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Farris v. Conger

Supreme Court of Arkansas

March 9, 2017




          Cullen & Co., PLLC, by: Tim J. Cullen, for appellant.

          David M. Hargis, for appellee.

          JOSEPHINE LINKER HART, Associate Justice

         Felicia Farris, M.D., appeals from the circuit court's decision to grant summary judgment in favor of Cynthia L. Conger, C.P.A., both individually and d/b/a Conger Wealth Management (Conger). The circuit court found that Farris's complaint sounded in negligence, and consequently, her cause of action was barred by the three-year statute of limitations applicable to negligence claims. On appeal, Farris argues that her complaint sounded in contract and thus was subject to the five-year statute of limitations, making her cause of action timely. We reverse the decision of the circuit court.[1]

         Farris filed an initial complaint on October 10, 2013, and an amended complaint on October 14, 2013. In the amended complaint, Farris alleged that in 2005 she entered into a contract with Conger. The contract was attached to the amended complaint and was styled "Wealth Management Agreement." According to the amended complaint, Farris learned on November 11, 2008, that a five-acre tract adjoining her property would be sold at a foreclosure sale on November 14, 2008. Farris arranged to purchase the property by paying off the mortgage and delinquent taxes prior to foreclosure. On November 12, 2008, Farris sought to have Conger transfer sufficient funds from Farris's Fidelity Investment Account, which was managed by Conger, to Farris's personal checking account at the Bank of Fayetteville so that Farris could close the transaction prior to the foreclosure sale. The amended complaint alleged that Conger failed to transfer the funds to her personal checking account by the time of the foreclosure sale, and the property was sold to a third party. She further alleged that she was ultimately able to obtain the parcel at additional costs of $29, 557.28. Farris alleged that Conger's actions forced her to liquidate her Fidelity Investment Account and that the account would have been worth an additional $126, 969 had she not liquidated the account. Farris alleged that Conger had exclusive control over her Fidelity Investment Account, and by "agreeing and assuring Dr. Farris that they would execute transfer of funds in a timely fashion so that the funds [would be] available to purchase the property and in failing to do so, [Conger] breached the written Wealth Management Services contract with Dr. Farris." Farris further alleged, "[Conger's] breaches of contract include, but are not limited to, failing to arrange for execution of the brokerage transaction as directed by Dr. Farris in a timely fashion and in compliance with Paragraph 5 of the written Wealth Management Agreement." After claiming that she suffered damages as a "direct and proximate cause of [Conger's] breach of contract, " Farris also claimed that Conger's "breaches of duty constitute a reckless disregard for the circumstances and attempted fraud on behalf of [Conger]." Farris requested that she be awarded punitive and exemplary damages to deter Conger and "others from such fraudulent and reckless behavior."

         Paragraph 5 of the Wealth Management Agreement, provided in part as follows:

5. Execution of Brokerage Transactions. Unless directed otherwise, we will arrange for the execution of securities brokerage transactions for the Assets through a broker-dealer that we reasonably believe will provide "best execution." In seeking best execution, the determinative factor is not the lowest possible commission cost but whether the transaction represents the best qualitative execution, taking into consideration the full range of the broker-dealer's services, execution capability, commission rates, and responsiveness. Consistent with seeking best execution, transactions for your Account may be effected through broker-dealers that provide us with research tools and/or other services (e.g., an online account management platform, portfolio management software, etc.) that assist in our investment decision-making process and with the management of our clients' accounts. While these tools and services shall generally be used to service all of our clients, all the tools and services may not be used to manage your particular Account. Directing transactions to broker-dealers that provide us with these types of tools and services shall occur only when we determine in good faith that the brokerage fees charged are reasonable in relation to the overall value of the brokerage and other services rendered. Accordingly, although we will seek competitive transactions fees for securities transactions, we may not necessarily obtain the lowest possible transaction rates for Account transactions.
Neither we, nor any of our Advisory Affiliates (as defined in Form ADV), will receive any portion of the brokerage commissions or transaction fees charged to you by the Broker-Dealer.
Transactions for each client account generally will be effected independently, unless we decide to purchase or sell the same securities for several clients at approximately the same time. We may (but are not obligated to) combine or "batch" such orders to obtain best execution, negotiate more favorable commission rates, or allocate equitably among our clients differences in prices and commissions or other transaction costs that might have been obtained had such orders been placed independently. Under this procedure, transactions will be averaged as to price and will be allocated among our clients in proportion to the purchase and sale orders placed for each client account on any given day. To the extent that we aggregate client orders for the purchase or sale of securities, including securities in which our Advisory Affiliates may invest, we shall do so in accordance with applicable rules promulgated under the Investment Advisers Act of 1940, as amended (the "Advisers Act") and guidance provided by the staff of the Securities and Exchange Commission. We shall not receive any additional compensation or remuneration as a result of the aggregation. We shall endeavor to process all Account transactions in a timely manner, but do not represent nor warrant that any such transaction shall be processed or effected by the Broker-Dealer on the same day as requested.

(Emphasis added.) It is the first phrase in the last-quoted sentence, "We shall endeavor to process all Account transactions in a timely manner, " that served as the basis for Farris's allegation that Conger had breached the contract.

         Conger moved both for dismissal of the cause of action and for summary judgment, asserting that the cause of action sounded in the tort of negligence and thus was barred by the three-year statute of limitations for tort actions. Ark. Code Ann. § 16-56-105 (Repl. 2005). In its order granting summary judgment, the circuit court observed that Farris had argued that her cause of action was for a breach of contract, and thus the five-year statute of limitations applied. Ark. Code Ann. § 16-56-111. The court noted that the complaint had been filed beyond the three-year statute of limitations for tort claims but within the five-year statute of limitations for contract claims.

         In its analysis, the court stated that while the complaint asserted a contract claim, the "question then becomes whether the reference to the contract is the sort of specific promise that transforms the gist of the action from one for negligence into one for breach of the written agreement." The court concluded that the "complaint was based upon a negligence claim cloaked as a contract claim." In reviewing paragraph 5 of the Wealth Management Agreement, the court observed that the "obligation to act diligently and in good faith is the basis of a fiduciary obligation, " and ...

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