Pearrow v. Feagin

Citations: 778 S.W.2d 941; 300 Ark. 274; 1989 Ark. LEXIS 487Docket: 89-124

Court: Supreme Court of Arkansas; October 30, 1989; Arkansas; State Supreme Court

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Marvin V. and Joann Pearrow appealed a judgment foreclosing a mortgage in favor of Irene Feagin, acting on behalf of her deceased husband, Lester H. Feagin. The Pearrows challenged several evidentiary rulings and the chancellor's dismissal of their counterclaim for usury, as well as the finding that they did not prove their defense of payment. The Supreme Court of Arkansas affirmed the lower court's decision, noting that the evidentiary arguments presented on appeal differed from those made during the trial. The court found no clear error in the chancellor's conclusion regarding the Pearrows' inability to substantiate their claims of payment and usury.

The Pearrows executed a mortgage and a note for $14,700 at 10% interest on June 1, 1983, with payment due by June 1, 1984. Lester Feagin died on April 24, 1985, and shortly thereafter, his daughter, Linda Brimer, discovered the note and mortgage among his papers. Although other notes had payment notations, the Pearrows' note lacked such markers. In 1987, Brimer reached out to the Pearrows about the debt. Joe Pearrow claimed his father had paid it, presenting checks as evidence, but Brimer remained unconvinced.

At trial, Marvin Pearrow asserted the debt was settled through two cash checks dated January 10, 1984, which he claimed were used to pay Feagin. These checks were negotiated without endorsement. Marvin testified to a longstanding business relationship with Feagin and detailed various debts consolidated into the $14,700 obligation. Joe Pearrow confirmed he cashed the checks and gave the proceeds to Feagin, while another son, Vick, corroborated the payment but noted that no receipt was received. Other witnesses testified about informal borrowing from Feagin, indicating a culture of trust that did not require receipts for payments.

Evidence rulings were pivotal in the Pearrows' case against Mr. Feagin. The Pearrows sought to explain why Mr. Feagin retained their note and mortgage post-payment, but hearsay objections were sustained against their attempts to introduce testimony regarding Mr. Feagin's stated need for the documents for an IRS audit. The chancellor's exclusion of this testimony was contested on appeal under A.R.E. 804(a)(5), asserting it as an admission by a party opponent or a declaration against interest, but the court noted these arguments were not presented at trial. Consequently, they could not be raised for the first time on appeal, as established in prior rulings (National Lumber Co. v. Advance Development Corp., Wasp Oil, Inc. v. Arkansas Oil and Gas, Inc.). Additional hearsay objections were sustained regarding Marvin Pearrow's statement to Mr. Feagin about being "paid in full" and Carl Elliott’s testimony regarding a conversation with Charles Pearrow. The court emphasized that objections must be made at the time of the ruling to allow the chancellor to consider them, referencing Ark.R.Civ. P. 46 and previous case law.

In terms of usury, the chancellor struck the Pearrows' amended answer that included a usury counterclaim, citing misrepresentation regarding the unavailability of a witness used to obtain a continuance. The Pearrows contended that the chancellor’s finding of misrepresentation was clearly erroneous, arguing that the continuance was justified due to the unavailability of at least one witness not in question.

The chancellor did not strike the answer and counterclaim at the motion to strike or at the trial's outset, instead reserving a decision until after the trial concluded. He noted that even if the counterclaim had been permitted, the evidence presented was insufficient to support the usury allegation, a decision not contested on appeal. The Pearrows contended that the finding regarding their failure to prove payment was clearly erroneous. The chancellor highlighted that the burden of proof for the defense of payment rested on the Defendants, who needed to demonstrate payment by a preponderance of the evidence. After assessing the evidence and witness credibility, the chancellor concluded that the Pearrows did not meet this burden. Under Ark.R.Civ. P. 52(a), findings of fact are not overturned unless clearly erroneous, and the trial court's evaluation of witness credibility is given deference. The chancellor found the Pearrows' testimony lacking in credibility, and there was no basis to deem his assessment clearly erroneous. The decision was affirmed, with J. Hickman not participating.