Melba Tedder, Individually and as Administratrix of the Estate of Alice Leach, Deceased v. Simmons First Bank of NWA

NOT DESIGNATED FOR PUBLICATION

ARKANSAS COURT OF APPEALS

OLLY NEAL, Judge

DIVISION III

CA02-201

FEBRUARY 19, 2003

MELBA TEDDER, Individually and AN APPEAL FROM THE WASHINGTON as ADMINISTRATRIX OF THE COUNTY CIRCUIT COURT

ESTATE OF ALICE LEACH, Deceased [CIV 99-1401]

APPELLANT

v.

SIMMONS FIRST BANK OF NWA HONORABLE MICHAEL H. MASHBURN, JUDGE

APPELLEE

AFFIRMED

Appellant Melba Tedder, individually and as administratrix of the estate of Alice Leach, brings this appeal from a judgment of the Circuit Court of Washington County, which granted a motion for directed verdict in favor of appellee, Simmons First Bank of Northwest Arkansas. For reversal, appellant contends that (1) the court erred when it ruled her breach of contract claim was barred by the doctrine of res judicata and (2) the trial court erred in granting appellee's motion for directed verdict on her claims of misrepresentation, bad faith, and negligence. We conclude there was no error; therefore, we affirm.

Appellant is the daughter of Alice Leach. On December 3, 1996, Mrs. Leach obtained a loan in the amount of $8,144.51 from the Bank of Lincoln, now Simmons FirstBank of Northwest Arkansas. The loan was for a term of one year and secured by a mortgage on ten acres of land owned by Mrs. Leach. The loan was also secured by a credit-life policy with American Pioneer Life Insurance Company. The term of the credit-life policy was also for one year. On December 5, 1997, Mrs. Leach made a principal reduction payment on the loan and extended the term of the loan for another year. Mrs. Leach also requested that the loan extension be covered by credit life. Because the credit-life policy with American Pioneer Life Insurance Company had lapsed, a new application for credit life was executed with Foundation Life Insurance Company. The application contained a good-health statement that proclaimed the applicant was in good health. Mrs. Leach signed the application attesting that she was in good health; however, unbeknown to appellee, Mrs. Leach had been diagnosed with cancer and heart problems in March 1997. Mrs. Leach died from congestive heart failure secondary to cancer on June 9, 1998. Subsequently, the insurance company found that Mrs. Leach was not eligible for coverage at the time the policy was executed and denied appellant's claim for credit-life benefits.

Appellant was appointed administratrix of her mother's estate on March 26, 1999. Because the loan and mortgage were in default, appellee filed a claim against Mrs. Leach's estate in probate court and on July 2, 1999, appellee began a foreclosure action in chancery court. A hearing on the foreclosure action was held on October 18, 1999. On that same date, appellant filed a counterclaim alleging breach of contract, breach of fiduciary duty, negligence, and bad faith. A decree of foreclosure in favor of appellee was entered on October 25, 1999. The decree stated that appellant's counterclaim sounded in tort, andordered that it be transferred to circuit court upon the filing of appellant's motion to sever and transfer claim. The trial court filed an order of transfer on December 20, 1999. The circuit court then directed appellant to file an amended complaint. In her amended complaint, appellant alleged breach of contract, negligence, misrepresentation, and bad faith.

Meanwhile, the foreclosure sale was conducted, and appellee purchased the property for one hundred dollars. Appellant filed a motion to set aside the foreclosure; however, the motion to set aside was never ruled upon, and appellant did not appeal.

A jury trial on appellant's counterclaim was held on October 24, 2001. Appellant testified that when the initial policy was executed, her mother was in good health. She admitted that her mother was no longer in good health when the second policy was executed. Appellant further testified that after being served with the foreclosure she never contacted appellee or tried to pay the loan.

Loyd Swope, former president and chairman of the board of the Bank of Lincoln, explained that a credit-life policy is written for a certain period of time and when that time expires the policy expires. He also explained that the bank's responsibility ends when it writes the policy and sends the premium to the insurance company. Swope testified that if an applicant appeared healthy and said that they were healthy, the bank's inquiry ended there. Swope stated that he did inquire as to why the bank's claim was denied. Swope testified that he subsequently contacted appellant about transferring the loan or putting the loan in her name; however, when an agreement with appellant was not forthcoming, the bank instigated an action to protect its interest.

During his testimony, Swope denied doing anything wrong, false, or misleading. Swope further testified that he discussed the terms of the extension and the credit-life policy with Mrs. Leach. He stated that he explained the good-health clause and told Mrs. Leach not to sign it if she was not in good health. Swope stated that at the time of the extension, he was unaware Mrs. Leach was in poor health. Swope further testified that the policy contained a clause stating the applicant had read the policy; however, he could not recall if Mrs. Leach had read the policy.

Swope's former secretary, Becky Carter, also explained that a credit-life policy is written to coincide with the term of the loan. Carter testified that as a practice, when a customer requested credit life, she would have the customer read and sign the good-health statement verifying that the customer was in good health. Carter stated that she had never instructed anyone in poor health to sign the good-health statement.

At the close of appellant's case-in-chief, appellee argued that several of her claims were barred by the doctrine of res judicata and moved for directed verdict asserting (1) there was no evidence that it breached a contract; (2) there was no evidence that it was required to perform a duty outside of its regular debtor/creditor relationship; (3) there was no evidence that it misrepresented a material fact or that appellant relied on statements it made; and (4) the tort of bad faith is not recognized as a separate cause of action in Arkansas and is usually reserved specifically for insurance companies.

The court ruled that appellant's breach-of-contract and bad-faith claims in connection with the foreclosure were barred by the doctrine of res judicata. In addition, the courtgranted the motion for directed verdict in regard to the breach-of-contract and bad-faith claims concerning the procurement of the credit-life policy. However, the court denied the directed verdict on the issues of negligence and misrepresentation.

At the conclusion of its case-in-chief, appellee again moved for directed verdict, asserting the evidence was not sufficient to maintain causes of action for negligence and misrepresentation. The court agreed and granted appellee's motion for directed verdict. This appeal followed.

I. Res Judicata

On appeal, appellant asserts that the trial court erred when it ruled that her claims in connection with the foreclosure were barred by the doctrine of res judicata. She specifically argues that the court erred when it ruled that her breach-of-contract claim was barred.1 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. Van Curen v. Arkansas Prof'l Bail Bondsman Licensing Bd., 79 Ark. App. 43, 84 S.W.3d 47 (2002). Under the claim-preclusion aspect of the doctrine of res judicata, a valid and final judgment rendered on the merits by a 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. Brandon v. Arkansas W. Gas Co., 76 Ark. App. 201, 61 S.W.3d 193 (2001). Claim preclusion forecloses relitigation in a subsequent suit when (1) the first suit resulted in a finaljudgment on the merits; (2) the first suit was based upon proper jurisdiction; (3) the first suit was fully contested in good faith; (4) both suits involved the same claim or cause of action; and (5) both suits involved the same parties or their privies. Pentz v. Romine, 75 Ark. App. 274, 57 S.W.3d 235 (2001). Additionally, claim preclusion bars not only the relitigation of issues that were actually litigated in the first suit but also those that could have been litigated, but were not. Id. In the case at bar, appellant filed a motion to set aside the foreclosure on January 5, 2000. However, a hearing was not held and her motion was never ruled upon. Therefore, appellant's motion was deemed denied as of February 15, 2000. See Ark. R. App. P.-Civ. 4(b)(1). Moreover, the question of whether appellee breached a contractual obligation during the foreclosure was an issue that could have been litigated during the first suit.

II. Directed Verdict

Appellant also contends that the court erred in granting appellee's motion for directed verdict on her claims of misrepresentation, bad faith, and negligence.2 In reviewing an order granting a motion for directed verdict, this court considers the evidence in the light most favorable to the party against whom the verdict was directed. . . . [and if] any substantial evidence exists that tends to establish an issue in favor of that party, it is error for the trial court to grant the directed-verdict motion. Scott Truck & Tractor v. Alma Tractor & Equip., Inc., 72 Ark. App. 79, 35 S.W.3d 815 (2000).

In her misrepresentation claim, appellant asserted that appellee made a false statement that Mrs. Leach was covered by credit life and that Mrs. Leach relied on that statement. The tort of fraud or misrepresentation consists of five elements that must be proved by a preponderance of the evidence: (1) a false representation, usually of a material fact; (2) knowledge or belief by the defendant that the representation is false; (3) intent to induce reliance on the part of the plaintiff; (4) justifiable reliance by the plaintiff; (5) resulting damage to the plaintiff. Calandro v. Parkerson, 327 Ark. 131, 936 S.W.2d 755 (1997). There is simply no evidence establishing a false representation by appellee or reliance on a false representation. Thus, the grant of appellee's motion for directed verdict on this issue was proper.

Appellant also asserted that appellee acted with bad faith in the procurement of the credit-life policy. The elements for recovery under the tort of bad faith require the establishment of affirmative misconduct by an insurer, without a good-faith defense, which is dishonest, malicious, or oppressive in an attempt to avoid liability under a policy. Richison v. Boatmen's Ark., Inc., 64 Ark. App. 271, 981 S.W.2d 112 (1998). Our supreme court has declined to extend the tort of bad faith beyond an insurance context. See Quinn Cos. v. Herring-Marathon Group, Inc., 299 Ark. 431, 773 S.W.2d 94 (1989). Because appellee was not an insurer, appellant could not maintain a claim of bad faith.

In her negligence claim, appellant asserted that appellee was negligent in procuring the credit-life insurance. To establish a prima facie case in tort, a plaintiff must show that damages were sustained, that the defendant was negligent, and that such negligence was aproximate cause of the damages. Ouachita Wilderness Inst. v. Mergen, 329 Ark. 405, 947 S.W.2d 780 (1997). Negligence is the failure to do something which a reasonably careful person would do, and a negligent act arises from a situation where an ordinarily prudent person in the same situation would foresee such an appreciable risk of harm to others that he would not act or at least would act in a more careful manner. Id. Questions that must be answered in a negligence case are: (1) what duty, if any, the defendant owed the plaintiff; (2) whether that duty was breached; (3) whether it was reasonably foreseeable that such a breach would cause the injury; (4) whether the negligent act caused or was a substantial factor in causing the injury; (5) whether there was an intervening cause. Maneth v. Tucker, 72 Ark. App. 141, 34 S.W.3d 755 (2000).

In order to sustain her negligence claim, appellant had to first establish that appellee owed Mrs. Leach a duty. The question of the duty owed to the plaintiff alleging negligence is always one of law and never one for the jury. Mans v. Peoples Bank of Imboden, 340 Ark. 518, 10 S.W.3d 885 (2000). If the court finds that no duty of care is owed, the negligence count is decided as a matter of law. Id. In order for a bank's relationship with a customer to rise to the level that the bank owed the customer a fiduciary duty, there must be some factual underpinnings that establish a relationship of trust and confidence between a bank and its customers which is more than a debtor/creditor relationship. See Country Corner Food & Drug, Inc. v. First State Bank, 332 Ark. 645, 966 S.W.2d 894 (1998). Here the evidence fails to establish a relationship between appellee and Mrs. Leach that was anything more than a debtor/creditor relationship. Thus, the evidence was not sufficient tomaintain a negligence claim.

Viewing the evidence in a light most favorable to appellant, we cannot say that there was any evidence that established an issue in favor of appellant. Therefore, the court's grant of appellee's motion for directed verdict was proper.

Affirmed.

Stroud, C.J., and Vaught, J., agree.

1 Appellant fails to raise the issue of whether the court erred when it ruled her bad-faith claims, in conjunction with the foreclosure, were also barred by the doctrine of res judicata.

2 Appellant fails to raise the issue of whether the court erred when it granted appellee's motion for directed verdict on her breach-of-contract claim in connection with the procurement of the credit-life policy.