text:
    Ron WOOD, Ed Wood, and Buck Graham v. The CORNER STONE BANK
    93-444
    866 S.W.2d 385
    Supreme Court of Arkansas
    Opinion delivered December 6, 1993

      William R. Mayo, for appellants.

      Ralph C. Williams, for appellee.
   Jack Holt, Jr., Chief Justice.

The issue before us is whether the trial court erred in finding there was sufficient evidence to support a claim and judgment against the appellants, Ron and Ed Wood, and Buck Graham, for conversion of property in which the appellee, The Corner Stone Bank, claimed a proprietary interest. We hold that the evidence was sufficient and affirm.

James P. Chamberlain, a resident of Benton County, Arkansas, obtained a $12,930.73 loan from The Corner Stone Bank and gave the bank a security interest in a 1980 Great Dane trailer and a 1984 Ford one-ton truck. Apparently, the Great Dane trailer was stolen, and the bank agreed to apply the insurance funds from the loss on the purchase of another trailer. As a result, Chamberlain brought in a title to a 1977 TIMP trailer which was accepted by the bank as substituted security for the stolen trailer. The TIMP trailer’s certificate of title reflected that it was owned by brothers, Ron and Ed Wood, doing business as W. W. Trucking. An endorsement on the certificate reveals that Ron Wood apparently transferred title and sold the TIMP trailer to Chamberlain. As a result, the bank and Chamberlain executed a new security agreement to reflect the substituted collateral. Thereafter Chamberlain defaulted on his payments, and the bank took possession of the trailer storing it at its lot in McDonald County, Missouri.

Later, Ed Wood sent Buck Graham to look for the trailer. When Graham reported its location, Wood obtained a tractor, took the trailer from the lot without notice to the bank, and towed it to Buck Graham’s place of business in northwest Arkansas. Graham purchased the trailer for $1,255 and immediately salvaged it.

The Corner Stone Bank filed suit for conversion against the appellants, Ron Wood, Ed Wood, and Buck Graham, for the value of the trailer and punitive damages. After a bench trial, the bank was awarded $4,000 in compensatory and $2,000 in punitive damages. We uphold the trial court as we do not set aside the findings of fact by a circuit judge sitting as a jury unless they are clearly erroneous. Taylor’s Marine, Inc. v. Waco Mfg., 302 Ark. 521, 792 S.W.2d 286 (1990).

As argued by the appellants, section 2-403(1) of the Uniform Commercial Code provides that “a purchaser of goods acquires all title which his transferor had.” Typically, this “Derivative Title Principle” works to the advantage of the original owner ■—• i.e. since Chamberlain supposedly did not have good title to pass on to the bank, the original owners, the Woods, would succeed.

However, four exceptions to this derivative title principle have been recognized in the Uniform Commercial Code and in common law. Relevant to the issue at hand is the fourth exception, the “Preclusion Exception,” which is found in common law and equity rather than in the U.C.C. This exception is well enunciated in an article by Professor Robert Laurence, entitled Bona Fide Purchaser Analysis, Beverage Products Corporation v. Robinson and the Case against Very Short Opinions, Ark. L. Notes 85 (1990). According to Professor Laurence, this doctrine holds that irrespective of the property holder’s (such as Chamberlain) actual title — void, voidable or good — there will be times when the original owner’s behavior does not justify allowing him to dispute the property holder’s title. Therefore, the purchaser of the property will win, not so much on his own behalf but rather due to the original owner’s procedural inability to force the contrary results. Id.

Applying the preclusion exception to the facts before us, it is clear that Woods’s and Graham’s conduct does not justify allowing them to dispute the bank’s security interest in the trailer. When the bank could not get Chamberlain to cooperate in perfecting a new title reflecting a lien in its favor, it contacted Ron Wood, as the listed seller on the certificate of title, to see if he would help. According to a loan officer, neither of the Woods told him that the signature on the certificate was allegedly forged. At trial, Ron Wood, to the contrary, stated that he had loaned the trailer to Chamberlain in order for him to fix it up and had given him possession of the trailer’s title to “obtain what permits he might need.” Wood claimed that when he presented Chamberlain with the title, the back of the certificate was signed, but he had not signed its front nor was he present when his signature on the back was notarized. The notary public, Mr. Hueston Brown, maintained that he did not remember whether Ron Wood signed the document in front of him or not. The Woods were aware the bank had possession of and a possible security interest in the trailer, yet they failed to inform or make mention to the bank that they disputed that Chamberlain had valid title.

Persuasive is the fact that the bank had no cause to be aware that anything was amiss and that Chamberlain presented the bank officer with a certificate of title seemingly signed by the owner and notarized.

The appellants ask us to rely upon Pachter, Gold & Shaffer v. Yantis, 742 F.Supp. 544 (W.D. Ark. 1990) for reversal, but this case is of no moment. There, the federal district court held that an owner of a lamp retained title to it after it was wrongfully pledged by his agent, and the sums received from the lamp’s sale could be garnished by the owner’s creditor. Yet, this case is distinguishable from the facts before us. In Pachter, there was no evidence that the original owner of the lamp had done anything to induce the loss, whereas here, the Woods furnished Chamberlain with the title as well as possession of the trailer.

In Snuffy Smith Motors v. Universal C.I.T., 236 Ark. 954, 370 S.W.2d 808 (1963), a case involving the question of title in two automobiles, we held that, “Where one of two innocent parties must suffer... the burden should be borne by the one whose conduct can be said to have induced the loss. We think the appellee is least at fault as between it and appellant.” Id. This principle embodies the preclusion exception and has been upheld in other situations. Lane v. Rachel, 239 Ark. 400, 389 S.W.2d 621 (1965); Pine Bluff Nat’l Bank v. Parker, 253 Ark. 966, 490 S.W.2d 457 (1973); Arkansas Dept. of Fin. & Adm. v. City of No. Little Rock, 280 Ark. 512, 659 S.W.2d 937 (1983).

In sum, the Woods’s as well as Graham’s conduct precludes them from disputing the bank’s proprietary interest in the trailer taken from its possession — thus, the trial court’s finding of a conversion of property was correct.

Affirmed.


source: Caselaw Access Project

author: Robert H. Dudley, Justice. Robert L. Brown, Justice,

license: Public Domain

text:
    ARKANSAS DEP’T OF HUMAN SERVICES, Division of Economic and Medical Services v. Lillian WALTERS
    93-468
    866 S.W.2d 823
    Supreme Court of Arkansas
    Opinion delivered December 6, 1993

      Richard B. Dahlgren, for appellant.

      G. Christopher Walthall, for appellee.
   Robert H. Dudley, Justice.

Medicaid is a governmental program designed to provide assistance to the aged, blind, and disabled and to dependent children whose incomes or resources are not sufficient to meet the costs of necessary medical care and services. It is a medical welfare program for the needy. The federal government shares the cost of the program with the states, and in return, the states agree to comply with the requirements imposed by the federal government. Appellee Lillian Walters was not eligible for Medicaid because of the amount of property she owned. Mrs. Walters created a trust for her “education, support, and general welfare” while living a normal life, but, in order to become artificially impoverished and therefore eligible for Medicaid, she suspended the trustee’s power to pay her maintenance if she were placed in a nursing home. She named her daughter as trustee. The settlor intended to preserve her assets for her heirs and have the government bear the expense of maintaining her in a nursing home through the provision for suspension of maintenance.

In August 1990, the settlor entered a nursing home as a paying patient. In December 1990, she applied to the county office of the Department of Human Services for Medicaid long-term benefits. In the application she stated that she had no interest in any trust. Her application was approved, and the Department began paying Medicaid benefits to the nursing home that same month. In March 1991, the Department learned of her trust and notified the county office. The county office subsequently declared her to be ineligible for Medicaid. The settlor appealed the county office’s ruling to the Department’s Appeals and Hearings section. The Appeals and Hearings officer upheld the county office’s ruling.

Mrs. Walters, the settlor, in her individual capacity, filed a petition in circuit court pursuant to the Administrative Procedures Act and asked for a judicial review of the Department’s administrative adjudication. See Ark. Code Ann. § 25-15-212 (1987). In addition, she asked to be reimbursed for all benefits that had been withheld. The circuit court ruled that the action of the agency was arbitrary and capricious and that the settlor was entitled to receive future Medicaid benefits. The proof showed that during the period the county office’s ruling was in effect, the trust paid the nursing home $14,758.00 for the settlor’s maintenance. The trial court ordered the State to reimburse the trust the $14,758.00, even though the trust was not a party to the appeal. We reverse the ruling of the circuit court.

The trial court entered its order on February 5, 1993. Less than three months later, on April 20, 1993, Ark. Code Ann. § 28-69-102 (Supp. 1993) became effective. Subsection (b) of that act provides that a “provision in a trust . . . which . . . provides . . . for the suspension. . .of the principal, [or] income ... of. . .the grantor ... in the event the grantor . . . should apply for . . . nursing care . . . shall be void as against the public policy of the State of Arkansas without regard to . . . the purpose for which the trust was created....” Subsection (c) of the act provides that the foregoing subsection is “remedial in nature and is enacted to prevent individuals otherwise ineligible for medical assistance benefits from making themselves eligible by creating trusts in order to preserve their assets.” The emergency clause provides that the purpose of the act is to prevent ineligible individuals from artificially impoverishing themselves to receive benefits to which they are not otherwise entitled and to facilitate recovery of improperly obtained benefits, in order that the fiscal integrity of the Medicaid funds can be maintained.

The first question is whether this court can apply the statute since it was enacted after the lower court entered its order. In Ziffrin, Inc. v. United States, 318 U.S. 73, 78 (1943), the opinion of the Court answers the question as follows: “A change in the law between a nisi prius and an appellate decision requires the appellate’court to apply the changed law.” The Court explained that if the law were otherwise, an administrative agency could be ordered to do future acts that would be contrary to existing legislation. Such is the situation now before us. If we did not apply the new Act, it would be necessary for us to affirm an order for the Department to act in the future in a manner contrary to the now existing legislation; We have no hesitancy in applying the Act. As a general rule we will not reverse the ruling of a trial court on an issue not presented, but the present situation falls outside the application of the rule because the issue could not have been presented to the trial court, as the Act was passed after the order was entered.

The settlor argues that applying the Act to her constitutes an unconstitutional retroactive application of the Act. It is true that the imposition of criminal liability ex post facto is prohibited by both the United States and State constitutions, as are Bills of Attainder, but here we are concerned with a civil act that defines eligibility for welfare. The fact that a civil statute might be retroactive is not sufficient, by itself, to invalidate an act. We have often approved retroactive application of civil statutes, especially those concerning the fiscal affairs of government. We have said the State can retroactively impose taxes. DuLaney v. Continental Life Ins. Co., 185 Ark. 517, 47 S.W.2d 1082 (1932). The Supreme Court has said taxes can be retroactively applied. Reinecke v. Smith, 289 U.S. 172 (1933). One court has said, “The need of the Government for revenue has been deemed a sufficient justification for making a tax measure retroactive whenever the imposition seems consonant with justice and the conditions were not such as would ordinarily involve hardship.” Combs v. United States, 98 F. Supp. 749, 754 (D. Vt. 1951).

The second issue is whether this remedial act should be applied. The Department’s regulations in effect before the legislation was enacted did not expressly prohibit a person from artificially impoverishing himself or herself in order to become eligible for Medicaid. The General Assembly, without question, intended to put an end to such contrivances. The language of the Act is clear: Such a provision in a trust is void for determination of eligibility for Medicaid. In another Act of the same 1993 session, the General Assembly declared the public policy of this State to be that Medicaid is to be the payor of last resort. It is only after the individual has exhausted his or her own resources that the taxpayers are to assume the financial burden of an individual’s necessary medical expenses. Ark. Code Ann. § 20-77-101 (Supp. 1993).

The settlor argues that any attempt by the State to legislatively void the provision in her trust constitutes a retroactive legislative enactment. Her argument assumes that the creation of her trust is the event around which prospective and retroactive application turns, but that is not correct. The event that determines whether the application of the statute is prospective or retroactive is the determination of eligibility of the individual for welfare. See Spires v. Russell, 300 Ark. 530, 780 S.W.2d 547 (1989). That determination could be made periodically with the outcome being dependent on the amount of resources and income the individual had at that time. Applying the Act to a determination of eligibility after the effective date of the Act would be a prospective application of the statute. The Act would be applied retroactively only when a determination of eligibility is made by applying the Act back to a time before the effective date of enactment. The issue of retroactivity is limited to applying the Act to that period from the initial determination of eligibility to the date of enactment. The remainder of the opinion addresses that issue.

The general rule is that statutes are to be given only prospective application. Arkansas Rural Medical Practice Student Loan & Scholarship Bd. v. Luter, 292 Ark. 259, 729 S.W.2d 402 (1987), and cases cited therein. However, the statute at issue is a remedial statute, and remedial legislation is more often given retroactive application. Barnett v. Arkansas Transp. Co., 303 Ark. 491, 798 S.W.2d 79 (1990). The cardinal principle for construing remedial legislation is for the courts to give appropriate regard to the spirit which promoted its enactment, the mischief sought to be abolished, and the remedy proposed. Skelton v. B.C. Land Co. 260 Ark. 122, 539 S.W.2d 411 (1976) (citing United States v. Colorado Anthracite Co., 225 U.S. 219 (1912)). The spirit which promoted the Act, and the mischief sought to be abolished are unmistakably set out. The General Assembly said it intended to declare these trust provisions void and to allow the State to recover any benefits that might have been obtained with the use of such provisions. From this, it is apparent that the legislative intent was to give the Act retroactive effect. The final issue then becomes whether we can validly give effect to the legislative intent.

We have said that statutes can be construed to operate retroactively so long as they do not disturb contractual or vested rights, or create new obligations. Harrison v. Matthews, 235 Ark. 915, 362 S.W.2d 704 (1962). We have indicated that it would violate due process to disturb vested rights or contractual rights. Talkington v. Turnbow, 190 Ark. 1138, 83 S.W.2d 71 (1935). We summarily hold that a retroactive application of the Act would not disturb a contractual right, or create a new obligation. Whether it disturbs vested rights is a more difficult question. One authority has written:

Judicial attempts to explain whether such protection against retroactive interference will be extended disclose that elementary considerations of fairness and justice govern the decision. Thus it has been explained that “The term ‘vested right’ is not defined in either the Federal or the State Constitution; but it would seem that, generally, the concept it expresses is that of a present fixed interest which in right reason and natural justice should be protected against arbitrary state action — an innately just and imperative right that an enlightened free society, sensitive to inherent and irrefragable individual rights, cannot deny.” [Pennsylvania Greyhound Lines, Inc. v. Rosenthal, 102 A.2d 587 (N.J. 1954).] As explained by an eminent constitutional authority, “as it is a right which rests upon equities, it has reasonable limits and restrictions; it must have some regard to the general welfare and public policy; it cannot be a right which is to be examined, settled, and defended on a distinct and separate consideration of the individual case, but rather on broad and general grounds which embrace the welfare of the whole community, and which seek the equal and impartial protection of the interest of all.” [Cooley, Constitutional Limitations 745 (8th ed. 1927).]

Norman Singer, Sutherland Statutory Construction § 41.06, at 379-80 (5th ed. 1991).

In Forrest City Machine Works, Inc. v. Aderhold, 273 Ark. 33, 616 S.W.2d 720 (1981), we held that we would determine retroactivity and vested rights after weighing the fairness of the act and the general welfare. We stated that courts do not regard rights vested contrary to the equity and justice of the case and that one of the principal factors in determining the retroactive application of an act is the public policy set out in the act. Id. at 42, 616 S.W.2d at 725. If the public policy set out in the act offends our sense of justice, we will not apply it retroactively, but if it does not offend our sense of justice, we can apply it retroactively. As an illustration of a just retroactive application of .an act, and one that is correlative to this case, we quoted from Bryant Smith, Retroactive Laws and Vested Rights, 5 Texas Law Review 231 (1927) and 6 Texas Law Review 409 (1928), and asked what of a law that, by. legitimizing an illegitimate child, takes property from an heir who before the law had a perfect title in every respect and gives it to a remote purchaser from the illegitimate? Id. at 40, 616 S.W.2d at 724. We said that if the term “vested” meant anything, this law takes away a vested right, and yet, all such laws have been sustained on the basis of public policy.

Here, the settlor examined the state regulations in effect at the time she created her trust and decided that she could artificially impoverish herself so that, at the time she applied for Medicaid, she would be found to be eligible for benefits. However, she, and others who did the same thing, knew, or should have known, they did not gain a fixed vested interest in future Medicaid payments since the government could repeal the program at any time. The settlor and others similarly situated understood they were taking some risk by placing their property in trust for a contrived purpose, and they understood, or should have understood, that this risk would involve hardship if the program were changed or repealed. The only consideration of fairness in favor of the settlor is that, in reliance on the absence of a prohibition in the regulations, she conveyed her property to a trust. This consideration is of only slight weight since a settlor should have understood the risk he or she was taking in this surreptitious act.,On the other hand of the scales of fairness, is the fact that the settlor intended for the taxpaying public to maintain her in a nursing home under the guise that she was impecunious so that her assets would go to her heirs. The General Assembly has voided such provisions in trusts as a matter of public policy in order to preserve the fiscal integrity of the program. Without question, the Act serves the general welfare of the public. In this weighing, the elementary considerations of fairness and justice strongly prevail in favor of the retroactive application of the Act. Just as the need of the government for tax revenue for the general welfare is a sufficient justification for making a tax measure retroactive, the need of the government to stop chicanery and to preserve the fiscal integrity of the Medicaid program is a sufficient justification for making this measure retroactive. Accordingly, we hold that the legislative intent may be given effect, and the Act may be applied retroactively.

Reversed and remanded.

Brown, J., concurs.

Robert L. Brown, Justice,

concurring. I agree with the result but would not apply Act 1228 of 1993 retroactively on the basis that it is “remedial.” Most legislative enactments could be construed as remedial in one way or another, and the retroactive application of state law must be employed in the rarest of instances.

Rather, the device used by the appellee was a subterfuge and directly contrary to the overall intent of the Medicaid program to provide welfare benefits to the aged who are impoverished. The fact that a precise state regulation did not prevent the appellee’s artifice is not determinative in my opinion. Her trust was clearly at odds with the purpose behind the Medicaid program and that is enough to mandate a reversal.


author: Robert H. Dudley, Justice.

text:
    John H. WRIGHT, III; Mark W. Wright; Lynn Wright Parker; and Valley Fast Foods, Inc. v. COMPTON, PREWETT, THOMAS & HICKEY, P.A. and W.I. Prewett
    93-522
    866 S.W.2d 387
    Supreme Court of Arkansas
    Opinion delivered December 6, 1993

      Crockett, Brown & Worsham, P.A., by: C. Richard Crockett and Christopher O. Parker, for appellants.

      Shackleford, Shackleford & Phillips, P.A., by: Norwood Phillips, for appellees.
   Robert H. Dudley, Justice.

Plaintiffs, John H. Wright, III, Mark W. Wright, Lynn Wright Parker and Valley Fast Foods, Inc., filed a malpractice action against defendants, Compton, Prewett, Thomas and Hickey, P.A., a professional corporation of attorneys, and William I. Prewett, an attorney employed by the corporation. Among affirmative defenses, the defendents pleaded that the statute of limitations had run and moved for summary judgment on that ground. The trial court granted the motion. We reverse and remand.

The facts surrounding the limitation issue are as follows. The suit was commenced on January 11, 1989. Prior to that, in the fall of 1985, Valley Fast Foods, Inc., a Texas corporation, owned Burger King fast food franchises and restaurant equipment in the Rio Grande Valley, fifty percent of the common stock in a corporation that owned the Benton Motor Inn in Benton, twenty-five percent of the common stock in a corporation that owned the International Inns of Louisiana, and other lesser items of personal property. The stockholders in Valley Fast Foods were J. H. Wright, Jr. and his three children, J. H. Wright, III, Mark W. Wright, and Lynn Wright Parker. In the fall of 1985, the stockholders wanted to separate the Burger King restaurants from the ownership of common stock in the motel corporations. They retained William I. Prewett to advise them on the separation of assets. By letter dated September 4, 1985, Prewett suggested that the separation of assets could be a tax free reorganization under section 355 (d) of the Internal Revenue Code.

Prewett subsequently prepared the documents to complete the three steps required for the reorganization. The steps consisted of the formation of a new corporation named Wright III Foods, Inc.; the transfer of some of the assets, primarily the Burger King restaurant franchises and equipment, from Valley Fast Foods to Wright III Foods, Inc.; and the exchange by plaintiff shareholders of their stock in Valley Fast Foods for stock in Wright III Foods, Inc. In the terms used in section 355, Valley Fast Foods was the distributing corporation and Wright III Foods, Inc. was the controlled corporation. The Internal Revenue Service subsequently ruled that the reorganization was taxable, not tax free, because, pursuant to subsection (b)(1)(A) of section 355 and the applicable regulations, both the distributing and the controlled corporations must be actively engaged in a business before and after the reorganization, and the passive ownership of the corporate stock in the motels did not qualify as actively engaging in a business. Valley Fast Foods and the stockholders in Wright III Foods, Inc., plaintiffs, were required to pay taxes and interest of more than $350,000 as a result of the reorganization being ruled to be taxable. The plaintiffs’ suit alleges that defendants are liable for malpractice because the reorganization was taxable.

The procedure involving the motion for summary judgment is well settled. The defendants, ás the movants for summary judgment, bore the burden of demonstrating that there was no genuine issue of material fact. Mount Olive Water Ass’n v. City of Fayetteville, 313 Ark. 606, 856 S.W.2d 864 (1993). All proof submitted had to be viewed most favorably to the party resisting the motion, and any doubt and all inferences should have been resolved against the moving party; Id. Once the movant made a prima facie showing of entitlement, however, the responding party had to meet proof with proof to demonstrate there was remaining a genuine issue of a material fact. Id. The response and supporting material had to set forth specific facts showing that there was a genuine issue for trial. Id. Our review is limited to examining the evidentiary items presented and determining whether the trial court correctly ruled that those items left all material facts undisputed. Hardie v. Estate of Davis, 312 Ark. 189, 848 S.W.2d 417 (1993).

The parties agree that the applicable statute of limitation is the three-year period provided in Ark. Code Ann. § 16-56-105 (1987). See also Goldsby v. Fairley, 309 Ark. 380, 831 S.W.2d 142 (1992). They also agree that the limitation period begins to run, in the absence of concealment of the wrong, when the negligence occurs, not when it is discovered by the client. Chapman v. Alexander, 307 Ark. 87, 817 S.W.2d 425 (1991).

In the trial court the defendants attached affidavits and supporting materials to their motion for summary judgment, and those documents constituted proof that the legal services involved in the reorganization were completed by the end of December 1985. Since suit was not filed until January 11, 1989, they contended the period of limitation had run. The documents prepared by Prewett do in fact reflect 1985 dates, and another document reflects that the tax deficiency was assessed for the 1985 calendar tax year. This proof constituted a prima facie showing of entitlement to summary judgment and required the plaintiffs to meet the proof with proof.

The gist of plaintiffs’ response was that Prewett did not in reality complete the transaction until sometime after January 14, 1986, because, on and after that date, many of the documents were signed but backdated to reflect that they were executed in 1985. In his affidavit, J. H. Wright, III, stated that the certificates of stock in Wright III, Inc., were not delivered to him until January 14, and, after that date, they were backdated to reflect the earlier date. In the same affidavit he additionally stated that Prewett did not provide him with the contract required for the transfer of the Burger King franchises to Wright III Foods, Inc. until January 14, and that contract, like other documents, was dated back to reflect an earlier date.

In another affidavit, J. H. Wright, Jr, in setting out the time of Prewett’s work, stated:

Burger King did not allow its franchises to be in the name of a corporation unless there was an agreement between the stockholders which restricted the transfer of shares. The original of the document which would allow the new corporation to engage in business as a Burger King was sent by copy of the January 13, 1986 letter to John W. Wright, III. Such agreement was the “Contract Restricting Transfer of Shares.” Such agreement was, like the other documents, signed after January 13, 1986, and backdated to December 1, 1985.

Other documentary evidence submitted by the plaintiffs, such as the defendants’ billing statement and a deed to transfer Valley Fast Foods’ interest in a condominium to Wright III Foods, Inc., additionally indicate that the reorganization was not completed in 1985. When the proof submitted is viewed most favorably to the parties resisting the motion, here the plaintiffs, and any doubt and all inferences are resolved against the moving party, here the defendants, we have no hesitancy in holding that a genuine issue existed about the date of the completion of the reorganization and whether the period of limitation had run. Consequently, the trial court erred in granting summary judgment on this issue.

The defendants do not admit giving erroneous advice, and they do not admit that the assessment by the Internal Revenue Service is a correct assessment, but, in oral argument, they contended that, even if they might have committed malpractice, it occurred in the fall of 1985 when they gave erroneous advice. In support of the argument they cited a sentence from Ford’s, Inc. v Russell Brown & Co., 299 Ark. 426, 773 S.W.2d 90 (1989). Neither the sentence, nor the case, affords the defendants relief. The holding in that case is that the limitation period in tax malpractice cases begins to run, in the absence of concealment of the wrong, when the negligence occurs, and not when the government assesses additional taxes. In Chapman v. Alexander, 307 Ark. 87, 817 S.W.2d 425 (1991), we made it clear that the limitation period begins to run in malpractice cases upon the occurrence of the last element essential to the cause of áction. In this case that would be the date of the last act in the reorganization. If we were to adopt the defendants’ position it could require a plaintiff to bring suit against his attorney before a lengthy transaction were completed, and that, in turn, could well deny the attorney the chance to effectuate the proper result.

Reversed and remanded.


author: Steele Hays, Justice.

text:
    John C. HERRINGER v. MERCANTILE BANK of Jonesboro, Arkansas
    92-1462
    866 S.W.2d 390
    Supreme Court of Arkansas
    Opinion delivered December 6, 1993

      Barrett, Wheatley, Smith & Deacon, by: Ralph W. Waddell, for appellant.

      Snellgrove, Laser, Langley & Lovett, by: Todd Williams, for appellee.
   Steele Hays, Justice.

This case involves a dispute between a landlord and a bank as to whether a landlord’s lien or a bank’s purchase money security interest has priority. The trial court held for the bank and we sustain that holding.

John Herringer, appellant, owns commercial property in Jonesboro. On March 15, 1990, he leased the property to Mike Crosby. The lease was to begin on April 15, 1990, but pursuant to an amendment to the lease, Crosby took possession of the premises prior to that date to begin work on a restaurant he planned to operate on the leased premises. Crosby began work on the premises immediately after the lease was signed.

On March 16, Crosby executed a promissory note and security agreement to the Mercantile Bank of Jonesboro (appellee) for $50,000. The loan was made to enable Crosby to purchase restaurant equipment and Crosby gave the bank a security interest in the equipment to be later purchased. The bank filed a financial statement pursuant to Ark. Code Ann. § 4-9-401 (1987) on March 21, 1990.

Crosby purchased equipment for the restaurant from Bras-co of Jonesboro. The parties stipulated that the restaurant equipment was delivered to the leased premises between March 17 and April 14, 1990. It appears from the record that the earliest any equipment was delivered was April 6, and neither party suggests otherwise. Crosby subsequently defaulted on the lease agreement and on the promissory note.

Both the bank and Herringer asserted an interest in the equipment left behind by Crosby. Herringer’s claim was based upon our statutory landlord’s lien enacted in 1987, Ark. Code Ann. § 18-16-108 (Supp. 1993):

Property left on premises after termination of lease.
Upon the voluntary or involuntary termination of any lease agreement, all property left in and about the premises by the lessee shall be considered abandoned and may be disposed of by the lessor as the lessor shall see fit without recourse by'the lessee. All property placed on the premises by the tenant or lessee is subjected to a lien in favor of the lessor for the payment of all sums agreed to be paid by the lessee.

Herringer argued that the language of this statute gave him priority over all other liens on the same property or, at least that his interest attached at the same time as the bank’s interest and therefore, the proceeds should be distributed pro rata.

The bank maintained it had a purchase money security interest (PMSI) in the equipment, and the law prior to the Uniform Commercial Code (UCC), which is generally applied in landlord’s lien cases, would give the bank priority.

The parties agreed to sell the equipment and hold the proceeds in escrow pending a determination of their rights. The case was heard in chancery on a petition for declaratory judgment. The bank filed a motion for summary judgment, which was granted, and Herringer appeals from that decision.

Our analysis begins with the question of what law to apply, as the UCC specifically excludes landlord’s liens. Ark. Code Ann. § 4-9-104(b) (1987). A majority of other jurisdictions dealing with this exclusion have applied their respective pre-code law to determine the outcome [see Ex-Cell-O Corp v. Lincor Properties, 762 P.2d 594 (Ariz. 1988)], and results have varied depending on the pre-code law in each state and the particular facts and interests competing with the landlord’s lien. See e.g. the discussion of Iowa law in The Relative Priority of a Landlords Lien and Article Nine Security Interest, 35 Drake L. Rev. 27 (1985-86); Hartwell v. Hartwell Co., Inc., 167 N.J. Super. 91, 400 A.2d 529 (1979); National Investment Trust v. First National Bank in Albuquerque, 88 N.M. 514, 543 P. 2d 482 (1975).

However, we feel no constraint to apply pre-code law to this situation. Our legislature adopted the comprehensive UCC in preference to the law existing at that time and consideration, if not preference, should be given to the policies embodied in that law. Therefore, we will be guided primarily by the law and policies promoted by the UCC, and to the extent it is helpful in determining the legislative intent, we will examine our pre-code law as well.

We look first to the nature of each interest and the time at which it attached to the property. We will then weigh those factors in light of the competing considerations of each interest.

The Bank’s Purchase Money Security Interest

Under the Uniform Commercial Code, the bank’s interest would be classified as a PMSI under Ark. Code Ann. § 4-9-107 (1987):

A security interest is a “purchase money security interest” to the extent that it is:
(a) Taken or retained by the seller of the collateral to secure all or part of its price; or
(b) Taken by a person who by making advances or incurring an obligation gives value to enable the debtor to acquire rights in or the use of collateral if such value is in fact so used.

The bank had made a loan to Crosby to enable him to acquire restaurant equipment and the money was in fact so used, so the bank had a PMSI in the equipment. Ark. Code Ann. § 4-9-107(b). The bank took the appropriate steps for perfection by filing its financing statement on March 21, 1990. Ark. Code Ann. § 4-9-302 (1987). However, the bank’s interest was not perfected until the security interest had attached, under Ark. Code Ann. § 4-9-303(1) (1987):

(1) A security interest is perfected when it has attached and when all of the applicable steps required for perfection have been taken. Such steps are specified in §§ 4-9-302 and 4-9-304 — 4-9-306. If such steps are taken before the security interest attaches, it is perfected at the time when it attaches. [Our emphasis.]

The Official Comment to Ark. Code Ann. § 4-9-303 (1987) states:

(1) The term “attach” is used in this Article to describe the point at which property becomes subject to a security interest. The requisites for attachment are stated in Section 9-203. When it attaches a security interest may be either perfected or unperfected. “Perfected” means that the secured party has taken all the steps required by this Article as specified in § 9-303(1). [Our emphasis.]

See also Ark. Code Ann. § 4-9-312 (1987), Official Comment, Section (4).

Under Ark. Code Ann. § 4-9-203 (1987), a security interest will attach when all the stated requirements are met: a valid security agreement has been executed, value has been given and the debtor has rights in the collateral. In this case the first two conditions had already been met and the only thing remaining was the debtor (Crosby) having rights in the collateral. There is no dispute between the parties that the debtor had rights in the collateral and therefore the bank’s security interest attached, at the time the equipment was delivered to Crosby. Therefore the bank’s interest was perfected when Crosby received the equipment on April 6, 1990. Sections 4-9-203 and 4-9-303.

The Landlord’s Lien

Prior to the enactment of Ark. Code Ann. § 18-16-108 (1987), the only landlord’s lien, either by statute or common law, recognized in Arkansas, pertained to crops. See Ark. Code Ann. § 18-41-101 (1987). The opinion in Bennett v. Taylor, 185 Ark. 794, 49 S.W.2d 608 (1932) contains this comment:

We cannot assent to this conclusion [that Arkansas has adopted the common law landlord’s lien], for the very reason that, throughout nearly a hundred years of the history of this State, no court or Legislature has ever recognized the harsh and oppressive remedies of the landlord’s common law right of distraint, and, in the absence of a statutory direction, we are unwilling now to revive and apply that doctrine.

The only other comment we find on the question of landlord’s liens, pertains to statutory liens generally, that such statutes must be construed strictly because they are in derogation of the common law and provide an extraordinary remedy that is not available to every merchant or worker. Valley Metal Works v. A.I. Smith-Inland, 264 Ark. 431, 572 S.W.2d 138 (1978).

Since we have had no landlord’s lien prior to § 18-16-108, we look to other jurisdictions to determine when attachment occurred. It is generally agreed that the lien attaches at the time the goods are placed on the property or at the beginning of the tenancy. 49 Am. Jur. 2d Landlord & Tenant § 688 (1970). Under the language of our statute, it appears the lien attaches at the time the goods are placed on the property. In this case then the landlord’s lien would have attached to the goods on April 6, 1990, when they were delivered to Crosby.

There is no mechanism under our statute for filing a landlord’s lien that would approximate the perfection requirement under the Code. See 35 Drake Law Rev., supra at 42, 46; B. Clark supra, at § 3.03[2][a]. As our law stands, when the landlord’s lien attaches, no further perfection is required. Therefore, under Arkansas law, the priority of a landlord’s lien is dependent on the time of attachment.

Priority of Interests

While the bank had filed on its interest prior in time to Her-ringer’s interest attaching, it was not perfected until the bank’s interest had attached, as discussed above. Therefore we are faced with two interests which arose at the same time.

Under the Code (§ 4-9-312) the bank’s PMSI would have priority over all other conflicting security interests under the provisions of Section (4):

(4) A purchase money security interest in colláteral other than inventory has priority over a conflicting security interest'in the same collateral or its proceeds if the purchase money security interest is perfected at the time the debtor receives possession of the collateral or within twenty-one (21) days thereafter.

This provision of the code gives priority to a perfected PMSI, over other conflicting security interests in the same collateral, even when a PMSI creditor comes into existence after a competing financing statement is filed. B. Clark, supra, § 3.02[3].

The advantage given a PMSI is based on sound policy, for without the PMSI lender there would be no collateral. B. Clark, supra § 3.09[1]. Clark writes:

The purchase money priority is a consistent theme throughout Article 9. Its policy is to protect those whose credit enables the debtor to acquire identifiable assets, even though the purchase money creditor may come into the picture long after a competing financing statement is filed. . . .
... .Without the purchase money priority, secondary sources of credit would be chilled out of the picture unless they were willing and able to obtain subordination agreements from the floating lienor. The purchase money priority, an outgrowth of conditional sales financing, breaks up what would otherwise be a complete monopoly on the debtor’s collateral.

Id. at § 3.01 [2][e] and § 3.09[1]. To the same effect, see White!Summers, supra at § 26-5.

Similar policies favored PMSIs under pre-code law in Arkansas, as well as in other jurisdictions. See Ark. Code Ann. §§ 18-45-201 and 202 (1987), and in our cases interpreting those statutes. Bond v. Dudley, 244 Ark. 568, 426 S.W.2d 780 (1968); Corning Motor Company v. White, 173 Ark. 144, 293 S.W.2d 46 (1927); Terrell v. Loomis, 218 Ark. 296, 235 S.W.2d 961 (1951). And see Official Comment to Ark. Code Ann. § 4-9-312(3) (1987).

In contrast to this favored status of the PMSI, the landlord’s lien in Arkansas has not been favored and did not even exist until recently. And as a statutory lien it will be construed strictly against the landlord. In other jurisdictions, the current status of the landlord’s lien varies, supra, but it was generally held in the past that the creditor in a conditional sale, the forerunner to the PMSI (B. Clark, supra, § 3.09[1]), had priority over other interests and over landlord’s liens in particular. See 45 A.L.R. 949, Landlord’s Lien or Right of Distress on Property Sold to Tenant on Conditional Salt (1926).

The legislature has continued to look with favor on PMSIs by adopting the UCC in 1962. Act 1961, No. 185. See also, the statement of purposes of the UCC at Ark. Code Ann. § 4-1-101 (1987). Therefore, when the legislature adopted the landlord’s lien in 1987, it was mindful of this state’s longstanding aversion to a landlord’s lien and of the strict construction that would be applied to such legislation; it was also aware of the law and policies embodied in the UCC. McCleod, Commissioner of Revenues v. Santa Fe Trail Transportation Co., 205 Ark. 225, 168 S.W.2d 413 (1943). On that basis, we believe the legislature never intended a landlord’s lien which arose simultaneously with a PMSI to have priority.

We find support for this conclusion, by analogy, under the Code. While a landlord’s lien is not a security interest under the Code, and therefore not a “conflicting security interest” under § 4-9-312, the landlord’s lien in this case operates in effect, as a floating lien on after-acquired property. See Ark. Code Ann. § 4-9-204 (1987) and Official Comment thereto, (1) and (2). It was exactly this kind of lien for which § 4-9-312 was structured, in order to protect the PMSI creditor. See B. Clark, supra, § 3.09[1].

Under this analogy the landlord’s lien would be subject to the priority of the PMSI, even if thé landlord’s lien had attached prior in time to the PMSI. It follows that a landlord’s lien which arises simultaneously with a PMSI would be subordinate. Having continued to approve the UCC and its policies, we believe the legislature would doubtless embrace those same policies for matters outside the scope of the UCC when they are in furtherance of the same interests. See Ark. Code Ann. § 4-1-101 (1987).

For the reasons stated, we affirm the order appealed from.

       The bank argues its interest attached at a time prior to the delivery of the goods. While the term “rights in the collateral” has been so interpreted [see B. Clark, The Law of Secured Transaction Under the Uniform Commercial Code § 2:04 (1988), and J. White & R. Summers, Uniform Commercial Code § 24-6 (3rd Ed. 1988)], no facts are stated in the record to sufficiently support that claim.

       Herringer also argues that the preferred status previously granted to landlords on crops, Ark. Code Ann. § 18-41-101 (1987), citing to Gould-Galsbrath Supply Co. v. Triplett, 167 Ark. 125, 266 S.W.2d 937 (1924), should be granted to landlords generally. The agricultural landlord, however, has historically enjoyed such preference, and, even now, agricultural goods occupy a special treatment under Ark. Code Ann. § 4-9-312(2) (1987). See also Arkansas Law Notes 1988 Crop Financing: A Guide to Arkansas Law. However, as discussed above, there has been no preference for the urban landlord, in fact, quite the opposite. With that background we find no merit in appellant’s reliance on the crop lien statute.

       These cases use the term conditional sale rather than PMSI. The conditional sale was the forerunner of the PMSI. B. Clark, supra at n.l, at 3.09 [1].


text:
    Jimmy D. REYNOLDS v. Jerry WATTS, A Law Enforcement Officer in his Official Capacity and Personally
    93-507
    864 S.W.2d 870
    Supreme Court of Arkansas
    Opinion delivered December 6, 1993

      Woodruff Law Firm, by: Ronald G. Woodruff, for appellant.

      Winston Bryant, Att’y Gen., by: Victra L. Fewell, Asst. Att’y Gen., for appellee.
   Steele Hays, Justice.

Appellant Jimmy D. Reynolds brought this action against Officers Jerry Watts (appellee) and Harold Moe, alleging use of excessive force in the arrest of Jimmy D. Reynolds. The trial court granted a motion to dismiss as to Harold Moe and Reynolds has appealed. The action still pends as to Jerry Watts.

We dismiss the appeal for lack of compliance with Ark. R. Civ. P. 54(b), an indispensable element of our jurisdiction which we address on our own. State Farm. Mutual Automobile Insurance Company v. Thomas, 312 Ark. 429, 850 S.W.2d 4 (1993).

Appeal Dismissed.


author: David Newbern, Justice.

text:
    Jessie Lee BUCHANAN v. STATE of Arkansas
    CR 93-714
    866 S.W.2d 395
    Supreme Court of Arkansas
    Opinion delivered December 6, 1993

      Davis H. Loftin, for appellant.

      Winston Bryant, Att’y Gen., by: Kent G. Holt, Asst. Att’y Gen., for appellee.
   David Newbern, Justice.

Jessie Lee Buchanan, the appellant, was convicted of capital murder for having shot and killed Alfred Tobar while they were arguing in Mr. Buchanan’s home. He was sentenced to life imprisonment without parole, and he raises four points of appeal. Mr. Buchanan contends the evidence was insufficient to establish that the killing was done with premeditation and deliberation. We hold the nature and manner of use of the weapon was sufficient to support the verdict. He also contends the similarity of the capital and first degree murder statutes make the law too vague for enforcement. We have previously held to the contrary. Finally, he contends two statements made by Lilly Hodges, the only witness to the shooting, should not have been admitted into evidence. We hold the statements were admissible for the purpose of impeachment. We affirm the conviction.

1. Sufficiency of the evidence

Mr. Buchanan and Mr. Tobar were friends who had gotten into an argument during an afternoon outing with other persons. After Mr. Buchanan returned to his home, Mr. Tobar knocked on Buchanan’s door and was allowed to enter. Despite Tobar’s stated intention to apologize, the argument flared again. Lilly Hodges, Mr. Buchanan’s fiance who lived with him and their two children, witnessed the shooting. She testified that she had asked Tobar to leave but he refused. At some point she called Mr. Tobar’s wife a name, and he then grabbed her and threatened to hit her. Ms. Hodges testified further that Buchanan had gone to the back room of their mobile home, gotten a rifle, and then returned to the front. Ms. Hodges had by then broken free. Buchanan again asked Tobar to leave, but Tobar advanced toward Buchanan who then shot Tobar.

Mr. Buchanan did not deny the shooting. His testimony was similar to that of Ms. Hodges. She testified she heard two or three shots. Mr. Buchanan testified he blacked out after the first shot. He said he had no intention of killing Tobar but shot at him because Tobar was advancing on him and he felt fear for himself, Ms. Hodges, and the children.

The weapon used was a .22 caliber semi-automatic rifle with a sawed off stock. Ronald Andrejack, a firearms and tool-mark examiner of the State Crime Laboratory, testified that it was necessary to pull the trigger of that rifle for each shot fired. Dr. David De Jong, Associate Medical Examiner with the Crime Laboratory testified that Mr. Tabor suffered five bullet wounds, two entered his front and three entered his back.

Mr. Buchanan argues that the only evidence about premeditation and deliberation came from the only two witnesses to the shooting, Ms. Hodges and himself, and that no such intent could be found as a result of their testimony. Be that as it may, we hold the jury’s decision is supported by the evidence of the nature of the weapon and the manner of its use.

In determining whether there was premeditation and deliberation, the jury may consider the nature of the weapon used, the extent and location of the wounds inflicted, and Buchanan’s actions. Tillman v. State, 300 Ark. 132, 777 S.W.2d 217 (1989); Ricketts v. State, 292 Ark. 256, 729 S.W.2d 400 (1987). Given the five bullet wounds, their location in Mr. Tobar’s body, and the nature of the weapon used, we cannot say there was no question of fact for the jury to decide, and we have been given no convincing argument or citation of authority which might cause us to overturn its decision with respect to Mr. Buchanan’s intent when he fired the fatal shots.

2. Statutory overlap

Mr. Buchanan argues that the law pursuant to which he was convicted was void for vagueness. The capital murder statute, Ark. Code Ann. § 5-10-101(a)(4) (Supp. 1993), under which Buchanan was charged, describes the offense as one committed “[w]ith the premeditated and deliberated purpose of causing the death of another person.” The first degree murder statute, Ark. Code Ann. § 5-10-201(a)(2) (Supp. 1993), describes that crime as causing the death of another person “[w]ith a purpose of causing the death of another person.” Mr. Buchanan’s point is that the discretion given the prosecution to choose between the two similarly described crimes makes the law too vague for enforcement. It would allow different persons to be convicted of two different offenses even though their conduct had been the same.

A subsidiary contention is that, had he been charged with first degree rather than capital murder he could have been freed on bond to assist in his defense and the discretion given to the prosecutor to charge either offense violates some unspecified constitutional mandate. The argument seems to assume that a charge of capital murder automatically obviates the possibility of the accused being freed on bond. Although the State’s brief does not question the assumption, it is not correct. Arkansas Const, art. 2, § 8 (1874) provides, “All persons shall, before conviction, be bailable by sufficient sureties, except for capital offenses, when the proof is evident or the presumption great.” The State bears the burden of showing “the proof is evident or the presumption great,” and the mere fact that capital murder has been charged does not mean the offense is non-bailable. Renton v. State, 265 Ark. 223, 577 S.W.2d 594 (1979).

The only authority cited in support of the contention that the overlapping of the two statutes constitutes some sort of constitutional violation is Cromwell v. State, 269 Ark. 104, 598 S.W.2d 733 (1980). In that case the same argument was presented • with respect to the so called “felony murder” provisions found in both the capital murder and first degree murder statutes. We rejected the void for vagueness argument because we found that each of the statutes in question contained no impermissible vagueness, and the fact of the overlapping of the definitions of the two crimes presented no constitutional infirmity. We said the first degree murder statute might have been intended to include an overlap with the capital murder statute.

The actual wording of the [first degree murder] statute may have been chosen to lighten the possible punishment that might be imposed for conduct falling within the strict definition of capital murdér — á consequence that might be acceptable both to the prosecution and to the defense. If that is not true in a particular case, presumably the defense can ask that the State be required to elect between the two degrees. In any event, we find no constitutional infirmity in the overlapping of the two sections, because there is no impermissible uncertainty in the definition of the offense.

Mr. Buchanan concedes that the very case he cites is contrary to his position, but he seeks to distinguish it on the basis that the felony murder situation is somehow different from the one before us now. We disagree with the proposed distinction. We have followed the Cromwell rationale on a number of occasions in which the same argument has been made, Mauppin v. State, 309 Ark. 235, 831 S.W.2d 104 (1992); Smith v. State, 306 Ark. 483, 815 S.W.2d 922 (1991); Sellers v. State, 300 Ark. 280, 778 S.W.2d 603 (1989); White v. State, 298 Ark. 55, 764 S.W.2d 613 (1989), and it applies in this case as well.

3. Admissibility of the statements

In a handwritten statement and a separate tape recorded oral statement, both made shortly after the event, Ms. Hodges told about witnessing the homicide. In neither of those statements, however, did she say anything about being personally threatened with harm by Mr. Tabor or about his having advanced on Mr. Buchanan after Buchanan asked him to leave the scene. The State called Ms. Hodges as its witness. When her testimony went beyond facts found in her handwritten statement given to a police officer shortly after the homicide, the State introduced the handwritten statement. The defense objected that, while it omitted some facts to which Ms. Hodges had testified at the trial, it contained nothing inconsistent with her testimony.

The objection was overruled and, at that point, no admonition was given to the jury to describe the purposes for which the jury could consider the statement; however, at the conclusion of Ms. Hodges’ testimony as the State’s witness, the Trial Court admonished the jury that it could only consider the handwritten statement for the purpose of impeachment and not for the truth of the matters contained in it.

The objection made by Mr. Buchanan’s counsel was, again, that Ms. Hodges’ prior statement should not be admitted because it was not inconsistent with her testimony. Although it was not mentioned at the trial, and is not mentioned in Mr. Buchanan’s brief, we assume the principle underlying the objection is the hearsay rule. We know of no rule to the effect that, to be admissible, evidence must be inconsistent with other evidence. Thus, although it was not cited to the Trial Court and is not cited in either brief, the argument apparently relates to A.R.E. 801(d) which excludes from the definition of “hearsay” a prior statement made by the witness which is inconsistent with the witness’s testimony.

We need not try to decide whether testimony which goes beyond a previous statement made by the witness is “inconsistent” with it. The reason we need not answer that question is that the statement offered by the State during Ms. Hodges’ direct examination as a State’s witness did not meet the definition of hearsay, and thus it matters not that it may not have been inconsistent with her testimony at the trial.

Rule 801(c) defines “hearsay” as “a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.” The statement was not offered for the truth of the matter asserted, and the jury was properly instructed not to consider it as being offered for the truth of the matter asserted. It was offered to show that items contained in her trial testimony were not included in the statement she made to the sheriff’s investigator shortly after the homicide she witnessed. The argument supported by admission of the statement into evidence was that she did not include the facts tending to exculpate Buchanan when her memory of the event must have been quite fresh. No error was committed with respect to admitting the handwritten statement into evidence.

Ms. Hodges also testified as a defense witness and was confronted on cross-examination with the transcript of her tape recorded statement and questions about why she had not included the information about Tabor’s threatening gestures. Mr. Buchanan’s counsel objected on the ground that Officer Laxton, who had taken the statements from Ms. Hodges on the night of the homicide had said the tape was an accurate representation of her oral statement but then testified that the recording inaccurately identified the place where the statement was taken as the scene of the crime rather than the sheriff’s office. The prosecutor responded, correctly, that Officer Laxton had not indicated that anything said by Ms. Hodges was inaccurately recorded or transcribed. The Trial Court admitted the statement and again gave an instruction limiting its use to impeachment. Again, the transcription of the oral statement was not offered for the truth of the matter asserted, and the objection presented at the trial was properly overruled.

4. Rule 4-3(h)

In accordance with Arkansas Supreme Court and Court of Appeals Rule 4-3(h), the record of trial has been examined, and it has been determined that there were no rulings adverse to Mr. Buchanan which constituted prejudicial error.

Affirmed.


author: David Newbern, Justice. Robert L. Brown, Justice, Per Curiam.

text:
    P.A.M. TRANSPORT, INC. v. ARKANSAS BLUE CROSS AND BLUE SHIELD
    93-59
    868 S.W.2d 33
    Supreme Court of Arkansas
    Opinion delivered December 6, 1993
    [Supplemental Opinion on Denial of Rehearing January 10, 1994]

      Jones, Hixson & Jones, by; Kenneth S. Hixson, for appellant.

      Matthews, Campbell & Rhoads, P.A., by: George R. Rhoads and David R. Matthews, for appellee.

       Hays and Brown, JJ., would grant rehearing.

   David Newbern, Justice.

This is an insurance contract case. The appellant, P.A.M. Transport, Inc. (PAM), entered a contract with the appellee, Arkansas Blue Cross and Blue Shield (BCBS), which provided that BCBS would administer the health care claims of PAM employees. BCBS was to adjust and then pay all claims submitted by PAM employees. BCBS would then bill PAM, monthly, for reimbursement of the claims plus an administrative fee. The agreement provided PAM’s annual liability for insurance claims would not exceed a “cap.” The cap was calculated using a formula based on the number of employees insured under the plan. BCBS adjusted and paid all claims, but PAM was to reimburse BCBS only up to the cap amount. Claims in excess of the cap amount were to be absorbed by BCBS. Within sixty days after the contract year, BCBS provided PAM with an accounting of insurance claims for that year. If the accounting showed that PAM’s monthly reimbursements to BCBS exceeded the cap for the year, BCBS would reimburse PAM that amount.

At the end of the 1988-89 contract year, a dispute arose as to how the cap was calculated. Officials at PAM believed payments to BCBS for the 1988-89 year had exceeded the cap by several thousand dollars. By BCBS’s calculations, these payments had not reached the cap amount. The dispute extended into the 1989-90 contract year. Toward the end of the 1989-90 contract year, PAM believed it was being overbilled again. It decided that when its monthly payments approached the cap, as PAM calculated the cap, PAM would cease reimbursing BCBS. As a result of that action, PAM’s account became delinquent according to BCBS, and in May, 1990, BCBS suspended payment on claims submitted by PAM employees.

PAM sued BCBS for breach of contract and deceit. PAM claimed BCBS had miscalculated the cap for contract years 1988-89 and 1989-90 and thus PAM was entitled to a reimbursement for each of those contract years. Additionally, PAM claimed BCBS had induced PAM to enter the contracts by misrepresenting the manner in which BCBS intended to calculate the liability cap. BCBS counterclaimed for the unpaid invoices in contract year 1989-90.

The jury found that BCBS had indeed overbilled PAM $201,099.50 for the contract year 1988-89. It also determined BCBS liable for deceit damages of $400,000. For the 1989-90 contract year, the jury returned a $94,271.24 verdict in favor of PAM, and a $282,187.98 verdict in favor of BCBS. The Trial Court set aside the deceit verdict, stating there was not substantial evidence to support it and that it was inconsistent with the contract awards in favor of PAM. Judgment was entered on the other two verdict awards favoring PAM and the one favoring BCBS.

PAM has raised five points of appeal, and BCBS argues six points in its cross-appeal. We find no reversible error.

PAM and BCBS signed a new contract each contract year beginning in late May or early June. Each contract contained a clause describing the cap. The clauses were identical with the exception of changes in the cap amount and number of PAM employees to be insured. For example, the clause in the contract entered June 1, 1988, for the 1988-1989 year stated:

MAXIMUM LIABILITY: The maximum liability is $1,208,457.00 based on 901 certificates. If actual exposure exceeds these amounts, the maximum liability will be adjusted at the end of the policy year using $111.77 per certificate. A settlement will be computed sixty days after the end of the policy year. In the event that paid claims plus administrative expenses exceed the maximum liability, carrier is liable for the excess.

Each of PAM’s employees was issued an insurance certificate by BCBS. The number of certificates stated (901) was BCBS’s projection of the number of PAM employees through the contract year. The maximum liability cap ($1,208,457.00) was the product of the number of certificates times the cost figure contained in the clause ($111.77) and the number of months the contract was in effect (12).

The dispute that arose between PAM and BCBS concerned the number of certificates used in calculating the cap. It was PAM’s understanding that the number of certificates used to calculate the cap was to be based on the actual number of PAM employees. Based on that interpretation, the liability cap could fluctuate up or down from the cap stated in the liability clause. According to BCBS’s interpretation, the liability cap was calculated based on the minimum number of certificates that was found in the liability clause. According to BCBS, the cap could only adjust upward.

PAM presented evidence that BCBS representatives stated the liability cap would fluctuate up or down. PAM based its calculation of each annual cap on the understanding it claimed to have been induced by those representations.

BCBS rebutted this evidence with testimony of its representatives that those comments were made while PAM was in an “expansion growth' mode.” The BCBS representatives believed, at the time the statements were made, the actual number of PAM employees during a contract year would always be higher than the projected figure that was placed in the maximum liability clause. In that context the liability cap would fluctuate up and down between contract years. As it turned out PAM’s number of employees decreased during the years it contracted with BCBS. That is evident from the contracts in dispute. In 1988-89, the projected number of certificates used in the liability cap clause was 901, and the same figure for the 1989-90 clause was 783.

Appeal

1. The deceit verdict

PAM introduced testimony of its employees and some BCBS employees to the effect that, during negotiation of the agreement, BCBS personnel had stated that PAM’s liability in any given contract year could decrease below the “maximum liability” stated in the contract if the number of PAM employees decreased. PAM contended that was a misrepresentation made to induce it to enter the agreement, and it suffered damages accordingly. In its first two points of appeal, PAM argues the jury’s award of damages for deceit was not inconsistent with its recovery on the contract as it was injured in excess of its contract recovery, and thus it was improper to have set the verdict aside.

In each of the breach of contract verdicts favoring PAM, the jury awarded damages to PAM calculating the liability cap for each contract based on PAM’s interpretation of the maximum liability clause. The Trial Court set aside the deceit verdict, holding that, as the jury had determined that the contract was as PAM had interpreted it to be, there was no misrepresentation. Although it is somewhat inverted, we find no fault with the Trial Court’s logic, but in addition we choose to state a different rationale for our agreement with the result reached.

One of the elements of deceit is that the misrepresentation alleged must typically be a misrepresentation of fact. Delta School of Commerce, Inc. v. Wood, 298 Ark. 195, 766 S.W.2d 424 (1989). In the context of negotiating a contract, a misrepresentation sufficient to form the basis of a deceit action may be made by one prospective party to another and must relate to a past event, or a present circumstance, but not a future event. “An assertion limited to a future event may be a promise that imposes liability for breach of contract or a mere prediction that does not, but it is not a misrepresentation as to that event.” 1 E. Allen Farnsworth, Farnsworth on Contracts §4.11 (1990); see also, Delta School of Commerce, supra (citing Anthony v. First National Bank of Magnolia, 244 Ark. 1015, 431 S.W.2d 267 (1968); Lawrence v. Mahoney, 145 Ark. 310, 225 S.W. 340 (1920); Harriage v. Daley, 121 Ark. 33, 180 S.W. 333 (1915); and Conoway v. Newman, 91 Ark. 324, 121 S.W. 353 (1909)).

The representations in question illustrated BCBS’s interpretation of the liability cap. Since these representations were made before any contract was signed, they could not have represented a past event or present circumstance. These representations could only have alluded to BCBS’s future performance of contracts to be executed in the future. In these circumstances, the Trial Court was correct to set aside the deceit verdict.

2. Inconsistent verdicts

PAM contends the breach of contract verdict favoring BCBS awarded by the jury is inconsistent with the ones favoring PAM. In its first breach of contract verdict, the jury awarded PAM $201,099.50 for BCBS’s breach of the 1988-89 contract. The second breach of contract verdict is divided into two portions. In the first portion, the jury awarded PAM $94,271.24 for BCBS’s breach of the 1989-90 contract; in the second portion the jury awarded BCBS $282,187.98 for PAM’s breach of the 1989-90 contract. PAM contends it was impossible for the jury to return the award to BCBS based on the calculations used to determine the damages awarded to PAM. To understand PAM’s argument requires careful analysis of each verdict.

At trial PAM presented calculations to show it was over-billed for the 1988-89 contract. The 1988-89 contract contained a liability cap of $1,208,457.00. According to PAM’s interpretation of the contract, its maximum liability was $1,079,027.58, based on the actual number of PAM employees. PAM’s monthly payments to BCBS for 1988-89 totalled $1,208,457.24. Using PAM’s liability cap, PAM claimed it was overbilled $129,429.66. PAM was also entitled to a “large claim rebate” from BCBS in the amount of $71,669.84. This rebate was based on an agreement between BCBS and PAM in which BCBS insured PAM for any claims from a single employee that exceeded $50,000 during the contract year. All claims paid by BCBS were forwarded to PAM in its monthly invoices. At the end of the contract year, these large claims were calculated and returned to PAM in the form of a rebate. In sum, PAM claimed BCBS owed it $201,099.50. That was the exact amount of the jury’s first verdict.

The verdict for the 1989-90 contract was somewhat different in that PAM owed BCBS for unpaid invoices. Throughout their dispute, PAM admitted it did not pay several invoices at the end of its 1989-90 contract with BCBS. PAM introduced evidence to show that it owed BCBS $139,683.08. This figure was calculated using the same process PAM used in determining the damages it was awarded in the first verdict.

The 1989-90 contract contained a maximum liability figure of $1,329,910.00. According to PAM, the actual maximum liability for 1989-90 was $1,161,477.24. PAM’s payments to BCBS for that year totalled $1,021,794.16. The difference between the latter figures represents the $139,683.08 that PAM contends it owed BCBS. However PAM also presented evidence that it was entitled to a $233,954.32 “large claim rebate” from BCBS. Deducting the amount PAM owed BCBS from the rebate left a net due to PAM of $94,271.24. That was the exact amount of the first portion of the jury’s second verdict.

BCBS presented evidence that PAM’s unpaid invoices for 1989-90 totalled $282,187.98. That included the $233,954.32 rebate PAM was entitled to. The figure was based on BCBS’s interpretation of the contract which set PAM’s liability for the 1989-90 contract year at $1,329,910.00. The second portion of the jury’s second verdict awarded BCBS the $282,187.98 it claimed it was due.

PAM did not object to the verdict before the jury was discharged but filed a post-trial motion to modify the verdict. The Trial Judge denied the motion. PAM argues that the jury obviously agreed with the PAM position on how the contract was to be interpreted, and thus'for it to have awarded the $282,187.98 on the basis of the contrary BCBS interpretation was inconsistent and should be reversed and remanded to the Trial Court.

PAM also alleges BCBS miscalculated its damages. PAM claims that the $282,187.98 sought by BCBS represents BCBS’s unpaid invoices, together with interest and late penalties, without taking into account any liability cap. That contention is incorrect. A review of BCBS’s invoices shows that BCBS billed PAM each month subject to a monthly liability cap, which was 1/12 of the liability cap stated in the contract.

By returning both portions of its second breach of contract verdict, the jury in essence endorsed each party’s theory with respect to how the liability cap was to be calculated. In overruling PAM’s post-trial motion, the Trial Court stated the jury apparently intended to do so. If that is so, the verdicts were inconsistent.

The time to object to an irregularity or inconsistency in a verdict is prior to the discharge of the jury. Wal-Mart Stores, Inc. v. Kelton, 305 Ark. 173, 806 S.W.2d 373 (1991); Center v. Johnson, 295 Ark. 522, 750 S.W.2d 396 (1988). The purpose of this rule is to allow the Trial Court to resubmit an inconsistent verdict to the jury and attempt to correct discrepancies.

For its proposition that the Trial Court erred in overruling its post-trial motion, PAM cites Traylor v. Huntsman & Allis Chalmers, 253 Ark. 704, 488 S.W.2d 30 (1972). In that case, the Trial Court did render a judgment different from the jury verdict, and we held it was proper, stating:

When the jury’s intention is obvious and manifest and is incorrectly expressed, under a mistake of law and not of fact, it is proper for the court to amend the verdict in order that it conforms to the jury’s intention. In other words, when the jury’s intention can be ascertained with certainty, the trial court is accorded the power and authority to modify the verdict. Trailmobile v. Robinson, 227 Ark. 915, 302 S.W.2d 786 (1957); Neal v. Peevey, 39 Ark. 337 (1882).

If we were to extend the Traylor case here, we would hold that, in these circumstances, it was error for the Trial Court not to have disregarded a part of the jury’s verdict. We would have to do so on the conclusion that the Trial Court should have been aware of the jury’s “obvious and manifest” intention.

It is possible to conclude that the jury intended to use PAM’s interpretation of the liability cap. That could be deduced from the two verdicts awarding PAM damages based on PAM’s interpretation. Yet it is clear, from the inconsistent verdicts, that the evidence each side presented was complex and confusing. The Trial Court concluded that the evidence supported the verdicts. That conclusion did nothing to resolve the inconsistency; however, it highlighted the complexity of the evidence presented to the jury and the Trial Court’s inability to say what the “obvious and manifest” intention of the jury was. The problem is one which could have, and should have, been resolved by the jury. In these circumstances, the case should not be retried, and we will apply our rule that an objection should have been made while the jury remained available to cure the inconsistency.

3. Partial summary judgment

PAM claimed that under the contract BCBS was responsible for paying claims in the year they were generated and that, in determining PAM’s “maximum liability,” PAM should have received credit for payments made by BCBS in subsequent contract years. For example, if PAM’s liability for 1988-89 had been $1,000,000, and $1,200,000 in insurance claims were incurred by PAM employees in that year, BCBS would be liable to pay the excess $200,000 despite the fact that the claims might not have been processed or actually paid by BCBS until the 1989-90 contract year.

BCBS was granted a partial summary judgment to the effect the liability cap for each year was based on claims that had been paid by BCBS for that year, rather than the claims incurred by PAM employees for that year. The holding was based solely on the contract. The judge found that the contracts, with respect to this point, were unambiguous.

The ruling was correct. All of the agreements of the parties referred to “paid” claims. No references were made to “incurred claims” in the context of assignment of liability. There was no ambiguity with respect to that portion of the contract.

4. Attorney’s fees

PAM contends it is entitled to attorneys’ fees pursuant to Ark. Code Ann. § 23-79-208(a) and (b) (Repl. 1992). The Statute provides, in part:

(a) In all cases where loss occurs and the [insurer] . . . liable therefor shall fail to pay the losses within the time specified in the policy, after demand made therefor, the person, firm, corporation, or association shall be liable to pay the holder of the policy or his assigns, in addition to the amount of the loss, twelve percent (12%) damages upon the amount of loss, together with all reasonable attorneys’ fees for the prosecution and collection of the loss.

The Statute does not apply to this case. The contract between PAM and BCBS was a contract to provide insurance coverage to PAM employees, not to PAM. PAM employees were the policy holders of whatever policies existed under this agreement. Moreover, the basis of PAM’s lawsuit against BCBS was breach of contract because BCBS overcharged PAM for insurance claims paid by BCBS.

Under Ark. Code Ann. § 16-22-308 (Supp. 1993), the prevailing party, in a breach of contract action, may request reasonable attorneys’ fees and a Trial Court may award fees at its discretion. PAM alternatively requested attorneys’ fees pursuant to the Statute. The Trial Court denied this request. We cannot say that the Trial Court abused its discretion.

Cross-appeal

1. Parol evidence

BCBS has two parol evidence arguments. First, it contends the Trial Court erroneously allowed parol evidence to be introduced by PAM, despite having found the contract unambiguous, and gave an instruction permitting the jury to interpret the contract despite that finding. Second, BCBS argues the Trial Court erred in refusing to admit parol evidence proffered by BCBS to interpret the contract.

As noted above, the Trial Court found the contract was unambiguous only as to one particular aspect, that is, the question whether PAM’s annual liability was determined based on claims incurred or claims paid by BCBS for that contract year. The parol evidence introduced by PAM went to interpretation of the clause containing the “maximum liability” language.

That language is ambiguous. Parol evidence may be introduced to assist the fact finder to determine the intent of parties to a contract. Minerva Enterprises, Inc. v. Bituminous Casualty Corp., 312 Ark. 128, 851 S.W.2d 403 (1993); Isbell v. Ed Ball Construction Co., 310 Ark. 81, 833 S.W.2d 370 (1992); First National Bank of Crossett v. Griffin, 310 Ark. 164, 832 S.W.2d 816 (1992), cert. denied, 122 L.E.2d 673 (1993). If PAM’s liability was not. to dip below the figure named as the “maximum,” then the use of that term made the clause questionable. If the term “minimum liability” had been used it would have been clear that PAM was obligated to pay no less than the figure stated in the contract. We note that in the testimony of Steven Daugherty who claimed to have developed the language used, and whose testimony is discussed below, he referred to a “minimum maximum liability” clause.

In both contracts, the fact that the “maximum liability” was stated as a dollar amount, combined with the fact that the amount was calculated based on a number of certificates issued times a dollar figure created doubt as to the parties’ intent. It was proper to admit parol evidence with respect to that issue. That is especially true as the evidence also went to proof of the deceit claim which was before the jury as well.

. The Trial Court’s refusal to admit the parol evidence offered by BCBS is more troublesome. In its case in chief, BCBS offered testimony of Mr. Daugherty, who was manager of BCBS’s actuarial division from 1986-1990. Mr. Daugherty was asked whether the “maximum liability” clause was standard in all BCBS insurance contracts of the “cost plus” type being considered here. PAM objected on the basis of relevancy, and the objection was sustained. That was followed by a proffer to the effect that Mr. Daugherty would have testified the clause is the same as is used in the insurance industry standard form.

Whether evidence is relevant is a discretionary determination made by a trial judge. Rich Mountain Elec. Coop. v. Revels, 311 Ark. 1, 841 S.W.2d 151 (1992). The relevancy of the proffered testimony of Mr. Daugherty is questionable. In the supplemental abstract of BCBS, it appears that Mr. Daugherty testified he developed the language in the “maximum liability” clause in BCBS’s contracts with PAM. Although he was allowed to allude to the fact that BCBS has some 50 to 60 such contracts operating in Arkansas, PAM’s abstract shows that he was not allowed to testify about the contract clause he developed being included in many contracts other than PAM’s.

Arkansas R. Evid. 406 was not mentioned to the Trial Court as a basis for admitting the testimony of Mr. Daugherty, but the argument on appeal is that this evidence should have been admitted to establish “routine practice of an organization” as permitted by the Rule.

While the clause may or may not be used routinely, there is no showing that Mr. Daugherty would have testified that in every contract in which it is included it is interpreted the same way. We cannot say the Trial Court abused its discretion in excluding the proffered testimony.

BCBS also offered testimony by Eula Douglas who would, according to the proffer of her testimony as abstracted, have said she has a similar contract with BCBS for her small business and that, while her number of employees varies, her “maximum liability” remains the same. Nothing was proffered to show that her number of certificates dipped below the number stated in her contract as the basis of the calculation of the “maximum liability.” The proffer was insufficient to establish clear relevancy of Ms. Douglas’s testimony, and we cannot say the Trial Court erred in rejecting it.

2. Fiduciary relationship instructions

BCBS argues the Trial Court erred in giving two instructions which would permit the jury to conclude that BCBS stood in a fiduciary relationship with PAM. In view of letters introduced into evidence in which BCBS clearly referred to its role as a fiduciary, we find no error.

3. Form letter evidence

PAM offered evidence that its employees received objectionable termination of coverage notices from BCBS. BCBS offered into evidence a form letter which it typically sent to relay such a notice. It was rejected by the Trial Court upon an irrelevancy objection by PAM.

During the trial, BCBS’s attorney attempted to lay the foundation for the introduction of this letter with the testimony of Steve Daugherty. Mr. Daugherty was unable to say that the letter being offered in evidence was one sent to PAM employees. He testified the letter was exemplary of one sent to persons whose claims were being suspended. He testified, on voir dire, that he was not sure the form letter was the letter which was sent to PAM’s employees. The Trial Court ruled that this foundation was insufficient. Again, we cannot hold that the Trial Court abused its discretion in rejecting this evidence.

4. Attorney’s fees for BCBS

BCBS does not contend it was entitled to an attorney’s fee or that the Trial Court abused its discretion in refusing to award the fees it requested pursuant to Ark. Code Ann. § 16-22-308 (Supp. 1993). The only argument presented is that it would be unfair if PAM were given an attorney ’s fee award on its breach of contract action.

In view of the fact that no such fee is being awarded to PAM, we need not discuss the point further.

Affirmed on appeal and on cross-appeal.

Hays and Brown, JJ., concur in part and dissent in part.

Robert L. Brown, Justice,

concurring in part, dissenting in part. The net result of the majority’s decision is to affirm post-trial relief in favor of BCBS in the amount of $400,000 and to deny PAM similar relief in the amount of $282,187.98, even though neither party objected to the verdicts while the jury was empaneled. I cannot rationalize this discrepancy in treatment under these facts.

The verdicts and awards for the respective recipients by year were:

1988/89 PAM Breach of Contract $ 201,099.50

1989/90 PAM Breach of Contract $ 94,271.24

1989/90 BCBS Breach of Contract $ 282,187.98

PAM Tort of Deceit $ 400,000.00 (no year specified)

. In sum, the jury awarded PAM a total recovery of $694,370.74 and BCBS $282,187.98. PAM’s net award, therefore, was $412,182.76.

Ten days after the verdicts, BCBS filed a motion stating that PAM could not recover in both contract and tort. Accordingly, BCBS called for PAM to elect between its tort award and its recovery in contract. Ten days following BCBS’s motion to elect, PAM filed a motion to modify BCBS’s award for the 1989/90 contract year. PAM’s argument was that this award could not be reconciled with awarding damages to PAM for breach of contract for the two years in controversy.

In its judgment, the trial court found as follows regarding the two post-trial motions:

3. That the verdicts for the Plaintiff on breach of contract and on the tort of deceit are inconsistent because in order for the Plaintiff to recover on breach of contract, the maximum liability provision of the contract had to be interpreted as contended by the Plaintiff, and if the maximum liability provision of the contract were interpreted as contended by the Plaintiff, then the Plaintiff was not fraudulently induced to enter into a contract different than what it understood the contract to be. Since the Plaintiff has affirmed the contract by receiving benefits under it and being awarded damages for the breach of it, the recovery of additional damages for the tort of deceit is inconsistent therewith; so the Plaintiff’s verdict for the tort of deceit should be set aside.
4. That the verdict in favor of the Defendant for breach of contract is consistent with the evidence because even the Plaintiff admitted it breached the contract, and the Defendant introduced evidence as to the amount of its damages for breach of contract, which amount was the amount awarded by the jury; so the verdict in favor of the Defendant for breach of contract should not be set aside. (Emphasis added.)

Hence, the court found that the verdicts in PAM’s favor for breach of contract and tort were “inconsistent,” though no motion to that effect had been made by BCBS before the jury was discharged. The court went on to say that BCBS’s verdict for 1989/90 in the amount of $282,187.98 for breach of contract was “consistent” with the evidence, and it allowed that verdict to stand.

The majority opinion discards the circuit court’s analysis and findings, though it does affirm the result reached by the court. First, it agrees with the court’s conclusion that recovery in both tort and contract by PAM was double recovery, or inconsistent as the circuit court put it, but in doing so, the majority fails to address BCBS’s failure to object before the jury was dismissed. The opinion then proceeds to reverse the trial court’s finding that the 1989/90 recoveries in favor of BCBS and PAM were consistent. The. majority finds, on the contrary, that these verdicts were inconsistent and holds that PAM is procedurally barred from raising the inconsistency on appeal because it failed to object to the inconsistent verdicts while the jury was still empaneled. The effect of the majority’s decision is to reduce PAM’s total award from $412,182.76 to $12,182.76.

Clearly, the majority’s disparate analysis of the two post-trial motions cannot be meshed or made compatible. Either objections asserting inconsistent verdicts must be made before the jury is dismissed or not. PAM should not be penalized for what BCBS also failed to do. In short, both parties must be treated the same. Here, it is obvious that PAM was content with the verdicts which netted it $412,182.76 until BCBS called them into question. At the very least, after BCBS sought to unravel the verdicts, PAM should be accorded the right to raise its own theory of inconsistency.

I would reverse the trial court’s decision on the dual contract awards for 1989/90, and strike the award of $282,187.98 in favor of BCBS. Admittedly, our decisions hold that an objection to inconsistent verdicts must be made before the jury is dismissed. See, e.g., Wal-Mart Stores, Inc. v. Kelton, 305 Ark. 173, 806 S.W.2d 373 (1991). Ordinarily that is true. But in a case of this complexity involving several theories of recovery for multiple years and a counterclaim to boot it is unduly harsh and somewhat unrealistic to hold the jury at bay and require the lawyers to sift through the various verdicts searching for an inconsistency before the jury is dismissed. And, again, PAM was undoubtedly satisfied with the verdicts until BCBS called them into question and should not be sanctioned for a failure to object under such circumstances.

It is a dangerous business to tinker with jury verdicts. But when one enters into such uncertain territory, it cannot be for the benefit of only one party, particularly when both parties have advanced along the same course procedurally.

While agreeing with the results reached on the other issues, I respectfully dissent on this point.

Hays, J., joins.

Kenneth S. Hixon, for appellant.

Matthews, Cambell & Rhoads, P.A., by: George R. Rhoads and David R. Matthews, for appellee.

SUPPLEMENTAL OPINION ON DENIAL OF REHEARING JANUARY 10, 1994

Petition for Rehearing; denied.

Per Curiam.

The appellant in this case, P.A.M. Trucking (PAM), requests a rehearing based on several alleged mistakes of fact and law in our original opinion. We deny this petition, but write this supplement to clarify a portion of our opinion.

Our opinion contains the following paragraph:

PAM also alleges BCBS [Blue Cross Blue Shield] miscalculated its damages. PAM claims that the $282,187.98 sought by BCBS represents BCBS’s unpaid invoices, together with interest and late penalties, without taking into consideration any liability cap. That contention is incorrect. A review of BCBS’s invoices shows that BCBS billed PAM each month subject to a monthly liability cap, which was 1/12 of the liability cap stated in the contract.

This paragraph is technically incorrect. BCBS paid insurance claims of PAM’s employees, and billed PAM for these claims in monthly invoices. To levelize PAM’s payments, in any month the invoice exceeded 1/12 of the contracted liability cap, BCBS deducted the excess from the invoice. This deduction was then carried over to the next month in which PAM’s invoice was less than 1/12 of the liability cap. The effect of this procedure was to keep PAM’s monthly insurance bill below a specified amount, and to attempt to keep PAM’s annual payments as close to the contracted liability cap, as BCBS calculated it, as possible. Our opinion incorrectly implies that in any month PAM’s invoice exceeded 1/12 of the liability cap, BCBS absorbed the excess.

This correction does not disturb the holding in our opinion. BCBS received a jury verdict based on the records they presented in court. This award was inconsistent with the jury verdicts returned in PAM’s favor. PAM failed to object to this award until after the jury was dismissed. As we held in the opinion, the proper time to object to a jury verdict is while the jury is still available to cure an inconsistency.

Hays and Brown, JJ., would grant rehearing.


author: Tom Glaze, Justice.

text:
    Douglas SANDERS v. Billy PUTMAN
    93-140
    866 S.W.2d 827
    Supreme Court of Arkansas
    Opinion delivered December 6, 1993

      Walters Law Firm, for appellant.

      Robert E. Irwin, for appellee.
   Tom Glaze, Justice.

Appellant Douglas Sanders filed suit in Yell County Municipal Court against Appellee Billy Putman, and alleged Putman, a tenant, damaged Sanders’ rental house trailer. The municipal court awarded judgment against Putman in the amount of $2,429.36, plus costs and interest.

Sanders subsequently garnished Danville State Bank and Georgia Putman, and as a result, found the Bank held a certificate of deposit (CD) in the name of Georgia Putman, as trustee for Billy Putman. The municipal court held a hearing and testimony showed the CD in question had been purchased by proceeds payable to Billy under his deceased-father’s life insurance policy. The court initially ruled that these life insurance proceeds (CD) were exempt from garnishment under the terms set out in Ark. Code Ann. § 16-66-209 (1987). However, the court later changed its holding and held Sanders was entitled to seize those proceeds because § 16-66-209 had been declared unconstitutional by a United States Bankruptcy Court. See In Re Hudspeth, 92 B.R. 827 (Bkrtcy, W.D. Ark. 1988); see also In Re Holt, 894 F.2d 1005 (8th Cir. 1990); Robert Laurence, In Re Holt and the Re-making of Arkansas Exemption Law: Commentary after the Rout, 43 Ark. L. Rev. 235 (1990).

Putman appealed the municipal court’s final decision to the Yell County Circuit Court which reversed the municipal court judgment. In reversing, the court found the life insurance proceeds in issue had been placed in trust and were subject to spendthrift provisions which protected them against garnishment. In reaching its decision, the circuit court did not rely upon § 16-66-209; nor did it rule on that statute’s constitutionality. Sanders brings this appeal, and argues the circuit court erred in finding the proceeds Sanders garnished were a part of a spendthrift trust.

Before addressing Sanders’ point for reversal, we first consider Putman’s argument that the municipal court never had subject matter jurisdiction to award Sanders a judgment in the first place because Sanders’ action involved damage to real estate. See Ark. Const. amend. 64; Ark. Code Ann. §§ 16-17-206(a) and 16-17-704 (1987); Miles v. Southern, 297 Ark. 274, 760 S.W.2d 868 (1988). Putman cites Miles for the proposition that if the municipal court had no jurisdiction of Sanders’ cause, the Yell County Circuit Court acquired none on appeal.

Putman’s reliance on the foregoing constitutional, statutory and case law is misplaced because the circuit court here found that the damages sought and obtained by Sanders resulted from a breach of contract, not from damage to real estate. Putman, on the other hand, claimed Sanders’ loss involved damages Putman administered to Sanders’ house trailer which was a fixture since it had been assessed as real estate. The circuit court determined that, while Putnam showed Sanders assessed the trailer as real estate, Putman’s proof fell short of establishing Sanders’ house trailer to be a fixture or realty because no evidence was produced showing how the trailer was attached to the ground or whether the trailer’s removal would cause damage to the real estate.

Whether personal property becomes a fixture by annexation to the land depends upon the annexer’s manifested intention, which can be shown by material considerations such as the character of the fixture as related to the use to which the land is being put and the manner in which the property is attached to the land. Kearbey v. Douglas, 215 Ark. 523, 221 S.W.2d 426 (1949); see also Farmers Mutual Ins. Co. v. Denniston, 231 Ark. 768, 376 S.W.2d 252 (1964) (where court upheld trial court’s finding that a house trailer was personal property and had not become a fixture). Here, we agree with the court’s conclusion that Putman’s assessment evidence was insufficient to show Sanders intended his trailer to be a fixture. Putman simply failed to present any evidence as to whether Sanders’ house trailer was attached to the land or whether Sanders in tented the trailer to remain on the premises. Farmers Mutual Ins. Co., 231 Ark. 768, 376 S.W.2d 252.

We also agree with Sanders’ contention on appeal that Putman failed to prove that his CD funds were part of a spendthrift trust. A spendthrift trust is one created to provide support for a designated beneficiary and to guard against his improvidence. Pool, Trustee v. Cross County Bank, 199 Ark. 144, 133 S.W.2d 19 (1939). It is a well-established principle that a spendthrift trust can only be created by an express restraint on alienation. Miller, Trustee v. Maryland Casualty Co., 207 Ark. 312, 180 S.W.2d 581 (1944). This court has also adopted the principle that a mere trusteeship, even though it is for the protection of the beneficiaries, ought not, as a matter of taste, if for no other reason, to be called a spendthrift trust. Pool, 199 Ark. 144, 133 S.W.2d 19.

The record fails to reflect the introduction into evidence of any will with a trust provision or any trust agreement whatever. Nor was the insurance policy in issue offered as evidence by either party. The only indication that a trust existed was a check in the amount of $20,000 payable by an insurance company to Billy Putman’s trustee. From this one piece of evidence, the trial judge found that these insurance proceeds or CD constituted spendthrift trust funds which were protected from creditors. The circuit court’s finding was based upon' pure speculation (or at least on somethng outside the record), and in this respect, we must hold his finding was clearly erroneous. See Rich Mountain Electric Cooperative, Inc. v. Revels, 311 Ark. 1, 841 S.W.2d 151 (1992).

Having found the circuit court erred, we must reverse and remand.

       The statute provides that moneys paid or payable to any resident of this state as the insured or beneficiary designated under any insurance policy or policies providing for the payment of life, sick, accident, or disability benefits shall be exempt from liability or seizure under judicial process of any court and shall not be subjected to the payment of any debt by contract or otherwise by any writ, order, judgment, or decree of any court. However, the validity of any sale, assignment, mortgage, pledge, or hypothecation of any policy of insurance, or, if any avails, proceeds, or benefits thereof, shall in no way be affected by the provisions of this section.

       The record reflects different municipal court judges and their respective orders were involved, but the final judgment appealed from was in Sanders’ favor, permitting him to garnish the proceeds.