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Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1441 Petition for Removal- Fraud

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Doc. No. 187.

2

Doc. No. 191.

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Doc. No. 195.

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IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

PINE BLUFF DIVISION

RAYMOND DAY, et al. PLAINTIFFS

VS. 5:01CV00304-WRW

CASE CREDIT CORPORATION DEFENDANT

ORDER

Pending is Defendant /Counter-Plaintiff Case Credit Corporation’s (“Case”) Motion for

Summary Judgment on the Issue of Unjust Enrichment.1

 The Plaintiff /Counter-Defendants

Raymond Day, Boren Holtoff, Mike Moreland, and Steve Ross (“the farmers”) responded,2

 and 

Defendant/Counter Plaintiff replied.3

I. Background

 This case originated in the Desha County Circuit Court, when the farmers filed suit

against Ron Kaufman (“Kaufman”) and Case for fraud. Case answered and counter-claimed for

breach of contract. Later, Kaufman was dismissed from the suit, and the case was removed to

federal court based on diversity of citizenship. 

 The farmers were Kaufman’s customers between 1996 and 1998. During this time, they

agreed to purchase or lease various items of farm equipment from Kaufman. In each case, the

farmers and Kaufman orally negotiated the terms of the lease and purchase agreements. 

Case 5:01-cv-00304-BRW Document 200 Filed 02/22/07 Page 1 of 11
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Doc. No. 191, Ex. 1 (the farmers do not know Mr. Rosenbaum’s first name).

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Kaufman entered into agreements with Case, agreeing to pay off the farm equipment Kaufman

sold or leased to the farmers, in exchange for an assignment of rights to Case. 

The agreements between Case and Kaufman were unknown to the farmers and did not

reflect the terms of their oral contracts with Kaufman. For instance, the purchase agreements

misrepresented lease agreements as outright sales, and inflated the sales price of equipment

actually purchased by the farmers. In addition, Kaufman assigned Case forged “purchase

agreements” that covered equipment that the farmers never possessed or agreed to purchase. 

Kaufman hid his schemes from Case and the farmers by giving Case phony addresses. Case’s

monthly statements were mailed to these addresses and never reached the farmers. 

Eventually Case discovered Kaufman’s activities, and its representatives met with the

farmers. According to the farmers’ joint affidavit, Case representatives engaged in the following

conduct: a Case representative presented the farmers with forms entitled “account verifications”

and asked each farmer to sign these forms; after the farmers pointed out that the forms contained

erroneous terms, they were assured that the forms would only be used to verify their possession

of the equipment; when the farmers met with Case representatives David Harris, Carey Yokum,

and Mr. Rosenbaum, they refused to cure the “account verifications,” and told the farmers that

they would enforce the invalid terms in those documents; these representatives indicated that

they were aware of the fraud committed by Kaufman, but refused to settle with the farmers or

change the “account verification” terms.4

 Case did not provide affidavits or testimony from

David Harris, Carey Yokum, or Mr. Rosenbaum contradicting the farmers’ version of events. 

Moreover, in its response to the farmers’ Statement of Undisputed Facts, Case admitted its

Case 5:01-cv-00304-BRW Document 200 Filed 02/22/07 Page 2 of 11
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Doc. No. 196, ¶ 1, 2, and 3.

6

Doc. No. 21.

7

Doc. No. 44.

8

Doc. No. 108.

9

Doc. No. 109.

10Doc. No. 173; Day v. Case Credit Corp., 427 F.3d 1148, 1153 (8th Cir. 2005).

11Id.

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awareness of Kaufman’s wrongful conduct, and also admitted that the farmers attempted to settle

based on the terms in the oral agreements.5

Because settlement failed, the farmers filed a Complaint alleging that Kaufman was

Case’s agent and should be accountable for fraud. An Order granting Partial Summary Judgment

found no agency relationship between Case and Kaufman.6

Case’s second Motion for Partial Summary Judgment on the issue of the farmers liability

for breach of contract was granted.7 Specific damages were determined in a later Order,8 and a

Judgment9 was entered.

 The farmers appealed. The Eighth Circuit affirmed the finding that Case was not an

agent of Kaufman, but reversed the finding in favor of Case’s breach of contract claim.10 The

Court held that the forged “purchase agreements” between Kaufman and the farmers were void

and unenforceable, and that Case was not an assignee under any contract, including the oral

contracts negotiated by the farmers and Kaufman.11

 According to the Eighth Circuit, two issues remain -- will the farmers be unjustly

enriched if they are excused from an obligation to Case; and is Case barred from obtaining

Case 5:01-cv-00304-BRW Document 200 Filed 02/22/07 Page 3 of 11
12Id. at 1154.

13Sparks Reg’l Med. Ctr. v. Blatt, 55 Ark. App. 311, 316 (1996); Klein v. Jones, 980 F.2d

521, 527 (8th Cir. 1992); Pro-Camp Management, Inc. v. R.K. Enterprises, LLC, 366 Ark. 463,

(2006).

14 Friends of Children, Inc. v. Marcus, 46 Ark. App. 57 (1994).

15Larson Machine, Inc. v. Wallace, 268 Ark. 192, 213-14 (1980) (holding that in the

absence of an express contract the basis for recovery is an implied contract or quasi-contract,

which is founded on the equitable principles of restitution).

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equitable relief under the “clean-hands doctrine,” (the principle that denies remedy to a guilty

party).12 

Case contends that the farmers’ possession of farm equipment for the last six years,

without making rental or installment payments, unjustly enriched them. Case further argues that

unjust enrichment is an equitable remedy and should be decided by a court, not a jury. The

farmers contend that Case has “unclean hands” and is not entitled to equitable relief. The

farmers further contend that they did not act unjustly and had a right to possess the farming

equipment. Finally, the farmers assert that they are entitled to a jury trial. 

II. Authority

 A. Unjust Enrichment

The doctrine of unjust enrichment is an equitable remedy.13 “The remedy is neither given

nor withheld automatically but is awarded as a matter of judgment.”14 The doctrine of unjust

enrichment is connected to the doctrines of implied contract, quasi-contract, and restitution.15

 Unjust enrichment is based on the principle that “one person should not be permitted

enrich himself at the expense of another, but should be required to make restitution for property

or benefits received, retained, or appropriated, when it is just and equitable that such restitution

Case 5:01-cv-00304-BRW Document 200 Filed 02/22/07 Page 4 of 11
16Adkinson v. Kilgore, 62 Ark. App. 247, 254 (1998).

17Sparks Reg’l Med. Ctr., 55 Ark. App. at 316.

18Duckworth v. Poland, 30 Ark. App. 281, 283 (1990) (emphasis added).

19Frigillana v. Frigillana, 266 Ark. 296 (1979).

20Dews v. Haliburton Industries, Inc., 288 Ark. 532 (1986). 

21Deanna Construction Company v. Sarasota Entertainment Corp., 563 So. 2d 150 (Fla.

Ct. App. 2d Dist. 1990)

22Smith v. Whitener, 42 Ark. App. 225, 228 (1993).

23Childs v. Adams, 322 Ark. 424, 435 (1995).

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be made.”16 In such circumstances, “a court may imply a contract that is dictated by reason and

justice.”17 To find unjust enrichment, “a party must have received something of value to which

he was not entitled and which he should restore.”18

 In order to create an obligation for restitution, it is not necessary that an unjustly

enriched party is guilty of a wrongful act.19 However, “there must be some operative act, intent,

or situation to make the enrichment unjust and compensable.”20 For instance, an individual will

be liable for unjust enrichment if he requested a valuable service or voluntarily accepted a

benefit that he knew required payment under the circumstances.21 In such a case, even though a

party is innocent, he may be compelled to surrender benefits to another, more deserving person if

he gained something of value to which he was not entitled.22

However, there are instances when a defendant receives benefits from another that do not

trigger entitlement to unjust enrichment.23 An individual will not be forced to pay for something

Case 5:01-cv-00304-BRW Document 200 Filed 02/22/07 Page 5 of 11
24Credit Bureau Enterprise, Inc. v. Pelo, 608 N.W. 2d 20, 25 (Iowa 2000) (holding that

one will not have to pay for a benefit forced upon one against one’s will) (overturned on other

grounds).

25Merchants & Planters Bank & Trust Co. v. Massey, 302 Ark. 421, 424 (1990).

26Smith v. Walt Bennett Ford, Inc., 314 Ark. 591, 602 (1993) (emphasis added).

27Wesley v. Estate of Bosley, 81 Ark. App. 468, 478 (2003).

28Id. (citing Cardinal Freight Carriers, Inc. v. J.B. Hunt Transp. Servs., Inc. 336 Ark. 

143 (1999)).

29Estate of Houston v. Houston, 31 Ark. App. 218 (1990).

30Laroe v. Laroe, 48 Ark. App. 192 (1995)

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he did not request, and did not know was valuable.24 Moreover, “[o]ne who is free from fault

cannot be held to be unjustly enriched merely because he has chosen to exercise a legal right.”25

Simply put, equity does not prohibit enrichment alone -- the enrichment must have come about

from unjust events or motives.

The goal of restitution is to prevent injustice by making a defendant give up what he

wrongfully received from a plaintiff. Damages for unjust enrichment are measured by the

defendant’s gain and not by the plaintiff’s loss.26

 B. Clean-Hands Doctrine

The clean-hands doctrine bars relief to guilty parties,27 because “equity will not intervene

on behalf of a party whose conduct in connection with the same matter has been unconscientious

or unjust.”28 To decide if the clean-hands doctrine should be applied, the equities are weighed.29

Application of this doctrine is discretionary.30

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31Day, 427 F.3d at 154.

32Crawford v. Lee County School District, 64 Ark. App. 90, 97 (1998).

33Blacks’s Law Dictionary 1277 (8th ed. 2004).

34Klein v. Arkoma Production Co., 73 F.3d 779, 786 (8th Cir. 1996).

35White v. Gladden, 6 Ark. App. 299 (1982); see also, Garoogian v. Medlock, 592 F.2d

997 (8th Cir. 1979) (holding that measure of damages is fair market rental value, plus any

damage to the property).

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III. Discussion

The Eighth Circuit found that there was neither a contract between the farmers and Case,

nor a legitimate assignment of rights to Case from Kaufman. The Court described Case as an

“unprotected incidental beneficiary with no enforcement rights.”31 So, Case has no contract

rights and is seeking an equitable remedy based on “unjust enrichment.”

 Case maintains that because the farmers have retained possession of the farm equipment,

it is entitled to the equipment’s full value according to the oral purchase agreements. Therefore,

Case alleges that Mr. Day has been unjustly enriched in the sum of $137,500.00, Mr. Ross has

been unjustly enriched in the sum of $47,326.67, and Mr. Holthoff has been unjustly enriched in

the sum of $59,162.18. I disagree with Case’s damages allegations.

 Case is attempting to obtain contract damages under the guise of unjust enrichment. The

monetary value of the equipment is not the correct measurement of damages -- quantum meruit

is the remedy for unjust enrichment.32 The literal translation of quantum meriuit is “as much as

he has deserved.”33

 In Arkansas, “[t]he measure of damages for unjust enrichment is the amount of unfair

gain received by those unjustly enriched.”34 If personal property is detained, the measure of

damage is the fair market rental value of the property during the time it is detained.35 If the

Case 5:01-cv-00304-BRW Document 200 Filed 02/22/07 Page 7 of 11
36Smith, 314 Ark. at 602; see also, Marmo v. Tyson Fresh Meats, Inc., 457 F.3d 748 (8th

Cir. 2006) (applying Nebraska law and holding that a defendant will be liable for the unjust

benefit it receives, and not the harm sustained by the plaintiff).

37Friends of Children, Inc., 46 Ark. App. at 61.

38Dews, 288 Ark. at 532. 

39Doc. No. 191, Ex. 1 and Doc. No. 196.

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farmers were unjustly enriched, they are liable for the value of benefits received by possessing

the equipment, not the full monetary value of the equipment.36 

Case alleges that the farmers were unjustly enriched because they continued to possess

the equipment without remuneration. However, this fact, standing alone, does not automatically

entitle Case to a remedy for unjust enrichment.37

 To find that the farmers were unjustly enriched, it must be shown that they possessed the

equipment under circumstances that made it inequitable. The circumstances would be

inequitable if the farmers acquired the benefit without justification, or demonstrated an intent to

unfairly gain something for nothing. 38

A. Inequitable Circumstances

Case was largely responsible for leaving the equipment in the possession of the farmers. 

The farmers were cooperative, and voluntarily signed forms verifying that they possessed

equipment that Case financed through Kaufman. Instead of attempting to settle the matter with

the farmers, or to bring a replevin action, Case’s representatives tried to enforce Kaufman’s

forged contracts, and refused to negotiate.39 Case never filed an action to recover the equipment,

but pursued a contract claim against the farmers. Case now wants restitution for losses

connected to its own mistakes. 

Case 5:01-cv-00304-BRW Document 200 Filed 02/22/07 Page 8 of 11
40Childs, 422 Ark. at 434.

41Id.

4277 C.J.S. Replevin § 5 (1994) (explaining that replevin is a mixed action, being partly in

rem and partly in personam; it is in rem as far as specific recovery of the property is concerned,

and in personam as to the damages).

43Lake Village Implement Co. v. Cox, 252 Ark. 224, 231 (1972); Bill C. Harris Const.

Co., Inc. v. Powers, 262 Ark. 96, 104-05 (1977).

44Merchants & Planters Bank & Trust Co., 302 Ark. at 424.

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This is similar to a request for restitution in Childs v. Adams.

40 The Arkansas Supreme

Court refused to provide relief to a property owner who made valuable improvements on

property after he reneged on a contract for sale. When he was ordered to perform the contract,

the owner asked for restitution for his home improvements. The Supreme Court affirmed the

trial court’s ruling that the improvements could have been postponed and were undertaken at the

owner’s risk.41 Like the property owner in Childs, Case is requesting restitution for damages that

were incurred because Case sought contract relief from the farmers, instead of filing an in rem

action against the property.42 Case made this decision at its own risk. Generally, a party cannot

recover damages resulting from consequences that he could reasonably have avoided by

reasonable care, effort, or expenditure.43 Case could have reasonably avoided the losses incurred

over the last six years. Moreover, Case presents no evidence that the farmers had an avenue

through which they could divest themselves of the equipment. Finally, the farmers cannot be

unjustly enriched by holding property to which they are legally entitled.44

B. Legal Entitlement

Case 5:01-cv-00304-BRW Document 200 Filed 02/22/07 Page 9 of 11
45Barbara Wallraff, www.wordcourt.com/archives.php?show=2006-01-04 (explaining

that in early use, the satisfaction of ten points was commonly asserted to show full entitlement or

ownership -- so, the original saying was “possession is nine points of the law”).

46Golenternek v. Kurth, 213 Ark. 643 (1948); Norton v. McNutt, 55 Ark. 59 (1891); see

also, Kurrle v. Helvering, 126 F.2d 723, 724-25 (8th Cir. 1942).

47Ricard v. Williams, 20 U.S. (7 Wheat.) 59 (1822) (holding that if a person be found in

possession it is prima facie evidence of his ownership); Bradshaw v. Ashley, 180 U.S. 59, 63

(1901). See also, Oliver Wendell Holmes, The Common Law 241 (1881) (stating that the

consequences attached to possession are substantially those attached to ownership).

48Bradshaw, 180 U.S. at 63.

49Velder v. Crown Exploration Co., 10 Ark. App. 273, 274-75 (1984).

50Williams v. Harrell, 226 Ark. 115 (1956) (holding that the burden of proof in a replevin

action is on the plaintiff to prove he is the owner and entitled to possession of the items in

litigation).

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There is an old saying that “Possession is nine-tenths of the law.” The Oxford Dictionary

of Proverbs dates this saying back to 1616, and it means that a person who possesses property

has a clear advantage.45 The common law makes this old saying more than just a proverb -- it is

a rule of law that still holds sway.

 Possession of personal property is prima facie evidence of ownership.46 The common

law has long recognized this principle, as evidenced by Supreme Court holdings that date back to

the early nineteenth and twentieth centuries.47 The Supreme Court held: “If there be no

evidence to the contrary, proof of possession, at least under a color of right, is sufficient proof of

title.”48 Prima facie evidence is deemed sufficient to establish a given fact if not contradicted,

rebutted or explained by other evidence.49 The farmers possessed the farm equipment under a

contract with Kaufman which constituted prima facie evidence that they were entitled to

continued possession. Case has the burden of proving otherwise.50 Thus, until Case proves that

Case 5:01-cv-00304-BRW Document 200 Filed 02/22/07 Page 10 of 11
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it has a superior claim to the equipment possessed by the farmers, the farmers were not unjustly

enriched by keeping what they had a colorable right to keep. 

IV. Conclusion

 Case filed a motion for summary judgment, alleging that it was entitled to a remedy

based on unjust enrichment. I find that Case is not entitled to summary judgment, and based on

the undisputed facts, is not entitled to an equitable remedy.

 Case presented no evidence that the farmers acquired use of the farming equipment under

inequitable circumstances. If Case had settled with the farmers at the outset, or pursued an in

rem action against the property, it would have been able to obtain either monthly payments under

the terms of the oral agreements, or take control of the farming equipment. Case chose to claim

breach of contract based on void contracts, and also chose to leave the farm equipment in the

possession of the farmers. Because I find that there is no unjust enrichment, the clean-hands

doctrine need not be addressed. 

In view of the above, the Motion for Summary Judgment is DENIED. Case is ordered to

file a brief by 5:00 p.m., Friday, March 16, 2007 explaining what material facts remain in dispute

that would prevent a dismissal of this case with prejudice. A response is due by 5:00 p.m.,

Friday, March 30, 2007.

IT IS SO ORDERED dated this 22nd day of February 2007.

 /s/Wm. R. Wilson, Jr.

UNITED STATES DISTRICT JUDGE

Case 5:01-cv-00304-BRW Document 200 Filed 02/22/07 Page 11 of 11