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Fulmer v. Hurt

Court of Appeals of Arkansas, Division I

March 1, 2017



          Richard Mays Law Firm, PLLC, by: Richard H. Mays, for appellants.

          Womack Phelps Puryear Mayfield & McNeil, P.A., by: Jeffrey W. Puryear and Ryan M. Wilson, for appellees.

          ROBERT J. GLADWIN, Judge.

         Appellants Lester Fulmer, Rob Bentley, Robert Best, and Carl Chilson appeal the October 8, 2015 order entered by the Cleburne County Circuit Court granting the motion for summary judgment filed by appellees William Hurt, Michael Hoover, and Mobility Lift Systems, LLC ("MLS"). On appeal, appellants argue that the trial court imposed a higher standard of misconduct by appellees needed to support piercing the corporate veil than is required by Arkansas law. This appeal initially arose from an earlier lawsuit and related appeals[1] in the Cleburne County Circuit Court between the plaintiffs/appellants and Hurt-Hoover Investments, LLC ("HHI") d/b/a MLS, of which individual defendants/appellees Hurt and Hoover are the sole members.

          I. Facts

         The events leading to this particular appeal began with the signing of an "Interests Purchase and Sale Agreement" ("Agreement") dated June 19, 2008, between appellants and HHI. In the Agreement, appellants agreed to sell, and HHI agreed to purchase, all the interests of appellants in H2O Lifts and Ramps, LLC ("H2O"), of which appellants were the sole owners.

         HHI agreed to pay appellants $955, 000, with an initial payment of $400, 000 in cash at closing, and the remaining $550, 000 to be paid by promissory notes from HHI to the respective appellants as follows: (i) Lester Fulmer, $249, 750; (ii) Rob Bentley, $194, 250; (iii) Robert Best, $55, 500; and (iv) Carl Chilson, $55, 500. Each note was to be paid in thirty-six monthly installments, starting October 1, 2008, and continuing on the first day of each month thereafter until September 1, 2011, when the final installments of all remaining principal were due.

         The Agreement was drafted by HHI's attorney, Robert Jones, at the request of Hoover. Hoover specifically directed Jones to include a right of HHI to offset against appellants' promissory notes in the Agreement. In addition, Jones included the procedure that HHI would follow to assert any offsets.

         Appellants were not represented by counsel in the negotiation and execution of the Agreement, and the terms of the indemnity provisions therein were not explained to them at closing. Immediately after the closing on June 19, 2008, HHI assumed control of the business, but Hoover did not conduct an inventory of the assets before the closing because there was a provision in the Agreement to offset any difference that existed after the sale. Only in September 2008 did HHI actually take possession of and move the parts and equipment to Jonesboro. On July 3, 2008, Hoover and Hurt formed a limited liability corporation named "Lifts, People-Mobility, LLC, " the name of which was changed to MLS on September 3, 2008. The acquired assets of H2O were transferred to MLS, and that new LLC continued to operate the business under its name.

         The initial installment payments on the promissory notes to appellants were due on October 1, 2008. However, when those payments became due, HHI, through Hoover, notified appellants by letter that it was claiming offsets against the notes, and then immediately deducted those offsets without following the procedure set out in the Agreement. Additional offsets against subsequent installment payments were similarly claimed by HHI without notifying appellants or following the procedures.

         Appellees acknowledge that appellants' ownership in H2O was purchased as a "going business" and that they assumed the liabilities of H2O as well as its assets. Notwithstanding, Hoover testified that he did not accept the current normal business expenses of H2O incurred before closing. Offsets claimed included H2O's normal business expenses prior to closing; charges for services ordered by Hoover after the closing; charges for the value of equipment the parties had, prior to the sale, agreed was obsolete; and estimates of future sales that did not develop. Those offsets collectively amounted to more than the cumulative total of all the promissory notes.

         After appellants objected to these offsets, HHI made a partial payment on one installment of the notes on April 3, 2009. Fulmer received a check for $135.75; Bentley was paid $105.58; and Best and Chilson each received $30.16. Those checks were not cashed or deposited by appellants.

         Appellants filed suit against HHI d/b/a MLS on August 28, 2012, alleging breach of contract by appellees. The suit resulted in the following jury verdicts in favor of appellants: for Fulmer, $294, 705; for Bentley, $229, 215; for Best, $65, 490; and for Chilson, $65, 490. A judgment totaling $651, 490, including interest, was entered on August 22, 2012. A garnishment served on HHI's bank account in May 2013, realized $4, 391.44. That is the only sum that has been paid on the judgment, and Hurt and Hoover have individually paid nothing on the obligation since that time. HHI, doing business as ...

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