Windsong Enterprises, Inc. v. Upton

Josephine Linker Hart, Judge.

In a previous opinion,

Windsong Enterprises, Inc. v. Upton, CA04-571 (Ark. App. Feb. 9, 2005), we affirmed the Cleburne County Circuit Court’s award of summary judgment to appellee Richard Upton in appellant Windsong’s lawsuit for tortious interference with a business expectancy on the ground that, as a matter of law, appellant did not have a valid business expectancy. Appellant has filed a petition for rehearing, arguing that our original decision was erroneous. After careful reconsideration, we find appellant’s argument to be persuasive. Accordingly, we grant the petition for rehearing and issue this substituted opinion reversing the circuit court’s grant of summary judgment and remanding for trial.

Appellant, a land developer, owns real property, “South-winds,” in the Eden Isle subdivision in Cleburne County. Appellant’s adjoining landowner and predecessor in title, appellee Upton, resides in that subdivision and owns a significant portion of the real estate in the Eden Isle development. He also has an interest in several businesses there, including Red Apple Enterprises Limited Partnership. Soon after appellant purchased Southwinds, it learned that appellee had inadvertently conveyed to appellant some of the cart paths on the Red Apple golf course. Although Upton attempted to reacquire that land, the parties could not agree upon a price. According to appellant, Upton then began to interfere with appellant’s plans to develop Southwinds, which was zoned for condominiums when appellant purchased the property. After the cart-path dispute, appellee allegedly banded together with friends and relatives who also owned property in the Eden Isle subdivision, and, using a provision in the original bill of assurance providing for its amendment by a majority of the landowners, rezoned appellant’s property to permit only single-family residences.

Eden Isle Corporation and its president, Donald Tollefson, filed this action for declaratory relief against appellant as to whether appellant could subdivide the Southwinds property without the approval of Eden Isle Corporation. Appellant filed a counterclaim, which it amended to add Red Apple Enterprises and Richard Upton as counterdefendants. While this lawsuit was pending, Eden Isle Corporation filed another action against appellant and Red Apple Enterprises in Cleburne County concerning the sewer service in Eden Isle subdivision (the “sewer case”). Appellant filed a counterclaim against Eden Isle Corporation and a cross-claim against Red Apple Enterprises in that case, alleging intentional interference with a business expectancy. Upton was not named as a party in the sewer case. After amending its counterclaim in this action several times, appellant filed a motion for voluntary dismissal of its claims for intentional interference with its business expectancies. It also filed a similar motion in the sewer case. On June 15, 2001, the courts entered dismissal orders in both cases.

On May 21, 2002, appellant filed a seventh amended counterclaim reasserting its claims for intentional interference with its business expectancies against Eden Isle Corporation and Upton. Appellant took a nonsuit on its claim against Eden Isle Corporation. In that' order, the circuit court stated: “It is recognized that Windsong’s remaining causes of action in this case are directed solely against Richard Upton.” Appellant filed an eighth amended counterclaim against Upton. After Upton moved to dismiss the seventh and eighth amended counterclaims, the circuit court entered an order stating that it would consider the motion to dismiss as a motion for a more definite statement and gave appellant a period of time within which to file an amended counterclaim against Upton.

Appellant filed its “Restated Complaint” against Upton on January 10, 2003, stating that Upton had influenced Eden Isle Corporation to impose certain conditions to be met by appellant for the development of Southwinds in order to resolve appellant’s dispute with Eden Isle Corporation and that those conditions were, in fact, Upton’s “personal expectations.” Appellant stated:

10. Mr. Upton knew ofWindsong’s development plans which were consistent with the existing development in the area and with the existing provisions of the Bill of Assurance. Armed with this knowledge, Mr. Upton, whether through his personal initiation or through the exercise of his necessary approval, repeatedly caused the Bill of Assurance and Dedication to be amended, revised and, ultimately, rewritten, all to Windsong’s detriment. He manipulated Eden Isle Corporation to act adversely to Windsong and otherwise tortiously interfered with Windsong’s contractual rights and business expectancies. Since Windsong’s purchase, Mr. Upton supported a limitation on Windsong’s rights to services, thwarted its ability to subdivide the property, undertook offensive activities on lands adjacent to Windsong’s property and imposed new restrictions on the use for Windsong’s property.

11. Mr. Upton’s actions were specifically intended to restrict the usage ofWindsong’s property and to interfere with its contractual relationships and business expectancies....

Upton moved for summary judgment, arguing that appellant’s restated complaint was barred by the doctrine of res judicata because appellant had twice nonsuited essentially identical claims for tortious interference with a business expectancy in this case and in the sewer case, and that, according to Ark. R. Civ. P. 41(b)(2), when the restated complaint was filed, there had already been a decision on the merits of these claims. Upton argued that, although he was not a named party in the sewer case, he was a privy of Red Apple Enterprises for purposes of res judicata. Upton also asserted that, because the plat and bill of assurance could be lawfully amended at any time and appellant’s boat-dock application was subject to approval by the United States Army Corps of Engineers, any expectancy appellant had was subject to a contingency. Upton further argued that the restated complaint contained no factual allegation sufficient to justify the piercing of the corporate veil of the business entities in which he serves as an officer, director, stockholder, or manager. Additionally, Upton argued that collateral estoppel applied to the court’s final order in the sewer case, wherein the court found that appellant had acknowledged that it did not have a comprehensive development plan for Southwinds and that it intended to develop the property on a lot-by-lot basis. Upton further argued that the tort of intentional interference with the use and enjoyment of property does not exist under Arkansas law. In his supporting affidavit, Upton stated that his understanding was that the bill of assurance could be amended at any time for any nondiscriminatory purpose. He also said that he had not attempted to hinder Southwinds’s sewer access or service and that he had not interfered with the creation and sale of lots in South-winds.

In response to the motion for summary judgment, appellant argued that the doctrine of res judicata does not apply to interlocutory orders. It also asserted that, because the sewer case involved Red Apple Enterprises and not Upton, res judicata did not apply. It further argued that whether a corporation is distinct from its shareholders was not relevant because its claims were against Upton, individually, and not against a business entity. Additionally, appellant stated that it had not alleged tortious interference with the use of its property. In support of its response, Windsong filed the affidavits of its owners, Ronald McKenzie and Mark McKenzie. On June 11, 2003, the circuit court awarded summary judgment to Upton without stating the basis for its decision. This is the second appeal from that decision. On October 29, 2003, we dismissed the first appeal for lack of a final order. After our dismissal of the first appeal, the circuit court granted the motion for voluntary nonsuit of Red Apple Enterprises on its cross-claim against appellant. This appeal followed.

The standard of review for this appeal from the entry of summary judgment is well settled. Summary judgment is to be granted only when it is clear that there are no genuine issues of material fact to be litigated, and the moving party is entitled to judgment as a matter of law. State Farm Mut. Auto. Ins. Co. v. Henderson, 356 Ark. 335, 150 S.W.3d 276 (2004). In considering whether to grant summary judgment, we consider pleadings, depositions, answers to interrogatories, admissions, and affidavits, if any. Curley v. Old Reliable Cas. Co., 85 Ark. App. 395, 155 S.W.3d 711 (2004). Once the moving party makes a prima facie showing that it is entitled to summary judgment, the opponent must meet proof with proof by showing a material issue of fact. Id.

In its brief, appellant addresses all of the grounds on which Upton based his motion for summary judgment and argues that none of them are sustainable. Because we are reversing on the business expectancy issue, we need not address the other points on appeal.

To establish a claim of tortious interference, a plaintiff must prove: (1) the existence of a valid contractual relationship or a business expectancy; (2) knowledge of the relationship or expectancy on the part of the interfering party; (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy; (4) resultant damage to the party whose relationship or expectancy has been disrupted. Vowell v. Fairfield Bay Cmty. Club, Inc., 346 Ark. 270, 58 S.W.3d 324 (2001). It is also necessary that the defendant’s conduct be improper. Id. For guidance as to what is improper, the Restatement (Second) of Torts § 767 (1979) states that the court should consider (1) the nature of the actor’s conduct; (2) the actor’s motive; (3) the interests of the other with which the actor’s conduct interferes; (4) the interests sought to be advanced by the actor; (5) the social interests in protecting the freedom of action of the actor and the contractual interests of the other; (6) the proximity or remoteness of the actor’s conduct to the interference; and (7) the relations between the parties. Vowell, supra; Dodson v. Allstate Ins. Co., 345 Ark. 430, 47 S.W.3d 866 (2001).

Here, appellant purchased its property when it was zoned for multifamily use with the express intention of developing it for that purpose. It is true that the subdivision’s bill of assurance could be amended at any time by a majority of the landowners. Nevertheless, we cannot say that purchasing property that was zoned for multifamily use with the intention of building multifamily dwellings was not, as a matter of law, a valid business expectancy in this situation. In our view, appellant sufficiently demonstrated the existence of genuine issues of material fact on all of the elements of a claim for tortious interference with a business expectancy, and those issues should be tried. We therefore hold that the circuit court erred in granting summary judgment to Upton and reverse and remand for trial.

Reversed and remanded.

Bird, Griffen, Vaught, Crabtree, and Roaf, JJ., agree. Gladwin, Robbins, and Neal, JJ., dissent.