author: Ed. F. McFaddin, Associate Justice. Robert C. Compton, Special Associate Justice,

text:
    Allied Telephone Co. v. Ark. Public Service Comm.
    5-3540
    393 S. W. 2d 206
    Opinion delivered May 24, 1965.
    [Rehearing denied September 20,1965.]

      H. Clay Robinson and R. H. Thornton, Jr., for appellant.

      Harry E. McDermott, Jr., Donald K. King, Bill R. Holland, Hershel H. Friday, F. Marie Garlinghouse, St. Louis, Mo., for appellee.
   Ed. F. McFaddin, Associate Justice.

The important question in this case is whether the appellant should be allowed to use a machine called “Telfast” for completing long distance calls to points in Arkansas served by Southwestern Bell Telephone Company. A minor question relates to an injunction.

The appellant, Allied Telephone Company (hereinafter called “Allied”), is an Arkansas corporation owning and operating telephone exchanges in the cities of Sheridan and Fordyce, as well as in several other cities in Arkansas. Southwestern Bell Telephone Company (hereinafter called “Southwestern”) is a corporation (being a subsidiary or affiliate of American Telephone and Telegraph Company) operating telephone exchanges and long distance lines in Arkansas and several other states. The Bell system of American Telephone and Telegraph Company (of which Southwestern is a part) is nation-wide, whereas Allied is one of several so-called independent companies operating in Arkansas.

In order that the subscribers of the independent telephone companies may complete long distance calls to points on the Southwestern system throughout Arkansas, and in order that Southwestern subscribers in other Arkansas cities may complete long distance calls to subscribers served by independent companies, there exists a so-called standard “Traffic Agreement” between Southwestern and the various independent companies specifying how long distance calls will be handled over the long distance lines of Southwestern throughout the State. Thus long distance calls are available from any point in the State to any telephone exchange having-such Traffic Agreement with Southwestern. The present Traffic Agreement between Allied and Southwestern was signed on July 21, 1961, and was for one year and then automatically renewable until notice of termination should be given by, either party. Two of the provisions in the Traffic Agreement are:

“V. TOLL OPERATING. The toll operating-(tick-ting and timing) required hereunder shall be performed as may be agreed upon from time to time between the parties.
“VI. METHODS AND PRACTICES. With respect to all matters covered by this Agreement, each company will adopt and comply Avith standard Bell System operating methods and practices and Avill observe the rules and regulations of the lawfully established tariffs. Each company -will, upon request, furnish to the other such information relating- to the interchanged business covered herein as may reasonably be required.”

There are at least three methods now in use for making and completing long distance calls:

(1) Call the operator at a local exchange and place the long distance call to the place, number, and/or person desired; and the operator handles interchange and communications, and the person placing the call has only to wait until his desired number or person is reached. This is called the “Operator Method.”

(2) Use the method of “Distance Direct Dialing,” whereby the person making a station to station call dials an area code, exchange number, and the number of the telephone at the destination desired. This is called the “DDD Method.”

(3) Use the method known as “Person to Person Called Special” whereby the person making the long distance call may dial direct to the desired city but have an operator come on the line to control completion of the call and the billing of the charges either to the person called or to a credit card or to a third party number. This method is called “PPCS.”

The foregoing three methods are now in operation in various exchanges; but the problem involved in this litigation arises because of a fourth method which Mr. Hugh E. Wilbourn, President of Allied, has invented and desires to use at the Allied telephone exchange in Sheridan, Arkansas. This fourth method for handling of long distance calls is called “Telephone Fully Automatic Switching and Ticketing,” and is herein referred to as “Telfast.” Below we copy the description of “Telfast” as contained in Allied’s brief in this Court:

‘ ‘ Tape recording equipment is added to the existing automatic ticketing machines of a PPCS system. Station to station prepaid calls work like DDD and PPCS. The difference comes in sending other types of toll calls. To operate the equipment, the subscriber dials three digits: the first activates the machine, the second indicates the type of call that he wishes to make, and the third designates which station on a party line is making the call. Then the subscriber dials the area code (if the call is to another state), followed by seven digits of the desired number. Both the calling and called number are recorded in a computer, and the call is stored in the machine. At this point, the subscriber is connected with the tape recorder and a periodic beep tone commences. The tape recording tells the caller what type of call he has dialed and gives him instructions (e.g. for a credit card call, the recording might state, ‘when you hear the bell, give your credit card number’). After a certain period of time, up to twenty (20) seconds, the machine rings the called number. When a party answers at the called number, the subscriber, in a person to person call, asks for the desired person, or in a collect call, asks if the party will accept the charges. During this period the tape recorder is running to make sure that the correct party has reached the phone or that the charges will be accepted. When the desired party is reached, or charges are accepted, the calling party dials the digit 2 which disconnects the tape recorder (including the beep tone), and the call is timed and ticketed automatically. If, for any reason, a subscriber does not wish to use the Telfast equipment, e.g. if he wants time and charges, he may dial the digit ‘O’, get the operator, and proceed to complete his call with operator assistance.”

There is no Telfast machine now in use in any telephone exchange in the United States., Mr. Wilbourn’s invention of Telfast has been patented during the course of this litigation and the Kellogg Division of the International Telephone Telegraph Company is ready to manufacture and install a Telfast machine in Allied’s exchange in Sheridan, Arkansas.

With the above background matters, we come to the present litigation. On June 14, 1963, Southwestern filed before the Arkansas Public Service Commission a complaint against Allied regarding Telfast. The complaint alleged the traffic agreement between Allied and Southwestern; that Southwestern had been notified of Allied’s intention to install a Telfast machine in the Sheridan exchange; “that the use of such equipment would create numerous problems and have much a detrimental effect on long distance telephone service that Southwestern could not agree to Allied’s proposal.” The complaint also alleged:

“The use of the aforesaid ticketing equipment in the mailing of long distance calls will conflict with Bell System standard practices and, therefore, violate the parties’ Traffic Agreement. It will also cause damage, expense and financial loss to Southwestern, will adversely affect the quality of toll service furnished jointly by Allied and Southwestern, will lead to toll service abuses and will result in dissatisfaction, confusion and complaints on the part of Southwestern’s customers and other telephone users in the State of Arkansas. The use of such equipment would unreasonably impair the ability of Southwestern and Allied to furnish reasonably safe, adequate and sufficient service to the telephone users in Arkansas and would be contrary to the public interest. ’ ’

The complaint detailed a number of results — all claimed to be detrimental to the long distance service— that it was claimed would flow from the use of Telfast by Allied in its Sheridan exchange; and the prayer of the complaint was that the Commission order Allied to refrain from the installation or use of Telfast. Allied resisted Southwestern’s complaint, insisting that Allied had a managerial right to use the new and improved Telfast in its exchange; prayed that Southwestern’s complaint be dismissed, and said:

“Allied is desirous of mailing available to its subscribers of all classes the best possible service which becomes available through technological advances in the science of telephony. Allied admits that one feature of the system being installed in Sheridan is technologically new, and like all new equipment can only be tested out in practice, as have been all of the technological advancements made in telephony; . . . ” Also Allied said:
“Allied proposes that a hearing on the merits of this controversy be delayed for six (6) months, during which time the. Sheridan System can be given a trial run. During this period of time all dialings invoking the unique features of the system will be monitored by a human operator in Fordyce so that no possible fault in the system will result in harm to the subscribers or to Southwestern. Allied considers that the facts which will become available through actual experience are necessary for a proper determination of all issues of customer service, and that actual experience in the operation will resolve all controversy with Southwestern with regard thereto.”

Southwestern resisted the six months abeyance plea of Allied; the Arkansas Telephone Association and the City of Sheridan intervened on behalf of Allied; and the Commission proceeded to a full hearing on all issues. Various witnesses testified and a record of more than 700 pages is before us. On December 12, 1963, the Commission entered its order refusing to hold the case in abeyance for six months, ordering Allied to refrain from installing the Telfast machine in its Sheridan exchange for use in any calls over Southwestern’s long distance lines, but permitting Allied to use the Telfast machine on its own lines.

There was a Majority Opinion delivered by two of the Commissioners and a Dissenting Opinion by one Commissioner; and the Opinions demonstrate the care with which the Commission considered this cause. Prom the order of the Commission adverse to it, Allied proceeded in due channels through the Circuit Court, and the cause is now here before us and Allied has made three points, to-wit:

“I. The Commission exceeded its authority in prohibiting installation of adequate service equipment because of ‘degradation.’
“II. The Commission exceeded its authority in prohibiting installation of Telfast because of an alleged breach of contract.
‘ ‘ III. The order is erroneous because it is arbitrary and capricious.”

We will'use our own topic headings in disposing of the issues.

I. Use Of Telfast On Long Distance Galls Over The Southwestern Lines.

The Commission found:

“The Allied proposal would degrade the quality of long distance service, would breach the contract between Bell and Allied; and would, therefore, be adverse to the public interest.”

Based on the above finding the Commission ordered:

“That Allied be, and it is hereby, ordered to cease and desist from installing the proposed system at Sheridan for the purpose of connecting it to Bell’s facilities.”

It is well to state again the extent of our review in a case like this one. In Barnes v. Ark. Public Service Comm., 235 Ark. 683, 362 S. W. 2d 1, Mr. Justice Bohlinger quoted from an earlier case:

“ ‘It is well settled by our decisions that the Commission is clothed with broad legislative and administrative powers and that a review of its findings and order by either the circuit court or this court, on appeal, is considerably limited in its extent. Ark. Stats., See. 73-233 (d) provides that such review shall not be extended further than to determine whether the Commission has regularly pursued its authority, including a determination of whether the order under review violated any right of the complainant under the U. S. or State Constitutions. However this does not mean that the courts cannot inquire beyond mere formality when other provisions of the statute are considered along with Sec. 73-233, supra. In this connection we have repeatedly held that if the Commission’s order is supported by substantial evidence, free from fraud, and not arbitrary, it is the duty of courts to permit it to stand, even though the courts might disagree with the wisdom of the order. Department of Public Utilities v. Ark.-La. Gas Co., 200 Ark. 983, 142 S. W. 2d 213; City of Fort Smith v. Southwestern Bell Telephone Co., 220 Ark. 70, 247 S. W. 2d 474; Arkansas Power & Light Co. v. Arkansas Public Service Commission, 226 Ark. 225, 289 S. W. 2d 668.’ ”

Witnesses for Southwestern testified that the use of ■ Telfast by Allied at its Sheridan exchange would violate the provisions in the Traffic Agreement, as heretofore copied; would reduce revenue to Southwestern because of the holding of circuits in attempting to complete calls; and would degrade the quality of long distance service in the confusion and slowing of service. This latter was explained by these features:

(a) The person placing the call would be required to dial an increased number of digits;

(b) the presence of the “beep tone” would be an innovation;

(c) the person placing the call would directly inquire if the person called would accept the collect call, and this ' might be in language much longer than the regular operator would use; and

(d) then a new digit would be dialed or the line would be automatically disconnected after an interval.

A reference back to the description- of the Telfast Method clearly shows that the foregoing factors are present. Also it was shown that the telephone industry has spent large amounts of money and considerable time to educate the telephone using public as to Distance Direct Dialing; that PPCS has not yet gone into full service ; and that larger amounts of money and much more time would be required before the telephone using public could efficiently use the Telfast system, which is as great a departure from the DDD as that method was from the Operator Method. Even the PPCS is not yet in general use, and Telfast contains additional factors not found in PPCS. Furthermore, witnesses testified that the use of Telfast by Allied in its Sheridan exchange would necessitate the expenditure by Southwestern of several thousand dollars in its Little Eock exchange. There were other matters in evidence, but we have detailed enough to show that the Commission’s findings meet the tests set by our cases.

Allied says that the finding that Telfast would “degrade” long distance service is not the correct test. The applicable statute (Ark. Stat. Ann. § 73-218 [Eepl. 1957]) gives the Public Service Commission the power to “Detemine the reasonable, safe, adequate, sufficient service to be observed, furnished, enforced, or employed by any public utility, and to fix the same by its order, rule, or regulation.” The record before us shows that the present long distance service, without Telfast, complies with the requirements of the quoted statute. When the Commission found that the use of Telfast to complete long distance calls over Southwestern’s lines would “degrade” the service, such was tantamount to a finding that the use of Telfast for such long distance calls would result in service that would be less than “reasonable, safe, adequate, sufficient,” because the word “degrade” means (according to Webster) “to lower from a superior to an inferior level,” or “to lower or impair in respect to some physical property,” or “to damage.”

We conclude that the order of the Public Service Commission — that Allied cease and desist from installing Telfast System for the purpose of connecting with Southwestern’s long distance lines — is sustained by the. Commission’s findings, which are likewise sustained by the evidence, and should be affirmed.

II. Refusal To Allow The Six Months Trial- Period Sought By Allied. Allied moved that the Commission temporarily postpone any hearing and decision and allow Allied a period of six months to install the Telfast machine in the Sheridan exchange for use on all long distance calls over Southwestern lines. Allied claimed that the Commission would be able to determine from actual experience the effect of Telfast, and offered to indemnify Southwestern for any loss or expense caused by such six months trial period if the Commission, on final hearing, found against Telfast.

The Commission postponed decision on this six months test period request until the final hearing in this cause, and then disallowed such trial period on Southwestern’s long distance calls. The order of the Commission on this point is:

‘ ‘ That the motion of Allied to hold these proceedings in abeyance until the completion of a trial of the equipment and procedure, during a controlled test period, be, and it is hereby, overruled.”

Allied insists that the Commission allowed Allied to use the Telfast machine on long distance calls on its own lines, thereby — -as Allied claims- — finding that Tel-fast was not “degrading” Allied’s efficiency. Why then —insists Allied — should Telfast not be tried on Southwestern’s system? The answer seems clear to us: one of the point made by Southwestern against the immediate use of Telfast on Southwestern’s long distance lines was the amount of money and time that would be required to educate the telephone using public as to the new procedure required for Telfast. If Allied wants to undertake this educational effort among its own subscribers in its limited territory, it is free to do so; but the Commission found that it was not feasible to have this done all over the State at this time. The City of Sheridan intervened to support Allied, so evidently the City of Sheridan feels that the educational program on Telfast will not be too difficult for calls in that area; but just as “one swallow does not make the spring,” so one Tel-fast machine in Arkansas does not require Southwestern to undertake a six months educational campaign for long distance telephone calls originating in Sheridan.

Progress is sometimes made by small independents, rather than by large corporations, and-we sincerely hope that Telfast will prove to be a great forward advance in long distance telephone service. The mere fact that Telfast is something new that Southwestern had not installed and the like of which the Bell Laboratories have never been able to 'perfect, is no justification for the objection of Southwestern to the use of Telfast by Allied on its own lines; but the amount of educational campaign and advertising that Southwestern and other companies would have to conduct over their entire systems in Arkansas to explain the use of Telfast is a good reason for the action of the Commission in denying Allied’s request for a six months trial period. The order refusing the use of Telfast on Southwestern long distance calls is not res judicata. After Allied has used Telfast for a time for long distance calls on its own lines, and thereby demonstrated the efficiency of Telfast, Allied may see fit to ask the Commission for a new hearing as regards Telfast on Southwestern lines long distance calls. In such event, the entire issue will be tried anew without any plea of res judicata being available to Southwestern.

III. The Injunction To Prevent Allied From Rerouting Long Distance Calls. This issue is largely unrelated to the Telfast issue, but is in the same case. The Traffic Agreement signed by Allied - and Southwestern on July 21, 1961, and previously discussed, provided that' Allied’s Sheridan exchange would be interconnected with the Southwestern facilities at Sheridan and served by Southwestern’s Pine Bluff, Arkansas Toll Center. The complaint filed by Southwestern in this case alleged the foregoing Traffic Agreement and alleged that Allied was proposing to reroute all outgoing Sheridan long-distance calls through Allied’s Fordyce, Arkansas Toll Center, and proposed to use Southwestern’s Sheridan-Pine Bluff facilities for incoming traffic only. Southwestern prayed that Allied be enjoined from such rerouting of its outgoing long distance calls, and claimed that such rerouting would be a violation of the Traffic Agreement between Southwestern and Allied. The Commission made this order:

“That Allied be, and it is hereby, ordered to cease and desist from rerouting- Sheridan Long- Distance traffic through Fordyce, and it is further ordered to maintain the present routing of such traffic during the existence of the present traffic agreement between Allied and Bell.”

While this is a minor issue in the case, we nevertheless conclude that the Commission acted beyond its jurisdiction in enjoining Ailed from the breach of a contract on the broad terms as contained in the aforesaid copied order. Of course, if there had been a finding that such rerouting of calls would result in inadequate service to the telephone using public, then the Commission would have had jurisdiction, since, under Ark. Stat. Ann. § 73-218 (Repl. 1957), its duty is to see that service is adequate, etc. But there was no finding in this case that the mere rerouting of Sheridan long distance calls through Pordyce would result in any inadequate service ; and the Commission is not the proper forum to enjoin a .mere breach of contract.

In Asso. Mechanical Contractors v. Ark. La. Gas Co., 225 Ark. 424, 283 S. W. 2d 123, there was a proceeding-brought before the Arkansas Public Service Commission ■by the Associated Mechanical Contractors, seeking to enjoin and restrain Arkansas Louisiana Gas Company from selling and installing- air-conditioning- equipment in competition wth the Associated Mechanical Contractors. The Commission found that it had no jurisdiction in such a case, and we upheld the holding- of the Commission to that effect. The cited case is ruling here. The mere fact that Allied may be about to breach its contract with Southwestern does not give the Commission jurisdiction to issue an injunction in the absence of any factual finding (and there is none to that effect in this record) that such breach of the contract would impair the service to the public. Southwestern must seek its remedy in the proper judicial tribunal regarding breach of the contract, rather than before an administrative agency. So we reverse that part of the Commission’s order which enjoined Allied from rerouting Sheridan long distance traffic through Pordyce. To that extent only the order of the Commission was in error.

In all other respects the order of the Commission is affirmed.

Robinson & Holt, J. J., not participating.

Special Associate Justice Albert Graves votes for this opinion.

George Rose Smith, Johnson, J. J. and Special Associate Justice Robert Compton, dissent.

Robert C. Compton, Special Associate Justice,

(dissenting) .

. I am unable to agree with the majority opinion and therefore respectfully dissent.

This appeal questions the jurisdiction and right of the Arkansas Public Service Commission to grant the relief sought by Appellee Southwestern Bell Telephone Company prohibiting Appellant Allied Telephone Company from connecting to Bell’s facilities automatic long distance equipment conceived by Allied and called “Tel-fast.”

Á unique problem and likely a case of first impression is before us because a public utility regulatory body, upon complaint by one telephone company, has restricted another telephone company as to its proposed use of equipment chosen by management. Certainly the effects of such action by such a regulatory body, if lawful, will be far reaching.

Allied is an Arkansas corporation owning and operating telephone exchanges in towns and cities within the State, including Sheridan and Fordyce. Bell is a wholly owned subsidiary of American Telephone & Telegraph Company, which owns the lines carrying most of the long distance calls in the United States. Allied’s exchanges are interconnected with Bell’s lines.

Bell and Allied operate under contract, cancelable by either party on sixty-days’ notice, the most recent being dated March 25, 1963. This contract sets forth the agreement between the two companies regarding Allied’s connections with BelPs lines, establishes points of connection, operating methods and procedures for the settlement of revenues derived from long distance calls.

In recent years Bell has developed and put into wide use “Direct Distance Dialing” (DDD) by which the customer dials a distant number without the assistance of an operator, the calling and the called number and the time length of the call being recorded in a computer. Another recent automation of long distance calls is referred to as “PPCS” meaning “person-to-person collect and special.” "With this equipment, a customer, in addition to directly dialing a distant number, may,- in part, by dialing appropriate digits to activate the machine, call person-to-person, collect, etc., but such call is completed with some assistance from an operator.

In March, 1961, Allied, over the objections of Bell, installed such a PPCS system at its toll center in Fordyce; This was the first installation of this type of equipment in the United States. Allied then programmed the installation of another PPCS system in Sheridan and on January 26, 1962, the Arkansas Public Service Commission granted Allied a Certificate of Convenience and Necessity for the Sheridan PPCS system.

Subsequently, H. it. Wilburn, Jr., President and General Manager of Allied, himself conceived an improvement on the PPCS machine whereby a customer, if desiring to do so, could dial person-to-person, etc., entirely automatically and without any assistance from an operator. Allied presented its plans for such automatic machinery to the Kellogg Division of International Telephone and Telegraph Company and that company agreed to build the machine for Allied, the device being called “Telfast”.

In May, 1962, Mr. Wilburn met with Bell personnel to explain the system to them. After a series of meetings, engineering studies and exchange of letters, Bell, by letter dated April 23, 1963, advised Allied that it would not agree to the connection with its lines of the Telfast system at Sheridan. Allied then informed Bell that it would install Telfast at Sheridan and instead of routing its long distance traffic through Bell’s lines to Pine Bluff, as provided by the contract, it would route Sheridan long distance traffic over its own lines to Fordyce, where Allied’s first PPCS system had been installed in 1961.

On June 14, 1963, Bell filed an action before the Arkansas Public Service Commission praying that Allied be ordered to cease and desist from installing the Telfast system at Sheridan because (1) by installing the equipment Allied was breaching its contract with Bell, and (2) the installation of the equipment would be detrimental to the nationwide telephone system. Allied filed an answer and motion denying the Commission’s jurisdiction to grant the relief sought and moved that any action be held in abeyance for six months so that the Telfast system could be subjected to monitored testing by the Public Service Commission.

Bell objected to Allied’s motion to hold in abeyance. The City of Sheridan, Arkansas, intervened in behalf of allowing Allied to install Telfast for service to Sheridan citizens. The Arkansas Telephone Association intervened and asserted that any telephone company, should have the right to test new f acilities.

The Commission refused to hold Bell’s complaint in abeyance and the matter proceeded to hearing. On December 12, 1963, by a two-to-one decision, the Commission entered its findings, conclusions and order. The findings of the Commission were based upon the assumption that the proposed Allied equipment will work properly from a mechanical standpoint. The Commission nevertheless concluded that it had jurisdiction over the parties and the subject matter and that “the Allied proposal would degrade the quality of long distance service, would breach the contract between Bell and Allied; and would, therefore, be adverse to the public interest.” The Commission then ordered Allied to cease and desist from installing the proposed system at Sheridan for the purposes of connecting it to Bell’s facilities and to cease and desist from re-routing Sheridan long distance traffic through Fordyce and to maintain the present routing pursuant to the agreement between Allied and Bell.

Following the filing of a vigorous and well-written dissent, the Commission entered a clarifying order stating that the order only prohibits Allied from connecting Telfast to Bell’s facilities and specifically stated that such order does not interfere with Allied’s right to test equipment on its own system.

Allied appealed to the Pulaski Circuit Court, which affirmed the Commission’s order. Allied now appeals to this Court and for reversal of the Commission’s order asserts:

(1) “The Commission exceeded its authority in prohibiting installation of automatic service equipment because of ‘degradation’ ”;

(2) “The Commission exceeded its authority in prohibiting installation of Telfast because of an alleged breach of contract;”

(3) “The order is erroneous because it is arbitrary and capricious.”

Bell and the Public Service Commission have filled Appellees’ Briefs in support of the Commission’s actions. As expressed in oral argument Bell takes the position that this is an attempt by a flea on the end of the tail of a dog to wag the dog, inasmuch as Allied’s proposal would degrade the existing telephone system by destroying uniformity.

For the purposes of this opinion these points will be discussed under the headings of Authority and Arbitrariness.

AUTHOBITY

Although one of the two conclusions, reached by the Commission, is that the installation of Telfast “would breach the contract between Bell and Allied”, there is no mention of the contract in the eleven findings of the Commission.

However, the facts concerning this contract are not in controversy. It was entered into by the parties on March 25, 1962, approximately nine months after Allied had written Bell confirming an earlier conference at which the installation of Telfast was discussed, and shortly after a meeting discussing the installation in greater detail. Thus at the time this contract luas made Bell had full knowledge of Allied’s intention to install Telfast at Sheridan yet there are no provisions in that contract prohibiting such equipment.

Thus it is clear that any anticipatory breach of the contract could not be due to the proposed use of Telfast but due to Allied’s plans to route its Sheridan long distance traffic to Fordyce rather than Pine Bluff, but this proposed change in routing was only made when Bell refused to permit the connection at Sheridan.

In any event, the question of who breached the contract and the consequenses thereof is a question for a Court of Law and certainly not a determination that can properly be made by this state regulatory body.

The governmental powers of this state are divided among the legislative, executive and judicial, no one of which may exercise any powers belonging to one of the others. Constitution of 1874, Article 4. The judicial power of the state is vested in certain specified courts and this list does not include the public service commission. Ibid, Article 7, Section 1.

The Commission is an administrative agency and has no powers not specifically granted by the Legislature for the purpose of regulating public utilities. It is not a court and cannot exercise judicial powers. City of Ft. Smith v. Department of Public Utiliites, 195 Ark. 513, 113 S. W. 2d 100.

This is not to say that the Commission could not have authority over any controversy which also involved a breach of contract. An act by a public utility in breach of a contract with another utility could also be in violation of the utility’s duty to the public within the statutory authority of the Commission. However, in such event, the authority of the Commission would exist because the act would violate the statutory regulation governing the activity of the utility, not because of the breech of the contract.

That part of the Commission’s order based upon its conclusion of “breach of contract” could well fail because there are no findings of fact to support that conclusion, but must fail because the Commission has no authority to decide such matter.

Having eliminated the Commission’s authority to prohibit Allied’s installation of Telfast because of any supposed breach of contract, did the Commission have authority to prohibit the installation because of ‘ ‘ degradation”? If so, one utility has successfully used the police power of the state to prohibit the use of particular machinery by another utility.

Since Bell’s complaint was based only upon breach of contract and the alleged detrimental effect on the nationwide telephone system, that part of the Commission’s order concluding’ that the Allied proposal would ‘ ‘ degrade the quality of long distance service” grants Bell’s prayers on a ground not urged by Bell.

The reason for this is obvious. The Arkansas Public Service Commission has no jurisdiction over the nationwide telephone system, so the Commission could not base its order on the nationwide effect of Telfast. This is a field pre-empted by Congress and in that arena the states have no power to regulate. 47 USCA 151, Oklahoma-Arkansas Telephone Company v. Southwestern Bell Telephone Company, 45 F. 2d 995 (C.C.A., Ark. 1930), Independent Theatre Owners v. Arkansas Public Service Commission, 235 Ark. 668, 361 S. W. 2d 642.

The Commission does have authority to regulate public utilities within the state and under this authority to require utilities to furnish adequate facilities. In any utility there are different grades of service, e.g., the private telephone lines and the multiple party telephone lines. If the grade of service becomes so low that the service becomes inadequate, Commissions have authority to require that adequate service be provided the public by the utility.

Here the Commission’s order was not based on a conclusion that the installation of Telfast would result in inadequate service to the people of Arkansas, but rather that it would ‘ ‘ degrade the quality of long distance service.” Yet, by its clarifying order, the Commission specifically stated that its order does not interfere with Allied’s right to test this equipment within its own system.

In its tenth finding the Commission stated that it proceeded on the assumption that the equipment will -work properly from a mechanical standpoint. In its clarifying order it expressly permitted Allied to test the equipment within its own system, yet it enjoined Allied from connecting Telfast to Bell’s facilities. As shown, the Commission had no authority for this action on the ground of breach of contract. Likewise, the Commission’s action is not authorized on the ground of degradation of quality.

When the Commission found that Telfast will work properly from a mechanical standpoint and then permitted Allied to test Telfast within its own system and actual effect was a determination of adequacy and the Commission exceeded its authority in prohibiting the connection of Telfast to Bell’s lines.

To hold otherwise would result in the Commission’s allowing Allied to furnish inadequate service to the public within Allied’s system. The Commission is charged with the regulation of public utilities for the benefit of the consuming public. It cannot, with or without complaint, knowingly permit a utility to furnish inadequate service to any segment of the people of this state.

It cannot correctly be said that a finding that the use of Telfast would degrade service is tantamount to a finding of unreasonable, unsafe, inadequate or insufficient service. If the Commission actually found that the use of Telfast would result in inadequate service to the public it could have and would have so stated. This Court cannot re-phrase the findings of the Commission in order to sustain the Commission’s unauthorized acts.

The Commission simply does not have authority to prohibit the use of particular equipment on the basis of degradation. Otherwise, the Commission could direct the type of vehicles, poles, lines, insulators, telephone instruments and personnel based solely upon its own conception of grades of quality.

Authority to regulate does not include authority to manage. If utility equipment functions mechanically and provides adequate and reasonable service to the public, a state regulatory body has no authority to overrule management’s decision to put that equipment into use.

In Banton v. Belt Line Ry. Corp., 268 U.S. 413, 45 S. Ct. 534, 537, 69 L. Ed. 1020, it is said:

“Broad as its power to regulate, the state does not enjoy the freedom of an owner. Appellees property is held in private ownership; and, subject to reasonable regulation in the public interest, the management and right to control the business policjr of the company belong to its owners. * * *”

Certainly, there can be no question of the right of a utility to adopt new methods of furnishing service if those methods are reasonable. The Commission has no authority to substitute its judgment for the judgment .of management when the choice is between two systems which provide reasonable and adequate service. State of Missouri v. Public Service Commission of Missouri, 262 U.S. 276, 43 S. Ct. 544, 67 L. Ed. 981, 31 ALR 807.

AEBITEAEINESS

It is not often that an appellate court will construe the actions of the fact-finding administrative tribunal to be unreasonable, an abuse of authority or arbitrary and capricious. 2d Am. Jur. 2d. Administrative Law, Section 651. This Court has often stated that its judgment will not be substituted for that of the Commission and that an order of the Commission will not be disturbed if supported by substantial evidence. City of Ft. Smith v. Southwestern Bell Telephone Co., 220 Ark. 70, 247 S. W. 2d 474.

But this does not mean that this Court should summarily affirm a Commission’s act, even when based upon substantial evidence, if that act exceeds the Commission’s authority and is arbitrary and unreasonable.

The entire evidence relating to the effect of Telfast is speculation. The cost to Allied, Bell and the public; the nature and extent of confusion and customer education, and the overall effect of change in uniformity are all actually unknown. This is true because nobody really knows and cannot know until the device is adequately tested.

All Allied asks is an opportunity to submit the device to an adequate test. It has already invested a substantial sum in the development and manufacture of Telfast; its management is convinced that it will be of benefit to the public and Allied is willing to indemnify Bell against any loss by reason of the connection of Telfast to Bell’s lines. Of course, a test confined to Allied’s own small territory would in reality be no test at all.

The principle that new ideas deserve to be tested by customer acceptance or rejection is basic to the concept of a free enterprise society. The Arkansas law clearly reflects this principle in that the Commission is directed (Ark. Stats. 73-201, 218) to prescribe reasonable regulations for the examination and testing of the plant and equipment or apparatus employed by airy public utility in performing any service to its customers.

In its finding no. 7, the Commission states that “the feature of Allied’s proposal that is objected to as being contrary to the public interest is the elimination of operator control over those types of long distance calls in which, under the ‘PPCS’ system, the operator performs an essential function.” However, the record shows that if a customer so desires he may merely dial the digit “0” and place his call in the present manner. Also, Allied offers to have an operator on duty to furnish aid, if needed, in the public’s use of telfast.

The Commission, also states that uniformity is a desirable quality in the nation’s toll network, however, uniformity was not met by the Commission permitting Bell’s installation of ‘ ‘ DDD ’ ’ equipment and its prior approval of the Allied “PPCS” system at Fordyce.

The Commission prohibited Allied from connecting Telfast to Bell’s toll lines, yet permitted Allied to install Telfast within its own system which would, of course, result in non-uniformity. Each innovation in the telephone communications industry has resulted in non-uniformity until the proven contribution of that innovation and subsequent industry-wide adaption has resulted in the uniformity of its use.

Truly, necessity is the mother of invention and the building of a better mouse trap will carve a path to the door of the builder. The record in this case reveals that all parties recognize a need for fully automatic long distance equipment and, according to Bell’s own witness, a need that Bell has been studying and working toward for some years.

Allied has now developed and had manufactured a machine designed to fill that need. It asks that the device be tested for six months, that such test be monitored by the Commission and Bell and offers to hold Bell harmless for any loss it may sustain. The Commission has denied Allied permission to connect Telfast to Bell’s lines for such a test. That action effectively prevents Allied from adequately testing the device because such test confined to its own small system would be inconsequential.

A determination of the adequacy of Telfast as a fully automatic long distance device cannot be made unless and until it is put into use as a part of the telephone system. Allied has developed the device and its management has directed its installation at Sheridan. The City of Sheridan asks that Allied be permitted to install Telfast at Sheridan. The Arkansas Telephone Association asserts the right of telephone companies to test new facilities. Only Bell objects to the installation and connection with its lines. Under these facts and circumstances the action of the Commission not only exceeded its authority hut is also arbitrary and unreasonable.

This cause should be reversed and remanded to the Pulaski Circuit Court, to he remanded to Arkansas Public Service Commission with directions to permit Allied to install Telfast at Sheridan and connect it with Bell’s lines for a six-months ’ test to he monitored by the Commission and Bell, Allied first to indemnify Bell against loss by reason of the connection of Telfast to Bell’s lines.

Smith and Johnson, J. J., join in this dissent.

       We are stating the case as an intrastate case so that the Arkansas Public Service Commission’s order cannot be considered as infringing on the powers of the Federal Communications Commission (see Title 47 U.S.C.A.); but, of course, some of the calls from Allied subscribers would be to points outside Arkansas. In the brief for Southwestern it is stated that there are now more than 80 million telephones in the United States, and that there are 55 different telephone companies in Arkansas, and 2,800 different telephone companies in the entire United States.

       Back at the turn of the century the operator was called “Central.”

       For the applicable statutes in relation to the powers and duties •of the Arkansas Public Service Commission, see Ark. Stat. Ann. § 73-201 et seq. (Repl. 1957), particularly § 73-218.

       The order also contained provisions for an injunction against Allied for rerouting long distance calls; and that will be discussed in Topic III of this Opinion.

       Allied has abstracted the testimony of the witness Edward Kiee, Jr. as to the loss of circuit time through use of Telfast: “In an average Arkansas town the relationship of uncharged time to total circuit time is 2.49 minutes to 5.92 minutes. In evaluating the Sheridan system, we knew a newly trained operator is 40% less effective than an experienced operator, and assumed the Sheridan customer would equal a ■newly trained operator. Since 55% of Sheridan calls would require that the customer perform some operating functions, the penalty will be 55% X 40% or about 20% inefficiency. I will make no adjustment for the 45% of calls which did require an operator, but will become completely automatic. This 20% applied to the ratio of 2.49 to 5.92 equals 7% of the circuit time.”


source: Caselaw Access Project

author: Ed. P. MgFaddin, Associate Justice.

license: Public Domain

text:
    Wilson v. Coston
    5-3565
    390 S. W. 2d 445
    Opinion delivered May 24, 1965.
    di. C. Lewis, Jr., and William R. Mitchell for appellant.

      Wootton, Land é Mattheivs, McMillan, McMillan & Ttiruer, for appellee.
   Ed. P. MgFaddin, Associate Justice.

This case stems from a traffic mishap in the City of Hot Springs. Appellant Wilson was driving his car south on Central Avenue ; appellee Coston was driving east on Oakwood Avenue into Central Avenue; and the collision occurred in the intersection. Both parties were seriously and painfully hurt. Mr. Wilson filed action and Mr. Coston filed answer and cross complaint. Trial to a jury resulted in a verdict and judgment for Mr. Coston and Mr. Wilson brings this appeal, urging for reversal five main points and a number of minor points. We find it unnecessary to discuss all of the points, since we conclude that the judgment must be reversed.

I. Giving Of Defendant’s Instruction No. 33. It was claimed by defendant Coston that plaintiff Wilson was driving while intoxicated. The traffic mishap occurred at about 10:30 A.M.; Mr. Wilson was taken to a hospital in an ambulance; and two hours later (12:30 P.M.) there was a test made of Mr. Wilson’s blood for the presence of alcohol. At the trial it 'was shown that at the time of the test the alcohol in Mr. Wilson’s blood was 0.10 per cent. The doctor who made the test was allowed, without objection, to give it as his opinion that at 10:30 A.M. (the time of the traffic mishap) the alcohol content of Mr. Wilson’s blood would have been as much as 0.15 per cent. Over strenuous and well worded objections of Mr. Wilson’s attorneys, the Court gave the Defendant’s Instruction No. 33, which reads:

“You are instructed that under the laws of the State of Arkansas if a person is charged with driving a vehicle while under the influence of intoxicating liquor, the amount of alcohol in the person’s blood, at the time alleged as shown by chemical analysis of the person’s blood, urine, breath, or other bodily substance, shall give rise to the following presumptions: 1. If there was at that time 0.05 per cent or less by weight of alcohol in the person’s blood, urine, breath, or other bodily substance, it shall be presumed that the person was not under the influence of intoxicating liquor. 2. If there was at that time in excess of 0.05 per cent but less than 0.15 per cent by weight of alcohol in the person’s blood, urine, breath, or other bodily substance, such fact shall not give rise to any presumption that the person was or was not under the influence of intoxicating liquor, but such fact may be considered with other competent evidence in determining whether the person was under the influence of intoxicating liquor. 3. If there was at that time 0.15 per cent or more by weight of alcohol in the person’s blood, urine, breath, or other bodily substance, it shall be presumed that the person'was under the influence of intoxicating liquor. ’ ’

The foregoing instruction was framed from Ark. Stat. Ann. § 75-1031.1 (Repl. 1957) which applies to admission of blood tests in cases wherein a defendant is charged with the offense of driving while intoxicated. The original Legislative Enactment was Act No. 346 of 1957, which was captioned: “An Act relating to the admission of evidence derived from chemical analysis in cases where persons are charged with driving a motor vehicle while under the influence of intoxicating liquor.” The 1957 statute was amended by Act No. 215 of 1961, and the caption of that Act reads: “An Act to amend Section 1 of Act 346 of 1957, being § 75-1031.1 of the Arkansas Stats, relating to the admisison of evidence derived from chemical analysis in cases where persons are charged with driving a motor vehicle while under the influence of intoxicating liquor. ” It is true that proof of the violation of a criminal statute is evidence going to show negligence (Rogers v. Woods, 184 Ark. 393, 42 S. W. 2d 390; and Hammond v. Hamby, 191 Ark. 980, 87 S. W. 2d 1000); but this statute (§ 75-1031.1) is not a criminal statute, as such. Rather, it is a statute relating to admission of evidence in cases of criminal prosecution. It was error to apply this statute to a civil proceeding such as in the case at bar.

The Supreme Court of Arizona had this same question before it in Mattingly v. Eisenberg (1955), 79 Ariz. 135, 285 P. 2d 174. After quoting the Arizona statute similar to ours, the Court said:

“It will be further observed that these presumptions according to the language of the statute, apply only in criminal prosecutions for driving or being in physical control of any vehicle while under the influence of intoxicating liquor. (The use of the word ‘vehicle’ of course includes automobiles.) We therefore conclude that the above section of the statute is intended to create a rule of evidence in the prosecution of persons charged with driving an automobile while under the influence of intoxicating liquor. We therefore hold that it constituted reversible error for the trial court to extend the application of the statute to an action for damages for personal injuries. McDonald v. Hamilton B. Wills & Co., 240 N.Y. 144, 147 N.E. 616, 43 A.L.R. 956. See also 43 A.L.R. 956 with annotations. Inasmuch as the statute has no application to civil cases or to any offense other than that defined in the act itself the instruction which in effect states that the presence of certain percentages of alcohol (by weight) in the blood of defendant created a presumption of intoxication was, we believe, a comment upon the evidence as much so as if the particular statute had never been enacted.”

Because of the error of the Court in giving Defendant’s Instruction No. 33, the judgment is reversed and the cause remanded.

II. Other Matters. Because of the likelihood of a new trial we think it well to mention a few of the other matters:

(a) There was no error in the ruling of the Court in refusing to strike the cross complaint of defendant Coston. See Huffman v. City of Hot Springs, 237 Ark. 756, 375 S. W. 2d 795.

(b) In several of the instructions there is a detailing of certain acts and the instructions say of these acts: “This would be negligence.” We mention particularly Defendant’s Instruction No. 21 and Defendant’s Instruction No. 34. It is sometimes proper to say that certain acts “would be negligence” (see our Opinion in Wright v. Covey,, 233 Ark. 798, 349 S. W. 2d 344); but in most of the instructions in this case the better language would be that these acts “would be evidence of negligence.”

(c) Defendant’s Instruction No. 36 pertained to heart injuries alleged to have been sustained by Mr. Cos-ton.' This instruction appears to have several defects.

(d) Other matters argued are not likely to occur on retrial; so we do not discuss them.

Reversed and remanded.


author: Ed. F. McFaddin, Associate Justice.

text:
    Grace v. Mt. Holly Lumber Co.
    5-3570
    390 S. W. 2d 105
    Opinion delivered May 24, 1965.

      McMath, Leatherman, Woods <& Youngdahl and John P. Sizemore, for appellant.

      Mahony & Yocum, for appellee.
   Ed. F. McFaddin, Associate Justice.

This is a workmen’s compensation case. Marvin Grace died on March 18,1963, as a result of serious injuries received in a traffic mishap on December 27, 1962. A claim was filed for temporary total disability from the date of his injury until his death; and another claim filed by his widow and minor child (the present appellants) for death benefits. The claims were against the alleged employer, Mt. Holly Lumber Company, and its insurance carrier (appellees here). The two claims were consolidated for hearing before the Commission and were resisted on the ground that the injuries and consequent death of Marvin Grace did not arise out of and in the course of his employment.

The case was heard by the Referee, who disallowed the claims; and the Full Commission likewise disallowed the- claims, on the basis that the injuries and death did not arise out of and in the course of employment. The Circuit Court affirmed the Commission; and the case is here on appeal.

Marvin Grace lived near Mt. Holly in Union County. In October 1961 be commenced to work for tbe Mt. Holly Lumber Company, being engaged in the work of ‘ ‘ log banking. ’ ’ The contract between Mr. Grace and Mt. Holly was entirely oral. The manager of Mt. Holly would go with Mr. Grace to a tract of timber and offer Mr. Grace the opportunity to “bank” the cut logs along the roadside at a designated point. Mt. Holly paid a total of $14.00 per thousand feet for having the trees cut into logs and the logs “banked.” Five Dollars of the Fourteen Dollars was paid to the cutter; and Nine Dollars of the Fourteen Dollars was paid to the “log banker.” If Mr. Grace accepted the offered work, then he would undertake the job of “banking” the logs, which consisted in dragging the logs with tractors from the place, where the tree had been cut, to the designated point on the roadside. To accomplish this “log banking” Mr. Grace used his own two tractors and employed his own helper.

Mt. Holly was careful to see that there was full compliance with the "Wage and Hour Law of the United States. So Mt. Holly paid Mr. Grace’s helper $1.25 per hour for each hour that the helper worked, and likewise paid Mr. Grace $1.25 per hour for each hour that he worked. Each week Mr. Grace would deliver the time to the manager of Mt. Holly and from the ‘ ‘ time checks ’ ’ of Mr. Grace and his helper there were deductions made for Social Security and withholding tax. After issuing the “time cheeks,” if any amount remained from the $9.00 per thousand for “log banking” this balance was paid to Mr. Grace in a separate check each week; and from' this “balance check” there were deductions for workmen’s compensation premiums on Mr. Grace and his helper, as well as other deductions authorized by Mr. Grace. One of these deductions consisted in the time payments due by Mr. Grace on his tractors. He had at one time purchased some tractors from a third party, but later had purchased two tractors from Mt. Holly and had authorized Mt. Holly to withhold $1.50 per thousand from each “balance check” to apply on the purchase price of the tractors. Keeping the tractors in good working condition was at the expense and responsibility of Mr. Grace.

On December 26, 1962 Mr. Grace had completed all work on the assigned tract of timber, and no new tract of timber had been agreed upon for Mr. Grace to “log bank.” Mr. Grace had experienced some difficulty with the tractors as regards cranking; and on December 27, 1962 he asked his neighbor, Harold King, to drive with him in Mr. Grace’s automobile to Magnolia, where Mr. Grace would see about trading the tractors for others. The two men went to Magnolia but Mr. Grace made no trade there; and so the two drove on to Haynesville, Louisiana, where Mr. Grace talked to a tractor dealer in that city. Finally it was thought best for Mr. Grace to put one tractor in good condition by taking the good parts from the other and then consider trading the discarded tractor. No trade was made. Mr. Grace and his friend, Mr. King, started the return trip from Haynes-ville to Mt. Holly, and the traffic mishap occurred which resulted in Mr. Grace’s injuries and subsequent death.

On the foregoing facts, and others in evidence, the Referee first, and the Full Commission secondly, held that Mr. Grace’s injuries did not arise “out of and in the course of his employment” as those words are used in our Workmen’s Compensation Act (Ark. Stát. Ann. §81-1302(d) [Repl. I960]. We cannot say that the Commission’s findings are erroneous. Mr. Grace’s work liad been completed on tbe agreed tract of timber on December 26th and there had been no new tract agreed npon between the parties. While he was thus “between jobs” he decided to see about having some kind of work done on his tractors. He was not sent to Magnolia or to Haynesville. He went in response to his own desires. He was not paid so much per hour for the day that he made the trip: he was only paid so much per hour while he was at work in “log banking” the timber. It is true that he left his tractors in the woods on December 26th; but all the evidence shows that this was not to do any further work in the woods but merely because any tract later agreed upon might be close to where the tractors were. ■ •

There was testimony to support the Commission’s findings of fact, and the conclusions of the Commission are supported by the findings of fact. The appellants cite us to many cases from this and other courts. Some of the cases from our Court are: Fine Nest Trailer Colony v. Reep, 235 Ark. 411, 360 S. W. 2d 189; United Steel Workers v. Walden, 228 Ark. 1024, 311 S. W. 2d 787; and Frank Lyon Co. v. Oates, 225 Ark. 682, 284 S. W. 2d 637. In all of these cases there existed the relationship of employer and employee at the time of the injury received by the workman. But in the case at bar there was evidence that the relationship had ceased to exist when one tract of timber had been completed and no new tract of timber had been agreed upon to re-establish the relationship.

The appellants cite a variety of cases from other jurisdictions; but we have repeatedly held that the injury must arise “out of and in the course of the employment”; and we conclude that the Commission committed no error in its conclusions since there was no employment after December 26th, and the injury occurred on December 27th when Mr. Grace was on a mission of his won.

Affirmed.

       The claims were also resisted on another alleged ground: that Marvin Grace was an independent contractor. We forego any discussion of the independent contractor matter because the Commission rested its order, adverse to the claimants, solely on the ground that the injuries and death did not arise out of and in the course of the employment.

       Appellants state their point in this language:
      “Marvin Grace suffered a fatal accident which arose out of and in the course of his employment and the Commission’s decision otherwise is not supported by substantial evidence.
      “ (A) When he was killed Marvin Grace was on a trip he made for the mutual benefit of the Mt. Holly Lumber Company inasmuch as it was for the purpose of obtaining parts to repair the tractors and/or for the purpose of trading the tractors to be used exclusively in his work for Mt. Holly Lumber Company.
      “(B) An accident that occurs while an employee is in the process of securing workable equipment ‘arises out of and in the course of his employment.’
      “(C) The fact that Marvin Grace had not been assigned a new tract of timber to ‘bank’ does not defeat his status as an employee and is no basis for concluding his death did not ‘arise out of and in the course of his employment.’
      “(D) The Workmen’s Compensation Act should be liberally construed and all doubts should be resolved for the claimant.
      “(E) This Court has consistently held that when a Commission denial of benefits is not supported by substantial evidence it will be reversed.”

       The Full Commission found:
      “1. That on December 27, 1962, Marvin Grace sustained an accidental injury when he was involved in an automobile accident while driving his personally owned automobile after leaving Haynesville, Louisiana, en route back to his home near Sparkman, Arkansas.
      “2. That the purpose of Marvin Grace’s trip to Haynesville, Louisiana, was to attempt to trade his tractors.
      “3. That on December 26,1962, Marvin Grace completed the work he was doing for respondent employer, Mount Holly Lumber Company, and just when he would have resumed wok on another tract of timber was not known, and Marvin Grace had not made any agreement to work after December 26, 1962.
      “4. That on December 27, 1962, the relationship of employer and employee did not exist between Mount Holly Lumber Company and Marvin Grace nor was there any other relationship such as an independent contractor relationship.” On these findings the Commission concluded:
      “We are of the opinion that the preponderance of the evidence clearly establishes that the purpose of Grace’s trip to Haynesville, Louisiana, on December 27, 1962, was to see about trading his tractors and said trip was not for the purpose of purchasing parts for said tractors. While on such trip Grace was involved in an automobile accident while riding in his personally owned automobile after leaving Haynesville, Louisiana. We are, therefore, of the opinion that Grace’s accidental injury did not arise out of and during the course of any employment he may have previously had with Mount Holly Lumber Company.
      “Section 2 (d) of the Act (Section 81-1302 (d) Ark. Stats.) provides: ‘“Injury” means only accidental injury arising out of and in the course of employment, including occupational diseases as set out in Section 14 and occupational infections arising out of and in the course of employment.’
      “This Commission, as well as the Arkansas Supreme Court, have held on numerous occasions that to be compensable, the injury must not only arise out of, but must also occur during the course of the employment. Both elements must be present. The terms ‘out of’ and ‘in the course of’ are used conjunctively. ‘Out of’ denotes the origin or cause of the accident. ‘In the course of’ identifies the time, place, and circumstances. In our opinion, Grace’s accidental injury neither arose out of nor during the course of any employment he may have had with the respondent employer.
      “The uncontradicted evidence in this case establishes that a separate agreement was made between the respondent employer and Marvin Grace on each separate tract of timber; that if Grace did not choose to work a particular tract, he had a right to decline; that the work on the last tract of timber Grace worked by agreement was completed by him on December 26, 1962. No additional agreement as to another tract of timber had been agreed upon between Grace and the respondent employer. In fact, there is no evidence that another tract had even been discussed by the parties. We believe a reasonable inference to be drawn from the testimony is that when another tract of timber was ready to be harvested at some uncertain and unknown date in the future, Grace would have been given the opportunity to accept or decline skidding and banking the logs on that tract. We, therefore, are of the Opinion that on December 27, 1962, Grace was not acting in the scope of any relationship he may have had with the respondent employer so as to make Mount Holly Lumber Company liable for the unfortunate accident that befell him on that date. Claimants’ claims are therefore denied and dismissed.”


author: George Bose Smith, J.

text:
    Meyer v. Confab Corporation.
    5-3614
    393 S. W. 2d 253
    Opinion Delivered May 24, 1965.
    [Rehearing denied September 20, 1965.]

      Wright, Linclsey, Jennings, Lester & Shults, for appellant.

      John T. Haskins and Neill Bohlinger, for appellee.
   George Bose Smith, J.

In December, of 1962 the appellant, Bobert M. Meyer, and one of the two appellees, Joseph A. Pascale, executed a written contract by which they became business associates. Pursuant to the contract Meyer invested $38,000 in common stock and debentures issued by the other appellee, Confab Corporation, which was one of several allied companies controlled by Pascale. As of April 1, 1964, the business relationship between Meyer and Pascale came to an end. Under the contract it became the duty of Pascale and Confab to repurchase Meyer’s stocks and debentures. The only disputed issue now in the case is the date as of which this repurchase must be made. The chancellor held that Pascale and Confab are not required to repurchase the securities until December 31,1965. Meyer insists that under the contract the obligation to repurchase arose not later than sixty days after the parties’ business association ended.

With one exception — the question of who was at fault in bringing about the dissolution of the parties’ association — the facts are not in dispute.

"When the parties first negotiated their contract in December, 1962, Pascale controlled three corporations that were to engage in the production of Fourdrinier cloth and wire, which are used in the manufacture of paper from wood pulp. Meyer wanted to engage in that business. The contract recited that Pascale would use his influence in the other two corporations (referred to as National and Lauren) to obtain for Meyer a three-year contract of employment at a salary of $10,000 a year. Meyer, as we have said, was required to invest $38,000 in Confab Corporation. His contract with Pascale contained this .pivotal language:

“In the event that the employment of Meyer with National and Lauren is terminated for any reason, Meyer will sell and Pascale and Confab, jointly and/or severally, will agree to purchase the shares of no-par common stock and the debentures which Meyer may own in Confab at such time for a cash consideration equal to the par value of the debentures and a consideration for the stock equal to its adjusted book value . . .
“The said consideration as determined shall be paid as follows: — one-third of the total amount within sixty days after determination and the balance over a period of two years thereafter in equal monthly payments with the right to prepay in whole or in part at any time before maturity. ’ ’

In January, 1963, National and Lauren executed°an agreement with Meyer by which he was employed for the years 1963, 1964, and 1965 at an annual salary of $10,000. Meyer became the manager of both companies and worked in that capacity until the latter part of March, 1964. He then quit his job, tendered his resignation as an officer and director in the two companies, and requested that Pascale and Confab repurchase his common stock and debentures.

On April 7, 1964 National and Lauren brought suit against Meyer for breach of contract, their complaint asking that the matter of the repurchase of the securities be held in suspense until the case was decided. A few days later Meyer sued Pascale and Confab for specific performance of the repurchase agreement. The two cases were consolidated for trial. At the beginning of the trial National and Lauren took a nonsuit in their case. The other suit was tried on its merits. The chancellor found that it would be “manifestly unfair” to permit Meyer to quit his employment and still require Pascale and Confab to repurchase the securities promptly. Upon that ■ reasoning the chancellor held that the repurchase need not be made until December 31,1965 — the expiration date of Meyer’s contract of employment.

In this court the appellees insist that Meyer alone was at fault in leaving his employers, that he does not come into equity with clean hands, and that he is precluded from recovery under the rule that one who is himself in default in the performance of his contract cannot compel performance by the other party. Boswell v. Gillett, 226 Ark. 935, 295 S. W. 2d 758 (1956); Haney v. Caldwell, 43 Ark. 184 (1884).

We are unable to agree with the appellees’ basic premise, that Meyer alone was at fault. Meyer gave several reasons for his decision to quit, including the fact that he was excluded from participating in matters of policy, the fact that the companies did not produce Fourdrinier cloth and wire as had been planned, and the fact that misrepresentations had been made to a bank that lent money to the companies.

■ Pascale was the principal witness for the appellees. In a discovery deposition taken before the trial he stated positively that during the fifteen months of Meyer’s employment his services were not satisfactory. “We got nothing out of him. We got no sales from him.” Pascale went on to say that he had told Meyer “a number of times ’ ’ that his services v^ere not satisfactory. It is quite apparent that this disparagement of Meyer’s work tended to support National and Lauren’s suit for breach of contract. That suit, however, was dismissed on the day of trial.

At the trial Pascale’s testimony was materially at variance with his discovery deposition. He testified not only that Meyer’s services had been satisfactory but also that he, Pascale, had been ‘ ‘ anxious ’ ’ to keep Meyer on the job. He professed to be perfectly willing for Meyer to resume his duties under the contract of employment. It will be seen, of course, that this testimony tended to establish the appellees’ defense to Meyer’s suit for specific performance.

Reviewing the evidence de novo, we are not impressed by Pascale’s testimony. What he said at the trial is so seriously in conflict with his pretrial deposition that one version or the other must be untrue. It is our best judgment that Meyer’s decision to give up his employment was acceptable to all concerned, so that it is fair to say that his contract of employment was abrogated by common consent. Hence neither side is in a position to complain of a breach of contract on the part of the other. The agreement between Pascale and Meyer provided, as we have seen, that Pascale and Confab were obligated to repurchase Meyer’s stock and debentures in the event that his employment should be terminated “for any reason.” In the circumstances we are of the opinion that Meyer is entitled to insist that the securities be repurchased in accordance with the contract; that is, that one third of the purchase money be paid as of June 1, 1964, and the rest in equal monthly installments as of the next two years thereafter.

Reversed and remanded for the entry of a decree consistent with this opinion.

Ward, J. dissents.


author: Paul Ward, Associate Justice.

text:
    Beck v. Bates.
    5-3581
    390 S. W. 2d 103
    Opinion Delivered May 24, 1965.

      Harold- L. Hall, for appellant.

      Reed, Williamson, By: Lesly W. Mattingly, for appellee.
   Paul Ward, Associate Justice.

On September 19, 1964, tbe parents of six minor children herein involved met their death under tragic circumstances. The children (all girls except one) ranged in age from thirteen months to thirteen years.

On September 29, 1964 John R. Beck (a resident of Little Rock and an uncle of the children) filed a petition in Probate Court which named as the nearest of kin the following:

Mrs. L. H. Betts, Maternal Grandmother, Norwich, England

Mrs. Lee Beck, Paternal Grandmother, Booneville, Arkansas

John R. Beck, Uncle, Little Rock, Arkansas

William J. Beck, Uncle, Benton, Arkansas

Rex Beck, Uncle, Stinnett, Texas

Ray Beck, Uncle, Bossier City, Louisiana

Geneva Parsons, Aunt, Lakewood, California

Bessie Nelson, Aunt, Red Bluff, California.

The prayer was the Rex Beck be appointed guardian of the person and estate of each of said minors with authority to remove them to his home in Stinnett, Texas, ‘ ‘ so that he can keep them in his home and thereby properly care for and educate them. ...”

To the above petition a response was filed by Mr. and Mrs. L. H. Betts (maternal grandparents of the minors) and Rev. B. Franklin Bates (formerly appointed temporary guardian of the minors) in which it was alleged: The minors desire to live with their maternal grandparents in Norwich, England who are willing and able to provide them with a suitable home and to properly educate and care for them; it is desired to have Rev. B. Franklin Bates appointed permanent guardian so that he may return the children to Norwich, England and place them under the care of their grandparents. The prayer was that the petition filed by Rex Beck be denied ; and, that Rev. B. Franklin Bates be appointed permanent guardian of the children with power to take them to their grandparents in Norwich, England.

After hearing the testimony of several witnesses the trial court (on October 9, 1964) found and ordered: It will be for the best interest of the children to appoint Rev. B. Franklin Bates of Jacksonville as permanent guardian of their persons and estates; it would be for the best interest of the children to allow them to be removed to Norwich, England and placed in the care of their maternal grandparents; and, the guardian is directed to make a full account of his actions.

The decisive question involved is whether the trial court erred in directing and empowering Rev. Bates (as guardian) to take the children to England and deliver them to their maternal grandparents. For several reasons we think the court acted properly. In the first place, appellant having withdrawn his petition to have Rex ■ Beck appointed guardian, we find nothing in the record to indicate that anyone else (including relatives) is ready, able and willing to take and look after the children. On the other hand, it is undisputed that the maternal grandparents want the children and are able to provide them with a good home. If appellant or any other relatives had a better plan — or any plan — -for taking care of the children, they failed to reveal it to the trial court. In support of the trial court’s decision, we also point out certain facts and circumstances revealed by the record, (a) The children (or some of them) had formerly lived with their grandparents in Norwich, England. Two of them had gone to school while living there — one for four years and the other for two or three years, (b) The children will not be sent to England but will be taken there by Rev. Bates who will have an opportunity to observe the home and surroundings in which the children would live, and who testified he would see that all legal arrangements would be made for the protection of them and their property, (c) The grandparents state they are ready, able and willing to take the children and look after their best interests, and the record reveals they have kept in constant (almost weekly) touch with the children during recent years, and they have frequently sent them presents.

As to the jurisdiction and power of the trial court to commit the children to the care and custody of their grandparents in England, we refer to the statement in Annot., 15 A.L.R. 2d 444 (1951) which reads:

“Upon showing of circumstances which would better promote the welfare and interests of the child, the courts have not hesitated to award the custody of a child to a nonresident, or to permit a resident custodian to remove the child to another jurisdiction . . . .”

The rule or principle above set out is held to apply where the child is removed to another country. See Wilson v. Mitchell, 48 Colo. 454, 111 P. 21, 30 L.R.A. N.S. 507, the' cases cited therein, and also 12 R.C.L. 1174, Guardian and Ward, Foreign Guardians § 65.

There was no error in allowing the introduction of a doctor’s certificate which established the death of the parents of the children. It was necessary to establish the reason for the guardianship proceedings, and no one questioned the death of the parents.

Certain letters were offered in evidence by appellees but, upon objection by appellant, the letters were not admitted. It is contended, however, by appellant that the trial court read the letters, and that this constituted reversible error. Conceding for the purpose of this opinion, the court should not have read these said letters, yet, we think no possible prejudice has been shown. When the objection was made the trial court stated:- “I did not read them. I glanced at portions of them.”

It follows therefore that the order of the trial court must be affirmed.

Affirmed.


author: Sam: Robinson, Associate Justice.

text:
    Deam v. Deam
    5-3599
    390 S. W. 2d 97
    Opinion delivered May 24, 1965.

      Beinberger, Eilbott, Smith & Staten, for appellant.

      Edward M. Owens, for appellee.
   Sam: Robinson, Associate Justice.

Appellee, Delores Deam, filed suit against appellant,. Leslie Deam, asking that she be granted a divorce, the custody of the parties two minor children, alimony for herself, support for the children, and possession of the homestead. The trial court denied the petition for a divorce, but ordered that appellee have custody of the two children, possession and occupancy of the home, and that appellant pay to her $200 per month as support. Later, appellee petitioned the court for authority to lease the homestead for one year for the consideration of $125 per month. The petition was granted, and Leslie Deam has appealed from that order.

The only issue is whether the Chancellor erred in authorizing appellee to lease the home place for the one year period. Appellant does not contend that the court erred in ordering that appellee have the right of possession and occupancy of the property, but does maintain that the Chancellor erred in authorizing her to lease the property.

It was shown that the appellee would have great difficulty in maintaining the property and supporting herself and the two children on $200 per month; that she could lease the property for $125 per month and move into the City of Pine Bluff (the homestead is located in the country), where she could get a job and earn enough to help with the support of herself and the children. The court ordered the monthly rent money to be divided $100 to appellee and $25 to appellant.

We have held that the trial court may grant the wife possession of the homestead although no divorce is awarded. Cassell v. Cassell, 211 Ark. 489, 200 S. W. 2d 965. To the same effect is Goodin v. Goodin, 232 Ark. 853, 340 S. W. 2d 580, where it is pointed out that the order giving the wife possession of the home would not amount to a permanent disposition of the property rights. Likewise, in the case at bar the arrangement is not permanent. The lease is only for one year. Here, for all practical purposes, the appellee will have possession of the property, but instead of occupying it she will live on other property more economical and convenient, and will use the rent money from the homestead to pay the rent on the property she will occupy. In the circumstances, the court did not exceed its jurisdiction or discretion.

Appellee was allowed an attorney’s fee in the Chancery Court and has asked for additional fee on appeal. Due to the present circumstances of the parties, Ave are alloAving an additional fee of only $100.

Affirmed.


author: Sam Robinson, Associate Justice.

text:
    Moore v. Moore
    5-3542
    393 S. W. 2d 381
    Opinion delivered May 24, 1965.
    [Rehearing- denied September 27,1965.]

      Wayne Foster, for appellant.

      No brief filed for appellee.
   Sam Robinson, Associate Justice.

This is an appeal from a decree granting appellee a divorce,'and a finding by the court that she is the owner of a one-half interest in certain real property and also owner of a one-half interest in some personal property consisting of household s’oods. etc.

Appellee first filed suit against appellant asking for a divorce in 1959. On appeal to this court a decree in favor of appellee was reversed because, in the opinion of this court, the record showed both parties to be at fault. The doctrine of recrimination applied. Moore v. Moore, 230 Ark. 213, 322 S. W. 2d 77. The case was decided March 9, 1959.

Later, on November 29, 1962, appellee filed the present action alleging three years separation as grounds for divorce. On appeal appellant does not question that part of the decree granting appellee a divorce, but does contend that the Chancellor was in error in finding that appellee owned a one-half interest in the real and pergonal property involved. The real property in issue is Lot 16, and the North 11 feet of Lot 15, Block 4, Davis Addition to Argenta (now North Little Rock). The preponderance of the evidence shows that the property was acquired by the joint efforts of both parties; that originally the property was conveyed to appellant, Hugh Moore, that later he conveyed the property to his wife, the appellee herein, using her maiden name, Minnie Hart, as grantee; that a purported deed dated August 27, 1956 from Minnie Hart to Hugh Moore was not signed by the appellee; that the deed is a forgery.

Since it is decided that the deed from Minnie Hart to Hugh Moore is a forgery, the title to the foregoing-real property is still in appellee under her maiden name, Minnie Hart; however, she makes no contention that appellant does not own one-half interest in the property.

The preponderance of the evidence also shows that the parties each own one-half interest in the personal property.

The decree is affirmed.


author: Jim Johnson, Associate Justice.

text:
    Weathers v. City of Springdale
    5-3561
    390 S. W. 2d 125
    Opinion delivered May 24, 1965.

      Rex W. Perkins, Dickson, Putnam, Milhoee & Davis, for appellant.

      Crouch, Blair and Cypert, for appellee.
   Jim Johnson, Associate Justice.

This is an appeal from a summary judgment. Appellants Sam Weathers and Margaret Weathers are the owners of a dairy farm in Benton County. On December 30, 1963, appellants filed suit against appellee City of Springdale alleging a taking of and/or damages to their land occasioned by the city’s continued conduct of dumping raw sewage into a mountain stream which traverses the land of appellants; that this activity of the city has so polluted the stream (Spring Creek) as to render the land useless and amounts to a taking by the city of appellants’ land. The prayer is for damages as just compensation for such taking.

The city filed an answer and inter alia pleaded res judicata. In support of this plea appellee attached exhibits showing that in 1961 appellants and a number of other landowners in Benton County filed an action in the Washington Chancery Court seeking an injunction against the City of Springdale to prevent the same conduct which is alleged in the present complaint to amount to a taking of appelents’ land. The Washington Chancery Court on November 29, 1961, bj*- consent of the parties to that action, entered a decree enjoining such conduct in the future. It was further shown that on April 6, 1962, the same landowners petitioned for and obtained an order of citation against the city to show cause why the city should not be adjudged in contempt for failure to comply with the decree. On April 11, 1962, the city responed to the citation. No further action has been taken in Washington Chancery proceedings.

In the present action, before a trial on the merits the city filed a motion for summary judgment contending that prior chancery proceedings established a defense of res judicata to the present action as a matter of law. The trial court granted summary judgment and dismissed appellants’ complaint; this appeal followed.

For reversal appellants contend that the Washington Chancery Court was without jurisdiction and thus the Washington Chancery decree could not have been res judicata to the action in the Benton Circuit Court.

We take judicial- notice that the City of Springdale is located within Washington County. The consent decree acknowledges that the city was dumping raw sewage into Spring Creek to the detriment of the parties to that law suit, including appellants. Certainly the Chancery Court of Washington County had jurisdiction to command the City of Springdale to refrain from that particular act. We hold that the Washington, Chancery decree is valid to that extent. Ark. Stat. Ann. §<§> 32-ÍL01, 32-102 (Repl. 1962).

Having so found we reach the real question in issue, i.e., did the Washington Chancery Court have jurisdiction over Benton County lands so as to award damages for the taking thereof?

Appellants in the Washington Chancery action asked no damages for the taking of their land, and it would have been a vain prayer. Damages for the taking of land is a local action. Ark. Stat. Ann. § 35-101 (Repl. 1962) provides that the owner of property taken for public use “shall have the right to bring an action ... in the circuit court of the county in which said property is situated.” And Ark. Stat. Ann. § 27-601 (Repl. 1962) requires that an action for an injury to real, property must be brought in the county in which the land is situated. Missouri Pacific R. Co. v. Henry, 188 Ark. 530, 66 S. W. 2d 636. The Washington Chancery Court never obtained jurisdiction of the subject matter. This is true even though the parties to the equity action consented to the jurisdiction and entry of that decree. Jurisdiction of the subject matter cannot be conferred by consent. Pruitt v. Sebastian County Coal & Mining Co., 215 Ark. 673, 222 S. W. 2d 50. It follows, therefore, that the Washington Chancery Court could not have awarded damages in the previous action because of lack of jurisdiction. It is well settled that where jurisdiction is lacking, a decree to that extent is void and therefore not res judicata to a subsequent action in a court of competent jurisdiction. Hendricks v. Henson, 192 Ark. 544, 92 S. W. 2d 867; Kyle v. Pate, 222 Ark. 4, 257, S. W. 2d 34. See generally Dobbs v. Gillett, 119 Ark. 398, 177 S. W. 1141; and Hall v. Bush, 128 Ark. 437, 194 S. W. 1031.

In the alternative, appellee urges that even if the present action were properly brought in Benton Circuit Court, appellants are barred by the statute of limitations.

The summary judgment made no finding as to statute of limitations but is based entirely (as both parties concede) on the question of res judicata. The question of statutes of limitation, which limitation may be applicable, if any, (see 152 A.L.R. 343), is a question of fact. The office of summary judgment is invocable “where there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law. ’ ’ Ark. Stat. Ann. § 29-211 (Repl. 1962). A fact question existing in the case at bar, summary judgment will not lie. The case is therefore reversed and remanded for further proceedings not inconsistent with this opinion.


author: Frank Holt, Associate Justice.

text:
    Ark. State Highway Comm. v. Lasley.
    5-3545
    390 S. W. 2d 443
    Opinion delivered May 24, 1965.

      Mark E. Woolsey and Don Gillaspie, for appellant.

      Howell, Price & Worsham, for appellee.
   Frank Holt, Associate Justice.

This is a condemnation proceeding by appellant to acquire land for highway purposes. The appellee sought just compensation for his leasehold interest in the land. In addition he sought to recover for the damages to his crops and the loss of cattle caused by the negligent acts of appellant’s agents and employees. From the judgment on the verdict favorable to the appellee, the appellant brings this appeal. For reversal appellant relies upon two points. One of appellant’s contentions is that the court erred in permitting a suit against the appellant, an agency of the state, in violation of Article 5, §20 of the Constitution of the State of Arkansas. Appellant asserts that the appellee’s damages which resulted from loss of his cattle and their trampling and eating his crops are tort claims.

Appellant’s agents and employees went upon appellee’s property for acquisition purposes. They permitted appellee’s cattle to escape resulting in the loss of fourteen head of the agreed value of $1,050.00. The damages to the crops outside the strip of right-of-way, caused by the escaped cattle, was agreed to be $3,125.30. Appellee filed his claim with the State Claims Commission for the recovery of these and other damages. The appellant filed a motion to dismiss appellee’s claim on the basis that there was a suit pending in the Pulaski Circuit Court “filed for the purpose of paying all damages to which * * * [appellee is] entitled, as well as for acquisition of land title”; that appellee “has a good legal remedy open to him in the Circuit Court, which he cannot ignore and must exercise ’ ’; that an award by the State Claims Commission would result in a cost to the State which would not be shared by the Federal Government; and that “claimant is not placed in the position of suing the State of Arkansas”.

Pursuant to appellant’s motion to dismiss, the Claims Commission entered an order placing appellee’s questioned claims upon the inactive docket stating that in its opinion “the claimant has a remedy at law” for the damages appellee suffered to his crops and his- loss of cattle. Thereupon appellee filed his answer in the pending suit in circuit court. Appellant then filed a motion to require appellee to make his answer more definite and certain, to which appellee properly responded. A joint stipulation, prepared by the appellant, setting forth the proceedings before the Claims Commission and the extent of some of the damages suffered by appellee, was admitted into evidence without objection. Appellant made no motion for a directed verdict nor made any objection to the pleadings, the testimony, or the jurisdiction of the court.

In a long line of cases we have recognized that: ‘ ‘ The State of Arkansas shall never be made a defendant in any of her courts.” Article 5, §20, Arkansas Constitution. We are of the view that the loss of the cattle and resulting damages to the crops after their escape are tort claims and, therefore, are not permissible in a suit against the state. St. Francis Drainage Dist. v. Austin, 227 Ark. 167, 296 S. W. 2d 668 and Wenderoth v. Baker, 238 Ark. 464, 382 S. W. 2d 578. In Ark. State Highway Comm. v. McNeil, 222 Ark. 643, 262 S. W. 2d 129, we recognized the well settled principles that there is no authority in the law to waive the state’s immunity to a suit; that the state is not bound by the unauthorized acts of its agents and, further, the state is not estopped by an erroneous construction of the law by its representatives.

As was said in St. Francis Drainage Dist. v. Austin, supra:

“There are many laymen, lawyers and judges who believe that, in all fairness, the State, its political subdivisions and quasi public corporations such as improvement districts created by the State, should be liable for torts committed. But the law, holding otherwise, has been firmly established for many years.”

The State Claims Commission was created to represent the state’s conscience in such matters. The fact that the loss of the cattle and the resulting damages to appellee’s crops outside the acquired -right-of-way strip are tort claims does not now prejudice the right of appellee to again present his apparently just claims to the Claims Commission. Appellant urges that damages to other items belonging to appellee sound in tort. However, we refuse to interfere further since we are of the view that there was sufficient evidence the damages were necessary and incidental to the taking of the leasehold interest.

Appellant next contends for reversal that certain instructions given by the court were inherently erroneous as being confusing and conflicting. No specific objection was made to any instruction given by the court and, further, appellant offered no instruction. We find no merit in this contention, especially in view of the remittitur we now order.

If the sum .of $4,175.30 [$1,050.00, the agreed value of appellee’s cattle and $3,125.30, the agreed damages to appellee’s crops outside the right-of-way strip] is entered as a remittitur to the judgment of $20,160.00 within seventeen (17) calendar days then the judgment will be affirmed. If no remittitur is so entered, then the judgment will be reversed and the cause remanded for a new trial.

McFaddin, J., concurs.


text:
    C.J.C. Corporation v. Cheney, Commissioner.
    5-3577
    390 S. W. 2d 437
    Opinion delivered May 24, 1965.

      Smith, Williams, Friday & Botoen and Jerry T. Light, for appellant.

      Lyle Williams and Tom Tanner, for appellee.
   Frank Holt, Associate Justice.

The appellant, a foreign corporation, supplied concrete and aggregate to a contractor in the construction of a Titan II missile base in Arkansas. The appellant purchased fourteen cement mixer trucks and four batching plants outside Arkansas. The machinery was subsequently brought into the state and used by appellant in the performance of its local contract. The appellee assessed a compensating [use] tax against the appellant in the amount of $9,529.98 based upon the use of this equipment in Arkansas.

This tax was paid under protest by the appellant and suit was brought to secure a refund contending that the equipment was exempt under Ark. Stat. Ann. §84-3106 (d) (Repl. 1960). It was stipulated that the appellant’s business in Arkansas consisted of processing and supplying the cement and aggregate, pursuant to a contract between appellant and the prime contractor, for the construction of the federal project. It was further agreed by the parties that in the cement business, the various basic materials used to make concrete are initially measured, commingled and mixed in the batching plant which contains mechanical measuring and mixing equipment. The measured and mixed product of the batching plant is then transferred in a dry condition to a mixer truck. There water is added and the mixing drum on the truck revolves en route to the job site. The adding of water and the mixing by the revolving drum causes a chemical reaction which completes the processing of the concrete product so that it is prepared for ultimate use.

On appeal from an adverse decision the appellant urges for reversal that the court erred in holding that the appellant’s manufacturing and processing equipment was not exempt from the compensating [use] tax under Ark. Stat. Ann. §84-3106 (d) (Repl. 1960). The pertinent part of this statute reads as follows:

“Exemptions. — -There are hereby specifically exempted from the taxes levied in this Act [§§ 84-3101— 84-3128]:
(d) Tangible personal property used by manufacturers or processors or distributors, including ginners of cotton and including the artificial drying of rice, for further processing, compounding or manufacturing; ’ ’.

The main tenor of appellant’s argument is that the exemption was denied by the appellee because of appellant’s status as a non-resident contractor making sales to a single purchaser instead of the general public. Appellant contends that the exemption section clearly contains no such limitation. We think, however, the issue to be decided is aptly stated by the appellee when he says that “appellant’s brief refers to appellant as a ‘manufacturer or processor’ as though this had been decided, when this is in fact the sole point of contention.”

When determining whether a particular operation constitutes “manufacturing or processing” we follow the rule of common usage or the popular meaning of the words. Morley v. E. E. Barber Const. Co., 220 Ark. 485, 248 S. W. 2d 689. In that case a road contractor claimed that the exemption applied to steel, sand and gravel purchased outside the state because they were processed and used in the construction of roads. Therefore, it was urged that the contractor was a manufacturer or a processor within the meaning of the statute. In holding that the construction of a highway is not manufacturing and, therefore, the materials processed and used in construction are not exempt, we said:

“® * * We think that this is a strained construction and that it is not supported by the intent of the legislature or the ordinary use of language. The intent of the legislature was that the Use Tax Act, Act 487, would complement or supplement the Gross Receipts Tax Act and [since it taxes personal property bought in other states] that it would protect home merchants and businesses from out of state competition. If appellee’s interpretation is accepted the Use Tax Act would not only not complement the Gross Receipts Tax Act but would to a large degree emasculate it. Such an interpretation would be a strong inducement for- contractors engaged in building roads [and it would have to include houses and every similar construction] in Arkansas to buy all material from suppliers in other states, thus avoiding the tax imposed by both Acts.”

Surely it must be said that the machines processing or mixing certain of these, concrete ingredients are not exempt within the meaning of the statute if, as we have held, these ingredients, when processed, commingled, mixed and used in construction, are not exempt.

Furthermore, in Scurlock v. Henderson, 223 Ark. 727, 268 S. W. 2d 619, we held that cotton ginning machinery was not within the exemption provisions since it was not being used for “manufacturing or processing”. There we said:

“Strictly speaking, any change or alteration in a commodity is a process; but ‘processing’ as utilized in the exemption Act must have been selected as a word having some direct bearing upon manufacturing.”

Later the legislature expressly exempted the ginning machinery.

There is a presumption favoring the taxing power of the state and the claimant has the burden to establish clearly any right to an exemption. Wiseman v. Madison Cadillac Co., 191 Ark. 1021, 88 S. W. 2d 1007. There can be no implied exemption and an exemption provision must be strictly construed. To doubt is to deny the exemption. Scurlock v. Henderson, supra; Wiseman, Comm. of Revenues, v. Town of Omaha, 192 Ark. 718, 94 S. W. 2d 116; Bangs v. McCarroll, 202 Ark. 103, 149 S. W. 2d 53.

The rationale behind these cases is that taxation is the rule and exemption from taxation is the exception. The presumption is against any surrender of the taxing power in favor of any particular class. In order for this presumption to be refuted, there must be a clear indication of the legislative intent to provide for the exemption. The exemption, if allowed in the case at bar, would discriminate against any home merchants since the use tax complements or supplements the sales tax. The record does not disclose exactly when the equipment was first brought into the state for use. However, it was purchased and brought into Arkansas sometime during 1961. In this connection, attention is directed to Ark. Stat. Ann. §84-3106 (D) (Supp. 1963) [Act 140 of 1961].

Suffice it to say we do not think there is a clear intention of the' legislature to exempt the machinery in the case at bar.

Affirmed.