T & S Mach. Shop, Inc. v. KD Sales, CA 09–87.

• Decision Date: 09 December 2009
• Docket Number: No. CA 09–87.,CA 09–87.
• Citation: 2009 Ark. App. 836,372 S.W.3d 410
• Parties: T & S MACHINE SHOP, INC., Appellant v. KD SALES and Sunland Machinery, Inc., Appellees.
• Court: Arkansas Court of Appeals

2009 Ark. App. 836

372 S.W.3d 410

T & S MACHINE SHOP, INC., Appellant

v.KD SALES and Sunland Machinery, Inc., Appellees.

No. CA 09–87.

Court of Appeals of Arkansas.

Dec. 9, 2009.

Jensen Young & Houston, PLLC, by: Brent Houston, Benton, for appellant.

Humphries & Lewis, by: Alan Humphries, Benton, for appellees.

D.P. MARSHALL JR., Judge.

[Ark. App. 1]After a bench trial, the circuit court often issues a letter opinion, which decides the case and directs the prevailing party's lawyer to prepare a judgment. Arkansas Rule of Civil Procedure 58 authorizes the circuit court to do this or prepare its own judgment. Many times, the judgment either echoes the circuit court's findings from the letter opinion, or incorporates the letter opinion, or both. When the terms of the judgment vary from the letter opinion, and the letter opinion is not incorporated in the judgment, questions arise. The question here presented is whether a clearly erroneous finding in the court's unincorporated letter opinion, a finding which is absent from the judgment, should be overlooked or considered on appeal.

[Ark. App. 2]The Facts and Procedural History. T & S Machine Shop produced custom machine parts for KD Sales, which then used those parts to manufacture earth-moving equipment and replace parts in that equipment. T & S sued KD Sales, alleging that the manufacturer owed money for unpaid invoices. KD Sales answered and counterclaimed, alleging that some of T & S's parts were defective. KD Sales eventually acknowledged that it owed T & S around $24,000.00.

The bench trial turned on whether T & S had provided KD Sales with defective parts. Though this dispute seems to fall under the Uniform Commercial Code, and KD Sales pleaded Code warranties, the parties tried it as a matter of the common law of contracts. The parties presented conflicting evidence on three key issues: whether the parts were defective; whether T & S or some other company had actually manufactured any defective parts; and how many defective parts T & S provided. The circuit court had to resolve the conflicting testimony, and evaluate the witnesses' credibility, on all these issues. In a letter opinion issued three months after the trial, the circuit court ruled in favor of KD Sales.

In its letter opinion, the circuit court made a general finding based on all the evidence that T & S had provided defective machine parts to KD Sales. The court went on to make one specific finding in support of this general conclusion. The court found “specifically” that T & S issued “Returned Goods Authorization[s]” that became “credit memos” based on defective parts. This was incorrect. KD Sales, it was undisputed, had issued the returned-goods authorizations and the credit memos to its customers—the folks who had ultimately [Ark. App. 3]received T & S's allegedly defective parts in KD Sales-manufactured equipment. In making this finding, the circuit court did one of two things: either the court inadvertently misnamed the parties, or it incorrectly thought that T & S had issued the credit memos, and thus essentially admitted liability. The circuit court offset the roughly $48,000.00 of credit memos against the approximately $24,000.00 KD Sales owed T & S. Based on the math, the court ordered T & S to pay KD Sales about $24,000.00.

The circuit court directed KD Sales's lawyer to “submit an order ... in conformity with this letter opinion.” The court also offered to arrange a conference call “[i]f there are any questions concerning the Court's ruling.” The record shows no action of any kind until the court signed and filed the judgment prepared by KD Sales's lawyer. The judgment does not contain the mistaken specific finding about T & S issuing the credit memos. Instead, the judgment simply found that T & S sold defective parts without elaboration. Nor does the judgment reflect submission to T & S's lawyer for approval as to form. Although this submission is required by Rule 58 and usually done, it was not directed by the circuit court here. Once the court entered its judgment, T & S did not use the option created by Rule of Civil Procedure 52(b)(1) to move for additional findings or amended findings. T & S appeals.

The Law. There is a preliminary point. KD Sales urges us to affirm because T & S never raised the clearly erroneous finding to the circuit court. This omission, however, is not dispositive. Rule 52(b)(2) authorizes T & S's challenge to the sufficiency of the evidence supporting the circuit court's findings even though T & S neither objected to them nor [Ark. App. 4]moved to amend them in the circuit court. Cogburn v. Wolfenbarger, 85 Ark.App. 206, 211, 148 S.W.3d 787, 791 (2004). With this threshold issue resolved, we turn to the question presented.

When may an appellate court look behind a judgment to findings in an unincorporated letter opinion in deciding the case on appeal? The precedent covers two situations. The first is where the circuit court's judgment contains a gap that can be filled by the court's letter opinion. Bishop v. Bishop, 98 Ark.App. 111, 250 S.W.3d 570 (2007); Guest v. San Pedro, 70 Ark.App. 389, 19 S.W.3d 62 (2000). The divorced Bishops, for example, were wrangling over the husband's petition to decrease his alimony and child-support obligations. The circuit court entered an order, which failed to recite the presumptively correct chart amount of child support. Mr. Bishop appealed. In affirming the circuit court's decision on support, our court looked behind the circuit court's order to its earlier letter opinions. In those letters, the circuit court had discussed the proper chart amount in detail. 98 Ark.App. at 113, 250 S.W.3d at 571–72.

In Moses v. Dautartas this court faced a different situation. 53 Ark.App. 242, 922 S.W.2d 345 (1996). Dautartas claimed part of the Moseses' land by adverse possession. The chancery court found for Dautartas, and our court, by a vote of 4–2, affirmed. The dissent argued, however, that we should reverse and remand because of an inconsistency between the court's letter opinion and its judgment. The court's letter opinion found that Dautartas had proved adverse possession of an area north of a certain structure, while the judgment contained a legal description which gave Dautartas land south of the structure. In responding to the [Ark. App. 5]dissent on the inconsistency issue, this court held:

The decisions, opinions, and findings of a court do not constitute a judgment or decree. They merely form the bases upon which the judgment or decree is subsequently to be rendered and are not conclusive unless incorporated in a judgment or a judgment be entered thereon. They are more in the nature of the verdict of a jury and no more a judgment than such a verdict.

53 Ark.App. at 247, 922 S.W.2d at 348 (citations omitted).^* Having concluded that the letter opinion was not a judgment, this court confined its review to the judgment. Moses holds this: if a circuit court's unincorporated letter opinion and its judgment conflict, then the judgment controls and the appellate court may not look behind it. 53 Ark.App. at 247, 922 S.W.2d at 348.

This case is not exactly like Moses. Here the circuit court's letter opinion and judgment do not conflict. The court's judgment on defect is consistent with its letter-opinion findings. The bar against considering the letter opinion therefore does not exist. But this case is not exactly like Bishop either. There is no obvious legal gap in this judgment. The clear path allowing consideration of the letter opinion to supplement the judgment therefore does not exist either.

This case seems to present a choice. We could expand Moses to cover this situation, and refuse to consider the clearly erroneous finding in the letter opinion. Of course a presumption of correctness attends this judgment even though it contains no specific findings on defect. McCracken v. McCracken, 2009 Ark. App. 758, at 7, 358 S.W.3d 474, 479. But [Ark. App. 6]resting on that presumption here would mean pretending that the troubling finding in the letter opinion does not exist. Or we could expand Bishop, affirming or reversing the judgment outright as supplemented by the letter opinion. But this conclusion would allow an appellate court to look behind the judgment in deciding any case where an unincorporated letter opinion is consistent with the judgment. Taking that step would give insufficient weight to the circuit court's final word.

Both Moses and Bishop must guide our decision, but this case falls between these precedents. Here the circuit court did not incorporate its findings from the letter opinion. It requested a judgment from KD Sales's lawyer, however, that conformed to its letter opinion. The record shows no action in the case between the letter opinion and the judgment—no motion papers, or exchange of letters between counsel and the court, about the findings. The judgment does not reflect submission for approval as to form by T & S's lawyer. Defect was the fighting issue. Considering all these circumstances, we hold that we should not ignore the letter opinion's clearly erroneous finding on defect or ignore that the judgment must have been “entered thereon” even though it did not so state. Moses, 53 Ark.App. at 247, 922 S.W.2d at 348. Though it is not a gap that must be filled like in Bishop, the absence of a specific finding on defect in the judgment and the presence of a specific finding that was clearly wrong in the letter opinion casts doubt over the circuit court's decision on the critical issue. Cf. Bishop, 98 Ark.App. at 113, 250 S.W.3d at 571–72.

Unlike in Moses and Bishop, we do not decide the merits at this point. Instead, we reverse the judgment and remand for clarification. We remand, rather than reaching the [Ark. App. 7]merits now, for several reasons. The circuit court may have simply reversed the parties' names in the erroneous finding. That court is entitled to the opportunity to...