Advantage Prop. Mgmt. v. Burkard

690 S.W.3d 157

2024 Ark. App 342

ADVANTAGE PROPERTY MANAGEMENT, Appellant/Cross-Appellee

v.Christopher BURKARD, Appellee/Cross-Appellant

No. CV-21-540

Court of Appeals of Arkansas, DIVISION IV.

Opinion Delivered May 29, 2024

APPEAL FROM THE FAULKNER COUNTY CIRCUIT COURT [NO. 23CV-19-1615], HONORABLE CHARLES E. CLAWSON III, JUDGE

Taylor & Taylor Law Firm, P.A., by: Andrew M. Taylor and Tasha C. Taylor, for appellant/cross-appellee.

Quattlebam, Grooms & Tull PLLC, by: Thomas H. Wyatt, Little Rock and Meredith A. Powell, for appellee/cross-appellant.

BART F. VIRDEN, Judge

₁Appellant Advantage Property Management ("APM") appeals from a Faulkner County jury verdict in favor of appellee Christopher Burkard on his action for breach of contract and breach of fiduciary duty. The jury awarded Burkard $149,025 in compensatory damages and $72,000 in punitive damages. On direct appeal, APM argues that (1) the trial court erred in finding that Burkard’s breach-of-contract claim as to APM’s failure to withhold and pay property taxes was not barred by the statute of limitations; (2) the trial court erred in denying its motion for a directed verdict on Burkard’s breach-of-contract claim because the property-management agreement did not require APM to withhold and pay property taxes; (3) all of Burkard’s claims fail on the issue of damages; and (4) the jury’s punitive-damages award and the trial court’s award of attorney’s fees to Burkard should be reversed. ₂On cross-appeal, Burkard argues that the trial court abused its discretion in denying his motion for default judgment. We affirm on direct appeal and on cross-appeal.¹

I. Factual Background

In June 2011, Burkard, a resident of California, purchased certain real property located in Conway, Arkansas ("Property"), which he then rented to tenants pursuant to lease agreements. On June 24, 2014, Burkard signed a property-management agreement with APM in which APM agreed to take all necessary actions to rent, manage, operate, and maintain the property.

In June 2019, Burkard contacted APM regarding missing rent payments and was informed that the Property was under new ownership. The Arkansas Commissioner of State Lands had sold the Property for nonpayment of property taxes in May 2018. In October 2018, APM had entered into a property-management agreement with the subsequent purchaser of the Property, ARChoice, LLC ("ARChoiee"), and had further assisted ARChoice with posting notice on the Property with respect to its quiet-title action, which resulted in a decree entered in March 2019 confirming and quieting title to the Property in ARChoice.

On December 19, 2019, Burkard filed a complaint against APM, alleging breach of contract and negligence for failing to notify him of the tax sale of the Property, contracting ₃with ARChoice without notice to him, failing to notify him of the quiet-title action, and assisting ARChoice in the quiet-title action. In the complaint, Burkard identified duties owed by APM in the property-management agreement and under common law, including providing Burkard with mailed notice of the service of any papers, notices, subpoenas, summonses, or other legal documents concerning the property. He alleged that the duty could be discharged only in accordance with paragraph 3 of the property-management agreement, which provides that

[a]ny delivery by Managing Agent of correspondence, municipal notices, service of process, or other information shall be deemed effectively delivered to Owner by Managing Agent so long as Managing Agent has, within two (2) business days of receipt, deposited such information in the United States mail, with sufficient postage to ensure delivery, addressed to Owner at the above address.

Burkard contended that he suffered damages equal to the fair market value of the Property and the loss of the monthly rental payments on the Property. APM filed its answer, generally denying the claims and asserting affirmative defenses, including statute of limitations.

On May 13, 2021, Burkard filed an amended complaint adding that APM had further breached the property-management agreement by failing to withhold and pay the property taxes on the Property on his behalf in accordance with paragraph 3 of the agreement, which provides the following:

[I]f Owner is not an Arkansas citizen or domestic Arkansas entity, Owner shall deliver to Managing Agent all filings required by Arkansas law to eliminate the need for income tax withholding, including without limitation filings with the Arkansas Department of Finance and Administration pursuant to Act 1982 of 2005 (and regulations thereunder), or, in the alternative, Owner understands, acknowledges, agrees and instructs Managing Agent to withhold for taxation purposes all sums ₄required by law and, in addition, agrees to reimburse Managing Agent for all tax or accounting expenses incurred in determining the withholding amount and for preparation and filing of applicable forms.

Burkard also asserted a cause of action for breach of fiduciary duty and sought punitive damages. When APM failed to timely answer his amended complaint, Burkard moved for a default judgment, which the trial court denied.

At a pretrial hearing, the trial court concluded that the parties’ property-management agreement was ambiguous. Also, the trial court ruled that Burkard’s contract claim was not barred by the statute of limitations and thus granted his motion for partial summary judgment on that issue. The trial court further granted Burkard’s motion to dismiss with prejudice his cause of action for negligence.

At a jury trial in July 2021, Burkard testified that he had purchased multiple "distressed" properties in several states, including Arkansas; he had renovated those properties; and he had rented them to tenants. Burkard stated that he regularly used property-management companies and negotiated the property-management agreement at issue with APM. Burkard testified that he typically financed his rental properties, so the taxes were automatically paid by the lender through the escrow account. Burkard stated that he had paid cash for the Property and was unaware that Arkansas collects annual real estate taxes. Burkard testified that he did not receive a tax bill in either the year he bought the Property or the following year when he transferred the Property to his limited-liability company because the taxes had been paid as a part of those transactions. Burkard stated that in the third year he owned the Property, he did not receive a tax bill, so he contacted the ₅Faulkner County Tax Collector and was informed that he did not owe taxes on the Property. Burkard asserted that he did not receive any communications from Faulkner County or the State of Arkansas regarding the tax status of the Property. Burkard testified that he had never had any other property sold for the nonpayment of taxes. Burkard acknowledged that no APM employee had told him that APM would pay the property taxes on his behalf and that he did not ask any APM employee who was responsible for paying the property taxes.

Burkard also testified that APM had an owner portal where monthly statements concerning deposits, repairs, commissions, old rentals, and new rentals were disclosed. Burkard conceded that the monthly statements from APM did not reflect that taxes were being paid out of his rents. Burkard noticed that it had been a few months since he had received any emails from APM’s owner portal, so he checked his bank statement to determine whether he had been receiving rent payments. When he noticed rental payments had not been made, he contacted APM in June 2019 and was informed that the Property was under new management. Burkard testified that APM’s employee had told him that the renters had brought APM a taxsale notice in February 2018. Burkard also spoke with Belinda Boyd, APM’s owner and manager, who said that APM had attempted to phone him about the tax-sale notice but was unable to reach him.

Burkard testified that he had also not received a copy of the deed conveying his Property to ARChoice and that he had not received notice from APM that it had entered into a property-management agreement with ARChoice. Burkard stated that APM did not notify him that it was terminating his property-management agreement and that he had not ₆received a final accounting. Burkard testified that he had last received a monthly statement from APM in the owner portal in January 2019. Burkard further testified that APM did not forward the notice regarding entry of the March 2019 decree of confirmation and quiet title on the Property that ARChoice had provided to APM.

Burkard stated that, had he received notice of the pending tax sale, he would have called the Faulkner County Tax Collector and paid the taxes immediately. Burkard testified that the value of the Property in March 2019 would have been about $125,000 based on comparable sales in the area, square footage, price per square foot in the area, and public-records searches. Burkard further testified that he had lost $24,025 in rental payments through the time of trial for a total of $149,025 in actual damages. Including his request for punitive damages, Burkard stated that $298,050 was the total amount of damages that would compensate him.

Boyd testified that APM manages over 300 properties for seventy-three owners in Little Rock, Cabot, Vilonia, Greenbrier, Conway, and Morrilton. She said that APM does not pay property taxes for any of its other clients and that Burkard had not asked who would pay the property taxes. Boyd insisted that APM had not received notice of the tax sale of the Property in early 2018. She conceded that APM was aware of the tax sale by October 2018 but that she had no evidence that APM had notified Burkard of the tax sale in October. She testified that the Property’s tenant had received a letter that ARChoice had purchased the Property and that the tenant had given that letter to APM. Boyd testified...