Grand Valley Ridge, LLC v. Metro. Nat'l Bank

• Decision Date: 15 March 2012
• Docket Number: No. 11–483.,11–483.
• Parties: GRAND VALLEY RIDGE, LLC, and Thomas A. Terminella, Appellants v. METROPOLITAN NATIONAL BANK; Rogers Bancshares, Inc.; Doyle Rogers Company; Doyle Rogers, Sr.; Josephine Raye Rogers; Barbara Hoover; Tommy Lasiter; Richard D. Parker; Lunsford Bridges; Doyle W. Rogers, Jr.; and Susan F. Smith, Appellees.
• Court: Arkansas Supreme Court

2012 Ark. 121

388 S.W.3d 24

GRAND VALLEY RIDGE, LLC, and Thomas A. Terminella, Appellants

v.METROPOLITAN NATIONAL BANK; Rogers Bancshares, Inc.; Doyle Rogers Company; Doyle Rogers, Sr.; Josephine Raye Rogers; Barbara Hoover; Tommy Lasiter; Richard D. Parker; Lunsford Bridges; Doyle W. Rogers, Jr.; and Susan F. Smith, Appellees.

No. 11–483.

Supreme Court of Arkansas.

March 15, 2012.

Robert A. Ginnaven III, Fayetteville, for appellant.

Philip E. Kaplan, Jo Ann Compton Maxey and Clayborne S. Stone, Little Rock, for appellee.

COURTNEY HUDSON GOODSON, Justice.

Appellants Grand Valley Ridge, LLC (Grand Valley) and Thomas A. Terminella (Terminella), a member of Grand Valley, appeal an order of the Washington County Circuit Court granting a motion to dismiss and a motion for sanctions filed by appellees Metropolitan National Bank; Rogers Bancshares, Inc.; Doyle Rogers Company; Doyle Rogers, Sr.; Josephine Raye Rogers; Barbara Hoover; Tommy Lasiter; Richard D. Parker; Lunsford Bridges; Doyle W. Rogers, Jr.; and Susan F. Smith (collectively MNB). Appellants also challenge the circuit court's denial of their motions to compel and to set aside the judgment. For reversal, appellants argue that the circuit court erred in denying their motion to compel MNB's financial records; in denying their motion to set aside the judgment; in finding that Terminella had no standing to sue; in granting summary judgment on the nonsuited, “dangling issues” based on the doctrines of res judicata, collateral estoppel, and the statute of limitations; in dismissing claims based on the Arkansas Deceptive Trade Practices Act (ADTPA); and in awarding Rule 11 sanctions against their counsel. We have jurisdiction pursuant to Arkansas Supreme Court Rule 1–2(a)(7), as this case involves a subsequent appeal in our court. We affirm.

I. Facts

We set out a portion of the relevant facts in the first appeal of Grand Valley Ridge, LLC v. Metropolitan National Bank, 2010 Ark. 402, 2010 WL 4264508 ( Grand Valley I ):

In August 2005, Terminella presented a request for financing to MNB, seeking to fund the completion of the Grand Valley Ridge subdivision in Washington County. MNB agreed to loan Grand Valley $9,630,000.00, and on September 13, 2005, Grand Valley executed, among other documents, a promissory note, a construction loan agreement, and a construction mortgage. Separately, Terminella executed a commercial guaranty.

According to an August 22, 2005 Commercial Credit Memorandum, the loan had a one-year “interest carry.” Grand Valley and MNB budgeted $572 million of the project for this interest carry. Commencing in October 2005, Grand Valley authorized MNB to draft each month's interest payments. By September 2006, Grand Valley had drawn $453 million in interest carry. In October 2006, Terminella made an out-of-pocket payment on the interest, and he indicated to MNB that Grand Valley would not be able to carry the monthly interest. Grand Valley subsequently asked MNB whether it would consider changing the terms of the loan from interest due monthly to interest due annually in order to allow Grand Valley to complete the first phase of its subdivision and market the lots. MNB denied the request, but elected to allow Grand Valley to utilize the remaining interest carry that had been in the original budget, or approximately $94,000.

Grand Valley failed to make its interest payments from January 2007 through April 2007. In April and May 2007, MNB sent several memoranda to Terminella attempting to work out an arrangement on the loan. The parties were apparently unable to reach an agreement, however, and MNB filed a petition for foreclosure on May 30, 2007.

Terminella and Grand Valley filed an answer that denied the loan was in default. In addition, they filed a counterclaim alleging that MNB had breached the contract. The counterclaim also raised counts of constructive fraud, promissory and equitable estoppel, conversion, negligence, and breach of the covenant of good faith and fair dealing. In an amended counterclaim, Terminella and Grand Valley raised claims of breach of contract and tortious interference with a business expectancy. A second amended counterclaim reasserted the claims of breach of contract, negligence, and interference with contract, and included a demand for a jury trial.

MNB filed a motion objecting to Terminella and Grand Valley's demand for a jury trial, arguing that, because the lawsuit was fundamentally an equitable action for foreclosure, there was no right to a jury trial. The circuit court entered an order on October 13, 2008, sustaining MNB's objection to the jury-trial demand and setting the case for a bench trial. MNB also filed a motion for summary judgment in which it contended, among other things, that Terminella, as guarantor, lacked standing to assert any individual action against the bank. The trial court agreed and granted MNB's summary-judgment motion on that issue.

The case proceeded to a bench trial in October of 2008. During the course of the trial, Terminella and Grand Valley moved to take a voluntary nonsuit of their claims of negligence and tortious interference with contract. The circuit court entered an order granting the motion pursuant to Ark. R. Civ. P. 41(a)(1) on October 30, 2008, dismissing Counts II and III without prejudice.¹

The circuit court ultimately issued a letter opinion on February 3, 2009, in which it found that MNB had not breached the contract with Grand Valley. The court further found that the note between Grand Valley and MNB was a demand note and that Grand Valley failed to pay the balance due thereon. In addition, the court rejected Grand Valley's claims that MNB had breached the implied covenant of good faith and fair dealing, finding that Arkansas does not recognize such a cause of action. The court concluded that MNB was entitled to judgment on its decree of foreclosure and to a dismissal of the second amended counterclaim.

Grand Valley, 2010 Ark. 402, at 1–2, 2010 WL 4264508.

There are other relevant facts necessary to a full understanding of the current appeal that were not included in our factual recitation in Grand Valley, supra. On August 1, 2008, appellants filed a motion to compel the production of certain bank records, which included (1) budgets for MNB's northwest Arkansas bank branches; (2) operating statements for MNB's northwest Arkansas bank branches; (3) strategic plans for MNB's northwest Arkansas bank branches; and (4) minutes of MNB's Special Assets Committee meetings. The circuit court subsequently held a hearing and denied appellants' motion to compel. Additionally, on October 20, 2008, the circuit court entered an order ruling that Terminella had no standing to sue MNB and that, as a result, his counterclaims were dismissed with prejudice.

On February 27, 2009, the circuit court entered a foreclosure decree incorporating the court's letter opinion. In its order, the circuit court granted MNB's petition for foreclosure and awarded MNB a judgment against appellants for $7,614,166 and attorney's fees and costs in the amount of $846,223.74. Appellants then moved for a new trial. The circuit court denied the motion, and appellants brought their first appeal. We dismissed the appeal without prejudice in Grand Valley I, supra, holding that the circuit court's order was not final and appealable because the nonsuited negligence and interference-with-business-expectancies claims could be refiled.

During the course of the litigation, MNB entered into an agreement with the Office of the Comptroller (OCC) wherein MNB admitted that it had engaged in unsound banking practices for loaning too much money without sufficient capital reserves, particularly in northwest Arkansas. According to appellants, a prominent business journal reported that a routine examination by the OCC prompted MNB to restate its year-end report for 2008 and to lower its reported earnings by $7.8 million. Based on these publications, appellants disputed MNB's representations to the court in 2008 that MNB made money during that time.

Following our dismissal in Grand Valley I, supra, appellants, on November 22, 2010, filed a complaint, alleging their original nonsuited counterclaims and adding additional claims, including an ADTPA claim. Appellants amended their complaint twice and added other named defendants. ² MNB filed a motion to strike or, alternatively, a motion to dismiss appellants' complaint, arguing that appellants' complaint should be struck and dismissed because (1) the court lacked jurisdiction and (2) the complaint failed to state facts upon which relief could be granted, pursuant to Rule 12(b)(6). MNB also filed a motion for sanctions pursuant to Rule 11 of the Arkansas Rules of Civil Procedure. In their motion, MNB alleged that appellants' complaint was barred by res judicata, collateral estoppel, and the statute of limitations; that the complaint was not well grounded in fact and was not warranted by existing law; that the complaint was filed for the purpose of harassing appellees; and that appellants violated Rule 11. Appellants filed a motion to set aside the judgment on the breach-of-contract claims, pursuant to Rule 60 of the Arkansas Rules of Civil Procedure, arguing that MNB committed fraud by lying to the court about its financial condition and that the bank did not fund the balance of the loan because of its troubled financial condition.

The circuit court held a hearing on the parties' motions. On March 17, 2011, the circuit court entered a summary-judgment order granting MNB's motion to dismiss appellants' second amended complaint and MNB's motion for Rule 11 sanctions. In its order, the circuit court made the following rulings: (1) that Terminella was barred by the doctrines of res judicata and collateral estoppel from asserting any claims against appellees for interference of contract and business expectancies, negligence, or violation of the ADTPA and that Terminella...