Halon V, LLC v. Terminella

Cite as 2023 Ark. App. 193
ARKANSAS COURT OF APPEALS
DIVISION IV
No. CV-21-237

HALON V, LLC Opinion Delivered April 5, 2023
APPELLANT
APPEAL FROM THE BENTON
COUNTY CIRCUIT COURT
V. [NO. 04CV-20-2198]

THOMAS TERMINELLA A/K/A TOM
TERMINELLA; MONICA
TERMINELLA; THE TERMINELLA
HONORABLE XOLLIE DUNCAN,
COMPANY, INC.; MONICA’S
JUDGE
MEADOW, LLC; WEDINGTON MINE,
LLC; AND JOHNSON MINE, LLC
APPELLEES
REVERSED AND REMANDED

CINDY GRACE THYER, Judge

Halon V, LLC (“Halon”), has filed this appeal from a Benton County Circuit Court

order dismissing its first amended complaint against the appellees. Because the circuit court

converted a motion to dismiss to a motion for summary judgment without giving the

appellant a reasonable opportunity to meet proof with proof and attempt to show an issue

of material fact, we reverse and remand.

In 2019, the appellant, Halon, was assigned a judgment against Thomas Terminella

(“Tom”) that had been entered in 2009. On October 13, 2020, Halon filed a complaint

against Tom; his wife, Monica Terminella (“Monica”); the Terminella Company, Inc.;

Monica’s Meadow, LLC; Wedington Mine, LLC; and Johnson Mine, LLC. The Terminella
Company, Inc., and Monica’s Meadow, LLC, are collectively referenced herein as the

“Monica Business Appellees.” Wedington Mine, LLC, and Johnson Mine, LLC, are

collectively referenced herein as the “Mine Appellees.”

Halon alleged claims under Arkansas Code Annotated section 16-66-418 (Repl. 2005)

and unjust enrichment against all appellees and asked to pierce the corporate veil of the

Monica Business Appellees. All the appellees moved to dismiss the complaint. Additionally,

the Mine Appellees filed a verified answer on November 13, 2020.

On December 15, 2020, Halon purchased “every chose in action possessed by

Thomas A. Terminella.” On December 17, Halon filed its first amended complaint stating

several new facts, including that Halon had purchased Tom’s choses in action. The first

amended complaint again alleged claims under § 16-66-418 and unjust enrichment on

Halon’s behalf and as Halon standing in Tom’s shoes against all appellees. The first amended

complaint also asserted a claim to pierce the corporate veil of the Monica Business Appellees.

All the appellees moved to dismiss pursuant to Arkansas Rule of Civil Procedure 12(b)(6).

The Mine Appellees did not file a verified answer to the first amended complaint. The circuit

court granted the appellees’ motions to dismiss on February 25, 2021. The dismissal order

stated, in its entirety:

Now on this 25th day of February, 2021, the above-styled cause came before
the Court on the motions of all Defendants to dismiss the Plaintiff’s Amended
Complaint. From the pleadings, the Court finds that said motions should be
and hereby are granted. The court does not find the underlying judgment to
be void, but does find that the Plaintiff’s Amended Complaint fails to state
facts upon which relief can be granted based on Plaintiff’s causes of action as
asserted in said Amended Complaint.

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The appellant then brought this appeal, arguing that the circuit court abused its

discretion when it dismissed all of Halon’s claims.

I. Standard of Review

When reviewing a summary-judgment action, this court will determine whether

genuine issues of material fact exist. United Servs. Auto. Ass’n v. Norton, 2020 Ark. App. 100,

at 4, 596 S.W.3d 522, 525. If issues of law or statutory interpretation are presented, then

this court’s standard of review is de novo. Id.

II. Analysis

The order in this appeal was purportedly an order granting the appellees’ motions to

dismiss for failure to state a claim pursuant to Arkansas Rule of Civil Procedure 12(b)(6).

However, the circuit court converted the motions to dismiss to motions for summary

judgment by considering matters outside the first amended complaint.

When considering a Rule 12(b)(6) motion, the circuit court does not consider matters

outside the four corners of the complaint, and all the allegations in the complaint are to be

taken as true. York v. GALR, LLC, 2022 Ark. App. 287, at 3, 647 S.W.3d 1, 4. Arkansas Rule

of Civil Procedure 12(b)(6) also requires that if matters outside the complaint “are presented

to and not excluded by the court, the motion shall be treated as one for summary judgment

and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity

to present all material made pertinent to such a motion by Rule 56.” Ark. R. Civ. P. 12(b)(6).

Further, when a party presents material outside the complaint and the circuit court does not

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specifically exclude it, then this Court considers the material to have influenced the circuit

court’s decision. Morgan v. Turner, 2010 Ark. 245, at 8, 368 S.W.3d 888, 894.

Here, the Mine Appellees filed a verified answer to the complaint on November 13,

2020. This verified answer was not a simple list of which facts as stated in the complaint were

denied and which were admitted along with a recitation of affirmative defenses. The verified

answer also included facts that were not pled in the complaint—or later, in the first amended

complaint. The verified answer stated that 100 percent of the Mine Appellees’ interests were

sold to Mitchell Massey on or about October 1, 2020, “in a good-faith, arm’s length

transaction for value, which cuts off any rights Plaintiff may have to recover from [Mine

Appellees] any money to satisfy Plaintiff’s judgment against Tom.”

Counsel for the Mine Appellees referenced this new factual allegation at least six

times in the Mine Appellees’ combined motion to dismiss plaintiff’s first amended complaint

and brief in support. Indeed, counsel for the Mine Appellees referenced the allegation from

the verified answer as grounds for this court to affirm the circuit court’s order.

The circuit court stated in its order that it decided its ruling “[f]rom the pleadings[.]”

An answer is a pleading. Ark. R. Civ. P. 7(a). The Mine Appellees clearly asked both the

circuit court and this court to consider matters outside the first amended complaint. Because

the Mine Appellees presented facts outside the first amended complaint and encouraged the

circuit court to consider those facts, and because the circuit court specified that it had relied

on the pleadings—which would include the verified answer—the motion to dismiss was

converted to a motion for summary judgment. See Ark. R. Civ. P. 12(b)(6).

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Rule 12(b)(6) states that when a motion to dismiss is treated as a motion for summary

judgment, “all parties shall be given reasonable opportunity to present all material made

pertinent to such a motion by Rule 56.” Ark. R. Civ. P. 12(b)(6). If the party moving for

summary judgment makes a prima facie showing that it is entitled to judgment as a matter

of law, then the nonmoving party has the opportunity to “meet proof with proof by showing

a material issue of fact.” Robinson v. Quail Rivers Props., LLC, 2022 Ark. App. 409, at 3, 654

S.W.3d 690, 693.

Here, there was no hearing on the motion, nor was there any notice given to the

parties that the circuit court was converting the Rule 12(b)(6) motion to a motion for

summary judgment. Failing to provide such notice or an opportunity to present all material

made pertinent by Rule 56 is reversible when it is “manifest” that the error was prejudicial.

See Rankin v. Farmers Tractor & Equip. Co., Inc., 319 Ark. 26, 31, 888 S.W.2d 657, 659 (1994)

(citing BWH, Inc. v. Metro. Nat’l Bank, 267 Ark. 182, 590 S.W.2d 247 (1980)). The circuit

court dismissed the first amended complaint before the appellant had the opportunity to

conduct discovery and gather any documents or other evidence it could use in an attempt to

refute the new factual allegations made in the verified answer. Under these circumstances, it

is manifest that the circuit court’s error was prejudicial.

For these reasons, the circuit court’s order dismissing the first amended complaint is

reversed and remanded for further proceedings.

Reversed and remanded.

ABRAMSON and GLADWIN, JJ., agree.

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Ferguson Law Firm, PLLC, by: J. Brian Ferguson, for appellant.

Tim Snively, for separate appellee Thomas Terminella a/k/a Tom Terminella.

Everett Law Firm, by: John Everett; and Smith, Cohen & Horan, PLC, by: Matthew T.

Horan, for separate appellees Monica Terminella; The Terminella Company, Inc.; and

Monica’s Meadow, LLC.

Friday, Eldredge & Clark, LLP, by: Joshua C. Ashley and Kael K. Bowling, for separate

appellees Wedington Mine, LLC; and Johnson Mine, LLC.

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