Court Opinion

ID: 9773818
Source: CourtListenerOpinion
Date Created: 2023-08-29 18:00:19.677266+00
Date Added: 2024-06-11T07:31:58.284134
License: Public Domain

Annabelle Clinton Imber, J., dissenting. I concur with affirming the trial court’s entry of summary judgment against appellants on their claims for malpractice and breach of contract for the reasons stated in the majority opinion. However, I would also affirm the trial court’s entry of summary judgment on appellants’ separate claim for deceit. The corporation U & Me, Inc., lost its capacity to sue when its charter was revoked for failure to pay franchise fees. Thus, any claims by the corporation for legal malpractice, deceit, or breach of contract have ceased to exist. Schmidt v. McIlroy Bank and Trust, 306 Ark. 28, 811 S.W.2d 281 (1991). In order to state a cause of action for deceit by the individual appellants, and not the corporation, appellants must allege sufficient facts to support each of the five elements of the cause of action for deceit, including facts to support the resulting damage to the individual appellants. Clark v. Ridgeway, 323 Ark. 378, 914 S.W.2d 745 (1996). Although appellants may have alleged sufficient facts to come within the first four elements of a claim for deceit, they have failed to allege sufficient facts under the fifth element — the resulting damage to the individual appellants. Appellants allege in their complaint that as a result of appellee’s misrepresentation, “they voluntarily surrendered their rights in the equipment and fixtures necessary to operate their business.” (Emphasis added.) This allegation ignores the fact that all rights to the equipment and fixtures belonged to the corporation under the lease agreement. The majority agrees with the well-settled rule that a corporation is an entity separate from its stockholders. Shipp v. Bell & Ross Enterprises, Inc., 256 Ark. 89, 505 S.W.2d 509 (1974). And, as a separate legal entity distinct from its members, a corporation owns the corporate property and owes the corporate debt, with the corresponding right to sue as a creditor and to be sued as a debtor. Arkansas Iron and Metal Co. v. First National Bank of Rogers, 16 Ark. App. 245, 701 S.W.2d 380 (1995). As stated in Red Bug Realty Co. v. South, 96 Ark. 281, 291, 131 S.W. 340, 344 (1910): A stock holder does not acquire any estate in the property of a corporation by virtue of its stock; the full legal and equitable tide thereto is in the corporation, and a cause of action for the recovery of its property or for a violation of its rights thereto is in the corporation. (Emphasis added.) I find no factual basis for the conclusory allegation in the complaint that the individual appellants were damaged by the alleged misrepresentation. Under the lease agreement, all rights in the equipment and fixtures necessary to operate the business belonged to the corporation. Consequently, the appellants would have sustained no damages in their individual capacities by the surrender of the corporation’s rights to the equipment and fixtures. Thus, appellants have failed to allege sufficient facts to support the required element of damages in their individual cause of action for deceit. I must therefore conclude that no genuine issue of material fact has been presented on the deceit claim brought by the individual appellants and that the complaint fails to state a cause of action for deceit. For the above-stated reasons, I would affirm the trial court’s entry of summary judgment in its entirety. Glaze and Brown, JJ., join in the dissent.