author: W. WAYNE OLIVER, Special Justice.

text:
    AETNA CASUALTY & SURETY CO., Appellant, v. Ollie K. LONG, Appellee.
    Supreme Court of Tennessee.
    Aug. 7, 1978.
    Robert R. Campbell, Knoxville, for appellant.
    Joel E. Pearman, Harriman, for appellee.
   OPINION

W. WAYNE OLIVER, Special Justice.

In this workmen’s compensation case, in which the trial court found and held that the plaintiff is totally and permanently disabled by asthmatic bronchitis resulting from the conditions of her employment and awarded benefits accordingly, the defendant urges upon us in this appeal that there was no material evidence to sustain the judgment of the trial court (1) that the plaintiff’s disease was so closely related to one of the statutory occupational diseases as to render it compensable under the Workmen’s Compensation Law of this State, (2) that the plaintiff’s disease met the statutory criteria of an occupational disease, and (3) that the plaintiff’s claim was not barred by the notice and statute of limitations provisions of our Workmen’s Compensation Law.

Of course, the defendant’s insistence makes it incumbent upon us to determine whether there is any material evidence in the record to sustain the trial court’s findings and judgment. The extent of this Court’s authority in reviewing questions of fact involved in a workmen’s compensation case here on appeal is to determine whether any material evidence appears in the record justifying the findings and judgment complained of. Davis v. Gulf Insurance Group, 546 S.W.2d 583 (Tenn.1977).

The plaintiff, Mrs. Ollie K. Long, 54 years of age, testified she worked as a backwin-der at Fibron, Inc. from about mid-August of 1972 until January of 1975; that her work involved quality control of plastic yarn and consisted in operating machines to rewind large spools of second quality yarn “. . . and try to get first quality out of them if I could”; that she was exposed to dust produced by the yarn with which she was working; and that a compressed air hose was used to clean the machines each time a package of yarn was removed and this process blew dust all over her face and clothing. She said her health was good when she began working at Fibron, Inc.; that “around ’73,1 think it was. Or ’74. I don’t know exactly the date” she “just suddenly accumulated a cough and that sneezing” and began experiencing difficulty in breathing, and this condition gradually became worse until she quit about January 6, 1975, because her request to transfer to the less dusty “packout” department was refused. “Well, in ’75, when I started back to work [after Christmas vacation], they had hired another girl in there — She had previously worked there and they had fired her — and they brought her back in and put her in packout. She knew how to run the backwinding where I had worked. They put her up on the packout instead of changing me. And I told my supervisor that it wasn’t fair. And he said if I didn’t like what he did, I could go home. And I walked out.”

On cross-examination she said that she first learned she had bronchial asthma when she went to see Dr. Nat Swann at the Newell Clinic in Chattanooga about April 14, 1973. She said that initial visit to Dr. Swann was when she first started having breathing difficulty, that she continued to see him until she quit her job, and that he hospitalized her two or three times because of her breathing problem.

Further, she stated she began smoking when she was 13 or 14 years old and had never stopped, notwithstanding Dr. Domm (Sheldon E.) had advised her to do so. .In addition to Dr. Swann and Dr. Domm, she had also seen Dr. I. M. Cox of Rockwood in regard to her condition.

Mrs. Long testified that, although in October or November of 1974 she suffered a rib fracture when she fell over a box and her supervisor took her to the company doctor, she never told anyone at Fibron, Inc. about her lung condition, stating “. . . they knew about it, because I had been excused from a staff meeting in the quality control office one time because I could not stop coughing for the dust.” She testified no one has ever told her that her bronchial asthma is related to the working conditions at Fibron.

On cross-examination she reiterated that she never at any time told any of her bosses at Fibron, Inc. that the dust was causing her breathing and coughing problems, either while she was working there or after she quit, saying she assumed they knew it was the dust that was causing her coughing. But she admitted this was only an assumption and that she did not know they knew that. And she explained that the reason she did not so inform the company officials, although she knew breathing the dust was causing those conditions, was because she loved her job and did not want to quit and needed to work, “And I was also afraid they would lay me off if I told them.”

Testifying by deposition given on June 3, 1976 (Exhibit 2), Dr. Isham M. Cox, a general practitioner in Rockwood, Tennessee, stated, upon examination by the plaintiff’s counsel, that he first saw Mrs. Long on June 17, 1975, and found that she had an acute case of asthmatic bronchitis which she said she had had for some time; that she gave him no other personal history and told him nothing about the history of her working conditions; that asthmatic bronchitis is a chronic lung disease caused by “irritants in the lung or in the system producing wheezing, shortness of breath and inability to maintain good respiratory function. It can be caused from many things”; that he had seen Mrs. Long several times since her initial visit, had hospitalized her on occasions, had treated her with different bronchial dilators, and that her condition had not improved; and that she is a complete respiratory cripple incapable of doing any work and is 100 percent disabled.

Responding to a hypothetical question briefly outlining the nature of Mrs. Long’s work and the associated dust, essentially in accordance with her description, Dr. Cox said her exposure to the dust “could be” the cause of her condition, “Yes, that can cause it.” Persisting, plaintiff’s counsel asked Dr. Cox “Is it your opinion that this condition could well have caused it?”, to which the doctor replied, “It could well have caused it.” Pressing the point, counsel asked, “Doctor, what is your opinion about the cause of this problem?” He replied, “I don’t find any other condition in her history that would produce this.” (As noted, however, Dr. Cox had already testified that Mrs. Long gave him no history except that she had had asthmatic bronchitis for some time, and told him nothing about her working conditions.)

Dr. Cox was asked whether the plaintiff’s condition has “similar pathological effects and affects the lung as silicosis would,” and his answer was “Similar, not exactly like it.” On cross-examination, he agreed that silicosis is a disease caused by the inhalation of free silica or silica particles into the lungs, and that this can result in a fibrotic or nodule condition developing in the lungs, reducing the elasticity of the lungs and causing respiratory impairment; and that the pathological description of asthmatic bronchitis is different from silicosis. He said x-rays taken when the plaintiff was in the hospital with asthmatic bronchitis showed her lungs to be clear. He further testified that bronchial asthma is a seasonal allergic condition caused by “pollens and things,” where as “Asthmatic bronchitis in contrast can come on any time that there is a favorable situation in the system whereby the lungs act up. It can follow a cold or pneumonia or be associated with them”; that “Lots of things can cause it. . Being allergic to your own germs that are causing a respiratory infection. Also working around dusty areas could predispose to this”; that when he referred in his testimony to irritants in the system he meant “colds and respiratory infections being associated with it”; that it can be caused by infection, “Yeah, you can be allergic to the bug whether it be a virus or bacteria that’s causing your respiratory infection. You can be allergic to that”; and that breathing cigarette smoke “can” cause it, but said he did not know whether or not Mrs. Long smokes.

Asked hypothetically whether smoking a pack of cigarettes a day from the time she was 13 years of age could be a cause of her asthmatic bronchitis, Dr. Cox said, “It could, it wouldn’t necessarily have to. Everybody that smokes a pack of cigarettes from age 13 won’t get that, they’ll get emphysema more than likely.” (Mrs. Long told Dr. Sheldon E. Domm, to whom she was referred by Dr. Cox on another matter, that she had smoked a pack a day for 40 years. Exhibit 5.)

Still under cross-examination, Dr. Cox was asked and testified:

“Q I take it as far as the breathing of the dust in Mrs. Long’s work, I take it your answer there is the same it could be but you’re not necessarily saying that it was?
A That’s correct.
Q As to whether it was smoking or breathing dust at work or what it might be you can’t just pick out and say it was one of these and not the other?
A No, I can’t.”

The doctor also stated that the plaintiff has hypertension, arthritis of the spine and obesity. (Dr. Domm’s report, Exhibit 5, states that she weighs over 200 pounds.)

On re-direct examination, when asked about the physical effects of silicosis, Dr. Cox said “Now, we’re talking about two different things.” Under further questioning he said the particles breathed in over a period of time by silicosis victims will eventually cut the lungs and cause them to bleed and hemorrhage, that they have a cough, difficulty in breathing and reduced chest movement; and that Mrs. Long has some reduced chest movement, a severe cough and great difficulty in breathing.

Dr. Sheldon E. Domm, a thoracic surgeon of Knoxville, said in a letter to the plaintiff’s attorney, included in his reports concerning the plaintiff (Exhibit 5), that he was unable to give an opinion as to the significance of inhaling plastic dust particles as related to her condition, stating that it would be difficult for him to make any such evaluation.

The plaintiff called her daughter and son-in-law, with whom she lived in Chattanooga while she was employed at Fibron, Inc. Her daughter testified about seeing the dust on the plaintiff’s clothes, which she washed during that period. Her son-in-law said he worked at Fibron, Inc. for a year while Mrs. Long was employed there and described the dusty conditions where she worked. He testified he had known her about 15 years; that as far as he knew she had no persistent cough and was in good health when she began working at Fibron; and that while she was employed there he noticed that “she was getting short-breathing, and she was having real bad coughing spells.”

From this review of the evidence certain important considerations emerge. Asthmatic bronchitis, with which the plaintiff is afflicted to a degree rendering her totally and permanently unable to do any work, is not one of the statutorily defined occupational diseases within the meaning of the Workmen’s Compensation Law. TCA § 50-1101. Upon this record, we find it unnecessary to reach the issue of- whether asthmatic bronchitis is so closely related to one of the diseases listed in the statute as to be properly classifiable as “occupational,” and we do not decide that question.

However, even if it be assumed that this disease may be so classified, insurmountable obstacles preclude recovery of benefits by the plaintiff. There is no material evidence that her asthmatic bronchitis arose out of and in the course of her employment at Fibron, Inc. in accordance with the imperative standard of proof required by TCA § 50-1101. This Court has long recognized that etiology of disease is the special province of trained professionals. Medical causation and the permanency of an injury must be established by expert testimony in workmen’s compensation cases. Employers Insurance Company of Alabama v. Heath, 536 S.W.2d 341 (Tenn.1976). “The increasing tendency to make awards unsupported by medical testimony should not be allowed to obscure the basic necessity of establishing medical causation by expert testimony in all but simple and routine cases — and even in those cases such evidence is highly desirable.” Neas v. Snapp, 221 Tenn. 325, 426 S.W.2d 498 (1968); American Enka Corporation v. Sutton, 216 Tenn. 228, 391 S.W.2d 643 (1965).

In American Insurance Company v. Ison, 519 S.W.2d 778 (Tenn.1975), Mr. Justice Brock wrote for the Court:

“[T]o establish that the occupational disease ‘had its origin in a risk connected with the employment and flowed from that source as a natural consequence . . .’ medical experts or other suitable expert testimony is required because the conclusions called for can result only from expert training and education not to be found in laymen such as judges.”

As we have seen, Dr. Isham M. Cox, who testified by deposition as a witness for the plaintiff, was the only medical expert who undertook to give an opinion as to the causation of her asthmatic bronchitis. But his testimony on that subject, summarized above, very plainly was only tentative and speculative. Mrs. Long told him nothing about her working conditions. Testifying hypothetically, Dr. Cox said her exposure to the dust “could be” the cause of her condition, “can cause it,” “could well have caused it.” Specifically pressed for an opinion about the cause, Dr. Cox said he found no other condition “in her history that would produce this,” although he said she had given him no history except that she had had that disease for some time. He did not know whether Mrs. Long smokes, but answered a hypothetical question that smoking a pack of cigarettes a day from the time she was 13 years of age “could” be a cause of. that disease, but said that wouldn’t necessarily cause it; that while breathing the dust in her work could be the cause, he was not necessarily saying that it was; and that whether it was smoking or breathing dust at work “or what it might be,” he could not say the cause was one and not the other.

If the cause of the injury in question is a matter of speculation it is not compen-sable. “It is settled law that there must be a causal connection between a workman’s accidental injury and the nature of his employment.” McCann Steel Co v. Carney, 192 Tenn. 94, 100, 237 S.W.2d 942, 944 (1951); Workman v. General Shoe Corporation, 196 Tenn. 290, 295, 265 S.W.2d 883 (1954); Neas v. Snapp, 221 Tenn. 325, 426 S.W.2d 498 (1968). See also American Insurance Company v. Ison, supra; American Insurance Company v. Ison, 538 S.W.2d 382 (Tenn.1976).

But beyond all of this, it is uncontradict-ed that the plaintiff Mrs. Long never gave any notice of any kind to her employer as required by TCA § 50-1107, which provides as follows:

Notice of contraction of disease and claim for compensation — Exception.— Within thirty (30) days after the first distinct manifestation of an occupational disease the employee, or some one in his behalf, shall give written notice thereof to the employer in the same manner as is provided in the case of a compensable accidental injury.
This section shall not apply to claims for total disability or death due to coal worker’s pneumoconiosis.

As stated in this statute, the notice required in an occupational disease case is the same as that required in a case of accidental injury. Wilson v. Van Buren County, 196 Tenn. 487, 268 S.W.2d 363 (1954).

The notice requirement applicable in injury cases is set out in TCA § 50-1001 as follows:

Notice of injury and claim for compensation. — Every injured employee or his representative shall, immediately upon the occurrence of an injury, or as soon thereafter as is reasonable and practicable, give or cause to be given to the employer who has not actual notice, written notice of the injury, and the employee shall not be entitled to physician’s fees nor to any compensation which may have accrued under the provisions of the Workmen’s Compensation Law from the date of the accident to the giving of such notice, unless it can be shown that the employer had actual knowledge of the accident; and no compensation shall be payable under the provisions of this law unless such written notice is given the employer within thirty (30) days after the occurrence of the accident, unless reasonable excuse for failure to give such notice is made to the satisfaction of the tribunal to which the claim for compensation may be presented.

The judgment of the trial court in this case recited that the plaintiff’s action was not barred by the statutory notice provisions of the Workmen’s Compensation Law. This Court is not bound by the conclusions drawn by the trial court from undisputed facts. Wilson v. Van Buren County, supra.

This plaintiff was not incapacitated from work when she left the employment of Fi-bron, Inc. She testified she quit her job because her request for transfer to another department was refused. Although she believed, she says, that her cough and breathing difficulty were caused by the dust from the plastic yarn she worked with, she never at any time complained to any of her superiors about the dust nor told anyone in the company that it was adversely affecting her health in that way, notwithstanding she said she first consulted Dr. Nat Swann on April 14, 1973, and first learned of her asthmatic condition and continued to see him until she quit her employment and he hospitalized her two or three times because of her breathing problem. Even after she “walked out” and left her employment about January 6, 1975, and even after she first consulted Dr. Cox on June 17, 1975, when he found she was suffering from asthmatic bronchitis, by her own admission she never gave the company any notice of any kind that her health had been undermined by her working conditions.

In its answer to the plaintiff’s complaint the defendant asserted that her claim was barred by her failure to comply with the statutory notice requirements of the Workmen’s Compensation Law. It is not required that a petition or complaint seeking workmen’s compensation benefits must affirmatively allege that the statutory notice was given, nor that a reason for not giving it be stated, because failure to give the required notice is a matter of defense. Greener v. E. I. Du Pont De Nemours & Co., 188 Tenn. 303, 219 S.W.2d 185 (1949). But when failure to give notice is pleaded, as here, the burden is on the claimant to prove it was given, or why it was not. International Playing Card & Label Co., Inc. v. Broyles, 214 Tenn. 530, 381 S.W.2d 888 (1964).

There is nothing whatever in this record to establish that the plaintiff’s employer, Fibron, Inc., ever had any knowledge that her health was being affected or that she contracted a disease as a result of the dust where she worked. Upon this record the plaintiff’s excuse for keeping quiet about her coughing and breathing problem and her working conditions before she quit her job is patently unacceptable. There is no perceivable excuse for her failure to give notice to the company after Dr. Cox found and advised her she had asthmatic bronchitis, and she claims none.

The law is settled in this State that the giving of the statutory notice to the employer is an absolute prerequisite to the right of an employee to recover compensation under the Workmen’s Compensation Law, unless the employer has actual knowledge of the employee’s injury or waives notice thereof, or unless the employee had a reasonable excuse for failure to give notice. Black Diamond Collieries v. Deal, 144 Tenn. 465, 234 S.W. 322 (1921); Brookside Mills v. Harrison, 158 Tenn. 86, 11 S.W.2d 679 (1928); Hartwell Motor Co. v. Hickerson, 160 Tenn. 513, 26 S.W.2d 153 (1930); York v. Federal Chemical Co., 188 Tenn. 63, 216 S.W.2d 725 (1949); Smith v. Tennessee Furniture Industries, Inc., 212 Tenn. 291, 369 S.W.2d 721 (1963); International Playing Card & Label Co., Inc. v. Broyles, supra.

“The reasons for the requirement as to notice of injury are to give the employer an opportunity to make an investigation while the facts are accessible, and also to enable him to provide timely and proper treatment for the injured employee.” 82 Am.Jur.2d, Workmen’s Compensation § 443, p. 209. See also: York v. Federal Chemical Co., supra, 188 Tenn. at pages 66 and 67, 216 S.W.2d 725 to the same effect.

Upon this record the conclusion is inescapable that by her inexcusable failure to give her employer the required statutory notice, the plaintiff cut herself off from any right to benefits under the Workmen’s Compensation Law. We have no alternative but to reverse the judgment of the trial court and dismiss this case. Smith v. Tennessee Furniture Industries, Inc., supra; In ternational Playing Card & Label Co., Inc. v. Broyles, supra. So ordered.

The costs are taxed to the plaintiff.

HENRY, C. J., and BROCK, FONES and HARBISON, JJ., concur.


source: Caselaw Access Project

author: FONES, Justice.

license: Public Domain

text:
    Claude BALDWIN, Petitioner, v. Dr. Bart KNIGHT and Dr. Lee Myers, Respondents.
    Supreme Court of Tennessee.
    Aug. 7, 1978.

      R. Jerome Shepherd, Colloms, Banks & Shepherd, Cleveland, for petitioner.
    William C. Carriger, Strang, Fletcher, Carriger, Walker, Hodge & Smith, Chattanooga, Mayo L. Mashburn, Eddie L. Head-rick, Bell, Painter, McMurray, Callaway, Brown & Mashburn, Cleveland, for respondents.
   OPINION

FONES, Justice.

This is a medical malpractice case. In directing a verdict in favor of both doctors at the close of the plaintiff’s proof, the trial judge held that (1) the formal statement of the Medical Malpractice Review Board (MMRB) was admissible under T.C.A. § 23-3409, but that it could not be used to provide the expert testimony required by T.C.A. § 23-3414(b) to support the three elements of a plaintiff’s prima facie case required by paragraph (a) of that section; and (2) that the testimony of the three doctors called by the plaintiff failed to establish the elements of a malpractice case as required by T.C.A. § 23-3414(a). The Court of Appeals affirmed.

We granted certiorari and we are of the opinion that the plaintiff’s proof established a prima facie case and that error was committed in granting a directed verdict.

On September 18,1975, plaintiff, 79-year-old Claude Baldwin, was struck in the calf of his right leg by a piece of wire which had been run over by the lawnmower he was using. Plaintiff was taken to the emergency room of Bradley Memorial Hospital, where he was initially interviewed by a nurse, who wrote on the admitting form that “[t]he patient has a puncture type wound-obtained when mowing grass from a broken bottle.” Plaintiff was then examined by defendant Dr. Bart Knight, who read the history taken by the nurse, diagnosed the wound as a simple three-quarter-inch laceration, cleaned it, and sutured it. Doctor Knight then released plaintiff, telling him to stay off the leg, keep it clean and dry, and to return to the emergency room or to his private physician if he had problems. Doctor Knight did not x-ray the wound.

The next day, plaintiff returned to the emergency room complaining about the pain in his leg. On this occasion, he was examined by Dr. Lee Myers, who diagnosed plaintiff’s condition as cellulitis, prescribed various home treatments for this condition, and released plaintiff. Doctor Myers did not x-ray the wound.

On September 21, plaintiff returned to the emergency room again, and was seen by his personal physician, Dr. Jack Free. Doctor Free x-rayed the wound and discovered a piece of wire slightly over one inch long inside, which he removed.

Plaintiff sued Drs. Knight and Myers, alleging damages resulting from their failure to x-ray his wound, and the claim was referred to the MMRB in accordance with T.C.A. § 23-3403. After a hearing, the MMRB found the claim against Dr. Myers to be without merit; it found the claim against Dr. Knight to be with merit, and made the following formal statement required by T.C.A. § 23-3409:

“The standard of care deemed applicable by the Board is that (1) the physician should obtain a history of how the wound occurred, (2) the physician should inspect the wound, and (3) if the probability of a foreign body exists as being determined from either the history and/or inspection of the wound, appropriate x-rays should be taken.
“CONCLUSION: In the Board’s opinion, a proper history was not obtained and with a proper history under the standard of care in this community the Board feels x-rays should have been obtained.”

The parties did not settle the claims, and plaintiff proceeded to trial against both doctors.

Plaintiff’s assignments of error raise these questions: (1) can the formal statement of the MMRB be used as a substitute for expert testimony; (2) what use, if any, can be made of the formal statement of the MMRB in the examination or cross-examination of experts; and (3) did the Court of Appeals err in sustaining the trial judge’s decree directing a verdict for defendants at' the conclusion of plaintiff’s proof.

I.

This Court is confronted, for the first time, with a Legislatively mandated rule of evidence directing the admissibility of the formal statement of the MMRBs, “as an exception to the hearsay rule.” The statute provides as follows:

23-3409. Hearing Reports Board members barred from trial — Liability of board. — The hearing shall be informal and without a stenographic record. No statement nor any expression of opinion made in the course of the hearing shall be admissible in evidence either as an admission or otherwise in any trial of the action. The board shall prepare a formal statement of its recommendations. If a minority number of the board members do not agree with the statement and recommendations of the majority, a minority statement may be prepared which shall be identified as such.
The formal statement of the board and the minority statement, if any, shall be admissible at a subsequent trial as an exception to the hearsay rule. The formal statement of recommendations of the board or the minority statement shall include, but not be limited to, (1) the standard of conduct applied; (2) the alleged deviation from such standard; and (3) findings and conclusions.
No board member shall participate in the trial either as counsel or witness. Board members shall be immune from civil suit as a result of actions or omissions committed pursuant to duties described in the chapter. Sections 4-507— 4-527 shall not apply to the board established by this chapter or the proceedings thereof. [Acts 1975, ch. 299, § 9; 1976 (Adj.S.), ch. 759, § 10.]

This statute marks a radical departure from the rules of evidence applicable to all other types of cases. It dispenses with the traditional right of cross-examination and confrontation. It is likely to be of greater benefit to defendants, when favorable to them, than to plaintiffs, when favorable to that class of litigants, creating a possible imbalance between classes of litigants.

However, we are not authorized to strike down the statute because we consider it unwise or inequitable, only if it violates constitutional requirements or deprives any person of his constitutional rights. See State v. Yardley, 95 Tenn. 546, 565, 32 S.W. 481 (1895); 29 Am.Jur.2d Evidence § 44 (1967). No party to this litigation questions the admissibility of the MMRB’s formal statement offered as evidence in this case.

However, plaintiff has insisted at all stages of this litigation that the MMRB’s statement should be accepted as evidence establishing a prima facie case against defendant Knight, because it was a unanimous decision, two members of the Board were physicians, and the statement embraces the elements of proof required of a plaintiff by T.C.A. § 23-3414(a).

We think the answer to that contention is to be found by considering T.C.A. § 23-3414 in pari materia with T.C.A. § 23-3409, in light of the avowed legislative purpose in establishing MMRB, to wit, “to facilitate the disposition of all medical malpractice actions.” T.C.A. § 23-3403(a).

T.C.A. § 23-3414 provides as follows:

23-3414. Claimant’s burden — Expert testimony — Presumption of negligence— Jury instructions. — (a) In a malpractice action, the claimant shall have the burden of proving by evidence as provided by subsection (b):
(1) the recognized standard of acceptable professional practice in the profession and the specialty thereof, if any, that the defendant practices in the community in which he practices or in a similar community at the time the alleged injury or wrongful action occurred;
(2) that the defendant acted with less than or failed to act with ordinary and reasonable care in accordance with such standard; and
(3) as a proximate result of the defendant’s negligent act or omission, the plaintiff suffered injuries which would not otherwise have occurred.
(b) No person in a health care profession requiring licensure under the laws of this state shall be competent to testify in any court of law to establish the facts required to be established by subsection (a) unless he was licensed to practice in the state or a contiguous bordering state a profession or specialty which would make his expert testimony relevant to the issues in the case and had practiced this profession or specialty in one of these states during the year preceding the date that the alleged injury or wrongful act occurred. The court may waive this subsection when it determines that the appropriate witnesses otherwise would not be available.
(c) In a malpractice action as described in subsection (a) of this section there shall be no presumption of negligence on the part of the defendant. Provided, however, there shall be a rebuttable presumption that the defendant was negligent where it is shown by the proof that the instrumentality causing injury was in the defendant’s (or defendants’) exclusive control and that the accident or injury was one which ordinarily doesn’t occur in the absence of negligence.
(d) In a malpractice action as described in subsection (a) of this section, the jury shall be instructed that the claimant has the burden of proving, by a preponderance of the evidence, the negligence of the defendant. The jury shall be further • instructed that injury alone does not raise a presumption of the defendant’s negligence. [Acts 1975, ch. 299, § 14; 1976 (Adj.S.), ch. 759, § 15.]

It is readily apparent that the foregoing section of the Act, in paragraph (a), briefly states the requirements of existing case law governing the plaintiff’s burden of proof in a medical malpractice action and adds, in paragraph (b) to the present case law requirements relating to expert testimony, (1) the necessity that a medical expert be licensed in this state or a contiguous bordering state; (2) the relevant specialty requirement; and (3) judicial discretion to waive those requirements upon a showing of the unavailability of such witnesses.

We think the conclusion is inevitable that the Legislature has sanctioned existing case law governing both substantive and eviden-tiary requirements, merely adding thereto the admissibility of the Board’s decision and the additional expert witness requirements. It is apparent- that the legislative purpose in directing the admission of the formal statements of MMRBs was to encourage settlements, and not for use as an evidentiary substitute for expert testimony, as required by case law, augmented by T.C.A. § 23-3414(b).

II.

We see no reason why the expert witnesses who testify at trial may not be examined or cross-examined to determine if they agree or disagree with the recommendations contained in the formal statement of the MMRB, with appropriate questioning to elicit the specifics of any disagreement. The admissibility of a review board’s statement having been legislatively enacted, as an exception to the hearsay rule, the jury has the recommendation of the board before it, not as a substitute for the proof required to sustain or defend a malpractice action, but to be given such weight, credit and value as the jury may ultimately determine. Such use of the formal statement at trial should assist the jury in determining the probative value, if any, to assign to the board’s recommendation.

We think it appropriate to observe, in view of incidents that occurred at the trial of this case, that the second sentence of T.C.A. § 23-3409 excludes from admissibility at the trial any attempt to bring to the attention of the jury what evidence was or was not adduced at the board hearing. In short, nothing about the MMRB hearing, beyond the language of the formal statement, is admissible at trial.

III.

The two lower courts concentrated their analysis of plaintiff’s proof upon the testimony of Dr. Free. We will not review it in detail, because in our view, a correct resolution of the issue before us turns upon the facts and the expert testimony of the two defendant doctors, both of whom were called as adverse witnesses by the plaintiff. Suffice it to say that Dr. Free, who had practiced medicine in Bradley County for twenty years, steadfastly maintained under examination by plaintiff’s counsel that he did not know the standard of care in that community, but also said he did know, “what is proper medical treatment in this area.” He said that he would have x-rayed plaintiff on the occasion of his first visit to the hospital, but that.the “standard of care in the community” did not require an x-ray. In short, his testimony is subject to the same observation made by Mr. Justice Gai-lor, in Mullendore v. State, 183 Tenn. 53, 191 S.W.2d 149 (1945), with respect to the testimony of a psychiatrist:

“The attitude of obvious partisanship displayed by this nominally expert witness, furnishes convincing evidence of the wisdom of the rule laid down by this Court, that expert testimony is to be received ‘with great caution;’ (Fisher v. Travelers Insurance Co., 124 Tenn. 450, 505, 138 S.W. 316, 330, Ann.Cas. 1912D, 1246; Wilcox v. State, 94 Tenn. 106, 28 S.W. 312) . . . .” 191 S.W .2d at 152.

Plaintiff called Dr. Myers as an adverse witness and he testified, in part, as follows:

Q. All right, now Dr. Myers, the standard of care in the Bradley County area is that physicians should obtain the history of how the wound occurred. Isn’t that part of the standard of care?
A. Yes.
Q. And, the second standard of care is that the physician should inspect the wound. Isn’t that part of it?
A. Yes.
Q. Third, is that if the possibility of a foreign body exists, as being determined either from the history, or inspection of the wound, an appropriate x-ray should be taken. Isn’t that part of the standard of care?
A. Yes.
Q. All right. And, also, part of the standard of care is, if you see the patient — on the first time you see him, and you suture him up and he later comes back with complications, then you re-evaluate the patient. Isn’t that correct?
A. Yes.
Q. And, then you take more information, do you not, sir?
A. If it’s available, yes.

Thus, Dr. Myers’ testimony established the standard of care in Bradley County applicable to the facts of this case.

Doctor Free’s deposition established that plaintiff’s healing process was delayed and the pain period prolonged by the failure to discover the wire on plaintiff’s earlier visits to the hospital, when he was seen first by Dr. Knight and then by Dr. Myers. That testimony established that the plaintiff suffered injury, proximately caused by the failure to discover the wire.

Thus, it follows that if the failure to discover the wire resulted from defendants’ lack of reasonable and ordinary care in obtaining the history of the injury or inspecting the wound, plaintiff has established a prima facie case of malpractice against defendants.

The focus of our inquiry is reduced to (1) has plaintiff adduced evidence that defendants did not act with reasonable and ordinary care in obtaining the history of the injury, which would have revealed that the wound was caused by a flying object, with the probability that a foreign body remained imbedded therein; and (2) was expert testimony necessary to characterize their actions, or failure to act, as negligent?

It is significant to observe at this point that the standard of care required that appropriate x-rays be taken if the history of how the wound occurred indicates the probability of a foreign body.

Plaintiff’s wound was located in the calf of the right leg. He was wearing rubber boots, the tops of which were just below the knee, and the flying object went through his boot near the top, into the large muscle of the lower leg. Doctor Knight denied seeing the boots, but the location of the wound incurred while operating a lawn mower is in and of itself circumstantial evidence that a flying object was involved, and that probability is clearly in the realm of the common observation of men of ordinary experience and affairs, requiring no scientific or medical expertise to perceive.

The nurse at the hospital saw plaintiff before he was seen by Dr. Knight. She wrote on the admitting form that “[t]he patient has a puncture type wound obtained when mowing grass from a broken bottle.” Doctor Knight admitted that he saw that entry. He testified that “[i]f there is any indication of a flying object that I can elicit in the history, my normal procedure is to x-ray it.”

Doctor Knight’s responses to questions relating to the significance of the nurse’s entry follow:

A. I did read the history the nurse takes.
Q. You just overlooked it?
A. No, sir, I did not overlook it. This is a descriptive term used by a nurse. I don’t have nurses diagnose for me. I do my own diagnosis. Now, in my evaluation of the patient, and in my history, I had nothing to indicate that there was any flying object that had anything to do with this laceration.
Q. Well, you had this did you not, Doctor?
A. Yes, and it says that he cut his leg on broken glass while he was mowing grass.
Q. It says, Doctor, “The patient has a puncture type wound obtained from mowing grass from a broken bottle.” Now, doesn’t that tell you that the mower hit the broken glass and threw the glass back in his leg?
A. No, sir.
Q. Now, you—
A. I want to make it very clear — that is the place on each emergency room slip where nurses put the history the patient gives them and their findings. Nurses do not — and they are very carefully instructed not to make a diagnosis. This is not a diagnosis. This is a nurse’s impression and whatever she was told. The doctor makes his diagnosis. My diagnosis in my writing is on the line that says diagnosis, and I say that in my professional opinion it was a three-quarter-inch laceration of the right leg.

The nurse’s one-sentence history, although grammatically incorrect, was sufficient, in our opinion, to put anyone who has a reasonable understanding of the English language on notice that a flying object may have been impelled into plaintiff’s leg and that a foreign body might still be imbedded therein. No medical expertise is called for in reaching that deduction.

It appears that the experts concede that most glass shows on x-ray because it contains lead. The fact that the nurse’s entry mentioned glass as the probable flying object was not asserted by the experts as detracting from its significance.

Doctor Knight testified later that plaintiff gave him a “misleading or inaccurate” history. No attempt was made to state what Dr. Knight asked plaintiff or plaintiff’s response, and the bare statement that plaintiff gave a misleading or inaccurate history is a conclusion entitled to no probative value. At the very least, Dr. Knight was put on notice that the history should be clarified, and there is no evidence that he attempted to further explore the probability of a flying object as the cause of the wound.

When Dr. Myers saw plaintiff, the nurse’s history and the location of the wound were available and known to him. Whatever reliance he was entitled to place upon Dr. Knight’s having ascertained the presence or absence of a foreign body in the wound was offset by the complications that had developed, which he admitted called for re-evaluation, and plaintiff testified that when Dr. Myers was inspecting and pressing on the wound, plaintiff said, “Whoa, hold on there, Doc, there’s something in there sticking me.”

There is an analogy between this case and Haskins v. Howard, 159 Tenn. 86, 16 S.W.2d 20 (1929). Doctor Haskins operated on plaintiff for the purpose of removing an ovarian tumor, discovered that she was three and one half months pregnant, terminated the operation, and closed the incision. Plaintiff miscarried fifteen days later. Doctor Haskins testified that he would not have operated on plaintiff if he had known she was pregnant; that he was “apprehensive” of pregnancy at the time he operated and that plaintiff was in no danger of death if the operation had been delayed. He said that he was induced to operate at the time he did because plaintiff was suffering. Expert testimony was presented to the effect that the standard of care prohibited an operation on a pregnant woman, because of the fear of miscarriage, unless it was absolutely necessary, her life being in danger. The- Supreme Court held that although plaintiff presented no expert testimony as to what other physicians would have done in the circumstances proven, entertaining an apprehension of pregnancy, “we think the jury, as men of ordinary experience and affairs, were qualified to draw their own inferences, and to reach their own conclusion as to what course other physicians of requisite skill and ability would have taken, without the aid of the testimony of experts.” 159 Tenn. at 96, 16 S.W.2d at 23.

Where the act of alleged malpractice lies within the common knowledge of a layman, expert testimony is not required. Bowman v. Henard, 547 S.W.2d 527 (Tenn.1977); Rural Educ. Ass’n. v. Bush, 42 Tenn. App. 34, 298 S.W.2d 761 (1956). See also Vaughn v. Shelton, 514 S.W.2d 870 (Tenn.App.1974) where it was held that expert medical evidence was not required to prove that if both of the fallopian tubes are severed and closed, the patient would thereby be rendered immune from pregnancy.

Floyd v. Walls, 26 Tenn.App. 151, 168 S.W.2d 602 (1942); and Gresham v. Ford, 192 Tenn. 310, 241 S.W.2d 408 (1951), are relied upon by defendants as requiring expert testimony to determine whether or not a doctor’s decision not to x-ray constitutes malpractice. Those cases are inapposite for the reason that this case does not involve the alleged negligent act of failure to x-ray. The alleged negligent act here was the failure to ascertain, from history and inspection, that the wound was caused by a flying object and possibly contained a foreign body. All the experts agreed that if the true facts had been ascertained, x-rays were indicated and would have been taken.

Reversed and remanded for a new trial. Costs are adjudged against defendants.

HENRY, C. J., COOPER and HARBI-SON, JJ., and DAVIS, Special Justice, concur.


text:
    BEECHAM LABORATORIES, a Division of Beecham, Inc., a New Jersey Corporation domesticated in the State of Tennessee, with place of business in Bristol, Sullivan County, Tennessee, Appellant, v. Jayne Ann WOODS, Commissioner of Revenue, State of Tennessee, Appellee.
    Supreme Court of Tennessee.
    Aug. 7, 1978.

      Charles M. Gore, Gore & Hillman, Bristol, for appellant.
    Brooks McLemore, Atty. Gen., David S. Weed, Senior Asst. Atty. Gen., Nashville, for appellee.
   OPINION

FONES, Justice.

Plaintiff brought this lawsuit to recover a tax assessment of $109,403.97 plus interest of $19,567.01, paid under protest to the Tennessee Department of Revenue. The validity of the assessment of $4,600 of this sum is not questioned here; the remainder represents use tax and interest assessed on the value of pharmaceutical samples stored at plaintiff’s warehouse in Bristol, Tennessee, and from there distributed to destinations both inside and outside Tennessee. The majority of the pharmaceutical samples in question were manufactured by plaintiff in its Bristol plant, and the remainder were manufactured in plaintiff’s Piscataway, New Jersey plant, or by other companies outside of Tennessee. After storage and inventory in the Bristol warehouse, the pharmaceutical samples are distributed to salesmen as needed for free distribution to doctors, and for subsequent free distribution to their patients.

After hearing proof, the Chancellor held that the decision of this Court in Shopper’s Guide Publishing Co. v. Woods, 547 S.W.2d 561 (Tenn.1977), established that plaintiff’s pharmaceutical samples stored in Tennessee were subject to the use tax under the Ten-< nessee Retailers’ Sales Tax Act, T.C.A. § 67-3001, et seq.. Plaintiff appeals, asserting that no taxable event has occurred which makes it subject to the use tax. Shopper’s Guide is not controlling in this case because that case did not involve an interpretation of the tax exemption created by T.C.A. § 67-3007.

It is the declared legislative intent that every sale or use of tangible personal property in Tennessee is subject to tax under the Retailers’ Sales Tax Act, unless expressly exempted therein. T.C.A. § 67-3003; Shopper’s Guide Publishing Co. v. Woods, supra.

The warehousing and distribution of plaintiff’s samples is clearly within the statutory definition of “use” found in T.C.A. § 67-3002(h) as follows:

“ ‘Use’ means and includes the exercise of any right or power over tangible personal property incident to the ownership thereof, except that it shall not include the sale at retail of that property in the regular course of business.”

Plaintiff’s “use” or “storage” of these samples is clearly taxable under T.C.A. § 67-3003, as follows:

“It is declared to be the legislative intent that every person is exercising a taxable privilege . . . who uses or consumes in this state any item or article of tangible personal property as defined in this chapter, irrespective of the ownership thereof . . ., or who stores for use or consumption in this state any item or article of tangible personal property as defined in this chapter . . ..”

There is no provision in the Retailers’ Sales Tax Act exempting from tax those pharmaceutical samples stored for distribution in Tennessee; however, the samples which are either manufactured in this State for export or imported into this State for export are specifically exempted from sales and use taxes by the clear language of the first clause of T.C.A. § 67-3007. The statute provides as follows:

“It is not the intention of this chapter to levy a tax upon articles of tangible personal property imported into this state or produced or manufactured in this state for export; nor is it the intention of this chapter to levy a tax on bona fide interstate commerce. It is, however, the intention of this chapter to levy a tax on the sale at retail, the use, the consumption, the distribution, and the storage to be used or consumed in this state of tangible personal property after it has come to rest in this state and has become a part of the mass of property in this state.”

The plain language of the first clause of this statute was construed as exempting property stored in this State for subsequent export in the case of Young Sales Corp. v. Benson, 224 Tenn. 88, 450 S.W.2d 574 (1970); that case is the one most analogous in recent history to the case at bar, and it is controlling here. In Young Sales, we held that the plaintiff-taxpayer was entitled to recover use taxes paid under protest on the value of industrial insulation materials stored in its Memphis warehouse and shipped to destinations outside the State. The following excerpt from Young Sales is especially relevant here:

“Defendant [the Commissioner of Revenue], while admitting that T.C.A. § 67-3007 expresses a plain intention not to tax goods imported into this state for export, contends, however, that this statute does express the intention to tax all property when it becomes a part of the mass of Tennessee property, to the extent that it may constitutionally do so under the Federal decisions dealing with the Commerce Clause.
“It is our opinion that defendant’s contention would require a somewhat strained interpretation of this statute and would require ignoring the express language that goods imported into the state for export are not to be taxed.” 224 Tenn. at 96-97, 450 S.W.2d at 577.

The State is again before us arguing this same proposition which was decided adversely to it in Young Sales.

The State relies heavily on Vector Co. v. Benson, 491 S.W.2d 612 (Tenn.1973), and Texas Eastern Transmission Corp. v. Benson, 480 S.W.2d 905 (Tenn.1972), in which it was said that the purpose of T.C.A. § 67-3007 is to confine application of the sales and use taxes to those subjects which a State is permitted to tax under the commerce clause of the United States Constitution, and thus the statute does not exempt any property from taxation if it is within the power of the state to tax it. Neither of these cases dealt with the clause here in question, and insofar as they purport to construe the first clause of T.C.A. § 67-3007, they are dictum.

Texas Eastern Transmission Corp. v. Benson, supra, involved the taxation of the sale of electricity to the taxpayer where the electricity was consumed in furthering the transmission of petroleum along the taxpayer’s pipeline in interstate commerce. The case did not involve export of the commodity taxed; the electricity was sold in Tennessee and consumed in Tennessee, and it was the sale, and not only the use, which triggered the tax. 480 S.W.2d at 909-910. The only implications of the case relative to T.C.A. § 67-3007 permissible under the facts are 1) the phrase “interstate commerce” in the second clause of the statute is a term of art meaning the same thing in the statute as it means when applied to the United States Constitution; and 2) the intent of the Legislature, expressed in the second sentence of the statute, to impose a retail sales tax is not further qualified by the subsequent language expressing an intent to levy a use tax on property which has “become a part of the mass of property in this state.” This construction is based on standard application and usage of the English language. The complete elision of the express exemption created by the first clause, as urged by the Commissioner, cannot likewise be justified.

The case of Vector Co. v. Benson, supra, is likewise inapplicable to the instant case. That case involved the taxation of an airplane, purchased outside Tennessee, brought into the state, and hangered in Knoxville, from which point it was used in conducting the taxpayer’s business in Tennessee and elsewhere. There appears to have been no serious contention in the case that flying the aircraft in and out of the state constituted “export.” The taxpayer argued that the aircraft could not be taxed by the State because it would be a tax on interstate commerce. This Court referred to Federal Constitutional authority for its determination that taxation of the aircraft was not a tax on interstate commerce because, under the holding of Texas Eastern Transmission Corp., the meaning of that phrase as applied to the United States Constitution is determinative of its meaning in T.C.A. § 67-3007.

Had the Legislature intended that the sole purpose of T.C.A. § 67-3007 was merely to confine application of the sales and use tax to constitutional limits, that purpose could easily have been accomplished by straightforward language to that effect. A plain reading of the statute indicates that the Legislature intended to create a class of property exempt from the use tax, and we must give effect to this language as written.

As noted above, those drug samples which were ultimately distributed in Tennessee are subject to the use tax under the provisions of T.C.A. § 67-3003. Because the Chancellor’s finding in the case rendered unnecessary a determination of the value or applicable tax on these samples, we must remand the case for a determination of the tax not inconsistent with this opinion.

Affirmed in part; reversed in part.

Costs are assessed against appellee.

HENRY, C. J., COOPER and HARBI-SON, JJ., and OLIVER, Special Judge, concur.

      . The tax in this case was assessed for the period from April l; 1972, to March 31, 1975, and reference to statutes in this opinion will necessarily be to the statutes as they existed at that time. Tennessee Code Annotated § 67-3012 was amended in 1977 to exempt certain storage of pharmaceutical samples from the sales and use tax, but this amendment is inapplicable to the period for which taxes were assessed in the instant case.


text:
    Carrington Lee COLEMAN, Appellant, v. J. T. ACUFF, Superintendent of Grainger County Schools, et al., Appellees.
    Supreme Court of Tennessee.
    Aug. 7, 1978.

      Charles Hampton White, Nashville, for appellant.
    Earnest R. Taylor, Morristown, for appel-lees.
   OPINION

W. WAYNE OLIVER, Special Justice.

The plaintiff-appellant is in this Court complaining of the judgment of the chancellor dismissing his suit and sustaining the action of the Grainger County Board of Education in not re-electing him as a teacher after the end of the 1976-77 school year. The only question presented by this appeal is whether Mr. Coleman had obtained permanent teacher tenure automatically and as a matter of law under TCA § 49-1403 by continuing in his teaching until the end of the 1976-77 school term, during which completion of his probationary period occurred. According to the complaint he filed in the Chancery Court of Grainger County, Mr. Coleman was hired as a teacher in the Grainger County school system on January 20, 1973. He worked until the end of the ’73 school term, which ended on June 3, 1973. At that time, he was advised by defendant J. T. Acuff, Superintendent of the Grainger County school system, that he ought to return to college and obtain a permanent teacher’s certificate, and that if he did so he would then be re-employed in the county school system. Accordingly, Mr. Coleman says he went to Carson-Newman College, was awarded a permanent elementary and secondary teacher’s certificate, and was re-elected as a teacher in the Grainger County school system for the 1974-75 school year; that he was subsequently re-elected for the 1975-76 and for the 1976-77 school years; that while teaching during the 1976-77 term he completed his probationary period required for permanent tenure status by completing 27 months of teaching within the preceding five years, as prescribed by the Teacher Tenure Act (TCA §§ 49-1401, et seq.); that by allowing him to continue in his teaching position after completion of his probationary period and for the remainder of the 1976-77 academic year, the Board of Education thereby retained him within the meaning of TCA § 49-1403 and granted him permanent tenure status; that as a tenured teacher he was entitled to continue in his position as a teacher in the Grainger County school system until and unless removed for cause after a hearing; that, notwithstanding he had thus achieved tenure status, when the Board met in April of 1977 to elect teachers for the 1977-78 school year he was not re-elected and his written request for a hearing when so notified was denied. Charging that the action of the Board of Education in terminating his employment as a teacher was “illegal, arbitrary, and capricious” for failure to comply with the provisions of the Teacher Tenure Act, the plaintiff prayed that the court vacate that action of the Board and re-instate him to his position as a teacher.

In reply, the Board of Education filed a motion to dismiss, on the theory that Coleman had not been re-employed following expiration of his probationary period and therefore had not attained permanent tenure status and was not entitled to the relief he sought.

The chancellor agreed and dismissed the plaintiff’s suit, holding that the term “retained in the system” in TCA § 49-1403 is only definitive or supportive of the preceding word “re-employed,” rejected the plaintiff’s contention that by his “retention” for the remainder of that term after he completed his probationary period he thereby acquired tenure status automatically, and held he was entitled to no relief because the Board declined to re-employ him for the succeeding school year. We concur.

TCA § 49-1402 provides, in pertinent part:

“(1) ‘Permanent tenure’ shall apply to any teacher who (a) has a degree from an approved four (4) year college . . ., (b) holds a valid professional certificate ., (c) has completed a probationary period of three (3) school years or not less than twenty-seven (27) months within the last five (5) year period, the last year to be employed as a regular teacher, and (d) is reemployed by the board for service after the probationary period.” (Emphasis supplied.)

And, insofar as is material here, TCA § 49-1403 provides as follows:

“Any teacher . . . shall serve three (3) years or not less than twenty-seven (27) months within a five (5) year period as a probationary teacher before acquiring ‘permanent tenure’
“Upon completion of the probationary period, any teacher who is reemployed or retained in the system is entitled to tenure status . . . provided that the superintendent shall notify the board pri- or to reelection by the board that the teacher, if reelected, will attain tenure status.” (Emphasis supplied.)

Sanders v. Vinson, 558 S.W.2d 838 (Tenn.1977), is dispositive of this appeal. In that case this Court said:

“Contrary to the belief which apparently prevails in some quarters, the mere completion of the three-year or twenty-seven month probationary period by a teacher otherwise qualified, does not automatically confer permanent tenure. It merely is a condition precedent to eligibility for tenure.
“The conference of tenurial status is dependent not only upon service but also upon affirmative action by the Board of Education. The statute (49-1403) is clear:
‘Upon completion of the probationary period, any teacher who is reemployed or retained in the system is entitled to the tenure status for which she is qualified by college training and certification
“Further, Sec. 49-1402, T.C.A., in defining permanent tenure, specifies that it applies to teachers who meet certain educational requirements, hold valid professional certificates, have completed the probationary period and who are ‘reemployed by the board for service after the probationary period.’ See State v. Lunsford, 207 Tenn. 33, 336 S.W.2d 20, 21 (1960).”

Plainly, Sections 49-1402 and 49-1403 of Tennessee Code Annotated are in pari materia. A familiar rule of statutory construction is that code provisions in pari materia must be construed together, and the construction of one, if doubtful, may be aided by consideration of the words of and the legislative intent indicated by the others. Gallagher v. Butler, 214 Tenn. 129, 378 S.W.2d 161 (1964).

So, construing TCA §§ 49-1402 and 49-1403 together, as we did in Sanders v. Vinson, supra, it is unquestionable that in TCA § 49-1403 the Legislature intended the term “retained in the system” to be synonymous with the word “reemployed” used in both sections of the statute.

It is unarguable, therefore, that a qualified teacher who has finished the statutory probationary requirements does not obtain tenure status until and unless he or she is re-employed by the Board of Education for further service after expiration of the contract during which the probationary period was completed. As the chancellor observed, to hold otherwise would result in great distortion of the legislative intent.

The judgment of the trial court dismissing the plaintiffs suit and taxing him with the costs is affirmed. The costs incident to this appeal are adjudged against the plaintiff and the sureties on his appeal bond.

HENRY, C. J., and HARBISON, COOPER and FONES, JJ., concur.


author: HENRY, Chief Justice.

text:
    William Wiley JONES and Bobby Lee Weatherford, Petitioners, v. STATE of Tennessee, Respondent.
    Supreme Court of Tennessee.
    Aug. 14, 1978.
    Dan H. Hamm, Luke E. Harvey, Linden, for petitioners.
    Brooks McLemore, Jr., Atty. Gen., William 0. Kelly, Asst. Atty. Gen., Elmer Davies, Jr., Dist. Atty. Gen., Nashville, Tommy E. Doyle, Sp. Pros., Linden, for respondent.
   OPINION

HENRY, Chief Justice.

We granted certiorari in this case because we were not content with the manner in which the Court of Criminal Appeals treated the double jeopardy issue. We affirm the conclusion, but concur in the results only.

This case is in a unique posture.

Petitioners were indicted for third degree burglary, larceny and receiving and concealing stolen property. At the conclusion of the first trial judgment was entered finding them guilty of burglary in the third degree. An appeal ensued and the Court of Criminal Appeals reversed on grounds not relating to the sufficiency of the evidence.

At the second trial defendants were found guilty of grand larceny.

It was the contention of the petitioners before the Court of Criminal Appeals that their conviction in the first trial of burglary operated as an acquittal of the charge of grand larceny. Therefore, they insist that the second trial violated their immunity against double jeopardy.

In disposing of this contention the Court of Criminal Appeals said:

This contention is predicated on the theory that when the appellants were convicted of third degree burglary at their first trial, they were thereby acquitted of grand larceny. In view of the fact that the judge at the first trial instructed the jury that the count in the indictment charging third degree burglary embraced the offense of grand larceny and that the appellants could be convicted of either of these offenses but not both, the jury’s verdict finding the appellants guilty of third degree burglary was not tantamount to an acquittal of grand larceny. Cf. State v. Fry, 98 Tenn. 323, 39 S.W. 231 (1897).

We are not satisfied that this holding squares with the record or conforms to the law.

We look first to the indictment. It contains two counts, i. e., third degree burglary and receiving and concealing stolen property. The first count, however, after charging that the defendants

unlawfully, feloniously, forcibly and violently, did break and enter, in the night time, the business house of another [naming him] with the unlawful and felonious intent then and there and therein to commit a felony, to wit: Larceny,

continued by charging

and did then and there and therein unlawfully and feloniously take, steal and carry away certain goods and chattels, to wit [describing property having a value of $825.00 and identifying his owner] with the felonious intent and purpose to deprive the said true owner thereof and to appropriate the same to their own use.

Thus, the first count charged two separate offenses, i. e. third degree burglary and grand larceny. The essential element of third degree burglary is breaking and entering with the intent to commit a felony; and burglary is not larceny, Hindman v. State, 215 Tenn. 127, 384 S.W.2d 18 (1964), nor is larceny necessarily a lesser included offense embraced within the crime of burglary. Petree v. State, 530 S.W.2d 90 (Tenn.Cr.App.1975).

The second count charged receiving and concealing stolen property.

On the first trial, the trial judge charged: You will first inquire, are the defendants . guilty of the offenses of burglary in the third degree, or grand larceny.
******
If you find the defendant . . . not guilty of either of the above offenses you will then proceed to inquire whether or not . . . the defendants are guilty of petit larceny.

The dissenting opinion of the Court of Criminal Appeals to the contrary notwithstanding, the trial judge did not even submit the second count, charging receiving and concealing, to the jury.

The jury retired and, in due time, returned to the courtroom. After indicating that it had reached a verdict, and, in response to the trial judge’s inquiry, reported:

The Jury voted unanimously to find both defendants guilty as charged .

The jury was instructed to fix the punishment and after doing so the trial judge pronounced judgment as follows:

In accordance with the verdict of the jury it becomes my duty to sentence you each to confinement in the penitentiary. .

It is readily apparent that the jury found the defendants guilty of both third degree burglary and grand larceny.

When the judgment was reduced to writing, it recited

We the jury find the defendants guilty of burglary in the third degree .

Thus, there was a marked discrepancy between the verdict as actually found and as actually entered.

The trial judge has both the power and duty to require that the jury correct or amend an improper or incomplete verdict. Meade v. State, 530 S.W.2d 784 (Tenn.Cr.App.1975). The trial judge has the right and duty to mould a judgment in accordance with the final verdict as returned by the jury. Sullivan v. Morrow, 504 S.W.2d 767 (Tenn.App.1973). But this does not carry with it the right to substitute for the rendered verdict a judgment that is substantially different.

However, the question of the validity of the judgment is not before the Court. We can only assume that the trial judge treated the offense of grand larceny as being merged with the offense of third degree burglary, under the authority of Cronan v. State, 113 Tenn. 539, 82 S.W. 477 (1904). Cronan is at variance with Petree, supra, but it has been followed by a long line of cases.

Since this matter is not precisely before us, we do not at this time address the conflict in these cases. It has in effect, become the law of this case that this particular grand larceny is merged with the offense of third degree burglary.

We recognize the general rule of law that a special verdict upon a single count of an indictment is given the effect of an acquittal upon the other counts to which the jury did not respond. Conner v. State, 531 S.W.2d 119 (Tenn.Cr.App.1975). See also Wright v. State, 2 Tenn.Crim.App. 95, 451 S.W.2d 707 (1969).

In this case the jury responded fully by finding the defendants guilty of both charges specifically set forth in the first count.

The conviction of the charge of third degree burglary, embracing or including the charge of grand larceny, was appealed and, upon appeal, the Court of Criminal Appeals reversed on the basis of errors in the admission of evidence, as opposed to its sufficiency-

The effect of this reversal was that the slate was wiped clean and the two-charge first count of the indictment was triable anew. The state and federal constitutional provisions against double jeopardy are not offended under these circumstances. The first convictions are not being reversed for insufficiency, the rule of Greene v. Massey, — U.S. -, 98 S.Ct. 2151, 57 L.Ed.2d 15 (1978), does not apply.

Affirmed.

PONES, COOPER, BROCK and HARBI-SON, JJ., concurring.

      . We concur in the conclusion reached by the Court of Criminal Appeals as to all other issues.

      , See Marshall v. State, 497 S.W.2d 761 (Tenn.Cr.App.1973); Brumley v. State, 475 S.W.2d 180 (Tenn.Cr.App.1971); McAfee v. State, 3 Tenn.Cr.App. 424, 463 S.W.2d 141 (1970); Carter v. State, 1 Tenn.Crim.App. 545, 447 S.W.2d 115 (1969).


author: NEARN, Judge.

text:
    Jay B. STRINGER, Appellant, v. CONTINENTAL CASUALTY COMPANY, Appellee.
    Court of Appeals of Tennessee, Western Section Sitting at Knoxville.
    Feb. 23, 1978.
    Certiorari Denied by Supreme Court July 10, 1978.
    Noone, Stringer, Powers & Schulman, Chattanooga, for appellant.
    Duggan, McDonald & Hawley, Chattanooga, for appellee.
   NEARN, Judge.

By this suit plaintiff seeks recovery as a beneficiary under a group hospitalization insurance policy. As will be seen, other than the existence and terms of the policy in question, all the material facts are within the singular knowledge of plaintiff and are actually uncontroverted.

Those facts are that the plaintiff, a licensed la,wyer in Illinois and Tennessee, enrolled in a group insurance plan sponsored by the Illinois Bar Association in 1966. Shortly after enrollment the plaintiff received from the insurance company agent a letter stating, “You will be notified of your next premium due by being billed from this office approximately 30 days in advance or about 9-1-66.” Payments were to be made semi-annually. Thereafter, the plaintiff received his semi-annual premium notices and paid them including the April 1968 premium. During the fall of 1968 plaintiff was in the process of relocating in Tennessee from his home in Illinois. At the same time the Illinois Bar was in the process of negotiating a new group policy for its policyholders. Although plaintiff had filed with the post office a notice of his new address in Chattanooga, Tennessee, plaintiff testified he did not receive a notice of the existence of a new policy or of the premium being due in the fall of 1968.

Defendant adduced testimony to the effect that notices were mailed to all members of the Illinois Bar Association in September of 1968, advising that the old policy was to be terminated, a new policy issued, and the amount of premium; that it was its further procedure to mail follow up notices to those who did not respond to the initial premium request and such procedures were followed.

The policy contains no notice provision.

Plaintiff testified that in December of 1968 he received a letter (Ex. 21) from the insurance agent containing a sealed blue envelope which contained the Continental Casualty certificate of coverage for the new policy, a copy of the new master policy, along with a premium notice. The cover letter containing the foregoing items commenced with the statement: “Your Association has adopted a new Medicare Supplement group policy effective October 1,1968.

This special program is designed expressly for each member and his spouse over age 65.” Since plaintiff was not then over 65, he concluded that the letter did not affect him, read no further, and did not open the blue envelope. However, plaintiff did not discard Exhibit 21, but retained same. Had plaintiff continued reading the letter he would have discovered that the second paragraph advised of higher hospital and medical costs plus

“the advent of Medicare has contributed to the necessity of terminating the existing Major Medical Policy # 22-A-3416 on October 1, 1968, 12:01 A.M. Standard Time. A new group Major Medical contract also will be issued to each insured member under age 65 and his dependents effective the same date. Spouses who have not attained their 65th birthday will be issued a new Major Medical contract at that time. Upon their reaching age 65, they too will be issued the Medicare Supplement.”

Had plaintiff read to the fourth paragraph he would have discovered that it provided:

“Enclosed find your certificate for the new program which has been issued to you automatically and without evidence of insurability. The descriptive brochure enclosed contains an enrollment form requiring your completion. Your new coverage will become effective upon return of your completed form with payment of the premium per the enclosed statement by October 31, 1968.”

Plaintiff received no other notice from the insuror or the Illinois Bar Association.

In August 1969 upon plaintiff discovering that his daughter would have to have expensive surgery, plaintiff determined to look at his insurance policy and see what his benefits were. On August 18, 1969, plaintiff testified he first discovered his premium notice in the blue envelope heretofore mentioned and immediately remitted premiums to the insurance company with the statement that “In going over my papers yesterday I discovered the premium notice which I apparently overlooked in the confusion of my moving from Illinois.” The insurance company advised plaintiff that his policy had lapsed because of non-payment of the premium, returned his check, and advised that if he wished to reapply for coverage he could do so. Plaintiff did not do so.

By this suit plaintiff seeks recovery of $16,225.26 for hospital expenses incurred on behalf of his daughter. The insuror contended the policy had lapsed.

The Chancellor found that Exhibit 21, if it had been read, would put anyone on notice that there was a premium to be paid. The one page letter comprising Exhibit 21 explicitly referred to “an enclosed premium notice” and the Chancellor concluded that the letter complied with any notice requirements that might be placed upon the insurance company. The Chancellor also stated that he knew “of no excuse in the law for not reading such a letter that a person receives.” We do not know of one either.

The Chancellor correctly held that the fact that the plaintiff did not read his letter or his certificate did not relieve him of knowledge of its contents and the Assignments of Error to the effect that the Chancellor erred in so finding are overruled and the decree below affirmed. Costs of this appeal are adjudged against appellant.

Honorable JERRY SCOTT, by designation of the Supreme Court of Tennessee, took part in the hearing of this appeal in the absence of Judge PAUL R. SUMMERS.

Done at Knoxville in the two hundred and second year of our Independence and in the one hundred and eighty-third year of our Statehood.

MATHERNE, J., and SCOTT, Special Judge, concur.


author: DROWOTA, Judge.

text:
    INTERTHERM, INC., et al., Plaintiffs-Appellees, v. OLYMPIC HOMES SYSTEMS, INC., Johnny R. Bailey, Sr., Fred R. Langley and James L. Clayton, Defendants-Appellants.
    Court of Appeals of Tennessee, Middle Section.
    Feb. 24, 1978.
    Certiorari Denied by Supreme Court June 26, 1978.

      P. Douglas Morrison, Morrison, Morrison & Morrow, Knoxville, for defendants-appellants.
    Milton E. Henderson, Steltemeier & Westbrook, Nashville, for plaintiffs-appel-lees.
   OPINION

DROWOTA, Judge.

This is a suit by general creditors against an insolvent corporation and three of its shareholders. The issue is whether a security interest taken by two of the shareholders in personal property of the corporation is valid, and whether it entitles the two shareholders to priority over the general creditors as to the property covered by it.

This suit was filed on February 28, 1975, in the Chancery Court of Giles County, by plaintiff Intertherm, Inc., and others on behalf of themselves and of all other creditors of defendant Olympic Home Systems, Inc. (Olympic). In addition to Olympic, the complaint named as defendants Johnny R. Bailey, Sr., Fred R. Langley, and James L. Clayton, who were alleged to be “officers and/or principal stockholders” of Olympic. Plaintiffs alleged that Olympic was insolvent, and asked relief on behalf of its general creditors. Although plaintiff Intert-herm and three other companies originally brought the suit, there is now a 365-page technical record consisting primarily of the claims of dozens of creditors. The Chancellor found that these claims total “several hundred thousand dollars.”

On October 24, 1975, the trial court entered his “order sustaining general creditors’ action,” and appointed a receiver to take charge of Olympic’s property. Soon afterward, at the court’s direction, the receiver conducted a sale of Olympic’s inventory. The receiver reported that the sale of the inventory produced $11,172.00. After adding to this $6.30 “cash found on premises,” the only income taken in by the receiver other than that derived from the sale, and deducting the expenses of the sale, the receiver was left with a net amount of $9,254.02.

It was shortly after the receiver’s sale that defendants Langley and Clayton asserted the claim around which the instant controversy revolves. They filed with the court a petition in which they alleged that they held a valid security interest in the inventory that had been sold, and asked that the entire $9,254.02 held by the receiver be turned over to them. Plaintiffs answered the petition, denying the validity of the security interest and alleging that money transferred to the corporation by Langley and Clayton was payment for shares of stock rather than a loan. The Chancellor was thus called upon to determine the validity and priority of the security interest asserted by Langley and Clayton.

The evidence presented to the Chancellor is very meager, and establishes only the most basic facts. In the summer of 1973, defendant Langley was approached by Jim Roberts, who told Langley that he (Roberts), Roger Dale Baker, and defendant John R. Bailey wanted to form a company to manufacture mobile homes. Langley was interested, and became involved in some of the details of how such a corporation could be successfully structured. Langley also asked defendant Jim Clayton, a friend who had experience in the mobile home business, to join the discussions. All parties were apparently enthused about the project, and a plan was formulated. The plan called for Langley and Clayton to finance and construct, at a cost of about $150,000.00, the physical plant, which would be leased to the corporation. The corporation itself was to be headed by defendant Bailey as President and Chief Executive Officer. The financial structure called for an initial amount of $100,000.00, of which $25,000.00 was to be equity and $75,000.00 was to be debt in the form of loans or convertible debentures. Langley and Clayton were each to own 15% of the stock, while some persons known as the “Alabama Group” were to own the remaining 70%. Langley and Clayton would be “putting in” a total of $50,000.00 but would not participate in the day-to-day business of the company.

It appears that this plan was largely carried into effect, though it is not clear from the evidence whether the entire $75,-000.00 was loaned to the corporation as originally anticipated. On September 18, 1973, Langley and Clayton bought from the corporation, Olympic Home Systems, $7,500.00 worth of capital stock, so that each owned 15% of the stock of Olympic. On the same date, Langley and Clayton, participating equally, loaned Olympic $42,-500.00. This debt is evidenced by a promissory note dated September 18, 1973, in the amount of $42,500.00 with interest at 8½%, due and payable on or before January 1, 1974. The note recites that it is “secured by a security agreement of even date herewith covering certain property in the possession of the maker at its place of business in Ardmore, Tennessee.” It is signed for Olympic by Johnny R. Bailey as President.

The security agreement, also dated September 18, 1973, gave Langley and Clayton a security interest in the following property of Olympic:

Accounts receivable, inventory, merchandise, work in process, building materials and all other materials and supplies used by Debtor in its manufacturing operations.

In addition to this property itself, the agreement secured “all additions and accessions thereto, substitutions thereof, and all proceeds of its sale or other disposition.” The agreement recites that it is “to secure the payment of a note dated September 18, 1973.” It is signed for Olympic by Johnny R. Bailey, Sr., as President and attested by Roger Dale Baker. A financing statement and a copy of the security agreement were filed with the Secretary of State in Nashville, but not until September 18, 1974.

The record contains no evidence whatsoever of the day-to-day operations of Olympic, other than the numerous claims of creditors for unpaid accounts. It is obvious, however, that Olympic was not long in encountering financial difficulties. None of the defendants has contested the trial court’s finding that Olympic is insolvent. On February 17, 1975, defendant Langley sold his stock in the corporation to defendant Bailey for $1.00. Defendant Clayton did the same, but the exact date of his sale is not clear.

These facts constitute almost all of the facts proven in this case. Some were established by copies of the promissory note, security agreement, and financing statement. Others appear in a copy of a letter written by Langley in August of 1973 to Ike Hobson, President of the Bank of Ard-more, which financed the real estate occupied by Olympic. Still others are found in the answers of defendants Langley and Clayton to fourteen interrogatories. The letter to Hobson is attached to these answers as an exhibit. Also attached are copies of Langley’s checks to Olympic for $21,-250.00 and $3,750.00, and Bailey’s $1.00 check to Langley, as well as copies of handwritten notes taken by Langley and Clayton during preliminary negotiations.

In addition to facts already stated, the answers to interrogatories aver that Langley and Clayton loaned Olympic $42,500.00 for “operating capital.” They also state that prior to the loan, the two men engaged in active negotiations with defendant Bailey, Dale Baker, and Jim Roberts, who were the promoters and operating officers. The answers state that the loan was not a capital contribution but a short term loan which Langley and Clayton expected to be repaid from operating income within a year. Neither Langley nor Clayton said he knew why the financing statement was not filed until a year after the note and security agreement were executed, and both answered that it was not their intention that the loan be kept from public knowledge.

The only other evidence presented, and the only evidence that approaches live oral testimony, is a taped deposition taken by telephone. The deponent is J. Earl Rainwater, who was Langley’s attorney and the man who drafted the security agreement. It was Rainwater who had custody of the loan documents and who failed to file a financing statement until September 18, 1974. He explained that he had been waiting to receive copies of the real estate documents, to be recorded by another attorney, and had delayed recording the U.C.C. documents until he received those copies. He said that neither he, Langley, nor Clayton delayed recording the security interest purposely. He gave two reasons for Langley’s and Clayton’s having bought $7,500.00 worth of stock and having loaned the corporation $42,500.00: this arrangement was to their tax advantage, and they did not want to buy $50,000.00 worth of stock in Olympic. Rainwater said that the loan was made because Olympic needed more money to get started than the amount obtained through stock subscriptions, but that he could not say whether the corporation was undercapi-talized.

Rainwater’s deposition, the loan documents, and the answers to interrogatories with attached exhibits are the only material evidence in the record on the issue of the validity of this security interest. No oral testimony was taken in the trial court. Aside from the claims of creditors, there is no evidence of how Olympic’s business progressed after its inception. No corporate minutes, financial statements, or records of any kind for any period of the corporation’s existence were introduced. Nowhere does it appear that either Langley or Clayton was an officer or director of Olympic. All the documents in the record that were executed by Olympic are signed by defendant Bailey, the President, or Baker, the Secretary.

After considering the evidence, the Chancellor embodied his findings and conclusions in a very thorough memorandum, which contains quotes from and citations to relevant cases as well as a clear presentation of the facts. The Chancellor’s holding was that Langley and Clayton are not secured creditors entitled to priority over the general creditors. This holding is based in the main on his findings that the loan was not an arm’s-length transaction, and that it constituted a contribution to capital rather than a loan. The Chancellor said that “[t]o allow the shareholders to disguise their contribution of capital as a loan to the detriment of other creditors would be a fraud on all other creditors.” Defendants Langley and Clayton have appealed the Chancellor’s ruling.

Defendants devote the first part of their brief to the argument that they have met the requirements of Tennessee’s version of the Uniform Commercial Code, T.C.A. § 47-1-101 et seq., for a security interest in Olympic’s inventory and priority over its general creditors. While this point was apparently in contention in the trial court, plaintiffs have not disputed it in this Court. We think there is no doubt that the security agreement between Olympic and Langley and Clayton properly covers inventory of Olympic and its proceeds, and so covers the funds claimed by defendants here. Further, it is clear that T.C.A. § 47-9-201 gives the holder of even an unperfected security interest priority over general creditors of the debtor as to the property secured. See J. White & R. Summers, Uniform Commercial Code § 25-2 (1972). The real question in the instant case is whether on the instant facts there are legal or equitable reasons for disregarding the priority otherwise apparently accorded Langley and Clayton by the U.C.C.

It is true, in Tennessee as elsewhere, that there is no general prohibition against a good faith transaction between a shareholder and his corporation. See Russell v. Tennessee & Kentucky Tobacco Co., 16 Tenn.App. 561, 65 S.W.2d 256 (1933); 18 C.J.S. Corporations § 489 (1939). Accordingly, a shareholder may lawfully loan money to his corporation and receive security therefor. 13 W. Fletcher, Cyclopedia of the Law of Private Corporations § 5739 (1970); 18 Am.Jur.2d Corporations § 490 (1965); Annot., 31 A.L.R.2d 663, 671 (1953).

It is also generally held that officers and directors may, in good faith, lawfully loan money to the corporation they serve and take security therefor. See, e. g., 3 W. Fletcher, Cyclopedia of the Law of Private Corporations § 952 (1975). This rule is clearly followed in Tennessee. Rawlings v. New Memphis Gaslight Co., 105 Tenn. 268, 60 S.W. 206 (1900); Fidelity Bankers Trust Co. v. Chapman Drug Co., 51 Tenn.App. 246, 366 S.W.2d 528 (1962); McConnell v. Sprouse, 13 Tenn.App. 291 (1931). The rule further provides, however, that “such transactions will invite the closest investigation by the courts, and must be characterized by the utmost good faith.” Fidelity Bankers Trust Co., supra, at 255, 366 S.W.2d at 532. The burden of proving such good faith is on the officer or director. See Smith v. Mississippi Livestock Producers Ass’n, 188 So.2d 758 (Miss.1966); 19 Am.Jur.2d Corporations § 1298 (1965).

As can be seen from cases like Fidelity Bankers Trust Co., supra, and Smith, supra, close investigation is accorded a corporation’s transactions with an officer or director, and the burden of proof is placed upon the officer or director, because of his fiduciary capacity. As a fiduciary, the officer or director has a strong influence on how the corporation conducts its affairs, and a correspondingly strong duty not to conduct those affairs to the unfair detriment of others, such as minority shareholders or creditors, who also have legitimate interests in the corporation but lack the power of the fiduciary.

It is also generally held, in accordance with the leading case of Pepper v. Litton, 308 U.S. 295, 60 S.Ct. 238, 84 L.Ed. 281 (1939), that courts will closely scrutinize the transactions of a majority, dominant, or controlling shareholder with his corporation, and will place the burden of proof upon the shareholder when the good faith and fairness of such a transaction is challenged. See 18 Am.Jur.2d Corporations § 504 (1965). Sometimes this rule is stated to apply to corporate transactions with “shareholders,” unmodified by “majority,” “dominant,” or “controlling.” See, e. g., Annot., 31 A.L.R.2d 663, 676 (1953). It is obvious, however, that the reason for applying the rule to a shareholder is the same as the reason for applying it to an officer or director, that is, that he occupies a fiduciary position with regard to the corporation and those interested in it. Unless it is shown that a shareholder owns a majority of the stock or that he otherwise controls or dominates a corporation, however, a shareholder cannot be said to be a fiduciary and the reason for closely scrutinizing his transactions with the corporation disappears. Further, in reviewing the cases in which the courts have closely scrutinized transactions between a corporation and a shareholder and have put the burden of justifying them on the latter, we find that they almost invariably involve a majority, dominant, or controlling shareholder. See, e. g., Pepper v. Litton, 308 U.S. 295, 60 S.Ct. 238, 84 L.Ed. 281 (1939); Small v. Williams, 313 F.2d 39 (4th Cir. 1963); Albert Richards Co. v. The Mayfair, 287 Mass. 280, 191 N.E. 430 (1934); Belcher v. Webb, 176 Wash. 448, 29 P.2d 702 (1934). Accordingly, it is clear that courts should apply the rule of close scrutiny and place the burden on the shareholder to justify a transaction with his corporation only when the shareholder owns a majority of stock, or is shown to dominate or control the corporation to a significant degree in some other way.

In the instant case, defendants contend that their secured loan to Olympic should be upheld under the general rule that shareholders may lawfully contract with their corporation. Plaintiffs, on the other hand, argue that this Court should scrutinize this transaction closely and put the burden of justifying it on defendants who, plaintiffs further argue, have failed to carry that burden. We hold that the instant transaction should not be subjected to close scrutiny, and that the burden of proof should not be on defendant shareholders, because plaintiffs have offered no evidence from which we could conclude that defendants owned a majority of Olympic’s stock or otherwise dominated it in such a way as to justify imposing fiduciary responsibilities on them.

There is no evidence in this record that either defendant Langley or defendant Clayton was ever an officer or director of Olympic. The evidence is that each owned 15% of the capital stock of Olympic. It is clear that both were involved in setting up the corporation, but there is nothing to show that they participated in the business afterward. There is evidence that they did not intend to participate in the corporation’s everyday affairs. No corporate records of any sort appear in the record. Consequently, it is impossible to know whether defendants had voting stock, whether they acted together to exert their 30% influence, or whether each used his 15% ownership in a different way. Nor is there any indication of who was in the “Alabama Group” that was to own the remaining 70% of the shares, or of how ownership of those shares was divided. In short, there is no evidence of any degree of power or control by defendants over the corporation at any time. As far as we can tell from' this record, defendants were simply two 15% shareholders who, although they participated in setting up the corporation, were not even its promoters. It is our conclusion that plaintiffs are required to present at least some evidence that defendant shareholders were also officers or directors, or that they in some significant way dominated the corporation, in order to invoke close scrutiny of the transaction and place the burden of justifying it on defendants. Plaintiffs have failed to do so here.

Plaintiffs, then, by failing to show that defendants Langley and Clayton had any fiduciary capacity with Olympic, have failed to shift from themselves the burden of proving fraud or absence of good faith in the loan transaction. That they have also failed to carry that burden of proof is discussed below.

Plaintiffs, however, also argue that Olympic was undercapitalized. A finding of undercapitalization is often used by courts, especially in federal tax cases and insolvency proceedings, as a reason for treating stockholder-corporation transactions that in form are loans or purchases of debt securities as contributions of equity capital. See 1 F. O’Neal, Close Corporations § 2.10 (2d ed. 1971). Plaintiffs argue that Olympic was undercapitalized, and that consequently the $42,500.00 transferred to Olympic by defendants was not in fact a loan but a contribution of equity capital. This situation, plaintiffs seem to say, would have the following effects: (1) that the transaction was not a loan voids defendants’ security interest and means that they are not creditors of Olympic at all; (2) that the $42,500.00 was equity capital means that defendants Langley and Clayton were majority shareholders, and that their transactions with Olympic are subject to the close scrutiny and burden of proof discussed earlier.

A corporation is undercapitalized when the amount of capital invested in its equity securities is insufficient for the requirements of the particular business. Courts and commentators have stated many different tests for determining whether a corporation is sufficiently undercapitalized to consider treating all or part of its “debt” to shareholders as equity. Some, for example, propose that the test should be whether an outsider would have made a loan to the corporation under the circumstances. See 1 F. O’Neal, Close Corporations § 2.10 (2d ed. 1971). Others say a corporation is underca-pitalized when only a nominal amount is invested in equity. See id. It has also been suggested that a debt/equity ratio of about 4:1 can be considered “safe.” See id. Whatever test is used, it is clear that the exact definition of undercapitalization varies according to the type of business or industry involved, and even according to the features of the particular business being examined. Again, unless the shareholder whose loan is challenged is in some way a fiduciary, the burden of proving undercapi-talization should be upon the challenger. See In re Brunner Air Compressor Corp., 287 F.Supp. 256 (N.D.N.Y.1968).

In the instant case, the scant evidence is insufficient to support a finding of undercapitalization. In Brunner, supra, the court expressed regret at the absence of expert testimony but affirmed the referee’s finding of undercapitalization on the basis of extensive data on the corporation’s expenses and operations from its minutes and financial statements. In the instant case we lack not only expert testimony but also, as we have pointed out, any information from Olympic’s records about any aspect of its business. There is no testimony as to what amount of capitalization is generally needed in the mobile home manufacturing industry, nor as to what was needed or expected to be needed in Olympic’s case. Rainwater testified that Olympic needed more than the $25,000.00 obtained from stock subscriptions to get started, but stated that he could not say whether Olympic was undercapitalized. Indeed, the only evidence urged with any zeal by plaintiffs to show undercapitalization is that Olympic’s equity was $25,000.00 while its debt was from $42,500.00 to $75,000.00, a ratio of no more than 8:1. This, without more, is insufficient to support a finding that Olympic was undercapitalized.

On the meager evidence in this record, then, we have no choice but to conclude that defendants were minority shareholders without control, and that Olympic was adequately capitalized. Have plaintiffs nevertheless proven that a fraud was perpetrated on them, Olympic’s general creditors, or that the loan was not an arm’s-length transaction? We think not. The only concrete evidence is that defendants participated in organizing Olympic, a corporation with a debt/equity ratio of about 3:1. They each purchased 15% ($3,750.00 worth) of its $25,000.00 worth of equity securities, and lent it $42,500.00 of its debt for which they took security. The security interest was not recorded for a year. Defendants and their attorney, by answers to interrogatories and taped deposition, respectively, categorically denied any intent to defraud creditors by any of their actions. No oral testimony was taken in the trial court, so that the factor of the witnesses’ credibility, an area in which this Court gives great deference to the trial court, is wholly lacking. Defendants have not been shown to have been officers or directors of Olympic, or to have participated in its management in any way. That the loan was to defendants’ tax advantage is not enough, of itself, to prove that it was not an arm’s-length transaction. The loan in question was made when the corporation was begun, before it became insolvent, and before it had any general creditors. There is no evidence that defendants misrepresented the corporation’s financial structure to creditors, or that they acted in bad faith in any way.

We conclude that the evidence in this case is insufficient to sustain a finding of fraud or lack of good faith against defendant shareholders, Langley and Clayton. To find fraud on the instant facts would amount almost to finding it fraudulent per se to organize a corporation with a debt/equity ratio of 3:1 in which minority shareholders are also substantial secured creditors. Such an inflexible rule could inhibit the development of a great many perfectly sound new businesses, for “[n]o private investor could be expected to invest in the debt securities of a corporation he does not control if he must run the risk of having his debt security classified as a stock in the event of the corporation’s failure.” Brunner, supra, at 266.

Our decision does not imply a disavowal of the equitable principles of Pepper v. Litton, 308 U.S. 295, 60 S.Ct. 238, 84 L.Ed. 281 (1939), and its progeny, which judge very strictly the transactions of a fiduciary with his corporation and place the burden of justifying those transactions on the former. Nor do we quarrel with the understanding of those cases displayed by the Chancellor, who carefully analyzed and applied them. We have simply concluded that there is no evidence in the instant case that defendants Langley and Clayton had any fiduciary position in or control over Olympic, and that consequently no reason has been shown for invoking the strict rules of cases like Pepper. Similarly, we do not imply that a fraud on creditors could not be found in the organization of a corporate structure similar or identical to Olympic’s. We simply hold that this record does not contain enough evidence to demonstrate that such a fraud occurred in the instant case.

We .hold that defendants Langley and Clayton have a valid security interest in the property of Olympic recited in the security agreement of September 18, 1973, and that no reason appears for subordinating that interest to the claims of Olympic’s general creditors. The decree of the Chancellor is reversed and the case is remanded for a final determination of the priority of claims to Olympic’s remaining assets in accordance with State law and with this opinion.

Reversed and remanded.

SHRIVER, P. J., and TODD, J„ concur.