Legislative and Case Law Update
J. Cliff McKinney
Quattlebaum, Grooms, Tull & Burrow PLLC
111 Center Street, Suite 1900
Little Rock, Arkansas 72201
501-379-1700
GOVERNMENT ALWAYS
MAKES THINGS
BETTER
SOLVING THE
BROADWAY BRIDGE
CRISIS
Just read the papers…
3
MORE GOVERNMENT
AT WORK
4
AND FINALLY…
5
YOU PAID FOR THIS
STUDY…
6
HOUSING SALES RISE

Sales of existing homes rose in July even with constraints
of affordable inventory, and the national median price is
showing five consecutive months of year-over-year
increases, according to the National Association of
Realtors®. Monthly sales rose in every region but the
West, where inventory is very tight.

Total existing-home sales, which are completed
transactions that include single-family homes, townhomes,
condominiums and co-ops, grew 2.3 percent to a
seasonally adjusted annual rate of 4.47 million in July from
4.37 million in June, and are 10.4 percent above the 4.05
million-unit pace in July 2011.

Lawrence Yun, NAR chief economist, said housing
affordability conditions are very good. “Mortgage interest
rates have been at record lows this year while rents have
been rising at faster rates. Combined, these factors are
helping to unleash a pent-up demand,” he said. “However,
the market is constrained by unnecessarily tight lending
standards and shrinking inventory supplies, so housing
could easily be much stronger without these abnormal
frictions
2.3% Increase – Modest but Positive
Once the residential market returns…
So will the commercial market
We all know “retail follows rooftops”
7
HOME PRICES RISING…
THE WALL STREET JOURNAL

Updated August 28, 2012, 10:52 a.m. ET
Home Prices Post First Gain in Two Years
0.5% Median Price increase – again, modest but
positive…
Reversed a 20 month decline…
U.S. home prices in June posted their first year-over-year increase in nearly two years
as more buyers chased fewer homes for sale during the first half of 2012, according to
an index released Tuesday.
The S&P/Case-Shiller index of 20 metropolitan areas showed home prices rose 0.5%
from a year ago in June, ending a streak of 20 straight monthly declines. Home prices
are still down by nearly 31% from their 2006 peak, returning to mid-2003 levels.
Housing Prices still only back to 2003 levels….
Since prices began their steep decline in 2006, they had previously posted year-overyear increases in just eight months during 2010, when home-buyer tax credits fueled a
burst of sales activity.
Reuters Sale prices of U.S. homes were up in June, the S&P Case-Shiller indexes showed
Tuesday.
Today, prices are rising amid sharp declines in the number of homes for sale as banks
are taking back fewer foreclosed homes and traditional sellers have held out for better
prices. Meanwhile, record-low mortgage-interest rates have dramatically increased the
purchasing power of buyers. Also, investors have scooped up bargain-priced
foreclosures that can be converted into rental properties.
8
HOUSING STARTS EDGE
DOWN 1.1 PERCENT,
PERMITS RISE IN JULY
August 16, 2012 - Nationwide housing
production edged down 1.1 percent to a
seasonally adjusted annual rate of 746,000 units
in July, according to newly released figures from
HUD and the U.S. Census Bureau. However,
builders pulled more permits for planned
new-home projects than they have in any
month since August of 2008.
9
PLANNED U.S. STORE
OPENINGS UP 11
PERCENT IN JULY
U.S. retailer store-opening plans hit a four-year
high in July, according to RBC Capital Markets,
whose research team tracks 2,000 chains each
month.The retailers in the firm’s database say
they plan to open 78,325 stores over the next 24
months, up 11 percent from the 2-year
period ended in 2011 and 0.6 percent from
June. Dollar General, Family Dollar, Five Guys
Burgers and Fries, and Subway have the most
new stores on the drawing board, according to
the RBC report.
10
FEDERAL ISSUES
11
THE FINANCIAL
INSTITUTIONS EXAMINATION
FAIRNESS AND REFORM ACT
(HR 3461)
NOW, UNDER DODD FRANK,
LOANS WITHOUT PAYMENT OR
OTHER DEFAULT MAY FACE A
REQUIRED WRITE DOWN…
BECAUSE THE APPRAISAL
SHOWS A COLLATERAL VALUE
DECLINE
THE INCREASE IN REFINANCING
PRESSURES FOR THESE
PERFORMING LOANS, ALONG
WITH THE 1.4 TRILLION OF
COMMERCIAL LOANS THAT
COME DUE IN THE NEXT 2
YEARS…SHRINKS SUPPLY OF
MONEY
HR 3461 WOULD FIX THAT
SITUATION VIA DIRECTIVE TO
REGULATORS NOT TO REQUIRE A
LOAN WRITE DOWN OR
PLACEMENT ON NON-ACCRUAL
SOLELY DUE TO AN APPRAISAL
12
FLOOD INSURANCE
H.R.4348
The Biggert-Waters Flood Insurance
Reform Act of 2012 (July 6, 2012)
Extended the National Flood Insurance
Program until September 30, 2017
5,600,000 property owners rely on the
NFIP
Replaces the uncertainty we have faced
over the past 5 years resulting from 17
short-term extensions and 2 periods
where the program was actually allowed to
expire
13
GSES/CMBS/SECONDARY
FINANCE MARKET
WHAT FORM OF GOVERNMENT
SPONSORED ENTERPRISES, IF
ANY WILL REPLACE
FNMA/FREDDIE MAC?
-WILL THE REPLACEMENT HAVE
ANY GOVERNMENT BACKING
OR BE LEFT SOLELY TO THE
PRIVATE SECTOR?
-COULD WE SOON SEE THE END
OF THE 30 YEAR
MORTGAGE…WE ARE ONE OF
AND MAYBE THE LAST
COUNTRY ON EARTH THAT
HAS SUCH A PRODUCT?

NOVEMBER 9, 2011: LETTER FROM NAR
PRESIDENT TO CONGRESS URGING SUPPORT
OF THE BILL:

REAL ESTATE IS THE CORNERSTONE OF OUR
NATION’S ECONOMY. NAR RESEARCH SHOWS
THAT COMMERCIAL REAL ESTATE SUPPORTS
MORE THAN 9 MILLION JOBS AND GENERATES
BILLIONS OF DOLLARS IN TAX REVENUE.
MOREVOER, OUR RESEARCH ALSO INDICATES 1
MILLION ADDITIONAL HOME SALES WILL
GENERATE AN ADDITIONAL 500,000 PRIVATE
SECTOR JOBS. IN NEARLY ALL PAST ECONOMIC
DOWNTURNS, IT HAS BEEN REAL ESTATE THAT
HAS PULLED THE ECONOMY THROUGH.
THEREFORE, AS WE WORK TO REFORM AND
REBUILD OUR REAL ESTATE FINANCING SYSTEM,
REALTORS BELIEVE THAT IT IS IMPERATIVE THAT
ALL REAL ESTATE FINANCE INSTRUMENTS IN OUR
ARSENAL BE UTILIZED.
14
THE OBAMA
GSE/HOUSING PLAN
The Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 mandated that the Treasury
Department present a plan for reforming Fannie Mae
and Freddie Mac by the end of January 2011. On
February 11, 2011, the Obama Administration released
its proposal for restructuring the housing finance
system.
The proposal offers three options for restructuring the
secondary mortgage market: (1) full
privatization, (2) a guarantee mechanism
that would step up during times of crisis,
and (3) a privatized system with a federal
catastrophic reinsurance if private capital
proved to be insufficient.
The proposal also favors higher down payments
for GSE and FHA mortgages, lower GSE
and FHA loan limits, and higher GSE
guarantee fees (g-fees) and FHA
premiums, which the Obama Administration
believes are appropriate changes to give sufficient
incentive for the private sector to resume making
mortgages without FHA or GSE involvement. NAR has
serious concerns with the Administration proposals.
15
COVERED BONDS
(S. 1835)
Would provide an alternative to traditional
loan securitization—
Either residential pools
Or
Commercial Mortgage Backed Securities
(CMBS)
Would allow for a mix of financial
institution assets to serve as collateral for a
Bond…residential, commercial even (limited
to 20%) state and federal debt obligations
Would provide a new “placement” source
for financial institution assets
New potential source of commercial finance
16
ARKANSAS ISSUES
17
“STAR BONDS”
Sales Tax Anticipated Revenue Bonds
Passed as Senate Joint Resolution 5
Will be on November Ballot
Much like “TIF” legislation
But avoids school conflict
18
PROPOSED
CONSTITUTIONAL
AMENDMENT #1HIGHWAYS
Temporary 1/2¢ Sales Tax Financing a 10-Year
Bond Issue and Providing Annual Revenue to
Cities and Counties.
Support 40,000 Jobs Without Raising Taxes on
Groceries, Medicine or Gasoline.
Continue Construction and Improvement of a
Four-Lane Highway System Connecting All
Parts of the State.
Make Arkansas Roads Safer for Everyone,
Including School Buses, Emergency Vehicles
and Drivers Sharing the Road with Big Trucks.
Make it Easier and More Desirable for
Business and Industry to Locate and Expand
in Arkansas.
Provide Local Revenue for Cities and Counties
to Improve County Roads and Fix City
Streets.
19
ARKANSAS SENDS
MEDICAL MARIJUANA
LAW TO THE BALLOT
If voters approve the measure in
November, Arkansas would become the
first medical pot state in the South
Talk Business – Hendrix College Poll:
Q: A proposal to allow the use of
medical marijuana may also be on
the ballot. It would provide
Arkansans the ability to use
medical marijuana for serious
debilitating medical conditions
with a doctors recommendation,
and to allow patients to purchase
their medicine at a regulated notfor-profit dispensary. If the election
were held today, would you vote to
allow for medical marijuana sales?
47% Yes
46% No
7% Don’t Know
Arkansas Business –
The proposal would allow Arkansans with
qualifying conditions to purchase marijuana
from non-profit dispensaries with a doctor's
recommendation. Qualifying conditions include
cancer, glaucoma, HIV, AIDS and Alzheimer's
disease.
If a patient lives more than 5 miles from a
“dispensary” he/she may “grow their own?”
The proposal acknowledges that marijuana is
illegal under federal law.
20
ACT 185 –RESTRICTIVE
COVENANTS
Addresses the holding in Rausch Coleman
Homes, 2009 Ark. App. 225. If there are
separate restrictive covenants dealing with
“duration” and “amendment,” they are to be
read independently of each other so that
the durational requirement will not prohibit
amendment of the covenants during the
duration. Ark. Code Ann. § 18-12-103.
21
STATUTORY
FORECLOSURES
THE “IN RE JOHNSON” MESS
CAUSED ARKANSAS FORECLOSURES
TO COME TO A COMPLETE HALT
CAUSED TITLE INSURANCE
COMPANIES TO CEASE INSURING ANY
TITLE WITH A STATUTORY
FORECLOSURE IN ITS CHAIN OF
TITLE
MADE ARKANSAS LOOK REALLY
GREAT—FOR AWHILE -- IN THE
“FORECLOSURE CHARTS”
22
STATUTORY FORECLOSURE FIX
In re Johnson, 460 B.R. 234 (Sept. 28, 2011)
 JPMorgan Chase Bank v. Johnson, 470 B.R. 829 (May 11,
2012)

The decision of the bankruptcy court was reversed by Judge
Leon Holmes
 But, still issues linger with regard to out of state lenders,
servicing companies
 Any entity with a mortgage loan in Arkansas but not
“registered” with bank department or secretary of state
 Implication for Arkansas – non “lender friendly”
 ARA to seek a fix for this problem in the 2013 general
assembly

ACKNOWLEDGMENT FIX

In re Stewart, 422 B.R. 185 (Dec. 21, 2009)
◦ Omission of the name and use of the pronoun
“he” in the acknowledgment” combined to
invalidate the acknowledgment.

In re Beene, 354 B.R. 856 (Nov. 27, 2006)
◦ Jurat was an improper acknowledgement:
 “Given under my hand and seal this 24th day of
November, 2003. [Signed by Notary]”
DEFECTIVE
ACKNOWLEDGEMENT
CURE PASSED IN 2005…



Most Arkansas lawyers and title professionals felt
the “defective acknowledgment statute” would
prevent outcomes such as Stewart and Beene





§ 18-12-208. Defects
(a) All deeds, conveyances, deeds of trust,
mortgages, marriage contracts, and other
instruments in writing affecting
or purporting to affect the title to any real
estate or personal property situated in this
state, which have
been recorded and which are defective or
ineffectual because:
(1) Of failure to comply with § 18-12-403;
(2) The officer who certified the
acknowledgment or acknowledgments to
such instruments omitted any words
required by law to be in the certificate or
acknowledgments;
(3) The officer failed or omitted to attach his
or her seal to the certificate

***
25
AN ATTEMPT TO
CORRECT…
The Arkansas REALTORS® Association
will work on legislation and anticipates
assistance and support from numerous
organizations including:
The Arkansas Land Title Association,
Arkansas Community Bankers, Arkansas
Bar Association and Arkansas Bankers
Association
State of Arkansas
89th General Assembly
Regular Session, 2012
A Bill
For An Act To Be Entitled
 AN ACT TO AMEND ARKANSAS CODE TITLE
18, CHAPTER 12, REGARDING DEFECTS IN
ACKNOWLEDGEMENTS IN RECORDED
INSTRUMENTS, TO CORRECT
DISCREPENCIES BETWEEN TITLE 18,
CHAPTER 12, SECTION 207 AND TITLE 16,
CHAPTER 47, SECTION 107 AND TITLE 16,
CHAPTER 47, SECTION 207; AND FOR
OTHER PURPOSES.

Subtitle
 AN ACT REGARDING THE FORM OF
ACKNOWLEDGMENTS AND ADDRESSING
DEFECTS IN ACKNOWLEDGEMENTS IN
RECORDED INSTRUMENTS; AND FOR
OTHER PURPOSES.

26
I HEAR YOU KNOCKING…

HB1781 — An Act to Provide Notice of
Land Surveys to Adjoining Landowners:
Would have required surveyors to give 25
days notice to adjoining landowners before
conducting a survey. The bill was referred to
interim study by the Joint Interim Committee
on Agriculture, Forestry & Economic
Development.
27
ACT 1198—COMMISSION
ON THE STUDY OF
LANDLORD-TENANT 
LAWS
Commission Members
Steve Giles (Chair) (Little Rock
attorney)(Governor appointee)
Requires the governor to
call the first meeting of the
Commission.
Lynn Foster (Vice-Chair)(UALR Law Professor)
Marshall Prettyman (Arkansas Legal Services
Partnership)(UofA Law)
John Phelps (Jonesboro attorney)(Bar)
Dr. Jay Barth (Hendrix professor)
Howard Warren (Landlord’s Association)
Robin Miller (ARA)
Russ Altizer (Affordable Housing Assoc)
Jim Cargill (Arkansas Bankers Assoc)
John Hill (Senate Pro Tem)

The Commission is
charged with “studying,
reviewing and reporting, by
Dec. 31, 2012, on the
landlord-tenant laws in
Arkansas and other states.”
28
Act 145—Prohibition of Certain
Transfer Fee Covenants

Prohibits private transfer fee covenants whose
sole purpose is to pay developers for years
after the completion of a house or subdivision.
Private transfer fees arise after a home’s original
sale, often unbeknownst to the buyer and seller.
Arkansas now joins approximately half the
states in banning them. The statute does not
affect any such covenants recorded before its
effective date. Ark. Code Ann. § 18-12-107.
Act 172—Illegally Recording
Instruments
Increases the penalties for persons who
file a false instrument for the purpose of
harassing a judge, prosecuting attorney or
law enforcement officer.
 A felony in some cases.

LET’S SCREW UP EVERY DEED

HB1209 — An Act to Modify the
Requirements for Recordation of a Deed:
Would have required a statement on the deed
listing the monetary consideration and the
value and type of any nonmonetary
consideration. The bill was withdrawn by the
author.
32
DEEDS
Grant, Bargain and Sell
There are no implied warranties of title.
 The magic words “grant, bargain and sell”
imply some of the warranties of title.
 Without the exact magic words, or
express warranties, then the deed is
without warranty of title regardless of
the title of the deed.

Grant, Bargain and Sell
The warranties created by “grant, bargain
and sell” has one special warranty in it.
 The magic words create only a special
warranty against encumbrances.
 This has the effect of limiting liability
under the covenants of seisin, right to
convey and quiet enjoyment to defects in
title caused by the grantor only, and not
any of his predecessors in title.

The Deed Study






Sample of 311 deeds filed in Pulaski County in
June 2011.
79.1% labeled General Warranty
20.6% labeled Special Warranty
17.7% drafted by Arkansas-licensed attorneys
76.6% drafted by title agents using forms
prepared by Arkansas-licensed attorneys
2.3% drafted pro se
The Deed Study
Average purchase price was $171,551.
 Median purchase price was $135,000.

The Riddle Problem
Riddle v. Udouj (371 Ark. 452) (2007)
 Fence not exactly on the property line
 Boundary by acquiescence established
 Breach of the covenant of seisin is
decided “on the basis of who has
possession” at the time of the conveyance

The Deed Study


67.8% contained an express exception to the covenants
of title:
◦ “subject to easements, restrictions or encumbrances
which may appear of record”
The Riddle problem
◦ Not fixed merely by excepting matters “of record”
because the boundary dispute is not necessarily a
matter of record
◦ Only 4.2% of the deeds had language that would
prevent a Riddle claim
The Deed Study
Only 30.9% of the deeds contained an
express exception for prior mineral
reservations.
 None of the deeds contained a mineral
reservation in favor of the grantor.

The Deed Study
29.7% of the special warranty deeds failed
to include the phrase “grant, bargain and
sell”, thus failing to convey any of the
present covenants of title.
 Only 1.2% of the general warranty deeds
failed to include the phrase “grant, bargain
and sell”

The Deed Study

Though included as part of the covenants
automatically created by “grant, bargain
and sell”, 99.7% of all deeds still contained
an express covenant of either special or
general warranty in the deed.
Suing the Heirs
In Smiley v.Thomas (1952), Brice Williams conveyed a
warranty deed with no exceptions to a Mr. and Mrs.
Thomas in 1929, but Williams did not own one-half of
the mineral interests.
 Williams died in 1936.
 In 1950, the Thomases sued a third party unsuccessfully
to quiet title to the mineral rights in themselves. After
losing the quiet title action, the Thomases sued Jodie
Smiley, the sole heir of Brice Williams.

Smiley v. Thomas


Smiley argued in defense the statute of limitations,
laches, and the statute of nonclaims.
The court held these arguments were without
merit, without citing any authority as to how
recovery could be had as against an heir of the
decedent fourteen years after his death. The court
held that eviction had occurred when the decree in
the 1950 quiet title suit was rendered.
SPECIAL NOTE
New required transfer tax affidavit:
I certify under penalty of false swearing that
documentary stamps or a documentary symbol
in the legally correct amount has been placed
on this instrument.

MAJOR RECENT
CASES
Parks v. Rogers Group, Inc.
February 9, 2011
 Arkansas Court of Appeals
 Parks (landlord) signed a lease in 2001 with Rogers
Group (tenant). Toward the end of the 5 year term,
Parks notified Rogers Group that it wanted to
terminate the lease.
 Lease provided that it would be renewed automatically
for one year terms until the tenant gave the landlord
written notice of termination at least 30 days before the
end of the term.

Parks v. Rogers Group, Inc.
Parks sued Rogers Group for a
declaration that the landlord has a right
to terminate the lease.
 Court held that the terms of the lease
effectively created a perpetual lease.
 The leased property was a rock quarry—
could this be a distinction?

Fairpark, LLC v. Healthcare
Essentials
February 23, 2011
 Arkansas Court of Appeals
 Landlord gave tenant a build-out allowance of
$28,000 but did not specify in the lease that
Tenant would be responsible for the difference.
The finish out cost $65,000.


Tenant refused to pay the difference.
Fairpark, LLC v. Healthcare
Essentials
Tenant and Landlord argued about the $37,000
deficit and tried different options for resolving
the dispute including reducing the size of the
Tenant’s space and adjusting rent.
 During the negotiations, the air conditioner
broke. Landlord did not fix the air conditioner,
allegedly to hold the Tenant hostage to resolve
the $37,000 issue.

Fairpark, LLC v. Healthcare
Essentials
The Court found that the Landlord
breached its obligation in the lease to
keep the premises in good working order.
 The Court found that the written lease,
which failed to specify that the Tenant
would be responsible for excess building
costs, left the Landlord responsible for
the entire finish-out costs.

Garner v. XTO Energy, Inc.
October 12, 2011
 2011 Ark. App. 606
 Garner and XTO’s predecessor signed a
mineral lease for a term of five years “and
so long thereafter as oil, gas, or other
hydrocarbons were produced or deemed
to be produced from the premises or
lands pooled therewith.”

Garner v. XTO Energy, Inc.
Thirteen days before the expiration of the
5 year term, XTO started drilling.
 Garner sued for a declaration that the
lease terminated at the end of the five
years because there was no production.
 Paragraph 6 of the lease defined
“operations” to include preparation of a
drilling site and drilling.
 The lease survived challenge.

Hipp v.Vernon L. Smith & Associates
October 12, 2011
 2011 Ark. App. 611
 Kenneth and Tammy Hipp executed an oil
and gas lease. The lease included an initial 5
year term with an additional five year option.
 The Hipps claim that the leasing agent told
them there were no options terms.
 The Hipps did not read the lease.

Hipp v.Vernon L. Smith & Associates
Hipps sued alleging fraud in the
inducement and violations of the Arkansas
Deceptive Trade Practices Act (ADTPA).
 Court dismissed the suit, holding that the
lessor’s failure to read the lease will not
support a claim of fraud to toll the statute
of limitation for either fraudulent
inducement or the ADTPA.

Mauldin v. Snowden
October 26, 2011
 2011 Ark. App. 630
 Snowden owned the surface and the
minerals.
 On the same day, Snowden conveyed the
minerals to his company, Cenark Oil, and
sold the surface to Flory. The deed did
NOT contain a reservation of mineral
rights.

Mauldin v. Snowden
Six years later, Flory sold the surface to
Mauldin, but the deed did not include a
reservation of mineral rights.
 A year later, Cenark Oil conveyed the
minerals back to Snowden.
 Mauldin sued for the mineral estate under
the doctrine of after-acquired title or,
alternatively, breach of the deed
covenants from Flory and Snowden.

Mauldin v. Snowden
Flory and Snowden filed a counterclaims
asking for reformation of the deeds due
to mutual mistake to include a
reservation of the mineral rights.
 Flory and Snowden convinced the court
by “clear and convincing evidence” that
Mauldin knew no minerals were to be
conveyed and that no consideration was
paid for the minerals.

Gurlen V. Henry Management
December 15, 2010
 Arkansas Court of Appeals
 Gurlen leased an apartment and an off-site storage
facility.
 The apartment manager invited Gurlen to move her offsite property to an on-site storage unit on the
premises.
 The manager said there would be no charge until the
apartment decided how much to charge in the future
for units.

Gurlen v. Henry Management
Gurlen did not tell the apartment manager
which storage bins on-site she had decided to
use.
 The apartment decided to start charging for onsite storage and posted notices informing
residents that they needed to coordinate with
management to keep the storage bins.
 Gurlen claims she did not see the notices.

Gurlen v. Henry Management
After failing to respond to the notices, the
apartment emptied the unclaimed bins and
disposed of the property.
 The lease said:
All personal property placed on the leased premises,
or in the storerooms or in any other portion of said
premises or any place appurtenant thereto, shall be at
the risk of the Resident…

Gurlen v. Henry Management
Landlord won at the trial court…
…but LOST on appeal
…the landlord’s knowledge that Gurlen had
stored property in the storage bins, but
nevertheless destroyed the property, made
the landlord liable for the destroyed
property.

Garrett v. Fite
2009 Ark. App. 869
 December 16, 2009
 Question of whether the purchase
agreement was valid.
 Fite=Seller
 Garrett=Buyer

Garrett v. Fite




Property had a fair market value of $368,000
Purchase price in the contract was $104,000
Fite’s son-in-law, Wintory, was the broker for
both Garrett and Fite in the real estate
contract
Wintory also did other work for Garrett
Garrett v. Fite
Fite was in the business of buying and
selling houses.
 Two years before the contract, Fite stated
that he wanted $100,000 for the
property.
 Garrett and Fite never met.

Garrett v. Fite
But…
“The record shows that Fite was vulnerable at
the time of contracting. He had gout. And he
was depressed about in-fighting among his
children.”
Fite testified, “I was just would have loved to fell
in a place to just gone off and left everything…I
didn’t—didn’t care what happened.”

Garrett v. Fite
Wintory visited Fite’s home four separate
times on the day the contract was signed.
 Fite testified, he simply “gave in and signed
it”.

Garrett v. Fite
Do you have any obligation to judge the
mental or physical health of the seller?
 Do you have any obligation to judge
whether the sale is for adequate
consideration?
 What warnings should be given about
familial relationships as part of a
transaction?

Donathan v. McDill
304 Ark. 242
 December 21, 1990
 Tort of Interference with Business
Expectancy

Donathan v. McDill
Guy McDill was president of Hot Springs
Title Company
 Raymond Donathan hired Hot Springs
Title Co. to research title to a parcel that
Donathan wished to purchase.
 McDill identified that the land was soon
to be sold for nonpayment of taxes.

Donathan v. McDill
McDill and Donathan both showed up at
the tax sale and bid on the property.
 Donthan was the successful bidder at
$2,800.
 The delinquent taxes were approximately
$300.

Donathan v. McDill
McDill contacted the owner of the land about
the sale and notified the owner of its right to
redeem the land by payment of the back taxes
within 30 days of the date of the sale.
 McDill used his own money, channeled through
Hot Springs Title Company, to redeem the
property.
 McDill purchased the property from the estate.

Donathan v. McDill

“Donathan’s business expectancy was to
purchase the land in question for $2800
from the commissioner unless the owner
made a timely redemption. His
expectancy was fulfilled. No authority is
cited holding, or even suggesting, that
causing such a contingency as redemption
to occur constitutes tortious
interference.”
Donathan v. McDill
Would it have made a difference if McDill
was also a licensed attorney?
 Where is the line between being an
attorney and being a title agent?

Windsong Enterprises v. Upton
366 Ark. 23
 March 23, 2006
 Tort of Interference with Business
Expectancy

Windsong Enterprises v. Upton
In 1997, Windsong purchased a tract at a
foreclosure sale in Eden Isle Subdivision
(the “Southwinds Property”).
 Southwinds was previously owned by Red
Apple Enterprises Limited Partnership
 Windsong planned to develop
condominiums on the Southwinds
Property

Windsong Enterprises v. Upton
After the foreclosure sale, Windsong
discovered that the Property it acquired
included parts of the Red Apple golf
course.
 Red Apple Enterprises and Windsong
could not agree on a price to return the
golf course portion to Red Apple
Enterprises.

Windsong Enterprises v. Upton
The Bill of Assurances could be amended with
more than 50% of the landowners approving.
 Red Apple Enterprises owned 48% of the Eden
Isle Subdivision.
 Friends and relatives of the owners of Red
Apple Enterprises owned enough of the Eden
Isle Subdivision to amend the subdivision’s bill
of assurances.

Windsong Enterprises v. Upton

In alleged retaliation for Windsong not
selling the golf course back to Red Apple
Enterprises, Red Apple Enterprises and its
friends amended the bill of assurances to
restrict Southwinds to single-family
residential use only.
Windsong Enterprises v. Upton
Donathan v. McDill is the “apposite and
controlling” case.
 Compare Windsong Enterprises, Inc. v. Upton, 91
Ark. App. 149, stating:
“Finally, we reject out-of-hand Upton’s
suggestion that this court somehow erred in
distinguishing Donathan v. McDill. We are not
aware of anything that requires us to cite
inapposite authority.”

Windsong Enterprises v. Upton
Is there a duty of good faith?
 When is it “OK” to hurt someone’s
business for revenge or leverage?

Campbell v. Asbury Automotive
Arkansas Supreme Court Case
 April 14, 2011
 Unauthorized Practice of Law (UPL)

Campbell v. Asbury Automotive

“Statutes relating to the practice of law
are merely in aid of, but do not supersede
or detract from the power of the judicial
department to define, regulate, and
control the practice of law, and the
legislative branch may not, in any way,
hinder, interfere with, restrict, or frustrate
the powers of the courts.”
Campbell v. Asbury Automotive
Allows a private lawsuit against nonlawyers who engage in the practice of law.
 Class Action against Car Dealers for
charging document preparation fees.
 So, what is the definition practicing law???

Campbell v. Asbury Automotive
…well, there isn’t one…
 Arkansas Bar Association v. Block (1959)

◦ “We believe it is impossible to frame any
comprehensive definition of what constitutes the
practice of law. Each case must be decided upon
its own particular facts.—The practice of law is
difficult to define. Perhaps it does not admit of
exact definition.”
Campbell v. Asbury Automotive
So what is permitted??
 Creekmore v. Izard (1963)

◦ “[A] real estate broker, when the person for whom he is
acting has declined to employ a lawyer to prepare the
necessary instruments and has authorized the real estate
broker to do so, may be permitted to fill in the blanks in
simple printed standardized real estate forms, which
forms must be approved by a lawyer…without charge
for the simple service of filling in the blanks.”
Cambell v. Asbury Automotive




Pope County Bar Ass’n, Inc. v. Suggs (1981)
(1) That the person for whom the broker is acting has
declined to employ a lawyer to prepare the necessary
instruments and has authorized the broker to do so; and
(2) That the forms are approved by a lawyer either before
or after the blanks are filled in but prior to delivery to the
person for whom the broker is acting; and
(3) That the forms shall not be used for other than simple
real estate transactions which arise in the usual course of
the broker's business; and
Campbell v. Asbury Automotive

Pope County Continued…

(4) That the forms shall be used only in connection with
real estate transactions actually handled by such brokers
as a broker; and
(5) That the broker shall make no charge for filling in
the blanks; and
(6) That the broker shall not give advice or opinions as
to the legal rights of the parties, as to the legal effects of
instruments to accomplish specific purposes or as to
the validity of title to real estate.


Campbell v. Asbury Automotive

Filling out forms IS the practice of
law…but non-lawyers with a real estate
license have limited permission from the
Arkansas Supreme Court to do so…