577 S.W.3d 769
Ark. Ct. App.2019Background
- Appellant (seller/lessor) and appellees (buyers/DJ Mart, LLC and Singh) entered a written "as-is" contract for sale of a gas station on Sept. 8, 2017; buyer paid $96,000 down on a $640,000 purchase price with installment payments to follow.
- Contract contained clauses requiring buyer to maintain premises and allocating tax payments (seller to pay 2017 taxes from contract date forward; buyer to pay subsequent years).
- Before and after signing, Singh learned multiple fuel tanks and pumps were unserviceable and that the property had delinquent real-estate taxes dating back several years; Singh testified appellant’s agent promised new tanks/pumps within two months and repeatedly assured repairs would be made.
- DJ Mart continued operating the convenience store, accepted limited gasoline deliveries, then stopped making further payments after receiving notice of tax delinquency; appellant sued for unlawful detainer and unpaid installments.
- DJ Mart counterclaimed for fraud and sought rescission and return of the $96,000 down payment; the trial court found appellant’s agents committed material fraud and omissions (tax delinquency, pump/tank condition, false repair promises), rescinded the contract, dismissed appellant’s complaint with prejudice, and ordered return of the $96,000.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether seller committed fraud by omission in failing to disclose delinquent taxes | Singh/DJ Mart: seller withheld material fact (years of unpaid taxes, pending tax sale); buyer relied and would not have contracted | Seller: contract allocated taxes and was "as-is"; no fraud — written contract governs | Court: Seller’s omission was material and fraudulent; rescission granted and down payment returned |
| Whether seller misrepresented pump/tank condition and promised repairs | DJ Mart: agents promised new tanks/pumps within two months and concealed true inoperability; induced the sale | Seller: statements were superseded by written contract; future promises not actionable; buyer had contractual repair/maintenance duties | Court: Found oral promises and omissions fraudulent; exception to future-events rule applied where promisor lacked intent to perform |
| Admissibility of extrinsic evidence given an integrated written contract (parol-evidence) | DJ Mart: oral promises and omissions are evidence of fraud to avoid the contract | Seller: parol-evidence rule bars prior/contemporaneous oral statements that contradict written agreement | Court: Parol-evidence rule does not bar proof of fraud; trial court properly relied on testimony to find fraud |
| Whether seller validly terminated contract and forfeited payments under default clause | Seller: buyer defaulted; contract allows seller to terminate and retain payments as liquidated damages | DJ Mart: seller never validly exercised termination; rescission was timely sought due to fraud | Court: Argument waived/not preserved; in any event, trial court found rescission appropriate and returned down payment |
Key Cases Cited
- Waddell v. Ferguson Home Builders, LLC, 513 S.W.3d 271 (Ark. App. 2017) (bench-trial standard of review)
- Hurt-Hoover Invs., LLC v. Fulmer, 433 S.W.3d 917 (Ark. App. 2014) (parol-evidence rule as substantive law)
- First Nat'l Bank of Crossett v. Griffin, 832 S.W.2d 816 (Ark. 1992) (written contract merges prior agreements absent fraud, accident, or mistake)
- Morris v. Knopick, 521 S.W.3d 495 (Ark. App. 2017) (appellate deference to trial-court credibility determinations)
- Lone v. Koch, 467 S.W.3d 152 (Ark. App. 2015) (future-promises generally not actionable as fraud; exception where promisor lacked intent to perform)
- Trakru v. Mathews, 434 S.W.3d 10 (Ark. App. 2014) (fraud elements and limits on misrepresentation recovery)