This is the second appeal in this action. In Coleman's Service Center, Inc. v. Southern Inns Management, Inc., 44 Ark.App. 45, 866 S.W.2d 427 (1993), we dismissed the first appeal. This appeal follows the Monroe County Circuit Court's entry of judgment for appellee Federal Deposit Insurance Corporation (FDIC) against appellant Coleman's Service Center, Inc., in the amount of $123,135.29 as the result of Coleman's breach of a lease. For the reasons expressed below, we affirm the circuit judge's decision.
Royce Lee, J.M. Denton, Jr., Darrell Larker, and James McGowin decided to build a motel, truck stop, and convenience-store complex near the intersection of U.S. Highway 49 and Interstate 40 in Brinkley, Arkansas. Messrs. Lee, Larker, and McGowin incorporated D'Jer, Inc., for this purpose. D'Jer and Messrs. Lee, Larker, and McGowin borrowed over $4 million from Audubon Federal Savings & Loan Association on May 4, 1984, to finance the project. The note was secured by a deed of trust executed that same date which conveyed to Audubon a lien on two parcels of realty (one contained 15 acres and the other, 1.159 acres) and D'Jer's leasehold interest dated June 24, 1971, in a contiguous one-acre tract. Also, on that date, D'Jer separately assigned to Audubon all of its interest in the one-acre lease. In October 1984, D'Jer leased the entire project to appellant. Separate leases were executed for the motel, the truck center, and the convenience store. On February 21, 1985, D'Jer assigned its interest in the convenience-store sublease to Audubon as additional security. The 1984 assignment of the 1971 lease and the February 1985 assignment of the sublease were recorded in Monroe County.
The project experienced serious financial difficulties, and no payments were made on the 1984 note. In the summer of 1985, Audubon instituted foreclosure proceedings against D'Jer in Monroe County. Later, rather than pursuing foreclosure, Audubon agreed to restructure the financing on the project and entered into a purchase and sale agreement with Messrs. Lee and Denton, Troy Coleman (appellant's principal stockholder), Dr. Glen Wegener, and Dr. Herme Plunk. That agreement, dated December 31, 1985, provided that Audubon would provide enough money to permit completion of the project and that the individuals would assume the project indebtedness. This agreement also provided that the transaction was made subject to the terms, liens, and other encumbrances created by the original deed of trust, the 1984 one-acre lease assignment, and the 1985 assignment of the conveniencestore lease. Although Mr. Coleman and Dr. Plunk withdrew from the project, the others completed the plan.
D'Jer transferred all interest it had in the project to Audubon on February 19, 1986. On March 12, 1986, Audubon conveyed the real and personal property involved in the project to Messrs. Lee and Denton and Dr. Wegener. At the same time, Messrs. Lee and Denton and Dr. Wegener delivered a promissory note in the amount of $5,500,000 to Audubon. This note represented the original principal plus accrued and unpaid interest. Messrs. Lee and Denton and Dr. Wegener, and their spouses, executed to Audubon a mortgage on the 15-acre and 1.159-acre parcels. The next day, these individuals conveyed the property to Hercoleed, Inc., an Arkansas corporation formed by Messrs. Lee and Denton and Dr. Wegener. On June 19, 1986, another promissory note in the amount of $100,000 was executed by Messrs. Lee and Denton and Dr. Wegener to Audubon in consideration for additional funds. On June 20, 1986, the Federal Home Loan Bank Board put Audubon into receivership. The debtors made no payments on the May 4, 1984, or the March 12, 1986, notes. The
On June 1, 1989, Hercoleed, through Mr. Lee, and appellant, through Mr. Coleman, entered into a written amendment to the convenience-store lease, which substantially reduced appellant's obligation for rent. This was apparently done without any approval from, or notice to, Audubon or its receiver, even though all of the rents and profits under the lease had been assigned to Audubon.
In 1989, Marbella & Company of Arkansas, Inc., unsuccessfully tried to purchase the FDIC's interest in the project. However, in December 1989, Marbella did acquire all of the stock of Hercoleed and D'Jer and, in March 1990, acquired the fee simple interest in the one-acre parcel of land.
In 1990, the FDIC sued in federal district court for foreclosure of the deed of trust. On June 11, 1990, the federal court appointed Southern Inns Management, Inc. (SIMI), as receiver for the property. Appellant was included as a defendant in the federal court foreclosure action. In its third amended complaint, the FDIC included the following allegations against appellant:
On February 8, 1991, Federal Judge Elsijane Roy entered an order granting the FDIC's motion for partial dismissal of paragraphs 33 and 34 of its third amended complaint. Judge Roy stated: "IT IS, HEREBY, ORDERED, DECREED, and ADJUDGED, after due consideration of the matters and Motion before the Court, that Plaintiff's claim as set out in paragraphs 33 and 34 of its Third Amended Complaint concerning the default and breach of the Coleman Service Center, Inc., lease is hereby dismissed without prejudice." On February 11, 1991, in response to appellant's objection, appellees filed a copy of Judge Roy's order with the circuit court and argued that, as a result of the federal court's partial dismissal, the circuit court had jurisdiction of this action.
A hearing was set for 9:00 a.m. on February 12, 1991, in circuit court. Appellant's counsel, however, was mistaken as to the time of the hearing and failed to appear. On February 13, 1991, the circuit judge held that appellees had presented prima facie evidence that they were entitled to judgment against appellant in the amount of $143,240.90 and entered a "judgment" directing the clerk of the court to issue appellees a writ of possession.
That same day, appellant filed a motion to set aside the judgment, arguing that its attorney had missed the hearing due to a misunderstanding. It also argued that the order of partial dismissal by the federal district court had been entered ex parte without the knowledge of appellant's counsel. Appellant also filed its answer on February 13, 1991, wherein it stated that the lease had been orally amended in 1986 to provide that, in order to stimulate business, the lessor would bear one-half the cost of certain expenses and that, in 1989, the amendment was memorialized in a written document. Appellant denied that it was in arrears and asserted that it had simply paid rent according to the amended lease.
Appellant also filed a motion for stay of the writ of possession and requested that it be allowed to post a bond pending trial. On February 20, 1991, appellant filed a bond for $150,000.00. On February 22, 1991, the circuit court entered an order finding that the proposed bond was not filed within the five-day period required by Ark.Code Ann. § 18-60-307(e) and that it did not otherwise comply with that statute. In this order, the circuit judge directed the sheriff of Monroe County to complete appellant's eviction from the premises.
On March 22, 1991, appellant filed a counterclaim against appellees and a third-party complaint against Don Dedman.
On October 28, 1991, the federal judge issued a memorandum opinion determining the rights of the parties in the one-acre tract and the lease agreement with respect to the convenience-store portion of the project. (It was undisputed that the FDIC was entitled to a judgment of foreclosure on the 15-acre and 1.159-acre tracts.) Judge Roy made the following findings in her memorandum opinion:
Simpson v. Little Rock—North Heights Water Dist. No. 18, 191 Ark. 451, 86 S.W.2d 423, 425 (1935), citing Oliphint v. Eckerley, 36 Ark. 69 (1880).
On January 24, 1992, Judge Roy issued a supplemental opinion to reflect that Marbella's unsuccessful efforts to purchase the interest of the FDIC in the subject properties terminated in March 1990; that Marbella acquired the fee simple interest in the oneacre parcel in a series of transactions between December 20 and 28, 1989; and that Marbella acquired by quitclaim deed the leasehold interest of Messrs. Lee and Denton and Dr. Wegener in the one-acre tract on March 30, 1990.
In the supplemental opinion, Judge Roy stated:
On March 25, 1992, Judge Roy issued a judgment of foreclosure and held that all interest claimed by appellant, whether pursuant to the lease, amendment to lease, or otherwise, is subject and subordinate to the interest of the FDIC and thereby subject to foreclosure. Judge Roy specifically adopted her findings in the October 28, 1991, memorandum opinion and stated: "[T]he June 1, 1989, Amendment To Lease was procured and entered into without any approval from, or notice to, Audubon or its receiver, the FDIC, formerly the FSLIC, in spite of the assignment and pledge to Audubon of all rents and profits under the Lease." In this judgment, Judge Roy decreed that its filing in the real estate records of Monroe County
Appellant appealed Judge Roy's decision to the Eighth Circuit Court of Appeals and argued three points:
Federal Deposit Insurance Corporation v. Lee, 988 F.2d 838, 841 (8th Cir.1993). Apparently, appellant did not argue that Judge Roy had erred in dismissing paragraphs 33 and 34 of the third amended complaint. Appellant did argue that, by dismissing paragraphs 33 and 34, the district court could not make any findings as to whether the lease was breached. The Eighth Circuit Court of Appeals disagreed:
988 F.2d at 842.
On January 23, 1992, the circuit court dismissed appellant's counterclaim and thirdparty complaint based upon lack of subjectmatter jurisdiction under Ark. R. Civ. P. 12(b)(1). The circuit court entered an order under Rule 54(b) of the Rules of Civil Procedure on February 7, 1992, and held that it would be highly prejudicial for appellees to proceed to trial and obtain judgment against appellant without appellant first having a final adjudication of its right to assert its counterclaim and third-party complaint.
Appellant then filed a notice of appeal, reciting that it appealed from "all orders and judgments entered herein." On appeal to this Court, however, appellant failed to challenge the dismissal of its counterclaim and third-party complaint. Instead, it argued the following four points: (1) this court had no jurisdiction of the subject matter because the
In our opinion, we noted that appellant had argued issues that were totally unrelated to the interlocutory order from which it had been given permission to appeal:
44 Ark.App. at 49, 866 S.W.2d 427.
The Arkansas Supreme Court granted appellant's petition for review in part and stated: "The result of the case is corrected and modified to the extent that it is dismissed rather than affirmed." Coleman's Serv. Center, Inc. v. Southern Inns Management, Inc., 93-1285, slip. op. (Ark. January 10, 1994).
Upon remand, the circuit court granted the FDIC's motion in limine to prevent appellant from introducing evidence respecting the purported amended lease as a defense to the FDIC's claims because Judge Roy had found that the amendment to the lease was done without any approval from, or notice to, FDIC or its receiver. The FDIC's claim for damages resulting from appellant's failure to pay rent according to the original sublease was tried to the circuit court on October 28, 1994. On January 11, 1995, the circuit judge held that the FDIC was entitled to damages against appellant in the amount of $123,135.29. He denied the FDIC's request for treble damages.
On appeal, appellant raises four points: (1) the circuit court erred in holding that it had subject-matter jurisdiction because the dismissal of the issues relating to the D'Jer-Coleman lease from the federal case did not permit refiling in state court; (2) the circuit court erred in refusing to set aside the "judgment" rendered against appellant pursuant to the 1991 hearing; (3) the circuit court erred in finding that the supersedeas bond proffered by appellant did not comply with the applicable statute; and (4) the circuit court erred in refusing to admit evidence of appellant's unjust-enrichment defense.
In its first point on appeal, appellant contends that appellees should have brought all of their claims for relief in one action against appellant. It argues that the FDIC improperly split its cause of action by pursuing the unlawful-detainer action in addition to the original federal foreclosure action. However, we conclude that this case falls within an exception to the general rule against splitting a cause of action: because Judge Roy specifically stated that she dismissed paragraphs 33 and 34 of the FDIC's third amended complaint "without prejudice," the FDIC could file this unlawful-detainer action and obtain a judgment for rent arrearages in circuit court.
Under the claim-preclusion aspect of the doctrine of res judicata, 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. Magness v. Commerce Bank, 42 Ark.App. 72, 78, 853 S.W.2d 890 (1993). Res judicata bars not only the relitigation of claims which were actually litigated in the first suit but also those which
The doctrine of collateral estoppel or issue preclusion bars the relitigation of issues of law or fact actually litigated by parties in the first suit. John Cheeseman Trucking, Inc. v. Pinson, 313 Ark. 632, 635-36, 855 S.W.2d 941 (1993); Arkansas Dep't of Human Servs. v. Dearman, 40 Ark.App. 63, 66, 842 S.W.2d 449 (1992). When an issue of fact or law is actually litigated and determined by a valid and final judgment and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim. John Cheeseman Trucking, Inc. v. Pinson, 313 Ark. at 636, 855 S.W.2d 941. Collateral estoppel is based upon the policy of limiting litigation to one fair trial on an issue and is applicable only when the party against whom the earlier decision is being asserted had a full and fair opportunity to litigate the issue in question. Arkansas Dep't of Human Servs. v. Dearman, 40 Ark.App. at 66, 842 S.W.2d 449. For collateral estoppel to apply, the following elements must be met: (1) the issue sought to be precluded must be the same as that involved in the prior litigation; (2) that issue must have been actually litigated; (3) the issue must have been determined by a valid and final judgment; and (4) the determination must have been essential to the judgment. Crockett & Brown, P.A. v. Wilson, 314 Ark. 578, 581, 864 S.W.2d 244 (1993). In Finch v. Neal, 316 Ark. 530, 538, 873 S.W.2d 519 (1994), the supreme court stated that the test in determining whether res judicata applies is whether matters presented in a subsequent suit were necessarily within the issues of the former suit and might have been litigated therein.
In Carter v. Owens-Illinois, Inc., 261 Ark. 728, 729, 551 S.W.2d 209 (1977), the supreme court stated that identical cases between the same parties can be pending in a federal district court and a state court at the same time. In such a situation, the first forum to dispose of the case by trial enters a judgment that is binding on the parties. Id. at 729-30, 551 S.W.2d 209. See also Country Pride Foods, Ltd. v. Medina & Medina, 279 Ark. 75, 78, 648 S.W.2d 485 (1983).
It should be noted that an unlawful-detainer action is quite limited in scope. Arkansas Code Annotated § 18-60-308 (1987) provides: "In trials under the provisions of this subchapter, the title to the premises in question shall not be adjudicated upon or given in evidence, except to show the right to the possession and the extent thereof." See also Cortiania v. Franco, 212 Ark. 930, 934, 208 S.W.2d 436 (1948); Williams v. Prioleau, 123 Ark. 156, 161, 184 S.W. 847 (1916). Additionally, Ark.Code Ann. § 18-60-312(a) (1987) provides: "Neither the judgment to be rendered by the court in matters brought pursuant to the provisions of this subchapter nor anything in this subchapter shall bar or preclude the party injured from bringing any cause of action for trespass or ejectment, or any other action, against the offending party." A final judgment was first rendered, however, in the federal court action. Our focus, therefore, must be upon the res judicata effect of that judgment on this action.
A person having only a single cause of action is usually not permitted to split up the cause of action and maintain more than one suit for different parts of the action; if this rule is violated, it is held that the adjudication reached on the first action is, under the doctrine of res judicata, a bar to the maintenance of the second suit. 1 Am.Jur.2d Actions § 110 (1994). In Eiermann v. Beck,
221 Ark. at 141, 252 S.W.2d 388.
In Lisenbey v. Farm Bureau Mutual Insurance Co. of Arkansas, Inc., 245 Ark. 144, 431 S.W.2d 484 (1968), the supreme court held that claims resulting from the loss of personalty and realty in one fire covered by one insurance policy constituted one cause of action:
245 Ark. at 146, 431 S.W.2d 484.
In his treatise, Arkansas Civil Practice and Procedure (1993), Justice David Newbern states:
Id. at § 3-7.
It has been said that, in order to determine whether a second action is for the same cause of action as the first, one should consider the identity of facts essential to their maintenance, and whether the same evidence would sustain both. See Chiotte v. Chiotte, 225 Ark. 101, 102, 279 S.W.2d 296 (1955); Coley v. Westbrook, 208 Ark. 914, 917, 188 S.W.2d 141 (1945). "Whether a factual grouping constitutes a `transaction' for purposes of res judicata is to be determined pragmatically, by considering whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit and whether treatment of the facts as a unit conforms to the parties' expectations for business understanding or usage." 46 Am.Jur.2d Judgments § 533 (1994). "In the context of res judicata, a contract is typically considered to be a `transaction' so that all claims arising from the breach of the contract must be brought in the original action, as well as all defenses." Id. at § 529.
The Restatement (2d) of Judgments has adopted a "transactional" approach in determining whether a claim is barred by res judicata:
Restatement (2d) of Judgments § 24 (1982).
In Section 25, the Restatement (2d) of Judgments provides exemplifications of the general rule concerning splitting:
The doctrine of res judicata, however, does not bar a subsequent action where, in an earlier action, a court has made an express reservation of right as to future litigation or where a party was actually prohibited from asserting a claim. Cater v. Cater, 311 Ark. at 632, 846 S.W.2d 173. See also Thornbrough v. Barnhart, 232 Ark. 862, 866, 340 S.W.2d 569 (1960). It has been held that an express reservation of rights as to litigation on a certain item preserves that subject for future adjudication. Miles v. Teague, 251 Ark. 1059, 1061, 476 S.W.2d 245 (1972). See also Kulbeth v. Purdom, 305 Ark. 19, 22, 805 S.W.2d 622 (1991); 50 C.J.S. Judgments § 641 (1947).
Section 26(1)(b) of the Restatement (2d) of Judgments sets forth an exception to the general rule concerning splitting that controls our disposition of this appeal. It provides:
This subsection is explained in comment b as follows:
Under Section 24 of the Restatement (2d) of Judgments, this unlawful-detainer action would normally be barred under the rule against splitting a cause of action. However, because Judge Roy dismissed paragraphs 33 and 34 of the FDIC's third amended complaint in federal court against appellant
In appellant's second point on appeal, it argues that the "judgment" that followed the hearing on February 12, 1991, addressed all issues in the case and awarded a monetary judgment to the FDIC. This is not correct. As we noted in the first appeal, an action for unlawful detainer under Ark.Code Ann. § 18-60-307 (Supp.1991) is a two-step process. Coleman's Serv. Center, Inc. v. Southern Inns Management, 44 Ark.App. at 48, 866 S.W.2d 427. The statute contemplates that the right to possession will be preliminarily determined and, if appropriate, a writ of possession will be issued; however, the question of damages will be left for a subsequent hearing. Id. at 48-49, 866 S.W.2d 427. The statute expressly provides that an order directing the issuance of a writ of possession shall not be a "final adjudication of the parties' rights in the action." Id. at 49, 866 S.W.2d 427. See Ark.Code Ann. § 18-60-307(d)(1). We stated: "In the case at bar, the parties are in the middle of the primary lawsuit. While the circuit court has directed the issuance of a writ of possession, its orders clearly contemplate a further hearing on the question of damages. A money judgment has not yet been entered." 44 Ark.App. at 49, 866 S.W.2d 427. In fact, the February 13, 1991, "judgment" specifically stated that appellees had presented "prima facie evidence" that they were entitled to judgment against appellant.
In any event, we need not address the second and third points on appeal because they are moot. A case becomes moot when any judgment rendered would have no practical legal effect upon a then existing legal controversy. Stair v. Phillips, 315 Ark. 429, 435, 867 S.W.2d 453 (1993). See also Martin Farm Enters., Inc. v. Hayes, 320 Ark. 205, 210, 895 S.W.2d 535 (1995). With few exceptions, the appellate court will not address moot issues. Leonards v. E.A. Martin Machinery Co., 321 Ark. 239, 246, 900 S.W.2d 546 (1995); Wright v. Keffer, 319 Ark. 201, 203, 890 S.W.2d 271 (1995); Kinkead v. Union Nat'l Bank, 51 Ark.App. 4, 19, 907 S.W.2d 154 (1995). An exception is made to the mootness doctrine for cases that are capable of repetition yet evading review because the justiciable controversy will necessarily expire or terminate prior to adjudication. Wright v. Keffer, 319 Ark. at 203, 890 S.W.2d 271. This is not one of those cases. Even if we were to hold that the circuit judge erred in refusing to set aside the February 12, 1991, decision or to accept the supersedeas bond, no meaningful relief could be granted. Because of the decisions of the federal district court and the Eighth Circuit Court of Appeals, appellant can not be put back into possession of the property covered by the sublease.
In its fourth point on appeal, appellant argues that the circuit court erred in refusing to admit evidence of appellant's unjust-enrichment defense. Appellant asserts that it should have been allowed to introduce evidence of its performance pursuant to the amended lease in order to establish its "negative defense" to appellees' claim for back rent. Appellant does not argue that the amended lease is controlling; instead, it argues that evidence of its performance under the amended lease was admissible to prove that the FDIC would be unjustly enriched by receiving judgment for the entire amount of damages due under the original sublease. Appellant, in anticipation of a response by the FDIC that it failed to properly plead the unjust-enrichment defense, argues that this defense did not have to be affirmatively pled. Appellant states that it is not making a claim for affirmative relief, but is merely setting forth its performance under the amended lease as a "negative defense."
We disagree. Here, appellant has attempted to utilize its unjust-enrichment defense as a set-off against the FDIC's award for back rent due under the original sublease. Under Ark. R. Civ. P. 8, set-off is an affirmative defense, which must be pled. The abstract contains no indication that appellant pled this set-off.
Appellant also argues that, even if it was required to affirmatively plead unjust
Because appellant failed to abstract this part of the transcript, we need not address appellant's fourth point. Supreme Court Rule 4-2(a)(6) provides that the appellant's abstract of the record should consist of an impartial condensation, without comment or emphasis, of only such material parts of the pleadings, proceedings, facts, documents, and other matters in the record as are necessary to an understanding of all questions presented to the court for decision. Rule 4-2(b)(2) provides that, if this court finds the abstract to be flagrantly deficient, the judgment or decree may be affirmed for noncompliance with the rule. See D. Hawkins, Inc. v. Schumacher, 322 Ark. 437, 438, 909 S.W.2d 640 (1995); Chrysler Credit Corp. v. Scanlon, 319 Ark. 758, 761, 894 S.W.2d 885 (1995); Stroud Crop, Inc. v. Hagler, 317 Ark. 139, 142, 875 S.W.2d 851 (1994). In Hunter v. Williams, 308 Ark. 276, 277, 823 S.W.2d 894 (1992), the supreme court stated that it had pointed out repeatedly, "for a hundred years ... that there being only one transcript it is impractical for all members of the court to examine it...."
Even if we were to address this argument, however, we would affirm. To find unjust enrichment, a party must have received something of value, to which he was not entitled and which he must restore. Dews v. Halliburton Indus., Inc., 288 Ark. 532, 536, 708 S.W.2d 67 (1986). The basis for recovery under this theory is the benefit that the party has received, and it is restitutionary in nature. Id. at 536-37, 708 S.W.2d 67. The doctrine of unjust enrichment had its origins in the action for money had and received, which was based upon the theory that there was an implied promise to pay. Frigillana v. Frigillana, 266 Ark. 296, 307, 584 S.W.2d 30 (1979).
One who is free from fault cannot be held to be unjustly enriched, however, merely because one has chosen to exercise a legal or contractual right. Guaranty Nat'l Ins. Co. v. Denver Roller, Inc., 313 Ark. 128, 138, 854 S.W.2d 312 (1993). One is not unjustly enriched by receipt of that to which he is legally entitled. Smith v. Whitener, 42 Ark.App. 225, 228, 856 S.W.2d 328 (1993). It is generally held that, where there is an express contract, the law will not imply a quasi or constructive contract. Lowell Perkins Agency, Inc. v. Jacobs, 250 Ark. 952, 959, 469 S.W.2d 89 (1971); Friends of Children, Inc. v. Marcus, 46 Ark.App. 57, 61, 876 S.W.2d 603 (1994). It has been held that the quasi-contractual principle of unjust enrichment does not apply to an agreement deliberately entered into by the parties. Lowell Perkins Agency, Inc. v. Jacobs, 250 Ark. at 959, 469 S.W.2d 89. "[T]he law never accommodates a party with an implied contract when he has made a specific one on the same subject matter." Id. In Moeller v. Theis Realty, Inc., 13 Ark.App. 266, 268-69, 683 S.W.2d 239 (1985), we stated that the concept of unjust enrichment has no application when an express written contract exists.
ROGERS and GRIFFEN, JJ., agree.