author: Jack Holt, Jr., Chief Justice. Tom Glaze, Justice,

text:
    UNION NATIONAL BANK, Little Rock, AR; and Financial Guaranty Insurance Company v. Katherine BARNHART, for Herself and all Others Similarly Situated
    90-291
    823 S.W.2d 878
    Supreme Court of Arkansas
    Opinion delivered February 3, 1992

      Cravath, Swaine & Moore, by: Robert S. Rifkind and Brian S. Fraser, for appellant Financial Guaranty Insurance Company.

      Friday, Eldredge & Clark, by: Larry W. Burks, Elizabeth J. Robben, and Jeffrey H. Moore, for appellants Union National Bank and Financial Guaranty Insurance Company.

      E. Kent Hirsch, P.A., by: E. Kent Hirsch; and Pearson, Evans & Chadwick, by: Marshall Dale Evans, for appellee.
   Jack Holt, Jr., Chief Justice.

This appeal involves class certification. The appellants, Union National Bank (Union Bank) and Financial Guaranty Insurance Company (Financial Guaranty), oppose the Washington County Chancery Court’s certification of a class consisting of “the taxpayers and sanitation ratepayers of the City of Fayetteville, Arkansas.” In addition, the appellants contest the form and content of the notice sent to the class. We affirm.

In December 1985, the Northwest Arkansas Resource Recovery Authority (Authority) issued revenue bonds to finance construction of an incinerator facility to dispose of the solid waste of the cities of Fayetteville and West Fork, as well as Washington County. The bonds were later remarketed to the public and, at that time, Fayetteville entered into a contract with the Authority in which it agreed to unconditionally guarantee the debts of the Authority, which included debt service on the bonds. Union Bank is the trustee for the Authority’s bonds and Financial Guaranty is the insurer of the bonds.

The incinerator project was subsequently terminated for lack of a location and cost overruns by a non-binding referendum vote of the Fayetteville electorate.

On August 15, 1989, Fayetteville city directors passed Ordinance 3444, which raised sanitation rates for the purpose of paying the Authority’s debts. Shortly thereafter, suit was filed on behalf of the taxpayers and sanitation ratepayers of Fayetteville alleging the contract between the city and the Authority constituted an “illegal exaction” in violation of Ark. Const, art. 16, § 13. The plaintiffs requested that the agreement be declared null and void, that the rates exacted under Ordinance 3444 be refunded, and that the city be permanently enjoined from collecting any monies under the ordinance.

Following a lengthy bout of disagreement over a suitable representative for the class action, appellee Katherine Barnhart was certified as class representative, in accordance with ARCP Rule 23, in an order issued August 20, 1990. On September 10, 1990, the chancellor ordered notice by publication, in two Washington County newspapers, to the absent class members.

Union Bank and Financial Guaranty now appeal, basing their arguments for reversal on the requirements of Rule 23. They contend 1) Ms. Barnhart’s representation of the class is not fair to all parties; 2) Ms. Barnhart is not an adequate representative of the class, but a mere instrumentality of counsel; 3) Ms.Barnhart is unqualified to serve as class representative; and 4) the notice prescribed by the chancery court is inadequate. None of these arguments have merit.

Initially, we note the appellees argue that since Fayetteville’s contract is being challenged as an illegal exaction under Art. 16 § 13, a provision we have held to be self-executing, the taxpayers’ rights to bring such a suit cannot be limited by the requirements of Rule 23. The appellees’ complaint, however, was brought as a Rule 23 class action suit, and the trial court consistently treated it as such. Since this issue was not developed at the trial level, we decline to address it.

I. FAIR AND ADEQUATE REPRESENTATION

Because they are interrelated, points one and two of the appellants’ argument will be combined for purposes of our discussion.

We agree with appellants’ initial assertion that, in class action suits, “the greatest care is required to insure fairness both to the absent members of the class and to the defendants.” We disagree, however, with their contention that this basic principle was not observed here.

The appellants first focus their objections on the process by which Ms. Barnhart assumed her role as class representative. It is true that the litigation concerning the incinerator project is marked by a long history, involving a number of different plaintiffs. Two successive actions were initially filed by Mr. Gordon Cummings, currently one of Ms. Barnhart’s attorneys, which were later voluntarily dismissed. The present class action was first instituted by Mr. Joe Robson, who was later disqualified due to his position on the Washington County Quorum Court. Disagreement among plaintiff’s counsel arose over Mr. Robson’s successor, Mr. Roudabush, whose name was twice proposed and withdrawn before Ms. Barnhart agreed to assume the role of class representative. Appellants assert that the “only function of the successive plaintiffs in this litigation has been to serve as counsels’ ticket of admission to the courtroom.” They argue that the action has been propelled not by Ms. Barnhart, but by “a loose band of lawyers who want to be in court. . . .”

Appellants cite two violations of the Model Rules of Professional Conduct, one being the solicitation of a plaintiff by a lawyer for pecuniary gain, see Rule 7.3, and the other Rule 1.8(e), which governs an attorney’s provision of financial assistance to a client. The latter rule was cited in support of the appellants’ objection to an agreement between Mr. Roudabush and his attorneys, whereby it was agreed “the attorneys shall not call upon client for costs or expense of litigation.” (The appellants do not contend the agreement applies to Ms. Barnhart and, in fact, Ms. Barnhart testified at her deposition that she had paid one of her attorneys, Mr. Froelich, a retainer.)

Appellants further point to the fact that the class representatives have been described by opposing counsel as “nominees,” that Mr. Froelich’s attorney’s lien shows an entry labeled “search for class representative,” and that pleadings have been filed “on behalf’ of the plaintiffs’ lawyers. All of these facts, appellants argue, show that Ms. Barnhart is a mere “pawn in an action being maintained by counsel.”

First, we are not convinced that the evidence put forth by the appellants supports their assertion that Ms. Barnhart was actively recruited as part of her attorneys’ attempts to litigate for their own interests. Furthermore, absent more egregious conduct on the part of the class attorneys, we do not believe the rights of the plaintiffs should be prejudiced by denying them class status. See In re Nissan Motor Corp. Anti-trust Litigation, 22 Fed. R. Serv. 2d 63 (S.D. Fla. 1975). Arkansas has not specifically addressed the issue, but the few cases in other jurisdictions in which class action status was denied as the result of an attorney’s misconduct, also involved serious questions regarding the lawyer’s competence, or deficiencies in meeting the other requirements for a class action. See Effect of Breach of Ethics or Other Misconduct by Plaintiffs’ Attorney on Status of Class Action under Rule 23 of Federal Rules of Civil Procedure, 16 A.L.R. Fed. 883 (1973). When it otherwise appears that the representative plaintiff will “fairly and adequately protect the interests of the class,” allegations of attorney misconduct are more appropriately addressed to the state disciplinary committee. See Halverson v. Convenient Food Mart, Inc., 458 F.2d 927 (7th Cir. 1972); Kallen v. Nexus, Corp., 16 Fed. R. Serv. 2d 1016 (N.D. Ill. 1972).

Ms. Barnhart’s own testimony established that she was interested in joining the lawsuit before she was ever “proposed” as its class representative and that she voluntarily agreed to accept this role. Ms. Barnhart testified at her deposition, which was submitted to the chancellor for consideration, that she had informed Mr. Robson, the initial representative, “if there was anything I could do to help in his cause to let me know.” She later told him that she would be willing to be named as a plaintiff in the class action suit. Ms. Barnhart stated that several such conversations with Mr. Robson had occurred in the year prior to her joining the lawsuit. She further testified that she had made similar remarks to Mr. Froelich, commencing approximately eight months before her deposition and request for certification.

The chancellor is in the best position to assess the credibility of witnesses and where an issue turns heavily upon credibility, we will defer to the trial court. First Nat’l Bank v. Mercantile Bank, 304 Ark. 196, 801 S.W.2d 38 (1990). Most importantly, Rule 23(d) gives the court continuing jurisdiction to require additional terms and conditions in order to ensure that the class members are being fairly and adequately represented. The chancellor indicated his disposition towards this responsibility when he granted the appellants an extension of time to take Ms. Barnhart’s deposition before proceeding with the certification hearing.

We find no merit to the appellants’ argument that Ms. Barnhart’s representation violates Rule 23’s notions of fairness and adequacy.

II. QUALIFICATION

Appellants next attack Ms. Barnhart’s qualifications and ability to adequately represent the class.

The pertinent part of Rule 23, in effect at the time of the chancellor’s decision, provided as follows:

(a) Prerequisites to Class Action. Where the question is one of a common or general interest of many persons, or where the parties are numerous, and it is impracticable to bring all before the court within a reasonable time, one or more may sue or defend for the benefit of all.
(b) Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.

Subdivision (a) was subsequently amended to read:

(a) Prerequisites to Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

The amended version tracks the language of the federal rule. However, in analyzing cases under our old rule, we have held that “the spirit of the federal rule is to be found in our Rule 23 even if all the words are not,” and that “both- set out the same basic requirements for a class action.” First Nat’l Bank v. Mercantile Bank, 304 Ark. at 199, 801 S.W.2d at 39. We are satisfied that these requirements were met here, and note the longstanding rule that the trial judge has broad discretion in matters of class certification. International Union of Elec. Workers v. Hudson, 295 Ark. 107, 747 S.W.2d 81 (1988).

The appellants apparently do not contest the numerosity of the class or that there are common questions of law or fact. The “taxpayers and sanitation ratepayers of the city of Fayetteville” obviously comprise thousands, and all were subjected to an increase in sanitation rates due to Fayetteville’s agreement with the Authority and the passage of Ordinance 3444. Nor can it be argued that Ms. Barnhart’s claims, i.e., that the challenged contract constituted an illegal exaction and, therefore, the sanitation ratepayers are entitled to a refund of the illegally exacted monies, are not typical of the class she purports to represent. The appellants argue, however, that some tax and rate paying members of the community oppose the nullification of the city’s contract and, thus, Ms. Barnhart does not adequately represent their interests. This argument is meritless.

Appellants offered the affidavits and testimony of six Fayetteville residents who were of the opinion that a repudiation of the city’s contract with the Authority would be harmful to the community and who opposed the class action. Although case law supports the appellants’ contention that adequate representation may be jeopardized if a representative’s interests are in conflict with other class members, see Payne v. Travenol Labs, Inc., 673 F.2d 798 (5th Cir. 1982), six residents who disagree with what, otherwise, is a potentially legitimate claim, common to thousands of people, does not justify decertification.

It is further argued by the appellants that Ms. Barnhart is unqualified to represent the class because she has not followed the proceedings, did not comply with discovery requests and was not candid in her deposition, and, lastly, because she does not pay real property taxes she cannot represent the interests of the purported class members.

We summarily dismiss the latter three arguments as we do not find sufficient support for them in the record, nor do we find them disqualifying. Ms. Barnhart does pay sanitation rates and sales taxes and this is sufficient for purposes of her representation of the class at issue.

As for appellants’ assertion that Ms. Barnhart has not adequately followed the proceedings, the representative must simply “display some minimal level of interest in the action, familiarity with the practices challenged, and ability to assist in decision making as to the conduct of the litigation.” Gentry v. C & D Oil Co., 102 F.R.D. 490, 495 (W.D. Ark. 1984); see also First Nat’l Bank, supra. Ms. Barnhart’s answers to questions at her deposition, and at the hearing, indicate she has more than adequate knowledge and interest in the issues involved in the litigation. She has clearly articulated her understanding of the lawsuit and willingness to pursue the matter, and we have no hesitancy in holding that she is an adequate representative of the class she purports to represent.

III. NOTICE

Finally, the appellants contend the chancellor’s prescribed notice to the absent class members, which was by publication in two Washington County newspapers, was inadequate.

As an initial matter, Ms. Barnhart argues the chancellor’s separate order with regard to notice is not appealable and that the appellants have no standing to challenge notice.

We explained in Ford Motor Credit Co. v. Nesheim, 285 Ark. 253, 254, 686 S.W.2d 777, 777 (1985) (reversed on other grounds) (citing Eisen v. Carlisle & Jacquelin, 479 F.2d 1005 (2nd Cir. 1973)), that since “an order sustaining a class action allegation involves issues ‘fundamental to the further conduct of the case,’ . . . the order is also separable from the merits of the case. . .” and thus an order certifying a class action is reviewable on interlocutory appeal. Likewise, an order prescribing notice of the class action is “fundamental to the further conduct of the case,” and is appealable.

Appellants also have standing to challenge the notice since they are not asserting the due process rights of the class, see Ford Motor Credit Co. v. Rogers, 285 Ark. 64, 685 S.W.2d 145 (1985), but rights of their own. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 805 (1985). Without a determination of the issue, the appellants may be subject to multiple lawsuits from absent class members who claim they never received adequate notice.

As stated previously, an older version of Rule 23 was in effect at the time of the chancellor’s decision. Under that version, subsection (d) provided that the trial court “may order that notice be given, in such manner as it may direct. . . .” The amended version, which appellants urge us to apply, requires “in any action in which monetary relief is sought,” class members are to be given “the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable efforts.” The new rule goes on to specify what information is to be contained in the notice.

In our per curiam opinion, delivered December 10, 1990, we expressly stated the changes in the rule would become effective February 1, 1991. The established rule is that all statutes are to be construed as having only a prospective operation, unless the purpose and intention of the legislature to give them a retrospective effect is expressly declared or is necessarily implied from the language used. Gannett River States Pub. Co. v. Arkansas Jud. Disc. & Disabil. Comm’n, 304 Ark. 244, 801 S.W.2d 292 (1990). Court rules are to be applied in the same manner. Id.

Here, publication in two local newspapers, once a week for three weeks, notifying the absent class members of the pendency of the class action, the claims asserted, the remedies sought, and information as to the class representative, counsel, and time and location of the trial, was more than adequate under former Rule 23(d). Furthermore, the chancellor noted its continuing jurisdiction to correct any deficiencies as to notice during the pendency of the litigation.

The chancellor’s orders are affirmed.

Glaze, J., concurs.

Tom Glaze, Justice,

concurring. I concur. The majority does not decide the following question: Whether ARCP Rule 23, the class action rule, is applicable in an illegal exaction suit. This court in the City of Little Rock v. Cash, 277 Ark. 494, 644 S.W.2d 229 (1982), answered this question in the affirmative. In a proper case, we should review that part of the holding in Cash, and in my view, reverse it. However, because this issue was not fully developed at trial, I agree with the majority’s reluctance to decide this important issue in this appeal.

Here, the appellee brought this case as a Rule 23 class action suit. On appeal, however, she argues forcefully that, because this is an illegal exaction suit, all the requirements of Rule 23 need not be met. She points out that Ark. Const. art. 16, § 13, the state’s illegal exaction provision, is self-executing and imposes no terms or conditions upon a citizen to bring it. In Price v. Edmonds, 231 Ark. 332, 330 S.W.2d 82 (1959), this court held one need only show he is a citizen, property owner, taxpayer, rate payer or consumer to maintain an exaction suit. Such illegal exaction cases have been filed for decades prior to the promulgation of Rule 23 or its earlier comparable statute without requiring more than those matters stated in Price. Nor had this court recognized Rule 23’s application to illegal exaction suits until its 1982 ruling in Cash.

Without unduly lengthening this concurrence on a point not decided, I suggest that the application of Rule 23 to illegal exaction suits makes little sense except that the notice requirement afforded under Rule 23 does assure notice to all taxpayers, thus guarding against the so-called “friendly lawsuit” filed by parties attempting to protect their private or vested interests in what is basically an action involving the public’s interests. Such notice, however, can be afforded by a well-drafted rule or law without also requiring all the impediments presented under Rule 23. Clearly, an illegal exaction proceeding differs from the type class action contemplated under Rule 23 where the primary objective is a suit for damages.

While there is much to say on this subject, the majority is correct to defer its consideration of this important issue in a case where it is properly developed at trial and argued on appeal.


source: Caselaw Access Project

author: Robert H. Dudley, Justice.

license: Public Domain

text:
    Robert E. JOHNSON v. Sandra K. LILLY
    91-251
    823 S.W.2d 883
    Supreme Court of Arkansas
    Opinion delivered February 3, 1992
    [Rehearing denied March 2, 1992.]

      The Cortinez Law Firm, P.A., by: Mark D. D’Auteuil, for appellant.

      Wendy Renard, for appellee.
   Robert H. Dudley, Justice.

This court has accepted appellate jurisdiction of this case to decide whether Act 870 of 1991, which enlarges the statute of limitation for enforcement of child support obligations, can be applied retroactively to revive a claim that had been barred. We hold that the chancellor erred in retroactively applying the enlarged limitation to revive a barred cause of action. The appellant assigns two other points on appeal, but we cannot decide them because we have not been provided a sufficient record.

At the outset we confront the defect in the record. The appellee mother, Sandra K. Lilly, filed this action to collect past due child support from the father, Robert E. Johnson. The father filed an answer and a trial brief. The mother responded by filing a trial brief. We do not know what evidence, if any, was presented. The trial court’s order reflects that the mother appeared for trial by her attorney and that the father appeared in person and by attorney. It is silent about the presentation of evidence. The appellant has not provided us with a record of the testimony, if any, nor has he supplied us with a stipulation of facts, if any. We only have the pleadings, trial briefs, appellate briefs, and the trial court’s order. The defect is fatal to two of the three points of appeal. The burden is on the appellant to file a record sufficient to show that the trial court erred, and he has not done that. Trout v. Matchett, 305 Ark. 474, 808 S.W.2d 111 (1991). As a result, we have no choice but to affirm the order of the trial court on the two points that involve facts. However, one point of appeal involves only a question of law and, on that point, the trial court’s order is erroneous on its face. We address that one point.

Prior to 1989, the statute of limitation for child support arrearages was five (5) years. Ark. Code Ann. § 16-56-115 (1987). In 1989, the General Assembly changed the limitation to ten (10) years. Ark. Code Ann. § 9-14-236 (Repl. 1991). Weheld the 1989 amendment did not apply retroactively. Sullivan v. Edens, 304 Ark. 133, 801 S.W.2d 32 (1990). The General Assembly wanted to further enlarge this statute of limitation, so it passed Act 870 of 1991, which amends Ark. Code Ann. §§ 9-14-105 & 9-14-236, and provides child support actions can be “brought at any time up to and including five (5) years beyond the date the child for whose benefit the initial support order was entered reaches the age of eighteen (18) years.” The 1991 act also provides that the enlarged limitation “shall retroactively apply to all child support orders now existing.”

In summary, prior to 1989 the statute of limitation was five (5) years. In 1989 the limitation was changed to ten (10) years, but that limitation was not made retroactive. Thus, in this case the cause of action against the father for arrearages more than five (5) years past due was barred. The mother filed her complaint on January 2,1991. At that time any cause of action against the father for arrearages on or before January 2, 1986, was barred. The chancellor held that the General Assembly could revive the cause of action for those arrearages accruing before January 2, 1986. That ruling was in error.

We have long held that the legislature has the power to amend statutes of limitation affecting causes of action which are not yet barred. See Pinkert v. Lamb, 215 Ark. 879, 224 S.W.2d 15 (1949); Paragould v. Lawson, 88 Ark. 478, 115 S.W. 379 (1908), both involving title to property. More recently, we reiterated our position in a case that did not involve real property. Morton v. Tullgren, 263 Ark. 69, 563 S.W.2d 422 (1978). In Morton we wrote:

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

Id. at 72, 563 S.W.2d at 424 (emphasis supplied) (citations omitted).

The Supreme Court of the United States has held that in all cases except those involving title to property a legislature can, consistent with the Fourteenth Amendment, extend or repeal a statute of limitation, even after the cause of action has been barred. See Chase Sec. Corp. v. Donaldson, 325 U.S. 304 (1945); Campbell v. Holt, 115 U.S. 620 (1885).

However, we have long taken the view, along with a majority of the other states, that the legislature cannot expand a statute of limitation so as to revive a cause of action already barred. Rhodes v. Cannon, 112 Ark. 6, 164 S.W. 752 (1914); Couch v. McKee, 6 Ark. 484 (1845). In Wasson v. State ex. rel. Jackson, 187 Ark. 537, 60 S.W.2d 1020 (1933), we wrote:

In most jurisdictions it is held that, after a cause of action has become barred by the statute of limitations, the defendant has a vested right to rely on that statute as a defense, and neither a constitutional convention nor the Legislature has power to divest that right and revive the cause of action. Where title to property has vested under a statute of limitation, it is not possible by an enactment to extend or revive the remedy since this would impair a vested right in the property.

Id. at 538, 60 S.W.2d at 1020-21 (quoting 6 R.C.L., p. 309). Although the above quotation, which was part of the holding, mentioned cases involving title to property, the case did not involve title to property, but instead involved claims against a bank that had been taken over by the State Bank Commissioner. Similarly, in Rhodes v. Cannon, 112 Ark. 6, 164 S.W. 752 (1914), we discussed the fact that the Supreme Court of the United States had made a distinction between statutes of limitation that vest rights to real and personal property and those that operate as a defense to contracts. See Campbell v. Holt, supra. We rejected that distinction and stated:

The general statute of limitations applies to the remedy only, and the debt, after it is barred, may be revived by a new promise, part payment, etc., but the statute of nonclaim applies to the right, and when the claim is barred by it it is forever barred. No promise of the executor or administrator, made in any form, can revive the claim. It is not within their power to allow a demand after the expiration of the two years. The policy of the statute forbids it. The statute need not be pleaded, but the executor or administrator may insist on the bar, at any time before final judgment.

112 Ark. at 15, 164 S.W. at 754-55 (quoting Hill v. State, 23 Ark. 604, 612 (1861)). Thus, the trial court erred in holding that the expanded statute of limitation revived the cause of action that was barred.

Reversed and remanded with directions to enter an order consistent with this opinion.


author: Steele Hays, Justice.

text:
    Monte DUNCAN v. STATE of Arkansas
    CR 91-236
    823 S.W.2d 886
    Supreme Court of Arkansas
    Opinion delivered February 3, 1992

      Leslie Borgognoni, for appellant.

      Winston Bryant, Att’y Gen., by: Clint Miller, Senior Asst. Att’y Gen., for appellee.
   Steele Hays, Justice.

This is an appeal from the Benton Circuit Court’s denial of bail which we treat as a petition for a writ of certiorari. Thomas v. State, 260 Ark. 512, 542 S.W.2d 284 (1976). The appellant, Monte Duncan, was charged with fraudulent use of a credit card by Information filed October 3, 1990. Duncan tendered a guilty plea. On March 27,1991, Circuit Judge Tom J. Keith issued a memorandum opinion deferring Duncan’s guilty plea and placing him on five years supervised probation pursuant to Ark. Code Ann. § 16-93-303 (1987) (codifying 1975 Ark. Acts 346).

On September 5,1991, Duncan was charged in Washington County with possession of a controlled substance with intent to deliver. He was released the same day on a $10,000 bond. Some two weeks later Duncan was arrested for probation violation and incarcerated in the Benton County jail. The state promptly filed a petition for revocation alleging that Duncan violated the conditions of his probation by committing the offenses in Washington County.

On September 27,1991, a hearing was held on the petition to revoke probation. Circuit Judge Tom J. Keith found there was probable cause to revoke Duncan’s probation and that he had no right to bail and thereafter recused from the case.

Duncan petitioned for a writ of habeas corpus to reconsider the finding of probable cause and denial of bail and to postpone the revocation hearing until the pending charges in Washington County were concluded. Circuit Judge Terry Crabtree, replacing Judge Keith, denied the postponement and held as a matter of law that Duncan was not entitled to bail.

For his first allegation of error, appellant contends that the Benton Circuit Court erred in denying bail pending his probation revocation hearing. We agree, consequently, we reverse and remand.

Arkansas Const, art. 2, § 8 confers an absolute right before conviction, except in capital cases, to a reasonable bail. Reeves v. State, 261 Ark. 384, 548 S.W.2d 822 (1977). It provides in part:

All persons shall, before conviction, be bailable by sufficient sureties, except for capital offenses, which proof is evident or the presumption is great. [Emphasis added.]

In the first hearing Judge Keith found as a matter of law that Duncan was not entitled to bail. In subsequent hearings Judge Crabtree reached the same conclusion. However, he reasoned that defendants facing a revocation hearing have already been convicted, which differentiates those defendants from ones who have merely been accused of committing a crime.

We agree that Duncan’s situation is different from the unconvicted accused because prior to the charges of possession and delivery of a controlled substance Duncan tendered a plea of guilty to a felony, despite the fact that it was deferred under Act 346. But we cannot agree that the deferment as provided under Act 346 is the equivalent of a conviction. A conviction is defined in Ark. Code Ann. § 16-85-712(3) (1987) as a “. . . plea of guilty accepted by the court.” In this case it is clear that Duncan’s guilty plea was not yet accepted by the court. An April 29, 1991, order states:

. . . the court noted but refused to accept the defendant’s tendered plea of guilty, deferred further proceedings under Act 346 of 1975 and placed defendant on supervised probation for five (5) years. . . . [Emphasis added.]

Duncan’s guilty plea to a felony may be taken into consideration in fixing the amount and conditions of bail, however, the trial court’s ruling that, as a matter of law, the appellant cannot be released on bail because of the plea, cannot be sustained. Duncan is entitled to a hearing in which a proper inquiry is conducted concerning the propriety of his release on bail. See Ark. R. Crim. P. 8.5 and 9.2.

For his second allegation of error Duncan argues that the Benton County Circuit Court erred in denying his motion requesting that the revocation hearing be postponed until after the resolution of the charges against him in Washington County. We decline to consider this issue because the court’s denial of the motion was not a final judgment for purposes of appeal. See Ark. R. App. P. 2(a); Ellis v. State, 302 Ark. 597, 791 S.W.2d 370 (1990).

Reversed and remanded.


text:
    LAND O’FROST, INC. v. James C. PLEDGER, Director of Department of Finance and Administration
    91-220
    823 S.W.2d 887
    Supreme Court of Arkansas
    Opinion delivered February 3, 1992

      Wright, Lindsey & Jennings, by: Jimmy W. Mitchell, for appellant.

      Rick L. Pruett, for appellee.
   Steele Hays, Justice.

Appellant, Land O’Frost, Inc., is an Illinois corporation. Appellant brought this suit for a refund of corporate income taxes paid to the State of Arkansas by Land O’Frost Arkansas, Inc., an Arkansas corporation wholly owned by appellant. Land O’Frost Arkansas operated a plant at Searcy and filed corporate tax returns for fiscal years 198 3 through 1986. None of the returns reflected income or expenses of the appellant from its Illinois operations.

On December 31, 1986, Land O’Frost Arkansas, Inc., was merged into appellant, Land O’Frost, Inc. As successor in interest to the Arkansas corporation, appellant filed the amended returns which are the subject of this dispute. The returns included the Illinois operations of the appellant in computing “business income” under Ark. Code Ann. § 26-51-701 (a) (1987) and requested a tax refund of $757,770, together with accrued interest.

Appellant’s claims for refund were denied and when administrative remedies under the Arkansas Tax Procedure Act were concluded unsuccessfully, appellant brought this suit in the Chancery Court of White County.

The plaintiff and the defendant, James C. Pledger, Director of the Department of Finance and Administration, moved for summary judgment, directing their arguments to whether a corporate taxpayer may file Arkansas tax returns incorporating the unitary combined reporting method. Relying on the Department’s Revenue Policy Statement 1984-2, the chancellor denied summary judgment to the appellant and granted the Commissioner’s motion for summary judgment by order entered on April 1, 1991. On appeal to this court, appellant maintains the chancellor erred in ruling that the corporation was prohibited from filing corporate income tax returns according to the unitary combined reporting method. We reject the argument and affirm the order of summary judgment.

There is no contention on appeal that material facts are unresolved. Appellant argues that in Pledger v. Illinois Tool Works, 306 Ark. 134, 812 S.W.2d 101 (1991), this court held Revenue Policy Statement 1984-2 unconstitutional. The regulation reads in part:

The Revenue Department will not utilize combined reporting to tax multistate or multinational corporations. Also, the Revenue Division will not accept returns filed on a unitary combined report basis.

Some three months after summary judgment was ordered in this case, Pledger v. Illinois Tool Works, supra, was decided. Appellant promptly moved to vacate the judgment in this case, but that motion was withdrawn.

Appellant is entirely correct in its premise that Pledger v. Illinois Tool Works, struck down Revenue Policy Statement 1984-2 on constitutional grounds. However, that does not end the matter, for nowhere in this record do we find any challenge to the constitutionality of the statement, which we deem an essential requirement. Appellant cites Huffman v. Dawkins, 275 Ark. 520, 622 S.W.2d 159 (1981), for the principle that an unconstitutional statute must be treated as if it had never been passed. And see Worth v. Civil Service Commission, 294 Ark. 643, 746 S.W.2d 364 (1988). But while that is said to be the “general” rule, it has never been categorically true. See e.g., Johnson v. State, 248 Ark. 184, 450 S.W.2d 564 (1970); Hall v. Hall, 274 Ark. 266, 623 S.W.2d 833 (1981). We examined the rule of retroactivity in some depth in a comparable setting quite recently in Seyller v. Pierce and Co., Inc., 306 Ark. 474, 816 S.W.2d 577 (1991).

The appellants in Seyller, as here, asked us to apply our decision in Urrey Ceramic Tile Co. v. Mosley, 304 Ark. 77, 805 S.W.2d 54 (1991) retroactively. In Urrey the commercial construction exception to the notice provision of the materialmen’s lien statute was declared unconstitutional. Such a holding would have worked to the advantage of appellants in the Seyller case. We declined that request because the appellants in Seyller, not having preserved the issue before the trial court, were procedurally barred from raising it on appeal. We quote from the opinion in Seyller.

We have stated that once a statute is declared unconstitutional, it is treated as if it had never been passed. Bob Hankins Distrib. Co. v. May, 305 Ark. 56, 805 S.W.2d 625 (1991); Huffman v. Dawkins, 273 Ark. 520, 622 S.W.2d 159 (1981). However, in this particular case, to treat the statute as if it had never been passed would require us to ignore the well-settled rule that even constitutional arguments are waived on appeal unless raised below. Smith v. City of Little Rock, 305 Ark. 168, 806 S.W.2d 371 (1991). Thus, before addressing the merits of appellants’ second argument, we must make a choice of law. In other words, we must decide if Urrey is applicable to the present case such that section 18-44-115(f) is considered never to have existed; or, if because appellants failed to preserve the constitutional argument for appellate review, is Urrey not applicable to the present case such that section 18-44-115(f) is considered to exist in this case.
In reaching our determination of the applicability of Urrey we consider the recent decision, James B. Beam Distilling Co. v. Georgia,_U.S__, 111 S.Ct. 2439, 115 L.Ed2d 481 (1991), where a plurality of the United States Supreme Court stated its position on the retroactive application of a decision to claims arising on facts antedating the decision. That position, as stated by Justice Souter who announced the judgment of the Court; is that once the Court has applied a rule of law to the litigants in one case, it must apply the same rule of law to all other litigants not barred by procedural requirements or res judicata. Thus, having no procedural bars, James B. Beam Distilling Company, as petitioner, received the benefit of a prior decision of the Court, Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 104 S.Ct. 3049, 82 L.Ed2d 200 (1984), although it did not begin to litigate its case until after the Bacchus decision was rendered.

The identical rationale applies here and we decline to apply the holding of Pledger v. Illinois Tool Works retroactively.

The question remaining then, is whether the chancellor properly decided the issue presented to him according to the law then in effect. Appellant submits that the two corporations were members of a “unitary” business group, that its business in Illinois was an integral part of its overall operations and benefit-ted its Arkansas subsidiary. Appellant further contends that nothing in the Uniform Division of Income for Tax Purposes Act (UDITPA) [Ark. Code Ann. § 26-51-701—723 (1987 and Supp. 1991)] prohibits the filing of corporate tax returns employing a “unitary” basis.

All of which may be true, but it does not follow that in the context of this case the chancellor erred in upholding the Department’s regulation expressly prohibiting unitary combined reporting. As the appellee points out, UDITPA is not “a substantive taxation statute . . . [but] was conceived as merely a procedural vehicle by which the states could resolve conflicts among themselves and aggrieved taxpayers.” Williams Companies v. Director of Revenues, 799 S.W.2d 602 (Mo. 1990), citing Goldberg v. State Tax Commission, 639 S.W.2d 796, 799 (Mo. 1982).

Appellee argues with some force that appellant made a calculated decision to conduct its business operations in Searcy, Arkansas, as a wholly owned subsidiary of the Illinois parent company. The decision to conduct operations in Arkansas as a separate corporation was appellant’s prerogative, entitling it to whatever advantages might be derived from that construct. When those advantages later appeared outweighed by other considerations, i.e., combining corporate losses of the parent with income realized by the subsidiary, appellant sought somewhat belatedly to achieve “unity” through merger. We imply no criticism of that endeavor, but we are given no authority that inveighs in favor of our imposing on the Commissioner a requirement that Arkansas, which has plenary power to tax those corporations created and established under its laws, must then defer to a method of reporting business operations clearly inconsistent with existing laws and regulations.

Appellant relies in part on the case of Caterpillar Tractor Co. v. Lenchos, 417 N.E.2d 1343 (Ill. 1981), where the Illinois Supreme Court construed UDITPA as permitting the unitary reporting method. But, unlike the case before us, the Director of Revenue agreed with the taxpayer that it was part of a unitary business group. No such agreement exists in this case.

For the reasons stated, the order appealed from is affirmed.


author: David Newbern, Justice.

text:
    Shirley Joan GOULD v. Larry Devon GOULD
    91-236
    823 S.W.2d 890
    Supreme Court of Arkansas
    Opinion delivered February 3, 1992

      Gregg, Hart, Farris & Rutledge, by: John C. Gregg, for appellant.

      Pearson, Evans & Chadwick, by: Marshall Dale Evans, for appellee.
   David Newbern, Justice.

Shirley Joan Gould, the appellant, and Larry Devon Gould, the appellee, were formerly husband and wife. They were divorced on November 7,1983, and custody of their four minor children was placed with Shirley Gould. In 1988, petitions for change of custody, collection of past due child support, and contempt were filed by both parties. Hearings were held over an 18-month period, and on January 22, 1990, the Chancellor issued an order which denied Larry Gould’s petition for a change of custody, fixed visitation, and awarded Shirley Gould a judgment for past due child support. He also awarded a judgment to Shirley Gould for an attorney’s fee in the sum of $32,859.29.

Larry Gould, appealed but filed no supersedeas bond. During the pendency of the appeal Shirley Gould sought to enforce the judgment for the attorney’s fee by a petition for a contempt citation. The Court of Appeals substantially modified the order which forms the basis for this appeal, but the change is not material to this decision. The Chancellor dismissed the contempt petition, holding that, as the award of fees had been reduced to judgment, he was without power to hold Larry Gould in contempt for failure to pay.

Shirley Gould contends the Chancellor erred in holding he lacked power to enforce the attorney’s fee award by a contempt citation. She is correct. The holding was erroneous albeit precipitated by an opinion written by this Court.

The Chancellor ruled that Nooner v. Nooner, 278 Ark. 360, 645 S.W.2d 671 (1983), prohibited using the contempt power to enforce the attorney’s fee judgment. The Nooner marriage was dissolved by a divorce decree which incorporated an agreement stating obligations of the former husband. He failed to meet his support obligation. A hearing was held on contempt requests with requests for modification of the decree. The former husband was held in contempt for failing to pay, and child support arrearages were reduced to a judgment. A payment schedule was established to address both current support and the arrearages judgment. Nooner was sentenced to jail for 30 days for contempt. The sentence was to be suspended upon payment of $5000 to apply on the judgment and payment of an additional $ 100 per week toward the arrears as well as the $100 per week child support.

We affirmed in part but held the Chancellor was without authority to enforce payment of the arrears in that fashion. We wrote:

However, once the Chancellor reduced the arrearages for child support to judgment, he lost control and could not use the judgment in any way to control past or future acts of the appellant, and that is exactly what he did. Nooner was sentenced to thirty (30) days in jail for contempt. The Chancellor then offered to suspend the sentence if Nooner would pay $5000 toward the judgment. The judge did not have the authority to suspend the contempt sentence. Johnson v. Johnson, 243 Ark. 656, 421 S.W.2d 605 (1967). After Nooner stated he could not pay the $5000 and would lose his job if he were not released from jail, the Chancellor said he would release Nooner for the balance of his sentence if he would pay additional money toward the satisfaction of the judgment he had entered for back child support.
The appellant in an amended order was required to pay $ 150 per week to stay out of jail under a threat of some type of continuing contempt. The Court had no authority to use this judgment to encourage this agreement from Nooner. The Court had given Ruth Nooner a remedy for arrearage and that was a judgment for which execution may issue.
The order to reduce the arrearage under such circumstances cannot be enforced by contempt proceedings. We hold that Nooner does not have to serve the balance of his jail sentence because it was improperly suspended and the order to reduce the judgment is unenforceable by contempt proceedings.

The Chancellor in the case now before us relied on that language to conclude he was without power to enforce the order with the power of contempt. Shirley Gould argues the Nooner holding is distinguishable and that our statutory scheme was changed after the Nooner decision to give a chancellor contempt power to enforce judgments in domestic cases.

We agree the Nooner case can be distinguished in part. One problem was that the Chancellor erroneously suspended a contempt citation. But we gave an additional reason for reversal of the citation, i.e., that the contempt power cannot be used to enforce an award which has been reduced to a judgment. If the Chancellor had not attempted to suspend the contempt citation, the opinion indicates we would have reached the same result because of the latter reason.

It may well be that the General Assembly intended to supersede the Nooner decision by enactment of § 2 of Act 383 of 1989, Ark. Code Ann. § 9-14-234(c) (1987), entitled by the codifier, “Arrearages — Finality of judgment,” which provides:

Nothing in this section shall be construed to limit the jurisdiction of the court to proceed to enforce a decree, judgment, or order for the support of a minor child or children through contempt proceedings when the arrearage is reduced to judgment under subsection (a) of this section.

Although the language used does not directly confer jurisdiction to enforce money judgments with the contempt power in support cases, the implication is there because there seems to be an assumption that the court has the “jurisdiction ... to enforce a . . . judgment . . . for . . . support . . . through contempt proceedings . . . .”

Even if the General Assembly did not directly supersede the Nooner decision, we overrule it and will state our reasons below.

In support of her statutory argument that attorney’s fee arrearages reduced to judgment may be enforced by contempt, Shirley Gould cites another subsection of § 2 of Act 383 of 1989, Ark. Code Ann. § 9-14-233(c) (1987), which provides:

Arrearages — Interest and attorneys’ fees.
* * *
(c) Collection of interest and attorneys’ fees may be by executions, proceedings of contempt or other remedies as may be available to collect the original support award.

The Chancellor interpreted the language of the Statute as follows:

That language would indicate that the Court could use any of the listed remedies. The language is: ‘or:[’] and not ‘and’. It is not clear to the Court that this statute shows intention to overrule the Supreme Court’s holding in Nooner. It appears, rather, to say that the listed remedies are available to the Court. It does not say that they are cumulative or that they can be used in succession to enforce the other.

The language explicitly empowers the court to enforce awards of attorney’s fees by execution or contempt. A reasonable interpretation is that it authorizes collections of attorney’s fees after judgments. The “executions” referred to obviously follow judgments. In this context, so do “proceedings of contempt.”

In Holley v. Holley, 264 Ark. 35, 568 S.W.2d 487 (1978), which we did not cite in the Nooner opinion, the Chancellor reduced arrearages in child support to judgment against the former husband. She then found him in contempt for having failed to make the child support payments and stated he could exonerate himself by paying $1,000 on the judgment for arrearages and $150 attorney’s fee. We affirmed that aspect of the decree but reversed the part requiring further payments on the judgment because the payment amounts set were too low and amounted to a refusal to execute the judgment.

Our decision in the Nooner case is at least implicitly inconsistent with the General Assembly’s intent expressed in the Statutes enacted after the decision. It is clearly inconsistent with the earlier Holley case. We have searched the law of other jurisdictions, and we find no support for the conclusion, stated in the Nooner case without citation of authority, that support arrearages reduced to judgment cannot be enforced the same as delinquent payments pursuant to other court orders. We dispel any remaining doubt about the viability of the Nooner holding on the issue of the power to enforce a child support arrearages judgment by the contempt power and declare it overruled in that respect. In view of our interpretation of § 9-14-233(c), we hold that failure to pay an attorney’s fee reduced to judgment in a divorce case may also be the subject of a contempt citation.

No doubt a chancellor can enforce an order to compel conduct, even if it is an order to pay money, by the contempt power. We reached that conclusion with respect to alimony awards as early as Ex Parte Hall, 125 Ark. 309, 188 S.W. 827 (1916), but have found it limited to cases where it is assured that the contempt power is not used unless the contemnor has the ability to pay. Ark. Const. art. 2, § 16; Godwin v. Godwin, 286 Ark. 364, 596 S.W.2d 695 (1980). See also Leonard v. State, 170 Ark. 41, 278 S.W. 654 (1926), and Harrison v. Harrison, 239 Ark. 760, 394 S.W.2d 622 (1965), pointing out that a party may be ordered to pay money found to be in the possession or control of a party, and the order may be enforced by the contempt power.

At the outset of the contempt hearing in this case, the Chancellor was asked by counsel for Shirley Gould to rule as a matter of law that Larry Gould had been previously determined able to pay the attorney’s fee judgment. The Chancellor declined. Although evidence relevant to the ability to pay was taken during the hearing, in the form of Larry Gould’s testimony on direct and cross examination, the Chancellor did not rule on his ability or lack of ability to pay. We remand to give the Chancellor an opportunity to consider the contempt issue within the limitation of Ark. Const. art. 2, § 16.

Reversed and remanded.

Corbin, J., dissents.


author: Tom Glaze, Justice.

text:
    Darren Jerome CRAWFORD v. STATE of Arkansas
    CR 91-224
    822 S.W.2d 386
    Supreme Court of Arkansas
    Opinion delivered February 3, 1992

      Durnett and Coleman by: Chad L. Durnett, Jr., ..for appellant.

      Winston Bryant, Att’y Gen., by: Gil Dudley, Asst. Att’y Gen., for appellee.
   Tom Glaze, Justice.

Appellant appeals his conviction of possession of cocaine with intent to sell or deliver. He was sentenced as a habitual offender and received fifty years imprisonment to run consecutively to a six-year sentence in another case.

Appellant’s sole argument is whether the trial court erred in allowing an investigator, James Sudberry, to testify that, on December 8,1988, the police had made a cocaine purchase from appellant at 528 South 15th Street in West Memphis through the use of a confidential informant. On December 9,1988, the police used this December 8 drug transaction to obtain a search warrant for the premises at 528 South 15th Street. Upon executing the warrant, the police found cocaine and $605.00 on the appellant’s person. They also discovered other money and cocaine on the table located in the kitchen where appellant and a Brian O’Gwin were standing. At trial, O’Gwin testified that the crack cocaine, gun and pager found during the search were his and that he was on the way to sell the cocaine to another person at another address.

Appellant argued below, and now on appeal, that Sudberry’s testimony concerning the December 8 drug sale had no relevancy except to show the appellant had sold cocaine before and therefore he must be guilty of the crime with which he was charged that resulted from the December 9th drug raid. The state, on the other hand, argues Sudberry’s testimony was admissible under Ark. R. Evid. Rule 404(b) to show the appellant intended to deliver the cocaine he possessed on December 9,1988. The state is correct.

The issue raised here was decided by this court in Lincoln v. State, 285 Ark. 107, 685 S.W.2d 166 (1985). See also Holloway v. State, 293 Ark. 438, 738 S.W.2d 796 (1987). In Lincoln, the defendant was charged with the possession of marijuana with the intent to deliver. The trial court allowed various state witnesses to testify they had bought drugs from Lincoln in the past. However, it cautioned the jury that proof of prior sales was admitted only to be considered with regard to the intent with which Lincoln had possessed drugs on the evening in question and for which he was charged. We upheld the trial court, holding such prior sales are admissible if not too remote in time. Lincoln, 285 Ark. at 109, 685 S.W.2d at 168. In the present case, the prior sale was not remote since it occurred only the day before the drug charge transaction with which appellant was charged.

Appellant cites the case of Moser v. State, 266 Ark. 200, 583 S.W.2d 15 (1979), in support of his argument that the December 8th drug transaction was unnecessary to show intent. Appellant claims that the law presumes intent to deliver when he was found with the amount he possessed at the time of the December 9th search. The facts in Moser are clearly distinguishable from the ones here. There, Moser was charged with and convicted of possession of marijuana with the intent to deliver. On appeal, he successfully challenged testimony concerning prior drug sales that took place eighteen months prior to the drug offense for which he was being tried. This court held such testimony was inadmissible because the state had already proved actual delivery of the marijuana charge by testimony showing Moser had sold sixteen bags of the marijuana to a man named Parnell.

Here, no actual delivery was shown to have occurred on December 9th. While appellant argues delivery was presumed because of the amount of cocaine involved, O’Gwin testified in appellant’s behalf, claiming that the cocaine found during the search belonged to him, not the appellant. Clearly, under these circumstances, appellant’s intent was in issue. In fact, his main defense was that the cocaine found by the police was O’Gwin’s and O’Gv/in had planned to sell it later to some third party at another address. On this point, we add, as well, that the jury was never instructed that the proof of possession of a set amount of cocaine by appellant would be presumptive of his intent to deliver. Instead, the trial court told the jury that the amount or quantity of cocaine possessed by the appellant was evidence it could consider along with the other facts and circumstances of the case in determining the purpose or intent for which the cocaine was possessed.

For the foregoing reasons, we cannot say the trial judge abused his discretion in allowing Sudberry’s testimony. See Beebe v. State, 301 Ark. 430, 784 S.W.2d 765 (1990). Therefore, we affirm.


author: Donald L. Corbin, Justice. Robert H. Dudley, Justice.

text:
    BEVERLY ENTERPRISES-ARKANSAS, INC. and Hillsboro Manor Nursing Home, Inc. v. ARKANSAS HEALTH SERVICES COMMISSION, et al.
    91-196
    824 S.W.2d 363
    Supreme Court of Arkansas
    Opinion delivered February 3, 1992

      Rose Law Firm, A Professional Association, by: Webb Hubbell, for appellant Beverly Enter.-Ark., Inc.

      Schackleford, Schackleford, & Phillips, P.A., by: Teresa Wineland, for appellant Hillsboro Manor.

      Winston Bryant, Att’y Gen., by: Susan G. Jones, Asst. Att’y Gen., for appellee.
   Donald L. Corbin, Justice.

This appeal is from a decision of the Health Services Commission (“Commission”) granting a permit of approval for the construction of a new 70 bed nursing home in Drew County. In accordance with the Arkansas Administrative Procedures Act, the decision was first appealed to the Commission by separate appellants Beverly Enterprises-Arkansas, Inc. (“Beverly”) and Hillsboro Manor Nursing Home, Inc. (“Hillsboro”). The Commission affirmed its prior decision and both appellants appealed to circuit court which affirmed the Commission’s decision. Our jurisdiction is pursuant to Ark. Sup. Ct. R. 29(l)(c) as the appeal involves the interpretation of the rules and regulations of an administrative agency. We find no error in the Commission’s decision and affirm.

On appeal, Beverly argues the circuit court erred in upholding the Commission’s decision to grant a permit of approval for the construction of a new nursing home in Drew County. Separate appellant Hillsboro argues the circuit court erred in holding both that the Commission properly adopted, interpreted and applied the standards and criteria for review of the permit applications and that the Commission’s decision was not arbitrary, capricious, nor an abuse of discretion. Although each appellant makes separate arguments on appeal, their arguments can be characterized as a challenge of the method the Commission used in deciding to grant a permit of approval for a new nursing home in Drew County. A brief discussion of how the Commission reached this decision follows.

In fulfillment of one of its statutory duties stated in Ark. Code Ann. § 20-8-103(b) (Repl. 1991), the Commission determined there was a need for additional nursing home beds in Drew County. The Health Services Agency (“Agency”) then issued applications for a permit of approval to construct a new nursing home in Drew County. In accordance with Ark. Code Ann. § 20-8-104(d) (Repl. 1991) and the Commission’s Policies and Procedures For Permit of Approval Review, which the Agency is authorized to implement pursuant to Ark. Code Ann. § 20-8-104(b) (Repl. 1991), the Agency reviewed the three applications for the permit it had received. The Agency then issued its written findings and recommendations to the Commission, concluding that appellee Monticello Nursing Home’s application should be granted while the applications of both Hillsboro and Drew County Nursing Home (Drew County Nursing Home is not a party to this appeal) should be rejected. The Commission then adopted the Agency’s findings and approved Monticello Nursing Home’s application.

Beverly, which operates the only existing nursing home in Drew County, appealed the approval of Monticello Nursing Home’s application; Hillsboro appealed the rejection of its application. The Commission heard both appeals and affirmed its previous decision. From there, both Beverly and Hillsboro appealed to circuit court where the judge ruled the Commission’s “adoption, interpretation and application of the standards and criteria for granting the application of the intervenor, Maxwell [Monticello Nursing Home], was proper” and that the Commission’s decision to grant Monticello Nursing Home the permit of approval is supported by substantial evidence and was not “arbitrary, capricious, or characterized by abuse of discretion.”

As its only point of error, Beverly asserts the circuit court erred in upholding the Commission’s decision to grant a permit of approval for a new nursing home in Drew County because the decision is not supported by substantial evidence and was arbitrary, capricious, and an abuse of discretion. The Commission responds with the argument that its decision is supported by substantial evidence because it was made in accordance with its review criteria.

On review of an agency decision, the circuit court is limited to a review of the evidence to determine whether there was substantial evidence to support the decision made, and on appeal, our review of the evidence is similarly limited. Arkansas Real Estate Comm’n v. Harrison, 266 Ark. 339, 585 S.W.2d 34 (1979). When reviewing the evidence, we give it its strongest probative force in favor of the agency. Williams v. Scott, 278 Ark. 453, 647 S.W.2d 115 (1983). In order to establish an absence of substantial evidence, Beverly must show the proof before the Commission was so nearly undisputed that fairminded persons could not reach its conclusion; the question is not whether the evidence supports a contrary finding, but whether it supports the finding that was made. Id.

In an attempt to meet its burden, Beverly asserts the Commission’s decision was made through the evaluation of.the Commission’s four criteria for review of permits, that three of the four criteria were not satisfied by the application which received the Commission’s approval, and that because of this failure to satisfy the criteria, the Commission’s decision was not supported by substantial evidence and should be reversed.

Beverly is correct in asserting that the permit applications must be reviewed according to the review criteria promulgated by the Commission. Sections 20-8-103.(d), —104(b), (d); Section VIII, CRITERIA FOR REVIEW, Health Services Commission Policies and Procedures for permit of Approval Review. The four criteria are stated as follows:

Section VIII. CRITERIA FOR REVIEW
A. The Agency and the Commission will utilize the following general criteria in the review process:
a. Whether the proposed project is needed or projected as necessary to meet the needs of the locale or area;
b. Whether the project can be adequately staffed and operated when completed;
c. Whether the proposed project is economically feasible; and
d. Whether the project will foster cost containment through improved efficiency and productivity.

The Commission concedes it must follow the review criteria it promulgated and answers Beverly’s claim with an assertion that, based upon the four review criteria, its decision is supported by substantial evidence. We agree. Thus, provided the Commission follows its procedures and considers its four review criteria, the ultimate decision to grant a permit of approval is a discretionary one for the Commission to make. We will uphold the Commission’s exercise of its discretion in reaching this decision if it is supported by substantial evidence and is not arbitrary, capricious, nor an abuse of its discretion. Williams, supra; Partlow v. Arkansas State Police Comm'n, 271 Ark. 351, 609 S.W.2d 23 (1980).

The first of the three criteria Beverly challenges as not being satisfied is the criterion of need. See Section VIII. A.a., Health Services Commission Policies and Procedures for Permit of Approval Review. Specifically, Beverly challenges the Commission’s application of its population based methodology in determining the need for a new nursing home in Drew County.

To determine the need for nursing home beds in the state the Commission has adopted a “population based methodology” and a “utilization based methodology.” The population based methodology provides as follows:

I. POPULATION BASED METHODOLOGY
A. This methodology projects nursing home bed need using the 1992 estimated population in four age groups (see below) of a service area (county). This method is based on a study commissioned by the Arkansas Nursing Home Association which estimated the following nursing home bed need by age group:
AGE GROUP BEDS PER 1000 POPULATION
Below 65 1.53
65 to 74 16.30
75 to 84 59.40
153.10 85 and above
Note: The projection for a county represents the number of patients estimated to need beds. Since all nursing homes cannot be expected to operate at 100% occupancy year round, additional beds are added to the projection to allow for patient fluctuation i.e., the projection represents 95 % of the beds needed.
B. Even if a county is projected as needing additional beds, no beds will be approved unless the county has experienced a 94.5 % average occupancy rate during the previous calendar year.

In the present case, the Commission used its population based methodology and concluded there was a “need” for 39 beds in Drew County. The Commission allowed the existing nursing home in Monticello, which is owned by Beverly, to expand to the 140 bed limit by awarding it 16 of the 39 beds. Because the population based methodology indicated there was.a need for 39 beds, and because 39 is “at least 35, but less than 70,” the Commission went on to apply the next provision of the population based methodology which states that:

C. In counties where the Population Based Bed Need Formula indicates a need for at least 35, but less than 70, nursing home beds and the existing facilities in the service area cannot utilize more than half of that need without exceeding 140 beds, the Commission may grant a permit of approval for a new 70 bed nursing home.

Beverly asserts that under the above-quoted provision of the population based methodology, because it was awarded 16 beds there is only a “need” for 23 beds, rather than 39 beds, and therefore the Commission erred in exercising its discretion to grant a permit of approval. Beverly supports this argument with numerous references to the record where the Commission, either in its findings and recommendations or at its hearings, made statements to the effect that “there is a need for 23 additional beds.”

The Commission answers Beverly’s argument by pointing out that provision C of the population based methodology has two requirements: 1) a need for at least 35 but less than 70 beds, and 2) the existing facilities in the county must be unable to utilize more than half of that need without exceeding the 140 bed limit. The Commission had already determined there was a “need” for 39 beds in Drew County. The Commission had also already determined to award the existing facility in Drew County 16 beds, thereby allowing it to expand to the 140 bed limit. Thus, the Commission argues that the correct application of provision C of the population based methodology to the facts of this case is as follows. Provisions A and B are used to determine a need of 39 beds in Drew County. Provision C is then applied because 39 is “at least 35 but less than 70,” and because Beverly’s existing facility could only utilize 16 of those 39 beds without exceeding the 140 bed limit. As 16 is less than half of the need of 39, the Commission asserts the second requirement of provision C is satisfied and therefore it had the discretion to grant the permit of approval. The Commission is quick to point out that, had Beverly’s existing facility been able to utilize 20 beds without exceeding the 140 bed limit, the Commission would not have had the discretion to grant Monticello Nursing Home the permit of approval.

We agree with the Commission’s analysis. Beverly is overlooking the second requirement of provision C and ignoring the semantics of the word “need” as used in the population based methodology. “Need” is determined according to provisions A and B of the methodology. Provision C is then used, when applicable by its own terms, to determine the Commission’s discretion to grant permits in limited situations. Provision C is not, as Beverly asserts, used to determine the actual “need” for nursing home beds in a county. Beverly reads the second requirement of provision C as altering the determination of need made pursuant to provisions A and B.

On review of agency decisions, we determine whether an agency’s interpretation of its regulations is reasonable; and although not binding on us, an agency’s interpretation of its own rules is persuasive. Sparks Regional Medical Ctr. v. Arkansas Dep’t of Human Servs., 290 Ark. 367, 719 S.W.2d 434 (1986). Beverly’s interpretation of provision C strains the plain meaning of the population based methodology. We conclude the Commission’s interpretation is consistent with the population based methodology as a whole and is therefore much more reasonable.

Also with respect to this first criterion of need, Beverly argues the Commission erred in not considering the number of existing beds within a close proximity of Drew County although outside the county itself. Beverly points out that 139 beds were recently approved within a 25-mile radius of Monticello, the county seat of Drew County. Beverly claims the Commission considered the effect of the 139 beds outside Drew County when it reviewed the criterion of economic feasibility but refused to go outside the county and consider the 139 beds when reviewing the criterion of need. This inconsistency, argues Beverly, is willful and unreasoning action and therefore arbitrary and capricious.

The requirement that administrative action not be arbitrary or capricious is less demanding than the requirement that it be supported by substantial evidence. Woodyard v. Arkansas Diversified Ins. Co., 268 Ark. 94, 594 S.W.2d 13 (1980). To set aside the Commission’s action as arbitrary and capricious, Beverly must prove that the action was a willful and unreasoning action, made without consideration, and with a disregard of the facts or circumstances of the case. Partlow v. Arkansas State Police Comm’n, 271 Ark. 351, 609 S.W.2d 23 (1980).

The determination that there was a need for a new nursing home in Drew County was made in accordance with the Commission’s population based methodology requiring it to consider evidence of need within a “service area” which is defined in provision A as a “county.” The Commission did not go outside the county boundary when it reviewed the criterion of economic feasibility as Beverly asserts. Rather, the Commission merely expressed a concern for the financial feasibility of a new nursing home in Drew County given the fact that recently approved beds existed in the surrounding area. Considering need based on county boundaries as service areas is certainly reasonable. In fact, such a procedure is consistent with the legislature’s mandate that, during the moratorium on approval of new nursing homes while the Commission was promulgating its rules and regulations, the Agency consider permit applications on a county-by-county basis. See Ark. Code Ann. § 20-8-106(a)(3) (Repl. 1991). Therefore, we conclude that the Commission’s action in limiting its consideration of the criteria of need to within the Drew County limits was a reasonable action made in consideration of its policies and procedures. This action was not arbitrary nor capricious.

The second criterion Beverly challenges relates to economic feasibility. See Section VIII. A.c., Health Services Commission Policies and Procedures for Permit of Approval Review. In its findings and recommendations, the Agency explained that “[t]his criterion includes the applicant’s ability to obtain capital financing in order to bring the projection to fruition and generate adequate revenues to retire any debt, cover operational costs, and provide quality services without excessive cost.” Beverly asserts the evidence does not support a finding that this criterion has been met because, although the Agency found that Monticello Nursing Home had the ability to obtain financing, it did not conclude that any of the proposed facilities would be able to “generate adequate revenues to retire any debt, cover operational costs, or provide quality services without excessive costs.” Because the Commission never made such a finding, Beverly argues there is not substantial evidence to support the Commission’s decision, especially in light of the Agency’s expressed concern for the financial feasibility of any new nursing home in Drew County.

Beverly supports this argument with the testimony of its expert, Larry Taylor, who testified there was a surplus of beds in the county’s surrounding area and someone is “going to suffer adverse effect from not having enough patients to fill up the beds.” Beverly further supports its argument with the testimony of Dr. Ralph Maxwell, the owner of the proposed Monticello Nursing Home, that the purchase price of the land needed for the construction of Monticello Nursing Home is unknown.

The Commission responds by pointing out that it specifically found that Monticello Nursing Home had lower costs, lower annual debt service, and more local support than the other applicants. The Commission explained its expressed concern for the financial feasibility as merely a genuine concern for the success of any new nursing home in the county.

Obviously, no enterprise entering a new business has a guarantee of financial success. Moreover, the Commission is not required to find a guarantee of success before it grants a permit. Rather, the Commission is required to consider the applicant’s relative chances for economic success. The Commission did so and after reviewing the foregoing evidence, concluded that, as Monticello Nursing Home was the only applicant with approved financing and expressed local support, it was the applicant with “the best chance of making it.”

At this level of review, we do not judge the credibility of the evidence. We will not substitute our judgment for that of the Commission’s absent an abuse of its discretion. Green v. Carder, 282 Ark. 239, 667 S.W.2d 660 (1984). The Commission concluded, albeit without using the buzz words Beverly asserts are necessary, that Monticello Nursing Home was the most economically feasible of the three proposed nursing homes. This decision is supported by the substantial evidence of a loan commitment letter, numerous letters of expressed local support, an established need for new beds in the county, and an application stating a lower construction cost than the other two applications. Where the decision is supported by substantial evidence, it follows that the decision cannot be classified as arbitrary or an abuse of discretion. See Partlow, supra.

Beverly’s third point of error concerns the criterion of cost containment. See Section VIII. A.d., Health Services Commission Policies and Procedures for Permit of Approval Review. Beverly argues the evidence of record does not demonstrate that construction of a new nursing home in Drew County will foster cost containment by improving the efficiency or productivity of the health care currently provided in Drew County. To support this final argument, Beverly relies on its previous two arguments and alleges that because there is a surplus of beds in the Drew County area, there is no need for a new nursing home within Drew County and such a nursing home woiild not be economically feasible; therefore it is arbitrary, capricious, and an abuse of discretion for the Commission to conclude that a new nursing home in Drew County would improve the efficiency and quality of care there. Because we have previously rejected Beverly’s two arguments that form the underlying premise of this third and final argument, we conclude this final argument is without merit.

We note however, that in its reply brief, Beverly attempts to bolster this final claim with the legislative history of the Federal Health Services Act. Beverly cites us to a report of the Senate Committee on Labor and Human Resources where that Committee concluded that “[t]he highly technical nature of medical services, together with the growth of third party reimbursement mechanisms, acts to attenuate the usual forces influencing the behavior of consumers with respect to personal health services.” S. Rep. No. 96, 96th Cong., 1st Sess. (1979), reprinted in 1979 U.S.C.C.A.N. 1306, 1357-58.

In its project findings and recommendations, the Commission recognized Beverly’s concern that in the nursing home industry, competition does not always improve the quality of care. However, the Commission also recognized that there was currently only one nursing home in the county and that there was an expressed local desire for another locally-owned nursing home in the county. With this local desire in mind, the Agency concluded that the competition provided by a second nursing home in Drew County might well have a positive effect on the quality of care there. This conclusion reflects rational thought and is supported by substantial evidence in the record.

After reviewing the evidence and the Agency’s written findings and recommendations to the Commission, which the Commission adopted, we conclude that Beverly has not met its burden on appeal. The evidence before the Commission was not so undisputed that fair-minded persons could not have reached the same conclusion as the Commission. The Commission carefully considered all three applications before it pursuant to its own policies and procedures. The Agency’s findings, which the Commission adopted, reflect that all aspects, both positive and negative, of the decision to grant a permit were considered. The conclusion to grant a permit of approval to Monticello Nursing Home was based on the Commission’s four criteria for review and evidence that, of the three applicants, Monticello Nursing Home had proposed a lower construction cost for a 70 bed facility and a lower annual debt service. Monticello Nursing Home was the only applicant with a loan commitment letter. It was also the only applicant that had any proof of local support in the community. There was evidence before the Commission that favored the other applicants; however, the Commission concluded that because of the above-referenced factors, Monticello Nursing Home had the best chance for success and granted it a permit of approval for its proposed new nursing home. We conclude the decision to grant a permit of approval for the construction of a new 70 bed nursing home in Drew County was one which was within the Commission’s discretion, reflects careful consideration of the requisite criteria, is supported by substantial evidence, and was not made arbitrarily, capriciously, or with an abuse of discretion.

Next, we consider separate appellant Hillsboro’s two arguments. As its first point of error, Hillsboro claims the Commission properly promulgated criteria for review of applications in accordance with the Arkansas Administrative Procedures Act and then changed these criteria after all the applications for the Drew County project had been accepted. Hillsboro claims it was denied procedural due process as the criteria were changed in the midst of the application process without notice to Hillsboro or an opportunity to be heard. The Commission responds to this claim by arguing that the alleged change in its criteria for review was not a change at all, but an interpretation, which does not require notice and comment under our Administrative Procedures Act. In addition to its procedural due process argument, Hillsboro also claims its rights of contract were impaired and that the application of the allegedly changed criteria was ex post facto. Hillsboro claims these violations further infringed its substantive due process rights.

Hillsboro packs these four distinct claims into a mere two sentences in its brief. Two of these claims, those of ex post facto and impairment of contracts, were never presented to the Commission or trial court and should not be addressed for the first time on appeal. Fisher v. Jones, 306 Ark. 577, 816 S.W.2d 865 (1991). The substantive due process claim is merely asserted in Hillsboro’s brief; there is no mention of the protected right that was violated and no analysis of why the Commission’s actions were not rational in a due process context. It is not apparent without further research that this argument is well-taken and without authority or convincing argument, we will not address this issue on appeal. RLI Ins. Co. v. Coe, 306 Ark. 337, 813 S.W.2d 783 (1991).

In our review of the record with respect to Hillsboro’s procedural due process claim, it appears that what Hillsboro complains of as a rule change and the Commission defends as an interpretation of a rule was actually a clarification of how the Commission would apply its review priorities under its population based methodology for determining need. The criteria Hillsboro complains of as being changed midstream appear in the application form as part of the population based methodology. When the population based methodology is used to determine need, as was done in the Drew County project, there is a list of nine “review priorities” which are applicable. These review priorities appear as follows:

E. REVIEW PRIORITIES - these ranked priorities apply to the Population Based Methodology.
WEIGHT
(POINTS)
9 1. Applicant homes that have not had a life threatening compliance issue in the last two (2) calendar years.
8 2. Applicants with nursing homes of below 70 licensed beds applying to expand up to, or closer to, 70 beds.
7 3. Applicants proposing a major renovation or the replacement of an older facility.
6 4. Applicants with the highest occupancy rate.
WEIGHT
(POINTS)
5 5. Applicants who have a record of higher nursing staffing ratios. (Higher staffing ratios are defined as exceeding the minimum licensure requirements. This will be documented by the latest Office of Long Term Care survey).
4 6. Applications by small (70 bed or less) rural (towns of 8,000 or less) hospitals.
3 7. Applicants with lower proposed construction costs of applicable quality.
2 8. Applicants proposing to develop a facility or wing for Alzheimer patients in an area without such a facility.
1 9. Applicants proposing to construct additional space to train students enrolled in, and as a part of a state approved nursing education program that would lead to licensure.

The record reveals that, with respect to two counties in the state, the Commission was accepting applications for a new nursing home as opposed to applications for expansion of an existing nursing home. The record also reveals that the Commission received a letter requesting clarification of how it intended to apply these criteria to the applications for new nursing homes. In response to this letter, the Commission first published notice of its intent to consider the nursing home standards in the newspaper and then considered the review priorities at its July 12, 1989 meeting. At the July 12, 1989 meeting, the Commission concluded that six of the nine review priorities did not apply to applications for new nursing homes. Only priorities 6, 7, and 9 would be applied to applications for new homes. Hillsboro was not present at this meeting and did not make any comments, written or oral, to the Commission at this time. However, Hillsboro immediately began complaining to the Commission that application of only three of the nine priorities would prejudice Hillsboro because its good reputation and successful operation of its existing nursing homes would not be considered when reviewing the three applications. Hillsboro then filed its application on the deadline of July 31, 1989.

In response to Hillsboro’s complaints, the Commission decided to give Hillsboro the statutory notice and comment opportunity. On September 13, 1989, after the 20 days notice required by the Administrative Procedures Act, and after the applications had been accepted but before the Agency reviewed them and issued its findings and recommendations, the Commission held another hearing and again concluded it would only apply three of the nine review priorities to applications for new homes.

In its findings and recommendations, the Commission gave a well-reasoned and detailed explanation of all nine review priorities and why they were or were not being applied to the three applications for a new nursing home in Drew County. All. three applications were analyzed under the same three review priorities. The Commission’s actions in so applying the review priorities were consistent and very reasonable.

For the Commission to have applied the other six priorities to these applications would have been unreasonable. For example, the first priority refers to “applicant homes that have not had a life threatening compliance issue in the last two years.” Obviously, it is impossible for a new nursing home to have a record of life threatening compliance issues; thus, it was reasonable for the Commission to conclude that this review priority refers to the facilities applying for expansions rather than to new facilities. The Commission reached a similar conclusion with respect to priorities two through five. The Commission also concluded that priority eight would not be applied because of the uncertainty regarding the licensing procedure of an Alzheimer’s wing.

As it stands today, none of the priorities have been changed in any manner. All nine of the Commission’s population based methodology review priorities still exist for the Commission to apply whenever appropriate. In fact, Section VII of the Commission’s Policies and Procedures for Permit of Approval Review anticipates such a varied application of review criteria when it states “the procedures and criteria adopted and utilized by the Agency for conducting the review covered by this section may vary according to the purpose of which a particular review is being conducted [.]” Therefore, we conclude, no matter what label any of the parties places on it, the Commission’s actions in applying only three of the nine review priorities did not amount to a change of its rules or procedures requiring compliance with the Administrative Procedures Act. The fact that the Commission wrote Hillsboro a letter indicating it was considering a “rule change” does not a “rule change” make; nor does the fact that the Commission held a hearing after announcing its intention to apply only the three priorities make the Commission’s actions a “rule change.” The letter and hearing are merely evidence of the Commission’s concern that it apply its nine review priorities in a rational and well-reasoned manner. In short, Hillsboro received all the process that was due it, and we affirm the Commission’s application of the three priorities.

Hillsboro’s second claim on this appeal is that the Commission’s decision was arbitrary, capricious and an abuse of discretion because all nine of the review priorities were not applied. We refer to our review of the record with respect to Hillsboro’s first claim and conclude the Commission’s decision was well-reasoned and supported by substantial evidence. It follows that the decision was not arbitrary, capricious, nor an abuse of discretion. Partlow v. Arkansas State Police Comm’n, 271 Ark. 351, 609 S.W.2d 23 (1980). Even if we disagreed with the Commission’s decision, we could not substitute our own conclusions for that of the Commission’s. Green v. Carder, 282 Ark. 239, 667 S.W.2d 660 (1984). The Commission’s decision is affirmed in all respects.

Dudley, J., dissents.

Brown, J., not participating.

Robert H. Dudley, Justice.

The crux of this case is whether the Commission’s decision was arbitrary. If there were a need for another nursing home the decision was reasonable, but if there were no need it was arbitrary.

“Need” is determined by use of a Commission formula based upon population and a “utilization based” method. By using that formula the Commission, in December 1988, published data which stated that in 1992 Drew County would need thirty-nine (39) additional nursing home beds. The Commission invited applications from persons who were interested in meeting that 1992 need. Beverly Enterprises-Arkansas, Inc. already had a 124-bed nursing home in Drew County. In July 1989, after the Commission published its data, Beverly, Monticello Nursing Home, and Hillsboro Manor Nursing Home, Inc., each applied to the Commission for approval of a seventy-bed nursing home. In the fall of 1989 the Commission approved a sixteen-bed expansion for Beverly. When the Commission approved the sixteen beds for Beverly, the original need of thirty-nine beds was reduced to a need of twenty-three beds.

In its finding of fact the Commission found:

Drew County shows a need for 39 additional beds in 1992. Sixteen were approved for the only nursing home in the County. That facility is now approved for 140 beds. There is a need for 23 additional beds. Drew County qualifies under the amendment. [Emphasis supplied.]

The pivotal question in this case is simple. Was there a need for thirty-nine beds or was there a need for twenty-three beds? If the need was for thirty-nine beds then the Commission’s action was reasonable under its regulations which are set out below, but if the need was for only twenty-three beds, the Commission’s action was in violation of its regulations. The majority opinion does not discuss the issue, and I can only guess that the majority thinks the Commission’s finding, quoted above, is inconclusive in some manner. It seems to me that it clearly sets out that the need at the time of the hearing is “for 23 additional beds.” However, for the sake of full discussion of the issue, I will assume that majority thinks the above quoted finding is inconclusive, and we must decide how many additional beds were needed. That question can only be answered by deciding when the “need” was to be determined. If it were to be determined on the publication date of the December 1988 data, then the “need” existed and the Commission’s action was reasonable, but, if it were to be determined at the time of the hearing or at the time of the Commission’s ruling, the action was arbitrary because, by that time, Beverly had been approved for the sixteen beds, and there was a “need” of only twenty-three beds.

It would be illogical and senseless to determine the need as of the publication date of the December 1988 data, because, if that were the determinative date, the “need” would never be filled. The December 1988 data will always show a prospective need of thirty-nine beds in 1992. That will be true even after Beverly builds its sixteen beds and even if Monticello is allowed to build seventy beds. Thus, the publication date alone cannot logically be the controlling date. It is just as senseless to determine “need” on the date of applications alone, because that date does not reflect the beds approved after the applications were submitted but before the hearing on those applications. If the stated “need” that existed on application date was the determinative date, and was not subject to modification because of the later approvals, then a need of thirty-nine beds would still exist. A wholly new nursing home could still apply for approval since the need for thirty-nine beds would still exist. Such an interpretation would also be senseless. Clearly, approval of beds granted after the application date must be taken into account in determining need. Consequently, the date of the hearing and the date of the finding of fact is the only logical date for determining “need.” This is most likely the reason that the Commission, in its finding of fact, as quoted at the beginning of this opinion, found a “need” of twenty-three beds.

The Commission’s regulation provides:

In counties where the Population Based Bed Need Formula indicates a need for at least 35, but less than 70, nursing home beds and the existing facilities in the service area cannot utilize more than half of that need without exceeding 140 beds, the Commission may grant a permit of approval for a new 70 bed nursing home.

The first requirement of the above quoted regulation is a need of “at least 35” nursing home beds before “the Commission may grant a permit of approval.” That need of “at least 35” nursing home beds did not exist at the date of the hearing. At that time, there was a need of only twenty-three beds. Thus, the Commission did not follow its own regulations and, as a result, acted in an arbitrary manner.