Windsong Enterprises, Inc. v. Richard Upton

WINDSONG ENTERPRISES, INC. v. Richard UPTON

CA04-571

Court of Appeals of Arkansas

Opinion delivered June 29, 2005

Appeal and error - mistakes of fact in opinion - supplemental opinion on denial of rehearing. - Although the appellate court made two misstatements of fact in its previous opinion reversing, on one ground, the trial court's award of summary judgment to the appellee (now petitioning for rehearing), those facts were of no moment and were not instrumental in the appellate court's decision not to find merit in the other grounds on which the appellee moved for summary judgment; nonetheless, in the interest of clarity, the appellate court outlined, in a supplemental opinion on denial of rehearing, its reasons for rejecting the petitioner's remaining theories.

Judgments - res judicata - privity of parties. - Privity of parties within the meaning of res judicata means a person so identified in interest with another that he represents the same legal right; the fact that an individual owns stock in a corporation does not, in itself, create privity between the individual and the corporation; the summary judgment for the appellee could not be affirmed on the basis of res judicata where the appellee was not a named party in a previous action and where the appelleeoffered a substantial amount of proof to support his contention that he was separate in identity from the corporation that was a party in that action; the appellate court could not say, as a matter of law, that the appellee and the corporation were so identified in interest that they represented the same legal right.

Corporations - piercing the corporate veil - not applicable. - When it can be shown that an individual employed by a corporation is personally involved in the events surrounding an injury, the individual may be sued and may be personally liable for torts committed in the corporate capacity; because a question of fact remained as to the appellee's personal involvement in, and liability for, the actions on which this lawsuit was based, the appellate court rejected the appellee's argument that the "corporate veil" justified the granting of summary judgment.

Torts - intentional interference with a business expectancy - interpretation of the plaintiff's pleadings. - The appellate court rejected the appellee's "straw man" argument in support of his motion for summary judgment - that the plaintiff (the appellant in this appeal) asserted a cause of action for intentional interference with the use and enjoyment of property, which is not recognized in the courts of this state - because it interpreted those pleadings asasserting a cause of action for tortious interference with a business expectancy.

Appeal and error - appellate court's opinion - no requirement to cite inapposite authority. - Because the appellate court was not aware of any requirement that it cite inapposite authority, it rejected the appellee's suggestion that it erred in its earlier decision in not distinguishing a particular supreme court case.

Appeal from Cleburne Circuit Court; John Norman Harkey, Judge; supplemental opinion on denial of rehearing.

Johnny Merritt Belew and Michael Stephen Bingham, for appellant.

Stuart W. Hankins, for appellee.

Josephine Linker Hart, Judge. We delivered our opinion in this appeal from the grant of summary judgment in Cleburne County Circuit Court on June 1, 2005. Richard Upton has petitioned for rehearing, asserting that this opinion contains errors of fact and law. We deny the petition.

Regarding mistakes of fact, Upton asserts, and we acknowledge, that our June 1, 2005, opinion incorrectly states that Upton, rather than his various closely held corporations, was a predecessor in title and adjoining landowner to Windsong. Furthermore, weacknowledge our error in stating that Upton had inadvertently conveyed to Windsong some of the cart paths on the Red Apple Golf Course. In fact, as Upton points out, Windsong acquired the Southwinds property, which had been sold in foreclosure to American Holdings, LLC. However, we find these misstatements of fact are of no moment. Although Upton surmises that these facts were somehow instrumental in our decision not to find merit in Upton's "res judicata" and "piercing the corporate veil" grounds for summary judgment, for the reasons outlined below, this was simply not the case. It is simply a non sequitur for Upton to conclude that in identifying theories and questions of fact that should not have been disposed of by summary judgment, this court failed to consider arguments that we found to be meritless and that this court had shirked its duty to affirm the trial court if there was any tenable means to do so. Nonetheless, in the interest of clarity we will outline our reasons for rejecting Upton's remaining theories for sustaining the trial court's grant of summary judgment.

Regarding Upton's "Res Judicata" argument, the doctrine of res judicata has two aspects: claim preclusion and issue preclusion. See Van Curen v. Arkansas Prof'l Bail Bondsman Licensing Bd., 79 Ark. App. 43, 84 S.W.3d 47 (2002). The purpose of the res judicata doctrine 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. Id. Under the claim-preclusion aspect of the doctrine of res judicata, a valid and final judgment rendered on the merits bya court of competent jurisdiction bars another action by the plaintiff or his privies against the defendant or his privies on the same claim or cause of action. Id. The key question regarding the application of res judicata is whether the party against whom the earlier decision is being asserted had a full and fair opportunity to litigate the issue in question. Id.

In our view, the privity-of-parties question is simply not clear enough to say that, as a matter of law, res judicata bars appellant's claims. Upton was not a named party in the sewer case and, unless it can be demonstrated as a matter of law that he was in privity with Red Apple Enterprises, the dismissal in the sewer case cannot be res judicata as to the claims asserted against Upton personally in this lawsuit. Although Upton's affidavit reflected that he was the sole shareholder of United Resorts, Inc., which was the corporate general partner of Red Apple Enterprises, and that Upton also owned a 100% interest in Island Enterprises, which was a limited partner in Red Apple Enterprises, Upton, as an individual, did not own any shares in Red Apple Enterprises.

Privity of parties within the meaning of res judicata means a person so identified in interest with another that he represents the same legal right. Spears v. State Farm Fire & Cas. Ins., 291 Ark. 465, 725 S.W.2d 835 (1987). Precisely identical parties are not required; a substantial identity is sufficient. See Parker v. Perry, 355 Ark. 97, 131 S.W.3d 338 (2003); Terry v. Taylor, 293 Ark. 237, 737 S.W.2d 437 (1987). In Arkansas Department of Human Services v. Dearman, 40 Ark. App. 63, 68, 842 S.W.2d 449, 452 (1992), weexplained:

It has been suggested that privity is merely a word used to say that the relationship between one who is a party and another person is close enough that a judgment that binds the one who is a party should also bind the other person.... It has also been held that the identity of parties or their privies for res judicata purposes is a factual determination of substance, not mere form.

(Citations omitted.) The fact that an individual owns stock in a corporation does not, in itself, create privity between the individual and the corporation. Walthour v. Finley, 237 Ark. 106, 372 S.W.2d 390 (1963). Given the substantial amount of proof offered by Upton to support his contention that he is separate in identity from Red Apple Enterprises and his other businesses, we cannot say as a matter of law that Upton and Red Apple Enterprises are so identified in interest that they represent the same legal right. Therefore, the summary judgment cannot be affirmed on the basis of res judicata.

Upton also argues that the so-called "corporate veil" justified the granting of summary judgment. We rejected this ground because we agree with Windsong that there is a question of fact regarding Upton's personal involvement, and in this context, it is irrelevant whether a corporation is separate and distinct from its shareholders. Windsong points out that its claim is not that any business entity acted to interfere with its contractual relations and business expectancies but that Upton individually committed these tortious actions. A corporate agent may be held personally liable for torts committed in the corporate capacity. See Torchmark Corp. v. Rice, 945 F. Supp. 172 (E.D. Ark. 1996). When it canbe shown that an individual employed by a corporation is personally involved in the events surrounding an injury, the individual may be sued. McGraw v. Weeks, 326 Ark. 285, 930 S.W.2d 365 (1996). See also Cash v. Carter, 312 Ark. 41, 847 S.W.2d 18 (1993). Because we cannot hold, as a matter of law, that Upton could not be personally liable on appellant's claims, the summary judgment for Upton also cannot be affirmed on this ground.

As a final basis on which Upton moved for summary judgment, he asserted that Windsong's complaint asserted a cause of action for intentional interference with the use and enjoyment of property, a tort that is not recognized by the courts of this state. See Carmical v. McAfee, 68 Ark. App. 313, 7 S.W.3d 350 (1999). We hold that this was simply a "straw man" argument in that we interpreted Windsong's pleadings only to assert the cause of tortious interference with a business expectancy.

Finally, we reject out-of-hand Upton's suggestion that this court somehow erred in not distinguishing Donathan v. McDill, 304 Ark. 242, 800 S.W.2d 433 (1990). We are not aware of anything that requires us to cite inapposite authority.

For the foregoing reasons, Upton's motion for rehearing is denied.

Bird, Griffen, Vaught, Crabtree, and Roaf, JJ., agree.

Gladwin, Robbins, and Neal, would grant.