Middleton v Lockhart

• Decision Date: 26 April 2001
• Docket Number: 99-1331
• Citation: 43 S.W.3d 113
• Parties: KENNETH G. MIDDLETON, and LYNN CARL MIDDLETON, APPELLANTS, VS. GERALDINE LOCKHART, MILDRED M. ANDERSON, JOYCE M. HENSON and JESSIE J. BREWER, APPELLEES.SUPREME COURT OF ARKANSAS 26 April 2001 APPEAL FROM THE NEWTON COUNTY CHANCERY COURT, NO.JOHNNY R. LINEBERGER, JUDGE, AFFIRMED IN PART, AND REVERSED AND REMANDED IN PART. JIM HANNAH, Associate Justice This appeal arises from an action under the Fraudulent Conveyance Act and an attempt to execute on a judgment appellees received in Missouri against appellant Kenneth G. Middleton for the murder of his wife, Katherine Middleton. The action in Arkansas was begun here before the judgment was obtained in Missouri in an apparent attempt to preserve the Arkansas assets until the judgment was obtained. Appellants filed several motions to dismiss under Ark. R. Civ. P. 12. The trial court granted two motions to dismiss under Ark. R. Civ. P. 12(b). The complaint was amended several times, and the case reached trial on
• Court: Arkansas Supreme Court

KENNETH G. MIDDLETON, and LYNN CARL MIDDLETON, APPELLANTS VS GERALDINE LOCKHART, MILDRED M. ANDERSON, JOYCE M. HENSON and JESSIE J. BREWER, APPELLEES

No. 99-1331

SUPREME COURT OF ARKANSAS

26 April 2001

APPEAL FROM THE NEWTON COUNTY CHANCERY COURT, NO. E-91-17-1, HON. JOHNNY R. LINEBERGER, JUDGE, AFFIRMED IN PART, AND REVERSED AND REMANDED IN PART.

JIM HANNAH, Associate Justice

This appeal arises from an action under the Fraudulent Conveyance Act and an attempt to execute on a judgment appellees received in Missouri against appellant Kenneth G. Middleton for the murder of his wife, Katherine Middleton. The action in Arkansas was begun here before the judgment was obtained in Missouri in an apparent attempt to preserve the Arkansas assets until the judgment was obtained. Appellants filed several motions to dismiss under Ark. R. Civ. P. 12. The trial court granted two motions to dismiss under Ark. R. Civ. P. 12(b). The complaint was amended several times, and the case reached trial on March 25, 1999. Appellants allege the trial court erred in failing to dismiss under Ark. R. Civ. P. 41(b) when they prevailed under two successive motions to dismiss under Ark. R. Civ. P. 12(b)(6). Appellants also allege res judicata barred the trial of this matter because certain issues decided at trial had already been decided against plaintiffs in the Rule 12 motions. Appellants additionally assert error in finding Kenneth abandoned his homestead right when he murdered his wife. Finally, appellants assert it was error to tax Kenneth's attorney's fees as costs against Kenneth and his brother, Lynn Carl Middleton. The issue as to taxing Kenneth's attorney's fees as cost against Kenneth and Lynn is reversed and remanded to the trial court for further consideration of costs consistent with this opinion. The case is affirmed in all other respects.

Facts

On February 22, 1991, Kenneth G. Middleton was convicted of the first-degree murder of his wife, Katherine, and sentenced to life without parole for the murder plus 200 years for armed criminal action. On February 27, 1991, Kenneth entered into a contract to convey a tract of land known as the Middleton homeplace to Lynn Carl Middleton, Kenneth's brother. On March 7, 1991, a warranty deed conveying the land was filed. Additional transactions around this same time make it clear Kenneth was liquidating his assets. On March 11, 1991, Kenneth sold his cattle for $19,000. On March 26, 1991, Kenneth conveyed 265 acres of land to Rocky Lee McCutcheon and Sheila Marie McCutcheon.

Prior to these transfers, Kenneth had been sued on July 19, 1990, by Katherine's siblings in a wrongful-death action. Trial of the wrongful-death action in Missouri was set for May 26, 1992. On the day of trial, no one appeared on behalf of Kenneth, which resulted in a judgment against him for $1,350,000. Lockhart v. Middleton, 863 S.W.2d 367 (Mo. Ct. App. 1993).

The trial court concluded there was ample evidence Kenneth transferred or conveyed all or substantially all of his assets as of early 1991, and that due to Kenneth's refusal to comply with discovery, the record did not reflect what, if any, assets he might have retained. The court then considered the transfers and found the conveyance of the 265 acres was for a reasonably equivalent value. Thus no claim of resulting insolvency could be made as to this transfer. However, the trial court found that the Middleton homeplace was not transferred for a reasonably equivalent value. The trial court then found Kenneth abandoned any homestead right he claimed when he murdered his wife and ordered the Middleton homeplace sold at execution sale.

Both Kenneth and his brother, Lynn, raise an asserted marriage homestead exemption of Kenneth and Katherine as a defense to execution on the Middleton homeplace. Kenneth and Katherine were married in April of 1974. At that time, Kenneth already owned the tract of land referred to as the Middleton homeplace, which is located in Newton County. When the land was conveyed to him in 1973, he noted on the deed that he would offer the land to a brother or sister before it would be sold to anyone else. This deed also contains a provision reserving the right to live in the house to Oshia Middleton for the remainder of her life. The land was in Kenneth's name and remained so until Kenneth transferred it shortly after his conviction. During the marriage, a 1,663 square foot home and a 2,800 square foot metal building were erected on the Middleton homeplace. In considering the claim of a homestead exemption, the trial court found a lack of evidence to show an exemption based upon head of household, and found there was conflicting evidence on whether the exemption might be based on marriage. The trial court concluded that whatever interest Kenneth had in the Middleton homeplace as a result of his marriage, he abandoned it when he terminated his marriage by the murder of his wife.

The trial court awarded Kenneth's attorney a reasonable attorney's fee pursuant to Ark. Code Ann. § 16-61-109 (1987) in the sum of $14,996.93, to be paid by appellees, and taxed the attorney's fees as cost to Kenneth and Lynn.

Standard of Review

We review chancery cases de novo on the record, but we do not reverse a finding of fact by the trial court unless it is clearly erroneous. Simmons First Bank v. Bob Callahan Servs., Inc., 340 Ark. 692, 13 S.W.3d 570 (2000); Myrick v. Myrick, 339 Ark. 1, 2 S.W.3d 60 (1999). A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed. Id. Similarly, we review issues of statutory construction de novo, as it is for this court to decide what a statute means. Simmons First Bank, supra; Hodges v. Huckabee, 338 Ark. 454, 995 S.W.2d 341 (1999). In this regard, we are not bound by the trial court's decision; however, in the absence of a showing that the trial court erred, its interpretation will be accepted as correct on appeal. Id.; Stephens v. Arkansas School For The Blind, 341 Ark. 939, 20 S.W.3d 397 (2000); Buchbinder v. Bank of America, 342 Ark. 632, 30 S.W.3d 707 (2000).

Res Judicata and Arkansas Rule of Civil Procedure 41(b)

Appellants assert that because they prevailed on two motions to dismiss under Ark. R. Civ. P. 12(b)(6), the complaint should have been dismissed under Ark. R. Civ. P. 41(b), and that the trial court was in error when he allowed trial of the matter. Consistent with this assertion, appellants further allege that it was error for the trial court to allow trial on the issues decided in these motions because such consideration was barred by the doctrine of res judicata.

Res Judicata

Under the doctrine of res judicata or claim preclusion, a valid and final judgment rendered on the merits by a court of competent jurisdiction bars another action by the plaintiff or his privies against the defendant or his privies on the same claim or cause of action. Francis v. Francis, 343 Ark. 104, 31 S.W.3d 841 (2000); Arkansas Louisiana Gas Co. v. Taylor, 314 Ark. 62, 858 S.W.2d 88 (1993).

As is evidenced by the orders, amended pleadings, and trial, the dismissals in this case were without prejudice. A dismissal without prejudice is not an adjudication on the merits. Benedict v. Arbor Acres Farm, 265 Ark. 574, 579 S.W.2d 605 (1979). Res judicata bars relitigation of a subsequent suit when certain elements are met, including a prior judgment on the merits. National Bank of Commerce v. The Dow Chemical Company, 338 Ark. 752, 1 S.W.3d 443 (1999). There was no judgment on the merits and, therefore, res judicata is not applicable.

A review of the pleadings reveals that the appellees in their complaint were asking for the imposition of a constructive trust upon Kenneth's assets. The amended complaint alleged that Kenneth was attempting to convey his real property for inadequate consideration with the fraudulent intent of depriving the plaintiff of recovery and asked for the imposition of a constructive trust in lieu of a prejudgment attachment. The complaint and amended complaint did not make Lynn a party defendant to this cause of action. On September 16, 1991, the trial judge granted a motion to dismiss under Rule 12(b)(6) and gave the appellee twenty days to plead further to show a property interest upon which a constructive trust might rest.

The appellees filed their second amended complaint, and among other things, made Lynn a party defendant alleging Lynn had actual or constructive possession of personal property belonging to Katherine, and a portion of Katherine's personal property had been sold, transferred, or assigned by defendants subsequent to Katherine's death. The second amended complaint did not allege that Kenneth had conveyed real property to Lynn. The issue of whether Kenneth's transfer of the Middleton homeplace to Lynn was in fraud of creditors under the Fraudulent Conveyance Act was not before the trial court when it considered appellant's second motion to dismiss. The trial court on May 26, 1992, granted a motion to dismiss under Rule 12(b)(6) except that a constructive trust would be placed on the Middleton homeplace and certain personal property. On the same day, May 26, 1992, the appellees received a judgment against Kenneth in their Missouri wrongful-death case.

On June 12, 1992, the appellees filed their third amended complaint alleging Kenneth's transfers of the real property to Lynn and to the McCutcheons were fraudulent conveyances in fraud of creditors under the Fraudulent Conveyance Act and should be set aside. The issue of fraudulent conveyance in fraud of creditors under the Fraudulent Conveyance Act was not considered or adjudicated by the trial court in the two dismissals under Rule 12(b)(6). In fact, a cause of action under the Fraudulent Conveyance Act could not have been brought by the appellees until after the Missouri...