Case Title: Aaron Collins and Diane Collins v. Burl Keller, Carol Keller, and Jeremy's Investments, Inc.

Citation: 

Docket Number: 

State: arkansas

Court: Arkansas Supreme Court

Date: 1998-05-14T00:00:00Z

Document:
Aaron COLLINS and Diane Collins  v. 
Burl KELLER, Carol Keller, and 
Jeremy's Investments, Inc.

97-1012                                            ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered May 14, 1998


1.   Appeal & error -- issue not ruled on at trial not considered
     on appeal. -- Where, at trial, appellants neither specified
     the Interstate Land Sales Act as an affirmative defense nor
     mentioned it in their counterclaim; and where, although
     appellants submitted the Interstate Land Sales Act to the
     trial court to support their request for rescission, the trial
     court never addressed or ruled on the Act's applicability to
     the parties' contract, the supreme court would not consider
     the issue on appeal; an issue must be raised and ruled on
     before it will be considered on appeal. 

2.   Property -- appellants' request for rescission untimely --
     federal Truth-in-Lending Act limits obligor's right to rescind
     consumer-credit transaction. -- The trial court was correct in
     denying appellants' request for rescission under the federal
     laws because appellants' request was untimely; section 1635(a)
     of the Truth-in-Lending Act limits an obligor's right to
     rescind a consumer-credit transaction until midnight of the
     third business day following the consummation of the
     transaction or the delivery of the information and rescission
     form required under section 1635; an obligor's right of
     rescission expires three years after the date of consummation
     of the transaction or upon the sale of the property, whichever
     occurs first, notwithstanding the fact that the information
     and forms required under the section or any other disclosure
     required under this provision have not been delivered to the
     obligor.

3.   Property -- Interstate Land Sales Act -- rescission by
     purchaser of property limited by provisions. -- The Interstate
     Land Sales Act has provisions that limit when a purchaser of
     property can seek rescission for the seller's violation of the
     Act; section 1703(b) provides that any contract for the sale
     of a lot not exempt under the Act may be revoked at the option
     of the purchaser until midnight of the seventh day following
     the signing of such contract or until such later time as may
     be required by state laws; also, any such contract for the
     sale of a lot not exempted under the Act may be revoked at the
     option of the purchaser for two years from the date of the
     signing of such contract. 

4.   Property -- appellants failed to act timely under provisions
     of Truth-in-Lending and Interstate Land Sales Acts -- defense
     not asserted until more than three years after contract
     consummated. -- Appellants failed to act timely under the
     provisions of both the Truth-in-Lending and Interstate Land
     Sales Acts; in fact, appellants asserted their rescission
     rights only after appellees brought suit against them for
     having defaulted on their contract, which occurred more than
     three years after the parties' contract was consummated.

5.   Appeal & error -- appellants failed to object to trial court's
     findings -- right to raise issue on appeal waived. -- 
     Appellants complained that appellees had defaulted in the suit
     because they failed to answer appellants' counterclaim,
     arguing that they were entitled to a default judgment and that
     the trial court erred in finding that appellees were entitled
     to the affirmative defenses of laches and estoppel even though
     those defenses were never pleaded by appellees and were
     inapplicable to the facts of the case; because, however,
     appellants failed to object to the trial court's findings at
     the hearing, they waived their opportunity to raise the issue
     on appeal.

6.   Civil procedure -- default judgment -- entry discretionary. --
     Under Ark. R. Civ. P. 55(a), the entry of a default judgment
     is discretionary rather than mandatory; appellants never
     proved any claim or damages under the federal laws; thus, the
     trial court correctly denied appellants the relief they
     sought.

7.   Property -- appellants not entitled to rescission of contract
     -- trial court appropriately addressed rental damages due
     appellees under contract.-- Appellants' assertion that the
     trial court erred in awarding appellees rental damages under
     the terms of the parties' contract because the contract should
     have been rescinded under the Truth-in-Lending and Interstate
     Land Sales Acts, thereby discharging them from any obligation
     for rental damages, was without merit; appellants were not
     entitled to rescission of the contract, and because they
     indisputably remained in default of its terms, the trial court
     appropriately addressed the rental damages due appellees under
     the contract.

8.   Appeal & error -- usury claim never ruled on at trial -- issue
     summarily dismissed. -- Appellants' damage claim for
     appellees' alleged violation of Arkansas's usury laws was
     summarily dismissed because the trial court never ruled on the
     issue.

9.   Appeal & error -- issue not ruled upon below -- issue not
     reached on appeal. -- Appellants' argument in support of their
     conversion claim that only one appellee signed the contract
     for deed and that, as a consequence, the parties' agreement
     was never effective was not reached; appellants failed to
     obtain a ruling on the issue and thus could not argue it on
     appeal.

10.  Conversion -- argument without merit -- laches and statute of
     limitations barred any right appellants may have had under
     Truth-in-Lending Act. -- Appellants' argument that, even if
     they were in default on the contract, they could still enforce
     their rights to converted shale under the federal Truth-in-
     Lending Act was meritless; laches and the statute of
     limitations barred any right appellants may have had under the
     Truth-in-Lending Act.  

11.  Conversion -- equitable conversion argued -- trial court
     correctly rejected appellants' argument -- forfeiture
     provisions of parties' contract were valid and timely
     enforced. -- Appellants argued that the parties' contract for
     deed operated as an equitable conversion by which the interest
     of appellants, as purchasers, became real estate, and that
     they had an equitable interest in the disputed property until
     appellees rescinded the contract for deed; the record,
     however, reflected that appellants' rights in the property
     were subject to a forfeiture clause of an executory contract
     that they breached; appellees elected to seek strict
     enforcement of their rights under the contract, and the trial
     court correctly rejected appellants' equitable-conversion
     argument; the trial court properly held that the forfeiture
     provisions of the parties' contract were valid and timely
     enforced. 

12.  Appeal & error -- issue not raised at trial not addressed on
     appeal. -- Appellants' argument that their substantial rights
     were violated because the trial court did not allow them
     sufficient time at trial to call their witnesses and establish
     their case was not raised below and therefore could not be
     argued on appeal.


     Appeal from Crawford Chancery Court; Floyd G. Rogers,
Chancellor; affirmed.
     Philip Jack Taylor, for appellants.
     Thurman Ragar, Jr., for appellees.


     Tom Glaze, Justice.
     Appellants Aaron and Diane Collins bring this appeal from the
Crawford County Chancery Court's finding that they had breached
their contract to purchase two unimproved lots from appellees, Burl
and Carol Keller and Jeremy Investments, partners who own a
subdivision named Butterfield Trail Properties.  This court's
jurisdiction was invoked because this case involves issues
concerning the interpretation and application of the Truth-in-
Lending Act, 15 U.S.C.  1601 et seq., and the Interstate Land
Sales Act, 15 U.S.C.  1701 et seq.
     On May 2, 1992, appellees sold the two disputed lots to the
appellants by a contract for deed.  The purchase price was for
$15,000.00 at 8.5% in 239 amortized monthly payments of $128.90. 
Appellants' first payment was due on June 1, 1992, and subsequent
payments were to be made each month thereafter.  The parties agreed
that, if appellants failed to make a payment within fifteen days
after a monthly payment was due, or after twenty days' notice
appellants failed to pay the taxes, appellees could declare the
entire balance of the purchase price due, or could rescind and
declare the entire contract forfeited.  In addition, if appellees
duly declared a forfeiture, they could further demand immediate
possession of the property, and retain previous payments as
liquidated damages, whereupon appellants would become tenants and
pay monthly rental payments in the amount of $128.90.
     Appellants defaulted commencing on their first payment, and
thereafter, never came into compliance with the terms of the
parties' contract.  At one stage, appellants did reach some
agreement with appellees to pay on the arrearages, along with
continuing their $128.90 monthly payments, but because appellant
Aaron Collins sustained a back injury and could not work,
appellants were unable to make their payments and therefore,
continued in default. 
     On October 27, 1995, appellees brought suit against appellants
for breach of contract and unlawful detainer, and appellants later
filed a motion to dismiss, an answer asserting affirmative
defenses, and a counterclaim.
  In their counterclaim, appellants alleged the appellees had
violated the Truth-in-Lending Act by failing to make certain
required material disclosures.  Additionally, appellants, in their
counterclaim, tendered the subject property to appellees, requested
rescission of the parties' contract, and asked for damages provided
under the Truth-in-Lending Act.
     At a hearing on May 12, 1997, appellants admitted they were in
default of the parties' May 2, 1992 contract, and conceded they had
made only seventeen payments in fifty-nine months.  Nonetheless,
appellants asserted that they were entitled to relief in the form
of rescission under the Truth-in-Lending Act, and added that they
had a similar right to relief for appellees' having violated the
federal Interstate Land Sales Act.  Appellants also argued that
appellees' finance charge under the May 2 contract was usurious,
and additionally claimed damages for conversion, alleging appellees
had wrongfully removed shale from the property while appellants
owned and were in possession of the lots.
     On June 3, 1997, the trial court entered its order finding the
appellants had breached the parties' May 2, 1992 contract by
failing to make timely payments and concluded the contract had been
effectively terminated on October 27, 1995, when appellees filed
this suit.  Because appellants continued to hold possession of the
property after defaulting, the trial court determined appellees
were entitled to rent from appellants in the sum of $4,640.50. 
Also, because appellants were in default, the trial court denied
their conversion claim, holding they had no equitable or legal
title in the lots or the shale at the time it was removed. 
Regarding the appellants' Truth-in-Lending Act claims, the trial
court held they were barred from asserting those claims because of
the doctrines of laches and estoppel.  Finally, the trial court
ordered appellants to vacate the two lots, and if they failed to do
so, directed a writ of assistance would be issued to oust them.
     Appellants raise five points for reversal, but their points
one, two, and four are basically grounded in rescission rights they
assert they are entitled to under either the federal Truth-in-
Lending Act or the Interstate Land Sales Act or both.  We hold the
appellants are not availed entitlement to those federal laws or the
rescission rights provided in these acts.  In their first argument,
appellants urge the trial court erred in denying them rescission
because the appellees failed to provide material disclosure forms
required by the Truth-in-Lending Act and its regulations, and
appellees made misstatements and material omissions of facts that
violated both the Truth-in-Lending Act and the Interstate Land
Sales Act.
     First, we note that appellants never specified the Interstate
Land Sales Act as an affirmative defense, nor did they mention the
Act in their counterclaim.  Appellants did submit the Interstate
Land Sales Act to the trial court to support their request for
rescission, but the trial court never addressed or ruled on that
Act's applicability to the parties' contract.  It is well settled
that an issue must be raised and ruled on before we consider it on
appeal.  Hercules, Inc. v. Pledger, 319 Ark. 702,