Burma Jean Martin, John Paul Martin and Hazel Martin v. Michael Knollmeyer et al.

ARKANSAS COURT OF APPEALS
NOT DESIGNATED FOR PUBLICATION

ca03-967

DIVISION I

CA03-967

November 2, 2005

BURMA JEAN MARTIN, JOHN PAUL AN APPEAL FROM PULASKI COUNTY

MARTIN and HAZEL MARTIN CIRCUIT COURT

APPELLANTS [CV 2002-3132]

v. HONORABLE ALICE SPRINKLE GRAY,

CIRCUIT JUDGE

MICHAEL KNOLLMEYER, et al.

APPELLEES AFFIRMED

Josephine Linker Hart, Judge

This is a summary-judgment case. Burma Jean Martin and her parents, John Martin and Hazel Martin (the Martins), bring this pro se appeal from a summary judgment entered by the Pulaski County Circuit Court for appellees Michael Knollmeyer and Knollmeyer Law Office, P.A. (Knollmeyer). We affirm.

Knollmeyer represented the Martins in a dispute over property in Burma's bankruptcy proceeding in the Eastern District of Arkansas, which was resolved by settlement in March 1998. Appellants later unsuccessfully sought to set the settlement aside. On March 8, 2001, Burma sued Knollmeyer and other defendants in federal court, asserting legal malpractice, fraud, negligence, breach of contract, and breach of fiduciary duty. Burma filed an amended complaint adding the Martins as plaintiffs on April 30, 2001. According to the court's July 20, 2001 order denying reconsideration, the district court dismissed that action without prejudice for lack of subject-matter jurisdiction on May 7, 2001. The Eighth Circuit Court of Appeals affirmed on February 12, 2002.

Appellants filed this action against the same defendants in the Pulaski County Circuit Court on March 19, 2002. On May 15, 2002, appellants filed a second amended complaint,alleging that these defendants had conspired to defraud them over a period of several years during the course of Burma's Arkansas bankruptcy case and in the state and federal actions in which she was involved with Brian Sanford in Texas. In their lengthy complaint, appellants sued Knollmeyer; the bankruptcy trustee, Richard L. Cox; Richard L. Cox, P.A.; Cox's attorney, James F. Dowden; James F. Dowden, P.A.; Dowden's former firm, Eichenbaum, Liles, Heister, P.A.; Brian Sanford; Brian Sanford, P.A.; Sanford's attorney, Stephen Niermann; and Niermann and Olivo, P.A. Their claims against Knollmeyer were for fraud, legal malpractice, breach of fiduciary duty, and outrage.

At the same time, Burma continued to attempt to set aside the bankruptcy orders, making the same allegations of fraud as appellants raise in this action. In an opinion dated January 15, 2003, the bankruptcy judge recited the lengthy history of that litigation and had the following to say about Burma's unwillingness to accept the previous decisions refusing to set aside the bankruptcy orders:

Debtor's arguments show that either she does not understand or will not accept principles of finality in litigation. Once an issue is litigated and decided, it cannot be raised again under principals [sic] of res judicata. See Spears v. State Farm & Casualty Ins., 291 Ark. 465, 468, 725 S.W.2d 835, 837 (1987) ("The purpose of res judicata is `to put an end to litigation by preventing a party who had one fair trial on a matter from relitigating the matter a second time.'") (citations omitted). Likewise, issues which could have been raised in prior litigation, but were not, are barred as well. The issues raised by Debtor, specifically the alleged inconsistencies between the Settlement Agreement and Compromise Settlement Agreement and the parties' alleged fraud in inducing her to sign the 3-13-98 Order, were previously determined by this Court at least twice. Debtor's first collateral attack on the 3-13-98 Order requested the same relief she seeks now and made the same allegations with the exception of Michael Knollmeyer's involvement. The Court denied Debtor's motion to set aside the 3-13-98 Order, and Debtor chose not to appeal this decision. At that point, her litigation over the 3-13-98 Order was complete. However, Debtor instead brought the same matter before the Court again approximately three years later. Again, Debtor requested the same relief, and the Court denied it. See In re Martin, 268 B.R. 168. The Court's decision was upheld on appeal, not only on the grounds that Debtor's motion was untimely, but that she failed to show fraud on the court as a matter of law. Debtor then chose not to prosecute her appeal to the Eight [sic] Circuit, and her appeal was consequently dismissed. At that point, her litigation over the 3-13-98 Order was finished (once again), and this is true regardless of whether the substantive issues raised by Debtor were considered or not (the BAP did in factconsider the substantive issues raised by Debtor along with the timeliness issue) and regardless of whether the Eighth Circuit reviewed Debtor's appeal. This Court finds that Debtor has in fact had her day in court on at least three occasions now, and because the issues raised by Debtor have been previously decided, it is improper for Debtor to raise them again. See Arleaux, 229 B.R. at 185; Kieffer v. Riske (In re Kieffer-Mickes, Inc.), 226 B.R. 204, 210 (B.A.P. 8th Cir. 1998); In re Brown, 152 B.R. 563, 568 (Bankr. E.D. Ark. 1993).

Furthermore, the fact that Debtor makes a new allegation in her most recent motions regarding Michael Knollmeyer's involvement does not allow her to once again attack the 3-13-98 Order. The princip[le] of res judicata operates to bar all issues that were or could have been decided during the litigation. See Spears v. State Farm Fire & Casualty Ins., 291 Ark. at 468. Debtor does not allege that she uncovered new evidence that led her to believe Knollmeyer fraudulently induced her to sign the agreed 3-13-98 Order, but rather, that it only recently occurred to her that he was part of the alleged conspiracy against her. Accordingly, she could have made this allegation before but did not, and cannot do so now. Moreover, even if this allegation were considered new evidence, motions for relief from orders based on new evidence can only be brought within one year of entry of the order under Federal Rule of Civil Procedure 60(b)(2), and accordingly, her request for relief based on Knollmeyer's alleged involvement is time-barred.

Additionally, Debtor's allegation that Knollmeyer induced her to sign the 3-13-98 Order approving the Compromise Settlement Agreement when she believed it was the Settlement Agreement she was signing ignores a very significant fact. The Settlement Agreement, which Debtor acknowledges agreeing to and signing, clearly refers to the Compromise Settlement Agreement and provides that Debtor will withdraw her objections to the Compromise Settlement Agreement and that she asks the Court to approve it. In other words, the terms of the Settlement Agreement (which Debtor clearly agreed to) require that Debtor agree to an order approving the Compromise Settlement Agreement. The Compromise Settlement Agreement in turn incorporated by reference the Agreed Judgment which was entered in federal court in Texas. Debtor agreed to these settlements by executing the Settlement Agreement, and consequently, she cannot logically assert that she was tricked into signing the 3-13-98 Order. For the same reasons, Debtor's implication that one settlement agreement was fraudulently switched for the other, and that it was only the Settlement Agreement which was put before the Court for approval, makes no sense. As clearly set forth in the facts above, the Trustee moved for approval of the Compromise Settlement Agreement in the case-in-chief and filed a separate motion for approval of the Settlement Agreement in the adversary proceeding. There were two motions for approval of settlement agreements in two different cases, and an order approving each settlement was entered in each case. Having chosen to proceed pro se, Debtor took it upon herself to keep track of her bankruptcy case and the adversary proceedings in which she was involved - she cannot claim fraud because she failed to carefully read the Settlement Agreement to which she agreed, or because she failed to keep track of what was going on in her case-in-chief, namely, the approval of the Compromise Settlement Agreement, a distinct settlement from the Settlement Agreement executed by different parties and approved in a separate adversary proceeding.

In that order, the bankruptcy judge denied appellants leave to sue Cox, Cox's firm, Dowden, James Dowden, P.A., or Eichenbaum in any forum and imposed sanctions against Burma, stating that, "[w]hile the Debtor appears to subjectively believe she has been wronged, she has demonstrated enough legal sophistication to understand that she has lost on this issue, yet continues to raise it again and again." Stating that Burma's arguments not only were barred by res judicata but also defied logic, the judge ordered her to pay Cox's and Dowden's attorney's fees.

In this case, appellants propounded forty requests for admission to Knollmeyer, who filed responses on June 24, 2002. Knollmeyer moved for summary judgment on November 26, 2002, arguing that appellants' claims were barred by res judicata, collateral estoppel, and the statute of limitations. He also filed his affidavit, in which he stated:

3. For a time, I represented John and Hazel Martin (the "Martins") in the bankruptcy proceeding of Burma Jean Martin, Case No. 95-42745S, in the United States Bankruptcy Court, Eastern District of Arkansas, Little Rock Division (the "Bankruptcy Case"). I have never represented Burma Jean Martin, either in the Bankruptcy Case or otherwise.

4. My representation of the Martins in the Bankruptcy Case centered on their claim to certain properties in Arkansas and Texas, which they contended they owned.

5. The Trustee in the Bankruptcy Case, Richard Cox, asserted that the Bankruptcy Estate of Burma Jean Martin owned the properties. In connection with that contention, the Trustee filed an adversary proceeding, or complaint, in the Bankruptcy Case, Cox v. Burma Jean Martin, Hazel Victoria Martin, John Paul Martin, et al., AP No. 97-4034 (the "Adversary Proceeding").

6. Thereafter, in consultation with the Martins and together with counsel for the other parties, I negotiated a settlement of the Adversary Proceeding. The Settlement Agreement was specifically executed by the Martins and is attached as Exhibit 3 to the Affidavit of Richard Cox previously filed herein (the "Settlement Agreement").

7. The Settlement Agreement was formally presented to the Bankruptcy Court and approved by its Order entered March 25, 1998, a copy of which is attached to the Affidavit as Exhibit 1 (the "Settlement Agreement Order").

8. Immediately following entry of the Settlement Agreement Order, my representation of the Martins in the bankruptcy proceeding of Burma Jean Martin ended.

9. On March 8, 2001, Burma Jean Martin filed an action in the United States District Court, Eastern District of Arkansas, Western Division, Martin v. U.S. Trustee et al., in which I was one of a number of named defendants (the "District Court Action"). She claimed fraud, breach of fiduciary duty, breach of contract, and negligence, among other things, in connection with the Settlement Agreement.

10. Thereafter, or about April 24, 2001, Burma Jean Martin attempted to add the Martins as plaintiffs, but the Court dismissed the amended complaint without prejudice for lack of subject matter jurisdiction and failure to state a claim. The U.S. District Court's dismissal was affirmed by the Eighth Circuit Court of Appeals.

11. This action was filed on March 2, 2002. Both this action and Martin's attempted appearance in the District Court Action were commenced more than three years after my representation of the Martins in the Burma Jean bankruptcy proceeding terminated.

In support of their response to Knollmeyer's motion for summary judgment, appellants filed a brief in which they accused Sanford and Niermann of "making out like bandits," Dowden and Cox of having worked against the Martins, and Knollmeyer of having "rolled over." In a supporting affidavit, Burma stated that she had read the allegations in appellants' brief in support of their response to Knollmeyer's motion for summary judgment and had reviewed the attached exhibits. She said: "To the best of my knowledge and belief, the allegations, facts, and exhibits are true and correct. I adopt them as my testimony herein."

On March 6, 2003, the circuit court awarded summary judgment to Knollmeyer, holding (1) that the gist of appellants' action against Knollmeyer was in tort, for which the three-year statute of limitations in Ark. Code Ann. § 16-56-105 (1987) applied; (2) that Knollmeyer's affidavit was uncontroverted and established that this action was barred by limitations; (3) that Burma's affidavit was conclusory and did not meet the requirements of Ark. R. Civ. P. 56 as a controverting affidavit; and (4) that, even if this action were not barred by limitations, the claims against Knollmeyer were barred by collateral estoppel. Thecircuit court also dismissed the claims against Cox and his firm, Dowden and his firm, Eichenbaum, Sanford and his firm, and Niermann and his firm. This appeal concerns only the summary judgment entered for Knollmeyer.

The standard of review for this appeal from the entry of summary judgment is well settled. Summary judgment is to be granted only when it is clear that there are no genuine issues of material fact to be litigated, and the moving party is entitled to judgment as a matter of law. State Farm Mut. Auto. Ins. Co. v. Henderson, 356 Ark. 335, 150 S.W.3d 276 (2004). In considering whether to grant summary judgment, we consider pleadings, depositions, answers to interrogatories, admissions, and affidavits, if any. Curley v. Old Reliable Cas. Co., 85 Ark. App. 395, 155 S.W.3d 711 (2004). Once the moving party makes a prima facie showing that he is entitled to summary judgment, the opponent must meet proof with proof by showing a material issue of fact. Id.

Appellants have raised six points on appeal. They argue that: (1) the circuit court erred in mixing summary-judgment and dismissal standards; (2) Knollmeyer's affidavit does not answer appellants' questions of material fact; (3) the circuit court erred in dismissing this action before Knollmeyer complied with appellants' requests for discovery; (4) the trial court erred in conducting a hearing on Knollmeyer's motion for summary judgment on February 20, 2003; (5) the statute of limitations does not defeat appellants' claims; (6) the doctrine of collateral estoppel does not apply to appellants' claims against Knollmeyer. For the reasons explained below, we need not address the statute of limitations issue.

We will first consider the procedural issues. Appellants' first point is difficult to understand. They recite the circuit judge's statement in the order that, from "a consideration of the pleadings, papers, arguments and statements of counsel, the Court FINDS ... the motion for summary judgment of Knollmeyer should be ... GRANTED, and this cause is DISMISSED ...." According to appellants, the judge erred in considering the briefs, papers, arguments, and statements of counsel because they cannot be considered when granting summary judgment, see Pyle v. Robertson, 313 Ark. 692, 858 S.W.2d 662 (1993); however,relying on Stapleton v. M.D. Limbaugh Constr. Co., 333 Ark. 381, 969 S.W.2d 648 (1998), appellants argue that "a judge can consider any and all documents except affidavits" when granting a motion to dismiss. Appellants, however, did not raise this argument below. We do not consider arguments raised for the first time on appeal. Ghegan & Ghegan, Inc. v. Barclay, 345 Ark. 514, 49 S.W.3d 652 (2001). Even if they had raised it, it is totally without merit. Pyle stands for the proposition that, when ruling on a motion for summary judgment, the judge cannot rely on factual allegations in briefs; it does not state that the court cannot consider the parties' legal arguments contained therein.

Appellants also contend that the circuit judge erred in not requiring Knollmeyer to respond to discovery before entering summary judgment. They also assert that, at the hearing, the judge should have considered their motion to compel instead of Knollmeyer's motion for summary judgment. According to the abstract, however, appellants' former attorney did not make these arguments at the hearing. In fact, when Knollmeyer's attorney stated that he planned to argue the motion for summary judgment at the hearing, appellants' attorney proceeded to argue against that motion without mentioning the motion to compel, even though he could have requested a continuance. See Ark. R. Civ. P. 56(f). An appellant may not complain on appeal of action that he has induced, to which he has consented, or in which he has acquiesced. Cranfill v. Union Planters Bank, N.A., 86 Ark. App. 1, 158 S.W.3d 703 (2004); Keathley v. Keathley, 76 Ark. App. 150, 61 S.W.3d 219 (2001).

In their second point, appellants assert that their allegations in their second amended complaint and Knollmeyer's statements in his affidavit are evidence that Knollmeyer defrauded them in the signing and entry of the settlement agreement and compromise settlement agreement. They point to the difference between Knollmeyer's statement in his affidavit that the settlement agreement was approved on March 25, 1998, and the order, which provided that it was the compromise settlement that was actually approved on thatdate. They also contend that Cox's affidavit supports their allegations of fraud. We disagree on all counts. First, nothing in the second amended complaint is evidence. Allegations in a complaint are not proof for summary-judgment purposes. Country Corner Food & Drug, Inc. v. First State Bank & Trust Co., 332 Ark. 645, 966 S.W.2d 894 (1998). Second, although Knollmeyer's use of the term "settlement agreement," rather than "compromise settlement," in the affidavit may have been an error, it is not evidence that he defrauded appellants when those documents were signed. Third, Cox's affidavit gives a recitation of the procedural history in Burma's bankruptcy and lends no support to appellants' claims. Appellants are correct in pointing out that Knollmeyer erroneously stated in his affidavit that the amended complaint adding the Martins as plaintiffs in the federal court case was filed on April 24, 2001; that complaint was actually filed on April 30, 2001. However, it does not necessarily follow that Knollmeyer intended to mislead the circuit court.

Unlike the Martins, Burma failed to produce any evidence that she was ever in an attorney-client relationship with Knollmeyer or that he owed her any duty. She asserts that, because she was a third-party beneficiary of the settlement agreement, she did not need to have an attorney-client relationship with Knollmeyer to be able to sue him. We do not address this argument because it was not ruled upon by the circuit court. Even if a party raises an issue in response to a motion for summary judgment, the appellate court will not review it on appeal if he failed to obtain a ruling on it. See Sturgis v. Skokos, 335 Ark. 41, 977 S.W.2d 217 (1998). Burma also argues that her claims of fraud against Knollmeyer should survive because, even if they had no attorney-client relationship, privity of contract is not required to have a cause of action for fraud against an attorney. See Calandro v. Parkerson, 327 Ark. 131, 936 S.W.2d 755 (1997). This argument also fails because, as explained below, all of the fraud claims are barred by collateral estoppel. Thus, Burma's legal malpractice and breach of fiduciary duty claims were properly dismissed. A trial courtshould grant summary judgment to a defendant if he conclusively shows that some fact essential to a plaintiff's cause of action is lacking and the plaintiff is unable to offer substantial evidence to the contrary. Carmical v. McAfee, 68 Ark. App. 313, 7 S.W.3d 350 (1999).

Our next question is whether collateral estoppel barred appellants' other claims. The doctrine of collateral estoppel bars the relitigation of issues of law or fact actually litigated in the first suit. Van Curen v. Ark. Prof'l Bail Bondsman Licensing Bd., 79 Ark. App. 43, 84 S.W.3d 47 (2002). When an issue of law or fact is actually litigated and determined by a valid and final judgment and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim. Id. Collateral estoppel is based upon the policy of limiting litigation to one fair trial on an issue. Id. Collateral estoppel does not require mutuality of parties before the doctrine can be applied; it may be asserted by a stranger to the first decree (like Knollmeyer) but is applicable only when the party against whom the earlier decision is being asserted had a full and fair opportunity to litigate the issue in question in the earlier proceeding. Id. For collateral estoppel to apply, the following elements must be met: (1) the issue sought to be precluded must be the same as that involved in the prior litigation; (2) that issue must have been actually litigated; (3) the issue must have been determined by a valid and final judgment; (4) the determination must have been essential to the judgment. Id.

Because the Martins also participated in Burma's bankruptcy proceeding, all issues determined in that proceeding that are relevant here (such as the circumstances surrounding the settlement agreements and whether fraud or outrageous conduct occurred) are subject to collateral estoppel. Therefore, appellants are barred by collateral estoppel from asserting fraud and outrage against Knollmeyer. Because the Martins' claims of legal malpractice and breach of fiduciary duty were not determined by the bankruptcy court, collateral estoppel does not apply to those claims.

Therefore, the only remaining question is whether the Martins' claims of malpractice and breach of fiduciary duty should have withstood Knollmeyer's motion for summary judgment. In our view, appellants utterly failed to "meet proof with proof" and demonstratethe existence of a genuine issue of material fact for trial. Clearly, the trial judge was correct in finding Burma's affidavit lacking. In Knollmeyer's responses to appellants' numerous requests for admission, he denied committing the acts on which appellants' claims are based. Other than Burma's conclusory affidavit, appellants failed to offer any proof to rebut his responses. Arkansas Rule of Civil Procedure 56(e) requires that opposing affidavits shall be made on personal knowledge and shall set forth such facts as would be admissible in evidence. When the proof supporting a motion for summary judgment is sufficient, the opposing party must meet proof with proof, and her failure to do so leaves the uncontroverted facts supporting the motion accepted as true for purposes of the motion. See Inge v. Walker, 70 Ark. App. 114, 15 S.W.3d 348 (2000). Self-serving statements regarding a party's subjective beliefs are not competent summary judgment evidence. Little Rock Elec. Contractors, Inc. v. Entergy Corp., 79 Ark. App. 337, 87 S.W.3d 842 (2002). Arguments of counsel, like the statements in the brief "adopted" by Burma, are also not evidence. Flentje v. First Nat'l Bank of Wynne, 340 Ark. 563, 11 S.W.3d 531 (2000). In response to a motion for summary judgment, the supporting material must set forth specific facts showing that there is a genuine issue of fact for trial. Mount Olive Water Ass'n v. City of Fayetteville, 313 Ark. 606, 856 S.W.2d 864 (1993); Bushong v. Garman, 311 Ark. 228, 843 S.W.2d 807 (1992). An affidavit stating only conclusions is not sufficient to show a genuine issue of fact. Robson v. Tinnin, 322 Ark. 605, 911 S.W.2d 246 (1995); Hampton v. Taylor, 318 Ark. 771, 887 S.W.2d 535 (1994).

The granting of summary judgment may be appropriate in a legal malpractice case. Pugh v. Griggs, 327 Ark. 577, 940 S.W.2d 445 (1997). An attorney is negligent if he or she fails to exercise reasonable diligence and skill on behalf of the client. Id. In order to prevail on a claim of legal malpractice, a plaintiff must prove that the attorney's conduct fell below the generally accepted standard of practice and that such conduct proximately caused thedamages. Id. In order to show damages and proximate cause, the plaintiff must show that, but for the alleged negligence of the attorney, the result in the underlying action would have been different. Id. Here, the Martins offered no proof that Knollmeyer failed to exercise reasonable skill and diligence on their behalf. Additionally, even if they had established negligence on his part, they did not demonstrate that, but for that negligence, the result would have been different.

The Martins also failed to demonstrate the existence of an issue of fact on their claim for breach of fiduciary duty. A person standing in a fiduciary relationship with another is subject to liability to the other for harm resulting from a breach of the duty imposed by the relationship. Key v. Coryell, ___ Ark. App. ___, ___ S.W.3d ___ (June 2, 2004). Breach of fiduciary duty involves betrayal of a trust and benefit by the dominant party at the expense of one under his influence. Id. As discussed above, it is res judicata that no fraud occurred in connection with the bankruptcy. Thus, the Martins' claim of breach of fiduciary duty also lacked any basis. In the absence of proof of such fraud, or negligence, it cannot be said that Knollmeyer betrayed their trust.

Appellants, therefore, have not offered any fact showing wrongdoing in connection with the settlements or negligence on the part of Knollmeyer, nor have they demonstrated why collateral estoppel does not apply. For these reasons, we affirm the circuit judge's decision.

Affirmed.

Glover and Crabtree, JJ., agree.