Arkansas

Warning: The following opinion is provided for purposes of discussion only. We have not Shepardized™ this opinion, and do not know the subsequent disposition of this case nor whether the effect of the opinion has been overruled or superceded by other law.

Dennis Martindill v. Robert Stanton,
No. CA04-8 (Ark.App. 06/01/2005)

CA04-8

COURT OF APPEALS OF ARKANSAS, DIVISION FOUR

2005 Ark. App. LEXIS 424

June 1, 2005, Decided

NOTICE: [*1] NOT DESIGNATED FOR PUBLICATION. PLEASE REFER TO THE ARKANSAS RULES OF COURT.

PRIOR HISTORY: AN APPEAL FROM PULASKI COUNTY CIRCUIT COURT. NO. CIV2002-6696. HONORABLE TIMOTHY FOX, CIRCUIT JUDGE. Martindill v. Stanton, 2004 Ark. App. LEXIS 878 (Ark. Ct. App., Nov. 17, 2004)

JUDGES: ANDREE LAYTON ROAF, Judge. HART and GLADWIN, JJ., agree.

OPINIONBY: ANDREE LAYTON ROAF

OPINION: ANDREE LAYTON ROAF, Judge

Appellant Dennis Martindill appeals from an order granting summary judgment to appellee Robert Stanton. He also appeals from the trial court's subsequent refusal to vacate that order. We affirm.

In 1996, four plaintiffs obtained $ 231,000 in judgments against three corporations that operated the Midnight Rodeo nightclub -- Heartland, Inc. (Heartland), Hospitality Innovators Corp. (Hospitality), and Lumberjac Corp. (Lumberjac). n1 When the plaintiffs tried to execute on the judgments, they learned that Heartland and Hospitality had filed a UCC financing statement on the nightclub's assets, naming Realty Mortgage & Investment Co. (Realty Mortgage) as the secured party. They also discovered that another corporation, Wonderland Cave & Club, Inc. (Wonderland), had begun operating a nightclub on the same premises using Midnight Rodeo's assets.

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

n1 The plaintiffs received injuries when they were attacked by the nightclub's bouncers.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [*2]

The plaintiffs returned to court and filed a "Third Amended Complaint" adding Realty Mortgage, Wonderland, and appellee Robert Stanton as defendants. The complaint alleged that fraudulent transfers had occurred; that Stanton owned and controlled Heartland, Hospitality, Lumberjac, Realty Mortgage, and Wonderland; and that Stanton should be liable for the judgments against Heartland, Hospitality, and Lumberjac. The case was transferred to chancery, where the chancellor entered an order on September 16, 1998, finding that Arkansas's fraudulent-transfer laws had been violated and that the plaintiffs could execute against all assets at the Midnight Rodeo location. The order also mentioned that testimony had been given regarding the relationship between the three judgment-debtor corporations and Realty Mortgage, Wonderland, and Robert Stanton but said that the testimony was "evasive, unclear, and not credible" and that the chancellor had "much difficulty" tracing the relationship of Stanton to Midnight Rodeo because "no clear and concise explanation was ever provided the Court." Wonderland appealed from the chancellor's order on the ground that its motion to dismiss the third amended complaint [*3] should have been granted, but we did not reach the merits of the appeal, holding that the motion was not ruled upon. Wonderland Cave & Club, Inc. v. Hughes, 1999 Ark. App. LEXIS 836, CA99-251 (Dec. 8, 1999) (not designated for publication).

While the appeal was pending, the plaintiffs assigned their judgments to appellant Dennis Martindill for a total of $ 15,000. Martindill was substituted as a plaintiff in the chancery case and at some point received $ 100,000 from an appeal bond that had been posted by Wonderland. He later assigned any interest he might have in Wonderland's assets to another entity for $ 38,324. However, when that entity was substituted as the plaintiff in the chancery case, Martindill attempted to re-enter the lawsuit by means of intervention for the purpose of collecting the remaining $ 92,768 (although he apparently meant $ 92,676) on the judgments. His intervention was briefly permitted but ultimately denied, and he did not appeal from that order or from any other chancery order.

On June 27, 2002, Martindill filed the action that is the subject of this appeal. He sued Robert Stanton individually, alleging that Stanton owned and controlled Heartland, Hospitality, and Lumberjac; [*4] that Stanton had "buried himself beneath multiple layers of corporate shields"; and that Stanton should be held personally liable for the judgments against Heartland, Hospitality, and Lumberjac. Stanton moved for summary judgment on the ground that the issue of his relationship to the judgment-debtor corporations had been tried or should have been tried in the 1998 chancery case and, thus, the claim against him was barred by res judicata. Martindill responded with his own motion for summary judgment and argued that Stanton had not been served nor had he appeared in the prior action, and the issue of Stanton's relationship to the judgment-debtor corporations had never been tried.

In conjunction with filing his motion for summary judgment, Martindill returned to the chancellor who had entered the 1998 order and asked that he clarify his order by deleting language indicating that Stanton had entered an appearance through attorney Steve Morley and by deleting any indication that the issue of Stanton's personal liability was tried. In an amended order for clarification entered November 7, 2003, the chancellor stated that he never determined whether Stanton had any personal liability [*5] and that the only issue tried was whether the assets at the Midnight Rodeo location could be executed upon to satisfy the judgments. He made no changes to the order's language regarding Stanton's appearance in the case.

By the time the clarification order was entered, the circuit judge in the present action had granted summary judgment to Stanton and denied summary judgment to Martindill. Martindill asked the judge to vacate his ruling in light of the chancellor's clarifications, but the judge denied his request. Martindill now brings this appeal.

A trial judge's conclusion of law regarding the application of res judicata is given no deference on appeal. See, e.g., Office of Child Support Enforcement v. King, 81 Ark. App. 190, 100 S.W.3d 95 (2003). If the law has been erroneously applied and the appellant has suffered prejudice, the erroneous ruling is reversed. Id. Further, where parties file cross-motions for summary judgment, as they did in this case, they essentially agree that there are no material facts remaining, and summary judgment is an appropriate means of resolving the case. See Clarendon Nat'l Ins. Co. v. Roberts, 82 Ark. App. 515, 120 S.W.3d 141 (2003). [*6]

Four elements must be met for res judicata to apply: (1) the first suit must have resulted in a final judgment on the merits; (2) the first suit must be based on proper jurisdiction; (3) both suits must involve the same cause of action; (4) both suits must involve the same parties or their privies. Crockett & Brown, P.A. v. Wilson, 314 Ark. 578, 864 S.W.2d 244 (1993). The test in determining whether res judicata applies is whether the matters presented in a subsequent suit were necessarily within the issues of the former suit and might have been litigated therein. Cox v. Keahey, 84 Ark. App. 121, 133 S.W.3d 430 (2003). Res judicata applies not only to claims that were actually litigated in the prior suit but to claims that might have been litigated in the prior suit. See Nichols Bros. Invs. v. Rector-Phillips-Morse, 33 Ark. App. 47, 801 S.W.2d 308 (1990). When a case is based on the same events as the subject matter of a previous lawsuit, res judicata will apply even if the subsequent lawsuit raises new legal issues and seeks additional remedies. Cox, supra.

Martindill argues first that he could [*7] not litigate his claim against Stanton in the chancery case because Stanton was never served with the third amended complaint and therefore was not a party to the chancery litigation. When a person has neither been served in nor appeared in an action, he cannot be bound by the court's order therein, and a plea of res judicata against him cannot be sustained. See Forrest v. Forrest, 208 Ark. 48, 184 S.W.2d 902 (1945).

There is in fact some evidence in the record that Stanton did not consider himself as having been served in the chancery action; he filed a pleading in that case on April 20, 2001, in which he stated that he had never been served with process or entered an appearance. However, the circuit judge in the original action found that Stanton was avoiding service and granted the plaintiffs leave to serve the third amended complaint on him by placing a copy under his door or between the door and the door jamb. Service was accomplished in this manner on July 2, 1997, and the circuit court's transfer order contained a finding that Stanton had been properly served, as did the 1998 chancery order. The record does not reflect that those findings were attacked [*8] by any person during the pendency of the chancery case. Therefore, Martindill's argument on this point is not well taken.

Martindill claims next that, if Stanton was served in the chancery case, he was in default because he never answered or appeared. The chancellor's 1998 order stated that the "Defendants" appeared by and through their attorney, Steve Morley. Despite that statement, the record reflects that the only response to the third amended complaint was a motion to dismiss filed solely on behalf of Wonderland. Nevertheless, even if Stanton did not file a timely response to the third amended complaint, the record does not indicate that either the original plaintiffs or Martindill brought the matter to the chancellor's attention or moved for entry of a default judgment against Stanton. Martindill does not explain this, except to say a default judgment would have been "worthless" because service on Stanton was "unusual." Moreover, when Stanton finally did file a pleading in the chancery case in April 2001, which he designated as an answer to the third amended complaint, there is no evidence that Martindill objected or sought a default judgment, even though he was permitted to [*9] intervene thereafter for a brief period of time. In light of these factors, we find no basis for reversal on this point.

Martindill also argues that, even though "piercing of the corporate veil was a part of the third amended complaint," that part of the case "never came to trial." It is true that, while the chancellor's 1998 order reflects that some testimony was presented regarding Stanton's relationship to the corporations, the 2003 clarification order states that the subject of Stanton's liability was never actually tried. Nevertheless, even if the claim against Stanton was not actually tried in chancery, it could have been tried. The third amended complaint asserted a claim against Stanton for the corporate judgments. Witnesses were obviously available to testify regarding Stanton's relationship to the corporations and, according to the 1998 chancery order, did in fact testify. Additionally, both the circuit court and chancery court found that Stanton had been served with the lawsuit. Moreover, the action remained ongoing through 2001, and there is no showing that the claim against Stanton could not have been tried at some point in the proceeding. The claim is thus barred by [*10] the rule that res judicata applies to claims that were actually tried and that could have been tried in the prior action. See Nichols Bros. Invs., supra. n2

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

n2 Martindill contends that language in our appellate cases to the effect that res judicata bars litigation of claims that could have been tried is dicta. His contention is incorrect; our courts have applied that language as the basis for decision. See, e.g., Swofford v. Stafford, 295 Ark. 433, 748 S.W.2d 660 (1988); Taggart v. Moore, 292 Ark. 168, 729 S.W.2d 7 (1987); Golden Host Westchase, Inc. v. First Serv. Corp., 29 Ark. App. 107, 778 S.W.2d 633 (1989).

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

Martindill makes a brief argument that res judicata cannot be applied because no final order was entered in the chancery case. The record does not reflect that Martindill made this argument below, so it should not be considered on appeal. See Hisaw v. State Farm Mut. Auto. Ins. Co., 353 Ark. 668, 122 S.W.3d 1 (2003); [*11] Swofford v. Stafford, 295 Ark. 433, 748 S.W.2d 660 (1988). In any event, the pleadings and orders that are contained in the record before us state that the case was dismissed in 2001. Martindill also makes a brief argument that res judicata does not bar a subsequent action "where a party has been prohibited from asserting the claim in the earlier action," citing Cater v. Cater, 311 Ark. 627, 846 S.W.2d 173 (1993), and Coleman's Service Center v. Federal Deposit Insurance Corp., 55 Ark. App. 275, 935 S.W.2d 289 (1996). Martindill does not say in his appellate brief nor did he explain below how he or the original plaintiffs were prohibited from asserting their claim in the earlier action. Where an argument is not fully developed at the trial level or on appeal, it is not preserved for review. See Omni Holding & Dev. Corp. v. 3D.S.A., Inc., 356 Ark. 440, 156 S.W.3d 228 (2004).

In light of the foregoing, we affirm the trial court's grant of summary judgment to Stanton and the denial of summary judgment to Martindill. As for Martindill's argument that the trial judge should have vacated his order after the chancery [*12] court amended its 1998 ruling, that argument is unavailing. While the chancellor clarified that no findings had been made with regard to Stanton's personal liability, that did not change the fact that Martindill or his predecessors could have litigated that claim in the chancery action.

Affirmed.

HART and GLADWIN, JJ., agree.

The legal opinions are a matter of public record (that's how we got them), and as such there can be no defamation for republishing them. Sometimes, however, legal opinions are reversed, vacated, or significantly modified, etc., and we do not discover this fact until somebody points it out to us. As we do not desire to publish inaccurate or outdated information, if a legal opinion has been reversed, vacated, or significantly modified, please advise us of this fact immediately, by fax to (877) 698-0678 or you may also send regular postal correspondence to Riser Adkisson LLP at 1827 Powers Ferry Road, Building One, Suite 200, Atlanta GA 30339.