Winchel v. Craig

Judith Rogers, Judge, dissenting. I am in agreement with appellant’s argument that the circuit court lacked jurisdiction to afford equitable relief. Therefore, I respectfully dissent to the majority’s decision rejecting appellant’s argument.

The issue of which court, law or equity, has jurisdiction to grant the relief known as “piercing the corporate veil” is one of first impression. The majority relies, in part, on the decision of Black and White, Inc. v. Love, 236 Ark. 529 , 367 S.W.2d 427 (1963), where the supreme court, upon review of a circuit court case, found no error in the admission of evidence or an instruction touching upon the issue of piercing the corporate entity. Although the court found “no error in the entire case,” that finding is not equivalent to a ruling that jurisdiction in circuit court was proper. That issue was simply not raised or even remotely discussed by the court, just as the propriety of the circuit courts’ transfer of the issue of piercing the corporate veil to equity was not at issue in the cases of Parker v. Point Ferry, 249 Ark. 764 , 461 S.W.2d 587 (1971), and Banks v. Jones, 239 Ark. 396 , 340 S.W.2d 108 (1965). Consequently, neither the decisions in Black and White, Inc., Parker, nor Banks can be relied upon as controlling authority on the issue of jurisdiction. The question is decidedly one of first impression, although it is not one for which there is no guidance.

The majority does not deny that piercing the corporate veil is a remedy that is equitable in nature. Indeed, in Farmers Gulf Station v. Bray, 271 Ark. 962 , 611 S.W.2d 791 (Ark. App. 1981), this court observed that the doctrine of piercing the corporate veil is founded in equity. As observed by the majority, it is a doctrine that is applied to prevent injustice and it is one that is to be applied with great caution. Additionally, the doctrine of piercing the corporate veil is recognized as being an equitable remedy, not a cause of action unto itself, which is used as a means of imposing liability. See 1 William Meade Fletcher, Fletcher Cyclopedia of the Law of Private Corporations, § 41 (1990). With this distinction in mind, the supreme court’s decision in Cummings v. Fingers, 296 Ark. 276 , 753 S.W.2d 865 (1988), provides the answer to the question of whether a circuit court has jurisdiction to grant equitable relief, and that answer is in the negative.

In Cummings v. Fingers, id., the appellees sought to obtain satisfaction of a judgment rendered in their favor in circuit court by petitioning the court to compel the appellant to obtain and deposit into the court’s registry funds appellant was entitled to receive, but which were being held by a government agency. Although the trial judge had recognized that the type of order sought by appellees was cognizable in equity, the judge ruled that he had the inherent authority to compel the appellant to act. The supreme court disagreed, holding in no uncertain terms that the circuit court lacked jurisdiction to grant what amounted to equitable relief. The majority here dismisses the appellant’s rebanee on Cummings by stating that the case was decided on the basis of a statute. However, I do not believe that the holding of the court in Cummings can be distinguished with such facility. It is clear from the opinion that the focus of the decision was on the compulsory aspect of the type of relief afforded by the statute, which was said to be equitable in nature. By this decision, the court clearly took the position that circuit courts do not have the power to afford equitable relief, as demonstrated by its rejection of the dissenting viewpoint. See, id., 296 Ark. at 280, n.2 . In sum, the supreme court did hold that circuit courts do not have jurisdiction to enforce their judgments by means of an equitable remedy. In other words, it was held that jurisdiction lies exclusively in chancery court. See also Monette Road Improvement Dist. v. Dudley, 144 Ark. 169 , 222 S.W. 59 (1920) (where the supreme court held that the creation of chancery courts in this state left no vestige of equity jurisdiction in the circuit courts), and Commission on Judicial Discipline and Disability v. Digby, 303 Ark. 24, 29 , 792 S.W.2d 594 (1990) (where the supreme court stated matter of facdy that injunctive relief is a remedy exclusively cognizable in equity).

The parallels between the instant case and the decision in Cummings v. Fingers, supra, are striking, and I am at a loss to conceive of any reason why the majority finds no application of the holding in Cummings to this case. As in Cummings, the appellee here is seeking to enforce its judgment, in an effort to impose individual liability, by means of an equitable remedy. As did the court in Cummings, we should hold that the circuit court had no jurisdiction to grant equitable relief and reverse and remand with directions to transfer the matter to chancery court. Until the distinction between equity and law courts is abolished in this state, I feel constrained to not blur this separation.