Chalmers v. Chalmers

Hugh B. CHALMERS and Janelle Chalmers v. Nina
CHALMERS and Ralph W. Sloan, Successor
Trustee

96-358                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered February 3, 1997


1.   Gifts -- inter vivos -- promissory note may be subject. -- A promissory
     note, or any chose in action or other evidence of debt, may be
     the subject of a gift inter vivos.

2.   Gifts -- inter vivos -- requirements. -- The requirements for an
     effective inter vivos gift are an actual delivery of the
     subject matter of the gift to the donee with a clear intent to
     make an immediate, unconditional, and final gift beyond
     recall, accompanied by an unconditional release by the donor
     of all future dominion and control over the property so
     delivered.

3.   Gifts -- delivery -- family transactions. -- Although the rule with
     respect to delivery of gifts is less strictly applied to
     transactions between members of a family, delivery must occur
     for a gift to be effective.

4.   Gifts -- inter vivos -- acceptance by donee required. -- It has been
     held that, in addition to other requirements, the validity of
     an inter vivos gift is dependent upon acceptance by the
     putative donee.

5.   Gifts -- delivery -- requirements. -- The gravamen of delivery is a
     showing of an act or acts on the part of the putative donor
     displaying an intention or purpose to part with dominion over
     the object of the gift and to confer it on some other person;
     express words or particular conduct may be dispensed with when
     reasonable minds would conclude from attending circumstances
     that the purpose was present; intention to give, by itself, is
     not sufficient; there must be a delivery to consummate the
     gift and to pass title; the decisive factor is whether the
     putative donor has the power to reclaim the property.

6.   Gifts -- delivery -- placing of item in lockbox not sufficient. -- The
     mere placing of an item in a lockbox to which both the alleged
     donor and donee have access is not sufficient to constitute
     delivery; even the placement of an item in a lockbox
     exclusively controlled by the alleged donee may not constitute
     delivery; the appellate court, however, considers other
     evidence to determine the intent of the alleged donor.

7.   Gifts -- delivery -- indorsement and declaration supported chancellor's
     decision that present gift was intended and delivery requirement was
     satisfied. -- The supreme court held that the chancellor's
     decision that the deceased intended a present gift and that
     the delivery requirement was satisfied was supported by the
     deceased's indorsement on the back of a promissory note in
     favor of his wife and by the fact that the deceased declared
     "to the world" that he had assigned the note and deed of trust
     to his wife by recording the assignment to her of the deed of
     trust; the assignment mentioned the note as well; the
     chancellor's conclusion that it was the intention of the
     deceased to make a present gift was not clearly erroneous, and
     his conclusion that delivery occurred was proper in the
     circumstances presented.

8.   Appeal & error -- chancellor's factual determination on usury not clearly
     erroneous. -- In reviewing a chancellor's factual determination,
     the appellate court does not reverse unless it can say that it
     was clearly erroneous or clearly against the preponderance of
     the evidence; the appellate court defers to the superior
     position of the chancellor to judge the credibility of the
     witnesses; in this case, the appellate court could not say
     that the chancellor's determination that appellant had failed
     to meet his burden of showing usury by clear and convincing
     evidence was clearly erroneous or clearly against the
     preponderance of the evidence.


     Appeal from Crittenden Chancery Court; Rice Van Ausdall,
Chancellor; affirmed.
     Rieves & Mayton, by: Martin W. Bowen, for appellants.
     Sloan, Rubens & Peeples, by: Kent J. Ruebens, for appellees.

     David Newbern, Justice.
     The issues in this case concern whether a promissory note was
delivered, and if so, whether the interest specified was usurious
thus rendering the note unenforceable.  We affirm the Chancellor's
decision that the note was delivered and that the interest charged
was not usurious.
     Appellant Hugh B. Chalmers issued a promissory note to his
father, Hugh J. Chalmers, now deceased, in the amount of $50,000. 
The note was payable upon demand or within sixty days of the death
of Hugh J. Chalmers.  The note, dated January 1, 1975, provided for
interest at 10% per year.  According to the note, payment was
secured by 150 shares of common capital stock of Chalmers Buick
Company.
     On November 9, 1982, the parties substituted a deed of trust
on certain real property in place of the stock as security for the
note.  The substitution agreement referred to the note as "a note
dated January 1, 1975."  The deed of trust was recorded on November
19, 1985.
     On February 2, 1989, an additional agreement was entered
between Hugh B. Chalmers and his father.  According to the
agreement,  Hugh B. Chalmers would pay $15,000 to First Commercial
Bank and "The balance owed to Hugh [J.] Chalmers by Hugh B.
Chalmers will be $35,000."
     Hugh B. Chalmers paid interest on the note, including a $5,000
payment for the year 1975, up until 1991.  On July 9, 1992, Hugh J.
Chalmers assigned the deed of trust to his wife, Nina Chalmers,
"together with the note and indebtedness described in and now
secured thereby, and all monies due or to become due thereunder
with the interest thereon."  The assignment was recorded on July 9,
1992.
     Hugh J. Chalmers died.  Nina Chalmers's demand for payment of
the note was rejected by Hugh B. Chalmers, and she filed this
action to recover the $35,000 remaining unpaid on the note and to
foreclose on the deed of trust.
     Hugh B. Chalmers moved to dismiss the complaint on the ground
that the note was unenforceable because interest was charged at a
usurious rate.  He also contended that his father failed to make an
effective inter vivos assignment of the note because it was not
delivered to Nina Chalmers while he was alive.  The Chancellor
refused to dismiss the complaint.
     At the trial, Mr. Chalmers admitted that the interest rate
provided in the note, 10%, was not usurious on its face.  He
claimed that, rather than being issued January 1, 1975, the date on
the note, the original transaction occurred and the note was
actually issued on September 30, 1975.  According to Mr. Chalmers,
the interest for 1975 was at a usurious rate because he paid $5,000
in interest for the three months immediately following the issuance
of the note.
     Nina Chalmers testified that she and her husband had a bank
safety-deposit box.  It was referred to as a "lock box."  She knew
nothing of the note until after her husband died when she found the
note in the lockbox.  The note was indorsed, "Pay to the order of
Nina L. Chalmers," and signed "Hugh Chalmers."
     The Chancellor's letter opinion stated that "The proof showed
that ... [Nina Chalmers] was unaware of the gift, but the court is
satisfied that the deceased intended a present gift, and delivery
is satisfied by the recording of the deed of trust assignment, when
coupled with the endorsement on the back of the note."  
     The Chancellor declined to hold the note usurious.  The
Chancellor found that "it is not clear that the instrument did not
reflect the agreement of the parties....  The note is not usurious
on its face.  The burden of showing usury, by clear and convincing
evidence, is upon defendants, and the court feels they have failed
to do this."  The decree granted Nina Chalmers a judgment on the
note for $35,000 and ordered a sale of the property described in
the deed of trust if the debt were not paid in ten days.

                           1. Delivery
     Hugh B. Chalmers contends that Hugh J. Chalmers did not effect
an inter vivos gift to Nina Chalmers because Hugh J. Chalmers
failed to deliver the note to her during his life.  A promissory
note, or any chose in action or other evidence of debt, may be the
subject of a gift inter vivos.  See Irvin v. Jones, 310 Ark. 114,
832 S.W.2d 827 (1992).  The requirements for an effective inter
vivos gift have been stated by the Court as:  an actual delivery of
the subject matter of the gift to the donee with a clear intent to
make an immediate, unconditional, and final gift beyond recall,
accompanied by an unconditional release by the donor of all future
dominion and control over the property so delivered.  Ragland v.
Commercial Nat'l Bank of Arkansas, 276 Ark. 418, 635 S.W.2d 258
(1982);  Boling v. Gibson, 266 Ark. 310, 584 S.W.2d 14 (1979).  
     Although the rule with respect to delivery of gifts is less
strictly applied to transactions between members of a family,
delivery must occur for a gift to be effective.  Aycock v. Bottoms,
201 Ark. 104, 144 S.W.2d 43 (1940).  See Baker v. Applen, 181 Ark.
454, 26 S.W.2d 109 (1930).  
     Mr. Chalmers contends that placement of the note in the lock-
box was insufficient to effect delivery because the gift was not
beyond recall by his father.  He submits that Hugh J. Chalmers
retained the right to exercise dominion and control over the note. 
Nina Chalmers contends that placement of the note in the lock-box
to which she and Hugh J. Chalmers both had access was sufficient
delivery when combined with the recordation of the assignment of
the deed of trust and the indorsement on the note.  She also points
out that the transaction was between family members.
     Some of our cases state a requirement that the validity of an
inter vivos gift is dependent upon acceptance by the putative donee
in addition to the elements stated above.  See, e.g., Irvin v.
Jones, supra.   Although reference is made to the fact that Nina
Chalmers was unaware of the note and deed of trust until after Hugh
J. Chalmers's death, that fact is argued under the point that
delivery was not effected.  We are not asked to hold that there was
no gift due to lack of acceptance, and we do not address that
point.    
     The gravamen of delivery is a showing of an act or acts on the
part of the putative donor displaying an intention or purpose to
part with dominion over the object of the gift and to confer it on
some other person.  Express words or particular conduct may be
dispensed with when reasonable minds would conclude from attending
circumstances that the purpose was present.  Carlson v. Carlson,
224 Ark. 284, 273 S.W.2d 542 (1954).  Intention to give, by itself,
is not sufficient; there must be a delivery to consummate the gift
and to pass title.  Gross v. Hoback, 187 Ark. 20, 58 S.W.2d 202
(1933).  The decisive factor is whether the putative donor has the
power to reclaim the property.  Carlson Administrator v. Carlson,
supra.
     The mere placing of an item in a lockbox to which both the
alleged donor and donee have access is not sufficient to constitute
delivery.  Cowan v. Powell, 219 Ark. 498, 243 S.W.2d 373 (1951). 
Even the placement of an item in a lockbox exclusively controlled
by the alleged donee may not constitute delivery.  McCune v. Brown,
8 Ark. App. 51, 648 S.W.2d 811 (1983).  We do, however, consider
other evidence to determine the intent of the alleged donor.  
     In  Boling v. Gibson, supra, certificates of deposit were
placed in a lockbox over which both the alleged donor and the
alleged donee may have had control.  The case was decided on a
different point, but in an obiter dictum we said, "The question was
not whether ... [the alleged donor] had lost all dominion and
control over these certificates.  It was whether he clearly
intended to relinquish all dominion and control." 
     According to Ark. Code Ann.  4-3-203(a) (Repl. 1991), "An
instrument is transferred when it is delivered by a person [Hugh J.
Chalmers] other than its issuer [Hugh B. Chalmers] for the purpose
of giving to the person receiving delivery the right to enforce the
instrument."  According to Ark. Code Ann.  4-3-204(c) (Repl.
1991), "... an indorsement that transfers a security interest in
the instrument is effective as an unqualified indorsement of the
instrument."  In this case, the Chancellor's decision is supported
by the indorsement on the back of the note in favor of Nina
Chalmers and the fact that Hugh J. Chalmers declared "to the world"
that he had assigned the note and deed of trust to his wife by
recording the assignment to her of the deed of trust.  The
assignment mentioned the note as well.  
     The Chancellor relied on our decision in Aycock v. Bottoms,
supra, not only for the holding that the delivery requirement is
relaxed as between family members, but for the statement that,
"Indeed it has been held quite frequently in many jurisdictions
that the assignment of certificates of stock to a donee by a holder
is tantamount to delivery of the stock, although manual delivery
may be wanting."
     The Chancellor's conclusion that it was the intention of Hugh
J. Chalmers to make a present gift was not clearly erroneous, and
his conclusion that delivery occurred was proper in the
circumstances presented.

                            2.  Usury
     Hugh B. Chalmers also contends that the note is void because
he was charged a usurious rate of interest.  All parties concede
that the 10% interest rate included in the terms of the note is
facially valid.   
     The evidence presented by Mr. Chalmers to support his claim
consisted solely of his testimony that the note was actually issued
on September 30, 1975.  In his letter to the attorneys explaining
his decision, the Chancellor stated the following:

     This note was prepared by an accountant, and appears to have
     been prepared at the request of both parties to the note.  It
     is clear defendant [Hugh B. Chalmers] was well versed about
     usury, he being a director on a bank board.  It must be
     pointed out that if a borrower is the author of, or joint
     adventurer of the tainted transaction, he cannot profit by his
     own action.  Perry v. Selby, 196 Ark. 541, 118 S.W.2d 849
     (1938); McDermott v. Strauss, 283 Ark. 444, 678 S.W.2d 334
     (1984); Crawford v. Gen. Contract Corp.,  174 F. Supp. 283
     (1959).

Reference was also made by the Chancellor to the fact that Hugh B.
Chalmers had referred to the note as a note of January 1, 1975, in
subsequent instruments to which he was a party.
     The Chancellor thus held that Hugh B. Chalmers failed to meet
his burden of showing usury by clear and convincing evidence.  In
reviewing that factual determination, we do not reverse unless we
can say that it is clearly erroneous (clearly against the
preponderance of the evidence).  Ark. R. Civ. P. 52(a); Riddick v.
Streett, 313 Ark. 706, 858 S.W.2d 62 (1993).  We defer to the
superior position of the chancellor to judge the credibility of the
witnesses.  Id.;  Brown v. City of Stuttgart, 312 Ark. 97, 847 S.W.2d 710 (1993); McElroy v. Grisham, 306 Ark. 4, 810 S.W.2d 933
(1991).  We cannot say the Chancellor's determination was clearly
erroneous or clearly against the preponderance of the evidence.
     Affirmed.
     Thornton, J., not participating.