Opinion ID: 2371910
Heading Depth: 1
Heading Rank: 1

Heading: Direct appealGovernmental immunity

Text: The Estates of Archie Masterson, Louis Macon, and Calvin McCray assert that the trial court erred in granting Conway Corporation's motion to be dismissed as a party defendant inasmuch as it was an arm of the City of Conway, and thus immune from liability for actions in tort pursuant to Ark.Code Ann. § 21-9-301 (1987). Before addressing the merits of this argument, we note that the trial court considered matters outside of the parties' complaints to reach its conclusions, and for this reason, we treat the trial court's ruling as the granting of summary judgment. If matters outside the pleadings are presented and not excluded by the court, the motion to dismiss will be treated as one for summary judgment. Rankin v. Farmers Tractor & Equip. Co., 319 Ark. 26, 888 S.W.2d 657 (1994). See also Ark. R.Civ.P. 12(b) and (c). We review motions for summary judgment as follows: (1) summary judgment is a remedy that should be granted only when it is clear that there is no genuine issue of material fact to be litigated; (2) the burden of proving that there is no genuine issue of material fact is upon the movant, and all proof submitted must be viewed in a light most favorable to the party resisting the motion; (3) any doubts and inferences must be resolved against the moving party; (4) the burden in a summary judgment proceeding is on the moving party and cannot be shifted when there is no offer of proof on a controverted issue; and (5) when the movant makes a prima facie showing of entitlement, the respondent must meet proof with proof by showing genuine issue as to a material fact. Brumley v. Naples, 320 Ark. 310, 896 S.W.2d 860 (1995). The question before us is whether the trial court properly granted Conway Corporation's motion to dismiss, which we treat as a motion to grant summary judgment, in favor of Conway Corporation on the grounds that it was entitled to immunity under Act 165 of 1969, codified at Ark.Code Ann. § 21-9-301 (1987). On cross-appeal, the issue presented to us is whether the trial court erred in ruling that Conway Corporation was not immune from liability for tort as a qualified charitable organization. Arkansas Code Annotated § 21-9-301 (1987) reads as follows: It is declared to be the public policy of the State of Arkansas that all counties, municipal corporations, school districts, special improvement districts, and all other political subdivisions of the state shall be immune from liability for damages. No tort action shall lie against any subdivision because of the acts of their agents and employees. (Emphasis added.) In an answer to requests for admissions, Conway Corporation admitted that it is not a political subdivision, yet it maintains that it is entitled to governmental immunity under this statute on the basis that it is an arm of the City of Conway. Obviously, we find no language in this statute which provides that a municipal corporation may extend its tort immunity to its so-called arm. The basic rule of statutory construction is to give effect to the intent of the legislature, and when a statute is clear, it is given its plain meaning; the legislative intent is gathered from the plain meaning of the language used. Hercules, Inc. v. Pledger, 319 Ark. 702, 894 S.W.2d 576 (1995), citing Pugh v. St. Paul Fire & Marine Ins. Co., 317 Ark. 304, 877 S.W.2d 577 (1994). The statute provides for tort immunity for all counties, municipal corporations, school districts, special improvement districts, and all other political subdivisions. Conway Corporation does not fall within any of these enumerated categories, nor does the statute provide immunity for arms of municipal corporations or the other named entities. We disagree with Conway Corporation that we have previously resolved this issue in its favor in Conway Corp. v. Construction Eng'rs, Inc., 300 Ark. 225, 782 S.W.2d 36 (1989). In fact, we specifically declined the invitation to decide whether Conway Corporation was entitled to governmental immunity under section 21-9-301, while holding that contracts let by Conway Corporation were exempt from requirements that public improvement contracts be awarded to the lowest bonded bidder pursuant to Ark.Code Ann. § 19-11-403 and 404 (1987). We stated, in dicta, as follows: Although the Conway Corporation is not, strictly in name, a utility commission, that is what it is; it performs the same duties as a commission in managing and operating a municipal waterworks. 300 Ark. at 230, 782 S.W.2d 36. Following our comments in Conway Corp. v. Construction Eng'rs, Inc., supra , we recognize that Conway Corporation performs the same duties as a utility commission. Yet, when we look at the Corporation's articles of incorporation, we note that it was organized for benevolent purposes and especially for the promotion of education and aiding educational institutions in the City of Conway, and that it was authorized to adopt laws and regulations for the corporation not inconsistent with its articles. Thereafter, the City of Conway granted Conway Corporation a franchise to operate an electrical plant facility within the City of Conway. By its own admission, Conway Corporation was created to operate Conway's electrical system for the stated purpose of providing financial assistance to Hendrix College, a college owned and operated by the United Methodist Church, and Central Baptist College, so that they would not leave the City. To this end, the Corporation issued $215,000 in bonds against its earnings, and distributed the proceeds as follows: (1) $150,000 to Hendrix College; (2) $43,000 to Central Baptist College; (3) $2000 to Arkansas State Teachers College; and (4) and (5) $10,000 each to Conway Public Schools and St. Joseph's Parochial School. Specifically, the $150,000 was given to Hendrix College to meet a contract made between the college and the Chamber of Commerce to cause the college to remain within the City, and the $43,000 was given to Central Baptist College to pay off that school's indebtedness. According to the affidavit of William H. Hegeman, General Manager of Conway Corporation, the current lease and franchise to the corporation were adopted by the City of Conway in Ordinances 79-24 and 79-25, respectively, for a term beginning June 1, 1979, and ending May 31, 2009. The lease provides for an annual rental of $120,000 and requires the Corporation to maintain, free of charge, all street lights, the City Hall, and all other public buildings. It also requires that the Corporation provide an adequate supply of electric power to the city, and to expand the system as the City's needs increase. The franchise grants the Corporation the exclusive right to operate an electric system in the city. Pursuant to City Ordinance 86-11, the Corporation now operates Conway's waterworks system and sanitary sewer or waste water disposal system, for which it is paid $8000 per year by the City, and $2500 per year, respectively. Also, the City has granted the Corporation, similar to the electric system, a franchise to operate a cable television system, for which the City is repaying the loan from the Corporation for its construction. In return, according to the affidavit of Mr. Hegeman, from 1987 to 1991, the Corporation made various contributions to education in Conway which included a $45,000 contribution to Central Baptist College to aid in its building program. As an aside, we note that in 1945, the Internal Revenue Service declared that the Corporation was exempt from taxation as an organization not organized for profit but operated for the promotion of social welfare. In 1965, the IRS clarified that the Corporation was exempt as an integral part of an instrumentality of the State of Arkansas, specifically the municipality of Conway. The Corporation is also exempt from the payment of state income tax. Be this as it may, we disagree that Conway Corporation is entitled to governmental immunity. Its articles of incorporation and the general manager's testimony reflect that the original purpose of the Corporation was to provide money to Hendrix College and Central Baptist College to keep these institutions from leaving the City of Conway. [1] Yet the present relationship between the City of Conway and the Corporation as franchisor-franchisee rebuts the contention that the Corporation is entitled to immunity. The dissent acknowledges that in Conway Corporation v. Construction Engineers, Inc., supra , we declined to reach the issue of whether the Corporation was exempt from liability under section 21-9-301, yet it takes solace in the language of an emergency clause found in Act 165 of 1969, by noting that it was the General Assembly's intent to afford immunity to municipalities and all units of local government. The dissent bolsters its position by making reference to the fact that in Adams v. Bryant, 236 Ark. 859, 370 S.W.2d 432 (1963), we stated that the Clarksville Light and Water Commission was an agent of the City, and that later, in Paragould Cablevision, Inc. v. City of Paragould, 305 Ark. 476, 809 S.W.2d 688 (1991), we held that the Paragould Light and Water Commission was an agent of the City, and was endowed with the authority to acquire and operate a cable television system. We further noted in Adams that the City had the power to operate and maintain certain utilities by statute (now codified as Ark.Code Ann. § 14-91-401 (1987)), and that the City could designate its agent to carry out executive and administrative functions with respect to these utilities. From a reading of the emergency clause and the reference to the respective Commissions as being agents in their respective cities, the dissent wrongly claims that the status of Conway Corporation is clear, and that it falls within the umbrella exemption from tort action set out in section 21-9-301. The dissent overlooks that, unlike Conway Corporation, both agencies in Adams and Paragould Cablevision were creatures of statute. In Adams , Clarksville's Light and Water Commission was created pursuant to section 14-91-402, which gives cities the express statutory power to own and operate a public utility. Similarly, in Paragould Cablevision , the Paragould Light and Water Commission was created pursuant to Act 70 of 1941, and later reestablished under Act 562 of 1953, codified at Ark.Code Ann. § 14-201-201 et seq. (1987). In sharp contrast, Conway Corporation was formed and incorporated as a not-for-profit corporation for benevolent purposes, and, particularly, to aid the educational institutions located in the City of Conway. In the first place, the Corporation pays the City an annual $120,000 rental fee for the franchise. It is also evident, when examining the statutory requirements for the structure of a utility commission set forth in section § 14-201-105, that Conway Corporation does not satisfy these criteria. For example, the terms of the directors are not staggered for two years; new members are not required to be appointed by the mayor; and new directors may be approved by a simple majority of the city council rather than by the two-thirds majority required by the statute. See Ark.Code Ann. §§ 14-201-105(b), (d), (e) and (f). Conway Corporation was not created pursuant to statute; in fact, it has operated and continues to operate outside of the statutory boundaries of a utility commission as permitted by our Code. More importantly, the statute itself does not provide immunity for arms of a city or municipal corporation. Thus, it cannot be said that Conway Corporation is entitled to immunity under Act 165 of 1969. Under these circumstances, we hold that the trial court erred in granting summary judgment on the grounds that Conway Corporation had governmental immunity from actions in tort.