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Tilley v. Malvern National Bank

Supreme Court of Arkansas

December 7, 2017

KENNETH W. TILLEY, INDIVIDUALLY AND AS TRUSTEE OF THE KENNETH TILLEY FAMILY TRUST APPELLANT
v.
MALVERN NATIONAL BANK AND STEPHEN MOORE APPELLEES

         APPEAL FROM THE GARLAND COUNTY CIRCUIT COURT [NO. CV-2011-1194-1] HONORABLE JOHN HOMER WRIGHT, JUDGE

          Eichenbaum Liles P.A., by: James H. Penick III and Joshua Allen, for appellant.

          Wright, Lindsey & Jennings LLP, by: Charles T. Coleman, Adrienne L. Baker, and Kristen S. Moyers, for appellees.

          KAREN R. BAKER, ASSOCIATE JUSTICE.

         Appellant Kenneth W. Tilley, individually and as trustee of the Kenneth Tilley Family Trust ("Tilley"), appeals the Garland County Circuit Court's judgment and decree of foreclosure finding in favor of appellee Malvern National Bank ("MNB") and against Tilley on his counterclaims against MNB and his third-party complaint against Stephen Moore ("Moore"), the former vice president of commercial lending at MNB. On appeal, Tilley argues that (1) the circuit court erred in granting MNB and Moore's motion to strike Tilley's jury-trial demand and (2) the circuit court abused its discretion by granting MNB and Moore's motion in limine to exclude Tilley's future lost-profit damages. This appeal involves the interpretation and construction of the Arkansas Constitution; therefore, our jurisdiction is proper pursuant to Arkansas Supreme Court Rule 1-2(a)(1). We reverse and remand.

         Facts and Procedural History

         On July 7, 2010, Tilley and MNB entered into a loan agreement and executed a promissory note in the amount of $221, 000. To secure payment of the note, Tilley granted MNB a mortgage interest in real property located in Garland County, Arkansas. As relevant to the present appeal, the loan agreement included a jury-waiver clause.

         On November 8, 2011, MNB filed a complaint against Tilley alleging that Tilley defaulted on the loan agreement and therefore sought foreclosure of the mortgage and replevin of certain personal property.[1] On February 27, 2012, Tilley filed an answer to MNB's complaint and demanded a right to a trial by jury.

         On October 1, 2012, Tilley filed a counterclaim against MNB and a third-party complaint against Moore. Tilley alleged that in October 2009, Tilley was working on two land-development projects, one in Garland County and one in Logan County. Once the Garland County property was finalized, Tilley intended to sell individual tracts of land. The Logan County property was to be used as a recreational facility. In order to fund the developments, Tilley sought financing from multiple financial institutions, including MNB. Tilley met with Moore and explained that he would need $350, 000 to fund both developments. Moore promised that MNB would deliver $250, 000 within thirty days, and the remaining $100, 000 would be made available to Tilley as soon as he sold five or six tracts in Garland County. Based on Moore's promises, Tilley decided to finance his developments through MNB. Tilley never received the $350, 000 loan. In April 2010, Tilley was informed by an officer of MNB that Moore was no longer employed by MNB. Tilley ultimately entered into the $221, 000 loan agreement instead of the $350, 000 agreement that Tilley and Moore had allegedly agreed upon. Tilley contended that MNB's failure to fulfill the promise to loan him $350, 000 caused him to default on the $221, 000 loan. In Tilley's counterclaim and third-party complaint, Tilley raised six causes of action: (1) breach of contract/breach of the duty of good faith and fair dealing; (2) promissory estoppel; (3) violation of the Arkansas Deceptive Trade Practices Act; (4) tortious interference with a business relationship or expectancy; (5) negligence; and (6) deceit/fraud in the inducement. Tilley requested "a full and final adjudication of the causes of action raised herein by a jury."

         The circuit court notified the parties that the case was set for a three-day jury trial scheduled for April 29 through May 1, 2015. On April 13, 2015, MNB and Moore filed a motion to strike Tilley's jury-trial demand. MNB and Moore argued that it is well established under Arkansas law that a foreclosure claim must be tried in equity, without a jury. Further, Tilley was not entitled to a jury trial on his claims because they arose from the same nexus of operative facts as MNB's foreclosure claim and were essential to the foreclosure proceeding. Finally, MNB and Moore argued that in executing the loan agreement containing a jury-waiver clause, Tilley had agreed to waive his right to a jury trial.

         On April 15, 2015, Tilley filed his response and argued that the clean-up doctrine is no longer viable. Tilley contended that the claims at issue are legal matters and must be submitted to a jury. Finally, under his argument section entitled "Waiver, " Tilley asserted that "[t]he Arkansas Constitution, Article 2, Section 7, provides that the right to a jury trial 'shall remain inviolate', a principle which is applied with regard to waivers." Tilley then argued that for a waiver to exist, the waiver must be knowingly, intelligently, and voluntarily made.

         In an April 22, 2015 letter from the circuit court to the parties, the circuit court announced that it agreed with MNB and Moore and therefore granted the motion to strike the jury-trial demand as to all claims. The circuit court entered its written order granting MNB and Moore's motion to strike Tilley's jury-trial demand on April 29, 2015. After a bench trial, the circuit court ruled in favor of MNB on its foreclosure claim and against Tilley on his counterclaims and third-party complaint. On July 29, 2015, the circuit court entered a judgment and decree of foreclosure. On August 7, 2015, Tilley filed a motion for new trial, which was deemed denied. Tilley timely filed his notice of appeal.

         On March 1, 2017, the Arkansas Court of Appeals affirmed the circuit court's decision, finding that although Tilley had a constitutional right to a jury trial on his legal claims, the jury-waiver clause in the loan agreement was enforceable and Tilley waived his right to a jury trial. Tilley v. Malvern Nat'l Bank, 2017 Ark.App. 127, 515 S.W.3d 636. On March 20, 2017, Tilley filed a petition for review, which this court granted on May 25, 2017. When we grant a petition for review, we treat the appeal as if it had been originally filed in this court. Russell v. Russell, 2013 Ark. 372, 430 S.W.3d 15.

         I. Right to a Jury Trial

         On appeal, Tilley argues that the circuit court erred in denying Tilley his constitutional right to a jury trial on his legal claims pursuant to the clean-up doctrine and the loan agreement's predispute jury-waiver clause. Specifically, Tilley argues that (1) he had a constitutional right to a jury trial on all of his legal claims asserted against MNB and Moore; (2) predispute contractual waivers of the right to a jury trial are unenforceable under the Arkansas Constitution; (3) MNB and Moore waived any right to enforce the jury-waiver clause; (4) Tilley did not knowingly and voluntarily waive his right to a jury trial; and (5) the jury-waiver clause does not apply to his third-party claims against Moore.

         As an initial matter, MNB and Moore argue that Tilley's appeal of the right-to-a-jury-trial argument is untimely because Tilley was required to appeal this issue when his jury-trial demand was struck. Specifically, MNB and Moore argue that Tilley was required to appeal the circuit court's April 29, 2015 order within 30 days. Thus, they contend that because Tilley waited until after the final order had been entered, his appeal is untimely and we lack jurisdiction to consider any portion of Tilley's appeal that addresses the jury-trial issue. We disagree. We have specifically held that a party may not bring an interlocutory appeal from the denial of a jury-trial demand. Liberty Life Ins. Co. v. McQueen, 364 Ark. 367, 219 S.W.3d 172 (2005). Thus, Tilley's appeal of the right-to-a-jury-trial argument is timely.

         We employ a de novo standard of review for claims to a right to a jury trial. See First Nat'l Bank of DeWitt v. Cruthis, 360 Ark. 528, 203 S.W.3d 88 (2005). We are not bound by the decision of the circuit court; however, in the absence of a showing that the circuit court erred in its interpretation of the law, that interpretation will be accepted as correct on appeal. Id.

         A. Right to a Jury Trial: Amendment 80 & Clean-Up Doctrine

         For his first point on appeal, Tilley argues that the circuit court erred in granting MNB and Moore's motion to strike Tilley's jury-trial demand on the basis that the clean-up doctrine allowed the court to hear Tilley's legal counterclaims and third-party claims. MNB and Moore respond that because this appeal arises out of a foreclosure action, the circuit court properly heard Tilley's claims because his claims were essential to the foreclosure proceeding.

         This implicates amendment 80 to the Arkansas Constitution and its effect on jurisdiction formerly residing in circuit and chancery courts. Id. In Cruthis, we explained:

Amendment 80 to the Arkansas Constitution merged the chancery and circuit courts. Section 6(A) of Amendment 80 to the Arkansas Constitution provides "Circuit Courts are established as the trial courts of original jurisdiction of all justiciable matters not otherwise assigned pursuant to this Constitution." As a consequence of Amendment 80, courts that were formerly chancery and circuit courts are now referred to as circuit courts. Because Amendment 80 states that circuit courts assume the jurisdiction of chancery courts, circuit courts simply have added to their already existing jurisdiction as a court of law the equitable jurisdiction which chancery courts held prior to adoption of the Amendment. In other words, no new or expanded jurisdiction beyond that formerly existing in the chancery and circuit courts was created through Amendment 80. Rather, circuit court jurisdiction now includes all matters previously cognizable by circuit, chancery, probate, and juvenile court.

360 Ark. at 533, 203 S.W.3d at 91-92 (internal citations omitted). Since the passage of amendment 80 to the Arkansas Constitution in 2000, there is no longer a need to elect in which court to file a lawsuit. Id. However, amendment 80 did not alter the jurisdiction of law and ...


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