Chalmers v. Chalmers

HALMERS> v. <CHALMERS>, 327 Ark. 141 (1997)

Hugh B. <CHALMERS> and Janelle <Chalmers> v. Nina <CHALMERS> and

Ralph W. Sloan, Successor Trustee

96-358

937 S.W.2d 171

Supreme Court of Arkansas

Opinion delivered February 3, 1997

1. GIFTS — INTER VIVOS — PROMISSORY NOTE MAY BE SUBJECT. — A
promissory note, or any chose in action or other evidence of
debt, may be the subject of a gift inter vivos.
2. GIFTS — INTER VIVOS — REQUIREMENTS. — The requirements for
an effective inter vivos gift are an actual delivery of the
subject matter of the gift to the donee with a clear intent
to make an immediate, unconditional, and final gift beyond
recall, accompanied by an unconditional release by the donor
of all future dominion and control over the property so delivered.
3. GIFTS — DELIVERY — FAMILY TRANSACTIONS. — Although the
rule with respect to delivery of gifts is less strictly
applied to transactions between members of a family, delivery
must occur for a gift to be effective.
4. GIFTS — INTER VIVOS — ACCEPTANCE BY DONEE REQUIRED. — It
has been held that, in addition to other requirements, the
validity of an inter vivos gift is dependent upon acceptance
by the putative donee.
5. GIFTS — DELIVERY — REQUIREMENTS. — The gravamen of
delivery is a showing of an act or acts on the part of the
putative donor displaying an intention or purpose to part
with dominion over the object of the gift and to confer it on
some other person; express words or particular conduct may be
dispensed with when reasonable minds would conclude from
attending circumstances that the purpose was present;
intention to give, by itself, is not sufficient; there must
be a delivery to consummate the gift and to pass title; the
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decisive factor is whether the putative donor has the power
to reclaim the property.
6. GIFTS — DELIVERY — PLACING OF ITEM IN LOCKBOX NOT
SUFFICIENT. — The mere placing of an item in a lockbox to
which both the alleged donor and donee have access is not
sufficient to constitute delivery; even the placement of an
item in a lockbox exclusively controlled by the alleged donee
may not constitute delivery; the appellate court, however,
considers other evidence to determine the intent of the
alleged donor.
7. GIFTS — DELIVERY — INDORSEMENT AND DECLARATION SUPPORTED
CHANCELLOR'S DECISION THAT PRESENT GIFT WAS INTENDED AND
DELIVERY REQUIREMENT WAS SATISFIED. — The supreme court
held that the chancellor's decision that the deceased intended
a present gift and that the delivery requirement was satisfied
was supported by the deceased's indorsement on the back of a
promissory note in favor of his wife and by the fact that the
deceased declared "to the world" that he had assigned the note
and deed of trust to his wife by recording the assignment to her
of the deed of trust; the assignment mentioned the note as well;
the chancellor's conclusion that it was the intention of the
deceased to make a present gift was not clearly erroneous,
and his conclusion that delivery occurred was proper in the
circumstances presented.
8. APPEAL & ERROR — CHANCELLOR'S FACTUAL DETERMINATION ON USURY
NOT CLEARLY ERRONEOUS. — In reviewing a chancellor's factual
determination, the appellate court does not reverse unless it
can say that it was clearly erroneous or clearly against the
preponderance of the evidence; the appellate court defers to
the superior position of the chancellor to judge the
credibility of the witnesses; in this case, the appellate
court could not say that the chancellor's determination that
appellant had failed to meet his burden of showing usury by
clear and convincing evidence was clearly erroneous or
clearly against the preponderance of the evidence.

Appeal from Crittenden Chancery Court; Rice Van Ausdall,
Chancellor; affirmed.

Rieves & Mayton, by: Martin W. Bowen, for appellants.

Sloan, Rubens & Peeples, by: Kent J. Ruebens, for appellees.

DAVID NEWBERN, Justice.

The issues in this case concern whether a promissory
note was delivered, and if so, whether the interest specified
was usurious thus rendering the note unenforceable.
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We affirm the Chancellor's decision that the note was delivered
and that the interest charged was not usurious.

Appellant Hugh B. <Chalmers> issued a promissory note to his
father, Hugh J. <Chalmers>, now deceased, in the amount of $50,000.
The note was payable upon demand or within sixty days of the death
of Hugh J. <Chalmers>. The note, dated January 1, 1975, provided
for interest at 10% per year. According to the note, payment was
secured by 150 shares of common capital stock of <Chalmers> Buick
Company.

On November 9, 1982, the parties substituted a deed of trust
on certain real property in place of the stock as security for the
note. The substitution agreement referred to the note as "a note
dated January 1, 1975." The deed of trust was recorded on
November
19, 1985.

On February 2, 1989, an additional agreement was entered
between Hugh B. <Chalmers> and his father. According to the
agreement, Hugh B. <Chalmers> would pay $15,000 to First Commercial
Bank and "The balance owed to Hugh [J.] <Chalmers> by Hugh B.
<Chalmers> will be $35,000."

Hugh B. <Chalmers> paid interest on the note, including a
$5,000 payment for the year 1975, up until 1991. On July 9, 1992,
Hugh J. <Chalmers> assigned the deed of trust to his wife, Nina
<Chalmers>, "together with the note and indebtedness described in
and now secured thereby, and all monies due or to become due
thereunder with the interest thereon." The assignment was
recorded on July 9, 1992.

Hugh J. <Chalmers> died. Nina <Chalmers>'s demand for
payment of the note was rejected by Hugh B. <Chalmers>, and she filed
this action to recover the $35,000 remaining unpaid on the note and
to foreclose on the deed of trust.

Hugh B. <Chalmers> moved to dismiss the complaint on the ground
that the note was unenforceable because interest was charged at a
usurious rate. He also contended that his father failed to make
an effective inter vivos assignment of the note because it was not
delivered to Nina <Chalmers> while he was alive. The Chancellor
refused to dismiss the complaint.
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At the trial, Mr. <Chalmers> admitted that the interest rate
provided in the note, 10%, was not usurious on its face. He
claimed that, rather than being issued January 1, 1975, the date
on the note, the original transaction occurred and the note was
actually issued on September 30, 1975. According to Mr. <Chalmers>,
the interest for 1975 was at a usurious rate because he paid
$5,000 in interest for the three months immediately following the
issuance of the note.

Nina <Chalmers> testified that she and her husband had a bank
safety-deposit box. It was referred to as a "lock box." She knew
nothing of the note until after her husband died when she found
the note in the lockbox. The note was indorsed, "Pay to the order
of Nina L. <Chalmers>," and signed "Hugh <Chalmers>."

The Chancellor's letter opinion stated that "The proof showed
that . . . [Nina <Chalmers>] was unaware of the gift, but the court is
satisfied that the deceased intended a present gift, and delivery
is satisfied by the recording of the deed of trust assignment,
when coupled with the endorsement on the back of the note."

The Chancellor declined to hold the note usurious. The
Chancellor found that "it is not clear that the instrument did not
reflect the agreement of the parties. . . . The note is not usurious
on its face. The burden of showing usury, by clear and convincing
evidence, is upon defendants, and the court feels they have failed
to do this." The decree granted Nina <Chalmers> a judgment on the
note for $35,000 and ordered a sale of the property described in
the deed of trust if the debt were not paid in ten days.

1. Delivery

[1, 2] Hugh B. <Chalmers> contends that Hugh J. <Chalmers> did not
effect an inter vivos gift to Nina <Chalmers> because Hugh J. <Chalmers>
failed to deliver the note to her during his life. A promissory
note, or any chose in action or other evidence of debt, may be the
subject of a gift inter vivos. See Irvin v. Jones, 310 Ark. 114,
832 S.W.2d 827 (1992). The requirements for an effective inter
vivos gift have been stated by the Court as: an actual delivery of
the subject matter of the gift to the donee with a clear intent to make
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an immediate, unconditional, and final gift beyond recall, accompanied
by an unconditional release by the donor of all future dominion and
control over the property so delivered. Ragland v. Commercial
Nat'l Bank of Arkansas, 276 Ark. 418, 635 S.W.2d 258
(1982); Boling v. Gibson, 266 Ark. 310, 584 S.W.2d 14 (1979).

[3] Although the rule with respect to delivery of gifts is less
strictly applied to transactions between members of a family,
delivery must occur for a gift to be effective. Aycock v.
Bottoms, 201 Ark. 104, 144 S.W.2d 43 (1940). See Baker v.
Applen, 181 Ark. 454, 26 S.W.2d 109 (1930).

Mr. <Chalmers> contends that placement of the note in the
lock-box was insufficient to effect delivery because the gift was
not beyond recall by his father. He submits that Hugh J. <Chalmers>
retained the right to exercise dominion and control over the note.
Nina <Chalmers> contends that placement of the note in the lock-box
to which she and Hugh J. <Chalmers> both had access was sufficient
delivery when combined with the recordation of the assignment of
the deed of trust and the indorsement on the note. She also
points out that the transaction was between family members.

[4] Some of our cases state a requirement that the validity of an
inter vivos gift is dependent upon acceptance by the putative
donee in addition to the elements stated above. See, e.g., Irvin
v. Jones, supra. Although reference is made to the fact that
Nina <Chalmers> was unaware of the note and deed of trust until
after Hugh J. <Chalmers>'s death, that fact is argued under the
point that delivery was not effected. We are not asked to hold
that there was no gift due to lack of acceptance, and we do not
address that point.

[5] The gravamen of delivery is a showing of an act or acts on
the part of the putative donor displaying an intention or purpose
to part with dominion over the object of the gift and to confer it
on some other person. Express words or particular conduct may be
dispensed with when reasonable minds would conclude from attending
circumstances that the purpose was present. Carlson v. Carlson,
224 Ark. 284, 273 S.W.2d 542 (1954). Intention to
give, by itself, is not sufficient; there must be a delivery to
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consummate the gift and to pass title. Gross v. Hoback,
187 Ark. 20, 58 S.W.2d 202 (1933). The decisive factor is whether
the putative donor has the power to reclaim the property.
Carlson Administrator v. Carlson, supra.

[6] The mere placing of an item in a lockbox to which both the
alleged donor and donee have access is not sufficient to
constitute delivery. Cowan v. Powell, 219 Ark. 498, 243 S.W.2d 373
(1951). Even the placement of an item in a lockbox exclusively
controlled by the alleged donee may not constitute delivery. McCune
v. Brown, 8 Ark. App. 51, 648 S.W.2d 811 (1983). We do,
however, consider other evidence to determine the intent of the
alleged donor.

In Boling v. Gibson, supra, certificates of deposit were
placed in a lockbox over which both the alleged donor and the
alleged donee may have had control. The case was decided on a
different point, but in an obiter dictum we said, "The question
was not whether . . . [the alleged donor] had lost all dominion and
control over these certificates. It was whether he clearly
intended to relinquish all dominion and control."

[7] According to Ark. Code Ann. § 4-3-203(a) (Repl. 1991),
"An instrument is transferred when it is delivered by a person [Hugh
J. <Chalmers>] other than its issuer [Hugh B. <Chalmers>] for the
purpose of giving to the person receiving delivery the right to
enforce the instrument." According to Ark. Code Ann. § 4-3-204(c)
(Repl. 1991), ". . . an indorsement that transfers a security
interest in the instrument is effective as an unqualified
indorsement of the instrument." In this case, the Chancellor's
decision is supported by the indorsement on the back of the note
in favor of Nina <Chalmers> and the fact that Hugh J. <Chalmers>
declared "to the world" that he had assigned the note and deed of
trust to his wife by recording the assignment to her of the deed
of trust. The assignment mentioned the note as well.

The Chancellor relied on our decision in Aycock v. Bottoms,
supra, not only for the holding that the delivery requirement is
relaxed as between family members, but for the statement that,
"Indeed it has been held quite frequently in many jurisdictions that
the assignment of certificates of stock to a donee by a holder is
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tantamount to delivery of the stock, although manual delivery may
be wanting."

The Chancellor's conclusion that it was the intention of Hugh
J. <Chalmers> to make a present gift was not clearly erroneous, and
his conclusion that delivery occurred was proper in the
circumstances presented.

2. Usury

Hugh B. <Chalmers> also contends that the note is void because
he was charged a usurious rate of interest. All parties concede
that the 10% interest rate included in the terms of the note is
facially valid.

The evidence presented by Mr. <Chalmers> to support his claim
consisted solely of his testimony that the note was actually
issued on September 30, 1975. In his letter to the attorneys
explaining his decision, the Chancellor stated the following:

This note was prepared by an accountant, and appears to have
been prepared at the request of both parties to the note. It
is clear defendant [Hugh B. <Chalmers>] was well versed about
usury, he being a director on a bank board. It must be
pointed out that if a borrower is the author of, or joint
adventurer of the tainted transaction, he cannot profit by
his own action. Perry v. Selby, 196 Ark. 541, 118 S.W.2d 849
(1938); McDermott v. Strauss, 283 Ark. 444, 678 S.W.2d 334
(1984); Crawford v. Gen. Contract Corp., 174 F. Supp. 283
(1959).

Reference was also made by the Chancellor to the fact that Hugh B.
<Chalmers> had referred to the note as a note of January 1, 1975, in
subsequent instruments to which he was a party.

[8] The Chancellor thus held that Hugh B. <Chalmers failed to
meet his burden of showing usury by clear and convincing evidence. In
reviewing that factual determination, we do not reverse unless we
can say that it is clearly erroneous (clearly against the
preponderance of the evidence). Ark. R. Civ. P. 52(a); Riddick v.
Streett, 313 Ark. 706, 858 S.W.2d 62 (1993). We defer to the
superior position of the chancellor to judge the credibility of
the witnesses. Id.; Brown v. City of Stuttgart, 312 Ark. 97,
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847 S.W.2d 710 (1993); McElroy v. Grisham, 306 Ark. 4, 810 S.W.2d 933
(1991). We cannot say the Chancellor's determination was clearly
erroneous or clearly against the preponderance of the evidence.

Affirmed.

Thornton, J., not participating.