Al Faigin and N.G. Faigin v. Diamante Members Club, Inc. And Diamante, a Private Membership Golf Club, LLC

2022 Ark. App. 361, 653 S.W.3d 383

• Court: Court of Appeals of Arkansas
• Decided: September 28, 2022
• Status: Published

Opinion

Cite as 2022 Ark. App. 361 ARKANSAS COURT OF APPEALS DIVISION I No. CV-19-765

AL FAIGIN AND N.G. FAIGIN Opinion Delivered September 28, 2022 APPELLANTS APPEAL FROM THE SALINE COUNTY CIRCUIT COURT V. [NO. 63CV-10-959]

DIAMANTE MEMBERS CLUB, INC.; HONORABLE GRISHAM PHILLIPS, AND DIAMANTE, A PRIVATE JUDGE MEMBERSHIP GOLF CLUB, LLC APPELLEES AFFIRMED

ROBERT J. GLADWIN, Judge

This appeal comes from a final judgment and decree of foreclosure entered by the

Saline County Circuit Court granting summary judgment in favor of the appellees.

Appellants, Al Faigin and N.G. Faigin (collectively “appellants”), are owners of property

within the Diamante subdivision located in Hot Springs Village, Arkansas. The appellees,

Diamante, A Private Membership Golf Club, LLC and Diamante Members Club, Inc.

(collectively “appellees”), respectively, are the former and current owners of a private golf

club associated with the developed subdivision. Appellants raise five points on appeal. We

affirm the judgment of the circuit court.

I. Background Facts In 1994, Cooper Communities, Inc. (“CCI”), and Club Corporations of America

announced plans to build a private golf course with 450 dwelling units that would have

access to the course. The private golf club was advertised as a premier amenity associated

with the development. On March 29, 1994, CCI recorded the supplemental declarations of

covenants and restrictions (the “Declarations”) for the subdivision in the office of the circuit

clerk and recorder of Saline County, Arkansas.

The Declarations set forth the intention of CCI to develop lands adjacent to the

subdivision into Diamante, A Private Membership Golf Club, Inc. (“Old Club”),1 and

declared all purchasers of lots within the subdivision subject to the covenants contained

therein, including but not limited to, a “full golf membership” that entitled the lot owner to

utilize the facility at the “highest level of privilege.” Further, all property owners are required

to pay monthly dues, pay a transfer fee anytime the property is sold, and give Old Club lien

and foreclosure rights for any unpaid fees. Additionally, the Declarations state that the

provisions would be subject to the rules and regulations of the club as well as any articles

and bylaws, revised or amended by Old Club. The Declarations also authorize the club to

create other categories of membership that may be made available to the general public.

Appellants purchased a lot in the subdivision from John D. Schoonover, trustee of

the Schoonover Living Trust, on July 31, 2006. As of April 30, 2010, appellants were

1 We refer to Diamante, A Private Membership Golf Club, Inc., as “Old Club” and its predecessor, Diamante Members Club, Inc., as “New Club” due to an assignment, as detailed below, wherein Old Club assigned its rights related to the subdivision to New Club.

2 delinquent in the amount of $3,341.91 for monthly club dues. On October 14, 2010, Old

Club recorded a lien against the property and on November 16, 2010, Old Club filed its

complaint in foreclosure against the appellants.

Subsequently, the Faigins moved for class certification and appointment of class

counsel on January 5, 2011, on behalf of all lot owners in the subdivision. See Faigin v.

Diamante, a Private Membership Golf Club, LLC, 2012 Ark. 8, 386 S.W.3d 372. The motion

was denied, and as a result, appellants brought an interlocutory appeal to the Arkansas

Supreme Court. The supreme court affirmed the circuit court’s denial of the motion. Id.

Following the denial of class certification, Linda and Gary Dye brought suit in 2012

in the Saline County Circuit Court seeking a declaratory judgment to have the provisions

contained in the Declarations declared unenforceable. Subsequently, a class of property

owners in the Diamante subdivision was certified by the circuit court, and the certification

was affirmed by the Arkansas Supreme Court in Diamante, LLC v. Dye, 2013 Ark. 501, 430

S.W.3d 710. The class requested that the circuit court declare the covenants contained in

the Declarations unenforceable; order Old Club to disgorge dues paid during the suit;

mandate that dues recovered go directly to the maintenance and upkeep of the golf course;

and award attorney’s fees. See Dye v. Diamante, a Private Membership Golf Club, LLC, 2017

Ark. 42, 510 S.W.3d 759. The circuit court declared the provisions of the Declarations valid

and also denied disgorgement of any dues. The supreme court affirmed the circuit court’s

order on February 16, 2017. Id.

3 After Dye had concluded, appellants filed their third amended answer and also

asserted a counterclaim against Old Club. Appellants asserted a cause of action for deceit

for the alleged deliberate concealment of intent by Old Club related to exclusivity, or lack

thereof, of the golf course and access thereto by non-property owners. They also alleged the

following affirmative defenses: (1) deceit; (2) fraudulent inducement of contract; (3)

inapplicability of the statute of limitations; (4) offset; and (5) waiver of unpaid dues charged

after attempts to resign their full golf membership.

In response, Old Club moved to dismiss and argued that the claim of deceit should

have been raised in the Dye lawsuit; the question of whether it could allow non-property

owners to use the golf course had already been adjudicated; and the statute of limitations

had expired. Appellants steadfastly maintain that the fraud was concealed until July 10,

2014, when Randy Brucker, president of the developer, testified in Dye that it was the intent

of the developers to offer golf memberships to non-property owners from the beginning.

Accordingly, appellants allege their claim was brought within the three-year statute of

limitations. They also maintain that their counterclaim is not barred by the doctrine of res

judicata.

On May 31, 2017, appellants executed a quitclaim deed wherein they conveyed their

interest in the property to Old Club. In response, Old Club executed a quitclaim deed back

to appellants and noted their reconveyance of the property was unauthorized and not

accepted. Notwithstanding Old Club’s refusal to accept the conveyance, appellants filed a

disclaimer of interest for the property on October 10, 2017.

4 While this matter was progressing, Old Club entered into an asset purchase and sale

agreement with Diamante Members Club, Inc. (“New Club”), on July 28, 2017. Moreover,

CCI entered a quitclaim of developer rights on December 19, 2017, wherein it transferred

its rights and title to the Declarations as well as other recorded documents related to the

subdivision to New Club. Last, Old Club entered into an assignment of pending litigation,

judgment, and liens (the “Assignment”) wherein it assigned its rights, titles, interests, powers,

privileges, benefits, and obligations under the recorded liens, acquired judgments, and

pending foreclosure causes of action to New Club.

On December 3, 2018, New Club moved for summary judgment against appellants,

arguing that no genuine issues of material fact remain and appellants failed to provide any

valid defense to the complaint. In support of its motion, New Club attached the affidavit of

Terri Socha, the club’s property controller, wherein she attested to the membership dues and

fees owed by appellants. Additionally, the real property lien; delinquent-dues spreadsheet;

Declarations; quitclaim of developer’s rights; and Assignment were provided by New Club.

Appellants opposed the summary-judgment motion and argued, among other things, that

they had no knowledge of the terms of the Declarations; no claim for deceit was alleged or

adjudicated in Dye, 2017 Ark. 42, 510 S.W.3d 759; and there exists no contractual

agreement between themselves and New Club. Mr. Faigin attested to such assertions via

affidavit, which was attached as an exhibit to appellants’ response. Subsequently, appellants

filed a cross-motion for summary judgment or, in the alternative, partial summary judgment.

New Club defended summary judgment on the bases of the statute of limitations and res

5 judicata. On April 11, 2019, Old Club filed a response to appellants’ summary-judgment

motion citing the ruling in Dye.

The circuit court held a hearing on May 2, 2019, wherein the court heard argument

on both motions for summary judgment as well as Old Club’s motion to dismiss appellants’

counterclaim. On May 6, 2019, the circuit court emailed its findings of fact and conclusions

of law to counsel for the parties. For the purposes of the findings, the circuit court noted

that it considered the two entities (Old Club and New Club) to be “one in the same.” A

final judgment and decree of foreclosure was entered by the court on May 31, 2019. The

circuit court held as follows:

The same facts which form the basis of the Defendants’ defenses and counterclaims were presented to the circuit court of Saline County in the case of Dye v. Diamante, A Private Membership Golf Club, LLC, Case No. 63CV-12-90. The Dye case was certified as a class action. The Plaintiff class consisted of all of the property owners in Diamante Subdivision, which includes the Defendants herein. The trial court ruled against the Plaintiff class in the Dye case, and on February 16, 2017, the Arkansas Supreme Court upheld the trial court’s decision and found that the covenants between Diamante Golf Course and the property owners were enforceable. The Defendants herein did not opt out of the Plaintiff class; therefore, they are bound by the trial court’s decision as well as by the affirmation of the Arkansas Supreme Court.

Furthermore, the circuit court stated that while the Dye class did not assert a cause of action

for deceit, fraud, or misrepresentation, the pleadings filed in Dye alleged the same facts used

here to form the basis of fraudulent inducement as a defense as well as the counterclaim for

deceit.2 Accordingly, the court determined that appellants’ claims could have been litigated

2 The circuit court also noted that counsel for appellants was the same attorney who represented the plaintiffs in the Dye class action.

6 in Dye and because they were not, their claims are subject to the doctrine of res judicata, and

therefore, are forever settled and cannot be litigated. Additionally, the court declared all

remaining defenses asserted by appellants meritless.

Following entry of judgment, New Club filed a petition for attorney’s fees, which was

granted by the circuit court on July 24, 2019. Appellants filed timely notices of appeal on

July 24, 2019. This appeal followed.

II. Points on Appeal

On appeal, appellants argue the following: (1) they were denied their right to a jury

trial; (2) res judicata was no bar because (a) there was no claim preclusion, (b) there was no

issue preclusion, and (c) unknown claims are not barred by res judicata; (3) reversal and

remand is appropriate because fraudulent inducement is a proper defense that must be

considered, specifically (a) fraudulent inducement is a question of fact, (b) the statute of

limitations is no bar to raising fraudulent inducement in defense of the principal lawsuit or

by conclusion, (c) the fraud alleged of selling golf membership to non-lot-owners was hidden

by the secret plan and by fraudulent inducement, (d) the statute of limitations is no bar

under Ark. Code Ann. § 16-56-102, and (e) time limitations were tolled because of the

fraudulent conduct; (4) New Club’s claims were based on a failed assignment because it

abolished the earlier contract by its amended and substituted bylaws, and appellants never

agreed to New Club’s contract; and (5) the award of fees and costs should be reversed.

III. Discussion

7 Appellants contend that res judicata is not applicable; therefore, the circuit court’s

order should be reversed and remanded. Specifically, appellants maintain that Dye was

devoid of any allegations of fraud in the inducement of a contract; that the issues litigated

were not the same; they were not parties in Dye nor was New Club; and there was no full

and fair opportunity in Dye for the parties to litigate fraud in the inducement because it was

not revealed until the trial testimony of Mr. Brucker. In response, New Club contends

appellants had knowledge of what they now allege as fraud but instead characterized the

same underlying facts as breach of contract in Dye. Old Club filed a separate appellate brief

in defense of the circuit court’s dismissal of the counterclaim arguing that appellants’ claim

is merely clothed in a different theory of recovery than in Dye; therefore, the appeal is barred

by res judicata.

While this is an appeal from a motion granting summary judgment, the application

of res judicata is the core of this appeal. When this court reviews a legal doctrine such as res

judicata, we simply determine whether the appellees were entitled to judgment as a matter

of law. Daily v. Langham, 2017 Ark. App. 310, 522 S.W.3d 177.

The concept of res judicata has two facets, one being claim preclusion and the other

issue preclusion. Sutherland v. Edge, 2021 Ark. App. 428. Res judicata bars not only the

relitigation of claims that were actually litigated in the first suit but also those that could have

been litigated. Id. Where a case is based on the same events as the subject matter of a

previous lawsuit, res judicata will apply even if the subsequent lawsuit raises new legal issues

and seeks additional remedies. Id. The purpose of the res judicata doctrine is to put an end

8 to litigation by preventing a party who had one fair trial on a matter from relitigating the

matter a second time. DeSoto Gathering Co., LLC v. Hill, 2018 Ark. 103, 541 S.W.3d 415.

The key question regarding the application of res judicata is whether the party against whom

the earlier decision is being asserted had a full and fair opportunity to litigate the issue in

question. Winrock Grass Farm, Inc. v. Affiliated Real Est. Appraisers of Ark., Inc., 2010 Ark. App.

279, 373 S.W.3d 907. Res judicata is based on the assumption that a litigant has already had

his day in court. Cox v. Keahey, 84 Ark. App. 121, 133 S.W.3d 430 (2003).

Claim preclusion bars relitigation of a claim in a subsequent suit when five factors

are present: (1) the first suit resulted in a final judgment on the merits; (2) the first suit was

based on proper jurisdiction; (3) the first suit was fully contested in good faith; (4) both suits

involve the same claim or cause of action; and (5) both suits involve the same parties or their

privies. Winrock, 2010 Ark. App. 279, at 6–7, 373 S.W.3d at 912. Issue preclusion, otherwise

known as collateral estoppel, applies when the following elements are present: (1) the issue

sought to be precluded must be the same as that involved in the prior litigation; (2) the issue

must have been actually litigated; (3) the issue must have been determined by a final and

valid judgment; and (4) the determination must have been essential to the judgment. Id. at

10, 373 S.W.3d at 914.

Here, the circuit court found that appellants’ claims were barred by claim preclusion.

The court held that the “pleadings filed in the Dye case by counsel for the Plaintiffs in the

Dye case and Defendants herein allege the same facts that he now claims constitute the tort

of deceit, although he did not denominate it as deceit, fraud, or misrepresentation at the

9 time.” Additionally, the circuit court reiterated that the basis for the alleged “new” cause of

action is testimony elicited in the Dye case; that counsel for appellants was present when that

testimony was elicited; and counsel was aware of the testimony before the circuit court

rendered a decision. Accordingly, the court held that appellants could have litigated their

claim of deceit and/or fraud in the inducement in Dye, and because they did not do so, their

claims are barred by res judicata. We agree.

In Dye, the Arkansas Supreme Court expressly addressed Old Club’s right to create

public golf memberships pursuant to the terms of the Declarations. The court held as

follows:

In the instant case, the language in the Declarations clearly puts a purchaser on notice that the club may create “categories of membership, not running with the land, which may be made available to the general public.” The appellants argue this language does not mean that the club could make other memberships. However, the Declarations clearly put the appellants on notice that the full golf membership is subject to the rules and regulations of the club. The trial court found that a version of the club’s rules and regulations existed as early as 1994. Furthermore, those documents allow the club to create “other categories of membership but not at the same level of privilege as Full Golf Members or that run with the land.” Given the authority in both the rules and regulations as well as the Declarations, the circuit court was correct that the Declarations authorize the club to create other categories of membership. Lastly, the trial court noted, the club had actively created other forms of golf membership since 1998. Any claim for an alleged breach had long been time- barred.

Dye, 2017 Ark. 42, at 10–11, 510 S.W.3d at 766. Furthermore, the Dye court specifically

addressed the documentation used to market the development, which maintained that use

of the golf course would be limited to Diamante property owners and their guests. The Dye

class members provided the marketing materials to support their claim that allowing non-

10 property-owning individuals to use the golf course was a fundamental breach of contract,

thereby rendering the Declarations unenforceable. Here, appellants submitted the same

documents to support their fraud claim against appellees. However, the supreme court in

Dye rejected the plaintiff class members’ argument and held that because the provisions

contained in the sales materials were not contained or referenced within the Declarations,

they did not become a part of the agreement between the parties. Id. at 11, 510 S.W.3d at

766.

We find that the elements of claim preclusion are satisfied. First, all pending motions

were decided by summary judgment, and summary judgment is a final adjudication on the

merits. See Nat’l Bank of Com. v. Dow Chem. Co., 338 Ark. 752, 1 S.W.3d 443 (1999).

Second, the Saline County Circuit Court had jurisdiction to hear the motions. Third,

appellants fully contested entry of summary judgment in favor of appellees. And fourth,

appellants were unnamed parties in Dye, and while they make the argument that New Club

was not a party, the parties need not be precisely the same for a judgment in one action to

bar another. See Winrock, 2010 Ark. App. 279, 373 S.W.3d 907. As long as there is

substantial identity or privity of parties, this element of claim preclusion is met. Privity of

parties within the meaning of res judicata means a person so identified in interest with

another that he represents the same legal right. Spears v. State Farm Fire & Cas. Ins., 291 Ark.

465, 725 S.W.2d 835 (1987). Here, there is clearly privity between Old Club and New Club

pursuant to the Assignment, and furthermore, there is substantial identity because the same

claim is at stake for both parties (i.e., the foreclosure of lien on appellants’ property).

11 Finally, and undoubtedly where the highest source of contention lies—is whether both

suits involve the same claim or cause of action. Appellants strongly maintain their claim for

fraud was unknown until the Dye trial, therefore, res judicata does not bar their right to bring

such claim in a later lawsuit. We disagree. Several points on appeal in Dye centered on the

so-called lack of “exclusiveness” of the club, even referencing the same marketing material

appellants set forth here, to evidence how the lots were marketed to potential property

owners. As held in Dye, the Declarations were public record prior to the sale of any lot in

the subdivision, and those Declarations allow the developer to create other categories of golf

memberships that do not run with the land. Therefore, property owners were on notice that

a membership was subject to the rules and regulations of the club and probable “less

privileged” use of the facilities by the general public. Dye, 2017 Ark. 42, at 10–11, 510

S.W.3d at 766.

Despite the terms of the Declarations, appellants maintain that Old Club deliberately

concealed its “secret plan,” and as a result, they are entitled to damages for deceit and/or

fraud in the inducement. As noted by the circuit court, appellants’ attempt to nominate

their cause of action as one for “deceit, fraud, or misrepresentation” does not change the

fact that appellants’ claim involves the same set of facts alleged in Dye. Appellants were

unnamed members of the class action and thus are bound by the circuit court’s decision in

Dye, as affirmed by the Arkansas Supreme Court.

Considering our record on appeal, as well as the multitude of accompanying circuit

court cases and appeals involving these facts and parties, we find this to be textbook res

12 judicata. Allowing the appellants, who have already had their day in court, to continue on

this journey of litigating the same set of facts goes against the clear purpose of the well-

established doctrine of res judicata, which is to prevent a litigant, who had a fair trial on the

merits, from relitigating the matter a second time. Thus, appellees were entitled to judgment

as a matter of law, and res judicata applies to prevent appellants’ claims on appeal. The

circuit court correctly applied res judicata in granting summary judgment in favor of

appellees.

We note that appellants raise other challenges to the circuit court’s order granting

appellees’ motions for summary judgment. However, having concluded that res judicata bars

appellants’ suit, we need not consider the other points on appeal.

Affirmed.

GRUBER and BARRETT, JJ., agree.

Robert S. Tschiemer, for appellants.

Schnipper, Britton & Stobaugh, by: Beau Britton, for separate appellee Diamante

Membership Club, Inc.

McMillan, McCorkle & Curry, LLP, by: J. Philip McCorkle, for separate appellee

Diamante, a Private Membership Golf Club, LLC.