author: ROBERT L. Brown, Justice. Tom GLAZE, Justice.

text:
    Donald PENNINGTON, et al. v. HARVEST FOODS, INC.
    95-732
    934 S.W.2d 485
    Supreme Court of Arkansas
    Opinion delivered November 25, 1996
    [Petition for rehearing denied January 13, 1997.]

      Dodds, Kidd, Ryan & Moore, by: Charles Gregory Alagood, for appellants Joel Tumblson, Sr., and Soundra Tumblson.

      David H. Williams, for appellants Joel Tumblson, Jr., T.S.P., Inc., and Top Spread Potato, Inc.

      Wilson, Engstrom, Corum & Coulter, by: Stephen Engstrom, Gary D. Corum, and Nate Coulter, for appellee Harvest Foods, Inc.

       Glaze, J., would grant.

   ROBERT L. Brown, Justice.

This is an appeal by appellants Joel Tumblson, Sr.; Soundra Tumblson; Joel Tumblson, Jr.; T.S.P., Inc.; and Top Spread Potato, Inc. (Tumblson appellants). The appellee is Harvest Foods, Inc., a corporation that owned over 50 grocery stores at time of trial. On May 16, 1994, Harvest Foods filed its second amended complaint against Don Pennington (former President and CEO of Harvest Foods), the Tumblson appellants, John Oldner and his various businesses, and Billy J. Armstrong and Service Brokerage Company, Inc. In that complaint, Harvest Foods outlined three schemes devised by the defendants that supported causes of action for breach of fiduciary duty, civil conspiracy, conversion, and fraudulent concealment.

The first conspiracy alleged was between Pennington and John Oldner (Oldner/Pennington conspiracy). The facts asserted were that Oldner, a food broker, acquired various products such as health and beauty aids and bagged ice for resale to retail chains like Harvest Foods. Pennington allegedly received kickbacks in the form of commissions from Oldner on products sold to Harvest Foods through Oldner’s businesses. Pennington and Oldner also conspired to steer business to Oldner’s clients. Oldner in turn would pay Pennington a “consulting fee” through an account known as Capital City Marketing, which was maintained by Pennington. The conspiracy occurred in 1990 and 1991.

The second alleged conspiracy was between Pennington and Billy J. Armstrong, also a food broker (Armstrong — Pennington conspiracy), and it, too, was a kickback scheme. Armstrong owned in whole or in part Service Brokerage Company, Inc. Pennington sent business to Armstrong through Service Brokerage Company, and the two men split the brokerage fees, commissions, and “slotting fees” paid by manufacturers for space in the chain’s warehouse. Pennington was also paid by Armstrong as a “consultant.” Payments were made to Pennington’s Capital City Marketing account set up by Pennington. Coleman Dairy, Bunzl Mac-Pac, Sweetheart Cups, and other vendors were alleged to be involved through Armstrong. The conspiracy occurred from 1989 into 1991.

The third alleged conspiracy involved Pennington and the Tumblson appellants (Tumblson/Pennington conspiracy) and was a self-dealing scheme. Joel Tumblson, Sr., was the produce merchandising manager at Harvest Foods and in that capacity bought produce for the store. He worked under Pennington, and the two men started a company known as T.S.P. in 1987, which bought produce, packaged it, and sold it to Harvest Foods. Soundra Tumblson worked for T.S.P. as bookkeeper and eventually owned half the stock of the company. Betty Bryant, Pennington’s former spouse, owned the other half of the company’s stock. Joel Tumblson, Jr., managed the day-to-day operations of T.S.P. T.S.P. sold potatoes, tomatoes, onions, watermelons, and other produce to Harvest Foods at inflated prices, with Joel Tumblson, Sr., controlling both ends of the transaction. Joel Tumblson, Sr., and Pennington divided the profits derived at T.S.P. The arrangement continued into 1991.

On June 30, 1993, T.S.P. and Joel Tumblson, Jr., moved to sever the claims against them from the claims involving the Oldner/ Pennington conspiracy and the Armstrong/Pennington conspiracy. Two days later, Joel Tumblson, Sr., and Soundra Tumblson filed their motion to sever on the same basis. A hearing on the motions was held on August 2, 1993. At the hearing, the Tumblson appellants argued that Pennington was the only link among the defendants and the three conspiracies and that the Tumblson/Pennington conspiracy should be severed. In denying the motions to sever, the court said:

There are doubts in my mind that this would not be proper to sever, but if the plaintiff feels comfortable in proceeding without the severance and feels strongly enough that this is not reversible error, I’m not going to sever. I think that the Supreme Court might well agree with you defendants that is (sic) should be severed but it’s the plaintiff’s lawsuit.

The order denying severance was entered on December 1, 1993.

The three-and-one-half-week trial began on September 13, 1994. Before the testimony, counsel for T.S.P. and Joel Tumblson, Jr., objected to Harvest Foods “changing horses” at trial on their theory of damages because the company had not previously stated it was going to pursue the benefits received by the Tumblsons and Pennington as a damage theory in addition to lost profits to the company. Counsel for Harvest Foods denied the allegation and argued that the damages were not inconsistent. Counsel for Joel Tumblson, Sr., and Soundra Tumblson added that the new damage theory smacked of restitution and claimed that Harvest Foods did not disclose this theory when questioned during discovery. The trial court denied a motion for continuance and ruled that the defendants were not surprised by the evidence and further that the damages for benefits received were part and parcel of the overall damages claimed by Harvest Foods.

Because of the issues raised at trial and on appeal, we will present an abstract of the testimony at trial. Robert Rough, who had previously worked for Harvest Foods as Chief Financial Officer, testified that he was the second highest ranking officer at the company. Rough stated that after Pennington left the company, he collected the financial records involving Pennington’s transactions. He found three schemes involving Oldner and Pennington. One involved consulting fees and brokerage commissions for health and beauty products purchased from SAJ Distributors and bagged ice purchased from Big-R Ice Company. The fees and commissions were split between the men.

Rough also described three schemes under the Armstrong/ Pennington conspiracy. Coleman Dairy had been a supplier of dairy products to Harvest Foods without the need for a food broker. Rough testified that Armstrong’s firm, Service Brokerage, began acting as a food broker for the account and that funds were traced from Harvest Foods to Service Brokerage and then to Pennington’s Capital City Marketing account. Rough explained that Armstrong claimed that the money paid to Pennington’s account was for consulting services by Pennington. The second scheme involved Bunzl Mac-Pac, a distributor of foam trays for meat and plastic bags for produce. As in the case of Coleman Dairy, Harvest Foods was already getting its foam trays from another company without the need for a food broker. Thereafter, the original supplier of foam trays wanted to include Bunzl Mac-Pac in the distribution scenario. At first, the price of the trays did not change. Rough testified that it was later discovered that the price of the foam trays had increased exactly six percent and that funds were routed to Armstrong’s firm and Pennington’s Capital City Marketing account in connection with brokerage payments for the foam trays. For the final scheme, Rough testified that Harvest Foods did not receive slotting fees for space in Harvest Foods’s warehouse for a line of new products from Sweetheart Cup as it should have. The payment was made directly to Service Brokerage.

Rough next testified that Don and Betty Pennington and Joel and Soundra Tumblson were the owners of T.S.P. He stated that he figured the total benefit to the Penningtons under the potato scheme from 1988 to 1991 was $311,761. The benefit to Joel and Soundra Tumblson for the same period was $336,047. Joel Tumbl-son, Sr., received his salary from Harvest Foods in addition to that. Rough believed that the company was entided to recover the salaries paid to all three Tumblsons. His total figure for benefits received by the Tumblson/Pennington conspirators over the term of the conspiracy was in excess of $1,300,000.

Rough further testified that Harvest Foods was damaged by paying inflated prices to T.S.P. He concluded that T.S.P. owed all of its profits to Harvest Foods. T.S.E’s sales to Harvest Foods from 1987 to 1991 were $14.3 million or 16% to 18% of Harvest Foods’s total produce purchases. Rough admitted that there were no documents to tie Armstrong into the T.S.P. or Oldner schemes.

Brad Moore testified that he worked for Bunzl Mac-Pac, which supplied foam trays to the meat department at Harvest Foods. Bunzl used Armstrong’s company, Service Brokerage, as a food broker, and Armstrong approached Moore about paying Armstrong a direct commission. Moore initially declined because he would have to raise the price of his product to include the commission in order to maintain profit margin. After a business lunch with Armstrong, Pennington, and Bill Mathis, who was in charge of the meat department, Moore agreed to raise the price of the foam trays and further agreed that the arrangement would go through Armstrong’s brokerage firm. By letter, Armstrong instructed Brad Moore to make the additional payments to Pennington’s Capital City Marketing account.

Douglas Johnson worked for Sweetheart Cup Company. He testified that Harvest Foods was to be paid $22,800 as a slotting fee by his company. The money was paid into Armstrong’s account for Service Brokerage, but Johnson later concluded that Harvest Foods never received that money. At the conclusion of Johnson’s testimony, counsel for T.S.P. and Joel Tumblson, Jr., renewed a continuing objection to the testimony of the last few witnesses as irrelevant and prejudicial to their clients. They moved for a curative instruction, but the court denied the motion.

Roy Kipp, at time of trial an executive vice-president of Harvest Foods, testified that he took over the produce department previously managed by Joel Tumblson, Sr. He knew that Tumblson had an ownership interest in T.S.P., and he instructed his buyer to stop buying from T.S.P. He also implemented a new competitive bidding system for suppliers that had not previously been required. He testified that the potatoes received after the relationship with T.S.P. was terminated were fresher and a better quality. He testified that gross profit increased by 10% after he instituted competition and made the change from T.S.P. He estimated that the company had overpaid T.S.P. for potatoes by about $413,955.

By way of deposition, Soundra Tumblson testified that she owned 50% of the stock of T.S.P. and that Betty Pennington owned the remaining 50%. She stated that Betty Pennington was also on the board of directors but never attended a meeting. Joel Tumblson, Sr., testified in his deposition that he had worked for Safeway and then Harvest Foods since 1964. He stated that only his wife had an ownership interest in T.S.P. He testified that he decided who would run T.S.P. and how much they would be paid. He added that Joel Tumblson, Jr., paid him some cash from the sale of watermelons, and he split the money with Pennington. He did this up to twelve times, he stated, and never counted the money. He denied that T.S.P. ever sold anything to Harvest Foods but believed that T.S.P. sold to food brokers who may have sold to Harvest foods.

Joel Tumblson, Jr., testified that he made $40,000 per year working for T.S.P. He started working for T.S.P. in 1987 as a forklift operator and eventually took over the operation in Little Rock. He described T.S.P. as a “potato shed” where potatoes were graded and packaged for resale as well as onions, tomatoes, watermelons, and other produce. Harvest Foods was T.S.P.’s largest customer with at least 50% to 75% of its sales being made to Harvest Foods. He added that he never knew who the shareholders and directors of T.S.P. were. He did not see anything wrong with T.S.R’s selling produce to Harvest Foods even though his father ran the produce department there. He admitted that T.S.P.’s other customers were probably getting a cheaper potato than Harvest Foods.

Dr. Charles Venus, an economist and expert witness for Harvest Foods, testified about lost profits to Harvest Foods. The Tumblson appellants again objected to his testimony as prejudicial because he propounded two theories of damage recovery — benefits received by the conspirators and lost profits to Harvest Foods — but the trial court overruled the objection. Venus testified that T.S.P. sold 94 different products to Harvest Foods. After going through the figures and his calculations, he concluded that there was a 5.14% change in gross profits to Harvest Foods for the period when T.S.P. was selling produce to Harvest Foods compared to the period when it was not, which translated into a loss to Harvest Foods of $1,545,063 per year over the three and three-quarters years of T.S.R’s business relationship. He estimated T.S.P.’s markup at 28% and placed the total lost profits to Harvest Foods at $5,700,000. Venus testified that his estimate of $1.5 million in damages per year was a minimum when compared to Roy Kipp’s estimate of a $2.5 million loss per year.

Harvest Foods then introduced the deposition of Don Pennington. Pennington testified that his salary from Harvest Foods was $165,000 per year. He denied having income from any other source but stated that his wife received $83,000 annually from T.S.P. as a director and that he deposited those fees into their joint checking account. He testified that he had worked as a consultant for Armstrong and Oldner. In 1990, he received income for his various consulting services with them in the neighborhood of $186,892.26. That year, he withdrew $184,700 from the Capital City Marketing account for those services. He testified that he was a passive investor in T.S.P. According to Pennington, the board of directors of Harvest Foods was aware of his relationship with T.S.P. He testified that Joel Tumblson, Sr., would pay him $2,000 to $3,000 periodically — sometimes twice a month. He added that even though his wife was a director of T.S.P., she was never involved in the business. Joel Tumblson, Sr., according to Pennington, talked him into starting T.S.P., and there was no initial investment required. Pennington denied knowing that T.S.P. did direct business with Harvest Foods but believed instead that T.S.P. used a food broker as an intermediary.

Betty Bryant, Pennington’s ex-wife, testified that her divorce became final in October of 1991. She testified that in 1987, Pennington stopped allowing her to write checks and gave her cash when she needed it because he did not want anyone knowing his business. She did not know about her involvement with T.S.P. until Pennington received a payment from the company in an envelope bearing her initials, which she found in the trash. She also found a check made payable to her for director’s fees in the amount of $16,750, but she never received the money. She later learned that she had been listed as an officer and director of T.S.P. She testified that Pennington told her that he bought a car for Joel Tumblson, Sr., because he had made him over $800,000 the previous year.

After Harvest Foods rested, counsel for Joel Tumblson, Sr., moved for a directed verdict and argued to the trial court that his client did not owe a fiduciary duty to Harvest Foods because he was only a managerial employee of the company. He also moved for a directed verdict because there was insufficient evidence that Soun-dra Tumblson aided and abetted her husband in a breach of fiduciary duty. The trial court denied the motions. The Tumblson appellants then moved for a mistrial based on the failure to sever the Tumblson/Pennington case from the other two conspiracies. The trial court expressed concern over the motions for mistrial but denied them. The trial court did, however, reject joint and several liability for all defendants and limited joint and several liability to the participants in each of the three conspiracies.

Liles Henry, a CPA with a masters degree in statistics, testified in the case-in-chief of the Tumblson appellants. Henry criticized Dr. Venus’s calculations. He testified that the benefit received by Pennington for the T.S.P. arrangement over the period in question was $276,750, and the benefit received by Joel and Soundra Tumbl-son was $265,878. He saw no benefit to Joel Tumblson, Jr., because he was merely a salaried employee of T.S.P. After several more witnesses testified, the Tumblson appellants rested and generally renewed their motions, including their motion for a mistrial which had been couched in terms of severance. They were denied. There were two rebuttal witnesses by Harvest Foods. Additional motions were not made following their testimony.

During the arguments over the instructions, counsel for Joel Tumblson, Jr., and T.S.P. objected to the damage instruction because the testimony about lost profits to Harvest Foods was speculative and there was no showing of proximate causation relating to lost profits. Counsel for Joel Tumblson, Sr., and Soundra Tumblson complained that the instruction was improper because it entailed two conflicting theories of damage — benefits received and lost profits to the company — which required an election of remedies.

Counsel for Harvest Foods responded that this issue had been decided before trial and by the denial of motions for directed verdict. Counsel for Pennington objected to the language of the damage instruction and proffered his own instruction that would only allow damages for benefits received by the alleged conspirators. The jury was instructed to consider the three conspiracies separately.

The jury rendered its judgment in the form of interrogatories. The jury specifically found that (1) Pennington breached his fiduciary duty in connection with the Oldner transactions; (2) Pennington committed fraud by his nondisclosure of the Oldner transactions; (3) Pennington breached his fiduciary duty for transactions involving T.S.P. and Top Spread; (4) Pennington committed fraud in connection with the T.S.P. and Top Spread transactions; (5) Joel Tumblson, Sr., owed and breached his fiduciary duty to Harvest Foods; (6) Pennington breached his fiduciary duty in regard to the Armstrong transactions with Coleman Dairy, Bunzl, and Sweetheart Cup; (7) Pennington committed fraud for his nondisclosure of the Armstrong transactions; (8) Oldner and his companies aided and abetted Pennington in the breach of his fiduciary duty; (9) Oldner and his companies conspired with Pennington in the breach of his fiduciary duty; (10) the Tumblson appellants aided and abetted Pennington or Joel Tumblson, Sr., in the breach of his fiduciary duty; (11) Joel Tumblson, Sr., conspired with Pennington and that Soundra Tumblson and Joel Tumblson, Jr., conspired with Joel Tumblson, Sr., and/or Pennington in the breach of their fiduciary duties; (12) and (13) Armstrong aided and abetted Pennington and conspired with him in the breach of his fiduciary duties in the Coleman Dairy, Bunzl, and Sweetheart Cup deals.

The jury found that Harvest Foods was damaged in the amount of $2,000,000 by the Oldner transactions, $3,250,000 by the T.S.P. transactions, and $115,121.72 by the Armstrong transactions. In the judgment, Pennington, Oldner, and the Oldner Companies were assessed damages, jointly and severally, in the amount of $769,805.91 for fraud and breach of fiduciary duty. Pennington was adjudged liable for the additional $1,165,194.09 attributed to the Oldner/Pennington conspiracy. Pennington, Tumblson, Sr., Tumblson, Jr., Soundra Tumblson, T.S.P., and Top Spread were held jointly and severally liable for $3,250,000. Pennington, Armstrong, and Service Brokerage, Inc. were found to be jointly and severally liable for $102,621.72. The jury further awarded $1,000,000 in punitive damages against Pennington and $500,000 in punitive damages against Joel Tumblson, Sr.

On November 8, 1994, T.S.P. and Joel Tumblson, Jr., moved for a new trial or, alternatively, for remittitur. They alleged that the trial court abused its discretion in refusing to grant severance and that this resulted in an award of excessive damages against them on insufficient evidence. They also contended that Harvest Foods was erroneously permitted to submit two theories of recovery to the jury that resulted in a double recovery.

On that same date, Joel Tumblson, Sr., and Soundra Tumblson moved for a new trial. They, too, complained that the trial court erred in failing to sever the cases because prejudicial testimony impacted their case. The Tumblsons also claimed that they should have been granted a continuance when they learned of Harvest Foods’s attempt to recover under two conflicting damage theories. Finally, they complained that the damages were not supported by the evidence.

The trial court denied the post-trial motions without discussion.

The Tumblson appellants now claim on appeal (1) Harvest Foods received a double recovery, (2) proof of damages was insufficient, (3) denial of a continuance was an abuse of discretion, (4) the trial court erred in denying severance of the trials, and (5) Joel Tumblson, Sr., owed no fiduciary duty to Harvest Foods. We agree that the Tumblson/Pennington conspiracy should have been tried separately from the Oldner/Pennington and Armstrong/Pennington conspiracies. We further find no basis in the record for the $3,250,000 damage award against the Tumblson appellants which lends credence to their contention of confusion on the part of the jury in making the award. We reverse the judgment against the Tumblson appellants and remand for a new trial.

I. Severance

The Tumblson appellants contend that they were prejudiced by a joint trial which involved two unrelated conspiracies: the Oldner/Pennington conspiracy and the Armstrong/Pennington conspiracy. Though counsel for Harvest Foods made representations before trial that these two conspiracies were intertwined with the Tumblson/Pennington conspiracy, there was no proof at trial to evidence that the conspiracies were interrelated. As Harvest Foods admits, the Tumblson appellants repeatedly moved for severance throughout the trial and again did so in their motions for a new trial.

The relevant rules are Rule 20 and Rule 42 of the Arkansas Rules of Civil Procedure. The apposite part of Rule 20 on permissive joinder of parties reads:

(a) Permissive Joinder. ... All persons may be joined in one action as defendants if there is asserted against them joindy, severally, or in the alternative, any right to relief in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all defendants will arise in the action.
(b) Separate Trials. The court may make such orders as will prevent a party from being embarrassed, delayed, or put to expense by the inclusion of a party against whom he asserts no claim and who asserts no claim against him and may order separate trials or make other orders to prevent delay or prejudice.

Rule 42 reads:

(a) Consolidation. When actions involving a common question of law or fact are pending before the court, it may order a joint hearing or trial of any or all the matters in issue in the actions; it may order all the actions consolidated; and it may make such orders concerning proceedings therein as may tend to avoid unnecessary costs or delays.
(b) Separate Trials. The court, in furtherance of convenience or to avoid prejudice, or when separate trial will be conducive to expedition and economy, may order a separate trial of any claim, cross-claim, counterclaim, or third-party claim, or of any separate issue or any number of claims, cross-claims, counterclaims, third-party claims, or issues.

A trial court’s order pursuant to Rule 42 is a matter within the trial court’s discretion, and the court’s decision will not be reversed absent a showing of abuse of that discretion. Ciba-Geigy Corp. v. Alter, 309 Ark. 426, 834 S.W.2d 136 (1992); Missouri Pac. R.R. Co. v. Arkansas Sheriff’s Boy’s Ranch, 280 Ark. 53, 655 S.W.2d 389 (1983).

The primary purpose of the rule is to advance judicial economy so long as the parties are not prejudiced. See Ciba-Geigy Corp. v. Alter, supra. The trial court’s abuse of discretion in denying severance can be demonstrated by a showing of prejudice to the complaining party. Id.

The conspiracy theory advanced by Harvest Foods for joinder of party defendants is a wheel-conspiracy theory in which Don Pennington sat at the hub of the wheel and the Oldner/Pennington conspiracy, Armstrong/Pennington conspiracy, and Tumblson/ Pennington conspiracy were separate spokes of the wheel. In 1983, the Eighth Circuit Court of Appeals affirmed a summary judgment in an antitrust case in favor of corporate defendants and the Department of Agriculture extension veterinarian, in part, on the basis that the evidence of the antitrust violation did not support a finding of a hub-and-spoke conspiracy. Impro Products, Inc. v. Herrick, 715 F.2d 1267 (8th Cir. 1983). The Court of Appeals stated:

Second, the record shows that none of the corporate defendants communicated with any of the others concerning Impro or its products until after the plaintiff commenced this lawsuit, and that none of the corporate defendants knew that Herrick had consulting agreements with any of the other corporate defendants. This evidence — combined with the district court’s findings that none of the corporate defendants had entered into an agreement with Dr. Herrick to disparage Impro — precludes this Court from concluding, as required by the Elder-Beerman test [Elder-Beerman Stores Corp. v. Federated Dep’t Stores, Inc., 459 F.2d 138 (6th Cir. 1972)], that there existed an overall plan to suppress the plaintiff as a competitor or that each defendant had knowledge that others were involved in the conspiracy.

Id. at 1280.

Three cases are instructive on the wheel conspiracy. Corrigan v. Methodist Hospital, 160 F.R.D. 55 (E.D. Pa. 1995); S.E.C. v. Peters, 735 F. Supp. 1505 (D. Kan. 1990), rev’d on other grounds, 978 F.2d 1162 (10th Cir. 1992); Tri-R Systems, Ltd. v. Friedman & Son, Inc., 94 F.R.D. 726 (D. Colo. 1982). In each of these cases, a motion for separate trial was made and in each case the motion was denied.

In Corrigan v. Methodist Hospital, supra, the medical physician sought severance of the negligence and informed-consent claims against him from those against the hospital for negligent credentialling. The district court noted that separate trials were ordered only when necessary. Citing Tri-R Systems, Ltd. v. Friedman & Son, Inc., supra, the court set out the three factors to weigh in deciding to order separate trials for separate defendants:

These are 1) whether separate trials would further the convenience of the parties; 2) whether separate trials would promote judicial economy; and 3) whether separate trials would avoid substantial prejudice to the parties. Tri-R Sys. v. Friedman & Son, 94 F.R.D. 726, 727 (D.Colo. 1982).

Corrigan, 160 F.R.D. at 57. The mere possibility of some prejudice is not enough, the district court concluded, where prejudice is not substantial and where there are strong countervailing considerations of judicial economy. Id.

The district court then noted the “spillover” effect that can occur when the evidence of specific injuries suffered by the plaintiff might influence the jury’s consideration of other issues. According to the district court, steps to remedy prejudice might involve protective measures like cautionary warnings, limiting instructions, and other instructions to the jury. The court concluded, however, that the physician had presented no evidence that the proof and witnesses in each issue were different and easily separable. That is not the situation in the case before us.

Our court has considered the detrimental impact of combined trials under certain circumstances. In Ciba-Geigy Corp. v. Alter, supra, we held that the trial court abused its discretion in refusing to bifurcate a claim of breach of a settlement contract from claims of strict liability, negligence, breach of warranty, and misrepresentation. The jury returned a general verdict of $100,410.51, and we reversed due to substantial prejudice caused by the inadmissible evidence concerning the settlement agreement, which was presented to the jury. In Missouri Pac. R.R. Co. v. Arkansas Sheriff’s Boy’s Ranch, supra, we held that the defendant railroad company was prejudiced by the joinder of claims by 16 landowners against it, with each claiming punitive damages, because this called undue attention to the need to punish the tortfeasor. We noted that there were common questions of law and fact in the punitive-damages claims, but we concluded that severance was appropriate in that case for purposes of determining punitive damages because consolidation substantially prejudiced the defendant. See also Clay v. State, 318 Ark. 550, 886 S.W.2d 608 (1994) (criminal case where prejudice resulted from trying defendant for five sex offenses involving different defendants at different locations over a period of 12 months).

It is apparent in this case that as related to Don Pennington there were common questions of law and fact in the Oldner/Pennington, Armstrong/Pennington, and Tumblson/Pennington conspiracies. The Tumblson appellants, however, as contrasted to Don Pennington, shared no common questions of law or fact with the other conspiracies. The Tumblson appellants contend that the Pennington hub was not enough to overcome the substantial prejudice that resulted from trying the unrelated cases together. Harvest Foods parries that argument with its contention that the schemes were sufficiently related in time, place, and modus operandi to justify trying them together. The company asserts that the common scheme among all of the defendants was to “take what you can from the henhouse (Harvest) while the fox (Pennington) is guarding the door.”

First, it is necessary to address Harvest Foods’s contention that there was sufficient evidence of a conspiracy among all the defendants. If there was no common scheme and the Tumblson appellants were prejudiced at trial, the trial court abused its discretion in denying the motions to sever. To prove the fox-in-the-henhouse argument, Harvest Foods had to show knowledge of the conspiracies on the part of the actors. See Kotteakos v. United States, 328 U.S. 750 (1946) (criminal case). Harvest Foods’s assertion that Armstrong, Oldner, and the Tumblsons were acting in concert because each shared consulting fees with Pennington — or, in the case of the Tumblsons, income from T.S.P. — does not by itself show knowledge of the other conspiracies. The only evidence of a combined conspiracy is the existence of the hub, Pennington. There is nothing connecting the spokes of that wheel and thus nothing exhibiting knowledge among the separate conspiracies. In short, we fail to perceive the common questions of law and fact that are necessary to link the Tumblson appellants to the Oldner/Pen-nington and Armstrong/Pennington conspiracies.

Nor do we agree with Harvest Foods that the Court of Appeals’s decision in Dooley v. Cecil Edwards Constr. Co., Inc., 13 Ark. App. 170, 681 S.W.2d 399 (1984), decides the matter. In Dooley, a general contractor (Edwards) hired a plumbing concern (Cooksey) as a subcontractor to work on five projects for the owners. Cooksey testified that he had a separate agreement with the owners to bill them direcdy for work done. Edwards and Cooksey then sued thé owners for failure to pay, and the owners moved to sever the actions. The trial court denied the motion, and the Court of Appeals affirmed on the basis that both plaintiffs were involved in the same series of transactions with the owners and there were common questions of law and fact in the two actions. In particular, the appellate court pointed to the necessity to establish the billing arrangements among the owners, Edwards, and Cooksey. That situation is a far cry from the case before us. Here, there was no proven linkage among the Tumblsons, Oldner, and Armstrong, when Pennington was removed from the picture.

We next must address whether the Tumblson appellants were prejudiced by the failure to sever under Rule 20(b) or Rule 42(b). Judicial economy unquestionably was served by combining all of the Harvest Foods claims for the three conspiracies. Nevertheless, that laudable goal must be weighed against unfair prejudice to a litigant. The jury in this case sat through almost four weeks of trial that culminated in nearly 7,000 pages of record. The majority of the witnesses called by Harvest Foods to testify about the various schemes gave testimony about the Oldner/Pennington conspiracy and the Armstrong/Pennington conspiracy. We conclude that by necessity there was unfair prejudice to the Tumblson appellants due to the spillover evidence which made them more readily culpable in the eyes of the jury because of their apparent association with Oldner and Armstrong. Although there was strong evidence of self-dealing on the part of Joel Tumblson, Sr., that evidence was improperly bolstered by the fact that Pennington had involved food brokers (Oldner and Armstrong) in different conspiratorial schemes against the company. While this evidence may have been relevant for the case against Pennington, it was wholly irrelevant to the Tumblsons’ case.

Harvest Foods argues that the proof of the other two conspiracies would have come in against Pennington in a separate trial for the Tumblson/Pennington conspiracy under Rule 404(b) of the Arkansas Rules of Evidence as proof of motive, knowledge, or intent. Thus, the company questions the existence of prejudice. We see a marked distinction between introduction of proof of conspiratorial intent related solely to Pennington as compared to a joint trial with the alleged conspirators of three separate and distinct conspiracies seated together as defendants. Nor are we convinced that an instruction to the jury to separate the conspiracies and special interrogatories to the jury cure the prejudice.

It is easy to be seduced by the appeal of judicial economy. Here, however, we conclude that the mountain of evidence against Oldner and Armstrong and their relationship with Pennington could only have disparaged the ability of the Tumblson appellants to receive a fair trial. We hold that the trial court, which was ambivalent on the severance point from the outset, abused its discretion in denying severance.

II. Damages

The Tumblson appellants further claim that it was error to submit damages of both lost profits to Harvest Foods and benefits received by the conspirators because the theories conflicted. They further contend that Harvest Foods should have been required to choose one or the other theory of damages.

The trial court gave the following instruction to the jury:

If an interrogatory requires you to assess the damages of Harvest Foods in connection with the transactions involving T.S.P., Inc., or Top Spread Potato, Inc., you must then fix the amount of money which will reasonably and fairly compensate Harvest Foods for any of the following elements of damage:
First, the value of any benefits received as the result of the breach of a fiduciary duty, the conspiracy to breach a fiduciary duty or the aiding and abetting of the breach of a fiduciary duty; or
Second, the value of any lost profits by Harvest Foods as a result of the breach of a fiduciary duty, the conspiracy to breach a fiduciary duty or the aiding and abetting of the breach of fiduciary duty.
Whether either or both of these elements of damage has been proved by the evidence is for you to determine.

The Tumblson appellants read this instruction to mean that the jury could have understood the last sentence of the instruction to mean that it could combine both theories of damage for a recovery.

We disagree. The instruction reads in the alternative. Moreover, we have said that a plaintiff is not required to select a theory of damages before trial but may pursue both remedies until the time that the jury is instructed, when it must be made clear that the jury is required to choose one or the other. Smith v. Walt Bennett Ford, Inc., 314 Ark. 591, 864 S.W.2d 817 (1993). While we find the instruction minimally sufficient to apprise the jury of its duty to assess damages under only one theory, for purposes of retrial, we underscore the necessity to state this charge with clarity. The instruction directing the jury to choose one theory of damages should be made even clearer to eliminate any confusion.

We are concerned, nevertheless, by the jury verdict of $3,250,000 against the Tumblson appellants. There appears to be no rhyme or reason for this amount. The Tumblson appellants assert that the jury was left to speculate about the amount of lost profits. They contest the methodology used by Dr. Charles Venus where he took the “before-and-after” data from Roy Kipp relating to T.S.P. sales to Harvest Foods and extrapolated that into lost profits to the company for the three years and nine months in question. Total lost profits, according to Venus, were $5,700,000.

Robert Rough, former Chief Financial Officer for Harvest Foods, offered a benefits-received analysis. He calculated damages for ill-gotten gains to the conspirators of more than $1,300,000. Liles Henry, an accountant for the Tumblson appellants put the total figure for restitution by the conspirators at substantially less than the Rough figure — $276,750 for Pennington and $265,878 for Joel Tumblson, Sr., and Soundra Tumblson. Thus, the jury had multiple calculations for damages before it. Yet none appears to correspond to the verdict of $3,250,000.

This court is exceedingly reluctant to question a jury verdict. At the same time, the verdict must have some relationship to the damages proved. Either the jury agrees with the evidence of damages or it does not. Here the verdict suggests confusion or even speculation on the part of the jury. The questionable award adds additional weight to our decision to remand for a new trial.

III. Fiduciary Duty

For purposes of retrial, we address the argument that Joel Tumblson, Sr., owed no fiduciary duty to Harvest Foods because he was neither an officer nor a director of the corporation but only a manager. Our Business Corporation Act does not specifically address the fiduciary duty of a manager. See Ark. Code Ann. §§ 4-27-830 to 831, 4-27-842 (Repl. 1996). Nevertheless, this court has stated that a manager owes a fiduciary duty to his business. See Tandy Corp. v. Bone, 283 Ark. 399, 678 S.W.2d 312 (1984); see also Raines v. Toney, 228 Ark. 1170, 313 S.W.2d 802 (1958). We see no reason to diverge from our previous statements on this point.

Reversed and remanded.

Glaze, J., dissents.

Tom GLAZE, Justice.

I respectfully dissent. An order of consolidation is a matter of discretion with the trial judge, and this court has held that it will not reverse such an order except for abuse of that discretion. Mo. Pac. R.R. Co. v. Ark. Sheriff’s Boys’ Ranch, 280 Ark. 53, 655 S.W.2d 389 (1983); Ark. R. Civ. P. 42(b). The purpose of Rule 42(b), this court’s rule permitting consolidation, is to further convenience, avoid delay and prejudice, and serve the needs of justice. Ciba-Geigy Corp. v. Alter, 309 Ark. 426, 834 S.W.2d 136 (1992). The primary concern is efficient judicial administration, as long as no party suffers prejudice by the bifurcation. Id. at 436.

The rule in Arkansas regarding severance is that, where the defendants were involved in the same series of transactions, and where, at trial, the testimony revealed that there were questions of law and fact common to the defendants that arose in their actions, a trial court’s decision to permit joinder of the defendants is correct and prevents needless waste of scarce space on the court’s docket. Dooley v. Cecil Edwards Construction Co., 13 Ark. App. 170, 681 S.W.2d 399 (1984).

The Tumblsons argue that the trial court’s rationale for denying severance for judicial economy cannot stand. They cite Ciba-Geigy Corp. where this court held that “in no area of law are we disposed to promote the interests of judicial economy over a party’s right to receive a fair trial.” 309 Ark. at 437. However, the facts in Ciba-Geigy are so dissimilar to the present case that it is inapplicable. In Ciba-Geigy, the trial court joined a strict liability claim for damages with a claim asserting breach of a settlement agreement arising out of the same dispute. Because evidence of setdement negotiations are inadmissible under Ark. R. Evid. 408, that court’s ruling was clearly reversible error.

The Tumblsons also contend that Ark. Rule Civ. P. 20(a), the permissive joinder rule, is not applicable to this case, because there were no common questions of fact or law between the defendants. They argue that there is no civil conspiracy here, defined by this court as “a combination of two or more persons to accomplish a purpose that is unlawful or oppressive or to accomplish some purpose, not in itself unlawful, oppressive, or immoral, by unlawful, oppressive or immoral means, to the injury of another.” Mason v. Funderbank, 247 Ark. 521, 446 S.W.2d 543 (1969). The Tumblsons compare the present case to Kotteakos v. United States, 328 U.S. 750 (1946), wherein the Court found a lack of interdependence between the thirty-two defendants on trial and eight conspiracies they were accused of to support a conspiracy theory.

However, Harvest Foods contends, and I agree, that the common thread between the defendants here is the corruption of Don Pennington, Harvest Food’s former CEO. It states that the same proof that shows the defendants’ common scheme would have been admissible at separate trials because it proves intent to defraud Harvest Foods. See Ark. Rule Evid. 404(b); Blaylock v. Strecker, 291 Ark. 340, 724 S.W.2d 470 (1987).

In my view, evidence of Pennington’s contemporaneous breaches of fiduciary duties alongside the other defendants showed that Pennington and his cohorts were not merely consulting, but consciously working with the same purpose or object in mind — to defraud Harvest Foods. In other words, while all of the schemes and conspiracies involved some slight variations in how they were conducted, they were all designed and calculated to defraud Harvest Foods during essentially the same period of time. In my opinion, this proof evidences a question of fact common to all the defendants in this case, thus satisfying the requirements of this court’s permissive joinder and consolidation rules. At the very least, I cannot say the trial judge abused his discretion in finding these defendants should be made party-defendants in this conspiracy case.

       The corporate name was changed to Top Spread Potato, Inc., in 1989. The company’s operation moved to Oklahoma City, Oklahoma in 1990. The reference in this opinion for both operations will be T.S.P.

       Oldner was given a credit in the amount of $65,000 for a settlement reached between Scott McPherson, a former employee, and Harvest Foods in connection to the Oldner transactions. The jury had originally assessed $834,805.91.

       Appeals by Pennington, Armstrong, and Service Brokerage, Inc, were dismissed for failure to file the transcript in a timely manner. Pennington v. Harvest Foods, Inc., 322 Ark. 820, 913 S.W.2d 758 (1995) (per curiam). The appeal of Oldner and his businesses has been stayed. Pennington v. Harvest Foods, Inc., 326 Ark. 272, 929 S.W.2d 162 (1996).


source: Caselaw Access Project

author: Robert L. Brown, Justice.

license: Public Domain

text:
    Danny REEVES, Individually, and d/b/a Reeves Body Shop v. Michael HINKLE, Individually, and d/b/a Hinkle Auto & ATV Sales
    95-1092
    934 S.W.2d 216
    Supreme Court of Arkansas
    Opinion delivered November 25, 1996

      W. Frank Morledge, P.A., by: W. Frank Morledge, for appellant.

      Daggett, Van Dover & Donovan, by: Robert J. Donovan, for appellee.
   Robert L. Brown, Justice.

This is the second time this matter has been before us. In the first appeal, we dismissed under Ark. R. Civ. P. 54(b), owing to unresolved claims among the parties and the failure of the abstract to include an order which set forth facts warranting an intermediate appeal. Reeves v. Hinkle, 321 Ark. 28, 899 S.W.2d 841 (1995) (Reeves I). Appellant Danny Reeves now raises the same issues in his second appeal: error in the trial court’s grant of a default judgment on liability and summary judgment on damages. We affirm for failure to comply with Ark. Sup. Ct. R. 4-2(a)(6).

The facts, as stated, are taken from Reeves’s abstract in his brief and from Hinkle’s supplemental abstract. On November 24, 1992, appellee Michael Hinkle, individually and d/b/a Hinkle’s Auto & ATV Sales (Hinkle), filed a complaint in Lee County Circuit Court against James Crossland, individually and d/b/a Crossland Auto Sales (Crossland), alleging breach of express and implied warranties of title resulting from a sale of two stolen vehicles by Crossland to Hinkle. On December 1, 1992, Crossland filed a third-party complaint against his seller, appellant Reeves, individually and d/b/a Reeves Body Shop (Reeves), seeking indemnification. On December 4, 1992, Hinkle filed a direct complaint against third-party-defendant Reeves in the same litigation and alleged that Reeves breached the express and implied warranties of title because he knew the two vehicles were stolen when he sold them to Crossland. The F.B.I. confiscated one vehicle from Hinkle and picked up the second vehicle from Hinkle’s subsequent purchaser.

On December 16, 1992, Reeves moved to dismiss Crossland’s third-party complaint due to improper venue because Reeves was a resident of St. Francis County. The circuit court denied the motion and ruled that venue was appropriate because the third-party complaint concerned the sale of stolen vehicles which “may be defined as fraud.” The circuit court concluded that venue was appropriate in Lee County under Ark. Code Ann. § 16-60-113 (b) (1987).

On April 21, 1993, Reeves moved for reconsideration and, alternatively, for summary judgment on Hinkle’s claim and stated that based on the allegations in the complaint, he was entitled to judgment as a matter of law.

On April 27, 1993, Hinkle moved for a default judgment against Reeves. Reeves responded, alleging: (1) that Crossland’s filed answer inured to his benefit; (2) that the trial court should exercise its discretion in denying a default; (3) that he possessed a meritorious defense; and (4) that the allegations of Hinkle’s complaint were insufficient to support a default judgment. The trial court issued a letter opinion finding that Hinkle’s motion for default judgment should be granted and that Reeves’s motions for dismissal for improper venue and for summary judgment should be denied. He reserved ruling on the damages issue. Hinkle subsequently filed a motion for summary judgment on damages, which was granted. Judgment based on Reeves’s default and denying Reeves’s motions was entered. Summary judgment was subsequently entered against Reeves in the amount of $16,800 plus prejudgment interest.

Reeves now urges that the default judgment must fail because there is no factual basis for a constructive-fraud cause of action and, similarly, no basis for a breach-of-warranty claim. Specifically, he contends that Hinkle’s complaint did not allege any relationship or contact between Hinkle and Reeves. See Kohlenberger, Inc. v. Tyson Foods, Inc., 256 Ark. 584, 510 S.W.2d 555 (1974). Hence, according to Reeves’s theory of the case, Hinkle’s complaint was insufficient and cannot support a default judgment predicated on either constructive fraud or breach of warranty.

We decline to reach this issue due to failure to comply with Rule 4-2 (a) (6) of the Supreme Court Rules. Nowhere in Reeves’s abstract is it shown that this issue was raised or considered by the circuit court, and we will not turn to the record to decide that issue. We have stated the blackletter law regarding sufficiency of an abstract as follows:

This court has been adamant in refusing to consider arguments raised for the first time on appeal, where that argument has not been first presented to the trial court for resolution. See, e.g., Stacks v. Jones, 323 Ark. 643, 916 S.W.2d 120 (1996); Thompson v. Perkins, 322 Ark. 720, 911 S.W.2d 582 (1995). While the issue or argument may be contained in a pleading or brief in the record, we have said many times that there are seven justices of the Supreme Court and one record, and we will not be placed in the position of having seven justices scour one record for pertinent information. Kearney v. Committee on Prof. Conduct, 320 Ark. 581, 897 S.W.2d 573 (1995); Stroud Crop, Inc. v. Hagler, 317 Ark. 139, 875 S.W.2d 851 (1994). We, accordingly, affirm due to lack of sufficient information in the appellant’s abstract to enable us to decide this point. See Ark. Sup. Ct. R. 4-2 (b)(2).

Hardy Constr. Co. v. Arkansas State Highway & Transp. Dep’t. 324 Ark. 496, 503, 922 S.W.2d 705, 708 (1996).

Here, Reeves’s abstract is skeletal at best, and we cannot garner from it whether the argument regarding lack of relationship or contact between Hinkle and Reeves, which Reeves contends is essential for a cause of action for constructive fraud or breach of warranty, was raised before the trial court or considered by it. Indeed, we cannot ascertain from the abstract what arguments before the trial court resulted in the default judgment and, specifically, whether the court actually decided that the warranty and fraud causes of action were sufficiently pled. It is critical that this court not be placed in a position of considering an issue for the first time on appeal.

It is well-settled that the standard of review for default judgments is the deferential standard of whether the trial court abused its discretion. Arnold & Arnold v. Williams, 315 Ark. 632, 870 S.W.2d 365 (1994); Divelbliss v. Suchor, 311 Ark. 8, 841 S.W.2d 600 (1992). In light of the abstract presented, which we must rely on to decide this case, it is impossible for Reeves to show that the trial court decided the matter erroneously or abused its discretion in entering the default judgment.

Affirmed.

Dudley and Newbern, JJ., not participating.

Special Justice Toney D. McMillan joins.

Special Justice Hermann Ivester joins.


text:
    Richard Dalton RICHMOND v. STATE of Arkansas
    CR 96-34
    934 S.W.2d 214
    Supreme Court of Arkansas
    Opinion delivered November 25, 1996

      Charles E. Tilmon, Jr, for appellant.

      Winston Bryant, Att’y Gen., by: Sandy Moll, Asst. Att’y Gen., and Rinda Baker, Law Student Admitted to Practice Pursuant to Rule XV(E)(l)(b) of the Rules Governing Admission to the Bar of the State of Arkansas, for appellee.
   Robert L. Brown, Justice.

This case was certified to this court by the Court of Appeals because it involved statutory interpretation. Appellant Richard Dalton Richmond contends that a bench warrant served on him which led to the revocation of his three concurrent five-year probated sentences was stale and, therefore, void and of no effect. We affirm.

On February 15, 1989, appellant Richmond pled guilty to counts of burglary, theft of property, and hindering apprehension. In connection with these pleas, he was sentenced to a term of five years’ probation and was required to pay fines, costs, and restitution. On September 27, 1990, a revocation petition was filed, alleging that Richmond had failed to report to his probation officer; failed to notify his probation officer of his change of address; and failed to pay the required fines, costs, and restitution. That same day, a bench warrant was issued for the arrest of Richmond. The warrant was not served until July 13, 1995 — approximately 17 months after the expiration of Richmond’s probationary sentence. Richmond appeals the order of the Miller County Circuit Court denying rehearing on its order granting the petition for revocation and sentencing him to five years’ imprisonment on each count to run concurrently.

Richmond argues only one point on appeal: whether the trial court, at a time after the expiration of his probationary sentence, could revoke the sentence and imprison him under a warrant that had been issued but not served for a period of almost five years. He premises his argument on two Arkansas statutes — Ark. Code Ann. § 5-4-309(e) (Repl. 1993) and Ark. Code Ann. § 5-l-109(f) (Repl. 1993). Section 5-4-309(e) reads:

The court may revoke a suspension or probation subsequent to the expiration of the period of suspension or probation, provided the defendant is arrested for violation of suspension or probation, or a warrant is issued for his arrest for violation of suspension or probation, before expiration of the period.

Id.

The State notes, and it is undisputed, that the warrant was issued on September 27, 1990, which was well within the five-year probated sentence that commenced on February 5, 1989. Under the plain language of § 5-4-309(e), the warrant was not stale and Richmond was properly served.

Richmond argues that § 5-l-109(f) must be read in conjunction with § 5-4-309(e). Section 5-l-109(f) reads:

A prosecution is commenced when an arrest warrant or other process is issued based on an indictment, information, or other charging instrument, provided that such warrant or process is sought to be executed without unreasonable delay.

Id. In order to prove whether the delay was reasonable or not, Richmond had to present facts and evidence. None of what was presented to the trial court is contained in his abstract. The abstract only gives the dates when the bench warrant was issued and served. Hence, we have nothing in the abstract which would assist this court in determining the reasonableness of the delay.

It is a fundamental rule that the appellant is required to provide an abstract that contains information from the record necessary to an understanding of the questions presented to the Court for decision. Ark. Sup. Ct. R. 4-2 (a) (6); D. Hawkins, Inc. v. Schumacher, 322 Ark. 437, 909 S.W.2d 640 (1995); Carmical v. City of Beebe, 316 Ark. 208, 871 S.W.2d 386 (1994). The only relevant evidence provided is included within the argument portion of Richmond’s brief in the form of various questions and answers taken piecemeal from the record. Scattered references to the record throughout an argument are not sufficient to meet this court’s requirements under Rules 4-2(a)(6) and 4-2(b)(2). See Wynn v. State, 316 Ark. 414, 871 S.W.2d 593 (1994); Watson v. State, 313 Ark. 304, 854 S.W.2d 332 (1993). Moreover, the abstract cannot be supplemented by statements made in the argument portion of the brief. See Wynn v. State, supra.

In sum, even were § 5-l-109(f) to apply to this situation, which is an issue we do not reach today, Richmond’s abstract prevents us from deciding the issue of reasonableness. Ark. Sup. Ct. R. 4-2(b)(2).

Affirmed.


author: ROBERT L. Brown, Justice.

text:
    Ray TOWNSEND and Ray Townsend Farms, Inc. v. ARKANSAS STATE HIGHWAY COMMISSION
    96-677
    933 S.W.2d 389
    Supreme Court of Arkansas
    Opinion delivered November 25, 1996

      T. David Carruth, for appellants.

      Robert L. Wilson, Chief Counsel, William L. Wharton, and Calvin R. Gibson, for appellee.
   ROBERT L. Brown, Justice.

This is the fourth time this matter has been before this court. See Arkansas State Highway Comm’n v. Townsend, 313 Ark. 702, 858 S.W.2d 66 (1993) (Townsend I); Arkansas State Highway Comm’n v. Townsend, 317 Ark. 581, 879 S.W.2d 447 (1994) (Townsend II); Townsend v. Arkansas State Highway Comm’n, 322 Ark. 122, 907 S.W.2d 726 (1995) (Townsend III). Appellants Ray Townsend and Ray Townsend Farms, Inc. (Townsend), now contend that the chancery court lacked subject-matter jurisdiction when it first heard the Highway Commission’s petition for a mandatory injunction to remove encroachments, which resulted in Townsend I. This is so, according to Townsend, because the Highway Commission had an adequate remedy at law — self help. We affirm.

On April 1, 1992, appellee Highway Commission filed a petition for a mandatory injunction to compel Townsend to remove encroachments from the Highway Commission’s right-of-way. The chancery court enjoined the Highway Commission from removing the encroachments. In Townsend I, this court reversed the chancery court.

In Townsend II, the Highway Commission again appealed because on remand from Townsend I, the chancery court ruled that it was powerless to act because the case had been “dismissed” by this court. We held that the language contained in the body of the opinion in Townsend I was clear in its directive, which contemplated a remand despite the use of the word “dismissed” at the end of the opinion. We reversed and remanded the case for the trial court to enter its decree ordering Townsend to remove all structures from the right-of-way.

In Townsend III, we upheld a contempt sanction against Townsend and refused to hold that the “dismissal” in Townsend I was law of the case.

The following facts give rise to Townsend IV. On November 29, 1995, Townsend for the first time moved to dismiss the case for lack of subject-matter jurisdiction because the Highway Commission had an adequate remedy at law. In response, the Highway Commission asserted that the motion to dismiss was filed for an improper purpose and only for harassment and delay in violation of Ark. R. Civ. P. 11. A hearing was held on Townsend’s motion, and counsel for the Highway Commission argued that the motion was meridess because this court had previously held that the mandatory injunction was proper. Counsel for Townsend countered that the subject-matter jurisdiction of the court could be raised at any time. This was so, Townsend’s counsel contended, because from the beginning the Highway Commission had an adequate remedy at law under Ark. Code Ann. § 27-67-304 (Repl. 1994). He added that Townsend had disputed the inadequacy of the remedy at law in his answer to the initial complaint. Accordingly, Townsend claims that jurisdiction in chancery court was lacking. The chancery court apparently denied Townsend’s motion to dismiss (the order ruling on the motion is not abstracted), which led to this appeal.

Townsend’s argument on appeal is the same: the remedy afforded the Highway Commission under § 27-67-304, authorizing removal of encroachments, provides an adequate remedy at law. That statute reads in pertinent part: “No physical or functional encroachments ... or other structures or uses shall be permitted within the right-of-way limits of state highways.” Ark. Code Ann. § 27-67-304 (a) (Repl. 1994).

As a general matter, equity jurisdiction exists only when the remedy at law is inadequate. See, e.g., Priest v. Polk, 322 Ark. 673, 912 S.W.2d 902 (1995); Walker v. First National Bank, N.A., 317 Ark. 617, 880 S.W.2d 316 (1994); Bates v. Bates, 303 Ark. 89, 793 S.W.2d 788 (1990). But the existence of a remedy at law does not deprive the chancery court of jurisdiction unless such remedy is clear, adequate, and complete. McGehee v. Mid-South Gas Co., 235 Ark. 50, 357 S.W.2d 282 (1962). We determine jurisdiction from the pleadings. McCormac v. McCormac, 304 Ark. 89, 799 S.W.2d 806 (1990).

We observe, as an initial matter, that Townsend’s abstract is flagrantly deficient because he fails to include the order of the chancery court disposing of this issue. See McGarrah v. McGarrah, 325 Ark. 81, 924 S.W.2d 453 (1996); Winters v. Elders, 324 Ark. 246, 920 S.W.2d 833 (1996). Nevertheless, it is clear from the abstract that Townsend broached the fundamental point of jurisdiction to the chancery court. It is further clear that this court can consider subject-matter jurisdiction on its own motion. Tucker v. Lake View Sch. Dist. No. 25, 323 Ark. 693, 906 S.W.2d 295 (1996). The issue then becomes whether the matter raised is one of subject-matter jurisdiction.

In Liles v. Liles, 289 Ark. 159, 711 S.W.2d 447 (1986), we concluded:

[W]hen the issue is whether the chancery court has jurisdiction because the plaintiff lacks an adequate remedy at law, we will not allow it to be raised for the first time on appeal. ... [I]t is only when the court of equity is “wholly incompetent” to consider the matter before it will we permit the issue of competency to be raised for the first time on appeal.

Liles, 289 Ark. at 175, 711 S.W.2d at 455-56. We went on to say that we will not raise the issue ourselves when the adequacy of the legal remedy is in question, and we will not permit a party to raise it on appeal if it was not first brought to the chancery court’s attention.

Thus, the adequacy of a legal remedy does not render the chancery court wholly without jurisdiction, and the issue of the legal remedy must first be presented to the chancery court. Here, the issue was argued to the chancery court, according to the abstract, but for two reasons we give it little credence. First, the abstract does not evidence that the question was resolved by the chancery court. The chancery court’s order was not abstracted, and we will not speculate about the chancery court’s ruling. Nor will we require all seven justices to go to the record to determine whether an order was entered. We have stated many times of late that there are seven justices and one record, and it is impossible for the seven justices to examine the one record. See, e.g., Winters v. Elders, supra. Secondly, the issue was not timely raised. We do not view a general denial of an allegation of inadequate remedy raised in the complaint in 1992 as the equivalent of a jurisdictional contest or of a motion to transfer to circuit court. This litigation has been ongoing since April of 1992, and the merits of this case were decided in Townsend I in 1993. To now question the adequacy of the legal remedy and the authority of the chancery court to act at least two years after the case has been decided at the appellate level strains the bounds of reasonableness.

By this decision, we are not suggesting that § 27-67-304 authorizes self-help or that self-help under these facts constitutes an adequate legal remedy. We simply decide the issue raised in this appeal on other grounds.

Affirmed.


author: Robert L. Brown, Justice. DAVID Newbern, Justice.

text:
    Jerry VAN DYKE and Shirley Van Dyke v. Dorsey D. GLOVER, Robert Ward, Nature Estates, Inc., Phinis Warnex, and Sparks Brothers Realty
    95-1348
    934 S.W.2d 204
    Supreme Court of Arkansas
    Opinion delivered November 25, 1996

      Friday, Eldredge & Clark, by: John Dewey Watson and Allison Graves, for appellants.

      Glover, Glover & Roberts, by: David M. Glover and Mark Roberts, for appellees Dorsey D. Glover and Robert Ward.

      Ellis Law Firm, by: George D. Ellis, for appellees Nature Estates, Inc., Phinis Warnex, and Sparks Brothers Realty.
   Robert L. Brown, Justice.

Appellants Jerry Van Dyke and Shirley Van Dyke appeal a dismissal of their complaint against appellees Dorsey D. Glover, Robert Ward, Nature Estates, Inc., Phinis Warnex, and Sparks Brothers Realty. They contend that the trial court erred in finding that they did not state facts upon which relief can be granted under Ark. R. Civ. P. 12(b)(6). We agree with the appellants, and we reverse the order of dismissal and remand the matter.

On May 26, 1995, the Van Dykes filed their complaint against Glover, Ward, Nature Estates, Warnex, and Sparks Brothers. The history of the dealings among the parties, according to the Van Dykes, is set out in the allegations of the complaint. They first alleged that Glover and Ward owned four tracts of land in Hot Spring County. The Van Dykes owned land near those tracts and approached Ward and Glover about purchasing the tracts. On or about June 20, 1994, Glover on behalf of himself and Ward hand-delivered an offer of sale to Shirley Van Dyke with a color-coded map of the four tracts. (The map was Exhibit A and the Glover offer was Exhibit B to the complaint.) Shirley Van Dyke then went to Glover’s office on June 21, 1994, and orally accepted the terms of the written offer. Shirley Van Dyke also offered to make a down payment on the tract to be purchased and option payments on the three tracts to be optioned and to pay earnest money as well, but Glover told her that was not necessary at that time to consummate the contract because he did not want to receive payment until after the first of the year. The Van Dykes left for California with the belief that they had a contract, and Glover left for Europe. Shirley Van Dyke later began pursuing information on timber values on the tracts, water service, and the feasibility of constructing a lake.

The Van Dykes asserted in their complaint that Shirley’s actions informed Nature Estates, Warnex, and Sparks Brothers of their contract with Glover and Ward and that Nature Estates, Warnex, and Sparks Brothers offered Ward and Glover a higher price for the land. The Van Dykes further assert that Nature Estates, Warnex, and Sparks Brothers were engaged in subdividing the property for mobile home/trailer sites, and they had entered into purchase agreements to sell some of the subdivided tracts. The Van Dykes sought (1) cancellation of the Glover/Ward contract with Nature Estates, Warnex, and Sparks Brothers as well as any contracts to third persons; (2) specific performance of their contract with Glover and Ward; (3) a preliminary injunction to prevent any further transfer or sale of the property by Nature Estates, Warnex, and Sparks Brothers; and (4) recovery from Nature Estates, Warnex, and Sparks Brothers for tortious interference with their contract.

The letter from Glover to Shirley Van Dyke was attached to the complaint as Exhibit B and reads:

The purpose of this letter is to set forth in writing for your convenience the terms Robert Ward and I discussed with you here in my office on Friday regarding a tract of land you are interested in purchasing, and to make a proposal to you regarding options on three additional tracts of land you have indicated that you and Jerry might be interested in purchasing.
I will hand you with this letter a copy of an ownership map with the various tracts of land marked with a different color for easy identification. The land you have expressed an interest in buying now is marked in pink and contains approximately 109 acres. At $675.00 per acre, the total purchase price on this tract will be $73,575.00. With a 20% down payment ($14,715.00) we would agree to finance the $58,860.00 balance of the purchase price for a period of five years with interest at 8% per annum, which would make your monthly payments approximately $1,200.00. Obviously, if you want to pay more down there would [be] less to finance and your payments would be reduced accordingly. You let us know what you are comfortable with and we will put the figures together for you.
The tracts you have indicated you would like an option to purchase are the area marked in blue on your map containing 77 acres, which we will refer to as Tract 1, the area marked in yellow containing 57 acres, which we will refer to as Tract 2 and the area marked in green containing 100 acres, which we will refer to as Tract 3. We value Tract 1 and 2 at $800.00 an acre and Tract 3 at $900.00 an acre. We feel that this land, by virtue of timber growth, etc., is increasing in value at the rate of 10% a year. We would grant you a two year option to purchase either or all option tracts of land in exchange for your payment of 5% of the current value as option money (all of which would be credited back against the purchase price if you elect to buy) and an amount equal to 10% per annum to your date of purchase if you elect to buy, which we feel will offset the growth factor and increased value of the property.
As an example, if you wanted to buy the 77 acre tract marked in blue, which we have referred to as Tract 1 today, the price at $800.00 per acre would be $61,600.00. If, instead of buying it today, you wanted a two year option to buy it, you would pay 5% of that value ($3,080.00) for that option with that amount to be credited against the purchase price if you elect to buy, otherwise to be forfeited. Using that same example, if you decided to go ahead and buy the land one year after the option date, you would pay the purchase price of $61,600.00, plus the 10% growth factor of $6,160.00 for a total of $67,760.00, from which would be deducted the $3,080.00 option money payment, which would result in a total purchase price of $64,680.00, if my math is correct.
We will go over all of this when you are here at the office again today, but I thought that Jerry might not come with you, and it would be beneficial to have something in writing to discuss with him.

The Van Dykes filed a notice of lis pendens against the four tracts.

On June 13, 1995, Glover and Ward moved to dismiss the complaint on grounds that the Glover letter did not comply with the statute of frauds — Ark. Code Ann. § 4-59-101 (a) (4) (Repl. 1996). Glover and Ward also argued that the complaint otherwise failed to state sufficient facts to satisfy the statute of frauds for an oral contract. Nature Estates, Warnex, and Sparks Brothers filed their separate answer and affirmatively pled that the complaint should be dismissed because the statute of frauds had not been satisfied. In addition, they filed a counterclaim for slander of tide and interference with contractual relations and business expectancy.

On July 18, 1995, a hearing was held on the motion to dismiss. Counsel for the Van Dykes maintained that all of the essential elements of an agreement were contained in the Glover letter. At the conclusion of the hearing the trial court informed the parties that its letter opinion would be forthcoming after it had reviewed the law. In a letter dated July 21, 1995, the trial court advised the attorneys that it had decided to grant the motion to dismiss for failure to comply with the statute of frauds.

On August 21, 1995, the Van Dykes filed an amended and substituted complaint in which they added a fifth count for promissory estoppel or detrimental reliance against Glover and Ward. Also on August 21, 1995, the Van Dykes filed a motion for the trial court to reconsider its ruling to dismiss the original claims in their complaint. The order of dismissal had not yet been entered.

On September 5, 1995, a hearing was held on the motion for reconsideration and the amended complaint. On September 19, 1995, the trial court entered its order of dismissal. The trial court stated in its order that it had considered “the pleadings, the briefs, the arguments of counsel and the cases cited to the court” and specifically found that the Glover letter did not comply with the statute of frauds and, therefore, was not an enforceable contract:

The [C]ourt thinks the letter is an offer but the letter has options in it. The Court cannot find an acceptance because to the document on its face one cannot say, “I accept.” There are too many options in there to just accept it. It takes a specific acceptance of option one, two or three. The Court thinks that could have been done. There were sufficient items there (sic) it could constitute an offer; but the Court finds no acceptance. Likewise for the above reasons, the court finds the amended and substituted complaint does not state facts upon which relief may be granted on the doctrine of detrimental reliance or promissory estoppel. Defendants’ counterclaims are pending and are transferred to circuit court.

The trial court dismissed the Van Dykes’ original complaint and their amended and substituted complaint and granted a Rule 54(b) certification for purposes of appeal because the counterclaim against the Van Dykes was still pending. See Ark. R. Civ. P. 54(b).

The Van Dykes urge on appeal that they did plead sufficient facts on which relief could be granted, including facts sufficient to satisfy the statute of frauds. In considering a motion to dismiss under Arkansas Rule of Civil Procedure 12(b)(6), the facts alleged in the complaint are treated as true and are viewed in the light most favorable to the plaintiff— in this case, the Van Dykes. Malone v. Trans-States Lines, Inc., 325 Ark. 383, 926 S.W.2d 659 (1996); Deitsch v. Tillery, 309 Ark. 401, 833 S.W.2d 760 (1992). Though counsel for appellees contended at oral argument that the trial court considered matters outside the pleadings in deciding to grant a dismissal, there is nothing in the abstract to substantiate that claim. Indeed, the order of dismissal specifically states to the contrary.

The issue then is whether the Glover letter was a sufficient memorandum to satisfy the statute of frauds, which reads:

(a) Unless the agreement, promise, or contract, or some memorandum or note thereof, upon which an action is brought is made in writing and signed by the party to be charged therewith, or signed by some other person properly authorized by the person sought to be charged, no action shall be brought to charge any:
(4) Person, upon any contract for the sale of lands, tenements, or hereditaments, or any interest in or concerning them;

Ark. Code Ann. § 4-59-101 (a)(4) (Repl. 1996). The Van Dykes initially contend that oral acceptance of a written offer by a party sought to be charged meets the requirements of the statute of frauds. This precise issue has been addressed in Arkansas, and, generally speaking, an offer may be accepted by spoken words or conduct. Childs v. Adams, 322 Ark. 424, 909 S.W.2d 641 (1995); Baker v. Taylor & Co., 218 Ark. 538, 237 S.W.2d 471 (1951); Jones v. School Dist. No. 48, 137 Ark. 414, 208 S.W.2d 798 (1919); ERC Mortgage Group, Inc. v. Luper, 32 Ark. App. 19, 795 S.W.2d 362 (1990); see also E. LeFevre, Oral Acceptance of A Written Offer by a Party Sought to be Charged as Satisfying Statute of Frauds, 30 A.L.R.2d 972 (1953). Whether there was an acceptance is a question for the trier of fact. Robertson v. Ceola, 255 Ark. 703, 501 S.W.2d 764 (1973); James v. P.B. Price Constr. Co., 240 Ark. 628, 401 S.W.2d 206 (1966).

The next question to be addressed is whether the Glover letter contained all the essential terms of a contract in order to comply with the statute of frauds. The general rule has been stated in this fashion:

Unless the essential terms of the sale can be ascertained from the writing itself, or by reference in it to something else, the writing is not [in] compliance with the statute; and if the writing be thus defective, it cannot be supplied by parol proof, for that would at once introduce all the mischiefs which the statute was intended to prevent.

Sorrells v. Bailey Cattle Co. , 268 Ark. 800, 811-12, 595 S.W.2d 950, 955 (Ark. App. 1980), quoting Williams v. Morris, 95 U.S. 444 (1877).

As an initial matter, it is undisputed that the writing was signed by the party to be charged, as the statute of frauds requires, because Glover signed the document. From the allegations in the complaint, he had the authority to bind Ward. However, “[a] contract for the sale of land which fails to show the terms and conditions of the sale, the price to be paid, and the time for payment is not sufficient to satisfy the requirements of the statute of frauds.” Wyatt v. Yingling, 213 Ark. 160, 163, 210 S.W.2d 122, 123 (1948), quoting Tate v. Clark, 203 Ark. 231, 156 S.W.2d 218 (1941).

Moreover, a writing may flunk the test of the statute of frauds when it does not sufficiently describe the land to be sold. See, e.g., Richardson v. Stuberfield, 168 Ark. 713, 271 S.W. 345 (1925); Sossamon v. Davis, 271 Ark. 156, 607 S.W.2d 405 (Ark. App. 1980); Boensch v. Cornett, 267 Ark. 671, 590 S.W.2d 55 (Ark. App. 1979). In the case at hand, the land was adequately described because there was not only the Glover letter giving the acreage in each tract but a color-coded map accompanying the letter that illustrated the tracts of land at issue. A writing may also fail to comply with the statute of frauds because the time and method of payment are not set forth. See, e.g., Jonesboro Investment Corp. v. Cherry, 239 Ark. 1035, 396 S.W.2d 284 (1965); Schuman v. Hughes, 203 Ark. 395, 156 S.W.2d 804 (1941); Tate v. Clark, supra. That is not a problem in the instant case. The purchase price per acre per tract of land was adequately set out together with down payments and option payments as well as the terms for financing the balance due.

The ultimate issue to be decided is whether the Glover letter is so indefinite with its alternative payment plans that the essential terms of the agreement cannot be distilled from it. To be sure, the letter permitted the Van Dykes to pay more down on the purchase price for the land to be bought and thereby finance less of the balance owing. It also provided that on the three “option” tracts, the Van Dykes could pay a fixed option price for a two-year option to purchase. The Van Dykes could also purchase one or more of the “option” tracts immediately, or at any time up to two years subject to an adjustment in the payment plan. The formula for the purchase price for all four tracts and the credits, if applicable, were set out in the letter.

The circuit court found too many ways to proceed in the Glover letter for it to be susceptible to an acceptance and concluded dismissal was appropriate. We disagree. The allegations in the complaint, which we must take as true for purposes of a motion to dismiss are:

7. After plaintiff Shirley Van Dyke discussed with plain-tiffjerry Van Dyke the Offer of defendants Dorsey D. Glover and Robert Ward to sell the Property, the Van Dykes agreed to accept the Offer. On or about June 21, 1994, plaintiff Shirley Van Dyke went to the office of defendant Dorsey D. Glover and orally informed him the Van Dykes accepted the terms of the Offer of defendants Dorsey D. Glover and Robert Ward.
8. Plaintiff Shirley Van Dyke, upon accepting the Offer of defendants Dorsey D. Glover and Robert Ward, offered to pay the down payment and option payments, and also offered to pay an earnest money check to defendant Dorsey D. Glover to evidence the Van Dykes’ good faith intention and ability to carry out the terms of the purchase contract.

Hence, the Van Dykes accepted the offer and then tendered a down payment and option payments as well as earnest money. We must construe these allegations in the complaint in favor of the Van Dykes, that is, that an acceptance was made to purchase the one tract and to preserve an option to purchase the remaining three tracts. Whether an acceptance was actually made and the precise payment plan agreed to become questions of fact and matters of proof in the trial court.

We reach the same result with respect to the Van Dykes’ claim of detrimental rebanee and promissory estoppel. The Van Dykes argue that the statute of frauds has no bearing on the doctrine of promissory estoppel. Glover and Ward, on the other hand, argue that the Van Dyke’s reliance was not reasonable.

The blackletter law on promissory estoppel is found in the Restatement (Second) of Contracts:

A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

Restatement (Second) of Contracts, § 90 (1981); Reynolds v. Texarkana Constr. Co., 237 Ark. 583, 374 S.W.2d 818 (1964). See also Childress v. McManus, 282 Ark. 255, 668 S.W.2d 9 (1984). Whether there was actual reliance by the Van Dykes and whether it was reasonable is a question for the trier of fact, but at the pleading stage, the allegation must be sufficiendy stated. Sanders v. Arkansas-Missouri Power Co., 267 Ark. 1009, 593 S.W.2d 56 (Ark. App. 1980). The court of appeals has recognized that reasonable detrimental reliance may be raised to defeat the defense of statute of frauds. See Country Corner Food & Drug, Inc. v. Reiss, 22 Ark. App. 222, 737 S.W.2d 672 (1987); Ralston Purina Co. v. McCollum, 271 Ark. 840, 611 S.W.2d 201 (Ark. App. 1981).

Here, the Van Dykes alleged that they relied on the existence of the contract to their detriment and that they incurred expenses while investigating timber values, water service on the property, and the feasibility of building a lake on the property. This sufficiendy states a cause of action for promissory estoppel or detrimental reliance.

We conclude that the Van Dykes have adequately stated facts to withstand a motion to dismiss on their five counts for relief.

Reversed and remanded.

Dudley and Newbern, JJ., dissent.

DAVID Newbern, Justice.

This is essentially a specific performance case. The question is whether the document alleged to have been an offer to sell land was sufficiendy definite to permit the formation of a contract upon evidence of a general “acceptance.” The Chancellor correcdy held that it was not. The dismissal pursuant to Ark. R. Civ. P. 12(b)(6) was correct because facts stating a claim upon which relief could be granted were not stated in the complaint.

i. Formation of a contract

With respect to the approximately 109 acres Shirley Van Dyke had expressed an interest in buying immediately, the letter from Dorsey D. Glover to Ms. Van Dyke gave a purchase price but proposed a sliding payment scale based on the amount of down payment and then said, “You let us know what you are comfortable with and we will put the figures together for you.”

As to the other tracts in which Mrs. Van Dyke had expressed an interest, the letter stated current land values and then presented an example of a kind of deal that might be entered: “As an example, if you wanted to buy the 77 acre tract marked in blue. ... If, instead of buying it today you wanted a two year option to buy. . . . Using that same example, if you decided to go ahead and buy the land one year after the option date. . . .” The letter concluded by saying, “We will go over all of this when you are here at the office today. . . .” The complaint alleged simply that the “offer” was “accepted” by Mrs. Van Dyke when she returned to the office and offered earnest money.

As we held in Wyatt v. Yingling, 213 Ark. 160, 210 S.W.2d 122 (1948), to satisfy the statute of frauds, a writing must be such that all of the contract can be collected from it. To say that the writing in this case formed a contract would leave unknown the terms of financing and payment with respect to the 109-acre tract. It would also leave unknown the option durations and payment options choices among those proposed with respect to the other tracts in which Mrs. Van Dyke had expressed interest.

The Chancellor was correct in holding the writing was insufficient to support a finding of a contract upon a general acceptance. To have formed a contract satisfying the statute of frauds, the writing “must have embraced the terms and conditions of the sale and it must have been a mutual contract.” Tate v. Clark, 203 Ark. 231, 156 S.W.2d 218 (1941).

2. Promissory estoppel

As to the added alternative claim of promissory estoppel, the Van Dykes’ only allegation of detrimental reliance was as follows:

In October, 1994, plaintiff Shirley Van Dyke, relying upon the aforementioned representations of Dorsey D. Glover, began pursuing information regarding timber values on the Property, water service to the Property, and the feasibility of constructing a man-made lake on the property, and in so doing incurred valuable expenditures of time and money.

The Chancellor correctly held the allegation insufficient to state facts upon which relief could be granted pursuant to the detrimental-reliance theory. In evaluating the allegation, the Chancellor said he “had a difficult time finding detrimental reliance of any significant nature at all on the part of the Van Dykes.” The problem is that the allegation amounts to no more than a conclusion which might be reached by a fact finder. It does not state facts. The general rule is that claims of promissory estoppel are questions for the fact finder. See Country Corner Food & Drug, Inc. v. Reiss, 22 Ark. App. 222, 737 S.W.2d 672 (1987); Dickson v. Delhi Seed Co., 26 Ark. App. 83, 737 S.W.2d 382 (1988). Specifically, in both cases, the Court of Appeals upheld denials of motions to dismiss for failure to state a claim of detrimental reliance and allowed the question to go to the jury.

However, in the Dickson case, the complaint alleged specific facts such as dates of meetings between the parties, and particular secondary contracts entered into with other parties in reliance on the promise. Similarly, in the Country Corner case, the complaint specifically alleged a detailed oral agreement and the additional action of moving the complainant’s family to a new town. In the case at bar, to say that the plaintiff “began pursuing information” does not inform the reader of any facts constituting expenditure of time and money. To overcome a motion to dismiss pursuant to Ark. R. Civ. P. 12(b)(6), the pleader must set forth more than mere conclusions. Perrodin v. Rooker, 322 Ark. 117, 908 S.W.2d 85 (1995); Rabalaias v. Barnett, 284 Ark. 527, 683 S.W.2d 919 (1985). I respectfully dissent.

Dudley, J., joins.


author: Andree LAYTON Roaf, Justice.

text:
    Betty Sue Carter BRANCH v. Kyle Dean CARTER
    96-754
    933 S.W.2d 806
    Supreme Court of Arkansas
    Opinion delivered November 25, 1996

      Dunham & Faught, P.A., by: James S. Dunham, for appellant.

      Buddy Hixson, for appellee.
   Andree LAYTON Roaf, Justice.

Appellant Betty Carter Branch appealed an order of the Logan County Chancery Court holding that appellee Kyle Dean Carter was not liable for child-support arrearages which accrued prior to July 20, 1989, because they were barred by the five-year statute of limitations in Ark. Code Ann. § 16-56-115 (1987). The Arkansas Court of Appeals reversed the decision of the chancellor and held that Act 870 of 1991, codified as Ark. Code Ann. § 9-14-236 (Repl. 1993), applied retroactively to expand the statute of limitations for causes of action for delinquent child-support payments not barred on the date of its enactment. Branch v. Carter, 54 Ark. App. 70, 923 S.W.2d 874 (1996). We granted Mr. Carter’s request for review of the Court of Appeals’ decision pursuant to Ark. S. Ct. R. l-2(f). We affirm the Court of Appeals.

On July 19, 1983, Ms. Branch and Mr. Carter were divorced by a decree in which Carter was ordered to pay child support at the rate of $52 per Week. On May 18, 1994, Branch filed a petition for citation and alleged that Carter was delinquent in his support payments. At a hearing on October 26, 1994, the parties stipulated that Carter owed arrearages of $7,404 for the period of July 19, 1,989 to the date of the hearing, and Branch was granted judgment for this amount. The order further provided that the parties would stipulate as to the amount of arrearages that accrued prior to July 19, 1989, and would brief the court on the issue of the statute of limitations as it applied to those arrearages.

On March 2, 1995, the chancellor entered a final order which stated that the parties had stipulated that child-support arrearages had accrued between July 19, 1984 and July 19, 1989 in the amount of $12,251.50. The parties further stipulated that, of this amount, $5,562 had accrued between July 19, 1986 and July 19, 1989. The chancellor ruled that the action for arrearages accruing prior to July 20, 1989 was barred by the statute of limitations.

On appeal, Branch argues in essence that Act 870 of 1991, now codified as Ark. Code Ann. § 9-14-236 (Repl. 1993), applies retroactively so that all causes of action still in existence on the date the Act became effective would benefit from an enlarged statute of limitations. She contends that the five-year statute of limitations relied upon by the trial court only bars the recovery of support payments due prior to July 19, 1986. Although the effective date of Act 870 was March 29, 1991, we agree that the Act applies retroactively to all causes of action not barred on the date of its enactment. Branch made claim to the sum of $5,562 which accrued between July 19, 1986 and July 19, 1989, and we agree that she is entitled to recover this amount.

Because the legislature has in recent years twice changed the statute of limitations with regard to collection of delinquent child support, we must review these legislative enactments and the cases in which we have recently considered the issue of the limitations period applicable to actions for child-support arrearages.

In Sullivan v. Edens, 304 Ark. 133, 801 S.W.2d 32 (1990), we recognized that prior to 1989 the collection of arrearages accruing as a result of failure to comply with an order of child support was governed by the general five-year statute of limitations. Ark. Code Ann. § 16—56—115 (1987). In 1989, the legislature established a ten-year statute of limitations specifically for the collection of child-support arrearages. 1989 Ark. Acts 525 (codified at Ark. Code Ann. § 16-56-129 (Supp. 1993)). However, because Act 525 did not repeal the general five-year statute and contained no retroactivity provision, we held that the ten-year statute of limitation did not apply retroactively, and that the former statute of limitations controlled for all causes of action already accrued on the date of enactment of Act 525. Sullivan, supra. Consequently, we concluded that “the old five-year statute of limitation is applicable to those support payments due prior to the effective date of the new act, and the new ten-year statute of limitation is applicable to payments accruing after the effective date of the new act.” Id.

In response, the General Assembly enacted Act 870 of 1991, which repealed Act 525 of 1989 and became effective on March 29, 1991. The Act provides in relevant part:

(b) In any action involving the support of any minor child or children, the moving party shall be entitled to recover the full amount of accrued child support arrearages from the date of the initial support order until the filing of the action.
(c) Any action filed pursuant to subsection (b) may be brought at any time up to and including five (5) years beyond the date the child for whose benefit the initial support order was entered reaches the age of eighteen (18) years.
(d) No statute of limitation shall apply to an action brought for the collection of a child support obligation or arrearage against any party who leaves or remains outside the State of Arkansas with the purpose to avoid the payment of child support.
(e) This section shall apply to all actions pending as of March 29, 1991, and filed thereafter and shall retroactively apply to all child support orders now existing.

1991 Ark. Acts. 870 (codified at Ark. Code Ann. § 9-14-236 (Supp. 1995) (Emphasis supplied.) The statute of limitations for child support thus now commences with an initial order of support and extends until the child reaches the age of twenty-three.

We were first presented with the opportunity to interpret Act 870 of 1991 in Johnson v. Lilly, 308 Ark. 201, 823 S.W.2d 883 (1992), in which we recognized that the legislature has the power to amend statutes of limitation affecting causes of action which are not yet barred. See also Sullivan, supra; Chunn v. D’Agostino, 312 Ark. 141, 847 S.W.2d 699 (1993). However, in Johnson, at issue was a complaint for arrearages filed on January 2, 1991, prior to the enactment of Act 870, and a ruling by the trial court that Act 870 applied retroactively to revive a cause of action for arrearages which accrued prior to January 2, 1986. Id. We held that the action for arrearages which accrued prior to January 2, 1986 was already barred on the date the petition was filed, and that Act 870 could not retroactively revive a cause of action already barred on the date of its enactment. Id. We thus did not consider the effect of Act 870 on a cause of action for arrearages not yet barred on the date of enactment. Id. Furthermore, our decision in Johnson did not turn on the fact that the complaint for arrearages was filed prior to the passage of Act 870; the decision would have been the same had the complaint been filed on or after March 29, 1991. Id.

We next considered the retroactive application of Act 870 of 1991, in Chunn, supra. As in Johnson, supra, the appellants in Chunn sought by petition filed in September, 1991, to apply Act 870 retroactively to a claim for arrearages which accrued prior to July 16, 1981, more than nine years before the enactment of Act 870. We again held that the new statute could not revive a claim already barred, even though the petition for arrearages was filed by the children entided to support and not the mother.

Moreover, in both Johnson, supra, and Sullivan, supra, we relied upon Morton v. Tullgren, 263 Ark. 69, 563 S.W.2d 422 (1978), where we wrote:

[N]o one has any vested right in a statute of limitations until the bar of the statute has become effective. It is also true that the General Assembly may validly enlarge the period of limitations and make the new statute, rather than the old, apply to any cause of action which has not been barred at the time the new statute becomes effective.

(Emphasis supplied.) In Morton, supra, we noted that the critical question is one of legislative intent. We found that the legislature had not made the new statute of limitations retroactive, and that there was in fact nothing to indicate that the legislature intended to do so. Id. We stated: “the amendatory act does not extend the statutory period unless the legislative intention that it do so is expressly stated.” Id. We further commented:

The rationale of our holdings that a statute extending the period of limitations is applicable only to causes of action arising after the act becomes effective, unless expressly made retroactive, is not based upon any vested right in the statute of limitations. It is based upon the strong presumption that a legislative act is not intended to operate retroactively.

Id. See also Ragland v. Travenol Labs., Inc., 286 Ark. 33, 689 S.W.2d 349 (1985).

In the instant case, the General Assembly has clearly mandated that the enlarged limitations period in Act 870 of 1991 “shall retroactively apply to all child support orders now existing.” Thus, the legislature has expressly declared its intent to make the enlarged limitations period retroactive. The legislature, however, only has the power to amend statutes of limitation affecting causes of action which are not yet barred. See Johnson, supra. Because the effective date of Act 870 is March 29, 1991, any cause of action by Branch for arrearages accruing prior to March 29, 1986 is barred, and cannot be revived by its passage. As to support payments due on or after March 29, 1986, the legislature may retroactively expand the statute of limitation for causes of action not yet barred, and that is precisely the effect of Act 870 of 1991.

Carter argues that neither the ten-year statute in effect from July 3, 1989 until the passage of Act 870, nor Act 870 applies retroactively to the arrearages which accrued prior to July 19, 1989. He relies on our holding in Johnson, supra, for this interpretation. However, he has failed to recognize the factual distinction in Johnson, which involved a claim for arrearages which accrued prior to January 2, 1986. Our holding today, that Act 870 does not revive claims for arrearages accruing prior to March 29, 1986, is in harmony with both Johnson, supra, and Chunn, supra.

In sum, it is black-letter law that the legislature may retroactively expand a statute of limitations for a cause of action still in existence at the time the limitations period is expanded. We have so stated in Johnson, supra; Chunn, supra; Sullivan, supra; and Morton, supra. Branch’s cause of action for child-support payments due on July 19, 1986, and thereafter was in existence at the time the statute of limitation was retroactively expanded on March 29, 1991. Thus, the chancellor erred in concluding that her specific claim against Carter for $5,562 was barred by the five-year statute.

Accordingly, we agree with the Court of Appeals that Branch is entitled to recover $5,562 additional support for the period ofjuly 19, 1986 to July 19, 1989, plus the statutory attorneys fees, and interest provided under Ark. Code Ann. § 9-14-223 on the total arrearages owed of $12,966. We affirm the holding of the Court of Appeals.