author: RAY THORNTON, Justice. DONALD L. Corbin, Justice, ROBERT L. Brown, Justice,

text:
    Richard BARCLAY, Director, Arkansas Department of Finance and Administration v. FIRST PARIS HOLDING COMPANY and Subsidiary, First National Bank at Paris, Arkansas
    00-1128
    42 S.W.3d 496
    Supreme Court of Arkansas
    Opinion delivered May 10, 2001

      Mary Cameron, for appellant.

      Jack, Lyon & Jones, P.A., by: Eugene G. Sayre, for appellee.

      Friday, Eldredge & Clark, LLP, by: Walter M. Ebel, III and Joseph G. Nichols, amicus curie in support of appellees’ position.
   RAY THORNTON, Justice.

In 1979, the General Assembly adopted Act 708, allowing corporate members of an affiliated group that files a federal consolidated income tax return, to file a consolidated Arkansas tax return. Following the adoption of Act 708, First Paris Holding Company [The Holding Company] was organized on March 27, 1980. At the time of its organization, the Holding Company owned eighty-six percent of the stock of First National Bank at Paris [First National]. The Holding Company and First National formed an affiliated group that filed consolidated tax returns for the years 1980 through 1994 for both federal and state taxes. The consolidated group filed its return on the basis of federal principles that exclude intercorporate dividend distributions between members of an affiliated group in the calculation of gross income for the consolidated group.

In 1994, appellant, the Arkansas Department of Finance and Administration [DFA], conducted an audit of the consolidated group’s tax returns and imposed a tax on the intercorporate dividends, asserting that the provisions of Act 570 of 1965 only permitted the exemption of dividends received from First National by the Holding Company from the gross income of the consolidated group if the Holding Company owned at least ninety-five percent' of the stock of First National. Appellant assessed appellees additional income taxes of $181,960.14, which appellees paid under protest.

The decision of the DFA was appealed to the Pulaski County Chancery Court, and the chancellor found that the provisions of Act 708 of 1979 allowed the filing of consolidated returns, and that intercompany distributions of dividends between corporate members of an affiliated group were excluded from computation of taxable income for the taxpayer, the consolidated group. It is from that decision that appellant brings this appeal, and we affirm.

This case requires us to interpret two statutes relating to the taxation of closely related corporations. The first statute was enacted as Act 570 of 1965. Act 570 did not address the filing of consolidated returns, but was effective for corporations that filed separate tax returns. Act 570 provided that dividends payable by a subsidiary corporation to its parent, were exempt from taxation if the parent owned at least ninety-five percent of the subsidiary’s capital stock.

The second statutory provision, as adopted by Act 708 of 1979, extended to Arkansas corporations the right of an affiliated group under federal tax laws to elect to consolidate tax returns for the purposes of state taxation. We are instructed by Act 708 of 1979 that “this Act is based upon the concept of filing federal consolidated income tax returns.”

Concept of consolidated tax returns

The basic federal rules for taxing corporations were enacted by Congress in 1909. A corporation, regardless of its organization into separate divisions, is taxed upon its taxable income, and in 1909 the rule was adopted that intercorporate dividends are excluded from the payee corporation’s income. The principle has been refined and limited to address perceived abuses of the exclusion, but the principle that taxable income should not bear multiple levels of corporate tax is the fundamental policy underlying the taxation of dividends received by corporations. See George Mundstock, Taxation of Intercorporate Dividends Under an Unintegrated Regime, 44 Tax L. Rev. 1 (1988). The Mundstock article also points out that the Revenue Act of 1918 provided statutory authority for consolidated returns when the corporation declaring dividends is, in effect, a part of an economic unit with the shareholder-corporation. Specifically, Mundstock states: “[N]o more tax should result than if the two corporations were one entity for tax purposes.” Id.

As expressed by John M. Pearce in a comment published in the 1989 Oregon Law Review, “the general rationale behind the dividends-received deduction is to mitigate the double taxation of corporate earnings before such earnings are paid, and taxed again, to individual shareholders.” John M. Pearce, The Intercorporate Dividends-Received Deduction: An Area of Increasing Complexity, 68 OR. L. Rev. 161 (1989). To the same effect, Boris I. Bittker and James S. Eustice, in their treatise Federal Income Taxation of Corporations and Shareholders § 13.42 (Supp. 2000), note:

[T]he elimination of dividends from gross income is consistent with the theory that the group is, in effect, a single taxable enterprise and that such earnings have already been reflected in the consolidated return and taxed once to the group.

Id. To eliminate or to reduce the double taxation of earnings within a consolidated taxpayer’s return, the federal rule for filing consolidated returns specifically provides that “a dividend distributed by one member to another member during a consolidated year shall be eliminated.” 26 CFR §1.1502-14 (a). Bittker and Eustice further note that:

The basic concept underlying these provisions is that the consolidated group constitutes, in substance, a single unitary economic enterprise, despite the existence of technically distinct legal entities; as such the group’s tax liability ought to be based on its dealings with outsiders rather than on intra group transactions. This unitary enterprise concept lies at the heart of the treatment — both past and present — of intercompany transactions, which generally are ehminated in computing the group’s consolidated taxable income. In effect, the results resemble in many respects the joint-return treatment of a husband and wife.

Federal Income Taxation of Corporations and Shareholders § 13.42.

It is clear that the concept of exclusion of intercompany dividends in computing taxable income of an affiliated group is central to the concept of filing federal consolidated tax returns. We next address the question whether, under Arkansas law, the Holding Company and National Bank were eligible to form an affiliated group and to file a consolidated return as provided by Act 708 of 1979, or whether they were restricted by Act 570 of 1965 from forming an affiliated group and realizing the benefits of filing a consolidated return.

Statutory Interpretation

Our standard of review of a chancery court’s decision in a tax case is de novo. Pledger v. Troll Book Club, Inc., 316 Ark. 195, 871 S.W.2d 389 (1994). We will not disturb the chancellor’s findings of fact unless they are clearly erroneous. Id. We also review issues of statutory construction de novo as it is for us to decide what a statute means. Hodges v. Huckabee, 338 Ark. 454, 995 S.W.2d 341 (1999). We are not bound by the decision of the trial court; however, in the absence of a showing that the trial court erred in its interpretation of the law, that interpretation will be accepted as correct on appeal. Id.

The basic rule of statutory construction is to give effect to the intent of the legislature. Ford v. Keith, 338 Ark. 487, 996 S.W.2d 20 (1999). Where the language of a statute is plain and unambiguous, we determine legislative intent from the ordinary meaning of the language used. In considering the meaning of a statute, we construe it just as it reads, giving the words their ordinary and usually accepted meaning in common language. We construe the statute so that no word is left void, superfluous, or insignificant; and meaning and effect are given to every word in the statute if possible. Id. When a statute is ambiguous, we must interpret it according to the legislative intent. ACW, Inc. v. Weiss, 329 Ark. 302, 947 S.W.2d 770 (1997). Our review becomes an examination of the whole act. We reconcile provisions to make them consistent, harmonious, and sensible in an effort to give effect to every part. We also look to the legislative history, the language, and the subject matter involved. An additional rule of statutory construction in the area of taxation cases is that when we are reviewing matters involving the levying of taxes any and all doubts’and ambiguities must be resolved in favor of the taxpayer. Central and Southern Co. v. Weiss, 339 Ark. 76, 3 S.W.3d 294 (1999).

Appellant contends that Act 570 of 1965 was the controlling law at all times relevant to this case, and that it grants certain exemptions to corporations with subsidiaries, but only if the parent company owns ninety-five percent of the subsidiary’s stock. Appellant argues that because the Holding Company does not own ninety-five percent of First National’s stock, then the consolidated group may not claim this exemption. Act 570 of 1965 in relevant part states:

(2) The words ‘gross income’ do not include the following items, which shall be exempt from taxation under this act:
0 Dividends received by a corporation doing business within this state from a subsidiary, if at least ninety-five percent of the subsidiary’s capital stock is owned by such corporation doing business within the state.

Id.

Appellees respond to this argument by contending that they filed a consolidated tax return pursuant to Act 708 of 1979, and, therefore, they looked to the federal tax laws for guidance as to whether they could eliminate from the affiliated group’s gross income the dividends paid to the Holding Company. Act 708 of 1979, which was titled “an Act to clarify the Arkansas statutes allowing corporations that are part of an affiliated group to file consolidated income tax returns and other purposes,” provides in part that:

All corporations who are eligible members of an affiliated group (as that term is defined in 26 U.S. C. § 1504 (a) and (b) as of the effective date of this Act), which affiliated group files a Federal consolidated corporate income tax return pursuant to 26 U.S.C. §§ 1501-1505 as of the effective date of this Act, may elect to file a consolidated Arkansas corporate income tax return.

Act 708 of 1979 (emphasis added). We hold that the plain and unambiguous language of this statute is that corporations that become members of an affiliated group are eligible to file a consolidated tax return based .upon the concepts of federal consolidated returns. Thus, the issue we must address is whether the provisions of Act 570 of 1965 restrict the formation of an affiliated group that may file a consolidated return, thereby eliminating intercorporate dividends from its gross income.

Analysis

The question remaining for resolution is whether Act 570 of 1965 precludes the Holding Company and the National Bank from becoming members of an affiliated group eligible to file a consolidated return because the Holding Company owns less that ninety-five percent of the National Bank’s stock. As we have previously noted, Act 570 of 1965 did not address the formation of an affiliated group to file a consolidated return, but merely expressed a threshold level for a parent and a subsidiary filing separate returns to exempt dividends if the stock ownership by the parent was ninety-five percent or greater of the stock of the subsidiary. This avenue for exemption of dividends between corporations filing separate returns remained effective from the time of its adoption until the present time. Act 570 provides a means for a corporation that does not file a consolidated return to exempt from taxation the income received from dividends from a subsidiary. This interpretation of Act 570 harmonizes with Act 708, which offers a second means of imposing taxes upon the taxable income of a lawfully formed affiliated group electing to file a single consolidated return.

We next address the criteria for eligibility to form an affiliated group. Act 708 of 1979 specifically states that eligibility for becoming a member of an affiliated group for purposes of filing a consolidated Arkansas corporate income tax return is controlled by 26 U.S.C. § 1504 (a) and (b). That provision provides:

(1) The term ‘affiliated group’ means—
(A) 1 or more chains of includible corporations connected through stock ownership with a common parent corporation which is an includible corporation, but only if—
(B) (i) the common parent owns directly stock meeting the requirements of paragraph (2) in at least 1 of the other includible corporations, and
* * *
(2) 80 percent voting and value test— The ownership of stock of any corporation meets the requirements of this paragraph if it—
(A) possesses at least 80 percent of the total voting power of the stock of such corporation, and
(B) has a value equal to at least 80 percent of the total value of the stock of such corporation.

Id.

It appears to us that the legislative intent of Act 708 of 1979 was to make available the choice for a corporation holding eighty percent of the voting power and total value of one or more other corporations to form an affiliated group with such corporations and for the affiliated group to file a single consolidated return on gross earnings from its business operations, thereby eliminating intercorporate dividends from taxation.

We note that this interpretation was followed by DFA from 1977 until 1994. DFA allowed corporations eligible under Act 708 to form an affiliated group and to file consolidated tax returns following the concepts of the federal tax code from the time Act 708 was passed in 1979 until 1994. Appellees were contacted by DFA on three occasions prior to 1994 by DFA auditors. DFA reviewed appellees’ income-tax returns. The auditors did not challenge appellees’ eliminations of dividends on the consolidated tax returns which they reviewed. In 1994, DFA decided to interpret Act 570 as restricting the provisions of Act 708, and decided to disallow the elimination of dividends from the consolidated gross income of an affiliated group when a parent corporation within the group did not own ninety-five percent of its subsidiary. We note that there were no statutory changes, nor were there any new regulations promulgated by the DFA to explain this new “audit position.”

Apparently, in 1994, DFA auditors simply decided that Act 570 of 1965 superseded Act 708 of 1979. This conclusion is wrong. Act 570 does not address consolidated returns, and if it did, the later Act 708 of 1979 would prevail. See Dicken v. Missouri Pacific R.R. Co., 188 Ark. 1035, 69 S.W.2d 277 (1934) (holding that where two statues relating to the same subject are in conflict with each other the later statute controls). Act 708 contained a specific repealer clause amending conflicting portions of the Arkansas Revenue Code, of which Act 570 was a part. We conclude that eligibility to become a member of an affiliated group is controlled by Act 708, and that in a consolidated return by an affiliated group, inter-corporate dividends are excluded. We do not find any ambiguity in the statutory provisions. Act 570 applies to separate tax returns filed by a non-consolidated parent and its subsidiary. Act 708 controls the requirement for eighty percent stock ownership for the formation of affiliated groups for the purpose of fifing consolidated returns. We see no conflict between these statutory provisions, but if such were to exist, the later act would prevail. See Dicken, supra. Accordingly, we affirm the trial court on this first point.

Appellant next argues that if we adopt the federal rules regarding the elimination of dividends then we would be unconstitutionally delegating to the federal government the General Assembly’s ability to determine the net income of Arkansas taxpayers. Appellant further argues that this would be harmful to the tax system in Arkansas because it would be subject to change every time the federal government changes its tax laws. The language, appellant argues, delegates this unconstitutional authority to the federal government is as follows: “this Act is based upon the concept of filing federal consolidated tax returns.”

Before specifically addressing appellant’s point on appeal, we note:

In reviewing the constitutionality of an act, we recognize that every act carries a strong presumption of constitutionality. The burden of proof is on the party challenging the legislation to prove its unconstitutionality, and all doubts will be resolved in favor of the statute’s constitutionality, if it is possible to do so. An act will be struck down only when there is a clear incompatibility between the act and the constitution.

City of Cave Springs v. City of Rogers, 343 Ark. 652, 37 S.W.3d 607 (2001). Remaining mindful on this presumption, we turn now to appellant’s challenge.

In Leathers v. Gulf Rice Arkansas, Inc., 338 Ark. 425, 994 S.W.2d 481 (1999), we discussed the doctrine prohibiting delegation of legislative power. Relying on the United States Supreme Court, we explained:

In determining whether an unconstitutional delegation has been made, the Court considers whether Congress “has attempted to abdicate, or to transfer to others, the essential legislative functions with which it is vested by the Constitution.”

Id. (citing Currin v. Wallace, 306 U.S. 1939)). We have also noted that while the legislature may not delegate its power to make laws, it can make a law and prescribe the conditions upon which it may become operative. Cave Springs, supra.

Appellant cites Cheney v. St. Louis Southwestern Railway Co., 239 Ark. 870, 394 S.W.2d 731 (1965), in support of its argument, that if we adopt the federal rules regarding the elimination of dividends, then we would be unconstitutionally delegating to the federal government the General Assembly’s ability to determine the net income of Arkansas taxpayers. In Cheney, we determined that a statute, which expressly allowed the Interstate Commerce Commission to determine the net income of a railway, was an unlawful delegation of the General Assembly’s taxing power to the federal government. The unlawful statute stated:

[T]he income taxable in Arkansas of any corporation engaged in the business of operating a steam or electric railroad, express service, telephone or telegraph business, or other such forms of public service, shall be a proportionate part of the corporation’s gross revenues, deducting therefrom a proportionate part of all deductions. The revenues, deductions and the allocations thereof are to be determined under the Interstate Commerce Act pursuant to the Interstate Commerce Commission’s standard classification of accounts.

Cheney, supra (emphasis added).

The statutory language in Cheney is easily distinguishable from the statutory language in question in the present case. Specifically, in Cheney, the General Assembly delegated to the federal government, through the language of its Interstate Commerce Act, the authority to determine the revenues, deductions, and allocations for Arkansas taxpayers. This statute should be contrasted with the statute in question in the case now on review.

In the present case, the General Assembly was not attempting to abdicate or transfer to the federal government the right to determine how income is calculated in Arkansas. The provisions of Act 708 stated' the requirements for determining eligibility to file a consolidated tax return in Arkansas in accordance with the provisions of 26 U.S.C. § 1504 (a) and (b) as of the date of passage of Act 708. We conclude that the language “this Act is based upon the concept of filing federal consolidated tax returns” was not a delegation of power to the federal government, it was instead the General Assembly’s adoption of the conditions upon which the law for filing consolidated tax returns was to become operative.

Appellant also argues that if we allow appellees to claim an elimination of dividends without the Holding Company owning ninety-five percent of First National’s stock because they filed a consolidated tax return, then we would be treating taxpayers differently based on their election to file a consolidated return instead of a separate return. Appellant is procedurally barred from raising this argument on appeal because it was not raised below or ruled upon by the trial court. It is well settled that to preserve arguments for appeal, even constitutional ones, the appellant must obtain a ruling below. Wilson v. Neal, 332 Ark. 148, 964 S.W.2d 199 (1998). Accordingly, we reject this argument without reaching the merits. However, we do note that there are numerous variations of tax consequences that result from a decision to elect to file a consolidated return, some of which are beneficial to the taxpayer, and some of which are not.

In its final point on appeal, appellant argues that the trial court applied the wrong burden of proof on the parties at trial. Specifically, appellant argues that the trial court erroneously placed the burden of proof on the DFA to prove that the additional assessment of taxes on appellees was proper. Appellant argues that the appropriate burden would have been for appellees to prove that the dividends were properly eliminated.

We discussed the issue of appropriate burdens of proof in Ragland v. Meadowbrook Country Club, 300 Ark. 164, 777 S.W.2d 852 (1989). In Ragland, the DFA argued that it was the taxpayer’s burden to prove entitlement to a statutory exemption. Id. We noted that the taxpayer in that case was not claiming entitlement to an exemption, but instead was claiming an exclusion from coverage. Id. We explained the difference in the two taxing concepts, and noted that “a different burden of proof at the administrative and trial levels is required when an exemption or exclusion is at issue.” We noted that:

the taxpayer claiming an exemption shoulders the burden of establishing his claim. By the same logic, it follows that the agency claiming the right to collect a tax bears the burden of proving that the tax law applies to the item sought to be taxed.

Ragland, supra. Applying this rule to the case at hand, we hold that the trial court properly placed the burden on justifying the imposition of a tax upon intercorporate dividends that were excluded from taxation on the DFA. The facts in the case now on review are on all fours with those in Ragland. Specifically, the appellees in this case were not claiming an exemption from taxation they were instead claiming an exclusion from the consolidated group’s gross income of dividends paid to the Holding Company by First National. Therefore, it became DFA’s burden to prove that appellees were not eligible to file, or improperly filed, a consohdated tax return that did not include the intercorporate dividends within the affiliated group. DFA did not meet this burden of proof. Accordingly, we affirm the trial court.

Affirmed.

Corbin, J„ concurs.

Brown and Imber, JJ., dissent.

DONALD L. Corbin, Justice,

concurring. I concur with the majority’s decision to affirm the chancellor’s ruling. I write separately because I view the issue presented differently than the majority. In my opinion, the key issue is whether dividends paid by a subsidiary to a parent corporation, holding more than eighty percent, but less than ninety-five percent, of the subsidiary’s stock, should be reported as gross income when the corporations make up an affiliated group that files a consolidated corporate tax return. Resolution of this issue turns on this court’s interpretation of Ark. Code Ann. §§ 26-51-404(b) (9) and 26-51-805 (Supp. 1992).

During the relevant dates in this case, section 26-51-404(b)(9) provided an exemption from gross income for dividends paid by a subsidiary corporation to its parent corporation, if that parent owned at least ninety-five percent of the subsidiary. That provision was originally enacted in Act 570 of 1965. At the time of its passage, Arkansas law did not provide a means for such affiliated corporations to file consolidated state income tax returns.

The General Assembly subsequently passed Act 708 of 1979, now codified as section 26-51-805, allowing corporations that are members of an affiliated group to file a consolidated Arkansas corporate income tax return. Section 26-51-805 (a) directs DF&A to look to the federal laws to determine whether a group of corporations is an “affiliated group,” for purposes of filing a consolidated return. During the time in question here, federal tax regulations defined an “affiliated group” as one in which corporations share a common parent, and the parent owns at least eighty percent of the subsidiary. Also at that time, federal law provided that affiliated groups filing consolidated federal tax returns could eliminate from the group’s gross income those dividends paid by the subsidiary to the parent.

DF&A does not dispute that Appellees were an affiliated group under the federal definition and that they were, therefore, eligible to file a consolidated state tax return. Nor does the agency dispute that federal regulations provided for the “elimination” of dividends distributed by one member of an affiliated group to another. The question then is whether the General Assembly intended to allow the same elimination for purposes of determining gross income of the affiliated group under state law. I believe that was the legislature’s intention.

Our state system of income taxation is based on the federal system, and our legislature has consistently looked to the federal income tax regulations for guidance. For example, Ark. Code Ann. § 26-51-401 (Repl. 1997) provides that a taxpayer must calculate his state income tax liability using the same accounting method as used for federal income tax purposes. Similarly, Ark. Code Ann. § 26-51-402 (Repl. 1997) provides that a taxpayer must calculate his state income tax liability using the same income year as used for federal income tax purposes. More significantly, section 26-51-805(c) requires an affiliated group filing a consolidated state tax return to attach to its state return “a complete copy of the federal consolidated corporate income tax return filed with the federal Internal Revenue Service for that taxable year[.]” This court has previously held that requiring federal returns to be attached to state returns is an indication of the legislature’s intent to conform state returns to the requirements of federal concepts. See Central & Southern Cos., Inc. v. Weiss, 339 Ark. 76, 3 S.W.3d 294 (1999).

In enacting section 26-51-805, the General Assembly intended this state’s consolidated corporate income tax provisions to mirror the corresponding federal tax regulations. Subsection (g) specifically provides: “This section is based upon the concept of filing federal consolidated income tax returns.” I agree with the chancellor that this “concept” is based on a considerable body of federal law regarding consolidated corporate tax returns that existed at the time the statute was enacted. That established body of law provided that an affiliated group could eliminate from its gross income dividends paid by one member of the group to another member. Accordingly, I believe that the chancellor did not err in concluding that section 26-51-805 requires DF&A to look to the federal laws in effect at the time the Act was passed to determine whether such dividends should be eliminated from the affiliated group’s income.

I agree with the majority that section 26-51-404(b)(9) was not rendered meaningless by the passage of section 26-51-805. Rather, it’s exemption for dividends paid by a subsidiary to a parent corporation owning at least ninety-five percent of the subsidiary continued to apply to those corporate groups that elected not to file consolidated returns. For those corporations that elected to file consolidated returns, however, I believe that section 26-51-805 and its reference to the federal concept and federal tax regulations is controlling of those corporations that file a consolidated return.

Additionally, I agree with the majority that the purpose of allowing these intra-group dividends to be eliminated from the group’s gross income is to prevent double taxation. When affiliated corporations file a consolidated return, effectively pooling their income and deductions, they should not be required to count dividends paid by one member of the group to another. The reason is that before the group’s gross income is arrived at, each member of the group must first determine its individual income. The earnings that create the stock dividends will be included in the income of the first member. Thus, including them as dividend income to the second member would be tantamount to counting the same monies twice and would amount to double taxation of the group.

In sum, I believe that with the passage of Act 708 in 1979, the General Assembly differentiated between corporations that file separate returns and those that file consolidated returns. Because of the specific reference in Act 708 to the federal “concept” of filing consolidated corporate tax returns and the Act’s deference to federal law to determine which corporate groups are eligible to file consolidated returns, I believe that the General Assembly intended to adopt the federal law regarding the elimination of dividends paid by the subsidiary to the parent from the group’s consolidated income. Federal law at the time in question only required eighty percent ownership of the subsidiary by the parent. Under the facts of this case, Appellees were entitled to that elimination.

I cannot leave this subject without noting that in 1997, the General Assembly realized the confusion that was being created by these two statutes, and it amended section 26-51-404(b)(9) to require only eighty percent ownership of the subsidiary by the parent in order to get the state tax exemption. See Act 1189 of 1997. The Act reflects the legislature’s awareness of the many pending cases that were litigating the very issue at stake in this case. Although it offers a disclaimer of sorts, attempting not to influence the outcome of those pending cases, the stated purpose for amending the section is quite telling:

It is further determined that state income tax laws should have been the same as federal income tax laws and this Act is adopted to clarify that these dividends are to be treated for state income tax purposes in the same manner they would be treated for federal income tax purposes for all corporations to which the Act is applicable.

Acts 1997, No. 1189, § 3 (emphasis added). This section makes one thing perfectly clear: Federal law was always intended to guide Arkansas law in the area of consolidated corporate income tax. For these reasons, I concur in the majority’s decision to affirm the chancellor’s order.

ROBERT L. Brown, Justice,

dissenting. In 1965, the General Assembly passed Act 570, which amended the Tax Code for income taxes and read in relevant part:

(2) The words ‘gross income’ do not include the following items, which shall be exempt from taxation under this act[:]
....
(j) Dividends received by a corporation doing business within this state from a subsidiary, if at least ninety-five percent (95%) of the subsidiary’s capital stock is owned by such corporation doing business within this state.

Act 570 of 1965 is codified at Ark. Code Ann. § 26-51-404(b)(9) (Supp. 1995).

In 1979, the General Assembly passed Act 708 to clarify the filing of consolidated corporate income tax returns in Arkansas. Act 708 stated as part of its purpose: “This Act is based upon the concept of filing Federal consolidated income tax returns.” The Act further stated that corporations that qualify for filing a consolidated return are those eligible members of an affiliated group as that term is defined in 26 U.S.C. § 1504(a) and (b). Act 708 of 1979 is codified at Ark. Code Ann. § 26-51-805(a)(l) (Repl. 1997).

The United States Code defines “affiliated group” as one or more chains of includable corporations connected through stock ownership with a common parent corporation. 26 U.S.C. § 1504(a)(1). The parent corporation of an “affiliated group” must own at least eighty percent of the stock of the includable corporation. 26 U.S.C. § 1504(a)(2).

The exemption percentage remained ninety-five percent in Arkansas until 1997 when Act 1189 was passed. Act 1189 changed the subsidiary’s percentage from ninety-five percent to eighty percent. In section 3 of Act 1189, the General Assembly acknowledged that Arkansas income tax law was “at variance” with federal income tax law on the percentage figure and stated that the Act was passed to treat state and federal income taxes “in the same manner” and was not intended to affect existing controversies or have an effect on the interpretation of prior law.

The majority opinion concludes that since the 1979 Act references the United States Code’s definition of “affiliated group” and states that the federal concept of consolidated returns will apply, the 1965 Act with the ninety-five percent figure was effectively repealed for consolidated returns. I do not see it that way.

To be sure, Act 708 of 1979 directs corporations to the United States Code for a definition of “affiliated group,” but it is silent on what percentage of ownership of a subsidiary company is necessary for an income tax exemption. That, of course, is clearly and unambiguously set out in Act 570 of 1965. All Act 708 did was define what comprises an affiliated group to enable corporations to file consolidated returns. Consolidated returns, of course, may be filed for a variety of reasons and not simply to take advantage of the dividend exemption. Act 708 did not adopt or incorporate the federal regulation which provides the exemption from federal income tax for dividends paid by a corporation to a parent. See 26 C.F.R.. § 1.1502-14. Hence, Arkansas’s ninety-five percent criterion stayed in place and was not affected by the 1979 Act. Again, this ninety-five percent criterion was not repealed by the General Assembly until 1997. And the stated intent of the General Assembly in 1997 was to eliminate the variance in percentages between Arkansas and federal income tax law.

Here, we are talking about a tax exemption. Act 570 of 1965 makes that fact abundantly clear. Tax exemptions in this state must be proved beyond a reasonable doubt. See City of Little Rock v. McIntosh, 319 Ark. 423, 892 S.W.2d 462 (1995) (citing Pledger v. Baldor Int’l, 309 Ark. 30, 827 S.W.2d 646 (1992)). That is a hefty burden of proof for the taxpayers, as a strong presumption operates in favor of the taxing power. See id. (citing Ragland v. General Tire & Rubber Co., 297 Ark. 394, 763 S.W.2d 70 (1989)). Moreover, we take pains to harmonize tax statutes which are seemingly in conflict. See, e.g, Central & Southern Cos., Inc. v. Weiss, 339 Ark. 76, 3 S.W.3d 294 (1999). And it is blackletter law for statutory construction to give effect to the specific statute over the general. See Board of Trustees for City of Little Rock Police Dept. Pension & Relief Fund v. Stodola, 328 Ark. 194, 942 S.W.2d 255 (1997) (citations omitted). Finally, this court has recently held that the legislative intent of Act 780 of 1979 was for concepts of federal taxation to apply “unless a different treatment is prescribed by Arkansas law.” Central & Southern Cos., Inc., 339 Ark. at 83, 3 S.W.3d at 299. Clearly, Arkansas law provided a different treatment for tax exemptions for subsidiary dividends.

Viewing the significant burden of proof on the Holding Company to prove its exemption as well as the clear statement of the stock ownership necessary in Arkansas for an exemption during the relevant time period, I would reverse the trial court and hold that the Holding Company did not qualify for the exemption. In my opinion, with Act 708 of 1979, the General Assembly merely adopted the federal concept of consolidated returns and the federal definition of affiliated groups while retaining Arkansas’s specific statute on stock ownership. See Central & Southern Cos., Inc. v. Weiss, supra. That statutory interpretation easily harmonizes the two statutes.

Accordingly, I dissent.

IMBER, J., joins.

       We note that Act 570 was amended in 1997 to conform to the eighty percent eligibility requirement for forming an affiliated group to file a consolidated return. See Act 1189 of 1997.


source: Caselaw Access Project

author: JIM HANNAH, Justice.

license: Public Domain

text:
    Rodney BUNCH v. STATE of Arkansas
    CR 00-1360
    43 S.W.3d 132
    Supreme Court of Arkansas
    Opinion delivered May 10, 2001

      James R. Wallace & Associates, by: Tammy L. Harris, for appellant.

      Mark Pryor, Att’y Gen., by; Vada Berger, Ass’t Att’y Gen., for appellee.
   JIM HANNAH, Justice.

This appeal arises from Appellant Rodney Bunch’s conviction for aggravated robbery and theft of property. Bunch was convicted as an habitual offender, and sentenced to life in prison under the enhanced sentencing statute. He raises one point on appeal, arguing that the sentencing enhancement provision in Ark. Code Ann. § 5-4-501 (d) (Repl. 1997) is unconstitutional as applied to him. We affirm.

Facts

On July 19, 1998, Stephanie Springer Transue returned home at about 11:00 p.m. from a business trip and, as she was unlocking her front door, was attacked by a black male whom she had seen moments before across the parking lot at her condominium complex. According to Transue’s testimony, the man was carrying some type of weapon, either a knife or a gun, and he pushed her down and demanded her purse and car keys. However, the man ran away when the alarm at Transue’s apartment went off. Transue’s neighbors called the police, and Transue was able to recover her purse and car keys from the parking lot. She subsequently gave a statement to the police that night, and described her attacker with some detail. She indicated that she got a very good look at her attacker.

On August 6, 1998, Transue identified Bunch from a photo lineup shown to her by Detective Charles Ray of the Little Rock Police Department. According to Transue’s and Ray’s testimony, it only took three seconds for Transue to identify Bunch as her attacker. Bunch was subsequently charged by felony information on October 6, 1998, on two counts including aggravated robbery, a felony, and theft of property under $500, a misdemeanor. The first trial in this matter occurred on March 4, 1999, and ended in a mistrial due to a hung jury.

The State chose to retry Bunch, and on March 14, 2000, the prosecutor amended the felony information to include a charge that Bunch is an habitual offender because he was convicted on February 4, 2000, of two counts of aggravated robbery and one count of misdemeanor theft of property in an unrelated matter. He was sentenced to 120 months each on the aggravated-robbery counts.

Bunch’s attorney filed a motion to declare Ark. Code Ann. § 5-4-501 (d) unconstitutional as applied to Bunch. The court denied this motion at a pretrial hearing on April 10, 2000.

Trial was held on April 25, 2000, and the prosecution first presented Transue and Ray who testified about the attack and Transue’s identification of Bunch in the photo lineup. Pulaski County Deputy Sheriff Sylvester Nelson testified that after a pretrial hearing on January 4, 1999, Bunch, who was in Nelson’s custody, fled from Nelson at the courthouse and was apprehended several blocks from the courthouse. Following the State’s case, the defense made the requisite directed-verdict motions, which were denied.

The defense then presented its case. Little Rock Police Officer John Witt testified that he was the first to respond to Transue’s call after the attack, and that Transue gave him a description of what her attacker looked like and what he was wearing. Little Rock Police Officer John Bracey testified that at 11:40 p.m. on the night of Transue’s attack, he stopped Bunch as he was driving and gave him a traffic ticket. Bracey testified that he patted down Bunch, and that Bunch had no weapons, money, credit cards, or a purse on him or in view in the car. He testified that Bunch had some women with him in the car. Bracey further testified that he had driven the route from Transue’s apartment complex to where he pulled Bunch over, and that the entire route took approximately ten minutes in noonday traffic. Little Rock Police Officer Todd Armstrong testified that he arrested Bunch on August 6, 1998, for robbery, and at the time, Bunch had a tattoo on his left arm. Armstrong testified on cross-examination that Bunch fled when Armstrong tried to pull him over, and that a car chase ensued until he was apprehended. The photo taken of Bunch after his arrest was the same photo used in the photo lineup shown to Transue.

After the defense rested, defense counsel renewed all motions and objections, including the motion challenging the constitutionality of Ark. Code Ann. § 5-4-501 (d) as it applies to Bunch. The trial court again denied the motions. After receiving instructions, the jury retired for approximately one hour, then returned with a unanimous guilty verdict on the charges of aggravated robbery and theft of property. Because the State indicated that it would proceed under the “three strike” provision of the sentencing statutes' based on Bunch’s prior conviction on two counts of aggravated robbery, the trial court indicated that it would announce to the jury that there was a mandatory life sentence. The defense objected, renewing its motion as to the constitutionality of that provision, arguing that the two previous convictions arose from the same occurrence. However, the court overruled the objection and announced to the jury that it was sentencing Bunch to a life sentence. On May 16, 2000, Bunch moved for a new trial and the hearing was held on this motion on May 22, 2000. The defense again challenged the constitutionality of Ark. Code Ann. § 5-4-501(d) as it applied to Bunch, but the trial court denied that motion again. Bunch filed his notice of appeal on June 12, 2000.

Bunch does not challenge the sufficiency of the evidence, but argues on appeal that the trial court erred in sentencing him to life in prison because the trial court did not follow the sentencing procedures laid out in Ark. Code Ann. § 5-4-502 (Repl. 1997), which contemplates a sentencing range for the jury to consider and apply. He argues this violates his equal protection and due process rights because it removes from the jury the discretion to apply a punishment within the contemplated “range.” Furthermore, Bunch argues that this error also violates the Eighth Amendment to the United States Constitution and Article 2, § 9, of the Arkansas Constitution prohibiting cruel and unusual punishment. Finally, Bunch argues that the mandatory life sentence for an habitual offender who falls within the provisions of Ark. Code Ann. § 5-4-501(d) violates the Separation of Powers Doctrine in the United States and Arkansas Constitutions because it allows the legislature instead of the jury to pass the sentence on a defendant.

Standard of Review

Statutes are presumed constitutional, and the burden of proving otherwise is on the challenger of the statute. Ford v. Keith, 338 Ark. 487, 996 S.W.2d 20 (1999); ACW, Inc. v. Weiss, 329 Ark. 302, 947 S.W.2d 770 (1997). If it is possible to construe a statute as constitutional, we must do so. Jones v. State, 333 Ark. 208, 969 S.W.2d 618 (1998). In construing a statute, we will presume that the General Assembly, in enacting it, possessed the full knowledge of the constitutional scope of its powers, full knowledge of prior legislation on the same subject, and full knowledge of judicial decisions under preexisting law. McLeod, Comm’r of Revenues v. Santa Fe Trail Transp. Co., 205 Ark. 225, 168 S.W.2d 413 (1943). We must also give effect to the legislature’s intent, making use of common sense and giving words their usual and ordinary meaning. Kyle v. State, 312 Ark. 274, 849 S.W.2d 935 (1993).

A. Do Ark. Code Ann. §§ 5-4-501(d)(1)(A) and 5-4-501(d)(3)(A)(3) and (4) Conflict and Violate Bunch’s Due Process and Equal Protection Rights?

As a first issue, Bunch argues that these statutes conflict in that the first, Ark. Code Ann. § 5-4-501(d)(l)(A), requires that a defendant be sentenced to life in prison while the second, Ark. Code Ann. § 5-4-501 (d)(3)(A)(3) and (4), requires that a jury sentence him within the statutory range for the crime. As such, failure to allow the jury to sentence him within that statutory range is a violation of due process and equal protection. Ark. Code Ann. § 5-4-501 (d)(1) (A) states:

(d)(1) A defendant who is convicted of a felony involving violence enumerated in subdivision (d)(2) of this section and who has previously been convicted of two (2) or more of the felonies involving violence enumerated in subdivision (d) (2) of this section shall be sentenced to an extended term of imprisonment, without eligibility except under § 16-93-1302 for parole or community punishment transfer, as follows:
(A) For a conviction of a Class Y felony, a term of not less than life in prison;...

Ark. Code Ann. § 5-4-501 (d)(3)(A)(3) and (4), however, indicate that the procedure governing sentencing requires the trial court to do the following:

(3) The trial court shall then instruct the jury as to the number of previous convictions involving violence and the statutory sentencing range. The jury may be advised as to the nature of the previous convictions and the date and place thereof.
(4) The jury shall retire again and then determine a sentence within the statutory range.

Clearly, the first statutory provision dictates that a life sentence be imposed while the second provision indicates that the jury must determine a sentence “within the statutory range.”

Bunch’s argument is premised on the idea that Ark. Code Ann. § 5-4-501(d), which requires a mandatory life sentence in certain instances, and Ark. Code Ann. § 5-4-103(a), which allows the jury to impose a sentence within a statutory range, are at odds. While Ark. Code Ann. §§ 5-4-501 (d)(1)(A) and 5-4-501 (d)(3) (A) (3) and (4) would seem to be inconsistent, our case law detailing sentencing clarifies the seeming discrepancy. This court has basically decided this issue in Ricks v. State, 327 Ark. 513, 940 S.W.2d 422 (1997), where the court found that Ark. Code Ann. § 5-4-501 (Supp.1995) requiring a life sentence did not conflict with another statute that allowed the jury to sentence within the prescribed range. While the second statute was different from Ark. Code Ann. § 5-4-501(d) (3) (A) (3) and (4), the reasoning is the same. Basically, the court found that because the jury is required to fix punishment according to the entire criminal code under Ark. Code Ann. § 5-4-103(a) (Repl. 1997), and the code required that a life sentence be imposed under Ark. Code Ann. § 5-4-501 (d)(1)(A), there is no conflict. Nor is there a constitutional right to be sentenced by a jury. Spaziano v. Florida, 468 U.S. 447 (1984); Scherrer v. State, 294 Ark. 227, 742 S.W.2d 877(1988). The fact that the trial court instead of the jury imposed the sentence is meaningless. Certainly, the court, could have instructed the jury that the only sentence available was a life sentence pursuant to the statute, and then dismissed the jury to “deliberate,” but the outcome would have been the same. There could not be a violation of the defendant’s due process and equal protection rights where the same sentence would have been handed down whether the court or the jury made the ruling.

Sentencing in Arkansas is entirely a matter of statute. State v. Freeman, 312 Ark. 34, 846 S.W.2d 660 (1993). The Freeman court quoted previous cases, stating, “It is well settled that it is for the legislative branch of a state or federal government to determine the kind of conduct that constitutes a crime and the nature and extent of punishment which may be imposed.” Freeman, 312 Ark. at 37 (citing Southern v. State, 284 Ark. 572, 683 S.W.2d 933 (1985), quoting Sparrow v. State, 284 Ark..396, 683 S.W.2d 218 (1985)). This court has also held that minimum sentences for habitual offenders are mandatory, McKillion v. State, 306 Ark. 511, 815 S.W.2d 936 (1991), and that there is no constitutional right to be sentenced by a jury. Ricks, supra. As such, whether the trial court or the jury sentenced him to a mandatory life term seems to be a distinction with no effect.

Regardless, this court must analyze the statutes using a rational-basis review because the defendant is not in a protected class. Under this analysis, this court must find that the legislature had a rational basis for enacting a heightened punishment scheme such as that in Ark. Code Ann. § 5-4-501 (d)(1). See Chapman v. United States, 500 U.S. 453 (1991). As other cases have shown, such “three-strike” provisions currently are constitutional in other states and the federal. courts. See Harmelin v. Michigan, 501 U.S. 957 (1991); State v. Jones, 543 S.E.2d 541 (2001); State v. Block, 587 N.W.2d 914 (Wis. 1998); State v. Thorne, 921 P.2d 514 (Wash. 1996); State v. Manussier, 921 P.2d 473 (Wash. 1996). The rational basis most commonly offered by these courts is that the legislature has an interest in protecting the public by requiring heightened punishment for repeat offenders, particularly violent offenders such as Bunch. See Block, supra;, Thorne, supra; and Manussier, supra. Therefore, because it appears that there is a rational basis for enacting the enhancement provision in Ark. Code Ann. § 5-4-501 (d), any perceived “conflict” between that statute and any statute allowing the jury to sentence to the same punishment does not create a constitutional violation.

B. Does Ark. Code Ann. § 5-4-501(d)(3) violate the federal and state constitutional prohibition against cruel and unusual punishment?

Next, Bunch argues that applying a life sentence for this crime constitutes cruel and unusual punishment under the Eighth Amendment to the United States Constitution and Article 2, § 9, of the Arkansas Constitution. Bunch offers absolutely no authority in support of this argument, and this court has repeatedly said that arguments unsupported by authority or convincing argument will not be considered by this court. Womack v. Foster, 340 Ark. 124, 8 S.W.3d 854 (2000). This court has said on numerous occasions that it will not consider the merits of an argument if the appellant fails to cite any convincing legal authority in support of that argument. Ellis v. Price, 337 Ark. 542, 990 S.W.2d 543 (1999); Craft v. City of Fort Smith, 335 Ark. 417, 984 S.W.2d 22 (1998); Ayers v. State, 334 Ark. 258, 975 S.W.2d 88 (1998); Williams v. State; 329 Ark. 8, 946 S.W.2d 678 (1997). Bunch’s failure to cite authority or make a convincing argument is sufficient reason for affirmance of the trial court’s ruling on this point. Williams v. Martin, 335 Ark. 163, 980 S.W.2d 248 (1998). It is certainly not apparent without further research that this argument is well-taken. Id.

Despite this lack of authority or argument, we choose to reach the merits. It should first be noted that this court has interpreted the provisions in both the state and federal constitutions identically on the issue of the prohibition against cruel and unusual punishment, and this case does not offer any legal authority or persuasive argument to change our legal course now. See, e.g., Williams v. State, 325 Ark. 432, 930 S.W.2d 297 (1996); Allen v. State, 253 Ark. 732, 488 S.W.2d 712 (1973). Because of that, the United States Supreme Court’s decision in Harmelin, holding that a mandatory life sentence does not violate the Eighth Amendment prohibition against cruel and unusual punishment, appears to be dispositive. Furthermore» the sentence falls within the limits set by the General Assembly for the offense. Henderson v. State, 322 Ark. 402, 910 S.W.2d 656 (1995). As such, this court has held that if the sentence fixed by the trial court is within legislative limits, we are not free to reduce it even though we might consider it to be unduly harsh. Williams v. State, 320 Ark. 498, 898 S.W.2d 38 (1995); Parker v. State, 302 Ark. 509, 790 S.W.2d 894 (1990). We have carved out extremely narrow exceptions to this general statement of the law: (1) where the punishment resulted from passion or prejudice; (2) where it was a clear abuse of the jury’s discretion; or (3) where it was so wholly disproportionate to the nature of the offense as to shock the moral sense of the community. See Williams, supra; Dunlap v. State, 303 Ark. 222, 795 S.W.2d 920 (1990); Parker, supra; see also, Harmelin, supra. None of these three narrow exceptions applies here where the punishment is mandated by the legislature and has been determined by the Supreme Court in Harmelin as not violative of the Eighth Amendment. Other jurisdictions, as well, have come to the same conclusion, particularly in relation to their “three strikes” legislation. See Jones, supra; Block, supra; Thorne, supra; and Manussier, supra. We do not think Bunch’s argument has merit based on the current state of the law.

C. Does Ark. Code Ann. § 5-4-50i(i)(3) Violate the Separation of Powers Doctrine?

As his final argument, Bunch argues that the legislature’s enactment of a mandatory sentence violates the Separation of Powers Doctrine in the federal and state constitutions or constitutes a bill of attainder because it legislatively determines a mandatory sentence without a trial before a jury or judge.

Once again, Bunch failed to offer any legal authority in support for this proposition and, as such, this court may refuse to consider the argument. See Womack, supra. Again, however, we choose to reach the merits. This argument necessarily ties in with the first point on appeal. Since the enactment of the criminal code, this court has said that sentencing is controlled by statute. See Spann v. State, 328 Ark. 509, 944 S.W.2d 537 (1997), and Cody v. State, 326 Ark. 85, 929 S.W.2d 159 (1996). In State v. Murphy, 315 Ark. 68, 864 S.W.2d 842 (1993), this court considered whether the trial court’s refusal to sentence the defendant as an habitual offender despite the statutory requirement to do so violated the Separation of Powers Doctrine. The court stated:

In refusing to sentence appellee as an habitual offender, the trial court stated that the word “may” in the recidivist statute indicated that sentencing an accused pursuant to that statute is discretionary with the trial court. The trial court relied on Mathis v. State, 267 Ark. 904, 591 S.W.2d 679 (Ark. Ct. App. 1979). The trial court’s reliance was misplaced. In Mathis, the court of appeals incorrectly indicated that sentencing an accused as an habitual was a matter within the trial court’s discretion. Realizing its error, the court of appeals overruled Mathis in Rogers v. State, 10 Ark. App. 19, 660 S.W.2d 949 (1983).
This court has very clearly stated on several occasions that sentencing under the recidivist statute is mandatory, not optional. State v. Freeman, 312 Ark. 34, 846 S.W.2d 660 (1993); McKillion v. State, 306 Ark. 511, 815 S.W.2d 936 (1991); Woodson v. State, 302 Ark. 10, 786 S.W.2d 120 (1990); Hart v. State, 301 Ark. 200, 783 S.W.2d 40 (1990). This court has reasoned that the word “may” in the recidivist statute indicates that the jury or the trial court, whichever is considering the sentence to be imposed, has only the discretion to sentence an accused within the range of punishment set out in the recidivist statute. See e.g., McKillion, 306 Ark. 511, 815 S.W.2d 936. We have consistendy maintained our position on this issue and do so again today.

Murphy, 315 Ark. at 73. Based on this reasoning, in this case a violation of the Separation of Powers Doctrine could only have occurred here if the trial court had not sentenced Bunch to life in prison as required by the habitual offender statute. Because sentencing is controlled by statute, and, thus, by the legislature, the legislature’s requirement of a life sentence for an habitual violent offender is mandatory and not within the trial court’s or jury’s discretion.

Furthermore, this court discussed bills of attainder in Burns v. State, 303 Ark. 64, 793 S.W.2d 779 (1990), and stated:

In Nixon v. Administrator of General Services, 433 U.S. 425 (1977) (citing United States v. Brown, 381 U.S. 437 (1965)), the Supreme Court discussed the key features of a bill of attainder and stated that it was “. . . a law that legislatively determines guilt and inflicts punishment upon an identifiable individual without provision of the protections of a judicial trial.” Bills of attainder are proscribed by Art. I, 10 of the United States Constitution, which provides that “[n]o State shall. . . pass any Bill of Attainder, ex post facto Law . . . .”

Burns, 303 Ark. at 68. Clearly, as the State points out in its brief, Bunch cannot show that he was determined guilty and sentenced to a previously fixed punishment without a trial, or that he was a targeted “identifiable individual” not afforded the protections of a judicial trial.

Arkansas Supreme Court Rule 4-3 (h)

The transcript of the record in this case has been reviewed in accordance with our Rule 4-3(h), which requires, in cases in which there is a sentence to life imprisonment or death, that we review all prejudicial errors in accordance with Ark. Code Ann. § 16-91-113(a). None have been found.

Affirmed.

       Aggravated robbery, of which Bunch was convicted here and in his two previous convictions, is considered a felony involving violence subject to this sentencing provision. See Ark. Code Ann. § 5-4-501(d)(2)(A)(iv).


author: PER CURIAM. TOM Glaze, Justice,

text:
    Brian GOODEN v. STATE of Arkansas
    CR 00-845
    42 S.W.3d 528
    Supreme Court of Arkansas
    Opinion delivered May 10, 2001

      Gene E. McKissic, respondent’s cousel.

      Respondent, pro se.
    No response.
   PER CURIAM.

On March 22, 2001, this court granted Brian Gooden a belated appeal and required that Gene E. McKissic remain attorney of record in this case and continue his representation of Gooden. We directed McKissic to file a petition for writ of certiorari to call up the entire record in this appeal.

On April 6, 2001, McKissic moved this court to be relieved as counsel. In his motion, he gave this court the following reasons:

1. He has been sued in federal district court by Gooden in connection with this and other legal matters.
2. Gooden has filed an ethics complaint against him with the Committee on Professional Conduct.
3. He does not believe Gooden’s appeal has merit, and it violates his plea agreement.

Citing irreparable differences and a conflict of interest, McKissic prays to be relieved as counsel.

On April 24, 2001, Gooden, pro se, tendered a motion in which he disagreed with McKissic’s assessment of his appeal and plea agreement and argued that he paid McKissic $1,500 to represent him at the trial court level and on appeal. He prays that McKissic refund the fee or assist in paying expenses incurred in the appeal. Gooden attaches an affidavit of indigency as an alternative to having McKissic pay for his appeal. We treat Gooden’s tendered motion as an answer to McKissic’s motion to be relieved.

The appeal in this matter has already been seriously delayed. Nevertheless, we remand this matter to circuit court for a determination of whether McKissic was retained to represent Gooden on appeal and was paid accordingly. We direct the circuit court to file findings of fact and conclusions of law on this point within sixty days. That determination, of course, will be instrumental in our decision of whether to declare Gooden indigent and appoint McKissic or other counsel to represent him.

Glaze, J„ dissents.

TOM Glaze, Justice,

dissenting. We denied Mr. McKissic’s prior request to withdraw as counsel in a per curiam on March 22, 2001. See Gooden v. State, 344 Ark. 291, 40 S.W.3d 271 (2001). Nothing has changed to my knowledge except that Gooden now wants to proceed in forma pauperis. I would grant Gooden’s motion and appoint McKissic as counsel.


author: TOM GLAZE, Justice,

text:
    Richard HILL, Jr. v. STATE of Arkansas
    CR 00-921
    40 S.W.2d 751
    Supreme Court of Arkansas
    Opinion delivered March 22, 2001
    Concurring Opinion on Denial of Petition for Rehearing April 26, 2001
   TOM GLAZE, Justice,

concurring. I would deny the petition for rehearing butnot on the basis that there was no evidence to support the giving of an instruction on felony manslaughter as a lesser included offense. Based on the evidence, it cannot be said the appellant Richard Hill’s shooting and killing the victim, Kenneth Oglesby, was done negligently.


author: W.H. “Dub” Arnold, Chief Justice.

text:
    FORREST CONSTRUCTION, INC. v. John and Claudia MILAM, et al.

    00-830
    43 S.W.3d 140
    Supreme Court of Arkansas
    Opinion delivered May 17, 2001

      Phillip J. Taylor, for appellant.

      Robertson, Beasley, Cowan & Ketcham, PLC, by: Kenneth W. Cowan, for appellees.
   W.H. “Dub” Arnold, Chief Justice.

This appeal comes from a chancery decree enjoining appellant from subdividing certain lots and from selling certain lots that had already been subdivided in the Meadowbrook South Addition in the city of Greenwood. The chancellor also refused to enforce a sewer easement over land owned by appellees Donnie and Carol Whitson, and awarded appellees $23,579.65 in attorney fees. Appellant contends on appeal that the chancellor’s rulings were erroneous; appellees ask that we dismiss the appeal on the grounds of mootness and lack of standing. We affirm the trial court as to the easement issue but reverse the trial court’s interpretation of the restrictive covenants; as such, the court of appeals is affirmed in part and reversed in part.

The appeal was originally heard by the Arkansas Court of Appeals, which denied the motion to dismiss and reversed and remanded the case. See Forrest Construction, Inc. v. Milam, et al., 70 Ark. App. 466, 20 S.W.3d 440 (2000). Appellees then petitioned this Court for review, asserting that the decision rendered by the court of appeals was arguably in conflict with prior holdings of this Court. We granted petition for review pursuant to Ark. Sup. Ct. R. 1-2 (e) (ii). When we grant review following a decision by the court of appeals, we review the case as though it had been originally filed with this court. Freeman v. Con-Agra Frozen Foods, 344 Ark. 296, _S.W.3d_(2001); White v. Georgia-Pacific Corp., 339 Ark. 474, 6 S.W.3d 98 (1999).

In 1993, Forrest Griffith and his wife Gloria acquired title to over 100 acres of land in Sebastian County. The land was later annexed to the city of Greenwood. In 1994, Griffith began developing the majority of the land into a subdivision called Meadow-brook South. He planned to divide the property into thirty-nine lots. However, before he could plat the subdivision, he sold two tracts by metes and bounds description. One tract was sold to appellees John and Claudia Milam; the other was sold to Melissa and Nelson Brock. Thereafter, Griffith platted the subdivision into lots. On May 4, 1994, he filed a plat with the circuit clerk reflecting thirty-seven lots ranging in size from 1.05 acres to 5.52 acres. The plat was signed by the Griffiths, Milams, and Brocks.

On May 9, 1994, five days after the plat was filed, Forrest Griffith filed a document containing ten restrictive covenants pertaining to the subdivision. The covenants provided, inter alia, that all lots were to be used for residential purposes only, that all residences were to have a minimum of 1,600 square feet of living area, and that all lots were to be used for single family dwellings. The document was signed only by Forrest Griffith.

After filing the plat and covenants, Griffith began to market the subdivision as one having estate-sized lots and offering “country living in the city.” A few lots were sold in the summer of 1994 by Forrest and Gloria Griffith to various buyers, including appellees John and Claudia Milam and appellees Bill and Donna Dennis. In August 1994, the remaining property in the subdivision was transferred from the Griffiths to appellant Forrest Construction, Inc. After that time, the remaining appellees Maverick and Wendy Trozzi, Rush and Marcia West, Dean and Lena Kang, Rod and Sherry Hower, Ed and Andria Hawkins, Chris and Debra Honaker, Kenneth and Ann Hamilton, Donnie and Carol Whitson, and Charles and Kathryn O’Brien, purchased various lots in the subdivision.

In June 1996, Forrest Griffith, as president of Forrest Construction, Inc., decided to replat the subdivision by splitting nine of the unsold lots into twenty-two smaller lots. Lot 19 was split into eight lots approximately one-half acre in size, Lots 21 and 22 into three lots approximately three-quarters of an acre in size, Lots 31 and 32 into three lots approximately one and one-half acres in size, and Lots 34, 35, 36, and 37 into eight lots ranging in size from .63 acres to 1.2 acres. The Greenwood City Council approved the replatting in September 1996. Thereafter, appellant began making improvements on the lots.

Griffith did not inform the appellee homeowners of his plan to split lots. However, they discovered his intention to do so; and, on February 18, 1997, a number of homeowners, including many of the appellees in this case, filed suit in Sebastian County Chancery Court to enjoin the splitting of lots. Within a few days thereafter, the Greenwood City Council withdrew its approval of the replatting. As a result, the homeowners voluntarily dismissed their chancery action without prejudice. Griffith, meanwhile, pursued judicial review of the city council’s withdrawal of its approval. He ultimately obtained relief on May 8, 1998, when the Sebastian County Circuit Court found that the city council’s withdrawal of approval had been wrongful.

Following the circuit court’s ruling, Griffith began to sell the replatted lots. On August 19, 1998, appellees filed the suit that is the subject of this appeal. They alleged that appellant had split the lots in violation of the restrictive covenants filed in 1994, and they asked that appellant be enjoined from further violations. Appellant defended primarily on the grounds that none of the restrictive covenants expressly prohibited splitting the lots and that appellees’ request for relief should be barred by the equitable doctrines of laches, waiver, estoppel, and unclean hands. The case went to trial, and the chancellor found that the restrictive covenant which stated that “all lots are to be used for single family dwellings” prohibited appellant from splitting the originally platted lots. He also found that there was no basis for the application of appellant’s equitable defenses. Appellant was permanently restrained from any further splitting of the originally platted lots and from allowing any of the lots already split to be sold unless the lots already had substantial construction on them. It is from this ruling that appellant now appeals.

I. Appellees’ Motion to Dismiss

We must first address an issue originally presented by appellees in a motion to dismiss the appeal. The motion concerns events that occurred after the notice of appeal was filed in this case. On September 14, 1999, a decree of foreclosure was entered as the result of a complaint filed by Farmers Bank of Greenwood against appellant. The decree ordered the sale of certain secured property owned by appellant in order to repay over $1,000,000 owed to the bank. Among the properties that had been pledged as security were Lot 23 in the Meadowbrook South subdivision and seventeen of the twenty-two split lots in the subdivision. On or about October 26, 1999, those lots were in fact sold to Farmers Bank. Appellees argue that, because of the foreclosure sale, the issues in this case are now moot, and appellant has no standing to prosecute this appeal. We disagree.

A. Mootness

We have held that a case becomes moot when any judgment rendered would have no practical legal effect upon a then-existing legal controversy. Dillon v. Twin City Bank, 325 Ark. 309, 924 S.W.2d 802 (1996). As a general rule, an appellate court will not address moot issues. Id. However, we may elect to address moot issues when they raise considerations of public interest or when addressing them will prevent future litigation. See Stair v. Phillips, 315 Ark. 429, 867 S.W.2d 453 (1993).

Obviously, this case involves considerations of public interest in that the case involves the use of property in a large subdivision, and the rights of a substantial number of persons will be affected. A ruling on the merits will have the practical legal effect of determining what actions may or may not be taken with respect to the subdivision lots. Additionally, although appellant has purportedly filed a lawsuit in federal court against the City of Greenwood and the Whitson appellees and, according to him, that case has been stayed pending our resolution of this appeal, there is no evidence in the record as to foreclosure by any bank against Forrest Construction nor of the federal lawsuit. As such, we deny the motion to dismiss on mootness grounds.

B. Standing

The appellees further assert that appellant’s appeal should be dismissed for lack of standing to prosecute this appeal. We have held that a party has no standing to raise an issue regarding property in which he has no interest. Nash v. Estate of Swaffar, 336 Ark. 235, 983 S.W.2d 942 (1999). However, we have also held that a party is an aggrieved party and thus has standing to appeal if the trial court’s order has impaired his economic interests. Sebastian Lake Pub. Util. Co. v. Sebastian Lake Realty, 325 Ark. 85, 923 S.W.2d 860 (1996).

Even though appellant may have no present property interest in the lots that were replatted, he remains aggrieved by virtue of his liability for attorney fees in the amount of $23,579.65. The chancellor awarded those fees because he found that appellees were the prevailing party below. A reversal of that finding will necessarily entail a reversal of the attorney fee award against appellant. Therefore, we hold that appellant does have standing to prosecute the instant appeal.

II. Merits of the Appeal

A. Interpretation of Restrictive Covenant

Appellant raises several points of error regarding the chancellor’s finding that the subdivision covenants prohibit the splitting of the originally platted lots. Chancery cases are reviewed de novo on appeal. Holaday v. Fraker, 323 Ark. 522, 915 S.W.2d 280 (1996). We do not reverse a chancellor’s findings of fact unless they are clearly erroneous. Id. A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. Id.

The chancellor in this case found that the subdivision’s general plan of development, the plat showing oversized lots, the marketing of the subdivision by appellant, and the covenant which read, “all lots are to be used for single family dwellings,” prohibited the splitting of the subdivision’s lots. We disagree and hold that the covenant was neither valid nor effective as executed.

Arkansas Code Annotated § 18-12-103 (1987) states:

No restrictive or protective covenants affecting the use of real property nor any instrument purporting to restrict the use of real property shall be valid or effective against a subsequent purchaser or owner of real property unless the restrictive or protective covenants or instrument purporting to restrict the use of the real property is executed by the owners of the real property and recorded in the office of the recorder of the county in which the property is located.

(Emphasis added.) Here, only Forrest Griffith signed the restrictive covenants document, although he was not the sole owner. As such, we hold that the covenants are not valid pursuant to Ark. Code Ann. § 18-12-103, as all of the parties did not sign the covenants.

Notwithstanding, even if we had found the restrictive covenants to be valid, we do not find them to be prohibitive of lot-splitting in this case. We have held that we do not favor restrictions upon the use of land, and if there is a restriction on the land, it must be clearly apparent. Holaday v. Fraker, supra. Restrictive covenants are to be strictly construed against limitations on the free use of property. Casebeer v. Beacon, 248 Ark. 22, 449 S.W.2d 701 (1970). All doubts are resolved in favor of the unfettered use of land. Id. However, this rule of strict construction is limited by the basic doctrine of taking the plain meaning of the language employed. Holaday v. Fraker, supra. The general rule governing interpretation, application, and enforcement of restrictive covenants is that the intention of the parties as shown by the covenant governs. Id.

The covenant primarily at issue in this case, which is covenant number nine, provides simply that all lots are to be used for single-family dwellings. The court of appeals held, and we agree, that, as written, the covenant is directed more toward the type of use to which a lot is put rather than to the size of a lot. If there had been any intention to restrict the division of lots, such intention could have been clearly and unambiguously expressed in a covenant. See Shermer v. Haynes, 248 Ark. 255, 451 S.W.2d 445 (1970). There, in fact, was evidence at trial that, prior to the filing of the ten covenants that now govern the subdivision, a set.of twelve covenants was drafted, one of which contained an express restriction on the splitting of lots. However, those covenants were not filed. The ten covenants filed, including covenant number nine, contain nothing to make it clearly apparent that the splitting of lots is prohibited.

In addition to basing his decision on the language contained in covenant number nine, the chancellor considered three additional factors: the size of the lots as originally platted, the fact that Griffith advertised the subdivision as having “estate-sized” lots, and the existence of a general plan of development. We hold that the chancellor was in error in finding that these factors impose a restriction against lot-splitting. First, it is generally recognized that no restriction on subdividing lots is implied by the mere filing of a map depicting the lots. See Milton Friedman, Contracts and Conveyances of Real Property, § 4.13(b) (4th ed. 1984). See also 20 Am. Jur. 2d Covenants, § 158 (2d ed. 1995); Hickson v. Noroton Manor, Inc., 118 Conn. 180, 171 A. 31 (1934); Bersos v. Cape George Colony Club, 4 Wash. App. 663, 484 P.2d 485 (1971).

Second, the fact that the lots in the subdivision were marketed as being estate-sized does not, in and of itself, imply a restrictive covenant against splitting lots. Appellees cite us to no case, and our research has revealed none, in which the representations in an advertisement were used to create a restrictive covenant. In any event, the split lots were still sizeable, ranging from .5 to 1.2 acres.

Third, the fact that a general plan of development existed in the subdivision is, also, not evidence of a restrictive covenant against lot-splitting. The importance of a general plan of development is that, in its absence, a restrictive covenant cannot be enforced. See Constant v. Hodges, 292 Ark. 439, 730 S.W.2d 892 (1987). A general plan of development cannot create a restriction. See Ray v. Miller, 323 Ark. 578, 916 S.W.2d 117 (1996).

The chancellor relied upon the case of Constant v. Hodges, supra, in making his decision. While Constant has many similarities to the case at bar, it is distinguishable. In Constant, a property owner in the Robinwood subdivision in Little Rock wanted to divide his lot. The subdivision’s restrictive covenants contained no express restriction against lot-splitting. Nevertheless, this Court held that lot-splitting was prohibited based upon the existence of a general plan of development but, more importantly, the language of all of the instruments and the intent gathered therefrom. Two of those instruments recited that “only one detached single-family residence . . . shall be erected.” It is this language that distinguishes Constant from the case before us. It avails itself of the interpretation that property use is restricted to “only one” house per originally-platted lot. By contrast, the restriction in this case that “all lots are to be used for single family dwellings” is not susceptible to such an interpretation. Nothing in the latter language evidences an intent to prohibit the splitting of lots.

In short, we hold that the chancellor erred in his interpretation of the restrictive covenant. As such, we reverse his order enjoining the further splitting of lots and the sale of lots that are already split. Our holding necessitates that we also reverse the chancellor’s attorney fee award to appellees because appellees are no longer the prevailing party. See Ark. Code Ann. § 16-22-308 (Repl. 1999).

B. Easement

The next issue to be addressed concerns the chancellor’s decision not to enforce a fifteen-foot sewer easement over the lot owned by appellees Donnie and Carol Whitson. The easement was sought by appellant in late 1996 for the purpose of connecting sewer lines to some of the split lots. Donnie Whitson (unaware that the sewer lines would service split lots, which he opposed) executed the easement in December 1996 in favor of the city of Greenwood. In conjunction therewith, he executed an agreement with appellant that, as compensation for the easement, appellant would clean up two ditches on the Whitsons’ lot, clean out a creek on the lot, repair any ground disturbed by the laying of the sewer lines, and hook the Whitsons’ house up to the sewer fine at no charge. Both the easement and the agreement were signed by Donnie Whitson but not by his wife, Carol Whitson. In reliance on these instruments, appellant laid the sewer line across the Whitsons’ property. According to Forrest Griffith, he was unaware that the easement might not be valid in the absence of Mrs. Whitson’s signature.

Following the trial, the court initially declared that the city of Greenwood was granted an easement by estoppel across the Whit-sons’ lot. However, upon appellees’ motion, he set that ruling aside on the ground that the city of Greenwood was not a party to the action and appellant was not the real party in interest with regard to whether the easement should be granted. Appellant contends that the chancellor’s initial ruling should not have been set aside. We disagree and hold that the trial court should be affirmed on this issue.

Arkansas law provides that every action is to be prosecuted in the name of the real party in interest. Ark. R. Civ. P. 17(a). A real party in interest is considered to be the person or corporation who can discharge the claim on which the allegation is based, not necessarily the person ultimately entitled to the benefit of any recovery. Smith v. National Cashflow Systems, Inc., 309 Ark. 101, 827 S.W.2d 146 (1992). Here, although appellant was a party to the easement agreement, the easement ran in favor of the City.

Further, although the Whitsons hooked into the sewer line and saw it being set, the record is clear that the Whitsons were opposed to lot-splitting and that they did not know that the sewer line was servicing split lots; moreover, as Mrs. Whitson refused to sign the easement agreement, it was neither valid nor enforceable. If the line had been servicing regular lots, the Whitsons would arguably be estopped from contesting the easement; however, because both Mr. and Mrs. Whitson, who did not sign, were opposed to lot-splitting, we hold that the easement cannot be enforced against them. Arkansas Code Annotated § 18-12-403 (Supp. 1999) states as follows:

No conveyance, mortgage, or other instrument affecting the homestead of any married person shall be of any validity, except for taxes, laborers’ and mechanics’ liens, and purchase money, unless his or her spouse joins in the execution of the instrument, or conveys by separate document, and acknowledges it.

(Emphasis added.) As such, we affirm the trial court in regard to this issue.

Affirmed in part; reversed in part. Court of Appeals affirmed in part; reversed in part.

       The lots were numbered one through thirty-nine, but the plat contained no lot twenty or twenty-nine.

       We need not reach the issue of whether attorney fees are recoverable under § 16-22-308 in an action for breach of a restrictive covenant.


author: Tom Glaze, Justice.

text:
    Joshua SUTTER v. Mary Lou SUTTER
    00-552
    43 S.W.3d 736
    Supreme Court of Arkansas
    Opinion delivered May 17, 2001

      James F. Lane, P.A., for appellant.

      Boyett & Morgan, PA., by: Comer Boyett, Jr., for appellees.

      Hartsfield, Almand & Grisham, LLP, by: William G. Almand, for appellee Clayla Hicks.
   Tom Glaze, Justice.

This case was previously before us concerning procedural issues. See Sutter v. Payne, 337 Ark. 330, 989 S.W.2d 887 (1999). In that appeal, the chancellor had stricken Joshua Sutter’s untimely answer to a petition for declaratory judgment, which was filed against Joshua and other co-defendants, seeking to determine the validity of an inter vivos trust established by the defendants’ grandfather, Luther S. Sutter. Joshua challenged that ruling on appeal, asserting the chancellor had erred because Joshua was entitled under the common-defense doctrine to benefit from the timely answer filed by his co-defendant, Luther O’Neal Sutter II. We held the chancellor erred, and we remanded the case for further proceedings. On June 28, 1999, the chancellor heard the case on its merits and held (1) the court had jurisdiction of the persons and subject matter, and (2) Luther’s inter vivos trust was valid. Joshua disagrees with the chancellor’s decisions and brings this second appeal. Before addressing Joshua’s points for reversal, we first set out the relevant facts necessary for a foil understanding of his arguments.

Luther had three children — Mary Lou Sutter Payne, Cora Sue Sutter West, and Luther O’Neal Sutter, Sr. On June 1, 1994, Luther, as settlor, executed a declaration of trust wherein he named himself trustee to hold the trust estate for his own benefit. He specifically reserved the right during his life to amend or revoke his declaration-of-trust agreement without the consent of any beneficiary. Luther further provided that, upon his death, his son, Luther O’Neal, Sr. should be successor trustee and, as successor trustee, Luther O’Neal, Sr. was directed forthwith to transfer the trust estate to Luther’s three children, Mary Lou, Cora Sue, Luther O’Neal, Sr., and a grandson, William Howard Payne. After Luther O’Neal met an untimely death in November 1995, Luther named Mary Lou to serve as the successor trustee. At the same time, Luther also added his granddaughter, Clayla Hicks, as a beneficiary, but specifically provided Luther O’Neal’s lineal descendants “would receive only one dollar”; this provision essentially excluded Luther’s grandchildren, Joshua, Luther O’Neal Sutter II and De’Shawn Robinson, from having an interest in the trust estate.

Luther’s trust estate was comprised of nine tracts of real estate described in separate quitclaim deeds that were attached as exhibits to the trust instrument and made part of the schedule of assets of the trust estate. Each deed reflects Luther as both grantor and grantee. In addition, Luther’s trust instrument specified which named beneficiary would be distributed an interest in which tract of land at the closing of the trust.

Luther died on August 16, 1996, and on December 26, 1996, his daughters, Mary Lou and Cora Sue, as executrixes of Luther’s last will and testament, filed a petition for declaratory judgment in chancery court, requesting the court to declare the rights of the parties under Luther’s inter vivos trust and will. As already noted, Joshua, Luther O’Neal II, and De’Shawn were included as defendants in this action, but only Joshua continued as a party both at trial and on appeal.

As previously mentioned, the chancellor ruled Luther’s inter vivos trust was valid, but Joshua disagrees and, at least initially, raises the following three reasons why the chancellor’s decision should be overturned: (1) The chancellor had no subject-matter jurisdiction of the case; (2) the inter vivos trust was invalid because the property had not been properly transferred to the trust; and (3) the chancellor failed to void the trust because the disposition of personal property under the terms of the trust violated the rule against perpetuities. We disagree with Joshua’s contentions and affirm.

Regarding Joshua’s first issue, he now concedes in his reply brief that the chancery court had jurisdiction to construe and interpret the validity of Luther’s trust agreement. This court has long written that the construction, interpretation, and operation of trusts are matters within the jurisdiction of the courts of equity. In Re: Long Trust v. Holk, 315 Ark. 112, 864 S.W.2d 869 (1993); see also Spradling v. Spradling, 101 Ark. 451, 455, 142 S.W. 848, 850 (1911). Having established the chancery court had jurisdiction in considering the construction and validity of Luther’s inter vivos trust, we now address Joshua’s second argument.

In his second point, Joshua argues Luther’s status as a settlor or trustee is not mentioned in the deeds to the nine tracts of land that he listed as assets to his declaration of trust. Joshua contends that because Luther’s deeds conveyed his tracts to himself, not to the trust, the tracts were never made a part of the trust. He further submits that, even if Luther had conveyed the land to “Luther S. Sutter, trustee, grantee,” the land would not have been considered conveyed to the trust, but would have remained in Luther’s name only. In support of this proposition, Joshua cites Ark. Code Ann. § 18-12-604 (1987), which in relevant part provides that the words “trustee” or “as trustees” following the names of grantee in any deed, without other language showing a trust, shall not be deemed to give notice to any person dealing with the land that a trust exists or that there are other beneficiaries of the conveyance except the named grantee.

The chancellor rejected Joshua’s argument, and concluded that Luther, as a property owner, was able to create a trust by acting as a settlor and trustee and hold the property for his own benefit. The chancellor further held that Luther’s trust document was a valid inter vivos trust established for Luther’s use and benefit, and which named beneficiaries to take the property upon Luther’s death. The chancellor found that the trust document, the amendments thereto, and the exhibits and deeds attached to the document, constituted the corpus of the trust, described the land which Luther made a part of the trust, and named the five beneficiaries who were to receive those described tracts of land. The chancellor’s judgment found that these trust documents and the deposition of Howard Wygall sustained the burden of proof that a valid trust was created by Luther; that the quitclaim deeds, attached as exhibits to the declaration of trust, properly identified the property to be transferred to the trust; and showed that the clear intention of Luther was to create a valid trust. We believe the chancellor reached the right result.

The ultimate issue to be decided in this appeal is whether Luther’s declarations, exhibits, and other acts created a valid inter vivos trust. While not controlling, we believe the federal district court case of United Bldg. & Loan Ass’n v. Garrett, 64 F. Supp. 460 (W.D. Ark. 1946), is instructional and suggests the validity of Luther’s trust. There, Presley G. Garrett owned certain stock certificates that he made the subject of separate declarations of trusts. Each certificate was attached to a trust document. In each trust, Garrett was named trustee for the use and benefit of nine beneficiaries, and, in the event of Garrett’s death, a successor trustee was designated. The trust involving one certificate was to terminate one year after Garrett’s death, and the trust estate was to be transferred to the named beneficiaries according to their described interests in the trust agreement. Garrett, however, expressly reserved the right and power to enjoy the use and benefit of the certificates, or parts thereof, for himself, and that the exercise of the power reserved to him would be conclusive on the named beneficiaries. Garrett died intestate and his widow filed suit, claiming Garrett’s trusts were invalid. The widow urged that the certificates should be distributed in accordance with Arkansas’s intestacy laws.

In upholding Garrett’s trust as valid, the federal district court considered and applied trust principles we believe are applicable to the situation now before us. Citing Griffith v. Maxfield, 66 Ark. 513, 51 S.W. 832 (1899), the Garrett court stated that it is beyond question that it is permissible for the settlor to act also as trustee and that a trust will be created without transfer of legal title to the property. Garrett, 64 F. Supp. at 463. The federal court further referred to the well-established rule that the settlor may reserve to himself a beneficial interest in the proceeds from the property for his fife and the power to revoke the trust in whole or in part at any time. Id. at 464 (citing Gall v. Union Nat’l Bank of Little Rock, 203 Ark. 1000, 159 S.W.2d 757 (1942); Cribbs v. Walker, 74 Ark. 104, 85 S.W. 244 (1905)). In finding Garrett’s trust valid, the federal court held that Garrett’s reservation of dominion and control over the res did not negate his intention to create a present trust. Id.

In considering the one trust wherein Garrett fixed the termination date to be one year after the death of the settlor, the federal court further ruled such provision did not make the trust instrument testamentary, since the trust terms had passed an interest in the res to the beneficiaries during the life of the settlor, even though possession or enjoyment thereof was postponed until the death of the settlor. Id. at 465. The court further recognized that the policy of the law favors the vesting of interests and, where possible, will construe a provision as a condition subsequent in preference to a condition precedent. Id.; see also Farkas v. Williams, 125 N.E.2d 600 (Ill. 1955), where the Illinois Supreme Court, relying on the Garrett case, wrote as follows:.

So long as the trust continues, the cestuis have equitable interests, no matter who acts for them in protecting those interests, whether it be trustee or settlor. If the exercise of these powers by the settlor involves the total or partial destruction of the trust, as where the settlor has power to sell the res and keep the proceeds, the power seems to be treated as practically that of revocation of the trust. It leaves an equitable interest in the cestuis till revocation. It shows a vested interest, subject to divestment, and not the lack of any interest at all.

Id. at 608 (emphasis added).

In addition to the settled trust principles set out above, the Garrett court further emphasized that, in determining whether the reserved powers are so great as to negate an intent to create any present interest, one of the factors to be considered is the formality of the transaction. 64 F. Supp. at 465. There, the court pointed out that Garrett had executed and acknowledged each declaration of trust and the certificates were shown subject to a declaration of trust. The court found and held as follows:

The settlor, by the declarations in question, intended and effected the transfer of a present beneficial interest to the named beneficiaries, retaining in himself the legal title in trust and an equitable interest for life in the proceeds of the funds. The powers reserved by the settlor were in the nature of conditions subsequent, which, if exercised by positive action on his part, would have divested the interest of the beneficiaries and denied them the possession and enjoyment of the res. Since the settlor never chose to exercise the powers reserved by him, the interest of the beneficiaries was present and subsisting at his death, and they are now entitled to have the trust administered according to its terms.

Id. at 466 (emphasis added).

In the instant case, and as touched on earlier above, the chancellor found that Luther executed a declaration of trust and amendments thereto, all of which were formally acknowledged. Luther specifically included in an attached “schedule of trust assets” deeds describing the nine tracts of land and directives as to how and to whom those property interests were to be distributed. Also significant, Luther’s last will and testament dated November 7, 1995, devised and bequeathed his entire estate to his June 1, 1994, inter vivos trust to be disposed of in accordance with those trust provisions. In this respect, we note the Uniform Testamentary Addition to Trusts Act, Ark. Code Ann. § 28-27-101 -105 (1987), which in relevant part provides as follows:

Unless the testator’s will provides otherwise, the property so devised or bequeathed shall not be deemed to be held under a testamentary trust of the testator but shall become a part of the trust to which it is given; and shall be administered and disposed of in accordance with the provisions of the instrument or will setting forth the terms of the trust, including any amendments made before the death of the testator, regardless of whether made before or after the execution of the testator’s will, and, if the testator’s will so provides, including any amendments to the trust made after the death of the testator. A revocation or termination of the trust before the death of the testator shall cause the devise or bequest to lapse.

Ark. Code Ann. § 28-27-101 (emphasis added). From the foregoing, we cannot say the chancellor was clearly erroneous in holding Luther’s trust to be valid.

In his final point, Joshua submits the chancellor erred in failing to void the trust because the disposition of personal property in Luther’s trust violates the rule against perpetuities. He recites the common-law rule which voids any trust whose assets will not necessarily vest within some life in being at the time of its creation plus twenty-one years. See Cotham v. First Nat’l Bank, 287 Ark. 167, 697 S.W.2d 101 (1985). Joshua asserts the trust failed to dispose of the personalty and thus the trust was perpetual, and because the trust failed at its inception, the successor trustees hold the personalty upon a resulting trust for Luther’s estate. This argument is meritless.

When entering into his June 1, 1994, trust, Luther executed a bill of sale that describes all of his tangible personal property, and he gave, sold, and conveyed that personalty to himself, as trustee. Luther, as trustee, acknowledged receipt of the personal property. Moreover, Luther’s declaration of trust stated, “Upon my death, the successor trustee is hereby directed forthwith to transfer the trust estate and all right, tide, and interest in the trust estate to the named contingent beneficiaries.” (Emphasis added.) In short, the rule against perpetuities was not violated in these circumstances since Luther’s personalty was given to the trustee by way of a bill of sale and thereby made a part of a present trust for a subsequent and immediate transfer to the designated beneficiaries upon Luther’s death.

For the reasons set out above, we affirm.

       Luther O’Neal II settled his claim in this matter for the sum of $20,000.00. Why De’Shawn is no longer involved in this dispute is not clear from the record.

       We note that Clayla Hicks also filed a brief in this matter, and largely takes the same position as Mary Lou and Cora Sue in opposing Joshua’s argument in this appeal.

       Mr. Wygall is a registered public accountant who assisted in filling in the blanks of a printed declaration of trust “kit” obtained by Luther.

       The Uniform Act has been modified by Act 751 of 1995. See Ark. Code Ann. § 28-27-106 (Supp. 1999).