author: J. Fred Jones, Justice. John A. Fogleman, Justice,

text:
    ARKANSAS SAVINGS AND LOAN ASSOCIATION BOARD et al v. WEST HELENA SAVINGS AND LOAN ASSOCIATION et al
    76-12
    538 S.W. 2d 560
    Opinion delivered July 19, 1976

      Harold E. Anderson Jr., for appellants.

      Joe N. Peacock; Schieffler & Tates, by: Eugene L. Schiejjler, and Smith, Williams, Friday, Eldredge & Clark, by: Hermann Ivester, for appellees.

      Wright, Lindsey & Jennings, for intervenor appellants and for Arkansas Savings and Loan League, Amicus Curiae.

      Hardin, Jesson & Dawson, for Arkansas Savings Savings and Loan League, Amicus Curiae.
   J. Fred Jones, Justice.

This is an appeal by Arkansas Savings and Loan Association Board, et al., from a judgment of the Pulaski County Circuit Court holding Ark. Stat. Ann. § 67-1831 (Repl. 1966) unconstitutional as a delegation of legislative authority to a federal agency. The pertinent provisions of the statutes pertaining to savings and loan associations, Ark. Stat. Ann. §§ 67-1801 — 67-1862 (Repl. 1966), as applied to the questions here involved appear as follows:

67-1824. The Board shall not approve any charter application unless the incorporators establish and the Board shall have affirmatively found from the data furnished with the application, the evidence adduced at such hearing and the official records of the Supervisor that:
(1) All the prerequisites for the approval of a charter set forth in this act [§§ 67-1801 —67-1862] have been complied with.
(2) The character, responsibility and general fitness of the persons named in the articles of incorporation and who will serve as directors and officers of such association are such as to command confidence and warrant belief that the business of the proposed association will be honestly and efficiently conducted in accordance with the intent and purpose of this act and the proposed association will have qualified full-time management.
(3) There is a public need for the proposed association and the volume of business in the area in which the proposed association will conduct its business is such as to indicate a successful operation.
(4) The operation of the proposed association will not unduly harm any other existing association or federal savings and loan association or other financial institution.
If the Board so finds, its findings shall be stated in writing, and the supervisor shall indorse on the proposed articles of incorporation and by-laws the approval of the Board, whereupon the proposed association shall be a corporate body and may exercise the powers of a savings and loan association as set forth in this act. A copy of the articles of incorporation of such association bearing the approval of the Supervisor shall be filed in the office of the Supervisor, with the Secretary of State and with the county clerk of the county in which the home office of the association is located.
67-1825. If the Board does not make the findings as required by this act [§§ 67-1801 — 67-1862], it shall issue a written statement of its grounds for such refusal and this statement shall be promptly mailed to the chairman of the incorporators by certified mail.
67-1826. An association shall furnish satisfactory evidence to the Supervisor that it has commenced business within six [6] months from the date its articles of incorporation are approved. If any association whose charter has been approved fails to commence business within six [6] months after the date of such approval and the Supervisor so finds after notice and hearing, he shall enter an order canceling such charter, unless good cause is shown for such failure, in which event the Supervisor shall grant a reasonable extension of the time for commencing business, not to exceed twelve [12] months, to give such association an opportunity Jo overcome the cause for the delay. The Supervisor shall file a copy of any order canceling such charter with the Secretary of State and with the county clerk of the county in which the home office of such association is located.
67-1831. No association hereinafter chartered under this act [§§ 67-1801 — 67-1862] shall carry on the business of a savings and loan association in this State until it has filed with the Supervisor satisfactory evidence that its savings accounts are insured by the Federal Savings and Loan Insurance Corporation or other similar agency or corporation of the United States.

The facts appear as follows: On August 22, 1972, the appellant savings and loan association board, hereafter referred to as “the board,” granted a charter to the appellee West Helena Savings and Loan Association authorizing it to operate as a savings and loan association in Arkansas. The charter was to expire on February 22, 1973, and was conditioned upon the association obtaining insurance of accounts from the Federal Savings and Loan Insurance Corporation, or some other similar agency or corporation of the United States, before commencing business as provided in § 67-1831, supra.

West Helena Savings and Loan Association made application for the requisite insurance of accounts but the application had not been approved by February 22, 1973, and on that date West Helena Savings and Loan Association obtained an extension of its charter to February 22, 1974, as provided in § 67-1826, supra. West Helena Savings and Loan continued its efforts to obtain the requisite insurance but its application therefor was protested by Helena Federal Savings and Loan and by First Federal Savings & Loan Association of Helena. Apparently the Federal Housing Loan Bank Board, FHLBB, conducted hearings on the application for insurance and the application was denied because of lack of public need for additional savings and loan service in the area. On April 16, 1974, West Helena Savings and Loan Association filed suit in federal court against FSLIC and its superintending corporate agency, FHLBB, to force the issuance of insurance of accounts to West Helena Savings and Loan Association and that suit was still pending on October 29, 1973, when West Helena Savings and Loan Association applied for an additional extension of its charter to February 22, 1975. On November 12, 1973, the board’s supervisor conducted a hearing on the application and by order of the supervisor on November 21, 1973, the application for further extension was denied. West Helena Savings and Loan appealed from the order of the supervisor to the board and also made direct application to the board for the additional extension. Following a hearing by the board on February 29, 1974, the supervisor’s previous order was upheld and the application for extension was denied.

On May 1, 1974, the supervisor held a hearing to determine whether or not West Helena Savings and Loan had “commenced business” by February 22, 1974, and upon finding that it had not, its charter was canceled by order of the supervisor dated May 23, 1974. West Helena Savings and Loan appealed the cancellation order to the board pursuant to Ark. Stat. Ann. § 67-1809 (Repl. 1966) and the board upheld the ruling of the commissioner on the cancellation. West Helena Savings and Loan then appealed to the Circuit Court of Pulaski County as provided in § 67-1811 contending that § 67-1831 was unconstitutional as a delegation of legislative authority to a federal agency and, as already stated, the circuit court agreed. Helena Federal Savings & Loan Association, First Federal Savings and Loan Association of Helena and the Woodruff County Savings and Loan Association intervened. The appellees, West Helena Savings and Loan and Woodruff County Savings and Loan have cross-appealed, and the Arkansas Savings and Loan League has filed an amicus curiae brief.

The appellant Arkansas Savings and Loan Association Board has designated the points on which it relies as follows:

I
The circuit court of Pulaski County, Arkansas, erred in holding that Arkansas statutes section 67-1826 was invalidly applied to West Helena Savings and Loan Association in the canceling of its charter.
II
The circuit court of Pulaski County, Arkansas, erred in finding Arkansas statutes section 67-1831 unconstitutional as an unlawful delegation of legislative authority to a federal agency.

Helena Federal Savings and Loan Association and First Federal Savings and Loan Association of Helena, as interveners, joined with the board in contending that the court erred in holding § 67-1831 an unconstitutional delegation of legislative authority. West Helena Savings and Loan Association and Woodruff County Savings and Loan Association have designated the points they rely on as follows:

I
The circuit court did not err in holding that Ark. Stat. Ann. § 67-1831 is unconstitutional and that the application of Ark. Stat. Ann. § 67-1826 to West Helena Savings and Loan Association was invalid.
II
The circuit court erred in denying American Savings Insurance Company’s motion for leave to intervene.
III
The circuit court erred in not admitting into evidence the exhibits submitted by the appellees.
IV
The circuit court erred in limiting West Helena Savings & Loan Association’s time within which to commence business to six months.
V
West Helena Savings and Loan Association commenced business prior to expiration of its charter.
VI
West Helena Savings & Loan Association was entitled to an extension of its charter.

The board argues under its first point that we need not reach the constitutional issue on this appeal because there was evidence that the appellee association had not procured an indemnity bond as required by Ark. Stat. Ann. § 67-1833 (Repl. 1966) or paid an annual fee as required by Ark. Stat. Ann. § 67-1854 (Repl. 1966), and that this evidence alone was sufficient to show that the appellee association had not commenced business. The board argues that this is especially true since the board is subject to the Arkansas Administrative Procedure Act under which judicial review of decisions of agencies is limited to a determination of whether there is any substantial evidence to support the action of the board or commission, and the courts do not evaluate the weight or preponderance of the evidence. Ark. Racing Comm’n v. Emprise Corp., 254 Ark. 975, 497 S.W. 2d 34 (1973).

The fallacy in this argument lies in the use of the term “commenced business” in § 67-1826. The Savings and Loan Association Act does not specify that procuring an indemnity bond or paying annual fees are prerequisites for commencing business. Indeed, since the annual fee is not due under § 67-1854 until an annual report is filed, it could be logically argued that the payment of such fee is a requirement for “carrying on business” rather than for “commencing business.” Furthermore, it is clear that the failure to secure FSLIC insurance was the primary, if not the only, reason the association had not commenced business and the supervisor and board so found. The requirement for FSLIC insurance is for “carrying on business.” Section 67-1831, supra; Morrilton Fed. S & L v. Ark. Valley S & L, 243 Ark. 627, 420 S.W. 2d 923 (1967). In Florsheim Bros. Dry Goods Co. v. Lester, 60 Ark. 120, 29 S.W. 34 (1895), this court quoted with approval from Cooper Mfg. Co. v. Ferguson, 113 U.S. 727 (1885), as follows:

The meaning of the phrase “to carry on,” when applied to business, is well settled. In Worcester’s Dictionary the definition is: “To prosecute, to help forward, to continue, as to carry on business,” etc.

This definition implies the continuing of something already begun. Therefore, it could be argued just as logically that the trial court judgment could be affirmed rather than reversed without considering the constitutionality of § 67-1831 since the supervisor and the board erred in considering factors not prerequisites for “commencing business” in denying the charter. We find no merit in the appellant’s first contention.

The primary controversy in this case boils down to a rather simple question of law as to whether § 67-1831 is an unconstitutional delegation of legislative power to a federal agency as found by the trial court and whether the trial court erred in so holding as contended by the appellant board under its second point. The question of law is rather simple but the answer to the question is not. The appellants and the appellees agree as to the following basic rule of law:

[Tjhe functions of the Legislature must be exercised by it alone. That power cannot be delegated to another authority. Ark. Const. Art. 4. Oates v. Rogers, 201 Ark. 335, 144 S.W. 2d 457 (1940); Walden v. Hart, 243 Ark. 650, 420 S.W. 2d 868 (1967).

The appellants and also the appellees cite 16 Am. Jur. 2d Constitutional Law, § 242, which reads in part as follows:

As has already been indicated, the rule of nondelegability is applicable to legislative powers only; the rule does not bar Congress or other legislatures from delegating such of their powers as are not legislative in nature. Thus, the rule is that in order that a court may be justified in holding a statute unconstitutional as a delegation of legislative power, it must appear that the power involved is purely legislative in nature — that is, one appertaining exclusively to the legislative department. It is the nature of the power, and not the liability its use or the manner of its exercise, which determines the validity of its delegation.

The FSLIC was organized by an act of Congress and became a body corporate in 1934. It was placed under the authority of the FHLBB an entirely separate federal corporate entity. FSLIC was organized primarily for the purpose of insuring federal savings and loan accounts with power to borrow from the United States treasury. As a part of its authority Tit. 12, USCA, § 1726 (a), provides as follows:

It shall be the duty of the Corporation to insure the accounts of all Federal savings and loan associations, and it may insure the accounts of building and loan, savings and loan, and homestead associations and cooperative banks organized and operated according to the laws of the State, District, Territory, or possession in which they are chartered or organized.

The Act then provided for investigative procedures and requirements for obtaining insurance, and subsection (c) of § 1726 provides as follows:

The Corporation shall reject the application of any applicant if it finds that the capital of the applicant is impaired or that its financial policies or management are unsafe; arid the Corporation may reject the application of any applicant if it finds that the character of the management of the applicant or its home financing policy is inconsistent with economical home financing or with the purposes of this subchapter. Upon the approval of any application for insurance the Corporation shall notify the applicant, and upon the payment of the initial premium charge for such insurance, as provided in section 1727 of this title, the Corporation shall issue to the applicant a certificate stating that it has become an insured institution. In considering applications for such insurance the Corporation shall give full consideration to all factors in connection with the financial condition of applicants and insured institutions, and shall have power to make such adjustments in their financial statements as the Corporation finds to be necessary.

It would thus appear that FSLIC has no discretion in rejecting applications for insurance except as provided in the Congressional Act. Certainly it would appear that in administering the Act by borrowing funds from the United States treasury and insuring state savings and loan accounts, FSLIC should not be totally unrestricted in determining the insurability of its insured. Whether the authority for rejecting applications for insurance thus delegated to FSLIC by the Congress was a delegation of administrative or legislative authority is really not before us on this appeal. If FSLIC did exercise legislative authority in denying West Helena’s application for insurance, it either exercised such authority under its delegation from Congress or it unlawfully exercised a legislative authority it did not possess. In any event the Arkansas Legislature delegated no such authority to FSLIC.

There is no question that the Legislature has the power to regulate savings and loan associations under the police power of the state and the legislative authority to require insurance on savings and loan accounts as a prerequisite to doing business is not seriously questioned in this case. In 78 ALR at page 1090 is found an annotation as follows:

In view of the general scheme and purpose of building and loan associations, the state, under its police power, may assert rights of inspection and supervision over them which it may not deem necessary with respect to corporations organized for profit generally. Union Sav. & Invest. Co. v. District Ct. (1914) 44 Utah, 397, 140 Pac. 221, Ann. Cas. 1917A, 821.
The business of building and loan associations is subject to regulation under the police power of the state, as well as the business of banking and of insurance. Mechanics Bldg. & L. Asso. v. Coffman (1913) 110 Ark. 269, 162 S.W. 1090. In this instance the court sustained the validity, as applied to a building and loan association, of the Arkansas statute making it the duty of the insurance commissioner to conduct an examination of investment companies coming within the provisions of the act, at the expense of the companies, and declaring, among other things, that, if he found a company solvent and its constitution and by-laws and proposed plan of business to be fair, just, and equitable, he should issue a permit to do business, — otherwise he should refuse such permit. Provision was also made, in case the right of any investment company to do business in the state was refused or revoked, for the institution of a suit to annul such refusal or revocation. The statute was held not to confer upon the insurance commissioner judicial or legislative power, and not to make an arbitrary or unreasonable classification.

By Ark. Stat. Ann. § 67-1831 (Repl. 1966) the Legislature simply required that all savings and loan associations thereafter chartered furnish “satisfactory evidence that its savings accounts are insured by the Federal Savings and Loan Insurance Corporation or other similar agency or corporation of the United States.” The FSLIC was not told or requested to do anything and FHLBB was not even mentioned in the Act.

The parties to this litigation have cited numerous cases but ndne of them are squarely in point with the question here involved and our own research has revealed no such case. The Idaho case of Idaho S & L Ass’n v. Roden, 350 P. 2d 225, comes as near to the point involved as any case we have found. Legislative authority was unlawfully delegated by the Idaho Legislature in Roden but such delegation was discreetly avoided by the Arkansas Legislature in the case at bar. The trial court in Roden attempted to sever the unconstitutional delegation of legislative authority portion of the Act from that portion of the Act requiring the savings and loan associations to obtain the insurance. The pertinent portions of the Roden decision read as follows:

Idaho Code, § 30-1301Q, subsection 2, exempted corporations which had been in continuous operation for a period of more than 15 years from the requirement that they procure insurance of accounts with the Federal Savings and Loan Insurance Corporation.
The trial court entered a judgment holding I.C., § 30-1301Q, subsection 2, void and ineffective, quoting the void and ineffective portion, to wit:
“* * * except such as shall have been in continuous operation for a period of more than fifteen years prior to the effective date hereof * * *”
in that it violated the Idaho Constitution, Article 1, secs. I and 2, and the Fourteenth Amendment to the Constitution of the United States.
After holding there was no reasonable basis for making a distinction between corporations having been in continuous business 15 years or longer and other corporations, the trial court then held all savings and loan associations of the State of Idaho were required to insure their accounts with the Federal Savings and Loan Insurance Corporation.
[1] In accordance with Morey v. Doud, 354 U.S. 457, 77 S. Ct. 1344, 1 L. Ed. 2d 1485; Fidelity & Deposit Company of Maryland v. Logan, 230 Ky. 776, 20 S.W. 2d 753; State v. Glidden, 228 N.C. 664, 46 S.E. 2d 860; Eslin v. Collins, Fla., 108 So. 2d 889; Northwestern National Ins. Co. v. Fishback, 130 Wash. 490, 228 P. 516, 36 A.L.R. 1507; Crom v. Frahm, 33 Idaho 314, 193 P. 1013; Newland v. Child, 73 Idaho 530, 254 P. 2d 1066, the trial court was correct in holding the distinction arbitrary, unreasonable, and discriminatory as to corporations of the same classification, such as we have in savings and loan associations in the State of Idaho. However, the trial court erred in striking that provision from the Act and in effect bringing the exempted savings and loan associations within the purview of the Act.
The trial court also held the Idaho Legislature unlawfully delegated its authority to an agency of the United States government in enacting the following sections: I.C. § 30-1301A, 30-1301H, subd. 3, 30-1301M, 30-1301Q, subds. 1 and 2, in that a savings and loan association, as a condition precedent to obtaining insurance of accounts with the Federal Savings and Loan Corporation, is required to abide by and conform with rules and regulations of the Federal Home Loan Bank Board adopted after enactment of the Idaho legislation, and to abide by and conform with any amendment to Title 4 of the Housing Act relating to insurance of accounts which may become effective after the date of the Idaho act. After holding these provisions to be an unlawful delegation of legislative power to the Federal government and its agency, the trial court struck those provisions from the Act on the ground they were severable. Plaintiff agrees to the unconstitutionality of delegation or authority, but argues the delegation of power is not severable.
Subsequent to the enactment of the provisions of this Act which the plaintiff is contesting, the Federal Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation have enacted several modifications of the rules and regulations governing applicants and members. Defendants argue that future rules and regulations should not be considered herein as they do not affect the plaintiff. This argument is not persuasive, inasmuch as the question to be resolved is whether or not the Legislature of the State of Idaho, contrary to the Idaho Constitution, Article 3, section 1, unlawfully delegated its authority to the federal government and an agency thereof.
[2] The legal axiom that all legislative power is vested in the Legislature of the State of Idaho has been set forth in State v. Nelson, 36 Idaho 713, 213 P. 358. The legislature cannot delegate its authority to another government or agency in violation of our Constitution. State v. Nelson, supra; State v. Heitz, 72 Idaho 107, 238 P. 2d 439.
[3, 4] In dealing with the problem as to whether the unconstitutional provisions are severable, we must look to the effect upon the legislation of the deletion of these provisions. Under the decision of the trial court, the plaintiff is not required to observe future rules and regulations of the Board nor future amendments of the National Housing Act. But an agreement to observe and be bound by future amendments to the National Housing Act and future rules and regulations of the Board is exacted as a condition to granting the insurance, and also to continuing it in force. Hence, appellant can neither obtain the insurance nor continue it in force without being compelled to abide by the unconstitutional provisions of the Idaho act. Thus, it is demonstrated that the unconstitutional provisions delegating to the Congress and the Home Loan Bank Board the legislative power and function to make future laws and regulations governing appellant’s business and its right to remain in business, are not severable from the provisions requiring appellant to obtain insurance of accounts by the Federal Savings and Loan Insurance Corporation. The provisions requiring such insurance are therefore unconstitutional and void.
The judgment to the extent that it holds the unconstitutional provisions of the Act severable from those requiring insurance of accounts and holding the insurance of accounts requirement valid is reversed, and the cause is remanded with directions to enter judgment in conformity herewith.

We conclude the trial court erred in holding Ark. Stat. Ann. § 67-1831 (Repl. 1966) invalid as a delegation of legislative authority.

We consider it unnecessary to discuss the other points designated by the parties except the last point designated by the appellee that “West Helena Savings and Loan Association was entitled to an extension of its charter.” The appellees, in their brief, argue this point in part as follows:

[Tjhe only reasonable construction of Ark. Stat. Ann. § 67-1826 is that the Supervisor has authority to cancel the charter of an association which has not commenced business within the initial or an extended period of time, and that he must grant successive extensions of time not exceeding 12 months each (now two years) upon an association’s showing that it has good cause for its failure to commence business. This is the only construetion which is consistent with the legislative intent underlying the statute; it is the only construction which will avoid undue and unnecessary hardship to newly chartered associations; and it is the construction given to the statute by Supervisors in the past.

We agree that the Supervisor has the authority under § 67-1826 to cancel the charter of an association which has not commenced business within the initial or an extended period of time. We do not agree that the Supervisor must grant successive extensions of time not exceeding 12 months each (now two years) upon an association’s showing that it has good cause for its failure to commence business. We do agree, however, that the Supervisor may grant additional extensions to accomplish the purpose of the Act and that such extensions should have been granted under the facts of record in this case. Section 67-1826 does not deal with the granting of charters but deals with the revocation of charters for failure to commence business. The only purpose in requiring the Supervisor to grant a reasonable extension of time for commencing business not to exceed 12 months upon the showing of good cause, is “to give such association an opportunity to overcome the cause for the delay.” Certainly the associations delay in the case at bar was because FSLIC refused to insure the accounts of the association and the association could have had no better reason for not commencing business under the requirements of the statute.

It must be remembered that the association’s suit in federal court to force FSLIC to issue the insurance was pending when the association’s request for additional extension was denied and its charter was revoked. The statute does not limit the Supervisor’s authority to one single extension at the end of which the charter must be revoked. We agree with the appellees’ contention “this is the only construction which is consistent with the legislative intent underlying the statute; it is the only construction which will avoid undue and unnecessary hardship to newly chartered associations.”

For the error indicated the judgment of the trial court is reversed and this cause is remanded for entry of judgment not inconsistent with this opinion.

Reversed and remanded.

Fogleman, J., concurs in part and dissents in part.

John A. Fogleman, Justice,

concurring in part, dissenting in part. I fully agree that Ark. Stat. Ann. § 67-1831 (Repl. 1966) is constitutional. I have reservations about the court’s construction of Ark. Stat. Ann. § 67-1826 (Supp. 1975) as permitting more than one twelve-month extension. It seems to me that the arguments favoring appellant’s construction are stronger than those favoring the construction given it by the majority. Appellant says that the act provides that, after failure of the recipient of a charter to commence business within six months, the Supervisor, upon a showing of good cause, shall grant a reasonable extension not to exceed twelve months. I suppose the matter is arguable, and I defer to the wisdom of the majority since it seems that, prior to the tenure of the Supervisor who acted in this case, Supervisors had construed the Act to permit successive extensions totalling more than twelve months. Of course, administrative construction is not controlling, only persuasive. Brawley School District v. Kight, 206 Ark. 87, 173 S.W. 2d 125. See also, International Shoe Co. v. Pinkus, 278 U.S. 261, 49 S. Ct. 108, 73 L. Ed. 318 (1928).

I disagree with this court’s holding that the extension in this case should have been granted. This matter has not been considered by either the trial court or the Savings & Loan Association Board or even by the Supervisor. The showing of good cause for an extension certainly involves more than showing that efforts to obtain deposit insurance have been unsuccessful. It is a matter of common knowledge that changes can take place in conditions pertinent to the grant of a charter in a matter of a few months. There must be some latitude of discretion in the matter. Otherwise, a chartered association could interminably prolong efforts to obtain insurance and the Supervisor would be required to grant extension after extension. Clearly the legislature did not intend for this to happen. The Supervisor expressly stated that he did not reach the question whether there was good cause for the Association’s failure to commence business. The Board’s first order recited that the Supervisor, not the Board, was empowered to issue extensions, subject to appeal to the Board, but that there was no provision for a direct application to the Board for an extension, which the West Helena Association had made. The Board then, on appeal from the Supervisor, simply sustained the Supervisor’s holding that he had no authority to grant further extensions. The charter was cancelled later.

The trial court sustained demurrers to jurisdiction on all orders except the order of cancellation by the Board. The circuit court retained jurisdiction over that order only. In his opinion, the circuit judge found it necessary to consider only one point, i.e., the constitutionality of the act.

Consequently, this court is ruling on a question never considered by the Supervisor, the Board or the trial court. I would remand the case with directions to the circuit court to remand it for consideration by the Supervisor of extension of the charter in light of this decision.

      The Federal Savings and Loan Insurance Corporation will hereafter be referred to as “FSLIC.”

      This company was originally a cross-appellant but dismissed its appeal after the record and briefs were filed herein.

      See Ark. Stat. Ann. § 67-1826 (Supp. 1975).


source: Caselaw Access Project

author: J. Fred Jones, Justice.

license: Public Domain

text:
    Joseph HELTON et al v. MISSOURI PACIFIC RAILROAD COMPANY et al
    75-34
    538 S.W. 2d 569
    Opinion delivered July 19, 1976

      Holloway & Haddock, by: Bill R. Holloway, for appellants.

      Herschel H. Friday, Robert V. Light, and Williamson, Ball & Bird, by: Samuel N- Bird, for appellees.
   J. Fred Jones, Justice.

This is an appeal by Joseph Helton and Elgin Bush, individually, and as next friends of their minor sons Danny Helton and Donald Bush, hereafter referred to as “Helton” and “Bush,” in a suit they filed against the appellees Missouri Pacific Railroad and Robert D. Selby.

The facts appear as follows: Helton was 16 years of age and owned a Honda motorcycle. Bush was 14 years of age. The two boys were close personal friends and Bush was in the habit of riding around with Helton on Helton’s motorcycle. On November 19, 1974, Bush was riding behind Helton on the motorcycle with Helton driving as they crossed the Missouri Pacific Railroad tracks at an elevated street crossing inside the city limits of Lake Village. As the boys approached the railroad crossing, they were unable to see what was beyond the crossing and at that point they observed a pickup truck belonging to, and being driven by, the appellee Selby backing into the street approximately 92 feet ahead of the motorcycle and in the same lane of traffic. Another automobile was approaching from the opposite direction the motorcycle was traveling and the motorcycle collided with the back portion of the pickup truck. The motorcycle was damaged and both boys were injured.

Two separate suits were filed by Bush and Helton and they were consolidated for trial. The complaints alleged that the collision was the result of the negligent acts of Missouri Pacific Railroad in constructing and maintaining an unsafe street crossing on an elevated dump or roadbed in such manner that the vision was obstructed from one side of the crossing to the other; that Selby was negligent in his failure to yield the right-of-way; failure to keep a proper lookout for oncoming traffic and in driving his vehicle from a private driveway into the plaintiffs’ traffic lane in violation of statute. A jury trial resulted in verdicts for the defendant-appellees Missouri Pacific and Robert D. Selby in both cases.

On appeal to this court the appellants have designated the points on which they rely for reversal as follows:

A. Appellant Bush—
I
The trial court erred by instructing the jury that passenger assumed the risk of his injuries when the uncontradicted facts show that the passenger could not have known or anticipated the risk that appellee would illegally back his vehicle into the motorcycle’s lane of traffic from a private driveway when under the law there is no duty to assume that another person will violate the law.
II
The trial court committed reversible error in instructing the jury on joint enterprise as between operator and passenger of a motorcycle when the ride was within the corporate limits of Lake Village and for no particular purpose except pleasure.
B. Appellant Helton—
I.
The trial court erred by submitting an instruction to the effect that the mere happening of an accident is not of itself, evidence of neligence when there was uncontradicted proof in the record that appellee had been negligent by violating Ark. Stat. Ann. 75-624 by failing to yield the right-of-way by pulling his vehicle from a private driveway into a public street.

Appellant Bush, the passenger on the motorcycle, contends the trial court erred in giving AMI Instruction 612 as the court’s instruction 17. This instruction permitted the jury to render a verdict in favor of Selby if the jury determined that Bush had “assumed the risk” for his injuries. Bush argues that the evidence failed to show that Bush assumed the risk for Selby’s actions. Appellee Selby argues that the risk Bush assumed was not the risk of negligent acts on the part of Selby, but the risk of appellant Helton’s negligent acts in the operation of the motorcycle and, therefore, Selby contends instruction 17 was proper.

In Prosser, Torts § 68 (4th ed. 1971), appears the following:

It is here that is the greatest misapprehension and confusion as to assumption of risk, and its most frequent misapplication. It is not true that in any case where the plaintiff voluntarily encounters a known danger he necessarily consents to negligence of the defendant which creates it. A pedestrian who walks across the street in the middle of a block, through a stream of traffic traveling at high speed, cannot by any stretch of the imagination be found to consent that the drivers shall not use care to avoid running him down. On the contrary, he is insisting that they shall. This is contributory negligence pure and simple; it is not assumption of risk. And if A leaves an automobile stopped at night on the traveled portion of the highway, and his passenger remains sitting in it, it can readily be found that there is consent to the negligence of A, but not to that of B, who runs into the car from the rear. This is a distinction which has baffled a great many law students, some judges, and unhappily a few very learned legal writers.

Thus, if Bush did assume the risk of Helton’s negligent driving, the proper instruction should have been one concerning Bush’s comparative neligence, that is, Bush was negligent in riding with Helton. The jury should have been instructed to compare the negligence of Bush and Selby instead of ruling in favor of Selby because Bush assumed the risk. See AMI 2102.

Appellee Selby cites a portion of 61 C.J.S. Motor Vehicles, § 486 (7), quoted by this Court in J. Paul Smith Co. v. Tipton, 237 Ark. 486, 374 S.W. 2d 176 (1964), and in Hass v. Kessell, 245 Ark. 361, 432 S.W. 2d 842 (1968), as authority for the questioned instruction.

A guest’s assumption of risk, in case of a motor vehicle collision, applies only as between the guest and his host, and does not bar recovery from a third person for injuries to which the third person’s negligence proximately contributed, unless the acts of the host, in which the guest acquiesces, operate as the cause of the collision.

Neither this rule from C.J.S. nor the Arkansas cases where it was quoted call for the instruction 17. Bush was not suing the driver Helton for negligence; the C.J.S. rule limits the assumption of risk defense to the driver charged with negligence. Cases from other jurisdictions, Calahan v. Wood, 24 Utah 2d 8, 465 P. 2d 169 (1970); Keowen v. Amite Sand & Gravel Co., 4 So. 2d 79 (La. App. 1941); Guile v. Greenberg, 192 Minn. 548, 257 N.W. 649 (1934), as well as the two Arkansas cases, supra, clarify the last clause of the C.J.S. (“unless the acts of the host, in which the guest acquiesces, operate at the cause of the collision.”) Where the host causes the collision, the recovery of the guest is affected by the guest’s comparative negligence in riding with the negligent host. However, the guest’s recovery is not barred by assumption of risk. In J. Paul Smith Co. v. Tipson, supra, Tipton was a passenger in an automobile driven by Woolsey. Woolsey drove his automobile into the rear of a truck which negligently drove onto the highway. Tipton was killed in the collision and the Tiptons sued the truck company and driver and also sued Woolsey. The jury found that Woolsey contributed 20% of the negligence and that the truck driver contributed 80% of the negligence which caused the death of young Tipton; and, that the negligence of Woolsey, as well as the negligence of the truck driver, was a proximate cause of the injuries and death. Contributory negligence did not go to the jury. The verdict for Tipton fixed the amount of damages and the trial court reduced the amount by 20% in the judgment against the truck company. It seems that the Tiptons waived their right to any judgment against Woolsey. On appeal the truck driver and truck company asserted assumption of the risk and contended:

that the boys should not be allowed to recover because they “assumed the risk of the harm that might come to them through the negligent acts of Billy Joe Woolsey in the operation of the vehicle in which they were riding.” This contention is based partly on the fact (as found by the jury) that Woolsey was 20% negligent and that his negligence was a proximate cause of the injuries. It is contended that under the well established “assumption of the risk” rule they could recover nothing, and that this rule was not affected in any way by our comparative negligence statute.

In affirming the judgment of the trial court this court said:

To adopt the rule which appellants appear to espouse would lead to an illogical and unjust result. It would allow Woolsey (the negligent driver) to recover, but it would deny recovery to the boys who had no control over the car.

Hass v. Kessel, supra, was the consolidation of two lawsuits resulting from an automobile collision. The driver of car 1, Morris, sued the driver of car 2, Hodges, and the passenger of car 1, Kessell, sued the driver of car 2, Hodges. Hodges was killed in the accident and Hass, the appellant, was the administrator of the Hodges estate. The case was submitted to the jury on interrogatories and the jury found the following percentages of negligence:

Hodges 44% Hodges 75%
Morris 56% Kessell 25%

The trial court reduced the amount of Kessell’s damages by 25% and entered judgment for Kessell against Hodges’ estate. The appellant argued on appeal as follows:

The Trial Judge erred in refusing to apply the jury’s finding that appellee Louis Kessell assumed the risk of riding with his host whose negligence exceeded fifty per cent and further erred in refusing to dismiss appellee Kessell’s complaint.

This court on appeal dismissed the appellant’s argument saying:

We are unable to see where assumption of risk as an element separate and apart from contributory negligence enters into the picture in this case at all. * * * Although Kessell assumed the risk of riding with Morris, and although he may have been negligent in doing so, he was not driving the Morris automobile, nor was he directing Morris in its operation at the time of the collision. Kessell did not sue Morris, but he did sue Hodges’ estate for damages he sustained because of Hodges’ negligence. The jury found that the combined, negligence of Hodges and Kessell caused the damages sustained by Kessell and that Hodges contributed 75% and Kessell contributed 25% of this total negligence causing Kessell’s injuries, and the court correctly found that as between Kessell and Hodges, Hodges was only liable for 75% of Kessell’s damages.

Although a jury instruction was not in issue in Hass v. Kessell, supra, the majority opinion indicates there is no need for any assumption of the risk instruction where the plaintiff guest in a motor vehicle is not suing his host driver.

Under the rationale of the concurring opinion in Hass, supra, the negligence of Helton, which the jury found to be greater than the negligence of Selby, might have been imputable to Bush because Bush assumed the risk of riding with Helton; and, therefore, Bush’s negligence was greater than Selby’s. But the instruction 17 given in the case at bar did not require the jury to hold against Bush if it determined that Bush assumed the risk of riding with Helton, and if it determined that Helton was more negligent than Selby. Rather, instruction 17 is the classic assumption of the risk instruction to the effect that a plaintiff who assumes the risk is barred from receiving recovery from the defendant. See AMI 612.

We conclude that the trial court erred in giving instruction 17 on assumption of risk because assumption of the risk by appellant Bush for the negligent acts of appellee Selby was not involved.

Under his second point the appellant Bush contends that there was not sufficient evidence to justify the trial court in instructing the jury on joint enterprise, and the trial court erred in giving AMI 712 as the court’s instruction No. 18. The appellant argues that there wgs no evidence showing the second element of joint enterprise under AMI 712: “An equal right to share in the control of the operation of the vehicle.”

In Wymer v. Dedman, 233 Ark. 854, 350 S.W. 2d 169 (1961), this court quoted with approval from 4 Blashfield, Chapter 65, as follows:

It is commonly a question of fact, for the jury to say, whether a joint enterprise existed between the driver and another occupant of an automobile, except where the evidence as to the existence of such a relation is insufficient to go to the jury.
The doctrine of joint adventure, in connection with the operation of motor vehicles, should be restricted to those cases where the common right to control its operation and the correlative common responsibility for negligence in its operation either are clearly apparent from the agreement of the parties or result as a logical and necessary conclusion from the facts as found.

As already pointed out, the evidence in the case at bar shows that the appellants, two teenaged boys, were riding together on appellant Helton’s motorcycle and that appellant Bush was the guest on the motorcycle. Helton testified that he and Bush often made such rides and that he would take Bush to destinations Bush suggested. Bush testified that Helton would take him to destinations in the community which Bush wanted to visit. Bush also testified as to his role in controlling the speed of the motorcycle when he rode with Helton.

Q. Let me ask you this, Donald, if you were ever going too fast, in your opinion, do you feel like you would have had the authority to tell him to stop, and let you off that thing?
A. I would have, but I wouldn’t know how, it is hard to judge how fast you are going on the back.
Q. You just ride on the back, and the speed is up to him?
A. Yes, sir.
Q. If you ever had the sensation that this thing was just going too fast for you, would you have felt like you could say, “Stop and let me off?”
A. Yes, sir.
Q. You think you could have done that?
A. Yes, sir.
Q. If he had ever been driving the motorcycle in such a manner that you felt like he was reckless, would you have felt like you could have said, “Stop and let me off?”
A. Yes, sir.
Q. And would he have honored that request?
A. Yes, sir.

We are of the opinion the evidence does not establish equal control of the motorcycle between the driver and his passenger. The answers of the appellants simply say that Helton, as a friend of Bush, would take Bush where Bush wanted to go. There is no testimony that Bush had the right to determine the destination of the pair over the objection of Helton. Bush’s testimony as to his control of the speed of the motorcycle indicates that he left the speed up to Helton and that Bush had the right to have the vehicle stopped so he could get off.

In Restatement of Torts (2d), § 491 (1965), is found language as follows:

[ Ij f there is no prearrangement for a substantial sharing of the expenses of the trip, . . . the trip is not a joint enterprise merely because it is made at the request of the plaintiff, because he and his host have a common destination, because the destination or any change in it is to be determined by mutual agreement, because it is arranged that the guest is to drive alternatively with his host, or even because they are going to the common destination to accomplish a purpose in which they have a common but not a business interest. No one of these facts, nor indeed all of them together, is sufficient to justify a jury or other trier of fact in finding that the trip was a joint enterprise.

In Woodard v. Holliday, 235 Ark. 744, 361 S.W. 2d 744 (1962), the court found error in instructing the jury on joint enterprise because the testimony failed to show equality of control between the passenger and host of an automobile. The case involved two salesmen who traveled together; they took turns suggesting locations where they should go to call on customers. In that case this court said:

Joint control and joint responsibility should go hand in hand; neither should exist without the other. If the passenger shares the responsibility for the physical control of the vehicle then it is proper for him to share the liability for the driver’s negligence. But if the responsibility of control is not shared then the liability ought not to be shared. In the case at bar the trial court’s error lies in permitting the jury to infer the existence of the second requirement from proof of the first, which in effect amounted to doing away with the second requirement altogether.

We conclude that the trial court erred in giving instruction 18 under the evidence in this case.

The appellant Helton contends that the trial court erred by submitting AMI instruction 603 as the court’s instruction 16, to the effect that the mere happening of an accident is not of itself, evidence of negligence when there was uncontradicted proof in the record that appellee had been negligent by violating Ark. Stat. Ann. § 75-624 (Repl. 1975) by failing to yield the right-of-way by pulling his vehicle from a private driveway into a public street. We find no error in giving this instruction. The appellant could have requested the court to give AMI 601 as follows:

A violation of Ark. Stat. Ann. 75-624 although not necessarily negligence, is evidence of negligence to be considered by you along with all of the other facts and circumstances in the case.

The judgment as to Bush v. Selby is reversed and that cause remanded for a new trial. The judgment as to Bush v. Missouri Pacific and the judgment as to Helton v. Missouri Pacific and also v. Selby are affirmed.

Affirmed in part; reversed in part.


text:
    MIDWEST MUTUAL INSURANCE COMPANY v. ARKANSAS NATIONAL COMPANY, a Corporation, and Robert E. LYDDON
    76-38
    538 S.W. 2d 574
    Opinion delivered July 19, 1976

      Wright, Lindsey & Jennings, for appellant.

      Laser, Sharp, Haley, Young & Boswell, P.A., for appellees.
   J. Fred Jones, Justice.

This is an appeal by Midwest Mutual Insurance Company from an adverse summary judgment in a suit it filed against the appellees Arkansas National Company, Inc. and Robert E. Lyddon for $6,850, plus interest and costs.

We can do no better in stating the background facts than to reiterate the statement made by the appellant in its brief. The appellee, Arkansas National Company, was an independent insurance agency in Hot Springs, Arkansas, and the appellee Robert E. Lyddon was one of its agents. The agency acquired an assigned risk liability insurance policy for Red Fop Cab Company of Hot Springs through Farm Bureau Mutual Insurance Company covering certain taxicabs owned by Red Top. On August 7, 1970, pursuant to the request of Red Top, Arkansas National caused a certain taxicab to be deleted from the coverage while undergoing repairs and another taxicab substituted in its place. There was a standing agreement between Arkansas National and Red Top that substitution of taxicabs under the coverage would be effective as of the day the request was made. On August 11, 1970, after the original taxicab had been repaired, Red Top requested Arkansas National’s agent, Lyddon, to delete the replacement vehicle and reinstate the original taxicab under the coverage; Lyddon, however, neglected to cause the original taxicab to be reinstated and, on August 20, 1970, it was involved in a collision in Hot Springs with a motorcycle driven by Robert A. Bratton and owned by Archie Lee Lowe.

On May 24, 1971, Bratton and Lowe instituted suit against Red Top for personal injuries and property damage. Red Top made demand on Farm Bureau to provide it with a defense and pay any judgment that might be entered and Farm Bureau declined. Before the case reached trial, Bratton and Lowe took a voluntary nonsuit. Bratton then made claim against the appellant Midwest under the uninsured motorist provisions of a policy of insurance the appellant had issued covering the motorcycle. The appellant settled Bratton’s claim by the payment of $5,250. Bratton and Lowe again instituted suit against Red Top for personal injuries and property damage, and the appellant claimed subrogation to the extent of $5,250 it paid in settlement to Bratton. Red Top filed a third party complaint against Arkansas National seekJ ing judgment over against it; Arkansas National filed a motion to strike the third party complaint and the motion was granted by the trial court on April 17, 1973. The third party complaint alleged that “third party defendant negligently failed to obtain the insurance as per its agreement, and its negligence has forced defendant to defend this action which should have been done by its insurance carrier”; and, Red Top prayed “judgment over against third party defendant for any judgment obtained by plaintiff plus its costs and attorney’s fees in defending this action.”

In granting the motion to dismiss, the trial court said:

Your motion is granted. To start with:
Number 1. The contract specifically between Farm Bureau and Red Top Cab precludes such a Third Party Complaint until judgment is recovered.
Number 2. Arkansas National Company is not the general agent of Farm Bureau, but the agent of the insured.

The case proceeded to trial on August 8, 1973, resulting in a verdict in favor of Bratton and Lowe against Red Top for $6,850, and judgment for that amount together with interest and costs was entered on September 11, 1973. Thereafter, for valuable consideration, Red Top duly assigned to the appellant its “chose in action” against appellees for failure to reinstate insurance coverage on the taxicab involved in the collision and, on March 29, 1974, Midwest filed suit against the appellees Arkansas National and its agent Lyddon for $6,850. The appellees answered alleging, as affirmative defenses, that the suit was barred by limitations and that the assignment was not valid. Motions for summary judgments were subsequently filed by both sides. The parties stipulated that appellee Lyddon was negligent, that his negligence resulted in the judgment against Red Top, and that the sole question to be determined by the trial court was the validity of the affirmative defenses as a matter of law. The trial court held that Red Top’s assigned cause of action accrued on August 11,1970, when Arkansas National negligently failed to reinstate the insurance coverage and the three year statute of limitations as set out in Ark. Stat. Ann. § 37-206 (Repl. 1962), started running on that date. The trial court granted appellees’ motion for summary judgment from which comes this appeal.

On appeal to this court the appellant has designated the following point on which it relies for reversal:

The court erred in not granting appellant’s motion for summary judgment and in granting summary judgment for appellees, because appellant is entitled to judgment as a matter of law.

The parties to this appeal have stipulated that this is a cause of action for negligence, consequently the three year statute of limitations provided in § 37-206 is applicable. It would further appear, from the arguments presented, that the parties are in basic agreement that appellant, as assignee, had no greater rights, and was subject to the same defenses, an would have applied to Red Top. Davis v. So. Farm Bur. Cas. Ins. Co., 231 Ark. 211, 330 S.W. 2d 276 (1960). Consequently, the question as to limitations on this appeal boils down to when Red Top’s cause of action against its insurance agent, Midwest, accrued. The appellees contend it accrued on August 11, 1970, as found by the trial court, and the appellant contends that it accrued not earlier than May 24, 1971, when suit was filed against Red Top and it first learned that it had no insurance coverage through Farm Bureau’s refusal to defend. It was at this point Red Top was required to assume the cost of its own defense because of the appellee’s negligence in failing to obtain insurance coverage. So we are forced to the conclusion that the appellant is right in its contentions on this point.

The appellees, and apparently the trial court, relied heavily on our decisions in Field v. Gazette Pub. Co., 187 Ark. 253, 59 S.W. 2d 19 (1933), and Faulkner v. Huie, 205 Ark. 332, 168 S.W. 2d 839 (1943). Both of these cases involved personal injury with delayed results — lead poisoning requiring multiple surgical procedures before final diagnosis in the Field case, and loss of hearing six years after an automobile collision in the Huie case. We consider the case at bar more in point with the cases found not in point in the Huie case than with the Field and Huie cases. In Huie we said:

The appellant cites several cases which, he contends, show that the doctrine followed in the Field case does not apply here. These cases are not in point.
In C., R. I. & P. Ry. Co. v. Humphreys, 107 Ark. 330, 155 S.W. 127, L. R. A. 1916E, 962, the railway company had constructed a culvert on its right-of-way. Damages to the adjoining property resulted. This court held that the statute of limitations would not begin to run at the time of the construction if it were known at that time merely that damage could not be reasonably known and estimated at that time. The construction of the culvert was lawful unless it had a damaging effect and the passage of time alone would reveal whether it would have a damaging effect — whether any wrongful act had been committed at all. Here the wrongful act was complete at the moment the car was turned over.
The same principle is involved in the case of Brown v. Arkansas Central Power Company, 174 Ark. 177, 294 S.W. 709. The action there complained of was the construetion of a power plant which was lawfully constructed upon the defendant’s lands, but which, it was claimed, through its operation, constituted a nuisance. This court held that it could not say as a matter of law that the plant was of such a nature that it could be known at the beginning that damage must necessarily result and that the nature and extent of such damage could have been reasonably ascertained and estimated at the time of construction. If not, the statute of limitations would not begin to run .at the time of the construction.

In Schenebeck v. Sterling Drug, Inc., 423 F. 2d 919 (8th Cir. 1970), a case in which the defendant argued that the statute of limitations ran from the day of the wrongful act, the United States Court of Appeals for the Eighth Circuit said:

While it is true that the Arkansas Supreme Court has referred to the statute of limitations governing negligence actions as commencing “from the time when the injury was first inflicted * * Field v. Gazette Publishing Co., 187 Ark. 253, 59 S.W. 2d 19, 20 (1933), and that court has specifically held that a plaintiff who discovered more than three years after an automobile accident that his loss of hearing was traceable to the accident could not recover since the “. . . wrongful act was complete at the moment the car was turned over,” Faulkner v. Huie, 205 Ark. 332, 168 S.W. 2d 839 (1943), nevertheless, an analysis of the Arkansas cases, we believe, demonstrates that appellant reads them too narrowly. As we construe the Arkansas cases, in the instances where there has been delay between the negligent act and the damage, the occurrence of harm marks the beginning of the period. Thus, in Field v. Gazette Publishing Co., supra, also dealing with a slow-developing disease, the court approved an instruction authorizing the jury to determine whether the statute of limitations had run by determining whether the plaintiff “. . . contracted the malady of which he complains . . .” prior to a specified crucial date. This same test was again mentioned as a dictum in Barksdale v. Silica Products Co., 200 Ark. 32, 137 S.W. 2d 901 (1940). Even though defendant has completed a negligent surgical operation, Arkansas has held that the statute need not commence running with the negligent act if discovery of the damage has been delayed. See Burton v. Tribble, 189 Ark. 58, 70 S.W. 2d 503 (1934) (patient’s malpractice action against surgeon commenced more than three years following surgical procedure to recover for damage attributable to a foreign object left in the body, held not barred). In an action for damage to land subsiding because of loss of subjacent support caused by defendant’s earlier negligent act, Arkansas Court has held the cause accrues from the time the damage to the surface becomes apparent rather than when the defendant removed the underground support. Western Coal & Mining Co. v. Randolph, 191 Ark. 1115, 89 S.W. 2d 741 (1936). A traditional element of a cause of action in a negligence action requires the invasion of another’s interest. See Restatement (Second) of Torts, § 281 (1965); Prosser, The Law of Torts, 146-148 (3d ed. 1964). Ordinarily, the plaintiff must suffer some actual loss or damage in order to bring an action. Slight damage initiates the accrual of the cause of action. See Faulkner v. Huie, 205 Ark. 332, 168 S.W. 2d 839 (1943); Prosser, supra, at 146-148.

It is entirely possible that Red Top may have had a cause of action against Arkansas National for breach of contract accruing on August 11, 1970, when Arkansas National failed to reinstate the insurance coverage. That apparently was the trial court’s view when on April 17, 1973, Red Top attempted to join Arkansas National as a third party defendant in the tort action brought by Bratton and Lowe against Red Top. The parties stipulated that the action resulting in the judgment, from whence comes this appeal, was an action sounding in tort and not in contract. We conclude that Red Top had no tort action against Midwest until a tort against Red Top was committed by Arkansas National and that Arkansas National’s negligence in its failure to convert the insurance coverage did not become tortious as to Red Top and for which a cause of action would lie, until at least some element of damage accrued to Red Top because of the negligence of Arkansas National. According to the record before us, Red Top’s cause became actionable against Arkansas National on or after May 24, 1971, when Red Top was forced to bear its own expense in defending litigation because of Arkansas National’s negligence in failing to transfer the insurance coverage.

Both parties to this litigation filed motions for summary judgment. We conclude that the statute of limitations had not run against Red Top in favor of Arkansas National when suit was filed by Midwest on March 29, 1974, but the appellant’s secondary argument concerning the validity of the assignment from Red Top to Midwest is another matter. As already indicated, we are of the opinion Red Top could have asserted a cause of action for breach of contract against Arkansas National on August 11, 1970, when the breach occurred by failure to reinstate the insurance but Red Top could not interplead such breach of contract action into the personal injury and property damage tort action filed by Bratton and Lowe against Red Top as the trial court correctly pointed out.

In other words, it would appear that Red Top had an election of two separate remedies or causes of action against its insurance agent. Arkansas National, in thL case. It could have sued for damages for breach of contract when the breach occurred as above set out, or it could sue for damages in tort when the tort occurred and became actionable as above set out. The same three year statute of limitations applied in either the breach of contract or the tort action. It would appear that in order to avoid the statutory bar to an action in contract, the appellant was careful to lay the suit it did file in tort rather than in contract. It is clear that had the suit been for breach of contract it would have been barred by the statute. Since the suit was in tort it was within the statute but we conclude it was not assignable.

It must be remembered that the assignor Red Top did not assign a judgment for $6,850 to the appellant Midwest in this case. Red Top did not own the judgment; Red Top owed the judgment for $6,850 to Bratton and Lowe who were complete strangers to the transactions between Red Top and its insurance agency Arkansas National. Bratton’s and Lowe’s claims against Red Top were liquidated by judgments for $6,850 but the subject of the assignment of this case was Red Top’s separate tort damage claim against its insurance agent. The pertinent part of the written assignment appears as follows:

On September 11, 1973, judgment was rendered against Red Top in favor of Robert A. Bratton and Archie Lee Lowe in the total sum of $6,850.00 together with interest thereon from that date until paid at the rate of six percent (6%) per annum and costs. The chose in action herein assigned is that cause of action which Red Top had against the producing agent, Arkansas National for negligently failing to provide coverage as promised resulting in the judgment debt against Red Top.
We hereby authorize Midwest Mutual Insurance Company, in its own name and at its own cost, to make any demands, institute any and all legal proceedings and exercise all powers and rights which would be ours to enforce this claim and to receive any or all of same to its own use and hereby relinquish forever all our claims thereto or rights therein.

We agree with the trial court’s observation that Red Top’s assigned claim and rights of recovery against Arkansas National were not necessarily limited to the judgment for $6,-850 obtained by Bratton and Lowe against Red Top.

As between the parties to the litigation in this case, Red 'Lop’s actionable claim against Midwest amounted to an unliquidated tort claim and it was not assignable. See So. Farm Bur. Cas. Ins. Co. v. Wright Oil Co., Inc., 248 Ark. 803, 454 S.W. 2d 69; Lowrey v. Lowrey, 260 Ark. 128, 538 S.W. 2d 36 (1976). See also Nat’l Fire Ins. Co. v. Pettit-Galloway Co., 157 Ark. 333, 248 S.W. 262.

The judgment is affirmed.

Fogleman, J., dissents.

John A. Fogleman, Justice,

dissenting. I dissent because I would hold that the claim was assignable. This holding, in my opinion, would not conflict with our holdings that tort claims for personal injuries are not assignable. There is no sound reason why such a claim as the one involved here should not be assignable under the circumstances prevailing.

      The statute has since been changed in medical malpractice cases.


author: Conley Byrd, Justice. J. Fred Jones, Justice,

text:
    Johnny R. WHITE v. STATE of Arkansas
    CR 75-204
    538 S.W. 2d 550
    Opinion delivered July 19, 1976

      Robert L. Shaw, for appellant.

      Jim Guy Tucker, Atty. Gen., by: Terry Kirkpatrick, Asst. Atty. Gen., for appellee.
   Conley Byrd, Justice.

Appellant Johnny R. White was charged by information with the offense of possessing marijuana for the purpose of delivery allegedly committed on November 22, 1974. The jury found him not guilty of the offense charged but returned a verdict finding him guilty of only possessing marijuana. From a judgment assessing a $250 fine and a one year jail sentence, appellant appeals contending that mere possession of marijuana was not a misdemeanor offense under Act 590 of 1971, as amended by Act 186 of 1973.

Act 590 of 1971, being the Uniform Controlled Substance Act, comprises in excess of 38 pages in the 1971 Acts. Section 1, containing 24 different definitions provides in so far as here pertinent, as follows:

“SECTION 1. As used in this Act:
(d) ‘Controlled substance’ means a drug substance, or immediate precurson in Schedules I through V or Article II of this Act.”

Article II of Act 590 of 1971 contained Schedules I through V and marijuana was classified as a substance in Schedule I.

Section 1 of Article IV of Act 590 of 1971 provided as follows:

SECTION 1. (a) Except as authorized by this Act, it is unlawful for any person to manufactur, deliver, or possess with intent to manufacture or deliver, a controlled substance.
(1) Any person who violates this subsection with respect to:
(i) a controlled substance classified in Schedule I or II which is a narcotic drug, is guilty of a crime and upon conviction may be imprisoned for not more than fifteen (15) years or fined not more than $25,000, or both;
(ii) any other controlled substance classified in Schedule I, II, or III, is guilty of a crime and upon conviction may be imprisoned for not more than five years, fined not more than $15,000 or both;
(¡ii) a substance classified in Schedule IV, is guilty of a crime and upon conviction may be imprisoned for not more than 3 years, fined not more than $10,000.-00, or both;
(iv) a substance classified in Schedule V, is guilty of a crime and upon conviction may be imprisoned for not more than one year, fined not more than $5,000, or both.
(b) Except as authorized by this Act, it is unlawful for any person to create, deliver, or possess with intent to deliver, a counterfeit substance.
(b) (1) Any person who violates this subsection with respect to:
(i) a counterfeit substance classified in Schedule I or II which is a narcotic drug, is guilty of a crime and upon conviction may be imprisoned for not more than 15 years, fined not more than $25,000 or both;
(ii) any other counterfeit substance classified in Schedule I, II, or III, is guilty of a crime and upon conviction may be imprisoned for not more than 5 years, fined not more than $15,000, or both;
(iii) a counterfeit substance classified in Schedule IV, is guilty of a crime and upon conviction may be imprisoned for not more than 3 years, fined not more than $10,000, or both;
(iv) a counterfeit substance classified in Schedule V, is guilty of a crime and upon conviction may be imprisoned for not more than one year, fined not more than $5,000, or both.
(c) It is unlawful for any person knowingly or intentionally to possess a controlled substance unless the substance was obtained directly from, or pursuant to, a valid prescription or order of a practitioner while acting in the course of his professional practice, or except as otherwise authorized by this Act. Any person who violates this subsection is guilty of a misdemeanor. Provided, any person who is convicted of a third or subsequent offense for violation of this subsection shall be guilty of a felony and shall be subject to imprisonment in the Penitentiary for not less than two (2) nor more than five (5) years.”

In Act 186 of 1973 marijuana was removed from Schedule I of Article II and placed in a new Schedule VI. No amendment was made at that time to Section 1 of Act 590 which defined a “controlled substance” as a “drug, substance, or immediate precursor in Schedules I through V of Article II of this Act.” However, Act 186 of 1973 did provide:

SECTION 2. Subsection (a) of Section 1 of Article IV of Act 590 of 1971 as amended the same being Arkansas Statutes Section 82-2617 (a) is hereby amend-eh to read as follows:
‘(a) Except as authorized by this Act, it is unlawful for any person to manufacture, deliver, or possess with intent to manufacture or deliver, a controlled substance.
(1) Any person who violates this subsection with respect to:
(i) a controlled substance classified in Schedule I or II which is a narcotic drug, is guilty of a felony and upon conviction may be imprisoned in the state penitentiary for not less than five (5) years nor more than thirty (30) years or fined not more than $25,000, or both;
(ii) any other controlled substance classified in Schedule I, II, III, or VI is guilty of a felony and upon conviction may be imprisoned in the state penitentiary for not less than three (3) years nor more than ten (10) years, fined not more than $15,000, or both;
(iii) a substance classified in Schedule IV, is guilty of a felony and upon conviction may be imprisoned in the state penitentiary for not less than one (1) year nor more than three years, fined not more than $10,000, or both;
(iv) a substance classified in Schedule V, is guilty of a felony and upon conviction may be imprisoned in the state penitentiary for not less than one (1) year nor more than two (2) years, fined not more than $5,000, or both.’
SECTION 3. Subsection (c) of Section 1 of Article IV of Act 590 of 1971 as amended, the same being Arkansas Statutes Section 82-2617 (c) is hereby amended to read as follows:
(c) It is unlawful for any person knowingly or intentionally to possess a controlled substance unless the substance was obtained directly from, or pursuant to, a valid prescription or order of a practitioner while acting in the course of his professional practice, or except as otherwise authorized by this Act. Any person who violates this subsection is guilty of a misdemeanor. Provided, any person who is convicted of a third or subsequent offense for violation of this subsection shall be guilty of a felony and shall be subject to imprisonment in the penitentiary for not less than two (2) nor more than five (5) years. Provided however, any person who unlawfully possesses a controlled substance listed under Schedule I of this Act shall be guilty of a felony and upon conviction thereof, shall be imprisoned in the state penitentiary for not less than two (2) years nor more than five (5) years.”

Obviously subsection (c) of Section t of Article IV as amended by Act 186 of 1973 does not make the mere possession of marijuana a misdemeanor if the definition in Section 1 (d) of Act 590 of 1971, is substituted for the term “controlled substance.” Under that construction only possession of drugs appearing in Schedule I through V are classified as misdemeanors.

To avoid the definition of a “controlled substance” as used in Section 1 (d) of the Uniform Controlled Drug Act, the State makes two arguments — i.e. (1) appellant did not properly raise the issue in the trial court, and (2) “it would indeed he an absurd result to construe the failure of Act 186 to amend § 82-2601 (d) [Section 1 (d) of Act 590] to include possession of marijuana, the crime of which appellant stands convicted.” To do so, says the State, “would clearly thwart the obvious intent of the Legislature.”

We find no merit to the contention of the State that the issue was not properly raised in the trial court. Such issues go to the jurisdiction of the trial court and can be raised at any time, even after a guilty plea by certiorari, Switzer v. Golden, Judge, 224 Ark. 543, 274 S.W. 2d 769 (1955).

Neither can we agree with the State as to its second contention for the rule of law with respect to statutory construction of penal provisions is that nothing will be taken as intended which is not clearly expressed and all doubts must be resolved in favor of the accused, Bennett v. State, 252 Ark. 128, 477 S.W. 2d 497 (1972). This rule comes to us from the early common law and is well known to lawyers and legislators alike. Consequently, when the doubts as to the construction of the use of the term “controlled substance” in subsection (c) of Section 1 of Article IV of Act 590 of 1971, as amended by Act 186 of 1973, is considered in the light of the strict construction rule, we must agree with the appellant that the mere possession of drugs classified in Schedule VI of Article II of the Uniform Controlled Substance Act as amended by Act 186 of 1973, do not constitute a misdemeanor.

Reversed and dismissed.

Jones, J., dissents.

J. Fred Jones, Justice,

dissenting. I do not agree with the majority opinion in this case.

The Uniform Controlled Substances Act of 1971 (Act 590 of 1971) separated the controlled drugs and substances into five general classifications referred to as “schedules” according to their nature and potency. The Act included marijuana, along with 16 other named substances among the “hallucinogenic substances” classified under Schedule I. The Act then provided a penalty for possession with intent to deliver non-narcotic controlled substances under Schedules I, II or III as imprisonment for not more than five years and a fine of not more than $15,000, or both. The Act then provided that mere possession of such substance would constitute a misdemeanor except that a third or subsequent offense would constitute a felony.

Act 186 of 1973 amended the 1971 Act and as recited in the enacting clause was for the purpose, among other things, “to Create a New Schedule to be Designated ‘Schedule VI’ to Include Marihuana and to Provide a Penalty for the Possession Thereof; and for Other Purposes.” I cannot accept the apparent reasoning of the majority that possession of marijuana was legalized by Act 186 of 1973 for lack of definition. By passing Act 186 of 1973 the Legislature simply concluded that marijuana, classified as the tenth numbered substance among the 17 hallucinogenic substances in Schedule I under Section 4 (a) of Act 590, was simply in the wrong schedule penalty-wise and was entitled to a separate numbered schedule. Consequently, by Act 186 of 1973, the Legislature provided in Sections 13, 14 and 15 of the Act as follows:

SECTION 13. There is hereby established a Schedule VI for the classification of those substances which are determined to be inappropriately classified by placing them in Schedules I through V. Schedule VI includes controlled substances listed or to be listed by whatever official name, common or usual name, chemical name or trade name designated.
SECTION 14. The Coordinator shall place a substance in Schedule VI if he finds that:
(a) the substance is not currently accepted for medical use in treatment in the United States;
(b) that there is lack of accepted safety for use of the drug or other substance even under direct medical supervision;
(c) that the substance has relatively high psychological and/or physiological dependence liability; and,
(d) That use of the substance presents a definite risk to public health.
SECTION 15. Unless specifically excepted or unless listed in another schedule, any material, compound, mixture, or preparation, whether produced directly or indirectly from substances of vegetable origin, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis, which contains any quantity of the following substances, or which contains any of their salts, isomers, and salts of isomers whenever the existence of such salts, isomers, and salts of isomers is possible within the specific chemical designation are included in Schedule VI:
1. Marihuana.
2. Tetrahydrocannabinol.

Act 186 then provided, as did the previous Act 590, felony penalty for violation in connection with controlled substances under Schedules I and II when the substance is a narcotic drug, and raised the penalty from imprisonment for not more than 15 years or fine not more than $25,000, or both, to “imprisonment in the state penitentiary for not less than five (5) years nor more than thirty (30) years or fined not more than $25,000, or both.”

Article IV, Section 1 (a) (1) (ii) of original Act 590 pertaining to possession with intent to deliver recited as follows:

Any person who violates this subsection with respect to: . . . any other controlled substance classified in Schedule I, II, or III, is guilty of a crime and upon conviction may be imprisoned for not more than five years, fined not more than $15,000 or both.

This subsection was amended by Act 186 to read as follows:

Any person who violates this subsection with respect to any other controlled substance classified in Schedule I, II, III, or VI is guilty of a felony and upon conviction may be imprisoned in the state penitentiary for not less than three (3) years nor more than ten (10) years, fined not more than $15,000, or both.

Section 3 (c) of Act 186 simply re-enacted the misdemeanor provision for mere possession under Act 590 (subsection [c] of Section 1 of Article IV of Act 590) with the additional proviso: “Provided however, any person who unlawfully possesses a controlled substance listed under Schedule I of this Act shall be guilty of a felony and upon conviction thereof, shall be imprisoned in the state penitentiary for not less than two (2) years nor more than five (5) years.”

The appellant was simply charged with the possession of controlled substance, to-wit: Marijuana, with the intent to deliver said substance to other persons. Under Section 1 of Act 590 of 1971 many words and terms “as used in this Act” were defined. These words included “Administer,” “Agent,” “Bureau,” “Controlled substance,” “Deliver,” “Dispense,” “Dispenser,” etc. The Act then provided administrative authority for the Commissioner to add to or delete from the various Schedules drugs and substances. Then Section 4 of the Act named 42 opiates as being included in Schedule I and also named 22 opium derivatives as being included in Schedule Í and then, as already stated, named 17 hallucinogenic substances as included in Schedule I.

Act 590 was approved on April 17, 1971, and Act 186 of 1973 was approved on March 2, 1973, and the appellant White was accused of having possessed marijuana on November 22, 1974. He now says that there could be no violation of law as charged because the amendatory Act 186 removed marijuana from Schedule I under Act 590; and, consequently, since Act 590 defined “controlled substance” as a substance mentioned in Schedule I through V of Article 2 of that Act and since Act 186 of 1973 did not amend the definition of “controlled substance” to include substances in Schedule VI, there was no violation of the law by possession of marijuana since the re-enactment of Act 186 of 1973.

Under Act 590 of 1971 the Legislature set up five classifications for the drugs and substances being controlled. The drugs and substances were not controlled because they fell into one of the five classified schedules, they fell into one of the five schedules because they were being controlled, and their nature and derivation were important to their classification in providing the penalties in connection with violations pertaining to them. The Legislature concluded that under Act 590 marijuana was erroneously included under Schedule I, and if the Legislature did amend marijuana out of the definition of a controlled substance by Act 186, it certainly did not leave the mere possession of marijuana, or the possession of marijuana with intent to deliver, without penalty. In other words, by Act 186 the Legislature did not legalize the possession of marijuana by lack of definition and if Act 186 did take marijuana out' of the definition of a controlled substance in Act 590, it placed marijuana back within the definition of a controlled substance when the Legislature in Section 13 of Act 186 said:

There is hereby established a Schedule VI for the classification of those substances which are determined to be inappropriately classified by placing them in Scheduh 5 I through V. Schedule VI includes controlled substances listed. . . .

Section 14 of the Act then provided foir the Coordinator to add substances to or subtract them from Schedule VI. Section 15, supra, of Act 186, defined what substances were to be included in Schedule VI and specifically mentioned marijuana. Then Act 186, under Section 3 (c) just simply reenacted the penalty clause contained in Act 590 for mere possession with the exception that since marijuana was given a designated schedule, possession of the other substances listed in Schedule I of the Act was made a felony.

I would affirm on the point here involved.

       § 82-2601 (d) was amended by Act 305 of 1975 to include Schedule VI.


author: Robert Hays Williams, Special Justice.

text:
    E. B. FENDLEY et al v. Johnnie Faye LASTER
    75-246
    538 S.W. 2d 555
    Opinion delivered July 19, 1976

      Bailey, Trimble & Holt, for appellants.

      Frances D. Holtzendorff and Kay L. Matthews, for appellee.
   Robert Hays Williams, Special Justice.

This Appeal involves the validity of a gift causa mortis.

Briefly, Stanley Claude Fendley owned the Economy Drug Stores in Little Rock and the Appellee, Johnnie Faye Laster, was his trusted employee for many years. On December 23, 1967, Fendley suffered a severe and disabling heart attack from which he remained hospitalized for approximately two months.

On March 1, 1968, after returning home, he wrote and delivered a check to Johnnie Faye Laster for $10,000.00, which is the subject of the purported gift. In the lefthand corner he penned the following words, “Only Good In Case of Death SCF.”

After the heart attack he only returned to the active management of his business affairs on a part time basis for the period of about a year. He died on June 21, 1973 at the age of 71. Prior to his death, on the 16th day of October, 1972, E. B. Fendley and C.B. Fendley were appointed Co-Guardians of the Person and Estate of Stanley Claude Fendley, because of his mental and physical incompetency.

Fendley died testate and Appellants who were appointed Co-Executors of his Estate, disallowed the claim of Johnnie Faye Laster for $10,000.00. Subsequently, the Probate Court of Pulaski County allowed it as a gift causa mortis.

Under these facts, about which there is no dispute, most of them having been stipulated, there is no question but that Stanley Claude Fendley attempted to make a gift to Johnnie Faye Laster of $10,000.00 and effectively delivered the check representing the money to her. Also, in the opinion of the Court, there is no doubt but that he was apprehensive of death at the time he wrote and delivered the check to her. It is not difficult to conceive his state of mind at that time, having just undergone such a serious brush with death.

We reaffirm the rule announced in the case of Smith, Administratrix, v. Clark, 219 Ark. 751, 244 S.W. 2d 776, that a check may be the subject of a gift causa mortis.

There is no difficulty, therefore, in finding that the subject matter of a gift has been delivered by the donor to the donee at a time when the donor was under the apprehension of death from some existing disease, two of the requirements of a valid gift causa mortis.

The difficulty in this case, however, comes with the third requirement, that is, that the donor must die without recovering from the disease (or surviving the peril).

Did Fendley die without recovering from the disease which placed him in a state of apprehension during the last few days of 1967 and the first two months of 1968?

Under the stipulation of facts, Fendley did not return to full time management of his businsss interests but during the period between the heart attack and his death he did actively conduct some of his business affairs on a part time basis for about one year; and ultimately died from the existing heart condition on June 21, 1973. From the stipulation of the parties with reference to the testimony of John W. McCracken it appears that Fendley and McCracken, during this same period of time, went together to the Ochsner Clinic in New Orleans, Louisiana during which trip Fendley discussed the specific question here involved together with other business and personal matters. He also discussed this matter with Reeves Anderson as well as with the witness, Mrs. L. D. Bursott, and also discussed it with Joe Meek, Jr.

The cause of death as reflected on the Death Certificate signed by the attending physician was “acute pulmonary edema, arterioscleriotic heart disease, congestive heart failure chronic”.

In view of the time that Fendley lived after the apprehensive incident, in excess of five years, and of his activities during that period of time, though limited to some extent, we are of the opinion that it is not reasonable to say that he had not recovered from the disease which caused his apprehension and that the effort to establish a gift causa mortis must fail.

The case of Ellsworth v. Cornes, 204 Ark. 756, 165 S.W. 2d 57, quoted the rule from Pomeroy’s Equity, 4th Ed., P. 2669, with reference to gifts causa mortis as follows:

“When a gift causa mortis is made during sickness, it is essential, in order to perfect it and prevent a revocation, that the donor should die of the very same sickness from which he was then suffering, and there should be no intervening recovery between the illness and his final death; and it seems that the donee must affirmatively show the existence of all these facts.”

The Courts as well as the text writers agree generally on the essentials as above quoted. None give any great amount of guidance as to what “recovery” should be limited or defined. In the case of Smith, Administratrix v. Clark, supra, the Court did say that in many of the reported cases the gift was made weeks, and even months, before the death of the donor. So that time of life subsequent to the incident is not the sole criteria.

That Fendley did leave his hospital bed and the hospital and did show some interest and activity in his business is at least convincing evidence that he “recovered” from the depth of the disease that caused him to be overly concerned about his chances of prolonged life. This, in addition to five years of prolonged life, convinces the Court that there was an intervening recovery between the illness and his final death.

This cause is, therefore, reversed and remanded to the Lower Court with directions to enter its Order consistent herewith.

Special Justice Sam Hilburn joins in this opinion.

Jones, J., dissents.

Holt and Roy, JJ., disqualified and not participating.


author: James A. Ross, Jr., Special Chief Justice. J. Fred Jones, Justice.

text:
    UNITED STATES FIDELITY AND GUARANTY COMPANY v. Monroe LOVE
    75-281
    538 S.W. 2d 558
    Opinion delivered July 19, 1976

      Bridges, Toung, Matthews & Davis, for appellant.

      Lee A. Munson, Prosecuting Atty., 6th Judicial Circuit, by: John Wesley Hall Jr., Dep. Prosecuting Atty., Civil Litigation Division.
   James A. Ross, Jr., Special Chief Justice.

This case involves an action by appellant, United States Fidelity and Guaranty Company, to recover attorney’s fees from appellee, Sheriff Monroe Love, under the terms of an indemnity agreement. Monroe Love, while serving as Sheriff of Pulaski County, was required by Arkansas Statute Annotated § 12-1101 (1968 Repl.) to execute a bond to the State of Arkansas. In December of 1970 Sheriff Love applied to U.S.F. & G. to act as surety for this bond and he executed an application form prepared by U.S.F. & G. containing an indemnity agreement “to indemnify the Company against any loss, damage and expense of any kind incurred by it by reason of the execution of any such bond.”

Later, a civil rights action was filed in federal district court against Sheriff Love and U.S.F. & G. (as surety on the bond) seeking damages alleged to have been caused by one of the sheriff’s deputies. The Prosecuting Attorney for the Sixth Judicial District defended Sheriff Love, but he declined to defend U.S.F. & G. on the grounds that a prosecuting attorney could not represent a private entity. Separate counsel was retained by U.S.F. & G.

Judgment was entered against Sheriff Love in the federal action, and he paid the judgment in full. Then, U.S.F. &G. instituted this action to recover the sum of $1,962.50 which it paid to its defense attorney. Both Sheriff Love and U.S.F. & G. filed motions for summary judgment and the Circuit Court granted the motion of Sheriff Love. This order is appealed by U.S.F. & G.

The issue before the Court is an interpretation of the language of the indemnity agreement to determine if this includes attorneys’ fees actually expended for the defense of U.S.F. & G. in the federal civil rights action.

This case is distinguishable from Title Guaranty & Surety Co. v. Burke, 134 Ark. 499, 204 S.W. 215 (1918), because the language involved in the U.S.F. & G. indemnity agreement is broader and more inclusive than the language of the indemnity agreement in the Burke case. The case of Fausett Builders, Inc. v. Globe Indemnity Co., 220 Ark. 301, 247 S.W. 2d 469 (1952), is not controlling here because that case involved a contract of suretyship and not an indemnity contract.

In a recent case, attorneys ’ fees were recovered under the terms of an indemnity agreement in which such fees were not specified. Buck v. Monsanto Co. et al, 254 Ark. 821, 497 S.W. 2d 664 (1973). However, the issue of inclusion of attorneys’ fees within the language of that indemnity provision was not raised before the Court.

This Court has given broad construction to language similar to the indemnity provision here by holding such language includes interest on the principal sum from the date it was paid by the indemnitee in its capacity as surety on a bond. Kincade v. C. & L. Rural Electric Coop. Corp., 227 Ark. 321, 299 S.W. 2d 67 (1957). Finding no Arkansas cases directly in point on the issue of attorneys’ fees, the Court looks to the decisions of other jurisdictions.

This Court adopts the general rule that this indemnity apreement does include attorneys’ fees. B. & G. Electric Co. v. G. E. Bass & Co., 252 F. 2d 698 (5th Cir. 1958); Fidelity & Casualty Co. of New York v. Mauney, 273 Ky. 400, 116 S.W. 2d 960 (1938); 11 APPLEMAN, Insurance Law and Practice, § 6677; 41 AM. JUR. 2d, Indemnity, § 36; 42 C.J.S., Indemnity, § 13.

A number of cases are cited by Sheriff Love from other jurisdictions denying recovery of attorneys’ fees under an indemnity agreement. However, as U.S.F. & G. points out, most of these cases involve attorneys’ fees expended by the indemnitee in an action on the indemnity agreement against the indemnitor. Such fees are not recoverable and are not being allowed in this case. Other cases cited bv Sheriff Love represent the minority rule. 11 APPLEMAN, Insurance Law and Practice, supra.

To be recoverable by the indemnitee, the attorneys ’ fees must be reasonable, proper, necessary and incurred in good faith and with due diligence. Fidelity & Casualty Co. of New York v. Mauney, supra; U.S.F. & G. v. Garrett, 156 S.C. 132, 152 S.W. 772 (1930); 11 APPLEMAN, Insurance Law and Practice, supra. These are factual questions to be determined by the trier of fact, and when properly placed in dispute are not matters to be disposed of on motion for summary judgment. Sheriff Love does, by sworn answers to interrogatories, place in issue the question of reasonableness of the fees paid. Accordingly, this case is reversed and remanded to the trial court for a determination of the reasonableness of the attorneys’ fees.

Special Justices James E. West and Lee Tucker join in this opinion.

Jones, J., dissents.

Harris, C.J., and Fogleman and Roy, JJ., not participating.

J. Fred Jones, Justice.

I do not agree with the majority opinion in this case. I agree with the majority that the sheriff was required by statute to enter into bond to the State of Arkansas with good and sufficient security condition that he would well, truly and faithfully discharge and perform his duties as sheriff; and, I agree that in his application for bond Sheriff Love agreed to pay the premium in advance and “to indemnify the company against any loss, damage and expense of any kind incurred by it by reason of the execution of any such bond.”

I also agree that to be recoverable by the indemnitee as a proper item of expense attorney’s fees must be reasonable, proper, necessary and incurred in good faith and with due diligence; but, I do not agree with the majority that the attorney’s fees expended by United States Fidelity and Guaranty Company in this case were necessary at all.

It is my view that this was a proper case for summary judgment but in my opinion the summary judgment should have been rendered in favor of Sheriff Love. If Sheriff Love was liable for the acts of his deputy in the civil rights action in federal court, then his bonding company was, in my opinion, automatically liable because its liability to the state, for the use and benefit of Pulaski County, was secondary to the liability of Sheriff Love and depended wholly and entirely on the liability of Sheriff Love. If Sheriff Love was liable, so was his bonding company and it had no separate defense under the record in this case. If Sheriff Love was not liable, neither was his bonding company. Sheriff Love’s defense was the defense of his bonding company.

It is my view that United States Fidelity and Guaranty Company had no separate defense requiring the services of its own separate attorney at the expense of Sheriff Love. I would reverse and dismiss.