Ronney Evans v. Brensher Properties, L.L.C., Douglas Brent Medlock, and Sheryl Medlock
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ARKANSAS COURT OF APPEALS
NOT DESIGNATED FOR PUBLICATION
JUDGE DAVID M. GLOVER
DIVISION IV
CA06-138
September 20, 2006
RONNEY EVANS
APPELLANT
V.
BRENSHER PROPERTIES, L.L.C.,
DOUGLAS BRENT MEDLOCK, and
SHERYL MEDLOCK
APPELLEES
APPEAL FROM THE CRAWFORD
COUNTY CIRCUIT COURT
[CV-04-420]
HONORABLE GARY R. COTTRELL,
JUDGE
REVERSED AND REMANDED
This one-brief appeal arises from the trial court’s dismissal of appellant Ronney
Evans’s complaint. In the complaint, appellant alleged in pertinent part that appellees
Brent and Sheryl Medlock had been the sole shareholders and officers of a company
called Medco, Inc.; that an $85,000 judgment against Medco, Inc., had been entered in
favor of appellant; that prior to Medco, Inc.’s filing for bankruptcy, the Medlocks
transferred all of their individual assets, as well as all of the assets of Medco, Inc., to
appellee Brensher Properties, LLC, in order to avoid satisfaction of appellant’s judgment;
and, that in doing so, they violated Arkansas Code Annotated section 4-26-1103 (Repl.
2001).1 In connection with those allegations, appellant sought by his complaint to pierce
the corporate veil of appellee Brensher Properties, LLC, and to pursue appellees Brent
and Sheryl Medlock to collect on the $85,000 judgment that had been entered earlier
against Medco, Inc. Appellees answered the complaint and incorporated into it their
three-paragraph motion to dismiss, contending in part that appellant’s action was barred
by the doctrine of res judicata. Following a hearing on the motion to dismiss, the trial
court granted it.
The court’s order of dismissal provided: “After reviewing the motion, the file and
other matters before the Court, the Court does hereby find that the debt which is the
subject of this action was properly before the Federal Bankruptcy Court and that
jurisdiction was properly before that court and that this matter should have been tried by
the Federal Bankruptcy Court.” (Emphasis added.) Appellant’s subsequent motion for
reconsideration was denied, and this appeal followed. Appellant contends that the trial
court erred in granting appellees’ motion to dismiss and in denying appellant’s motion for
reconsideration on the basis of res judicata because appellant did not have a full and fair
opportunity to litigate the issue in question. Finding error in the trial court’s dismissal of
the case, we reverse and remand for proceedings consistent with this opinion.
Standard of Review
1
One or both of the Medlocks subsequently filed personal bankruptcy, which was
apparently dismissed.
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A motion to dismiss is converted to a motion for summary judgment when matters
outside the pleadings are presented to and not excluded by the court. Francis v. Francis,
343 Ark. 104, 31 S.W.3d 841 (2000). Here, it is clear from the language of the order of
dismissal, previously emphasized, that matters outside the pleadings were considered by
the trial court in deciding appellees’ motion to dismiss. Consequently, we review this
appeal as one from summary judgment.
Summary judgment is appropriate when there are no genuine issues of material
fact, and the moving party is entitled to judgment as a matter of law. Francis, supra. The
law is well settled that summary judgment is to be granted by a trial court only when it is
clear that there are no genuine issues of material fact to be litigated, and the party is
entitled to judgment as a matter of law. Id. Once the moving party has established a
prima facie entitlement to summary judgment, the opposing party must meet proof with
proof and demonstrate the existence of a material issue of fact. Id. On review, our
appellate courts determine if summary judgment was appropriate based on whether the
evidentiary items presented by the moving party in support of the motion leave a material
fact unanswered. Id. This court views the evidence in a light most favorable to the party
against whom the motion was filed, resolving all doubts and inferences against the
moving party. Id. Our appellate review focuses not only on the pleadings, but also on the
affidavits and other documents filed by the parties. Id.
Subpoint A
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Under his first subpoint, appellant contends that he should be allowed to pursue
common law fraud causes of action, to pierce the corporate veil of Brensher Properties,
LLC, and to pursue the Medlocks to collect on the $85,000 judgment from the earlier case
of Evans v. Medco, Inc. The problem with his argument is that the trial court did not
grant the motion to dismiss for any of the reasons addressed by appellant under this
subpoint, even though they were presented as bases for dismissal by appellees in their
motion to dismiss. The trial court granted the motion to dismiss on the basis that “the
debt which is the subject of this action was properly before the Federal Bankruptcy Court
and that jurisdiction was properly before that court and that this matter should have been
tried by the Federal Bankruptcy Court.” Accordingly, it is the res judicata argument that
appellant raises in his second subpoint that challenges the basis upon which the trial court
actually granted appellees’ motion to dismiss.
Therefore, we need not address the
arguments discussed by appellant under his first subpoint.
Subpoint B
For his second subpoint, appellant contends that his attempt to sustain a commonlaw-fraud and fraudulent-transfer action is not precluded by the doctrine of res judicata
and that the trial court’s decision to grant appellees’ motion to dismiss should be
reversed. We agree that the trial court erred in its dismissal of appellant’s case.
The following colloquy at the July 15, 2005 hearing is pertinent to the decision
reached by the trial court:
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T HE C OURT:
I understand, but the question here is a procedural one
as to whether or not the creditors had an opportunity to
investigate and bring that up before the bankruptcy
court. [Appellant’s Attorney], did you have a chance at
that time to do that, or were you cut off from that?
[A PPELLANT’S ATTY]:
Your Honor, we exhausted this, to my knowledge, and
I can provide the court with the documents that I’m
relying upon. It is my impression that we were cut off
from the possibility of proceeding any further.
T HE C OURT:
Why don’t you get that to me. I believe the motion to dismiss
has to be dealt with first. If the court denies your motion to
dismiss, you’ll be ordered to comply with the discovery. If
the court dismisses the case, then it’s not an issue. If you had
an opportunity to go into bankruptcy to find assets, and for
bankruptcy to handle that, I consider your case over. If you
did not, you were cut off from that; you were not given an
opportunity to fully do that, then, I’m for letting you have this
action. Provide me with whatever documents you need to and
see what I can do.
(Emphasis added.)
By letter to the court dated July 15, 2005, the same date of the
hearing, appellant’s attorney reported in pertinent part:
I indicated to the Court that I was under the impression that due to the Termination
of Medco, Inc.’s bankruptcy case, we were unable to pursue our cause of action
against Medco, Inc. However, it appears that I was incorrect in that although,
Medco, Inc. did not receive a discharge of their debts, they did close their
bankruptcy case to conclusion. As such, I am not attaching any documentation to
this correspondence.
(Emphasis added.) Earlier that day, there had been a discussion at the hearing regarding
whether Medco, Inc.’s bankruptcy case was terminated for failure to follow procedure or
whether its debts were discharged. The above-quoted portion of appellant’s attorney’s
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letter, which certainly was not in affidavit form, does not completely clarify the situation;
neither does the trial court’s order of dismissal, to-wit:
After reviewing the Motion, the file and other matters before the Court, the Court
does hereby find that the debt which is the subject of this action was properly
before the Federal Bankruptcy Court and that jurisdiction was properly before that
court and that this matter should have been tried by the Federal Bankruptcy Court.
Defendant’s Motion to Dismiss is hereby granted.
Appellant’s attorney additionally argued in her July 15 letter:
However, as I indicated to the Court in this morning’s hearing, I am
reiterating our reliance on Plaintiff’s Response and Brief in Support of Plaintiff’s
Response to Defendant’s Motion to Dismiss as our basis for asking the Court to
deny Defendant’s Motion to Dismiss. . . .
Specifically, noting that the case in
front of this Court is a different cause of action (Piercing the Corporate Veil) than
in Plaintiff’s first cause of action and that the doctrine of res judicata bars another
action by the Plaintiff only on the same claim or cause of action.... As we filed a
Complaint to Pierce the Corporate Veil (of Brensher Properties, LLC) in the
present case, we are not attempting to re-litigate the same issues as in the first
cause of action against Medco, Inc. As set forth in Plaintiff’s Brief, the test in
determining whether res judicata applies is “whether matters presented in a
subsequent suit were necessarily within the issues of the former suit and might
have been litigated therein.” ... Plaintiff’s present action could not have been
brought in his former suit because the Defendants created Brensher Properties,
LLC subsequent to the first suit.
In Harrison v. Loyd, 87 Ark. App. 356, 367, 192 S.W.3d 257, 264 (2004), this
court explained:
Four elements must exist for res judicata to apply: (1) the first suit resulted
in a final judgment on the merits; (2) the first suit was based on proper jurisdiction;
(3) both suits involve the same cause of action or claim; (4) both suits involve the
same parties or their privies. Crockett & Brown, P.A. v. Wilson, 314 Ark. 578, 864
S.W.2d 244 (1993). Res judicata bars not only the relitigation of claims that were
actually litigated in the first suit, but also those that could have been litigated.
Searcy v. Davenport, 352 Ark. 307, 100 S.W.3d 711 (2003). Thus, where a lawsuit
is based on the same events as the subject matter of the previous lawsuit, res
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judicata will apply even if the subsequent lawsuit raised new legal issues and
seeks additional remedies. Id.
(Emphasis added.)
Here, at a minimum, element three appears to be lacking. That is, as argued by
appellant, the instant case does not seem to involve the same cause of action or claim as
that which was tried and resulted in the earlier $85,000 judgment. Moreover, without
more to go on, we are not convinced that the claims presented here could have been
litigated in the other action. Neither this court nor the trial court was presented with
enough information about exactly what went on in bankruptcy court to truly understand
whether appellant’s claim could have been pursued there.
Consequently, in light of our standard of review, we have concluded that the trial
court disposed of this case prematurely based upon the doctrine of res judicata. It was
appellees’ burden to establish prima facie entitlement to summary judgment. We hold
that they failed to do so. Genuine issues of material fact remained unanswered, and
summary judgment was not appropriate. We therefore reverse and remand this case for
proceedings consistent with this opinion.
Reversed and remanded.
P ITTMAN, C.J., and G LADWIN, J., agree.
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