author: Robert L. Brown, Justice.

text:
    Andrew MERTYRIS v. P.A.M. TRANSPORT, INC.
    92-151
    832 S.W.2d 823
    Supreme Court of Arkansas
    Opinion delivered June 29, 1992

      Rice & Ogles, P.A., by: John Ogles, for appellant.

      Richard L. Miller, for appellee.
   Robert L. Brown, Justice.

Appellant Andrew Mertyris appeals on the basis that the circuit court erred in granting summary judgment in favor of appellee P.A.M. Transport, Inc. on his claims of implied contract and tort of outrage. His appeal is without merit, and we affirm the judgment of the circuit court.

P.A.M. Transport, a trucking firm, hired Mertyris in November 1987 and gave him a Driver’s Manual at that time. The manual stated, in part, under a heading entitled “Performance Standards”: “This Driver’s Manual is not to be construed as a guarantee of employment for any specific period of time or any specific type of work. All assignments and continued employment will depend upon your satisfactory performance and the company’s determination of the needs for your service.” No written employment contract was entered into between P.A.M. Transport and Mertyris, and the record evidences no document which specified the term of employment.

On November 28, 1988, Mertyris was involved in a traffic accident in Holbrook, Arizona, which resulted in the death of a State Highway Department worker. He claimed at the time that the truck was defective and suddenly pulled to the right, causing the death. Mertyris was arrested, charged with manslaughter, and jailed. After a week in jail, his brother posted bond for him. Two weeks later, he returned to Arkansas. Following his return, he contacted a psychiatrist, Dr. Wayne Winkle, on the advice of P.A.M. Transport’s Employee Benefits Officer, Kathy Rogers, for problems he was having with nervousness and depression. Dr. Winkle found that Mertyris had symptoms of depression, guilt feelings, and sleeplessness, all due to the accident. He concluded that Mertyris was obsessed with the accident and was unable to work because of these symptoms.

Mertyris later filed a claim with the Workers’ Compensation Commission for injury to his mental health caused by the accident. He described his mental health problems in his claim as including feelings of guilt and depression.

P.A.M. Transport suspended Mertyris after the accident on November 28, 1988. It later rehired him on May 25, 1989, will full benefits and seniority after he was acquitted of the manslaughter charge that same month. Mertyris suffered a heart attack on July 18, 1989, and on August 12, 1989, he had a heart transplant operation. He has been disabled since that time.

Mertyris filed his complaint against P.A.M. Transport on July 29, 1990, and asserted claims for implied contract, tort of outrage, and wrongful discharge. P.A.M. Transport moved for summary judgment on all three claims, and on November 13, 1991, the circuit court filed its letter opinion granting summary judgment to the appellee. Judgment was entered thereafter.

For his first point, Mertyris contends that the Driver’s Manual constituted an implied contract with P.A.M. Transport. Mertyris- argues specifically that the manual set out seven violations that would result in automatic termination of any driver regardless of length of service. Violations leading to automatic termination included use of alcohol and drugs, theft, failure to report an accident immediately, and the like. Criminal charges such as manslaughter were not included in the automatic termination provision.

The manual list for automatic termination was meant to be exclusive, according to Mertyris, and because of this list, his employer could dismiss him for no other reason. P.A.M. Transport counters that Mertyris was an at-will employee, whose employment could be terminated at any time by either party, and that the manual in no wise could be construed as a contract. The appellee emphasizes the point that the manual expressly states that it does not constitute a “guarantee of employment.” The question before us, then, is whether the list of prohibited conduct was intended by implication to be exhaustive and exclusive of any other cause for discharge.

We recently reaffirmed the employment-at-will doctrine and noted certain exceptions to it “where there is an agreement that the employment is for a specified time, in which case firing may be only for cause, or where an employer’s employment manual contains an express provision stating that the employee will only be dismissed for cause and that provision is relied on by the employee.” Crain Industries, Inc. v. Cass, 305 Ark. 566, 571, 810 S.W.2d 910, 913 (1991). We have further recognized a limited public policy exception to the at-will doctrine and have held “that an at-will employee has a cause of action for wrongful discharge if he or she is fired in violation of a well-established public policy of the state.” Sterling Drug, Inc. v. Oxford, 294 Ark. 239, 249, 743 S.W.2d 380, 385 (1988).

The Crain case added still another exception. There, the circuit court presented the jury with the issue of whether a statement in an employment handbook that layoffs would be according to seniority amounted to an enforceable promise by the employer. The jury found that it did. We affirmed, concluding that the circuit court did not err in presenting the issue to the jury.

The issue of whether a list of violations leading to termination could be interpreted as exclusive of all other causes for dismissal was presented squarely to this court in two consolidated cases. See Gladden v. Arkansas Children’s Hospital, 292 Ark. 130, 728 S.W.2d 501 (1987). In the first case, we affirmed a directed verdict in favor of the employer on the basis that the personnel manual involved simply listed the conduct which could result in termination “with no implications that those infractions alone constitute cause for discharge.” 292 Ark. at 134, 728 S.W.2d at 503-504. Nor did we find a policy expressed in either manual that the respective employees would not be discharged except for cause.

That is exactly the situation that we have in the case before us. The P.A.M. Transport manual lists certain conduct that will result in termination, but nothing in the manual suggests that he list is intended to be exhaustive. Indeed, it would not only be unreasonable but absurd to interpret the manual as implicitly foreclosing termination for criminal acts and wrongful conduct beyond the seven violations listed in the manual. We note with respect to this point that Mertyris himself admitted at deposition that the manual did not say that these were the only reasons P.A.M. Transport could fire someone.

Were we to adopt Mertyris’s argument on this point, we would be forced to overrule clear and sound precedent in the form of Gladden, which we are not disposed to do. In sum, we refuse to hold that a list of conduct in the manual leading to automatic termination constituted an implied promise by the employer not to dismiss Mertyris for any other criminal conduct, wrongful act, or other legitimate reason. The manual contained no express provision that an employee would be dismissed only for cause, and the case falls within no other exception to the at-will doctrine. We affirm the circuit court’s decision on this point.

Mertyris next asserts that the court erred in granting summary judgment on his claim of outrage. The precise allegation in his complaint was that P.A.M. Transport “undertook a systematic and malicious campaign of intentionally inflicting upon the plaintiff emotional distress by dismissing plaintiff.” He presents three additional examples to support his allegation of outrageous conduct; 1) P.A.M. Transport should have posted bail for him when he was in jail in Arizona; 2) the employer should have inspected the truck for defects in the steering box; 3) the lawyer for the employer tried to get him to change his story about the accident.

A person is subject to liability for outrage if he or she willfully or wantonly causes severe emotional distress to another by extreme and outrageous conduct. Smith v. American Greeting Corp, 304 Ark. 596, 804 S.W.2d 683 (1991); Sterling Drug, Inc. v. Oxford, supra; Ingram v. Pirelli Cable Corp, 295 Ark. 154, 747 S.W.2d 103 (1988); M.B.M. Co., Inc. v. Counce, 268 Ark. 269, 596 S.W.2d 681 (1980). In Counce, we stated: “By extreme and outrageous conduct, we mean conduct that is so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in civilized society.” 268 Ark. at 280, 596 S.W2d at 687.

We have considered the issue of whether discharge of an at-will employee alone can support a claim for outrage:

Because of the employer’s right to discharge an at-will employee, a claim of outrage by an at-will employee cannot be predicated upon the fact of discharge alone. However, the manner in which the discharge is accomplished or the circumstances under which it occurs may render the employer liable.

Harris v. Arkansas Book Co., 287 Ark. 353, 356, 700 S.W.2d 41, 43 (1985), quoted with approval, Smith v. American Greetings Corp., supra.

Here, Mertyris was suspended for about six months but rehired without loss of benefits or seniority. Affidavits from Kim Tedder, the Dispatch Supervisor, and Kathy Rogers, Employee Benefits Manager, aver that Mertyris was an at-will employee and that this suspension was due to U. S. Department of Transportation regulations which forbid a person from driving a motor vehicle if the person suffers from a mental disorder that renders him unable to drive safely. 49 C.F.R. § 391.41(b)(9) (1991). Thus, a legitimate reason for the suspension existed due to the fatal accident and the appellant’s consequent mental problems. And, again we note, Mertyris was rehired by the appellee.

Accepting, as alleged, that P.A.M. Transport did not bail Mertyris out of jail or inspect the truck and that its attorney tried to get him to change his story, this conduct falls far short of the profound seriousness required for a successful outrage claim. We observed in Ingram v. Pirelli Cable Corp., supra, that liability in tort-of-outrage cases does not extend to mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities. Yet, the conduct supporting Mertyris’s claim falls more readily into the categories adduced in Ingram than in the category of behavior so extreme and atrocious as to be utterly intolerable in a civilized society. We decline to hold that the circuit court erred in finding his conduct to be insufficient for the tort of outrage.

Summary judgment was appropriate under the facts of this case, and we affirm.

Affirmed.


source: Caselaw Access Project

author: Robert L. Brown, Justice. Steele Hays, Judge,

license: Public Domain

text:
    Brian M. WEIDRICK v. James A. ARNOLD, M.D. and Springdale Memorial Hospital
    91-364
    835 S.W.2d 843
    Supreme Court of Arkansas
    Opinion delivered June 29, 1992

      Raymond C. Smith, P.A., by: Raymond C. Smith, for appellant.

      Bassett Law Firm, by: Walker Dale Garrett, for appellee Arnold.

      Davis, Cox & Wright, by: Don A. Taylor and Walter B. Cox, for appellee Springdale Memorial Hospital.
   Robert L. Brown, Justice.

The appellant, Brian M. Weidrick, failed to comply with the sixty-day statutory notice requirement prior to filing a medical malpractice complaint. See Ark. Code Ann. § 16-114-204(1987, Supp. 1991). Based on this non-compliance, the Washington County Circuit Court granted summary judgments in favor of the appellees, Dr. James A. Arnold and Springdale Memorial Hospital. The single point on appeal is whether Rule 3 of our Rules of Civil Procedure regarding commencement of actions superseded this statutory provision. We hold that it did, and we reverse the summary judgments and remand the case for a trial on the merits.

Dr. Arnold performed a bilateral meniscectomy and reconstructive surgery on the appellant at the appellee hospital on December 2, 1988. He was released on the following day, December 3, 1988. After a series of follow-up examinations, the appellant went to another physician on January 13, 1989, who discovered a deep-pocket open-wound infection that has resulted in physical limitations. On December 3, 1990, exactly two years after the appellant’s release from the appellee hospital, the appellant filed a medical malpractice lawsuit against the appellees. The commencement of the action was just within the two-year limitation period imposed on malpractice suits by Ark. Code Ann. § 16-114-203(a) (Supp. 1991). No sixty-day notice was given within the two years or prior to commencement of the action as required Code Ann. § 16-114-204.

On December 11, 1990, the appellant sent to both appellees, by regular mail, a notice of intent to sue. Service of summons was obtained on April 1, 1991. The appellee hospital moved for summary judgment on April 5, 1991, followed by the same motion from Dr. Arnold on April 16, 1991. Both appellees asserted that the appellant had failed to comply with Ark. Code Ann. § 16-114-204(a) which provides:

No action for medical injury shall be commenced until at least sixty (60) days after service upon the person or persons alleged to be liable, by certified or registered mail to the last known address of the person or persons allegedly liable, of a written notice of the alleged injuries and the damages claimed.

At the hearing on the motions on June 5,1991, the appellant argued that Ark. R. Civ. P. 3, which governs the commencement of civil actions, superseded the sixty-day notice requirements of Ark. Code Ann. § 16-114-204. Rule 3 states: “A civil action is commenced by filing a complaint with the clerk of the proper court who shall note thereon the date and precise time of filing.” The circuit court relied on our previous holding in Jackson v. Ozment, 283 Ark. 100, 671 S.W.2d 736 (1984) and found that Rule 3 did not supersede the sixty-day notice statute.

On appeal, the appellant urges this court to reexamine the supersession argument as we said we would do in Dawson v. Gerritsen, 290 Ark. 499, 720 S.W.2d 714 (1986).

We begin by examining the history of the sixty-day notice statute, the subsequent cases interpreting it, and the Arkansas Rules of Civil Procedure. Act 709 of 1979, now codified as Ark. Code Ann. § 16-114-201, et seq. (1987 and Supp. 1991), was a comprehensive act enacted for the purpose of governing actions for medical injury. One facet of that enactment was section five, which provided the sixty-day notice to sue as a condition before commencing an action for medical injury. Act 709 contained an emergency clause which stated that the threat of legal action had caused increased rates for malpractice insurance and that the Act “should be given effect immediately to help control the spiralling cost of health care.” The Act was signed into law on April 2, 1979.

Before the enactment of Act 709, this court adopted the Arkansas Rules of Civil Procedure under the authority set forth in Act 38 of 1973 and this court’s own constitutional and inherent power to regulate procedure in the courts, but the civil rules did not become effective until July 1, 1979, which was after the enactment of Act 709. Re: Rules of Civil Procedure, 264 Ark. 964 (Per Curiam Dec. 18, 1978).

We adopted the Supersession Rule as part of the civil rules which provides that all laws in conflict with the civil rules and the Rules of Appellate Procedure, and the Rules for Inferior Courts are superseded.

Rule 3 of the Arkansas Rules of Civil Procedure provides for commencement of civil actions. As first adopted, it stated that an action was commenced by filing a complaint and obtaining service within sixty days of filing. Rule 3 was amended in 1983 to eliminate the service requirement for commencement and to provide, as quoted above, that filing a compliant with the clerk of the proper court is all that is required to commence a civil action. In Re: Amendments to the Rules of Civil Procedure, 279 Ark. 470, 651 S.W.2d 63 (Per Curiam 1983).

Also, in 1983, this court refused to hold that Act 709 was arbitrary or a violation of the Equal Protection Clause or constituted special legislation. See Gay v. Rabon, 280 Ark. 5, 652 S.W.2d 836 (1983). In holding that the Act was constitutional, we observed that there was a rational basis for the notice requirement. We did not consider the supersession issue in that case because it was not raised before the trial court.

In 1984, we considered two notice cases: Simpson v. Fuller, 281 Ark. 471, 665 S.W.2d 269 (1984) and Jackson v. Ozment, 283 Ark. 100, 671 S.W.2d 736 (1984). In both cases, we affirmed the constitutionality of the sixty-day notice statute, but in Jackson we went further and held that Rule 3 did not supersede the notice requirements which “simply adds an additional step to the proper commencement of a medical injury case provided under ARCP Rule 3." Jackson, 283 Ark. at 101-103, 671 S.W.2d at 738.

Two related decisions followed in 1986 and 1988: Dawson v. Gerritsen, 290 Ark. 499, 720 S.W.2d 714 (1986) (Dawson I); Dawson v. Gerritsen, 295 Ark. 706, 748 S.W.2d 33 (1988) (Dawson II). In Dawson I, we observed that the supersession issue had not been raised in that case, and we announced our intention to reexamine our holding in Jackson v. Ozment at the next opportunity. In Dawson II, supersession was apparently not an issue because it was not discussed in the decision. However, in deciding whether to award attorney fees against the losing plaintiff and in favor of the doctor and the hospital involved, we noted that the sixty-day notice requirement was “manifestly harsh” and “an obvious hardship, the equal of which may not exist elsewhere in the law.” Dawson II, 295 Ark. at 211, 738 S.W.2d at 35.

In 1989 and 1990, we confirmed the point that plaintiffs had to comply literally and strictly with the notice requirement in order to commence a civil action for medical injury. Cox v. Bard, 302 Ark. 1, 786 S.W.2d 570 (1990); Ofili v. Osco Drug, Inc., 300 Ark. 431, 780 S.W.2d 11 (1989).In neither case was supersession discussed.

Now we are directly confronted with the supersession issue for the first time since Jackson v. Ozment, supra. In reviewing the history of the civil rules, it is manifest and clear that we intended for Rule 3 to govern commencement of all civil actions. These actions are commenced by filing a complaint with the clerk of the proper court. The sixty-day notice requirement adds an additional condition for commencing a civil action for medical injury and is directly at odds with Rule 3. Our holding in Jackson v. Ozment, supra, that this did not represent a conflict in civil procedure was error, and we overrule Jackson v. Ozment on that point.

The Arkansas General Assembly granted to the Arkansas Supreme Court the power to prescribe from time to time rules of pleading, practice, and procedure with respect to all proceedings in civil cases in all courts of this state. Act 38 of 1973, now codified as Ark. Code Ann. § 16-11-302 (1987). The Arkansas Constitution further endows this court with “general superintending control over inferior courts of law and equity.” Ark. Const. art. 7, § 4. General superintending control includes the power to adopt rules of procedure in civil cases. There is no question that the power to adopt civil rules of procedure is well-established and grounded in constitutional and statutory authority as well as this court’s inherent authority.

Both appellees contend that Ark. R. Civ. P. 81(a) carves out an exception to this court’s rulemaking authority. Rule 81(a) reads:

These rules shall apply to all civil proceedings cognizable in the circuit, chancery and probate courts of this state except in those instances where a statute which creates a right, remedy or proceeding specifically provides a different procedure, in which event the procedure so specified shall apply. (Emphasis ours.)

The appellees offer no interpretive authority to support their position. Accordingly, it is left to this court to determine what is meant by a statutorily created right, remedy or proceeding and whether that exception applies to civil actions for medical malpractice.

We first observe that an action for medical malpractice did not originate as a right, remedy, or proceeding created legislatively; it had its origins at common law. Prosser in his distinguished treatise on torts refers to an article that traces the history of medical malpractice. Prosser, Law of Torts, §32, p.161, fn.32 (4th Ed. 1971). That article traces the first recorded case back to the fourteenth century:

The professional liability of the medical practitioner is almost as old as personal injury actions. This first recorded case in Anglo-American law goes back to the year 1374 when one J. Mort, surgeon, undertook to treat a wounded hand and allegedly acted in such a negligent manner as to maim the hand. While the action against the surgeon was dismissed because it was brought in “trespas sur son case” rather than in trespass vi et armis, the court indicated that if the surgeon had done as well as he was able and had employed all his diligence in administering to the patient, “it is not right that he should be held culpable,” reflecting the standard of care suggested by the Hippocratic Oath.

McCoid, The Care Required of Medical Practitioners, 12 Vand. L. Rev., 549, 550 (1959).

In this same vein, Arkansas has recognized the common law action for medical malpractice and did so long before the enactment of Act 709 in 1979. See, e.g., Farrier v. Trammel, 207 Ark. 372, 18 S.W.2d 818 (1944); Gray v. McDermott, 188 Ark. 1, 64 S.W.2d 94 (1933); Plunkett v. Hays, 180 Ark. 505, 21 S.W.2d 851 (1929); Dorr, Gray & Johnston v. Fike, 177 Ark. 907, 9 S.W.2d 318 (1928); Spears & Purifoy v. McKinnon, 168 Ark. 357, 270 S.W.2 524 (1925). Thus, we can conclude without hesitancy that medical malpractice actions are not creatures of statute but are rooted in the Anglo-American common law.

Though the civil cause of action for medical malpractice was grounded in the common law, the Arkansas General Assembly enacted Act 709 of 1979, which provides a procedural scheme for medical malpractice actions, including the sixty-day notice, as a prerequisite to commencing a civil action. The question posed for our consideration is whether, by so doing, the legislature created a statutory right, remedy, or proceeding as contemplated by the Rule 81(a) exception. We hold that it did not.

What this court intended when it adopted the civil rules, and Rule 82 in particular, was to except from the rules special proceedings created by statute which established different procedures from those applicable to civil actions. We said as much in a recent local option election case where the statutes providing the procedure for local option elections were in seeming conflict with our default rule, Ark. R. Civ. P. 55:

The Arkansas Rules of Civil Procedure apply to civil actions. ARCP Rule 2. A civil action is an ordinary proceeding by one party against another for the enforcement or protection of a private right or redress or prevention of a private wrong. Ark. Stat. Ann. § 27-106 (Repl. 1979). Every other remedy is a special proceeding. Ark. Stat. Ann.,§ 27-107 (Repl. 1979). Therefore a local option election contest is a special proceeding, and it is not necessary that all of the rules of civil procedure be applied. See Reed v. Baker, 254 Ark. 631, 495 S.W.2d 849 (1973).

Garrett v. Andrews, 294 Ark. 160, 167, 741 S.W.2d 257, 260 (1987), cert. denied sub nom. Andrews v. Adams, 487 U.S. 1219 (1988).

Over the years, this court has referred to multiple special proceedings created by statute which do not constitute civil actions. See, e.g., Brantley v. Davis, 305 Ark. 68, 805 S.W.2d 75 (1991) (a proceeding to probate a will is a special proceeding under the Probate Code); Travelodge International, Inc. v. Handleman National Book. Co., 288 Ark. 368, 705 S.W.2d 440 (1986), cited with approval, May v. Bob Hankins Distrib. Co., 301 Ark. 494, 785 S.W.2d 23 (1990) (garnishment is a special statutory procedure); Liles v. Hill, 268 Ark. 106, 594 S.W.2d 836 (1980) (election contests are special proceedings authorized only in accordance with constitutional or statutory provisions); Coleman v. Coleman, 257 Ark. 404, 520 S.W.2d 239 (1974) (a will contest is not a civil action where the civil code applies but instead a special proceeding where the right to contest is governed by the Probate Code); Mack Trucks of Arkansas, Inc. v. Yarbrough, 251 Ark. 618, 473 S.W.2d 889 (1971) (action in replevin is a special proceeding fixed by statute for possession of property); State v. Snow, 230 Ark. 746, 324 S.W.2d 532 (1959) (commitment of a tubercular person under the Act is neither a civil nor criminal proceeding but a special proceeding); Beaver Bayou Drainage Dist. v. Lee-Phillips Drainage Dist., 221 Ark. 550, 254 S.W.2d 465 (1953) (petition to levy tax to improve ditches is a special proceeding within the jurisdiction of the county court); Burton v. Ward, 218 Ark. 253, 236 S.W.2d 65 (1951) (statutory proceeding to condemn land is a special proceeding for the purpose of determining compensation to the owner). Velvin v. Kent, 198 Ark. 267, 128 S.W.2d 686 (1939) (the changing of a county seat is a special proceeding and regarded as such by the legislature and judiciary); Bullion v. Pope, 192 Ark. 959, 96 S.W.2d 465 (1936) (statute provides a special proceeding for protection of the assets of an insolvent insurance organization and is the exclusive method for determining solvency of such companies); Ex parte Kelley, 191 Ark. 848, 88 S.W.2d 65 (1935) (Juvenile Court Act provides a special proceeding for committing a child to reform school and must be followed).

A Reporter’s Note to Rule 81 (a) provides this commentary on the Rule 81(a) exception: “The exception would be those proceedings established by statute and the statute prescribes a different procedure.” That is precisely correct. The Rule 81(a) exception is limited to special proceedings created exclusively by statue where a special procedure is appropriate and warranted. It was never the intention of this court to accede to the General Assembly on matters of civil procedure for civil actions.

This principle is evidence by a case where we refused to apply a statutory procedure regulating the content of a complaint for collection of a debt when the statue ran counter to Ark. R. Civ. P. 8. See Borg-Warner Acceptance Corp. v. Kesterson, 288 Ark. 611, 708 S.W.2d 606 (1986). In doing so, we held the statute was superseded by Rule 8:

ARCP Rule 8 sets out the required content of a complaint and of an answer. It is a rule of procedure and not a matter of substantive law. Ark. Stat. Ann. § 27-1142 does not conform with ARCP Rule 8, and therefore, it is deemed to be superseded even though it is not so listed in our per curiam order of December 18, 1978. See Venable v. Becker, 287 Ark. 236, 697 S.W.2d 903 (1985). A suit to collect a debt is not a special proceeding as contemplated by ARCP Rule 81(a), and therefore, it is not subject to a different statute.

288 Ark. at 614; 708 S.W.2d at 607. There is no discernable difference between our holding in Borg-Warner and our holding in this case.

We can think of few rules more basic to the civil process than a rule defining the means by which complaints are filed and actions commenced for a common law tort such as medical malpractice. The express intent of the Arkansas Constitution and Act 38 of 197 3 is for the governance of the procedure of the courts of this state to fall within the power and authority of the Arkansas Supreme Court. How civil actions are commenced is fundamental cog in that procedural wheel.

We hold, therefore, that Rule 3 directly conflicts with and supersedes Ark. Code Ann.§ 16-114-204 (1987, Supp. 1991) with respect to the commencement of civil actions. We reverse the summary judgments in favor of the appellees and send this matter back to circuit court for a trial on the merits.

Reversed and remanded.

Hays, J., dissents.

Steele Hays, Judge,

dissenting. I respectfully dissent from the Court’s holding today for three reasons: (1) this issue was decided eight years ago and today’s overruling of Jackson v. Ozment, 283 Ark. 100, 671 S.W.2d 736 (1984) significantly detracts from the doctrine of stare decisis; (2) the Court today violates the separation of powers of the Arkansas Constitution when it holds that a court-imposed Rule of Civil Procedure preempts a statute enacted by the legislature after the court promulgated the Rules; and (3) the Court misconstrues the application of Ark. R. Civ. P. 81(a) to Ark. Code Ann. § 16-114-204 (1987). I write not because the individual statute, Ark. Code Ann. § 16-114-204, warrants the attention but because I believe the Court today arrogates to itself the prerogatives of the legislature.

I. STARE DECISIS

As the majority notes, we held that Ark. R. Civ. P. 3 (“Rule 3”) did not supersede or preeempt Ark. Code Ann. § 16-114-204 (“§ 16-114-204”). Jackson v. Ozment, supra. The issue in this case was squarely presented in Jackson: whether Rule 3, as amended in 1983, superseded the statute enacted in 1979. We held that it did not.

In Dawson v. Gerritson, 290 Ark. 499, 720 S.W.2d 714 (1986) (“Dawson I”), we indicated a willingness to reexamine our holding in Jackson. Jackson and a related case, Simpson v. Fuller, 281 Ark. 471, 665 S.W.2d 269 (1984), were the products of a sharply divided court, perhaps leaving an impression that the underpinnings of those cases were infirm. But a disposition to reexamine is not a commitment to reverse, merely a proposal to revisit. Six years have elapsed, during which Cox v. Bard, 302 Ark. 1, 786 S.W.2d 570 (1990) and Ofili v. Osco Drug, Inc., 300 Ark. 431, 780 S.W.2d 11 (1989), and Dawson v. Gerritson, 295 Ark. 206, 748 S.W.2d 33 (1989) (“Dawson II”) were decided. After reexamination of Jackson and its several companion cases, I believe the position of the majority in Jackson and Simpson was sound and merits affirmance.

Stare decisis is the principal reason for upholding the validity of § 16-114-204 today. Stare decisis is a policy of adhering to precedent that gives predictability to the law. To avoid unsettling things, it is fundamental to the common law. Precedent governs until it gives a result so patently wrong, so manifestly unjust, that a breakdown becomes unavoidable. See Parish v. Pitts, et al.,255 Ark. 1239, 1252, 429 S.W.2d 45 (1968). There are limits to the effects of stare decisis; precedent may not implicitly govern but should discretely guide the Court. See, Id. (citations omitted.) In this case, there is no reason to overturn precedent.

In more than a decade since § 16-114-204 was passed as Act 709, numerous challenges to the act, including constitutional arguments of due process and equal protection have been repelled: See Gay v. Rabon, 280 Ark. 5, 652 S.W.2d 836 (1983); Dawson v. Gerritson, 290 Ark. 499, 720 S.W.2d 714 (1986), (“Dawson I”); Dawson v. Gerritson, 295 Ark. 706, 748 S.W.2d 33 (1988) (“Dawson II”); Lambert v. Beverly Enterprises, Inc., 753 F. Supp. 267 (W.D. Ark. 1990); Cox v. Bard, supra; Ofili v. Osco Drug, Inc., supra; Jackson v. Ozment, supra; and Simpson v. Fuller, supra.

There is no manifest injustice here. The facts show that the complaint was filed before notice was served. Upon receiving the “Motion to Dismiss” for failure to serve notice, plaintiff had a clear alternative to defending the motion and could have avoided the problem entirely. Plaintiff could have taken a voluntary nonsuit. Ark. R. Civ. P. 41(a). Plaintiff subsequently could have met the notice requirement, waited sixty days, and refiled suit within the one-year extension of the statute of limitations. See Ark. Code Ann. § 16-56-126 (1987). This is precisely the procedure we outlined in Dawson I.

Now the majority overrides the Arkansas Legislature, on perhaps the weakest ground available, and holds that the sixty-day notice is nothing more than “a cog in the wheel of civil procedure” and, hence, the prerogative of this court under Rule 3. Today’s decision directly overrules a 1984 decision without giving sufficient weight to the need for certainty, uniformity, and finality of result.

II. SEPARATION OF POWERS

I have previously noted my disagreement with the direction of the Court’s Separation of powers analysis concerning these issues. I dissented without opinion in Ricarte v. State, 290 Ark. 100, 718 S.W.2d 488 (1986); and joined in the dissenting opinion in State v. Sypult, 304 Ark. 5, 800 S.W.2d 402 (1990). I write to further express my disagreement with the direction the Court has taken in such matters.

The statute at issue is more than a mere “procedural cog.” Section 16-114-204 cannot be read as a single procedural rule enacted by the legislature. Rather, it is part and parcel of a series of substantive laws that completely supplant the common-law medical malpractice action. In particular, § 16-114-204 must be read in conjunction with § 16-114-203, the statute of limitations in a statutory medical injury case, and § 16-114-205, providing for the elimination of any allegation of damages in the complaint.

I set out the current statutory provisions for clarity, because the Court today invalidates those provisions, not merely the law as it stood when the lower court decided this case. The amended text is underlined:

§ 16-114-204. Notice of intent to sue.
(a) No action for medical injury shall be commenced until at least sixty (60) days after service upon the person or persons alleged to be liable, by certified or registered mail to the last known address of the person or persons allegedly liable, of a written notice of the alleged injuries and the damages claimed. Provided, service of the written notice of the alleged injuries and damages claimed may also be made by hand delivery.
(b) If the notice is served within sixty (60) days of the expiration of the period for bringing suit described in § 16-14-203, the time for commencement of the action shall be extended ninety (90) days from the service of the notice. When service is by certified or registered mail, the date of service of the notice shall be the date of mailing of the written notice.

First, and albeit as an aside, the legislature disagreed with some of our interpretations of the statute. In order to ameliorate the effects of those decisions, the legislature permitted delivery of the written notice by hand (responding to Cox, supra). The legislature also provided that the service date of the notice was the date of mailing the certified or registered letter. Finally, the legislature amended the extension of the statute of limitations from seventy to ninety days.

The statute, then, does several things: When read in conjunction with §16-114-205, it provides the basis for changing the form of the complaint: damages cannot be specified in the publicly-filed complaint but must be specified in the privately-mailed notice and by subsequent special interrogatory. The Court considered this provision this term. See Travis v. Hook, 307 Ark. 84, 817 S.W.2d 207 (1991) (reversing circuit court’s dismissal without prejudice and holding that amended pleading striking the dollar amount was sufficient, under Ark. R. Civ. P. 15(a) to fulfill the statutory requirement.

The statutory scheme also provides that service of the notice to sue will automatically extend the statutory limitations period. So, for example, one reading of the statute permits a person to mail a notice of intent to sue on the last possible day, i.e., on the 730th day or two full years after the date of the tortious act. Service is complete on mailing and suit may subsequently be filed not less than sixty days later and not more than ninety days later. Another reading of the statute might be that the limitations period actually expired; plaintiff mails a certified letter on the 59th day after the expiration of the statutory limitations period; not less than sixty days later and not more than ninety days later, plaintiff files suit. Thus the language of § 16-114-204(b) (notice “served within sixty days of the expiration” of limitations period) arguably permits the filing of a valid complaint some five (5) months after the expiration of the statutory limitations period. While no one has attempted to argue these interpretations to the Court, such argument would certainly ameliorate the harsh consequences of the notice requirements. These are not implausible interpretations given the language of the statute.

The point of this exercise is that the notice requirement cannot be read alone and should not be read so restrictively. The sixty-day notice requirement is clearly more than a mere procedural step in the commencement of an action at law so as to bring it under Rule 3. Mechanically, it is that, of course. But as noted above, it is patently more than that. The notice requirement is an integral part of a statutory scheme intended to alleviate what the General Assembly of Arkansas saw as a matter of critical concern to the people of this state. That concern is forcefully expressed in the emergency clause:

It is hereby found, determined and declared by the General Assembly that the threat of legal actions for medical malpractice insurance which in turn causes and contributes to an increase in health care costs placing a heavy burden on those who can least afford such increases and that the threat of such action contributes to expensive medical procedures to be performed by physicians and others which otherwise would not be considered necessary and that this Act should be given effect immediately to help control the spiraling cost of health care.

The effect of today’s decision is the first step in unraveling the entire statutory scheme. Assuming § 16-114-205 (providing for a complaint without a prayer for a specific amount of damages) remains unchallenged, defendants now have only one means of ascertaining the monetary amount of the prayer in the complaint; that is by filing special interrogatories. Plaintiffs are arguably worse off than they were before: the effect of today’s decision reduces the statutory limitations period back to two years from, arguably, as much as two years and five months.

Finally, the Court’s interpretation of the statue today conflicts with the interpretation of the statute given by the federal courts in this state. In federal court, purely procedural rules are governed by federal law, not by state law. In Lambert v. Beverly Enterprises, Inc., 753 F. Supp. 267, the federal district court applied § 16-114-204 because the court interpreted it as a state substantive law that had to be applied in a diversity case. Were the notice requirement a “mere procedural cog,” it would not apply in federal court at all.

As Justice Darrell Hickman said:

I question the opinion in this case which contains dictum that could lead to an extension of this court’s rule making power. We do not need to extend that power: we need to limit it and use it with careful restraint. That we have not done.

Curtis v. State, 301 Ark. 208, 216, 783 S.W.2d 47 (1990) (Hickman, J., dissenting). There are some “procedural” elements of the law that are beyond this Court’s powers. Statues of limitations are one example. I believe § 16-114-204 does not conflict with this Court’s Rules of Procedure any more than statutes of limitations. It conflicts with our Court Rules less so than does § 16-114-205. Yet, the Court today tells the legislature that it may not enact such a statute in the future absent a modification to the state constitution. I cannot agree with the majority on this point.

III. APPLICATION OF RULE 81(a)

The Court today too narrowly construes the application of Ark. R. Civ. P. 81(a) to § 16-114-201 et seq. As discussed above, this is a comprehensive statutory scheme that completely replaces the common-law action for medical malpractice. It regulates the statute of limitations, the content of the complaint concerning allegations of damages, the allocation of burdens of proof at trial, limitations on expert witnesses, the timing of future payments for damages, and the consequences of deliberately false pleadings as well as the notice of intent to sue. Either this entire section must stand together or it must fall. Certainly, though, until today’s decision, it was generally understood that the legislature abolished common law actions for medical malpractice.

The majority concludes that the General Assembly cannot do what it attempted to do here because it did not go far enough. The Court leaves open to the General Assembly the possibility that it might adopt mandatory arbitration procedures, as other states have done, or, as the securities industry has done. The court previously noted as much in Gay v. Rabon:

We note that recent statutes providing special pretrial procedures in medical malpractice actions, such as the mandatory requirement that a claim for medical malpractice be submitted to a review board before filing an action, have been enacted in a number of states and it appears that a majority of courts have upheld them. Lacey v. Green, 428 A.2d 1171 (Del. Super. 1981) and cases cited therein. Obviously, this precondition is more burdensome and delaying than the 60 day notice in issue here.

Gay, 280 Ark. 5, 652 S.W.2d 836, 838. I do not read today’s opinion any differently.

I cannot agree that Ark. R. Civ. P. 81(a) can be circumvented by limiting the exception to “special proceedings created exclusively by statute where a special procedure is appropriate and warranted.” The majority has redefined Arkansas law by declaring that medical malpractice is still an action at common-law. The holding implicitly moots the entire statutory scheme — not simply the notice requirement — enacted by the legislature to limit common-law liability in medical malpractice actions. The majority opinion certainly goes beyond the issue in this case, and it opens the possibility that none of the statutory modifications to the law of professional liability are valid.

Moreover, the language from the majority opinion quoted above implies that this Court does not consider a “special proceeding” either “approprite” or “warranted” in medical malpractice actions. I cannot agree that this Court may impose its own views as to the “appropriateness” of substantive legislation. Whether or not the statutory scheme is warranted is not a question for this Court; it is solely a question for the General Assembly.

It is a safe prediction that today’s decision will at once increase and compound the confusion begun with Ricarte and perfected in Sypult as to which branch of government has the final word in the enactment of rules of evidence and procedure. For further discussion and for the source of much of this dissent, see M. Gitelman & J. Watkins, No Requiem for Ricarte: Separation of Powers, the Rules of Evidence, and the Rules of Civil Procedure, 1991 Ark. L. Notes, at 27.

For the foregoing reasons, I respectfully dissent.

       Compared to§ 16-114-204,§ 16-114-205 is far more intrusive on the Rules of Civil Procedure. Section 16-114-205 represents a partial return to pre-reform days when there were numerous “forms of complaint” and filing the wrong form with the wrong court or for the wrong reason was enough to have the complaint dismissed. This is a purely procedural matter.


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

text:
    John Vernon WILSON v. CITY OF FAYETTEVILLE, Arkansas
    91-290
    835 S.W.2d 837
    Supreme Court of Arkansas
    Opinion delivered June 29, 1992
    [Supplemental Opinion on Rehearing November 2, 1992.]

      Stanley, Harrington, & Mars, by: Roy E. Stanley, for appellant.

      James N. McCord, for appellee.

      Hayes, Glaze, and Brown, JJ., would deny rehearing.

   Robert L. Brown, Justice.

The appellant, John Vernon Wilson, is a landowner in Fayetteville who had eminent domain proceedings commenced against him in 1977 for a triangular piece of his land. The city wished to use the land for a traffic signal control panel and to relocate a sewer line. It paid into the court registry $100 as just compensation. More than eleven years later, a trial was held on October 5, 1988, and judgment was entered on October 11, 1988. The jury placed the value of the land at $29,000. The circuit court, however, refused to assess prejudgment interest, and the case was appealed to the Arkansas Court of Appeals.

The court of appeals, in an unpublished opinion dated November 15, 1989, affirmed the award of $29,000 asthevalueof the land. On cross appeal, Wilson argued that the circuit court erred in denying prejudgment interest. The court of appeals agreed and remanded the matter to circuit court for a determination of “a proper rate” of interest from the time of taking until judgment. Neither party argued to the court of appeals what the prejudgment interest should be.

On remand, the circuit court conducted a hearing, received evidence, and heard argument on prejudgment interest. The court found in its order entered June 9, 1990, that interest should not be compounded and that the interest rate should be based on average rates paid by local lenders on their certificates of deposit. Using this formula, it further found that the prejudgment interest rate should be 9.25 percent per annum. The court then calculated that interest of $30,718.32 as of October 11, 1988 — the date of judgment — and added that amount to the judgment award for the value of the land for a total of $59,618.32. On the total sum of $59,618.32, the court allowed postjudgment interest at ten percent per annum from date of judgment.

Wilson now appeals, contesting the refusal of the circuit court to compound interest and arguing that the court should have included non-local interest rates on certificates of deposit and returns on seasoned corporate bonds and AAA-rated corporate bonds in ascertaining a proper rate. We affirm the circuit court’s decision.

/. COMPOUND INTEREST

The essence of Wilson’s first point is that he can only be fully compensated by compounding interest. He supports his argument by urging that this is what the Arkansas Constitution and case law require.

Wilson is correct in stating the standard for compensation. The Arkansas Constitution requires just compensation for taking private property for public use, and we have clearly held that “[j]ust compensation means full compensation.” Ark. Const. art. 2, § 22; Arkansas State Highway Comm’n v. Stupenti, 222 Ark. 9, 13, 257 S.W.2d 37, 40 (1953). Statutory law, however, provides a six percent interest rate “as part of just compensation.” Ark. Code Ann. § 27-67-316(e)(1) (1987). The question then arises whether six percent interest represents full compensation. We concluded that it did not under the circumstances in Arkansas State Highway Comm’n v. Vick, 284 Ark. 372, 682 S.W.2d 731 (1985), and we observed that interest “at a proper rate” was a good measure for deciding the amount to be added to the land value to compensate for deprived use of the land or its money equivalent. We allowed ten percent simple interest as the proper rate in Vick.

The award of prejudgment interest is a matter of law for the trial judge — not the jury — to determine. See USAA Life Ins. Co. v. Boyce, 294 Ark. 575, 745 S.W.2d 136 (1988). We have observed that the payment of interest upon interest is not generally favored by the courts. Hartford School Dist. No. 94 v. Commercial National Bank, Trustee, 208 Ark. 984, 188 S.W.2d 638 (1945). Furthermore, the General Assembly has not mandated compound interest as a necessary component of just compensation. Ark. Code Ann. § 27-67-316 (1987). One land condemnation case in the past has expressly affirmed a simple interest award. See Arkansas State Highway Comm’n v. Vick, supra. We can find no Arkansas case awarding compound interest as part of just compensation; instead, the cases appear to award only simple interest. See, e.g., Hopper v. Denham, 281 Ark. 84, 661 S.W.2d 379 (1983); Housing Authority of Little Rock v. Rochelle, 249 Ark. 524, 459 S.W.2d 794 (1970). Other jurisdictions have either refused to compound interest in land condemnation cases or deferred to the trial court’s finding in disallowing compounded interest. See, e.g., State v. Doyle, 735 P.2d 733 (Alaska 1987); City of Phoenix v. Campbell, 728 P.2d 1247 (Ariz. Ct. App. 1986); City of Austin v. Porter, 623 S.W.2d 672 (Tex. Ct. App. 1981); Walker v. Acting Dir., Dept. of Forests & Parks, 396 A.2d 262 (Md. 1979).

On the other hand, there is federal and state authority standing for the proposition that prejudgment interest should be compounded. See 40 U.S.C. § 258 e-1; United States v. 429.59 Acres of Land, 612 F.2d 459 (9th Cir. 1980); United States v. 319.46 Acres of Land, 508 F. Supp. 288 (W.D. Okla. 1981); Borough of Wildwood Crest v. Smith, 563 A.2d 73 (N.J. Super. 1988); Lea Co. v. North Carolina Bd. of Transp., 345 S.E.2d 355 (N.C. 1986).

This is an issue of first impression in Arkansas, and we are mindful that a landowner is entitled to the full equivalent of the value of the land as if paid contemporaneously at the time of taking. Arkansas State Highway Comm’n v. Stupenti, supra. However, were we to reverse the circuit court and mandate compound interest in this case, we would in effect be requiring that henceforth just compensation under the Arkansas Constitution include compound interest in land condemnation cases. We refuse to take such a dramatic step.

Here, the circuit court considered and rejected the compounding of interest. In doing so, he expressly noted that we approved only simple interest in Arkansas State Highway Comm’n v. Vick, supra. What constitutes appropriate interest is a question for the factfinder which will not be reversed unless clearly erroneous. See Washington Metropolitan Area Transit Authority v. One Parcel of Land in Montgomery County, Maryland, 706 F.2d 1312 (4th Cir. 1983), cert. denied, 464 U.S. 893 (1983). We cannot say that the court clearly erred in awarding simple interest in this case.

II. PRUDENT INVESTMENT

Wilson’s second point is related to the first. He urges that the circuit court should have also used average interest rates on certificates of deposit issued by non-local institutions or interest rates available on seasoned corporate bonds or on AAA-rated corporate bonds in determining the interest rate. The circuit court refrained from doing this and relied on an average of local CD rates which was a formula affirmed by the Arkansas Court of Appeals in a previous case. See Arkansas State Highway Comm’n v. Security Savings Ass’n, 19 Ark. App. 133, 718 S.W.2d 456 (1986).

Wilson would have us reverse the circuit court and hold that the failure to factor foreign interest rates into the court’s equation in this case was clear error. As a concomitant to this, he contends that a prudent investor would have looked beyond local CD rates for a return on his or her money. He advances this position, even though he testified that in his private investments he had availed himself of investments in local CD’s.

Again, the choice of an appropriate interest rate is a question of fact for the circuit court, and we cannot say that the court clearly erred in refusing to use foreign CD rates or interest rates on corporate bonds in its averaging formula. In certain cases, trial courts may well want to look beyond local interest rates, and there are multiple barometers for determining interest on accounts and securities. Yet, we would be unduly curtailing a trial court’s factfinding role were we to say that one interest rate is more appropriately considered than another or that a certain formula should be utilized in all instances. We refuse to go that far. The decision of the circuit court is affirmed.

Affirmed.

Holt, C.J., Dudley and Newbern, JJ., dissent.

Robert H. Dudley, Justice,

dissenting. In 1977, the City of Fayetteville deemed it necessary to condemn a tract of appellant Wilson’s land and deposited $100.00 in the registry of the trial court as the amount necessary to make compensation for the land taken. See Ark. Code Ann. § 18-15-303(b)(1) (1987). The City then obtained an order of possession for the land, see Ark. Code Ann. § 18-15-303(b)(2) (1987), and has possessed the land since then. The appellant has had the $100.00, and the interest it has earned over that period of time. In October 1988, more than eleven years after the taking, the condemnation case was heard, and the jury found that the true value of the tract at the time of the taking was $29,000.00. The trial court entered judgment for the $29,000.00, less the $100.00 deposit, but refused to award interest from the time of taking until judgment. The court of appeals affirmed the award of $29,000.00, but remanded the case to the trial court “for a determination of ‘a proper rate’ of interest from the time of taking until judgment.” City of Fayetteville v. Wilson, CA90-139, slip op. at7 (Ark. App. Nov. 15, 1989).Upon remand, the trial court found that the interest rate should be set at 9.25 % per annum because that was the average rate paid by local banking institutions on certificates of deposit, but it made the award of simple interest.

I.

Procedure

The majority opinion states that the trial court “considered and rejected the compounding of interest.” In fact, the trial court did not exercise its discretion involving the compounding of interest, since it thought that this court had prohibited the awarding of compound interest as a matter of law. In his letter opinion the trial judge wrote:

Some question has also arisen as to whether or not the interest is to be compounded or if it is to be simple interest. In the Vick case, supra, [Arkansas State Highway Comm’n v. Vick, 284 Ark. 372, 682 S.W.2d 731 (1985)] the Supreme Court allowed ten percent simple interest. Therefore, . . . they have spoken on the issue and have only allowed simple interest.

The trial court’s order provides: “Based upon the holding in Vick, supra, the Court finds that such prejudgment rate of interest should be computed as simple interest without compounding.” Thus, it seems clear that the trial judge thought that, as a matter of law, he did not have discretion to award compound interest and did not exercise any discretion with regard to the compounding of interest. Since the majority opinion holds that, as a matter of law, compound interest could have been awarded, and since the trial court did not think that it had the discretion to award such interest, it seems clear that the case should be reversed and remanded for the trial court to exercise its discretion. We have long held that the erroneous failure of a trial court to exercise its discretion is reversible error. Acklin v. State, 270 Ark. 879, 606 S.W.2d 594 (1980); Gould & Co. v. Tatum, 21 Ark. 329 (1860).

The trial court held that it could not compound the interest. The appellant assigns the ruling as error, and the majority opinion holds that the ruling was error. Even so, the majority opinion declines to reverse and remand for the trial court to exercise its discretion. Instead, the majority implies that the appellant asks us to award compound interest as though we were reviewing this case de novo and as though we would grant the relief which the trial court should have given. The majority opinion states:

This is an issue of first impression in Arkansas, and we are mindful that a landowner is entitled to the full equivalent of the value of the land as if paid contemporaneously at the time of taking. Arkansas State Highway Comm’n v. Stupenti, supra. However, were we to reverse the circuit court and mandate compound interest in this case, we would in effect be requiring that henceforth just compensation under the Arkansas Constitution include compound interest in land condemnation cases. We refuse to take such a dramatic step.

The fallacy of the statement is that the appellant has not asked us to “take such a dramatic step” because he has not asked this court to mandate that interest be compounded. Rather, he has quite properly asked that the trial court be reversed and “be given opportunity to fix the subject interest rate within the full range of prudent, locally-available investments in evidence. Interest on these investments should be evaluated as it actually exists, without artificial exclusion of any benefit of compounding.” Reply Brief of Appellant at 14 (emphasis added). The appellant also asks that the case be remanded for the trial court to exercise its discretion on compounding, and the majority opinion for some unknown reason denies that relief.

The majority opinion holds that compound interest can be considered by trial courts, but affirms the trial court in this case even though it refused to consider the compounding of interest. If this precedent is followed, the result could be that on the same day a trial court in Fayetteville might refuse to consider awarding compound interest while a trial court in Jonesboro might award compound interest, and both would be approved by this court in this day of nationally competitive interest rates. The reason for such a holding is that the majority opinion does not delve deeply into the applicable substantive law.

II.

Substantive Law

In Seaboard Air Line Ry. v. United States, 261 U.S. 299, 304 (1923), the United States Supreme Court explained that when private property is taken for public use, “[t]he compensation to which the owners is entitled is the full and perfect equivalent of the property taken.. . . [This] means substantially that the owner shall be put in as good position pecuniarily as he would have been if his property had not been taken. [Citations omitted. Emphasis added.]” The award must be a full and fair reimbursement. Id. at 306. Another decision suggests acceptance of the principle that constitutionally proper interest must reflect market conditions. In Kirby Forest Indus., Inc. v. United States, 467 U.S. 1, 10-11 (1984), the Court affirmed that interest is compensation for the delay between the taking and payment, necessary to place the landowner “in as good a position pecuniarily as he would have occupied if the payment had coincided with the appropriation. Phelps v. United States, 274 U.S. 341, 344 and Seaboard Air Line R. Co. v. United States, 261 U.S. 299, 306 (1923).” The Court stated that in cases such as the one at bar, where the government obtains title and possession before a final condemnation judgment is rendered, the landowner is constitutionally entitled to interest on any delayed payment “sufficient to ensure” a monetary position as favorable to him as if payment and taking had coincided. Kirby Forest Indus., Inc., 467 U.S. at 10. In a footnote, the court explained that this principle of “full and perfect” financial equivalency “underlies several decisions by Courts of Appeals, holding that the six percent rate of interest prescribed by [the federal condemnation statute] is not a ceiling on the amount that can and must be paid by the Government. [Emphasis added.]” Id. at 11 n. 16.

In Arkansas State Highway Comm’n v. Stupenti, 222 Ark. 9, 13, 257 S.W.2d 37, 40 (1953), we said, “Just compensation means full compensation,” and additionally quoted from Jacobs, et al. v. United States, 290 U.S. 13 (1933) as follows:

The owner is not limited to the value of the property at the time of the taking; ‘he is entitled to such addition as will produce the full equivalent of that value paid contemporaneously with the taking.’ Interest at a proper rate ‘is a good measure by which to ascertain the amount so to be added.’

In Arkansas State Highway Comm’n v. Vick, 284 Ark. 372, 375, 682 S.W.2d 731, 732 (1985), we said, “As a matter of just compensation and due process under the federal and state constitutions, a landowner cannot be denied interest on the unpaid part of the award during the time he is deprived both of the use of the land and of the money representing its value.”

During the period in which the government has taken possession of the land but has not paid an amount representing its full value, eleven years in this case, the landowner becomes “an involuntary lender to a debtor he would often prefer not to have.” Redevelopment Agency of the City of Burbank v. Gilmore, 700 P.2d 794, 806 (Cal. 1985). That involuntary lender is forced to loan an uncertain amount of principal to an uncertain date of maturity. As this case turned out, the landowner had involuntarily loaned the City of Fayetteville $28,900.00 for a period of eleven years. If the interest on that involuntary principal is not compounded then “as the unpaid interest accumulates, the accumulated interest is the equivalent of an interest-free loan.” Borough of Wildwood Crest v. Smith, 563 A.2d 73, 75 (N.J.Super. 1988). We have said that the landowner “cannot be denied interest on the unpaid part of the award during the time he is deprived both of the use of the land and of the money representing its value.” Arkansas State Highway Comm’n v. Vick, 284 Ark. at 375, 682 S.W.2d at 732. Yet, there is no doubt that a landowner is deprived of interest on the unpaid part of the principal when he is forced to give an interest-free loan on the accumulated interest.

Another way of demonstrating the unfair and erroneous holding of the majority opinion is as follows. The City of Fayetteville deposited $100.00, which allegedly represented the market value of the land at the time it took possession. The landowner could deposit that money at an average rate of 9.25 %, and at the end of the first year, he would have had $109.25. He could have then deposited $109.25 and earned interest and compounded it the same way for the full eleven years. It is undisputed that each of the local financial institutions compounded depositors’ interest. However, because the City did not deposit the remaining $28,900.00 of market value, the landowner is deprived of the benefit of compounded interest on that amount. Yet, it is without question that the landowner is constitutionally entitled to sufficient interest on any delayed payment to place him “in as good a position pecuniarily as he would have occupied if the payment had coincided with the appropriation.” Kirby Forest Indus., Inc. v. United States, 467 U.S. at 10 (emphasis added).

As previously set out, the compensation constitutionally due is the “full and perfect” monetary equivalent of the fair market value of the condemned property dating back to the time of taking. Under the federal and state constitutions, interest is an element of this just compensation, and its computation becomes a task of the trial court. Most of the modern cases authorize the trial courts to find the rate which would have been earned by a reasonably prudent person investing funds so as to produce a reasonable return while maintaining safety of principal. See Redevelopment Agency of the City of Burbank v. Gilmore, 700 P.2d at 804, for a listing of cases to that date, and see also Lea Co. v. North Carolina Bd. of Transport., 345 S.E.2d 355, 360 (N.C. 1986), for an additional listing. “Since a prudent investor would diversify his interest portfolio,. . .the trial court should consider prevailing rates, during the period of delay, for investments of varying length and risk. Typically, these have included short, medium, and long-term government and corporate obligations.” Redevelopment Agency of the City of Burbank v. Gilmore, 700 P.2d at 804. In general, the trial court would examine, upon proof by the parties, the rates prevailing during the period a condemnation payment was delayed for all forms of money-market obligations available in the local area, including governmental and private, that prudent depositors and investors normally purchase for income purposes, and whose terms or maturities fall within the period of delay. Here, there was testimony that there were banks, savings and loans, investment bankers, and securities institutions in Fayetteville, and they had available local certificates of deposit, secondary market certificates of deposit, government securities, and corporate bonds rated AAA, or very safe bonds. Many published services accurately track money-market trends. Examples include the publications of Moody’s Investors Service and the comprehensive monthly Federal Reserve Bulletin. The United States Court of Claims has utilized Moody’s Composite Index of Yields on Long Term Corporate Bonds. Georgia-Pacific Corp. v. United States, 640 F.2d 328 (1980). In Lea Co. v. North Carolina Bd. of Transport., supra, the trial court looked at the prime rates, prime commercial paper, long term U.S. Bonds, AAA rated utility bonds, and federally insured notes and mortgages.

NOVEMBER 2, 1992.

838 S.W.2d 366

Some courts, in determining the factors to be considered in setting the rate of interest, have considered the cost of money to the governmental entity taking the land. See United States v. Blankenship, 543 F.2d 1272 (9th Cir. 1976). However, the government’s cost of borrowing, as such, simply is not relevant to determining the amount necessary to restore the landowner to a monetary position as favorable to him as if the payment and taking had coincided.

This cases should be reversed and remanded, and the trial court should be given instructions to let the truth of the marketplace determine the monetary equivalent of the condemned property. The majority opinion does not so hold, and accordingly, I dissent.

Holt, C.J., and Newbern, J., join in the dissent.

SUPPLEMENTAL OPINION ON REHEARING

Stanley, Harrington & Mars, by: Roy E. Stanley, for appellant.

James N. McCord, for appellee.

Robert H. Dudley, Justice.

We grant rehearing in this case. The facts are as follows. In 1977, appellee the City of Fayetteville condemned a tract of appellant Wilson’s land, took possession of it, and deposited $ 100.00 into the registry of the trial court as the amount necessary to make compensation. Over eleven years later, in 1988, the condemnation case was heard, and a jury fixed the value of $29,000.00 for the land taken. The trial court entered judgment for the $29,000.00, less the $100.00 deposit, but refused to award pre-judgment interest. The City appealed the amount of the award, and Wilson cross-appealed the trial court’s refusal to award pre-judgment interest. The court of appeals, in an unpublished opinion handed down on November 15,1989, affirmed the award of $29,000.00 on direct appeal, but on cross-appeal reversed the failure to award pre-judgment interest and remanded the case “for a determination of ‘a proper rate’ of interest from the time of taking until judgment.” Upon remand to the circuit court, the City conceded that “post-judgment interest should accrue on the pre-judgment interest award as well as on the jury award,” but contended that prejudgment interest is limited by the Constitution of Arkansas to a rate of six percent. See Ark. Const. art. 19, § 13. The circuit court correctly ruled that the six percent limitation did not limit Wilson’s state and federal constitutional rights to recover just compensation. See Arkansas State Highway Comm’n v. Vick, 284 Ark. 372, 682 S.W.2d731 (1985). However, the circuit court also held that it could not award compound interest. In its letter opinion the trial court wrote:

Some question has also arisen as to whether or not the interest is to be compounded or if it is to be simple interest. In the Vick case, supra, the Supreme Court allowed ten percent simple interest. Therefore,. . . they have spoken on the issue and have only allowed simple interest.

The trial court’s order recites: “Based upon the holding in Vick, supra, the Court finds that such prejudgment rate of interest should be computed as simple interest without compounding.”

Wilson appealed the circuit court’s ruling that it could not award compound interest, and the court of appeals certified the case to this court because it involves both a constitutional issue and a matter of significant public interest. The original majority opinion this court handed down held that the circuit court should have considered awarding compound interest, but did not remand the case for a consideration of such award. We now remand for such a consideration.

Under the Fifth Amendment and the Due Process Clause, interest is an element of just compensation, and just compensation is for the trier of fact to determine. The Court of Claims in Miller v. United States, 620 F.2d 812, 837 (Ct. Cl. 1980) wrote:

“Just compensation” in the Constitutional sense has been held to include interest for the delay in payment from the date of taking to the date of payment. Albrecht v. United States, 329 U.S. 599, 602, 67 S. Ct. 606, 608, 91 L.Ed. 532 (1947); Seaboard Air Line Ry. v. United States, 261 U.S. 299, 43 S. Ct. 354, 67 L.Ed. 664 (1923). Where there has been an appropriation of private property for public use within the meaning of the fifth amendment, “the right to interest or a fair equivalent, attaches itself automatically to the right to an award of damages.” Shoshone Tribe v. United States, 299 U.S. 476, 497, 57 S. Ct. 244, 251, 81 L.Ed. 360 (1937). The determination of just compensation, including the proper rate of interest, is basically a question of fact. United States v. 100 Acres of Land, 468 F.2d 1261 (9th Cir. 1972), cert. denied, 414 U.S. 822, 864, 94 S. Ct. 119, 137, 38 L.Ed.2d 54, 84 (1973).

See also, Tony Guiffre Distrib. Co. v. Washington Area Transit Auth., 740 F.2d 295 (4th Cir. 1984); United States v. 174.12 Acres, 671 F.2d 313 (9th Cir. 1982); United States v. Blankenship, 543 F.2d 1272 (9th Cir. 1976); and United States v. 100 Acres, 468 F.2d 1261 (9th Cir. 1962), cert. denied 414 U.S. 822 (1973).

In Arkansas State Highway Commission v. Vick, 284 Ark. 372, 682 S.W.2d 731 (1985), we expressly held that the just compensation due a landowner in a condemnation case could not be limited by state law. In that particular case, the limitation was by a statute, Ark. Code Ann. § 27-67-316(e)(1) (1987), which provides for six percent interest in condemnation cases. We wrote:

The landowners’ position in the case at bar is right. As a matter of just compensation and due process under the federal and state constitutions, a landowner cannot be denied interest on the unpaid part of the award during the time he is deprived both of the use of the land and of the money representing its value. Housing Authority of the City of Little Rock v. Rochelle, 249 Ark. 524, 530 S.W.2d 794 (1970); Ark. State Hwy. Comm’n v. Stupenti, 222 Ark. 9, 257 S.W.2d 37 (1953). In Stupenti we quoted from a Supreme Court case holding that the landowner is not limited to the value of the property at the time of the taking; he is also entitled to such an addition as will produce the full equivalent of the value as if paid contemporaneously with the taking. Interest “at a proper rate” was held to be a good measure by which to ascertain the amount to be added. Jacobs v. United States, 290 U.S. 13 (1933). Since a constitutional right is involved, the interest rate to be allowed may exceed that specified by statute. Redevelopment Agency of City of Burbank v. Gilmore, 198 Cal. Rptr. 304 (Cal. App. 2 Dist. 1984); State by Spannaus v. Carney, 309 N.W.2d 775 (Minn. 1981); Edwareds v. Ark. Power & Light Co., 638 F.2d 1149 (8th Cir. 1982), Arnold J., concurring.

284 Ark. at 375, 682 S.W.2d at 732.

Thus, it is clear that interest is an element of the just compensation required to be paid in condemnation cases, and, under the Fifth Amendment and the Due Process Clause of the United States Constitution, it is to be determined by the trier of fact.

In Seaboard Air Line Ry. v. United States, 261 U.S. 299, 304 (1923), the United States Supreme Court explained that when private property is taken for public use, “[t]he compensation to which the owner is entitled is th efull and perfect equivalent of the property taken. . . . [This] means substantially that the owner shall be put in as good position pecuniarily as he would have been if his property had not been taken. [Citations omitted. Emphasis added.]” The award must a full and fair reimbursement. Id. at 306. Another decision suggests acceptance of the principle that constitutionally proper interest must reflect market conditions. In Kirby Forest Indus., Inc. v. United States, 467 U.S. 1, 10-11 (1984), the Court affirmed that interest is compensation for the delay between the taking and payment, necessary to place the landowner “in as good a position pecuniarily as he would have occupied if the payment had coincided with the appropriation. Phelps v. United States 274 U.S. 341, 344 and Seaboard Air Line R. Co. v. United States, 261 U.S. 299, 306 (1923).” The Court stated that in cases such as the one at bar, where the government obtains title and possession before a final condemnation judgment is rendered, the landowner is constitutionally entitled to interest on any delayed payment “sufficient to ensure” a monetary position as favorable to him as if payment and taking had coincided. Kirby Forest Indus., Inc., 467 U.S. at 10 (emphasis supplied). In a footnote, the court explained that this principle of “full and perfect” financial equivalency “underlies several decisions by Courts of Appeals, holding that the six percent rate of interest prescribed by [the federal condemnation statute] is not a ceiling on the amount that can and must be paid by the Government. [Emphasis added.]” Id. at 11 n. 16.

During the period in which the government has taken possession of the land, but has not paid an amount representing its full value, eleven years in this case, the landowner becomes “an involuntary lender to a debtor he would often prefer not to have.” Redevelopment Agency of the City of Burbank v. Gilmore, 700 P.2d 794, 806 (Cal. 1985). The involuntary lender is forced to loan an uncertain amount of principal to an uncertain date of maturity. As this case turned out, the landowner involuntarily loaned the City of Fayetteville $28,900.00 over a period of eleven years. If the interest on that involuntary principal is not compounded, then “as the unpaid interest accumulates, the accumulated interest is the equivalent of an interest-free loan.” Borough of Wildwood Crest v. Smith, 563 A.2d 73,75 (N.J. Super. 1988). We have said that the landowner “cannot be denied interest on the unpaid part of the award during the time he is deprived both of the use of the land and of the money representing its value.” Arkansas State Highway Comm’n v. Vick, 284 Ark. at 375, 682 S.W.2d at 732. Yet, the landowner might be deprived of interest on the unpaid part of the principal if he were forced to make an interest free loan on the accumulated interest.

Here, the trier of fact should have been allowed to consider that the City of Fayetteville deposited $100.00 which supposedly represented the market value of the land at the time the City took possession. According to the proof, the landowner could deposit that $ 100.00 at an average rate of 9.25 %, and at the end of the first year, he would have had $109.25. He could then deposit the $109.25 and earn interest, and, in turn, compound it the same way for the full eleven years. It is undisputed that each of the local financial institutions compounded depositors’ interest. If the City had deposited the remaining $28,900.00 at the time of taking the landowner could have compounded it just as he might have done with the $100.00. However, simply because the City did not deposit the remaining $28,900.00, the landowner should not be deprived of the benefit of the compound interest on that amount. Compounding of interest should be considered in any formula that would place the landowner “in as good a position pecuniarily as he would have occupied if the payment had coincided with the appropriation.” Kirby Forest Indus., Inc. v. United States, 467 U.S. at 10 (emphasis added).

Reversed and remanded for the trier of fact to consider whether compound interest is necessary to afford “just compensation.”

Hays, Glaze, and Brown, JJ., dissent.

Robert L. Brown, Justice,

dissenting. The majority has reversed itself and now remands the matter to the “trier of fact” to reconsider the compound-interest question. By its second remand, the majority sends the unmistakable message that henceforth prejudgment interest in condemnation cases should be compounded to afford “just compensation.” I cannot agree with that decision.

On October 11, 1988, the jury awarded appellant Wilson $29,000 for a triangular piece of land taken by the City of Fayetteville. The trial court denied prejudgment interest. Wilson appealed to the court of appeals on the prejudgment-interest point, and that court reversed the decision and remanded to the trial court for a determination of a proper rate of interest.

The trial court conducted a hearing, received evidence, heard arguments, and made its decision to award prejudgment interest of $30,718.32 as of October 11, 1988, which was more than the value of the land awarded by the jury. In doing so, the court denied compound interest and awarded only simple interest. It then averaged local CD rates to arrive at the appropriate rate and the resulting $30,718.32. The total award to Wilson as of October 11, 1988, became $59,618.32.

The majority apparently still agrees with the original decision of this court affirming the trial court in its decision that average CD rates in .the area comprise the proper rate of interest. It remands solely for the purpose of deciding whether that rate should be compounded to afford just compensation. Who should decide the compound interest question? The opinion states that the trier of fact should, presumably a jury unless waived by the parties. The trial court, of course, has already considered the prejudgment-interest issue twice. Wilson would have nothing to lose by requesting a jury determination.

At the hearing, the trial court rules as follows on the compound interest question:

Now, we had one issue [which] was whether or not he is entitled to simple or compound interest. I ruled in a letter opinion February 7th that based upon the Vick case, cited at 284 Ark. 372, the Supreme Court used the words “simple interest” in that case, although they were not specifically addressing that issue. But based upon that language, in my opinion, simple interest is the way to figure the interest and not compounding it. Your objections to that will be noted, Mr. Stanley, on Mr. Wilson’s behalf.

The court looked to dictum in Arkansas State Highway Comm’n v. Vick, 284 Ark. 372, 682 S.W.2d 731 (1985) for guidance and made a decision not to compound interest.

We have held that the award of prejudgment interest is a matter of law, and there is no right to trial by jury on the issue. USAA Life Ins. Co. v. Boyce, 294 Ark. 575, 745 S.W.2d 136 (1988); Hopper v. Denham, 281 Ark. 84, 661 S.W.2d 379 (1983); Wooten v. McClendon, 272 Ark. 61, 612 S.W.2d 105 (1981). The trial judge in this case followed the law. Nowhere in our statutes or constitution is compound interest authorized. Indeed, the converse is true since both the statutes and constitution speak in terms of a six-percent-per-annum rate. Ark. Const. art. 19, § 13; Ark. Code Ann. § 27-67-316 (1987). In Arkansas State Highway Comm’n v. Vick, supra, we said that since a constitutional right was involved, the interest rate could exceed that specified by statute, and we allowed ten percent simple interest. We have never approved compound interest in condemnation cases. Before compound interest can be considered in determining a proper rate of interest for just compensation, there should be legislative authority for doing so. It represents a significant change.

The majority opinion decides that the award of compound interest is an issue of fact for the factfinder to decide and sends a clear signal that compound interest is appropriate. In doing so, it gives Wilson a third bite at the apple and reverses the trial court’s decision which was one of law and which followed our decision in Vick v. Arkansas Highway Comm’n, supra.

This decision sets us on a new and expensive course. I would deny the petition.

Hays and Glaze, JJ., join.

       The October 11, 1988 judgment amount was actually $28,900 due to the fact that the initial $100 was paid in to court in 1977. Interest is not allowed on amounts paid into court. Ark. Code Ann. § 27-67-316(e)(l) (1987).