Middleton v. Lockhart

Annabelle Clinton Imber, Justice, dissenting. I write to my strong disagreement with the majority’s Rule 41 (b) holding in this case. Furthermore, although I concur with the majority’s conclusion that the res judicata doctrine is inapplicable because the trial court’s two dismissals pursuant to Ark. R. Civ. P. 12(b)(6) were not final judgments on the merits, I cannot agree with several statements made by the majority regarding the res judicata issue.

In support of its conclusion on the res judicata issue, the majority opinion states: “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).” According to the majority opinion, the appellees did not raise the fraudulent-transfer issue until they filed their third amended complaint on June 12, 1992. That statement, however, is not entirely accurate. Although the appellees did not make a fraudulent-transfer allegation in their original complaint, they filed an amended complaint on April 15, 1991, which contained the following allegations:

that following the murder of his spouse, defendant has attempted to divest himself of a portion of the real property at issue in this case to a family member for inadequate financial consideration, with the fraudulent intent of depriving plaintiffs of recovery.

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that [the appellees] will be irreparably harmed if this court does not impose a constructive trust upon the defendant and his property, in that the defendant will render himself insolvent in order to deprive them of any recovery.

The amended complaint was filed after the warranty deed conveying the Middleton homeplace from Kenneth Middleton to Lynn Carl Middleton was recorded on March 7, 1991. Thus, the issue of a fraudulent transfer was raised for the first time in the amended complaint filed on April 15, 1991. The trial court entered its first order of dismissal pursuant to Rule 12(b)(6) on September 18, 1991. In that order, the trial court ruled that “the case should be dismissed under Rule 12b, 6 because it states no cause of action as the pleadings now stand.” (Emphasis added.) The order also provided that the dismissal be “subject to the right of the [appellees] to plead further within twenty days facts which show this court a property interest upon which a constructive trust might rest.” Thereafter, the appellees filed their second amended complaint against the appellants and realleged the allegations contained in their original and amended complaints. On May 26, 1992, the trial court granted a motion to dismiss under Rule 12(b)(6) and dismissed the appellees’ complaint as amended, except as to claims (1) that a trust should be placed on certain personal property and (2) that a constructive trust should be placed on the Middleton homeplace for the decedent’s interest therein that allegedly resulted from the use of marital funds to construct certain improvements on the property. It is therefore clear that the appellees’ fraudulent-transfer allegation was made twice and dismissed twice pursuant to Rule 12(b)(6) before the appellees filed their third amended complaint on June 12, 1992. The majority’s statement to the contrary is simply not supported by the pleadings in this case.

The majority also states that the appellees did not allege a fraudulent transfer in their amended complaint because they did not make Lynn Middleton a party. Likewise, the majority asserts that no allegation of a fraudulent transfer was made in the second amended complaint because, although Lynn was made a party, he was only made a party as to the appellees’ personal property claims. Each of these assertions merely reflects the basis for a Rule 12(b)(6) dismissal by the trial court, and, thus, is nothing more than a red herring. The appellees were attempting to bring a fraudulent-transfer claim in their amended and second amended complaints, but failed to sufficiently state the claim in both pleadings. That is precisely the reason the trial court dismissed the claim twice. By the majority’s reasoning, if a plaintiff attempts to bring a claim but fails to state sufficient facts or name the correct party, thus resulting in a dismissal of the claim, we should act as though the allegation was never made or dismissed. Such reasoning ignores the entire premise of a Rule 12(b)(6) dismissal.

The following statement by the majority raises yet another red herring: “In fact, a cause of action under the Fraudulent Conveyance Act could not have been brought by the appellees until after the Missouri judgment was entered on May 26, 1992, the same date as the second dismissal.” Whether or not the appellees could have brought the claim in their amended and second amended complaint is entirely irrelevant. The important fact is that they were attempting to bring the claim. When a party attempts to bring a claim but does so prematurely, the claim is subject to being dismissed under Rule 12(b)(6), which is exactly what happened here. I cannot agree with the majority that a Rule 12(b)(6) dismissal of a premature claim should simply be ignored.

In any event, the majority’s statement that a cause of action under the Fraudulent Conveyance Act could not have been brought by the appellees until after entry of the Missouri judgment on May 26, 1992, is not supported by law. The Arkansas Fraudulent Transfer Act, prohibits fraudulent transfers “as to present and future creditors.” Ark. Code Ann. § 4-59-204 (Repl. 1996) (emphasis added). Section 4-59-204(a) states, in relevant part: “A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred ...” (Emphasis added.) Furthermore, a “creditor” for purposes of the Act, is any person “who has a claim.” Ark. Code Ann. § 4-59-201 (4) (Supp. 1999). Moreover, the term “claim” is defined as “a right to payment, whether or not the right is reduced to judgment, liquidated or unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured,' or unsecured.” Ark. Code Ann § 4-59-201(3)' (emphasis added). Pursuant to the provisions of the Arkansas Fraudulent. Transfer Act, the appellees need not have obtained a judgment in Missouri in order to bring a claim for fraudulent transfer. Their fraudulent-transfer claim could have been asserted when the appellees filed the amended and second amended complaints in this case. 1

My strongest disagreement, however, is with the majority’s analysis of the two-dismissal ride under Rule 41(b). The question presented is as follows: When there are two involuntary dismissals pursuant to Ark. R. Civ. P. 12(b)(6), does the second Rule 12(b)(6) dismissal operate as an adjudication on the merits pursuant to Rule 41(b)? Rule 41(b) states, in relevant part, that “[i]n any case in which there has been a failure of the plaintiff to comply with these rules [,]” the plaintiff’s case may be involuntarily dismissed. The rule further states: “A dismissal under this subdivision is without prejudice to a future action by the plaintiff unless the action has been previously dismissed, whether voluntarily or involuntarily, in which event such dismissal operates as an adjudication on the merits.” Ark. R. Civ. P. 41(b). In Brown v. Tucker, 330 Ark. 435 , 954 S.W.2d 262 (1997), the case was voluntarily nonsuited under Rule 41(a)(1), refiled, and then dismissed pursuant to Rule 12(b)(6). We held that the Rule 12(b)(6) dismissal should have been with prejudice pursuant to Rule 41(b). Id, Thus, a second dismissal of a case under Rule 12(b)(6) qualifies as an involuntary dismissal for Rule 41(b) purposes. 2

We still must determine whether, for purposes of Rule 41(b)’s two-dismissal rule, the first dismissal may also be a Rule 12(b)(6) dismissal; that is, whether two dismissals pursuant to Rule 12(b)(6) satisfy the requirements of Rule 41(b)’s two-dismissal rule so that the second Rule 12(b)(6) dismissal operates as an adjudication on the merits. The majority concludes that the first dismissal must be pursuant to Rule 41 instead of Rule 12(b)(6): “This case has never been dismissed voluntarily or involuntarily under Rule 41.” However, according to the plain language of Rule 41(b), the first dismissal may be any voluntary or involuntary dismissal. We held in Baker v. Ralston, 326 Ark. 575 , 932 S.W.2d 325 (1996), that Rule 41(b) is expressly addressed to a situation similar to the one presented here where there has been more than one dismissal, whether voluntary or involuntary. Although Rule 41 provides that a plaintiff may take a voluntary nonsuit without prejudice, there is a limit to the number of times a case can be dismissed, regardless of whether the dismissals are voluntary or involuntary. Id.; See reporter’s notes to Rule 41.

In summary, pursuant to our holding in Brown v. Tucker, supra, the second dismissal may be a dismissal under Rule 12(b)(6), and pursuant to the plain language of Rule 41(b) and our holding in Baker v. Ralston, supra, the first dismissal may also be a dismissal under Rule 12(b)(6). It makes no sense to hold, as the majority does, that one dismissal for Rule 41(b) purposes may be under Rule 12(b)(6) but the other may not. The majority’s opinion effectively means that a claim may be filed and refiled an endless number of times, despite being repeatedly dismissed on Rule 12(b)(6) grounds, until the applicable statute of limitations expires.

For the above stated reasons, I respectfully dissent. The chancellor’s order denying appellants’ motion to dismiss should be reversed and this case should be dismissed.

Although not cited by the parties, Rule 18(c) of the Arkansas Rules of Civil Procedure states, in relevant part: “In particular, a plaintiff may state a claim for money and a claim to have set aside a conveyance fraudulent as to him, without first having obtained a judgment establishing the claim for money” (Emphasis added.)

The majority opinion does not disagree with this court’s holding in Brown v. Tucker, supra; nor have we been asked to overrule that holding. The majority confuses a dismissal on the merits under the doctrine of res judicata with a Rule 12(b)(6) dismissal when it attempts to distinguish Brown v. Tucker by suggesting that the appellees’ fraudulent conveyance claim “was not decided by the trial court when it granted the two motions to dismiss under Rule 12(b)(6).”