Title: First Commercial Bank, N.A. v. Michael W. Walker, Aearth Development, Inc., Aearth Preparation, Inc., and Coal Processors, A Joint Venture

State: arkansas

Issuer: Arkansas Supreme Court

Document:

FIRST COMMERCIAL BANK, N.A. v. Michael W.
WALKER, Aearth Development, Inc., Aearth
Preparation, Inc., and Coal Processors, A
Joint Venture

96-1495                                            ___ S.W.2d ___

                    Supreme Court of Arkansas
                Opinion delivered April 30, 1998


1.   Appeal & error -- standing and capacity issue preserved by directed-verdict
     motion. -- The issue of standing and capacity was preserved by
     a timely motion for a directed verdict that was renewed at the
     conclusion of the case.

2.   Appeal & error -- law of case -- effect on subsequent appeal. -- The
     doctrine of law of the case prevents an issue raised and
     decided in the first appeal from being raised in a subsequent
     appeal.

3.   Appeal & error -- law of case -- review of standing and capacity not
     barred by. -- Where the supreme court's decision in the first
     appeal was predicated solely on the issue whether the chancery
     court had subject-matter jurisdiction, the supreme court's
     review of standing and capacity was not barred by the law of
     the case.

4.   Judgment -- res judicata -- when applicable. -- For the doctrine of
     res judicata to apply, the claim must have been adjudicated on
     the merits; this requirement presupposes that the court in
     which the claim was litigated properly had jurisdiction over
     those proceedings.
5.   Judgment -- res judicata -- did not require circuit court to adopt
     chancellor's rulings on remand. -- The doctrine of res judicata did
     not bar the circuit court's or the supreme court's
     consideration of standing and capacity where the chancery
     court rendered a judgment for appellant on the merits, but the
     supreme court reversed that decision for lack of subject-
     matter jurisdiction; therefore, the circuit court was not
     required by the doctrine of res judicata to adopt on remand
     any of the chancellor's rulings.

6.   Contracts -- interference with contractual relationship -- only appellee
     business entities could assert claim. -- To prevail on a claim for
     interference with a contractual relation, a plaintiff must
     present evidence and prove that a third party failed to
     continue a contractual relationship with the claimant as a
     result of the defendant's improper conduct; here, appellees
     did not allege that appellant's actions caused a third party
     to fail to continue a contractual relationship with the
     individual appellee, but rather asserted that appellant's
     conduct caused a third party to discontinue a contractual
     relationship with appellee business entities.

7.   Fraud -- only appellee business entities could assert claim. -- Only
     appellee business entities could assert a fraud tort claim
     where there was no allegation that appellant had made or
     breached any promise to provide financing to the individual
     appellee as an individual, but instead the claim was that
     there was a breach of a promise to enter into long-term
     financing with appellee business entities.

8.   Conversion -- only appellee business entities could assert claim. -- Where
     appellees claimed that appellant converted a sum of money
     belonging to appellee business entities that had been
     deposited in an escrow account, but where there was no
     allegation that the individual appellee asserted any right or
     interest in these funds for his own individual benefit,
     appellee business entities were the only parties who could
     assert, as owners, that appellant's actions constituted a
     conversion of the escrow account.

9.   Corporations -- corporation and stockholders separate entities. -- A
     corporation and its stockholders are separate and distinct
     entities, even though a stockholder may own the majority of
     the stock.

10.  Corporations -- attributes of corporation. -- A corporation has the
     power to sue and be sued in its corporate name; it is a legal
     entity which, being distinct from its members, owns the
     corporate property and owes the corporate debts, is the
     creditor to sue or the debtor to be sued, has perpetual
     existence, and can act only through its duly constituted
     organs, primarily its board of directors.

11.  Corporations -- officers -- no individual right of action for corporate
     injuries. -- Generally, the officers and members of a
     corporation may not sue or be sued in their own name; a
     corporate officer has no individual right of action against a
     third party for alleged wrongs inflicted on the corporation,
     even if the officer is the sole shareholder.

12.  Corporations -- officers -- no showing that individual appellee made
     contribution toward payment of guaranteed notes. -- There was no
     showing that the individual appellee had made any contribution
     toward payment of the notes that he guaranteed, even though it
     appeared that he had been discharged from bankruptcy; the
     wrongs that appellees sought to redress were corporate
     injuries, not injuries to the stockholder-officer as an
     individual.

13.  Guaranty -- promises of debtor and guarantor are independent. -- The
     undertaking of the principal debtor, here appellee business
     entities, is independent of the promise of the guarantor, here
     the individual appellee; a guarantor is one who makes a
     contract, which is distinct from the principal obligation, to
     be collaterally liable to the creditor if the principal debtor
     fails to perform; a guaranty relationship does not merge with
     that of a principal borrower so as to allow the guarantor to
     pursue the borrower's causes of action.

14.  Guaranty -- majority shareholder did not have standing to pursue causes of
     action belonging to corporate borrowers -- acted only as guarantor. -- The
     individual appellee's status as a majority shareholder did not
     vest him with standing to pursue causes of action that
     belonged to the corporate borrowers; likewise, in borrowing
     the funds, the individual appellee acted as a representative
     of appellee business entities and as a guarantor of the debt;
     although he was shown as a "maker" on some of the loan
     documents, he did not have standing to maintain this action
     because appellee business entities were the principal
     borrowers and sole recipients of the borrowed funds; the
     individual appellee acted only as a guarantor, even on those
     notes that he signed individually and as a representative of
     appellee business entities.

15.  Appeal & error -- individual appellee did not have standing as either
     stockholder-officer or guarantor of corporate debts. -- The supreme
     court concluded that the individual appellee did not have
     standing to bring the action either as an individual
     stockholder and officer of appellee business entities or as a
     guarantor of the debts of appellee business entities.
16.  Corporations -- corporation not in existence cannot initiate lawsuit. --
     A corporation not in existence cannot initiate a lawsuit; a
     suit must be initiated by a person, natural or artificial. 

17.  Corporations -- appellee business entities lost capacity to file suit
     following dissolution of joint venture and revocations of corporate
     charters. -- Appellee business entities lost the capacity to
     file suit following the dissolution of appellee joint venture
     and the revocations of the corporate charters of appellee
     business entities; the matter was reversed and dismissed.


     Appeal from Pulaski Circuit Court, Second Division; Chris
Piazza, Judge; reversed and dismissed.
     Barber, McCaskill, Jones & Hale, P.A., by: Glenn W. Jones,
John S. Cherry, and Joseph F. Kolb; and Williams & Anderson, by:
Philip S. Anderson, Leon Holmes, and Katharine R. Cloud, for
appellant/cross-appellees.
     The Burk Law Firm, A Professional Corporation, by: Michael G.
Burk; Walker & Black, by: Kendell R. Black; and James E. Burk, for
appellees/cross-appellants.

     Ray Thornton, Justice. 
     Plaintiffs, Michael W. Walker, Aearth Development, Inc.
(Aearth), Aearth Preparation, Inc., and Coal Processors, brought
the underlying lender-liability action, asserting that wrongful
actions of defendant, First Commercial Bank and its predecessors
(the Bank), caused the failure of plaintiffs' coal mining,
processing, and sales business in the Arkansas River Valley.  This
is the second appeal involving the disposition of these issues. 
The first appeal followed the chancery courtþs judgment in favor of
the Bank on all allegations after a twelve-day trial.  On appeal,
the jurisdiction of the chancery court was challenged, and we
determined that the lower court erred in transferring the case from
circuit court to the chancery court because the chancery court
lacked subject-matter jurisdiction.  See Walker v. First Commercial
Bank, 317 Ark. 617,