Ark. Dev. Fin. Auth. v. Wiley

2020 Ark. 395

611 S.W.3d 493

ARKANSAS DEVELOPMENT FINANCE AUTHORITY, Appellant

v.Jean WILEY and Rosalind Williams, Appellees

No. CV-20-167

Supreme Court of Arkansas.

Opinion Delivered: December 3, 2020

Leslie Rutledge, Att'y Gen., by: Patricia Van Ausdall Bell, Ass't Att'y Gen., for appellants.

Vicki Lucas Attorney PLLC, by: Vicki Lucas for appellees.

COURTNEY RAE HUDSON, Associate Justice

Appellant, Arkansas Development Finance Authority (ADFA), filed this interlocutory appeal of the Chicot County Circuit Court's order denying its motion to dismiss a complaint filed by Rosalind Williams and Jean Wiley. For reversal, ADFA argues that article 5, section 20 of the Arkansas Constitution immunizes it from appellees’ claims. We have jurisdiction of this appeal pursuant to Arkansas Supreme Court Rule 1-2(a)(1) (2019) because it involves our interpretation of the Arkansas Constitution. We reverse and dismiss appellees’ claims against ADFA.

On April 2, 2018, appellees filed a complaint for breach of contract, negligence, fraud, and unjust enrichment, against ADFA; Ronnie Minnick, Ronnie Minnick d/b/a the Reata Foundation, Inc.; the City Council of the City of Lake Village, Arkansas; and Union Bank & Trust Co. of Monticello, Arkansas. Appellees alleged that they each entered into a contract with Reata, ADFA, and the city, to pay Reata $90,000 in exchange for home repairs. According to the complaint, on April 7, 2014, ADFA issued to appellees a "Notice to Proceed" with reconstruction activities that required them to move out of their homes so that the repairs could be made. The notice also began a ninety-day time period for Reata to make the repairs. Appellees asserted that Union Bank issued irrevocable letters of credit on March 18, 2015, promising to act as guarantor of defendant's obligations under the contracts. Reata did not complete the repairs in a timely manner, and the repairs that Reata reported as complete were defective and rendered the premises unsuitable for occupation. Although appellees provided Reata with written and detailed notices that Reata was in breach of its obligations, the problems were not resolved by the time the complaint was filed some three years later. Appellees asserted that they were contractually entitled to one hundred dollars per day in liquidated damages that began to accrue on the ninety-first day after ADFA's notice to proceed. Wiley was excluded from her home for about a year and a half because of the incomplete repairs and was forced to move back into her home despite the deficiencies. Williams has not moved back into her home. Appellees alleged that their circumstances were the result of Reata's failure to make the repairs called for in the contract and "the joint and several failures of the other Defendants as fiduciaries herein, in their obligations to indemnify or protect Plaintiffs from such breaches." Appellees sought "specific performance of the contracts herein, including an injunction that Reata immediately resume repairs to the homes[.]" They also sought compensatory damages against all defendants, "both jointly and severally," as well as punitive damages against separate defendants Reata and Minnick.

On May 16, 2018, ADFA filed a motion to dismiss, asserting that it was entitled to sovereign immunity. ADFA also argued that no exception to sovereign immunity applied because the complaint failed to plead sufficient factual matter to state a plausible claim for breach of contract, negligence, fraud, or unjust enrichment. The circuit court considered ADFA's motion at an October 21, 2019 hearing. At the conclusion of the hearing, the court orally denied the motion. The circuit court entered a written order denying ADFA's motion on October 30, stating in relevant part as follows:

Based on the hearing held on October 21, 2019, the pleadings, and the arguments of counsel, the Court hereby denies ADFA's Motion to Dismiss on the grounds of sovereign immunity or failure to state a claim pursuant to Arkansas Rules of Civil Procedure 8(a) and 12(b)(6).

ADFA filed a timely notice of appeal pursuant to Rule 2(a)(10) of the Arkansas Rules of Appellate Procedure–Civil, which permits an interlocutory appeal from an "order denying a motion to dismiss or for summary judgment based on the defense of sovereign immunity or the immunity of a government official." Bd. of Trs. v. Andrews , 2018 Ark. 12, at 4, 535 S.W.3d 616, 618.

As a preliminary matter, we note that the parties dispute whether ADFA's motion should be treated as a motion to dismiss or as a motion for summary judgment. Relying on Hanks v. Sneed , appellees argue that the circuit court's order stating that it had considered the pleadings and the argument of counsel compels us to presume that the order was based on matters beyond the pleadings and to treat this as an appeal of the denial of a motion for summary judgment. 366 Ark. 371, 235 S.W.3d 883 (2006). They note that they attached exhibits to their response to a motion for summary judgment filed by separate defendant Union Bank. Appellees are mistaken. In Hanks , the circuit court considered "the pleadings, transcript and all exhibits attached thereto." In Hanks , affidavits were attached as exhibits to a motion to dismiss. Because the affidavits were proof outside the complaint, the motion was converted to a motion for summary judgment. In this instance, ADFA attached no affidavits or other evidence to its motion. Therefore, we review this as an appeal of the denial of a motion to dismiss.

In reviewing a circuit court's decision on a motion to dismiss, we treat the facts alleged in the complaint as true and view them in the light most favorable to the plaintiff. Worden v. Kirchner , 2013 Ark. 509, 431 S.W.3d 243. We look only to the allegations in the complaint and not to matters outside the complaint. Ark. State Plant Bd. v. McCarty , 2019 Ark. 214, 576 S.W.3d 473. We treat only the facts alleged in the complaint as true but not a plaintiff's theories, speculation, or statutory interpretation. Id. Whether a party is immune from suit is purely a question of law that we review de novo. Harris v. Hutchinson , 2020 Ark. 3, 591 S.W.3d 778.

This appeal concerns a lawsuit filed against a state agency. The doctrine of sovereign immunity extends to state agencies. Steve's Auto Ctr. of Conway, Inc. v. Ark. State Police , 2020 Ark. 58, 592 S.W.3d 695. If a judgment in favor of a plaintiff would operate to control the action of the State or subject it to liability, the suit is one against the State and is barred by the doctrine of sovereign immunity. Ark. Tech. Univ. v. Link , 341 Ark. 495, 17 S.W.3d 809 (2000). However, the defense of sovereign immunity is inapplicable in a lawsuit seeking only declaratory or injunctive relief and alleging an illegal, unconstitutional, or ultra vires act. Martin v. Haas , 2018 Ark. 283, 556 S.W.3d 509. A plaintiff seeking to surmount sovereign immunity under this exception is not exempt from complying with our fact-pleading requirements. Harris , 2020 Ark. 3, 591 S.W.3d 778. Rule 8(a) of the Arkansas Rules of Civil Procedures requires "a statement in ordinary and concise language of facts showing ... that the pleader is entitled to relief." The complaint must provide facts to state a claim based on illegal, unconstitutional, or ultra vires state action, and short, conclusory statements and bare allegations will not do. Harris , 2020 Ark. 3, 591 S.W.3d 778.

With these authorities in mind, we look to the claims in appellees’ complaint. Appellees first argue that ADFA breached its contract. Generally, to state a cause of action for breach of contract the complaint must assert (1) the existence of a valid and enforceable contract between the plaintiff and defendant, (2) the obligation of defendant thereunder, (3) a violation by the defendant, and (4) damages resulting to plaintiff from the breach. Ballard Group, Inc. v. BP Lubricants USA, Inc. , 2014 Ark. 276, 436 S.W.3d 445.

Although appellees asserted in the complaint that they had entered into a written contract with ADFA, they provided no facts describing ADFA's obligations under the contract. Moreover, they have not alleged any facts to show how ADFA violated its purported obligations under the contract. Finally, appellees’ complaint generally seeks damages "against Defendants, both jointly and severally," but the only contractual provision they have cited is Reata's obligation to pay liquidated damages of one hundred dollars per day for each day the work is incomplete after the ninety-day deadline.

Appellees did allege in the complaint that Reata's contractual breach resulted in "the joint and several failures of the other Defendants as fiduciaries herein, in their obligations to indemnify or protect Plaintiffs from such breaches." Breach of fiduciary duty involves betrayal of a trust and benefit by a dominant party at the expense of one under his or her influence. Cole v. Laws , 349 Ark. 177, 76 S.W.3d 878, cert. denied , 537 U.S. 1003, 123 S.Ct. 509, 154 L.Ed.2d 400 (2002). 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. Long v. Lampton , 324 Ark. 511, 922 S.W.2d 692 (1996). Regardless of the express terms of an agreement, a fiduciary may be held liable for conduct that does not meet the requisite standards of fair dealing, good faith, honesty, and loyalty.

Sexton Law Firm, P.A. v. Milligan , 329 Ark. 285, 948 S.W.2d 388 (1997). The guiding principle of the fiduciary relationship is that self-dealing, absent the consent of the other party to the relationship, is strictly proscribed. Id.

Just as appellees failed to plead sufficient facts to state a claim for a breach of contract, they have failed to plead sufficient facts to establish a breach of fiduciary duty. The complaint does not provide any facts describing the relationship that appellees had with ADFA, nor does it explain...