author: Donald L. Corbin, Justice.

text:
    Elgin Gregory KING v. STATE of Arkansas
    CR 95-1175
    916 S.W.2d 732
    Supreme Court of Arkansas
    Opinion delivered March 11, 1996

      William R. Simpson, Jr., Public Defender, by: Sally Collins, Dep. Public Defender.

      Winston Bryant, Att’y Gen., by: Brad Newman, Asst. Att’y Gen., for appellee.
   Donald L. Corbin, Justice.

Appellant, Elgin Gregory King, appeals the judgment of the Pulaski County Circuit Court convicting him of first-degree murder and sentencing him to forty years imprisonment. For reversal, appellant contends first, that the trial court erred in failing to declare one of the state’s witnesses an accomplice as a matter of law or in failing to instruct the jury on the accomplice question, and second, that there was insufficient evidence of guilt. We find the trial court erred in refusing to instruct the jury on the accomplice question and therefore reverse and remand. We address the trial court’s ruling on accomplice status as a matter of law for the benefit of the trial court as an issue that is likely to arise on retrial.

Appellant and Kenneth Lamont Slocum were charged by felony information with the capital murder of Willie Simpkins. The cases were severed. Appellant was tried by a jury and convicted of the lesser-included offense of first-degree murder.

SUFFICIENCY OF THE EVIDENCE

Preservation of appellant’s right to freedom from double jeopardy requires that we consider a challenge to the sufficiency of the evidence prior to considering alleged trial error. Young v. State, 316 Ark. 225, 871 S.W.2d 373 (1994); Lukach v. State, 310 Ark. 119, 835 S.W.2d 852 (1992); Harris v. State, 284 Ark. 247, 681 S.W.2d 334 (1984) (citing Burks v. United States, 437 U.S. 1 (1978)). Therefore, although raised as the final point of appeal, we consider the sufficiency argument prior to considering the other points relating to alleged trial error. Young, 316 Ark. 225, 871 S.W.2d 373. In determining the sufficiency question, we disregard any alleged trial errors, because to do otherwise would result in avoidance of the sufficiency argument by remanding for retrial on other grounds. Id. (citing Har ris, 284 Ark. 247, 681 S.W.2d 334).

At the close of the state’s case, appellant moved for a directed verdict based on insufficient evidence, arguing specifically that the state had failed to prove premeditation and deliberation, the correct date of death, and that appellant caused the death of the victim. Appellant also moved for direction of a verdict due to lack of corroborating evidence of the testimony of Vernon Scott, the state’s witness who appellant contends is an accomplice. Appellant renewed these arguments at the close of all the evidence. On appeal, appellant asserts simply that there was insufficient evidence of guilt of first-degree murder, arguing that Scott’s testimony resulted in speculation and conjecture and therefore does not constitute substantial evidence. This latter argument is all that we address, as appellant has abandoned on appeal the other arguments raised below. Dillard v. State, 313 Ark. 439, 855 S.W.2d 909 (1993).

We treat the denial of a motion for directed verdict as a challenge to the sufficiency of the evidence. Lukach, 310 Ark. 119, 835 S.W.2d 852. The test for determining the sufficiency of the evidence is whether there is substantial evidence to support the verdict; substantial evidence must be forceful enough to compel a conclusion one way or the other beyond suspicion and conjecture. Id. On appellate review, it is only necessary for us to ascertain that evidence which is most favorable to appellee, and it is permissible to consider only that evidence which supports the guilty verdict. Brenk v. State, 311 Ark. 579, 847 S.W.2d 1 (1993).

The following evidence, as viewed most favorably to appellee, was presented at trial. The medical examiner testified that the victim suffered ten separate gunshot wounds. The source of the gunshots either came from two shooters, or one shooter who fired from two positions. A possible murder weapon came into police custody, a .380-caliber Lorcin semi-automatic pistol. The Lorcin had previously been reported stolen by a Marvin Baccus, who purchased the gun. A handwriting expert from the Internal Revenue Service testified that the person who signed the name of Marvin Baccus when purchasing the gun was Shelby Baccus. A firearms toolmark examiner from the Arkansas State Crime Laboratory testified that a bullet found in the victim’s body was fired from the .380-caliber Lorcin. The same firearms examiner testified that a .45-caliber bullet recovered from the victim’s head was the same type of bullet as bullets recovered by police from appellant’s grandmother’s house. He explained the bullets were similar in that they were both full-metal jacketed, both weighed 230 grains, and both had an exposed lead base which is characteristic of any number of brands. At the scene where the victim’s body was found, police found a rubber mask. Scott identified appellant as one of the two persons who abducted the victim at gunpoint just minutes before Scott heard gunshots. His identification of appellant was based on his knowing appellant for most of his life, recognizing the clothes he was wearing hours prior to the crime, and recognizing appellant’s voice. Scott remembered appellant wearing a costume mask and brandishing a semiautomatic weapon when the victim was abducted.

We conclude that the foregoing constitutes substantial evidence in support of the jury’s verdict. The trial court ruled that Scott was not an accomplice as a matter of law; therefore, there was no requirement of corroborating evidence to send the case to the jury for deliberation. Accordingly, the trial court did not err in denying the motion for directed verdict.

ACCOMPLICE AS A MATTER OF LAW

Appellant contends the trial court erred in failing to declare Scott an accomplice as a matter of law. The trial court held a hearing on appellant’s motion in limine to have Scott so declared. At the hearing, Scott testified that, approximately thirty minutes to an hour before the murder, he was approached by appellant’s co-defendant, Slocum, who asked appellant if he could “get Willie [Simpkins] out.” Scott stated that he responded affirmatively, and Slocum then promised to “take care of [Scott].” Scott continued that he then lured the victim to a nearby site, the home of Louis Hattison, where he and the victim together consumed forty ounces of beer and crack cocaine worth $40.00. Scott stated that appellant and Slocum later appeared at Hattison’s home, masked and brandishing weapons, and abducted the victim from the house. Scott testified that when he gave his first statement to the police, he denied seeing who entered Hattison’s home and abducted the victim. Scott explained his denial as being protective of himself and his family. The state conceded that Scott made the denial in his first statement. Scott also testified that he received cash payments from the North Little Rock Police Department prior to and after the date appellant and Slocum were charged in this case. Most significantly, however, Scott stated at the pretrial hearing on the motion in limine that he did not know the reason Slocum had asked him to lure the victim to Hattison’s house.

After hearing the foregoing evidence, the trial court stated that it had not heard any evidence that Scott had knowledge of the crime that was going to occur. Accordingly, the trial court refused appellant’s request to declare Scott an accomplice as a matter of law. Appellant renewed this request at a subsequent pretrial hearing; again, the trial court denied the request on the same basis. We find no error in these two rulings.

The defendant bears the burden of proving that a witness is an accomplice. Cole v. State, 323 Ark. 8, 913 S.W.2d 255 (1996). An accomplice is one who, with the purpose of promoting or facilitating the commission of an offense, either solicits, advises, encourages, or coerces another person to commit the offense, aids, agrees to aid, or attempts to aid the other person in planning or committing the offense, or, having a legal duty to prevent the offense, fails to make a proper effort to prevent the commission of the offense. Ark. Code Ann. § 5-2-403 (Repl. 1993). One’s status as an accomplice is a mixed question of law and fact. Earl v. State, 272 Ark. 5, 612 S.W.2d 98 (1981). One’s presence at the crime scene or failure to inform law enforcement officers of a crime does not make one an accomplice as a matter of law. Pilcher v. State, 303 Ark. 335, 796 S.W.2d 845 (1990) (citing Spears v. State, 280 Ark. 577, 660 S.W.2d 913 (1983)). The facts do not show conclusively that Scott was an accomplice. The trial court was therefore correct in refusing to declare him an accomplice as a matter of law. Cole, 323 Ark. 8, 913 S.W.2d 255; Pilcher, 303 Ark. 335, 796 S.W.2d 845.

FAILURE TO GIVE PROFFERED INSTRUCTIONS ON STATUS AS ACCOMPLICE

Appellant proffered AMI Crim. 2d 402, entitled “Accomplice Status Undisputed — Corroboration,” and AMI Crim. 2d 403, entitled “Accomplice Status in Dispute — Corroboration,” which the trial court refused without explanation. Appellant argues the trial court’s ruling was error. Our law is well-settled that a witness’s status as an accomplice is a mixed question of law and fact, and that when the status of a witness presents issues of fact, the defense is entitled to have the question submitted to the jury. Earl, 272 Ark. 5, 612 S.W.2d 98; Jackson v. State, 193 Ark. 776, 102 S.W.2d 546 (1937). The question must be submitted to the jury where there is any evidence to support a jury’s finding that the witness was an accomplice. Id.

Scott testified at trial, consistent with his testimony at the hearing on the motion in limine. His trial testimony, however, revealed the following additional facts that were not revealed at the hearing. Appellant and Slocum are cousins. Scott was “hanging out” on a street corner in his neighborhood when Slocum approached him and asked him to lure the victim to Hattison’s house. With Slocum were Shelby Baccus and Vida Davis. At that time, appellant was not with Slocum and the two others; rather, he was on his grandmother’s porch, which is across the street from the “hang-out” corner. Scott explained Slocum’s statement that Slocum would take care of Scott to mean that, in exchange for Scott luring the victim to Hattison’s home, Slocum would pay Scott in rock cocaine. Scott estimated he received rock cocaine worth $40.00 from Slocum. Scott testified that, approximately five minutes after appellant and Slocum left Hattison’s home with the victim, he heard a flurry of about ten gunshots. The first thought that came to Scott’s mind upon hearing the shots was, “[t]hey done shot that boy.” Scott explained the cash payments he received from the North Little Rock Police were for food and lodging for him and his parents to relocate after Scott told what he knew about the victim’s murder to the police. Most significantly, however, Scott stated that the reason the victim was killed was because the victim possessed knowledge that would implicate Slocum’s brother in another murder case. Scott testified that to avoid the victim’s implication of Slocum’s brother, “they had to eliminate Willie [Simpkins], I imagine.”

Scott’s testimony at trial creates a fact question as to his status as an accomplice. He knew there was ill will between the victim and the co-defendants. He was offered rock cocaine in return for luring the victim to the co-defendant’s reach. He initially denied knowledge of the co-defendants’ involvement in the crime. On this evidence, some of which was not known until Scott testified at trial, the trial court erred in refusing to give the proffered instruction AMI Crim. 2d 403. Due to the error, the jury was not given an opportunity to consider whether Scott was an accomplice and, if so, whether there was sufficient corroborating evidence presented. We therefore reverse the judgment of conviction and remand for a retrial.

We are well aware that when there is insufficient evidence to corroborate an accomplice’s testimony, the only remedy is reversal and dismissal due to jeopardy considerations. Foster v. State, 290 Ark. 495, 720 S.W.2d 712 (1986), supplemental opinion on denial of reh’g, 290 Ark. 498, 722 S.W.2d 869, cert. denied, 482 U.S. 929 (1987). However, in such cases, the witness’s status as an accomplice is not a fact question. See, id. When, as in the present case, the witness’s status as an accomplice presents a jury question and the jury was erroneously not given the opportunity to pass on that question, remand for retrial is the appropriate remedy. See Robinson v. State, 11 Ark. App. 18, 665 S.W.2d 890 (1984). Dismissal is not required in such cases because the jeopardy clause has not been violated; error in failing to instruct the jury does not relate to sufficiency of the evidence and the jeopardy clause. See United States v. Miller, 952 F.2d 866 (5th Cir.), cert. denied, 112 S. Ct. 3029 (1992) (citing Forman v. United States, 361 U.S. 416 (I960)). Retrial is the proper remedy where, as here, the jury was not given the chance to consider the question of the status of the accomplice, for it is quite possible for the jury to conclude either that the witness was not an accomplice or that there is sufficient corroborating evidence.

The judgment of conviction is reversed due to the error in refusing to give AMI Crim. 2d 403. The case is remanded for retrial.


source: Caselaw Access Project

author: Robert L. Brown, Justice.

license: Public Domain

text:
    PORTS PETROLEUM COMPANY, Inc., of Ohio v. Jim Guy TUCKER, as Governor of the State of Arkansas; Winston Bryant, as Attorney General of the State of Arkansas; Lone Star Company, Inc.; Thomas Oil Company; and Arkansas Oil Marketers Association
    95-705
    916 S.W.2d 749
    Supreme Court of Arkansas
    Opinion delivered March 11, 1996

      Williams & Anderson, by: Peter G. Kumpe and Leon Holmes, for appellant.

      Winston Bryant, Att’y Gen., by: Angela S. Jegley, Sr. Asst. Att’y Gen., for appellee.

      Mitchell, Williams, Selig, Gates & Woodyard, by: Sherry P. Bartley and Marshall S. Ney, for appellees Lone Star Company, Thomas Oil Company, and Arkansas Oil Marketers Ass’n.
   Robert L. Brown, Justice.

The issue before this court is whether the Arkansas Petroleum Trade Practices Act (Act 380 of 1993) violates the Arkansas Constitution by impinging on the due process rights, the equal protection rights, and the privileges and immunities of appellant Ports Petroleum Co., Inc. We hold that Act 380 is constitutionally infirm because of its failure to include an element of predatory intent for a violation. As a consequence, the Act is overbroad in its effect and impermissibly impinges on the due process rights of Ports Petroleum.

I. Facts

On April 20, 1993, Ports Petroleum Company, Inc. (“Ports Petroleum”) filed its complaint for declaratory judgment in chancery court. Ports Petroleum owns Fuel Mart gasoline stations in Little Rock and Jonesboro, which sell unbranded motor fuel. Lone Star and Thomas Oil sell retail gasoline in Arkansas. Through their attorneys, Lone Star and Thomas Oil contacted Ports Petroleum and threatened to sue if Ports Petroleum did not raise its price per gallon above below-cost levels. The letters asserted that Ports Petroleum was selling its gas in violation of the Arkansas Petroleum Trade Practices Act (Act 380 of 1993). Ports Petroleum sued first and named Lone Star and Thomas Oil as defendants based on the threatening letters. It further named Governor Jim Guy Tucker and Attorney General Winston Bryant as parties defendant because they constitute the enforcement mechanism under the Act.

Ports Petroleum’s declaratory judgment complaint alleged that Act 380 violates the Arkansas and United States Constitutions because it does not require an antitrust injury or predatory intent to run afoul of the Act. Its argument was framed in terms of due process, privileges and immunities, and equal protection violations. Ports Petroleum claimed that, as a practical matter, the prohibition on selling unbranded fuel below cost inhibited fair competition because unbranded fuel sellers are by necessity required to sell a greater volume of fuel at a discounted price in order to compete with branded fuel companies like Exxon and Texaco. It further alleged that the prohibition under Act 380 of below-cost sales violated its property and liberty interests by regulating innocent pricing decisions, which do not adversely affect competition.

Other claims made by Ports Petroleum were: (1) as an unbranded dealer, it does not receive the same protection as branded dealers under the Arkansas Constitution and that the denial of its rights resulted in a deprivation of business opportunity without just compensation, and (2) Act 380 violates the United States Constitution by negating the requirement of antitrust injury in pricing cases, which has the ironic effect of hindering competition and amounts to an unreasonable exercise of the state’s police power, all of which is contrary to federal legislation. According to the complaint, the Supremacy Clause of the United States Constitution preempts Act 380. Ports Petroleum prayed for an injunction to halt enforcement of the Act.

The Arkansas Oil Marketers Association (“AOMA”) moved to intervene as a defendant in the suit. The organization is comprised of approximately 200 independent petroleum marketers in the state, and, according to the motion, it played an instrumental role in developing the Act. The parties did not oppose the intervention of AOMA, and the trial court granted the motion.

Ports Petroleum moved for summary judgment. Attached to the motion were the two letters of intent to sue by Lone Star and Thomas Oil and an affidavit by Michael D. Ports, the president of Ports Petroleum. In the affidavit, Ports substantiated the claims in the complaint that unbranded fuel sellers are required to sell at a discount price in order to compete with other types of fuel retailers. Ports also averred that the volume of Fuel Mart sales had dropped since the Jonesboro store raised its fuel price but that the Little Rock price was sufficiently low to sustain its volume of sales. Ports opined that the enforcement of the act would ultimately drive Ports Petroleum out of business.

Ports Petroleum also attached the deposition of Mike Coulson, the former president of AOMA. Coulson described the differences between branded and unbranded fuel markets. He testified that AOMA retained counsel to draft the legislation which was later enacted as Act 380. According to Coulson, the Act does not distinguish between branded and unbranded dealers. He testified that if you do not have a branded product, “then price is probably what you’re selling.”

As a fifth exhibit, Ports Petroleum attached an affidavit from Leonard A. White, a professor of economics at the University of Arkansas in Fayetteville. He predicted that the Act would cause higher prices and decrease competition, which would injure the consumer. White pointed out that it was not automatically predatory for a business to sell a product at below cost. As examples, he listed giving away a free radio with the purchase of a car and selling gasoline below cost to reap an inflated price on ice cream cones.

Thomas Oil, Lone Star, and AOMA filed a response to Ports Petroleum’s motion for summary judgment and filed their own cross-motion for summary judgment. They too attached affidavits. Gerald J. Lynch, an economics professor at Purdue University, analyzed the Act and opined that the dynamic nature of competition will not suffer under the Act. Lynch concluded that “[t]he Act is a reasonable one that will allow dynamic competition [in] the short run, and protect the market from monopoly power in the long run.” The affidavit of Professor David R. Kamerschen, a professor of economics at the University of Georgia, was submitted in addition. Kamerschen recognized that below-cost pricing is seldom prudent. He noted that the per se rule, as stated in the Act, has advantages in that it offers certainty among businesses with respect to the legality of their pricing schemes. Kamerschen estimated that the Act will ultimately hélp more dealers survive in the market place because more dealers will be able to survive competitive price battles.

The affidavit of Al Heringer, the president of Lone Star, was submitted in support of the appellees’ cross-motion for summary judgment. He stated that the purchase of fuel is extremely price sensitive regardless of whether it is branded or unbranded. According to Heringer, the fact that a company sells unbranded fuel makes no difference because neither can survive without making a profit.

A hearing was held on the motions, and arguments of counsel were made. The trial court granted summary judgment in favor of the appellees. In its order, the court found:

1. Motor fuel is a commodity of general use and consumption and is impressed with the public interest for purposes of regulation under the State’s police power.
2. The purposes of Act 380 of 1993, subtitled the Arkansas Petroleum Trade Practices Act (the “Act”), as set forth in Section 3 of the Act are proper purposes for the exercise of the State’s police power.
3. The prohibition of sales of motor fuel at below cost to the retailer of motor fuel unless such sales are exempt under the Act is a reasonable means to accomplish the Act’s purposes.
4. The Act is not preempted by federal anti-trust law.
5. The act is rationally related to a legitimate state purpose and does not violate the Arkansas Constitution or the United States Constitution.
The pertinent sections of the Act are sections 3 and 4:
SECTION 3. PURPOSE.
(b) Independent and small dealers and distributors of motor fuel are vital to a healthy, competitive market place, but are unable to survive subsidized below-cost pricing at the retail level by others who have other sources of income. Fair and healthy competition in the marketing of motor fuel provides maximum benefits to consumers in this state, and certain marketing practices which impair such competition are contrary to the public interest. Predatory pricing practices are unfair trade practices and restraints which adversely affect motor fuel competition. Subsidized pricing is inherently predatory because it is unfair and destructive to, and reduces competition in, the motor fuel marketing industry. . . .
(c) Recovery under the anti-trust laws has become increasingly difficult due to the requirement of establishing an “antitrust injury.” The legislature has determined that subsidized and predatory pricing presumptively injure competition by damaging independent dealers and distributors of motor fuel. Proof of “antitrust injury” is unnecessary to recover under this act.
SECTION 4. SALES BELOW COST TO RETAILER, (a) No dealer shall make, or offer or advertise to make, sales at retail at below cost to the retailer of motor fuel, where the effect may injure competition, unless such sales at retail are exempt under Subsection (c) or (d) of this Section. . . .
(c) Nothing in this section shall prohibit a dealer from making, or offering or advertising to make, sales at retail of motor fuel which are made in good faith to compete with the equally low or lower retail price of a competitor. However, while the previous sentence allows a dealer to make, offer or advertise, sales at a price equal to the price of a competitor, it does not authorize such dealer to make, offer or advertise to make, sales at retail at a price below such competitor if such sales would be in contravention with the provisions of this section.
(d) The provisions of this section shall not apply:
(i) Where motor fuel is advertised, offered for sale, or sold in a bona fide clearance sale. . . .
(ii) Where motor fuel is sold upon the final liquidation of a business; or
(iii) Where motor fuel is advertised, offered for sale, or sold . . . under the order or direction of any court; or
(iv) Where motor fuel is sold during a grand opening to introduce a new or remodeled business. . . .

The Act then provided that violation would subject the offender to civil penalties of $1,000 a day and three times the amount of actual damages for knowing and willful violations. A showing that the cost exceeded the price constitutes a prima facie case. The Act states that it is “remedial” and should be “liberally construed.”

This case is one of first impression in Arkansas in that it provides the first opportunity for this court to decide whether the General Assembly may constitutionally abrogate a business’s right to sell fuel below cost when there is no requirement that the business intended to put its competition out of business or even to damage it. Indeed, we have found that there is a paucity of authority on this precise point from other jurisdictions as well.

It is true, as the appellees underscore, that statutes are presumed constitutional in Arkansas, and if it is possible to construe a statute so as to pass constitutional muster, we will do so. Clinton v. Bonds, 306 Ark. 554, 816 S.W.2d 169 (1991); Love v. Hill, 297 Ark. 96, 759 S.W.2d 550 (1988). It is also true that if a statute is penal in nature, it is strictly construed in favor of the offender. Wal-Mart Stores, Inc. v. American Drugs, Inc., 319 Ark. 214, 891 S.W.2d 30 (1994); State Farm Mut. Auto Insur. Co. v. Thomas, 316 Ark. 345, 871 S.W.2d 571 (1994). The penalties in Act 380 render it a clear penal statute, and we must strictly construe it in favor of Ports Petroleum. This is so, even though the Act itself states that it should be liberally construed.

We have no hesitation in affirming the trial court on the point that the subject matter of Act 380 falls within the General Assembly’s police powers to regulate an industry of general public interest. Unlike the State of Georgia [see Strickland v. Ports Petroleum Co., Inc., 353 S.E.2d 17 (Ga. 1987)], we have taken an expansive view of the State’s general ability to regulate professions and businesses under its police powers. See Noble v. Davis, 204 Ark. 156, 161 S.W.2d 189 (1942) (regulatory authority of state over barbers proper in general, though price-fixing act in question was not a legitimate exercise of state police powers). We have further stated that a commodity of general use and consumption like ready-mixed concrete is impressed with a public interest and, thus, subject to regulation under the police powers of the state. Concrete, Inc. v. Arkola Sand and Gravel Co., 230 Ark. 315, 322 S.W.2d 452 (1959). The question then becomes whether the police powers have been used by Act 380 to interfere arbitrarily with the business rights of Ports Petroleum and, thus, violate the due process clause of the Arkansas Constitution. We conclude that that is the case.

The issue of an impermissible exercise of state police powers was raised in Union Carbide & Carbon Corp. v. White River Distrib., Inc., 224 Ark. 558, 275 S.W.2d 455 (1955). There, the appellant argued that it had the right under the Act in question to require all retailers of Prestone antifreeze to sell its product at a fixed price. This court disagreed and cited Ark. Const. art. 2 § 8, which states that no one can be deprived of property without due process of law. We also observed that the General Assembly has no right to take away a valuable property right unless it has the right by virtue of its inherent police power to protect the public welfare. We concluded:

We recognize that competition is preserved to a degree under the provisions of the Act, but it must be admitted that it is also restricted to a degree. The Act can be sustained only if it enhances the general welfare and not if it restricts it to only a small extent.
The exercise of the [police] power must have a substantial basis and cannot be made a mere pretext for legislation that does not fall within it. The Legislature has no power, under the guise of police regulations, arbitrarily to invade the personal rights and liberty of the individual citizen, to interfere with private business or impose unusual and unnecessary restrictions upon lawful occupations, or to invade property rights.

Union Carbide, 224 Ark. at 563, 566, 275 S.W.2d at 458, 460. We held that the price-fixing statute violated the due process clause of the Arkansas Constitution.

Admittedly, the distinction between predatory practices and competitive pricing may appear to blur at times. But one point has been made abundantly clear by both this court and the U.S. Supreme Court — the mere fact of cutting prices does not equate to a predatory practice. In Wal-Mart Stores, Inc. v. American Drugs, Inc., supra, we examined a provision of the Arkansas Unfair Practices Act, which included a prohibition against below-cost sales “for the purpose of injuring competitors and destroying competition.” Ark. Code Ann. § 4-75-209(a)(1) (Repl. 1991). We held that the use of loss leaders was not enough to infer an intent to destroy competition, as the trial court had done. We added that we were not willing to interpret the Act to contemplate a prima facie case of predation absent a clear directive from the General Assembly. We did not reach the issue, however, of whether eliminating predatory intent altogether would comply with constitutional mandates. We quoted with approval from an Eighth Circuit Court of Appeals case concerning the difference between predation and competition relative to lowering prices:

The difficulty, of course, is distinguishing highly competitive pricing from predatory pricing. A firm that cuts its prices or substantially reduces its profit margin is not necessarily engaging in predatory pricing. It may simply be responding to new competition, or to a downturn in market demand. Indeed, there is a real danger in mislabeling such practices as predatory, because consumers generally benefit from the low prices resulting from aggressive price competition. See e.g., Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 231 (1st Cir. 1983).

Wal-Mart Stores, Inc., 319 Ark. at 222, 891 S.W.2d at 35; quoting Morgan v. Ponder, 892 F.2d 1355, 1358-1359 (8th Cir. 1989).

The U.S. Supreme Court in interpreting federal antitrust laws has acknowledged that the purpose of those laws is to permit vigorous price competition and is not to protect firms from losing profits due to competition. Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104 (1986). The Court noted the perverse result that might flow from disallowing firms to reduce prices to enhance market share:

“[T]he mechanism by which a firm engages in predatory pricing — lowering prices — is the same mechanism by which a firm stimulates competition; because ‘cutting prices in order to increase business often is the very essence of competition . . .; mistaken inferences . . . are especially costly, because they chill the very conduct the antitrust laws are designed to protect.’ ” Cargill, supra, 479 U.S., at 122, n. 17, 107 S.Ct., at 495, n. 17 (quoting Matsushita, supra, 475 U.S., at 594, 106 S.Ct., at 1360). It would be ironic indeed if the standards for predatory pricing liability were so low that antitrust suits themselves became a tool for keeping prices high.

Brook Group, Ltd. v. Brown & Williamson Tobacco Corp., 113 S. Ct. 2578, 2589-2590 (1993).

What separates predation from legitimate price cutting is the intent of the predator to damage and destroy competition and then recoup the losses through a greater share of the market. Brook Group, Ltd. v. Brown & Williamson Tobacco Corp., supra. The one case from a foreign jurisdiction that involved a state statute regulating sales below cost that approximates the facts of the present appeal is State v. Mapco Petroleum, Inc., 519 So. 2d 1275 (Ala. 1987). In that case, the Alabama Supreme Court first noted the shift in analysis caused by Nebbia v. New York, 291 U.S. 502 (1934). In Nebbia, the U.S. Supreme Court held that state economic regulation of businesses withstood due process challenges unless the regulation was arbitrary, discriminatory or demonstrably irrelevant to the policy that the legislature is free to adopt, all of which equated to an interference with individual liberty. The Alabama Supreme Court then adopted a standard to use when reviewing state economic regulations for a due process violation:

Generally speaking, the test is whether the legislation is designed to accomplish an end within legislative competence and whether the means it employs are reasonably designed to accomplish that end without unduly infringing upon protected rights. . . . Specifically, in these “sale below cost” cases, the primary issue will be whether the legislation too broadly imposes restrictions on individuals’ liberty to conduct their business as they choose. If the act penalizes innocent acts not reasonably related to the problem of monopolistic practices or other deceptive, disruptive, or destructive price cutting, the act strikes too broadly.

Mapco Petroleum, 519 So. 2d at 1284-1285.

The Alabama Supreme Court then went forward and construed the state’s Motor Fuel Marketing Act to prohibit below-cost sales that tended to destroy or substantially lessen competition. But the Court further read into the Act the ability of a defendant to offer the defense of an absence of harmful intent, after the plaintiff had made a prima facie case by showing a sale below cost with an injurious effect on competition. What distinguishes the Alabama Motor Fuel Marketing Act factually from the Arkansas Petroleum Fair Practices Act is the Alabama Act does require predatory intent in one section, where Act 380 is devoid of any such provision. Hence, the Mapco decision offers little precedential guidance for the case at hand.

Nevertheless, the standard employed by the Alabama Supreme Court in Mapco of whether the Act works too broad an impingement on individual liberty is useful. We observe that this standard bears a strong kinship to the one adopted by this court in Union Carbide & Carbon Corp. v. White River Distrib., Inc., supra, which is quoted above. In the instant case, there is a laudable purpose stated in Act 380 — to foment competition and prevent predation by prohibiting subsidized below-cost pricing at the retail level, which can have a deleterious impact on competition. But is Act 380 reasonably designed to accomplish that purpose? We think not. Indeed, in some instances the Act appears to have exactly the opposite effect from its stated purpose, and the plight of Ports Petroleum is a case in point. The flip side of prohibiting below-cost pricing is that smaller enterprises and single retail outlets (the mom and pop stores) are not able to use this strategy as a means of attracting customers and, thereby, competing with larger firms. Though completely free and innocent of predatory intent, these smaller outlets are foreclosed by the Act from engaging in a pricing mechanism that is one of the few competitive tools they have at their disposal.

The appellees urge that Act 380 bears a rational relationship to a legitimate objective of state government, and for that reason it cannot be the product of arbitrary action. See Arkansas Hosp. Ass’n v. Arkansas State Bd. of Pharmacy, 297 Ark. 454, 763 S.W.2d 73 (1989); Streight v. Ragland, 280 Ark. 206, 655 S.W.2d 459 (1983). But we cannot agree that legislation which hampers innocent and legitimate competition can in any wise be deemed to be rational irrespective of the goal to be accomplished.

We conclude that Act 380 is overbroad in that it prohibits legitimate and innocent competition fostered by below-cost sales. Had the Act included a prohibition against such sales made with predatory intent to damage and destroy competition comparable to what the Arkansas Unfair Practices Act [Ark. Code Ann. § 4-75-209(a)(l) (Repl. 1991)] provides, due process impairment would not be a concern. But here legitimate and innocent below-cost strategies are precluded, and that is a burden on legitimate competition that we cannot condone. Because we reverse due to the absence of an intent to damage and destroy competition, we need not address Ports Petroleum’s associated argument that the Act is also deficient in eliminating the element of antitrust injury.

We hold that Section 4 of Act 380 of 1993 violates the due process clause of the Arkansas Constitution and is void and of no effect. To the extent Section 4 is independent from the balance of the Act, its invalidity shall not affect the other provisions and applications of the Act. U.S. Term Limits, Inc. v. Hill, 316 Ark. 251, 872 S.W.2d 349 (1994), aff'd_U.S__, 115 S. Ct. 1842, 129 L. Ed.2d (1995); Faubus v. Kinney, 239 Ark. 443, 389 S.W.2d 887 (1965).

Reversed and remanded for entry of an order consistent with this opinion.


author: Andree Layton Roaf, Justice. Tom Glaze, Justice, Robert L. Brown, Justice,

text:
    Jim Guy TUCKER, Governor, et al. v. LAKE VIEW SCHOOL DISTRICT NO. 25 of Phillips County, et al.
    95-471
    917 S.W.2d 530
    Supreme Court of Arkansas
    Opinion delivered March 11, 1996

      Winston Bryant, Att’y Gen., by: Tim Humphries, Deputy Att’y Gen., for appellant.
    Mitchell, Blackstock & Barnes, by: Clayton R. Blackstock, for amicus curiae Arkansas Education Ass’n.
   Andree Layton Roaf, Justice.

Appellants, Jim Guy Tucker, and others, appeal from an order of the Pulaski County Chancery Court which declared that the public school financing system then in effect violated the equal protection and education provisions of the Arkansas Constitution.

Appellants raise two points on appeal: the trial court erred by 1) misapplying the equal protection and education provisions of the Arkansas Constitution; and 2) incorrectly applying statistical measures of equity. As the ruling by the chancellor does not constitute a final appealable order, we dismiss the appeal.

Facts

On September 19, 1994, appellees Lake View School District (“Lake View”) and various of its students and patrons filed an amended complaint against Governor Jim Guy Tucker, the State Board of Education and its members, the State Treasurer, Speaker of the House of Representatives, Senate President Pro Tempore, and the Director of the Department of Education (“the State”). The complaint alleged that the system of school funding then in place violated the Arkansas constitutional guarantees of equal protection and of a general, suitable, and efficient system of education. The complaint also asserted that the funding system violated the equal protection and due process clauses of the Fourteenth Amendment to the United States Constitution. Lake View sought declaratory and injunctive relief, mandamus against the State to enact a constitutional system of school funding and to increase funding for public schools, nominal damages, attorney’s fees, and costs.

After a trial on the merits before Chancellor Annabelle Clinton Imber, involving numerous witnesses and exhibits, the chancellor issued 147 findings of fact and eighteen conclusions of law on November 9, 1994. She determined that the school funding system was constitutional under the United States Constitution and dismissed with prejudice Lake View’s claims in that regard. However, she ruled that the funding system was in violation of the equal protection provision of the Arkansas Constitution, “as it has no rational bearing on the educational needs of the district,” and that the system also violated the education provision of the Arkansas Constitution by “failing to provide a general, suitable, and efficient system of free public education.” The chancellor stayed the effect of her decision for two years to allow the General Assembly time to enact and implement appropriate legislation in conformity with her opinion.

The General Assembly subsequently enacted new school funding statutes, Acts 916 and 917 of 1995, which effectively repealed the funding system at issue in this appeal.

There are three questions raised by the posture of this case and by the chancellor’s decree which would all have to be answered in the affirmative for us to reach the merits of this case — whether the order entered by the chancellor was a final, appealable order, whether the chancellor had jurisdiction to hear the case, and whether the enactment of a new school funding system renders this matter moot. We conclude that there has been no final order entered in this action.

Finality of Order

Because the chancellor stayed for two years the effect of her decision finding the school funding system unconstitutional, and declined to grant Lake View any of the specific remedies requested, we must consider whether the decision is a final, appealable order. This is a requisite for appellate jurisdiction, which we have a duty to determine. See Walker v. Kazi, 316 Ark. 616, 875 S.W.2d 47 (1994); Chambers v. Manning, 315 Ark. 369, 868 S.W.2d 64 (1993).

We first note that the question of whether the chancellor can stay the effect of her decision finding the statutes unconstitutional is not before us. The State does not raise this issue and Lake View has not filed a cross appeal or even a brief in this case.

For a judgment to be final and appealable, it must dismiss the parties from the court, discharge them from the action, or conclude their rights to the subject matter in controversy. Kelly v. Kelly, 310 Ark. 244, 835 S.W.2d 869 (1992); Jackson v. Yowell, 307 Ark. 222, 818 S.W.2d 950 (1991). To be final, an order must not only decide the rights of the parties, but also put the court’s directive into execution, ending the litigation or a separable part of it. Kilgore v. Viner, 293 Ark. 187, 736 S.W.2d 1 (1987). See also Bonner v. Sikes, 20 Ark. App. 209, 727 S.W.2d 144 (1987).

The case primarily relied upon by the parties and the trial court on the questions of substantive law, Dupree v. Alma School Dist. No. 30, 279 Ark. 340, 651 S.W.2d 90 (1983), appears to be precisely on point and was also tried before a chancellor. However, the issue of finality was not presented by the chancellor’s award of declaratory relief in Dupree. There, eleven school districts brought a class action suit against members of the Arkansas State Board of Education, charging, as in the present case, that the system of school financing then in effect violated the Arkansas Constitution’s guarantee of equal protection and its requirement that the state provide a general, suitable and efficient system of education. The trial court declared the system to be in violation of the constitutional provisions in question, and this Court affirmed that decision. The opinion in Dupree does not indicate whether any further relief was sought by the appellee school districts, however, the effect of the trial court’s order was not stayed, and the chancellor’s decision granting declaratory relief was a final order.

Here, as in Dupree, the chancellor made a final determination that the school funding system was unconstitutional. However, she stayed the effect of her decision to allow the General Assembly to implement a constitutional system, and consequently did not consider the constitutionality of the individual elements of the system, nor did she address Lake View’s requests for injunctive relief and mandamus. The chancellor’s failure to grant the specific relief requested by the prevailing parties was in effect a deferral; she provided in her decree that the two-year stay was to “give the State of Arkansas time to enact and implement appropriate legislation in conformity with this opinion.” By the terms of the decree, Lake View could request further hearings at the end of two years to determine if the new funding system conforms to the chancellor’s ruling, or had the State failed to take any action at all. Lake View’s rights in this matter have not been concluded and they have no way to put the chancellor’s directive into execution without further proceedings before the trial court; the requirements for finality are thus not met.

Jurisdiction and mootness

Because we dismiss this appeal for lack of a final order, we need not reach the issues of whether the chancellor had jurisdiction to hear the case, or whether the enacting of a new funding system has rendered this matter moot. However, we point out that the matter of jurisdiction may again arise if further proceedings before the trial court result in another appeal of this case. The issue of subject-matter jurisdiction, like that of finality, is one that we raise on our own motion. Villines v. Lee, 321 Ark. 405, 902 S.W.2d 233 (1995). As to mootness, we note that repeal of the funding system declared unconstitutional does not become effective until July 1, 1996. Act 917 of 1995, § 15(b).

Appeal dismissed.

Glaze, J., concurs, and Brown, J., dissents.

Tom Glaze, Justice,

concurring. I concur. The chancellor’s decree clearly runs afoul of Ark. R. App. P. 2, and is not an appealable order. The chancellor declared the Arkansas school funding system (School Finance Act of 1984) unconstitutional under Article II, § § 2,3, 18 and Article XIV, § 1 of the Arkansas Constitution, but she never put her directives into execution. The plaintiff school district filed suit, asking the trial court to declare Arkansas’s statutory funding structure unconstitutional and requesting the State Board of Education be enjoined from implementing that unlawful funding structure. Although the chancellor decreed Arkansas’s educational funding laws were unconstitutional, she denied plaintiffs any remedies, and instead stayed the effect of her decision for two years to give the General Assembly time to implement a school funding system in conformity with her opinion. The chancellor further stated the following:

The court has declared the Arkansas school funding “system” unconstitutional. At this point in time, the court will not consider the constitutionality of the individual elements of the “system.” (Emphasis added.)

Exactly where the chancellor’s decree left the prevailing plaintiffs is unclear, since plaintiffs were unable to enforce their rights under the trial court’s declaration. Apparently, plaintiffs must wait two years at which time the chancellor would decide if the General Assembly had adopted and implemented a school funding system which complied with her decision. Apparently, when the two-year period ends, another hearing would be required to review any new law to determine if conformity was achieved.

Our court has held that, to be final and appealable, a trial court’s order, decree or judgment must dismiss the parties from the court, discharge them from the action, or conclude their rights to the subject matter in controversy. Estate of Hastings v. Planters and Stockmen Bank, 296 Ark. 409, 757 S.W.2d 546 (1988). This court also related the rule that a final judgment or decision is one that finally adjudicated the rights of the parties, putting it beyond the power of the court which made it to place the parties in their original positions. It must be such a final determination as may be enforced by execution or in some other appropriate manner. Here, the chancellor’s decree meets none of the foregoing requirements, since the parties are still before the trial court, and the plaintiffs must wait to enforce their rights. That being so, I would dismiss this appeal, because no final order exists.

In conclusion, I take exception to the majority opinion wherein it concludes the question of whether the chancellor can stay the effect of her decision is not before this court. Sure it is. The chancellor’s action staying its decision for two years is part of the reason why the judgment is not final and failed to grant any remedies. In addition, I would state the subject-matter jurisdiction issue is not clear to me, especially since mandamus was requested by the plaintiffs and that relief must be sought in circuit court. Thus, I reserve my opinion on this issue. Concerning the mootness issue, however, I see no merit. I merely point out that the School Finance Act of 1984 which the chancellor declared unconstitutional (effective in two years) is not, as yet, repealed. In fact, Act 917 of 1995 (the Equitable School Finance System Act) mentioned in the majority opinion does not repeal the 1984 Act until July 1, 1996. Nor is it clear at this juncture whether Act 917 cures those constitutional infirmities that the chancellor says exist in the 1984 Act. In sum, the parties have not benefited us with a comparison of these laws or offered an argument that Act 917 caused this litigation to be moot. Based on what is before this court now, mootness is not shown.

I respectfully join in the result reached by the majority on the finality issue and find it reason enough to dismiss.

Robert L. Brown, Justice,

dissenting. This case involves approximately $1 billion in Minimum Foundation Program Aid funds for education. About 435,000 students in Arkansas are affected. The chancellor’s judgment declaring the school funding program unconstitutional, as it existed in 1994, was entered November 9, 1994. That declaratory judgment was immediately appealed by the State. Now, almost a year and a half later the majority declines to entertain the appeal because it concludes that the declaratory judgment was not a final order. The majority further suggests that jurisdiction in chancery court may be faulty, but it makes no decision on that point.

I would hold that jurisdiction of this matter properly lies in chancery court and that the declaratory judgment is final for purposes of appeal and for this court’s review. For that reason, I dissent.

I. Final Order

It is statutory law in Arkansas that declaratory judgments shall have the effect of a final judgment:

(a) Courts of record within their respective jurisdictions shall have power to declare rights, status, and other legal relations whether or not further relief is or could be claimed.
(2) The declaration may be either affirmative or negative in form and effect and declarations shall have the force and effect of a final judgment or decree.

Ark. Code Ann. § 16-111-103(a)(2) (1987). (Emphasis added.)

The Commentary to the Declaratory Judgment Act supports this notion:

The Declaratory Judgment may be either affirmative or negative in form and effect; it may determine some right, privilege, power or immunity in the plaintiff, or some duty, no-right, liability or disability in the defendant. The judgment is not based on any wrong already done or any breach committed. It is not required to be executed, as it orders nothing to be done. It simply declares rights and duties so that parties may guide themselves in the proper legal road, and, in fact, and in truth, avoid litigation.

Prefatory Note to Ark. Code Ann. § 16-111-101 et seq. (Repl. 1995). (Emphasis added.)

Here, the chancellor declared the school funding formula unconstitutional as violative of the Equal Protection Clause of the Arkansas Constitution. That declaration of rights had the force and effect of a final judgment. The chancellor then refrained from granting any supplemental relief to execute the judgment for two years in order to give the General Assembly a chance to come into compliance with her order. In staying the effect of her order, she cited as authority Helena Elementary School Dist. 1 v. State, 784 P.2d 412, 413 (Mont. 1990); Carrollton-Farmers v. Edgewood Indep. School Dist., 826 S.W.2d 489 (Tex. 1992); and Edgewood Indep. School Dist. v. Kirby, 777 S.W.2d 391, 399 (Tex. 1989). The reason for doing this is obvious. Had she immediately enjoined an expenditure of State funds under the program, public education would have come to an abrupt halt absent an appeal.

What the chancellor did in declaring rights and staying her order is precisely what virtually every other jurisdiction has done when considering a similar issue. In none of these cases has the appellate court dismissed the matter for lack of finality. For example, the District Court which invalidated Texas’s school finance system in 1971 allowed the legislature two years to take corrective action. Rodriguez v. San Antonio Indep. Sch. Dist., 337 F. Supp. 280 (W.D. Tex. 1971), rev’d on other grounds, 411 U.S. 1 (1973). A California trial court also set a period of six years from the date of judgment as a reasonable time to rectify an unconstitutional school funding system, and the California Supreme Court affirmed. See Serrano v. Priest, 18 Cal.3d. 728, 135 Cal. Reptr. 345, 557 P.2d 929 (1977), cert. denied sub. nom. Clowes v. Serrano, 432 U.S. 907 (1977).

Likewise, in Robinson v. Cahill, 62 N.J. 473, 303 A.2d 273 (1973), cert. denied sub. nom. Dickey v. Robinson, 414 U.S. 976 (1973), the New Jersey Supreme Court agreed with the trial court that a period of time was necessary to allow the legislature an opportunity to come into compliance with constitutional mandates. A specific deadline for compliance was fixed by the court. Robinson v. Cahill, 63 N.J. 196, 306 A.2d 65 (1973) (per curiam), cert. denied sub. nom. Dickey v. Robinson, 414 U.S. 976 (1973). In the first Robinson case, the court made the case for a stay:

We agree with the trial court that relief must be prospective. The judiciary cannot unravel the fiscal skein. Obligations incurred must not be impaired. And since government must go on, and some period of time will be needed to establish another statutory system, obligations hereafter incurred pursuant to existing statutes will be valid in accordance with the terms of the statutes.

303 A.2d at 298.

State appellate courts have also modified trial court orders to provide for stays to give legislatures time to act in comparable situations. Rose v. Council for Better Educ., Inc., 790 S.W.2d 186 (Ky. 1989) (withheld finality of judgment until 90 days after the adjournment of the General Assembly at its regular session); Washakie County Sch. Dist. No. 1 v. Herschler, 606 P.2d 310 (Wyo. 1980), cert. denied sub. nom. Hot Springs County Sch. Dist. No. 1 v. Washakie County Sch. Dist. No. 1, 449 U.S. 824 (1980) (court ordered that the conversion be in effect and underway not later than July 1, 1982); Seattle Sch. Dist. No. 1 v. State, 90 Wash.2d 476, 585 P.2d 71 (1978) (en banc) (opinion deemed all acts taken under existing statute valid until July 1, 1981); Horton v. Meskill, 172 Conn. 615, 376 A.2d 359 (1977) (stayed judicial intervention to afford the General Assembly an opportunity to take appropriate legislative action).

By dismissing this appeal, the constitutionality of school funding is placed in limbo with nothing resolved. Presumably, as of November 9, 1996, the chancellor’s opinion will be final in the majority’s eyes. What happens then? The State could refile the same appeal, but a considerable period of time will have been lost in reviewing the chancellor’s order.

II. Mootness

The General Assembly has passed school-funding legislation since the chancellor’s order. See Act 917 of 1995. We have said that when one act has been superseded by a second act, we generally dismiss an appeal from a declaratory judgment action construing the first act for mootness. Nathaniel v. Forrest City School Dist. No. 7, 300 Ark. 513, 780 S.W.2d 539 (1989). The Nathaniel case was an election matter, and we went on to say in our opinion that when an issue is capable of repetition, even though moot, we will entertain it. We concluded that Nathaniel presented such a case, and we addressed the merits. We have further stated:

[W]hen the case involves the public interest, or tends to become moot before litigation can run its course, or a decision might avert future litigation, we have, with some regularity, refused to permit mootness to become the determinant (citing authority).

Campbell v. State, 300 Ark. 570, 572, 781 S.W.2d 14, 15 (1989). Thus, when matters of great public interest are involved that might arise in the future, we have decided them even though the precise matter on appeal is moot. Dotson v. Ritchie, 211 Ark. 789, 202 S.W.2d 603 (1947).

The matter presently before us is arguably moot because the General Assembly has passed a new school funding law in the form of Act 917. However, the issue that remains is whether the chancellor was correct in her analysis of what a school funding formula must provide to pass constitutional muster. That issue is before this court in this appeal, and it is left hovering in the air by today’s decision. There may well be a second lawsuit by the Lake View School District to decide whether Act 917 complies with the chancellor’s order. (Compliance of Act 917 with the chancellor’s order has not been raised in this appeal.) However, a second lawsuit on compliance would necessarily have to include whether the chancellor’s reasoning in her declaratory judgment was right. I would decide that issue in this appeal.

Education receives high priority status under the Arkansas Constitution, as it should:

Intelligence and virtue being the safeguards of liberty and the bulwark of a free and good government, the State shall ever maintain a general, suitable and efficient system of free public schools and shall adopt all suitable means to secure to the people the advantages and opportunities of education.

Ark. Const, art. 14, § 1. I would treat this case as the matter of high public interest that it is and review the merits of the chancellor’s decision. To do otherwise runs the risk of causing delay and fomenting uncertainty and instability in the educational system.

III. Jurisdiction

Jurisdiction in chancery court has been questioned by the majority opinion, but no resolution of the matter has been made. I believe that chancery court had jurisdiction of this case. Mandamus is clearly a legal remedy, but it is supplemental relief, as already discussed. A declaration of rights concerning an illegal application of State funds and injunctive relief fall readily in chancery’s domain. See, e.g., Hartwick v. Thorne, 300 Ark. 502, 780 S.W.2d 531 (1989); DuPree v. Alma School Dist. No. 30, 279 Ark. 340, 651 S.W.2d 90 (1983). The upshot of today’s opinion is to place in doubt chancery’s jurisdiction over this case while leaving a decision on the matter to another day. Having not addressed the jurisdictional point in connection with the present appeal, it would be unfair in the extreme to dismiss a subsequent, related appeal emanating from chancery court for lack of jurisdiction.

IV. Summary

To summarize, I would hold that the jurisdiction of this matter appropriately lies in chancery court. I would further view the declaratory judgment as final for purposes of our review. And, lastly, though superseding legislative action in 1995 may have rendered the constitutionality of the previous formula moot, the chancellor’s analysis is the polestar against which Act 917 of 1995 must ultimately be measured. I would decide whether that analysis missed the mark or correctly assessed constitutional mandates. For that reason, I respectfully dissent.

       The chancellor entered an order on December 21, 1994, amending the findings of fact and denying Lake View’s request for specific remedies and for the funding system to be set aside. However, Lake View’s motion to modify the findings of fact was untimely pursuant to Ark. R. Civ. P. 52 and we determined this December 21, 1994 order to be a nullity. See Tucker v. Lake View Sch. Dist., 321 Ark. 618, 906 S.W.2d 295 (1995). The State made a timely request to modify the findings of fact, and a separate valid order was entered December 21, 1994, pursuant to this request.

        Dupree was decided on May 31, 1983. “The School Finance Act of 1984,” Act 34 of 1983 (Ex. Sess.), codified as Ark. Code Ann. §§ 6-20-301 — 319, (Repl. 1993), was approved on November 1, 1983 in a special legislative session. The emergency clause to the act provided that:
      In view of the fact that the Arkansas school finance system, . . . has been invalidated by the Court; that the Court’s ruling on this matter has been reviewed and upheld by the State’s Supreme Court; that state funds for the support of the state’s public elementary and secondary schools are now being allocated and distributed under a system which has been declared unconstitutional; and that there is a pressing need to implement a constitutional system of school finance for Arkansas schools at the earliest possible date. Therefore, an emergency is hereby declared to exist and this Act, being necessary for the immediate preservation of the public peace, health and safety, shall be in full force and effect from and after January 1, 1984.


author: Per Curiam.

text:
    Charles Allen McGEHEE v. STATE of Arkansas
    CR 95-368
    916 S.W.2d 756
    Supreme Court of Arkansas
    Opinion delivered March 11, 1996

      William M. Howard, Jr., for appellant.
    No response.
   Per Curiam.

On January 16, 1996, we granted the appellant’s petition for writ of certiorari to complete the record in this capital-murder case. The writ was returnable on February 15, 1996. On that date, appellant, Charles Allen McGehee, through his attorney, William M. Howard, Jr., filed this motion for extension of time for the court reporter, Val Dixon-Sims, to complete the record. Attached to the motion is a written statement from Ms. Dixon-Sims informing us that her records, including tapes relating to this case, were vandalized on January 17, 1995. A partial transcript has been filed in this case, but the contents of certain bench conferences have not been included, despite Ms. Dixon-Sims’s contention that she recorded them at trial and has since transcribed “what [she] could of the proceedings.”

Consequently, we grant appellant’s motion and direct the trial court, court clerk, court reporter, and counsel for appellant and appellee to attempt to reconstruct the missing parts of the record and to settle the record in this case in accordance with Ark. R. App. P. Civ. 6(d), made applicable in criminal cases pursuant to Ark. R. App. P. Crim. 5(a). See West v. State, 322 Ark. 114, 907 S.W.2d 133 (1995) (per curiam). The record must be settled and returned within thirty days from the date of this opinion.


author: Robert H. Dudley, Justice.

text:
    FARM BUREAU MUTUAL INSURANCE COMPANY OF ARKANSAS, INC., and Southern Farm Bureau Casualty Insurance Company v. FARM BUREAU POLICY HOLDERS and Members, Dennis Lee, Class Representative
    95-402
    918 S.W.2d 129
    Supreme Court of Arkansas
    Opinion delivered March 18, 1996

      Laser, Wilson, Bufford & Watts, P.A., by: Sam Laser, for appellants.

      Gibson Law Office, by: C.S. "Chuck” Gibson, II, and Charles S. Gibson, for appellees.
   Robert H. Dudley, Justice.

This is an interlocutory appeal from an order certifying a class action. See Ark. Sup. Ct. R. 1-2(a)(12); Ark. R. App. P. 2(a)(9); and Ark. R. Civ. P. 23. We affirm the order of certification.

Appellee Dennis Lee, the class representative, alleged in his complaint that appellants Farm Bureau Mutual Insurance Company of Arkansas, Inc., and Southern Farm Bureau Casualty Insurance Company, Inc., require all purchasers of their automobile insurance policies to pay $35.00 in annual membership dues to the Farm Bureau Federation. He alleged that after he paid the premium, but during the effective dates of the insurance contract, he was contacted by a representative of Farm Bureau who asked him to pay the membership fee and informed him that his automobile insurance would be cancelled if he did not pay the fees. He pleaded that neither the application for insurance nor the policy specifies the premium, as required by statute; consequently, “the membership dues are invalid and further constitute a fraudulent inducement to contract.” He prayed for reformation of his insurance contract, a declaratory judgment that “all such membership dues were wrongfully collected,” and, because the companies “had been unjustly enriched,” for a constructive trust to be placed on the corpus of the funds to be distributed to members of the class. He pleaded that the class is composed of insureds who have been, continue to be, and may in the future be adversely affected by the companies’ charging membership dues, and that the numerosity requirement was met because the class consisted of more than 180,000 insureds.

The trial court ruled (1) the numerosity requirement was satisfied because the class totals over 180,000 people; (2) the commonality requirement was satisfied because the proposed class consists of “other insureds of these companies with similar type of insurance as Plaintiff Dennis Lee”; (3) the typicality requirement was satisfied because the insurance appellee had was typical of the type of automobile insurance of the other insureds of appellant; and (4) the adequate representation requirement was met because counsel for appellee “appealed] to be exerting maximum effort in behalf of his client” and had “diligently approached this case in a manner that more than meets the requirements of the law.” In addition, the court found that the questions of law or fact common to all class members predominate over any questions affecting only individual members and that costs would be prohibitive for the case to be pursued individually; thus, it was the economically feasible approach. The trial court certified the class as (1) only those insureds that have had, during the last five years, automobile insurance with one or both the defendant companies and (2) any insureds who purchased automobile insurance in Arkansas from the defendant companies within the five years immediately preceding the filing of the action.

Separately, the companies moved for summary judgment on the ground that the applicable statutes allow insurance companies to charge membership dues. The trial court denied the motion for summary judgment because there are disputed issues of material fact.

Appellant companies make a number of arguments that we do not address on appeal. In the arguments contained in their brief to this court, the companies contend that a plaintiff “individually must have a claim before he can seek certification of a class.” From that premise, they make a number of arguments about appellee’s lack of a cause of action. However, the premise is false, as the statement is an erroneous statement of the law.

Rule 23 of the Arkansas Rules of Civil Procedure, the Arkansas class-action rule as now revised, is comparable to Rule 23 of the Federal Rules of Civil Procedure. We have said that we will interpret Ark. R. Civ. P. 23 in the same manner the federal courts interpret the comparable Fed. R. Civ. P. 23. Union Nat’l Bank v. Barnhart, 308 Ark. 190, 823 S.W.2d 878 (1992). In Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974), the Supreme Court held that a trial court does not have authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action. Id. at 177-78. The Court opined that a preliminary hearing on the merits might substantially prejudice the parties, since it would be unaccompanied by traditional rules and procedures applicable in civil trials. Id. at 178. It said that the proper focus of the inquiry is not “whether the plaintiff or plaintiffs have stated a cause of action or will prevail on the merits, but rather whether the requirements of Rule 23 [of the Federal Rules of Civil Procedure] are met.” Id. at 178 (quoting with approval Miller v. Mackey Int'l, Inc., 452 F.2d 424, 427 (5th Cir. 1971)) (emphasis added).

In Miller v. Mackey International, Inc., 452 F.2d 424 (5th. Cir. 1971), the case cited with approval in Eisen v. Car-lisle & Jacquelin, the Fifth Circuit Court of Appeals reversed an order denying a class action because the district judge improperly considered the merits of the claim in passing on the class action request. Id. at 430. The court said that, for Rule 23 purposes, it is totally immaterial whether the petition will succeed on the merits or even if it states a cause of action. Id. at 427 and cases cited therein. It stressed that the propriety of a class action is “basically a procedural question.” Id. We have specifically adopted the reasoning of Eisen v. Carlisle & Jacque lin and held that an order denying or granting class certification is separate from the merits of the case. See Arkansas State Bd. of Educ. v. Magnolia Sch. Dist. No. 14, 298 Ark. 603, 769 S.W.2d 419 (1989).

In oral argument to this court, the companies’ counsel candidly admitted that the arguments in their brief were in error in asserting that they could delve into the merits of the claim, and they abandoned reliance on such a premise. Consequently, we do not address the companies’ arguments that the trial court erred in denying summary judgment, or in finding that the complaint did not state a cause of action. Further, in oral argument, the companies’ counsel forthrightly admitted that the trial court’s certification of a class was proper for the claims alleging reformation [breach of contract] and declaratory judgment, but steadfastly contended that certification was improper for claims alleging fraud. Counsel contended in oral argument that tort claims involve different amounts of damage for each member of a class, and therefore tort claims should not be allowed in class actions. Counsel for the class responded by stating that damages will not vary: The damages are the same for all members — thirty-five dollars for each year the dues were paid. We do not address the companies’ argument that allegations of fraud should not be certified since the argument was not made to the trial court.

The companies’ only remaining challenge to class certification is that the action is lacking in commonality and in typicality. The standard of review for either the grant or denial of a certification of a class action is whether the trial court abused its discretion. Arthur v. Zearley, 320 Ark. 273, 895 S.W.2d 928 (1995); LeMarco, Inc. v. Wood, 305 Ark. 1, 804 S.W.2d 724 (1991). In the case at bar, the common question is whether the applicable statutes preclude the companies from requiring their insureds to pay membership dues to the Farm Bureau Federation. The trial court ruled that commonality of interests and common questions of law were present. The trial court found, in part:

The record is abundant with exhibits that have been offered, that, on their face, tend rather strongly to support the argument that there are common questions of fact involved between [appellee], as a past insured of at least one of the defendant companies and a past member of the Farm Bureau Federation, and other insureds of these companies with similar type of insurance as [appellee].

The testimony showed that, to secure auto insurance from one of the defendant companies, an insured must pay the membership dues to the Farm Bureau Federation. The trial court certified as a class “only those insureds that have had, during the last five years, automobile insurance with one or both of the defendant companies” and “any insureds who purchased automobile insurance from defendant companies during the past five years preceding this case.” The trial court did not abuse its discretion in ruling on the commonality of interests; however, even if the trial court should eventually determine that the class should be splintered with respect to some individual claims, efficiency could still be achieved by resolving those common questions which predominate over individual questions. See LeMarco, Inc. v. Wood, 305 Ark. 1, 804 S.W.2d 724 (1991), and International Union of Elec., Radio, & Mach. Workers v. Hudson, 295 Ark. 107, 747 S.W.2d 81 (1988).

The companies also contest the trial court’s ruling on the requirement of typicality. The trial court found that the plaintiff’s automobile insurance policy and membership dues were typical of that of others who have auto insurance with the companies. In Chequenet Systems, Inc. v. Montgomery, 322 Ark. 742, 911 S.W.2d 956 (1995), we said, even if allegations about injuries and damages are different, claims are typical when they “arise from the same wrong allegedly committed against the class.” Id. at 749, 911 S.W.2d at 959. Here, the allegation is that dues were wrongfully collected by the companies. Therefore, even though some class members may collect more than others, the claims are still typical because they arise from the same alleged wrong. See also Summons v. Missouri Pac. R.R., 306 Ark. 116, 813 S.W.2d 240 (1991) (quoting H. Newberg, Class Actions, § 3.13 (1985)). Thus, the trial court did not abuse its discretion in ruling on typicality.

Affirmed.

Special Chief Justice William Randal Wright and Special Justice Judy Simmons Henry join in this opinion.

Jesson, C.J., and Glaze, J., not participating.


author: Robert H. Dudley, Justice. David Newbern, Justice,

text:
    Richard A. WEISS, Director, Arkansas Department of Finance and Administration v. BEST ENTERPRISES, INC.
    95-527
    917 S.W.2d 543
    Supreme Court of Arkansas
    Opinion delivered March 18, 1996

      Joyce Kinkead, for appellant.

      Deininger Law Firm, by: Neil Deininger and Reba M. Wingfield, for appellee.
   Robert H. Dudley, Justice.

Best Enterprises, Inc., charges a fee to place its portable toilets at customers’ sites. The fee includes charges for pumping, cleaning, sanitization, and waste-disposal services for the toilets. The Department of Finance & Administration audited Best’s records, administratively ruled that Best’s operation was subject to the gross-receipts tax, and assessed a deficiency. Best paid the assessment, penalty, and interest under protest and filed suit for judicial relief in the chancery court. See Ark. Code Ann. § 26-18-406(a)(l) (Repl. 1992). The chancellor ordered the tax, penalty, and interest refunded. We reverse and dismiss.

In its complaint, Best alleged that Ark. Code Ann. § 26-52-103(a)(3)(E) excludes from gross-receipts taxation, with certain exceptions, furnishing or rendering of a service, and that Ark. Code Ann. § 26-52-301(2) exempts sewer services from the gross-receipts tax. The Director answered that Best’s lease of portable toilets was not excluded from taxation because the lease was an integral part of the business and, since the lease and the attendant cleaning services were not separated, it contended that the transaction was subject to taxation. The Director additionally answered that Best was not exempt from taxation as a sewer service because Best is not a utility or public service and only those entities are exempt.

The facts, which are largely undisputed, show that Best purchases portable toilets out of state, takes the toilets to its base of operation in Cabot and, from there, delivers the toilets to the customers’ sites. After placing a portable toilet on a customer’s site, Best provides pumping, cleaning, sanitation, and waste disposal services for the unit. It charges one fixed price for both the use of portable toilets and the attendant services. The fixed price is determined by using a chart that was formulated by Best. The fixed price includes the cost of the toilet and other equipment such as the service truck and chemicals, toilet tissue, gloves, boots, and uniforms; the cost of fuel for its truck and time for travel by service personnel to the site; and the cost of labor. The cost of equipment constitutes about eleven percent of the fixed price, and the cost of toilets amounts to about five percent of the fixed price.

When a customer calls for a portable toilet, Best inquires about the number of people who will use the facility, the location, and the length of time the toilet or toilets will be needed. After receiving the information, Best determines the fixed price by using its chart. The customer signs a written contract. The toilet is delivered and subsequently serviced at least once a week. The frequency of service depends upon the number of people using the toilet. If a toilet is overused, the customer is informed and either frequency of service is increased or the number of toilets is increased, and the fixed price is increased. The customer is billed every four weeks.

Most of the portable toilets are leased to contractors for use at construction sites. A six-month lease would be considered a short lease; some toilets have been on site since 1987. Best will supply a toilet for only one week, but the fixed charge is about the same as for four weeks.

Servicing the toilets includes pumping waste to the truck, recharging the holding tank with chemicals, deodorizing, cleaning, disinfecting, replacing toilet tissue, removing graffiti, and maintenance. The waste is transported by a service truck to Cabot where it is stored in larger tanks until disposed at a municipal waste-water treatment facility.

The chancellor ruled that providing portable toilets to customers did not constitute the rental of tangible personal property, but rather that Best is engaged in providing sewer and sanitation services which are exempt from taxation. We reverse and dismiss.

The Director’s first point of appeal is that the chancellor erred in ruling that providing portable toilets did not constitute, in part, the rental of tangible personal property. The point is well taken.

Rentals of tangible personal property are taxable. Ark. Code Ann. § 26-52-103(a)(3)(B) (Repl. 1992). In determining whether a transaction constitutes a lease that is taxable under the Gross Receipts Act, we look to all of the factors involved to determine the true nature of the transaction. Leathers v. A & B Dirt Movers, Inc., 311 Ark. 320, 844 S.W.2d 314 (1992). No specific words are necessary to create a lease, but the words that are used must have the effect of divesting the owner of the right to the possession of his property and, for a consideration, investing the other party with the right to possession for a designated period or at will. Harbottle v. Central Coal & Coke Co., 134 Ark. 254, 203 S.W. 1044 (1918). Best’s form contract states that it will “supply the sanitation units” and that the customer will “retain absolute and sole control, possession, and custody of the sanitation units and return such units to the contractor at the end of the service period.” It further provides that if the toilet is damaged, other than from ordinary wear and tear, the customer is liable for the damages, the customer cannot make alterations or make attachments to the toilets without Best’s permission, and the customer will return the toilet to Best at the end of the contract period. One of Best’s exhibits introduced at trial was basic industry data published by the School of Business and Public Administration of Howard University. It provides: “As a part of the cost of renting units, the portable sanitation contractor services on a regular basis.” One of Best’s employees admitted that the customers frequently called the transaction a rental of portable toilets.

In summary, Best, for a consideration, divested itself for a period of time of the right to the possession of its portable toilets, and invested the customer with the right of possession of its property. The transactions fit within the definition of leases, and we hold that they were leases. Similarly, a Tennessee court of appeals recently held that providing portable toilets to customers constituted a lease of toilets. Essary v. Huddleston, WL 384985 (Tenn. App. 1995).

The chancellor ruled that Best was not in the business of leasing portable toilets, but rather was a public utility providing sewer services, which are exempt from the gross-receipts tax. The Director also assigns this part of the ruling as error. The assignment has merit for two reasons.

First, sanitation services are provided for the portable toilets leased by Best. Manifestly, the leasing of the portable toilets is an integral part of Best’s business. Best offered testimony that it would service toilets owned by another company, but it did not deny that it primarily serviced its own toilets. Thus, it cannot be said that Best was solely providing sewer services.

Second, it is undisputed that part of the fixed charge is related to the cost of the toilets. Best estimated this to be approximately five percent of the charge. If the charges for the toilets and services had been separately stated, the amount charged for services would not have been taxable. However, since the nontaxable service was included as part of the total consideration received from the rental of the portable toilets, the charge for services constitutes part of the gross proceeds, and the entire proceeds are subject to taxation.

In Ferguson v. Cook, 215 Ark. 373, 220 S.W.2d 808 (1949), a monument dealer sought to deduct the cost of labor necessary to make and install monuments from the sales price. We held that the entire sales price was subject to the tax because the statute that is now codified as Ark. Code Ann. § 26-52-103, states in pertinent part:

“Gross receipts” or “gross proceeds” means the total amount of consideration for the sale of tangible personal property and such services as are herein specifically provided for, whether the consideration is in money or otherwise, without any deduction on account of the cost of the properties sold, labor service performed, interest paid, losses, or any expenses whatever.

Ark. Code Ann. § 26-52-103(a)(4) (emphasis added). We concluded that “where one sells an article in the preparation of which for sale he has expended labor, which adds to its value and was necessary to make it salable, he must pay the sales tax on the price received, without deduction for the value of the labor performed.” Ferguson v. Cook, 215 Ark. at 376, 220 S.W.2d at 810 (emphasis added).

In Larey v. Dungan-Allen, 244 Ark. 908, 428 S.W.2d 71 (1968), the appellee taxpayer was a corporation engaged in commercial photography. Id. at 908, 428 S.W.2d at 72. The Director sought to tax it under the section of the act that levies the tax under “photography of all kinds.” Id. The taxpayer argued that eighty-five percent of its revenue was recompense for services because in the course of its business, its employees “frequently [had] long consultations with their patrons about matters such as advertising layouts, promotional planning, material for magazine publication, and other activities going beyond the mere taking and developing of pictures.” Id. at 909, 428 S.W.2d at 72. One of the principal stockholders testified that taking pictures was “the least of what they [did].” Id. The stockholders offered testimony that for a day’s work an advertising agency might be charged $200 for photographic services and $10 for five different pictures. Id. at 910, 428 S.W.2d at 72. The taxpayer argued that “the incidence of the gross-receipts tax should be similarly divided between nontaxable revenue from professional services and taxable revenue from the taking of pictures.” Id. We stated that we had previously rejected such an argument in Ferguson v. Cook, 215 Ark. 373, 220 S.W.2d 808 (1949). We concluded by stating that while the tax would not apply in instances where the taxpayers “were paid for services only, such as consultations, without any photographs being involved . . . the principle cannot be extended to the point of separating the sale of the photograph from the exercise of that skill ‘which adds to its value and was necessary to make it salable.’ ” Larey v. Dungan-Allen, 244 Ark. at 911, 428 S.W.2d at 73 (citation omitted).

In Ragland v. Miller Trane Service Agency, 274 Ark. 227, 623 S.W.2d 520 (1981), the taxpayer was in the business of inspecting, servicing, and repairing commercial heating and cooling devices and had two different types of contracts. Id. at 228, 623 S.W.2d at 521. The first was an “inspection only” contract, and the Director agreed it was nontaxable. Id. at 229, 623 S.W.2d at 521. The second contract provided for the taxpayer to maintain and repair the units, in addition to inspecting them, a minimum of three times a year. Id. The trial court found that the full-coverage contract could be broken down into component parts for the purposes of collecting the gross receipts tax. In reversing, we stated that, under the rationale of our established case law, the inspection services enhanced the value of the full coverage contract, and increased the marketability of the taxable services; therefore, the entire transaction was taxable. Id. at 231, 623 S.W.2d at 522.

Most recently, in Leathers v. A & B Dirt Movers, Inc., 311 Ark. 320, 844 S.W.2d 314 (1992), the taxpayer was a dirt hauler who contended that it provided the nontaxable service of hauling free dirt. Id. at 322, 844 S.W.2d at 315. The chancellor ruled that the transactions were not taxable. Id. We reversed because the taxpayer’s records made the transaction appear as though it involved a sale of dirt, even though the record was devoid of any direct testimony that proved the sale of dirt. Id. at 330, 844 S.W.2d at 319. We held that Ark. Code Ann. § 26-18-506(a) & (d) (1992) requires a taxpayer to keep adequate tax records, and when a taxpayer fails to maintain the required records, the Director may make an estimated assessment of tax due, as “the burden of proof of refuting this estimated assessment is upon the taxpayer.” Id. at 325, 844 S.W.2d at 316-17; Ark. Code Ann. § 26-1 ¿-506(d). We concluded that the transactions were taxable, because they involved the transfer and possession of tangible personal property.

In summary, just as in Leathers v. A & B Dirt Movers, Inc., the taxpayer’s records show the transactions were leases. The transactions were the type of mixed transactions that are fully taxable under Larey v. Dungan-Allen and its progeny. Finally, because Best did not maintain the required records, the burden of refuting the assessment was upon the taxpayer, Leathers v. A & B Dirt Movers, Inc., 311 Ark. at 325, 844 S.W.2d at 316-17, and Best did not meet that burden.

Best urges us to adopt a “dominant-use test” for this case. To do so would require us to reject the reasoning of the above cases, and we decline to do so.

The chancellor ruled that Best was entitled to a refund on the additional ground that it provided sewer and sanitation services in the furtherance of public health, and those services are nontaxable. The Director assigns the ruling as error.

Arkansas Code Annotated § 26-52-301 levies an excise tax upon utilities or public service companies “except transportation services, sewer services, and sanitation or garbage collection services.” Id. § 26-52-301(2). In short, utilities or other public services are subject to the tax, except for their transportation services, sewer services, and sanitation services. To prove that it comes within the exemption, Best must have proved that it was a utility or public service company engaged in sewer services.

In Ragland v. Meadowbrook Country Club, 300 Ark. 164, 777 S.W.2d 852 (1989), we said, “The difference between an exclusion and an exemption is that an exemption pertains to sales that would be covered were they not specifically exempted from the Act, while exclusion is simply not included in the first place.” Id. at 168, 777 S.W.2d at 854. Stated differently, an exemption “presupposes a liability, and is properly applied only to a grant of immunity to persons or property which otherwise would have been liable to assessment, and exists only by virtue of constitutional or statutory provisions.” 84 C.J.S. Taxation § 215 at 411 (1954). A taxpayer must prove entitlement to an exemption beyond a reasonable doubt. City of Fayetteville v. Phillips, 320 Ark. 540, 899 S.W.2d 57 (1995). Best failed to prove beyond a reasonable doubt that it was exempt from taxation as a utility or public service.

Best did not prove that it was regulated by the Arkansas Public Service Commission or the Arkansas Transportation Commission, that a city, state board, or commission had authorized it to service a territory, or that its rates were regulated by an official agency. In short, it failed to prove that it was a public utility as contemplated by Ark. Code Ann. § 23-1-101.

In Quinn-Moore v. Lambert, 272 Ark. 324, 614 S.W.2d 230 (1981), we said that a public utility is entitled to a guaranteed but limited return on its investment, and it cannot pick and choose whom it will serve, while a private entrepreneurship is entitled to pick and choose whom it will serve, but is not entitled to a guaranteed return on its investment. Id. at 328, 614 S.W.2d at 232. Indeed, the term “public utility” implies a public use and service to the public, and the principal determinative characteristic of a public utility is service to, or a readiness to serve, an indefinite public that has a legal right to demand and receive its services or commodities. See 64 Am. Jur. 2d Public Utilities § 1 at 549 (1972). A public utility holds itself out to the public generally and may not refuse any legitimate demand for service, while a private business independently determines who it will serve. The record is devoid of any evidence that Best is required to serve any area, or indefinite public, or that it is entitled to a return on its investment.

In addition, the lease and service of a toilet does not fit within the definition of a public utility sewer service. Section 8-4-102 of the Arkansas Code Annotated defines “sewage” and “sewer system” as follows:

(1) “Sewage” means the water-carried waste products from residences, public buildings, institutions, or other buildings, including the excrementitious or other discharge from bodies of humans or animals, together with such groundwater infiltration and surface water as may be present.
(5) “Sewer system” means pipelines or conduits, pumping stations, and force mains, and all other constructions, devices, and appliances appurtenant thereto, which are used for conducting sewage or industrial water or other wastes to a point of disposal.

Ark. Code Ann. § 8-4-102(1) & (5) (Repl. 1993). In summary, Best failed to prove beyond a reasonable doubt that it was exempt as a public sewer service.

We need not address the Director’s final point of appeal. Reversed and dismissed.

Newbern and Corbin, JJ., dissent.

David Newbern, Justice,

dissenting. In Ferguson v. Cook, 215 Ark. 373, 220 S.W.2d 808 (1949), a dealer in cemetery monuments reported to the tax authority only 50% of the gross proceeds of each sale because he attributed the other 50% to labor expended in the erection of the monuments. The case was tried on stipulations, and there was no evidence as to what might actually have been attributable to labor expended in the erection of monuments or in the creation of the monuments, engraving, etc. In that circumstance, we held the entire amounts taxable. The result in the Ferguson case also seems contrary to a statement of general principle written by Justice Frank G. Smith in that opinion, a statement with which I totally agree, as follows:

This language appears to mean, and we so construe it, that where one sells an article in the preparation of which for sale he has expended labor, which adds to its value and was necessary to make it salable, he must pay the sales tax on the price received, without deduction for the value of the labor performed.

Ark. Code Ann. § 26-52-103(a)(2)(E) (Supp. 1995) provides that “ ‘sale’ shall not include the furnishing or rendering of services, except as otherwise provided in this section.” Section 26-52-103(a)(4), in pertinent part provides:

“Gross receipts” or “gross proceeds” means the total amount of consideration for the sale of tangible personal property and such services are herein specifically provided for, whether the consideration is in money or otherwise, without deduction on account of the cost of the properties sold, labor services performed, interest paid, losses or any expenses whatsoever.

The confusion caused by the outset provision that a “sale” does not include services followed by a definition of “gross proceeds” which includes “labor services performed” has resulted in uncertainty and in conflicting decisions. For example, Ragland v. Meadowbrook Country Club, 300 Ark. 164, 777 S.W.2d 852 (1989), we held that the sale of food and beverages did not include the 15% “gratuity” included in the price to the customer for service. We distinguished Belvedere Sand & Gravel Co. v. Heath, 259 Ark. 767, 536 S.W.2d 312 (1976), in which we held taxable the total amount charged to customers by a sand and gravel company for its products, including the labor supplied to the taxpayer company by a contractor for delivery to its customer. Our distinction between the cases seemed to be that the “gratuity” in the Ragland case was added to the cost of the food and beverages after the sale whereas the delivery cost of the sand or gravel in the Belvedere case was somehow more integral to the sale. That is a distinction without a difference.

We are on the wrong track, and we have been on it since the decision in the Ferguson case. It is obvious to me that the General Assembly intended that any service which goes into the creation of an item for sale and indeed adds to its value should be taxable. In view, however, of the general statutory definition of “sale,” which excludes services, services ancillary to a sale should not be included. Such an interpretation would be consistent with what Justice Smith said in the Ferguson case, albeit probably not consistent with the result reached there.

The unreasonableness of the interpretation given by the majority opinion, and its portent for continued uncertainty in this area, is underlined by the parties’ apparent agreement that we will allow a taxpayer to avoid the tax on such services if they are “separately stated” in the bill to the customer. The majority opinion states, “Since the non-taxable service was included as part of the total consideration received from the rental of the portable toilets, the charge for services constitutes part of the gross proceeds, and the entire proceeds are subject to taxation.” That suggests a merchant can avoid taxation on services if they are billed separately from the charge for the item sold, regardless whether the services helped create the value of the item or were ancillary to the sale. Surely that cannot be the intent of the General Assembly. If services ancillary to a sale are to be taxed, the General Assembly could clearly say so. In the absence of such statutory language we should not permit the gross receipts tax on sales to be applied to such services.

I respectfully dissent.

Corbin, J., joins in this dissent.


author: David Newbern, Justice.

text:
    Howard BUTLER v. Herman COMIC
    95-215
    918 S.W.2d 697
    Supreme Court of Arkansas
    Opinion delivered March 18, 1996

      Ralph Patterson, for appellant.

      Herman Comic, pro se.
   David Newbern, Justice.

This is an appeal from a judgment in a deceit action. Howard Butler, the appellant, brought the action against the appellee, Herman Comic, who is a notary public. Mr. Butler claimed he had suffered a loss because of a deed acknowledgment falsely notarized by Mr. Comic. Judgment was rendered in favor of Mr. Comic because there was no showing that Mr. Butler had relied on the notarization by Mr. Comic. We affirm the judgment.

The undisputed facts are as follows. Two members of the Mackintrush family, Johnny Mackintrush and his sister, presented a deed to be notarized. The quitclaim deed purported to be by ten brothers and sisters in favor of their brother “Johnny Lee Mackintrush.” Mr. Comic saw only the grantor “Johnny Mackintrush” sign the deed and took the word of Johnny Mackintrush and his sister that all the signatures were valid. He notarized the instrument, stating in his certificate that all the purported grantors were known to him to be the persons whose names were subscribed to the deed and that they “personally appeared” before him to acknowledge their signatures.

Thereafter, Johnny Lee Mackintrush sold the property by warranty deed to Mr. Butler. Mr. Butler purchased a homeowner’s policy from American General Property Insurance Company (American General). A fire loss occurred, and Mr. Butler claimed against the policy seeking $20,000 for loss of a dwelling, $10,000 for loss of contents, and $2,000 for living expenses.

In the course of investigating the claim, American General examined Mr. Butler’s title and concluded not all of the signatures on the deed to Johnny Lee Mackintrush were valid. American General refused to pay, and Mr. Butler joined his claim against it with his claim against Mr. Comic. American General settled by paying $5,000, apparently on the basis that one or two of the signatures might have been valid, and thus Mr. Butler owned some undivided interest in the property. The claim against American General was dismissed. Mr. Butler pursued his claim for the losses against Mr. Comic.

One of the five elements of the tort of deceit or fraud is “justifiable reliance on the representation”; another is “damage suffered as a result of the reliance.” Roach v. Concord Boat Corp., 317 Ark. 474, 880 S.W.2d 305 (1994); Wheeler Motor Co. v. Roth, 315 Ark. 318, 867 S.W.2d 446 (1993). Mr. Butler argues the Trial Court erred because the doctrine of constructive fraud supports his claim despite the lack of evidence of reliance. No such argument was made to the Trial Court, so we decline to consider it. Grandjean v. Grandjean, 315 Ark. 620, 869 S.W.2d 709 (1994); Oliver v. State, 312 Ark. 466, 851 S.W.2d 415 (1993).

Mr. Butler’s only other argument is that the Trial Court should have applied the doctrine of transferred intent. As with constructive fraud, we have no evidence that the doctrine of transferred intent was presented by Mr. Butler to the Trial Court. It was, however, mentioned in the judgment, so we will answer the argument briefly.

In Fidelity Mortgage Co. v. Cook, 307 Ark. 496, 821 S.W.2d 39 (1991), we explained that, although the doctrine of transferred intent is generally not applicable in cases of misrepresentation, when a document is intended to be directed to others in addition to the immediate recipient, or where it is customary for the document to be relied upon by third parties, the doctrine of transferred intent will be applied to support a case of misrepresentation. The element of the tort of deceit supplied by the doctrine is that of intent to deceive rather than that of reliance which the Trial Court found to be missing in this case.

Mr. Butler argues that anytime one purchases real property there is reliance on the chain of title. No authority is cited in support of that statement. Although Mr. Butler testified, he did not even mention having examined Johnny Lee Mackintrush’s title. The Trial Court did not err in finding no evidence of reliance.

Affirmed.