Southern Paper Box Co. v. Houston

Melvin Mayfield, Judge. Appellee, a Little Rock attorney, filed suit against appellant to recover an $85,979.85 fee alleged to be due him. Appellant did not file an answer to the complaint but its president, Raymond Cardwell, contacted appel-lee’s attorney, made a payment of $21,544.89 on the account, and agreed that the company would pay $5,000.00 each week until the account was paid. Only one weekly payment was made and when several weeks passed without further payments, appellee’s attorney notified appellant in writing of his intention to take a default judgment. Appellant then contacted its present attorney who filed a motion to quash the summons on the basis of improper service, alleging that the summons was not served on an officer, managing or general agent, or any other authorized agent of the corporation as required by the Arkansas Rules of Civil Procedure Rule 4(d)(5). At an evidentiary hearing, there was testimony that a sheriff’s deputy had left the summons with a receptionist at appellant’s office although Mr. Cardwell admitted that an employee gave him the summons the same afternoon it was given to the receptionist. The trial court denied the motion to quash and granted the appellee’s motion for default judgment for the balance due on the account. Appellant’s first argument on appeal is that the trial court erred in denying its motion to quash since there was a failure to obtain service as provided by ARCP Rule 4(d)(5). Appellant cites several cases to support its position, but we do not think any of them are applicable under the facts of this case. In Tucker v. Johnson, 275 Ark. 61, 628 S.W.2d 281 (1982), a default judgment was set aside because the summons did not give the defendant adequate notice. The court said the summons was defective because it was not directed to the defendant, did not direct him to file a pleading and defend, did not notify him that judgment would be entered against him if he did not defend, and did not inform him that the default judgment would be for the relief demanded in the complaint. In Edmonson v. Farris, 263 Ark. 505, 565 S.W.2d 617 (1978), the defendant was out of town when his wife picked up the summons at the sheriff’s office. The Arkansas Supreme Court held that a default judgment obtained on that service should have been vacated since the summons was not served by leaving a copy at the defendant’s usual place of abode in keeping with the statute in effect at that time. The Court said the judgment was void under Ark. Stat. Ann. § 29-107 (Repl. 1962) which “provides that ‘[a] 11 judgments’ rendered by any court against any person ‘without notice, actual or constructive, and all proceedings’ thereon ‘shall be absolutely null and void.’ ” See Ark. Stat. Ann. § 29-107 (Repl. 1979). In Pounders v. Chicken Country, Inc., 3 Ark. App., 220, 624 S.W.2d 445 (1981), the president of a‘corporation testified that he had no knowledge of the writ of garnishment served on an employee until after a default judgment had been entered against the corporation. The trial court set that judgment aside and the appellate court affirmed on the basis that the judgment was void. Pounders cited Nutrena Mills, Inc. v. Parsons Feed & Farm Supply, Inc., 234 Ark. 1058, 356 S.W.2d 421 (1962), where the trial court granted the corporate garnishee’s motion to quash service because the writ was not served upon its president and it was not shown that he was unavailable. Thus, that case, unlike the instant case, did not involve a default judgment. In Terminal Truck Brokers v. Memphis Truck & Trailer, Inc., 279 Ark. 427, 652 S.W.2d 34 (1983), it was held that a default judgment should be set aside because the writ of garnishment fell short of the requirements of ARCP Rule 4(b) as to form “in substantially the same manner” as the summons held defective in Tucker v. Johnson, supra. And in A. O. Smith Harvestore v. Burnside, 282 Ark. 27, 665 S.W.2d 288 (1984), default judgment was set aside where proper service was not obtained upon a nonresident corporation “because the attempt to use the Secretary of State resulted in the notice being returned,” and appellant’s agent, who was given a copy of the complaint, removed any question of waiver of proper service by a statement in a letter to appellee’s attorney. The above cases, relied upon by the appellant, fall into two categories. In Tucker and Terminal Truck Brokers default judgment was set aside because the summons was defective in form, that is, in the language used. In Edmonson, Burnside, and Pounders, the default judgment was set aside because the summons was not served in the proper manner and the defendant did not have actual notice of the suit until after judgment was entered. The case at bar, however, does not fall into either of these categories. Here, the proper officer of appellant, its president, admits he actually received the summons the same day it was served on the receptionist. Also, there is no contention that the form does not comply with the form prescribed by the Supreme Court in its per curiam issued February 1, 1981, as a result of the Tucker decision. See 275 Ark. at 497. Considered under the factual circumstances of the instant case, the case of White v. Ray’s Bldg. Contractor, 267 Ark. 83, 589 S.W.2d 28 (1979), relied upon by the appellee, reaches a conclusion contrary to those cited by the appellant. In White, notice to the nonresident defendants by registered mail was returned undelivered as “unclaimed.” The appellee, however, obtained default judgment on the basis of an affidavit suggesting that the defendants had in fact refused to receive the letter. The appellate court affirmed the trial court’s refusal to set aside the judgment since the proof indicated that the defendants had actual knowledge of the suit several months before the default judgment was entered. We believe that decision fits the situation in the instant case. Here, the president of the appellant corporation admits that he actually received the summons the same day it was left at his office. He also admits that he made a substantial payment on the account and agreed to make weekly payments until the account was paid in full. The appellant has not been prejudiced. It has not been denied either notice of the suit or opportunity to answer. See Ford Life Ins. Co. v. Parker, 277 Ark. 516, 644 S.W.2d 239 (1982). Appellant also, argues that the trial court erred in granting the default judgment since, before the time to answer had expired, the appellee had agreed to “drop the suit” in exchange for the appellant’s promise to pay the amount sued for. It is argued that appellant had a valid defense to a portion of the account but did not file an answer in reliance upon the appellee’s agreement to “drop the suit,” and that this constituted “excusable neglect” within the meaning of ARCP Rule 55(c). Perry v. Bale Chevrolet Co., 263 Ark. 552, 566 S.W.2d 150 (1978), and Burns v. Shamrock Club, 271 Ark. 572, 609 S.W.2d 55 (1980), are cited in support of this contention. In Perry the appellant tendered a handwritten answer on the 19th or 20th day after service but the clerk would not file it because it was not typed in compliance with a local court rule. The appellant then filed a typewritten answer one day late. In response to a motion for default judgment the appellant responded by affidavit that he had been in communication with appellee’s respresentatives who had agreed the case would be dismissed; however, on the 18th day after service he learned they had not advised their attorney of this agreement and he then tried to file the handwritten answer. The trial court found this did not constitute “excusable neglect” and granted the default judgment motion. The Supreme Court pointed out that appellant’s affidavit had not been controverted and held that excusable neglect did exist. In Burns the appellant was served with summons on a suit to recover damages for appellant’s negligent operation of an automobile. Appellant called an attorney who had previously represented him. The attorney advised appellant he could not represent him, but when appellant said he had insurance coverage, the attorney explained the company’s obligation to defend the suit and asked appellant to get him the name of the company. The next day the appellant called and left the name of the company with the attorney’s secretary and that same day the attorney wrote the insurance company asking that it defend the suit. About a week later, before time to.file an answer had expired, the company notified the attorney that appellant had no coverage on the automobile. The attorney neglected to pass that information on to appellant, no answer was filed, and default judgment was granted. The Supreme Court reversed, holding that there was “an honest and unfortunate misunderstanding which constituted just cause for not filing a timely answer.” We do not believe the facts in the instant case demonstrate the extenuating circumstances shown in Perry and Burns. Here, the president of appellant corporation agreed to pay the amount sued for. Although he testified that there was some question in his mind as to whether he really would make all the payments necessary to pay the full amount, he very clearly did not reveal that to the appellee. Certainly the trial court was entitled to take that evidence into consideration in determining whether the appellant had a valid defense to the claim and whether there was excusable neglect or other just cause sufficient to excuse the appellant from a default judgment. In Renault Central v. Int’l Imports, 266 Ark. 155, 159, 583 S.W.2d 10 (1979), the Supreme Court said: A trial judge has wide discretion in determining whether a default judgment should be vacated and this court will not reverse the decision of the trial judge unless he has abused that discretion. Jetton v. Fawcett, 264 Ark. 69, 568 S.W.2d 42 (1978); and Davis v. McBride, 247 Ark. 895, 448 S. W.2d 37 [ 1969]. In a case such as this, where no attempt was made to show either the existence of a meritorious defense or a lack of knowledge of the pendency of the proceeding, we cannot say that refusal to grant a motion to vacate was an abuse of discretion. And in Meisch v. Brady, 270 Ark. 652, 658, 606 S.W.2d 112 (Ark. App. 1980), the Court of Appeals said: Rule 55 states in no uncertain terms that a default judgment may be set aside “upon a showing of excusable neglect, unavoidable casualty, or other just cause.” And rule 60(d) is equally clear and in definite terms provides that “[njo judgment against defendant, unless it was rendered before the action stood for trial, shall be set aside . . . unless defendant in his motion asserts a valid defense to the action and, upon hearing, makes a prima facie showing of such defense.” We also note that the agreement to “drop the suit” is not free of ambiguity. In a sense the suit was dropped for as long as the agreed payments were made. What this term meant and the weight it should have been given in considering whether appellant had a valid defense or whether excusable neglect or other just cause existed was for the trial judge to decide. We find that his decision was not clearly against the preponderance of the evidence. Affirmed. Cooper and Glaze, JJ., dissent.