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McMahen v. Robinson

Court of Appeals of Arkansas, Division IV

May 3, 2017



          Jon R. Sanford, P.A., by: Jon R. Sanford, for appellant.

          Niswanger Law Firm PLC, by: Stephen B. Niswanger and Benjamin M. Ross, for appellee Kenneth Mac Robinson.

          ROBERT J. GLADWIN, Judge

         Rebecca McMahen appeals the August 14, 2015 order of the Pope County Circuit Court that denied her petition for declaratory judgment. In denying the petition, the trial court found that the three-year statute of limitations provided in Arkansas Code Annotated section 4-59-209 (Repl. 2011) did not apply to prevent appellee Kenneth Mack Robinson from obtaining an order to set aside the August 23, 2007 quitclaim deed that transferred certain real property to Rebecca from her husband, David McMahen. Rebecca argues that the trial court improperly applied the statute and erred in finding that David had a curtesy interest to which Robinson's judgment lien could attach. We reverse and remand.

         I. Facts

         Rebecca filed a complaint on March 2, 2015, seeking a declaration that Arkansas Code Annotated section 4-59-209 prevented judgments against David from attaching to the land she had acquired from him.[1] She alleged that on August 23, 2007, David quitclaimed to her certain real property located in Pope County. When he made the transaction, David was insolvent, and the property was subject to a mortgage. On April 7, 2010, American Express Centurion Bank (Centurion) obtained a judgment against David; and on October 12, 2010, Robinson was awarded a consent judgment against David, that was filed on November 1, 2010, in Pope County. Rebecca alleged in her complaint that the statute of limitations expired on August 23, 2010, on any action arising under Arkansas Code Annotated sections 4-59-201 to -213 (Arkansas Fraudulent Transfers Act). Rebecca further claimed that on June 2, 2011, David sought bankruptcy protection by filing a petition for Chapter 7 relief in the Bankruptcy Court for the Eastern District of Arkansas, and on October 20, 2011, the debts to Robinson and Centurion were discharged.[2]

         Rebecca and David signed an escrow agreement on December 22, 2011, agreeing to sell the quitclaimed property at issue to Owen Jones. Subsequently, when Jones tried to sell the property, he could not acquire title insurance because of the prospect that either Robinson or Centurion might have a cause of action against David under the Arkansas Fraudulent Transfers Act. Rebecca sought a declaration from the trial court that the time for either Robinson or Centurion to obtain an order setting aside the quitclaim deed- which would allow their judgments to attach to the land-had expired and that the judgments against her husband were not enforceable as to her or her property.

         Robinson answered that the quitclaim deed lacked consideration and was void; so, the lien on the property arising from his judgment was still attached. He argued that the statute of limitations for an action on a judgment, such as a lien foreclosure, had not run. Ark. Code Ann. § 16-56-114 (Repl. 2005) (actions on all judgments and decrees shall be commenced within ten years after cause of action shall accrue). Rebecca filed a first-amended complaint alleging that Robinson did not have a judgment against any owner of the property in question. Robinson pled affirmatively that the statute of limitations cited by Rebecca was not applicable to his efforts to rescind the quitclaim deed to her, which is a remedy sounding in equity. He alleged that the quitclaim deed at issue was a fraudulent transfer and lacked consideration and was therefore void. Thus, he argued that David still had an interest in the subject property, and Robinson's lien on the property arising from the judgment was still attached.

         At the hearing on Rebecca's declaratory-judgment complaint, Rebecca's counsel argued that when the three-year statute of limitations had run, Robinson's opportunity to pull that property back into David's ownership had also expired. Counsel claimed, "It did not affect the lien of the judgment, it's just that there was no property in Mr. McMahen's name to which [Robinson's] lien might attach."

          Counsel for Robinson declared that the three-year statute of limitations did not preclude other principles of law and equity under Arkansas Code Annotated section 4-59-210 (Repl. 2011). Counsel argued that a court of equity was not bound by limitations fixed by statute if it would be inequitable or unjust to do so. Counsel pointed to Rebecca's admission that David was insolvent at the time of the transfer and that she had given no money for the property. Even though the quitclaim transaction occurred about ten years prior, counsel argued that the homestead exemption the McMahens would have enjoyed ended in 2011 when they signed the escrow agreement with Jones. Counsel argued that caselaw supports the position that a homestead is abandoned when the property is sold. Further, he claimed that the escrow agreement was not recorded, so Robinson had no reason to know about it until it was brought to his attention in 2015. Finally, counsel argued that David had a curtesy interest in his wife's property.

         The trial court filed an order on August 14, 2015, finding that, despite the three-year limitation provided in Ark. Code Ann. § 4-59-209, the issue of when the time for setting aside the quitclaim transaction expired was a question of fact under the equitable doctrine of laches. The trial court stated,

When applying the doctrine of laches to the timeliness of a rescission action, the courts must consider various factors including the circumstances, purposes, and nature of the action or inaction and the attempt to rescind a contract "must be made within a reasonable time after the facts supporting the right of rescission become known." See Brill, Arkansas Law of Damages, § 31:3, at p. 715; Ark. Code Ann. § 4-59-210.

         The trial court held that it could not find that the time for obtaining an order to set aside or rescind the transaction from David to Rebecca had expired under the doctrine of ...

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