General Legal News

By: Bob Ballinger, Real Estate Attorney and Director of Operations, Kings River Title

In Arkansas neighboring property owners can legally modify the boundaries dividing their properties without any written instrument. This can be done a variety of ways, one of which is by a principal in the law called “boundary by acquiescence.” A boundary line by acquiescence can be inferred from the neighbor’s conduct over many years so as to imply the existence of an agreement about the location of the boundary line. Whenever adjoining landowners tacitly accept a fence line or other monument as the visible evidence of their dividing line and thus apparently consent to that line, it becomes the boundary by acquiescence. Walker v. Walker,8 Ark. App. 297, 651 S.W.2d 116 (1983). Even if there never was an express agreement to treat a fence as the dividing line between the two parcels of land, such an agreement may be inferred by the action of the parties. See Kittler v. Phillips, 246 Ark. 233, 437 S.W.2d 455 (1969). Whether a boundary line by acquiescence exists is to be determined upon the evidence in each individual case. See Hedger Bros. Cement & Materials, Inc. v. Stump, 69 Ark. App. 219, 10 S.W.3d 926 (2000).

Further, boundaries by acquiescence are frequently found to exist at locations other than those shown by an accurate survey of the premises. See Summers v. Dietsch, 41 Ark. App. 52, 849 S.W.2d 3 (1993). A fence, by acquiescence, may become the accepted boundary even though contrary to said survey line. Id. Thus, tacit acceptance of a fence line or other monument as the visible evidence of the dividing line for a long period of time manifests apparent consent. Id. The property owners and their grantees are then precluded from claiming that the boundary line thus recognized and acquiesced in is not the true one, although it may not be on the survey line. Id.

Therefore, if you have an old fence separating your property from your neighbor’s, you can be somewhat confidant that the boundary to your property is along that line.

by: Robert A. Ballinger, Attorney at Law, Director of Operations, Kings River Title and Abstract

At the heart of most judicial opinions is the question of statutory interpretation. Arkansas law requires courts to apply statutes as they plainly read. For example, the court in Bishop v. Linkway Stores, Inc., declared neither the “exigencies” of a case, nor a “resort to extrinsic facts,” will be permitted to alter the meaning of the language used in the statute. Thus, when a statute is plain and unambiguous, the court is primarily concerned with what the document says, rather than what its drafters may have intended. In Bishop, a consumer purchased furniture by executing a sales contract with an interest rate of fifteen percent. The consumer filed an action against the lender, credit council, and retail merchants association, alleging that the contract was usurious. The court declared the statute was clear and unambiguous and held that the contract was void as to the unpaid interest because it had an interest rate in excess of the lawful rate.

Similarly, in Williams v. Little Rock School District, the Arkansas Supreme Court rejected the use of extrinsic facts when the words of the statute are clear. Williams, a school teacher, informed his principal that he wished to resign. The following morning, Williams asked if he could withdraw his resignation. The principal informed Williams that the administration officials had already decided to accept his resignation. As a result Williams sued in an effort to be reinstated. The court found that there was nothing in the language of the statute that either expressly or impliedly stated that the remedy of an appeal to circuit court was applicable to cases involving a disputed resignation. The statute allowed for any nonprobationary teacher, aggrieved by a decision made by the board, to appeal the decision to the circuit court of the county in which the school district is located. Teacher and district may introduce additional testimony and evidence on appeal to show facts and circumstances indicating that the termination or nonrenewal was lawful or unlawful. The court declared that the statute’s purpose was to protect teachers’ jobs from arbitrary and capricious actions committed by the school district, it was not to protect teachers from their own actions.

When examining an issue of statutory construction, Arkansas’s cardinal rule is to give effect to the intent of the legislature. Where the language of a statute is clear and unambiguous, Arkansas determines legislative intent from the ordinary meaning of the language used. Where the meaning is unclear, Arkansas looks to the language of the statute, the subject matter, the object to be accomplished, the purpose to be served, the remedy provided, the legislative history, and other appropriate means that shed light on the subject.

Federal law also requires a court to look first at the plain meaning of a statute. For example, in the United State Supreme Court case of Griffin v. Oceanic Contractors, Inc., the Court stated, “[i]t is enough that [the legislature] intended that the language it enacted would be applied as we have applied it. The remedy for any dissatisfaction with the results in particular cases lies with [the legislature] and not with this Court. [The legislature] may amend the statute; we may not.” In Griffin, a seaman brought an action against his former employer seeking wages he was entitled to by statute upon his discharge. The Court held that district courts did not have the discretion to limit the period during which the wage penalty was assessed, and that the imposition of the penalty was mandatory for each day that payment was withheld in violation of the statute.

Griffin also declared that legislative intentions should only be controlling “in rare cases” where the literal application of the statute will produce results demonstrably at odds with the intent of its drafters. The Court reserved “some scope for adopting a restricted rather than a literal or usual meaning of its words where acceptance of that meaning . . . would thwart the obvious purpose of the statute.” The Court also noted that if a court resorts to interpretation of legislative intent, the statute should be considered as a whole, and the language should not be interpreted in a manner that leads to “absurd consequences.”

by: Matt Bishop, Attorney at Law, Thurman, Bishop & Flanagin

A new case out of the Arkansas Court of Appeals, T-1 Construction v. Tannenbaum Development gives us some insight into how a real estate contract can be undone when the seller realizes he made a big mistake.

Tannenbaum Development had 5 lakefront lots in Cleburne County it wanted to sell. It listed them with a realtor, and in the listing agreement it stated a total offering price for the 5 lots of $75,000. After they went on the market, T-1 Construction made an offer of $70,000 for all 5, which was accepted by Tannenbaum via its owner. The purchase contract was drafted by T-1 and its real estate agent, presumably on the standard Arkansas Realtors form contract.

Two days before the closing, Tannenbaum’s owner realized that the sales contract said $70,000 total for all 5 lots, rather than $70,000 for EACH lot. He refused to close the deal, so T-1 sued.

The circuit court found that while the mistake was all Tannenbaum’s (a unilateral mistake), it would be unconscionable to force them to close given the price and rescinded the contract. T-1 appealed this decision.

The Court of Appeals laid out the rules for recission (breaking) of a contract due to a unilateral mistake:

(1) the mistake must be of so great a consequence that to enforce the contract as actually made would be unconscionable;

(2) the matter as to which the mistake was made must relate to a material feature of the contract;

(3) the mistake must have occurred notwithstanding the exercise of reasonable care by the party making the mistake;

(4) it must be able to get relief by way of rescission without serious prejudice to the other party, except for loss of his bargain.

Looking at these, the Court first noted two appraisers presented testimony that the value of the 5 lots in total was between $325,000 and $400,000, and the tax assessor valued the lots at $100,000 per lot. The Court then noted a US Supreme Court case from the 1800s which defined an unconscionable contract as “such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.” The Court of Appeals thought that phrase fit the bill for the first element, unconscionableness, of the T-1 – Tannenbaum contract.

There was no argument that the price was a material feature of the contract, so the second element was not in dispute.

The third element, reasonable care by the person making the mistake, was in dispute, with T-1 saying that Tannenbaum’s owner had not taken reasonable care to ensure everything was correct. However, the Court cited to testimony by Tannenbaum’s owner that he thought the agent had him it was $70,000 per lot, even though she claimed she was clear that it was $70,000 total in the listing agreement. (Frankly, if the realtor had any experience at all, she would almost certainly have been explicit to her client on this point, for she had to know this was way undervalued). The Court also noted that Tannenbaum’s owner and realtor made several changes to the listing agreement, including retaining mineral rights and negotiating her commission. This was apparently enough to excuse him not paying closer attention to the actual sales contract.

With respect to the last element, T-1 didn’t argue it on appeal, so apparently it felt that there was no other harm it would suffer other than losing out on a great deal. Which, since the deal wasn’t closed, was probably correct. Had they started building on them, however, they might have been able to make more hay out of this part.

Taking all that into consideration, the Court of Appeals agreed to permit Tannenbaum to get out of the contract, saying:

The totality of the evidence supports the circuit court’s finding that it would be inequitable and unconscionable to enforce the contract because of the damages that would be incurred by appellee [Tannenbaum] if the contract were enforced.

So is the moral of this story that you can get out of a bad deal even if it’s all your mistake? Not really. What this case stands for is that you can get out of a bad deal if, despite taking care to make sure things are right, you accidentally enter into a contract that essentially gives away your property.

For example, if you’re hard up for cash and you agree to dump some property, but before you close the deal you come into some money and now want out of the contract, that’s not going to cut it. Likewise if you just sign a sales contract without thinking, or at least attempting to pay attention to the terms, as Tannenbaum had done in negotiating some of the terms of the listing agreement, that’s not going to cut it. Nor do I think you’ll convince a court to get out of a deal with a 10% error in the price. You’re going to have to be a pretty conscientious seller, or for that matter buyer, who just made a fundamental mistake despite some due diligence.

by: Robert A. Ballinger, Attorney at Law, Director of Operations, Kings River Title and Abstract

Arkansas, as well as a few other states, recognizes a peculiar type of marital rights to property called dower and curtesy. Dower is a wife’s interest in her husband’s property, and curtesy is a husband’s interest in his wife’s property. Today, these rights are essentially the same; just different terms to define the gender involved. These rights are designed to protect the spouse in the event of intestacy (the condition of the estate of a person who dies owning property without having made a valid will or other binding declaration). Interests based on dower and curtesy are inchoate (a right contingent on an event) until the death of a spouse.

Dower or curtesy exists in all real and personal property that is seized (owned with the right to possess) during the marriage. This is taken literally. If the property is brought into the marriage, it is owned during marriage and these rights are in effect. If the property is transferred during the marriage, it was still owned during marriage and these rights are in effect.

The extent of dower and curtesy right depends on whether there are descendants or not. In the situation with real property, if there are descendants, the amount of the dower is a 1/3 life estate. This would mean that the surviving spouse will receive one-third of the income generated from the land during his or her life. At the death of the surviving spouse, he or she owns nothing to pass on to someone else. If there are no descendants, the dower is 1/2 fee simple. Fee simple is the most common way real estate is owned in Arkansas, and is ordinarily the most complete ownership interest that can be had in real property, but the decedent’s creditors may reduce this share if the remainder of the estate is not sufficient to pay all debts.

Therefore, when buying real estate in Arkansas, one of the most important questions to ask the seller is “are you married?” If the seller’s spouse does not sign the conveyance, buyer could rescind for failure to provide marketable title. Dower and curtesy interest can be terminated through time, but only after seven years pass from date the interest becomes choate, which is most often the death of spouse. The best way to take care of this is to get the spouse’s signature on the deed.

See, Arkansas Code:

28-11-305. Personalty.

If a person dies leaving a surviving spouse and a child or children, the surviving spouse shall be entitled, as part of dower or curtesy in his or her own right, to one-third (1/3) part of the personal estate whereof the deceased spouse died seized or possessed.

28-11-307. Dower or curtesy when no children.

(a)(1) If a person dies leaving a surviving spouse and no children, the surviving spouse shall be endowed in fee simple of one-half (1/2) of the real estate of which the deceased person died seized when the estate is a new acquisition and not an ancestral estate and of one-half (1/2) of the personal estate, absolutely, and in his or her own right, as against collateral heirs.

(2) However, as against creditors, the surviving spouse shall be invested with one-third (1/3) of the real estate in fee simple if a new acquisition, and not ancestral, and of one-third (1/3) of the personal property absolutely.

(b) If the real estate of the deceased person is an ancestral estate, the surviving spouse shall be endowed in a life estate of one-half (1/2) of the estate as against collateral heirs and one-third (1/3) as against creditors.

18-12-402. Dower or curtesy; relinquishment

A married person may relinquish dower or curtesy in any of the real estate of a spouse by joining with the spouse in the deed of conveyance thereof, or by a separate instrument executed to spouse’s grantee or anyone claiming title under the spouse, and acknowledging it in the manner prescribed by law.

By: Robert A. Ballinger, Attorney at Law, Director of Operations, King River Title and Abstract

Arkansas’ statute of frauds, ARK. CODE ANN. § 4-59-101(a)(4), requires that any contract for the sale of land, or any interest concerning such land, be in writing and signed by the party to be charged. ARK. CODE ANN. § 4-59-101(a)(4). To meet the requirements of a valid contract for the sale of real estate within ARK. CODE ANN. § 4-59-101(a)(4), the written agreement must include the essential terms and conditions of the sale. Tate v. Clark, 203 Ark. 231, 156 S.W.2d 218 (1941); Van Dyke v. Glover, 326 Ark. 736, 934 S.W.2d 204 (1996). Arkansas’ general rule with respect to the statute of frauds also has been stated another way:

Unless the essential terms of the sale can be ascertained from the writing itself, or by reference in it to something else, the writing is not in compliance with the statute; and if the writing be thus defective, it cannot be supplied by parol proof, for that would at once introduce all the mischiefs which the statute was intended to prevent.

Van Dyke, 326 Ark. at 742-743, 934 S.W.2d at 208 (1996), citing Sorrells v. Bailey Cattle Co., 268 Ark. 800, 811-12, 595 S.W.2d 950 (1980), (quoting Williams v. Morris, 95 U.S. 444, 24 L.Ed. 360 (1877)).

Arkansas law mandates that a contract for the sale of land “sufficiently describe the land to be sold.” Van Dyke, 326 Ark. at 742-743, 934 S.W.2d at 208 (1996); Boensch v. Cornett, 267 Ark. 671, 590 S.W.2d 55 (1979). This required description of land must be as definite and certain as that required to be found in a deed of conveyance. Sorrells v. Sorrells, 268 Ark. 800, 809-810, 595 S.W.2d 950, 954 (1980). With respect to the land description requirements for a deed, the Court in Sorrells quoted favorably from Tiffany, Real Property, 3rd Ed. which stated “if a conveyance does not describe the land with such particularity as to render identification possible, the conveyance is a nugatory.” Sorrells, supra; See also Boensch v. Cornett, 267 Ark. 671, 590 S.W.2d 55 (1979). If the document does not identify the land as “being in any county or even in the state. It does not furnish a key by which the land might be certainly identified . . . .” Turrentine v. Thompson, 193 Ark. 253 (1963). Even if the property could be identified by oral testimony, a contract for the sale of land comes within the statute of frauds, ARK. CODE ANN. § 4-59-101, and must therefore be in writing to be enforceable.

A document which is in violation of Arkansas’ statute of frauds is unenforceable and void. Sorrells, 268 Ark. at 818. In Sorrells, the real estate contract did not contain a description that detailed the county or state of property to be purchased. The court stated that the instruments could not be incorporated into one agreement to furnish a description of the land because neither described the land with such particularity as to make identification possible; therefore, the contracts did not satisfy the statute of frauds. The court held that the transaction was void and awarded the purchasers the amount of money paid on the contract. Id.

by Robert A. Ballinger, Attorney at Law

The CLA (construction loan agreement) is often likened to a road map or a blueprint. It should contain all the terms and conditions of the construction loan necessary to bring the project to fruition while simultaneously protecting the bank’s interests. A good construction loan agreement clearly spells out the terms and conditions under which the bank will fund construction, as well as the terms and conditions that, if not met by the borrower, entitle the bank to halt funding and implement certain remedies. The goal of the agreement is to set the guidelines that must be met in order to achieve the successful lien-free completion of the construction of the subject project.
Paramount to accomplishing that goal is having the borrower and lender agree on the definitions of terms found throughout the construction loan agreement. Without the terms clearly defined up front, differences of opinion between borrower and lender may arise during the construction period. Figuring out those differences midstream may cause delays and the project may suffer, which is something no one wants to happen.
Also, a key component to the CLA is the construction period, normally defined as the period of time between the commencement date and the completion date.
Finally, the Use of Proceeds form, or Sources and Uses of Funds statement, is an important part of construction loan underwriting that should be included in the construction loan agreement. The purpose of the Use of Proceeds form in underwriting is to identify the total costs of a project, calculate acceptable loan-to-cost parameters, and determine the sufficiency and sources of the borrower’s equity.