Court Opinion

ID: 9664518
Source: CourtListenerOpinion
Date Created: 2023-08-24 00:20:29.468907+00
Date Added: 2024-06-11T18:15:06.962973
License: Public Domain

David Newbern, Justice, dissenting. This is a garden variety embezzlement case. The Chancery Court lacked jurisdiction, and the case should be remanded for transfer to a circuit court. The only allegation in Reynolds’ complaint suggesting chancery court jurisdiction was one of “express trust,” but no fact, such as a reference to a trust instrument, was alleged in support of finding an express trust. In his letter opinion the Chancellor states that Reynolds alleged an implied trust (apparently meaning constructive or resulting trust), and apparently that was a theory upon which Reynolds proceeded before the Chancellor without amending the complaint. At the outset of the hearing before the Chancellor, counsel for the Bank pointed out that Reynolds had a complete and adequate remedy at law and, “Simply putting in an allegation of a so-called implied trust does not divest Circuit Court of jurisdiction. And we continue to object to Chancery Court jurisdiction throughout the trial.” The Chancellor apparently did not explicitly rule on the objection. There was no motion to transfer the case to a circuit court. While the Bank has not raised the question of subject matter jurisdiction in this appeal, it is an issue we have a duty to raise on our own. See Coran v. Keller, 295 Ark. 308, 748 S.W.2d 349 (1988); Arkansas S. & L. v. Corning, 252 Ark. 264, 478 S.W.2d 431 (1972). In the opening paragraphs of Reynolds’ argument to this Court, it is clearly stated that there was no express trust, and the argument proceeds on theories of constructive or resulting trust as well as legal theories of bailment, breach of contract, conversion, and negligence. Chancery courts have original jurisdiction in matters of equity. Ark. Code Ann. § 16-13-304 (1987). See Ark. Const., art. 7, §§ 1,11 and 15; Ark. R. Civ. P. 2. The remainder of the general subject matter jurisdiction of Arkansas trial courts is retained in the circuit courts. Ark. Const., art. 7, § 11. In Bierbaum v. City of Hamburg, 262 Ark. 532, 559 S. W.2d 20 (1977), Bierbaum sought a mandatory injunction against the City to compel it to remove a water pumping station it had mistakenly built on land owned by him. The City counterclaimed for condemnation. The Chancellor denied the injunction and held that the City had the right to condemn the property. He then transferred the case to the Circuit Court for determination of damages, despite the lack of any motion to transfer or demand for jury trial. We held the Chancellor had no authority to transfer a case to a circuit court on his own motion and should have retained the case under the cleanup doctrine to determine the damages. In Liles v. Liles, 289 Ark. 159, 711 S.W.2d 447 (1986), we attempted to reconcile the Bierbaum case with our cases on “subject matter jurisdiction” of chancery courts. We concluded that the matter is most often one of “propriety” rather than jurisdiction in the traditional sense and that we would not reverse a chancery court decision on subject matter jurisdiction grounds unless there was no tenable nexus whatever with a chancery court’s equitable or statutory jurisdiction. Arkansas is a fact pleading jurisdiction. Ark. R. Civ. P. 8; West v. Searle & Co., 305 Ark. 33, 806 S.W.2d 608 (1991); Harvey v. Eastman Kodak Co., 271 Ark. 783, 610 S.W.2d 582 (1981). The jurisdiction of the trial court of the subject matter of a claim is determined initially from the pleadings. Walker v. State, 308 Ark. 498, 825 S.W.2d 822 (1992); McKinney v. City of Eldorado, 308 Ark. 284, 824 S.W.2d 826 (1992). If the pleadings state no fact in support of the Court’s jurisdiction, the trial court should not proceed. Martin v. Couey Chrysler Plymouth, Inc., 308 Ark. 325, 824 S.W.2d 832 (1992) (subject matter jurisdiction); Malone & Hyde, Inc. v. Chisley, 308 Ark. 308, 822 S.W.2d 394 (1992) (personal jurisdiction). In other words, it is not enough just to name an equity theory cognizable in a chancery court and then state facts which would not support the equity theory but which might support legal claims. While the Liles case gave as examples of lack of a tenable nexus instances of specific statutory and constitutional assignment of classes of cases to certain courts, it was not meant to suggest that a party could invoke chancery jurisdiction merely by naming an equitable theory or remedy and have jurisdiction sustained without stating, proving or even arguing to the chancellor any fact in support of that theory or remedy. There are, of course, instances in which pleadings state facts upon which jurisdiction depends, and those facts turn out to be untrue, thus depriving the court of jurisdiction. In such cases, we have, on many occasions, stated that prohibition will not lie at the beginning of the case but that a jurisdictional error can be corrected on appeal. See, e.g., Statewide Health Coordinating Council v. Circuit Court of Pulaski County, 287 Ark. 84, 696 S.W.2d 729 (1985); Isely v. Isely, 287 Ark. 401, 700 S.W.2d 49 (1985). In considering subject matter jurisdiction of a chancery court, a complication arises because of the cleanup doctrine. If a chancery court obtains jurisdiction for one purpose, such as to decide a fact upon which availability of an equitable remedy, and thus equitable jurisdiction, might rest, then it may decide all issues presented. That is illustrated in Bierbaum case where we held that the chancellor should have decided the issue of damages despite the fact that the equitable remedy was no longer at issue. When questioned on subject matter jurisdiction during oral argument, Reynolds’ counsel candidly stated, as he had done before the Chancellor, his reason for seeking application of a trust was simply that the statute of limitations would bar Reynolds’ claim for nearly all of the 12-year embezzlement period if he were to have asserted his bailment, breach of contract, and negligence claims in a circuit court where they belonged. In oral argument before this Court, Reynolds contended the “implied trust” theory was a legitimate invocation of chancery jurisdiction upon which to base jurisdiction of the other claims under the clean up doctrine. The argument is that the money given to Ms. Brown as “less cash” was the Bank’s money, not Reynolds’ money, and thus the Bank continues to hold Reynolds’ money in its possession in trust. Regardless of the merits of this characterization of the facts, and its direct inconsistency with paragraph 12. of Reynolds’ complaint that “the Bank gave Lumber Company money to “Ms. Brown, I cannot regard the pleadings as having been amended to conform to that version, as I can find no evidence in Reynolds’ abstract that it was presented to the Chancellor. The record contains a trial brief submitted to the Chancellor at the conclusion of the trial, but no post-hearing briefs are included in the record. If he had argued that the money given to Ms. Brown belonged to the Bank, it would have been inconsistent with Reynolds’ counsel’s consistent references before the Chancellor, which are included in the record and are consistent with Reynolds’ pleading, to money given by the Bank to Ms. Brown as having come from the deposits or from the Bank’s account. I cannot say the pleadings were amended to conform to proof which was not offered or argued. It is clear that no fact was stated in support of subject matter jurisdiction in the Chancery Court; nor was any evidence of a fact which would have established a constructive or resulting trust offered or even argued. That the Chancellor apparently considered (arid correctly declined) arguments on trust theories does not change the fact that the case should not have remained in Chancery Court beyond the pleadings stage. The Chancery Court lacked jurisdiction and should have transferred the case to the Circuit Court at the outset. See Ark. Code Ann. § § 16-13-401 and 16-57-104(a) (1987); Linder v. Howard, 296 Ark. 414, 757 S.W.2d 549 (1988); Meeks v. Arkansas Power & Light Co., 147 Ark. 232, 227 S.W.2d 405 (1921). This case is no different from one in which a party to an automobile accident files a complaint in a chancery court claiming injury and asserting that the money he is due in the form of damages is being held in trust by the defendant and thus a chancery court has jurisdiction. The Liles case opinion went as far as this Court should go toward minimizing the problems caused by the continued separation of our equity and law courts. The majority opinion in this case crosses the line and violates Ark. Const. art. 7, §§ 11 and 15. I fully realize that it seems a waste of judicial resources to remand this case for transfer when both parties are, now at least, happy with the choice of trial forum. There is, however, a larger question involved which the majority of the members of this Court choose to ignore. Separation of equity courts from law courts may be an anachronism, but it is a constitutional anachronism. If we wink at it or turn our heads we do the law a great disservice in two ways. First, we display our willingness to ignore our fundamental organic document, and that weakens the law and this Court. Second, we make it easier for the people and the General Assembly to continue to decline badly needed reform of our Constitution’s judicial article. I respectfully dissent. Dudley, J., joins in this dissent.