Crockett v. C.A.G. Invs., Inc.

2011 Ark. 208

381 S.W.3d 793

Kim CROCKETT, Appellant,

v.C.A.G. INVESTMENTS, INC., Appellee.

No. 10–987.

Supreme Court of Arkansas.

May 12, 2011.

Paul N. Ford, Jonesboro, and Brian G. Brooks, Attorney at Law, PLLC, by: Brian G. Brooks, for appellant.

Fogleman, Rogers & Coe, West Memphis, by: Joe M. Rogers, for appellee.

JIM GUNTER, Justice.

This is an appeal from a grant of summary judgment in favor of appellee C.A.G. Investments, Inc., in which appellant Kim Crockett asserts three points on appeal: (1) that the circuit court erred in granting summary judgment to C.A.G.; (2) that the circuit court erred in awarding C.A.G. attorney's fees as the prevailing party; and (3) that the circuit court erred in sanctioning Crockett under Rule 11. Our jurisdiction is pursuant to Rule 1–2(a)(7) of the Rules of the Arkansas Supreme Court because this case is a subsequent appeal following an appeal decided by this court. ¹ We affirm.

In 1993, Bob Herren and Tom Papachristou developed a business plan for a crop-dusting service and a farm-equipment export business. Herren would provide financing and facilities and Papachristou would oversee operations. Herren incorporated the business, Omni Holding and Development Corp., in Louisiana, but it was to be located in Arkansas. Thereafter, Herren and his girlfriend, Shirley Despot, organized C.A.G. Investments Inc. as a Louisiana corporation and, in January 1994, C.A.G. purchased an eighty-acre tract of land outside of Marion, Arkansas, to serve as Omni's headquarters. Despot, Herren, and Papachristou agreed that Omni would pay the taxes and insurance on the land until the business could afford to make rental payments. Additionally, C.A.G. purchased a home for Papachristou and his girlfriend, Kim Crockett, who was also an Omni employee. In July 1997, Crockett became a minority shareholder in Omni, and by May 2005, she became its sole stockholder, president, and chairman of the board.

On December 3, 1997, Despot, acting for C.A.G., conveyed the eighty-acre tract of land to Crockett by warranty deed for the purchase price of $50,000. Prior to recording the deed, Papachristou asked Herren to secure additional financing from Despot and C.A.G. for Omni's export business. C.A.G. refused the request for additional financing unless it owned the land. Thereafter, on February 18, 1998, C.A.G. wired $50,000 to Omni, and Crockett executed a warranty deed to C.A.G. transferring the property. Both the December 1997 and February 1998 deeds were recorded on February 19, 1998.

Herren, as president of Omni, signed a $175,000 promissory note on September 15, 1998, in favor of C.A.G. for the purpose of consolidating Omni's outstanding indebtedness to C.A.G. The note was secured with an aircraft owned by Omni. One year later, Omni executed a bill of sale in favor of C.A.G., conveying airplane hangars, which had been built on the eighty-acre tract, thereby securing title to the improvements in C.A.G. On March 2, 2000, Omni borrowed $150,000 from Textron Financial Corporation, a loan which was personally guaranteed by Despot. The $150,000 note was also secured by the identical aircraft that secured the earlier $175,000 note from Omni to C.A.G.

Thereafter, Omni suffered numerous financial difficulties, resulting in the deterioration of the business relationship among the parties. In late summer 2003, Despot and Herren learned that Omni was contemplating bankruptcy and that Papachristou was in Greece. Despot and Herren promptly traveled to Arkansas and discovered that the aircraft designated as security on both the Textron and C.A.G. notes had crashed in 2002. In addition, insurance proceeds payable to C.A.G., Omni, and Textron as loss payees, totaling $233,500, had been deposited into Omni's bank account on May 15, 2002, without the endorsement of either C.A.G. or Textron. In November 2003, C.A.G. demanded that Omni immediately remove all personal property it owned or possessed from the real property owned by C.A.G. and to surrender possession of the real property.

Omni refused to comply, and C.A.G. filed a complaint on December 18, 2003, asserting that Omni was in possession of real property owned by C.A.G. and that the property was being unlawfully detained. The circuit court entered an order on June 22, 2004, stating that Omni had committed an unlawful detainer of the property and that C.A.G. was entitled to a writ of possession of the property without the requirement of posting a bond. Omni requested permission to post bond and remain in possession but failed to post the required bond. Moreover, Omni did not vacate the premises, and Papachristou continued to reside on the premises.

C.A.G. amended its complaint, seeking additional remedies for outstanding debts. C.A.G. also filed a petition for contempt against Papachristou, asserting that, with Omni's permission, he willfully remained on the premises and authorized other persons to remain on the premises in violation of the court's orders. The petition requested that the court find Papachristou and Omni in contempt. Omni counterclaimed for quiet title, asserting that although Crockett signed and delivered a deed to C.A.G. purportedly conveying the real property, Omni never intended to vest title in C.A.G.

The case was tried and, on May 30, 2006, the circuit court entered its order and judgment, finding in pertinent part as follows: (1) C.A.G. was the record fee simple title owner of the land and that all improvements and fixtures were quieted in C.A.G.; (2) Omni's claim to rescind and reform C.A.G.'s title into a mortgage and quiet title in Omni was denied and dismissed; (3) C.A.G.'s claim that Omni was indebted to it under the terms of a promissory note, or was otherwise liable in debt to it, was denied and dismissed; (4) Omni and Papachristou were in contempt for failing to vacate the premises after the court awarded possession to C.A.G.; and (5) Omni had abandoned all personal property it left on the premises following its failure to post the requisite bond to retain possession.

Omni timely appealed the circuit court's order quieting title in favor of C.A.G., and this court affirmed the circuit court's decision, holding that Omni was precluded from seeking reformation of either the December 1997 deed or the February 1998 deed because it was not a party to either. Omni Holding & Dev. Corp. v. C.A.G. Invs., Inc., 370 Ark. 220, 228, 258 S.W.3d 374, 380 (2007).

On June 15, 2007, after this court's decision in Omni, Crockett filed a reformation and quiet-title action against C.A.G. averring substantially the same allegations as the counterclaim previously filed by Omni in its litigation with C.A.G. On the same day, Crockett filed a lis pendens to provide notice that the land in question was subject to an action to quiet title. On August 2, 2007, C.A.G. answered and raised the defenses of statute of limitations, laches, estoppel, waiver, res judicata, and collateral estoppel. Additionally, it sought Rule 11 sanctions against Crockett and her attorney for filing the complaint and lis pendens and filed a motion to quash the lis pendens. Later, on August 24, 2007, C.A.G. filed a counterclaim against Crockett for tortious interference with its business right to sell or mortgage the land. On October 1, 2007, Crockett amended her complaint to add a breach-of-contract claim, alleging that she was contractually bound with C.A.G. to use the land as collateral for the $50,000 loan and that C.A.G. breached the contract by not returning the land when the debt was satisfied. On October 11, 2007, C.A.G. moved for summary judgment. On November 5, 2007, Crockett moved for a voluntary nonsuit of her reformation and quiet-title claims; her breach-of-contract claim remained pending. The circuit court held a hearing and granted summary judgment on December 4, 2007, in favor of C.A.G. on the basis of waiver, res judicata, and collateral estoppel.

On December 31, 2007, Crockett appealed to the Arkansas Court of Appeals, but later moved to dismiss her appeal, which the court granted. Thereafter, C.A.G. voluntarily dismissed its tortious-interference counterclaim without prejudice, and an order to that effect was entered by the circuit court. On February 5, 2009, the circuit court entered an order reaffirming its grant of summary judgment, awarding C.A.G. $5670 in attorney's fees, and sanctioning Crockett and her attorney in the sum of $5670 for violating Rule 11. Crockett appealed; this court dismissed the appeal without prejudice because the February 5, 2009 order of the court did not adjudicate all claims-specifically, it left unresolved C.A.G.'s counterclaim, which had been voluntarily nonsuited. See Crockett, 2010 Ark. 90, 361 S.W.3d 262.

On June 14, 2010, C.A.G. again filed its counterclaim in circuit court, and Crockett answered. On June 18, 2010, the circuit court entered an order in which it certified the case for appeal pursuant to Rule 54(b), explaining in detail the policies best served by allowing the case to be appealed without a final order as to all claims. On July 2, 2010, Crockett filed her notice of appeal from the June 18 order and the interlocutory orders granting summary judgment to C.A.G. and awarding sanctions against Crockett.

I. Summary Judgment

Appellant's first argument on appeal is that the circuit court erred in granting summary judgment in favor of appellee. The law is well settled regarding the standard of review used by this court in reviewing a grant of summary judgment. Bryan v. City of Cotter, 2009 Ark. 172, 303 S.W.3d 64. A trial court will grant summary judgment only when it is apparent that no genuine issues of material fact exist requiring litigation and that the moving party is entitled to judgment as a matter of law. Id. The burden of proof shifts to the opposing party once the moving party establishes a prima facie entitlement to summary judgment; the opposing party must demonstrate the existence of a material...