author:
Jack Holt, Jr., Chief Justice. Darrell Hickman, Justice,
      Jack Holt, Jr., Chief Justice.

text:
    AMERICAN TRUCKING ASS’N, INC., et al. v. Henry C. GRAY, Dir., Arkansas Highway & Transp. Dep’t, et al. and AMERICAN TRUCKING ASS’N, INC., et al. v. Charles D. RAGLAND, Comm’r of Revenues, Revenue Div., et al.
    85-101 & 85-112
    707 S.W.2d 759
    Supreme Court of Arkansas
    Opinion delivered April 14, 1986
    [Supplemental Opinion on Denial of Rehearing May 27, 1986.]

      William S. Busker, Daniel R. Barney, and Robert Digges, Jr.; and Mitchell, Williams, Selig, Jackson & Tucker, by: Eugene G. Sayre, Pat Moran, and Timothy W. Grooms, for appellant.

      Chris Parker, Ted Goodloe, and Thomas B. Keys, for appellee, Henry C. Gray and the Arkansas State Highway Commission.

      Joe Morphew, Revenue Legal Counsel, for appellee, Revenue Division.

      Steve Clark, Att’y Gen., by: E. Jeffery Story, Asst. Att’y Gen., for appellees.

      Hickman, J., would grant; Purtle, J., not participating.

   Jack Holt, Jr., Chief Justice.

In this consolidated appeal, the constitutionality of Act 685 of 1983, Ark. Stat. Ann. §§ 75-817.2, 75-817.3 and 75-819(b) (Supp. 1985), is challenged. The Act imposed a Highway Use Equalization (HUE) tax on all trucks that operate on Arkansas highways at maximum weights between 73,281 and 80,000 pounds. The appellants, American Trucking Association, Inc., (ATA), filed a complaint in Pulaski Chancery Court, fourth division, against appellees, Arkansas Highway and Transportation Department, alleging that the HUE tax would be an “illegal exaction.” Appellants requested a temporary restraining order preventing the money collected under Act 685 from being deposited into the state treasury. Chancellor Bruce Bullion dissolved the temporary restraining order and denied appellants’ requested preliminary injunction. That decision was appealed to this court. We affirmed Chancellor Bullion’s decision and reserved any further consideration until after a trial on the merits. American Trucking Ass’n, Inc., et al. v. Gray, Director, 280 Ark. 258, 657 S.W.2d 207 (1983).

The case was remanded, certified as a class action, and the trial on the merits was held. Appellants attempted to prove that the HUE tax as written and administered was violative of the commerce clause, the privileges and immunities clause, and the equal protection clause of the fourteenth amendment to the United States Constitution. Chancellor Bullion ruled on October 11, 1984, that the tax was constitutional and that appellants’ counsel were not entitled to attorneys’ fees.

On January 25,1984, the companion case of ATA.Inc., et al. v. Charles D. Ragland, et al., was filed in the second division of Pulaski Chancery Court. That complaint also challenged the tax as an illegal exaction and alleged that Act 685, which was approved by a mere majority vote of the General Assembly, was subject to the three-fourths voting majority required by amendment 19 § 2 of the Arkansas Constitution. Chancellor John Earl granted appellees’ motion for summary judgment on this issue. Since the facts and issues in the two appeals are similar, they were consolidated in this court. Our jurisdiction is pursuant to Sup. Ct. R. 29(1)(a), (c), and (j). We uphold the constitutionality of Act 685.

Act 685 provides that the HUE tax is to be administered for all Arkansas base-registered trucks by the Commissioner of Revenues of the Revenue Division of the Department of Finance and Administration, while the Director of the Arkansas State Highway and Transportation Department administers the tax for all non-Arkansas base-registered trucks. The Act provides that the HUE tax for all vehicles can be satisfied through the election to pay:

1) an annual flat fee of $175;
2) a fee equal to 50 per mile for every mile the truck travelled in Arkansas during the previous registration year; or
3) for the purchase of a trip permit at the rate of $8.00 per hundred miles driven.

The appellants primarily rest their arguments on the results of a survey conducted by ATA regarding Arkansas and non-Arkansas base-registered trucks upon which the HUE tax is imposed. The survey results, according to appellants, established that the average cost of complying with the HUE tax, on a per mile of operation basis, affects non-Arkansas base-registered trucks at a rate 370% higher than it impacts Arkansas base-registered trucks. Under these circumstances, appellants maintain the practical effect of the HUE tax is to unconstitutionally discriminate against the non-Arkansas based vehicles’ use of the highways. The appellants urge seven points for reversal, which will be discussed individually.

I.

THE HUE TAX VIOLATES THE COMMERCE CLAUSE

States are not permitted to tax interstate commerce in a manner that discriminates in favor of local interests. Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450 (1959); Boston Stock Exchange v. State Tax Comm’n, 429 U.S. 318 (1977).

The appellants pursue two theories in their commerce clause argument. First, they state the HUE tax, although facially neutral, imposes a far higher effective tax rate on out-of-state trucks than on in-state trucks for the same use of the highways. Their second argument is that as a flat, nonproportional tax, it is not fairly related to the level of highway services provided by the state to each HUE taxpayer.

In Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), the United States Supreme Court considered the validity of a state sales tax under the commerce clause. The Court noted that under its prior decision in Spector Motor Service v. O’Connor, 340 U.S. 602 (1951), a state tax on the “privilege of doing business” was per se unconstitutional when it is applied to interstate commerce. In Brady, the Supreme Court overruled Spector, and instead, applied a four-part test to determine constitutionality under the commerce clause. Under that test a tax is valid when the tax (1) “is applied to an activity with a substantial nexus with the taxing State”, (2) “is fairly apportioned”, (3) “does not discriminate against interstate commerce”, and (4) “is fairly related to the services provided by the State.” In Burlington N.R.R. Co. v. Ragland, Comm’r, 280 Ark. 182, 655 S.W.2d 437 (1983), we acknowledged that “whenever there is a challenge to any state tax on interstate commerce, the tax will be subjected to the Brady test.”

The appellants maintain that the HUE tax fails to meet the third and fourth prongs of the Brady test. Since they admit that the tax is facially neutral, the appellants are claiming in their discussion of the third prong, that its practical effect is to discriminate against interstate commerce. This argument is based on the results of the ATA survey discussed previously. Although several arguments, pro and con, are made about the veracity of the ATA survey, we find no evidence that the HUE tax discriminates against interstate commerce. The tax is structured to offer three options for compliance. A truck that meets the criteria of the tax may pay an annual flat fee, a fee based on mileage, or buy a trip permit. These options are available to intrastate and interstate carriers alike. The money collected is used to offset highway repairs and costs and thus the HUE tax is in the nature of a user fee or tax.

In Aero Mayflower Transit Co. v. Georgia Public Serv. Comm’n, et al., 295 U.S. 285 (1935), the U.S. Supreme Court discussed a Georgia statute imposing an annual license fee for the maintenance of the highways. The Court found the statute did not lay an unlawful burden on interstate commerce. In so holding, the Court noted that the fee is a moderate amount, it is used for the upkeep of highways, and “it is exacted without hostility to foreign or interstate transactions, being imposed also upon domestic vehicles operated in like conditions.” There, too, the Court was confronted with the argument that the out-of-state carrier uses the roads of Georgia less than the local carriers, yet they pay the same amount. The Court held, “[t]he fee is for the privilege for a use as extensive as the carrier wills that it shall be. There is nothing unreasonable or oppressive in a burden so imposed . . . One who receives a privilege without limit is not wronged by his own refusal to enjoy it as freely as he may” (citations omitted).

Here, the amount of the fee is not being challenged as unreasonable per se, the money is used for the upkeep of the highways traveled by the carriers being taxed, and the tax applies to foreign and domestic carriers alike. The interstate carriers can opt to pay the flat fee. The fact that they do not make extensive use of the state’s highways, does not make the tax levied discriminatory.

Again, in Aero Mayflower Transit Co. v. Bd. of R.R. Comm’rs of Montana, et al., 332 U.S. 495 (1947), the Supreme Court discussed two flat highway taxes imposed “in consideration of the use of the highways of this state.” The Court found neither exaction discriminated against interstate commerce since each applies alike to local'and interstate operations and neither taxes traffic or movements taking place outside Montana. The Court stated:

Motor carriers for hire, and particularly truckers of heavy goods, like appellant, make especially arduous use of roadways entailing wear and tear much beyond that resulting from general indiscriminate public use . . . Although the state may not discriminate against or exclude such interstate traffic generally in the use of its highways, this does not mean that the state is required to furnish those facilities to it free of charge or indeed on equal terms with other traffic not inflicting similar destructive effects . . . Interstate traffic equally with intrastate may be required to pay a fair share of the cost and maintenance reasonably related to the use made of the highways, (citations omitted).

The appellants maintain that the Brady decision overruled the Court’s early decisions in the two Aero Mayflower cases. We disagree. The Court expressly overruled only Spector. It did not so treat these cases. Furthermore, in Massachusetts v. United States, 435 U.S. 444 (1978), decided one year after Brady, the Supreme Court analogized the problem of a flat fee registration tax on all civil aircraft, to their previous motor vehicle tax cases, citing the Montana Aero Mayflower decision.

The Maryland Court of Appeals reached a similar conclusion in American Trucking Ass’ns Inc., et al. v. Goldstein, et al., 483 A.2d 47 (Md. 1984), using reasoning we now adopt. That court discussed an annual registration fee imposed on all motor carriers operating in Maryland. The Maryland court specifically found that Brady “did not undercut the previously discussed flat highway user tax cases”, which included both Aero Mayflower decisions.

In finding that the registration fee did not discriminate against interstate commerce under Brady, the Maryland court noted that “[i]t is not aimed at placing interstate business at a competitive disadvantage with local businesses”, it “applies equally” to in-state and out-of-state registered motor carriers, and its purpose “is not to protect local carriers against foreign competition.” Rather, the court noted its purpose “is to spread evenly among all commercial users the tax burden of supporting Maryland’s highway system.” The HUE tax meets the same criteria and accomplishes the same purposes.

The appellants claim their statistics show that the HUE tax is discriminatory because, on a cost per mile basis, out of state truckers are charged more. Assuming their statistics are valid, the flat tax portion of our law must, logically, be the most onerous provision. The per mile or per trip alternatives benefit the out of state truckers by permitting them to pay less than the flat tax. We need go no further than to cite the cases holding that a flat tax is not discriminatory. The alternatives offered by our law, which in fact could benefit the out of state truckers, do not make this case distinguishable from the ones approving the flat rate as being a proper tax method in the context of a commerce clause challenge.

As to the argument under the fourth prong of Brady, that as a flat tax, it is not fairly related to the level of highway services provided by the state to each HUE taxpayer, it can be answered under the same authority as the previous argument.

The first “flat fee” case dealt with by the U.S. Supreme Court was the Georgia Aero Mayflower case, supra. The Court upheld the flat tax then, and in subsequent flat fee cases, holding that a state may impose a flat fee for the privilege of using its roads. In Capitol Greyhound Lines, et al. v. Brice, Comm’r, 339 U.S. 542 (1950), the Court held that the formula used in calculating the flat tax was not crucial, rather the relevant inquiry was whether the amount of the tax was excessive. We agree. Acts of the Legislature are presumed to be constitutional and will not be held by the courts to be unconstitutional unless there is a clear incompatibility between the act and the constitution, with all doubts resolved in favor of the act. Pulaski County Municipal Court v. Scott, 272 Ark. 115, 612 S.W.2d 297 (1981). Here, the flat tax rate of $ 175 was not shown to be excessive or unreasonable.

THE HUE TAX VIOLATES THE EQUAL PROTECTION CLAUSE

The fourteenth amendment to the U.S. Constitution provides that no person shall be denied equal protection of the law by any state. Before a statute can be reviewed under the equal protection guarantee, a party must demonstrate that the law classifies persons in some manner. Nowak, Rotunda, & Young, Constitutional Law, p. 600 (2ded. 1983). There are three ways to establish a classification: the statute may do so on its face; a facially neutral statute may be applied unevenly to different groups by those administering it; or a facially neutral law, applied evenhandedly, in reality may constitute a device designed to impose different burdens on different classes of persons. Id. The appellants argue that the tax classifies carriers based on interstate versus intrastate commerce.

Once a classification is found to exist, the equal protection analysis turns on whether the classification bears a rational relationship to a legitimate state interest.

We need not reach the rational relationship test, however, because no classification exists. The appellants acknowledge that the statute is facially neutral, so the first method of classifying is not established. The other two methods concern the uneven application and the burdensome effect of a neutral statute. We have already indicated in our discussion of the commerce clause that the statute is applied to interstate and intrastate carriers alike and does not have a discriminatory effect on interstate commerce. Since interstate commerce is not singled out for disparate treatment, no classification on that basis is made, and no equal protection problem arises.

III.

THE HUE TAX VIOLATES THE PRIVILEGES & IMMUNITIES CLAUSE

The privileges and immunities clause provides that “[t]he Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the Several States.” United States Constitution, Art. IV, § 2. It is well established that the privileges and immunities clause is inapplicable to corporations. Hemphill v. Orloff, 277 U.S. 537 (1928); Western & Southern Life Ins. Co. v. State Bd. of Equalization of Calif., 451 U.S. 648 (1981). The named appellants, ATA, et al., are all corporations. Nevertheless, they argue that since their complaint was certified as a class action, there are noncorporate individuals within the class which permits them to raise a privileges and immunities challenge, citing City of Little Rock v. Cash, 277 Ark. 494, 644 S.W.2d 229 (1982), rehearing denied. Cash does not stand for that proposition. The lawsuit in that case was filed by six residents of the city of Little Rock who were water users. The case was certified as a class action. There is no discussion about corporate and noncorporate parties. Nor did our research indicate that there is any case law stating that it will be assumed that noncorporate individuals are included in a class action in a case such as this. In fact in ATA, et al. v. Goldstein, et al., supra, the same appellants attempted to raise a privileges and immunities argument. The Maryland court noted that the clause was inapplicable to corporations and stated: “ [a] 11 of the named plaintiffs are corporations. As such, they have no standing to challenge § 423(a) under the Privileges and Immunities Clause of Art. IV.” Here, as in that case, all the named plaintiff's are corporations. Therefore, they have no standing to make this argument.

IV.

THE ARBITRARY & DISCRIMINATORY REGULATIONS & ADMINISTRATION OF THE HUE TAX ARE UNCONSTITUTIONAL

Act 685 divides authority for the administration of the HUE tax between the Commissioner of Revenues of the Department of Finance & Administration, (DF&A) for Arkansas base-registered vehicles; and the Director of the Arkansas State Highway & Transportation Department, (ASH&TD) for non-Arkansas base-registered vehicles. Appellants do not object to the regulations or administration by the DF&A. Their argument under this point instead is directed toward the ASH&TD, whose regulations and policies, they maintain, violate the commerce clause, the privileges and immunities clause, and the equal protection clause of the Constitution.

We can immediately dispense with the privileges and immunities argument since the named appellants are corporations. As to the commerce clause and equal protection allegations, the appellants maintain that the regulations and policies of the ASH&TD violate the first and third prongs of the Brady test, supra. The appellants specifically object to (a) the ASH&TD’s general approach, (b) the specialty carrier status, and (c) fleet registration.

(a) The general policies named by appellants are that the ASH&TD, unlike the DF&A, does not allow the owner/operator of non-Arkansas base-registered trucks the option of choosing whether to qualify their trucks by weight for the use of the highways afforded by payment of the HUE tax. The policy appellants are challenging requires non-Arkansas base-registered trucks to either declare that they are carrying 73,281 pounds in Arkansas and pay the HUE tax, or else take some affirmative action to elect not to carry that weight. A non-Arkansas base-registered truck who has not taken either of these actions is not allowed to enter the state. This affirmative action is burdensome on interstate commerce according to the appellants.

The appellants’ argument is without merit. All trucks must declare their gross weight for travel in Arkansas. Arkansas base-registered vehicles do so when they register in this state. Those Arkansas vehicles who participate in the International Registration Plan (IRP) declare their weight by a sworn statement on the IRP application. Obviously, a comparable opportunity was needed for non-Arkansas base-registered carriers to declare their gross weight. The Highway Department established a mechanism where a carrier could either qualify and pay the HUE tax or formally declare a gross weight below 73,281 pounds and obtain a free specialty carrier decal. The state’s interest in a weight declaration from all trucks travelling on state highways is apparent, satisfying the first prong of Brady.

As to the discrimination issue raised under the third prong, all carriers have to take some affirmative action to declare the weight of their vehicles. Here, ASH &TD had the authority to promulgate its regulation and it is reasonable. As a practical matter the mechanism for registration differed for interstate vehicles, yet the result was the same, without undue burden to interstate commerce. During oral arguments, appellees’ counsel explained that to implement registration procedures, it was necessary to utilize a certain policy during the first two years of registration after the act became effective, however, that now there is no difference in registration for those carriers who are members of IRP. They are presently allowed to declare the gross weight of their vehicles when they register in other states. Likewise, non-Arkansas base-registered carriers, who are not members of IRP, still submit an affidavit as to weight and receive a special carrier decal upon entry into Arkansas. These simple methods for carriers to declare gross weight of vehicles for travel in Arkansas are non-discriminatory.

(b) The specialty carrier status was created by regulation and is awarded to carriers entering the state who are carrying below 73,281 pounds or fall within a statutory exemption and are thus not subject to the HUE tax. The specialty carrier decal is given free to those carriers and allows them entry into the state. Appellants contend the status was created by regulation even though the language of Act 685 does not provide a rational basis for the creation of such a classification. This action, they claim, violates the agency’s legislative grant of rule-making authority, citing State, ex rel Attorney General v. Burnett, 200 Ark. 655, 140 S.W.2d 673 (1940). Burnett held that a regulation promulgated by the commissioner of revenues was contrary to the applicable statute and therefore void. The specialty carrier status is not contrary to Act 685. It identifies exemptions to the HUE tax, including trucks carrying less than 73,281 pounds. Since the ASH&TD is required to administer the HUE tax and to do so requires a determination of the gross weight of vehicles using the state’s highways, the designation of the specialty carrier status is a way to facilitate collection of that tax and is within the agency’s power to promulgate.

(c) Appellants also complain that non-Arkansas base-registered carriers must qualify their trucks by an “integral fleets” classification, under only one payment option. Arkansas-based owner/operators are allowed by DF&A to pick their payment option and apply it to their individual trucks, according to appellants.

The appellants misinterpret the pertinent policies. The actual practices of the ASH&TD and DF&A are the same: they allow one payment option per fleet. Arkansas base-registered vehicles that are registered under the IRP have their mileage reported by the IRP on a fleet basis. That IRP mileage documentation is then used by the DF&A to allow the carrier to select an option for each fleet. Similarly, the ASH&TD allows mileage documentation to be computed on a fleet basis using either IRP records or other records submitted to a governmental entity for some official purpose. Once the fleet is set, in either case, only one option of HUE payment is allowed.

The ASH&TD allows non-Arkansas based carriers, where separate integral fleets exist under one ownership and separate record and reporting systems are maintained for each integral fleet, to select separate options. Highway Department Regulation V(B). The DF&A also has a regulation stating that IRP qualification shall be on a fleet basis and all affected vehicles will pay either of two relevant options. Highway Use Equalization Tax Regulations, paragraph (8). Mary Ellen Gerke, head of the Revenue IRP Unit, testified that a single IRP fleet can select an option but the owner has to then exercise the same option with all the trucks in that account or fleet. Since there is no disparate treatment there is no basis for a claim of discrimination.

V.

ACT 685 OF 1983 WAS NOT ADOPTED IN ACCORDANCE WITH THE REQUIREMENTS OF THE ARKANSAS CONSTITUTION

Amendment 19 § 2 of the Arkansas Constitution provides that no rates for “property, excise, privilege or personal taxes now levied shall be increased by the General Assembly except... in case of an emergency, the votes of three-fourths of the members elected to each House of the General Assembly.”

The appellants suggest that Act 685 is an increase in an existing “privilege tax” and is therefore subject to the three-fourths vote requirement. In support of their allegation that an existing privilege tax has been increased, appellants point to the registration fee charged under Ark. Stat. Ann. § 75-201 (Repl. 1979 and Supp. 1985), as the tax that Act 685 increased. Appellees maintain this is a new tax on the new privilege of carrying larger loads. We find that amendment 19 § 2 is inapplicable because Act 685 does not impose a privilege tax but rather exacts a user fee from motor vehicles carrying the prescribed weight. In Evansville-Vanderburgh Airport Auth. Dist., et al. v. Delta Airlines, Inc., 405 U.S. 707 (1972), the U.S. Supreme Court explained:

that a charge designed only to make the user of state-provided facilities pay a reasonable fee to help defray the costs of their construction and maintenance may constitutionally be imposed on interstate and domestic users alike. . .
At least so long as the toll is based on some fair approximation of use or privilege for use, . . . and is neither discriminatory against interstate commerce nor excessive in comparison with the governmental benefit conferred, it will pass constitutional muster. . .

Such charges for the use of public facilities, like highways, have been characterized as being in the “nature of rent charged by the State, based upon its proprietary interests in the public property, rather than of a tax.” Hartman, Federal Limita tions on State and Local Taxation, Chapt. 12 p. 665 (1981).

We find that this is a user fee, passed by the Legislature to compensate the state for the wear and tear on the highways caused by trucks carrying the higher weights. It is not a privilege tax in a technical sense. A privilege tax is “ [a] tax on the privilege of carrying on a business or a occupation for which a license or franchise is required.” Black’s Law Dictionary, (5th ed. 1979). Trucks not carrying the higher weight are not prohibited from travelling through the state, thus, the HUE tax is not a tax for the privilege of carrying on a business. It is instead a charge for the damage done by trucks carrying the higher weights and is exacted to make repairs. Since the approval of a user fee does not necessitate a three-fourths majority in the Legislature, appellants’ argument is without merit.

VI.

THE FINDINGS & CONCLUSIONS OF THE CHANCELLORS ARE INSUFFICIENT UNDER ARCP RULE 52(a)

Arkansas Rules of Civil Procedure Rule 52(a) provides that, in contested actions tried by a judge without a jury, if requested by a party, “the court shall find the facts specifically and state separately its conclusions of law thereon.” Appellants here object to the findings of fact and conclusions of law promulgated by the chancellors, claiming they were very brief, general and conclusory in nature. Rule 52(a) does not address the specificity with which findings of fact and conclusions of law must be made. Furthermore, we review chancery cases de novo and the chancellors’ findings and conclusions are supported by the record in this case. Accordingly, this point is not well taken.

VH.

APPELLANTS SHOULD BE AWARDED ATTORNEYS’ FEES WITH REGARD TO ANY REFUNDS RECEIVED BY MEMBERS OF APPELLANT CLASS

The appellants pursue two theories seeking attorneys’ fees. Initially they state that if this court should find that the HUE tax is an illegal exaction and refund taxes collected to members of appellant class, that a portion should be awarded as attorneys’ fees. Since we find that the tax is constitutional, this argument need not be addressed.

Appellants next contend that, notwithstanding the decision on the merits, Chancellor Bullion erred in denying them an award of $9,270.42 in attorneys’ fees. The chancellor found that refunds were made to the class from taxes erroneously collected pursuant to emergency regulations, before the final regulations were enacted. The final regulations did not include this erroneously collected tax. The judge ruled, however, that there was no common fund from which the attorneys’ fees could be paid, and denied the claim. We agree.

In Powell, Mayor of N.L.R. v. Henry, 267 Ark. 484, 592 S.W.2d 107 (1980), the appellants sought attorneys’ fees from refunds that were made to electrical ratepayers. This court held that attorneys’ fees were proper because the refund created a common fund, and stated:

[T]he action was a class action, which resulted in the recovery of a substantial amount which constituted a common fund. The allowance of attorneys’ fees from a common fund established or augmented through the efforts of the attorneys to whom the fee is allowed is a well recognized practice and is proper, (citations omitted).

Awards have been made by courts based on the common fund doctrine where the litigation results in the creation of a common fund against which the fees may be awarded. Annotation, 89 A.L.R.3d 690, 701 (1979).

In finding that the common fund requirement was not met, Chancellor Bullion explained in a letter opinion that:

Because the Court refused to enjoin the collection of this tax, and refused to require the tax monies to be deposited in an escrow account, all of the tax monies collected under Act 685 have been, and are now being deposited in the State Treasury. There is no impounded fund from which costs and fees that might be allowed for a successful taxpayers action to be drawn.
Monies paid by truckers under the offensive emergency regulation long ago ceased to be paid, and those who paid under its mandates received full refunds long ago. It is probably true that other lawful Act 685 taxes are being received by the State on a daily basis, but this tax money is not related to the offensive emergency regulation, rather are being collected pursuant to the valid exercise of the State’s power to tax. In this situation, it is beyond the power of this Court to order state government to pay counsel for the class a fee for services, no matter how deserving it may be.

We do not find the chancellor’s finding of fact that no common fund was established to be clearly erroneous. Ark. R. Civ. P. 52(a). Accordingly we affirm his judgment.

Affirmed.

Purtle, J., not participating.

Hickman, J., dissents.

Darrell Hickman, Justice,

dissenting. This is a test of the Arkansas Highway Department’s answer to the claim that our state’s highways will be damaged because of the increase of the maximum weight limit on trucks to 80,000 pounds. The legislature’s goal was to tax these heavy trucks to make them pay for their share of the damage to our highways. That worthy goal was partly forgotten by the legislators, resulting in a tax which decidedly favors Arkansas-based trucks. Those trucks may do all the damage they want for $175 per year.

The evidence reflected that interstate truckers invariably choose to pay five cents per mile or purchase a trip ticket, rather than pay the annual fee of $ 175 per truck. That is the only sensible choice for interstate truckers who will not use Arkansas Highways extensively. Arkansas-based truckers just as sensibly choose to pay the $175 per truck every year, because there is no mileage limit with that payment. They can drive thirty thousand miles for considerably less than five cents a mile.

Interstate truckers, not based in Arkansas, are paying 370% more than Arkansas-based truckers for the damage done. That is discrimination that violates the commerce clause of the United States Constitution. Discriminatory, parochial legislation such as this interferes with interstate commerce, an exclusive province of the federal government. Boston Stock Exchange v. State Tax Commission, 429 U.S. 318 (1977); City of Philadelphia v. New Jersey, 437 U.S. 617 (1978).

709 S.W.2d 410

Perhaps most important to us in Arkansas is the fact that the tax as delineated does not make those pay who may do the most damage; our own truckers.

The tax must be fairly related to the services provided, in this case decent highways. Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977). A mile-weight tax is probably the most fair and sensible answer to the problem: all truckers, Arkansas-based and interstate, pay equally for the damage to the highways. Not only is that sensible, it is unquestionably fair to the people of this state who have to bear any unpaid costs for damage.

I would find the tax violates the commerce clause of the United States Constitution.

Supplemental Opinion on Denial of Rehearing Opinion delivered May 27, 1986

Jack Holt, Jr., Chief Justice.

The appellants filed a petition for rehearing contending in part that we erred by failing to address the question of whether the HUE tax violates the privileges and immunities clause of the United States Constitution.

In the opinion, we incorrectly found the appellants lacked standing to raise this argument since all of the named plaintiff's are corporations and the privileges and immunities clause is inapplicable to corporations.

Appellants maintain in their petition that the parties had stipulated that there were two individuals named in the complaint as representative appellants who were so named for the purpose of raising this issue. The respondent states that this is so. Accordingly, we admit error and address this question on its merits.

The privileges and immunities clause provides:

The Citizens of each State shall be entitled to all Privileges and Immunities in the Several States.

The United States Supreme Court has explained that “[t]he primary purpose of this clause . . . was to help fuse into one Nation a collection of independent, sovereign States. It was designed to insure to a citizen of State A who ventures into State B the same privileges which the citizens of State B enjoy.” Toomer v. Witsell, 334 U.S. 385, 395 (1948); see also Paul v. Virginia, 8 Wall. 168 (1868); Ward v. Maryland, 12 Wall. 418 (1870). In Ward v. Maryland, the Supreme Court stated:

Beyond doubt those words are words of very comprehensive meaning, but it will be sufficient to say that the Clause plainly and unmistakably secures and protects the rights of a citizen of one State to pass into any other State of the Union for the purpose of engaging in lawful commerce, trade, or business without molestation . . . and to be exempt from any higher taxes or excises than are imposed by the State upon its own citizens.

Ward at p. 430.

The HUE tax does not violate the privileges and immunities clause. We have already held that the tax is facially neutral, applying equally to both Arkansas base-registered trucks as well as to non-Arkansas base-registered vehicles. Further, the Arkansas and non-Arkansas based trucks share the same opportunity of carrying the higher weights. Therefore, there is no classification made between citizens of one state as opposed to citizens of another state.

The second argument by petitioners is that the court was incorrect in finding that the tax did not discriminate against non-Arkansas based trucks. Petitioners cite two Vermont cases which have been decided since the arguments were presented in this appeal. We are obviously not bound by the decisions of a Vermont court. Furthermore, in those cases, the court found that the relevant statutes imposed different requirements on out-of-state operators. Here, the HUE tax applies equally to all operators and any disparity in amounts results from the number of miles traveled by their trucks. The rest of petitioners’ argument on this issue and their final contention are essentially restatements of their original brief and thus not proper for rehearing. Sup. Ct. R. 20(g).

Rehearing denied.

Purtle, J., not participating.

Hickman, J., would grant rehearing.


source: Caselaw Access Project

author: Jack Holt, Jr., Chief Justice.

license: Public Domain

text:
    WESTERN GROVE SCHOOL DISTRICT v. Imogene STRAIN
    85-232
    707 S.W.2d 306
    Supreme Court of Arkansas
    Opinion delivered April 14, 1986

      G. Ross Smith & Asso., P.A., for appellant.

      Cearley, Mitchell & Roachell, by: Richard W. Roachell and Paul J. Ward, for appellee.
   Jack Holt, Jr., Chief Justice.

The teaching contract of appellee, Imogene Strain, was not renewed for the 1982-1983 school year by the Western Grove School District Board of Directors. Mrs. Strain appealed her nonrenewal to the Newton County Circuit Court where the board’s decision was affirmed. Subsequently, Mrs. Strain, appealed to the Arkansas Court of Appeals which reversed the circuit court in an unpublished opinion and remanded the case for consideration of damages and mitigation. After a hearing on remand, the circuit court awarded Mrs. Strain back pay for the two years she was out of work, less her earnings in mitigation. It is from that decision on remand that the school district brings this appeal. Our jurisdiction is pursuant to Sup. Ct. R. 29(l)(c).

The district first contends that Mrs. Strain was only entitled to an award of back pay for one year and that the court, therefore, erred in basing the award on the two-year period between Mrs. Strain’s nonrenewal and her reinstatement. Second, the appellant argues that Mrs. Strain did not make reasonable attempts to mitigate her damages. We find no merit to either contention and affirm the circuit court.

Appellant relies on this court’s decision in Marion County Rural School Dist. No. 1 v. Rastle, 265 Ark. 33, 576 S.W.2d 502 (1979). In that case the teacher had a one-year teaching contract for the 1974-1975 school year. Notice of nonrenewal was not properly given to the teacher as provided by the statute in effect at that time, Ark. Stat. Ann. § 80-1304(b) (Supp. 1977). We affirmed the trial court’s holding that the teaching contract was extended by operation of law for the succeeding year, 1975-1976, and the district was liable to Rastle for that year’s salary. Rastle argued, however, that he should also be awarded a salary for the 1976-1977 school year since he never received statutory notice of nonrenewal and the district’s contractual liability would therefore continue until he received such notice. In rejecting that argument, we held that § 80-1304(b), which allowed for nonre-newal without cause by simply giving the teacher notice, did not create an expectation of continued employment and the required notice only goes to the succeeding school year.

Reliance upon Rastle is misplaced, since the statutory law governing teaching contracts had been changed by the legislature prior to the dispute between Mrs. Strain and the school district. The Teacher Fair Dismissal Act of 1979, Ark. Stat. Ann. §§ 80-1264—80-1264.10 (Repl. 1980), was in effect and it provided that before a school district could nonrenew a nonprobationary teacher, such as Mrs. Strain, the district must give notice, state grounds for the action, hold a hearing if requested, and nonrenew for a cause which is not arbitrary, capricious, or discriminatory.

By statute, Mrs. Strain’s contract with the school district continues unless nonrenewed for cause. Once she was removed from her job by the school district without cause, her contract was in abeyance during the pendency of the lawsuit. Since the lawsuit resulted in her reinstatement, Mrs. Strain is entitled to be compensated for the period she was unemployed due to the actions of the school district. This holding is in accord with the general rule of law that the measure of damages in a breach of employment contract case is the wages which were to be paid less any sum earned in mitigation. 68 Am. Jur. 2d Schools § 211 p. 534 (1973). This court has recognized that a teacher is entitled to damages equivalent to the amount of actual loss sustained as measured by the wages that would have been paid if not for the wrongful discharge, less any mitigation. Russellville Special School Dist. v. Tinsley, 156 Ark. 283, 245 S.W. 831 (1922); Annot., 22 A.L.R.3d 1047, 1054 § 3[b]. Accordingly, Mrs. Strain is entitled to compensation for the two years of salary she lost between her nonrenewal and her reinstatement.

As to the second point raised by appellant, Mrs. Strain offered ample proof of her efforts to mitigate damages at a hearing held on that specific question. Appellant contends, however, that despite the fact that Mrs. Strain’s nonrenewal was the result of an alleged dispute with the superintendent over her philosophy of teaching, she included with her applications to other school districts her “statement of philosophy of education.” Second, appellant points out that Mrs. Strain sent a letter with her job applications which contained two misspellings and one word incorrectly used. Her efforts to find other employment were not reasonably diligent, according to appellant.

The school district has the burden of proving that Mrs. Strain could have obtained other employment in mitigation. Newton v. Calhoun County School Dist., 232 Ark. 943, 341 S.W.2d 30 (1960); Arkansas State Hwy. Comm’n v. Frierson, 269 Ark. 81, 598 S.W.2d 420 (1980). A party must use reasonable care, effort or expenditure in mitigating damages, but the determination of whether one has acted reasonably is a question of fact. Id. Such fact findings, when made by a judge, are not reversed unless clearly erroneous. Ark. R. Civ. P. 52(a). The district also had the burden of proving the amount of damage that might have been avoided by proper mitigation. Harris Const. Co. et al. v. Powers, 262 Ark. 96, 554 S.W.2d 332 (1977).

Here, the district offered no evidence that a school district refused to hire Mrs. Strain because of the letter or the statement of philosophy. Nor did the district offer evidence of the extent to which Mrs. Strain’s actions contributed to her inability to mitigate her damages. The district failed to meet its burden of proof.

Affirmed.

Purtle, J., not participating.


author: George Rose Smith, Justice.

text:
    Mary Maxine ZAJAC, Administratrix v. MISSOURI PACIFIC RAILROAD et al.
    85-289
    707 S.W.2d 309
    Supreme Court of Arkansas
    Opinion delivered April 14, 1986

      The Haskins & Hendricks Law Firm, by: Clark W. Mason, for appellant.

      Friday, Eldredge & Clark, by: James M. Simpson and C. Tab Turner, for appellees.
   George Rose Smith, Justice.

This action for the wrongful death of Thomas Albert Zajac arose from a crossing accident in Pulaski County in September, 1984. Zajac was killed. The jury’s verdict after a five-day trial was for the defendant. The only argument for reversal is that the trial judge should not have given a modified version of AMI 908, by which the jury was instructed that no person shall drive on any highway a vehicle which is in such an unsafe condition as to endanger any person. AMI Civil 2d, 908 (1974). It is contended that there was no substantial evidence to support a finding that the mechanical condition of Zajac’s pickup truck was a proximate cause of his death. We cannot sustain that contention.

The only two eyewitnesses who described the accident were members of the train crew. The brakeman, who was sitting on the left in the lead engine, had the clearer view. At a distance of 300 feet he saw the pickup slowly approaching the crossing from the left. It crept up on the track and stalled or stopped right in the middle of the track. The emergency brakes were applied, but it was too late to stop the train, which was about a mile long. At first the driver of the truck was looking straight ahead, but a few seconds before the impact he looked at the train. The brakeman testified: “It looked like he was either downshifting — he took the lever and went up with it the last time I seen him.”

The decedent, Tommy Zajac, had been about high-school age. One of his friends testified that Tommy had a problem with the gears in his truck. Occasionally the shifter would hang up when he was going into another gear. It didn’t happen much, but when it did Tommy had to stop and reach under the hood to unjam the linkage. When the trouble occurred, Tommy would try to wiggle the gear shift knob to get it into gear. This witness had seen the gears hang up a day or two before the accident.

Tommy’s girlfriend, who said she and Tommy were planning to be married, was familiar with the gearshift problem. She said that Tommy bought a part for the problem and that he and his father fixed it on the day before the accident. She and Tommy then went for a ride and had no problems. They assumed it was fixed. On cross examination she admitted that in a deposition she had said that the truck was fixed “sometime during the two weeks before he got killed.” She explained that she just couldn’t remember then, but she thought back about it and remembered that it had been the day before the accident.

It was for the jury to decide whether the gearshift defect contributed to the accident. According to the brakeman, young Zajac’s truck stalled on the track. In the last few seconds Zajac saw the approaching train and was working with the gearshift lever just before the impact. Upon all the testimony the jury could have found that the truck stalled on the track because the malfunctioning of the gearshift had not been repaired. It was accordingly proper for the court to give the instruction about which complaint is made.

Affirmed.

Purtle, J., not participating.


author: Darrell Hickman, Justice.

text:
    Santiago SANCHEZ, a/k/a/ Robert George PACICCO, and Gary Dale PIERCEFIELD v. STATE of Arkansas
    CR 85-211
    707 S.W.2d 310
    Supreme Court of Arkansas
    Opinion delivered April 14, 1986

      John W. Settle, for appellant Santiago Sanchez.

      David L. Gibbons, for appellant Gary Dale Piercefield.

      Steve Clark, Att’y Gen., by: Clint Miller, Asst. Att’y Gen., for appellee.
   Darrell Hickman, Justice.

When the police broke into the apartment of Toni Needham in Fort Smith, Arkansas, an empty box of freezer bags came flying down the stairs and someone was heard running above. The officers went upstairs and found appellant Santiago Sanchez and Bernie Netz in a bedroom with a quantity of illegal drugs and drug paraphernalia. This is what they found: a set of scales and a bowl with a substance in it identified as methamphetamine, a controlled substance, were found on a table. Another dish with methamphetamine was found on a mattress on the floor. In a coat, lying on the bed, was a .32 caliber semi-automatic pistol with seven live rounds along with a syringe in a plastic bag. The plastic bag had a residue of ephedrine, a chemical commonly used to dilute controlled substances. A box of freezer bags was on the floor. There was a mirror used as a tabletop on which were three razor blades. The state elicited testimony that razor blades were used to line out drugs for snorting or putting into syringes. Searching further, the officers found two syringes in an adjoining bathroom. In another bedroom they discovered appellant Gary Piercefield hiding in a closet. Toni Needham was also in the room. There were no drugs or paraphernalia found in this room.

Both Sanchez and Piercefield were convicted of possession of a controlled substance with intent to sell and sentenced as habitual criminals: Sanchez to 35 years, Piercefield to 22 years. On appeal Sanchez raises three arguments: the trial court wrongly refused to disclose the name of the confidential informant who supplied the information for the search warrant; the trial court should have admitted evidence that Toni Needham and Bernie Netz pleaded guilty; and there was not substantial evidence to support his conviction. All are meritless. Piercefield only argues lack of substantial evidence. His argument is convincing and requires a reversal and dismissal of his conviction.

The state proceeded under the theory that both Piercefield and Sanchez were in constructive possession of the drugs. Possession may be constructive when one controls a substance or has the right to control it. Osborne v. State, 278 Ark. 45, 643 S.W.2d 251 (1982). Actual physical possession at the time of the arrest is not required. Cary v. State, 259 Ark. 510, 534 S.W.2d 230 (1976). In Jones v. State, 269 Ark. 119, 598 S.W.2d 748 (1980), we quoted with approval the following definition of substantial evidence:

Substantial evidence has been defined as ‘evidence that is of sufficient force and character that it will, with reasonable and material certainty and precision, compel a conclusion one way or the other. It must force or induce the mind to pass beyond a suspicion or conjecture. . .’

In determining whether the evidence is substantial, we consider it in a light most favorable to the state. Westbrook v. State, 286 Ark. 192, 691 S.W.2d 123 (1985); Cary v. State, supra.

First, Piercefield’s case: the apartment was not Piercefield’s, and there is no evidence that he had any connection with it. One officer testified that he interviewed Piercefield and asked him why his car smelled like ether. Piercefield said he had gone to Oklahoma with a third party to get a can of ether. An empty can was found on the premises but was not seized. It was established that ether was used to clean methamphetamine. Piercefield was found on the premises but was not where any drugs or paraphernalia were. Nothing was found on or about him that might indicate possession. See Ravalette v. State, 264 Ark. 344, 571 S.W.2d 433 (1978). The jury could only have speculated that Piercefield possessed these drugs because the state did not prove it. His conviction is reversed and dismissed.

The facts are entirely different concerning Sanchez. All evidence indicates he was in control of these drugs and paraphernalia; he was surrounded by them. Sanchez had a gun on him; another was found in a coat nearby. Shells were found in Sanchez’s car which matched the shells in the pistol in the coat. As the police entered the room, Sanchez was rising from the table where the scales and a bowl of methamphetamine were found. Nearby were methamphetamine in a dish on a mattress, ephedrine in a plastic bag along with a syringe, and freezer bags. The tabletop mirror and razor blades were next to where Sanchez was sitting. The jury could have easily concluded that Sanchez was sitting at the table measuring out the drug. The evidence is too strong to support his story that he was a casual visitor. The jury had substantial evidence from which to convict Sanchez.

Sanchez also argues that there was not enough evidence to convict him of intent to deliver. Ark. Stat. Ann. § 82-2617(d) (Supp. 1985) provides that possession of 200 milligrams of a stimulant creates a rebuttable presumption that possession is with intent to deliver. Sanchez possessed 1.26 grams of methamphetamine.

Sanchez’s other arguments are easily answered. There was no evidence that Sanchez needed to know the name of the confidential informant to prepare his defense. The informant was not present when the search was made nor was Sanchez charged with a sale that the informant witnessed. Under the facts of this case, disclosure was not required. Jackson v. State, 283 Ark. 301, 675 S.W.2d 820 (1984). See also Toland v. State, 285 Ark. 415, 688 S.W.2d 718 (1985); and Bennett v. State, 252 Ark. 128, 477 S.W.2d 497 (1972). Sufficient reliability of the informant was shown. Thompson v. State, 280 Ark. 265, 658 S.W.2d 350 (1983); Illinois v. Gates, 103 S.Ct. 2317 (1983).

Sanchez’s argument that the trial court should have allowed the defense to prove that Netz and Needham pleaded guilty is not supported by any authority. Furthermore he was allowed to show that they were both serving sentences for their involvement; therefore, there was no abuse of discretion in excluding this evidence.

Affirmed as to Sanchez. Reversed and dismissed as to Piercefield,

Purtle, J., not participating.


author: Steele Hays, Justice.

text:
    Sherman Dwight BROWN and Leon Larry SMITH v. STATE of Arkansas
    CR 85-187
    707 S.W.2d 313
    Supreme Court of Arkansas
    Opinion delivered April 14, 1986

      John Wesley Hall, Jr., for appellants.

      Steve Clark, Att’y Gen., by: Joel O. Huggins, Asst. Att’y Gen., for appellee.
   Steele Hays, Justice.

This appeal questions the legality of Ark. Stat. Ann. § 41-2604 (Repl. 1977), which permits the state to prove perjury by introducing conflicting statements without having to prove which statement is false.

Appellants, Sherman Dwight Brown and Leon Larry Smith, were first convicted on pleas of guilty to five charges of aggravated robbery and theft by receiving. They later filed motions to withdraw their guilty pleas pursuant to A.R.Cr.P. Rule 26, alleging they were innocent, that their pleas were coerced by threats of life sentences if they went to trial, and that they were denied effective assistance of counsel.

At a hearing on the Rule 26 motions appellants testified that they had lied at the hearing on their guilty pleas when they testified they had committed the crimes, their pleas were voluntary, and they were satisfied with their attorneys. The motions were denied and the denials were affirmed on appeal.

On October 24,1984, appellants were charged with the violation of Ark. Stat. Ann. § 41-2602 (Repl. 1977), which provides that a person commits perjury if in any official proceeding he makes a false statement under oath, knowing it to be false. The charges were based on the conflicting testimony given by appellants at the guilty plea hearing and at the Rule 26 hearing. The jury returned a verdict of guilty and, as habitual offenders, appellants were given sentences of twenty-three years each, to run concurrently with the sentences already being served. They have appealed. We affirm the judgment.

Five points of error are presented: the trial court should not have overruled a motion to dismiss the information because it charged perjury in the disjunctive; should not have denied a motion for a directed verdict because of retractions by the appellants during the same official proceeding; should not have admitted testimony concerning the guilty pleas because of privilege, should not have denied the jury access to exhibits during deliberations and should not have given an improper instruction to the jury. We will deal with the arguments in the order raised.

I

Appellants submit that by keeping them in prison the state impliedly affirms the truth of the statements given at the guilty plea hearing and that the state should be estopped from charging perjury in the disjunctive where the jury is not required to find which statement is false. The argument has a veneer of logic, but in reality the only position the state assumes when it imprisons individuals under pleas of guilty is that they have made an informed and voluntary plea to the charges, after a full explanation of the consequences of their act. To enforce the sentences imposed upon a guilty plea does not give rise to estoppel when a defendant subsequently claims he lied at the guilty plea hearing. We have held the defense of estoppel is not readily available against the state and that four essential elements must be present: 1) the party to be estopped must know the facts; 2) he must intend that his conduct shall be acted on or must so act that the party asserting the estoppel had a right to believe it is so intended; 3) the latter must be ignorant of the facts; and 4) he must rely on the former’s conduct to his injury. See Foote’s Dixie Dandy, Inc. v. McHenry, 270 Ark. 816, 607 S.W.2d 323 (1980) and AP&L v. Arkansas Public Service Commission, 275 Ark. 164, 628 S.W.2d 555 (1982). Some of those elements are plainly lacking here: the state has taken no position on which the appellants have relied to their detriment, nor can it be said the appellants are ignorant of the facts.

To adopt appellant’s argument would effectively nullify Ark. Stat. Ann. § 41-2604 (Repl. 1977), which expressly permits the state to proceed as it did in this case. The statute provides that proof of the inconsistency of the statements shall be evidence that one such statement is false. It relieves the state of the necessity of proving which statement is false, since obviously both cannot be true. Given the presumption of constitutionality, we find nothing remiss in the statute. Gibbs v. State, 255 Ark. 957, 504 S.W.2d 719 (1974).

II

Ark. Stat. Ann. § 41-2606 includes a provision that if an accused has retracted a false statement during “the course of the same official proceeding,” it is a defense to a prosecution for perjury. Appellants urge that the hearing on their guilty pleas and the hearing on their motions to withdraw their guilty pleas were the “same official proceeding” and, thus, they retracted their false statements when they told the truth at the Rule 26 hearing. We reject the argument. Ark. Stat. Ann. § 41-2606(l)(b), (c) requires retraction in the same proceeding and “before the subject matter of the official proceeding was submitted to the ultimate trier of fact.” When the circuit judge accepted the guilty pleas and entered judgment, it was then too late to retract. While § 41-2606(2) provides that separate stages of the same case shall be deemed to have been made in the course of the same proceeding, we do not consider the hearing on plea withdrawal to be part of the same proceeding when the previous phase ended with the acceptance of the guilty pleas. To hold otherwise would be inconsistent with the purpose of the perjury statute. See generally Commentary to § 41-2602 and see also, § 41-2606(3).

Ill

Nor do we find merit in the argument that Uniform Evidence Rule 410 and A.R.Cr.P. 25.4 render the appellants’ guilty pleas privileged. Rule 410 reads:

Evidence of a plea later withdrawn, of guilty, or admission of the charge, or nolo contendere, or of an offer so to plead to the crime charged or any other crime, or of statements made in connection with any of the foregoing withdrawn pleas or offers, is not admissible in any civil or criminal action, case, or proceeding against the person who made the plea or offer.

The simple answer is that an attempt to withdraw a plea of guilty does not operate as a withdrawal, which only the court can grant, and hence, the rule does not come into play. This provision is intended to protect an accused who has been permitted to withdraw a plea of guilty in accordance with A.R.Cr.P. 25 from having his guilty plea used against him as an admission against interest when he is tried on those same charges. It has no relevance to this case. As appellants tacitly concede, if their proposition were to prevail, there could be no perjury charges dependent on testimony at a guilty plea hearing. That was not the intent of Rule 410.

IV

Appellants next contend the trial court erred when the jury sent a note from the jury room asking, “[D]uring what time period was Mr. Smith on the medication, Triavil?” The defense asked that the exhibits be sent to the jury because the answer could have been found in one of the exhibits. The trial judge declined to do so and told the jury it would have to rely on the evidence previously presented. Appellants concede that this issue falls within the trial judge’s discretion, but they believe his denial was an abuse of discretion. We disagree that his action was beyond the bounds of discretion.

V

The remaining point concerns a jury instruction which appellants say should not have been given. The instruction told the jury in effect that conflicting statements made in the same proceeding, if found to have occurred, constituted evidence of perjury. We need not answer the assertion that the instruction amounted to a comment on the evidence, as the record reflects that no such instruction was given.

The judgment on the sentences is affirmed.

Purtle, J., not participating.

       Record, pp. 289-296.


author: David Newbern, Justice.

text:
    Marvia DUGGAR v. ARROW COACH LINES, INC.
    85-271
    707 S.W.2d 316
    Supreme Court of Arkansas
    Opinion delivered April 14, 1986

      Darrell F. Brown & Associates, P.A., for appellant.

      Laser, Sharp & Mayes, P.A., for appellee.
   David Newbern, Justice.

The appellant was the plaintiff below. She was injured in an accident while she was a passenger in a bus operated by Mr. Godley, an employee of the appellee. The jury returned a verdict for the appellee. The appellant’s only point on appeal is: “The evidence was sufficient to support a verdict for the plaintiff (appellant).” However, the argument portion of the appellant’s brief shows her point to be that the verdict was the result of passion or prejudice. We must affirm.

The evidence before the jury on the issue of liability consisted of testimony from the state policeman who investigated the accident and other persons who were passengers at the time of the wreck as well as the deposition of Mr. Godley, who was deceased at the time of the trial. The evidence showed that the bus left the road after another vehicle had passed and cut in front of the bus in heavy traffic at a place where the highway changed from four to two lanes. The bus landed upright, after going over a traffic island and an embankment, and all but four of the twenty-six passengers were injured. All of the other passengers who testified said or implied the bus was traveling too fast for conditions. Mr. Godley’s deposition, however, conflicted with that testimony, and he concluded the sole cause of the accident was his attempt to avoid colliding with other vehicles after the driver of the passing car had cut in front of him and slowed down sharply, forcing him off the road. He testified he was driving within the speed limit.

There was evidence that it was a standard procedure for the appellee to have a bus driver involved in an accident hand “courtesy cards” to the passengers on which the passengers could indicate who was at fault in the accident. Without objection, such cards, allegedly executed by two of the three passenger witnesses who testified for the appellant, were admitted into evidence. They showed the fault causing the accident to have been that of the “other driver.”

The appellant recognizes we will not overturn a jury verdict unless it is clearly the result of passion or prejudice. AAA T.V. & Stereo Rentals, Inc. v. Crawley, 284 Ark. 83, 679 S.W.2d 190 (1984). As bases of prejudice, the appellant mentions (1) the sympathy of the jury for the reputation of the deceased bus driver, (2) the fact that the jury knew the other passengers who testified also had claims against the appellee, and (3) the fact that the appellant’s doctor’s testimony was presented by deposition and perhaps was not understood by the jury.

It is enough to say that the appellant presented no evidence or credible argument that any of these factors in any way influenced the jury unfairly. No issue was raised in any way in the trial court about any of the items mentioned being prejudicial, and we do not see how any legitimate complaint about them could have been made, as they all go merely to the weight to be given the witnesses’ testimony or the manner of its presentation and have nothing to do with the kind of unfair prejudice we might find sufficient to overturn a jury verdict. We review the evidence in the light most favorable to the verdict, and where there is substantial evidence to support a verdict either for the appellant or for the appellee we will not disturb the verdict. Petrus Chrysler-Plymouth v. Davis, 283 Ark. 172, 671 S.W.2d 749 (1984); MFA Mutual Insurance Co. v. Keller, 274 Ark. 281, 623 S.W.2d 841 (1981).

Affirmed.

Purtle, J., not participating.


author: J. Michael Shaw, Special Justice.

text:
    ARKANSAS POWER & LIGHT COMPANY v. POTLATCH FOREST, INC.
    85-188
    707 S.W.2d 317
    Supreme Court of Arkansas
    Opinion delivered April 14, 1986
    [Rehearing denied May 27, 1986.]

      House, Wallace, Nelson & Jewell, P.A., by: Jim L. Julian and David A. Couch, for appellant.

      Owens, McHaney & Calhoun, by: James M. McHaney, and McKenzie, McRae & Vasser, for appellee.

      James E. Baine, Amicus Curiae, for Deltic Farm & Timber Company, Inc.

       Purtle and Dudley, JJ., not participating.

   J. Michael Shaw, Special Justice.

Arkansas Power & Light Company (AP&L) initiated this eminent domain proceeding against Potlatch Forest, Inc. (Potlatch) in the Nevada Circuit Court seeking condemnation of a 180 foot wide right-of-way across twelve (12) tracts of land in Clark and Nevada Counties for the construction of a 500 Kilovolt electric transmission line as well as reasonable access to and from the right-of-way. AP&L also sought the right to cut, trim or remove trees (referred to as “danger trees” by AP&L) growing outside the 180 foot right-of-way that could potentially endanger the transmission line. In its Complaint filed March 28, 1984, AP&L defined “danger trees” as:

Trees which have branches or limbs overhanging the right-of-way and/or trees whose height plus 22 feet exceed the horizontal distance from the butt of the tree to the center line of the transmission line.

On March 28, 1984, the Nevada Circuit Court entered an Ex parte Order authorizing AP&L to immediately enter upon Potlatch’s lands in order to commence construction of the transmission facility and directing AP&L to deposit $56,000.00 into the Registry of the Court as a guarantee of any judgment entered after the cause was tried to a jury for the assessment of just compensation. Potlatch moved the Circuit Court to modify its March 28, 1984 Ex parte Order by requiring AP&L to describe and condemn the lands which would fall within the “danger tree” area. In response, AP&L contended that Potlatch had challenged its right to condemn “danger trees,” the extent of its power to condemn, and the validity of its taking. It requested that the entire action be transferred to Chancery Court.

Potlatch filed an amended answer and counterclaim alleging that if AP&L were granted the right to cut “danger trees” outside the 180 foot right-of-way Potlatch would effectively be deprived of its right to engage in the normal course of its business of growing timber, particularly in a large area adjacent to and outside the 180 foot right-of-way and that AP&L should be denied the right to cut “danger trees” outside the 180 foot right-of-way unless it condemned additional rights-of-way of sufficient width to include all “danger trees.” Potlatch also prayed that AP&L specifically describe and condemn the route of reasonable access. In response to the counterclaim, AP&L prayed that the action be transferred to Chancery Court. Later, Potlatch filed a motion for more definite statement contending that AP&L’s complaint insufficiently described both the “danger tree” areas and reasonable access routes. In response, AP&L again prayed that the action be transferred to Chancery Court.

By Memorandum Opinion dated April 11,1985,theNevada Circuit Court held that it had subject matter jurisdiction over the case and that AP&L did not have the authority to go outside the condemned 180 foot right-of-way to exercise control over property for which it had not paid just compensation. Further, the court held that the easement for ingress and egress sought by AP&L must be specifically defined and condemned and just compensation paid. Thereupon, AP&L moved the court to clarify or in the alternative, to alter or amend its findings.

On April 15, 1985, the Circuit Court entered its Order granting Potlatch’s motion to modify the March 28, 1984 Ex parte Order and requiring AP&L to specifically describe and condemn the lands over which it desired to exercise such control as to cut, trim or remove “danger trees.” In addition, the court granted Potlatch’s motion for more definite statement or to dismiss on the basis that AP&L’s complaint inadequately described both the “danger tree” areas and the reasonable access routes. The Circuit Court denied AP&L’s motion to transfer the case to Chancery Court as well as its motion for clarification or amendment of the Court’s findings as stated in the Memorandum Opinion.

On appeal, AP&L challenged the Circuit Court’s exercise of jurisdiction and its rulings that AP&L must specifically describe and condemn both the “danger tree” areas and the reasonable access routes. We affirm the Circuit Court’s decision.

AP&L contends that the Circuit Court lacked subject matter jurisdiction and erred in exercising jurisdiction after Potlatch filed pleadings and pre-trial motions praying that the Court require AP&L to specifically describe and condemn the lands affected by the “danger tree” and reasonable access condemnation claims of AP&L. AP&L characterizes Potlatch’s request that the Court require specific descriptions of the “danger tree” and reasonable access areas as questioning the validity of AP&L’s taking and therefore within the sole jurisdiction of the Chancery Court.

Generally, condemnation proceedings are within exclusive jurisdiction of the Circuit Courts. Where a landowner raises equitable defenses in a condemnation proceeding, the landowner may move that the case be transferred to Chancery Court. See, 29 A C.J.S., Eminent Domain, § 232 (1965), citing Hampton v. Arkansas State Game & Fish Commission, 218 Ark. 757, 238 S.W.2d 950 (1951) and W. R. Wrape Stave Co. v. Arkansas State Game & Fish Commission, 215 Ark. 229, 219 S.W.2d 948 (1949).

Potlatch has not challenged AP&L’s right of eminent domain nor raised any equitable defenses not cognizable at law. Instead, Potlatch maintains that AP&L must specifically describe the areas over which it desires to exercise the right of eminent domain. Therefore, the Circuit Court was correct in retaining jurisdiction and denying AP&L’s motions to transfer the case to Chancery Court.

AP&L contends that the Circuit Court erred in striking the portions of its pleadings relating to “danger trees” and requiring AP&L to specifically describe and condemn the lands within the “danger tree” area. A public utility’s right to condemn private property is governed by article 12, § 9 of the Arkansas Constitution which provides:

No property, nor right of way, shall be appropriated to the use of any corporation until full compensation therefor shall be first made to the owner, in money, or first secured by him by a deposit of money, which compensation, irrespective of any benefit from any improvement proposed by such corporation, shall be ascertained by a jury of twelve men, in a court of competent jurisdiction, as shall be prescribed by law.

In Baucum v. Ark. Power & Light Co., 179 Ark. 154, 15 S.W.2d 399 (1929), this Court held that article 12 § 9 of the Arkansas Constitution required payment of the full fair market value of the right-of-way to the owner. In addition, Ark. Stat. Ann. §§ 35-302 and 73-276.15 govern AP&L’s right to condemn private property. As stated in Loyd v. Southwest Ark. Utilities Corp., 264 Ark. 818, 825, 580 S.W.2d 935 (1979):

Such statutes delegating the power of eminent domain are strictly construed in favor of the landowners because the power is in derogation of a common right. City of Little Rock v. Sawyer, 228 Ark. 516, 309 S.W.2d 30 (1958). The only right of access granted by these statutes is the right to acquire a right-of-way or reasonable access. Ark. Stat. Ann. §§ 35-302 and 73-276.15.

Ark. Stat. Ann. § 73-276.15(a)(2) (Repl. 1979) requires a “description of the land taken sufficient for the identification thereof.”

In State ex rel. Publicity & Parks Commission v. Earl, 233 Ark. 348, 345 S.W.2d 20 (1961), rehearing denied, this Court faced a situation similar to the case at bar. The condemning authority sought to condemn a 350 foot strip of land for a runway and, in addition, a 400 foot strip of land on either side of the runway for the purpose of keeping trees cut and trimmed to eliminate obstructions to aircraft. This Court followed the Baucum case and held that the condemning authority must pay full market value for the 400 foot strips of land. In Earl, the condemning authority’s taking destroyed the landowner’s common and ordinary uses of the 400 foot strips. Similarly, Potlatch would be deprived of its customary use and practice of tree farming of the property on which the “danger trees” would be cut since it would be unable to grow trees in the area outside the right-of-way. In order to exercise such dominion over Potlatch’s lands, AP&L must specifically describe, condemn and pay just compensation for the right to cut, trim, or remove trees that could potentially endanger the transmission line.

AP&L contends that the Circuit Court erred in requiring it to define and condemn a specific route of access to and from the right-of-way. AP&L relies upon cases from other jurisdictions which have adopted the “secondary easement” theory. In Loyd, supra, we noted that we had never had an occasion to recognize the secondary easement theory and found no need to do so since the condemning authority in Loyd had not sought and acquired a separate and distinct right of ingress and egress across the landowner’s property in addition to its claim of a secondary easement. As Potlatch states in its Brief, AP&L has ample access to the right-of-way without the necessity of crossing the lands of Potlatch since there are numerous existing public roads on Potlatch’s lands which cross the right-of-way. If AP&L desires some other form of access to the right-of-way, it must specifically describe, condemn and pay just compensation for any alternate routes of reasonable access.

For the foregoing reasons, the decision of the Nevada Circuit Court is affirmed.

Special Justice Eugene Hunt concurs in this opinion.

Purtle and Dudley, JJ., not participating.


author: Per Curiam.

text:
    Diana Jean VANDERKAMP et al. v. STATE of Arkansas
    706 S.W.2d 396
    Supreme Court of Arkansas
    Opinion delivered April 14, 1986

      James E. Davis, for appellants.

      Steve Clark, Att’y Gen., by: Theodore Holder, Asst. Att’y Gen., for appellee.
   Per Curiam.

The appellants have filed a motion for a rule to require the Clerk to file the record in this case. It appears that the record was tendered a day late. The appellants’ attorney, James E. Davis, accepts full responsibility for the delay.

This is a sufficient reason for accepting the record. See our per curiam opinion of February 5, 1979. 265 Ark. 964. The motion is accordingly granted.

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

Purtle, J., not participating.


text:
    Lyle DEWS v. HALLIBURTON INDUSTRIES, INC., et al.
    85-172
    708 S.W.2d 67
    Supreme Court of Arkansas
    Opinion delivered April 21, 1986
    [Rehearing denied June 2, 1986.]

      Anderson, Crumpler, Bell & Malock, P.A., for appellant.

      Steve R. Crane, for appellee Halliburton Industries, Inc.

      Jackson, Jackson, Loving & Gutman, by: Gary D. Jackson; and David L. Beatty, for appellee Analytical Logging, Inc.

      Williams & Kemp, by; Karlton H. Kemp, Jr., for appellee KAT Wireless Services, Inc.

      Smith, Stroud, McClerkin, Dunn & Nutter, by: Hayes C. McClerkin and Bruce Lorenzen, for appellee Hall Engineering, Inc. and Mosley Well Service.

      David W. Talley, Jr., for appellee Dresser Industries, Inc.

      Unger & Hughes, by: John W. Unger, Jr., for appellee Global Industries, Inc.

       Purtle, J., not participating.

   Jack Holt, Jr., Chief Justice.

At issue in this case is who is to pay eleven different companies approximately half of a million dollars for work performed while drilling an oil well. The chancellor held the appellant, Lyle Dews, and Bruce Massey are responsible for the debt. We agree. It is from that judgment that this appeal is brought. Our jurisdiction is pursuant to Sup. Ct. R. 29(1)(c) and (d).

Crystal Oil Co. owned certain leases covering lands in the southeast quarter and the north half of the southwest quarter, section 10, township 20S, range 25W, in Lafayette County, Arkansas. Crystal executed a farmout agreement of these leases with Dews on May 4, 1982. The terms of the farmout required Dews, at his expense, to drill a test well by May 15, 1982 and continue drilling to a depth sufficient to test the Cotton Valley Formation. If production was obtained, Crystal was required to assign Dews an interest in the leasehold estate. Crystal reserved an overriding royalty interest. If the first well was drilled, the agreement gave Dews the option to drill additional wells on the remaining acreage. The agreement was extended until July 15, 1982. Dews paid no consideration for this farmout.

Dews then entered into an agreement with Bruce Massey whereby Massey would pay Dews $50,000 in exchange for Dews assigning to Massey his right to the leasehold estate under the Crystal-Dews agreement and subject to the terms of the Crystal-Dews agreement. Dews reserved 5% of the leasehold estate as an overriding royalty interest. Massey agreed in return to cause the well to be drilled as required by the Crystal-Dews farmout agreement.

Drilling operations began prior to July 15,1982 and the well was completed as a producing well on November 14,1982. All of the claimants in this case were hired by Massey to supply labor or material for drilling the well.

As a result of the drilling and completion of the well, Dews received his assignment of leases from Crystal. Dews never assigned his right to Massey pursuant to their agreement, because Massey never paid Dews the $50,000 in a manner satisfactory to Dews.

Some of the various companies responsible for drilling the well filed suit against Massey in an attempt to collect the money owed to them. Dews was brought in as a party defendant and Dews then cross-claimed against all of the companies.

The chancellor found that Massey did not appear and defend and was therefore in default, and that Massey and Dews were jointly and severally liable for the companies’ claims. Each company was awarded a money judgment, for a total of $519,397.60 plus interest. In addition, all but one of the companies were allowed statutory liens against the leasehold estate, and all claimants were granted constructive, equitable liens upon all funds held by any purchaser of the oil or gas produced from the well.

Numerous issues are raised on appeal and on a cross-appeal filed by one of the companies. The chancellor based Dews’ liability for the money owed on four alternative grounds. We agree with one of the reasons, therefore, the chancellor is affirmed as to the money judgment.

I. QUASI-CONTRACT

In holding Dews liable under a quasi-contract theory, the chancellor found that the claimants provided valuable services and materials to the well, which services and materials were anticipated by the parties and were necessary to the completion of the well. Since Dews claims ownership of the well by virtue of the assignment from Crystal, and has accepted the well and the work performed by the claimants, the court held Dews would be unjustly enriched if he were not required to pay for the work.

Quasi-contracts, or contracts implied in law, are legal fictions, created by the law to do justice. They do not rest upon the express or implied assent of the parties. Rather, the underlying principle is that one person should not unjustly enrich himself at the expense of another. Dunn v. Phoenix Village, Inc., 213 F. Supp. 936 (W.D. Ark. 1963); Brill, Arkansas Law of Damages § 15-3 (1984). To find unjust enrichment, a party must have received something of value, to which he was not entitled and which he must restore. There must also be some operative act, intent, or situation to make the enrichment unjust and compensable. Brill, supra; Frigillana v. Frigillana, 266 Ark. 296, 584 S.W.2d 30 (1979). The basis for recovery under this theory is the benefit that the party has received and it is restitutionary in nature. Brill, supra. Recovery may be had under quasi-contract where services have been performed, whether requested or not, which have benefited a party. Dobbs, Handbook on the Law of Remedies, § 4.2 (1973). Courts, however, will only imply a promise to pay for services where they were rendered in such circumstances as authorized the party performing them to entertain a reasonable expectation of their payment by the party beneficiary. Dunn, supra. Quasi-contracts rest on the equitable principle that “whatsoever it is certain that a man ought to do, that the law supposes him to have promised to do . . . Where a party has in good faith rendered a service, not illegal or contrary to public policy, and the other party has accepted and used the service, the former may recover.” Dunn, supra.

That is the situation we are confronted with here. The appellees provided valuable services and materials for the well, without which the well never would have been drilled. Because the well was drilled and is producing, Dews received his assignment. Dews was undoubtedly enriched by appellees’ actions.

As to the unjust aspect, the testimony at the trial demonstrated that Dews was aware that the companies were rendering valuable services to the well. Because Massey never paid Dews the $50,000 pursuant to their agreement, Dews at all times knew that Massey was in breach. Since Massey’s authority to drill the well stemmed from the same agreement he had breached, Dews could not stand by and watch the companies perform services based on their agreements with Massey. Dews testified he decided to let Massey continue drilling in the hopes that he would finish the well. By making a conscious decision not to inform the companies that Massey was in breach of their agreement, and would therefore never receive the assignment, Dews allowed the debts to be incurred. He cannot permit such an injustice and still receive the benefit of the services rendered. Dews admitted as much during the course of the trial when he testified as follows:

Q: If the situation occurs what I just said and you don’t have to pay any lien claimants any money because you didn’t contract with them according to your statement and you don’t have to pay Mr. Massey because he is in breach of your contract and you have got an assignment from Crystal and the well is in [your] name, then you just get a freefall in this whole thing, is that just? Is that fair? For you to get something when you have got nothing in it except an assignment?
Dews: I would say if I am paid I feel like. . .
Q: That is not my question.
Dews: No sir, that is not fair.

The appellee companies, in good faith, performed services on the well. As the owner of the majority of the working interest in the producing well, Dews has accepted and used their services. The companies, therefore may recover from him.

II. STATUTORY AND EQUITABLE LIENS

The chancellor imposed statutory liens pursuant to Ark. Stat. Ann. § § 51 -701 — 51-714 (Repl. 1971) for all but one of the claimants. The court found that those claimants filed affidavits for lien as required by Arkansas law within the time and manner required by law, adequately describing the land, and attaching statements of account to the liens. We disagree and dissolve the liens.

Arkansas Stat. Ann. § 51-608.1 (Supp. 1985) provides that no lien may be acquired under the applicable statutes unless the owner or his authorized agent has received a copy of notice of an intent to file a lien prior to the furnishing of the material. All the claimants contracted directly with Massey, who was neither an owner of the leasehold, nor an authorized agent of the owner. At all times while work was being performed, Crystal was the owner of the leasehold. No notice was ever given to Crystal or to Crystal’s authorized agent, Dews. Our lien statutes are strictly construed since they provide an extraordinary remedy. Valley Metal Works, Inc. v. A.O. Smith-Inland, Inc., 264 Ark. 341, 572 S.W.2d 138 (1978). The liens, therefore, were not properly perfected.

The equitable liens upon all funds held by any purchaser of the oil or gas produced from the well also must fail. At the time the work was performed by the claimants, Dews did not have an interest in the production from the well. Now that the well is completed and is producing, Dews only receives a percentage of the profits, with the remainder going to Crystal to satisfy its interest in the well. To allow the claimants to impress a lien upon all of the funds would be, in effect, to grant them a greater interest in the well than that owned by Dews. Since a creditor with a lien upon property is entitled at a proper time to have the property sold and the proceeds used for payment of the debt, Crystal, through no fault of its own, conceivably could lose its right to profits from a producing well, should it be sold to satisfy Dews’ debts.

Furthermore, the Crystal-Dews agreement specifically provided that Dews would hold Crystal harmless from all losses and claims arising out of its operations on any well. The validity of this agreement has not been challenged, nor has Crystal been made a party to this action. Crystal’s interest in the well, therefore, is protected by its contract with Dews. Accordingly, we reverse the award of equitable liens.

III. DEFAULT JUDGMENTS .

Dews filed a cross-complaint against two of the claimants, Decca Drilling Co. and Tri-State, on April 14, 1983. The companies were served on April 14 and April 19, respectively. Decca answered on May 23,1983 (39 days later) and Tri-State answered on January 11, 1984 (266 days later). Dews filed motions to strike the answers and for default judgments since they were not filed within 30 days of service. Ark. R. Civ. P. Rule 12(a). The trial court denied the motions stating that the answers filed by the other claimants inured to their benefit. Dews claims he is entitled to a defaült judgment as to those two companies.

The trial court was following the Court of Appeals’ decision in Firestone Tire & Rubber Co. v. Little, 269 Ark. 636, 599 S.W.2d 756 (Ark. App. 1980) which held that a default judgment should not be granted based on an untimely answer when an action is against several defendants jointly and the defense interposed by an answering defendant is not personal to him but is common to himself and non-answering defendants. Here, all of the claimants are seeking compensation from Dews for work performed on the same well and under the same theories. An answer filed by one party would be common to all parties in a similar position. The trial court’s ruling was correct.

IV. WINGO ACT

For his final point, Dews claims that the Wingo Act, Ark. Stat. Ann. §§ 64-1201 — 64-1202 (Repl. 1980) was not complied with by four of the claimants and their claims were therefore barred. The act provides that every foreign corporation doing business in this state shall file its articles of incorporation in the secretary of state’s office. § 64-1201. Failure to comply with this provision by a company who does business in this state prohibits the company from making any contract in this state which can be enforced by it in law or equity. § 64-1202.

Four of the claimants did not register with the secretary of state. Nevertheless, the judgments against Dews on behalf of these companies are valid. The Wingo Act prevents an unregistered foreign corporation from enforcing its contracts. The relief being awarded the appellees, however, is restitutionary in nature and is based upon the theory of quasi-contract. Any contract that might have existed in this case was between the companies and Massey, not Dews. Here, damages are being awarded against Dews because he is the party that has been unjustly enriched by the services performed by appellees. Such a recovery when based upon unjust enrichment does not involve the enforcement of a contract. Dobbs, Handbook on the Law of Remedies, § 4.2 p. 237 (1973). This parallels our previous cases where we have held that an unregistered or unlicensed foreign corporation may bring suit to protect its property as long as the suit does not unavoidably involve the enforcement of a prohibited contract. See, e.g., Ark. Airmotive Div. of Currey Aerial Sprayers, Inc. v. Ark. Aviation Sales, Inc., 232 Ark. 354, 335 S.W.2d 813 (1960). A corporation’s failure to qualify to do business should not enable third persons to misappropriate its property with impunity. Id. Accordingly, such foreign corporations are permitted to maintain restitution suits, Id.; C.B. International, Inc. v. Cook, 659 F.2d 862 (8th Cir. 1981), and appellees are entitled to judgment on the theory of quasi-contract. The Wingo Act does not apply under these circumstances.

V. CROSS-APPEAL

Analytical Logging, Inc., a Louisiana company hired to do the mudlogging on the well, raises three points in its cross-appeal. First, it argues that the contract was entered into in Louisiana and that, therefore, matters bearing on the obligations of the contract are to be determined by Louisiana law. Analytical’s claim in this lawsuit is based on the court’s finding that a quasi-contract existed between the claimants and Dews. No express contract was entered into by Dews with any of the companies. Since the acts upon which the finding of quasi-contract is based took place in Arkansas, the law of this state governs.

Analytical’s second argument concerns attorney’s fees and need not be addressed since it is based on a Louisiana statute.

For its final point on cross-appeal, Analytical seeks punitive damages for Dews’ willful or malicious conduct. Punitive damages are not ordinarily recoverable for breach of contract and to support such a claim there must be a showing of a willful or malicious act in connection with a contract. McClellan v. Brown, 276 Ark. 28, 632 S.W.2d 406 (1982), rehearing denied. A bare allegation of fraud which results in monetary loss does not justify punitive damages. Id. We do not find that Dews’ conduct rises to the level of willful .or malicious and, therefore, an award of punitive damages is not justified.

Affirmed in part; reversed in part.

Purtle, J., not participating.


text:
    STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. Sandra G. SIMS, Individually and as Mother and Next Friend of Daryl Ray COOK, a Minor
    85-314
    708 S.W.2d 72
    Supreme Court of Arkansas
    Opinion delivered April 21, 1986

      Roy, Mashburn & Lambert, for appellant.

      Bassett Law Firm, by: William Robert Still, Jr., for appellees.
   Jack Holt, Jr., Chief Justice.

An issue of first impression in Arkansas is presented by this case. The court is being asked to decide whether an automobile insurance carrier may, by policy language, set-off its medical payments, made on behalf of its insured to a third party, against its payment for the same insured to the injured party of the policy limit for bodily injury. The trial court held that the provision allowing such a set-off was void as against public policy since the set-off would effectively reduce the stated policy limits. It is from that decision that the insurance company brings this appeal. Our jurisdiction is pursuant to Sup. Ct. R. 29(l)(c).

The facts giving rise to this cause of action are as follows. Appellee, Daryl Ray Cook, was riding as a passenger in a vehicle owned by Nancy J. Schippers and driven by Mrs. Schippers’ son, Kent Clary, with her permission and consent. The vehicle was involved in an accident and Cook was seriously injured. At the time of the accident, the vehicle was insured by State Farm Mutual Insurance Company, the appellant. Following the accident, Cook, through his mother, Sandra Sims, filed suit against Clary and Mrs. Schippers. That case was settled for $25,000, the policy limits for bodily injury liability.

Subsequently, Mrs. Sims and Cook made demand upon appellant for payment of $5,000 under the medical pay provisions of the same policy. State Farm refused to pay, contending the appellees are entitled to no further payment in light of the $25,000 already paid. This suit was then filed. The parties submitted stipulated facts and briefs to the trial court and oral arguments were held. The trial court found the provision of the policy authorizing the set-off void, and awarded appellees the $5,000.

The front of the insurance policy states that the following limits of liability are provided: “A-LIABILITY, Bodily Injury, Each Person $25,000” and “C-MEDICAL PAYMENTS, Each Person $5,000”. Liability limits for property damage and for uninsured motor vehicles are also listed. Separate premiums are paid for each type of coverage. The set-off provision at issue here provides:

MEDICAL EXPENSES
We will pay reasonable medical expenses, for bodily injury caused by accident, for services furnished within two years of the date of the accident. . .
Any payment shall be applied toward the settlement of a claim or payment of a money judgment for bodily injury against any insured under the liability coverage.

The $25,000 limit on bodily injury liability is mandated by a provision of the Motor Vehicle Safety Responsibility Act, Ark. Stat. Ann. § 75-1427 (Supp. 1985) which states that a policy of insurance must provide no less than $25,000 in coverage because of bodily injury or death. A separate statute, Ark. Stat. Ann. § 66-40i4 (Supp. 1985), requires every automobile liability insurance policy to offer minimum medical and hospital benefits up to an aggregate of $5,000 per person without regard to fault. Appellant claims its right of set-off is authorized by Ark. Stat. Ann. § 66-4019 (Repl. 1980) which reads:

Whenever a recipient of Section 1(a) and (b) [§ 66-4014(a) and (b)] benefits recovers in tort for injury, either by settlement or judgment, the insurer paying such benefits has a right of reimbursement and credit out of the tort recovery or settlement, less the cost of collection, as hereinafter defined. All costs of collection thereof shall be assessed against insurer and insured in the proportion each benefits from such recovery. Said insurer shall have a lien upon said recovery to the extent of its said benefit payments.

While it is a correct statement of law that an insurance provision which is in accordance with a statute cannot be contrary to public policy, MFA Mutual Ins. Co. v. Van Driesum, 282 Ark. 24, 665 S.W.2d 286 (1984), the appellant’s policy is not in accord with § 66-4019. Appellant is seeking a right of set-off against its own insured. In a more typical case, another insurance company has paid the injured party, or the injured party’s own insurance company has made payments, and the tortfeasor’s insurance company wants to subrogate or setoff its payment against the one already made. Here, both payments are being made by the tortfeasor to the injured party. That § 66-4019 was not intended to apply in this situation, is evidenced by the language of the statute where it provides that the insurer has a right of reimbursement and credit less the cost of collection. There is no cost of collection if the insurance company is collecting from its own insured. A cost of collection only arises in the situation described above, where subrogation is sought against payments made from another source. See O’Bar, Adm’x v. MFA Mutual Ins. Co., 275 Ark. 247, 628 S.W.2d 561 (1982).

Furthermore, to allow the requested set-off would in effect abrogate § 75-1427, by reducing the required limit of $25,000 to $20,000. As the trial court noted, separate protective coverage is provided by § 75-1427 and § 66-4014 and neither may be diminished or contracted away by a provision in the insurance contract.

Our decision in Heiss, Ex’x v. Aetna Cas. & Sur. Co., 250 Ark. 474, 465 S.W.2d 699 (1971) is instructive although it involves application of a different statute. In Heiss two men were killed in a collision involving an uninsured motorist. One of the men had an insurance policy with Aetna Casualty and Surety Co. The insurance company contended it was entitled to deduct the medical payments made from the $20,000 limit contained in the uninsured motorist section of the policy. Separate premiums were paid for the uninsured motorist protection and the medical payments. This court took the position that the deduction for medical expenses was in derogation of the explicit requirements of the uninsured motorist statute and financial responsibility laws, §§ 64-4003 and 75-1427, which establish the limits of payment for injuries or death.

In so holding, we relied on Bacchus v. Farmers Ins. Group Exchange, 475 P.2d 264 (Ariz. 1970) where the court condemned the procedure of reducing the amount received under the uninsured motorist provision by the amount already paid under the medical payments clause as follows:

Permitting offsets of any type would allow insurers, by contract, to alter the provisions of the statute and to escape all or part of the liability, which the Legislature intended they should provide. . .
By our statute against financially irresponsible drivers a minimum coverage must be made available to insureds. . . The fact that the motorist sees fit to clothe himself with other insurance protection and pays a premium therefor — such as medical payments — cannot alter the mandatory safeguards that the Legislature considers necessary for the well being of the citizen-drivers of our state. More particularly, a policy provision which the insured considers to be additional protection and for which he pays a premium with such extra protection in mind cannot be transposed by the insurer into a reduction of the mandatory minimum coverage.

Heiss was decided prior to the enactment of § 66-4019 setting out subrogation rights. Its theory is still sound, however, in so far as it prohibits an insurance company from setting off one payment under its policy against another one under the same policy. In a situation involving payments from more than one source, a right of reimbursement and credit is allowed pursuant to § 66-4019.

Accordingly, the trial court’s award of $5,000 is affirmed.

Purtle, J., not participating.