author: David Newbern, Justice.

text:
    Elizabeth Henes MOTES, et al. v. John L. JOHNSON
    90-201
    799 S.W.2d 798
    Supreme Court of Arkansas
    Opinion delivered December 3, 1990

      Dickey Law Firm, P.A., by: Jay W. Dickey, Jr:, and Shults, Ray & Kurrus, by: Robert Shults and Thomas Ray, for appellant.

      Wright, Lindsey & Jennings, for appellee.
   David Newbern, Justice.

The appellee, John L. Johnson, is an attorney who represented the appellant, Elizabeth Henes Motes, and her now deceased sister, Helen Fay Henes, in the sale of certain business properties in 1982 and the subsequent creation of trusts. He prepared documents for an entity known as the “Motes/Henes Trust” and one known as the “Motes Children’s Trust.” Ms. Motes, the estate of Ms. Henes, and the beneficiaries of the children’s trust sued Mr. Johnson for malpractice, claiming that he breached his fiduciary duty to them by not disclosing personal habits and other conduct which would have caused them to replace him in the position he created for himself as trustee.

The case was tried and submitted to a jury on eight interrogatories. The question asked in five of the interrogatories concerned whether the evidence showed Johnson breached his duty with respect to such items as investment policies, drafting practices, and other actions as trustee. The jury found no breach of duty. Another interrogatory asked whether a certain purchase of property in the name of the children’s trust was a gift in excess of the gift tax exclusion under federal law. The jury found that the gift was in excess of the allowable exclusion but that no damages were incurred as a result.

The remaining two interrogatories asked whether Johnson’s conduct had necessitated an audit of trust records and the instigation of an earlier lawsuit [Motes/Henes Trust v. Motes, 297 Ark. 380, 761 S.W.2d 938 (1988)]. The jury found that it had and that expenditure of $40,000 of the audit and $50,000 for the lawsuit had resulted. In accordance with the verdict, the court awarded damages of $90,000. Motes, the Henes estate, and the beneficiaries of the children’s trust appeal, contending the court erred in not allowing them to introduce evidence of Johnson’s use of drugs and alcohol as well as his gambling habit, indebtedness, and evidence that his conduct as a bank director resulted in action adverse to him taken by bank regulators. They also contend they should have been allowed to use this evidence to impeach Johnson’s credibility. The trial court disallowed the evidence, finding its prejudicial effect outweighed its probative value. We find no abuse of the trial court’s discretion and thus affirm.

The exclusion of evidence of Johnson’s addiction to alcohol and drugs and his gambling and debts was in response to Johnson’s motion in limine. The court ruled that evidence on those matters would be excluded until it could be shown that it should be allowed. A hearing was held out of the jury’s presence at which the appellants proffered testimony of various witnesses.

Keith Moser is a lawyer and certified public accountant who was associated with Johnson and worked on the trust matters. Moser’s proferred testimony was that he confronted Johnson about his drinking, drug use, and gambling and that when Johnson refused to admit he had a problem, Moser resigned. Moser called Ms. Motes and cautioned her about Johnson’s habits. He would have testified that Johnson was in the office in 1985 only three days a week and that he made five trips to Las Vegas that year. Johnson removed money from a “bank holding account” to his personal account. Moser’s observation was that those problems affected Johnson’s performance as trustee and lawyer for the trusts. He thought Johnson was on drugs because he found a white powdery substance in the bathroom at the law office and Johnson was undergoing mood swings.

The appellants also called Johnson to the stand during the hearing. He testified he did not know whether he had a drinking problem. He said he had been kept away from his office by hangovers on occasion and that there had been days when he had had drinks with friends at lunch and had not returned to the office in the afternoon. He did not recall a time during 1985 when drinking affected his office habits or work. He flatly denied having used cocaine and said that he had not been required to put $1,000,000 in the bank by the banking commission but that he had done so voluntarily to capitalize the bank and had removed the money the following year.

The testimony of Mr. Marlin Jackson, Arkansas Banking Commissioner, was also proffered by the appellants in rebuttal to that of Johnson. This testimony had to do with investments made by Johnson for Clinton State Bank of which Johnson was a director. Jackson stated that his department issued a cease and desist order to stop Johnson from trading in bonds without authority to do so. The order also required Johnson to transfer $1,000,000 to the bank due to losses Johnson had caused to the bank.

Rebuttal testimony of Bob Morgan, an employee of the bank in 1987, was proffered. He testified that while he was working at the bank for Johnson he was asked by Johnson as to the whereabouts of some cocaine Johnson apparently thought was in his medicine cabinet.

The appellants have stated two points of appeal, but there is just one issue. Whether the testimony was proffered as direct or rebuttal evidence, the issue is whether the court abused its discretion in keeping it out. We think not. We agree with the appellants’ citations of authority to the effect that, as trustee, Johnson owed the appellants the highest degree of honesty, skill, prudence and caution and that he owed them the utmost good faith. Hardy v. Hardy, 222 Ark. 932, 263 S.W.2d 690 (1954).

The appellants contention is that Johnson’s failure to disclose his personal conduct was a breach of the fiduciary relationship. While we might agree that, had Johnson gone to the appellants and revealed all his activities they might have discharged him sooner from his responsibilities as trustee, there is little, if any, evidence that the appellants were harmed by Johnson’s failure to make the disclosure. Even if we were to determine that the proffered evidence was relevant, and it would only be barely so, we are in no position to gainsay the trial court’s conclusion that the proffered evidence would have been unfairly prejudicial to Johnson and of hardly any probative value, given the lack of any evidence to connect the conduct to any harm which came to the appellants. A.R.E. 403. We do not reverse a trial court on such a decision unless we determine there has been a manifest abuse of discretion in balancing unfair prejudice against probative value. See Bennett v. State, 297 Ark. 115, 759 S.W.2d 799 (1988); Harris v. State, 295 Ark. 456, 748 S.W.2d 666 (1988); Simpson v. Hurt, 294 Ark. 41, 740 S.W.2d 618 (1987). We find no such abuse here.

Affirmed.


source: Caselaw Access Project

author: Tom Glaze, Justice.

license: Public Domain

text:
    William H. COLE v. FIRST NATIONAL BANK of Fort Smith, Arkansas
    90-156
    800 S.W.2d 412
    Supreme Court of Arkansas
    Opinion delivered December 3, 1990

      Bethell, Callaway, Robertson & Beasley, by: Kenneth W. Cowan, for appellant.

      Shaw, Ledbetter, Hornberger, Cogbill and Arnold, by: R. Gunner Delay, for appellee.
   Tom Glaze, Justice.

This appeal concerns a procedural question about service of process. First National Bank, appellee, filed suit against William Cole, appellant, on a past due note on August 7,1984. At that time, the appellant was living in Houston, Texas. The appellee served the summons and complaint by certified mail, return receipt requested, addressed to Mr. William Cole at a post office box in Houston. The mail receipt shows that it was signed by the appellant’s step-daughter Jacqueline Cole on August 17, 1984. When the appellant failed to file an answer, default judgment was entered against him for approximately $42,200 on December 14, 1984.

On April 11, 1989, the appellant received a letter stating that his bank account was being charged with a setoff pursuant to a default judgment obtained against him. On November 8,1989, appellant filed a motion to set aside the default judgment. In that motion, the appellant signed that he had never been personally served with process and had no notice, actual or constructive, of the proceedings against him until he received notification of the setoff on his bank account. The trial court denied the appellant’s motion, and on appeal, appellant claims that denial was erroneous. He also claims appellee’s cause of action should be dismissed with prejudice because it is now barred by the statute of limitations. While we agree with the appellant that the default judgment should be set aside, we dismiss the appellee’s action without prejudice.

To serve the appellant, then an out-of-state defendant, by mail, the appellee was required to follow ARCP Rule 4(e)(3). Rule 4 has been amended many times, but in 1984, when appellee attempted service, it provided the following:

(e) Other Services: Whenever the law of this state authorized service outside this state, the service, when reasonably calculated to give actual notice, may be made:
(3) By any form of mail addressed to the person to [be] served and requiring a receipt signed by the addressee or the agent of the addressee.

We have held that “agent” as referred to in this rule must be an agent appointed pursuant to postal regulations. Green v. Yarbrough, 299 Ark. 175, 771 S.W.2d 760 (1989); see also Reporter’s Notes to Rule 4. In addition, we have stated that statutory service requirements, being in derogation of common law rights, must be strictly construed and compliance with them must be exact. Wilburn v. Keenan Cos., 298 Ark. 461, 768 S.W.2d 531 (1989).

In the present case, the appellee’s sole attempt at service was mailing a copy of the complaint and summons addressed to the appellant. The appellee received a return receipt signed by the appellant’s step-daughter, but there was no marking on the receipt in the boxes provided for “addressee” or “agent” located above her signature. There is no showing that the appellant appointed his step-daughter as his agent pursuant to postal regulations, and in fact there is an indication that the young woman was under the minimum age of fourteen for service at the time she signed the receipt. ARCP Rule 4(d)(1). Because the receipt was not signed by the appellant or his agent, the appellee’s service failed to meet the requirements of Rule 4(e)(3).

In concluding that service was not made on the appellant, we now address the sufficiency of the appellant’s motion to set aside appellee’s default judgment. The appellee argues that even if service was not proper, the appellant’s motion should not be granted because he did not raise a valid defense pursuant to ARCP Rule 60. Rule 60(d) provides that no judgment against a defendant shall be set aside under this rule unless the defendant in his motion asserts a valid defense to the action, and upon a hearing, makes a prima facie showing of such defense. Section 16-65-108, of Ark. Code Ann. (1987), however, provides that a judgment made by any court of the state against anyone without notice, actual or constructive, is null and void. We have held that in cases where judgments are void, no proof of a meritorious defense is necessary to set aside the judgment. Lawson v. Edmondson, 302 Ark. 46, 786 S.W.2d 823 (1990); Green v. Yarbrough, 299 Ark. 175, 771 S.W.2d 760 (1989); see also ARCP Rule 60(k). Thus, we conclude that appellant’s motion is sufficient and should be granted.

While we agree that the trial court erred in denying the appellant’s motion, we do not agree that the appellee’s action is now barred under the statute of limitations. Under ARCP Rule 3, as amended in 1983, a civil action is commenced by filing a complaint with the clerk of the proper court who shall note thereon the date and precise time of filing. Pursuant to ARCP Rule 4(i), the plaintiff has 120 days after the filing of the complaint to serve summons on the defendant. If the service is not made within 120 days, the action against the defendant is dismissed without prejudice.

Here, the appellee timely filed its complaint on August 7, 1984. Appellee attempted service by mail, and the parcel was received by appellant’s step-daughter on August 17, 1984. Although we now hold in this appeal that appellee’s service was improper, the trial court previously granted appellee a default judgment, finding that the appellant had been “personally served in the time and manner required by law.”

Although the trial court erred in finding that proper service had been made on the appellant, the appellee should not now be penalized five years later by having its action barred by the statute of limitations. This is especially true in this situation where the trial court compounded its error when it denied the appellant’s motion to set aside the default judgment, finding again that proper service had been made. The saving statute, Ark. Code Ann. § 16-56-126 (1987), is meant to apply in this situation. Under this provision, if any action is commenced within time, and the plaintiff suffers a nonsuit, or after a judgment for him the judgment is reversed on appeal, the plaintiff may commence a new action within one (1) year after nonsuit or when the judgment is reversed.

We have held that the saving statute should be given a liberal and equitable construction to secure that a class of litigants, who “from causes incident to the administration of the law, are compelled to abandon their present action, whether by their own act or the act of the court, when either would leave them a cause of action yet undetermined, by giving them a reasonable time in which to renew such action.” Coleman v. Young, 256 Ark. 759, 510 S.W.2d 877 (1974).

An analogous situation to the present case is found in the early case of L.R., M. R. & T. Ry. v. Manees, 49 Ark. 248,4 S.W. 778 (1887). In Manees, the plaintiff instituted his suit before a justice of the peace and obtained verdict and judgment against the defendant railroad company in the amount of $125. The verdict was affirmed by the circuit court, but on appeal to this court, we vacated the judgment and dismissed the action finding that the justice of the peace could not have jurisdiction over an injury claim to personal property over the amount of $ 100. When the plaintiff attempted to refile his claim against the railroad, the railroad company argued that his action was barred by the one year statute of limitations. Pursuant to the saving statute, the plaintiff refiled his suit and received judgment against the railroad company. On appeal, we affirmed the trial court’s reliance on the saving statute and stated the following:

It cannot be said to be the policy of the State to encourage the citizen to take upon himself the task or the hazard of determining the validity of the proceedings of the courts. Simple and expeditious judicial remedies are provided to test their legality. It is not to be presumed that the framers of this remedial law, the only object of which was to relieve meritorious creditors, intended to invite the debtor, who had gone through all the forms of a trial in his cause in a judicial tribunal, and seen the result recorded in the form and with apparent effect of a binding judgment or decree, afterwards to take the law into his own hands and wholly disregard the court’s proceedings. ... It is more in consonance with the spirit of the legislation to presume that it was anticipated that every defendant, against whom an apparently binding judgment had been rendered, would seek to avoid it by the forms of law, as the railroad company did in this case, and that when so avoided, the judgment should be deemed arrested or reversed within the meaning of the act.

Applying the above language to the facts of the present case, the appellee had the right to rely on the trial court’s award of a default judgment. The trial court found that the appellant was properly served, and it would be unfair to expect the appellee not to rely on this finding and believe that its action was timely commenced.

For the foregoing reasons, we reverse the trial court’s decision denying appellant’s motion to set aside appellee’s default judgment and direct that appellant’s action be dismissed without prejudice.

Hays, J., dissents on the ground that the appellant should prove a meritorious defense.

       We note that the current version of ARCP Rule 4(e) requires restricted delivery, but this was not a requirement under the rule in effect in 1984.


text:
    EAST POINSETT COUNTY SCHOOL DISTRICT NO. 14 of Poinsett County, Arkansas v. UNION STANDARD INSURANCE CO. and PercyMart, Inc., d/b/a Perciful Roofing Company
    90-203
    800 S.W.2d 415
    Supreme Court of Arkansas
    Opinion delivered December 3, 1990

      Jim Dunlap, for appellant.

      Snellgrove, Laser, Langley & Lovett, by: Glenn Lovett, Jr., for appellee Union Standard Ins. Co.

      Mooney & Boone, for appellee PercyMart, Inc., d/b/a Perciful Roofing Company.
   Tom Glaze, Justice.

This is an appeal from the trial court’s dismissal of the appellant’s cause of action against the appellees for breach of an oral contract. This litigation resulted from storm damage to appellant’s gymnasium roof. At the time of the damage, appellant was insured by appellee Union Standard Insurance Company (Union). The appellant alleges that Union made an oral contract with appellee PercyMart, Inc. to repair the roof.

PercyMart completed its repairs around May 30, 1984, but shortly thereafter, the roof began to leak. PercyMart was unable to fix the problem after several attempts. Nearly five years later, on May 8, 1989, the appellant filed suit, alleging that it was a third party beneficiary of the earlier oral contract between Union and PercyMart and that PercyMart breached the agreement by not performing the work as warranted. The trial court dismissed the appellant’s action as being barred by Ark. Code Ann. § 16-56-105(3) (1987), the three year statute of limitations for breach of ■contract actions. In addition, the trial court granted Union’s motion for summary judgment, finding there was no evidence of a contract between Union and PercyMart. On appeal, the appellant argues the trial court was erroneous in these rulings. Because we affirm the trial court’s finding that the appellant’s action is barred by the three year statute of limitations, we need not address the summary judgment issue.

Appellant argues that the trial court erred in applying § 16-56-105(3) (1987), to its cause of action, and that instead the correct statute of limitations is Ark. Code Ann. § 16-56-112(a) (1987), which in pertinent part provides as follows:

No action in contract, whether oral or written, sealed or unsealed, to recover damages caused by . . . construction and repair of any improvement to real property or for injury to real property or personal property caused by such deficiency, shall be brought against any person performing . . . the construction or repair of the improvement more than five (5) years after substantial completion of the improvement.

While the appellant’s cause of action was not brought within three years of the alleged breach, its action was brought within five years of the completion of the deficient repairs.

This is our first opportunity to address § 16-56-112 and its effect, if any, on § 16-56-105(3) and other statutes of limitations. Before the enactment of § 16-56-112, a third party could sue architects and people in the construction and building field at any time after completion of work, so long as the third party brought suit within the applicable statue of limitations period commencing from when an injury or breach occurred.In recognition of this fact, states, including Arkansas, adopted statues to limit the time within which actions could be brought against persons in the construction and building field. See generally Annotation, Time Limitations — Action Against Architect, 93 A.L.R.3d 1242 (1979).

In making its argument, the appellant cites the established rule of law that if two statutes of limitations apply to the same cause of action, generally the statute with the longest limitations will be applied. See O’Bryant v. Horn, 297 Ark. 617, 764 S.W.2d 445 (1989). That rule, however, is not applicable to this case. Section 16-56-112, by its own terms, is not meant to extend existing statutes of limitations. In this respect, subparagraph (f) of the statute provides as follows:

Nothing in this section shall be construed as extending the period prescribed by the laws of this state for the bringing of any cause of action, nor shall the parties to any contract for construction extend the above prescribed limitations by agreement or otherwise.

In keeping with the express language of § 16-56-112(f), we believe it is clear that the five year limitations contained in § 16-56-112(a) cannot be used to extend the three year limitations period provided in § 16-56-105(3). As it relates to the facts in the present case, § 16-56-112(a) clearly establishes a maximum five year period within which an injured party can bring suit against a person who deficiently constructs or repairs an improvement to real property. That period commences after the substantial completion of the improvement. But, in bringing such a suit, the injured party must still bring the action within the statute of limitations for that type of cause of action. For example, in the present case, if the breach or injury occurs immediately after the completion of the improvement, the injured party must still comply with § 16-56-105(3) and bring his action within three years from when the breach occurs but not later than the five year period provided in § 16-56-112(a).

In holding that § 16-56-112 does not extend the three year statute of limitations for the appellant to bring its contract action, we note that other jurisdictions with similar statutes have followed this reasoning. See Lee v. Fisher, 413 F.2d 1286 (6th Cir. 1969) (applying Kentucky law); Benning Const. Co. v. Lakeshore Plaza, 240 Ga. 426, 241 S.W.2d 184 (1977); Berns Const. Co. v. Miller, 491 N.E.2d 565 (Ind. App. 1 Dist. 1986); O’Connor v. Altus, 67 N.J. 106, 335 A.2d 545 (1975); Comptroller of Virginia v. King, 232 S.E.2d 895 (Va. 1977).

For the reasons stated above, we affirm.

Newbern, J., not participating.

       We have addressed § 16-56-112 in other opinions, but in those cases the plaintiffs’ actions were barred because they were brought after five years from the date of construction. See Elliotte v. Johnson, 285 Ark. 383, 687 S.W.2d 523 (1985); Okla Homer Smith Manuf. Co. v. Larson & Wear, Inc., 278 Ark. 467, 646 S.W.2d 696 (1983); Cherokee Carpet Mills, Inc. v. Manly Jail Works, Inc., 257 Ark. 1041, 521 S.W.2d 528 (1975).


text:
    Nancy WILLIS, as Mother and Next Friend of Tina Raynee Adams, A Minor, and Melissa Sharron Adams Pruitt v. ESTATE OF William Sherman ADAMS, Deceased, and Tracy Charlene Slote
    90-158
    799 S.W.2d 800
    Supreme Court of Arkansas
    Opinion delivered December 3, 1990

      Jack Skinner, for appellant.

      Walters Law Firm, P.A., by: James B. Pierce, for appellee.
   Tom Glaze, Justice.

This is the second appeal in this probate case. The executor of William Sherman Adams’s estate brought the first appeal from the trial court’s decision finding the deceased’s two grandchildren, Tina and Melissa, pretermitted heirs and upholding the constitutionality of Ark. Code Ann. § 28-39-307(b) (1987), the pretermitted heir statute. We upheld the statute’s validity. Holland v. Willis, 293 Ark. 518, 739 S.W.2d 529 (1987).

Following Holland, the probate court added Tracy Slote as a pretermitted heir to its earlier order. Tina and Melissa, having complied with ARCP Rule 54(b), now bring this interlocutory appeal, contending the “law of the case” of the Holland decision precluded the trial judge from adding Slote and giving her a distributive share of the estate. We affirm.

Arkansas follows the general rule that an argument which could have been raised in the first appeal and is not made until a subsequent appeal is barred by the law of the case. Alexander v. Chapman, 299 Ark. 126, 771 S.W.2d 744 (1989). We also have said that the law of the case doctrine prevents consideration of an argument that could have been made at the first trial. Id.; see also Widmer v. Widmer, 292 Ark. 384, 729 S.W.2d 422 (1987). Here, a hearing was held on the issue of pretermitted heirs on February 26,1987, prior to the first appeal. Therefore, Tina and Melissa argue that Tracy could have challenged at trial and on appeal the trial judge’s decision naming only Tina and Melissa as pretermitted heirs. They further argue that, while Tracy had been listed as an heir and given notice of all probate proceedings, Tracy failed to appear at the February 26 hearing to show that she was a grandchild of the deceased.

Tina and Melissa filed a petition for their statutory shares as pretermitted heirs on June 10, 1986. On February 26, 1987, a hearing was held on the petition and on the issue raised by the estate regarding the constitutionality of the pretermitted heir statute. Although Tina and Melissa claim Tracy received notice of all the hearings below, we have thoroughly searched the record and nowhere find she had notice of the February 26 hearing or its purpose. At the closing of all the testimony in that hearing, the estate’s attorney informed the trial judge that Tracy had also been named as a granddaughter and surviving heir, but he was uncertain as.to her legal status. He told the judge that Tracy had been served with the estate’s original petition, but she had not filed a claim prior to the February 26 hearing. Upon conclusion of the hearing, the trial judge made no actual finding as to Tracy but did determine and order that Tina and Melissa each were entitled as pretermitted heirs to a one-quarter share of the estate.

Upon our review of the record, we are unable to say Tracy knew that her status as a grandchild was in dispute, nor that she had been notified that a hearing was scheduled to determine either her rights or Tina’s and Melissa’s as pretermitted heirs. That being true, it is impossible to conclude that Tracy could have questioned either at trial or on appeal the trial judge’s earlier order which omitted any reference to Tracy and named only Tina and Melissa as pretermitted heirs. As a consequence, we hold that the law of the case is inapplicable here.

In its order awarding Tracy a one-sixth distributive share in the estate, the trial court found no one had presented any proof that negated Tracy’s position and relationship to the decedent or that showed she had abandoned her claim as an heir. Under these circumstances, we agree with the trial court that to deny her claim would be patently unjust. Therefore, we affirm.

       At the hearing following Holland, Tracy was shown to be the adopted daughter of. Bill Adams, the deceased’s son. Thus, Tracy was shown to be one of the deceased’s grandchildren, and no question is raised in this appeal concerning that relationship.


author: Otis H. Turner, Justice.

text:
    William COLLINS, et al. v. The CHURCH OF GOD OF PROPHECY, et al.
    90-159
    800 S.W.2d 418
    Supreme Court of Arkansas
    Opinion delivered December 3, 1990

      Lesly W. Mattingly, and Brazil, Clawson & Adlong, by: Charles E. Clawson, Jr., for appellants.

      William Price Feland, for appellees.
   Otis H. Turner, Justice.

On August 29,1944, W.E. Collins executed and delivered to appellee Church of God of Prophecy a warranty deed containiñg the following clause:

This transfer or deed is made with the full understanding that should the property fail to be used for the Church of God, [it] is [to] be null and void and property to revert to W.E. Collins or heirs.

The appellee church, desiring to sell the property and relocate, filed this action to cancel the clause in question and to quiet and confirm title in and to the property in the church. The trial court granted to the appellee the relief sought, finding that the appellee holds a fee simple absolute title to the real property. We find that the trial court erred and, accordingly, reverse.

In holding that the conveyance from Collins to the Church of God violated the Rule Against Perpetuities embodied in art. 2, § 19, of the Arkansas Constitution, the trial court, stated:

[T]he property was clearly granted to the Church, then later a reservation was attempted to be obtained. . . .
[T]he reservation was ineffectual, and created an executory interest only.
[T]he courts have looked to the archaic common law rule against perpetuities of a bygone era. Generally, mental gymnastics are used to twist and turn through a maze of rules to a desired result. Perhaps it is time to look to a reasonable application of this constitutional provision. . . . The simple and common sense approach to such grants would be to simply cut the reservations off after the life of the donor. After all, it is not logical to assume that the grantor intends to tie up the property for generations or centuries. Additionally, most of the gifts have resulted in tax savings. Perhaps, the rule should be that gifts to charitable organizations are absolute and final. This court therefore holds that the reservation clause violates the Arkansas Constitution, and the gift to the Church absolute.
[T]he interest held by the heirs violates the rule against perpetuities, [Ark. Code Ann. § 1-2-119 (1987)].

Our case law has established, over a period of some 150 years, interpretations and refinements of doctrines concerning future interests created in real property and reversionary interests retained by the grantors of real property. That long process of interpretation and analysis includes resolution of disputes over whether the interest at issue violates the common law and the subsequently adopted constitutional bar against perpetuities. That historic development should not be subject to total annihilation by a sweep of the trial court’s pen in characterizing it as “archaic” — even in order to reach what is described as a “simple and common sense approach to such grants.”

As early as 1856, this court held that a deed provision reciting that the lot conveyed is “never to be sold or to be used in any other way only for the use of a church” is enforceable and not against public policy. Grissom v. Hill, 17 Ark. 483 (1856).

The Constitution of Arkansas prohibits “perpetuities” but it does not define or describe them. Instead, the common law is the source of the Rule Against Perpetuities. See The Duke of Norfolk’s Case, 3 Ch. Cas. 1 (1681). That longstanding rule prohibits the creation of future interests or estates which by possibility may not become vested within a life or lives in being at the time of the effective date of the instrument and 21 years thereafter. See Otter Creek Development Co. v. Friesenhahn, 295 Ark. 318, 748 S.W.2d 344 (1988).

In Otter Creek, we stated that “[t]his Court should rarely overrule an earlier decision when the decision has become a rule of property. (Citations omitted.) Even if we should decide to overrule a rule of property, we could not do it retroactively, but only give a caveat for the future. (Citation omitted.)” 295 Ark. at 231, 748 S.W.2d at 346. Were we to affirm the trial court’s decision in the case now before us, we would be changing the settled rule in Arkansas that a possibility of reverter as retained in this conveyance is treated as an interest retained by the grantor. We consider such an interest as being vested at the time of its retention and therefore not subject to the Rule Against Perpetuities. See McCrory School Dist. of Woodruff Co. v. Brogden, 231 Ark. 664, 333 S.W.2d 246 (1960); Houston v. First Baptist Church of Clarksville, 219 Ark. 693, 242 S.W.2d 966 (1951); Fletcher v. Ferrill, 216 Ark. 583, 227 S.W.2d 449 (1950); Coffelt v. Decatur School Dist. No. 17, 212 Ark. 743, 208 S.W.2d 1 (1948); Williams v. Kirby School Dist. No. 32, 207 Ark.458, 181 S.W.2d 488 (1944); Johnson v. Lane, 199 Ark. 740, 135 S.W.2d 853 (1940).

The estate conveyed by Mr. Collins to the appellee church amounted to a fee simple determinable with a possibility of reverter retained by the grantor, to become again a possessory estate when and if the property ceased to be “used for the Church of God.”

In Houston v. First Baptist Church of Clarksville, real property was conveyed to the church and its successors so long as it was used for the location of “a church edifice or other church purposes.” Upon a failure so to use the property, it was to revert to the grantor and his heirs. After 50 years of such use, the church desired to move to another location, sell the property, and apply the proceeds to the purchase of a new lot. The trial court confirmed title in the church, and this court reversed. We held the conveyance to be a fee simple determinable and ruled that a possibility of reverter was retained by the grantor.

Quoting with approval from 1 Tiffany on Real Property, 3rd Ed., § 220, p. 745, this court held that when land is granted for certain purposes, as for a schoolhouse, a church, a public building, or the like, and it appears that the grantor intended this use to be for that purpose alone, and, upon cessation of such use, the estate so granted terminated, a determinable fee was created. Coffelt v. Decatur School Dist. No. 17.

Here the trial court cited as authority three cases, none of which even remotely support the result. Fletcher v. Ferrill, involved the devisability by will of a possibility of reverter. In holding that such an interest was one subject to devise by will, this court stated: “[I]t is . . . well settled that the retention by the grantor of a possibility of reverter does not offend the rule against perpetuities, even though the reverter may not take place for an indefinite period in the future.” 216 Ark. at 568, 227 S.W.2d at 451.

McCrory School Dist v. Brogden, cited by the trial court, involved property conveyed to a school district by conveyance containing a reverter clause. The school district discontinued the use of the property as a school but claimed title through adverse possession, along with other theories such as estoppel. Subsequent to the school district’s discontinuance of use for school purposes, the interest of the holder of the possibility of reverter was then conveyed. This court, under those circumstances, held that at the time the reversionary interest was transferred, the condition triggering the reverter had already occurred and the interest so transferred, though it had become an executory interest and subject to the doctrine, was not ripe for application of the doctrine of adverse possession.

The last case cited as authority by the trial court is Otter Creek Development Co. v. Friesenhahn. That case involved the application of the Rule Against Perpetuities to an option to purchase real estate and has no bearing upon the substantive issues presented here.

In summary, the Rule Against Perpetuities is alive, well, and fully applicable to terminate interests where those interests do not vest within 21 years after some life in being at the time of the creation of the instrument. However, the rule has no application to reversionary interests, which remain in the transferor and heirs. Such is the interest retained by the transferor in this instance, W.E. Collins and his heirs.

The decree entered in favor of the appellee is therefore reversed, and the cause is remanded for entry of decree consistent with this opinion.


author: Dale Price, Justice.

text:
    Robert KEENAN, Jr., Personally, d/b/a Superior Grain Co., Inc. v. AMERICAN RIVER TRANSPORTATION CO., Subsidiary of Archer Daniels Midland Co.
    90-173
    799 S.W.2d 801
    Supreme Court of Arkansas
    Opinion delivered December 3, 1990

      Van Kleef & Strait, by: John D. Van Kleef, for appellant.

      Raymond Harrill, for appellee.
   Dale Price, Justice.

This is an appeal from a decision granting the appellee’s motion for summary judgment. The four points for reversal concern its entry. We find no merit and affirm.

The appellee, American River Transportation Company (American), a subsidiary of Archer Daniels Midland Company, brought suit against the appellant for nonpayment of barge freight charges. The appellant, Robert Keenan, Jr., personally, d/b/a Superior Grain Company, Inc. (Superior), filed a general denial, alleging the proper party was Superior and not Keenan personally. Keenan subsequently filed a motion for summary judgment, contending there was no material issue of fact inasmuch as Superior had merged with Keenan Cotton Gin & Grain Elevator, Inc., as of April 1, 1986. A copy of the certificate of merger was attached to the motion. The motion was denied by the trial court upon its determination there could be a question of fact as to whether Keenan signed as an individual or on behalf of Superior. Keenan counterclaimed for abuse of process and later amended his answer, adopting pervious pleadings and alleging he did not do business with American personally. He further alleged in his amended answer that if paperwork was erroneously made out to Superior, it was a mistake and the contract should be reformed. Keenan was deposed by American, and American thereafter filed its motion for summary judgment which the trial court granted.

Keenan first alleges reversible error in the trial court’s granting of American’s motion for summary judgment. He contends there were genuine issues of material fact which should have been resolved by the trier of fact, and American failed to carry its burden of proof. It is well settled that summary judgment is appropriate only when the pleadings, depositions, answers to interrogatories, and affidavits show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. ARCP Rule 56. Once the movant makes a prima facie showing of entitlement, the respondent must meet proof with proof by showing a genuine issue as to a material fact. Pruitt v. Cargill, Inc., 284 Ark. 474, 683 S.W.2d 906 (1985).

Because this appeal is from the trial court’s granting of summary judgment, our review is limited and focuses on the pleadings, deposition testimony and other documents filed by the parties in support of their respective arguments.

Keenan executed a broker contract with American on November 5,1987, which provided for the shipment of soybeans on two barges. The barge freight totaled $21,447.24. Keenan was the corporate president of Superior. At the time of the contract’s execution, Superior had merged into Keenan Cotton Gin & Grain Elevator, Inc. No one was aware of the merger other than Keenan and his CPA. American was listed as the “seller” and Superior/Robert Keenan the “buyer” in the broker contract. Keenan stated in his deposition that he had read the broker’s contract, knew what it contained, and signed it. He further stated by deposition that he continued to do business under the name of Superior to July, 1988, and never notified Marine Freight Exchange, Inc. (the broker), or American that Superior had merged into another corporation. The barge freight was never paid and Keenan admitted there was no reason to doubt the accuracy of the charges.

American contends the above facts were sufficient for the trial court to rule as a matter of law that Keenan was personally liable for the debt incurred on behalf of Superior. Upon Superior’s merger with Keenan Cotton Gin & Grain Elevator, Inc., Superior ceased to exist and any contracts entered into by or on behalf of Superior would be contracts with a nonexistent entity. The merger occurred under former Ark. Stat. Ann. § 64-705(B) (Repl. 1980), which provided as follows:

Subject to Section 77 [§ 64-708] infra, the separate existence of all corporations parties to the plan of merger or consolidation, except the surviving or new corporation, shall cease.

American correctly recites the rule that one who contracts as an agent in the name of a nonexistent or fictitious principal renders himself personally liable on the contract so made.

The trial court stated at the hearing on American’s motion for summary judgment that the controlling document was the broker’s contract executed by the parties on November 5, 1987, and that its effect was to make Keenan personally liable. Because of the trial court’s determination that Keenan was personally liable to American, there could be no remaining issue of material fact to be tried. Accordingly, summary judgment was appropriate.

The appellant alleges error in the granting of American’s motion for summary judgment because American had not complied with the appellant’s requested discovery. The appellant served interrogatories on American on September 30, 1989, and in an interrogatory asked American to provide the names of all persons who would be witnesses at trial. On November 13,1989, American stated in its response to that interrogatory “[p]ersons who will be witnesses will be determined after deposition of the Defendant and this response will be supplemented.” Keenan was deposed by American on October 17, 1989. American filed its motion for summary judgment on November 16 and Keenan objected to American’s motion on the basis that American had not complied with Keenan’s discovery requests. Keenan complained at the hearing that he had been provided with the name of a witness by American three days prior to the hearing, and the trial court should not have ruled on the motion until Keenan was furnished with responses to his interrogatories.

We sustained the same argument on appeal in First National Bank, Guardian v. Newport Hospital & Clinic, 281 Ark. 332, 663 S.W.2d 742 (1984). The appellant there contended the information and documents requested from the appellee were crucial to its case and were relevant to the issues to be litigated. It was clear to this court that the information sought by the interrogatories and requests was pertinent to the issues of the case. In Mixon v. Chrysler Corporation, 281 Ark. 202, 663 S.W.2d 173 (1984), we held the grant of summary judgment was proper where unanswered interrogatories would not have produced evidence of sufficient force to remove the case from the realm of speculation and conjecture, regardless of the answers.

In the instant case, the appellant has not demonstrated any prejudice as a result of American’s failure to supplement Keenan’s interrogatory which merely requested the names of any witnesses American intended to call at trial. We are unable to say that the trial court erred in granting summary judgment on this basis inasmuch as Keenan failed to demonstrate the answer would change the status of the litigation.

Keenan contends the trial court committed reversible error by granting summary judgment because the motion was not timely filed pursuant to ARCP Rule 56(c). It provides in part as follows: “The motion shall be served at least 10 days before the time fixed for the hearing.”

As previously noted, American’s motion was filed on November 16 and the matter had been set for a jury trial on November 21. Keenan filed a response to the motion on November 20, and the trial court considered the motion on November 21. The timeliness of the motion for summary judgment was raised by Keenan both in his response and at the hearing. The notice requirement was clearly not complied with and as this court stated in Purser v. Corpus Christi State National Bank, 258 Ark. 54, 522 S.W.2d 187 (1975), such requirements are not mere formalities and should not be treated so lightly as to deprive a party of an opportunity to present rebutting evidence and argument. Unless it is manifest that the error is prejudicial, reversal is not warranted. See Braswell v. Gehl, 263 Ark. 706, 567 S.W.2d 113 (1978).

Under the circumstances, we fail to see how Keenan was prejudiced by American’s failure to comply with the notice requirement of ARCP Rule 56(c). Keenan filed a response to the motion and had the opportunity to argue it. Accordingly, we cannot say Keenan was deprived of the opportunity .to present rebutting evidence and argument.

Finally, Keenan contends the trial court erred in dismissing his counterclaim with prejudice. He alleges the dismissal was not the appropriate relief and was precipitated by the erroneous entry of summary judgment by the trial court. American correctly states that a counterclaim based upon malicious prosecution cannot be determined until trial of the underlying action for breach of contract. Keenan argues there was no legal basis for the granting of summary judgment and there is therefore no basis for the dismissal with prejudice of his counterclaim. Our holding that summary judgment was proper disposes of this argument.

Affirmed.


author: Dale Price, Justice. Steele Hays, Justice,

text:
    James C. PLEDGER, Commissioner of Revenues, State of Arkansas v. EASCO HAND TOOLS, INC.
    90-139
    800 S.W.2d 690
    Supreme Court of Arkansas
    Opinion delivered December 3, 1990
    [Rehearing denied January 14, 1991.]

      John Theis, Philip Raia, Robert L. Jones, William Keadle, Cora Gentry, David Kaufman, Malcolm Bobo, and Beth B. Carson, by: Rick L. Pruett, for appellant.

      Cypert, Crouch, Clark & Harwell, by: Charles L. Harwell, for appellee.

      Hays, J., would grant rehearing. Corbin and Brown, JJ., not participating.

   Dale Price, Justice.

This is a use tax case in which the appellant appeals from an adverse decision finding the appellee was entitled to an exemption. Three points are relied upon for reversal. We find no merit to any of these issues and affirm.

The appellee, EASCO Hand Tools, Inc. (EASCO), has operated a manufacturing plant in Springdale, Arkansas, in excess of twenty years. EASCO’s wrenches and hand tools are sold throughout the United States as well as foreign countries. In the early 1980’s, EASCO, faced with foreign competition, expanded its plant operations to increase efficiency in its manufacturing process. In 1985 a Computer-Aided Design/Computer-Aided Manufacturing (CAD/CAM) system was purchased out of state for $793,674.41. An audit was performed by appellant Arkansas Commissioner of Revenues (Commissioner), and EASCO was subsequently assessed use tax for unreported purchases of office supplies, repair parts, die block material, machinery and equipment. The assessment was litigated before the Commissioner’s Office of Hearing and Appeals, resulting in an administrative decision upholding the assessment of tax, penalty and interest. EASCO appealed and the case was submitted to the trial court upon stipulations of facts and law together with supporting briefs. The trial court specifically found EASCO established its entitlement to an exemption from use tax on the purchase of the CAD/CAM system and die block materials beyond a reasonable doubt.

The Commissioner first alleges the chancellor erred in finding EASCO was entitled to the machinery and equipment exemption. Entitlement to the exemption will be upheld if EASCO established beyond doubt its CAD/CAM system was used directly in its manufacturing process, creating an “article of commerce.” In addition, the system had to have been purchased by EASCO in order to create an expansion of its existing facilities. Ark. Code Ann. § 26-53-114 (1987).

The CAD/CAM system consists of a main frame computer, four terminals and milling machines for the plant. The milling machines are connected to the computer by cable. The die used in the manufacturing process determines the shape of the tools, the “articles of commerce” produced by EASCO. The dies are formed on site by the CAD/CAM system to strict tolerances, and the physical characteristics of the hand tools are determined from these dies. The dies are placed in stamping machines to produce the finished hand tools. The system can retool dies as they become worn and provides the specifications for quality control. As a direct result of its purchase of the CAD/CAM system, EASCO’s die cost per wrench dropped significantly and the number of persons employed in the plan increased substantially.

The Commissioner argues the system is used to make a die which in turn is used to make an “article of commerce” and, therefore, is not used directly in the manufacturing process. It is pointed out that the “articles of commerce” manufactured by EASCO are wrenches and hand tools, not dies and molds. In other words, the CAD/CAM system is an integral part of the manufacture of dies and molds and not an integral part of the manufacturing process.

In a lengthy and detailed memorandum opinion, the trial court found EASCO had met the requirements of Ark. Code Ann. § 26-53-114. The court stated that the CAD/CAM system performed an essential function directly in the manufacture of tools. It further found the system’s function, designing and manufacturing, directly pertained to the dies, and the dies shaped the wrenches and hand tools which were the “articles of commerce.”

It is well settled that a presumption exists in favor of the taxing power of the state, and a taxpayer has the burden of establishing the right to an exemption beyond a reasonable doubt. Ragland v. General Tire & Rubber Co., 297 Ark. 394, 763 S.W.2d 70 (1989). Tax exemptions must be strictly construed against exemption, and to doubt is to deny the exemption. Ragland v. Dumas, 292 Ark. 515, 732 S.W.2d 118 (1987). We review such cases de novo and do not set aside the findings of the chancellor unless they are clearly erroneous. Southern Steel & Wire Co. v. Wooten, 276 Ark. 37, 631 S.W.2d 835 (1982). Under the specific facts of this case, we cannot say the chancellor’s finding that EASCO’s CAD/CAM system was exempt from use tax is clearly erroneous.

The Commissioner next alleges the chancellor erred in applying an “economically essential” test to determine if EASCO was entitled to an exemption on its CAD/CAM system. In this regard, the Commissioner states the trial court improperly determined EASCO’s manufacturing operation would cease if the CAD/CAM system were removed and based this determination upon competition and cost factors. Although the trial court referred to the economic results of removing the CAD/CAM system from EASCO’s manufacturing process in its opinion, we do not view its remarks as applying an economic test in finding that EASCO’s CAD/CAM system was used directly in its manufacturing process. The trial court noted the die work could not be obtained from any other facility in the state, and specifically stated that without the CAD/CAM system, EASCO’s manufacturing process would cease. This comports with the language of Ark. Code Ann. § 26-53-114(c)(3)(A) (1987), which provides in part as follows:

Machinery and equipment used in actual production include machinery and equipment that meet all other applicable requirements and which cause a recognizable, and measurable mechanical, chemical, electrical, or electronic action to take place as a necessary and integral part of manufacturing, the absence of which would cause the manufacturing operation to cease. ‘Directly’ does not mean that the machinery and equipment must come into direct physical contact with any of the materials that become necessary and integral parts of the finished product. . . .

EASCO relies upon our decision in Ragland v. Deltic Farm & Timber Co., 288 Ark. 604, 708 S.W.2d 90 (1986), which upheld a use tax exemption on a crane utilized in a sawmill operation. Deltic constructed a merchandiser which was a physical plant built next to its sawmill operation and supplemented that facility. The crane served the merchandiser primarily and the sawmill secondarily. The Commissioner contended the crane was not used directly in manufacturing, but we noted the uncontradicted proof showed the sawmill department could not operate without the merchandiser department and vice versa.

The Commissioner in the case at bar says that Deltic is distinguishable because if the crane were absent, the manufacturing operation would cease and, in this case, EASCO’s manufacturing of hand tools would continue. He contends the chancellor did not utilize the analysis set forth in Deltic but applied an erroneous “economically essential” test. The chancellor correctly applied Ark. Code Ann. § 26-53-114(c)(3)(A), and we find no merit to this argument.

Finally, the Commissioner contends the trial court erred in determining die block material purchased by EASCO was exempt from tax. The trial court found the die block materials constituted the molds and dies which in turn determined the physical characteristics of the finished product. In its opinion, the court reasoned that “ [s] imply because the material is purchased in raw form and shaped by EASCO instead of being purchased in finished form should not, alone, cause it to be taxable.” The chancellor apparently determined the die block material was exempt pursuant to Ark. Code Ann. § 26-53-114(c)(3)(B)(i) (1987), which provides:

Further, machinery and equipment ‘used directly’ in the manufacturing process shall include, but shall not be limited to, the following:
Molds and dies that determine the physical characteristics of the finished product or its packaging materials;

The Commissioner argues the die block material is tangible personal property and is presumed taxable pursuant to Ark. Code Ann. § 26-53-106 (Supp. 1989). It is also argued that if the die block material is exempt from tax pursuant to Ark. Code Ann. § 26-53-114(c)(3)(B)(i), that exemption is limited to the initial dies and molds under the authority of the Arkansas Department of Finance and Administration’s regulations. The stipulated testimony of two witnesses submitted by EASCO established the die block material was utilized for the making of initial dies and molds and did not include subsequent replacement molds and dies. This testimony was unrebutted. Accordingly, we cannot say the trial court’s finding that the die block material was exempt is clearly erroneous.

Affirmed.

Hays, J., dissents.

Steele Hays, Justice,

dissenting. I fail to see the basis for the majority’s decision. The opinion states the standard rules regarding tax exemptions which require strict construction of the exemption and proof of the exemption beyond a reasonable doubt. Yet the majority seems to entirely ignore not only those rules but also the plain language of the statute and simply finds the die manufacturing equipment to be but one step in the manufacture of the hand tools. The statute and facts here, however, clearly do not allow this conclusion.

I would first note that Ragland v. Deltic Farm & Timber Co., 288 Ark. 604, 708 S.W.2d 90 (1986), which the majority appears to rely on, is easily and definitively distinguishable from the case before us. In Deltic we dealt with the taxation of a crane which lifted logs from logging trucks to a sawmill where certain types of logs were minimally prepared for the primary manufacturing operation which was located in a separate facility. This system was described as no more than raw wood arriving at the mill and moving through “a continuous process that produces an end result of finished timber and high-quality chips.” We stated that “with regard to what is essentially an issue of fact, we cannot say that the chancellor’s finding is clearly wrong,” the implication being that there is a gray area at the beginning of the manufacturing process, and we could not say the trial court was clearly wrong in where it decided to draw that line.

Deltic, however, was dealing with the machinery involved in a step of preparing the raw material for manufacture into the finished product-the “articles of commerce.” [Ark. Code Ann. § 26-53-114(a)(1)(A) (Supp. 1989).] Our case involves machin-; ery used to manufacture an item that is not the article of commerce this company produces at all. Rather the machinery is only used to manufacture dies for the company’s own use, an operation completely aside from the manufacture of its commercial products, the hand tools. This is not analogous to the Deltic circumstances.

I would also note under Deltic, that to the extent the majority is reading the exemption statute to require a “but for” test, that holding is limited to the circumstances of that case, and the plain language of the statute, which simply makes no such allowance. Furthermore if the state were to exempt all machines, whose absence would cause operations to cease, no matter how tangential to the production, there would be almost no limit to the exempted class. Had the legislature intended such a broad exemption they have twice had the opportunity to make that point clearer in two sessions since the Deltic opinion. They have not moved in that direction at all, but have provided changes which if anything, have narrowed and limited the scope of the exemption. See Ark. Code Ann. § 26-53-114 (Supp. 1989).

As to the language of the exemption statute, it is true as the majority points out that as regards the requirement in the statute that exempted machinery be “used directly” in the manufacturing process, “molds and dies” are expressly stated as being considered as being “used directly.” However, that section is referring to molds and dies used in making the finished product. Here we are not talking about the molds and dies used to make the hand tools, we are talking about the machines that make the molds and dies. If the company sold molds and dies, it would be another question. But they do not. They manufacture these dies for their own use and do not distribute them as articles of commerce.

Of greatest importance here, the language in the exemption does not approach the expansiveness given to it by the majority. To the contrary, the legislature had done all it could to define and limit the effect of this exemption, e.g.:

(c)(1) It is the intent of this section to exempt only such machinery and equipment as shall be utilized directly in the actual manufacturing or processing operation at any time from the initial stage where actual manufacturing or processing begins through the completion of the finished article of commerce and the packaging of the finished end product.
(2) The term “directly” as used in this section is to limit the exemption to only the machinery and equipment used in actual production during processing, fabricating, or assembling raw materials or semifinished materials into the form in which such personal property is to be sold in the commercial market.
(A). . .Machinery and equipment which handle raw, semifinished, or finished materials or property before the manufacturing process begins are not utilized directly in the manufacturing process. [My emphasis.]

The equipment in question here is clearly not involved in the “actual production” of the end product, as is required by the statute, but is a secondary and separate operation. The computers and terminals used to manufacture the die machines are not part of the actual production of the hand tools. Thqy do not work with the raw or semifinished materials that become the final product.

I also find that the die block materials do not come within this exemption. It might be said that the die block material is used in both the secondary operation as well as the actual production of the hand tools. However, it is not purchased in the form of equipment, but as raw material, and as such, does not come at all within the exemption’s definition of “machinery and equipment,” and only machinery and equipment are exempt. See Ark. Code Ann. § 26-53-114(c)(3)(A) (1989) and Ark. Code Ann. § 26-53-114(a)(1)(A) (1989).


author: W. Dent Gitchel, Special Justice.

text:
    NATIONAL BANK OF COMMERCE (of El Dorado, Arkansas), Guardian of the Estate (Only) of James Talley, a Minor, and Shirley Talley Collins and George Talley, Parents v. HCA HEALTH SERVICES OF MIDWEST, INC. d/b/a Doctors Hospital, Hospital Corporation of America, Frances Tully, and Brenda Swayze
    89-283
    800 S.W.2d 694
    Supreme Court of Arkansas
    Opinion delivered December 3, 1990
    [Rehearing denied January 14, 1991.]]

      Whetstone and Whetstone, by: Bernard Whetstone, Bud Whetstone, and Bob Davidson, for appellants.

      Friday, Eldredge & Clark, by: William H. Sutton, Donald H. Bacon, and Laura Hensley Smith, for appellees.

      Newbern, Corbin, and Brown, JJ., not participating.

   W. Dent Gitchel, Special Justice.

James Talley was born in Doctors Hospital on September 7, 1982. He appeared to be a normal, healthy baby. Several hours later, shortly after midnight, nurse Frances Tully discovered that James had stopped breathing and had no heartbeat. He was immediately resuscitated, but showed symptoms of brain damage. James’ parents and the guardian of his estate sued HCA Health Services of Midwest, Inc., d/b/a Doctors Hospital (Midwest) and the three nurses who were on duty in the nursery at the time of the incident.

When the case was first tried in 1986, the jury returned a verdict against Midwest, awarding both compensatory and punitive damages. This court reversed and remanded. HCA Health Serv. of Midwest, Inc. v. National Bank of Commerce, 294 Ark. 525, 745 S.W.2d 120 (1988). The second trial, from which this appeal comes, resulted in a verdict in favor of the defendants. Appellants raise a number of points for reversal. However, we find none of them persuasive and affirm.

1. Absence of the mattress.

Appellants assert that “appellees unwarrantedly failed to produce at the trial the mattress on which James Talley was lying at the time of the occurrence.” The “mattress” in question is a plastic-covered, foam rubber bassinet pad about an inch thick. Appellees had introduced the mattress at the first trial, asserting that it was the actual mattress. Appellants objected to its authenticity, contending that the actual mattress was thicker and fluffier. The mattress was filed with the record on the first appeal to this court and was misplaced by the clerk. While preparing for the second trial, appellees attempted to obtain the mattress from the clerk, but were informed that it was lost. Appellants did not attempt to locate the mattress, but the clerk found it after the second trial. Appellants suffered no prejudice from the absence of the appellees’ exhibit, the admissibility of which they had steadfastly contested.

2. Summary judgment in favor of Hospital Corporation of America.

Midwest is a wholly owned subsidiary of Health Services Acquisition Corp.; Health Services Acquisition Corp. is a wholly owned subsidiary of HCA, Inc.; and HCA, Inc. is a wholly owned subsidiary of Hospital Corporation of America (Hospital Corporation), a publicly owned corporation. Of these corporations, only Midwest was a party at the time of the first trial.

One basis for this court’s reversal on the first appeal was plaintiffs’ counsel’s references to Hospital Corporation, a non-party, when discussing punitive damages during opening statement and closing argument. On remand, the appellants joined Hospital Corporation as a defendant, and the trial court entered summary judgment in favor of Hospital Corporation. The trial court erred, but the jury’s verdict in favor of the appellees rendered the error harmless.

In essence, the appellants’ theory of liability was that James Talley’s injuries were proximately caused by the nurses leaving him unattended, that the inattention resulted from understaffing in the nursery, that hospital personnel had complained to the manager about the understaffing, and that the manager had failed or refused to provide more nurses. Appellants argue that the manager’s allegedly wrongful acts should be imputed not only to Midwest, but also to Hospital Corporation. Appellees argue that no relationship existed between Hospital Corporation and either Midwest or the hospital manager.

Appellants made no allegation, proffered no evidence, and presented no affidavit to the trial court indicating that Hospital Corporation was itself guilty of wrongful conduct. In their briefs and argument the appellants make bare, unsupported statements that Hospital Corporation ordered the manager to cut the nursing staff, but the record contains nothing to support these statements. Although a principal or master may be liable for its own tortious conduct, ice RESTATEMENT (SECOND) OF AGENCY § 212(1958), some factual support for the assertion is necessary. In the absence of any such factual support, summary judgment on the issue of Hospital Corporation’s own conduct was proper.

A principal or master may also be vicariously liable for the tortious acts of its agent or servant within the scope of the agency or employment. See Gleason v. Seaboard Air Line Ry., 278 U.S. 349 (1929); Dillard Dept. Stores, Inc. v. Stuckey, 256 Ark. 881, 511 S.W.2d 154 (1974). The record does contain sufficient evidence to raise a genuine question of fact whether a principal-agent or master-servant relationship existed between Hospital Corporation and the manager of Doctors Flospital. This question of fact should have been left for the jury to decide. See B. J. McAdams, Inc. v. Best Refrigerated Exp., Inc., 265 Ark. 519, 579 S.W.2d 608 (1979); Fireman’s Fund Ins. Co. v. Leftwich, 192 Ark. 159, 90 S.W.2d 497 (1936). However, the court’s error in granting summary judgment was rendered harmless by the jury’s verdict in favor of appellees. Where the issue of liability is decided in favor of the agent or servant and against the plaintiff, as it was here, the principal or master cannot be vicariously liable. See New Orleans & N.E. R.R. v. Jopes, 142 U.S. 18 (1891).

Appellants argue two other theories under which they assert that Hospital Corporation could have been held liable, neither of which has merit. First is joint venture. Joint venturers may be held jointly and severally liable for one another’s wrongful acts, Myers v. Lillard, 215 Ark. 355, 220 S.W.2d 608 (1949), but a joint venture must have the elements of a partnership. State ex rel. Attorney General v. Gus Blass Co., 193 Ark. 1159, 1055 S.W.2d 853 (1937). Hospital Corporation and Midwest were not joint venturers because their relationship did not have the elements of a partnership. Even if they had been joint venturers, the jury’s verdict in favor of Midwest also exonerated Hospital Corporation because liability of a joint venturer is vicarious, founded on principles of agency. See Franko v. Bunyard, 261 Ark. 144, 547 S.W.2d 91 (1977); Vrabel v. Acri, 156 Ohio St. 467, 103 N.E.2d 564 (1952). Appellants’ other theory is “piercing the corporate veil.” One who seeks to disregard the corporate entity must show that the corporate form has been abused to the injury of a third person. Rounds & Porter Lbr. Co. v. Burns, 216 Ark. 288, 225 S.W.2d 1 (1949). There is no evidence to support this theory.

3. The trial court’s handling of prospective juror Wheetley.

During voir dire, appellant’s counsel was allowed to ask the following question over objection:

Do any of you have a feeling that you would not be able to award as much as ten million dollars or in that neighborhood under any circumstances, no matter what the proof has shown, no matter what the process of law is, does anybody have any hesitation about awarding as much as ten million dollars if you thought the evidence justified? This may be the most important question that I will ask you and I would like to ask you the question individually. . . .

An objection to individual questioning was overruled, and appellants’ counsel examined each prospective juror. The following transpired:

Q: Mrs. Linda Wheetley, would you have any hesitation in awarding ten million dollars if you felt it was justified under the evidence and the instructions of the court?
A: As I told you previously, I was on the Guthrie-Alcoa case and this one to me is very similar and I still have the opinion and judgment from that case and that was a large sum of money, and I don’t really think I am going into this case with a clear mind.

Appellants’ counsel next attempted to inquire into Mrs. Wheetley’s deliberations in the other case, but an objection was sustained. Then the following transpired:

A: From previous experience I do have feelings that are different now.
Q. Translating that into my question now, and the answer to my question about the ten million dollars, would you have any hesitation about giving as much as ten million dollars if you thought the evidence justified it?
A: I sure would.

Counsel then approached the bench and moved that the juror be struck for cause. The court then asked:

Q: Ms. Wheetley, if you’re chosen as a juror in this case, can you lay aside everything, I’m not talking about laying aside your common sense because you have a right and you should exercise that, but can you lay aside everything besides the case and the exercise of your common sense based on the evidence and based on the law and return the verdict that is appropriate whether it be for the defendant, or whether it be for the plaintiff and if the verdict be for the plaintiff return the amount of compensation that you feel is justified under the evidence and the law that you have heard? Can you do that? Forget about the figure of ten million dollars Mr. Whetstone asked you and I’ll just ask you can you do that?
A: Yes.

The motion to strike for cause was denied, and the appellants used a peremptory challenge to strike Mrs. Wheetley.

Appellants argue that the trial court’s instruction to Mrs. Wheetley to “forget about the figure of ten million dollars Mr. Whetstone asked you. . .” was disparaging, belittling and prejudicial. However, appellants made no objection. It has long been the rule in this state that an objection must be made to the trial judge’s conduct before the issue may be considered on appeal. Life & Cas. Ins. Co. v. Gilkey, 255 Ark. 1060, 505 S.W.2d 200 (1974). See also Smiths. Perkins, 246 Ark. 427, 439 S.W.2d 275 (1969).

Appellants also argue that the trial court erred in refusing to strike Mrs. Wheetley for cause. They contend that they wanted to use their peremptory challenges to strike three other jurors and argue that the necessity of using a peremptory challenge to strike Mrs. Wheetley forced them to leave one objectionable juror on the panel. None of the three other jurors were challenged for cause. We affirm on this point because there is no proof in the record to substantiate the appellants’ assertion of prejudice. In Rickett v. Hayes, 256 Ark. 893, 511 S.W.2d 187 (1974), this court held:

We need not decide whether the circuit judge abused his discretion in this instance. The questioned juror did not sit on the jury. It has been a long-standing rule in this state that a party is not entitled to claim prejudice in such circumstances unless it is shown that he was forced to accept some objectionable or disqualified juror without the privilege of exercising a peremptory challenge. Arkansas State Highway Comm’n v. Dalrymple, 252 Ark. 771, 480 S.W.2d 955. No juror who was challenged for cause served on the jury and it is not shown that appellant would have otherwise struck the name of some juror other than the three actually stricken.

We find Rickett to be determinative in this case.

4. The incident with the jury foreman.

Shortly after the jury retired to deliberate, the jury foreman suddenly walked into the room where the trial judge and counsel for both parties were sitting. The record’s only reference to this incident appears in the trial court’s order denying the appellants’ motion for new trial. According to the order:

4. Within a few minutes after retiring in the present case the jury foreman came to the trial judge, and in the presence of all attorneys, stated some of the jurors wanted a definition of the word “occurrence.” The foreman inquired if it meant only the “seizure or what.”
5. The Court stated no further explanation could be given by the Court; gave the jury foreman the written instructions; and told the foreman that the jury should resolve that question from all evidence received and the law as contained in the instructions.

The word “occurrence” appeared in interrogatories proposed by the appellants and submitted to the jury over the appellees’ objection. No party objected to the court’s manner of handling the incident with the jury foreman.

The procedure to be followed in civil cases when the jury desires further instruction during deliberation is governed by Ark. Code Ann. § 16-64-115 (1987), which states:

After the jury has retired for deliberation, if there is a disagreement between them as to any part of the testimony, or if they desire to be informed as to any point of law arising in the case, they may request the officer to conduct them into court, where the information required shall be given in the presence of, or after notice to, the parties or their counsel.

An almost identical statute, Ark. Code Ann. § 16-89-125(e) (1987), governing the procedure in criminal cases, has been construed many times. In every case decided under the criminal statute the court communicated significant information to the jury without complying with the statute. In Andrews v. State, 251 Ark. 279, 472 S.W.2d 86 (1979), this court held that strict compliance with the criminal statute is mandatory.

In Andrews, this court discussed the dangers inherent in the court’s conversing with one juror after deliberations have begun:

[W]here answers are given to only one member of the jury, and he in turn reports that answer to the other jurors, there is a great opportunity for misconstruction. After all, the juror is not a lawyer and, though honestly and conscientiously endeavoring to convey to the other jurors the answer of the court, will necessarily only give his interpretation of what was said; this interpretation may be erroneous. Of course, it is also possible that the single juror might not hear correctly everything the court said.

These dangers are, of course, equally present in a civil case, and we hold that compliance with the civil statute is also mandatory. Prejudice is presumed from a violation unless we can say with confidence that lack of prejudice is manifest. We find that lack of prejudice is manifest in the present case.

Section 16-64-115 commands that the information required be given to the entire jury in the presence of, or after notice to, the parties or their counsel. The statute prescribes the method of communicating the information required, not necessarily the information requested. Before additional information is given, the trial court must determine whether the information requested is required. The trial court has broad discretion to decide what information should be given to the jury. Dickerson Constr. Co., Inc. v. Dozier, 266 Ark. 345, 584 S.W.2d 36 (1979); Rose v. King, 170 Ark. 209, 279 S.W. 373 (1926); Dodwell v. Mound City Sawmill Co., 90 Ark. 287, 119 S.W. 262 (1909). If the trial court decides that further information is required, Section 16-64-115 governs the method of communicating that information to the jury.

In the present case, the trial court determined that no information was required and so informed the foreman. No information was given. The only violation of the statute was in the foreman’s requesting clarification himself rather than sending the deputy to convey the request. The appellants could have requested that the jury be brought in for further instructions, but did not. The appellants could have objected to the court’s method of handling the incident, but, again, did not.

The statute governing further instructions to the jury in civil cases, Section 16-64-115, was discussed in Dickerson Constr. Co., Inc. v. Dozier, supra. In Dickerson the jury sent the deputy to request that it be furnished a damages chart used by the appellee in closing argument. The chart had not been introduced into evidence. The trial judge and appellant’s counsel were not present. Appellee’s counsel gave the chart to the deputy, who took it to the jury. As soon as he learned of the incident, appellant’s counsel moved for a mistrial. This court reversed because “appellant had no opportunity to object or to ask the court to give the jury a cautionary instruction.” Appellants in the present case had both of those opportunities. Accordingly, in these circumstances, we find that there was no prejudicial error. See also Stull v. Ragsdale, 223 Ark. 277, 620 S.W.2d 264 (1981).

5. Alleged jury confusion.

Appellants allege that the verdict was the obvious result of jury confusion over the meaning of the word “occurrence.” The allegedly confusing word appeared only in interrogatories proposed by the appellants and objected to by the appellees. When the incident with the jury foreman occurred, the appellants did not request that the jury be further instructed. Nor did the appellants ask that the jury be polled after it returned its verdict or question the verdict before the jury was discharged.

The sanctity of jury deliberations is a fundamental precept of our adversary system. The public interest in preserving the confidentiality of jury deliberations is embodied in an evidentiary rule making jurors incompetent to:

testify as to any matter or statement occurring during the course of the jury’s deliberations or to the effect of anything upon his or any other juror’s mind or emotions as influencing him to assent to or dissent from the verdict or indictment or concerning his mental processes in connection therewith, nor may his or any other juror’s affidavit or evidence of any statement by him concerning a matter about which he would be precluded from testifying be received. . . .
A.R.E. 606(b).

The evidence rule includes an exception applicable when a question is raised as to whether extraneous prejudicial information was improperly brought to the jury’s attention or whether outside influence was improperly brought to bear upon any juror, but no such question is raised here.

This court has held that “as a general rule, the failure to object to some irregularity in a verdict prior to the discharge of the jury constitutes a waiver of that irregularity.” Coran v. Keller, 295 Ark. 308, 748 S.W.2d 349 (1988). Since no timely objection was made by the appellants, we affirm on this point.

6. The quality-care committee privilege.

Arkansas, like virtually every other state, has created a medical quality-care committee privilege. Ark. Code Ann. § 16-46-105 (1987). The statute provides:

(a) The proceedings, minutes, records, or reports of organized committees of hospital medical staffs or medical review committees of local medical societies having the responsibility for reviewing and evaluating the quality of medical or hospital care, and any records compiled or accumulated by the administrative staff of such hospitals in connection with such review or evaluation, together with all communications or reports originating in such committees, shall not be subject to discovery or admissible in any legal proceeding and shall be absolutely privileged communications. Neither shall testimony as to events occurring during the activities of such committees be admissible.
(b) Nothing in this section shall be construed to prevent disclosure of the data mentioned in subsection (a) to appropriate state or federal regulatory agencies which by statute or regulation are entitled to access to such data, nor to prevent discovery and admissibility if the legal action in which such data is sought is brought by a medical practitioner who has been subjected to censure or disciplinary action by such committee.
(c) Nothing in this section. . . shall be construed to apply to original hospital medical records, incident reports, or other records kept with respect to any patient in the course of business of operating a hospital or to affect the discoverability or admissibility of such records.

Appellants allege that the quality-care committee privilege created by Section 16-46- 105(a) was applied too broadly by the trial court and that, as applied by the trial court, the privilege violates Ark. Const, art. II. § 13. We hold that the trial court did not err in its application of the privilege. Therefore, we do not reach the appellants’ constitutional argument.

At the first trial of this case, the appellants were allowed to introduce the records of a post-incident disciplinary proceeding against one of the nurses. Appellants contended that the records were admissible under subsection (c) of the privilege statute. This court reversed, holding that the records were within the privilege described in subsection (a). HCA Health Serv. of Midwest, Inc. v. National Bank of Commerce, 294 Ark. 525, 745 S.W.2d 120 (1988).

At the trial on remand, the appellees took the position that virtually everything any physician or hospital employee did or said at any time was protected by the privilege. The appellants argue that the trial court agreed with the appellees’ overbroad application of the privilege. However, the record does not support the appellants’ argument. For example, the treating physician, who was a member of the hospital’s pediatric committee, was allowed to testify over the appellees’ objection to his conversations with the manager and other hospital employees about the shortage of nurses.

The appellants also contend that they were not allowed to cross-examine the hospital manager about conversations concerning a nursing shortage. The record reflects that the court overruled the appellees’ objection to that line of cross-examination. Appellants’ counsel then asked a question that confused the witness and when the court instructed counsel to restate the question, counsel instead withdrew the question and proceeded to another line of inquiry.

The appellants further contend that error occurred when they were not allowed to use some blown-up charts during their questioning of one of the nurses. The charts contained prior statements of the witness, some of which the trial court found should be excluded by the privilege. The court required that the charts be redone to omit the privileged statements. No proffer was made and there is nothing in the record to indicate that the court erred. Failure to make an offer of proof precludes review of this issue on appeal. See A.R.E. 103(a)(2).

The appellants also argue that the court erred in directing their hospital safety expert not to base any of his opinions on facts he had learned from examining quality-care committee records. The expert told the court he had no intention of doing so. This was not error.

Additionally, the appellants allege error in the exclusion of the deposition of another physician who had been a member of the pediatric committee. A portion of the deposition had been introduced at the first trial. In the deposition the physician had related his conversations with the hospital manager about the shortage of nurses. The court excluded this deposition in its entirety on the ground that it related almost entirely to committee proceedings. Appellants made no proffer of the deposition. A.R.E. 103 (a) (2) requires an offer of proof before alleged error in excluding evidence may be considered on appeal. Without the deposition, this court cannot question the rectitude of the trial court’s decision.

7. Misconduct of counsel.

Appellants assert that appellees’ counsel was guilty of misconduct. They assert that appellees’ counsel argued during opening statement, made improper closing argument, made frivolous objections, asked leading questions, moved repeatedly for mistrial, asked a question calculated to make a witness break down, improperly referred to the former trial, and used “a tone of voice carrying the clear message that he feels the Deity is on his side. . . .” We agree with the trial court’s finding, in its order denying appellants’ motion for new trial, that “the conduct of the attorneys in this case, while spirited and persistent, did not constitute misconduct.”

In support of their argument, the appellants rely on Alexander v. Chapman, 289 Ark. 238, 711 S.W.2d 765 (1986). In Alexander, this court reversed and remanded because that case presented “the unique situation where counsel was repeatedly admonished and the court repeatedly sustained objections to the leading questions, was even presented with a motion to strike the testimony, yet counsel’s conduct was not stopped.” We emphasized that “our decision is necessarily limited to the facts this record presents. . . . The question on appeal is whether the trial court abused its discretion. . . . We do not, as a matter of course, reverse on the basis of such allegations even if they are borne out by the record.”

The record in the present case does not reveal the kind of flagrant violations of the trial court’s rulings that were present in Alexander. We will briefly discuss each of the appellants’ assertions of misconduct.

Both the appellants and the appellees objected during opening statements and closing arguments; the trial court properly instructed the jury that statements and arguments of counsel were not evidence and should be disregarded if not supported by the evidence. Both the appellants and the appellees made frequent objections throughout the trial; their objections were made in good faith and were not frivolous. Counsel for appellees did not engage in excessive leading questions and did not ignore the trial court’s rulings when it sustained the appellants’ occasional objections to leading. Appellants cite six instances where the appellees moved for a mistrial; each motion was made out of the hearing of the jury, and no prejudice resulted.

The witness who broke down was a nurse called as an adverse witness by the appellants. After the appellants’ lengthy examination, the first question asked by appellees’ counsel was: “[Wjhen you and I met the first time, I believe you had returned after some leave [of] absence due to a very tragic loss of your own. Is that correct?” The witness said, “yes.” Appellees’ counsel then began inquiring about the nursery room. After two questions, the witness requested time to compose herself. Nothing in the record supports the argument that the witness’s loss of composure was deliberately caused by appellees’ counsel.

The appellees, of course, wanted to prevent any reference to the first trial because it had resulted in a large verdict for the appellants. The appellants had made a motion in limine for permission to refer to the first trial, with an instruction to the jury that it should not influence their deliberations. The court forbade all reference to the first trial. Appellees’ counsel, while reading into evidence excerpts from the deposition of one of the appellants’ expert witnesses, read an answer that included the language, “I probably billed him around. . .four thousand dollars for everything that I did up to and including the trial in 1986.” No objection was made. After the appellees rested, appellants requested permission to mention the first trial in closing argument because of alleged prejudice aroused by the deposition reference to the first trial. The court denied the request, holding that there was no substantial prejudice to appellants and that further mention would only emphasize the matter. The court did not abuse its discretion.

“A tone of voice carrying the clear message that he feels the Deity is on his side. . .” is a characteristic every trial lawyer seeks to acquire. Whether a lawyer adopts the stentorian manner of Daniel Webster, the quiet reason of Abraham Lincoln, or the bombastic passion of Billy Sunday, the goal is the same: to persuade the jury that his side’s theory of the case enjoys the imprimatur of justice, truth and right. The lawyer who achieves this pinnacle of credibility should be praised, not censured.

8. Costs.

Appellants request that this court award them $3,404.60 costs for additional parts of the record unnecessarily designated by the appellees. The appellants submitted an itemized list of parts of the record for which they assert the appellees should be responsible. Many of these items were pretrial matters and were outside the scope of the appellees’ supplemental designation of record. The remainder consisted of the transcript of testimony of trial witnesses. The appellants raised broad, general issues on appeal, particularly with regard to the alleged misconduct of appellees’ counsel. To effectively respond to such allegations, the appellees reasonably considered it necessary to have the transcript of the testimony of all trial witnesses. We cannot say in hindsight that the additional portions of the record designated by the appellees were unnecessary to the consideration of the issues. Accordingly, the appellants’ motion to retax costs is denied.

Affirmed.

Special Justices Jerry Cavaneau and A. D. McAllister join in this opinion.

Newbern, Turner, and Price, JJ., not participating.