Title: Steward v. Wurtz

State: arkansas

Issuer: Arkansas Supreme Court

Document:

Kathryn STEWARD v. Sid WURTZ and Rita Wurtz
d/b/a Rita Wurtz Interiors

96-1160                                            ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered February 17, 1997


1.   Civil procedure -- judgments -- trial court has inherent
     authority to modify order. -- The trial court has the inherent
     power to modify an order with or without notice to any party
     by motion of a party or on its own within ninety days of
     filing; the power of a court to modify or set aside a judgment
     during the term it was entered, now ninety days according to
     Ark. R. Civ. P. 60(b), exists as an inherent power and outside
     of any rule or statute so that courts may review and correct
     any mistakes, errors, or indiscretions that might have been
     committed during the term. 

2.   Civil procedure -- order modified within required ninety-day
     period -- order validly entered. -- Where the supplemental
     order was filed on  March 11, 1996, and the order amending the
     supplemental order was filed within ninety days on June 5,
     1996, the amended order was timely entered.

3.   Attorney & client -- award of attorney's fees -- amount
     pleaded in plaintiff's complaint generally accepted as amount
     in controversy. -- The supreme court has generally accepted
     the amount pleaded in the plaintiff's complaint as the amount
     in controversy when that amount is significant in determining
     whether a court has jurisdiction. 

4.   Attorney & client -- attorney's fees available for claims made
     without any basis in law or fact -- complaint taken at face
     value in determining amount in controversy. -- The obvious
     purpose of Ark. Code Ann.  16-22-309 (Repl. 1994) is to
     prevent claims without any basis in law or fact from being
     made in bad faith and for the purpose of harassment; in these
     circumstances, the court should be able to take the complaint
     at face value for determining the amount in controversy and
     thus the limit to be placed on the attorney's fee if it is
     found that the action was commenced in bad faith, solely for
     purposes of harassing or maliciously injuring another without
     just cause, or that the party knew or should have known that
     the action was without any reasonable basis in law or equity
     and could not be supported by a good-faith argument for an
     extension, modification, or reversal of existing law.   
     
5.   Attorney & client -- attorney's fees awarded upon finding of
     bad faith -- award limited by statute. -- The trial court
     found that there was a complete absence of a justiciable issue
     raised by the losing party, and the appellees did not cross-
     appeal from that finding; pursuant to Ark. Code Ann.  16-22-
     309, the appellee was entitled to an award of attorney's fees;
     however, because the statute was incorrectly applied, the case
     was reversed and remanded to the trial court. 


     Appeal from Pulaski Circuit Court; Marion Humphrey, Judge;
reversed and remanded.
     Charles A. Brown, P.A., for appellant.
     Floyd A. Healy, for appellees.

     David Newbern, Justice.
     This case arises from the Trial Court's decision to modify
(reduce) a previous order awarding an attorney's fee and expenses
to a prevailing defendant.  The order which was later modified was
in favor of the appellant, Kathryn Steward.  The issues are whether
the Trial Court had the authority to modify its order and whether
Ark. Code Ann.  16-22-309 (Repl. 1994), which provides for an
award of an attorney's fee in the event an unfounded claim or
defense is made in bad faith, was correctly applied.  We hold the
Trial Court had the authority to modify its order, but that the
statute was improperly applied; thus the decision is reversed and
the case is remanded for further proceedings.
     In 1992 Ms. Wurtz and Dean Haley, Jr., leased a building from
Ms. Steward for $300 per month.  Mrs. Wurtz and Mr. Haley shared
space in the building where they operated separate businesses
intended to be complimentary to each other.  Each tenant was to pay
half the monthly rent.
     At the outset, Ms. Steward agreed to forego collection of
several rental payments in exchange for improvements to be made to
the property by the tenants.  Later, she agreed to reimburse the
tenants for other repairs and improvements.
     In October, 1994, Ms. Wurtz and her husband, appellee Sid
Wurtz, sued Mr. Haley and Ms. Steward.  It was alleged that Mr.
Haley, acting as agent for Ms. Steward, had placed Ms. Wurtz's
inventory in an alley behind the building and that it was damaged. 
It was further alleged that Mr. Haley took other assets from Ms.
Wurtz.  Finally, the complaint contended that Mr. Haley was
obligated by his agreement with Ms. Wurtz to pay her $5,000 for the
value of improvements to the building when she moved out.  The
Wurtzes prayed for $11,000 in compensatory damages and $50,000 in
punitive damages.  The claim against Mr. Haley was settled, and he
was dismissed from the litigation.
     In her answer to the complaint, Ms. Steward, in language
quoted from Ark. R. Civ. P. 11, asked for an attorney's fee and
expenses, although the answer did not cite Rule 11.
     A trial was held on December 15, 1995.  Ms. Wurtz testified
that Ms. Steward had paid her all she was owed.  Mr. Wurtz
testified he was a plaintiff only because he was Ms. Wurtz's
husband.  Ms. Steward's motion to dismiss was granted.  At that
point, counsel for the Wurtzes inquired about the Rule 11 sanctions
sought by Ms. Steward.  Counsel for Ms. Steward suggested that
matter be considered at a later date, and the Trial Court agreed.
     Ms. Steward later moved for attorney's fees and expenses,
citing Rule 11.  On March 11, 1996, a hearing was held on the
motion.  Neither the Wurtzes nor their counsel appeared.  The Trial
Court, without discussion, awarded Ms. Steward $2,604.77,
consisting of an attorney's fee, costs, and expenses in the amount
of $2,536.42, and personal expenses of Ms. Steward in the amount of
$68.35, all of which were itemized in the motion.    
     An "Order of Supplemental Judgment" was filed the same day. 
The order recognized Ms. Steward's claim for personal expenses and
attorney's fees "arising out of her defense in this action, in
which the Court has found the Plaintiffs to have no meritorious
cause against Kathryn Steward."  
     The Wurtzes moved to set aside the order on March 18, 1996. 
Counsel for the Wurtzes admitted that he was responsible for his
and their absence from the hearing, but claimed that he made an
honest scheduling mistake which he characterized as an "unavoidable
casualty and neglect."  The motion further claimed "That Plaintiffs
have a valid defense as to the Motion for Contempt and Rule 11
sanctions which were brought against them."
     On May 31, 1996, a hearing was conducted on the Wurtzes'
motion to set aside.  In their arguments to the Trial Court, the
parties focused on  16-22-309 rather than Rule 11 which was not
mentioned.  The Wurtzes asked the Trial Court to set aside the
amount of the award and to take testimony concerning the amount of
the fee owed.  They claimed that the amount in controversy was
$6,650 and that, in accordance with the statute, an award of
attorney's fees based on the lack of a justiciable issue would be
limited to 10% of that amount.  We cannot ascertain from the record
the origin of the $6,650 amount-in-controversy figure stated by the
Wurtzes.  Ms. Steward argued that she was entitled to the fee and
expense amount previously awarded because the amount in controversy
should be determined from the amount of the damages prayed for in
the complaint.
     The Trial Court granted the motion to reduce the award
pursuant to  16-22-309 stating, "I am going to amend [the earlier
order] to reflect the statutory amount of attorney's fees as Six
Hundred Sixty Five Dollars."  On June 5, 1996, a supplemental order
was filed.  In that order, the Trial Court specifically found: 

     [T]hat there has not been excusable neglect shown as to
     why [the Wurtzes] did not appear on March 11, 1996,
     therefore the order of Supplemental Judgment hereby
     stands.  However, the Court having taken into account
     Ark. Code Ann.  16-22-309, hereby modifies the order of
     Supplemental Judgment to reflect attorney's fees awarded
     to Kathryn Steward in the amount of $655.00 representing
     10% of the amount in controversy.

No explanation is given for the difference between the amount the
Trial Court stated from the bench, $665, and the $655 amount
appearing in the order.


                 1.  Procedure for modification
     Ms. Steward argues that the Trial Court lacked the authority
under Ark. R. Civ. P. 55(c) or Ark. R. Civ. P. 59 to reduce the
amount of the award.  We need not address those arguments because
the Trial Court has the inherent power to modify an order with or
without notice to any party by motion of a party or on its own
within ninety days of filing.  Young v. Young, 316 Ark. 456,