__________ 94-3893

__________ Adam Ferrif; Angela Ferrif; * * Plaintiffs - Appellants, * * v. * Appeal from the United States * District Court for the The City of Hot Springs, * Western District of Arkansas Arkansas; John Does, 1-10, * * Defendants - Appellees. *

__________ Submitted: April 10, 1996 Filed: April 26, 1996

__________ Before LOKEN, HANSEN, and MURPHY, Circuit Judges.

__________ MURPHY, Circuit Judge.

Adam and Angela Ferrif appeal the amount of the judgment entered in their favor against the City of Hot Springs, Arkansas following a cour t trial. After finding that the Ferrifs' constitutional rights had bee n violated when the cit y razed three homes without adequate notice and that the total damages suffered were $36,500, the court awarded the Ferrifs one

third of that amount. The only issue raised on appeal is whether th e Ferrifs were entitled to receive the total amoun t. We reverse and remand.

In 1985, the Ferrifs purchased three adjacent homes in Hot Springs, Arkansa s with their friends and real estate partners, John and Jacki e Allen. At that time the Ferrifs and Allens were tenants in common, with the Ferrifs holding an undivided one-third interest

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and the Allens holding the remaining two-thirds. The Ferrifs and Allens then wer e living in California and used the three homes as renta l properties.

Initiall ythe properties returned a profit, but they soon began t o generate losses. The Allens developed financial difficulties and became unable to pay their share of the mortgage, maintenance, and other costs. By 1987 , the Ferrifs were paying the bulk of all expenses. In Februar y 1989, AdamFerrif wrote to the Allens requesting that they make thei r contributions. The A llens instead agreed to assign their interest in the propertyto the Ferrifs. Thereafter the Ferrifs paid all of the cost s
ass ociated with the properties. Adam Ferrif testified that the Ferrif s also gave a car to th e Allens in exchange for their property interest and that the Ferrifs and Allens saw no need at that time to record the transfe r of inte rest. Eventually the Ferrifs' bankers convinced them that th e transaction should be recorded. A deed was executed by the Allens to the Ferrifs on January 24, 1994; it was recorded February 3, 1994.

Meanwhile , in 1991 the City of Hot Springs razed the houses. Th e city h ad begun receiving complaints about the properties in 1989 ; apparentlyvagrants were using them for illicit activities. The concern
was heig htened by the presence of a school across the street. Late i n 1990, the city began to consider condemnation. It sent three letters, one for each dwelling, to the Allens' address of record in California. They had moved several tim es after purchasing the properties, however, and the letters were returned, marked "Addressee unknown." At a December 199 0 meeting, the city council decided to condemn the three houses if repairs
were not made. The city posted notices on each of the houses and agai n used certified mail t o send copies to the Allens' old California address. All three were returned. No one attempted to contact the mortgagee , Arkansas Bank & Trust Co. The houses were destroyed and the debris remove d in March 1991. The Ferrifs had no actual notice

### Judgment was entered against the city only. The Ferrifs 1 

### never identified John Does 1-10. The city's counterclaim was not addressed by the court in 2 

### its order, and the city has not raised it on appeal. -3- of the condemnation until July 1991, when a potential purchaser informed them that the houses were gone.

The Ferri fs filed this action against the city in the United States District Court for the Western District of Arkansas. They alleged that th e conde mnations were unreasonable seizures in violation of the fourt h amendment and unlawfu l deprivations of property without due process under the fourteenth amendment. They sought damages of over $100,000 under 42 U.S.C. § 1983. The city counterclaimed for $8,131.23, the cost of removin g the homes from the property.

By consen t of the parties, the case was tried by a magistrate judge in August 1994. The court found that the city had violated the Ferrifs' constitutional rights by not providing sufficient notice of th e conde mnations. The only evidence at trial regarding the value of th e 1 properties was an appraisal submitted jointly by the parties. It assessed their tota l value in 1985 at $44,500. The lots alone were valued a t $8,000. The court fo und that the total loss caused by the constitutional violation was $36,500, the difference between the total value and the valu e of the lots. Neither the city's liability, nor the total damage amount is contested on appeal. 2

The court concluded that the Ferrifs were entitled to only one-third of the total damage because they held only one-t hird of the legal interest in the properties on the date of condemnation in 1991. Judgment wa s therefore entered in their favor in the amount of $12,166.66. On appeal they assert their right to receive the total damage amount of $36,500.

### -4- The Ferrifs argue that they are enti tled to the full damages because they held equitable title to the two-thirds of the properties to which the y did not hold legal ti tle in 1991. Even though the damages award is based
on a constitutional violation, the Ferrifs' property right is created by state l aw. E.g. , Gattis v. Gravett , 806 F.2d 778, 780 (8th Cir. 1986)

. The state law issues whether the Ferrifs held equitable title in 1991 and whether their interest entitles them to the full damages are considered de
novo. Salve Regina College v. Russell , 499 U.S. 225, 231-33 (1991); see also Elli s v. Great-West Life Assurance Co. , 43 F.3d 382, 386 (8th Cir

. 1994).
Under Arkansas law equitable title is "the present right to the legal title." Hendriksen v. Cubage , 309 S.W.2d 306, 308-09 (Ark. 1958). Adam Ferrif's description of the 1989 oral assignment of the Allens' interest in the properties to the Ferrifs is undisputed. His testimony established that the Allens "assign[ed] their rights in the Oak Street Property" to th e Ferrifs. Subsequent conduct of the parties confirmed this transfer. See Langston v. Langston , 625 S.W.2d 554, 555 (Ark. App. 1981). The Allen s made no payments of a ny kind related to the properties after the transfer and b efore the condemnations, a fact corroborated by an officer of th e mortgagee. These facts lead to the conclusion t hat under Arkansas law the Ferrifs possessed equ itable title at the time of the condemnations to the two-thirds of the properties still recorded in the Allens' names.

Arkansas recognizes that "the ownership of the equitable estate i s regarded by equity as the real ownership, and the legal estate is, as has been said , no more than a shadow. . . . [T]he remedies given to th e equitable owner are intended to preserve his estate, and to protect it bot h against the legal owner and against third person s ." Hendriksen v. Cubage , 309 S. W.2d 306, 309 (Ark. 1958) (emphasis added, citations omitted)

. Moreover, Arkansas will allow a single cotenant to maintain an action on behalf of all

### Statutory authority for municipalities to raze dilapidated 3 

### buildings is granted by Ark. Code Ann. § 14-56-203 (Michie 1987). Similarly, there is no merit to the city's arguments that 4 

### the Ferrifs were not the real parties in interest or lacked standing with respect to the two-thirds of the properties legally held by the Allens.
-5- cotenants, even though it is preferable to join all cotenants. Perry v. Rye , 267 S.W.2d 507, 509-10 (Ark. 1954).
Full recovery by the Ferrifs also se ems consistent with the Arkansas code. The most relevant section reads:
As soo n as the amount of compensation that may be due to th e ow ners of the property taken, or to any of them, shall hav e beenascertained by the jury, the court shall make such order as to its payment or deposit as shall be deemed right an d proper in respect to . . . the proportion to which each owner is entitled and may require adverse claimants of any part o f the money or property to interplead, so as to fully settle and determ ine their rights and interests according to equity an d justice. Ark. Code Ann. § 18-15-307(a) (Michie 1987). Neither side questions the 3 total amount of damages found by the trial court here or that the city has
a liability for that amount. Interpleading the Allens was unnecessar y because t hey had surrendered all of their interest to the Ferrifs. Fo r these reasons the magistrate judge erred in awar ding the Ferrifs only onethird of the damages. 4
Other equitable considerations suppo rt this conclusion. The Ferrifs alleged in their complaint that they were the owners of the properties

. The city admitted that allegation in its answer, denying only that there had been any constitutional violation. It was n ot until trial, or shortly before, that the city even raised the issue of the Ferrifs' right to the entire amount of the loss, and the Ferrifs state it would then have been too late to join the Allens. In addition, the c ity's counterclaim against the Ferrifs was for the full cost of removing the three homes, not only fo r

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one-third. Finally, since it is undisputed that the Ferrifs gained legal title to the entirety of the properties shortly after this suit wa s commenced, there is no realistic danger that the city will be exposed to confli cting liabilities. Under all the circumstances, the Ferrifs wer e entitled to be awarded the total sum of damages -- $36,500.

Accordin gly, the judgment is reversed as to the amount of damages , and the c ase is remanded for entry of judgment consistent with thi s opinion.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.