Akin v. First Nat. Bank of Conway, CA

• Decision Date: 19 October 1988
• Docket Number: No. CA,CA
• Citation: 758 S.W.2d 14,25 Ark.App. 341
• Parties: Ted Martin AKIN and Gloria D. Akin, Appellants, v. The FIRST NATIONAL BANK OF CONWAY, Appellee. 87-377.
• Court: Arkansas Court of Appeals

Page 14

758 S.W.2d 14

25 Ark.App. 341

Ted Martin AKIN and Gloria D. Akin, Appellants, v. The FIRST NATIONAL BANK OF CONWAY, Appellee.

No. CA 87-377.

Court of Appeals of Arkansas En Banc.

Oct. 19, 1988.

Rehearing Denied Nov. 23, 1988.

Wright, Lindsey & Jennings, Little Rock, for appellants.

Henry & Henry, Conway, for appellee.

JENNINGS, Judge.

This suit was brought by First National Bank of Conway, the appellee here, against Ted Akin, appellant here, and William Yarbrough to foreclose a mortgage on a home in Guy, Arkansas. The lawsuit also sought reformation of a guaranty executed by Akin and a note to the bank executed by Yarbrough. Yarbrough failed to answer the bank's complaint. The chancellor reformed both the guaranty and the note, and awarded judgment to the bank as against Akin.

On appeal Akin argues that the court erred in reforming the guaranty, erred in reforming the note, and erred in exercising personal jurisdiction over him. Because we find merit in the second argument only, we affirm the chancellor's decree, as modified.

The only two witnesses at trial were Tommy Sanson, a vice-president for the bank, and Larry Grady, an attorney for the bank. Neither Akin, a resident of Dallas, nor Yarbrough, apparently a resident of Mesquite, Texas, testified. Sanson testified that he made a loan to Yarbrough in 1980. The loan was to enable Yarbrough to buy the house at Guy from a Mr. and Mrs. Stephens. A loan application was admitted into evidence, signed by both Akin and Yarbrough. Sanson said that Yarbrough signed it in his presence, but that the application was mailed to Akin in Texas for his signature. Akin submitted a personal financial statement to the bank showing a substantial net worth. The application itself indicated that the property would be held in Yarbrough's name. Sanson testified that he talked with Akin on the telephone about the loan and Akin told him that he was going to "co-sign" and be a "co-owner" with Yarbrough. Akin told him they were in the dog business down in Texas and that they wanted the property in Guy for raising dogs. He said that Akin also told him he did not want the property in his name.

Sanson testified that he required a loan guaranty agreement to be signed by Akin and that his secretary prepared it. He said that he and Akin had discussed this by telephone. The guaranty agreement was apparently received by Akin in Texas, signed by him, and returned to the bank in Conway. It was also signed by David M. Voyles, Molly Bisson, and J.H. Yarbrough. These three parties were never served and the chancellor dismissed the lawsuit as to them.

In the instrument of guaranty, Akin, and the others, agreed to guarantee the debt of Akin to the bank. Sanson's testimony was that the instrument was intended to guarantee the debt of William Yarbrough and that it failed to do so only because Sanson's secretary had made a mistake. The guaranty was dated August 26, 1980.

On September 26, 1980, William Yarbrough executed a note and mortgage in favor of the bank, on the Guy property. Yarbrough also took title to the property in his name alone. Yarbrough subsequently failed to make the payments on the note to the bank and, on December 14, 1982, deeded the Guy property to Akin.

Sanson testified that he went to Dallas with the lawyer, Grady, to talk to Akin about the debt, in 1984. He said that Akin told them that he was going to pay the debt. Apparently, at this time Akin had filed for reorganization under Chapter 11 of the Bankruptcy Act. Grady corroborated Sanson's version of the 1984 meeting with Akin in Dallas. He also testified that Akin had listed this debt in his bankruptcy pleadings, showing the bank as the creditor. By the time of trial, the Guy property had been released from the bankruptcy proceeding.

At the conclusion of the testimony counsel for Akin conceded that the bank was entitled to foreclose its mortgage, but argued that the court should not enter a personal judgment against Akin.

Reformation of a written instrument is permitted in equity to show the true intent of the parties where there is a mutual mistake. Bicknell v. Barnes, 255 Ark. 697, 501 S.W.2d 761 (1973). Reformation is an equitable remedy which is available when the parties have reached a complete agreement but, through mutual mistake, the terms of their agreement are not correctly reflected in the written instrument purporting to evidence that agreement. Delone v. USF & G, 17 Ark.App. 229, 707 S.W.2d 329 (1986). The parties seeking reformation, however, must present evidence which "clearly and convincingly" warrants a finding that a mutual mistake occurred. Bicknell, supra; Turner v. Pennington, 7 Ark.App. 205, 646 S.W.2d 28 (1983). However, the proof need not be undisputed in order to obtain reformation. Winkle v. Grand Nat'l Bank, 267 Ark. 123, 601 S.W.2d 559 (1980). Bicknell, supra; Turner, supra. Although we continue to hear chancery cases de novo, "the test on review is not whether we are convinced that there is clear and convincing evidence [to support the] judge's findings, but whether we can say that the ... judge was clearly wrong in his findings." ARCP Rule 52; A.B. v. Arkansas Social Services, 273 Ark. 261, 620 S.W.2d 271 (1981) (Hickman, J., dissenting). We have said that in such a case, the question we must answer on appeal is whether the chancellor's finding that the disputed fact was proved by clear and convincing evidence is clearly erroneous. Freeman v. Freeman, 20 Ark.App. 12, 722 S.W.2d 877 (1987); Turner, supra. Even in reformation cases, where the burden of proof is by clear and convincing evidence, we defer to the superior position of the chancellor to evaluate the evidence. Bicknell, supra; Turner, supra.

When all of the evidence in the case is considered we think it reasonably clear that Akin agreed with the bank to guarantee the debt of Yarbrough and that through the error of Sanson's secretary the instrument did not reflect the parties true intention. In Kohn v. Pearson, 282 Ark. 418, 670 S.W.2d 795 (1984), the court said, "[t]he mistake of a draftsman, whether he is one of the parties or merely a scribner, is adequate grounds for relief, provided only that the writing fails to reflect the parties true understanding," citing D. Dobbs, Remedies § 4.3 (1973). The fact that it was a bank employee who drafted the instrument wrong, does not render the mistake a unilateral one in a legal sense. Certainly, a guaranty agreement can be reformed. Scott v. Citizens Bank of Batesville, 245 Ark. 235, 431 S.W.2d 832 (1968). We cannot say the chancellor was clearly wrong in finding that a mutual mistake had been established by clear and convincing evidence.

However, the evidence to support the chancellor's decision to reform the note itself is clearly insufficient. Once it is accepted that Akin understood he was guaranteeing the note signed by Yarbrough, Akin's subsequent acknowledgment of the debt provides no support for an argument that the note should be reformed. Although Sanson was apparently in charge of the preparation of the note and mortgage, he offered no testimony that his secretary or any other bank employee had made a mistake in their preparation. Sanson's insistence that Akin guarantee Yarbrough's debt is inconsistent with a contention that Akin was a co-debtor.

Finally, Akin contends that the trial court erred in exercising in personam jurisdiction over him. Ark.Code Ann. § 16-4-101 provides that a court may exercise personal jurisdiction over a person as to a cause of action arising from that person's "transacting any business in this state." The supreme court has held that the purpose of the statute is to expand this state's personal jurisdiction over non-residents, within the limits permitted by the due process clause of the United States Constitution. See S.D. Leasing, Inc. v. Al Spain and Assoc., Inc., 277 Ark. 178, 640 S.W.2d 451 (1982); Nix v. Dunavant, 249 Ark. 641, 460 S.W.2d 762 (1970). In order for a valid judgment to be rendered against a non-resident not served within the forum state, due process requires that certain minimum contacts exist between the non-resident and the state, such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). The contacts with the forum state must be such that the non-resident defendant should reasonably anticipate being "haled" into an Arkansas court. Jagitsch v. Commander Aviation Corp., 9 Ark.App. 159, 655 S.W.2d 468 (1983) (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)). A single contract can provide the basis for the exercise of jurisdiction over a non-resident defendant if there is a substantial connection between the contract and the forum state. McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957). Whether the "minimum contacts" requirement has been satisfied is a question of fact. Wisconsin Brick & Block Corp. v. Cole, 274 Ark. 121, 622 S.W.2d 192 (1981).

In Jagitsch, supra, we said that although there was no exact formula for deciding what is reasonable and fair under the circumstances five factors should be considered: The nature and quality of the contacts with the forum state; the quantity of contacts with the forum state; the relation of the cause of action to the contacts; the interest of the forum state in providing a forum for its residents; and the convenience to the parties. Jagitsch, 9 Ark.App. at 163, 655 S.W.2d 468 citing Arkansas-Best Freight System, Inc. v. Youngblood, 359 F.Supp. 1115 (W.D.Ark.1973).

In the case at bar it is clear that Akin was a resident of the State of Texas. Sanson's testimony was that Akin never came to Conway and that their discussions were all by mail or phone. There was also evidence, however, that Akin signed a loan application, a financial statement,...