text:
    SEXTON LAW FIRM, P.A., and Sam Sexton, Jr. v. Phillip J. MILLIGAN
    97-52
    948 S.W.2d 388
    Supreme Court of Arkansas
    Opinion delivered June 30, 1997

      Matthew Horan, for appellants.

      John Everett, for appellee.
   Robert L. Brown, Justice.

Appellants Sexton Law Firm, P.A., and Sam Sexton, Jr. (Sexton), appeal a judgment in favor of appellee Phillip J. Milligan on Sexton’s claim of breach of contract, claiming error by the trial court in excluding certain evidence. Sexton further claims that the trial court erred in directing a verdict in favor of Milligan on his claims of fraud and breach of fiduciary duty. We agree that the trial court erred in excluding evidence of the Firm Handbook as well as evidence of the arrangements with other attorneys associated with the Sexton Law Firm. We further agree that the trial court erred in directing a verdict on the fraud and breach-of-fiduciary-duty counts. We reverse the trial court on these points and remand the matter for further proceedings.

This litigation arose out of the arrangement struck between Sexton and Milligan relating to Milligan’s practice of law between April 1, 1992, and November 1, 1995. Certain facets of that arrangement are not in dispute. Sexton was to provide Milligan with office space, utilities, telephone services, advertising, library facilities, stationery, clerical and secretarial services, and other expenses necessary to the practice of law. Milligan would receive 50 percent of all attorney fees generated by cases assigned to him minus expenses incurred in the preparation and trial of such cases. For cases that were either dismissed or unsuccessfully tried, Milligan and Sexton would equally divide the costs incurred during representation. Milligan would be assigned cases based on a rotation system set up by Sexton for all attorneys working at the law firm with similar arrangements.

On Saturday night, November 1, 1995, Sam Sexton was advised that Milligan was loading case files from the law firm into his Ford Explorer. Sexton called Milligan and was assured that he was merely moving closed files that were taking up space in his office to storage. The following Monday Sexton learned that Milligan had cleared out his office and had removed multiple closed and open case files from the law firm premises. Milligan does not deny taking the files but has contended throughout that the clients involved were his clients — not Sexton’s.

On February 27, 1996, Sam Sexton and the professional association of which he was sole shareholder filed an amended complaint against Milligan and alleged that Milligan, an independent contractor, had breached his agreement with the law firm. Sexton further alleged that commencing in February 1995, Milligan devised a scheme where Sexton would incur substantial expense for the preparation of certain cases assigned to Milligan only to have Milligan leave and open his own law firm with the intent to keep all fees generated. Sexton sought an accounting for moneys owed and injunctive relief to prevent the destruction of files taken and to require their return based on claims of breach of fiduciary duty and interference with contractual relations. He also asserted a claim for fraud and deceit and asked for both compensatory and punitive damages.

Milligan answered and admitted that he entered into an oral contract with Sexton that established his relationship as an independent contractor. He denied that the agreement encompassed the terms of the law firm’s handbook on procedure (“Firm Handbook”). He asserted that his relationship with the law firm was one of independent contractor and that he had formed a professional association known as “Phillip J. Milligan, Inc.”

Sexton moved for a jury trial on the fraud count. He urged that the chancery court decide the issues of equitable relief (the accounting and the restraining order) but empanel a jury and accept its recommendation for the claims for compensatory and punitive damages. Both sides agreed to this, and the trial court approved submission of the breach of fiduciary duty and fraud counts for a binding verdict. Sexton then filed a second amended complaint that added a claim for breach of contract, which was also agreed to be submitted to the jury.

At trial, Milligan was called by Sexton as a witness and testified about his arrangement with Sexton, as already described. He testified that this arrangement remained the same throughout his experience with Sexton, and that the agreement was the same as that for the other attorneys who were with the firm when he joined. Because Milligan was new to the practice of law and had yet to achieve a client base, part of the agreement included a six-month probationary period, where Sexton agreed to advance Milligan $2,000 per month for living expenses. According to Milligan, the agreement was waived after three months because 50 percent of the fees he had generated at that time exceeded the $2,000 per month advance. He testified that he received assistance from members of the firm on cases and offered assistance to other attorneys in return. He testified about occasional meetings of attorneys headed by Sexton for the discussion of cases and admitted that on at least one occasion attorneys were required to submit a memorandum on the number of open cases and possible fees to be recovered. He testified about several forms used in the firm and particularly about the attorney-client form, which listed individual attorneys like Milligan as well as “Sexton Law Firm, P.A.”

Three case files taken by Milligan were focal points in this litigation. First, there was the Watson case. Milligan testified that he met John Watson on March 1, 1993, in the firm’s offices and represented him on an IRS matter. During the course of this representation, Watson and his wife were involved in an automobile accident and suffered serious physical injury. Milligan testified that, per Watson’s request, he entered into an attorney-client agreement naming himself individually as the attorney on the personal-injury claim and reduced his contingency fee from 33 1/3 percent, which was the customary amount at the Sexton Law Firm, to 25 percent. He admitted that he did not inform Sexton that he signed the attorney-client agreement in his individual name because he did not believe it was necessary to do so. Milligan testified that, at the time he entered into the agreement, he was still bound to share 50 percent of his fees with the Sexton Law Firm. He testified, however, that if his client received a recovery after he left the firm, the law firm had no claim to a share of his fees. Milligan admitted that he started making plans to leave the Sexton Law Firm in the late summer or early fall of 1995. He settled the Watson case in July 1996 for $1,314,000.

Milligan also discussed the Mary Jane Wood case, which was assigned to him by Sexton after the departure of another attorney from the law firm. He admitted that on September 19, 1995, while he was still associated with the firm, he caused a letter to be sent to opposing counsel offering a settlement for $150,000 that was written on the letterhead of “Milligan Law Offices.” That letterhead contained the address of a Fort Smith post-office box. On October 5, 1995, Milligan sent a letter recognizing a $140,000 settlement of the case, which stated: “PLEASE TAKE NOTE OF MY NEW ADDRESS AND FIRM NAME.” Subsequently, the settlement payment was sent to Milligan’s post-office box address. Both the September 19 and October 5, 1995 letters were prepared by a secretary provided by the Sexton Law Firm, with the use of firm stationery and postage. Milligan agreed that the Mary Jane Wood settlement sheet, dated November 9, 1995, reflected that he received attorney fees in the amount of $46,666.20 but disagreed that the Sexton Law Firm had any entitlement to 50 percent of that amount. The funds from the settlement were distributed eight days after his departure from the firm.

Milligan settled another case involving Bonnie Scandrett. Using his personal letterhead, a settlement was effected during his association with the Sexton Law Firm. The Scandrett settlement sheet, dated November 15, 1995, reflected an attorney fee of $18,750. Milligan acknowledged that the Sexton Law Firm paid some of the expenses associated with the case but admitted that none of these funds were paid to the law firm. Milligan admitted that the settlements from the Mary Jane Wood and Scandrett cases allowed him to spend approximately $30,000 in expenses associated with the Watson case.

Milligan testified that he departed from the Sexton Law Firm at approximately 10:00 p.m. on Saturday night, November 1, 1995, with the files and told Sam Sexton that he was moving closed files. He did not inform Sexton at that time that he was leaving the firm. Eventually, Milligan removed all of his files and ordered his secretary to download associated information from the firm’s computer onto floppy disks.

On cross-examination by his own counsel, Milligan stated that he believed his status with the Sexton Law Firm to have been that of an independent contractor. He pointed to the allegations in Sexton’s own complaint and to the fact that Sexton treated him as an independent contractor for income-tax purposes. He denied that his oral contract was governed by the Firm Handbook but admitted that other attorneys, who joined the firm after he did, signed a written contract and were likely subject to the handbook’s provisions.

Milligan also believed that Sexton was not performing pursuant to contractual obligations. At the time he left the firm, he had only been reimbursed for $800 of the $2,000 worth of expenses he had incurred during his work on the Watson case. He also explained that he was not receiving his equal share of cases under the firm’s rotation system.

He testified that although he received the Mary Jane Wood case from an attorney in the firm, he was the attorney responsible for effecting the settlement. As to the Scandrett case, he stated that he was the only attorney who worked on the file. With respect to the Watson case, he explained that the bulk of the work performed which resulted in the settlement occurred after his departure. He testified that in the months leading up to the July 1996 settlement, he devoted 50 to 75 percent of his private practice to the case.

Sam Sexton testified that Milligan joined the firm under the same conditions as did all other attorneys that he had associated with the law firm. Sexton testified that he regularly met with attorneys in the firm to review the status of open cases and that he established policies for attorneys to follow while associated with the firm. He testified that on April 9, 1993, he sent a 41-page memorandum, or handbook on procedure, to all attorneys and that Milligan acknowledged receipt of the Firm Handbook. Sexton also testified that he was not aware of unpaid expenses to Milligan because they were not properly requested pursuant to the firm’s billing system.

Sexton stated that he had no idea Milligan was leaving the law firm on Saturday night, November 1, 1995. When he spoke to Milligan that evening, Milligan told him that he was moving a number of closed files to storage because they were taking up space in his office. Sexton then learned the following Monday that Milligan had cleared out his entire office and left with over 260 closed and 69 open files. He testified that he relied on Milligan's representation that he was not absconding with the files and said he suffered because he was unable to take an inventory of the files before Milligan’s departure. He testified that he would have prevented Milligan from taking the files of long-standing clients and that he would have retained certain files as evidence had he known that Milligan had already effected settlements without intending to share 50 percent of the fees received.

Sexton stated that he had two meetings with Milligan during the week following his departure. He further stated that he presented Milligan that week with three separate audits of funds Milligan owed the firm for expenses incurred during litigation. The first audit represented a sum due in the amount of $30,432.26; the second reflected $23,902.11; and the third was for the sum of $22,258.12. Sexton testified that repayment of the expenses was due at that time, rather than at the time the cases were ultimately settled, because the firm was not going to finance him at his new location. Sexton asserted that he made no demand for fees received from the Mary Jane Wood and Scandrett cases, again because he did not know that they had already been settled from his office.

Sexton testified that Milligan owed the firm $198,332 in fees collected on open files that Milligan eventually settled, including fees on the Mary Jane Wood, Scandrett, and Watson cases. He further stated that Milligan owed $18,129.29 for expenses on cases that he had taken with him and for cases that he had lost while he was at the firm. After Sexton’s case-in-chief, Milligan moved for a directed verdict on the claim for breach of fiduciary duty and on the fraud count. The trial court granted both motions.

The jury returned a verdict for Milligan on the contract claim, and judgment was entered accordingly.

I. Contract Claim

Sexton raises several points for reversal, but we first address his claim that the trial court erred in excluding the Firm Handbook. At trial, Sam Sexton testified at length about the agreement he struck with Milligan and how Milligan’s conduct, as well as the conduct of all attorneys at the firm, was to be governed in part by the Firm Handbook. He specifically testified that on April 9, 1993, he circulated the handbook to all attorneys in the firm and testified that Milligan acknowledged its receipt. The trial court excluded the handbook because Milligan did not specifically testify that his agreement was subject to change by a handbook and because the change by the handbook was not supported by consideration.

The case of Crain Industries, Inc. v. Cass, 305 Ark. 566, 810 S.W.2d 910 (1991), is instructive on this point. In that case, this court cited with approval the following language from the Supreme Court of Minnesota’s decision in Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn. 1983):

If the handbook language [is sufficiently definite to constitute] an offer, and the offer has been communicated by dissemination of the handbook to the employee, the next question is whether there has been an acceptance of the offer and consideration furnished for its enforceability. In the case of unilateral contracts for employment, where an at-will employee retains employment with knowledge of new or changed conditions, the new or changed conditions may become a contractual obligation. In this manner, an original employment contract may be modified or replaced by a subsequent unilateral contract. The employee’s retention of employment constitutes acceptance of the offer of a unilateral contract; by continuing to stay on the job, although free to leave, the employee supplies the necessary consideration for the offer. [Footnotes omitted.]

Crain Industries v. Cass, Inc., 305 Ark. at 573, 810 S.W.2d at 914. See also Childs v. Adams, 322 Ark. 424, 909 S.W.2d 641 (1995) (a party’s manifestation of assent to a contract is judged objectively and may be proved by circumstantial evidence).

We conclude that in the present case Sexton laid a foundation that Milligan, whether deemed an employee or independent contractor, received the handbook in April 1993 and remained on the job and continued to retain the benefits of his association with the law firm until November 1, 1995. Using the rationale of our holding in Crain Industries, Inc. v. Cass, supra, we hold that the trial court erred in excluding the handbook from evidence and that Sexton is entitled to a new trial on the breach-of-contract claim.

Also at trial, Sexton attempted to introduce the testimony of former and present attorneys at the Sexton Law Firm regarding their agreements with the law firm. The point was to establish that these attorneys were required to remit 50 percent of the fees they achieved from open files that they took with them, as Milligan was also required to do. At one point during trial, Milligan admitted that he had the same arrangement with Sexton as did those attorneys who were at the law firm when he joined.

Milligan correctly contends that Morrow v. McCaa Chevrolet Co., 231 Ark. 497, 330 S.W.2d 722 (1960), stands for the proposition that a trial court may act within its discretion in excluding cumulative evidence. See also Hicks v. State, 327 Ark. 727, 940 S.W.2d 855 (1997); Elk Corp. of Arkansas v. Jackson, 291 Ark. 448, 725 S.W.2d 829 (1987), reh’g denied, 291 Ark. 458-A, 727 S.W.2d 856 (1987). Nevertheless, in this case, the testimony of the other attorneys would have been highly probative of Milligan’s agreement with Sexton; without the testimony, the jury was left to determine only whether to believe the testimony of Sexton or Milligan. We fail to agree that the testimony would have been merely cumulative. Cf. Childs v. Motor Wheel Corp., 164 Ark. 149, 261 S.W. 28 (1924) (reversing trial court’s decision to exclude the terms of a written contract to prove the terms of a subsequent oral contract embodying the same agreement). We conclude that the attorney contracts were admissible and that the trial court abused its discretion in excluding them.

II. Breach of Fiduciary Duty and Fraud

Sexton also claims that the trial court erred in directing a verdict on his counts for breach of fiduciary duty and fraud.

In reviewing an order granting a motion for directed verdict, this court views the evidence in the light most favorable to the party against whom the verdict was directed. Lakeview Country Club, Inc. v. Superior Prods., 325 Ark. 218, 926 S.W.2d 428 (1996); Higgins v. General Motors Corp., 287 Ark. 390, 699 S.W.2d 741 (1985). If any substantial evidence exists that tends to establish an issue in favor of that party, it is error for the trial court to grant the motion for directed verdict. Lakeview Country Club, Inc. v. Superior Prods., supra.

When the trial court granted a directed verdict on Sexton’s claim for breach of fiduciary duty, it stated as follows:

Well, there [have] been allegations of a breach of a fiduciary duty. And I’ve explained to both of you my feelings on that. Certainly both parties owed a fiduciary duty to each other. And they owed fiduciary [duties] to their clients. I don’t see, though, a separate cause of action for breach of fiduciary duty for this reason. If, in fact, Mr. Milligan did breach his contract, then that included breaching fiduciary duty, I think, to the Sexton Law Firm. (Emphasis added.)

The trial court apparently ruled that Milligan owed a fiduciary duty to Sexton, and we have held that that determination is a matter of law. See Long v. Lampton, 324 Ark. 511, 922 S.W.2d 692 (1996). The court’s ruling was not challenged by Milligan on cross-appeal. Accordingly, we do not decide the issue of whether a fiduciary duty was owed by Milligan under these circumstances but accept the unchallenged ruling of the trial court for purposes of this discussion.

After deciding that a fiduciary duty was owed, the trial court went forward and refused to submit the claim to the jury on the basis that the claim for breach of fiduciary duty was included within Sexton’s claim for breach of contract. This was error. First, Sexton was entitled to have the two claims of breach of contract and breach of fiduciary duty considered by the jury if both were supported by substantial evidence. While the doctrine of election of remedies bars more than one recovery on inconsistent remedies, the doctrine does not limit the number of causes of action asserted by a plaintiff to be submitted to the jury. Cater v. Cater, 311 Ark. 627, 846 S.W.2d 173 (1993); Westark Specialties v. Stauffer Family Ltd., 310 Ark. 225, 836 S.W.2d 354 (1992).

Additionally, claims for breach of fiduciary duty and breach of contract are not identical causes of action. A person may be liable for breach of contract if the complaining party can prove the existence of an agreement, breach of the agreement, and resulting damages. See Rabalaias v. Barnett, 284 Ark. 527, 683 S.W.2d 919 (1985). But a person standing in a fiduciary relationship may be held hable for any conduct that breaches a duty imposed by the fiduciary relationship. Long v. Lampton, supra. It follows that, regardless of the express terms of an agreement, a fiduciary may be held liable for conduct that does not meet the requisite standards of fair dealing, good faith, honesty, and loyalty. See Berry v, Saline Memorial Hosp., 322 Ark. 182, 907 S.W.2d 736 (1995); Texas Oil & Gas Corp. v. Hawkins Oil & Gas, Inc., 282 Ark. 268, 668 S.W.2d 16 (1984); Yahraus v. Continental Oil Co., 218 Ark. 872, 239 S.W.2d 594 (1951). The guiding principle of the fiduciary relationship is that self-dealing, absent the consent of the other party to the relationship, is stricdy proscribed. See Hosey v. Burgess, 319 Ark. 183, 890 S.W.2d 262 (1995).

Sexton testified that Milligan engaged in self-dealing to the law firm’s detriment. Sexton further testified that without knowledge and consent, Milligan used firm resources to achieve settlements and attorney fees in the Mary Jane Wood and Scandrett cases. According to Sexton, these fees then provided Milligan with the resources to finance a settlement in the Watson case, which resulted in substantial legal fees to the exclusion of the Sexton Law Firm. The evidence is buttressed by proof that Milligan misrepresented the removal of open and closed files to Sexton on the night of Saturday, November 1, 1995. Under these unique circumstances, and, again, without deciding the issue of whether a fiduciary duty was owed by Milligan to Sexton, we hold that the trial court erred in granting Milligan’s motion for directed verdict on Sexton’s claim for breach of fiduciary duty.

The trial court also granted a directed verdict on the fraud count because clients have “an absolute right to pick the lawyer they want, and an absolute right to get their material.” Unquestionably, the client owns his file. However, as this case makes clear, attorneys have an interest in files in connection with potential fees, and Sexton claims that Milligan defrauded him of his share of those fees. Particularly, Sexton claims that Milligan, as part of a larger scheme, intentionally misrepresented to him on the night of November 1, 1995, that he was taking files to storage as opposed to relocating them to his new practice. Sexton contends that the truth would have caused him to take action to prevent settlement checks on the Mary Jane Wood and Scandrett cases from being sent to Milligan’s address. Essentially, Sexton asserts that Milligan’s misconduct eliminated the possibility that he could stop the resulting damage.

Under Arkansas law, the following elements must be established by a preponderance of the evidence in order to establish a claim for fraud: (1) a false representation, usually of material fact; (2) knowledge or belief by the defendant that the representation is false; (3) intent to induce reliance on the part of the plaintiff; (4) justifiable reliance by the plaintiff; and (5) resulting damage to the plaintiff. Calandro v. Parkerson, 327 Ark. 131, 936 S.W.2d 755 (1997); Clark v. Ridgeway, 323 Ark. 378, 914 S.W.2d 745 (1996).

Viewing the evidence in the light most favorable to Sexton, as we must do, Sexton had acquired a 50 percent interest in any attorney fees acquired from the open files taken by Milligan. Sexton testified that on November 1, 1995, Milligan misrepresented his actions with the intent that they be relied upon by Sexton for the purpose of acquiring a 100 percent interest in attorney fees that would soon thereafter be achieved. Sexton further testified that he relied on that misrepresentation and was severely damaged. We conclude that there was substantial evidence that Milligan’s conduct was the type of misfeasance that constituted fraud and that the issue should have gone to the jury. See Westark Specialties v. Stouffer Family Ltd., 310 Ark. 225, 836 S.W.2d 354 (1992); L.L. Cole & Sons, Inc. v. Hickman, 282 Ark. 6, 665 S.W.2d 278 (1984).

III. Remaining Issues

Because we remand this matter for further proceedings, we will address two issues likely to arise on retrial.

a. Customs and Practices of the Legal Profession.

Prior to trial, Milligan moved in limine to preclude Sexton from introducing the testimony of Howard Brill, a professor at the University of Arkansas School of Law, on the ground that the application of the Model Rules of Professional Conduct had no relevance to the litigation. At trial, Sexton attempted to elicit testimony from Brill on what is customarily done in the legal profession by an attorney when he plans to leave a law firm. The trial court excluded Brill’s testimony for the reason that custom and usage was simply not relevant and stated that it believed you could find law firms that had agreements “both ways.”

The trial court was correct. In this case, there were two interpretations of the agreement between Milligan and Sexton. Milligan asserted that he was absolutely not required to share fees that were received after his departure from the firm, while Sexton contended that Milligan did, in fact, bind himself to the payment of such fees. According to Sexton himself, the contract was neither ambiguous nor silent on the relevant terms. The decision of whether to allow expert testimony is a matter within the trial court’s discretion, and the trial court will not be reversed absent an abuse of that discretion. Williams v. Ingram. 320 Ark. 615, 899 S.W.2d 454 (1995); Sims v. Safeway Trails, Inc., 297 Ark. 588, 764 S.W.2d 427 (1989). What is customary or usual within the legal profession has no bearing when the parties are at loggerheads over whether Milligan had agreed to pay 50 percent of fees after leaving the firm. The trial court correctly excluded the testimony of Professor Brill.

b. Evidence of Expense Audits.

The record reflects that before trial, Sexton moved in limine to preclude evidence of the three expense audits or accountings issued to Milligan during the week following his departure in the amounts of $30,432.26, $23,902.11, and $22,258.12, respectively. Sexton characterized this correspondence as having occurred during the course of settlement negotiations and sought their exclusion based on considerations of relevancy.

Rule 408 of the Arkansas Rules of Evidence provides:

Evidence of (1) furnishing, offering, or promising to furnish ... a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for, invalidity of, or amount of the claim or any other claim. Evidence of conduct or statements made in compromise negotiations is likewise not admissible. This rule does not require exclusion if the evidence is offered for another purpose, such as proving bias or prejudice of a witness, negativing a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution.

Id. The first question becomes whether Sam Sexton by sending the expense audits was “furnishing, offering, or promising to furnish ... a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount[.]”

This court has made it clear that Rule 408 does not provide a blanket protection against the admission of all evidence concerning offers of compromise. For example, the rule does not prohibit evidence when it is offered for reasons other than proving “liability for, invalidity of, or amount of the claim or any other claim.” Ozark Auto Transp., Inc. v. Starkey, 321 Ark. 227, 234, 937 S.W.2d 175, 178 (1997), quoting McKenzie v. Tom Gibson Ford, Inc., 295 Ark. 326, 332-33, 749 S.W.2d 653, 657 (1988). The decision on whether the probative value of admitting the correspondence is substantially outweighed by its prejudicial effect is left to the sound discretion of the trial court, and absent a manifest abuse of that discretion, the trial court’s decision will not be disturbed. Ozark Auto Transp., Inc. v. Starkey, supra; Swindle v. Lumbermens Mut. Cas. Co., 315 Ark. 415, 869 S.W.2d 681 (1993); McKenzie v. Tom Gibson Ford, Inc., supra.

Milligan asserts that the trial court properly admitted the correspondence because it was relevant to Sam Sexton’s credibility because he made no demand at that time for 50 percent of the attorney fees Milligan was to receive from files he took. We hold that Milligan’s contention presents another purpose under Rule 408 for admitting the expense audits into evidence. There was no abuse of discretion by the trial court in receiving them.

Reversed and remanded.


source: Caselaw Access Project

author: Ray Thornton, Justice. Robert L. Brown, Justice, Tom Glaze, Justice,

license: Public Domain

text:
    ACW, INC.; Phillips Development Corporation; and United Wholesale Florists, Inc., On Behalf of Themselves and All Others Similarly Situated v. Richard WEISS, Director of Department of Finance & Administration, and John Theis
    96-894
    947 S.W.2d 770
    Supreme Court of Arkansas
    Opinion delivered June 30, 1997
    [Appellants’ petition for rehearing denied September 11, 1997; appellees’ petition for rehearing denied September 11, 1997.]

      Timothy Davis Fox, Richard E. Holiman, and Gregory M. Hopkins, for appellants.

      Beth Briscoe Carson, Chief Counsel, for appellees Richard A. Weiss and John H. Theis.

       Glaze, J., would grant.

   Ray Thornton, Justice.

Appellants are the named plaintiffs in a certified class of approximately 3,100 corporations seeking a refund of corporate income taxes levied by Act 1052 of 1991. Each of the named plaintiffs, ACW, Inc.; Phillips Development Corporation; and United Wholesale Florists, Inc., filed Arkansas state income-tax returns reporting Arkansas net taxable income in excess of $100,000. Each paid corporate income tax at the flat rate of 6V2% on their entire net income. After seeking refunds individually, the named plaintiffs filed a verified claim for repayment of overpayment of taxes on their first $100,000 of net taxable income, on behalf of themselves and others similarly situated. They contended that the proper assessment would be a graduated rate on the first $100,000, as is applied to corporations with net taxable income of $100,000 or less.

After exhausting their administrative remedies, appellants filed a complaint in chancery court, which alleged: (1) Act 1052 violates the provisions of Ark. Const, art. V, § 38; (2) the Act requires application of graduated rates on the first $100,000 of income, or in the alternative, that it is ambiguous; (3) if the Act unambiguously levies a 6lh% flat rate on the first $100,000 of income, it violates equal protection; (4) the Act results in a confiscatory tax. They requested class certification pursuant to Ark. R. Civ. P. 23 and Ark. Const, art. XVI, § 13, and asked for refunds, injunctive relief, and the establishment of a common fund.

The trial court granted class certification, but affirmed the decision of the Commissioner imposing the flat rate and denied the requested relief. It found that the Act was subject to the provisions of Ark. Const, art. V, § 38, which requires that the passage of the Act be a response to an emergency allowing the imposition of such a tax by a three-fourths vote of each House of the General Assembly, and that an emergency had been stated. Regarding the ambiguity argument, the trial court acknowledged that the language of the statute could be read to reach three divergent results, but concluded that the interpretation offered by appellees, the Department of Finance and Administration and the Commissioner of Revenues, should prevail. Finally, the court found that the statute did not violate equal protection.

On appeal, appellants contend that (1) there was not an emergency allowing the passage of the tax as provided by Ark. Const, art. V, § 38; (2) the statute is ambiguous and should be resolved in favor of the taxpayer; and (3) the Department’s interpretation of the Act results in a confiscatory tax and violates equal protection. We agree with the trial court’s finding that the requirements under the Arkansas Constitution for adoption of the statute had been met, and affirm on this point.

While we agree with the trial court’s finding that the statute could be read to reach divergent results, we disagree with its ruling that the Department’s interpretation should prevail; and we reverse on this point.

Finally, we consider appellees’ cross-appeal, contending that the doctrine of sovereign immunity invalidates the certification of a class of taxpayers seeking refunds in this case. On the basis of our recent decisions in State v. Tedder, 326 Ark. 495, 932 S.W.2d 755 (1996), and State v. Staton, 325 Ark. 341, 942 S.W.2d 804 (1996) (substituted opinion granting rehearing), we agree with appellees that no class certification should have been ordered, and reverse the certification.

The Existence of an Emergency

We first address the trial court’s determination of the existence of an emergency. Appellants argue that the tax imposed by Act 1052 of 1991 must fail because it was not a response to an emergency allowing passage of the tax by the votes of three-fourths of the members of each house of the General Assembly. We agree with the trial court that the emergency clause did state an emergency sufficient to meet the requirements of the Arkansas Constitution under art. V, § 38. Section 9 of Act 1052, the emergency clause of the Act, provided the following:

It is hereby found and determined by the General Assembly that additional funds are necessary to provide higher quality educational programs which are accessible by all segments of the population in the state; that recent studies have shown that in the year 2000, workers must have a minimum of fourteen (14) years of education to function in the work force; that the state is in desperate need of training, retraining and upgrading the work force; that this act will provide the funding necessary to provide every citizen with an opportunity to participate in vocational-technical training or college transfer programs; and that it is necessary for this act to become effective immediately to provide the funding needed for these programs as soon as possible. Therefore, an emergency is hereby declared to exist and this act being necessary for the immediate preservation of the public peace, health, and safety shall be in full force and effect from and after its passage and approval.

For a thorough understanding of the provisions and requirements of Ark. Const, art. V, § 38, a brief review of its historical background is required. At the time the article was adopted as Amendment 19 in 1933, Arkansas was in the throes of financial emergency. More than 165 million dollars of highway and road improvement bonds were in default, and checks drawn on the state treasury were nearly worthless. The regular session of the General Assembly of 1933 cut state spending in half, established a sinking fund to pay off checks, and proposed a constitutional amendment limiting the issuance of bonds or other evidence of indebtedness. That amendment, together with Amendment 19, were proposed by the legislature, and adopted by overwhelming majorities at the general election on November 6, 1934.

Among its other provisions, and with a notable exception for paying the just debts of the state, Confederate pensions, and expenditures for educational and highway purposes, Amendment 19 prohibited expenditures exceeding, two and one-half million dollars during any biennial period “unless approved by the votes of three-fourths of the members elected to each House of the General Assembly.”

Amendment 19 also provided that:

None of the rates for property, excise, privilege or personal taxes, now levied shall be increased by the General Assembly except after the approval of the qualified electors voting thereon at an election, or in case of emergency, by the votes of three-fourths of the members elected to each House of the General Assembly.

We observe that this amendment does not require either an emergency or an extraordinary vote to adopt new classes of taxes. The limitations of the amendment apply only to increased rates for property, excise, privilege, or personal taxes in existence at the time the amendment was adopted. Other taxes, such as sales and use taxes, or other means of increasing revenues, such as the repeal of deductions applicable to the computation of tax liabilities on income taxes, may be adopted without any declaration of emergency, and without an extraordinary majority vote. For example, while we have decided that higher rates of income taxes are included in the class of taxes requiring an extraordinary three-fourths majority for adoption under Amendment 19, Hardin v. Fort Smith Couch & Bedding Co., 202 Ark. 814, 152 S.W.2d 1015 (1941), we have also determined that a three-fourths vote is not necessary to repeal a deduction or. an exemption from federal taxes used in computing state income taxes, Morley v. Remmel, 215 Ark. 434, 221 S.W.2d 51 (1949).

The selective targeting of certain specific classes of tax increases by Amendment 19 may perhaps express a preference for other means of raising revenues, but does not establish a public policy opposed to raising revenues for significant and appropriate public purposes, such as education, highways, and the payment of public debts. To the contrary, the public policy of our state clearly favors sustaining public schools and defraying necessary expenses of government. For example, as long ago as 1927, we held that the maintenance of institutions of higher education was a necessary expense of government that did not require an extraordinary majority vote from both houses of the General Assembly. Hudson v. Higgins, 175 Ark 585, 299 S.W. 1000 (1927).

In a long fine of cases interpreting emergency clauses adopted in accordance with Amendment 7’s provision on initiative and referendum matters, we have given great deference to legislative determination whether an emergency exists. Such emergency clauses must state not only a grave problem, but because the effect of the clause is to allow an act to become effective upon passage, there must also be a showing of a need to promptly begin a response to the circumstances that have generated the emergency. However, it is not essential that the emergency be suddenly discovered or that the remedy be immediately effective. In Priest v. Polk, 322 Ark. 673, 912 S.W.2d 902 (1995), we pointed out that the revision of our state’s Constitution was properly described as an emergency, even though the problems were not recently discovered, and the remedies would not bring immediate results. The following reasoning articulated by U.S. District Court of Oregon in Daugherty Lumber Co. v. United States, 141 F.Supp. 576 (1956), is useful for our consideration:

Legislative emergencies are those situations where the common good or public interest is legislatively declared to be paramount to individual interests. Common knowledge tells us that legislative action effective immediately, has on legion occasions been adopted to correct an adverse public interest of long standing.

Id. at 581.

Emergency legislation is enacted for the purpose of alleviating grave conditions. Norman J. Singer, Sutherland Statutory Construction § 71.06, at 282. If legislation shows a remedial purpose, it will be given generous construction. Id. As another court stated, the facts must show a necessity for immediate action. Osage Outdoor Advertising v. State Highway Comm’n, 687 S.W.2d 566 (Mo. App. 1984).

Statutes are presumed constitutional, and the burden of proving otherwise is upon the challenger of the statute. Ports Petroleum Co. v. Tucker, 323 Ark. 680, 916 S.W.2d 749 (1996). Here appellants bear the burden of proving that there was no emergency.

We recognize that it may require many years of inadequate support of education before there is a legislative realization of an emergency that has resulted from the economic and societal impact of that inadequate education. We also observe that educational problems cannot be corrected immediately. As expressed by the emergency clause in Act 1052, the goal is to provide access to all segments of the population so that fourteen years of education is available by the year 2000. We note that the length of time required to address the problem is in itself a strong and rational basis for getting started toward a solution.

In light of the history of Ark. Const, art. V, § 38, and the expressed public policy of our state, we hold that an emergency existed, enabling the General Assembly to pass the Act by the extraordinary vote of three-fourths of the entire membership of each house of the General Assembly.

We have also considered appellants’ argument that the measure must fail because 3% of the revenues will be allocated to the Constitutional Officers Fund and the State Central Services Fund. The application of revenues to be derived from this tax is subject to review and legislative action during the years in which the revenues are realized. Some overhead costs can be expected, and as pointed out by the trial court, once the threshold question of the existence of an emergency is resolved, the trial court lacked the authority to substitute its priorities for those expressed in the statute.

Finally, it should be emphasized that the adoption of an emergency clause does not deprive the people of their rights to refer any measure to a popular vote. Jumper v. McCollum, 179 Ark. 837, 18 S.W.2d 359 (1929).

Statutory Interpretation

Appellants next urge that even if the passage of Act 1052 met the requirements of art. V, § 38, its application by appellees either reflects a misinterpretation of the language of the Act, or in the alternative, results in an unconstitutional levy of a confiscatory tax, as well as the imposition of arbitrarily unequal taxation in violation of state and federal equal protection guarantees.

Each appellant filed Arkansas state income-tax returns reporting Arkansas net taxable-income tax in the excess of $100,000.00 per year. Each paid corporate income tax at the flat rate on their entire net income. Each sought refunds, contending that the correct tax liability should be based on a graduated tax rate of 1% up to 6% on the first $100,000.00 of net income, identical with that applied to corporations having a net income of $100,000.00 or less; and that the final bracket of 6V2% should apply, “on net income exceeding $100,000.00. . . .” Appellees contend that the statute creates two distinct classes of taxpayers, those making $100,000.00 or less, and those making $100,000.50 or more, and that those in the second group are required to pay more taxes on their first $100,000.00 of income than required of those in the first group.

Act 1052 of 1991, codified at Ark. Code Ann. § 26-51-205 (Repl. 1992), provides as follows:

(a) Every corporation organized under the laws of this state shall pay annually an income tax with respect to carrying on or doing business on the entire net income of the corporation,. . .received by the corporation during the income year, on the following basis:
(1) On the first $3,000 of net income or any part thereof............................................ 1%
On the second $3,000 net income or any part thereof .. 2%
On the next $5,000 of net income or any part thereof.. 3%
On the next $14,000 of net income or any part thereof. 5%
On the next $75,000 of net income or any part thereof, but not exceeding $100,000 ............................. 6%
(2) On net income exceeding $100,000, a flat rate of six and one-half (6V2 %) percent shall be applied to the entire net income.

Similar language in subsection (b) applies to foreign corporations.

We agree with the trial court’s statement that “the language set fourth in the subsection (a) (2) . . . when read in conjunction with sections (a)(1) . . . can be read to reach any of the three results set forth in the plaintiffs exhibit no. 35.”

There is absolutely no language in section (a)(1) to indicate that any corporation shall pay any tax on the first $100,000 of net income other than the graduated taxes provided by that section. To the contrary, the statute provides the following: “Every corporation. . .shall pay. . .on the following basis:” and then sets out the graduated schedule that clearly applies to all corporations. Without any reference to the clear and unambiguous schedule of (a)(1), the first phrase of the next sentence reads as follows: “(2) On the net income exceeding $100,000, a flat rate of . . . 6V2% shall be applied. . . .”

We note that until this point in the statute, the interpretation remains unambiguous, but the next five words render the statute ambiguous. Those words are “. . .to the entire net income.” We are next told by appellees that those words take precedence over the language of (a)(1) and repeal the graduated scale of taxes contained in that section, with the effect that the taxpayer is charged with a 6V2% tax applied “to the entire net income. ...” However, this interpretation becomes even more strained when the same words in the section dealing with foreign corporations must be interpreted as meaning something other than “the entire net income.”

We have determined that a statute is ambiguous where it is open to two or more constructions, or where it is of such obscure or doubtful meaning that reasonable minds might disagree or be uncertain as to its meaning. City of Little Rock v. Arkansas Corp. Comm’n, 209 Ark. 18, 189 S.W.2d 382 (1945). We hold that the statute before us is internally inconsistent and ambiguous.

When a statute is ambiguous, we must give effect to the legislative intent. Omega Tube & Conduit Corp. v. Maples, 312 Ark. 489, 850 S.W.2d 317 (1993). Therefore, our review now turns to an examination of the whole Act, reconciling provisions to make them consistent, harmonious, and sensible in an effort to give effect to every part. Id. at 493, 850 S.W.2d at 319. To determine legislative intent, this court looks to such appropriate matters as the legislative history, the language, and the subject matter involved. Id. at 495, 850 S.W.2d at 320. The manner in which a statute has been interpreted by executive and administrative officers may also be considered, and will not be disregarded unless clearly wrong. Id.

Following the adoption of Act 1052, the official Arkansas Legislative Tax Handbook prepared by the Legislative Council of the Arkansas General Assembly for the years 1992-93 and 1994 set out the corporate income taxes as enacted by the Act 1052, as follows:

On the first $3,000 of net income.................... 1%
On the second $3,000 of net income................. 2%
On the next $5,000 of net income................... 3%
On the next $14,000 of net income.................. 5%
On the next $75,000 of net income but not exceeding $100,000 .......................................... 6%
On all net income in excess of $100,000 .............. 6.5%

In a further reference to the effect of Act 1052 of 1991, the handbook contained the following: “ Act 1052 of 1991 — the 6.5% applies to the entire net income over $100,000.”

We note with interest that the 1991-1993 Official Biennial Budget of the State of Arkansas, prepared by the director of appellee, Department of Finance and Administration, as abstracted at page 9, contains the following summary on page 16: “ Act 1052 - Increases the corporate income tax on corporations with net income exceeding $100,000. The new tax is a flat 6.5% on the net taxable income that exceeds $100,000.”

The above official documents suggest that the legislative intent was to impose a flat tax of 61A% only on income in excess of $100,000. Notwithstanding these earlier interpretations of the Act, the Department finally decided that the 6V2% tax rate repealed the graduated schedule for the first $100,000 of net income and replaced it with the higher 6V2% levy. The result is that like the statute itself, the executive and administrative interpretations show that reasonable minds could differ and that the statute is clearly ambiguous.

We have often stated that a tax cannot be imposed except by express words indicating that purpose, and that any ambiguity or doubts must be resolved in favor of the taxpayer. Leathers v. Active Realty Inc., 317 Ark. 214, 876 S.W.2d 583 (1994). Based upon our review of the legislative intent and consistent with our own decisions relating to the interpretation of tax measures, we find that the statute imposes a graduated tax applying to all corporations for the first $100,000 of net income, and a flat tax of 6V2% on the entire net income above $100,000. The uniform application of tax rates on all corporations resolves the issues of confiscatory taxation and alleged violations of equal protection guarantees.

Class Certification

Appellees argue on cross-appeal that because there was no waiver of sovereign immunity, the chancellor lacked authority to certify the members of the class that did not file refund claims. We agree, and reverse the order granting class certification.

Our constitution prohibits suits against the state, Ark. Const, art. V, § 20; however, this sovereign immunity may be waived in certain limited circumstances. State v. Staton, 325 Ark. at 344, 942 S.W.2d at 805. The legislature allows a taxpayer to sue the state for an improperly collected tax only after that taxpayer has requested a refund and that request has been denied. Ark. Code Ann. § 26-18-507(e)(2)(A) (Repl. 1992). In State v. Tedder, 326 Ark. at 496, 932 S.W.2d at 756, we determined that only the taxpayer who has requested and has been denied a refund under this statutory provision has obtained a waiver of sovereign immunity. “A trial court acquires no jurisdiction where the suit is one against the State and there is no waiver of sovereign immunity.” State v. Staton, 325 Ark. at 344, 942 S.W.2d at 805.

In the instant case, only the named plaintiffs have followed the procedure outlined in Ark. Code Ann. § 26-18-507(e)(2)(A) by applying for a refund. Under our prior holdings, the named plaintiffs are the only persons for whom sovereign immunity has been waived. Therefore, the order granting class certification must be reversed.

Conclusion

In sum, we hold that Act 1052 of 1991 meets the requirements of art. V, § 38 of the Arkansas Constitution. We observe that its ambiguous language can be reconciled into a consistent, harmonious, and sensible interpretation that provides the same graduated tax rates upon the income of all corporations, both foreign and domestic. We hold that the statute, so interpreted, does not violate constitutional provisions of equal protection; and finally, we hold that the doctrine of sovereign immunity bars the certification of a class of taxpayers to seek refunds of taxes.

We affirm in part, and reverse and remand in part for further proceedings consistent with this opinion.

Newbern and Glaze, JJ., dissent.

Brown, J., dissents in part concurs in part.

Robert L. Brown, Justice,

concurring in part and dissenting in part. I agree with the majority’s opinion on direct appeal, but I would affirm the cross-appeal.

The court’s decision with respect to the cross-appeal gives the plaintiffs in this case a hollow victory and repeats the mistake that was made in the substituted opinion in State v. Staton, 325 Ark. 341, 942 S.W.2d 804 (1996). My dissent in that case foretold that this precedent would work to deny taxpayers who had been assessed an illegal tax the only viable remedy to reclaim those taxes. As an example, it is estimated in this case that individual corporations have $1,060 at risk in this litigation. It would be cost-prohibitive for a corporation to take on the expense of filing the administrative claim, and then upon denial of that claim, to pursue relief through the trial court and on appeal. The bottom fine is that the State has every motivation to take the most aggressive stance on a given tax statute, for it is now a virtual certainty that even the most extreme interpretation will reap the bounty of illegal tax revenue.

Our decision in Staton hinged on the notion that sovereign immunity protects the State from the consequences of its illegal actions and also on the porous premise that class actions will bankrupt the State. As I stated in my dissent in Staton, sovereign immunity was sufficiently waived by the General Assembly by its enactment of Ark. Code Ann. § 26-18-507 (Repl. 1992); hence, the voluntary payment rule is of no consequence in light of this refund statute. Moreover, the State will not be pushed toward bankruptcy with these class actions. Individual taxpayers still would have to prove their claims should the tax interpretation be decided in their favor.

A class action is the only practical way to remedy many illegal taxes like the one before the court today, because only the most civic-minded citizen would undertake the arduous burden of obtaining judicial relief when the recovery could only be nominal at best. The death of Pledger v. Bosnick, 306 Ark. 45, 811 S.W.2d 286 (1991), has left the taxpaying families and companies of this State subject- to the will of the Department of Finance and Administration without a remedy. I would permit the class action to proceed.

Tom Glaze, Justice,

dissenting. I must dissent. In my view, the majority decision is disturbing precedent and bodes trouble for Arkansas taxpayers. In short, I submit that Act 1052 of 1991 is unconstitutional because it was enacted contrary to Article 5, Section 38, of the Arkansas Constitution, as amended by Amendment 19.

First, it must be kept in mind that the Arkansas Constitution is a limitation upon and not a grant of power to the legislature. Erxleben v. Horton Printing Co., 283 Ark. 272, 675 S.W.2d 638 (1984). As previously mentioned, this court is called on to interpret Amendment 19, and in relevant simple terms, that provision prohibits the General Assembly from increasing personal taxes except after the voters approve the increase, or in case of emergency, the General Assembly approves the increase by a three-fourths vote.

Here, the voters have not approved an increase in personal taxes, so the issue is, did an emergency exist that would authorize the General Assembly under Amendment 19 to enact a measure by a three-fourths vote to increase such taxes? In determining what is meant by the hmiting language of Amendment 19, this court should look to the history and state of things existing when the constitution was framed and adopted. Glover v. Hot Springs Kennel Club, 230 Ark. 544, 323 S.W.2d 902 (1959); Lybrand v. Wafford, 174 Ark. 298, 296 S.W.2d 729 (1927). With this principle in mind, this court must look to the situation confronting the Arkansas people when they adopted Constitutional Amendment 19 in 1934, and when it does so, the conclusion is obvious — Arkansas and all states were fighting a depression. Unquestionably, Arkansas voters passed Amendment 19 to prohibit the increase in taxes except (1) when the people approved them, or (2) in emergencies, when the General Assembly enacted an increase by a three-fourths vote.

The majority opinion mistakenly relies on cases from other, jurisdictions that lend no light on Amendment 19’s history, but instead espouse general principles largely concerning statutory construction. Here, the reader must keep in mind that this court is asked to expound on the Arkansas Constitution.

The majority opinion also looks to Arkansas’s Initiative and Referendum Amendment 7 to define the meaning of emergency and in support cites to a plurality opinion, Priest v. Polk, 322 Ark. 673, 912 S.W.2d 902 (1995). However, this court’s decision in Burroughs v. Ingram, 319 Ark. 530, 893 S.W.2d 319 (1995), appears to be the prevailing law and, in Burroughs, this court held the word “emergency,” in its most accepted usage, means some sudden or unexpected happening that creates a need for immediate action.

Act 1052 reveals no “sudden or unexpected happening,” which required its passage by the General Assembly. To the contrary, § 9 of Act 1052 merely recites that the General Assembly studied the State’s higher quality education programs and its studies showed that, in the year 2000, workers will need more education and the State is in desperate need of training, retraining, and upgrading the work force. The Act further reads that the Act “will provide the funding necessary to provide every citizen with an opportunity to participate in vocational-technical training or college transfer programs, and that it is necessary for this Act to become effective immediately to provide the funding needed for these programs as soon as possible.”

In sum, while I am the first to concede that Act 1052’s objective is a lofty one, the fact remains that it cannot fairly or reasonably be said that the establishment of a program to train all citizens to function in the workplace by 2000 is a concept or goal that resulted from a “sudden” or “unexpected” event.

In conclusion, I must respond to the majority opinion’s final suggestion that this court’s holding that Act 1052 is an emergency measure does not deprive the people of their rights to refer any measure to a popular vote. First, I note the obvious that it is much too late now for citizens to refer Act 1052’s tax increase to the vote of the people. See Amendment 7 to the Arkansas Constitution. Second, and more important, the majority’s suggestion cryptically underscores that, under today’s decision, the Arkansas people now have the burden to remain watchful for tax-increase measures like Act 1052 in the future, and be organized, well-funded and otherwise prepared to initiate referendums on such measures.

It is difficult, if not impossible, for me to believe that, when the voters of Arkansas passed Amendment 19, they intended an emergency could be so easily declared so as to authorize the General Assembly to approve a tax increase without a vote of the people. Nor did they intend to establish a situation or procedure whereby Arkansas voters would be forced to refer tax-increase measures in order to ensure their right to vote on such taxes. The majority opinion’s interpretation of Amendment 19 and its term “emergencies” is much too broad, and in my view, is error.

For the above reasons, I would reverse and dismiss.

Newbern, J., joins this dissent.


author: Per Curiam.

text:
    Patricia Louise FINCH v. STATE of Arkansas
    CR 97-306
    947 S.W.2d 11
    Supreme Court of Arkansas
    Opinion delivered June 30, 1997

      Jim Clark Law Firm, by: Jim Clark, for appellant.
    No response.
   Per Curiam.

Appellant, Patricia Louise Finch, filed a motion to supplement the record in the above case. Appellant has filed a partial transcript, but seeks to supplement the record with affidavits of the deputy prosecuting attorney and appellant’s attorney. Appellant states that these affidavits show that a motion to exclude the attorney, whose assistance was at issue in the Rule 37 hearing, from court during appellant’s testimony was made in chambers; and appellant’s attorney concedes error in his affidavit regarding the failure to renew this motion for the record when the hearing began.

We remand the matter back to the trial court to settle the record in accordance with Ark. R. App. P. — Civ. 6(d), made applicable to criminal proceedings pursuant to Ark. R. App. P.— Crim. 5(a). West v. State, 322 Ark. 114, 907 S.W.2d 133 (1995) (per curiam). We direct that the record, as settled, be filed with this court’s clerk within thirty-five days.


author: Per. Curiam. Robert L. Brown, Justice,

text:
    Christine JONES v. Jerry A. JONES
    97-212
    947 S.W.2d 6
    Supreme Court of Arkansas
    Opinion delivered June 30, 1997

      McNutt Law Firm, by: Mona J. McNutt, for petitioner.

      Lueken Law Firm, by: Patty Lueken and Helen Rice Grinder, for respondent.
   Per. Curiam.

We have considered this custody case on four prior occasions before invoking Rule 11 of Appellate Procedure— Civil. See Jones v. Jones, 328 Ark. 684, 944 S.W.2d 121 (1997) (Jones V). In Jones v. Jones, 328 Ark. 97, 940 S.W.2d 881 (1997) (Jones IV), this court went into detail to clarify that it had substantively decided the parties’ custody issue in Jones v. Jones, 326 Ark. 481, 931 S.W.2d 767 (1996) (Jones I). Nonetheless, the actions taken by Dr. Jones and counsel reflect a refusal on their part to accept our earlier admonitions and decision that, if they continued to seek custody of the parties’ son, they should do so only by showing material changes in circumstances, since the last custody order entered on December 13, 1996. See Jones IV, 328 Ark. at 101. Instead, as late as April 23, 1997 and June 6, 1997, they have expressed an unwillingness to accept this court’s express decision in Jones IV that it had substantively ruled that custody of the parties’ son should be reinstated to Ms. Jones. In fact, in reviewing their response filed in this Rule 11 matter on June 6, 1997, Jones and his counsel continue their argument that the chancellor should have all evidence, both prior to and after December 13, 1996, when considering Dr. Jones’s most recent petition for custody now pending in the Faulkner County Chancery Court.

Dr. Jones’s and counsel’s Rule 11 response sets out three reasons for dismissing the court’s order to show cause:

(1) They believe they have sufficient facts for the trial court to find a change in circumstances since the initial trial in February of 1994, and will be amending Dr. Jones’s petition as soon as this (Rule 11) proceeding is completed.

(2) Since December of 1996 and the award of custody being given to Ms. Jones, the child’s physical and emotional status has deteriorated.

(3) They had relied on the concurring opinion in Jones IV in believing their continuing custody argument was not frivolous or without a legal basis.

The first point set out by Dr. Jones and counsel reflects, once more, that they intend, in future custody hearings, to introduce changes in circumstances that had occurred prior to December 13, 1996 —■ the date custody of the parties’ son was reinstated with Ms. Jones. Dr. Jones’s and his counsel’s second point also fails to support their Rule 11 dismissal request since, while a change in the child’s physical and emotional status may be relevant in a future custody proceeding, that factor in no way explains their prior actions of ignoring this court’s earlier decisions and directives. In fact, such information is not a part of this record and should not have been set out in the response filed in this matter.

Finally, Jones and his counsel attempt to establish a good-faith argument based upon the concurring opinion filed in Jones IV. Such an attempt is a not-so-artful, if not contemptuous, effort to evade the majority court’s decision. In this respect, we first point out that Jones and his counsel continue to rely on a reference in the Jones IV concurring opinion that this court in Jones I never reached the parties’ child’s emotional-needs issue when reinstating custody to Ms. Jones. In doing so, they ignore the language in Jones IV where this court specifically referred to and disagreed with the concurring opinion by stating, “the court thoroughly dealt with this child’s emotional-needs issue in its original opinion (Jones I) under the caption ‘Cameron’s emotional needs.’” In Jones IV, we further reiterated the following pertinent parts of our Jones I opinion showing this court decided the parties’ custody issue:

Simply put, this court held the chancellor was clearly wrong in ruling Dr. Jones had proven that a material change of circumstances existed, and a transfer in custody was warranted.
In deciding the (custody) modification question (which Dr. Jones filed after Jones IV and is presently pending), we emphasize that the chancellor should only consider facts arising since the last custody order (in Jones I), or evidence that has not been previously presented to the chancellor.

Although this court has plainly stated Dr. Jones is prohibited from using the same evidence presented in the Jones I trial in his future (now pending) custody modification proceedings against Ms. Jones, Dr. Jones and his counsel continue their efforts to do so, offering an argument void of legal citation, that three new justices, who joined the court after Jones I was decided, could not possibly know the basis for this court’s decision in Jones I. Dr. Jones’s and his counsel’s willful reluctance to follow the court’s earlier directives is best understood by a verbatim reading of their written argument to this court. That argument, as set out in Dr. Jones’s petition for rehearing in Jones IV, reads as follows:

A. The ruling in the March 7, 1997 per curiam order indicating that the emotional needs issue was decided on it merits, and not on procedural grounds, could not be accurately determined with the current court.
The Court erred in proclaiming that the November 22, 1996, mandate (Jones I) was decided on its merits, rather than on procedural grounds for three reasons. First, Justice Brown, who was a sitting Justice at the time that the Arkansas Supreme Court reinstated custody of the minor child to Ms. Jones (in Jones I) on November 22, 1996, indicated in his concurring opinion that the case was reversed and remanded on procedural grounds, not on its merits. At the time of the original hearing, Chief Justice Jesson, Associate Justice Roaf, and Associate Justice Dudley were sitting on the Court. When the Writ of Prohibition was decided, Chief Justice Jesson, who actually wrote the opinion, and Associate Justices Roaf and Dudley were no longer on the Court. At this time, it would be difficult to determine whether the November 22, 1996 Court (Jones I) reversed the trial court and the Arkansas Court of Appeals on procedural or substantive grounds as only four Justices that comprised the November 22, 1996 (Jones I) Court remain on the Supreme Court. Of those four, only three Justices were of the opinion that the case was reversed on substantive grounds. Three Justices do not comprise a majority the (Jones I) Court of November 22, 1996. Without the participation of Chief Justice Jesson and Associate Justices Roaf and Dudley, it would be impossible to know the basis for his or her ruling (in Jones I) on November 22, 1996.

In conclusion, we note, in fairness, Dr. Jones’s and his counsel’s response, which includes their apologies to the court, if the court believes respondents’ advocacy has “overstepped the line.” However, the issue here is whether respondents’ petitions and argument are frivolous and without reasonable or factual basis as described in Rule 11(a) and (b). Because respondents’ arguments made in Jones IV, and particularly in their response in Jones V, fail in this respect, we are compelled to impose sanctions.

Because we find Christine Jones has been unnecessarily compelled to seek relief in response to Dr. Jones’s and his counsel’s most recent petition and response filed in Jones IV and Jones V, we order them to pay Ms. Jones the costs of the last proceeding conducted before this court in the amount of $462.00, and award attorney’s fees to Ms. Jones in the amount of $1,500.00 to be paid each by Dr. Jones and counsel in the respective amounts of $500.00.

After we considered and decided this appellate Rule 11 matter, Christine Jones filed with this court a motion for sanctions, alleging that, on June 20, 1997, Dr. Jones and his counsel filed an amended petition for change of custody in the Faulkner County Chancery Court. Among other things, she asserts Dr. Jones’s pleadings continue to include allegations pertaining to the same “emotional needs” issue previously decided in Jones I. Ms. Jones submits that Dr. Jones’s present actions belie his apologies to this court and his representation that he intended no appearances of disrespect or disregard of this court’s authority or decisions. Ms. Jones’s allegations are ones that must be filed with and addressed by the trial court, which can impose sanctions, if any, under ARCP Rule 11. Under Rule 11 of Appellate Procedure— Civil, this court may consider sanctions regarding papers filed in this court, as we have just done in this cause. Thus, we dismiss Ms. Jones’s motion for sanctions.

Brown, J., concurs.

Robert L. Brown, Justice,

concurring. This per curiam represents a landmark opinion, and attorneys engaged in appellate practice would do well to take note. For the first time, we are sanctioning attorneys and their client for violation of the new Rule 11 of the Rules of Civil Appellate Procedure which became effective March 1, 1997. Our decision will affect all future petitions for rehearing, where the decision rendered by a majority is this clear and unmistakable.

Appellate Rule 11 provides in pertinent part:

The filing of a brief, motion or other paper in the Supreme Court or the Court of Appeals constitutes a certification of the party or attorney that, to the best of his knowledge, information and belief formed after reasonable inquiry, the document- is well grounded in fact; is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and is not filed for an improper purpose such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. A party or an- attorney who files a paper in violation of this rule, or party on whose behalf the paper is filed, is subject to a sanction in accordance with this rule.

Ark. R. App. P. — Civ. 11(a). The authority is clear — this court or the court of appeals may, upon its own motion or upon the motion of a party or attorney, impose sanctions based on appeals or proceedings initiated with no reasonable legal or factual basis. See Ark. R. App. P. — Civ. 11(b).

The purpose of a petition for rehearing is to call this court’s attention to specific errors of law or fact that the opinion is believed to contain. See Ark. S. Ct. R. 2-3(g). It is not for reargument, which this court has said time and again, and which our rule clearly states. Id. As the per curiam in the instant case points out, the pleading filed by Dr. Jones entitled “PETITION FOR REHEARING AND CLARIFICATION OF ORDER OF APRIL 7, 1997” reiterated almost entirely an argument put forth in my concurring opinion in Jones v. Jones, 328 Ark. 97, 940 S.W.2d 881 (1997)(Jones ÍF)(Brown, J., concurring). While I believe my concurrence to be correct, the approach advocated by me in the concurring opinion was given due consideration by the full court, and six justices joined the language of Jones IV, which held unequivocally that the issue concerning Cameron’s emotional needs was decided in Jones v. Jones, 326 Ark. 481, 931 S.W.2d 767 (1996) Jones I). The petition at issue did nothing more than repeat an argument that had been unmistakably rejected by a clear majority of this court.

With the advent of Rule 11 and this per curiam, attorneys must be wary of the trap of using a petition for rehearing to try to sway the court yet once more to the legitimacy of their position, even though a minority of the court’s members may agree with them. Such petitions that merely reiterate arguments that have been rejected by this court will run afoul of Rule 11.


author: W.HTDub” Arnold,

text:
    Carmen Anthony FLEETWOOD v. STATE of Arkansas
    97-210
    947 S.W.2d 387
    Supreme Court of Arkansas
    Opinion delivered July 7, 1997

      Robert T. Rogers, II, Carroll County Public Defender, for appellant.

      Winston Bryant, Att’y Gen., by: Kelly Terry, Asst. Att’y Gen., for appellee.
   W.HTDub” Arnold,

Chief Justice. Appellant, Carmen Anthony Fleetwood, appeals the order of the Carroll County Circuit Court denying transfer of his case to juvenile court. The interlocutory appeal is proper pursuant to Ark. Code Ann. § 9-27-318(h)(Supp. 1995). Jurisdiction is properly in this Court pursuant to Ark. Sup. Ct. R. l-2(a)(ll). We find no error and affirm.

Fleetwood was charged with second-degree murder for the January 3, 1996, killing of Christopher Klein. Fleetwood called the police on January 3, 1996, and informed them that he had shot a man in self-defense. When the police arrived, Fleetwood indicated that he was asleep on a sofa in his grandmother’s house and was awakened by Klein standing over him masturbating. He claimed that Klein had ejaculated on his face and that he had wiped the decedent’s semen from his face with his shirt. He said that the decedent moved toward him and that he fled the room and went into his grandmother’s bedroom. He claims that the decedent followed him into the room and cornered him, so he then took a 410 shotgun from the closet and shot Klein.

The initial DNA test on Fleetwood’s shirt showed no evidence of the decedent’s semen; however, a semen stain of the defendant’s was later detected. A second DNA test indicated a small stain of semen on the sleeve of the shirt; the DNA of this semen was consistent with the decedent’s. An autopsy report indicated that Klein died of a gunshot wound to the head.

After a nine month investigation, Fleetwood was charged with second-degree murder. Charges were brought in the Circuit Court of Carroll County. Fleetwood entered a motion to transfer the matter to juvenile court based upon the fact that he was a minor when the act occurred. Fleetwood was seventeen years old on January 3, 1996, when the shooting occurred. On March 3, 1996, he turned eighteen. At the omnibus hearing on December 18, 1996, the trial court denied the motion to transfer to juvenile court.

At the hearing, the trial court heard testimony from Sue Campbell, Deputy Juvenile Officer of the 44th Judicial Court in Wright, County, Missouri. She testified that Fleetwood was on probation for a year from November 1993 until December 1994 and that he violated probation when he engaged in a fight with a fellow classmate.

Chief Earl Hyatt of the Eureka Springs Police Department testified. He stated that he investigated the murder of Klein and that Fleetwood admitted to shooting the decedent. He also testified that there was no indication that the decedent was armed when he cornered Fleetwood in the bedroom.

Testifying on Fleetwood’s behalf was Margie Anderson, Commissioner for Eureka Springs Park and Recreation Department where Fleetwood was employed. She indicated that Fleet-wood had been issued an award for saving a child’s life. She also stated that Fleetwood had not been the cause of trouble in the community of Lake Leatherwood during the time that he had lived there with his grandmother.

After hearing all of the evidence, the trial court denied the motion to transfer. Fleetwood challenges that ruling as an abuse of discretion.

Ark. Code Ann. § 9-27-318(e)(Supp. 1995) sets forth statutory factors that a trial court must evaluate when ruling upon a motion to transfer a matter to juvenile court. Specifically, § 9-27-318 provides:

(e) In making the decision to retain jurisdiction or to transfer the case, the court shall consider the following factors:
(1) The seriousness of the offense, and whether violence was employed by the juvenile in the commission of the offense;
(2) Whether the offense is part of a repetitive pattern of adjudicated offenses which would lead to the determination that the juvenile is beyond rehabilitation under existing rehabilitation programs, as evidenced by past efforts to treat and rehabilitate the juvenile and the response to such efforts; and
(3) The prior history, character traits, mental maturity, and any other factor which reflects upon the juvenile’s prospects for rehabilitation.
(f) Upon a finding by clear and convincing evidence that a juvenile should be tried as an adult, the court shall enter an order to that effect.

In ruling upon a motion to transfer, a court is not required to give equal weight to each of the factors enunciated in Ark. Code Ann. § 9-27-318(e). Brooks v. State, 326 Ark. 201, 929 S.W.2d 160 (1996); Booker v. State, 324 Ark. 468, 922 S.W.2d 337 (1996); Sebastian v. State, 318 Ark. 494, 885 S.W.2d 882 (1994). According to Ark. Code Ann. § 9-27-318(f) (Supp. 1995), a trial court decision to try a juvenile as an adult must be supported by clear and convincing evidence. A trial court decision will not be overturned unless it is clearly erroneous. Booker v. State, supra; Davis v. State, 319 Ark. 613, 893 S.W.2d 768 (1995).

According to Butler v. State, 324 Ark. 476, 922 S.W.2d 685 (1996), it is the movant’s burden to prove the transfer to juvenile court was warranted. See also, Williams v. State, 313 Ark. 451, 856 S.W.2d 4 (1993); Pennington v. State, 305 Ark. 312, 807 S.W.2d 660 (1991). This is a burden appellant has not met.

The defense conceded that the offense was both serious and violent but claims that the denial of the motion to transfer was improper because of the affirmative defense of self-defense. The statutory scheme for determining whether a case should be transferred to juvenile court is not dependant upon affirmative defenses. A trial court must evaluate the specific offense and the individual defendent to determine whether a transfer is warranted. It is obvious that Fleetwood was allowed to offer evidence to support his motion, and we have often held that a trial court is in the best position to weigh such evidence. We will not question such a ruling absent evidence that the trial court was clearly erroneous.

In addition to the offense being of a serious and violent nature, the State additionally submitted that Fleetwood had turned eighteen years of age and, therefore, was not eligible for juvenile rehabilitative programs. In two recent cases, Smith v. State, 328 Ark. 736, 946 S.W.2d 667 (1997); Oglesby v. State, 329 Ark. 127, 946 S.W.2d 693 (1997), we held that the age of the juvenile is a permissible factor to evaluate when determining whether a transfer is proper. See also, Maddox v. State, 326 Ark. 515, 931 S.w.2d 438 (1996); Brooks v. State, supra; Hansen v. State, 323 Ark. 407, 914 S.W.2d 737 (1996).

Based upon the serious and violent nature of second-degree murder and the fact that Fleetwood is now nineteen years old, we cannot say that the denial of transfer was clearly erroneous. We therefore affirm.

Affirmed.


author: Donald L. Corbin, Justice.

text:
    NATIONAL ENTERPRISES, INC. and Arkansas No. 1 LLC v. Charles REA and Mickie Rea, His Wife
    97-274
    947 S.W.2d 378
    Supreme Court of Arkansas
    Opinion delivered July 7, 1997
    [Petition for rehearing denied September 11, 1997.]

      Joel Taylor, for appellants.

      Skokos, Bequette & Billingsley, P.A., by; Jay Bequette and Keith I. Billingsley and Wood, Smith, Schnipper & Clay, by: Don M. Schnipper, for appellees.
   Donald L. Corbin, Justice.

Appellants National Enterprises, Inc. (“NEI”), and Arkansas No. 1 LLC appeal the judgment of the Garland County Chancery Court permitting Appellees Charles P. Rea and Mickie Rea to equitably rescind their contract of purchase and deed of conveyance of a time-share unit located in the now-defunct Lakeshore Resort & Yacht Club in Hot Springs. Appellants raise four points for reversal, one of which requires an interpretation of Ark. Code Ann. § 18-14-601 (1987). Our jurisdiction is thus pursuant to Ark. Sup. Ct. R. 1-2(a)(17)(vi) (as amended by per curiam July 15, 1996). We cannot reach the merits of the appeal, however, due to a flagrantly deficient abstract. Accordingly, we affirm pursuant to Ark. Sup. Ct. R. 4-2(a)(6).

From the sparse abstract provided to us, it appears that Appellees purchased a time-share condominium from Hansen, Hooper & Hayes, Inc., the developer of the Lakeshore project. Appellant NEI purchased the note and mortgage on the condominiums from the Resolution Trust Corporation (“RTC”) and subsequently foreclosed on the property. Appellees filed suit against NEI for rescission of the contract, alleging that NEI had failed to provide them with utilities, parking, and access to the facilities of the adjacent hotel, as promised by the original developer. Sometime after Appellees had filed suit, NEI transferred 100% of its right, title, and interest to Arkansas No. 1 LLC. The chancellor ruled in favor of Appellees on a theory of constructive fraud and this appeal followed.

The points argued on appeal comprise two issues: (1) Whether Appellants were the proper party defendants as the successors-in-interest to the developer, and (2) whether there was sufficient evidence of constructive fraud. We are unable to reach the merits of either of these points due to the fact that Appellants have failed to abstract the following essential documents: (1) The note and mortgage on the Lakeshore property purchased by NEI from the RTC; (2) the original contract for the purchase of the timeshare unit entered into by Appellees and the developers; (3) the foreclosure action executed by NEI on the Lakeshore time-share project; (4) a letter written by an ex-employee of NEI on December 3, 1993, advising time-share purchasers that the services and amenities previously provided by the hotel had been terminated; and (5) the master deed and by-laws of the time-share development.

Additionally, Appellants have failed to sufficiently abstract the relevant parts of the chancellor’s letter order, which actually comprised some seven pages, but is summarized in one paragraph as follows:

Defendants^] status as successor in interest to Hanson [sic], Hooper & Hayes cannot be seriously questioned. In order to rescind a contract, actual fraud is not necessary, and constructive fraud is sufficient. Plaintiffs did not prove actual fraud, but the Court finds constructive fraud. Plaintiffs are entitled to rescission. The provision in the By-Laws which require the developer to relinquish its right and duty to administer the regime no later than three years following the first sale of the unit week was not supported by testimony that the counsel of co-owners was established. Plaintiffs [sic] resitutionary [sic] damages should be reduced pro rata, based upon the amount of use they had in their time-share.

It is fundamental that the record on appeal is confined to that which is abstracted and cannot be contradicted or supplemented by statements made in the argument portions of the briefs. In the Estate of Brumley, 323 Ark. 431, 914 S.W.2d 735 (1996). Appellants axe required to abstract such material parts of the pleadings, proceedings, facts, documents, exhibits, and other matters in the record as are necessary to an understanding of each issue presented to this court for review. Kingsbury v. Robertson, 325 Ark. 12, 923 S.W.2d 273 (1996); Brumley, 323 Ark. 431, 914 S.W.2d 735. The judgment or decree appealed from, including relevant factual findings, is an essential part of the abstract. Pulaski County Child Supp. Enforcement Unit v. Norem, 328 Ark. 546, 944 S.W.2d 846 (1997). Failure to abstract a critical document precludes this court from considering any issues concerning it. Brumley, 323 Ark. 431, 914 S.W.2d 735. Similarly, when those exhibits necessary for a clear understanding of the issues are not included in the abstract, we will summarily affirm the decision of the trial court. Kingsbury, 325 Ark. 12, 923 S.W.2d 273. We have stated on occasions too numerous to count that it is impractical to require all seven members of this court to examine one transcript in order to decide an issue. See, e.g., Duque v. Oshman’s Sporting Goods Servs., Inc., 327 Ark. 224, 937 S.W.2d 179 (1997); Kingsbury, 325 Ark. 12, 923 S.W.2d 273.

From the abstract provided, we cannot discern what services, if any, Appellants were obligated to provide to Appellees and other time-share owners or what the original developer was obligated to provide. Without a copy of the note and mortgage purchased by NEI from the RTC, we cannot address Appellants’ argument that Appellees’ time-share unit was specifically excluded from the mortgage. Moreover, without a copy of the master deed and bylaws, we cannot address Appellants’ argument that the developer’s obligations ceased after three years from the date of the sale of the first time-share week. Furthermore, without being able to examine the letter written by the ex-employee of NEI, we cannot address Appellants’ argument that the trial court erred in finding that statements made in the letter were authorized by Appellants and were binding upon them as admissions. :Though there are scant references to these documents contained in the abstracted testimony and in the argument portion of Appellants’ briefs, as well as references to some of the documents as trial exhibits, such references do not comply with this court’s abstracting requirements set out in Ark. Sup. Ct. R. 4-2(a)(6).

Correspondingly, from Appellants’ summary of the chancellor’s order, we are left to guess as to the specific factual findings made by the trial court and her reasons for ruling as she did. It is further unclear from the abstracted order that the chancellor ever ruled on Appellants’ argument concerning the application of section 18-14-601 to the facts of this case. Without the benefit of knowing the specific findings and conclusions made by the trial court, it is well nigh impossible for this court to conduct a meaningful review of Appellants’ allegations of error. Accordingly, we affirm the order of the chancery court.

       We only know that the actual letter order comprised at least seven pages because Appellants have quoted from page seven of the order in the argument portion of their brief.