author: Lyle Brown, Justice.

text:
    James R. SPEARS & SPEARS CONSTRUCTION Co., Inc. v. John W. RICH et ux John W. RICH et ux v. James R. SPEARS & SPEARS CONSTRUCTION Co., Inc.
    5-6040
    5-6064
    486 S.W. 2d 1

      Thomas E. Sparks and Wright, Lindsey & Jennings, for appellants.

      Gaughan, Laney, Barnes, Roberts é1 Harrell, for appellees.

      Gaughan, Laney, Barnes, Roberts & Harrell, for appellants.

      Thomas E. Sparks and Wright, Lindsey ¿r Jennings, for appellees.
    Opinion delivered October 16, 1972
    [As Amended on denial of Rehearing Nov. 20, 1972.]
   Lyle Brown, Justice.

John W. Rich and wife, Audrey E. Rich, initiated this action against James R. Spears and Spears Construction Co., Inc., to establish their alleged ownership of a substantial amount of stock in the corporation. Spears contended that he was the sole owner and that the Riches were each issued one share of qualifying stock solely for the purpose of incorporation. The chancellor held that the Riches, own 49% of the stock. That was in case number 5-6040. The only issue in that appeal is the contention that the chancellor’s findings were against a preponderance of the evidence. Subsequent to the entry of the decree the chancellor modified it by an order permitting Spears to operate the corporation as the majority stockholder, making such expenditures for capital assets and payment of bonuses and salaries as were proper. To obtain that order Spears posted a supersedeas bond. The Riches objected to the modification and were overruled. They lodged an appeal from the modification and that case is here numbered 5-6064. We shall refer to Spears and Spears Construction Co., Inc., as appellants and to the Riches as appellees, and shall treat the cases as a unit, they having been consolidated here by agreement.

The three individuals here involved were experienced in the dry kiln manufacturing business. They had all worked for Russell Dry Kiln Company in Fordyce. In January 1965 a new dry kiln company was started, known as Spears Construction Company, with which all three parties were connected. Spears contends that he was the sole owner of the business, that John Rich was the welder on an hourly basis, and that Audrey Rich was the bookkeeper on a weekly salary. Spears contends further that a corporation was formed in August 1965 and that a qualifying share was issued in the name of each of the Riches. On the other hand the Riches contend that the business was started as a partnership, with each making a contribution to the capital; that it was agreed that Spears would own 51% and the Riches, 49%; and that when the corporation was formed the parties each took only one share of stock. The problem boils down to the nature and origin of the association.

Audrey E. Rich related in detail her version of the organization of the dry kiln company, and the salient testimony is herein summarized. In January 1965, the Riches and Spears decided to start a dry kiln business. The business was a partnership but was set up on the books as a sole proprietorship. Mr. Spears contributed $500 in cash, Mrs. Rich contributed office equipment (for which she was later reimbursed by the corporation), and her husband contributed his welding equipment and a pickup truck. Mrs. Rich maintained the books and records at her home. In August 1965 the parties knew the company was going to show considerable profit, so it w;as decided to incorporate to keep Mr. Spears from having to pay so much taxes. The corporate records show that for the year 1966 a bonus was accrued for Mr. Spears and Mr. Rich, each in the amount of $6125. For the year 1967, car expenses and bonuses in equal amounts were again posted for the two men. For the year 1968 an expense allowance of over $17,000 was allowed each of the two men. All of those allowances and bonuses were paid excepting $13,355 balance owed Mr. Rich (for which the chancellor allowed him judgment). Disagreement arose in early 1969 and culminated in the Riches quitting work in July of that year.

On cross examination the witness conceded that the company first operated with Mr. Spears being shown as sole proprietor. It was shown that when an employer identification number was obtained, Spears was shown to be the sole owner, that for 1965 the Riches were listed as employees; that the W-2 forms for that year showed Spears to be sole owner; that the financial statement of August 1965 showed likewise; and that “as far as the records are concerned Spears Construction Company was operated as a sole proprietorship” during 1965 and preceding the incorporation in August 1965. The minutes of the corporation, signed by Mrs. Rich, showed a meeting on Sept. 10, 1965, at which time that record showed Mr. Spears was to receive an additional 154 shares of stock. Mrs. Rich said she signed the minutes without reading them, they having been prepared by an attorney, Mr. Frank Wynne.

John W. Smith testified for the Riches, appellees. He was an insurance salesman. He said he was acquainted with all the parties and met with them at the Rich home in January 1965 to discuss their insurance needs. The parties said they wanted to first start a partnership to see if it would be a success before incorporating. “I understood it was a 50-50 partnership.” He said he suggested the sole proprietorship in order to provide workmen’s compensation coverage for Mr. Rich because he would be doing the construction.

Witness John W. Rich outlined the formation of the partnership in much the same manner as his wife. On cross-examination he conceded that he signed the minutes of September 15, 1965 (wherein an additional 154 shares of stock was authorized for Mr. Spears) but he insisted that he did not attend the meeting, nor did he read the minutes before signing them.

Witness Mavis Prewitt is the mother of Audrey Rich, lived in the Rich home and was present at the time of the first meeting between the parties. She testified that “they discussed being partners, just the three of them”.

Attorney Frank Wynne of Fordyce was the first witness for appellant Spears. He handled the incorporation and met the parties one or more times prior to the date of incorporation, August 27, 1965. “I prepared the minutes of the director’s meeting of September 10, 1965. James R. Spears, Audrey E. Rich, John W. Rich, and myself were present at the meeting, and the minutes were signed by Audrey E. Rich. The authorization for the issuance of stock was in particular accordance with their wishes.” Here is the authorization as it appears in the minutes:

Bill Mowrey, of the C.P.A. firm of Russell Brown of Little Rock, Ark., reported to the directors that the total capital invested in the Spears Construction Company of Fordyce, Ark. amounted to $15,700.00. It was brought to the directors’ attention that James R. Spears, has produced 98% of this capital and at a par value share of stock amounting to $100.00 dollars, that James R. Spears should hold 155 shares; Audrey E. Rich one share, and John W. Rich one share, making a total outstanding shares of 157 shares. The Articles of Incorporation list James R. Spears as holder of one share.
John Rich, moved that the corporation issue to James R. Spears 154 shares of stock in the Spears Construction Company, Inc. This motion was seconded by Audrey Rich and upon vote, the motion carried.

Attorney Wynne testified further that he was “sure Audrey Rich knew what was in' these minutes, and I do recall reading them to them at their house, when Bill Mowrey was present......I did incorporate a sole proprietorship.”

William E. Mowrey, certified public accountant with Russell Brown Company in Little Rock, testified for Spears. He prepared Spears’ tax returns during 1965-70. “The corporate returns showed ownership of the corporation 100% in James R. Spears”, the qualifying shares being fictitious. Mrs. Rich, as bookkeeper and secretary of the corporation furnished Mowrey with the information for compilation. Just prior to the incorporation the net worth of the corporation was figured and it was determined that the net worth of the company was to be surrendered to the corporation for stock. On the basis of those figures Mowrey suggested an additional issue of 154 shares to Mr. Spears. On cross-examination he conceded that a tax return could reflect 100% ownership in one person when in fact it was not “but I would say it did not happen here since I put the true information as I knew it.”

Appellant Spears testified at some length. Mr. Russell of Russell Dry Kiln died in 1964 and Spears decided to go in business for himself. He discussed his decision with his friends, Mr. and Mrs. Rich, and they were interested in joining him. He hired Mr. Rich on an hourly basis for welding and construction; he employed Mrs. Rich as bookkeeper at $75.00 per week; and Mr. Spears was to do selling and supervise construction. Mr. Spears was rated in Dunn & Bradstreet as having a net worth of approximately $45,000. Mr. Rich’s financial situation was bad, he being delinquent on welding equipment payments, and Spears asked Rich’s creditor for an extension. He verified the issuance of the stock certificates of September 10. He explained the bonuses. At the end of 1965 he gave the Riches $500 each and took $2500 for himself. The payment to Mrs. Rich was for office rent. He told them that if the company kept prospering he would give them an annual bonus of ten per cent total. Car expense was set up on the books for 1966 and 1967 in the amount of $5000 but was not to be withdrawn except to pay taxes. Of the bonus for 1968, $10,000, was set up for tax purposes and was not to be drawn except to pay taxes. The legitimate bonuses for 1968 amount to $17,200 and were accrued and paid. The working arrangement became unsatisfactory in some respects in 1967. Spears gave them the 1968 bonus but insisted that Rich’s services would have to improve before they could expect to receive any more bonuses. Serious dissension developed in early 1969 and the Riches left the business in July of that year. Prior to their departure Spears said he told the Riches there would be no bonus for them for the year 1969. He insisted that there was never any discussion about a partnership.

C. L. Talbot, president of the Bank of Fordyce, testified for appellant Spears. When Spears started the business he came to the bank to discuss possible financing. He dealt only with Spears and nothing was said about Spears having any partners. The entire conversation led the banker to believe that Spears was operating individually.

Witness Barbara Spears succeeded Mrs. Rich as bookkeeper. She explained the sources of the $15,700 that was placed in the capital stock account of the new corporation; it came from Mr. Spears’ initial investment account, less his drawing account, plus the profit of the unincorporated company.

Our abstract of the evidence is of course not complete in every detail. We have familiarized ourselves with the appellants’ abstract and the supplemental abstracts, including the numerous exhibits filed in a separate volume.

After carefully weighing the evidence we have concluded that a preponderance thereof rests on the side of appellant Spears. We refer to the critical question as to the status of the association between the parties. First, the written evidence is all in favor of Spears’ contention. The minutes of the first meeting of the stockholders recited that Spears had invested as capital the sum of $15,700 and was entitled to 155 shares, and that Audrey Rich and John Rich held one share each. Those minutes were signed by Audrey Rich as secretary. At the next meeting of the corporation the minutes of the previous meeting were approved over the signatures of all three parties. All corporate tax returns were filed in the name of Spears as the sole proprietor. When the business was begun, Spears took all the financial risk; he had a good credit rating, while the Riches were less fortunate. Spears declined profitable employment to set up the business. Rich was delinquent on the payment for the welding equipment and the corporation finally took up the payments. If a partnership were organized as claimed by the Riches, then the latter should have shared equally with Mr.Spears in the first distribution of bonuses. The record shows that for the first year Mr. Spears received a bonus of $2500, while the Riches received $500. It is true that the bonuses for the “corporate years” amount to a total for the Riches of ten per cent of the profits. When considered percentagewise it cannot be said, ipso facto, that the size of the bonuses showed a partnership. After all, they were the three key people in the venture and it is not shown to be unusual for a prosperous concern to give a ten per cent bonus to key personnel. It is not insignificant that the title of the company bore the name of Mr. Spears. The only two disinterested witnesses testified for Spears. We refer to the testimony of Attorney Frank Wynne and the C.P.A., Bill Mowrey. We have abstracted their testimony and suffice it is here to say that it strongly favored the position of Mr. Spears. Finally, we point out that the burden of proof was on appellees, the Riches.

On the question of the ownership of the stock of Spears Manufacturing Co., Inc., the finding of the chancellor is reversed. That part of the decree which awarded appellees, the Riches, judgment for $13,355 is affirmed. That figure represents the unpaid bonus which Mr. Mowrey testified was charged properly on the books of the corporation and constituted a just debt. Mr. Mowrey’s testimony was not contradicted and the allowance is not seriously questioned on appeal. Because of our finding as to sole ownership in Mr. Spears, the points raised by appellees in case numbered 5-6064 become moot.

The cause is reversed and remanded with directions to the chancellor to enter a decree not inconsistent with this opinion.

Affirmed in part, reversed in part.

Jones, J., dissents.


source: Caselaw Access Project

author: John A. Fogleman, Justice.

license: Public Domain

text:
    Betty Sue GRAY v. STATE Of Arkansas
    5760
    485 S.W. 2d 537
    Opinion delivered October 16, 1972

      Carpenter, Finch ir McArthur, for appellant.

      Ray Thornton, Atty. Gen., by: James A. Neal, Asst. Atty. Gen., for appellee.
   John A. Fogleman, Justice.

Betty Sue Gray was found guilty of second degree murder of her husband Bobby Gray, who died as the result of a single abdominal gunshot wound inflicted by her while both were at the Park Lounge in Little Rock on the evening of August 7, 1971. She seeks reversal of her conviction on four grounds. They are:

I. The trial court erred in allowing alleged oral admissions by appellant to be placed before the jury without a proper prior hearing as to their voluntariness and admissibility.
II. The trial court erred in failing to direct a verdict of not guilty to first and second degree and the evidence is insufficient to sustain the jury’s verdict of second degree murder.
III. The trial court erred in allowing State to cross-examine appellant as to convictions of misdemeanors.
IV. The trial court erred in allowing the Prosecuting Attorney to misstate the law of murder in the second degree and manslaughter.

At the outset, we consider and dispose of Point II, because it involves consideration of evidence in the case. We have carefully reviewed this evidence and find it, when viewed in the light most favorable to the state, to afford ample support to the jury’s verdict of second degree murder.

Appellant testified that she had lived with Bobby Joe Gray for about eight years, during which she had supported him and herself by prostitution, but that they had been married only about one month. She and Bobby Joe had differences about his relationship with one Ruby Graves, and she said that on the afternoon preceding his shooting he had called and told her that he was with Ruby Graves. She stated that after she had seen her car parked at an apartment house, she had gone in and had been told by a friend that her husband and Ruby Graves were in the friend’s apartment, and, following her unsuccessful attempts to gain admission, she left, went home and decided to go visit a friend. She stated that when she left home she took the pistol (described as a four-barrel derringer) with which the fatal shot was fired. After she visited the friend for about an hour and one-half, she went to the Park Lounge, arriving at about 7:15 p.m. Both Bobby Joe Gray and Ruby Graves were at the lounge when she entered.

There is a conflict in the testimony as to what took place after her arrival. Pat R. Wilson, a part owner of the lounge, testified that Gray was sitting at the back of the tavern with two men, and Ruby Graves was sitting alone on the opposite side of the room. He stated that after appellant had walked past the table where her husband was sitting she sat down on a stool at the bar, ordered a beer, and then turned to Gray and asked him why, he wasn’t sitting with his whore. Then, he said, Gray walked to the bar, and the two started cursing one another. The bartender said that appellant then pulled a pistol from her brassiere, but returned it when he directed her to dp so. Gray started to walk away, but, according to Wilson and other witnesses, he turned, grabbed her blouse, tore it open and exclaimed “I know you have a gun, Betty. I’m not afraid of it. Go ahead and shoot me.” or words of similar import. According to four witnesses who were at, or near, the bar, she then shot Gray. Wilson said that she was only an arm’s length from her husband when she fired the shot after placing the gun very close to him. The witnesses for the state said that Gray fell to the floor immediately saying “Betty, you shot me.” or “She shot me.” Wilson testified that appellant stood at her husband’s head, and stated “I know I shot you.” nudging his head with her foot. Nellie Johnson, who had been seated at the bar, said that appellant kicked Gray lightly and said “Is it worth it? I told you I’d get you.”

The bartender, who left to call the police, testified that upon his return appellant told him to take Ruby Graves out or she would shoot her. An examining pathologist at the University of Arkansas Medical Center described powder markings at the wound entrance. He described the course of the bullet as running downward through the body at an angle of 45 degrees from its point of entry on the lower part of the right side of the chest. Even though there was evidence upon which the jury might have found appellant guilty of voluntary manslaughter, the evidence was not only sufficient to support a conviction of second degree murder, but it would have supported a conviction of first degree murder.

Appellant’s third point may be quickly disposed of. In Arkansas, a witness may be cross-examined as to convictions of misdemeanors. In Hays v. State, 219 Ark. 301, 241 S.W. 2d 266, we held that a defendant in a criminal case may be cross-examined about convictions of various misdemeanors, including gambling, immorality, drinking in a public place and possessing untaxed liquor, citing a case in which inquiry as to conviction for disturbing the peace had been held proper and another where the conviction was for drunken driving. See also, Rickett v. Hayes, 251 Ark. 395, 473 S.W. 2d 446; Atha v. State, 217 Ark. 599, 232 S.W. 2d 452.

Appellant’s first point is based upon procedures which were not prejudicial, even if erroneous. She moved to suppress testimony of police officers as to statements made by her to them. A pretrial hearing was held on the day preceding the trial. Appellant objected to the testimony of Officer Morrow, one of the officers who went to the scene, arguing that he was unable to state that appellant’s statements were spontaneous or that they were made before she was in custody, because he was not the first officer at the scene. The officers who preceded him were not then available to testify. Appellant’s attorney stated at this hearing that it would be admitted that appellant shot the deceased. The court then held that certain statements made by appellant at the police station were voluntary and admissible. These incriminating remarks were admitted into evidence without further objection. The couft also held that statements made to Officer Morrow were voluntary, conditioned, in part, upon the testimony to be given on the next day by officers not available at the pretrial hearing relating to the time the defendant was taken into custody and the nature of the statements, i.e., whether voluntary or responsive to interrogation by the officer. Officer Morrow did not testify at the trial. No further hearing in the absence of the jury was had as to whether appellant’s statements were voluntary.

When Officer Bounds was unable to identify appellant as the woman making certain statements in his presence, the circuit judge instructed the jury to disregard the testimony. No further objection was made to this procedure, and the judge was not requested to give further admonition or to declare a mistrial. Officer Gocke then testified about statements made by appellant in his presence and identified her as the person making the statements. The only objection made to the testimony of this officer about appellant’s statements was that it was hearsay. Gocke testified that appellant approached the officers as soon as they arrived, started cursing her husband, and stated, without any questions having been asked, that she shot the “g. d. s.o.b.” because he grabbed her in spite of her telling him not to ever touch her. He also testified that appellant’s arrest followed the making of these remarks. Appellant’s attorney cross-examined this witness about his ability to identify appellant and to remember exact words of appellant’s statement, the condition of appellant’s clothing and the time. No objection to the procedure followed was ever made by her. Furthermore, appellant testified in her own behalf, without any direct contradiction of Gocke’s testimony and without any suggestion that her statements to the officers were involuntary, or the result of interrogation or that she was in custody at the time they were made.

While Ark. Stat. Ann. § 43-2105 (Supp. 1971) requires an in camera hearing on the admissibility of a confession, it also provides that the issue of fact involved in determining admissibility shall be decided by the court (on evidence heard out of the presence of the jury) when the issue is raised by the defendant. The significance of the lack of objection to a consideration of the issue of voluntariness was recognized by the Supreme Court of the United States in Pinto v. Pierce, 389 U.S. 31, 19 L. Ed. 2d 31, 88 S. Ct. 192 (1967). It is not improbable that appellant expected to gain corroboration of her theory of self-defense, or of her testimony from which the jury might have found that her actions resulted from sudden, uncontrollable passion, through statements made by her immediately after the shooting. Appellant cannot say that she suffered any unfair consequences under the circumstances. We cannot say that reversible error was committed. See Pinto v. Pearce, supra; Annot., 19 L. Ed. 2d 1313 (1968).

In support of Point IV, appellant contends that, in the closing argument, the deputy prosecuting attorney’s statements deluded the jury into a belief that it could not find that the degree of homicide was voluntary manslaughter unless the killing was unintentional. She cites the action of the jury in requesting, after some period of deliberation, a simplified explanation of the distinction between the various degrees. We find no merit in this contention. The record discloses that the deputy prosecuting attorney had distinguished second degree murder from first degree and then said that voluntary manslaughter was not an intentional crime, after he had stated that this degree did not require any of the elements he had previously mentioned. When appellant’s attorney interposed an objection, the judge stated that second degree murder includes intent and all elements of first degree murder except premeditation and deliberation. The court had given correct instructions distinguishing the degrees of homicide. When the jury, after deliberating for a time, requested a written, simplified explanation and distinction between murder in the first degree, murder in the second degree and manslaughter, the trial judge furnished the jury with all his instructions, in writing, including that on self-defense. This procedure was followed with the express approval of the attorneys for both sides. Appellant never requested an admonitory instruction or the declaration of a mistrial by the court after the statement complained of was made. Any error that there may have been in this isolated statement made during the course of the argument could hardly have misled the jury, when all the circumstances are taken into consideration. Certainly, it cannot be said, if there was error, that it was reversible error.

The judgment is affirmed.

       Two of the alleged convictions about which inquiry was made were described as vagrancy. The circuit judge directed that no further inquiry be made along this line, after an objection was made because appellant had testified on direct examination that she was a professional prostitute.


author: J. Fred Jones, Justice.

text:
    Carl LEE v. WESTARK INVESTMENT COMPANY and McILROY BANK
    5-5998
    485 S.W. 2d 712
    Opinion delivered October 16, 1972

      Little & Lawrence, by: Clayton N. Little and J.L. Hendren, for appellant.

      Ball, Gallman & Martin, for appellees.
   J. Fred Jones, Justice.

This is an appeal by Carl Lee from a judgment of the Washington County Circuit Court sustaining a demurrer filed by Westark Investment Company and Mcllroy Bank to a complaint filed by Carl Lee to set aside a summary judgment previously rendered in favor of Westark and Mcllroy in a suit filed by Carl Lee for a real estate commission.

The facts, as we gather them from so much of the record that is before us, appear as follows: The appellant Carl Lee filed suit in Washington County Circuit Court against Ottis Watson and other individuals as well as against Westark Investment Company and Mcllroy Bank, alleging that he was entitled to a real estate commission from them in connection with the sale of a shopping center in Washington County which he originally thought belonged to Watson but which in fact belonged to Westark and Mcllroy. It appears that Westark and Mcllroy moved for summary judgment and supported their motion with the affidavit of their president, Ellis Burgin, to the effect that they had not hired plaintiff to find a buyer for the shopping center, nor had they authorized Watson to do so. Apparently no counter-affidavit or other pleading in opposition to the motion was filed by Carl Lee. In any event, the summary judgment was entered on December 16, 1969, and apparently no further action was had in the matter until after September 2, 1970, on which date Ellis Burgin testified in a separate chancery court action involving the same property. The appellant Lee, in the memorandum brief he filed in the trial court, points up the real issue before the court in language as follows:

“. . . the Court had no choice but to grant the motion [for summary judgment] since plaintiff then had no sworn testimony with which to rebut Burgin’s assertions. Now, however, plaintiff has Burgin’s own sworn testimony of September 2, 1970, which contradicts and rebuts his Affidavit on the key point of Ottis Watson’s authority to act as the agent of Westark and Mcllroy for the procurement of a buyer for the Watson Shopping Center.”

The affidavit, in support of the motion for summary judgment, is not in the record but in his complaint to vacate and set aside the summary judgment, Mr. Lee alleged that the false and misleading matter in Burgin’s affidavit “consisted of Mr. Burgin’s following assertions:

(a) That after July 31, 1967, the time of the transfer of title to the WATSON SHOPPING CENTER to WESTARK for liquidation, Westark had the sole and exclusive right to deal in and sell the property involved except for the reservation in the Watsons of pending negotiations for sale of the Center to Benson Brothers of Texas.
(b) That Westark had never authorized Ottis Watson or anyone else, to list the property for sale with any real estate agent or broker.
(c) That Westark never contracted with Carl Lee or his broker associates for services in the sale of the Center.
(d) That the February 9, 1968, contract between Ottis Watson and Oklahoma Industrial Enterprises, Inc. was not presented to Westark and Mcllroy until April 9, 1968, after Oklahoma Industrial Enterprises, Inc. had failed to secure a loan commitment and the proposed contract had expired by its own terms.
(e) That neither Mcllroy nor Westark was ever advised of any contract by Ottis Watson with Carl Lee or any other broker and had no knowledge of the alleged agreement between Ottis Watson and Carl Lee concerning the Watson Shopping Center.
(f) That Westark has not ratified or in any way taken any acts or steps to ratify any agreement or contract that may exist, or be claimed to exist, between Ottis Watson and Carl Lee concerning the Watson Shopping Center.”

Appellant Lee contends that the false and fraudulent nature of Burgin’s affidavit was brought to light by his testimony in a separate subsequent chancery court trial in which Mr. Burgin was a defendant and testified in his own behalf. As an exhibit to his complaint, Mr. Lee filed excerpts from Burgin’s chancery court testimony consisting of eight pages of questions and answers propounded to and answered by Mr. Burgin. We deem it unnecessary to reproduce the questions and answers in this opinion; we have compared them, however, with the alleged assertions in the affidavit and we are unable to find the conflict between the affidavit and the testimony complained of by the appellant.

The substance of Mr. Burgin’s exhibited testimony in chancery court was to the effect that Mr. Watson, who apparently had built and was in the process of operating a shopping center, was deeply indebted to Mcllroy Bank. In order to avoid a forced sale under foreclosure, he deeded the property to Westark Investment Company with a verbal understanding that in the event he could find a buyer or a bona fide lender whose qualifications and ability to purchase and pay for the property met with the approval of Mr. Burgin, the president of both Mcllroy Bank and Westark, then Westark would deed the property back to Watson. Mr. Burgin then testified in chancery that Flewelling aijd Willingham of Oklahoma had made an offer to purchase the property and that he advised Mr. Watson that the offer looked bona fide. He said he advised Watson to police up the unfinished portion of the shopping center and that some cash downpayment should be obtained rather than the promise of $700,000 in cash upon closing the deal. Mr. Burgin then testified concerning a trip he made to Oklahoma and his further discussions with the prospective purchasers. At no place in the excerpts from Burgin’s testimony in chancery court is real estate commission or Carl Lee mentioned, and at no place in his testimony does he discuss any authority given to, or retained by, Watson to make binding contracts for the employment of real estate agents or realtors, or for the payment of real estate commissions.

The appellant’s complaint was based on Ark. Stat. Ann. § 29-506 (Repl. 1962) which provides as a fourth ground, that a judgment in the trial court may be vacated or modified "for fraud practiced by the successful party in the obtaining of the judgment or order.” From the record before us we are unable to detect any basis at all for the alleged fraud practiced on the court in procuring the summary judgment. If the testimony of Mr. Burgin did conflict with the affidavit he made in support of the motion for summary judgment, and if the perjury was in the affidavit rather than in the testimony and amounted to fraud as alleged by the appellant, then we agree with the trial court that the fraud was clearly intrinsic and the matter set out in the affidavit could have been controverted by counter-affidavit or deposition when the affidavit was made.

We have held that the fraud which entitles a party to impeach a judgment must be extrinsic of the matter tried in the cause and does not consist of false or fraudulent act or testimony, the truth of which was or might have been in issue before the court at the trial which resulted in the judgment assailed. Parker v. Sims, 185 Ark. 1111, 51 S. W. 2d 517; Pattillo v. Toler, 210 Ark. 231, 196 S. W. 2d 224; Alexander v. Alexander, 217 Ark. 230, 229 S. W. 2d 234. In supporting their motion for summary judgment, the burden was on the appellees to show that there was no justiciable issues to be tried and this they did, to the satisfaction of the trial court, by use of the affidavit mentioned herein.

Ark. Stat. Ann. § 29-211 (Supp. 1971) provides:

“The court may permit affidavits to be supplemented or opposed by depositions, answers to interrogatories, or by further affidavits. When a motion 'for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.”

All that was required of the appellant to avoid the entry of summary judgment against him, was to show that there was a justiciable issue made up by the pleadings, and this the appellant failed to do or attempt to do.

As to appellant’s second point, Ark. Stat. Ann. § 29-211 (g) (Repl. 1962) provides:

“Should it appear to the satisfaction of the court at any time that any of the affidavits presented pursuant to this rule are presented in bad faith or solely for the purpose of delay, the court shall forthwith order the party employing them to pay to the other party the amount of the reasonable expenses which the filing of the affidavits caused him to incur, including reasonable attorney’s fees, and any offending party, or attorney may be adjudged guilty of contempt.”

The argument presented by the appellant in support of this point merits little discussion for the reason that the words “should it appear to the satisfaction of the court” denote considerable discretion in the trial court, and there is no showing that the trial court abused its discretion in this case. Furthermore, there is no evidence in this case that the affidavit was made in bad faith or solely for the purpose of delay.

As to appellant’s third point, we are of the opinion that the trial court did not err in sustaining the demurrer to the appellant’s complaint to set aside the summary judgment, for the reason that the contents of the affidavit as alleged in the complaint, together with the contents of Mr. Burgin’s subsequent testimony, as alleged in the complaint, simply do not conflict to the point of perjury and certainly do not conflict to the extent that one over the other could be branded as fraudulent. Consequently, we are of the opinion that for all practical purposes the complaint does not state a cause of action for the relief prayed, and that the trial court did not err in sustaining the demurrer.

The judgment is affirmed.

Fogleman, J., not participating.


text:
    Carl Wendell AKINS v. STATE of Arkansas
    5762
    485 S.W. 2d 535
    Opinion delivered October 16, 1972

      Kenneth C. Coffelt, for appellant.

      Ray Thornton, Atty. Gen., by: Henry Ginger, Asst. Atty. Gen., for appellee.
   J. Fred Jones, Justice.

The appellant, Carl Wendell Akins, was charged with the crimes of unlawfully opening a coin vending machine under provisions of Ark. Stat. Ann. § 41-3944 (Repl. 1964), and with escape under the provisions of Ark. Stat. Ann. § 41-3513 (Supp. 1971). He waived a jury trial in the Pulaski County Circuit Court and was tried before the trial judge sitting as a jury. He was acquitted on the vending machine charge but was convicted on the escape charge and sentenced to 30 days on the Pulaski County Penal Farm.

On appeal to this court the appellant relies on the following point:

“There was no unlawful escape as charged, because there was no lawful custody of the defendant by the officers from whom it is alleged defendant (appellant) escaped.”

We agree with the appellant.

Ark. Stat. Ann. § 41-3513 (Supp. 1971) under which the appellant was charged provides as follows:

“It shall be unlawful for any person who is lawfully imprisoned in any jail or other place of confinement, or held in the custody of any officer, for any cause whatsoever to escape, or attempt to escape, from such imprisonment or custody without the use of force or violence to the person; and upon conviction therefore, such person shall be imprisoned for a period of not more than three (3) years; provided, however, that the sentence imposed under this provision for the crime of escape or attempt to escape from imprisonment or custody shall not exceed the period of confinement imposed for the conviction of the offense for which such person is imprisoned, or prescribed by law for the conviction of the offense for which said person may be in the custody of any officer. ” (Emphasis added).

Mr. Bryon Greer, serviceman for a coin laundry, testified that some machines had been broken into at the Big Boy Coin Laundry and the coin boxes had been emptied. He testified that he called the officers who investigated the matter but that he had no personal knowledge of who broke into the machines other than hearsay.

The appellant was apparently stopped on the street corner by Deputy Sheriff Lewis upon request from Detective Joe Thomas. Deputy Lewis called Detective Thomas and the appellant ran away while being questioned by Detective Thomas. Apparently Detective Thomas requested the appellant’s apprehension on information furnished to him by one Mary Taylor. Mrs. Taylor testified at the trial as a witness for the state, but she denied any knowledge whatever concerning the matter. Of course, Detective Thomas was not permitted to testify as to what Mrs. Taylor had told him. He did testify that during the course of his investigation he “determined that Carl Wendell Akins broke into the machine,” but the trial court struck this testimony from the record on motion of the appellant’s counsel. Detective Thomas testified that he identified himself to the appellant, “showed him my badge and told him that I was Detective Joe Thomas of the Little Rock Police Department and that he was under arrest for investigation of vending machine burglaries.”

The appellant testified in his own behalf and testified that Deputy Sheriff Lewis, when he first contacted him, told him that the officers wanted to talk to him about his brother, Ira. He said that he was 17 years of age, had never been convicted and was only about one block from his home when the officer stopped him. He testified that when Deputy Lewis told him that the officers wanted to talk to him, he was afraid they would beat him so he ran home. He denied he was under arrest and denied that any of the officers told him he was under arrest. He said they only told him they wanted information as to the whereabouts of his brother, Ira, but refused to believe him when he told them he did not know.

Two pertinent statutory provisions pertaining to arrest by police officers are as follows: Ark. Stat. Ann. § 43-403 (Repl. 1964).

"A peace officer may make arrest:
First. In obedience to a warrant of arrest delivered to him.
Second. Without a warrant, where a public offense is committed in his presence, or where he has reasonable grounds for believing that the person arrested has committed a felony.”
§ 43-412-“An arrest is made by placing of the person of the defendant in restraint, or by his submitting to the custody of the person making the arrest.”

There is a conflict in the evidence as to whether the appellant was in actual custody at the time he ran away, but assuming that he was in actual custody under the arrest as described by Detective Thomas, the question still remains as to whether the appellant was lawfully in custody. It is admitted that no public offense was committed in the presence of the officers and that the appellant was not arrested in obedience to a warrant of arrest. There is no competent evidence in the record that the officers had reasonable grounds for believing that the appellant had committed a felony.

In Harding & Hildebrandt v. State, 248 Ark. 1240, 455 S.W. 2d 695, we cited several opinions to the effect that one must be in lawful custody before he can unlawfully escape. In referring to the “escape statute,” § 41-3513, supra, in Harding & Hildebrandt v. State, we said:

“The amendment provided by Act 66 of 1969 makes it now necessary to not only show by competent evidence that a person being tried for attempt to escape was lawfully imprisoned, or held in custody at the time of the attempt to escape, but it must also be shown in order to fix punishment, 'the period of confinement imposed for the conviction of the offense for which such person is imprisoned, or prescribed by law for the conviction of the offense for which said person may be in the custody of any officer.’ ”

The felony information filed against the appellant in the case at bar charged him with the,

“crime of violating Ark. Stat. Ann. § 41-3513 ESCAPE committed as follows, to-wit: The said defendant(s), in Pulaski County, Arkansas, on or about the 2nd day of September, 1971, did unlawfully, feloniously, while in the lawful custody of the Pulaski County Sheriff’s Department, escape, against the peace and dignity of the State of Arkansas.” (Emphasis added).

The state in the case at bar, as was the situation in Harding & Hildebrandt, supra, failed to show that the appellant was “lawfully . . . held in the custody of any officer.” The record in the case at bar simply fails to show that the appellant was in “lawful custody” at the time he ran away from the presence of the officers.

The judgment is reversed, and the cause dismissed.


author: Frank Holt, Justice.

text:
    The PEOPLE’S BANK v. PIONEER FOOD INDUSTRIES, Inc., and ALICE-SIDNEY DRYER and SEED CO.
    5-6012
    486 S.W. 2d 24
    Opinion delivered October 16, 1972

      Arnold, Hamilton if Streetman, for appellant.

      George E. Pike, for Pioneer Food Industries, Inc., David F. Gillison Jr. and Keith, Clegg ir Eckert, for Alice-Sidney Dryer and Seed Co.
   Frank Holt, Justice.

The principal issue on this appeal is whether the crop description in a combined Financing Statement and Security Agreement is sufficient to put a third party on notice pursuant to our Uniform Commercial Code.

The appellant bank loaned Dewey Beavers $40,000 to finance his 1969 crops. As part of the security for this loan, Beavers gave the bank a security interest in all the crops grown by him in Chicot and Ashley Counties. The combined Financing Statement and Security Agreement given by Beavers was duly filed. Beavers harvested his soybeans and sold them to appellee Alice-Sidney Dryer and Seed Company. The debtor, also, harvested his rice and delivered it for drying and storage to Alice-Sidney. The rice was sold for Beavers by Alice-Sidney to appellee Pioneer Food Industries, Inc. None of the proceeds from the sales of the soybeans and rice crops was ever applied against Beavers’ indebtedness to the bank. At the end of the crop year, since Beavers had defaulted on his obligation, the bank filed suit against him for the unpaid balance. The bank, also, instituted a third party action against Alice-Sidney and Pioneer alleging they had converted crops grown by Beavers on which the bank claimed a lien. The chancellor found that Beavers owed the appellant bank a balance of $22,565.72, together with interest costs and attorney’s fees and accordingly awarded judgment to the appellant against Beavers, who does not appeal.

As to the appellant's claim against the appellees, the chancellor found that the description of the crops in the Security Agreement was insufficient to put a third party on notice except for 7.6 acres of rice. The bank was awarded a judgment for $1,046.52 against the appellees for the rice grown upon the 7.6 acres contained in a specifically described tract. The appellant bank appeals from that part of the chancellor’s decree which denied its claim against Alice-Sidney for the soybeans purchased by. it in 1969 from Beavers. The appellees cross-appeal from that part of the decree which awarded judgment against them in favor of the bank for $1,046.52 on the rice crop.

The appellant, on direct appeal, contends for reversal that the Chancery Court erred in holding that the crop description in the Security Agreement was insufficient to require third parties to take notice of the bank’s security interest in the crops. The description in the combined Financing Statement and Security Agreement recites:

“(i) All crops of every kind grown or to be planted, heretofore or hereafter, within one year from date of the execution hereof, on lands commonly known and referred to as the Dewey Beavers Farm in Chicot and Ashley Counties, Arkansas, or at any other place in Chicot and Ashley Counties, Arkansas. ###*
(v) Other:
Said crops to consist of 1,200 acres of soybeans, 28 acres of cotton, and 30 acres of rice. These crops to be planted on the following lands.”

Then followed immediately an accurate legal description of certain farm lands in Chicot and Ashley Counties. It appears undisputed that this legal description omitted three other parcels of lands on which Beavers planted and harvested crops. Only the lands in Chicot County are involved in this litigation.

Appellant’s position is that the filing of the combined security documents which state that the appellant, the secured party, has a lien on all crops of every kind grown on Beavers’ farm or any other place in Chicot County is sufficient to put a reasonable person on notice. Appellant cites Ark. Stat. Ann. (1961 Add.) § 85-9-110, which states: “Any description of personal property or real estate is sufficient whether or not it is specific if it reasonably identifies what is described.” Our attention is called to the Commissioner’s Comment: “The test of sufficiency of a description laid down by this section is that the description do the job assigned to it *** that it make possible the identification of the thing described. *** The same test of reasonable identification applies where a description of real estate is required in a financing statement.” Appellant urges that the Committee Comment requires a liberal construction as to the description of the crops and real estate. Also, appellant asserts that § 85-9-402, which requires a description of the land as well as the crops grown thereon, does not require a detailed description of the land for a crop lien. Appellant, therefore, contends that to hold the general description “all crops” does not suffice, when liberally construed, would reach a result contrary to the intent of the UCC writers and contrary to our decisions predating the UCC.

The position of the appellees is, however, that the description is not sufficient to put a reasonable person on notice. § 85-9-203 is cited which provides that a security interest in crops is not enforceable against third parties unless the Security Agreement contains “a description of the land concerned***.” The Comment to the Code states that “in the case of crops *** the best identification is by describing the land and sub-section (1) (B) requires such a description.” Also, cited is § 85-9-402 (1) which, with respect to crop liens, requires “the statement must also contain a description of the real estate concerned.” Clearly, the pertinent provisions of the Code require some type of a description of'the land. Piggott State Bank v. Pollard Gin Co., 243 Ark. 159, 419 S.W. 2d 120 (1967): see, also, Secured Transactions Under the Uniform Commercial Code, 18 Ark. L. R. 30, p. 54, and United States v. Big Z Warehouse, 311 F. Supp. 283 (1970). In the case at bar, the appellant inserted an accurate legal description to only three parcels of Beavers’ lands and omitted another three parcels on which Beavers’ crops were grown.

We agree with the chancellor in his finding that the Financing Statement and Security Agreement did not sufficiently describe the lands to put a third person on notice under the UCC (except as to the 7.6 acres of rice). We do not reach the argument made by the appellant that the general description, which encompasses “all crops” grown by Beavers on his farm or elsewhere in Chicot County, is alone sufficient inasmuch as appellant restricted this general description by limiting it to three crops (soybeans, cotton and rice) and specifying the exact number of acres of these different' crops to be grown and then proceeded to give a legal description of only three of the six tracts on which these named crops and an unnamed crop (milo maize) were admittedly grown. We think the recited limitations restrict and control the general description, “all crops,” which is relied upon by appellant as being a sufficient description.

On cross-appeal Alice Sidney and Pioneer first assert for reversal of the judgment against them that the appellant failed to discharge the burden of proof to show that the rice purchased by Pioneer came from lands on which the appellant held a Security Agreement and, further, that appellant bank failed to show the fair market value of the rice. We cannot agree. The undisputed evidence by Beavers is that 7.6 acres of rice was grown on a tract specifically described in the Financing Statement. Beavers, also, testified that he harvested rice on a 19 acre tract which was not described. The yield from both tracts was purchased by Pioneer from Alice-Sidney, which acted as a broker on a lot bid at $2,295 per bushel for the commingled production. Beavers testified that he “produced approximately 60 bushels of rice per acre in 1969.” A computation of these figures (7.6 x 60 x $2,295) results in $1,046.52 as the monetary value ascribed to that part of the rice grown on the 7.6 acres which were included in the specific description as found by the chancellor. Certainly we cannot say that his finding on this issue is against the preponderance of the evidence.

Neither can we agree with the argument by the cross-appellants that the conduct of the appellant bank’s officials constituted an estoppel which precludes the bank from claiming anything from cross-appellants. It appears that two individuals are part owners of a local gin company as well as directors of appellant bank. One of these individuals is manager of the local gin company and president of the bank. Beavers was indebted to both the gin company and the bank. When the gin company made a demand on Beavers for payment of his account, Beavers directed cross-appellant Alice-Sidney, buyer of a quantity of his soybeans, to issue a check to the gin company for $4,500 from the proceeds due him. This check was credited to Beavers’ account at the gin company. It appears from the grain settlement sheets that Alice-Sidney purchased Beavers’ soybean crop during the period of October 15, 1969, and November 10, 1969. According to these settlement sheets with Beavers, Alice-Sidney had paid Beavers for all of his soybeans on or before November 24, 1969, the date the $4,500 check was issued by Alice-Sidney to the local gin company. On the following day (November 25) Pioneer paid Beavers, at Alice-Sidney’s direction, for his interest in his rice crop. We do not perceive in this situation how Alice-Sidney or Pioneer can rely upon the principle of estoppel. It would be useless for the bank officials to notify Alice-Sidney or Pioneer that it claimed a lien against Beavers’ crops after Alice-Sidney and Pioneer had paid Beavers for his crops. Suffice it to say that ordinarily, as Alice-Sidney admits, the personal interest and activity of a bank official cannot be imputed to the bank itself. We think that rule is controlling in this situation and prevents application of the doctrine of estoppel for either Alice-Sidney or Pioneer.

Neither can we agree with the cross-appellants’ contention that an asserted agreement between Beavers and the appellant bank officials constituted a waiver of the bank’s claim on the crops sold by him, Beavers testified that the bank officials agreed in January, 1970, that if he would make a $4,500 payment on his delinquent account his loan would be extended for one year. Beavers sold a quantity of catfish and made the requested payment upon his bank loan. The appellant bank denied any such extension agreement. A waiver is a voluntary relinquishment of a known right. In the circumstances, we cannot agree that this disputed agreement for an extension of the delinquent loan constituted a waiver of any claim by appellant upon the crops sold by Beavers.

Cross-appellant Alice-Sidney, also, asserts that it acted as an agent for Beavers, a disclosed principal, and, therefore, the chancellor erred in rendering a judgment against it. Beavers delivered his rice crop to Alice-Sidney for drying and storage. As a further service, Alice-Sidney acted as agent or broker by finding a buyer, Pioneer, for Beavers’ rice. Alice-Sidney instructed Pioneer to make one check to it for $220.70 in payment “for drying.” Pioneer, also, was directed by Alice-Sidney to pay the $2,418.55 balance directly to Beavers as the owner. These payments were promptly made as authorized. It is undisputed that payment for the rice was specifically directed by Alice-Sidney to a source other than the appellant bank which had a sufficiently recorded lien with respect to the 7.6 acres of rice. Admittedly, Alice-Sidney never checked the appropriate records to determine if a lien existed on this rice crop. In the circumstances, as between the appellant bank and Alice-Sidney, we think the doctrine of estoppel precludes Alice-Sidney from asserting the invalidity of the bank’s judgment. In the recent case Branch v. Standard Title Company, 252 Ark. 737, 480 S.W. 2d 568 (1972), we recognized the equitable maxim that where one of two innocent persons must suffer a loss it is better that it be borne by one whose conduct could have prevented the loss or situation.

Affirmed on direct and cross-appeal.


text:
    Frankie Joe TODD v. STATE of Arkansas
    5782
    485 S.W. 2d 533
    Opinion Delivered October 16, 1972

      Charles L. Honey, for appellant..

      Ray Thornton, Atty. Gen., by: John D. Bridgforth, Asst. Atty. Gen., for appellees.
   Frank Holt, Justice.

Appellant pleaded guilty to the crime of second degree murder and was sentenced to 15 years in the state penitentiary with three years suspended. Subsequently, the trial court accorded him an evidentiary hearing based upon his allegations that the sentence was imposed in violation of his constitutional rights. This appeal results from a denial of his Rule 1 petition.

Appellant first contends for reversal that it was prejudicial error to permit a deputy prosecuting attorney to testify for the appellee-state at the evidentiary hearing. This witness testified that, before he became a prosecuting official, he represented appellant by court appointment at his arraignment. At this time he advised appellant about his rights and explained to him the possible penalty and parole eligibility. The attorney, also, conveyed to appellant the state’s offer on a “plea bargain” basis which was a five year sentence with three years suspended. Appellant declined the state’s offer. Thereupon, the attorney interposed for appellant a plea of not guilty. This attorney had no further contact with appellant. Subsequently, appellant made bail and retained his own trial counsel. We are of the view that appellant has not demonstrated that his rights were prejudiced in any manner by this limited testimony of his court appointed counsel. Furthermore, since there was no objection to the testimony of this witness, the appellant is precluded from raising this contention for the first time on appeal. Ford v. State, 253 Ark. 5, 484 S.W. 2d 90 (1972). See, also, 31 A.L.R. 3d 953 § 16.

Appellant next contends that his plea of guilty was involuntary. This assertion appears to be based upon the argument that when appellant appeared in court he observed a jury in the court room which he thought was impaneled to try him on the alleged offense or for the higher offense of first degree murder which he understood might be brought against him. There was evidence adduced by the state that no jury was present at the time the appellant entered his plea of guilty. He admits his retained counsel represented him during the plea proceedings. Appellant has not demonstrated that his plea was induced by threats which would deprive it of the character of a voluntary act. Bradshaw v. State, 250 Ark. 135, 464 S. W. 2d 614 (1971), Machibroda v. U.S., 368 U.S. 487 (1962).

Appellant, also, asserts through his court appointed appellate counsel that the plea bargaining conducted in his behalf was unconstitutional because it was done under the constant threat of amending the charge of second degree murder to first degree murder which, therefore, constituted coercion. Appellant’s guilty plea was the result of prolonged negotiations between his retained counsel and the prosecuting attorney. There is testimony to the effect that as a result of further investigation the prosecuting attorney felt he could justify amending the charge to first degree murder for which appellant could have received at least life imprisonment. Ark. Stat. Ann. (1964 Repl.) § 41-2227. A plea of guilty even if induced by the possibility of a more severe sentence does not establish coercion. Bradshaw v. State, supra, Brady v. U.S., 397 U.S. 742 (1970). Furthermore, a negotiated plea is recognized with approval in the administration of our criminal laws. Meyers v. State, 252 Ark. 367, 479 S.W. 2d 238 (1972). In the case at bar, the appellant, a former inmate of the penitentiary, is an adult with a highschool education. His retained counsel testified that after full disclosure of the state’s evidence to him, he consulted with appellant on numerous occasions and advised him of the state’s recommendation of a 15 year sentence with three years suspended. To his knowledge, the appellant was never threatened with the prosecution of a greater offense. The appellant voluntarily expressed the desire to plead guilty after a full explanation to him of his rights and a discussion of the evidence. He testified that appellant intelligently discussed and understood the various penalties for homicide as well as parole eligibility requirements. Furthermore, the court, as customary, accepted the appellant’s plea of guilty after interrogation of appellant. A transcript of the plea proceedings reflects that in response to the court’s inquiry as to his guilt or innocense, appellant personally answered “guilty.” Further, the court inquired if he was familiar with “meritorious good time” and “statutory good time,” to which appellant replied affirmatively. Also, appellant stated to the trial court “I had originally asked for three days before I went to the pen and will go on and go now.”

We are of the view the evidence is amply sufficient to sustain the trial court’s finding that there was no infringement upon appellant’s constitutional rights at the time he pleaded guilty to the alleged offense. It appears the plea negotiations were fairly and understanding^ conducted.

Affirmed..


author: Carleton Harris, Chief Justice.

text:
    William Paul ADAMS v. STATE of Arkansas
    5772
    485 S.W. 2d 746
    Opinion delivered October 23, 1972

      Ike Allen Laws Jr., for appellant.

      Ray Thornton, Atty. Gen., by: Milton Lueken, Asst. Atty. Gen., for appellee.
   Carleton Harris, Chief Justice.

Appellant, William Paul Adams, on April 12, 1971, pleaded guilty to charges of armed robbery, kidnapping, and grand larceny in Johnson County, Arkansas, and was sentenced to ten years in the Arkansas Department of Correction on each charge, the sentences to run concurrently. On March 23, 1972, appellant filed a Criminal Procedure Rule I motion, alleging the violation of constitutional rights and the court, on May 4, 1972, conducted a hearing on this motion, several witnesses testifying. At the conclusion of the hearing, Adams requested that he have another witness obtained to testify on his behalf, this witness being a fellow prisoner who had been confined with Adams in the county jail and who according to Adams, witnessed the officers taking a lock of appellant’s hair. The circuit court adjourned the hearing, directed the issuance of a subpoena and ordered the sheriff to secure the witness. On June 22, 1972, the hearing was resumed, appellant being present, at which time the sheriff reported that he had been unable to locate this witness, even though he had make a trip to Springdale to search for the witness at the request of the appellant. The hearing was then closed and appellant’s motion to vacate the judgment was denied.

It is first contended that appellant’s constitutional rights were violated by the manner in which a lineup was conducted. The record reflects that Mr. Edward Patterson, an attorney of Johnson County, was originally appointed to represent Adams prior to arraignment, and Patterson testified that he was present at the lineup which took place in the courtroom, and that he advised appellant of his rights. Patterson testified that he did not see anything unusual and that the officers did not give any indication to those viewing the lineup that Adams was the party to be identified. Adams, who asked for the lineup, testified that he had been in a few lineups in Califormia and that “suspects are supposed to be lined up accordingly and witnesses come in one at a time to make identification”. He said that all the witnesses were in the. courtroom at the same time, although he stated that he did not see the officers talk to any persons who were there to identify him, nor did the officers sit with the people who were there for identification purposes. Adams testified that the people in the lineup with him had “southern accents ”, though he stated that he was dressed no differently from other people in the lineup; that there were some who were about his size. Assistant Chief of Police Earl Hunt testified that there was no one from the deep south in the lineup, and there was one boy from Arkansas, one from Oklahoma, and one from “back east”. A photograph taken reflects that six people appeared in the lineup, all of the same race, all around the same age, and Adams was permitted to stand while the lineup was being conducted in the position that he desired. Counsel for Adams was asked if he desired that another boy be brought in but he replied that another boy was not needed and Adams did not object to those who appeared with him. Though the witnesses were all in the courtroom, they were not sitting together. The lineup appears to have been fairly conducted, but at any rate, no prejudice could have resulted since Adams pleaded guilty and no evidence was introduced against him. See Williams v. State, 215 Ark. 757, 223 S.W. 2d 190; Medley v. Stephens, Supt., 242 Ark. 215, 412 S.W. 2d 823; Read v. State, 242 Ark. 821, 415 S.W. 2d 560.

It is next asserted that appellant’s right against self-incrimination was violated because a lock of his hair was taken by Hunt and another officer while Adams was confined in the county jail. Hunt testified that the police found a lock of hair in a window in a wrecked Oldsmobile in which they believed appellant had been riding as a passenger, and that the purpose of taking the lock of hair from Adams was to compare the two. Fingerprints had been lifted from the car and proved to be those of Adams. As to appellant’s argument, it appears in the first place, that there really was no objection to the lock of hair being taken, but were it otherwise, the contention would still be vvithout merit. It has been held that only testimonial evidence is protected as being within the scope of the privilege against self-incrimination guaranteed by the Fifth Amendment to the Federal Constitution; Schmerber v. California, 384 U. S. 757; McGinnis v. State, 251 Ark. October 18, 1971. Adams asserts that his plea of guilty was based in part upon the fact that the officers had taken this lock of hair. Actually, when asked if the fact that the officers had taken a lock of his hair influenced his pleading guilty, Adams replied “In a way, it did, sir”, explaining that he figured the evidence obtained would be used at the trial. He subsequently stated that his plea was influenced by the fact that the state had quite a bit of evidence against him, and he wouldn’t have pleaded guilty except for that fact. In Bradshaw v. State, 250 Ark. 135, 464 S.W. 2d 614, we commented “That a plea of guilty is induced by the possibility of the prisoners receiving a more severe sentence does not establish coercion”, and we cited Brady v. United States, 397 U.S. 742.

Finally, it is asserted that at the time of his initial arrest, Adams was not advised of his constitutional rights. It appears that appellant was arrested in Ohio by the Federal Bureau of Investigation, at which time he was told that he was arrested for kidnapping. Appellant stated that he was not advised of his rights at that time. Subsequently however, he was advised that four felony charges were pending against him in Arkansas, and he testified that he was advised of his rights and told what would happen if he waived extradition and returned to this state. No statements were made, nor confession given, by Adams and it is thus difficult to ascertain how he would have been prejudiced, even though he were not advised of his rights.

When Adams entered his plea of guilty, he was represented by counsel who had conferred with him prior to the plea. Adams testified that the court told him that he had the right to a trial by jury; that he was aware that the court intended to sentence him to ten years, when he entered the plea, having been told that already by his attorney, and it simply appears that Adams felt that he would get less time by pleading guilty than by going to trial; at least, it is quite evident that he did not want to risk a trial. We agree with the trial court that no constitutional rights were violated, and that the plea was voluntarily entered.

Affirmed.

       One of the officers testified that Adams was wearing a "bush type” coat.

       Appellant stood on the left end of the line.

       Attorney Patterson’s son was appointed Deputy Prosecuting Attorney and the court named new counsel for Adams, Mr. Ike Allen Laws, Jr.


author: George Rose Smith, Justice. Conley Byrd, Justice,

text:
    A. B. HERVEY, Jr., Commissioner of Revenues v. SOUTHERN WOODEN BOX, Inc. et al
    5-6004
    486 S.W. 2d 65
    Opinion delivered October 23, 1972
    [Rehearing denied November 27, 1972.]

      Walter Skelton, for appellant.

      Frierson, Walker, Snellgrove if Laser and Shaver if Shaver, for appellees.
   George Rose Smith, Justice.

The question in this case is whether one of the appellees, CocaCola Bottling Company of Southeast Arkansas, must pay the Arkansas sales tax or use tax upon its purchases of certain paper cups and wooden cases that it uses in marketing soft drinks. The chancellor held, in two cases consolidated for trial, that neither the purchase of the cups nor the purchase of the cases is a taxable transaction. Since the issues in the two cases are quite different, we discuss them separately-

First, the paper cups. CocaCola, as plaintiff, brought suit to recover use taxes which it had paid under protest upon its purchase of paper cups from out-of-state manufacturers. CocaCola claims an exemption under the “sale for resale” provisions of the statutes, which exempt property that becomes “a recognizable, integral part of the manufactured, compounded, processed, assembled or prepared products.” Ark. Stat. Ann. § 84-1904 (i) and 84-3106 (b) (Repl. 1960). As we pointed out recently in Hervey v. International Paper Co., 252 Ark. 913, 483 S.W. 2d 199 (1972), the clear legislative intent is to exempt purchases that are made for the purpose of resale, to the end that the same property will not be twice subjected to the same tax.

The paper cups in question are bought by CocaCola solely for use in its own coin-operated retail vending machines. When a customer deposits the proper coin or coins in one of those machines, the machine first drops one of the paper cups into an allocated space and then fills the cup with a cold carbonated beverage. The customer takes the paper cup and presumably discards it when he finishes the drink; certainly the cup is not returned to the CocaCola Company for re-use. The company holds a gross receipts tax permit and pays the 3% sales tax, properly called the gross receipts tax, upon the total revenue derived from its vending machines.

The appellant, in arguing that the sale of the paper cups to CocaCola is taxable, relies upon our decision in Wiseman v. Ark. Wholesale Grocers’ Assn., 192 Ark. 313, 90 S.W. 2d 987 (1936). There we denied a tax exemption to grocers upon their purchase of wrapping paper, paper bags, and twine, to be used in the retail sale of groceries. Our reasoning was that grocers buy those wrapping materials for consumption in the course of their own business rather than for resale.

The Wiseman case was clearly and logically distinguished by Chief Justice Griffin Smith in McCarroll v. Scott Paper Box Co., 195 Ark. 1105, 115 S.W. 2d 839 (1938). There it was stipulated that the Wortz Biscuit Company, a manufacturer, purchased paper boxes to be used in the sale of prepackaged cakes, cookies, etc. (which Wortz also sold in bulk at lower prices). The paper boxes became a component part of the product, which was sold in the box to the wholesaler, jobber, retailer, and ultimate consumer. The cost of the box merged into and became an element in the cost of the finished article, representing twelve to fourteen per cent of the net selling price, and was so computed by the biscuit company, rather than being considered by it as part of its general overhead expense.

In the McCarroll case we held that Wortz purchased the paper boxes for resale. In distinguishing the earlier Wiseman case the opinion pointed out that in a grocery store the price of a dozen oranges, a peck of potatoes, a roast, and other groceries is predetermined either by weight or by count, without reference to the paper bag that the checker uses for delivering such articles to the customer. Hence those paper bags are purchased by the grocer for consumption in the course of his business rather than for resale to the customer. Thus the cost of the paper bags merely enters into the selling price of the groceries in the same way as other overhead expenses, such as rent, utility bills, labor, etc.

By contrast, the cost of the boxes used by Wortz Biscuit Company in McCarroll was allocable to the particular product being sold rather than to the overhead cost of doing business. In the case at bar the same showing was made by CocaCola in the trial court with respect to its paper cups. Their cost represents one sixth of the total cost of each drink sold through a vending machine and is considered by the company in fixing the price of such drinks. It follows that the company pays a sales tax upon the paper cups, as a component part of what the statute describes as the “assembled or prepared products,” when the company pays its tax upon the gross revenue derived from its vending machines. The chancellor correctly held that CocaCola’s purchase of the paper cups from the manufacturer is exempt from the use tax, as a purchase for resale.

Secondly, the wooden cases. CocaCola is again an interested party, though the suit to recover taxes paid under protest was brought by the other appellee, Southern Wooden Box, Inc., which manufactures the wooden cases. Here again CocaCola’s argument is that it buys the cases for resale.

CocaCola’s proof upon this branch of the case was largely directed toward showing that bottling companies must deliver their products in compartmented wooden cases, to keep the bottles of carbonated beverage from being broken. That showing, however — that the cases are essential to the company’s method of doing business— does not necessarily show that the cases are purchased for resale. In fact, it is the company’s failure to make that latter showing that compels us to conclude that the purchase of the cases is not a tax-exempt transaction.

The wooden cases are of two types, which CocaCola buys at different prices. It pays $1.07 for a case compartmented to hold 24 bottles and $.96 for a case compartmented to hold four six-packs.

CocaColá contends that it actually “sells” the wooden cases to its retailers, but the proof does not support that contention. CocaCola’s routemen deliver the company’s bottled beverages, in the wooden cases, to grocery stores, filling stations, restaurants, and other retailers. The 24 bottles in a case sell at wholesale for $1.25 (or did in the early 1960’s, the years involved in this case). The route-man also collects a deposit of 12 cents upon each wooden case that he delivers to the retailer. At the same time he picks up other cases of empty bottles, crediting the retailer with 12 cents for each wooden case that is returned. If a retailer or consumer fails to return a case he loses his 12-cent deposit, but no other charge for the missing case is made.

It is obvious from the proof, simply as an economic fact, that CocaCola does not engage extensively in selling, for 12 cents each, cases that it buys for $.96 or $1.07. No such loss could conceivably be taken with regularity in transactions involving only $1.25 as the basic price for the beverage being sold. In fact, the proof is clearly to the effect that the cases are not sold. The only wooden case examined at the trial, which came from an area assigned to another CocaCola bottling company, was marked “Property of the CocaCola Company.” The chief witness for the appellee bottling company testified that his company’s cases were “usually” just marked “Coca-Cola,” but that was done to identify “our cases” so they couldn’t be taken by somebody else. He admitted that the company certainly hoped that the cases would be returned. He also stated that there are statistics showing the average number of times that the cases are returned to a bottling company. Those statistics were not put in the record, even though CocaCola had the burden of proving its claim to an exemption from the tax. Hervey v. International Paper Co., supra.

We hold that CocaCola must prove that it buys the wooden cases for the purpose of reselling them. We do not interpret the broad statutory definition of a sale to include every transaction in which there is a transfer of possession, for a consideration. Ark. Stat. Ann. § 84-1902 (c). The statute must be read as a whole. If the reference to a transfer of possession were applied literally in every instance, absurd results would follow. For instance, a company engaged in renting automobiles would not be required to pay a sales tax upon its purchase of cars, because it would be buying them for resale. Similarly, a company selling butane gas in heavy iron bottles would be reselling the bottles, even though its customers were required to return them. It is our duty to give the statute a reasonable construction, not an absurd one.

The section of the statute now before us clearly provides that if the sale is not for resale, then it is for the processor’s own “consumption or use.” Ark. Stat. Ann. § 84-1904 (i). We think it plain that CocaCola is using the wooden cases, not reselling them.

Although the statute, as we have said, is designed to prevent the same property from being subjected twice to the same tax, there is a correlative legislative intent that all property be subjected to the tax at some point in the course of its manufacture and sale to the ultimate consumer. The “sale for resale” section of the statute pointedly confirms this intent by its requirement that, for the initial sale to be exempt, the resale must be to a person having a sales tax permit. In our judgment the proof falls decidedly short of showing that CocaCola deliberately buys wooden cases for about a dollar each to resell them for 12 cents apiece. If the company’s initial purchase from the manufacturer of the cases is not taxable, then the cases escape taxation altogether, contrary to the intent of the statute. We accordingly hold that the purchases are not tax exempt. That conclusion makes it unnecessary for us to discuss the appellant’s contention that the court should have admitted proof of the custom within the industry with respect to the retailer’s failure to pay any tax upon the wooden cases.

Affirmed as to the paper cups, reversed as to the wooden cases.

Holt, J., not participating.

Harris, C.J., and Byrd, J., dissent as to the reversal.

Conley Byrd, Justice,

dissenting. I disagree with that portion of the majority opinion which removes the wood boxes from the “sale for resale” exemption set Out in Ark. Stat. Ann. § 18-1904. That statute provides:

“§84-1904. EXEMPTIONS FROM TAX. There is hereby specifically exempted from the tax imposed by this Act the following:
(a) . . . .
(i) Gross receipts or gross proceeds derived from sales for resale to persons regularly engaged in the . business of reselling the articles purchased, whether within or without the State, provided that such sales within the State are made to persons to whom sales tax permits have been issued as provided in section 12 of this Act.
Goods, wares, merchandise, and property sold for use in manufacturing, compounding, processing, assembling or preparing for sale,- can be classified as having been sold for the purpose of resale or the subject matter of resale only in the event such goods, wares, merchandise, or property becomes a recognizable, integral part of the manufactured, compounded, processed,'assembled or prepared products. Such sales of goods/ wares, merchandise, and property not conforming to this requirement are classified for the purpose of this act as being ‘for consumption or use.’”

Ark. Stat. Ann. §84-1902 provides:

“DEFINITIONS. —The following words and phrases shall, except where the context clearly indicates a different meaning, have, when used in this act [§§84-1901 — 84-1904, 84-1906 — 84-1919], the following meanings:
(a) . . .
(c) Sale: The term ‘sale’ is hereby declared to mean the transfer of either the title or possession for a valuable consideration of tangible personal property, regardless of the manner, method, instrumentality, or device by which such transfer is accomplished. The term ‘sale’ is also declared to include the exchange, barter, lease or rental of tangible personal property where such exchange, barter, lease or rental results or may result in either the transfer of the title or the possession. ...” [Emphasis mine]

F. M. Bellingrath, the president of appellee Coca-Cola Bottling Company of Southeast Arkansas, testified as follows:

“Plaintiff purchases glass bottles of various sizes, which bottles are filled with the particular beverage sold by the Plaintiff. Plaintiff’s beverages are bottled under carbonation and for this reason it is necessary that the beverage remain sealed in the bottles until the moment the beverage is consumed. Plaintiff also purchases wooden cases, which cases are designed to carry twenty-four (24) bottles of Plaintiff’s beverages. The customary way of delivering Plaintiff’s beverages is to place twenty-four (24) bottles of beverages in each wooden case and load said bottles and cases on Plaintiff’s truck for delivery to its customers.
“The wooden cases filled with bottles containing beverages are delivered to the customer by the Plaintiff’s salesmen-drivers, each of whom is assigned a particular territory or route. Each day a salesman-driver’s truck is loaded with an assortment of beverages at the bottler’s plant, and the salesman-driver calls on various customers on his route. These customers include independently owned grocery stores, drug stores, branches of large chain stores, restaurants and other establishments engaged in the sale of food or beverage for consumption. Most all the sales are for cash, in which case the customer pays the driver upon delivery of the goods. The price which a customer pays for a wooden case full of bottles containing beverage sold to that customer by the Plaintiff includes a charge commonly referred to as a ‘deposit’. The deposit for the glass bottle depends on the size of the bottle. The deposit that Plaintiff require was 2Í per bottle and 12Í per wooden case. When Plaintiff sold to a customer, or retailer, the bottled drinks were sold for $1.25 per case, exclusive of deposit required. The total amount received from each customer was $1.25 for 24 bottles of beverage contained in a wooden case, and 60<£ deposit, on bottles and wooden case, or a total of $1.85.
“At the time that the salesman-driver delivers beverages to a customer of Plaintiffs, he also picks up from the customer empty bottles and empty wooden cases, which the customer has purchased from the public after the beverage originally contained in those bottles has been consumed. For each such empty bottle and used wooden case picked up by the salesman-driver, the customer is given a credit against his purchase equal to the amount of the ‘deposit’ charge currently included by the bottler in its price of full bottles and wooden cases. This credit is allowed to the customer whenever the empty bottle or wooden case (as the case may be) picked up by the driver-salesman is one which is designed for use in connection with the sale of the beverage sold by that particular bottler without regard to whether or not the empty bottle, or wooden case was originally sold by that bottler.
“There is no way of ascertaining whether any particular individual bottle or wooden case will be * returned. However, based upon the experience of the trade, statistical data has been prepared from which the average number of times a bottle or wooden case will be returned (commonly called ‘trips’ in the trade) can be calculated. These averages differ among bottlers and among various sizes of bottles or wooden cases.
“When Plaintiff delivers such bottles and wooden cases to their customers, the Plaintiff surrenders the possession of such containers.
“Used bottles and wooden cases may be, and commonly are, returned to Plaintiff by persons other than the customer who originally purchased them; there is no necessary correlation between the number of bottles or wooden cases delivered to any customer and the number, if any, returned by such customer to Plaintiff. The sales record of Plaintiff may indicate the number of full bottles and wooden cases sold to its customers from time to time, Plaintiff does not maintain records in their books of account showing the number of bottles or wooden cases in the possession of any customer; and no customer is accountable to Plaintiff for the return of any bottles or wooden cases.
“When Plaintiff ships and sells its soft drinks in the bottles and cases as above described, it is the hope of the Plaintiff that containers, bottles and cases referred to, will be used more than one time for packaging and selling Plaintiff’s products to return the bottles and cases. Plaintiff customarily requires the customer to deposit an amount which represents a part of the cost of such items, and the deposit will be returned to the customer upon the return of such items. In some instances the bottles and cases are returned and in other instances they are not returned. If the bottles and cases are not returned, no refund is made by the Plaintiff to the customers of the Plaintiff.
“Although the cases used cost considerably more than the 12Í deposit which is made, there is no extra charge for the deposit.
“In some instances the wooden cases are never returned to Plaintiff and in such instances no refund is made by Plaintiff. In those instances in which wooden cases, damaged or undamaged, are returned to Plaintiff, refunds are made thereon. Damaged wooden cases, whether damaged by the customer or not, are repaired if repairable; and undamaged or repaired wooden cases are re-used. In instances where wooden cases are lost, destroyed or damaged beyond repair, no refunds are made by the Plaintiff.”
“Q. One more thing. Is it practical to deliver bottles to your customers, merchants in any way other than in a wooden case?
A. No sir, unless in very recent times they are packed in a reusable fiber case.
Q. But, I mean some type of case which is either wood or plastic or similar, but the same type of case?
A. Right.
Q. Why is that?
A. Because the bottles contain carbonated beverages and these bottles must be protected from bumping into each other, so they won’t have an impact and burst, and so they are packed in these type cases to be delivered to the consumer and for his use.”

Donald Goens, a witness called by appellant, testified that he was the manager for Safeway Stores, Rodney Parham and Markham, Little Rock, Arkansas. He identified a wooden box as one obtained from his store. He then testified as follows.

“Q. This box on the floor has been introduced into evidence. Would you tell the Court what you know about how we acquired that box?
A. Well, ..., you and Mr. Lewis came into the store and we — you asked questions as to the contents of the box, what they looked like, and I took you in the back room stock area and you observed these and took this out, this particular empty case of our reserve empty boxes.
Q. And did I then express a desire to take it with me?
A. Yes, sir.
Q. And, what was required for me to do that?
A. A deposit. I handled the transaction myself.” On cross-examination Mr. Goens testified as follows:
“Q. Mr. Goens, you testified that Mr. Skelton paid you the deposit and you gave him this box? Did you understand that he was going to offer this in as evidence here in the Court?
A. No, sir.
Q. Did you expect to get the box back?
A. No, sir.
Q. In other words you sold him the box didn’t you?
A. Yes, sir.

When the foregoing facts are considered in the context of the statutes it would appear that the majority has ignored the language thereof — at least no explanation has.been given to show that the statutory language is not applicable.

Ark. Stat. Ann. §84-1904, supra provides an exemption from the Gross Receipts Act for “sales for resale.” By Ark. Stat. Ann. §84-1902, the definition of a “sale” “... is hereby declared to mean the transfer of either title or possession for a valuable consideration of tangible personal property, regardless of the manner ...by which such transfer is accomplished.” The definition did not stop there but further asserted that a sale includes “the exchange...of tangible personal property where such exchange ... results or may result in either the transfer of the title or possession.” Under the facts set out above, the sale by Southern Wooden Box, Inc., to appellee Coca-Cola Bottling Company of Southeast Arkansas amounts to a “sale for resale” within the definition of the terms set out above. The bottling Company certainly had a permit and from the facts recited, above, they certainly bought the boxes for the purposes of transferring possession to others for a valuable consideration. Furthermore, appellant’s own witness asserted that he had title to the box he sold to appellant’s counsel.

The record also substantiates the Bottling Company’s claim that it is entitled to the exemption under the definition of the term “sale for resale” given to manufacturers and processors under Section 84-1904, above. That section provides: “...property sold for use in ... processing, assembling or preparing for sale, can be classified as having been sold for the PURPOSE of resale ... in the event such ... property becomes a recognizable integral part of ... processed, assembled or prepared products.” The proof is here that the boxes are a necessary and integral part of the preparing for sale of Coca-Cola. Admittedly, the boxes are a recognizable and a integral part of the prepared product sold by the Bottling Company. Thus the boxes not only come within the definition of the term “sale” as defined in Section 84-1902, but they also come within the definition of a “sale for resale” given to manufacturers and processors in Section 84-1904 (i). Added to the foregoing is the administrative interpretation of the Gross Receipt Act since 1933. Therefore, it appears to me that the majority, instead of construing the Gross Receipts Act, is legislating.

The fallacy of the majority’s position that the sale from Southern Wooden Box, Inc., to the Bottling Company does not amount to a “sale for resale” can best be demonstrated by the position in which the Bottling Company will find itself in picking up the boxes from the merchants to whom they have been delivered when full of cokes. At that point a transfer of possession from the merchant to the Bottling Company is made for a valuable consideration and in that event, under the majority opinion, the transfer to the Bottling Company will not qualify as a “sale for resale” and of course the Bottling Company will again be required to pay another tax. Thus the majority opinion meets itself “coming and going” for it also asserts that the same property should not be subjected twice to the same tax. Therefore, notwithstanding, the majority’s assertion that the same property should not twice be subjected to the same tax, the net effect of the majority’s determination— i.e., that a transfer from Southern Wooden Box, Inc. to the Bottling Company is not a “sale for resale” — also dictates that a transfer from the merchant to the Bottling . Company for a valuable consideration does not qualify as a “sale for resale”. Thus if the boxes are returned to the Bottling Company as many times as the majority would lead one to believe, the Bottling Company will have paid a sales tax many times on the same box.

The suggestion in the last paragraph of the majority opinion that “ ...the proof falls decidedly short of showing that Coca-Cola deliberately buys wooden cases for about a dollar each to resell them for 12 cents...” is a conclusion that I cannot reach from the record. The unmitigated proof, and the only proof, is that when the cases are full of cokes, they are physically transferred to the customer (a retailer) for a valuable consideration and that the customer thereafter has no obligation to Coca-Cola to return or otherwise preserve the box. Furthermore, the majority’s suggestion of absurd results and analogy to the renting of automobiles and the distribution of butane gas in heavy iron bottles is erroneous. In the first place the taxing of automobiles to an owner or purchaser is controlled by Ark. Stat. Ann. § 84-1903 (e). In the next place the analogy presupposes a situation in which “a return” is required. Under the facts here the transfer of possession is made for a valuable consideration and no obligation to return is imposed. Thus in effect the customer gets both the title and the possession as was demonstrated when appellant’s counsel purchased the box they introduced in evidence. By Act 181 of 1965, [Ark. Stat. Ann. § 84-1902 (supp. 1972)], the definition of the term “sale” was amended to provide”...that the tax shall not apply to gross receipts or gross proceeds derived from leases or rentals of tangible personal property upon which either the Arkansas Gross Receipts Tax or Compensating Tax was paid at the time of purchase of such tangible personal property.”

For the reasons stated, I respectfully dissent.


author: George Rose Smith, Justice.

text:
    HOME INSURANCE COMPANY et al v. MORO, Inc., a/k/a MORO CONSTRUCTION COMPANY
    5-6033, 5-6034, 5-6035
    485 S.W. 2d 736
    Opinion delivered October 23, 1972

      Murphey, Arnold &■ Blair, for appellants.

      Hodges, Hodges ir Hodges, for appellee.
   George Rose Smith, Justice.

The owners of Powell’s Motel (not parties to these appeals) brought three actions against three casualty insurance companies upon policies insuring the motel and an adjacent restaurant building against property damage. The complaints asserted that the plaintiffs’ buildings had sustained damage, within the coverage of the policies, by blasting operations conducted by Moro, Inc., in the construction of a highway interchange near the motel. By cross-complaints against Moro the defendant insurance companies attempted to bring Moro into the litigation, asserting a right of subrogation under the policies if the motel owners should recover judgment against the insurers. The trial court sustained Moro’s demurrers to the insurance companies’ cross-complaints. The insurers elected to stand upon their pleadings and have appealed from the trial court’s orders dismissing Moro from the suits. The three appeals have been consolidated here.

The question is whether, upon the pleadings, the insurance companies are entitled to bring Moro into the litigation. The motel owners’ complaints, without asserting fault on the part of Moro, simply allege that the defendant insurance companies are liable for the damage to the motel and restaurant buildings. The insurance companies’ answers deny liability to the plaintiffs. By cross-complaint, however, the insurance companies assert that any damage to the plaintiffs’ buildings was wrongfully caused by Moro and that if the plaintiffs recover judgment against the insurance companies they in turn are entitled to judgment over against Moro. Moro demurred to the cross-complaint.

The trial court was right in sustaining the demurrers. The Civil Code, with respect to cross-complaints against third persons, provides that when a defendant “has a cause of action” against a person not a party to the action, and affecting the subject matter of the action, the third person may be brought into the case. Ark. Stat. Ann. § 27-1134 (Repl. 1962). Under the law of subrogation the appellants do not yet have a cause of action against Moro, because they have not paid the claims of the motel owners. Haley v. Brewer, 220 Ark. 511, 248 S.W. 2d 890 (1952). To the contrary, the appellants are denying that they are liable to the motel owners. Hence it is plain that the appellants have not brought themselves within the statutory requirements that they have a cause of action against the third person, Moro.

We may observe, in passing, that Rule 14 of the Federal Rules of Civil Procedure is more liberal than our statute, in that Rule 14 allows a defendant to bring into the litigation a third person “who is or may be liable” to the defendant for all or part of the plaintiff’s claim. 28 U.S.C.A., Rule 14. If the more stringent provisions of our Civil Code (adopted in 1868) need relaxation, that is a matter for the legislature to consider, not the courts.

The appellants, in seeking to avoid the language of our statute, argue that in uninsured motorist cases we have permitted the defendant insurance company to maintain a cross-complaint against the uninsured motorist. Three uninsured motorist cases are cited: Home Ins. Co. v. Williams, 252 Ark. 1012, 482 S.W. 2d 626; Hartford Acc. & Indem. Co. v. Warren, 246 Ark. 323, 438 S.W. 2d 31 (1969); and MFA Mut. Ins. Co. v. Bradshaw, 245 Ark. 95, 431 S.W. 2d 252 (1968). Those decisions, however, are readily distinguishable from the case at bar, because: (a) The cross-complaint statute, § 27-1134, was not even mentioned in any of the opinions; (b) the uninsured motorists apparently did not object, as Moro does, to being brought into the litigation; and (c) the insurer’s cross-complaint against the uninsured motorist injected no new issue into the case; for the basic question was still whether the plaindff had been injured by the negligence of an uninsured motorist. We cannot say that the case at bar is controlled by the foregoing uninsured motorist decisions.

Affirmed.