Thompson v. Broussard
2017 Ark. App. 423
| Ark. Ct. App. | 2017Background
- Lara Thompson owned Summit Gymnastics and agreed to sell the business to Rachel Broussard in October 2014 for $48,000, to be paid $1,500/month for 36 months; Broussard made initial payments and other payments totaling $7,111 (including down payment, receivables kept by Thompson, salary offset, and loan payments).
- Broussard operated the gym for November–December 2014, then returned the business to Thompson on January 1, 2015 amid disputes; Thompson nevertheless sued for breach of contract on January 2, 2015 seeking the full purchase price.
- Broussard counterclaimed, seeking rescission and return of funds paid, and moved for summary judgment arguing the parties had rescinded the contract and Broussard was entitled to restitution of $7,111.
- The circuit court granted summary judgment for Broussard, finding the contract had been rescinded, Thompson retook the business, and Broussard had paid or expended $7,111; the court reserved the question whether Thompson was entitled to an offset for any net profits earned by Broussard.
- At an evidentiary hearing, the court heard bank records and testimony from both parties; both testified the business was not profitable while Broussard ran it. The court found Thompson failed to prove Broussard made a profit and entered judgment for Broussard for $7,111 plus costs, interest, and $2,000 in attorney’s fees.
- Thompson appealed, arguing the court erred in (1) denying her offset and (2) awarding attorney’s fees to Broussard.
Issues
| Issue | Thompson's Argument | Broussard's Argument | Held |
|---|---|---|---|
| Whether Thompson was entitled to an offset for profits earned while Broussard operated the business | Bank-deposit evidence showed Broussard received income/profits; Thompson met her burden to prove offset | Deposits included personal funds and receipts; testimony and statements showed the business lost money | Court affirmed: Thompson failed to prove Broussard made a profit; trial court’s factual finding not clearly erroneous |
| Whether attorney’s fees under Ark. Code Ann. § 16-22-308 were recoverable by Broussard | Fees unavailable because the judgment was for rescission, not a breach-of-contract recovery, so no prevailing party in contract action | Case was originally a breach-of-contract action; rescission is a remedy but does not change the original nature of the suit | Court affirmed: award of $2,000 was proper because the action was primarily a breach-of-contract case, so fees under § 16-22-308 were available |
Key Cases Cited
- Maumelle Co. v. Eskola, 315 Ark. 25 (1993) (distinguishes equitable rescission from rescission at law and discusses rescission remedies)
- Phelps v. U.S. Life Credit Life Ins. Co., 336 Ark. 257 (1999) (discusses rescission at law versus equitable rescission and restitution)
- Econ. Swimming Pool Co. v. Freeling, 236 Ark. 888 (1964) (rescission and restitution available where material breach or failure of consideration)
- Barnhart v. City of Fayetteville, 335 Ark. 57 (1998) (denies recharacterizing an action as contract-based when the gist of the suit is noncontractual)
- Beck v. Inter City Transportation, Inc., 417 S.W.3d 740 (Ark. App. 2012) (whether rescission allows attorney’s-fee recovery depends on whether the case is primarily a breach-of-contract action)