author: Conley Byrd, Justice. John A. Fogleman, Justice,

text:
    Raymond CHENOWITH v. STATE of Arkansas
    5432
    445 S. W. 2d 889
    Opinion delivered October 27, 1969

      Irwin, Streett & Broclcer, for appellant.

      Joe Purcell, Attorney General; Don Langston, Asst. Atty. Gen., for appellee.
   Conley Byrd, Justice.

Appellant Raymond Chenowith was convicted upon 10 counts of forgery and 10 counts of uttering. His only contention for reversal is that the trial court failed to conduct a “Denno’ hearing- in accordance with Ark. Stat. Ann. § 43-2105 (Supp. 1967), outside the presence of the jury before admitting into evidence certain affidavits he had signed in the presence of his attorney.

Mr. Harold Hampton, an employee of People’s Bank & Trust Co. of Russellville at the time of the occurrence, testified that he did not know how far in advance he knew he was going to Tulsa but that he knew he was going to Tulsa, because he was present when Mr. Irwin, appellant’s counsel, and Mr. Mobley, the prosecuting attorney, came into Mr. Barger’s office. (Mr. Barger is president of the People’s Bank & Trust Co.). He said that he and Mr. Irwin went to Tulsa to get Chenowith to admit forgery as far as he knew of the notes involved. Other testimony from the witness insinuated that some of the bank’s insurance was involved in the transaction. Mr. Hampton says that when they met Mr. Chenowith in a hotel in Tulsa, Mr. Chenowith went over the accounts and under instructions from his counsel signed the affidavits on the accounts that were not genuine and that on the accounts that he claimed were good he merely passed them on. There were several affidavits signed at the time.

The affidavits introduced identify the note involved by number and state that the name signed to the note is not genuine or authorized by the maker, ‘ ‘ that in fact said purported signature was affixed to said instrument by Raymond Chenowith without the knowledge or authority of the purported maker and was executed for ‘Glen’s Used Cars’ for the purpose of obtaining money and credit from People’s Bank & Trust Co. of Russell-ville, Ark. in the amount of the principal and amount reported to be due on said note.”

Ark. Stat. Ann. § 43-2105, supra, provides:

“Issues of fact shall be tried by a jury, provided that the determination of fact concerning the admissibility of a confession shall be made by the court when the issue is raised by the defendant; that the trial court shall hear the evidence concerning the admissibility and the voluntariness of the confession out of the presence of the jury and it shall be the court’s duty before admitting said confession into evidence to determine by a preponderance of the evidence that the same has been made voluntarily. ’ ’

Under the statute and the affidavits here involved, the trial court erred in not determining the voluntariness of the confessions before they were admitted into evidence. For this reason the cause is reversed and remanded.

Reversed and remanded.

Fogleman, J., concurs.

John A. Fogleman, Justice,

concurring. I concur because I cannot find where the trial judge ever made any ruling that the confessions in the affidavits of Chenowith were voluntary. I have the same view in this case as that expressed in my concurring opinion in Estep v. State, 244 Ark. 843, 427 S. W. 2d 535. Here, as there, the record was totally devoid of any offer of proof which might be anticipated in a hearing on the question of voluntariness of the confession.

This is a case in which it might easily be said that no prejudice resulted from a determination by the trial judge in the presence of the jury, in the absence of any proffer by appellant or request that he be permitted to testify. The language contained in an annotation in 19 L. Ed. 2d 1313 at 1315 (1968) is appropriate:

“While it has been widely recognized that it is improper to permit the jury to be present, even where no request for its exclusion was made, only a few state courts have gone so far as to indicate that the presence of the jury is prejudicial under all circumstances. More generally, and especially in the federal courts, it has been held that the jury’s presence during the preliminary hearing into the voluntariness of a confession does not constitute prejudicial error where the trial court eventually holds the confession voluntary and admits it into evidence. Where the confession is found to be involuntary and inadmissible, the jury’s presence during the hearing is more likely to be considered prejudicial.
It should be noted that many of the courts, both state and federal, which have in recent years held or stated that voluntariness hearings ‘must’ be held outside the presence of the jury, reached this conclusion on the basis of their interpretation that Jackson v. Denno required such a result. The value of these cases is now questionable in view of the fact that the Supreme Court itself did not read Jackson v. Denno to require this result. At least one court has already taken note of the fact that the Supreme Court does not require all hearings to he outside the presence of the jury.”

I do not know of any reason why the rule that we will not find error in refusal by the trial court to admit or hear evidence in the absence of a proffer should not apply to a proceeding in determining the voluntariness of a confession. I do not see how there could really have been a question of fact in this case.

The affidavits constituting the confessions were prepared in blank form, so that the note number, the name of the purported maker and the name of the person who actually signed the name of the purported maker could be inserted. The identity of the preparer is not shown. Hampton, a bank employee, was told by the bank president that he was to accompany Chenowith ’s attorney, Irwin, to Tulsa to meet Chenowith. At some time prior to this trip, there was a conference at the bank among the bank president, the prosecuting attorney and Irwin. Along with the blank affidavit forms Hampton and Irwin took 40 or 50 notes held by the bank and purportedly signed by purchasers of automobiles sold by Chenowith. When the parties assembled, Chenowith and Irwin conferred privately. When they rejoined Hampton, Irwin presented each note for Chenowith ’a inspection and instructed him to state whether the note was genuine or a forgery. Whenever Chenowith indicated that a note was forged, the appropriate information was inserted in a blank affidavit form. He then signed the affidavit and the jurat was signed by Irwin as a notary public. Hampton did not remember having seen these forms until this time. He could not remember whether he or Irwin actually took them to Tulsa. It was his recollection that Irwin kept the completed affidavits and delivered them to the bank the following day. He says that he did not tell Chenowith that no charges would be filed against him.

The coercion of a confession by one in the presence of his own attorney, with whom he had first consulted privately, seems highly improbable. This is particularly so when the attorney is an active participant in the confession. In' the absence of any showing that there was evidence tending to overcome this strong evidence of voluntariness, I could not say that appellant was prejudiced.

It is regrettable that we cannot follow a procedure in this case similar to that followed by the federal courts when state convictions are reviewed in habeas corpus proceedings. It would be more appropriate to remand with directions to the trial judge to hold a hearing to determine whether the statements were voluntarily made, and to grant a new trial if they were not found to be voluntary.


source: Caselaw Access Project

author: Frank Holt, Justice. John A. Fogleman, Justice,

license: Public Domain

text:
    W. J. SLEEPER and Otto GAGE d/b/a Cameo Jewelry and Engraving Shop v. Bob SWEETSER
    5-4999
    446 S. W. 2d 228
    Opinion delivered October 27, 1969

      Ball & Gallman and John Lineberger, for appellants.

      Estes & Stony, for appellee.
   Frank Holt, Justice.

This appeal results from granting appellee’s motion for a summary judgment based upon the following transaction. The appellants gave $50 to appellee for a man’s nine-diamond ring. Appellants received a standard bill of sale from appellee. As a part of the same transaction, appellants then signed and delivered to the appellee an option to repurchase agreement. By its terms the appellee retained the right to repurchase the same ring for $55 within ten days upon presentation of the written option. Within this ten-day period the appellee gave appellants a $5 check for the purpose of having the option extended for an additional ten days. When appellee tendered $55 to appellants for the return of this diamond ring, the offer was refused by appellants with the explanation that appellee’s $5 check had been returned due to insufficient funds and, therefore, the time had expired for appellee to exercise his option to repurchase.

In appellee’s complaint as amended he alleged that although the agreements on their face appear to be a bill of sale and an option to repurchase, they are in effect merely a pawn-loan agreement by which he pawned his ring for $50 with the right to redeem it within ten days for an additional $5; that $5 of the $55 repurchase price provided in the option to repurchase constituted a usurious rate of interest in that it amounts to 10% for ten days, or 1% per day; that the contract should be rescinded and the diamond ring returned to appellee, or in lieu thereof, he be awarded $500 as the alleged value of the ring and that appellee was entitled to damages of $500 for appellants’ unlawful detention of the ring. Appellants responded with a general denial. In answering appellee’s request for admission of facts, appellants admitted the bill of sale agreement and option to repurchase agreement and denied that the option to repurchase had been extended for an additional ten days since appellee had given an insufficient funds check. Appellants also admitted that 70% of their inventory, based upon valuation, was used merchandise.

Appellee then filed a motion for summary judgment supported by his affidavit that he had entered into the sale and repurchase agreement; that the value of the diamond ring was $500; that, “I retained an option to repurchase the ring mentioned above for $50 plus an additional $5 interest within ten days from the execution of the bill of sale agreement dated January 10, 1968. I understood the entire transaction to be a pawn-loan agreeinent”; that he gave appellants his $5 check for a ten-day extension to repurchase his ring; that later his tender of $55 to appellants for the return of his ring was refused on the basis that he had not exercised his option in the repurchase agreement within the agreed extension of time since his $5 check was returned unpaid due to insufficient funds. The appellants did not file a counter affidavit.

In granting the summary judgment the trial court found:

“That the defendants did not file any counter affidavits or pleadings in response to plaintiff’s Motion for Summary Judgment and as a result thereof there is no genuine issue as to any material fact. ’ ’

The court further found that the transaction between the parties is a “shift or device for usurious loan of money;” that as a result the appellee is entitled to the return of the diamond ring or its value in the sum of $500 and the further sum of $500 as damages for appellants’ wrongful detention of the ring. Appellee now concedes that the record does not support an award of $500 as damages for the unlawful detention of the ring and offers a remittitur in that amount.

For reversal the appellants, through their present counsel, contend that the bill of sale and repurchase agreement on their face constitute a fact issue. Appellants say that: ‘ ‘ The Bill of Sale agreement in question reflects on its face that the appellee made a bona fide sale of a diamond ring to appellants. The Option to Repurchase agreement reflects on its face that a bona fide right was vested in appellee to repurchase the ring within the option period for the stated amount. There is no language in either of these agreements reflecting that the transaction between the parties was one of borrowing and lending of money as alleged by the appellee and the lower court erred in finding the latter to be the case as a matter of law.”

Appellee takes the position that the pleadings, appellants’ answers to appellee’s request for admission of facts, and appellee’s uncontroverted affidavit present a transaction which was a mere shift or device for a usurious loan of money. He cites Sparks v. Robinson, 66 Ark. 460, 51 S. W. 460 (1899). There we held that a sale and an option to repurchase based upon written instruments in a transaction similar to the one at bar constituted “a shift for a usurious loan of money.” We said:

“The instrument itself, and the sale ticket given with it, show that the grantor had the privilege of redeeming in thirty days, by paying the principal and not exceeding ten per cent., and the proof shows that at the end of each month the eighty cents, or ten per cent per month, was collected, and another sale ticket was issued granting the same privilege. And this might be continued ad Infinitum. The law shells the covering, and extracts the kernel. Names amount to nothing when they fail to designate the facts. We are of the opinion that the court was justified in concluding that the papers called ‘bill of sale’ and ‘sale tickets’ were nothing more or less than a shift for a usurious loan of money.”

A 1967 amendment to our summary judgment statute provides, in pertinent part:

“(e) * # # Defense Required. * * * When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.” Ark. Stat. Ann. § 29-211 (Supp. 1967).

In Ray Deam et al v. O. L. Puryear & Sons, Inc., 244 Ark. 18, 423 S. W. 2d 554 (1968), we said:

“* * * The opposition to the motion cannot always successfully take his stand on the content of his pleading alone. If the movant makes a case for summary judgment the opponent must come from behind ‘the shielding cloak of formal allegations and demonstrate a genuine issue.’ ”

See, also, Weldon Douglas et al v. The Citizens Bank of Jonesboro, 244 Ark. 168, 424 S. W. 2d 532 (1968), and Epps v. Remmel, 237 Ark. 391, 373 S. W. 2d 141 (1963).

We recently had occasion to consider the effect of a failure to respond to an affidavit supporting a motion for summary judgment in Ashley v. Eisele, 247 Ark. 281, 445 S. W. 2d 76 (1969). There we said that the failure to file counter affidavits does not in itself entitle the moving party to a summary judgment. However, the effect is to leave the facts asserted in the uncontroverted affidavit supporting the motion for summary judgment accepted as true for purposes of the motion.

In the case at bar appellee’s complaint asserted a pawn-loan arrangement with an illegal rate of interest. Appellants responded with a general denial. In a request for admissions appellants admitted that 70% of the value of their inventory consisted of used goods. Thereafter, appellee’s uncontroverted affidavit, which must be accepted as true, asserted that this was a pawn-loan transaction with a usurious rate of interest. In our view when the established law is applied, the appellee has met the burden of demonstrating that no material issue of fact exists since his affidavit stands uncontroverted. The trial court did not err in granting a summary judgment in favor of the appellee.

With exception of the award of $500 for damages for wrongful detention of the nine-diamond ring, conceded by appellee as error, the judgment is affirmed.

Fogleman and Jones, JJ., dissent.

John A. Fogleman, Justice,

dissenting. I respectfully dissent, because I think the court is departing from its previous position on summary judgments. I do not believe that the summary judgment procedure has been properly utilized in this case. This very wholesome process for eliminating claims and defenses without merit and thus expediting the disposition of litigation was not intended to be a vehicle for bypassing jury trials or for early prediction of the outcome of litigation, however obvious it might seem. We have always been very strict in resolving every doubt, against a summary judgment. See, e. g., Russell v. City of Rogers, 236 Ark. 713, 368 S. W. 2d 89; Wirges v. Hawkins, 238 Ark. 100, 378 S. W. 2d 646; Deam v. O. L. Puryear & Sons, Inc., 244 Ark. 18, 423 S. W. 2d 554.

I cannot subscribe to the very cursory manner in which two written documents have been held to be something other than what they appear to be. This court has always unhesitatingly looked behind the “covering” to “extract the kernel” in removing the shielding cloak from any usurious transaction. Our zeal in doing so has not caused us to depart from the rules in such cases however, that the burden is upon one asserting usury to show that the transaction is usurious, and that usury will not be presumed, imputed or inferred when the opposite conclusion can reasonably and fairly be reached. Geyer v. First Arkansas Development Co., 245 Ark. 694, 434 S. W. 2d 301; Peoples Loan & Investment Co. v. Booth, 245 Ark. 146, 431 S. W. 2d 472. Where usury is pleaded, it must be established by clear and convincing evidence and not by a mere preponderance where written instruments are alleged to be something other than that which they appear to be. Baxter v. Jackson, 193 Ark. 996, 104 S. W. 2d 202; Commercial Credit Plan v. Chandler, 218 Ark. 966, 239 S. W. 2d 1009.

Appellee seeks to meet Ms burden to demonstrate the want of a genuine issue as to any material fact by his own affidavit only. The content of that affidavit is not sufficient to require appellants to remove the shielding cloak of formal allegations to demonstrate the existence of a material issue. Appellee’s allegation, that the bill of sale and option to repurchase were, in effect, only a pawn-loan agreement, was denied. The bill of sale and option were brought into the record as exhibits to appellants’ request for admissions. In Ms affidavit appellee admits the execution of the bill of sale and his retention of an option to repurchase the diamond ring. The only statement which would tend to show that the transaction was something other than what it appeared on its face to be was: “I understood the entire transaction to be a pawn-loan agreement.” This sentence was insufficient to support the summary judgment for many reasons.

In the first place, appellee’s own understanding of the transaction would not show that it was usurious. There must be an intention upon the part of the “lender” to take or receive more than the legal rate of interest, or an agreement between the parties by which the borrower promises to pay and the lender knowingly- receives a higher rate of interest than the constitution allows. Peoples Loan & Investment Company v. Booth, 245 Ark. 146, 431 S. W. 2d 472; Cammack v. Runyan Creamery, 175 Ark. 601, 299 S. W. 1023; Briant v. Carl-Lee Brothers, 158 Ark. 62, 249 S. W. 577. Sweetser’s understanding of the transaction would not tend to convert the transaction into an agreement by appellants to receive an excessive rate of interest or an intention by them to exact such interest.

The statement would not have been admissible in evidence as required by statute. Ark. Stat. Ann. 29-211(e) (Supp. 1967). A witness may not testify whether he understood from that which took place between him and another that they assumed a certain contractual relationship, but must state only the facts as to what occurred, not his conclusions. Bercher v. Gunter, 95 Ark. 155, 128 S. W. 1036.

A supporting affidavit is sufficient only when the facts stated therein clearly demonstrate that there is no issue of fact. It cannot consist of statements of legal conclusions and ultimate facts. Walling v. Fairmont Creamery Co., 139 F. 2d 318 (8th Cir. 1943); Engelhard Industries, Inc. v. Research Instrumental Corp., 324 F. 2d 347 (9th Cir. 1963); Doff v. Brunswick Corp., 372 F. 2d 801 (9th Cir. 1967), cert. denied, 389 U. S. 820, 88 S. Ct. 39, 19 L. Ed. 2d 71 (1967); 6 Moore’s Federal Practice 2808, § 56.22 [1], Supporting affidavits must be subjected to close scrutiny and any doubts resolved against the moving party. Walling v. Fairmont Creamery Co., supra; Seman v. Mumford, 335 F. 2d 704 (D. C. Cir. 1964); Bryan v. Aetna Casualty & Surety Co., 381 F. 2d 872 (8th Cir. 1967); 6 Moore’s Federal Practice p. 2338, § 56.15 [3], p. 2853, § 56.23.

When the rules relating to summary judgment are applied in this case, I cannot see how it can be said that the appellee met his burden. The case of Sparks v. Robinson, 66 Ark. 460, 51 S. W. 460, relied upon by appellee and the majority opinion, does not support summary judgment in this case. In that case the borrower testified that she borrowed $8.00 and understood at the time that she was to pay 80c per month for the use of it. She left a sewing machine with the lender for the sole purpose of borrowing this money. The parties executed an absolute bill of sale for the sewing machine. By an endorsement on this ticket, the borrower was given the privilege of purchasing any article of merchandise in the lender’s place of business at a price not to exceed 10 percent above its actual cost, within 30 days, with the sewing machine at the price of $8.00 preferred. The proof showed that, at the end of each month, 80c was collected and another sales ticket issued granting the same privilege. The lender did not really contradict this evidence that the transaction involved a loan. He testified that he made no contracts for interest on his loans and trusted to a man’s honor what he should pay for the use of money, but that he expected something. In that case there was evidence to support the court’s finding that the transaction was a loan of money at an interest rate of 10 percent per month. The court said that the extraneous proof warranted the conclusion that the instrument called bill of sale and sales ticket was intended as a mortgage.

The court’s findings in the Sparks case were based upon evidence offered upon a contested issue of fact. The borrower there offered testimony as to what took place between the parties and did not let the case rest upon her own conclusional statement that she understood the transaction to be a pawn-loan agreement. It may well be that the transaction here is identical with that in the Sparks case, but I do not see how it can be held to be upon the record before the court. I would reverse the summary judgment.

Jones, J., joins in this dissent.

      For example, an affiant cannot be permitted to state that a party operated as an independent contractor and was engaged in the production of goods for commerce where these were the ultimate facts in issue. Creel v. Lone Star Defense Corporation, 171 F. 2d 964 (5th Cir. 1949). Here the ultimate fact to be determined was whether the transaction was a pawn-loan agreement.


author: Frank Holt, Justice.

text:
    Bonnie HUNTER and Bonnie Jo CONNELLY v. John L. CONNELLY, Nell Jean Connelly MILLER and Arthur P. CONNELLY
    5-5018
    446 S. W. 2d 654
    Opinion delivered October 27, 1969
    [Rehearing denied December 1, 1969]

      Curtis L. Ridgeway, Jr. and John C. Echols, for appellants.

      Wooten, Land & Matthews, for appellees.
   Frank Holt, Justice.

The appellants brought this action for specific performance of three written instruments which they contend constitute a “Bill of Sale.” Appellants alleged that these instruments were executed by Mrs. Jeannette Connelly, who is now deceased. She was the proprietor and later majority shareholder of Connelly Press, Incorporated.

Appellants, Bonnie C. Hunter and Bonnie Jo Connelly, are respectively the widow and adult daughter of Joseph Connelly who died on April 28, 1959, subsequent to the date of these written instruments. His widow, appellant Bonnie C. Hunter, was convicted of involuntary manslaughter as a result of his death. Appellees are the surviving three children of Jeannette Connelly.

Appellants base their cause of action on three instruments, one dated July 31, 1954, and two dated October 27,1958. The appellants contend these instruments are bills of sale executed by Jeannette Connelly conveying a one-third interest in her business and a one-fourth interest in the balance of her property to her son, Joseph Connelly, and his wife and daughter, the appellants, as joint tenants. Appellants brought their cause of action on June 14, 1967, for the specific performance of these three instruments and for a transfer to them of their alleged ownership interest. The appellees controverted appellants’ claim, alleging that the signature of Jeannette Connelly was a forgery and invoked other affirmative defenses such as statute of limitations, laches, etc. The trial court dismissed appellants’ complaint for want of equity specifying the grounds for the dismissal of their complaint.

For reversal the appellants urge that the trial court erred in finding that: Appellants’ cause of action is barred because of their failure to assert a claim against the estate of Jeannette Connelly; their claim is barred by laches; their claim is barred by the statute of limitations; and the appellants failed to prove their cause of action by a preponderance of the evidence. Since we agree with the chancellor that the appellants’ cause of action is barred by our five-year statute of limitations, Ark. Stat. Ann. § 37-209 — 10 (Repl: 1962), it becomes unnecessary for ns to discuss the correctness of the other findings of the chancellor.

■ 'According to the appellants, Joseph Connelly, in 1954, was considering leaving his job in his mother’s printing business on account of discord within the family. Appellant Hunter testified that to alleviate the family discord, Mrs. Jeannette Connelly, on July 31, 1954-, by a written Bill of Sale and Ownership Agreement, which was introduced into evidence, sold and conveyed to her son Joseph, with full survivorship rights in the appellants, a one-third interest in the business and a one-fourth interest in all her other property in recognition of his years of service and in return for her son’s promise to remain as a linotype operator in the printing business. There was a joint covenant to keep the agreement confidential. Mrs. Connelly covenanted that the conveyance of this interest could not be altered or changed by her through a will or in any other manner. This instrument admittedly was written by appellant Hunter and her husband.

However, strife within the Connelly family continued. In March 1958 appellant Hunter and her then husband, Joseph Connelly, filed a $100,000.00 lawsuit against Jeannette Connelly and Arthur Connelly as a result of a family altercation in which appellant Hunter claimed she was struck by her mother-in-law and brother-in-law, Arthur-. Then followed the two written agreements dated October 27, 1958. By these instruments appellant Hunter and her then husband, Joseph, agreed to discontinue their lawsuit and in return Mrs. Jeannette Connelly again recognized that the business “legally belongs to Joe, Art and John Connelly” and each should have a one-third interest. Further, that “[i]t is agreed by both Joseph E. Connelly and Mrs. J. M. Connelly to full co-owner and survivorship rights from either one’s estate to Bonnie and Bonnie Jo Connelly, not to void or change this by divorce, separation, other partnerships or incorporation or by Will and Testament. This is recognized as a Bill of Sale and Transfer, as co-owner, to Bonnie Connelly, $10.00 and other consideration, and is legal and binding. No transaction shall be made without my signature as co-owner. Should I die first,, or Joe and I die, ownership reverts to Bonnie Jo Connelly. Should discord at the shop continue, Mrs. J. M. Connelly and Joe Connelly both agree to cash settlement immediately.” There was a provision in which appellant Hunter’s husband, Joe, agreed to refrain from any act that would alter appellants’ survivorship rights. These instruments were also written by appellant Hunter and her husband, Joe Connelly, and signed by them and Mrs. Jeannette Connelly. There was no covenant to keep these agreements confidential.

In December 1958 appellant Hunter and her husband separated and he instituted a suit for divorce. They were estranged at the time of his death in April 1959.

Assuming, without deciding, that these instruments are valid, it is undisputed that the last two agreements were breached four months after their execution when the business was incorporated in February 1959. All of the assets together with Mrs. Connelly’s title and interest in the printing business were transferred to Connelly Press, Inc. Mrs. Connelly received a majority of the issued stock. A portion of the authorized stock was distributed in equal shares to appellees. Joseph Connelly received no stock in the corporation. However, he was elected to the board of directors. Joseph Connelly understood that he was not receiving stock. He disclaimed interest in any ownership saying that he was only interested in having a job. The evidence shows that he affixed his signature as a director to the minutes of the first business meeting on February 25, 1959.

Following Joseph Connelly’s death on April 28, 1959, an administrator of his estate was appointed on October 12, 1959 upon the petition of his mother and the appellees. Appellant Hunter unsuccessfully sought appointment as administratrix of her husband’s estate. She testified that she exhibited the three written instruments to the administrator in December 1959 and he rejected them saying that she “had no interest whatsoever.” Appellants never filed any claim to this estate based upon the instruments now relied upon.

Appellant Hunter testified that in November 1959 and again in June 1961 she wrote to her mother-in-law, Mrs. Connelly, asserting her rights according to “these Bill of Sales” and asking that she and her daughter be given “what is ours.” She stated there was no compliance with the request in these letters.

The will of Mrs. Jeannette Connelly dated May 22, 1959, was admitted to probate on November 12, 1963. She had died in September 1963. Her stock certificates and other property were distributed according to the terms of her will to the appellees. It appears undisputed that appellant Bonnie Jo Connelly, the granddaughter, received a copy of the will with a $1.00 bequest and that appellant Hunter was aware of the will and its provisions. The estate was closed and the executor dismissed in December 1964. Appellant Hunter testified that in October 1963 she asserted her rights in a letter to John Connelly and received no response. The appellants made no demands on the executor, Arthur Connelly, nor presented any claim to the shares of stock or the property listed in the inventory of the Jeannette Connelly estate.

There was evidence presented by the appellees that during the lifetime of Joseph Connelly he never made any claim to any ownership interest in the business and that the mother, Jeannette Connelly, never indicated to her other children that her son Joseph had any interest in the business. According to the public accountant who had performed all of the accounting work for the firm since 1947, all the records reflected the business as an individual proprietorship in the name of Mrs. Jeannette Connelly until it was incorporated in 1959. There was nothing in the business records that indicated any right or claim in favor of Joseph Connelly or the appellants before or after the incorporation of the business.

Assuming, without deciding, as we have indicated, that the written instrument dated in 1954 and the- two written instruments dated in 1958 are valid, it must be said that two months before Joseph Connelly’s death in 1959, his ownership rights under these agreements now sought to be enforced were breached by the incorporation of his mother’s business. A cause of action definitely accrued at that time on his behalf if he so desired. Instead, it appears he was content with being made a member of the board of directors and receiving no stock in the corporation which became the owner of all the assets of his mother’s printing business. In fact, he affixed his signature to the minutes of the initial meeting of the board of directors.

The general rule as to when a cause of action accrues is well stated in 34 Am. Jur., Limitation of Actions, § 113, p. 92. There it is said:

“* * * It may be stated as a sound general proposition that a cause of action accrues the moment the right to commence an action comes into existence, and the Statute of Limitations commences to run from that time * *

See, also, § 137, p. 110.

In Rawlings v. Ray, 312 U. S. 96, 61 S. Ct. 473, 85 L. Ed. 605 (8th Cir. 1941), it is said:

“The words ‘after the cause of action shall accrue’ in the Arkansas Statute have their usual meaning and refer to ‘a complete and present cause of action.’ ”

The statute of limitations begins to run when there is a complete and present cause of action. Holloway v. Morris, 182 Ark. 1096, 34 S. W. 2d 750 (1931).

Certainly, under the terms of these written agreements and the attendant facts of family strife and violence, appellants’ rights vested and their present cause of action accrued at the latest upon Joseph Connelly’s death in 1959.

Appellants assert they first discovered in 1966 that in 1959 Mrs. Connelly transferred her interests to the corporation. Even though that be true, the ignorance of a cause of action does not prevent the running of the statute of limitations unless there has been fraudulent concealment on the part of- those invoking the statute. Landman v. Fincher, 196 Ark. 609, 119 S. W. 2d 521 (1938), and Arkansas Power & Light Co. v. Decker, 181 Ark. 1079, 28 S. W. 2d 701 (1930). See, also, 54 C.J.S., Limitation of Actions, § 205, p. 216. In the case at bar it appears the appellants were neither ignorant nor unaware of the existence of the claims they now assert, nor is there any evidence of fraudulent concealment on the part of the appellees. The written instruments relied upon by appellants were in their exclusive possession for more than five years before this action was instituted.

The chancellor was correct in finding that appellants’ action was not commenced within five years after their cause of action accrued and is, therefore, barred by the statute of limitations.

Affirmed.


author: Carleton Harris, Chief Justice.

text:
    M. L. SIGMON FOREST PRODUCTS, Inc. v. Harold E. SCROGGINS, Sr.
    5-5023
    446 S. W. 2d 198
    Opinion delivered November 3, 1969

      Catlett & Henderson, for appellant.

      Clifton Bond, for appellee and cross-complainant.
   Carleton Harris, Chief Justice.

From 1955 to 1967, appellee Harold E. Scroggins leased from the appellant, M. L. Sigmon Forest Products,. Inc., by written agreement, certain lands known as the Florence Farm, consisting of approximately 1,000 acres in Drew County, Arkansas. This land was suitable, and was used, for the production of rice and other agricultural products. On January 18, 1967, appellant, hereafter sometimes called Sigmon, and Scroggins entered into a new written lease, which provided, inter alia:

“Lessor hereby leases and lets to Lessee for a term of two (2) years commencing on the 18th day of January, 1967, the following described lands lying and situated in Drew County, Arkansas, to wit: [description of lands follows].”

Certain covenants were entered into by the parties which are not at issue in this litigation. The lease provided that, for rental, lessee would pay one-half of the rice and one-fourth of all other crops grown on the lands.

On December 13, 1968, by registered mail with return receipt requested, the company wrote Scroggins, advising appellee that the lease agreement, under its terms would end on January 18, 1969, and that appellant would expect to take full possession of the farm on that date. Mrs. Scroggins signed the receipt on December 16, 1968. Thereafter, on December 30, Scroggins filed a complaint in the Chancery Court of Drew County, alleging that he was a tenant for years under the lease agreement, and was entitled to six months’ written notice of termination, with such notice to end with the rental period in 1971. It was further asserted that Scrog-gins had done substantial work in preparing the lands for the 1969 crop year; that more than six months prior to January 18, 1969, appellee had attempted to ascertain from the company whether the lease would be continued or terminated, but without success. It was further asserted that the annual rental value of the farm was $30,000.00, and that Sigmon should be enjoined from taking possession of the Florence Farm or interfering with appellee’s possession. On the day of the filing of the complaint, a temporary restraining order was issued against .appellant, its officers, agents and employees, enjoining them from trespassing upon said lands, or from interfering in any manner with appellee’s possession, pending a final hearing, the order, however, being conditioned upon the furnishing of a $30,000.00 bond by appellee; this requirement was complied with on the same date.

On January 17, 1969, Sigmon answered the complaint and counterclaimed, asserting that the lease agreement definitely fixed the time that the lease was to terminate, and that no notice from Sigmon to Scrog-gins was necessary, even though appellant had given a written notice demanding possession of the lands on January 18, further, that Scroggins was:

“* * * willfully holding over the lands described in said lease agreement after termination date thereof and 30 days’ previous written notice-to quit given by defendant to plaintiff requiring possession of said lands by defendant, which conduct and action on the part of plaintiff entitle defendant to recover double the annual rent for such lands.”

Thereafter, Sigmon moved for a summary judgment, supported by the affidavit of Glenn M. Cooper, president and chief executive officer of appellant company, setting out the execution of the lease, and attaching a copy thereto; further alleging that the value of the crops grown on the leased land as one year rental was $30,000.00. The affidavit further set out that the lease agreement had expired, and that no other agreement, written or oral, had been entered into between the parties; that the notice, previously mentioned, had been sent to Scroggins, who had received it on December 16. Finally, the affiant stated that he was entitled to receive double the yearly rent of the lands for all of the time lessee should keep him out of possession by the willful holding over after the termination of the lease. Appellee responded to the motion, alleging that there were genuine issues as to material facts, and the response was supported by the affidavit of Scroggins, In such affidavit, Scroggins stated that the value of the crops grown on the leased lands as one year rental was approximately $30,000.00; that the lease agreement contained no provision for the termination of the lease, and no provision regarding the giving of notice, written or oral. It was stated that Scroggins was entitled to six months’ written notice, rather than the lease automatically terminating at the end of the two-year period; further, that substantial work in preparation of the land for the 1969 crop year, and the purchase of seed, fertilizer and supplies, had already been accomplished, which would be for naught if Sigmon were allowed to take possession. Finally, Scroggins stated that he had endeavored to ascertain the intentions of the company more than six months prior to January 18, 1969, but the president of appellant company had failed and refused to advise of its intentions.

The court, acting upon the motion, responses, the affidavits, and exhibits thereto, found that the lease was for a term certain; that the appellee was not a holdover tenant prior to the expiration of the same, and thus yas not entitled to six months’ notice to quit; however, the court added:

“* * * That notice by Sigmon to Scroggins of the termination of said lease was unnecessary, but with Scroggins remaining in possession of the demised premises, claiming a right therein under the lease, it was necessary that Sigmon give the three days notice to ‘quit and surrender possession’ under Section 34-1503, of the Statutes of Arkansas to formally terminate said lease and end the landlord-tenant relationship existing between the parties.”

A decree was entered, making permanent the temporary restraining order of December 30, 1968, “until such time as the landlord and tenant relationship between the parties is terminated by proper notice and action.” The decree further released Scroggins and his bondsmen from liability upon the bond for injunction filed in the amount of $30,000.00. From such decree, appellant brings this appeal. Appellee cross-appeals, contending that there are genuine issues, material to the case, which should be determined by testimony.

The court was in error in the conclusions reached. In the case before us, ah estate for years was created by the lease. In 32 Am. Jur. Landlord and Tenant § 61, we find:

“An estate for years has been defined as an interest arising from an agreement or contract for the possession of lands or tenements for some definite period. Every estate which must expire at a period certain and fixed in advance, by whatever words created, is an estate for years. A lease for years has been defined as a contract between the lessor and lessee by which the lessor contracts to grant the possession and enjoyment of land, or hereditaments of a demisable nature, for a period of years certain, and in most cases, the lessee agrees to render to the lessor a rent in money, or any other kind of payment, at the end of stated periods of a year or more, during the term.”

Also, it is pointed out in Section 993:

“At common law and under statute, a notice to quit is necessary to terminate periodic tenancies, such as those from year to year or month to month, and such statutes are frequently made applicable to tenancies at will, and with respect to the maintenance of certain actions and proceedings, such notice is essential. The reason of the requirement is the indefiniteness and uncertainty of the duration of such a tenancy and the protection of each of the parties thereto against capriciousness on the part of the other. When, however, the parties have by agreement fixed the time for. the lease to terminate, notice to quit is unnecessary because the reason for it ceases.”

The same view is expressed in 510 O. J. S. Landlord and Tenant § 89(3)a.:

“In the absence of a statute or provision in the lease to the contrary, no notice of termination or notice to quit need be given by the lessor in order to terminate a lease for a term of years or other definite period, nor need any notice of termination or of intention to quit be given by the lessee.”

Numerous other authorities are to the same effect. Accordingly, there was no necessity that Sigmon give Scroggins any notice at all. It may be that appellant, through its officers, contemplated that Scroggins might not surrender the premises, but would hold over, and the notice was sent as a matter of complying with Section 50-509, hereafter set out, or it may be that the notice actually was only in the nature of an accommodation or courtesy, i. e., to let Scroggins know that appellant intended to take possession of the lands. Be that as it may, there is no reason, legal or otherwise, why appellant should be penalized for giving the notice; certainly, appellee was not prejudiced thereby, and we are unable to agree with the trial court that this written notice given under Section 50-509, had the effect of continuing the landlord-tenant relationship between the parties on the basis of “a tenancy at will, sufference or year to year.” Ark. Stat. Ann. § 50-509 (1947) provides as follows:

“If any tenant for life or years, or if any other person who may have come into possession of any lands and tenements under or by collusion with such tenant, shall wilfully hold over the same, after the termination of such term and thirty [30] days’ previous notice in writing given, requiring the possession thereof, by the person entitled thereto, such person so holding over, shall pay to the person so kept out of possession double the yearly rent of the lands or tenements so detained, for all the time he shall keep the person entitled thereto out of possession.”

The giving of the 30 days’ notice before the filing of the suit (in order to claim double damages) was not necessary in the instant case for the reason that the complaint was filed by appellee on December 30, and in answering, it was necessary under our statute, Ark. Stat. Ann. § 27-1121 (Eepl. 1962) that appellant file any counterclaim that it might have, or be thereafter barred. See also Pettit v. Kilby, 232 Ark. 993, 342 S. W. 2d 93. We hold that, under the terms of the lease instrument, no notice was necessary, and that, under Section 27-1121, no 30 days’ previous notice was necessary in order for appellant to seek double damages.

There is, however, one fact definitely left for determination. Section 50-509 provides that one who willfully holds over, thus preventing possession to the person entitled thereto, shall pay the person so kept out of possession double the yearly rent of the lands detained for all the time he shall keep the person entitled thereto out of possession. This record does not reflect for how long the appellant has been, or will be, kept from possession, and this fact will have to be determined at another hearing. Also, while there is nothing in the record before us which reflects that appellee acted in good faith in not surrendering the premises, inasmuch as the case is being remanded anyway, we think it proper to permit Scroggins to offer competent evidence of his reasons for withholding possession. In Lesser-Goldman Cotton Company v. Fletcher, 153 Ark. 17, 239 S. W. 742, this court pointed out that, under the statute :

“* * * to entitle the landlord or lessor to double rents after the termination of the lease term, the holding over by the tenant must be done wilfully. The statute is highly penal, must be strictly construed, and cannot be extended by intendment beyond its express terms. A holding over by the tenant under the bona fide belief that he has the right to do so, even though he were mistaken, is not a wilful or contumacious holding under the statute, where the undisputed facts show, as they do here, that there were reasonable grounds for such belief.”

The decree is reversed and the cause is remanded for the determination of the two issues mentioned.

It is so ordered.

      Referring to Section 34-1503, the court said:
      “* * * This notice was not given, but notice under Section 50-509, supra, was given by Sigmon to Scroggins. This notice had the effect of continuing the landlord-tenant relationship between the parties on a basis of a tenancy at will, sufferance or year to year. That in default of notice under Section 34-1503, supra, with notice being given under Section 50-509, supra, and Sigmon not pleading for possession of the demised premises, the tenancy existing between the parties should be protected and the possession of Scroggins preserved by injunction.”

      Appellee asserted that he did not receive the notice until December 19- While the receipt was signed by Mrs. H. E. Scrog-gins, there is no absolute showing that this was appellee’s wife.

      The court was referring to Section 6557 of Crawford and Moses Digest, which is identical with Section 50-509.


author: George Rose Smith, Justice. John A. Fogleman, Justice,

text:
    Alta RISOR, Administratrix v. Gordon BROWN
    5-4873
    446 S. W. 2d 202
    Opinion delivered November 3, 1969

      Smith, Williams, Friday & Bowen; By: Byron M. Eiseman, Jr., for appellant.

      Moses, McClellan, Arnold, Owen & McDermott, for appellee.
   George Rose Smith, Justice.

This suit was brought by the appellant, as administratrix of the estate of Oddie M. Anderson, deceased, to require the appellee, Gordon Brown, to contribute his proportionate share of the. federal and state estate taxes that had been paid by the administratrix upon the decedent’s estate. This appeal is from a decree holding that- Brown is under no duty to contribute to the payment of the taxes (except with respect to a small testamentary bequest not in issue).

The facts are not in dispute. On March 4, 1964, Mrs. Anderson gave Brown securities worth $22,000. The donor was then 86 years old and suffered from an incurable degenerative process of the spinal cord. Within a few months Mrs. Anderson was taken to a hospital, where she died in the following October. In an earlier declaratory judgment proceeding it was held that the gift to Brown was valid, as against an assertion that it had been procured by undue influence and by an abuse of a confidential relationship. Barrineau v. Brown, 240 Ark. 599, 401 S. W. 2d 30 (1966).

Thereafter the federal taxing authorities determined that the gift to Brown had been made in contemplation of death, so that the value of the gift was to be included in the decedent’s estate for tax purposes. That determination was accepted by the state revenue department and by the parties to the present dispute. Thus it is an uncontroverted fact that the gift to Brown was in contemplation of death.

The question now before us is whether the recipient of such a gift must bear his proportionate part of the estate taxes. That question turns upon the proper construction of our apportionment statute, § 1 of Act 99 of 1943, which reads as follows:

Except as otherwise directed by the decedent’s will, the burden of any State and Federal Estate, Death, and Inheritance Taxes paid by the executor or administrator shall be spread proportionately among the distributees, and/or beneficiaries of the estate, so that each shall bear his proportionate part of said burden. [Ark. Stat. Ann. § 63-150 (1947).]

When one studies the language of the apportionment act itself, and the language of the three prior decisions that are pertinent to the present problem, it is plain that the recipient of a gift which was includible in the decedent’s estate as having been made in contemplation of death, must bear his fair share of the estate taxes assessed by the federal and state governments.

It has long been the rule that state law — not federal law — determines the manner in which the burden of the federal estate tax is to be distributed among the beneficiaries of .an estate. At first Arkansas had no apportionment statute. That deficiency in our law led to the inequitable result that the court felt itself compelled to reach in the first of the three decisions to which we have alluded: Thompson v. Union & Merc. Tr. Co., 164 Ark. 411, 262 S. W. 324, 37 A. L. R. 536 (1924). There we held that the widow was not required to contribute to the payment of the federal estate tax, even though the value of her dower was included in the valuation upon which the tax was computed. We thought it appropriate to explain that we had no choice in the matter: “We have nothing to do with the justice or the policy of our laws in this regard, as that is a matter entirely for the legislative branch of government.”

Late in 1942 the Supreme Court of the United States handed down the next pertinent decision: Riggs v. Del Drago, 317 U. S. 95 (1942). That case involved a New York apportionment statute. The state trial court had held that under the statute the tax should be equitably apportioned among all the persons beneficially interested in the estate. The New York appellate court reversed that decision, under the mistaken impression that the federal estate tax law did not permit the states to accomplish such a fair and just distribution of the federal tax burden. That appellate decision was in turn reversed by the United States Supreme Court, which upheld the validity of the state statute.

The Riggs decision made it clear to the states that by appropriate legislation they could put into effect an equitable distribution of the tax burden. The Arkansas General Assembly at once acted upon that invitation by the adoption of the apportionment act now before us, Act 99 of 1943. That the act stemmed from the Riggs decision cannot be doubted, for the language of the act is almost a verbatim copy of the Supreme Court’s paraphrase of the New York law in the first paragraph of the Riggs opinion.

The apportionment act came before us for interpretation in the third pertinent case: Terral v. Terral, 212 Ark. 221, 205 S. W. 2d 198, 1 A. L. R. 2d 1092 (1947). There the widow argued, on the authority of the Thompson case, supra, that she ought not to be required to bear her fair share of the tax, even though the amount of the tax had been swelled by the inclusion in the tax base of the value of her dower and of her interest as surviving tenant by the entirety. We rejected that argument, pointing out that if the legislature had meant to continue in force the (inequitable) rule of the Thompson case it would have used appropriate language to accomplish that result.

Specifically, the widow in the Terral case insisted that she was not a distributee or beneficiary of her husband’s estate, within that clause of the apportionment act which directs that the tax burden be spread proportionately among “the distributees, and/or beneficiaries of the estate.” We found that argument unsound, holding that the words were used in a nontechnical sense to include all persons in whom the law might vest any part of the intestate’s property.

That decision is controlling here. Mrs. Terral’s dower and survivorship interests did not pass through the hands of her husband’s personal representative, but she was nevertheless a beneficiary of his taxable estate within the apportionment act. Similarly, the gift to Brown did not pass through the hands of Mrs. Anderson’s personal representative, but Brown was nevertheless a beneficiary of her taxable estate. The whole point and it is a simple one — is that both Mrs. Terral and the appellee Brown were the recipients of property which constituted a part of the decedent’s taxable estate and increased the amount of the tax. If the key word “proportionate” in our apportionment act means anything at all, it means that those who receive a portion of the decedent’s taxable estate must bear their just part of the tax burden. Here Brown received, we are told, 13.4906% of Mrs. Anderson’s taxable estate. The apportionment act achieves justice by requiring that he bear that same proportionate part of the estate ta?:es paid by the administratrix. Nothing could be more simple or more fair.

Reversed.

Fogleman, Jones and Byrd, JJ., dissent.

John A. Fogleman, Justice,

dissenting. I respectfully dissent because I firmly believe that the majority has extended the application of our estate tax apportionment statute by construction. I further feel that the effect of this extension is actually contrary to the intention of the General Assembly in at least one respect; i. e., one who desires to make a completed gift inter vivos must, if he desires to insulate it from estate tax liability, make a will if he does not have one and would not otherwise make one, or, if he has made a will, he must either revoke it and make another or amend it by codicil. This may be exactly what the donor sought to avoid by making the gift especially if the gift is in contemplation of death. I cannot read this requirement into our statute.

There are facts in the record but not stated in the majority opinion which I consider pertinent in consideration of this case. At the time of Mrs. Anderson’s death, she had not filed a gift tax return on this and other gifts made by her on the same date she made the one involved here. Her will and first codicil were executed approximately four years prior to this gift. Neither the will nor the codicil contained any directions concerning the estate tax burden. The decedent did direct that, after payment of debts, expenses of administration and certain bequests, the personal representative convert all stocks, bonds and other evidences of indebtedness into cash and purchase a refund plan annuity for her niece. While estate tax returns were filed by her personal representative, the assets involved in this gift were not included. The accountant who prepared these returns did not prepare any gift tax return, even though it was the responsibility of the decedent to have done so before April 15, 1965. 26 U. S. C. A. §§ 6019, 6075. Since she died before she filed the return, the duty to do so devolved upon her personal representative. See Int. Rev. Serv. Reg. §■ 25.6019-1 (b) (1969); 1 CCH Fed. Est. & Grift Tax Rep. § 4021, p. 5032. The tax on this gift was due when the return was filed. 26 U. S. C. A. § 6151. The tax is to be paid by the donor. 26 U. S. C. A. § 2502. It is only when the tax is not paid when due that any liability attaches to the donee of a gift. 26 U. S. C. A. § 6324(a) (2). If the tax is collected from a donee, he is entitled to reimbursement either out of any part of the estate still undistributed or by a just and equitable contribution by those whose interest in the estate of the decedent would have been reduced if the tax had been paid before distribution of the estate or whose interest is subject to equal or prior liability for the payment of taxes. 26 U. S. C. A. § 2205. The excuse given for the personal representative’s not filing this return was that the validity of the gift was then in question. Even though any doubt on this score was resolved by our decision in Barrineau v. Brown, 240 Ark. 599, 401 S. W. 2d 30, on April 4, 1966, no gift tax return has ever been filed. After the federal Internal Revenue Service made a determination that the gift was made in contemplation of death, no effort was made to collect the $22,401.08 tax assessed, or any part thereof, from anyone other than the personal representative. The total amount of the estate tax was not any different from what it would have been had a gift tax return been filed because the gift tax of $13,070.00 on the gifts would have been credited upon the estate tax assessed. 26 U. S. C. A. § 2012.

My reading of our statute and the pertinent Arkansas decisions leads me to a conclusion directly contrary to that of the majority. Appellant argues here that the chancellor’s error was twofold. First, she says that the term “estate” as used in Ark. Stat. Ann. § 63-150 (Supp. 1967) actually means “gross estate” for federal estate tax purposes, contrary to the chancery court holding. Next, she contends that appellee was a “distributee and/or beneficiary” of the estate of Mrs. Anderson within the meaning of that term as used in § 63-150.

In determining the meaning of these critical words, we should keep in mind the entire statutory background. It must be remembered that both the federal and state taxes are “estate,” not “inheritance” taxes, i. e., both are taxes on the transfer of property by the decedent at his death while an inheritance tax is a tax upon the right to receive, or upon the taking of, property by a beneficiary or distributee. 26 U. S. C. A. §§ 2001, 2002; 42 Am. Jur. 2d 217-221, Inheritance, etc. Taxes §§ 2, 3, and 4 (1969); Riggs v. Del Drago, 317 U. S. 95, 63 S. Ct. 109, 87 L. Ed. 106 (1942); Young Men’s Christian Association v. Davis, 264 U. S. 47, 44 S. Ct. 291, 68 L. Ed. 558 (1924); New York Trust Company v. Eisner, 256 U. S. 345, 41 S. Ct. 506, 65 L. Ed. 963, 16 A. L. R. 660 (1921); Thompson v. Union and Mercantile Trust Co., 164 Ark. 411, 262 S. W. 324; Ark. Stat. Ann. §§ 63-101, et seq.; Annot., 1 A. L. R. 2d 1104 (1948); Gates v. Bank of Commerce and Trust Co., 185 Ark. 502, 47 S. W. 2d 806, 10 Law School Bull. (Ark.) 30 (1941).

The federal estate tax is imposed upon the ‘ taxable estate.” 26 U. S. C. A. § 2001. This is determined by deducting from the value of the “gross estate” the exemptions and deductions provided for in the Internal Revenue Code. 26 U. S.'C. A. §§ 2051 — 2056. “Gross estate” for the purpose of determining the taxable estate is defined by 26 U. S. C. A. §§ 2031 — 2034. It includes the value of property of which the decedent has made a transfer in contemplation of death. There is a presumption, subject to rebuttal, that any such transfer within a period of three years prior to the date of death of decedent was a gift made in contemplation of death. 26 U. S. C. A. § 2035. The purpose and intent of the federal internal revenue laws, as stated in 26 U. S. C. A. § 2205, is that, so far as is practicable and unless otherwise directed by the will of the decedent, the tax shall be paid out of the estate before its distribution. Under the code, the executor is entitled to recover from the beneficiary of policies of life insurance on the life of the decedent such portion of the total tax paid as the proceeds of the policies bear to the sum of the taxable estate. 26 U. S. C. A. § 2206. Provision is also made for the recovery by the executor of a pro rata amount from persons receiving property by reason of the exercise, nonexercise or release of a power of appointment. 26 U. S. C. A. § 2207. No other provision is made by federal law for recovery of any part of the tax by the executor.

Prior to the passage of our apportionment act, it was clearly the law in Arkansas that the estate tax constituted a claim against the estate. The idea of an equitable apportionment of the tax under which there would be an allocation among all who enjoy the benefits of the property included in a decedent’s gross estate, was rejected by this court in Thompson v. Union & Mercantile Trust Co., 164 Ark. 411, 262 S. W. 324, where we said:

a* * * Though the tax is a lien on the whole estate, it is discharged, like other claims against the estate, out of property other than the widow’s dower, and the fact that- it is a lien and that the government may enforce that lien, even against dower property, does not make the dower taxable as against the heirs of the decedent. We have nothing to do with the justice or the policy of our laws in this regard, as that is a matter entirely for the legislative branch of government.”

Until the decision in Riggs v. Del Drago, 317 U. S. 95, 63 S. Ct. 109, 87 L. Ed. 106, (1942), it seems that there was no question that the ultimate burden of an estate tax fell upon the residuary estate in the absence of statute or testamentary provision to the contrary. The weight of authority seems to remain so, even after that decision. See Annotations, 142 A. L. R. 1135, 1137 (1943); 37 A. L. R. 2d 7, 109 (1954); 37 A. L. R. 2d 169, 171, 176 (1954); 37 A. L. R. 2d 199, 203 (1954). When our legislative branch undertook to deal with the matter after that decision it is significant that it chose language decidedly different from that of the New York statute, which, like some other state statutes, specifically provides for equitable proration among persons interested in the property required to be included in the gross estate under the tax law. N. Y. Decedent Estate Law § 124 (McKinney 1949). The significance is that this language of the New York statute does not appear in the Arkansas act. While there is no doubt that the Arkansas legislation stemmed from the Riggs decision, the selection of the “paraphrase” of the act there under consideration and the omission of the language read into our statute by the majority must have been intentional. In the Riggs case the courts were dealing only with property which was the subject of testamentary bequests and legacies. After referring to the controlling federal legislation relating to collection of proportionate shares of the tax from beneficiaries of life insurance includable in the gross estate and from a person receiving property subject to a power, the United States Supreme Court said:

“* * * But these sections deal with property which does not pass through the executor’s hands and the congressional direction with regard to such property is wholly compatible with the intent to leave the determination of the burden of the estate tax to state law as to properties actually handled as part of the estate by the executor.” (Emphasis mine.)

Consequently, we can only take the language employed in that opinion to describe the effect of the New York statute to refer only to the situation then before it and not to encompass valid, completed inter vivos gifts. Thus, we must interpret our own statute according to its own language.

In our first construction of our statute we held that property passing to the widow in the form of dower and statutory allowances and as surviving tenant of an estate by the entirety should bear its proportionate share of estate taxes. In doing so, we followed the rule that we must consider the usual and ordinary nontechnical interpretation of such words as “distributee” and “beneficiary,” in reference to the subject matter in the minds of the legislators. Terral v. Terral, 212 Ark. 221, 205 S. W. 2d 198. We said that these words referred to all persons in whom the law might vest any part of the property of the intestate. The logic of the decision in the Terral case is sound and is in harmony with the general scheme relating to both federal and state estate taxes. The definition arrived at in that case is bulwarked when we consider the usual meaning of the critical words. In the sense used here the word beneficiary is given the following meanings:

Webster’s Third New International Dictionary
“2: one who receives something: as (a): the person designated to receive the income of a trust estate (b): the person named (as in an insurance or annuity policy) as the one who is to receive proceeds or benefits accruing”
Random House Dictionary of the English Language
“1. one who receives benefits, profits or advantages 2. a person designated as the recipient of funds or other property under a trust, insurance policy, etc. ’ ’
Bouvier’s Law Dictionary
“A substitute for cestui que trust; the person named in a policy of insurance to whom the insurance is payable upon the happening of the event insured against.”

Definitions of distributee in the ordinary sense are:

Webster’s Third New International Dictionary
‘ ‘ one to whom something is or is to be distributed: ■ esp: one sharing in or entitled to share in an estate5 ’
Random House Dictionary of the English Language
“a person who shares in a decedent’s estate”
Bouvier’s Law Dictionary
“The persons who are entitled under the statute of distribution to the personal estate of one who has died intestate.”

Definitions of the word estate include:

Webster’s Third New International Dictionary
“4b(l): the aggregate of property or liabilities of all kinds that a person leaves for disposal at his death”
Random House Dictionary of the English Language
“the property of a deceased person viewed as an aggregate”

The property received by appellee more than seven months prior to the death of the decedent was not left by Mrs. Anderson to be divided at her death, was not vested in him by law and did not constitute her property, iñ any sense of the word, after the completed gift. Thus, appellee Brown did not receive anything that constituted a part of the estate of his donor, nor was anything vested in him by reason of the death of the donor.

This conclusion is consistent with the holding in Williamson v. Williamson, 224 Ark. 141, 272 S. W. 2d 72. It was emphasized in that case that our statute does not come into play until the tax has been computed and paid by the personal representative. This is in keeping with the letter and spirit’ of the federal statute which requires payment of the tax by the executor in the first instance and which permits one such as appellee to recover from undistributed assets in the hands of the executor any amount collected from him by the Internal Revenue Service. I submit that the only result of the Thompson case rejected in the Terral case was the holding that property taken by the widow by reason of the death of her spouse would not bear any of the tax burden. I do not understand how it can possibly be said that the decision in the Terral case is controlling here. The only holdings there that do control have to do with the necessity of giving words in our apportionment statute their usual and ordinary nontechnical meaning. The words “distributee” and “beneficiary” were there said to refer to those persons in whom the law might vest any part of the property of the intestate. As above pointed out appellee could not be considered to have been one of those persons.

In Williamson, not mentioned in the majority opinion, the argument that the tax should be apportioned among those whose shares in an estate entered into the tax base was rejected. It was argued that the burden is to be spread proportionately only among those whose shares entered into the tax base, so that that portion of the estate vested in the widow but constituting the marital deduction would not pay any part of the tax. This court then said that the burden of the tax under our act was to be spread proportionately among the beneficiaries who share the net remaining estate. This estate was there described, insofar as distributees are concerned, as what is left after the federal demand has been satisfied. It is consistent with that holding to say that the statute requires the burden here to be borne among those who share all assets of which the decedent was possessed at the time of her death remaining after the payment of debts and expenses of administration and taxes and in which her interest ceased by reason of her death and which became vested in the distributee or beneficiary by law because of her death.

I humbly and sincerely submit that the court has now departed from the rule requiring that words in the statute be given their ordinary, nontechnical meaning and substituted the highly technical definition of “gross estate” in the federal Intexmal Revenue Code for the ordinary meaning of the word “estate.” It is not ordinarily understood that something that one gives away in his lifetime without any strings attached constitutes any part of his “estate.”

The argument of appellee, that under any construction given the apportionment act, the estate of the decedent would be liable for the gift tax, has been ignored by the majority. The donor was primarily liable therefor. 26 U. S. C. A. § 2502(d); 1 CCH Fed. Est. & Gift Tax Rep., § 3090, p. 4328. Since the donor died before the return was filed, the responsibility for filing it devolved upon the personal representative. Int. Rev. Serv. Reg., § 25.6019-1 (b) (1969); 1 CCH Fed. Est. & Gift Tax Rep., § 4021, p. 5032. Since the donor died before the tax was paid the amount of the tax was a debt of the decedent’s estate to the United States, and her executor or administrator was responsible for its payment out of the estate. Int. Rev. Serv. Reg., § 25.2502-2; 1 CCH Fed. Est. & Gift Tax Rep., § 3090, p. 4328. The claim for the tax had priority over all other claims. 31 U. S. C. A. § 191. It also constituted a lien against the property of the estate. 26' U. S. C. A. § 6321; 1 CCH Fed. Est. & Gift Tax Rep., § 4350, p.' 5308; Int. Rev. Serv. Reg., ^ 301.6324-l(b) (1969). 'The personal representative becomes personally liable for the tax upon his failure to pay it from the assets of the estate. 31 U. S. C. A. § 192; Int. Rev. Serv. Reg., § 25.2502-2 (1969); 1 CCH Fed. Est. & Gift Tax Rep., § 3090, p. 4328. Since the gift tax was a debt of the decedent’s estate, it should have been paid by the personal representative from the assets of the estate in his hands. The will of the decedent contained a clear direction to the executor to pay all of her just debts as speedily as possible out of any moneys or other property of which she. might die seized and possessed. I. cannot undertand how it can be said that the tax to this extent should not be borne by the residuary estate.

It seems absurd to me that Mrs. Anderson could possibly be said to have intended that appellee net only $19,337.96 from a gift of $22,000. Yet this is the result reached by the majority. It is also obvious that, in making such a gift, a testator does not intend for a residuary legatee or devisee to be the object of his bounty to the extent originally contemplated when his will was drawn. The making of the gift inter vivos insures this without the necessity of drafting and executing a new will or codicil. The words of the Supreme Judicial Court of Massachusetts in Warfield v. Merchants National Bank of Boston, 337 Mass. 14, 147 N. E. 2d 809 (1958), are appropriate here:

“* * * We may not act in the place of the donor, and should not, in the guise of doing justice, modify legislative enactments. To assert that apportionment should he decreed in ‘equity and good conscience’ (Carpenter v. Carpenter, 364 Mo. 782, 796-797, 267 S. W. 2d 632, 642) we respectfully suggest begs the question.”

We cannot refuse to give effect to the language of the statute merely because we think it brings about an inequitable result in a particular case. Cupp v. Frasier’s Heirs, 239 Ark. 77, 387 S. W. 2d 328.

I would affirm the judgment of the trial court. At the very least, I would hold that the gift tax .was a debt of Mrs. Anderson’s estate, and that none of that tax should be borne by appellee.

Jones and Byrd, JJ., join in this dissent.

      While the statute has been amended since the decision in the Williamson case, that amendment goes no farther than to provide that no part of the burden of the taxes shall be apportioned against that part of the property received by a surviving spouse which is deductible for federal estate tax purposes. It is evident that this amendment does not affect the decision in the Williamson case in any respect except as to property constituting the marital deduction under federal estate tax law. Professor Ray Trammell has said that, since the amendment, a testator must affirmatively direct an equitable apportionment, if there is to be one. Trammell, Act 122 Estate Tax Amendment, 9 Ark. L. Rev. 411, 413 (1955).


author: Lyle Brown, Justice.

text:
    THE RELIABLE LIFE INSURANCE CO. v. Ortis ELBY
    5-5017
    446 S. W. 2d 215
    Opinion delivered November 3, 1969

      Don Gillaspie, for appellant.

      O. K. Robertson, for appellee.
   Lyle Brown, Justice.

The Reliable Life Insurance Company petitioned the chancellor for an order of cancellation of insurance issued on the life of Fannie M. Elhy. The petition was filed after Mrs. Elby’s death and Ortis Elby, beneficiary, was named as defendant. The prayer for cancellation was based on a policy requirement that the insured be in good health on the date of policy issuance. The trial court held the requirement of good health to have been waived because the insured made disclosure of her medical history to the insurer’s agent on the date of the application. The single point advanced by Reliable Life on appeal is that the finding of waiver was against the preponderance of the evidence.

Appellee Ortis Elby was his only witness. His evidence may be summarized thusly: Reliable’s agent solicited an application and filled in the answers for a five hundred dollar policy on the life of Elby’s wife; Mrs. Elhy signed by mark; present were the agent and the Elby couple; in answer to the agent’s inquiries, Elhy informed him that some three or four years previously Mrs. Elhy had been hospitalized and suffered a hemorrhage; the agent asserted that experience to be too remote to he material; he gave the agent the name of the attending physician; and on the date of the application Mrs. Elby was in apparent good health and had so appeared for some time. Other proof showed the date of the application to be July 28, 1967, and the date of death to have been September 12, 1967.

The only witness for Reliable was Dr. Thibault. He testified that Mrs. Elby was his patient in July 1964 and was in his office on three occasions during that month for treatment; that he gave her medication for extremely high blood pressure; that the pressure was down to normal when he saw her the third time; that she was suffering from hypertensive disease which prevailed until her death and actually caused a fatal hemorrhage of the brain; that he next saw her at the hospital at the time of death; and that the autopsy performed by another doctor substantiated his diagnosis.

Reliable’s soliciting agent did not testify, nor was any reason for his absence placed in the record. He could have been a material witness in that the answers he allegedly inserted in the application did not correspond to Elby’s testimony. The chancellor could properly have treated his unexplained absence as a factor unfavorable to Reliable.

It is significant that, according to Elby, the only medical inquiry was whether his wife had ever been hospitalized with an illness; that he responded by explaining that three or four years previously she was in the hospital and suffered a hemorrhage; and that he gave the agent the name of the doctor. (At the trial Elby was not called upon to name the hospital or the doctor. Apparently the attending physician was one other than Dr. Thibault because the latter testified he did not hospitalize Mrs. Elby.) It is true the application contained other medical questions but the agent did all the writing. He was certainly dealing with uneducated people. The record discloses that Mrs. Elby could not write her name; that Elby, a Negro laborer, wrote a poor hand; and he used inferior English in his testimony.

Notwithstanding Elby did not relate to the agent Dr. Thibault’s 1967 treatment (apparently because he was not asked), Elby supplied information of a serious illness — a hemorrhage of such severity as to require hospitalization. A hemorrhage is certainly not unrelated to high blood pressure; in fact it is commonly known that the latter ailment in a major stage is often climaxed by a hemorrhage. Be that as it may, it is entirely logical that inquiry respecting the reported ailment would have disclosed the blood pressure problem. Reliable had the type of information that suggested a cautionary investigation and therefore is in no position to complain that Dr. Thibault’s treatment was not revealed. 1 Appleman Ins. L. & P. § 220 (1965); Old American Life Ins. Co. v. McKenzie, 240 Ark. 984, 403 S. W. 2d 94 (1966).

A provision that a life policy is void if the insured is not in good health at the time of delivery has long been recognized as valid and enforcable; but it is unavailing if the insurer’s agent, in the scope of his employment, learns before delivery of the policy that the insured is not in good health. Southern National Ins. Co. v. Heggie, 206 Ark. 196, 174 S. W. 2d 931 (1943). The chancellor concluded that the medical evidence supplied by Elby constituted a disclosure sufficient to put Reliable on notice of his wife’s hypertension. We are unwilling to say that finding was clearly against the preponderance of the evidence. Appellee is allowed an attorney’s fee of $250 on the appeal.

Affirmed.


text:
    Marion George BAKER et al v. CITY OF LITTLE ROCK
    5-5043
    446 S. W. 2d 253
    Opinion delivered November 3, 1969

      Edgar Thompson and Langston & Langston, for appellants.

      House, Holmes & Jewell; By: Donald T. Jack, Jr., for appellee.
   Lyle Brown, Justice.

This is an eminent domain proceeding initiated by the City of Little Rock to obtain lands needed for expanding the present airport facilities. Landowners Marion G. Baker and wife appeal from the jury award of just compensation. They allege four irregularities in the trial procedure.

The first challenge of the Bakers is directed at portions of Instructions 13 and 14, specifically those pronouncements which stated that comparable sales could be considered as substantive evidence of the value of the Bakers’ property. We have examined the evidence to ascertain whether those portions of the instructions were applicable to any of the testimony. That is because if the instructions were correct under any of the circumstances of the case, they would not be inherently erroneous. Insured Lloyds v. Mayo, 244 Ark. 802, 427 S. W. 2d 164 (1968). A general objection, which appellants made, only reaches those instructions which are inherently erroneous.

Two of the expert witnesses said they had considered as comparable some sales in the same vicinity-which they had personally processed as realtors. Witness Louis Block, Sr., of Block Realty Company, described in detail a sale handled by him in 1968 which in his opinion was highly comparable. Evidence of comparable sales and comparable values given by those having firsthand information may be introduced as substantive evidence going to the value of the subject lands. Sewer & Waterworks Imp. Dist. v. McClendon, 187 Ark. 510, 60 S. W. 2d 920 (1933); St. Louis I. M. & S. Ry. Co. v. Theo Maxfield Co., 94 Ark. 135, 126 S. W. 83 (1910). Instructions 13 and 14 were proper, at least insofar as they applied to any comparables not based on hearsay; whether they are otherwise applicable is not before us because a specific objection was not made.

The second point for reversal: Similarity or dissimilarity of other lands sold in the vicinity is a question for the trial judge and not for the jury. Expert witnesses for both litigants testified as to comparable sales and at no stáge of the trial did the landowner seek to have any of them removed from consideration by the jury. If the essential elements of similarity between an alleged, comparable and the subject property are revealed by the testimony then it is for the jury to evaluate the weight to be given to thát particular comparable; if as a matter of law it is not comparable then it would be the duty of the adverse party to call that fact to the attention of the court.

This brings us to appellants’ third contention for reversal. Counsel for the landowners recalled as a rebuttal witness, Marion G-. Baker, one of the appellants:

Q. Mr. Baker, do you have any opinion as the owner as to what the value of your real estate is? Your property?
A. Replacement value . . .
Mr. Trimble: I object. This is not rebuttal. He didn’t express his opinion on direct and he’s reopening the case. (Objection sustained.)

Appellants contend that Mr. Baker should have been permitted to continue with his answer. We do not agree. It is a general rule of evidence of long standing that the court may, acting with sound discretion, refuse to permit such evidence relating inherently to the case in chief to be held out until rebuttal. Here the issue of just compensation was raised by the pleadings and was competent and proper to be introduced by the landowners in chief. No showing was made as to why it was not brought forward in chief. Absent such showing we certainly cannot say the trial court abused its discretion. Bain v. Fort Smith Light & Traction Co., 116 Ark. 125, 172 S. W. 843 (1915).

Finally, appellants contend that a remark of the trial court amounted to a comment on the evidence. We do not review the contention because it was not called to the attention of the court when made, nor was an objection filed. Southern Cotton Oil Co. v. Campbell, 106 Ark. 379, 153 S. W. 256 (1913). See Arkansas Valley Industries, Inc. v. Giles, 241 Ark. 991, 411 S. W. 2d 288 (1967).

Affirmed.