author: Lyle Brown, Justice.

text:
    Dorothy EDGIL v. Roy Russell RAGSDILL Sr.
    74-65
    511 S.W. 2d 625
    Opinion delivered July 15, 1974

      Sarver <2? Scott by Bob Scott, for appellant.

      Gibson, Gibson & Gibson, Howell, Price, Howell & Barron by F. J. Howell, Jr., for appellee.
   Lyle Brown, Justice.

There are two issues on this appeal. The chancellor held that upon the death of the parent having custody of a minor child the court lost jurisdiction to make further orders relative to custody. The other issue stems from the denial of an attorney’s fee. In that connection the wife filed a second petition for divorce and before summons was served on the husband, the wife died. The wife’s attorney filed a petition for attorney’s fee for services respecting the second petition and the court held that its jurisdiction terminated with the death of the wife.

On December 12, 1972, the chancellor entered a decree on the petition of Roy Russell Ragsdill, Sr., and the counterclaim of Martha Kathryn Ragsdill. The decree denied a divorce to either party. Custody of a minor child, James Thomas Ragsdill, a mongoloid, was awarded the mother together with support money. The wife was given possession of the homestead in Little Rock, along with household furnishings. The wife’s attorney was awarded a fee of $1,000 plus $231.30 costs incurred.

One year later the wife filed a new petition for divorce in the same case alleging adultery. She died in about ten days after the filing. Shortly thereafter, Dorothy Edgil, appellant here, filed a petition to intervene, seeking custody of the then minor child and support money. The petitioner is an aunt of the child. The chancellor dismissed the petition to intervene on the ground that the court lost jurisdiction upon the death of the mother. Appellant’s single point for reversal is the alleged error in dismissing her petition.

The other principal point concerns the denial of an attorney’s fee to attorney Bob Scott. Shortly after the death of Martha Kathryn Ragsdill, Mr. Scott filed his petition for an attorney’s fee. The petition recited that Mr. Scott represented the mother continuously since the entry of the decree in 1972 until her death in 1973; that he spent a considerable amount of time in consultation with the mother; and that he had spent considerable funds for a private investigator preparatory to filing the second petition for divorce on grounds of adultery. The court denied that petition on the theory that it lost jurisdiction upon the death of Martha Kathryn Ragsdill.

Upon the death of the custodial parent we conclude that the chancery court lost jurisdiction to make further orders in the divorce and custody case concerning the custody of the child. Appellant filed her petition in the case styled Ragsdill v. Ragsdill, which was the divorce and custody case. We gather from undisputed statements in the briefs that Dorothy Edgil is a resident of Alabama; that the mongoloid child is living with her; and that Roy Russell Ragsdill, Sr., is a resident of Pulaski County. The action in which Dorothy Edgil filed her petition was in a suit in Jefferson County. The facts recited establish a practical reason for the law which we follow in disposing of the first point.

The nearest case in point cited by appellant is Brown v. Brown, 218 Ark. 624, 238 S.W. 2d 482 (1951). In fact Brown is cited by both parties to support their respective positions. In that case the mother was granted custody of the three minor children. Upon her death the husband sought modification of the custody award. The trial court entertained the petition and made an award, dividing the custody, two children to the father and the youngest child to an uncle and aunt. We reversed, placing custody of the three children in the father. It is clear to us in Brown that the jurisdiction of the court over the father’s petition for modification was not challenged. In the case before us, jurisdiction of the trial court was attacked on the specific ground that the trial court had lost jurisdiction upon the death of the custodial parent. In the case before us, and particularly in the light of the undisputed facts we have recited, we think the majority rule as stated in 39 ALR 2d, p. 278, § 7 (a) is decisive. There it is stated that when the custody of children is awarded in a divorce and custody decree and the custodial parent dies, “the custody provisions of the decree ordinarily come to an end, of necessity and because intended to operate only as between the parents (see § 3, supra), [and] it would seem that ordinarily upon such death occuring the jurisdiction of the divorce court to provide, in the divorce suit, for the custody of the children must also terminate. In fact that clearly is the majority view, notwithstanding the usual statutory provisions to the effect that the divorce court may change its custody provisions from time to time as circumstances require.”

Nothing we have said would prevent the filing of a custody proceeding in a court of competent jurisdiction.

In respect to the second point — the application for a fee by the attorney for the deceased wife — we must hold that the chancellor was correct in denying the fee on the ground that it had lost jurisdiction. 27A C.J.S. Divorce § 226. It should be remembered that the wife’s second petition for divorce had not proceeded beyond the filing of a complaint and a general denial. In fact there was no service of summons on the husband until after the wife’s death. In support of the general statement of law from C.J.S. we find such cases as Greer v. Greer, (Col. 1942), 130 P. 2d 1050; Sutphen v. Sutphen, (N.J. 1928), 142 A. 817; Rosenhouse v. Ever, (Fla. 1963), 150 So. 2d 732; Fitzgerald v. Williams, (D.C. 1961), 170 A. 2d 777.

Affirmed.


source: Caselaw Access Project

author: John A. Fogleman, Justice. John A. Fogleman, Justice. Conley Byrd, Justice,

license: Public Domain

text:
    Walter SKELTON, Assistant Director of Revenues v. B. C. LAND COMPANY, INC.
    74-67
    513 S.W. 2d 919
    Opinion delivered July 15, 1974
    [Rehearing denied October 14, 1974. Supplemental opinion P. 967-A.]

      Walter Skelton, Karl D. Glass, John F. Gautney, Terry Little, J. R. Nash, Harlin Ray Hodnett, for appellant.

      Gordon, Gordon & Eddy, for appellee.
   John A. Fogleman, Justice.

Appellant made an assessment against appellee of $18,474.08 for income taxes for 1969 and 1970 because of his disallowance of a net operating loss carryover of B. C. Gin Company claimed by B. C. Land Company, Inc., the survivor in a merger of the two corporations, which took place right after July 31, 1969. Thereafter appellee brought this suit to have the assessment set aside. The chancery court held that appellee was entitled to the net operating loss carryover and set the assessment aside. We reverse.

The facts are undisputed. B. C. Land Company, Inc., B. C. Gin Company and B. C. Seed & Mercantile Company were all corporations. The Land Company was incorporated in 1917 and the Gin Company in 1937. J. G. Hoyt, Sr. owned all the stock in both corporations. J. G. Hoyt, Jr. became the sole stockholder of the land company in 1958, by acquiring the interest of a brother, after their father’s death. He owned over 95% of the stock at the time of the merger, having given a few shares to his son. At the time of the merger the land company owned about 7,000 acres of land, which was its principal asset. Prior to the merger this corporation’s principal function was the production of crops on this land, most of which was rented to tenants who paid crop share rentals. The gin company operated several gins. B. C. Seed & Mercantile Company conducted a grain elevator and warehousing operation and processed and stored soybeans and other grains produced on the farm land. All these operations were supported by the 7,000 acres of land. There was a two to three thousand acre cotton allotment on the land company lands. It is not unusual for the owner of 2,000 acres to own a gin in connection with his farming operation and most plantation owners that appellee’s vice president and accountant knew had one or two gins.

Prior to the merger, the principal office of all three corporations was in one location in Leachville, where books of account of all three operations were kept by Mrs. Winnie Pierce. There was no change in the administrative setup after the merger. After the merger, a separate set of records for the gin operation was kept in order that the profitability of the gins could be known.

At the time of the merger, B. C. Gin Company had unused net operating loss carryovers of $53,000 for its fiscal year ending July 31, 1968 and $295,518 for the year ending July 31, 1969. These were claimed as a deduction on the income tax returns of B. C. Land Company for the calendar year of 1969 and subsequent years. The books on the gin operation reflected that the profits thereon after the merger would have been more than enough to absorb the carryovers had the gin company continued in existence. Due to a subsequent merger, there is now only one corporation instead of three, with Hoyt, Jr. the only stockholder in the family enterprise except for his son.

Prior to the mergers, each of the corporations was utilized for a different purpose. Each of their purposes was considered by appellee, according to its vice president and certified public accountant (the only witness who testified), as a different activity in one farming operation. The avowed purpose of having had three separate corporations was to take advantage of federal income tax laws under which the first $25,000 in taxable income of each corporation was subject to a very low federal income tax rate. The merger resulted from the desire of the principal owner of the three corporations to simplify his business operations. Appellant considers the two corporations involved here as being engaged in two different types of business, i.e., farming on the one hand, and the ginning of cotton on the other. He took the position that the business of the survivor had been altered, enlarged and materially affected by the merger. There is no evidence that the land company had ever engaged in ginning cotton or that the gin company had ever engaged in the growing or production of crops. The merger with the seed and mercantile company has no bearing on the issue here.

We have no statute allowing the survivor in a corporate merger to take advantage of a net operating loss carryover of a merged corporation. The only authority in this state is found in the case of Bracy Development Company v. Milam, 252 Ark. 268, 478 S.W. 2d 765. The only significant difference in that case, where we held that the survivor was entitled to the benefit of such a deduction and this one, was that there was no question about the two corporations in Bracy having been engaged primarily in the same business. This primary business was construction of public housing projects. We think this case is governed by what we said in Bracy.

Inasmuch as appellee relies to some extent upon cases we reviewed in Bracy, we will not undertake a complete treatment of these cases. We did extensively review many supporting the opposing views in that case and reached the following conclusions:

We think the better procedure, however, is that followed by the North Carolina court where the “separate taxable entity” theory is not rejected in a proper case, but the “continuity of business enterprise” theory is followed in a proper case. We disagree with the chancellor in the case at bar and hold that the “continuity of business enterprise” theory should apply under the facts of this case.

In reaching that conclusion (there being no specific statute on the subject), we expressed a decided preference for the treatment of the question by the North Carolina courts, which do not reject the “separate entity” theory, under which appellee would be totally barred from claiming the loss in any event. Consequently, this case turns upon whether the merger resulted in a continuity of business enterprise.

We found such a continuity in Bracy, where both the constituent corporations had engaged, prior to merger in the same type, if not identical, business. We made it quite clear that the deduction was allowable in the Bracy case because, following the statutory merger, the business of the survivor “was not altered, enlarged, or materially affected by the merger but that it constituted, or at least included a continuation, of the business enterprise of [the merged corporation] but on a much sounder financial basis, and almost to the exclusion of separate entities.” If it were not for the qualification that the business of the survivor was not altered, enlarged or materially affected, we might well say the chancellor was not in error in drawing an inference from the facts in this case that the remaining criteria of Bracy had been met. But we cannot say he was warranted in reaching the conclusion that, on the evidence presented, the business of B. C. Land Company was not altered, enlarged or materially affected.

In viewing this matter, we must say that appellee failed .to meet its burden of proof in this respect. Although we have never expressly held that the taxpayer has the burden of showing his entitlement to a tax deduction, we have many times held that one (particularly a plaintiff) claiming an exemption from taxation bears the burden of proving clearly that he is entitled to it and to bring himself clearly within the terms of such conditions as may be imposed by statute. Hervey v. Southern Wooden Box, 253 Ark. 290, 486 S.W. 2d 65; Hervey v. International Paper Co., 252 Ark. 913, 483 S.W. 2d 199; C.J.C. Corporation v. Cheney, 239 Ark. 541, 390 S.W. 2d 437; Missouri Pacific Hospital Assn. v. Pulaski County, 211 Ark. 9, 199 S.W. 2d 329: Wiseman v. Town of Omaha, 192 Ark. 718, 94 S.W. 2d 116; Wiseman v. Madison Cadillac Co., 191 Ark. 1021, 88 S.W. 2d 1007, 103 A.L.R. 1208. Reason and the decided weight of authority dictate the application of the same rule to one claiming a deduction, since both exemptions and deductions are privileges allowed merely as matters of legislative grace. White v. United States, 305 U.S. 281, 59 S. Ct. 179, 83 L. Ed. 172 (1938); Palmer v. Commission of Revenue and Taxation, 156 Kan. 690, 135 P. 2d 899 (1943); Christopher v. James, 122 W. Va. 665, 12 S.E. 2d 813 (1941); Fennell v. South Carolina Tax Commission, 233 S.C. 43, 103 S.E. 2d 208 (1958); Arizona State Tax Commission v. Phelps Dodge Corp., 53 Ariz. 252, 88 P. 2d 79, 121 A.L.R. 1458 (1939); Brosnan v. Undercofler, 111 Ga. App. 95, 140 S.E. 2d 517 (1965); 85 C.J.S. 772, Taxation Sec. 1099; 71 Am. Jur. 2d 804, State and Local Taxation Sec. 518. See also Commissioner of Corporation and Taxation v. Adams, 316 Mass. 484, 55 N.E. 2d 697 (1944); Southern Soya Corporation v. Wasson, 252 S.C. 484, 167 S.E. 2d 311 (1969). Deductions from gross income in income tax statutes are in the nature of exemptions, so the general rule as to the burden on the taxpayer is applicable. Bigelow v. Reeves, 285 Ky. 831, 149 S.W. 2d 499 (1941); Tupelo Garment Co. v. State Tax Commission, 178 Miss. 730, 173 So. 656 (1937). Although an income tax case was not involved, we have tacitly accepted the idea that a deduction is in the nature of an exemption in the application of the rule as to the burden on the taxpayer. See Bangs v. McCarroll, 202 Ark. 103, 149 S.W. 2d 53. This is the burden the taxpayer had in this case. Its proof falls far short of a showing that the addition of the business of ginning cotton did not alter, enlarge or materially affect the business of B.C. Land Company. Appellant takes the position that the business was not affected because both operations constituted farming. The ordinary and commonly accepted meaning of the word farming is the act or business of cultivating land (Webster’s New International Dictionary, 2d Ed); the business of operating a farm (The Random House Dictionary of the English Language). Be that as it may, appellee had never engaged in the ginning of cotton prior to the merger and it seems to us that the addition of this operation materially extended its business, which had previously consisted only of the production of crops.

Since we preferred the “continuity of business enterprise” concept in Bracy as expressed in North Carolina in Good Will Distributors (Northern) v. Currie, 251 N.C. 120, 110 S.E. 2d 880, we should look to that case in evaluating the evidence here. When we do, the conclusion that appellee is not entitled to the deduction under the evidence here seems inescapable. In that case the three merged corporations (of which the appellant there was one) had all been engaged in the distribution of books through independent contractors and franchise dealers. The kind of business was identical, but the operations were in different territories with some overlapping. After the merger the same character of business was continued in the same territories. The North Carolina court said there was a continuity of business enterprise when the income producing business has not been altered, enlarged, or materially affected by the merger. It illustrated the meaning by discussing two cases. In the first, Newmarket Manufacturing Co. v. U.S., 233 F 2d 493 (1 Cir., 1956) there was a merger of a parent corporation into its wholly owned subsidiary, created for that purpose. The subsidiary had no business until after the merger. Therefore, the court, in that case, held that the income producing business was unchanged by the merger because in substance there was no change in business but only a change of name. In the second, Industrial Cotton Mills Co. v. Commissioner, 61 F 2d 291 (4 Cir., 1932), a corporation operating a textile manufacturing business was merged into a holding company organized to avoid a financial disaster for the merged corporation by inducing its creditors to accept stock of the holding company in lieu of their claims. Post-merger deduction of the losses of the manufacturing corporation from the post-merger income of the resulting corporation was allowed. Both cases are clear illustrations of the meaning of “continuity of business enterprise.” While we found that meaning sufficiently broad to embrace the Bracy merger, we cannot expand it to encompass the B. C. merger.

It is interesting to note that in Industrial Cotton Mills the court of appeals of the Fourth Circuit said that if the resulting corporation had owned any business or property other than the stock and obligations of the constituent corporation, there would be reason for denying the resulting corporation the right to deduct such loss from its income. It is very significant that the Good Will court reversed the trial court’s holding on stipulated facts that there was a continuity of business enterprise. That court said:

The facts in this case are analogous with those in the Koehler case. Before the merger the three corporations operated in separate territories, though somewhat overlapping, made separate incomes and filed separate income tax returns. By virtue of the merger a larger and more expanded business came into being and included all of the former income producing businesses. There was no continuity of the business of either of the constituent corporations. By reason of the merger a new and more extensive enterprise has emerged. This new enterprise did not suffer the loss and cannot claim a deduction therefor.
As was said in the former opinion of this Court in the instant case, the enactment of loss carry-over legislation by the General Assembly was purely a matter of grace. The provision should not be “construed to give a ‘windfall’ to a taxpayer who happens to have merged with other corporations.” Its purpose “is not to give a merged taxpayer a tax advantage over others who have not merged.” Lisbon Shops, Inc. v. Koehler, supra.

Since we cannot agree that appellee has brought itself within the conditions essential to allowance of the net operating loss carryover of B. C. Gin Company, the decree of the chancery court is reversed and appellee’s action is dismissed.

Byrd and Holt, JJ., dissent.

Supplemental Opinion on Denial of Rehearing delivered October 14, 1974

1. Taxation — deductions for losses — continuity of business- enterprise. — There is a continuity of business enterprise with respect to the right of a new corporation to deduct from post-merger income the economic loss of its constituent corporation when the income producing business has not been altered, enlarged or materially affected by the merger.

2. Taxation — deductions for losses — scope of statute. — Surviving corporation could not claim the operating loss carryover of the submerged corporation as an income tax deduction where it failed to bring itself within the statutory provisions authorizing it.

John A. Fogleman, Justice.

Appellee, on petition for rehearing, aptly summarizes its very forceful argument thereon in stating its point to be relied on thus:

A rehearing should be granted and the holding of the lower court affirmed because Lisbon Shops v. Koehler, and the cases following that decision hold that the losses of a loss corporation, which has merged into another corporation, may be carried over and deducted, for income tax purposes, if the “bundle of assets” of the loss corporation produces profits in post merger years from a continuation of the business that the loss corporation was engaged in.

In its brief, great reliance is placed by appellee upon language of the opinion in Lisbon v. Koehler, 353 U.S. 382, 77 S. Ct. 990, 1 L. Ed. 2d 924 (1957), partly because some of the reasoning in that opinion was relied upon by the North Carolina Supreme Court in Good Will Distributors (Northern) v. Currie, 251 N.C. 120, 110 S.E. 2d 880 (1959). In Good Will, the concept of “continuity of business enterprise” was applied in determining when the “operating loss carryover” of a submerged corporation could be taken by the surviving corporation as an income tax deduction. Appellant also argues, however, that both Newmarket Manufacturing Co. v. U.S., 233 F. 2d 493 (1 Cir. 1956) and Industrial Cotton Mills Co. v. Commissioner, 61 F. 2d 291 (4 Cir. 1932) discussed by the Good Will court and by us in our original opinion can be distinguished and that we should allow B. C. Land Company to take the deduction of the “operating loss carryover” of B. C. Gin Co. by following other progeny of Koehler, some of which had been cited by the parties in Bracy Development Company v. Milam, 252 Ark. 268, 478 S.W. 2d 765. Appellee, in its original brief, first argued that the “continuity of business enterprise” doctrine mandated the allowance of the deduction because premerger activities of B. C. Land Co. and B. C. Gin Co. were related activities of a common farming enterprise. Appellee also argued, however, that not only was the business of the two merged corporations substantially identical but the “continuity of business enterprise” theory required that the deduction be allowed if the income against which the premerger loss was offset was substantially the same operation which suffered the loss. While our emphasis in the original opinion was directed toward the first argument, we rejected both and reject them now. Furthermore, we do not agree with appellee that both Koehler and Good Will would have been decided favorably to the taxpayer if the same operations which had been conducted by loss corporations had generated profits in postmerger years to offset the losses claimed. And lastly, we do not consider that we should look only to the ginning operation to see whether that business was altered, enlarged or materially affected by the merger, as appellee suggests.

In denying the petition for rehearing we need not indulge in any attempt to distinguish the cases cited in appellee’s brief or to analyze the rationale of Koehler. This is because our decided preference for the North Carolina treatment of the problem expressed in Bracy foreclosed those considerations. As we said in our original opinion in the instant case, our result was governed by what we said in Bracy. We did not say that it was governed by the result in Bracy. There we held, substantially, that the deduction was allowable because of the coexistence of four standards:

1. Common stock ownerships prior to merger.
2. The merged corporation and the survivor were engaged in the same type, if not identical, business.
3. The deduction would have been available to the merged corporation.
4. The business of the survivor was not altered, enlarged or affected by the merger; it constituted, or at least included a continuation of the business enterprise of the merged corporation on a much sounder financial basis.

We did not say all four of these standards must be met in every case; however, we did take the position that the “separate taxable entity” theory followed by the Wisconsin courts would be applicable in a proper case and that the “continuity of business enterprise” theory would be followed in a proper case. We applied our interpretation of the North Carolina cases both in our original opinion and in Bracy. Our reexamination of this interpretation leads us to the conclusion that it was correct. Because of our deliberate choice in Bracy to follow the treatment of the question by the North Carolina courts, we have confined our re-examination to the decisions of those courts.

In the principal case (Good Will) the rule was stated thus:

Where there has been a merger of corporations, the resulting corporation may not deduct from its post-merger net income the pre-merger economic loss of its constituent corporations unless there is a “continuity of business enterprise” as above defined.

The argument between appellee and appellant arises from differences as to how “continuity of business enterprise” was “above defined.” The Good Will court said that the expression had a definite and well-defined meaning, i.e.:

There is a continuity of business enterprise when the income producing business has not been altered, enlarged or materially affected by the merger.

The North Carolina court then illustrated by reference to two cases. In the first (Newmarket Manufacturing Co. v. U.S., supra) the court said that, in substance, there was no change in business, only a change in name. The surviving corporation, prior to the merger, owned no property (except for the proceeds of the issuance of its entire capital stock to the subsequently merged manufacturing corporation) and engaged in no business. Consequently, said the North Carolina court, the income producing business was unchanged by the merger.

In the other case (Industrial Mills) a manufacturing corporation on the brink of financial disaster was merged into a holding company organized to rescue the first corporation by inducing its creditors to accept stock. Premerger losses of the merged corporation were allowed as a deduction. The North Carolina court quoted from this case as follows:

If it had owned any business or any property other than the stock and obligations of the constituent corporation, there would be reason for denying to the corporation resulting from the merger the right to deduct such loss from its income.

Our interpretation of Good Will and our holding that the North Carolina rule would not permit the deduction of B. C. Gin Company’s operating losses are clearly sustained by Holly Farms Poultry Industries, Inc. v. Clayton, 9 N.C. App. 345, 176 S.E. 2d 367 (1970), cited in Bracy but not in our original opinion in this case. Holly Farms was decided in reliance upon Good Will and certiorari was denied by the North Carolina Supreme Court. In order that the effect of that case and the proper application of the North Carolina rule be clearly understood, we fully state our analysis of the opinion of the North Carolina Court of Appeals, viz:

Holly Farms, a N.C. corporation, carried on an integrated poultry operation and was the parent of a large number of separate corporate entities, all of which were engaged in the poultry industry or in a business directly connected therewith. The purpose was to so operate that one corporation could manage and control the production of poultry from the breeder hens through the hatchery, feed mills, broiler farms, feed out operations, processing plants, and transportation to retail outlets. Holly Farms acquired, either by direct merger into it or by merger into a wholly-owned subsidiary and then into it, 32 corporations. Among them were:
Mocksville Feed Blue Ridge
Lovette Poultry* Davie Poultry*
Lovette Feed
Blue Ridge and Lovette Feed were merged into Lovette Poultry, which was later merged into Mocksville Feed. Still later Davie Poultry was also merged into Mocksville Feed.
Prior to merger, Lovette Poultry had an economic net loss of over $600,000, of which approximately $100,-000 was attributable to Lovette Feed. The premerger businesses conducted by those corporations (primarily in two counties) were:
Mocksville Feed — manufacture of feed, principally poultry feed, 90% of which was sold through Lovette Poultry and Davie.
Lovette Poultry — a feed out operation by furnishing feed (Mocksville) to farmers to enable them to grow chickens to a weight suitable for the processing plant.
Davie Poultry — in addition to a business similar to that of Lovette Poultry, an experimental farm for the benefit of Mocksville Feed by which Mocksville could conduct experiments with new formulae and feeds.
Subsequent to the mergers the same type and kind of businesses were carried on, in the same manner and with the same management, officers and personnel and the mergers did not effect any change in administration, operation or ownership of either of the three corporations. On its income tax return for the year of the mergers and the succeeding year Mocksville Peed claimed the net operating loss of Lovette as a deduction. Mocksville also carried forward and claimed the net operating loss of Davie.

The court of appeals reversed the trial court’s holding that there was a continuity of business enterprise and that Mocksville was, for this reason, entitled to the deduction. It held:

1. The allowance of a deduction is a matter of legislative grace.
2. One claiming the deduction must bring himself within the provisions of the statute authorizing it.
3. Generally the deduction may be taken only by the taxpayer to whom it accrues.
4. The facts did not support the trial court's conclusion, viz:
a. Before merger Mocksville (B. C. Land Co.) had a net worth of $2,057,204.94 and was engaged in the manufacture of feeds. After the merger of Lovett Poultry (B. C. Gin Co.) it had a net worth of $3,017,-414.78, having added Lovette s net worth of $960,-209.84, and was engaged not only in the manufacture of feed (farming the land it owned) but was also engaged in the business of feeding out chickens (ginning cotton); thus, the income producing business was substantially enlarged and materially affected by the increase.
b. The subsequent merger of Davie Poultry (B. C. Gin Co.) into Mocksville Feed further increased the net worth of Mocksville (B. C. Land Co.) by $76,-936.66, the net worth of Davie, and added an experimental farm and another feed-out operation (cotton ginning) to the combined operation.
c. Each merger both substantially enlarged and materially affected the income producing business of the surviving corporation (B. C. Land Co.).
5.To find any continuity of business enterprises would require that the three businesses be considered as though they had always been one or that the mergers be ignored.
6. Each merger so substantially enlarged and materially affected the income producing business that there was no continuity of business enterprise within the definition laid down in Good Will.
7. The fact that there was a vertical merger, i.e., the several merged corporations were doing different jobs in one continuous chain of processing (in Holly Farms and here) and the merger in Good Will was horizontal, i.e., each of the corporations involved was doing basically the same job, is a distinction without a difference.
8. The fact that the mergers were made in pursuance to an overall plan to bring into being an integrated operation, and not for tax avoidance purposes is not determinative of the question.
(Parenthetical matter has been inserted in order to clearly indicate the close analogy.)

This is the only “post-Cotw/ Will" decision we have found in North Carolina. We find no case reaching a different result in applying the North Carolina rule. Clearly, the application of the North Carolina rule we used in Bracy mandates the result we reached and to which we adhere.

Holt, J., dissents.

Conley Byrd, Justice,

dissenting. The suggestion that we married all of the interpretations given by North Carolina when we quoted from one of its cases in Bracy Development Company v. Milam, 252 Ark. 268, 478 S.W. 2d 765 (1972), greatly disturbs me. If the majority sticks to that position, then I will hereafter be noted as concurring in all opinions that quote cases from other jurisdictions because I cannot possibly research what every jurisdiction has generally held on a subject and certainly cannot speculate how a foreign jurisdiction might treat a different fact situation.

Furthermore, the case of Holly Farms Poultry Industries Inc. v. Clayton, 9 N.C. App. 345, 176 S.E. 2d 367 (1970), does not support the position of the majority here. In that case there was no attempt to show that the individual business which incurred the losses before the merger earned the income. The only proof in the North Carolina case was the stipulation that, after the merger, business was carried on as usual and that the corporation resulting from the merger had an income.

The undisputed proof in the case before us is that before the merger the gin had a loss. That after the paper merger business was carried on as usual with the books for each business being kept in the same manner as before the merger and that the individual business operated by the gin had sufficient earnings after the merger to offset the losses here sought to be taken.

Consequently, since our income tax law adopted the Federal Income Tax Statute, we should follow the Federal authorities cited in appellees' brief. See Amherst Coal Company v. United States, 295 F. Supp. 421 (S.D. W. Va. 1969).

For the reas'ons stated, I would grant the rehearing.

      AU of these were wholly owned subsidiaries of Holly Farms and had identical officers and directors.


author: JOHN A. Fogleman, Justice.

text:
    WHITTEN DEVELOPMENTS, Inc. et al v. Chester AGEE
    74-80
    511 S.W. 2d 466
    Opinion delivered July 15, 1974

      Barrett, Wheatley, Smith & Deacon, for appellants.

      Gardner & Steinsiek, for appellee.
   JOHN A. Fogleman, Justice.

The sole error asserted by appellants for reversal of the decree of the chancery court rendering judgment against them on two promissory notes is the overruling of their demurrer and denial of their motion for transfer of the case to the circuit court. We find no error and affirm the decree.

Chester Agee contracted to sell Whitten Developments, Inc. two tracts of land in Craighead county for development as sub-divisions. Agee accepted two promissory notes for $56,000 each dated June 18, 1970, executed by Whitten Developments, Inc. and personally guaranteed by Lindsey Whitten. No mortgage was given by the purchaser to secure the payment of these notes and no vendor’s lien was specifically retained by Agee in the instruments evidencing the sale. The notes were payable 36 months after date, subject to an agreement which provided for payments on the principal as lots were sold from the tracts by the development company.

On February 8, 1971, Agee filed his complaint in the chancery court asking judgment on the notes, an attachment upon one of the tracts and “all other relief to which plaintiff may be entitled.” He alleged that:

He was induced to sell the lands by assurances that immediate development would result in his being paid the purchase price under the agreement to which the notes were subject; the corporation immediately after the sale borrowed $15,000 from the Mercantile Bank of Jonesboro, securing the loan by a mortgage on one of the tracts but had defaulted in the payment of that loan resulting in the filing of a foreclosure suit by the bank; appellants had never developed the lands and it appeared that the corporate defendant had schemed to secure title to the lands without paying the consideration; prepayment under the agreement had been rendered impossible; appellee was requesting the right to intervene in the foreclosure proceeding to the end that the rights of all parties in any surplus remaining after a foreclosure sale might be preserved; the corporate defendant had engaged engineers and attorneys with reference to the development of the other tract, who had obtained judgments and executions against appellants when they were not paid for their services; appellee had no adequate remedy at law and filed the action to prevent a multiplicity of actions for the parties.

Appellants filed a general denial without asking any transfer of the case to law. On June 21, 1973 appellee filed an amended and substituted complaint in which he adopted all the allegations of the original complaint praying judgment for $112,000 and $11,200 for attorney’s fees and costs of collection, less any amount to be credited by reason of his intervention in the foreclosure suit, along with “all other relief to which plaintiff may be entitled.” New service was had upon appellants, but no responsive pleading was filed until after they had been given notice the case would be tried on October 29, 1973. They then employed the attorneys who represent them on this appeal. These attorneys filed a motion for continuance on October 24, 1973, alleging their lack of opportunity to investigate the facts and the failure of appellants’ former attorney to contact them pursuant to request of appellants. This motion was granted and the case reset for November 19. 1973.

On November 9, 1973, appellants filed a demurrer alleging that the court had no jurisdiction of the subject matter of the action and that there was an adequate remedy at law. When the case came on for trial, the court overruled the demurrer and denied appellants’ oral motion to transfer.

Appellant contends that the cause of action under the amended and substituted complaint lay wholly within the jurisdiction of the law courts, and since subject matter was involved, the question could not have been waived.

Of course, the subject matter involved here is not of the type over which the equity court has no power to act, as is the case in such proceedings as the probate of a will or the trial of a tort action for personal injuries. The alleged lack of jurisdiction is wholly based upon the purported adequacy of the remedy at law. We have held that this question cannot be raised by demurrer. Reid v. Karoley, 232 Ark. 261, 337 S.W. 2d 648; Higginbotham v. Harper, 206 Ark. 210, 174 S.W. 2d 668; Columbia Compress Co. v. Reid, 160 Ark. 436, 254 S.W. 825; Sledge-Norfleet Co. v. Matkins, 154 Ark. 509, 243 S.W. 289. We have also held that by failure to make timely motion to transfer, in a case of this kind, a party waives the right unless the equity court is wholly incompetent to grant the relief sought. Reid v. Karoley, supra; McIlvenny v. Horton, 227 Ark. 826, 302 S.W. 2d 70; Hayes v. Bishop, 141 Ark. 155, 216 S.W. 298.

The notes were not due when the complaint was filed, but became due during the pendency of the litigation. Even if it could be said that the law court could have rendered judgment on the notes before they came due so that it was unnecessary to resort to equity when the complaint was first filed, or that the fact they came due after it was filed justified the filing of the motion, there was still another basis for the exercise of equity jurisdiction. In both the original complaint and the amended one, there was another basis for equitable relief. Under the allegations made by appellee, the notes were for purchase money for the real estate. The mere fact that no mortgage was given or specific vendor's lien retained to secure them, did not ipso facto deprive appellee of a vendor’s lien, as between the parties. Robertson v. American Investment Co., 170 Ark. 413, 279 S.W. 1008. Even though he did not ask foreclosure of the lien, he was, in view of his prayer for general relief in both complaints entitled to any relief in equity that would be justified upon proof of the facts alleged (Jackson v. Jackson, 253 Ark. 1033, 490 S.W. 2d 809). and in view of his coordination of both the original and amended complaint with an intervention in the bank’s foreclosure suit so that any surplus recovered thereby be credited on the purchase money judgment, there was still a basis for equity jurisdiction and a decree declaring a vendor’s lien subject to the intervening rights of third parties. Lay, Administrator v. Gaines, 130 Ark. 167, 196 S.W. 919; Keathley v. Keathley, 115 Ark. 605, 170 S.W. 564; Swan v. Benson, 31 Ark. 728. Furthermore, appellee made quite clear in his pleadings that his intervention in the foreclosure suit was for the purpose of protecting the rights of all the parties. He also clearly asked that any recovery by reason thereof should be credited, in the action now before us, upon the amount due him on the notes, in determining the amount for which judgment should be rendered. This in itself was an assertion of a vendor’s lien subject to the intervening rights of the mortgagee bank.

This facet of the case was not disposed of until the final decree rendered after the action of which appellant complains. In that decree, the chancery court directed that its Commissioner in the foreclosure suit pay to appellee the amount remaining after proper application of the proceeds of sale in that suit to be applied to the judgment in appellee’s favor in this action. Until this time, the matter was one calling upon the court for equitable relief.

Since we cannot say the action of the chancery court was error, the decree is affirmed.


author: J. Fred Jones. Justice.

text:
    RALSTON PURINA COMPANY v. A. E. DAVIS and Georgene DAVIS, His Wife; J. M. DAVIS and Lila DAVIS, His Wife; and PEOPLES BANK & TRUST COMPANY
    74-58
    511 S.W. 2d 482
    Opinion delivered July 15, 1974

      W. H. Schulze, for appellant.

      Williams & Gardner and Wright, Lindsey & Jennings by David M. Powell, for appellees.
   J. Fred Jones. Justice.

This is an appeal by Ralston Purina Company from an adverse decree of the Pope County Chancery Court in a suit filed by Ralston against A. E. Davis, et al., to set aside a conveyance of 400 acres of farmland from J. M. Davis to his son and daughter-in-law, A. E. Davis and Georgene Davis, as a fraud on creditors. On appeal to this court Ralston contends that the chancellor’s finding that Ralston had not sustained its burden of proof was against the clear preponderance of the evidence. We are of the opinion that the chancellor’s finding was not clearly against the preponderance of the evidence.

J. M., or Monroe, Davis and his wife Lila owned 480 acres of land in Pope County which they used in connection with cattle production, with a part of the land being devoted first to turkey raising and then to hen egg production. They were assisted in these operations by their married son Jerry Davis who appears to have been a partner in the operation. Another son. Dr. A. E. Davis, was a doctor of veterinary medicine and owned adjacent land to his father’s land. The three Davises, for convenience and identification, will hereafter be referred to as Monroe, Jerry and Dr. A.E. Davis, and Ralston Purina Company will be referred to as Ralston.

Monroe and his son Jerry had over a period of years raised turkeys, produced hen eggs and hauled feed under contracts with Ralston. In 1967 a difficulty arose between Ralston and the Davises resulting in a suit in 1968 by the Davises against Ralston for breach of contract, and a counterclaim by Ralston for debt on account. The Davises obtained judgment against Ralston for $45,349.96 and Ralston obtained judgment against Monroe Davis for $163,-142.42 on its counterclaim. The judgments were affirmed by opinion of this court on June 2, 1970, in Davis v. Ralston Purina, 248 Ark. 1128, 455 S.W. 2d 685.

Notwithstanding their past differences and the amount owed by the Davises on the 1967 account, in early 1968 the Davises obtained 90,000 laying chickens from Ralston under a contract whereby Ralston agreed to extend credit to the Davises for chicken feed and supplies. In February, 1968, the Davises owed Ralston $187,500.25 and Ralston refused further credit to the Davises. On March 15, 1968, Monroe and his wife conveyed 400 acres of their 480 acre tract to their son Dr. A. E. Davis and his wife Georgene for a consideration of $30,000. Two bank mortgages on the land totaling $17,-884.59 were paid out of the sale price and approximately $10,000 was paid to Monroe in cash.

On May 21, 1969, execution was issued on Ralston’s judgment against Monroe which, after set-off, amounted to $117,792.85. The execution was returned wholly unsatisfied, whereupon Ralston brought the present action to set aside the transfer of the 400 acres to Dr. A. E. Davis and his wife as a fraud on creditors.

Ralston argues that the transfer was made or contrived with the intent to hinder, delay or defraud Ralston as a creditor and is, therefore, void under Ark. Stat. Ann. § 68-1302 (Repl. 1957) which reads as follows:

“Every conveyance or assignment, in writing or otherwise, of any estate or interest in lands, or in goods and chattels, or things in action, or of any rents issuing therefrom, and every charge upon lands, goods or things in action, or upon the rents and profits thereof, and every bond, suit, judgment, decree or execution, made or contrived with the intent to hinder, delay or defraud creditors or other persons of their lawful actions, damages, forfeitures, debts or demands, as against creditors and purchasers prior and subsequent, shall be void.”

Ralston has cited several of our prior decisions bearing on fraudulent intent and rules as to the nature and sufficiency of evidence necessary to set aside deeds of conveyance as fraud upon creditors. Fraudulent intent is, of course, necessary to bring the conveyance within the terms of the statute and conveyances made to members of the household or near relatives of a financially embarrassed debtor are looked upon with suspicion and scrutinized with care. When such conveyances are made to members of a household or near relatives without consideration, or with only token consideration, the transfer is presumed to be fraudulent as to existing creditors. See 12 R.C.L. 537; 37 Am. Jur. 2d, Fraudulent Conveyances. § 23; Wilks v. Vaughn, 73 Ark. 174, 83 S.W. 913; Harmon v. McSpadden, 174 Ark. 184, 295 S.W. 353.

In Harris v. Shaw, 224 Ark. 150, 272 S.W. 2d 53, we set out certain indicia of fraudulent intent which may give rise to an inference that a conveyance has been made with the intent to hinder, delay or defraud creditors, and in that case we said:

“There are certain circumstances which so frequently attend conveyances or transfers to defraud creditors that they are recognized as badges or indicia of fraud. 37 C.J.S., Fraudulent Conveyances, § 79. One of the most important of these is the insolvency or indebtedness of the transferrer. Others are inadequate or fictitious consideration, retention by the debtor of the property, the pendency or threat of litigation, secrecy or concealment, and the fact that the disputed transactions were conducted in a manner differing from the usual business practice. 24 Am. Jur., Fraudulent Conveyances, §§ 14 and 17.”

The deed of conveyance from Monroe and his wife Lila to Dr. A. E. Davis and Georgene Davis was dated March 13, 1968. The judgment for $117,792.85 was rendered against Monroe Davis on April 18, 1969. It was filed for record on April 21 and execution was issued on October 27, 1970. Under date of December 3, 1970, Monroe filed a schedule claiming his 80 acre homestead as a part of his constitutional exemptions from civil execution; so, the question comes down to whether the transfer was fraudulent under the facts in this case, and whether Ralston sustained its burden of proving that the transfer from Monroe Davis and Lila Davis to Dr. A. E. Davis and his wife Georgene was done with the intent to defraud or delay creditors, specifically the Ralston Purina Company.

The only direct testimony offered by Ralston was the testimony of its credit manager Mr. Davis Sorenson. He testified that Mr. and Mrs. Monroe Davis and Jerry Davis had an open account with Ralston and as of March 13, 1968, it amounted to $120,822.75. He said that in addition to the open account, as of March 13, 1968, the Davises owed a balance on seven promissory notes in the total amount of $66,678.50 and the notes were introduced into evidence. One of the notes was dated February 13, 1968, in the original amount of $30,940 and was payable on demand; another was dated January 9, 1967, in the original amount of $16,742.25. It bore eight per cent interest after maturity and was to be paid as follows:

“At all egg proceeds over 20¿ (twenty cents) per dozen. The egg proceeds will be applied first to the interest and then to principal. Interest will be charged at the rate of 7% (seven per cent) before maturity.”

The other notes were also to be paid from egg proceeds. Three of them were dated January 9, 1967, in the original amounts of $33,623.03, $21,258.08 and $21,623.92 respectively. Another note in the amount of $23,018.10 was dated June 7, 1967, and another was dated January 9, 1967, for $13,-512.83. Mr. Sorenson said that nothing had been paid on the indebtedness and nothing had been paid on the judgment.

On cross-examination Mr. Sorenson testified that he started working for Ralston in 1968 and had no direct information concerning the dealings with the Davises. He said that in March, 1968, the Davises owed Ralston $187,000 and between March 13, 1968, and October 31, 1968, the indebtedness was reduced by approximately $35,000. He said the laying hens were sold in connection with the replevin action brought by Ralston and their sale price partially accounted for the difference in the amount owed.

The amount of indebtedness is not questioned in this case and Mr. Sorenson’s testimony had little bearing on the question of fraud in connection with the conveyance from Monroe to Dr. A. E. Davis. Ralston relies most heavily on the presumptions attending sales by financially embarrassed debtors to members of their household or near relatives.

Monroe and Dr. Davis testified in defense of their transaction, but we deem it unnecessary to set out their testimony in detail. The substance of Dr. Davis’ testimony was to the effect that he owned 240 acres of land adjacent and contiguous to the 480 acres owned by his parents. He was aware in a general way, of some of the difficulties Monroe was having with Ralston. In February, 1968, Monroe had 90,000 laying chickens on hand which had not reached productive, or laying, age when Ralston discontinued credit to Monroe. In March Dr. Davis purchased 400 acres of Monroe’s land for a total consideration of $30,000. Two bank mortgages were satisfied out of this amount and approximately $10,000 was paid to Monroe in cash. Monroe was then on a cash basis in buying feed from Ralston and he used the $10,000 cash for feed in bringing the poultry flock into egg production. In July, 1968, Monroe was having additional difficulty with Ralston over poor quality of eggs Monroe attributed to feed and Ralston attributed to other causes. According to Dr. A. E. Davis, he organized Dega Poultry Company, Inc. in the latter part of July, 1968. Dega owned considerable assets, including flocks of laying hens, throughout Pope County by October, 1968, when Ralston repossessed in replevin Monroe’s laying flock which was sold at public sale and the proceeds applied on Monroe’s indebtedness. Dega Poultry purchased the laying flock from the purchaser at the public sale. Dega also purchased repossessed equipment from Monroe’s creditors and continued or carried on the egg production business in buildings it leased from Monroe. Dr. Davis testified in part as follows:

“Q. I believe the replevin action was in October of 1968?
A. Yes, sir.
Q. You’ve testified, Mr. Davis, that you purchased this land because you own land adjacent to it and wanted some other land?
A. Yes.
Q. Uh . . was it ever discussed with you or did you ever have any knowledge of the fact that there was a possibility that your father would have a judgment rendered against him by Ralston Purina Company?
A. Oh, Good Lord no, not at that time. There was no . . . there was no litigation at that time and of course, my father’s only interest at that time was staying in the poultry business.
Q. There was disagreement at that time, though, wasn’t there?
A. Yes.
Q. And had been for about six months previous to that between your father and Ralston Purina?
A. Yes, there was disagreement because Ralston Purina would not furnish the hens which they had promised to do.
Q. He felt like he had been mistreated by Ralston Purina?
A. Well I am sure he did.
Q,. And you were aware of this problem when you purchased the land?
A. Yes.”

Mr. Monroe Davis testified that in the spring of 1968 he had 90,000 birds which Ralston had promised to finance. He said the birds were 14 weeks old when Ralston requested additional security in the form of a mortgage on his real property and when he refused, Ralston refused to finance his operation any further. He said when he refused to give additional mortgages to Ralston, he already had his land mortgaged to banks. He said he sold the land involved to his son in March, 1968, and that at that time he was in debt to Ralston in a substantial amount. He said that dealing in poultry, however, on the scale and to the extent he was involved, constituted a substantial operation. He then testified as follows:

“Q. O.K. So then in March you sold this land to your son and you took the money and cleared that land and the land you had left?
A. Also took some of this money and put it right back into this business because Ralston Purina had agreed to finance the birds and they wouldn’t do it. and I had them 18 weeks old and they had cut off and 1 had to have money.
Q. They had already cut your credit off when you had this transaction?
A. In February.
Q. In February before you sold this land to your son in March?
A. Yes.
Q. So in 1968 you ah made a transaction which cleared your homestead and also cleared you with certain of your other creditors?
A. Yes, sir.
Q. All right, now you continued to operate your poultry business?
A. Yes, sir.
Q. And in the summer of 1968 you had additional problems, feed problems?
A. Yes, sir, in July I believe.
Q. As a result of these problems, you had . . . you sought legal advice and sent some of these hens off to be tested?
A. Yes, sir.”

Mr. Monroe Davis testified that after Ralston stopped extending him credit in February and after he sold his land to his son in March, he paid off some mortgages on the land and continued to pay cash for feed. He said that he continued to purchase feed from Ralston but was having trouble with the Ralston feed in connection with light colored egg yolks. He said that Ralston was contending that his difficulty was caused by worms and that it was his contention that the difficulty was caused by the feed. He said he did not go out of the poultry business as an individual until his birds were replevied in October, 1968. He said that following this date he went to work for his son around the first of January, 1969, and has been employed by Dega Poultry Company ever since. He said that he would have been able to pay his indebtedness to Ralston if it had not replevied his chickens and forced him out of business.

Mr. Monroe Davis testified that the debt he owed to Ralston increased when he purchased the hens. He said he went to the credit manager for Ralston and asked about furnishing the birds and that nothing was said about security other than a mortgage on the birds. He said that Ralston furnished him 90,000 birds and agreed to finance them at $1.40 per bird. In this connection he testified as follows:

“A. The birds were to be financed at a dollar forty cents a bird. There were to go to the bank and get the money and turn it over to us and we were to grow the birds and they were to pay the dollar and forty cents at the end of six months, which they did not do.
Q. How many birds did you put down?
A. Put down 90,000.
Q. When did Ralston Purina cut your credit off?
A. In February of 1968.
Q. And why at that point . . . how old were your hens?
A. They were averaging about 18 weeks of age.
Q. And how much did it cost to feed those hens at that time?
A. It cost a nickel a bird a week.
* * *
A. It costs four thousand five hundred dollars a week to feed those 90,000 birds a week.
Q. Four thousand five hundred dollars a week. How old do the hens have to be before production begins?
A. Approximately 25 to 26 weeks.
Q. Why did you sell your land to your son?
A. I needed the money.
Q. In addition to that land, did you sell other assets?
A. Yes.
Q. What happened to the money you obtained from the sale of the land and the other assets?
A. We put those birds into production.
Q. In March of 1968 had Ralston Purina ever threatened to sue you?
A. No, sir.
Q. Had they ever made demand on you to pay the account that you owed them at that time?
A. No, sir.
Q. They simply put you on a cash basis for feed, is that correct?
A. Right.
Q. In March of 1968 were you paying your debts as they accrued to others?
A. Yes, sir.
Q. After March of 1968 did you make payments to Ralston Purina?
A. Yes, sir.
Q. Did you reduce the indebtedness?
A. Yes, sir. We took every check we got and went by their office. They took what they were supposed to have and give us what we were supposed to have.
Q. And this continued up until the time the hens were repossessed is that correct?
A. Right.”

In connection with Monroe’s testimony as to market value of his land, the record appears as follows:

“BY THE COURT: And in 1968 wasn’t $75.00 an acre a little low for 400 acres of land lying together out there?
BY MR. DAVIS: In 1968 it was altogether different from what it is now. Land wasn’t selling too good in 1968. I can show you land all around it that sold for less than $30.00 or around $30.00 an acre. Fact the business, Mr. Ike Laws [Ralston’s attorney] bought some right close to it for about $30.00.
BY MR. LAWS: $87.00 an acre was what I paid for it.”

Under continued questioning by the court Mr. Davis continued as follows:

“Q. What improvements are on this land?
A. Not any.
Q. Not any at all?
A. No, sir, not any on the land he bought.
Q. I’m talking about the 400 acres that A1 bought.
A. Not any.
Q. On the 400 acres that Mr. A1 Davis bought were there any improvements, houses, etc. ?
A. No, sir.
Q. No houses. What was it used for? Or what could it have been used for?
A. Pasture land.
Q. Was it under fence?
A. Part of it was. Part of it wasn't.
Q. What about timber, had it been cut over?
A. Timber land ... I sold the timber off it. . . I sold the pine timber off of it for approximately $4,000.00. The rest of the timber was just scrub timber.
Q. So that was vacant land without any houses or improvements?
A. Yes, sir.
Q. It wasn’t being used in your egg business?
A. It just held the world together. . . part of it.
Q. Now this check for $10,211.40 which was the cash part of this transaction?
A. Yes, sir, I got that.
Q. That’s the money you put into the business, is that right?
A. I got the oh — money and jout the money in my business. And I spent it getting these hens ready for production, so that I could pay the debt.
Q. I see that Mr. Barger handled that transaction for you from the looks on the back of it?
A. Yes, sir.
Q. Used part of it to pay off your home place?
A. Yes, sir.I had to pay it off because it was mortgaged together with the other land.”

It is obvious from the record before us, that raising laying hens for the production of eggs, as well as raising turkeys, on the scale in which Monroe Davis was involved is a large scale operation requiring a substantial amount of money to stay in business. It is clear from the evidence that Monroe was only using a small portion of his 480 acres of land in connection with his poultry business. It is apparent from the record that notwithstanding the fact he owed Ralston a substantial amount in connection with the production of turkeys in 1967, he made arrangements with Ralston whereby Ralston furnished to him 90,000 young birds for the purpose and with the intent that they would be raised by Davis and used as laying hens for the commercial production of eggs. It is clear from the record of Mr. Davis’ uncontradicted testimony that Ralston agreed to finance Davis in connection with the laying flock to the extent of $1.40 per bird, but that Ralston put Davis on a cash basis before the birds had reached production age but while they were still consuming $4,500 worth of feed per week. It is apparent from the record that it was at this point Mr. Davis sold his land for $30,000 with approximately $10,000 of the purchase price paid in cash which he used in purchasing chicken feed (primarily from Ralston) in putting his birds into production.

Even after the birds were in full production, the record indicates that Mr. Davis continued to purchase his feed from Ralston and the question arose as to whether the Ralston feed or something else was causing the poor quality or grade of the eggs being produced. This argument apparently resulted in Ralston replevying the hens under a procedure whereby they were sold at public auction.

The evidence of record indicates that Dr. A. E. Davis was to some extent in competition with Ralston, in that his corporation was furnishing laying flocks to farmers scattered all over Pope County; and the 90,000 hens as well as the equipment originally purchased on credit by Monroe Davis, and subsequently purchased by Dr. Davis or Dega Poultry, constituted only part of the Dr. Davis and Dega Poultry assets and operation. There is no question that Dr. Davis actually gave $30,000 value for the 400 acres involved. The highest market value even alleged as to the 400 acres was $46,000, or approximately $115 per acre. The evidence as to the actual market value of the land here involved as well as adjacent lands, ranges from slightly more than $30 per acre for the 80 acres purchased in 1966, to $70.85 per acre for the 240 acres purchased in 1964, and $87.50 per acre recently purchased in the vicinity by one of the attorneys in this case. Dr. Davis paid $75.00 per acre for the 400 acres he purchased from his parents.

We are unable to say that the chancellor’s finding and decree are against the preponderance of the evidence in this case, so the decree of the chancellor is affirmed.


author: J. FRED JONES, Justice.

text:
    INTERSTATE FIRE INSURANCE COMPANY of Chattanooga, Tennessee v. Willie L. INGRAM
    74-94
    511 S.W. 2d 471
    Opinion delivered July 15, 1974

      Gaughan, Barnes, Roberts, Harrell & Laney, for appellant.

      Streett, Plunkett, Faulkner, P.A., for appellee.
   J. FRED JONES, Justice.

This is an appeal by Interstate Fire Insurance Company from a circuit court judgment based on a jury verdict in favor of Willie L. Ingram on two fire insurance policies. One of the policies was on a residential building in the amount of $3,000 and the other one was on the contents in the amount of $3,500. The judgment was for the full amount of $3,000 on the building and for $2,060 on the contents. The appellee Ingram was also awarded statutory penalty in the amount of $607.20, attorney’s fee in the amount of $1,500 and costs in the amount of $24.20. Ingram also purchased insurance coverage on a garage apartment not involved in this case.

Interstate contends for reversal that the trial court erred in failing to give defendant’s requested instructions 8, 9, 10 and 11, and that the trial court erred in giving plaintiff’s instruction No. 7. It also contends that the jury’s verdict in favor of Ingram on the defense of arson is not supported by substantial evidence.

The background facts appear as follows: The appellee Willie L. Ingram purchased the property here involved on October 18, 1971, for the sum of $5,620. When Ingram purchased the property, he assumed payments on a mortgage indebtedness to a federal savings and loan association and there was already fire insurance on the property in the amount of $6,000. When Ingram first purchased the property he was living alone, but his divorced daughter and her two children moved into the house with him in the latter part of November, 1971. Mr. Ingram purchased the insurance through a friend, Roy Bryant, who had just started selling insurance for Interstate, and Mr. Bryant’s supervisor Leroy Latner actually took Ingram’s application and caused the policies to be issued. The policies were issued on December 6 and 20, 1971, and the house and contents were totally destroyed by fire on February 11, 1972, while both policies were in force. The fire was the result of arson in which one of the arsonists died in the house and the other one escaped with his clothing on fire.

In his applications for insurance, which were signed by the appellee but filled out by the company’s agent Mr. Leroy Latner, the following questions were asked:

“Item 6. Has applicant ever had a fire loss payment from any company ?
Item 11. Is there a mortgage or loan on the building?
Item 12. If this policy is issued, will the building be insured by any other policy?.”

On both applications these three questions were answered in the negative by check marks in the box space for a “yes” or “no” answer at the end of the question. At the trial Ingram admitted that he had previously received $13,000 in insurance proceeds; that his dwelling was mortgaged to First Federal Savings and Loan in Camden, and that the building was insured for $6,000 under a fire insurance policy issued by Home Insurance Company.

The appellant Interstate denied liability on the theory that by giving false answers to the questions on the applications, Ingram intentionally misrepresented material facts in order to obtain insurance coverage. Ingram, on the other hand, denied ever having given false information to appellant’s agent and took the position that agent Latner inaccurately recorded the true answers given to him by Ingram.

Both insurance policies contained the following language:

“Total insurance (does not apply to any of the perils named in the Extended Coverage) — Other insurance is prohibited unless the total amount of insurance, including the amount of this policy, is inserted in the blanks provided on the first page of this policy under the Caption Total Insurance. This company shall not be liable for loss while the insured shall have other insurance prohibited by this policy.
Concealment, fraud. This entire policy shall be void if, whether before or after a loss, the insured has wilfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the insured therein, or in any case of fraud or false swearing by the insured relating thereto. This policy contains the entire agreement between the Company and the Insured and the holder and owner hereof. * * * Its terms cannot be changed nor its conditions varied except by a written agreement signed by an Authorized Officer of the Company. No other person shall have power to make or alter this contract or waive forfeitures.”

The appellant insurance company pled these policy provisions as an affirmative defense in its amended answer.

Turning now to the assignments of error, the defendant’s requested instruction No. 8 was as follows:

“You are instructed that the plaintiff admits that he had another insurance policy insuring this building against loss by fire which was in violation of the provisions of the building policy and your verdict shall be for the defendant on the building insurance policy.”

The effect of this instruction would have been to direct a verdict for Interstate and we are of the opinion that Interstate was not entitled to a directed verdict under the evidence in this case. Defendant’s requested instruction No. 9 would also have directed a verdict for Interstate unless the jury found that notice of other insurance was given to a general agent with authority to waive policy provisions. Instructions Nos. 10 and 11 had to do with a general agent's authority to waive provisions of an insurance policy and with burden of proof as to general agents.

We are of the opinion that the trial court did not err in refusing defendant’s instructions Nos. 8, 9, 10 and 11. We are also of the opinion that the trial court did not err in giving plaintiff’s instruction No. 7 which was given as follows:

“You are instructed that where facts have been truthfully stated to an agent of an insurance company, but by the agent’s fraud, negligence, or mistake the facts are misstated in the application, the company cannot after accepting the premium and issuing the policy, set up such misstatements in the application in avoidance of its liability, where the agent is acting within his real or apparent authority and there is no fraud or collusion upon the part of the insured.”

The appellee, Willie L. Ingram, testified that the questionnaire on the application forms was filled out by the agent, and that he truthfully answered all the quesiions propounded to him by the agent. He said he did not definitely remember signing his name to the applications, but he admitted the genuineness of his signature on the applications.

Agent Roy Bryant testified that he had gone to work as a soliciting agent for Interstate but did not know how to write a policy when Mr: Ingram obtained his insurance, so he requested his immediate supervisor, Leroy Latner, to go with him to actually take Ingram’s application for the insurance. He testified that he does not recall Mr. Ingram telling him that he had other insurance on either his building or its contents, or that it was mortgaged, or that he had ever had any previous fire losses. He testified that he was only an employee of Interstate for approximately three months, and that Leroy Latner filled out Ingram’s applications. He said he does not remember whether the specific questions appearing on the application forms were asked or not, and does not know whether Mr. Ingram read the application before he signed it.

Mr. Latner testified that he went with Mr. Bryant to Ingram’s home to take his application for insurance. He said he filled in the insurance application blanks, and that Mr. Ingram signed the applications in his presence. He said he did ask Mr. Ingram each question appearing on the front of the application forms and that he checked the answers as they were given to him by Mr. Ingram. He said he was unaware that Mr. Ingram had had two previous fire losses, but was familiar with his company's policy that if one previous fire loss showed on an application, the company would usually issue a policy; but if more than one previous fire loss was shown on the application, the company would refuse to issue a policy until a retail report was run on the applicant. He said that actually a third policy was issued to Mr. Ingram in the amount of $2,100 on his garage apartment. On cross-examination he again stated that he asked Mr. Ingram every question that appeared on the application blanks, and that he filled the answers in according to the information given him by Mr. Ingram.

In the 1943 case of Southern Nat'l Ins. Co. v. Heggie, 206 Ark. 196, 174 S.W. 2d 931, a suit on a life insurance policy was defended on the ground that the insured had stated in her application that she was in sound health and had no illness in the previous years when in truth she had been suffering from tuberculosis and had been treated for this disease during two previous years. A jury trial in that case resulted in a verdict and judgment in favor of the plaintiff insurance beneficiary. The evidence in that case was to the effect that when the soliciting agent took the application for insurance from Mrs. Heggie, he wrote down the answers himself and had Mrs. Heggie sign the application without reading it and that when the question as to whether or not she had ever had tuberculosis was asked, the agent was told that she had been afflicted with the disease. He was also told that she had gone to the Booneville Sanatorium in 1939, and there had an examination which disclosed the existence of pulmonary tuberculosis. In the Heggie case, as in the case at bar, there was a direct conflict between the testimony of the agent and the witnesses on behalf of the insurance beneficiary. The agent testified that he correctly filled in the answers on the application form as given to him by Mrs. Heggie. In affirming the judgment in the Heggie case, we approved an instruction almost identical to the plaintiff’s instruction No. 7 in the case at bar and in doing so, we said:

“It has been frequently held by this court that, where an applicant for insurance makes to the agent of the insurer a full disclosure of the facts inquired about in the application, but the agent fails to write down the answers of the applicant correctly, and the applicant is permitted by the agent to sign the application without reading it or hearing it read, the knowledge of the agent as to the physical condition of the applicant is imputed to the company and, if a policy is issued on such an application, the company is estopped in an action on said policy to set up the falsity of the answers in the application.”

See also Union Life Ins. Co. v. Johnson, 199 Ark. 241, 133 S.W. 2d 841; American Nat'l Ins. Co. v. Hale, 172 Ark. 958, 291 S.W. 2d 82, cited in Heggie.

We are of the opinion that the trial court properly submitted the fact issues to the jury under plaintiff’s instruction No. 7, and that there was no error in giving that instruction.

As to the allegation of Ingram’s participation in the arson by which the building was destroyed, the burden of proof was on the appellant Interstate. It is true the record bears dramatic proof that two out-of-state arsonists burned the house in this case about 9 p.m. on a Friday night by igniting a highly combustible fluid inside the house. The record also indicates that Ingram was shooting dice at a friend’s trailer; that his daughter had gone to work and her children were visiting their father when the fire occurred. There is simply no evidence in the record that Ingram was acquainted with either of the arsonists or that he had anything at all to do with the fire. Certainly there is no evidence of Ingram’s knowledge of, or participation in, arson sufficient to overturn a jury verdict.

The judgment is affirmed.


author: CONLEY Byrd, Justice.

text:
    Devert C. FLOYD et al v. TOWN of MAYFLOWER, Arkansas, et al
    74-78
    511 S.W. 2d 490
    Opinion delivered July 15, 1974

      Hartje & Hartje, by: Geo. F. Hartje Jr., for appellants.

      Bob Dawson, for appellees.
   CONLEY Byrd, Justice.

The town of Mayflower proceeded pursuant to Acts 1971, No. 298, to annex several hundred acres of land adjacent to the town. Appellants Devert C. Floyd, et al, brought this action in the chancery court to enjoin the action of the town and its officials. By an amendment appellants brought the county clerk and the county collector into the action on the theory that their acts in extending city taxes against appellants’ property amounted to a taking of private property without giving any compensation. Upon motion of the parties the chancellor transferred to the law docket that part of the action contesting the conduct of the election and the merits of the annexation but retained jurisdiction of that part of the complaint amounting to a collateral attack upon the annexation. When the collateral attack came on for trial in the chancery court, appellants proffered testimony to show that the city would be unable to furnish city services to the annexed area within three years as required by Acts 1971, No. 298. The chancellor sustained an objection to the proffered testimony on the theory that that matter had been transferred to the circuit court and dismissed the collateral attack for want of equity. For reversal appellants contend that Acts 1971, No. 298 is unconstitutional and that the chancellor should have heard their proffered testimony.

Acts 1971, No. 298 provides for annexation of territory by two-thirds vote of the governing body of a municipal corporation submitting the issue of annexation to the qualified electors living both in the city and the area to be annexed. The Act provides that any interested person may contest the annexation within 60 days after the election by filing a petition in the circuit court of the county. Appellants acknowledge that they had ample notice but here contend, without citing any authority, that the Act is unconstitutional because the burden of going forward with the proof is placed upon the objecting property owner. We find no merit in this contention.

Neither do we find merit in the contention that the chancellor should have heard the proffered proof because as we view the record the only matter to which the proof was directed had been transferred to the law docket. Consequently, appellants have no reason to here complain because on that issue they do not have a final decree or order from which to appeal that issue.

Affirmed.


text:
    James R. McWILLIAMS and Dottie Ann KIMES v. Marjorie TINDER, Executrix of the Estate of Velpoe Petty McWILLIAMS, Deceased
    74-101
    511 S.W. 2d 480
    Opinion delivered July 15, 1974

      Parker & Kincannon, for appellants.

      Franklin Wilder, for appellee.
   CONLEY Byrd, Justice.

The appellants James R. McWilliams and Dottie Ann Kimes contested the Will of their grandfather Velpoe Petty McWilliams, giving all of his property to his surviving daughter Marjorie Tiner, on the grounds of mental incapacity and undue influence. From an adverse decree they bring this appeal raising the same factual issues.

The record shows that the testator, Velpoe Petty McWilliams, had three children, — i.e., Audrey McWilliams, the father of appellant James R. McWilliams; Bernard McWilliams, the father of appellant Dottie Ann Kimes; and appellee Marjorie Tinder. Bernard predeceased his father several years ago. Audrey died in 1972, a month or so before the will here involved was executed. So far as the record shows Mr. McWilliams, following the death of his second wife, lived alone for the last eight or nine years of his life. During part or all of this time he had a bell hookup whereby he could summon Carl Tinder, the adult son of appellee Marjorie Tinder. Appellee Marjorie Tinder during this time saw that Mr. McWilliams’ cooking and washing were taken care of to his satisfaction.

During the year of 1970, there were some allegations made to the effect that Carl Tinder was forging some checks on Mr. McWilliams. As a result of those allegations Audrey McWilliams and Marjorie Tinder both filed petitions for appointment of a guardian for Mr. McWilliams on the same day. Audrey acted through appellant’s present counsel and Marjorie acted through her present counsel. At the hearing on the appointment of a guardian the parties submitted a letter from Dr. Kemal E. Kutait to appellant’s counsel (under date of 8/31/70) as follows:

“In response to your request regarding the mental status of Mr. McWilliams, please accept the following.
Mr. McWilliams had slow emotional deterioration over the past several years, and although he is in excellent contact with reality and well oriented as to time, place, and person, and shows no imcompetence at times. Other times he shows marked senile changes, is poorly oriented, and, in my opinion, is certainly not competent to care for his personal financial affairs, despite the fact that he is in excellent contact and quite competent a majority of the time. The segment of time of which he is categorically incompetent, renders him potentially a hazard to his own well-being as well as to the well-being of his estate.
In my studied opinion, I feel that Mr. McWilliams is incompetent, at least part of the time, and is not capable mentally of caring either for himself, or for his estate.”

Mr. McWilliams, who was still driving his own automobile at the time of the guardianship hearing, testified in his own behalf. Subsequently, on November 17, 1972, Dr. Kutait wrote to appellee’s counsel the following letter:

“Mr. McWilliams was seen by this examiner on November 12, 1970, and was found to be at that time well oriented as to time, place, and person, and of sound mind.
This does not dispute the facts stated in a previous letter, as Mr. McWilliams has transient periods of loss of contact with reality; however, at the time of this interview, the patient was felt to be medically of sound mind and stated that he was quite firm that he did not want his son to have any social or financial contact with him now or in the future. He was quite firm that he was not in agreement with the decision to make his son guardian of his body or his estate.”

Shortly after the death of Audrey McWilliams, appellee’s counsel caused Mr. McWilliams to be examined by Dr. Max Alden Baker who wrote the following letter:

“Mr. V. P. McWilliams, an eighty three year old, widowed, Caucasian, male, was evaluated psychiatrically in my office on 9/6/72 on referral from Mr. Franklin Wilder, his attorney. The purpose of the referral was a re-evaluation of the patient with regard to his competency and testamentary capacity.
Two years ago, in a setting of considerable family disharmony, the patient’s son (who has since become deceased) declared his father incompetent to manage his affairs. The son had allegedly become upset by the amount of money that his father was giving to his sister (Mr. McWilliams’ daughter). According to Mr. McWilliams this had been a long standing difficulty in the family because out of respect for the care and consideration that his daughter has given him, he has felt it desirable to help her out financially. He states with considerable feeling that the other members of his family never seemed to want to communicate with him or care for him as did his daughter, since they always expected something in return. He states that his daughter has been a great help to him and that he has been most happy to be able to help her financially.
From a psychiatric standpoint, Mr. McWilliams has minor impairments of memory function retention and recall which are quite compatible with his age of eighty three. Despite this, his mental faculties seem to be otherwise intact. There is no evidence at all of psychosis or serious affective disorder. He has no history of drug or alcohol abuse. He has a clear understanding of the extent of his property and an awareness of the natural objects of his bounty thereby fulfilling the legal requirements for being able to write a will. I find no evidence that he is unable to manage his own affairs and he seems to be functioning quite well with only a modest amount of assistance from his daughter. At the present time, I see no psychiatric reason that his petition to restore his legal competency and to cancel the present guardianship should not be granted from a psychiatric standpoint.”

At the Will contest hearing in addition to the three attesting witnesses to the Will the trial court heard testimony from Dr. Max Baker, appellee Majorie Tinder, Cora McWilliams, the surviving spouse of Audrey McWilliams, and appellant James R. McWilliams. Obviously we cannot say from the testimony of those witnesses that Mr. McWilliams did not have the mental capacity to execute a Will and counsel for appellant recognizes as much but contends that when Mr. McWilliams’ mental capacity is coupled with the undue influence that is shown then the Will should be set aside. We disagree.

We have consistently held that the undue influence which avoids a Will is not the influence which springs from natural affection or which is acquired by kind offices but is such as results from fear, coercion or any other cause that deprives the testator of his free agency in the disposition of his property, Parette v. Ivey, Executor, 209 Ark. 364, 190 S.W. 2d 441 (1945). When we consider the testimony of the aforementioned witnesses, we cannot find the required quantum of proof necessary to establish the charge of undue influence.

In reviewing the fact issues here we have not set out the testimony in detail as such would serve no useful purpose as a precedent. Furthermore, we have reviewed the facts without giving any consideration to the testimony of appellee’s counsel who appeared in the trial as an advocate for appellee but, who without withdrawing from the litigation, took the witness stand to testify in behalf of his client. We have previously addressed ourselves to the disapproval of such conduct. See Watson v. Alford, 255 Ark. 911, 503 S.W. 2d 897 (1974); Montgomery v. First National Bank of Newport, 246 Ark. 502, 439 S.W. 2d 299 (1969); Old American Life Insurance Co. v. Taylor, 244 Ark. 709, 427 S.W. 2d 23 (1968); and Rushton v. First National Bank of Magnolia, 244 Ark. 503, 426 S.W. 2d 378 (1968).

Affirmed.


author: Frank Holt, Justice.

text:
    Napoleon FULLER v. STATE of Arkansas
    CR 74-49
    511 S.W. 2d 474
    Opinion delivered July 15, 1974

      Guy Jones, Jr., for appellant.

      Jim Guy Tucker, Atty. Gen., by: Richard Mattison, Asst. Atty. Gen., for appellee.
   Frank Holt, Justice.

Appellant pleaded guilty to first degree murder after the state waived the death penalty. He was sentenced to life imprisonment in accordance with a jury verdict. Appellant now seeks postconviction relief pursuant to Criminal Procedure Rule 1. Following an evidentiary hearing, the trial court denied his petition. One of his contentions on appeal, through his court appointed appellate counsel, is that the trial court erred in failing to make findings of fact and conclusions of law as is required by Rule 1. We agreed and remanded in Fuller v. State, 256 Ark. 133, 505 S.W. 2d 755 (1974), for compliance with that requirement which is now met. Therefore, we proceed to consider appellant’s contention that the court erred in failing to grant a new trial because of the father-in-law/son-in-law relationship between the trial court judge and appellant’s court appointed attorney. We do not agree.

Art. 7 § 20 of our Ark. Const. (1874) provides in pertinent part:

No judge or justice shall preside in the trial of any cause in the event of which he may be interested, or where either of the parties shall be connected with him by consanguinity or affinity, within such degree as may be prescribed by law ....

Ark. Stat. Ann. § 22-113 (Repl. 1962) reads:

No judge of the circuit court, justice of the county court, judge of the court of probate or justice of the peace, shall sit on the determination of any cause or proceeding in which he is interested, or related to either party within the fourth degree of consanguinity or affinity.

We have interpreted the word “party” in the constitution and statute in a broad manner, refusing a technical and,restricted application, and applied the term to anyone who is pecuniarily interested directly in the result of the suit. Johnson v. State, 87 Ark. 45, 112 S.W. 143 (1908). We have also held that a judge should have excused himself at a murder trial where the victim was related to the judge within the fourth degree of affinity, the judge’s wife’s second cousin, making the judge interested in the outcome of the case within the meaning of the statute. Byler v. State, 210 Ark. 790, 197 S.W. 2d 748 (1946). See also Black v. Cockrill, Judge, 239 Ark. 367, 389 S.W. 2d 881 (1965). If the prohibited degree of relationship were known by a litigant before trial, the issue cannot be raised thereafter since one is not allowed to speculate on the result of a trial. Byler v. State, supra. In the case at bar, the appellant was unaware of the relationship between the court and the court appointed attorney.

In criminal cases the majority view is that the relationship alone will not disqualify a judge when a relative is an attorney, under statutes similar to ours and requiring interpretation of the word “party.” See e.g. Dennard v. State, 46 Ga. App. 513, 168 S.E. 311 (1933), App. Transf. 176 Ga. 361, 168 S.W. 310 (1933), involving the relationship of a second cousin prosecutor, and People v. Whitney, 105 Mich. 622, 63 N.W. 765 (1895), involving a brother-in-law prosecutor.

In the case at bar, however, suffice it to say that the appellant has utterly failed to demonstrate any possible prejudice because of the relationship between his court appointed counsel and the trial judge. Appellant was represented by two court appointed attorneys. The first one requested the court to appoint another attorney to assist him in the defense of the case. This resulted in the son-in-law’s appointment. Admittedly, each of the attorneys counseled and advised with the appellant preceding the trial date. At that time the court was advised of the negotiated plea. It was presented through the first court appointed attorney. In response to a very thorough interrogation by the court, the appellant stated that he had been advised of his rights; he understood he was charged with first degree murder in the death of his wife and was guilty as charged; he understood the death penalty was being waived and “I understand that I will get life;” no one had coerced, threatened or promised him anything to enter a plea of guilty; and, further, his plea was his own decision after advising with counsel. The court’s inquiry was ended by asking “Do you want to do this?” to which the appellant responded “Yes.” The fact that any statutory fee the court appointed attorneys received was to be fixed by the trial judge is not significant since that fee was allowable regardless of the outcome of the case. Ark. Stat. Ann. § 43-2417 (Supp. 1973). In fact, no latitude for prejudice existed in the instant case. The death penalty being waived the only remaining sentence appellant could receive upon his voluntary plea to first degree murder was life imprisonment. Ark. Stat. Ann. § 41-2227 (Repl. 1964).

Appellant also contends that the procedure required by § 43-2152 in murder cases was not followed. That section was repealed by Act 124, 1971, (§ 43-2108.1, .2) and was therefore inapplicable. Strouthers v. State, 252 Ark. 538, 479 S.W. 2d 870 (1972).

Neither can we agree with appellant’s assertion of reliance upon assurances of his court appointed attorneys that upon a plea of guilty he would receive a sentence not in excess of 21 years. His testimony to this effect was clearly refuted by both lawyers who testified that they thoroughly advised him as to the various degrees of homicide, the possible sentences and never told him he would receive a term of years as a sentence. Their testimony indicated no recommendation of a guilty plea to first degree murder. The attorneys informed appellant the state would waive the death penalty and accept a life sentence. The decision was left completely to the appellant. Their testimony is buttressed by the inquiry of the trial court as previously indicated.

After a thorough review of the entire proceedings, we are of the view there was no violation of appellant’s constitutional rights and, therefore, the trial court correctly dehied the petition.

Affirmed.