Court Opinion

ID: 9758566
Source: CourtListenerOpinion
Date Created: 2023-08-28 23:36:29.268652+00
Date Added: 2024-06-11T07:28:53.002450
License: Public Domain

Wendell L. Griffen, Judge, dissenting. I agree that the trial court misinterpreted the Hazel case and that it erred in concluding that appellant was entitled to contribution on the promissory note. However, unlike the majority, I disagree that these errors require reversal. This case is before us after denial of a motion to dismiss under Arkansas Rule of Civil Procedure 12(b)(6). Arkansas is a fact-pleading state. Ark. R. Civ. P. 8. As such, appellant was required to state sufficient facts to show entitlement to relief. We must decide whether the trial court erred in holding that appellant failed to state sufficient facts to entitle him to proceed with his claim. I would hold that the trial court properly dismissed appellant’s claim because (a) appellant failed to attach a copy of the promissory note to his pleadings as expressly required by Arkansas’s pleading requirements, and (b) he faffed to state facts to support any legal theory entitling him to recovery. Although not addressed by the majority, it is crucial at the outset to understand the effect of the nature of the appellant’s pleading obligation. If appellant sufficiently pled that he satisfied appellee’s debt to the Union Bank pursuant to a written obligation, then the five-year statute of limitations under Arkansas Code Annotated § 16-56 — 111 (Supp. 2003) governs his action, and his complaint is not time-barred. If appellant’s pleadings assert that he satisfied the debt pursuant to an implied (unwritten) agreement, then he might be entitled to recover, based on equitable subrogation. Consequently, his complaint would be governed by the three-year statute-of-limitations under Arkansas Code Annotated § 16-56-105(3)(1987), and therefore, his complaint would be time-barred. Thus, in order to properly reverse and allow appellant to proceed with his claim in the face of the three-year statute-of-limitations, the majority must hold that appellant alleged in his pleadings that he either had an independent written agreement with appellees to act as guarantor or that he, by some written agreement, obligated himself to the Union Bank, allowing him to rise to the rights of the bank when appellees defaulted. Appellant plainly failed to attach the promissory note to his pleadings and he failed to state sufficient facts alleging that he entered into a written contract with the bank that obligated him to pay in the event of appellees’ default on the promissory note. Further, appellant failed to allege that he had a written agreement with appellees that required them to repay him for any payment made to the bank if they defaulted. Accordingly, appellant’s pleadings do not show that he was entitled to the five-year statute of limitations. Although the majority fails to address appellee Randall Carpenter’s argument in this regard, I agree that Arkansas Rule of Civil Procedure 10(d) requires a complainant to attach a copy of the written agreement upon which he bases his claim to his pleadings. See Ray & Sons Masonry Constr., Inc. v. U.S. Fidelity & Guaranty, 353 Ark. 201, 114 S.W.3d 189 (2003) (affirming the grant of JNOV, in part, where the claimant failed to attach to his pleadings the contract upon which he claimed a subcontractor was liable).1 On its face, Rule 10(d) makes no exceptions to the requirement for Rule 12(b)(6) motions. The only exception to this requirement under Rule 10(d) is that the party may demonstrate “good cause” for not attaching the agreement. Appellant did not even broach the issue of good cause in his pleadings or in the hearing below. The majority, by a reasoning process I have yet to comprehend, characterizes appellant’s legal theory as “subrogation as an accommodating party.” The majority cites general law governing subrogation, guarantors, and sureties, asserts that equitable subro-gation is an equitable theory of recovery, and maintains that appellant stepped into the shoes of Union Bank when he satisfied the promissory note.2 Then, without explicitly declaring that appellant is entitled to recovery as an accommodation party or pursuant to equitable subrogation, the majority holds that the statute of limitations governing written agreements governs appellant’s claim because the promissory note between appellees and Union Bank evinces an agreement between appellant and the bank. By this process, the majority either ignores or fails to discern the patent flaws in appellant’s pleadings. In short, appellant did not plead sufficient facts to entitle him to recover on the written note as an accommodation party or based upon an implied agreement pursuant to an equitable-subrogation theory. While the trial court is to accept as true appellant’s allegation that he acted as guarantor, this begs the question as to whether appellant acted as guarantor pursuant to a written agreement or an implied agreement. It is not enough to assert that an agreement existed, where the very nature of the agreement determines whether appellant’s claim is time-barred. In any event, the trial court’s dismissal should be affirmed because no matter which legal theory applies, appellant has failed to sufficiently state a claim for Rule 12(b)(6) purposes. First, although appellant cites law governing accommodation parties in his brief, he never alleged below that he signed the promissory note in any capacity, or was an accommodation party; nor does he develop this argument on appeal in any fashion. Instead, appellant merely cites Arkansas Code Annotated § 4-3-419(e)(Repl. 2001), part of the Arkansas Uniform Commercial Code (UCC), and then, without applying UCC law to any facts, he argues that he is entitled to recover based upon equitable subrogation. But equitable subrogation has nothing in common with being an accommodation party on a note. Appellant’s argument is internally inconsistent. An accommodation party has rights arising from a written obligation, whereas equitable subrogation arises from an implied obligation. Instead of affirming the trial court’s decision that appellant’s claim must be dismissed for failure to state a claim, the majority reverses on the ground that appellant is entitled to proceed because he stepped into Union Bank’s rights to recover on the promissory note that even the majority must concede appellant did not append to his pleadings. We do not allow litigants to develop arguments on appeal and we do not make their arguments for them. Carter v. Four Seasons Funding Corp., 351 Ark. 637, 97 S.W.3d 387 (2003). This is not a case involving recovery on a promissory note under the UCC. If it were, appellant’s claim must fail because he neither produced the original note nor satisfied the UCC requirements for proving lost negotiable instruments. McKay v. Capital Resources Co. Ltd., 327 Ark. 737, 940 S.W.2d 869 (1997); Ark. R. Civ. P. 10(d). The only way appellant’s claim can survive a 12(b)(6) motion is if it states facts to support that appellant was entitled to recover based upon a written agreement because any claim based upon an implied agreement would clearly be barred by the three-year statute of limitations. Unfortunately, appellant’s complaint does not state, and cannot be fairly read to infer, that appellant signed the promissory note or signed any other written agreement between him and Union Bank that would entitle him to rise to the rights of the bank upon appellees’ default of the note. How can appellant be entitled to recover on the promissory note when he did not allege in his complaint that he signed the promissory note? How can his pleadings be interpreted to support such a theory when he failed to attach the promissory note showing his signature? How can we justly hold that appellant alleged the facts needed to recover as an accommodation party in the face of a record that shows he never produced any writing in his pleadings that would entitle him to relief on that theory? The majority ducks these legitimate concerns with resounding silence. Further, nothing in the complaint states whether appellant’s agreement with appellees was written or implied. Thus, despite the majority’s bald assertion that “the loan papers between appellees and the bank constituted evidence of the agreement between appellant and appellees,” nothing in the complaint alleges or even allows an inference that appellant entered into a written agreement with appellees. Rather, the complaint merely asserts that appellees were obligated to pay Union Bank pursuant to a promissory note and that appellant agreed to act as guarantor on appellees’ obligation under the note. However, the note was not attached to the complaint. The upshot of the majority opinion is that our pleading rules are satisfied by merely inserting the word “guarantor” in a complaint, without also asserting whether the complaining party acted based on a written or an implied obligation and without attaching any written agreement to the complaint. Such a pleading does not provide a trial court with sufficient facts regarding the basis upon which a complainant seeks to recover. It is axiomatic that if a trial court cannot determine a complainant’s basis for recovery, then the complainant has not stated an adequate claim under Rule 12(b)(6) and therefore, should not be allowed to proceed with his or her claim. Accordingly, appellant is not entitled to proceed on the promissory-note theory. Second, appellant’s pleadings do not establish his entitlement to proceed based upon an equitable-subrogation theory. Subrogation allows recovery when a person pays the debt of another but was not legally obligated to do so. The elements of subrogation are as follows: 1) a party pays in full a debt or an obligation of another or removes an encumbrance of another 2) for which the other is primarily liable, 3) although the party is not primarily or technically hound to do so, 4) in order to protect his own secondary rights, to fulfill a contractual obligation, or to comply with the request of the original debtor, 5) without acting as a volunteer or an intermeddler. St. Paul Fire & Marine Ins. Co. v. Murray Guard, Inc., 343 Ark. 351, 356, 37 S.W.3d 180, 183 (emphasis added). Equitable subrogation is given a liberal application and is broad enough to include every instance in which one person, not acting voluntarily, has paid a debt for which another was primarily liable and which that other party should have paid. Id. Equitable subrogation requires no writing or agreement in most instances. Id. Conventional subrogation, by contrast, is founded on an understanding or agreement. Id. Here, appellant does not plead facts to entitle him to recover on an equitable subrogation theory. According to his own allegations, he merely paid a debt that he was already obligated to pay. Moreover, even if appellant had sufficiently pled a cause of action for recovery under equitable subrogation, his claim would be time barred by the three-year statute of limitations. This is not a case in which a party may recover under alternative legal theories. The fatal problem with appellant’s pleadings is that the only legal theory that he pled, equitable subrogation, is inconsistent with his assertion that the statute of limitations governing written agreements also applies to his claim. Thus, in reversing the dismissal of appellant’s claim, the majority is allowing appellant to obtain the benefit of a statute-of-limitations governing a written agreement, by which he would be legally obligated to pay, when the sole theory he advances is an equitable theory of recovery based on an implied agreement when there is no legal obligation to pay. Appellant cannot have it both ways: either he was legally required to pay the debt pursuant to a written contract (for which the five-year statute-of-limitations would apply), or he paid a debt that he was not required to pay pursuant to an implied agreement (under which his claim is barred by the three-year statute-of-limitations.) Finally, as a practical matter, I do not see how the trial court is to proceed on remand. A defendant should not be required to defend, and a trial judge should not be compelled to entertain, a lawsuit where it is apparent from the pleadings that the complainant does not state facts to establish his legal claim. The precise purpose of Rule 12(b)(6) is to nip in the bud those claims, like appellant’s, that do not properly assert a basis for relief. Given the decision reached today, I do not envy the trial judge who, on remand, must somehow retain jurisdiction over a matter that is clearly not what appellant alleges it to be, but which the majority has yet to classify within any other legal theory upon which appellant might avoid being barred by limitations. I respectfully dissent.   Although Ray and Sons, supra, did not involve a 12(b)(6) motion, the case is still instructive, in that the Arkansas Supreme Court stated that the term “shall” in Rule 10(d) is mandatory, which means that the claim does not stand if the written agreement is not attached to the pleadings. In the instant case, appellant belatedly attached the illegible promissory note to his brief-in-response to appellee Randall Carpenter’s motion to dismiss. However, a brief-in-support of a pleading is not a pleading. Arkansas Rule of Civil Procedure distinguishes between “pleadings” and “motions.” Rule 7(a) specifies which pleadings are allowed and Rule 7(b) governs the submission of motions and other papers. Rule 7(a) recognizes the following as pleadings: complaints, answers, counterclaims, replies to counterclaims, answers to cross-claims, third-party complaints and third-party answers. Rule 7(a) states specifically that “[n]o other pleadings shall be allowed.” Thus, a brief-in-response to a motion to dismiss is not a pleading and appellant’s attachment of the illegible promissory note to the same does not satisfy Rule 10(d).    As we review this appeal following dismissal on the pleadings rather than after summary judgment or trial on the merits, I do not understand how my colleagues can conclude that appellant succeeded to the rights of Union Bank, particularly when none of us is able to read the promissory note from appellees to the Bank and absent any other written agreement in the record.