Council of Co-Owners v. Glyneu, LLC

• Decision Date: 05 October 2006
• Docket Number: No. 06-354.,06-354.
• Citation: 240 S.W.3d 600,367 Ark. 397
• Court: Arkansas Supreme Court
• Parties: COUNCIL OF CO-OWNERS FOR the LAKESHORE RESORT AND YACHT CLUB HORIZONTAL PROPERTY REGIME, Appellants, v. GLYNEU, LLC, Appellee.

240 S.W.3d 600

367 Ark. 397

COUNCIL OF CO-OWNERS FOR the LAKESHORE RESORT AND YACHT CLUB HORIZONTAL PROPERTY REGIME, Appellants, v. GLYNEU, LLC, Appellee.

No. 06-354.

Supreme Court of Arkansas.

October 5, 2006.

Rehearing Denied November 9, 2006.

Niswanger Law Firm, PLC, by: Stephen B. Niswanger, Little Rock, AR, for appellant.

Hardin & Grace, P.A., by: David A. Grace, Little Rock, AR, for appellee.

ROBERT L. BROWN, Justice.

The appellant, Council of Co-Owners for the Lakeshore Resort and Yacht Club Horizontal Property Regime (Council), appeals from an order granting the motion to dismiss of the appellee, Glyneu, LLC. The Council raises several points for reversal. None of the points has merit, and we affirm.

The Council is an organization of condominium unit owners and was formed pursuant to the Arkansas Time Share Act and the Declaration of Horizontal Property Regime Master Deed and By-Laws for Lakeshore Resort and Yacht Club in Hot Springs. The Council owns approximately 20% of the time-share intervals in a lake-front condominium building in Hot Springs known as the Lakeshore Resort and Yacht Club Horizontal Property Regime (condominiums). The condominiums are located adjacent to a hotel now owned by Glyneu. The Council acquired its 20% ownership interest in the condominiums in 2001 from the former owners, known as the Kessler Class, in a foreclosure proceeding.

The condominiums and the hotel have been the subject of multiple lawsuits and appeals to this court. As a result, a complete recitation of the facts involved in this current appeal can be found in two previous opinions by this court — National Enterprises, Inc. v. Kessler, 363 Ark. 167, 213 S.W.3d 597 (2005), and National Enterprises, Inc. v. Lake Hamilton Resort, Inc., 355 Ark. 578, 142 S.W.3d 608 (2004). What follows is a brief summary of the facts.

In 1983, Painters Point Development Company, L.P., developed the land into the resort that now includes the hotel and condominiums. Union Planters National Bank provided the financing for the development. In 1985, Painters Point conveyed the condominiums to Lakeshore Resort and Yacht Club Limited Partnership (Lakeshore Partnership), and Union Planters released its mortgage lien on the condominium property. Later in 1985, Painters Point and the Lakeshore Partnership entered into a license agreement which allowed Lakeshore Partnership and its condominium owners to use the hotel's recreational amenities and parking. A memorandum of the agreement was recorded in the real estate records.

Lakeshore Partnership then sold approximately 20% of the condominiums to a group of people now known as the Kessler Class, and 80% of the condominiums were acquired by its general partner — Hanson, Hooper & Hays, Inc. (Hansen Hooper). In 1988, Union Planters foreclosed on Painters Point's interest in the hotel, and a foreclosure decree was entered in 1990. The hotel property was purchased at the foreclosure sale and ultimately sold to Lake Hamilton Resort.

In 1993, the mortgagee's successor in interest for the Hansen Hooper purchase began foreclosure proceedings on the 80% condominium interest. National Enterprises, Inc. bought the note and mortgage. Lake Hamilton Resort offered $275,000 to National Enterprises for the note and mortgage, and National Enterprises counter offered for $1 million. Lake Hamilton Resort considered the counter offer "totally off base," and negotiations terminated.

In December 1993, Lake Hamilton Resort advised National Enterprises and the Kessler Class that they could no longer use the hotel's parking and recreational amenities and that utilities to the condominiums would be disconnected. National Enterprises, which by now had purchased the 80% interest in the condominiums, sued Lake Hamilton Resort to enforce the license agreement and easements by necessity for utility usage and ingress and egress. The trial court ruled in its 1994 order that any rights National Enterprise might have had under the license agreement were foreclosed by the 1990 foreclosure decree. The court further found that the warranty deed executed to National Enterprises's predecessor in interest did not contain any grants of easement over the hotel property and that there was no implied easement by necessity or prescriptive easement for use of the utilities.

In August 2005, Glyneu, an Arkansas limited liability company, purchased the hotel at a foreclosure sale. The Council, which had since acquired 20% of the condominiums from the Kessler Class, filed suit against Glyneu for a declaratory judgment that the Council had the right to use the hotel's recreational amenities, parking, and utilities and that the 1990 foreclosure decree did not affect those rights. The circuit court granted Glyneu's motion to dismiss, based on its prior decision in the 1994 order. The Council now appeals.

I. Dismissal Under Either The 1994 Order Or The Kessler¹ Decision.

The Council makes three distinct arguments under this point. First, it claims that neither the 1994 order nor the Kessler decision is res judicata as to the Council's current cause of action. It also asserts that the 1994 order has no stare decisis effect. Finally, it contends that the Kessler decision also has no stare decisis effect. Glyneu responds that, though it may apply, the circuit court's dismissal was not based on res judicata. Glyneu argues that the record clearly shows that the circuit court based its decision on the doctrine of stare decisis in deciding to follow its own precedent established in the 1994 order.

The Council first contends that res judicata should not apply in this case because it was not a party to the 1994 order nor to the Kessler decision. The doctrine of res judicata consists of "two facets, one being issue preclusion and the other claim preclusion." Beebe v. Fountain Lake School Dist., 365 Ark. 536, 231 S.W.3d 628 (2006). Claim preclusion bars the relitigation of a subsequent suit when five elements are met: (1) the first suit resulted in a final judgment on the merits; (2) the first suit was based on proper jurisdiction; (3) the first suit was fully contested in good faith; (4) both suits involve the same claim or cause of action; and (5) both suits involve the same parties or their privies. See id.

Regarding the 1994 order, the first four elements are met. It was a final judgment on the merits. The action was based on proper jurisdiction. It was fully contested in good faith, and the current suit involves the same cause of action. However, there is no evidence that the fifth element has been met. The two suits do not involve the same parties or their privies. The Council did not acquire its interest in the time-share from National Enterprises. Plus, the Council did not attempt to intervene in the 1994 action until 2000. The circuit court ruled that this attempt at intervention was untimely. Accordingly, the Council was not a party to the 1994 order, and there is no evidence that the Council is in privity with any party to the prior judgment. Therefore, claim preclusion does not bar the current suit.

Issue preclusion, or collateral estoppel, is the second facet of res judicata, and it bars the relitigation of issues that were actually litigated by the parties in a previous suit. See Beebe, supra. The issue must have been previously litigated and determined by a valid and final judgment, and the following four elements must be met: (1) the issue sought to be precluded must be the same as that involved in the prior litigation; (2) the issue must have been actually litigated; (3) the issue must have been determined by a valid and final judgment; and (4) the determination must have been essential to the judgment. See id.

Furthermore, for collateral estoppel to apply, the party against whom the prior decision is being asserted must have had a full and fair opportunity to litigate the issue. Craven v. Fulton Sanitation Serv., Inc., 361 Ark. 390, 206 S.W.3d 842 (2005). In this regard, this court has abandoned the requirement for collateral estoppel that both parties to a prior judgment must be bound for either to be bound. See Fisher v. Jones, 311 Ark. 450, 844 S.W.2d 954 (1993). One treatise discusses this development as follows:

At one time, the utility of issue preclusion was limited by an additional requirement known as "mutuality of estoppel." Under this concept, neither party to a lawsuit was bound by a prior judgment unless both were bound. In Fisher v. Jones, the Arkansas Supreme Court abolished mutuality when issue preclusion is asserted defensely, i.e., against a plaintiff who has previously litigated the same issue against a different defendant.

DAVID NEWBERN & JOHN J. WATKINS, 2 Arkansas Practice Series: Civil Practice and Procedure § 34.3 at 668 (4th ed.2006). In the instant case, though the current issue is the same as that decided in the 1994 order, the Council did not have a full and fair opportunity to litigate the issue in 1994, since it was not a party to that action. Because this criterion was not met, issue preclusion does not decide this case.

The Council, however, also argues that the 1994 order has no stare decisis effect on the current case. We disagree. As a general rule, courts are bound to follow prior case law under this doctrine. Low v. Insurance Co. of North America, 364 Ark. 427, 220 S.W.3d 670 (2005). This court has said:

We have held that there is a strong presumption of the validity of prior decisions. Bharodia v. Pledger, 340 Ark. 547, 11 S.W.3d 540 (2000). Although we do have the power to overrule previous decisions, it is necessary as a matter of public policy to uphold prior decisions unless great injury or injustice would result. Id. The policy behind stare decisis is to lend predictability and stability to the law. Id. In matters of practice, adherence by a court to its own decisions is necessary and proper for the regularity and uniformity of practice, and that litigants may know with...