text:
    MINERVA ENTERPRISES, INC. v. Jean HOWLETT and Leona Carter
    91-261
    824 S.W.2d 377
    Supreme Court of Arkansas
    Opinion delivered February 10, 1992

      John I. Purtle, for appellant.

      Ludwig Law Firm, for appellee.
   Donald L. Corbin, Justice.

Appellant, Minerva Enterprises, Incorporated, (“Minerva”), appeals a judgment of the Pulaski County Circuit Court awarding separate appellees Jean Howlett and Leona Carter property damages for negligence associated with a septic tank system in its mobile home park. For reversal, Minerva contends there was insufficient evidence of liability as well as insufficient proof of damages. We find no error in the circuit court’s judgment and affirm.

Appellee Jean Howlett lived in a mobile home located in Pulaski County. Separate appellee Leona Carter, Howlett’s mother, signed an installment sales contract for the purchase of the mobile home because Howlett was unable to obtain credit for the purchase. At all times after the purchase, however, Howlett possessed the mobile home and made the payments on it. Howlett also executed a rental agreement for a lot in Landmark Mobile Home Court, which is owned and operated by Minerva. Approximately one year after her mobile home was installed at Landmark Court, Howlett returned to her mobile home after a week’s absence to find it flooded with solid and liquid sewage. Howlett made unsuccessful attempts to sell the mobile home and its contents. She then allowed the mobile home to be repossessed.

Howlett filed suit against Minerva alleging damages to the mobile home and its contents caused by Minerva’s negligent maintenance and operation of its septic tanks. Minerva answered denying its negligence and claiming the negligence of Howlett or someone other than itself. The case was tried to a jury which awarded Carter $10,750.00 for damage to the mobile home. The jury also awarded Howlett $2,425.00 for damage to her personal property inside the mobile home. The trial court entered a judgment consistent with the jury’s verdict. Minerva moved for judgment notwithstanding the verdict, or alternatively for a new trial, based on insufficient evidence of liability and insufficient proof of damages. The trial court denied Minerva’s motion, but exercised its inherent power of remittitur and reduced Carter’s judgment to $8,500.00. Howlett’s judgment remained unchanged. It is from this order that Minerva appeals.

Minerva makes three assignments of error. First, Minerva asserts there is insufficient evidence to support the trial court’s judgment of negligence. Minerva contends all the evidence is consistent with its theory that Howlett is responsible for the damage to her mobile home. The rental agreement between Minerva and Howlett provided that Minerva was responsible for maintaining the septic tank and lines to the point where Howlett’s mobile home connected to the lines and that Howlett was responsible for maintaining the lines from her mobile home to the point of connection. Minerva argues the evidence suggests the septic lines were upward-sloping from Howlett’s mobile home to the point of connection, thereby causing a stoppage problem. Minerva also argues that Howlett had a problem with her water and that her toilet was disfunctioning so that water was constantly draining into the septic tank, possibly causing sewage to overflow into her mobile home.

When reviewing a trial court’s refusal to set aside a jury verdict on liability, we view the evidence in the light most favorable to the appellee and affirm if there is substantial evidence to support the verdict. Harper v. Clark Equip. Co., 300 Ark. 413, 779 S.W.2d 175 (1989). Substantial evidence is evidence of sufficient force and character to compel a conclusion one way or the other with reasonable and material certainty; it must force the mind to pass beyond suspicion or conjecture. Bank of Malvern v. Dunklin, 307 Ark. 127, 817 S.W.2d 873 (1991); Williams v. O’Neal Ford, Inc., 282 Ark. 362, 668 S.W.2d 545 (1984).

The evidence, as viewed most favorably to Howlett and Carter, is that after discovering the sewage in her mobile home, Howlett notified Frank Jones and John McCaleb, Minerva’s officers and owners, and waited at her mobile home for them to inspect the problem. Howlett waited for thirty to forty-five minutes and neither Jones nor McCaleb came to her mobile home. Howlett then telephoned Dale Crawford, who has been in the plumbing business for fifteen years, and he agreed to inspect her mobile home at 7:00 a.m. the next morning.

Mr. Crawford arrived at appellant’s mobile home as he said he would and found the carpet soaked with toilet paper and sewage waste. Mr. Crawford testified that it looked like the sewage had risen about a foot in the mobile home. He saw sewage backed up in the bathtub, toilet and sink drains. Mr. Crawford testified that in his opinion, there was improper maintenance in the septic system itself; the septic tank was either full or had a stoppage in the line somewhere. He stated that if there was a stoppage in the line, the remainder of the plumbing in the mobile home would create pressure, forcing liquids, fecal matter, and toilet paper to back up through the mobile home owner’s line. He also stated that Howlett’s mobile home was on the downhill side of the septic tank and that if the tank were full or stopped up it would be Howlett’s mobile home that would flood first. Mr. Crawford stated he regularly worked on plumbing problems in mobile homes and had never seen this much damage from a sewer or septic tank to a mobile home before.

Although Minerva presented evidence that is contrary to the foregoing evidence, we are reminded that it is within the province of the jury to resolve the conflicting evidence, Union Lincoln Mercury v. Daniel, 287 Ark. 205, 697 S.W.2d 888 (1985). We conclude the foregoing evidence is substantial and therefore sufficient to support the conclusion and judgment of the trial court. For as we have stated many times before, the question is not whether the evidence would have supported some other conclusion, but whether it supports the conclusion reached by the trier of fact. Lewis v. Crowe, 296 Ark. 175, 752 S.W.2d 280 (1988); Arkansas W. Gas Co. v. Arkansas Pub. Serv. Comm’n, 266 Ark. 668, 588 S.W.2d 424 (1979).

Minerva’s second assignment of error relates to the assessment of damages. Minerva claims that the correct measure of damages for damage to personal property is the difference in the fair market value of the property immediately before and immediately after the injury. As authority for this measure of damages, Minerva cites AMI 2226 and Daughhetee v. Shipley, 282 Ark. 596, 669 S.W.2d 886 (1984). Minerva claims neither Howlett nor Clark has met their respective burdens of producing evidence of the value of their property immediately before and immediately after the incident causing the damage.

We begin addressing Minerva’s second point by reviewing the rules for measuring and proving damages to property. When there has been a total loss of property as when there is no salvage value or no possibility of repair, the owner is entitled to recover the fair market value of the property immediately before the loss occurred. Kanis v. Rogers, 119 Ark. 120, 177 S.W. 413 (1915). However, when the property is not a total loss but is only damaged, the owner is entitled to recover the difference in the fair market value of the property immediately before and immediately after the damage occurred. Daughhetee, supra. In both situations, the fair market value is defined as the price the personalty would bring between a willing seller and a willing buyer in the open market after negotiations. Southern Bus Co. v. Simpson, 214 Ark. 323, 215 S.W.2d 699 (1948). When the personalty that has been damaged is clothing, home appliances, or other personal items, the measure of damages is not the fair market value but simply the fair value. Howard’s Laundry & Cleaners v. Brown, 266 Ark. 460, 585 S.W.2d 944 (1979); Cecil v. Headley, 237 Ark. 400, 373 S.W.2d 136 (1963). Fair value is determined not by considering the saleable or second-hand value, but by considering the reasonable value to the owner for his own use, which includes considerations of original cost, replacement cost, and the owner’s past and future use of the items. Howard’s Laundry, supra.

When alternative methods of measuring damages are available, the court must determine the appropriate measure and instruct the jury accordingly. Lewis v. Phillips, 223 Ark. 380, 266 S.W.2d 68 (1954); Willis v. Triplett, 10 Ark. App. 247, 663 S.W.2d 201 (1984). Here, the jury was instructed that the appropriate measure of damages is the difference in fair market value immediately before and immediately after the damage occurred. Neither party disputes that this is the correct measure of damages for this case. Instead, Minerva claims Howlett and Carter have not met their respective burdens of proving value before and after the accident.

The burden of proving damages rests on the party claiming them and the proof must consist of facts, not speculation. Christmas v. Raley, 260 Ark. 150, 539 S.W.2d 405 (1976). In a variety of factual situations, we have consistently allowed the property owner to give his or her opinion of the value of the damaged property. Walt Bennett Ford, Inc. v. Brown, 283 Ark. 1, 670 S.W.2d 441 (1984); L.L. Cole & Son, Inc. v. Hickman, 282 Ark. 6, 665 S.W.2d 278 (1984); Boston Ins. Co. v. Farmer, 234 Ark. 1007, 356 S.W.2d 434 (1962). Additionally, when proving damages for property that was not a total loss, the difference in fair market value may be established by the reasonable cost of repairing the damaged property. Sipes v. Munro, 287 Ark. 244, 697 S.W.2d 905 (1985); Slaughter v. Barrett, 239 Ark. 957, 395 S.W.2d 552 (1965).

We discuss the evidence as it relates to the values of the mobile home and its contents separately. With respect to the value of the mobile home, Howlett testified that she gave approximately $12,000.00 for it. The installment sales contract for the purchase of the mobile home listed a total purchase price of $19,459.72, including a down payment of $4,405.00 and a balance of $8,810.00 financed at 14.75 % for a finance charge of $6,244.72. Howlett testified the mobile home was in the same condition at the time of the accident that it was at the time it was purchased. Howlett also testified that she ran an advertisement in the newspaper offering to sell the mobile home and its contents. She also contacted a representative from A-l Mobile Homes, the company from which the mobile home was purchased, regarding the repurchase of the mobile home. Howlett stated she did not receive any offers to purchase the mobile home or its contents. Minerva’s witness, Louis Nalley, Sr., described himself as a dealer of manufactured homes for forty-one years who also had occasion to do repair work on mobile homes. Mr. Nalley testified that the current value of a Champion Woodlake 14 x 66 mobile home, the same model as Howlett’s, was $8,500.00. After viewing photographs of Howlett’s mobile home, Mr. Nalley stated that the carpet and floors could be repaired or replaced for $1,200.00.

With respect to Howlett’s personal effects inside the mobile home, she testified she made a list of this property two or three days after the accident. She valued some of the items on the list according to replacement cost; however, the items she purchased most recently were valued according to purchase price. Howlett testified these items were worthless to her after the accident because of their bacterial contamination. Again, we note that she advertised the items for sale along with the mobile home, but received no offers to buy anything.

The thrust of Minerva’s argument is that neither Carter nor Howlett has met their respective burdens of proving damages to the mobile home and its contents as there is no proof of value. Minerva also argues it was error for the trial judge to allow Howlett to testify as to the value of the mobile home because she was not the owner of it, her mother was. Alternatively, Minerva argues Howlett’s testimony as to value of the mobile home should not have been admitted because it did not have a rational basis. Howlett responds that she is the de facto owner of the mobile home and thus should be allowed to testify as to its value.

We find no merit in Minerva’s argument. First, we conclude the trial court did not abuse its discretion in allowing Howlett to testify to the value of the mobile home. It is true that she is not the legal owner of the property, however, she is the equitable owner. She shopped for the mobile home, made the payments on it, rented a lot for it and arranged for its installation. Howlett had exclusive possession of the mobile home. She had personal knowledge of the mobile home and its condition both before and after the accident. Thus, she was competent to testify as to its value either as the equitable owner in possession of the property or as a lay witness. She gave a rational basis for her valuation testimony. Second, we conclude she presented sufficient proof of the damages to her mobile home. She testified the before-injury value was $12,000.00. She stated the mobile home had no salvage value as she was unable to sell it after the accident. Thus, the after-injury value was $0.00.

We reach the same conclusion with respect to the contents of the mobile home. There is no question that Howlett was the owner and could testify to the value of the contents. Walt Bennett Ford, supra. The before-injury value she stated on the itemized list was $5,124.00. Her statements that the items were worthless to her because of the bacteria along with her unsuccessful attempts to sell the items established the after-injury value at $0.00. She also testified the party who repossessed her mobile home charged her $2,000.00 for the removal and repossession fee.

Accordingly, we hold Howlett and Carter presented sufficient proof of damages to their respective properties. It was not error for the trial court to deny the request to set aside the verdict or grant a new trial.

Minerva’s third assignment of error is that Howlett failed to mitigate her damages as required by law. It is a defendant’s burden to prove matters relating to mitigation. As a defendant, Minerva must show both that Howlett could have taken actions to mitigate her damages and the amount of damages that might have been avoided by her proper mitigation. Western Grove Sch. Dist. v. Strain, 288 Ark. 507, 707 S.W.2d 306 (1986); Bill C. Harris Constr. Co. v. Powers, 262 Ark. 96, 554 S.W.2d 332 (1977). This Minerva has failed to do. Minerva merely asserts that Howlett should have salvaged her personal belongings and cleaned and sterilized them; it offers no evidence that she could have salvaged or sterilized the belongings at a reasonable or unreasonable expense nor does it assert a dollar amount that could have been avoided had any of the belongings been salvaged. Therefore, we conclude Minerva has not met its burden of proving Howlett’s failure to mitigate and the dollar value of damages caused by such failure.

Affirmed.


source: Caselaw Access Project

author: Robert L. Brown, Justice.

license: Public Domain

text:
    Louis Arthur DODRILL v. EXECUTIVE DIRECTOR, Committee on Professional Conduct
    91-252
    824 S.W.2d 383
    Supreme Court of Arkansas
    Opinion delivered February 10, 1992
    [Rehearing denied March 16, 1992.]

      Louis Arthur Dodrill, pro se.

      Meeks & Carter, P.A., by: W. Russell Meeks III, for appellee.

      Hays, J., not participating.

   Robert L. Brown, Justice.

This case is an appeal from action taken by the Supreme Court Committee on Professional Conduct suspending the attorney’s license of the appellant, Louis Arthur Dodrill, for one year for violating Rules 1.1, 3.1, and 8.4(D) of the Model Rules of Professional Conduct. The complaint was filed against the appellant by United States Bankruptcy Judge James Mixon under Rule 5.A of the Rules of the Court Regulating Professional Conduct of Attorneys at Law and was premised on allegations of incompetence, abusive behavior, and frivolous litigation. We affirm the findings of the Committee and the one-year suspension of the appellant’s license.

On December 7, 1988, the appellant, representing Bobby Bratton, a debtor in a bankruptcy proceeding, filed a complaint in federal district court against Bratton’s former bankruptcy attorneys, the law firm of Mitchell, Williams, Selig, Jackson & Tucker. The complaint sought damages in the amount of $15,184,571. The appellant amended the complaint on February 3, 1989, and requested permission to add Charles Darwin Davidson, who is an attorney and was also trustee of Bratton’s estate in bankruptcy, and the Davidson Law Firm, Ltd., as defendants. The federal district court entered an order on March 23, 1989, referring the action to the Bankruptcy Court for the Western District of Arkansas.

On March 31, 1989, the Mitchell firm filed a motion to dismiss the complaint for lack of subject matter jurisdiction and lack of standing. On April 26, 1989, the appellant moved to dismiss the complaint against the Mitchell firm, and the bankruptcy court entered an order on May 11, 1989, granting the motion to dismiss without prejudice.

On May 16, 1989, Davidson and the Davidson Law Firm also moved for dismissal. Bankruptcy Judge James G. Mixon held a hearing on the motion on June 6,1989, and treated it as a motion for summary judgement. Judge Mixon granted the parties twenty days to file additional motions or affidavits. Davidson and the Davidson Law Firm filed timely affidavits; the appellant did not. On September 11,1989, Judge Mixon granted summary judgment to Davidson and the Davidson Law Firm. The appellant did not appeal the judgment.

The appellant then moved in bankruptcy court to remove Davidson as Bratton’s trustee on grounds of fraud and waste. A hearing on this motion was held on August 30, 1989, at which time the appellant failed to produce any evidence of fraud, waste, or other misconduct on Davidson’s part. At the conclusion of Bratton’s case, Judge Mixon granted a directed verdict to Davidson. Again, no appeal was taken by the appellant.

On October 18, 1989, the appellant filed another complaint in bankruptcy court against Davidson, the Mitchell firm, and a third-party corporation — Bibler Brothers, Inc. — on Bratton’s behalf and alleged wrongful conduct. He sought $158,903.65 in damages. The three defendants all filed motions to dismiss. After a hearing on the motions, the appellant moved to dismiss the complaint, and his motion was granted.

Three motions for sanctions against the appellant and Bratton were filed: on May 16,1989, by Davidson; on November 7,1989, by the Davidson Law Firm; and on November 22,1989, by the Mitchell firm. The parties alleged in each motion violations of Bankruptcy Rule 9011, which provides that an attorney verifies the veracity of a pleading by his signature and certifies that the cause of action is brought in good faith. Sanctions in the form of costs and attorney’s fees were sought by the movants for breach of the rule.

In a Memorandum Opinion dated August 2, 1990, Judge Mixon ruled in favor of the movants and stated in part: “Due to their frustration, anger, and ignorance, both Dodrill and Bratton incorrectly assumed that Davidson, the Davidson Law Firm, and the Mitchell Law Firm were guilty of various acts of misconduct. The evidence, however, reveals no acts of misconduct.” Judge Mixon stated further: “Dodrill and Bratton have been irresponsible in their behavior before this Court. They have failed to review the law to determine whether the facts are relevant to support entitlement to the relief being sought. Additionally, Dodrill has continuously displayed a complete lack of competence in the practice of bankruptcy law. The conduct of Dodrill and Bratton is inexcusable, and unquestionably warrants the imposition of sanctions.” The Davidson Law Firm and Charles Darwin Davidson were awarded a combined total of $19,261.43 for litigation expenses and attorney’s fees, and the Mitchell firm was awarded $8,987.93.

Judge Mixon then filed a copy of his August 2, 1990, Memorandum Opinion as a complaint against the appellant with the Supreme Court Committee on Professional Conduct. The judge also attached as an exhibit to his complaint an Order dated February 26,1990, which catalogued, according to Judge Mixon, “previous inappropriate, acts” on the appellant’s part at various hearings and which highlighted “derogatory and unprofessional remarks toward opposing counsel and the Court.” The judge in his order assessed a sanction of $100 against the appellant for criminal contempt of court. The appellant was subsequently placed briefly in the custody of the U.S. Marshall due to his stated inability to pay the fine.

Following an investigation, the Supreme Court Committee on Professional Conduct informed the appellant in a letter dated January 23,1991, that it had found his conduct to be “a violation of Rules 1.1, 3.1 and 8.4(d) of the Model rules of Professional Conduct as amended by the Arkansas Supreme Court” and reprimanded the appellant. The Rules cited by the Committee in pertinent part are:

RULE 1.1 Competence
A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.
RULE 3.1 Meritorious Claims and Contentions
A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis for doing so that is not frivolous, which includes a good faith argument for an extension, modification or reversal of existing law. . . .
RULE 8.4 Misconduct
It is professional misconduct for a lawyer to: . . . (d) engage in conduct that is prejudicial to the administration of justice ....

By letter dated January 31,1991, the appellant requested a public hearing on the decision and the reprimand. A de novo hearing was held on May 18, 1991, pursuant to Rule 5.F.(1) Procedures of the Arkansas Supreme Court Regulating Professional Conduct of Attorneys at Law. At that time, Judge Mixon appeared as a witness and was cross-examined by the appellant, who acted pro se. Based on the testimony and exhibits introduced at the hearing, the Committee affirmed its previous conclusion that disciplinary action against the appellant was warranted. The Committee, however, increased the penalty to be assessed. By letter dated May 29, 1991, the Committee advised the appellant that he was “suspended from the practice of law for a period of one (1) year.” The letter noted, among other reasons for the decision, that the appellant had admitted at a hearing before Judge Mixon that he knew “nothing whatever about bankruptcy,” that he was “thoroughly incompetent in bankruptcy court,” and that he had “no business being there.” The Committee stated that the decision of the Committee was unanimous.

The appellant now raises six points for relief. The appellant first contends that Judge Mixon, as a judge in bankruptcy, is not a judge of a court of record in this State. Only judges of courts of record are excepted from the requirement that a complaint be verified under Section 5. A of the Rules of the Court Regulating Professional Conduct of Attorneys at Law. According to the appellant’s theory, because Judge Mixon’s court is not a court of record, his unverified complaint was defective and improperly accepted and investigated by the Committee.

We dispute the appellant’s initial premise. Judge Mixon is a judge of the Bankruptcy Curt for the Western District of Arkansas. His court easily qualifies as a court of record, as the Committee found. Black’s Law Dictionary contains this definition for a court of record: “A court that is required to keep a record of its proceedings, and that may fine or imprison. Such record imports verity and cannot be collaterally impeached.” Black’s Law Dictionary, p. 353 (6th Ed. 1990). The Bankruptcy Court for the Western District of Arkansas is a court where proceedings and testimony are recorded. Also, it is a court where common law is adhered to, and where the judge may exercise the contempt power, as Judge Mixon did in the case before us. Though further reason is not required, we do note that Judge Mixon testified under oath before the Committee and repeated the same allegations that were contained in his complaint against the appellant.

The appellant next argues that he was entitled to protection under the Uniform Federal Rules of Disciplinary Enforcement or, stated another way, that the federal procedure should have been followed rather than the state disciplinary process before the Committee. We do not agree. The appellant hinges this contention on Judge Mixon’s admission during discovery that attorneys practicing in the bankruptcy courts in Arkansas are subject to the Uniform Federal Rules of Disciplinary Enforcement. That answer, however, in no way divests the State Committee or the Arkansas Supreme Court of the authority to discipline lawyers for incompetent practice and abuse of process.

The Arkansas Constitution is clear that the Supreme Court regulates the practice of law in this state and the professional conduct of practicing attorneys. Ark. Const. amend. 18. Inherent in this authority is the power to admit or disbar lawyers. See Feldman v. State Bd. of Law Examiners, 438 F.2d 699 (8th Cir. 1971). In the case of In re Dodrill, 260 Ark. 223, 538 S.W.2d 549 (1976), we quoted from Feldman and stated that it is firmly established that the judicial branch of government, acting through the courts, has exclusive jurisdiction to admit, control and disbar attorneys. There is no doubt that this court operates well within its constitutional authority when it considers disciplinary appeals such as the case before us. The fact that federal disciplinary rules may also exist affects the exclusive jurisdiction of this court over the conduct of this state’s attorneys not one iota.

For his next point, the appellant argues that the Committee impermissibly delegated to its chairman the authority to decide the appellant’s motion to dismiss on September 4, 1990. The Committee chairman denied that motion in a letter dated September 11,1990, and the appellant failed to broach the issue of the chairman’s authority to the Committee at the formal hearing on May 18, 1991, or at any other time for that matter. The Committee chairman further denied the appellant’s two post-hearing motions. Again, the appellant failed to bring the issue to the attention of the full Committee.

The mere fact that Rule 3 of the Rules of Professional Conduct provides that a majority of the Committee shall constitute a quorum does not decide the issue. Nothing in the rules denies the chairman the delegated power to decide motions. At no point was the issue raised before the full Committee. The issue was not preserved .for appeal, and the appellant’s argument is without merit.

The appellant also advances ignorance of the disciplinary process as a basis for relief. Specifically, he urges that he was unaware that a hearing before the full Committee could result in a greater penalty by virtue of de novo review. Our rules, however, are precise and unambiguous in stating that if a hearing is requested, the Committee “will hear the complaint de novo under the rules for public hearings.” Rule 5.F.(1), Procedures of the Arkansas Supreme Court Regulating Professional Conduct of Attorneys at Law. The rules themselves afforded the appellant sufficient notice, and he has no basis for arguing this point.

The appellant’s remaining arguments are either redundant or contest the one-year suspension under these facts. Again, we cannot agree. The Committee heard testimony from Judge Mixon that the appellant admitted that he was incompetent in bankruptcy matters and yet he filed several motions and complaints, and engaged in multiple hearings in that forum without the requisite competence. According to Judge Mixon, his behavior was continually insulting, abusive, and disruptive to the court, to witnesses, and to opposing counsel despite repeated warnings. For example, rather than engage in simple discovery to prove his point, the appellant’s course was to assail opposing counsel as liars and embezzlers. His allegations with regard to Davidson, the Davidson law firm, and the Mitchell firm in the second lawsuit were not founded in fact according to the appellant’s own admission, and apparently were brought for the purposes of harassment and intimidation rather than for legitimate purposes. The appellant himself agreed that all he wanted was a clarifying order in bankruptcy court; yet, rather than pursue that course, he sued the attorneys involved for wrongful conduct. Only after a full hearing did he move to dismiss the complaint.

We do not countenance such conduct in the courts of this state. Our rules and the Committee’s investigation, review, and decision are designed to thwart and penalize precisely this kind of activity. A one-year suspension, though certainly serious, is not unduly severe under the facts of this case.

Affirmed.

Hays, J., not participating.


text:
    MALONE & HYDE, INC. v. Elvert CHISLEY and John Plegge, Circuit Judge of the Seventh Division Pulaski County Circuit Court
    91-237
    825 S.W.2d 558
    Supreme Court of Arkansas
    Opinion delivered February 10, 1992

      David Hodges, for petitioner.

      Gary Eubanks & Assoc., by: Darryl E. Baker and James Gerard Schulze, for respondents.
   Robert L. Brown, Justice.

This case presents the single issue of whether the circuit judge exceeded his authority in accepting jurisdiction of a lawsuit brought by a Louisiana resident, Elvert Chisley, against a non-resident corporate defendant, Malone & Hyde, Inc., involving an accident that occurred in Tennessee. We hold that he did, and we grant the petition of Malone & Hyde.

On January 14, 1988, Elvert Chisley, was driving a tractor-trailer rig for Arkansas Best Corporation on Interstate 40 in Madison County, Tennessee. A truck driven by an employee of Malone & Hyde, a foreign corporation that transacts business in Pulaski County, Arkansas, struck the rear of Chisley’s vehicle, and Chisley was injured. On January 20,1991, Malone & Hyde filed a motion to dismiss on Rule 12(b) grounds, including lack of personal jurisdiction. After hearing the matter, the circuit judge denied the motion by letter opinion dated May 21, 1991. In that opinion he found that venue was proper in Pulaski County on the basis that Malone & Hyde had been summoned there and, further, that jurisdiction over the parties lay in Arkansas because Malone & Hyde was authorized to do business and had a registered agent in the state and maintained a business office in Jacksonville. Malone & Hyde then filed this petition for writ of prohibition on grounds that the circuit court exceeded its authority by assuming personal jurisdiction under these facts.

When addressing the question of a trial court’s jurisdiction over the parties, we first look to the complaint for an allegation of sufficient facts. Howard v. Craighead County Court, 278 Ark. 117, 644 S.W.2d 256 (1983). If jurisdiction is not established by the complaint, the complaint is fatally deficient. Id.

For personal jurisdiction to exist over a non-resident defendant, there must be compliance with the Arkansas long-arm statute and personal jurisdiction must be consistent with due process. Szalay v. Handcock, 307 Ark. 232, 819 S.W.2d 684 (1991). The Arkansas long-arm statute states precisely what is required with respect to the transaction of business by a foreign defendant and the cause of action:

1. A court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a (cause of action) (claim for relief) arising from the person’s:
(a) transacting business in this state.

Ark. Code Ann. § 16-4-101 (c)(1) (1987). (Emphasis ours.)

In the case before us, the first paragraph of Chisley’s complaint reads:

1. Plaintiff is a resident of Louisiana and an employee of Arkansas Best Corporation, a foreign corporation with its principal place of business in Arkansas. Defendant is a foreign corporation transacting business in Arkansas. The events complained of occurred in Tennessee.

No facts are alleged in the pleading as to how the accident in Tennessee arose from the transaction of business by Malone & Hyde in Arkansas. Yet, that is exactly what the long-arm statute requires.

Under similar circumstances, we have held that the failure to allege facts connecting the transaction of Arkansas business to the accident in a foreign state is fatal to a cause of action. See Howard v. Craighead County Court, supra. Federal courts have reached the same conclusion in interpreting the Arkansas long-arm statute and considering complaints that fail to allege how the cause of action arose from the transaction of business in Arkansas. See, e.g., Pearrow v. National Life & Acc. Ins. Co., 703 F.2d 1067 (8th Cir. 1983); Davis v. The Kroger Co., 576 F.Supp. 1156, (W.D. Ark. 1983).

Chisley’s complaint is plainly deficient in omitting sufficient facts which connect the Arkansas business of Malone & Hyde with the Tennessee accident. Personal jurisdiction over Malone & Hyde in the Pulaski County circuit court is, therefore, lacking, and the circuit judge acted in excess of his authority when he assumed jurisdiction over the parties.

A question remains concerning whether prohibition is the appropriate remedy under these facts. Where an alternative avenue for relief exists, we have been reluctant to grant the extraordinary remedy of prohibition. See, e.g., Lowery v. Steel, 215 Ark. 240, 219 S.W.2d 932 (1949). Malone & Hyde, however, does not appear to have an alternative remedy which is adequate. Certainly, forcing it to go through a trial in a court that has no jurisdiction on its face is unreasonable. This provides the petitioner only with speculative hope of success on appeal, should it not prevail before the jury.

Chisley raises one final point in support of jurisdiction. The long-arm statute specifically states that it does not displace other bases for jurisdiction authorized by law. See Ark. Code Ann. § 16-4-101 (F) (1987). This court has looked to § 16-4-101(F) on occasion as a vehicle for establishing personal jurisdiction in a particular court on other common law grounds. See, e.g., Levi Strauss & Co. v. Crockett Motor Sales, Inc., 293 Ark. 502, 739 S.W.2d 157 (1987) (personal jurisdiction exists for collection of a debt if the debtor or his property can be found in Arkansas). Chisley argues that a common law basis is present in this case and that the circuit judge was correct in asserting jurisdiction predicated on Running v. Southwest Freight Lines, Inc., 227 Ark. 839, 303 S.W.2d 578 (1957).

The Running case, which was decided in 1957, premised jurisdiction over a nonresident corporate defendant that did business in Arkansas on the basis that the cause of action was transitory and could be brought wherever the defendant could be served with process. In doing so, this court relied on earlier case law. See Yockey v. St. Louis-San Francisco Ry. Co., 183 Ark. 601, 37 S.W.2d 694 (1931); St. Louis I.M. & S.R. Co. v. Haist, 71 Ark. 258, 72 S.W. 893 (1903); St. Louis & San Francisco Ry. Co. v. Brown, 62 Ark. 254, 35 S.W. 225 (1896). Six years later, the long-arm statute was enacted. It established specific bases for personal jurisdiction and required more than the mere presence of a corporate agent or a corporate office in the state for jurisdiction to lie. Act 101 of 1963, now codified as Ark. Code Ann. § 16-4-101 (1987). The long-arm statute displaced the common law principle of the transitory cause of action as a rationale for asserting jurisdiction over corporate defendants and, as discussed above, required that the cause of action arise out of prescribed conduct such as the transaction of business in Arkansas. It would be illogical for the General Assembly to include the transitory cause of action as another basis for jurisdiction under section 16-4-101(F), when the purpose of the statute was to displace such theories of jurisdiction and give shape and structure to what had become a vague and tangled area of the law.

In short, the long-arm statute now defines the basis for jurisdiction over non-resident corporate defendants. To the extent that Running v. Southwest Freight Lines, Inc., supra, and the cases on which it relies, stand for the principle that service upon an agent appointed by a foreign corporation to receive process in this State confers personal jurisdiction in a transitory action regardless of the long-arm statute, we overrule them.

The petition for writ of prohibition is granted.


author: Robert S. Hargraves, Special Justice.

text:
    B. Dewey FITZHUGH v. COMMITTEE ON PROFESSIONAL CONDUCT
    90-219
    823 S.W.2d 897
    Supreme Court of Arkansas
    Opinion delivered February 10, 1992

      Darrell F. Brown & Assoc., P.A., by: Darrell F. Brown, for appellant.

      Hilburn, Calhoun, Harper, Pruniski & Calhoun, Ltd., by: John C. Calhoun, Jr., and Dorcy Kyle Corbin, for appellee.
   Robert S. Hargraves, Special Justice.

This is an appeal from the decision of the Committee on Professional Conduct cautioning appellant for violation of the Model Rules of Professional Conduct governing ex parte communications.

Appellant, an attorney, represented Jean Hayes in a civil action filed against her by Service Finance Corporation for a debt resulting from a prior hospitalization. Ms. Hayes subsequently filed a third party complaint in the same action against her employer, Urban League of Arkansas, alleging it failed to provide health insurance as required by her employment contract which would have paid the debt for which she had been sued. Service Finance Corporation obtained a summary judgment on its complaint against Ms. Hayes and Ms. Hayes subsequently won a jury verdict on her third party complaint against the Urban League.

Ms. Hayes then filed writs of garnishment against Urban League’s bank accounts at First Commercial Bank and Worthen Bank. Some months later, Service Finance Corporation filed a writ of garnishment against Ms. Hayes’ wages due her from the Urban League. Urban League objected to the garnishment of its bank accounts on the basis that the funds on deposit were exempt. Ms. Hayes also filed an objection to the garnishment of her wages arguing that if the Urban League’s accounts were exempt, then her wages which were to be paid out of those accounts should likewise be exempt.

All of these proceedings were filed under one docket number in the Pulaski County Circuit Court.

Judge David Bogard conducted a consolidated hearing on all three garnishments on August 14,1987. Service Finance Corporation and its attorney, Julius Acchione, the Urban League and its attorney, Zimmery Crutcher, and Ms. Hayes and her attorney, Mr. Fitzhugh, were all present and participated in the hearing. Judge Bogard found the Urban League’s funds in one account were exempt but the funds on deposit at Worthen Bank were subject to garnishment, as were Ms. Hayes’ wages from the Urban League. After stating his decision, Judge Bogard remarked: “That’ll be my judgment. Draw it up, gentlemen”.

By agreement with Mr. Acchione, Mr. Fitzhugh prepared a precedent which included all parties in the. style of the case and which disposed of all the issues addressed at the August 14 hearing. The precedent also provided signature lines for the three attorneys involved in the case. For reasons of form, Mr. Acchione requested Mr. Fitzhugh to make certain revisions to the precedent. Mr. Fitzhugh revised the precedent, signed it, and sent it to Mr. Acchione for approval and entry.

While the revised precedent was at Mr. Acchione’s office, Mr. Fitzhugh prepared yet another precedent based on the findings of the August 14 hearing but which provided recovery only for his client of the funds in the Urban League’s account. This precedent omitted Service Finance Corporation in the style of the case and did not reflect it was a party to the action, nor did it make any provision for Service Finance Corporation’s judgment of its garnishment. Without any notice to Mr. Acchione, Mr. Fitzhugh obtained the signature of Mr. Crutcher and delivered the precedent to the trial court on the afternoon of September 10, 1987. Judge Bogard was not in his office that day and the judgment was left with Special Judge Anna Belle Clinton who was sitting for Judge Bogard. Although Mr. Fitzhugh was aware the precedent had been submitted to Judge Clinton, he made no effort to inform her of the material facts of the proceedings. Judge Clinton signed the judgement and Mr. Fitzhugh immediately used it to collect the funds which had been garnished at Worthen Bank.

A few days later, Mr. Acchioné presented to Judge Bogard the precedent previously forwarded to him by Mr. Fitzhugh. After this judgment had been signed and entered by Judge Bogard, Mr. Acchione learned that the funds in Worthen Bank had already been paid to Mr. Fitzhugh pursuant to the judgment entered by Judge Clinton.

Service Finance Corporation filed a complaint against Mr. Fitzhugh with the Committee on Professional Ethics. The executive secretary of the Committee forwarded a copy of the complaint and supporting affidavits to Mr. Fitzhugh notifying him that the allegations seemed to be governed by Rules 3.3, 3.4, 3.5, 4.1, and 8.4 of the Model Rules of Professional Conduct. Appellant did not request a hearing before the Committee but responded by affidavit. Based on the written submissions, the Committee found appellant in violation of Rule 8.4(d) for conduct prejudicial to the administration of justice.

As permitted by the Rules, appellant then requested a public hearing before the Committee. At the conclusion of that hearing, the Committee ruled that appellant improperly had ex parte communications with the trial court in violation of Rules 3.3(d) and 3.5(b) of the Model Rules of Professional Conduct. A letter of caution was issued by the Committee disciplining appellant for his conduct.

Appellant seeks reversal of the Committee’s actions on four points. He contends: (1) the garnishments were the result of a separate action and did not require approval by a person not a party to that action; (2) the presentation of a separate judgment to Special Judge Anna Belle Clinton was not an ex parte proceeding; (3) he was denied due process by the Committee; and (4) the decision of the Committee was clearly against the preponderance of the evidence.

Rule 3.3 of the Model Rules pertains to candor toward the tribunal. Subsection (d) of that Rule provides:

In an ex parte proceeding, a lawyer shall inform the tribunal of all material facts known to the lawyer which will enable the tribunal to make an informed decision, whether or not the facts are adverse.

Rule 3.5 pertains to impartiality and decorum of the tribunal and provides:

A lawyer shall not:
(a) seek to influence a judge, juror, prospective juror or other official by means prohibited by law;
(b) communicate ex parte with such person on the merits of the cause except as permitted by law.

A judicial proceeding, including the entry of an order, is ex parte when it is taken or granted at the instance and for the benefit of one party only, and without notice to, or contest by, any person adversely interested. Black’s Law Dictionary, (5th Ed. 1979).

Appellant first argues that his client’s garnishments were separate and distinct from the garnishments of Service Finance Corporation and therefore Rule 58 of the Arkansas Rules of Civil Procedure required him to set forth the Court’s decision on his garnishments in a separate document. Appellant’s reliance on Rule 58 is misplaced. The Rule clearly states it is subject to the provisions of Rule 54(b) which requires in a case where there are multiple parties that a single judgment embody the ruling of the court with respect to all parties, unless the court expressly directs the entry of a partial judgment.

We do not believe the circumstances which existed in the trial court permitted appellant to make a good faith conclusion that Rule 58 required him to submit a precedent which governed only his garnishments. The proceedings in the trial court involved multiple parties and multiple claims and were conducted under one docket number. The August 14 hearing on the propriety of all the garnishments involved common questions of law and fact. Furthermore, this Court has long held that a garnishment in this state is an ancillary proceeding, not a separate action. Vaughn v. Screeton, 181 Ark. 511 (1930); Tiger v. Rogers Cotton Cleaner and Gin Company, 96 Ark. 1 (1910).

Appellant next argues he could not have violated the rules concerning ex parte communications since he only delivered the precedent to the trial court but did not communicate with the Court on the merits of the case. Appellant does not dispute that he agreed with Mr. Acchione at the conclusion of the August 14 hearing to prepare a single judgment. He did in fact prepare, sign and forward to Mr. Acchione such a precedent for his approval and submission. Appellant admitted to the Committee he knew Mr. Acchione claimed an interest in his garnishments. Nevertheless, without any notice to Mr. Acchione, appellant prepared and submitted a precedent to the special judge without any disclosure whatsoever of the material facts. Appellant acknowledged before the Committee all of this was done for the express purpose of obtaining the funds at Worthen Bank for his client before Mr. Acchione could effectuate a lien for Service Finance Corporation on the proceeds of Ms. Hayes’ garnishment. Appellant attempted to justify his conduct on the basis that he was simply protecting the interest of his client.

We are not insensitive to the demands made on or perceived by lawyers to protect the interests of their clients. Nevertheless, if the legal profession is to retain the unique privilege of self-regulation, our ethical standards must not be compromised under the guise of protecting the interests of clients.

We cannot ignore the means by which Mr. Fitzhugh gained an advantage for his client. We agree with the Committee that he had a duty to disclose to the special judge all the material facts of the case and his failure to do so violated the clear wording, as well as the spirit, of the rules of conduct.

Lastly, appellant argues he was denied due process by the Committee because of its failure to properly notice him of the alleged violations which would be considered at the public hearing. Appellant contends the Committee’s original decision finding him to have violated Rule 8.4(d) limited the scope of the public hearing only to that issue. Because the ultimate decision of the Committee was based on Rule 3.3(d) and 3.5(b), appellant argues he was deprived of due process since he was prepared to defend only the alleged violations of Rule 8.4(d).

At the time the complaint and affidavits were originally forwarded to appellant, the executive secretary advised him that his conduct appeared to be governed by Rules 3.3, 3.4, 3.5, 4.1 and 8.4 of the Model Rules of Professional Conduct. The complaint and affidavits, as well as the notice by the executive secretary, clearly and sufficiently advised appellant of the conduct complained of and the facts supporting the complaint.

The Committee’s rules of procedure specifically provide that upon a request for a public hearing the written ballots previously cast will have no force or effect at the hearing. Rules of Professional Conduct,. Rule 5(d)(2). It is obvious from the record of the public hearing that appellant was fully aware that the issue before the Committee centered on his actions of submitting the precedent to the trial court ..One of the Committee members even asked appellant to reconcile his conduct with Rule 3.5(b). Neither appellant nor his attorney made any objection to that inquiry. Instead, appellant accepted the opportunity to submit evidence concerning the allegations of his misconduct based upon Rule 3.3(d) and 3.5(b). Appellant made no claim of prejudice during the proceedings before the Committee and he has failed to demonstrate to this Court how he was prejudiced in any way by the Committee’s actions.

Affirmed.

Special Justice William I. Prewett joins in this opinion.

Corbin and Brown, JJ., not participating.


author: Per Curiam.

text:
    Thomas B. HARVEY v. Bill CLINTON, Governor of the State of Arkansas; Jim Guy Tucker, Lieutenant Governor and Acting Governor When the Governor is Absent from the State; William J. “Bill” McCuen, Secretary of State; Winston Bryant, Attorney General; and the Board of Apportionment
    91-346
    822 S.W.2d 393
    Supreme Court of Arkansas
    Opinion delivered February 10, 1992

      Charles Karr and W. Asa Hutchinson, for appellant.

      Winston Bryant, Att’y Gen., by: Tim Humphries, Asst. Att’y Gen., for appellees.
   Per Curiam.

Counsel for the parties appeared in court on Monday, February 2, 1992, and advised that they were in the process of entering into stipulations of fact; however, they requested that the Court designate a Master to conduct hearings and make findings of fact in the event the parties were unable to perfect their stipulations.

The parties have submitted the name of former Associate Justice Darrell D. Hickman to the Court for consideration. The Court hereby accepts the nomination of the parties and appoints Darrell D. Hickman to serve as a Master.

Judge Hickman is to conduct appropriate hearings and make findings of fact in accordance with Ark. R. Civ. P. 53 and to file his findings of fact with the Court and the parties within time for the appellant to prepare and file his brief on or before February 21, 1992.


text:
    IN THE MATTER OF Contempt of Counsel, Roger T. JEREMIAH
    822 S.W.2d 392
    Supreme Court of Arkansas
    Opinion delivered February 10, 1992

      Roger T. Jeremiah, pro se.
   Per Curiam.

On October 11,1990, the appellant, Richard Lee Mitchell, was convicted in the Circuit Court of Crawford County, Arkansas, 12th District, of rape and sentenced to thirty-five years imprisonment. On November 8,1990, appellant filed a motion for a new trial which the trial court denied on January 29, 1991. On February 1, 1991, the appellant appealed from his conviction judgment and denial of his motion for new trial. Roger T. Jeremiah was appellant’s counsel at trial and is also attorney of record in this appeal. Mitchell v. State, CR 91-150.

Appellant’s transcript was timely filed with the clerk on May 2, 1991. As of January 21, 1992, no brief had been tendered or filed on behalf of the appellant with the clerk of this court. As a result, we issued a per curiam citing counsel, Roger T. Jeremiah, to appear before this court on Monday, February 3, 1992, and show cause why he should not be held in contempt for failing to file his brief in a timely manner.

Counsel, Roger T. Jeremiah, appeared before the court on February 3,1992, and advised the court that he had tendered his brief this date and that he had a meritorious defense to the charge of contempt. In addition, Mr. Jeremiah filed with the clerk, a motion to file a belated brief in support of his position.

It is necessary for a hearing to be held to determine whether or not counsel has a meritorious defense to the charge of failing to file his brief in a timely manner. We appoint the Honorable Perry Whitmore as a Master to conduct the hearing. The Master is to assume that counsel timely filed the transcript on this case on May 2,1991, and that appellant’s brief was tendered on February 3,1992. Counsel will have the burden of proving, by a preponderance of the evidence, that he has meritorious reasons for not filing the appellant’s brief when due as prescribed by the Rules of Supreme Court, Rule 11. The Master shall conduct a hearing and make findings of fact. Upon receiving the findings of fact from the Master, we will make a decision as to whether or not counsel, Roger T. Jeremiah should be held in contempt.


text:
    Wardell WASHINGTON v. STATE of Arkansas
    CR 91-286
    823 S.W.2d 900
    Supreme Court of Arkansas
    Opinion delivered February 10, 1992

      Petitioner, pro se.

      Winston Bryant, Att’y Gen., by: J. Brent Standridge, Asst. Att’y Gen., for respondent.
   Per Curiam.

The petitioner Wardell Washington was found guilty of forgery in the second degree in 1989 and sentenced as a habitual offender to thirty years imprisonment. The Court of Appeals affirmed. Washington v. State, CACR 89-204 (April 18, 1990). Petitioner now seeks permission to file a thirteen-page petition to proceed pursuant to Criminal Procedure Rule 37. This court adopted a ten-page limitation on such petitions on June 5,1989. Petitioner contends that the final three pages of the petition are exhibits which will aid this court in determining whether he is entitled to relief on certain grounds.

We have held that the rule limiting petitions under Rule 37 to ten pages paces an entirely reasonable restriction on petitioners for post-conviction relief. Maulding v. State, 299 Ark. 570, 776 S.W.2d 339 (1989). Due process does not require courts to provide an unlimited opportunity to present post-conviction claims or prevent a court from setting limits on the number of pages a petition may contain. Maulding, 299 Ark. 570, 776 S.W.2d 339.

Exhibits to a Rule 37 petition are considered a part of the petition for the purposes of determining whether the petition conforms to the ten-page limitation. Petitions will not be accepted for filing which exceed ten pages, unless the petitioner can demonstrate in a motion that he cannot adequately present his claims to the court in only ten pages.

It is important to note that allegations contained in a petition under Criminal Procedure Rule 37 must be supported by facts contained in the body of the petition which supports the allegations, but it is not required that documents, pages from the trial transcript, or other similar “proof’ be attached to the petition for an allegation to be considered. The court may examine the record in the trial transcript in considering a petition without the record or transcript being attached to the petition.

Here, petitioner has attached to the petition a statement about the chain-of-custody of a black bag and its contents, a letter from petitioner to his attorney about the black bag, and a page from the trial transcript wherein the court imposed sentence as a habitual offender. None of the three attachments adds information to the petition which could not have reasonably been incorporated into the body of a ten-page petition. For this reason, the motion to file an overlength Rule 37 petition is denied.

.Motion denied.

Brown, J., would grant in part.


author: Robert H. Dudley, Justice.

text:
    Sherry Leah Witkoski Myers GROOMS v. Tony Edwin MYERS, Nancy E. Myers, T. E. Myers Construction Co., Inc., Robert L. Bolin, Jr., Sandra Lea Bolin, Keith R. Taylor, Kevin Charles Myers, Rebecca Lynn Myers, Donald P. Alvis, and Hazel L. Alvis.
    91-287
    823 S.W.2d 901
    Supreme Court of Arkansas
    Opinion delivered February 17, 1992

      J. Harrod Berry, for appellant.

      Scott Manatí, for appellees.
   Robert H. Dudley, Justice.

Sherry Grooms brought suit against Troy Myers, Nancy Myers, T. E. Myers Construction Co., Inc., Robert Bolin, Sandra Bolin, Kevin Myers, Rebecca Myers, Keith Taylor, Donald Alvis, and Hazel Alvis.

Donald and Hazel Alvis moved to dismiss the action against them. The chancellor granted the motion. Sherry Grooms seeks to appeal the dismissal of the Alvises from the suit. We dismiss the appeal for the lack of an appealable order, a jurisdictional requirement we are obliged to raise even when the parties do not. Kilcrease v. Butler, 291 Ark. 275, 724 S.W.2d 169 (1987).

This is yet another attempt to appeal from an order dismissing one or some of the defendants when other defendants remain in the case, and A.R.C.P. Rule 54(b) is not complied with. We have issued numerous reminders that the rules of civil procedure do not permit an appeal in such cases except in accordance with Rule 54(b). Kilcrease v. Butler, 291 Ark. 275, 724 S.W.2d 169 (1987); Arkhola Sand & Gravel Co. v. Hutchinson, 289 Ark. 313, 711 S.W.2d 474 (1986); Sherman v. G & H Transp., Inc., 287 Ark. 25, 695 S.W.2d 832 (1985); 3-W Lumber Co. v. Housing Authority of Batesville, 287 Ark. 70, 696 S.W.2d 725 (1985); Tulio v. Arkansas Blue Cross & Blue Shield, Inc., 283 Ark. 278, 675 S.W.2d 369 (1984); Vermeer Mfg. Co. v. Vandiver Equip. Co. and Ford Motor Co., 279 Ark. 218, 650 S.W.2d 244 (1983). That was not done in this case, and the order is not appealable. Ark. R. App. P. 2.

Appeal dismissed without prejudice to an appeal from a final judgment.


author: Steele Hays, Justice. David Newbern, Justice,

text:
    Mahlon MARTIN, Director of the Arkansas Department of Finance and Administration v. COUEY CHRYSLER PLYMOUTH, INC.
    91-50
    824 S.W.2d 832
    Supreme Court of Arkansas
    Opinion delivered February 17, 1992

      Cora L. Gentry, for appellant.

      Johnson & Harrod, by: William E. Johnson, for appellee.
   Steele Hays, Justice.

By this appeal we must decide whether the Chancery Court of Ashley County had jurisdiction to enjoin the appellant, as Director of the Arkansas Department of Finance and Administration, (ADFA) from proceeding under the Arkansas Tax Procedures Act to collect unpaid gross receipts (sales) taxes from Couey Chrysler Plymouth, Inc., appellee, on the sale of new automobiles. Couey maintains that an attempt by the ADFA to collect sales taxes from a party not responsible for their payment under law is an illegal exaction within the meaning of Ark. Const, art. 16, § 13. We hold that the efforts of ADFA to collect taxes from Couey under the circumstances of this case were not an illegal exaction and, therefore, the Ashley Chancery Court had no jurisdiction.

Auditors of the ADFA examined invoices of Couey’s sales of automobiles covering a period from July 1, 1985, to June 30, 1988. When invoices given by Couey to its financing agent, Chrysler Credit Corporation were compared with records maintained by the Office of Motor Vehicles of the ADFA, the auditors discovered that Couey prepared two sets of retail installment contracts for some 340 vehicles sold during the period covered by the audit. One contract, reflecting the actual selling price, was sent to the financing agent. The other, reflecting a significantly lower purchase price, was sent to the Office of Motor Vehicles to determine the amount of gross receipts tax due on the transaction. ADFA contends the 340 transactions involved sales price discrepancies ranging from a low of $160 to a high of $10,519. The resulting loss in revenues to the state was calculated to be $60,960.46.

On October 14, 1988, AFDA notified Couey of a jeopardy assessment and demanded payment of the amount claimed, plus penalty and interest. The notice of jeopardy assessment required that Couey either pay the assessment or request an administrative hearing within five business days. Couey was notified that failure to respond within the allotted time would result in the filing of a certificate of indebtedness, the equivalent of a judgment against Couey’s real and personal property. Arkansas Code Ann. § 26-18-701 (3)(A) (1987).

Couey requested an administrative hearing and argued the consumer, rather than the dealer, was liable for gross receipts taxes under Ark. Code Ann. § 26-52-510 (1987) and that a jeopardy assessment could only be instituted against a party responsible for paying the tax, relying on Ark. Code Ann. § 26-18-402 (1987). An administrative law judge upheld the jeopardy assessment and notified Couey it had twenty days to appeal to the Commissioner.

The statutory procedure for obtaining judicial relief from an administrative decision establishing a tax deficiency is set out in Ark. Code Ann. § 26-18-406(a) (1987). Within thirty days after a final decision, a taxpayer may seek judicial relief by paying the tax under protest and filing suit to recover the amount within one year, or posting a bond in double the amount of the tax deficiency to stay the effect of the administrative decision and filing suit within thirty days. Section 28-18-406(d) provides, “ [t] he method provided in the section is the exclusive method for seeking relief from a written decision of the director establishing a deficiency in tax” and “[n]o injunction shall issue to stay proceedings for assessment or collection of any taxes levied under any state tax law.”

Couey did not pay the amount under protest or post a bond to stay the effect of the administrative decision but filed an illegal exaction suit requesting the Ashley Chancery Court for injunctive relief to prohibit ADFA from proceeding further against it, also requesting attorney’s fees and costs.

ADFA responded that Couey was liable for the gross receipts tax and the statute specifically provided no injunction could issue to stay deficiency proceedings. ADFA also counterclaimed alleging fraud, unjust enrichment and a willful attempt by Couey to evade payment of the tax under Ark. Code Ann. § 26-18-501 (1987); that Couey’s actions fraudulently caused a deficiency to be reported on a tax return in violation of Ark. Code Ann. § 26-18-208(4) (1987). Couey replied that none of the statutory provisions relied upon by the ADFA applied to an automobile dealer.

The Chancellor granted Couey’s motion for summary judgment finding no genuine issue of material fact, and that the statutes made it clear the taxpayer was the consumer, not the dealer. He also held § 26-18-406(d) to be in violation of the illegal exaction provision of the Arkansas Constitution to the extent the statute prohibited injunctive relief. Couey was awarded a $5,000 attorney’s fee pursuant to Ark. Code Ann. § 16-22-309 (1987) because AFDA’s answer to the petition stated no justiciable issue of law or fact and was without any reasonable basis. Couey reserved the right to file a motion for summary judgment as to the allegations in ADFA’s counterclaim.

On August 23, 1989, ADFA filed a first amended counterclaim, alleging that by delivering contracts reflecting an incorrect sales price to consumers Couey committed a tortious interference with an implied contract between the taxpayers and the state. ADFA also alleged intentional interference with prospective economic advantage and conversion. A second amended counterclaim, filed on May 7,1990, added a misrepresentation claim and requested punitive damages.

Couey filed a motion for summary judgment and a motion to strike and dismiss the amendments to the counterclaim. The Chancellor struck the first and second amended counterclaims due to prejudice and undue delay they would cause by presenting new tort issues. He also held ADFA estopped from asserting that Couey was liable for the gross receipts tax and that the election of remedies doctrine prevented the ADFA from first commencing jeopardy assessment procedures against Couey and then attempting to pursue non-statutory causes of action.

After striking the amendments, the Chancellor entered a summary judgment in Couey’s favor on the original counterclaim. The basis for the decision was that the statutory provisions relied upon by ADFA in the counterclaim applied only to the party responsible for paying the tax, the consumer.

On appeal, ADFA argues the Chancellor lacked subject matter jurisdiction as the statute expressly prohibits injunctive relief to stay a tax assessment proceeding. The Chancellor held Couey’s claim was an illegal exaction, and the statue prohibiting injunctive relief was in violation of Ark. Const, art. 16, § 13. ADFA maintains that because Couey does not contest the legality of the tax, no illegal exaction was presented.

Arkansas Const, art. 16, § 13, provides, “[a] ny citizen of any county, city or town may institute suit in behalf of himself and all others interested, to protect the inhabitants thereof against the enforcement of any illegal exactions whatever.” The illegal exaction provision is self-executing and requires no enabling act or supplementary legislation to make its provisions effective. The section confers the right to institute suits against the enforcement of an illegal exaction. Section 13 imposes no terms or conditions upon the right of the citizen to file suit, and this court has stated “we would be required to write something into the Constitution, which does not there appear, if we hold that this right was conditional.” Samples v. Grady, 207 Ark. 724, 182 S.W.2d 875 (1944); Nelson v. Berry Petroleum Co., 242 Ark. 273, 413 S.W.2d 46 (1967). The General Assembly has the authority to regulate the practice to be pursued in enforcing the illegal exaction provision as long as the constitutional guarantee is not abridged. Samples v. Grady, supra; Taxpayers’ Suits to Prevent Illegal Exactions in Arkansas, 7 Ark. L. Rev. 130 (1954).

In Schuman v. Ouachita County, 218 Ark. 46, 234 S.W.2d 42 (1950), the court stated that a flaw in the assessment or collection procedure, no matter how serious from the taxpayer’s point of view, will not make the exaction illegal. See also Beard v. Wilcockson, 184 Ark. 349, 42 S.W.2d 557 (1931). In the Schuman case, the defect in the procedure was that the property owners encountered undue difficulty in discharging their debt to the state because the taxes were so extended on the tax books. In the Beard case, we held there was no illegal exaction because the taxes were not illegal or unauthorized but were only excessive in their amount.

AFDA cites Hardin v. Gautney, 204 Ark. 723, 164 S.W.2d 427 (1942). Hardin, the Commissioner of Revenues, filed a certificate of indebtedness with the Circuit Clerk of Mississippi County asserting that O.M. Morgan owed gross receipts taxes on revenues generated by coin operated music machines for which Morgan had filed no returns. Morgan was notified under the statutory procedures then applicable that the Commissioner would determine the tax and after twenty days issue a certificate of indebtedness. Morgan asked to be heard, evidently contending he was not liable for the tax, as the Commissioner responded that the question of liability would not be addressed at the hearing, only the amount of tax due. Morgan did not appear at the hearing and on February 24, 1942, the certificate of indebtedness was filed. Under the procedures then in place a taxpayer had thirty days in which to either sue in his home county if he contended the transaction was not taxable or he was not the party charged by law with payment of the tax, or pay the tax and sue in Pulaski County for a refund. Morgan did neither. Rather, on March 28 he petitioned the Mississippi County Court to enjoin the Commissioner from further efforts to collect the tax. The Commissioner moved to dismiss because Morgan had not acted within thirty days as the law required. This court held there was no illegal exaction within the meaning of Ark. Const, art. 16, § 13, upholding the existing statutory procedures:

We think the legislature had a right to designate a period within which one alleged to owe the state on sales tax, or two percent on gross receipts, would be required to make his defense. If the controversy goes only to the proposition that the transaction is not taxable, or, if taxable, the person assessed is not the party charged by law with payment, such issue is determinable by the chancery court of the county where it is sought to compel collection — that is, where the certificate, prima facie, creates a lien. If the issue relates only to the amount of a valid tax to be paid, then it is appropriate for the general assembly to require payment as a condition precedent to the right to litigate as to any alleged overcharge; and since the fund, when so paid, is transmitted to Little Rock, it is competent for the lawmaking body to fix the venue in Pulaski County. [Our emphasis.]

Recently, in Taber v. Pledger, 302 Ark. 484, 791 S.W.2d 361 (1990), we said repeatedly that in order for the statutory mechanism to be superseded by an illegal exaction proceeding, the underlying validity of the tax must be challenged:

We find the tax is not an illegal tax, thus there is no illegal exaction . . .
We cannot agree that the McCarroll case gives chancellors jurisdiction to hold that the procedural requirements of the tax law do not apply when there is no allegation that the basic tax statute is void. The same is true of Harrison v. Norton, 104 Ark. 16, 148 S.W. 497 (1912), cited as a “see also” case by Taber. There, the chancellor was held to have jurisdiction of an illegal exaction suit where a county road tax was challenged because the results of the election which had resulted in the tax had allegedly been improperly reported. Again, there was a challenge to the validity of the underlying tax law. [Our emphasis.]

The wording of Ark. Const. art. 16, § 13 is broad and not to be narrowed by statute or interpretation. We believe our cases are consistent with that concept. But we also think it clear that the provision was not intended to be the vehicle by which taxpayers air individual grievances in the methods by which taxes are assessed and collected. Rather, it was intended to be the means by which taxpayers, generally in a collective capacity, resist illegal taxation.

In Pledger v. Featherlite, 308 Ark. 124, 823 S.W.2d 852 (1992), we discuss the two categories of illegal exactions which are encompassed by our cases. One category, “public funds” exaction cases, deals with the misapplication of public funds or the recovery of funds wrongly paid to a public official. Citing Brewer v. Hawkins, 242 Ark. 460, 408 S.W.2d 492 (1966), as illustrative, we said public funds exaction cases are given a broad interpretation because taxpayers are the equitable owners of all such funds and are obliged to replenish funds wrongly used. The other category, “illegal tax” exaction cases, involve a taxpayer who seeks to enjoin a governmental entity from taxing him, and are not supported by the same rationale. In this group, of which Greedup v. Franklin County, 30 Ark. 101 (1875) is typical, “the exaction itself must be alleged to be illegal before the chancery court has jurisdiction under the constitutional provision.” Featherlite, supra, at 128. Here, the legality of the tax is not at issue and therefore, no illegal exaction occurred. It follows that the chancellor had no jurisdiction in these premises.

Reversed and dismissed.

Holt, C.J., and Newbern and Corbin, JJ., dissent.

David Newbern, Justice,

dissenting. Apparently realizing the error of its position, the Arkansas Department of Finance and Administration (ADFA) effectively admitted Couey Chrysler Plymouth, Inc., (Couey) did not owe the motor vehicle sales tax ADFA was attempting to collect. It attempted unsuccessfully to amend its pleading to state various contract and tort claims. So at this point, ADFA, Couey, and the Chancellor have all concluded the attempt to impose the tax on Couey was wrong and illegal, and yet this Court refuses to characterize the collection of the tax from one who is not even the “taxpayer” under the law as an illegal exaction. That means Couey will have to pay a tax all concede it does not owe, subjecting its property to lien and execution, before it can obtain judicial relief from an act by ADFA which no one can contend was proper.

ADFA did not concede the error of its position until after the Chancellor entered summary judgment against it with respect to its tax claim. It then attempted to amend to state the alternative claims mentioned above. The Chancellor’s reaction is contained in part 4. of his statement of conclusions:

The Court further concludes the two amendments should be stricken under a combined theory of estoppel and undue prejudice. After defendants completed an audit of new car sales by plaintiff, they determined that gross receipts taxes of over $60,000.00 had not been paid on vehicles purchased from plaintiff. Arkansas Code 26-52-510 is clear that payment of such gross receipts tax is the duty of the consumer, not the dealer. Therefore, defendants had the following possible options:
A. Collect the unpaid taxes from the consumers who had allegedly underpaid, or
B. File a civil action against plaintiff, or
C. Both of the above.
None of these remedies were chosen. Instead, defendants, or their agents, assessed the taxes against plaintiff and gave notice that a Certificate of Indebtedness would be filed. Defendants knew, or certainly should have known, that there was no authority for such action under Arkansas law. Therefore, their motives must be considered. The Court has no alternative but to find the defendants opted to shortcut and simplify collection by utilizing a despotic method intended to intimidate and frighten plaintiff into submission. Legal collection of the taxes from the hundreds of consumers would have been time consuming and burdensome. A civil action against plaintiff would have been time consuming with the result not as certain as of that afforded by a successful filing of a Certificate of Indebtedness. Such certificate provides for a judgment and lien on all property owned by plaintiff, and immediate execution is possible. This is an extreme measure which should not be utilized lightly.
The plaintiff filed an action in this court for an injunction against the Certificate of Indebtedness. Even then, the defendants did not retreat from their incorrect position, but continued to attempt their bluff. Only after this Court granted plaintiffs Motion for Summary Judgment did they acknowledge the dealer was not liable for the tax. They should now be estopped from asserting such a blatantly inconsistent position. The plaintiff had no choice but to rely on the first course of action by defendants in the preparation of a defense against the Certificate of Indebtedness. To have ignored it could have invited immediate execution against his property. The Court can certainly take notice from the number of hearings, the size of the court file, and the briefs submitted that the plaintiff has incurred considerable legal expense. It would be fundamentally unfair and inequitable to allow a powerful state agency to knowingly assert an illegal position against one of its subjects and then change that position entirely after the Court has ruled in a manner which indicates that such tactics will not be allowed. Such change would unduly prejudice plaintiff and should be denied. To rule otherwise would be tantamount to condoning illegal exaction of taxes as opposed to legal civil actions any time private citizens or businesses are indebted to the state for any reason.

The majority is willing to place this Court in the anomalous posture of condoning an illegal attempt at tax collection because this case cannot be placed in one of the illegal exaction categories we have previously described. We have cases in which we have broadly defined an illegal exaction as an exaction that is either not authorized by, or contrary to, law. Hartwick v. Thorne, 300 Ark. 502, 780 S.W.2d 531 (1989); Tedford, et al. v. Mears & Scott, 258 Ark. 450, 526 S.W.2d 1 (1975); Mackey v. McDonald, 255 Ark. 978, 504 S.W.2d 726 (1974). We have written, “the remotest effect upon the taxpayer concerning any unlawful act by a tax supported program or institution may be enjoined under Article 16, Section 13, of the Arkansas Constitution.” Starnes v. Sadler, 237 Ark. 325, 372 S.W.2d 585 (1963). Our refusal to follow those cases in this instance is perhaps the ultimate nit pick.

The majority relies on Schuman v. Ouachita County, 218 Ark. 46, 234 S.W.2d 42 (1950), and Beard v. Wilcockson, 184 Ark. 349, 42 S.W.2d 557 (1931), for the proposition that a flaw in the tax assessment or collection procedure will not make the exaction itself illegal. The case now before us hardly involves a mere collection or procedural flaw, and the Schuman and Beard cases are irrelevant.

In the Schuman case the Court recognized a property tax debt existed, and the sole defect was in the procedure used by the county in recording mineral interest ownership and in collection of the appropriate taxes. In the Beard case, we held there was no illegal exaction because the taxes were not illegal or unauthorized but were only excessive in amount. I cannot conclude these cases have anything to do with an attempt to collect a tax from one who is not even the taxpayer contemplated by the law.

The majority also states that when the taxpayer only claims it is not the person or entity responsible for paying the taxes under law, no illegal exaction is presented, relying on Hardin v. Guatney, 204 Ark. 723, 164 S.W.2d 427 (1942). The Hardin case has been interpreted as meaning that only when the taxpayer claims “no tax due” could the venue of his own county be invoked. See, e.g., Scurlock, Comm. of Rev. v. Yarbrough, 224 Ark. 113, 271 S.W.2d 916 (1954). It cannot be interpreted as meaning when the taxpayer claims “no tax due” an illegal exaction is not present, as the majority suggests. The case no longer has any validity whatever, as the specific venue statute at issue in the Hardin case was repealed. We recognized that in Taber v. Pledger, 302 Ark. 484, 791 S.W.2d 361 (1990).

The majority also relies on Taber v. Pledger, supra, for the proposition that, because Couey did not claim the basic gross receipts tax unconstitutional, no illegal exaction is presented. In the Taber case, the taxpayer claimed an exemption for gross receipts tax, and we held no illegal exaction existed. The taxpayer was not contending that the underlying tax was unconstitutional or void. If Couey were a taxpayer under the tax law as ADFA contended in its pleading prior to amendment, and if Couey were questioning the right to an exemption under the law, I would hold no illegal exaction had been stated. While Couey is not questioning the validity of an underlying tax law, the point is that there is no underlying tax law, and the attempt to collect this tax from Couey was wholly unauthorized.

It should be clear that in no manner do I condone the actions ADFA alleges Couey took in attempting to assist its customers in evading full taxation on transactions with Couey. The case did not reach the proof stage, however, and Couey’s conduct is not at issue here. The issue rather is whether the actions of ADFA should be condoned in attempting to collect a tax from a citizen who had no liability-for it whatever under the law. While there may have been proper remedies for ADFA to have pursued against Couey, they were not properly pursued, and it was correct for the Chancellor to find that an attempt to collect an unauthorized “tax” was an illegal exaction.

I respectfully dissent.

Holt, C.J., and Corbin, J., join in this dissent.


author: David Newbern, Justice.

text:
    LIFE INSURANCE COMPANY of Arkansas v. Barbara Fike ASHLEY, Administratrix of the Estate of Owen L. Fike, Deceased
    91-281
    824 S.W.2d 393
    Supreme Court of Arkansas
    Opinion delivered February 17, 1992

      Davidson, Horne & Hollingsworth, by: Allan W. Horne and Patrick E. Hollingsworth, for appellant.

      Noyl Houston, for appellee.
   David Newbern, Justice.

This is an insurance case. Owen Fike died after leaving employment with Storall Manufacturing Co. which had a group life policy in which Fike participated. The policy was issued by the appellant, Life Insurance Company of Arkansas (the Company). The group insurance terminated on Fike’s last work day, and Fike was killed in an accident 88 days later. The appellee, Barbara Fike Ashley, administratrix of Fike’s estate, claimed, and the Trial Court held the estate entitled to, an amount of insurance to which Fike would have been entitled had he exercised his option to convert his group insurance to an individual policy.

The primary question presented is whether a statute requiring notice of the right to convert from group to individual life insurance upon termination of employment is satisfied if the notice is given with the initial certificate of group insurance rather than when eligibility to convert the insurance arises. Other questions involve the length of the period during which the conversion may occur and whether, in this case, the insurer ultimately conceded liability in a manner sufficient to avoid application of statutory penalties and fees. The Trial Court held in favor of the estate on all points as do we.

Fike left his employment with Storall February 12, 1985. Under the terms of the group policy, insurance terminated as to individual employees when they were no longer actively at work. The policy entitled an employee to convert from group coverage to individual coverage without evidence of insurability upon termination of employment, application, and payment of the premium. It provided that the applicant could apply for conversion within 31 days after termination of group coverage. It also provided that, if no notice of the right to convert was given, the period for exercising the conversion privilege was extended 60 days.

Fike died in an automobile accident, on May 11, 1985, without having applied for conversion. While employed at Storall, Fike received a certificate of insurance explaining his conversion right, but no additional notice was given when the group insurance terminated. Barbara Fike Ashley, Pike’s administratrix, sued the Company individually and on behalf of the estate, claiming that, as the Company did not give Fike notice of his conversion rights after termination of employment, Fike was entitled to the individual coverage to the date of his death. The Company denied coverage. Both parties moved for summary judgment, and Ashley’s motion was granted with judgment entered for $9,861.97, representing $10,000 in benefits less the premium which would have been paid had the conversion occurred. The Trial Court withheld judgment on Ashley’s additional claim for accidental death benefits of $10,000.

Ashley later amended the complaint to delete the claim for accidental death benefits and sought to recover the statutory penalty and attorney’s fee. The Trial Court granted a 12% penalty, interest, and an attorney’s fee of $4,500.

1. Notice

The controlling Statute, Ark. Code Ann. § 23-83-122 (1987), provides:

Notice as to conversion right.
(a) If any individual insured under a group policy, excluding an annuity policy, hereafter delivered in this state becomes entitled under the terms of a policy to have an individual policy of life insurance issued to him without evidence of insurability, subject to making of application and payment of the first premium within the period specified in the policy and if the individual is not given notice of the existence of the right at least fifteen (15) days prior to the expiration date of the period, then the individual shall have an additional period within which to exercise that right. Nothing in this subsection shall be construed to continue any insurance beyond the period provided in the policy.
(b) This additional period shall expire fifteen (15) days next after the individual is given the notice but in no event shall the additional period extend beyond sixty (60) days next after the expiration date of the period provided in the policy.
(c) Written notice presented to the individual or mailed by the policyholder to the last known address of the individual or mailed by the insurer to the last known address of the individual as furnished by the policyholder shall constitute notice for the purpose of this section.

We have no cases construing this section, but the meaning of the words is plain in the context of the Statute. “The individual” entitled to the notice is, according to subsection (a), “any individual . . . entitled ... to have an individual policy issued . . . .” Fikes was not such a person until his employment ended. By giving him notice, the Company could shorten the conversion period. The Statute thus clearly contemplates the notice will be given once the entitlement arises.

The Company has cited cases from other jurisdictions which would be helpful in interpreting this language if we deemed it ambiguous, but we do not think it is ambiguous. When the wording of a statute is clear and unambigious, it will be given its plain meaning. Cash v. Arkansas Comm’n on Pollution Control & Ecology, 300 Ark. 317, 778 S.W.2d 606 (1989). The notice given prior to Fike’s termination of employment did not comply with the statutory requirement, thus the conversion period was extended.

2. Extension period

Fike died more than 31 days but less than 91 days after he became eligible to convert the policy. The Trial Court found he died during the conversion period because the original 31-day period was extended to 91 days due to the failure to give notice as discussed above. The conclusion that Fike was covered by individual insurance arises from the language found in Ark. Code Ann. § 23-83-119 (1987) which provides that a person covered under the group policy who dies during the conversion period but before exercising the conversion right is entitled to “the amount of life insurance which he would have been entitled to have issued to him under the individual policy.”

The Company argues that because § 23-83-119 and §§ 23-83-117 (providing conversion must be applied for within 31 days after termination of work) and 23-83-118 (providing the minimum amount of insurance upon conversion), make no reference to the notice and extension provisions in § 23-83-122, they should be construed separately and without consideration of the notice requirement and extension provisions of § 23-83-122.

Although it is true that there is no common law extension period for insurance policies, and thus the statutes are in “derogation” of the common law and to be construed strictly, Hartford Ins. Group v. Carter, 251 Ark. 680, 473 S.W.2d 918 (1971), we cannot agree that § 23-83-122 somehow becomes irrelevant when the other sections are considered.

It is also argued that the line in § 23-83-122 which provides that “nothing in this subsection shall be construed to continue any insurance beyond the period provided in the policy” prohibits adding the 31-day and 60-day extension periods together.

The Company cites cases from other jurisdictions which hold the conversion right extension period does not extend coverage under the policy. Reference to these decisions is again unnecessary because construction comes easily from the words used. We must discern legislative intent by looking to all the statutory provisions, Shinn v. Heath, 259 Ark. 577, 535 S.W.2d 57 (1976), and giving effect to all the parts.

Fike was covered, while employed, by group insurance. That coverage terminated when his job terminated, and nothing in § 23-83-122 works to extend the group coverage. The Statute does give, and provide for extension of, a period in which one in Fike’s circumstances was eligible to exercise the right of conversion from group to individual coverage.

We are not holding that Fike was entitled to “continue any insurance beyond the periods provided in the policy.” Under no circumstances was the group coverage to be continued beyond his employment. The beneficiary recovers the amount of “individual” insurance coverage Fike was entitled to have purchased even though it was “payable as a claim under the group policy.”

The Company’s argument that this constitutes a continuation of coverage in violation of § 23-83-122 is incorrect because it fails to distinguish between group and individual coverage. The Trial Court correctly applied the conversion period extension provisions.

3. Penalties and attorney’s fee

The Company argues the awards of the statutory penalty, interest, and attorney’s fee were in error because Ashley did not recover the exact amount she initially claimed. Farm Bureau Ins. Co. v. Paladino, 264 Ark. 311, 571 S.W.2d 86 (1978). Ashley did recover exactly that which she sought in her amended complaint. We have held an insurer is obligated for the penalty where it fails to confess judgment after the amendment of pleadings to conform to the proof. Old American Life Ins. Co. v. McKenzie, 240 Ark. 984, 403 S.W.2d 94 (1966). The Company contends there was no need to confess judgment after the complaint was amended because the Trial Court had already held Ashley was entitled to recover the basic life insurance amount.

We would have found the award erroneous had the Company confessed judgment or tendered the proceeds after partial summary judgment but before the amending of the pleadings, and we recognize that the grant of partial summary judgment distinguishes this case from the Old American Life Co. case. However, in Cato v. Ark. Mun. League Health Benefit Fund, 285 Ark. 419, 688 S.W.2d 720 (1985), we suggested that some action is necessary after the amendment of the pleadings to conform to the proof to avoid the imposition of a penalty. This conclusion is very consistent with the legislatively recognized purposes of the penalty, including discouraging oppressive delay in recognition of liability, deterring arbitrary or capricious denial of claims, and insuring the ability of claimants to obtain legal representation. Aluminum Co. of America v. Henning, 260 Ark. 699, 543 S.W.2d 480 (1976). We find no error in the award of the penalty and fee.

Affirm.


author: David Newbern, Justice. Hays and Glaze, JJ.,

text:
    WAL-MART STORES, INC. v. William A. ISELY, Jr., as Father and Next Friend of Alison R. Isely, a Minor
    91-283
    823 S.W.2d 902
    Supreme Court of Arkansas
    Opinion delivered February 17, 1992

      Daily, West, Core, Coffman & Canfield, by; Robert W. Bishop, for appellant.

      William A. Isely, Jr., and Joe Cambiano, for appellee.
   David Newbern, Justice.

This case concerns the granting of a new trial on the ground of juror misconduct. The appellant, Wal-Mart Stores, Inc., contends the Trial Court lost jurisdiction by failing to rule on the motion within 30 days after it was filed, as required by Ark. R. App. P. 4(c) (1991). We agree.

Dr. William Isely brought a personal injury action against Wal-Mart on behalf of his minor daughter, Alison. The jury returned a unanimous verdict in Wal-Mart’s favor, and judgment was entered on April 2, 1991.

Dr. Isely filed a new trial motion on April 9,1991. A hearing on the motion was scheduled for May 3, 1991, but it was postponed until May 17, at Wal-Mart’s request. The hearing was held June 7, 1991, and the order granting the new trial was entered June 19, 1991, approximately 71 days after the motion was filed.

Rule 4(c)

Rule 4(c) provides in part that if a trial court neither grants nor denies a new trial motion within 30 days of its filing, the motion will be deemed denied as of the 30th day. Dr. Isely argues the Trial Court did not lose jurisdiction as a hearing on the motion was scheduled within 30 days, relying on Deason v. Farmers & Merchants Bank, 299 Ark. 167, 771 S.W.2d 749 (1989).

In the Deason case, we held “the trial court, by operation of law, loses jurisdiction to rule on a motion for a new trial after the expiration of the 30 days if no written notation is entered either taking the motion under advisement or setting a hearing date.” That case, however, was controlled by an older version of Rule 4(c), which stated that post-trial motion would be deemed denied after 30 days from its filing unless the motion was set for a hearing or was taken under advisement within 30 days after it was filed. Rule 4(c) no longer contains references to setting the motion for a hearing or taking it under advisement within 30 days. We have recently held that cases interpreting the older version no longer apply. Bush v. Bush, 306 Ark. 513, 816 S.W.2d 590 (1991).

In Phillips v. Jacobs, 305 Ark. 365, 807 S.W.2d 923 (1991), we specifically addressed the issue presented pursuant to the current Rule 4(c) and held “when a Rule 59 motion is timely made, the trial court must decide the motion within thirty days and enter that decision of record. Otherwise, the trial court loses jurisdiction to grant the relief requested in the motion.” In the present case, the Trial Court lost jurisdiction of the motion by failing to rule on it within 30 days after filing.

Reversed and dismissed.

Hays and Glaze, JJ.,

dissent. See Phillips v. Jacobs, 305 Ark. 365, 369, 807 S.W.2d 923, 926 (1991).

Dudley, J., not participating.