author: Frank Holt, Justice.

text:
    HOUSEHOLD GOODS CARRIERS of the State of Arkansas v. ARKANSAS TRANSPORTATION COMMISSION
    77-192
    562 S.W. 2d 42
    Opinion delivered February 13, 1978
    (Division II)
    [Rehearing denied March 27, 1978.]

      Harper, Young & Smith, for appellants.

      Garry L. Brewer, Commissioner, by: Martha M. Miller, for appellee.
   Frank Holt, Justice.

The Arkansas Transportation Commission (ATC) adopted rules and regulations governing the operations of appellants. Ark. Stat. Ann. §§ 73-162, 73-1759 (a) (6). Before doing so and after notice to interested parties, a public hearing was held for the purpose of any party expressing reasons why the rules should or should not be adopted in their proposed form. The appellants appeared and made known their comments and objections. A revised set of rules was then adopted to which appellants also made objections. As a result, the rules were suspended by the ATC, and another hearing was scheduled to consider complaints and any proposed changes offered by appellants. Finally, seven months following the initial hearing and after considering all objections and suggestions, the ATC entered its order adopting “Special Rules and Regulations Governing Household Goods Carriers.”

Appellants first contend that the regulations adopted by the ATC and affirmed by the circuit court are arbitrary, capricious, unreasonable and without substantial evidentiary basis. Appellants’ argument is that the rules were enacted without any evidentiary basis inasmuch as the ATC did not, at either hearing, present any testimony or other evidence establishing the necessity of the rules and regulations. Only the appellants presented witnesses. In other words, they contend that the ATC had the burden of showing by recorded evidence at the hearings that the proposed rules were necessary. We cannot agree.

In Clear Creek O. & G. Co. v. Ft. S. Spelter Co., 161 Ark. 12, 255 S.W. 903 (1923), we recognized:

[T]he presumption is that the rates fixed by the Commission are reasonable, and the burden of proof is upon the company contesting the rates to show to the contrary.
******
[T] he establishment of rates is the making of a rule for the future, and is therefore an act legislative in character, whether exercised by the Legislature itself or by some subordinate body created for that purpose by it.

In accord is Pacific Coast European Conference v. United States, 350 F. 2d 197 (9th Cir. 1965), cert. denied 382 U.S. 958 (1965). There it was said:

[T]he purpose is to permit the agency to educate itself and not to allow interested parties to choose the issues or narrow the scope of the proceedings. The purpose of the notice is to allow interested parties to make useful comment and not to allow them to assert their ‘rights’ to insist that the rule take a particular form. The agency, in rule making, can look beyond the particular hearing record since it otherwise would be unable to draw upon its expertise.

In The Assigned Car Cases, 274 U.S. 564 (1927), the United States Supreme Court stated that the contention that findings essential to the Commission’s order are lacking “rests largely upon a misconception” because “in establishing a rule of general application, [there dealing with coal car distribution] it is not a condition of its validity that there be adduced evidence of its appropriateness in respect to every railroad to which it will be applicable. ” Further, “where the regulation is within the scope of authority legally delegated, the presumption of the existence of facts justifying its specific exercise attaches alike to statutes, to municipal ordinances, and to orders of administrative bodies.” Pacific States Co. v. White, 296 U.S. 176 (1935). See also 2 Am. Jur. Administrative Law § 360. Here it is undisputed that the ATC had authority to promulgate the rules. Therefore, it was not necessary that ATC adduce evidence at these hearings, and appellants have not demonstrated that ATC’s rules and regulations were unnecessary on unreasonable.

Appellants next contend that the enactment of Rules 18.5 (h) and (e) exhibits arbitrary action by the ATC because these rules were never discussed or proposed during any of the hearings. These rules deal with the carrier making certificates of insurance available to a shipper. It appears from the record that the subject of these rules was discussed at the hearings. Also it appears appellants themselves initiated the idea that they should “be required to offer insurance for the full value of their shipments.”

Appellants also assert that the rules and regulations cancel existing tariffs without notice. We observe that appellants, in their brief, argue that they repeatedly warned the ATC that the proposed rules would be contrary to their existing tariffs. Obviously, the appellants had notice. Further, the existing tariffs were not canceled but merely modified, and the appellants were given forty-five days to republish their tariffs in accordance with the rules.

Neither can we agree with appellants that the reporting requirements outlined in Rule 18.8 (a) are unnecessary and oppressive. They contend this rule is unduly burdensome, because it requires them to submit copies of these records to the ATC. However, the rule only requires that they be made available to ATC upon request. Appellants also claim Rule 18.8 (b), which requires a carrier to provide five additional items of information in its annual report, is oppressive and unnecessary. We see nothing oppressive in thss rule. It also appears that appellants voiced approval and also proposed an identical rule on this matter.

Appellants assert that Rules 18.3 (c) and (f), which relate to the retention of goods by appellants, violate the U.C.C. and discriminate against them. However, Ark. Stat. Ann. § 85-7-103 (Add. 1961) provides:

[T]o the extent that any treaty or statute of the United States, regulatory statute of this State or tariff, classification or regulation filed or issued pursuant thereto is applicable, the provisions of this Article are subject thereto.

The commentary to § 85-7-103 states that “the purpose of this provision is to make clear also that regulatory state statutes **** are not affected by the Article and are contiolling on the matters which they cover” nor are “regulations filed or issued pursuant to them.” Therefore, there is no conflict between the regulations and the U.C.C. as asserted by appellants. Further, Ark. Stat. Ann. § 73-1776 (Repl. 1957) specifically provides that the retention of goods by the carrier “until all tariff rates and charges thereon have been paid,” is subject to “such rules and regulations as the Commission may from time to time prescribe to govern the settlement of all such rates and charges, including rules and regulations for weekly or monthly settlement, and to prevent unjust discrimination or undue preference or prejudice . . . . ” Appellants have demonstrated no discrimination or undue preference against them by the enactment of these rules.

Neither can we agree with appellants that Rule 18.5 (h), previously discussed, requires the appellants to become insurance agents or to sell insurance. It appears the rule merely assures the shipper the opportunity of purchasing additional insurance if desired. Suffice it to say the rule is similar to appellants’ proposed rule which required them to offer insurance to their customers.

As to appellants’ contentions that the rules and regulations, particularly 18.3, 18.5 (b), 18.6, and 18.7, are detrimental to the public in that they will result in higher costs for shipping and that they will lead to disharmony between carriers and shippers, suffice it to say that we find their argument speculative, unconvincing, and without cited authority. See Dixon v. State, 260 Ark. 857, 545 S.W. 2d 606 (1977).

Appellants also insist that the circuit court was without legal authority to propose additional language to the rules upon affirming the order of the ATC, citing Ark. Stat. Ann. § 73-133 (Repl. 1957). Here the circuit court stated that the rules should be amended to allow the appellants to have a lien for nonpayment of additional charges and suggested that additional language be added to 18.3 (c) and (f) to insure this for the benefit of appellants. The court then affirmed the order so modified. Appellants contend the court must either affirm, reverse or direct the ATC to take certain action. Even so, appellee, in its brief, acquiesced to this modification which was made to meet appellants’ objection. Therefore, even if it be said that it is not the court’s function to modify the Commission’s order, we perceive no prejudicial error. An error without prejudice is no ground for reversal. See Bridges v. Ark. Motor Carriers, 256 Ark. 1054, 511 S.W. 2d 651 (1974).

In summary, the appellants have not demonstrated that the appellee’s order nor the trial court’s affirmance was erroneous in any respect.

Affirmed.

We agree: George Rose Smith and Fogeeman and Byrd, JJ.


source: Caselaw Access Project

author: Darrell Hickman, Justice.

license: Public Domain

text:
    Christena HASEMAN v. UNION BANK OF MENA & Liston HASEMAN, Jr.
    77-150
    562 S.W. 2d 45
    Opinion delivered February 13, 1978
    (Division I)
    [Rehearing denied March 20, 1978.]

      James Howard Smith, for appellant.

      Nabors Shaw; and Hardegree & Maddox, by: David Maddox, for appellees.
   Darrell Hickman, Justice.

Christena Haseman sued the Union Bank of Mena in the Polk County Circuit Court for breach of contract and negligence for permitting her adopted son to withdraw about $12,000 from a joint savings account. Mrs. Haseman’s lawsuit was primarily based on the premise that she had exclusive possession of the savings passbook and withdrawals could only be made by presentation of the passbook. The bank permitted the son, a co-tenant of the account, to withdraw the money without the passbook. Before trial the son was joined as a defendant in the suit. The allegations against him were the same as those against the bank.

The trial judge granted the son’s motion for a directed verdict. The 9ase against the bank went to the jury and a verdict was returned in favor of the bank.

Mrs. Haseman appeals alleging four errors: the trial court should have ruled as a matter of law the defendants breached the savings account contract by permitting the withdrawal of money without the use of the passbook; the trial court was wrong in directing a verdict for the son because he did not present the passbook and extrinsic evidence proved the money was actually Mrs. Haseman’s; the instructions given by the court were slanted and amounted to a comment on the evidence; and, the court erroneously prohibited Mrs. Haseman’s attorney from arguing to the jury the import of an Arkansas statute.

We find the trial court committed error in granting a directed verdict for the son; in the giving of one instruction; and, in commenting about the instructions.

In 1966, Mrs. Haseman and her husband deeded to their adopted son, Liston Haseman, Jr., a 240-acre farm in Polk County, Arkansas, reserving for themselves a life estate. In May of 1973, the Hasemans opened a savings account with the Union Bank of Mena. A passbook was issued to the Hasemans which contained printed rules and regulations. Rule 3 provided, among other things:

. . . the passbook must be presented in order that the payment may be entered therein . . .

However, Rule 5 stated that any change of the rules and regulations could be made by posting a notice in the lobby of the bank for five consecutive business days.

The son was added to the account as a joint owner with the right of survivorship in July, 1973. Before Mr. Haseman died in October of 1973, a timber deed on the farm was signed by Mr. and Mrs. Haseman and their son.

Two deposits were made to the account from the sale of the timber; one in November of 1973, for $5,500; and, one in January of 1974, for $5,500. Mrs. Haseman tried to testify that the money was hers. The court ruled such testimony improper. She was, however, permitted to testify that she paid income tax on the interest earned on the account for 1973 and 1974. On two occasions in 1974, Mrs. Haseman went to the Mena Bank and tried to change the account. In July of 1974, she tried to change the account to her name only with her four children named as beneficiaries on her death. She said she was advised by employees of the bank that such a change could not be made. In August of 1974, she consulted a bank officer about changing the account or withdrawing the money and the account remained the same. She testified that on both occasions employees and officers of the bank assured her that withdrawals could not be made by anyone without the use of the passbook.

The employees and the bank officers denied making any such statements. The bank introduced into evidence a copy of a notice that stated the use of passbooks would be discontinued as of April 1, 1974. Testimony was offered that the notice was properly posted according to the passbook rules and regulations. A bank official testified that as early as 1969 or 1970 the required use of passbooks was discontinued and issued thereafter only as a convenience at the request of depositors. The son withdrew most of the money from the savings account on August 13, 1974, without the use of the passbook.

First, the court correctly refused to rule that as a matter of law both defendants had breached the savings account contract by permitting a withdrawal without the use of the passbook. The rules, as printed in the passbook, seemed to require the book for a withdrawal. However, it was disputed whether the passbook was required to be used at the time of the withdrawal. Evidence was offered to the jury that the rule requiring passbooks had been changed. Also, the bank offered testimony disputing Mrs. Haseman’s statement that she was told twice the passbook would be required.

We considered a similar problem in a recent decision. Coristo v. Twin City Bank, 257 Ark. 554, 520 S.W. 2d 218 (1975). However, in Coristo there was no requirement in the “rules and regulations” that the passbook must be presented for withdrawal. There was a statement in the passbook to such an effect but it was not a “rule.” We held in Coristo that the passbook did not have to be presented for withdrawals; but the Coristo decision turns on the peculiar facts of that case. The facts here were disputed, therefore, the trial court properly submitted Mrs. Haseman’s case against the bank to the jury on a fact question.

Second, the trial judge erred in directing a verdict for the son. The court so ruled because it determined that as a matter of law the proceeds of the timber sale belonged to the son since Mr. and Mrs. Haseman had only a life estate in the land and, therefore, did not have a legal right to sell the timber. See McLeod v. Dial, 63 Ark. 10, 37 S.W. 306 (1896). However, Mrs. Haseman argued that she, her husband and her son, had agreed that the money belonged to the parents until their death. As noted previously, she paid income taxes on the interest of the timber sale proceeds for two years. Also, Mr. and Mrs. Haseman had deposited over $1,000.00 to the account before the timber proceeds were added.

The trial judge should have allowed the question of ownership of the money to go to the jury as a fact question. We have indicated that regardless of the ownership listed on the signature card of a financial institution, the parties may agree otherwise among themselves. See Coristo, supra.

Finally, we agree with the appellant’s last two assignments of error. The court erred in giving an instruction requested by the bank which read:

You are told that ordinarily a passbook is for the convenience of the customer in order that the statement of the account may be posted at the time of any withdrawals or deposits, and as such the presentation of the pass book at the time of any withdrawal or deposit is subject to being waived by the bank.

The basis for this instruction was our decision in Coristo. This is not an accurate statement of the law from Coristo. The ordinary use of a passbook is irrelevant. The question in Coristo, as here, was whether a contract existed which required the use of a passbook for withdrawal of funds. That depends on the facts of the case. This instruction is misleading.

It was critical to Mrs. Haseman’s case that the jury be properly instructed that she and the bank could have an agreement requiring the use of a passbook. Such a contract is permitted by Arkansas law. Ark. Stat. Ann. § 67-519 (Repl. 1966). Arkansas law also provides that when two or more persons become joint owners of an account either person may withdraw funds and such a withdrawal exonerates the bank from any liability to the other joint tenant. Ark. Stat. Ann. § 67-521 (Repl. 1966).

The trial judge correctly read both of these statutes verbatim as instructions. However, when the attorney for Mrs. Haseman tried to read Ark. Stat. Ann. § 67-519 (Repl. 1966), and comment about it to the jury, he was stopped by the trial judge. After a brief consultation the court indicated that no instruction was given on this latter statute commenting:

No, sir, I didn’t give it.

Obviously, the court was in error. Counsel for Mrs. Haseman then indicated to the jury that he could not discuss this statute. The court stated:

Members of the Jury, in that connection, I am not defending myself, but 1 did give you a more recent statute that was adopted that does apply to this case.

This could only be a reference to Ark. Stat. Ann. § 67-521 (Repl. 1966) which would tell the jury that the bank would not be liable if a joint tenant withdrew money without a passbook.

This was error because the first question to the jury was: whether a contract existed which required the use of the passbook? If so, did the bank breach its contract by permitting the son to withdraw the funds without the passbook. Such a contract is not inconsistent with Ark. Stat. Ann. § 67-521 (Repl. 1966). The statutes mentioned herein are not inconsistent and are easily reconciled. By commenting as he did, the trial judge made a comment on the evidence which was error. Ark. Const., Art. 7 § 23.

Therefore, we affirm the trial court’s refusal to find as a matter of law that the passbook contract was clear, unambiguous and required presentation of the passbook for the withdrawal of funds. We reverse the directed verdict for Liston Haseman, Jr. since there is a question as to ownership of the funds. We reverse the verdict for the bank because the court improperly commented on these instructions.

Reversed and remanded.

We agree. Harris, C.J., and George Rose Smith and Howard, JJ.


author: Carleton Harris, Chief Justice. George Howard, Jr., Justice,

text:
    FARM SERVICE COOPERATIVE OF FAYETTEVILLE, James F. DICKSON and Wayne B. BALL v. The Honorable Maupin CUMMINGS, Circuit Judge, First Division, Circuit Court of Washington County, Arkansas
    77-303
    561 S.W. 2d 317
    Opinion delivered February 20, 1978
    (In Banc)

      James F. Dickson, for petitioners.

      Pearson & Pearson and Jones & Segers, for respondent.
   Carleton Harris, Chief Justice.

This action relates to litigation between appellant, Farm Service Cooperative, and Goshen Farms. On May 17, 1972, Goshen Farms sought a declaratory judgment and $5,264.96 in damages from Farm Service, the suit apparently based on a contention that Farm Service was a holdover tenant, and damages were sought for injury to the property. This litigation resulted in a jury verdict for Farm Service. On December 1, 1972, a second complaint was filed by Goshen seeking $160,281.21, or, in the alternative, $26,705.55. Again, there was a jury verdict for Farm Service. On May 24, 1974, damages were sought by Goshen in the amount of $6,000.00, but apparently a non-suit was taken before the trial.

On January 17, 1977, another suit was filed by Goshen, and Farm Service counterclaimed for $20,455.12 for attorneys’ fees plus exemplary damages of $10,000.00. Goshen’s attorneys gave notice to take the depositions of James F. Dickson and Wayne B. Ball, attorneys for Farm Service and thereafter those attorneys filed a motion with the Washington County Circuit Court seeking to quash the taking of the depositions and alleging that they had “no unprivileged knowledge regarding any matter which is relevant to the subject matter involved in the pending action which relates to any claim or defense of any party or which is reasonably calculated to lead to the discovery of admissible evidence.” It was further asserted that the notice to take the depositions was “for the purpose of annoying and harassing attorneys for defendant and counterclaimant.” A response was filed to this motion in support of the taking of the depositions alleging that Dickson and Ball “know more about the alleged malicious prosecution as set forth in the counterclaim than any other persons;” that the named attorneys possessed knowledge of agreements entered into as attorneys with the attorney representing Goshen, and that such attorneys “have personal knowledge as to whether or not there is any malice” on the part of Goshen and “also have knowledge of possible malice on the part of Farm Service Cooperative, Inc.” On hearing, the court found that the motion to quash notice to take the depositions should be overruled, and that the two attorneys should submit themselves for oral depositions and ordered:

“James F. Dickson and Wayne Ball are ordered to appear in person in Washington County Circuit Courtroom on third floor in the Washington County Courthouse, Division 1, on the 28th day of September, 1977, at 10:00 a.m., for purpose of being deposed by Tom Pearson, Sr., in behalf of Goshen Farms, Inc., and George Melbourn and Carl Rose on thé question of malice and the basis of malicious prosecution allegation and the basis of attorney fees charged upon which recovery is sought.”

Farm Service, and Dickson and Ball petitioned this court for a writ of prohibition requiring respondent, Judge Maupin Cummings, to set aside the above order.

The petition cannot be granted. Certainly, the court has jurisdiction of the subject matter and jurisdiction of the parties, and we have said on numerous occasions that a writ of prohibition does not issue when a court acts merely in excess of its jurisdiction, since the writ cannot be used as a substitute for appeal. Ark. Motor Coaches v. Taylor, Judge, 234 Ark. 803, 354 S.W. 2d 731, 95 A.L.R. 2d 1227 (1962).

But appellants’ argument is predicated on the contention that the trial court’s order will require Dickson and Ball to violate the lawyer-client privilege expressed in Rule 502 of the Uniform Rules of Evidence, and it is argued the court was without jurisdiction to enter such an order. Here, they refer to the court’s order as it relates to being deposed “on the question of malice and the basis of malicious prosecution allegation.” Of course, an attorney is not required to divulge information of a privileged nature, but we do not take it that the court’s order authorized, or intended to authorize, unlimited authority to propound any questions, including privileged matters or the attorneys’ work product, and have them answered. Of course, this court has no idea what questions will be asked and this would appear to be likewise true of the trial court; there certainly is no way that we can rule on questions that have never been asked, nor can the trial court. However, we have a statute which protects against such an invasion. Ark. Stats. 28-352 (d) (Repl. 1962) reads as follows:

“At any time during the taking of the deposition, on motion of any party or of the deponent and upon a showing that the examination is being conducted in bad faith or in such manner as unreasonably to annoy, embarrass, or oppress the deponent or party, the court in which the action is pending or the court in the district where the deposition is being taken may order the officer conducting the examination to cease forthwith from taking the deposition, or may limit the scope and manner of the taking of the deposition as provided in subdivision (b). If the order made terminates the examination, it shall be resumed thereafter only upon the order of the court in which the action is pending. Upon demand of the objecting party or deponent, taking of the deposition shall be suspended for the time necessary to make a motion for an order. In granting or refusing such order the court may impose upon either party or upon the witness the requirement to pay such costs or expenses as the court may deem reasonable.”

An additional reason for denying relief is that an order for discovery is interlocutory and not appealable, and a writ of prohibition will not lie. Ark. Motor Coaches v. Taylor, Judge, supra. See also Vale, Admr. v. Huff, Judge, 228 Ark. 272, 306 S.W. 2d 861.

But, say the petitioners, even if this court should subsequently hold that the trial court’s order was in error, or that the court ordered questions answered that were, in fact, privileged, the damage would already have been done. In Arkansas State Highway Commission v. Ponder, Judge, 239 Ark. 744, 393 S.W. 2d 870, a case involving a writ of certiorari, this court refers to Ark. Motor Coaches v. Taylor, Judge, supra, with the following pertinent observations:

“We think the writ must be denied on the authority of Arkansas Motor Coaches v. Taylor, Judge, 234 Ark. 803, 354 S.W. 2d 731, 95 A.L.R. 2d 1227 (1962). There the defendant sought a writ of prohibition to prevent the trial court from compelling it to answer certain discovery interrogatories, on the ground that the information sought was privileged. We denied the writ, holding that the discovery order was interlocutory and not appealable. Since the court had jurisdiction to make the order, prohibition could not be used as a substitute for an appeal from the final judgment in the case. Similarly, certiorari cannot serve as a substitute for an appeal. Morgan v. Hess, 210 Ark. 207, 194 S.W. 2d 871 (1946).
“This petitioner insists that if it complies with the trial court’s order, under protest, its remedy by eventually taking an appeal from the final judgment will be inadequate, for, even if we should hold that the discovery order was an error, the harm will already have been done. In effect it is argued that if the cat is ever let out of the bag it can never be gotten back into the bag. An identical argument can be made whenever a discovery order is objected to. To sustain the argument in this case would mean that we should have to make a similar piecemeal decision whenever an application for discovery is unsuccessfully resisted at the trial level. We have repeatedly held that we cannot review interlocutory orders in this fashion.”

It follows from what has been said that the petition cannot be granted.

Writ denied.

Howard, J., dissents.

George Howard, Jr., Justice,

dissenting. I am compelled to dissent from the holding of the majority in this action.

The record clearly shows that the trial court exceeded its authority in ordering the attorneys for Farm Service Cooperative of Fayetteville, James F. Dickson and Wayne B. Ball,

. to appear ... for purpose of being deposed on the question of malice and the basis of malicious prosecution allegation and the basis of attorney fees charged upon which recovery is sought.” (Emphasis Added)

It is apparent from the face of the order that the attorneys for Farm Service Cooperative of Fayetteville run the risk of contempt of the trial court’s order should they refuse to answer any questions posed by attorneys for Goshen Farms regarding the malicious prosecution allegation contained in the counterclaim of their client without being afforded the opportunity to object to the grounds of relevancy, materiality and attorney-client privilege and have such objections considered by the trial court before being ordered to respond to questions posed.

It seems clear that the sole purpose of deposing the attorneys for Farm Service Cooperative is to harass and intimidate counsel. This conclusion is inescapable when one considers the fact that Goshen Farms has brought several actions against Farm Service Cooperative which have had a rather tragic demise either by way of jury verdicts in behalf of Farm Service Cooperative or by nonsuit. Moreover, it seems further obvious that if Goshen Farms desired to take discovery deposition on the malicious prosecution allegation, the party litigant is the proper person to be deposed and not its lawyers.

The majority has recognized in its opinion that it is clear from the face of the trial court’s order that the trial court exceeded its authority, but concludes that a writ of prohibition does not issue for this purpose since the writ may not be used as a substitute for an appeal. It is, perhaps, true that writ of prohibition is not the appropriate means to deal with the problem faced by the Court, but this Court may treat petitioners’ petition for writ of prohibition as a petition for certiorari and strike that part of the order directing the attorneys for Farm Service Cooperative to answer questions pertaining to malice and the basis of malicious prosecution allegation.

In State of Arkansas, Ex Rel Joe Purcell, Attorney General, Arkansas State Highway Commission v. G.D. Nelson, Berry Petroleum Company, et al, 246 Ark. 210, 438 S.W. 2d 33, we said, among other things:

“certiorari lies to correct proceedings erroneous upon the face of the record when there is no other adequate remedy ... it is available in the exercise of superintending control over a tribunal which is proceeding illegally where no other mode of review has been provided . . . certiorari lies where there is a want of jurisdiction or an act in excess of jurisdiction which is apparent on the face of the record ...” (Emphasis added)

An additional reason asserted by the majority in denying relief is the contention that the order of the trial court is interlocutory in nature and consequently, an appeal does not lie.

I submit, however, that due to the nature and scope of the trial court’s order in directing the attorneys to answer questions pertaining to their client’s allegations and the possible serious consequences that could flow upon counsel’s refusal to answer on the grounds of attorney-client relationship, materiality or relevancy, this Court should not look to form, but, indeed, the substance of the order and regard it as final. See: 4 Am. Jur. 2d, Appeal and Error, Section 51, p. 573, where it is provided:

“A number of tests of finality for purpose of appealability have been suggested, but none of these has universal applicability. Where there is a doubt in this respect, the surrounding circumstances as disclosed by the record may be considered. Ordinarily it will appear from the face of the decision whether it is or is not final. However, the test of finality is the substance of the decision rather than its form or name, so that a decision may be final and appealable although it is denominated interlocutory.”

It must be remembered that that portion of the trial court’s order directing counsel to answer questions relating to their client’s counterclaim was gratuitous in every respect. Respondents made no demand for affirmative relief. Petitioners simply filed a motion to quash notice of the time and place for deposing counsel. It seems that an appropriate order would have simply denied the motion to quash. Thus, the parties could have simply followed the statutory provisions for discovery. But as it now stands, counsel do not know precisely what destiny has in store for them.

       The original complaint is not a part of the record.

       This complaint is not in the record and there is nothing to show the reason for the vast difference in the two figures.

       This complaint is not in the record.

       This complaint is not in the record.

       In the earlier case of H.B. Deal & Co., Inc. v. Marlin, Judge, 209 Ark. 967, 193 S.W. 2d 315, we quoted with approval from 42 Amjur 165 as follows:
      “ ‘It is the universal rule that mere error, irregularity, or mistake in the proceedings of a court having jurisdiction does not justify a resort to the extraordinary remedy by prohibition, and that a writ of prohibition never issues to restrain a lower tribunal from committing mere error in deciding a question properly before it; or, as it has sometimes been said, the writ of prohibition cannot be converted into, or made to serve the purpose of an appeal, writ of error, or writ of review to undo what already has been done. This is true both because there has been no usurpation or abuse of power and because there exist other adequate remedies. Thus, when jurisdiction is clear, an erroneous decision in ruling on the sufficiency of the petition or complaint or on a motion to dismiss, or on matters of defense, or in rendering judgment, is not ground for a writ of prohibition. ’ ”

      Numerous other cases are to the same effect.


author: George Rose Smith, Justice.

text:
    Carolyn DAVIS v. Thomas HARE and wife
    77-218
    561 S.W. 2d 321
    Opinion delivered February 20, 1978
    (Division I)

      Guy H. Jones, Phil Stratton, Guy Jones, Jr. and Casey Jones, by: Phil Stratton, for appellant.

      Pollard & Cavaneau, for appellees.
   George Rose Smith, Justice.

Upon an earlier appeal the appellant, as a pretermitted grandchild, was held to be the testator’s sole heir. Hare v. First Security Bank, 261 Ark. 79, 546 S.W. 2d 427 (1977). While that litigation was pending the appellees filed a claim ágainst the estate for the value of certain services rendered to the testator shortly before his death. The claim was approved, first by the administrator and then routinely by the probate judge. In response to objections filed by the appellant the probate court conducted a hearing and allowed the claim in part. This is an appeal from that order, three contentions being urged.

It is first argued that the trial judge erred in ruling that the appellant had the burden of proving that the claim should not have been allowed. The ruling was correct. In the first instance the administrator acts for the estate in approving, disapproving, or compromising claims. His decision, when approved by the court, makes a prima facie case that must be overcome by one who later objects to his action. See the Committee Comment to Ark. Stat. Ann. § 62-2612 (Repl. 1971). Here the point is more or less academic, for in reviewing the record de novo we have not found it necessary to attach any importance to the question of where the burden of proof lay.

Second, it is argued that the claimant Hare’s testimony about the services rendered was inadmissible under the dead man’s statute. Ark. Const., Schedule, § 2 (1874). That section of the Constitution recited that it might be repealed by the General Assembly, and it was in fact expressly repealed by the Uniform Rules of Evidence. Ark. Stat. Ann., § 28-1001, Note to Rule 1102 (Supp. 1977). The dead man’s statute was merely a rule of evidence and was therefore procedural in nature. Since this case was tried after the uniform rules became effective, they were applicable and made Hare’s testimony admissible. Duncan v. State, 260 Ark. 491, 541 S.W. 2d 926 (1976).

Third, it is argued that the claimants’ services were gratuitous, because there was no express agreement between the claimants and the testator about their compensation. An express agreement, however, is not necessary. It is sufficient to show that both parties understood that the services were to be paid for. Peoples Nat. Bank v. Cohn, 194 Ark. 1098, 110 S.W. 2d 42 (1937). Here Hare was not related by blood to the testator. Hare testified that the testator told him that “he had his place fixed” so that Hare would get it if he took care of the testator and his wife. The testimony of the lawyer who prepared the will was to the same effect. The will did leave the testator’s estate to Hare. Thus it is clear that both parties understood that Hare was to be compensated for his services by being made the beneficiary of the testator’s estate. Under our cases that understanding was sufficient to rebut the argument that the services were gratuitous.

Affirmed.

We agree. Harris, C.J., and Fogleman and Howard, JJ-


author: John A. Fogleman, Justice.

text:
    ARKANSAS PUBLIC SERVICE COMMISSION et al v. CONTINENTAL TELEPHONE COMPANY OF ARKANSAS
    77-126
    561 S.W. 2d 645
    Opinion delivered February 20, 1978
    (In Banc)

      Michael O’Malley and C. Richard Lippard, for appellants.

      Bill Clinton, Atty. Gen., by: Ellen G. Brantley, Asst. Atty. Gen., amicus curiae brief for appellants.

      Tom S. Lovett and Steve L. Riggs, of House, Holmes & Jewell;Robert A. Helman, Wayne W. Whalen and James E. Honkisz, of Mayer, Brown & Platt of Chicago, 111., for appellee.
   John A. Fogleman, Justice.

On May 30, 1975, Continental Telephone Company of Arkansas applied to Arkansas Public Service Commission requesting an increase in rates. The commission suspended the rate increase for a period of six months, or until such earlier time as the commission’s staff completed its investigation. The rates went into effect, under bond and subject to refund, on November 30, 1975. The City of Booneville had filed a petition on April 21, 1975, requesting an investigation and hearing by the commission on the quality of service being rendered by Continental in that city. On November 14, 1975, the two proceedings were consolidated. Hearings were conducted for four days beginning January 26, 1976.

It was first essential that a rate base be established. Here there was little difference between the company and staff figures. Continental proposed a rate base figure of $31,343,-850, which the staff adjusted to $31,110,358. Continental sought a return between 8.5% and 8.9%. The staff recommended a rate of return of 7.48%. The rate deficiency for which Continental contended was $1,594,072. The staff computed the rate deficiency by “the flow method” at $661,.-644 or, alternatively, at $790,905, if the commission permitted the company to use the “normalization” approach.

On May 19, 1976, the commission entered its order denying any rate increase, finding that the service rendered by the company was grossly unsatisfactory, that the company had not provided adequate and efficient service to its patrons and the public, that there had been specific violations of certain special rules of the commission, and that denial of the rate increase would not result in confiscation of Continental’s property.

On June 23, 1976, the commission denied Continental’s application for a rehearing. Continental then filed its petition to review, set aside and modify the commission’s order in the Circuit Court of Pulaski County. On March 1, 1977, that court entered an order remanding the case to the commission, directing the commission to fix just and reasonable rates within a zone of reasonableness ranging from 7.48% to 8.9% and to state its findings of fact in sufficient detail to show how it arrived at its decision.

The commission appealed asserting that the court erred in holding that the commission had exceeded its authority by denying any adjustment in rates, and that, if it did not err in so holding, it did err in finding that the commission must fix rates that would allow the company to earn a return within a zone of reasonable rates, the lower end of which was the increase in revenues recommended by the commission staff. We agree that the case must be remanded to the commission for specific findings of fact, but do not agree with the circuit court’s holdings as to the rate increase.

The commission’s ultimate findings on the denial of the rate increase were as follows:

The Commission has reviewed the testimony of both the Company and Staff witnesses in regard to each issue raised.
In finding, as we do, that no increase in rates has been justified, we also find that, under its approved rates, the Applicant will continue to collect sufficient funds with which it can meet all of its operating expenses, including debt service, and provide a return to its stockholders.
The Commission makes this finding after a thorough analysis of the evidence presented on the issue of quality of service which is set forth in detail herein.

The commission did indeed make a detailed resume of the testimony and findings of fact on the quality of service rendered by Continental. There is no contention that this element was not a pertinent factor to be considered on the question of rates.

It is elementary that the rate fixed by the commission must not be so low as to amount to a confiscation of the property of a utility. City of Fort Smith v. Southwestern Bell Telephone Co., 220 Ark. 70, 247 S.W. 2d 474. The only effort of the commission to make specific findings on the reasonableness of the rates fixed was:

The Applicant will continue to be in a position whereby it can pay its operating expenses, interest on its debt and provide a return to its stockholders. Therefore, we find that a denial of this Application will not result in a confiscation of the utility’s property.
On the other hand, if a rate increase is granted even though the evidence shows that the quality of service doesn’t meet the adequate and efficient standard, then the new rates will be discriminatory in that the Company will be earning a rate of return which will compensate it in the same manner as other companies who do maintain adequate and efficient service. The subscriber and the public will also be discriminated against in that the customer’s property will be confiscated since he is paying for adequate service but in reality receiving debased service which is so poor that he is unable to obtain the full benefits of that for which he is paying.
This Commission will not shy away and allow a company to increase rates regardless of the quality of service it provides. Rather, we will take a hard line with such companies and fix rates which are just, reasonable and commensurate with the quality of service that it renders.
The foregoing analysis has spelled out this Commission’s responsibilities and duties as required by the Arkansas Statutes when considering the issue of adequate and efficient service. Based on the overwhelming evidence found in the record, the Commission therefore finds:
* * *
4. That the just and reasonable rates to be charged by the Company for the commensurate service that it provides should be those rates charged prior to the Company’s filing this Application on May 30, 1975. We find that the Application for a rate increase should be denied.
IT IS, THEREFORE, ORDERED:
That the rates and tariffs filed by Applicant on May 30, 1975, be, and the same are rejected. The Application is denied in its entirety.
The pertinent statute required more than this.

On this point Ark. Stat. Ann. § 73-229 (Supp. 1977) states the following requirement:

After the conclusion of any hearing, the Commission shall, within sixty (60) days, make and file its findings and order, with its opinion, if any. Its findings shall be in sufficient detail to enable any court in which any action of the Commission is involved to determine the controverted question presented by the proceeding.

Ark. Stat. Ann. § 73-229.1 (Supp. 1977) governing judicial review provides:

*** The finding of the Commission as to the facts, if supported by substantial evidence, shall be conclusive. The review shall not be extended further than to determine whether the Commission’s findings are so supported by substantial evidence, and whether the Commission has regularly pursued its authority, including a determination of whether the order or decision under review violated any right of the petitioner under the laws or Constitution of the United States or of the State of Arkansas.

The court must determine, not whether the conclusions of the commission are supported by substantial evidence, but whether its findings of fact are so supported. It is the duty of the commission to fix rates that lie between that which would amount to an overcharge to the public and that which would amount to confiscation of the property of the utility. City of Ft. Smith v. Southwestern Bell Telephone Co., supra. Since it is the duty of the courts in determining whether the commission’s findings are supported by substantial evidence, and to determine whether the commission’s order or decision violates appellee’s constitutional rights by fixing a rate which amounts to confiscation of its property (see City of Ft. Smith v. Southwestern Bell Telephone Co., supra), the commission’s findings must be in sufficient detail to enable the courts to make an adequate and meaningful review. Courts cannot perform the reviewing functions assigned to them in the absence of adequate and complete findings by the commission on all essential elements pertinent to determination of a fair return. Southwestern Bell Telephone Co. v. State Corp. Com’n., 192 Kan. 39, 386 P. 2d 515 (1963).

The United States Supreme Court has addressed the problem which the circuit court faced and which confronts us on appeal in Colorado-Wyoming Gas Co. v. Federal Power Com’n., 324 U.S. 626, 65 S. Ct. 850, 89 L. Ed. 1235 (1945). In an opinion by Mr. Justice Douglas, that court, in remanding a case for further proceedings because of the generality of findings made by the Federal Power Commission, said:

The review which Congress has provided for these rate orders is limited. Section 19(b) 15 USCA § 717 r(b), 4 FCA title 15, § 717r(b) says that the “finding of the Commission as to the facts, if supported by substantial evidence, shall be conclusive.” But we must first know what the “finding” is before we can give it that conclusive weight. We have repeatedly emphasized the need for clarity and completeness in the basic or essential findings on which administrative orders rest (Citations omitted). Their absence can only clog the administrative function and add to the delays in rate-making. We cannot dispense with them for Congress has provided the standards for judicial review under this Act. § 19(b). The courts cannot perform the function which Congress assigned to them in absence of adequate findings. ***

The commission has urged that the findings are sufficient because there is evidence from which it could reach the conclusions it stated. But it is not the function of the courts to evaluate the evidence, to draw inferences from it or to read its implications into the statement of the ultimate conclusion. Petition of New England Tel.&Tel. Co., 115 Vt. 494, 66 A. 2d 135 (1949); Wichita R. R. & Light Co. v. Public Utilities Com’n., 260 U.S. 48, 43 S. Ct. 51, 67 L. Ed. 124 (1922). The courts are not authorized under a statute like ours to make findings which should have been made by the commission. Colorado-Wyoming Gas Co. v. Federal Power Com’n., supra.

There was substantial evidence that the quality of service rendered by Continental, at least in a substantial portion of its service area, left much to be desired, and the commission’s findings in that regard are subject to meaningful appellate review. But there is no way that any court could do more than surmise as to the specific factors on which one could conclude that the denial of the application would not result in confiscation of the utility’s property. The fact that it can pay current operating expenses (on the quality of service it is presently rendering), interest on its existing debt, and provide a return (what return, we do not know) to its stockholders is not enough.

Confiscation simply means “the taking or seizing of private property to the public use as being forfeited.” Webster’s New International Dictionary, 2d Ed. In order for rates to be confiscatory, it is not necessary that they be such that the stockholders receive no return and the utility must immediately default on its debt. If the rates ultimately and foreseeably produce this result, the forfeiture is just as complete as it would be if the effect were dramatically instantaneous. If the rates are such that the company cannot finance the improvements necessary to provide the required quality of service or to pay increased operating expense essential to the improvement of service, it is inevitable that confiscation will result and that Continental’s certificate of public convenience and necessity will be lost, through surrender or revocation, and awarded to some other telephone company, as one member of the commission has already stated should presently be done. A wound is fatal when death is a predictable consequence, even though it is lingering rather than instantaneous. It is recognized that, although the approval of proposed rate increases is necessarily related to the services offered, a rate that is just and reasonable may be a condition precedent to adequate service. Village of Apple River v. Illinois Commerce Com’n., 18 Ill. 2d 518, 165 N.E. 2d 329 (1960). The potential confiscatory effect in such a situation has been considered by the Supreme Court of Ohio in a case where inadequacy of service was a factor. In Elyria Tel. Co. v. Public Utilities Com’n., 158 Ohio State 441, 110 N.E. 2d 59 (1953), that court said:

There is still another aspect to the problem. A utility to survive must receive a fair return on its property. Otherwise capital will not be attracted to furnish the funds for the new equipment needed to meet the demands of increased population and the consequential necessity for increased service. The commission’s order as made has the effect of creating serious difficulties for the company. A situation is present where the company needs an increase in rates to attract capital to buy new equipment and to meet increased demands, and the commission says, in effect, “we will give you the new rates to attract the new capital to purchase new equipment when you show that you have installed the new equipment.” Adoption of such an attitude would hamstring the utility.

This principle has been recognized by this court when it was held that a utility rate must be reasonable and just for a reasonable time in the future. City of Ft. Smith v. Southwestern Bell Telephone Co., supra.

It is a matter of common knowledge that interest rates are comparatively high and that money cannot be borrowed by a concern whose income is not sufficient to provide an adequate fund to service this indebtedness. In considering the question whether rates are confiscatory, current dividends and prevailing interest rates must be considered not only as they affect current costs but also as they will influence yields for a reasonable time in the future. Southwestern Bell Telephone Co. v. Public Service Com’n., 262 U.S. 276, 43 S. Ct. 544, 67 L. Ed. 981, 31 ALR 807 (1923); General Telephone Co. v. Michigan Public Service Com’n., 341 Mich. 620, 67 N.W. 2d 882 (1954). Low income makes for low prices for the securities of the utility and demand for higher interest rates by investors. Bluefield Waterworks & Improvement Co. v. Public Service Com’n., 262 U.S. 679, 43 S. Ct. 675, 67 L. Ed. 1176 (1923).

The last general adjustment of appellee’s rates was made in April, 1969. It is undisputed that the cost of providing telephone service has increased substantially since that time. The devastating effect of inflation and the increase in interest rates since that time are matters of such common knowledge that any court must take judicial notice of these facts. Cf. Atchison, Topeka & Santa Fe Railway Co. v. United States, 284 U.S. 248, 52 S. Ct. 146, 76 L. Ed. 2d73 (1932). It is not disputed that appellee’s investment in telephone plant increased by 59% during the last five years. There was testimony that between 1969 and March 31, 1975, total gross plant expenditures were $21,376,524 and, by November 30, 1975, had reached $24,490,673. A company witness testified that the single greatest factor contributing to the need for a rate increase was the cost of money, which he said had increased at an unparalleled rate. It was shown that in order to sell a debt issue of $3,000,000 in November, 1975, the company had to pay interest at the rate of 10-7/8%. In addition, the company sold preferred stock at 10-1/8%. A company officer whose principal duty was to supervise the planning, placement and negotiation of debt and equity issues, commercial bank transactions and maintenance of the company’s cash position, expressed the opinion that the company is not earning a rate of return sufficient to cover its cost of capital. There was testimony by the executive vice-president of Duff & Phelps, Inc., whose duties were to analyze individual utility companies and their securities and to report on them to investor clients, testified that construction costs had soared to record high levels during the past several years and that the attraction of capital had become a major problem of utilities. There was testimony that the rate increase sought was “absolutely necessary” if the company is to continut to maintain, expand and improve its telephone service.

It may well be that the present rates are adequate to avoid confiscation of Continental’s property, but we are totally deprived of any meaningful appellate review of the commission’s basis for so finding.

Continental’s application for rehearing aptly points out that the order is “defective in that its failure to make certain specific findings precludes the Applicant or a court on review from analyzing the financial aspects of Applicant’s operations, for purposes of determining whether or not the Order constitutes a confiscation of Applicant’s property.” Continental adds:

The Order is further defective in that it makes no accompanying finding with respect to Continental’s ability to attract capital and maintain its financial integrity or to enable it to raise sufficient capital to make the improvements in service effectively dictated by the Order. Failure to address the issue or procurement of that additional capital, which withholding rate relief until service expenditures are made, constitutes an undue burden on Applicant, confiscation of Applicant’s property without due process, and renders the Order defective due to inadequacy of findings on the part of the Commission.

We agree with the circuit court that the commission must fix rates which would allow Continental to earn a return within a zone of reasonableness and, on the record before us, that the zone should be at the lower end of the zone for utilities which provide an inferior grade of service, but not so low as to result in confiscation. We do not agree, however, that the zone of reasonableness lies at some point between the lowest revenue recommended by the commission staff and the revenue sought by Continental. See State ex rel Utilities Com’n. v. General Tel. Co., 285 N.C. 671, 208 S.E. 2d 681 (1974). The commission was not bound to accept one or the other of the conflicting views and opinions. Idaho Power Co. v. Thompson, 19 F. 2d 547 (S.D. Idaho, 1927). To say that the commission is limited by its staff’s recommendation as to the rate of return on the rate base would be to transfer the fact finding function in rate making from the commission to the staff. The staff presentation includes certain adjustments which may or may not be accepted by the commission. Furthermore, the commission may properly reduce the rate deficiency found by its staff because of an inferior quality of service. We find nothing to indicate that either Continental or the commission staff gave any consideration whatever to the quality of service being rendered, in determining the rate deficiency.

In fixing rates, appropriate attention must be given to the ability of the company to attract additional capital as needed. Cambridge Electric Light Co. v. Department of Public Utilities, 333 Mass. 536, 131 N.E. 2d 922 (1956). See also, Bluefield Waterworks & Improvement Co. v. Public Service Com’n., supra; Southwestern Bell Tel. Co. v. State Corp. Com’n., 192 Kan. 39, 386 P. 2d 515 (1963). As previously indicated, unless a utility’s rate of return is sufficient to make its securities attractive to the public when it is prudently operated, inferior service will result and ultimately, bankruptcy, of the utility. Petersburg Gas Co. v. Petersburg, 132 Va. 82, 110 S.E. 533, 20 ALR 542 (1922). The rate fixed should allow some surplus for necessary expansion of service and for working capital. Application of the Diamond State Telephone Co., 49 Del. 203, 113 A. 2d 437 (1955); Idaho Power Co. v. Thompson, supra.

The cost of financing to enable a utility to raise the money necessary for proper discharge of its public duties is an element to be considered in determining whether a rate is confiscatory. Los Angeles G & E Corp. v. Railroad Com’n., 289 U.S. 287, 53 S. Ct. 637, 77 L. Ed. 1180 (1933); Smith v. Illinois Bell Telephone Co., 282 U.S. 133, 51 S. Ct. 65, 75 L. Ed. 255 (1930); Riverton Consolidated W. Co. v. Pennsylvania Public Utility Com’n., 186 Pa. Super. 1, 140 A. 2d 114 (1958). Cost of capital, when properly determined, involves consideration of the financial structure (with appropriate adjustments where financing is from a parent company) of the utility, its credit standing, dividends, interest, regulatory lag, wasting assets and any peculiar features of the particular utility. Riverton Consolidated W. Co. v. Pennsylvania Public Utility Com’n., supra. The return to the utility should be sufficient to assure confidence in its financial integrity so as to maintain and support its credit and attract new capital necessary for the proper discharge of its public duty. Federal Power Com’n. v. Hope Nat. Gas Co., 320 U.S. 591, 64 S. Ct. 281, 88 L. Ed. 333 (1944); Petition of Public Service Coordinated Transport, 5 N.J. 196, 74 A. 2d 580 (1950); Bluefield Waterworks & Imp. Co. v. Public Service Com’n., supra; Petition of New England Tel. & Tel. Co., 115 Vt. 494, 66 A. 2d 135 (1949).

The range of reasonableness in a case where quality of the service is a factor requires a rate no more than the reasonable worth of the service supplied but not so low as to be confiscatory. Petition of Public Service Coordinated Transport, supra; Coal & Coke Ry. Co. v. Conley, 67 W. Va. 129, 67 S.E. 613 (1910); Iowa-Illinois Gas & Electric Co. v. Illinois Commerce Com’n., 19 Ill. 2d 436, 167 N.E. 2d 414 (1960). See also, Wisconsin Telephone Co. v. Public Service Com’n., 232 Wis. 274, 287 N.W. 122 (1939).

In the interest of avoiding multiple appeals, we should consider one other matter raised by appellee, even though it took no cross-appeal from the judgment of the circuit court, probably because the circuit court did not act on the contention by Continental. Continental contends and contended before the circuit court that it was denied constitutional due process of law by the commission’s denial of a continuance to permit it to rebut testimony presented to show that it was rendering a poor quality of service.

The commission ordered that its staff and the City of Booneville file their testimony and exhibits on January 21, 1976, five days before the scheduled hearing date. On January 20, 1976, Continental had moved that, following direct testimony of staff witnesses (with the exception of Lee Pigg), and the testimony of public witnesses, the hearing be recessed for 30 days, to permit it to present testimony in rebuttal, or explanation of Pigg’s testimony and that of public witnesses. The motion was denied by the commission on January 23, 1976, on the ground that it would not be in the public interest to delay the matter any further. There is nothing in the record to indicate that any of the previous delay was caused by Continental.

Lee Pigg is a member of the commission’s staff, who is highly skilled in the field of electronics engineering. He conducted an extensive quality of service study and filed his report just five days before the hearing. He testified that the tests showed electrical faults, such as AC induction, ground noise, central office switching noise, cross-talk and circuit unstabilization. The weight given the testimony of this witness (perhaps properly), is best described by the statements in the commission’s findings that “Pigg’s educational background and experience has enabled him to become very knowledgeable of his duties and extremely well qualified to conduct a quality of service study on any phone company in this state” and that “he has testified in a number of proceedings before this commission and when testing procedures have been challenged, the companies have conducted their own tests only to conclude that Mr. Pigg’s results were indeed valid.” The commission also emphasized the fact that Continental failed to present a witness in its own behalf to show how these tests should have been conducted or the errors in his methodology.

The commission, in weighing the testimony of Pigg, noted that an official of Continental had expressed surprise at the sweeping comments made in Pigg’s testimony and his pre-filed report. The commission went on to say that the company failed to produce a rebutting witness, even though the official had stated that company technicians had found Pigg’s methods and tests inadequate in number or design and not properly performed; and another witness had said that the company planned to present a witness who would testify that Pigg’s notes did not support his report and that there were other tests which should have been performed; that it was admitted that Pigg had furnished the company copies of his notes; that the company had assigned an individual familiar with the locale and knowledgeable about at least some of the tests, to accompany Pigg when he made the tests. The commission stated that the company had ample opportunity to become aware of Pigg’s findings before his report was filed (apparently because of the receipt of the field notes) and to prepare testimony in response, but chose not to present testimony in rebuttal of the contents of the report or to show why the field notes did not support his report. The commission pointed out that Pigg testified that when his report was submitted he had to assume that the company had a problem, but that it was hard for him to distinguish what the problem was.

It is obvious to us that the entire field covered by Pigg is a highly technical and sophisticated one, as is the whole process of rate making. Pigg testified that the commission did not have the type of equipment required to make certain measurements about which he was asked on cross-examination.

The weight the commission gave to the testimony of 30 public witnesses, who testified on the quality of service on the last day of the hearing, is illustrated by its statement that the testimony was so substantial and condemning that it bore repetition in the order. The repetition took nearly one-half of the extensive rate order entered. There is no indication that appellee had any knowledge of the identity of the witnesses or of the gist of their testimony before they testified. Continental’s petition for rehearing, denied by the commission, reiterated its contention that the denial of the opportunity to investigate and respond to the staff testimony, as well as to hearsay and vague charges concerning the quality of its service, constituted a denial of due process of law.

We do not find the testimony of some of these witnesses to be so vague as to categorize all of it as being so. We do observe, however, that much of it is the rankest sort of hearsay and much of it is hearsay upon hearsay. It is true, as the commission points out, that no objection was made to this testimony by appellee and that the commission is not bound by strict rules of evidence. See Ark. Stat. Ann. § 73-127 (Repl. 1957). But Continental did not ask that the testimony be excluded. It only asked an opportunity for rebuttal.

In rate-fixing cases, the hearing required partakes of the nature of and embraces the scope and incidents of a judicial hearing. The character of the proceeding to determine the reasonableness of rates has been appropriately described by the United States Supreme Court in Morgan v. U.S., 298 U.S. 468, 56 S. Ct. 906, 80 L. Ed. 1288 (1936), viz:

A proceeding of this sort requiring the taking and weighing of evidence, determinations of fact based upon the consideration of the evidence, and the making of an order supported by such findings, has a quality resembling that of a judicial proceeding. Hence it is frequently described as a proceeding of a quasi judicial character. The requirement of a “full hearing” has obvious reference to the tradition of judicial proceedings in which evidence is received and weighed by the trier of the facts. The “hearing” is designed to afford the safeguard that the one who decides shall be found in good conscience to consider the evidence, to be guided by that alone, and to reach his conclusion uninfluenced by extraneous considerations which in other fields might have play in determining purely executive action. The “hearing” is the hearing of evidence and argument. ***

In such a proceeding, due process must be preserved to all whose legal rights are involved and concluded by the ultimate determination. Alabama Power Co. v. Fort Payne, 237 Ala. 459, 187 So. 632, 123 ALR 1337 (1939). A full and fair hearing is a fundamental requirement of due process in the determination of the reasonableness of rates. Shields v. Utah Idaho Central R. Co., 305 U.S. 177, 59 S. Ct. 160, 83 L. Ed. 111 (1938); Atchison, Topeka & Santa Fe Railway Co. v. U.S., 284 U.S. 248, 52 S. Ct. 146, 76 L. Ed. 273 (1932). The opportunity to submit evidence to rebut charges or adverse claims and testimony is an essential requirement of a full or fair hearing. Federal Trade Com’n. v. National Lead Co., 352 U.S. 419, 77 S. Ct. 502, 1 L. Ed. 2d 438 (1957); U.S. v. Storer Broadcasting Co., 351 U.S. 192, 76 S. Ct. 763, 100 L. Ed. 1081 (1956). See also, Interstate Commerce Com’n. v. Louisville & N. R. Co., 227 U.S. 88, 33 S. Ct. 185, 57 L. Ed. 431 (1913). To meet due process requirements a hearing must afford a utility the right to reasonably know the charges and the right to meet such charges by competent evidence. Mayfield Gas Co. v. Public Service Com’n., 259 S.W. 2d 8 (Ky., 1953). Where reliance is placed by an administrative agency upon testimony of certain witnesses in making a critical factual determination, it will be an abuse of discretion to fail to hear material evidence which might impeach, not only the testimony, but the findings made by the agency as well. National Labor Relations Board v. Indiana & Michigan Electric Co., 318 U.S. 9, 63 S. Ct. 394, 87 L. Ed. 579 (1943). The more liberal the practice in admitting testimony, the more imperative is the obligation to preserve the essential rules by which rights are asserted or defended, Interstate Commerce Com’n. v. Louisville & N. R. Co., supra; Alabama Power Co. v. Fort Payne, supra.

The commission must necessarily have a wide latitude of discretion in conducting and expediting the many hearings it must hold. Fundamental fairness requires, however, that, where expert or technical testimony is essential to a proper response to testimony adverse to it, adequate opportunity must be given to present testimony in rebuttal. In re St. Joseph Lead Co., 352 S.W. 2d 656 (Mo., 1961). See also, Interstate Commerce Com’n. v. Louisville & N.R. Co., supra; Simmons v. United States, 348 U.S. 397, 75 S. Ct. 397, 99 L. Ed. 453 (1955).

When a tribunal is vested with a great latitude of discretion, considerable judicial restraint should be observed in finding abuse of that discretion. It is with some reluctance that we conclude that the commission should, upon remand, give appellee a reasonable time within which to present evidence to rebut, impeach, or detract from, the testimony on the quality of its service.

The judgment of the circuit court, insofar as the remand of the case is concerned, is affirmed as modified to eliminate its holding as to the lower limit on the zone of reasonableness and upon remand, further proceedings of thé commission shall be consistent with this opinion.

George Rose Smith and Hickman, JJ., would affirm the commission’s order.


author: George Howard, Jr., Justice.

text:
    NORTHWEST SAVINGS AND LOAN ASSOCIATION and THE ARKANSAS SAVINGS AND LOAN ASSOCIATION BOARD v. FAYETTEVILLE SAVINGS AND LOAN ASSOCIATION AND FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF FAYETTEVILLE, ARKANSAS
    77-219
    562 S.W. 2d 40
    Opinion delivered February 20, 1978
    (Division I)
    [Rehearing denied March 27, 1978.]

      Spitzberg, Mitchell & Hays, by: John P. Gill and Kent Foster; Kelley, Luffman & Jennings, by: Eugene Kelley and Roger W. Giles, for appellants.

      Crouch, Blair, Cypert & Waters, by: James B. Blair and William M. Clark, Jr.; Friday, Eldredge & Clark, by: Hermann Ives ter, for appellees.
   George Howard, Jr., Justice.

This controversy presents the following question for resolution: Whether the Washington County Circuit Court committed reversible error in holding that the Arkansas Savings and Loan Association Board’s, hereinafter referred to as the Board, decision granting the application of Northwest Savings and Loan Association, hereinafter referred to as Northwest, to establish a branch office in Fayetteville, Arkansas, was not supported by substantial evidence.

THE FACTS

On July 22, 1976, Northwest, which has its principal office in Rogers, Arkansas, filed an application with the Board for permission to establish a branch office in the City of Fayetteville, Washington County, Arkansas. Northwest’s service area is the Benton and Washington Counties trade area, and Northwest has savings account customers as well as loan customers in Fayetteville. Northwest was chartered in 1973 under the laws of the State of Arkansas.

Appellees, First Federal Savings and Loan Association of Fayetteville, hereinafter referred to as First Federal, and Fayetteville Savings and Loan Association, hereinafter referred to as Fayetteville Association, protested the application of Northwest.

On December 7, 1976, the Board rendered its decision finding, inter alia:

1. There is a public need for the proposed branch office and the volume of business in the area in which the proposed branch office will conduct its business is such as to indicate a successful operation; and,
2. The operation of the proposed branch office will not unduly harm any other existing association of Federal savings and loan association or other financial institution; and,
3. The operation of the proposed branch office will not unduly harm the association seeking authority to open the branch office.

In support of its findings of fact, the Board made thirty-two underlying facts which were separately and distinctly stated and numbered.

The Board concluded that the application of Northwest for permission to establish a branch office should be approved.

On December 8, 1976, Northwest opened the branch office for business. However, on December 10, 1976, a temporary restraining order was issued by the Circuit Court of Washington County enjoining Northwest from doing any business pending appeal of the Board’s decision . The restraining order was subsequently made permanent pending completion of the appellate process.

On March 16, 1977, the Board denied appellees ’ petition for rehearing.

On July 1, 1977, the Circuit Court rendered a rather detailed and extensive opinion which in substance found that the Board’s decision was not supported by substantial evidence by considering the record as a whole, and further concluded that some of the findings of the Board were arbitrary and that the Board abused its discretion in granting the application of Northwest; arid, accordingly, entered an order reversing the action of the Board.

CONTENTION OF THE PARTIES

1. Appellants contend that the Board’s decision in granting the application of Northwest is supported by substantial evidence and is not arbitrary or capricious. Moreover, appellants contend that the Circuit Court erred in substituting its judgment for that of the Board.

2. First Federal and Fayetteville Association both contend that the Circuit Court was correct in holding that the Board’s approval of the application of Northwest was not supported by substantial evidence and that the Board’s action was both arbitrary and capricious. Moreover, appellees contend that the Circuit Court’s review did not involve the substitution of the court’s judgment for that of the Board, but, on the contrary, the court’s careful consideration of the record was to determine whether the Board’s decision was based on relevant factors and whether there was clear error of judgment on the part of the Board in granting Northwest’s application.

Fayetteville Association also contends that it is inherently arbitrary, capricious and an abuse of discretion for the Board to approve an application for a branch office by outsiders in a city having local savings and loan associations.

THE DECISION

After carefully reviewing the record and the briefs submitted by appellants and appellees, we are persuaded that the appellants are correct in asserting that there is substantial evidence to support the Board’s decision and that in several instances, the trial court substituted its judgment for that of the Board. Consequently, the holding of the Circuit Court of Washington County, Arkansas, is reversed.

In First State Building & Loan Association, Mountain Home, Arkansas v. Arkansas Savings & Loan Association Board and Home Savings & Loan Association, 261 Ark. 482, 549 S.W. 2d 274 (1977), we stated that in reviewing the record to determine if the Board’s findings are supported by substantial evidence:

“. . . we consider the evidence with all reasonable inferences deducible therefrom in the light most favorable [to the Board’s action] . . . Whether the evidence of Appellee or the Appellant weighs more heavily is not a consideration.”

• In First National Bank of Fayetteville v. Smith, 508 F. 2d 1371 (8th Cir. 1974), the Court, inter alia, observed:

“The ‘arbitrary and capricious’ standard of review is a narrow one ... its scope is more restrictive than the ‘substantial evidence’ test which is applied when reviewing formal findings made on a hearing record . . . ‘Administrative action may be regarded as arbitrary and capricious only where it is not supportable on any rational basis ’. . . Something more than mere error is necessary to meet the test. . . To have administrative action set aside as arbitrary and capricious, the party challenging the action must prove that it was ‘willful and unreasoning action,’ without consideration and a disregard of the facts or circumstances of the case ...” (Emphasis added)

In Terrell Gordon v. Gordon L. Cummings, et al, 262 Ark. 737, 561 S.W. 2d 285 (1978), we made the following statement involving administrative proceedings:

“It is well settled that administrative agencies are better equipped than courts, by specialization, insight through experiences and more flexible procedures to determine and analyze underlying legal issues; and this may be especially true where such issues may be wrought up in a contest between opposing forces in a highly charged atmosphere. This recognition has been asserted, as perhaps, the principal basis for the limited scope of judicial review of administrative action and the refusal of the court to substitute its judgment and discretion for that of the administrative agency.”

The following excerpts from the trial court’s opinion characterize the posture assumed by the trial court in reviewing the record in order to determine if the findings and conclusions of the Board were supported by substantial evidence:

“If, in fact, this be true, and savings and loan associations in Washington County are losing their competitive position with the banks, does it follow that this trend would be changed by the addition of still another savings and loan branch office into an area in which existing savings and loan associations are being bested by the banks, loan-wise? There is no substantial evidence in the record to explain this, or to so indicate.
“The COURT believes that there is substantial evidence in the record upon which the Board should have predicated a finding that Northwest Savings and Loan Association had not experienced the growth in savings it would have liked to realize from its operations in Rogers and Benton County, and that the move to expand and establish a branch office in Fayetteville was a move to capture a part of the attractive Washington County savings market.”

As we stated in Terrell Gordon v. Gordon L. Cummings, et al, supra, the review of an administrative agency’s decision is limited in scope and the court may not substitute its judgment and discretion for that of the agency. Moreover, the trial court should not become an advocate for one side or the other. It must be remembered that the credibility of witnesses and the proper weight to be accorded evidence presented to the Board is a prerogative of the Board and not that of the reviewing court. The Board has a superior position to that of the reviewing court inasmuch as it is in a position to observe the witnesses and consider their demeanor. The reviewing court may not displace the Board’s choice between two fairly conflicting views even though the Court would have made a different choice had the matter been before it de novo. The reviewing court may set aside a Board’s decision when it cannot conscientiously find that the evidence supporting that decision is substantial.

We do not find that the Board’s action may be characterized as arbitrary or capricious because, in our judgment, none of the evidence contained in this record may be classified as based upon suspicion, surmise, implications or plainly incredible evidence. It is true that there is evidence in the record that does not support the establishment of a branch, but on the whole, the decision of the Board is sustained by substantial evidence.

Relative to need, there is evidence that clearly shows that the proposed service area is one of the fastest growing areas in this part of the State. Moreover, the population is growing at a rate of approximately three times that of the State of Arkansas; it was established that the loan demand for home financing would be over $32.0 million in Washington County for the year 1976; it was established that the population in Washington County will grow over 12,000 people between 1976 and 1981; the Northwest Regional Planning Commission projected a need of 4,256 new dwelling units for the period 1976 to 1981.

The existing savings and loan associations in the proposed area grew about $83.0 million between 1971 and 1976. The evidence also shows that the savings and loan industry, as it existed at the time of the hearing before the Board, could not adequately serve the projected loan demands of the area; the record reflects that the savings and loan associations’ share of the total mortgage market dropped from 30.6% in 1973 to 22.1 in 1976 while the commercial banks’ share grew, during the same period, from 31.8% to 53.0%; that during the period 1973-1976 (projected for all of 1976), the total mortgage recordings increased from $72,000,000 to over $110,000,000. Moreover, this record indicates that the deposit growth in the proposed area shows again that the banks have acquired a larger total amount of savings deposits and a larger percentage share than the savings and loan industry in recent years.

The growth that is taking place now in the proposed service area convinces us that appellants’ branch facility can operate successfully and can do so without causing harm or detriment to existing financial institutions.

We are further persuaded that Northwest can provide additional services that existing savings and loan associations do not provide, and these include, among other things, the following:

A. Premiums and gifts to savers for making saving deposits.

B. Loan assumption and transfer fee of only $50 instead of 1% of the unpaid balance of the loan.

C. No charge for loan application, credit reports and additional appraisal fees unless the loan is actually made.

D. Drive-in teller windows.

E. Parking.

F. Compounding interest daily, which amounts to paying 1/4 of a percent more per year than compounding interest weekly.

Finally, appellees have not cited any authorities to support their contention that it is inherently arbitrary, capricious and an abuse of discretion for the Board to approve the location of a branch of a savings and loan association owned by outsiders in a city having local savings and loan associations. While the presence of an existing savings and loan association in the proposed service area may be a factor that is taken into consideration in granting or denying a branch application, we are persuaded that it should not be the controlling and dominant factor in ruling on an application such as the one that is considered in this case. We believe that the existence of this branch may serve to stimulate competition in the proposed service area and as argued in the Board’s brief, the most obvious example of the lack of competition in the proposed area is illustrated by the release, almost simultaneously, of identical notices by the appellees indicating that a revised loan assumption policy would raise the transfer fee to 1 % of the unpaid balance of the loan.

Reversed and remanded for proceedings not inconsistent with this opinion.

We agree. Harris, C.J., and George Rose Smith and Hickman, JJ.

       Although not an issue in this appeal, the Fayetteville Association filed, subsequently to the application of Northwest, an application with the Board for a branch office in Fayetteville which was protested by Northwest. Both applications were consolidated for hearing on the 7th of December, 1976, and the Board granted both applications.

       First Federal was chartered by the Federal Home Loan Bank Board under Federal Law.

       During the hearing on its application, Northwest informed the Board that Northwest had acquired a business site for its proposed branch office in Fayetteville, paying a purchase price of $145,000.00 for the site prior to the consideration of its application for the branch office by the Board.

       Appellees filed an appeal in the Circuit Court of Washington County, Arkansas, from the Board’s order of December 7, 1976, approving Northwest’s application before petitioning the Board for a rehearing. Northwest and the Board challenged the jurisdiction of the Circuit Court to entertain the appeal on the grounds that appellees had not exhausted administrative remedies as required under Section 2(e) of the Rules and Regulations of the Board. Consequently, the Circuit Court remanded the cause to the Board. After the Board disposed of appellees’ petition for rehearing, appellees refiled the petition for review of the Board’s decision by the Circuit Court.

       Here the Court discusses finding No. 17 of the Board which found that the savings and loan industry in Washington County is losing its competitive position with the banking industry as compared to Benton County.


text:
    FARM BUREAU MUTUAL INSURANCE COMPANY OF ARKANSAS, Inc. et al v. Tommy ROBINSON
    77-212
    562 S.W. 2d 53
    Opinion delivered February 27, 1978
    (Division I)

      Laser, Sharp, Haley, Young & Huckabay, for appellants.

      Felver A. Rowell, Jr., for appellee.
   George Rose Smith, Justice.

On January 19, 1976, the appellee bought a house, obtaining the purchase price by means of a $20,148 mortgage to First State Bank of Morrilton. On the next day the appellee applied to the appellant’s general agent for a $20,000 fire insurance policy on the house. The agent issued a binder with a loss payable clause naming the bank as its interest might appear. That night the house was accidentally destroyed by fire.

Upon the insurer’s refusal to pay the claim Robinson brought this action for the full amount of the policy, asserting a total loss. The insurer denied that the loss was total and asserted liability only for the reasonable cost of repair. At a jury trial Robinson recovered the full amount sued for, together with penalty and attorney’s fee. Two points for reversal are. argued.

First, at the end of the trial the insurer moved for a directed verdict on the ground that the bánk was the loss payee and was not a party to the action. It is now insisted that the motion should have been granted.

We do not think that the asserted defect of parties was properly raised. A defect of parties plaintiff is ordinarily waived if the defendant fails to object and ask that the other party be brought in. Crawford County Bank v. Baker, 95 Ark. 438, 130 S.W. 556 (1910); Clark v. Gramling, 54 Ark. 525, 16 S.W. 475 (1891). Here it was Robinson who owned the house and who applied for and received the binder. Thus he was at least a proper party to bring the action. A mortgagee may consent to the mortgagor’s maintenance of an action upon a policy having a loss payable clause. Worley v. State Ins. Co., 91 Iowa 150, 59 N.W. 16, 51 Am. St. Rep. 334 (1894); Coates v. Pennsylvania Fire Ins. Co., 58 Md. 172, 42 Am. Rep. 327 (1881); Couch on Insurance (2d), § 74:342, (1968). Here it was to the appellant’s interest to protect itself from any possibility of double liability by asking that the bank be brought into the case. Instead it apparently recognized Robinson as a proper plaintiff and defended the case on its merits. In the circumstances the attempt to raise the defect of parties by a motion for a directed verdict came too late.

Second, the insurer argues that the penalty and attorney’s fee should not be recoverable, because it appeared from the testimony below that the premium had not been paid, which would reduce the plaintiff’s recovery below the amount sued for. Under our statute it is mandatory that a defendant assert any set-off in its answer. Ark. Stat. Ann. § 27-1121 (Repl. 1962); May v. Exxon Corp., 256 Ark. 865, 512 S.W. 2d 11 (1974). The appellant must have known that the premium, which had been charged to the appellee’s account, had not been paid; but the possible set-off was not pleaded. Hence the appellee was entitled to, and did, recover the full amount sued for.

Affirmed, with an additional SI,500 attorney’s fee to be allowed for services in this court.

We agree. Harris, C.J., and Hickman and Howard, JJ.


text:
    Lester Charles LAKE v. Shirley Ann LAKE, Guardian of Earl James LAKE, a Minor
    77-240
    562 S.W. 2d 68
    Opinion delivered February 27, 1978
    (Division I)

      Q. Byrum Hurst, Jr., for appellant.

      Philip M. Clay, for appellee.
   George Rose Smith, Justice.

The appellee Shirley Ann Lake and her late husband, as guardians of their minor son, Earl James Lake, brought this action for damages against the child’s great uncle, the appellant Lester Charles Lake. The complaint alleged, and there was sufficient proof to show, that the defendant had shown obscene pictures to the child, then eight years old, and had partially undressed the child and fondled him in a homosexual manner. The defendant denied the allegations. This appeal is from a jury verdict of $10,000 for the child and $5,000 for the mother, as his surviving parent.

The two points for reversal do not require a further narration of the proof. It is first argued that the court should not have permitted the introduction in evidence of certain obscene pictures that were seized by the sheriff in a search of the defendant’s home. The court’s ruling was correct. The child had testified that the defendant had shown him pictures of naked persons. The pictures meet that description. The pictures were found in the defendant’s home. Thus a prima facie case of admissibility was made, the weight to be given to the evidence being a matter for the jury to decide. Cf. the Uniform Rules of Evidence, Ark. Stat. Ann. § 28-1001, Rules 104 and 1008 (Supp. 1977).

The second point for reversal, that the verdicts are excessive, presents the serious issue in the case. The complaint sought both compensatory and punitive damages. The verdicts, as we have said, were $10,000 for the child and $5,000 for the mother. There is, however, almost no proof of compensatory damages. As to the child, the only relevant evidence is the mother’s testimony that a day or two after the incidents the child was afraid to go into a room by himself or to go to bed without the door being open and the lights turned on. There is no proof that the child’s fears continued. As to the mother, the only evidence is that she spent about $100 in taking the child away from the neighborhood after the occurrences. If the jury’s awards are treated as being solely compensatory damages, they are not sustained by the evidence.

The appellee presents a twofold argument to sustain the awards. First, it is pointed out that no objection to the ex-cessiveness of the verdicts was made in the trial court. That, however, is immaterial. Such an objection would formerly have been made in a motion for a new trial. But Act 555 of 1953 provides that such a motion is no longer necessary. Ark. Stat. Ann. § 27-2127.5 (Repl. 1962). Consequently it is now permissible for an objection to the amount of the verdict to be made for the first time on appeal. Southern Nat. Ins. Co. v. Williams, 224 Ark. 938, 277 S.W. 2d 487 (1955).

Second, it is argued that the verdicts can be sustained as awards of punitive damages. The trouble is, the issue of punitive damages was not submitted to the jury. The Oklahoma court, apparently the only one to have passed on the question, has held that when punitive damages have not been submitted to the jury, the jury is not authorized to consider such damages. Myers v. Hubbard, 80 Okl. 97, 194 P. 433 (1920). That holding is in harmony with our own decisions. We have held that punitive damages are not recoverable unless compensatory damages not only have been suffered by the plaintiff but also have been assessed by the jury. Southern Farm Bureau Cas. Ins. Co. v. Daniel, 246 Ark. 849, 440 S.W. 2d 582 (1969); Kroger Gro. & Baking Co. v. Reeves, 210 Ark. 178, 194 S.W. 2d 876 (1946). That holding necessarily means that the jury must make separate awards of compensatory damages and punitive damages, else it becomes impossible for a court to say whether the award of punitive damages is supported by the essential companion award of compensatory damages. That impossibility of review is presented here; so we cannot sustain the verdicts on the theory that they include punitive damages. Moreover, we cannot offer the appellee the option of a remittitur, for it is possible that the jury arrived at its verdicts by awarding punitive damages only. Hence we can correct the error only by ordering a new trial.

Reversed and remanded.

We agree. Harris, C.J., and Hickman and Howard, JJ.