Tenants of 1974 Lakeland Acres Rd., Drasco, Ark. v. U.S. Bank

2017 Ark. App. 362, 525 S.W.3d 475, 2017 Ark. App. LEXIS 381
CourtCourt of Appeals of Arkansas
DecidedMay 31, 2017
DocketCV-16-396
StatusPublished

This text of 2017 Ark. App. 362 (Tenants of 1974 Lakeland Acres Rd., Drasco, Ark. v. U.S. Bank) is published on Counsel Stack Legal Research, covering Court of Appeals of Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Tenants of 1974 Lakeland Acres Rd., Drasco, Ark. v. U.S. Bank, 2017 Ark. App. 362, 525 S.W.3d 475, 2017 Ark. App. LEXIS 381 (Ark. Ct. App. 2017).

Opinion

KENNETH S. HIXSON, Judge

jjThis appeal arises from a default judgment entered against Thomas Kelso in a foreclosure case. Kelso appeals from the trial court’s denial of his amended motion to set aside the default judgment. Kelso argues that service of process, which was by warning order, was defective because the affidavit in support of the warning order was insufficient; After conducting a de novo review, we agree with Kelso’s argument that there was a failure of strict compliance with our service requirements and that the trial court erred in denying his motion to set aside the judgment. Therefore, we reverse and remand.

In 2006, Kelso executed a note and mortgage for $284,800, which was secured by residential property at 1974 Lakeland Acres Road in Drasco, Arkansas. The mortgage was later assigned to the appel-lee herein, U.S. Bank. On October 30, 2012, U.S. Bank filed a foreclosure complaint alleging that Kelso was in default because he had failed to make any payments on the mortgage and note since October 2008.

|2U.S. Bank attempted to serve Kelso on November 3, .2012, by mailing the complaint and summons to a P.O. Box address in Searcy, Arkansas, which it had discovered from an internet search. U.S. Bank also attempted to effect service on November 5, 2012, by mailing the summons and complaint to the address of the mortgage property. These. efforts by the Bank to locate Kelso proved unsuccessful, and the Bank then sought a warning order.

On December 6, 2012, U.S. Bank filed an affidavit for warning order. In the affidavit, the attorney for U.S. Bank stated:

1. U.S. Bank’s records do not contain a current address for Thomas Kelso.
2. Diligent effort has been made, but U.S. Bank has been unable to contact or otherwise serve the defendant as evidenced by receipts which are collectively attached hereto as Exhibit “A.”
3. A search performed on the internet did, not produce an additional address or telephone number for the defendant.
4. U.S. Bank and this office have made diligent inquiry, but have been unable to achieve service upon or determine the whereabouts of said defendant.

The Exhibit “A” attached to the affidavit contained a U.S. Postal Service receipt showing payment for return receipt, restricted delivery to Thomas Kelso at P.O. Box 882, Searcy, Arkansas 72146, with tracking number 6084. A USPS “Track and Confirm” document indicated that delivery of the package with tracking number 6084 was attempted on November,3, 2012. Also attached to the affidavit was a certified-mail “green card” documenting an article addressed to “Tenants” at 1974 Lakeland Acres Road, Drasco, Arkansas 72530, with tracking number 6091. An envelope with that address and tracking number showed attempted certified-mail restricted delivery on November 5, 2012, with the notation “Return to Sender-Vacant.”

On the same day U.S. Bank filed the affidavit, the trial court issued a warning order, warning Kelso to appear and answer the foreclosure complaint within thirty, days of ^publication or face entry of default judgment. U.S. Bank mailed the warning order and complaint via certified, restricted-delivery mail to Thomas Kelso, P.O. Box 882, Searcy, Arkansas 72145, and the envelope was returned as “Unclaimed.” The warning order was published in The Sun Times, a Cleburne County newspaper, one time per week' for two consecutive weeks.

Kelso failed to respond to the warning order, and on April 13, 2013, U.S. Bank filed a motion for default judgment. On May 9, 2013, the trial court granted U.S. Bank’s motion for default judgment and entered an order of foreclosure. The foreclosure sale was held on August 2, 2013, and the trial court confirmed the sale on August 9,2013.

On June 6, 2014, Kelso filed an amended motion to set aside the default judgment and order of foreclosure and to void the commissioner’s deed, arguing that U.S. Bank had failed to obtain valid service. 1 In his amended motion, Kelso asserted that U.S. Bank had failed to perform a diligent inquiry to locate and serve him and had failed to attach sufficient evidence of diligent inquiry to its affidavit for warning order.

Two hearings were held on Kelso’s amended motion to set aside the default judgment, wherein the parties made arguments pertaining to the sufficiency of service. On December 7, 2015, the trial court entered an order denying Kelso’s amended motion to set aside the default judgment. In its order, the trial court found that U.S. Bank had complied |4with the service requirements of Ark. R. Civ. P. 4, and in particular had complied with Rule 4(f) pertaining to service by warning order.

In this appeal, Kelso argues that the trial court erred in failing to set aside the default judgment because U.S. Bank’s affidavit failed to demonstrate that it had conducted a diligent inquiry into his whereabouts before serving him by warning order. Although Rule 55 of the Arkansas Rules of Civil Procedure provides for entry of a default judgment when a party fails to appear or otherwise defend, our supreme court has recognized that defaults are not favored. McGraw v. Jones, 367 Ark. 138, 238 S.W.3d 15 (2006). Because of its harsh and drastic nature that can result in the deprivation of substantial rights, a default judgment should be granted only when strictly authorized. Id. Service requirements, being in derogation of common-law rights, must be strictly construed and compliance with them must be exact. Heirs of Duncan v. Alfred T. Williams Living Trust, 2013 Ark. App. 740, 2013 WL 6565804. Judgments by default rendered without valid service are judgments rendered without jurisdiction and are therefore void. Id. Kelso argues that due to ineffective service, the default judgment and order of foreclosure was void. When an appellant claims that a default judgment is void, the matter is a question of law that we review de novo. Nucor Corp. v. Kilman, 358 Ark. 107, 186 S.W.3d 720 (2004); Young v. Welch, 2016 Ark. App. 614, 2016 WL 7232081. Based on our de novo review, we agree that the default judgment was void for lack of strict compliance.

Actual service was not accomplished in this case. However, U.S. Bank contends that it accomplished service by warning order pursuant to Rule 4(f). We disagree.

| fiRule 4(f) provides, in relevant part:

(f) Service By Warning Order.
1. If it appears by the affidavit of a party seeking judgment or his or her attorney that, after diligent inquiry, the identity or whereabouts of a defendant remains unknown, or if a party seeks a judgment that affects or may affect the rights of persons who are not and who need not be subject personally to the jurisdiction of the court, service shall be by warning order issued by the clerk. This subdivision shall not apply to actions against unknown tort-feasors.
2.

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Related

Nucor Corp. v. Kilman
186 S.W.3d 720 (Supreme Court of Arkansas, 2004)
McGraw v. Jones
238 S.W.3d 15 (Supreme Court of Arkansas, 2006)
Heirs of Mancil Duncan v. Alfred T. Williams Living Trust
2013 Ark. App. 740 (Court of Appeals of Arkansas, 2013)
XTO Energy, Inc. v. Thacker
2015 Ark. App. 203 (Court of Appeals of Arkansas, 2015)
Billings v. U.S. Bank National Ass'n
2016 Ark. App. 134 (Court of Appeals of Arkansas, 2016)
Young v. Welch
2016 Ark. App. 614 (Court of Appeals of Arkansas, 2016)
Scott v. Wolfe
384 S.W.3d 609 (Court of Appeals of Arkansas, 2011)

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Bluebook (online)
2017 Ark. App. 362, 525 S.W.3d 475, 2017 Ark. App. LEXIS 381, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tenants-of-1974-lakeland-acres-rd-drasco-ark-v-us-bank-arkctapp-2017.