Thompson v. Broussard

Cite as 2017 Ark. App. 423

ARKANSAS COURT OF APPEALS
DIVISION III
No. CV-16-1099

LARA THOMPSON Opinion Delivered September 6, 2017
APPELLANT
APPEAL FROM THE GARLAND
COUNTY CIRCUIT COURT
V. [NO. 26CV-15-2]

HONORABLE MARCIA R.
HEARNSBERGER, JUDGE
RACHEL BROUSSARD
APPELLEE AFFIRMED

PHILLIP T. WHITEAKER, Judge

Appellant Lara Thompson appeals the decision of the Garland County Circuit Court

awarding appellee Rachel Broussard $7,111 plus attorney’s fees of $2,000. Finding no error,

we affirm.

I. Background

Thompson was the owner of Summit Gymnastics, a gymnastics studio. She agreed to

sell the business to Broussard. The parties executed a document entitled “Agreement for the

Sale and Purchase of Assets and Bill of Sale” in October 2014. Broussard agreed to pay

Thompson $48,000 for the business by making installments of $1,500 per month for thirty-six

months. Broussard made a down payment of $4,500, and Thompson kept $1,000 in

receivables after the sale was made, for a total initial payment of $5,500. In addition,

Thompson applied $345 in salary she owed to Broussard (who had been employed by the
Cite as 2017 Ark. App. 423

studio), and Broussard made payments on two loans—one for $152 and the other for

$1,114—that the studio owed to Diamond Lakes Federal Credit Union.

Broussard operated the gymnastics studio for two months—November and December

2014. The parties began to have disputes early on, however, and by December, Thompson

was threatening to sue Broussard for breach of contract. Broussard returned ownership of the

studio to Thompson on January 1, 2015. Thompson nonetheless filed a breach-of-contract

suit against Broussard on January 2, 2015, alleging that Broussard had failed to make the

required monthly payments. Thompson demanded that Broussard pay her the entire purchase

price of $48,000. Broussard answered and filed a counterclaim, alleging that Thompson had

failed to disclose that she did not own 100 percent of the business’s assets. Broussard sought

cancellation of the contract and return of the money she had paid to Thompson.

Broussard eventually filed a motion for summary judgment, contending that the

contract between the parties had been rescinded and that she was therefore entitled to a refund

of the amounts she had paid toward the purchase of the business, totaling $7,111. The circuit

court agreed with Broussard and granted summary judgment. The court found that the parties

had rescinded the contract, that Thompson had retaken the business, and that Broussard had

paid Thompson or made payments on her behalf totaling $7,111. The court noted, however,

that there was still a dispute as to whether Thompson was entitled to an offset for any net

profits Broussard might have earned during the two months that she ran the business.

The circuit court later held a hearing on Thompson’s request for an offset. After

hearing testimony and taking evidence, the circuit court concluded that Thompson had not

2
Cite as 2017 Ark. App. 423

met her burden of proof that Broussard made a profit for which Thompson would be entitled

to a credit, and it therefore ordered that Thompson’s complaint be dismissed. The court

entered judgment for Broussard in the amount of $7,111, plus costs and interest. Additionally,

the court awarded Broussard $2,000 in attorney’s fees. Thompson subsequently filed a timely

notice of appeal.

II. Thompson’s Entitlement to an Offset

In her first argument on appeal, Thompson argues that the circuit court erred in

finding that she failed to meet her burden of proof on the issue of an offset. Our standard of

review on appeal in civil bench trials is whether the circuit court’s findings were clearly

erroneous or clearly against a preponderance of the evidence. Patel v. Patel, 2015 Ark. App.

726, at 2, 479 S.W.3d 580, 582; Tadlock v. Moncus, 2013 Ark. App. 363, at 3, 428 S.W.3d

526, 529. A finding is clearly erroneous when, although there is evidence to support it, the

reviewing court, on the entire evidence, is left with a firm conviction that a mistake has been

committed. Patel, supra. We must give recognition to the circuit court’s superior opportunity

to determine the credibility of witnesses and the weight to be given to their testimony. S.

Bldg. Servs., Inc. v. City of Ft. Smith, 2013 Ark. App. 306, at 6, 427 S.W.3d 763, 766.

Before addressing the merits of Thompson’s argument, we briefly set out the general

law as it relates to rescission. Our supreme court has stated that rescission is cognizable both

at law and in equity. Maumelle Co. v. Eskola, 315 Ark. 25, 29, 865 S.W.2d 272, 274 (1993).

Equitable rescission is distinct from rescission at law in that equitable rescission requires the

affirmative powers of an equity court to rescind or undo the contract, whereas in rescission

3
Cite as 2017 Ark. App. 423

at law, the court merely grants restitution after the party seeking it has achieved rescission by

his or her own acts. Phelps v. U.S. Life Credit Life Ins. Co., 336 Ark. 257, 984 S.W.2d 425

(1999); Moreland v. Dodds, 2012 Ark. App. 10, 388 S.W.3d 73.

Here, the parties agree that the agreement for Broussard to purchase the business from

Thompson was legally rescinded when Broussard returned the venture to Thompson.

Thompson does not appear to dispute that the $7,111 judgment against her accurately

represents the funds that Broussard expended during her time as owner of the business. She

maintains, however, that she met her burden of proof on the issue of an offset. We therefore

turn our attention to the evidence presented at the offset hearing.

At the offset hearing, Thompson presented evidence consisting of testimony and bank

statements. Broussard testified that she opened a bank account when she bought the business

and that she used the account for both business and personal use.1 She stated that she deposited

$1,253 in November 2014, $8,207 in December, and $2,174 in January 2015, although she

pointed out that she did not have control over the business during the last month. Broussard

acknowledged that the bank statements showed deposits and credits, but she said some of

those funds were her personal money. Broussard testified about the expenses of running the

business during the two months she had owned it, explaining how much was spent on payroll,

utilities, rent, supplies, and other necessities, but she said that she could not pay the business’s

bills. During the two months she ran the gym, Broussard said, she “did not make a profit . .

. . [she] lost money.” That was one of the reasons she returned the gym to Thompson.

1
Broussard, who was eighteen years old when she bought the gym, said that “nobody
told [her] that was a bad idea until after.”

4
Cite as 2017 Ark. App. 423

Thompson also testified at the hearing. She admitted that for the years 2013, 2014, and 2015,

the business lost money.

On appeal, Thompson argues that the bank-statement evidence introduced at the

hearing proved that Broussard made a profit on the business and that she (Thompson) should

be entitled to an offset equal to those amounts.2 Broussard responds that the bank statements

showed only money that was deposited into the account and expenses that were paid out of

it. She denies that all the money deposited into the account was “income,” as Thompson

describes it, and she notes her own testimony that she deposited personal funds into the

account as well as funds received via the business.

Here, the circuit court received evidence of bank deposits and business expenses. The

circuit court additionally heard testimony from both Broussard and Thompson that the

business was not profitable at all. It was well within the circuit court’s purview to deem both

women’s testimony credible on the issue of whether the business was ever profitable. See S.

Bldg. Servs., Inc., supra. We therefore cannot say that the court’s findings were clearly

erroneous on this point.

III. Attorney’s Fees

In her second point on appeal, Thompson argues that the circuit court erred in

awarding $2,000 in attorney’s fees to Broussard. We will not disturb an award of attorney’s

2
Thompson also cites the bank-account balance from January 2015; however,
Broussard returned the business to Thompson on January 1, 2015, so any money in the bank
from that month would not be attributable to Broussard in any event.

5
Cite as 2017 Ark. App. 423

fees absent an abuse of discretion. Chambers v. Ratcliff, 2009 Ark. App. 377, at 4, 309 S.W.3d

224, 226–27 (citing Artman v. Hoy, 370 Ark. 131, 257 S.W.3d 864 (2007)).

Thompson argues that in an action for rescission, attorney’s fees are not available

pursuant to Arkansas Code Annotated section 16-22-308 (Repl. 1999). Whether an award

of attorney’s fees to a prevailing party is appropriate under section 16-22-308 depends on

whether the case is one primarily based on breach of contract. Gladden v. Trs. of the Pruitt

Family Tr., 2015 Ark. App. 680, at 11, 477 S.W.3d 530, 536 (awarding attorney’s fees in a

contract-rescission case); Jiles v. Union Planters Bank, 90 Ark. App. 245, 247, 205 S.W.3d 187,

189 (2005). Thompson maintains that the circuit court’s judgment referenced only the

rescission of the parties’ agreement and not the underlying contract itself. Because there was

no longer any “contract” by the time of the court’s ruling, Thompson suggests that Broussard

was therefore not a “prevailing party” in a breach-of-contract action under section 16-22-308.

In support of her argument, Thompson relies exclusively on Barnhart v. City of

Fayetteville, 335 Ark. 57, 977 S.W.2d 225 (1998). Barnhart, however, is inapposite. Barnhart

was an illegal-exaction case in which the attorney was awarded fees under Arkansas Code

Annotated section 26-35-902(a) (Repl. 1997), which authorizes an award of attorney’s fees

to winning litigants in illegal-exaction cases. 335 Ark. at 59, 977 S.W.2d at 226. Appellant

Barnhart, however, moved for additional fees under section 16-22-308. The circuit court

denied the request, finding that her contention that her action “concerned a contract” did not

make it an action on a contract or a breach-of-contract case. Id. at 60, 977 S.W.2d at 226.

The supreme court affirmed, holding that the complaint was not primarily based on a contract

6
Cite as 2017 Ark. App. 423

but on an illegal exaction and that Barnhart failed to raise any breach-of-contract claim or

request damages in her earlier case on appeal. Id. at 61, 977 S.W.2d at 227. In short, the court

rejected Barnhart’s attempt to recharacterize her case as one that sounded in contract. Id.

On the other hand, in Beck v. Inter City Transportation, Inc., 2012 Ark. App. 370, 417

S.W.3d 740, this court distinguished Barnhart and explained that rescission is a remedy that

may be used in either contract cases or tort cases:

It is basic contract law that where there is a material breach of a contract, substantial
nonperformance, and entire or substantial failure of consideration, the injured party
is entitled to rescission of the contract and restitution and recovery back of money
paid. Econ. Swimming Pool Co. v. Freeling, 236 Ark. 888, 891, 370 S.W.2d 438, 440
(1963). Whether an award of attorney’s fees is appropriate under Ark. Code Ann. § 16-22-
308 depends not on whether the remedy of rescission was granted but on whether the case is one
primarily based on breach of contract.

Beck, 2012 Ark. App. 370, at 8, 417 S.W.3d at 745–46 (emphasis added). Therefore, we must

look to the gist of the action that Thompson originally brought against Broussard.

Here, Thompson’s lawsuit was filed as a breach-of-contract action. It sounded entirely

in contract, and the mere fact that the parties agreed to rescind that contract does not defeat

the original nature of the action. Because the complaint was brought as a breach-of-contract

action, the award of attorney’s fees to Broussard, as the prevailing party, was therefore

appropriate under section 16-22-308.

Affirmed.

GLOVER and HIXSON , JJ., agree.

The Applegate Law Firm, PLLC, by: Ryan J. Applegate, for appellant.

Baker Schulze Murphy & Patterson, by: Darryl E. Baker and J.G. Schulze, for appellee.

7