Griffin v. First Nat. Bank of Crossett

• Decision Date: 05 December 1994
• Docket Number: No. 93-1302,93-1302
• Citation: 888 S.W.2d 306,318 Ark. 848
• Parties: Richard Earl GRIFFIN, Appellant, v. FIRST NATIONAL BANK OF CROSSETT, Appellee.
• Court: Arkansas Supreme Court

Page 306

888 S.W.2d 306

318 Ark. 848

Richard Earl GRIFFIN, Appellant, v. FIRST NATIONAL BANK OF CROSSETT, Appellee.

No. 93-1302.

Supreme Court of Arkansas.

Dec. 5, 1994.

Hopkins & James, Little Rock, for appellant.

Gregory M. Hopkins, Patrick R. James, Little Rock, for appellee.

ROBERT SHULTS, Special Chief Justice.

On May 1, 1986, First National Bank of Crossett (the "Bank") loaned Bearhouse, Inc. ("Bearhouse") $490,000 and took a promissory note as evidence of the debt. Payment of the note was secured by a mortgage on real estate. In connection with the loan, Richard Earl Griffin ("Griffin") executed a guaranty "limited to 25% of the outstanding debt" plus "all expenses, legal and/or otherwise (including court costs and attorney's fees, paid or incurred by said Bank in endeavoring to collect such indebtedness, obligations and liabilities, or any part thereof, and in enforcing this guaranty)."

Bearhouse defaulted on its note and was placed in involuntary bankruptcy. In the bankruptcy proceeding, the trustee in bankruptcy challenged the validity of the Bank's mortgage securing payment of the note. In the meantime, the Bank had sued Griffin on his guaranty and Griffin answered alleging that the Bank had impaired the collateral for the Bearhouse loan because the mortgage securing the loan was not valid and the Bank had failed to realize on its collateral in a commercially reasonable manner, thereby releasing Griffin of liability on his guaranty. Griffin also filed a counterclaim alleging misrepresentation, negligence, and breach of fiduciary duty. All of the counts in the counterclaim were based on the Bank's alleged failure to obtain a valid mortgage on the real estate securing the Bearhouse loan. Subsequently, the Bankruptcy Court found that the Bank's mortgage was in fact valid.

Thereafter, the case between the Bank and Griffin was tried to the court without a jury on February 13, 1990. Griffin was allowed to testify, over the objection of the Bank, that he had discussions with an officer of the Bank prior to execution of his guaranty in which he agreed to guarantee only 25% of any deficiency in the debt to the Bank after credit for the amount the Bank realized from sale of the mortgaged real estate. He also testified that the value of the real estate was such at the time of the Bearhouse bankruptcy that, if it had been sold at that time, 25% of the resulting deficiency would have been $17,000. The trial court accepted Griffin's arguments and entered judgment in favor of the Bank for $17,000. The Bank appealed from that judgment, and this Court reversed and remanded the case to the Ashley County Circuit Court. First National Bank v. Griffin, 310 Ark. 164, 832 S.W.2d 816 (1992), cert. denied, 507 U.S. 919, 113 S.Ct. 1280, 122 L.Ed.2d 673 (1993).

In the above opinion, this Court held that Griffin's guaranty agreement was clear and unambiguous and that parol evidence should not have been admitted to vary it. Consequently, judgment should have been entered against Griffin for 25% of the outstanding Bearhouse debt and not 25% of the deficiency. This Court also held in that opinion that the defense of impairment of collateral was not available to Griffin under the terms of his guaranty.

In the first appeal of this case, the Bank had also appealed from the refusal of the trial court to award the Bank appropriate attorney's fees. In First National Bank v. Griffin cited above, this Court reversed and remanded the case for a new trial and directed the trial court to "award an appropriate attorney's fee pursuant to the agreement of the parties." Id., 310 Ark. at 174, 832 S.W.2d at 821.

After the case was remanded to the Ashley County Circuit Court, the Bank filed a motion for partial summary judgment with accompanying affidavits setting out the amount of the outstanding debt to the Bank on the Bearhouse loan. Griffin responded by arguing that he should be able to have a trial on his counterclaim after the case had been remanded. The trial court (Hon. Samuel H. Bird, Circuit Judge on Assignment) rejected Griffin's argument, holding that this Court in the first appeal of this case had decided all issues related to the Bank's suit against Griffin on his guaranty adversely to Griffin. The trial court held Griffin was barred by res judicata from trying his counterclaim after the case had been remanded and consequently granted the Bank a partial summary judgment against Griffin in the amount of 25% of the outstanding Bearhouse debt.

It is from this partial summary judgment that Griffin brings this appeal which is now before this Court.

After the trial court granted the partial summary judgment in favor of the Bank, there remained the issue of attorney's fees to be awarded to the Bank. A hearing was held to determine the appropriate amount of such fees. The trial court concluded that the amount of the fees should conform to the agreement of the parties to the extent not prohibited by law. The trial court grouped services rendered by the Bank's attorney in the following categories.

1. Services in U.S. Bankruptcy Court proceedings against Bearhouse.

2. Services in the trial court against Griffin.

3. Services in appellate court against Griffin.

4. Services to be rendered in trial and appellate courts in the future in the collection of the judgment against Griffin.

The trial court determined that reasonable attorney's fees and expenses chargeable to Griffin for services rendered in the trial court were $24,994.56 and awarded the Bank a judgment against Griffin in that amount. In making this determination, the trial court held that it had no authority to award fees for services rendered in the Bankruptcy Court or in the appellate court, or for services to be rendered in the future. The Bank cross-appealed asking for reversal of the trial court's decision disallowing attorney's fees for services in the Bankruptcy Court and in the appellate court.

APPEAL

In his appeal, Griffin contends that after the case was remanded by this Court in the first appeal, the trial court erred in not granting him a trial on his counterclaim. That counterclaim had been filed and was pending when the trial court entered its judgment in the first trial of this case awarding the Bank $17,000. The court did not enter any finding on Griffin's counterclaim and no cross-appeal was taken by Griffin on the court's failure to do so.

In a well reasoned opinion by Judge Bird, after the case had been remanded, he held that res judicata barred Griffin from litigating his counterclaim. That decision was correct.

In Bailey v. Harris Brake Fire Protection District, 287 Ark. 268, 269, 697 S.W.2d 916, 917 (1985), the Court said:

Our decision in this case is based upon the well established law of the claim preclusion facet of res judicata. It bars relitigation of a subsequent suit when: (1) the first suit resulted in a final judgment on the merits; (2) the first suit was based upon 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.

In the first trial of this case before the Ashley County Circuit Court, all matters relating to Griffin's counterclaim were fully contested in good faith. The court entered judgment in favor of the Bank without making any reference to the counterclaim. This was tantamount to denial of the counterclaim, and, when no cross-appeal was taken in regard to the counterclaim, this had the effect of a final judgment denying it. We note that what constitutes a final judgment for res judicata purposes is not necessarily the same as what constitutes a final judgment for other purposes. See Restatement (Second) of Judgments § 13 (1982). Accordingly, all factors making res judicata applicable in this case are present.

The clearly established Arkansas law regarding res judicata is also set out in Wells v. Arkansas Public Service Commission, 272 Ark. 481, 483, 616 S.W.2d 718, 719 (1981):

We first consider the question of res judicata and when it is applied. Generally speaking, it applies when there has been a final adjudication on the merits of an issue, without fraud or collusion, by a court of competent jurisdiction, on the matters litigated or which might have been litigated.... It is res judicata even though not adjudicated if the matters were necessarily within the issues and might have been litigated in the former suit.

In this case, the issues raised in Griffin's counterclaim were clearly within the issues involved in the first trial and the first appeal of this case. By not asking the trial court to rule explicitly on his counterclaim in the first trial and failing to raise that issue in the first appeal of this...