Court Opinion

ID: 6551369
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:26:41.402615+00
Date Added: 2024-06-11T15:56:07.014463
License: Public Domain

Judith Rogers, Judge. This case involves a question of priority between two creditors who each held a security interest in certain restaurant equipment. Appellants, J.A. Womack and W.A. Beaver, appeal the decision of the trial court in favor of appellee, the Newman Fixture Company. Although the appellants’ financing statement was recorded prior to that of the appellee, the chancellor found that appellee’s security interest was superior because the financing statement relied upon by appellants failed to adequately describe the collateral. Appellant urges the following points for reversal: (1) that the chancellor erred in ruling that the description found in appellants’ financing statement failed to give reasonable notice as to the appellee because appellee had actual notice of the lien, and that appellee was not barred by the doctrines of clean hands and laches; and (2) that the chancellor erred in reinstating the case after it had been dismissed twice for want of prosecution. We find no error and affirm. In early 1983, Larry Stafford began making plans to open a restaurant, which was later named the Chick-N-Shack, in Camden, Arkansas. In furtherance of this plan, Stafford contacted Tommy Newman, vice president of appellee, which is in the business of selling restaurant equipment. On April 7, 1983, Stafford and Newman, along with Jim Lusby, a friend of Stafford’s who had experience with chicken restaurants, met for the purpose of discussing the equipment that would be required to operate the restaurant. Newman submitted an estimate in the form of an invoice, which contained a proposed list of equipment at a cost of $33,730.90. On July 23, 1983, appellants leased Stafford the property where the restaurant was to be located. Stafford and his wife obtained a $30,000 loan from Merchants & Planters Bank of Camden to finance the purchase of equipment, and in turn gave the bank a promissory note in that amount. Stafford gave the bank the proposal with estimated costs for the equipment to be installed in the restaurant after the building was constructed. As collateral for the note, the bank retained a security interest in the restaurant’s equipment. A security agreement and financing statement were executed. The financing statement alone was filed on August 3,1983, with the County Clerk of Ouachita County, as well as with the Secretary of State on August 5, 1983. In the financing statement, the collateral was described as “[a] 11 equipment used in the business known as.” Appellants obtained financing from Merchants & Planters Bank for the construction of the restaurant building. Appellants also agreed with the bank to guarantee payment of the Staffords’ note. Construction of the restaurant began sometime in September of 1983. Appellee supplied and installed equipment during the course of construction of the building, and upon completion, Newman compiled a final invoice of the equipment that he actually sold to Stafford. The final invoice differed from the original estimate both in terms of the equipment that was listed and the cost, which was $23,117.92. Appellee took a security interest in the equipment that was sold. The financing statement and security agreement were filed with the County Clerk of Ouachita County on February 17, 1984, and with the Secretary of State on February 21, 1984. In describing the collateral, appellee’s financing statements made reference to attachments, which were copies of the final invoice. The restaurant closed six months after it had opened in November of 1983, and the Stafford defaulted on their obligation to Merchants & Planters Bank. Appellants were obliged, pursuant to their guarantee agreement with the bank, to satisfy the remaining indebtedness on the note, totalling $31,135.99 in principal and interest, whereupon the bank made an assignment of the note, as secured by the equipment, to appellants on May 24, 1984. In 1984, appellants originally filed suit in the Ouachita County Chancery Court, First Division, No. E-84-216. The case, which included appellee’s counterclaim, was dismissed for want of prosecution. On February 7,1986, appellee filed a complaint in chancery seeking the recovery of $4,617.92, plus interest, which remained due and owing on the purchase of the equipment. The chancellor granted appellee judgment in rem against the property for $5,896.88, representing the unpaid purchase price plus interest and costs, and ordered the equipment to be sold by public sale. In so holding, the chancellor declared that appellee’s security interest was superior because the description contained in appellants’ financing statement failed to reasonably identify the equipment.  In their first point on appeal, appellants contend that the chancellor erred in ruling that the description contained in the appellants’ financing statement failed to give reasonable notice as it relates to appellee. Ark. Code Ann. § 4-9-402(1) (1987) provides: A financing statement is sufficient if it gives the names of the debtor and secured party, is signed by the debtor, gives an address of the secured party from which information concerning the security interest may be obtained, gives the mailing address of the debtor, and contains a statement indicating the types or describing the items, of collateral. (emphasis supplied) Pursuant to Ark. Code Ann. § 4-9-110 (1987), any description of the personal property or real estate is sufficient, whether or not it is specific, if it reasonably identifies what is described. The commentary to this section states, “ [T] he test of the sufficiency of a description laid down in this section is that the description do the job assigned to it — that it make possible the identification of the thing described.” Commentary, § 85-9-110 (1961) (now codified as Ark. Code Ann. § 4-9-110). In the instant case, the financing statement described the collateral as “[a] 11 equipment used in the business known as.” The chancellor found that -this description fell short of the minimum requirement as found in Ark. Code Ann. § 4-9-110. The chancellor stated in his letter opinion filed June 15, 1988, that “had the description contained an address where the collateral was located then perhaps a person searching the records could at least be given notice of what the collateral might be.”  Although chancery cases are tried de novo on appeal, the chancellor’s findings of fact will not be reversed unless they are clearly against the preponderance of the evidence. Reves v. Reves, 21 Ark. App. 177, 730 S.W.2d 904 (1987); Ark. R. Civ. P. 52(a).  A description is sufficient if it reasonably identifies or makes possible the identification of the collateral. The statement purports to cover “[a] 11 equipment used in the business known as,” which is not a complete sentence. As such, there is nothing in the description which would provide a key to the identity of the collateral. The description neither indicates where the equipment could be located, nor does it disclose the name of the business where the equipment was to be used. We cannot say that the finding of the chancellor on this issue was clearly erroneous. Nevertheless, appellants argue that appellee had actual notice of the equipment in which appellants claimed a security interest, because appellee supplied and installed the equipment. Despite this contention, however, Tommy Newman testified that he not only did not know which bank Stafford was dealing with, but that he also was unaware of the specifics of the arrangements Stafford had made to obtain financing. The record reveals that there was conflicting testimony in this regard given by Stafford. However, disputed facts and the credibility of witnesses are within the province of the fact finder to resolve. France v. Nelson, 292 Ark. 219, 729 S.W.2d 161 (1987).  Appellants also argue that appellee is precluded from gaining priority based on the equitable maxim of clean hands. This maxim provides that he who comes into equity must come with clean hands, and it acts as a bar to relief to those guilty of improper conduct in the matter to which they seek relief. Marshall v. Marshall, 227 Ark. 582, 300 S.W.2d 933 (1957). In support of this argument, appellants allege that appellee, in collaboration with Stafford, inflated the cost of the equipment when he provided the initial estimate. Appellants contend that this was done to enable Stafford to mislead the bank and obtain a higher loan, thereby increasing appellants’ exposure pursuant to their agreement to guarantee payment of the note. As evidence of this, appellants point to the differences between the price and the equipment as listed in the original proposal and the final invoice. The chancellor found that there was no convincing proof presented to substantiate this allegation.  Stafford testified in reference to the estimate that it was “rough scratched.” There was testimony given by Newman that changes were made to tailor the equipment and furniture to the building as it was being constructed. For instance, Newman related that the restaurant’s seating space was smaller than anticipated which required adjustments to be made. He also testified that Stafford provided some of the equipment that was listed on the estimate on his own, and consequently was not on the final invoice. The credibility of witnesses and the weight to be given their testimony are matters for the determination of the trial court, and the appellate court is not at liberty to disregard any testimony which the trial court has accorded some weight. Herrick v. Robinson, 267 Ark. 592, 595 S.W.2d 647 (1980) (supplemental opinion denying rehearing). Based on the record before us, we cannot say that the chancellor’s finding was clearly wrong. The appellants also assert laches as a bar to appellee’s claim. Appellants argue that this matter was pursued by appellee in a counterclaim in the original suit that was dismissed for want of prosecution, and that the instant suit instituted by appellee was also dismissed, although reinstated, due to inaction. Appellants also contend that in the interim there have been four owners of the business where the equipment was located, and that witnesses to the loan transaction to Stafford had become unavailable.  The doctrine of laches does not apply unless there is an unreasonable delay, coupled with some change of position which makes it inequitable to enforce the claim. Beeson v. Beeson, 11 Ark. App. 79, 667 S.W.2d 368 (1984). The length of time after which inaction constitutes laches is a question to be answered in light of the facts and circumstances of each case. Briarwood Apartments v. Lieblong, 12 Ark. App. 94, 671 S.W.2d 207 (1984). We cannot say that under the facts and circum stances of this case, the chancellor erred in finding that the delay was not so unreasonable as to preclude appellee from asserting its claim. Appellants are not in a position to complain because the original suit brought by them, their counterclaim in this case, was also dismissed due to their inaction.  In appellants’ final argument, it is argued that the chancellor erred in reinstating this action after it had been dismissed for want of prosecution. The case was dismissed without notice to either party, and the chancellor set aside the order of dismissal. Appellants contend that according to Rule 41 of the Arkansas Rules of Civil Procedure, this was a second dismissal as the original suit, which included appellee’s counterclaim, had also been dismissed. Thus, pursuant to Rule 41, appellant contends that the second dismissal served as an adjudication on the merits, and thus should not have been reinstated. We need not reach this issue because it does not appear that this argument was raised below. The record does not reveal that this argument was made at trial, and it does not appear the appellant filed a motion to set aside the order reinstating the case. An issue not raised in the trial court may not be raised for the first time on appeal. Ark. Burial Ass’n v. Dixon Funeral Home, Inc., 25 Ark. App. 18, 751 S.W.2d 356 (1988). We do note, however, that pursuant to Rule 60 of the Arkansas Rules of Civil Procedure, to correct any error or mistake or to prevent the miscarriage of justice, a decree or order of a circuit, chancery or probate court may be set aside, with or without notice, within ninety days of its having been filed with the clerk. Dismissal of a case without notice to all attorneys of record is not valid under Rule 10 of the Uniform Rules of Circuit and Chancery Courts. Peek v. Pulaski Federal Savings & Loan Ass’n., 286 Ark. 147, 690 S.W.2d 120 (1985). JANUARY 31, 1990 _S.W.2d_ AFFIRMED. Cracraft and Mayfield, JJ., agree.