James R. Lovett v. Arkansas Federal Credit Union

Annotate this Case









December 8, 2004





Larry D. Vaught, Judge

In this one-brief appeal, Lovett contends that Arkansas Federal Credit Union (AFCU) was estopped from relying on a reaffirmation agreement that he executed to AFCU after his personal bankruptcy. We disagree and affirm the judgment of the circuit court.

On June 17, 2002, AFCU filed a complaint against Lovett asserting that he owed $45,741.45, plus costs, pre-judgment interest, and post-judgment interest based on a loan that he received-secured by his home-from AFCU. The complaint alleged that the debt was past due and owing, that AFCU had made numerous requests of Lovett to bring the account current, and that he failed to respond or comply with the debt. AFCU proved the debt by introducing a reaffirmation agreement that Lovett and his attorney signed on May 3, 2001. The reaffirmation of Lovett's debt to AFCU followed his filing for bankruptcy protection in federal court.

In his answer, Lovett asserted the defense of estoppel. Specifically, he claimed that AFCU advised him that its mortgage was the first mortgage on his home. According to Lovett, based on this representation, he agreed to enter into a reaffirmation agreement with the lender in order to save his home. However, subsequent to his reaffirmation of the debt it was determined that AFCU in fact had the second mortgage on the property. Based on this fact, Lovett asked the circuit court to dismiss AFCU's complaint "based on estoppel or intentional misrepresentation of fact," because he would not have entered into the agreement if AFCU had acknowledged that it had the second-not the first-mortgage on his home.

The circuit court rejected Lovett's claim of estoppel, specifically noting evidence presented-testimony of AFCU loan officer Nina Furman-that indicated Lovett was made aware of AFCU's mistaken belief that it had the first mortgage before the reaffirmation agreement was signed and returned to the lender. The court also imputed much of AFCU's initial confusion to Lovett based on his misrepresentation on the AFCU loan agreement that no money whatsoever was owed on his property to any other person, firm, or corporation. This statement was made despite the fact that, on December 1, 1997, Lovett secured a $48,047 loan from Money Tree (now Home Equity) with the same real property that he later pledged to AFCU. The circuit court awarded AFCU the full debt amount, together with pre-judgment interest of 6%, and post-judgment interest of 10%, plus costs associated with the action. Lovett appeals the judgment, arguing that AFCU should not have been allowed to rely on an agreement that it fraudulently induced.

The circuit court's decision that AFCU was not estopped from relying on the reaffirmation agreement executed by Lovett will be upheld unless it is clearly against the preponderance of the evidence. First Bank of Crosset v. Phillips, 13 Ark. App. 157, 681 S.W.2d 408 (1984).There are four elements necessary for a finding of estoppel: (1) the partyto be estopped must know the facts; (2) the party to be estopped must intend that the conduct be acted on or must act so that the party asserting the estoppel had a right to believe it was so intended; (3) the party asserting the estoppel must be ignorant of the facts; (4) the party asserting the estoppel must rely on the other's conduct and be injured by that reliance. Ark. Dep't of Human Servs. v. Estate of Lewis, 325 Ark. 20, 922 S.W.2d 712 (1996).

The testimony established that Furman did make an error in the cover letter that she attached to the reaffirmation agreement prepared on April 26, 2000. She indicated in her cover letter that AFCU believed that it had the first mortgage on Lovett's property. However, she testified that almost immediately after writing the letter, she realized her error and called and discussed the mistake with Mr. Lovett or Ms. Lovett on three separate occasions-all prior to the signing and filing of the reaffirmation agreement. In response, Lovett makes a credibility argument. He asserts that the only evidence presented that AFCU (or its representative) acknowledged the error prior to his signing of the agreement is the oral testimony of Furman. He further notes that her testimony was based on her personal notes and that she failed to offer any further proof-like a written letter-rescinding her prior assertion that AFCU held the first mortgage on his home.

The circuit court believed Furman's testimony and concluded that Lovett failed to establish even a prima facie case of estoppel. Because Lovett's estoppel claim is dependent on a converse credibility determination as to the misrepresentation (and the cure thereof), we must review the circuit court's credibility finding. In this review, we give due deference to the circuit court's superior position to determine the credibility of the witnesses and the weight to be accorded to their testimony. Owners Assoc. of Foxcroft Woods, Inc. v. Foxglen Assocs., 346 Ark. 354, 57 S.W.3d 187 (2001). Disputed facts and determinations of witness credibility are within the province of the fact-finder. Id. The circuit court found Furman's testimony to be credible, and our own review of the record is not in marked disagreement with this finding. Accordingly, because the circuit court's decision that Lovett failed to establish an estoppel defense is not against the preponderance of the evidence, we affirm.


Pittman and Hart, JJ., agree.