J. Michael Enterprises, Inc. v. Robert Oliver

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DIVISION IV  CA07­537  DECEMBER 19, 2007  J. MICHAEL ENTERPRISES, INC.  APPELLANT  AN APPEAL FROM BENTON COUNTY  CIRCUIT COURT  [No. CV 2006­600­3]  v.  HONORABLE JAY FINCH,  CIRCUIT JUDGE  ROBERT OLIVER  APPELLEE  AFFIRMED  J. Michael Enterprises, Inc. (JME), brings this appeal from a judgment of the Benton  County Circuit Court quieting title to thirty­nine acres in appellee Robert Oliver. The court  also awarded Oliver $2,500 in punitive damages and $5,000 in attorney’s fees. JME raises  three points on appeal in which it challenges the quieting of title in Oliver on the basis that  Oliver had not paid the taxes on the property for seven years and that the tax deed to Oliver  contained an invalid description, as well as the award of punitive damages. Finding no merit  in any of these points, we affirm. Stipulated Background Facts  In  1964,  Paula  Weir  took  title  by  warranty  deed  to  forty  acres  described  as  the  Southeast Quarter of the Northeast Quarter of Section 9, Township 18 North, Range  29  West, in Benton County. In 1965, Weir had a survey conducted which carved a one­acre  tract out of the forty­acre tract. Weir and her husband executed a deed of trust to the one­acre tract. The deed of trust was foreclosed by the lender and the lender purchased the one­acre  tract at the foreclosure sale. In 1970, Lulu Woodington purchased the one­acre tract from the  lender. In July 1996, Woodington filed suit against Weir seeking to quiet title to the one­acre  tract. A decree quieting title in Woodington was entered in August 1996, and an amended  order was entered on September 23, 1996. The description in the decree was different from  the 1965 survey description.  In 1987, Weir successfully sued to set aside an earlier tax sale of the thirty­nine­acre  tract on the basis of an improper tax sale. The complaint alleged that the legal description  was improper and that the proceedings to quiet title after the tax sale were defective in that  Weir was not made a party to those proceedings.  Weir failed to pay the property taxes on the property after 1989, and the property was  forfeited to the State of Arkansas.  In  November 1996, Oliver received a tax deed to the  thirty­nine­acre tract. The description of the property contained in the tax deed was “SE 1/4  NE 1/4 EXC 1 A NW1/4 PT,” together with references to the appropriate section, township,  and range as shown by the notation “9 18N 29W.” In January 1997, Oliver and Woodington  exchanged  quitclaim  deeds  in  which  each  quitclaimed  his  or  her  interest  in  the  other’s  property. In other words, Woodington quitclaimed whatever interest she had in the thirty­  nine­acre tract to Oliver, and he did the same in regards to the one­acre tract. Woodington  then conveyed the one­acre tract to Eric Cabledue by warranty deed also recorded on January  2, 1997. On December 1, 2005, Weir and her husband each executed quitclaim deeds to the  entire forty­acre tract to JME. The deeds were recorded on December 5, 2005. 2  Oliver filed suit seeking to quiet title to his thirty­nine acre tract. He asserted that he  had  paid  the  taxes  on  the  property  for  more  than  seven  years  under  color  of  title.  The  complaint also asserted that JME’s action in obtaining and recording the quitclaim deeds  from the Weirs was a violation of Ark. Code Ann. § 5­37­226 (Supp. 2007) and sought treble  actual  and  punitive  damages  as  provided  by  that  section.    JME  answered,  denying  the  material allegations of the complaint. JME also filed a counterclaim in which it sought a  declaratory judgment that the tax deed to Oliver was invalid based on the legal description  being legally insufficient.  The Evidence  At trial, Oliver testified that he had paid all of the property taxes owed on the thirty­  nine­acre tract since he purchased the property at the tax sale. Oliver also said that he paid  the  back  taxes  owed  on  the  property.  Both  Oliver  and  Eric  Cabledue  testified  that  the  exchange of deeds between Oliver and Lulu Woodington was necessitated when Woodington  was  attempting  to  sell  her  one­acre  tract  to  Cabledue  and  it  was  discovered  that  the  description of her tract was incorrect. Cabledue said that he had paid all of the taxes on his  property since he acquired it. Cabledue also considered the quitclaim deeds executed by  Paula Weir and her husband to JME to be a cloud on his title.  Title  examiner  Phil  Bronson  testified  that,  after  the  exchange  of  quitclaim  deeds  between  Oliver  and  Woodington,  he  issued  a  title  insurance  policy  for  Woodington’s  conveyance to Cabledue. He also said that he relied on assessment cards and other records  showing  the  assessment  and  payment  of  taxes  on  property.  According  to  Bronson,  the 3  records show that Oliver was paying the taxes on thirty­nine acres of the forty­acre tract. On  cross­examination, he acknowledged that he could not tell from the legal description of the  tax deed or the information in the Assessor’s Office where Cabledue’s one­acre tract was  located within the forty acres. He asserted that the same legal description on Oliver’s tax  deed and the records in the Assessor’s Office describe two different thirty­nine­acre tracts  because of the changed description of the excepted one­acre tract.  Thurstle Mullen, the president and sole stockholder in JME, testified that JME does  not have any specific business and that he purchases property in the corporate name. He  described JME as a shell company that owns real estate. Mullen said that he prepared the  deeds that the Weirs executed to convey their interest to JME after he determined that the  tax deed to Oliver did not describe any lands. He acknowledged that he was unaware of  Cabledue’s ownership of the one­acre tract when he obtained the quitclaim deeds from the  Weirs. Mullen also could not say that he had researched the tax assessment records before  obtaining the quitclaim deeds. He said that, when he did his research, the records showed  that Oliver was paying taxes on thirty­nine acres of the forty­acre tract but not which thirty­  nine acres.  Shirley  Sandlin,  the  recently  retired  Benton  County  Assessor,  testified  that  the  assessor’s office keeps records on maps and cards and that any parcel within the county can  be  located.  She  said  that  the  card  for  the  forty­acre  tract  shows  the  exchange  of  deeds  between Oliver and Woodington and that the entire forty­acre tract has been assessed in the  names of either Oliver or Cabledue since 1997. She said that the Oliver and Cabledue tracts 4  cannot be confused with each other. Sandlin had used the legal description contained in the  deed from Woodington to Oliver in assessing Oliver’s property. She described the problem  as being with only ten acres in the northeast portion of the forty­acre tract. She added that  Oliver’s legal description never changed on the card in the assessor’s office because all of  Oliver’s land is located within the quarter­quarter description.  Greg Hoggatt, the Tax Collector for Benton County, testified that both Oliver and  Cabledue had paid the taxes on their respective parcels since 1997.  He said that Oliver’s tax  sale purchase included paying the taxes owed for the years 1990 through 1995.  The Circuit Court’s Ruling  The circuit court ruled from the bench and found that Oliver had met his burden of  proving his title. The court noted that the parcel number could have been used to obtain the  history for the entire forty­acre tract and its correct description. The court also found that  both the tax deed and the quitclaim deed from Woodington to Oliver constituted color of title  for Oliver and that Oliver had paid the property taxes for more than seven years.  On January 17, 2007, Oliver filed a motion pursuant to Ark. Code Ann. § 5­37­226(a)  (Supp. 2007). That statute makes it unlawful to file any instrument of record clouding or  affecting  the  title  or  interest  of  the  true  owner  with  the  intent  of  clouding  the  title  or  procuring money from the true owner. Under subsection (c), an owner who brings suit to  remove the cloud from his title is entitled to three times actual damages, punitive damages,  and costs, including attorney’s fees. JME filed a response to the motion. 5  In its written judgment entered on January 31, 2007, the circuit court, in addition to  the findings relative to quieting title in Oliver, found that JME procured the quitclaim deeds  from the Weirs for the purpose of obtaining money from Oliver and awarded Oliver $2,500  in punitive damages and $5,000 in attorney’s fees. On March 1, 2007, JME filed a motion  to modify the judgment pursuant to Ark. R. Civ. P. 60, as well as a notice of appeal from the  judgment. On March 30, 2007, the circuit court entered an amended judgment. JME filed an  amended notice of appeal on April 9, 2007.  Standard of Review  Quiet title actions have traditionally been reviewed de novo as equity actions. City of  Cabot v. Brians, 93 Ark. App. 77, 216 S.W.3d 627 (2005). However, we will not reverse the  circuit court’s findings in such actions unless the findings are clearly erroneous. See id. A  finding of fact is clearly erroneous when, although there is evidence to support it, we are left  with the definite and firm conviction that a mistake has been committed. Id.  Arguments on Appeal  JME’s first and second points, which we address together, are that the circuit court  erred in quieting title in Oliver because the legal description contained in the tax deed to  Oliver was insufficient, and that, because of the indefiniteness of the description, Oliver  could not rely on either the tax deed or the quitclaim deed from Woodington as color of title.  We disagree.  A tax deed is sufficient if the description itself furnishes the key through which the  land might be definitely located by proof aliunde. Liggett v. Church of Nazarene, 291 Ark. 6  298, 724 S.W.2d 170 (1987). A tax deed may be declared invalid for want of a sufficient  legal description of the land involved. Payton v. Blake, 362 Ark. 538, 210 S.W.3d 74 (2005);  see also Gardner v. Johnson, 220 Ark. 168, 246 S.W.2d 568 (1952) (invalidating a deed  containing the description: “SW corner NE 1/101 N.Y. 63, 4 NE 1/4 Section 1, Township  7 North, Range 4 West, 5 acres E of R”); Sutton v. Lee, 181 Ark. 914, 28 S.W.2d 697 (1930)  (recognizing as invalid the description: “Parts of lots 3 and 4 in block 36 in the city of Hot  Springs, Arkansas”); Walls v. Mills, 149 Ark. 670, 225 S.W. 225 (1920) (invalidating a deed  containing the description: “Pt. NW NW Section 7 Township 12 S, Range 29 W.  11.16  acres”). Unlike the cases cited above, the description here is sufficient because Oliver owns  thirty­nine of the forty acres in the quarter quarter and the question is the location of the one  acre  he  does  not  own.  That  can  easily  be  determined  by  reference  to  the  records  in  the  assessor’s office. Therefore, the tax deed could properly be considered color of title.  In its argument directed to the Woodington deed to Oliver as color of title, JME relies  on  Bailey  v.  Jarvis,  212  Ark.  675,  208  S.W.2d  13  (1948),  and  Weast  v.  Hereinafter  Described Lands, 33 Ark. App. 157, 803 S.W.2d 565 (1991), for the proposition that one  cannot  “manufacture”  color  of  title.  Those  cases  have  no  application  here  because  the  exchange  of  deeds  between  Woodington  and  Oliver  was  necessary  to  align  the  legal  description of Woodington’s property with its actual placement on the ground, as shown by  exhibit  22.  The  Woodington  quitclaim  to  Oliver  contains  proper  metes­and­bounds  descriptions of both the forty­acre tract and the one­acre tract belonging to Cabledue. 7  JME also argues that, because the descriptions in Oliver’s and Cabledue’s deeds are  insufficient, Oliver cannot prove the exact thirty­nine acres on which he has been paying the  property taxes. However, the testimony was that the description contained in the exchange  of quitclaim deeds has been used to assess the property since 1997 and that the taxes have  been paid on this assessment since that time.  In JME’s third and final point, it argues that the circuit court erred in awarding Oliver  $2,500 in punitive damages and $5,000 in attorney’s fees, pursuant to Ark. Code Ann. § 5­  1  37­226(a).  Section 5­37­226(a) requires a two­prong test: first, that the instrument be filed  with knowledge that it is not genuine or authentic and, second, that the filing is with the 1  Section 5­37­226(a) provides:  (a) It is unlawful for any person with the knowledge of the instrument’s lack  of authenticity or genuineness to have placed of record in the office of the recorder  of any county any instrument:  (1) Clouding or adversely affecting:  (A) The title or interest of the true owner, lessee, or assignee in real  property; or  (B) Any bona fide interest in real property; and  (2) With the intent of:  (A) Clouding, adversely affecting, impairing, or discrediting the title or  other interest in the real property which may prevent the true owner,  lessee, or assignee from disposing of the real property or transferring  or granting any interest in the real property; or  (B) Procuring money or value from the true owner, lessee, or assignee  to clear the instrument from the records of the office of the recorder.  8  intent either to cloud or adversely affect the owner’s interest in the property or with the intent  to procure money from the owner in order to clear the title. JME argues that neither prong  has been met and that Oliver offered no proof of his actual damages and, therefore, an award  of  punitive  damages  is  improper.  The  circuit  court  made  an  express  finding  that  JME  obtained the quitclaim deeds from the Weirs for the purpose of obtaining money from the  true owner. The court did not make a finding that the instrument was filed with knowledge  that it was not genuine or authentic. However, such a finding was implicit when the court  awarded punitive damages pursuant to section 5­37­226. Also, both findings are supported  by the evidence that JME prepared the quitclaim deeds to the entire forty acres, despite the  one acre having been carved out in 1965; that JME was simply a shell company; and that  there were no revenue stamps on its quitclaim deeds. Arkansas Code Annotated section 26­  60­110(b) provides, subject to exceptions not applicable here, that no instrument evidencing  a transfer of title shall be recorded without the attachment of the revenue stamps. Further,  the letter attached to Oliver’s complaint implies that JME was seeking money from Oliver  in order to clear Oliver’s title.  Oliver did not offer any proof as to his loss or damages during the trial; he did offer  an affidavit stating the amount of attorney’s fees he incurred in prosecuting the suit. JME,  citing Hale v. Ladd, 308 Ark. 567, 826 S.W.2d 244 (1992), argues that an award of punitive  damages without an award of compensatory damages cannot stand. However, that rule has  no application in the present case because the award was not based on a common­law cause 9  of action; rather, it was based on a statutory remedy. As such, the circuit court could have  awarded punitive damages without first having awarded compensatory damages.  Affirmed.  PITTMAN, C.J., and ROBBINS, J., agree. 10 

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