550 S.W.3d 420
Ark. Ct. App.2018Background
- DWB, LLC and member Danny Brown leased the Mayflower property and were contractually required to maintain replacement-value insurance on improvements; they instead carried $450,000 actual-cash-value coverage.
- A tornado in April 2014 damaged the property; insurer issued a $450,000 policy payment and a separate $10,000 debris-removal payment to DWB.
- Brown endorsed the $450,000 check and tendered it to D & T Pure Trust and Doug Boydston with an accord-and-satisfaction letter; appellees refused and moved to deposit the funds into the court registry. The court ordered deposit.
- First Service Bank, the mortgagee, later withdrew approximately $185,000 from the registry. Doug Boydston died during the litigation and Toni Boydston was substituted.
- At trial the circuit court found appellants underinsured the property, converted the $450,000 and $10,000 checks, awarded punitive damages ($230,000), prejudgment interest, and $200,000 in attorney’s fees; this appeal followed.
Issues
| Issue | Plaintiff's Argument (D & T / Boydston) | Defendant's Argument (Brown / DWB) | Held |
|---|---|---|---|
| Waiver of insurance requirement | No waiver; appellees never knowingly accepted lower coverage | Brown emailed COI and received no objection, so Boydston waived right to insist on replacement-value coverage | No waiver; factual credibility findings for appellees affirmed |
| Conversion of $450,000 check | Brown/DWB exercised dominion inconsistent with appellees’ rights | Tender + accord-and-satisfaction attempt and deposit to registry show lack of wrongful intent or that court controlled funds | Conversion affirmed for $450,000; placement in registry did not negate prior dominion |
| Conversion of $10,000 debris-payment | Appellees had an interest and defendants never offered the funds | Debris policy not required by lease, so defendants entitled to funds | Conversion affirmed for $10,000; appellees had an interest and were never offered funds |
| Punitive damages for conversion | Defendants acted with purpose to deny appellees’ rights | Defendants relied on court order/finding of good faith re deposit, so punitive damages improper | Punitive damages ($230,000) affirmed; nonfinal good-faith finding did not preclude punitive award |
| Attorney’s fees under Ark. Code §16-22-308 | Prevailing party on primarily contract action; fees justified | Case primarily tort; fees for tort-related work should be excluded | Fee award ($200,000) affirmed; court correctly found action primarily contractual and did not abuse discretion |
| Prejudgment interest (underinsurance and $450,000 conversion) | Interest compensates funds wrongfully withheld | Exact date/amount of loss ambiguous; prejudgment interest inappropriate | Prejudgment interest awards reversed: underinsurance and conversion interest reversed for lack of exact ascertainability |
| Personal liability of Brown | Brown not liable individually; LLC shield applies | Brown personally obligated under lease and exercised personal control | Brown held jointly and severally liable; appellants bound by pleadings and evidence showed personal control |
Key Cases Cited
- Stephens v. W. Pontiac-GMC, Inc., 647 S.W.2d 492 (Ark. App.) (knowledge of breach plus continued acceptance of benefits can waive contract rights)
- Omni Holding & Dev. Corp. v. C.A.G. Invs., Inc., 258 S.W.3d 374 (Ark.) (appellate standard for reviewing factual findings)
- Ford Motor Credit Co. v. Ellison, 974 S.W.2d 464 (Ark.) (credibility determinations lie with fact-finder)
- Buck v. Gillham, 96 S.W.3d 750 (Ark. App.) (definition and elements of conversion)
- City Nat'l Bank of Fort Smith v. Goodwin, 783 S.W.2d 335 (Ark.) (punitive damages standard in conversion: intent to violate property right or cause damage)
- Entertainer, Inc. v. Duffy, 407 S.W.3d 514 (Ark.) (standard of review for punitive-damage findings)
- Chrisco v. Sun Indus., Inc., 800 S.W.2d 717 (Ark.) (trial court discretion in awarding attorney’s fees)
- Jiles v. Union Planters Bank, 205 S.W.3d 187 (Ark. App.) (fees under §16-22-308 limited to actions primarily in contract)
- Dorsett v. Buffington, 429 S.W.3d 225 (Ark.) (purpose of prejudgment interest)
- Lovell v. Marianna Fed. Sav. & Loan Ass'n, 589 S.W.2d 577 (Ark.) (prejudgment interest requires ascertainable damages calculable without opinion)
- Looney v. Looney, 986 S.W.2d 858 (Ark.) (court may modify nonfinal orders)
- King v. Carney, 20 S.W.3d 341 (Ark.) (limits on reliance on orders’ directives)
- Cole v. First Nat'l Bank of Fort Smith, 800 S.W.2d 412 (Ark.) (reliance on orders and statute-of-limitations principles)
- Sturdivant v. Reese, 111 S.W. 261 (Ark.) (court control over registry disbursements)
- Int'l Harvester Co. v. Burks Motors, Inc., 481 S.W.2d 351 (Ark.) (litigants bound by their pleadings)