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Bruns Foods of Morrilton, Inc. v. Hawkins
Citations: 328 Ark. 416; 944 S.W.2d 509; 1997 Ark. LEXIS 279Docket: 97-17
Court: Supreme Court of Arkansas; May 5, 1997; Arkansas; State Supreme Court
Bruns Foods of Morrilton, Inc. appeals a dismissal favoring Marlin and Marvine Hawkins, with the key issue being whether a prior judgment in a lawsuit involving the Hawkinses and McDonald’s Corporation bars Bruns Foods’s action against the Hawkinses. The court affirms that it does. In 1982, the Hawkinses conveyed a 1.69-acre lot to McDonald's, including a twenty-year restrictive covenant limiting restaurant use on adjoining land. Bruns Foods later obtained a franchise from McDonald's but did not intervene in the Hawkinses' subsequent action to void the covenant, which resulted in a default judgment against McDonald's. Bruns Foods's motion to intervene in McDonald’s appeals was denied. While that appeal was ongoing, Bruns Foods filed its own action against the Hawkinses to declare the restrictive covenant enforceable. The trial court held that the prior judgment voided the covenant and dismissed Bruns Foods’s case, ruling that Bruns Foods held no greater interest than McDonald's and was thus barred by res judicata. Bruns Foods contended it was not in privity with McDonald's, but the court disagreed, affirming that as a lessee, Bruns Foods had an inferior interest to its lessor, McDonald's, and was subject to the same legal conclusions as McDonald's, including the application of res judicata. A tenant is in privity with their landlord, meaning a judgment affecting the landlord's interests in real property prevents the tenant from relitigating the same matter. This principle is supported by case law, indicating that a successor in interest is similarly bound by prior rulings against their grantor. The court acknowledges that the Hawkinses won against McDonald’s through a default judgment, rather than a decision based on the merits. However, it has been established that a default judgment is as binding as any other judgment regarding res judicata, confirming a plaintiff's right to recover and a defendant’s liability. Res judicata applies not only to litigated issues but also to those that could have been brought up in the prior case. Consequently, the court concludes that issues resolved by default judgment cannot be relitigated. Since res judicata prevents Bruns Foods from pursuing action against the Hawkinses, the court affirms the trial ruling, deeming Bruns Foods's attempt to revive the invalid restrictive covenant unsuccessful. Justice Glaze did not participate in this decision.