Paine v. Walker , 76 Ark. App. 217 ( 2001 )

Josephine Linker Hart, Judge.

Appellant, Michael Paine, appeals from the chancellor's decree settling the accounts of appellant and appellee Timothy Walker, after the parties dissolved their partnership, WP. Farms. Mr. Paine argues that the chancellor erred in determining that an intervenor to the lawsuit, appellee Rose Walker, held a life estate in certain property that she deeded to the partnership. Further, he argues that the chancellor erred in permitting Mr. Walker to introduce hearsay testimony regarding their respective cash capital contributions to the partnership. Finally, he generally argues that the chancellor failed to follow the dictates of the Uniform Partnership Act in winding up the partnership. We reverse on the first two issues and remand for a new trial without addressing Mr. Paine’s final point.

According to the chancellor’s order, in 1991 Mr. Paine and Mr. Walker entered into a partnership under the name of WP. Farms for the purpose of engaging in farming operations, with the parties agreeing to share profits and losses equally. In mid-September of 1998, the parties agreed to dissolve the partnership but failed to reach an enforceable agreement as to how the parties would settle their accounts. In settling the accounts, the chancellor made several dispositions regarding property in the partnership.

In particular, in December of 1994, the intervenor, appellee Rose Walker, deeded to the partnership approximately seventy acres, further providing as follows:

The right to live in the dwelling located on the NWfrl/4 pf (sic) tje (sic) NWfrll/4 Section 5, Township 19 North, Range 24 West is hereby reserved by Grantor, Rose Walker, for as long as she desires to live there.

In settling accounts, the chancellor concluded that Ms. Walker conveyed by general warranty deed a gift to the partnership. Further, the chancellor determined that she reserved a life estate in the 29.92 acres described above and the home located there.

On appeal, Mr. Paine argues that the chancellor erred in finding that Ms. Walker held a life estate in the entire 29.92 acres. We agree. The above-quoted language closely resembles that in Middleton v. Lockhart, 344 Ark. 572, 43 S.W.3d 113 (2001), where the deed provided that the grantor “reserves for herself the exclusive right to use and occupy the residence situated on said land for and during the remainder of her lifetime.” Middleton, 344 Ark. at 580, 43 S.W.3d at 119. The Arkansas Supreme Court concluded that such language reserved only a life estate in the residence, not in the land. Id. Because of the similarity of the language in the case at bar and Middleton, we conclude that the chancellor erred in finding that Ms. Walker held a life estate in the 29.92 acres, rather than just the dwelling.

In his order, the chancellor further concluded that Mr. Paine provided cash contributions of $46,628.42 and Mr. Walker provided cash contributions of $126,849.18, the same figures that Mr. Walker presented in his testimony. On direct examination, Mr. Walker testified that money was placed in various accounts for partnership business. Mr. Walker was asked whether “based on your looking at those accounts and adding up the figures,” how much both he and Mr. Paine had put into the partnership, and Mr. Walker provided the above-referenced figures without further elaboration.

On cross examination, however, Mr. Walker admitted that he did not have any records and that he relied on what he was told by the bank. Mr. Paine objected, arguing that the testimony was hearsay. In the decree, the chancellor noted that evidence of these totals came from Mr. Walker’s testimony that was admitted over Mr. Paine’s hearsay objection and that Mr. Walker testified that the totals were “compiled by the First National Bank of Berryville, Arkansas.” The chancellor found that Mr. Walker’s testimony was admissible under the business-records exception to the hearsay rule.

On appeal, Mr. Paine argues that the court’s ruling was error. We agree. As an exception to the hearsay rule, Rule 803(6) of the Arkansas Rules of Evidence permits the admission of business records.¹ For a record to be admitted under this exception it must be: (1) a record or other compilation, (2) of acts or events, (3) made at or near the time the act or event occurred, (4) by a person with knowledge, or from information transmitted by a person with knowledge, (5) kept in the course of regularly conducted business, (6) which has a regular practice of recording such information, (7) all as known by the testimony of the custodian or other qualified witness. Edwards v. Stills, 335 Ark. 470, 511, 984 S.W.2d 366, 388 (1998). One who offers evidence has the burden of showing its admissibility, and we will not reverse the court’s decision to permit introduction of the evidence absent an abuse of the court’s discretion. Id.

In the decree, the chancellor specifically noted that the cash-contribution figures were “derived from [Mr. Walker’s] testimony that these totals were compiled by the First National Bank of Berryville, Arkansas.” Thus, Mr. Walker presented only bald figures that were derived from bank records by someone at the bank. Even if we assume that Mr. Walker’s testimony was a “compilation,” he failed to present any evidence that his “compilation,” which was made by someone at the bank, was “made ... by, or from information transmitted by, a person with knowledge.” See Ark. R. Evid. 803(6). As we have previously noted, “the party offering the record must. . . establish by a competent witness that its content is worthy ofbelief.” Marshall Trucking Co. v. State, 23 Ark. App. 110, 114, 743 S.W.2d 16, 18 (1988) (holding that a company that integrated another company’s records into its own records failed to establish that the other company’s records were trustworthy). Moreover, there was no evidence that the “compilation” was “kept in the course of a regularly conducted business activity,” as opposed to some other special purpose, that is, for the purpose of litigation. See Ark. R. Evid. 803(6); Parker v. State, 270 Ark. 897, 606 S.W.2d 746 (1980) (holding that there was no foundation to prove that a list of checks prepared by a bank vice-president were kept in the regular course of business and instead the records were prepared for a specific purpose). Because Mr. Walker failed to establish that his “compilation” fit within the business-records exception to the hearsay rule, we must conclude that the chancellor abused his discretion in admitting the testimony under this exception. Compare Smith v. Citation Mfg. Co., 266 Ark. 591, 597-98, 587 S.W.2d 39, 42 (1979) (holding that the chancellor properly excluded an unaudited financial statement prepared by an accountant where the statement was not properly authenticated and no basis was laid for it being admitted as a business record) with Ward v. Gerald E. Prince Constr., Inc., 293 Ark. 59, 62-63, 732 S.W.2d 163, 165 (1987) (holding that witness’s testimony unquestionably identified a summary document she prepared as a business record).

Finally, Mr. Paine argues that the chancellor erred in not according him his rights under the Uniform Partnership Act. Specifically, he argues that the chancellor erred by failing to order an accounting and by failing to allow him to manage partnership assets. Mr. Paine, however, failed to show this court where he made related requests for relief that were adversely ruled upon by the chancellor. Nevertheless, we do not doubt that on retrial the chancellor will accord Mr. Paine whatever rights he may have under the Uniform Partnership Act. Mr. Paine further argues, as he stressed to the chancellor in his motion for a new trial, that his and Mr. Walker’s contributions to the partnership were not properly accounted for by the chancellor. On remand, Mr. Paine and Mr. Walker will undoubtedly readdress, with greater specificity, the issue of their respective contributions to the partnership. Because of the considerable likelihood that the evidence presented at the new trial will be substantially different than the evidence presented here, we do not address Mr. Paine’s argument at this time. Finally, on remand the chancellor should determine how much land is reasonably necessary to accompany the residence reserved by Ms. Walker and provide for legal access to a public road from the residential tract.

Reversed and remanded.

Stroud, C.J., and Jennings, Griffen and Crabtree, JJ., agree. Bird, J., agrees in part and dissents in part.

1 The exclusion from the hearsay rule provided in Rule 803(6) is as follows:

(6) Records of Regularly Conducted Business Activity. A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses [sic], made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness. The term “business” as used in this paragraph includes business, institution, association, profession, occupation, and calling of every kind, whether or not conducted for profit.