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Black v. Duffie

Court of Appeals of Arkansas, Division IV

December 7, 2016




          The Rose Law Firm, by: Amanda K. Wofford, for appellants.

          Dunn, Nutter & Morgan, LLP, by: James L. Cook, for appellee.

          ROBERT J. GLADWIN, Chief Judge

         Joanne B. and Charles Black, their children, Clay and Travis Black, and Yancey Reynolds appeal the Hempstead County Circuit Court's November 18 and 30, 2015 orders that found null and void a deed transferring an interest in 180 acres and the transfer of a share in the Hempstead County Hunting Club (Grassy Lake) and ordered judgment against appellants Joanne and Charles in the amount of $52, 605.56. Appellants also appeal the circuit court's January 6, 2016 order awarding attorney's fees in the amount of $31, 069.36 to appellee Jack Duffie, Jr., as guardian of the estate of Ellen Annabelle Duffie (Annabelle). Appellants argue four points on appeal: (1) the circuit court erred in declaring null and void the transfer of the Grassy Lake share; (2) the claims regarding the Grassy Lake share were barred by the statute of limitations; (3) the circuit court erred in declaring null and void the deed for 180 acres to Joanne and Charles Black; and (4) the circuit court erred in awarding attorney's fees to appellee.[1] We affirm.

         I. Facts

         Annabelle, born May 16, 1938, and her adult brother, Jerome Duffie, resided together during Annabelle's entire adult life until Jerome's death. Annabelle never married. Jerome took care of Annabelle's finances until he died on April 4, 2006, leaving Annabelle his property, which included a three-quarter interest in 180 acres located near Hope, Arkansas, and a share of stock, along with a cabin, in Grassy Lake. Appellee, Annabelle's nephew, was appointed guardian of the person and estate of Annabelle on June 17, 2013.

         Appellee filed a complaint alleging that on June 21, 2006, less than three months after Jerome's death, Annabelle transferred her share in Grassy Lake to appellants without consideration and that appellants had intentionally misrepresented to her that she would retain ownership in Grassy Lake and would be giving them only hunting and fishing privileges. It alleged that Annabelle had not been told that, by giving up her share of stock, she would forfeit her right to continue using the hunting club and living in the cabin. It was alleged that, after the stock had been transferred, appellants moved Annabelle from Grassy Lake to a "run down, substandard housing unit."

         The complaint described that Annabelle executed a warranty deed with vendor's lien on August 20, 2009, granting her interest in the 180-acre tract to appellants Joanne and Charles. It was alleged that Joanne and Charles intentionally misrepresented the value of the tract, that the tract was transferred for a payoff to Annabelle of $150, 000, and that the land was worth $400, 000 or more. Also, Annabelle financed the sale of the property, only receiving monthly payments of $1000, while the Blacks maintained possession and use of the land, having sold the timber in June 2012.

         Appellee alleged in the complaint that any statutes of limitation were tolled because Annabelle had been mentally incompetent, citing Arkansas Code Annotated section 16-56-116 (Repl. 2005). He alleged that the transfers of the 180-acre tract and the share in Grassy Lake should be declared void for failure of a contract because Annabelle, having been incompetent her entire life, had been incapable of entering into a valid and binding contract, no consideration had been paid for the hunting club stock, and there had been no mutual agreement due to undue influence, duress, and fraud. Appellee also alleged the conversion of timber cut from the 180-acre tract and sought rescission of the contracts, an accounting, damages, punitive damages, and attorney's fees. Appellants answered, generally denying the complaint, and pled all applicable statutory limitations, waiver, estoppel, laches, and unclean hands.[2]

         At the bench trial held November 9 and 10, 2015, Betty J. Feir, a licensed psychologist, testified that she had conducted a psychological evaluation of Annabelle and had made a report in January 2013. She said that Annabelle was "functioning retarded" at that time and that her IQ score was 59, which Feir considered to be mild mental retardation. She said that a person of Annabelle's intelligence would be incapable of determining the value of her assets or making financial decisions without assistance. Feir explained that an IQ of 100 is average and that 70 is considered borderline retarded. Feir said that Annabelle's mental retardation did not begin in January 2013, but had occurred over a period of years, and that a person functioning with a 59 IQ would not be able to make decisions that were logical and relevant. Feir's impression was that Annabelle was not able to say "no" when it was needed for her well-being because she appeared to want to please people. It was Feir's opinion that Annabelle would be vulnerable in a business transaction. Feir said that Annabelle did not have the necessary intellectual or cognitive functioning at "this point in her life, " or even earlier, because the decline had been gradual, and Annabelle had the beginning of dementia.

         James Burton Clem testified that he is a real-estate broker and is licensed in Texas and Arkansas. He gave his opinion that the total value of the 180-acre tract was $425, 000, and in addition, the timber on the land was worth $177, 000. In making his analysis, Clem testified that he had reviewed an expert report prepared by Jeff Neill, who had valued the land at $300, 000, which included the timber value. He believed that Neill had not included what Clem considered to be the commercial value of the "front 40 acres."

         Appellee testified that he thought Annabelle was too trusting of people. He said that Annabelle had never married and had never worked. He said that Jerome had bought her a building that had school supplies in it, known as the School Box, and she had spent time there. Neither Jerome nor Annabelle had depended on income from it for their livelihood.

         He said that Annabelle was living at the Grassy Lake cabin at the time of Jerome's death, but within a month or two, Annabelle moved. In 2009, Annabelle deeded the 180-acre tract to Joanne and Charles and signed a warranty deed with vendor's lien retained transferring her ownership to them. At the time of the transfer, Annabelle owned a three-quarter interest in the property, and her sister Patricia Holloman owned one-fourth. He testified that it was his understanding that Reynolds had helped to negotiate a price of $150, 000 for Annabelle's interest, with $1000 monthly payments to Annabelle. He said that Annabelle was supposed to receive 5 percent interest under the transaction, but she had not been receiving anything but a flat $1000 payment with no interest. He also said that the Blacks had not given Annabelle a down payment. He testified that some timber had been cut off the property and sold for $58, 886.73 and $11, 254.01. He asked that the contract for the sale of the 180 acres be nullified, for all amounts paid to Annabelle be declared rents for use and possession of the property, and for a judgment doubling the amount for which the timber had sold. He also asked that the share in Grassy Lake be returned to Annabelle because she had not been paid any money for it. He asked that any improvements made to the cabin by Reynolds be retained by Annabelle in exchange for the Blacks' use and possession of it.

         Joanne testified that her son Clay had called her one afternoon after bush hogging on the 180 acres for Annabelle. Clay told Joanne that a man said that Annabelle had given him permission to look at the property because he was thinking about buying it. Joanne said she left work early, went to the School Box, asked Annabelle if she planned to sell the 180 acres, and "she didn't answer me." When Joanne told her that she would like an opportunity to buy it, Annabelle did not "make any comment one way or another, " and Joanne went home. Joanne said that she then asked Reynolds to negotiate a sales price on the property because he was knowledgeable in timberland sales, property sales, and large tracts of land because he sold timberland tracts for a living. Joanne said that she was Reynolds's personal secretary and bookkeeper and that she held a real-estate license in Arkansas. She said that she had never sold any timberland when she had been active in real estate, and she never had a discussion with Annabelle about the price of the land before Reynolds became involved. She also said that Annabelle knew what the property was worth because Annabelle "had an appraisal when Jerome died."

         Joanne said that she bought Annabelle's three-quarter interest for $150, 000. She testified that she had never obtained a bank loan to purchase the property "because I thought maybe [Annabelle] could finance it and by financing it she could make interest on her money, on the property, at 5 percent interest on me instead of the bank making interest on me. She liked that idea." Joanne said that she did not provide Annabelle with an amortization schedule, and she did not know how much she had paid on the principal amount. She said that she had sold timber off the property on two occasions for a little over $70, 000, and that she had used that money to purchase Patricia's one-fourth interest for $45, 000. She had obtained a bank loan for that purchase, but when she got the money for the timber sale, she applied some "plus the interest on that." She said that she and her husband do not live on the property but that her family hunted on the land during deer season.

         She said that at some point in 2006, her sons, Clay and Travis, gained ownership of the share of stock at Grassy Lake and the cabin located there. "We did not pay anything for that share of stock, to my knowledge, " she said. She acknowledged that Jerome did not leave her anything in his Will. She said that the improvements made to the cabin could be valued at $70, 000 and that Reynolds paid for those "because he wanted to. He told me he wanted to do it for the boys and me." She said that she had worked for Reynolds for a long time and that he had paid for the improvements because of their friendship. She said that her boys pay the dues at Grassy Lake, and she did not know how much a share of stock was worth.

         Joanne testified that when Jerome had been sick before his death, she had applied for guardianship over him. She admitted that she could have characterized Annabelle as having limited business experience and having limitations that would prevent her from being Jerome's guardian. She read from her petition filed in Jerome's guardianship proceeding and acknowledged that Jerome had taken care of business affairs for himself and his sister and that Annabelle was described therein as being "limited and unable to serve" as guardian over Jerome. Joanne admitted that it was three years later that she had offered Annabelle $150, 000 for her interest in the 180 acres and that Annabelle did not have representation during the negotiation. She said that she had felt that Annabelle could not serve as guardian of Jerome at the time because she was distraught because of her brother, but that Annabelle had insisted to her shortly thereafter that she was quite capable. She said she had not seen Annabelle since 2011 because she had received a letter from a Hot Springs attorney telling her not to have any more contact with Annabelle. The Hot Springs attorney had handled the sale of the mobile-home park owned by Annabelle after Jerome's death.

         Joanne described her family's relationship with Annabelle and Jerome as close and loving. She said that Jerome had taught the boys to shoot and had taken them for weekends with him and Annabelle at Grassy Lake "all the years they were growing up." She said Annabelle got mad at her when she had told Annabelle "it's either those people or me, " referring to Robert Bonnette and Marilyn McRoy, who had bought the mobile-home park from Annabelle. Joanne said that when Annabelle "chose them, " she left Annabelle alone and then shortly thereafter she had received the letter from the Hot Springs attorney. Joanne said that she thought Annabelle had been afraid that if she "didn't stay with those folks that they were going to somehow get her out of there." She also testified that Jerome had asked her and her husband to "keep an eye on Annabelle while he was in the hospital, which meant getting her to town from the hunting club cabin to her shop every day and back to the cabin. One of us would stay with her." She said that she had been Annabelle's friend for over twenty years.

         Reynolds testified that he had become involved in negotiating the sales price between Joanne and Annabelle in 2009 after he had an update of the property appraisal. He had discussed the price with Annabelle when she had come to his office in 2009, and he said Bill Cason, Annabelle's confidant, had been with her. He testified that Annabelle had answered "yes" when asked if she wanted to sell her property. He said that Joanne offered Annabelle $150, 000 for the property and, following that discussion, he had "immediately" sent Annabelle and Cason to Mr. Pilkington's office (an attorney). Reynolds testified that he assumed Annabelle had consulted with Cason about the sales price, as Cason had heard the entire discussion. He said that no other figure than $150, 000 had been discussed, and Annabelle had been told that she would be paid on an installment, with 5 percent interest, for fifteen years, when a balloon payment would become due. Reynolds also testified that he had spent $75, 000 on improvements at the Grassy Lake cabin, and he had done so because he had regard for Joanne and her family. He said that he had no ownership interest in that cabin and that he was a member of Grassy Lake, had a cabin there, and was on the board of directors. When first asked, he said that he was not at liberty to say how much shares of Grassy Lake stock were worth, but he later said that he had no idea for what the recent share had sold.

         Annabelle testified that she did not remember when she had sold her land to Joanne and Charles, and she did not remember having gone to Reynolds's office. She later said that she seemed to remember going to Reynolds's office and that it seemed like she remembered she was offered $150, 000, which sounded like a lot of money to her. She said that she had not done any investigation to determine what her property was worth, she had been receiving $1000 per month, and she hoped it would continue. She also testified that she did not remember when she had transferred her share of Grassy Lake to Travis and Clay. She said that she did not know why she had done it, and she did not know at the time why she was doing it. She said that no one told her it was what Jerome had wished, she did not think she could stay in the cabin after the transfer, and she did not remember how long she had stayed there after the transfer. She said that she thought Clay or Travis had told her she must move out of the cabin. Annabelle later testified that she recalled the 2009 deed transfer to Joanne and Charles, as well as other transactions that occurred regarding other properties she had sold since that time.

         Clay testified that he owned half of the share in Grassy Lake with his brother Travis, and neither of them paid Annabelle for it. He testified that he spent considerable time hunting with Jerome at Grassy Lake and that Annabelle had told him that she gave them the stock because Jerome had wanted it like that. He said that he had been living with Annabelle at Grassy Lake after the stock transferred and that he had told Annabelle before the transfer that "somebody is going to make a statement and let us know we can't stay up here anymore. Otherwise, it's going to come down on Travis. It's no reflection on me because I'm not the active member. Travis is held accountable." He said that in 2008,

[w]e took her and Bill over to the duplex which she owned. She owned a couple of trailers out there and the duplex . . . She appeared to be very happy there and at the same time she was able to take care of her day-to-day operations. . . . Once she got to the duplex, I don't know who took care of paying the utilities.

         He said that Annabelle took care of herself during the time he had lived with her and that when Jerome had been alive, Jerome would hand her money and tell her to get what they needed for that night, and she would keep what was left over. He said that when Bill, her boyfriend, became ill and could not drive, Annabelle had to rely on others for transportation and "stuff."

         Travis testified that he and his brother had split the share of stock at Grassy Lake, there was only one membership per share, and he utilized the membership from that stock. He testified that Jerome had been like a grandfather to him and his brother and that some people at Grassy Lake thought he was related to Jerome. After the Grassy Lake board had met in the fall of 2008, Travis told Clay something must be done with his and Annabelle's living situation because to continue to live at the cabin was "illegal." He said that if the rules of Grassy Lake were broken, members were suspended or expelled and never allowed back on the property. He said that he had never told Annabelle she could not "come and hang out at the cabin, " and that she was welcome so long as he was there. He said that he did not feel like he had taken advantage of Annabelle and that he loved her. Travis testified that he had a copy of a letter that Jerome had left with his Will, which he found when Jerome's brother apparently had left it with the Will at the cabin. The letter was introduced as an exhibit, and it is a handwritten list of Jerome's assets and states in a parenthetical, "Annabelle, it is my wish that you put in your will to let Clay and Travis Black get the share [in Grassy Lake] when you die." Travis also testified,

She has not ever asked me to transfer the share of stock back to her. If she did, I would discuss it with her and if she felt that's what was best then I'd probably talk to my brother because I can't make decisions without him but I would probably say it wouldn't be a good idea because I'd lose my membership and then nobody would be allowed on the property.

         Charles Black testified that his family had been friends with Jerome and Annabelle for years, and he had never thought there was anything wrong with Annabelle, that Annabelle took care of herself and had a business, that she knew how to make a dollar, and, when it was needed, she would call on him. He said his wife had negotiated the purchase of the 180-acre tract and that, after they had received the letter from the attorney in Hot Springs, he had not bothered Annabelle anymore.

         Damon Young testified that he had been the president of the Grassy Lake board of directors at the time of the stock transfer to Travis and Clay. He said Reynolds had contacted him about the transfer and had delivered transfer paperwork to his office in June 2006. Young said that Travis and Clay had received a stock certificate dated June 21, 2006, for one share and that the membership committee had approved Travis's application for membership. He did not know if Annabelle had been paid for the share, and although Annabelle had signed the documents to transfer, this had not been done in his presence. He said that he did not know for how much the most recent shares of stock had sold, but he did know that one had sold for $400, 000 when he was serving as president. He said that he had not ...

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