Holly Wood, John Wood, and Tara Capital, LLC v. Ladimer Alkhaseh Gloria Peterson, Benton County Collector Tommy Land, Commissioner of State Lands And Dawn Hill Townhouse and Condominium Property Owners Association, Inc. , 2023 Ark. App. 179 ( 2023 )

Cite as 2023 Ark. App. 179ARKANSAS COURT OF APPEALS
DIVISIONS III & IV
No. CV-20-322
HOLLY WOOD, JOHN WOOD, AND Opinion Delivered March 29, 2023
TARA CAPITAL, LLC
APPELLANTS APPEAL FROM THE BENTON
COUNTY CIRCUIT COURT
[NO. 04CV-16-77]
V.
HONORABLE DOUG SCHRANTZ,
LADIMER ALKHASEH; GLORIA JUDGE
PETERSON, BENTON COUNTY
COLLECTOR; TOMMY LAND, AFFIRMED IN PART; DISMISSED IN
COMMISSIONER OF STATE LANDS; PART
AND DAWN HILL TOWNHOUSE AND
CONDOMINIUM PROPERTY
OWNERS ASSOCIATION, INC.
APPELLEES
MIKE MURPHY, Judge
This is a contract case in which the circuit court entered default judgments against
the appellants, John Wood, Holly Wood (John’s wife), and Tara Capital, LLC, on cross-
claims filed by Luther Alkhaseh, appellee Ladimer Alkhaseh’s father and predecessor in
interest. After a hearing on damages, the circuit court awarded Ladimer a judgment in the
amount of $747,424.35. The circuit court also awarded a judgment of foreclosure in favor
of appellee Dawn Hill Townhouse and Condominium Property Owners Association, Inc.
(“Dawn Hill POA”), which had intervened in the lawsuit to collect unpaid assessment fees
from Tara Capital on a condominium unit that it acquired in the contract with Luther.
The appellants now appeal the orders striking the Woods’ answer to Ladimer’s cross-
claims, the judgment awarding damages to Ladimer, and the judgment of foreclosure. They
claim that the circuit court erred when it granted Luther’s motion to substitute Ladimer as
the plaintiff on the cross-complaint. Additionally, the Woods appear to assert that the default
judgment against them should be set aside because the allegations in the cross-complaint do
not support Ladimer’s claims of breach of contract and fraud. The appellants also challenge
the sufficiency of the evidence supporting the judgment awarding money damages to
Ladimer—which they concede is not a final judgment—and Tara Capital urges reversal of the
judgment of foreclosure in favor of Dawn Hill POA. We affirm in part and dismiss in part.
I. Factual Background
John and Holly (collectively “the Woods”) became acquainted with Luther while they
were neighbors in California. In January 2014, Luther asked the Woods to lend him
$150,000 so that he could settle a tax lien on a property in Arizona. Because the Woods were
unable to lend Luther the full amount that he requested, they introduced Luther to John’s
brother, David. According to John, the following transaction ensued:
[Luther] drew up a promissory note for $180,000 [payable to David Wood]. The
money was to be used—he was going to use that money, the $150,000 principal, to
pay a . . . tax lien on property . . . that was going to sale in Arizona. Shortly [after the
promissory note was drafted] my brother was not able to come up with the $150,000
principal. He notified me that he was not going to be able to . . . follow through . . .
on [the] promissory note.
2
....
So, I put [in] a cashier’s check made out to Mr. Alkhaseh for $50,000, and . . . David
. . . wrote . . . a cashier’s check for $100,000.[1]
In addition to the promissory note, Luther executed a mortgage that pledged his property in
Benton County, Arkansas—Dawn Hill Country Club—as collateral for the debt. As further
incentive for the transaction, John and Holly executed a note promising to pay David the
principal amount of $100,000. The balance of that note would be reduced by Luther’s
payments made on his note to David.
A few months later, on May 20, 2014, the Woods and Luther entered into another
written agreement that was intended to help Luther settle unpaid property taxes on Dawn
Hill Country Club in Benton County, Arkansas. Through their limited liability company,
Tara Capital, the Woods agreed to pay the $180,000 debt that Luther owed to David. In
exchange, Luther transferred his ownership interest in Dawn Hill Country Club and
associated condominiums the Woods.2 The Woods and Luther also agreed to share any
profits earned by the country club, the condominium rentals, and any future sale of the
property. Luther subsequently executed a quitclaim deed that transferred the property to
Tara Capital.
On January 14, 2016, David filed a lawsuit against Luther and the Woods alleging
that they had each defaulted on their respective promissory notes. On September 27, 2017,
1
The additional $30,000 was interest charged on the loan.
2
This mortgage was not filed of record in Benton County, Arkansas.
3
Luther followed with a cross-complaint against John and Holly (d/b/a Tara Capital) as well
as a third-party complaint against Tara Capital, the Benton County collector, and the
commissioner of state lands. The cross-complaint alleged that the appellants were liable for
breach of contract and fraud as the result of their alleged failure to pay the debt, to pay the
taxes on the property, and to fulfill their promise to share the profits. The complaint sought
a constructive trust and an equitable accounting of the income and expenses of the country
club, and it further claimed that the alleged fraud warranted piercing the corporate veil to
disregard Tara Capital as a separate legal entity. The Benton County collector and
commissioner of state lands were added as third-party defendants so that their respective
interests in the unpaid taxes “may be properly reflected in [the] proceedings.”
John and Holly filed a joint pro se answer denying the allegations in the cross-
complaint on October 26, 2017. Through out-of-state counsel, Tara Capital filed an answer—
also denying the facts alleged in the cross-complaint—on February 1, 2018.
On February 28, 2018, the circuit court entered an order striking Tara Capital’s
answer to the cross- and third-party complaints. The court found that Steven Rein, who
appeared as counsel therein, was licensed out of state and had failed to take steps to be
qualified to practice law in Arkansas. The circuit court also found Tara Capital “wholly in
default” as a consequence of the stricken answer and, therefore, granted Luther’s motion for
a default judgment in the same order. Tara Capital did not file a notice of appeal from the
court’s February 28 order.
4
On November 16, 2018, Luther filed a motion in which he requested leave to
substitute Ladimer as the cross-plaintiff and on the cross- and third-party complaints. The
motion asserted that Luther had assigned his interest in the litigation to Ladimer in January
2018, and under Arkansas Rule of Civil Procedure 25(c), “the court may upon motion
substitute a party upon a transfer of the original party’s interest.” The circuit court granted
the motion in an order entered on December 13, 2018.
Shortly thereafter, on December 21, Ladimer moved for sanctions against the Woods
and Tara Capital. He alleged that a severe sanction—in the form of striking the Woods’
answer to the cross-complaint—was warranted because the Woods had failed to comply with
a previous court order compelling discovery.
On January 25, 2019, John Wood filed a petition for Chapter 13 bankruptcy. The
circuit court removed the case from the pending docket in an order entered on January 28.
By order entered August 27, 2019, the bankruptcy court lifted the automatic stay “to allow
the parties to resume the litigation pending before [the circuit court] for the purpose of
obtaining a determination of the amount of debt that [John Wood] owes to Alkhaseh.” In
particular, the bankruptcy court determined that the Woods’ objection to Ladimer’s claim
against the bankruptcy estate should be held in abeyance pending the circuit court’s
determination of the amount of the judgment that Ladimer was due in state court.
Consequently, the circuit court entered an order reopening the case on August 27.
The circuit court held a hearing on Ladimer’s motion for discovery sanctions on
October 15, 2019. His attorney requested a default judgment against the Woods because a
5
default judgment had already been entered against Tara Capital. Ladimer’s attorney also filed
an affidavit setting forth the time spent on the motion for sanctions and sought an attorney’s
fee of $450. The circuit court’s order granting the motion and awarding the requested fee
was entered October 29.
On November 4, 2019, the court also entered an order granting Ladimer’s motion
for discovery sanctions. The court found that the Woods had failed to show that they were
acting in good faith in defending against Ladimer’s claims. The court further found that the
Woods had more than ample time to comply with the order compelling discovery but had
failed to do so. As a sanction, the court struck the Woods’ answer and entered a default
judgment against them, jointly and severally. The court also scheduled a hearing on damages
to coincide with a damages hearing on the default judgment against Tara Capital. The
appellants filed a notice of appeal from the October 29 and November 4 orders on
November 20, 2019.
In the meantime, Dawn Hill POA joined the lawsuit by filing a complaint in
intervention against Tara Capital, the Benton County collector, the commissioner of state
lands, and David Wood on September 30, 2019. In its complaint, the POA alleged that it
“is charged with the duty to fix, levy, collect, and enforce the payments of charges and
assessments authorized to be collected for services provided within a certain real estate
subdivision known as Dawn Hill Country Club Resort ‘Cynthiana’ Townhouses Phase II.”
The complaint also alleged that Lot 148 in the subdivision was subject to a recorded bill of
assurances and protective covenants that provides for an assessment “to be collected and
6
creates a lien on [Lot 148] to enforce and secure payment of the assessments.” In addition,
the complaint claimed that Tara Capital, the recorded owner of the property, “ha[d] failed
to pay assessments according to the terms of the Bill of Assurances and Protective
Covenants,” and as of September 1, 2019, Tara Capital owed $5,850. Consequently, Dawn
Hill POA requested a judgment in rem “against the interest of all intervenor defendants” for
the amount of the outstanding debt and applicable interest. Tara Capital filed an answer
denying the material allegations in the POA’s complaint in intervention on December 13,
2019.3
A bench trial was held on January 9, 2020, on the POA’s complaint to foreclose its
lien and to determine Ladimer Alkhaseh’s damages resulting from the default judgments.4
The court found that the POA had established that it had a lien in the amount of $6,050,
the POA’s lien was superior to David Wood’s unrecorded mortgage, and it granted
foreclosure on the unit. The judgment was in rem against the property. Also, the court
awarded Ladimer a judgment against the Woods in the amount of $251,324.35. The court
further awarded judgment to Ladimer in the amount of $496,000 for the Woods’ failure to
account for one-half the profits of the operation of Dawn Hill as well as attorney’s fees. The
3
The Woods joined Tara Capital’s answer. The record does not reflect, however, that
the POA amended its complaint to include them as intervenor defendants.
4
David Wood did not present his case against appellants on the note they executed
because he believed he was bound by the automatic stay issued in John Wood’s bankruptcy
case, which, again, was lifted for the purpose of determining the debt that John owed to
Ladimer.
7
court indicated that the case was not concluded because there were to be further proceedings
in bankruptcy.
A judgment memorializing the circuit court’s ruling was entered on January 23, 2020.
A judgment was entered on March 4, nunc pro tunc to January 23, to correct the rate of
interest on the judgment. The appellants amended their notice of appeal to include the
October 29 and November 4, 2019, orders awarding attorney’s fees and striking their answer;
the January 23, 2020, judgment; and the March 4, 2020, nunc pro tunc judgment.
The appellants now raise five issues on appeal. As we view their arguments, they assert
that (1) the default judgment against the Woods and the judgment awarding damages to
Ladimer should be reversed because Luther and Ladimer failed to comply with the notice
requirements in Ark. R. Civ. P. 25(a) and (c) before the circuit court entered its order
substituting Ladimer as a plaintiff on the cross-complaint and third-party complaint; (2) the
circuit court erred by granting a default judgment against the Woods because the factual
allegations in the complaint also did not support Ladimer’s claims for breach of contract or
fraud; (3) the judgment awarding damages and attorney’s fees to Ladimer is not supported
by sufficient evidence; (4) the circuit court erred by denying their motion for certification
under Ark. R. Civ. P. 54(b); and (5) insufficient evidence supports the foreclosure decree in
favor of the POA.5
5
The appellants also assert that the circuit court “appropriately did not grant Ladimer
a constructive trust over Dawn Hill, but if the court did, it clearly erred.” Because we agree
that the circuit court did not impose a constructive trust from which the appellants might
take an appeal, we do not recognize it here as an assignment of error.
8
We affirm the default judgment because the Woods’ challenges to the sufficiency of
the allegations in the complaint are not preserved for our review. We also affirm the
foreclosure decree because the circuit court did not clearly err when it determined that the
POA was entitled to foreclose on its lien. We dismiss the appellants’ remaining arguments,
which challenge the order substituting Ladimer and the sufficiency of the evidence
supporting damages and attorney’s fees, for lack of jurisdiction.
II. Discussion
A. Default Judgment
The Woods first assert that the default judgment entered against them should be set
aside because the allegations in the complaint were insufficient to establish their liability for
breach of contract or fraud.6 According to the Woods, the allegations in the cross-complaint
failed to establish any breach of their promise to share the profits. They argue that their May
2014 agreement with Luther provided that they would share the profits “at a later time, not
yet specified,” and there was no factual allegation or evidence regarding any further
agreement about the time or amount that they would pay a share of the profits to Luther.
Because there was insufficient evidence of agreement on those terms, the Woods say, “there
was insufficient evidence of breach.”
6
We do not view this argument as extending to Tara Capital, which did not file any
notice of appeal from the circuit court’s February 28, 2018, order striking its answer and
granting a default judgment against it.
9
The Woods also suggest that the circuit court erroneously entered the default
judgment because the factual allegations in the complaint failed to establish that they
breached their promise to “take on the indebtedness and ownership of the [note with
David].” They claim that David’s lawsuit against them, in which he claims they defaulted on
the $100,000 loan, is evidence that they fulfilled their promise to take on that debt.
Finally, the Woods argue that the circuit court erred to the extent it granted a default
judgment on the basis of fraud. They say that the factual allegations in the cross-complaint
fail to establish their alleged misrepresentation that they would “take on the indebtedness
and ownership of the note with David” or, even so, that Luther or Ladimer justifiably relied
on that statement. We have jurisdiction to hear these arguments under Ark. R. App. P.–Civ.
2(a)(4), which allows an appeal to be taken from “an order [that] strikes out an answer,” and
Arnold & Arnold v. Williams, 315 Ark. 632, 637, 870 S.W.2d 365, 367 (1994), in which the
supreme court held that appellate jurisdiction under Rule 2(a)(4) extends to “all the issues
dependent upon the stricken answer,” including default judgments.
Having said that, we must decline to reach the merits of the Woods’ challenges to the
sufficiency of the allegations in the complaint for another reason: because they failed to raise
them in a motion to set aside the default judgment under Arkansas Rule of Civil Procedure
55(c). While it is, indeed, erroneous to render a default judgment on a complaint that fails
to state facts sufficient to state a cause of action, see Nucor Corp. v. Kilman, 358 Ark. 107, 127,
186 S.W.3d 720, 732 (2004), that argument, like other grounds to set aside a default
judgment, must be raised below. See Ark. Dep’t of Hum. Servs. v. Egbosimba, 2019 Ark. App.
10608, at 1; see also Rennels v. Four Seasons HVAC Distribs., 2011 Ark. App. 274, at 3 (refusing
to consider arguments to set aside a default judgment that are raised for the first time on
appeal). The Woods did not move to set aside the default judgment or challenge the
sufficiency of the allegations in the complaint at the hearing on Ladimer’s motion for
discovery sanctions. Consequently, they are not preserved for our review.
Further, to the extent the Woods argue that Ladimer failed to introduce sufficient
evidence to establish their liability for breach of contract or fraud, we do not view that
argument as cognizable here. While the default judgment established their liability on those
claims, see Jean-Pierre v. Plantation Homes of Crittenden Cnty., Inc., 350 Ark. 569, 575, 89
S.W.3d 337, 340 (2002), there was no indication that the circuit court considered any
evidence or made any factual findings that would transform the default judgment to one on
the merits. See Harold M. v. Clark, 316 Ark. 439, 443–44, 872 S.W.2d 410, 414 (1994).7
Therefore, for all of these reasons, we cannot agree that the circuit court erred when it
entered the default judgment against the Woods.
B. The Judgment Awarding Damages and Attorney’s Fees to Ladimer
The Woods and Tara Capital next argue that the circuit court did not have sufficient
evidence to support the damages and attorneys’ fees that it awarded. Regarding lost profits,
7
Inasmuch as the Woods also claim that the circuit court should not have awarded
damages because evidence supporting liability at the damages hearing was insufficient, we
must dismiss that argument for the same reason that we dismiss their other arguments
attacking the sufficiency of the evidence supporting damages: the judgment awarded to
Ladimer is not a final judgment from which an appeal can be taken. See infra.
11
they contend that the evidence did not support the circuit court’s finding that John earned
a net income of $14,600 a month or the circuit court’s alleged assumption that the Dawn
Hill property was profitable when the appellants took it over. They also contend that the
circuit court’s calculation of damages was erroneous in other respects, including the circuit
court’s failure to consider factors reducing the rental income they earned from the
condominiums as well as their expenses. Regarding the damages awarded on the Woods’
breach of their agreement to pay David Wood’s note, the Woods claim that the circuit court
erred by relying on a calculation of outstanding principal and interest that was not supported
by the evidence. Finally, the appellants argue that all of these errors, which they say
demonstrate that Ladimer was not a prevailing party under Ark. Code Ann. § 16-22-308, led
to an erroneous award of attorney’s fees.
We must dismiss these claims because the judgment awarding damages to Ladimer is
not a final order. The question of whether an order is final and appealable is jurisdictional,
and this court is obligated to consider the issue on its own even if the parties do not raise it.
Price v. Carver, 2017 Ark. App. 75, at 2, 513 S.W.3d 877, 879. The requirement that an order
must be final and appealable is observed to avoid piecemeal litigation. Id. An order is final if
it dismisses the parties, discharges them from the action, or concludes their rights to the
subject matter in controversy. Id. at 3, 513 S.W.3d at 879. An order is not final, therefore,
when it adjudicates fewer than all the claims or rights and liabilities of fewer than all the
parties. Id.12
Entry of a final judgment on fewer than all claims is allowed, however, under the
following circumstances:
(1) Certification of Final Judgment. When more than one claim for relief is presented
in an action, whether as a claim, counterclaim, cross-claim, or third party claim, or
when multiple parties are involved, the court may direct the entry of a final judgment
as to one or more but fewer than all of the claims or parties only upon an express
determination, supported by specific factual findings, that there is no just reason for
delay and upon an express direction for the entry of judgment. . . .
(2) Lack of Certification. Absent the executed certificate required by paragraph (1)
of this subdivision, any judgment, order, or other form of decision, however
designated, which adjudicates fewer than all the claims or the rights shall not
terminate the action as to any of the claims or parties, and the judgment, order, or
other form of decision is subject to revision at any time before the entry of the
judgment adjudicating all the claims and the rights and liabilities of the parties.
Ark. R. Civ. P. 54(b)(1) & (2) (2021). Here, there is no judgment adjudicating the claims
that originated the lawsuit—David Wood’s claims alleging default on the promissory note
that the Woods executed. There is also no order dismissing the Benton County collector or
the commissioner of state lands, who Ladimer also named as third-party defendants; and the
record does not reflect that the circuit court has appointed a receiver or imposed a
constructive trust, as Ladimer also requested in the cross- and third-party complaint. The
circuit court did not certify a final judgment, moreover, under Rule 54(b). Accordingly, we
do not have jurisdiction to review the appellants’ arguments challenging the sufficiency of
the evidence supporting the judgment awarding damages to Ladimer or, for that matter, the
13
associated award of attorney’s fees.8 See Dodge v. Lee, 350 Ark. 480, 486–87, 88 S.W.3d 843,
847 (2002) (“Without . . . a final order, no appeal may be entertained, even on a collateral
issue such as attorney’s fees.”).
We are not persuaded by the appellants’ argument that we have jurisdiction because
their appeal from the order striking their answer is appealable under Ark. R. App. P.–Civ.
(2)(a)(4), and the judgment awarding damages is dependent upon the stricken pleadings in
the same manner as default judgments.9 While our cases have held that an appeal from a
stricken answer permits review of “all issues dependent on the stricken answer,” Arnold &
Arnold, 315 Ark. at 637–38, 807 S.W.2d at 367, the appellants do not cite—and we have not
found—any case that permits any review beyond the default judgment that follows a stricken
answer.
Rather, the supreme court has stated that “[a]s a general rule, an appeal from an
interlocutory decision brings up for review only the decision from which the appeal was
taken.” Villines v. Harris, 340 Ark. 319, 323, 11 S.W.3d 516, 518–19 (2000). That means
“the issues raised in the appeal must be reasonably related to the order appealed from,” and
8
We do not agree that this case warrants application of the exception that the supreme
court recognized in Omni Farms, Inc. v Arkansas Power & Light Co., 271 Ark. 61, 607 S.W.2d
363 (1980), as the appellants claim. The appellants’ speculation that Ladimer “might try to
execute on the judgment and force the sale of Dawn Hill, thus making impossible to place
the [appellants] back to their former condition,” falls short of the appellee’s concession at
oral argument in Omni Farms that the appellant could not be restored to its previous
condition if the condemnation order there was not immediately appealable.
9
This is especially so in the case of Tara Capital, which did not file any notice of
appeal from the order striking its answer to the cross- and third-party complaint.
14
an interlocutory appeal “may not be used as a ‘vehicle to bring up for review matters which
are still pending before the trial court.’” Id. (quoting Coleman’s Serv. Ctr., Inc. v. S. Inns Mgmt.,
Inc., 44 Ark. App. 45, 49, 866 S.W.2d 427, 429 (1993)). A default judgment is
unquestionably linked to an order striking an answer, and the default judgment, once
granted, only establishes a defendant’s liability. See Jean-Pierre, 350 Ark. at 575, 89 S.W.3d at
340. The judgment awarding damages to Ladimer, then, is beyond the scope of the
interlocutory order that the appellants claim as a basis for this court’s jurisdiction.
We also cannot agree with our dissenting colleagues’ view that the bankruptcy court’s
order lifting the automatic stay in John Wood’s Chapter 13 bankruptcy proceedings makes
the judgment awarding damages final and appealable as it relates to him. While our supreme
court has held that a bankruptcy court’s order allowing the continuation of state court
proceedings restores full jurisdiction to proceed to a final determination on appeal, see Union
Nat’l Bank of Ark. v. Nichols, 305 Ark. 274, 277, 807 S.W.2d 36, 37–38 (1991), the court
made it plain that it did so because the Arkansas Constitution provided for “a right to appeal
from all final orders of the circuit court.” Id. (citing Ark. Const. art. 7, § 1, repealed by Ark.
Const. amend. 80, § 22(A) July 1, 2001) (emphasis added). As we conclude above, the
judgment awarding damages to Ladimer is not final because claims and parties remain
pending.
We are also influenced by our more recent decision in Yarborough v. Powell, 2015 Ark.
App. 218, 459 S.W.3d 329, in which we dismissed an appeal on very similar facts. In
Yarborough, appellant Terry Yarborough had been appointed as one of the trustees of his late
15
mother’s trust. His sister, appellee Jane Powell, sued Yarborough for an accounting of the
trust’s assets, distributions, and expenses. Powell also filed amended complaints that
additionally sought an order setting aside Yarborough’s release of a mortgage that secured a
loan he received from the family business (a cosmetology school); an accounting of the family
business; Yarborough’s removal as an officer; the appointment of a receiver; and damages.
The circuit court entered a judgment for Powell, but only on her claims concerning the
cosmetology school. The court also reserved consideration of Powell’s request for attorney’s
fees and costs for a later date.
Yarborough requested a new trial. He filed for bankruptcy before the circuit court
could hear the motion, but the bankruptcy court partially lifted the automatic stay that
accompanied the filing of his petition to allow the circuit court to consider (1) Powell’s
entitlement to attorney’s fees and costs; and (2) Yarborough’s request to set aside the
judgment. The circuit court ultimately denied Yarborough’s motion to set aside as well as
several other postjudgment motions that he later filed. The circuit court also denied Powell’s
request for attorney’s fees. Yarborough appealed the orders denying his postjudgment
motions, and Powell cross-appealed the circuit court’s rulings.
We dismissed both the appeal and the cross-appeal for lack of a final order because
the record did not reflect that Powell’s claims involving her mother’s trust, which originated
the lawsuit, had been adjudicated. Id. at 4–5, 459 S.W.3d at 331–32. There was also no
indication that an accounting of the family business or a settling of the family business by a
receiver had taken place as the circuit court ordered. Id. at 4, 459 S.W.3d at 332. In
16
dismissing the appeal, we noted that Yarborough’s bankruptcy “[did] not affect the lack of
finality” because “a bankruptcy filing does not completely divest the circuit court of
jurisdiction over all matters in a lawsuit.” Id. Rather, “it simply suspends the court’s
jurisdiction, subject to that jurisdiction being restored.” Id. Accordingly, “while various
claims in [the] lawsuit were stayed by the bankruptcy court at the time the orders on appeal
were entered, those claims remained pending, and the circuit court could have reacquired
the ability to rule on them at any time.” Id. We believe our decision in Yarborough controls
here, and we therefore dismiss the appellant’s challenges to the sufficiency of the evidence
supporting the damages the circuit court awarded to Ladimer as well as the award of
attorney’s fees.
C. Rule 54(b) Certification
The appellants next argue that the circuit court erred by denying their motion to
certify the judgment awarding damages to Ladimer under Rule 54(b). They allege that there
was no just reason for delaying their appeal of the judgment; and considering the interest
that will accrue until the entire case is resolved, any further delay would cause undue
hardship to them. The appellants further contend that the circuit court’s failure to certify
the judgment also contravenes the rule’s intent to prevent piecemeal appeals. We do not
agree.
We have already observed that the “denial of certification [under Rule 54(b)] is not
within itself appealable[.]” Cureton v. Stout, 2020 Ark. App. 414, at 5 n..6, 609 S.W.3d 435,
17
438 n.6. Accordingly, we decline to review the circuit court’s denial of a Rule 54(b)
certificate.
D. Substitution of Parties
Appellants additionally argue that the circuit court erred when it granted Luther’s
motion to substitute Ladimer as the cross- and third-party plaintiff in the case. In particular,
they say that Rule 25(c) and Rule 25(a) of the Arkansas Rules of Civil Procedure required
Luther to serve them with notice that he had assigned his interest in the litigation to Ladimer
in the same manner that a “statement of the fact of death” is served when a party dies. Luther
did not do so within ninety days of making the assignment, and according to the appellants,
this failure deprived the circuit court of jurisdiction to grant the substitution. They further
argue that the jurisdictional nature of the issue enables this court to consider it on appeal
despite their failure to lodge an objection below. Unfortunately, we must also dismiss this
argument for lack of jurisdiction because the appellants failed to include the substitution
order in their notice of appeal.
A notice of appeal must designate the judgment or order appealed from, see Ark. R.
App. P.–Civ. (3)(e) (2022), and orders not mentioned in a notice of appeal are not properly
before the appellate court. E.g., Daniel v. State, 64 Ark. App. 98, 100, 983 S.W.2d 146, 147
(1998). In the instant case, the appellants’ fourth amended notice of appeal declares that
they appeal “the orders entered on October 29, 2019 (awarding attorney’s fees); November
4, 2019 (striking John and Holly’s answer and granting a default judgment); January 23, 2020
(awarding foreclosure to the POA and damages to Ladimer); March 4, 2020 (the nunc pro
18
tunc judgment); and April 8, 2020 (denying certification under Rule 54(b)). The notice does
not include the December 13, 2018 order substituting Ladimer as the plaintiff on the cross
and third-party complaint.
Moreover, while we recognize that Ark. R. App. P.–Civ. 2(b) provides that “[a]n
appeal from any final order also brings up for review any intermediate order involving the
merits and necessarily affects the judgment,” we cannot view the substitution order as an
intermediate order that is automatically brought up for our review. An order striking an
answer is not a final judgment that would trigger application of Rule 2(b), see Allen v.
Greenland, 347 Ark. 465, 467, 65 S.W.3d 424, 426 (2002), and for reasons that we have
already explained, supra, the judgment awarding damages to Ladimer also does not constitute
a final order. Accordingly, we cannot reach the merits of the appellants’ challenge to the
circuit court’s order substituting Ladimer as the plaintiff on the cross- and third-party
complaint.
E. Sufficiency of the Evidence Supporting the Foreclosure Decree
Finally, Tara Capital argues that the judgment in favor of the POA is not supported
by sufficient evidence that it was obligated to pay the assessments. As we say above, Tara
Capital asserts that the evidence introduced at the hearing established that it owned only a
condominium “lot” and not condominium “unit” that was subject to the fee assessment. We
affirm.10
10
We note that we have jurisdiction of the appeal from the foreclosure decree despite
the lack of a Rule 54(b) certificate. The decree was placed into execution with the
19
In civil bench trials, the standard of review on appeal is whether the circuit court’s
findings were clearly erroneous or clearly against the preponderance of the evidence. Friday
v. Friday, 2019 Ark. App. 129, at 3–4, 572 S.W.3d 884, 886. A finding is clearly erroneous
when, although there is evidence to support it, the reviewing court, on the entire evidence,
is left with a firm conviction that a mistake has been made. Id. at 4, 572 S.W.3d at 886. Facts
in dispute and the determinations of credibility, however, are solely within the province of
the fact-finder. Id.There was no dispute at the hearing that a bill of assurances allowed the POA to
charge reasonable maintenance fees, and that covenant (as well as others) ran with the land.
Particularly, the POA offered proof establishing that the POA agreed to a bill of assurances
that applied to “Dawn Hill Country Club Resort ‘Cynthiana’ Townhouses Phase II.” The
pertinent paragraph in the Bill of Assurances provided that
[t]he Dawn Hill Townhouse and Condominium Property Association, Incorporated,
Board of Directors shall have the right and ability to charge reasonable maintenance
fees to be assessed against each unit on a monthly basis. Said maintenance fee shall
be used for trash services, septic system maintenance, lawn care, outdoor lighting of
common areas, and for other expenses as determined by the exclusive decision of the
appointment of a commissioner and an order to sell the property, and in a line of cases
including Alberty v. Wideman, 312 Ark. 434, 850 S.W.2d 314 (1993); Scherz v. Mundaca
Investment Corp., 318 Ark. 595, 886 S.W.2d 631 (1994); and Wantanabe v. Webb, 320 Ark.
375, 896 S.W.2d 597 (1995), the supreme court has held that an executed foreclosure decree
is appealable without a certification under Rule 54(b). See Alberty, 312 Ark. at 437, 850
S.W.2d at 316 (“Where there is such an order, a certification under Rule 54(b) is not
necessary.”). Moreover, while we are aware that the supreme court subsequently dismissed
an appeal from a foreclosure decree in Grand Valley Ridge, LLC v. Metropolitan National Bank,
2010 Ark. 402, at 3–4, we view that case as distinguishable because there is no indication
that the decree in that case had been executed or any discussion of Alberty, Scherz, or
Wantanabe, in which the existence of an executed decree was of paramount importance.
20
Dawn Hill Townhouse and Condominium Property Owners Association,
Incorporated, Board of Directors. Any past due or unpaid maintenance fees shall be
a lien against the unit owned by the person or entity whose fees are delinquent and
shall be enforceable by foreclosure of said lien.
Johnathan Barnett, the president of the POA, also testified that the association provides all
of the services set forth in the bill of assurances. The covenants further provide that they
shall run with the land and shall be binding on all parties and all persons claiming
under them for a period of 20 years from the date of these covenants are recorded
unless changed or amended by a majority of the unit owners, after which time said
covenants shall be automatically extended for successive periods of five years unless
an instrument signed by a majority of then owners of the lots has been recorded
agreeing to change the covenants in whole or in part.
In addition, Mr. Barnett testified that the legal description of the property subject to the bill
of assurances matched the legal description of the property in the recorded plat of the
Cynthiana Subdivision Townhouses Phase II. The POA also offered a quitclaim deed
demonstrating that Tara Capital was the current owner of “Lot 148 of Cynthiana
Townhouses Subdivision Phase 2.”
Nevertheless, as stated above, Tara Capital asserts that the proof at the hearing was
insufficient to establish that it was obligated to pay the maintenance fees charged to each
unit owner, as provided in the bill of assurances. There was no evidence, it says, that “a unit
was on Lot 148.”
We disagree. In the following colloquy, John Wood testified, in pertinent part, that
a townhouse was on Lot 148:
Q. Can you tell me a little bit about that lot so the court can be familiar?
21
A. It’s — as described in the legal description—it’s a townhouse that’s in Cynthiana
Phase II or whatever.
(Emphasis added.) Black’s Law Dictionary, moreover, defines a townhouse as “a dwelling
unit having usually two or three stories and often connected to a similar structure by a
common wall and (particularly in a planned-unit development) sharing and owning in
common the surrounding grounds. Townhouse, Black’s Law Dictionary (9th ed. 2009)
(emphasis added). With John Wood’s testimony in mind as well as other evidence
demonstrating that the development was for condominium townhouses, we cannot say that
the circuit court’s judgment of foreclosure was clearly against the preponderance of the
evidence. We therefore affirm the judgment of foreclosure.
IV. Conclusion
We decline to reach the Woods’ challenges to the default judgment entered against
them because those issues are not preserved for appellate review. The judgment awarding
damages to Ladimer is not a final and appealable order; therefore, we dismiss the appellants’
arguments challenging the sufficiency of the evidence supporting that judgment as well as
the associated award of attorney’s fees. We also hold that the appellants’ failure to include
the order substituting Ladimer in their notice of appeal deprives us of jurisdiction to reach
that issue. Finally, we hold that sufficient evidence supports the decree of foreclosure in favor
of the POA.
Affirmed in part; dismissed in part.
KLAPPENBACH, GRUBER, and WOOD, JJ., agree.
22
BARRETT and HIXSON, JJ., dissent.
STEPHANIE POTTER BARRETT, Judge, dissenting. The majority dismissed appellant
John Wood’s challenges to the sufficiency of the evidence supporting the damages awarded
against him to appellee Ladimer Alkhaseh on the basis of its conclusion that the judgment
awarding these damages was not a final order. Because I believe the trial court’s award of
damages to Alkhaseh was a final order from which John Wood may appeal, I respectfully
dissent.
There are multiple parties to this litigation with complaints, cross-claims,
counterclaims and third-party claims. On January 25, 2019, appellant John Wood filed for
Chapter 13 bankruptcy protection, and on the same day, the bankruptcy court entered an
automatic stay of “certain collection and other actions against the debtor and the debtor’s property.”
(Emphasis added.) The case at bar is clearly a collection action against John Wood and John
Wood’s property and was, therefore, subject to the stay. 1 Accordingly, three days later, on
January 28, 2019, the circuit court entered an order removing the case from the pending
docket and ordered that “this matter is closed until the bankruptcy matter of [John Wood] is
resolved and a Motion to Reopen is filed by any party.” (Emphasis added.)
1
It should be noted, as addressed more fully below, that the judgment in favor of
Alkhaseh in the amount of $747,424.35 is against John Wood and Holly Wood, jointly and
severally. Hence, the judgment against Holly Wood is a “certain collection and other action[ ]
against [John Wood] and [John Wood’s] property.” (Emphasis added.) Further, any judgment
against Tara Capital, LLC, is similarly a collection action against John Wood and his
property because Tara Capital, LLC, is not a duly authorized limited liability company, and
any liability of Tara Capital, LLC, will encumber any assets of John Wood.
23
John Wood’s petition for bankruptcy proceeded through the bankruptcy court, and
the bankruptcy judge was faced with the responsibility of creating and enforcing a Chapter
13 repayment plan. Two of John’s largest liabilities were the contingent unliquidated claims
set forth in the present circuit court litigation. The first unliquidated claim was John’s
potential liability on David Wood’s complaint alleging that John had breached a $150,000
promissory note. The second unliquidated claim was John’s potential liability on Alkhaseh’s
cross-claim based on John’s alleged nonpayment on the promissory note and the allegation
that John had breached a transfer agreement regarding the transfer of the ownership of Dawn
Hill Country Club in exchange for certain promises. This amount of the potential liability
on this cross-claim was so unascertainable and undefinable that Alkhaseh simply prayed for
a judgment “in excess of federal court jurisdiction.” To fashion the repayment plan, it was
imperative that these two claims were liquidated to a sum certain for use in fashioning the
Chapter 13 repayment plan.
In order to do so, the bankruptcy court maintained jurisdiction over David’s
promissory-note complaint, but it transferred Alkhaseh’s claims against John to circuit court
for disposition through a partial lift of the automatic stay it had imposed on the circuit court
litigation. To that end, on August 27, 2019, the United States Bankruptcy Court lifted the
automatic stay in the Chapter 13 bankruptcy filed by John by consent of John and Alkhaseh
“to allow the parties to resume the litigation pending before the Honorable Doug Schrantz
in the Circuit Court of Benton County, Arkansas for the purpose of obtaining a determination of
the amount of the debt that the debtor owes Alkhaseh.” (Emphasis added.)
24
Due to the fact that “certain collection and other actions against the debtor and the debtor’s
property” were stayed and due to the restrictive language of the bankruptcy order lifting the
stay, I believe that the jurisdiction of the circuit court was conclusively and categorically
limited to the issue of determining the amount of debt that John owes to Alkhaseh and that
John remained protected from any other action by the circuit court to assess damages by
other claimants by virtue of the stay under the bankruptcy proceeding. (Emphasis added.)
The whole idea behind a bankruptcy stay is to maintain the status quo of the debtor vis-à-vis
creditors during bankruptcy so as to prohibit various creditors from racing to the courthouse
and obtaining judgments––and therefore, judgment liens—to the detriment of other similarly
positioned creditors. I find that all orders of the circuit court herein that are not specifically
related to the debt that John owes to Alkhaseh are void 2 because they emanate from claims
independent of the limited jurisdiction granted by the bankruptcy court, and I further find
that the order of damages against John in favor of Alkhaseh is final for the purposes of appeal
and should be reviewed by this court.
The majority opinion answers several ancillary questions arising from the bankruptcy
estate except the one question specifically authorized by the bankruptcy court: “What is the
amount of the debt that John Wood owes Alkhaseh.” To that narrow essential question,
2
In light of the limited jurisdiction that the circuit court was granted to determine the
amount of damages John owed Alkhaseh, all other orders, including the judgment of
foreclosure entered in favor of Dawn Hill, are void for lack of subject-matter jurisdiction
because the subject-matter jurisdiction was suspended by the filing of the Chapter 13
bankruptcy. See Jones v. Nat’l Bank of Com. of El Dorado, 207 Ark. 613, 182 S.W.2d 377(1944).
25
the majority failed to answer, depriving the bankruptcy court of the one decision it needed
and for which it asked.
In fairness to the majority, we acknowledge that there may be additional litigation in
the future in circuit court. The bankruptcy court stayed the prosecution of David’s
complaint for breach of the $150,000 promissory note and did not lift that cause of action
from the stay. The bankruptcy court may subsequently entertain that complaint, it may lift
the stay in the future and transfer it to circuit court, or it may release it from the bankruptcy
estate altogether. However, none of those options are of any consequence to the limited
question asked of our court: What is the amount of debt that John owes Alkhaseh? I believe
the circuit court’s award of damages against John to Alkhaseh is final for three reasons. First,
because the order concludes the parties’ rights to the subject matter in controversy; second,
because the order of judgment that arises from an order striking an answer is immediately
appealable under Arkansas Rule of Appellate Procedure–Civil 2(a)(4); and third, because if
the order is not immediately appealable, it will divest a substantial right in a way as to put it
beyond the power of the court to place the party in the party’s former condition.
In order for a judgment to be final, it must dismiss the parties from court, discharge
them from action, or conclude their rights to subject matter in controversy. Taylor v. Taylor,
26 Ark. App. 31, 759 S.W.2d 222 (1988). To be final and appealable, an order must not
only decide the rights of parties but also put court’s directive into execution, ending the
litigation or a separable part of it. Tucker v. Lake View Sch. Dist. No. 25 of Phillips Cnty., 323
Ark. 693, 917 S.W.2d 530 (1996); Ark. Dep’t Hum. Servs. v. Farris, 309 Ark. 575, 832 S.W.2d
26482 (1992); Foreman v. Ark. Dep’t of Hum. Servs., 78 Ark. App. 48, 82 S.W.3d 176 (2002); Lee
v. Konkel-Swaim, 73 Ark. App. 429, 43 S.W.3d 767 (2001); Capitol Life & Accident Ins. Co. v.
Phelps, 72 Ark. App. 464, 37 S.W.3d 692 (2001).
Alkhaseh’s judgment against John on appeal herein is a final and appealable order
because the rights of the parties (John vis-à-vis Alkhaseh) have been decided, and the court’s
directive has been put into execution by its determination presented to the bankruptcy court,
ending a separable part of this litigation. The bankruptcy court will take the damages award
that has not been reviewed and that clearly lacks support by the preponderance of the
evidence and prepare and enforce a repayment schedule under the Chapter 13 bankruptcy
plan that will be completed and implemented long before the state court concludes the
litigation. After appellate review of this final damages order, we would surely find that there
was insufficient evidence to support the damages awarded to Alkhaseh. The circuit court
even stated as it recited its findings that the only information that it had was from an
unreliable source: “Yet it is the only information that we have here related to what should
have been a complete set of books regarding the income and expenses of a business
operation. Totally absent. And it – it pains me to have to rely on the unreliable, if you will,
but that’s all I have. . . .” So, we are sending a judgment back to the bankruptcy court for it
to develop a repayment plan that is likely, if not probably, in error.
Furthermore, an order striking an answer, as in the case presented, is immediately
appealable under Arkansas Rule of Appellate Procedure–Civil 2(a)(4). An order is also
immediately appealable if it would divest a substantial right in a way as to put it beyond the
27
power of the court to place the party in the party’s former condition. See Smith v. Flash TV
Sales & Serv., Inc., 17 Ark. App. 185, 706 S.W.2d 184 (1986). Not allowing Wood to appeal
the damages awarded against him will forever bar his ability to do so after the bankruptcy
court resumes its proceedings wherein Alkhaseh is asserting a claim for the debt that the
state trial court has now determined.
At the point that this court finally reviews the judgment of damages and finds them
unsupported by a preponderance of the evidence, the court could reverse and remand the
damages award; but should the bankruptcy have concluded or should the repayment
schedule have progressed significantly, John will be divested of his rights, and no court will
be able to place him in his former condition. Therefore, under Smith, supra, the award of
damages is final and should be reviewed by this court. The bankruptcy court asked the state
court to give it a sum certain to use in the Chapter 13 bankruptcy proceeding, and the
defendant in that action has the right to have that sum—now determined by the circuit
court—reviewed by an appellate court. To do otherwise is a grave injustice to the parties.
Furthermore, the bankruptcy court, in the August 27, 2019 order lifting the stay for
a limited purpose, stated, “This Court shall hold the debtor’s objection to Claim 4 in
abeyance until the state court has made such a determination.” When is this judgment for
damages against John reviewable if not now? The majority relies on Yarborough v. Powell,
2015 Ark. App. 218, 459 S.W.3d 329, claiming the case has similar facts. However, the
majority’s conclusion fails to consider the distinct difference between a Chapter 7
bankruptcy in Yarborough that was filed after a sum-certain judgment was obtained against
28
the debtor staying the proceedings and preventing the collection of the judgment; and the
Chapter 13 bankruptcy that was filed before judgment in the instant case and the stay lifted
by the bankruptcy court for the sole purpose of ascertaining a judgment amount. The
difference is that the debtor in Yarborough is protected by the stay, and once the bankruptcy
is concluded, the debtor may be returned to the same position he was in before. In this case,
the debtor is not protected from the collection of the error-prone judgment when the
bankruptcy resumes and cannot be returned to the same position he was in before because
a repayment plan will have commenced.
Furthermore, Yarborough relies on cases such as Bank of the Ozarks v. Cossey, 2014 Ark.
App. 581, 446 S.W.3d 214 (Cossey I), in which the court of appeals dismissed the case for
lack of a final order and was overturned on review by the Arkansas Supreme Court. In
Cossey I, a claim was filed alleging certain deficiencies by a trustee and requesting an
accounting. The circuit court entered an order that declared the bank to be trustee of the
Hamilton Living Trust and ordered the Bank to provide an accounting. Before the
accounting was performed, the case was appealed. The Arkansas Court of Appeals held that
the order was not final and appealable because there was more activity anticipated below in
the form of an accounting and dismissed the appeal. See Cossey I, 2014 Ark. App. 581, 446
S.W.3d 214. The appellant filed a petition for review with the supreme court, arguing, inter
alia, that the order was final and appealable. The supreme court agreed and issued In re
Hamilton Living Trust, 2015 Ark. 367, 471 S.W.3d 203, which vacated and set aside the court
29
of appeals opinion in Cossey I. The supreme court affirmed the circuit court’s order after
determining that the order was final and held:
The circuit court’s order was appealable as a final judgment or decree. See Ark.
R. App. P.–Civ. 2(a)(1) (2014). For a judgment to be final, it must dismiss the parties
from the court, discharge them from the action, or conclude their rights to the subject
matter in controversy; thus, the order must put the trial court’s directive into
execution, ending the litigation, or a separable branch of it. Smith v. Smith, 337 Ark.
583, 990 S.W.2d 550 (1999). Such is the case here. A single petitioner (Cossey)
brought a single claim (accounting) against a single respondent (the Bank). After a
hearing, the circuit court granted the petition and ordered the Bank to perform an
accounting. Thus, the parties were dismissed from the court, the action was
discharged, and the rights to the subject matter were concluded.
Id. at 3 n.1, 471 S.W.3d at 206 n.1.
That is the very instance that we have in this case before us involving John Wood and
Ladimer Alkhaseh and the subject matter of damages. The majority is making the same
mistake in this case as it did in Cossey I by claiming that the judgment is not a final, appealable
order.
I would be remiss if I did not point out one additional problem. There is a judgment
jointly and severally against John Wood and Holly Wood for $750,000. If John’s stay does
not extend to his co-debtor, Holly, then property co-owned by Holly and John is subject to
execution. An execution against Holly will diminish John’s bankruptcy estate. This is exactly
the scenario that a stay was designed to protect. Now, we have creditors (Alkhaseh and Dawn
Hill Townhouse and Condominium POA) that have climbed over other creditors and
enhanced their creditor status to the detriment of other creditors. This is why a stay can be
extended against a co-debtor in certain circumstances.
30
Analogy to Federal Court/State Court Question
The purpose behind the bankruptcy court’s lifting of the stay to determine the
amount of the debt that John owes Alkhaseh is obviously to allow the circuit court to litigate
and liquidate Alkhaseh’s cross-claim to a sum certain so that the bankruptcy court can
justifiably rely on that amount in fashioning John’s Chapter 13 repayment plan. That begs
the question of why, or how, can the bankruptcy court rely on that sum certain in fashioning
the repayment plan, if that sum certain is still subject to subsequent appellate review? The
answer, obviously, is that it cannot rely on that amount with any reasonable certainty. The
bankruptcy court requires a definitive answer. And the definitive answer can be supplied to the
bankruptcy court only after appellate review. By way of analogy, this is not unlike the
scenario where in federal court litigation, a federal district court—pursuant to Arkansas
Supreme Court Rule 6-8—asks the Arkansas Supreme Court to accept jurisdiction and
answer a state question posed therein. The federal court requires a definitive answer, not an
intermediate answer. The federal court does not ask a circuit court for an answer and does
not even ask the court of appeals for an answer to the question. Why? Because decisions of
the circuit court and even the court of appeals can be reviewed and overturned by the
supreme court and further delay the federal litigation. The federal court requires a definitive
answer, and the definitive answer can only come from the Arkansas Supreme Court. This
requirement of a definitive answer from the supreme court was discussed in the following
excerpt:
31
Section (a) of Arkansas Supreme Court Rule 6-8 permits only the Arkansas Supreme
Court to receive and respond to certified questions. The Arkansas General
Assembly’s rejection of an alternative rule, which would have allowed the Arkansas
Court of Appeals to respond to certified questions as well, sheds light on the reason
why Section (a) may have been so structured. In 1966, the American Law Institute
suggested this same limitation of allowing questions to be certified only to a state’s
highest court, a limitation that the UCQLA Commissioners later accepted.
According to one commentator, the reason for this decision was the thought by the
UCQLA Commissioners that delay “would be increased by certification to an
intermediate state court whose decisions would always be subject to appeal and
reversal.” Therefore, certification to the Arkansas Court of Appeals would defeat major
purposes of the certification process of obtaining a final, definitive answer on Arkansas state
law and saving federal courts and litigants time and money. By adopting the more limited
approach, and thereby avoiding the risks of appeal and reversal, the Arkansas General
Assembly helped to ensure that the certification process in Arkansas would achieve
these goals.
Coby W. Logan, Certifying Questions to the Arkansas Supreme Court: A Practical Means for Federal
Courts in Clarifying Arkansas State Law, 30 U. Ark. Little Rock L. Rev. 85, 89 (2007) (footnotes
omitted) (emphasis added).
The analogy here is that just like a federal district court requires a definitive answer
to the state question to proceed in the federal litigation, the federal bankruptcy court
similarly requires a definitive answer to the question of how much debt the debtor, John
Wood, owes Alkhaseh before it can proceed and fashion a Chapter 13 repayment plan.
Without a definitive answer, and especially with an intermediate answer that is rife with
potential error, the bankruptcy cannot proceed with any expectation of accuracy or
reliability. If the bankruptcy court fashions a Chapter 13 repayment plan based on indefinite
and inaccurate information from the circuit court, the plan is doomed to subsequently fail.
For hypothetical purposes, assume the bankruptcy court utilizes the $747,424.35 judgment
32
against John Wood in fashioning its repayment plan, and further assume that the circuit
court was 100 percent in error and the judgment against John Wood should be $0. How
can the federal bankruptcy court’s repayment plan possibly be correct when the circuit court
has erroneously entered a $747,424.35 liability in John Wood’s bankruptcy estate? That
judgment must be reviewed by this court, and we must provide the bankruptcy court with a
definitive answer to the only question referred to us: How much debt does John Wood owe
Alkhaseh?
… or a Separable Part of it.
It is elementary that in order for judgment to be final, it must dismiss parties from
court, discharge them from action, or conclude their rights to subject matter in controversy.
Taylor v. Taylor, 26 Ark. App. 31, 759 S.W.2d 222 (1988). To be final and appealable, an
order must not only decide the rights of the parties, but also put the court’s directive into
execution, ending the litigation or a separable part of it. Tucker, 323 Ark. 693, 917 S.W.2d
530; Farris, 309 Ark. 575, 832 S.W.2d 482; Foreman, 78 Ark. App. 48, 82 S.W.3d 176; Lee,
73 Ark. App. 429, 43 S.W.3d 767; Phelps, 72 Ark. App. 464, 37 S.W.3d 692.
The standard—to be final and appealable, an order must not only decide the rights of
parties, but also put court’s directive into execution, ending the litigation or a separable part of
it—has been quoted more than one hundred times in Arkansas appellate jurisprudence since
apparently first used in 1978 in Festingor v. Kantor, 264 Ark. 275, 571 S.W.2d 82 (1978).
While we are familiar with the premise that the order must decide the rights of the parties,
the remainder of the standard,—but also put the court’s directive into execution, ending the
33
litigation or a separable part of it—is not as familiar. In fact, the final phrase “. . . or a separable
part of it” has not received any judicial interpretation. But it has been quoted with approval
more than one hundred times, so it must mean something. By using ordinary definitions,
“or a separable part of it” must mean what it says. In some circumstances where part of the
litigation can be “separated,” then that separated part may be deemed final and appealable.
That is exactly what we have here.
When the bankruptcy court entered its stay and the circuit court ordered “this matter
is closed,” all proceedings in circuit court lurched to a stop. The circuit court, perhaps, could
have entered a less expansive order, but it ordered “this matter is closed.” What was closed?
David Wood’s complaint against John Wood and Holly Wood on the promissory
note
Alkhaseh’s cross-claim for nonpayment on the promissory note and breach of the
transfer agreement against John Wood and Holly Wood
Alkhaseh’s third-party complaint against Tara Capital, LLC
Alkhaseh’s third-party complaint against the Benton County collector
Alkhaseh’s third-party complaint against commissioner of state lands
Dawn Hill POA’s complaint in intervention
When John Wood filed his petition for bankruptcy, an automatic stay was entered.
The purpose of the automatic stay is to maintain the status quo of the debtor’s estate vis- à-
vis various creditors and to prevent a race to the courthouse where one creditor could
favorably position itself ahead of another creditor.
34
The bankruptcy court was faced with the six causes of action described above. For
reasons known only to the bankruptcy court, the bankruptcy court separated out the cross-
claim by Alkhaseh against John Wood to be lifted from the stay and remanded to the circuit
court to determine how much money John owed Alkhaseh. Regardless of the finality of
other aspects of the circuit court litigation, the bankruptcy court separated out Alkhaseh’s
cross-claim against John so that the circuit court could determine that debt. This is perfectly
in line with the premise that, to be final, an order must not only decide the rights of the
parties, but also put the court’s directive into execution, ending the litigation or a separable part
of it. Here, the parties are John Wood and Alkhaseh. The circuit court’s order decided the
rights of John Wood vis-à-vis Alkhaseh to the tune of a $747,424.35 judgment. And the
court’s order put the court’s directive into execution, ending a separable part of the litigation.
The separable part of it was Alkhaseh’s cross-claim for nonpayment on the promissory note
and breach of the transfer agreement, which was the only separable part of the multifaceted
circuit court litigation that was lifted from the stay. To that end, the Alkhaseh’s judgment
in the amount of $747,424.35 is a final and appealable order.
The supreme court has stated that the “test of finality and appealability of an order is
whether the order puts the court’s directive into execution, ending the litigation or a
separable part of it.” Villines v. Harris, 362 Ark. 393, 397, 208 S.W.3d 763, 766 (2005).
However, when the order appealed from reflects that further proceedings are pending, which do not
involve merely collateral matters, the order is not final. Id. Under the particular circumstances
of this case, where the circuit court was reinvested with limited jurisdiction for the sole
35
purpose of assessing the debt owed from John to Alkhaseh, I would conclude that no further
proceedings are presently pending in circuit court for purposes of finality and John Wood’s
right to appeal from the amount of damages set by the circuit court. Furthermore, the often
repeated “separable part of it” language must mean something, and under these
circumstances and for the reasons explained herein, a separable part of this litigation has
concluded for purposes of John’s appeal from the damages award. Therefore, I would hold
that we have jurisdiction of the judgment for damages against John and that we should reach
the merits and issue a ruling.
HIXSON, J., joins.
Eric Soller, for separate appellants John Wood and Tara Capital, LLC.
Brett D. Watson, Attorney at Law, PLLC, by: Brett D. Watson, for separate appellant
Holly Wood.
William R. Mayo, for separate appellee Ladimer Alkhaseh.
Carla Wasson, for separate appellee Dawn Hill Townhouse and Condominium
Property Owners Association, Inc.
36