author: George Howard, Jr., Justice. George Rose Smith, Justice, John A. Fogleman, Justice,

text:
    RYDER TRUCK RENTAL, INCORPORATED v. J. B. KRAMER
    77-263
    563 S.W. 2d 451
    Opinion delivered March 27, 1978
    (In Banc)

      Thaxton, Hout & Hartsfield, by: Larry Hartsfield, for appellant.

      Murphy, Blair, Post & Stroud, by: H. David Blair, for appellee.
   George Howard, Jr., Justice.

We are to determine whether the trial court’s holding was proper which granted a summary judgment resulting in the cancellation of an installment note on the grounds that the note was usurious.

THE FACTS

On April 13, 1973, appellee, J. B. Kramer, signed an installment note, as president of J. B. Kramer Grocery Company, Inc., and in his individual capacity as guarantor, promising to pay to the order of appellant, Ryder Truck Rental, Inc., the sum of One Hundred Seventy-one Thousand and no/100 Dollars ($171,000.00). The note provided that interest would be computed in the following manner: “Prime rate of interest established by the First National Bank of Boston plus One and Three-Fourths Per Cent (1 3/4%). Such rate to be adjusted quarterly as of the last day of each calendar quarter. The initial rate of interest payable hereunder shall be Eight and One-Fourth Per Cent (8 1/4%).” The note also provided that appellee, James Kramer, as guarantor, would repay the note with interest at the highest rate permitted by law until fully paid.

Under the terms of the note, Two Thousand Eight Hundred Fifty and no/100 Dollars ($2,850.00) principal together with accrued interest was to be paid on the 1 st day of May, 1973, and Two Thousand Eight Hundred Fifty and no/100 Dolars ($2,850.00) together with accrued interest was to be paid on the 1st day of each succeeding month until the entire amount of principal and interest were paid.

Appellee paid to appellant two separate installments in the sum of Eighty-five Thousand and no/100 Dollars ($85,-000.00) and, consequently, left a remaining unpaid balance on the note in the sum of Eighty-six Thousand and no/100 Dollars ($86,000.00), plus interest. On October 19, 1976, appellant instituted its action against appellee in the Circuit Court of Independence County after appellee had ignored and refused the demands for payment made by appellant. Pursuant to appellee’s motion for summary judgment, upon its affirmative defense of usury, a judgment was entered by the trial court cancelling the indebtedness.

HOLDING OF THE TRIAL COURT

The trial court held that there was no material issue of fact involved and that a summary judgment should be granted in favor of appellee inasmuch as the note was usurious and void.

APPELLANT’S CONTENTION FOR REVERSAL

The lower court committed error in granting summary judgment in that genuine fact issues existed.

THE DECISION

Ark. Stat. Ann. § 29-211 (Repl. 1962 and Supp. 1977) relating to summary judgment proceedings in the circuit, chancery and probate courts, in relevant part, is as follows:

“. . . The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. ...”

The primary purpose of summary judgment procedure is to determine whether there are any triable issues of fact requiring a formal trial on the merits. The procedure provides a speedy method of determining whether there are any disputed and material issues of fact. The remedy of summary judgment is essentially one in the interest of justice and its object is to obtain judgment immediately and avoid delays which may result in injustice. If the trial court concludes, after reviewing the record, that there are no questions of fact, the court applies the law in accordance with admitted facts as disclosed by the affidavits, if any, and other submitted pleadings and grants the summary judgment if the party is otherwise entitled thereto as a matter of law. Universal Life Ins. Co. v. Howlett, 240 Ark. 458, 400 S.W. 2d 294; Jones v. Comer, 237 Ark. 500, 374 S.W. 2d 465. In reviewing the record, the trial court must view it in the light most favorable to the party resisting the motion with all doubts and inferences being resolved against the moving party.

In considering the entire record submitted in this cause, we cannot conclude or hold that the trial court committed reversible error. We are satisfied and persuaded that the trial court was correct in holding that appellee was entitled to a judgment as a matter of law.

In reviewing the installment note in question which provides, in material part, that the “Prime rate of interest established by the First National Bank of Boston plus One and Three-Fourths Per Cent (1 3/4%)” along with the admissions made by appellant in response to request for admissions submitted by appellee, there is not a material fact in dispute.

Appellant admitted in its response to defendant’s request for admissions that the following schedule represented the prime rate of interest established by First National Bank of Boston for the designated periods:

PERIOD INTEREST TOTAL INTEREST From To RATE CHARGED

8/13/73 8/21/73 9.25 plus 1 3/4 11.00

8/21/73 8/28/73 9.50 plus 1 3/4 11.25

8/28/73 9/14/73 9.75 plus 1 3/4 11.50

9/14/73 10/23/73 10.00 plus 1 3/4 11.75

10/23/73 12/10/73 9.75 plus 1 3/4 11.50

12/10/73 12/31/73 10.00 plus 1 3/4 11.75

12/31/73 2/1/74 9.75 plus 1 3/4 11.50

2/1/74 2/11/74 9.50 plus 1 3/4 11.25

2/11/74 2/20/74 9.25 plus 1 3/4 11.00

2/20/74 2/26/74 9.00 plus 1 3/4 10.75

2/26/74 3/22/74 8.75 plus 1 3/4 10.50

3/22/74 3/28/74 9.00 plus 1 3/4 10.75

3/28/74 4/3/74 9.25 plus 13/4 11.00

4/3/74 4/8/74 9.50 plus 1 3/4 11.25

4/8/74 4/11/74 9.75 plus 1 3/4 11.50

4/11/74 4/19/74 10.00 plus 1 3/4 11.75

4/19/74 4/24/74 10.25 plus 1 3/4 12.00

4/24/74 5/1/74 10.50 plus 1 3/4 12.25

5/1/74 5/6/74 10.75 plus 1 3/4 12.50

5/6/74 5/10/74 11.00 plus 1 3/4 12.75

5/10/74 5/17/74 11.25 plus 1 3/4 13.00

5/17/74 6/26/74 11.50 plus 1 3/4 13.25

6/26/74 7/5/74 11.75 plus 1 3/4 13.50

6/5/74 9/30/74 12.00 plus 1 3/4 13.75

9/30/74 10/21/74 11.75 plus 1 3.4 13.50

10/21/74 10/29/74 11.50 plus 1 3/4 13.25

10/29/74 11/18/74 11.00 plus 1 3/4 12.75

11/18/74 1/13/75 10.50 plus 1 3/4 12.25

1/13/75 1/20/75 10.25 plus 1 3/4 12.00

1/20/74 1/27/75 10.00 plus 1 3/4 11.75

1/27/75 2/4/75 9.50 plus 1 3/4 11.25

2/5/75 2/10/75 9.25 plus 1 3/4 11.00

According to the agreement of the parties, one and three-fourths percent (1 3/4%) was to be added to the aforementioned prime rate of interest.

It is readily apparent that between the date of the execution of the installment note and the trial of this cause, the interest rate far exceeded the 10% per annum permissible under the Arkansas Constitution, Article 19, Section 13, which provides, in material part, as follows:

“All contracts for a greater rate of interest than ten percent per annum shall be void, as to principal and interest, ...”

Indeed, the installment note involved in this action calls for a variable rate of interest to be determined by a future contingency in which appellee had no control. See: Foster v. Universal C.I.T. Corp., 231 Ark. 230, 330 S.W. 2d 288 (1959); Sosebee v. Boswell, 242 Ark. 396, 414 S.W. 2d 380 (1967).

In Sosebee v. Boswell, supra, we said, inter alia:

“. . . When the lender stipulates for the absolute repayment of principal and interest at the highest legal rate, and for a further profit payable upon a contingency not under the control of the borrower, the contract is usurious. Furthermore, even the chance ... of the lender’s receiving excessive profit under the transaction or arrangement is more than the lender is legally entitled to require. *** A fortiori is the contract usurious when the contingency under which the excessive interest is payable is under the control of the lender.”

Appellant argues that it is a question of fact as to whether it intended to profit beyond an amount equal to ten percent (10%) of the principal shown on the note. Moreover, appellant insists that provisions of the note which state that appellee guarantees payment of the note with “interest at the highest rate permitted by law” supports its position and also establishes an ambiguity on the face of the note, thus raising a material issue of fact concerning the intent on the part of appellant to impose an illegal rate of interest.

Appellant’s argument is not persuasive. It is readily apparent on the face of the note that there is nothing which limits the interest payable to the maximum allowable under Arkansas law. Moreover, during a substantial part of the life of the indebtedness, the prime rate of interest of the First National Bank of Boston plus one and three-fourths percent (1 3/4%) has exceeded the maximum allowable interest under Arkansas law.

In Wilson v. Whitworth, 197 Ark. 675, 125 S.W. 2d 112, we said:

“It is not necessary for both parties to intend that an unlawful rate of interest be charged, but if the lender alone charges or receives more than is lawful, the contract is void.” (Emphasis added)
See also: Cagle v. Boyle Mtg. Co., 261 Ark. 437.

It is obvious that appellant made a mistake of the law, that of thinking that its method of charging interest, and the consequences that flowed therefrom was lawful under Arkansas law. If the Arkansas Constitution means what it says that all contracts for a greater rate of interest than ten percent (10%) are void, and this Court is to carry out this mandate, as every judge of this Court has a sworn duty to do, every lender who misjudges the law and collects excessive interest charges cannot purge his conduct by alleging in court that the debtor must prove that the lender intended to profit in excess of ten percent (10%), when, as here, it is clear from the face of the documents involved that the lender has charged more than the lawful interest rate.

Finally, the remaining question to be dealt with is whether the finding that the installment note sued upon is void for usury inures to the benefit of appellee who signed in his individual capacity as a guarantor. We are persuaded that a guarantor may take advantage of usury in the obligation guaranteed. In other words, if the debt which the guarantor has guaranteed is declared void and a nullity, the guarantee is also void, especially when, as here, the principal obligation and the guaranty thereof are parts of one entire transaction so that there is a matter of fact only one contract. Roe v. Kiser, 62 Ark. 92.

Nor are we persuaded or convinced that appellee is precluded from asserting usury on the theory that there exists a disclaimer in that the guarantee stated that appellee guarantees payment of the note with “interest at the highest, rate permitted by law.” It must be remembered that the quoted provision appears only in connection with the guaranty agreement and does not appear in the principal obligation between the maker and appellant. As asserted by the appellee, the principal obligation having been rendered illegal and void, there is nothing for the appellee to guarantee.

Affirmed.

Harris, C.J., and Holt and Hickman, JJ., concur in results.

George Rose Smith, J., concurs with written opinion.

Fogleman, J., dissents.

George Rose Smith, Justice,

concurring. The majority opinion holds the contract to have been usurious because the interest rate, calculated in accordance with the unambiguous language of the note, was more than 10% per annum for 18 successive months (October 1, 1973, through March 1, 1975). I would affirm the decree not on that broad ground but on the narrower ground that, as of the filing of the complaint on October 19, 1976, the contract as written had already provided for interest that exceeded the legal 10% maximum by $2,-553.24. A plaintiff’s cause of action is to be determined as of the date the complaint is filed, regardless of any later change in the facts. Massey v. Tyra, 217 Ark. 970, 234 S.W. 2d 759 (1950); Pearce v. Hollis Construction Co., 212 Ark. 434, 206 S.W. 2d 15 (1947); Vandergriff v. Vandergriff, 211 Ark. 848, 202 S.W. 2d 967 (1947).

Contrary to the opening sentence in the dissenting opinion, I think this case is tailor-made for a summary judgment. The controlling facts are absolutely without dispute. There is nothing for the court to do except to apply simple mathematics and unquestioned rules of law to the uncontradicted facts. When that is done, the contract is undeniably usurious.

The debtor, J. B. Kramer Grocery Company, agreed to pay $171,000 in 60 equal monthly installments of $2,850, with interest at the specified Boston prime rate plus 1 3/4%, the rate to be adjusted as of the last day of each calendar quarter. As an appendix to this concurring opinion I am attaching a calculation of the interest that would have accrued from the date of the note down to and including the date of the last installment that was payable before suit was filed. It will be seen that the interest, according to the terms of the note, would have been more than $2,500 in excess of the maximum permissible total.

No matter how “capital-hungry” the State of Arkansas may be — a matter about which I know next to nothing — the law is perfectly clear. Contracts calling for more than 10% interest per annum are void as to principal and interest. Ark. Const., Art. 19, § 13 (1874). Contingent contracts are to be enforced according to their terms, when the contingency is not within the control of the borrower. Sosebee v. Boswell, 242 Ark. 396, 414 S.W. 2d 380 (1967), cert. den. 389 U.S. 953 (1967). (There the majority rejected a dissenting opinion making the same arguments that are now repeated in dissent.)

It seems to me to be utterly futile to attempt to raise the specter of a question of fact about the parties’ intent. The language of the contract, by incorporation by reference, adopted the Boston rate plus 1 3/4% as positively and as unmistakably as if the figures set out in the appendix to this opinion had been written into the contract. Neither party had the power to change the terms that had been agreed upon. It makes no difference that the appellant might have offered to parade into court a hundred expert witnesses ready to testify that the increase in the Boston rate was unexpected and unprecedented. Such evidence would directly contradict the language of the agreement and would therefore be inadmissible under the parol evidence rule — a rule of substantive law. Hoffman v. Late, 222 Ark. 395, 260 S.W. 2d 446 (1953). Thus the trial judge was demonstrably and unquestionably correct in granting the appellee’s motion for summary judgment.

APPENDIX

Due Date of Each Payment Principal Balance Int. Rate Interest to Interest to be charged be charged at 10%

1973

May 1 171,000 8.25 $ 695.70 $ 843.30

Tune 168,150 8.25 1.156.03 1.401.25

July 165,300 9.50 1,308.62 1.377.50

Aug. 162,450 9.50 1,286.06 1.353.75

Sept. 159,600 9.50 1,263.50 1,330.00

Oct. 156,750 11.75 1,534.84 1.306.25

Nov. 153,900 11.75 1,506.93 1.282.50

Dec. 151,050 11.75 1.479.03 1.258.75

1974

Tan. 148,200 11.50 1,420.25 1.235.00

Feb. 145,350 11.50 1,392.93 1.211.25

March 142,500 11.50 1.365.62 1.187.50

April 139,650 11.00 1,280.12 1.163.75

May 136,800 11.00 1,254.00 1.140.00

June 133,950 11.00 1.227.87 1.116.25

July 131,100 13.50 1.474.87 1.092.50

Aug. 128,250 13.50 1,442.81 1.068.75

Sept. 125,400 13.50 1,410.75 1.045.00

Oct. 122,550 13.50 1,378.68 1.021.25

Nov. 119,700 13.50 1.346.62 997.50

Dec. 116,850 13.50 1,314.56 973.75

Due Date of Principal Each Payment Balance Tnt. Rate to be charged Interest to be charged Interest at 10%

1975

Tan. 114,000 12.25 1,163.75 950.00

Feb. 111,150 12.25 1,134.65 926.25

March 108,300 12.25 1,105.56 902.50

April 105,450 9.25 812.84 878.75

May 102,600 9.25 790.87 855.00

Tune 99,750 9.25 768.90 831.25

July 96,900 8.75 706.56 807.50

Aug. 94,050 8.75 685.78 783.75

Sept. 91,200 8.75 665.00 760.00

Oct. 88.350 9.75 717.84 736.25

Nov. 85,500 9.75 694.68 712.50

Dec. 82,650 9.75 671.53 688.75

1976

Tan. 79,800 9.00 598.50 665.00

Feb. 76,950 9.00 577.12 641.25

March 74,100 9.00 555.75 617.50

April 71,250 8.50 504.68 593.75

May 68,400 8.50 484.50 570.00

Tune 65,550 8.50 464.31 546.25

July 62,700 9.00 470.25 522.50

Aug. 59,850 9.00 448.87 498.75

Sept. 57,000 9.00 427.50 475.00

Oct. 54,150 8.50 383.56 451.25

41,372.79 38,819.55

John A. Fogleman, Justice,

dissenting. This is not a case for summary judgment. By disposing of this case by summary judgment, the majority, by disregarding cardinal principles governing the treatment of usury questions, has virtually outlawed a modern business method of obtaining capital in a capital-hungry state. This is because in every variable interest note tied to the prime interest rate, fluctuations in that rate may, without warning, or control by either party, make the effective interest rate above 10% per annum. Hereafter, any such contract, made in good faith, will have to be made, if made at all, in dealings that cannot in any way relate to the State of Arkansas. See Cooper v. Cherokee Village, 236 Ark. 37, 364 S.W. 2d 158.

There, is not the slightest suggestion in the record on which the summary judgment was rendered that the note was drawn and the scheme devised as a cloak for usury. So far as this record discloses, it was a perfectly legitimate business transaction entered into when the prime interest rate was 6.5%. There is no suggestion that either party, in his wildest imagination, could have, or should have, anticipated the explosive and perhaps unprecedented, rise of the prime interest rate at a time when the major portion of the principal would still be outstanding. In five months the rate rose to 10%. If the prime interest rate had not reached 10% as quickly as it did, the effective interest rate would not have exceeded 10% per annum over the life of the loan. It remained at 10% or over during a period that, insofar as the note was concerned, applied to monthly payments due November 1 and December 1, 1973, January 1, February 1, March 1, July 1, August 1, September 1, October 1, November 1, and December 1, 1974 and January 1, 1975. At the time these payments were due the rates were applicable to principal balances, if the note had been paid according to its terms, ranging from $153,900 to $105,450. If these rates had applied when these balances ranged downward from $50,000, for example, we would have quite a different picture.

In order to put the matter in proper perspective, I think it appropriate to quote the clause incorporated in the note by which the Kramers became guarantors. It read:

The undersigned James B. Kramer and Ura Faye Kramer, individually, hereby guarantee the payment of the within note at maturity, or at any time thereafter, with interest at the highest rate permitted by law until fully paid, hereby waiving presentment, demand for payment, protest for non-payment, notice of dishonor, and all extensions of time for payment. [Emphasis added.]

I emphasize that this clause is not separate from the note. It is a part of the note itself. I think it appropriate to point out that this clause is not the typical disavowal of an intent to charge usurious interest we have so often, and properly, disregarded. In my opinion, it is a limitation on the interest to be paid, by its very language. Appellant has not sought to recover any more, as was the case in Daniels v. Johnson, 234 Ark. 315, 351 S.W. 2d 853. The guarantor does not say that he will pay the principal with the interest at the highest legal rate, in case of default by the maker. He guarantees the payment of the note at maturity, or thereafter, with interest at the highest legal rate.

The majority opinion is based upon a totally erroneous premise. The admission covers interest rates both before and after the list reproduced in the majority opinion. It is. sufficient, at this point, to say that they were lower both before and'after the periods listed. By simple calculation, the principal of $171,000, if paid according to the contract, would have been repaid by 60 payments of $2,850. Thus the term of the loan was five years and eighteen days. There is absolutely no prohibition against an interest rate in excess of 10% per annum over a portion of the term of the loan, and there never has been, so long as the interest taken or reserved does not exceed 10% per annum over the full term of the loan. A contract is usurious only if the amount the borrower is required, according to the terms of the agreement, to repay, over the whole term of the loan, more than he could have been required to pay if the interest rate had been the maximum of 10% per annum, i.e., the principal, plus 10% per annum from the date of the receipt. Davidson v. Commercial Credit Equipment Corp., 255 Ark. 127, 499 S.W. 2d 68; McDougall v. Hachmeister, 184 Ark. 28, 41 S.W. 2d 1088; 76 ALR 1463; Lyttle v. Mathews Inv. Co., 193 Ark. 849, 103 S.W. 2d 47. In making the test the principles of application of partial payments under the statute [Ark. Stat. Ann. § 68-606 (Repl. 1957)] are utilized. Lyttle v. Mathews Inv. Co., supra. When the proper test is applied to this contract, it becomes apparent that the amount the borrower would have been required to repay would never have exceeded 10% if the prime rate (not the rate prescribed by the note) had remained below 10%. Any interest in excess; of 10% per annum over the full term of the loan is attributable to fortuitous circumstance. In order to say that the lender had the intention to charge usury, we would have to attribute to it a clairvoyance possessed by few, if any. Who could have contemplated on April 13, 1973, when the loan was made, that the prime interest rate would jump from 6 V2 % to 10% in five months and rocket to 12% in just a little more than a year? Not only would the contract not have required any payment in excess of interest at the rate of 10% per annum if the prime rate had remained below 10% during the 18-month period when the rates soared above that level, it would not have if the high rates prevailing between August 13, 1973 and February 10, 1975 had occurred say two years later when more of the principal should have been retired according to the schedule of payments at a lower interest rate. For a better understanding, it is appropriate that some of the admitted rates for the period not shown in the majority opinion be set out. It is not necessary that all be reproduced, because the interest rates on the last days of the calendar quarters, i.e., March 31, June 30, September 30 and December 31, of each year are the only ones that affect interest rates.

PRIME INTEREST PERIOD_RATE
From To
3/26/73 4/18/73 6.50
6/22/73 7/2/73 7.75
3/26/75 5/21/75 7.50
6/10/75 7/18/75 7.00
9/12/75 10/28/75 8.00
12/1/75 1/12/76 7.25
1/22/76 5/28/76 6.75
6/7/76 8/2/76 7.25
9/27/76 11/1/76 6.75
12/13/76 6.25

It is the agreement, not the performance of it, that renders it usurious. Hayes v. First National Bank of Memphis, 256 Ark. 328, 507 S.W. 2d 701; Foster v. Universal C.I.T. Corp., 231 Ark. 230, 330 S.W. 2d 288. It must be assumed that the contract will be performed according to its terms. Eldred v. Hart, 87 Ark. 534, 113 S.W. 213; Sager v. American Investment Co., 170 Ark. 568, 280 S.W. 654; Hayes v. First National Bank of Memphis, supra. The test is whether the contract, if performed according to its terms, will result in producing to the lender a greater rate of interest than the law allows and whether such a result was intended. Hayes v. First National Bank of Memphis, supra; McDougall v. Hachmeister, supra; Lyttle v. Mathews Investment Co., supra. In examining the transaction, the court must look to the whole transaction and all the circumstances. Textron, Inc. v. Whitener, 249 Ark. 57, 458 S.W. 2d 367; Ragge v. Bryan, 249 Ark. 164, 458 S.W. 2d 403. The intent of the lender to exact more than the legal rate of interest must exist at the time the alleged usurious instrument was made. In Sloan v. Sears, Roebuck & Co., 228 Ark. 464, 308 S.W. 2d 802, this court said:

The facts and circumstances existing at the instant the contract is consummated determine whether it is usurious. ***
General Contract Corp. v. Duke, 223 Ark. 938, 270 S.W. 2d 918, 919, involved the sale of an automobile, and there we said:
Our cases hold that the transaction is to be judged at the time the contract is entered into, and not thereafter. ***

Thus, it is clear that usury is to be determined from the facts and circumstances existing at the time of the transaction and not by subsequent events. General Contract Corp. v. Duke, 223 Ark. 938, 270 S.W. 2d 918.

Certainly, it is not apparent from the face of the note that the interest rate would be usurious, or for that matter that it would ever exceed 10% per annum. When the usurious nature of the transaction is not apparent from the face of the instrument, the question of usurious intent (i.e., the intent to exact interest at more than the legal rate, not the intent to violate the usury laws) is for the factfinder and the burden of proving usury by clear, satisfactory and convincing evidence is on the party who asserts it. Brown v. Central Arkansas Production Credit Assn., 256 Ark. 804, 510 S.W. 2d 571; Hayes v. First National Bank of Memphis, supra; Peoples Loan & Investment Co. v. Booth, 245 Ark. 146, 431 S.W. 2d 472; Arkansas Real Estate Co. v. Buhler, 247 Ark. 582, 447 S.W. 2d 126; Haley v. Greenhaw, 235 Ark. 481, 360 S.W. 2d 753; Commercial Credit Plan, Inc. v. Chandler, 218 Ark. 966, 239 S.W. 2d 1009; Baxter v. Jackson, 193 Ark. 996, 104 S.W. 2d 202; Citizens' Bank v. Murphy, 83 Ark. 31, 102 S.W. 697. The issue must be determined as of the date of the contract and not by subsequent events. Brown v. Central Arkansas Production Credit Ass’n., supra; United-Bilt Homes, Inc. v. Teague, 245 Ark. 132, 432 S.W. 2d 1. It must be shown that there was an intention on the part of the lender to take or receive more than the maximum legal rate of interest. Ragge v. Bryan, supra; Peoples Loan & Investment Co. v. Booth, supra. The intention to charge a usurious rate of interest will never be presumed, imputed or inferred where an opposite result can be reached. Brown v. Central Arkansas Production Credit Ass’n., supra; Hayes v. First National Bank of Memphis, supra; Davidson v. Commercial Credit Equip. Corp., supra; Key v. Worthen Bank & Trust Co., 260 Ark. 725, 543 S.W. 2d 496. It must be shown by clear and satisfactory evidence that there was an intent knowingly to take excessive interest. American Farm Mortgage Co. v. Ingraham, 174 Ark. 578, 297 S.W. 1039. It must be shown by clear and convincing evidence that appellant knowingly entered into a usurious contract, intending to profit by the methods employed. Commercial Credit Plan v. Chandler, supra. The lender must have knowingly and intentionally reserved, taken or secured interest at a higher rate than allowed by law before the note was usurious. Singley v. Norman, 202 Ark. 532, 150 S.W. 2d 947; Briggs v. Steele, 91 Ark. 458, 121 S.W. 754.

To constitute usury, where there is no agreement by which the borrower promised to pay, and the lender knowingly receives a higher interest than the statute allows, the greater rate of interest must be knowingly and intentionally reserved, taken or secured. It is essential that there be an intent or agreement to take unlawful interest and such unlawful interest must be actually taken, received or reserved. Armstrong v. McCluskey, 188 Ark. 406, 65 S.W. 2d 558; Briant v. Carl-Lee Bros., 158 Ark. 62, 249 S.W. 577. This rule was first stated in Briggs v. Steele, 91 Ark. 458, 121 S.W. 754, thus:

To constitute usury there must either be an agreement between the parties by which the borrower promises to pay, and the lender knowingly receives, a higher rate of interest than the statute allows for the loan or forbearance of money, or such greater rate of interest must be knowingly and intentionally “reserved, taken, or secured” for such loan of forbearance. It is essential, in order to establish the plea of usury, that there was a loan or forbearance of money and that for such forbearance there was an intent or agreement to take unlawful interest, and that such unlawful interest was actually taken or reserved.

The quotation has been repeated many times. See e.g., Brittian v. McKim, 204 Ark. 647, 164 S.W. 2d 435; Universal CIT Credit Corp. v. Lackey, 228 Ark. 101, 305 S.W. 2d 858.

The rule is incorporated into the statute governing such contracts. It reads:

All bonds, bills, notes, assurances, conveyances, and all other contracts or securities whatever, whereupon or whereby there shall be reserved, taken or secured, or agreed to be taken or reserved, any greater sum, or greater value for the loan or forbearance of any money, goods, things in action, or any other valuable thing than is prescribed in this act [§§ 68-602 — 68-604, 68-608], shall be void.

The language of the statute and our decisions have been so applied that where there is no agreement to pay interest at an excessive rate, or the excessive charge is not incorporated into the contract, the lender must knowingly receive some part of the excessive interest. See Garvin v. Linton, 62 Ark. 370, 35 S.W. 430, 37 S.W. 569; Jones v. Phillippe, 135 Ark. 578, 206 S.W. 40.

I had thought that on motion for summary judgment, a very extreme remedy, that all reasonable inferences were to be drawn in favor of the party against whom the judgment would be entered and all reasonable doubts resolved in his favor. Harvey v. Shaver, 247 Ark. 92, 444 S.W. 2d 256; Deltic Farm & Timber Co. v. Manning, 239 Ark. 264, 389 S.W. 2d 435; Russell v. City of Rogers, 236 Ark. 713, 368 S.W. 2d 89; Mason v. Funderburk, 247 Ark. 521, 446 S.W. 2d 543. Just the opposite has been done here. Not only that, the intention to charge a usurious rate has been presumed, imputed or inferred.

Summary judgment is too drastic a remedy to be so applied. To say that only a mathematical calculation is involved, much of what we have said on the subject of intent must be totally disregarded. It requires an ex post facto view of the matter, contrary to our decisions. It must be remembered that the lender has not received any payment of interest and it is obvious from the complaint that no payment has been applied to interest. The mechanistic mathematical computation approach taken in the concurring opinion also totally ignores the fact that the guarantors guaranteed “payment of the note at maturity, or at any time thereafter, with interest at the highest rate permitted by law until fully paid.” Even if this is not an integral part of the contract and a limitation on the interest rate, it is certainly a very important circumstance constituting a part of the transaction and having a bearing upon the question of intent, upon which the determination of usury turns.

I disagree with the application of the parol evidence rule suggested in the concurring opinion. The authority cited merely states that the parol evidence rule is substantive law. It has little place in usury cases. Every time a borrower seeks to show the intention of the lender by contradicting the language stated in the face of the agreement, he is permitted to do so by parol evidence. See American Physicians Insurance Co. v. Hruska, 244 Ark. 1176, 428 S.W. 2d 622. But we have rejected the idea expressed in the concurring opinion that parol evidence on the question of intent of the lender is not admissible when offered by the lender in explanation of the transaction. Peoples Loan & Investment Co. v. Booth, 245 Ark. 146, 431 S.W. 2d 472; Nineteen Corporation v. Guaranty Financial Corp., 246 Ark. 400, 438 S.W. 2d 685.

I do not understand the application here of the rule that a defendant cannot do anything to change the cause of action of a plaintiff at the time suit is filed, as we held in Massey v. Tyra, 217 Ark. 970, 234 S.W. 2d 759. Neither can I appreciate the applicability of Pearce v. Hollis Construction Co., 212 Ark. 434, 206 S.W. 2d 15, or Vandergriff v. Vandergriff, 211 Ark. 848, 202 S.W. 2d 967, where we held that a suit was premature where plaintiff’s cause of action had not accrued when his suit was filed. None of these cases have any bearing upon the amount of a plaintiff’s recovery when he has a cause of action.

Nor do I agree that Sosebee v. Boswell, 242 Ark. 396, 414 S.W. 2d 380, cert. den. 389 U.S. 953, 88 S. Ct. 337, 19 L. Ed. 2d 363, is controlling here. In Sosebee, the contingency was based on a collateral contract, which required the borrower to put in escrow $150 at the time the borrower sought release from the mortgage securing the debt of any of the lots in a residential subdivision. The parties expected that all lots would be sold by the borrower during the three-year term of the loan. The $150 deposit was also to be made for each lot not released from the mortgage if the borrower prepaid the loan. This $150 was to be forfeited if the lot purchasers did not obtain FHA or VA financing through the lender. Although I have difficulty in accepting the result in Sosebee, that was quite a different situation. Furthermore, the device in Sosebee was treated as a cloak for usury. There’s no suggestion of a cloak here. That was the basis for the rejection in Sosebee of Dunbar v. State Building & Loan Ass'n., 171 Ark. 232, 284 S.W. 2, which was also distinguished on the basis that Dunbar involved a loan by a bona fide building and loan association. There is no indication that appellant conducts a less legitimate operation. At any rate, we said in Dunbar that if there was an element of uncertainty or hazard in the contract relative to the amount of interest to be paid, the contingency excludes the idea of usury in the agreement. Why should that rule of law apply only to a building and loan association?

It seems to me that in considering this contract and in view of the severity of the penalty we should follow the principles set out in Usury, § 11a, 91 CJS 579, viz:

If an agreement can reasonably be construed as nonusurious, it should be so construed. The question of usury in loan transactions must be determined by construing all the papers executed in connection therewith, and not from isolated clauses and provisions therein. The courts, therefore, will not hold a contract to be in violation of the usury laws unless on a fair and reasonable construction of all of its terms, in view of the dealings of the parties, it is manifest that the intent of the parties was to engage in such a transaction as is forbidden by those laws. They have no right, however, to cfepart from the terms in which the contract is expressed to make legal what the parties have made unlawful. In determining whether a loan transaction is usurious, the courts will give effect to the intention of the parties, as reflected in the contract, but an unlawful intent will not be imputed as long as the acts of the parties admit of a construction which will render them lawful. If two reasonable constructions are possible, by one of which the contract will be legal and valid, while by the other it will be usurious and unlawful, the court will always adopt the former. In short, the general rule of interpretation and construction of such contracts may be said to be that the contract is not usurious when it may be explained on any other hypothesis.

These principles are in harmony with our case law and consistent with the requirement that a contract be construed to be a legal and valid one if it is reasonably possible to do so.

Of course, it is the duty of this court to uphold the Constitution of Arkansas, and I take it that none of the members of this court need to be reminded of that fact. But it is not the duty of this court, by an overzealous attention to one constitutional provision, to act for the sovereign people in amending that constitution by extending it beyond its own limits or to usurp the functions of the legislative branch of the government by implementing it. I humbly submit that this is just what the majority has done. The lender, upon whom the severest of penalties in the civil law may be invoked, has rights too, even under the usury clause in our constitution. These rights should be respected and regarded as highly as those of the borrower.

      J. B. Kramer Grocery Company, Inc. was not made a party to the action.

      The installment note executed by appellee was prepared by appellant. See: Foster v. Universal C.I.T. Corp., supra, where we said the contract must be strictly construed against the party preparing it.

      Ura Faye Kramer also executed the note in her individual capacity as guarantor, but was not made a party defendant to this action having been released from her individual guarantee in July, 1973. Whether the release of Ura Faye Kramer affected appellee’s standing as a guarantor is not an issue in this case.

      If it is not clearly a limitation, and I do not concede that it is not, it at least is an ambiguity which should be construed most favorably to the legality of the contract; or, if not, parol evidence would be admissible to explain the terms of the contract.

      It should be noted that the prime rate in the tabulation shown in the majority opinion is the first figure in the column headed “Interest Rate.”

      I do not agree with the mathematical computation attached to the concurring opinion. In the first place, it is based upon an application of rate changes which are not in accord with the terms of the note. For example, the rate of 11.75% is used to establish the payment due on October 1,1973. This is based upon the fact that the prime rate was 10% on September 30, 1973. Under the terms of the note that rate did not apply to the October 1 payment. The payment on October 1 was to include accrued interest, i.e., interest that accrued between September 1, 1973 and October 1, 1973. Interest would only accrue on a rate that had already been established, that is, the rate that applied under the terms of the note while it was accruing. This same “advancement” of rates in calculating accrued interest is followed throughout the calculation and may account, in substantial part, for the difference in my calculations and those of the author of that opinion. I do not set out my calculations, however, because I agree with the author of that opinion that, if the note had been paid at the rates arrived at by adding to the prime rate, and ignoring the limitation on interest in the note, the amount of interest would have, on both October 1, 1976 and October 19, 1976, exceeded 10% per annum on what would have been the outstanding balance from time to time, on the installment basis, if the note had been paid according to its terms. I repeat — appellant did not seek to recover this amount.


source: Caselaw Access Project

author: George Howard, Jr., Justice. John A. Fogleman, Justice, George Rose Smith, Justice,

license: Public Domain

text:
    Bill BROWN v. Roberta BROWN
    77-290
    563 S.W. 2d 444
    Opinion delivered March 27, 1978
    (In Banc)

      John R. Henry, for appellant.

      William B. Howard, for appellee.
   George Howard, Jr., Justice.

We are to decide whether the holding of the trial court declaring that a fire insurance policy obtained by appellant, wherein appellee, his cotenant, was not designated as an insured, inured to the benefit of appellee is supported by the preponderance of the evidence.

THE FACTS

Appellant and appellee were divorced on February 27, 1974. The divorce decree provided that the ownership of the dwelling house and lot owned by the parties be converted from an estate by the entirety to a tenancy in common. Appellee was granted exclusive possession of the property until such time as the youngest child of the parties reached his majority or until the appellee remarried. Appellee remained in possession of the dwelling house from February, 1974, to January, 1975, when she remarried. During the period from February, 1974, to January, 1975, appellee paid all of the monthly installment notes due Farmers Home Administration under an indebtedness in the sum of $12,300.00 and secured by a note and. mortgage. The note and mortgage were jointly executed by appellant and appellee. Appellee also paid the insurance premiums during this period in the sum of $360.00 which was required under the terms of the mortgage.

Appellee discontinued the monthly mortgage payments and the insurance premiums in January, 1975, and consequently, the insurance coverage lapsed for nonpayment of premiums.

In March, 1975, appellant procured a policy of insurance in the sum of $26,000.00, at the request of Farmers Home Administration, from State Farm Insurance. Appellant designated himself as the sole insured while Farmers Home Administration was designated as mortgagee.

The dwelling house was destroyed by fire in November, 1975, and pursuant to the request made by the attorney for appellee, State Farm made the draft, evidencing the insurance proceeds for the loss, payable to appellant, appellee, Farmers Home Administration and the attorney for appellant.

Appellant filed a petition for declaratory judgment in the Chancery Court of Craighead County seeking an order declaring him as the sole owner of the proceeds. However, before the trial of the matter, the parties agreed that the insurance draft would be endorsed by all concerned and the proceeds deposited in the registry of the trial court. The parties further agreed that the clerk of the court should be authorized, pursuant to court order, to pay from these proceeds the following sums: (1) The sum of $12,831.89 to Farmers Home Administration, thus paying the mortgage indebtedness in full; (2) to appellant’s attorney for services rendered in connection with the recovery of the insurance proceeds the sum of $3,000.00; and (3) the sum of $2,500.00 to appellee to satisfy a judgment obtained by appellee against appellant for arrearages due for nonpayment of child support payments.

Appellee filed pleadings in the action for declaratory judgment alleging, among other things, that she was entitled to one-half of the net proceeds remaining in the registry of the court.

FINDINGS OF THE TRIAL COURT

1. That on or before March 14, 1975, and after the appellee had abandoned the premises, the appellant entered upon and took possession of the premises, and he occupied same as a private residence; and that this occupancy continued until the dwelling burned on November 4, 1975.

2. That on March 14, 1975, appellant obtained fire insurance coverage on the dwelling house and that appellant was the only named insured on the policy; and that Farmers Home Administration was designated in said policy as mortgagee; and that appellant paid the premiums for such insurance coverage.

3. That appellant and appellee were tenants in common; and that at the time of the loss, appellant was in possession of the property as a tenant in common; and that the insurance policy which appellant acquired inured to the benefit of appellee; and that appellee is entitled to one-half of the net proceeds remaining on deposit in the registry of the court.

APPELLANT’S CONTENTION FOR REVERSAL

1. That the court erred in declaring that the insurance policy acquired by appellant for his own benefit inured to the benefit of appellee.

THE DECISION

In Clements v. Cates, 49 Ark. 242, we made the following observation:

“The law forbids a trustee, and all other persons occupying a fiduciary or quasi fiduciary position, from taking any personal advantage, touching the thing or subject as to which fiduciary position exists; or, as expressed by another, ‘whereever one person is placed in such relation by another, by the act or consent of that other, or the act of a third person, or of the law, that he becomes interested for him or interested with him in any subject of property or business, he is prohibited from acquiring rights in that subject antagonistic to the person with whose interest he has become associated.’ If such a person acquires an interest in property as to which such a relation exists he holds it as a trustee for the benefit of those in whose interest he was prohibited from purchasing, to the extent of prohibition. This rule applies to tenants in common by descent, with the same force and reason as it does to persons standing in a direct fiduciary relation to others. For they stand by operation of law in a confidental relation to each other, as to the joint property, and the duty is imposed on them to protect and secure their common interests. They have a community of interest which produces a community of duty, and imposes on each one the duty to exercise good faith to the others. Neither can take advantage of the other by purchasing an outstanding title or incumbrance and asserting it against them. Such an act would be inconsistent with good faith, and ‘against the reciprocal obligations to do nothing to the prejudice of each other’s equal claims which’ their relationship created.....”

In Hendrix v. Hendrix, 256 Ark. 289, 506 S.W. 2d 848, we made the following observation:

“We have long held that between tenants-in-common there is a fiduciary relationship, for they stand by operation of law in a confidential relation to each other, as to the joint property, and the duty is imposed on them to protect and secure their common interest.”

In reviewing the evidence in this record de novo, as we must, we are persuaded that the trial court’s holding is supported by a preponderance of the evidence and consequently, the trial court’s decision is affirmed.

It is clear from this record that both appellant and appellee were tenants in common in the property involved"as a consequence of the trial court’s action in converting the property owned by the parties from an estate by the entirety to a tenancy in common. See: Ark. Stat. Ann. § 34-1215 (Repl. 1962 and Supp. 1977). As such, a fiduciary relationship existed between them which imposed on each a duty to protect and secure their common interest. From February, 1974, to January, 1975, appellee maintained insurance coverage, at her own expense, for the benefit of herself and for appellant. After appellee remarried and decided to move elsewhere, she immediately advised the appellant of her plans to the end that appellant could assume possession of the premises. Moreover, the trial court found that the appellant took possession of the premises and occupied same as his private dwelling. Appellant did not see fit to obtain insurance coverage until he was requested to do so by Farmers Home Administration. However, appellant’s effort to obtain insurance coverage to the exclusion of his cotenant is to no avail.

It is interesting to note that the record reflects that although appellee paid the monthly installments to Farmers Home Administration between February, 1974, and January, 1975, appellant readily admitted on cross-examination that he claimed as a deductible item on his federal income tax return the interest paid by appellee, during this period, to Farmers Home Administration on their joint indebtedness. Moreover, it is further interesting to note that the trial court in the divorce proceedings between appellant and appellee expressly enjoined the appellant from burning the dwelling house down when the court awarded appellee possession of the property.

Appellant has cited the following cases in support of his position that the trial court erred in holding that the insurance proceeds inured to the benefit of appellee: Langford v. Searcy College, 73 Ark. 211, 83 S.W. 944; Barner v. Barner, 241 Ark. 370, 407 S.W. 2d 747. These cases hold essentially that a contract of insurance is a personal contract which inures to the benefit of the party with whom it is made and by whom the premiums are paid. But these cases are to be distinguished from the instant case and, consequently, are not controlling.

In Langford v. Searcy College, supra, the Board of Directors of Searcy College leased certain property containing certain structures to one R. B. Willis and others for a term of two years to be used for school purposes. It was understood that if the school proved a success, the lessees would propose to purchase the property. At the time of the execution of the lease, there was an outstanding indebtedness against the property which was secured by a mortgage. During the term of the lease, the indebtedness matured and foreclosure proceedings were instituted on the mortgage against the Board of Directors of Searcy College. Pursuant to a foreclosure decree, a sale was conducted and A. W. Yarnell and others became the purchasers. Following the sale, Mary E. Speers and William H. Langford, who were associated with R. B. Willis, lessee, of the Board of Directors of Searcy College, received a warranty deed from A. W. Yarnell and his associates whereby the property was conveyed in fee to Mary E. Speers and William H. Langford. The grantees acquired insurance coverage on the structures located on the premises and as a consequence of a fire, insurance proceeds in the sum of $20,000 were paid to Mary E. Speers and William H. Langford. The Directors of Searcy College claimed that they were entitled to the insurance proceeds. In reversing the trial court’s holding that the Directors of Searcy College were entitled to the proceeds, we held that inasmuch as the equity of redemption of Searcy College had been foreclosed and the legal title thereto passed to Yarnell and his associates, who sold it to Mary E. Speers and William H. Langford under a conveyance that was absolute and unconditional, and there was no contract by which it was agreed that the property would be held in trust by Mary E. Speers and William H. Langford for any purpose, Mary E. Speers and William H. Langford were lawfully seized in fee of the property. Consequently, the contract of insurance was a personal contract with Speers and Langford and the property was insured for their benefit. In other words, we held in Langford v. Searcy College, supra, that inasmuch as there was no fiduciary relationship existing, the insurance coverage did not inure to the benefit of the Board of Directors of Searcy College.

In Barner v. Barner, supra, we held that where a legal life tenant insures the property in his own name and for his own benefit and pays the premium from his own funds, the insurance policy does not inure to the benefit of the remainder-man in the absence of a fiduciary relationship between them or an agreement between the life tenant and the remainder-man as to which of them shall procure and maintain insurance coverage.

Affirmed.

Georoe Rose Smith and Byrd, JJ., dissent.

Fogleman, J., concurs with written opinion.

John A. Fogleman, Justice,

concurring. 1 concur in the majority opinion and its result. The limitation on the fiduciary relationship between tenants in common stated in the dissent is far too narrow. In Brittin v. Handy, 20 Ark. 381, 73 Am. Dec. 497, the proper line was drawn and we have not departed from it. The relationship exists whenever the tenants in common hold, not only under a common ancestor, but also under one instrument, or as a result of the same purchase, or where they hold by the same title. The rule was not changed by the dictum quoted in the dissenting opinion from Trout v. Harrell, 217 Ark. 670, 233 S.W. 2d 233. I do not disagree with that statement, however. It simply does not affect the rule of Brittin, which has not changed from the day it was announced. The general principle of Brittin was applied in Hayes v. Gordon, 217 Ark. 18, 228 S.W. 2d 464, where the cotenants were husband and wife and the tenancy was by the entirety. The Brittin rule was restated in full in Neilson v. Hase, 229 Ark. 231, 314 S.W. 2d 219 and was in no way impaired by the holding in that case. The decision in Neilson fully recognized the rule. Hayes was decided shortly before Trout but Neilson was decided after Trout.

The tenancy in common in Neilson certainly was not created by the same instrument. Neither did it result from the same purchase. Nor did the tenants in common hold by the same title.

I cannot accept the classification of the Brittin rule as dictum. Whether statements in opinions of courts are dictum engenders much debate. We recently rejected an argument that language from a prior opinion, adopting a test, was dictum because it constituted the adoption of a test which was essential to the decision. See, Greenlee v. Mum, 262 Ark. 663, 559 S.W. 2d 928. The situation in Brittin was closely parallel. After stating the test, we said that the parties in Brittin were not in a confidential or fiduciary relationship. The language of the opinion indicates that the decision was based upon two factors, one of them being the test stated at some length. We said:

It may be further remarked that Brittin and Handy were not tenants in common under the same instrument, etc., but that they purchased at different times, and held by different titles, though both of their titles were derived from the same source.

The statement in Brittin was not just a stray remark made without adequate support. It is quite true that the confidential relationship is virtually inescapable when there is a joint tenancy or a tenancy in common by descent. But the matter of the relationship of other tenancies in common is treated in Fréeman on Cotenancy & Partition, a text that has been widely cited. That author said:

RESTRAINTS ARISING FROM FACT OF COTENANCY
§ 151. Relations are those of Mutual Trust. — *****
Tenants in common by descent are under no other or greater obligations towards one another than other cotenants frequently are. Where two or more come to an estate by devise or descent from a common source of title, the relations between them are presumed to be relations of trust and confidence. Such a presumption may not appear so strong where the cotenants acquire their respective interests, at different times and by different conveyances; and it may, in certain cases, disappear altogether. But where the cotenants acquired their interest by a joint conveyance, under which they both went into possession, there can be no doubt that the relation necessarily produced is as much one of trust and confidence as though it originated in devise or descent. And even where the cotenants come to their titles at different times and from different grantors, they may, by being in the actual joint possession, and by a course of behavior in reference to one another and to the common subject of ownership indicating an intent to support and respect the common title, create relations of mutual trust and confidence as strong in fact and as worthy of consideration in law, as the relations growing out of the acquisition of title from a common source, by the same purchase or descent. *****
§ 155. When Purchase of Adverse Title permitted. — As the rule forbidding the acquisition of adverse titles by a cotenant, from being asserted against his companions, is always said to be based upon considerations of mutual trust and confidence supposed to be existing between the parties, the question naturally arises whether the rule is applicable where the reasons on which it is based are absent. Joint tenants, tenants by the entirety, and coparceners, always hold by and under the same title. Their union of interest and of title is so complete, that, beyond all doubt, such a relation of trust and confidence unavoidably results therefrom that neither will be permitted to act in hostility to the interests of the other in reference to the joint estate. Tenants in common, on the other hand, may claim under separate conveyances, and through different grantors. Their only unity is that of right to the possession of the common subject of ownership. As their connection is not necessarily so intimate as that of other cotenants, it may well be doubted whether they should always be subject to the restraints imposed upon the others. There are many cases in which the rule in regard to the acquisition of an adverse title by a cotenant is spoken of in general terms as applying to tenants in common, irrespective of their special and actual relations to one another. But an examination of the decisions clearly shows that tenants in common are not necessarily prohibited from asserting an adverse title. If their interests accrue at different times, and under different instruments, and neither has superior means of information respecting the state of the title, then either, unless he employs his cotenancy to secure an advantage, may acquire and assert a superior outstanding title, especially where the cotenants are not in joint possession of the premises.

I do not agree that the hypothetical situation postulated in the dissenting opinion would be a matter of form rather than substance. I would say that if two parties bought by the same purchase and took separate deeds, they would still be in a confidential and fiduciary relationship. If they did not acquire title by the same purchase and took by separate deeds, there would certainly be a reason for doing so, and avoidance of the confidential and fiduciary relationship would be appropriate.

Unquestionably, appellant and appellee became cotenants by virtue of one instrument, one purchase and by the same title. If that was not sufficient they certainly became tenants in common by one act, or one instrument, i.e., the divorce decree, and it was the same title.

I will not elaborate on the testimony, but, even though appellant tried to say that he was not in possession of the property, we áre in no position to say that the chancery court erred in holding that he was in possession. Even though the possession of one tenant in common is the possession of all, the cotenant who is in possession owes certain duties to the other tenants for whom he holds possession, particularly when the tenancy is one giving rise to a relationship of trust and confidence.

It is the general rule in this country that the tenant in common in possession occupies a confidential relation to his cotenants. Brietman v. Jaehnal, 99 N.J. Eq. 243, 132 A. 291 (1926). A tenant in common while occupying the property owes a duty to his co-owner to act as a reasonably prudent person in looking after and preserving the property and the relationship of trust and confidence binds all to protect and secure the common interest. Smither v. Betts, 264 S.W. 2d 255 (Ky., 1954); Crawford v. Wiedemann, 170 Ky. 613, 186 S.W. 509 (1916). Thus, it has been held that it is the occupying tenant’s duty to keep the property insured and insurance taken by him will inure to the benefit of both. Mastbaum v. Mastbanm, 126 N.J. Eq. 366, 9 A. 2d 51 (1939); Smither v. Betts, supra; Crawford v. Wiedemann, supra. See also, In re Estate of Ray, 7 Ill. App. 3d 433, 287 N.E. 2d 144 (1972).

I think that the facts in this case bring this case within the purview of those in which the tenancy in common is such that a fiduciary relationship exists between the tenants in common and that insurance coverage taken by the tenant in possession inures to the benefit of the tenant out of possession.

Accordingly, I would affirm the judgment.

George Rose Smith, Justice,

dissenting. In Barner v. Barner, 241 Ark. 370, 407 S.W. 2d 747 (1966), we held that a fire insurance policy taken out by a life tenant did not inure to the benefit of the remainderman, in the absence of a fiduciary relation between the two. The reason is that an insurance policy is a personal contract for the benefit of the person with whom it was made and by whom the premiums were paid.

Thus the controlling distinction is whether or not a fiduciary relationship exists. Here the parties were divorced. Thereafter there was not even a confidential relationship between them, much less a fiduciary one, merely because they had formerly been husband and wife.

They were, however, tenants in common with respect to the insured property. We have said that tenants in common by descent (such as brothers and sisters) are in a fiduciary relationship, because they stand by operation of law in a confidential relation to each other. Clements v. Cates, 49 Ark. 242, 4 S.W. 776 (1887). The Clements holding has been cited in a number of cases, but it has not been applied except to cotenants who held the property by common descent or devise. Quite the contrary, we pointed out in Trout v. Harrell, 217 Ark. 670, 233 S.W. 2d 233 (1950), that “the mere relationship of a co-tenancy does not, ipso facto, create a confidential relationship in all the dealings between the parties, even though such a relationship may exist in some matters.”

The suggestion is made in a concurring opinion in this case that the Clements holding, creating a fiduciary relationship, should be applied to any tenants in common whose title is acquired by the same instrument. We have never so extended the rule. Such an extension was stated, as dictum, in a quotation to be found in Brittin v. Handy, 20 Ark. 381 (1859), but in that case the court pointed out. that “Brit-tin and Handy were not tenants in common under the same instrument.” Nor as far as I can find, has any such rule been applied in any other Arkansas case.

Such an extension of the fiduciary principle would put form above substance. Suppose, for example, that two business acquaintances decide to buy an apartment house together. They might equally well have the seller make a single deed conveying the property to them as tenants in common or have him make separate deeds conveying a half interest to each grantee. The difference is simply one of form, as the final substantive effect of the transactions is exactly the same. But, according to the argument now being made, when only one deed is used the two men are fiduciaries toward each other. Thus, for example, if one seeks to buy the other’s half interest, he must make a full disclosure of everything he knows about the property. If, however, the common title had been acquired by separate deeds, even as part of the same transaction, the two men would be in a position to negotiate at arm’s length, with no fiduciary obligation toward each other. Surely the obligation of a fiduciary — perhaps the most burdensome position of trust that the law has ever created — should rest upon some legal or moral duty, not upon the extraneous fact that one deed rather than two was used in the transfer of property.

It is nevertheless true, however, that when the conduct of cotenants affects the entire property, they are unavoidably under an obligation to one another. Thus when one cotenant possesses the entire property or pays taxes upon it, his action inures to the benefit of the other owners. Someone must be in possession, someone must pay the taxes; such matters are ordinarily not susceptible of separate action.

I have emphasized the word ordinarily, because the situation is different if the interests of the cotenants are separable for a particular purpose. That situation was presented in Neilson v. Hase, 229 Ark. 231, 314 S.W. 2d 219 (1958). There the two cotenants each owned an undivided half interest in certain minerals, but their interests were separately assessed for taxation. In holding that one cotenant was at liberty to buy the other’s half interest at a delinquent tax sale, we based our decision on the fact that the purchasing cotenant was under “no duty or obligation, legal or moral,” to pay the taxes on the other’s interest. That decision is sound and should control the case at bar.

The same reasoning is applicable to fire insurance. Each cotenant is free to insure his own interest, just as the life tenant and the remaindermen in the Earner case, supra, were free to insure their own interests. That is what the divorced husband did in this case. The policy provides that it insures the named insured, Bill Brown, to the extent of the actual cash value of the property, but in any event not more than his interest. Perhaps the insurance company might have contested its liability on the ground that its insured owned only an undivided half interest in the property and had overinsured its value. But I do not see how the divorced wife, absent any fiduciary relationship, is in a position to demand the protection of a fire insurance policy that was not payable to her, that did not insure her interest in the property, and for which she contributed no part of the premium.

Byrd, J., joins in this dissent.


author: John A. Fogleman, Justice.

text:
    Hayden CARTER v. Lee QUICK et ux
    77-186
    563 S.W. 2d 461
    Opinion delivered April 3, 1978
    (Division II)

      Rhine, Rhine & Young, by: Robert E. Young, for appellant.

      Mooney & Boone, by: Joe C. Boone, for appellees.
   John A. Fogleman, Justice.

Appellant Hayden Carter contracted to build a dwelling house for appellees Lee and Irline Quick on property they owned about one mile west of Paragould. The oral contract was entered into sometime in October, 1973. Plans and specifications were furnished by the Quicks. The agreed price was $25,000. The Quicks moved into the house in December, 1973, and were occupying it when this suit was filed. They commenced this action for breach of contract, alleging that Carter had represented and warranted that the residence would be constructed in a good workmanlike manner and that the quality of construction would be equal to, or better than that of Carter’s own residence. The Quicks also alleged negligence in the performance of the contract. Carter denied all material allegations of appellees’ complaint. The case was tried by the court, without a jury, and judgment for $4,060 for damages was granted the Quicks, but Carter was allowed $205 on his cross-complaint, which was not abstracted. Carter alleges several grounds for reversal and we find merit in one of them and reverse the judgment on that account.

Carter moved for a “directed verdict” on the ground, among others, that the Quicks failed to show a breach of the contract because no evidence was presented as to the quality of workmanship of his own residence. The Quicks had complained more about the workmanship in the brick veneer on their house than anything else, but they also complained of the Fireplace, allegedly out-of-plumb doors and windows, the use of ungalvanized nails in walls, the location of a switch and fuse box and floors they said were not level. There was substantial evidence that the workmanship in laying the brick was defective and the circuit court gave judgment on this item for the lowest estimate of the cost of replacement, $4,000. He also allowed $20 for reframing the garage door, $20 for moving either a fuse box or a water heater and $20 to repaint the garage to cover rust on ungalvanized nails. There was substantial evidence to support the awards of all except the last item. On that item, it seems clear that appellees prevented the repainting that Carter offered to do.

The terms of the contract were shown by the testimony of Lee Quick and Carter. Lee Quick said that Carter declined to enter into a written contract but promised that “he would build the house the same quality and be as good as his own,” with certain exceptions not material here. Prior to this agreement, the Quicks had viewed Carter’s residence. Carter testified that he told the Quicks, “If you want to look at my house, look it over. I’ll build you one just like it with the same material and workmanship as my house.” He said that he used ungalvanized nails in his own house and that they are visible. He also testified that the brickwork on his own house was comparable to that on the Carter house and that the Quick house was “as good and workmanlike as the house I was living in at the time.” The abstract of the evidence does not reflect any evidence that Carter agreed, as the Quicks alleged, that the house “would be constructed in a good and workmanlike manner with proper construction.” Carter’s testimony was the only evidence pertaining to the quality of the workmanship on his own house.

We are not presently concerned with the question whether there was an implied warranty of the quality of the materials and workmanship used on the construction of the Quick home. For the purposes of this opinion, we assume that there was. But, according to the testimony in this case, there was an express warranty. Although we have no cases involving, the effect of an express warranty upon an implied warranty in building contracts, we conclude that implied warranties are not applicable when there is an express warranty, by analogy to pre-Commercial Code sales contract cases, the reasoning in such cases being appropriate to a contract such as this. The oral contract here was based upon an express warranty of quality in unequivocal language even though the words “warrant” and “warranty” were never used. Harris v. Hunt, 216 Ark. 300, 225 S.W. 2d 15; Nichols v. Lea, 216 Ark. 388, 225 S.W. 2d 684; Ives v. Anderson Engine & Foundry Co., 173 Ark. 112, 292 S.W. 111; Warren v. Granger, 151 Ark. 453, 236 S.W. 607. Where a contract contains an express warranty on the subject of an asserted implied warranty, the former is exclusive and there is no implied warranty on that subject. C. B. Ensign & Co. v. Coffelt, 119 Ark. 1, 177 S.W. 735; Elder Grocery Co. v. Applegate, 151 Ark. 565, 237 S.W. 92; Earle v. Boyer, 172 Ark. 534, 289 S.W. 490; Reed v. Rea-Patterson Milling Co., 186 Ark. 595, 54 S.W. 2d 695. In C. B. Ensign & Co. v. Coffelt, supra, it was argued that there was an implied warranty of the suitability of a carbide gas lighting plant, but we held that there was no such warranty when the contract included an express provision that the plant would diffuse light equal to a sample exhibited. It would be difficult to find a more analogous situation. The evidence was not sufficient to show a breach of warranty. Appellant’s motion should have been granted.

Appellant also questions the measure of damages applied by the trial judge, i.e., the cost of replacing the allegedly defective brickwork. It is highly likely that this question will arise on retrial. Appellant contends that the proper measure of damages is the difference between the value of the building erected and the value of the building if it had been built according to the contract. In making this argument, appellant relies on Restatement of the Law, Contracts § 346 (1) (a) (ii) and language in our opinion in J. E. Hollingsworth & Co. v. Leachville Special School District, 157 Ark. 430, 249 S.W. 24. The Restatement rule is stated as follows:

The difference between the value that the product contracted for would have had and the value of the performance that has been received by the plaintiff, if construction and completion in accordance with the contract would involve unreasonable economic waste.

See also, 5 Corbin on Contracts 485, 491, § 1089.

In Hollingsworth, we approved the following declaration of law.

A substantial compliance by the contractor is all that is required under the law, he being charged (where there is a substantial compliance) with the difference in value between the work as done and as contracted to be done, or the replacement of defective work where this can be done without great expense or material injury to the structure as a whole.

We also approved an award by the chancellor of the cost of tearing down and removing defective work and rebuilding a school building according to the original plans. The chancellor had stated the question to be decided thus:

Could the defective masonry have been replaced with reasonable expense without tearing down the whole structure? If it could, then the district is entitled to charge only what such cost would have been, together with difference in value of brick, steel, lugs, caps, bases, etc., furnished and those contracted for. On the other hand, if the inferior masonry was all over the building so that the structure was unsafe (and the maximum of safety is required for school buildings where hundreds of little children are housed), and it was necessary to rebuild in order to be certain of durability, then the district was justified in dismantling the house as a whole and in the rebuilding to use materials conforming strictly to the contract.

That case was a suit by the contractor for breach of contract after his work had been stopped by the owner before the building was complete. The owner (school district) cross-complained. The damages awarded were the costs of the completed building, including the cost of tearing down and removing defective parts of the work done by the contractor. It seems, however, that the principles stated in the above quotations should apply in a case like this one where construction was completed and the contractor paid.

The underlying purpose in awarding damages for breach of contract is to place the injured party in as good position as he would have been had the contract been performed. Rebsamen Companies, Inc. v. Arkansas State Hospital Employees Federal Credit Union, 258 Ark. 160, 522 S.W. 2d 845; 11 Williston on Contracts, (3rd Ed.) 345, § 1363; 5 Corbin on Contracts 5, § 992. It has generally been considered that financial loss is the measure, as was said in the cited case. Yet, the difference in value of a building as erected and its value if it had been constructed according to the contract is not always appropriate where the contractor’s performance is defective. See Annot. 76 ALR 2d 805 (1961). It has always been recognized that in an action by a contractor to recover the contract price, where there has been substantial performance or the work has been accepted by the owner notwithstanding defects therein, the contractor is only entitled to recover the contract price, less the cost of correcting such defects. Mitchell & Pumphrey v. Caplinger, 97 Ark. 278, 133 S.W. 1032. The applicable rule was stated in Roseburr v. McDaniel, 147 Ark. 203, 227 S.W. 297, thus:

The rule established by decisions of this court is that, where a building contract is substantially performed, even though there are omissions and deviations therefrom, if such defects do not impair the structure as a whole and are remedial “without doing material damage to other parts of the building in tearing down and reconstructing, and may without injustice be compensated by deductions from the contract price, ” there may be a recovery for the amount found due after making such deductions. ***

See also, Harris v. Holder, 217 Ark. 434, 230 S.W. 2d 645. This particular approach does not seem to have been utilized in Arkansas in cases such as this, where the contractor has been fully paid and the owner sues for damages for breach of contract. But the cost of remedying such defects has been considered in other jurisdictions as a measure of damages for the builder’s breach of contract, in an action such as this, as indicated by the Restatement Rule. See Annot., 78 ALR 805, 810, 815, Footnote 14; 11 Williston on Contracts (3rd Ed.) 344 § 1363. Sometimes, however, “difference in value” is considered as a limitation on the owner’s recovery for cost of correction. See Ward v. Qualls, 229 Ky. 662, 17 S.W. 2d 739 (1929); State Prop. & Buildings Com’n. v. H. W. Miller Construction Co., 385 S.W. 2d 211 (Ky., 1964). On the other hand, it has been held that the difference in value rule in case of defective performance applies only when it would be unfair to apply the cost of construction rule. Bellizzi v. Huntley Estates, Inc., 164 NYS 2d 395, 3 NY 2d 112, 143 NE 2d 802 (1957).

It has been said that as a general rule the cost of correcting^ defects, rather than the difference in value, is the proper measure of damages where the correction would not involve unreasonable destruction of the work and the cost would not be grossly disproportionate to the results to be obtained. 13 Am. Jur. 2d 79, Building & Construction Contracts, § 79. See also, 5 Corbin 491, § 1089, where the author says that the cost of curing defects should be the measure whether the breach of the contract is large or small and that it should be applied in every case, except where the actual curing of the defects would cause unreasonable economic waste. This view is consistent with the result in Hollingsworth, where the contention was that the owner had not properly proved its damages.

It has been held in other jurisdictions that the cost of correction, even though substantial, if not grossly and unfairly disproportionate to the good to be attained, rather than the “difference in value” is particularly appropriate where the building is a dwelling house. Ritchey v. Sato, 39 Hawaii 500 (1952); Fox v. Webb, 268 Ala. 111, 105 So. 2d 75, 67 ALR 2d 1077 (1958). See also, Baldwin v. Alberti, 58 Wash. 2d 243, 362 P. 2d 258 (1961). This is because the interest of the owner is in having defective construction corrected so that he and his family may enjoy a properly constructed dwelling and he is not concerned with offsetting any loss on a possible resale of the property. In such a case, aesthetic values are properly involved. This is a reasonable and proper approach to the matter, and we think it peculiarly applicable in this case, where the house was built on the owner’s property for occupancy by him and his family, and all parties agree that the present market value exceeds the contract price. The owner, however, is not to be deprived of the benefit of his bargain, if the contract price was less than the value of the building. See Ward v. Qualls, supra.

We note also that the “cost rule” of damages has been applied in many cases where the defects were in floors, walls and roofs. See Southern Surety Co. v. Sealy Independent School Dist., 10 S.W. 2d 786 (Tex. Civ. App., 1928); Blecick v. School District No. 18 of Cochise County, 2 Ariz. App. 115, 406 P. 2d 750 (1965) and cases cited therein.

Appellant contends that the cost of replacement of the brickwork was so excessive that, as a matter of law, the cost of replacement measure of damages is inapplicable, and since the value of the house as constructed exceeds the contract price, appellee was not entitled to recover. The burden of proving affirmatively and conclusively that the cost was unreasonable, or an economic waste, was on appellant. County of Maricopa v. Walsh & Oberg, Architects, 16 Ariz. App. 439, 494 P. 2d 44 (1972); Blecick v. School District No. 18 of Cochise County, supra; 5 Corbin on Contracts 488, 492, § 1089. It cannot be seriously contended that replacement would result in material injury to the structure. The mere fact that replacement would cost $4,000 or more and the contract price was only $25,000 does not mean that the appellant had met his burden to the extent that the court should say, as a matter of law, that there was an unreasonable economic waste or that the expense is too great to resort to this measure of damages. In Southern Surety Co. v. Sealy Independent School Dist., supra, the Texas Court of Civil Appeals held that the cost of correction amounting to $17,100 was the proper measure of the owner’s damage when the contract price was $41,245.81. In Ritchey v. Sato, supra, the cost of correction allowed was $2,000 and the contract price for the dwelling was $7,600. On the evidence presented the question was one of fact. This is consistent with the statements in Hollingsworth that the contentions of the contractor were substantially questions of fact. The defects in that case were in the brick walls of the building. The question of damages, both as to measure and amount, seems to have been treated as a question of fact.

Appellant also contends that he was entitled to a directed verdict because appellees were constantly at the construction site and the defects of which they complain were readily apparent and because they accepted the residence as constructed. We consider the evidence on this question to be somewhat less than conclusive. There is some dispute about the frequency of Mrs. Quick’s visits to the job site and of her complaints or instructions about the work. We feel, however, that even if it be taken as established that all the defects were obvious and not latent, there was a question of fact as to waiver. There was evidence that Carter asked that a loan being made to the Quicks on the completed house be closed by December 15, 1973, when the lending agency closed its fiscal year and that the Quicks did so, and paid Carter, relying upon Carter’s promise that he would return and finish any work that was incomplete and remedy any defects. There was also testimony that Lee Quick was in ths hospital at the time and that his wife moved into the house while he was in this hospital. There was also testimony that Carter had made some effort to correct some of the defects. It is also signficiant that this house was built on property owned by the appellees.

If appellant had not been fully paid and had sued for a balance due him, there would be little room for doubt about the inapplicability of waiver in this case. It is well established by our decisions that a contractor suing for the contract price, on the balance due him, after acceptance of the work by the owner, may only recover the contract price less the costs of correcting defects. Fitzgerald v. LaPorte, 64 Ark. 34, 40 S.W. 261; Harris v. Holder, 217 Ark. 434, 230 S.W. 2d 645.

Waiver of defects is a question of fact to be determined from the circumstances of the case. Mitchell v. Carlson, 132 Mont. 1, 313 P. 2d 717 (1957). See also, Vernali v. Centrella, 218 Conn. Sup. 476, 266 A. 2d 200 (1970). The taking of possession and use by an owner of a building constructed on land owned by him, unaccompanied by other indications of acceptance of the work, can seldom be construed to be a waiver of either known or unknown defects in the construction of the building, because his use and possession are consistent with his ownership and he has no real alternative. Annot. 20 LRA (n.s.) 872 (1909).

When all the circumstances here are considered collectively, we cannot say that there was a waiver as a matter of law. Acceptance upon assurances that defects would be corrected is not alone sufficient to constitute waiver. Dutton & Barnes v. McIlroy, 171 Ark. 1010, 287 S.W. 370. Acceptance and occupancy by the owner of the land upon such a promise do not constitute waiver. Kendrick v. White, 75 Ga. App. 307, 43 S.E. 2d 285 (1947). Neither payment of the contract price by the owner nor occupancy by him even with knowledge of defects, standing alone, constitutes a waiver of defective performance. Sparling v. Housman, 96 C.A. 2d 159, 214 P. 2d 837 (1950). Aubrey v. Helton, 276 Ala. 134, 159 So. 2d 837 (1964); Barton v. Morin, 281 Mass. 98, 183 N.E. 170 (1932); Garbis v. Apatoff, 192 Md. 12, 63 A. 2d 307 (1949). Mere acceptance and occupation by the owner do not constitute a waiver of defective performance, unless the use of the structure is accompanied by conduct clearly indicating an acceptance of the work. Aubrey v. Helton, supra; Kendrick v. White, supra. See also, Vernali v. Centrella, supra. Payment and occupancy together without more, is not a waiver as a matter of law. Mitchell v. Carlson, supra.

It has been held that an owner who was convalescing from an illness when a house being built for him was completed, so that he was unable to inspect it, but who, upon insistence of the builder, went to a bank to borrow the last payment due on the contract and paid the contractor, with the definite understanding that the contractor would make any adjustments with the owner that proved to be proper, did not waive his right to assert defective performance. Temple Lumber Co. v. Miller, 169 S.W. 2d 256 (Tex. Civ. App., 1943).

The judgment is reversed and the cause remanded.

We agree. Harris, C.J., and Byrd and Holt, JJ.

Hickman, J., dissents.

      Carter also alleged that the contract was not with him but was with Carter Construction Company, Inc. This defense seems to have been waived. At any rate, no point is made of it.

      Appellees say in their brief here that Carter admitted in a deposition that he expressly agreed that the house would be completed and finished in a good, workmanlike manner. There is no indication that this deposition, which was not abstracted because appellant treated it as irrelevant on appeal, was ever introduced or offered in evidence.


author: Conley Byrd, Justice.

text:
    Dale BOOTH et al v. Ken BAER et al
    77-351
    563 S.W. 2d 709
    Opinion delivered April 3, 1978
    (Division II)

      Joseph C. Kemp, for appellants; Floyd J. Lofton, for intervenors.

      Howell, Price, Howell & Barron, P.A., for appellees.
   Conley Byrd, Justice.

The trial court enjoined the use of the sergeant’s eligibility promotion list of the Little Rock Police Department, as certified by the Little Rock Civil Service Commission [hereinafter referred to as Commission] on June 23, 1977. The appellants, the City Manager of Little Rock, members of the Little Rock Civil Service Commission and several intervening patrolmen, have appealed.

The law under which the Little Rock Civil Service Commission performs its duties, so far as applicable, Ark. Stat. Ann. § 19-1603 (Repl. 1968 and Supp. 1971), provides:

“The Board of Civil Service Commissioners herein provided shall prescribe, amend and enforce rules and regulations governing the fire and police departments of their respective cities, and said rules and regulations shall have the same force and effect of law. They shall keep a record of its examinations and shall investigate the enforcement and effect of this act [§§ 19-1601.1 — 19-1618] and the rules as provided for herein.

These rules shall provide:

1st. For the qualifications of each applicant for appointment to any position on the police or fire department; . . .
2nd. For open competitive examination to test the relative fitness of applicants for such positions.
3rd. For public advertisement of all examinations by publication of notice in some newspaper having a bona fide circulation in such city and by posting of notice at the city hall at least ten (10) days before the date of said examinations. Said examinations may be held on the first Monday in April and/or the first Monday in October, and more often if necessary, under such rules and regulations as may be prescribed by the Board of Civil Service Commissioners.
4th. For the creation of eligible lists for each rank of employment in said departments in which shall be entered the names of the successful candidates in the order of their standing in the examination. . . .
9th. For promotion based upon open competitive examinations of efficiency, character and conduct, lists shall be created for each rank of service and promotions made therefrom as provided herein, and advancement in rank or increase in salary beyond the limits fixed for the grade by the rules of said commission shall constitute a promotion.”

In addition, Ark. Stat. Ann. § 19-1607 (Repl. 1968) provides:

“All examinations provided for herein shall be fair and impartial, and such as to test the qualification of the applicants for the particular service and position to be filled.”

The record shows that the Commission, in certifying the eligibility list, uses a point system as follows:

Written test 40%
Seniority 20%
Oral Examination 20%
Rating by Chief 10%
Rating by Supervisor 10%
Total 100%

For the year in question the oral examination was conducted by Dr. R. D. Pursley, a University of Arkansas Professor, Larry Fletcher, a lieutenant with the Arkansas State Police and Mrs. Irma Fingers Hendricks, a resident of Pulaski County. After the first day of interviewing patrolmen, Mrs. Hendricks was called from her duties because of a personal emergency (apparently involving a member of her family), and the oral examinations were continued, at the direction of the Director of Personnel for the City of Little Rock, by Dr. Pursley and Lieutenant Fletcher. The oral examinations were conducted by asking questions and recording the examiner’s opinion of the respective applicant according to a scale of “a, b, c, d, or e” on (1) Supervisory Ability, (2) Administrative Ability, (3) Judgment, (4) Investigative Ability, (5) Effectiveness of Expression, (6) Alertness, (7) Self-confidence, (8) Tact and Diplomacy, and (9) Appearance. Thereafter, the scores were computed by the Director of Personnel of the City of Little Rock, or under his supervision, and were certified by the Commission according to the rank of the total score computed by the Director. The Commission did know that only Dr. Purley’s and Lieutenant Fletcher’s gradings were used.

For the reasons hereinafter stated, we find that the trial court must be affirmed.

(1) The record as abstracted does not show the qualifications designated for a police sergeant.

(2) The record does not show that the personality traits, upon which the applicants were examined, have been determined by the Commission to be necessary and important to the position to be filled.

(3) While the official rules and regulations provide for an examination, appellants have cited no rule or regulation delegating the oral examination to a panel or how the panel is to be selected. The minutes of the Commission approving the use of a panel can hardly be said to constitute a rule prescribed in accordance with Ark. Stat. Ann. § 19-1603, supra.

(4) Even if the minutes of the Commission meeting could be said to constitute a delegation of the oral examination to a panel, still the panel used by the Director of Personnel cannot be said to be a panel selected in accordance with a rule or regulation of the Commission — i.e., the record shows that the Commission had not authorized the substitution of a two member panel for a three member panel.

Without the establishment of some measurable standards capable of review by which the panelist should examine the applicants, a delegation to a panel to hold an oral examination as the panel deems necessary would constitute an unlawful delegation of the Commission’s authority, North Little Rock v. McDougal, 198 Ark. 388, 129 S.W. 2d 589 (1939). See also Stoor v. Seattle, 44 Wash. 2d 405, 267 P. 2d 902 (1954). In Almassy v. Los Angeles County Civil Service Commission, 34 Cal. 2d 387, 210 P. 2d 503 (1949), upon which appellants rely for reversal, we find this statement:

“To be sure, there must be measurable standards established for determining the general proficiency of the candidates for the particular position, but the fact that such standards were subjective rather than objective does not prevent the classification of the ‘oral interview’ as a ‘competitive’ examination. The various aspects of the personality factors, as previously determined by the commission to be ‘necessary and important’ to the position to be Filled, were itemized for consideration by the examiner as the measuring rod and guidepost in his evaluation process as to the personal fitness of the candidate, so that it cannot be said that there was no effective common cirterion of base topics underlying the comparative ratings.”

Upon the record before us, we can find no measurable standard for determining the general proficiency of the candidates capable of review.

Affirmed.

We agree: Harris, C.J., and Fogleman and Holt, JJ.


author: Frank Holt, Justice.

text:
    Jack Richard CALLENDER and Nancy CALLENDER v. STATE of Arkansas
    CR 78-1
    563 S.W. 2d 467
    Opinion delivered April 3, 1978
    (Division II)

      Pearce & Robinson, by: H. Clay Robinson, for petitioners.

      Bill Clinton, Atty. Gen., by: Joyce Williams Warren, Asst. Atty. Gen., for respondent.
   Frank Holt, Justice.

The issue in this case is whether the petitioners are entitled to a dismissal of certain charges because of respondent’s failure to bring them to trial within three terms of court as provided in Rules of Grim. Proc., Rule 28 (1976). Petitioners were arrested on July 2, 1976, and charged by information in municipal court on July 6, 1976, with possession with intent to deliver cocaine, amphetamines, and barbituates. On July 12, 1976, petitioners were each released on bond. On September 21, 1976, after a preliminary hearing in municipal court, at which probable cause was found on all charges, the court bound petitioners over to the circuit court “on all charges — on all the counts.” The prosecution filed an information against petitioners with the circuit court on November 9, 1976, charging them only with possession of cocaine with intent to deliver. Subsequently, on November 3, 1977, an amended information was filed adding the charges which were originally filed in municipal court plus the charge of possession with intent to deliver heroin. Admittedly, all charges arose out of the original criminal episode for which petitioners were arrested on July 2, 1976, and a few days later released on bail and have continuously remained so. Petitioners moved to dismiss the amended information on the ground the state was barred from trying them on the latter or additional charges because three terms of court had expired since their arrest on those charges. This motion was overruled and we subsequently issued a temporary writ of prohibition. Petitioners now seek a permanent writ of prohibition against the circuit court’s hearing the additional charges against them which were first filed in circuit court by the amended information. The state argues that a writ of prohibition is not an available remedy in the case at bar although they concede that three full terms of court have expired since the date petitioners were released on bond.

Rule 28.1 (b) is jurisdictional inasmuch as it requires a defendant to be brought to trial within three full terms of court, and if he is not, the defendant shall be absolutely discharged pursuant to Rule 30.1 (a). Further, a writ of prohibition is proper to prevent a court from exercising a power not authorized by law and there is no other remedy available. Streett v. Roberts, 258 Ark. 839, 529 S.W. 2d 343 (1975); and Pulaski Co. ex rel, Mears v. Adkisson, Judge, 262 Ark. 636, 560 S.W. 2d 222 (1978). The writ of prohibition is available here provided there has been a denial of petitioners’ speedy trial right.

Rule 28.1 (b) provides:

Any defendant charged with an offense in circuit court and held to bail, or otherwise lawfully set at liberty, shall be brought to trial before the end of the third full term of court from the time provided in Rule 28.2, excluding only such periods of delay as authorized in Rule 28.3.

Rule 28.2 provides:

The time for trial shall commence running without demand by the defendant from the following dates:
(a) from the date the charge is filed, except that if prior to that time the defendant has been continuously held in custody or on bail or lawfully at liberty to answer for the same offense or an offense based on the same conduct or arising from the same criminal episode, then the time for trial shall commence running from the date of arrest.

All of the charges added by the amended information arose out of the same criminal episode for which petitioners were arrested and held continuously in custody or on bail. Therefore, under Rule 28.2 (a), the time for trial commenced to run on these charges upon petitioners’ arrest on July 2, 1976, and their speedy trial right has been violated provided there is no authorized delay under Rule 28.3. Here it is not demonstrated that there were any excludable periods of delay chargeable to the petitioners under Rule 28.3.

Since the time to bring petitioners to trial on these charges has expired, the state is barred by Rule 30.1 (a) from prosecuting petitioners on them.

Writ granted.

We agree: Harris, C.J., and Fogleman and Byrd, JJ.


author: Darrell Hickman, Justice.

text:
    Irving GAUDINEER et ux v. CITY OF RUSSELLVILLE et al
    77-294
    563 S.W. 2d 711
    Opinion delivered April 3, 1978
    (Division I)

      J. Marvin Holman, for appellants.

      John C. Harris, for appellees.
   Darrell Hickman, Justice.

This is an appeal from a summary judgment granted by the Pope County Circuit Court to the appellees — the City of Russellville.

The appellants, Irving Gaudineer and his wife, filed this lawsuit, one of three lawsuits, to try and force the City of Russellville to issue a permit for ytilities to be connected to a house trailer.

The city fijed a motion for summary judgment and attached to it was an affidavit signed by the mayor. The mayor stated that he had personal knowledge of the facts of the case and that the case was the same as one previously decided in Pope County Chancery Court and another case filed in Pope County Circuit Court. The mayor’s affidavit went on to say he personally knew of no genuine issue of material fact.

The defense of res judicata, of course, may be raised by summary judgment but normally the pleadings are attached to the motion so the court may make a ruling based on the facts as evidenced by all the relevant court records. The affidavit here is conclusory in nature. See Miskimins v. The City National Bank, 248 Ark. 1194, 456 S.W. 2d 673 (1970).

The appellants did not file any affidavits. However, there is no requirement that affidavits be filed. The question in this case is, can the summary judgment stand on the basis of the evidence presented to the trial judge. In view of the fact the only evidence the court had in the record was the affidavit of the mayor, we find that it cannot stand.

Reversed and remanded.

We agree.

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