interest of the employer. 41 ALR 2d 15, 37. Customer lists are generally taken in other states to be confidential information sufficiently important to warrant protection. 41 ALR 2d 15, 37; 43 ALR 2d 94, 118, 191. It is significant to me that the majority continues to emphasize Orkin Exterminating Co. v. Murrell, 212 Ark. 449, 206 S.W. 2d 185, because that case, in spite of what has been said about it in later cases, turned upon the fact that not only trade secrets, but special training and confidential information were involved. The court, after having stated that there was special training in the business the employer was conducting and on the proper use of chemicals in that business, also stated that the employee “had access to all records, customer lists and credit rating.” An annotator has stated the matter thus:

Now, what are the special facts, either one or more of which must be present in order to make a restrictive covenant relating to entering into competitive business reasonable? The courts are quite well agreed as to what they are, although not always enumerating all of them, or in the same way. Generally speaking they are (1) special influence obtained by the employee during the course of his employment with the customers of the employer; (2) the possession by the employer of trade secrets, communicated to the employee during the course of his services or of confidential information not amounting to trade secrets in the strictest sense of the word; (3) and in a much lesser degree than in the two preceding factors, the acquisition of experience or skill by the employee during his employment.

Furthermore, it is generally recognized that the right of an employer to keep his trade or business secrets for himself and to retain the advantage of such special knowledge as he may possess of names and special needs of potential customers is subject to protection by a restrictive covenant. Annot. 41 ALR 2d 15, 102; 43 ALR 2d 94, 118, 185; 6A Cor-bin on Contracts 97, § 1394.

The concept of reasonableness is broken down into three separate and distinct elements, i.e., reasonableness as to the employer, reasonableness as to the employee and reasonableness as to the public. Annot. 41 ALR 2d 15, 54; 43 ALR 2d 94, 116, 144. The first and most important of the three is reasonableness as to the employer, the party in whose favor the covenant is given. Annot. 41 ALR 2d 15, 61, 67; 43 ALR 2d 94, 117, 151. See Orkin Exterminating Co. v. Murrell, supra.

The rules governing such contracts are flexible, and, if the public welfare is not involved, and the restriction on the employee is no greater than protection to the other party requires, the contract may be sustained. 3 Pomeroy’s Equity Jurisprudence 688, § 934c. There is no hard and fast rule as to what contracts are void, and each case must be judged according to its own facts and circumstances. Robbins v. Plant, 174 Ark. 639, 297 S.W. 1027, 59 ALR 1128. Such a covenant is reasonable, where there is no public injury, “if it is such only as to afford fair protection to the party in whose favor it is given,” and the employee is not deprived of his means of making a living. Edgar Lumber Co. v. Cornie Stave Co., 95 Ark. 449, 130 S.W. 452; Bailey v. King, 240 Ark. 245, 398 S.W. 2d 906.

A review of some of the facts in this case will demonstrate the reasons I feel so strongly that the legitimate interests of the employer are not outweighed by the interests of the public, insofar as appellee Cingolani is concerned. I agree that the contract with Melder is unenforceable for reasons I find unnecessary to state.

Cingolani was a route man and service technician who serviced particular customers. He terminated his employment on January 30, 1976, four days after Melder had terminated his contract. Cingolani’s agreement contained a covenant that he would not accept, solicit, divert, appropriate, or attempt to accept, divert or appropriate any customers in a specified area who were customers of appellant during his employment or who were served or called upon by him pursuant to his employment.

Immediately upon termination, Melder and Cingolani went into a new company then formed to perform the identical service being performed by appellant and in an area from which appellant drew a substantial part of its business and employed three other former employees of appellant. Appellant sought an injunction to enjoin Cingolani from accepting, soliciting, diverting or appropriating or continuing to service customers of appellant in the territory covered by the employment contract for the purpose of selling or rendering pest control services.

Appellant’s president testified that a new serviceman is not worth his salt until he has worked for the company for six months and that it will take four to six months for him to establish a relationship with a customer. The importance of this relationship, he said, is due to the fact that the serviceman is the company’s only contact with the customer. He said the cost of changing a serviceman on a route was $2,000 and that of 307 customers on Cingolani’s route on January 26, 1976, appellant had lost 278, which meant a revenue loss of $27,393. The company’s normal attrition rate was 3% to 4%. Appellant had raised its prices in 1975, effective in July and September. There was only one price increase, however. The new company established service rates below appellant’s prices. According to the secretary of the branch office of appellant, price increases normally resulted in the loss of six to eight customers. Melder testified that the attrition rate was 25% to 30%, or more if prices were increased. The testimony on behalf of appellant was not otherwise substantially contradicted.

Cingolani admitted that he was at the time of the trial servicing approximately 192 of the customers he had serviced when employed by appellant.

Cingolani would only be restrained from servicing customers he had serviced while employed by appellant and who remained within the area designated. Thus the restraint would apply to a very small segment of the public. Cingolani’s customers while employed at Delta could do business with the new firm if they were serviced by a routeman other than Cingolani and Cingolani could not serve them or solicit their business. There was evidence that there was a substantial number of prospective customers in the area who were not receiving this service from anyone. Both Melder and Cingolani had a wide acquaintance in the area.

The restrictions on Cingolani could not greatly interfere with the interests of the public.

This court has only recently recognized and applied the principles that should govern here. In Borden, Inc. v. Huey, 261 Ark. 373, 547 S.W. 2d 760, we said:

*** Many decisions in other states have recognized the importance of such “customer-contract” by employees. “The most important single asset of most businesses is their stock of customers. Protection of this asset against appropriation by an employee is recognized as a legitimate interest of the employer. A restrictive covenant, therefore, fulfills the first requirement on which its enforceability depends, if it is necessary to protect the employer against loss of his customers.” Annotation, 41 A.L.R. 2d 15, 71 (1955). The annotator goes on to point out that an employer is especially vulnerable when an employee, such as a route man, deals with customers away from the employer’s place of business and builds up personal relationships that bind the customers to himself instead of to the employer’s business. That reasoning applies to the case at bar, Huey having been an outside salesman for Borden.

Oddly enough, the majority tacitly, but perhaps unwittingly, points up the importance of the customer-serviceman relationship by saying that the record indicates that the defection of appellant’s prior customers was due to their satisfaction with Cingolani’s prior servicing. Yet the majority does not attempt to explain why it gives no consideration to this fact in relation to the employer’s legitimate interest or why it did not have the same impact given it in Huey.

I would reverse the decree and direct the entry of an appropriate injunction against Cingolani.

       There is respectable authority that area is the most important single element of the covenant and that it has an important bearing on the question of enforceability. Annot. 43 ALR 2d 94, 106, Restatement of the Law, Contracts, § 515, Comment c. Not long ago, this court said that the most important factors are time and area. All-State Supply Co. v. Fisher, 252 Ark. 962, 483 S.W. 2d 210.

       This was certainly the situation in this case.


author: Frank Holt, Justice.

text:
    UNION LIFE INSURANCE COMPANY v. Ernest Leroy WASSON et ux
    77-231
    562 S.W. 2d 70
    Opinion delivered February 27, 1978
    (Division II)

      Moses, McClellan, Owen & McDermott, by: William L. Owen, for appellant.

      Bradley & Coleman, by: Douglas Bradley,.for appellees.
   Frank Holt, Justice.

Appellees initiated this action to recover medical and hospitalization expenses as provided in a group insurance policy issued by appellant. Appellant had denied coverage on the basis that on December 15, 1974, the effective date of the policy, appellee Mrs. Wasson was disabled and had never completely recovered from these disabilities. The jury specifically found that Mrs. Wasson was not disabled on December 15, 1974, and awarded her the claimed benefits of $6,098.71. Appellant asserts that the trial court erred in overruling its motion for a directed verdict and also there was no substantial evidence to support the jury’s finding.

“A directed verdict for the defendant is proper only when there is no substantial evidence from which the jurors as reasonable men could possibly find the issues for the plaintiff.” Ark. Kraft Corp. v. Johnson, Adm’r., 257 Ark. 629, 519 S.W. 2d 74 (1975). Further, in determining if substantial evidence exists, “it is well established that upon appeal we consider only the evidence of the appellee or that portion of all the evidence which is most favorable to him.”

Here the insurance certificate reads: “The coverage of any dependent who is disabled by injury or disease .... will not be made effective until the dependent completely recovers from such disability.” The policy defines “disability” or “disabled” thusly:

(b) in the case of a dependent, that he is prevented from engaging in all the normal activities of a person of like age and sex and in good health solely as a result of injury or sickness.

Appellant argues that, on the effective date of the policy, December 15, 1974, Mrs. Wasson was disabled from a broken leg and hysterectomy and had not completely recovered as of January 1, 1975, the beginning date of Mrs. Wasson’s claims. Mrs. Wasson produced evidence to the contrary. Also, her claimed disabilities, from and after January 1, 1975, were unrelated to her previous disabilities.

Mr. Wasson testified that his wife worked in his place of business until she broke her leg about October 5, 1974. After that “she worked some with the cast on” and finally quit when she had a hysterectomy about November 6, 1974, with a recovery period of six weeks. During this recovery period, however, she did some work such as “taking orders or taking cash.” No claim for any medical or hospital expense is being made relating to the hysterectomy or broken leg. According to him, his wife had fully recovered from her broken leg and hysterectomy on the effective date of the policy, December 15, 1974. Mrs. Wasson’s testimony corroborated that of her husband; namely, she had fully recovered from both the broken leg and hysterectomy and suffered no residual effects as of January 1, 1975. Her present claims began when she visited her doctor “[a]bout the middle .... the last part of December” for bronchitis and was admitted to the hospital January 1, 1975, for bronchitis secondary to influenza. She was hospitalized twice for other ailments after the January 1, 1975, hospitalization. Neither of her three hospitalization records, which were in evidence, indicated her sickness was related to her previous leg injury or hysterectomy. The evidence was amply substantial to support the jury’s finding of coverage under the policy.

Appellant next contends the court erred in refusing to admit into evidence a copy of a decision on appellee’s application for Social Security benefits. The Social Security Administration, after a hearing on appellee’s March 18, 1975 claim for disability benefits, held appellee was entitled to benefits for a period of disability commencing October 3, 1974. Appellant argues that this decision, although not conclusive, is persuasive evidence that Mrs. Wasson had not recovered from her leg injury and hysterectomy. The court held that Mrs. Wasson’s application for Social Security was admissible for the jury to consider with respect to any statements therein against her interests. However, the court ruled that the decision, proffered in evidence, was inadmissible. The court was correct. Suffice it to say that the requirements as to disability under the Social Security Act and those under the terms of the contract of insurance here are dissimilar.

Appellees’ attorney is awarded $1,500 for his services in this appeal.

Affirmed.

We agree: Harris, C.J., and Fogleman and Byrd, JJ.


author: Darrell Hickman, Justice. Carleton Harris, Chief Justice, Conley Byrd, Justice,

text:
    FORD LIFE INSURANCE COMPANY and FORD MOTOR CREDIT COMPANY v. Mrs. Lamar JONES, Jr.
    77-143
    563 S.W. 2d 399
    Opinion delivered February 27, 1978
    (In Banc)
    [Rehearing denied April 17, 1978.]

      Griffin Smith and W. R. Nixon, Jr., for appellants.

      Holloway & Haddock, by: James W. Haddock, for appellee.
   Darrell Hickman, Justice.

Lamar Jones, Jr., age thirty-three, purchased a new Ford pick-up truck in 1976 from the Eudora Motor Company, a Ford motor company dealer. The purchase was financed through Ford Motor Credit Company. The salesman, Harold Stokes, sold Jones Ford credit life insurance. Jones died a little over three months later from what was diagnosed as a heart attack caused by diabetes.

Peggy Jones, the widow, did not make payments on the truck and Ford Motor Credit filed suit in Chicot County Circuit Court to recover the vehicle. Peggy Jones, as administratrix of Jones’ estate, filed a counterclaim joining Ford Life Insurance, the salesman and Eudora Motor Company claiming damages for $10,000 for misleading representations. Ford Life Insurance Company denied coverage because of a misrepresentation and credited the premium to the Jones’ account with Ford Motor Credit because Jones had suffered a heart attack three years before and been under a doctor’s care since. The suit against Stokes and Eudora Motor was dismissed.

The case was submitted to a jury and it returned a verdict in favor of Peggy Jones for the amount owed on the vehicle, which was stipulated to be $4,826.86; a 12% statutory penalty; and, a $500.00 attorney’s fee was also awarded.

Ford Life and Ford Motor Credit appeal alleging three errors. The last two have merit. Judgment was granted in favor of Peggy Jones for the amount of money due on the truck rather than payment being ordered to Ford Motor Credit Company to satisfy the indebtedness. The insurance policy clearly provided that Ford Mo*ir Credit would be the beneficiary. The judgment of the lower court in this regard was, of course, erroneous. Also, the court awarded statutory penalty and attorney’s fee as authorized by Ark. Stat. Ann. § 66-3238 (Repl. 1966). The penalty and attorney’s fee may not be awarded unless the exact amount sued for is recovered. Southwestern Ins. Co. v. Camp, 253 Ark. 886, 489 S.W. 2d 498 (1973). Peggy Jones sued for $10,000 and only recovered the amount owed on the trucks The judgment is reversed in these regards.

The other issue raised on appeal by the appellants has given us considerable trouble. The appellants argue that it was not disputed that Lamar Jones, Jr. had a heart attack three years before and had been under a doctor’s care for several years before the insurance was issued. It is also undisputed that Mr. Jones candidly told the agent for Ford Life, Howard Stokes, who was also the salesman of the vehicle, that he had this heart condition and had been under a doctor’s care. Even so, Jones signed a form which can best be described by its reproduction.

It can be readily seen that this policy has only one place for the signature of the insured and that is at the bottom of the form under a heading called “Health Statement.” There is nowhere else on the form, nor any other relevant document used by Ford Life, for the insured to answer any questions, make any statements or qualify the language in the insurance policy.

The appellants contend that Jones made an incorrect statement. All Jones did was sign their printed form which says, “I am in good health.” We are not unmindful of an Arkansas statute that deals with this matter. Ark. Stat. Ann. § 66-3208 (Repl. 1966) provides:

All statements in any application for life or disability insurance policy . .. shall be deemed to be representations and not warranties. Misrepresentations, omissions, concealment of facts, and incorrect statements shall not prevent a recovery under the policy or contract unless either: (a) fraudulent; or (c) the insurer in good faith either would not have issued the policy or contract... or would not have provided coverage with respect to the hazard resulting in the loss, if the true facts had been made known to the insurer as required either by the application for the policy or contract or otherwise.

The appellants argue that this statute applied to this case voids the policy. We disagree.

It was stipulated by the parties that the salesman, Stokes, was a “soliciting agent” for Ford Life (later the appellee’s attorney obviously regretted this agreement). We have held before many times that a soliciting agent has no authority to change or alter the provisions of a policy and cannot bind the company. National Life and Accident Ins. Co. v. Broyles, 197 Ark. 113, 122 S.W. 2d 603 (1939). We do not quarrel with these decisions. We simply do not feel they apply in this case.

Stokes, the salesman, was an employee of Eudora Motor Company, a Ford dealership. A new Ford pick-up was sold to Jones, financed by Ford Credit Company through an application filled out by Stokes, insurance was issued by Ford Life Insurance Company at the request of Stokes, Ford’s agent, and Stokes received 35% of the premium paid. It is undisputed that Stokes was told in detail the truth of Jones’ condition. There is no evidence whether Stokes relayed the information to Ford Life or not. Stokes did not testify. Ford Life has a policy of not inquiring of an insured’s health until a claim is made.

The insurance form of Ford Life Insurance’s contract, which is reproduced herein, contains its printed statement that “to the best of my knowledge and belief I am now in good health” with no room for disagreement. Such a statement on such a form should not be used as a defense when, in fact, it is undisputed that there was no misrepresentation or fraudulent statement.

In addition to this defense the company had the defense that its agent is a “soliciting agent” with no legal authority to bind the company. In other words, it does not matter what Jones told Stokes. The agent is given a form which cannot be altered, only signed. Obviously the agent is encouraged to sell insurance, which is Ford Life’s business, and is paid a handsome commission. Everyone is satisfied until the death of the insured when it may be learned that he was not “in good health.”

Such a situation places an unrealistic burden on an insured which can only result in a decided advantage inuring to the benefit of the company. It leaves room for all sorts of abuses by the agent, the insured and the company.

We limit our decision to the facts in this case. We are not unmindful that a strong argument can be made that we are making a decision that flies in the face of our previous decisions and Ark. Stat. Ann. § 66-3208 (Repl. 1966). However, in the final analysis it is our duty to see that the law enables people to have a fair decision after their day in court and undoubtedly our decision in this case cannot be characterized otherwise.

The judgment is reversed and remanded for proceedings not inconsistent with our decision.

Harris, C.J., concurs.

George Rose Smith, Fogleman and Byrd, JJ., dissent.

Carleton Harris, Chief Justice,

concurring. I concur with the majority and my views are pretty well expressed in a concurring opinion that I wrote in National Old Line Insurance Company v. People, 256 Ark. 137, 506 S.W. 2d 128, a case involving credit life insurance. Though I have never done this, I should like to repeat some of the language in that concurring opinion, as follows:

“I have noticed from time to time, in these cases involving credit life insurance that the affirmative statement called for from the applicant is rather general in nature, (I am now in good health) and can, in many instances, be honestly answered by the applicant by ‘Yes,’ though actually he or she may not be in good health. For instance, perhaps one had open heart surgery a few months ago, or an operation on one of his carotid arteries which was partially blocked, endangering the flow of blood to the brain. He is told by his doctor that the operation was successful, and he genuinely feels that he has no further problems and is in good health. In fact, I know of an individual who underwent open heart surgery, and who is using a pacemaker. He constantly plays tennis and engages in other sports and considers himself as getting along fine, but I doubt seriously that an insurance company would consider him an acceptable risk. This man probably could honestly answer the question by stating that he is in good health, though the prospective insurer would disagree.
It would appear to me that the company selling credit life insurance, in its application form, could follow the practice generally followed by insurance companies selling regular life insurance policies, and propound more specific questions ... I refer to such questions as whether one has been in the hospital any time during the last three years, consulted a physician within the last three years, ever been told he had high blood pressure, heart disease, diabetes, cancer, etc. On the basis of such answers, the company can intelligently determine whether to consider the man a good insurance risk. If answers are in the negative and are false, this fact should not be difficult to establish. . . .
I can only say if the insurance company selling credit life insurance is willing to take the risk of asking only general questions, it will just have to also take the chance of perhaps paying benefits to the designee of an applicant who was not in good health when he applied for the policy.”

As pointed out in the majority opinion, the evidence is undisputed that the agent Stokes was plainly told that Jones had a heart attack three years earlier and had been seen by his physician since that time; the health situation was discussed. Nonetheless, agent Stokes wrote the policy. I reiterate that specific questions which certainly called for specific answers would have prevented this situation.

George Rose Smith, Justice, dissenting. I cannot agree with the majority’s position that this court is entitled to simply ignore the plain language of a controlling statute in order to reach what is considered to be a fair decision. Fairness is a two-way street. Presumably the insurer issued its policy in reliance on the statute and on our decisions giving effect to the statute. To change the rules of the game while play is in progress can hardly be characterized as complete fairness.

The statute provides that incorrect statements in an application for life insurance prevent a recovery if they are material to the acceptance of the risk or if the insurer would not have issued the policy if the true facts had been made known as required by the application for the policy. Ark. Stat. Ann. § 66-3208 (Repl. 1966). Until today’s decision we have given effect to the statute by holding that an applicant’s false statement of good health in the application for the policy, if material, is a defense within the period of con-testability. Life & Casualty Ins. Co. of Tenn. v. Smith, 245 Ark. 934, 436 S.W. 2d 97 (1969); Dopson v. Metropolitan Life Ins. Co., 244 Ark. 659, 426 S.W. 2d 410 (1968). Those decisions, to which there was no dissent, should govern this case. If the court is to overrule its decisions, fair warning should be given.

Under the statute it is immaterial that the applicant orally explained the condition of his health to the insurer’s soliciting agent. Such an agent “has no authority to agree upon the terms of the policies or to change or waive those terms, nor can his knowledge be imputed to the company he represents.” Holland v. Interstate Fire Ins. Co., 229 Ark. 491, 316 S.W. 2d 707 (1958). Here it was the company’s practice not to issue a credit life insurance policy unless the insured signed a statement of his good health in the application for the policy. The soliciting agent, who was actually an automobile salesman, had no authority to change or waive that practice. Yet the majority’s decision invests him with that authority, contrary to a long line of cases decided by this court.

The judgment should be reversed and the cause dismissed.

Fogleman, J., joins in this opinion.

Conley Byrd, Justice,

dissenting. The relevant facts in the record are uncontradicted except by the conclusion stated in the majority opinion. The credit life policy was issued on March 17, 1976, and Jones died on June 26, 1976, with a heart attack. In the testimony of Mr. Jones’ treating physician, Dr. Allen Gray Talbot testified that in April of 1973, Mr. Lamar Jones, Jr., had an acute myocardial infarction. He treated Jones periodically from April of 1973, until the time of his death in June, 1976. Jones was suffering from heart disease. Jones saw Dr. Talbot January 12, 1976, April 5, 1976, April 19, 1976 and May 31, 1976. Jones had nitroglycerin tablets and anti-coagulant pills. Jones had angina pectoris which is heart pains and one of the symptoms.

Appellee, Mrs. Lamar Jones, Jr., testified that she was present during all of the conversations with Mr. Stokes, the soliciting agent, and that she was also there when the contract was signed on March 17, 1976. She testified that she and her husband advised Mr. Stokes truthfully about Mr. Jones’ past health situation, and that Stokes was aware of Jones’ past health when he wrote the policy. Mrs. Jones also admitted that notwithstanding their knowledge of Mr. Jones’ past health, Jones then signed the policy health statement “. . . that to the Best of My Knowledge and Belief lam Now in Good Health. ...”

Notwithstanding the foregoing uncontradicted testimony, the majority makes the following assertion:

“The insurance form of Ford Life Insurance’s Contract, which is reproduced herein, contains its printed statement that ‘to the best of my knowledge and belief I am now in good health’ with no room for disagreement. Such a statement on such a form should not be used as a defense to liability when, in fact, it is undisputed that there was no misrepresentation or fraudulent statement.” (Italics mine).

Under Ark. Stat. Ann. § 66-3208 (Repl. 1966), it was not necessary for Ford Life Insurance Company to show fraud, it was only necessary to show that the insured had made either an incorrect or material misrepresentation which materially affected the risk. Contracts are a two way street and require some integrity on the part of both parties. Can an insured in dealing with a soliciting agent, who has no authority to change or modify the policy, rely upon the statement of such agent when the insured signs an erroneous good health provision upon which the company is supposed to act? The cases hold that an insured cannot become a participant with an agent in making an erroneous or incorrect statement and retain the benefits of the policy. See Theros v. Metropolitan Life Insurance Company, 17 Utah 2d 205, 407 P. 2d 685 (1965) and Norwick v. United Security Life Company, 82 S.D. 640, 152 N.W. 2d 439 (1967). In the last mentioned case it was pointed out “. . . the general law relative to insurance contracts requires good faith in making answers to questions in an application and if applicant discovers that statements made therein were not based upon facts detailed by him to the agent, it becomes his duty to make known the facts to the insurer.” In Theros v. Metropolitan Life Insurance Company, supra, the Supreme Court of Utah stated:

“In order to defeat recovery on an insurance policy because of misrepresentation in the application, the misrepresentations must have been made with an intent to deceive and defraud the insurance company. However, such an intent may be inferred where the applicant knowingly misrepresents facts which he knows would influence the insurer in accepting or rejecting the risk. The same rule should apply where the applicant knowingly or with constructive knowledge, permits such misrepresentation to be submitted to the insurance company.”

See also Williams v. Black Hills Benefit Life Ass’n., 70 S.D. 611, 19 N.W. 2d 769 (1945), where it was stated:

“It is clear that if the applicant for insurance had falsely answered the questions above set out, and the falsity of such answers was not known to the agent, such false answers would have rendered the policy void. Hohenthaner v. Mutual Life Ins. Co., 62 S.D. 8, 250 N.W. 370; Life Benefit, Inc. v. Forbragd, 68 S.D. 38, 298 N.W. 259. However, respondent contends that the facts of the present case estop the defendant from asserting the invalidity of the policy. Respondent bases this contention upon the holdings of this court to the effect that a soliciting agent of a mutual benefit association is in effect the general agent of the association and the agent’s knowledge of any fact that might increase the risk is the knowledge of the company. Thomas et al v. Modern Brotherhood of America, 25 S.D. 632, 127 N.W. 572; Fosmark v. Equitable Fire Ass’n., 23 S.D. 102, 120 N.W. 777. But the rule upon which respondent relies should not be without limitation. The rule, we believe, contemplates the existence of entire good faith on the part of the insured, and the absence of circumstances that would impute to him knowledge that the insurer would be deceived by the application submitted. ‘An agent can never have authority, either actual or ostensible, to do an act which is, and is known or suspected by the person with whom he deals to be, a fraud on the principal.’ SDC 3.0208. Frazier v. Hartford Fire Ins. Co., 51 S.D. 40, 211 N.W. 973.”

In view of some statements in the majority opinion such as “Ford Life has a policy of not inquiring of an insured’s health until a claim is made” it appears to me that the majority are more interested in the end result of this litigation than in a fair application of the law. Since Ark. Stat. Ann. § 66-3809 (Repl. 1966), requires a delivery of a certificate of insurance at the time the indebtedness is incurred or within 30 days thereafter with the insurance being retroactive to the date of the indebtedness, a credit life insurer, as a practical matter, has to rely upon the application for the issuance of its policy.

The suggestion in the majority opinion that after stipulating to Stokes’ capacity as a “soliciting agent”for Ford Life (later the appellee’s attorney obviously regretted this agreement) (emphasis mine), ignores the fact that insurance agents are licensed by the Insurance Commissioner, Ark. Stat. Ann. § 66-2815 (Repl. 1966). Furthermore by Ark. Stat. Ann. § 66-2823 it is specifically provided that “(4) a solicitor shall not have authority to bind risks or countersign policies.” If the conduct of the soliciting agent here does not fall within the holding of our prior cases that a soliciting agent has no authority to change or alter the provisions of a policy, it would appear the appellant is entitled to a better explanation than “We simply do not feel they apply in this case.” I dare say that such a statement can be made with respect to any prior decision but without some elucidation, the citizens of this State have no warning when the court will just as abruptly say that any other matter will not be controlled by the prior decisions. I plead with the majority to elucidate further so that the citizens of our State will know how to conduct their business or what law the legislature must enact to make their wishes known.

Finally the majority without citing a single previous case makes the bold statement “We are not unmindful that a strong argument can be made that we are making a decision that flies in the face of our previous decisions and Ark. Stat. Ann. § 66-3208 (Repl. 1966).” I humbly submit that when the majority recognizes that its decision “flies in the face” of a valid statute that it then owes to the losing litigant and the public in general a detailed explanation of why and how the majority has the authority to render a decision contrary to the established law — this duty the majority brushes aside with the mere assertion “. . . that the law enables people to have a fair decision after their day in court and undoubtedly our decision in this case cannot be characterized otherwise.” Can the majority ignore a statute to reach a result and still logically proclaim that its decision is fair? Is the majority characterizing its decision as fair merely because the credit life insurer loses and the insured wins?

For the reasons herein stated, I respectfully dissent.

Fogleman, J., joins in this opinion.

       Actually, some companies selling credit life insurance do set out questions relating to specific ailments in the application form.


author: George Howard, Jr., Justice. John A. Fogleman, Justice,

text:
    WHITE COUNTY GUARANTY SAVINGS AND LOAN ASSOCIATION and ARKANSAS SAVINGS & LOAN ASSOCIATION BOARD v. FARMERS AND MERCHANTS BANK OF DES ARC, Arkansas
    77-203
    562 S.W. 2d 582
    Opinion delivered February 27, 1978
    (In Banc)
    [Rehearing denied April 3, 1978.]

      Charles D. Matthews, of: Matthews, Mays & Glaze; Robert Edwards; and Roger W. Giles, for appellants.

      James M. McHaney and John C. Calhoun, Jr., of: Owens, McHaney & McHaney, for appellee.
   George Howard, Jr., Justice.

The question for review is whether the decision of the Arkansas Savings & Loan Association Board, hereinafter referred to as the Board, in approving the application of the White County Guaranty Savings and Loan Association, appellant herein, and hereinafter referred to as the Guaranty, for a branch office at Des Arc, Prairie County, is supported by substantial evidence on the record considered as a whole. Stated differently, we must determine if the Circuit Court of Prairie County, Northern District, committed reversible error in holding that the Board’s decision was not supported by substantial evidence and, accordingly, reversed and dismissed the Board’s action.

THE FACTS

Appellant, the Guaranty, filed an application with the Board to establish a branch office at Des Arc, Arkansas. Appellee, Farmers and Merchants Bank of Des Arc, Arkansas, hereinafter referred to as the Bank, resisted the application vigorously.

Following a hearing conducted by the Board on May 11, 1976, the Board unanimously approved the application and entered the following order, in material part, on May 12, 1976:

“1. There is a public need for the proposed branch; and,
2. The volume of business in the area in which the proposed branch will conduct its business is such as to indicate a successful operation; and,
3. The operation of the proposed branch office will not unduly harm any of the existing associations or other financial institutions; and,
4. The operation of the proposed branch office will not unduly harm the association seeking authority to open the branch.”

In support of the above findings, the Board also set out extensive underlying facts in its order.

Appellee, on May 18, 1976, appealed the Board’s decision to the Circuit Court of Prairie County contending essentially that there was no substantial evidence to support the Board’s findings and conclusions.

HOLDING OF THE TRIAL COURT

On April 7, 1977, the Circuit Court reversed the decision of the Board holding, in relevant part, as follows:

1. “... the court finds that the decision of the Board is not supported by substantial evidence of public need or prospects for successful operations or the absence of undue harm to existing financial institutions in the area. ”
2. “Specifically, the Court finds that the Proposed Service Area (PSA) of the Applicant-intervenor, White County Guaranty Savings & Loan Association was substantially overstated in area and population and that the resulting projections of savings volume, loan volume and profit submitted by it were thereby rendered inaccurate, unreliable, overstated, and misleading; that there is a substantial overlap of the area presently served by the facilities or applicant-intervenor at Searcy and Bald Knob with that claimed in its PSA; that the residential construction loan volume projected by applicantintervenor is unrealistic in view of the small actual volume of such construction in this area; that the realistic trade area to be served by applicant-intervenor is adequately served by existing financial institutions; that the evidence submitted in support of the application was not substantial and reliable, particularly in view of the record as a whole; that all other issues of law and fact are found in favor of Petitioner, and that the Order of the Board is not supported by substantial evidence and should be reversed and set aside.” (Emphasis added)

THE DECISION

It is, perhaps, appropriate to deal first with the applicable law that is to be resorted to by the circuit court in reviewing the decision of the Board in determining, (1) the area of responsibility of the circuit court, and (2) the proper standard of judicial review.

In Ark. Stat. Ann. § 67-1866 (Supp. 1977), it is provided as follows:

“The Board shall not approve any application for authority to open a branch office or other service facility for business unless the association seeking said authority establishes and the Board shall have affirmatively found from the data furnished with the application, the evidence adduced at such hearing . . . that:
“(1) There is a public need for the proposed branch office or service facility and the volume of business in the area in which the proposed branch office or service facility will conduct its business is such as to indicate a successful operation.
“(2) The operation of the proposed branch office or service facility will not unduly harm any other existing association or federal savings and loan association or other financial institution.
“(3) The operation of the proposed branch office or service facility will not unduly harm the association seeking authority to open the branch office or service facility for business.”

Ark. Stat. Ann. § 5-713, which is Arkansas’s Administrative Procedure Act, in providing for judicial review of an administrative agency’s decision, provides in material part as follows:

“(h) The court may affirm the decision of the agency or remand the case for further proceedings. It may reverse or modify the decision if the substantial rights of the petitioner have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:
(1) in violation of constitutional or statutory provisions;
(2) in excess of the agency’s statutory authority;
(3) made upon unlawful procedure;
(4) affected by other error of law;
(5) not supported by substantial evidence of record; or
(6) arbitrary, capricious, or characterized by abuse of discretion.”

In Arkansas Savings & Loan Association Board and Security Savings & Loan Association v. Central Arkansas Savings & Loan Association, 260 Ark. 58, 538 S.W. 2d 505, we adopted the rationale enunciated by the United States Supreme Court in Universal Camera Corp. v. National L. R. Bd., 340 U.S. 474, 71 S. Ct. 456 (1950), that court review of an administrative decision, under the federal Administration Procedure Act, requires such a review upon the record as a whole in applying the substantial evidence rule rather than predicating such review upon only the evidence supporting the administrative finding when reviewed by itself. In other words, we held that the provisions of Arkansas’s Administrative Procedure Act give to the courts the same type of review that is applied by the federal courts.

In Universal Camera Corp. v. National L. R. Bd., supra, the Court made the following observation in discussing the well recognized limitations that a court faces in determining substantiality by considering the record as a whole:

“To be sure, the requirement for convassing ‘the whole record’ in order to ascertain substantiality does not furnish a calculus of value by which a reviewing court can assess the evidence. Nor was it intended to negative the function of the Labor Board as one of those agencies presumably equipped or informed by experience to deal with a specialized field of knowledge, whose findings within that field carry the authority of an expertness which courts do not possess and therefore must respect. Nor does it mean that even as to matters not requiring expertise a court may displace the Board’s choice between two fairly conflicting views, even though the court would justifiably have made a different choice had the matter been before it de novo. Congress has merely made it clear that a reviewing court is not barred from setting aside a Board decision when it cannot conscientiously find that the evidence supporting that decision is substantial, when viewed in the light that the record in its entirety furnishes, including the body of evidence opposed to the Board’s view.
“. . . Nothing in the statutes suggests that the Labor Board should not be influenced by the examiner’s opportunity to observe the witnesses he hears and sees and the Board does not. Nothing suggests that reviewing courts should not give to the examiner’s report such probative force as it intrinsically commands.” (Emphasis added)

In First National Bank of Fayetteville v. Smith, 508 F. 2d 1371 (8th Cir. 1974), the Court, in reviewing an administrative decision made the following pertinent comments:

“The ‘arbitrary and capricious’ standard of review is a narrow one ... its scope is more restrictive than the ‘substantial evidence’ test which is applied when reviewing formal findings made on a hearing record . . . ‘Administrative action may be regarded as arbitrary and capricious only where it is not supportable on any rational basis’ . . . Something more than mere error is necessary to meet the test. . . To have administrative action set aside as arbitrary and capricious, the party challenging the action must prove that it was ‘willful and unreasoning action’, without consideration and with a disregard of the facts or circumstances of the case . . . ” (Emphasis added)

Upon reviewing the entire record carefully, we are persuaded that the appellee failed to meet the burden imposed upon it to show that the Board’s findings were not supported by substantial evidence, and while much of the evidence in this record did not favor the establishment of a branch as requested by appellant, the decision of the Board was, indeed, not without some support in the record. Consequently, we hold that the trial court committed reversible error in holding that the Board’s decision was not supported by substantial evidence and by substituting its judgment in lieu of the Board’s judgment in finding “that the evidence submitted in support of the application was not. .. reliable ...” Indeed, it is clear that the credibility of witnesses and the proper weight to be accorded evidence adduced is a prerogative of the Board and not that of the reviewing court. It must be remembered that the Board was in a position to observe the witnesses and consider their derfteanor and conduct. The reviewing court does not have this advantage in view of the fact that administrative decisions are not reviewed de novo.

In Terrell Gordon v. Gordon L. Cummings et al, 262 Ark. 737, 561 S.W. 2d 285 (1978), involving an administrative proceeding, we made this observation:

“It is well settled that administrative agencies are better equipped than courts, by specialization, insight through experience and more flexible procedures to determine and analyze underlying legal issues; and this may be especially true where such issues may be wrought up in a contest between opposing forces in a highly charged atmosphere. This recognition has been asserted, as perhaps, the principal basis for the limited scope of judicial review of administrative action and the refusal of the court to substitute its judgment and discretion for that of the administrative agency.”

It would unduly prolong this opinion to enumerate in detail the evidence that substantially supports the Board’s decision and, therefore, we shall mention briefly the evidence we find to be clearly substantial.

The proposed service area (PSA) branch is not presently served by a savings and loan association; the PSA consists of White, Woodruff, Monroe and Prairie Counties having a stable and nondeclining population and according to the 1970 census report, the population exceeds 13,000 inhabitants.

From 1965 through 1974, Prairie and White Counties had a per capita income higher than the State average. Moreover, the evidence indicates that Prairie County income is the highest in the State.

The evidence also reflects that retail trade increased in Prairie County from $12.7 million to $15.9 million between 1967 and 1972 while in White County the increase in retail trade increased from $48.1 million to $76.3 million.

The personal income of Prairie County residents increased from $28.5 million in 1969 to $79.3 million in 1974 at an annual rate of 35.6% and, after inflation, equaled 21.5%. However, during this same period, the annual rate of increase for Arkansas in total personal income was only 5.8%. White County’s total personal income increased from $90.3 million to $161.1 million between 1969 and 1973 at an annual rate of 15.8% and, after inflation, at a rate of 6.7%. Woodruff County experienced a growth from $32.2 million to $65.3 million in total personal income for an annual rate of 23.2% and, after inflation, equaled 12.3%.

The evidence also established that the financial institutions in the PSA have realized considerable growth. Three banks are located in the proposed area and the total assets of the banks combined grew from $9,978,000 in 1969 to $25,470,000 or 157.3% in 1975. Time deposits grew from $3,-831,000 to $23,181,000 with a total increasement of $8,350,-000 or 218% during this period.

Appellant’s economic experts established that the three banks in the PSA have been able to accumulate only 35% of the total new savings generated by the economic growth between 1970 and 1975, while 65% of the available savings deposits were placed outside of the PSA.

Appellant’s economic experts also projected in 1976 total estimated savings flow to be $6.1 million and the estimated share of the three banks in the PSA would be $2.1 million. The evidence further reflects that appellant’s branch could reach its goal of $1,000,000 in savings deposits during the first year from the remaining $4,000,000 not deposited with the three banks.

Finally, the economic experts for appellant projected that at the end of the first three years of operation of the branch, its assets would be $1,000,000, $2,100,000 and $3,-300,000, respectively. Based on these and other projections, the profits of the branch at the end of the first year would be $490.00, at the end of the second year $17,751, and at the end of the third year $28,944. Based on this testimony the Board concluded that the operation of the branch would not unduly harm the appellant.

Reversed and remanded for proceedings not inconsistent with this opinion.

Byrd and Hickman, JJ., not participating.

Fogleman, J., dissents.

John A. Fogleman, Justice,

dissenting. The troublesome problem of judicial review, both at the trial and appellate levels, now seems further from solution than ever. Nowhere does the process seem to rest on shifting sands more than in the type of case now before us, i.e., action on applications for the establishment of savings and loan associations or branch offices of established associations. When one views our decisions in these cases, it becomes obvious that a trial judge can only approach a case like this with uncertainty, and perhaps bewilderment, as to just which standard he should follow. See, e.g., Arkansas Savings & Loan Board v. Central Arkansas Savings & Loan Ass’n., 260 Ark. 58, 538 S.W. 2d 505; First Federal Savings & Loan Ass’n. v. Union Fidelity Savings & Loan Assn’., 257 Ark. 199, 515 S.W. 2d 75; Arkansas Savings & Loan Board v. Southerland, 256 Ark. 445, 508 S.W. 2d 326; Arkansas Savings & Loan Board v. Grant County Savings & Loan Ass’n., 256 Ark. 858, 510 S.W. 2d 863; Arkansas Savings & Loan Board v. Corning Savings & Loan Ass’n., 253 Ark. 987, 490 S.W. 2d 460; Morrilton Federal Savings & Loan Ass’n. v. Arkansas Valley Savings & Loan Ass’n., 243 Ark. 627, 420 S.W. 2d 923.

In Arkansas Savings & Loan Board v. Central Arkansas Savings & Loan Ass’n., supra, a clear majority of the court (all but the writer) cast aside everything we had previously said on the subject and rejected the idea that, in determining the substantiality of evidence, we should be governed by the same rule of review as we follow in cases involving jury verdicts. In doing so, it adopted language from Universal Camera Corp. v. National L. R. Bd., 340 U.S. 474, 71 S. Ct. 456, 95 L. Ed. 456 (1950), ignoring all our previous statements and decisions on the question, but relating the quoted language to our Administrative Procedure Act [Ark. Stat. Ann. § 5-701 et seq (Repl. 1976)] and particularly to one section (Ark. Stat. Ann. § 5-713). The language adopted was:

“Whether or not it was ever permissible for courts to determine the substantiality of evidence supporting a Labor Board decision merely on the basis of evidence which in and of itself justified it, without taking into account contradictory evidence or evidence from which conflicting inferences could be drawn, the new legislation definitely precludes such a theory of review and bars its practice. The substantiality of evidence must take into account whatever in the record fairly detracts from its weight . . . . ”

The majority opinion there specifically stated that the court was construing our act to mandate that type of judicial review. Yet the very first time a trial court follows that mandate, the court retreats from that position.

The portion of the circuit court judgment italicized by the majority clearly shows that the review was undertaken in the light of what was then our most recent decision. The court stated that its findings were reached on the review provided for in that case. The quoted portion of the circuit court’s findings are completely ignored by the majority. Every factual statement in the majority opinion to show substantial evidentiary support for the board’s action is based upon the applicant’s stated PSA (Proposed Service Area). I submit that whatever gauge is used in testing substantial evidence, the basis for this PSA was totally destroyed by the evidence, and that every estimate, projection or finding stated in the majority opinion and in the board’s findings of fact fell when its foundation, the PSA, failed. In this the trial court was eminently correct.

The proposed service area consisted of the north half of Prairie County and portions of White, Woodruff and Monroe Counties, with a total population of 13,057. It was described in the application as a 25-mile area which would normally be considered commuting distance. It was determined solely by J. Darol Bell, White County Guaranty’s manager, who explained how he arrived at it by saying that he based it on his association’s experience in Bald Knob. The application recognized that savings and loan associations had branch offices outside the PSA in Brinkley, Bald Knob and Beebe, all of which are closer to most of the area than Searcy, the home office of White County Guaranty Savings & Loan Association, which also has the branch office at Bald Knob, with a service area population of 9,143. Most.of the applicant’s projections on the estimated income, operating expenses, deposits and loans of the proposed Des Arc branch were based upon the performance of the Bald Knob branch. All were based on this PSA.

The population of Des Arc was 1,714 in 1970. It is 31 miles from Searcy by highway, 25 miles from Brinkely, 42 miles from Stuttgart, 34 miles from Lonoke, 18 miles from Hazen, 22 miles from DeValls Bluff and 26 miles from Car-lisle. Brinkley lies virtually on the perimeter of the PSA and much of the area is much nearer to Brinkley than Des Arc. Almost the same situation prevails as to Bald Knob. Some of the PSA is actually nearer Stuttgart than Des Arc. Carlisle is served by a mobile unit of a Little Rock association twice weekly. A considerable portion of the PSA is nearer Carlisle than Des Arc. DeValls Bluff is as close to Stuttgart, where there is an established association, and to Brinkley, where there is a branch office of White County Guaranty, as it is to Des Arc. Most of the White County area in the PSA is closer to Searcy than it is to Des Arc. A portion of the PSA in the Northern District of Prairie County is closer to Beebe than it is to Des Arc.

The applicant explained that its PSA boundaries were established by considering the factors of convenience and needs of potential customers within the proposed service area. It would include both Hazen and De Vails Bluff in the Southern District of Prairie County. The evidence that these towns and their surrounding area were not in the Des Arc trade area was overwhelming.

Dr. Donald R. Market, an economist employed to make an economic report for the applicant, said that he took the PSA as determined by the management of the applicant and analyzed the data. He said that he did not attempt to justify the PSA. After testimony which clearly showed that it was overextended, Dr. Taylor stated that he thought the applicant was a little “exuberant” in defining its service area. He did say that he thought it was “somewhat bigger” than that stated by Dr. Dominick, an economist employed by the protestant. He did not attempt to describe or justify this “somewhat bigger” area. He said that the PSA or market area described by Dr. Dominick had a population of 5,205. The only figures or estimates he really adjusted for this area were his estimate of per capita income, and those dependent on this estimate.

Dr. Dominick, Professor of Finance and holder of the Chair of Banking at the University of Arkansas, had made an independent study of the service area to determine the market area of a financial institution located in Des Arc. He demonstrated that the travel distance from a considerable portion of the proposed White County area would be nearly twice as great to Des Arc as to Searcy. When it was equal or virtually so, he pointed out that at least one-half of the people would go to' Searcy, a city of 10,000 population, rather than to Des Arc. He also pointed out that Beebe was a larger town than Des Arc, and as close or closer to a substantial portion of applicant’s PSA than Des Arc. He also pointed out the attractiveness of travel on Interstate Highway 40, passing south of Des Arc and through or near Brinkley, Hazen and Carlisle, dividing Prairie County.

Dr. Dominick referred to the testimony of an implement dealer, who was the only witness whose testimony even tended to justify the applicant’s PSA. This witness, a John Deere dealer, had testified that individuals from Stuttgart and from beyond both Searcy and Carlisle came to buy his product and that the implement company’s service area reached from Beebe to Carlisle to Lonoke, as far as Stuttgart and beyond Cotton Plant and Hunter., The probative value of this testimony had been virtually, if not totally, negated by the reason this witness gave for those distant customers. He said they came “because we offer them something they can’t get at a closer location. ” Nothing in this record even suggests that White County I Guaranty Savings & Loan Association will offer people outside the area, as limited by Dr. Dominick, anything they can’t get at a closer location. But Dr. Dominick pointed out that one purchasing a $30,000 tractor, or seeking the services of a good attorney or good dentist or medical doctor or for special shopping, might drive from De Vails Bluff to Searcy, Des Arc, Brinkley or Stuttgart but would not drive that far to do business with a financial institution, unless he hated everyone in his market area. He said that the major consideration in consumer selection of a financial institution is convenience. There is no substantial contradiction of this testimony by Dr. Dominick. The board simply stated that the PSA consisted of that described in the application. It really made no finding of fact on this critical point, satisfying itself by saying that applicant’s economic experts, using the protestant’s adjusted PSA, projected personal income to grow from $39.6 million in 1975 to $56.8 million in 1980, with a savings flow during the same period growing from $2.4 million to $3.4 million. The board added that per capita income for this adjusted area would be $7,608 as opposed to a national average of $5,832.

I repeat that the circuit court was eminently correct in the finding quoted in the majority opinion and submit that the circuit judge was not substituting his judgment for the expertise of the board. I further submit that the majority has failed to demonstrate that the circuit judge erred.

       The population was estimated to be 2,200 at the time of the application.

       Dr. Phillip Taylor, Jr. worked in conjunction with Dr. Market in making this study.

       The manager of a factory in Des Arc testified that their employees were drawn from distances of “about 15 miles.”


author: George Howard, Jr., Justice.

text:
    ANHEUSER-BUSCH, INC. v. Betty McALPIN
    77-238
    562 S.W. 2d 72
    Opinion delivered February 27, 1978
    (Division I)

      Holloway & Haddock, by; Bill R. Holloway, for appellant.

      Drew & Mazzanti, for appellee.
   George Howard, Jr., Justice.

The question to be decided is whether the verdict of the jury in behalf of appellee, on her claim for damages resulting from drinking beer from a bottle containing a foreign substance, in the sum of $10,-000.00 is so grossly excessive requiring either a remittitur or a new trial.

THE FACTS

Appellee purchased a bottle of beer at the Tiara Club. After completing approximately half of the contents of the bottle of beer, appellee discovered what appeared to be the remains of a decomposed mouse at the bottom of the bottle.

Appellee alleged in her complaint that as a direct consequence of discovering the foreign substance in the beer, she became “violently ill”; that “she was unable to work as a waitress or any other occupation for several weeks”; that “she sustained pain, suffering and mental anguish, past, present and future and incurred medical expenses for which she should recover the sum of $100,000.00”.

The case was tried to a jury and the jury rendered a verdict in behalf of appellee in the sum of $10,000.00 against Anheuser-Busch, Inc. Although the action was initially instituted against Delta Distributing, Inc., and Bobbie Helling, d/b/a The Tiara Club and Anheuser-Busch, Inc., appellee took a nonsuit as to Delta Distributing, Inc. and Bobbie Helling, d/b/a The Tiara Club.

APPELLANT’S CONTENTION FOR REVERSAL

1. The trial court erred by failing to enter a remittitur in view of a grossly excessive verdict of $10,000.00 obviously based on passion and prejudice of the jury when there were no medical bills and the claimed injuries were based solely on the uncorroborated testimony of the appellee.

THE DECISION

The evidence shows that when appellee discovered the foreign substance in her bottle of beer, she became nauseated, nervous and had chills and as a consequence of this condition, she lost everything that she had eaten. The appellee immediately visited her personal physician who advised her, in effect, that her condition was not serious, but “all in my mind.” After a few weeks, appellee concluded that her condition — loss of weight, sleepless nights and a sickly feeling — was not improving, appellee consulted a psychiatrist who gave appellee some “depression pills”.

Appellee further testified that it was approximately “eight months to a year” before she returned to the Tiara Club because mere mentioning of the club refreshed her memory about the incident and she would become nervous and upset. But even after a year, the evidence reflects, appellee had to take one of her pills in order to relax and drink a bottle of beer.

Appellee offered no evidence pertaining to any medical bills or expenditures and, moreover, there was no evidence offered from her physician or psychiatrist. The only medical evidence offered came directly from appellee pertaining to her condition before and after she discovered the foreign substance in her beer.

The appellee testified that at the time of the incident, she worked three days a week, earning $10.00 per day as a regular salary and between $10.00 to $15.00, at certain times, per day from tips; that she tried to work at a grocery store and at a garment factory, but her condition was such that she could not cope with her work assignments and that the pay that she received during these efforts to maintain employment was considerably less than what she had received at the Tiara Club for the same amount of time or work performed.

In Breitenberg v. Parker, 237 Ark. 261, 372 S.W. 2d 828, we stated:

“Every case involving the issue of excessiveness must be examined on its own facts; and before this Court can constitutionally reduce a verdict we must give the evidence in favor of the verdict its highest probative force and then determine whether there is any substantial evidence to sustain the verdict.”

After giving the evidence in this case its highest probative force, we are persuaded that the verdict of the jury in the sum of $10,000.00 is highly speculative and is not supported by any substantial evidence and, consequently, excessive. We hold that the appellee is entitled to recover a sum not exceeding $3,000.00. If within seventeen days, appellee will enter a remittitur of $7,000.00, the judgment for the remaining $3,000.00 will be affirmed; otherwise, the cause will be remanded for a new trial. See: Coca-Cola Bottling Company of Arkansas v. Langston, 198 Ark. 59, 127 S.W. 2d 263.

Modified and affirmed, if remittitur is entered.

We agree. Harris, C.J., and George Rose Smith and Hickman, JJ.

       Appellee was a part time employee of the Tiara Club, but this incident occurred on her day off from work.