Ozarks Unlimited Resources Co-op., Inc. v. Daniels

• Decision Date: 14 May 1998
• Docket Number: No. 97-924,97-924
• Parties: OZARKS UNLIMITED RESOURCES COOPERATIVE, INC., Appellant, v. Edward C. DANIELS, Jr., and Edward C. Daniels, III, Appellees,
• Court: Arkansas Supreme Court

Page 169

969 S.W.2d 169

333 Ark. 214

OZARKS UNLIMITED RESOURCES COOPERATIVE, INC., Appellant, v. Edward C. DANIELS, Jr., and Edward C. Daniels, III, Appellees,

No. 97-924.

Supreme Court of Arkansas.

May 14, 1998.

Dan F. Bufford, Brian A. Brown, Little Rock, for Appellant.

Russell C. Atchley, Berryville, for Appellee.

ARNOLD, Chief Justice.

Appellant, Ozarks Unlimited Resources ("O.U.R."), brings this appeal challenging the Boone County Circuit Court's findings that (1) O.U.R. was not immune from suit pursuant to Article 5, Section 20, of the Arkansas Constitution, and (2) that a lease entered into by O.U.R. was not violative of Ark.Code Ann. § 6-20-402 (Repl.1993 & Supp.1997). Additionally, O.U.R. appeals the circuit court's judgment awarding the appellees, Edward C. Daniels, Jr., and Edward C. Daniels, III (collectively "Daniels"), prejudgment interest. Via a cross-appeal, Daniels contests the circuit court's judgment setting aside a portion of a jury verdict awarding Daniels $25,000 for damages sustained after July 26, 1993. Our jurisdiction is invoked pursuant to Ark. Sup.Ct. Rules 1-2(a)(1), (a)(17)(i), (a)(17)(vi) (1997) because the issues involve the interpretation of the Arkansas Constitution and Ark.Code Ann. § 6-20-402. Finding no error in the points raised on direct appeal or cross-appeal, we affirm.

O.U.R. is an education service cooperative, providing educational services to twenty-one school districts in a multi-county region of northwestern Arkansas, that was created pursuant to Ark.Code Ann. § 6-13-1000 to -1025 (Repl.1993 & Supp.1997). Since the late 1980's O.U.R. has leased a building from Daniels. The initial leases provided for one-year lease terms. However, in November of 1990 O.U.R. and Daniels executed an "Agreement to Enter into a Lease" that contemplated a new lease, conditioned upon Daniels completing specified improvements to the premises, with a five-year term at a higher monthly rental rate than the prior leases. In May of 1991, the parties executed a new lease with the five-year lease term.

Subsequently, in January 1992, O.U.R. informed Daniels that it was exploring other housing alternatives, because of a projected decrease in funding and an inability to make the additional space functional, and that it was terminating the lease effective June 30, 1992. Although Daniels sold the property to another party on July 26, 1993, they filed a complaint in the Boone County Circuit Court against O.U.R. for breach of the lease agreement. Daniels's complaint sought recovery of the unpaid monthly rental payments due from July 1992 through July 26, 1993, and $25,000 for diminution in property value.

O.U.R. asserted two legal defenses: (1) that the action was barred by Article 5, Section 20, of the Arkansas Constitution because it was, in effect, a suit against the State, and (2) that the five-year lease agreement was void because it violated the limitation on a school district's current indebtedness mandated by Ark.Code Ann. § 6-20-402. Additionally, O.U.R. claimed two factual defenses: (1) that the lease agreement permitted termination if O.U.R.'s funding was not sufficiently available and, in fact, funding was not available, and (2) that Daniels breached the lease.

O.U.R. moved for summary judgment based on the two legal defenses and, after hearing oral arguments on March 10, 1995, the trial court denied the motion. On December 2, 1996, the parties tried the case before a jury. O.U.R. renewed the legal defenses raised in its summary-judgment motion at the close of Daniels's case and at the close of all evidence. However, the trial court overruled these motions and permitted the jury to consider whether O.U.R. was justified in terminating the lease because of a funding loss and whether O.U.R. breached the lease. Ultimately, the jury returned a verdict in favor of Daniels, awarding them $13,575.60 for lost rental payments from July 1, 1992 through July 26, 1993, and $25,000 for damages sustained after July 26, 1993. The trial judge set aside the post-July 26, 1993 damages and entered a judgment for Daniels in the amount of $13,575.60, plus prejudgment interest, attorney's fees, and costs.

I. Appeal from Denial of Motion for Summary Judgment

The appellant's first point on appeal contests the trial court's finding that O.U.R. was not entitled to sovereign immunity pursuant to Article 5, Section 20, of the Arkansas Constitution. O.U.R. first raised the immunity defense via a motion for summary judgment, which the trial court denied. As a general rule, the denial of a motion for summary judgment is neither reviewable nor appealable. Nucor Holding Corp. v. Rinkines, 326 Ark. 217, 931 S.W.2d 426 (1996). Accordingly, we first consider whether this point reaches us through an appealable order. See Newton v. Etoch, 332 Ark. 325, 965 S.W.2d 96 (1998). When the parties fail to address the issue of an order's appealability we, nevertheless, must determine whether we have jurisdiction. See Associates Fin. Servs. Co. v. Crawford County Mem. Hosp., 297 Ark. 14, 759 S.W.2d 210 (1988).

O.U.R.'s brief on appeal suggests that it renewed the immunity defense via motions for directed verdict at the close of Daniels's case and at the close of all evidence. Such a motion, if made, would be properly appealable. However, the record indicates that O.U.R. merely renewed the arguments advanced in its summary-judgment motion. Specifically, O.U.R. made the following motion at the conclusion of Daniels's case:

The Court will recall that I had a motion for summary judgment pending which the Court denied about a year ago, but I just want at this point to renew for the record that we contend that this lease is unenforceable and illegal under the state law and the Arkansas constitution, and, in fact, make the same motion I did at summary judgment and have the Court note the denial of that for the record.

The trial court noted and overruled the motion. Likewise, the trial court noted and overruled the motion when made at the close of all evidence.

Although denials of summary-judgment motions generally are nonappealable, the general rule does not apply where the refusal to grant a summary-judgment motion has the effect of determining that the appellants are not entitled to immunity from suit, as the right of immunity from suit is effectively lost if a case is permitted to go to trial. See Robinson v. Beaumont, 291 Ark. 477, 725 S.W.2d 839 (1987); see also Ark. R.App. P.--Civil 2(a)(2) (providing that an appeal may be taken from an order that in effect determines the action and prevents a judgment from which an appeal might be taken). In Robinson, this court held that the refusal to grant the motion for summary judgment amounted to "a denial of appellants' claimed defense which would have, if allowed, discontinued the action. The qualified immunity claim is a claim of right which is separable from, and collateral to, rights asserted in the complaint...." Robinson, 291 Ark. at 482-83, 725 S.W.2d 839.

Moreover, in Virden v. Roper, 302 Ark. 125, 128, 788 S.W.2d 470 (1990), we noted that: "The appealability of a denial of summary judgment based on qualified immunity from suit is clearly established." Id. (citing Robinson, 291 Ark. 477, 725 S.W.2d 839); compare Nucor Holding Corp., 326 Ark. 217, 931 S.W.2d 426 (dismissing appeal from denial of summary-judgment motion for lack of finality when issue raised was exclusivity of remedy under the Workers' Compensation Act)). Although we voiced our strenuous objections in Nucor against accepting appeals from denials of motions for summary-judgment, the facts of the instant case are distinguishable from Nucor, which implicated the Workers' Compensation Act. Here, appellants claim the defense of sovereign immunity, which is, simply, jurisdictional immunity from suit. See Newton, 332 Ark. 325. Accordingly, the instant case falls within the well-settled line of cases permitting review of summary-judgment denials based on qualified immunity, and warrants our review. The standard of review when an order denying a motion for summary judgment is appealed is whether the trial court abused its discretion in denying the motion. Karnes v. Trumbo, 28 Ark.App. 34, 770 S.W.2d 199 (1989).

II. Sovereign Immunity

Article 5, Section 20, of the Arkansas Constitution provides that, "[t]he State of Arkansas shall never be made defendant in any of her courts." Article 5, Section 20, grants sovereign immunity and a general prohibition against awards of money damages in lawsuits against the State of Arkansas and its institutions. Cross, 328 Ark. at 258, 943 S.W.2d 230 (citing Smith v. Denton, 320 Ark. 253, 895 S.W.2d 550 (1995); Fireman's Ins. Co. v. Arkansas State Claims Comm'n, 301 Ark. 451, 784 S.W.2d 771, cert. denied, 498 U.S. 824, 111 S.Ct. 76, 112 L.Ed.2d 50 (1990). The doctrine of sovereign immunity is rigid and, as such, the immunity may be waived only in limited circumstances. Id. at 258-59, 943 S.W.2d 230 (citing State v. Staton, 325 Ark. 341, 934 S.W.2d 478 (1996). Where the suit is one against the State and there has been no waiver of immunity, the trial court acquires no jurisdiction. Id. (citing Staton, 325 Ark. 341). Therefore, sovereign immunity fully protects the State absent a waiver or consent by the State to be sued. Jacoby v. Arkansas Dept. of Educ., 331 Ark. 508, 962 S.W.2d 773 (1998); see also Cross, 328 Ark. 255, 943 S.W.2d 230; State v. Tedder, 326 Ark. 495, 932 S.W.2d 755 (1996); Fireman's Ins. Co., 301 Ark. 451, 784 S.W.2d 771; Parker v. Moore, 222 Ark. 811, 262 S.W.2d 891 (1953). There is no issue of waiver or consent by the appellant in the case before us. O.U.R. relies, rather, on a claim of immunity granted under the State Constitution.

Here, O.U.R. notes that it is a "public agency" overseen by the Arkansas Department of Education pursuant to Ark.Code Ann. §§ 6-13-1001 to -1025, the Education Service Cooperative Act of 1985, and that this "agency"...