Donnell Bauer and Marilyn Bauer v. Jesse Lee Beamon, Jr., and Mary A. Beamon, Individually and as Trustees of the Jesse Lee Beamon, Jr. and Mary A. Beamon Family Trust Dated 13th October 2015 And the Jesse Lee Beamon, Jr. and Mary A. Beamon Family Trust Dated 13th October 2015 , 2023 Ark. 194 ( 2023 )

Cite as 2023 Ark. 194SUPREME COURT OF ARKANSAS
No. CV-20-265
Opinion Delivered: December 21, 2023
DONNELL BAUER AND MARILYN
BAUER
APPELLANTS/CROSS-APPELLEES APPEAL FROM THE CRAWFORD
COUNTY CIRCUIT COURT
[NO. 17CV-17-549]
V.
HONORABLE MICHAEL
JESSE LEE BEAMON, JR., AND MEDLOCK, JUDGE
MARY A. BEAMON, INDIVIDUALLY
AND AS TRUSTEES OF THE JESSE
LEE BEAMON, JR. AND MARY A. REVERSED ON DIRECT APPEAL;
BEAMON FAMILY TRUST DATED AFFIRMED ON CROSS-APPEAL;
13TH OCTOBER 2015; AND THE COURT OF APPEALS OPINION
JESSE LEE BEAMON, JR. AND MARY VACATED.
A. BEAMON FAMILY TRUST DATED
13TH OCTOBER 2015
APPELLEES/CROSS-APPELLANTS
BARBARA W. WEBB, Justice
This matter arises from a real estate transaction between appellants Donnell and
Marilyn Bauer and appellees Jesse Lee and Mary A. Beamon. The Bauers appeal the
Crawford County Circuit Court’s judgment awarding damages in favor of the Beamons.
They argue that the circuit court erred by (1) denying their jury-trial demand; (2) awarding
damages on a breach-of-contract claim that was not alleged in the Beamons’ complaint; and
(3) awarding attorney’s fees and costs. The Beamons cross-appeal, arguing that the circuit
court erred by denying their request for rescission of the real estate contract. We reverse on
direct appeal and affirm on cross-appeal.
I. Facts
This case concerns Lot 24A and Lot 18 of the Highland Hills subdivision in Van
Buren. The residence on Lot 24A sits on a hillside above the adjacent parcel, Lot 18. The
Bauers purchased Lot 24A and Lot 18 in 2004. They lived in the residence on Lot 24A and
constructed a metal barn and driveway on Lot 18. Shortly after the barn was built, Mr.
Bauer noticed that water began to seep downhill toward the barn. To address the problem,
the Bauers used a bulldozer to open a drainage ditch and, later, rented a mini excavator to
further help water drainage on the hillside above the barn. The Bauers also hired a contractor
to reshape the hill and remove a dead tree.
In 2013, the Bauers listed Lot 18 for sale and executed a seller property disclosure
wherein they acknowledged drainage and erosion problems on the hillside straddling Lot
24A and Lot 18. John Will purchased Lot 18 later that same year. After the sale, Mr. Bauer
told Mr. Will that he had twice pushed dirt up the hill and rain had washed it back out.
Throughout Mr. Will’s ownership of Lot 18, he observed the hillside would become
unstable with heavy rain, and soil would accumulate against the barn. In 2016, Mr. Will
hired a contractor to work on the soil on the hillside above the barn.
The Bauers also listed Lot 24A for sale and in 2015 executed a seller property
disclosure wherein they asserted no knowledge of “any settling from any cause, or slippage,
sliding or other poor soil conditions at the Property or at adjacent properties.” They also
asserted no knowledge of “any facts, circumstances or events on or around the Property
which, if known to a potential buyer, could adversely affect in a material manner the value
or desirability of the Property.” Further, the Bauers denied any knowledge of “any other
defects in the Property.”
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On April 1, 2016, the Beamons visited Lot 24A with their real estate agent. They
also drove up the driveway on Lot 18 and viewed the downslope portion of Lot 24A. Mr.
Beamon observed “off on the downhill side there was some disturbed ground and bare
ground” and what appeared to be “dirt work to control the surface erosion.” Despite the
apparent conditions of the hillside, the Beamons purchased Lot 24A for $315,000 in reliance
on the Bauers’ written disclosures.
The Beamons had a survey of Lot 24A performed on April 28, 2016. During this
time, Mr. Bauer exchanged text communications with Mr. Will regarding the survey. Both
men acknowledged in this exchange the poor soil conditions on the hillside and their failed
efforts to remediate the problem. The Beamons were not advised of this information, and
the Bauers did not amend their disclosure form to reflect the soil conditions on Lot 18.
The sale closed on May 26, 2016. Mr. Bauer came out to the property that day to
explain the operating systems in the house. During their discussion, Mr. Beamon asked
about the soil conditions on the hillside, and Mr. Bauer disclosed for the first time that he
had uncovered a water seep on Lot 18 when he built the metal barn.
The Beamons began moving into the residence on Lot 24A on June 17, 2016. The
following day, Mr. Beamon noticed a mold-like substance in the master bedroom. Mr.
Beamon contacted his real estate agent to discuss the mold situation and erosion concerns
on the hillside. At this point, the Beamons began moving their possessions out of the house
and took up temporary residence nearby. They also had their home inspector, Lowell
Coomer, test the substance, which he confirmed to be mold. Mr. Coomer recommended
EGIS, a mold-remediation firm. EGIS’s testing revealed extensive mold in the master
bedroom. The inspection further revealed high humidity throughout the residence, which
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is conducive to mold growth. EGIS determined the culprit was a condensate line that was
improperly installed in the return air plenum, resulting in humidity distribution throughout
the residence. This condition would not have been discoverable in a routine home
inspection. The Beamons paid $20,716.16 for mold remediation and HVAC repair.
Due to the mold remediation, the Beamons did not move into the Lot 24A residence
until September 1, 2016. Thereafter, the geotechnical engineering firm GTS, Inc., was
retained to resolve the instability issues on Lot 24A. Upon investigation, GTS concluded
that if not remediated, the slope’s instability would progress up gradient to the residence on
Lot 24A. GTS recommended stabilizing the hillside by re-sloping and compacting the soil
and placing a fabric lining and stone riprap over the subject area.
The Beamons hired a contractor to perform the slope-stabilization work. The
contractor re-graded and compacted the slope and was prepared to lay the fabric and riprap
when a rain caused tension cracks to form. The plan to lay fabric lining and riprap was
abandoned. The Beamons then requested a report from GTS regarding what actions should
be taken next to address the hillside. GTS issued a preliminary report on September 26,
2017, concluding that the slope failure could not be remediated from Lot 24A. The
Beamons paid the contractor $30,950 for the work completed and paid GTS $5,900.
Based on the GTS report, the Beamons’ counsel sent the Bauers a rescission letter on
September 29, 2017. In pertinent part, the letter stated that the Beamons had
investigated and, based on engineering advice, have attempted repair work regarding
the water seep on the property (and resulting erosion) of which you informed Mr.
Beamon after the closing of the real estate transaction. Your real estate disclosures
regarding the property did not disclose the water and erosion problems, and the
disclosures did not reveal the previous repair actions apparently attempted by you
and others on adjacent property and on the subject property. The recent August rains
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made obvious the attempted repair work has failed to solve the water/erosion
problems.
The Beamons “concluded the appropriate action is a rescission of the real property
sale/purchase” and sought “return of the money paid for the property.” In addition, the
Beamons sought reimbursement for costs associated with the mold remediation and the
attempted stabilization of the hillside.
The Beamons filed their operative complaint on September 11, 2018, which
included an equitable claim for rescission and a legal claim for damages. Both claims were
based on the same factual allegations and a common theory of fraud and deceit. The Bauers
filed an answer demanding a jury trial. In response, the Beamons moved the circuit court
to strike the jury-trial demand and instead schedule a bench trial. Pursuant to the doctrine
of election of remedies, the Beamons elected the remedies associated with their equitable
claim for rescission. However, the Beamons asserted that “[e]ven if rescission is not
granted[,] . . . [they] are entitled to recover their damages proved at trial.”
The circuit court granted the Beamons’ request for a bench trial, and a trial was held
in September 2019. The circuit court issued a letter opinion in which it rejected the
Beamons’ rescission claim because they “did not act with reasonable diligence in advising
the sellers of their intent to rescind.” Rather, the circuit court found
[t]he evidence shows [the Beamons] were put on notice of the issue of mold shortly
after taking possession; further, conversations with Mr. Bauer indicate they were told
about the “wet weather” issue with the Lot 18, shortly after closing. They acted with
intention to keep, maintain and repair the property for at least 12 or more months.
They engaged in mold eradication, hired engineers, excavators and various repairs
after taking possession. These acts of possession, repair and reclamation are
inconsistent with the intent to rescind and further, as stated above, impair the
opportunity to restore the parties to the original position as nearly as possible, that
being the goal of rescission.
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Despite rejecting the rescission claim, the circuit court concluded that the Beamons
were entitled to damages for “breach of the contract” because the Bauers “did not disclose
the issues with the adjoining lot and slope.” As such, the circuit court awarded the Beamons
damages for land-reclamation expenses. In addition, while the circuit court found rescission
was not appropriate as to the mold issue, it noted that “the house was delivered to the
[Beamons] in a defective condition.” According to the circuit court, the improperly installed
condensate line was a defect that “breached the contract” and, therefore, the Beamons were
entitled to damages for the cost of the mold remediation.
The circuit court later entered a formal judgment incorporating its letter opinion.
The Beamons subsequently moved for attorney’s fees, which the circuit court granted. The
Bauers filed their notice of appeal. For reversal, they argued that the circuit court erred by
(1) holding a bench trial on the Beamons’ legal claim, in violation of the Bauers’
constitutional right to a jury; (2) awarding damages on a breach-of-contract claim that was
not alleged in the Beamons’ complaint; and (3) awarding attorney’s fees and costs. 1 The
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We note that this court has previously held that where a circuit court grants
attorney’s fees after entry of the judgment, the challenging party must file a notice of appeal
from the fee order and, without such notice, this court will not address any argument
pertaining to the fee issue. Craig v. Carrigo, 353 Ark. 761, 777, 121 S.W.3d 154, 164 (2003).
Here, the record reveals that judgment was entered on November 4, 2019, and the order
granting fees was entered on December 26, 2019. The Bauers filed their notice of appeal
from the underlying judgment on November 27, 2019; however, they failed to file a notice
of appeal adding the fees order. Accordingly, we lack jurisdiction to review the fees order
on appeal. Id.Further, because the Bauers’ notice of appeal predates the circuit court’s initial
decision on the fees issue, they cannot avail themselves of Rule 4(a) of the Arkansas Rules
of Appellate Procedure–Civil.
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Beamons filed a cross-appeal, arguing that the circuit court erred by denying their rescission
claim.
The court of appeals reversed and dismissed the circuit court’s decision on direct
appeal. It held that the circuit court erred by failing to hold the Beamons to their elected
remedy of equitable rescission and, consequently, violated the Bauers’ right to a jury trial.
Bauer v. Beamon, 2023 Ark. App. 111, at 16, 663 S.W.3d 388, 395. On cross-appeal, the
court of appeals affirmed the circuit court’s finding that the Beamons had waived their right
of rescission. Id. at 21, 663 S.W.3d at 397. The Beamons filed a petition for review, which
this court granted. When we grant a petition for review, we consider the appeal as though
it had been originally filed in this court. Covenant Presbytery v. First Baptist Church, 2016 Ark.
138, at 1, 489 S.W.3d 153, 155.
II. Direct Appeal
The Bauers argue that the circuit court erred by granting the Beamons’ motion for
a bench trial and, after denying their rescission claim, awarding damages on a legal claim for
breach of contract that was not pled. Such action, the Bauers contend, had the effect of both
denying their right to a jury trial on a legal claim and impermissibly electing another
inconsistent remedy on the Beamons’ behalf. The Beamons respond by arguing that the
circuit court did not err in granting their request for a bench trial because their claim for
recission is historically an equitable remedy to which no right to a jury trial attaches. The
Beamons also aver that the circuit court was not barred from awarding “less disruptive
remedies” once it determined that rescission was unsuitable.
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This court employs a de novo standard of review for claims to a right to a jury trial.
Bandy v. Vick, 2020 Ark. 334, at 4, 608 S.W.3d 903, 905. We are not bound by the circuit
court’s decision; however, a circuit court’s interpretation will be accepted as correct on
appeal in the absence of a showing that the circuit court erred. Rowe v. Hobbs, 2012 Ark.
244, at 5, 410 S.W.3d 40, 43.
The Arkansas Constitution does not ensure the right to a jury in all possible instances,
but rather in those cases where the right to a jury trial existed when the constitution was
framed. Baptist Health v. Murphy, 2010 Ark. 358, at 13, 373 S.W.3d 269, 280. Further, the
right to a jury trial extends only to those cases that were subject to trial by jury at the
common law. Williams v. Baptist Health, 2020 Ark. 150, at 12, 598 S.W.3d 487, 495. In
equitable proceedings, there was no right to a jury trial at the common law. Id. Thus, the
constitutional right to a jury trial does not extend to cases in equity. In re Estates of McKnight
v. Bank of Am., NA., 372 Ark. 376, 380, 277 S.W.3d 173, 177 (2008).
The rescission of a contract is an equitable remedy. See, e.g., Phelps v. U.S. Life Credit
Life Ins. Co., 336 Ark. 257, 260, 984 S.W.2d 425, 427 (1999). Because the Beamons elected
rescission as their remedy, the circuit court properly considered the claim without a jury.
The Beamons assert that the circuit court was still empowered to award damages
after it rejected their claim for rescission. As mentioned above, the circuit court awarded
legal damages reimbursing the Beamons for mold remediation and land-reclamation
expenses. It found such damages were warranted based on “breach of the contract.” But the
Beamons’ equitable and legal claims were both brought under a theory of fraud and deceit–
–they never pled breach of contract. Nor did they move to amend their complaint to add a
breach-of-contract claim under Arkansas Rule of Civil Procedure 15, and no evidence of
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breach of contract was adduced at trial. We have long held that a party is bound by his
pleadings and the allegations therein. See, e.g., Dupwe v. Wallace, 355 Ark. 521, 530, 140
S.W.3d 464, 470 (2004) (quoting Int’l Harvester Co. v. Burks Motors, Inc., 252 Ark. 816, 821,
481 S.W.2d 351, 355 (1972)). The Beamons therefore could not recover damages for breach
of contract. As a result, the circuit court’s award of damages was erroneous. Consequently,
we reverse the case on direct appeal.
III. Cross-Appeal
The Beamons argue that the circuit court erred in denying their request for rescission.
They contend that the record demonstrates that the Bauers intentionally withheld
information concerning the slope instability on Lot 18, or at minimum, that their behavior
constituted constructive fraud. The Beamons further contend that the circuit court erred
when it found they had failed to exercise reasonable diligence in advising the Bauers of their
intent to rescind. They assert that the extent of the soil conditions was not discovered until
September 26, 2017, and they issued their notice of rescission three days later.
The standard of review on appeal from a bench trial is whether the circuit court’s
findings of fact were clearly erroneous or clearly against the preponderance of the evidence.
James v. Mounts, 2023 Ark. 53, at 8, 660 S.W.3d 801, 807. A finding is clearly erroneous
when, although there is evidence to support it, the reviewing court on the entire evidence
is left with a firm conviction that a mistake has been made. Id.One who desires to rescind a contract on grounds of fraud or deceit must do so as
soon as he discovers the truth. Douglass v. Nationwide Mut. Ins. Co., 323 Ark. 105, 114, 913
S.W.2d 277, 282 (1996). The rescinding party must announce his purpose at once and act
with reasonable diligence so that the parties may be restored to their original position as
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nearly as possible. Id. But if he continues to treat the property involved as his own or
conducts himself with reference to the transaction as though it were still subsisting and
binding, he will be held to have waived his right to rescission and will be conclusively bound
by the contract as if the fraud had not occurred. Herrick v. Robinson, 267 Ark. 576, 585, 595
S.W.2d 637, 643 (1980).
We cannot say that the circuit court clearly erred in finding that the Beamons had
waived their right to rescission. The Beamons learned of the Bauers’ omissions on their
disclosure form when, on the day of closing, Mr. Bauer told them about the water seep on
Lot 18. Shortly after taking possession of Lot 24A, the Beamons discovered mold in the
residence. Yet, over the course of a year, they engaged in mold eradication and attempted
to remediate the soil conditions on the hillside. These acts of possession, repair, and
reclamation are inconsistent with an intent to rescind. Accordingly, we affirm the circuit
court’s dismissal of the Beamons’ rescission claim.
Reversed on direct appeal; affirmed on cross-appeal; court of appeals opinion
vacated.
Kenneth W. Cowan, PLC, by: Kenneth W. Cowan, for appellants/cross-appellees.
Daily & Woods, P.L.L.C., by: Jerry L. Canfield, for appellees/cross-appellants.
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