Court Opinion

ID: 9668288
Source: CourtListenerOpinion
Date Created: 2023-08-24 02:08:47.949057+00
Date Added: 2024-06-11T08:29:27.155726
License: Public Domain

James Roy, Special Justice, dissenting. The only issue to be determined by this Court is whether the Chancellor’s decision in Dolphin v. Wilson II was consistent with the Supreme Court’s mandate of May 12, 1997, in regard to Dolphin v. Wilson I. Appellant Dolphin argues that the Chancery Court had no authority to act as it did in granting .a judgment to appellee for unjust enrichment in light of this Court’s opinion and mandate in the previous appeal of Dolphin v. Wilson, 328 Ark. 1, 940 S.W.2d 494 (1997). The Court there held that plaintiffs Henrietta and Jimmie Wilson had failed to come forward with clear, cogent, and convincing evidence that would take an oral contract for the sale of land out of the statute of frauds. Both the statute of frauds, ACA §4-59-101(a)(4), and the case law interpreting same require a quantum of proof to remove an oral contract from the statute of frauds to be clear, cogent, and convincing. The mandate in Dolphin I provided: It is therefore ordered and decreed by the Court that the decree of said Chancery Court in this cause rendered be, and the same is hereby reversed, annulled and set aside with costs and that this cause be remanded to said Chancery Court for further proceedings to be therein had according to the principles of equity and consistent with the opinion herein delivered. The mandate did three things: (1) it remanded the case to Chancery Court, it did not dismiss the case; (2) it directed the Chancellor to act in accordance with the principles of equity; and (3) it directed the Chancellor to act consistent with the opinion in Dolphin I. Two questions must be answered. (1) Did the Chancellor act according to the principles of equity in awarding Wilson a judgment based on unjust enrichment, and (2) was the chancellor’s opinion in Dolphin II consistent with this Court’s mandate in Dolphin I? The answer to both of these questions is “yes.” While the Wilsons did not pray for the relief of unjust enrichment in their original complaint, upon remand to the Chancery Court the Wilsons so amended their pleadings. The Dolphins timely objected to such amendment based on this Court’s decision in Dolphin I. However, the chancellor, in relying on this Court’s decision in Townsend v. Arkansas Highway Commission, 317 Ark. 581, 879 S.W.2d 447 (1994) (hereinafter referred to as Townsend II), held that she had authority to allow such amendment. After the ruling by the chancellor, neither Mrs. Dolphin nor her attorney made any request to the court to submit additional proof, nor even made an additional offer of proof to in any way modify the record made in Dolphin I. In Dolphin I, all the facts were developed on which the chancellor relied in making her award on remand for unjust enrichment. The facts as developed in Dolphin I reflect that Mrs. Dolphin and her deceased husband were several hundred thousand dollars indebted to the Farmers’ Flome Administration for agricultural loans. The United States of America filed suit against Beatrice Dolphin, surviving wife of Leroy Dolphin, deceased, in January 1994 and at that time filed a lis pendens on the property which is the subject matter of this litigation. Mrs. Dolphin was duly served but took no action to defend herself. In fact, the judgment issued by the U. S. District Court, Eastern District of Arkansas, Eastern Division, in regard to this matter in Case No. H-C-94-5, specifically held: That said defendant, after having waived service as reflected by the waiver filed herein, has not answered, appeared or otherwise made any defense to the plaintiffs complaint and is wholly in default. . . . The Court thereafter entered judgment against Beatrice Dolphin: in the amount of $136,114.34 and interest in the sum of $135,268.98 accrued to September 29, 1993, and thereafter at the daily rate of $36.2113 to the date of this judgment and thereafter at the statutory rate pursuant to 28 U.S.C. § 1961 plus advances and recoverable charges made during the pendency of this action for protection and maintenance of the subject property, and the costs of this action. (Tr. 190 of Dolphin I.) Mrs. Dolphin had no hope whatsoever of ever repaying or discharging the judgment. Subsequently, a notice of sale was entered on April 13, 1995, advising that the property would be sold at the courthouse steps on May 25, 1994, to satisfy the judgment. Mrs. Dolphin admitted at the trial in Dolphin I that she had asked Wilson to take steps on her behalf. The exact nature of these steps, however, was disputed. However, it is undisputed that Wilson interceded on behalf of Mrs. Dolphin and succeeded in stopping the sale and satisfying the indebtedness (Tr. 60-61).1  Plaintiff’s Exhibits 5 and 6 show that the judgment was in fact satisfied and the sale was stopped. The Wilsons paid the money out of their own funds as part of the agreement (Tr. 60-61, 66) but the U.S. demanded that the payment be in the Dolphins’ name (Tr. 80, 200). There is no question that the funds to satisfy the government’s claim came from the Wilsons as reflected on the checks which appear as Plaintiff’s Exhibit 4 (Tr. 160) and part of Defendant's Exhibit 9 (Tr. d, (1) stopped the sale, and (2) satisfied the indebtedness. (Tr. 161-162) It is also undisputed that Mrs. Dolphin never did anything once the lawsuit in foreclosure was filed to stop it. She entered her appearance, she did not contest the amount in issue, she did not contest the validity of the United States government’s claim. (Tr. 190) While she says she hired an attorney (Tr. 89), there is no evidence the attorney ever did anything but enter her appearance and consent to the judgment. She further admitted that she took no action whatsoever to stop the sale or foreclosure (Tr. 179-180, 187, 190), she did not care if the foreclosure went through (Tr. 140-141), she was not going to the sale (Tr. 89, 97), she was not going to pay to stop the sale (Tr. 142), she was not going to pay any dollars to stop the sale or to satisfy the judgment (Tr. 88, 94, 113), and she admitted that she would have no interest in the property whatsoever after the sale (Tr. 145). Dolphin further admitted that she had no intention of redeeming the property after the sale (Tr. 98). It is clear that Mrs. Dolphin did not care and was going to let the property be sold and go wherever it might. However, based on the actions of Wilson and the expenditure of his own funds, the property was not sold at a foreclosure sale. Even though Mrs. Dolphin claims she did not want Wilson to stop the sale of the property, she admitted she knew of his actions but yet never contacted Wilson, never complained to Wilson of his actions, and she never told the federal government not to accept Wilson’s checks on her behalf or to stop the foreclosure sale (Tr. 100, 122, 127, 143). It is further undisputed that even prior to the foreclosure sale, Mrs. Dolphin did nothing to care for the property. Mrs. Dolphin admits that in 1988 she abandoned the property (Tr. 85, 101), that she had not farmed the property since 1985 (Tr. 107), that the house burned on the property on which her son had been living and that he left in 1990 (Tr. 125), that she never rented the land nor worked the land in any way after her son left (Tr. 124), and that she had not cared for the property in any way since she had left (Tr. 101) and had not seen the property in seven years until the day before the trial of Dolphin I (Tr. 101). Her son, who testified, made similar admissions (Tr. 155). The record reflects that only Wilson cared for and maintained the property after his conversation with Mrs. Dolphin. The chancellor’s decision in Dolphin II that Wilson did not act as a volunteer is certainly supported by a preponderance of the evidence and is consistent with the principles of equity. The chancellor’s award to Wilson entitling him to judgment and a lien on the property if not paid in 60 days in the amount of $14,439.40 is supported by the record. Further, even though chancery cases are tried de novo on the record, the Supreme Court does not reverse a finding of fact by the chancellor unless it is clearly erroneous. Ark. R. Civ. P. 52(a); Merchant & Planters Bank & Trust Co. v. Massey, 302 Ark. 421, 790 S.W.2d 889 (1990); and other cases too numerous to cite. The Chancellor determined that the sole question to be reached in regard to this equitable argument was “whether the defendant would be unjusdy enriched if she were not required to repay the funds.” (Page 6 of the Chancellor’s opinion). The law on unjust enrichment is relatively clear and is stated as follows: The doctrine of unjust enrichment is an equitable one, providing that one party should not be allowed to benefit at the expense of another because of an innocent mistake or intentional error. Brookfield v. Rock Island Improvement Co., 205 Ark. 573, 169 S.W.2d 662 (1943). Here the chancellor correctly determined that, absent restitution being paid to Stoddard, Shannon would without justification reap the benefits of Stoddard’s labor and expense. . . . See Kistler v. Stoddard, 15 Ark. App. 8, 688 S.W.2d 746 (1985). Therefore, whether Wilson was mistaken in his directions from Mrs. Dolphin or she intentionally deceived him into making payments with no intention of conveying the land to him, is of no matter in regard to unjust enrichment. The important thing is, would Mrs. Dolphin be unjustly enriched by being allowed to keep the property which she had done nothing to protect from foreclosure and which she had done nothing to care for, for over seven years. The answer to this is a clear and resounding yes. A similar decision was reached in Smith v. Whitener, 42 Ark. App. 225, 856 S.W.2d 328. In Smith, the pertinent facts are that Patricia Birlson had owned property in White County which she encumbered with a mortgage in favor of Newport Federal Savings & Loan. In 1980 Birlson sold all the property but one acre to Billy Ray Whitener. In conjunction with the purchase of that property, Whitener assumed the existing mortgage. Birlson later sold the remaining one acre to Charles Burress who then sold the acre to appellant Jimmy Smith. Smith constructed a house on the property and then entered into a contract for its sale with J.J. Reeves. The title search revealed Newport’s Hen on the property and to facilitate the sale, Smith obtained a release of his one acre from the mortgage by signing a $5,000 certificate of deposit to Newport Federal Savings & Loan. It was Smith’s understanding that the CD would be returned once the note secured by the mortgage was paid off. Unfortunately for Smith, the note became delinquent and Newport Federal applied the CD to the indebtedness. Smith then brought suit against Whitener claiming he was entitled to be repaid his $5,000 CD since it had been applied to Whitener’s loan which had been assumed by Whitener when he purchased the property from Birlson. Whitener contended that he would not be unjustly enriched by his indebtedness being reduced by Smith’s $5,000. The facts, at least in this regard, are very similar to Dolphin. Whitener was going to receive the benefit of Smith’s money and Dolphin would receive the benefit of Wilson’s money without any benefit to the person who had actually paid the money to save the property. The Chancellor agreed with Whitener and held that Smith had failed to meet his burden of proof and dismissed his case. On appeal, the Court of Appeals held that Whitener would be unjustly enriched since Whitener’s indebtedness was reduced by the application of the proceeds of the funds from the CD which rightfully belonged to Smith. The Court even held this to be the case in spite of the fact that Whitener apparently didn’t even know that Smith’s money had been applied to reduce his indebtedness, stating: If one has money belonging to another, which in equity and good conscience, he ought to retain it, it can be recovered although there is no privity between the parties. Patton v. Brown Moore Lumber Co., 173 Ark. 128, 292 S.W.2d 383 (1927). Although the enrichment was to appellee and at the expense of appellant, the enrichment need not have come directly from appellant but could come from a third source, Newport Federal. The Court went on to state: When one not primarily bound to pay a debt to remove an encumbrance nevertheless does so, either from his legal obligation or to protect his own secondary right, he may assert a claim of unjust enrichment against the other who is liable. See Cox v. Wooten Brothers Farms, 271 Ark. 735, 601 SD.W.2d 278 (Ark. App. 1981) Here appellant was not obligated to appellee to pay any portion of appellee’s mortgage. . . . (Emphasis added.) Wilson was obviously not obligated to pay any portion of Dolphin’s mortgage, but did so based on their understanding or based on a mistake on his part. Under the doctrine of Kistler v. Stoddard, supra, one is entitled to benefits of the doctrine of unjust enrichment if such payment is made based on an innocent mistake. There is no evidence whatsoever that the acts of Wilson were anything other than that. This brings us to question number two, were the Chancellor’s actions inconsistent with the opinion delivered in Dolphin P. In order to make that determination, we must look at the mandate and the Court’s opinion. As pointed out injustice Brown’s excellent opinion, the mandate governs what actions the lower court may take once a decision is made by a superior court. In this case, the case was remanded, not dismissed. Three things need to be considered in determining whether or not the Chancellor violated the mandate: (1) the fact that the case was not dismissed but was remanded to the Chancellor; (2) that the quantum of proof required to prove specific performance is clear, cogent and convincing (see Dolphin I) and the quantum of proof required to support a claim for unjust enrichment is a mere preponderance of the evidence (see Kistler v. Stoddard, supra); and (3) is there anything in the language of Dolphin I that would preclude the request for unjust enrichment by the Wilsons upon remand. The previous decision of this Court merely held that the Chancellor had erred in finding “that there was clear and convincing evidence that an agreement existed between the parties. Under these circumstances, we hold that the Wilsons’ complaint was barred by the statute of frauds and reverse and remand for an Order consistent with this opinion. In comparing the chancellor’s decision on remand and this Court’s opinion and mandate on Dolphin I, the following is evident: 1. Unjust enrichment does not require clear and convincing evidence as is required for specific performance; 2. A claim for unjust enrichment is not barred by the statute of frauds; 3. An award for unjust enrichment can be made where the facts would be insufficient to support a claim for specific performance. Therefore, the Chancellor’s Order was not inconsistent with this Court’s decision in Dolphin I. Therefore, the answer to question No. 2 is yes, the chancellor’s decision was consistent with this Court’s decision in Dolphin I. Dolphin I dealt with a different quantum of proof required for specific performance and did not preclude an award for unjust enrichment based on a lower standard of proof, i.e., a mere preponderance of the evidence. The main issue that troubles this writer is what rights, if any, a party has to amend its pleadings upon remand. Justice Brown apdy cites in his opinion at page 6, Little Red Levee Dist. No. 2 v. Moore, 199 Ark. 946, 137 Ark. 106, 241 S.W.2d 234 (1940) and Felker v. McKee, 154 Ark. 106, 241 SW. 378 (1922). However, both of these cases predate both our current Rules of Civil and Appellate Procedure. Felker even dealt with the sustaining of a demurrer which is no longer even recognized under our rules of civil procedure. The Court’s mandate in Dolphin I directed the Chancellor to act consistently with both the principles of equity as. well as consistent with the mandate. The Chancellor in this writer’s opinion has done both and her decision should be affirmed. The Townsend case may be an anomaly and may be distinguishable. Perhaps it should be limited to its facts or overruled as suggested by Justice Glaze in Townsend III, Townsend v. Arkansas State Highway Commission, 322 Ark. 122, 907 S.W.2d 726 (1995). Since the rule in Townsend II and Townsend III results in uncertainty and lack of finality, the Court may want to cure this problem by overruling Townsend II as suggested by Justice Glaze in his dissents in Townsend II and Townsend III. Until Townsend II is overruled or limited to its facts, it would appear the chancellor was correct in relying on Townsend in her decision. Further, even without Townsend the chancellor’s decision was not contrary to this Court’s mandate or this Court’s decision in Dolphin II. In fact, it would appear to the writer that even without Townsend, the chancellor’s acts were consistent with both the mandate and the principles of equity as ordered by this Court. Thornton, J., joins. Special Associate Justice Kent Tester joins.   The abbreviation “Tr” is a reference to the transcript pages from Dolphin I.