Tilley v. Malvern National Bank
532 S.W.3d 570
Ark.2017Background
- Kenneth Tilley borrowed $221,000 from Malvern National Bank (MNB) in 2010; the loan agreement contained a predispute jury-waiver clause.
- MNB sued for foreclosure and replevin in 2011 after Tilley defaulted; Tilley answered and demanded a jury and later filed counterclaims and a third-party complaint against former MNB VP Stephen Moore alleging promissory misrepresentations and related torts.
- Tilley’s counterclaims sought money damages (lost profits among them) and a jury trial; the circuit court struck his jury demand, held a bench trial, and entered foreclosure judgment for MNB.
- Tilley appealed; the Court of Appeals affirmed on waiver grounds, and the Arkansas Supreme Court granted review.
- The Supreme Court considered (1) whether Tilley was entitled to a jury on his legal claims despite the foreclosure proceeding, (2) whether predispute contractual jury waivers are enforceable under the Arkansas Constitution, preservation of that argument, and (3) whether Arkansas applies a per se new-business rule barring lost-profit damages.
Issues
| Issue | Plaintiff's Argument (Tilley) | Defendant's Argument (MNB/Moore) | Held |
|---|---|---|---|
| Whether Tilley’s legal counterclaims/third-party claims must be tried to a judge because they arose in a foreclosure (clean-up doctrine) | Clean-up doctrine is obsolete after Amendment 80; historical test controls and Tilley’s claims are legal and demand money damages, so they require a jury | Foreclosure is equitable and claims integral to it may be decided by the court without a jury | Court: Clean-up doctrine abolished after Amendment 80; historical nature/relief test controls. Tilley’s legal claims seeking money damages must be submitted to a jury. |
| Whether a predispute contractual jury-waiver clause is enforceable under Ark. Const. art. 2, § 7 | Predispute jury waivers are unenforceable because the Constitution guarantees the inviolate right to a jury and waivers must occur “in the manner prescribed by law,” which requires statutory or Rule-based procedure after demand | Parties may contractually waive jury; contract terms controlling forum/resolution (or arbitration) should be enforceable | Court: Predispute contractual jury waivers are unenforceable. Waiver must occur in a manner prescribed by law (statute or court rule after a demand). Reversed on jury-waiver ground. |
| Whether Tilley preserved his constitutional challenge to predispute waivers (timeliness/preservation) | Tilley raised constitutional right and waiver argument in responses and at hearing; preserved for appeal | Argument was first presented post-trial or only in motion-for-new-trial reply and thus not preserved | Court: Tilley preserved the constitutional-waiver argument; appellate review permitted. (Dissent disagreed.) |
| Whether Arkansas applies a per se new-business rule barring recovery of lost profits for new enterprises | Marvell’s per se bar is outdated; apply the American Fidelity standard requiring reasonably complete evidence so jury need not speculate — lost profits may be awarded if adequately proven | Marvell remains binding and bars lost-profits for new businesses; alternatively issue is moot | Court: Overrules Marvell to the extent it imposes a per se new-business bar; applies American Fidelity standard — lost profits recoverable with adequate proof. |
Key Cases Cited
- Cruthis v. First Nat’l Bank of DeWitt, 360 Ark. 528 (discusses Amendment 80 consolidation and historical law/equity test)
- Riggin v. Dierdorff, 302 Ark. 517 (foreclosure characterized as equitable proceeding)
- Mode v. Barnett, 235 Ark. 641 (constitutional interpretation that Legislature may prescribe manner of jury-waiver)
- Venable v. Becker, 287 Ark. 236 (waiver governed by Rule 38 and predecessor statute; Rule-based waiver analysis)
- Marvell Light & Ice Co. v. Gen. Elec. Co., 162 Ark. 467 (1924) (historic new-business rule barring lost-profits recovery)
- Am. Fidelity Fire Ins. Co. v. Kennedy Bros. Constr., Inc., 282 Ark. 545 (standard that lost-profits recovery requires sufficiently complete evidence to avoid speculation)