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.'"
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
"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 ...