text:
    ARKANSAS RAILWAY EQUIPMENT COMPANY v. Richard R. HEATH, Director, DEPARTMENT OF FINANCE AND ADMINISTRATION
    74-202
    519 S.W. 2d 45
    Opinion delivered February 24, 1975

      Rose, Nash, Williamson, Carroll and Clay, by: James H. Wilkins, Jr., for appellant.

      Karl Glass and Harlin R. Hodnett, for appellee.
   Conley Byrd, Justice.

At issue here is whether appellant Arkansas Railway Equipment Company is entitled to a use tax exemption pursuant to Ark. Stat. Ann. § 84-3106 (D) (2) (Supp. 1973), upon the purchase of two diesel locomotive cranes and a 72 inch Ohio magnet. The trial court denied appellant’s claimed exemption on the basis that it had failed to clearly show that:

“A. Such equipment is used in producing, manufacturing, fabricating, assembling, processing, finishing or packaging of articles of commerce.
“B. Such equipment is not transportation equipment.”

To sustain the action of the trial court, appellee Richard R. Heath, Director, Department of Finance and Administration, State of Arkansas, contends:

1. The appellant’s operation is not “manufacturing.” It is commonly understood as, and falls precisely within the definition of a “salvage” operation. Nor does the appellant assemble or fabricate a finished product from “raw or semi-finished materials.”

2. The machinery and equipment is not used “directly” within a manufacturing process. The word “directly” means that the machine must fabricate or assemble a new product from raw or semi-fnished materials. Since there are no raw or semi-finished materials, only an old railroad tank car, used in the appellants’ operation, it is impossible for the appellant to meet this statutory requirement.

3. Additionally, the cranes and magnet are used only to “transport” the metal tank from one work site to another. The Arkansas Compensating Tax Act specifically excludes such equipment from use tax exemption.

The record shows that appellant through its processing of old railroad tank cars makes and sells culverts fabricated therefrom in competition with manufacturers of corrugated metal culverts. The nature of appellants’ business operations and the facts and circumstances which gave rise to this litigation were stipulated in the trial court as follows:

“a. In late 1970, the American Association of Railroads issued a ruling, effective January 1, 1971, requiring its members to remove from interchange service all railroad cars in excess of fifty years of age. This ruling went on to provide that, effective January 1, 1972, all railroad cars forty-nine and fifty years of age would be similarly retired, and each subsequent January 1, two more years of cars would be removed from service, until no cars in excess of forty years of age would remain in service. One result of the above ruling was to place a substantial number of railroad cars on the market for sale and the most significant purchasers of such railroad cars were salvage companies such as Arkansas Railway Equipment Company (hereinafter ‘Plaintiff’). In early 1971, Plaintiff purchased 1,500 railroad tank cabs. At that time, Plaintiff was one of the few operations in the United States with sufficient tract capacity to permit the storage of such a volume purchase. All of the 1,500 tank cars so purchased were being retired from service pursuant to the above-mentioned ruling of the American Association of Railroads.
b. The tanks which are mounted on such railroad tank cars have capacities of from 8,000 to 10,000 gallons and are of four basic types:
(1) insulated;
(2) insulated with heating coils;
(3) non4nsulated; and
(4) non-insulated with heating coils.
For the most part, the tank cars purchased by Plaintiff were of types (2) and (3). The heating coils are a network of tubing inside the tank and are used to carry steam to soften heavy petroleum products in order to drain such products from the tanks. The insulation, of course, is for the purpose of heat retention in the draining process. Examples of such petroleum products include asphalt, paraffin and wax.
c. The most significant portion of Plaintiff’s business in 1971 and 1972 was the production and sale of drainage culvert from these railroad tank cars. Because of the market conditions created by the above-mentioned ruling, Plaintiff was able to produce a longer-lasting product than competing items, — corrugated culvert — while selling that product at a lower price than the competition. Plaintiff’s principal customers for such culvert were local governments or road contractors who used the culvert for street and highway drainage and farmers who used such products for field drainage. The cranes and magnets which are the subject of this litigation were purchased by Plaintiff for the specific purpose of engaging in business of this nature.
d. In producing this culvert, the following operations are performed upon the railroad tank cars:
(1) The first step required is delivery of the cars to the work site. This is a switching operation which involved moving several cars simultaneously to the work site. The crane that is most conveniently located performs this function. The total time involved in such switching operation is approximately 30 minutes and, in the aggregate, amounts to approximately 5% of the cranes’ work time.
(2) Upon arrival at the work site, the tank is cleaned to remove all residual hydrocarbons. This is a safety measure made necessary because subsequent operations on the tank include the use of an acetylene torch which would render the operation hazardous because of fire, absent such cleaning.
(3) After the cleaning, the straps which secure the tank to the undercarriage of the railroad car are cut and the tank is lifted to the ground by the crane.
(4) In the case of an insulated tank, there is a thin metal shell which surrounds the tank and encases the insulation. An acetylene torch operator cuts the shell horizontally and the crane lays open, the two halves of the shell. Once open, one or more laborers scrape the insulation from the shell and pile it for disposal. The two shell halves are than removed from the work site by the crane and magnet and the shell is sold as scrap.
(5) The next step in converting the tank car into culvert consists of cutting the ends out of the tank, removing the coils, if any, and removing the dome of the tank. The crane is used to roll and reposition the tank to facilitate such cutting. The crane is also used in conjunction with the magnet or with cable in removing the coils.
(6) The crane then picks up the unprepared culvert and moves it to an area where a welder can repair and patch both the dome hole and the coil attachment hole. In some cases the crane is also used for positioning two prepared culverts so that they may be welded together, resulting in a culvert that is 60 feet long, rather than the conventional 30 feet.
(7) Finally, the crane is used to load the finished culvert aboard trucks for delivery.
e. During 1971 and 1972, approximately 80% of Plaintiff’s business was performed substantially as described above. During late 1972 and early 1973, with the advent of the fuel shortage, some sales of tanks, adapted for stationary use, were made. In such cases, the dome was removed, the coils, if any, were removed and the resulting holes in the tank were patched. Then the tank was adapted for conventional filling and emptying and sold for use as a storage facility for such products as gasoline, kerosene or diesel fuel. Of the 1,-924 tank cars purchased by Plaintiff, 71 were refurbished as above and sold as stationary tanks.
f. The balance of the 1,924 tank cars, when delivered to Plaintiff, were in such poor condition (752 cars) that Plaintiff either used them to patch the holes in tanks or culvert or Plaintiff cut them up for sale as scrap.
g. The primary purpose in Plaintiff’s purchase of the cranes and magnets and the primary use of the same was the production of culvert from the tank cars, as described above. The loading of scrap and the switching of tank cars to the work area were incidental to the primary business of Plaintiff and incidental to the primary use of such equipment.”

The statutory exemption here involved is set forth in Ark. Stat. Ann. § 84-3106 (D) (2) (Supp. 1973), as follows:

“Exemptions. — There are hereby specifically exempted from the taxes levied in this Act:
(D) (2) Machinery and equipment used directly in producing, manufacturing, fabricating, assembling, processing, finishing, or packaging of articles of commerce at manufacturing or processing plants or facilities in the State of Arkansas, but only to the extent that such machinery and equipment is purchased and used for the purposes set forth in this subsection.
(a) Such machinery and equipment will be exempt under this subsection if it is purchased and used to create new manufacturing or processing plants or facilities within this State or to expand existing manufacturing or processing plants or facilities within this State.
(c) It is the intent of this subsection to exempt only such machinery and equipment as shall be utilized directly in the actual manufacturing or processing operation at any time from the initial stage where actual manufacturing or processing begins through the completion of the finished article of commerce and the packaging of the finished end product. The term ‘directly’ as used in this Act is to limit the exemption to only the machinery and equipment used in actual production during processing, fabricating or assembling raw materials or semi-finished materials into the form in which such personal property is to be sold in the commercial market. Hand tools, buildings, transportation equipment, office machines and equipment, machinery and equipment used in administrative, accounting, sales or other such activities of the business involved and all other machinery and equipment not directly used in the manufacturing or processing operation are not included or classified as exempt.
* * *
(e) For the purposes of this subsection, the term ‘manufacturing’ and/or ‘processing’, as used herein, refer to and include those operations commonly understood within their ordinary meaning, and shall also include mining, quarrying, refining, extracting oil and gas, cotton ginning, and the drying of rice, soy beans and other grains.”

POINT I. To deny the exemption the Director takes the position that an old railroad tank car is neither raw material nor semi-finished material within the meaning of the statute, supra, and furthermore, the appellant’s operation is one which is commonly understood as a “salvage operation.” We disagree with both contentions. In the first place the Director has given us no authority and we know of no authority that would exclude an old railroad tank car from being “raw or semi-finished materials” to a culvert manufacturer. In fact, in view of the ruling by the American Association of Railroads, the old tank cars would have been only so much scrap iron had not appellant through its ingenuity and labor fabricated a cylinder therefrom that could be used as a culvert. Furthermore, appellant’s operation is not the common or ordinary salvage operation where a próduct is disassembled and sold as used parts, for in this instance the appellant through its fabrication forms a culvert that actively competes in the market with culverts made from corrugated metal — the Director concedes that the persons engaged in the fabrication of corrugated metal culverts are engaged in the manufacturing process within the meaning of the exemption.

Consequently, we conclude that under the stipulated facts, appellant is a manufacturer of culverts within the meaning of the tax exemption, supra.

POINT II. The Director’s contention that the locomotive cranes and the 72 inch magnet are not used “DIRECTLY” in manufacturing is contrary to the position we took in Cheney, Commissioner v. Georgia-Pacific Paper Corp., 237 Ark. 161, 371 S.W. 2d 843 (1963). We there held that a piece of machinery was “directly” used in the manufacturing process when the item was an integral part of the plant and the removal of the item would stop the operation. The machinery here involved is not only an integral part of the operation but the operation in fact could not be performed without the use of the machinery.

POINT III. Finally the Director contends that the machinery here involved is not exempt because it is transportation equipment. In doing so he relies upon Heath v. Midco Equipment Co., 256 Ark. 14, 505 S.W. 2d 739 (1974). In that case we held that dump trucks used to transport rock from the quarry site to the rock crusher were not exempt because they came under the classification of “transportation equipment” which was excluded by the last sentence in Ark. Stat. Ann. § 84-1904 (r) (2) (c) (Supp. 1973). Of course the dump trucks there could not have been classified as “only the machinery and equipment used in the actual production during processing, fabricating or assembling raw materials or semi-finished materials” because (1) they were not an integral part of the operation and (2) they were only used for the transportation of the rock from the quarry site to the processing site and during that time no processing or fabricating occurred. Here however, the machines are used as tools not only to move but to hold and position the old railroad tank cars during the time that the culverts are being fabricated and as such tools the machines are a necessary and integral part of the operation. While “transportation equipment” is obviously a mode of conveyance it does not necessarily follow that every mode of conveyance is “transportation equipment” within the meaning of the statute. Thus we find from the stipulated facts that the trial court erred in classifying the machinery here involved as “transportation equipment.”

Reversed and remanded.

Harris, C.J., and Jones, J., dissent.


source: Caselaw Access Project

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

license: Public Domain

text:
    ARKANSAS STATE HIGHWAY COMMISSION v. M.E. WITKOWSKI et ux
    74-236
    519 S.W. 2d 743
    Opinion delivered February 24, 1975
    [Rehearing denied March 24, 1975.]

      Thomas B. Keys and Philip N. Gowen, for appellant.

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

The jury awarded compensation in this eminent domain proceeding in accordance with the testimony of C. V. Barnes, an expert witness called on behalf of appellees M. E. Witkowski, et ux. For reversal of the $155,-000 judgment the Arkansas State Highway Commission makes the following contentions:

“I. The court erred in denying appellant’s motion to strike the before value testimony of C. V. Barnes, expert witness for the landowners.
II. The court erred in allowing appellees to establish in the presence of the jury that an appraiser who had made an appraisal of the subject property for appellant was not called to testify.”

POINT I. The record shows that appellant condemned 79.35 acres which ran diagonally across appellees’ ownership of 269 acres. C. V. Barnes testified for the landowner arriving at a total before valuation of $363,000 and an after valuation of $208,000. After testifying that he placed an assemblage value on the property, the record on direct examination shows:

“Q. What is assemblage value, explain that to the jury, please, sir?
A. Well, assemblage value can be made up of a number of things. First, assemblage primarily talks about size of Two Hundred Sixty Nine Acre parcel of ground such as the Witkowskis had is more flexible and conducive to development than like say a forty acre tract of ground because there are certain fixed expenses that have to be written off in any development and the larger the development, the more you have to write the fixed expenses off of. Also, when you have a development large enough to take advantage of multi-family and commercial use, why that goes into the element of assemblage.
Q,. So that . . .
A. In a Forty acre tract, it would be very, very hard to get commercial and multi-family and single family all on one tract of ground, so that when you get a large acreage that comprised of seven forty acre tracts, so to speak, you do have this capability.
Q. So the size of the property in other words, the size of this particular piece of property does increase its value in your opinion?
A. In my opinion, yes, sir.”

On direct in showing how he arrived at his before value the witness testified as follows:

“Q. All right, sir, so in looking at the trend and using that as a factor in determining the fair market value of raw land in this area, particularly Mr. Witkowski’s what did you come up with as to value per acre?
A. After making all of my studies and analysis, I came to the conclusion that Mr. Witkowski’s property on the raw land basis and in let’s say forty acre segments, more or less, had a value of a Thousand Dollars per acre.
Q. And you add to that, I believe you have already testified, you add to that . . .
A. Well, I didn’t ... let me back up and put it this way. I valued Mr. Witkowski’s property before the taking at Thirteen Hundred and Fifty Dollars an acre, and as I just said, I felt like based on my study of the sales and there were no sales out there of Two Hundred and Sixty Nine acres, hunted all over that end of the world to find anything comparable in size, most of the market data was of the sizes that we have talked about, so I came to the conclusion that in small parcels or smaller parcels that the value of the property was a Thousand Dollars and that the fact that over a period of some four or five years, he had put this Two Hundred Sixty Nine acres together into one parcel, thereby increasing its potential and adaptability and all kinds of things, that it had an assemblage factor of Two Hundred Dollars per acre.
Q. Over and above the Thousand?
A. Over and above the Thousand, and that the improvements that had been constructed on the property made a contribution of a Hundred and Fifty Dollars per acre to the property and that’s the way I got my Thirteen Hundred and Fifty Dollars per acre.
Q. Or Three Hundred and Sixty Three Thousand Dollars before market value.
A. That’s correct.”

On cross-examination the witness testified that the property remaining had a value of $1100 per acre. With reference to the assemblage value the record shows only the following:

“Q. I want to ask you about that assemblage business. How did you arrive at that Two Hundred Dollars an acre assemblage value?
A. Well, based on judgment and experience, I would say, and based on the fact that the, for example, let’s just talk about the three sales that Mr. Witkowski . . .
Q. I want to talk about them, go ahead.
A. One of the sales, of course, the highest price sale was for Eight Hundred and some odd dollars per acre and it had access. The other two sales, one at Five Hundred and the other at Six Hundred and Fifty Dollars, if I remember my figures about right, didn’t have access and so that right there would indicate to me that property with access was worth more than that without and when the last two sales, for example, were purchased, that increased their value because they then had the same access as all the rest of them, so that’s one of the factors that go to make up the assemblage value. Now, another thing is that when you talk about a small tract of ground like the Curtis sale which was the forty acre tract, the only potential for it would be . . . well, let’s put it this way, the potential for a forty acre tract is not as great as Two Hundred and Sixty Nine acres, when you get to Two Hundred and Sixty Nine acres, you’ve got a big enough unit to start planning and relating commercial and multi-family uses on the property where you cannot do that on smaller tracts and thus commercial potential created by putting smaller pieces together into a big block enhances its value.”

The witness’ definition of “assemblage” corresponds generally to the definition of “plottage” as defined in Black’s Law Dictionary 4th Ed. — i.e., “A term used in appraising land values and particularly in eminent domain proceedings, to designate the additional value given to city lots by the fact that they are contiguous which enables the owner to utilize them as large blocks of land.” However, this is a separate and distinct item from that which occurs when access is given to a landlocked tract because in the latter instance the enhancement in value accrues only to the landlocked portion whereas the enhancement from “assemblage” or “plottage” is to the whole property.

We readily recognize that “assemblage” or “plottage” is an element that may be taken into consideration in arriving at the valuation of property but like all other elements to which a damage factor is assigned an expert witness on cross-examination must demonstrate that he has some reasonable basis for assigning a particular amount of damage. In this instance the $200 figure comes to 20% of the value of the land and if we should accept his answer that the $200 figure is based “. . . on judgment and experience” then we know of no rationale that would prevent the same witness from using a $2000 figure.

However, at the outset we are confronted with the problem that the only motion to strike was made at the close of the direct examination of the witness. Of course, at that time the trial court properly refused the motion to strike, Ark. State Highway Comm. v. Johns, 236 Ark. 585, 367 S.W. 2d 436 (1963). The motion to strike was not renewed at the end of the cross-examination. Consequently, appellant is not in a position to claim error on the part of the trial court, Mo-Pac R.R. v. McDaniel, 252 Ark. 586, 483 S.W. 2d 569 (1972).

In its argument appellant proceeds on the theory that there is no substantial evidence to support the award but it cannot avail on this issue because at least one other expert arrived at a difference between a before and after value of $164,000 and it is not contended that he had no basis for his opinion.

POINT II. In accordance with our decision in Arkansas State Highway Commission v. Phillips, 252 Ark. 206, 478 S.W. 2d 27 (1972), the landowners submitted evidence to the jury to show that the Highway Commission had used a number of appraisers to appraise the property in question that were not called to testify. Admittedly this was done to raise the inference that the testimony of those witnesses would have been unfavorable to the condemnor. The Highway Commission recognizes the binding effect of the Phillips' case, supra, but requests that we reconsider the issue. While we cannot say that the trial court erred in following the Phillips ’ case, supra, we note that it was not a unanimous decision and that it is decidedly contrary to a majority of the other jurisdictions that have considered the issue — see Boyles v. Houston Lighting and Power Company, 464 S.W. 2d 359 (Tex. 1971); Lutsko v. Commonwealth Department of Transp., 13 Pa. Comwlth. 150, 318 A. 2d 361 (1974); and State Ex rel State Highway Com’n v. Texaco Inc., 502 S.W. 2d 284 (Mo. 1973). For cases involving related issues see Logan v. Chatham County, 113 Ga. App. 491, 148 S.E. 2d 471 (1966) and Whitcomb v. Whitcomb, 267 S.W. 2d 400 (Ky. 1954). Consequently, with respect to all cases being tried after the effective date of this opinion, we give the bench and bar notice that the issue involved in the Phillips’ case, supra, will be reconsidered.

Affirmed.

Fogleman and Holt, JJ., concur.

John A. Fogleman, Justice,

concurring. I concur in both the result and the majority opinion with reference to the testimony of the expert witness Barnes. I would affirm, however, even if a motion had been made to strike his testimony after cross-examination or at the conclusion of all his testimony.

I cannot, however, subscribe to the caveat that the evidentiary rule stated and applied in Arkansas State Highway Commission v. Phillips, 252 Ark. 206, 478 S.W. 2d 27, is subject to reconsideration less than three years later, during which time nothing has really changed. The discovery that the court was not unanimous certainly is not a recent or surprising one. The original ruling we approved in Phillips was made by one of the most eminent jurists ever gracing the trial bench in this state. It is supported by no less eminent authority than Professor Wigmore and for sound reasons. If there has been expert shopping by either a plaintiff or a defendant the jury has a right to know it, whether the case be in eminent domain, for personal injuries, or whatever. The question is not actually suppression of evidence. It is nonproduction.

The principle followed in Phillips was applied in United States v. Certain Land in City of Fort Worth, Texas, 414 F. 2d 1026 (5 Cir., 1969), where the court commented that the expert hired by the government but not called by it to testify was a recognized and qualified land appraiser.

It should be noted that in practically all those jurisdictions holding contrary to Phillips, the result is based to a great extent upon the premise that the expert witness is just as available to the adverse party as he is to the one by whom he was employed. Those cases cited in the majority opinion are: Boyles v. Houston Lighting & Power Co., 464 S.W. 2d 359 (Tex. 1971); Lutsko v. Commonwealth Department of Transp., 318 A. 2d 361 (Pa. Commonwealth, 1974); Logan v. Chatham County, 113 Ga. App. 491, 148 S.E. 2d 471 (1966); Whitcomb v. Whitcomb, 267 S.W. 2d 400 (Ky. 1954). Not cited there are State Highway Commission v. Earl, 82 S.D. 139, 143 N.W. 2d 88 (1966); Department of Public Works and Buildings v. Cuerine, 19 Ill. App. 3d 509, 311 N.E. 2d 722 (1974). The validity of that premise is certainly subject to question. It does not prevail in favor of a private litigant in the majority of jurisdictions that have passed upon the question.

It is quite generally held that the state in the exercise of its sovereign power may compel a witness to testify as an expert in matters affecting the common welfare, particularly in criminal cases. 31 Am. Jur. 2d 504, Expert and Opinion Evidence § 10; 97 C.J.S. 365, Witnesses, § 16. This rule has been recognized and applied in Arkansas but not extended to private litigants. See St. Francis County v. Cummings, 55 Ark. 419, 18 S.W. 461; Flinn v. Prairie County, 60 Ark. 204, 29 S.W. 459. As a matter of fact the language used in Flinn would seem to confine the rule to cases related to the enforcement of criminal laws. We said:

.... It is' the duty of every citizen to assist, within reasonable limits, in enforcing the criminal law of the state; and it is not unreasonable that he should be required, on behalf of the state, to give such information as he may possess towards the elucidation of any question arising in a criminal trial, whether that information be in the nature of expert evidence or not. He cannot be required to make any examination or preliminary preparation, nor can he be compelled to attend the trial, and listen to the testimony, that he may be better enabled to give his opinion as an expert. For any service of this kind he may demand extra compensation. But such information as he already possesses, that is pertinent to the issue, he can be made to give, whether such information is peculiar to his trade or profession, or not. There is very little probability of any great hardship being imposed on physicians by reason of this rule.

I submit that State ex rel State Highway Commission v. Texaco, Inc., 502 S.W. 2d 284 (Mo. 1973), the only remaining case cited in the majority opinion, does not support the position contrary to that of Phillips. In the Missouri case, the landowner moved to strike the testimony of three expert valuation witnesses on the ground that the state withheld an appraisal by a fourth such expert more favorable to the landowner than the other three. The landowner sought to equate this action with that of the state in Brady v. Maryland, 373 U.S. 83, 83 S. Ct. 1194, 10 L. Ed. 2d 215 (1963), where evidence favorable to the defendant was withheld by the state. Naturally the court held Brady inapplicable. Furthermore, there the landowner knew the value put on his land by this expert.

It is also generally held that an expert cannot be compelled, if unwilling, to give opinion testimony at the request or for the benefit of a private litigant. United States v. $5,608.30, 326 F. 2d 359 (7 Cir. 1964); Cold Metal Process Co. v. United Engineering and Foundry Co., 83 F.S. 914 (W.D. Pa., 1938) affirmed 107 F. 2d 27 (3 Cir., 1939); Evans v. Otis Elevator Co., 403 Pa. 13, 168 A. 2d 573 (1961); Braverman v. Braverman, 21 N.J. Super 367, 91 A. 2d 226 (1952); People v. Thorpe, 296 N.Y. 223, 72 N.E. 2d 165 (1947); Karp v. Cooley, 349 F.S. 827 (1972), 97 CJS 366, Witnesses § 16; 31 Am. Jur. 2d 504, Expert and Opinion Evidence, § 10; Annot, Compelling Expert to Testify, 77 ALR 2d 1182 (1961).

The general rule that the expert may not be compelled to testify has been applied in eminent domain cases. See, e.g., Pennsylvania Co. for Insurances on Lives and (Granting Annuities v. City of Philadelphia, 262 Pa. 439, 105 A. 630, 2 ALR 1573 (1918); Reda v. State, 62 Misc. 2d 244, 308 N.Y.S. 2d 558 (1970); L’Etoile v. Director of Public Works, 89 R.I. 394, 153 A. 2d 173, 77 ALR 2d 1174 (1959).

In Pennsylvania Co. v. City of Philadelphia, supra, the leading case on the subject, the condemner in an eminent domain case subpoenaed as expert witnesses two real estate men who objected to testifying because they had previously been employed by the landowner and had reported to him. The trial court sustained the objection on the ground that the witnesses maintained a confidential relationship with the landowner. The Pennsylvania Supreme Court said:

We think it unnecessary to decide whether or not the reason for sustaining the objection is a sound one, in view of the fact that the witnesses themselves objected to being required to testify as experts. The process of the courts may always be invoked to require witnesses to appear and testify to any facts within their knowledge; but no private litigant has a right to ask them to go beyond that. The state or the United States may call upon her citizens to testify as experts in matters affecting the common weal, but that is because of the duty which the citizen owes to his government, and is an exercise of its sovereign power. So, also, w;here the state or the United States in her sovereign capacity, charges the citizen with crime, she may, if need be, lend her power in that regard to the accused; for she is vitally interested, as such sovereign, that public justice shall be vindicated within her borders. Perhaps, also, under like circumstances, she may also lend her power in civil cases. But the private litigant has no more right to compel a citizen to give up the product of his brain than he has to compel the giving up of material things. In each case it is a matter of bargain, which, as ever, it takes two to make, and to make unconstrained.

One of the reasons why experts are not as readily available to the adverse party as to the party by whom he was employed is well expressed in language of the N.J. Court of Errors and Appeals in Stanton v. Rushmore, 112 N.J. Law 115, 169 A. 721 (1934), where the court held that expert testimony cannot be compelled. That court said:

It is quite clear, and no argument is required to demonstrate, that all knowledge which one has of the actual facts of a litigation, whether the witnesses to those facts be professional or lay, is available and such witnesses thereof amenable to subpeona and com-pellable to give evidence of such facts. On the other hand, when the experience, training, and skill acquired by years of study and practice in a given profession or calling exists, such knowledge and skill are not the property of litigants. It belongs to the professional man in his chosen occupation. Neither justice nor public policy in our view forbids that the expert shall retain such knowledge and skill free from divulgement except by his voluntary acquiescence, whether it be sought for compensation in the exercise of his skill, in the expression of his professional judgment privately, or when he is called for that purpose into a court of justice.

I submit that if we are to reconsider the Phillips rule because of holdings of cases such as those cited in the majority opinion, we must also adopt the corollary which furnishes the rationale on which those cases are based, i.e., that the expert witness is as available to the adverse party as he is to the party by whom he was employed and that he can be compelí-ed to testify. I cannot envision any enthusiasm for the adoption of such a rule by the trial bar of this state. No trial attorney could approach the presentation to a jury of an opinion coerced from a reluctant or recalcitrant witness with enthusiasm. Such a witness could never be said to be one the party opposing the one by whom he was originally employed would, in the nature of things, be expected to call if his testimony was not adverse. To say the least, a trial lawyer faced with the prospect of calling his adversary’s expert would never agree that such a witness was “equally available” to him.

The rule of Phillips is right and we should adhere to it without suggestion that someone at the trial level should not.

I am authorized to state that Mr. Justice Holt joins in this opinion.


author: J. H. Evans, Special Chief Justice.

text:
    PEEK PLANTING COMPANY, Inc. and Arden VASSAUR v. W. H. KENNEDY & SONS, Inc.
    74-156
    519 S.W. 2d 49
    Opinion delivered February 24, 1975

      Jones, Matthews & Tolson, for appellants.

      Bridges, Young, Matthews & Davis, for appellee.
   J. H. Evans, Special Chief Justice.

For convenience the appellants will be referred to as “Peek and Vassaur” and the appellee as “Kennedy”. Peek and Vassaur were two of the appellants and Kennedy was one of the appellees in J. L. McEntire & Sons, Inc. v. Hart Cotton Company, Inc., 256 Ark. 937, 511 S.W. 2d 179, decided on July 8, 1974. This appeal grows out of the proceedings of the McEntire case in which this court affirmed the trial court’s declaratory judgment that certain written contracts between Peek and Vassaur, as sellers, and Kennedy, as buyer, were valid agreements. Under these contracts Peek and Vassaur had agreed to sell Kennedy their entire 1973 cotton crops for a specified price.

The facts are not in dispute on this appeal. Pending a decision on the appeal by Peek and Vassaur in the McEntire case, in which they did not post a supersedeas bond, they made a written tender to Kennedy to deliver the cotton under a reservation of rights under Ark. Stat. Ann. § 85-1-207 (Add. 1961). In this letter Peek and Vassaur stated that if the contracts were declared invalid upon appeal that Kennedy, by accepting delivery, would be guilty of a tortious conversion and they would be entitled to damages as set forth in New-burger Cotton Company v. Stevens, 167 Ark. 257, 267 S.W. 777 (1925). Kennedy refused to accept delivery and perform under these conditions and promptly filed suit for specific performance, which was granted by the trial court in November of 1973. Peek and Vassaur took this appeal and did not supersede the order.

Peek and Vassaur contend they had the right to tender performance and reserve their rights under § 85-1-207 to sue Kennedy for tortious conversion if the contracts were declared invalid upon appeal in the McEntire case. Since Kennedy refused to perform under these conditions, Peek and Vassaur claim Kennedy breached the agreement, thus relieving them of the duty to perform. The relief they seek is a reversal of the decree of specific performance and that the cause be remanded for restitution proceedings in their favor. Kennedy contends § 85-1-207 had no application and that Peek and Vassaur were imposing conditions to their tendered performance on which they had no legal right to insist. Kennedy further contended that if Peek and Vassaur did not wish to perform they could have posted a sufficient supersedeas bond and disposed of their cottton in any manner they chose.

We agree with Kennedy’s contentions. There is very little authority available as to the meaning of § 85-1-207, which is as follows:

“A party who with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as “without prejudice”, “under protest” or the like are sufficient.”

However, our view of the situation does not require an interpretation of this statute as we believe it has no application in this instance. This section appears in the General Provisions Chapter of the Uniform Commercial Code and obviously is intended to apply only to transactions falling under the provisions of the code. The rights which Peek and Vassaur had, in the event of a reversal of their appeal in McEntire, were fixed by Ark. Stat. Ann. § 27-2153 (Repl. 1962), which is as follows:

“If any judgment of the Circuit Court shall be reversed by the Supreme Court on writ of error or appeal, and such judgment may have been carried into effect before the reversal thereof, such defendant may recover from the plaintiff in such judgment the full amount paid thereon, including costs, by an action (of the debt or on the case) for so much money had and received to his use.”

Ark. Stat. Ann. § 27-2156 (Repl. 1962) makes the provisions of § 27-2153 applicable to cases in Chancery. Where, as here, the delivery of property rather than a money judgment is involved, these statutes have been construed to provide for restitution of the identical property upon reversal, and if this cannot be done, then a recovery may be had for the value of the property. Mothershead v. Douglas, 219 Ark. 457, 243 S.W. 2d 761 (1951); Dodson v. Butler, 101 Ark. 416, 142 S.W. 503 (1912). The rights of Peek and Vassaur upon appeal in McEntire were fixed, as a matter of law, by these statutes and court decisions and they could have performed pending their appeal without losing these rights. Obviously, § 85-1-207 had no application to the situation.

If the contracts had been held invalid on appeal in the McEntire case Kennedy would not have been guilty of a tor-tious conversion as claimed by Peek and Vassaur in their tender of performance with reservation of rights. Berthold-Jennings Lumber Company v. St. Louis, I.M.&S. Railway Company, 80 F. 2d 32 (8th Cir 1935); Dodson v. Butler, supra; 5 Am. Jur. 2d 424, Appeal and Error, § 997. In Dodson v. Butler at page 421 of 101 Ark. the following statement is made in this regard:

“But an erroneous judgment is valid until it is reversed. By the rendition of such judgment, it is the Court which makes the mistake, and not the party in whose favor it is rendered. The judgment, though erroneous, is not void, and protects all persons acting under it until it is reversed.”

The measure of damages under § 27-2153 and court decisions thereunder is different from damages growing out of a tortious conversion of cotton. Therefore, Peek and Vassaur, under the conditions they imposed, had no right to require performance by Kennedy. Also, Peek and Vassaur could have avoided performance by posting a supersedeas bond, which they chose not to do.

Affirmed.

Harris, C.J., and Fogleman and Byrd, JJ., disqualified and not participating. Special Justice Henry Woods and Special Justice Winslow Drummond join in the opinion.


author: Charles M. Conway, Special Justice. William K. Ball, Special Justice. Charles M. Conway, Special Justice,

text:
    Sam A. WEEMS v. THE SUPREME COURT COMMITTEE ON PROFESSIONAL CONDUCT
    74-143
    523 S.W. 2d 900
    Opinion delivered February 24, 1975
    [Supplemental Opinion on Denial of Rehearing June 16, 1975, p. 685-A.]

      Zachary D. Wilson and Stuart W. Hankins, for appellant.

      John P. Gill and Thomas M. Bramhall, for appellee.
   Charles M. Conway, Special Justice.

The appellant, Sam A. Weems, has appealed from a judgment of the Circuit Court of Arkansas County, Northern District, rendered on November 14, 1973, finding him guilty of unprofessional conduct as an attorney at law, canceling his attorney’s license and barring him from engaging in the practice of law in this State.

From the entire record including the pleadings and transcript of testimony in this case, we find the pertinent facts to be as follows:

The Supreme Court Committee on Professional Conduct, hereinafter referred to as the “Committee”, after receiving information, commenced an investigation of the alleged professional misconduct of Sam A. Weems, a licensed attorney in Arkansas engaged in the practice of law principally in Prairie County and Arkansas County. The appellant was notified of the charges of professional misconduct and that a hearing would be held before said Committee. A hearing was had before the Committee where the appellant appeared in person, the charges were fully presented and thereafter the Committee filed a complaint in the Circuit Court of Arkansas County, Northern Division. A trial being had, judgment was entered against the appellant, which is the subject of this appeal. The complaint alleged three (3) charges of gross professional misconduct against the appellant; Charge I arising from representation of Roe Minton, sometimes referred to as “Minton”, Charge II arising from representation of Leroy, Catherine and Vivian Van Houten, sometimes referred to as “Van Houten”, and Charge III arising from representation of Thurston National Insurance Company, sometimes hereinafter referred to as “Thurston”.

Roe Minton Charge.

Roe Minton, of Hazen, Arkansas, employed the appellant to represent him in a claim on a health insurance policy against the Prudence Mutual Casualty Company, hereinafter referred to as “Prudence”. The appellant thereafter, as attorney for Minton, filed suit against Prudence and on January 3, 1970, secured a consent judgment in favor of Roe Minton for $5,000.00. Prudence was placed in receivership and on May 17, 1971, the appellant received a check from the receiver for $5,000.00, payable to the order of “Roe Minton and Sam A. Weems, Attorney”. Appellant did not promptly notify Roe Minton of the receipt of these funds, and on the same day caused an endorsement of Roe Minton’s name to be placed on the draft and deposited it in the appellant’s checking account at the Citizens Bank of Carlisle, Carlisle, Arkansas, hereinafter referred to as “Carlisle Bank”. Roe Minton did not authorize the endorsement of the draft. (Appellant contends otherwise as will be hereinafter discussed.) The checking account in the Carlisle Bank was not identified as a trust account and was the depository of other funds belonging to the appellant and checks were drawn by appellant on said account for the payment of monies owed by the appellant to other clients, personal expenses, and business expenses. Thereafter, Roe Minton, in order to pay his bills, borrowed Twelve Hundred Dollars ($1,200.00). In January, 1972, the appellant, with Roe Min-ton and Mrs. Minton, at a cafe in De Vails Bluff in discussing Minton’s insurance claim stated: “Now you understand your money is up there but we are not going to accept it until they pay you the back premiums and interest on those back premiums that they are supposed to pay.” The appellant did not say that he had received the money. Two weeks later, on January 22, 1972, Roe Minton died without receiving payment from the appellant. On the Saturday following the burial of Roe Minton, Mrs. Minton called the appellant to inquire if Roe Minton’s death would interfere with the collection of the money from the insurance company and the appellant stated, “No ma’am, I have already contacted them and they are ready to settle, and you should be getting a check in a few days”. When the check did not arrive from the appellant, Dwight Minton, son of Roe Minton, went to the office of Mr. Max Sears, the receiver for Prudence, at which time he was shown the original check for $5,000.00 made by the receiver payable to Roe Minton and Sam A. Weems, attorney, which had been deposited in Sam Weems’ account in the Carlisle Bank on May 17, 1971. Thereafter, on February 24, 1972, the appellant caused to be delivered to Mrs. Minton a check payable to her in the amount of $3,333.34, drawn on the trust account of Sam A. Weems, attorney, with the notation thereon “insurance settlement less legal fees”. From the date of the receipt of the $5,000.00 from the receiver of Prudence on May 17, 1971, until delivery of the check for $3,-333.34 to Mrs. Minton on February 24, 1972, there were occasions when the funds on deposit in the Carlisle Bank and all other accounts of appellant in other banks, including a trust account in the Farmers and Merchants Bank, did not have sufficient funds therein to pay the $3,333.34 owed to Roe Minton or his estate.

The appellant did not have the authority to use Roe Minton’s money, and the appellant borrowed money in order that the check sent to Mrs. Roe Minton could be honored. The appellant had a trust account in the Farmers and Merchants Bank in Des Arc, Arkansas, from the time the receiver’s check was deposited in Sam Weems’ personal account until February 24, 1972, and the appellant knew the purpose of a trust account.

The Van Houten and Thurston Charges.

Catherine Van Houten and Vivian Van Houten, wife and daughter respectively of Leroy Van Houten, were injured while driving in a motor vehicle belonging to Leroy Van Houten as a result of a collision with Loretta Thompson. Leroy Van Houten employed the appellant as an attorney to represent Van Houten and his wife and daughter in their claim against Loretta Thompson. Leroy Van Houten’s automobile was insured by Thurston National Insurance Company, and it employed the appellant to represent it in a subrogation claim for damage to the motor vehicle against Loretta Thompson, who was insured by Allstate Insurance Company, hereinafter referred to as “Allstate”. On July 14, 1970, appellant filed suit in Prairie Circuit Court as attorney for the Van Houtens for their claims, and as attorney for Leroy Van Houten on the subrogation claim of Thurston. Subsequent to the filing of the suit, the appellant and the adjusters for Allstate negotiated for a settlement of the claims of all Van Houtens, including the subrogation claim of Thurston. On September 30, 1971, Allstate wrote three drafts and thereafter delivered the same to the appellant. One draft in the amount of $5,300.00 was payable to “Leroy and Catherine Van Houten, individually and as husband and wife, Route 1, Stuttgart, Arkansas; and their attorney, Sam Weems, Des Arc, Arkansas”. One draft in the amount of $2,-500.00, was payable to “Vivian Van Houten, Route 1, Stuttgart, Arkansas; and her attorney, Sam Weems, Des Arc, Arkansas”. One draft in the amount of $1,205.93, was payable to “Thurston National Insurance Company, 3102 West Markham Street, Little Rock, Arkansas; and their attorney, Sam Weems, Des Arc, Arkansas”. Each draft reflected thereon that it was in full settlement of any and all claims . . . arising out of the accident on June 17, 1970, in Little Rock, Arkansas. The appellant endorsed his own name on each of said drafts and thereafter, without notice and without authority, endorsed the names of Vivian Van Houten, Thurston National Insurance Company, and Leroy Van Houten and Catherine Van Houten on their respective drafts. The endorsements of the clients’ names were written so as to appear to not have been made by the appellant in order that the bank would not question the endorsements. The appellant deposited all three drafts in his account in the Carlisle Bank. None of the clients authorized the endorsement of the drafts. The checking account in the Carlisle Bank was the same account used for the deposit of the Roe Minton draft.

At the time appellant deposited the three drafts into his account at the Carlisle Bank and commenced using the funds as his own, neither the Van Houtens nor Thurston had been advised by appellant of the proposed aggregate settlement, the total amount of the settlement, nor the participation of each client in the settlement. On October 28,1971, Allstate by letter to Vivian Van Houten requested that she confirm the issuance of the draft of September 30, 1971, to her and Sam Weems in the amount of $2,500.00. Leroy.Van Houten on behalf of Vivian Van Houten replied that she had no knowledge of the draft and requested advice as to “why this claim has not been settled and if any offer of settlement has been made by you in regard to the damage to my father’s car and in regard to the injury to my mother”. Thereafter, Leroy Van Houten was requested by the appellant to execute a release for all the Van Houten claims for the sum of $6,-000.00, which amount the appellant offered to pay by personal check. Mr. Van Houten refused the offer and thereafter the appellant asked the Van Houtens to execute a release for $7,800.00. Leroy Van Houten became suspicious as to how much money Allstate was willing to pay for the claims. Leroy Van Houten met with Sam Weems and John Butram, adjustor for Allstate, on December 29, 1971, at which time Mr. Butram explained what he was willing to pay on behalf of Allstate for the settlement of all of the Van Houten claims and the Thurston claim. Mr. Van Houten did not agree to settle and thereafter on December 30, 1971, met with Mr. Butram in his office in Little Rock and for the first time saw copies of the drafts Allstate had issued on September 30, 1971, which had been endorsed and deposited by the appellant in his account. Mr. Van Houten secured the withdrawal of the appellant as his attorney and thereafter settled his claim against Allstate for the amount of $7,800.00 which Allstate paid the Van Houtens. The appellant repaid Allstate $7,500.00 on December 22, 1971, and the remaining $300.00 shortly thereafter.

No representative of Thurston ever saw the original draft from Allstate payable to it, and no representative of Thurston authorized the endorsement of the draft by appellant. Thurston had no knowledge that the claim had been settled until December 14, 1971, when they were so advised by Mr. Butram of Allstate. It was not until January 24, 1972, that Sam A. Weems paid Thurston the sum of $803.96 by check drawn on his account at the Carlisle Bank, which amount represented the balance due Thurston on its total claim after subtracting therefrom one-third (1/3) as attorney’s fees. Thurston never complained to the Committee on Professional Conduct.

The trial court concluded that Mr. Weems had violated Arkansas Statute §25-401, (Repl. 1962), Canon 1, Canon 9, Disciplinary Rules 1-102(A) (4), (6); 9-102(A) (2); and 9-102(B) (1), (3), (4), on each of the three (3) Charges, and also Canon 5 and Disciplinary Rule 5-106 on Charges II and III. From our examination of the entire record in this case, we are unable to say that the findings of the trial court, and its judgment entered thereon, were against the weight of the evidence, except for violation of Canon 1 in Charge I. Violation of Canon 1 was not alleged in Charge I.

The appellant contends that the scope of appellate review should be wider than heretofore existing on appeal from the decisions of the circuit and chancery court, and cites Rule V of the Rule of the Supreme Court, Regulating Professional Conduct of Attorneys at Law as follows: “. . . On appeal, the matter shall be heard de novo upon the record made before the trial judge, and this court shall pronounce judgment as in its opinion, should have been pronounced below.” Appellant contends that this means the appellate court is in no way committed to findings of the court below even if supported by the evidence, and should make independent findings of fact, drawing its own conclusions from the evidence, except where there is a conflict in direct facts and only the demeanor and credibility of the witness is the remaining gauge upon which a decision could result.

In Hurst vs. Bar Rules Committee of the State of Arkansas, 202 Ark. 1101, 155 SW 2d 697 (1941), the court held that proceedings for disbarment of an attorney are not criminal but civil in their nature, and as such are governed by the rules applicable to all civil actions, and hence it is required that the material allegation in such cases be established only by prepondernace of the evidence and not beyond a reasonable doubt. Further, the court said: “it seems to us that, in view of the present rules of procedures relating to disbarment, this court on appeal should give even greater weight to the findings of the lower tribunal. . .”. We reaffirm the teachings in the Hurst case, supra.

This Court’s proper task is to inquire whether the determination of the trial court was contrary to the weight of the evidence, and must affirm the judgment of the trial court if it is not against the preponderance of the evidence.

The appellant contends that he promptly notified Roe Minton of receipt of the $5,000.00 check from the receiver of Prudence, and that he had oral authority from Minton to endorse his name on the check and deposit the same and to hold the money until a complete collection could be had. A close reading of the transcript does not support the contention of the appellant. Appellant testified, “My arrangement with Mr. Minton was that when a check would come in that he would sign it and I would sign it and we would have to let it clear before we distributed any funds. We notified Mr. Min-ton of this one and he called me right after, as I recall . . . ”. Further, in appellant’s testimony, he testified as follows, “As soon as he received this particular letter, (defendant’s exhibit 10), he called me . . . ”.

The appellant received the $5,000.00 check on May 17, 1971, as reflected in a letter from the appellant of that date to the receiver which states, “I am in receipt this date of your check in the amount of $5,000.00 re: Mr. Minton’s claim.” The check for $5,000.00 reflects the endorsement of the Citizens Bank on May 17, 1971, and was therefore deposited on or before that date. The appellant testified that he gave written notification, defendant’s exhibit 10, to Roe Minton and that thereafter Minton called and gave authority to appellant to endorse and deposit the check. Had the appellant written and mailed the letter to Minton as he claimed, notifying him of receipt of the check on May 17, 1971, the same day he deposited the check in the Carlisle Bank, any call made by Roe Minton authorizing such deposit could only have been made after the written notification had been received by Minton by mail.

Also, defendant’s exhibit 10, which the defendant introduced in trial, was dated May 19, 1971, which the appellant stated was not the true date of the letter. The testimony also reveals that his usual practice with regard to copies was to make a tissue copy or to make a photocopy of the original letter. The proffered exhibit was neither a tissue copy of the original letter nor a photocopy of the original letter. It was a photocopy of a tissue copy. The learned trial judge gave no credence to defendant’s purported notice, finding that it was no doubt a fabrication and having been made as an afterthought in an attempt to implement a cover-up. Considering all the evidence with regard to this exhibit, we conclude that the circuit judge was not in error in finding that no notice of the receipt of the funds was given Roe Minton and that the appellant was unauthorized to endorse and deposit the check in his account.

With regard to notice of receipt of the funds and authority to endorse the check payable to the Van Houtens, the Van Houtens testified that they had no notice of receipt of the funds and that they did not authorize the endorsement of the check by the appellant. Although the appellant testified that he did give notice and was authorized by Leroy Van Houten to endorse the checks, ali the circumstances of the case, including the fact that Leroy Van Houten wrote Allstate inquiring about his settlement and that of his wife and daughter, lead us to conclude the circuit judge was not in error in finding no notice to and no authority from the Van Houtens.

Appellant testified that, with regard to Thurston, he had authority by reason of prior dealing with Thurston wherein he represented them and they had authorized him to endorse checks payable to them. Appellant did not produce other evidence of prior representation of Thurston. The representatives of Thurston testified that the appellant had never represented Thurston prior to this matter, and that no one in authority had authorized the endorsement by appellant and deposit of the check in the appellant’s account. They stated further that the first knowledge they had of the receipt of the check was when they were notified of it by Allstate. We conclude that the circuit judge was not in error in finding that there was no notice to nor authority from Thurston.

The appellant contends that the committee must elect to either proceed according to Ark. Stats. Ann. § 25-411 and § 25-413 (Repi. 1962) or by the Rules Regulating Professional Conduct of Attorneys, and must state such election formally.

Rule X of the Rules Regulating Professional Conduct of Attorneys is as follows:

“RULES AND SUPPLEMENT TO STATUTES. The rules adopted shall not be deemed exclusive of, but as supplemental to, the statutes of the State of Arkansas. The committee may invoke the statutes or proceed hereunder if it should elect to do so.”

Appellant has cited no authority to support his position that election must be stated. It is apparent in the case at bar, that the Committee chose to proceed as provided by the Rules, and a formal statement of election is unnecessary.

The power to regulate and define the practice of law is a prerogative of the Judicial Department as one of the divisions of government. Arkansas Bar vs. Union National, 224 Ark. 48, 273 SW 2d 408 (1954). Amendment 28 to the Constitution of the State of Arkansas reads,

“The Supreme Court shall make rules regulating the practice of law and the professional conduct of attorneys at law.”

The Court has adopted substantive rules relating to professional conduct and procedural rules relating to the enforcement thereof. The acts of the Legislature with regard to regulating and defining the practice of law are to be considered to be in aid of the judicial prerogative and not in derogation thereof. Arkanaas Bar vs. Union National, supra.

Appellant next contends that “essential facts” to the jurisdiction must appear in the record, and that the Rules require that the complaint “shall set forth the specific facts constituting the alleged misconduct”, citing Monks vs. Duffle, 163 Ark. 118, 259 SW 735, (1924). The complaint alleges that the Supreme Court Committee on Professional Conduct, as authorized by this Court, is charging in the Circuit Court of Arkansas County, the appellant, a licensed attorney engaged in the practice of law in Prairie County and Arkansas County, with gross professional misconduct. It further states that the complaint was filed after a hearing of which the appellant received notice, and at which appellant appeared, and the matters pertaining to the charges were fully presented and the committee found violation of statutes, Canons, and Disciplinary Rules. The complaint further charges that the appellant was guilty of gross professional misconduct in representing a stated client against a stated third party concerning a stated claim, for a stated period of time at a stated place, and that with regard to said representation his conduct violated certain statutes, Canons, and Disciplinary Rules proscribed by the Supreme Court. The “essential facts” required by Monks vs. Duffle, supra, appear in the record.

Does the complaint “set forth the specific facts constituting the alleged misconduct” required by Rule IV of the Rules Regulating Professional Conduct of Attorneys? The final paragraph of each of the three charges in the complaint alleges violation of a particular statute, Cannons, and Disciplinary Rules. The final paragraph of each of the three charges clearly relates to the acts of appellant in his representation of the stated client in a particular matter. Each charge informs the appellant of “specific facts” with sufficient clarity in order to permit him to prepare his defense, and, once the charge is determined, to constitute res judicata of the matter under consideration Rule IV of the Rules Regulating Professional Conduct of Attorneys is satisfied.

The appellant contends that Rule IV requires that the basis of the original complaint of professional misconduct, i.e. affidavit of complaint or statement that a member of the committee had information, is required. We do not agree. As pointed out in Armitage vs. Bar Rules, 223 Ark. 465, 266 SW 2d 818 (1954), the purpose of the procedure before the committee is to sift substantial charges from those without serious implication, and where serious, to allow the attorney a hearing, and if found in violation to bring formal charges by complaint. The rules have as their purpose the creation of a Committee to maintain the highest standards of ethical conduct in the practice of law. This purpose can best be served if there is free and easy access of information regarding the activities of members of the Bar. It is for this reason that the rules permit investigation on information from any source. Investigation by the Committee may be commenced without an affidavit being signed by the client. The nature or the form of the information which causes the committee to commence the investigation is not jurisdictional and a statement of the source is not required.

The appellant contends that with respect to alleged violations of Disciplinary Rules l-102a(4)4 and (6)6, the evidence which would show that appellant “engaged in conduct involving dishonesty, fraud, deceit or misrepresenation, or engaged in any other adverse conduct” is not of sufficient degree or certainty or character to constitute the required culpability. We do not agree. In all three charges, there was active concealment of the receipt of funds. The endorsement of the drafts was deceitful and the use of the money for his own purposes dishonest. Advising Roe Minton that he was not going to accept the money at a time when he had already deposited the same in his bank account and seeking to obtain a release for $6,000.00 from the Van Houtens at a time when $7,800.00 had already been received by him and placed in his bank account was dishonest, deceitful, fraudulent, and a misrepresentation of the true facts. The intention to permanently deprive the clients of the appropriated funds is not necessary, and the action of the appellant in dealing with his clients was a continuing one of fraud, deceit, misrepresentation, and dishonesty. The appellant had the benefit of the use of the clients’ money and deprived them of its use to their damage.

The trial judge entered a permanent disbarment order. Although the charges proved against the appellant are serious and demonstrate an unfitness to practice law, we feel that in view of all the circumstances of the case the judgment should be modified.

We conclude that Sam A. Weems should be disbarred as an attorney at law for a period of three years for a period from November 14, 1973, the date the judgment of the Trial Court was entered, and that his license and right to practice law in the State of Arkanaas should be revoked. Further, should Sam A. Weems, at the end of the period of disbarment, make application for readmittance to the practice of law, the State Board of Law Examiners shall at that time determine his fitness to practice law.

It is so ordered.

William K. Ball, Special Justice, concurs. Byrd and Holt, JJ., disqualified.

Supplemental Opinion on Denial of Rehearing delivered June 16, 1975

523 S.W. 2d 900

William K. Ball, Special Justice.

Each of the parties has petitioned for rehearing, and after carefully considering these petitions we have reached the conclusion that both should be denied.

The appellant’s petition for rehearing, which is primarily a reiteration of some arguments he made previously, does not move us to further words.

In its petition for rehearing the appellee forcefully urges that nothing short of permanent disbarment will square with the Opinion of this Court handed down February 24, 1975. Agreeing that the appellee’s position in this respect is well taken, we feel compelled to supplement our earlier opinion to explain why we reached the decision to disbar the appellant for three years instead of permanently.

Considering the record before us — and it is a good one — we unhesitatingly find that the appellant has been guilty of professional misconduct of a serious nature and adversely reflecting upon his fitness to practice law. Therefore, it is the duty of this Court, as the enforcing agency charged with the responsibility of maintaining the highest standards of professional and ethical conduct by lawyers licensed to practice law in the State of Arkansas, to take appropriate disciplinary measures.

It has been proved to our satisfaction that the appellee, in addition to being guilty of conduct prohibited by Ark. Stat. Ann. § 25-401 (Repl. 1962), violated certain of the Disciplinary Rules set forth in the Code of Professional Responsibility prepared by a special committee of the American Bar Association and recently adopted by this Court. In the “Preliminary Statement” prefacing this code it is said, “The severity of judgment against one found guilty of violating a Disciplinary Rule should be determined by the character of the offense and the attendant circumstances.”

Certain attendant circumstances not mentioned in our earlier opinion but having relevance tending to mitigate the severity of judgment against this lawyer are (1) the lack of evidence of past professional or personal misconduct on his part, (2) the fact that his professional misconduct which brought on these charges fell short of being criminal in nature, (3) the fact that his clients received all moneys to which they were entitled, and (4) the generally cooperative actions of this lawyer during the course of the investigation by the appellant.

In our earlier opinion it was stated that “* * * the actions of the appellant in dealing with his clients was a continuing one of fraud, deceit, misrepresentation, and dishonesty.” Actually, we are convinced that the appellant’s professional conduct in issue, though inexcusable, resulted in the main from inattention, disregard and neglect, and not from a conscious desire or plan to permanently deprive his clients of their money. Thus, even though this conduct adversely reflects on his fitness to practice law and was improper in several respects, nonetheless it should not have been characterized as “a continuing one of fraud, deceit, misrepresentation, and dishonesty.”

The decision should not be interpreted to indicate that this Court has taken or will hereafter take a “soft” position or a “hard” stance or some middle ground in disciplining wayward members of the bar of the Court. It does evidence this Court’s dedication to requiring that the attorneys on its rolls fulfill their professional responsibilities and maintain the highest standards of ethical conduct. Each disciplinary proceeding stands separate and apart from any other; and what we are saying here in the case of Sam A. Weems is that, while the charges of professional misconduct against him have been satisfactorily proved, and while a persuasive case for permanent disbarment has been presented, considering the character of the offenses and the attendant circumstances justice will be best served by disbarment for a period of three years as ordered in our earlier opinion, with his readmittance to the practice of law being subject to the conditions specified in that opinion.

Petitions denied.

Charles M. Conway, Special Justice, concurs.

Byrd and Holt, JJ., not participating.

Charles M. Conway, Special Justice,

concurring. I concur that the petitions for rehearing should be denied.

I would not modify the findings of the Trial Court by characterizing the acts of the attorney as resulting from inattention, disregard and neglect.

The judgment of disbarment was for a period of three (3) years with readmittance being conditioned upon the attorney’s application for readmittance and a determination at that time of his fitness to practice law. Such judgment requires that should the attorney again desire to practice law that he maintain a competence in the law during his disbarment period to be tested as required of all other applicants. In addition the applicant would have the burden of proving to the satisfaction of the Committee on Admissions that it was reasonable to expect that he would comply with the Conduct of Professional Responsibility adopted by this Court. The conditions of readmission are such as to assure that those who are admitted to practice law are worthy of the privilege.


author: Carleton Harris, Chief Justice.

text:
    Edward FARLEY, d/b/a STAMPS BUILDERS SUPPLY v. Mr. and Mrs. Charles JESTER et al
    74-246
    520 S.W. 2d 200
    Opinion delivered March 3, 1975

      Keith, Clegg & Eckert, for appellant.

      Graves & Graves, for appellees.
   Carleton Harris, Chief Justice.

Appellees, Mr. and Mrs. Charles Jester, desiring to build a home, requested appellant, Edward Farley, a builder, to examine their plans and submit a contract price. After some discussion on a couple of occasions, the parties met at the home of the Rev. Glen A. Park, Sr., father of Mrs. Jester, a minister and a manufacturer of furniture cream. Subsequent to this meeting, the house was built. During construction, Jester was submitted monthly invoices, and money was paid to Farley as per the invoices, until January, 1973, when the December, 1972 invoices were presented, these invoices including charges by subcontractors, and air conditioning and tile charges. Portions of the invoices were paid at that time, making total payments to Farley of $53,000. According to Farley, Jester said that he did not have sufficient money to pay the complete amount of the invoices, and he was going to see his father-in-law to ascertain if the latter could help in raising the money. Further conversations were held, but on March 7, Jester directed a letter to Farley in which Jester stated:

“I have again reviewed the invoices you have submitted for construction of my home in Forrest Hills, and find that there is a grand total amounting to $60,523.92 — of which $53,000.00 has been paid to you.
“You will remember that our agreement was for you to construct a home for $50,000.00 or less, with me furnishing the home-site and carpeting for the floor.
“Advances were given to you toward the completion price and they amount to $3,000.00 more than the agreed maximum total. This $3,000.00 additional was paid to you without my waiving any of my rights or remedies under our original agreement.
“Actually, you never completed the house; the gutters, sidewalks, yard leveling and general clean-up were by someone other than you — yet you want approximately 21% more than agreed upon.
“Please be advised that I feel you have been paid in full and cannot remit additional funds.”

Thereafter, Farley instituted suit, which, after amendment, sought recovery in the total sum of $7,523.92. The Jesters answered, asserting that appellant had been completely paid for all services performed and materials delivered. Trial started on July 26 and was continued on July 28. During these hearings, the question arose of whether the chancellor was prejudiced because of his association with one of the witnesses for appellee. At the conclusion of the evidence on that date, the chancellor rendered some findings. Thereafter, on August 7, written motion was filed by appellant suggesting that the chancellor recuse himself, and this motion was denied on August 20. Subsequently, a record was made on the motion, and further proof was taken in the case. After additional hearings, on February 5, the court entered its final decree rendering judgment for Farley in the amount of $1,530.59. From such judgment, appellant brings this appeal, and for reversal relies upon two points, viz-, “The court erred by refusing to recuse himself” and “The court erred in imposing a $50,000 limitation on the construction price.” Since we think Point I is dispositive of the litigation, Point II will not be discussed.

During cross-examination of Mr. Park, the record reflects:

“Q. Mr. Park, you testified to two of three things about the agreement. One of them you said was $50,000 plus 10%.
A. That was a slip of the tongue. The total cost of that house as I understand it was on a cost plus basis.
Q. Well, it’s based on a slip of a lot of tongues because people don’t agree with what was said. That’s the reason I’m using that question in this case.
A. Well, I resent that statement. I didn’t get on this witness stand to lie. I came up here to tell the truth and that’s what I’m trying to tell you.”
AT THIS POINT, THE ABSTRACT REFLECTS THAT THE COURT GOES “OFF THE RECORD” AND THEN PICKS UP WITH THE FOLLOWING:
“MR. ECKERT: My clinet is going to be impaired. He’s telling the truth too. I won’t agree to what this witness testified to. We’ll have to impeach him. There is no way I can question him.
THE COURT: I want you to do that. It might be more difficult as far as I’m concerned for you to impeach his credibility than it would be of Mr. Jester. Fact the matter is, I knew Ed Farley in business at Stamps and I thought well of him, but didn’t know him as well as I do this fellow.
MR. ECKERT: I’m quite concerned about the possibility of trying a lawsuit in which anyone is held in the Court’s esteem in such a great favor. It causes too great a burden. I’ll go ahead.
THE COURT: Mr. Park, in view of what I have said here, Mr. Eckert is going to try to get rough with you. Keep your temper.”

As previously stated, the trial continued and at the conclusion of the first hearing, the court made some findings.

It has already been pointed out that appellant had filed a motion for the chancellor to disqualify himself. Appellees argue that the motion for disqualification was not timely, i.e., it was not made at the time the issue arose; that though appellant’s attorney indicated concern about going ahead with the suit, he did proceed with the trial, and authority is cited to the effect that in order to raise a matter on appeal, objections or motions must be timely made. Appellee states that appellant, after some findings of the chancellor had been rendered, should not be permitted to then question the qualifications of the court. This argument does not settle the issue for it is the contention of appellant that the motion for disqualification was made at the first hearing during the time that discussion between court and counsel was “off the record.”

■This seems an appropriate time to mention the subject of courts going “off the record.” The present instance is by no means the first that has occurred; rather, it has been done over the years by many courts, and this court is accordingly left in the dark as to what actually was said or transpired. Of course, there are some matters relating to procedure to be followed, or. matters of a similar nature which do not justify lengthening the record, but let it quickly be said that any phase of the trial which relates to the testimony, other evidence, or is pertinent in any way to a determination of the litigation, should be included in the record. In other words, “If it is worth saying, it is worth placing in the record.”

In the present case, at a subsequent hearing, witnesses testified relative to what occurred during the “off the record” discussion between court and counsel. Counsel for appellant stated that the chancellor had said that the court was closely connected with the witness Park; that if the chancellor had known that Park was going to be a witness he would have excused himself, and that whatever Park testified to would be the findings of the court. The chancellor responded that he did not remember saying that what Mr. Park testified to would be the verdict of the court, and did not believe he said it; that what Park said wasn’t the verdict of the court, in his opinion. He said that he considered Park to be a man of integrity and that what he had sought to do was to place appellant’s counsel on notice that Park was a man he knew and that he had considerable confidence in whatever Park might say under oath and he just wanted counsel not to go easy on him because he was a preacher and because the chancellor had stated that he knew him well. He reiterated that what Park said would not dictate what the court determined, though “It may have o'utweighed some of the other testimony.” The chancellor stated that he had had no business or social relationship with Park for ten years.

Counsel for appellee testified that the chancellor told counsel for appellant that he would have to cross-examine Park in a “tough manner or something like that to discredit his testimony,” but that he did not recall whether or not the court said the testimony of Park would be the findings of the court, or words to that effect. He did remember an objection to the court’s remarks, but did not remember if it were made at that time. The witness said that he remembered the chancellor commenting that he did not know Park was going to be a witness in the case, but he did not remember whether the chancellor said anything about whether he would have disqualified.

Park testified that he recalled appellant’s counsel objecting to the court’s comments but did not recall any of the alleged remarks made by the court.

ITarley testified that'Park was asked a question that he objected to and feelings were “raised a little bit”, and the court stopped the case and told the court reporter, “This would be off the record.” Farley said that the chancellor stated that he had known Park over 20 years and if he (the chancellor) had known that Park was going to testify, he would have disqualified himself. He then stated that the chancellor said that “Whatever Mr. Park testifies in this case will be the findings of the court”; that appellant’s counsel had objected.

Probably the most significant testimony of all is that of Mr. Charles Jester, one of the appellees in the case. Jester said that he was present in the courtroom during the entire hearing and that during the cross-examination of his father-in-law, Mr. Park by counsel for appellant, a question was asked by counsel in a tone that was “sensitive to my father-in-law,” who responded that he resented the line of questioning that counsel was taking, and “the way you are asking it has to do with my integrity and honesty.” The witness said that the chancellor remarked to counsel “that I want to also tell you that I have known this man for a long time and I know him to be an honest man, and that he has a good reputation. If I had known ahead of time that he was going to testify in this case, I wouldn’t have been presiding, but I want to state also I have known Mr. Farley for a long, long time, and he was connected with some type of court over in Stamps, and I know Mr. Farley also, but I do not know the Jesters.” He said that he did not recall the court making any statement that his father-in-law’s testimony would be the verdict or the findings of the court. Mr. Jester responded to a question asked by appellant’s counsel as follows:

“You objected to the fact the Judge making a statement like that and you suggested that he should disqualify himself or declare a mistrial. He might not have used the word ‘mistrial’ but that’s the way I’ve got it in my mind.”

The witness said that he did not gather that the chancellor and his father-in-law had had a close relationship, but he assumed that-the chancellor, being “a lay preacher and my father-in-law a preacher, they had known one another throughout the community.”

We think, under all the circumstances, the chancellor should have disqualified himself to hear this case. In so finding, we do not mean to say, nor even imply, that the chancellor had preconceived ideas or that his friendship with the Reverend Park prejudiced his findings. To the contrary, we consider this chancellor a capable jurist and a man of integrity, a reputation that he bears over the state. As pointed out by the chancellor himself, the final judgment fell far short of conforming to the contentions of appellee, who contended vigorously that the agreement limited the cost of the home to $50,000.

However, court proceedings must not only be fair and impartial — they must also appear to be fair and impartial. This factor is mentioned in a Comment found in 71 Michigan Law Review 538, entitled, “Disqualification for Interest of Lower Federal Court Judges: 28 U.S.C. § 455’, as follows:

“Another factor to be considered in a judge’s decision to disqualify is the contention that the appearance of impartiality is as important, if not more so, than actual impartiality. In 1952, Justice Frankfurter explained his disqualification in a case by stating that ‘justice should reasonably appear to be disinterested as well as be so in fact. ’ The Supreme Court gave support to this view in the due process context when in Murchison Justice Black wrote for the Court:
(T)o perform its high function in the best way ‘justice must satisfy the appearance of justice.’
More recently the Court set aside an arbitration award and stated that ‘(a)ny tribunal permitted by law to try cases and controversies not only must be unbiased but also must avoid even the appearance of bias.’ ”

Likewise, in the Code of Judicial Conduct, prepared by the Special Committee on Standards of Judicial Conduct of the American Bar Association, and adopted by this court by Per Curiam Order of November 5, 1973, the Commentary to Canon 2 points out that not only must a judge avoid all impropriety, but must avoid also any appearance of impropriety-

It seems probable that the chancellor, during the period when no record was being made, may well have commented that had he known Mr. Park would be a witness, he would not have tried the case. The attorney for appellee recalled the chancellor remarking that he did not know Mr. Park was going to be a witness, although he did not recall what was said about disqualifying. However, Mr. Jester, one of the appellees, testified that the chancellor did say if he had known ahead of time that Mr. Park would testify, he (the chancellor) wouldn’t have been presiding. This was also testified to by Farley, and the only person who recalled nothing about the remarks (not knowing Park would testify and disqualifying) was Mr. Park. The chancellor himself in stating his recollections, made no comment about this particular fact. Of course, if the court’s relationship with a witness is such that he would, with advance knowledge that that person would testify, recuse himself — then —. the matter becomes very simple — he is disqualified, and should so announce when he learns that that person will be a witness.

Actually, the statement of the court which was taken for the record, viz., “It might be more difficult as far as I am concerned for you to impeach his credibility than it would be of Mr. Jester,” could be taken as an implication that Park’s testimony would receive more consideration, and would carry more weight than some others, particularly when he added “I knew Ed Farley in business at Stamps and thought well of him, but didn’t know him as well as I do this fellow.”

What we are saying is that it is understandable that appellant could feel that he was under a handicap in the trial of this case and that he might not receive impartial treatment.

Reversed and Remanded.

      The court reporter testified that “I went off the record at that time on the instructions of the court.”