Harvison v. Charles E. Davis and Associates, Inc.

• Decision Date: 29 June 1992
• Docket Number: No. 91-286,91-286
• Citation: Harvison v. Charles E. Davis and Associates, Inc., 835 S.W.2d 284, 310 Ark. 104 (Ark. 1992)
• Parties: James HARVISON and Maidlene Harvison, Appellants, v. CHARLES E. DAVIS AND ASSOCIATES, INC., a/k/a Davis & Associates, P.A., Charles E. Davis and Jeff H. Watson, Appellees.
• Court: Arkansas Supreme Court

Page 284

835 S.W.2d 284

310 Ark. 104

James HARVISON and Maidlene Harvison, Appellants, v. CHARLES E. DAVIS AND ASSOCIATES, INC., a/k/a Davis &amp Associates, P.A., Charles E. Davis and Jeff H Watson, Appellees.

No. 91-286.

Supreme Court of Arkansas.

June 29, 1992.

Gregory R. Bowman, Fayetteville, for appellants.

Walter B. Cox, Tim E. Howell, Fayetteville, for appellees.

CORBIN, Justice.

Appellants, James and Maidlene Harvison, appeal an order of the Washington Circuit Court entering summary judgment and dismissing their complaint for conversion, fraud, and legal malpractice against appellees, Charles E. Davis and Associates, Inc., a/k/a Davis & Associates, P.A., Charles E. Davis, and Jeff H. Watson. The Harvisons allege their causes of action arose from Davis' and Watson's representation of the Harvisons in the drafting and enforcement of a land sales contract. The Harvisons assert six points of error in the proceedings below, all of which concern their claim for legal malpractice. We find no error and affirm.

The Harvisons' complaint alleged Davis and Watson committed malpractice by obtaining a foreclosure of their land rather than following their instructions to repossess the land for them. Davis and Watson moved for summary judgment on the grounds that they attempted to achieve a forfeiture, but forfeiture was not an available remedy to the Harvisons. The trial court entered an order concluding there was no genuine issue of material fact and that Davis and Watson were entitled to judgment as a matter of law.

We address the Harvisons' first, second, and fourth assignments of error together as they are essentially the same argument--that the trial court erred in granting summary judgment because Davis and Watson did not meet their burden of showing an absence of a genuine issue of material fact or that they were entitled to judgment as a matter of law. On appellate review, we need only to decide if the granting of summary judgment was appropriate based on whether the evidentiary items presented by the moving party in support of the motion left a material question of fact unanswered. Nixon v. H & C Elec. Co., 307 Ark. 154, 818 S.W.2d 251 (1991). The burden of sustaining a motion for summary judgment is always the responsibility of the moving party. Cordes v. Outdoor Living Center, Inc., 301 Ark. 26, 781 S.W.2d 31 (1989). All proof submitted must be viewed in a light most favorable to the party resisting the motion and any doubts and inferences must be resolved against the moving party. Reagan v. City of Piggott, 305 Ark. 77, 805 S.W.2d 636 (1991).

With the foregoing standards in mind, we recite the evidence in the light most favorable to the Harvisons. For a purchase price of $55,000.00, with $10,000.00 down and remainder financed at an interest rate of 10% per annum, the Harvisons sold approximately 10.76 acres in Washington County to Charles R. and Vera Howard. The contract was dated June 4, 1982, and directed the Howards to make monthly payments of $594.68 to the escrow agent, First State Bank, Springdale, Arkansas, beginning on July 5, 1982. The contract contained a forfeiture clause, providing that in the event of the buyers' default for as long as thirty days, the sellers were entitled to declare the entire unpaid balance due within twenty days; if the balance remained unpaid at the expiration of the twenty days, the sellers were entitled to retake possession of the land without legal process and to keep all payments made under the contract as liquidated damages. The contract further provided that in the event of the buyers' default, the sellers were entitled to waive their forfeiture rights and seek specific performance of the contract.

The Harvisons hired Davis to draft the contract in question. They also hired Davis to handle the collection of the Howards' default on two occasions, once in 1984 or 1985 and again in 1986. On both occasions, Davis advised the Harvisons of their right to enforce the forfeiture clause. On both occasions, the Harvisons chose not to seek a forfeiture. Instead, they chose to accept the Howards' late payments and to proceed under the contract. The Howards defaulted again in January 1989. And again, the Harvisons consulted Davis for advice on handling the default. Davis assigned the matter to his associate Watson.

The Harvisons consulted Watson concerning the latest default and informed Watson they wanted to retake possession of the land. As required by the contract, on February 23, 1989, Watson drafted a letter of notice to the Howards notifying them of their default and demanding that the entire balance be paid in twenty days.

By letter dated March 22, 1989, Watson informed the Harvisons that the Howards desired to make up all the back payments and make one payment in advance. The Harvisons instructed Watson that they did not want to accept the Howards' payments, rather they wanted to enforce the forfeiture clause of the contract. On April 10, 1989, Watson filed a complaint on the Harvisons' behalf in Washington Chancery Court seeking first a forfeiture of the lands sold under the contract, and in the alternative, a judgment lien and foreclosure. On October 12, 1989, the chancellor entered an order stating that the Howards had acquired an equitable interest in the property and that because equity abhors a forfeiture, a sale of the property to a third party for $115,000.00 was approved. The order distributed the proceeds from the sale so that the Harvisons received the balance due them under the contract of $24,801.48, including principal, interest, costs, and attorneys' fees. In addition, the proceeds were distributed so that federal income tax liens totaling $72,594.75 against the Howards' interest and a judgment lien for workers compensation benefits of $5,412.85 against the Howards' interest were satisfied.

In their motion for summary judgment, Davis and Watson argued that they were not negligent in seeking the foreclosure as an alternative remedy to forfeiture because forfeiture was not an available remedy to the Harvisons. The Harvisons opposed the motion arguing, as they argue on appeal, that if forfeiture was not a remedy available to them it was not because of their own actions but because of Davis' and Watson's negligence in drafting or enforcing the contract. Specifically, the Harvisons claim that a forfeiture clause in a land sales contract is enforceable unless the seller acts so as to waive the right to forfeiture and that appellees did not produce evidence that waiver exists in this case.

Davis and Watson clearly met their burden of sustaining the summary judgment. The foregoing evidence was recited from facts which were not disputed by either party. Those material facts reveal that forfeiture was not a remedy available to the Harvisons for a number of reasons. First, the Howards had made payments under the contract for almost seven years amounting to approximately 60% of the purchase price. The Harvisons always accepted these payments, whether timely or untimely. As a result, by the time suit was filed for the 1989 default, the Howards had acquired an equitable interest in the property. Principles of equity abhor a forfeiture of the Howards' equitable interest under these circumstances, even when the contract expressly provides for the right of forfeiture. Humke v. Taylor, 282 Ark. 94, 666 S.W.2d 394 (1984); Triplett v. Davis, 238 Ark. 870, 385 S.W.2d 33 (1964). Second, there were two interests other than those of the Harvisons' and the Howards' for the equity court to consider. The Internal Revenue Service had an interest based on federal income tax liens of $72,594.75. In addition, Ron McCann had a judgment lien of $5,412.85 for unpaid workers compensation benefits. Third, the value of the property in question had appreciated substantially from $55,000.00 on the date of the contract to $115,000.00 at the time of the 1989 default and the subsequent suit on the contract. The combination of these three factors tipped the scales of equity in favor of the foreclosure sale.

The Harvisons place too great an emphasis on the issue of waiver. We do not ignore, however, their argument that Davis and Watson never informed them that their conduct in accepting late payments would amount to a waiver of their right to forfeiture. Whether or not such a failure was a breach of Davis' and Watson's duty, it did not cause the Harvisons any damages because the trial court's approval of the sale and denial of forfeiture was not based entirely on the Harvisons' conduct in accepting late payments. There were other factors involved, the most significant factor being the liens against the property. The chancellor considered these liens at the hearing on the motion. From the bench he stated his ruling as follows:

Gentlemen, I think all of you are in agreement that forfeiture clauses are proper, and it's strictly up to the Court. And, of course, equity abhors a forfeiture, an old maxim that sometimes, or often called by chancellors when the occasion arises. In this particular case, with this lien, judgment lien, IRS lien, against the property, I don't think any Judge in the State of Arkansas would allow a forfeiture under those particular circumstances. I see no genuine issue of material fact, and I'm granting the defendant summary judgment.

Thus, even in the absence of...