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First Government Lease Co. v. Northwest Scott County Volunteer Fire Department

Court of Appeals of Arkansas, Division III

September 19, 2018



          Pinnacle Law Firm, PLLC, by: Matthew D. Campbell, for appellants.

          Walters, Gaston, Allison & Parker, by: Troy Gaston, for appellee.


         First Government Lease Company ("FG") and Paul Graver, sole owner and operator of FG, appeal the Scott County Circuit Court's judgment against Graver in the amount of $258, 195 in general damages and $1.5 million in punitive damages and the order of May 11, 2017, denying appellants' posttrial motions for judgment notwithstanding the verdict, new trial, remittitur, and findings of fact and conclusions of law. On appeal, appellants argue that the circuit court erred in (1) its analysis and ruling on their motion to dismiss; (2) refusing to continue or delay the start of trial; (3) allowing punitive damages; (4) denying appellants' motion for new trial; and (5) striking appellants' counterclaims. We affirm.

         I. Procedural History

         Appellee Northwest Scott County Volunteer Fire Department ("VFD") borrowed $166, 500 from FG to buy fire trucks, although the amount of money and number of trucks are disputed. When VFD failed to make payments, FG filed a replevin complaint in circuit court alleging that VFD had violated their "Lease Purchase Agreement" and seeking recovery of seven vehicles, which FG alleged were used as collateral for the loan, interest, and attorney's fees. VFD responded that FG had already repossessed the vehicle financed through their agreement and filed a counterclaim against FG based on fraud and the Arkansas Deceptive Trade Practices Act ("DTPA").

         FG dismissed its replevin complaint without prejudice on June 2, 2014. The circuit court filed a June 16 order noting that VFD's counterclaim was still pending. Trial was set for VFD's counterclaim on December 18‒19, with a pretrial hearing set on December 11. The scheduling order filed July 21 included an October 30 discovery deadline.

         After a hearing held November 13, an order filed December 1 required that FG provide all supplemental discovery responses and a list of exhibits and witnesses by November 24, and all of FG's witnesses were to be made available for deposition between November 25 and December 5. In a separate order, the circuit court denied FG's motion to reconsider its ruling that Graver appear in Arkansas to be deposed and noted that the rulings from the November 13 hearing were imposed on FG as sanctions for failure to answer interrogatories and requests for production of documents.

         FG then filed a petition for writ of prohibition with the Arkansas Supreme Court on December 4, and Graver did not appear for deposition on December 5. The petition for writ of prohibition was denied, and the formal order was filed in the circuit court on December 10. On that date, VFD filed a motion to implead Graver because Graver had represented himself as "d/b/a FG" on numerous occasions. At the pretrial hearing on December 11, the trial was continued to August 20‒21, 2015. The resulting order, filed February 5, 2015, granted the motion to implead Graver and found that FG did not produce Graver for deposition in violation of the circuit court's order. The circuit court reserved the right to strike FG's answer, and Graver was ordered to reappear for deposition on March 25, 2015. The circuit court found that Graver could not testify as a witness in the case unless called by VFD, and evidence not provided to VFD prior to November 13, 2014, was excluded. A December 22, 2014 scheduling order required any pretrial motions to be filed at least fifteen days prior to the pretrial hearing set for August 13, 2015.

         On January 12, 2015, VFD filed an amended counterclaim, which added a complaint against Graver as a third-party defendant. VFD alleged that Graver was liable for FG's conduct and claimed that appellants had committed fraud, conversion, and usury and had violated the DTPA-which included a claim for punitive damages. FG filed a motion to dismiss VFD's counterclaim for failure to state a claim. See Ark. R. Civ. P. 12(b)(6) (2017).

         On March 23, two days before Graver's scheduled deposition, he filed a notice of removal in the United States District Court and a separate notice in the circuit court. Accordingly, Graver did not appear for deposition on March 25. On November 12, the federal court remanded for lack of jurisdiction, finding that FG was not a registered business entity and was in fact Paul Graver acting as a sole proprietorship; therefore, Graver was the plaintiff in the circuit court case, and he was not entitled to removal.

         On November 30, VFD filed a motion for emergency ex parte relief alleging that appellants took two vehicles from VFD and sold them. The vehicles were the objects of the parties' litigation, and appellants received $179, 000 more than the amount of the loan. VFD alleged that appellants were "currently trying to repossess the remaining vehicles, which would effectively render most of the northwestern portion of Scott County without adequate fire protection." VFD further alleged that since appellants initially filed their complaint, appellants' agents had broken into the local fire department and taken a vehicle. VFD asked for an order directing appellants to cease all further collection and repossession efforts. The circuit court granted ex parte relief on December 2, 2015.

         VFD filed a motion for contempt and temporary attorney's fees on January 4, 2016, claiming that after filing this action, appellants filed two cases in Illinois regarding the same matter. One Illinois case was dismissed, but the second case was still pending. VFD asked for attorney's fees for having to defend these cases and argued that appellants were trying to cause VFD financial hardship.

         By order filed April 6, 2016, the circuit court denied appellants' motion to dismiss VFD's amended counterclaim. The court found that the issues were waived because appellants had not moved to dismiss the original counterclaim, which was no different from the amended pleading except that Graver was named. Because the issues were not raised against the original counterclaim, Graver waived those arguments. The circuit court also found that the claim for fraud should survive the motion to dismiss under Rule 12(b)(6). The circuit court further denied the dismissal request related to the DTPA or conversion because the case had been pending for over three years with most of the delay caused by appellants' failure to answer discovery and their erroneous attempt to remove the case to federal court. Finally, the circuit court denied VFD's motion for contempt and temporary attorney's fees. A new scheduling order provided that the trial was reset for August 18‒19, 2016, and a pretrial hearing was scheduled for August 11, 2016. The parties were reminded that all pretrial motions should be filed at least fifteen days before the pretrial hearing.

         On May 3, 2016, appellants filed an amended answer with counterclaims based on fraud and breach of contract. Appellants claimed the affirmative defenses of laches, unclean hands, detrimental reliance, and the Illinois Credit Agreement Act, "which bars all tortious causes of action that are 'in any way related' to a credit agreement."

         VFD filed a motion to dismiss appellants' counterclaims, citing the circuit court's February 5, 2015 order that excluded evidence not provided before November 13, 2014, and excluding Graver as a witness unless called by VFD. VFD also argued that it was clear from the circuit court's oral instruction prior to the latest scheduling order that no further pleadings would be tolerated and that this matter would proceed to trial under the prior pleadings. VFD also argued that appellants' fraud claim was barred by the statute of limitations because the matter had been pending since 2012, and the May 3, 2016 fraud allegation was appellants' first attempt to sue VFD for any cause of action based on fraud or deceit, and VFD claimed that all of appellants' counterclaims were not timely filed.

         Appellants filed a motion for partial judgment on the pleadings on August 1, 2016, claiming entitlement to judgment for breach of contract based on VFD's admission that it had failed to make payments. VFD filed a motion to strike because appellants' motion for partial judgment was filed after the deadline set forth in the circuit court's scheduling order. At the pretrial hearing, the circuit court ordered that appellants were prohibited from testifying or presenting any other witnesses because they had failed to produce witnesses for deposition; the written order was filed on September 8, 2016.[1] In the same order, the circuit court struck appellants' claims against VFD.

         Following the pretrial hearing, appellants filed a notice of interlocutory appeal on August 15, 2016, appealing the circuit court's order striking their counterclaims.[2] After the Arkansas Supreme Court denied appellants' petition for emergency stay pending appeal, and the circuit court filed its order of September 8, 2016, appellants filed an amended notice of interlocutory appeal on October 10, 2016.[3]

         II. Jury Trial

         The scheduling order filed August 24, 2016-setting the jury trial for February 22‒ 23, 2017, and a pretrial hearing on February 9, 2017-remained in effect, despite appellants' attempts at an interlocutory appeal.[4] However, on the first day of the scheduled jury trial, neither Graver nor his counsel appeared. The circuit court elected to proceed after contacting counsel and determining that counsel had mistakenly marked his calendar.

         VFD presented its case that it had borrowed $90, 000 from FG after contacting Graver. VFD alleged that it already had $170, 000 to pay toward a fire truck that cost $260, 000. VFD was provided the "Lease Purchase Agreement" from FG, and Donnie Adkins, the fire chief, testified that the document was illegible. He said that he had trusted Graver, that $90, 000 had been handwritten at the top of the agreement, and that nothing else on the agreement had been filled in. He was told that he had to sign the agreement to get the check. He said that he signed the document and that Graver "filled out the rest"; although, when the document was faxed to him, it had not been filled out, and they had never discussed the interest amount of $76, 500. Adkins also described Graver's hatefulness and their having to hide the smaller truck to prevent repossession after Graver had sold the larger truck for $182, 032. Adkins also said that the smaller truck was repossessed after the circuit court had issued an ex parte order to cease and desist any repossessions. He described how appellants' agents had broken into the fire station by pulling out ductwork from the outside air units.

         At the close of the evidence, the circuit court instructed the jury, and VFD's counsel gave its closing argument. The circuit court then introduced appellants' counsel, who had just arrived, and appellants made their closing argument. After VFD's reply argument was given, the jury retired to deliberate. Before the jury returned with its verdict, appellants' counsel moved for directed verdict and "JOV at this time based on the insufficiency of the evidence." The circuit court denied the motion. Counsel renewed the motion, and it was denied. The following colloquy then occurred:

Appellants' Counsel: Okay. Also, ask the court for a mistrial due to the unfairness of my client not being able to put on any sort of case and not being here and having a chance to cross examine the witnesses.
Court: And whose fault is that, sir?
Appellants' Counsel: It's my, that is mine, Your Honor.
Court: Okay. This case has been set for months. There was a Notice sent. We've had several pretrial hearings. We had a pretrial on February 9 in which everyone was here including you at which time we discussed any motions pending. There were none. I asked everybody if everybody was ready and said see you on the 22nd. So, I don't see the fact that you put it on your calendar wrong and didn't get here ...

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