author: Richard F. Hatfield, Special Justice.

text:
    Billy V. HALL, et al. v. Monte J. STAHA, et al. v. Dunhall Pharmaceuticals, Inc., Cross-Appellants
    89-288
    800 S.W.2d 396
    Supreme Court of Arkansas
    Opinion delivered November 19, 1990

      Hilburn, Calhoon, Harper, Pruniski & Calhoun, Ltd., by: John E. Pruniski and Dorcy Kyle Corbin; and Hendren & Hood, for appellants.

      Estes, Estes & Gram ling, by: Peter J. Estes, Jr., for appellee Monte J. Staha, Jimmy H. Hatfield, and MJS, Inc.

      Stephen E. Adams, Ltd., for MED-MAX Associates Limited Partnership.

      Stanley, Harrington & Mars, by: Roy E. Stanley, for appellee/cross-appellant Dunhall Pharmaceuticals, Inc.
   Richard F. Hatfield, Special Justice.

This is a consolidation of (1) an action by Monte J. Staha (Staha) and Jimmy H. Hatfield (Hatfield) challenging the election of directors of Dunhall Pharmaceuticals, Inc. (Dunhall), and (2) a shareholder derivative suit by Billy V. Hall, et al., alleging excess compensation, improper use of corporate assets and breaches of fiduciary duty by Hatfield and Staha as officers and directors.

Dunhall, which sells pharmaceuticals, was formed in 1960. In 1970, Hatfield and Staha, who were sales manager and president, respectively, entered into employment contracts with Dunhall to be renewed annually “unless the parties did not agree” to pay themselves a percentage of all net sales of the company. In 1973, Staha formed M.J.S., Inc., and Hatfield formed R.N.I., Inc., and each assigned his employment contract to his corporation. Dunhall’s net sales rose from $327,039 in 1970 to $6,221,941 in 1987, and its shareholder equity account rose from $87,659 in 1970 to $1,694,896 in 1987. No dividends were ever paid to Dunhall shareholders. The employment contracts provided for the following percentages of Dunhall net sales to Hatfield and Staha each in the respective years: 1970 - six percent, 1973 - five percent, and 1982 - four percent. At the time of the contract revisions of the agreement with the Dunhall Board in 1973 and 1982, Hatfield and Staha did not own or control the majority of the Dunhall stock.

In March 1987, Hatfield, Staha and Hall, who together owned 48 percent of the outstanding Dunhall stock and were the only directors, received an offer from Jones Medical Industries, Inc., (JMI) to purchase their Dunhall stock, which was refused at the request of Staha in June, 1987. At a shareholders’ meeting on May 11,1987, a dispute as to the election of directors resulted in a lawsuit in June, 1987, challenging this election which was part of this consolidated action. On July 13, 1987, another offer was received by Hatfield, Staha and Hall from JMI to acquire all or substantially all of the total Dunhall stock for a sales price which would approximate $15 per share. This offer was withdrawn on August 31, 1987. Shareholders other than directors were never informed of either offer.

Hatfield and Staha formed MED-MAX Associates Limited Partnership, a Delaware limited partnership (MED-MAX) on July 7, 1987. Through their efforts and those of Dunhall salesmen, sufficient stock was acquired at $3 to $5 a share from thenDunhall shareholders together with stock owned by Hatfield and Staha to constitute 50.5 percent of the outstanding stock of Dunhall. Hatfield, Staha and the other shareholders owning 50.5 percent of the Dunhall stock exchanged this stock for limited partnership interests in MED-MAX. Such solicitations ceased once control was obtained, and, thus, not all Dunhall shareholders were offered interests in MED-MAX. Hatfield and Staha were the general partners in MED-MAX and authorized by it to vote all Dunhall stock it owned. The employment contracts of Hatfield and Staha, through their individual corporations, M.J.S., Inc., and R.N.I., Inc., were assigned to MED-MAX in August, 1987.

The names of the Dunhall shareholders, who had transferred their stock for limited partnership interests in MED-MAX, were not of public record as of September 21, 1987, the next called shareholder meeting after May 11, 1987.

At the September 21, 1987, shareholders’ meeting, Staha voted the MED-MAX stock to elect Hatfield and Staha directors together with Hall, who was elected by the other voting shareholders. Hall objected to Staha voting the Dunhall stock owned by MED-MAX on the basis that it constituted an illegal voting trust.

Consideration of the employment contracts was on the agenda for the June, 1987, board meeting and the September, 1987, shareholders’ meeting, but was not acted upon at either meeting. These contracts required annual renewal “as long as the parties agreed.” The last renewal date was October 1, 1986. Hatfield and Staha had previously opposed any change in these contracts.

Dunhall was profitable from 1970 until the fiscal year ending December 31, 1986, in which a loss of $138,593 occurred, followed by a loss of $487,215 for the fiscal year ending December 31,1987. Hatfield’s and Staha’s employment contracts based on net sales provided for total compensation to them of $513,768 in 1986 and $497,754 in 1987.

On September 17,1987, Hall and other shareholders filed a shareholder derivative action suit against Hatfield, Staha, their corporations, MED-MAX and Dunhall alleging that Hatfield and Staha received excessive compensation and payment by Dunhall for their personal expenses and breached their fiduciary duty. At the May, 1988, Dunhall shareholders’ meeting, Hatfield, Staha and Hall were elected directors. Following this meeting, Hatfield and Staha voted for, and Hall against, continuing the employment contracts on the terms of the October 1, 1982, contract.

Sometime in 1982, Dunhall, at Staha’s direction, initiated a procedure which resulted in excess sales collections. A salesman receiving cash for a sale with five percent discount would forward the check to Dunhall headquarters, which would also invoice the customer for the same amount without showing the payment. Many customers paid the same bill twice resulting in $9,000 to $10,000 per month receipts to Dunhall. In September, 1988, this accumulated total was in excess of $550,000. The funds were not returned to the customer unless specifically requested. Staha testified that the reason for this procedure was that Dunhall had insufficient support staff to properly account for these payments. Dunhall’s certified public accountant, who audited the corporation annually, testified that a reserve was established for the refund of these funds based on experience of refund requests and that they were taken into income by Dunhall after two years if no repayment request was made.

The chancellor found that (1) the action challenging the election of directors was moot; (2) Dunhall should elect necessary directors according to its corporate documents; (3) Hatfield and Staha should pay Dunhall interest for personal use of corporate property; (4) the business judgment rule shielded actions of Hatfield and Staha regarding JMI proposals to purchase Dunhall stock; (5) change of the employment contract of Hatfield and Staha had not been considered by Dunhall shareholders or directors; (6) Hatfield and Staha did not breach their fiduciary duty to Dunhall by forming MED-MAX; (7) Staha did not breach his fiduciary duty to Dunhall shareholders by implementing and maintaining the double billing operation; (8) MED-MAX was not an invalid voting trust arrangement; and (9) Dunhall should pay $25,000 fees to the Hall’s attorneys for prosecuting the derivative action suit. Appellants appeal alleging error in findings 4 through 8. Dunhall cross-appeals finding 9.

In Gries Sports v. Cleveland Browns Football, 26 Ohio St. 3d 15, 496 N.E. 2d 959 (1986), a shareholders’ derivative action, the Ohio Supreme Court held the directors were not entitled to the benefit of the business judgment rule under Delaware law. In discussing the applicability of the rule, the court said:

The business judgment rule is a principle of corporate governance that has been a part of the common law for at least one hundred and fifty years. It has traditionally operated as shield to protect directors from liability for their decisions. If the directors are entitled to the protection of the rule, then the courts should not interfere with or second-guess their decisions. If the directors are not entitled to the protection of the rule, then the courts scrutinize the decision as to its intrinsic fairness to the corporation and the corporation’s minority shareholders. The rule is a rebuttable presumption that directors are better equipped than the courts to make business judgments and that the directors acted without self-dealing or personal interest and exercised reasonable diligence and acted with good faith.

Two elements must be satisfied in order for the rule to be invoked. First, its protections can only be claimed by disinterested directors whose conduct otherwise meets the tests of business judgment. Second, to invoke the rule’s protection, directors have a duty to inform themselves of all material information reasonably available to them prior to making a business decision. Having become so informed, they must then act with requisite care in discharge of their duties. Aronson v. Lewis, 473 A.2d 805 (Del. 1984).

The application of the business judgment rule has never been addressed in prior decisions of this court. We believe the rule should be utilized as a tool of judicial review, and, accordingly, the business judgment rule is hereby adopted and will by applied by courts in Arkansas when deemed appropriate.

The evidence reflects that Hatfield and Staha were not disinterested directors in dealing with the offer by JMI in July, 1987, to purchase all or substantially all of the Dunhall stock for the following reasons:

1. The chancellor found that Hatfield and Staha exercised good faith judgment in opposing the JMI offer in July, 1987, to acquire all or substantially all Dunhall stock on the basis that it would be hostile to the present Dunhall management. However, at the time this JMI proposal was made to purchase all Dunhall stock for a price of approximately $15 per share, purchases of Dunhall stock were being made, in a coordinated effort, by Hatfield, Staha and Dunhall salesmen at $3 to $5 a share with the purpose of gaining control of Dunhall.

2. The chancellor found that JMO did not intend to retain Hatfield and Staha in their positions at the salary provided in the existing employment contracts and would make other changes. There is no evidence that Hatfield and Staha communicated this offer to other Dunhall shareholders and little evidence that they thoroughly investigated the effect on Dunhall and its shareholders even though they had an obvious conflict of interest in probably losing their lucrative positions. The chancery court further found that the offer was only a “proposal,” not a “binding offer.”

Chancery cases are tried de novo on appeal, and we will not reverse the chancellor’s findings unless clearly erroneous. Conway Corp. v. Construction Engineers, Inc., 300 Ark. 225, 782 S.W.2d 36 (1989), cert. denied,_U.S__, 110 S. Ct. 1809 (1990). This court does not normally remand a case to chancery court, but rather we try the case de novo and render the decree that should be rendered below. The usual practice is to end the controversy by final judgment or by directions to the trial court to enter a final decree. This rule, however, is not imperative and this court, in the furtherance of justice, has the power to remand any case in equity for further proceedings, including hearing additional evidence. Walt Bennett Ford v. Pulaski County Special School District, 274 Ark. 208, 624 S.W.2d 426 (1981).

The evidence clearly shows that Hatfield and Staha had a conflict of interest, thus making the business judgement rule inapplicable. The chancery court was clearly erroneous in holding the business judgment rule protected the actions of Hatfield and Staha regarding the JMI offer of July, 1987. The case is remanded for further proceedings to determine whether Hatfield’s and Staha’s conduct concerning the JMI offer of July, 1987, was in the best interests of Dunhall. If, after hearing additional evidence on this matter the trial court finds that Hatfield’s and Staha’s conduct was not in the best interests of Dunhall, the chancellor is instructed to determine any damage to appellants as a result of Hatfield’s and Staha’s actions.

The chancery court found that Hatfield’s and Staha’s employment contracts had not been considered by shareholders or directors and erroneously refused to “speculate” as to the directors’ actions had the contracts been considered.

The question is one of the burden of proof of the “fairness” to Dunhall of the employment contracts. The situation changed dramatically once MED-MAX controlled over fifty percent of Dunhall stock and owned the employment, contracts. The record reflects that Hatfield and Staha had opposed any change in the employment contracts since 1982 and voted in May, 1988, to continue the terms of the 1982 contracts. The first time at which the contracts could have been considered after problems giving rise to this litigation arose was October 1,1987. After the May, 1987, shareholder’s meeting, the evidence presents a real question about whether there was “agreement” of the parties. It is apparent that as of October 1, 1987, there was a dispute about whether the Dunhall shareholders’ meeting on September 21, 1987, was properly held and voting of MED-MAX stock proper, which is covered later in this opinion. In any event, the directors had a fiduciary duty to consider the fairness of these employment agreements to Dunhall which were to be considered after October 1,1987. At that time, Hatfield and Staha constituted two-thirds of the Dunhall board, and represented MED-MAX, owner of 50.5 percent of outstanding shares of Dunhall. Their actions before 1987 and in May, 1988, made it apparent that they, as Dunhall directors, would oppose any change in the employment contracts. MED-MAX benefited from continuing the existing contracts, whereas Dunhall lost $138,573 in 1986 and $487,215 in 1987 when Hatfield and Staha were paid a total of $513,768 in 1986 and $497,754 in 1987 under their employment contracts.

Managing directors have a fiduciary duty to the corporation not to pay themselves excessive salaries. Clark-McWilliams Coal Co. v. Ward, 185 Ark. 237, 47 S.W.2d 18 (1932). A director is a “fiduciary” as to any agreements between the corporation and himself individually. The directors have the burden of proving the good faith of the transaction and its “inherent fairness” to the corporation. Pepper v. Litton, 308 U.S. 295 (1939).

Hatfield and Staha had the burden of proving at trial both the “good faith” and “inherent fairness” of the transaction of monies they received after the expiration of the last approved contract on October 1, 1987. The trial court erred in this regard, and the case is remanded for the court to take additional evidence on the question of whether the compensation to MED-MAX for the management services of Hatfield and Staha was in “good faith” and “inherently fair” to Dunhall after October 1,1987. Its fairness to all shareholders must be determined. Our holding later in this opinion that MED-MAX was an illegal voting trust will necessarily be considered by the chancellor in this matter on remand.

Hatfield and Staha formed MED-MAX to which the employment contracts of Hatfield and Staha, through their corporations, were assigned. The owners of 50.5 percent of Dunhall stock were limited partners in MED-MAX. Hatfield and Staha did not breach their fiduciary duty to Dunhall by forming MED-MAX. Damages from any activity (as opposed to formation) could be the basis for damages; i.e., excess compensation. However, we find no error in the chancellor’s finding that the formation of MED-MAX by Hatfield and Staha was not a breach of fiduciary duty to Dunhall.

The chancellor erroneously found that the “double billing” procedure established and operated by Staha (unknown to other directors or shareholders) was not a breach of fiduciary duty due to his broad discretion over corporate activities and the requirement that the court speculate as to damages.

The evidence clearly demonstrates that this procedure is a breach of Staha’s fiduciary duty to Dunhall. Within the applicable statute of limitations, actions for refund of overpaid amounts and various other actions could drastically affect Dunhall’s financial condition much to the detriment of its shareholders. The evidence reflects that this “double billing” placed the corporation in jeopardy of liabilities which are unclear from the record. Futhermore, the evidence is unclear as to whether the compensation of Hatfield and Staha per the contracts was enhanced by this procedure.

The case is remanded for the chancellor to determine the damages to Dunhall as a result of Staha’s “double billing” operation, including whether he and Hatfield were compensated from such funds which would be a clear violation of his fiduciary duty.

Hatfield and Staha formed MED-MAX as a vehicle to gain control of Dunhall by acquiring more than 50 percent of its stock. Ark. Code Ann. § 4-26-706(a)(b) (1987) provides:

Any number of shareholders of a corporation may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote or otherwise represent their shares, for a period of not to exceed ten (10) years, by entering into a written voting trust agreement specifying the terms and conditions of the voting trust, by depositing a counterpart of the agreement with the corporation at its registered office, and by transferring their shares to the trustee or trustees for the purposes of the agreement.
The counterpart of the voting trust agreement so deposited with the corporation shall be subject to the same right of examination by a shareholder of the corporation, in person or by agent or attorney, as are the books and records of the corporation and shall be subject to examination by any holder of a beneficial interest in the voting trust, either in person or by agent or attorney, at any reasonable time for any proper purpose.

The chancellor properly found that the legislative purpose of this section is to “avoid secret control and unlawful purpose,” but that the Code did not apply to the facts of this case. As of September 21,1987, the first shareholders’ meeting after formation of MED-MAX on July 8, 1987, the names of the limited partners of MED-MAX, who were also Dunhall’s shareholders, were not of public record. The vote by Staha of Dunhall shares owned by MED-MAX at the September 21,1987, shareholders’ meeting was unauthorized.

The main purpose of a voting trust statute is to avoid secret, uncontrolled, combinations of stockholders formed to acquire voting control of a corporation to the possible detriment of the nonparticipating stockholders. Oceanic Exploration Co. v. Grynberg, 428 A.2d 1 (Del. 1981). Even though MED-MAX is a partnership, its characteristics come within the definition of a “voting trust” in Ark. Code Ann. § 4-26-706. Section 10.1(b) of the MED-MAX agreement provides:

The general partners (MJS, Inc. and RNI, Inc.) are hereby granted the right, power and authority to do on behalf of the partnership all things which, in their sole judgment, are necessary, proper or desirable to carry out the aforementioned duties and responsibilities, including, ... the right, power and authority to vote the [Dunhall] shares in such a matter as they deem appropriate in their sole discretion. . . .”

The MED-MAX partnership violates Ark. Code Ann. § 4-26-706(a)(b) in that the term is longer than ten years, and a copy of the fully executed written agreement, including names of the limited partners, was not filed with Dunhall. We hold that MED-MAX as formed at the times involved in the trial, was an illegal voting trust. Therefore, Staha’s vote on behalf of shares owned by MED-MAX at the Dunhall shareholders’ meeting on September 21,1987, and any subsequent meetings was unauthorized. The general partners of the illegal voting trust will not be permitted to vote the shares in subsequent shareholders’ meetings. The chancellor correctly determined that directors should be elected according to the articles of incorporation and by-laws of Dunhall.

Dunhall contends in its cross-appeal the chancellor erred in requiring it to pay $25,000 in fees to Hall’s attorneys. The award of attorney’s fees is clearly within the guidelines of Millsap v. Lane, 288 Ark. 439, 706 S.W.2d 378 (1986). The shareholders, who prosecuted this derivative action which resulted in economic recovery to Dunhall, proved breaches of fiduciary duty, and the basis for the court’s award is clearly supported by the record.

The case is remanded for proceedings not inconsistent with this opinion.

Affirmed in part; reversed and remanded in part.

Glaze, J., not participating.


source: Caselaw Access Project

author: Special Justice, Frank J. Huckaba.

license: Public Domain

text:
    GANNETT RIVER STATES PUBLISHING CO. v. ARKANSAS INDUSTRIAL DEVELOPMENT COMMISSION, et al.
    90-50
    799 S.W.2d 543
    Supreme Court of Arkansas
    Opinion delivered November 19, 1990

      Rose Law Firm, P.A., by: Phillip Carroll, for appellant.

      Steve Clark, Att’y Gen., by: Oían W Reeves, for appellee.
   Special Justice, Frank J. Huckaba.

This is an appeal from the circuit court’s finding that an Arkansas Industrial Development Commission (Commission) file was exempt from public disclosure under provisions of the Arkansas Freedom of Information Act (FOIA). Specifically, the trial court found that Act 8 of the Third Extraordinary Session of 1989 (Act 8), which amended the Act, applied to the file, rendering it exempt. Since the case involves interpretation and construction of acts of the General Assembly, we have jurisdiction under Supreme Court Rule 29(1 )(c). We reverse and remand the decision of the trial court.

Appellant, Gannett River States Publishing Co., is publisher of the Arkansas Gazette. On October 23,1989, the Gazette made a proper request to inspect the Commission’s file. The file concerned the Agency’s announcement some days earlier that Tokusen, U.S.A. (Tokusen), would locate a new steel plant in Conway, Arkansas.

The Commission, through Dave Harrington, its executive director, refused the Gazette’s request because Harrington concluded, relying on exemptions under existing freedom of information law, that disclosure would give advantage to competitors or bidders. No bidders are involved in this case.

It is not disputed that the records sought are subject to disclosure under the FOIA, unless the Act itself or other laws specifically exempt it from disclosure. The Act, codified at Ark. Code Ann. § 25-19-105 (1987 & Supp. 1989), read as follows when the request for information was made:

(a) Except as otherwise specifically provided by this section or by laws specifically enacted to provide otherwise, all public records shall be open to inspection and copying by any citizen of the State of Arkansas during the regular business hours of the custodian of the records.
(b) It is the specific intent of this section that the following records shall not be deemed to be made open to the public by the provisions of this chapter:
(9) Files which, if disclosed, would give advantage to competitors or bidders: . . .

Appellant’s suit filed on October 27, 1989, four days after the information was requested. The General Assembly, then in special session, passed Act 8, and the Act was signed into law on November 1,1989. The hearing in this case was held the next day, on November 2. After passage of Act 8, Section (b) (9) of FOIA was expanded to exempt from disclosure:

(9)
(A) Files which, if disclosed, would give advantage to competitors or bidders; and
(B) Records maintained by the Arkansas Industrial Development Commission related to any business entity’s planning, site location, expansion, operations, or product development/marketing, . . .

While quoting both Sections (A) and (B) above, the trial court specifically found that Act 8 applied and that the Tokusen file falls within the exemptions from disclosure expressed in the Act. The court further found that the Gazette possessed no property right or other vested right which it lost by the application of Act 8.

The question before this court are: (1) Did Act 8 operate to make the Tokusen file exempt because it related to a business entity’s planning, site location, expansion, operations, or product development/marketing? and (2) Is the Tokusen file exempted from disclosure because disclosure would give advantage to competitors, as FOIA provided when this suit was filed?

Since Act 8 took effect before the trial court order was entered, but after the request for information was made, an answer to the first question depends upon whether the Act operates retroactively as well as prospectively. We will first address retroactive application of Act 8, since the trial court’s decision was based upon that Act.

This court, in Abrego v. United Peoples Fed. Sav. & Loan, 281 Ark. 308, 664 S.W.2d 858 (1984), quoted favorably from an opinion of the United States Supreme Court:

The principle that statutes operate only prospectively, while judicial decisions operate retrospectively, is familiar to every law student. Compare Sands, Sutherland’s Statutory Construction § 106 with Linkletter v. Walker, 381 U.S. 618, 622-625 (1965). This court has often pointed out that
the first rule of construction is that legislation must be considered as addressed to the future, not to the past. . . . The rule has been expressed in varying degrees of strength but always of one import, that a retrospective operation will not be given to a statute which interferes with antecedent rights. . . . unless such be “the unequivocal and inflexible import of the terms, and the manifest intention of the legislature.”
Union Pacific R. Co. v. Laramie Stock Yards Co., 231 U.S. 190, 199 (1913) (citations omitted). . . .

Later, in Arkansas Rural Medical Practice Student Loan & Scholarship Bd. v. Luter, 292 Ark. 259, 729 S.W.2d 402 (1987), citing Abrego, supra, we approved the following language:

The operation of a statute must be prospective only, “unless the words are so clear, strong and imperative as to have no other meaning.” United States Fidelity & Guaranty Co. v. Struthers Wells Co., 209 U.S. 306 (1908). “Any doubt is resolved against retroactivity and in favor of prospectivity only. McQueeney v. Catholic Bishop of Chicago, 159 N.E. 2d 43, 80 A. L.R. 2d 796 (1959). “A retrospective application will not be given to a statute which interferes with antecedent rights unless such be the unequivocal and inflexible import of the terms and the manifest intention of the legislature.” United States v. Security Industrial Bank, 459 U.S. 70 (1982) (our emphasis). Statutes will not be construed to have retroactive operation “unless the language is so clear it will admit of no other construction.” Sutherland Statutory Construction, Vol. 2 § 41.04, p. 348.

The Commission argues that Act 8 was curative and intended to “clear up confusion” in existing law. The language of the statute itself does not expressly suggest that it is curative or for clarification. It amends FOIA by making seven additional types of records exempt from disclosure. The amendatory language makes no reference to any other provision in the FOIA. The rules cited above against retroactive operation apply especially with reference to amendatory acts. Lucas v. Hancock, 266 Ark. 162, 583 S.W.2d 491 (1979).

In a 1987 case we contrasted the language in an Act then under question with the examples of Act 169 of 1913 which said, “Provided, that this Act shall be construed as retrospective as well as prospective in operation,” and Act 102 of 1935 which said, “This Act shall be retroactive and shall take effect as of October 1,1934.” See Arkansas Rural Medical Practice Student Loan & Scholarship Bd. v. Luter, supra.

In Luter, we found the only express language about time was in the emergency clause. That language, as similar language does in this case, said the act would be in effect “from and after its passage and approval.” While we recognize that this wording also has import in other contexts, we have considered such wording to weigh against retroactivity. See also Lucas v. Hancock, supra.

As in Luter, we do not interpret this Act as implying a retroactive effect so clearly and unequivocally as to eliminate any doubt. Instead, an implication to the contrary seems more reasonable. We hold that Act 8 contains neither express language nor clear implication mandating retroactive effect.

Having decided that Act 8 operates prospectively only, the nature of the rights to the information requested need not be discussed extensively. The Gazette’s position in this case can be stated simply: when it made its request, it was entitled to review all the Tokusen file except those parts whose disclosure would give advantage to competitors.

Under Act 8, if applied retroactively, the Gazette would have no right to review records relating to Tokusen’s site location, as well as six other categories of records. These rights existed before Act 8, were substantive, and in a proper case, would be entitled to constitutional protection against a statute with retroactive effect.

Act 8 was not merely remedial or procedural in nature, but created new exemptions from public disclosure which did not exist before. Statutes which are remedial or procedural generally supply new, different, or more appropriate remedies which relate to existing rights, and do not create new rights or extinguish old ones. See Harrison v. Matthews, 235 Ark. 915, 362 S.W.2d 704 (1962), and Gillioz v. Kincannon, 213 Ark. 1010, 214 S.W.2d 212 (1948).

The remaining question is whether the information appellant requests may be withheld because its disclosure would “give advantage to competitors,” under the exemption which existed before Act 8. Then, necessarily incidental to that answer, is a question of implementation: who determines whether the exemption applies in a particular case?

Appellant, in its request, acknowledged the “competitors and bidders” exemption and did not request such information. Except for that portion of the file which related to expenditure of public funds, appellee withheld the entire file under the exemption. The Commission’s executive director assumed sole responsibility for deciding whether the file’s contents should be disclosed. He testified in considerable detail about information in the file concerning the nature of Tokusen’s business, what they were looking for in a plant site, their competitors, and other information of a general nature. The Commission’s file was in the courtroom, and appellee made a timely and proper request that the court examine its contents in camera, a request the court denied.

The trial court should have examined the Tokusen file, as requested, and made its findings as to what information, if any, should be withheld under the “competitors” exemption; and what information, if any, should be disclosed. The Commission affirmatively urged that the “advantage to competitors” exemption precluded disclosure. Like any other litigant, it had the burden of proving its affirmative allegation. Baumgartner v. Rogers, 233 Ark. 387, 345 S.W.2d 476 (1961). The trial court must ultimately decide whether the agency has met its burden of proving that the records are exempt from disclosure. To hold otherwise makes the public’s right to know hopelessly subservient to the unassailable impressions of the public agency involved. The person requesting information would be unable, for lack of information, to question the agency’s decision, and the court would be unwilling to scrutinize it.

The public’s right to know should not be foreclosed by an agency’s uncontrovertible impression, notwithstanding the perceived persuasiveness or ultimate vindication of the agency’s position. Even before FOIA, the policy, and probably the common law, of this state strongly favored openness in government. We said in a case decided before FOIA that “if there be any rule of the English common law that denies the public the right of access to public records, it is repugnant to the spirit of our democratic institutions.” Republican Party of Arkansas v. State ex rel Hall, 240 Ark. 545, 400 S.W.2d 660 (1966).

The course of FOIA was charted and launched early, in 1968, when Justice George Rose Smith spoke for a unanimous court:

In the act now before us the General Assembly clearly declared the State’s public policy: ‘It is vital in a democratic society that public business be performed in an open and public manner.’ We have no hesitation in asserting our conviction that the Freedom of Information Act was passed wholly in the public interest and is to be liberally interpreted to the end that its praiseworthy purposes may be achieved. Laman v. McCord, 245 Ark. 401, 432 S.W.2d 753 (1968).

The case is reversed and remanded with instructions that the trial court conduct appropriate evidentiary hearings consistent with this opinion.

Turner, J., not participating.


author: Per Curiam.

text:
    Jack Williams BEEBE v. STATE of Arkansas
    CR 89-204
    799 S.W.2d 547
    Supreme Court of Arkansas
    Opinion delivered November 19, 1990

      Doug Norwood, for petitioner.

      Steve Clark, Att’y Gen., by: Sandra Bailey Moll, Asst. Att’y Gen., for respondent.
   Per Curiam.

The petitioner Jack Beebe was convicted of aggravated robbery and two counts of theft of property. He was sentenced as an habitual offender to fifty years for aggravated robbery, thirty-five years imprisonment on one count of theft of property, and twenty-five years imprisoment on the other count of theft of property. The term of twenty-five years was to be consecutive to the term of thirty-five years for a total of sixty years; those two sentences would run concurrently with the term of fifty years. The convictions were affirmed. Beebe v. State, 301 Ark. 430, 784 S.W.2d 765 (1990). The petitioner now seeks permission to proceed in circuit court for post-conviction relief pursuant to Criminal Procedure Rule 37.

The petitioner maintains that his trial counsel was ineffective. To prevail on a claim of ineffective assistance of counsel, the petitioner must show first that counsel’s performance was deficient. This requires showing that counsel made errors so serious that counsel was not functioning as the “counsel” guaranteed the petitioner by the sixth amendment. Second, the petitioner must show that the deficient performance prejudiced the defense, which requires showing that counsel’s errors were so serious as to deprive the petitioner of a fair trial. Unless a petitioner makes both showings, it cannot be said that the conviction resulted from a breakdown in the adversary process that renders the result unreliable. A court must indulge in a strong presumption that counsel’s conduct falls within the wide range of reasonable professional assistance. The petitioner must show there is a reasonable probability that, but for counsel’s errors, the factfinder would have had a reasonable doubt respecting guilt, i.e., the decision reached would have been different absent the errors. A reasonable probability is a probability sufficient to undermine confidence in the outcome of the trial. In making a determination on a claim of ineffectiveness, the totality of the evidence before the judge or jury must be considered. Strickland v. Washington, 466 U.S. 668 (1984).

The petitioner was arrested with two others, Jesse and Martha Campbell, for robbing a bank in Centerton, Arkansas. During questioning, the petitioner made two statements to the authorities. At trial and on appeal, the petitioner contended that the statements should be suppressed because they were made subsequent to an illegal arrest. This court refused to consider the argument on appeal because the petitioner’s counsel failed to abstract the statements. The petitioner argues now that his trial counsel was ineffective for failing to submit a proper abstract.

The petitioner claims that the statements were inadmissible because he was unlawfully seized in violation of the Fourth Amendment to the United States Constitution since the police did not have probable cause to believe that he had committed any crime. He argues further that the authorities violated Arkansas Rules of Criminal Procedure 2.3 and 3.1 because when they requested that he go to the police station, they did not make it clear that there was no legal obligation to do so and because the officers detained him more than fifteen minutes.

Arkansas Rule of Criminal Procedure Rule 2.3 provides that if a law enforcement officer requests a person come to or remain at a police station, prosecuting attorney’s office or similar place, he shall take reasonable steps to make it clear that there is no legal obligation to comply with the request.

Arkansas Rule of Criminal Procedure 3.1 states:

A law enforcement officer lawfully present in any place may, in the performance of his duties, stop and detain any person who he reasonably suspects is committing, has committed, or is about to commit (1) a felony, or (2) a misdemeanor involving danger of forcible injury to persons or of appropriation of or damage to property, if such action is reasonably necessary either to obtain or verify the identification of the person or to determine the lawfulness of his conduct. An officer acting under this rule may require the person to remain in or near such place in the officer’s presence for a period of not more than fifteen (15) minutes or for such time as is reasonable under the circumstances. At the end of such period the person detained shall be released without further restraint, or arrested and charged with an offense.

Bill Baskin, a state police investigator, testified that he received a radio transmission that a bank in Centerton had been robbed and that he should watch for a “rough” blue and white pickup truck occupied by two men and a woman. He was given physical descriptions of the suspects. Upon proceeding to the scene, he saw a truck with occupants who matched the description he had received, and stopped the truck. The Campbells and the petitioner gave conflicting stories when they were separated from each other. The petitioner was put in the back seat of a state police car from which he could not get out unless the door was opened from the outside. An FBI agent at the scene of the stop told the officers that people matching the description of the Campbells and the petitioner were seen the day before at the bank, looking it over as if they were “casing” it. Two bank tellers, who were victims of the robbery, were also brought to the scene and one identified Martha and the petitioner as having been at the bank the day before. Martha Campbell was placed in the car with the petitioner and they were taken to the sheriffs office. They were not told that they were not required to go.

Martha’s purse was left on the seat of the truck. Officers searched the purse for weapons and found the money from the bank robbery. Via radio, the officer driving Martha and the petitioner was instructed to place them under arrest. There was testimony that the suspects were detained approximately thirty-five minutes prior to their arrest.

Arkansas Rules of Criminal Procedure Rule 3.1 requires only that an officer who reasonably suspects that a crime has been committed may stop a person for a period of not more than fifteen minutes “or for such time as is reasonable under the circumstances.” Given the information that the officers had at the time of the stop, it was reasonable that the petitioner was held longer than fifteen minutes. Moreover, the officers had probable cause to arrest the petitioner for being an accomplice to the armed robbery of the bank before he was put in the police car since he was identified as having been at the bank the day before, was found in a truck with two others matching the description of the suspects, and had given a statement which conflicted with his companions’ statements. “Probable cause exists where the facts and circumstances within the officers’ knowledge and of which they had reasonable trustworthy information are sufficient in themselves to warrant a man or reasonable caution in the belief that an offense has been or is being committed by the person to be arrested.” Coble v. State, 274 Ark. 134, 624 S.W.2d 421 (1981). “Determination of probable cause is based upon the factual and practical considerations of every day life upon which reasonable and prudent men act. All presumptions are favorable to the trial court’s ruling on the legality of the arrest, and the burden of demonstrating error rests on the appellant.” Reed v. State, 280 Ark. 316, 657 S.W.2d 557 (1983); Brewer v. State, 271 Ark. 810, 611 S.W.2d 179 (1981).

Since the officers had probable cause to arrest the petitioner, and since the Rules of Criminal Procedure were not violated, the petitioner’s statements were not tainted by an illegal arrest. Therefore, his attorney cannot be said to be ineffective for failing to abstract his statements because, even if the statements had been abstracted, there was no reversible error committed.

Petition denied.


text:
    Richard Allen MULLINS v. STATE of Arkansas
    CR 90-146
    799 S.W.2d 550
    Supreme Court of Arkansas
    Opinion delivered November 19, 1990

      Richard Allen Mullins, pro se, for petitioner.

      Steve Clark, Att’y Gen., by: Sandra Bailey Moll, Asst. Att’y Gen., for respondent.
   Per Curiam.

The petitioner Richard Allen Mullins was charged with capital felony murder but convicted of aggravated robbery and sentenced to twenty years imprisonment. His conviction was affirmed on appeal in an opinion not designated for publication. Mullins v. State, CACR 89-70 (March 7, 1990). The petitioner now seeks permission to proceed in circuit court for post-conviction relief.

The petitioner claims first that he was convicted of a crime with which he was not charged. The information charged the petitioner with capital murder in that, while acting as an accomplice, he attempted to commit the robbery of the victim and in doing so caused the victim’s death in circumstances manifesting extreme indifference to the value of human life. Although the underlying offense of the capital murder charge was attempted robbery, the petitioner was convicted of aggravated robbery. He argues that aggravated robbery is not a lesser included offense of capital murder and, therefore, he cannot be convicted of aggravated robbery since he was charged with capital murder. He also contends that since attempted robbery was the underlying felony charged, he could not be convicted of aggravated robbery.

A defendant may be convicted of one offense included in another offense with which he is charged. Ark. Code Ann. § 5-1-110(b) (1987). It is true as the petition contends, that aggravated robbery is not a “lesser included offense” of capital felony murder because robbery and murder are not in the same generic class. See Thompson v. State, 284 Ark. 403, 682 S.W.2d 742 (1984). However, aggravated robbery is an “element included offense” of capital felony murder because, by statutory definition, capital murder could not be committed without committing aggravated robbery in a case where aggravated robbery is the underlying felony supporting the capital murder charge. This type of included offense is illustrated in Ark. Code Ann. § 5-1-110(b)(1) which clearly states that in such cases a defendant may be convicted of an offense included in another offense charged.

The next question is whether a defendant when charged with capital felony murder, the underlying felony being attempted robbery, can be convicted of aggravated robbery.

In Moore v. State, 303 Ark. 514, 798 S.W.2d 87 (1990), this court quoted the United States Supreme Court as follows:

To uphold a conviction on a charge that was neither alleged in an indictment nor presented to a jury at trial offends the most basic notions of due process. Few constitutional principles are more firmly established than a defendant’s right to be heard on the specific charge of which he is accused. Dunn v. United States, 442 U.S. 100 (1979).

In Cole v. Arkansas, 333 U.S. 196 (1948), the United States Supreme Court held that the petitioners were denied due process by the fact that their convictions were upheld under a criminal statute for violation of which they had not been charged. The Court wrote, “It is as much a violation of due process to send an accused to prison following conviction of a charge on which he was never tried as it would be to convict him upon a charge that was never made.” Accord Robbins v. State, 219 Ark. 376, 242 S.W.2d 640 (1951); see also Ark. Code. Ann. 16-89-126(e)(1) (1987). Since the prosecution did not charge aggravated robbery as the underlying offense to the capital murder charge, the petitioner’s conviction must be reduced to simple robbery—the crime which the state used to support the capital murder charge.

The jury sentenced the petitioner to twice the minimum number of years he could receive for aggravated robbery. Ark. Code Ann. §§ 5-12-103(b) and 5-4-401 (a)(1). We reduce the twenty year sentence to ten years, which is twice the minimum number of years the petitioner could receive for simple robbery. Ark. Code Ann. § 5-12-102(b) and 5-4-401(a)(3). See Dixon v. State, 260 Ark. 857, 545 S.W.2d 606 (1977).

The petitioner next claims that his counsel was ineffective for failing to seek an admonition after the state introduced inadmissible hearsay implicating the petitioner in the crime. Prior to trial the trial court ruled that the state could not impeach Rick Surguine’s testimony with a prior, unsworn statement by Surguine in order to link the petitioner with Surguine’s crime. Surguine was convicted of the capital murder which the petitioner was charged with as an accomplice. During examination of Surguine the state did exactly what the trial court ordered the state not to do. The defense objected, after approaching the bench. The court sustained the objection; however, the defense did not, at that point, ask for an admonition or mistrial. On appeal, the petitioner argued that the trail court should have either admonished the jury following the state’s reference to Surguine’s prior statement or should have granted the motion for mistrial made by the defense at the close of the evidence. The Arkansas Court of Appeals ruled that since the attorney did not ask for an admonition, the trial court did not err in not giving one and refused to consider whether the trial court erred in denying a motion for mistrial since the motion was not made at the time of the state’s reference to the inadmissible statement.

To prevail on a claim of ineffective assistance of counsel, the petitioner must show first that counsel’s performance was deficient. This requires showing that counsel made errors so serious that counsel was not functioning as the “counsel” guaranteed the petitioner by the sixth amendment. Second, the petitioner must show that the deficient performance prejudiced the defense, which requires showing that counsel’s errors were so serious as to deprive the petitioner of a fair trial. Unless a petitioner makes both showings, it cannot be said that the conviction resulted from a breakdown in the adversary process that renders the result unreliable. A court must indulge in a strong presumption that counsel’s conduct falls within the wide range of reasonable professional assistance. The petitioner must show there is a reasonable probability that, but for counsel’s errors, the factfinder would have had a reasonable doubt respecting guilt, i.e., the decision reached would have been different absent the errors. A reasonable probability is a probability sufficient to undermine confidence in the outcome of the trial. In making a determination on a claim of ineffectiveness, the totality of the evidence before the judge or jury must be considered. Strickland v. Washington, 466 U.S. 668 (1984).

There is no indication that the reference to Surguine’s prior statement prejudiced the petitioner to the degree that he was denied a fair trial. The petitioner’s attorney immediately objected, approached the bench and asked the trial court to stop the state’s use of the inadmissible statement. It may well have been that the petitioner’s attorney did not seek an admonition to avoid emphasizing the inadmissible statement. The petitioner has not demonstrated that it is reasonably probable that the outcome of the trial would have been different had an admonition been given or had the motion for mistrial been made at the time of the incident.

The petitioner has also filed a motion asking that counsel be appointed for him. Since post-conviction proceedings under Rule 37 are civil in nature, there is no constitutional right to appointment of counsel to prepare a petition under Rule 37. Fretwell v. State, 290 Ark. 221, 718 S.W.2d 109 (1986). Rule 37.3 provides for the appointment of counsel by the circuit court where a hearing is granted and where the petitioner is unable to afford counsel. Robinson v. State, 295 Ark. 693,751 S.W.2d 335 (1988).

Petition granted and motion denied.


text:
    Johnny WHITAKER v. STATE of Arkansas
    RC 90-50
    798 S.W.2d 922
    Supreme Court of Arkansas
    Opinion delivered November 19, 1990

      Don Lloyd Cook II, for appellant.
    No response.
   Per Curiam.

Appellant, Johnny Whitaker, by his attorney, has filed for a rule on the clerk.

His attorney, Don Lloyd Cook II, admits that the record was tendered late due to a mistake on his part.

We find that such an error, admittedly made by the attorney for a criminal defendant, is good cause to grant the motion. See our Per Curiam opinion dated February 5,1979, In Re: Belated Appeals in Criminal Cases, 265 Ark. 964.

A copy of this opinion will be forwarded to the Committee on Professional Conduct.


author: Jack Holt, Jr., Chief Justice.

text:
    ST. LOUIS SOUTHWESTERN RAILWAY CO. v. Charles D. RAGLAND, Commissioner of Revenue, State of Arkansas, and Department of Finance and Administration
    90-74
    800 S.W.2d 410
    Supreme Court of Arkansas
    Opinion delivered December 3, 1990

      Ramsay, Bridgforth, Harrelson & Starling, by: Patrick A. Burrow, for appellant.

      John H. Theis, William E. Keadle, Robert C. Jones, Ricky L. Pruett, David B. Kaufman, Malcolm P. Bobo, and Beth B. Carson, by: Cora L. Gentry, for appellee.
   Jack Holt, Jr., Chief Justice.

The appellant, St. Louis Southwestern Railway Company (SSW), appeals from a decision of the Pulaski Country Chancery Court holding that for state tax purposes, SSW is required to include certain- nonbusiness income in calculating its net operating losses for 1980 and 1981. We affirm.

SSW initially brought suit in the Chancery Court of Pulaski County against the Commissioner of Revenue (Commissioner) asserting claims for refunds for the tax years 1976 and 1977. SSW later filed a second suit asserting claims for refunds for 1978 and 1979 which was consolidated with the first action.

While this litigation was pending, the Commissioner notified SSW of its disagreement with certain items contained in SSW’s tax returns filed for 1981 through 1983. Because some of the issues raised were identical to the issues pending before the court in the consolidated action, it was agreed that the court’s decisions in the consolidated action, with regard to those issues, would be controlling. The parties eventually reached a settlement agreement concerning all tax years before the court, and the chancellor entered an order dismissing the litigation.

As a result, SSW filed amended returns for the tax years in question in accordance with what it believed to be terms of the settlement agreement. The Commissioner, however, disputed SSW’s method of computing its net operating losses for 1980 and 1981. The Commissioner argued that certain nonbusiness income should be added to the gross income in calculating net operating losses which resulted in the elimination of the 1980 net operating loss carryforward and a reduction of the 1981 carryforward.

SSW filed a motion with the Pulaski County Chancery Court to reopen the case and enforce the settlement agreement or, in the alternative, to determine correct computation of net operating loss. SSW argued that reconsideration of the settlement agreement was barred by res judicata; however, the chancellor agreed with the Commissioner that because computation of net operating loss was never at issue in the previous actions but, rather, arose from the agreement itself, litigation on the merits was proper.

After consideration of the briefs in support of both arguments, the chancellor held in favor of the Commissioner. From this ruling, SSW appeals.

For reversal, SSW contends that the chancellor erred by including nonbusiness income, allocated to other states under Ark. Code Ann. § 26-51-701 through -723 (1987), in the computation of its net operating loss under Ark. Code Ann. § 26-51-427 (1987).

The pertinent part of section 26-51-427 provides as follows:

(2) As used in this section, the term ‘net operating loss’ is defined as the excess of allowable deductions over gross income for the taxable year, subject to the following adjustments:
(A) There shall be added to gross income all nontaxable income, not required to be reported as gross income, as provided by law, less any expenses properly and reasonably incurred in earning nontaxable income, which expenses would otherwise be nondeductible[.] (emphasis added)

The income items in question include rents, interest, and dividends which, as acknowledged by both parties, clearly fall within the definition of gross income. See Ark. Code Ann. § 26-51-404(a)(1) (1987). It was also agreed by both parties that the nonbusiness income items were not subject to Arkansas tax since they were allocated to other states in accordance with the Uniform Division of Income for Tax Purposes Act, (UDITPA) codified at Ark. Code Ann. § 26-51-701 through -723 (1987). (The UDITPA provides uniformity among the states in taxing the income of multi-state corporations and strives to avoid' potential taxation of the same income by providing for a fair means of assigning taxable income among the states. See Qualls v. Montgomery Ward & Co., Inc., 266 Ark. 207, 585 S.W.2d 18 (1979)).

SSW contends that section 26-51-427(2)(A) mandates a showing of two things before income can be added to gross income in calculating net operating loss: 1) the income must be “nontaxable” and 2) it must be income “not required to be reported as gross income.” SSW maintains that although it is undisputed that the income is nontaxable, the income was required to be reported as gross income under section 26-51-404 (defining gross income) and was subsequently allocated to other states; therefore, the items do not fall within the second provision of section 26-51-427(2)(A). We disagree.

The nonbusiness income items here, although clearly defined as “gross income” under our statute, were not required to be “reported as gross income” for purposes of taxation by this state, but merely for'purposes of allocation under the UDITPA. As we noted earlier, all of the income in question was allocated to other states. The income was never “reported” or taxed in Arkansas. Simply put, we cannot equate, as SSW would have us do, the reporting of gross income for taxation purposes, as required by Arkansas law, with the inclusion of income in the formula for allocation. The latter is only a method of apportioning a taxpayer’s taxable activity among the various states.

The result we reach is identical to our recent decision in Kansas City So. Ry. Co. v. Pledger, 301 Ark. 564, 785 S.W.2d 462 (1990). At issue in Pledger was certain dividend income specifically excluded from the term “gross income,” and thus nontaxable, under sections 26-51-404(b). We held that section 26-51-427 mandates inclusion of all nontaxable income in the calculation of net operating loss.

Likewise, under our reasoning above, the income at issue here was nontaxable and was not required to be reported as gross income for Arkansas tax purposes under UDITPA. The difference lies only in the statute which makes the income nontaxable and excludes it from gross income reporting.

By asserting the privilege of a net operating loss carryforward, SSW is claiming a deduction established by Arkansas law. The privilege is allowed only as a matter of legislative grace and one claiming the deduction bears the burden of proving that he is entitled to it and of bringing himself clearly within the terms of such conditions as may be imposed by statute. Skelton v. B.C. Land Co., 256 Ark. 961, 513 S.W.2d 919 (1974); Kansas City So. Ry. Co. v. Pledger, supra. Similarly, we have held in numerous exemption cases that any tax exemption must be strictly construed against the exemption and any doubt suggests the exemption should be denied. See Ragland v. General Tire and Rubber Co., 297 Ark. 394,763 S.W.2d 70 (1989). SSW has not demonstrated that it is entitled to the deduction within the terms imposed by statute. Thus, we hold that the Commissioner’s computation of SSW’s net operating loss was correct and that the nonbusiness income items must be added to gross income in calculating this loss.

Affirmed.


author: Jack Holt, Jr., Chief Justice. David Newbern, Justice, Otis H. Turner, Justice, Tom Glaze, Justice,

text:
    STATE of Arkansas v. Robert Dean SYPULT
    CR 90-127
    800 S.W.2d 402
    Supreme Court of Arkansas
    Opinion delivered December 3, 1990

      Steve Clark, Att’y Gen., by: Sandra Bailey Moll, Asst. Att’y Gen., for appellant.

      Ray Bunch, for appellee.
   Jack Holt, Jr., Chief Justice.

The appellee, Robert Dean Sypult, was charged with first degree sexual assault on an eight-year old girl. During the discovery process, the state notified Sypult of its intent to use statements he made to doctors and a counselor at the Veterans Administration Hospital in Fayetteville. Sypult moved to suppress the statements on the basis that such communications are protected by the physician and psychotherapist-patient privilege.

The trial court held a hearing on the motion and ruled that the state could admit evidence only that Sypult sought treatment, the type of treatment sought, and that the VA Hospital made a report in accordance with Arkansas law concerning the reporting of suspected child abuse to the proper authorities. The trial court further ruled, however, that any confidential statements between Sypult and his doctors and counselor were inadmissible.

The state appeals this interlocutory order, contending that the “confidential” statements are admissible pursuant to Ark. Code Ann. § 12-12-511 (a) (1987 andSupp. 1989). We disagree and affirm the trial court’s decision.

Section 12-12-511(a) states:

Any provision of the Arkansas Uniform Rules of Evidence notwithstanding, and except as provided in subsection (b) of this section, any privilege between husband and wife or between any professional person, except the privilege between a lawyer and client, and the privilege between a minister, including a Christian Science Practitioner, and any person confessing to or being counseled by the minister, including, but not limited to, physicians, counselors, hospitals, clinics, day-care centers, and schools and their clients shall not constitute grounds for excluding evidence at any proceeding regarding child abuse, sexual abuse, or neglect of a child or the cause thereof. (Emphasis added.)

In its memorandum opinion, the trial court noted sound reasons behind the enactment of section 12-12-511, yet recognized that a literal application of the statute would, on the other hand, completely erode the well-established policies embodied in the physician and psychotherapist-patient privilege. To avoid this conflict, the trial court designed its ruling to enforce provisions of our child abuse and sexual abuse statutes while preserving the sanctity of private communications between patients and their doctors and therapists under the Arkansas Uniform Rules of Evidence. Ricarte v. State, 290 Ark. 100, 717 S.W.2d 488 (1986), was cited for the proposition that this court “is the authority which controls the Rules of Evidence that apply in circuit court”; thus, the legislator’s enactment of an exception to our rules of evidence was invalid.

In Curtis v. State, 301 Ark. 208, 783 S.W.2d 47 (1990), and St. Clair v. State, 301 Ark. 223, 783 S.W.2d 835 (1990) we reaffirmed our inherent rule-making power as identified in Ricarte, supra', however, we went on to say that we share this power with the General Assembly and that we will defer to its authority where legislation involving matters of public policy conflicts with court rules. See also Lyons v. Forrest City Mach. Works, Inc., 301 Ark. 559, 785 S.W.2d 220 (1990).

Section 12-12-511(a) is clearly grounded in strong public policy — the protection of child abuse victims. So, once again, we are faced with sharing our rule-making powers with the legislature — this time involving the physician and psychotherapist-patient privilege. In doing so, we retreat from the positions we have taken in Curtis and St. Clair, supra, and redefine the parameters of our “shared” rule-making power with the legislature.

It is obvious that, in the interests of promoting important public policies and interests of the state, legislation enacted in this spirit will, on occasion, bring about conflict with rules of the court. It is equally obvious, however, that literal application of our decisions in Curtis and St. Clair to cases such as the one before us, could well open the door to total abrogation of the rules of evidence and procedure we deem vital to the interest and policies inherent in the judicial process. To protect what we hold inviolate we now declare that we will defer to the General Assembly, when conflicts arise, only to the extent that the conflicting court rule’s primary purpose and effectiveness are not compromised; otherwise, our rules remain supreme.

The policy behind the physician and psychotherapist-patient privilege is to encourage patients to communicate openly with their physicians and therapists and to prevent disclosure of the patient’s infirmities. Arkansas State Medical Bd. v. Leonard, 267 Ark. 61, 590 S.W.2d 849 (1979). Giving complete deference to the legislature would, in this instance, completely abolish the purpose and policy behind the rule. We cannot permit this.

The trial court’s finding in the present case reflects our new position. The admission into evidence of the fact that Sypult sought counseling for sexual abuse and that a report was made to the proper authorities satisfies the General Assembly’s purpose of enacting section 12-12-511 without taking from Sypult a privilege that has been firmly entrenched in Arkansas law since 1889. See Casenote, 36 Ark. L. Rev. 658 (1983).

We find strong support for our position in State v. Andring, 342 N.W.2d 188 (1984).There, the Minnesota legislature passed a child abuse reporting act very similar to ours, which provides that no evidence pertaining to a child’s injuries is to be excluded in any proceeding arising from the abuse. In addressing the conflict presented by the existence of the physician-patient privilege, the court refused to allow elimination of the privilege and held that evidentiary use of only the information contained in the abuse report would best promote the legislature’s policy behind the reporting act.

The central purpose of the child abuse reporting statutes is the protection of children, not the punishment of those who mistreat them.
This policy, which recognizes that the child may return to the same home environment in which the maltreatment occurred,-is best effectuated by continued encouragement for child abusers to seek rehabilitative treatment.
»}»
A narrow construction of section 626.556, subd. 8, which would achieve the purpose of the reporting act without destroying the benefits that result when those who maltreat children seek confidential therapy programs, should be, and hereby is, adopted.

In sum, we hold that deference to legislation involving rules of evidence and procedure will be given only to the extent the legislation is compatible with our established rules. When conflicts arise which compromise these rules, our rules remain supreme. Under this pronouncement, Sypult’s confidential statements to his doctors and therapist remain privileged; however, there is no privilege with regard to the fact that Sypult sought and received treatment. See Baker v. State, 276 Ark. 193, 637 S.W.2d 522 (1982).

The trial court further held that the admission of Sypult’s statements would violate his fifth amendment right against self-incrimination and his sixth amendment right to counsel. It is not necessary, however, that we address these issues inasmuch as we uphold the trial court and its findings on the basis of the foregoing analysis.

Affirmed.

Dudley, Newbern, Turner and Price, JJ., concur.

Hays and Glaze, JJ., dissent.

David Newbern, Justice,

concurring. The concurring opinion of Justice Turner expresses my views. I wish only to add that I cannot read our opinion in Ricarte v. State, 290 Ark. 100, 717 S.W.2d 488 (1986), as holding anything other than that the rules of evidence are rules of practice and procedure and not substantive law.

We were concerned with whether Ricarte could assert a privilege contained in one of the rules of evidence adopted, illegally as it turned out, by the general assembly. He asserted his wife could not testify against him because of the so-called “husband-wife privilege.” The state responded that under Uniform Rules of Evidence 504(b), she could testify because the rule specified that only “confidential” communications were privileged. Ricarte objected to the state’s reliance on the rule because its adoption by the general assembly had occurred in an unconstitutional manner. The trial court overruled the objection and allowed the wife to testify. We reversed.

We agreed with Ricarte that the rules had not been properly adopted by the general assembly. We explained our reasons for exercising our authority to make rules, noting the chaos which might ensue if we were simply to hold the statutory version invalid without replacing it. Although we gave that explanation, we said nothing about the adoption being a stop-gap or temporary. Here is what we said about our authority:

For more than fifty years there has been a steady trend in favor of committing to the courts the regulations of practice and procedure. Dean Wigmore took a strong stand in the matter as early as 1928. Editorial, 23 Ill. L. Rev. 276. Many others agreed. In 1940 the American Bar Association chose as the subject for its annual Ross essay contest: “To What Extent May Courts under the Rule-Making Power Prescribe Rules of Evidence?” the winning essay by Prof. Thomas F. Green, Jr., argued persuasively that all rules of evidence are properly subject to the courts’ rule-making power. 26 A.B.A.J. 482 (1940). Other pertinent articles include another Ross essay submitted by Charles A. Riedly, 26 A.B.A.J. 601 (1940); Morgan, “Rules of Evidence — Substantive or Procedural?,” 10 Vanderbilt L. Rev. 467 (1957); and Joiner and Miller, “Rules of Practice and Procedure: A Study of Judicial Rule Making,” 55 Mich. L. Rev. 623 (1957).
Arkansas has kept step with the progress made elsewhere. Our Constitution of 1874 confers upon the Supreme Court “a general superintending control over all inferior courts of law and equity.” Art. 7 § 4. We note in passing that the Supreme Court of New Mexico relied on almost identical language in the New Mexico constitution as authority for the court’s action in adopting the Uniform Rule of Evidence as the law in that state. Ammerman v. Hubbard Broadcasting, Inc., 89 N.M. 307, 551 P.2d 1354 (1976), where the court analyzed in depth its rule-making power.
In 1971, the Arkansas legislature used mandatory words in committing the regulation of criminal practice and procedure to this court:
The Supreme Court of the state of Arkansas shall have the power to prescribe, from time to time, rules of pleading, practice, and procedure with respect to any or all proceedings in criminal cases.
Ark. Stat. Ann. § 22-242 (Supp. 1985) [Ark. Code Ann. § 16-11-301 (a)(1987)]. That action was not an improper delegation of legislative power; it merely recognized the court’s inherent power. Miller v. State, 262 Ark. 223, 555 S.W.2d 563 (1977). The statutory language quoted above was repeated in a 1973 statute by which the legislature recognized the Supreme Court’s power to prescribe rules with respect to procedure in civil cases. § 22-245 [Ark. Code Ann. § 16-11-302 (1987)]. Under those statutes we have adopted the Rules of Criminal Procedure and the Rules of Civil Procedure. More recently we adopted rules for the certification of court reporters. We are not the first court to adopt the Uniform Rules of Evidence by judicial action. That step has been taken not only in New Mexico, as mentioned earlier, but also in Florida, In re Florida Evidence Code, 372 So.2d 1369 (1979); in Montana, Montana Rules of Evidence, Ch. 10 Mont. Code Ann. (1984); and in Wisconsin, In re Promulgation of Rules of Evidence, 59 Wis. 2d R1-R377 (1973). The Supreme Court of the United States adopted the Federal Rules of Evidence pursuant to federal statutes quite similar to the 1971 and 1973 statutes enacted in Arkansas. See Reporter’s Note, 409 U.S. 1132 (1972).

In our discussion concluding that the state would not get the benefit of our adoption of the rules in Ricarte’s case, we suggested that, had the rules been in place and applicable to Ricarte’s case, the state would have prevailed on the question of the limitation on husband-wife privilege contained in Rule 504(b). We made no reference to the privilege being a matter of public policy to be decided only by the general assembly. The psychotherapist-patient privilege is no different.

The substance-procedure distinction is a difficult one, but with respect to the nature of the rules of evidence, we crossed that bridge in the Ricarte case. But for our conclusion that the rules were procedural, we would have had no authority to adopt them, even temporarily. It is inescapable that the case held those rules come within our power to prescribe rules of “pleading, practice, and procedure.”

In our per curiam order adopting the rules as they had been published in Act 1143 of 1975, In re Adoption of the Uniform Rules of Evidence, 290 Ark. 616, 717 S.W.2d 491 (1986), we changed Rule 1102 so that the rules would no longer be named “Uniform Rules of Evidence” but would be named “Arkansas Rules of Evidence,” thus making the title consistent with the “Arkansas Rules of Civil Procedure” and “Arkansas Rules of Criminal Procedure” which this court had adopted earlier. It is clear to me that we have preempted evidence law, and we will be governed by statutes in the area only when we have not adopted a conflicting rule.

The supreme court obviously does not have the exclusive authority to prescribe procedure. As we pointed out in Curtis v. State, 301 Ark. 208, 783 S.W.2d 47 (1990), and St. Clair v. State, 301 Ark. 223, 783 S.W.2d 835 (1990), we share that authority with the general assembly. Absent a rule of court a statue regulating procedure controls. In addition, the general assembly controls procedure in special statutory actions. Arkansas R. Civ. P. 81(a) excepts from the application of court rules “those instances where a statute which creates a right, remedy or proceeding specifically provides a different procedure in which event the procedure so specified shall apply.” Bohnsack v. Beck, 294 Ark. 19, 732 S.W.2d 147 (1987); Travelodge International, Inc. v. Handleman National Book Co., 288 Ark. 368, 705 S.W.2d 440 (1986). See also Screeton v. Crumpler, 273 Ark. 167, 617 S.W.2d 847 (1981).

We should have based our decisions in the Curtis and St. Clair cases on the substance-procedure distinction rather than one requiring us to determine whether public policy is involved in a rule or statute. Thus I particularly agree with the majority opinion’s retreat from that aspect of those decisions. I presume, however, that the essence of those decisions, which is that statutory law will govern procedure except in an area preempted by court rule, remains.

I am also in full accord with Justice Turner’s expression of the need for uniformity and clarity so that lawyers and litigants will not have difficulty added to the already complex task of knowing whether our rule or a statute applies. While we will still, from time to time, have to decide whether a matter is substantive or procedural or whether an area has been preempted by court rule and thus is not governed by statute, it will be helpful for all to understand, as a result of this decision, that the Arkansas Rules of Evidence are the primary, general source of evidence law.

Otis H. Turner, Justice,

concurring. I concur in the result reached by the court although for additional reasons, which may be inferred from the majority opinion, but which I choose to enunciate and emphasize.

The rules of practice and procedure, including the Rules of Evidence, constitute the foundation supporting our system based upon the rule of law. In order for the system to work in an efficient manner, it is imperative that the rules under which litigants and their attorneys operate be, as nearly as possible, definite, certain, and uniform in their application. Not only are these objectives necessary to achieve uniform justices, but they are also essential to promote uniformity in practice. No other means are available for those involved in the justice system on a day-to-day basis — the lawyers and trial judges — to know with any degree of certainty the extent of their obligations and limitations in their efforts to achieve the efficient and consistent administration of justice. It is clear that those matters that are procedural in nature inherently rest with the judiciary.

As this juncture, I feel compelled to elaborate on the basis for my concurrence. In our cases cited by the majority, we have alluded to “matters of public policy.” Clearly, matters of public policy enacted as laws by the legislature involving substantive rights as distinguished from matters of procedure will always be controlling, subject to constitutional restraints. However, it is not sufficient to say simply that we will defer to legislative enactment on all “matters of public policy”; in fact, all enactments of the General Assembly become matters of “public policy.”

Therefore, even though a particular legislative enactment, procedural in nature, may serve to enhance or advance an acknowledged public policy issue, if the legislatively enacted procedure conflicts with a procedure established by the judicial branch, then in all such cases the judicially established procedure should prevail unless and until it is changed or modified by the judicial branch.

This position in no way conflicts with our decisions which hold that in matters of procedure clearly involving public policy issues, where the judicial branch has not previously spoken and preempted the subject, a legislative enactment not in conflict with established rules of practice and procedure will be recognized and enforced. See Curtis v. State, 301 Ark. 208, 783 S.W.2d 47 (1990).

To adhere to this policy will aid in promoting the stability of our system of jurisprudence. It will secure the establishment of a body of procedural law which, it is to be hoped, will be uniform in its application and consequently less subject to exceptions which, although created with all good intentions, in their proliferation may overturn an entire area of established practice and procedure. For this court to hold otherwise, litigants and their attorneys would have no objective means for determining which procedures meet the “public policy” criteria. A final resolution would thus only follow an oftentimes expensive trial and appeal.

Price, J., joins.

Tom Glaze, Justice,

dissenting. I disagree with the majority court for two reasons.

First, the result reached by the majority assumes there is a conflict between Ark. Code Ann. § 12-12-511(a) (1987 andSupp. 1989) — the General Assembly’s provision that disallows any privilege in a child sex abuse case for a person who confesses to or is counseled by a physician — and A.R.E. Rule 503 — this court’s general rule, providing for a psycho-therapist-patient privilege. The history behind § 12-12-511(a) and Rule 503 reveals no such conflict.

The General Assembly enacted § 12-12-511(a) in 1975 and in an extended session adopted Rule 503, which was contained in the Uniform Rules of Evidence. See Act 1143 of 1975 (Extended Session 1976); Ark. Stat. Ann. § 28-1001 (Repl. 1979). Of course, in Ricarte v. State, 290 Ark. 100, 717 S.W.2d 488 (1986), this court held the Uniform Rules of Evidence were not validly adopted because the General Assembly was in an unlawfully extended session at the time. To avoid a host of problems that could result from having no lawfully enacted rules of evidence, this court, citing its inherent power to do so, merely adopted Rule 503 and the other Uniform Rules of Evidence as court rules. Nevertheless, the point is quite clear that it was the General Assembly that originally enacted both § 12-12-511(a) and Rule 503.

Recently, we considered § 12-12-511 (a) and whether it was controlling in a situation where the social worker privilege law, Ark. Code Ann. § 17-39-107 (1987), had been invoked by a defendant charged with a sex abuse crime. Cozad v. State, 303 Ark. 137, 792 S.W.2d 606 (1990). We held § 12-12-511(a) controlled, and the trial court correctly allowed the social worker to testify. In doing so, we referred to the settled rule that a general statute (§ 17-39-107) did not apply when there was a specific statute (§ 12-12-511(a)) covering a particular subject matter.

The instant case bears the same scrutiny and analysis. Here, Rule 503 provides a general privilege when the psychotherapist-patient relationship exists, but § 12-12- 511 (a) prohibits any such privilege in child sex abuse cases. The only distinction between the situation in Cozad and the one here is that this court in Ricarte adopted the General Assembly’s Rule 503 and other evidentiary rules as rules of the court. In adopting those rules, this court was not ignorant of § 12-12-511, and other statutory provisions like it. Significantly, the court never indicated that it would place a different construction on these rules of evidence than that which had been previously intended by the General Assembly. Contrary to the majority court’s suggestion, this is not a situation where this court and the General Assembly have adopted a rule and a statute, concerning a procedural or evidentiary matter, that serve cross purposes. Instead, Rule 503 and § 12-12-511 (a) originated from the same source — the General Assembly — and as a consequence, should be harmonized as was done in Cozad.

My second and most serious point of departure concerns the majority’s expansive view of this court’s holding in Ricarte. With its decision today, the majority concludes that the court’s inherent authority preempts any evidentiary law enacted by the General Assembly that conflicts with this court’s rules even if that law is substantive, and not procedural, in nature. In this respect, the majority extends its role and power too far.

Common law failed to recognize physician-patient and related privileges. S. Stone and R. Liebman, Testimonial Privileges § 7.02 (1983); Allred v. State, 554 P.2d 411 (Alaska 1976). The reluctance of the common law to protect physician-patient communications may well have stemmed from a view that such protection was not sufficiently necessary or important. R. Stone and R. Liebman, Testimonial Privileges § 7.02 (1983). However, even in states where such a privilege is recognized, that privilege in numerous states has been determined inapplicable in criminal cases, id. at § 7.24, because of the state’s countervailing interest in uncovering and proving crime.

In a paper prepared for the Michigan Procedural Revision Committee, Charles W. Joiner and Oscar J. Miller emphasized the distinction between rules of evidence that they characterized as involving only procedure or “the orderly dispatch of judicial business” from those they say involve policy decisions that should be enacted by the legislature. See Joiner & Miller, Rules of Practice and Procedure: A Study of Judicial Rule Making, 55 Mich. L. Rev. 623, 651 (1957). We adopted such a distinction in our recent cases. St. Clair v. State, 301 Ark. 223, 783 S.W.2d 835 (1990); Curtisv. State, 301 Ark. 208, 783 S.W.2d 47 (1990). Today, the majority decision abandons this distinction, and I believe mistakenly so.

Most states either by legislation, constitution or court decision have recognized that a court cannot by its rule-making authority, abrogate or modify substantive law. See D. Pugh, C. Korbakes, J. Alfine and C. Grau, Judicial Rulemaking, A Compendium (1984) (See in particular states Alaska, Delaware, Florida, Idaho, Illinois, Iowa, Kansas, Minnesota, Nebraska, Nevada, New Jersey, Ohio, Oregon, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin, Wyoming.) From my research, the supreme courts of Arizona, North Dakota and New Mexico are the only jurisdictions that have extended their rule-making power to promulgate all rules of evidence, whether they affect procedural or substantive rights, as does the majority court in today’s decision. State v. Seidel, 142 Ariz. 587, 691 P.2d 678 (1984); Ammerman v. Hubbard Broadcasting, Inc., 89 N.M. 307, 551 P.2d 1354 (1976); State v. Vetsch, 368 N.W.2d 547 (N.D. 1985).

In sum, I have no problem with this court’s decisions where it has exercised its inherent power to control an area of procedure or practice, especially when it has preempted that area of procedural law. See Lyons v. Forrest City Mach. Works, Inc., 301 Ark. 559, 785 S.W.2d 220 (1990); May v. Hankins Distributing Co., 301 Ark. 494, 785 S.W.2d 23 (1990). However, when extending its inherent power to include evidentiary matters that contain both procedural and substantive rights. I believe the court goes too far. In fact, the majority court’s opinion makes no mention of or distinction between procedural and substantive rights. Of course, if the majority had done so, it would have required reversal of the trial court’s ruling since the psychotherapist-patient privilege is a rule that clearly vests in a person a substantive right that never existed at common law or until the legislature provided for it by statutory law.

While it may be argued that this court’s expertise in both procedural and evidentiary matters should be superior to the legislature’s, this court simply has not exercised its authority in drafting and promulgating evidentiary rules — independent of the General Assembly — except to avoid the problems discussed in Ricarte This court has far more than it can do now in trying to keep up with its case load and other committee work. Now, the court will independently be required to add another committee to study and to keep abreast of what changes need to be made regarding the uniform rules of evidence. Until now, that task has been a cooperative venture with the General Assembly. I believe not only the law but also practicalities warrant that cooperative venture to continue — at least in areas where evidentiary rules affect substantive rights, as they do in the instant case.

For the reasons above, I would uphold the validity of § 12-12-511(a) and reverse this case.

Hays, J., joins this dissent.

       The distinction between substance and procedure was discussed in Sibbach v. Wilson & Co., 312 U.S. 1 (1941), where the Court stated the test must be whether a rule really regulates procedure — the judicial process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for disregard or infraction of them. Id. at 14.

       It is interesting to note that the Congress has plenary authority over the promulgation of evidentiary rules for the federal courts. See Usery v. Turner Elkhorn Mining Co., 428 U.S. 1 (1976). This authority has been delegated to federal courts by 28 U.S.C. § 2071 (1948) and 28 U.S.C. § 2076 (1975), but the statutes make it clear that any rule promulgated by the courts must be consistent with the Acts of Congress.

       For example, some of this court’s committees presently include the following: Supreme Court Committee on Rules Criminal, Supreme Court Committee on Rules Civil, Model Jury Instructions Criminal, Model Jury Instructions Civil, Board of Certified Court Reporter Examiners, Unauthorized Practice of Law Committee, State Board of Law Examiners, Supreme Court Committee on Professional Conduct.


author: Steele Hays, Justice.

text:
    Janet S. NEFF v. ST. PAUL FIRE & MARINE INSURANCE CO.
    90-125
    799 S.W.2d 795
    Supreme Court of Arkansas
    Opinion delivered December 3, 1990

      Woodruff & Green, by: Mary E. Green, for appellant.

      Davis, Cox & Wright, by: Constance G. Clark, for appellee.
   Steele Hays, Justice.

Appellant Janet Neff brought this damage suit against appellee St. Paul Fire & Marine Insurance Co., insurer of Washington County Regional Medical Center, alleging that by delivering the body of her stillborn fetus to her husband, the hospital had committed a tort of outrage. The trial court held that no cause of action was stated and we agree.

On March 20,1987, Janet S. Neff, appellant, was admitted to Washington Regional Medical Center with complications in pregnancy. The treating physician, Dr. Harmon Lushbaugh, could detect no fetal heart tones and an ultrasound confirmed there was no fetal heart motion or fetal activity. Labor was induced and appellant passed the fetus and placenta spontaneously. The seventeen-week-old fetus was nonviable.

About 6:00 p.m. on March 21, 1987, the hospital released the fetus to Mrs. Neff’s husband, Charles Neff, for burial. Later that evening, Charles Neff was arrested and charged with driving while intoxicated. Both Charles Neff and the fetus were taken into custody by the Madison County sheriff.

Appellant’s complaint alleges that next morning Claudette Warren, a registered nurse on the hospital staff, came to see appellant in her room, that Warren told appellant her husband and the fetus were being held in jail in Huntsville and advised appellant to go to Huntsville to retrieve the body. Whether appellant acted on this advice is not disclosed but the baby was buried appropriately on March 22, 1987.

On May 24, 1989, appellant filed suit against appellee, St. Paul Fire & Marine Insurance Company, as the statutory substitute defendant for the hospital. Appellant alleged negligent and intentional infliction of emotional distress. St. Paul moved to dismiss the complaint for failure to state facts upon which relief could be granted, pursuant to ARCP Rule 12(b)(6). The motion was supported by the affidavits of Claudette Warren and Ruby Milligan, the mother of Charles Neff. Appellant responded by submitting her own supporting affidavit. St. Paul submitted the affidavit of Dr. Lushbaugh and medical records related to appellant’s hospital stay.

St. Paul’s motion to dismiss was treated as a motion for summary judgment, ARCP Rule 56. In a letter opinion dated September 27,1989, the trial court concluded that even assuming the truth of appellant’s allegations, the actions of the hospital failed to support a claim for the tort of outrage. Appellant appeals from that order.

The trial court, in its letter opinion, noted initially that Arkansas does not recognize the tort of negligent infliction of emotional distress, citing Mechanics Lumber Co. v. Smith, 296 Ark. 285, 752 S.W.2d 763 (1988). Appellant takes no exception to that ruling, but does object to the trial court’s denial of her claim of an intentional tort. However, it was proper for the trial court to decide in the first instance whether the conduct of the hospital was so atrocious and outrageous as to permit recovery. Harris v. Arkansas Book Co., 287 Ark. 353, 700 S.W.2d 41 (1985); Restatement (Second) of Torts § 46, Comment h (1965); Givens v. Hixson, 275 Ark. 370, 631 S.W.2d 263 (1982).

We first recognized the tort of outrage — the intentional infliction of emotional distress — in M.B.M. Co. v. Counce, 268 Ark. 269, 596 S.W2d 681 (1980). The conduct complained of must be “so outrageous in character, and so extreme in degree as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized society.” While this court has recognized the type of conduct must be decided on a case by case basis, the stringent standard in Counce has prevailed. Mechanics Lumber Co. v. Smith, 296 Ark. 285, 752 S.W.2d 763 (1988); Ingram v. Pirelli Cable Corp., 295 Ark. 154, 747 S.W.2d 103 (1988).

Appellant’s claim of outrage has two aspects. The first is her objection to the hospital releasing the fetal remains to her intoxicated husband; and second, her objection to Nurse Warren’s advice that she recover the body from the Madison County sheriff. We believe the trial court was correct in finding no cause of action for the tort of outrage. The hospital did nothing more than it had a right to do under the law — to deliver the fetus to either parent. In fact, a refusal to do so might well have been a breach of duty. Additionally, it simply reported the subsequent development to the appellant and suggested a course of action she might take. However one chooses to view the unfortunate episode, the emotional distress which it occasioned was brought about primarily by the actions of Mr. Neff rather than by the actions of the hospital.

Appellant argues that the hospital’s release of the body to Charles Neff was improper. But we are given no authority for that conclusory allegation. Appellant maintains the hospital should have consulted with her first, particularly in view of her husband’s intoxication. We find no statute dealing with the right to possession of a corpse or control of a burial. Under relevant case law it usually belongs to a surviving spouse, then to the next of kin in the order of their relationship to the decedent — children of proper age, parents, brothers and sisters, and so forth. 22A Am. Jur. 2d Dead Bodies § 25 (1988). Our holding in Teasley v. Thompson., 204 Ark. 959, 165 S.W.2d 940 (1942), is in accord.

In this case, it appears that either parent is entitled to the right of possession, and the only question is whether one is entitled to possession without the consent of the other. Nothing we have found suggests that dual consent is necessary.

As between competing parents, we find no authority requiring the consent of both parents before a body may be released to one of them. In health matters generally, either parent’s consent is sufficient. For example, in Ark. Code Ann. § 20-9-602 (1987), outlining what consent is necessary for medical treatment, provision for parental consent specifically requires only one parent’s consent. Similarly, in Ark. Code Ann. § 20-17-302 (1987), providing for consent to an autopsy, either parent is authorized to consent. And in Ark. Code Ann. § 20-17-603 (1987), consent for organ donations, again either parent may consent. [Ark. Code Ann. § 20-17-603(a)(3) (1987).] Under section (d) of that statute, the anatomical gift may be revoked by any member of the listed classes which can give consent, if the physician or surgeon responsible is notified by the revoking party. There is no requirement that a doctor or hospital inquire as to the wishes of the other members of a class under this statute, only that other members of a class have veto power if they notify the party holding the body. Here, the appellant specifically recognizes that the hospital was not on notice that she had objections to the delivery of the body to Charles Neff.

We must conclude that the hospital had the authority and the right to release the fetus to the father without first obtaining the consent of the mother. This is particularly true where the hospital has merely surrendered physical custody of the remains, absent notice to the contrary.

The Restatement (Second) of Torts § 46 (1965), on the tort of outrage, states specifically in Comment g., that “conduct, although it would otherwise be extreme and outrageous, may be privileged under the circumstances.” The comment continues:

The actor is never liable, for example, where he has done no more than to insist upon his legal rights in a permissible way, even though he is well aware that such insistence is certain to cause emotional distress.

Here, the hospital was doing no more than it had a legal right to do — release the remains to one of the parents, without consulting the other. Even if that conduct could be regarded as improper, it would not equate with outrageous conduct, as defined in the Restatement.

As to the allegation that Charles Neff had been drinking, we have not been shown how that factor would alter his right to physical custody of the remains, nor do we think that would bring the hospital’s conduct within the standard announced in Counce, supra.

The other component in appellant’s claim was the nurse’s relaying to her the fact of her husband’s arrest for DWI and the advice to her to recover the body. Even by appellant’s account, she was not forced to take any steps, the nurse simply advised her to drive to Huntsville, retrieve the fetus and return it to Washington Regional. While the wisdom of the advice could be debated, it was not coercive and appellant does not even claim to have acted on it. Certainly advice of that type, however ill-advised, but undeniably well-intentioned, does not rise to the level of behavior that can be characterized as atrocious, outrageous and intolerable.

We conclude that the trial court quite properly held that a cause of action for the tort of outrage was not stated and, accordingly, we affirm.

       Charles Neff died on October 31, 1987, from unrelated causes.