Arkansas State Highway Commission v. Nelson Brothers

• Decision Date: 04 November 1935
• Docket Number: 4-4026
• Citation: 87 S.W.2d 394,191 Ark. 629
• Parties: ARKANSAS STATE HIGHWAY COMMISSION v. NELSON BROTHERS
• Court: Arkansas Supreme Court

87 S.W.2d 394

191 Ark. 629

ARKANSAS STATE HIGHWAY COMMISSION v. NELSON BROTHERS

4-4026

Supreme Court of Arkansas

November 4, 1935

Appeal from Pulaski Chancery Court; Frank H. Dodge, Chancellor reversed.

Suit by Nelson Brothers against the Arkansas State Highway Commission.

From a decree for plaintiffs, defendant has appealed.

Decree reversed and case dismissed.

Carl E. Bailey, Attorney General, Neil Bohlinger, Leffel Gentry and W. L. Pope, for appellant.

Mahony & Yocum, for appellee.

BUTLER J. SMITH AND MEHAFFY, JJ., dissenting.

OPINION

BUTLER, J.

The trial court entertained jurisdiction of a suit instituted by the appellees against the appellant, Arkansas State Highway Commission, to recover balance alleged to be due for construction work done on State highways under a contract with the commission. The appeal prayed from the decree awarding to the appellees the amount claimed challenges the jurisdiction of the court. The lower court doubtless based its decision on the cases of Arkansas Highway Commission v. Dodge, 181 Ark. 539, 26 S.W.2d 879; Baer v. Arkansas Highway Commission, 185 Ark. 590, 48 S.W.2d 842, and Arkansas State Highway Commission v. Dodge, 186 Ark. 640, 55 S.W.2d 71. The appellant insists (1) that the case at bar is distinguishable from the cases supra, and comes within the exception of Watson v. Dodge, 187 Ark. 1055, 63 S.W.2d 993, and the late case of Ark. State Highway Commission v. Dodge, 190 Ark. 131, 77 S.W.2d 981, and (2) that the instant case is one in effect against the sovereign State and is prohibited by § 20, art. 5, of the Constitution of 1874. The appellees insist that there is no valid distinction in principle between the instant case and the cases first cited, and that it is ruled by them.

It is difficult to reconcile our decision in the first-named cases with the two last pronouncements of this court. We refrain from an analysis and comparison of these cases, but it must be confessed that they appear not to be in harmony and the two later cases--and especially the Dodge case in the 190 Arkansas seem to impair the validity of the cases first mentioned. Candor also compels the admission that the result serves as an uncertain guide for the profession and the trial courts.

The important question is: shall we attempt to distinguish the instant case from the three cases first cited, or shall we re- examine those cases, and, if the principles there announced clearly appear to be erroneous, shall we do in fact what appears to be implied in the last Dodge case, namely, abandon our erroneous views and overrule those cases? We prefer the latter course, although it involves this court in some degree of embarrassment.

In Arkansas Highway Commission v. Dodge, 181 Ark. 539, 26 S.W.2d 879, five of the justices were of the opinion that the plain provisions of § 20, art. 5, of the Constitution prohibited the State from giving its consent to its being made the defendant in any of its courts. Five justices held that the Arkansas Highway Commission was a State agency, and that a suit against it was in effect a suit against the State. With these views entertained by the majority, the illogical conclusion was reached that the Highway Commission, although the State's alter ego, could be made the defendant in the courts. This result flowed from the concurrent opinion of four of the justices, two of whom held that the Commission was not an agency of the State but "a legal entity," or "a juristic person" and, as such, was without the pale of the immunity to suit inherent in the sovereign. The other two judges held to the view that the Highway Commission was an agency of the State engaged in the discharge of the State's sovereign functions, but that the section of the Constitution, cited supra, was not mandatory, but simply declaratory of the inherent immunity of the State to suit except by its consent; that the State had consented by legislative enactment to suits against it, and therefore the suit against the Highway Commission could be maintained.

We first examine the theory that the Highway Commission is not an agency of the State, but a mere legal entity. This theory is bottomed on the authority of the case of State ex rel. State Highway Commission v. Bates, a case decided by the Supreme Court of Missouri and reported in 317 Mo. 696, 296 S.W. 418. In so far as we are advised, or our research extends, this case stands unique in the history of jurisprudence, and the principle there announced that a body clothed with the powers of the State and delegated to perform its duties is not an agency of the State but a mere legal entity (whatever that may be). We submit that this principle is based on neither reason nor authority, and the cases cited in support of it do not in fact lend support to that doctrine. Moreover, the Constitution of the State of Missouri does not contain the prohibition, or one similar to that of § 20, of art. 5, of our Constitution, and the Supreme Court of Missouri expressly found in that case that the State which created the commission subjected it to be sued by express statutory provision, and that "if it is in fact and in law the State, the State has consented to suit being brought." Although this conclusion was reached, the court proceeds with the following unnecessary remarkable declaration: "It (the commission) is not the State, but a mere entity created by the State for the specific purpose of contracting of the building of State highways and bridges and the maintenance of the same, and doing all other things pertaining thereto." It is upon this pronouncement that the opinion of two of the judges in the first Dodge cases is based.

A case cited by the Missouri court as "a case fully in point" is Gross v. Ky. Board of Managers of World's Columbian Exposition, 105 Ky. 840, 49 S.W. 458. In that case the board of managers was authorized by the act creating it to operate a restaurant in connection with the State building erected at the exposition. The suit was brought to recover for a breach of contract in the operation of the restaurant. The court said: "The erection of the headquarters building and the running of a restaurant were matters of business in which this board stood on the same plane as others engaged in like undertakings." The nature of the business, then, in which the board of managers was engaged was not a discharge of the sovereign functions of the State, as is the business of constructing, maintaining and operating the State's highways. The Constitution of the State of Kentucky in § 231 thereof provides: "The General Assembly may by law direct in what manner and in what courts suits may be brought against the Commonwealth." The reasoning of the Kentucky case seems to place liability on the State on the ground of consent more than on the nature of the business engaged in. We do not review the other cases cited, but it would seem that they come from States in which there is no prohibition against consent being given to suits, and do not support the declaration we have quoted from the Missouri court or persuade us that such declaration announces sound doctrine.

If the power delegated and the duties to be performed by the Highway Commission are essentially public in their nature, then it must be the agent of the State, for in the nature of things the State must act through agents, and these, while in the discharge of public duties, stand in the place of the State. The Highway Commission, by the act creating it, is clothed with the power and the duty to construct, operate and maintain highways. If these powers and duties rest primarily in the State, the Highway Commission, when clothed therewith, is something more than the "legal entity" thought to be its status. In Williams v. Parnell, 185 Ark. 1105, 51 S.W.2d 863, in speaking of legislation relating to highways, the court said: "In it the Legislature declared it to be the policy of the State to take over, construct, repair, maintain and control all the public roads in the State, comprising the State highway system as defined in the act." In that case, in upholding the right of the State to issue bonds for the purpose of borrowing money to construct highways and to levy taxes for their support, the court further said: "The reason is that highways may be constructed and maintained for public use by the State itself or by governmental agencies created by law for that purpose. Public highways are for public use, and there is no reason why the power of taxation by the State may not be exercised in their behalf. While it is elemental that taxes may only be levied for a public purpose, one of the most important duties of the State is to provide and construct public highways." (Citing Bush v. Martineau, 174 Ark. 214, 295 S.W. 9.) Numerous authorities might be cited to support this statement, and we apprehend there are none to the contrary. Illustrative of these are Wooster v. Arbenz, 116 Ohio St. 281, 156 N.E. 210, 52 A. L. R. 518; Robbins v. Limestone County, 114 Tex. 345, 268 S.W. 915; Kansas City Bridge Co. v. Alabama, etc., 59 F.2d 48; and Dougherty v. Vidal, 37 N.M. 256, 21 P.2d 90.

If then, the Highway Commission discharges duties primarily residing in the State, it must of necessity be the State's agent. This was the express holding in Dougherty v. Vidal, supra, and in the advisory opinion to the Governor, 94 Fla. 967, 114 So. 850. In the last case the court said: "The road department is a State agency and component part of the State government. The product of its work is State property, it exercises a part of the sovereign power of the State, and its activities are supported by funds created by State taxes and Federal aid funds." This is also necessarily implied by the language of the court in ...