Cent. Ark. Found. Homes, LLC v. Choate

• Decision Date: 06 April 2011
• Docket Number: No. CA 10–902.,CA 10–902.
• Citation: 2011 Ark. App. 260,383 S.W.3d 418
• Parties: CENTRAL ARKANSAS FOUNDATION HOMES, LLC, Appellant v. Rebecca CHOATE, Appellee.
• Court: Arkansas Court of Appeals

2011 Ark. App. 260

383 S.W.3d 418

CENTRAL ARKANSAS FOUNDATION HOMES, LLC, Appellant

v.Rebecca CHOATE, Appellee.

No. CA 10–902.

Court of Appeals of Arkansas.

April 6, 2011.

Brad A. Cazort, Little Rock, for appellant.

RITA W. GRUBER, Judge.

[Ark. App. 1]Central Arkansas Foundation Homes (CAFH) appeals from a judgment rescinding its construction contract with appellee Rebecca Choate and awarding CAFH $5340 in quantum-meruit damages. Four arguments are presented for reversal: 1) the circuit court lacked jurisdiction to set aside a previous judgment entered for CAFH; 2) the court abused its discretion in setting aside that judgment; 3) the court erred in rescinding the construction contract; 4) the court erred in its quantum-meruit award. We find no clear error or abuse of discretion in any of the court's rulings and affirm in all aspects.

I. Facts

Rebecca Choate owned property near Wooster in Faulkner County. In 2003, she decided to build a house on a two-acre tract and contacted CAFH to review the available house plans. After meeting with a sales representative named Barbara, Choate chose the [Ark. App. 2]Lexington plan, which the CAFH brochure depicted as having a small storage area at the back of the carport. The brochure also listed several “amenities” that were part of a CAFH home, including its being built on a “slab or concrete foundation wall.” According to Choate, she adamantly conveyed to Barbara her desire for a slab foundation and her dislike of concrete-block foundations. When Barbara informed her that even a slab foundation would have some blocks showing, Choate insisted that there be no more than three blocks visible.

On November 17, 2003, CAFH and Choate signed a contract in which CAFH agreed to build the Lexington model for $82,050. The contract contained several pages of building specifications for items such as the foundation, walls, doors and windows, roof, fireplace, and driveway. Some of the specifications contradicted each other. For instance, one page described the home's foundation as a slab while another page listed the foundation material as concrete blocks and bricks. In another instance, the notation “N/A” appeared beside the listing for a fireplace while a subsequent page described the fireplace dimensions.

In December 2003, before construction began, a bank appraisal was performed based on information obtained from CAFH. The appraisal listed various characteristics of the home, including a fireplace, garbage disposal, asphalt driveway, storage, and concrete foundation. That same month, a survey of the property was conducted for the benefit of Choate and CAFH. The survey depicted the proposed site of the new home and an existing double-wide home on the property. The new home was shown as being oriented in the same manner as the double-wide, which faced downhill toward a view. According to Choate, she informed [Ark. App. 3]Barbara that she wanted her new home to face toward the view just as the double-wide did. CAFH received a copy of the survey and placed it in its files.

Credit problems prevented Choate from obtaining construction financing, so CAFH obtained the construction loan from One Bank on May 26, 2004. As security, Choate deeded her two-acre tract to CAFH and signed a guaranty on the loan. Thereafter, Choate hired Altus Hollimon to clear the property, prepare the site, and stake out the position of the house. Hollimon did so and, according to him, staked the site so that the house would face the view down the hill. Choate also asked CAFH to provide a septic system and install the waterline to the house. CAFH did so at a cost of $5340. According to Choate, construction began on the house in May 2005.¹

While construction was in progress, Choate was out of town and received a call from her sister telling her that the house did not have a slab foundation and appeared to be turned in the wrong direction. According to Choate, she immediately called CAFH and told them to “stop” because she had ordered a slab foundation. She also told CAFH that she wanted the house “just like my double-wide ... looking down at the view.” When Choate returnedto Arkansas and viewed the house, she saw that construction had not ceased but had continued. The house was on a foundation of stacked concrete blocks, some of which were visible above ground as high as six feet. The house also was not facing toward the scenic view but rather [Ark. App. 4]toward the double-wide. It had no driveway, no carport storage, no fireplace, and no garbage disposal.

After CAFH completed construction, it obtained permanent home financing for Choate and tried to contact her to close the transaction. Choate did not respond until October 2005, when she sent CAFH a list of alleged construction defects, including that the house was facing in the wrong direction; that it was not built on a slab; and that the fireplace, garbage disposal, driveway, and storage area were missing. CAFH replied to Choate in writing, telling her that she had until January 6, 2006, to close on the house or CAFH would sell it. The correspondence enclosed worksheets showing that the amount Choate would owe at closing exceeded $94,000, which included interest that had accrued on the as-yet unpaid construction loan.

Choate never moved into the house. Instead, on July 31, 2006, she filed a lis pendens on her two acres and sued CAFH seeking rescission of the construction contract. Choate alleged that the house had numerous material defects, that CAFH had substantially failed to perform its obligations under the contract, and that CAFH had willfully breached the contract. CAFH denied most of Choate's material allegations and counterclaimed for an order directing Choate to close the sale and pay the debt owed on the construction loan. As an alternative, CAFH asked that, if the contract were rescinded, Choate be required to pay in quantum meruit for the value of the construction.

On April 18, 2007, Choate's attorney withdrew from representing her. Soon thereafter, CAFH's attorney asked the court to set a final hearing on the case. The attorney [Ark. App. 5]purportedly sent Choate a letter by regular mail on May 15, 2007, advising her that the case was set for trial on July 9, 2007. Choate, however, did not appear. CAFH did appear, and its general manager, John Oldner, testified to events leading up to the case and the amount of damages claimed. According to Oldner, the interest on the construction loan had accrued to the point that CAFH now sought $104,965.88 from Choate. The court found in favor of CAFH and entered judgment for that amount, plus attorney fees, on July 18, 2007. The court ruled that CAFH could sell the house and either remit any excess to Choate or look to Choate for the deficiency if the sales price did not cover the judgment.

Choate obtained a new attorney and moved to set the judgment aside pursuant to Ark. R. Civ. P. 60. The motion asserted that Choate had not received notice of the trial and that she had a valid cause of action based on CAFH's faulty construction and questionable business practices. At the motion hearing, Choate testified that she did not receive the trial notice, even though it was sent to her correct address. She explained that she was away from home for long periods of time in her occupation as a truck driver and that her sister, Judy Brown, collected her mail. Brown testified that she did not neglect Choate's mail and that she had no knowledge of Choate's receiving anything from CAFH's attorney in May or June 2007. Following this testimony, CAFH objected that Choate had not demonstrated a meritorious claim or defense. The attorney for Choate told the court that he stood ready to offer evidence on that point but that he understood the court would not require it. The court then set the judgment aside and ordered a second trial without determining whether a meritorious claim or defense existed.

[Ark. App. 6]At the second trial, Choate presented testimonial and photographic evidence in addition to the abovementioned proof. Her photographs depicted the use of concrete blocks on the foundation; the orientation of the house facing toward the double-wide rather than down the hill; the lack of a driveway; and the lack of a storage unit on the carport. Choate's excavator, Altus Hollimon, testified that the house, as constructed by CAFH, did not face the same way that he had laid it out. Structural engineer Justin Hall and appraiser Diane Thompson testified and offered reports regarding numerous problems with the house, including that the house was not oriented as shown on the survey; that the house's foundation had cracked and settled; that interior doors were difficult to open and close due to the settling; that the carpet was “bunching up” despite the house's not being occupied; and that there was a gap in the back door that had let rain into the house, causing mildew. At the close of Choate's testimony, she stated that she wanted to return to the position she was in before the contract was executed. She asked the court to set aside her deed to CAFH, to require CAFH to hold her harmless on the construction loan, and to remove the house from her property.

CAFH, for its case, called home inspector Mike Sullivan, who testified that the house had no problems other than a few cosmetic issues. CAFH also called several of its employees as witnesses, and they testified that they received no complaints from Choate about the foundation or placement of the house until her October 2005 letter. Regarding the foundation, employee Glen Nickels testified that he viewed Choate's land prior to construction and knew that it would not accommodate a slab foundation but that he did not discuss this knowledge with Choate. Employee Nick Avants testified that CAFH had “squared [Ark. App. 7]up” the stakes left by Choate's excavator to the position in which the house was ultimately constructed. He further stated that, due to...