author: ROBERT H. Dudley, Justice. David Newbern, Justice, ROBERT L. Brown, Justice,

text:
    STATE of Arkansas, Department of Finance and Administration v. Debora STATON
    96-215
    934 S.W.2d 478
    Supreme Court of Arkansas
    Substituted Opinion upon Granting of Rehearing delivered October 28, 1996

      Beth B. Carson, Revenue Legal Counsel, for appellant.

      Michael A. Skipper, for appellee.
   ROBERT H. Dudley, Justice.

In January 1994, Debora Staton purchased a car and an extended service contract on the car and paid State sales tax on the sale of both the car and the service contract. The State sales tax attributable to the service contract was $49.28. On April 21, 1994, Ms. Staton filed a claim with the Department of Finance and Administration for refund of the $49.28 on the ground that, under the language of the sales-tax statute, the tax did not apply to the extended service contract. The Department denied the refund.

On July 7, 1994, Ms. Staton filed suit in chancery court and asked for judgment of $49.28. In addition, she sought class certification for all other taxpayers similarly situated. On May 8, 1995, the chancellor certified a class of taxpayers under Ark. R. Civ. P. 23 as “all of those who have, since July 7, 1991, purchased vehicle service contracts, sometimes referred to as extended warranties, covering motor vehicles within the State of Arkansas.”

On November 21, 1995, the chancellor ruled that the service contracts were not taxable and that each class member could submit a claim to the chancery court for refund, dating back to 1991. The Department appeals to this court. Staton cross-appeals. We affirm the ruling that service contracts are not taxable and reverse the ruling certifying the class, causing the cross-appeal to be moot.

The Department argues that the chancellor erred in ruling that the service contracts were not taxable. It argues that Ark. Code Ann. § 26-52-301 (3)(C)(i) and § 26-52-103(4) (Repl. 1992), together, provide the basis for taxation. The chanceEor ruled correcdy. Arkansas Code Annotated § 26-52-301(3)(C)(i), in material part, plainly levies a “tax...upon the gross proceeds or gross receipts derived from all sales to any person of...service of...and repair of motor vehicles.” An extended warranty is not “service” of a motor vehicle. As the promised repairs are completely contingent upon events that may not transpire, the contracts cannot be said to be for service or repairs to automobiles. Consequendy, we affirm this part of the chancellor’s order.

We turn now to the Department’s point for reversal that the chancellor lacked subject-matter jurisdiction to certify the class. In its argument, the Department contends that the doctrine of sovereign immunity prohibits taxpayers’ suits against the State except when permission to sue has been granted, and at other limited times not material to this suit. The Department contends that permission to seek a refund of erroneously assessed and collected sales tax is governed by Ark. Code Ann. § 26-18-507(e)(2)(A) (Repl. 1992), which allows a taxpayer to sue the sovereign for improperly collected sales tax only after a refund has been sought and the request is refused or when no response is made by the Department. The Department concludes that since Ms. Staton is the only taxpayer who had sought a refund and the only taxpayer whose request was denied, the chancery court did not have subject-matter jurisdiction over other members of the proposed class. The argument is well taken.

Article 5, section 20, of the Constitution of Arkansas cogently provides: “The State of Arkansas shall never be made defendant in any of her courts.” This sovereign immunity may be waived only in limited circumstances. Arkansas Dep’t of Human Servs. v. State, 312 Ark. 481, 850 S.W.2d 847 (1993); Arkansas Game & Fish Comm’n v. Lindsey, 299 Ark. 249, 771 S.W.2d 769 (1989). The doctrine of sovereign immunity is rigid. Austin v. Arkansas State Highway Comm’n, 320 Ark. 292, 895 S.W.2d 941 (1995).

Arkansas Code Annotated § 26-18-507(e)(2)(A) (Supp. 1992) grants legislative permission to a taxpayer to sue the State after a claim for refund has been filed and refused or the Commissioner has not acted upon it. There must be full compliance with this type of statute before sovereign immunity is waived. Hercules, Inc. v. Pledger, 319 Ark. 702, 706-07, 894 S.W.2d 576, 578 (1995). Because Ms. Staton’s claim for refund was the only one filed and rejected, sovereign immunity was waived in only that one case.

A trial court acquires no jurisdiction where the suit is one against the State and there is no waiver of sovereign immunity. McCain v. Crossett Lumber Co., 206 Ark. 51, 174 S.W.2d 114 (1943); Pitcock v. State, 91 Ark. 527, 121 S.W. 742 (1909). Thus, the State is correct in its contention that the trial court had no subject-matter jurisdiction over the entire class. Subject-matter jurisdiction based on sovereign immunity is an issue that is always open, and it is the duty of an appellate court to raise the issue of its own volition. Crossett Lumber Co., 206 Ark. at 61-62, 174 S.W.2d at 120.

Interwoven with the doctrine of sovereign immunity in tax cases is sound fiscal public policy. Throughout the years, with one exception, we have written that a taxpayer must comply with the statutory requirements before sovereign immunity is waived. We have said that this procedure places the government on notice of the claim and informs it that it may be required to refund the money; consequendy, it should make appropriate financial allowances. We fully discussed this policy in the recent case of Mertz v. Pappas, 320 Ark. 368, 896 S.W.2d 593 (1995), as follows:

We have consistendy followed the common law rule that prohibits the recovery of voluntary paid taxes, except where a recovery is authorized by a statute, without regard to whether the payment is voluntary or compulsory. See, e.g., City of Little Rock v. Cash, 277 Ark. 494, 644 S.W.2d 229 (1982); Searcy County v. Stephenson, 244 Ark. 54, 424 S.W.2d 369 (1968); Thompson v. Continental Southern Lines, Inc., 222 Ark. 108, 257 S.W.2d 375 (1953). We follow this rule even when an illegal exaction claim is based on constitutional grounds. Cash, 277 Ark. at 504-05, 644 S.W.2d at 233. When recovery is authorized by statute upon payment “under protest, ” we literally require a payment “under protest”. Hercules, Inc. v. Pledger, 319 Ark. 702, 894 S.W.2d 576 (1995). There is an exception for payment under coercion, see Cash, Til Ark. at 505, 644 S.W.2d at 233; Chapman & Dewey Land Co. v. Board of Directors, 172 Ark. 414, 288 S.W. 910 (1926), but that exception is not applicable to the case at bar.
The reasoning underlying our cases is sound. When taxes are paid to a government they are deposited into that government’s general revenues and ordinarily are spent within that tax year. However, when the government is put on notice that it may be required to refund those taxes, it can make the appropriate allowance for a possible refund. See Hercules, Inc., 319 Ark. at 707, 894 S.W.2d at 578. If we were to allow refunds for taxes voluntarily paid in previous years, it would jeopardize current and future governmental operations because current and future funds might be necessary for the refund.

Id. at 370, 896 S.W.2d at 594 (emphasis supplied).

In another case, one involving a claim for refund under the comparable income-tax statute, we wrote:

In enacting § 28-18-406, the General Assembly had in mind at least two reasons for requiring a taxpayer to designate specifically any payment as being under protest when seeking judicial review of a final deficiency assessment. First, § 28-28-406(c) mandates that all taxes and penalties paid under protest are to be held by the director in an escrow account denominated the “Tax Protest Fund Account,” and that refunds are to be made from this account. While we agree with Hercules that the phrase “paying under protest” is not defined by the Act, these terms are not ambiguous or difficult to understand. Protest is commonly understood to mean a formal disapproval or objection issued by a concerned party. Here, under § 28-18-406, it is clear that the protest is intended to place DF&A on notice that the taxpayer’s payment must be deposited into the Protest Fund account. Second, a taxpayer who has protested and pursued an .earlier administrative review of a proposed assessment under § 28-18-404 may reasonably decide not to pursue further adjustments of the assessment or judicial review of the final determination. While a payment which is not made under protest is deposited into general revenues and becomes available for immediate use by the state, a payment made under protest only becomes available for the state’s use after the taxpayer fails to file suit within the one year period or after judicial determination that the deficiency assessment was valid. See § 28-18-406(c)(3).

Hercules, Inc. v. Pledger, 319 Ark. 702, 707, 894 S.W.2d 576, 578 (1995).

Another case in which we recogimed fiscal policy concerns was City of Little Rock v. Cash, 277 Ark. 494, 644 S.W.2d 229 (1982). In that case, which involved a tax that was illegal from its inception, we pointed out that, even though the tax had always been illegal, it had been collected and spent by the City; therefore, the class action could be maintained only from the date the suit was filed and the City was put on notice that it should make allowance before spending the money.

The anomalous case is Pledger v. Bosnick, 306 Ark. 45, 811 S.W.2d 286 (1991). In that case it was necessary for each member of the purported class of taxpayers seeking a refund of income taxes to file for a refund as a prerequisite for membership in the class. At issue there, as here, was Ark. Code Ann. § 26-18-507, the statute by which the State can waive sovereign immunity. We held that the statute did not require each member of the class to file a request for a refund. This court agreed with the argument that requiring strict compliance with the statute would “ignore one of the bases for class action suits, i.e., to deal with these types of issues in a single action rather than requiring all members of a class to bring suit.” Id. at 56, 811 S.W.2d at 293. However, neither the majority opinion nor the dissenting opinion mentions sovereign immunity, and the case contains no holding on the issue of sovereign immunity. We did not recognize that sovereign immunity was an issue that should have been argued, and we failed to raise it on our own motion. By not doing so, we allowed Ark. R. Civ. P. 23, the class action rule, to prevail over the constitutional provision granting sovereign immunity. But we now recognize that the issue is before us, and we reverse this part of Pledger v. Bosnick.

In the case now before us, Ms. Staton was the only taxpayer who complied with the statute that caused the State to waive sovereign immunity. It was error to certify a class composed of other taxpayers when they had not complied with that statute, and for that reason we reverse the certification of the class.

On cross-appeal Staton contends that the chancellor erred in refusing to grant an injunction against the collection of the tax and in refusing to order an accounting. Since we hold that it was error to certify the class, these two issues are moot.

This opinion is substituted for the opinion handed down on July 15, 1996. See State v. Staton, 325 Ark. 341, 925 S.W.2d 418 (1996).

Affirmed in part and reversed and remanded in part for proceedings consistent with this opinion.

Newbern, Corbin, and Brown, JJ., dissent.

David Newbern, Justice,

dissenting. The petition for rehearing filed by the Department of Finance and Administration (DFA) in this case does little more than reargue the points as they were argued in DFA’s original brief. Those points were fully aired in the original majority and dissenting opinions. (The original majority opinion appears as an appendix to this dissenting opinion.) The petition for rehearing, therefore, is distinctly violative of Rules of the Supreme Court and Court of Appeals of the State of Arkansas 2-3(f), and it should be denied summarily. Not only does the majority ignore our established rule on that point, it overrules recent precedent and rides roughshod over taxpayers whose money may have been illegally collected by the State. All of that is done in the name of sovereign immunity, which has been waived by the General Assembly.

The majority opinion rehashes the arguments which led to our original decision in this case. It states as a main point that the majority and dissenting opinions in Pledger v. Bosnick, 306 Ark. 45, 811 S.W.2d 286 (1991), a case upon which the original majority opinion relied, did not mention sovereign immunity. The suggestion seems to be that, because the decision did not mention sovereign immunity, it does not apply to this case. That is incorrect.

A main issue in the Pledger case was whether it was necessary for each member of the purported class of taxpayers seeking a refund of state income taxes to have filed for a refund as a prerequisite for membership in the class. At issue there, as here, was Ark. Code Ann. § 26-18-507, the statute by which the General Assembly waived sovereign immunity. While the opinion did not mention sovereign immunity, it held that the statute did not require a refund request by each member of the class. This Court agreed with the argument that requiring strict compliance with the statute would “ignore one of the bases for class action suits, i.e., to deal with these types of issues in a single action rather than requiring all members of a class to bring suit.”

The opinion granting rehearing concludes that government might have to “shut down some essential services” if the taxpayers are allowed to proceed as a class in a case such as this one. The argument is not convincing. The opinion focuses on the need of government to have notice of its possible liability. It does not, however, suggest why, as in a case such as this one, the notice given by one taxpayer should not be sufficient to inform the government that it may owe all who are similarly situated.

The sky is indeed not falling in this case or in others for which the Pledger decision should be precedent. Ed Hicks, the Excise Tax Administrator, testified that the General Assembly appropriates $50,000,000 biennially for the miscellaneous tax account for the purpose of making refunds. In response to a question by the Chancellor, Mr. Hicks stated there was plenty of money in that account to satisfy the claims at issue in this case. Contrary to the conclusion of the majority, government obviously has the ability to plan for and accommodate claims such as the one under consideration.

The Chancellor’s order, approved by the original majority opinion in this case, would have required notice to the taxpayers of the facts giving rise to claims, i.e., the allegation that the tax had been illegally collected. It would have then required each taxpayer seeking membership in the class to present proof of payment of the tax at issue and make a claim to a master for refund.

The effect of the majority opinion granting rehearing is to suggest that DFA may sit by smugly and entertain the claims of the one or two taxpayers who may have information about the possible illegality of the tax in question, knowing all the while that there are thousands of others who may be owed but with whom it will never have to reckon.

Once again, it must be pointed out that it is the announced policy of DFA to treat all taxpayers alike. Assuming that is the policy to be applied, it should make no theoretical difference to DFA or the State’s coffers whether the action proceeds as a class action or as a single claim by Ms. Staton if she prevails. It will, however, make a great practical difference to the others to whom the money may be owed. If the class action were allowed to proceed, taxpayers would be afforded notice pursuant to Ark. R. Civ. P. 23(c) which requires “the best notice practicable under the circumstances.” Denial of the class action will undoubtedly result in many persons who may be owed refunds remaining ignorant of the fact. As the majority of the members of this Court stated in the original opinion in this case, avoidance of payment of money owed is not a good reason for refusal of a class action.

I respectfully dissent.

Corbin and Brown, JJ., join.

APPENDIX TO DISSENTING OPINION

This is a class-action tax-refund case. The appellee, Debora Staton, sued the Department of Finance and Administration (DFA) on behalf of herself and other taxpayers for refunds of sales taxes {>aid on purchases of extended warranty agreements. The Chancel- or certified the class action in accordance with Ark. R. Civ. P. 23(a). Although requests for an accounting and an injunction ax were denied, the Chancellor merits and ordered refunds to taxpayers who seek them.

1. Appeal

Several issues are presented. DFA attacks the jurisdiction of the Chancellor to hear the suit as a class action because of failure to name a class of persons who have followed the statutory procedure to obtain a tax refund. The class counters with a claim that the class certification has not been appealed in a timely manner. On the merits, DFA contends the tax law, as interpreted for many years by DFA, permits collection of the tax. On cross-appeal, the class contends the Chancellor erred in refusing to enjoin the DFA from continuing to collect the tax and in refusing to require an accounting to class members who had paid the tax rather than to those who come forward with claims. We hold the Chancellor did not err on any of the points asserted.

a. Timeliness of appeal

The order certifying the class was entered May 8, 1995, and the notice of appeal from the final judgment was not filed until December 13, 1995. Although interlocutory, an order granting a motion to certify a case as a class action “in accordance with Rule 23 of the Arkansas Rules of Civil Procedure” is appealable. Ark. R. App. P. 2.(a)9. DFA does not question the class’s compliance with the basic requirements of Rule 23. It contends, rather, that sovereign immunity, Ark. Const, art. 5, § 20, precluded the Chancellor from having subject matter jurisdiction of the claim made by the class because its purported members have not complied with the provisions of the statute granting permission to sue the State and thus waiving sovereign immunity.

As the issue on appeal goes beyond the technical aspects of class certification, we do not regard it as untimely. Even if DFA had appealed within 30 days of the class certification, it is doubtful that we would have entertained its sovereign immunity claim upon interlocutory appeal. Arkansas State Bd. of Educ. v. Magnolia Sch. Dist. No. 14, 298 Ark. 603, 769 S.W.2d 419 (1989).

b. Subject-matter jurisdiction

Upon the purchase of a vehicle, Ms. Staton, the class representative, paid a sales tax of $49.28 on the price she paid for an extended warranty. She filed a claim for a refund from DFA which denied the claim. Ms. Staton then filed an action in Chancery Court on behalf of herself and on behalf of other similarly situated taxpayers. The amended complaint alleged that DFA was unlawfully imposing a tax on the prices paid by members of the plaintiff class for extended warranty coverage on automobiles. It asserted that the Arkansas Gross Receipts Act did not authorize the imposition of such a tax and sought a refund of the taxes paid on the sale of extended warranties. The complaint also prayed for an injunction to stop DFA from collecting the tax and for an accounting to determine which taxpayers had paid the tax. It would thus have put the onus of determining who had paid the tax, and thus of determining who was potentially entided to a refund, upon DFA.

DFA moved to dismiss on the ground that it failed to state facts upon which relief could be granted and on the ground that Ms. Staton lacked standing. After Ms. Staton filed a second amended complaint, DFA again moved to dismiss. DFA claimed, as another reason for dismissal, that “the doctrine of sovereign immunity bars a class action tax refund lawsuit where not all of the proposed class members have satisfied the administrative requirements necessary to confer subject matter jurisdiction on this court.”

The order certifying the class recognized as members of the class “all of those parties who have, since July 7, 1991, purchased vehicle service contracts, sometimes referred to as extended warranties, covering motor vehicles within the state of Arkansas.”

The essence of DFA’s sovereign immunity argument is that sovereign immunity prohibits suits against the State except when permission to sue has been granted. The statute granting permission to taxpayers such as Ms. Staton is Ark. Code Ann. § 26-18-507(e)(2)(A) (Repl. 1992) which allows a taxpayer to seek judicial relief from an improperly collected tax after a refund has been sought and there has been no timely response from “the director” or the request has been refused. As the complaint in this case seeks relief for a class of persons without specifying that they must have followed the statutory refund procedure, DFA contends the concept of sovereign immunity precluded subject-matter jurisdiction in the Chancery Court.

We recently rejected the same argument in Pledger v. Bosnick, 306 Ark. 45, 811 S.W.2d 286 (1991). In that case, certain taxpayers claimed that the State had taxed their pension incomes in a discriminatory manner. The challenged law allowed a full exemption for certain retirees from state government positions while exempting only a small portion of the pensions of others. On appeal it was urged that the Chancellor erred in allowing refunds to members of the class who had not filed amended income-tax returns for 1985. It was argued by the State, as in this case, that class members had not complied with § 26-18-507.

The Chancellor’s order permitting recovery by the class was affirmed. The opinion stated, “Although this court has not ruled on this precise issue as applicable to tax refunds, there is ample authority for the appellees’ position and we adopt that reasoning. See Santa Barbara Optical Co. v. State Bd. of Equalization, 47 Cal. App. 3d 244, 120 Cal. Rptr. 609 (1975); Ware v. Idaho State Tax Commission, 98 Idaho 477, 567 P.2d 423 (1977); Clark v. Lee, 273 Ind. 572, 406 N.E.2d 646 (1980); Thorn v. Jefferson County, 375 So.2d 780 (Ala. 1979); and Fiorito v. Jones, 39 Ill.2d 531, 236 N.E.2d 698 (1968).” We now review the “reasoning” we adopted from those cases.

The opinion in Fiorito v. Jones, supra, concerned amendments to an Illinois tax statute which gave exemptions to certain service providers while taxing all others. Some of the class members were the service providers who were to pay the tax to the State, and some were persons who had been charged the tax by the providers. It was held that the differences between the class members were not sufficient to void the class because each group presented common legal and factual issues, and each would have an interest in the common fond to be created by a holding that the tax was improperly collected.

In Ware v. Idaho State Tax Commission, supra, a group of taxpayers had failed to claim refunds of sales taxes due to persons over 65. The tax authority had failed to make available means to request the refunds and had even misrepresented the law on the procedure to be used. Although those facts are quite different from the ones now before us, some of the reasoning of the Supreme Court of Idaho is useful.

The record before us shows that the Commission ... refused any refund claims such as those which were found valid by the trial court. It admits that it had no intention of allowing any such claims. In these circumstances, we find that the requirement of the filing of a claim for the refund was the requirement of a useless and futile act. “The law does not require useless acts from litigants as prerequisites to seeking relief from the courts.” [Citations omitted.]

In Clark v. Lee, supra, plaintiffs claimed an Indiana “occupations income tax” discriminated against non-resident taxpayers by giving a credit to residents against other taxes. A question on appeal of a judgment in favor of the plaintiffs was whether the class was proper in the absence of a showing that all of the class members had exhausted their administrative remedies.

In holding the class was proper, the following reasoning was expressed by the Supreme Court of Indiana:

In the situation with which we are confronted, the named plaintiff personally satisfied the jurisdictional requirements of the statute by exhausting their administrative remedies before bringing their action. In so doing they afforded the state government the opportunity of reckoning with their claim. The claim itself was constitutional in nature and sought to void the statute because it discriminated against a class to which plaintiff belonged, namely non-residents. It was by its nature a claim which would, if successfully prosecuted by a lone plaintiff, provide a basis for class-wide relief in the absence of certification. We, therefore, conclude that the certification of this action as a class action does not vitiate or evade the jurisdictional requirements of the statute and is not contrary to the case law cited.

The Alabama case, Thorn v. Jefferson County, supra, cited in Pledger v. Bosnick, supra, is not as helpful as the others. In that case, the Alabama Supreme Court merely held that there was no requirement that class members have sought a refund when the claim was that the property-tax statute in question was unconstitutional and thus void.

In Santa Barbara Optical Co. v. State Bd. of Equalization, supra, a group of dispensing optical corporations sued California for refund of improperly imposed sales taxes. The State demurred on several bases including a contention that not all of the corporations had made timely claims with the State, each stating its name and the amount of refund due. The demurrer was sustained. The California Court of Appeals reversed, holding the claims statute was satisfied if the representative members of the class gave “sufficient information to identify and make ascertainable the class itself.” The Court also declined the State’s argument that some unnamed members of the class could not be “claimants” under the applicable refund statute because their claims had never been disallowed in writing, so their claims were not timely. The underlying reason recited for the decision sounded familiar.

If a class suit were not permitted a multiplicity of actions will be necessary in order to effectuate recovery by the individual purchasers. Since in many instances, the small amount involved may discourage an individual action as economically impractical, the state would be unjustly enriched, if a class suit were not permitted.

In Woosley v. State of California, 3 Cal.4th 758, 13 Cal. Rptr.2d 30, 838 P.2d 758 (1992), the California Supreme Court overruled the Court of Appeals decision in the Santa Monica Optical Co. case on the basis that the California Constitution specifically provides: “After payment of a tax claimed to be illegal, an action may be maintained to recover the tax paid, with interest, in such manner as may be provided by the Legislature.” The Court was also influenced by the fact that the California legislature had, subsequent to Woosley’s submission of his claim, enacted a law that required that any class action for refund of vehicle license fees be authorized by each member of the class who must sign the claim. The reasoning of the Court was that the State must know the claims against it and thus be able to plan its budget accordingly.

To be sure, there are other cases in other jurisdictions which use reasoning contrary to that we adopted from the cases we cited in Pledger v. Bosnick, supra. All of the cases we cited are found in Annot., “Propriety of Class Action in State Courts to Recover Taxes,” 10 ALR 4th 655 (1981). See also Annot., “Maintenance of Class Action Against Governmental Entity as Affected by Requirement of Notice of Claim,” 76 ALR 3d 1244 (1971).

Again, we have decided this issue based on the reasons given in the cases we cited in Pledger v. Bosnick, supra. We note in this case that filings for refunds by all the class members would apparently have been useless acts. We note also testimony presented by DFA that, once a decision had been reached by a court in a suit by a single taxpayer that the tax had been illegally collected, all taxpayers would be treated the same. We fail to see how presentation of requests for refund by way of a class action could be prejudicial to DFA or the budgeting process in view of DFA’s apparent willingness to give a refund to any taxpayer who seeks it after such a decision. It may be that more taxpayers who have paid the tax will become claimants due to the notices to be provided through the Court than would have sought refunds absent such a procedure, but discouraging payment of money owed is hardly a good reason to deny a class action.

We hold the Chancellor did not lack jurisdiction of the subject matter of the claim, as the class certification was proper.

c. The merits of the claim

Arkansas Code Ann. § 26-52-301 (Supp. 1995) provides in part:

There is levied an excise tax of three percent (3%) upon the gross proceeds or gross receipts derived from all sales to any person of the following:
* * *
(C)(i) Service of alteration, addition, cleaning, refinishing, replacement, and repair of motor vehicles, aircraft, farm machinery and implements, motors of all kinds, tires and batteries, boats, electrical appliances and devices, furniture, rugs, upholstery, household appliances, television and radio, jewelry, watches and clocks, engineering instruments, medical and surgical instruments, machinery of all kinds, bicycles, office machines and equipment, shoes, tin and sheet metal, mechanical tools, and shop equipment. [Emphasis added.]

DFA contends that the sales of extended warranties are taxable because it has ruled them taxable, and has taxed them for at least 17 years, and because the Court impliedly held that they are taxable in Ragland v. Miller Trane Service Agency, 274 Ark. 227, 623 S.W.2d 520 (1981).

In the Ragland case the taxpayer was engaged in the business of inspecting, servicing, and repairing commercial heating and cooling devices. The taxpayer sold two types of contracts. The first was an “inspection only” contract which all parties agreed was exempt from the gross-receipts tax. The second was a “Full Coverage Commercial Service Contract” whereby the service agency agreed with a customer to inspect (a minimum of 3 times a year), maintain, and repair commercial heating and cooling units. The contract provided for an annual or monthly prepayment. The full maintenance agreement was designed to assure the maximum service for the efficient and economical operation of the equipment. Contract jobs under the service agreement took priority over other jobs and were guaranteed prompt action upon request.

The State, through the Revenue Department Hearing Board, determined that the service agency owed a sales-tax deficiency of $8,253.71, which included interest and a 10% penalty, for failure to remit the 3% gross-receipts tax on the sale of the commercial contracts from September 1, 1975, through August 31, 1978. The assessment was paid under protest and then made the subject of a chancery court claim. The Chancellor found that 75% of the taxes assessed were improper, including the interest and penalty. The State was ordered to repay those funds.

On appeal, it was stipulated that the issue presented was whether the total consideration paid pursuant to the contract was subject to the 3% sales tax, or only that portion which relates to specific repairs. The State contended the Chancellor erred in finding the service agency’s full-coverage commercial contract could be broken down into component parts for the purposes of collecting the gross-receipts tax.

The Court noted that the sales-tax statute in effect provided for a 3% tax on gross proceeds or receipts derived from the service of “alteration, addition, cleaning, refurbishing, replacement and repair of. . . machinery of all kinds ...” The Court also noted that the term “gross proceeds” or “gross receipts” was defined as “the total amount of consideration for the sale of tangible personal property and such services as are herein specifically provided for...”

Based on the statute, the Court, in concluding that the entire value of the contract was subject to the sales tax, stated:

Here, the total consideration paid by appellee’s customers is for the package of services, i.e., inspection, maintenance and repairs, which it agreed to perform during the period covered by the contract. Maintenance and repairs of the machinery are taxable services. Inspection of the equipment is a prerequisite to the routine maintenance and repair and is an integral part of the contract. This inspection involves labor performed pursuant to the sale of taxable services; therefore, the cost of such an inspection cannot be deducted from the total amount of consideration paid for the full service contract. Appellee’s insurance coverage for reimbursement to it for repairs it made, plus 3% sales tax, was for its benefit. In summary, appellant’s claim is properly based upon the total consideration received by appellee for the sale of its package contract.

DFA argues that, because the contract receipts for future services were held to be taxable, the implication is that receipts for services to be performed upon contingency are taxable. We see a considerable difference between a prepayment for services to be rendered and a payment for something like insurance against the need for services which may or may not arise. DFA’s interpretation is obviously strained.

In response to the dissenting opinion, we must also note that which DFA does not argue. City of Little Rock v. Cash, 277 Ark. 494, 644 S.W.2d 229 (1983), is cited in DFA’s brief solely in support of this statement: “This court hears equity cases de novo on the record and enters such judgment as the chancellor should have entered on the undisputed facts.” DFA makes no argument whatever to the effect that, because the tax was “voluntarily” paid by the class members, they may not succeed in their quest for refunds.

We decline to address the issue in any depth, but point out summarily that there is good reason for not making such an argument. The general statement we adopted in Thompson v. Continental Southern Lines, Inc., 222 Ark. 108, 257 S.W.2d 375 (1953), from Cooley, The Law of Taxation, Ch. 20, § 1282, and cited in City of Little Rock v. Cash, supra, was based on Professor Cooley’s recitation that “every man must know the law.” It included the following: “It is well settled that if the payment of a tax is a voluntary payment, it cannot be recovered back, except where a recovery is authorized by the provisions of a governing statute regardless of whether the payment is voluntary or compulsory.” Section 26-18-507(a) authorizes such an action when a tax is paid under “mistake of law.” See Taber v. Pledger, 302 Ark. 484, 791 S.W.2d 363 (1990), cert. denied, 498 U.S. 967 (1990). The statute makes no reference to whether the tax was paid voluntarily or as the result of compulsion.

The reason we decline further to address this issue raised in the dissenting opinion is that it was not raised in the Trial Court or here. Our reason was stated by the majority of the members of this Court in Smart v. State, 297 Ark. 324, 761 S.W.2d 915 (1988), in response to a dissenting opinion raising an issue not argued by the appellant at trial or on appeal:

The dissenting opinion asserts that the majority “evades the question...” There are clear and cogent reasons. The argument was not raised in the trial court, nor was it argued on appeal. Either omission, according to literally hundreds of our cases, many of which are authored by the dissenting justice, obviates our dealing with issues that are not presented. If we undertook to answer arguments that were raised neither here nor in the trial court, the process of appellate review should doubdess collapse under its own weight. Few principles of appeal and error are more widely followed or firmly entrenched than the rule that we do not address arguments not raised by the litigants.

See also Smith v. State, 310 Ark. 31, 832 S.W.2d 497 (1992); Williams v. State, 304 Ark. 279, 801 S.W.2d 296 (1990).

DFA does argue its interpretation of the statute in question here is entided to deference, and we agree. See Arkansas Public Service Comm’n v. Allied Telephone Company, 274 Ark. 478, 625 S.W.2d 515 (1981). The basic rule of statutory construction, however, is to give effect to the intent of the General Assembly, and when a statute is clear, it is given its plain meaning. Hercules, Inc. v. Pledger, 319 Ark. 702, 894 S.W.2d 576 (1995).

The statute plainly levies a “tax . . . upon the gross proceeds or gross receipts derived from all sales to any person of.. . service of. . . and repair of motor vehicles.” An extended warranty is not “service.” As the promised repairs are completely contingent upon events which may not transpire, the contracts cannot be said to be for service or repairs to automobiles.

The judgment is affirmed on appeal.

2. Cross-appeal

a. Injunction

The Chancellor was asked to enjoin DFA from collecting the tax. The class contends:

Plaintiff was given judgment for $10,050,759.17 plus additional taxes and interest accruing at the rate of $6,352.00 per day. Since defendant was not enjoined from collecting the illegal tax on extended warranties, taxpayers have, and will, continue to pay State sales tax on extended warranties. It is possible that the total amount of refunds will exceed the damages awarded.

The only authority cited on this point is Harkey v. Matthews, 243 Ark. 775, 422 S.W.2d 410 (1967), for the proposition that public officials may be enjoined from ultra vires acts.

It is not at all clear that the Chancellor awarded the amount stated as a “judgment” in favor of the class. As we read the order, he found as a matter of fact that the figure stated was the amount which might have to be refunded.

The Chancellor was presented with evidence that DFA maintained a miscellaneous tax account through which it would pay the refund if ordered. According to testimony presented by DFA, $50 million per year was appropriated for the account for the years 1995, 1996, and 1997, and the State could have at least $30 million available for each fiscal year. The refunds, if required, would come out of that account. Testimony was also presented that an injunction, if granted, could disrupt public education and the services performed by the Department of Human Services.

The Chancellor denied the request for an injunction, finding that DFA had “established that sufficient funds are appropriated from which refunds may be made if ultimately ordered by the Court.” An order granting or denying an injunction is within a chancellor’s discretion. Smith v. American Trucking Ass’n, 300 Ark. 594, 781 S.W.2d 3 (1989). The Chancellor did not abuse his discretion.

b. Accounting

Again without citation to authority, it is contended that the Chancellor should have ordered DFA to identify each member of the group and refund the amount of the tax paid to that member.

Evidence was presented that such a requirement would be extremely burdensome and expensive. The Chancellor ruled that “the better method of refund is to require each taxpayer to present proof of their payment of taxes on an extended warranty during the time period in question in this lawsuit. A master is to be appointed to review and approve each claim filed for refund.”

We consider the solution reached by the Chancellor to be consistent with our decision in International Union of Electrical, Ra dio, and Machine Workers v. Hudson, 295 Ark. 107, 747 S.W.2d 81 (1988), in which we emphasized the need for discretion in the management of a class action and the desirability of choosing a management solution fair to all parties.

Affirmed on cross-appeal.

Dudley, J., not participating.

Jesson, C.J., and Glaze, J., dissent.

END APPENDIX TO DISSENTING OPINION

ROBERT L. Brown, Justice,

dissenting. The legacy of this opinion is to deny Arkansas taxpayers who have paid $20, $30, $50, or $100 in illegally assessed taxes a remedy for recouping those taxes. This is unjust and unfair in the extreme. Until today a remedy was recognized. See Pledger v. Bosnick, 306 Ark. 45, 811 S.W.2d 286 (1991). Now the majority of this court closes that door and effectively locks these people out of court and divests them of any practical legal recourse. I would deny rehearing and affirm our decision in State v. Staton, 325 Ark. 341, 925 S.W.2d 418 (1996) (Staton I).

The majority decides as it does for two primary reasons: (1) an immutable and unshakable conviction that sovereign immunity allows the Department of Finance and Administration (DFA) to collect illegal taxes under these circumstances with impunity; and (2) an amorphous notion that allowing individuals who are part of a class to file claims for refund for illegal taxes will bankrupt the State. I disagree on both counts.

First, on sovereign immunity. We do have a provision in our Constitution that says the State may not be a defendant in her courts. Ark. Const, art. 5, § 20. But the General Assembly has enacted a statute permitting claims for refunds for taxes erroneously and mistakenly paid and for suits thereafter if the claims are not paid. Ark. Code Ann. § 26-18-507 (Repl. 1992). Thus, sovereign immunity has been waived by the General Assembly for erroneously paid taxes. The fact that these taxes were voluntarily paid is of no moment in light of the statute that provides a refund remedy after voluntary payment.

The question then is whether § 26-18-507 has been complied with by virtue of the class-action remedy under Arkansas Rule of Civil Procedure 23. I conclude that it has been. Under comparable circumstances, we held there was compliance in Pledger v. Bosnick, supra. Using the precedent of Bosnick, we decided in Staton I that a class action was a valid means of claiming refunds under § 26-18-507 for wrongfully collected taxes. We further affirmed the chancellor who required each taxpayer to present proof of payment of the erroneous tax as a prerequisite to a refund. That is what the statute requires. Hence, the remedy afforded in this case met the statutory requirements.

The majority no doubt believes that permitting a class-action suit before class members have claimed refunds puts the cart before the horse. See Ark. Code Ann. § 26-18-507(c) (Repl. 1992). Not so. The class representative, Debora Staton, filed this lawsuit on behalf of the class. Notice presumably has gone out or will go out to class members who now must prove their claims. The net effect of this, as was emphasized in Staton I, is that notices will be sent to class members under court auspices as provided by Rule 23. Better notification to wronged class members will enhance their ability to claim refunds and is without question a worthy goal.

The majority writes, somewhat myopically, that individuals who have paid a $30 or $40 sales tax on an extended warranty should have claimed a refund under § 26-18-507 prior to the class-action relief. But how does that person know the tax is illegal? That person does not know. In addition, prior to the class action lawsuit, had a class member claimed a refund, that person would have been rebuffed by DFA because DFA’s position was that the tax was valid. A claim for refund would have been a totally useless act. It was only after the class action lawsuit and the decision by the chancellor that a claim had viability. Indeed, a class action is the only practical way to remedy this illegal tax, since only the most civic-minded citizen would undertake the arduous burden of obtaining judicial relief when the recovery could only be nominal at best.

The majority plainly fears a catastrophic loss to the State coffers resulting from class-action claims. I do not see that. In this case, each class member must prove his or her claim, which is what we held in Staton I. And consider the alternative. The majority is holding that DFA can wrongfully collect taxes, then build a wall around itself and assert that a taxpayer has no practical recourse, even when the taxpayer can prove the claim. The rationale by DFA is it has already relied on those wrongfully collected taxes for spending purposes. Something is severely out of kilter here. If a tax is wrongfully assessed and collected against a person and the taxpayer can prove it, that person deserves to be repaid. That is the remedy § 26-18-507 provides.

Again, the anomaly here is that under the decision today these people who have been wrongfully taxed have no remedy as a practical matter. In Pledger v. Bosnick, 306 Ark. 45, 811 S.W.2d 286 (1991), this court recognized that fact and permitted precisely what the class attempts to do in this case. Moreover, that was a 1991 decision and the General Assembly since that decision has taken no action to disabuse Arkansas taxpayers that that is a correct interpretation of the law. Finally, I strongly disagree with the majority’s conclusion that sovereign immunity was not contemplated by Pledger v. Bosnick, supra. That is splitting fine hairs. In Bosnick, we analyzed § 26-18-507, which waives sovereign immunity, and determined that compliance had occurred.

In short, the taxpayers of this State are put in a Catch-22 situation when the majority holds that they must first seek a refund apart from the class for a tax (1) they did not know was wrongful, and (2) DFA would not have refunded in any event because DFA believed it to be a valid tax. I would not give DFA carte blanche to tax illegally and then deny refunds after class action notice and proof by the taxpayers.

I respectfully dissent.

Newbern and Corbin, JJ., join.


source: Caselaw Access Project

author: TOM Glaze, Justice. DAVID Newbern, Justice,

license: Public Domain

text:
    BAKER CAR AND TRUCK RENTAL, INC.; Arelco, Inc., d/b/a National Car Rental; and Carco Rentals, Inc. v. The CITY OF LITTLE ROCK, Arkansas, Acting By and Through the Little Rock Municipal Airport Commission
    95-1128
    925 S.W.2d 780
    Supreme Court of Arkansas
    Opinion delivered July 15, 1996
    [Petition for rehearing denied September 9, 1996.]

      Friday, Eldredge & Clark, by: Harry A. Light, for appellant Baker Car and Truck Rental, Inc.

      Stark, Dininger & Smith, by: William K. Byrum; and Davidson, Horne & Hollingsworth, by: Garland W Binns, for appellant Arelco, Inc., d/b/a National Car Rental.

      Hardin, Dawson & Terry, by: Robert M. Honea, for appellant Careo Rentals, Inc.

      Kaplan, Brewer, & Maxey, P.A., by: Philip E. Kaplan and Jo Ann C. Maxey, for appellee.

      Special Chief Justice Josephine L. Hart would grant. Jesson, C.J., and Dudley, J., not participating.

   TOM Glaze, Justice.

This litigation arises out of leases entered into between the Little Rock Municipal Airport Commission and Avis, Hertz, and National car-rental businesses having concessions at the Litde Rock Airport. These three car-rental businesses first entered into identical leases in 1971, and each had a ten-year rental term with an additional ten-year option, ending in 1991. In 1973, Hertz and National obtained a second option to renew for a five-year period, extending their lease terms to 1996. All of these and later leases entered into between the Commission and car-rental businesses contained a clause referred to as a “most-favored-nations (MFN) clause.” What interpretation and effect this clause should be given is the focus of this litigation. The clause reads as follows:

That the concession granted by this agreement is not exclusive and lessor [Commission] shall have the right to deal with and perfect arrangements with any other individual company or corporation for engaging in like activity at the Airport; provided, however, no other concession for auto rental operation shall be granted on more favorable terms and conditions than granted to the concessionaires [car-rental lessees] herein. (Emphasis added.)

Avis, a franchisee of Baker Car and Truck Rental, Inc. (Baker), never invoked the MFN clause in its 1971 lease in an attempt to extend its 1971 lease to comport with the extended five-year term in the Hertz and National supplemental leases. Significandy, the Baker, Hertz, and National leases all contained concessionaire fees based upon a rate of $ .03 “per deplaning airline passenger” for the first 30,000 passengers per month and $2.75 for all deplaning passengers over 30,000.

What led to this legal dispute was the Commission’s 1986 concessionaire lease with Budget Rent-A-Car. This lease gave Budget a ten-year term with two five-year renewal options, extending Budget’s concession rights to 2006. Budget’s lease contained the MFN clause and other terms and provisions in the above-mentioned, prior car-rental leases, including the concessionaire fee rate based upon deplaning airline passengers. However, by the time Baker’s 1971 lease expired in 1991, the Commission was reconsidering its car-rental concessionaire fees and how they should be computed. It proposed basing the concessionaire’s fee upon the “percentage of the concessionaire’s gross receipts” rather than upon the “number of deplaning passengers.” This new formula or gross-receipts percentage rate concededly represents an increase in costs to the appellants’ car-rental businesses by establishing a higher fee rate than that required under the Commission’s deplaning-passenger formula. As a consequence, Baker rejected the Commission’s new formula rate in the proposed new lease. Instead, Baker submitted that, under the MFN clause of its 1971 lease, its existing lease terms and conditions (including the “deplaning-passenger formula rate”) had been automatically extended to 2006 when the Commission executed its twenty-year lease with Budget in 1986.

The Commission agreed to extend Baker’s lease to 1996 to coincide with Hertz’s and National’s 1973 amended leases, but Baker rejected such an extension agreement because Baker believed its lease was automatically extended to the 2006 date provided in Budget’s lease. After Baker rejected the Commission’s proposed extension agreement, the Commission approved a new concession agreement providing that concession fees be based upon a percentage of gross receipts. It then informed Baker, Hertz, National, and Budget that, if they did not execute the Airport’s new lease agreement when their existing agreements terminated, their rental space would be put up for bid. About nine months later, the Commission notified Baker that its tenancy would be terminated.

Baker filed suit in chancery court, seeking declaratory judgment and specific performance of the MFN clause and requesting its 1971 lease terms be extended to the 2006 termination date provided in Budget’s lease. It also asked the chancery court to declare the new proposed “percentage of gross receipts” formula an illegal exaction. Hertz and National intervened, reasserting Baker’s claims. The parties filed motions for summary judgment, but the chancellor granted the Commission’s, thereby dismissing Baker’s and its co-plaintiffs’ complaint with prejudice.

On appeal, Baker, Hertz, and National (hereafter collectively referred to as Baker) question the chancellor’s finding that the parties’ lease agreements, particularly the MFN clause, are unambiguous, and as a matter of law, reflect the parties never intended the car-rental leases to be automatically extended by a competing company’s separate and later lease.

The chancellor relied heavily on the case of Eveleth Taconite Co. v. Minnesota Power & Light Co., 221 N.W. 157 (Minn. 1974), where the Minnesota Supreme Court was faced with a similar issue. There, Eveleth Taconite Company entered into two contracts that called for the Minnesota Power & Light Company to provide all necessary electric power to Eveleth’s plant and mine. Both companies settled on a three-year contract for providing power to Eveleth’s plant, and a five-year contract for providing power to its mine. The contracts contained a MFN clause which provided as follows:

Company [defendant Minnesota Power] agrees that, if at any time during the term of this agreement it has in effect an agreement which gives or grants to any other customer, similarly engaged in the taconite industry and who receives the same class and type of electric service as Eveleth Taconite Company, more favorable treatment for the purchase of said electric service or otherwise gives or grants to any such customer more favorable price, terms or conditions, with respect to said other customer’s purchase of said electric service, Company shall notify Eveleth Taconite Company in writing with respect to said more favorable treatment, price, terms or conditions and said Eveleth Taconite Company, at its election, may request Company to substitute for this agreement such more favorable agreement in its entirety or on an equivalent basis to amend this agreement to give effect to such substitution.

Subsequent to the signing of Eveleth’s contracts, Minnesota Power executed contracts with other taconite producers, and the terms and conditions of those contracts were the same as Eveleth’s except they were for a period of ten years, and being later in time contained different termination dates. When the time came for cancellation of Eveleth’s contracts, Eveleth insisted the MFN clause in its contracts entitled it to the same termination date as that contained in the longest contract in which Minnesota Power had entered with other taconite producers. Without this requested extension of its term of contract, Eveleth was required to pay a higher rate for electricity than that paid by the other competing companies. The Minnesota Supreme Court rejected Eveleth’s contention and gave the following reasoning:

In our judgment, there is little doubt that the parties intended that the most-favored-nations clause would protect plaintiff [Eveleth] from being placed in a noncompetitive position by provisions in its contracts with defendant [Minnesota Power], including the price of its electricity, which were less advantageous than provisions its competitors might be granted by defendant at a later time during the agreed-upon span of plaintiff’s contracts. We do not believe that the period of duration of the contract was intended to be included in the phrase “terms or-conditions” because to do so would create a situation in which the contract could be indefinitely extended at plaintiff’s election if defendant continued to enter contracts with other taconite companies. In other words, these contracts would be perpetual if defendant entered other agreements with taconite producers because plaintiff, if it so chose, could continually assume the longer term of those contracts. That result appears inconsistent with the intent of the parties, particularly in light of the evidence concerning the pre-contract negotiations in which plaintiff successfully resisted defendant’s preference for a 10-year contract. In addition, the fact that the most-favored-nations clause uses the two separate phrases, “term” and “terms or conditions,” in different parts of the clause and in different contexts, gives further evidence that the parties intended those words to have different meanings. (Emphasis added.)

Like the holding in the Eveleth case, the chancellor here simply determined that, when construing the MFN clause in Baker’s and the Commission’s 1971 lease agreement, the parties never intended the length of their agreement would be extended. In fact, the 1971 lease contained another provision separate from the MFN clause that established (1) a ten-year term commencing with August 24, 1971, and (2) a renewable period often years upon the same terms and conditions. No language in either the length-of-term provision or the MFN clause of the 1971 lease specifically provided for an automatic extension of Baker’s lease term for any reason. To accept Baker’s argument that its lease should be “automatically extended” requires one to rewrite the parties’ agreement, which we refuse to do. Also, if we were to approve Baker’s “automatic extension” theory, these car-rental leases would be perpetual, since Baker would continually assume the longer lease term given any existing or new competitor. Our court of appeals has held a lease provision will not be construed as conferring a right to a perpetual renewal unless the language is so plain as to admit of no doubt of the purpose to provide for perpetual renewal. Pults v. City of Springdale, 23 Ark. App. 182, 745 S.W.2d 144 (1988). That holding makes sense, is applicable here and negates Baker’s theory because the plain wording of the 1971 lease provides for no automatic term extensions.

Baker suggests its 1971 lease is ambiguous, and the chancellor erred in not finding so. Baker points to parole evidence it offered to show the Commission had long manifested an intention to treat car-rental concessionaires equally and to have uniform commencement and termination dates for all such concessionaires. Again, uniform termination dates were never mentioned in the Baker/ Commission lease, nor was there any language providing for automatic term extensions for any reason.

In fact, a fair reading of the MFN clause of the Baker/Commission 1971 lease reflects merely that the Commission could not give concessions, containing more favorable terms and conditions, to other car-rental operations. Under this provision, Baker had every right to enforce its contractual rights when it received disparate treatment, but it never did so until after its lease expired. Having delayed such action, Baker now argues its 1971 lease should be construed to mean it had been automatically extended when Budget’s 1986 lease was executed, thus making Baker’s expiration date to be 2006, rather than the 1991 date actually provided in Baker’s lease.

In sum, Baker, under the plain language of its 1971 lease, could have negotiated or filed suit in an effort to enforce its rights under the MFN clause, but it simply failed to do so. The chancellor was correct in her holdings — the 1971 lease was free of ambiguity, extrinsic evidence was irrelevant, and when construing the entire agreement, the MFN clause in Baker’s lease did not automatically extend the termination date to coincide with the termination date of the Budget lease.

Finally, we consider Baker’s argument that, aside from the trial court’s ruling regarding the MFN clause issue, the trial court erred in refusing to reach Baker’s other argument that the commission’s proposed new lease constituted an illegal exaction because it contained an unlawful new rental rate based upon each concessionaire’s gross receipts. The chancellor reasoned that, because Baker continued to operate under a year-to-year agreement and had not, as yet, executed the Commission’s proposed new lease agreement containing the asserted unlawful rental rate, it would be merely advisory on the chancellor’s part to decide the rental rate issue. We agree. Suffice it to say, courts do not sit for the purpose of determining speculation and abstract questions of law or laying down rules for the future conduct of individuals in their business and social relations. Micklish v. Grand Lodge of the Loyal Star, 162 Ark. 71, 25 S.W. 353 (1924); see also Andres v. First Ark. Development Finance Corp., 230 Ark. 594, 324 S.W.2d 97 (1959). Because this issue presented by Baker depends on a state of facts which is future, contingent, or uncertain, we agree with the chancellor that it would be premature and advisory to render a decision at this time.

Special Justice JAMES A. ROSS, JR., joins this opinion; Special Chief Justice JOSEPHINE L. HART, NEWBERN and BROWN, JJ., dissent; JESSON, C.J., and DUDLEY, J., not participating.

DAVID Newbern, Justice,

dissenting. The words of a contract are to be taken and understood in their plain meaning. First Nat. Bank of Crossett v. Griffin, 310 Ark. 164, 832 S.W.2d 816 (1992), cert. denied, 507 U.S. 919 (1993), appeal after remand, 318 Ark. 848, 888 S.W.2d 306 (1994); Farm Bureau Mut. Ins. Co. of Arkansas, Inc. v. Milburn, 269 Ark. 384, 601 S.W.2d 841 (1980). To hold that the term (duration) of a contract is not one of its terms and conditions raises legal sophistry to a new level.

The evidence before the Chancellor included J. Dan Baker’s affidavit and the deposition of Harry Don Denton, assistant manager of the airport. Mr. Baker stated his intention was that the duration of the 1971 concession agreement was to be one of the terms and conditions subject to the “most-favored-nation clause.” Mr. Denton stated that, when the car-rental concession agreements were entered in 1971, all were of the same duration. At one point of his deposition, as abstracted, Mr. Denton also said:

My concern was generated as a result of the words in the contract with really litde understanding of the concept of the most favored nation clause. There were two principal concerns: one, the actual reading of the sentence. The words in the contract implied to me that terms and conditions meant what it said.

His other principal concern was the other facilities contracts at the airport which had similar terms. He said the “[i]ntention of the 7/94 agreement was to have all the concessionaires sign new agreement^] to eliminate the controversy over varying maturities.”

The Airport Commission has entered an agreement with Budget with rental rate terms more favorable to Budget than those it now wishes to impose on the other concessionaires. The Budget lease was apparently entered without consideration of the fact that its duration exceeded the durations of the leases to the other concessionaires and might well violate the provision prohibiting the Airport Commission from granting to Budget terms and conditions more favorable than those granted to Baker and the others.

In Eveleth Taconite Co. v. Minnesota Power & Light Co., 221 N.W.2d 157 (1974), the Minnesota Supreme Court rejected the invitation to define the meaning of “terms or conditions” in the context of whether it includes “term” or duration of the contract in all fact situations. The “most favored nation clause” in that contract provided, “if at any time during the term of this agreement it [the electric company] has in effect an agreement which gives or grants to any other customer ... more favorable treatment ... or otherwise gives or grants to any such customer more favorable price, terms or conditions ...” Eveleth would be entitled to obtain the same terms [emphasis by the Court]. Explaining its decision to differentiate the two references to “term” and “terms and conditions” in the case before it, the Court said:

In our judgment, there is little doubt that the parties intended that the most-favored-nations clause would protect plaintiff from being placed in a noncompetitive position by provisions in its contracts with defendant, including the price of its electricity, which were less advantageous than provisions its competitors might be granted by defendant at a later time during the agreed-upon span of plaintiff’s contracts. We do not believe that the period of duration of the contract was intended to be included in the phrase “terms or conditions” because to do so would create a situation in which the contract could be indefinitely extended at plaintiff’s election if defendant continued to enter contracts with other taconite companies. In other words, these contracts would be perpetual if defendant entered other agreements with taconite producers because plaintiff, if it so chose, could continually assume the longer term of those contracts. That result appears inconsistent with the intent of the parties, particularly in light of the evidence concerning the precontract negotiations in which plaintiff successfully resisted defendant’s preference for a 10-year contract. In addition, the fact that the most-favored-nations clause uses the two separate phrases, “term” and “terms or conditions,” in different parts of the clause and in different contexts, gives further evidence that the parties intended those words to have different meanings.”

To begin, the article of the contract before us containing the “most-favored-nation clause,” Article I.C.3., does not have in it both “term” and “terms and conditions.” Their appearance together in Article V having to do with the duration of the agreement is virtually irrelevant to the “most-favored-nation clause.” This difference robs the Eveleth case of much of its precedential value for this case. In addition, we have here no negotiating history of either party seeking leases of longer duration in 1971. To be noted carefully is the Minnesota Supreme Court’s recognition that the lease in question would be perpetuated only to the extent that other leases were entered with longer terms.

The fear of “perpetual” agreements is ill-founded. There is nothing perpetual about the Budget lease. Honoring the “most-favored-nation clause” will not extend the Baker lease beyond the term of the Budget lease. As long as the Airport Commission remembers not to enter any other leases with durations past 2006, the leases of the other concessionaires will not endure beyond that point.

The Airport Commission has made a mistake and has placed itself in a position of having to violate its agreement with its concessionaires in order to institute concessionaire rental rates more favorable to it. While it may, perhaps, be able to extricate itself from that position through negotiation with the concessionaires, it should not be allowed to do so by tortured interpretation of plain contract language.

I respectfully dissent.

Brown, J., and Special Chief Justice JOSEPHINE L. Hart, join.

       For clarity, Avis will be referred to as Baker.

       Some differences exist between Budget’s 1986 lease and the prior 1971 and 1973 leases. For example, the rates for terminal building space, parking space and ground rental space were higher and rental rate and fee review procedure differs in Budget’s lease. The Budget lease also contains an additional leasehold improvements section not contained in the earlier leases.

       We note that intervenor appellants National Car Rental and Hertz also have never signed the Commission’s proposed lease.


author: Tom GLAZE, Justice. ANDREE Layton roaf, Justice,

text:
    Gina Felicia FLEMINGS (Foster) v. Darryl A. LITTLES
    96-293
    926 S.W.2d 445
    Supreme Court of Arkansas
    Opinion delivered July 15, 1996
    [Petition for rehearing denied September 9, 1996.]

      Child Support Enforcement Unit of Pulaski County, by: Kimberly D. Burnette, for appellant.

      The Perroni Law Firm, P.A., by: Samuel A. Perroni, for appellee.

      Brown and Roaf, JJ., would grant.

   Tom GLAZE, Justice.

This is a paternity case which was first decided on February 4, 1982. On that date, the court entered a final judgment declaring appellee Darryl A. Littles to be the father of appellant Felicia Flemings’s (Foster’s) infant child. The court ordered Littles to pay $50.00 per month as child support. Almost twelve and one-half years later, August 10, 1994, Litdes filed a pro se motion in chancery court, requesting the court to order a paternity test, but Flemings objected, complaining the chancery court lacked jurisdiction to modify the 1982 judgment. The court granted Litdes’s motion, and upon finding the test excluded Litdes as the father, set aside the twelve-year-old judgment. The sole issue on appeal is whether the chancery court had authority to grant Littles’s motion and later set aside the earlier 1982 paternity judgment. We hold it did not; therefore, we reverse and remand.

Littles cites the case of Little v. Streater, 452 U.S. 1 (1980), where the Supreme Court held a Connecticut statute unconstitutional because it forced an indigent party seeking a paternity determination to pay the cost of testing. Littles contends that, in applying the Streater holding, he, too, was an indigent party when Flemings’s paternity suit was filed and decided in 1982, and because of his inability to pay for a test, he was denied due process and “meaning-fill opportunity to be heard” on the paternity issue.

First, we point out significant procedural differences between the Streater case and the case at hand. There, the putative father asserted that he was indigent, and asked that the state be ordered to pay for the paternity tests. The trial court denied the defendant’s request, no tests were performed and the court found the defendant to be the father. The putative father in Streater appealed the trial court’s decision, raising the due process issue he ultimately prevailed on before the Supreme Court.

Here, Littles personally appeared at the 1981 county court proceedings, but there is nothing in the record or judgments in that action that shows he ever claimed indigency or asked the state to pay for the paternity test — even though Arkansas’s law (unlike Connecticut’s statute in Streater) permitted such payment by the county. See Ark. Stat. Ann. § 34-705.1 (Repl. 1962). Instead, the county court judgment reflects Littles appeared in person, was ordered to deposit the cost of the paternity test and was informed that, if he failed to pay for the test, or if the test failed to exclude him as being the father, paternity would be established and support would be set at $50.00 per month. Accordingly, in its 1982 judgment, the county court found that Littles failed to pay for the paternity test, that he was found to be the infant’s father and that he must pay $50.00 per month in child support. Littles filed no timely appeal from that paternity judgment, nor did he file post-trial motions for a new trial. See Thomas v. Easley, 277 Ark. 222, 640 S.W.2d 797 ( 1982); Epperson v. Sharp, 222 Ark. 456, 261 S.W.2d 267 (1953) (court held an appeal from county court in paternity cases must be filed within thirty days). While Litdes seeks now, twelve years later, to assert he was indigent and unable to pay for a paternity test in the 1981 and 1982 paternity proceedings, this court has held that it will not go behind a judgment which is valid on its face, to raise such factual issues anew. Lawrence, Gdn. v. Meux, 282 Ark. 512, 669 S.W.2d 464 (1984).

Consistent with the foregoing analysis, we agree with Flemings’s argument that, under Ark. Code Ann. § 9-10-115 (Supp. 1995), the chancellor in these circumstances had no authority to permit Litdes to reopen or relitigate the paternity holding and underlying factual issues. Section 9-10-115 provides, in pertinent part, as follows:

(b) The court shall not set aside, alter, or modify any final decree, order, or judgment of paternity where paternity blood testing, genetic testing, or other scientific evidence was used to determine the adjudicated father as the biological father.
(c) (1) Upon request for modification of a judicial finding of paternity or a support order issued pursuant to § 9-10-120, if the court determines that the original finding of paternity or support order did not include results of scientific paternity testing, consent of the parents, or was not entered upon a party’s failure to comply with scientific paternity testing ordered by the court, the court shall, upon request when paternity is disputed, direct the biological mother, the child, and the adjudicated or presumed father to submit to scientific testing for paternity, which may include deoxyribonucleic acid testing or other tests as provided by § 9-10-108.
(2) In no event shall the adjudication or acknowledgement of paternity be modified later than five (5) years after such adjudication or execution of such acknowledgment.
(Emphasis added.)

As discussed previously, the 1982 judgment reflects the county court’s original finding of paternity was entered upon Littles’s failure to comply with the scientific paternity testing ordered. Thus, under the plain language of § 9-10-115(c)(1), the chancery court had no authority to grant Littles’s motion to modify the original judicial finding of paternity.

For the reasons hereinabove, we reverse and remand.

Brown and Roaf, JJ., dissent; Dudley, J., not participating.

ANDREE Layton roaf, Justice,

dissenting. On July 21, 1981, a warrant was issued for the arrest of the appellee, Darryl A. Littles, as a result of the complaint filed against him by the appellant, Gina Felicia Flemings. The complaint falsely alleged that Littles was the father of Flemings’s five-month-old daughter. Flemings and Littles were not married; Littles was nineteen years old, unemployed and living with his grandmother at the time.

A hearing was held on November 16, 1981; Littles appeared at this hearing without counsel. An order was entered on November 31, 1981, which reflected that Littles had been granted until January 16, 1982 to deposit the cost of a blood test with the child Support Enforcement Unit (CSEU) of Pulaski County. The amount to be deposited was not specified in this order. The order further provided that in the event Littles failed to pay by January 16, 1982, paternity would be established and support set at $50 per month.

On January 28, 1982, the paternity referee signed a judgment which established that Littles was the father of Flemings’s child. The judgment further stated that Littles had “failed to pay for blood test.”

In August 1994, Littles sent a handwritten letter to the chancellor in this case requesting that a blood test be done. He stated in his letter that he “strongly” believed that he was not the father of Flemings’s child, and that he did not have the money to pay for the paternity test when it was ordered in 1981. He was charitable to Flemings in his letter; he said that he believed that Flemings had made an “honest mistake” and that only a paternity test could clear up the matter.

The trial court treated this letter as a motion and Flemings, through the Pulaski CSEU, responded and asserted that because the original paternity judgment was entered “upon defendant’s failure to comply with scientific testing,” the trial court had no jurisdiction to modify the paternity judgment, pursuant to Ark. Code Ann. § 9-10-115 (1993 Repl).

In this instance, the trial court considered Litdes’s request for genetic testing more than twelve years after the judgment of paternity was entered in 1981. The chancellor, after a hearing, granted the request; a review of the abstract and record makes it abundantly clear why she did so in this case.

Litdes was unemployed at the time of the entry of judgment. He appeared before the court without counsel at the initial hearing held on November 16, 1981. He testified that the hearing “went so quick” and that he agreed to the blood test because he did not believe that he was the father of Flemings’s child. However, he was not told by the paternity referee or by the attorney for Flemings how much the test would cost. When he contacted CSEU after the hearing, he was told that he would have to pay the sum of $625 in advance to obtain this test. He could not afford to do so. Litdes earned only $90.46 in 1981 and entered the Job Corps in Texas shordy after the initial hearing in November 1981. It is interesting to note that the test finally conducted in 1993 cost him only $238. This test conclusively determined that Litdes could not be the father of Flemings’s child.

In 1981, Ark. Stat. Ann. § 34-705.1 (Supp. 1985), provided that a trial court could direct that the parties submit to one or more blood tests to determine whether or not a defendant could be excluded as being the father of a child. The statute further provided that the cost of the test “shall be taxed as other costs in the case” or, in the court’s discretion, “may be taxed against the county.” Id. The statute further stated that whenever the court ordered such blood tests to be taken and one of the parties “shall refuse to submit to such tests,” such facts shall be disclosed upon the trial unless good cause is shown to the contrary. Id. The paternity referee obviously did not comply with this statute in any respect when he ordered the paternity testing in November 1981 and entered the judgment of paternity ex parte in January 1982. The paternity judgment did not find that Litdes refused to submit to the blood test, only that he failed to pay for the test. The paternity referee in 1981 gave an indigent young man, unrepresented by counsel, some sixty days to post the substantial sum of $625, and entered judgment against him ex parte twelve days after he missed the sixty-day deadline.

In her arguments to the trial court, Flemings’s counsel acknowledged that the United States Supreme Court had declared unconstitutional a Connecticut paternity statute which required the defendant to pay the costs of paternity testing in advance. Little v. Streater, 452 U.S. 1 (1981). She further stated that the Arkansas statute in effect in 1981 was constitutional because it provided for taxing the cost of the test to the case. Flemings’s counsel conceded to the trial court that Littles “possibly was not given his rights — his due process rights under the statute, but his remedy was to appeal to the Supreme Court.” However, she admitted that the file did not indicate that Littles was ever sent a copy of the paternity judgment entered against him.

The trial court found that Littles was precluded in 1981 from the testing due to his age and his inability to pay the cost of the test, and that the statute which required that the State advance the cost of testing was not followed. She set aside the judgment pursuant to Ark. Code Ann. § 9-10-115, which provides that the chancery court may vacate a paternity judgment when the original finding of paternity did not include results of scientific paternity testing or was not entered upon a party’s failure to comply with scientific paternity testing ordered by the court.

The trial court determined that Litties’s inability to pay for the blood test in advance did not constitute a “failure to comply with scientific testing ordered by the court.” We review chancery cases de novo, and reverse only if the chancellor’s findings are clearly erroneous. Perryman v. Hackler, 323 Ark. 500, 916 S.W.2d 105 (1996). Chancellors have broad powers to fashion any remedy that is reasonable and justified by the proof. Id. If the paternity referee in 1981 had followed the statute which mandated that the cost of blood testing be taxed in the case, no judgment of paternity would have ever been entered against Littles. Under the circumstances of this case, it was not clearly erroneous for the chancellor in 1995 to determine that Litties’s inability to make a $625 payment ordered in flagrant violation of Arkansas law did not constitute the “failure to comply” with paternity testing contemplated by Ark. Code Ann. § 9-10-115(c)(1). It is the paternity referee, not Littles, who failed to comply with the paternity-testing statute in 1981. This failure constituted an abuse of discretion, and resulted in a denial of Litties’s right to due process in a very important and quasi-criminal proceeding. I would affirm.

BROWN, J., joins this dissent.

       In fact, in the 1994 chancery court proceeding to request a paternity test and to set aside the 1982 judgment, Littles testified that the judge in the original paternity proceeding suggested that Litdes should take the test, and Littles said, “I thought I could afford one when I was at the hearing.”

       The dissenting opinion makes references to Littles as being indigent and to the entering of ex parte orders. Suffice it to say, the dissenting opinion reaches conclusions not established by the 1982 judgment, and the dissenting opinion merely raises factual issues which were put to rest by a valid 1982 judgment and proceeding in which Litdes appeared and participated.


author: Tom Glaze, Justice.

text:
    Ophelia RANDOLPH, Administratrix of the Estate of Melvalene Hanson, Deceased v. ER ARKANSAS, P. A., James Guthrie, Ouachita Clinic, Ltd., J. R. Kendall and Judson M. Hout
    95-968
    925 S.W.2d 160
    Supreme Court of Arkansas
    Opinion delivered July 15, 1996

      Gary Eubanks & Associates, by: James Gerard Schulze and Hugh E Spinks, for appellant.

      Shackleford, Phillips, Wineland, & Ratcliff, P.A., by: Dennis L. Shackleford and Teresa Wineland, for appellees.
   Tom Glaze, Justice.

This action was brought as a result of alleged medical malpractice that resulted in the wrongful death of Melvalene Hanson. Hanson’s estate sued appellees, alleging Hanson had complained of chest and arm pains, and after having been examined and released by Doctors J. R. Kendall and Judson Hout on two separate occasions within four days, she died of a heart attack at home only a few hours after her second release from treatment. The gravamen of the estate’s allegations of medical negligence was that the doctors failed to perform an electrocardiogram (EKG).

Before trial and during voir dire of the jury, a number of veniremembers indicated they knew the doctors, and the estate moved to disqualify those potential jurors who had had (or had) a relationship with them. One of those jurors, Melba George, served on the twelve-person jury, and is the subject of one of the points for reversal in this appeal. The estate’s second issue for reversal concerns its out-of-state expert witness, Dr. James Goldstein, who testified that an EKG was essential in Hanson’s circumstances, and Doctors Kendall and Hout had deviated from the standard of good medical care when no EKG was performed. Because the defense focused on Goldstein’s lack of familiarity with the standard of care in Camden, Arkansas, the estate offered, and was denied, an instruction it believed would have better explained the so-called “locality rule” instruction the trial court gave the jury. The jury retired and returned a verdict in favor of the defendants, and the estate brings this appeal, asserting the two points raised below.

In the estate’s first argument, it complains of seven different veniremembers who had had some type of social, working, or medical relationship with either Kendall or Hout. Four of these jurors did not serve on the jury, and several, who did serve, had not been challenged peremptorily or for cause. Suffice it to say, the estate’s argument centers on Melba George, who, the estate suggests, was challenged for cause and wrongfully allowed to serve; thus, we turn our attention to George. In doing so, we keep in mind the controlling principle that it is presumed that persons comprising the venire are unbiased and qualified to serve, and it is appellant’s burden to prove otherwise. Kemp v. State, 324 Ark. 178, 919 S.W.2d 943 (1996). In addition, the proper test the court must employ when sorting through these juror-bias issues is whether the prospective juror can lay aside his impression or opinion and render a verdict based upon the evidence in court. Wainwright v. State, 302 Ark. 371, 790 S.W.2d 420 (1990), cert. denied, 111 S.Ct. 1123 (1990).

In the present case, the issue concerning Ms. George’s bias stems from a series of questions and answers during voir dire. George responded to the court’s query, whether anyone had any kind of ongoing business relationship with the defendants, by indicating that Dr. Kendall was her doctor. Ms. George had seen Dr. Kendall within the previous two to three weeks, and was under his care. The following pertinent colloquy took place:

ESTATE’S ATTORNEY: I’m going to ask you the pertinent questions that I asked Mr. Philyaw about having to sit here and make a decision that would potentially adverse your doctor then going back to seek him in the future, would that make it difficult for you to be fair in a case like this for Ms. Randolph?
GEORGE: I believe it would because I have to depend on him to tell me what I need to do to keep me living.
Estate’s ATTORNEY: So, what you’re telling us, as I understand it, is that because of that relationship, even though you would try it would be very difficult and in all probability you could not be fair because of that relationship?
George: (No response.)
COURT: In other words, you can’t listen to the evidence and decide this strictly on what you hear in the courtroom?
GEORGE: I could do that. But if it causes me to doubt my doctor in any way, I don’t know if I could go back to him.
COURT: Well, this is different — All I want to know from you, ma’am, and from each of you, maybe we can get this out here right now, for those of you who are patients at the clinic with Doctor Hout or Doctor Kendall what we are asking, and I think we’ve asked it once before, your job as a juror if you are selected to serve is to try this case stricdy on the evidence that’s presented from the witness chair and whatever exhibits are introduced, that and only that, and what we are asking is can you do that, be fair to both sides? You start out as if not knowing anything about this particular case and try it simply on the evidence that’s presented from the witness chair and the law as I give it in the form of instructions?
George: Yes.

George’s initial response to the estate’s voir dire raised the question of whether she could serve fairly, and the trial court properly pursued that matter, by asking if George could listen to the evidence and stricdy decide the case on what she heard in the courtroom. George said that she could do that. Any reservations expressed by George in her response dealt only with her declaration that “if it causes me to doubt my doctor in any way, I don’t know if I could go back to him.” George, then again, told the court she could decide the case based stricdy on the evidence and law presented in the courtroom. It has long been held that the qualification of a juror is within the sound discretion of the trial court, which has an opportunity to observe the venire members that the appellate court does not have, and the trial court will not be reversed unless the appellant demonstrates an abuse of discretion. Moss v. State, 280 Ark. 27, 655 S.W.2d 375 (1983); Rumping v. Arkansas National Bank, 121 Ark. 202, 180 S.W. 749 (1915). Here, the trial court followed the correct test in its voir dire of George, and acted well within its discretion to permit George to serve.

Before leaving the estate’s first point, we acknowledge its argument for us to adopt a line of Alabama cases that hold the relationship of physician and patient constitutes prima facie evidence of probable prejudice on the part of the veniremember. Dixon v. Hardey, 591 So.2d 3 (Ala. 1991); see also Boykin v. Keebler, 648 So.2d 550 (Ala. 1994); Bell v. Vanlandingham, 633 So.2d 454 (Ala. 1994); Wright v. Holy Name of Jesus Medical Center, 628 So.2d 510 (Ala. 1993); Roberts v. Hutchins, 613 So.2d 348 (Ala. 1993). We reject such suggestion, first, because we believe Arkansas’s established law in questioning prospective jurors for bias is relevant and effective regardless of whose relationship or purported bias might be in issue. Second, the Alabama cases cited by the estate, in our view, would not avail the estate here a different result in any event. The Alabama Supreme Court specifically refused to adopt an absolute rule of exclusion where a patient may never serve as a juror in a case against his or her physician. Dixon, 591 So.2d at 8. Instead, the Alabama court has said that, once prima facie evidence of prejudice on the part of a potential juror has been presented, it is the trial court’s function to question the juror further, so as to ascertain whether the juror can be impartial, Id. at 7, and the appellate court looks at the questions asked and the answers given to determine whether the trial court abused the discretion reserved to it. Wright, 628 So.2d at 513. In the circumstances now before us, the trial court did a thorough job in questioning and testing Ms. George’s possible bias, and, whether analyzed under Arkansas’s or Alabama’s law, we conclude the trial court did not abuse its discretion in allowing her to serve.

The estate’s second argument concerns the trial court’s refusal to give a proffered instruction the estate claims would have clarified AMI 1501, which reads in relevant part as follows:

In diagnosing the condition of and treating of a patient, a physician must possess and apply with reasonable care the degree of skill and learning ordinarily possessed and used by members of his profession in good standing engaged in the same type of service or specialty in the location in which he practices or in a similar locality. A failure to meet this standard is negligence.

Because defendants focused on the estate’s expert’s (Dr. Gold-stein’s) lack of familiarity with the Camden area and its medical services, the estate, citing to language employed in Gambill v. Stroud, 258 Ark. 767, 531 S.W.2d 945 (1975), proffered the following instruction, which it argues explains the “similar locality” language in AMI 1501:

In these instructions, when I have used the words “the same or similar locality” the similarity of communities should not depend on population or area but rather upon their similarities from the standpoint of medical facilities, practices, and advantages.

We dispose of the estate’s argument, first, by stating that AMI 1501, as given, covers the duty the defendants owed Hanson in this medical negligence case, and it is not error to refuse a proffered non-AMI instruction, even if it correctly states the law. See Wharton v. Bray, 250 Ark. 127, 464 S.W.2d 554 (1971). In addition, this court has expressly stated that the same or similar locality rule articulately expressed in AMI 1501 is proper, adequate, viable and not unduly restrictive on the evidence a plaintiff may introduce. Gambill, 258 Ark. at 769, 531 S.W.2d at 948. Accordingly, we believe the language contained in AMI 1501 is more than sufficient to have permitted the Hanson estate to develop the evidence and argue to the jury that her expert was entitled to credence based on his familiarity with similar localities in terms of medical facilities, practices, and advantages.

For the reasons set out hereinabove, we affirm.

DUDLEY, J., not participating.


author: Tom GLAZE, Justice.

text:
    SOUTHWESTERN GLASS COMPANY, Inc. and Waelder Oil & Gas, Inc. v. ARKANSAS OKLAHOMA GAS, CORPORATION
    95-1177
    925 S.W.2d 164
    Supreme Court of Arkansas
    Opinion delivered July 15, 1996

      Harper, Young, Smith & Maurras, by: S. Walton Maurras, for appellant Southwestern Glass Co.

      Warner, Smith, & Harris, PLC, by: Joel D. Johnson, for appellant Waelder Oil & Gas, Inc.

      Daily, West Core, Coffman & Canfield, by: Jerry Lee Canfield, for appellee.

      Barrett & Deacon, by: J. C. Deacon and D. P. Marshall, Jr., amicus curiae.
   Tom GLAZE, Justice.

Southwestern Glass Company, Inc., operates a manufacturing facility within the city limits of Van Burén, Arkansas. It entered into a contract with Waelder Oil & Gas, Inc., for the sale of natural gas and the construction of a natural gas pipeline from Waelder’s gas well to Southwestern’s facility. Waelder agreed to deliver its natural gas exclusively to Southwestern. Gaines Construction Co., Inc., was engaged to do the actual construction of the pipeline, which included crossing under a public street and within close proximity of an already existing natural gas pipeline owned by Arkansas Oklahoma Gas Corporation (AOG). AOG is a public utility that possesses a non-exclusive franchise entiding it to use the public rights-of-way in Van Burén.

In its effort to prevent construction of Southwestern’s pipeline, AOG filed a complaint in chancery court requesting the defendants Southwestern, Waelder, and Gaines be enjoined from laying the pipeline because there was insufficient space for its safe installation, operation and maintenance. The chancellor granted a temporary restraining order on June 27, 1995, but set a hearing date for July 11, 1995, to determine whether the order should be dissolved or made permanent.

On the day of the scheduled hearing, AOG filed an amended complaint raising six new grounds for relief, and Southwestern again moved to dismiss. The court offered either to proceed with the hearing on all issues or to adjourn to give the defendants Southwestern, Waelder, and Gaines more time to prepare. The defendants chose to proceed. The hearing resulted in the court enjoining defendants from completing the gas fine, and from that decision, Southwestern, Waelder, and Gaines (hereinafter defendants) bring this appeal.

First, we address the defendants’ argument that AOG should have filed its action with the Public Service Commission (PSC), not in chancery court. We disagree. The PSC is vested with the authority to adjudicate individual disputes involving public rights which the Commission is charged by law to administer. Public rights which the Commission may adjudicate are those arising from the public utility statutes enacted by the General Assembly, and the lawful rules, regulations, and orders entered by the Commission in the execution of the statutes. Ozarks Elec. Coop. Corp. v. Harrelson, 301 Ark. 123, 782 S.W.2d 570 (1990). Because in the present case the issues surrounded the enjoining of Southwestern’s private use of the public rights-of-way and not a public right arising from the public utility statutes, jurisdiction was properly in chancery court.

We now turn to Southwestern’s arguments that (1) AOG had no standing to request an injunction against Southwestern’s private use of the city’s right-of-way, and (2) even if AOG had standing, the chancellor was wrong in holding Southwestern could not construct its pipeline in the city’s right-of-way. Because we find merit to the substantive portion of Southwestern’s argument, we need not discuss the standing issue.

First, we point out that the chancellor’s order enjoined Southwestern from boring its pipeline which would have crossed under an AOG line already located under South 28th Street. That street is bordered on the west by Southwestern’s property and on the east by property owned by Dillmeier-Houle Land Co. In other words, Southwestern’s and Dillmeier’s common boundary fine is located on the center fine of South 28th Street.

Southwestern submits that South 28th Street and South 28th Circle were created by the dedication of an easement, and as an abutting property owner, Southwestern owned the fee underlying the street and could make use of that fee so long as it was not inconsistent with the city’s easement. Cases cited by Southwestern support its contention. For example, this court in Freeze, Mayor v. Jones & Harvel, 260 Ark. 193, 539 S.W.2d 425 (1976), considered the validity of a Ft. Smith ordinance vacating and abandoning a block of Bernie Avenue, and in discussing the city’s rights in dedicating easements, stated that the ownership of the fee in the Bernie Avenue right-of-way remained in the abutting owners together with all rights not inconsistent with the public use to which the property was dedicated. See also Lincoln Hotel Co. v. McGehee, 181 Ark. 1117, 29 S.W.2d 668 (1930). In the present situation, Southwestern says its pipeline is to pass under the area used by the city for street purposes and also in no way interferes with AOG’s line. Thus, because Southwestern’s private pipeline is consistent with the city’s use of its right-of-way, the chancellor’s injunction infringed on Southwestern’s rights as fee simple owners.

AOG counters Southwestern’s argument by urging Southwestern’s proposed private gas line is in direct conflict with the city’s dedicated use of its right-of-way. AOG relates that it is a public utility which provides natural gas service in Van Burén under a non-exclusive franchise issued by the city. It points out that it has a four-inch, high-pressure pipeline located within the right-of-way of South 28th Street and Southwestern’s proposed pipeline would have to physically cross AOG’s pipeline in order to reach its intended destination at Southwestern’s facility. AOG argues Southwestern has to locate AOG’s line, expose it and bore some twelve-to-eighteen inches above or below the line in order to construct Southwestern’s line. In sum, AOG contends Southwestern’s conflict with the public use to which the property was dedicated is evident because Southwestern’s proposed pipeline (1) has already necessitated AOG’s locating its own line, (2) would require AOG to uncover its line to accommodate safe construction of the proposed private line, and (3) would result in the city and utility companies operating in the future within twelve-to-eighteen inches of a pressurized gas line.

Our review of the record reveals gas pipelines presently parallel and cross one another in the areas inside and outside of the city. The evidence also shows that the twelve-to-eighteen-inch distance at which the Southwestern line would cross under AOG’s line is in conformity with both the U. S. Department of Transportation’s Pipeline Safety Regulations and the Arkansas Gas Pipeline Code. We note, too, that the PSC has authority to regulate safety concerns accompanying construction and maintenance of Southwestern’s proposed gas line, as is evidenced by Ark. Code Ann. §§ 23-15-201 — 214 (1987 and Supp. 1995). And finally, no evidence was introduced to illustrate AOG’s line must be moved to accommodate Southwestern’s line or that Southwestern’s line would block or alter AOG’s line in any way. Cf. Langford v. Griffin, 179 Ark. 574, 175 S.W.2d 296 (1929); City of Osceola v. Haynie, 147 Ark. 290, 227 S.W. 407 (1921).

The granting or denying of an injunction is a matter falling within the sound discretion of the trial court and its decision will not be reversed on appeal unless it is clearly erroneous. Southeast Arkansas Landfill, Inc. v. State, 313 Ark. 669, 858 S.W.2d 665 (1993). Because AOG failed to show how Southwestern’s proposed pipeline would be in conflict or inconsistent with the city’s public use of the dedicated easement and right-of-way, the chancellor was in error in enjoining the construction of Southwestern’s fine.

Accordingly, we reverse and remand for the reasons stated hereinabove.

Special Chief Justice JUDY SIMMONS HENRY joins in this opinion.

JESSON, C.J., and DUDLEY, J., not participating.