Arkansas Valley Cooperative Rural Electric Co. v. Elkins

CourtSupreme Court of Arkansas
Citation141 S.W.2d 538,200 Ark. 883
Docket Number4-5954
Decision Date10 June 1940

Appeal from Franklin Circuit Court, Ozark District; J. O. Kincannon Judge; reversed as to Cooperative Company; affirmed as to Wilson if remittitur is entered.

Judgment reversed and cause remanded.

Greer Nichols and Hill, Fitzhugh & Brizzolara, for appellants.

Jonah E. Yates and Evans & Evans, for appellee.



George Elkins sued the Arkansas Valley Co-operative Rural Electric Company and Roy Wilson to recover damages for alleged personal injuries received by him when an automobile driven by Roy Wilson, and in which he (Elkins) was riding, struck a stump, on a private road, on the farm of appellee Elkins. A jury awarded him a judgment against both appellants and they have appealed.

The complaint alleges "that the defendant corporation is a co-operative corporation organized and doing business under the laws of the state of Arkansas under the Electric Co- operative Corporation Act, Act 342 of the Acts of 1937, with a place of business in Ozark, Arkansas, engaged in manufacture and acquisition of electric energy and in its sale, transmission and distribution and all incidental activities to that business."

It is further alleged that appellant, Roy Wilson, while acting as employee and agent of the appellant corporation, "came to the farm home of plaintiff and invited plaintiff to accompany him in an automobile which he was driving and operating, to a point on plaintiff's farm for the purpose of there examining and discussing the setting of electric light poles by defendant corporation upon, over and across the farm of plaintiff; that as the result of said invitation plaintiff entered the automobile being operated by said defendant and started across plaintiff's farm in said automobile, not on a public road or highway of this state, and that said defendant operated said automobile in a reckless, dangerous, negligent and careless manner and as the result of such operation drove said automobile into a stump," injuring appellee.

Appellants denied every material allegation in the complaint, denied any liability on the part of both appellants, and affirmatively pleaded the contributory negligence of appellee as a bar to recovery.

It will be observed, as alleged, in the complaint that appellant, Arkansas Valley Co-operative Rural Electric Company (hereinafter referred to as the corporation), is a domestic corporation and was created under act 342 of the acts of the legislature of 1937, §§ 2315-2351, inclusive, of Pope's Digest. It is non-profit sharing. It was not created for profit, but solely for the benefit of its members only.

Section 2317 of Pope's Digest provides "Co-operative, non-profit, membership corporations may be organized under this act for the purpose of engaging in rural electrification by any one or more of the following methods: (setting them out)."

Section 2318 enumerates corporate powers. "(1) To sue and be sued, complain and defend, in its corporate name." (4) To generate, manufacture, purchase, acquire and accumulate electric energy and to transmit, distribute, sell, furnish and dispose of such electric energy to its members only. . . ."

Section 2339 provides: "(a) Each corporation shall be operated without profit to its members by the rates, fees, rents or other charges for electric energy and any other facilities, supplies, equipment or services furnished by the corporation shall be sufficient at all times. . . . (b) The revenues of the corporation shall be devoted first to the payment of operating and maintenance expenses and the principal and interest on outstanding obligations, and thereafter to such reserves for improvement, new construction, depreciation and contingencies as the board may from time to time prescribe. (c) Revenues not required for the purposes set forth in subsection (b) of this section shall be returned from time to time to the members on a pro rata basis according to the amount of business done with each during the period, either in cash, in abatement of current charges for electric energy, or otherwise as the board determines; but such return may be made by way of general rate reduction to members, if the board so elects."

Sections 2344 and 2345 exempt the corporation from all excise taxes and from the jurisdiction and control of the department of public utilities of this state.

It is first earnestly insisted that appellant corporation, being a non-profit sharing organization and created solely for the benefit of its members, and not for profit, cannot be held liable in damages for injuries resulting from a tort of its employee, Roy Wilson. After a careful review of the record, we have reached the conclusion that this contention must be sustained.

We take judicial notice of the act of Congress of May 20, 1936, creating "an agency of the United States to be known as the 'Rural Electrification Administration.'" Title 7--United States Code Annotated, § 901, et seq.

Under this act, great sums of money were set aside with which to make loans to local co-operative agencies throughout the nation to enable rural residents to secure the conveniences afforded by electric service, a privilege that had theretofore been denied to them on account of the prohibitive cost.

This act also provided for the creation of local co- operative agencies to be organized under the laws of any state which could be non-profit sharing.

For the purpose of carrying out this worthy enterprise, and to enable rural residents to comply with and take advantage of the provisions of the federal act and to secure the loan of funds from the federal agency, the legislation, supra, was enacted in Arkansas in 1937.

Appellant corporation in the instant case was created, as indicated, under the special provisions applying to non-profit sharing corporations for the benefit of its members only. No provision is made for the creation of a fund out of which to respond for the tort of one of its members or employees, and unless there is statutory liability, in tort actions, appellant corporation cannot be held liable. True it may be sued to enforce contracts into which it might enter, but it cannot be made to respond in tort in the absence of statutory provision therefor.

The principal of law as applied to the liability of improvement districts is stated in Board of Improvement Sewer Dist. No. 2 v. Moreland, 94 Ark. 380, 127 S.W. 469, 21 Ann. Cas. 957, where this court said:

"Public quasi corporations are created with limited statutory powers, and the general rule, as respects the question of liability to individuals for the negligence of their officers or agents, is that no such liability attaches unless expressly provided by statute. 1 Beach on Public Corporations, § 4, 262, 263; Mahoney v. Boston, 171 Mass. 427, 50 N.E. 939.

"In the case of Elmore v. Drainage Commissioners, 135 Ill. 269, 25 N.E. 1010, 25 Am. St. Rep. 363, the court said: 'A drainage district, however, is organized merely for a special and limited purpose. Its powers are restricted to such as the legislature has deemed essential for the accomplishment of such purpose, and it is only authorized to raise funds for the specific object for which it is formed, and can do that in no other mode than by special assessments upon the property benefited, which can in no case exceed the benefits to the lands assessed. No funds or means are furnished such district with which to pay damages, occasioned to individuals by the tortious or unauthorized acts of the drainage commissioners, and there is no express statutory requirement that it shall be liable for such torts." See, also, Sewer Improvement Dist. No. 1 of Sheridan v. Jones, 199 Ark. 534, 134 S.W.2d 551.

We think the funds created by non-profit sharing corporations, such as in the instant case, are in the nature of trust funds. As was said by this court in Chamber of Commerce of Hot Springs v. Barton, 195 Ark. 274, 112 S.W.2d 619: "As was stated in the case of Fordyce v. Library Ass'n, 79 Ark. 550, 96 S.W. 155, 7 L. R. A., N. S., 485, that the organization holds the property somewhat in the nature of the trust fund to be controlled, managed and used for the purposes of the corporation."

We have applied this same principle of law to charitable corporations which were non-profit sharing. The leading case in which this court denied liability of such corporations in...

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