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DWB, LLC v. D&T Pure Trust

Court of Appeals of Arkansas, Division II

May 2, 2018

DWB, LLC, et al. APPELLANTS
v.
D&T PURE TRUST et al. APPELLEES

          APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT, SEVENTEENTH DIVISION [NO. 60CR-16-4435] HONORABLE MACKIE M. PIERCE, JUDGE

          Walker Law Firm, PLLC, by: Kent Walker; and Taylor & Taylor Law Firm, P.A., by: Andrew M. Taylor and Tasha C. Taylor, for appellants.

          James, House, Downing & Lueken, P.A., by: Patrick R. James, Patty Lueken, and Charley E. Swann, for appellees.

          LARRYD. VAUGHT, Judge

         This appeal involves a business dispute arising out of the sale of Mayflower RV. Appellants DWB, LLC (DWB), and Danny Brown appeal from a judgment in favor of appellees D&T Pure Trust (D&T) and Toni Boydston, individually and as personal representative of her deceased husband Doug Boydston's estate. We affirm in part and reverse in part.

         Mayflower RV is an RV business that had locations in Mayflower, Malvern, and Van Buren. In March 2013, Doug Boydston and Mayflower R.V., Inc., entered into an agreement to sell Mayflower RV to DWB and Danny Brown. The agreement was memorialized in an asset-purchase agreement and a bill of sale. D&T leased the land on which Mayflower RV was operated to DWB and Brown.

         A critical component of this case is the insurance coverage required by the parties' lease, which required Brown and DWB to maintain insurance coverage in the amount of the replacement value of any improvements erected on the property. Replacement-value insurance covers the cost of replacing a structure, whereas actual-cash-value insurance takes depreciation into consideration and essentially covers only market value of the structure.

         After the parties entered into the agreements, extensive discussion was had regarding whether Brown and DWB were maintaining adequate insurance on the property. The final correspondence between the parties in evidence is an email from Brown to Doug Boydston wherein he attached a certificate of liability insurance, which provided that DWB had obtained $450, 000 in coverage for the Mayflower location-this is significantly less than the amounts for which Doug Boydston and D&T had historically insured the property. Additionally, the property was insured with actual-cash-value insurance rather than the contractually required replacement-value insurance. DWB and Brown would later argue that Doug Boydston and D&T knew and accepted the $450, 000 of insurance coverage and, thus, waived any claim for breach of contract for underinsurance.

         In April 2014, a tornado struck the Mayflower property, causing substantial damage. This triggered a dispute between the parties, and Brown and DWB sued Doug Boydston and D&T to seek a declaratory judgment on the parties' rights and responsibilities on several issues. D&T and Doug Boydston responded to DWB and Brown's complaint and counterclaimed. For appellate purposes, the claims presented to the court that are most pertinent are D&T and Doug Boydston's breach-of-contract claim for underinsurance of the Mayflower property and their two claims for conversion of certain insurance proceeds.

         Shortly after the declaratory-judgment action was filed, the insurance company tendered a $450, 000 check representing full policy limits to DWB for tornado damage incurred on the Mayflower property. Brown endorsed the check and tendered it to D&T and Doug Boydston with an accord-and-satisfaction letter providing that he considered the check to be payment in full for any damage that occurred from the tornado. D&T and Doug Boydston refused to accept the $450, 000 as accord and satisfaction of their claims against DWB and Brown. Thereafter, they filed a motion to disburse the $450, 000 free and clear of any accord-and-satisfaction claim or, alternatively, for this money to be placed into the circuit court's registry pending further orders of the court.

         The insurance company also tendered a $10, 000 check to DWB for cleanup of debris stemming from the tornado. DWB and Brown were not specifically required to maintain insurance for debris cleanup, but the lease did require them to maintain "fire, hazard and extended coverage insurance" on the improvements to the property. The evidence demonstrates that Brown and DWB never offered the $10, 000 insurance proceeds to Doug Boydston and D&T. Brown and DWB argued that because the debris-removal policy was not required under the lease, Doug Boydston and D&T were not entitled to the money.

         In September 2014, the circuit court held a hearing on the motion to disburse the $450, 000 or, alternatively, for the money to be placed into the registry. At the conclusion of the hearing, the circuit court gave D&T and Doug Boydston three options, they could (1) return the check to Brown and DWB, (2) accept the check as an accord and satisfaction, or (3) ask that the funds be deposited into the court's registry. They chose to have the money deposited into the registry of the court, and an order was entered authorizing the deposit.

         Even though no evidence was received at the hearing, the order included a finding that Brown and DWB had tendered the check to D&T and Doug Boydston in good faith-a requirement for accord and satisfaction.

         Later in September 2014, Doug Boydston died while cleaning debris at the Mayflower property. Toni Boydston, his widow and personal representative, was substituted for him as a party in this case; she also intervened in her individual capacity.

         In November 2014, First Service Bank (FSB), the mortgagee on the Mayflower property, filed a motion to intervene, which the circuit court granted. FSB sought to withdraw from the registry of the court the amount it was owed under the mortgage. FSB ultimately prevailed and was allowed to withdraw approximately $185, 000 from the registry of the court to satisfy its mortgage.

         A four-day trial on the merits was held in February 2016. In July 2016, the circuit court entered detailed findings of fact and conclusions of law and a judgment. The findings most pertinent to this appeal are that appellants Brown and DWB underinsured the Mayflower property; converted the $450, 000 and $10, 000 insurance checks and were liable for $230, 000 in punitive damages for conversion; and were required to pay prejudgment interest for the claims arising out of the converted checks and the underinsured property. The order also allowed appellees D&T and Toni Boydston, individually and as personal representative of Doug Boydston's estate, to submit a request for attorney's fees, and in November 2016, the circuit court entered an order awarding appellees $200, 000 in attorney's fees.[1] This timely appeal followed.

         Appellants make six arguments in support of reversal. They contend that (1) appellees waived their right to enforce against any alleged underinsurance of the Mayflower property; (2) they did not commit conversion of the $450, 000 and $10, 000 insurance checks; (3) assuming they committed conversion, punitive damages were not appropriate; (4) the attorney's-fee award should be reversed or reduced; (5) the award of prejudgment interest for conversion of the $450, 000 and for the underinsurance of the property is reversible error; and (6) it was error to hold Danny Brown personally liable for the acts of DWB.

         I. Waiver

         The parties' lease required appellants to maintain insurance coverage in the amount of the replacement value of any improvements erected on the property. The evidence demonstrated that appellants had the property insured with actual-cash-value insurance rather than replacement-value insurance and had $450, 000 worth of coverage, which appellees contend was significantly less than was necessary to cover the replacement of any improvements on the property.

         Appellants clearly breached the lease, but they argued that appellees waived the right to enforce against any breach because appellees knew and accepted that there was $450, 000 of actual-cash-value insurance on the property. "A party to a contract, who, with knowledge of a breach by the other party, continues to accept benefits under the contract and suffers the other party to continue in performance thereof, waives the right ...


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