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Lone v. Koch

Court of Appeals of Arkansas, Division I

June 17, 2015

MOHAMMAD ASHRAF LONE, APPELLANT
v.
RICK KOCH d/b/a RICK KOCH OIL COMPANY, APPELLEE

Page 153

APPEAL FROM THE PULASKI, COUNTY CIRCUIT COURT. SIXTH DIVISION. NO. 60CV-2013-3552. HONORABLE TIMOTHY DAVIS FOX, JUDGE.

Lax, Vaughan, Fortson, Rowe & Threet, P.A., by: Grant E. Fortson, for appellants.

Nixon & Light, by: J.R. Buzbee and John B. Buzbee, for appellees.

ROBERT J. GLADWIN, Chief Judge. VIRDEN and HIXSON, JJ., agree.

OPINION

ROBERT J. GLADWIN, Chief Judge.

Page 154

Appellant Mohammad Ashraf Lone appeals the August 15, 2014 order entered by the Pulaski County Circuit Court. He argues that the circuit court erred when it denied his motion to set aside the judgment previously entered in favor of appellee Rick Koch d/b/a Rick Koch Oil Company (collectively " Koch" ). Koch cross-appeals, arguing that the circuit court erred when it stayed all execution of the judgment until he appeared in person to show cause why he should not be held in contempt for failing to appear for his deposition. We affirm on direct appeal and reverse and remand on cross-appeal.

Facts

Mohammad Lone and Lone's Jacksonville, Inc. (collectively " Lone" ), and Koch entered into a " Retailer Product Sales Agreement" (the " RPSA" ) dated November 1, 2011. Under the RPSA, Koch paid Lone for the rights to supply fuel to two convenience-store locations as follows: $200,000 for a location in Wichita, Kansas, and $50,000 for a location in Johnson, Arkansas.

Under the RPSA, Lone was contractually obligated to provide Koch the rights to provide fuel to two stores. After executing the RPSA and accepting the $200,000, Lone was unable to open the Wichita store and was in default of the RPSA. On April 2, 2012, six months after the RPSA had been executed, Koch emailed Lone demanding the return of its $200,000 and advising that failure to do so would result in legal action. Lone did not return the $200,000 to Koch.

On April 26, 2012, Koch filed a lawsuit in Oklahoma district court alleging a single claim for breach of the RPSA and seeking to recover the $250,000 that had been advanced for the right to supply fuel to the two convenience-store locations, plus additional consequential damages. Lone was served with the lawsuit on May 29, 2012. After the lawsuit had been filed, Lone met with Koch and they negotiated in an attempt to settle the lawsuit by modifying the RPSA to substitute a different store location for the Wichita store. Based on his understanding of their agreement, Lone did not file an answer or otherwise appear in the lawsuit.

The modification agreement was drafted and sent to Lone via email by Koch's employee, Tom Howell, on June 29, 2012. Lone returned an executed copy of the modification agreement by email on July 3, 2012. The modification agreement provided that the RPSA was modified to substitute a store located in Frontenac, Kansas, for the Wichita store that appeared in the original RPSA. Pursuant to the terms of the modified RPSA, Koch supplied fuel to both the Frontenac store and the Johnson store after Lone signed the modification agreement. However, Koch claims that he never executed the modification agreement and never told Lone that the Oklahoma lawsuit had been dismissed or otherwise resolved.

Koch did not dismiss the lawsuit, and on January 4, 2013, without notice to Lone, Koch obtained a default judgment against Lone in the amount of $268,000 (the " judgment" ).

Page 155

At the time the judgment was entered, Koch was supplying fuel to both the Frontenac store and the Johnson store under the terms of the modified RPSA. Koch filed the Oklahoma judgment, and it was registered in Arkansas with the Pulaski County Circuit Court on September 6, 2013, and an order confirming registration of foreign judgment was entered on October 4, 2013.

On May 5, 2014, Lone filed a motion to set aside the judgment and to stay execution based on fraud, misrepresentation, and misconduct of Koch in obtaining the judgment. An amended motion was filed on July 1, 2014, and a hearing was held on the motion on July 16, 2014. Koch did not appear at the hearing. Lone testified at the hearing, and the circuit court received twenty-three exhibits, including emails from Koch and his agents concerning the modified RPSA substituting the Frontenac store for the Wichita store.

Koch's counsel deferred cross-examination of Lone, and Lone rested. After Lone rested, Koch's counsel moved to dismiss the motion to set aside the judgment. The circuit court granted the motion to dismiss and denied Lone's motion to set aside the judgment, determining that Lone had failed to prove fraud in the procurement of the judgment by clear and convincing evidence. In its ruling, the circuit court also stayed all execution of the judgment until such time as Koch appeared in person to show cause why he should not be held in contempt for failure to attend a scheduled deposition. The circuit court's ruling was memorialized by an order entered on August 15, 2014. Lone filed a timely notice of appeal on September 15, 2014.[1] Koch filed a timely notice of cross-appeal on September 23, 2014.

Standard of Review

An order denying a motion to set aside a default judgment is an appealable order, see Marcinkowski v. Affirmative Risk Mgmt. Corp., 322 Ark. 580, 910 S.W.2d 679 (1995), which this court reviews for an abuse of discretion. Nationwide Ins. Enter. v. Ibanez, 368 Ark. 432, 246 S.W.3d 883 (2007). The abuse-of-discretion standard is " a high threshold that does not simply require error in the circuit court's decision, but requires that the circuit court act ...


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