Aaron Collins and Diane Collins v. Burl Keller, Carol Keller, and Jeremy's Investments, Inc.

Aaron COLLINS and Diane Collins  v. 
Burl KELLER, Carol Keller, and 
Jeremy's Investments, Inc.

97-1012                                            ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered May 14, 1998


1.   Appeal & error -- issue not ruled on at trial not considered
     on appeal. -- Where, at trial, appellants neither specified
     the Interstate Land Sales Act as an affirmative defense nor
     mentioned it in their counterclaim; and where, although
     appellants submitted the Interstate Land Sales Act to the
     trial court to support their request for rescission, the trial
     court never addressed or ruled on the Act's applicability to
     the parties' contract, the supreme court would not consider
     the issue on appeal; an issue must be raised and ruled on
     before it will be considered on appeal. 

2.   Property -- appellants' request for rescission untimely --
     federal Truth-in-Lending Act limits obligor's right to rescind
     consumer-credit transaction. -- The trial court was correct in
     denying appellants' request for rescission under the federal
     laws because appellants' request was untimely; section 1635(a)
     of the Truth-in-Lending Act limits an obligor's right to
     rescind a consumer-credit transaction until midnight of the
     third business day following the consummation of the
     transaction or the delivery of the information and rescission
     form required under section 1635; an obligor's right of
     rescission expires three years after the date of consummation
     of the transaction or upon the sale of the property, whichever
     occurs first, notwithstanding the fact that the information
     and forms required under the section or any other disclosure
     required under this provision have not been delivered to the
     obligor.

3.   Property -- Interstate Land Sales Act -- rescission by
     purchaser of property limited by provisions. -- The Interstate
     Land Sales Act has provisions that limit when a purchaser of
     property can seek rescission for the seller's violation of the
     Act; section 1703(b) provides that any contract for the sale
     of a lot not exempt under the Act may be revoked at the option
     of the purchaser until midnight of the seventh day following
     the signing of such contract or until such later time as may
     be required by state laws; also, any such contract for the
     sale of a lot not exempted under the Act may be revoked at the
     option of the purchaser for two years from the date of the
     signing of such contract. 

4.   Property -- appellants failed to act timely under provisions
     of Truth-in-Lending and Interstate Land Sales Acts -- defense
     not asserted until more than three years after contract
     consummated. -- Appellants failed to act timely under the
     provisions of both the Truth-in-Lending and Interstate Land
     Sales Acts; in fact, appellants asserted their rescission
     rights only after appellees brought suit against them for
     having defaulted on their contract, which occurred more than
     three years after the parties' contract was consummated.

5.   Appeal & error -- appellants failed to object to trial court's
     findings -- right to raise issue on appeal waived. -- 
     Appellants complained that appellees had defaulted in the suit
     because they failed to answer appellants' counterclaim,
     arguing that they were entitled to a default judgment and that
     the trial court erred in finding that appellees were entitled
     to the affirmative defenses of laches and estoppel even though
     those defenses were never pleaded by appellees and were
     inapplicable to the facts of the case; because, however,
     appellants failed to object to the trial court's findings at
     the hearing, they waived their opportunity to raise the issue
     on appeal.

6.   Civil procedure -- default judgment -- entry discretionary. --
     Under Ark. R. Civ. P. 55(a), the entry of a default judgment
     is discretionary rather than mandatory; appellants never
     proved any claim or damages under the federal laws; thus, the
     trial court correctly denied appellants the relief they
     sought.

7.   Property -- appellants not entitled to rescission of contract
     -- trial court appropriately addressed rental damages due
     appellees under contract.-- Appellants' assertion that the
     trial court erred in awarding appellees rental damages under
     the terms of the parties' contract because the contract should
     have been rescinded under the Truth-in-Lending and Interstate
     Land Sales Acts, thereby discharging them from any obligation
     for rental damages, was without merit; appellants were not
     entitled to rescission of the contract, and because they
     indisputably remained in default of its terms, the trial court
     appropriately addressed the rental damages due appellees under
     the contract.

8.   Appeal & error -- usury claim never ruled on at trial -- issue
     summarily dismissed. -- Appellants' damage claim for
     appellees' alleged violation of Arkansas's usury laws was
     summarily dismissed because the trial court never ruled on the
     issue.

9.   Appeal & error -- issue not ruled upon below -- issue not
     reached on appeal. -- Appellants' argument in support of their
     conversion claim that only one appellee signed the contract
     for deed and that, as a consequence, the parties' agreement
     was never effective was not reached; appellants failed to
     obtain a ruling on the issue and thus could not argue it on
     appeal.

10.  Conversion -- argument without merit -- laches and statute of
     limitations barred any right appellants may have had under
     Truth-in-Lending Act. -- Appellants' argument that, even if
     they were in default on the contract, they could still enforce
     their rights to converted shale under the federal Truth-in-
     Lending Act was meritless; laches and the statute of
     limitations barred any right appellants may have had under the
     Truth-in-Lending Act.  

11.  Conversion -- equitable conversion argued -- trial court
     correctly rejected appellants' argument -- forfeiture
     provisions of parties' contract were valid and timely
     enforced. -- Appellants argued that the parties' contract for
     deed operated as an equitable conversion by which the interest
     of appellants, as purchasers, became real estate, and that
     they had an equitable interest in the disputed property until
     appellees rescinded the contract for deed; the record,
     however, reflected that appellants' rights in the property
     were subject to a forfeiture clause of an executory contract
     that they breached; appellees elected to seek strict
     enforcement of their rights under the contract, and the trial
     court correctly rejected appellants' equitable-conversion
     argument; the trial court properly held that the forfeiture
     provisions of the parties' contract were valid and timely
     enforced. 

12.  Appeal & error -- issue not raised at trial not addressed on
     appeal. -- Appellants' argument that their substantial rights
     were violated because the trial court did not allow them
     sufficient time at trial to call their witnesses and establish
     their case was not raised below and therefore could not be
     argued on appeal.


     Appeal from Crawford Chancery Court; Floyd G. Rogers,
Chancellor; affirmed.
     Philip Jack Taylor, for appellants.
     Thurman Ragar, Jr., for appellees.


     Tom Glaze, Justice.
     Appellants Aaron and Diane Collins bring this appeal from the
Crawford County Chancery Court's finding that they had breached
their contract to purchase two unimproved lots from appellees, Burl
and Carol Keller and Jeremy Investments, partners who own a
subdivision named Butterfield Trail Properties.  This court's
jurisdiction was invoked because this case involves issues
concerning the interpretation and application of the Truth-in-
Lending Act, 15 U.S.C.  1601 et seq., and the Interstate Land
Sales Act, 15 U.S.C.  1701 et seq.
     On May 2, 1992, appellees sold the two disputed lots to the
appellants by a contract for deed.  The purchase price was for
$15,000.00 at 8.5% in 239 amortized monthly payments of $128.90. 
Appellants' first payment was due on June 1, 1992, and subsequent
payments were to be made each month thereafter.  The parties agreed
that, if appellants failed to make a payment within fifteen days
after a monthly payment was due, or after twenty days' notice
appellants failed to pay the taxes, appellees could declare the
entire balance of the purchase price due, or could rescind and
declare the entire contract forfeited.  In addition, if appellees
duly declared a forfeiture, they could further demand immediate
possession of the property, and retain previous payments as
liquidated damages, whereupon appellants would become tenants and
pay monthly rental payments in the amount of $128.90.
     Appellants defaulted commencing on their first payment, and
thereafter, never came into compliance with the terms of the
parties' contract.  At one stage, appellants did reach some
agreement with appellees to pay on the arrearages, along with
continuing their $128.90 monthly payments, but because appellant
Aaron Collins sustained a back injury and could not work,
appellants were unable to make their payments and therefore,
continued in default. 
     On October 27, 1995, appellees brought suit against appellants
for breach of contract and unlawful detainer, and appellants later
filed a motion to dismiss, an answer asserting affirmative
defenses, and a counterclaim.
  In their counterclaim, appellants alleged the appellees had
violated the Truth-in-Lending Act by failing to make certain
required material disclosures.  Additionally, appellants, in their
counterclaim, tendered the subject property to appellees, requested
rescission of the parties' contract, and asked for damages provided
under the Truth-in-Lending Act.
     At a hearing on May 12, 1997, appellants admitted they were in
default of the parties' May 2, 1992 contract, and conceded they had
made only seventeen payments in fifty-nine months.  Nonetheless,
appellants asserted that they were entitled to relief in the form
of rescission under the Truth-in-Lending Act, and added that they
had a similar right to relief for appellees' having violated the
federal Interstate Land Sales Act.  Appellants also argued that
appellees' finance charge under the May 2 contract was usurious,
and additionally claimed damages for conversion, alleging appellees
had wrongfully removed shale from the property while appellants
owned and were in possession of the lots.
     On June 3, 1997, the trial court entered its order finding the
appellants had breached the parties' May 2, 1992 contract by
failing to make timely payments and concluded the contract had been
effectively terminated on October 27, 1995, when appellees filed
this suit.  Because appellants continued to hold possession of the
property after defaulting, the trial court determined appellees
were entitled to rent from appellants in the sum of $4,640.50. 
Also, because appellants were in default, the trial court denied
their conversion claim, holding they had no equitable or legal
title in the lots or the shale at the time it was removed. 
Regarding the appellants' Truth-in-Lending Act claims, the trial
court held they were barred from asserting those claims because of
the doctrines of laches and estoppel.  Finally, the trial court
ordered appellants to vacate the two lots, and if they failed to do
so, directed a writ of assistance would be issued to oust them.
     Appellants raise five points for reversal, but their points
one, two, and four are basically grounded in rescission rights they
assert they are entitled to under either the federal Truth-in-
Lending Act or the Interstate Land Sales Act or both.  We hold the
appellants are not availed entitlement to those federal laws or the
rescission rights provided in these acts.  In their first argument,
appellants urge the trial court erred in denying them rescission
because the appellees failed to provide material disclosure forms
required by the Truth-in-Lending Act and its regulations, and
appellees made misstatements and material omissions of facts that
violated both the Truth-in-Lending Act and the Interstate Land
Sales Act.
     First, we note that appellants never specified the Interstate
Land Sales Act as an affirmative defense, nor did they mention the
Act in their counterclaim.  Appellants did submit the Interstate
Land Sales Act to the trial court to support their request for
rescission, but the trial court never addressed or ruled on that
Act's applicability to the parties' contract.  It is well settled
that an issue must be raised and ruled on before we consider it on
appeal.  Hercules, Inc. v. Pledger, 319 Ark. 702, 894 S.W.2d 576
(1995).
     While other reasons may be suggested that would support the
trial court's decision denying appellants' request for rescission
under the federal laws, the court was correct in refusing such
relief because appellants' request was untimely.  Specifically, 
1635(a) of the Truth-in-Lending Act limits an obligor (as
appellants purport to be under the Act) the right to rescind a
consumer credit transaction until midnight of the third business
day following the consummation of the transaction or the delivery
of the information and rescission form required under  1635. 
Section 1635(f) further provides that an obligor's right of
rescission shall expire three years after the date of consummation
of the transaction or upon the sale of the property, whichever
occurs first, notwithstanding the fact that the information and
forms required under the section or any other disclosure required
under this provision have not been delivered to the obligor.
     The Interstate Land Sales Act, likewise, has provisions that
limit when a purchaser of property can seek rescission for the
seller's violation of the Act.  Section 1703(b), for instance,
provides in relevant part, that any contract for the sale of a lot
not exempt under the Act may be revoked at the option of the
purchaser until midnight of the seventh day following the signing
of such contract or until such later time as may be required by
state laws.  Also, any such contract for the sale of a lot not
exempted under the Act may be revoked at the option of the
purchaser for two years from the date of the signing of such
contract.  See  1703(d).
     Here, appellants failed to act timely under the provisions of
both the Truth-in-Lending and Interstate Land Sales Acts.  In fact,
appellants waited to assert their rescission rights only after
appellees brought suit against them for having defaulted on their
contract, which occurred more than three years after the parties'
contract was consummated.
     In their second point, appellants complain that the appellees
had defaulted in the suit below because they failed to answer the
appellants' counterclaim.  Once the trial court determined that
appellees had filed no timely response, appellants argue they were
entitled to a default judgment.  They also contend the trial court
erred in finding the appellees were entitled to the affirmative
defenses of laches and estoppel, even though those defenses were
never pled by the appellees and are inapplicable to the facts of
this case.  However, as appellants failed to object to the trial
court's findings at the May 12, 1997 hearing, they have waived
their opportunity to raise the issue on appeal.  Stacks v. Jones,
323 Ark. 643, 916 S.W.2d 120 (1996).  Moreover, contrary to the
appellants' argument, under ARCP Rule 55(a), the entry of a default
judgment is discretionary rather than mandatory.  Appellants never
proved any claim or damages under the federal laws, thus, the trial
court correctly denied appellants the relief they sought.
     As previously noted, appellants' fourth point is also premised
on their federal claims, and asserts that the trial court erred in
awarding appellees rental damages under the terms of the parties'
May 2, 1992 contract.  Relying on the Truth-in-Lending and
Interstate Land Sales Acts, appellants argue the May 2 contract
should have been rescinded, thereby discharging them from any
obligation for rental damages.  Again, appellants were not entitled
to rescission of the contract, and because they indisputably
remained in default of its terms, the trial court appropriately
addressed the rental damages to which appellees were due under the
contract.
     We now come to appellants' damage claims for appellees'
alleged violation of Arkansas' usury laws and of conversion of the
shale taken from the two lots in dispute.  Appellants' usury claim
can be summarily dismissed, since the trial court never ruled on
this issue.  McQuay v. Guntharp, 331 Ark. 466, S.W.2d (1998).
Concerning appellants' claim for conversion, the trial court denied
this request because they never had legal title to the two lots,
and since appellants were in default, they never obtained any
equitable title to the property.  The trial court ruled that
appellants were merely tenants at sufferance, and as such possessed
no interest in the shale located on and taken from the property,
and therefore had no conversion claim for the shale.  We affirm the
trial court's holding.
     Appellants mention various, somewhat confusing, arguments when
asserting they had obtained an equitable interest in the two lots
which supported their conversion claims.  In this respect, they
point out that only appellee Burl Keller signed the contract for
deed, and as a consequence the parties' agreement was never 
effective.  However, once again, appellants failed to get a ruling
on this issue below, and thus cannot argue the issue on appeal.
     Appellants urge that, even if they were in default on the
contract, they could still enforce their rights to the converted
shale under the federal Truth-in-Lending Act.  However, as
previously discussed, laches and the statute of limitations barred
any right appellants may have had under the Truth-in-Lending Act. 
     Appellants also argue the parties' contract for deed operated
as an equitable conversion by which appellants' interest, as
purchasers, became real estate.  While appellants argue they had an
equitable interest in the disputed property until appellees
rescinded the contract for deed, the record reflects that the
appellants' rights in the property were subject to a forfeiture
clause of an executory contract which they breached.  Appellees
elected to seek strict enforcement of their rights under the
contract, and the trial court correctly rejected appellants'
equitable conversion argument, which, if applied, would have
effectively and improperly rewritten the parties' argument.  See
Smith v. MRCC Partnership, 302 Ark. 547, 792 S.W.2d 301 (1990);
Humke v. Taylor, 282 Ark. 94, 666 S.W.2d 394 (1984); White v. Page,
216 Ark. 632, 226 S.W.2d 973 (1950).  From our review of the
record, we are unable to say the trial court was wrong in holding
the forfeiture provisions of the parties' contract were valid and
timely enforced.  Ashworth v. Hankins, 248 Ark. 567, 452 S.W.2d 838
(1970).
     Finally, appellants contend their substantial rights were
violated because the trial court did not allow them sufficient time
at trial to call their witnesses and establish their case. 
Appellants did not raise this issue below and therefore may not
argue it on appeal.  Zhan v. Sherman, 323 Ark. 172, 913 S.W.2d 776
(1996).  In sum, as appellants have failed their burden of proving
the chancellor's findings were clearly erroneous or against the
preponderance of the evidence, we affirm.