Case Title: Hervey v. AMF Beaird, Inc.

Citation: 464 S.W.2d 557

Docket Number: 5-5504

State: arkansas

Court: Arkansas Supreme Court

Date: 1971-03-15T00:00:00Z

Document:
464 S.W.2d 557 (1971) A. B. HERVEY, Jr., Commissioner of Revenues, State of Arkansas, Appellant, v. AMF BEAIRD, INC., Appellee. No. 5-5504. Supreme Court of Arkansas. March 15, 1971. *558 Lyle Williams, J. Victor Harvey, John F. Gautney, Walter Skelton and Dewey Moore, Jr., Little Rock, for appellant. Wright, Lindsey & Jennings, Little Rock, for appellee. FOGLEMAN, Justice. The Commissioner of Revenues contends that the chancery court erroneously granted summary judgment in favor of appellee AMF Beaird, Inc., a Delaware corporation, whose principal office is in Louisiana, for recovery of income taxes paid the State of Arkansas by it for the years 1964, 1965 and 1966. In the judgment, granted on appellee's motion in a suit by it to recover these taxes, the chancellor made the following findings: Appellant urges three points for reversal. He contends that the court erred (1) in holding that appellant had presented no evidence in opposition to the affidavit, depositions and exhibits submitted by appellee in support of its motion for summary judgment; (2) in granting summary judgment in spite of the existence of genuine issues as to material facts; and (3) in holding that appellant is barred from levying an income tax on appellee for the years in question by United States Public Law 86-272, 73 Stat. 555, 15 U.S.C. A. § 381. As we view the matter, the issues raised by these points are so interdependent and intertwined that they cannot well be treated separately, so we will discuss them collectively. The real issue *559 raised by the pleadings is whether appellee is relieved from the payment of income taxes for the years in question by the provisions of the federal law above mentioned. The act, insofar as pertinent, reads as follows: Appellee based its motion for summary judgment upon the pleadings, the depositions of Robert Carroll, Jr., Paul Downs and Clian Dearien and the affidavit of N. T. Adams. In response, appellant filed only a formal allegation that there was a genuine issue of material fact and a brief in which he argued that the business activities of appellee exceeded the mere solicitation of orders for sales of tangible property. Appellant relied upon disclosures in the depositions upon which appellee based its motion. These disclosures included the contracts between appellee and certain of those with whom it did business in Arkansas. Carroll operates Carroll Building & Supply Company, a sole proprietorship in Murfreesboro, engaged in the building material and LP gas business. He sells LP storage tanks manufactured by Beaird. He makes payment for tanks sold each month either to its representative or directly to the company at its principal office in Louisiana. He never returned any equipment to Beaird unless it was damaged or defective. He said that AMF salesmen never did anything except take orders, check his inventory and accept payments. Carroll carried insurance on the equipment obtained from Beaird while it was in his possession. He said that monthly sales were about equal to monthly orders. He stated, "As we sell a tank we pay for it." The contract between Carroll and Beaird, which could be terminated by either party upon 30 days' notice, contained the following pertinent provisions: Carroll stated that he used his own sales agreement forms, billed customers and extended credit at his own risk, without any dictation or suggestion of prices by Beaird, in spite of the contract provisions. Downs operated Tobin Furniture & Butane Company, a corporation engaged in the LP gas and furniture business in DeQueen, under a contract similar to that with Carroll. Paragraph 4, however, in the Tobin contract, reads as follows: This contract also contained an additional provision reading as follows: Downs followed practices similar to those of Carroll. He said that Beaird's salesman would come by, inventory his stock and collect for whatever merchandise he had sold. Dearien operated Stone County Gas Company, a corporation in Mountain View, selling propane gas and appliances. The corporation acquired the business from O. H. Stevens, who was buying from Beaird. It continued the existing relationship with appellee. Stevens' contract with Beaird was virtually identical with that of Tobin. Dearien obtained tanks by placing an order, usually when Beaird's salesman called. He paid Beaird either at the end of a month or when the salesman came around *561 and checked inventory. Otherwise, the method of operation was similar to those conducted with the other deponents. Dearien testified, "The property was on consignment and it was ours to handle any way we saw fit as long as we paid for it." N. T. Adams was Beaird's sales representative at all times after June 1, 1951. He made monthly calls on Beaird's customers in Arkansas. He stated that his only duties in Arkansas were: He said that the customer paid Beaird each month for the merchandise sold by the customer during the preceding month. He added that Beaird did not intend to retain title to the equipment sold to its customers, took no action for this purpose, did not designate its customers as its agents and did not deal with them on that basis. He corroborated the deposing customers as to practices with reference to sales, credit extended, prices, etc.[1] At the outset, we should say that we do not agree with the chancellor that the failure of appellant to offer evidence in opposition to the affidavit, depositions and exhibits submitted by appellee necessarily entitled the latter to summary judgment, or showed nonexistence of any genuine issue as to any material fact. See Ashley v. Eisele, 247 Ark. 281, 445 S.W.2d 76. This is only the case when the moving party has clearly met its burden of demonstrating that there is no justiciable issue. The adverse party only has the burden of demonstrating the existence of such an issue when the moving party has made a prima facie showing of entitlement to the relief sought by it. See Ark.Stat.Ann. § 29-211(e) (Supp.1969); Miskimins v. City National Bank of Fort Smith (1970), Ark., 456 S.W.2d 673. In determining whether the movant has made the requisite showing, all doubts are resolved against summary judgment, all presumptions and inferences must be resolved against the movant and, in a case in which fair-minded men may honestly differ about the conclusions to be drawn from the testimony, summary judgment must be denied. Mason v. Funderburk, 247 Ark. 521, 446 S.W.2d 543. The evidence must be liberally construed in favor of the party opposing the motion. Pickens-Bond Const. Co. v. North Little Rock Elec. Co. (1970), Ark., 459 S.W.2d 549. In order to determine the correctness of the chancery court's action, we must decide whether the facts shown in support of appellee's motion made a prima facie case for recovery of the taxes paid by it. We find that they do not. Appellee failed to bring itself within the statute upon which it relies because it did not show that the only business activity on its behalf in Arkansas was the solicitation of orders. The stated purpose of the act in question was to prohibit states from collecting income taxes permitted by Northwestern States Portland Cement Co. v. Minnesota and Williams v. Stockham, 358 U.S. 450, 79 S. Ct. 357, 3 L. Ed. 2d 421, wherein it was held that mere solicitation of orders afforded sufficient "nexus" with the state in which they were solicited for such taxation. 2 U.S. Code Cong. & Adm. News 2548 et seq. (86th Cong., First Session, 1959). When we consider the purpose of the legislation and the language of the act, we cannot give the term "solicitation" the broad interpretation necessary to sustain this judgment. Other jurisdictions considering this section have held that "solicitation" is not to be given a broad construction. Clairol, Inc. v. Kingsley, 109 N.J.Super. 22, 262 A.2d 213 (1970); Cal-Roof Wholesale Co., Inc. v. State Tax Commission, 242 Or. 435, 410 P.2d 233 *562 (1966); Herff-Jones Co. v. State Tax Commission, 247 Or. 404, 430 P.2d 998 (1967). The legislative history of the act clearly indicates that a narrow construction of the term "solicitation of orders" was intended by Congress. 2 U.S. Code Cong. & Adm. News 2548 et seq. (86th Cong., First Session, 1959). The activities of appellee's representative in Arkansas go far beyond mere solicitation of orders for sales of appellee's products to be shipped into the state if the orders are approved. Proper performance of his duties requires him to make regular checks of customers' inventories of Beaird equipment. The record shows that Adams did so. This practice itself extends Beaird's activities beyond the scope of solicitation of orders. Even if it should be said that this activity helped to produce orders, it is equally reasonable to conclude that Beaird's interest was in protecting its property rights in the items shipped to the various parties with whom it had contracts, to establish the basis for billing these parties and to determine whether conditions in any particular instances required invocation of rights reserved in the various contracts. If Beaird did not maintain this degree of control, then it would have had no means of determining whether or when it should bill a customer for a particular item or whether proper and timely remittances had been made by the customer.[2] We would have no difficulty, however, in finding that appellee had failed to show, at least as a matter of law, that its activities were restricted to solicitation of orders for sales of tangible personal property. Appellant argues, with persuasive force, that the relationship between appellee and its "customers" is based upon a consignment arrangement, and that no sale is made by Beaird to them. Since the contracts might possibly be construed as being for conditional sales, in determining whether there was a sale or consignment we must look at the entire contract, as well as the actions of the parties thereunder. Sternberg v. Snow King Baking Powder Co., 186 Ark. 1161, 57 S.W.2d 1057; American Snuff Co. v. Stuckey, 197 Ark. 540, 123 S.W.2d 1063. See also, Ludvigh v. American Woolen Co., 231 U.S. 522, 34 S. Ct. 161, 58 L. Ed. 345 (1913); Edgewood Shoe Factories, etc. v. Stewart, 107 F.2d 123 (5th Cir. 1939); Liebowitz v. Voiello, 107 F.2d 914 (2nd Cir. 1939); Reliance Shoe Co. v. Manly, 25 F.2d 381 (4th Cir. 1928). Significant factors in evaluating such a transaction include: *563 In reviewing the contract and the actions of the parties here we note the following significant factors indicating that the arrangement was for consignment rather than sale: We do not intend to say that there are not other significant factors involved. It would not be unreasonable to infer from appellee's filing of tax returns and paying the taxes that it once thought that it was liable for them. Some of the actions of the parties are probably more consistent with a conditional sale than with consignment. We do mean to say that, at the very least, those factors pointed out suffice to raise a question of fact for the trial court's determination. Language from In re Lexington Appliance Company, Inc., 202 F. Supp. 869 (D.C.Md.1962) is appropriate here: Here the "customers" were never absolutely bound in all events to purchase any item. The contracts could easily be terminated before liability accrued for a system in stock for more than 12 months. Since we cannot say that appellee was entitled to judgment on the record before us, as a matter of law, the judgment is reversed and the cause remanded for further proceedings. JONES, J., dissents. [1] Plemmons Brothers Butane Company in Waldron had a similar arrangement with Beaird, but it is not now doing business. [2] We do not discuss the effect of "acceptance of payments" in Arkansas by appellee's representative because appellee asserted and appellant admitted in oral argument that this issue had not been raised in the trial court. [3] It is notable that the words "sold" and "sale" are never used in connection with the transactions between Beaird and its "customers." They are only used in reference to transactions conducted by the "customers" in disposing of the goods.