Opinion
01-1318/01-1008
Delivered April 10, 2003
1. APPEAL ERROR — FINAL ORDER — MUST ESTABLISH AMOUNT OF DAMAGES. — For an order to be final, it must establish the amount of damages.
2. APPEAL ERROR — FINALITY APPEALABLILTY — TEST FOR. — 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 branch of it.
3. JUDGMENT — COLLATERAL MATTER — ATTORNEY'S FEES. — The award of attorney's fees is a collateral matter that does not affect the appealability of the underlying order.
4. APPEAL ERROR — PARTIAL SUMMARY-JUDGMENT ORDER — DID NOT ADJUDICATE ALL CLAIMS AGAINST ALL PARTIES. — The partial summary-judgment order did not adjudicate all claims against all parties (the complaint as amended also alleged common-law fraud claims against several defendants), and the circuit court did not certify the partial summary judgment as final pursuant to Ark. R. Civ. P. 54(b); furthermore, appellee's Rule 23 class action sought relief in the form of monetary damages as provided by the usury laws of Arkansas; the partial summary-judgment order did not decide the issue of damages so as to make it enforceable by execution.
5. APPEAL ERROR — ORDER LACKING SPECIFICS AS TO AMOUNT OF DAMAGES — ORDER NOT FINAL. — An order that fails to set out a formula or specifics as to the amount of damages is not final and appealable.
6. APPEAL ERROR — COLLATERAL MATTERS — ACCRUAL OF INTEREST ON JUDGMENT. — Accrual of interest on a judgment is a collateral matter.
7. APPEAL ERROR — CASES CITED BY APPELLANT DID NOT UNDERMINE PRIOR HOLDING THAT DAMAGES MUST BE DECIDED BEFORE JUDGMENT FINAL APPEALABLE — APPELLANT DID NOT ACT IN GOOD FAITH. — Where none of the cases cited by appellant undermined the supreme court's prior holdings that a judgment or order is not final and appealable if the issue of damages remains to be decided, and appellant bank eventually conceded that the partial summary-judgment order was not final, the supreme court disagreed with appellant's assertion that it acted in good faith, when in fact it waited until the last possible moment to abandon that point on appeal.
8. APPEAL ERROR — APPELLANT ARGUED BEFORE SUPREME CIRCUIT COURTS — INCONSISTENT ARGUMENTS MADE. — Appellant asserted that it did not make inconsistent arguments before the supreme and circuit courts on the issue of finality, and pointed to three excerpts from pleadings filed in the circuit court after appellant filed its notice of appeal; however, in each of those pleadings appellant suggested that the trial court had not entered a final judgment; the supreme court found the following language, used in appellant's response to appellee's motion for receiver filed in circuit court, "the plaintiff, by her motion for appointment of receiver, is, in effect, seeking to levy execution before final judgment in favor of class members, establishing whatever rights and entitlements are, has been entered," to be in accord with its opinion where it stated that appellant appeared to be arguing on appeal that the partial summary-judgment order was final, while at the same time arguing in the circuit court that no final order had been entered.
9. APPEAL ERROR — APPELLANT PROPOSED "IMPACT THEORY" AS BASIS FOR APPEAL — PROPOSAL FOUND NOT TO BE IN GOOD FAITH. — On appeal, appellant essentially contended that interlocutory orders — such as class-certification orders or orders approving class-action notices that were immediately appealable pursuant to Ark. R. App. P. — Civ. 2(a)(9) — may become appealable at a later time when the entry of any subsequent order "impacts" those prior orders; under the "impact theory," the appeal is not from a ruling by the circuit court on the alleged "impact" of a subsequent order; rather, it is the mere assertion on appeal of such an "impact" that would automatically make a previous order appealable at any time; in other words, appellant bank attempted to prosecute an appeal before the circuit court had an opportunity to rule on the issue, which proposition is not supported by our Rules of Appellate Procedure — Civil; moreover, the supreme court will not address issues for the first time on appeal; thus, appellant bank did not act in good faith in proposing the so-called "impact theory."
10. CIVIL PROCEDURE — SANCTIONS APPROPRIATE PURSUANT TO ARK. R. APP. P. — CIV. 11 — SANCTIONS ISSUED. — Based on its findings, the supreme court agreed with appellee that appellant bank and its counsel should be sanctioned pursuant to Ark. R. App. P. — Civ. 11; the interlocutory set of appeals prosecuted by appellant have already been dismissed; in addition, a fair sanction was determined to be the award of costs and reasonable attorney's fees to appellees for requiring them to go forward in defending this appeal; therefore, appellant bank and its counsel was ordered to pay appellees attorney's fees, plus costs for this appeal as provided by Ark. Sup. Ct. R. 6-7.
The Rose Law Firm, by: Herbert C. Rule III, Garland Garrett, and Stephen Joiner, for appellant.
Joe Holifield and McMath, Vehik, Drummond, Harrison Lebdetter, P.A., by: Mart Vehik, for appellee.
In this appeal, we issued our opinion on February 28, 2003, wherein we dismissed a set of interlocutory appeals by U.S. Bank stemming from a Rule 23 class-action proceeding. U.S. Bank v. Milburn, 352 Ark. 144, 100 S.W.3d 674. We did so because the notice of appeal filed by U.S. Bank was untimely with respect to the class-certification order and the order approving class notice, and U.S. Bank eventually conceded that the partial summary-judgment order was not a final order and, thus, not properly appealable. U.S. Bank also admitted that no appeal was taken from any ruling by the circuit court on its motion requesting reconsideration of the class-certification and partial summary-judgment orders. Finally, as to the appeal of an interlocutory order appointing a receiver, the untimely filing of the record procedurally barred U.S. Bank from pursuing that point on appeal.
Upon pointing out that U.S. Bank continued to prosecute the appeal, even though it appeared from the record before this court that U.S. Bank was arguing on appeal that the partial summary-judgment order was final, while at the same time arguing in the circuit court that no final order had been entered, we concluded sanctions under Rule 11 of the Arkansas Rules of Appellate Procedure — Civil might be appropriate. Pursuant to Ark. R. App. P. — Civ. 11(d), we directed U.S. Bank and its counsel to show cause in writing why a sanction should not be imposed against them, and we also allowed Milburn to respond. Both U.S. Bank and Milburn have filed their writings.
[1] In its response to the order to show cause, U.S. Bank posits three reasons why sanctions are inappropriate. First, U.S. Bank asserts that it had a good-faith belief that the partial summary-judgment order was final and appealable. Specifically, it maintains that a trial court's order need not always establish the amount of damages in order for the order to be final and appealable. U.S. Bank directs this court to Pledger v. Bosnick, 306 Ark. 45, 811 S.W.2d 286 (1991); Ives Trucking Co. v. Pro Transportation, 341 Ark. 735, 19 S.W.3d 600 (2002); Hartwick v. Hill, 77 Ark. App. 185, 73 S.W.3d 15 (2002); and Smith v. Smith, 51 Ark. App. 20, 907 S.W.2d 755 (1995). None of those cases, however, are apposite. In fact, we have on numerous occasions held that for an order to be final, it must establish the amount of damages. Tri-State Delta Chemicals, Inc., v. Crow, 347 Ark. 255, 61 S.W.3d 172 (2001); Sevenprop Assocs. v. Harrison, 295 Ark. 35, 746 S.W.2d 51 (1998); String v. Kazi, 312 Ark. 6, 846 S.W.2d 649 (1993).
[2] 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 branch of it. Pledger v. Bosnick, 306 Ark. 45, 811 S.W.2d 286. The Pledger case was a class action in which we concluded that the order at issue was appealable where it ended all issues except the amount of attorney's fees and the details of notice to the class of their rights to a refund. Id. The members of the class in Pledger asked for a declaration that certain provisions of the income tax laws of the state were unconstitutional, an injunction against using the funds illegally collected, a refund to the class, and attorney's fees. The trial court's order granted the prayer in favor of the members of the class on all of those issues. Id. [3, 4] Here, the partial summary-judgment order is just what it says it is — partial. The order did not adjudicate all claims against all parties (the complaint as amended also alleged common-law fraud claims against
U.S. Bank, Real Estate Title Services, Inc., and the other defendants), and the circuit court did not certify the partial summary judgment as final pursuant to Ark. R. Civ. P. 54(b). Furthermore, Milburn's Rule 23 class action sought relief in the form of monetary damages as provided by the usury laws of Arkansas. The partial summary-judgment order did not decide the issue of damages so as to make it enforceable by execution. In contrast, the class members in Pledger v. Bosnick sought the recovery of funds illegally collected by the State of Arkansas, not monetary damages. Likewise, as we reiterated in Ives Trucking Co. v. Pro Transportation, 341 Ark. 735, 19 S.W.3d 600, the award of attorney's fees is a collateral matter that does not affect the appealability of the underlying order.
"What is sought in an illegal-exaction case is return of taxes wrongfully collected. Relief may be an order that the taxes be refunded. A personal judgment is not entered." Worth v. City of Rogers, 351 Ark. 183, 192, 89 S.W.3d 875, 881 (2002) (citations omitted).
[5] The Hartwick case involved a landowner's claim to a roadway across a neighbor's property. Hartwick v. Hill, 77 Ark. App. 185, 73 S.W.3d 15 (2002). The trial court's order adopted the report of the viewers who had been appointed to examine the land and lay out the location of the roadway, described the location of the roadway to be granted, ordered the Hills to conduct a survey of the land to determine the precise acreage of the roadway, and established that Hartwick would incur damages in the amount of $6,000 per acre due to the loss of the land for the roadway. Id. The Arkansas Court of Appeals held that the future action contemplated by the trial court's order (obtaining a survey reflecting the precise acreage in the roadway and applying the $6,000 per acre formula that was ordered by the court as damages) was collateral to the main issues decided by the court — that the Hills were entitled to a roadway across the Hartwick's land and the amount of damages to be paid. Id. Unlike the order in Hartwick, the order at issue here set out no formula or specifics as to the amount of damages.
[6] Finally, in Smith v. Smith, 51 Ark. App. 20, 907 S.W.2d 755, the Arkansas Court of Appeals correctly characterized accrual of interest on a judgment as a collateral matter. The instant case does not concern an order to pay interest on a judgment.
[7] In sum, none of the cases cited by U.S. Bank undermine our prior holdings that a judgment or order is not final and appealable if the issue of damages remains to be decided. Tri-State Delta Chemicals, Inc. v. Crow, 347 Ark. 255, 61 S.W.3d 172; Sevenprop
Assocs. v. Harrison, 295 Ark. 35, 746 S.W.2d 51; John Cheeseman Trucking, Inc. v. Dougan, 305 Ark. 49, 805 S.W.2d 69 (1991). Indeed, U.S. Bank eventually conceded that the partial summary-judgment order was not final. Accordingly, we must disagree with U.S. Bank's assertion that it acted in good faith, when in fact it waited until the last possible moment to abandon that point on appeal. [8] Next, U.S. Bank asserts that it did not make inconsistent arguments before this court and the circuit court on the issue of finality. It points to three excerpts from pleadings filed in the circuit court after U.S. Bank filed its notice of appeal. However, in each of those excerpts, U.S. Bank suggests that the trial court had not entered a final judgment. The first excerpt states, "[t]here is no danger that [U.S. Bank] is going to hide its assets to put them beyond the reach of a final judgment." In the second excerpt, U.S. Bank states that all loan payments by class members should continue to be made to U.S. Bank "before a final determination of the amounts that might be due." Lastly, U.S. Bank directs us to the following language in its response to Milburn's motion for receiver filed in the circuit court:
With respect to the good-faith argument, U.S. Bank also asks this court to consider documents outside the record. Essentially, U.S. Bank suggests that Milburn made inconsistent arguments on the issue of finality before this court and the lower court, which caused U.S. Bank to continue prosecuting the appeal. We do not consider matters outside the record on appeal. Black v. Steenwork, 333 Ark. 629, 970 S.W.2d 280 (1998). In any event, nothing in the record indicates that Milburn argued to the circuit court that the partial summary judgment was a final order.
There has been no proof of fraud or insolvency on the part of U.S. Bank that would endanger its capacity to respond to any final judgment which may be entered in this case. The plaintiff, by her motion for appointment of receiver, is, in effect, seeking to levy execution before final judgment in favor of class members, establishing whatever their rights and entitlements are, has been entered.
(Emphasis added.) We find that this language is in accord with our opinion where we stated "it appears that U.S. Bank was arguing on appeal that the partial summary-judgment order was final, while at the same time arguing in the circuit court that no final order had been entered."
[9] For its last argument against the imposition of Rule 11 sanctions, U.S. Bank maintains it acted in good faith in proposing the so-called "impact theory" as the basis for the appeal. The bank states that making a good-faith argument and losing is not grounds for sanctions. Essentially, U.S. Bank contended on appeal that interlocutory orders — such as class-certification orders or orders approving class-action notices that are immediately appealable pursuant to Ark. R. App. P. — Civ. 2(a)(9) — may become appealable at a later time when the entry of any subsequent order "impacts" those prior orders. Under the "impact theory" proposed by U.S. Bank, the appeal is not from a ruling by the circuit court on the alleged "impact" of a subsequent order; rather, it is the mere assertion on appeal of such an "impact" that would automatically make a previous order appealable at any time. In other words, U.S. Bank attempted to prosecute an appeal before the circuit court had an opportunity to rule on the issue. Such a proposition is not supported by our Rules of Appellate Procedure — Civil. Moreover, our case law is clear that we will not address issues for the first time on appeal. Jones v. Jones, 347 Ark. 409, 64 S.W.3d 728 (2002). Thus, we cannot agree that U.S. Bank acted in good faith in proposing the so-called "impact theory."
[10] Based on the foregoing, we agree with Milburn that U.S. Bank and its counsel should be sanctioned pursuant to Ark. R. App. P. — Civ. 11. The interlocutory set of appeals prosecuted by U.S. Bank has already been dismissed. See U.S. Bank v. Milburn, 352 Ark. 144, 100 S.W.3d 674. In addition, we determine a fair sanction in these circumstances would be the award of costs and reasonable attorney's fees to appellees for requiring them to go forward in defending this appeal. See Ark. R. App. P. — Civ. 11(c), see also Stilley v. Hubbs, 344 Ark. 1, 40 S.W.3d 209 (2001); Jones v. Jones, 329 Ark. 320, 947 S.W.2d 6 (1997). Therefore, we order that U.S. Bank and its counsel pay appellees attorney's fees in the amount of $3,000, plus costs for this appeal as provided by Ark. Sup. Ct. R. 6-7, and do so within twenty days from the issuance of this supplemental opinion.
Rule 11 sanctions issued.
THORNTON and HANNAH, JJ., dissent.
I respectfully dissent. I disagree with the majority's holding that Rule 11 sanctions should be imposed in this case.
The majority dismisses U.S. Bank's argument that it had a good-faith belief that the trial court's order granting summary judgment was a final and appealable order. The majority held that all the cases cited by the bank in support of its argument that a trial court need not always establish the amount of damages in order for the order to be final and appealable were inapposite.
The majority distinguishes the cited cases from the present case. It is common for this court to distinguish cases cited in the parties' brief from the case at hand. We often disagree with parties' contentions that the cases cited in their briefs are on point with the case before the court. Our disagreement with the parties' contentions does not warrant sanctions.
The majority also notes that the trial court did not certify the partial summary-judgment as final pursuant to Ark. R. Civ. P. 54(b). While it is true that the bank did not attempt to obtain partial certification from the trial court, a review of our case law indicates that we have not imposed Rule 11 sanctions when we have not addressed the merits of an appeal due to a party's failure to have a judgment certified pursuant to Rule 54(b). See, e.g., Fisher v. Chavers, 351 Ark. 318, 92 S.W.3d 30 (2002); Chapman v. Wal-Mart Stores, Inc., 351 Ark. 1, 89 S.W.3d 906 (2002); Dodge v. Lee, 350 Ark. 480, 88 S.W.3d 843 (2002); Sharp v. State, 350 Ark. 529, 88 S.W.3d 848 (2002); City of Corning v. Cochran, 350 Ark. 12, 84 S.W.3d 439 (2002); Cole v. Laws, 349 Ark. 177, 76 S.W.3d 878 (2002); Eason v. Flannigan, 349 Ark. 1, 75 S.W.3d 702 (2002); Tri-State Delta Chems., Inc. v. Crow, 347 Ark. 255, 61 S.W.3d 172 (2001).
In addition, the majority states:
Indeed, U.S. Bank eventually conceded that the partial summary-judgment order was not final. Accordingly, we must disagree with U.S. Bank's assertion that it acted in good faith, when in fact it waited until the last possible moment to abandon that point on appeal. (Emphasis added.)
The majority appears to be implying that if U.S. Bank had maintained until the end that it believed the partial summary judgment order was a final judgment, then there would be no Rule 11 sanctions.
Counsel for U.S. Bank was acting as an officer of the court in admitting in its reply brief that the partial summary judgment was not a final order. Are we imposing sanctions because counsel was being honest and candid with this court and properly acting as an officer of the court? The majority is sending the wrong message to the bar.
It should be noted that Milburn previously filed a motion to dismiss the appeal because the partial summary judgment was not a final appealable order, and this court declined to rule on that motion. If the appeal was frivolous, and if it was so clear that the partial summary judgment order was not a final appealable order, would not this court have granted Milburn's motion to dismiss?
Rule 11 provides, in part:
(a) The filing of a brief, motion or other paper in the Supreme Court . . . constitutes a certification of the party or attorney that, to the best of his knowledge, information and belief formed after reasonable inquiry, the document is well grounded in fact; is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and is not filed for an improper purpose such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. A party or an attorney who files a paper in violation of this rule, or party on whose behalf the paper is filed, is subject to a sanction in accordance with this rule.
(c) Sanctions that may be imposed for violations of this rule include, but are not limited to, dismissal of the appeal; striking a brief, motion, or other paper; awarding actual costs and expenses, including reasonable attorneys' fees; imposing a penalty payable to the court; awarding damages attributable to the delay or misconduct; and, where there has been delay, advancing the case on the docket and affirming.
(d) A party may by motion request that a sanction be imposed upon another party or attorney pursuant to this rule, or the court may impose a sanction on its own initiative. A motion shall be in the form required by Rule 2-1 of the Rules of the Supreme Court and Court of Appeals, with citations to the record where appropriate, and will be called for submission three weeks after the filing. . . . If the court on its own initiative determines that a sanction may be appropriate, the court shall order the party or attorney to show cause in writing why a sanction should not be imposed on the party or attorney or both.
Ark. R. App. P. — Civ. 11 (2002).
It should be noted that Milburn's counsel argued that sanctions should be imposed on the bank, inter alia, because the bank violated procedural rules, i.e., failing to obtain the trial court's certification of the partial summary judgment order, pursuant to Rule 54(b); however, Milburn's counsel failed to follow procedure in requesting sanctions. Motions to request sanctions must comply with Rule 2-1. Rule 2-1 provides, in part, that "[a]ll motions must be in writing," and that "[i]n cases pending before the Supreme Court, eight (8) clearly legible copies must be filed. . . ." Ark. Sup. Ct. R. 2-1 (2002). While it is true that this court on its own initiative may determine that sanctions are appropriate and issue a show-cause order, there is nothing in the record to indicate that this court, prior to the oral request by Milburn's counsel, determined that sanctions may be appropriate.
At oral argument, the following colloquy took place between the court and counsel for Milburn:
COUNSEL FOR MILBURN: . . . I would like to address one more thing before we leave. I think the act of claiming this to be a final judgment has caused me and my client great harm in this case. . . . What have they gained in the process? Number one, by claiming it is a final judgment, what they have gained is I had to respond to it. . . . They managed to get an appeal before this court. The next thing is, because summary judgment is crucial. . . . I spent a huge amount of time responding to that. . . . So, they have now heard what I am going to do. They have taken advantage of it, and they gain advantage by a false claim that this is a final judgment. I am going to ask the court to dismiss this case with appeal, or, in the alternative, that they be prohibited from raising any new arguments should they bring this case up again, and to pay for the time and money I had to spend responding to something they knew they were going to drop when it was all over. . . .
I note that the majority's holding does not address the issue of whether U.S. Bank will be precluded from raising any new argument should the bank file a subsequent appeal.
JUSTICE BROWN: You seem to be raising a Rule 11 violation under the appellate rules.
COUNSEL FOR MILBURN: That is exactly what I am suggesting, but this court has inherent authority to do that, as well, I believe. * * *
Later, the court requested a response from U.S. Bank's counsel.
JUSTICE BROWN: What is the response to that? He said that there is no question that you knew it was not a final order and there was not Rule 54(b) certification. That has put him to the expense of having to reply to an appeal.
COUNSEL FOR U.S. BANK: Well, I would first say, your honor, that I believe such a request would require a motion and an opportunity for presentation of a full explanation by both sides with us in response.
* * *
JUSTICE GLAZE: Your response on the sanction 11 rule, then, is this has not been posed to you prior to today?
COUNSEL FOR U.S. BANK: Yes, that is correct, I believe your honor.
* * *
Milburn requested that the court impose sanctions. As such, Milburn should have complied with Rule 2-1 and submitted a motion explaining why sanctions should be imposed on the bank. Instead, Milburn ignored Rule 2-1 and orally requested sanctions. After hearing Milburn's oral request, which was raised at oral argument without notice to the bank, the court, in U.S. Bank, N.A., et al., v. Milburn, 352 Ark. 144, 100 S.W.3d 674, ordered
U.S. Bank and its counsel to show cause in writing why a sanction should not be imposed against them.
In addition, the majority rejects the bank's argument that it acted in good faith in proposing the so-called "impact theory" as the basis for appeal. The bank argues that making a good-faith argument and losing is not grounds for sanctions. I agree. In Crockett Brown, P.A. v. Wilson, 321 Ark. 150, 901 S.W.2d 826 (1995), the court discussed the requirements of Rule 11. We stated:
. . . Rule 11 does not require that the legal theory espoused in a filing prevail. The essential issue is whether signatories of the document fulfilled their duty of reasonable inquiry into the relevant law, and the indicia of reasonable inquiry into the law include the plausibility of the legal theory espoused and the complexity of the issues raised. CJC Holdings, Inc. v. Wright Lato, Inc., 989 F.2d 791 (5th Cir. 1993). The CJC Holdings decision admonished that a trial court should not impose Rule 11 sanctions for advocacy of a plausible legal theory, particularly when the law is arguably unclear. Id. at 794.
Crockett Brown, 321 Ark. at 155-56.
The present case, a class action, involved complex issues. Throughout the appeal, the bank argued that there was a question about whether an appealable order had been entered by the trial court. At oral argument, the bank's counsel stated:
. . . [W]e struggle with that question ourselves and with counsel for U.S. Bank from Minnesota, as to whether that was a final order. We talked. . . . Well, what we had in mind was, if it were a final order, we had better appeal it.
In its response to the order to show cause, the bank stated that, in determining that there was a final order, it reasonably relied on existing law and, that by appealing the order, "it . . . avoided the trap faced by U.S. Bank if it did not appeal — that it would be barred from litigating any further issues of law or fact by failing to appeal the order." The majority's determination that sanctions were proper in the present case could have a far-reaching effect on the attorney's role as an advocate for his or her client. In a case where an attorney is unsure about the finality of the order, is he or she now going to be faced with the choice of either: (1) filing an appeal of an order which may not be final, thereby risking sanctions by this court; or (2) failing to file an appeal of an order which may indeed be final, thereby risking a malpractice action from a client who loses the right to an appeal?
In the present case, the bank's counsel acted as an advocate for his client. Of course, an attorney may not shield himself or herself from sanctions stating that he or she was merely acting as an advocate. Indeed, Rule 11 provides that sanctions may be imposed upon a party or counsel or both for taking or continuing a frivolous appeal. However, for the purposes of Rule 11, "a frivolous appeal or proceeding is one that has no reasonable legal or factual basis." The appeal in the present case was not frivolous. The issues were complex, and the record indicates that there was a reasonable question concerning the finality of the order. I agree with the bank that sanctions should not be imposed.
For the foregoing reasons, I respectfully dissent.
THORNTON, J., joins this dissent.