Kinkead v. Union Nat. Bank

• Citation: 907 S.W.2d 154,51 Ark.App. 4
• Decision Date: 04 October 1995
• Docket Number: No. CA,CA
• Parties: Robert KINKEAD and Virginia Kinkead, Appellants, v. UNION NATIONAL BANK, Appellee. 94-534.
• Court: Court of Appeals of Arkansas

Page 154

907 S.W.2d 154

51 Ark.App. 4

Robert KINKEAD and Virginia Kinkead, Appellants, v. UNION NATIONAL BANK, Appellee.

No. CA 94-534.

Court of Appeals of Arkansas Division II.

Oct. 4, 1995.

Joyce Kinkead, Little Rock, for appellants.

H. William Allen, Sandra Jackson, Little Rock, for appellee.

PITTMAN, Judge.

This appeal is from a judgment entered by the Pulaski County Chancery Court that awarded appellee judgment on its complaint for foreclosure and also granted it judgment on all counts of the appellants' counterclaim. Appellants assert eleven points on appeal. We find these points to be without merit and affirm.

In 1991, appellant Robert Kinkead owned an insurance agency known as the Kinkead Agency. Appellee, Union National Bank, made available financing to Kinkead's insurance customers for their insurance premiums. Under this arrangement, Kinkead submitted premium finance notes signed by the insured and guaranteed by the Kinkead Agency to Union. Union then disbursed the loan proceeds to the Kinkead Agency to be used to pay the insurance companies writing the policies.

In July 1991, Union officials contacted Mr. Kinkead and set a meeting date after it discovered that some of the premium finance notes from the Kinkead agency were fraudulent. Neither Kinkead nor his wife, appellant Virginia Kinkead, attended the meeting or any of the subsequent meetings with the Union officials relating to this matter. Instead, attorney Webster Hubbell appeared on behalf of Kinkead but stated that he was there as a friend and not as an attorney. After the first meeting, it was decided that Kinkead would be given some time to arrange financing to pay off the notes owed to Union.

Kinkead was unable to procure outside financing, and at Hubbell's request, Union agreed to refinance the money it was owed secured by certain collateral. Union then sent Hubbell loan documents for appellants' execution which included a promissory note in the amount of $96,324.00; a mortgage on real property owned by appellants; and a collateral assignment of a contract for sale between Mr. Kinkead and Stevens-Dell & Associates, Inc. Before appellants executed the loan documents and mortgage, Union filed a criminal referral form regarding Kinkead's fraud as required by 12 C.F.R. § 21.11. Neither Kinkead nor Hubbell was notified that the criminal referral would be filed. The note and mortgages were signed by both appellants on November 21, 1991. On July 15, 1992, Kinkead pled guilty to bank fraud, and at the pre-sentencing hearing, Kinkead's attorney represented to the court that Kinkead had made restitution to Union by virtue of the November 21, 1991, note.

On October 15, 1992, Union filed its foreclosure action, contending that appellants failed to make the March 21, 1992, payment due on their note or any other payments required by the note thereafter. Appellants responded and counterclaimed. The central thrust of their counterclaim was that Union induced them to execute the promissory note and mortgages by representing that no criminal action would be taken against Robert Kinkead if the notes were paid by refinancing. They alleged misrepresentation, breach of fiduciary duty, failure to make disclosures required by the Truth-in-Lending Act, and malice, and requested that the note, mortgages, and collateral agreement be rescinded; that all payments made on such note be returned to them; and that they be awarded punitive damages in the amount of $3,000,000.00. Union denied appellants' allegations, and it affirmatively pled that the Truth-in-Lending Act did not apply to Union's transaction with appellants; that the counterclaim failed to state facts upon which relief could be granted; and that the Kinkeads were barred from seeking relief under the doctrine of unclean hands. The matter proceeded to trial, at the conclusion of which the court granted appellee judgment on its complaint and all counts of appellants' counterclaim and awarded attorney's fees of $47,995.95. Appellants petitioned the court to amend its judgment, but that motion was deemed denied after thirty days. Appellants then filed their notice of appeal.

Appellants first contend that, because they sought punitive damages from appellee in their counterclaim, the chancellor erred in refusing to sever their counterclaim from appellee's foreclosure action and transfer it to circuit court. In support of their argument, they rely on Rule 18(b) of the Arkansas Rules of Civil Procedure, which provides that "[t]he trial court may make appropriate orders affecting severance of claims and may transfer claims between courts of law and equity on appropriate jurisdictional grounds." Appellants also rely on Toney v. Haskins, 7 Ark.App. 98, 109, 644 S.W.2d 622, 628 (1983), where this court stated: "Equity will not ordinarily enforce penalties and it has been held that one who appeals to a court of equity for relief waives the award of punitive damages as a matter of right."

Although we agree that the chancellor has the power to sever and transfer a claim in an appropriate situation, we find no error in his failure to do so in this case. Regardless of whether a party is entitled to bring an action at law, the mere existence of that right does not deprive the equity court of jurisdiction, unless the legal remedy is clear, adequate, and complete. Weathersbee v. Wallace, 14 Ark.App. 174, 686 S.W.2d 447 (1985). Here, appellants' counterclaim sought rescission of the promissory note, mortgages, and collateral agreement based on their allegation of fraud and violation of the Truth-in-Lending Act. An action to rescind under the Truth-in-Lending Act is an equitable proceeding. See Bank of Evening Shade v. Lindsey, 278 Ark. 132, 644 S.W.2d 920 (1983). Once a chancery court acquires jurisdiction for one purpose, it may decide all other issues. Pryor v. Hot Spring County Chancery Court, 303 Ark. 630, 799 S.W.2d 524 (1990); see Bright v. Gass, 38 Ark.App. 71, 831 S.W.2d 149 (1992).

Appellants' second point concerns the chancellor's refusal to compel Union Bank officials and its former attorney, David Duke to testify regarding conversations that they held concerning the filing of the criminal referral. During depositions and at trial, appellee asserted that the attorney-client privilege protected these communications from disclosure to appellants. Appellants first contend that appellee did not meet its burden of showing the privilege applied. We disagree.

Rule 502(b) of the Arkansas Rules of Evidence generally provides that "[a] client has a privilege to refuse to disclose and to prevent any other person from disclosing confidential ... communications made for the purpose of facilitating the rendition of professional legal services to the client ... between himself or his representative and his lawyer or his lawyer's representative...." An attorney is incompetent to testify concerning any communication made to him by his clients, or his advice thereon, without his client's consent, and the rule as to privileged communications between attorney and client extends to statements of each to the other. See Norton v. Norton, 227 Ark. 799, 302 S.W.2d 78 (1957). The burden of showing that a privilege applies is upon the party asserting it. Shankle v. State, 309 Ark. 40, 827 S.W.2d 642 (1992).

At trial, Union's former attorney, Mr. Duke, acknowledged that the criminal referral form was discussed at meetings he held with Union officials and provided appellants with the dates of those meetings. Duke also testified that he was involved as a lawyer for Union and that he met with Union officials concerning the Kinkead matter. We find that this testimony was sufficient for appellee to meet its burden of showing that the privilege applied.

In regard to these same communications, appellants next argue that the communications were excepted from the attorney-client privilege because Arkansas Rule of Evidence 502(d)(1) provides an exception to the attorney-client privilege if the communication is in furtherance of the crime of fraud. Appellants contend that Duke and the Union officials conspired to commit a fraud by delaying the filing of the criminal referral form from late July 1991 until October 14, 1991. Under 12 C.F.R. 21.11 (1995), a national bank is required to "file an OCC Criminal Referral Form ... for any known or suspected criminal violation no later than thirty days after detection of the loss or known or suspected criminal violation." Appellants argue that appellee's delay in filing a criminal referral form was a violation of 18 U.S.C. § 371 and 18 U.S.C. § 1005.

We need not discuss these code sections because appellants have not provided this court with any citation to authority or convincing argument explaining how these code sections are applicable to this case. An assignment of error unsupported by convincing argument or authority will not be considered on appeal unless it is apparent without further research that the assignment of error is well taken. Smith v. Smith, 41 Ark.App. 29, 848 S.W.2d 428 (1993); General Elec. Supply Co. v. Downtown Church of Christ, 24 Ark.App. 1, 746 S.W.2d 386 (1988).

Appellants' final argument concerning the attorney-client privilege is that appellee waived its right to assert its attorney-client privilege when it filed the criminal referral form, discussed the matter with the FBI, and produced a copy of the form for appellants in response to their motion for production of documents. We disagree. It is not the information or the opinion that is privileged, but rather the communication of them to the attorney in whatever form, and neither the requirement that the information also be provided to some other forum nor its divulgence in response will subvert the privilege. Courteau v. St. Paul Fire & Marine Ins. Co., 307 Ark. 513, 821 S.W.2d 45 (1991).

For their third point, appellants contend that the trial court erred in striking their second amended counterclaim,...