text:
    David THOMPSON v. STATE of Arkansas
    CR 98-76
    966 S.W.2d 901
    Supreme Court of Arkansas
    Opinion delivered April 30, 1998

      Linda Scribner, Public Defender, for appellant.

      Winston Bryant, Att’y Gen., by: Brad Newman, Asst. Att’y Gen., for appellee.
   Annabelle Clinton Imber, Justice.

The appellant, David Andrew Thompson, entered a conditional guilty plea to the crimes of possession of a controlled substance and possession of drug paraphernalia. The sole issue on appeal is whether the trial court erred when it denied Thompson’s motion to suppress evidence found during an inventory search of his car. Finding no error, we affirm.

On August 14, 1996, at approximately 10:00 p.m., Officer Walter stopped Thompson’s vehicle because the tail lights were not working. Officer Walter cited Thompson for not having a valid driver’s license or proof of insurance and issued him a warning for the malfunctioning tail lights. Thompson was not placed under arrest. Officer Walter then attempted to contact two or three of Thompson’s friends in an effort to find someone to drive Thompson and his vehicle home. After these efforts proved unsuccessful, Officer Walter informed Thompson that he could not leave the car on the side of the highway because it would create a safety hazard, and the car could be vandalized. Therefore, the car would have to be impounded and its contents inventoried.

Thompson assisted Officer Walter in the inventory of his vehicle. Officer Walter briefly looked in the front seat of the car with his flashlight and did not see “anything obvious” to inventory. Thompson then opened the hatchback of his car, and assisted Officer Walter in the inventory of the items contained in a tool box and a wooden box. As the two men were looking through the wooden box, Thompson asked Officer Walter if he could remove some of the items. Officer Walter responded in the affirmative and advised Thompson that even the items removed from the car would have to be inventoried. Thompson proceeded to remove some books and an eyeglasses case. Officer Walter told Thompson that he would have to look inside the eyeglasses case to inventory the property contained therein and to insure that the case did not contain a small weapon. Thompson handed the eyeglasses case to Office Walter and exclaimed: “I’m busted. Can I bond out tonight?” Officer Walter opened the eyeglasses case and found several plastic bags containing methamphetamine.

Officer Walter immediately placed Thompson under arrest, and secured him in the back seat of the police car. Officer Walter then returned to the vehicle and resumed his search. Officer Walter looked further into the eyeglasses case and discovered drug paraphernalia. Officer Walter then found in the wooden box a bong with residue, marijuana, and a razor blade. On the driver’s side floorboard, Officer Walter found a small leather purse that contained more drugs and paraphernalia.

Prior to trial, Thompson filed a motion to suppress the evidence seized from his vehicle. During the suppression hearing, Officer Walter explained that it was a standard procedure in his department to impound a vehicle and inventory its contents if the officer could not find someone to drive the vehicle for a person who did not possess a valid license. Officer Walter then testified that it was “normal procedure” to “inventory everything inside the vehicle once the inventory is started,” and that he normally inventoried “every possession of a car.” The State then introduced the following written policy which is contained in the Benton County Sheriffs “Policy and Procedures” manual:

504 Impound If you make a physical custody arrest' out of a vehicle, you may not leave the vehicle unattended. It is up to the officer’s discretion to allow someone else to drive the vehicle (with the owner’s permission); however, if this is not done, it must be impounded .... When you impound, you will conduct an inventory. This is done for the violators [sic] protection as well as your own and the department’s. You will inventory all items in the vehicle, including locked or unlocked containers.

The trial court concluded that Officer Walter was credible, and that he reasonably decided to impound and inventory Thompson’s vehicle pursuant to the written policy which passed constitutional muster. Accordingly, the court denied Thompson’s motion to suppress. Thompson then entered a conditional guilty plea to the crimes of possession of a controlled substance and possession of drug paraphernalia.

In an unpublished opinion, the Court of Appeals reversed and remanded Thompson’s conviction because it concluded that the trial court should have suppressed the evidence seized from the Thompson’s car. Thompson v. State, CACR97726 (Ark. Ct. App. Jan. 21, 1998). We granted the State’s petition for review, and consider this case as though it were originally filed in this court. Frette v. City of Springdale, 331 Ark. 103, 959 S.W.2d 734 (1998); Travis v. State, 331 Ark. 7, 959 S.W.2d 32 (1998).

The sole issue on appeal is whether the trial court erred when it denied Thompson’s motion to suppress the evidence seized from his car. When reviewing a trial court’s denial of a motion to suppress, we make an independent determination based on the totality of the circumstances and reverse only if the court’s ruling is clearly against the preponderance of the evidence. Frette v. City of Springdale, supra; Travis v. State, supra. In making this determination, we view the evidence in the light most favorable to the State, as the appellee. Id.

On appeal, neither party contests the legality of the traffic stop. Instead, Thompson argues that Officer Walter had no legal basis for performing the inventory search, or, in the alternative, that he exceeded the scope of a permissible inventory search when he looked inside the eyeglasses case. We find no merit to these arguments.

It is well settled that police officers may conduct a warrantless inventory search of a vehicle that is being impounded in order to “protect an owner’s property while it is in the custody of the police, to insure against claims of lost, stolen or vandalized property, and to guard the police from danger.” Colorado v. Bertine, 479 U.S. 367 (1987); see also Welch v. State, 330 Ark. 158, 955 S.W.2d 181 (1997). An inventory search, however, may not be used by the police as a guise for “general rummaging” for incriminating evidence. Florida v. Wells, 495 U.S. 1 (1990); Welch v. State, supra. Hence, the police may impound a vehicle and inventory its contents only if the actions are taken in good faith and in accordance with standard police procedures or policies. See Colorado v. Bertine, supra; Florida v. Wells, supra; Welch v. State, supra. In Welch v. State, supra, we clarified that these standard procedures do not have to be in writing, and that they may be established by an officer’s testimony during a suppression hearing. In accordance with these principles, we have promulgated Ark. R. Crim. P. 12.6, which states that:

A vehicle impounded in consequence of an arrest, or retained in official custody for other good cause, may be searched at such times and to such extent as is reasonably necessary for safekeeping of the vehicle and its contents.

(Emphasis added.)

I. No Arrest

First, Thompson argues that Officer Walter did not have the authority to perform an inventory search because Benton County Policy 504 refers only to inventories of vehicles that are impounded pursuant to an arrest. However, Ark. R. Crim. P. 12.6, which is broader than Policy 504, allows an officer to impound a vehicle and inventory its contents for “any good reason.” Moreover, our case law establishes that it is permissible for an officer to impound and inventory a vehicle when the driver is physically unable to drive the car, and leaving it on the side of the road would create a safety hazard. Asher v. State, 303 Ark. 202, 795 S.W.2d 350 (1990); Kirk v. State, 38 Ark. App. 159, 832 S.W.2d 271 (1992). The only difference between the case at hand, and Asher and Kirk is that Thompson was legally, not physically, “unable” to drive his car because he did not have a valid driver’s license. Finally, Officer Walter testified at the suppression hearing that it was a standard practice in his department to impound and inventory vehicles under such circumstances. For these reasons, we hold that Officer Walter was justified in impounding Thompson’s vehicle and completing an inventory of its contents.

II. Opening Closed Containers

The next issue is whether Officer Walter exceeded the bounds of a permissible inventory search when he opened Thompson’s eyeglasses case. In Florida v. Wells, 495 U.S. 1 (1990), the United States Supreme Court held that the police may open containers during an inventory search if the department has a standard procedure allowing such conduct. In accordance with Florida v. Wells, supra, the Arkansas courts have consistently held that an officer may open a closed container during an inventory search when there is some evidence that the officer did so pursuant to a standard policy. Welch v. State, 330 Ark. 158, 955 S.W.2d 181 (1997); Snell v. State, 290 Ark. 503, 721 S.W.2d 628 (1986); Kirk v. State, 38 Ark. App. 159, 832 S.W.2d 271 (1992); Folly v. State, 28 Ark. App. 98, 771 S.W.2d 306 (1989).

As previously mentioned, Policy 504 declares that: “You will inventory all items in the vehicle, including locked or unlocked containers.” By referring to locked and unlocked containers, it is clear that this standard policy requires officers to open the containers instead of recording the unopened containers as a unit. Because Officer Walter was acting in accordance with a standard police procedure when he opened the eyeglasses case, and there was no evidence of bad faith, we hold that he did not exceed the permissible bounds of an inventory search when he opened the closed container.

III. Items Removed from the Car

This conclusion, however, does not end our analysis because Thompson further argues that once he removed the eyeglasses case from the vehicle, it was no longer subject to being inventoried. We disagree. As previously explained, an inventory search is conducted for the dual purpose of protecting the owner’s property and the police from false claims of theft or vandalism. See Colorado v. Bertine, supra; Welch v. State, supra. Accordingly, Ark. R. Crim. P. 12.6 provides that an officer may conduct the inventory to the extent “reasonably necessary for safekeeping of the vehicle and its contents,” and Policy 504 declares that officers “will inventory all items in the vehicle.”

In the case before us today, Officer Walter was in the midst of the inventory and exercised some dominion and control over the eyeglasses case before he allowed Thompson to remove it from the wooden box located inside the hatchback area. Under such circumstances, we find it reasonable that Officer Walter would need to record the contents of the case to protect himself from a possible claim that he removed, damaged, or destroyed the contents before he handed it over to Thompson. Moreover, Officer Walter’s actions were in accordance with the standard police procedure of inventorying all items found in the vehicle. Based on the limited facts of this case, we hold that Officer Walter did not violate Thompson’s Fourth Amendment rights when he opened the eyeglasses case.

Even if we had concluded otherwise, Thompson’s convictions could have been affirmed pursuant to the inevitable discovery rule which provides that suppressed evidence is admissible if the State proves by a preponderance of the evidence that the police would have inevitably discovered the evidence by lawful means. Nix v. Williams, 467 U.S 431 (1984); Brunson v. State, 296 Ark. 220, 753 S.W.2d 859 (1988); Mitchell v. State, 294 Ark. 264, 742 S.W.2d 895 (1988). We think that the State sustained its burden in this case as it is apparent that Officer Walter would have inevitably and lawfully discovered the other drugs and paraphernalia in the wooden box and the leather case during his inventory search even if he had never opened Thompson’s eyeglasses case.

For the forgoing reasons, the trial court’s ruling is affirmed.


source: Caselaw Access Project

author: Ray Thornton, Justice. Hani W. Hashem, Special Justice,

license: Public Domain

text:
    FIRST COMMERCIAL BANK, N.A. v. Michael W. WALKER, Aearth Development, Inc., Aearth Preparation, Inc., and Coal Processors, A Joint Venture
    96-1495
    969 S.W.2d 146
    Supreme Court of Arkansas
    Opinion delivered April 30, 1998

      Barber, McCaskill, Jones &Hale, P.A., by: Glenn W, Jones, John S. Cherry, and Joseph F. Kolb; and Williams & Anderson, by: Philip S. Anderson, Leon Holmes, and Katharine R. Cloud, for appellant/ cross-appellee.

      The Burk Law Firm, A Professional Corporation, by: Michael G. Burk; Walker & Black, by: Kendell R. Black; and James E. Burk, for appellees/cross-appellants.
   Ray Thornton, Justice.

Plaintiffs, Michael W. Walker, Aearth Development, Inc. (Aearth), Aearth Preparation, Inc., and Coal Processors, brought the underlying lender-liability action, asserting that wrongful actions of defendant, First Commercial Bank and its predecessors (the Bank), caused the failure of plaintiffs’ coal mining, processing, and sales business in the Arkansas River Valley. This is the second appeal involving the disposition of these issues. The first appeal followed the chancery court’s judgment in favor of the Bank on all allegations after a twelve-day trial. On appeal, the jurisdiction of the chancery court was challenged, and we determined that the lower court erred in transferring the case from circuit court to the chancery court because the chancery court lacked subject-matter jurisdiction. See Walker v. First Commercial Bank, 317 Ark. 617, 880 S.W.2d 316 (1994) (Walker I). We reversed and remanded with instructions to transfer the case to circuit court, without binding the circuit court on any issue decided by the chancellor.

Individual plaintiff Michael Walker was a principal stockholder in Aearth, which formed a wholly owned subsidiary, Aearth Preparation, Inc. Aearth entered into a joint venture with other parties to form Coal Processors. We refer jointly to Aearth Development, Inc., Aearth Preparation, Inc., and Coal Processors as “the Aearth business entities.” Aearth held a 75% interest in Coal Processors, and the remaining 25% was acquired by George Locke, who is not a party to this proceeding. In addition to being a stockholder and officer of Aearth, Mr. Walker was a guarantor of notes executed by the Aearth business entities to obtain funds from the Bank and other sources of credit.

At trial in the circuit court, the Bank challenged the standing and capacity of plaintiffs as a threshold matter, and also urged the court to declare that all of plaintiffs’ claims were barred on principles of judicial estoppel because those claims were not asserted during prior bankruptcy proceedings. Over the Bank’s objections, issues of fraud, conversion, and tortious interference with contractual relations were presented to the jury, which returned a $22.5 million verdict. The court reduced this verdict by a set-off that the court determined to be greater than $7.3 million, which, together with a remittitur of $7 million from the award of punitive damages, resulted in a verdict of $8.2 million.

From this order, the Bank appeals and plaintiffs cross-appeal, together asserting seventeen claims of error. We have determined that the Aearth business entities did not have the capacity to bring the action for “lender liability” and that Mr. Walker did not have standing to pursue, either as a stockholder or guarantor, the same causes of action asserted by the Aearth business entities. Accordingly, we reverse and dismiss.

Factual Background

Mr. Walker formed Aearth Development, Inc., in 1978. Aearth entered into a joint venture with Russell Mining Company of Kansas. At the time of this joint venture, Mr. Walker owned 40% of Aearth, and the balance of the stock was held by three other persons. Some coal was produced and sold, primarily to charcoal markets. In early 1980, Russell Mining withdrew from the joint venture. At that time, Aearth owned a small bulldozer, a front-end loader, and a scraper, and depended on contractors to provide their own equipment. Aearth had not yet made a profit from its operations. An overseas purchaser expressed an interest in Arkansas coal, but the coal had a high sulfur content with sulfur in the form of pyretic sulfur or “fools gold,” which often prevented the raw product from meeting the requisite specifications.

Aearth sought development capital to enhance the quality of its product in order to compete in the market place. In December 1980, Mr. Walker engaged the investment firm of Collins, Locke, and Lasater to assist in obtaining a target of $10,000,000 in development financing. One of the principals of the firm, George Locke, became personally interested in the enterprise. On December 16, 1980, Mr. Locke persuaded the Bank to grant Aearth, which had virtually no working capital, a line of credit of $500,000, secured by the personal guarantees of Mr. Locke and Mr. Walker. By April 27, 1981, the full amount of the note had been advanced, and no repayments had been made on that note. Aearth’s inventory and accounts receivable had been pledged as collateral to the Bank, and this security agreement was never terminated.

On May 20, 1981, Aearth, Mr. Locke, and Mr. Walker acquired a second fine of credit from the Bank in the amount of $800,000. No repayments were made on this loan.

In June 1981, Aearth entered into a joint venture with Arkala Coal Company. This joint venture, Coal 'Processors, named Mr. Locke as managing agent. With Mr. Locke’s assistance, the joint venture obtained two lines of credit from the Bank, aggregating an additional sum of $1,475,000 to be used in constructing a coal-washing facility. The notes for these lines of credit were signed by Aearth, Mr. Locke, and Mr. Walker, as well as by the principals of Arkala. These notes were fully advanced and were replaced by a single note, executed on November 30, 1981, by Coal Processors, Mr. Locke, and Mr. Walker, among others.

Notwithstanding promises made in several loan agreements with the Bank to refrain from entering into other loan agreements and encumbering assets and collateral already pledged to the Bank, Aearth, together with Mr. Locke and Mr. Walker, entered into two separate agreements with other creditors using some of the same assets as security. Aearth executed a note on December 23, 1981, in the amount of $716,000 to Bono, DiGiglia, and Levingston of Louisiana; however, only about $500,000 of this note was actually advanced. On January 9, 1982, Aearth also executed a security agreement pledging its assets to Taylor Machinery of Memphis as security for $662,667.36 that Taylor Machinery advanced to Aearth.

Additionally, on December 10, 1981, the Bank advanced to Coal Processors an additional $150,000. The note for this advance was due on March 10, 1982. Aearth executed another note to the Bank on April 9, 1982, for a $300,000 loan, which was due on May 10, 1982. By April, the Aearth business entities were in default on all loans except this note that was due on May 10, 1982, and the entities owed the Bank $2,925,000, plus interest.

On April 15, 1982, Aearth borrowed $272,000 from Dan Lasater, who personally borrowed this amount from the Bank, for the purpose of paying two past due installments on Coal Processors’ $1,475,000 note to the Bank. Mr. Lasater’s demand note to the Bank was due on or before May 14, and the Bank agreed to subordinate its right to any funds received from Aearth to Mr. Lasater. Aearth committed to Mr. Lasater that this debt would be paid from the first proceeds of a specified sale of coal, and Aearth instructed the broker for the purchaser of the coal that $272,000 of the proceeds were payable to Mr. Lasater.

While the Aearth business entities had also pledged proceeds from the sale of this coal to Taylor Machinery and other creditors, the specific instructions given by Aearth to the broker did not provide for any distribution of these funds to Taylor Machinery. When the $245,823.96 proceeds from the first sale were deposited in an escrow account at the Bank, the Bank applied these proceeds to Mr. Lasater’s loan.

Taylor Machinery had become concerned about the repayment of its $662,667.36 advance, and on or about April 6, Taylor Machinery had drawn down a $300,000 fine of credit from the Bank, reducing its exposure to about $360,000. Aearth had orally represented that some of the proceeds from the first sale of coal would be applied to Taylor Machinery’s claims, and when these funds were not forthcoming, Taylor Machinery orally told Aearth to park the equipment pending some resolution of the financial problems. After several weeks, Taylor Machinery arranged to have its equipment picked up and returned to Memphis.

The Aearth business entities discontinued operations and filed Chapter 11 bankruptcy proceedings in November 1982. In December 1983, the bankruptcy court converted the Chapter 11 proceedings to a Chapter 7 liquidation. In May 1984, Mr. Walker filed a personal Chapter 7 bankruptcy petition.

Standing and Capacity of the Parties

We first consider whether, under principles of Arkansas law, plaintiffs had standing or capacity to bring an action for lender liability against the Bank. Plaintiffs argue that these issues are not preserved for our review. We disagree. The issue of standing and capacity was preserved by a timely motion for a directed verdict that was renewed at the conclusion of the case.

Plaintiffs argue further that the issues were resolved in Walker I, and that by determining that the chancery court did not have subject-matter jurisdiction, we decided these issues sub silentio and that plaintiffs have standing and capacity as a result of the law of the case and res judicata. This argument also lacks merit.

The doctrine of law of the case does prevent an issue raised and decided in the first appeal from being raised in a subsequent appeal. Bennett v. State, 308 Ark. 393, 825 S.W.2d 560 (1992). However, our decision in Walker I was predicated solely on the issue whether the chancery court had subject-matter jurisdiction. We stated expressly that we “need not address any other issues in view of the ruling on this dispositive issue.” Walker v. First Commercial Bank, 317 Ark. at 619, 880 S.W.2d at 317. Our determination that the chancery court was without jurisdiction afforded the trial court a clean slate on which to consider the entire case, including motions to dismiss for lack of standing, motions for summary judgment, and all other matters, as though the chancery court had not acted at all. Therefore, our review of standing and capacity is not barred by the law of the case.

The doctrine of res judicata likewise does not bar the circuit court’s or our consideration of standing and capacity. For res judicata to apply, the claim must have been adjudicated on the merits; this requirement presupposes that the court in which the claim was litigated properly had jurisdiction over those proceedings. Crockett & Brown, P.A. v. Wilson, 314 Ark. 578, 864 S.W.2d 244 (1993). Here, the chancery court rendered a judgment for the Bank on the merits, but we reversed that decision for lack of subject-matter jurisdiction. Therefore, the circuit court was not required by the doctrine of res judicata to adopt on remand any of the Chancellor’s holdings.

The gravamen of plaintiffs’ complaint is that the Bank’s wrongful actions damaged the Aearth business entities, breached an alleged agreement to provide long-term financing to the Aearth business entities, impaired their ability to obtain other financing, interfered with their contracts with others, and wrongfully applied funds belonging to the business entities to a debt owed by the business entities. For the reasons stated below, we have determined that Mr. Walker, as an individual, lacked standing to bring this action against the Bank for compensatory and punitive damages that the Aearth business entities allegedly suffered.

A. Standing of Michael W. Walker as individual stockholder and guarantor or comaker of business debts of the corporate plaintiffs

Looking at the three underlying tort claims, each of plaintiffs’ claims was based on allegations of the Bank’s wrongful conduct against the Aearth business entities. Plaintiffs claimed that the Bank tortiously interfered with its contractual relations regarding the performance of contracts to sell coal and the performance of various other contractual commitments. All of these allegations were based on the Bank’s actions with respect to the Aearth business entities’ performance of their contracts with third parties. To prevail on a claim for interference with a contractual relation, a plaintiff must present evidence and prove that a third party failed to continue a contractual relationship with the claimant as a result of the defendant’s improper conduct. Navorro-Monzo v. Hughes, 297 Ark. 444, 763 S.W.2d 635 (1989). Plaintiffs did not allege that the Bank’s actions caused a third party to fail to continue a contractual relationship with Mr. Walker, but rather asserted that the Bank’s conduct caused a third party to discontinue a contractual relationship with the Aearth business entities.

In plaintiffs’ fraud claim, they alleged that the Bank fraudulently induced them to enter into the November 31, 1981, loan agreement by promising to provide long-term financing for all the debts of the Aearth business entities. Similarly, only the Aearth business entities could assert this tort claim. There was no allegation that the Bank had made or breached any promise to provide financing to Mr. Walker as an individual; rather, the claim was that there was a breach of a promise to enter into long-term financing with the Aearth business entities. The Aearth business entities’ loans were guaranteed by Mr. Walker, Mr. Locke, and others; however, the Aearth business entities were the primary obligors of the loans and the holders of legal title to the assets pledged for the repayment of the loans.

The third claim that went to the jury was that the Bank allegedly converted $245,000 belonging to the Aearth business entities that had been deposited in an Aearth escrow account. Plaintiffs asserted that the premature crediting of these proceeds from the specified sale of coal to reduce Mr. Lasater’s debt to the Bank caused Taylor Machinery to withdraw its equipment, resulting in Aearth’s downfall. There is no allegation that Mr. Walker asserted any right or interest in these funds for his own individual benefit; therefore, the Aearth business entities were again the only parties who could assert, as owners, that the Bank’s actions constituted a conversion of the escrow account.

There is a near universal rule that a corporation and its stockholders are separate and distinct entities, even though a stockholder may own the majority of the stock. Banks v. Jones, 239 Ark. 396, 390 S.W.2d 108 (1965). A corporation has the power to sue and be sued in its corporate name. Ark. Code Ann. § 4-26-204(a)(2) (Repl. 1991). The court of appeals has stated that a corporation is “a legal entity which, being distinct from its members, owns the corporate property and owes the corporate debts, is the creditor to sue or the debtor to be sued, has perpetual existence, and can act only through its duly constituted organs, primarily its board of directors.” Arkansas Iron & Metal Co. v. First Nat’l Bank of Rogers, 16 Ark. App. 245, 251, 701 S.W.2d 380, 383 (1985).

Generally, the officers and members of a corporation may not sue or be sued in their own name. See 19 C.J.S. Corporations § 711, at 364 (1990). A corporate officer has no individual right of action against a third party for alleged wrongs inflicted on the corporation, even if the officer is the sole shareholder. Id. § 629, at 277.

A recent federal case provides some guidance on a similar question. See Taggart & Taggart Seed v. First Tenn. Bank Nat’l Ass’n, 684 F. Supp. 230 (E.D. Ark. 1988). In Taggart, the defendant bank had provided plaintiffs with an $18 million line of credit and repayment of the funds advanced were guaranteed by the corporations’ principal shareholders Tommy Taggart, Charles Taggart, and their spouses, as well as other guarantors. The loan was further secured by the pledge of the corporation’s equipment, facilities, and inventory. The bank considered that an act of default had occurred and terminated the agreement. The note was repaid in. full, and plaintiffs secured another line of credit. The corporation and the individual stockholders and guarantors filed a lender-liability action, with allegations including bad faith, misrepresentation, deceit, constructive fraud, interference with contractual relations, and economic loss. Id.

The court granted the bank’s motion to dismiss all parties except the corporation. Id. The district court stated that the claims of the individual guarantors that they suffered damages because of the bank’s breach of its promise to lend further money to the corporation was “an attempt to piggyback their claims on top of Taggart Seed’s.” Id. at 234. The court noted that the injuries that the individuals alleged were “incidental to and derivative of the injury alleged to the corporate entity .... To allow [the individuals] to prosecute this action in their own names would . . . violate the near universal rule that an action to redress injuries to a corporation must be brought in the corporate name.” Id.

In concluding that the claims of the individual plaintiffs were properly dismissed, the district court stated:

[T]he status of some of the plaintiffs as guarantors of the April, 1984, loan agreement does not give them standing to bring this action .... [T] he guarantors do not contend that they contributed toward the repayment of the note. The corporate entity, Taggart & Taggart Seed, Inc., is the real party in interest, not the guarantors who no longer have even a contingent liability on the note and who do not allege that they were ever called on for its repayment.

Id. at 235.

As in Taggart, there is no showing in the case before us that Mr. Walker has made any contribution toward payment of the notes that he guaranteed, even though it appears that Mr. Walker has been discharged from bankruptcy. Also, as stated above, the wrongs that plaintiffs sought to redress were corporate injuries, not injuries to Mr. Walker as an individual.

We recognize that Mr. Walker also asserted that because he was a guarantor of the various loans, he should have standing as a “party” to the loan agreements. However, the undertaking of the principal debtor, here the Aearth business entities, is independent of the promise of the guarantor, Mr. Walker. First American Nat’l Bank v. Coffey-Clifton, Inc., 216 Ark. 250, 633 S.W.2d 704 (1982). A guarantor is one who makes a contract, which is distinct from the principal obligation, to be collaterally hable to the creditor if the principal debtor fails to perform. Id. (citing 10 Samuel Williston and Walter H.E. Jaeger, A Treatise on the Law of Contracts § 1211, at 685-86 (3d ed. 1967)); see also First Nat’l Bank of Helena v. Solomon, 170 Ark. 555, 280 S.W. 659 (1926). There is no holding in any of these cases that a guaranty relationship merges with that of a principal borrower so as to allow the guarantor to pursue the borrower’s causes of action.

In Schmidt v. McIlroy Bank & Trust, 306 Ark. 28, 811 S.W.2d 281 (1991), the appellants made a similar argument that they, as guarantors, should have standing to pursue lender-liability claims on behalf of the corporate entity. In concluding that the individual appellants had no standing to sue for injuries to the corporation, we observed:

[Appellants’] argument is that when the corporation’s charter was revoked for failure to pay franchise fees, the officers and shareholders were considered to be operating the business as a partnership and were individually liable for the obligations of the defacto corporation, and since they were subjected to individual liability as partners, they ought to be allowed, in fairness, to bring suit in the same capacity. The argument, while novel, is without merit.... The effect of revocation was that the corporation lost its capacity to sue, and this particular type of corporate cause ceased to exist. To allow the individual appellants to bring this cause of action would effectively reverse prior law which prohibits suits by a corporation whose charter has been revoked ....

Id. at 33, 811 S.W.2d at 283-84 (citations omitted).

Mr. Walker’s status as a majority shareholder does not vest him with standing to pursue causes of action that belong to the corporate borrowers. Likewise, in borrowing the funds, Mr. Walker acted as a representative of the Aearth business entities and as a guarantor of the debt. Although he was shown as a “maker” on some of the loan documents, he does not have standing to maintain this action because the Aearth business entities were the principal borrowers and sole recipients of the borrowed funds. Mr. Walker acted only as a guarantor, even on those notes that he signed individually and as a representative of Aearth business entities.

We conclude that Mr. Walker did not have standing to bring this action either as an individual stockholder and officer of the Aearth business entities or as a guarantor of the debts of the Aearth business entities.

B. Capacity of the Aearth Business Entities

On November 27, 1984, before the original complaint was filed in this matter, the corporate charters of Aearth Development, Inc., and Aearth Preparation, Inc., were revoked for nonpayment of franchise taxes. The other business plaintiff, Coal Processors, was a joint venture with Aearth Development, Inc., and George Locke as the joint venturers at the time the Aearth business entities filed voluntary bankruptcy petitions on November 4, 1982. Under the terms of the agreement creating the joint venture, the joint venture dissolved and was terminated upon the bankruptcy, insolvency, or involuntary dissolution of either joint venturer. As provided in 11 U.S.C. § 301 (1994), the commencement of a voluntary bankruptcy constitutes an adjudication of bankruptcy, and additionally the revocation of the corporate charter resulted in the dissolution of the corporate entities.

In considering whether a corporation that had ceased to exist could initiate a lawsuit, we have stated:

[T]he trial judge ruled, quite properly, that a corporation not in existence could not initiate a lawsuit. This is the law. In Sulphur Springs Recreational Park, Inc. v. City of Camden, 247 Ark. 713, 447 S.W.2d 844 (1969), we affirmed a trial court’s dismissal of a complaint, because the plaintiffs corporate charter was not in existence when the suit was filed .... A suit must be initiated by a person, natural or artificial. Fausett & Co. v. Bogard, 285 Ark. 124, 685 S.W.2d 153 (1985).

Committee for Utility Trimming Inc. v. Hamilton, 290 Ark. 283, 284-85, 718 S.W.2d 933, 934 (1986). We determined that the corporation’s complaint was properly dismissed because our law provides that a corporation cannot file a complaint in court after it ceases to exist legally. Id.

From these cases, we conclude that all of the Aearth business entities lost the capacity to file suit following the dissolution of the joint venture, Coal Processors, and the revocations of the corporate charters of Aearth Development, Inc., and Aearth Preparation, Inc., on November 27, 1984.

Other Issues and Conclusion

The Bank advanced a separate argument that the doctrine of judicial estoppel bars plaintiffs’ claims in this case. Plaintiffs declared to the bankruptcy court that they had no lender-liability claim against the Bank, or that such a claim had a zero value. This representation was made under penalty of pegury, and if plaintiff in this case had standing and capacity to bring their cause of action against the Bank, we would carefully consider whether the circumstances of this case call for us to apply the doctrine of judicial estoppel.

However, having determined that Mr. Walker did not have standing to bring this action and that the Aearth business entities had lost their capacity to bring suit, we need not determine whether the principles of judicial estoppel would bar these claims or address the remaining issues presented to us for decision.

We reverse and dismiss.

Glaze, Brown, and Imber, JJ., not participating.

Special Justices J.W. Greene, Jr., and Mark Klappenbach join in this opinion.

Special Justice Hani W. Hashem concurs.

Hani W. Hashem, Special Justice,

concurring. I agree with the majority decision reversing and dismissing this case. However, I write briefly to distinguish this case from Calandro v. Parkerson, 327 Ark. 131, 936 S.W.2d 755 (1997). I am concerned that, without delineation, our decision here may leave some misconception of inconsistency of decisions of this Court. In Calandro, a defunct corporation and its shareholders sued their attorney alleging malpractice, breach of contract, and deceit. The trial court granted summary judgment to the attorney on all three causes of action, finding that the revocation of the corporation’s charter caused it to lose its ability to bring suit. The trial court further found that the individual shareholders lacked standing and were not proper parties. On appeal, this Court found the summary judgment proper as it related to the corporate causes of action for breach of contract and attorney malpractice. However, the claim of the individual shareholders for deceit was reversed and remanded to the trial court. I see the distinction as being the procedural stages of the appeals involved between Calandro and this case.

In Calandro, the individual shareholders asserted that the attorney had knowingly made false representations, upon which they had relied to their detriment. This Court simply ruled that there was a sufficient question of fact regarding the allegations of false representation in reversing the trial court’s decision on the deceit claim. Calandro, 327 Ark. at 138, 936 S.W.2d at 759. After careful consideration and stringent scouring of the behemoth record in this appeal, I can find no credible, factual basis to believe that Michael W. Walker bore the brunt of any misrepresentation which caused him harm separate and apart from the Aearth corporate entities. “You’ve got to guard against speaking more clearly than you think.” Washington Post, June 24, 1973, quoting Howard H. Baker, Jr., U.S. Senator.


author: Per Curiam.

text:
    Antonio AYERS v. STATE of Arkansas
    CR 97-368
    968 S.W.2d 591
    Supreme Court of Arkansas
    Opinion delivered April 30, 1998

      R.S. McCullough, for appellant.
    No response.
   Per Curiam.

Attorney R.S. McCullough represents appellant Antonio Ayers, who was convicted of capital murder and sentenced to life imprisonment without parole. A notice of appeal was filed on Mr. Ayers’s behalf, and the appellate record was subsequently filed in this Court. Thereafter, Mr. McCullough received several extensions of the deadline for the filing of Mr. Ayers’s brief. In Ayers v. State, 332 Ark. 370, 960 S.W.2d 453 (1998), we granted Mr. McCullough’s request to extend the deadline to March 25, 1998, and cautioned that it was a “final extension.” That deadline was not met.

Mr. McCullough filed motions on March 31, 1998, and April 8, 1998, urging this Court to accept his client’s belated brief, which was tendered on April 1, 1998. We granted Mr. McCullough’s motions on April 23, 1998, and accepted Mr. Ayers’s brief for filing.

On account of the circumstances described above, we order R.S. McCullough to appear before this Court on Thursday, May 14, 1998, at 9:00 a.m., to show cause why he should not be held in contempt for falling to file his client’s brief on or before March 25, 1998, as previously ordered. See Bell v. State, 332 Ark. 432, 961 S.W.2d 36 (1998).


text:
    Robin K. SCHLESIER v. STATE of Arkansas
    CR 97-399
    968 S.W.2d 50
    Supreme Court of Arkansas
    Opinion delivered April 30, 1998

      Wayne Gruber, for appellant.

      Heather Patrice Hogrobrooks, for respondent Nila J. Keels.
    No response.
   Per Curiam.

On May 27, 1997, Appellant filed a Petition for Writ of Certiorari to complete the record. By Per Curiam order dated June 16, 1997, Appellant’s Petition for Writ of Certiorari was granted. The Writ of Certiorari was issued to the Monroe County Circuit Clerk and to the Court Reporter, Nila J. Keels, returnable on July 16, 1997.

On July 17, 1997, the Monroe County Circuit Clerk filed an affidavit in which she averred that the court reporter, Nila J. Keels, failed to file the record of testimony in her office as commanded in the Writ of Certiorari. On September 11, 1997, we issued an order for Nila J. Keels, court reporter, to appear before this court at 9:00 a.m., Thursday, September 25, 1997, to show cause why she should not be held in contempt of court for failure to comply in a timely manner with the command of the Writ of Certiorari issued on June 16, 1997.

Respondent Nila J. Keels appeared on September 25, 1997. At that time, she entered a plea of not guilty and requested a hearing. By Per Curiam order dated October 9, 1997, we appointed the Honorable Steele Hays as a master to conduct the hearing and file findings of fact with the court. By Per Curiam order dated January 15, 1998, we appointed the Honorable Jack L. Lessenberry as the substitute master in this matter.

The Honorable Jack L. Lessenberry conducted the hearing in this matter on February 25, 1998. Respondent Nila J. Keels appeared in person and was represented by her attorney, Heather Patrice Hogobrooks. Robin Plome, Chief Deputy Clerk of the Supreme Court Clerk’s Office, and Nila J. Keels testified as witnesses during the hearing. The transcript of the hearing was filed on March 4, 1998, and the Master’s Report and Findings of Fact was filed on March 17, 1998. Respondent Nila J. Keels filed objections to the Master’s Report and Findings of Fact on April 3, 1998.

According to the Master’s Report, Respondent Nila J. Keels raised two issues: (1) that this proceeding should be dismissed because she was not legally served or notified of the writ of certiorari issued against her; and (2) that she is unable to file a transcript in Appellant Schlesier’s case because her stenographic and other records in the case were stolen from her automobile.

We first address the Master’s findings on the issue of service. According to Robin Horne, Chief Deputy of the Arkansas Supreme Court Clerk’s Office, when a writ of certiorari is issued to complete the record, she places two copies of the writ (one for the circuit clerk and one for the court reporter) in one envelope addressed to the circuit clerk with a cover letter. The Supreme Court Clerk’s Office asks the circuit clerk to forward a copy of the writ to the court reporter for that proceeding. This method of transmittal to a court reporter is used by the Supreme Court Clerk’s Office because that office has no way of knowing the identity of the court reporter for a particular proceeding. Respondent Nila J. Keels was familiar with this procedure.

In accordance with this procedure, the Supreme Court Clerk’s Office mailed two copies of the Writ of Certiorari to the Monroe County Circuit Clerk on June 16, 1997. At that time, Respondent Nila J. Keels was no longer a court reporter. There is no evidence that she received the copy of the writ intended for her by the Clerk’s mailing on June 16, 1997. Although the attorney for Appellant Schlesier, Wayne A. Gruber, wrote a courtesy letter to Respondent Nila J. Keels on June 17, 1997, which contained a copy of the writ, there is no evidence that Respondent Nila J. Keels received that letter. In her testimony, Respondent Nila J. Keels denied having received the courtesy letter.

The first confirmed service on Respondent Nila J. Keels was service made by the Arkansas State Police of the Per Curiam order dated September 11, 1997, ordering Respondent to appear on September 25, 1997, and show cause why she should not be held in contempt. Respondent acknowledged receipt of the September 11, 1997 order. The record does not reflect and Respondent does not recall whether that service included a copy of the June 16, 1997 writ.

Based upon the above findings by the master, we conclude that the Writ of Certiorari issued on June 16, 1997, was not served upon Respondent Nila J. Keels before the Order to Appear and Show Cause was issued on September 11, 1997. Under these circumstances, the Order to Appear and Show Cause should be, and hereby is, dismissed.

With the dismissal of the Order to Appear and Show Cause for lack of service, we need not address the Master’s findings on the loss of the record.

Order to Appear and Show Cause dismissed.


text:
    Stephanie Kay WOFFORD v. STATE of Arkansas
    CR 97-38
    966 S.W.2d 266
    Supreme Court of Arkansas
    Opinion delivered April 30, 1998

      J. Randolph Shock, for appellant.

      Winston Bryant, Att’y Gen., by: Vada Berger, Asst. Att’y Gen., for appellee.
   Per Curiam.

Stephanie Kay Wofford pleaded nolo contendere to first-degree murder. Her plea was conditional, in accordance with Ark. R. Crim. P. 24.3(b), reserving the right to question on appeal the denial of her motion to suppress certain evidence seized from her home. We remanded the case to the Trial Court to determine if officers who first entered Ms. Wofford’s home under exigent circumstances had seen, in plain view, the items seized by other officers who entered the home later and searched it without a warrant. Our holding was that, if the items had been in plain view to the officers first entering, we would affirm. Wofford v. State, 330 Ark. 8, 952 S.W.2d 646 (1997).

Upon remand, a hearing on the matter was conducted and an order of findings was entered by the Trial Court. The record has been forwarded to us for further action. Accordingly, we will receive additional briefs from the parties. The Clerk of this Court will set a schedule for briefing.


author: David Newbern, Justice.

text:
    Kevin W. LAYMAN v. James Larry BONE
    97-948
    967 S.W.2d 561
    Supreme Court of Arkansas
    Opinion delivered May 7, 1998

      Gilker & Jones, P.A., by: N. Donald Jenkins, for appellant.

      Hardin, Dawson & Terry, by: Rex M. Terry, for appellee.
   David Newbern, Justice.

This is a default-judgment case arising from an action to recover on a promissory note. The payee, appellee James Larry Bone, sued one of the makers, appellant Kevin W. Layman, for payment. Mr. Layman’s answer was filed more than twenty days from the date he was served, and thus it was untimely and not in compliance with Ark. R. Civ. P. 12(a). The Trial Court declined to enlarge the time to file the answer and entered the default judgment in favor of Mr. Bone, stating that there was no “mistake, inadvertence, surprise, or excusable neglect or other just cause” for the failure to make a timely answer. We hold there was no abuse of discretion and affirm the judgment.

The operative language of the promissory note was as follows:

WE PROMISE TO PAY TO THE ORDER OF JAMES LARRY BONE OR HIS ASSIGNS THE SUM OF FIVE HUNDRED SEVENTY ONE THOUSAND, FIVE HUNDRED SIXTY ONE AND 08X100 ($571,561.08) FOR VALUE RECEIVED, NEGOTIABLE AND PAYABLE AT 310 LEXINGTON AVE., FT. SMITH, ARKANSAS (OR WHEREVER HEREAFTER DIRECTED), WITHOUT DEFALCATION OR DISCOUNT, WITH INTEREST FROM THE DATE ABOVE UNTIL PAID IN FULL AT THE RATE OF SIX (6%) PERCENT PER ANNUM. IN THE EVENT THE INDEBTEDNESS HEREBY BE NOT PAID ON MATURITY ACCORDING TO THE TERMS HEREOF, AND COLLECTION HEREOF IS EFFECTED BY SUIT OR OTHERWISE, OR SAID INDEBTEDNESS IS REDUCED TO JUDGMENT, THROUGH SERVICES OF AN ATTORNEY, THEN MAKERS FURTHER AGREE TO INDEMNIFY AND REPAY THE HOLDER ANY ATTORNEY’S FEES INCURRED AND PAID BY THE HOLDER NOT EXCEEDING 10% OF THE PRINCIPAL DUE, PLUS ACCRUED INTEREST.
PRESENTATION, NOTICE, PROTEST AND DEMAND IS HEREBY WAIVED BY US.
THE ENTIRE PRINCIPAL TOGETHER WITH INTEREST IS DUE AND PAYABLE ON DEMAND BY THE HOLDER. THIS NOTE IS SECURED BY THE ASSETS OF INTERNET PARTNERS OF AMERICA, AND MAY BE PREPAID AT ANY TIME WITHOUT PENALTY.
K. WAYNE KING KEVIN W. LAYMAN JAMES LARRY BONE

Proper signatures appeared in each of the prepared blocks. Internet Partners of America (“IPA”) was a Hmited-liability company established by Mr. Layman, Mr. King, and Mr. Bone to provide computer services to the public.

Mr. Bone alleged that Mr. Layman owed one third of the principal, or $190,520.36, plus interest and an attorney’s fee. He served Mr. Layman with a summons and complaint on January 14, 1997. The answer was due to be filed on or before February 3, 1997.

Following his receipt of the complaint on January 14, Mr. Layman forwarded it to his attorney who, apparently at some point thereafter, asked Mr. Layman when he had been served. Mr. Layman, who had failed to note the precise date of service, incorrectly guessed that service had occurred on January 16, 1997. Relying on that erroneous information, the attorney noted on his calendar that the answer was due to be filed on or before February 5. He prepared the answer and, on February 3, mailed copies of it to the office of the Circuit Court Clerk and to Mr. Bone’s counsel, who received it on February 4, 1997. The answer was filed on that date.

The answer admitted the validity of the note but seemed to suggest that IPA was the actual obligor and that Mr. Layman and the other two partners were merely “guarantors.” It stated that Mr. Layman did not know whether any demand had been made on IPA or the other “guarantors.”

Mr. Bone moved to strike Mr. Layman’s answer as untimely and for default judgment in accordance with Ark. R. Civ. P. 55(a). Mr. Layman responded to the motion and moved to enlarge the time for filing his answer in accordance with Ark. R. Civ. P. 6(b)(2). He asserted that Mr. Bone had not been prejudiced by the delay in the filing of the admittedly late answer. Mr. Layman explained that the late filing was “due to the inadvertence and mistake of his attorney who did not ascertain from the Defendant the exact date that he was served.”

At a hearing on the matter, Mr. Layman’s attorney reiterated the statements made in his affidavit that was attached to Mr. Layman’s response to the motion for default judgment. He emphasized that Mr. Bone had not been prejudiced and that he had not intentionally disregarded the twenty-day requirement but that his error was due to mistake or inadvertence.

The Trial Court granted the motion for default judgment. Remarks from the bench included the following: “It [the answer] was not filed within 20 days, and I don’t believe the failure to do so was [the] result of mistake, inadvertence, surprise, or excusable neglect or other just cause, so it will be judgment for the plaintiff.”

The order directed that Mr. Layman’s untimely answer should be stricken and that Mr. Bone was entitled to judgment by default under Rule 55. Although the Trial Court did not expressly refer to Mr. Layman’s request under Rule 6(b)(2) to enlarge the time for filing the answer, the language he used from the bench quoted that of Rule 6(b)(2), and thus he clearly made a ruling refusing to enlarge the time for answer. Mr. Layman did not, thereafter, file a motion under Ark. R. Civ. P. 55(c) to set aside the default judgment. The issues are, therefore, whether the time for filing the answer should have been enlarged under Rule 6(b)(2) and whether the default judgment was properly granted under Rule 55(a).

1. Rule 6(b)(2)

Presumably, any failure to file an answer on time could be referred to as a “mistake” in the sense that an error of some sort caused the failure to file on time. To hold, however, that any error whatsoever should excuse compliance with Rule 12(a) would deprive the trial courts of the discretion to which the rule refers. That is not the intent behind the rule.

In B&F Eng’g Inc. v. Cotroneo, 309 Ark. 175, 830 S.W.2d 835 (1992), two actions were brought against B&F Engineering, Inc., one by each of two separate plaintiffs. The first complaint was answered in a timely manner. The second was not, because an insurance company representative “mistakenly” thought it was filed in the action in which an answer had already been filed. As in the case now before us, there was a request to enlarge the time for answer pursuant to Rule 6(b)(2) and an appeal from the granting of the default judgment pursuant to Rule 55(a).

We upheld a default judgment on the claim in response to which the answer was filed late, and we commented that to do otherwise would allow defendants to give “slipshod treatment” to writs of summons. Id. at 178, 830 S.W.2d at 837. In this case, as in B&F Eng’g v. Cotroneo, supra, the actions of the defendant might be best characterized as “neglect” that was not “excusable” rather than “mistake.” Counsel relied on his client’s faulty recollection as to when he had been served instead of checking the record to ascertain that fact.

Rule 6(b)(2) was amended in 1990 to make it compatible with our move to “liberalize” Rule 55 and the standards for granting default judgments. It allows a trial court, “in its discretion,” to enlarge the time for answering, even after the initial period for answering has passed. See Edwards v. Szabo Food Serv., Inc., 317 Ark. 369, 373, 877 S.W.2d 932, 935 (1994)(“This rule clearly recognizes that the trial court may act after the expiration of a specified period of time under the Rules of Civil Procedure.”). The revision of the rule enlarged the discretion of the trial courts to permit late answers, but it did not require them to permit such answers in any circumstance. We cannot say that the Trial Court in this instance abused his discretion.

2. Rule 55(a)

Although it is necessarily a closely related question, we must respond separately to the argument that, regardless of the decision with respect to enlargement of the time to answer, it was an abuse of discretion for the Trial Court to have awarded the default judgment pursuant to Rule 55(a). That is the basic default-judgment rule. It provides: “When a party against whom a judgment for affirmative relief is sought has failed to appear or otherwise defend as provided by these rules, judgment by default may be entered by the court.” No criteria for considering the motion are provided in the rule.

The reporter’s note under Rule 55(a) suggests we should consider “whether the court would later set aside the default judgment under Rule 55(c).” That is what we did in B&F Eng’g, Inc. v. Cotroneo, supra, citing federal-court cases in which opposition to a motion for default judgment was considered as a motion to set aside. We also referred to the standards provided in Rule 55(c), although there had been no motion to set aside the default judgment. In addition to terminology much the same as that found in Rule 6(b)(2), Rule 55(c) requires the party moving to set aside a default judgment to “demonstrate a meritorious defense,” except in cases where the judgment is alleged to be void.

It has been suggested that it is improper to import the standards of Rule 55(c) into a decision whether a default judgment was properly granted pursuant to Rule 55(a). See John J. Watkins, Revised Rule 55, Five Years Later, 49 Ark. L. Rev. 23, 38 (1996). The trial courts in the first instance, and we upon review, must, however, apply some standards to determine whether a motion should be granted pursuant to Rule 55(a), and we can think of no better ones than those stated in Rule 55(c), including the requirement that a meritorious defense be demonstrated.

Whether a meritorious defense has been “demonstrated” in this case might present an interesting issue, but we need not get to it because, again, we cannot say that there was an abuse of discretion in the ruling stating that there was no mistake, inadvertence, surprise, excusable neglect, or other just cause for the failure to comply with Rule 12(a).

The reporter’s note following Rule 55(a) suggests also that, in applying that rule, we should look to the federal cases interpreting the parallel federal rule and consider factors such as lack of prejudice to the plaintiff, the defendant’s preparedness to defend, and avoidance of “largely technical” default judgments. No doubt those are factors that may influence a trial court in the exercise of discretion to determine whether a mistake or inadvertence is of the sort that should not yield a default or whether a negligent act is excusable.

Rule 55(a) provides that the court “may” grant a default-judgment motion in the event of failure to answer or otherwise defend. Thus, we apply an “abuse of discretion” standard in reviewing the granting of a default judgment pursuant to Rule 55(a), just as we do in reviewing the trial court’s ruling on a Rule 6(b)(2) motion to enlarge the time for answering. Maple Leaf Canvas, Inc. v. Rogers, 311 Ark. 171, 842 S.W.2d 22 (1992); B&F Eng’g, Inc. v. Cotroneo, supra. Again, in this instance an abuse of discretion has not been shown.

Affirmed.


author: Tom Glaze, Justice.

text:
    James JAMESON v. STATE of Arkansas
    CR 97-1043
    970 S.W.2d 785
    Supreme Court of Arkansas
    Opinion delivered May 7, 1998

      Val P. Price, for appellant.

      Winston Bryant, Att’y Gen., by: Sandy Moll, Asst. Att’y Gen., for appellee.
   Tom Glaze, Justice.

Appellant James Jameson brings this appeal from his convictions of kidnapping, a class Y felony, and rape of a five-year-old victim, E.C. He raises three points for reversal, but we hold none has merit.

Because this court considers review of sufficiency of the evidence arguments prior to a review of trial errors, we first address Jameson’s argument that the trial court erred in denying his motion for directed verdict on the rape charge. Williams v. State, 329 Ark. 8, 946 S.W.2d 678 (1997). The test on appeal, of course, is whether there is substantial evidence to support the verdiet. Lukach v. State, 310 Ark. 119, 835 S.W.2d 852 (1992). On review, it is only necessary for us to ascertain that evidence which is most favorable to the appellee. Id.

On November 2, 1996, at about 8:00 p.m., Becky Moore took her two minor daughters to Hastings Video Store in Jonesboro to rent a movie. Her five-year-old daughter, E.C., went to the children’s section, but minutes later, when Becky tried to locate her, E.C. could not be found. Subsequently, Becky contacted family members. Becky, along with the help of her family and law officers, who had been called, searched for E.C. to no avail. About 9:00 p.m., E.C.’s grandmother saw E.C. outside the store coming around the store’s building; the grandmother got E.C. and took her inside the store. E.C. was missing her baseball cap and the hair bow she had been wearing. When asked where she had been, E.C. responded, “A guy picked me up and took me to his house.” Jane Sanders, who had been sitting in her car parked in the store’s parking lot, reported to officers that she had seen a red truck pull up next to her car and open his door to retrieve what appeared to be a tiny child. Sanders described the man as being in a hurry when he placed the child on the sidewalk in front of the truck’s grill; he then scurried back into his truck and left in a hurry. Sanders described the night as cold, and voiced disbelief in seeing a man “dropping off” a tiny child on the sidewalk and leaving the child alone. Sanders said the man was tall, skinny, and had somewhat red or blond hair.

E.C. then told police officers she could lead them to the house where she was taken. During the ride to the house, E.C. told her mother that the kidnapper had knocked her hat off while putting her in his truck and had leaned over and kissed her. E.C. related further that the man, once inside his house, took his and E.C.’s clothes off, and he handcuffed her to a stove. E.C. was able to identify Jameson’s house and his truck as the one in which her kidnapper had placed her. Officers noticed her missing hair bow lying in Jameson’s locked truck.

The officers went to the house, knocked on the door, and Jameson opened it. Jameson was then advised of his Miranda rights, and asked what he had been doing with E.C. Speechless and stunned for a while, Jameson responded affirmatively to Investigator Roger Morphis’s question, “Did you just bring her home and then take her back?” Jameson was arrested, taken to the police department, and later charged with kidnapping and rape.

About ten days after E.C.’s kidnapping, she revealed to her mother further details of what had happened on November 2nd. E.C. and her mother were at home when E.C. said, without prompting or forewarning, “I’ve got something to tell you, and you are going to get mad.” E.C. then related that, after Jameson had handcuffed her to the stove and took off her clothes, he licked her genital region, and told her “if she wouldn’t stick his bottom in her mouth, he wouldn’t take her back.” She further said, “He forced his bottom in her mouth, and some white stuff fell on her stomach and toe.” E.C. told her mother that Jameson “washed it off.”

After these more detailed revelations given by E.C. of what occurred on November 2, Becky Moore called Dr. David Blaske. Dr. Blaske is a clinical psychologist with the Child Youth Development Center, who counseled E.C. after E.C.’s abduction. Dr. Blaske said that, in his initial visits, he merely tried to gain E.C.’s trust, and they did not discuss the details of what happened during the kidnapping. She merely related that “the man had touched her on her shoulder.” Dr. Blaske described E.C. as a reserved, non-verbal child, who was repressing the incident. About two days after E.C. disclosed the foregoing sexual details to her mother, Dr. Blaske said E.C. related to him that Jameson had “licked” her and forced his “bottom” into her mouth. In sum, E.C. told Dr. Blaske the same version of the kidnapping and rape incident that she had previously told her mother.

Other evidence given supporting E.C.’s and the other witnesses’ versions depicting kidnapping and rape, included Nurse Pam Widdick’s testimony that the medical exam performed on E.C. during the night in question showed redness in her vaginal area and abrasions on her right wrist. Furthermore, Investigator Morphis testified that, upon searching Jameson’s house, officers found a shoebox in one of the bedrooms, which contained handcuffs, crayons, markers, condoms, and a camera.

Having reviewed the evidence above, we conclude it unquestionably supports the jury’s verdict that Jameson raped E.C. A person commits rape if he engages in sexual intercourse or deviate sexual activity with another person, who is less than fourteen years of age. Ark. Code Ann. § 5-14-103(a)(3) (Repl. 1997). Deviate sexual activity means any act of sexual gratification involving the penetration, however slight, of the anus or mouth of one person by the penis of another person, or the penetration, however slight, of the vagina or anus of one person by any body member or foreign instrument manipulated by another person. Ark. Code Ann. § 5-14-101(1)(A) and (B) (Repl. 1997). This court has held that penetration can be shown by circumstantial evidence, and if that evidence gives rise to more than a mere suspicion, and the inference that might reasonably have been deduced from it would leave little room for doubt, that is sufficient. Jackson v. State, 290 Ark. 375, 720 S.W.2d 282 (1986). Our court has also found substantial evidence of rape by deviate sexual activity even though there was only a hearsay statement of the child victim. Peebles v. State, 305 Ark. 338, 808 S.W.2d 331 (1991).

Here, Jameson concedes, as he must, in view of the evidence, that he kidnapped, handcuffed, and stripped E.C. as described by the State’s proof; however, he denies any proof was shown of penetration, which is needed to show rape. Jameson’s argument is meritless and belies E.C.’s description to her mother and Dr. Blaske regarding what took place in Jameson’s house, and ignores the other physical evidence related by Nurse Widdick and Investigator Morphis. This evidence was more than ample to show all the required elements of rape. Thus, we affirm the trial court’s ruling denying Jameson’s directed verdict motion on this point.

We next consider Jameson’s argument that the trial court committed error in ruling that Becky Moore and Dr. Blaske could testify to what E.C. had told them some ten days to two weeks after the November 2, 1996, crimes occurred. In making this argument, Jameson concedes that Becky Moore and the other witnesses present at the crime scene on November 2nd could testify concerning what E.C. told them that day, but insists that hearsay statements of E.C. after November 2 are inadmissible under A.R.E. Rule 804(b)(7). Rule 804(b)(7) provides that the hearsay statement of a child who is under ten years of age and unavailable as a witness, is presumed unreliable and inadmissible unless the trial court, after conducting a hearing outside the presence of the jury, finds the statement possesses guaranties of trustworthiness that the truthfulness of the child’s statement is so clear from the surrounding circumstances that the test of cross-examination would be of marginal utility. Rule 804(b)(7)(A) lists twelve factors that a trial court may employ in deciding whether a child’s hearsay statement(s) is sufficiently trustworthy. Jameson asserts that the trial court here abused its discretion in utilizing those factors when ruling Becky Moore and Dr. Blaske could testify to what E.C. told them ten-to-twelve days after her abduction.

In deciding whether the statements E.C. related to her mother and Dr. Blaske possessed sufficient guarantees of trustworthiness, the trial court painstakingly considered most of the factors set out in Rule 804(b)(7)(A). In doing so, it found that, even though E.C. had ten days during which she could fabricate a story, the court could discern no reason why she would. While Jameson argued that E.C. had made no specific sexual allegations about penetration or ejaculation in her story on November 2, E.C. commenced revealing the details of Jameson’s sexual abuse of her by telling of his kissing, handcuffing, and stripping her while at his house. And though E.C. did not immediately tell anyone of how Jameson “licked” her and put his “bottom in her mouth,” the evidence showed that she was clearly afraid to give those details because her mother would “get mad.” The trial court determined that the manner in which she told her mother about Jameson’s acts was spontaneous. In other words, E.C. finally felt compelled to relate the details even though it would invoke her mother’s anger. The trial court also noted E.C. had never recanted any portion of her story, and although E.C. at one stage related only that Jameson touched her on the shoulder, the court indicated that any such inconsistency (if it was an inconsistency) would be before the jury and the jury could determine any credibility issue. See Johnson v. State, 298 Ark. 617, 770 S.W.2d 128 (1989).

In addition, E.C. was described by witnesses and the trial court as a quiet, reserved, nonverbal child, who had no motive to fabricate or to harbor a bias toward Jameson. While the trial court made no real determination of E.C.’s competency, the evidence reflects she had considerable awareness and knowledge of what happened to her on November 2, and who did it. At the tender age of five, E.C. was abducted by an unknown man, placed in a truck, kissed, taken to a strange house, handcuffed, stripped, returned near the store from which she was taken; nonetheless, she still had the composure and ability to tell her mother and officers of these events and lead officers to the house where the sexual abuse she described took place. Before taking officers to Jame-son’s house, she had already been shown a possible suspect whom she rejected as being the person who kidnapped her. E.C.’s actions in these matters showed an unusual ability for a child of her young age.

The trial court further considered E.C.’s language and terminology when describing Jameson’s treatment of her, and it concluded that such terms would be expected of a five-year-old. Also bearing on E.C.’s credibility, the trial court found that what E.C. described as having happened to her encompassed embarrassing events a child normally would not want to relate; and as pertains to her mother’s credibility, the statements included events Moore did not want to hear or believe had happened. Finally, the trial court stated that, after listening to Dr. Blaske’s counseling tapes with E.C., it found no suggestive or leading questions, and reiterated the fact that it was E.C. who initiated the original disclosure of Jameson’s abuse, not the mother, Dr. Blaske, or other witnesses.

In deciding this second point for reversal, we note the setded law that a trial court’s rulings on matters pertaining to the admission of evidence is within the judge’s discretion and his rulings will not be set aside absent an abuse of discretion. Roleson v. State, 277 Ark. 148, 640 S.W.2d 113 (1982). Here, the trial judge carefully considered, weighed, and detailed the factors under Rule 804(b)(7)(A) before ruling E.C.’s hearsay statements should be admitted into evidence, and we cannot say he abused his discretion in doing so.

Jameson’s final contention challenges the trial court’s refusal of his motion to restrict the State’s charge to class B kidnapping, a felony which bears a sentence of not less than five nor more than twenty years’ imprisonment. See Ark. Code Ann. § 5-4-401 (Repl. 1997). Instead, the trial court found sufficient evidence for the jury to find Jameson guilty of class Y kidnapping which may include a sentence of not less than ten years nor more than forty years, or life imprisonment. Id. Jameson was sentenced to life.

Under Ark. Code Ann. § 5-11-102 (Repl. 1997), the crime of kidnapping is designated a class Y felony, except that, if the defendant shows by a preponderance of the evidence that he or an accomplice voluntarily released the person restrained and alive in a safe place prior to trial, it is a class B felony. Here, Jameson argues that, because he returned E.C. alive and in a safe place near where he had originally abducted her, the kidnapping was a class B felony as a matter of law and the jury should not have been permitted to determine which of the two felonies, class Y or B, should have applied. The trial court disagreed, following instead the rationale of AMCI2d 1101-Exp that there was sufficient evidence presented to afford the jury a rational basis for finding that the safe release of the victim had been proved. Having made that finding, the trial court ruled a question of fact existed for the jury to decide. The trial court then read AMCI2d 1101-Exp to the jury, instructing it to determine whether Jameson had by a preponderance of the evidence shown he had voluntarily released E.C. in a safe place. In its verdict form AMCI2d 1101-VF, the jury specifically addressed that factual issue and found Jameson had not met his burden of proof, and thus, at the sentencing stage, imposed the class Y sentence of life imprisonment. We uphold that verdict.

Jameson relies primarily on the court of appeals’ case of Griffin v. State, 2 Ark. App. 145, 617 S.W.2d 21 (1981), where the kidnapped victim was an adult who had been safely released by Griffin approximately one block from her house. The jury remained deadlocked on the rape charge against Griffin, but found him guilty on the greater kidnapping charge. The court of appeals reversed that verdict, holding the proof showed only the victim’s safe release and no evidence to the contrary. That is not the situation now before us.

As already thoroughly discussed, the evidence reveals that Jameson took a five-year-old child from the inside of a business store to his house, where he sexually abused the child before returning her to a sidewalk outside, but around the corner, from the store’s entrance. It was dark and cold when he sped off in his truck, leaving the child to find her mother. The trial court found that, considering these events and the child’s young age, a question of fact existed as to whether it was safe for Jameson to have released E.C. in the place and manner he did. In these described circumstances, we agree with the trial court that a fact question existed for the jury to decide which of the kidnapping felonies applied. See Clark v. State, 292 Ark. 69, 727 S.W.2d 853 (1987); Whitt v. State, 281 Ark. 466, 664 S.W.2d 876 (1984).

In accordance with Ark. Sup. Ct. R. 4-3(h), the record has been reviewed for all other rulings adverse to Jameson, and we find none which constitute prejudicial error.

For the reasons above, we affirm Jameson’s convictions of rape and kidnapping.

       He also was charged with other crimes not relevant here.

       The Rule provides the trial court may employ any factor it deems appropriate, including, but not limited to, the following list:
      1. The spontaneity of the statement.
      2. The lack of time to fabricate.
      3. The consistency and repetition of the statement and whether the child has recanted the statement.
      4. The mental state of the child.
      5. The competency of the child to testify.
      6. The child’s use of terminology unexpected of a child of similar age.
      7. The lack of motive by the child to fabricate the statement.
      8. The lack of bias of the child.
      9. Whether it is an embarrassing event the child would not normally relate.
      10. The credibility of the person testifying to the statement.
      11. Suggestiveness created by leading questions.
      12. Whether an adult with custody or control of the child may bear a grudge against the accused offender, and may attempt to coach the child into making false charges.

       When Griffin was decided, kidnapping was designated a class A felony. Then, if the defendant, by a preponderance of the evidence, showed he had released the victim safely, the crime was a class C felony.