author: Tom Glaze, Justice. Robert H. Dudley, Justice, Donald L. Corbin, Justice,

text:
    CITY OF LITTLE ROCK and Arkansas Public Service Commission v. AT&T COMMUNICATIONS OF THE SOUTHWEST, INC.
    93-1251
    888 S.W.2d 290
    Supreme Court of Arkansas
    Opinion delivered November 14, 1994
    [Rehearing denied December 19, 1994.]

      Thomas M. Carpenter, City Att’y, by: David A. Stewart, William C. Mann III, and Anthony W. Black, for appellant City of Little Rock.

      Paul Ward, for appellant Arkansas Public Service Commission.

      Wright, Lindsey & Jennings, by: N. M. Norton, Jr. and Roy F. Cox, Jr., for appellee.

      Special Justice Charles Roscopf joins. Corbin, J., would grant rehearing. Newbern, J., not participating.

   Tom Glaze, Justice.

This case was originally decided by the Arkansas Public Service Commission which upheld the validity of a Little Rock ordinance that required AT&T Communications of the Southwest, Inc. to pay certain fees for the privilege of using the City’s public streets. The City of Little Rock had adopted the ordinance which granted each provider of interstate and intrastate toll (long distance) telephone services in the City a franchise to use the City’s public ways. The ordinance also levied a $.004 per minute charge on all long distance telephone calls that are billed to a city service address. AT&T filed its complaint with the PSC, challenging the validity of the ordinance, and the Commission designated an administrative law judge to hear the complaint.

The law judge issued Order No. 17, finding the ordinance valid and dismissing AT&T’s complaint. The Commission subsequently adopted Order No. 17 as its own. AT&T appealed from the Commission’s decision to the court of appeals and set out the following points for reversal: (1) The ordinance is unlawful as a tax or fee, and in particular, is not authorized by Ark. Code Ann. § 14-200-101 and is barred by Ark. Code Ann. § 23-17-101; (2) alternatively, the ordinance is an arbitrary, capricious and unreasonably discriminatory application of whatever franchise authority the City may possess; and (3) the ordinance is an unreasonable and therefore unconstitutional burden on interstate commerce. The court of appeals ruled in AT&T’s favor, reversing the Commission’s decision. AT&T Communications v. City of Little Rock, 44 Ark. App. 30, 866 S.W.2d 414 (1993). Specifically, it agreed with AT&T’s first point that the City’s ordinance levied an unauthorized tax. The court of appeals found it unnecessary to rule on AT&T’s other two points. Little Rock and the PSC petitioned this court to review the case, and we granted that petition. In doing so, we first consider the court of appeals’ decision which invalidated the City ordinance as levying an unauthorized tax.

In reaching its decision, the court of appeals put misplaced reliance upon City of Marion v. Baioni, 312 Ark. 423, 850 S.W.2d 1 (1993), and other similar cases where this court discussed the distinction between a fee and tax. We initially point out that the fee imposed by the City of Little Rock here against AT&T is called a “franchise” fee, and is wholly different from those fees discussed and dealt with in Baioni. By statutory law, a municipality may by ordinance assess and determine a rate/fee for service rendered by any public utility occupying streets (rights-of-way) within the municipality, and such an ordinance is deemed prima facie reasonable. Ark. Code Ann. §§ 14-200-101 — 14-200-104 (1987 and Supp. 1993). In common parlance, such franchise fees are, in form, rental payments for a public utility’s use of the municipality’s right-of-way, and such fees are reviewed by the PSC. § 14-200-101(b)(l).

Prior to AT&T’s divestiture, Little Rock assessed only one municipal franchise fee for the use of its rights-of-way for telephone service and that assessment was imposed only upon local calls. It was then generally believed that the imposition of a municipal franchise fee upon long distance service would violate the Commerce Clause. This practice was continued by Little Rock even after AT&T’s divestiture took place about eleven years ago when Southwestern Bell (SWB) and other regional companies received the local lines and property, and AT&T obtained the long-distance part of the telephone network. SWB continued its payments of the Little Rock franchise fees upon the local service. However, AT&T paid no similar fee on its long-distance service even though AT&T obtained access to originating and terminating caller locations within Little Rock over SWB’s facilities, a substantial portion of which occupy the City’s streets and rights-of-way. It was only after the Supreme Court’s decision in Goldberg v. Sweet, 488 U.S. 252 (1989), that Little Rock enacted the ordinance in issue here, whereby it assessed AT&T (and other companies) four mills on all long distance calls that originated or terminated within the City and were billed to a Little Rock address.

As previously mentioned, the court of appeals relied upon this court’s rationale in Baioni in holding Little Rock’s franchise fee or assessment is an unlawful tax, but in doing so, the court of appeals completely overlooked the fact that Baioni and related cases cited in that decision were not franchise fee cases.

In Baioni, the City of Marion charged sewer and water fees to certain developers. There, this court reached its decision by analyzing the evidence in light of the applicable rule in such cases that a governmental levy or fee, in order not to be denominated a tax, must be fair and reasonable and bear a reasonable relationship to the benefits conferred on those receiving the services. Baioni, and cases like it, involved fees charged directly to developers or residents for the construction or extension of certain services such as for sewer and water, and the general rule that the fees obtained for such purposes must be segregated and used for those purposes only.

The Baioni holding is simply inapplicable to situations where cities are statutorily authorized to assess public utilities franchise fees for the use or occupancy of the cities’ rights-of-way. The court of appeals was wrong in failing to recognize this legal or statutory distinction.

As pointed out above, § 14-200-101 (a)(1) empowers Arkansas municipalities to assess utility franchises operating within the municipalities, and telephone companies are not excluded. See also Ark. Code Ann. § 23-4-201 (1987); S.W. Bell Tel. Co. v. City of Fayetteville, 271 Ark. 630, 609 S.W.2d 914 (1980); Hot Springs Elec. Light Co. v. Hot Springs, 70 Ark. 300, 67 S.W. 762 (1902) (court recognized a municipality had right to enact an ordinance requiring a company to pay a fee for erecting and maintaining poles in the city streets for electric light, telephone or certain other purposes). In the S.W. Bell Tel. Co. case, this court pointed out that § 14-200-101 (then Ark. Stat. Ann. § 73-208) granted cities the authority to determine reasonable terms and conditions, which included a franchise payment/fee, for the use of public streets. Significantly, § 14-200-101 was found by the court to apply to a telecommunications utility deriving the right to construct its system under the Telephone Company Act [Ark. Code Ann. § 23-17-101 — 307 (1987)]. In this respect, AT&T argues that, without exception, the Telephone Company Act allows telephone companies the right to use highways and city streets without charge. It concedes, however, that, over the years, telephone companies have paid franchise fees on local calls. Of course, if AT&T’s construction of the Act were true, municipal fees charged on either local or long distance service would be unlawful and undoubtedly would impact greatly on present municipal revenues.

As AT&T concedes by acknowledging the telephone companies’ payment of franchise fees during past years, its proposed construction of the Act has not been the one applied by the telephone companies and cities, and, in ascertaining the Act’s intent, this court examines the statute historically, as well as the contemporaneous conditions at the time of its enactment, consequences of interpretation, and matters of common knowledge within the limits of this court’s jurisdiction. Mears, County Judge v. Ark. State Hospital, 265 Ark. 844, 581 S.W.2d 339 (1979); see also Hot Springs Elec. Light Co., 709 Ark. 300, 67 S.W. 762. It appears clear that the telephone companies, municipalities and this court have recognized franchise fees over the past years, and only now, does AT&T claim the 1885 Telephone Company Act invalidates such fees. In any event, § 14-200-101 has been enacted since the passage of the 1885 Act, and that later statute, as discussed above, empowers municipalities to impose such fees. For these reasons, we conclude the Little Rock franchise and fee ordinance is authorized by law, and the court of appeals was wrong in holding otherwise.

We next turn to AT&T’s second argument that Little Rock’s ordinance and franchise fee is an arbitrary, capricious and unreasonable application of the City’s franchise authority. In considering this issue, we emphasize that our review is of the PSC’s decision, therefore, we are bound by long-settled law governing this court’s limited review of PSC administrative rulings. The Commission has broad powers and is vested with wide discretion; that, if the order of the Commission is supported by substantial evidence, is free from fraud and not arbitrary, it is the duty of this court to let it stand even though the court might disagree with the wisdom of the order. And for the Commission’s order to be invalid, the Commission’s action must lack rational basis. In Re Sugarloaf Mining Co., 310 Ark. 772, 840 S.W.2d 172 (1992); Harding Glass Company v. Ark. Public Service Commission, 229 Ark. 153, 313 S.W.2d 812 (1958).

Here, Little Rock, by ordinance, assessed AT&T and other like utilities franchise fees based upon the use of Little Rock streets. These utilities obtained enormous gross revenues from handling long distance calls within the city. The PSC agreed with Little Rock that, given the inherent nature of communication services provided by telephone utilities, the only rational basis for assessing fees is in measuring time in units. Under Arkansas law, Little Rock’s ordinance, using time-unit methodology in establishing AT&T’s fee, is by law presumptively reasonable. Ark. Code Ann. § 14-200-101 (a)(1) (1987). AT&T had the burden to show the Little Rock fee ordinance is unreasonable, but even its own expert, Dr. Charles Venus, testified he did not think “anyone knows whether the relationship in this particular case is reasonable or unreasonable.” In sum, Little Rock’s imposition of a fee on a per-minute basis for the effective use of the city’s rights-of-way has not been shown to be unreasonable or without a rational basis.

Although this court on review must accept the PSC’s ruling unless it is arbitrary or capricious, AT&T (and a dissenting opinion) would force the PSC to require franchise fees based upon the number of miles of facilities AT&T (and like utilities) had located within the city’s rights-of-way. No authority is cited which requires such mileage methodology or formula, and we know of none. In fact, the Supreme Court has cautioned against such rigid formulas when dealing with telecommunication businesses which involve “the more intangible movement of electronic impulses through computerized networks.” Goldberg v. Sweet, 488 U.S. 252, 264 (1989). While other businesses may be more reasonably assessed on the basis of number of units owned or number of miles traveled, the Goldberg Court opined that a formula based upon “mileage or some other geographic division of individual telephone calls would produce insurmountable administrative and technological barriers” because “the exact path of thousands of electronic signals can neither be traced nor recorded.” Id. at 264-265, 266.

Finally, it is significant to point out that the time-use methodology selected by Little Rock and approved by the PSC results in the equality of treatment of all interexchange carriers. On the other hand, if Little Rock and the PSC had chosen the mileage right-of-way formula suggested by AT&T, disparity between telephone companies could be argued as AT&T does now in this appeal. The PSC is not required to mandate that the City use a mileage methodology in establishing fee charges for telecommunications business, especially when that formula is arguably discriminatory in nature.

In light of the Supreme Court’s reasoning in Goldberg v. Sweet, 488 U.S. 252 (1989), and the PSC’s finding that AT&T failed to show the City’s method of assessment was unreasonable, this court is not in a position to determine otherwise. As newer technologies, including cellular communications, continue to evolve, this court must abandon antiquated and simplistic formulas as that suggested by AT&T. Because there is sufficient evidence to support the PSC’s finding that the assessment based on $0,004 per minute of use is reasonable, we affirm that ruling.

Finally, we consider AT&T’s argument that the fee or charge under the Little Rock ordinance constitutes an unreasonable burden in violation of the Commerce Clause. AT&T cites Goldberg v. Sweet, wherein the Supreme Court upheld the validity of an Illinois Telecommunications Excise Act, finding the Act withstood scrutiny under the Commerce Clause. In so holding, the Supreme Court held that the Illinois Act satisfied the four-pronged test set forth in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, which required that the tax (1) must be applied to an activity with a substantial nexus with the taxing state, (2) is fairly apportioned, (3) does not discriminate against interstate commerce, and (4) is fairly related to the services provided by the state.

Here, AT&T does not question the first three test factors set out above, but it urges Little Rock’s ordinance fails the fourth criterion because the charge assessed by ordinance does not fairly relate to the services provided by Little Rock. AT&T specifically argues that it already pays a privilege license and sales taxes for general city services and the only added benefit the City purports to confer by its ordinance is a franchise or license to occupy Little Rock’s public streets. To state the obvious, all businesses do not pay the same amounts in sales taxes. It is equally apparent that only a few businesses have the privilege to occupy public rights-of-way. The proof showed that AT&T paid significantly less than the percentage of gross revenues paid by the electric, gas and water utilities using Little Rock public rights-of-way. In addition, we note that as a result of its use of these rights-of-way, AT&T has derived substantial benefits via gross receipts from its providing a commercial, profit-making, public utility service to the citizens of Little Rock. AT&T’s conclusory disagreement concerning its right of occupancy and contention that the franchise fee is excessive in comparison to the benefits afforded it by Little Rock is simply unpersuasive. Because AT&T failed to show the City’s franchise fee is an unreasonable burden on interstate commerce, we affirm the PSC’s ruling.

For the reasons given above, we reverse the court of appeals’ decision that the Little Rock ordinance levied an unauthorized tax, and affirm the PSC decision in all respects.

Dudley and Corbin, JJ., dissent; Special Justice Charles Roscopf joins this opinion; Newbern, J., not participating.

Robert H. Dudley, Justice,

dissenting. AT&T Communications of the Southwest, Inc. filed a complaint with the Arkansas Public Service Commission challenging a levy by the City of Little Rock of $.004 per minute on all long distance calls billed by interexchange long distance telephone companies to a service address within the City. The charge, which is based entirely on the number of minutes of telephone use, is billed to a telephone service address, and the charge may be passed on to the phone user.

An Administrative Law Judge for the Public Service Commission heard the complaint. In summary, he ruled that the levy was a validly enacted franchise fee, and not a tax; that the ordinance does not impose an unreasonable burden on interstate commerce; that the amount of the fee is reasonable; and that a rational basis exists for the differentiation between the cellular telephone companies and interexchange telephone carriers.

AT&T filed a petition for rehearing with the Administrative Law Judge. The petition was denied. AT&T filed a petition for rehearing with the full Public Service Commission, and it upheld the Administrative Law Judge’s ruling. AT&T then appealed to the court of appeals and, for reversal, relied on three points: (1) (a) the City lacked authority to enact the ordinance, and (b) the levy was an unauthorized tax; (2) the amount of the fee is arbitrary, capricious, and discriminatory as applied to AT&T; and (3) the ordinance is an unconstitutional burden on interstate commerce. The court of appeals held that the levy constituted a tax, and, because it had not been adopted at an election by the qualified electors of the city, it was invalid. AT&T Communications v. City of Little Rock, 44 Ark. App. 30, 866 S.W.2d 414 (1993). The court of appeals reversed the ruling of the Public Service Commission, but in so doing did not reach the issues of whether the levy is arbitrary, capricious, or discriminatory, or whether it constitutes an unconstitutional burden on interstate commerce.

The City of Little Rock and the Arkansas Public Service Commission both petitioned this court for review of the decision of the court of appeals. See Ark. Sup. Ct. R. 1 -2(f). Thus, the case is in the supreme court on certiorari to the court of appeals to review its reversal of the decision of the Arkansas Public Service Commission.

I.

Procedurally, on a grant of certiorari to the court of appeals, we will consider the case as if it were initially appealed to this court. Maloy v. Stuttgart Memorial Hosp., 316 Ark. 447, 872 S.W.2d 401 (1994). On certiorari we can affirm the trial court in part and reverse the court of appeals in part. See, e.g., Henry v. Kennedy, 273 Ark. 383, 619 S.W.2d 632 (1981); Hair v. Hair, 272 Ark. 80, 613 S.W.2d 376 (1981). We can address issues argued to, but not decided by, the court of appeals. See Oliver v. State, 286 Ark. 198, 691 S.W.2d 842 (1985).

The Public Service Commission, in its brief to this court, discusses the standard of review of the Administrative Law Judge’s findings of fact, but that is not a real issue in this appeal. There is no dispute about whether the Administrative Law Judge was clearly in error in determining any fact. Some of the facts were developed by testimony of interested witnesses, and some by introduction of documents such as city ordinances, but the vast majority of the facts were stipulated by the parties. The real issues are questions of law, and, if the Administrative Law Judge or the Public Service Commission is wrong on a question of law, we will reverse.

The majority opinion affirms the Public Service Commission, and reverses the court of appeals’ holding that the levy is a tax that is invalid because it was not adopted at an election by the qualified electors of the City. See Ark. Code Ann. § 26-73-103 (1987).

II.

Section 14-200-101 of the Arkansas Code Annotated of 1987, the controlling statute in this case, provides that a city can “determine” the “terms and conditions” for public utilities’ use of city streets and rights-of-way. The statute contains three provisions that are significant to the outcome of this case.

A.

The first of the significant provisions is contained in subsection (a)(1), which provides that a city can determine the “terms” upon which a public utility may be permitted “to occupy the streets, highways, or other public places within the municipality.” The word “terms” in such a statute means the “time and amounts of payment.” Nakdimen v. Ft. Smith & Van Buren Bridge Dist., 115 Ark. 194, 208, 172 S.W. 272, 276 (1914). In Southwestern Bell Telephone Co. v. City of Fayetteville, 271 Ark. 630, 609 S.W.2d 914 (1980), in dictum, we said section 14-200-101 granted authority to cities to determine reasonable terms for the use by public utilities of public streets. Id. at 635, 609 S.W.2d at 918. Thus, section 14-200-101 (a)(1) is authority for a municipality to charge a public utility for the use of its streets and rights-of-way.

B.

The second significant provision is also contained in subsection (a) and provides that a city can enact the charge “by ordinance or resolution.” Thus, it is not necessary for the qualified electors to approve the terms of an ordinance setting the amount of the charge for the use of a city’s streets and rights-of-way by a public utility. Because the statute authorizes the charge to be adopted “by ordinance or resolution,” it logically follows that the charge is not invalid because there was no election by the qualified electors of a city.

The court of appeals held that the levy is a tax and that the tax is invalid because there was no election. That holding is based upon our case of City of Marion v. Baioni, 312 Ark. 423, 850 S.W.2d 1 (1993). There we discussed the distinctions between a fee and a tax in situations in which there is no applicable statute. The issue was whether a charge to connect onto a city’s water and sewer system was a fee or a tax. Since there was no statute authorizing the charge, we had to look at all of the factors involved to determine the issue. To the contrary, in this case, there is a statute that specifically authorizes a charge for the use of city streets and rights-of-way. This is not a charge for maintaining regular and traditional governmental services, but rather is rent for occupation of city streets and rights-of-way. Since the applicable statute specifically authorizes this rental charge, the case of City of Marion is not in point. Thus, I concur with that part of the majority opinion that holds that the City of Little Rock is authorized by statute to charge for the use and occupation of its streets and rights-of-way.

C.

The third significant section of the statute, subsection (b)(1), requires that any rent charged for the use of a city’s streets or rights-of-way be reasonable. In pertinent part, it provides:

Any public utility affected by any such ordinance [charging rent for rights-of-way] . . . may appeal from the action of the council ... by filing ... a written complaint with the [Arkansas Public Service] commission setting out wherein the ordinance ... is unjust, unreasonable, or unlawful, whereupon the commission shall proceed . . . with the same procedure that it would dispose of any other complaint. . . .

Ark. Code Ann. § 14-200-101 (b)(1) (1987) (emphasis added). Even granting the rebuttable presumption of reasonableness of the charge, as set out in subsection (2), the rent assessed AT&T in the ordinance is unjust and unreasonable.

The ordinance provides that the amount charged AT&T is “for the use of the public rights-of-way.” The stipulated facts, computations using those facts, and undisputed evidence are summarized as follows:

There are approximately 1,198 miles of streets, roads, and alleys in the City, and the City received from public utilities, as fees for the use of its rights-of-way, $718,415.43 in 1990, and $703,970.24 in 1991.

AT&T maintains twenty-three miles of fiber optic cables, and eight and one-half miles of those facilities are on the City’s rights-of-way. AT&T’s rental payment in 1990 was $290,715.15, and in 1991 was $264,195.72, or an average annual rent of $ 277,455.00 This amounts to an average of $34,682.00 per mile for use of the City’s rights-of-way. AT&T does not own, possess, operate, or maintain any other facility within the City’s rights-of-way.

Arkansas Louisiana Gas Company maintains 943 miles of facilities, and approximately 850 miles of those facilities are on the City’s rights-of-way. Arkla paid an average of $2.5 million dollars, or about $2,940.00 per mile for use of the City’s rights-of-way.

Southwestern Bell Telephone Company’s average annual rental payment is $2 million dollars. About one-half of Southwestern Bell’s facilities are on the City’s rights-of-way, and about one-half are on private property. In the argument part of its brief the Public Service Commission cites the record and states that Southwestern Bell has facilities on about 1,000 miles of rights-of-way in the City. Assuming the ubiquitous availability of telephone service, Southwestern Bell’s occupancy is probably on about half, or 500 miles of the City’s rights-of-way. From these facts, it appears that Southwestern Bell pays about $2,750.00 per mile for use of the City’s rights-of-way.

Arkansas Power and Light Company maintains 970 miles of overhead facilities in the City, and about 775 miles of those facilities are on the City’s rights-of-way. It additionally maintains underground conduit, estimated by AT&T to be over 250 miles. AP&L paid an average rent of $8.8 million, or about $11,350.00 per mile if just the overhead facilities are counted. If the underground conduit are counted, the average cost per mile would be $5,900.00.

From the above statistics, AT&T concludes that it pays fourteen times as much rent per mile as Arkla, thirteen times as much as Southwestern Bell, and six times as much as AP&L. Neither the City nor the Public Service Commission dispute AT&T’s conclusions.

III.

The City does not deny that it charges AT&T a greater amount than the other utilities when the fee is considered on a per mile basis, and the Commission admits that “at first blush, [it] does make the charge assessed seem disproportionately high.” However, the City, the Commission, and the majority opinion respond to AT&T’s argument in two ways.

A.

First, the City and the Commission argue that AT&T’s cost per mile comparison is not valid because it ignores the 1,000 miles of the City’s rights-of-way used by Southwestern Bell to gain access to telephone customers, and, they contend, without that arrangement, AT&T would have to maintain its own physical facilities. This response, questioning the comparative costs per mile, will not stand scrutiny for either of two reasons. The first is that AT&T pays charges or tariffs to Southwestern Bell that are regulated by the Public Service Commission and the Federal Communications Commission, and AT&T cannot direct Southwestern Bell to route long distance calls over either its City rights-of-way, which constitutes about one-half of Southwestern Bell’s rights-of-way, or over privately owned right-of-way, which constitutes the other one-half of Southwestern Bell’s rights-of-way. Moreover, the argument is inconsistent with the ordinance itself because the ordinance requires the rental charge to be applied to all of AT&T’s long distance calls, even including those delivered over Southwestern Bell’s facilities that are on private rights-of-way.

B.

The second response by the City and the Commission is that a charge of a percentage of gross revenue as rent is not unreasonable or discriminatory when compared to the rentals charged other public utilities that operate within the City. The majority opinion adopts this rationale. The statute provides that a city can determine the terms “upon which the public utility may be permitted to occupy the streets, highways, or other public places within the municipality.” Ark. Code Ann. § 14-200-101 (a)( 1) (1987) (emphasis supplied). This section provides that a city may levy a charge for occupying the geographical area of the streets and other rights-of-way. It is written in terms of physical occupation of space. The statute does not authorize a “franchise fee” for the use of the rights-of-way, and it does not authorize the City to charge a gross receipts fee. The majority opinion, in upholding a fee on gross receipts, refers to the case of Goldberg v. Sweet, 488 U.S. 252 (1989), but that case provides a solid underpinning for this dissent. In Goldberg, the statute at issue imposed a “5% tax on the gross charges of interstate telecommunications.” The statute at issue in the case does not authorize a tax, and it does not authorize a tax on gross charges; it authorizes only a charge for the occupation of a city’s streets and other rights-of-way.

The ordinance, drafted in contemplation of the statute, provides that it levies a charge “for the use of the public rights-of-way, including those public areas along, across, on, over, through, above, and under all public streets, avenues, alleys, public grounds and airways, and places in the city.” The language patently shows that the charge is to be for the physical occupation of a geographical area of the streets and rights-of-way. Yet, the levy contained in the ordinance is based solely upon the minutes of long distance use by the telephone customer. In fact, the ordinance was deliberately drafted so that the fee could be passed on to the end user. In summary, the fee is not related to the physical use or occupancy AT&T makes of the City’s streets or other rights-of-way. AT&T’s occupancy of the rights-of-way is the same regardless of whether the fiber optic cable is carrying none, one, or a thousand long distance calls.

The majority opinion notes that “AT&T concedes, by acknowledging the telephone companies’ payment of franchise fees during past years, its proposed construction of the Act has not been the one applied by the telephone companies and cities.” The observation is valid and citation of Mears v. Arkansas State Hospital, 265 Ark. 844, 581 S.W.2d 339 (1979), is in point. However, one apparent reason for AT&T’s change in position, while not admitted by AT&T, is sufficient to disregard the past payments that were made without objection by AT&T. In the past most, if not all, holders of franchises from the City held exclusive franchises. AP&L holds an exclusive franchise on furnishing electricity within the City, ARKLA holds an exclusive franchise on furnishing natural gas, and in the past AT&T held an exclusive franchise on furnishing long distance service. Such franchise holders are allowed by the PSC to charge a rate sufficient for a “reasonable rate of return.” It would seem logical that an exclusive franchise holder would prefer that “reasonable rate of return” to be on the largest amount possible. For example, if the reasonable rate of return in any one year were determined to be ten percent, the franchise holder would prefer to make a ten percent return on two million dollars instead of on only one million dollars. The inherent difficulty with the “cost plus ten” concept is that such a system encourages high costs. It is most likely that while AT&T held an exclusive franchise on the long distance service, it relished the idea of higher costs by paying the franchise fee. Now, after the breakup of the parent American Telephone and Telegraph Company, it is in competition with Sprint, MCI, and LDDS. The concept of a guaranteed “cost plus ten” is gone, and AT&T must now change its position to meet competition. But the change in position affects more than AT&T. The change in position benefits the telephone user, the citizen, and taxpayer. Their rates should be lower. Under these circumstances, the past payment of the fee without protest should not defeat AT&T’s current position.

IV.

Charges are authorized for a public utility’s occupation of “the streets, highways, or other public places within the municipality.” Ark. Code Ann. § 14-200-101 (a)(1) (1987). Such charges cannot be unjust or unreasonable. Id. § (b)(1). The charge levied against AT&T under the ordinance, when compared to charges levied on other public utilities, is disproportionately high and discriminates against AT&T. Because the charge to AT&T is unjust and unreasonable, I respectfully dissent from the majority opinion.

Corbin, J., joins in this dissent.

Donald L. Corbin, Justice,

dissenting. Upon review, I agree with the decision of the court of appeals, AT&T Communications v. City of Little Rock, 44 Ark. App. 30, 866 S.W.2d 414 (1993), concluding the challenged levy in this case is an invalidly imposed tax, rather than a fee authorized by Ark. Code Ann. § 14-200-101(a) (1987). Section 14-200-101 (a), the statutory authority claimed by the City of Little Rock for its enactment of this levy, patently empowers the City to assess “terms and conditions” for occupancy of its streets, highways, or other public places, acting by ordinance or resolution, which are then deemed to be prima facie reasonable. However, I agree with the court of appeals that, upon a closer look, the substance of this levy was, in fact, a tax, and, as such, could not have been validly imposed without its adoption by the qualified electors of the City pursuant to a special or general election. Ark. Code Ann. § 26-73-103 (1987).

By the simple act of taking a closer look at the challenged levy, I contravene the majority opinion which, it appears, summarily concludes that since the challenged levy is called a “franchise fee” and is enacted by the City pursuant to a declared exercise of its statutory authority under section 14-200-101(a), any judicial analysis of the levy with a view to classifying it as “fee” or “tax” is inappropriate. In short, I am not persuaded that the City’s adoption of this levy via the mechanism of its statutory authority under section 14-200-101 (a) necessarily precludes a fee versus tax analysis, or renders that analysis inappropriate considering the fact that although a valid section 14-200-101 (a) “term and condition” may be enacted by ordinance alone, the enactment of a valid tax requires approval by the electorate. Hence, I am of the opinion that the analysis should be undertaken.

Clearly, it is difficult to classify this levy as a fee (and if so, what kind, e.g., franchise, license, user, occupancy, rent), or a tax. PSC Order No. 17’s findings of fact and conclusions of law summarize this point, in pertinent part, as follows:

2. How the charge imposed by the challenged ordinance is denominated will not be permitted to control the determination of its validity. The original enactment of the challenged ordinance, as well as its clarifying amendment, adopted in 1989, variously referred to this charge as both a fee and a tax. Subsequent renewals of this ordinance refer to it only as a franchise fee. It does not require extensive reading of the case law and municipal finance treatises to see that the technical historical and traditional distinction between a tax and a fee has become so blurred in modern usage and practical application that it has effectively lost its meaning. This blurring process was also noticed by Dr. Venus, [AT&T’s] expert economist. Both parties seem to agree that the essential characteristics of the charge levied by the ordinance ought to control how it is viewed, and not how it is labeled. This is the approach which has been used in this case in analyzing the ordinance in question. Validity is being determined by looking at such things as under what legal authority the City claims the power to enact such an ordinance and how it impacts financially the utilities upon which it is imposed as compared to how other ordinances impact other utilities operating within the City of Little Rock.

Order No. 17 at pp. 8-9.

This court has addressed the fee versus tax analysis in several decisions, most notably, City of Marion v. Baioni, 312 Ark. 423, 850 S.W.2d 1 (1993). Although the majority opinion declares that the instant levy, because it is a charge enacted pursuant to statutory authority, is “wholly different from those fees discussed and dealt with in Baioni,” I disagree and find the decision, and related cases cited therein, instructive as they outline the differences between a tax and a fee in the context of municipal enactments.

In Baioni, pursuant to a series of ordinances, the City of Marion charged “tapping fees” from builders or lot owners connecting onto the city’s existing water and sewer systems, and “access fees” from any person or entity connecting to the city’s transmission lines. These fees were applicable only to new development, and the funds collected therefrom were directed into separate accounts designated as the “water expansion account” and “sewer expansion account” for use solely to expand the city’s water and sewer system. The evidence indicated that the projected costs of water and sewer facilities per single family unit was $1,613.00, compared to the challenged connection fees which totaled $950.00 per single family unit.

The factors isolated by this court in its fee versus tax analysis in Baioni included the following:

1. A tax is a charge imposed for general revenue purposes; a fee is a charge imposed for the government’s provision, pursuant to its police powers, of a special service to the fee’s payors other than a service already in effect.
2. Proceeds of a fee are restricted for future use solely and exclusively to benefit the fee’s payors, and for no other purpose. The court here noted especially that the proceeds of the challenged levy were segregated from the City’s general revenue funds.
3. A fee must be fair and reasonable, and reasonably related to the benefits conferred upon the payors.

The court also noted that the label applied to the charge by the enactment or levy itself is not binding on the court’s analysis of the charge as fee or tax. The court found the challenged charges in this case were valid fees, rather than invalid taxes.

In City of North Little Rock v. Graham, 278 Ark. 547, 647 S.W.2d 452 (1983), this court invalidated a “public safety fee” enacted pursuant by city ordinance, without voter approval, as an invalid tax. The challenged ordinance was adopted by the City for the purpose of raising a sum certain to implement municipal police and firemen salaries. The contested charge was a flat monthly fee imposed on each household, business and apartment in the municipality, exempting certain low-income persons. Again, in its analysis, this court found noteworthy the fact that the charge was imposed for the purpose of raising revenues for contribution toward the cost of maintaining the municipality’s existing police and fire protection, rather than for providing a specific, special service for the payors of the tax.

Finally, in Holman v. City of Dierks, 217 Ark. 677, 233 S.W.2d 392 (1950), this court concluded an annual flat rate sanitation tax imposed on each business house and dwelling in the city for the purpose of paying for fogging the city with an insecticide periodically during the year was, in fact, a valid “fee for performance of a service” and not a tax.

Applying the factors utilized in the preceding case law to the instant levy, I note the following:

1. What was the purpose of the levy to raise general revenues or to pay for a specific and special service rendered to the levy’s payors?

At the administrative hearing, the Deputy City Manager testified that the City recognized a need for additional revenues in the beginning of the 1988 budget cycle. Local telephone service companies were already paying a franchise fee. The City considered placing a franchise fee on long distance service companies using the public rights-of-way. In structuring the fee, the City knew how much revenue it was attempting to generate. This revenue, according to the Deputy City Manager’s testimony, was to be used for all municipal purposes without restriction, not dedicated to .any particular purpose, and not segregated from other general municipal funds. Unlike Baioni, in which the tapping fees were placed in segregated accounts to be solely used to expand the sewer and water systems and for no other purpose, the evidence in the instant case is that the fee was collected to supplement the City’s general revenues without special use restriction.

2. Are the proceeds of this levy restricted for a future use solely and exclusively to benefit its payors?

Clearly not. As evidenced by the Deputy City Manager’s testimony, the proceeds of this levy were always intended for use as general revenues for the City. The parties’ stipulated facts confirmed that, since its enactment, the City has collected monies pursuant to the challenged franchise ordinance, and that the City treats revenues received under franchise ordinances as general revenues with no restrictions on their use.

3. Is the levy fair and reasonable, and reasonably related to the benefits conferred upon the payors?

Legitimate franchise fees are supported by both statutory and case law, and will be upheld so long as the fee is not unreasonable. See, e.g., E. McQuillen, The Law of Municipal Corporations § 34.81 (3d ed. 1986). “Reasonableness” in this context is determined by comparing the fee with the cost of the services to be provided to the fee payors. Baioni, 312 Ark. 423, 850 S.W.2d 1. In this case, the “service” provided was the right to use the City’s public rights-of-way. This issue is discussed in detail in Justice Dudley’s dissenting opinion in this case, in which I join as to that part which holds that the contested levy in this case is an unreasonable and discriminatory charge (parts 11(C)-through IV therein).

In sum, after consideration of the substance of the challenged levy in accordance with the factors outlined above, I would find the levy is not a fee within the City’s authority to enact pursuant to section 14-200-101 (a), but is a tax which is invalid for lack of approval by the electorate in accordance with section 26-73-103. Finally, I note that, even if the instant levy were a fee rather than a tax, I would still find that it is invalid for the reasons that it is unreasonable and discriminatory in accordance with the rationale set forth in Justice Dudley’s dissenting opinion.

For these reasons, I respectfully dissent from the majority opinion.

      interestingly, the fee charged AT&T for its per-minute usage of Little Rock’s rights-of-way amounts to a lower percentage of its revenue than the percentage of revenue paid by the other following (except for one) utilities:
      COMPANY_______PERCENTAGE
      ALLTEL 1.69
      AP&L 5.20
      ARKLA 4.42
      ARKLA (IN LITTLE ROCK) 5.20
      AT&T (IN LITTLE ROCK) 1.92
      LITTLE ROCK WATER WORKS 5.00
      SOUTHWEST ARK. ELEC. COOP. CORP. 3.67
      SOUTHWESTERN BELL TELEPHONE COMPANY 2.43
      SOUTHWESTERN BELL TELEPHONE COMPANY (IN LITTLE ROCK) 7.32
      STORER CABLE (IN LITTLE ROCK) 3.00


source: Caselaw Access Project

author: Tom Glaze, Justice.

license: Public Domain

text:
    Tommy DONOHO v. C. C. DONOHO
    93-1348
    887 S.W.2d 290
    Supreme Court of Arkansas
    Opinion delivered November 14, 1994

      Harper, Young, Smith & Maurras, by: S. Walton Maurras, for appellant.

      Jones, Gilbreath, Jackson & Moll, by: Robert L. Jones, Jr. and Charles R. Garner, Jr., for appellee.
   Tom Glaze, Justice.

This case involves litigation between two brothers, C. C. Donoho and Tommy Donoho, over an accounting involving various family businesses. The facts necessary to reach the legal issue in this appeal are few and undisputed. On September 28, 1990, the Sebastian County Chancery Court entered a judgment in C. C.’s favor against Tommy in the amount of $150,505.30, plus interest. That decision was appealed and the court of appeals affirmed it on September 23, 1992.

On July 20, 1993, Tommy obtained from First National Bank of Ft. Smith two partial assignments of judgments the bank had against C. C. — one was dated July 20, 1993, in the amount of $220,000 and the other was dated September 9, 1992, in the amount of $50,000. On September 23, 1993, Tommy filed a motion in the chancery court seeking to set off the two partial assignments of judgments against the September 28, 1990 judgment C. C. had against him. On September 28, 1993, the chancellor denied Tommy’s motion, and Tommy appeals that decision.

Tommy’s argument for reversal is that Ark. Code Ann. §§ 16-56-102 and 16-65-603(a) (1987) permit judgments to be set off against each other without restrictions and regardless as to when the judgments were obtained or assigned. Those statutes provide as follows:

§ 16-56-102
. . . any demand, right, or cause of action, regardless of how it may have arisen, may be asserted by way of setoff in any action to the extent of the plaintiff’s demand.
§ 16-65-603(a)
Judgments for the recovery of money may be set off against each other, having due regard to the legal and equitable rights of all persons interested in both judgments.

C. C.’s response to Tommy’s contention is that, under Ark. Code Ann. § 16-63-206(c) (1987), judgments assigned to the defendant after suit has been commenced against him shall not be allowed to be set off against the demands of the plaintiff. Thus, under this provision, because Tommy had obtained his assigned partial judgments years after C. C. had commenced suit against him, those partial judgments would be ineligible for setoff against C. C.’s suit and judgment.

Tommy counters C. C.’s position, saying that § 16-56-102 and § 16-65-603(a) are in irreconcilable conflict with the predecessor provision § 16-63-206(c) and, therefore, they impliedly repealed that provision. We disagree.

This court has held that a basic and fundamental rule when considering the effect of statutes is that repeal by implication is not favored and is never allowed except where there is such an invincible repugnancy between the former and later provisions that both cannot stand together. Moore v. McCuen, 317 Ark. 105, 876 S.W.2d 237 (1994); Henslee v. Madison Guar. Sav. & Loan Ass’n, 297 Ark. 183, 760 S.W.2d 842 (1989). This court has also held that a general statute does not apply when there is a specific statute covering a particular subject matter. Cozad v. State, 303 Ark. 137, 792 S.W.2d 606 (1990). That is the situation here. Sections 16-56-102 and 16-65-603(a) are provisions generally authorizing that a demand, right or course of action may be asserted by setoff and also permitting money judgments to be set off having due regard to the legal and equitable rights of all persons interested in both judgments. On the other hand, § 16-63-206(c) is a specific provision governing the timeliness of setoffs, disallowing those judgments assigned to a defendant after the plaintiff commenced suit against the defendant. Because these three provisions can be read in harmony, we believe the trial court’s decision was entirely correct. Therefore, we affirm.


text:
    GENERAL MOTORS ACCEPTANCE CORP., Appellant v. Gerald D. EUBANKS d/b/a Used Cars & Gerald Eubanks, Appellee v. Ryan Chevrolet & Imports, Inc., Appellant

    94-371
    887 S.W.2d 292
    Supreme Court of Arkansas
    Opinion delivered November 14, 1994
    [Rehearing denied December 19, 1994.]

      Barber, McCaskill, Amsler, Jones & Hale, P.A., by: Joseph F. Kolb, for appellant General Motors Acceptance Corporation.

      Compton, Prewett, Thomas & Hickey, P.A., by: Cathleen V. Compton, for appellant Ryan Chevrolet & Imports, Inc.

      John Richard Byrd, Sr., for appellee.

      Brown, J., would grant rehearing.

   Tom Glaze, Justice.

On March 18, 1991, appellee/defendant and third-party plaintiff Gerald Eubanks negotiated the purchase of a 1991 Chevrolet pickup truck by telephone from his office in Hamburg. Upon reaching an agreement, Eubanks and Kenneth Phillips, Eubanks’ employee and friend, traveled to appellant/third-party defendant Ryan Chevrolet & Imports, Inc., located in Monroe, Louisiana. Eubanks and Ryan Chevrolet’s finance manager, Douglas Glaze, met to work out a financing agreement. The terms and surrounding circumstances of that agreement are in dispute. Eubanks contends he signed the financing agreement in blank expecting the agreement to eventually contain those terms to which he agreed. It was stipulated at trial that the finance manager, who was unavailable, would testify that Eubanks did not sign the document in blank.

Thereafter, Eubanks could not register or obtain an Arkansas license for the vehicle because paperwork was not properly completed and the sales tax was not paid. After making twenty-one monthly payments on the truck, Eubanks stopped payment. Appellant/plaintiff General Motors Acceptance Corporation (GMAC), having purchased the security note from Ryan Chevrolet, then filed a replevin suit against Eubanks. Eubanks filed a counterclaim, alleging breach of contract, abuse of process, and requested damages for loss of income, rental payments for a replacement truck, and attorneys’ fees.

GMAC requested a hearing, and an order of immediate delivery. By order entered July 12, the trial court denied GMAC’s request and ordered GMAC to pay the sales tax, and accrued interest and penalties into the registry of the court. Additionally, the court ordered Eubanks to pay his monthly payments under the note into the registry of the court, and ordered that the truck be held and not used until a trial on the merits.

On June 18, 1993, Eubanks filed a third-party complaint against Ryan Chevrolet, which received it on June 24. Ryan Chevrolet filed its answer on July 22. Trial was scheduled to begin on August 20 by order of the court entered June 29. On August 5, Eubanks filed a motion to shorten discovery specifically as to Ryan Chevrolet. On August 10, Ryan Chevrolet filed a motion for continuance. On August 13, Ryan Chevrolet filed a motion for continuance or alternately to sever the third-party complaint. Ryan Chevrolet renewed its motion on the day of trial. The motion was denied.

Following trial and submission of the case on interrogatories entered on August 23, the jury found (1) there was an oral agreement between Eubanks and Ryan Chevrolet, (2) Ryan Chevrolet breached the oral contract, and (3) GMAC had engaged in abuse of process. The jury assessed $11,000 in compensatory damages against Ryan Chevrolet due to the breach, and $5500 in punitive damages against GMAC for abuse of process.

Following trial, a number of motions and orders were entered. For a better understanding of the events leading up to the present appeals, the post-trial procedures pertaining to GMAC and Ryan Chevrolet are discussed separately.

GMAC

After the August 23, 1993 jury verdict, on September 2, 1993, GMAC filed a motion for JNOV. Eubanks filed a motion for judgment on the verdict as to both GMAC and Ryan Chevrolet on September 3. In that same motion, Eubanks alleged it was the intent of the jury that he have possession of the truck free and clear of any liens. Following a hearing on these motions on September 7, 1993, the trial court entered an order on September 9, denying GMAC’s motion for JNOV. The court denied Eubanks’ motion on the judgment as to GMAC, but granted Eubanks’ oral motion for a new trial as to GMAC. The trial court further stated that Ryan Chevrolet had filed no post-trial motions or made any post-trial appearances. The court scheduled the retrial for October 25. On September 17, a consent order between GMAC and Eubanks was entered wherein the parties agreed that (1) the paperwork on the pickup truck would be delivered to Eubanks by GMAC in order to expedite the registration and licensure of the truck, (2) the sum of $875.35 deposited with the court by GMAC was to be released to Eubanks (the difference between the written agreement and oral agreement), with Eubanks paying the difference to obtain registration and licensure of the truck, (3) Eubanks would continue to pay monthly installments under the security note into the court registry, (4) Eubanks would not be restricted from any rights or remedies available to him by registering and licensing the truck, (5) delivery of the documents necessary for registering and licensing the truck to Eubanks is not an admission of any wrongful act by GMAC, and (6) the trial court would entertain additional motions for protective orders, motions in limine, and motions for partial summary judgments based upon res judicata or collateral estoppel.

On October 1, 1993, Eubanks filed a motion for partial summary judgment stating, the September 9 order, entering judgment in favor of Eubanks and against Ryan Chevrolet, rendered all issues as to the terms of the financing agreement res judicata, and that GMAC is collaterally estopped from raising on retrial issues as to the times and provisions of the contract between Eubanks and Ryan Chevrolet. The trial court never entered an order on Eubanks’ partial summary judgment motion.

On or about October 7, 1993, GMAC filed its notice of appeal from the September 9 order granting Eubanks’ motion for new trial and denying GMAC’s motion JNOV. On October 7, GMAC also filed a motion for stay of trial court proceedings, including the retrial scheduled for October 25. On October 11, the trial court granted GMAC’s motion to stay the proceedings “pending the entry of a final opinion by the appellate court.”

RYAN CHEVROLET

On September 8, 1993, Ryan filed a motion for JNOV or a new trial. As noted above, Eubanks, on September 3, had already filed a motion for judgment on the verdict as to both GMAC and Ryan Chevrolet. In its September 9 order discussed above, the trial court granted Eubanks’ motion for judgment on the verdict as to Ryan Chevrolet, but did not address Ryan’s motion for JNOV or a new trial. In fact, the trial court’s order decided on September 7, but filed on September 9, found that Ryan Chevrolet had made no post-trial motions or appearances. Again, Ryan Chevrolet filed its new trial motion on September 8, 1993. On September 10, Ryan Chevrolet filed an ex parte motion for stay to enforce judgment until a hearing on its motion for new trial.

A hearing on Ryan Chevrolet’s motion for JNOV or a new trial was held on September 24. However, the trial court’s order denying Ryan Chevrolet’s motion was not entered until October 11, 1993. That order denying the motion of Ryan Chevrolet for JNOV or new trial, certified the matter as a final order. On October 14, Ryan Chevrolet filed its notice of appeal. In that notice, Ryan Chevrolet stated its appeal is from the September 9 order denying GMAC’s motion for JNOV and granting Eubanks’ motion for a new trial, and “all intermediate Orders involving the merits of this case.”

On appeal, GMAC and Ryan Chevrolet argue a total of nine points which we are unable to consider because there is no appealable order. To be appealable, an order must be final. Cortese v. Atlantic Richfield, 317 Ark. 207, 876 S.W.2d 581 (1994). To be final, an order must dismiss the parties from the court, discharge them from the action, or conclude their rights to the subject matter in controversy. John Cheeseman Trucking, Inc. v. Dougan, 305 Ark. 49, 805 S.W.2d 69 (1991). Pursuant to Ark. R. App. P. 2(a)(3), a party may appeal from an order which grants or refuses a new trial. However, when the cause of action involves multiple parties and multiple claims, the finality of the trial court’s judgment is determined by Ark. R. Civ. P. 54(b). The fundamental policy of Rule 54(b) is to avoid piecemeal appeals, and the burden is on the appellants to produce a record on appeal showing that the jurisdictional requirements of the rule have been met. Cortese v. Atlantic Richfield, 317 Ark. 207, 876 S.W.2d 581 (1994).

An order of dismissal of one party or one claim from a multi-party, multi-claim lawsuit may be granted when the trial court directs the entry of a final judgment as to one or more of the claims or parties and makes express findings that there is no just reason to delay the appeal. Wormald U.S., Inc. v. Cedar Chemical Corporation, 316 Ark. 434, 873 S.W.2d 152 (1994). In order to determine that there is no just reason for delay, the trial court must find that a likelihood of hardship or injustice will occur unless there is an immediate appeal. Id. The trial court must also set forth facts to support its conclusions. Id.

In this case, neither GMAC nor Ryan Chevrolet has presented this court with an appealable order. While both appeals purport to emanate from the September 9 order, actions and inactions by Eubanks, GMAC and Ryan Chevrolet in the court below continued the litigation and rendered that order non-appealable.

First, we review the actions by GMAC. Following the September 9 order in which the court granted Eubanks’ motion for a new trial as to GMAC, GMAC and Eubanks joined in a consent order dated September 17 which the court approved and duly entered. That consent order contains the following language:

The Court will entertain any Motions for Partial Summary Judgment based upon the doctrine of res judicata or collateral estoppel prior to the trial of this matter.

By this action, the trial court continued its jurisdiction of the case for further proceedings, and Eubanks filed a motion for partial summary judgment as provided for in the consent order. While Eubanks’ motion was pending, GMAC filed its notice of appeal from the September 9 order. In other words, GMAC appealed prior to the trial court’s having resolved the partial summary judgment issue. Because Eubanks’ claim for relief against GMAC is still pending before the trial court, we must dismiss GMAC’s appeal.

Lastly, we review Ryan Chevrolet’s appeal which presents its own jurisdictional problem. Following entry of the jury’s verdict on August 23, 1993, Ryan filed its motions for JNOV or new trial on September 8. That motion asserted several grounds for new trial and urged that Eubanks was not entitled to damages from Ryan Chevrolet noth withstanding the jury’s verdict. The trial court denied Ryan Chevrolet’s motion on September 24, 1993, but did not enter its order doing so until October 11, 1993. In Standridge v. Standridge, 298 Ark. 494, 769 S.W.2d 12 (1989), this court, in construing A. R. Civ. P. Rules 54(b) and 58, has held that a judgment or decree may not be effective until it has been “entered.” See also Administrative Order No. 2. In addition, this court, in construing Ark. R. App. P. 4(c), has said that, if the trial court neither grants nor denies a party’s new trial motion within thirty days of its filing, the motion will be denied as of the thirtieth day.

In the present case, Ryan Chevrolet’s motion was deemed denied on October 4, 1993. Thus, while Ryan Chevrolet filed a timely notice of appeal on October 14, 1993, a proper order complying with the requirements in A. R. Civ. P. 54(b) was never entered. As discussed previously, this litigation involves multiple claims and parties, and the trial court could have directed the entry of a final judgment as to one or more, but fewer than all of the claims or parties only upon an express determination, supported by specific factual findings, that there is no just reason for delay. The trial court failed to enter such an order. Even if the trial court had had the jurisdiction to enter the October 11 order it did in this matter, that order recited no factual underpinnings making that a final, appealable order.

For the reasons above, we must dismiss both GMAC’s and Ryan Chevrolet’s appeals without prejudice.

      This notice of appeal is not file marked by the clerk of the court, thus, actual date of entry is unknown.

      It is noted that Ryan Chevrolet had substituted counsel during this period, and new counsel did not make an appearance until September 16, 1993.


text:
    Elizabeth Jan SCROGGIN; Carroll Scroggin, Jr.; Henry Scroggin; Roy Scroggin; David Williams & Sharon Lea Williams v. CITY OF GRUBBS, Arkansas; Arkansas Industrial Development Commission; & Arkansas Soil & Water Conservation Commission
    94-9
    887 S.W.2d 283
    Supreme Court of Arkansas
    Opinion delivered November 14, 1994
    [Rehearing denied December 19, 1994.]

      Hankins, Hicks, Madden & Adcock, by: Stuart W. Hankins, for appellant.

      Boyce & Boyce, by: Edward Boyce, for appellee.
   Tom Glaze, Justice.

This case involves a claim of inverse condemnation. In 1989, appellee City of Grubbs, a municipal corporation and city of the second class located in Jackson County, began efforts to design and construct a flood control levee to protect the city from overflow due to the flooding of the Cache River. Grubbs entered into a grant agreement with appellee Arkansas Industrial Development Commission (AIDC) which initially provided $164,100 for construction. Additionally, appellee Arkansas Soil and Water Conservation Commission (ASWCC) committed to provide up to $70,000 for construction, which amount was later increased by $100,000.

The appellants, the Scroggins and the Williamses, are property owners within and outside the city’s north and east boundary lines. The map below will aid the reader in understanding the facts of this case.

As can be seen from the map above, the Scroggins own three parcels of land totalling approximately 278 acres which are contiguous with each other. These parcels are worked as a single farm. The southwestern 40 acres are located within the corporate limits of Grubbs and are referred to as tract no. 2. Another tract, tract no. 1, totaling approximately 46 acres is located outside the corporate limits and lies adjacent to the eastern border of tract no. 2. Scroggins’ other 192 acres are referred to as the “remaining property” and lie immediately north of tracts no. 1 and 2. Appellants David and Sharon Williams, who rent and farm the Scroggins’ land, own a single family dwelling on a one acre tract located in the southeastern comer of Scroggins’ tract no. 1. In addition, the Williamses have a private road that extends from and is contiguous with Guffey Street. Guffey Street is a city street which ends at its intersection with Maple Street where the Williams private road begins and extends to the Williams residence.

On November 4, 1991, the Scroggins and Williamses filed suit in Pulaski County against Grubbs, AIDC and ASWCC, seeking to enjoin the funding and construction of the city’s levee on their property. Grubbs, AIDC and ASWCC filed motions to dismiss the suit, and the chancellor denied them on February 27, 1992. In her order, the chancellor also concluded that, as a matter of law, Grubbs was without statutory authority to condemn property outside its municipal borders. Based upon the chancellor’s February 27 order, the Scroggins asked for a partial summary judgment which was granted on July 8, 1992. The chancellor’s summary judgment stated the judgment is res judicata as to the issue of the power of Grubbs to condemn land outside its municipal borders for construction of a levee for flood control purposes. No appeal was taken from that judgment. As a result of the July 8 order, Grubbs is unable to condemn any part of the Scroggins’ tract no. 1, therefore, the levee cannot be extended along the south side of that tract without the owners’ consents.

Grubbs then purchased an easement south of and parallel to the Williams private road, so it could redesign the levee to lie in the easement and outside the Scroggins’ tract no. 1. The remaining segment of the proposed levee runs along the south boundary of Scroggins’ tract 2, but that property is within the city limits and subject to eminent domain. As shown on the map, the levee is to be positioned on the north side of Guffey Street where the street forms the southern border of tract no. 2, and on the south side of the Williams road, within Grubbs’ easement located south of tract no. 1 and the Williamses’ one acre. With this redesign of the proposed levee, Grubbs sought authorization and funding to proceed with the construction.

The Scroggins and the Williamses filed amended complaints that alleged, among other things, that the redesigned, proposed levee is located so their tracts and acreage are north and outside the levee, which would cause their lands to be a holding pond and flowage way area for flood waters diverted from the city. They further alleged the proposed levee would result in a taking by inverse condemnation in violation of the chancellor’s earlier February 27, 1992 order and July 8, 1992 partial summary judgment. They also alleged the location of the levee in relation to the Scroggins’ tract no. 2 was arbitrary and capricious, constituted an abuse of discretion, and unreasonably discriminated against the Scroggins.

Following trial on the merits on October 27, 1992, the chancellor dismissed the Scroggins and Williams complaint with prejudice. In her order of dismissal filed on April 28, 1993, the chancellor held that the proposed levee to the south of Scroggins tracts no. 1 and 2 will not block a natural watercourse. The chancellor also held that the increased water elevation on the Scrog-gins’ and Williamses’ properties caused by the proposed levee would be de minimis, and that Grubbs had sufficient funds to compensate the Scroggins and Williamses for any damage to their property and to maintain the levee. She further concluded that Grubbs had wide discretion in the location and construction of a levee, and that the location chosen by Grubbs was not made arbitrarily or capriciously. The Scroggins and Williamses appeal from this order and its findings and conclusions.

On appeal, chancery cases are reviewed de novo considering the evidence in a light most favorable to the appellee. Leathers v. W.S. Compton Co., 316 Ark. 10, 870 S.W.2d 710 (1994). This court will not reverse the chancellor’s findings of fact unless they are clearly erroneous, and the burden is on the appellant to show that the findings are erroneous. Id. Here, the Scroggins and Williamses base their appeal on the following three points: (1) Grubbs acted outside its legal authority by advancing the construction of the proposed levee, (2) Grubbs violated the Scroggins’ constitutional rights by placing tract no. 2, located within the city limits, outside the protection of the proposed levee, and (3) the construction of the levee will violate Ark. Code Ann. § 5-72-106(a) (Repl. 1993).

First, the Scroggins and Williamses argue the chancellor erred in holding that the levee as designed will not result in de facto takings of the Williams residence and private road, and the Scroggins’ tract no. 1 and remaining property. They claim that such takings will occur by inverse condemnation because the proposed levee will cause flood waters to be deeper and remain longer over larger areas of their respective properties, will block a natural drainage way, and will impair their access to the only public road available to them — Guffey Street. The Scroggins and Williamses argue the question is whether the proposed levee constitutes a restriction or blockage of the flow of the Cache River. For support of their position that the levee would impermissively interfere with the watercourse of the Cache River, they point to a letter from Curtis James, Acting Field Supervisor of the U.S. Fish and Wildlife Service, wherein James stated that the levee “would constrict the width of the [one-year] floodplain to less than 1/8 of a mile.”

The Scroggins and Williamses also point to the testimony of Robert Holloway, recognized by the court as an expert in the field of civil engineering and hydrology. Holloway testified that a natural drainage way exists across tract no. 1 and the Williams road. Holloway further testified that construction of the levee as designed will block the natural drainage flow over the road, thereby reducing the floodplain of the Cache River by 75 to 80 percent (3000 feet wide to 600-700 feet wide). Holloway testified that such reduction or “squeezing” of the flow of the river by the levee, without a corresponding elevation of the riverbed upstream, would cause the river to expand beyond its normal flood plain both above and below the levee. Thus, Holloway opined the inevitable effect on the Scroggins’ and Williamses’ lands because of the levee would result in more of their land being inundated more frequently with higher water levels.

Finally, the Scroggins and Williamses point to the testimony of Robert Fooks, Jr., an engineer with the U.S. Soil Conservation Service. Fooks testified that flood waters from the river will be stored north of the levee and the flood water elevations will be increased due to construction of the levee. Additionally, Fooks testified that while surface water would flow northeasterly off of the Scroggins’ and Williamses’ property during periods of low water, there essentially would not be any flow during periods of high flood when their property is inundated. Because the Scrog-gins’ and Williamses’ lands are within the floodplain, the levee would restrict the flow during high flows and cause an increase in water surface elevation. Finally, Fooks testified that the Corps of Engineers had determined that because of the proposed levee, the increase in water level for the 10-year flood frequency would be 0.25 feet or three inches, and the increase for the 100-year flood frequency would be 0.6 feet or slightly over seven inches. But Fooks was unable to tell the chancellor how many feet of inundation would occur on the Scroggins’ and Williamses’ properties with and without the levee.

The Scroggins and Williamses rely on National By-Products, Inc. v. U.S., 405 Fed.2d 1256 (Ct. Cl. 1969). There, the Air Force built a levee on the left side of Papillion Creek in order to protect its property from occasional floods. As a result of the government’s action in building the levee on only one side of the creek, property located on the right side of the creek experienced two severe floodings in 1964 within two months of each other. The plaintiff, an owner of property on the creek’s right side, brought suit against the government claiming that the government had taken a flowage easement across his property, and thus the government owed him just compensation. In rejecting National By-Products’ claim for compensation, the Court of Claims held that National By-Product’s land had not been “taken” under the Fifth Amendment since National By-Products had failed to show that damage to its land rose above a temporary, incidental injury. The court stated as follows:

The Government has been held liable where the construction of a dam or other obstruction in a stream results in either permanent flooding, or “a permanent liability to intermittent but inevitably recurring overflows.” But the courts have held that one, two or three floodings by themselves do not constitute a taking. The plaintiff must establish that flooding will “inevitably recur[.]”

Id. at 1273 (citations omitted). Further, the claims court stated that the distinction between “permanent liability to intermittent but inevitably recurring overflows” and occasional floods did not have clear guidelines, since “the rule is really an application to this particular situation of the general principle that the Government is not liable under the Fifth Amendment for ‘consequential damages’ arising from the carrying on of its lawful activities.” Id.

In finding that National By-Products failed to meet its burden of proof, the claims court pointed to the following four distinguishing circumstances of the case: (1) in the past, plaintiff was largely spared major flooding due to the breach of other older levees on the left side of the creek which relieved the pressure on the plaintiff’s older levee on the right side of the creek; (2) the 1964 floods were severe by past standards and there was no proof that such rainfall causing the floods would “inevitably recur” in the future; (3) during the 1964 floods the downstream portion of the creek was unusually constricted with debris and silt which created greater pressure on the plaintiff’s levee, but which condition was corrected after the floods; and (4) the flooding on the plaintiff’s property was partially due to the weakness of its own older levee which was corrected by the building of a new levee on the right side of the creek.

Here, the Scroggins and Williamses argue that the evidence shows that Grubbs’ proposed levee will cause “intermittent but inevitably recurring overflows” onto their properties. They further argue it is immaterial whether the taking is caused by either restricting the width of the flood-plain or diverting surface waters by blocking drainage over and under Williams road.

Grubbs countered by arguing that it has the authority to construct flood control improvements for protection of the health and safety of its citizens, and for preservation of their property pursuant to legislative determination. See Ark. Code Ann. §14-268-101 (1987). Under Ark. Code Ann. § 18-15-309 (Supp. 1993), Grubbs points out that the city is provided with the power of eminent domain necessary for the construction, operation, repair, or maintenance of flood control improvements including levees.

Grubbs also argues that, in order for there to be inverse condemnation of the Scroggins’ and Williamses’ properties, the Scroggins and Williamses must show deprivation of substantial possession or enjoyment of their properties caused by government action and without adequate compensation. Grubbs points out that Holloway disputed Fooks’ testimony regarding the amount of increased flood depth that would be caused by the levee. Additionally, Grubbs emphasizes the evidence that the Scroggins’ and Williamses’ properties have always been subject to flooding, yet they have continued to use the land for farming. As a consequence, Grubbs argues the chancellor was correct in finding that the levee will have only minimal effect on the Scroggins’ and Williamses’ lands.

Grubbs further relies on McCoy v. Board of Directors of Plum Bayou Levee Dist., 95 Ark. 345, 129 S.W. 1097 (1910) and City Oil Works v. Helena Improvement Dist. No. 7, 149 Ark. 285, 232 S.W. 28 (1921). Applying a modification of the common enemy doctrine, the court in McCoy held that the district had the right to construct a levee to prevent the escape of flood water from a river into surrounding lowlands even though such action resulted in the flooding of other land situated between the river and the levee, unless the injury could be avoided by reasonable effort and expense. The McCoy court held that the district was not liable for permanent damage to the plaintiff’s land despite the constitutional requirement of just compensation under Ark. Const, art. 2 § 22.

Citing McCoy with approval, the court in City Oil Works v. Helena Imp. Dist. No. 1, 149 Ark. 285, 232 S.W. 28 (1921), held that the distinguishing factor concerning whether the government becomes liable for damages- from construction of a levee was whether the damage resulted from the levee itself, rather than from the decision to place the property within or without the protection of the levee. In City Oil Works, the district replaced an older, ineffective levee with one located so that a mill was left outside the protection of the levee. In holding that the district owed damages to the mill in a condemnation action, the court found that the determinative factor was that the damage to the mill was caused by the levee being built across a railroad line which was used by the mill to carry freight. Because the levee itself blocked the mill’s railroad connection, the mill was rendered inoperable. The court reiterated the government’s right to construct a levee for the general good without being liable for damages caused by the exclusion of certain lands from the levee’s protection.

In the present case, additional evidence showed that Grubbs and the Scroggins’ and Williamses’ properties are located approximately one mile from the Cache River and within its floodplain, that the land is essentially flat except for a slight depression or swag in tract no. 1 and various man-made elevations including the Williams road, that flooding of the Scrog-gins’ lands occurs frequently and usually during the winter months when no farming is done, that flooding has not interfered with the Scroggins’ and Williamses’ abilities to farm the lands, that flooding of the Williams road has not interfered with the ability to use it, and that a small levee prevents high water flooding of the Williams residence. Specifically, the chancellor found that no flow exists when a floodplain, such as the area surrounding Grubbs, becomes inundated. Based upon the evidence and her findings, the chancellor held that the de minimis increase in water elevation caused by the proposed levee, as reflected in Fooks’ testimony, will not unnecessarily injure or damage the Scrog-gins’ and Williamses’ lands. As a consequence, she concluded no taking had been shown.

In conclusion, the chancellor’s finding that Grubbs has sufficient funds to redress any damage to the Scroggins and Williamses stands undisputed. Furthermore, the Scroggins and Williamses have failed to show that the levee itself would cause damage or that any damages they might experience could be avoided by a reasonable alternative. The chancellor found that Grubbs had considered two other alternatives and rejected each for valid reasons based in part because of costs and objections made by the Scroggins. Additionally, Grubbs rejected an alternative proposal by the U.S. Fish and Wildlife Service because of increased costs and potential damage to existing city facilities. Lastly, the Scroggins proposed an alternative through their agent Tommy Drew which Grubbs rejected because of increased costs and inclusion of additional wetlands which would have substantially lengthened the time for obtaining approval of, and in construction of, the proposed levee.

As this court has held and the chancellor so determined, Grubbs has wide discretion in making determinations with regard to the location of a levee and the mode of its construction. Garland Levee Dist. v. Hutt, 207 Ark. 784, 183 S.W.2d 296 (1944). Here, the Scroggins and Williamses have failed to show that Grubbs’ decision in locating the proposed levee was arbitrary and capricious, that the chancellor’s findings of fact were clearly erroneous or that the chancellor erred as a matter of law.

The Scroggins and Williamses raise two other points in this appeal, but we are unable to find where they obtained the chancellor’s ruling on those points. It is well settled that the burden of obtaining a ruling on a particular theory of recovery is on the party who advanced the theory below, and matters left unresolved at trial are waived and may not be relied upon on appeal. See Morgan v. Neuse, 314 Ark. 4, 875 S.W.2d 826 (1993).

For the reasons discussed above, we affirm.

       Although the land involved is located in Jackson County, the Scroggins and Williamses brought suit in Pulaski County because they sought to enjoin the two state agencies, AIDC and ASWCC, from providing funds for construction of the levee.

      We note that the Scroggins’ statement of the case reflects that, on November 12, 1992, Grubbs instituted a separate eminent domain action in Jackson County Circuit Court against the Scroggins for the condemnation of an eighty-foot-wide strip of land along the southern boundary of tract no. 2 and on the north side of and parallel to the Williams’ private road within Scroggins tract no. 1. The Jackson County Circuit Court case is not otherwise argued or put in issue here.

      As a part of her findings of fact and conclusions of law dated April 27, 1993, and filed on April 28, 1993, the chancellor dismissed this action with prejudice.

      In cross-examination, Holloway recharacterized this natural drain as “a high water overflow course” and not a regular watercourse.

      Other testimony revealed that the appellants had placed a thirty inch drain pipe under the Williams road to facilitate the flow of water off of the Scroggins’ land. The appellants claim the levee will block this drain, as well as prevent the flow of surface water and Cache River flood waters over the top of the Williams road.

      The common enemy doctrine provides that waters of the sea or surface waters are a common enemy and may be warded off by artificial methods without incurring liability for damages to another.

       Art. 2 § 22 provides in part that private property shall not be taken, appropriated or damaged for public use, without just compensation.


author: Robert L. Brown, Justice.

text:
    IN the MATTER OF Lonnie POSTON as Administrator of the Estate of Zachery Poston, Deceased, Philip Mark Le, as Administrator of the Estate of Michelle Theis, Deceased, and Philip Mark Le, Individually v. Shirlie FEARS and Sheri Thibodeau
    94-95
    887 S.W.2d 520
    Supreme Court of Arkansas
    Opinion delivered November 14, 1994

      Lawrence W. Fitting and Walters Law Firm, P.A., for appellants

      Pryor, Barry, Smith, Karber & Alford, by: Thomas B. Pryor, for appellees.
   Robert L. Brown, Justice.

The appellants in this appeal are Lonnie Poston, administrator of the estate of Zachery Poston, and Philip Mark Le, administrator of the estate of Michelle Theis. Philip Mark Le also appeals individually. The appellants, Poston and Le, raise essentially one issue in their appeal: whether the trial court erred in granting the motion to dismiss of appellees Shirlie Fears and Sheri Thibodeau. We treat the two dismissal orders as orders to dismiss under Ark. R. Civ. P. 12(b)(6), modify them to be without prejudice to plead further, and remand the cases to the trial court.

On September 5, 1990, Zachery Poston and Michelle Theis, two children of tender years, were placed in a daycare center operated by Caroline Theis under the name “God’s Rainbow.” At some point during the day, they left the daycare premises and made their way to the adjacent, unoccupied property owned by Fears and Thibodeau. They drowned in a swimming pool located on the premises.

On April 23, 1991, Poston filed his first complaint against Caroline Theis, Fears, and Thibodeau. This was followed by three amended complaints, the last being titled Second Amended Complaint and dated July 15, 1991. On June 4, 1992, Le filed his first complaint in intervention against Caroline Theis, Fears, and Thibodeau. It was followed by two amended complaints in intervention, the last being titled Second Amended Complaint in Intervention and dated July 13, 1992.

The complaints by Poston and Le alleged negligence against Caroline Theis as the operator of the daycare center and also against Fears and Thibodeau as owners of the adjacent property and swimming pool. Essentially the same facts are contained in both complaints. In addition to the ownership of the two properties, their proximity, and the deaths of the minor children, Poston and Le alleged the following with regard to the liability of Fears and Thibodeau:

- they failed to maintain their premises so as to prevent minor children from entering the pool area.
- they failed to cover or drain the pool so as to prevent minor children from falling in or drowning.
- they allowed the pool to become dirty and cluttered with debris so as to make the existence of water not apparent to minor children and so as to create a latent or hidden danger. The pool also had steep sides which prevented minor children from escaping.
- they allowed a water hose and a pool net with an eight-foot extended aluminum handle to lie in the pool area which would be attractive to minor children.
- they knew or should have known of the propensity of young children like the decedents to be attracted to swimming pools and should have properly secured the area and further covered or drained the pool.

Poston and Le each settled their complaints against Caroline Theis, leaving only the causes of action against Fears and Thibodeau remaining.

Fears and Thibodeau moved to dismiss both complaints. In each motion to dismiss, they moved for judgment on the pleadings, but they based each motion on the failure of Poston and Le to state facts upon which relief may be granted. The circuit court dismissed both complaints. In doing so, the court found (1) that neither complaint alleged that Fears and Thibodeau knew the minor children were on their property; (2) that the children were trespassers to whom “no duty” was owed; and (3) that facts alleging an attractive nuisance, a hidden inherent danger, or otherwise were not sufficient to establish a claim. In both orders the word “dismissing” or “dismissal” is used in the title. The circuit court stated in each order that the second amended complaint “fails to state facts upon which relief can be granted, and accordingly the defendants Shirlie Fears and Sheri Thibodeau are entitled to judgment on the pleadings.” The court then dismissed both complaints with prejudice.

Poston and Le urge that the circuit court erred in its conclusions, but we must first determine whether the circuit court entered a judgment on the pleadings pursuant to Ark. R. Civ. P. 12(c) or a dismissal pursuant to Ark. R. Civ. P. 12(b)(6). An argument could be made for either, but we conclude that the circuit court entered two 12(b)(6) dismissal orders. In reaching this conclusion, we observe that judgments on the pleadings are traditionally not favored by this court. See, e.g., Estate of Hastings v. Planters & Stockmen Bank, 307 Ark. 34, 818 S.W.2d 239 (1991); Reid v. Karoley, 229 Ark. 90, 313 S.W.2d 381 (1958). Moreover, there was abundant use of Rule 12(b)(6) language by the court, including reference to a failure to state facts upon which relief could be granted. The court further ordered dismissal of the two complaints.

The issue involved in this case is one of first impression for this court because we have not decided a case concerning the liability of an owner of a residential swimming pool in the context of attractive nuisance. The circuit court referred to principles of attractive nuisance garnered from our cases dealing with children of tender years and bodies of water such as ponds. See Cooper v. Diesel Service, Inc., 254 Ark. 743, 496 S.W.2d 383 (1973), overruled in part; Farm Bureau Mut. Ins. Co. v. Henley, 275 Ark. 122, 628 S.W.2d 301 (1982); Carmichael v. Little Rock Housing Authority, 227 Ark. 470, 299 S.W.2d 198 (1957); Brinkley Car Co. v. Cooper, 60 Ark. 545, 31 S.W. 154 (1893). The circuit court’s analysis was correct under those cases. Even if we assume as a matter of law that there is owner liability under these circumstances and that these cases should apply, Poston and Le simply have failed factually to state a cause of action under attractive nuisance principles. However, liability for deaths of very young children in private swimming pools may invoke different considerations, both legal and factual. See, e.g., Liability of Owner of Private Residential Swimming Pool for Injury or Death Occasioned Thereby, 20 ALR 3rd 1395 (1968); see also Restatement of Torts, Second, § 339 (ALI 1965).

We conclude that Poston and Le should be permitted to amend their respective complaints further in an attempt to state a cause of action following a dismissal on 12(b)(6) grounds. We have held under similar circumstances that an opportunity to amend should be afforded. See Hubbard v. Shores Group, Inc., 313 Ark. 498, 855 S.W.2d 924 (1993). In Hubbard, the plaintiff’s complaint was dismissed with prejudice under Rule 12(b)(6). We stated on appeal:

ARCP Rule 12(j) provides that a trial court is to notify the attorneys of any action taken, and “if appropriate, the court will designate a certain number of days in which a party is to be given to plead further.” Appellant Hubbard was not given the chance to plead further. Under such circumstances, we modify the dismissal to one without prejudice and remand. Ratliff v. Moss, 284 Ark. 16, 678 S.W.2d 369 (1984).

313 Ark. at 504, 855 S.W.2d at 928.

The same principle applies here. We, therefore, modify the two orders of dismissal to be without prejudice to plead further and remand the matter to circuit court.

Affirmed as modified and remanded.

      The ages of the children are not given, though in appellants’ brief, one child is described as being twenty-three months.