Background
Jonathan “Kirk” Cupp, Phillip Greer, and Chad Register each owned a one-third interest in Church Bells, LLC, a trampoline-park business. The three men personally guaranteed commercial leases for the company’s parks and a $3 million bank loan, and their spouses guaranteed some of the leases. In April 2020, Cupp agreed to sell his interest to Greer and Register for $590,000. The equity-purchase agreement made return of the transferred interest Cupp’s sole remedy for a payment default and required Greer and Register to make good-faith efforts to obtain cancellation of his guaranties after related litigation concluded.
After the COVID-19 pandemic forced the parks to close, Church Bells entered bankruptcy and Greer and Register stopped making the buyout payments. The parties later authorized Register to settle claims under the lease guaranties while expressly preserving their competing rights to contribution and indemnification. The Greers and Registers paid the landlords and bank, extinguishing the Cupps’ guaranty liability; the Cupps paid nothing.
The Cupps sued on contract, tort, statutory, and equitable theories and sought to eliminate or reduce any contribution obligation. The Greers and Registers counterclaimed for the Cupps’ proportionate share of the discharged debts. Following a bench trial, the circuit court rejected the Cupps’ claims, awarded $725,103.08 in contribution without a setoff, and awarded the Greers and Registers $220,167 in attorney’s fees.
The Court’s Holding
The Arkansas Court of Appeals affirmed the contribution award. Because the Greers and Registers paid more than their shares of debts for which the parties were jointly liable as guarantors, they were entitled to contribution from the Cupps. The circuit court had considered the Cupps’ allegations of bad faith and inequitable conduct, and its finding that the evidence did not establish conduct sufficient to defeat contribution was not clearly erroneous.
The court also affirmed the denial of a setoff. A setoff requires mutual obligations supported by a valid legal claim, but the Cupps lost all claims that could have established an obligation running from the Greers and Registers to them. Those adverse rulings—including the finding that Cupp was not entitled to further payments under the equity-purchase agreement—were not challenged on appeal.
Finally, the court upheld the attorney-fee award under Arkansas Code Annotated section 16-22-308. Although the case included noncontract claims and a contribution counterclaim, it was primarily a contract action because the claims and defenses centered on the equity-purchase agreement and the authorization. The contract and noncontract issues were too intertwined to require allocation of fees among individual claims.
Key Takeaways
- A co-guarantor who pays more than a proportionate share of a common liability may obtain contribution from co-guarantors whose liability was discharged.
- Equitable allegations do not defeat contribution or support a setoff when the fact-finder rejects the underlying claims and those rulings are not appealed.
- A prevailing defendant may recover attorney’s fees when a mixed-claim lawsuit is primarily contractual and the contract and noncontract issues are intertwined.
Why It Matters
The decision underscores that parties seeking to avoid contribution must prove the inequitable conduct or enforceable counter-obligation on which their defense depends. Merely labeling conduct as bad faith or invoking equitable principles will not overcome factual findings rejecting the underlying claims.
It also confirms that Arkansas courts assess the action’s primary character when awarding contractual attorney’s fees. Closely related tort, declaratory, and equitable claims will not necessarily require fee segregation when their resolution depends on the same contracts and evidence.