Temco Constr., LLC v. Gann

• Decision Date: 16 May 2013
• Docket Number: No. 12–874.,12–874.
• Citation: 2013 Ark. 202,427 S.W.3d 651
• Parties: TEMCO CONSTRUCTION, LLC, Appellant v. Gregg GANN and Sherry Gann, Appellees.
• Court: Arkansas Supreme Court

2013 Ark. 202
427 S.W.3d 651

TEMCO CONSTRUCTION, LLC, Appellant
v.
Gregg GANN and Sherry Gann, Appellees.

No. 12–874.

Supreme Court of Arkansas.

May 16, 2013.

[427 S.W.3d 653]

Barber, McCaskill, Jones & Hale, P.A., by: Perry L. Wilson and Rick Behring Jr., Little Rock, AR, for appellant.

Hilburn, Calhoon, Harper, Pruniski & Calhoun, Ltd., by: Randy L. Grice, North Little Rock, AR, and Lauren Ballard, for appellees.

DONALD L. CORBIN, Justice.

Appellant TEMCO Construction, LLC (TEMCO), appeals the orders of the Faulkner County Circuit Court dismissing its complaint against Appellees Sherry and Gregg Gann. TEMCO also appeals the order awarding attorneys' fees to the Ganns. This court assumed jurisdiction of this appeal pursuant to Ark. Sup.Ct. R. 1–2(a)(1), (b)(6), and (d) (2012) because it presents a challenge under the Arkansas Constitution to our materialman's lien statute, specifically Ark.Code Ann. § 18–44–115 (Supp.2011). The bulk of the issues argued on appeal were not ruled on by the circuit court, and we therefore summarily affirm.

This litigation centers on a contract for the construction of a residence in a subdivision in Mayflower, Arkansas. Under the terms of the contract, TEMCO was the general contractor and the Ganns were the owners. The contract was contingent upon the owners obtaining financing. As required by our materialman's lien statute, the contract included a preconstruction notice titled “IMPORTANT NOTICE TO OWNER.” This notice, however, did not include the precise language required after the materialman's lien statute was amended in 2009. SeeArk.Code Ann. § 18–44–115(a)(7).

After TEMCO completed construction of the residence and the Ganns took possession, TEMCO asserted a materialman's lien on the house, arguing that the Ganns had refused to fully compensate TEMCO. The Ganns then filed suit to protest the lien pursuant to Ark.Code Ann. § 18–44–118(f) (Supp.2011). The parties agreed to discharge the lien, and an agreed order was entered to that effect.

TEMCO later initiated the present litigation by filing a complaint against the Ganns for breach of contract, unjust enrichment or quantum meruit, promissory estoppel, and fraud or misrepresentation based on the failure of the Ganns to disclose that they had obtained inadequate financing.

The Ganns moved to dismiss the complaint on three grounds. First, the Ganns contended that the current suit was barred by the principle of res judicata due to the previous litigation that resulted in the agreed order to discharge the materialman's lien. Second, the Ganns moved to dismiss the complaint on the basis that it failed to state facts on which relief could be granted because, according to the plain language of Ark.Code Ann. § 18–44–115(a)(4), TEMCO was statutorily barred from making a claim in either law or equity to enforce the contract due to its failure to strictly comply with the lien-notice requirements.

[427 S.W.3d 654]

Third, the Ganns contended that the complaint should be dismissed for failure to sufficiently plead facts to establish a claim for fraud or misrepresentation.

TEMCO filed a response to the motion to dismiss, with a brief in support, defending the requested dismissal on multiple grounds. First, TEMCO responded that it was entitled to pursue its current contract and tort claims because this was a direct sale according to Ark.Code Ann. § 18–44–115(a)(8), and therefore section 18–44–115(a)(4)'s bar to suit resulting from deficient notice of the lien is not applicable. Second, TEMCO argued alternatively that if the statutory bar to suit is applicable, then the materialman's lien statute is unconstitutional as a violation of the doctrine of separation of powers as well as a violation of TEMCO's rights to due process and equal protection of the law. Third, TEMCO responded that its complaint did in fact sufficiently plead facts to pursue the claim for fraud or misrepresentation and that the doctrine of res judicata was not applicable because section 18–44–118(f)(2) expressly limited the issues TEMCO could litigate in the prior suit to issues concerning only the validity of the lien. Therefore, according to TEMCO, res judicata would not bar the current claims based in contract, equity, and tort.

The circuit court held a hearing on the motion to dismiss, in which all the foregoing arguments raised in the motion, response, and briefs were also argued to the court. The court did not make a ruling of any kind during the hearing, nor did the court give any indication at the conclusion of the hearing as to how it would rule. Rather, the circuit court took the motion under advisement and later issued a written order granting the motion to dismiss on only one of the three grounds argued—that TEMCO's “claims are statutorily barred by Ark.Code Ann. § 18–44–115(a)(4)” for failure to strictly comply with requirements for the notice of its lien. The order was completely silent as to the other two grounds the Ganns had asserted for dismissal. The order was likewise silent with respect to any of the arguments raised in defense of the motion to dismiss, including the direct-sale exemption, the constitutional challenge, and res judicata.

The precise wording of the circuit court's order is essential to an understanding of our resolution of this appeal, and we therefore quote the order in its entirety:

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS

The parties came before this Court to be heard on Defendants' Motion to Dismiss. Upon consideration of all arguments, pleadings, briefs, and exhibits, this Court finds that the Defendants' Motion to Dismiss should be and hereby is GRANTED.

The Plaintiffs' claims are statutorily barred by Ark.Code Ann. § 18–44–115(a)(4). The statute provides that “[i]f a residential contractor fails to give the notice required under this subsection, then the residential contractor is barred from bringing an action either at law or in equity, including without limitation quantum meruit, to enforce any provision of a residential contract.” Ark.Code Ann. § 18–44–115(a)(4). The required notice that a residential contractor must give is provided in Ark.Code Ann. § 18–44–115(a)(7); the statute requires that the “Important Notice to Owner” language “be conspicuous, set out in boldface type, [and] worded exactly as stated in all capital letters.” Ark.Code Ann. § 18–44–115(a)(7). The Arkansas Supreme Court has held that lien statutes, and specifically the notice provisions of § 18–44–115, require strict compliance. See

[427 S.W.3d 655]

Books–A–Million, Inc. v. Arkansas Painting and Specialties Co., 340 Ark. 467 [10 S.W.3d 857 (2000) ].

The Plaintiff included an “Important Notice to Owner” provision in the Residential Contract ( see Plaintiff's Complaint, Exhibit 1), however the notice does not strictly conform with the statutory language. Pursuant to Ark.Code Ann. § 18–44–115(a)(4), the Plaintiff is barred from bringing an action at law or equity to recover under the contract and has therefore failed to state a claim upon which relief can be granted. The Plaintiff's Complaint fails to state a claim upon which relief can be granted and must be dismissed pursuant to Ark. R. Civ. P. 12(b)(6).

Because the order states that the circuit court considered “all arguments, pleadings, briefs, and exhibits,” and because the exhibits included, among other documents, the contract and the agreed order from the prior litigation, the circuit court effectively converted the motion to dismiss into a motion for summary judgment. See Bayird v. Floyd, 2009 Ark. 455, 344 S.W.3d 80. After entering the foregoing order, the circuit court entered a subsequent order reflecting that the complaint was “dismissed with prejudice as to all parties.” Finally, the circuit court entered a third order awarding costs and attorneys' fees to the Ganns as the prevailing party.

TEMCO timely appeals from all three orders and raises four points for reversal. The first three are the same three arguments TEMCO raised in defense of the motion to dismiss. The fourth challenges the award of attorneys' fees to the Ganns as the prevailing party. For the reasons explained more fully herein, the circuit court did not provide a ruling on the first three arguments, and they are therefore not preserved for appellate review. The fourth argument has no merit given our summary affirmance on the first three points.

I. The Direct–Sale Exemption to the Materialman's Lien Statute

TEMCO's first point for reversal is that the circuit court erred in refusing to apply the direct-sale exemption to the notice requirement of the materialman's lien statute found in section 18–44–115(a), which states as follows:

(8)(A) If the residential contractor supplies a performance and payment bond or if the transaction is a direct sale to the property owner, the notice requirement of this subsection shall not apply, and the lien rights arising under this subchapter shall not be conditioned on the delivery and execution of the notice.

(B) A sale shall be a direct sale only if the owner orders materials or services from the lien claimant.

Ark.Code Ann. §§ 18–44–115(a)(8)(A)–(B). TEMCO argues that its contract with the Ganns constituted a direct sale, and therefore TEMCO is exempt from compliance with the notice requirements of the statute. The Ganns respond that TEMCO failed to obtain a ruling on whether the direct-sale exemption applied, and therefore this issue is not preserved for appellate review. The Ganns point out that the only ruling the circuit court made was to grant their motion to dismiss because TEMCO's notice was deficient; therefore, the suit was barred by the terms of section 18–44–115(a)(4), which states as follows:

(4) If a residential contractor fails to give the notice required under this subsection, then the residential contractor is barred from bringing an action either at law or in equity, including without limitation quantum meruit, to enforce any provision of a residential contract.

TEMCO...