Bullock's Ky. Fried Chicken, Inc. v. City of Bryant

• Decision Date: 19 September 2019
• Docket Number: No. CV-17-761,CV-17-761
• Citation: 2019 Ark. 249,582 S.W.3d 8
• Parties: BULLOCK'S KENTUCKY FRIED CHICKEN, INC.; Karen King; and Arkansas Pulpwood Company, Inc., Appellants v. CITY OF BRYANT, Arkansas, Municipal Property Owners' Multipurpose Improvement District No. 84; Bank of the Ozarks; and TND Developers, LLC, Appellees
• Court: Arkansas Supreme Court

2019 Ark. 249

582 S.W.3d 8

BULLOCK'S KENTUCKY FRIED CHICKEN, INC.; Karen King; and Arkansas Pulpwood Company, Inc., Appellants

v.CITY OF BRYANT, Arkansas, Municipal Property Owners' Multipurpose Improvement District No. 84; Bank of the Ozarks; and TND Developers, LLC, Appellees

No. CV-17-761

Supreme Court of Arkansas.

Opinion Delivered: September 19, 2019

James, House Downing & Lueken, P.A., Little Rock, by: Richard C. Downing, Little Rock and Charley E. Swann, for appellants Bullock's Kentucky Fried Chicken and Karen Bullock King.

Harrell, Lindsey & Carr, P.A., Camden, by: Paul E. Lindsey, for appellant Arkansas Pulpwood Company, Inc.

Don A. Eilbott – Attorney, PLC, by: Don A. Eilbott, Little Rock, for appellee City of Bryant Municipal Property Owners' Multipurpose Improvement District No. 84.

Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C., Little Rock, by: Lance R. Miller and Megan D. Hargraves, for appellee Bank of the Ozarks.

SHAWN A. WOMACK, Associate Justice

This case comes to this court from a decision of the Saline County Circuit Court entered on April 28, 2017, and supplemented on May 23, 2017. The Appellants are Bullock's Kentucky Fried Chicken, Inc. (KFC); Karen Bullock (King); and Arkansas Pulpwood Company, Inc. (APW). Appellees are the City of Bryant, Arkansas, Municipal Property Owners' Multipurpose Improvement District 84 (District 84); Bank of the Ozarks (Ozarks); and TND Developers, LLC (TND). We affirm.

I. Facts

In 2007, TND began contracting to purchase lands comprising 195 acres in Saline County and closed on most of these transactions in August 2007. Two of TND's principals, Don Spears and Aaron Jones, were also attorneys with the law firm Spears & Jones, land developers, and managed a title company that operated out of their law offices. Spears and Jones were later appointed as initial commissioners of District 84. KFC and King both sold land to TND and agreed to finance part of the purchase prices. TND purchased land from KFC and Bullock Investment for $2,680,000--$1,300,000 paid at closing to Bullock Investment for a tract of land south of Hilltop Road and a $1,380,000 promissory note was issued to KFC for a tract north of Hilltop Road. The King sale was for $125,000 (paid by a $125,000 promissory note delivered at closing) for her tract north of Hilltop Road. Under these two contracts, the KFC and King promissory notes were secured by a first mortgage in the real property they sold north of Hilltop Road. To obtain the necessary funds to finance these purchases, TND received a loan for $3,748,452 from Centennial Bank and issued Centennial a promissory note secured by a first mortgage on all 195 acres.

On August 27, 2007, the Centennial loan and the TND real estate purchases were closed by Spears & Jones. The firm prepared the TND deeds, promissory notes, and mortgages. On August 30, 2007, Spears & Jones recorded the Centennial mortgage first and then filed the KFC and King mortgages shortly thereafter. Ultimately, APW paid off the Centennial mortgage and was granted an assignment of all its interest. APW later foreclosed its mortgage against lands owned by TND.

On October 30, 2007, TND filed a petition with the City of Bryant to form an improvement district for the purpose of "constructing waterworks, sewers, recreational facilities, and systems for gas pipelines, and ... grading, draining, paving, curbing, and guttering streets and laying sidewalks...." The petition was subsequently approved, and District 84 was formed on November 26, 2007.

Commissioners for the improvement district were appointed and they, in turn, appointed Alan King as assessor for the district. Alan King appraised the benefits that would result to tracts within the district and arrived at a total value of improvements of $7,366,668. The assessment of benefits identified real property by lot and block number and an "Order of Assessment" was issued on January 4, 2008, setting the improvement-district taxes at 6 percent of the assessed benefits for each lot or parcel. The lots and parcels were eventually matched with the county assessor records, and tract numbers were assigned to District 84 lands. At issue in this appeal are tracts 840-11625-028 (tract 028), 840-11631-851 (tract 851), and 840-11811-000 (tract 000).

To finance development and construction of the improvements, District 84 entered into a bond indenture for the issuance of $6,110,000 in improvement-district bonds. In conjunction with the bond issuance, District 84 and Ozarks, as trustee, entered into a "Pledge and Mortgage" agreement in which District 84 pledged, mortgaged, assigned, transferred and set over to Ozarks its interest in all special improvement-district taxes then existing or thereinafter levied, including the proceeds from the special taxes levied by District 84.

In 2012, TND ceased payments of improvement-district taxes on the lots it still owned. On March 30, 2015, District 84 filed its complaint to foreclose its improvement-district tax liens for delinquent taxes, naming TND, KFC, King, and APW as party defendants. District 84 described the lands to be foreclosed as all of District 84, less and except certain lots previously sold by TND. On February 29, 2016, APW filed a third-party complaint to bring in Ozarks, seeking an order granting it the right to make a prepayment of the improvement-district taxes under section 9.08 of the "Trust Indenture" agreement. On March 14, 2016, APW filed a counterclaim against District 84 seeking an order compelling District 84 to allow prepayment of the improvement-district taxes for tracts 028, 851, and parts of 000.

On April 28, 2017, the circuit court issued its decree and then a supplemental decree was entered on May 23, 2017. The circuit court granted District 84's request for foreclosure and entered judgment against TND for the total of the unpaid improvement-district taxes, plus penalties, interest, and attorney's fees. It further ordered all TND lands within the district sold with the proceeds applied against District 84's judgment. The circuit court also ruled that there was no right to prepay improvement taxes and have particular tracts released from the tax lien. KFC and King were granted judgment against TND and Aaron Jones individually, for $1,380,000 and $125,000, respectively, plus accrued interest and their mortgage liens were ordered foreclosed. Because Jones recorded the KFC and King mortgages after the Centennial mortgage, the circuit court found that Jones, individually and in his agency capacity for TND, committed fraud against KFC and King. The circuit court, however, denied KFC's and King's request to find that Jones committed fraud in his capacity as commissioner of District 84, to impute his fraud to District 84, or to find that Jones's fraud impacted the validity or priority of District 84's lien. The circuit court also denied KFC's and King's due-process and equal-protection claims as well as their affirmative defenses of equitable subordination/estoppel or subrogation.

II. Foreclosed Property

On appeal, Appellants APW, KFC, and King argue that District 84's lien for nonpayment of improvement taxes can only attach to individual tracts upon which taxes were actually delinquent and unpaid. Specifically, Appellants argue the land north of Hilltop Road is not "real property" under the definition of the governing statute, and therefore an in rem judgment cannot be attached to those tracts.

This court reviews issues of statutory construction under a de novo standard. Ligon v. Stewart , 369 Ark. 380, 386, 255 S.W.3d 435, 439 (2007). The basic rule of statutory construction is to give effect to the intent of the legislature. Dachs v. Hendrix , 2009 Ark. 542, at 8, 354 S.W.3d 95, 100. Where the language of a statute is plain and unambiguous, the reviewing court determines legislative intent from the ordinary meaning of the language used. City of Little Rock v. Jung Yul Rhee , 375 Ark. 491, 495, 292 S.W.3d 292, 294 (2009). In considering the meaning of a statute, we construe it just as it reads, giving the words their ordinary and usually accepted meaning in common language. Great Lakes Chem. Corp. v. Bruner , 368 Ark. 74, 82, 243 S.W.3d 285, 291 (2006).

Arkansas Code Annotated sections 14-94-101 et seq. govern the improvement-district law at issue in the present appeal. Arkansas Code Annotated section 14-94-115(a)(1) (Repl. 1998) requires that upon the creation of an improvement district, an appointed assessor shall assess the benefits accrued to the real property within the district as a result of any improvements. Arkansas Code Annotated section 14-94-118(a)(1) (Repl. 1998) provides that following the assessment of benefits, the improvement district board will enter an order levying upon the real property of the district a tax sufficient to pay the estimated cost of the improvements. Subdivision (a)(2) explains that this tax is to be paid by the real property owners of the district in proportion to the amount of the assessment of benefits thereon. Ark. Code Ann. § 14-94-118(a)(2). Appellants contend that the unimproved tracts of 028 and 851 north of Hilltop Road do not meet the definition of "real property" set forth in this chapter because those lands did not accrue any direct benefits from improvements and are therefore not subject to the foreclosure proceedings detailed in Arkansas Code Annotated section 14-94-122 (Repl. 1998). Arkansas Code Annotated section 14-94-103(10) (Repl. 1998) defines "real property" as being all property subject to assessment. Thus, to be defined as "real property" for the purposes of this chapter, land need only be subject to assessment--a benefit need not actually be assessed. The record indicates that the land north of Hilltop Road was subject to the initial assessment and therefore constitutes "real property."

Despite Appellants' contention that District 84's tax lien attaches only to individual tracts in delinquency, section 14-94-118 makes clear that...