Raymond MORGAN and Katie Morgan, Appellants v. BIG CREEK FARMS OF HICKORY FLAT, INC., Appellee
No. CV-15-659
Court of Appeals of Arkansas, DIVISION II.
February 24, 2016
2016 Ark. App. 121
Grayson & Grayson, P.A., North Little Rock, by: Melanie L. Grayson and Keith L. Grayson, for appellee.
PHILLIP T. WHITEAKER, Judge
Appellants Katie and Raymond Morgan appeal the order of the Cleburne County Circuit Court denying their motion to set aside a default judgment that was entered against them in 2012. We find no error and affirm.
I. Background
Appellee Big Creek Farms of Hickory Flat, Inc. (“Big Creek“), and the Morgans entered into a contract for the construction of a log home in Cleburne County. Construction commenced in 2008 and was com-pleted in December 2009, at which time the Morgans still owed Big Creek $25,147.76. Although Big Creek attempted several times to collect the amount from the Morgans, the Morgans never paid the outstanding balance on the house. As a result, Big Creek filed a lawsuit against them on September 26, 2011.
Despite repeated attempts, Big Creek was unable to obtain service on the Morgans either in person or by mail. After the circuit court granted a motion for extension of time to obtain service, Big Creek ultimately obtained service by warning order pursuant to
The Morgans discovered the existence of the default judgment in 2013 and filed a motion to set it aside in November 2014. Big Creek responded, denying that the default judgment should be set aside. The court denied the Morgans’ motion to set aside the default judgment. The Morgans timely filed a notice of appeal and now raise four arguments as set out below.
II. Standard of Review
Default judgments are governed by
The court may, upon motion, set aside a default judgment previously entered for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) the judgment is void; (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; or (4) any other reason justifying relief from the operation of the judgment.
The party seeking to have the judgment
The Morgans raise four arguments on appeal: (1) the default judgment was void for insufficiency of service of process under Rule 55(c)(2); (2) the extension of time for service obtained by Big Creek was improperly obtained under Rule 55(c)(3); (3) they were deprived of their due-process rights to notice of the lawsuit against them under Rule 55(c)(4); and (4) if the court concludes that the default judgment should be set aside for a reason other than being void, the Morgans had a meritorious defense to the lawsuit under
In cases where the appellant claims that the judgment is void under Rule 55(c)(2), the appellate courts will review a trial court‘s denial of a motion to set aside default judgment using a de novo standard. Nucor Corp. v. Kilman, 358 Ark. 107, 118, 186 S.W.3d 720, 727 (2004). In cases where an issue arises under sections (c)(1), (3), or (4) of Rule 55, the trial court‘s denial of a motion to set aside default judgment is reviewed for abuse of discretion. Id.
III. Insufficiency of Service of Process
In their first argument on appeal, the Morgans argue that the default judgment should have been set aside because it was void for insufficient service of process. Arkansas law is long settled that valid service of process is necessary to give a court jurisdiction over a defendant. Shotzman v. Berumen, 363 Ark. 215, 213 S.W.3d 13 (2005); Smith v. Sidney Moncrief Pontiac, Buick, GMC Co., 353 Ark. 701, 120 S.W.3d 525 (2003); Raymond v. Raymond, 343 Ark. 480, 36 S.W.3d 733 (2001). It is equally well settled that statutory service requirements must be strictly construed and compliance with them must be exact because they are in derogation of common-law rights. Shotzman, supra; Carruth v. Design Interiors, Inc., 324 Ark. 373, 921 S.W.2d 944 (1996). The supreme court has held that the same reasoning applies to service requirements imposed by court rules. Nucor, supra; Carruth, supra. As a result, default judgments are void ab initio due to defective process regardless of whether the defendant had actual knowledge of the pending lawsuit. Nucor, supra; Smith, supra.
The Morgans challenge the sufficiency of service of process, raising three separate subheadings under this point: (1) there was no effective personal service pursuant to
The Morgans argue that service on them by warning order was deficient because Big Creek failed to conduct a “diligent inquiry” into their whereabouts. They maintain that Big Creek‘s actions in attempting to find or contact them were insufficient because the company‘s president knew Katie Morgan‘s phone number but failed to attempt to contact the Morgans to determine their current address prior to serving them by warning order. The Morgans thus contend that Big Creek did not conduct a diligent inquiry; therefore, the service by warning order was invalid, and the default judgment was void.
Given this framework, we examine the steps taken by Big Creek in an attempt to obtain service on the Morgans. First, Big Creek attempted to obtain personal service upon the Morgans at their address of 160 Heigle Road, Tumbling Shoals, Arkansas (“the Heigle address“). The Cleburne County Sheriff‘s Department unsuccessfully attempted service at this address on four separate occasions. Although service was unsuccessful, the sheriff‘s department was able to discover information that the utility bills were being mailed to a Chester Morgan, whose address was 491 Woodruff 252, McCrory, Arkansas (“the McCrory address“).
Second, Big Creek hired a private investigator, Jon Hopkins, to research Raymond Morgan‘s whereabouts. The investigation confirmed the McCrory address as a possible location to serve the Morgans.1 Third, Big Creek attempted personal service at the McCrory address, where the Woodruff County Sheriff‘s Department unsuccessfully attempted service on three separate occasions. Next, Big Creek attempted to serve the complaint via certified mail, restricted delivery to addressee only, at the Heigle address. The mail was returned, marked “Return to Sender, No Such Number.” Big Creek then mailed the complaint and summons to the Morgans at the Heigle address via first class mail; this mailing was likewise returned, marked “No Such Number.”
After pursuing these unsuccessful attempts to serve the Morgans, Big Creek obtained an extension of time in which to effectuate service. Eventually, Big Creek filed an affidavit for warning order, describing the attempts that had been made at service. The Cleburne County Circuit Clerk issued the warning order, and the order was published for two consecutive weeks in the Sun-Times, a Cleburne County newspaper. Big Creek mailed the affidavit, the warning order, and the complaint and summons to the Morgans at the Heigle address, return receipt requested with delivery restricted to addressee only, but this mail was returned marked “Return to Sender, No Mail Receptacle, Unable to Forward.”
We hold that Big Creek conducted a diligent inquiry into the whereabouts of the Morgans sufficient to satisfy the constructive-service provision of
The Morgans also argue, however, that the circuit court erred in finding that the Heigle address was their “last known address” for purposes of
On this issue, the circuit court found that the Heigle address was the Morgans’ last known address. The court concluded that, while evidence did establish that utility bills were being sent to the McCrory address, there was no proof that the McCrory address was a forwarding address.2 The circuit court‘s conclusions are supported by the evidence. The process servers’ affidavits indicated only that utility bills were being mailed to the McCrory address, not that mail was being forwarded by the post office from the Heigle address to the McCrory address. Moreover, in their petition to set aside the default judgment, the Morgans admitted that they resided at 160 Heigle Road. In sum, the evidence introduced below supported the circuit court‘s decision that the Heigle address, not the McCrory address, was the Morgans’ “last known address” for purposes of
IV. Motion for Extension of Time to Serve the Summons and Complaint
In their second argument on appeal, the Morgans assert that the circuit court erred in granting Big Creek‘s motion for extension of time to obtain service for two reasons: (1) Big Creek failed to show good cause to obtain an extension, and (2) the order does not bear the signature of the circuit court judge.
Regarding good cause, the Morgans complain that Big Creek never told the circuit court that it “knew all along how to contact the Morgans in order to perfect service prior to the trial court issuing the order for extension of time.” The circuit court never ruled on this argument, however, and it is therefore not preserved for appeal. See Tillman v. Raytheon Co., 2013 Ark. 474, at 18, 430 S.W.3d 698, 709 (noting that it is an appellant‘s burden to obtain a ruling to preserve an issue for appeal, and the failure to do so precludes appellate review); Neal v. Sparks Reg‘l Med. Ctr., 2012 Ark. 328, 422 S.W.3d 116.
With respect to the order extending the time to serve the summons and complaint, the Morgans question the authenticity of the judge‘s signature thereon. The order was signed only with initials, and the Morgans argue that the handwriting of the initials does not match the actual signature of the judge, as reflected on other documents filed in the case. At the hearing on the petition to set aside the default judgment, the circuit court agreed that it did not appear to be the judge‘s signature on the order, but the court concluded that it had no proof that it was not the judge‘s signature or that the judge did not ask his trial-court assistant to sign it. The court therefore declined to find that the order was improper.
When a circuit court denies a petition to set aside a default judgment on the basis of fraud pursuant to
V. Due Process
In their third argument on appeal, the Morgans contend that Big Creek failed to provide notice to them in such a manner that they received adequate notice according to the guarantees of due process provided by the United States and Arkansas Constitutions. A plaintiff‘s service of process on a defendant, or the defendant‘s waiver of service of process, is necessary in order to satisfy the due-process requirements of the United States Constitution. See Foods, Inc. v. Keener, 335 Ark. 209, 979 S.W.2d 885 (1998). Here, as discussed above, Big Creek properly served the Morgans by warning order pursuant to
VI. Meritorious Defense
Finally, the Morgans assert that, in the event this court finds that the default judgment should have been set aside for a reason other than the judgment being void, they had a meritorious defense to the action. However, because we have concluded that there is no basis at all for setting aside the default judgment, it is immaterial whether the Morgans presented a meritorious defense. See, e.g., West v. West, 103 Ark. App. 269, 272, 288 S.W.3d 680, 683 (2008) (“While it is true that defendants wishing to set aside default judgments must demonstrate a meritorious defense to the action, the defense in and of itself is not sufficient without first establishing one of the grounds laid out in
Affirmed.
Kinard and Hixson, JJ., agree.