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Serio v. Copeland Holdings, LLC

Court of Appeals of Arkansas, Division II

May 3, 2017



          Blair Arnold and Robert S. Tschiemer, for appellants.

          William Z. White, for appellee Copeland Holdings, LLC.

          KENNETH S. HIXSON, Judge

         This appeal arises from a foreclosure action that subsequently included, inter alia, a breach-of-contact complaint brought by appellee Copeland Holdings, LLC[1] against appellants Stan and Jo Serio. The litigation resulted in a partial-summary-judgment order entered in favor of Copeland against Jo Serio, individually, wherein the trial court found that Jo Serio had breached a real estate contract to sell property to Copeland. In the same order, the trial court denied the Serios' cross-motion for summary judgment filed against Copeland. After a hearing on damages, the trial court entered an order awarding $178, 993 in damages against Jo Serio. A proper Rule 54(b) certificate was executed, which made these orders immediately appealable.

          In this appeal, the Serios challenge both the partial summary judgment on liability and the award of damages.[2] The Serios argue that (1) summary judgment should not have been entered in favor of Copeland pursuant to Ark. Code Ann. § 4-32-1007(a) (Repl. 2016) because Copeland, a foreign limited liability company, was not registered to transact business in Arkansas; (2) the contract upon which the judgment was based failed for various reasons, including that the Serios owned the subject property as tenants by the entirety and Stan Serio did not sign the contract, and that there was an impossibility of performance because third-party lienholders failed to consent to the sale; and (3) the damages award was excessive because the appraiser of the property admitted in her testimony that she did not consider the effects of the foreclosure and liens on the value of the property.

         We agree with the Serios' argument that the partial summary judgment was erroneously entered because there was a material issue of fact as to whether Copeland was transacting business in Arkansas and thus statutorily barred from maintaining its action pursuant to Ark. Code Ann. § 4-32-1007(a), and also because the Serios established impossibility of performance as a defense to the breach-of-contract action. Therefore, we reverse.

         The standard of review that we apply to cases in which summary judgment has been granted is well settled. Our court need only decide if the trial court's grant of summary judgment was appropriate based on whether the evidence presented by the moving party left a material question of fact unanswered. Lloyd v. Pier West Prop. Owners Ass'n, 2015 Ark.App. 487, 470 S.W.3d 293. The moving party always bears the burden of sustaining a motion for summary judgment. Id. All proof must be viewed in the light most favorable to the resisting party, and any doubts and inferences must be resolved against the moving party. Id. The moving party is entitled to summary judgment if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Id.

         The relevant facts are these. Stan and Jo Serio, husband and wife, purchased approximately 850 acres of property in Cleburne County in 1996. The Serios executed a promissory note and first mortgage in favor of George and Necia Yax. At some point thereafter, the Serios borrowed money from First Arkansas State and Trust and executed a promissory note and second mortgage on the property in favor of First Arkansas State and Trust. Again, at some point thereafter, the Serios had a federal tax dispute with the Department of Treasury (hereinafter referred to as the "IRS"), which resulted in a federal tax lien on the property. And, the Serios had a state tax dispute with the State of Arkansas Department of Finance and Administration that resulted in a state tax lien on the property.[3]

         The Serios went into default on the Yax promissory note and first mortgage, and the Yaxes filed a complaint to foreclose on the property. The Yaxes included as defendants in the foreclosure action the Serios, the second mortgagee First Arkansas Bank and Trust, and the federal tax lienholder IRS.[4] The trial court eventually ordered the property sold at a foreclosure sale. The Serios offered to sell part of the 850-acre tract to raise sufficient funds to satisfy all of the outstanding liens. The trial court ordered that it be kept apprised of the foreclosure sale and any bids therein.

         It is with this background that appellee Copeland entered the foreclosure litigation. Copeland, an attorney, was from Texas and he was interested in purchasing real estate in the general area of Cleburne County. Copeland had previously established a business relationship with Cleburne County realtor Jim Broxson. There was evidently a standing agreement between Copeland and Broxson that, in the event certain types of real estate became available for purchase, Broxson would contact Copeland and advise Copeland of the subject property.[5] Broxson became aware of the Serio property and that it was up for sale. Broxson forwarded this information to Copeland in Texas. The record does not reflect whether Broxson advised his client, Copeland, that the property was subject to the first mortgage in favor of the Yaxes, the second mortgage in favor of First American Bank and Trust, or the tax lien from the IRS. Copeland executed a real estate Offer and Acceptance on 397 of the 850 acres of the foreclosed property wherein he generally offered to buy those acres for $377, 749, or $950/acre; however, the name of the seller was left blank. Jim Broxson testified in an affidavit that the Offer and Acceptance was issued in blank "because we simply did not know the name of the seller nor who was authorized to execute the document." The Offer and Acceptance included the following term:

Purchase Price is subject to the following conditions:
. . . .
"NEW LOAN: [The Offer is] Subject to the Property appraising for not less than the Purchase Price and Buyer's ability to obtain a loan to be secured by the Property in the amount of $337, 749 [and] Financing as Follows: Owner financing one year term at 5% with a promissory note and Deed of Trust (or comparable instrument) acceptable to Buyer." [Italicized sentence in handwriting.]

         Clearly, Copeland's offer was subject to, and conditioned on, Copeland's ability to obtain a loan that included owner financing for one year and obtaining a Deed of Trust or other comparable instrument. The Offer and Acceptance was subsequently delivered to the Serios' foreclosure attorney. It appears from the record that either the attorney or her administrative assistant telephoned Jo Serio and advised Jo Serio that an offer had been received for 397 of the acres for $377, 749, or $950/acre. While Jo Serio apparently authorized either her attorney or assistant to sign the Offer and Acceptance on her behalf, the record is undisputed that Stan Serio, as joint owner by the entirety, did not sign the Offer and Acceptance.

         Over the next few weeks, the Serios' attorney attempted to obtain permission from the Yaxes and the IRS to allow the sale to proceed with the Serios owner financing the Copeland purchase price for one year. The Serios' attorney contacted the Little Rock IRS office and discovered that the IRS would require Form 14135 Application for Discharge of Property from Federal Tax Lien along with a signed copy of the offer, two appraisals, and all other documents required by Form 14135. After working on the matter for several weeks, including discussions with Jim Broxson, the Serios were advised by the IRS that it would not allow owner financing, would not approve the Application for Discharge of Property from the Federal Tax Lien, and would not remove the tax lien. The record reflects that the Yaxes also refused to allow the Serios to owner finance the purchase. This information was forwarded to either Copeland or through his agent, Broxson.

         After Copeland was advised that the Yaxes and the IRS had refused to allow the Serios to owner finance, a new series of negotiations commenced between the attorneys for the Serios and Copeland. At the end of the negotiations, the Serios' attorney requested that Copeland reduce the negotiations to writing. Copeland drafted what he referred to as an ...

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