Jack Nelson Jones Professional Association
April 15-21, 2019
Patricia Fudge v. Eddie Parks, 2019 Ark. App. 191 (April 3, 2019)
This appeal arises from Baxter County Circuit Court, Honorable Gordon Webb presiding. It involves a dispute over the dissolution of a partnership between the appellant, Patricia Fudge (Fudge), and the appellee, Eddie Parks (Parks). Fudge claimed that Parks failed to properly account for partnership assets, misappropriated partnership funds and assets, breached his fiduciary duties, and improperly kept the proceeds from the sale of her personal vehicle, a 1967 Chevrolet Chevelle. The Baxter County Circuit Court, Honorable Gordon Webb, entered an order granting Fudge a judgment against Parks for the sale of her vehicle but denying Fudge relief on all other claims. On direct appeal, Fudge appealed the amount of damages awarded by the court as well as the court’s denial of her other claims. On cross-appeal, Parks appealed the judgment entered against him. The Court of Appeals affirmed on both direct and cross-appeal.
In 2006, the parties formed a partnership agreement for a cattle operation known as 2 Bar P Farms. Fudge was to contribute financially to the venture, while Parks, who was familiar with cattle farming, was to manage the operation. The relationship ultimately soured, and in 2015, the partnership was dissolved under a dissolution agreement signed by both, stating that the agreement constituted a “full and complete settlement of all issues, rights, claims or demands that each has against the other concerning the partnership” and that each party completely released the other from “any claim, demand or liability derived from the operation of 2 Bar P Farms.”
Despite signing the agreement, 17 months later, Fudge filed a complaint against Parks in the Baxter County Circuit Court alleging that Parks had fraudulently concealed some of the assets of the partnership prior to the signing of the dissolution agreement and that she had discovered his misappropriation of partnership property and assets only after the dissolution agreement had been executed. She requested a reimbursement of at least $15,000. She further alleged that Parks had prevented the return of items of personal property (these were returned to her under court order and were not part of this appeal) and had sold her vintage 1967 Chevrolet Chevelle without her knowledge. She requested damages for the value of the car she alleged was worth $38,000. Finally, she requested reimbursement for the out-of-pocket expenses she incurred in conducting the investigation into Parks’s fraudulent actions and misdeeds and her costs and attorney’s fees. Parks answered the complaint, denying the allegations. He further asserted that Fudge’s claims were barred by the dissolution agreement, that her claims were frivolous and brought for the purposes of harassment, and that he was entitled to attorney’s fees and costs.
Fudge subsequently amended her complaint to include allegations that Parks had received funds from the 2012 Livestock Forage Disaster Program and the 2012 Noninsured Crop Disaster Assistance Program that she maintained should have been paid to the partnership. As to this claim, she requested $11,380 in compensatory damages and $25,000 in punitive damages. Parks again answered the complaint, denying the allegations and alleging that Fudge’s claims were barred by the dissolution agreement. He also claimed the disaster programs were tied to the land, and the land was not part of 2 Bar P Farms.
The circuit court conducted a bench trial at which both parties presented their evidence. The evidence focused on four areas of disagreement: (1) disputed checks made on the partnership account; (2) the receipt of USDA funds; (3) the sale of cattle at dissolution; and (4) the sale of the car. After the hearing, the trial court entered an order denying Fudge’s claims with respect to the disputed checks but granting her claim as to the sale of the Chevelle. On that claim, the court ordered Parks to pay Fudge $16,000. An amended order resolved the remaining issues by denying Fudge’s claims as to the USDA funds and her claims of fraud and punitive damages. She appealed the trial court’s denial of her claims, and Parks cross-appealed the judgment entered against him.
The Court of Appeals noted that, on appeal, the standard of review following a bench trial is whether the trial court’s findings were clearly erroneous or clearly against the preponderance of the evidence. Disputed facts and determinations of the credibility of witnesses were within the province of the fact-finder.
The Court found the alleged error in this appeal was divided into four distinct categories: (1) the circuit court’s order regarding the disputed checks written by Parks off the partnership account; (2) the order regarding USDA funds Parks deposited into his personal account; (3) the order regarding the sale of partnership cattle; and (4) the court’s award of damages for the sale of the 1967 Chevelle. Regarding the first three issues, Fudge argued that the trial court erred by not requiring Parks to provide a full accounting, including evidence of expenditures and proof of non-appropriation of partnership assets. She contended that as a fiduciary, it was Parks’s burden to provide a full accounting of his actions and to prove that his actions did not amount to self-dealing. She contended that the court wrongly resolved all partnership-related issues by reference to the dissolution agreement as controlling. She argued for a remand for a full partnership accounting. Concerning the fourth issue, Fudge argued that the trial court erred in not awarding her full damages regarding the sale of the 1967 Chevelle. Parks also challenged the trial court’s award of damages with respect to the Chevelle, contending that he proved an ownership interest in the car and that the court erred in the judgment amount awarded to Fudge.
Evidence was presented regarding the disputed checks paid on the partnership account, including checks payable to Parks, his wife, and others for such items as fertilizer, a lawn mower, and firearms. Fudge claimed that these checks were not proper partnership expenditures and that she did not have copies or knowledge of the checks prior to dissolution. Parks testified that most of the disputed checks were either reimbursements for personal expenditures made for the partnership or were partnership related, and he reimbursed the partnership for any that were personal. He also presented evidence that the bank sent its statements on the account to Fudge, with copies of all checks written, and that all checks were written well before the agreement was entered with no objection by Fudge. The court heard conflicting evidence concerning the checks, weighed the conflicting evidence and found that Fudge had failed to prove that these transactions were improper. The Court of Appeals held it was the sole province of the fact-finder to weigh credibility and resolve disputed facts, and noted that absent fraud, these checks constituted partnership assets; hence they were governed by the agreement. Fudge either knew or should have known about the checks well before the dissolution agreement was executed.
Fudge next claimed that the trial court erred in failing to find that Parks breached his fiduciary duty by depositing USDA funds into his personal, rather than into the partners account. The circuit court heard conflicting testimony concerning these funds as well as the sale of the cattle and found Parks’ evidence more credible. The USDA funds went with the land, not the partnership, which laid no claim to the land. The cattle sales occurred months prior to the agreement, and the lower court held that the agreement again governed. The Court of Appeals agreed.
The last disputed item was the proceeds from the sale of the Chevelle. It was purchased in 2010 for $18,000, but the parties agreed it was not an asset of the partnership and that Fudge paid for it out of her personal funds (although Parks was the person who made the purchase). Fudge signed the registration as the owner of the vehicle, and the Chevelle was registered and titled by Parks to “Eddie Parks or Patricia Fudge.” After the purchase, Fudge maintained the title and registration and paid the insurance and taxes. The Chevelle was stored on Parks’s farm. When the partnership began to unravel, Fudge instructed Parks to sell the Chevelle. Parks claimed he sold the vehicle for $18,000, used $12,000 to purchase a “farm truck,” deposited $4,000 into the partnership account, and gave the remaining $2,000 to Fudge. Fudge denied receiving any money.
Based on the evidence, the court found that the vehicle had been purchased exclusively with Fudge’s private assets; that Parks had no ownership interest in the vehicle and had no right to use those funds to purchase a farm truck or to deposit the funds into the partnership account. The court then imposed a constructive trust on the $16,000 not returned to Fudge. On appeal, both parties disagreed with the trial court’s disposition as it relates to the Chevelle. Fudge argued that she never received any money for the sale of the Chevelle and disagreed with the amount she was awarded. Parks asserted that he was a part owner in the Chevelle and received nothing for his interest.
The Court of Appeals held it was not left with a definite and firm conviction that a mistake had been made and held there was evidence presented that the vehicle was purchased from Fudge’s individual funds, that the vehicle was sold for $18,000, and that Parks gave Fudge $2,000 of those funds. The Court affirmed the decision in favor of Parks on the checks, the federal monies, and the cattle. However, as to Parks’s contention that he had ownership in the Chevelle sufficient to allow him to sell it and buy a farm tractor, the Court affirmed the trial court’s weighing the conflicting evidence presented and resolved the ownership issue in Fudge’s favor but affirmed its valuation.
The Court of Appeals affirmed the circuit court’s decision on both the direct appeal and on the cross-appeal.