436 S.W.3d 173
Ark. Ct. App.2014Background
- Pinnacle Air, LLC owners included J.B. Hunt, Graham Holdings, Schwyhart LLC, and Thornton LLC; various Lear jets were financed with personal guaranties by principals.
- In Dec. 2007 J.B. Hunt and Graham sold interests to Calamos under an Investment Agreement; Schwyhart/Thornton parties executed an indemnity agreement (the "Schwyhart indemnity agreement") obligating them to indemnify Hunt and Graham for Pinnacle debts.
- After multiple defaults, J.B. Hunt (and Graham) paid over $22 million to satisfy various guarantied debts in 2008–2009; Calamos separately paid $15 million under his indemnity, leaving $7,028,575.47 claimed from the Schwyhart parties.
- J.B. Hunt sued Schwyhart and Thornton individually earlier (Suit I) on two Fifth Third Bank notes that Hunt had paid and to which Hunt obtained an assignment; liability was adjudicated in 2010.
- In Sept. 2011 Hunt and Graham sued the Schwyhart parties on the separate Schwyhart indemnity agreement to recover the remaining $7,028,575.47 (Suit II). After a bench trial Judge Schrantz entered judgment for plaintiffs for that amount.
- Defendants appealed, arguing res judicata, alleged assignment of the indemnity to Calamos (defeating plaintiffs’ standing), failure of proper notice/demand, insufficient proof of payment/damages, and improper transfer of the case.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Suit II is barred by res judicata | Suit I did not resolve claims on the Schwyhart indemnity; plaintiffs can pursue the separate indemnity obligation | Defendants: Suit II arises from the same Pinnacle debts and should have been litigated in Suit I | Court: No res judicata — Suit I and Suit II involved different claims, obligations, and parties; doctrine inapplicable |
| Whether plaintiffs’ rights under the Schwyhart indemnity were assigned to Calamos | Plaintiffs retained rights; any arrangement with Calamos was a settlement, not a valid assignment | Defendants: Indemnity was assigned to Calamos, extinguishing Hunt/Graham’s right to sue | Court: No valid written assignment shown; indemnity prohibited assignment without prior written consent, so plaintiffs retained standing |
| Whether plaintiffs proved breach, demand, and damages under the indemnity | Plaintiffs produced a Certificate of Payment showing $22,028,575.47 paid "on behalf of Hunt and Graham" and demanded payment; indemnity breached by defendants’ nonpayment | Defendants: Notice/demand did not comply with the indemnity’s certified-mail/address provision; Graham lacked proof of damages | Court: Demand/notice argument not preserved on appeal; Certificate of Payment and trial evidence sufficed to prove payment and damages; breach established |
| Whether transfer of the case to Judge Schrantz was improper | Plaintiffs: transfer was valid | Defendants: improper transfer required reversal | Court: Transfer objection not raised below; appellate court will not consider new arguments — issue forfeited |
Key Cases Cited
- Moon v. Marquez, 338 Ark. 636 (res judicata elements)
- Murphy Oil USA, Inc. v. Unigard Sec. Ins. Co., 347 Ark. 167 (denial of summary judgment not reviewable after trial)
- Ball v. Foehner, 326 Ark. 409 (procedural rule on review of summary-judgment denials)
- Elder v. Mark Ford & Assoc., 103 Ark. App. 302 (test for same claim in res judicata analysis)
- Ray & Sons Masonry Contractors, Inc. v. U.S. Fid. & Guar. Co., 353 Ark. 201 (indemnity agreements treated as contracts)
- St. Joseph’s Mercy Health Ctr. v. Edwards, 2011 Ark. App. 560 (abuse-of-discretion and prejudice standard on evidentiary rulings)
- Howard v. Adams, 2012 Ark. App. 562 (evidentiary rulings and nonprejudicial error)
- Milner v. Luttrell, 2011 Ark. App. 297 (same)
- Skallerup v. City of Hot Springs, 2009 Ark. 276 (res judicata discussion)
- Ultracuts Ltd. v. Wal-Mart Stores, Inc., 343 Ark. 224 (elements of breach-of-contract claim)
- DC Xpress, LLC v. Briggs, 2009 Ark. App. 651 (standard of review for bench-trial findings)
- Larson Mach., Inc. v. Wallace, 268 Ark. 192 (indemnitee must show actual loss by payment)
- Miner v. State, 342 Ark. 283 (appellate courts will not consider arguments raised first on appeal)