Turley v. Staley

• Decision Date: 09 December 2009
• Docket Number: No. CA 08–825.,CA 08–825.
• Citation: 2009 Ark. App. 840,372 S.W.3d 821
• Parties: Jerry M. TURLEY, Appellant v. Gerald R. STALEY, Billie J. Staley, and M. Randy Rice, Appellees.
• Court: Arkansas Court of Appeals

2009 Ark. App. 840

372 S.W.3d 821

Jerry M. TURLEY, Appellant

v.Gerald R. STALEY, Billie J. Staley, and M. Randy Rice, Appellees.

No. CA 08–825.

Court of Appeals of Arkansas.

Dec. 9, 2009.

The Henry Firm, P.A., Little Rock, by: Matthew M. Henry, for appellant.

H. Oscar Hirby, Little Rock, for appellees Gerald R. Staley and Billie J. Staley.

M. Randy Rice, U.S. Bankruptcy Trustee, Eastern District of Arkansas, for appellee M. Randy Rice.

KAREN R. BAKER, Judge.

[Ark. App. 1]Appellant Jerry Turley appeals from an order requiring him to relinquish forty-five acres of land after making more than eleven years of installment payments to appellees Gerald Staley, Billie Staley, and Randy Rice. For the reasons explained below, we reverse and remand.

On July 7, 1995, Gerald and Billie Staley contracted to sell forty-five acres of wooded, undeveloped property to Jerry Turley for $65,250. Turley made a $6525 down payment and promised to pay the remaining $58,575, plus interest, in 180 monthly installments of $578.29. Turley also agreed to pay property taxes within thirty days after presentation of a bill by the Staleys. The contract provided that the installment payments were due on the first of each month, with late charges for overdue payments of more than ten days. It also provided that [Ark. App. 2]there would be no penalty for prepayment of the principal; that the proceeds from any timber cut from the property would be paid to the Staleys and applied to the principal balance of Turley's debt; and that, upon payment of all installments and taxes, the Staleys would convey the deed to Turley. In addition, the contract contained the following relevant clause:

(e) Time of Essence. Time is of the essence of this AGREEMENT, and if BUYER defaults in payment of any installments of principal or interest for a period of thirty (30) days or fails to pay any taxes or assessments when due, SELLERS, at their sole option, may either declare the entire debt with interest due and payable or rescind this AGREEMENT, and in the event of rescission all moneys paid by BUYER shall be taken and retained by SELLERS not as a penalty but as rent of the property, and the relationship of the parties thereafter shall be that of landlord and tenant at a rental of [$578.29] per month; and thereupon SELLERS after notice may demand possession of the property and BUYER agrees to surrenderimmediately peaceable possession. No delay in the exercise of the options herein shall be construed as a waiver of such right, but the same may be exercised at any subsequent time....

Just over a year into the contract, Turley (through his father, Danny Rothstein) began making untimely payments. The late payments became a regular feature of the parties' dealings—Turley frequently fell several months behind, then made two, three, or four payments at once, along with late fees, to become current.

Gerald and Billie Staley divorced in 2001 or 2002, and the court awarded Billie all the installment payments for approximately four years. The decree required Billie to notify Gerald if Turley was more than ten days late on a payment, and required Gerald to make the payment to Billie if Turley missed a third payment. According to Gerald, this provision could have been placed in the decree because of Turley's history of late payments.

[Ark. App. 3]In 2004, Billie Staley filed for Chapter 7 bankruptcy, and Turley began making all payments due her to bankruptcy trustee Randy Rice. Thereafter, Rice also accepted late payments from Turley in March and December 2005.

By mid–2006, Gerald Staley began receiving half of each installment payment under the terms of the divorce decree. At that time, Turley once again fell several months in arrears. However, Turley caught up on the payments and additionally paid Gerald $7,706.95 from proceeds of a timber sale, which Gerald applied to the “end balance,” by shortening the payoff date to April 2009. As of October 2006, Turley was again several months behind on his payments, to both Gerald Staley and Randy Rice. On October 2, 2006, Rice sent the following letter to Turley:

As you know, you have failed to make your monthly payment on the real property that is due for the last three (3) months. This constitutes a breach of contract in accordance with your agreement.

This is notice to you of my intent to take immediate possession of the property. I am therefore demanding that you officially turn over this property to me, as trustee, for liquidation. I am requesting that this be done on or before October 15, 2006. If you have not turned over the property to me by that date, I will file papers with the Court asking that the Court [order] you to turn over the property and that you be ordered to vacate.

A few days after receiving Rice's letter, Turley remitted to Rice and to Gerald Staley sufficient payments to bring him current through the month of October. On October 9, 2006, Rice wrote the following letter to Turley:

This is to confirm our conversation on October 6, 2006, whereby I agreed to allow you to catch up the payments that you are in arrears on the real property. You acknowledged that you did receive my earlier letter dated October 2, 2006. You also [Ark. App. 4]confirmed that all payments due to Mr. Staley had been forwarded to him. I only agreed to allowing you to catch up your payments because you stated that you were mailing a payment to me in the amount of $867.44. This amount is equal to one-half of the payment due for the months of June, July and August 2006. You informed me that you mailed the other one-half payment to Mr. Gerald Staley already for this period of time. This payment was supposed to be placed in the mail on October 6, 2006.

Additionally, we agreed that, upon receipt of this letter, you would immediately mail a payment in the amount of $578.29 to me. This amount is equal to one-half payment of your regular note for the months of September and October 2006. Finally, you were instructed to mail one-half of all future payments to my address until such time as I notified you in writing that this process should stop....

You stated to me that Mr. Staley had instructed you to mail him the full payment for the next fourteen (14) months. DO NOT DO THAT. You will not be given credit for Mrs. Staley's payment if you follow that procedure. Also, I will proceed to foreclose on this property if these payments are not received promptly. I have advised Mr. Staley of my demand to you. Furthermore, I am sending a copy of this letter to him and to Mrs. Staley so that they will both know exactly what I have instructed you to do with the portions of funds that are supposed to be received by the bankruptcy estate....

Thereafter, Turley made no further payments on the contract. By February 2007, he was again three months in arrears with another due date approaching.

In late January or early February 2007, Gerald Staley sent Turley an undated letter, stating that he had spoken with Danny Rothstein in the last week of January and that Rothstein had promised to bring the payments up to date but had not done so. Staley told Turley the following:

I am [obligated] by the divorce decree that these payments be made on time to Billie Staley and myself and simply cannot tolerate the way these payments are being made anymore.

[Ark. App. 5]If Billie and I do not have in our hands by Monday, February 12, 2007 payments to bring your account current (four months) plus [accumulated] late charges ... without any further notice, I will turn this contract over to an attorney for legal action.

This is final notice on this matter with the intended [sic] to collect a debt.

Turley did not forward the payments, and Staley wrote to him again on February 15, 2007, stating that the four-month arrearage was “not acceptable” and that “due to the payment history on this contract and other points of interest, I no longer wish to carry this note.” Staley declared the contract “terminated and forfeited,” and he gave Turley until March 20, 2007, to vacate the premises. Rice wrote to Turley on March 5, 2007, stating that he would join in Staley's effort to retake the property.

According to Turley, he tried to contact Rice and Gerald Staley in February to pay off the contract in full, but they did not return his calls. As a result, Turley sued Rice and the Staleys on March 20, 2007, to quiet title to the property and to interplead $14,698.17, which he contended was the balance due on the land sale. Rice answered that Turley was in default on the contract and counterclaimed for Turley's eviction. Turley responded that the parties to the contract had acquiesced to his late payments as a course of dealing; that Rice had no standing to evict him from the property; and that a default judgment should be entered against the Staleys because they failed to answer his complaint. The court refused to enter a default judgment and did not rule on the issue of Rice's standing. Later in the proceedings, Gerald Staley filed a complaint seeking possession of the property based on Turley's failure to make [Ark. App. 6]payments when due. The court treated Staley's pleading as a counterclaim, and the issues were thus joined for trial.

During the bench trial, Gerald Staley testified that he had attempted to work with Turley over the years and had allowedTurley to make late payments. However, Staley said that he never told Turley that he would always make those arrangements. He said that he was constantly negotiating with Turley during the course of the contract and that he finally got “fed up” and wanted his land back. According to Staley, he spoke with Danny Rothstein in February 2007 about Rothstein's desire to pay off the balance, but Staley said that he had engaged in those types of payoff discussions from “day one.” He said that, when Turley began calling him after the February 15, 2007 letter, he did not answer Turley's calls. Staley also testified that he had sent tax...