Bibbs v. Community Bank of Benton

289 S.W.3d 393, 375 Ark. 150, 2008 Ark. LEXIS 761
CourtSupreme Court of Arkansas
DecidedDecember 4, 2008
Docket08-378
StatusPublished
Cited by15 cases

This text of 289 S.W.3d 393 (Bibbs v. Community Bank of Benton) is published on Counsel Stack Legal Research, covering Supreme Court of Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bibbs v. Community Bank of Benton, 289 S.W.3d 393, 375 Ark. 150, 2008 Ark. LEXIS 761 (Ark. 2008).

Opinion

Robert L. Brown, Justice.

Appellants, Michael Bibbs, L.D. Mason, and MJ Construction Company, Inc., appeal from the circuit judge’s judgment granting summary judgment and dismissal in favor of appellee Community Bank. The appellants assert three points on appeal. We affirm the judgment.

This dispute arises from a loan agreement between Community Bank and Bibbs, Mason, and MJ Construction. Bibbs and Mason are shareholders of MJ Construction — a dirt moving and development business. In 2000, Bibbs, Mason, and MJ Construction purchased 120 acres in Lonoke County with the intent to develop a subdivision. The purchase was financed with a three-year, $375,000 loan from Community Bank, with Community Bank taking a mortgage on the property as security. The loan agreement provided that a final balloon payment for the unpaid balance of the loan was due on April 25, 2003. According to Bibbs, he did not expect to pay off the loan on its due date because he believed that Community Bank would allow him to “roll over” the unpaid balance into a new loan. Bibbs, Mason, and MJ Construction failed to pay off the loan on its due date, and Community Bank made demand for the final balloon payment. When the final payment went unpaid, Community Bank sued for foreclosure on August 1, 2003. On August 25, 2003, Bibbs filed for Chapter 7 bankruptcy. On February 8, 2005, Mason also filed for Chapter 7 bankruptcy, and in doing so, he scheduled a potential lender-liability lawsuit against Community Bank as an asset of the estate. About four months later, Mason terminated his Chapter 7 bankruptcy and filed a Chapter 13 bankruptcy petition.

On August 8, 2005, Bibbs, Mason, and MJ Construction filed suit against Community Bank and alleged breach of the covenant of good faith, breach of fiduciary duty, fraudulent concealment, constructive fraud, conversion, unjust enrichment, and intentional infliction of emotional distress (“lender-liability lawsuit”). On August 30, 2005, Community Bank filed an answer in which it asserted that Bibbs, Mason, and MJ Construction lacked standing to bring this suit.

On February 13, 2007, Community Bank moved for summary judgment, arguing that the appellants lacked standing because Bibbs’s and Mason’s Chapter 7 bankruptcy trustees had the exclusive right to prosecute the action, and they were not parties plaintiff. On March 22, 2007, the appellants filed an amended complaint in which Bibbs’s and Mason’s bankruptcy trustees were added as plaintiffs. On that same date, Bibbs and Mason filed a response to Community Bank’s motion for summary judgment in which they argued that they were the proper parties before the court but that “the claims have been, and continue to be pursued on behalf of the estate.” Attached to their response to Community Bank’s motion for summary judgment was a February 20, 2007 affidavit from James Dowden, Bibbs’s bankruptcy trustee. Mr. Dowden’s affidavit said that during his tenure as trustee he became “aware of [appellants’] assertion that they had a cause of action against Community Bank”; that appellants hired an attorney, James Penick, to pursue the claim on a contingent fee basis; that Mr. Dowden obtained the bankruptcy court’s approval of the lawsuit (in September 2005, after the lawsuit had been filed) and recorded the suit as a potential asset of the estate on December 31, 2005; that appellants’ claims were “being pursued on behalf of the Chapter 7 bankruptcy estate by Mr. Penick as special counsel to the Trustee,” as was “the proper way of handling such litigation”; and that any funds obtained from a settlement or a verdict in favor of the appellants would be payable to the bankruptcy estate. Additionally, appellants argued that MJ Construction had standing to bring the lawsuit, even if Bibbs and Mason did not.

On April 12, 2007, Community Bank moved to dismiss the appellants’ amended complaint because it was filed after the three-year statute of limitations had expired. 1 Community Bank asserted, in addition, that MJ Construction lacked standing because it was not a corporation in good standing at the time either the original complaint or the amended complaint was filed. This assertion was supported by a certificate from the Arkansas Secretary of State, showing that MJ Construction’s corporate charter had been revoked on December 31, 2003, and was not reinstated until April 9, 2007.

On May 7, 2007, the circuit judge sent a letter to both parties stating that a hearing on Community Bank’s summary-judgment motion regarding standing and motion to dismiss regarding the statute of limitations would not be scheduled until the parties had completed mediation. The next day, on May 8, 2007, the judge sent a second letter to the attorneys setting a hearing on the motions for May 21, 2007. On that same date, counsel for Community Bank sent a letter to appellants’ counsel erroneously stating that the hearing had been scheduled for July 10, 2007.

On May 21, 2007, the circuit judge held a hearing on Community Bank’s motions. Counsel for the appellants was not present. The circuit judge noted for the record that he had sent a letter fixing the date and time of the hearing to all parties. 2 Because of appellants’ counsel’s absence, the circuit judge stated that he would not hear oral argument from Community Bank’s attorney and would instead decide the issues based on the pleadings and briefs of the parties. The circuit judge then ruled from the bench that he was granting Community Bank’s motion for summary judgment because of appellants’ lack of standing and was dismissing the suit as outside the limitations period.

On May 31, 2007, appellants moved for reconsideration, arguing that the circuit judge had erred by conducting the hearing without appellants’ counsel being present and also arguing why appellants did not lack standing. On June 4, 2007, the circuit judge entered a written order memorializing his ruling from the bench and granting Community Bank’s motion for summary judgment and motion to dismiss. In that order, the circuit judge found that neither Bibbs nor Mason had standing to file the original complaint on August 8, 2005, because both had filed for Chapter 7 bankruptcy prior to that date, and, thus, their bankruptcy trustees had the exclusive right to prosecute the cause of action against Community Bank and had not abandoned that right. The judge further concluded that the three-year statute of limitations had run by the time of the filing of the amended complaint and that the amended complaint did not relate back to the date of the filing of the original complaint because the original complaint was void ab initio. As a final point, he concluded that MJ Construction lacked standing at the time the original complaint was filed due to the revocation of its corporate charter. The circuit judge dismissed the original complaint and amended complaint with prejudice.

Appellants Bibbs and Mason appealed to the court of appeals, and the court of appeals affirmed. Bibbs v. Community Bank, 101 Ark. App. 462, 278 S.W.3d 564 (2008). 3 The appellants petitioned this court for review, which this court granted. When we grant review, we treat the appeal as if it were originally filed in this court. Cedar Chem. Co. v. Knight, 372 Ark.

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Bluebook (online)
289 S.W.3d 393, 375 Ark. 150, 2008 Ark. LEXIS 761, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bibbs-v-community-bank-of-benton-ark-2008.