Martin v. Kat's Bar & Grill, LLC.
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Cite as 2009 Ark. App. 737
ARKANSAS COURT OF APPEALS
DIVISION IV
No. CA 09-200
CECIL MARTIN and ANITA MARTIN,
APPELLANTS
V.
KAT’S BAR & GRILL, LLC,
APPELLEE
Opinion Delivered NOVEMBER 4,
2009
APPEAL FROM THE GARLAND
COUNTY CIRCUIT COURT,
[NO. CV2008-1027]
HONORABLE DAVID B. SWITZER,
JUDGE,
DISMISSED WITHOUT PREJUDICE
KAREN R. BAKER, Judge
Appellants Cecil and Anita Martin challenge the trial court’s entry of judgment in favor
of appellee Kat’s Bar & Grill, LLC, regarding the purchase of real property in Hot Springs,
Arkansas, known as Kat’s Bar & Grill, asserting two points of error: (1) The trial court erred
in granting foreclosure because the appellee set out a course of conduct that constituted a
waiver; (2) The trial court erred in granting foreclosure because enforcing the contract
between the parties would be inequitable. The decree granting the foreclosure also contains
the order memorializing the nonsuit of appellants’ counterclaim arising from the parties’
actions and interactions relating to the foreclosure. The order was filed on December 1,
2008. Appellants filed their notice of appeal on December 3, 2008. However, the record
Cite as 2009 Ark. App. 737
contains no Rule 54(b) certification. Following our supreme court’s precedent in Bevans v.
Deutsche Bank National Trust Co., 373 Ark. 105, 281 S.W.3d 740 (2008), we must dismiss the
appeal without prejudice for lack of a final order.
Cecil and Anita Martin are husband and wife. Cecil and Anita, along with an
individual named John Martin who is not a party on appeal, entered into an agreement and
executed a promissory note with Kat’s Bar & Grill, LLC, to purchase real property in
conjunction with the purchase of inventory from the business. The promissory note and a
mortgage were executed on June 28, 2007. The Martins tendered a down payment of
twenty-five thousand dollars ($25,000) for the real property. They also paid an additional
amount of money to purchase the inventory from the bar outright. The promissory note was
secured by a lien on the real property.
On August 22, 2008, appellee filed a complaint to foreclose the mortgage alleging a
breach of the payment terms pursuant to the promissory note. The complaint claimed that
there was no defense to the liability on the note. Appellants timely filed an answer to the
complaint denying that appellee was entitled to relief and subsequently filed a counterclaim
against appellee on October 8, 2008. Appellants’ counterclaim asserted that appellee had
intentionally induced and caused a disruption of appellants’ business expectancy in that
appellee knew that appellants intended to sell the business, along with the real estate, to Roger
Womack and Jack Wilhite. Appellants stated that the intentional disruption of their business
expectancy resulted in damages to them for which appellee was liable. Appellee timely
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answered the counterclaim denying liability and filed an amended complaint asking the court
to find its interest superior to any others who may claim an interest in the property.
Appellants timely answered the amended complaint denying appellee was entitled to relief.
A hearing was held on November 8, 2008. John Martin did not appear. At the
hearing, appellants moved to nonsuit their counterclaim, and the court granted the nonsuit.
The order memorializing the grant of the nonsuit is contained in the same decree granting
the foreclosure. The order was filed on December 1, 2008, with a notice of appeal filed on
December 3, 2008. However, the record contains neither a motion for, nor order granting,
a Rule 54(b) certification. The parties’ failure to obtain a Rule 54(b) certification requires
us to dismiss the appeal without prejudice.
An order or judgment is not considered final and appealable unless it disposes of all the
parties and all the claims. See Ark. R. Civ. P. 54 (2008). Pursuant to Rule 41(a)(1) of the
Arkansas Rules of Civil Procedure, a claim may be dismissed without prejudice to a future
action by the plaintiff before final submission of the case; however, “it is effective only upon
entry of a court order dismissing the action.” Ark. R. Civ. P. 41(a)(1) (2008). Pursuant to
Administrative Order Number 2(b)(2), a judgment, decree, or order is “entered” when
stamped or otherwise marked by the clerk with the date, time, and the word “filed.” The
provisions of Rule 41 also apply to the dismissal of any counterclaim, cross-claim, or thirdparty claim. Ark. R. Civ. P. 41(c) (2008).
Our supreme court in Bevans, supra, dismissed without prejudice an appeal of a
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foreclosure action when the appellant appealed the foreclosure decree after nonsuiting her
compulsory counterclaims arising from the financing arrangement. Our supreme court
explained its reasoning through a series of cases acknowledging that the possibility for
piecemeal appeals exists when a party is free to refile his or her compulsory counterclaims that
arise out of the same transaction or occurrence as claims that are decided by the circuit court.
In Haile v. Arkansas Power & Light Co., 322 Ark. 29, 907 S.W.2d 122 (1995), the court
held that a plaintiff may not take a voluntary nonsuit as to some of its claims and then appeal
from the circuit court’s order disposing of the plaintiff’s other claims because a voluntary
nonsuit without prejudice leaves the plaintiff free to refile the claim; therefore, the order is
not considered final. Id; see also Ratzlaff v. Franz Foods of Ark., 255 Ark. 373, 500 S.W.2d 379
(1973) (decided prior to the adoption of our rules of civil procedure). In Lemon v. Laws, 305
Ark. 143, 806 S.W.2d 1 (1991), the court was asked to decide whether a plaintiff was barred
by the doctrine of res judicata from refiling the plaintiff’s previously nonsuited claims. They
held that a plaintiff has an absolute right to take a voluntary nonsuit under Rule 41(a) before
the final submission of the case for trial. The court emphasized that the first nonsuit and
dismissal is without prejudice, thereby leaving the plaintiff free to refile his or her claim. In
Lemon, the plaintiff nonsuited his claim and the court proceeded to enter an order in favor of
the defendant on his counterclaim, but when the plaintiff attempted to refile his claim, the
defendant asserted that the claim was barred by res judicata. The court determined that to
apply the doctrine of res judicata to the plaintiff’s nonsuited claim would be changing the
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absolute right under Rule 41(a) to a qualified right. Accordingly, the court held that res
judicata did not apply. Id.
In Linn v. NationsBank, 341 Ark. 57, 14 S.W.3d 500 (2000), the court directly
addressed the issue of res judicata as to compulsory counterclaims that have been nonsuited.
In that case, NationsBank filed a complaint for foreclosure against the Linns’ bed-andbreakfast because the Linns had defaulted on their construction loans. The Linns then filed
counterclaims for breach of contract, fraudulent misrepresentation, and negligence arising
from NationsBank’s refusal to honor an alleged oral agreement to provide permanent
financing after construction of the bed-and-breakfast was completed. The Linns nonsuited
their counterclaims, which were dismissed without prejudice, and the court proceeded to
enter a foreclosure decree in favor of NationsBank. The Linns then attempted to file their
original counterclaims and some additional claims in circuit court. NationsBank argued that
the Linns’ claims were compulsory counterclaims, pursuant to Ark. R. Civ. P. 13, and were
barred by the doctrine of res judicata and collateral estoppel. The circuit court agreed and
entered summary judgment in favor of NationsBank. On appeal, the Linns argued that the
circuit court erred in dismissing their claims. Id.
In deciding the issue on appeal, our supreme court analyzed the doctrine of res
judicata, a common law principle, in the context of compulsory counterclaims under Rule
13 and voluntary nonsuits under Rule 41. Id. They explained that the purpose behind Rule
13 is to require parties to present all existing claims simultaneously or be forever barred,
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thereby preventing a multiplicity of suits arising from the same set of circumstances. Yet,
while Rule 13 requires compulsory counterclaims to be brought, or else waived, it does not
state whether a compulsory claim must be litigated in order to prevent a bar. The supreme
court then reiterated a party’s absolute right to voluntarily dismiss his or her claims without
prejudice and to refile those claims within a year, pursuant to Rule 41. Id. (citing Lemon v.
Laws, supra ). In light of the fact that the Linns filed their counterclaims in compliance with
Rule 13 and were also allowed to voluntarily dismiss those claims without prejudice, under
Rule 41, the court concluded that the doctrine of res judicata did not bar the Linns from
refiling their previous counterclaims. Id.
Our supreme court concluded that since a defendant who nonsuits all of his or her
compulsory counterclaims is not barred from bringing those claims against the plaintiff again,
it follows that an order or judgment providing for the nonsuit of those counterclaims while
entering a judgment on the plaintiff’s claims is not a final, appealable order under Rule 54(b)
of the Arkansas Rules of Civil Procedure.
The interplay of the finality rule for appellate review and the principle of res judicata
on a particular issue, along with the necessity of properly applying the two doctrines, is
required to preclude a bar to claims asserted by the litigants to a matter. Our supreme court
explained that the reason they were asked by the parties in Linn to address the res judicata
issue, and not the finality issue, was that the defendants did not attempt to appeal the original
foreclosure decree; instead, they refiled their previous counterclaims in circuit court.
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The facts in Linn were strikingly similar to the facts in Bevans. Deutsche Bank filed a
foreclosure action against the defendant Bevans. Bevans then filed compulsory counterclaims
that all arose out of the financing arrangement, and after she voluntarily nonsuited all of her
counterclaims against Deutsche Bank, the bank’s claims were decided at trial. Instead of
refiling her counterclaims in circuit court, Bevans appealed from the judgment against her.
Because her nonsuited claims were compulsory counterclaims, Bevans would have been able
to refile her claims. See Linn v. NationsBank, supra; Lemon v. Laws, supra. Therefore, the order
she appealed from was not a final, appealable order.
Rule 13(a) of the Arkansas Rules of Civil Procedure requires that a pleading shall state
as a counterclaim any claim, which at the time of the pleading, the pleader has against any
opposing party, if it arises out of the transaction or occurrence that is the subject matter of the
opposing party’s claim. Morsy v. Deloney, 92 Ark. App. 383, 214 S.W.3d 285 (2005).
Appellants’ counterclaim asserted that appellee intentionally induced and caused a disruption
of the business expectancy between appellants and the potential buyers of the business which
included the purchase of the real estate. One paragraph of the mortgage provides that the
appellants “will neither sell, convey, bargain or grant the aforesaid property or any interest
therein without the prior written consent of the Grantee [appellee], the aforesaid lien being
non-assumable.” While the facts arising out of the anticipated transfer of the business and real
estate were understandably not developed at trial given the grant of the nonsuit, the
inescapable conclusion is that a cause of action arising out of the thwarted sale of the real
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estate arose from the transactions related to rights of possession to the real estate as decided
by the circuit court in the foreclosure action.
For these reasons, we dismiss appellants’ appeal without prejudice.
Dismissed.
GRUBER and BROWN, JJ., agree.
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