Ferguson v. Green

• Decision Date: 01 October 1979
• Docket Number: No. 79-80,79-80
• Citation: 266 Ark. 556,587 S.W.2d 18
• Parties: Clyde A. FERGUSON et al., Appellants, v. James GREEN et al., Appellees.
• Court: Arkansas Supreme Court

Page 18

587 S.W.2d 18

266 Ark. 556

Clyde A. FERGUSON et al., Appellants, v. James GREEN et al., Appellees.

No. 79-80.

Supreme Court of Arkansas, In Banc.

Oct. 1, 1979.

John T. Harmon, North Little Rock, for appellants.

Mike Wilson, Jacksonville, for appellees.

FOGLEMAN, Justice.

This is the second appeal in this case. The case originated as an action by F & M Investments, Inc. against James Green and Cole Morgan to recover rentals alleged to have been due it under a lease-purchase agreement. Appellees here filed a cross-complaint in which they alleged that they had exercised their option to purchase the real estate which was the subject of the lease-purchase agreement, but that the original lessors, Clyde A. Ferguson, Sharon C. Ferguson, Charles D. Matthews and Susan S. Matthews, who are appellants here, had failed and refused to convey the property to appellees here. They sought specific performance. The Greens and the Morgans raised the same issues in an action by Twin City Bank for foreclosure of a mortgage, but other issues in the foreclosure suit are not material here. That action was consolidated with the suit by F & M Investments, Inc. In the consolidated proceeding the chancery court dismissed the counterclaims of the Greens and the Morgans on the ground that they had failed to assume the mortgage in favor of Twin City Bank. We disagreed with the chancery court and held that the clause in the contract requiring the Greens and Morgans to assume that mortgage did not require that they also obtain a release of appellants here from that obligation, before the option to purchase the property could be exercised. Green v. Ferguson, 263 Ark. 601, 567 S.W.2d 89. Even so, the disposition of the case on appeal on trial de novo on the record did not permit this court to direct a decree for specific performance by the appellees there (appellants here). In that trial, Clyde A. (Tony) Ferguson had testified that he and Matthews had conveyed the property to Freddie Hudson, a brother-in-law of Ferguson. He testified that no cash had been paid by Hudson to him and Matthews, but that Hudson had a letter of commitment from Arkansas Savings & Loan Association to finance his purchase for $165,000, and that there was no necessity for any money to change hands because he (Ferguson) had a letter of credit. Ferguson said that the deed to Hudson had been executed by Matthews and Ferguson, and had been recorded and delivered to Arkansas Savings & Loan Association, that the loan had been approved and signed, that the property was Hudson's and that everybody was happy. He said that the transaction had taken place in early 1977 when Hudson had obtained a tenant for the building on the property. He also testified that Hudson had spent about $30,000 improving the building on the property, but that the building had burned on the day after Hudson or his tenant had first occupied it.

In disposing of the first appeal, in which appellees here were appellants and appellants here were appellees, we said:

Appellants contend they are entitled to damages for breach of contract in lieu of specific performance. The chancellor made no finding on the issue of damages since he found there was no breach of the contract. It is undisputed that appellees conveyed the land to another following the alleged breach of contract. It is well established that the measure of damages for a breach of contract to convey is based on the value of the land at the time of the breach. Kempner v. Cohn, 47 Ark. 519, 1 S.W. 869 (1886). Here appellants exercised their right to purchase as of November 1, 1974. Appellees had four months from that date to convey title and failed and refused to do so. Appellants adduced evidence from an appraiser that the fair market value of the property was $193,151 "as of 1975," which figure, say appellants, would be reduced by the "mortgage indebtedness of $80,349 leaving an equity of ($102,803) of Appellants in the property." This asserted equity is the amount of damages sought by them. The appraiser did not know the property was encumbered by a twenty year lease-purchase option which he said could result in the property being "worth more or it may be worth less." Therefore, appellees argue that appellants did not sufficiently demonstrate the value of the property with respect to the date of the appraisal nor what effect the mortgage or the lease-purchase agreement had upon the value of the property. Ordinarily, we might agree with appellees. However, there is other evidence which should be considered with respect to the value of the property or damages in lieu of specific performance. It is undisputed that in March, 1975, some four months after appellants had exercised their option to purchase, appellees refused to sign appellants' proffered deed to the property, with assumption of the mortgage, at which time it appears the mortgage balance due to TCB for the original construction loan of $85,000 was $80,349. It appears it became unnecessary to sell the property by a foreclosure sale. Appellees acquired possession and in January, 1977, conveyed the property to a relative of one of them for $165,000. Therefore, a difference of $85,651 ($165,000 $80,349) existed based upon appellees' own sale of the property. In the unique circumstances, we hold appellants are entitled at least to this sum for its damages in lieu of specific performance of the contract.

The decree of the chancery court was reversed and the cause remanded for proceedings not inconsistent with the opinion rendered.

At a hearing after remand, held on November 9, 1978, appellees here offered no evidence. Appellants then objected that judgment was being rendered without any testimony having been taken and asked to make an offer of proof. They then proffered the following testimony: that of Sharon Ferguson that the income tax returns of the partnership of F & M Investments did not reflect any profit from the sale of the real estate to Freddie Hudson; that of Freddie Hudson that he purchased the property for what was owed Twin City Bank on the condition that he could "finance the property" and that he made certain improvements using his own funds, but that he did not pay $165,000 for the property and never paid Ferguson or Matthews one penny; that of Charles Matthews that the sale to Hudson was on a "look-at, look-see thing" for $1.00 and other good and valuable consideration, but not for any price of $165,000 and that he purchased the property at the judicial sale on foreclosure of the Twin City Bank's mortgage for just less than $99,000 and later through a real estate agent, sold the property for $107,500, suffering a loss of $11,073.89, after paying the real estate agent's commission, the closing costs, and delinquent taxes that had accrued during "Mr. Hudson's ownership," without considering the interest accruing on a note before he obtained the funds to pay the real estate agent's commission; that of Dietz, the real estate agent, that the sale was at fair market value, and was closed on June 1, 1978, and that his commission of $7,000 was paid on September 19, 1978; that of Ferguson that Hudson paid no money for the purchase of the property but assumed the note at Twin City Bank as the full purchase price and that the revenue stamps on the deed to Hudson, indicating a consideration of $165,000, did not reflect the actual consideration; that of H. B. Stubblefield that revenue stamps on a deed do not necessarily reflect the actual consideration, but that, in many instances, stamps in excess of the amount required by law are affixed.

Appellants on this appeal contend that appellees were entitled to only $19,079.78. This is the difference between the net proceeds of the sale by Matthews after his purchase at the foreclosure sale, less $80,349 paid as the balance due on the debt to Twin City Bank. They give no consideration to the loss of the building on the property when the option was exercised.

For the most part appellants rely for reversal on cases relating to remand of chancery cases for further proof, and on cases from other jurisdictions stating that retrial should be limited to certain issues only when it is clear that doing so will insure a fair trial. On the record before us at the time of the remand, there was no indication that our limitation of the issues on remand did not insure a fair trial of any issue remaining.

Appellants' present argument really is that we should have remanded the case without placing a floor on the amount of damages recoverable by appellees. But this is a matter which was determined on the first appeal, on a record which clearly established that appellees were entitled to at least that minimum. Appellants advanced the same argument in their petition for rehearing, which was denied.

Appellants' arguments are based upon a misconception, not only of the basis of our decision on the first appeal, but also of the scope of appellate review on the first appeal and the effect of that decision, as well. When the basis of our decision is viewed correctly in the light of the proper scope of appellate review on the first appeal and the effect of that decision, the decree entered by the chancellor was correct beyond doubt.

Appellants seem to think that we based our finding that they conveyed the property to Hudson for $165,000 upon a mirage produced by the amount of documentary stamps placed on the deed by which the conveyance was made. This is not so. The deed was not abstracted and, so far as the record reflects, never was introduced in evidence. Ferguson testified positively and unequivocally that the consideration for the deed was $165,000. He was asked, "What was the purchase price?" He answered, "$165,000."

We find no suggestion in Ferguson's testimony that this was a fictitious sale, or a conditional one, or that there was any chance that the consideration would not be paid. His testimony was quite to the contrary, and app...