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September 21, 1953


The opinion of the court was delivered by: John E. Miller, District Judge.

The defendant has filed a motion to dismiss on the ground, "that the complaint fails to state a claim upon which relief can be granted, in that the complaint shows on its face that the plaintiffs' cause of action, if any, accrued more than three years prior to the filing of this complaint on July 28, 1953, and is, therefore, barred by the statute of limitations."

The plaintiffs are citizens and residents of the State of Wisconsin. The defendant is a citizen and resident of the Fayetteville Division of the Western District of Arkansas and is engaged in business under the name of Greer Abstract Company. The amount in controversy exceeds the sum of $3,000.00, exclusive of interest and costs.

On August 10, 1949, Walter E. Fromm and wife, Gertrude Fromm, owned certain real property in the City of Fayetteville, Arkansas, and were engaged in maintaining and operating thereon a tourist court known as the "Circle Court." The plaintiffs entered into a contract with the owners to purchase said property and were furnished an abstract of title which they took to the defendant and requested the defendant to bring the abstract to date and show all instruments and recitals affecting the title. The defendant undertook to bring the abstract to date and inserted therein an additional sheet designated as Sheet No. 78. That sheet purported to show and recite the conditions and stipulations of a certain mortgage which had previously been executed by the owners of the property to and in favor of Frank Grotta and Anna Grotta. The mortgage was of record in Mortgage Record Book 405 at Page 47 in the Office of the Recorder of Deeds in Washington County, Arkansas, and the said Sheet 78 of the abstract of title recited that the mortgage secured an installment indebtedness with payments of $44.73 on the principal, plus interest at the rate of 3 per cent for two-hundred forty months, beginning December 1, 1948.

In Paragraph 8 of the complaint, the plaintiffs allege:

    "The defendant by oversight, neglect and
  misfeasance failed and omitted to show the following
  acceleration provision contained in the said
  mortgage, said provision in said mortgage being in
  the following language: `or in the event the lands
  covered by this mortgage shall be sold then in that
  case, the indebtedness secured by this mortgage shall
  immediately become due and payable and this mortgage
  subject to foreclosure at the option of the legal
  holder of said note and mortgage.'"

Following the insertion of Sheet 78 by the defendant in which he failed to show the acceleration clause in the mortgage, he attached his certificate dated August 24, 1949. In the certificate, the defendant certified that he had carefully examined the Deed and Mortgage Records of Washington County and found no conveyance affecting the land except as shown by Sheet 78. He further certified that he had examined the Judgment Docket, the Mechanics' Lien Record and the Record of Lis Pendens and found no judgments, liens or suits affecting the title to said land. The abstract, as amended and brought to date, was delivered to the plaintiffs and they paid the defendant his charges for his service in bringing the abstract to date.

The plaintiffs took the abstract to a reputable attorney, who examined the same, and received an opinion from the attorney based upon the abstract as brought to date, and the plaintiffs consummated their purchase of the property subject to the said mortgage with the intent to pay the mortgage indebtedness according to the terms as abstracted by the defendant and as shown by Sheet No. 78.

On November 15, 1949, the mortgagees, Frank Grotta and Anna Grotta, instituted suit in this court against the plaintiffs in which they asserted their right to accelerate the maturity of the principal and to foreclose the mortgage lien under the clause contained in the mortgage and hereinbefore quoted.

The plaintiffs further allege that one of the substantial inducements to purchase the property was the lenient credit terms of the mortgage as shown on Sheet 78 of the abstract of title and that, as a direct and proximate result of the defendant's oversight, neglect, negligence and misfeasance and the action of the mortgagees in foreclosing the mortgage lien, the plaintiffs were damaged in a sum of money in excess of $3,000.00, exclusive of interest and costs.

The defense of limitations may be raised by motion to dismiss. In 2 Moore's Federal Practice, Second Edition, Section 1210, Page 2257, after referring to the common law rule which was that a defendant could not raise the defense of limitations by demurrer, even though the complaint shows on its face that the statute had run, it is said:

    "We have seen that this rule has been altered by
  Rule 9(f) [Fed.Rules Civ.Proc. 28 U.S.C.A.] under
  which averments of time and place are material `for
  the purpose of testing the sufficiency of a
  pleading.' Accordingly, it is now held that the
  defense of limitations may be raised by motion to
  dismiss when the time alleged in the complaint shows
  that the action was not brought within the statutory

The able attorneys for the respective parties have furnished the court excellent briefs in support of their contentions. The attorneys for plaintiffs on Page 1 of the brief for plaintiffs state:

    "It is undisputed that the certificate complained
  of was signed and sealed by the abstractor on August
  24, 1949, and that an action was brought against
  these plaintiffs on November 15, 1949. Also at this
  time we do not dispute that the cause of action
  against the defendant accrued at the time of the
  delivery of the abstract. Neither do we dispute that
  the defendant has properly cited the governing
  statutes of limitations. We do not agree, however,
  that the three year statute is applicable. Our
  position is that this is an action founded upon a
  written contract and the five year statute is
    "Of necessity our position is, in accordance with
  the defendant's, that the abstractor and an employer
  entered into a contractual relationship and we agree
  that a contract existed in this case. The only
  disagreement is that we contend the liability is
  based upon ...

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